<PAGE> 1
File No. 70-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM U-1 APPLICATION-DECLARATION
UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
______________________________________
CENTRAL AND SOUTH WEST CORPORATION
1616 Woodall Rodgers Freeway
P.O. Box 660164
Dallas, Texas 75202
(Names of companies filing this statement and
addresses of principal executive offices)
_____________________________________
CENTRAL AND SOUTH WEST CORPORATION
(Name of top registered holding company parent)
____________________________________
Stephen J. McDonnell
Treasurer
Central and South West Corporation
1616 Woodall Rodgers Freeway
P.O. Box 660164
Dallas, Texas 75202
M. Douglas Dunn
Milbank, Tweed, Hadley & McCloy
One Chase Manhattan Plaza
New York, New York 10005
(Names and addresses of agents for service)
with copies to
George J. Forsyth & Joris M. Hogan
Milbank, Tweed, Hadley & McCloy
One Chase Manhattan Plaza
New York, New York 10005
<PAGE> 2
TABLE OF CONTENTS
Item 1. Description of Proposed Transaction . . . . . . . . . . . . . . . 1
A. Introduction. . . . . . . . . . . . . . . . . . . . . . . . . 1
B. Description of the Parties. . . . . . . . . . . . . . . . . . 2
1. CSW and Subsidiaries. . . . . . . . . . . . . . . . . . 2
2. EPE . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3. CSW Sub Merger Subsidiary . . . . . . . . . . . . . . . 3
C. History of EPE Bankruptcy and the Proposed Transaction. . . . 3
D. Treatment of Claims and Interests Under the Plan. . . . . . . 6
1. EPE Common Stock. . . . . . . . . . . . . . . . . . . . 7
2. Creditors and Preferred Shareholders. . . . . . . . . . 8
3. Cash in Lieu of Securities. . . . . . . . . . . . . . . 10
E. Conditions to the Transaction and the Plan. . . . . . . . . . 11
F. Description of Assets Being Acquired. . . . . . . . . . . . . 12
G. Management Arrangements . . . . . . . . . . . . . . . . . . . 14
H. Reasons for Transaction . . . . . . . . . . . . . . . . . . . 15
Item 2. Estimated Fees, Commissions and Expenses. . . . . . . . . . . . . 19
Item 3. Applicable Statutory Provisions . . . . . . . . . . . . . . . . . 20
Analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
I. Acquisition of EPE by CSW . . . . . . . . . . . . . . . . . . 21
A. Section 10(b) . . . . . . . . . . . . . . . . . . . . . 22
1. Section 10(b)(1) . . . . . . . . . . . . . . . . 22
a. Interlocking Relations . . . . . . . . . . 22
b. Concentration of Control . . . . . . . . . 23
2. Section 10(b)(2) . . . . . . . . . . . . . . . . 25
a. Reasonableness of Consideration. . . . . . 25
b. Reasonableness of Fees . . . . . . . . . . 26
3. Section 10(b)(3) . . . . . . . . . . . . . . . . 27
B. Section 10(c) . . . . . . . . . . . . . . . . . . . . . 29
1. Section 10(c)(1) . . . . . . . . . . . . . . . . 30
a. Section 11(b)(2) . . . . . . . . . . . . . . 30
i. Interconnection . . . . . . . . . . 31
ii. Single Interconnected and
Coordinated System. . . . . . . . . 33
iii. Single Area or Region . . . . . . . 34
iv. Localized Management, Efficient
Operation and Effective Regulation. 34
b. Section 11(b)(2) . . . . . . . . . . . . . . 34
2. Section 10(c)(2) . . . . . . . . . . . . . . . . 35
3. Section 10(f). . . . . . . . . . . . . . . . . . 35
II. Other Transaction-Related Action. . . . . . . . . . . . . . . 35
A. Issuances of Securities by CSW and Reorganized EPE. . . 35
1. Issuance of Common Stock by CSW. . . . . . . . . 36
2. Issuance of CSW Sub Common Stock . . . . . . . . 38
3. Issuance of New EPE Securities . . . . . . . . . 38
a. Description of Securities. . . . . . . . . 39
i. First Mortgage Bonds. . . . . . . . 39
ii. Second Mortgage Bonds.. . . . . . . 40
iii. Senior Fixed Rate Notes . . . . . . 41
i
<PAGE> 3
iv. Secured Floating Rate Notes . . . . 42
v. Senior Floating Rate Notes. . . . . 43
vi. Letters of Credit Supporting
Maricopa PCB's. . . . . . . . . . . 44
vii. Letter of Credit Supporting
Farmington PCB's. . . . . . . . . . 45
viii. Preferred Stock . . . . . . . . . . 45
b. Analysis . . . . . . . . . . . . . . . . . 46
4. Rule 50. . . . . . . . . . . . . . . . . . . . . 47
5. Registration. . . . . . . . . . . . . . . . . . . . 48
B. Addition of EPE to CSW System Service Agreement . . . . 49
C. Reacquisition by EPE of Ownership of the Palo Verde
Assets. . . . . . . . . . . . . . . . . . . . . . . . . 50
D. Protection against Market Risk. . . . . . . . . . . . . 51
1. Description of Proposed Arrangements . . . . . . 51
2. Analysis . . . . . . . . . . . . . . . . . . . . 53
Item 4. Regulatory Approval . . . . . . . . . . . . . . . . . . . . . . . 54
I. Bankruptcy Confirmation . . . . . . . . . . . . . . . . . . . 54
II. Pre-Merger Notification . . . . . . . . . . . . . . . . . . . 54
III. State Public Utility Regulation and Other State Approvals . . 54
A. Texas . . . . . . . . . . . . . . . . . . . . . . . . . 54
B. New Mexico. . . . . . . . . . . . . . . . . . . . . . . 55
IV. Federal Power Act . . . . . . . . . . . . . . . . . . . . . . 55
V. Atomic Energy Act . . . . . . . . . . . . . . . . . . . . . . 56
VI. Department of Energy. . . . . . . . . . . . . . . . . . . . . 56
Item 5. Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Item 6. Exhibits and Financial Statements . . . . . . . . . . . . . . . . 57
I. Exhibits. . . . . . . . . . . . . . . . . . . . . . . . . . . 57
II. Financial Statements. . . . . . . . . . . . . . . . . . . . . 60
Item 7. Information as to Environmental Effects . . . . . . . . . . . . . 62
Glossary of Defined Terms. . . . . . . . . . . . . . . . . . . . . . . . . 63
Index of Exhibits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1
ii
<PAGE> 4
(Note: A glossary of capitalized terms appears at the end of this Application
after Item 7.)
Item 1. Description of Proposed Transaction.
A. Introduction.
Central and South West Corporation ("CSW"), a Delaware corporation
and a holding company registered under the Public Utility Holding Company Act
of 1935, as amended (the "Act"), submits this application-declaration (the
"Application") pursuant to Sections 6(a), 7, 9(a), 10 and 13(f) of the Act and
the rules thereunder, for approval of CSW's proposed acquisition (the
"Transaction") of El Paso Electric Company ("EPE" and, after completion of its
reorganization in bankruptcy, "Reorganized EPE"), an electric public utility
incorporated under the laws of the State of Texas and a debtor-in-possession
in bankruptcy reorganization proceedings pending in the U.S. Bankruptcy Court
for the Western District of Texas, Austin Division (the "Bankruptcy Court") in
Case No. 92-10148-FM, and certain related transactions.
To effect the Transaction, EPE will merge with a shell subsidiary to
be established by CSW. Simultaneously with that merger, EPE's plan of
reorganization will become effective. As part of the reorganization and
merger, in exchange for existing EPE securities and claims against EPE, EPE
shareholders and creditors will receive shares of common stock, $3.50 par
value, of CSW ("CSW Common Stock"), new securities of Reorganized EPE and
cash.
The proposed Transaction is the result of nearly two years of
proceedings and negotiations of enormous complexity and expense, and resolves
a bankruptcy that is only the second bankruptcy of a major publicly traded
electric utility company since the Great Depression. In the words of the
Bankruptcy Court confirmation order, the Transaction involves a "global
compromise" of the "many significant issues" and "intertwined" claims and
interests in the proceedings, and avoids "the complexities and uncertainties
of . . . litigation" and "inevitable appeals." As such, the Transaction "is
calculated to permit EPE's rehabilitation and expedite its emergence from
bankruptcy" on a consensual basis. Moreover, the Transaction "resolves the
claims and interests of creditors and shareholders in a manner which is fair
to each of them . . . and, in addition, provides the ratepayers with
significant benefits." Finally, as the Bankruptcy Court found, "no other
alternative . . . is or would be appropriate for EPE at this time." (See
paragraphs 17 and 19-21 of the Findings of Fact and Conclusions of Law of the
Bankruptcy Court dated December 8, 1993 in support of its order confirming the
Plan ("Findings of Fact") (Exhibit D-14).)
For these reasons and the other reasons set forth herein, CSW
respectfully requests that the Securities and Exchange Commission (the
"Commission") consider and approve this Application on a timely and
expeditious basis. In addition, to preserve, to the extent practicable, the
financial status quo of the Transaction and to protect against market risk
while the Commission and other regulators are considering the Transaction, CSW
seeks immediate authorization to engage in certain hedging transactions more
fully described in Item 3.II.D. below.
<PAGE> 5
B. Description of the Parties.
1. CSW and Subsidiaries.
CSW is an electric utility holding company. CSW owns all of the
outstanding shares of common stock of Central Power and Light Company ("CPL"),
Public Service Company of Oklahoma ("PSO"), Southwestern Electric Power
Company ("SWEPCO"), West Texas Utilities Company ("WTU" and, collectively with
CPL, PSO and SWEPCO, the "CSW Electric Operating Companies"), Transok, Inc.
("Transok"), CSW Credit, Inc. ("CSWC"), CSW Energy, Inc. ("CSWE"), and Central
and South West Services, Inc. ("CSWS"), and 80% of the outstanding shares of
common stock of CSW Leasing, Inc. ("CSWL"). In addition, CSWE holds interests
in several power projects. The CSW System is comprised of the CSW Electric
Operating Companies, Transok, CSWC, CSWE, CSWS, CSWL and the aforementioned
power project interests (collectively, the "CSW System").
The CSW Electric Operating Companies are public utility companies
engaged in generating, purchasing, transmitting, distributing and selling
electricity. They supply electric service to approximately 1.6 million retail
customers. CPL and WTU operate in south and central west Texas, respectively;
PSO operates in eastern and southwestern Oklahoma; and SWEPCO operates in
northeastern Texas, northwestern Louisiana and western Arkansas. Transok is a
natural gas gathering, transmission and processing company which transports
for and sells natural gas to PSO and for the other CSW Electric Operating
Companies, and processes, transports and sells natural gas to and for
non-affiliates. CSWS performs various accounting, engineering, tax, legal,
financial, electronic data processing, centralized power dispatching and other
services for the CSW System. CSWC purchases accounts receivable of the CSW
Electric Operating Companies, Transok, and unaffiliated electric and gas
utilities. CSWE pursues cogeneration projects and other energy ventures.
CSWL invests in leveraged leases.
The authorized capital stock of CSW consists of 350,000,000 shares
of CSW Common Stock. As of September 30, 1993, 188,403,401 shares of CSW
Common Stock were issued and outstanding. Additional information concerning
CSW and its subsidiaries is set forth in the Annual Report on Form 10-K and
Annual Report to Shareholders for the year ended December 31, 1992 (Exhibits
H-1 and H-3 hereto, respectively), CSW's Quarterly Reports on Form 10-Q for
the quarters ended March 31, June 30 and September 30, 1993 (Exhibits H-5, H-
6, and H-7 hereto, respectively), and CSW 1993 year-end financial statements
to be added by amendment.
2. EPE.
EPE is engaged in the generation and distribution of electricity
through an interconnected system to approximately 261,000 retail customers in
El Paso, Texas, and an area of the Rio Grande Valley in west Texas and
southern New Mexico, and to wholesale customers located in southern
California, Texas, New Mexico, and Mexico. EPE has one subsidiary which it
expects to dispose of in the first quarter of 1994.
The authorized capital stock of EPE consists of 100,000,000 shares
of common stock, no par value ("EPE Common Stock"), and 2,000,000 shares of
cumulative preferred stock, no par value ("EPE Preferred Stock"). As of
September 30, 1993, 35,544,330 shares of EPE Common Stock, 52,000 shares of
<PAGE> 6
EPE Series 10.75% Preferred Stock, 97,600 shares of EPE Series 8.44% Preferred
Stock, 90,000 shares of EPE Series 8.95% Preferred Stock, 100,000 shares of
EPE Series 10.125% Preferred Stock, 300,000 shares of EPE Series 11.375%
Preferred Stock, 15,000 shares of EPE Series 4.5% Preferred Stock, 15,000
shares of EPE Series 4.12% Preferred Stock, 20,000 shares of EPE Series 4.72%
Preferred Stock, 40,000 shares of EPE Series 4.56% Preferred Stock, and 52,450
shares of EPE Series 8.24% Preferred Stock were issued and outstanding.
Additional information concerning EPE is set forth in EPE's Annual Report on
Form 10-K and Annual Report to Shareholders for the year ended December 31,
1992 (Exhibits H-2 and H-4 hereto, respectively), EPE's Quarterly Reports on
Form 10-Q for the quarters ended March 31, June 30 and September 30, 1993
(Exhibits H-8, H-9, and H-10 hereto, respectively), and EPE 1993 year-end
financial statements to be added by amendment.
3. CSW Sub Merger Subsidiary.
Solely for the purpose of facilitating the Transaction, and subject
to the approval of the Commission, CSW will incorporate a new subsidiary --
CSW Sub, Inc. ("CSW Sub") -- under the laws of the State of Texas prior to the
date on which the Plan becomes effective (the "Effective Date"). The
authorized capital stock of CSW Sub will consist of 1,000 shares of common
stock, $.01 par value ("CSW Sub Common Stock"), of which 1,000 shares will be
issued to CSW at the price of $1 per share. Except as contemplated in
connection with the Transaction, CSW Sub will not directly or indirectly
engage in any business activities, incur any contractual liabilities or
obligations, enter into any agreements or arrangements, or be subject to or
bound by any obligation or undertaking prior to the consummation of the
Transaction.
C. History of EPE Bankruptcy and the Proposed Transaction.
(The discussion in this Item 1.C. is derived from the Bankruptcy
Court's Findings of Fact and from the court-approved disclosure statement
relating to EPE's plan of reorganization (Exhibit B-3).)
In 1991, as a result of financial difficulties, EPE sought to
negotiate a restructuring of its obligations with its creditors. Despite
protracted negotiations and efforts, EPE was unable to implement an out-of-
court restructuring of its obligations.
On January 8, 1992, EPE filed a voluntary petition for
reorganization under Chapter 11 of the U.S. Bankruptcy Code ("Chapter 11").
In the summer and fall of 1992, EPE unsuccessfully proposed a plan of
reorganization providing for it to emerge from bankruptcy as a stand-alone
company. In late 1992, it became apparent that EPE would be unable to emerge
from bankruptcy on a stand-alone basis within any predictable period of time.
As a result, EPE undertook efforts to pursue a potential business combination
as a means for emerging from Chapter 11.
EPE's pursuit of a potential business combination included an
analysis of the entities which might have an interest in a merger or
acquisition. Thirteen of these entities requested and were sent an
information package about EPE prepared by EPE and its investment bankers.
Six of the thirteen entities obtained detailed briefings and additional
<PAGE> 7
information from EPE, and four of them engaged in a formal due diligence
investigation of EPE's business. As the process of merger discussions
evolved, the field narrowed to two bidders -- CSW and Southwestern Public
Service Company ("SPS"). Each held extensive discussions with EPE's
creditors, and their offers to EPE reflected, in part, the results of those
negotiations. Only one offer -- CSW's -- attracted the requisite support of
the Bankruptcy Court and the parties to the EPE reorganization proceeding.
On May 3, 1993, after months of intensive merger negotiations, CSW
and EPE entered into an Agreement and Plan of Merger dated as of May 3, 1993
(as amended on May 18, 1993 and by amendments dated as of August 26, 1993 and
December 1, 1993, and as it may be further amended, the "Merger Agreement")
(Exhibit B-1), which provides for CSW Sub to merge with and into EPE and for
EPE to become a wholly owned subsidiary of CSW as part of EPE's reorganization
in bankruptcy. Before entering into the Merger Agreement with CSW, EPE
encouraged SPS to make a bid of greater attractiveness to both EPE's creditors
and its shareholders than the CSW proposal. While SPS responded with a bid
that was marginally higher for creditors and preferred shareholders, the SPS
bid provided for minimal consideration for the holders of EPE Common Stock, so
that the overall enterprise value provided in the SPS offer was less than that
offered by CSW. For these reasons, the EPE Board of Directors determined that
the CSW offer provided a better resolution to the entire group of interested
parties, including creditors, shareholders and ratepayers, and had a better
potential for being implemented on a consensual basis and in an expeditious
manner.
On May 5, 1993, EPE filed a third amended plan of reorganization (as
thereafter modified, the "Plan") (Exhibit B-2) in connection with the Merger
Agreement, which classified EPE's shareholders and creditors into nearly 30
classes and subclasses. On May 26, 1993, the Bankruptcy Court held a hearing
on a motion by SPS to permit it to file a competing plan of reorganization.
At the conclusion of the hearing, the Bankruptcy Court adjourned the hearing
on SPS's motion and the hearing on approval of EPE's disclosure statement
without setting a new hearing date, stating, in essence, that SPS, on the one
hand, and EPE and CSW, on the other hand, needed to obtain a degree of
creditor support before proceeding further. During the period from May 5,
1993 through September 6, 1993, EPE and CSW, on the one hand, and SPS, on the
other hand, conducted extended and intensive negotiations with creditor
representatives to secure creditor support for their respective proposals.
CSW improved its offer to the various constituencies, without increasing the
rate path on which its proposal was premised. After further negotiations and
mediation sessions, the principal classes of secured and unsecured creditors
(Classes 1, 2, 5, 11, and 13), the Palo Verde bondholders (Class 12(a)), and
the equity committee (representing Classes 15 and 16) filed with the
Bankruptcy Court statements supporting EPE's acquisition by CSW and objecting
to a motion by SPS for leave to file a competing plan. On July 30, 1993 and
August 27, 1993, EPE filed modifications and amendments to its May 5 plan of
reorganization. A related disclosure statement dated August 27, 1993 and
corrected September 15, 1993 (the "Disclosure Statement") (Exhibit B-3) was
approved by the Bankruptcy Court by orders dated August 27, 1993 and September
15, 1993 (Exhibits D-11 and D-12). In addition, the Bankruptcy Court's August
27 order set December 6, 1993 as the date of the confirmation hearing on the
Plan. On September 17, 1993, the Bankruptcy Court entered an order denying
SPS's motion for permission to file a competing plan of reorganization.
<PAGE> 8
On November 15, 1993, EPE entered into, and on December 8, the
Bankruptcy Court approved, settlement agreements (the "OP Settlements")
(Exhibit B-8) with the beneficiaries (the "Palo Verde Owner Participants") of
the trusts holding title to certain interests in the Palo Verde Nuclear
Generating Station which were the subject of sale-leaseback transactions by
EPE. The OP Settlements provide for the transfer back to EPE, upon the
Effective Date, of the ownership interests covered by the sale-leasebacks. In
exchange, the OP Settlements provide for EPE to release certain claims against
the Palo Verde Owner Participants and to pay certain fees and expenses.
On November 19, 1993, the Bankruptcy Court approved a settlement
agreement (the "APS Settlement") (Exhibit B-9) between EPE and Arizona Public
Service Company ("APS"), for itself and as operating agent of, and on behalf
of the other participants in, the Palo Verde Nuclear Generation Station,
settling, effective as of the Effective Date, the dispute between EPE and APS
regarding the amount and feasibility of cure by EPE of its defaults under
certain agreements and certain claims by EPE against APS.
On November 15, 1993, voting on the Plan was completed, with all
applicable classes of creditors and shareholders voting overwhelmingly -- and
in most cases unanimously or near unanimously -- in favor of the Plan. The
vote of the impaired classes of creditors and shareholders is summarized
below. Classes 4(a)-(i), 7, 8, 9, 10(a)-(b) and 14 were not impaired under
the Plan and were therefore conclusively presumed to have accepted the Plan by
operation of Section 1126(f) of the Bankruptcy Code, and no solicitation of
the votes of such classes was required.
Class Percent of Votes in Favor
By Dollar By Number of
No. Description Amount Class Members
1 First Mortgage Bonds 99.7% 97.5%
2 Second Mortgage Bonds 100.0 100.0
3 Revolving Credit Facility 100.0 100.0
5(a) to (c) Letters of Credit for 100.0 100.0
Maricopa PCB's
6 Rio Grande Resources Trust 100.0 100.0
11 Letters of Credit for 100.0 100.0
Farmington PCB's
12(a) Palo Verde Bondholders 99.7 98.4
12(b) Palo Verde Owner
Participants 100.0 100.0
13 General Unsecured 99.9 97.4
By Number
of Shares
15 Preferred Stock 93.1%
16 Common Stock 97.9
<PAGE> 9
On December 1 and 6, 1993, certain further technical amendments and
modifications to the Plan were made which did not require creditor or
shareholder approval. On December 8, 1993 (the "Confirmation Date"), the
Bankruptcy Court confirmed the Plan and approved the Transaction proposed in
this Application. In its Findings of Fact, the Bankruptcy Court unambiguously
emphasized that the Transaction was the only presently viable option for
allowing EPE to emerge from bankruptcy as a financially viable entity:
"The events of this case, including particularly the competitive
bidding process which involved SPS and the substantial preference
for the CSW Merger which was expressed by the constituencies . . .
demonstrate that no other alternative, including the alternative
presented by the SPS proposal, is or would be appropriate for EPE at
this time. Even if such other alternative were feasible, moreover,
it would not be consistent with the objectives of the Bankruptcy
Code or the best interests of the estate to delay EPE's emergence
from Chapter 11 to pursue such other alternative." Findings of Fact
para. 19 (emphasis added).
The Bankruptcy Court also stated that liquidation would be "extremely more
undesirable" and "would be inconsistent with EPE's public service
obligations." In addition, the Bankruptcy Court found that liquidation would
yield "piecemeal sales" from which all classes of "unsecured creditors and
interest holders would receive significantly less in liquidation than they
would under the Plan." Id. para. 20.
D. Treatment of Claims and Interests Under the Plan.
The total Transaction consideration will be approximately $2.1
billion, exclusive of cash retained by EPE and paid out to EPE creditors and
preferred shareholders prior to the Effective Date and exclusive of bonds to
be issued in pledge as security for other obligations. The Transaction
consideration will consist of securities of Reorganized EPE (the "New EPE
Securities"), new shares of CSW Common Stock, and cash. Because the Plan and
Merger Agreement allow CSW to substitute CSW Common Stock or cash for certain
of the New EPE Securities and to substitute cash for CSW Common Stock, the
exact amount of each form of consideration has not yet been determined;
however, it is currently anticipated that the consideration will consist of
approximately $773 million in CSW Common Stock, approximately $1.19 billion in
securities of Reorganized EPE, and approximately $149 million in cash. In
addition, because the amount of consideration to be paid to holders of EPE
Common Stock is subject to certain contingencies, the total Transaction
consideration may be somewhat higher than $2.1 billion.
Except as noted below, claims of secured creditors will be paid in
full, including post-petition interest, but with instruments that, after the
Effective Date, are likely to bear interest rates that are lower than the
corresponding existing obligations. Unsecured claims generally will receive
notes of Reorganized EPE and CSW Common Stock equal to 95.5% of their claims,
and post-petition interest from June 25, 1993 through the Effective Date; in
the case of Classes 11 and 13, this interest will be in lieu of all claims for
the period from the commencement of the case to the date such interest
payments cease in the event the Effective Date does not occur. Creditors in
Class 6 will be paid in full, but forego 15% of their interest claims prior to
<PAGE> 10
September 10, 1993. Other classes of claims are unimpaired, including claims
relating to pollution control revenue bonds ("PCB's"). The letters of credit
in Classes 5 and 11 supporting the PCB's will remain outstanding (or be
reinstated or replaced by new letters of credit) under negotiated arrangements
that will permit the favorable PCB financing to be preserved for the benefit
of Reorganized EPE. The claims in Class 12(b) related to the leases entered
into by EPE in connection with its sale and leaseback of certain interests in
the Palo Verde Nuclear Generating Station (the "Palo Verde Leases") are
compromised pursuant to the OP Settlements, and the claims of the Palo Verde
Bondholders in Class 12(a) are treated in a manner similar to the allowed
claims of unsecured creditors. Holders of EPE Preferred Stock will receive,
at CSW's election within one year after the Confirmation Date, either CSW
Common Stock or Reorganized EPE Preferred Stock with a value (calculated as
set forth in the Plan) of $68 million, or 82% of the stated value of the
shares of EPE Preferred Stock presently outstanding, plus accumulated
prepetition dividends, and holders of EPE Common Stock will receive, in CSW
Common Stock, between $3 and $4.50 per share of EPE Common Stock.
Further details regarding the amount and type of securities and
other consideration to be given to EPE shareholders and creditors, and the
rights and preferences of such securities, are set forth in Sections I.D.2.
and V.B. of the Disclosure Statement (Exhibit B-3). In this regard, it should
be noted that Sections I.D.2. and V.B. of the Disclosure Statement, which
describe the securities and other consideration to be issued under the Plan,
describe a number of alternative treatments which would apply if particular
classes voted against the Plan. As all classes entitled to vote have voted
in favor of the Plan, these alternative treatments are no longer applicable
and should be disregarded. In addition, certain other matters in the
Disclosure Statement -- in particular, the description of arrangements
relating to hedging transactions by EPE on pages 203-204 of the Disclosure
Statement -- have been superseded by subsequent modifications to the Plan.
The sections of the Disclosure Statement describing the securities and other
consideration to be issued under the Plan -- including Sections I.D.2. and
V.B. -- were not affected by these modifications.
1. EPE Common Stock.
For each share of EPE Common Stock outstanding at the time of the
consummation of the Transaction, holders of EPE Common Stock will receive at
least $3, based on a price of $29.4583 per share of CSW Common Stock, and not
more than $4.50, except as described in the next paragraph, worth of CSW
Common Stock. The amount (if any) in excess of $3 -- up to a maximum of $1.50
(the "Maximum Additional Consideration Amount") -- will depend on the amount
of proceeds realized with respect to certain assets and the amount of savings
realized from reductions in certain claims, and will be based on one of two
pricing methods: (i) if realized before the Confirmation Date, the amount of
additional CSW Common Stock will be based on a price of $29.4583 per share of
CSW Common Stock; (ii) if realized after the Confirmation Date and before the
Effective Date, the amount of CSW Common Stock will be based on the closing
price of CSW Common Stock on the date such proceeds and/or savings are
realized. After the Effective Date, EPE's rights in the assets and savings in
question will be transferred to a liquidation trust (the "Liquidation Trust")
in the event an amount less than the Maximum Additional Consideration Amount
<PAGE> 11
was paid to holders of EPE Common Stock on the Effective Date, and any further
net proceeds and savings will be distributed from the Liquidation Trust in
cash in the following order of priority: (i) first, pro rata to holders of
EPE Common Stock up to the Maximum Additional Consideration Amount, and (ii)
second, to Reorganized EPE for its own benefit.
In addition, holders of EPE Common Stock will receive "dividend
shares," i.e., additional shares of CSW Common Stock in lieu of dividends that
would be deemed to have been paid between the Confirmation Date and the
consummation of the Transaction, on the shares of CSW Common Stock to be
issued to holders of EPE Common Stock under the Plan, including dividends on
the dividend shares. The value of the "dividend shares" will be equal to the
amount of such dividends and will be based on the closing price of CSW Common
Stock on the relevant dividend payment dates.
2. Creditors and Preferred Shareholders.
The Plan provides for claims and interests of EPE creditors and
preferred shareholders to be discharged as set forth below. See Item
3.II.A.3.a. below for a summary description of the securities to be issued by
Reorganized EPE under the Plan ("the New EPE Securities").
Class 1 -- EPE First Mortgage Bonds. Allowed claims arising from or
relating to EPE First Mortgage Bonds (excluding bonds held as collateral
claims) will be discharged through the issuance of Reorganized EPE Series A
First Mortgage Bonds in the principal amount of $100 million, Reorganized EPE
Series B First Mortgage Bonds for the remainder of the claim, and cash for
claims for unpaid interim interest.
Class 2 -- EPE Second Mortgage Bonds. Allowed claims arising from
or relating to EPE Second Mortgage Bonds (excluding bonds held as collateral
claims) will be discharged through the issuance of Reorganized EPE Series A
Second Mortgage Bonds and cash for claims for unpaid interim interest.
Class 3 -- EPE revolving credit facility. Allowed claims arising
from or related to EPE's revolving credit facility, including EPE First
Mortgage Bonds and EPE Second Mortgage Bonds held as collateral for such
facility, will be discharged through (a) the issuance of, at the creditors'
respective elections, subject to certain limitations, either (i) Reorganized
EPE Class 3A Secured Notes under a term loan agreement in the amount of such
claims, secured by a combination of pledged Reorganized EPE Series X First
Mortgage Bonds and pledged Reorganized EPE Series X Second Mortgage Bonds or
(ii) Reorganized EPE Series C First Mortgage Bonds and Reorganized EPE Series
B Second Mortgage Bonds in an amount equal to one-third and two-thirds,
respectively, of the amount of such claims, and (b) cash for claims for unpaid
interim interest.
Class 5 -- Claims against EPE relating to the letters of credit
associated with the Maricopa Pollution Control Bonds. The letter of credit
issuers associated with the Maricopa PCB's have committed to provide
replacement letters of credit on certain terms, and will receive Reorganized
EPE Class 5A Secured Notes under term loan agreements, secured by pledged
Reorganized EPE Series Y Second Mortgage Bonds with respect to outstanding
draws and interest on the existing letters of credit, and cash for claims for
<PAGE> 12
unpaid interim interest and letter of credit fees. Post-Effective Date
reimbursement obligations under such replacement letters of credit will be
secured by pledged Reorganized EPE Series Y Second Mortgage Bonds. In the
event a letter of credit issuer does not provide a replacement letter of
credit, it will receive Reorganized EPE Series B Second Mortgage Bonds for
claims determined by the Bankruptcy Court to be secured claims and Reorganized
EPE Class 13 Senior Fixed Rate Notes for claims determined to be unsecured
claims.
Class 6 -- Claims asserted by the Rio Grande Resources Trust.
Holders of allowed claims relating to the Rio Grande Resources Trust, a trust
established for purposes of financing the purchase and enrichment of nuclear
fuel for use by EPE in connection with its interest in the Palo Verde Nuclear
Generating Station, will receive, at the holder's respective election, either
(a) Reorganized EPE Class 6A Secured Notes under a term loan agreement secured
by pledged Reorganized EPE Series Z Second Mortgage Bonds, or (b) Reorganized
EPE Series B Second Mortgage Bonds. In addition, they will receive cash for
claims for 85% of unpaid interim interest.
Class 11 -- Claims relating to the letter of credit associated with
the Farmington PCB's. The issuer of the letter of credit has committed to
provide a replacement letter of credit on certain terms, and allowed claims
relating to the letter of credit associated with the Farmington PCB's (other
than claims, if any, for unreimbursed amounts drawn to pay the principal
amount of the purchase price of Farmington PCB's that have not been canceled
or extinguished) will be discharged by distribution of a combination of
Reorganized EPE Notes and CSW Common Stock in the following amounts:
Reorganized EPE Class 13 Senior Notes (Floating or Fixed Rate Notes, at the
election of the claimants) in a principal amount equal to 30% of the amount of
such allowed claims, shares of CSW Common Stock with a value equal to 60% of
the amount of such allowed claims, and, at the election of Reorganized EPE,
Reorganized EPE Class 13 Senior Notes (Floating or Fixed Rate Notes, at the
claimant's election) or shares of CSW Common Stock in an amount equal to 5.5%
of the amount of such allowed claims. If the existing letter of credit is
drawn upon before the Effective Date to pay the principal amount of the
purchase price of any Farmington PCB's that have not been canceled or
extinguished, such claims will be discharged and satisfied in full (to the
extent not paid out of proceeds of a remarketing or refunding of the
Farmington PCB's) by distribution of Reorganized EPE Class 11 Senior Floating
Rate Notes under a term loan agreement in a principal amount equal to such
claims. In addition, holders will receive cash for certain interim interest
payments. Post-Effective Date reimbursement obligations under the replacement
letter of credit will be secured by pledged Reorganized EPE Series Y Second
Mortgage Bonds. If the issuer of the letter of credit does not issue a
replacement letter of credit, allowed claims relating to the letter of credit
will be discharged through the distribution of Reorganized EPE Class 13 Senior
Fixed Rate Notes in an amount equal to one-third of such claims, and CSW
Common Stock for the balance of such claims.
Class 12 -- Claims relating to Palo Verde Lease Obligation Bonds and
Secured Lease Obligation Bonds. The $700 million in allowed claims relating
to the Palo Verde lease obligation bonds and secured lease obligation bonds
will be discharged through pro rata distribution of the following securities
in the amount of 95.5% of the allowed claims: unsecured Reorganized EPE
<PAGE> 13
Series A Senior Notes in an amount equal to no less than one-third and no more
than two-thirds of the amount distributed for such claims, and shares of CSW
Common Stock equal to the remaining distribution amount. The Palo Verde Owner
Participants, which are also holders of claims relating to the Palo Verde
Leases, will transfer their interests in the leased Palo Verde Assets, release
their claims for any additional damage amounts under the Palo Verde Leases,
retain $288.4 million previously drawn under the related letters of credit,
and be released from claims by EPE and indemnified by Reorganized EPE for
claims by other creditors.
Class 13 -- General unsecured claims. General unsecured claims will
be discharged through the issuance of a combination of Reorganized EPE Notes
and CSW Common Stock in the following amounts: Reorganized EPE Class 13
Senior Notes (Floating or Fixed Rate Notes, at the election of the claimants)
in an amount equal to 30% of such claims, exclusive of post-petition fees and
costs; CSW Common Stock in an amount equal to 60% of the amount of such
claims, exclusive of post petition fees and costs; and Reorganized EPE Class
13 Senior Notes (Floating or Fixed Rate Notes, at the election of the
claimants) in an amount equal to 5.5% of such claims, or, at Reorganized EPE's
option, CSW Common Stock in an amount equal to 5.5% of the amount of such
claims, exclusive of post-petition fees and costs.
Class 15 -- EPE Preferred Stock. Allowed interests of holders of
EPE Preferred Stock will be discharged through the distribution of shares of
Reorganized EPE Preferred Stock, or, at the election of CSW (which election
must be exercised within one year after confirmation of the Plan) and in lieu
of all or a portion of such shares of Reorganized EPE Preferred Stock, shares
of CSW Common Stock, with an aggregate value, calculated as set forth in the
Plan, of $68 million.
Other Claims. The following claims will be unimpaired and their
legal rights unaltered: allowed claims relating to the Maricopa PCB's and
Maricopa Loan Agreements (Class 4), allowed secured claims not classified
elsewhere (Class 7); allowed priority claims (Class 8); allowed claims by
EPE's customers for refunds or for deposits (Class 9); claims relating to the
Farmington PCB's and Farmington Installment Sale Agreement (Class 10); and
allowed administrative convenience claims of small creditors ($100,000 or
less) (Class 14).
Interim Payments. Holders of certain claims will receive cash for
certain interim interest payments or other periodic payments prior to the
Effective Date. It is currently projected that such interim payments will
total approximately $166 million. The interest rate, duration and other
details of such payments vary by class and are set forth in the Plan and
described in the Disclosure Statement.
3. Cash in Lieu of Securities.
The Plan provides that, in lieu of any or all shares of CSW Common
Stock to be issued under the Plan, CSW may, in its sole discretion, pay cash
to the holders of certain classes of claims and interests, subject to the
following limitations: (a) cash payments to any class must be made pro rata
to all holders of allowed claims within that class, based on the dollar amount
<PAGE> 14
of the allowed claim held by each holder, and (b) CSW may not elect to pay
cash to the holders of EPE Preferred Stock unless CSW has also elected to pay
cash in lieu of stock to the holders of certain other claims.
E. Conditions to the Transaction and the Plan.
The consummation of the Transaction and the Plan is subject to a
number of conditions, including:
* entry of a final order by the Bankruptcy Court confirming the
Plan;
* receipt of all necessary regulatory approvals from the
Commission, the Federal Energy Regulatory Commission ("FERC"),
the Nuclear Regulatory Commission ("NRC") and the applicable
state regulatory authorities; expiration or termination of all
applicable waiting periods under the Hart-Scott-Rodino Act
without action by the Department of Justice and the Federal
Trade Commission; and receipt of rate orders from the Public
Utility Commission of Texas ("PUCT") and the New Mexico Public
Utility Commission ("NMPUC") establishing certain ratemaking,
accounting and regulatory treatments;
* resolution of certain contingent, disputed or allowed general
unsecured claims in a total amount not to exceed $20,000,000;
* receipt of an investment-grade rating for all publicly tradeable
Reorganized EPE Series A and B First Mortgage Bonds and
Reorganized EPE Series A Second Mortgage Bonds; and
* transfer back to Reorganized EPE of good and marketable title to
the leased Palo Verde Assets and resolution of the adversary
proceeding between EPE and the Palo Verde Owner Participants
without a material adverse effect on EPE or Reorganized EPE.
A number of these conditions have already been satisfied or have had
significant steps taken toward their satisfaction: the Plan was confirmed on
December 8, 1993; settlements were entered into on November 15, 1993 (and have
been approved by the Bankruptcy Court) resolving the adversary proceeding
between the EPE and the Palo Verde Owner Participants and providing for the
transfer back to Reorganized EPE of title to the leased Palo Verde Assets on
the Effective Date; a capital structure for Reorganized EPE has been designed
which Applicant believes will meet the rating agencies' requirements for an
investment-grade rating; and applications have been (or will shortly be) filed
with the FERC, NRC, PUCT and NMPUC.
In addition to the conditions described above, the parties'
obligations to consummate the Transaction are subject to a number of other
conditions which must be satisfied or waived, as set forth in the Plan and the
Merger Agreement and as further described in the Disclosure Statement. The
other conditions include, (a) under the Merger Agreement: standard closing
conditions relating to the accuracy of representations and warranties,
performance of covenants and agreements, absence of injunctions, receipt of
third-party consents, and receipt of closing certificates; issuance and
<PAGE> 15
listing of the new shares of CSW Common Stock; absence of a material adverse
effect on EPE or CSW or any fact or circumstance which may reasonably be
expected to give rise to such an effect on EPE; absence of any enactment or
order which would have a material adverse effect on EPE, CSW or the prospects
of CSW or Reorganized EPE; receipt of a no-action letter (or effectiveness of
a registration statement) as to the securities to be issued under the Plan and
Merger Agreement; qualification of the Reorganized EPE mortgage indentures
under the Trust Indenture Act of 1939 (to the extent required); effectiveness
of the Plan; and absence of any decision or enactment materially diminishing
the benefits and protections of the Confirmation Order to EPE, CSW, CSW Sub or
their subsidiaries; and (b) under the Plan: filing of Reorganized EPE's
charter; qualification of the Reorganized EPE note and mortgage indentures;
satisfaction or waiver of the conditions to consummation of the Merger
Agreement; and filing of notice with the Bankruptcy Court relating to the
fulfillment of Plan conditions.
F. Description of Assets Being Acquired.
As noted above, EPE is engaged in the generation and distribution
of electricity through an interconnected system to approximately 261,000
retail customers in El Paso, Texas, and an area of the Rio Grande Valley in
western Texas and southern New Mexico and to wholesale customers located in
southern California, Texas, New Mexico and Mexico in addition to selling power
on a wholesale basis to Texas-New Mexico Power Company, a non-affiliated
electric utility company ("TNP").
EPE's service area extends approximately 100 miles northwesterly
from El Paso to the Caballo Dam in New Mexico and approximately 120 miles
southeasterly from El Paso to Van Horn, Texas. The service area has an
estimated population of 761,000, including approximately 613,000 in the
metropolitan area of El Paso. As of December 31, 1992, EPE's largest
wholesale customers included Comision Federal de Electricidad (the national
electric utility of Mexico), Imperial Irrigation District (an irrigation
district in California), and TNP.
EPE's generating facilities have a net generating capacity of 1,497
MW, consisting of an entitlement of 600 MW from Palo Verde Nuclear Generating
Station Units 1, 2 and 3 and 104 MW from the Four Corners Generating Project,
and generating capacity of 246 MW from the Rio Grande Power Station, 478 MW
from the Newman Power Station and 69 MW from the Copper Station. These assets
are more fully described as follows:
Four Corners Generating Project. The Four Corners Generating
Project ("Four Corners") consists of five coal-fired generating units located
in northwestern New Mexico, each with a 739 MW capability. Three units (Units
1, 2 and 3) are owned solely by Arizona Public Service Company ("APS"). Units
4 and 5 are jointly owned by the following electric utilities: APS, Public
Service Company of New Mexico, Salt River Project Agricultural Improvement and
Power District, Southern California Edison Company, Tucson Electric Power
Company and EPE. All five units are operated by APS. EPE has an undivided 7%
interest in Units 4 and 5 of Four Corners. Four Corners is located on land
held under easements from the federal government and also under a lease from
the Navajo Nation. Certain of the transmission lines and all of the
contracted coal sources for the Four Corners project are also located on the
<PAGE> 16
territory of the Navajo reservation. Units 4 and 5 are located adjacent to a
surface-mined supply of coal. Units 4 and 5 are among the lowest-cost
coal-fired resources in the western United States.
Rio Grande Power Station. The Rio Grande Power Station, located in
Dona Ana County, New Mexico, adjacent to El Paso, Texas, consists of three
steam-electric generating units owned by EPE which have an aggregate
capability of 246 MW when operating entirely on natural gas. If natural gas
at the station is curtailed, the units operate primarily on fuel oil.
Newman Power Station. The Newman Power Station, located in El
Paso, Texas, consists of three generating units with an aggregate capability
of 266 MW and one combined-cycle unit with a capability of 212 MW, all of
which are owned by EPE. The units regularly operate on natural gas, but also
are capable of operating on fuel oil.
Copper Station. The Copper Station, located in El Paso, Texas,
consists of a 69 MW combustion turbine capable of operating on fuel oil or
natural gas and is used for peaking purposes. The combustion turbine and
other generating equipment at the station were sold and leased back by EPE in
1980 pursuant to a 20-year lease with an option to renew of up to seven years.
In 1992, the Bankruptcy Court granted EPE's motion to assume all of the
agreements related to the sale and leaseback transaction.
Palo Verde Nuclear Generating Station. The Palo Verde Nuclear
Generating Station is a 3,810 MW facility located outside of Phoenix, Arizona.
As of January 8, 1992, when EPE filed its petition for reorganization, EPE
owned or leased a 15.8% interest in each of Palo Verde Units 1, 2 and 3 and
the associated common plant (the "Palo Verde Assets"). Each Palo Verde Unit
has an operating capability of 1,270 MW. EPE currently owns 100% of its
interest in Unit 1 and 60.5% of its interest in Unit 3, and leases 100% of its
interest in Unit 2 and 39.5% of its interest in Unit 3. EPE shares in Palo
Verde power, energy entitlements and costs with six other utilities: APS,
Southern California Edison Company, Public Service Company of New Mexico, Salt
River Project Agricultural Improvement and Power District, Southern California
Public Power Authority and the Department of Water and Power of the City of
Los Angeles (collectively with EPE, the "Palo Verde Participants"). EPE is
separately licensed by the NRC to possess its interest in the Palo Verde
Assets. Necessary NRC approvals for the proposed indirect transfer of control
of EPE, and the return of the ownership interests in the leased Palo Verde
Assets to EPE, are being applied for in a combined NRC application (Exhibit D-
7), as discussed below in Item 4.V. Following NRC approval, and upon the
Effective Date of the Transaction, Reorganized EPE will be licensed by the
NRC to possess its interest in the Palo Verde Assets.
EPE's rights and obligations with respect to the Palo Verde Nuclear
Generating Station, exclusive of rights or obligations arising in respect of
sale-leaseback agreements, are governed by several interrelated agreements to
which the Palo Verde Participants are parties. In addition, the Merger
Agreement provides, as a condition to the effectiveness of CSW's obligation to
consummate the Transaction (and, therefore, also as a condition to the
effectiveness of the Plan), that good and marketable title to the leased Palo
Verde Assets be transferred to Reorganized EPE. The OP Settlements provide
for such transfer. Following consummation of the Transaction, EPE's interests
<PAGE> 17
in the Palo Verde Nuclear Generating Station will continue to be used for the
benefit of EPE's operations and customers. The Plan makes no change in the
extent of EPE's utilization of the Palo Verde Nuclear Generating Station, the
percentage of costs that EPE is to bear, or the percentage of capacity it is
entitled to receive.
Transmission Lines. EPE owns a 313-mile long, 345 KV transmission
line and associated substation equipment known as the Arizona Interconnection
Project. The Arizona Interconnection Project transmission line originates at
the Springerville Generating Station in Springerville, Arizona, and terminates
at EPE's Diablo Substation near the Rio Grande Power Station. The Arizona
Interconnection Project facilitates EPE's imports of energy from the Arizona
and New Mexico power grids.
EPE also owns a 230-mile long, 345 KV transmission line from the
Arroyo Substation near Las Cruces, New Mexico, to Albuquerque, New Mexico, at
which point EPE's entitlement from Four Corners is delivered from 150 miles of
transmission lines owned by Public Service Company of New Mexico. This 345 KV
transmission line regularly carries power from Four Corners, where EPE has a
major interconnection with the other five participants in Four Corners, to the
EPE service territory.
EPE also owns undivided interests in a 200-mile long, 345 KV
transmission line from the Newman Power Station across southern New Mexico to
Greenlee, Arizona. Specifically, EPE owns an undivided 40% interest in the
60-mile segment from Greenlee, Arizona, to Lordsburg, New Mexico; an undivided
57.2% interest in the 50-mile segment from Lordsburg, New Mexico, to Deming,
New Mexico; and a 100% interest in the 90-mile segment from Deming, New
Mexico, to El Paso, Texas. This line provides interconnections with Tucson
Electric Power Company to provide transmission for EPE's entitlement from the
Four Corners Generating Project and Palo Verde Nuclear Generating Station and
also adds stability, flexibility and reliability to EPE's systems.
Finally, EPE owns an undivided 66% interest in a 125-mile long, 345
KV transmission line running between EPE's Amrad Substation and EPE's Eddy
County Substation near Artesia, New Mexico. The line terminates with a direct
current converter facility connected with SPS, providing EPE and TNP, the
co-owner of the line and direct current converter, with 200 MW access to the
Southwest Power Pool.
Additional Information. Further information regarding EPE's
contracts and franchises is set forth in Section II.A. of the Disclosure
Statement. EPE's material contracts are identified in the exhibit index to
its 1992 Annual Report on Form 10-K (Exhibit H-2 hereto). EPE's balance sheet
at December 31, 1992 and its income statements for the three years ending
December 31, 1992 are contained in EPE's 1992 Annual Report on Form 10-K
(Exhibit H-2 hereto); 1993 year-end financial statements will be filed by
amendment when they become available.
G. Management Arrangements.
After the Confirmation Date and before the Effective Date, the
business, operations, activities and affairs of EPE will be managed by
substantially the same top management as on the date EPE filed for
reorganization, subject to such changes as may be determined by EPE's Board of
<PAGE> 18
Directors and the applicable provisions of the Merger Agreement. In December
1993, the Bankruptcy Court approved the terms of an early retirement program
to be offered to five senior officers of EPE. As of January 3, 1994, three of
the officers had accepted the offer and retired from EPE. After the Effective
Date, Reorganized EPE will be managed by a modified Board of Directors and
executive officers to be designated by CSW in consultation with EPE, as
discussed more fully in Sections XIII.A. and XIII.E. of the Disclosure
Statement under "Future Management of the Debtor," and shall be governed by
the Reorganized EPE Amended and Restated Articles of Incorporation and By-Laws
(Exhibits A-7 and A-8) hereto, respectively).
H. Reasons for Transaction.
The Transaction is expected to produce a number of benefits for CSW
and EPE, their customers, investors and creditors, and the communities they
serve. As a result of these benefits, the Transaction is in the public
interest and the interests of investors and consumers.
Bankruptcy-related benefits. Foremost among the benefits that will
result from the Transaction are benefits flowing from a consensual end to the
bankruptcy proceedings in which EPE has been mired since January 1992. By
ending the bankruptcy proceedings, the Transaction will provide substantial
immediate benefits to all EPE stakeholders and ratepayers and to the citizens
and States of Texas and New Mexico. Among other things, the bankruptcy
proceedings and related litigation have resulted in substantial direct costs
to the EPE estate. These costs are expected to total between $45 million and
$60 million (assuming that the Transaction is consummated and EPE emerges from
bankruptcy on December 31, 1994) or more (if the Transaction is consummated
after that date or is not consummated). In addition, the bankruptcy has:
* diverted EPE's resources away from the operation of its
business;
* created uncertainty for investors and customers and impaired
their ability to make long-term plans; and
* had a negative effect on business expansion plans and resulted
in the loss of economic growth opportunities in EPE's service
areas.
The Transaction will create a financially viable EPE with an investment-grade
credit rating. This will reopen EPE's access to the capital markets and
reduce EPE's cost of capital. As a result of the Transaction, EPE will become
part of a financially secure system and will become a more reliable and stable
corporation.
These benefits cannot be achieved by other means. EPE was unable
to implement a viable stand-alone plan of reorganization within any
predictable period of time despite protracted attempts to do so. No other
acquisition proposal obtained the support of creditors and interest holders
whose support is necessary for EPE to emerge from bankruptcy, and no other
alternative offers the overall benefits provided by the Transaction proposed
herein.
<PAGE> 19
Cost savings and synergies. Apart from bankruptcy-related
benefits, approximately $420 million in potential cost savings and synergies
from the Transaction have been estimated for the 1995-2004 period in the areas
of non-fuel operating and maintenance expenses, financial synergies, and
production and transmission costs. The projected cost savings and synergies
will help hold future rates and rate increases below what would otherwise
result from a stand-alone plan of reorganization.
Estimates of net savings in these areas during the 1995-2004 period
can be summarized as follows:
Non-Fuel O&M $236,000,000
Financial 152,000,000
Production and Transmission 34,000,000
Total Net Savings $422,000,000
Each of these areas is discussed in greater detail below.
Non-Fuel Operation and Maintenance ("O&M") Savings. Initial
studies indicate that substantial non-fuel O&M savings (including general and
administrative savings) can be achieved from the Transaction. Savings are
initially expected from the following areas:
* adoption of CSW "best business" practices and management
philosophy in the operation of EPE, and staff reductions to
levels more consistent with those of the four existing CSW
Electric Operating Companies;
* consolidation of functions such as investor relations, fuel
management, power plant engineering, nuclear oversight, capacity
planning, corporate legal services, and information processing
services;
* reduction in certain costs, including employee benefits, audit
fees, insurance premiums, and savings from reductions in
facilities; and
* leveraging the employee strength of the CSW System to allow for
personnel reductions in technical, professional and managerial
staff positions.
It is currently estimated that EPE and CSW will realize net non-fuel O&M
savings of $236 million during the 1995-2004 period.
CSW and EPE management do not anticipate that reductions of current
employees will occur through layoffs; however, management may consider other
alternatives, including attrition, transfers within the combined CSW-EPE
system, enhanced voluntary separation packages, and early retirement.
Although CSW intends to maintain a separate operating identity and
headquarters for EPE in El Paso, Texas, the Transaction will provide an
opportunity to integrate a number of corporate and administrative functions
which at present are separately performed by CSW and EPE. The integration of
certain duplicated functions in areas such as treasury, accounting, law,
<PAGE> 20
purchasing, investor relations, human resources, corporate planning, public
relations, system planning, fuel management and administration should result
in lower costs, since these costs are relatively fixed and do not vary
directly with an increase in the number of customers served.
The integration of certain corporate and administrative functions
will also result in the reduction of total corporate and administrative
expenditures that are non-labor in nature. Corporate programs and
expenditures which would be combined to reduce total expenditure levels
include insurance, audit fees, information processing, facilities, pensions
and benefits. Additional savings in other areas are achievable but have not
yet been quantified. The combination of these programs and/or related
expenditures and resulting reduction of costs would not adversely affect the
quality of these programs since the related dollars reflect the stand-alone
costs of performing similar functions. The Transaction provides the
opportunity to limit expenditures for many nondiscretionary items to a single
occurrence and to reduce total expenditures of both companies where economies
of scale or scope are present.
Financial Savings: The Transaction is designed to permit EPE to
emerge from bankruptcy with an investment grade credit rating on its senior
secured debt securities versus the non-investment grade rating its debt
securities would have if EPE were to remain a stand-alone entity. An
investment grade bond rating will reduce EPE's financing costs and improve its
financial flexibility by providing access to a much larger and lower cost
market for capital than exists for non-investment grade companies. It is
currently estimated that these financial savings will total up to $152 million
during the 1995-2004 period. In addition, it is expected that EPE will
realize further savings from the factoring of its accounts receivable through
CSWC.
Production and Transmission Cost Savings. The integration of EPE
and the CSW electric systems will be accomplished as set forth in Item
3.I.B.1.a. and will produce two types of cost savings: (1) fuel cost savings
from the displacement of higher-cost generation with more efficient
generation; and (2) capacity cost savings from the shared use of existing
system generating capacity to avoid the cost of building new capacity or
purchasing capacity from unaffiliated entities. Based on initial engineering
studies, net savings of at least $34 million over the 1995-2004 period are
expected, after consideration of the costs of system integration.
In the area of dispatch, the Transaction is expected to have a
positive impact on the dispatching of CSW and EPE generating facilities to
meet retail, wholesale, and off-system load. The ability to jointly dispatch
the merged system's generating capacity will result in improved coordination
and fuel savings. These savings will result from an improved ability to
schedule and commit each of the base load, intermediate load, and peaking
facilities of the combined CSW-EPE system in a more economical and efficient
manner.
Over the 1995-2004 period, EPE and CSW will exchange both energy
and capacity. However, on balance for the period, EPE is expected to be a net
exporter of relatively low-cost energy to CSW. Such exports will displace
what is projected to be higher-cost gas-fired generation of the existing CSW
<PAGE> 21
Electric Operating Companies and thereby reduce production costs of the
combined CSW-EPE system relative to the costs that would be experienced if EPE
and CSW were to continue separate operations.
In addition, the Transaction will reduce the risk and cost of power
purchases for EPE. EPE is projected to use a mix of capacity purchases and
unit construction to satisfy future capacity needs. Because EPE's capacity
needs are projected to increase in small increments from year to year (annual
increases are projected at approximately 30 MW in years that have no
retirements), and because EPE's projected capacity needs decrease in 1997 and
2002 due to the expiration of capacity sales contracts, incremental capacity
purchases would be needed until EPE has a sufficient capacity need to build an
efficiently sized generating unit. Because the operating agreement among the
CSW Electric Operating Companies provides a cost-based pricing mechanism for
capacity purchases, the Transaction will significantly reduce EPE's market
risk in its capacity costs and will produce capacity cost savings as EPE
replaces higher-cost firm power purchases it would otherwise have made had it
not become a part of the CSW System with capacity purchased at a lower cost
from one or more of the CSW Electric Operating Companies through the CSW
Operating Agreement. This substitution of purchased resources will reduce
EPE's purchased power costs and will at the same time produce additional net
revenue for the CSW Electric Operating Companies. The "at-cost" basis for
capacity purchases under the CSW Operating Agreement also should provide EPE
with a cost advantage over purchases at projected market prices. These
savings could increase significantly if the market for additional capacity
available to EPE in the late 1990's is smaller than currently projected.
EPE's purchase of CSW capacity will also provide EPE with greater
flexibility. Purchases of firm capacity from third parties typically require
the buyer to commit to specified levels of capacity over relatively long
periods. Under the CSW Operating Agreement, EPE would have the flexibility of
purchasing capacity each December for any projected shortfall for the next
year.
Other Savings. In addition to the savings and synergies quantified
above, CSW expects the Transaction to create opportunities for cost savings,
synergies and benefits in other areas that are not readily identifiable or
quantifiable at present, including those set forth below.
Expansion of Bulk Power Sales and Purchase Capability. As a result
of the Transaction, EPE will gain increased access to wholesale power markets
to the east, and the CSW Electric Operating Companies will gain increased
access to wholesale power markets to the west. The result will be to increase
the combined system's opportunities to purchase and sell bulk power, to
increase competition in bulk power markets, and to provide the combined
companies with opportunities to expand off-system sales and with options for
purchased power resources. This broader set of options will result in a more
economic mix of generated and purchased power to meet system demand, an
expansion of opportunity to market bulk power, increased opportunities to
create additional revenue sources and/or reduce supply costs, and better
system reliability.
<PAGE> 22
Coordination of Resource Planning. The Transaction will result in
a more efficient and effective resource planning process by providing an
opportunity to plan jointly for future needs. Through integration of the
resource planning process, the Transaction will enable the CSW Electric
Operating Companies and EPE to take advantage of the expanded diversity and
number of resource options afforded by the combined generation and power
supply mix.
There are three areas where this greater flexibility should prove
especially beneficial to EPE: (1) purchasing capacity; (2) participating in
renewable technology demonstrations; and (3) pursuing a wider range of
demand-side management programs. In each case, the combined CSW-EPE system
has more potential for efficient procurement and program development than
either EPE or CSW alone. This strengthened position could be critical to
meeting customers' needs should the capacity purchase market become very tight
or environmental or economic factors greatly increase the rate at which
demand-side management programs and/or renewable technologies are deployed.
Market volatility and rapidly changing technology pose greater risks for
relatively smaller utilities because of the more limited resources (human and
capital) available to be invested in exploring options and developing
innovative responses to change.
Finally, economic benefits are expected to accrue to EPE and CSW
from the Transaction as a result of added flexibility in making changes in the
types and timing of resource additions. The integrated resource plan of the
combined EPE/CSW system will result in a postponement of capital expenditures
and a consequent savings in capital costs which are expected to accrue in the
second decade of combined operations.
Reduction in Future Operating Systems Expenditures. Currently,
the CSW System and EPE must develop the necessary operational systems for
management information and customer service on an independent basis. After
consummation of the Transaction, these separate development activities will be
replaced by a CSW system-wide integrated development program for new systems.
This is expected to reduce the level of costs that would otherwise be
incurred. The development cost for new systems would be spread among a larger
number of companies, thereby lowering each company's allocated portion of the
development cost.
Item 2. Estimated Fees, Commissions and Expenses.
The projected fees, commissions and expenses to be paid or incurred
by CSW in connection with the Transaction are estimated as follows:
Holding Company Act filing fee (actual amount).. $ 2,000*
Hart-Scott Rodino filing fees................... 2,000*
Other filing fees............................... 2,000*
Legal fees and expenses:
Bracewell & Patterson........................ 600,000
Broyles & Pratt.............................. 2,500,000
Jones, Day, Reavis & Pogue................... 2,500,000
Milbank, Tweed, Hadley & McCloy.............. 4,250,000
<PAGE> 23
Sheinfeld, Maley & Kay....................... 300,000
Simons, Cuddy & Friedman..................... 150,000
Taichert, Wilson, Virtue, Wilson & Najjar.... 400,000
Vinson & Elkins.............................. 275,000
Other........................................ 200,000
Exchange and information agent's fees
and expenses................................. 600,000
Services of engineering and other consultants... 2,860,698
Accountants' fees and expenses.................. 400,000
Investment banking fees and expenses:
Morgan Stanley & Co. Incorporated............ 8,295,000
New York Stock Exchange listing fee............. 175,000
Printing........................................ 25,000
"Blue Sky" fees and expenses.................... 500
Miscellaneous expenses, including financial
consultants' fees, expert witness fees,
and reimbursed employee expenses............. 3,000,000
-----------
Total................................... $26,558,198
===========
No person to whom fees or commissions are to be paid in connection
with the proposed Transaction is an associate company or affiliate of CSW or
an affiliate of an associate company.
Item 3. Applicable Statutory Provisions.
The following sections of the Act and rules promulgated by the
Commission pursuant to the Act are or may be applicable to the Transaction and
other transactions described herein.
Transactions to which sections
Section of the Act are or may be applicable
- ------------------ ------------------------------
6 and 7 Issuance of CSW Common Stock by CSW, CSW Sub
Common Stock by CSW Sub, and New EPE Securities
by Reorganized EPE; letters of credit
supporting Maricopa and Farmington PCB's
9 and 10 Acquisition by CSW of CSW Sub Common Stock, and
through merger of CSW Sub into EPE, common
stock of Reorganized EPE; acquisition by CSW of
hedging instruments
Re-acquisition by EPE of ownership of the Palo
Verde Assets which were sold and leased back to
EPE
<PAGE> 24
Transactions to which sections
Section of the Act are or may be applicable
- ------------------ ------------------------------
13 CSWS charges to EPE
Rules
Rule 50 Issuance of CSW Common Stock by CSW and New EPE
Securities by Reorganized EPE
Rule 50(a)(3) Issuance of CSW Sub Common Stock by CSW Sub
Rule 51 Acquisition of hedging instruments
Rules 80-91 CSWS charges to EPE
Analysis
I. Acquisition of EPE by CSW.
Section 9(a)(1) makes it unlawful, without approval of the
Commission under Section 10, "for any registered holding company or any
subsidiary company thereof to acquire, directly or indirectly, any securities
or utility assets or any other interest in any business." Section 9(a)(1) is
applicable to the Transaction because, as a result of the formation of CSW Sub
and the merger of CSW Sub into EPE, CSW will acquire all outstanding shares of
common stock of CSW Sub and Reorganized EPE.
The Transaction complies with all applicable provisions of Section
10 of the Act and should be approved by the Commission. Among other things:
* The Transaction will not create detrimental interlocking
relations or concentration of control.
* The consideration to be paid to the various parties in the
Transaction is fair and reasonable.
* The Transaction will not unduly complicate the capital structure
of the CSW System.
* The Transaction does not involve an acquisition unlawful under
the provisions of Section 8 or detrimental to the carrying out
of the provisions of Section 11.
* The Transaction will serve the public interest by tending toward
the economical and efficient development of an integrated
electric utility system.
The standards set forth in each subsection of Section 10 are dealt with
separately below.
<PAGE> 25
A. Section 10(b).
Section 10(b) of the Act requires that the Commission approve a
proposed acquisition unless the Commission finds that:
"(1) such acquisition will tend towards interlocking
relations or the concentration of control of public-utility
companies, of a kind or to an extent detrimental to the public
interest or the interest of investors or consumers;
(2) in case of the acquisition of securities or utility
assets, the consideration, including all fees, commissions, and
other remuneration, to whomsoever paid, to be given, directly or
indirectly, in connection with such acquisition is not reasonable
or does not bear a fair relation to the sums invested in or the
earning capacity of the utility assets to be acquired or the
utility assets underlying the securities to be acquired; or
(3) such acquisition will unduly complicate the capital
structure of the holding company system of the applicant or will
be detrimental to the public interest or the interest of investors
or consumers or the proper functioning of such holding company
system."
1. Section 10(b)(1).
The Transaction satisfies the standards of Section 10(b)(1) because
it will not tend towards interlocking relations or the concentration of
control of public utility companies of a kind or to an extent detrimental to
the public interest or the interest of investors or consumers.
a. Interlocking Relations.
By its nature, the proposed Transaction will result in the creation
of interlocking relations between CSW and EPE, but these relations will not be
the sort of "detrimental" interlocking relations prohibited by
Section 10(b)(1). The Merger Agreement provides that the Board of Directors
of Reorganized EPE will be comprised of CSW's chief executive officer,
Reorganized EPE's chief executive officer and five other officers, and six
outside directors who are residents of EPE's service area or designated by CSW
for at least three years from and after the Effective Date. In addition, one
resident of EPE's service area or one member of Reorganized EPE's Board of
Directors will serve on CSW's Board of Directors. These interlocking
relationships are necessary to integrate EPE into the CSW System and will be
in the public interest and the interest of investors and consumers. The
public interest is served by bringing an end to the EPE bankruptcy and
providing EPE with the management needed to make it a viable operating entity
again. In addition, the Transaction is expected to result in a number of
benefits to investors and consumers, as described more fully in Item 1.H.
above. The interlocking relations resulting from the combination of CSW and
EPE are similar to those of all other registered systems and are not the sort
of relations intended to be prohibited by Section 10(b)(1).
<PAGE> 26
b. Concentration of Control.
Section 10(b)(1) is intended to prevent utility acquisitions that
would result in "huge, complex and irrational holding company systems,"
American Electric Power, 46 SEC 1299, 1307 (1978), or "an undue concentration
of economic power." Northeast Utilities, 47 SEC Docket 1270, 1281 (1990). In
permitting American Electric Power, a holding company significantly larger
than CSW, to acquire another electric utility company, the Commission observed
that, although the framers of the Act were "concerned about the evils of
bigness":
"they were also aware that the combination of isolated local
utilities into an integrated system afforded opportunities for
economies of scale, the elimination of duplicate facilities and
activities, the sharing of production capacity and reserves and
generally more efficient operations."
American Electric Power, 46 SEC 1299, 1309 (1978). Other recent decisions
confirm that the size of the combined system is not determinative. See
Entergy Corp., Rel. No. 35-25952 (Dec. 17, 1993); Northeast Utilities, 47 SEC
Docket 1270, 1279 (1990); Centerior Energy Corp., 35 SEC Docket 769, 771
(1986) (determination regarding the enlargement of a system should be on the
basis of all the circumstances, and not on the basis of size alone).
The Transaction will increase the size of the CSW System, but will
not result in a system that exceeds the economies of scale of current
electrical generation and transmission technology. The system will be
smaller, in terms of value of total assets, than 15 other utility systems in
the United States and, as the table below illustrates, will be significantly
smaller in terms of these categories than three other registered public
utility holding companies.
(As of December 31, 1992)
1992
Total Operating Electric Sales in
Assets Revenues Customers KWH
System ($ Millions)($ Millions) (Thousands) (Millions)
------ ----------- ------------ ----------- ---------
Entergy 14,240 4,116 1,725 63,905
+Gulf States 6,858 1,773 588 27,554
New Entergy 21,098 5,889 2,313 91,459
Southern Company 20,038 8,073 3,386 141,984
American Electric Power 14,215 5,045 2,808 110,851
CSW 9,829 3,289 1,599 51,845
+EPE 1,703 525 255 7,919
New CSW 11,532 3,814 1,854 59,764
<PAGE> 27
The Transaction will not significantly change the relationship
between the size of the CSW System and the balance of the electric utility
industry in the region. Compared to the recent acquisition of Gulf States
Utilities by Entergy, which resulted in an increase of almost 50% in the
Entergy system's total assets, more than 40% in its operating revenues, more
than 30% in electric customers and more than 40% in its electric sales (based
on 1992 figures), the acquisition of EPE by CSW would result in an increase of
only approximately 15 to 17% in the size of the CSW System in these same
categories. In addition, the CSW System will remain smaller in these
categories than other utilities in its region, including Entergy and Texas
Utilities, and will be comparable in size to another utility in the region,
Houston Lighting & Power. In addition, the Transaction will produce
significant benefits for the public, investors and consumers. Among other
things, as more fully discussed in Item 1.H. above, the proposed acquisition
will serve the public interest by bringing a prompt end to the EPE bankruptcy,
by providing EPE with the management capacity and financial reserves to make
it a viable entity, and by creating significant efficiencies and economies.
Section 10(b)(1) also requires the Commission to consider the
possible anti-competitive effects of the Transaction. Northeast Utilities, 47
SEC Docket 1270, 1282 (1990). The Transaction should not raise competitive
concerns for a number of reasons, which are described more fully in the expert
testimony to be submitted by CSW to the FERC in support of CSW's application
for FERC approval of the Transaction (Exhibit D-6). The testimony concludes
that the Transaction will not adversely affect competition because, among
other things: (1) CSW and EPE have not competed in the past; (2) CSW and EPE
will not dominate the bulk power market for any utility; (3) CSW and EPE will
not block market entry by controlling scarce resources such as generation or
fuel; (4) CSW does not have market power to affect short-term firm power
transactions; (5) CSW and EPE have not competed in or dominated the nonfirm
energy market, and competition in this market will be enhanced by recently
available open access tariffs through other utilities (including PSO and
SWEPCO) as well as an EPE open access tariff to be made effective upon
consummation of the Transaction; (6) CSW and EPE will not control transmission
paths that would otherwise provide competing alternatives to transmission
users; and (7) CSW and EPE will not adversely affect retail competition.
In addition, CSW and EPE each will make filings under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, for review
by the Department of Justice and the Federal Trade Commission, and under the
Federal Power Act, as amended, for approval by the FERC. These filings will
describe the effects of the Transaction on competition in the relevant
markets. CSW and EPE expect that the FERC, the Department of Justice and the
Federal Trade Commission will determine that the Transaction does not raise
any antitrust concerns. Finally, if the Transaction is consummated, EPE will
file an open access tariff providing for similar transmission services on
substantially the same terms as those provided by the open-access tariffs
filed by PSO and SWEPCO and approved by the FERC on November 9, 1993. Because
open access tariffs create a favorable environment for bulk power
transactions, the Transaction is likely to increase rather than decrease
competition in a number of important respects.
<PAGE> 28
2. Section 10(b)(2).
Section 10(b)(2) requires that the Commission approve the
Transaction unless it finds that the consideration, including all fees,
commissions and other remuneration, is unreasonable or does not bear a fair
relation to the sums invested in or the earning capacity of the utility to be
acquired.
a. Reasonableness of Consideration.
The consideration to be paid by CSW in connection with the
Transaction is reasonable and bears a fair relation to the earning capacity of
the utility assets underlying the securities to be acquired, in compliance
with Section 10(b)(2). As discussed in Item 1.D. above, the total Transaction
consideration payable by CSW and EPE will be approximately $2.1 billion,
exclusive of cash retained by EPE and paid out to EPE creditors and preferred
shareholders prior to the Effective Date and exclusive of bonds to be issued
in pledge as security for other obligations. A portion of the Transaction
consideration will be paid by Reorganized EPE in the form of securities of
Reorganized EPE and a portion will be paid by CSW in the form of new shares of
CSW Common Stock and/or cash. Because the Plan and Merger Agreement allow CSW
to substitute cash and/or CSW Common Stock for certain securities of
Reorganized EPE and cash for CSW Common Stock, the exact amount of each form
of consideration has not yet been determined; however, it is currently
projected that the consideration will consist of approximately $773 million in
CSW Common Stock, approximately $1.19 billion in securities of Reorganized
EPE, and approximately $149 million in cash. In addition, because the amount
of consideration to be paid to holders of EPE Common Stock is subject to
certain contingencies, the total Transaction consideration may be somewhat
higher than $2.1 billion.
On April 30, 1993, Morgan Stanley & Co. Incorporated ("Morgan
Stanley") delivered to the CSW Board of Directors a written opinion (Exhibit
J-1 hereto) that the consideration to be paid to the creditors and equity
holders of EPE is fair from a financial point of view to the holders of CSW
Common Stock. No limitations were imposed by the CSW Board of Directors upon
Morgan Stanley with respect to the investigations made or procedures followed
by Morgan Stanley in rendering its opinion. In connection with its opinion,
Morgan Stanley: (i) analyzed certain publicly available financial statements
and other information of EPE and CSW; (ii) analyzed certain internal financial
statements and other financial and operating data concerning EPE prepared by
the management of EPE; (iii) analyzed certain financial projections concerning
EPE prepared by the management of EPE; (iv) discussed the past and current
operations and financial condition and the prospects of EPE with senior
executives of EPE; (v) analyzed certain internal financial statements and
other financial operating data concerning CSW prepared by the management of
CSW; (vi) analyzed certain financial projections concerning CSW prepared by
the management of CSW; (vii) discussed the past and current operations and
financial condition and the prospects of CSW with senior executives of CSW,
and analyzed the pro forma impact of the Merger Agreement and the Plan on
CSW's earnings per share, consolidated capitalization and financial ratios;
(viii) reviewed the reported prices and trading activity for EPE's Common
Stock; (ix) compared the financial performance of EPE and the prices and
trading activity of EPE Common Stock with that of certain other comparable
<PAGE> 29
publicly-traded companies and their securities; (x) discussed the strategic
objectives of the Transaction with CSW and reviewed the amount and timing of
the cost savings and synergies resulting from the Transaction projected by
CSW; (xi) reviewed the financial terms, to the extent publicly available, of
certain comparable acquisition transactions; (xii) participated in discussions
and negotiations among representatives of CSW and EPE and their financial and
legal advisors; (xiii) reviewed the Merger Agreement and the Plan, and certain
related documents; and (xiv) performed other analyses and examination and
considered other factors deemed appropriate.
In addition, Barr Devlin & Co., Incorporated ("Barr Devlin")
(formerly Barr, Beatty, Devlin & Co.) has delivered a written opinion to the
Board of Directors of EPE, dated May 3, 1993 (Exhibit J-2 hereto), stating
that, as of the date of such opinion and based upon the procedures and subject
to the assumptions described in such opinion, the consideration to be paid to
the holders of EPE Common Stock in the Transaction is fair to the holders of
EPE Common Stock from a financial point of view.
Finally, it should be noted that the Plan has been approved by EPE
creditors and shareholders and the Bankruptcy Court. Under Section 1129 of
the Bankruptcy Code, the Bankruptcy Court may confirm the Plan only if, among
other things, "[c]onfirmation of the plan is not likely to be followed by the
liquidation, or the need for further financial reorganization, of the debtor
or any successor to the debtor under the plan." In paragraph 31 of its
Findings of Fact with respect to the Plan, the Bankruptcy Court so found.
Implicit in these findings of the Bankruptcy Court is a determination that the
debt portion of the capital structure of Reorganized EPE is reasonable and
bears a fair relation to the earning capacity of its underlying utility
assets. This in turn supports the reasonableness of the Transaction
consideration.
For all of the foregoing reasons, CSW believes that the
consideration bears a fair relation to the earning capacity of the utility
assets that will be owned or leased by EPE.
b. Reasonableness of Fees.
CSW believes that the overall fees, commissions and expenses
incurred and to be incurred in connection with the Transaction are reasonable
and fair in light of the size and complexity of the Transaction relative to
other transactions, that they are consistent with recent precedent, that they
meet the standards of Section 10(b)(2).
As set forth in Item 2, CSW has incurred or expects to incur a
total of approximately $26.5 million in fees, commissions and expenses in
connection with the Transaction. This amount is significantly less than the
$46.5 million approved by the Commission in connection with the acquisition of
Public Service of New Hampshire by Northeast Utilities, Northeast Utilities,
51 SEC Docket 934 (1992), and the $38 million approved by the Commission in
connection with Entergy's recent acquisition of Gulf States Utilities, Entergy
Corp., Rel. No. 35-25952 (1993).
<PAGE> 30
With respect to financial advisory fees, CSW believes that the fees
payable to its investment banker are fair and reasonable for similar reasons.
CSW retained Morgan Stanley as financial advisor in connection with its
consideration of possible business combinations, including a business
combination with EPE. As compensation for its financial advisory services in
connection with the Transaction, CSW agreed to pay Morgan Stanley: (i) an
advisory fee to reimburse for time and effort expended, (ii) an exposure fee
of $500,000 (to which paid advisory fees are credited), and (iii) a
transaction fee (against which any paid advisory and exposure fees are
credited) of 0.395% of the "Aggregate Value" of the Transaction (based on an
"Aggregate Value" of $2 billion or more). The "Aggregate Value" is defined in
the engagement letter between Morgan Stanley and CSW, dated June 5, 1992 as
follows: "The "Aggregate Value" of the transaction shall be the value on the
date of closing of the total consideration paid by CSW in connection with the
acquisition, including the value of any debt, capital lease, or preferred
stock obligations (including accrued interest and/or dividends thereon) of
[EPE] directly or indirectly assumed by CSW." Assuming an "Aggregate Value"
of $2.1 billion for the Transaction, the transaction fee payable to Morgan
Stanley upon consummation of the Transaction would be $8,295,000, against
which fees previously paid by CSW would be credited. In addition, CSW has
agreed to reimburse Morgan Stanley for out-of-pocket expenses, which include
travel, document procurement and delivery and fees of attorneys and other
professional advisors, engaged with CSW's consent, should their advice be
required. CSW has also agreed to indemnify Morgan Stanley against certain
liabilities, including liabilities under federal securities laws, relating to
or arising out of its engagement.
In one recent case, the Commission approved investment banking fees
equal to 0.96% of the aggregate value of the acquisition, The Southern
Company, 40 SEC Docket 350, 354 (1988), or nearly three times the investment
banking fee here on a percentage basis. In the Northeast Utilities-Public
Service of New Hampshire decision, the Commission approved approximately $10.6
million in financial advisory fees. Northeast Utilities, 51 SEC Docket 934
(1992). In its recent Entergy-Gulf States decision, the Commission approved
financial advisory fees of $8.3 million by Entergy to its investment banker.
Entergy Corp., Rel. No. 35-25952 (1993). The financial advisory fees to be
paid by CSW in connection with the Transaction are significantly smaller on a
percentage basis than those approved in Southern, significantly smaller in
dollar amount to those approved in Northeast Utilities, and comparable in
dollar amount to those approved in Entergy. Moreover, the Transaction here is
significantly more complex than the transactions involved in the Entergy,
Centerior and Southern orders, none of which involved a bankruptcy and its
associated risks, complexities and duration. Finally, the investment banking
fees to be paid reflect the competition of the marketplace. Investment
banking firms actively compete with each other to act as financial advisors to
merger partners. The investment banking fees to be paid by CSW in connection
with the Transaction reflect this competition for services.
3. Section 10(b)(3).
Section 10(b)(3) of the Act requires the Commission to determine
whether a proposed acquisition by a holding company will unduly complicate the
capital structure of the holding company system, or will be detrimental to the
public interest, the interest of investors or consumers or the proper
functioning of such holding company system. The proposed combination of EPE
<PAGE> 31
and CSW will neither unduly complicate the capital structure of the CSW System
nor will it be detrimental to the interests of investors or consumers or the
proper functioning of the CSW System. The only changes to the capital
structure of CSW and its subsidiaries (including Reorganized EPE) as a result
of the Transaction will be the acquisition by CSW of Reorganized EPE Common
Stock and the addition of the capital structure of Reorganized EPE. As in the
case of the CSW Electric Operating Companies, Reorganized EPE will have
publicly held debt and may have publicly held preferred stock, and all of its
common stock will be held by CSW. Moreover, the Plan requires that
Reorganized EPE's publicly traded mortgage bonds be rated "investment grade".
The capital structure of Reorganized EPE will, therefore, be generally similar
to the capital structures of the existing CSW Electric Operating Companies
and, in any event, will form only a small part of the capital structure of the
overall CSW System. Thus, the Transaction will not complicate the capital
structure of the CSW System.
If the Transaction had been consummated on June 30, 1993, the pro
forma consolidated capital structure of CSW as of such date would have been as
follows:
Transaction Pro Forma
(in $ millions)
Common Stock Equity $3,687 39.7%
Preferred Stock 429 4.6%
Long-Term Debt 3,843 41.4%
Short-Term Debt 1,324 14.3%
------ -----
Total $9,283 100.0%
(The foregoing pro forma figures assume that no cash is paid by CSW in lieu of
shares of CSW Common Stock; that CSW issues shares of CSW Common Stock in an
amount representing two-thirds of the allowed claims of the Palo Verde
bondholders; and that CSW issues no shares of CSW Common Stock in lieu of
Reorganized EPE Preferred Stock. The actual amounts will depend on market
conditions, elections by CSW and other factors.) CSW's pro-forma consolidated
common equity to total capitalization ratio of 39.7% is significantly higher
than Northeast Utilities' recently approved 27.6% common equity position and
comfortably exceeds the "traditionally acceptable 30% level". Northeast
Utilities, 47 SEC Docket 1270, 1279 & 1284 (1990).
The Reorganized EPE First and Second Mortgage Bonds will be
substantially similar to the first mortgage bonds issued by the CSW Electric
Operating Companies. However, it is anticipated that the Reorganized EPE
First and Second Mortgage Bonds will vary in certain respects from the
Commission's "Statement of Policy Regarding First Mortgage Bonds Subject to
the Public Utility Holding Company Act of 1935" (Release No. 35-13105) and the
amendments thereto (Release No. 35-16369). These variances from the Statement
of Policy are not material for purposes of the Section 10(b)(3) analysis. See
Exhibit A-21 hereto for a description of such differences.
<PAGE> 32
The Reorganized EPE Preferred Stock will be substantially similar
to the preferred stock issued by the CSW Electric Operating Companies.
However, it is anticipated that the Reorganized EPE Preferred Stock will vary
in certain respects from the Commission's "Statement of Policy Regarding
Preferred Stock Subject to the Public Utility Holding Company Act of 1935"
(Release No. 35-13106) and the amendments thereto (Release No. 35-16758). See
Exhibit A-22 hereto for a description of such differences. These variances
from the Statement of Policy are not material for purposes of the Section
10(b)(3) analysis.
Finally, it should be noted that, except for certain lock-up
provisions described in Item 3.II.A.1. below, the CSW Common Stock which CSW
proposes to issue has the same par value, voting rights and preference as to
dividends and distributions and has the same rights as the CSW Common Stock
presently outstanding. The only voting securities of CSW which will be
publicly held after the Transaction will be CSW Common Stock, and because all
of the Reorganized EPE Common Stock will be owned by CSW as a result of the
Transaction, there will be no publicly held minority common stock interest in
Reorganized EPE following the Transaction.
Interest of public, investors and consumers and proper functioning
of CSW System: The Transaction is in the public interest and the interests of
investors and consumers, and provides all with substantial benefits. EPE's
investors will benefit from an end to EPE's bankruptcy because their
investment in a bankrupt utility will be exchanged for more creditworthy
securities. Investors in existing EPE securities will receive equity or debt
of a financially stronger company -- CSW, in the case of recipients of CSW
Common Stock, or Reorganized EPE, in the case of recipients of New EPE
Securities. After the Transaction, consumers will enjoy rates which are lower
than would otherwise be necessary under a stand-alone plan of reorganization.
Further, the Transaction allows EPE to continue to fulfill its public service
obligations as a utility and assures its ability to provide efficient and
reliable public utility service (Findings of Fact paragraphs 20-21), while
maximizing the value for all EPE stakeholders. In addition, the public and
consumers will benefit from the greater resources that CSW can commit to
economic development of the territory served by EPE.
The Transaction is entirely consistent with the "proper
functioning" of a registered electric utility holding company system. EPE's
electric operations will be integrated with those of the existing CSW Electric
Operating Companies (see Item 3.I.B.1.a.). In addition, the combination will
result in substantial, otherwise unavailable benefits to the public and to
consumers and investors of both companies. The benefits to be generated from
the combination are further described in Item 1.H.
B. Section 10(c).
Section 10(c) establishes additional standards for approval of the
Transaction. Under Section 10(c), the Commission cannot approve:
"(1) an acquisition of securities or utility assets, or
of any other interest, which is unlawful under the provisions of
section 8 or is detrimental to the carrying out of the
provisions of section 11; or
<PAGE> 33
(2) the acquisition of securities or utility assets of
a public utility or holding company unless the Commission finds
that such acquisition will serve the public interest by tending
towards the economical and the efficient development of an
integrated public utility system."
1. Section 10(c)(1).
Section 10(c)(1) requires that the proposed acquisition be lawful
under the provisions of Section 8. Section 8 prohibits registered holding
companies from acquiring, owning interests in or operating both a gas and an
electric utility serving substantially the same area if prohibited by state
law. Because neither CSW nor EPE has or will have any direct or indirect
interest in any gas utility company, the issues raised under Section 8 are not
implicated by the Transaction.
Section 10(c)(1) also requires that the Transaction not be
detrimental to the carrying out of the provisions of Section 11. Section
11(b)(1) generally requires a registered holding company system to limit its
operations "to a single integrated public utility system, and to such other
businesses as are reasonably incidental, or economically necessary or
appropriate to the operations of such integrated public utility system."
Section 11(b)(2) directs the Commission "to ensure that the corporate
structure or continued existence of any company in the holding company system
does not unduly or unnecessarily complicate the structure, or unfairly or
inequitably distribute voting power among security holders, of such holding
company system."
a. Section 11(b)(2).
The CSW System currently consists of an integrated electric utility
system and other businesses that the Commission has previously approved as
reasonably incidental, or economically necessary or appropriate to the
operations of such system. Since EPE will be engaged solely in the electric
utility business and plans to sell its only subsidiary prior to the Effective
Date, the Transaction will not add any new businesses to the CSW System.
With respect to the integration of EPE and the CSW System, Section
2(a)(29)(A) of the Act defines an integrated public utility system, as applied
to an electric utility company, as:
"a system consisting of one or more units of
generating plants and/or transmission lines and/or
distribution facilities, whose utility assets,
whether owned by one or more electric utility
companies, are physically interconnected or capable
of physical interconnection and which under normal
conditions may be economically operated as a single
interconnected and coordinated system confined in
its operations to a single area or region, in one
or more States, not so large as to impair
(considering the state of the art and the area or
region affected) the advantages of localized
management, efficient operation, and the
effectiveness of regulation."
<PAGE> 34
As this language suggests, and as the Commission has previously observed,
Section 11 is not intended to impose "rigid concepts" but rather creates a
"flexible" standard designed "to accommodate changes in the electric utility
industry." UNITIL Corp., 51 SEC Docket 562 (1992). Thus, Section 11
expressly directs the Commission to consider the "state of the art" in
determining whether a system is capable of efficient operation and to apply
"normal conditions" as the standard for determining whether a system may be
economically operated as a single coordinated system.
Recent changes in the law -- in particular, the Energy Policy Act
of 1992 and its provisions for mandatory wholesale wheeling -- and the
increasingly competitive and interconnected market for wholesale power have
created significant changes in the electric utility industry and have
redefined what is the "state of the art" and what conditions are "normal." In
addition, the Energy Policy Act expands the means for achieving physical
interconnection and the economic operation and coordination of utilities with
non-contiguous service territories.
i. Interconnection.
EPE is physically interconnected with the CSW electric utility
system through the transmission system of SPS. SPS and EPE are interconnected
at EPE's transmission substation near Artesia, New Mexico. SPS has three
points of interconnection with the CSW Electric Operating Companies: a 115 KV
interconnection with WTU near WTU's Shamrock substation; a 230 KV
interconnection with PSO at the Oklahoma-Texas state line by a 230 KV
transmission line, jointly owned by PSO and SPS, connecting SPS's
Harrington/Nichols substation and PSO's Elk City substation; and a 345 KV
interconnection with PSO at PSO's Oklaunion substation. In order to gain
access to the SPS transmission system, EPE and CSW (through CSWS, as agent for
PSO, WTU, SWEPCO and CPL) filed an application with the FERC on November 4,
1993 (Exhibit D-5) seeking an order pursuant to Section 211 of the Federal
Power Act to require SPS to provide firm and non-firm transmission services in
connection with the transfer of power and energy between the EPE and CSW
control areas at rates and on terms and conditions that the FERC determines to
be just and reasonable. Section 211 authorizes the FERC, upon application of
any electric utility and after giving public notice and affording an
opportunity for an evidentiary hearing, to issue an order requiring any other
electric utility to provide transmission services, including any enlargement
of transmission capacity needed to provide such services.
In connection with its request of SPS to provide the required
transmission services, CSW conducted load flow studies and stability studies
to determine the extent to which transmission system modifications would be
required in order for the necessary services to be provided. The results of
those studies were submitted to the FERC with the Section 211 application
filed on November 4, 1993 and indicate that, at most, only minor system
modifications would be needed to provide bi-directional firm service across
the SPS system in conjunction with the coordination of the EPE and CSW systems
and to assure that such service will not interfere with reliable SPS system
operations. To assure that non-firm (interruptable) service can be provided
without excessive curtailments, it may be necessary to increase transformer
capacity at SPS's Eddy County substation. To assure that firm service can be
<PAGE> 35
provided throughout the year on this basis, it may be necessary, in addition,
to increase transformer capacity at SPS's Tuco substation and at WTU's
Shamrock substation and to install capacitor banks to support voltage levels
at the Oklaunion, Tuco and Shamrock substations. Moreover, CSW study results
indicate that SPS can provide substantial non-firm service in shoulder and
off-peak hours without making any system modifications at all.
The physical interconnection requirement of Section 2(a)(29)(A) can
be satisfied by means of a contract path. In past instances, discussed below,
the Commission has found that utility assets are physically interconnected
where there is an agreement giving two affiliated utilities the right to use a
non-affiliated utility's transmission system in order to transmit power
between such utilities.
In Centerior Energy Corp., 35 SEC Docket 769 (1986), the Commission
found that the Cleveland Electric Illuminating Company and Toledo Edison
Company were interconnected under the Act by a power transmission line, owned
by an unaffiliated company, that the companies had the right to use. The
service areas of Cleveland Electric and Toledo Edison were 50 miles apart,
separated by the service area of Ohio Edison Company. A 345 KV transmission
line extended through the service areas of Cleveland Electric, Ohio Edison and
Toledo Edison, but each company owned only that portion of the line which
extended over its service territory. Pursuant to an agreement among the
members of a regional power pool, capacity of the transmission line was
available for use by Cleveland Electric and Toledo Edison as long as such use
did not materially interfere with the power pool's coordinated operations.
Although the service areas of the affiliated companies, Cleveland Electric and
Toledo Edison, were separated by the service area of a non-affiliated company,
Ohio Edison, the Commission found that this agreement and the coordinated use
of transmission lines satisfied the Act's requirement of physical
interconnection.
In Northeast Utilities, 47 SEC Docket 1270 (1990), Northeast
Utilities, a registered holding company, sought Commission approval to acquire
Public Service Company of New Hampshire ("PSNH"), an electric public utility
company in bankruptcy reorganization proceedings. The transmission lines of
Northeast Utilities and PSNH were interconnected through a transmission line
owned by Vermont Electric Power Company. The transmission lines of Northeast
Utilities, PSNH and Vermont Electric constituted a part of the 345 KV
Northfield-Scobie line. Vermont Electric and other Vermont utilities entered
into an agreement with Northeast Utilities to provide service to Northeast
Utilities and PSNH over Vermont Electric's portion of the Northfield-Scobie
line. On the basis of this right of use agreement, the Commission found that
the combined Northeast-PSNH system formed a single integrated public utility
system and satisfied the requirements of Section 2(a)(29)(A). Northeast
Utilities, 47 SEC Docket at 1285. See also Electric Energy, Inc., 38 SEC 658
(1958), in which the Commission found that, where none of the companies in a
utility system owns the full length of a transmission line connecting them to
the facility to be acquired, the contractual right to use the unowned portions
of the transmission facility constituted the physical interconnection required
by the Act.
<PAGE> 36
In UNITIL Corp., 51 SEC Docket 562 (1992), the Commission has found
that, where utilities had no transmission system at all, contractual
arrangements with non-affiliated companies for transmission service were
sufficient to satisfy the physical interconnection requirement of the Act.
Through its Section 211 application with the FERC, CSW intends to
enter into an agreement with SPS giving EPE and PSO the right to use the SPS
transmission system connecting the utility assets of EPE with those of PSO.
This contractual right to use the SPS transmission facilities satisfies the
physical interconnection requirement of Section 2(a)(29)(A).
Section 2(a)(29) also provides that the interconnection requirement
also may be satisfied if the utility assets of the combining systems are
capable of physical interconnection even though no such interconnection exists
at the time the application is approved. The Commission has found that
proposals to contract for or construct physical connections between utilities
in a single system satisfy the requirement of interconnection under Section
2(a)(29)(A). See New England Electric System, 38 SEC 193, 198-99 (1958)
(engineering studies and testimony showing feasibility of direct
interconnections among four small systems satisfied the requirement of the Act
that utilities be "capable of physical interconnection"). See also Panhandle
Eastern Pipe Line Co. v. Securities and Exchange Comm'n, 170 F.2d 453, 462
(8th Cir. 1948) (district court upheld Commission's decision that proposal to
construct pipeline connecting utilities demonstrated system was capable of
interconnection, finding that proposed pipeline was not "so illusory . . .
that the Commission could not consider its construction in determining the
propriety of the proposed plan of compliance"). If wheeling through the SPS
system cannot be obtained on a timely basis or ultimately is determined not to
be available under the Federal Power Act, CSW would implement an alternative
plan of integration. Alternatives available to CSW include construction of
transmission facilities by one or more of the CSW Electric Operating
Companies.
ii. Single Interconnected and Coordinated System.
Under normal conditions, EPE and the CSW Electric Operating
Companies may be economically operated as a single interconnected and
coordinated system, as required by
Section 2(a)(29)(A).
After consummation of the Transaction, the combined CSW-EPE system
will be dispatched initially using either voice or data link communications
with only minimal incremental costs (i.e. $300,000 to $500,000). Hourly
preset schedules will be arranged each day and such schedules will be subject
to change as necessary to accommodate changing loads, fuel prices,
"off-system" bulk power purchase and sale opportunities, generator
availability and transmission constraints, and other factors. CSW believes
that joint dispatch by means of hourly preset schedules will realize the
majority of the cost savings of joint dispatch. However, in the future, CSW
anticipates that it will be desirable to dispatch EPE on a minute to minute
basis with the current CSW Electric Operating Companies in order to increase
operating flexibility. The facilities required to accomplish such "real time"
dispatch could be completed after the CSW energy management facilities are
upgraded in 1997. The incremental costs of extending the planned upgrade to
include EPE would not exceed $100,000 to $200,000.
<PAGE> 37
The Commission has held that voice dispatch for utilities separated
geographically but within the same system may be operated as a single
interconnected and coordinated system. See Centerior Energy Corp., 35 SEC
Docket 769, 775 (1986). Accordingly, CSW believes that the dispatch
arrangements described above will satisfy the requirements of the Act.
iii. Single Area or Region.
The combined CSW-EPE system will be confined in its operations to a
single region in several states, as required by Section 2(a)(29)(A). EPE and
the CSW Electric Operating Companies subsidiaries provide retail electric
service in geographically contiguous states -- New Mexico, Texas, Oklahoma,
Arkansas and Louisiana. The Commission has found that utility systems
extending over several states within the same region satisfy the requirements
of the Act. See Electric Energy, 38 SEC 658 (approving acquisition where
addition of the acquired system extended the existing service area of the
applicants by as much as 100 miles). See also Northeast Utilities, 47 SEC
Docket 1270 (approving acquisition where the facilities and service areas of
the two companies were located in contiguous states).
iv. Localized Management, Efficient Operation and Effective
Regulation.
The combined CSW-EPE system will not be so large as to impair the
advantage of localized management, efficient operation, and the effectiveness
of regulation, as required by Section 2(a)(29)(A). EPE will continue to have
local management and directors and will remain headquartered in El Paso,
Texas. CSW will provide support services for its operations in El Paso. As
discussed in Item 1.H. above, the Transaction will also improve the efficiency
of operation and service by EPE.
Finally, the Transaction will not impair the effectiveness of regulation
of either EPE or CSW. EPE will continue to be subject to regulation by both
the PUCT and the NMPUC. Intra-system transactions between EPE and affiliated
CSW companies would be subject to regulation by the Commission, as are other
CSW System transactions. Wholesale contracts between EPE and other companies,
including the CSW Electric Operating Companies, will continue to be subject to
regulation by the FERC. EPE's ownership interest in Palo Verde will continue
to be regulated by the NRC.
b. Section 11(b)(2).
In addition, the Transaction will not unduly or unnecessarily complicate
the capital structure of the CSW System or unfairly or inequitably distribute
voting power among security holders of such system. The resulting capital
structure is fully discussed in Item 3.I.A.3. above. Voting power is
equitably and fairly distributed among the security holders of CSW and its
current subsidiaries, which have been approved by the Commission in previous
proceedings. The capital structure of EPE, which will become a wholly owned
subsidiary of CSW as a result of the Transaction, will be generally similar to
that of the existing CSW Electric Operating Companies. All outstanding
preferred stock of CSW's utility subsidiaries following the Transaction,
including that of EPE, will contain the voting provisions required by the
Commission. The Transaction is therefore consistent with Section 11(b)(2).
<PAGE> 38
2. Section 10(c)(2).
Section 10(c)(2) requires the Commission to approve a proposed
transaction only if it will serve the public interest by tending towards the
economical and efficient development of an integrated public utility system.
For the reasons discussed above, the CSW-EPE system will be an integrated
public utility system. In addition, as described in Item 1.H. above, the
Transaction is expected to result in approximately $420 million in net cost
savings and synergies during the 1995-2004 period and will therefore tend
towards the "economical and efficient" development of an integrated public
utility system.
3. Section 10(f).
Section 10(f) provides that "[t]he Commission shall not approve any
acquisition as to which an application is made under this section unless it
appears to the satisfaction of the Commission that such state laws as may
apply in respect of such acquisition have been complied with, except where the
Commission finds that compliance with such state laws would be detrimental to
the carrying out of the provisions of Section 11." As described in Item 4.
below, CSW intends to comply with all applicable state laws in respect of the
Transaction. In addition, CSW's obligation to consummate the Transaction is
conditioned, among other things, on the receipt of all requisite state
regulatory approvals.
II. Other Transaction-Related Action.
A. Issuances of Securities by CSW and Reorganized EPE.
Section 6(a) of the Act prohibits the issuance of securities by a
registered holding company except in accordance with an effective declaration
under Section 7. Section 7 in turn sets forth the standards applicable for
the issuance of securities by a registered holding company or a subsidiary
thereof. Under Section 7(c):
"[t]he Commission shall not permit a declaration regarding
the issue or sale of a security to become effective unless
it finds that (1) such security is (A) a common stock . . .
(B) a bond (i) secured by a first lien on physical property
. . . or (iii) secured by any other assets of the type and
character which the Commission . . . may prescribe as
appropriate in the public interest or for the protection of
investors . . . . or (2) such security is to be issued or
sold solely (A) . . . for the purpose of effecting a merger,
consolidation or other reorganization . . . ."
Section 7(g) of the Act states in pertinent part that if a state regulatory
body informs the Commission that the issuance of securities does not comply
with applicable state laws, then the Commission "shall not permit a
declaration regarding the act in question to become effective until and unless
the Commission is satisfied that such compliance has been effected."
<PAGE> 39
If the requirements of Sections 7(c) and (g) are satisfied, Section 7(d)
requires the Commission to permit the issuance of a security unless:
(1) the security is not reasonably adapted to the security structure
of the declarant and other companies in the same holding company
system;
(2) the security is not reasonably adapted to the declarant's earning
power;
(3) financing by the issue and sale of the security is not necessary
or appropriate;
(4) the fees paid in connection with the issue are unreasonable;
(5) the security is a guaranty of such liability as to be an improper
risk; or
(6) the terms of issuance or sale are detrimental to the public
interest or the interest of investors or consumers.
As set forth more fully below, the proposed issuances of securities under the
Plan and Merger Agreement in connection with the Transaction meet the
standards of Section 7.
1. Issuance of Common Stock by CSW.
Under the Plan and the Merger Agreement, CSW may issue a maximum of
approximately $925 million in CSW Common Stock to EPE creditors and
shareholders, although because of certain elections, the actual amount of CSW
Common Stock is presently expected to be less. In addition, the Merger
Agreement provides that certain options to purchase EPE Common Stock, if not
exercised prior to the Effective Date, will be converted into options to
purchase shares of CSW Common Stock. For the reasons set forth below, the
issuance by CSW of new shares of CSW Common Stock pursuant to the Plan and
Merger Agreement will comply with the standards of Section 7.
Section 7(c). The issuance is clearly permitted by Section 7(c).
First, CSW Common Stock is a type of security permitted by Section 7(c)(1)(A).
Second, the issuance of CSW Common Stock is an integral part of the
reorganization of EPE contemplated by the Plan and therefore authorized by
Section 7(c)(2)(A). The Commission has allowed the issuance of common stock
to effect the reorganization and acquisition of a bankrupt utility. See
Northeast Utilities, 47 SEC Docket 1270 (Dec. 21, 1990).
Section 7(d)(1). The CSW Common Stock to be issued is consistent with
the existing capital structure of CSW and the CSW System. As the Commission
has previously stated, "common stock is the cornerstone of a company's capital
structure." Northeast Utilities, 47 SEC Docket 1270 (1990). As of September
30, 1993, approximately 188 million shares of CSW Common Stock were
outstanding. The new shares of CSW Common Stock will be of the same rank as
these outstanding shares of CSW Common Stock, will have the same par value and
voting rights, and will have the same rights, privileges and preference as
<PAGE> 40
to dividends and distributions as the shares of CSW Common Stock currently
outstanding. The sole difference between the new shares of CSW Common Stock
and other shares is that holders of large blocks of the new shares will be
prohibited from disposing of such shares during temporary "lock-up periods"
specified in the Plan. These restrictions are intended to avoid having a
large number of shares of CSW Common Stock sold into the market all at once,
thereby increasing volatility in the market for CSW Common Stock. These
restrictions are described more fully on pages 186 through 188 of the
Disclosure Statement and will not apply to holders of 5,000 shares or less.
Section 7(d)(2). The new shares of CSW Common Stock will be reasonably
adapted to the earning power of CSW. At 1993 dividends-per-share levels of
$1.62 per share, assuming that a total of 25 million new shares of CSW Common
Stock are issued in connection with the Transaction, and disregarding the
effect on dividends of the lock-up periods provided by the Plan, the new
shares of CSW Common Stock would require dividend payments aggregating
approximately $40.5 million per year. In fact, because the payment or accrual
of dividends is deferred as to certain shares subject to the lock-up
provisions described above, dividend requirements of the new shares are likely
to be lower than this amount. As set forth more fully in the projected
statement of operations of EPE in the Disclosure Statement, EPE is expected to
have net income applicable to common stock (all of which will be held by CSW)
of approximately $51 million in 1995, $53 million in 1996, and $62 million in
1997, rising to $77 million in 2001.
Section 7(d)(3). The Commission has previously approved the issuance of
common stock to finance corporate acquisitions under Section 7(d)(3) of the
Act, including the issuance of common stock to creditors and equity holders in
connection with the acquisition of a bankrupt utility. See Northeast
Utilities, 47 SEC Docket 1270 (1990), 51 SEC Docket 504 (1992). Because CSW
is a financially strong company, the use of CSW Common Stock as part of the
Transaction consideration is calculated to attract investors at reasonable
cost and to fund the Transaction as economically and efficiently as possible.
Section 7(d)(4). The fees, commissions and other remuneration incurred
in connection with the Transaction and the EPE bankruptcy proceeding are
discussed in Items 2. and 3.I.A.2.b. of this Application.
Section 7(d)(5). This subsection applies only to the guarantee or
assumption of liability on securities of another company and is therefore
inapplicable to CSW's proposed issuance of new shares of CSW Common Stock
under the Plan and Merger Agreement.
Section 7(d)(6). The issuance of the CSW Common Stock is clearly in the
public interest and the interest of investors and consumers. The CSW Common
Stock is an integral part of a plan of reorganization which will permit EPE to
emerge from bankruptcy and a Transaction which is expected to achieve
identified cost savings of approximately $420 million. As described above in
Item 1.H. of this Application, the public benefits from the Transaction
include benefits to EPE's creditors, shareholders and ratepayers arising from
the end of EPE's lengthy and costly bankruptcy and cost savings and synergies
which will help hold future rates below what would otherwise be necessary
under a stand-alone plan of reorganization.
<PAGE> 41
Section 7(g). No approval is required under any state law for CSW to
issue shares of CSW Common Stock.
2. Issuance of CSW Sub Common Stock.
CSW Sub will be formed solely for purposes of effecting the Transaction,
and all shares of CSW Sub Common Stock will be issued to CSW and held by it
until consummation of the Transaction, at which time such shares will be
converted into shares of Reorganized EPE Common Stock pursuant to section
2.8(a) of the Merger Agreement. Prior to the Transaction, CSW Sub will not
directly or indirectly engage in any business activities, incur any
contractual liabilities or obligations, enter into any agreements or
arrangements, or be subject to or bound by any obligation or undertaking prior
to the consummation of the Transaction except as contemplated by the Merger
Agreement. To the extent that the various provisions of Section 7 of the Act
are applicable to the issuance of CSW Sub Common Stock, such issuance is
permitted for substantially the same reasons as the issuance of CSW Common
Stock discussed in Item 3.II.A.1. above.
3. Issuance of New EPE Securities.
Under the Plan, Reorganized EPE will issue Reorganized EPE First
Mortgage Bonds (Series A, B, C and X) in the maximum aggregate principal
amount of up to $400 million; Reorganized EPE Second Mortgage Bonds (Series A,
B, X, Y and Z) in the maximum aggregate principal amount of up to $500
million; Reorganized EPE Secured Notes (Classes 3A, 5A and 6A) in the maximum
aggregate principal amount of up to $250 million; Reorganized EPE Senior
Floating Rate Notes (Classes 11 and 13) in the maximum aggregate principal
amount of up to $125 million; Reorganized EPE Senior Fixed Rate Notes (Series
A and Class 13) in the maximum aggregate principal amount of up to $525
million; and Reorganized EPE Preferred Stock with a maximum aggregate value
(calculated as set forth in the Plan) of $68 million. These maximum levels
reflect the options of CSW and creditors for distributions of securities, as
discussed below, and bonds to be issued in pledge as security for other
obligations, and therefore exceed the total amount of New EPE Securities
projected to be issued elsewhere in this Application. As set forth more fully
below, the issuance of these securities meets the requirements of Section 7 of
the Act and should be approved by the Commission. CSW has assumed, for
purposes of this Application, that Section 7 applies to EPE's issuance of the
New EPE Securities at a time contemporaneous with the Transaction, even though
EPE is not technically a "registered holding company or subsidiary company
thereof" within the meaning of Section 7(a) until after the Transaction has
been consummated. A summary of the terms of the New EPE Securities is set
forth below.
In addition, pursuant to the Plan, holders of the Reorganized EPE Series
A and Series B First Mortgage Bonds and the Reorganized EPE Series A Second
Mortgage Bonds have the right (to be exercised not later than five days before
the Effective Date) to have Reorganized EPE cause to be underwritten and sold
in a registered secondary offering such bonds within 60 days after the
Effective Date. To the extent that such sales does not provide the holder
with net proceeds equal to the principal amount of the bonds so sold, then
<PAGE> 42
Reorganized EPE will pay such holder cash in an amount equal to such
deficiency. An aggregate of no more than 50% in aggregate of such bonds may
be so underwritten. Reorganized EPE will be responsible for all costs and
expenses of any such sale.
a. Description of Securities.
i. First Mortgage Bonds.
The Reorganized EPE First Mortgage Bonds will consist of Series A, B, C
and X and will be issued under an indenture, pursuant to which State Street
Bank and Trust Company will act as Trustee (the "FMB Indenture") (Exhibit A-13
hereto).
The Series A and Series B First Mortgage Bonds will mature on the fifth
and fifteenth anniversaries of the Effective Date, respectively; provided
that, by timely notice to the recipients thereof, CSW may elect another
maturity for such series of not less than five nor more than thirty years
which will be in increments of five years if a maturity of greater than
fifteen years is chosen. The Series C First Mortgage Bonds will mature on the
eighth anniversary of the Effective Date or such shorter maturity as CSW may
elect. The Series A, B and C First Mortgage Bonds will bear interest semi-
annually in arrears at a per annum rate equal to a "Market Basket Rate," as
defined in the Plan, to be determined pursuant to Schedule D to the Plan based
on the actual maturity and rating of each series of such bonds.
Neither the Series A nor the Series B First Mortgage Bonds will be
redeemable prior to the fifth anniversary of their issuance. On and after
such date, the Series A and Series B First Mortgage Bonds will be redeemable
at redemption prices calculated in accordance with Schedule B to the Plan.
The Series C First Mortgage Bonds will be redeemable at any time in whole or
in part at redemption prices calculated in accordance with Section 3.5.A.2. of
the Plan and Schedule C thereto.
The Series X First Mortgage Bonds will be issued to partially secure the
payment of the principal and interest due on the Class 3A Secured Floating
Rate Notes. The Series X First Mortgage Bonds will mature on the same dates
and bear interest at the same rates as the Class 3A Secured Floating Rate
Notes. The Series X First Mortgage Bonds will be redeemable only upon an
acceleration of the maturity of the Class 3A Secured Floating Rate Notes.
The following constitute defaults under the FMB Indenture: (i) failure
to pay principal or premium when due, (ii) failure to pay interest for 60 days
after becoming due, (iii) failure to satisfy sinking fund obligations for 60
days after becoming due, (iv) failure for 90 days after notice to observe
other covenants and conditions, (v) entry of an order for reorganization or
appointment of a trustee or receiver and continuance of such order or
appointment unstayed for 90 days, and (vi) certain adjudications, petitions or
consents in bankruptcy, insolvency or reorganization proceedings.
The FMB Indenture includes the following covenants on the part of
Reorganized EPE: (i) to maintain and preserve the lien of the FMB Indenture,
(ii) to pay principal, premium, if any, and interest on the bonds, (iii) to
pay taxes, (iv) to maintain customary insurance, (v) to maintain property,
<PAGE> 43
(vi) to merge, consolidate, or sell all or substantially all of its assets
only upon complying with certain conditions, and (vii) other covenants of
general applicability. The FMB Indenture also includes a maintenance and
renewal covenant whereby Reorganized EPE agrees to expend in each year 2.5% of
the average amount of Reorganized EPE's depreciable property for (1) the
maintenance and repair of its mortgaged utility properties, (2) the
construction or acquisition of bondable property or (3) the retirement,
through purchase or payment of bonds issued under the FMB Indenture, or
redemption of bonds that are subject to redemption. In addition, the Series A
and Series B First Mortgage Bonds will be entitled to the following additional
covenants: (i) Reorganized EPE will only pay dividends out of GAAP net income
after the Effective Date plus $300 million, (ii) Reorganized EPE will not
retire such bonds to satisfy the annual maintenance and renewal obligations
under the Indenture, and (iii) for so long as any original holders of such
bonds continue to hold such bonds, Reorganized EPE will not pay dividends on
its common stock unless such bonds have an investment grade rating.
Additional Reorganized EPE First Mortgage Bonds may be issued only upon
the basis of: (i) 66 2/3% of bondable property (including bondable property
existing on the Effective Date less an amount that would be utilized if the 66
2/3% test were applied to the issuance of the bonds on such date), (ii)
retired bonds and (iii) the deposit of cash. A net earnings test of two times
interest requirements may be applicable in certain situations.
Additional information regarding the Reorganized EPE First Mortgage
Bonds is set forth in Section VIII.F.1. of the Disclosure Statement.
ii. Second Mortgage Bonds.
The Reorganized EPE Second Mortgage Bonds will consist of Series A, B,
X, Y and Z, and under circumstances specified below, Series D, E and F Second
Mortgage Bonds, and will be issued under an indenture, pursuant to which IBJ
Schroder Bank & Trust Company will act as Trustee (the "SMB Indenture")
(Exhibit A-14 hereto).
The Series A Second Mortgage Bonds will mature on the tenth anniversary
of the Effective Date; provided that, by timely notice to the recipients
thereof, CSW may elect another maturity for such series of not less than five
nor more than thirty years which will be in increments of five years if a
maturity of greater than fifteen years is chosen. The Series B Second
Mortgage Bonds will mature on the eighth anniversary of the Effective Date or
such shorter maturity as CSW may elect. The Series A and B Second Mortgage
Bonds will bear interest semi-annually in arrears at a per annum rate equal to
a "Market Basket Rate" to be determined pursuant to Schedule D to the Plan
based on the actual maturity and rating of each series of such Bonds.
The Series A Second Mortgage Bonds will not be redeemable prior to the
fifth anniversary of their issuance. On and after such date, the Series A
Second Mortgage Bonds will be redeemable at redemption prices calculated in
accordance with Schedule B to the Plan. The Series B Second Mortgage Bonds
will be redeemable at any time in whole or in part at redemption prices
calculated in accordance with Section 3.5.A.2. of the Plan and Schedule C
thereto.
<PAGE> 44
The Series X, Y (sub-series Y-1 through Y-8) and Z Second Mortgage Bonds
will be issued to secure or partially secure the payment of the principal and
interest due on certain secured notes or the payment of certain reimbursement
and other obligations described in such bonds. These pledged Second Mortgage
Bonds will mature on the same dates and bear interest at the same rates as the
obligations which such bonds secure. The pledged Second Mortgage Bonds will
be redeemable only upon an acceleration of the maturity of the obligations
which such bonds secure. Forms of the letter of credit and reimbursement
agreements secured by Reorganized EPE Series Y Second Mortgage Bonds will be
filed as Exhibit A-20.
In the event the Maricopa PCB's are not refunded on the Effective Date
as contemplated by the Plan, Reorganized EPE will issue Series D, E or F
pledged Second Mortgage Bonds, as the case may be, to replace the existing EPE
Series D, E or F Second Mortgage Bonds, as applicable, currently securing the
Maricopa PCB's. Upon refunding, the Maricopa PCB's will no longer be secured.
The terms of the SMB Indenture will be substantially identical to those
of the FMB Indenture, except that Reorganized EPE's obligations under the SMB
Indenture will be secured by a second mortgage on all bondable property of
Reorganized EPE.
Additional Reorganized EPE Second Mortgage Bonds may be issued only upon
the basis of: (i) 33 1/3% of bondable property additions after the Effective
Date, (ii) retired bonds and (iii) the deposit of cash. A net earnings test
of two times interest requirements may be applicable in certain situations.
Additional information regarding the Reorganized EPE Second Mortgage
Bonds is set forth in Section VIII.F.2 of the Disclosure Statement.
iii. Senior Fixed Rate Notes.
The Reorganized EPE Senior Fixed Rate Notes will consist of Series A and
Class 13 Senior Fixed Rate Notes and will be issued under an indenture,
pursuant to which United States Trust Company of New York will act as Trustee
(the "Note Indenture") (Exhibit A-15 hereto).
The Series A Senior Fixed Rate Notes will mature at the end of the
quarter immediately following the tenth anniversary of the earlier of the
Effective Date or December 31, 1994. The term of the Series A Senior Fixed
Rate Notes may be adjusted at the election of CSW provided that such term may
not exceed 10 years. The Class 13 Senior Fixed Rate Notes will mature on the
ninth anniversary of the earlier of the Effective Date and December 31, 1994.
The Senior Fixed Rate Notes will bear interest semi-annually in arrears at a
per annum rate equal to a "Market Basket Rate" to be determined pursuant to
Schedule D to the Plan based on the actual maturity and rating of each series
of such notes.
The Senior Fixed Rate Notes will be redeemable at any time in whole or
in part at redemption prices calculated in accordance with Sections 3.14.A.2.
(with respect to the Series A Senior Fixed Rate Notes) and 3.15.A.2. (with
respect to the Class 13 Senior Fixed Rate Notes) of the Plan and Schedule C
thereto.
<PAGE> 45
Additional information regarding the Reorganized EPE Senior Fixed Rate
Notes is set forth in Section VIII.F.4. of the Disclosure Statement.
iv. Secured Floating Rate Notes.
The Reorganized EPE Secured Floating Rate Notes will consist of Class 3A
Secured Floating Rate Notes, Class 5A Secured Floating Rate Notes and Class 6A
Secured Floating Rate Notes. The Class 3A Secured Floating Rate Notes will be
issued under a term loan agreement between Reorganized EPE, the holders of
such Notes, and an agent acting for such holders (Exhibit A-16). The Class 5A
Secured Floating Rate Notes will be issued under four separate term loan
agreements (each having substantially similar terms and conditions) between
Reorganized EPE and the holders of the Class 5(a), 5(b) and 5(c) claims
(Exhibit A-17). The Class 6A Secured Floating Rate Notes will be issued under
a term loan agreement between Reorganized EPE, the holders of such Notes, and
Canadian Imperial Bank of Commerce, as agent for such holders (Exhibit A-18
hereto).
The Class 3A and Class 5A Secured Floating Rate Notes will mature on the
earlier of December 31, 1997 and the last business day of the month in which
the third anniversary of the Effective Date occurs. The Class 6A Secured
Floating Rate Notes will mature on the earlier of December 31, 1998 and the
last business day of the month in which the fourth anniversary of the
Effective Date occurs.
The Class 3A, Class 5A and Class 6A Secured Floating Rate Notes will
each be payable in equal quarterly principal installments commencing on the
earlier of December 31, 1994 and the last business day of the month in which
the first anniversary of the Effective Date occurs (provided, that if the
Effective Date occurs after December 31, 1994, any such installments that
would otherwise have been payable prior to the Effective Date will be payable
on the last business day of the month in which the Effective Date occurs).
The Class 3A and Class 6A Secured Floating Rate Notes will bear interest
at a rate equal to the 3-month London interbank offered rate ("LIBOR") plus
150 basis points (or, at the option of Reorganized EPE, at the respective
agent's adjusted reference rate plus 50 basis points), payable at the end of
each interest period. The Class 5A Secured Floating Rate Notes will bear
interest at a rate equal to the LIBOR (resetting, at the option of Reorganized
EPE, at 1, 3 or 6 months) plus 150 basis points (or, at the option of
Reorganized EPE, at the respective holder's adjusted reference rate plus 50
basis points), payable at the end of each interest period (but in any event
not less often than quarterly). The term "adjusted reference rate" means,
with respect to any bank, a rate determined with reference to such bank's
"base" or "prime" rate, such determination to be made according to the formula
customarily applied by such bank to its domestic loans priced with reference
to such rate, which formula may require that such rate be the higher of such
"base" or "prime" rate and the sum of a specified margin plus a rate
determined with reference to certificates of deposit and/or federal funds.
The Reorganized EPE Secured Floating Rate Notes will be prepayable by
Reorganized EPE at any time in whole or in part without premium, subject only
to LIBOR breakage costs, if any. In addition, the Class 5A Secured Floating
Rate Notes will provide that the net proceeds of any remarketing or
<PAGE> 46
refunding after the Effective Date of any Maricopa PCB's purchased prior to
the Effective Date through draws on letters of credit issued by the holders of
such Notes will be applied to repay the principal of such Notes.
The Class 3A Secured Floating Rate Notes will be secured by bonds, one-
third of which shall be Series X First Mortgage Bonds and two-thirds of which
shall be Series X Second Mortgage Bonds; the Class 5A Secured Floating Rate
Notes will be secured by Series Y Second Mortgage Bonds; and the Class 6A
Secured Floating Rate Notes will be secured by Series Z Second Mortgage Bonds.
Such Series X First Mortgage Bonds and Series X, Series Y and Series Z Second
Mortgage Bonds will be issued and deposited as security for the payment of,
and will have interest and payment terms identical to those in, the Class 3A,
Class 5A and Class 6A Secured Floating Rate Notes, as the case may be.
However, no principal or interest will be payable on such Bonds except if, and
to the extent that, the corresponding payment on the related Class 3A, Class
5A or Class 6A Secured Floating Rate Notes remains unpaid after the due date
thereof.
Additional information regarding the Reorganized EPE Secured Floating
Rate Notes set forth in Sections V.B.4(b), V.B.4(c) and V.B.4(d) of the
Disclosure Statement.
v. Senior Floating Rate Notes.
The Reorganized EPE Senior Floating Rate Notes will consist of Class 11
Senior Floating Rate Notes and Class 13 Senior Floating Rate Notes. The Class
13 Senior Floating Rate Notes will be issued under a term loan agreement among
Reorganized EPE, the holders of such Notes, and an agent acting for such
holders (Exhibit A-19). The Class 11 Senior Floating Rate Notes will be
issued under a term loan agreement that contains interest, maturity,
amortization, covenant and default terms identical to the term loan agreement
for the Class 13 Senior Floating Rate Notes, except to the extent discussed
below.
The Reorganized EPE Senior Floating Rate Notes will mature on the
seventh anniversary of the earlier of the Effective Date and December 31,
1994, and will each be payable in equal quarterly principal installments
commencing at the end of the quarter after the earlier of the fifth
anniversary of (i) the Effective Date and (ii) December 31, 1994 (provided,
that the maturity and amortization schedule of such Notes will be adjusted
prior to the Effective Date, if necessary, such that the maturity thereof is
not greater than the maturity of the Reorganized EPE Series A Senior Fixed
Rate Notes, as selected by CSW).
The Reorganized EPE Senior Floating Rate Notes will bear interest at a
rate equal to 3-month LIBOR plus 200 basis points (or, at the option of
Reorganized EPE, at the respective agent's adjusted reference rate plus 100
basis points), payable at the end of each interest period (but in any event
not less often than quarterly).
The Reorganized EPE Senior Floating Rate Notes will be prepayable by
Reorganized EPE at any time in whole or in part without premium, subject only
to LIBOR breakage costs, if any. Reorganized EPE will be required to redeem
all of the outstanding Class 11 and Class 13 Senior Floating Rate Notes
<PAGE> 47
if at any time less than 33-1/3% of the Series A Senior Fixed Rate Notes
issued on the Effective Date remain outstanding. In addition, the Class 11
Senior Floating Rate Notes will include provisions for the mandatory
prepayment thereof from the proceeds of any remarketing or refunding of the
Farmington Series A 1983 PCBs paid for or purchased prior to the Effective
Date with a draw on the Farmington PCB letter of credit.
Additional information regarding the Reorganized EPE Senior Floating
Rate Notes is set forth in Sections V.B.4(e) and V.B.4(g) of the Disclosure
Statement.
iv. Letters of Credit Supporting Maricopa PCB's.
The post-Effective Date obligations of Reorganized EPE with respect to
replacement letters of credit supporting the Maricopa PCBs will be governed by
separate letter of credit and reimbursement agreements between Reorganized EPE
and the respective issuers of such replacement letters of credit (each such
agreement having substantially similar terms) (Exhibit A-23).
Such replacement letters of credit will be scheduled to expire (i) in
the case of the replacement letter of credit for the Maricopa Series A 1983
PCB's, on the earlier of December 31, 1997 and the third anniversary of the
Effective Date, (ii) in the case of the replacement letter of credit for the
Maricopa Series E 1984 PCB's, on the last day of the fourth month following
the earlier of December 31, 1998 and the fourth anniversary of the Effective
Date, and (iii) in the case of the replacement letter of credit for the
Maricopa Series A 1985 PCB's, on the earlier of December 31, 1998 and the
fourth anniversary of the Effective Date, in each case with a one-year
extension at the option of Reorganized EPE.
Subject to the satisfaction of conditions specified in the respective
letter of credit and reimbursement agreements, certain drawings under the
replacement letters of credit may be treated as loans by the respective issuer
to Reorganized EPE. Such loans would mature on the stated termination date of
the relevant replacement letter of credit, would be payable in equal quarterly
installments (commencing on the last day of the calendar quarter in which the
90th day following the relevant drawing occurs), would bear interest at a rate
equal to LIBOR (resetting, at the option of Reorganized EPE, at 1, 3 or 6
months) plus 150 basis points (or, at the option of Reorganized EPE, at the
respective issuer's adjusted reference rate plus 50 basis points), and would
be prepayable by Reorganized EPE at any time in whole or in part without
premium, subject only to LIBOR breakage costs, if any. Reimbursement
obligations in respect of the replacement letters of credit (including those
treated as loans, together with interest thereon) will be secured by pledged
Reorganized EPE Series Y Second Mortgage Bonds.
Letter of credit commissions will be payable to the respective issuers
of the replacement letters of credit at an initial rate per annum equal to
0.75% of the amount available to be drawn under such letter of credit, such
rate increasing by 0.125% per annum on each anniversary of the earlier of
December 31, 1994 and the Effective Date.
<PAGE> 48
vii. Letter of Credit Supporting Farmington PCB's.
The post-Effective Date obligations of Reorganized EPE with respect to
the replacement letter of credit supporting the Farmington PCB's will be
governed by a letter of credit and reimbursement agreement between Reorganized
EPE and the issuer of such replacement letter of credit (Exhibit A-24).
Such replacement letter of credit will be scheduled to expire on the
last day of the sixth month after the scheduled final maturity date of the
Reorganized EPE Class 13 Senior Floating Rate Notes.
Subject to the satisfaction of conditions specified in such letter of
credit and reimbursement agreement, certain drawings under such replacement
letter of credit may be treated as loans by such issuer to Reorganized EPE.
Such loans would mature on the stated termination date of the replacement
letter of credit, would be payable in equal quarterly installments (commencing
on the last day of the calendar quarter in which the 90th day following the
relevant drawing occurs), would bear interest at a rate equal to LIBOR
(resetting, at the option of Reorganized EPE, at 1, 3 or 6 months) plus 150
basis points (or, at the option of Reorganized EPE, at the issuer's adjusted
reference rate plus 50 basis points), and would be prepayable by Reorganized
EPE at any time in whole or in part without premium, subject only to LIBOR
breakage costs, if any. Reimbursement obligations in respect of the
replacement letter of credit (including those treated as loans, together with
interest thereon) will be secured by pledged Reorganized EPE Series Y Second
Mortgage Bonds.
Letter of credit commissions will be payable to the issuer of such
replacement letter of credit at an initial rate equal to 0.625% per annum of
the amount available to be drawn under such letter of credit, such rate
increasing on the first seven anniversaries of the earlier of December 31,
1994 and the Effective Date to 0.75% per annum, 0.875% per annum, 1.00% per
annum, 1.125% per annum, 1.25% per annum, 1.625% per annum and 2.00% per
annum, respectively.
viii. Preferred Stock.
The Reorganized EPE Preferred Stock will have the rights and preferences
set forth in the Reorganized EPE Amended and Restated Articles of
Incorporation (Exhibit A-7 hereto).
The Reorganized EPE Preferred Stock will provide for cumulative cash
dividends payable quarterly at a rate equal to the "Market Basket Rate" to be
determined pursuant to Schedule E to the Plan based on the actual rating of
such stock. The Reorganized EPE Preferred Stock will be redeemable at any
time in whole or in part at redemption prices calculated in accordance with
Section 3.17 of the Plan and Schedule C thereto plus accrued dividends. In
addition, on each of the eleventh, twelfth, thirteenth and fourteenth
anniversaries of the Effective Date, Reorganized EPE is required to redeem
one-twentieth of the originally issued Reorganized EPE Preferred Stock, and on
the fifteenth anniversary, it is required to redeem all outstanding
Reorganized EPE Preferred Stock, in each case at a redemption price equal to
the liquidation value of such stock.
<PAGE> 49
The Reorganized EPE Preferred Stock will be entitled to vote only in the
following limited circumstances: (i) amendments to Reorganized EPE Preferred
Stock terms which are adverse to the holders thereof (including increases in
authorized number of shares); (ii) creation of a class of stock having a
preference superior to the Reorganized EPE Preferred Stock or of a security
convertible into any kind of stock; (iii) issuance of additional Reorganized
EPE Preferred Stock or parity stock (unless an earnings test is met); and (iv)
merger or sale of all or substantially all of Reorganized EPE's assets. In
addition, if dividends are in default in an amount at least equal to four
quarterly dividends, the Preferred Stock, voting as a class, will be entitled
to elect a majority of the Reorganized EPE Board of Directors.
For a more detailed description of the Reorganized EPE Preferred Stock,
please see Section VIII.F.3. of the Disclosure Statement.
b. Analysis.
Section 7(c). The New EPE Securities are an integral part of the
reorganization of EPE contemplated by the Plan and therefore authorized by
Section 7(c)(2)(A). The Commission has allowed the issuance of securities to
effect the reorganization and acquisition of a bankrupt utility. See
Northeast Utilities, 47 SEC Docket 1270 (1990). In addition, the Reorganized
EPE First Mortgage Bonds and the Reorganized EPE Class 3A Secured Notes to the
extent they are secured by Reorganized EPE Series X First Mortgage Bonds are
securities of the type expressly permitted in Section 7(c)(1)(B), namely, a
bond "secured by a first lien on physical property."
Section 7(g). Approvals of the NMPUC will be sought before the issuance
of the New EPE Securities.
Section 7(d). Of the six subsections of Section 7(d), two -- Sections
7(d)(3) and 7(d)(5) -- are not pertinent to the issuance of the New EPE
Securities. Section 7(d)(3) applies only to "financing[s]" and is therefore
not applicable to the issuance of securities for reorganization rather than
financing purposes. Section 7(d)(5) is not relevant because CSW is not
guaranteeing any of the New EPE Securities. As shown below, the issuance of
the New EPE Securities meets each of the remaining requirements. Thus, the
New EPE Securities will be reasonably adapted to the security structure and
earning power of EPE (Section 7(d)(2)) and will be consistent with the
security structure of the CSW System as a whole (Section 7(d)(1)); the fees to
be paid in connection with the issuance of the New EPE Securities are
reasonable (Section 7(d)(4)), and the terms of the issuance of the New EPE
Securities are not detrimental to the public interest or the interest of
investors or consumers (Section 7(d)(6)).
Section 7(d)(1). In its confirmation order, the Bankruptcy Court found
that the interest rates, maturities, and other terms and conditions of the New
EPE Securities "were negotiated at arm's length, are appropriate for
obligations of that type by comparison with other electric utilities with
comparable financial and other characteristics to EPE, and represent, in the
context of the Plan taken as a whole, a fair and reasonable resolution of such
creditors' claims." (Findings of Fact para. 18(b)) In addition, the
Bankruptcy Court found that the New EPE Securities "will be issued for the
discharge or lawful refunding of [EPE's] obligations, and in all cases, the
<PAGE> 50
creditors are giving valid consideration for the securities to be issued," and
that "[i]n many cases the amount offered to the creditors is less than the
consideration they furnished to [EPE], and the securities will be priced at
current market rates as of the Effective Date, thereby likely leading to a
reduction in [EPE's] interest costs."
The New EPE Securities follow a standard utility capital structure, and
in general, holders of existing EPE debt obligations will receive comparable
new debt obligations. Thus, in general, holders of existing EPE First
Mortgage Bonds will receive Reorganized EPE First Mortgage Bonds; holders of
existing EPE Second Mortgage Bonds will receive Reorganized EPE Second
Mortgage Bonds; holders of claims arising from secured credit facilities will
receive Reorganized EPE Secured Notes; holders of unsecured claims or claims
arising from unsecured credit facilities will receive Reorganized EPE Senior
Floating Rate Notes or Reorganized EPE Senior Fixed Rate Notes; and holders of
existing EPE Preferred Stock will receive Reorganized EPE Preferred Stock.
The New EPE Securities will be obligations solely of Reorganized EPE and
will be issued in exchange for obligations of EPE. For all of these reasons,
the New EPE Securities are reasonably adapted to the capital structure of the
CSW System as a whole.
Section 7(d)(2). The New EPE Securities are to be issued in connection
with the reorganization of EPE under Chapter 11, the fundamental purpose of
which is to reorganize a debtor to be a viable business upon emerging from
bankruptcy. In its Findings of Fact with respect to the Plan, the Bankruptcy
Court found that the Plan "is not likely to be followed by the liquidation, or
the need for further financial reorganization" of EPE. Implicit in this
finding is a determination that the New EPE Securities are reasonably adapted
to the expected earning power of Reorganized EPE. In addition, consummation
of the Transaction, and therefore the issuance of the New EPE Securities, is
contingent upon the receipt of rate orders from the PUCT and the NMPUC
establishing certain ratemaking, accounting, and regulatory treatments that
would enable Reorganized EPE to fulfill its obligations under the New EPE
Securities. These conditions ensure that the New EPE Securities are
"reasonably adapted" to the "earning power" of EPE and therefore in compliance
with Section 7(d)(2).
Section 7(d)(4). The fees, commissions and other remuneration incurred
in connection with the Transaction and the EPE bankruptcy proceeding are
discussed in Items 2. and 3.I.A.2.b. of this Application.
Section 7(d)(6). As an integral part of the Plan and the Transaction,
the issuance of the New EPE Securities is clearly in the public interest and
the interest of investors or consumers for all of the reasons discussed in
Item 1.H. above.
4. Rule 50.
Rule 50 generally requires any security issued by a registered holding
company to be issued in compliance with specified competitive bidding
procedures. However, competitive bidding for the issuance of CSW Common Stock
and New EPE Securities to EPE claimholders as part of the Transaction is
neither feasible nor desirable. EPE is the second bankruptcy of a major
<PAGE> 51
publicly traded electric utility company since the Great Depression. For
nearly two years, EPE has been in bankruptcy proceedings and negotiations with
creditors and related parties of enormous complexity and expense. The
proposed Transaction, which embodies a major compromise of many significant
issues and intertwined claims and interests, is the only viable option for
allowing EPE to emerge from bankruptcy as a financially viable entity.
The issuance of CSW Sub Common Stock to CSW by CSW Sub is exempt from
the competitive bidding requirement under Rule 50(a)(3). In addition, the
competitive bidding requirement should not be applicable to the issuance of
CSW Common Stock and New EPE Securities pursuant to the Plan. The CSW Common
Stock and New EPE Securities will be issued only to EPE's creditors in the
amounts set forth in the Plan for no additional monetary consideration.
Further, since the terms of the CSW Common Stock and the New EPE Securities
have already been heavily negotiated with and approved by EPE's creditors (and
approved by the Bankruptcy Court), no underwriting is required or necessary
for the issuance of the CSW Common Stock and the New EPE Securities pursuant
to the Plan. Such terms include the amount of the CSW Common Stock to be
issued pursuant to formulas set forth in the Plan and the interest rates for
various New EPE Securities. The First Mortgage Bonds and the Second Mortgage
Bonds (except for pledged First and Second Mortgage Bonds) and the Senior
Fixed Rate Notes will all bear interest at a "Market Basket Rate," which will
be determined pursuant to Schedule D to the Plan based on the actual maturity
and rating of such securities and a comparison to similar securities issued by
other utility companies. Reorganized EPE, with the assistance of one or more
investment banking firms, will determine such applicable "Market Basket Rates"
at the time of issuance of the New EPE Securities. The Secured Notes and the
Senior Floating Rate Notes will bear interest at floating rates, determined by
reference to various publicly available benchmarks such as LIBOR and prime.
For the foregoing reasons, the Commission is requested to make such
findings as are required under Rule 50(a)(5) under the Act (1) to exempt CSW
from the competitive bidding requirement contained in Rule 50 in connection
with the issuance by CSW of its Common Stock to EPE's creditors pursuant to
the Plan; (2) to exempt Reorganized EPE from the competitive bidding
requirement contained in Rule 50 in connection with the issuance by
Reorganized EPE of the New EPE Securities to EPE's creditors pursuant to the
Plan; and (3) to authorize CSW to retain one or more experienced investment
banking firms to assist in the determination of the "Market Basket Rate,"
where applicable, for the New EPE Securities.
5. Registration
CSW and EPE believe that, pursuant to Section 1145 of the Bankruptcy
Code, the New EPE Securities to be issued by Reorganized EPE and the new
shares of CSW Common Stock to be issued by CSW pursuant to the Plan and the
Merger Agreement are exempt from the registration requirements of the
Securities Act of 1933, as amended. CSW and EPE intend to file a no-action
request seeking the concurrence of the Staff of the Commission with this
conclusion. In the event that CSW and EPE cannot obtain a no-action response
from the Staff, the Merger Agreement provides for CSW and EPE to prepare and
file a registration statement for the securities to be issued under the Plan
and Merger Agreement.
<PAGE> 52
B. Addition of EPE to CSW System Service Agreement.
The Commission has previously authorized the cost allocation methods
employed in the system service agreement among CSW and its subsidiaries (the
"Service Agreement") (Exhibit B-6), under which CSWS performs certain
engineering, tax, legal, financial, human resources, information, operational
and other services for companies in the CSW System. To integrate EPE into the
CSW System after the Transaction, CSW seeks authority to cause EPE to become a
party to the Service Agreement, subject to a phase-in period as described
below.
The assimilation of EPE into the Service Agreement is essential to the
realization of many of the cost savings and synergies described in this
Application. Thus, as noted in Item 1.H. above, CSW expects the Transaction
to result in approximately $236 million in non-fuel O&M savings, primarily
through the elimination of duplicated functions in areas such as treasury,
accounting, law, purchasing, investor relations, human resources, corporate
planning, public relations, system planning, fuel management and
administration -- areas covered by CSWS and the Service Agreement. To
maximize these Transaction-related savings, it is anticipated that EPE will
become a party to the Service Agreement effective immediately upon the
consummation of the Transaction.
At the same time, the full assimilation of EPE into the CSW System will
not occur all at once, but is expected to occur over a number of years. Among
other things, adjustments will be required in EPE's workforce to reflect the
shift of various service functions from EPE to CSWS. It is expected that
these workforce adjustments will be effected through attrition, hiring
freezes, and transfers of personnel to other companies in the CSW System. As
a result, the workforce adjustments will not occur simultaneously with the
consummation of the Transaction and the addition of EPE to the Service
Agreement. Full coordination of CSWS and the management systems and processes
of EPE will require several years, consistent with the organization and
restructuring described above.
Although the centralization of services in CSWS will create significant
immediate and even greater long-term financial savings, some of these savings
may initially be offset to some extent by the existence of duplicate resources
at EPE during the first two years after the consummation of the Transaction.
To avoid having EPE bear both CSWS charges and the cost of such pre-existing
service capacity, CSW proposes to phase in CSWS charges to EPE. Under the
phase-in arrangements, EPE will bear one-third of its pro-rata allocation of
CSWS indirect charges during the first twelve months after the Effective Date,
two-thirds during the second twelve months after the Effective Date, and the
full allocation thereafter. EPE would bear its full share of direct charges
by CSWS for functions such as information processing. This phase-in procedure
for indirect charges will require an amendment to section 3 of the Service
Agreement, which governs the allocation of costs among the parties for
services performed by CSWS.
CSW believes that these phase-in arrangements are consistent with the
at-cost requirements of the Act and the applicable Rules thereunder and will
result in a fair and equitable allocation of expenses among all companies in
the CSW-EPE system.
<PAGE> 53
C. Reacquisition by EPE of Ownership of the Palo Verde Assets.
The Plan and the OP Settlements provide for EPE to reacquire ownership
of the Palo Verde interests previously sold and leased back by EPE. Because
Section 9(a)(1) prohibits a registered holding company or its subsidiaries
from directly or indirectly acquiring utility assets without Commission
approval pursuant to Section 10, Commission approval may be required for
Reorganized EPE to reacquire ownership of these interests. However, because
the "acquisition" relates to an asset EPE previously owned and presently
leases, Applicant believes that the only issue presented under Sections
9(a)(1) and 10 (assuming that such sections apply to the "acquisition") is the
reasonableness of the consideration. As set forth more fully below, the
consideration to be paid for the "acquisition" meets the standards of Section
10. In this regard, it should be noted that the Palo Verde "acquisition" is
an integral part of the Plan and a condition to the consummation of the
Transaction under Section 8.2(e) of the Merger Agreement.
Under the Plan, holders of the Palo Verde bonds will be treated as
creditors of the EPE estate and will receive consideration equal to 95.5% of
their claims, to be allowed in the amount of $700 million, together with post-
petition interest at LIBOR plus 200 basis points from July 29, 1993. Pursuant
to the OP Settlements, the liens of the Palo Verde bondholders and the Palo
Verde indenture trustees will be discharged, and the Palo Verde indenture
trustees will transfer their rights with respect to the leased Palo Verde
Assets to Reorganized EPE and exchange releases with the Palo Verde Owner
Participants. Subject to NRC approval, the Palo Verde Owner Participants will
transfer their interests in the leased Palo Verde Assets to Reorganized EPE,
release their claims for any additional damage amounts under the Palo Verde
Leases, retain $288.4 million previously drawn under related letters of
credit, and be released from claims by EPE and other creditors. After the
consummation of the Transaction and the OP Settlements, the Palo Verde Assets
will be used for the benefit of EPE's operations and customers. There will be
no change in the extent of EPE's utilization of the Palo Verde Nuclear
Generating Station, the percentage of costs that EPE is to bear, or the
percentage of capacity it is entitled to receive.
As a consequence of the settlement, $956.9 million will have been paid
on account of the Palo Verde claims, including the $288.4 million received by
the Palo Verde Owner Participants as a result of their draws on the Palo Verde
letters of credit, for the reacquisition of the leased Palo Verde Assets and
lease rejection damages. Of this amount, the Bankruptcy Court has determined
that $605 million is reflective of the fair market value, based on the
regulatory book value as of June 30, 1993, of the assets which are being
reacquired, and $351.9 million is attributable to lease rejection damages.
(Findings of Fact para. 18(f).)
In its order confirming the Plan, the Bankruptcy Court found that, "[i]n
the context of the Plan and the overall benefit it provides, there was no
practical or better alternative to this restructuring, either for [EPE] or for
the holders of Claims in Class 12." According to the Bankruptcy Court, the OP
Settlements constitute "a fair and equitable resolution and a reasonable and
sensible settlement by EPE and the Palo Verde Indenture Trustees of the
respective rights of the parties [and] is within the reasonable range of
litigation possibilities." Among other things, the Bankruptcy Court found
that:
<PAGE> 54
* the Palo Verde litigation "could not have been settled for a
materially lower amount to obtain a consensual plan";
* "[t]he Allowed Claim amount of $700 million represents a
significant reduction in the potential Claims of such
Bondholders, if all the disputed issues had been decided in their
favor," and that "[d]epending on the outcome of the Palo Verde
adversary proceeding, such holder could hold potential unsecured
Claims of approximately $725 million, including pre-petition
interest, plus potential administrative claims for post-petition
rent at the contract rate of $91 million per year, or such other
reasonable rate as the [Bankruptcy] Court might determine."
* "although there are theories on which [EPE's] Palo Verde
liabilities might have been less, there are also theories on
which damages might have been considerably greater";
* "litigation of the issues, given the amounts involved in this
case and the importance of the issues, would be extensive and
expensive, and likely involve multiple appeals";
* "continued litigation of [claims relating to Palo Verde] would
have precluded [EPE] from entering into a favorable merger
agreement that resolves this proceeding"; and
* "[u]nder all the circumstances, it would not have been
appropriate for [EPE] to continue to litigate."
(Findings of Fact para. 18(d)-(g)). As the Bankruptcy Court clearly
emphasized in finding that the litigation "could not have been settled for a
materially lower amount," the OP Settlements were a critical element for EPE
in achieving a consensual plan. Without the OP Settlements, EPE would have
been committed to years of expensive and uncertain litigation regarding who
was entitled to these valuable assets. By settling, the value of the leased
Palo Verde Assets is preserved instead of dissipated in litigation.
For these reasons, Applicant believes that the consideration to be
paid by EPE to repurchase the leased Palo Verde Assets is reasonable and meets
all other applicable requirements (if any) of Section 10.
D. Protection against Market Risk.
As noted at the beginning of this Application, to preserve, to the
extent practicable, the financial status quo of the Transaction and to protect
against market risk while the Commission and other regulators are considering
the Transaction, CSW is requesting immediate authorization to engage in
hedging transactions.
1. Description of Proposed Arrangements.
As more fully described above, the Plan and Merger Agreement call
for the issuance of up to approximately $2.1 billion in CSW Common Stock and
New EPE Securities. Because the Plan and Merger Agreement call for CSW to
issue a specified dollar amount of CSW Common Stock rather than a specified
number of shares of CSW Common Stock (except as to the shares which are
<PAGE> 55
subject to "Confirmation Date pricing" and have already been priced at
$29.4583, as described in Item 1.D.1. above), the required number of new
shares of CSW Common Stock may fluctuate. In addition, certain other
contingencies may affect the number of new shares of CSW Common Stock to be
issued (or deemed to have been issued) pursuant to the Plan in respect of
claims and interests thereunder, including the future price of CSW Common
Stock, future dividend rates, and the timing of the Effective Date of the
Plan. As a result, if the market price of CSW Common Stock were to drop below
a specified range for any reason, CSW may be required to issue more shares of
CSW Common Stock than currently. This would result in dilution of CSW's
earnings per share and an increase in CSW's dividend requirements.
In addition, the Plan calls for EPE to issue debt securities bearing
interest at a rate based on a "Market Basket Rate" for comparable electric
utility bonds shortly before the Effective Date of the Plan. Because
prevailing interest rates may increase during the interval between
confirmation and the Effective Date, EPE and therefore CSW are exposed to
interest-rate risk on the debt securities to be issued by Reorganized EPE in
connection with the Transaction.
To preserve the financial status quo during the regulatory review
period before consummation and implementation of the Plan and the Transaction,
it may be desirable for CSW to enter into a number of hedging transactions to
hedge against the risk of changes in the market price of CSW Common Stock and
interest rates which might adversely affect the cost of the Transaction to
CSW. (Under Section 5.1C of the Plan, EPE has the discretion to purchase
certain hedging instruments for the purpose of hedging against the possibility
of a decline in the price of CSW Common Stock or an increase in market rates
of interest, but CSW cannot direct EPE to do so except with Commission
approval and therefore cannot be assured of protection against these market
risks.)
These risks arise from a variety of sources and are largely outside
of CSW's control. Thus, prevailing interest rates may rise as a result of
changes in U.S. monetary policy or other macroeconomic developments. A rise
in prevailing interest rates could also cause the price of CSW Common Stock
and other utility stocks to fall, thereby causing an increase in the equity
costs as well as the debt costs of the Transaction. In addition, common stock
prices are exposed to a variety of other risks. As the experience of Black
Monday in October 1987 and other market breaks indicate, the price of any
company's common stock may be adversely affected by broad market developments
as well as by industry and company developments.
A variety of methods are available to hedge against these risks,
including acquisition of listed or other put options on an industry index or a
basket of utility stocks (as an equity hedge), acquisition of listed or other
put options on U.S. Treasury securities (as a debt or interest rate hedge),
synthetic options and investment contracts with an investment bank or other
financial institution (as a debt or equity hedge). The maximum total amount
of equity to be hedged, and the total principal amount of debt, the interest
cost of which is to be hedged, is currently estimated at approximately $1.4
billion. The cost of carrying out various hedging transactions will depend on
numerous factors, including the timing and duration of any particular hedging
transaction, market conditions, the amount of risk being hedged, and profits
<PAGE> 56
realized, if any, in particular hedging transactions. Without giving effect
to such factors, CSW anticipates that the aggregate gross purchase price of
hedging instruments would not exceed approximately $80 million. As an interim
step (and possible complete substitute) pending Commission action with respect
to the hedging authorization requested herein, and depending on future
developments in the securities markets and the terms and timing of Commission
action with respect to the hedging authorization requested herein, CSW may
purchase insurance to cover such risks notwithstanding the possibly greater
costs incurred when compared to the costs of hedging transactions.
2. Analysis.
As discussed above, Section 9(a)(1) of the Act makes it unlawful for
a registered holding company or any of its subsidiaries to acquire any
securities without Commission approval pursuant to the standards of Section
10. In addition, Rule 51 provides that it is unlawful, without prior approval
of the Commission, to make:
"a contract or agreement (herein called Preliminary
Agreement) pursuant to which a person who is subject
to Section 9(a) of the Act (herein called the
Proposed Acquirer) contingently or otherwise acquires
any right or becomes subject to any obligation: . . .
to acquire directly or indirectly any securities."
For the reasons set forth below, any acquisition of securities by CSW in
connection with the hedging transactions described above meets the
requirements of Section 10 and should be approved.
First, the hedging and reimbursement arrangements would not involve
the acquisition of securities issued by EPE or any other utility. Rather, the
arrangements involve only the acquisition of financial derivatives such as
options on Treasury securities, a utility industry index or a basket of
utility stocks or entering into investment contracts -- i.e., securities
without voting rights or any other interest in any company. Accordingly, the
hedging arrangements would create no detrimental interlocking relations or
concentration of control among CSW and any other utility.
Second, the consideration to be paid by CSW in connection with the
hedging and reimbursement arrangements will be fair and reasonable. The
hedging instruments would be acquired in market transactions or as a result of
arm's-length bargaining with market-makers and financial institutions.
Third, the hedging arrangements would be temporary and would be
unwound upon consummation or termination of the Transaction or shortly
thereafter. The hedging arrangements would therefore not cause any undue
complication in the capital structure of the CSW System.
Fourth, hedging transactions would help preserve the status quo in
an extremely complex situation and would help ensure that all parties pay and
receive the value they bargained for. This predictability is an important
factor in the willingness of all parties to carry out the complex arrangements
in the Plan. The hedging arrangements could therefore be an important factor
in facilitating EPE's emergence from bankruptcy and realizing the significant
Transaction-related benefits described above.
<PAGE> 57
Finally, by limiting the risk of an increase in the total cost of
the Transaction to CSW and new debt costs to EPE, hedging arrangements could
help preserve the financial status quo during the regulatory review period and
thereby facilitate the orderly review of the Transaction by the Commission and
other regulatory bodies.
Item 4. Regulatory Approval.
Set forth below is a summary of the regulatory approvals that CSW
and EPE have obtained or will seek in connection with the proposed
transaction.
I. Bankruptcy Confirmation.
For the Plan to become effective, the Bankruptcy Code requires EPE
to obtain confirmation of the Plan by the Bankruptcy Court. As noted above,
the Plan was overwhelmingly approved by all classes of creditors in November
1993 and was confirmed by the Bankruptcy Court on December 8, 1993.
II. Pre-Merger Notification.
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, CSW
and EPE are required to file notification and report forms with the Federal
Trade Commission and the Antitrust Division of the United States Department of
Justice. CSW and EPE currently anticipate filing the required notification
and report forms in the third quarter of 1994.
III. State Public Utility Regulation and Other State Approvals.
EPE is a public utility company operating under the Federal Power
Act, the Texas Public Utility Regulatory Act, and the New Mexico Public
Utility Act. Jurisdictional authority under such statutes may be affected by
EPE's rights and responsibilities under the Bankruptcy Code. EPE is regulated
in many aspects of its business, including as to the rates it can charge its
customers.
A. Texas.
The PUCT is authorized to review acquisitions of utility plant and
mergers involving a public utility to determine whether such transactions are
consistent with the public interest. In addition, incorporated
municipalities, such as the City of El Paso, have original jurisdiction over
the rates and services of a public utility within the municipality's
boundaries. Municipal rate determinations can be appealed to the PUCT for de
novo review. The effectiveness of the Transaction is conditioned on receipt
by Reorganized EPE and CSW of final orders of the PUCT (i) authorizing a rate
increase (as described in Exhibit D-10 hereto) both in areas of PUCT original
jurisdiction and in areas subject to appeals to the PUCT from municipal
determinations, and certain ratemaking, accounting and regulatory treatments;
(ii) to the effect that the combination of Reorganized EPE with CSW
contemplated under the Plan is consistent with the public interest; and (iii)
to the effect that Reorganized EPE's repurchase of the Palo Verde Assets which
were sold and leased back to EPE, and related ratemaking treatments, are
consistent with the public interest.
<PAGE> 58
An application seeking such orders is being filed with the PUCT
contemporaneously with this Application (Exhibit D-1 hereto). Reorganized EPE
will be required at some time in the future to initiate proceedings to secure
the regulatory approvals for the subsequent base rate increases. In addition
to such PUCT orders, applications will be filed with the City of El Paso and
other incorporated municipalities for an initial base rate increase within
municipal boundaries.
B. New Mexico.
EPE is subject to regulation as to rates, accounting, standards of
service, issuance of securities and certification of service area and
facilities by the NMPUC. The New Mexico Public Utility Act also requires the
prior express authorization of the NMPUC of a business combination involving a
New Mexico public utility and a public utility holding company under any
jurisdiction. The NMPUC further has the authority to review certain types of
transactions among affiliated interests to assure that the transactions do not
adversely affect public utility service and rates.
The effectiveness of the Plan and the Transaction is conditioned on
the receipt by Reorganized EPE and CSW of the following New Mexico regulatory
approvals and determinations:
(i) a final order of the NMPUC approving the combination;
(ii) a final NMPUC rate order authorizing a base rate increase
for Reorganized EPE, and authorization for certain regulatory
treatments; to be effective as of January 1, 1995;
(iii) a final NMPUC order authorizing the issuance by
Reorganized EPE of the securities required for the consummation
of the Plan;
(iv) a final NMPUC order approving a diversification plan for
Reorganized EPE; and
(v) a final NMPUC order determining that Reorganized EPE does
not require a new certificate of public convenience and necessity
as a result of the combination.
An application for such orders and determinations will be filed with the NMPUC
in the near future.
IV. Federal Power Act.
The FERC has jurisdiction over several of the transactions proposed
herein. These include approval of the disposition by EPE of control of its
jurisdictional facilities to CSW, and amendment of the CSW Operating Agreement
to include EPE as a party. Applications seeking such approval (Exhibits D-3
and D-4 hereto) are being filed contemporaneously with this Application. In
its application under Section 203, CSW is proposing an open access
transmission tariff for EPE which would become effective concurrently with the
Transaction.
<PAGE> 59
On November 4, 1993, CSW filed a related application with the FERC
(Exhibit D-5) requesting an order under Section 211 of the Federal Power Act
to gain access to the transmission system of SPS for use in coordinating the
operations of EPE and the existing CSW Electric Operating Companies.
V. Atomic Energy Act.
EPE holds licenses issued by the NRC in connection with its
ownership interests in the Palo Verde Nuclear Generating Station. The
licenses authorize EPE to be a participant in the facility. The Atomic Energy
Act of 1954, as amended, provides that such license or any rights thereunder
may not be transferred or in any manner disposed of, directly or indirectly,
to any person through transfer of control unless the NRC finds that such
transfer is in accordance with the Atomic Energy Act. Contemporaneously with
this Application, EPE and APS are filing a joint application (Exhibit D-7
hereto) for the NRC's consent to the indirect transfer of control of EPE's
interest in the Palo Verde Nuclear Generating System licenses that will occur
as a result of the Transaction. The application will also request that the
NRC amend the licenses to reflect EPE's reacquisition of ownership of the Palo
Verde Assets which were sold and leased back to EPE.
VI. Department of Energy.
Under the Federal Power Act and the Department of Energy
Organization Act, the United States Department of Energy authorizes persons to
transmit electric energy from the United States. EPE holds an authorization
to transmit electric energy to Commission Federal de Electricidad, the
national electric utility of Mexico. Because CSW will become the owner of
EPE's common stock, the Department of Energy requires that notice of a
succession of ownership be filed with it. CSW intends to file such a notice.
Item 5. Procedure.
CSW respectfully requests that the Commission issue notice of this
Application not later than January 25, 1994 and issue an order approving the
same, and permitting the Application to become effective, with respect to the
hedging transactions described in Item 3.II.D., promptly following the
expiration of the period set forth in such notice, and, with respect to the
other matters set forth in the Application, promptly following the expiration
of the period set forth in such notice and in any event prior to April 1,
1994.
CSW requests the Commission to issue its notice of proceedings as
soon as is reasonably practicable and to make the notice sufficiently broad so
that subsequent re-noticing will not be required if the details in the way the
Plan is implemented should be modified or if the Plan itself should be
modified.
No recommended decision by a hearing officer or other responsible
officer of the Commission is necessary or required in this matter. The
Division of Investment Management of the Commission may assist in the
preparation of the Commission's decision in this matter. There should be no
thirty-day waiting period between the issuance and the effective date of any
<PAGE> 60
order issued by the Commission in this matter, and it is respectfully
requested that any such order be made effective immediately upon the entry
thereof.
Item 6. Exhibits and Financial Statements.
I. Exhibits.
A-1 Second Restated Certificate of Incorporation of CSW
(incorporated by reference to CSW's Annual Report on Form 10-K
for the year ended December 31, 1992 (Exhibit H-1 hereto))
A-2 By-Laws of CSW (incorporated by reference to CSW's Annual
Report on Form 10-K for the year ended December 31, 1992
(Exhibit H-1 hereto))
A-3 Articles of Incorporation of EPE
A-4 By-Laws of EPE
A-5 Form of Articles of Incorporation of CSW Sub (to be filed by
amendment)
A-6 Form of By-Laws of CSW Sub (to be filed by amendment)
A-7 Form of Amended and Restated Articles of Incorporation of
Reorganized EPE (including Statement of Resolution
Establishing Series of Shares)
A-8 Form of By-Laws of Reorganized EPE
A-9 Form of Articles of Merger
A-10 Form of CSW Common Stock Certificate
A-11 Form of CSW Sub Common Stock Certificate (to be filed by
amendment)
A-12 Form of Reorganized EPE Preferred Stock Certificate (to be
filed by amendment)
A-13 Form of Reorganized EPE First Mortgage Bond Indenture,
including forms of bonds (to be filed by amendment)
A-14 Form of Reorganized EPE Second Mortgage Bond Indenture,
including forms of bonds (to be filed by amendment)
A-15 Form of Reorganized EPE Senior Debt Securities Indenture,
including forms of notes (to be filed by amendment)
A-16 Form of Reorganized EPE Term Loan Agreement for Class 3A
Secured Floating Rate Notes (including form of note)
<PAGE> 61
A-17 Forms of Reorganized EPE Term Loan Agreement for Class 5A
Secured Floating Rate Notes (including forms of note)
A-18 Form of Reorganized EPE Term Loan Agreement for Class 6A
Secured Floating Rate Notes (including form of note)
A-19 Form of Reorganized EPE Term Loan Agreement for Class 13
Senior Floating Rate Notes (including form of note)
A-20 Forms of Reorganized EPE Letter of Credit and Reimbursement
Agreements (to be filed by amendment)
A-21 Summary of Variances from Statement of Policy Regarding First
Mortgage Bonds Subject to the Public Utility Holding Company
Act of 1935
A-22 Summary of Variances from Statement of Policy Regarding
Preferred Stock Subject to the Public Utility Holding Company
Act of 1935
B-1 CSW-EPE Merger Agreement
B-2 EPE Modified Third Amended Plan of Reorganization
B-3 Disclosure Statement to EPE Modified Third Amended Plan of
Reorganization (without exhibits)
B-4 CSW System Operating Agreement
B-5 Form of CSW System-EPE Operating Agreement
B-6 CSW System Service Agreement
B-7 CSWS-EPE Service Agreement (to be filed by amendment)
B-8 OP Settlement Agreements
B-9 APS Settlement Agreement
D-1 Application to the PUCT (to be filed by amendment)
D-2 Application to the NMPUC (to be filed by amendment)
D-3 Section 203 Application to the FERC (to be filed by amendment)
D-4 Section 205 Application to the FERC (to be filed by amendment)
D-5 Section 211 Application to the FERC
D-6 Testimony of George R. Hall to the FERC (to be filed by
amendment)
D-7 Application to the NRC (to be filed by amendment)
<PAGE> 62
D-8 Notice of Succession of Ownership to the Department of Energy
(to be filed by amendment)
D-9 Notification and Report Form to U.S. Department of Justice and
Federal Trade Commission (to be filed by amendment)
D-10 Exhibit E to the Disclosure Statement (Rate Path)
D-11 Order of Bankruptcy Court dated August 27, 1993 (Disclosure
Statement Approval Order)
D-12 Order of Bankruptcy Court dated September 15, 1993
D-13 Order of Bankruptcy Court dated December 8, 1993 (Confirmation
Order)
D-14 Findings of Fact
E-1 Map showing service territories of CSW and EPE (to be filed by
amendment)
E-2 Map showing interconnections of CSW and EPE (to be filed by
amendment)
F-1 Preliminary Opinion of Counsel (to be filed by amendment)
F-2 Final ("Past Tense") Opinion of Counsel (to be filed by
amendment)
G-1 Proposed Notice of Proceeding
H-1 CSW Annual Report on Form 10-K for the year ended December 31,
1992 (previously filed with the Commission and hereby
incorporated by reference)
H-2 EPE Annual Report on Form 10-K for the year ended December 31,
1992 (previously filed with the Commission and hereby
incorporated by reference)
H-3 CSW Annual Report to Shareholders for the year ended December
31, 1992 (previously filed with the Commission and hereby
incorporated by reference)
H-4 EPE Annual Report to Shareholders for the year ended December
31, 1992 (previously filed with the Commission and hereby
incorporated by reference)
H-5 CSW Quarterly Report on Form 10-Q for the quarter ended March
31, 1993 (previously filed with the Commission and hereby
incorporated by reference)
H-6 CSW Quarterly Report on Form 10-Q for the quarter ended June
30, 1993 (previously filed with the Commission and hereby
incorporated by reference)
<PAGE> 63
H-7 CSW Quarterly Report on Form 10-Q for the quarter ended
September 30, 1993 (previously filed with the Commission and
hereby incorporated by reference)
H-8 EPE Quarterly Report on Form 10-Q for the quarter ended March
31, 1993 (previously filed with the Commission and hereby
incorporated by reference)
H-9 EPE Quarterly Report on Form 10-Q for the quarter ended June
30, 1993 (previously filed with the Commission and hereby
incorporated by reference)
H-10 EPE Quarterly Report on Form 10-Q for the quarter ended
September 30, 1993 (previously filed with the Commission and
hereby incorporated by reference)
J-1 Morgan Stanley opinion to the CSW Board of Directors dated
April 30, 1993
J-2 Barr Devlin opinion to the EPE Board of Directors dated May 3,
1993
II. Financial Statements.
FS-1 Consolidated Balance Sheet of CSW as of December 31, 1992
(incorporated by reference to CSW's Annual Report on Form 10-K
for the year ended December 31, 1992 (Exhibit H-1 hereto))
FS-2 Consolidated Statement of Income of CSW for the year ended
December 31, 1992 (incorporated by reference to CSW's Annual
Report on Form 10-K for the year ended December 31, 1992
(Exhibit H-1 hereto))
FS-3 Consolidated Statement of Cash Flows of CSW for the year ended
December 31, 1992 (incorporated by reference to CSW's Annual
Report on Form 10-K for the year ended December 31, 1992
(Exhibit H-1 hereto))
FS-4 Consolidated Statement of Retained Earnings of CSW for the
year ended December 31, 1992 (incorporated by reference to
CSW's Annual Report on Form 10-K for the year ended December
31, 1992 (Exhibit H-1 hereto))
FS-5 Notes to Consolidated Financial Statements of CSW for the year
ended December 31, 1992 (incorporated by reference to CSW's
Annual Report on Form 10-K for the year ended December 31,
1992 (Exhibit H-1 hereto))
FS-6 Balance Sheet of EPE as of December 31, 1992 (incorporated by
reference to EPE's Annual Report on Form 10-K for the year
ended December 31, 1992 (Exhibit H-2 hereto))
<PAGE> 64
FS-7 Statements of Operations of EPE for the year ended December
31, 1992 (incorporated by reference to EPE's Annual Report on
Form 10-K for the year ended December 31, 1992 (Exhibit H-2
hereto))
FS-8 Statement of Cash Flows of EPE for the year ended December 31,
1992 (incorporated by reference to EPE's Annual Report on Form
10-K for the year ended December 31, 1992 (Exhibit H-2
hereto))
FS-9 Statement of Retained Earnings (Deficit) of EPE for the year
ended December 31, 1992 (incorporated by reference to EPE's
Annual Report on Form 10-K for the year ended December 31,
1992 (Exhibit H-2 hereto))
FS-10 Notes to Financial Statements of EPE for the year ended
December 31, 1992 (incorporated by reference to EPE's Annual
Report on Form 10-K for the year ended December 31, 1992
(Exhibit H-2 hereto))
FS-11 Unaudited Actual and Pro Forma Combined Capitalization of CSW
and EPE as of June 30, 1993.
FS-12 Unaudited Pro Forma Combined Financial Statements as of and
for the year ended June 30, 1993.
FS-13 CSW Consolidated Balance Sheet as of September 30, 1993 (see
page 4 of the Quarterly Report of CSW on Form 10-Q for the
quarter ended September 30, 1993, incorporated by reference as
Exhibit H-7 hereto).
FS-14 CSW Consolidated Statement of Income and Surplus for the
twelve months ended September 30, 1993 (see page 3 of the
Quarterly Report of CSW on Form 10-Q for the quarter ended
September 30, 1993, incorporated by reference as Exhibit H-7
hereto).
FS-15 CSW Consolidated Statement of Income and Surplus for its last
three fiscal years (see page 24 of the Annual Report of CSW to
Shareholders for the quarter ended December 31, 1992,
incorporated by reference as Exhibit H-3 hereto).
FS-16 EPE Balance Sheet as of September 30, 1993 (see page 1 of the
Quarterly Report of EPE on Form 10-Q for the Quarter ended
September 30, 1993 filed herewith as Exhibit H-10 hereto)
FS-17 EPE Statement of Income and Surplus for the twelve months
ended September 30, 1993 (see page 3 of Quarterly Report of
EPE on Form 10-Q for the quarter ended September 30, 1993,
incorporated by reference as Exhibit H-10 hereto).
FS-18 EPE Statement of Income and Surplus for its last three fiscal
years (see page 58 of the Annual Report of EPE on Form 10-K
for the year ended December 31, 1992, incorporated by
reference as Exhibit H-2 hereto).
<PAGE> 65
There have been no material changes, not in the ordinary course of business,
to the financial statements listed above since the date of such financial
statements.
Item 7. Information as to Environmental Effects.
The proposed transaction does not involve major federal action
having a significant effect on the human environment. No federal agency has
prepared or is preparing an environmental impact statement with respect to the
proposed transaction.
<PAGE> 66
Glossary of Defined Terms
"Act" means the Public Utility Holding Company Act of 1935, as
amended.
"Application" means this Application-Declaration on Form U-1.
"APS" means Arizona Public Service Company.
"APS Settlement" means the settlement agreement between EPE and APS
approved by the Bankruptcy Court on November 19, 1993.
"Bankruptcy Code" means Title 11 of the United States Code, as
amended.
"Bankruptcy Court" means the United States Bankruptcy Court for the
Western District of Texas, Austin Division, before which the EPE bankruptcy
reorganization proceedings, Case No. 92-10148-FM, are pending.
"Chapter 11" means Chapter 11 of the Bankruptcy Code.
"Commission" means the Securities and Exchange Commission.
"Confirmation Date" means December 8, 1993, the date upon which the
Bankruptcy Court confirmed the Plan.
"CPL" means Central Power and Light Company, a wholly owned electric
utility subsidiary of CSW.
"CSW" means Central and South West Corporation, a Delaware
corporation.
"CSW Electric Operating Companies" means CSW's four existing
electric utility subsidiaries: CPL, PSO, SWEPCO and WTU.
"CSW Common Stock" means the shares of common stock, $3.50 par
value, of CSW.
"CSW Sub" means CSW Sub, Inc., a corporation proposed to be
organized under Texas law as a wholly owned subsidiary of CSW for the sole
purpose of facilitating the Transaction.
"CSW Sub Common Stock" means the shares of common stock, $.01 par
value, of CSW Sub.
"CSW System" means CSW, the CSW Electric Operating Companies,
Transok, CSWC, CSWE, CSWL and CSWS.
"CSWC" means CSW Credit, Inc., a wholly owned subsidiary of CSW.
"CSWE" means CSW Energy, Inc., a wholly owned subsidiary of CSW.
<PAGE> 67
"CSWL" means CSW Leasing, Inc., a subsidiary of CSW.
"CSWS" means Central and South West Services, Inc., a wholly owned
subsidiary of CSW.
"Disclosure Statement" means the Disclosure Statement dated August
27, 1993 and corrected September 15, 1993 relating to the Plan (Exhibit B-3
hereto).
"Effective Date" means the date on which the Plan becomes effective.
"EPE" means El Paso Electric Company.
"EPE Common Stock" means the shares of EPE common stock, no par
value.
"EPE Preferred Stock" means the shares of EPE Series 10.75%
Preferred Stock, no par value, Series 8.44% Preferred Stock, no par value,
Series 8.95% Preferred Stock, no par value, Series 10.125% Preferred Stock, no
par value, Series 11.375% Preferred Stock, no par value, Series 4.5% Preferred
Stock, no par value, Series 4.12% Preferred Stock, no par value, Series 4.72%
Preferred Stock, no par value, Series 4.56% Preferred Stock, no par value, and
Series 8.24% Preferred Stock, no par value.
"FERC" means the Federal Energy Regulatory Commission.
"Findings of Fact" means the Findings of Fact and Conclusions of Law
of the Bankruptcy Court dated December 8, 1993 in support of its order
confirming the Plan.
"FMB Indenture" means the indenture pursuant to which State Street
Bank and Trust Company will act as Trustee and under which the Reorganized EPE
First Mortgage Bonds will be issued (Exhibit A-13 hereto).
"Four Corners" means the Four Corners Generating Project.
"Liquidation Trust" means the trust to be established as of the
Effective Date and to which will be assigned EPE's rights to and interests in
excluded assets and certain reductions in claims, if any, not disposed of or
determined prior to the Effective Date.
"Maximum Additional Consideration Amount" with respect to holders of
EPE Common Stock means $1.50.
"Merger Agreement" means the Agreement and Plan of Merger between
EPE and CSW and to be subsequently joined in by CSW Sub, dated as of May 3,
1993, as amended (Exhibit B-1 hereto).
"Morgan Stanley" means Morgan Stanley & Co. Incorporated.
"New EPE Securities" means the securities to be issued by
Reorganized EPE under the Plan: Reorganized EPE First Mortgage Bonds;
Reorganized EPE Second Mortgage Bonds; Reorganized EPE Secured Notes;
Reorganized EPE Senior Floating Rate Notes; Reorganized EPE Senior Fixed Rate
Notes; and Reorganized EPE Preferred Stock.
<PAGE> 68
"NMPUC" means the New Mexico Public Utility Commission.
"Note Indenture" means the indenture pursuant to which United States
Trust Company of New York will act as Trustee and under which the Reorganized
EPE Senior Fixed Rate Notes consisting of Series A and Class 13 Notes will be
issued (Exhibit A-15 hereto).
"NRC" means the Nuclear Regulatory Commission.
"OP Settlements" means the settlement agreements dated November 15,
1993 between EPE and the owner-participants in certain sale-leaseback
arrangements relating to EPE's interests in the Palo Verde Nuclear Generating
Station.
"Palo Verde Assets" means the 15.8% interest owned or leased by EPE
in Units 1, 2 and 3 and the related common plant of the Palo Verde Nuclear
Generating Station.
"Palo Verde Leases" means the leases entered into by EPE in
connection with its sale and leaseback of its interest in Unit 2 and a portion
of its interest in Unit 3 of the Palo Verde Nuclear Generating Station.
"Palo Verde Owner Participants" means the beneficiaries of the
trusts which hold title to certain interests in the Palo Verde Nuclear
Generating Station which were the subject of certain sale-leaseback
transactions by EPE.
"Palo Verde Participants" means EPE, APS, Southern California Edison
Company, Public Service Company of New Mexico, Southern California Public
Power Authority, Salt River Project Agricultural Improvement and Power
District and the Los Angeles Department of Water and Power.
"PCB's" mean pollution control revenue bonds.
"Plan" means the Modified Third Amended Plan of Reorganization of
the Debtor Providing for the Acquisition of El Paso Electric Company by
Central and South West Corporation, dated August 27, 1993 (as corrected on
September 15, 1993 and as modified on December 1, 1993 and December 6, 1993)
and all exhibits and other attachments thereto, as the same may be amended
from time to time (Exhibit B-2 hereto). References to the Plan during the
August 27-December 6, 1993 period refer to the version of the Plan then on
file with the Bankruptcy Court.
"PSO" means Public Service Company of Oklahoma, a wholly owned
electric utility subsidiary of CSW.
"PUCT" means the Public Utility Commission of Texas.
"Reorganized EPE" means EPE after the Effective Date of the Plan.
"Service Agreement" means the system service agreement among CSW and
its subsidiaries.
<PAGE> 69
"SMB Indenture" means the indenture pursuant to which IBJ Schroder
Bank & Trust Company will act as Trustee and under which the Reorganized EPE
Second Mortgage Bonds (Exhibit A-14 hereto).
"SPS" means Southwestern Public Service Company.
"SWEPCO" means Southwestern Electric Power Company, a wholly owned
electric utility subsidiary of CSW.
"TNP" means Texas-New Mexico Power Company.
"Transaction" means the acquisition of EPE by CSW as proposed in the
Application.
"Transok" means Transok, Inc., a wholly owned subsidiary of CSW.
"WTU" means West Texas Utilities Company, a wholly owned electric
utility subsidiary of CSW.
<PAGE> 70
S I G N A T U R E
- - - - - - - - -
Pursuant to the requirements of the Public Utility Holding Company
Act of 1935, as amended, the undersigned company has duly caused this document
to be signed on its behalf by the undersigned thereunto duly authorized.
Dated: January 10, 1994
CENTRAL AND SOUTH WEST CORPORATION
By: /s/ STEPHEN J. MCDONNELL
Stephen J. McDonnell
Treasurer
<PAGE> 1
INDEX OF EXHIBITS
EXHIBIT TRANSMISSION
NUMBER EXHIBIT METHOD
- ------- ------- ------------
A-1 Second Restated Certificate of By Reference
Incorporation of CSW (incorporated
by reference to CSW's Annual Report
on Form 10-K for the year ended
December 31, 1992 (Exhibit H-1
hereto))
A-2 By-Laws of CSW (incorporated by By Reference
reference to CSW's Annual Report on
Form 10-K for the year ended
December 31, 1992 (Exhibit H-1
hereto))
A-3 Articles of Incorporation of EPE Electronic
A-4 By-Laws of EPE Electronic
A-5 Form of Articles of Incorporation of ---
CSW Sub (to be filed by amendment)
A-6 Form of By-Laws of CSW Sub (to be ---
filed by amendment)
A-7 Form of Amended and Restated Articles Electronic
of Incorporation of Reorganized
EPE (including Statement of Resolution
Establishing Series of Shares)
A-8 Form of By-Laws of Reorganized EPE Electronic
A-9 Articles of Merger Electronic
A-10 Form of CSW Common Stock Certificate Electronic
A-11 Form of CSW Sub Common Stock ---
Certificate (to be filed by amendment)
A-12 Form of Reorganized EPE Preferred Stock ---
Certificate (to be filed by amendment)
A-13 Form of Reorganized EPE First ---
Mortgage Bond Indenture, including
forms of bonds (to be filed by
amendment)
A-14 Form of Reorganized EPE Second ---
Mortgage Bond Indenture, including
forms of bonds (to be filed by
amendment)
<PAGE> 2
EXHIBIT TRANSMISSION
NUMBER EXHIBIT METHOD
- ------- ------- ------------
A-15 Form of Reorganized EPE Senior ---
Debt Securities Indenture,
including forms of notes (to be
added by amendment)
A-16 Form of Reorganized EPE Term Loan Electronic
Agreement for Class 3A Secured
Floating Rate Notes (including form
of note)
A-17 Forms of Reorganized EPE Term Loan Electronic
Agreement for Class 5A Secured
Floating Rate Notes (including
forms of note)
A-18 Form of Reorganized EPE Term Loan Electronic
Agreement for Class 6A
Secured Floating Rate Notes
(including form of note)
A-19 Form of Reorganized EPE Term Loan Electronic
Agreement for Class 13 Senior
Floating Rate Notes (including
form of note)
A-20 Forms of Reorganized EPE Letter ---
of Credit and Reimbursement
Agreements (to be filed by amendment)
A-21 Summary of Variances from Statement Electronic
of Policy Regarding First Mortgage
Bonds Subject to the Public Utility
Holding Company Act of 1935
A-22 Summary of Variances from Statement Electronic
of Policy Regarding Preferred Stock
Subject to the Public Utility Holding
Company Act of 1935
B-1 CSW-EPE Merger Agreement Electronic
B-2 EPE Modified Third Amended Plan
of Reorganization Electronic
B-3 Disclosure Statement to EPE Modified Electronic
Third Amended Plan of Reorganization
(without exhibits)
B-4 CSW System Operating Agreement Electronic
B-5 Form of CSW System-EPE Operating Electronic
Agreement
<PAGE> 3
EXHIBIT TRANSMISSION
NUMBER EXHIBIT METHOD
- ------- ------- ------------
B-6 CSW System Service Agreement Electronic
B-7 CSWS-EPE Service Agreement ---
(to be filed by amendment)
B-8 OP Settlement Agreement Electronic
B-9 APS Settlement Agreement Electronic
D-1 Application to the PUCT ---
(to be filed by amendment)
D-2 Application to the NMPUC ---
(to be filed by amendment)
D-3 Section 203 Application to the FERC ---
(to be filed by amendment)
D-4 Section 205 Application to the FERC ---
(to be filed by amendment)
D-5 Section 211 Application to the FERC Electronic
D-6 Testimony of George R. Hall to the ---
FERC (to be filed by amendment)
D-7 Application to the NRC ---
(to be filed by amendment)
D-8 Notice of Succession of Ownership to ---
the Department of Energy
(to be filed by amendment)
D-9 Notification and Report Form to ---
U.S. Department of Justice and
Federal Trade Commission
(to be filed by amendment)
D-10 Exhibit E to the Disclosure Statement Electronic
(Rate Path)
D-11 Order of Bankruptcy Court dated Electronic
August 27, 1993 (Disclosure Statement
Approval Order)
D-12 Order of Bankruptcy Court dated Electronic
September 15, 1993
D-13 Order of Bankruptcy Court dated Electronic
December 8, 1993 (Confirmation Order)
<PAGE> 4
EXHIBIT TRANSMISSION
NUMBER EXHIBIT METHOD
- ------- ------- ------------
D-14 Findings of Fact Electronic
E-1 Map showing service territories of ---
CSW and EPE (to be filed by amendment)
E-2 Map showing interconnections of ---
CSW and EPE (to be filed by amendment)
F-1 Preliminary Opinion of Counsel (to be ---
filed by amendment)
F-2 Final or "past tense" opinion of Counsel ---
(to be filed by amendment)
G-1 Proposed Notice of Proceeding Electronic
H-1 CSW Annual Report on Form 10-K By Reference
for the year ended December 31,
1992 (previously filed with the
Commission and hereby incorporated
by reference)
H-2 EPE Annual Report on Form 10-K By Reference
for the year ended December 31,
1992 (previously filed with the
Commission and hereby incorporated
by reference)
H-3 CSW Annual Report to Shareholders By Reference
for the year ended December 31, 1992
(previously filed with the Commission
and hereby incorporated by reference)
H-4 EPE Annual Report to Shareholders for By Reference
the year ended December 31, 1992
(previously filed with the Commission
and hereby incorporated by reference)
H-5 CSW Quarterly Report on Form 10-Q for By Reference
the quarter ended March 31, 1993
(previously filed with the Commission
and hereby incorporated by reference)
H-6 CSW Quarterly Report on Form 10-Q for By Reference
the quarter ended June 30, 1993
(previously filed with the Commission
and hereby incorporated by reference)
<PAGE> 5
EXHIBIT TRANSMISSION
NUMBER EXHIBIT METHOD
- ------- ------- ------------
H-7 CSW Quarterly Report on Form 10-Q for By Reference
the quarter ended September 30, 1993
(previously filed with the Commission
and hereby incorporated by reference)
H-8 EPE Quarterly Report on Form 10-Q for By Reference
the quarter ended March 31, 1993
(previously filed with the Commission
and hereby incorporated by reference)
H-9 EPE Quarterly Report on Form 10-Q for By Reference
the quarter ended June 30, 1993
(previously filed with the Commission
and hereby incorporated by reference)
H-10 EPE Quarterly Report on Form 10-Q for By Reference
the quarter ended September 30, 1993
(previously filed with the Commission
and hereby incorporated by reference)
J-1 Morgan Stanley opinion to the CSW Electronic
CSW Board of Directors dated
April 30, 1993
J-2 Barr Devlin opinion to the EPE Board Electronic
of Directors dated May 3, 1993
FS-1 Consolidated Balance Sheets of CSW By Reference
as of December 31, 1992
(incorporated by reference to
CSW's Annual Report on Form 10-K
for the year ended December 31,
1992 (Exhibit H-1 hereto))
FS-2 Consolidated Statements of Income By Reference
of CSW for the year ended December
31, 1992 (incorporated by reference
to CSW's Annual Report on Form 10-K
for the year ended December 31,
1992 (Exhibit H-1 hereto))
FS-3 Consolidated Statements of Cash By Reference
Flows of CSW for the year ended
December 31, 1992 (incorporated by
reference to CSW's Annual Report on
Form 10-K for the year ended
December 31, 1992 (Exhibit H-1
hereto))
<PAGE> 6
EXHIBIT TRANSMISSION
NUMBER EXHIBIT METHOD
- ------- ------- ------------
FS-4 Consolidated Statements of Retained By Reference
Earnings of CSW for the year ended
December 31, 1992 (incorporated by
reference to CSW's Annual Report on
Form 10-K for the year ended
December 31, 1992 (Exhibit H-1
hereto))
FS-5 Notes to Consolidated Financial By Reference
Statements of CSW for the year
ended December 31, 1992
(incorporated by reference to CSW's
Annual Report on Form 10-K for the
year ended December 31, 1992
(Exhibit H-1 hereto))
FS-6 Balance Sheets of EPE as of By Reference
December 31, 1992 (incorporated by
reference to EPE's Annual Report on
Form 10-K for the year ended
December 31, 1992 (Exhibit H-2
hereto))
FS-7 Statements of Operations of EPE for By Reference
the year ended December 31, 1992
(incorporated by reference to EPE's
Annual Report on Form 10-K for the
year ended December 31, 1992
(Exhibit H-2 hereto))
FS-8 Statements of Cash Flows of EPE for By Reference
the year ended December 31, 1992
(incorporated by reference to EPE's
Annual Report on Form 10-K for the
year ended December 31, 1992
(Exhibit H-2 hereto))
FS-9 Statements of Retained Earnings By Reference
(Deficit) of EPE for the year ended
December 31, 1992 (incorporated by
reference to EPE's Annual Report on
Form 10-K for the year ended
December 31, 1992 (Exhibit H-2
hereto))
FS-10 Notes to Financial Statements of By Reference
EPE for the year ended December 31,
1992 (incorporated by reference to
EPE's Annual Report on Form 10-K
for the year ended December 31,
1992 (Exhibit H-2 hereto))
<PAGE> 7
EXHIBIT TRANSMISSION
NUMBER EXHIBIT METHOD
- ------- ------- ------------
FS-11 Unaudited Actual and Pro Forma Electronic
Combined Capitalization of CSW and
EPE as of June 30, 1993
FS-12 Unaudited Pro Forma Combined Electronic
Financial Statements as of and for
the year ended June 30, 1993
FS-13 CSW Consolidated Balance Sheet as By Reference
of September 30, 1993 (see page 4
of the Quarterly Report of CSW on
form 10-Q for the quarter ended
September 30, 1993, incorporated by
reference as Exhibit H-7 hereto)
FS-14 CSW Consolidated Statement of By Reference
Income and Surplus for the twelve
months ended September 30, 1993
(see page 3 of the Quarterly
Report of CSW on form 10-Q for the
quarter ended September 30, 1993,
incorporated by reference as
Exhibit H-7 hereto)
FS-15 CSW Consolidated Statement of By Reference
Income and Surplus for its last
three fiscal years (see page 24
of the Annual Report of CSW on
Form 10-K for the year ended
December 31, 1992, incorporated
by reference as Exhibit H-1 hereto)
FS-16 EPE Balance Sheet as of September By Reference
30, 1993 (see page 1 of the
Quarterly Report of EPE on form
10-Q for the quarter ended
September 30, 1993, incorporated by
reference as Exhibit H-10 hereton)
<PAGE> 8
EXHIBIT TRANSMISSION
NUMBER EXHIBIT METHOD
- ------- ------- ------------
FS-17 EPE Statement of Income and Surplus By Reference
for the twelve months ended
September 30, 1993 (see page 3 of
the Quarterly Report of EPE on form
10-Q for the quarter ended
September 30, 1993, incorporated by
reference as Exhibit H-10 hereto)
FS-18 EPE Statement of Income and Surplus By Reference
for its last three fiscal years
(see page 58 of the Annual Report
of EPE on Form 10-K for the year
ended December 31, 1992, incorporated
by reference as Exhibit H-2 hereto)
<PAGE> 1
EXHIBIT A-3
[STATE OF TEXAS LOGO]
THE STATE OF TEXAS
SECRETARY OF STATE
CERTIFICATE OF AMENDMENT
FOR
EL PASO ELECTRIC COMPANY
CHARTER NUMBER 00010734
THE UNDERSIGNED, AS SECRETARY OF THE STATE OF TEXAS,
HEREBY CERTIFIES THAT ARTICLES OF AMENDMENT HAVE BEEN RECEIVED IN
THIS OFFICE AND ARE FOUND TO CONFORM TO LAW.
ACCORDINGLY THE UNDERSIGNED, AS SUCH SECRETARY OF
STATE, AND BY VIRTUE OF THE AUTHORITY VESTED IN THE SECRETARY BY
LAW, ISSUES THIS CERTIFICATE AND ATTACHES HERETO A COPY OF THE
ARTICLES OF AMENDMENT.
DATED JUNE 5, 1990
[State of Texas Seal] /s/ GEORGE S. BAYORD, JR.
Secretary of State
<PAGE> 2
[Filed in the Office of the Secretary of State of Texas
JUN 05 1990 Corporation Section]
ARTICLES OF AMENDMENT
TO THE RESTATED ARTICLES OF INCORPORATION
EL PASO ELECTRIC COMPANY
ARTICLE ONE. The name of the corporation is El Paso
Electric Company.
ARTICLE TWO. The following amendment to the Restated
Articles of Incorporation was adopted by the shareholders of the
corporation on May 21, 1990:
The first paragraph of Article VI of the Restated
Articles of Incorporation is amended to read as
follows:
The total number of authorized
shares of the capital stock of the
Corporation shall be 102,000,000 of
which 2,000,000 shares are
classified as Preferred Stock,
without nominal or par value, and
the balance, or 100,000,000 shares,
are classified as Common Stock,
without nominal or par value.
ARTICLE THREE. The number of shares of the corporation
outstanding and entitled to vote on such amendment was 35,285,932
shares of Common Stock.
ARTICLE FOUR. The number of shares voted for such
amendment was 22,446,172, the number of shares voted against such
amendment was 6,570,298 and the number of shares which abstained
from voting was 633,968.
DATED: May 24, 1990
EL PASO ELECTRIC COMPANY
By: /s/ DAVID H. WIGGS, JR.
DAVID H. WIGGS, JR.
President, Chief Executive
Officer and Chairman of
the Board
8003G-3
<PAGE> 3
[LOGO]
THE STATE OF TEXAS
SECRETARY OF STATE
CERTIFICATE OF RESTATED ARTICLES
OF INCORPORATION
OF
EL PASO ELECTRIC COMPANY
The undersigned, as Secretary of State of Texas, hereby
certifies that Restated Articles of Incorporation of the above
corporation duly signed pursuant to the provisions of the Texas
Business Corporation Act, have been received in this Office and
are found to conform to law.
ACCORDINGLY the undersigned, as such Secretary of
State, and by virtue of the authority vested in the Secretary by
law, hereby issues this certificate of Restated Articles of
Incorporation and attaches hereto a copy of the Restated Articles
of Incorporation.
Dated September 20, 1988.
/s/
Secretary of State
[State of Texas Seal]
<PAGE> 4
[FILED in the Office of the Secretary of State of Texas
SEP 20 1988 Corporations Section]
RESTATED ARTICLES OF INCORPORATION
OF
EL PASO ELECTRIC COMPANY
1. EL PASO ELECTRIC COMPANY, pursuant to the
provisions of Article 4.07 of the Texas Business Corporation Act,
hereby adopts Restated Articles of Incorporation which accurately
copy the Articles of Incorporation and all amendments thereto
that are in effect to date, and such Restated Articles of
Incorporation contain no change in any provision thereof.
2. The Restated Articles of Incorporation were
adopted by Resolution of the Board of Directors of the
Corporation on August 22, 1988.
3. The Articles of Incorporation and all amendments
and supplements thereto are hereby superseded by the following
Restated Articles of Incorporation which accurately copy the
entire text thereof:
ARTICLE I
The name of this Corporation shall be EL PASO ELECTRIC
COMPANY.
ARTICLE II
The purposes of this Corporation shall be to construct
or acquire, with power to maintain and operate street railways
and suburban railways and belt lines of railways within and near
cities and towns for the transportation of freight and
passengers; with power also to construct, own and operate union
depots; to acquire, maintain and operate motor buses for the
purpose of carrying passengers for hire on the public roads,
streets, plazas, alleys and highways within the corporate limits
of any incorporated cities or towns and on the public roads and
highways within five (5) miles of the corporate limits of any
such incorporated cities or towns; to supply and sell electric
light and power to the public and municipalities and to that end
to acquire, or otherwise provide the necessary appliances
therefor; and for such other purposes as may be from time to time
authorized by the laws of the State of Texas.
ARTICLE III
The principal place of business of this Corporation
shall be in the City of El Paso, the County of El Paso, and State
of Texas, and its business may be transacted within or without
the State of Texas in accordance with the laws of said State.
<PAGE> 5
The post office address of the registered office of
this Corporation is 303 North Oregon Street, El Paso, Texas
79901, and the name of its registered agent at such address is
Evern R. Wall.
ARTICLE IV
The period of duration of this Corporation is
perpetual.
ARTICLE V
The number of Directors of this Corporation shall not
be less than three nor more than the number fixed from time to
time by the Bylaws of this Corporation.
ARTICLE VI
The total number of authorized shares of the capital
stock of the Corporation shall be 42,000,000 which 2,000,000
shares are classified as Preferred Stock, without nominal or par
value, and the balance, or 40,000,000 shares, are classified as
Common Stock, without nominal or par value.
The Corporation has received for shares issued
consideration of the value of 10% of the total capitalization of
the Corporation.
The capital stock of the Corporation may be increased
or decreased at any time or times in any manner then prescribed
or permitted by existing laws of the State of Texas, subject,
however, to the provisions hereinafter in this Charter contained.
The designations of the different classes of stock of
the Corporation and the preferences, limitations and relative
rights, and the qualifications, limitations or restrictions
thereof of said classes of stock are as follows:
DIVISION A -- PREFERRED STOCK.
1. Series and Limits of Variations between Series.
Subject to the provisions of Division B of this Article VI
setting forth the provisions of the established series of
Preferred Stock and the provisions of clause (c) of subparagraph
5(A) of this Division A, the Preferred Stock may be divided into
and issued in one or more series from time to time as herein
provided. The authorized number of shares of any such series, the
designation of such series and the terms and characteristics
thereof (in those respects in which the shares of one series may
vary from the shares of other series as herein provided) shall be
fixed at any time prior to the issuance thereof by resolution or
resolutions of the Board of Directors of the Corporation. All
shares of each series shall be alike in every particular. The
Preferred Stock of all series shall be of the same class and of
<PAGE> 6
equal rank and shall be identical in all respects, except in the
following particulars:
(a) The designation of such series, which may be
by distinguishing number, letter or title;
(b) The rate at which dividends are to accrue on
the shares of such series, hereinafter referred to as
the "fixed dividend rate";
(c) The terms and conditions on which the shares
of such series may be redeemed and the amount payable
in respect of the shares of such series in case of the
redemption thereof at the option of the Corporation,
which amount in respect of any series may, but need
not, vary according to the time or circumstances of
such action, the amount or amounts so fixed being
hereinafter referred to as the "fixed redemption
price"; and the amount payable in respect of the shares
of such series in case of the redemption thereof for
any sinking fund for such series;
(d) The amount payable in respect of the shares
of such series in case of liquidation, dissolution or
winding up of the Corporation, or reduction or decrease
of its capital stock resulting in any distribution of
its assets to its Common Stockholders, the amount or
amounts so fixed being hereinafter referred to as the
"fixed liquidation price", and the amount payable, if
any, in addition to the fixed liquidation price for
each series in case such liquidation, dissolution,
winding up, reduction or decrease be voluntary, the
amount or amounts so fixed being hereinafter referred
to as the "fixed liquidation premium", which amounts in
respect to any series may, but need not, vary according
to the time or circumstances of such action;
(e) Any requirement as to any sinking fund or
purchase fund for, or the redemption, purchase or other
retirement by the Corporation of, the shares of such
series;
(f) The right, if any, to exchange or convert the
shares of such series into shares of any series of the
Preferred Stock or, to the extent permitted by law,
into shares of any other class of stock of this
Corporation and the rate or basis, time, manner and
conditions of exchange or conversion or the method by
which the same shall be determined; and
(g) The number of votes per share, which shall
vary according to the fixed liquidation price per share
as provided in Paragraph 3 of Article VI, Division D.
<PAGE> 7
2. Dividends. Out of the assets of the Corporation
available for dividends, the holders of the Preferred Stock of
each series shall be entitled to receive, (if and when declared
payable by the Board of Directors) dividends in lawful money of
the United States of America at, but not exceeding, the fixed
dividend rate for such series, payable quarterly on January 1,
April 1, July 1 and October 1 in each year, before any dividends
shall be paid upon or set apart for the Common Stock; and such
dividends on the Preferred Stock shall be cumulative, so that, if
in any past dividend period or periods full dividends upon the
outstanding Preferred Stock at the fixed dividend rate or rates
therefor shall not have been paid, the deficiency (without
interest) shall be paid or declared and set apart for payment
before any dividends shall be paid upon or set apart for the
Common Stock. Dividends on all shares of the Preferred Stock of
each series shall commence to accrue and be cumulative from the
dividend date for such series next preceding the date of issue of
the initial shares of such series, or from said date of issue, if
that be a dividend date; but in the event of the issue of
additional shares of Preferred Stock of any series, subsequent to
the date of the initial issue of shares of such series, all
dividends paid on the Preferred Stock of such series prior to the
issue of such additional shares, and all dividends declared
payable to the holders of record of Preferred Stock of such
series of a date prior to such issue, shall be deemed to have
been paid in respect of the additional shares so issued. Any
dividends paid on the Preferred Stock in an amount less than full
cumulative dividends accrued or in arrears upon all Preferred
Stock outstanding shall, if more than one series be outstanding,
be divided between the different series in proportion to the
aggregate amounts which would be distributable to the Preferred
Stock of each series if full cumulative dividends were declared
and paid thereon.
3. Preference on Liquidation, etc. In the event of
any liquidation, dissolution, or winding up of this Corporation,
or reduction or decrease of its capital stock resulting in a
distribution of assets to its Common Stockholders, the holders of
the Preferred Stock of each series shall be entitled to receive,
for each share thereof, the fixed liquidation price for such
series, plus, in case such liquidation, dissolution, winding up,
reduction or decrease shall have been voluntary, the fixed
liquidation premium for such series, if any, together in all
cases with all dividends accrued or in arrears thereon, before
any distribution of the assets shall be made to the holders of
the Common Stock; but the holders of the Preferred Stock shall be
entitled to no further participation in such distribution. If
upon any such liquidation, dissolution, winding up, reduction or
decrease, the assets distributable among the holders of the
Preferred Stock shall be insufficient to permit the payment of
the full preferential amounts aforesaid, then the entire assets
of this Corporation to be distributed shall be distributed among
the holders of the Preferred Stock then outstanding, ratably in
proportion to the full preferential amounts to which they are
<PAGE> 8
respectively entitled. As used in this Article the expression
"dividends accrued or in arrears" means, in respect of each share
of the Preferred Stock of any series, that amount which shall be
equal to simple interest upon the sum of one hundred dollars
($100) at an annual rate equal to the percentage that the fixed
dividend rate for such series is of one hundred dollars ($100),
from the date from which cumulative dividends thereon commence to
accrue to the date as of which the computation is to be made,
less the aggregate amount (without interest thereon) of all
dividends theretofore paid (or deemed to have been paid) or
declared and set aside for payment in respect thereof. Nothing in
this Paragraph 3 shall be deemed to prevent the purchase or
redemption of Preferred Stock in any manner permitted by
Paragraph 4 of this Division. Neither shall anything in this
Paragraph 3 be deemed to prevent the purchase or redemption by
this Corporation of shares of its own Common Stock if the
requirements of Paragraph 1 of Division C of this Article VI
shall be complied with and no such purchase or redemption in
compliance with such requirements shall be deemed to be a
reduction or decrease of capital stock resulting in a
distribution of assets to its Common Stockholders within the
meaning of this Paragraph 3 whether or not shares of Common Stock
so redeemed or purchased shall be retired. A consolidation or
merger of the Corporation or a sale or transfer of substantially
all of its assets as an entirety shall not be regarded as a
liquidation, dissolution or winding up of the Corporation or as a
reduction (or decrease of its capital stock resulting in a
distribution of assets to its Common Stockholders within the
meaning of this Paragraph 3.
4. Redemption and Repurchase. The Corporation may, at
its option expressed by vote of its Board of Directors, at any
time or from time to time, redeem the whole or any part of the
Preferred Stock or of any series thereof at the fixed redemption
price for such series, together with the amount of any dividends
accrued or in arrears thereon. Notice of any proposed redemption
of Preferred Stock shall be given by the Corporation by mailing a
copy of such notice, at least thirty (30) days prior to the date
fixed for such redemption, to the holders of record of the
Preferred Stock to be redeemed, at their respective addresses
then appearing on the books of the Corporation. Any such
redemption of Preferred Stock shall be in such amount, at such
place and by such method, whether by lot or pro rata, as shall
from time to time be determined by vote of its Board of
Directors. From and after the date fixed in any such notice as
the date of redemption, unless default shall be made by the
Corporation in providing funds sufficient for such redemption at
the time and place specified for the payment thereof pursuant to
said notice, all dividends on the shares called for redemption
shall cease to accrue; and from and after the date so fixed,
unless default be made as aforesaid, or from and after the date
of the earlier deposit by the Corporation in trust, with a
solvent bank or trust company doing business in the City of
Boston, Commonwealth of Massachusetts, or in the Borough of
<PAGE> 9
Manhattan, City and State of New York, of funds sufficient for
such redemption (a statement of the intention so to deposit
having been included in said notice), all rights of the holders
of the shares so called for redemption as Stockholders of the
Corporation, except only the right to receive when due the
redemption funds to which they are entitled, shall cease and
determine. Any funds so deposited which shall remain unclaimed by
the holders of such Preferred Stock at the end of six (6) years
after the redemption date, together with any interest thereon
that shall have been allowed by the bank or trust company with
which the deposit shall have been made, shall be paid by it to
the Corporation. The Corporation may also from time to time
repurchase shares of its Preferred Stock at not exceeding the
price at which the same may be redeemed. Shares of Preferred
Stock redeemed or repurchased by this Corporation may from
time to time be reissued by it.
5. Restrictions on Certain Corporate Action. (A)
Except as hereinafter specifically provided, each of the
following described proceedings, matters and things shall require
authorization with respect thereto by holders of issued and
outstanding shares of Preferred Stock voting as a class at a
meeting called for the purpose, but shall be deemed to be
authorized by holders of such shares outstanding if, at a meeting
so called and held, holders of a majority of the votes
represented by such shares outstanding shall vote favorably with
respect thereto, unless holders of one-third or more of the votes
represented by such shares outstanding shall vote unfavorably
with respect thereto:
(a) Creation, authorization or issuance of any
class of stock which shall be preferred as to dividends
or assets over the Preferred Stock, or any class of
security convertible into stock preferred as to
dividends or assets over the Preferred Stock;
(b) Any change in the provisions hereof relative
to the Preferred Stock, or of any series thereof, which
would change the express terms and provisions of such
stock in any manner prejudicial to the holders thereof,
including any change in the provisions of Paragraphs 4
and 6 of this Division A; provided, however, that if
such prejudicial change appertains to outstanding
shares of one or more, but not all, of such series,
then for the purposes of this Paragraph 5, such change
shall be deemed to be authorized if holders of a
majority of the votes represented by shares
prejudicially affected shall vote favorably with
respect thereto, unless holders of one-third or more of
the votes represented by such shares so prejudicially
affected shall vote unfavorably with respect thereto;
(c) Issuance of additional shares of Preferred
Stock or issuance of any shares of any stock ranking on
<PAGE> 10
a parity with the Preferred Stock as to dividends or
assets, unless
(1) the par value and/or the capital
represented by shares without par value of the
Corporation's stock junior to the Preferred Stock
to be outstanding immediately after such issuance
(plus, if the Corporation so elects, its surplus
as shown by its books to the extent that
distribution of such surplus to the holders of
such junior stock is prohibited while such
additional shares are outstanding) shall be at
least equal to the fixed liquidation price of its
Preferred Stock of all series and of any other
stock ranking on a parity with or in priority to
the Preferred Stock as to dividends or assets to
be outstanding immediately after the issuance of
such additional shares; and
(2) for the period of twelve (12) consecutive
calendar months within the fifteen (15) calendar
months immediately preceding the issuance of such
additional shares or the contracting for the
issuance and sale thereof, (i) the net earnings of
the Corporation available for dividends as
determined in accordance with sound accounting
practice are at least two and one-half (2 1/2)
times the annual dividend requirements on all
Preferred Stock of all series and all other stock
ranking on a parity with or in priority to the
Preferred Stock as to dividends or assets to be
outstanding immediately after the issuance of such
additional shares; and (ii) the balance of
earnings of the Corporation available (after taxes
and depreciation) for interest, amortization and
dividends as determined in accordance with sound
accounting practice are at least one and one-half
(1 1/2) times the aggregate of the annual interest
requirements on its indebtedness and the annual
dividend requirements on all Preferred Stock of
all series and all other stock ranking on a parity
with or in priority to the Preferred Stock as to
dividends or assets to be outstanding immediately
after the proposed issue of such additional
shares.
(B) Except as hereinafter specifically provided, each
of the following described proceedings, matters and things shall
require action with respect thereto by holders of issued and
outstanding shares of Preferred Stock voting as a class at a
meeting called for the purpose, but shall be deemed to be
authorized by holders of such stock, if, at a meeting so called
and held, a majority of the votes represented by such shares
outstanding shall be present or represented and a plurality of
<PAGE> 11
such majority so present or represented shall vote favorably with
respect thereto:
(a) Issuance or assumption of any "unsecured debt
securities" (which term as used in this clause (a)
shall mean notes, debentures or other securities
representing unsecured indebtedness maturing more than
one year from the date of issuance or assumption
thereof by the Corporation) for any purpose other than
for the purpose of refunding any outstanding securities
representing secured indebtedness or any outstanding
unsecured debt securities theretofore issued or assumed
by the Corporation or effecting the redemption or
retirement of outstanding shares of one or more series
of the Preferred Stock, if immediately after such
issuance or assumption the total principal amount of
all unsecured debt securities issued or assumed and
then outstanding would exceed ten per centum (10%) of
the aggregate of (i) the total principal amount of all
securities representing secured indebtedness issued or
assumed by the Corporation and then to be outstanding,
and (ii) the total of capital and surplus of the
Corporation as then to be stated on its books;
provided, however, that any unsecured debt securities
issued under any authorization of Preferred
Stockholders given pursuant hereto (and any securities
issued to refund the same) shall not be considered in
determining the amount of other unsecured debt
securities which may be issued or assumed within the
aforesaid ten per centum (10%) limitation.
(b) The statutory merger or consolidation of the
Corporation with or into any other Corporation, or a
sale of substantially all of the assets of the
Corporation, unless such merger or consolidation or
sale, or the issuance and assumption of all securities
to be issued or assumed in connection with any such
merger or consolidation or sale, shall have been
ordered, approved, or permitted by the Securities and
Exchange Commission under the Public Utility Holding
Company Act of 1935, or by any successor commission or
regulatory authority of the United States having
jurisdiction in the premises after specific application
or other formal presentation; but the provisions of
this clause (b) shall not apply to an acquisition by
the Corporation of franchises or assets in any manner
which does not involve a statutory merger or
consolidation.
6. Voting Rights. The holders of the Preferred Stock
shall not be entitled to vote except as follows:
(a) As provided in the preceding Paragraph 5; or
<PAGE> 12
(b) As may from time to time be mandatorily
provided by the laws of Texas; or
(c) For the election of two directors when and as
dividends on any of the outstanding Preferred Stock
shall be in default in an amount equivalent to four
full quarter-yearly dividends and thereafter until no
dividends on any Preferred Stock shall be in default or
until dividends on any of the outstanding Preferred
Stock shall be in default in an amount equivalent to
twelve full quarter-yearly dividends, whichever event
shall first occur; or
(d) For the election of the smallest number of
directors necessary to constitute a majority of the
full Board when and as dividends on any of the
outstanding Preferred Stock shall be in default in an
amount equivalent to twelve full quarter-yearly
dividends and thereafter until no dividends on any
Preferred Stock shall be in default.
When and as the right shall accrue to holders of the
Preferred Stock to elect two directors as provided in clause (c)
of the preceding sentence, the number of directors of the
Corporation shall thereupon, and until all Preferred Stock
dividends in default shall have been paid, be two more than the
full number constituting the Board of Directors immediately prior
to the time such right to elect directors accrued. So long as the
holders of the Preferred Stock shall have the right to elect two
directors under the terms of said clause (c), such right shall be
exercised by holders of the Preferred Stock voting as a class,
and holders of the Common Stock voting separately as a class
shall be entitled to elect the remaining directors. So long as
holders of the Preferred Stock shall have the right to elect a
majority of the directors under the terms of clause (d) of the
first sentence of this Paragraph 6, such right shall be exercised
by holders of the Preferred Stock voting as a class, and holders
of the Common Stock voting separately as a class shall be
entitled to elect the remaining directors.
When, under the provisions of this Paragraph 6, the
right shall have accrued to the holders of outstanding Preferred
Stock to elect Directors, the Board of Directors shall within ten
(10) days after delivery to the Corporation at its principal
office of a request to such effect signed by any holder of
Preferred Stock entitled to vote, call a special meeting of
holders of Preferred Stock in case such right shall have accrued
under clause (c) above, or a special meeting of all stockholders
in case such right shall have accrued under clause (d) above, to
be held, in either case, within forty (40) days from the delivery
of such request for the purpose of electing directors. Two
directors shall be elected at each meeting of holders of
Preferred Stock called for the purpose of electing directors
pursuant to clause (c) above and a full Board shall be elected at
<PAGE> 13
each meeting of all stockholders called for the purpose of
electing directors pursuant to clause (d) above, in each case to
serve until the next annual meeting of stockholders and until
their respective successors shall have been elected and
qualified. Whenever, under the provisions of this Paragraph 6,
the right of holders of outstanding Preferred Stock to elect
directors shall terminate, the Board of Directors shall, within
ten (10) days after delivery to the Corporation at its principal
office of a request to such effect signed by any holder of any
outstanding stock ranking junior to the Preferred Stock as to
dividends or assets and entitled to vote, call a special meeting
of the holders of such junior stock entitled to vote to be held
within forty (40) days from the delivery of such request for the
purpose of electing a full Board of Directors to serve until the
next annual meeting and until their respective successors shall
be elected and shall qualify. If at any meeting called as
aforesaid for the purpose of electing a full Board of Directors
after accrual or termination of the right of holders of
outstanding Preferred Stock to elect directors as in this
Paragraph 6 provided, any director shall not be reelected, his
term of office shall end upon the election and qualification of
his successor, notwithstanding that the term for which such
director was originally elected shall not at the time have
expired.
If, while holders of Preferred Stock shall be entitled
to elect any directors pursuant to this Paragraph 6, the number
of directors in office who have been elected by the holders of
Preferred Stock shall become less than the total number of
directors subject to election by the holders of shares of such
class, whether by reason of the resignation, death or removal of
any director or directors, or an increase in the total number of
directors, the vacancy or vacancies may be filled by a plurality
vote of holders of shares of such class at a meeting thereof
called for the purpose or, pending such action, by the
affirmative vote of the director or directors at the time in
office who were elected by the vote of shares of such class. Any
director who has been elected by the holders of Preferred Stock
may be removed from office either by vote of the holders of a
majority of the votes represented by the shares of Preferred
Stock or by vote of a majority of the entire Board of Directors,
but in the latter case the majority of the entire Board so voting
shall include a majority of the other directors then in office
elected by the vote of the holders of Preferred Stock. A special
meeting of holders of shares of Preferred Stock may be called by
a majority vote of the Board of Directors for the purpose of
filling a vacancy occurring as aforesaid or for the purpose of
removing a director in accordance with the provisions of the
preceding sentence, and shall be called within 40 days after
there shall have been delivered to the Corporation at its
principal office a request or requests to such effect signed by
holders of at least five per centum (5%) of the votes represented
by the outstanding shares of Preferred Stock entitled to vote
<PAGE> 14
with respect to the filling of any such vacancy or the removal of
any such director.
Preferred Stockholders shall not be entitled to receive
notice of any meeting of holders of any class of stock at which
they are not entitled to vote.
DIVISION B -- DIFFERENT SERIES OF PREFERRED STOCK.
1. $4.50 Dividend Preferred Stock. Fifteen thousand
(15,000) shares of authorized stock classified as Preferred Stock
as provided in the first paragraph of this Article VI shall
constitute the first series of Preferred Stock and are designated
as "$4.50 Dividend Preferred Stock"; the fixed dividend rate on
the shares of such series is Four and one-half Dollars ($4.50)
per share per annum and such dividends are cumulative from
January 1, 1941, with the first quarterly dividend payable April
1, 1941; the fixed redemption price on the shares of such series
is One Hundred Nine Dollars ($109) per share; the fixed
liquidation price on the shares of such series is One Hundred
Dollars ($100) per share; and the fixed liquidation premium on
the shares of such series is Nine Dollars ($9.00) per share. The
$4.50 Dividend Preferred Stock has no exchange or conversion
rights.
2. $4.12 Dividend Preferred Stock. Fifteen thousand
(15,000) shares of authorized stock classified as Preferred Stock
as provided in the first paragraph of this Article VI shall
constitute the second series of Preferred Stock and are
designated as "$4.12 Dividend Preferred Stock"; the fixed
dividend rate on the shares of such series is Four and Twelve
One-hundredths Dollars ($4.12) per share per annum and such
dividends are cumulative from January 1, 1954, with the first
quarterly dividend payable April 1, 1954; the fixed redemption
prices on the shares of such series are $106.48 per share if
redeemed prior to January 1, 1959; $105.48 per share if redeemed
on January 1, 1959 or thereafter and prior to January 1, 1964;
$104.48 per share if redeemed on January 1, 1964 or thereafter
and prior to January 1, 1969; and $103.98 per share if redeemed
on January 1, 1969 or thereafter. The fixed liquidation price on
the shares of such series is One Hundred Dollars ($100) per
share; and the fixed liquidation premium on the shares of such
series is, at any time, an amount per share equal to the
difference between One Hundred Dollars ($100) and the fixed
redemption price in effect at that time. The $4.12 Dividend
Preferred Stock has no exchange or conversion rights.
3. $4.72 Dividend Preferred Stock. Twenty thousand
(20,000) shares of authorized stock classified as Preferred Stock
as provided in the first paragraph of this Article VI shall
constitute the third series of Preferred Stock and are designated
as "$4.72 Dividend Preferred Stock"; the fixed dividend rate on
the shares of such series is Four and Seventy-two One-hundredths
Dollars ($4.72) per share per annum and such dividends are
<PAGE> 15
cumulative from April 1, 1956, with the first quarterly dividend
payable July 1, 1956; the fixed redemption prices for the shares
of such series are $106.50 per share if redeemed prior to April
1, 1961; $105.50 per share if redeemed on April 1, 1961 or
thereafter and prior to April 1, 1966; $104.50 per share if
redeemed on April 1, 1966 or thereafter and prior to April 1,
1971; $104.00 per share if redeemed on April 1, 1971 or
thereafter. The fixed liquidation price for the shares of such
series is One Hundred Dollars ($100) per share; and the fixed
liquidation premium for the shares of such series is, at any
time, an amount per share equal to the difference between One
Hundred Dollars ($100) and the fixed redemption price in effect
at that time. The $4.72 Dividend Preferred Stock has no exchange
or conversion rights.
4. $4.56 Dividend Preferred Stock. Forty thousand
(40,000) shares of authorized stock classified as Preferred Stock
as provided in the first paragraph of this Article VI shall
constitute a series of Preferred Stock designated as "$4.56
Dividend Preferred Stock"; the fixed dividend rate on the shares
of such series is $4.56 per share per annum and such dividends
are cumulative from July 1, 1963, with the first quarterly
dividend payable October 1, 1963; the fixed redemption prices on
the shares of such series are $106.50 per share if redeemed prior
to July 1, 1966; $105.00 per share if redeemed on July 1, 1966 or
thereafter and prior to July 1, 1969; $103.50 per share if
redeemed on July 1, 1969 or thereafter and prior to July 1, 1972;
$102.00 per share if redeemed on July 1, 1972 or thereafter and
prior to July 1, 1975; $101.00 per share if redeemed on July 1,
1975 or thereafter and prior to July 1, 1978; and $100.00 per
share if redeemed on July 1, 1978 or thereafter. The fixed
liquidation price for the shares of such series is One Hundred
Dollars ($100) per share; and the fixed liquidation premium on
the shares of such series is, at any time, an amount per share
equal to the difference between One Hundred Dollars ($100) and
the fixed redemption price in effect at that time. The $4.56
Dividend Preferred Stock has no exchange or conversion rights.
5. $10.75 Dividend Preferred Stock. A. Seventy-six
thousand (76,000) shares of authorized stock classified as
Preferred Stock as provided in the first paragraph of this
Article VI shall constitute a series of Preferred Stock
designated as "$10.75 Dividend Preferred Stock"; the fixed
dividend rate on the shares of such series is $10.75 per share
per annum, payable quarterly on January 1, April 1, July 1 and
October 1 in each year, and such dividends are cumulative from
the dividend date next preceding the date of issue, with the
first quarterly dividend payable on the dividend date next
following the date of issue; the fixed redemption prices on the
shares of such series are $110.75 per share if redeemed prior to
January 1, 1980; $108.00 per share if redeemed on January 1, 1980
or thereafter and prior to January 1, 1985; $105.25 per share if
redeemed on January 1, 1985 or thereafter and prior to January 1,
1990; $102.50 per share if redeemed on January 1, 1990 or
<PAGE> 16
thereafter and prior to January 1, 1995; and $101.00 per share if
redeemed on January 1, 1995 or thereafter, provided, however,
that no optional redemption of shares of such series (except in
the case of redemption pursuant to Paragraph C below) shall be
made prior to January 1, 1985, directly or indirectly as a part
of, or in anticipation of, any refunding operation involving the
issuance of indebtedness or of additional shares of Preferred
Stock or of shares of any stock ranking on a parity with
Preferred Stock as to dividends or assets, if such indebtedness
has an effective interest cost (calculated in accordance with
generally accepted financial practice), or if such Preferred
Stock or stock has an effective dividend cost (calculated in
accordance with generally accepted financial practice), of less
than 10.75% per annum. The fixed liquidation price of the shares
of such series is One Hundred Dollars ($100) per share; and the
fixed liquidation premium on the shares of such series is, at any
time, an amount per share equal to the difference between One
Hundred Dollars ($100) and the fixed redemption price in effect
at that time. The $10.75 Dividend Preferred Stock has no exchange
or conversion rights.
B. The $10.75 Dividend Preferred Stock shall be
entitled to the benefits of a sinking fund whereby, on January 1
in each year, commencing with the year 1980, this Corporation
shall, subject to the provisions of subdivision 1 of Division C
of Article VI of the Restated Articles of Incorporation, as
amended, and upon notice given as provided in subdivision 4 of
Division A of Article VI of the Restated Articles of
Incorporation, as amended, redeem at a sinking fund redemption
price of One Hundred Dollars ($100) per share plus accrued
dividends, 4,000 shares of $10.75 Dividend Preferred Stock.
The fixed sinking fund obligations shall be cumulative
so that if on any January 1 on or after January 1, 1980 this
Corporation shall not have satisfied to the full extent the
sinking fund obligation then due, whether by reason of the
provision of subdivision 1 of Division C of Article VI of the
Restated Articles of Incorporation, as amended, or otherwise,
then any such deficiency shall be made good on January 1 in the
succeeding year or years as soon as and to the extent permitted
by law and the provisions of the Restated Articles of
Incorporation, as amended; and until any such deficiency in the
fulfillment of the sinking fund obligation shall so be made good,
no dividends, whether in cash or of any other character (other
than dividends in Common Stock or any other class of stock
ranking junior to the Preferred Stock as to dividends or assets),
shall be paid or declared upon or set apart for, or any
distribution made or ordered in respect of, the Common Stock or
any other class of stock ranking junior to the Preferred Stock as
to dividends or assets, and no moneys or other consideration
shall be set aside for or applied to, directly or indirectly, the
purchase or redemption of Preferred Stock (except to the extent
required to comply with any sinking or purchase fund obligation
of this Corporation in respect of any series of Preferred Stock
<PAGE> 17
or as permitted pursuant to Paragraph C below) or the purchase of
Common Stock or the purchase or redemption of any other class of
stock ranking junior to the Preferred Stock as to dividends or
assets. Notwithstanding the foregoing, any money or other
consideration applied to, directly or indirectly, the purchase or
redemption of Preferred Stock to comply with any sinking or
purchase fund obligation of this Corporation in respect of
Preferred Stock in an amount less than the full amount due with
respect to the sinking or purchase fund obligations of all series
of Preferred Stock at the time such money or other consideration
is so applied shall, if more than one series of Preferred Stock
be then outstanding, be divided between the different series in
proportion to the aggregate amounts which would be applied to
such series if full payment of sinking and purchase fund
obligations then due were made.
So long as any shares of $10.75 Dividend Preferred
Stock are outstanding, no optional redemption, purchase or other
acquisition (other than redemptions pursuant to this Paragraph B)
of the $10.75 Dividend Preferred Stock by this Corporation shall
be used as a credit against, or affect this Corporation's
obligation with respect to, any sinking fund payment required
under this Paragraph B with respect to the $10.75 Dividend
Preferred Stock.
At least one day prior to any January 1 on which any
shares of $10.75 Dividend Preferred Stock shall have been called
for redemption for the sinking fund, this Corporation shall
deliver to the transfer agent for such stock, in trust for such
redemption, an amount of money sufficient to redeem all such
shares so called for redemption, to be held and applied as
provided herein and in subdivision 4 of Division A of Article VI
of the Restated Articles of Incorporation, as amended.
Any redemption of $10.75 Dividend Preferred Stock for
the sinking fund shall be by such method, whether by lot and/or
pro rata, as shall from time to time be determined by vote of the
Board of Directors of this Corporation.
So long as any shares of $10.75 Dividend Preferred
Stock are outstanding, shares of $10.75 Dividend Preferred Stock
which are purchased, redeemed or otherwise acquired by the
Corporation shall not be reissued, or otherwise disposed of, as
shares of $10.75 Dividend Preferred Stock.
C. In the event that prior to January 1, 1977 a law
of the United States of America shall become effective which
reduces or eliminates the deduction for dividends received set
forth in Section 243 of the Internal Revenue Code, allowable on
February 17, 1975 with respect to dividends payable on the $10.75
Dividend Preferred Stock (herein, the "Law") then, thereafter,
notwithstanding the foregoing this Corporation may, at its
option, at any time redeem, in accordance with the provisions of
paragraph 4 of Division A of Article VI of the Restated Articles
<PAGE> 18
of Incorporation, as amended, of this Corporation, all
outstanding $10.75 Dividend Preferred Stock, at the redemption
price of One Hundred Dollars ($100) per share together with the
amount of any dividends accrued to the date of such redemption;
provided that, if the Law reduces or eliminates such deduction
only in the event of an election by this Corporation, and any
such election may be made by this Corporation with regard to the
$10.75 Dividend Preferred Stock without regard to the tax or
accounting status or treatment of any other class or series of
this Corporation's Preferred Stock issued or to be issued at any
time, this Corporation may call for redemption the $10.75
Dividend Preferred Stock pursuant to this paragraph only during
the first year following the enactment of the Law or the
effective date of the Law, whichever is later.
The Law shall be deemed to become effective on that
date when, either by the terms of the Law or by a regulation
issued under the Law, or by an election by this Corporation made
pursuant to the Law or a regulation thereunder, any beneficial
holder of $10.75 Dividend Preferred Stock becomes no longer
entitled, in whole or in part, to the federal income tax
deduction for dividends received with respect to the $10.75
Dividend Preferred Stock.
6. $8.24 Dividend Preferred Stock. Fifty-two thousand
four hundred fifty (52,450) shares of authorized stock classified
as Preferred Stock as provided in the first paragraph of this
Article VI shall constitute a series of Preferred Stock
designated as "$8.24 Dividend Preferred Stock"; the fixed
dividend rate on the shares of such series is $8.24 per share per
annum, payable quarterly on January 1, April 1, July 1 and
October 1 in each year, and such dividends are cumulative from
the dividend date next preceding the date of issue, with the
first quarterly dividend payable on the dividend date next
following the date of issue; the fixed redemption prices on the
shares of such series are $107.52 per share if redeemed on or
prior to April 1, 1982; $105.46 per share if redeemed thereafter
and on or prior to April 1, 1987; $103.40 per share if redeemed
thereafter and on or prior to April 1, 1992; $101.34 per share if
redeemed thereafter and on or prior to April 1, 1997; and $100.11
per share if redeemed thereafter, provided, however, that no
optional redemption of shares of such series shall be made prior
to April 1, 1982, directly or indirectly, as a part of, or in
anticipation of, any refunding operation involving the issuance
of indebtedness or of additional shares of Preferred Stock or
shares of any stock ranking on a parity with Preferred Stock as
to dividends or assets, if such indebtedness has an effective
interest cost, or if such Preferred Stock or other stock has an
effective dividend cost (calculated in each case in accordance
with generally accepted financial practice), of less than 8.38%
per annum. The fixed liquidation price of the shares of such
series is One Hundred Dollars ($100) per share; and the fixed
liquidation premium on the shares of such series is, at any time,
an amount per share equal to the difference between One Hundred
<PAGE> 19
Dollars ($100) and the fixed redemption price in effect at that
time. The $8.24 Dividend Preferred Stock has no exchange or
conversion rights.
7. $8.44 Dividend Preferred Stock. A. One hundred
forty-four thousand (144,000) shares of authorized stock
classified as Preferred Stock as provided in the first paragraph
of this Article VI shall constitute a series of Preferred Stock
designated as "$8.44 Dividend Preferred Stock"; the fixed
dividend rate on the shares of such series is $8.44 per share per
annum, payable quarterly on January 1, April 1, July 1 and
October 1 in each year, and such dividends are cumulative from
the dividend date next preceding the date of issue, with the
first quarterly dividend payable on the dividend date next
following the date of issue; the fixed redemption prices on the
shares of such series are $108.45 per share if redeemed on or
prior to October 1, 1983; $106.33 per share if redeemed
thereafter and on or prior to October 1, 1988; $104.22 per share
if redeemed thereafter and on or prior to October 1, 1993;
$102.11 per share if redeemed thereafter and on or prior to
October 1, 1998; and $100.85 per share if redeemed thereafter;
provided, however, that no optional redemption of shares of such
series (except in the case of redemption pursuant to Paragraph C
below) shall be made prior to October 1, 1988, directly or
indirectly as a part of, or in anticipation of, any refunding
operation involving the issuance of indebtedness or of additional
shares of Preferred Stock or of shares of any stock ranking on a
parity with Preferred Stock as to dividends or assets or of
shares of any stock (other than the Common Stock of this
Corporation) ranking junior to the Preferred Stock as to
dividends or assets and senior to the Common Stock as to
dividends, if such indebtedness has an effective interest cost
(calculated in accordance with generally accepted financial
practice), or if such Preferred Stock or stock has an effective
dividend cost (calculated in accordance with generally accepted
financial practice), of less than 8.44% per annum. The fixed
liquidation price of the shares of such series is One Hundred
Dollars ($100) per share; and the fixed liquidation premium on
the shares of such series is, at any time, an amount per share
equal to the difference between One Hundred Dollars ($100) and
the fixed redemption price in effect at that time. The $8.44
Dividend Preferred Stock has no exchange or conversion rights.
B. The $8.44 Dividend Preferred Stock shall be
entitled to the benefits of a sinking fund whereby, subject to
the provisions of subdivision 1 of Division C of Article VI of
the Restated Articles of Incorporation, as amended, and upon
notice given as provided in subdivision 4 of Division A of
Article VI of the Restated Articles of Incorporation, as amended,
this Corporation shall redeem, at a sinking fund redemption price
of $100 per share, plus accrued dividends, on October 1 of each
year commencing with the year 1984, four percent of the aggregate
number of shares of $8.44 Dividend Preferred Stock theretofore
<PAGE> 20
issued by this Corporation and, on October 1, 2003, all remaining
shares of $8.44 Dividend Preferred Stock then outstanding.
The fixed sinking fund obligations shall be cumulative
so that if on any October 1 on or after October 1, 1984, this
Corporation shall not have satisfied to the full extent the
sinking fund obligation then due, whether by reason of the
provisions of subdivision 1 of Division C of Article VI of the
Restated Articles of Incorporation, as amended, or otherwise,
then any such deficiency shall be made good on October 1 in the
succeeding year or years as soon as and to the extent permitted
by law and the provisions of the Restated Articles of
Incorporation, as amended; and until any such deficiency in the
fulfillment of the sinking fund obligation shall so be made good,
no dividends, whether in cash or of any other character (other
than dividends in Common Stock or any other class of stock
ranking junior to the Preferred Stock as to dividends or assets),
shall be paid or declared upon or set apart for, or any
distribution made or ordered in respect of, the Common Stock or
any other class of stock ranking junior to the Preferred Stock as
to dividends or assets, and no moneys or other consideration
shall be set aside for or applied to, directly or indirectly, the
purchase or redemption of Preferred Stock (except to the extent
required to comply with any sinking or purchase fund obligation
of this Corporation in respect of any series of Preferred Stock
or as permitted pursuant to Paragraph C below) or the purchase of
Common Stock or the purchase or redemption of any other class of
stock ranking junior to the Preferred Stock as to dividends or
assets. Notwithstanding the foregoing, any money or other
consideration applied to, directly or indirectly, the purchase or
redemption of Preferred Stock to comply with any sinking or
purchase fund obligation of this Corporation in respect of
Preferred Stock in an amount less than the full amount due with
respect to the sinking or purchase fund obligations of all series
of Preferred Stock at the time such money or other consideration
is so applied shall, if more than one series of Preferred Stock
be then outstanding, be divided between the different series in
proportion to the aggregate amounts which would be applied to
such series if full payment of sinking and purchase fund
obligations then due were made.
So long as any shares of $8.44 Dividend Preferred Stock
are outstanding, no optional redemption, purchase or other
acquisition (other than redemptions pursuant to this Paragraph B)
of the $8.44 Dividend Preferred Stock by this Corporation shall
be used as a credit against, or affect this Corporation's
obligation with respect to, any sinking fund payment required
under this Paragraph B with respect to the $8.44 Dividend
Preferred Stock.
At least one day prior to any October 1 on which any
shares of $8.44 Dividend Preferred Stock shall have been called
for redemption for the sinking fund, this Corporation shall deliver
to the transfer agent for such stock, in trust for such
<PAGE> 21
redemption, an amount of money sufficient to redeem all such
shares so called for redemption, to be held and applied as
provided herein and in subdivision 4 of Division A of Article VI
of the Restated Articles of Incorporation, as amended.
So long as any shares of $8.44 Dividend Preferred Stock
are outstanding, shares of $8.44 Dividend Preferred Stock which
are purchased, redeemed or otherwise acquired by this Corporation
shall not be reissued, or otherwise disposed of, as shares of
$8.44 Dividend Preferred Stock.
C. In addition to the shares redeemed by this
Corporation pursuant to the fixed sinking fund obligations under
Paragraph B above, this Corporation shall have the non-cumulative
option to redeem on October 1 of each year, commencing with the
year 1984, at the sinking fund redemption price of $100 per
share, plus accrued dividends, up to an additional four percent
of the aggregate number of shares of $8.44 Dividend Preferred
Stock theretofore issued by this Corporation, subject to the
provisions of subdivision 1 of Division C of Article VI of the
Restated Articles of Incorporation, as amended, and upon notice
given as provided in subdivision 4, Division A of Article VI of
the Restated Articles of Incorporation, as amended. This option
shall be non-cumulative so that if on any October 1 on or after
October 1, 1984, this Corporation shall not exercise its option
or shall exercise its option to redeem less than four percent of
the aggregate number of shares of $8.44 Dividend Preferred Stock
theretofore issued by this Corporation, the option for such year
shall lapse to the extent not exercised. The aggregate number of
shares of $8.44 Dividend Preferred Stock which shall be
redeemable under this Paragraph C shall be limited to thirty
percent of the aggregate number of shares of $8.44 Dividend
Preferred Stock issued by this Corporation.
8. $8.95 Dividend Preferred Stock. A. One hundred
fifty thousand (150,000) shares of authorized stock classified as
Preferred Stock as provided in the first paragraph of this
Article VI shall constitute a series of Preferred Stock
designated as "$8.95 Dividend Preferred Stock"; the fixed
dividend rate on the shares of such series is $8.95 per share per
annum, payable quarterly on January 1, April 1, July 1 and
October 1 in each year, and such dividends are cumulative from
the dividend date next preceding the date of issue, with the
first quarterly dividend payable on the dividend date next
following the date of issue. The fixed redemption prices on the
shares of such series are $108.95 per share if redeemed on or
prior to October 1, 1984; $106.71 per share if redeemed
thereafter and on or prior to October 1, 1989; $104.48 per share
if redeemed thereafter and on or prior to October 1, 1994;
$102.24 per share if redeemed thereafter and on or prior to
October 1, 1999; and $100.90 per share if redeemed thereafter;
provided, however, (a) that no optional redemption of shares of
such series shall be made prior to October 1, 1984, directly or
<PAGE> 22
indirectly is a part of, or in anticipation of, any refunding
operation involving the issuance of indebtedness or of additional
shares of Preferred Stock or of shares of any stock ranking on a
parity with Preferred Stock as to dividends or assets or of
shares of any stock (other than the Common Stock of this
Corporation) ranking junior to the Preferred Stock as to
dividends or assets and senior to the Common Stock as to
dividends, if such indebtedness has an effective interest cost
(calculated in accordance with generally accepted financial
practice), or if such Preferred Stock or other stock has an
effective dividend cost (calculated in accordance with generally
accepted financial practice), of less than 8.95% per annum; and
(b) the fixed redemption price on the shares of such series is
$108.95 if redeemed on or after October 1, 1984, and through
September 30, 1989, directly or indirectly as part of, or in
anticipation of, any refunding operation, whether in the nature
hereinabove described or otherwise. The fixed liquidation price
of the shares of such series is One Hundred Dollars ($100) per
share; and the fixed liquidation premium on the shares of such
series is, at any time, an amount per share equal to the
difference between One Hundred Dollars ($100) and the applicable
fixed redemption price in effect at that time (which for the
period October 2, 1984 through September 30, 1989 shall be
$106.71 per share). The $8.95 Dividend Preferred Stock has no
exchange or conversion rights.
B. The $8.95 Dividend Preferred Stock shall be
entitled to the benefits of a sinking fund whereby, subject to
the provisions of subdivision 1 of Division C of Article VI of
the Restated Articles of Incorporation, as amended, and upon
notice given as provided in subdivision 4 of Division A of
Article VI of the Restated Articles of Incorporation, as amended,
this Corporation shall redeem, at a sinking fund redemption price
of $100 per share, plus accrued dividends, on October 1 of each
year commencing with the year 1985, five percent of the aggregate
number of shares of $8.95 Dividend Preferred Stock theretofore
issued by this Corporation and, on October 1, 2004, all remaining
shares of $8.95 Dividend Preferred Stock then outstanding.
The fixed sinking fund obligations shall be cumulative
so that if on any October 1 on or after October 1, 1985, this
Corporation shall not have satisfied to the full extent the
sinking fund obligation then due, whether by reason of the
provisions of subdivision 1 of Division C of Article VI of the
Restated Articles of Incorporation, as amended, or otherwise,
then any such deficiency shall be made good on October 1 in the
succeeding year or years as soon as and to the extent permitted
by law and the provisions of the Restated Articles of
Incorporation, as amended; and until any such deficiency in the
fulfillment of the sinking fund obligation shall so be made good,
no dividends, whether in cash or of any other character (other than
dividends in Common Stock or any other class of stock ranking
junior to the Preferred Stock as to dividends or assets), shall be
paid or declared upon or set apart for, or any distribution made or
<PAGE> 23
ordered in respect of, the Common Stock or any other class of stock
ranking junior to the Preferred Stock as to dividends or assets,
and no moneys or other consideration shall be set aside for or
applied to, directly or indirectly, the purchase or redemption of
Preferred Stock (except to the extent required to comply with any
sinking or purchase fund obligation of this Corporation in respect
of any series of Preferred Stock or as permitted pursuant to
Paragraph C below) or the purchase of Common Stock or the purchase
or redemption of any other class of stock ranking junior to the
Preferred Stock as to dividends or assets. Notwithstanding the
foregoing, any money or other consideration applied to, directly
or indirectly, the purchase or redemption of Preferred Stock to
comply with any sinking or purchase fund obligation of this
Corporation in respect of Preferred Stock in an amount less than
the full amount due with respect to the sinking or purchase fund
obligations of all series of Preferred Stock at the time such
money or other consideration is so applied shall, if more than
one series of Preferred Stock be then outstanding, be divided
between the different series in proportion to the aggregate
amounts which would be applied to such series if full payment of
sinking and purchase fund obligations then due were made.
So long as any shares of $8.95 Dividend Preferred Stock
are outstanding, no optional redemption, purchase or other
acquisition (other than redemptions pursuant to this Paragraph B)
of the $8.95 Dividend Preferred Stock by this Corporation shall
be used as a credit against, or affect this Corporation's
obligation with respect to, any sinking fund payment required
under this Paragraph B with respect to the $8.95 Dividend
Preferred Stock.
At least one day prior to any October 1 on which any
shares of $8.95 Dividend Preferred Stock shall have been called
for redemption for the sinking fund, this Corporation shall
deliver to the transfer agent for such stock, in trust for such
redemption, an amount of money sufficient to redeem all such
shares so called for redemption, to be held and applied as
provided herein and in subdivision 4 of Division A of Article VI
of the Restated Articles of Incorporation, as amended.
So long as any shares of $8.95 Dividend Preferred Stock
are outstanding, shares of $8.95 Dividend Preferred Stock which
are purchased, redeemed or otherwise acquired by this Corporation
shall not be reissued, or otherwise disposed of, as shares of
$8.95 Dividend Preferred Stock.
C. In addition to the shares redeemed by this
Corporation pursuant to the fixed sinking fund obligations under
Paragraph B above and notwithstanding the provisions of Paragraph
A above, this Corporation shall have the non-cumulative option to
redeem on October 1 of each year, commencing with the year 1985,
at the sinking fund redemption price of $100 per share, plus
accrued dividends, up to an additional five percent of the
aggregate number of shares of $8.95 Dividend Preferred Stock
<PAGE> 24
theretofore issued by this Corporation, subject to the provisions
of subdivision 1 of Division C of Article VI of the Restated
Articles of Incorporation, as amended, and upon notice given as
provided in subdivision 4, Division A of Article VI of the
Restated Articles of Incorporation, as amended. This option shall
be non-cumulative so that if on any October 1 on or after October
1, 1985, this Corporation shall not exercise its option or shall
exercise its option to redeem less than five percent of the
aggregate number of shares of $8.95 Dividend Preferred Stock
theretofore issued by this Corporation, the option for such year
shall lapse to the extent not exercised. The aggregate number of
shares of $8.95 Dividend Preferred Stock which shall be
redeemable under this Paragraph C shall be limited to twenty-five
percent of the aggregate number of shares of $8.95 Dividend
Preferred Stock issued by this Corporation.
9. $9.50 Dividend Preferred Stock. A. One hundred
thousand (100,000) shares of authorized stock classified as
Preferred Stock as provided in the first paragraph of this
Article VI shall constitute a series of Preferred Stock
designated as "$9.50 Dividend Preferred Stock"; the fixed
dividend rate on the shares of such series is $9.50 per share per
annum, payable quarterly on January 1, April 1, July 1 and
October 1 in each year, and such dividends are cumulative from
the dividend date next preceding the date of issue, with the
first quarterly dividend payable on the dividend date next
following the date of issue.
B. The shares of $9.50 Dividend Preferred Stock are
not redeemable at the option of the Corporation prior to October
1, 1987. Thereafter, the fixed redemption prices on the shares of
such series are $104.75 per share if redeemed on or prior to
October 1, 1988; $102.375 per share if redeemed thereafter and on
or prior to October 1, 1989, and $100 per share if redeemed
thereafter and prior to October 1, 1990, at which time the
Corporation shall, subject to the provisions of Paragraph 1 of
Division C of Article VI of the Restated Articles of
Incorporation, as amended, redeem all shares of $9.50 Dividend
Preferred Stock then outstanding at a redemption price of $100
per share plus accrued dividends.
C. The $9.50 Dividend Preferred Stock shall be
entitled to the benefits of a sinking fund whereby, subject to
the provisions of Subdivision 1 of Division C of Article VI of
the Restated Articles of Incorporation, as amended, this
Corporation shall, on July 1, 1986, and on each July 1 thereafter
(so long as any shares of $9.50 Dividend Preferred Stock are
outstanding), offer to purchase, out of funds legally available
for the purchase or redemption by the Corporation of shares of
$9.50 Dividend Preferred Stock, on the next succeeding October 1,
not less than 20,000 shares of $9.50 Dividend Preferred Stock (or
the number of such shares then outstanding if less than 20,000),
at a purchase price of $100 per share, plus accrued dividends to
the date of purchase. Each such offer is hereinafter referred to
<PAGE> 25
as an "Annual Call for Tenders." The offer shall be made by
mailing a notice thereof by first class mail, postage prepaid, to
all holders of record of shares of the $9.50 Dividend Preferred
Stock at their respective addresses then appearing on the books
of the Corporation. The notice shall specify the total number of
shares which the Corporation is offering to purchase thereunder
and the date of purchase. Each holder of record wishing to accept
the offer shall tender to the Corporation, not later than 60 days
prior to the date of purchase, the number of shares of $9.50
Dividend Preferred Stock which the holder of record proposes to
sell in response to the offer, whereupon there shall be deemed to
be a binding contract of purchase and sale between that holder of
record and the Corporation with respect to that number of shares
tendered as the Corporation shall be required to purchase
pursuant to the following provisions. If the total number of
shares tendered by holders of record pursuant to an Annual Call
for Tenders is equal to, or less than, the total number of shares
which the Corporation has offered to purchase, the Corporation
must purchase all tendered shares on such October 1.
Each holder of record of shares of $9.50 Dividend
Preferred Stock shall have the right, pursuant to each Annual
Call for Tenders and subsequent to the time it becomes a holder
of record, to have the Corporation purchase from it not less than
the number of shares of $9.50 Dividend Preferred Stock which is
equal to the product of (i) 20,000 (or the number of shares of
$9.50 Dividend Preferred Stock then outstanding if less than
20,000) and (ii) a fraction the numerator of which is the number
of shares of $9.50 Dividend Preferred Stock held by such holder
of record on the July 1 on which such Annual Call for Tenders was
issued in accordance with the first sentence of the next
preceding paragraph (less any of such shares, including any of
such shares held by the predecessor holder or holders thereof,
which would have been required to be purchased by the Corporation
on any previous October 1 but which were not purchased because
not tendered) and the denominator of which is the total
outstanding shares of $9.50 Dividend Preferred Stock held of
record by all shareholders (except shares held by the
Corporation) as of such July 1 (less any of such shares,
including any of such shares held by the predecessor holder or
holders thereof, which would have been required to be purchased
by the Corporation on any previous October 1 but which were not
purchased because not tendered) . In making any determination as
to whether shares subsequently transferred were not purchased
because not tendered it shall be assumed that such shares are not
transferred by a holder of record until all other shares held by
such holder are first transferred or otherwise disposed of,
unless the Corporation is otherwise so notified and the subject
shares appropriately legended by the Corporation. If the
aggregate number of shares of $9.50 Dividend Preferred Stock
tendered by all holders of record of such shares pursuant to any
Annual Call for Tenders shall be more than the number of shares
offered to be purchased by the Corporation pursuant to any Annual
<PAGE> 26
Call for Tenders, each holder of record so tendering shares of
$9.50 Dividend Preferred Stock shall be entitled to have
purchased by the Corporation at least the number of shares equal
to the number of shares determined in accordance with the next
preceding sentence; provided, however, that nothing contained in
this Paragraph C shall be deemed to require the Corporation to
purchase more than 20,000 shares of $9.50 Dividend Preferred
Stock pursuant to any Annual Call for Tenders.
If after application of the provisions of the preceding
sentence, the Corporation must purchase pursuant to an Annual
Call for Tenders less than 20,000 shares of $9.50 Dividend
Preferred Stock (or such lesser number of shares as shall then be
outstanding) offered to be purchased, then the Corporation shall
purchase the remainder of the shares required to be purchased
pursuant to the Annual Call for Tenders (the "Remaining Shares")
from those holders of record, if any, who have tendered more
shares than the Corporation shall have been required, as
aforesaid, to purchase from them in the following manner: The
Corporation shall purchase from each such holder of record a
number of shares determined by multiplying the Remaining Shares
by a fraction (i) the numerator of which is the number of shares
tendered by such holder of record but not required, as aforesaid,
to be purchased from it and (ii) the denominator of which is the
total number of all shares tendered by all holders of record but
not required, as aforesaid, to be purchased from them. The
Corporation shall notify each tendering holder of record, not
later than twenty-five (25) days prior to the proposed date of
purchase, of the number of shares to be purchased from that
holder of record. The Corporation may make reasonable regulations
with respect to the form and manner of tender.
On each purchase pursuant to this Paragraph C, the
Corporation shall pay any transfer or similar taxes (not
including any income or similar taxes) to which any holder of
record selling shares to the Corporation may become subject as
the result of such sale. To the extent that any offer to purchase
shares pursuant to any Annual Call for Tenders is not accepted by
holders of record of shares of $9.50 Dividend Preferred Stock,
the Corporation shall be under no obligation to purchase such
shares under this Paragraph C except pursuant to subsequent
Annual Calls for Tenders. The annual obligation of the
Corporation to make an Annual Call for Tenders to purchase shares
of $9.50 Dividend Preferred Stock shall be cumulative so that if
the Corporation (i) shall fail to make any Annual Call for
Tenders, or (ii) shall fail or shall have been unable to purchase
pursuant to any Annual Call for Tenders all or any part of the
number of shares of $9.50 Dividend Preferred Stock required to be
purchased by it pursuant thereto, whether by reason of the
provisions of Subdivision 1 of Division C of Article VI of the
Restated Articles of Incorporation, as amended, or otherwise,
then any such deficiency shall be made good pursuant to Annual
Calls for Tenders on October 1 in the succeeding year or years as
soon as, and to the extent permitted by law and the provisions of
the Restated Articles of Incorporation, as amended; and until any
<PAGE> 27
such deficiency in the fulfillment of the sinking fund obligation
shall so be made good, no dividends, whether in cash or of any
other character (other than dividends in Common Stock or any
other class of stock ranking junior to the Preferred Stock as to
dividends and assets), shall be paid or declared upon or set
apart for, or any distribution made or ordered in respect of, the
Common Stock or any other class of stock ranking junior to the
Preferred Stock as to dividends or assets, and no moneys or other
consideration shall be set aside for or applied to, directly or
indirectly, the purchase or redemption of Preferred Stock (except
to the extent required to comply with any sinking or purchase
fund obligation of this Corporation in respect of any series of
Preferred Stock or as permitted pursuant to Paragraph D below) or
the purchase of Common Stock or the purchase or redemption of any
other class of stock ranking junior to the Preferred Stock as to
dividends or assets. Notwithstanding the foregoing, any money or
other consideration applied to, directly or indirectly, the
purchase or redemption of Preferred Stock to comply with any
sinking or purchase fund obligation of this Corporation in
respect of Preferred Stock in an amount less than the full amount
due with respect to the sinking or purchase fund obligations of
all series of Preferred Stock at the time such money or other
consideration is so applied shall, if more than one series of
Preferred Stock be then outstanding, be divided between the
different series in proportion to the aggregate amounts which
would be applied to such series if full payment of sinking and
purchase fund obligations then due were made.
So long as any shares of $9.50 Dividend Preferred stock
are outstanding, no optional redemption, purchase or other
acquisition of the $9.50 Dividend Preferred Stock by this
Corporation shall be used as a credit against, or affect this
Corporation's obligation with respect to, any sinking fund
payment required under this Paragraph C with respect to the
$9.50 Dividend Preferred Stock.
At least one day prior to any October 1 on which any
shares of $9.50 Dividend Preferred Stock shall have been called
for redemption for the sinking fund, this Corporation shall
deliver to the transfer agent for such stock, in trust for such
redemption, an amount of money sufficient to purchase all shares
required to be purchased on such October 1.
So long as any shares of $9.50 Dividend Preferred Stock
are outstanding, shares of $9.50 Dividend Preferred Stock which
are purchased, redeemed or otherwise acquired by this Corporation
shall not be reissued, or otherwise disposed of, as shares of
$9.50 Dividend Preferred Stock.
For the purpose of repurchasing shares of $9.50
Dividend Preferred Stock during the period when the shares of
such series are outstanding in accordance with the sixth sentence
of Paragraph 4 of Division A of Article VI of the Restated
<PAGE> 28
Articles of Incorporation, as amended, the redemption price
referred to in said sixth sentence shall be $100 per share, plus
accrued dividends.
D. In addition to the shares purchased by this
Corporation pursuant to the fixed sinking fund obligations under
Paragraph C above and notwithstanding the provisions of Paragraph
B above, this Corporation shall have the non-cumulative option to
offer to purchase on October 1 of each year commencing on October
1, 1986, at the sinking fund redemption price of $100.00 per
share, plus accrued dividends, up to an additional 20,000 shares
of $9.50 Dividend Preferred Stock, subject to the provisions of
Subdivision 1 of Division C of Article VI of the Restated
Articles of Incorporation, as amended, and upon notice and
according to the procedure required for the Annual Call for
Tenders under the provisions of Paragraph C above. This option
shall be non-cumulative so that if on any October 1 on or after
October 1, 1986, this Corporation (i) shall not exercise its
option, (ii) shall exercise its option to offer to purchase less
than 20,000 shares of $9.50 Dividend Preferred Stock, or (iii)
shall actually purchase fewer than an additional 20,000 shares of
$9.50 Dividend Preferred Stock pursuant to its optional offer to
purchase, the option to purchase for such year shall lapse to the
extent not exercised. The aggregate number of shares of $9.50
Dividend Preferred Stock which shall be redeemable under this
Paragraph D shall be unlimited.
E . The fixed liquidation price of the shares of $9.50
Dividend Preferred Stock is One Hundred Dollars ($100) per share;
and the fixed liquidation premium on the shares of $9.50 Dividend
Preferred Stock is an amount equal to $9.50 per share on or prior
to October 1, 1983, $8.55 per share thereafter and on or prior to
October 1, 1984, $7.60 per share thereafter and on or prior to
October 1, 1985, $6.65 per share thereafter and on or prior to
October 1, 1986, $5.70 per share thereafter and on or prior to
October 1, 1987, $4.75 per share thereafter and on or prior to
October 1, 1988, $2.375 per share thereafter and on or prior to
October 1, 1989, and no premium thereafter. The $9.50 Dividend
Preferred Stock has no exchange or conversion rights.
10. $10.125 Dividend Preferred Stock. A. Two hundred
fifty thousand (250,000) shares of authorized stock classified as
Preferred Stock as provided in the first paragraph of this
Article VI shall constitute a series of Preferred Stock
designated as "$10.125 Dividend Preferred Stock"; the fixed
dividend rate on the shares of such series is $10.125 per share
per annum, payable quarterly on January 1, April 1, July 1 and
October 1 in each year, and such dividends are cumulative from
the dividend date next preceding the date of issue, with the
first quarterly dividend payable on the dividend date next
following the date of issue. The fixed redemption prices on the
shares of such series are $110.125 per share if redeemed on or
prior to July 1, 1988; $104.50 per share if redeemed thereafter
and on or prior to July 1, 1989; $103.375 per share if redeemed
<PAGE> 29
thereafter and on or prior to July 1, 1990; $102.25 per share if
redeemed thereafter and on or prior to July 1, 1991; $101.125 per
share if redeemed thereafter and on or prior to July 1, 1992; and
$100 per share if redeemed thereafter; provided, however, that no
optional redemption of shares of such series shall be made prior
to July 1, 1988, directly or indirectly, as a part of, or in
anticipation of, any refunding operation involving the issuance
of indebtedness or of additional shares of Preferred Stock or of
shares of any stock ranking on a parity with Preferred Stock as
to dividends or assets or of shares of any stock (other than the
Common Stock of this Corporation) ranking junior to the Preferred
Stock as to dividends or assets and senior to the Common Stock as
to dividends, if such indebtedness has an effective interest cost
(calculated in accordance with generally accepted financial
practice and after giving effect, on a pro forma basis, to the
Federal income tax benefits to the Company, calculated on the
basis of a Federal income tax rate equal to eighty percent of the
highest marginal rate of tax paid by the Company as reflected in
the Federal income tax return for the latest taxable year
theretofore filed by the Company), or if such Preferred Stock or
other stock has an effective dividend cost (calculated in
accordance with generally accepted financial practice), of less
than 10.125% per annum. The fixed liquidation price of the shares
of such series is One Hundred Dollars ($100) per share; and the
fixed liquidation premium on the shares of such series is, at any
time, an amount per share equal to the difference between One
Hundred Dollars ($100) and the applicable fixed redemption price
in effect at that time. The $10.125 Dividend Preferred Stock has
no exchange or conversion rights.
B. The $10.125 Dividend Preferred Stock shall be
entitled to the benefits of a sinking fund whereby, subject to
the provisions of subdivision 1 of Division C of Article VI of
the Restated Articles of Incorporation, and upon notice given as
provided in subdivision 4 of Division A of Article VI of the
Restated Articles of Incorporation, this Corporation shall
redeem, at a sinking fund redemption rice of $100 per share, plus
accrued dividends, on July 1 of each year commencing with the
year 1989, the lesser of (a) twenty percent of the aggregate
number of shares of $10.125 Dividend Preferred Stock theretofore
issued by this Corporation or (b) all shares of $10.125 Dividend
Preferred Stock then outstanding.
The fixed sinking fund obligations shall be cumulative
so that if on any July 1 on or after July 1, 1989, this
Corporation shall not have satisfied to the full extent the
sinking fund obligation then due, whether by reason of the
provisions of subdivision 1 of Division C of Article VI of the
Restated Articles of Incorporation, or otherwise, then any such
deficiency shall be made good on July 1 in the succeeding year or
years as soon as and to the extent permitted by law and the
provisions of the Restated Articles of Incorporation; and until
any such deficiency in the fulfillment of the sinking fund
obligation shall so be made good, no dividends, whether in cash
<PAGE> 30
or of any other character (other than dividends in Common Stock
or any other class of stock ranking junior to the Preferred Stock
as to dividends or assets), shall be paid or declared upon or set
apart for, or any distribution made or ordered in respect of, the
Common Stock or any other class of stock ranking junior to the
Preferred Stock as to dividends or assets, and no moneys or other
consideration shall be set aside for or applied to, directly or
indirectly, the purchase or redemption of Preferred Stock (except
to the extent required to comply with any sinking or purchase
fund obligation of this Corporation in respect of any series of
Preferred Stock or as permitted pursuant to Paragraph C below)
or the purchase of Common Stock or the purchase or redemption of
any other class of stock ranking junior to the Preferred Stock as
to dividends or assets. Notwithstanding the foregoing, any money
or other consideration applied, directly or indirectly, to the
purchase or redemption of Preferred Stock to comply with any
sinking or purchase fund obligation of this Corporation in
respect of Preferred Stock in an amount less than the full amount
due with respect to the sinking or purchase fund obligations of
all series of Preferred Stock at the time such money or other
consideration is so applied shall, if more than one series of
Preferred Stock be then outstanding, be divided between the
different series in proportion to the aggregate amounts which
would be applied to such series if full payment of sinking and
purchase fund obligations then due were made.
So long as any shares of $10.125 Dividend Preferred
Stock are outstanding, no optional redemption, purchase or other
acquisition (other than redemptions pursuant to this Paragraph B)
of the $10.125 Dividend Preferred Stock by this Corporation shall
be used as a credit against, or affect this Corporation's
obligation with respect to, any sinking fund payment required
under this Paragraph B with respect to the $10.125 Dividend
Preferred Stock.
At least one day prior to any July 1 on which any
shares of $10.125 Dividend Preferred Stock shall have been called
for redemption for the sinking fund, this Corporation shall
deliver to the transfer agent for such stock, in trust for such
redemption, an amount of money sufficient to redeem all such
shares so called for redemption, to be held and applied as
provided herein and in subdivision 4 of Division A of Article VI
of the Restated Articles of Incorporation.
Any redemption of $10.125 Dividend Preferred Stock for
the sinking fund shall be by such method, whether by lot and/or
pro rata, as shall from time to time be determined by vote of the
Board of Directors of this Corporation.
So long as any shares of $10.125 Dividend Preferred
Stock are outstanding, shares of $10.125 Dividend Preferred Stock
which are purchased, redeemed or otherwise acquired by this
Corporation shall not be reissued, or otherwise disposed of, as
shares of $10.125 Dividend Preferred Stock.
<PAGE> 31
C. In addition to the shares redeemed by this
Corporation pursuant to the fixed sinking fund obligations under
Paragraph B above and notwithstanding the provisions of Paragraph
A above, this Corporation shall have the non-cumulative option to
redeem on July 1 of each year, commencing with the year 1989, at
the sinking fund redemption price of $100 per share, plus accrued
dividends, up to an additional twenty percent of the aggregate
number of shares of $10.123 Dividend Preferred Stock theretofore
issued by this Corporation, subject to the provisions of
subdivision 1 of Division C of Article VI of the Restated
Articles of Incorporation, and upon notice given as provided in
subdivision 4, Division A of Article VI of the Restated Articles
of Incorporation. This option shall be non-cumulative so that if
on any July 1 on or after July 1, 1989, this Corporation shall
not exercise its option or shall exercise its option to redeem
less than twenty percent of the aggregate number of shares of
$10.125 Dividend Preferred Stock theretofore issued by this
Corporation, the option for such year shall lapse to the extent
not exercised. The aggregate number of shares of $10.125 Dividend
Preferred Stock which shall be redeemable under this Paragraph C
shall be unlimited.
11. $11.375 Dividend Preferred Stock. A. Five hundred
thousand (500,000) shares of authorized stock classified as
Preferred Stock as provided in the first paragraph of this
Article VI shall constitute a series of Preferred Stock
designated as "$11.373 Dividend Preferred Stock"; the fixed
dividend rate on the shares of such series is $11.375 per share
per annum, payable quarterly on January 1, April 1, July 1 and
October 1 in each year, and such dividends are cumulative from
the dividend date next preceding the date of issue, with the
first quarterly dividend payable on the dividend date next
following the date of issue. The fixed redemption prices on the
shares of such series are $111.73 per share if redeemed on or
prior to July 1989; $105.22 per share if redeemed thereafter and
on or prior to July 1990; $103.92 per share if redeemed
thereafter and on or prior to July 1, 1991; $102.61 per share if
redeemed thereafter and on or prior to July 1 1992; $101.31 per
share if redeemed thereafter and on or prior to July 1, 1993; and
$100 per share if redeemed thereafter; provided, however, that no
optional redemption (of shares of such series shall be made prior
to July 1, 1989, directly or indirectly, as a part of, or in
anticipation of, any refunding operation involving the issuance
of indebtedness or of additional shares of Preferred Stock or of
shares of any stock ranking on a parity with Preferred Stock as
to dividends or assets or of shares of any stock (other than the
Common Stock of this Corporation) ranking junior to the Preferred
Stock as to dividends or assets and senior to the Common Stock as
to dividends, if such indebtedness has an effective interest cost
(calculated in accordance with generally accepted financial
practice and after giving effect, on a pro forma basis, to the
Federal income tax benefits to the Company, calculated on the
basis of a Federal income tax rate equal to eighty percent of the
highest marginal rate of tax paid by the Company as reflected in
<PAGE> 32
the Federal income tax return for the latest taxable year
theretofore filed by the Company), or if such Preferred Stock or
other stock has an effective dividend cost (calculated in
accordance with generally accepted financial practice), of less
than 11.375% per annum. The fixed liquidation price of the shares
of such series is One Hundred Dollars ($100) per share; and the
fixed liquidation premium on the shares of such series is, at any
time, an amount per share equal to the difference between One
Hundred Dollars ($100) and the applicable fixed redemption price
in effect at that time. The $11.375 Dividend Preferred Stock has
no exchange or conversion rights.
B. The $11.375 Dividend Preferred Stock shall be
entitled to the benefits of a sinking fund whereby, subject to
the provisions of subdivision 1 of Division C of Article VI of
the Restated Articles of Incorporation, and upon notice given as
provided in subdivision 4 of Division A of Article VI of the
Restated Articles of Incorporation, this Corporation shall
redeem, at a sinking fund redemption price of $100 per share,
plus accrued dividends, on July 1 of each year commencing with
the year 1990, the lesser of (a) twenty percent of the aggregate
number of shares of $11.375 Dividend Preferred Stock theretofore
issued by this Corporation or (b) all shares of $11.375 Dividend
Preferred Stock then outstanding.
The fixed sinking fund obligations shall be cumulative
so that if on any July 1 on or after July 1, 1990, this
Corporation shall not have satisfied to the full extent the
sinking fund obligation then due, whether by reason of the
provisions of subdivision 1 of Division C of Article VI of the
Restated Articles of Incorporation, or otherwise, then any such
deficiency shall be made good on July 1 in the succeeding year or
years as soon as and to the extent permitted by law and the
provisions of the Restated Articles of Incorporation; and until
any such deficiency in the fulfillment of the sinking fund
obligation shall so be made good, no dividends, whether in cash
or of any other character (other than dividends in Common Stock
or any other class of stock ranking junior to the Preferred Stock
as to dividends or assets), shall be paid or declared upon or set
apart for, or any distribution made or ordered in respect of, the
Common Stock or any other class of stock ranking junior to the
Preferred Stock as to dividends or assets, and no moneys or other
consideration shall be set aside for or applied to, directly or
indirectly, the purchase or redemption of Preferred Stock (except
to the extent required to comply with any sinking or purchase
fund obligation of this Corporation in respect of any series of
Preferred Stock or as permitted pursuant to Paragraph C below)
or the purchase of Common Stock or the purchase or redemption of
any other class of stock ranking junior to the Preferred Stock as
to dividends or assets. Notwithstanding the foregoing, any money
or other consideration applied, directly or indirectly, to the
purchase or redemption of Preferred Stock to comply with any
sinking or purchase fund obligation of this Corporation in
respect of Preferred Stock in an amount less than the full amount
<PAGE> 33
due with respect to the sinking or purchase fund obligations of
all series of Preferred Stock at the time such money or other
consideration is so applied shall, if more than one series of
Preferred Stock be then outstanding, be divided between the
different series in proportion to the aggregate amounts which
would be applied to such series if full payment of sinking and
purchase fund obligations then due were made.
So long as any shares of $11.375 Dividend Preferred
Stock are outstanding, no optional redemption, purchase or other
acquisition (other than redemptions pursuant to this Paragraph B)
of the $11.375 Dividend Preferred Stock by this Corporation shall
be used as a credit against, or affect this Corporation's
obligation with respect to, any sinking fund payment required
under this Paragraph B with respect to the $11.375 Dividend
Preferred Stock.
At least one day prior to any July 1 on which any
shares of $11.375 Dividend Preferred Stock shall have been called
for redemption for the sinking fund, this Corporation shall
deliver to the transfer agent for such stock, in trust for such
redemption, an amount of money sufficient to redeem all such
shares so called for redemption, to be held and applied as
provided herein and in subdivision 4 of Division A of Article VI
of the Restated Articles of Incorporation.
Any redemption of $11.375 Dividend Preferred Stock for
the sinking fund shall be by such method, whether by lot and/or
pro rata, as shall from time to time be determined by vote of the
Board of Directors of this Corporation.
So long as any shares of $11.375 Dividend Preferred
Stock are outstanding, shares of $11.375 Dividend Preferred Stock
which are purchased, redeemed or otherwise acquired by this
Corporation shall not be reissued, or otherwise disposed of, as
shares of $11.375 Dividend Preferred Stock.
C. In addition to the shares redeemed by this
Corporation pursuant to the fixed sinking fund obligations under
Paragraph B above and notwithstanding the provisions of Paragraph
A above, this Corporation shall have the non-cumulative option to
redeem on July 1 of each year, commencing with the year 1990, at
the sinking fund redemption price of $100 per share, plus accrued
dividends, up to an additional twenty percent of the aggregate
number of shares of $11.375 Dividend Preferred Stock theretofore
issued by this Corporation, subject to the provisions of
subdivision 1 of Division C of Article VI of the Restated
Articles of Incorporation, and upon notice given as provided in
subdivision 4, Division A of Article VI of the Restated Articles
of Incorporation. This option shall be non-cumulative so that if
on any July 1 on or after July 1, 1990, this Corporation shall
not exercise its option or shall exercise its option to redeem
less than twenty percent of the aggregate number of shares of
$11.375 Dividend Preferred Stock theretofore issued by this
<PAGE> 34
Corporation, the option for such year shall lapse to the extent
not exercised. The aggregate number of shares of $11.375 Dividend
Preferred Stock which shall be redeemable under this Paragraph C
shall be unlimited.
DIVISION C -- THE COMMON STOCK.
1. Dividends. Out of any assets of the Corporation
available for dividends remaining after full cumulative dividends
upon the Preferred Stock of all series then outstanding shall
have been paid, or declared and a sum sufficient for the payment
thereof set apart, for all past quarterly dividend periods, and
after or concurrently with making payment of or provision for
full dividends on the Preferred Stock of all series then
outstanding for the current quarterly dividend period, then, and
not otherwise, dividends may be paid upon the Common Stock to the
exclusion of the Preferred Stock; provided, however, that so long
as any shares of the Preferred Stock shall be outstanding the
Corporation shall not declare or pay any dividend or make any
other distribution to the holders of its Common Stock (other than
a dividend payable in Common Stock of the Corporation) or
purchase or acquire or otherwise retire for a consideration
(otherwise than from the proceeds of new financing from the
issuance and sale of any shares of any class of stock of the
Corporation ranking junior to the Preferred Stock) any shares of
its Capital Stock of any class if (i) the aggregate amount so
paid, distributed and/or applied after December 31, 1939 plus
(ii) the principal amount theretofore maturing in accordance with
the original terms thereof of the bank note of the Company issued
at the time of the issuance of the initial 15,000 shares of $4.50
Dividend Preferred Stock (such principal amounts so maturing
being $70,000 on each June 1 and December 1 in each calendar year
from 1941 to 1946, inclusive and on June 1, 1947, and $90,000 on
November 1, 1947) would exceed in the aggregate the aggregate of
the net income of the Corporation available for dividends on its
Common Stock accumulated after December 31, 1939. Net income of
the Corporation for the purpose of this paragraph 1 shall mean
the sum of operating revenues and nonoperating income -- net of
the Corporation less all proper deductions for operating
expenses, taxes, interest charges and other appropriate items,
including provision for maintenance and retirements or
depreciation; and shall be otherwise determined in accordance
with such system of accounts as may be prescribed by governmental
authorities having jurisdiction in the premises or in absence
thereof in accordance with recognized accounting practice
applicable to companies engaged in a business similar to that of
the Corporation; provided, that in computing the amount of such
net income available for dividends accumulated after December 31,
1939 no adjustment or deduction shall be made for or on account
of (i) any charges for redemption premiums, double interest,
discount (including any amount by which the net consideration
received by the Corporation for any shares of its Preferred Stock
may be less than the preference of such Preferred Stock on
involuntary liquidation) or other expenses in connection with the
<PAGE> 35
refunding of its First Mortgage Gold Bonds, Series A 5%, due
1950, or its $6 Dividend Preferred Stock or the issuance and sale
of any stocks, bonds or other securities of the Corporation in
connection therewith; or (ii) any profits realized or losses
sustained in the sale of any investment securities or capital
assets or any change in the book value of or any appreciation or
depreciation in the value of any assets owned by the Corporation
for any reason whatsoever; or (iii) any earned surplus adjustment
properly applicable to any period or periods prior to January 1,
1940.
2. Distribution of Assets. In the event of any
liquidation, dissolution or winding up of the Corporation, or any
reduction or decrease of its capital stock resulting in a
distribution of assets to its Common Stockholders, after there
shall have been paid to or set aside for the holders of the
Preferred Stock the full preferential amounts to which they are
respectively entitled under the provisions of Paragraph 3 of
Division A of this Article VI, the holders of the Common Stock
shall be entitled to receive pro rata, all of the remaining
assets of the Corporation available for distribution to its
Stockholders. The Board of Directors by vote of a majority of the
members thereof, may distribute in kind to the holders of the
Common Stock such remaining assets of the Corporation or may
sell, transfer or otherwise dispose of all or any of the
remaining property and assets of the Corporation to any other
corporation and receive payment therefor wholly or partly in cash
and/or in stock and/or in obligations of such corporation and may
sell all or any part of the consideration received therefor and
distribute the balance thereof in kind to the holders of the
Common Stock.
3. Voting Rights. Subject to the voting rights
expressly conferred upon the Preferred Stock by Division A of
this Article VI, holders of the Common Stock shall exclusively
possess full voting power for the election of directors and for
all other purposes.
4. Special meetings of the holders of the Common Stock
of the Corporation may be called by the President, the Board of
Directors, the holder or holders of not less than 75% of the then
outstanding shares of Common Stock entitled to vote at the
meeting, or such other persons as may be authorized in the Bylaws
of the Corporation.
DIVISION D -- PROVISIONS APPLICABLE TO BOTH CLASSES OF
STOCK.
1. The Board of Directors shall have authority from
time to time to set apart out of any assets of this Corporation
otherwise available for dividends a reserve or reserves as
working capital or for any other proper purpose or purposes, and
to reduce, abolish or add to any such reserve or reserves from
time to time as said Board may deem to be in the interests of
<PAGE> 36
this Corporation; and said Board shall likewise have power to
determine in its discretion what part of the assets of this
Corporation available for dividends in excess of such reserve or
reserves shall be declared as dividends and paid to the
Stockholders of this Corporation.
2. No holder of stock of any class of the Corporation
shall be entitled as of right to subscribe for or purchase any
shares of stock of any class, whether now or hereafter
authorized, or any bonds, debentures, or other evidences of
indebtedness whether or not convertible into or exchangeable for
stock.
3. Any holder of Preferred Stock having the right to
vote at any meeting of the stockholders shall be entitled to one
vote for each whole dollar of the fixed liquidation price of each
share of Preferred Stock held by him; provided, however, that if
the amount of the fixed liquidation price with respect to any
series of Preferred Stock should vary according to the time or
circumstances of any action described in clause (d) of Paragraph
1 of Article VI, Division A, the holder of any shares of
Preferred Stock of such series shall be entitled at any such
meeting of stockholders to one vote for each whole dollar of the
lowest fixed liquidation price which may be payable in respect of
the shares of such series. Any holder of Common Stock having the
right to vote at any meeting of the stockholders shall be
entitled to one vote for each share of Common Stock held by him.
Cumulative voting of shares of Common Stock in the election of
directors is hereby prohibited. Except as herein expressly
provided, or mandatorily provided by the laws of Texas, a quorum
of any class of stock or one or more series thereof entitled to
vote as a class at any meeting shall consist of a majority of the
votes represented by such class or such one or more series, as
the case may be, and a plurality vote of such quorum shall
govern.
ARTICLE VII
Except as otherwise provided in Article IX, the
Corporation may sell, lease or exchange all or substantially all
of its properties and franchises upon obtaining (1) the
authorization of the Preferred Stock to the extent and in the
manner required by the provisions of Paragraph 5 of Division A of
Article VI hereof in the event action by the Preferred Stock is
required by said provisions; (2) the authorization by the vote of
the holders of a majority in number of the outstanding shares of
the Corporation entitled to vote in respect of such action (other
than shares of Preferred Stock); (3) the authorization of
two-thirds of the total number of members of the Board of
Directors; and (4) any additional or other authorizations, if
any, which may be required in respect of such action by the then
existing laws of Texas.
<PAGE> 37
ARTICLE VIII
Upon the written consent or the votes of the holders of
a majority in number of the shares then outstanding and entitled
to vote, notwithstanding any contrary provision which may at the
time be contained in these Articles of Incorporation, except as
otherwise expressly provided in Article VI in respect of
Preferred Stock, (1) any or every statute of the State of Texas
hereafter enacted, whereby the rights, powers or privileges of
the stockholders of corporations organized under the general laws
of said State are increased, diminished, or in any way affected
or whereby effect is given to the action taken by any part less
than all of the stockholders of any such corporation, shall apply
to this Corporation, and shall be binding not only upon this
Corporation but upon every Stockholder thereof to the same
extent as if such statute had been in force at the date of the
making and filing of these Articles of Incorporation, and/or (2)
except as otherwise expressly provided in Article IX, amendments
to these Articles of Incorporation, authorized by the then
existing laws of Texas, may be made.
ARTICLE IX
1. A Business Combination (as hereinafter defined)
shall require the affirmative votes of the holders of that
percentage of the Voting Shares (as hereinafter defined) which is
the greater of:
(a) 75%, or
(b) The percentage (the "Required Percentage")
calculated by dividing (x) the sum of (i) the aggregate
number of Voting Shares which are beneficially owned by
each and every Related Person (as hereinafter defined)
and (ii) one-half of all Voting Shares which are not
beneficially owned by any such Related Person by (y)
the total number of Voting Shares; provided, however,
that for the purpose of determining the Required
Percentage of the affirmative votes required for any
Business Combination between the Corporation or any
Subsidiary and any Related Person, only a Related
Person which is a party, or whose Affiliate or
Associate is a party, to such transaction shall be
deemed a "Related Person" under this Paragraph 1.
Such affirmative votes shall be required
notwithstanding the fact that no vote may be required, or that
some lesser percentage may be specified, in these Articles of
Incorporation or by law or otherwise.
2. The provisions of Paragraph 1 of this Article IX
shall not be applicable to any Business Combination in respect of
which all of the conditions specified in either Subparagraph (a)
<PAGE> 38
or Subparagraph (b) of this Paragraph 2 are met, and such
Business Combination shall require only such affirmative vote as
is required by law and any other provisions of these Articles of
Incorporation, as amended from time to time:
(a) Such Business Combination shall have been
approved by at least two-thirds of the Continuing
Directors; or
(b) Each of the five conditions specified in the
following clauses (1) through (5) shall have been met:
(1) The aggregate amount of cash and Fair
Market Value of Other Consideration (as
hereinafter defined) to be received in such
Business Combination by the Company (analyzed on a
per share basis) or per share by holders of Voting
Shares shall not be less than the greater of:
(A) The Highest Price Per Share (as
hereinafter defined) paid by the Related
Person in acquiring any Voting Shares or
other shares of capital stock of the
Corporation which if continued to be held at
the Record Date (as hereinafter defined)
would be (or are) Voting Shares;
(B) If the Related Person is a
corporation, the earnings per share of the
Voting Shares during the four consecutive
fiscal quarters immediately preceding the
Date of Determination (as hereinafter
defined) multiplied by the highest
price/earnings multiple of such Related
Person, as customarily computed and reported
in the financial community, attained by such
Related Person during the five fiscal years
immediately preceding the Date of
Determination;
(C) The highest per share market price
for such Voting Shares since the Related
Person became a Related Person; or
(D) The per share book value of the
Voting Shares at the end of the most recent
fiscal year preceding the Date of
Determination, calculated in accordance with
generally accepted accounting methods.
(2) The consideration to be received by the
Corporation or per share by Public Holders (as
hereinafter defined) in such Business Combination
<PAGE> 39
shall be in the same form and of the same kind as
the consideration paid by the Related Person in
acquiring any Voting Shares or other shares of
capital stock of the Corporation which if
continued to be held at the Record Date would be
(or are) Voting Shares. If the Related Person paid
for Voting Shares or such other shares with
varying forms of consideration, the form of
consideration to be received by the Corporation or
per share by Public Holders shall be either cash
or the form of consideration used to acquire the
largest number of Voting Shares or such other
shares acquired by the Related Person.
(3) After such Related Person has become a
Related Person and prior to the consummation of
such Business Combination:
(i) Except as approved by a majority of
the Continuing Directors, there shall have
been no failure to declare and pay at the
regular dates therefor the full amount of any
dividends (whether or not cumulative) payable
on any stock having a preference over the
Common Stock as to dividends or upon
liquidation;
(ii) There shall have been (x) no
reduction in the annual rate of dividends
paid on the Common Stock (except as necessary
to reflect any subdivision of the Common
Stock), except as approved by a majority of
the Continuing Directors, and (y) an increase
in such annual rate of dividends (as
necessary to prevent any such reduction) in
the event of any reclassification (including
any reverse stock split), recapitalization,
reorganization or any similar transaction
which has the effect of reducing the number
of outstanding shares of the Common Stock,
unless the failure so to increase such annual
rate was approved by a majority of the
Continuing Directors; and
(iii) Such Related Person shall not have
become the Beneficial Owner of any additional
shares of Voting Stock except as part of the
transaction in which the Related Person first
became a Related Person.
(4) After such Related Person has become a
Related Person, such Related Person shall not have
received the benefit, directly or indirectly
<PAGE> 40
(except proportionately as a shareholder), of any
loans, advances, guaranties, pledges or other
financial assistance or tax credits or other tax
advantages provided by the Corporation, whether in
anticipation of or in connection with such
Business Combination or otherwise.
(5) A proxy or information statement
describing the proposed Business Combination and
complying with the requirements of the Securities
Exchange Act of 1934 (the "1934 Act") and the
rules and regulations thereunder (or any
subsequent provisions replacing such 1934 Act,
rules or regulations) shall have been mailed to
all holders of Voting Shares at least 30 days
prior to the consummation of such Business
Combination (whether or not such proxy or
information statement is required to be mailed
pursuant to such Act or subsequent provisions).
3. The following definitions shall apply to the
provisions of this Article IX:
(a) An "Affiliate" of a Person is a Person that,
directly or indirectly, through one or more
intermediaries, controls or is controlled by, or is
under common control with the Person specified. The
term "control" (including the terms "controlling,"
"controlled by" and "under common control with") means
the possession, direct or indirect, 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.
(b) "Associate," when used to indicate a
relationship with any Person, means (1) any Person
(other than this Corporation or a Subsidiary of this
Corporation) of which such Person is an officer,
director or partner or is, directly or indirectly, the
Beneficial Owner of 10% or more of any class of equity
securities, (2) any trust or other estate in which such
Person has a substantial beneficial interest or as to
which such Person serves as a trustee or in a similar
capacity, and (3) any relative or spouse of such
Person, or any relative of such spouse.
(c) A Person shall be the "Beneficial Owner" of
Voting Shares:
(i) Which are beneficially owned, directly or
indirectly, by it or any of its Affiliates and
Associates;
<PAGE> 41
(ii) Which such Person or any of its
Affiliates or Associates has (a) the right to
acquire at any time pursuant to any agreement,
arrangement or understanding or upon the exercise
of conversion rights, exchange rights, warrants,
options or otherwise, or (b) the sole or shared
power to direct the voting or disposition pursuant
to any agreement, arrangement or understanding; or
(iii) Which are beneficially owned, directly
or indirectly, by any other Person with which such
first mentioned Person or any of its Affiliates
and Associates has any agreement, arrangement or
understanding for the purpose of acquiring,
holding, voting or disposing of any Voting Shares.
(d) "Business Combination" shall mean:
(i) Any merger or consolidation of the
Corporation or any Subsidiary with or into (a) any
Related Person or (b) any other Person (whether or
not itself a Related Person) which, after such
merger or consolidation, would be an Affiliate of
a Related Person or of an Associate of a Related
Person;
(ii) Any sale, lease, exchange, mortgage,
pledge, transfer or other disposition, either in a
single transaction or a series of related
transactions, to or with any Related Person of (x)
a Substantial part of the assets of the
Corporation (including without limitation any
voting securities of a Subsidiary) or (y) any
Subsidiary having total assets with an aggregate
fair market value of $1,000,000 or more;
(iii) The issuance or transfer by the
Corporation or any Subsidiary, either in a single
transaction or a series of related transactions,
of any securities of the Corporation or of any
Subsidiary to any Related Person in exchange for
cash, securities or other property (or a
combination thereof) having an aggregate fair
market value of $1,000,000 or more;
(iv) The adoption of any plan or proposal for
the liquidation or dissolution of the Corporation
proposed by or on behalf of a Related Person or
any Affiliate or Associate of a Related Person;
(v) Any reclassification of securities
(including without limitation, any reverse stock
split), recapitalization, reorganization, merger
<PAGE> 42
or consolidation, of the Corporation with any of
its Subsidiaries or any other transaction (whether
or not with or into or otherwise involving a
Related Person) which has the effect, directly or
indirectly, of increasing the proportionate share
of the outstanding shares (of any class of equity
or convertible securities of the Corporation or
any Subsidiary which is directly or indirectly
owned by any Related Person or any Affiliate or
Associate of a Related Person; or
(vi) Any agreement, contract or other
arrangement providing for any of the transactions
described in clauses (i) through (v) of this
Subparagraph (d).
(e) "Continuing Director" means (i) if there is a
Related Person, any member of the Board of Directors of
the Corporation who is not an Affiliate or Associate of
any Related Person and who was a member of the Board of
Directors immediately before the date as of which any
Related Person became a Related Person, and any
successor of a Continuing Director and any new director
elected to fill a vacancy resulting from an increase in
the number of directors constituting the Board of
Directors and who is not an Affiliate or Associate of
any Related Person and which successor or new director
is recommended to succeed a Continuing Director or to
fill such vacancy by a majority of Continuing Directors
at any regular or special meeting of the Board of
Directors; and (ii) if there is no Related Person, any
member of the Board of Directors.
(f) "Date of Determination" shall mean (1) the
date on which a binding agreement (except for the
fulfillment of conditions precedent, including, without
limitation, votes of shareholders to approve such
transaction) is entered into by this Corporation, as
authorized by the Board of Directors, and another
Person providing for any Business Combination, or (2)
if such an agreement referred to in (1) above is
amended so as to make it less favorable to this
Corporation or its shareholders, the date on which such
amendment is entered into by the Corporation, as
authorized by the Board of Directors, or (3) in cases
where neither items (1) nor (2) shall be applicable,
the Record Date for the determination of shareholders
of this Company entitled to notice of and to vote upon
the transaction in question. The Continuing Directors
shall have the power and duty to determine pursuant to
the foregoing the Date of Determination as to any
transaction for the purposes of this Article IX. Any
such determination made by two-thirds of the Continuing
<PAGE> 43
Directors in good faith shall be conclusive and binding
for all purposes of Article IX.
(g) "Fair Market Value" shall mean, as of any date
(1) in the case of stock, either (a) the median of the
averages of the daily high and low sales prices during
the 30-day period immediately preceding such date of a
share of such stock on the Composite Tape for New York
Stock Exchange Listed Stocks, or, if such stock is not
quoted on the Composite Tape, on the New York Stock
Exchange, or, if such stock is not listed on such
Exchange, on the principal United States Securities
Exchange registered under the Securities Exchange Act
of 1934 on which such stock is listed; or (b) if such
stock is not listed on any such Exchange, the median of
the averages of the daily closing bid and closing
asked quotations on the National Association of
Securities Dealers Automated Quotation System
("NASDAQ") or any successor system then in use, or the
median of the averages of the daily high and low sale
prices on the NASDAQ National Market System, if
applicable, for such stock during the 30-day period
preceding such date, or if no such quotations are then
available, the fair market value as determined in good
faith by two-thirds of the Continuing Directors; and
(2) in the case of property other than cash or stock,
the fair market value of such property on such date as
determined in good faith by two-thirds of the
Continuing Directors.
(h) "Highest Price Per Share" shall mean the
highest price that can be determined to have been paid
by the Related Person for any Voting Shares or shares
of capital stock of the Corporation which if continued
to be held at the Record Date would be (or are) Voting
Shares. In determining the Highest Price Per Share, all
purchases by the Related Person shall be taken into
account, regardless of whether the shares were
purchased before or after the Related Person became a
Related Person. Also, the Highest Price Per Share shall
include any brokerage commissions, transfer taxes and
soliciting dealers' fees paid by the Related Person
with respect to the shares acquired by that Related
Person. Determination of the Highest Price Per Share as
required from time to time by this Article IX shall be
made by at least two-thirds of the Continuing Directors
then in office.
(i) "Other Consideration" shall include, without
limitation, property, the capital stock of the
Corporation retained by its Public Holders in the event
of a Business Combination in which the Corporation is
the surviving corporation, or other securities.
<PAGE> 44
(j) "Person" shall mean any individual, firm,
corporation, partnership or other entity.
(k) "A Public Holder" shall mean a Beneficial
Owner of Voting Shares who is not a Related Person.
(l) "Record Date" shall mean the date set by the
Corporation for the determination of shareholders
entitled to notice of and to vote on the proposed
Business Combination.
(m) "Related Person" shall mean any Person (other
than the Corporation, any Subsidiary or any Person who
owns all of the Voting Shares or any one or a group of
more than one Continuing Director) which, together with
its Affiliates and Associates, as of the Date of
Determination or immediately prior to the consummation
of any such Business Combination, is the Beneficial
Owner of not less than 10% of the Voting Shares.
(n) "Subsidiary" shall mean any corporation of
which a majority of any class of equity security is
owned, directly or indirectly, by the Corporation;
provided, however, that for the purposes of the
definition of Related Person set forth in Subparagraph
(m) of this Paragraph 3, the term "Subsidiary" shall
mean only a corporation of which a majority of each
class of capital stock is owned, directly or
indirectly, by the Corporation.
(o) "Substantial Part" shall mean more than 20% of
the fair market value, as determined by at least
two-thirds of the Continuing Directors, of the total
consolidated assets of the Corporation and its
Subsidiaries taken as a whole as of the end of its most
recent fiscal year ended prior to the Date of
Determination.
(p) "Voting Shares" shall mean all of the shares
of Common Stock of the Corporation which are issued and
outstanding. The Voting Shares of a Related Person
shall include shares deemed owned through application
of Subparagraph (c) of this Paragraph 3 but shall not
include any shares (prior to issue) which may be
issuable pursuant to any agreement, or upon exercise of
conversion rights, warrants, options or otherwise.
4. For purposes of this Article IX, the Continuing
Directors shall have the power and duty to determine (a) the
number of Voting Shares beneficially owned by any Person, (b)
whether a Person is an Affiliate or Associate of another, (c)
whether a Person is the Beneficial Owner of any Voting Shares,
(d) the Fair Market Value of Other Consideration to be received
for Voting Shares, (e) whether the assets subject to any Business
<PAGE> 45
Combination have an aggregate Fair Market Value of $ 1,000,000 or
more, (f) the Date of Determination and (g) the Highest Price Per
Share. Any such determination shall be conclusive and binding for
all purposes of Article IX, provided that such determination is
approved by two-thirds of the Continuing Directors.
5. Nothing contained in this Article IX shall be
construed to relieve any Related Person from any fiduciary
obligation imposed by law.
6. Notwithstanding the provisions of Article VIII,
any amendment, alteration, change or repeal of this Article IX or
the adoption of any provision inconsistent with this Article IX
shall require the affirmative vote of the holders of at least 75%
of the Voting Shares, and if there is a Related Person, such
action must also be approved by the affirmative vote of a
majority of the Voting Shares of the Public Holders; provided,
that this Paragraph 6 shall not apply to any such amendment,
alteration, change, repeal or inconsistent provision recommended
to the holders of Voting Shares by two-thirds or more of the
Continuing Directors.
7. In the event that any provision or portion of a
provision of this Article IX is determined to be invalid, void,
illegal or unenforceable, the remainder of the provisions of this
Article IX shall continue to be valid and enforceable and shall
in no way be affected, impaired or invalidated.
ARTICLE X
The power to alter, amend or repeal the Corporation's
Bylaws and to adopt new Bylaws is hereby delegated to the Board
of Directors. The Bylaws of the Corporation may also be altered,
amended or repealed, and new Bylaws may be adopted, by holders of
the outstanding shares of Common Stock only if such alteration,
amendment, repeal or adoption is approved by the affirmative vote
of the holders of at least 75% of the outstanding shares of
Common Stock.
ARTICLE XI. LIMITATION OF DIRECTOR'S LIABILITY
11.1 A director of the Corporation shall not be liable
for monetary damages to the Corporation or its shareholders for
any act or omission in the performance of his duties, except that
this Article does not eliminate or limit the liability of a
director for:
(1) a breach of a director's duty of loyalty to
the Corporation or its shareholders or members;
(2) an act or omission not in good faith or that
involves intentional misconduct or a knowing violation
of the law;
<PAGE> 46
(3) a transaction from which a director received
an improper benefit, whether or not the benefit
resulted from an action taken within the scope of the
director's office;
(4) an act or omission for which the liability of
a director is expressly provided for by statute; or
(5) an act related to an unlawful stock
repurchase or payment of a dividend.
11.2 In discharging the director's duties, the director
is entitled to rely on information, opinions, reports or
statements, including financial statements and other data, if
prepared or presented by:
(1) One or more officers or employees of the
Corporation whom the director reasonably believes to be
reliable and competent in the matters presented;
(2) Legal counsel, public accountants, or other
persons as to matters the director reasonably believes
are within the person's professional or expert
competence; or
(3) A committee of the Board of Directors of which
the director is not a member if the director reasonably
believes the committee merits confidence.
A director is not entitled to so rely if the director
has actual knowledge concerning the matter in question that makes
reliance otherwise permitted by this Article XI unwarranted.
11.3 A director may, in discharging his duties,
consider the effects of any action on shareholders, employees,
suppliers, and customers of the Corporation, and communities in
which offices or other facilities of the Corporation are located,
and any other factors the director considers pertinent.
11.4 In the event that any provision or a portion of a
provision of this Article XI is determined to be in conflict with
any applicable statute, such provision or portion thereof shall
be inapplicable to the extent of such conflict.
11.5 In the event that any provision or portion of a
provision of this Article XI is determined to be invalid, void,
illegal or unenforceable, the remainder of the provisions of this
Article XI shall continue to be valid and enforceable and shall
in no way be affected, impaired or invalidated.
11.6 Nothing in this Article XI shall be construed to
diminish, limit or impair any rights or defenses afforded to
officers or directors by common law, statute, other provisions of
these Restated Articles of Incorporation, the Bylaws of the
<PAGE> 47
Corporation or otherwise, and the provisions of this Article XI
shall be deemed to be cumulative thereto.
11.7 The provisions of this Article XI shall become
effective as of May 16, 1988, the date of adoption by the
shareholders of the Corporation, and shall be inapplicable to
actions, suits or proceedings pending or any claim or claims made
or threatened by notice to the Corporation on or prior to such
date.
Dated: August 22, 1988
EL PASO ELECTRIC COMPANY
By: /s/ DAVID H. WIGGS, JR.
David H. Wiggs, Jr., President
8723C-4
<PAGE> 1
EXHIBIT A-4
EL PASO ELECTRIC COMPANY
BYLAWS
AS AMENDED THROUGH JANUARY 29, 1992
<PAGE> 2
BYLAWS
of
EL PASO ELECTRIC COMPANY
ARTICLE I.
Name.
The name of this Corporation shall be EL PASO ELECTRIC
COMPANY.
ARTICLE II.
Shareholders' Meetings.
All Meetings of the Shareholders shall be held at the
principal office of the Corporation in the State of Texas, unless
some other place in Texas is stated in the call.
ARTICLE III.
Annual Shareholders' Meetings.
The Annual Meeting of the Shareholders of this
Corporation shall be called by the board of Directors within nine
months after the end of the Corporation's fiscal year and will be
held at such time, on such day and at such place as determined by
the Board of Directors. If any Annual Meeting is for any reason
not held within the period determined as aforesaid, a Special
Meeting may thereafter be called and held in lieu thereof
pursuant to the provisions of Article IV of these Bylaws, and the
same proceedings (including the election of Directors) may be
conducted thereat as at a regular meeting.
<PAGE> 3
ARTICLE IV.
Special Shareholders' Meetings.
Special Meetings of the holders of the Common Stock of
this Corporation may be called by the President, a Vice
President, the Chairman of the Board of Directors, a majority of
the Board of Directors or the holder or holders of not less than
75% of the outstanding shares of the Common Stock entitled to
vote at the meeting.
ARTICLE V.
Manner of Bringing Business Before Shareholders' Meetings.
At any Annual or Special Meeting of the Shareholders,
only such business shall be conducted as shall have been properly
brought before the meeting. To be properly brought before an
Annual or Special Meeting, business must be (a) specified in the
notice of meeting (or any supplement thereto) given by or at the
direction of the Board of Directions, (b) otherwise properly
brought before the meeting by or at the direction of the Board of
Directors, or (c) otherwise properly brought before the meeting
by a shareholder. For business to be properly brought before an
Annual or Special Meeting by a shareholder, the shareholder must
have given timely notice thereof in writing to the Secretary of
the Corporation. To be timely, a shareholder's notice must be
received at the principal executive offices of the Corporation,
not less than 60 days nor more than 90 days prior to the meeting;
provided, however, that in the event that less than 70 days
notice or prior public disclosure of the date of the meeting is
<PAGE> 4
given or made to shareholders, notice by the shareholder to be
timely must be so received not later than the close of business
on the tenth day following the date on which such notice of the
date of the Annual or Special Meeting was mailed or such public
disclosure was made.
A shareholder's notice to the Secretary shall set forth
as to each matter the shareholder proposes to bring before the
Annual or Special Meeting (a) a brief description of the business
desired to be brought before the Annual or Special Meeting, (b)
the name and address, as they appear on the Corporation's books,
of the shareholder proposing such business, (c) the class and
number of shares of the Corporation which are beneficially owned
by the shareholder, and (d) any material interest of the
shareholder in such business. In addition, if such business
involves the nomination of persons for election as directors, the
shareholder's notice shall set forth as to each person whom the
shareholder proposes to nominate for election or re-election as a
director (i) the name, age, business address and residence
address of such person, (ii) the principal occupation or
employment of such person, (iii) the class and number of shares
of the Corporation which are beneficially owned by such person,
and (iv) all information regarding such person that would be
required to be disclosed in a solicitation of proxies with
respect to nominees for election as directors pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as
amended, including without limitation such person's consent to be
named in the proxy statement as a nominee and to serving as a
<PAGE> 5
director, if elected. Nothing in this Article shall obligate the
Board of Directors to include information as to any shareholder
nominee for director or any other shareholder proposal in any
proxy statement or other communication sent to shareholders.
Notwithstanding anything in these Bylaws to the
contrary, no business shall be conducted at an Annual or Special
Meeting except in accordance with the procedures set forth in
this Article. The presiding officer of an Annual or Special
Meeting shall, if the facts warrant, determine and declare to the
meeting that business was not properly brought before the meeting
and in accordance with the provisions of this Article, and if he
should so determine, he shall so declare to the meeting and any
such business not properly brought before the meeting shall not
be transacted.
ARTICLE VI.
Notice of Shareholders' Meetings.
Notice of all Shareholders' meetings, stating the time
and place, and, in the case of Special Meetings, the purpose or
purposes for which such meetings are called, shall be given by or
at the direction of the President, the Secretary or an Assistant
Secretary, or the Officer or person calling the meeting, either
personally or by mail, to each Stockholder of record, having
voting power in respect of the business to be transacted thereat,
at his or her registered address not less than ten (10) nor more
than sixty (60) days prior to the date of the meeting.
<PAGE> 6
ARTICLE VII.
Waiver of Notice.
Whenever any notice whatever of any meeting is required
to be given by these Bylaws or the Articles of Incorporation of
the Corporation, or any of the laws of the State of Texas, a
waiver thereof in writing, signed by the person or persons
entitled to said notice and filed with the records of the
meeting, whether before or after the holding thereof, shall be
deemed equivalent to such notice so required. The presence of
any meeting of a person or persons entitled to notice thereof
shall be deemed a waiver of such notice as to such person or
persons except where a Director attends a meeting for the express
purpose of objecting to the transaction of any business on the
grounds that the meeting is not lawfully called or convened.
ARTICLE VIII.
Quorum at Shareholders' Meetings.
At any meeting of the Shareholders, a majority of the
shares of capital stock issued and outstanding having voting
power in respect to the business to be transacted thereat,
represented by such Shareholders of record in person or by proxy,
shall constitute a quorum, but a lesser interest may adjourn any
meeting from time to time and the same shall be held as adjourned
without further notice. When a quorum is present at any meeting,
a majority of the shares of capital stock entitled to vote
represented thereat shall decide all questions brought before
such meeting, unless the question is one upon which by
<PAGE> 7
express provision of law or of the Articles of Incorporation of
the Corporation or of these Bylaws a larger or different vote is
required, in which case such express provisions shall govern and
control the decision of such question. The provisions of this
Article are, however, subject to the provisions of Paragraph 6 of
Division A of Article VI of the Articles of Incorporation of the
Corporation as amended so far as relates to Special Meetings of
Shareholders called pursuant to said Paragraph 6 upon the accrual
or termination of voting rights of the Preferred stock.
ARTICLE IX.
Proxy and Voting.
The voting power of the respective classes of stock of
the Corporation shall be as provided in Article VI of the
Articles of Incorporation of the Corporation as amended.
Shareholders of record entitled to vote may vote at any meeting
either in person or by proxy in writing, which shall be filed
with the Secretary of the meeting before being voted. Such
proxies shall entitle the holders thereof to vote at any
adjournment of such meeting, but shall not be valid after the
final adjournment thereof. Each holder of record of stock of the
Corporation of any class shall, as to all matters in respect of
which stock of such class has voting power, be entitled to one
vote for each share of stock of such class standing in his name
on the books of the Corporation. Cumulative voting of shares of
Common Stock in the election of Directors is hereby prohibited.
<PAGE> 8
The Officer or agent having charge of the stock
transfer books for shares of the Corporation shall make, at least
ten (10) days before each meeting of shareholders, a complete
list of the shareholders entitled to vote at such meeting or any
adjournment thereof, arranged in alphabetical order, with the
address of and the number of shares held by each, which list, for
a period of ten (10) days prior to such meeting, shall be kept on
file at the registered office of the Corporation and shall be
subject to inspection by any shareholder at any time during usual
business hours. Such list shall also be produced and kept open
at the time and place of the meeting and shall be subject to the
inspection of any shareholder during the whole time of the
meeting.
ARTICLE X.
Board of Directors.
The number of Directors of the Corporation, which shall
not be less than seven nor more than fifteen persons (exclusive
of Directors, if any, to be elected by the holders of shares of
Preferred Stock, voting separately as a class, pursuant to the
Restated Articles of Incorporation of the Corporation), shall be
fixed from time to time at any meeting of the Board of Directors
where all of the Directors are present or notice of a proposed
change in the number of Directors has been given in writing in
advance. Beginning on the date of the 1986 Annual Meeting of the
Corporation's Shareholders, the Directors shall be divided into
three classes (Class I, Class II and Class III), as nearly equal
<PAGE> 9
in number as possible. The initial term of office of members of
Class I shall expire at the 1987 Annual Meeting of the
Corporation's Shareholders; the initial term of office for
members of Class II shall expire at the 1988 Annual Meeting of
the Corporation's Shareholders; and the initial term of office
for members of Class III shall expire at the 1989 Annual Meeting
of the Corporation's Shareholders. At each annual meeting of the
Corporation's Shareholders following such initial classification
and election, Directors elected to succeed those Directors whose
terms expire shall be elected for a term of office to expire at
the third succeeding annual meeting of the Corporation's
Shareholders after their election and shall continue to hold
office until their respective successors are elected and
qualified. In the event of any increase in the number of
Directors fixed by the Board of Directors, the additional
Directors shall be so classified that all classes of Directors
have as nearly equal number of Directors as may be possible. In
the event of any decrease in the number of Directors fixed by the
Board of Directors, all classes of Directors shall be decreased
equally as nearly as may be possible; provided, however, no
change in the number of Directors may decrease the term of a then
incumbent Director.
ARTICLE XI.
Powers of Directors
The Board of Directors shall have the entire management
of the business of the Corporation. In the management and
control of the property, business and affairs of the Corporation,
<PAGE> 10
the Board of Directors is hereby vested with all the powers
possessed by the Corporation itself, so far as this delegation of
authority is not inconsistent with the laws of the State of
Texas, with the Articles of Incorporation of the Corporation or
with these Bylaws. The Board of Directors shall have power to
determine what constitutes net earnings, profits and surplus,
respectively, what amount shall be reserved for working capital
and for any other purposes, and what amount shall be declared as
dividends, and such determination of the Board of Directors shall
be final and conclusive.
ARTICLE XII.
Fees of Directors and Others.
The Board of Directors shall have power to fix and
determine the fee or fees to be paid members of the Board of
Directors or any Committees appointed by the Directors or
Shareholders. Any fees so fixed and determined by the Board of
Directors shall be subject to revision or amendment by the
Shareholders.
ARTICLE XIII.
Executive and Other Committees.
The Board of Directors may, by resolution adopted by a
majority of the whole board, elect from their number an Executive
Committee of not less than three nor more than five members,
which Committee may exercise the powers of the Board of Directors
in the management of the business of the Corporation when the
<PAGE> 11
Board is not in session. The Executive Committee shall report
its actions to the Board for approval. The Executive Committee
may make rules for the notice, holding and conduct of its
meetings and the keeping of the records thereof.
The Board of Directors may likewise appoint from their
number or from the Shareholders other Committees from time to
time, the number composing such Committees and the powers
conferred upon the same to be determined by vote of the Board of
Directors.
ARTICLE XIV.
Directors' Meetings.
Regular Meetings of the Board of Directors shall be
held at such places within or without the State of Texas and at
such times as the Board by vote may determine from time to time,
and if so determined, no notice thereof need be given. Special
Meetings of the Board of Directors may be held at any time or
place, either within or without the State of Texas, whenever
called by the Chairman of the Board, the President, a Vice
President, the Secretary, an Assistant Secretary or three or more
Directors, notice thereof being given to each Director by the
Secretary or an Assistant Secretary or Officer calling the
meeting, or at any time without formal notice provided all the
Directors are present or those not present have waived notice
thereof, subject however to the provisions of Article VII of
these ByLaws. Notice of Special Meetings, stating the time and
place thereof, shall be given by mailing the same to each
<PAGE> 12
Director at his residence or business address at least two days
before the meeting or by delivering the same to him personally or
by telephoning or telegraphing the same to him at his residence
or business address at least one day before the meeting, unless,
in the case of exigency, the Chairman of the Board of Directors
or the President or a Vice President shall prescribe a shorter
notice to be given personally or by telephoning or telegraphing
each Director at his residence or business address. Such Special
Meetings shall be held at such times and places as the notice
thereof or waiver shall specify.
ARTICLE XV.
Quorum at Directors' Meetings.
A majority of the Board of Directors shall constitute a
quorum for the transaction of business, but a lesser number may
adjourn any meeting from time to time and the same may be held
without further notice. When a quorum is present at any meeting,
a majority vote of the members in attendance thereat shall decide
any question brought before such meeting, except as otherwise
provided by law or by these By-laws.
ARTICLE XVI.
Officers.
The Officers of this Corporation shall be a President,
one or more Vice Presidents, a Secretary and a Treasurer. The
Board of Directors in its discretion may elect a Chairman of the
Board of Directors, who, when present, shall preside at all
<PAGE> 13
meetings of the Shareholders and Board of Directors and who shall
have the powers prescribed by Article XIX hereof as well as such
other powers as the Board from time to time shall prescribe. The
Officers shall be elected by the Board of Directors after its
election by the Shareholders, and a meeting may be held without
notice for this purpose immediately after the Annual Meeting of
the Shareholders and at the same place.
ARTICLE XVII.
Eligibility of Officers.
The Chairman of the Board of Directors must be a
Stockholder and shall be a Director of the Corporation. The
President, Vice Presidents, Secretary, Treasurer and such other
Officers as may be appointed may be, but need not be,
Shareholders or Directors of the Corporation. Any person may
hold more than one office provided the duties thereof can be
consistently performed by the same person except that the
President and Secretary shall not be the same person.
ARTICLE XVIII.
Additional Officers and Agents.
The Board of Directors in its discretion may appoint a
General Manager, one or more Assistant Treasurers, one or more
Assistant Secretaries, and such other Officers or agents as it
may deem advisable and prescribe the duties thereof.
<PAGE> 14
ARTICLE XIX.
Chairman of the Board and President.
Chairman of the Board. The Chairman of the Board shall
preside at all meetings of the Shareholders and the Board of
Directors; shall be the medium of communication to the
Shareholders and Directors of matters presented for their
consideration; shall perform the duties generally exercised by
the Chairman of a Board of Directors; and shall perform such
other duties as may be assigned to him from time to time by the
Board of Directors including, but not limited to, the signing or
countersigning of certificates of stock, bonds, notes, contracts
or other instruments of the Corporation. He shall be ex-officio
a member of all standing committees.
President. In the absence or inability of the Chairman
of the Board of Directors or during any vacancy in the office
thereof, the President shall preside at all meetings of the
Shareholders and Board of Directors. The President shall manage
the business and operations of the Corporation. The President
shall see that all orders and resolutions of the Board are
carried into effect. He may sign or countersign all certificates
of stock, bonds, notes, contracts, or other instruments of the
Corporation as authorized by the Board of Directors. He shall be
ex-officio a member of all standing committees, shall have the
general powers and duties of supervision and management usually
vested in the office of President of a Corporation, and shall
perform such other duties as may be assigned to him from time to
time by the Board of Directors.
<PAGE> 15
ARTICLE XX.
Vice Presidents.
Except as especially limited by vote of the Board of
Directors, any Vice President shall perform the duties and have
the powers of the President during the absence or disability of
the President, and shall have the power to sign all certificates
of stock, bonds, deeds and contracts of the Corporation. He
shall perform such other duties and have such other powers as the
Board of Directors shall designate from time to time.
ARTICLE XXI.
Secretary.
The Secretary shall keep accurate minutes of all
meetings of the Shareholders, the Board of Directors and the
Executive Committee, respectively, shall perform all the duties
commonly incident to his office, and shall perform such other
duties and have such other powers as the Board of Directors shall
designate from time to time. In his absence an Assistant
Secretary or a Secretary pro tempore shall perform his duties.
The Secretary, any Assistant Secretary and any Secretary pro
tempore shall be sworn to the faithful discharge of his duties.
ARTICLE XXII.
Treasurer.
The Treasurer, subject to the order of the Board of
Directors, shall have the care and custody of the money, funds,
valuable papers and documents of the Corporation (other than his
own bond which shall be in the custody of the President) and
<PAGE> 16
shall have and exercise, under the supervision of the Board of
Directors, all the powers and duties commonly incident to his
office, and shall give bond in such form and with such sureties
as shall be required by the Board of Directors. He shall deposit
all funds of the Corporation in such bank or banks, trust company
or trust companies or with such firm or firms doing a banking
business as the Directors shall designate, and shall have power
to borrow from time to time at his discretion moneys for the
corporate needs of the Corporation and to cause to be issued as
evidence thereof notes of the Corporation. He may endorse for
deposit or collection all checks, notes, et cetera, payable to
the Corporation or to its order, may accept drafts on behalf of
the Corporation, and, together with the Chairman of the Board or
the President or a Vice President, may sign bonds. He shall keep
accurate books of account of the Corporation's transactions which
shall be the property of the Corporation, and, together with all
its property in his possession, shall be subject at all times to
the inspection and control of the Board of Directors. The
Treasurer shall hold his office during the pleasure of the Board
of Directors, and shall be subject in every way to its orders.
All checks, drafts, notes or other obligations for the
payment of money shall be signed, either manually or, if and to
the extent authorized by the Board of Directors, through the use
of a facsimile signature, by the Treasurer, or an Assistant
Treasurer or such other Officer or agent as the Board of
Directors shall by resolution direct and, with the exception of
checks for the payment of not exceeding $5,000.00 and notes
<PAGE> 17
issued under an indenture, shall be countersigned or registered
as a condition to their validity by the Chairman of the Board or
the President or a Vice President or such other Officer or agent
as the Board of Directors shall by resolution direct. Checks for
the total amount of any payroll may be drawn in accordance with
the foregoing provisions and deposited in a special fund. Checks
upon this fund may be drawn by such person or persons as the
Treasurer shall designate and need not be countersigned.
The Directors may appoint one or more Assistant
Treasurers with such powers and duties, including the powers and
duties of the Treasurer as herein stated, as to them shall seem
best.
ARTICLE XXIII.
Removals.
Directors may only be removed for cause and may only be
removed by the vote of two-thirds of the Directors then in office
at a meeting at which all of the Directors are present or notice
of such removal has been given to all Directors in advance of the
meeting. Except as may otherwise be provided by law, cause for
removal shall exist only if: (i) the Director whose removal is
proposed has been convicted, or where a Director has been granted
immunity to testify where another has been convicted, of a felony
by a court of competent jurisdiction and such conviction is no
longer subject to direct appeal; (ii) such Director has been
grossly negligent in the performance of his duties to the
Corporation, or (iii) such Director has been adjudicated by a
<PAGE> 18
court of competent jurisdiction to be mentally incompetent, which
mental incompetence directly affects his ability as a Director of
the Corporation, and such adjudication is no longer subject to
direct appeal. This provision is subject to Paragraph 6 of
Division A of Article VI of the Restated Articles of
Incorporation, as amended, if and whenever the same may become
applicable by the accrual of voting rights to the Preferred
Stock. The Directors may, by vote of a majority of the entire
Board, remove from office any Officer or agent or member or
members of any Committee elected or appointed by them or by the
Executive Committee.
ARTICLE XXIV.
Vacancies.
Vacancies in the Board of Directors resulting from
death, resignation, retirement, disqualification, removal from
office or other cause shall be filled by a vote of a majority of
the continuing Directors then in office, or a sole remaining
Director, although less than a quorum, and a Director so chosen
shall be elected for the unexpired term of his predecessor in
office. If one or more Directors shall resign from the Board
effective as of a future date, such vacancy or vacancies shall be
filled pursuant to the provision hereof, and such new
directorship(s) shall become effective when such resignation or
resignations shall become effective, and each Director so chosen
shall hold office as herein provided for the filling of other
vacancies. Directors must be Shareholders in the Corporation.
<PAGE> 19
Newly created directorships resulting from any increase
in the authorized number of Directors shall be filled by majority
vote of the continuing Directors then in office, or a sole
remaining Director, although less than a quorum, for a term of
office continuing only until the next election of one or more
Directors by the Shareholders; provided, however, that the Board
of Directors may not fill more than two such directorships during
the period between any two successive annual meetings of the
Shareholders.
All of the provisions of this Article XXIV are subject
to Paragraph 6 of Division A of Article VI of the Restated
Articles of Incorporation of the Corporation, as amended, if and
whenever the same may become applicable by the accrual of voting
rights to the Preferred Stock.
ARTICLE XXV.
Capital Stock.
The amount of capital stock, and of each class thereof,
shall be as fixed in the Articles of Incorporation or in any
lawful amendments thereto and the votes of the Corporation from
time to time.
ARTICLE XXVI.
Certificates of Stock.
Every Stockholder shall be entitled to a certificate or
certificates representing the number and kind of shares owned by
him signed by the Chairman of the Board or the President or a
Vice President and by the Secretary or an Assistant Secretary and
<PAGE> 20
bearing the corporate seal or a facsimile thereof. Said
certificates shall be in such form as may be approved by the
Board of Directors. Said Board may appoint one or more Transfer
Agents and/or Registrars for its stock of any class or classes
and may require stock certificates to be countersigned and/or
registered by one or more of such Transfer Agents and/or
Registrars. If certificates of capital stock of this Corporation
are signed by a Transfer Agent and/or by a Registrar, the
signatures thereon of the Chairman of the Board or the President
or a Vice President and the Secretary or an Assistant Secretary
of this Corporation may be facsimiles, engraved or printed. Any
provisions of these Bylaws with reference to the signing and
sealing of stock certificates shall include, in cases above
permitted, such facsimiles. In case any Officer or Officers who
shall have signed, or whose facsimile signature or signatures
shall have been used on, any such certificate or certificates
shall cease to be such Officer or Officers of this Corporation,
whether because of death, resignation or for any other reason,
before such certificate or certificates shall have been delivered
by this Corporation, such certificate or certificates may
nevertheless be issued and delivered as though the person or
persons who signed such certificate or certificates or whose
facsimile signature or signatures shall have been used thereon
had not ceased to be such Officer or Officers of this
Corporation.
<PAGE> 21
ARTICLE XXVII.
Transfer of Stock.
Shares of stock may be transferred by delivery of the
certificate accompanied either by an assignment in writing on the
back of the certificate or by a written power of attorney to
sell, assign and transfer the same signed by the person appearing
by the certificate to be the owner of the shares represented
thereby. No transfer shall affect the right of the Corporation
to pay any dividend due upon the stock, or to treat the holder of
record as the holder in fact, until such transfer is recorded
upon the books of the Corporation or a new certificate is issued
to the person to whom it has been so transferred. It shall be
the duty of every Shareholder to notify the Corporation of his
post office address.
ARTICLE XXVIII.
Transfer Books.
The Board of Directors shall have power to close the
stock transfer books of this Corporation for a period not less
than ten (10) days nor more than sixty (60) days preceding the
date of any meeting of Shareholders or the date for payment of
any dividend or the date for the allotment of rights or the date
when any change or conversion or exchange of capital stock shall
go into effect; provided, however, that in lieu of closing the
stock transfer books as aforesaid, the Board of Directors may fix
in advance a date, not more than sixty (60) days and in case of a
meeting of Shareholders not less than ten (10) days preceding the
<PAGE> 22
date of any meeting of Shareholders or the date for the payment
of any dividend, or the date for the allotment of rights, or the
date when any change or conversion or exchange of capital stock
shall go into effect, as a record date for the determination of
the Shareholders entitled to notice of, and to vote at, any such
meeting and any adjournment thereof, or entitled to receive
payment of any such dividend, or to any such allotment of rights,
or to exercise the rights in respect of any such change,
conversion or exchange of capital stock, and in such case only
such Shareholders as shall be Shareholders of record on the date
so fixed shall be entitled to such notice of and to vote at, such
meeting and any adjournment thereof, or to receive payment of
such dividend, or to receive such allotment of rights, or to
exercise such rights, as the case may be, notwithstanding any
transfer of any stock on the books of this Corporation after any
such record date fixed as aforesaid.
ARTICLE XXIX.
Loss of Certificates.
In case of the loss, mutilation or destruction of a
certificate of stock, a duplicate certificate may be issued upon
such terms as the Directors may prescribe.
ARTICLE XXX.
Seal.
The seal of this Corporation shall consist of a
flat-faced circular die with the words and figures "EL PASO
ELECTRIC COMPANY, INCORPORATED 1901" cut or engraved thereon.
<PAGE> 23
ARTICLE XXXI.
Books and Records.
Unless otherwise expressly required by the laws of the
State of Texas, the books and the records of the Corporation may
be kept outside of the State of Texas at such place or places as
may be designated from time to time by the Board of Directors.
ARTICLE XXXII.
Bonds and Debentures.
Every bond or debenture issued by the Corporation shall
be signed by the Chairman of the Board or the President or a Vice
President and by the Treasurer, an Assistant Treasurer, the
Secretary or an Assistant Secretary, and shall be sealed with the
seal of the Corporation. The seal may be a facsimile, engraved
or printed. Where any such bond or debenture is authenticated
with the manual signature of an authorized Officer of the
Corporation or other trustee designated by the indenture of trust
or other agreement under which said security is issued, the
signature of any of the Corporation's Officers named herein may
be a facsimile. In case any Officer or Officers who shall have
signed, or whose facsimile signature or signatures shall have
been used on any such bond or debenture, shall cease to be an
Officer of the Corporation for any reason before the same has
been delivered by the Corporation, such bond or debenture may
nevertheless be issued and delivered as though the person or
persons who signed it or whose facsimile signature or signatures
shall have been used thereon had not ceased to be such Officer or
Officers of this Corporation.
<PAGE> 24
ARTICLE XXXIII.
Amendments.
The power to alter, amend or repeal these Bylaws and to
adopt new Bylaws is hereby delegated to the Board of Directors.
These Bylaws may also be altered, amended or repealed, and new
Bylaws may be adopted, by holders of the outstanding shares of
Common Stock only if such alteration, amendment, repeal or
adoption is approved by the affirmative vote of the holders of at
least 75% of the outstanding shares of Common Stock.
ARTICLE XXXIV.
Indemnification.
The Corporation shall indemnity every person who was or
is a party or is or was threatened to be made a party to any
action, suit, or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he or
she is or was a Director, Officer, employee, agent, or
controlling shareholder of the Corporation, or is or was serving
at the request of the Corporation as a Director, Officer,
employee, agent, or trustee of another corporation, partnership,
joint venture, trust, employee benefit plan, or other enterprise,
against judgments, penalties, fines, settlements and reasonable
expenses (including counsel fees), incurred by him or her in
connection with such action, suit or proceeding, to the full
extent permitted by applicable law. Such indemnification may, in
the discretion of the Board of Directors, include advances of his
or her expenses in advance of final disposition of such action,
suit or proceeding, subject to the provisions of any applicable
statute.
<PAGE> 25
To the extent authorized by the Texas Business
Corporation Act, the Corporation shall have the authority to
enter into insurance or other arrangements, without specific
approval of the Shareholders of the Corporation, with persons or
entities which are not regularly engaged in the business of
providing insurance coverage, on behalf of any person who is or
was a Director, Officer, employee or agent of the Corporation or
who is or was serving at the request of the Corporation as a
Director, Officer, partner, venturer, proprietor, trustee,
employee, agent or similar functionary of another foreign or
domestic corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other enterprise,
against any liability asserted against him and incurred by him in
such a capacity or arising out of his status as such a person,
whether or not the Corporation would have the power to indemnity
him against that liability under the Texas Business Corporation
Act. Without limiting the power of the Corporation to procure or
maintain any kind of insurance or other arrangement, said
Corporation may, for the benefit of persons indemnified by the
Corporation, (i) create a trust fund, (ii) establish any form of
self-insurance, (iii) secure its indemnification obligation by
grant of any security interest or other lien on the assets of the
Corporation, or (iv) establish a letter of credit, guaranty or
surety arrangement. Any such insurance or other arrangement may
be procured, maintained or established within the Corporation or
its affiliates or with any insurer or other person deemed
appropriate by the Board of Directors of said Corporation
<PAGE> 26
regardless of whether all or part of the stock or other
securities thereof are owned in whole or in part by said
Corporation. In the absence of fraud, the judgment of the Board
of Directors of the Corporation as to the terms and conditions of
such insurance or other arrangement and the identity of the
insurer or other person participating in any such arrangement
shall be conclusive, and such insurance or other arrangement
shall not be subject to voidability, nor subject the Directors
approving such insurance or other arrangement to liability, on
any ground regardless of whether Directors participating in
approving such insurance or other arrangement shall be
beneficiaries thereof.
<PAGE> 1
EXHIBIT A-7
FORM OF AMENDED AND
RESTATED ARTICLES OF INCORPORATION
OF
[SURVIVING CORPORATION]
ARTICLE I
The name of the Corporation is [SURVIVING CORPORATION].
ARTICLE II
The purposes of the Corporation shall be to own or
operate facilities used for the generation, transmission, or
distribution of electric energy for sale and the transaction of
any and all other lawful businesses for which corporations may be
incorporated under the Texas Business Corporation Act.
ARTICLE III
The principal place and registered office of business
of the Corporation shall be [street address], _________, Texas
and the name of its registered agent at such address is [ ].
ARTICLE IV
The period of duration of the Corporation is perpetual.
ARTICLE V
The number of Directors of this Corporation shall not
be less than one nor more than the number fixed from time to time
by the Bylaws of the Corporation. The names and addresses of the
persons now serving as directors are as follows:
Name Address
-------------- --------------
-------------- --------------
-------------- --------------
-------------- --------------
-------------- --------------
ARTICLE VI
The total number of shares of all classes of capital
stock which this Corporation shall have authority to issue is
__________ (_____), of which __________ (_____) shares shall be
designated as Common Stock, par value $.01 per share; __________
(_____) shares of which shall be designated as Preferred Stock,
__________ (_____) shares of which shall be Preferred Stock, par
value $100 per share and __________ (_____) shares of which shall
be Preferred Stock, par value $25.00 per share; and __________
(_____) shares of Preference Stock, par value $.01 per share.
The powers, designations, preferences and relative,
<PAGE> 2
participating, optional or other special rights, if any, and the
qualifications, limitations or restrictions of each class of
stock shall be governed by the following provisions:
SECTION 1. Common Stock. (a) All shares of Common
Stock shall be identical and will entitle the holders thereof to
the same rights and privileges in every respect. The holders of
shares of Common Stock shall be entitled to vote upon all matters
submitted to a vote of the shareholders of this Corporation and
shall be entitled to one vote for each share of Common Stock
held.
(b) Subject to the prior rights and preferences, if
any, applicable to shares of the Preferred Stock or the
Preference Stock or any series thereof, the holders of shares of
Common Stock shall be entitled to receive, when and if declared
by the Board of Directors, out of the assets of the Corporation
which are by law available therefor, dividends payable either in
cash, in stock or otherwise.
(c) In the event of any voluntary or involuntary
dissolution, liquidation, or winding up of the Corporation, after
distribution in full of the preferential amounts, if any, to be
distributed to the holders of shares of the Preferred Stock or
the Preference Stock or any series thereof, the holders of shares
of the Common Stock shall be entitled to receive all of the
remaining assets of the Corporation available for distribution to
its shareholders, ratably in proportion to the number of shares
of the Common Stock held by them. Neither liquidation,
dissolution, or winding-up of the Corporation, as such terms are
used in this Paragraph (c), shall be deemed to be occasioned by
or to include any merger of this Corporation with or into one or
more corporations or other entities, any acquisition or exchange
of the outstanding shares of one or more classes or series of the
capital stock of the Corporation, or any sale, lease, exchange,
or other disposition of all or substantially all of the assets of
the Corporation.
SECTION 2. Preferred Stock. (a) The Preferred Stock
("Preferred Stock") may be issued from time to time in one or
more series, the shares of each such series to have such
designations, preferences, privileges and voting powers, and
restrictions or qualifications thereof, as are provided herein or
as may be fixed prior to the issuance of such series by the Board
of Directors; and the Board of Directors is hereby expressly
authorized to fix from time to time before issuance the
designations, preferences, privileges and voting powers of each
such series which are not fixed herein, and the restrictions or
qualifications thereof.
(b) The following designations, preferences,
privileges and voting powers, and restrictions or qualifications
thereof, shall apply to all shares of Preferred Stock authorized
by this certificate; provided, however, that the Corporation may
<PAGE> 3
in the manner provided by law authorize and issue additional
shares of Preferred Stock:
(i) The holders of each series of Preferred Stock
shall be entitled to receive, if and when declared payable
by the Board of Directors out of assets legally available
for the payment of dividends, cumulative cash dividends at
such rate per share and payable quarterly on such dates as
shall be fixed by resolution adopted by the Board of
Directors prior to the issuance of such series. Dividends
on each share of Preferred Stock shall commence to accrue on
and be cumulative from the first day of the current dividend
period within which such share was issued. If for any past
dividend period or periods dividends shall not have been
paid or declared and set apart for payment upon all
outstanding shares of Preferred Stock at the rate per annum
applicable thereto, the deficiency shall be fully paid or
declared and set apart for payment (at any time without
reference to any payment date) before any dividend shall be
declared or paid or set apart for the Common Stock or any
other class of stock ranking junior to the Preferred Stock.
Accumulations of dividends shall not bear interest. In case
the stated dividends are not paid in full, the shares of all
series of the Preferred Stock shall share ratably in the
payment of dividends, including accumulations, if any, in
accordance with the sums which would be payable on said
shares if all dividends were declared and paid in full.
(ii) The holders of the Preferred Stock shall not be
entitled to receive any dividends thereon other than the
dividends referred to in paragraph (i) hereof.
(iii) Upon any involuntary dissolution, liquidation, or
winding up of the Corporation, the holder of shares of
Preferred Stock shall be entitled to receive out of the
assets of the Corporation, the stated par value of their
shares, plus, in the case of each share, an amount equal to
all dividends on such share accrued and unpaid thereon to
the date of payment upon such dissolution, liquidation or
winding up of the Corporation, before any distribution of
the assets to be distributed shall be made to the holders of
the Common Stock or any other class of stock ranking junior
to the Preferred Stock.
Upon any voluntary dissolution, liquidation, or winding
up of the Corporation, the holders of shares of Preferred
Stock shall be entitled to receive out of the assets of the
Corporation the then applicable redemption price of their
shares, plus, in the case of each share, an amount equal to
all dividends on such share accrued and unpaid thereon to
the date of payment upon such dissolution, liquidation or
winding up of the Corporation, before any distribution of
the assets to be distributed shall be made to the holders of
the Common Stock or any other class of stock ranking junior
to the Preferred Stock.
<PAGE> 4
In the case the amounts payable on liquidation are not
paid in full, the shares of all series shall share ratably
in any distribution of assets other than by way of dividends
in accordance with the sums which would be payable on such
distribution if all sums payable were discharged in full.
After payment to the holders of Preferred Stock of the
preferential amounts to which they are entitled upon an
involuntary or upon a voluntary dissolution, liquidation or
winding up, as the case may be, as hereinabove provided, the
holders of Preferred Stock, as such, shall have no right or
claim to any of the remaining assets of the Corporation,
either upon any distribution of surplus assets, or upon
involuntary or upon voluntary dissolution, liquidation or
winding up.
The sale, lease, exchange or other disposition of all
or substantially all the assets of the Corporation to, or
the merger of this Corporation with or into one or more
corporations or other entities, or any acquisition or
exchange of the outstanding shares of one or more class or
series of the capital stock of the Corporation, shall not be
deemed to be an involuntary or voluntary dissolution,
liquidation or winding up for the purposes of this paragraph
(iii).
(iv) At the option of the Board of Directors, the
Corporation may redeem the whole or any part of the
Preferred Stock at any time outstanding, or the whole or any
part of any series thereof, at any time or from time to
time, at the then applicable redemption price thereof as may
be fixed by resolution adopted by the Board of Directors
prior to the issuance of such series, plus accrued and
unpaid dividends to the date of redemption; provided,
however, that upon redemption of any outstanding shares of
Preferred Stock not less than thirty (30) nor more than
sixty (60) days previous to the date fixed for redemption,
notice of the time and place thereof shall be given to the
holders of record of Preferred Stock so to be redeemed, by
mail and publication in a newspaper, printed in the English
language and customarily published on each business day, of
general circulation in the Borough of Manhattan, City and
State of New York and in the City of Dallas, Texas or in
such manner as may be prescribed by the Bylaws of the
Corporation or by resolution of the Board of Directors; and,
provided further, that the accidental failure to mail any
such notice to one or more of such holders shall not affect
the validity of such redemption as to the other holders, and
that such notice shall be deemed to have been duly given to
any holder of the Preferred Stock within the meaning of the
foregoing provision when the same shall have been published
as aforesaid and a copy deposited in the United States
mails, postage prepaid, addressed to such holder at his
last-known address as it appears on the books of the
Corporation, and, provided further, that such notice shall
<PAGE> 5
include a statement to the effect that privileges of
conversion or exchange, if any, not theretofore expiring,
will expire at the close of business on the full business
day next preceding the date fixed for redemption; and,
provided further, that in every case of redemption of less
than all of the outstanding shares of any one series of
Preferred Stock, such redemption shall be made pro rata (so
far as may be without the issuance of fractional shares), or
the shares of such series to be redeemed shall be chosen by
lot in such manner as may be prescribed by resolution of the
Board of Directors. At any time after notice of redemption
has been given in the manner prescribed by the Bylaws of the
Corporation or by resolution of the Board of Directors to
the holders of stock so to be redeemed, the Corporation may
deposit funds sufficient for such redemption with a solvent
bank or trust company having its principal office in the
Borough of Manhattan, City and State of New York or the City
of Dallas, Texas and having a combined capital and surplus
of at least $1,000,000 named in such notice payable on the
date fixed for redemption, as aforesaid, and in the amounts
aforesaid, to the respective orders of the holders of the
shares so to be redeemed, on endorsement to the Corporation
or otherwise, as may be required, and upon surrender of the
certificates for such shares. Upon the deposit of said
money as aforesaid, or, if no such deposit is made, upon
said redemption date (unless the Corporation defaults in
making payment of the redemption price) such holders shall
cease to be shareholders with respect to said shares, and
from and after the making of said deposit, or, if no such
deposit is made, after the redemption date (the Corporation
not having defaulted in making the payment of the redemption
price), the said holders shall have no interest in or claims
against the Corporation with respect to said shares except
only the right to receive said moneys on the date fixed for
redemption, as aforesaid, from said bank or trust company,
or from the Corporation, as the case may be, without
interest thereon, upon endorsement, if required, and
surrender of the certificates as aforesaid and the right to
exercise, on or before the close of business on the full
business day next preceding the date fixed for redemption,
privileges of conversion or exchange, if any, not
theretofore expiring.
Any moneys deposited by the Corporation as aforesaid
which shall not be required for such redemption because of
the exercise of any such right of conversion or exchange
subsequent to the date of such deposit shall be repaid to
the Corporation forthwith. In case the holder of any
Preferred Stock redeemed as aforesaid shall not, within six
(6) years after said deposit, claim the amount deposited as
above stated for the redemption thereof, the depositary
shall, upon demand, pay over to the Corporation such amount
so deposited and the depositary thereupon shall be relieved
from all responsibility to such holder.
<PAGE> 6
Subject to the provisions hereof, the Board of
Directors shall have authority to prescribe from time to
time the manner in which Preferred Stock shall be redeemed
and cancelled.
Nothing herein contained shall limit or deprive the
Corporation of the right to redeem or purchase any shares of
Preferred Stock in any other manner now or hereafter
permitted by law.
(v) Except as hereinafter provided and except as some
provision of law expressly confers a right to vote
regardless of any provision to the contrary in the Amended
and Restated Articles of Incorporation or other certificate
filed pursuant to law, the holders of Preferred Stock shall
not be entitled to any notice of meetings of shareholders of
the Corporation, or to vote, or to any voting rights
whatsoever as shareholders of the Corporation. The
foregoing provisions are subject to the following:
(1) So long as any shares of Preferred Stock are
outstanding, the Corporation shall not, without the
affirmative vote of at least two-thirds of the votes
entitled to be cast by the holders of the total number
of shares of Preferred Stock then outstanding, given in
person or by proxy, at any meeting called for the
purpose:
(A) amend, alter, change or repeal any of
the express terms of the Preferred Stock then
outstanding in a manner to affect the holders of
such shares adversely otherwise than to increase
the authorized number of shares of Preferred
Stock; provided, however, that if such amendment,
alteration, change or repeal would adversely
affect the holders of one or more, but not all, of
the series of Preferred Stock at that time
outstanding, the affirmative vote of the holders
of at least two-thirds of the total number of
shares of all such series so affected shall be
required in lieu of the affirmative vote of the
holders by at least two-thirds of the total number
of shares of Preferred Stock then outstanding; or
(B) create or authorize any class of stock
having a preference superior to the preferences of
the Preferred Stock as to assets or dividends, or
create or authorize any security convertible into
shares of stock of any such kind; or
(C) issue any shares of, or ranking on a
parity with, the Preferred Stock under the Amended
and Restated Articles of Incorporation, unless for
any twelve (12) consecutive calendar months within
the fifteen (15) calendar months immediately
<PAGE> 7
preceding the calendar month within such
additional shares shall be issued, the net
earnings of the Corporation available for the
payment of interest charges on the Corporation's
interest-bearing indebtedness, determined after
provision for depreciation and all taxes, and in
accordance with sound accounting practice, shall
have been at least one and one-half (1-1/2) times
the aggregate of the annual interest charges on
the interest bearing indebtedness of the
Corporation and annual dividend requirements on
all shares of, or ranking on a parity with,
Preferred Stock to be outstanding immediately
after the proposed issue of such shares of, or
ranking on a parity with, the Preferred Stock.
There shall be excluded from the foregoing
computation, interest charges on all such
indebtedness and dividends on all stock which is
to be retired in connection with the issue of such
shares of, or ranking on a parity with, the
Preferred Stock. Where such shares of, or ranking
on a parity with, the Preferred Stock are to be
issued in connection with the acquisition of new
property, the net earnings of the property so
acquired may be included on a pro forma basis in
the foregoing computation, computed on the same
basis as the net earnings of the Corporation.
Nothing in this subparagraph (C) however
shall prevent the Corporation from issuing shares
of, or ranking on a parity with, the Preferred
Stock in connection with the purchase, redemption
or other acquisition of or any exchange for shares
of, or ranking on a parity with, the Preferred
Stock, if the aggregate amount of annual dividends
payable on the shares to be issued and the
aggregate amount payable on such shares in case of
voluntary dissolution shall not exceed said
respective amounts payable on the shares of, or
ranking on a parity with, the Preferred Stock
which are to be purchased, redeemed or otherwise
acquired.
(2) So long as any shares of Preferred Stock are
outstanding, the Corporation shall not, without the
affirmative vote of a majority of the votes entitled to
be cast by the holders of the total number of shares of
Preferred Stock then outstanding, given in person or by
proxy, at any meeting called for the purpose:
(A) sell, lease, exchange or otherwise
dispose of all or substantially all of the assets
of the Corporation or merge with or into one or
more corporations or other entities; provided,
however, that nothing herein contained shall
<PAGE> 8
require such authorization in respect of the
merger of the Corporation with or into any other
company if the company resulting from such merger
will, immediately after such merger, have only
such authorized classes of stock and such
outstanding shares of stock as would have been
permitted immediately prior to such merger under
the provisions hereof without any further consent
of the holders of the Preferred Stock, and if each
holder of the Preferred Stock immediately
preceding such merger shall receive the same
number of shares, with the same rights and
preferences, of the resulting company. For the
purposes of this clause insofar as any earnings
test may be applicable, the earnings, interest
charges on debt and dividend requirements of the
merging companies shall be determined on a
combined basis. No consent of the holders of the
Preferred Stock shall be required under the
provisions hereof if, at or prior to the time when
the act is to take effect with respect to which
consent would otherwise be required, provision is
made for the redemption of all shares of Preferred
Stock at the time outstanding; or
(B) increase the authorized number of shares
of Preferred Stock.
(3) If and when dividends payable on any shares
of Preferred Stock shall be in default in an amount
equivalent to or exceeding four (4) full quarterly
dividends, thereafter and until all dividends on the
shares of Preferred Stock in default shall have been
paid or declared and set aside for payment, the holders
of the shares of Preferred Stock, voting separately as
a class and regardless of series, shall be entitled to
elect the smallest number of directors necessary to
constitute a majority of the full Board of Directors of
the Corporation, and, the holders of the shares of the
Common Stock, voting separately as a class, shall be
entitled to elect the remaining directors of the
Corporation, anything herein or in the Bylaws to the
contrary notwithstanding.
(4) If and when all dividends then in default on
the shares of Preferred Stock then outstanding shall be
paid or declared and set aside for payment, the holders
of shares of Preferred Stock shall be divested of the
special right with respect to the election of directors
provided in Paragraph (3) hereof, and the voting power,
with respect thereto shall revert to the holders of the
shares of the Common Stock; but always subject to the
same provisions for vesting such special right in the
holders of the shares of Preferred Stock in case of
further like default or defaults in dividends thereon
<PAGE> 9
as provided in Paragraph (3) hereof. Upon the
termination of any such special right upon payment or
setting aside for payment of all accumulated and
defaulted dividends on the shares of Preferred Stock,
the terms of office of all persons who may have been
elected directors of the Corporation by vote of the
holders of the shares of Preferred Stock, as a class,
pursuant to such special right shall forthwith
terminate, and the resulting vacancies shall be filled
by the vote of a majority of the remaining directors.
(5) In the case of any vacancy in the office of a
director occurring among the directors elected by the
holders of the shares of Preferred Stock, as a class,
pursuant to the foregoing provisions hereof, the
remaining director so elected, may elect a successor to
hold office for the unexpired terms of the director
whose place shall be vacant, and such successor shall
be deemed to have been elected by such holders.
Likewise, in case of any vacancy in the office of a
director occurring among the directors elected by the
holders of the shares of the Common Stock pursuant to
the foregoing provisions hereof, the remaining
directors elected by the holders of the Common Stock,
by affirmative vote of a majority thereof, or the
remaining director so elected if there be but one, may
elect a successor or successors to hold office for the
unexpired term of the director or directors whose place
or places shall be vacant, and such successor or
successors shall be deemed to have been elected by such
holders.
(6) Whenever under the provisions hereof, the
right shall have accrued to the holders of the shares
of Preferred Stock to elect directors, the Board of
Directors shall within ten (10) days after delivery to
the Corporation at its principal office of a request to
such effect signed by any holder of shares of any
series of Preferred Stock entitled to vote, call a
special meeting of the shareholders to be held within
fifty (50) days from the delivery of such request for
the purpose of electing directors (unless under the
provisions of the Bylaws of the Corporation as then in
effect, an annual meeting of shareholders of the
Corporation is to be held within sixty (60) days after
the vesting in the holders of the Preferred Stock of
the right to elect directors). At all meetings of
shareholders held for the purpose of electing directors
during such time as the holders of the shares of
Preferred Stock shall have the special right, voting
separately and as a class, to elect directors pursuant
hereto, the presence in person or by proxy of the
holders of a majority of the outstanding shares of any
other class entitled to vote at such meeting shall be
required to constitute a quorum of that other class for
<PAGE> 10
the election of directors, and the presence in person
or by proxy of the holders of shares representing a
majority of the votes entitled to be cast by the
holders of the total number of shares of Preferred
Stock then outstanding shall be required to constitute
a quorum of such class for the election of directors;
provided, however, that the absence of a quorum of the
holders of stock of any such class shall not prevent
the election of directors at any such meeting (or at
any adjournment thereof) by the other such class or
classes if the necessary quorum of the holders of stock
of such class or classes is present in person or by
proxy at such meeting; in the absence of a quorum of
the holders of stock of any class of stock a majority
of those holders of the stock of such class who are
present in person or by proxy shall have power to
adjourn the meeting for the election of the directors
to be elected by such class from time to time without
notice other than announcement at the meeting until a
quorum shall be present in person or by proxy, but such
adjournment shall not be made to a date beyond the date
for the mailing of notice of the next annual meeting of
the Corporation or special meeting in lieu thereof.
(7) Whenever the holders of Preferred Stock shall
be entitled, as a class, to vote, authorize, consent or
otherwise act, they shall be entitled to cast one-
quarter of one vote for each share of Preferred Stock,
par value $25.00 per share, and one vote for each share
of Preferred Stock, par value $100.00 per share, held
by them respectively.
(f) The holders of shares of Preferred Stock at any
time outstanding shall have no preemptive or preferential
right to subscribe for or purchase any shares of stock, or
rights or options to purchase shares of stock whether now or
hereafter authorized, or any securities convertible into or
exchangeable for shares of stock or into rights or options
to purchase shares of stock of the Corporation of any class.
SECTION 3. Preference Stock. The Preference Stock may
be issued from time to time in one or more series, the shares of
each such series to have the designations, preferences,
privileges and voting powers, and restrictions or qualifications
thereof as are fixed prior to the issuance of such series by the
Board of Directors; and the Board of Directors is hereby
expressly authorized to fix from time to time before issuance the
designations, preferences, privileges and voting powers of each
such series, which may include, but not be limited to, the
following:
(a) The designation of the series, which may be by
distinguishing the number, letter or title of such series.
(b) The number of shares of the series.
<PAGE> 11
(c) Whether dividends, if any, shall be paid in cash
or in capital stock or other securities, whether such
dividends shall be cumulative (and, if so, from which date
or dates for each such series) or noncumulative, the
preference or relation which such dividends, if any, shall
bear to the dividends payable on any other class or classes
or any other series of capital stock, and the dividend rate,
if any, of the series.
(d) Conditions and dates upon which dividends, if any,
shall be payable.
(e) The redemption rights and redemption price or
prices, if any, for shares of the series.
(f) The terms and amount of any sinking fund provided
for the purchase or redemption of shares of the series.
(g) The amounts payable on and the preferences, if
any, of shares of the series in the event of any voluntary
or involuntary liquidation, dissolution or winding up of the
affairs of the Corporation.
(h) Whether the shares of the series shall be
convertible into or exchangeable for shares of any other
class or series of capital stock, or any other security, of
the Corporation or any other corporation and, if so, the
specification of such other class or series or such other
security, the conversion or exchange price or prices or rate
or rates, any adjustments thereof, the date or dates at
which such shares shall be convertible or exchangeable and
all other terms and conditions upon which such conversion or
exchange may be made.
(i) Restrictions on the issuance of shares of the same
series or of any other class or series.
(j) The voting rights, if any, of the holders of
shares of the series, whether as a class or otherwise, with
respect to the election of directors or otherwise; except
that, if and when dividends payable on any shares of
Preference Stock shall be in default in an amount equivalent
to or exceeding four (4) full quarterly dividends,
thereafter and until all dividends on the shares of
Preference Stock in default shall have been paid or declared
and set aside for payment, the holders of the shares of
Preference Stock, voting separately as a class and
regardless of series, shall be entitled to elect the
smallest number of directors necessary to constitute a
majority of the Board of Directors of the Corporation, and,
the holders of the shares of the Common Stock, voting
separately as a class, shall be entitled to elect the
remaining directors of the Corporation, anything herein or
in the Bylaws to the contrary notwithstanding.
<PAGE> 12
(k) The price or other consideration for which shares
of the series shall be issued and, if deemed desirable, the
stated value or other valuation of the shares constituting
such series.
(l) Any other relative rights, preferences and
limitations of that series.
ARTICLE VII
No holder of any shares of capital stock of the
Corporation, whether now or hereafter authorized, shall, as such
holder, have any preemptive or preferential right to receive,
purchase, or subscribe to (i) any unissued or treasury shares of
any class of stock (whether now or hereafter authorized) of the
Corporation, (ii) any obligations, evidences of indebtedness, or
other securities of the Corporation convertible into or
exchangeable for, or carrying or accompanied by any rights to
receive, purchase, or subscribe to, any such unissued or treasury
shares, (iii) any right of subscription to or to receive, or any
warrant or option for the purchase of, any of the foregoing
securities, or (iv) any other securities that may be issued or
sold by the Corporation.
ARTICLE VIII
No contract or transaction between the Corporation and
one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association,
or other organization in which one or more of its directors or
officers are directors or officers or have a financial interest,
shall be void or voidable solely for this reason, solely because
the director or officer is present at or participates in the
meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction, or solely because his or
their votes are counted for such purpose, if:
(a) The material facts as to each such director's or
officer's relationship or interest and as to the contract or
transaction are disclosed or are known to the Board of
Directors or the committee, and the Board of Directors or
committee in good faith authorizes the contract or
transaction by the affirmative vote of a majority of the
disinterested directors, even though the disinterested
directors be less than a quorum; or
(b) The material facts as to each such director's or
officer's relationship or interest and as to the contract or
transaction are disclosed or are known to the shareholders
entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the
shareholders; or
(c) The contract or transaction is fair as to the
Corporation as of the time it is authorized, approved or
<PAGE> 13
ratified by the Board of Directors, a committee thereof, or
the shareholders.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of
a committee which authorizes the contract or transaction.
This provision shall not be construed to invalidate a
contract or transaction which would be valid in the absence of
this provision or to subject any director or officer to any
liability that such officer or director would not be subject to
in the absence of this provision.
ARTICLE IX
The Corporation shall have the power and authority to
indemnify any person to the fullest extent permitted by law.
ARTICLE X
Any action of the Corporation which, under the
provisions of the Texas Business Corporation Act or any other
applicable law, is required to be authorized or approved by the
holders of any specified fraction which is in excess of one-half
or any specified percentage which is in excess of fifty percent
(50%) of the outstanding shares (or of any class or series
thereof) of the Corporation shall, notwithstanding any law, be
deemed effectively and properly authorized or approved if
authorized or approved by the vote of more than fifty percent
(50%) of the votes entitled to be cast by the holders of total
number of shares of such class then outstanding (or, if the
holders of any class or series of the Corporation's shares shall
be entitled by the Texas Business Corporation Act or any other
applicable law to vote thereon separately as a class, by the vote
of more than fifty percent of the votes entitled to be cast by
the holders of total number of shares of each such class or
series). Without limiting the generality of the foregoing, the
foregoing provisions of this Article X shall be applicable to any
required shareholder authorization or approval of: (i) any
amendment to these Restated Articles of Incorporation; (ii) any
plan of merger, share exchange, or reorganization involving the
Corporation; (iii) any sale, lease, exchange, or other
disposition of all, or substantially all, of the property and
assets of the Corporation; and (iv) any voluntary dissolution of
the Corporation.
Directors of the Corporation shall be elected by a
plurality of the votes cast by the holders of shares entitled to
vote in the election of directors of the Corporation at a meeting
of shareholders at which a quorum is present.
Except as otherwise provided in this Article X or as
otherwise required by the Texas Business Corporation Act or other
applicable law, with respect to any matter, the affirmative vote
of a majority of the votes entitled to be cast by the holders of
<PAGE> 14
total number of shares of such class then outstanding in person
or by proxy at a meeting of shareholders at which a quorum is
present shall be the act of the shareholders.
Nothing contained in this Article X is intended to
require shareholder authorization or approval of any action of
the Corporation whatsoever unless such approval is specifically
required by the other provisions of these Amended and Restated
Articles of Incorporation, the Bylaws of the Corporation, or by
the Texas Business Corporation Act or other applicable law.
ARTICLE XI
The power to alter, amend or repeal the Corporation's
Bylaws and to adopt new Bylaws is hereby delegated to the Board
of Directors. The Bylaws of the Corporation may also be altered,
amended or repealed, and new Bylaws may be adopted, by holders of
the outstanding shares of Common Stock only if such alteration,
amendment, repeal or adoption is approved by the affirmative vote
of the holders of at least seventy-five percent (75%) of the
outstanding shares of Common Stock.
ARTICLE XII
A director of the Corporation shall not be liable for
monetary damages to the Corporation or its shareholders for any
act or omission in the performance of his duties, except that
this Article does not eliminate or limit the liability of a
director for:
(1) a breach of a director's duty of loyalty to the
Corporation or its shareholders or members;
(2) an act or omission not in good faith or that
involves intentional misconduct or a knowing violation of
the law;
(3) a transaction from which a director received an
improper benefit, whether or not the benefit resulted from
an action taken within the scope of the director's office;
or
(4) an act or omission for which the liability of a
director is expressly provided for by an applicable statute.
In discharging the director's duties, the director is
entitled to rely on information, opinions, reports or statements,
including financial statements and other data, if prepared or
presented by:
(1) one or more officers or employees of the
Corporation whom the director reasonably believes to be
reliable and competent in the matters presented;
<PAGE> 15
(2) legal counsel, public accountants, or other
persons as to matters the director reasonably believes are
within the person's professional or expert competence; or
(3) a committee of the Board of Directors of which the
director is not a member if the director reasonably believes
the committee merits confidence.
A director is not entitled to so rely if the director
has actual knowledge concerning the matter in question that makes
reliance otherwise permitted by this Article XII unwarranted.
A director may, in discharging his duties, consider the
effects of any action on shareholders, employees, suppliers, and
customers of the Corporation, and communities in which offices or
other facilities of the Corporation are located, and any other
factors the director considers pertinent.
In the event that any provision or a portion of a
provision of this Article XII is determined to be in conflict
with any applicable statute, such provision or portion thereof
shall be inapplicable to the extent of such conflict.
In the event that any provision or portion of a
provision of this Article XII is determined to be invalid, void,
illegal or unenforceable, the remainder of the provisions of this
Article XII shall continue to be valid and enforceable and shall
in no way be affected, impaired or invalidated.
Nothing in this Article XII shall be construed to
diminish, limit or impair any rights or defenses afforded to
officers or directors by common law, statute, other provisions of
these Restated Articles of Incorporation, the Bylaws of the
Corporation or otherwise, and the provisions of this Article XII
shall be deemed to be cumulative thereto.
Any repeal or amendment of this Article XII by the
shareholders of the Corporation shall be prospective only and
shall not adversely affect any limitation on the personal
liability of a director of the Corporation arising from an act or
omission occurring prior to the time of such repeal or amendment.
In addition to the circumstances in which a director of the
Corporation is not personally liable as set forth in the
foregoing provisions of this Article XII, a director shall not be
liable to the Corporation or its shareholders to such further
extent as permitted by any law hereafter enacted, including
without limitation any subsequent amendment to the Texas
Miscellaneous Corporations Laws Act or the Texas Business
Corporation Act.
ARTICLE XIII
Any action which may be taken, or which is required by
law or the Amended and Restated Articles of Incorporation or
Bylaws of the Corporation to be taken, at any annual or special
<PAGE> 16
meeting of shareholders may be taken without a meeting, without
prior notice, and without a vote, if a consent or consents in
writing, setting forth the action so taken, shall have been
signed by the holder or holders of shares having not less than
the minimum number of votes that would be necessary to take such
action at a meeting at which the holders of all shares entitled
to vote on the action were present and voted.
ARTICLE XIV
Notwithstanding any other provisions of these Amended and
Restated Articles of Incorporation, the Corporation shall not
issue any nonvoting equity securities.
IN WITNESS WHEREOF, I have hereunto set my hand this
_____ day of __________, 19__.
______________________________
Authorized Officer
<PAGE> 17
STATEMENT OF RESOLUTION
ESTABLISHING SERIES OF SHARES
To the Secretary of State
of the State of Texas
Pursuant to the provisions of Article 2.13 of the Texas
Business Corporation Act, the undersigned corporation submits the
following statement for the purpose of establishing and desig-
nating a series of shares and fixing and determining the relative
rights and preferences thereof:
1. The name of the corporation is: El Paso Electric
Company.
2. The following resolution, establishing and desig-
nating a series of shares and fixing and determining the relative
rights and preferences thereof, was duly adopted the Board of
Directors of the corporation on _____________, 199__, which
constitutes all action necessary on the part of the corporation:
RESOLVED, by the Board of Directors of El Paso Electric
Company (the "corporation") as follows:
1. A series of the Preferred Stock of the corporation
is hereby created and established out of the authorized and
unissued shares of the Preferred Stock, par value $100 per share,
of the corporation, said series to consist of _________ shares,
all of which shares are hereby authorized to be issued by the
corporation.
2. Said series shall be designated "_____% Preferred
Stock".
3. The rate of dividend applicable to each of said
shares of said series shall be ______% per annum on the par value
thereof.
4. The dividends on the shares of said series shall
be cumulative from the date of issue of said shares and shall be
payable quarterly on the ____________ day of ____________,
____________, ____________, and ____________ in each year.
5. The shares of said series shall be subject to re-
demption, in whole at any time or in part from time to time, at
the option of the corporation, upon the notice and in the manner
and with the effect provided in the Amended and Restated Articles
of Incorporation of the corporation at the following fixed
redemption prices per share, plus in each case accrued and unpaid
dividends to the date of redemption:
<PAGE> 18
$______ if redeemed prior to _______, 199_;
$______ if redeemed on or after _______, 199_
but prior to _______, 199_;
$______ if redeemed on or after _______, 199_
but prior to _______, 199_;
$______ if redeemed on or after _______, 199_
but prior to _______, 199_;
$______ if redeemed on or after _______, 199_
but prior to _______, 200_;
$______ if redeemed on or after _______, 200_
but prior to _______, 200_;
$______ if redeemed on or after _______, 200_
but prior to _______, 200_;
$______ if redeemed on or after _______, 200_
but prior to _______, 200_;
$______ if redeemed on or after _______, 200_
but prior to _______, 200_;
$______ if redeemed on or after _______, 200_
but prior to _______, 200_; and
$100 if redeemed on or after _______, 200_;
provided, that prior to _____________, 199_ [fourth anniversary
of the Effective Date], the shares of said series shall be sub-
ject to redemption, in whole at any time or in part from time to
time, at the option of the corporation, upon the notice and in
the manner and with the effect provided in the Amended and
Restated Articles of Incorporation of the corporation at the
redemption price per share equal to the lesser of (x) the
applicable fixed redemption price set forth above, plus accrued
and unpaid dividends to the date of redemption, and (y) the
greater of (i) $100, plus accrued and unpaid dividends to the
date of redemption, and (ii) an amount that is equal to the sum
of the Present Values (as hereinafter defined) of (I) amounts
equal to 5% of the par value of said share which would have been
redeemed on _______ in each of the years 200__, 200__, 200__, and
200__, pursuant to paragraph 8 below, plus (II) an amount equal
to 80% of the par value of said share which would have been
redeemed on _____ in the year 200__, pursuant to such para-
graph 8, plus (III) the dividend payments that would have accrued
and been payable after the date fixed for such redemption
(assuming that the amounts of such share specified in the
preceding clauses (I) and (II) would have been redeemed on the
dates so specified).
<PAGE> 19
For purposes of this paragraph 5, "Present Value" shall
be determined in accordance with generally accepted financial
practice on a quarterly basis at a discount rate equal to the sum
of the Applicable Treasury Yield plus ______% [the original issue
spread over the yield on the United States Treasury security, as
of the Confirmation Date, which has a maturity closest to the
average life of such Preferred Stock]; and the "Applicable
Treasury Yield" for such purpose shall be determined as of 10:00
A.M. New York City time on the fifth Business Day prior to the
date of such redemption of said series of Preferred Stock by
reference to the yields of those actively traded "On The Run"
United States Treasury securities having a maturity equal to the
then-remaining average life of said series; provided that if such
then-remaining average life is not equal to the maturity of an
actively traded "On The Run" United States Treasury security,
such yield shall be obtained by linear interpolation (calculation
to the nearest one-twelfth of a year) from the yields of actively
traded "On the Run" United States Treasury securities having a
maturity closest to such then-remaining average life as reported
by the Telerate Access service page 7677 (ask side) or the
equivalent page, provided by Telerate Systems Incorporated (or,
if such data for any reason ceases to be available through such
Telerate Access Service, any publicly available source of similar
market data). For purposes hereof, "On The Run" United States
Treasury securities refers to those United States Treasury
securities which are most recently auctioned, as determined in
accordance with generally accepted financial practice.
6. In the event of the voluntary liquidation, dis-
solution or winding up of the corporation, the amount which the
holders of shares of the _____% Preferred Stock then outstanding
shall be entitled to be paid in full, out of the net assets of
the corporation and before any amount shall be paid or distrib-
uted to the holders of shares of the Common Stock, shall be the
then effective fixed redemption price of such shares of Preferred
Stock as provided in paragraph 5 above (including an amount equal
to the accrued dividends on such shares), and no more.
7. The shares of said series shall be subject to the
terms, provisions and restrictions set forth in the Amended and
Restated Articles of Incorporation of the corporation with re-
spect to the shares of Preferred Stock of the corporation, shall
be of equal rank with and, excepting only as to the rate of
dividend payable thereon, the voluntary liquidation prices and
the redemption prices thereof and the terms and conditions of
redemption applicable thereto, shall confer rights equal to the
rights conferred on all other shares of Preferred Stock of the
corporation.
8. As and for a sinking fund for the shares of said
series the corporation shall, subject to the restrictions con-
tained in this Resolution and upon the notice provided in the
Texas Business Corporation Act, redeem and retire (i) on
_________ in each of the years ____, ____, ____ and ____
<PAGE> 20
[eleventh, twelfth, thirteenth and fourteenth anniversaries of
the Effective Date] ______ shares of said series (being 5% of the
number of shares of said series originally issued) and (ii) on
_________ in the year ______ [fifteenth anniversary of the
Effective Date] all shares of said series then outstanding, in
each case at the sinking fund redemption price of $100 per share
plus accrued dividends to the date of redemption (such required
redemptions being hereinafter referred to as the "sinking fund
requirement"). The sinking fund requirement shall be cumulative
so that if the corporation shall fail to satisfy in full the
sinking fund requirement on any date of redemption specified in
the preceding sentence, the obligation of the corporation to
redeem and retire a number of shares of said series equal to the
amount of the deficiency shall continue until such deficiency
shall be made good. Such deficiency shall be made good as soon
as practicable. In the event that the corporation is in arrears
in any sinking fund requirement and so long as the corporation
shall remain in arrears in any such requirement, the corporation
may not purchase, redeem or pay dividends on any of its stock
ranking junior to the shares of said series.
9. The corporation may satisfy the whole or any part
of any sinking fund requirement set forth in paragraph 8 of this
Resolution by canceling and retiring, prior to the date of
redemption specified in such paragraph 8 for such sinking fund
requirement, shares of said series purchased by the corporation
or shares of said series redeemed by the corporation otherwise
than pursuant to paragraph 8 of this Resolution.
10. All shares of said series redeemed or purchased,
including those applied to meet the sinking fund requirement,
shall be cancelled and retired and shall become authorized and
unissued shares of Preferred Stock but may not be reissued as
shares of said series.
11. No shares of said series shall be redeemed to sat-
isfy the sinking fund requirement unless, at the date such shares
are called for redemption, full dividends on all shares of the
Preferred Stock of the corporation for all prior periods shall
have been paid or declared and set apart for payment. Nothing
contained in this Resolution shall be deemed to require the cor-
poration to redeem or purchase shares of said series at a time
when it may not legally do so.
<PAGE> 21
IN WITNESS WHEREOF, the corporation has caused this
Certificate to be signed by ___________________________________,
its _______________________________ this ____ day of _____ 199__.
EL PASO ELECTRIC COMPANY
By: _________________________
Name:
Title:
<PAGE> 1
EXHIBIT A-8
FORM OF BYLAWS
OF
[SURVIVING CORPORATION]
<PAGE> 2
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 3
TABLE OF CONTENTS
Page
PREAMBLE 1
ARTICLE ONE: OFFICES . . . . . . . . . . . . . . . . . . . . . 1
1.01 Registered Office and Agent . . . . . . . . . . . . 1
1.02 Other Offices . . . . . . . . . . . . . . . . . . . 1
ARTICLE TWO: SHAREHOLDERS . . . . . . . . . . . . . . . . . . 1
2.01 Annual Meetings . . . . . . . . . . . . . . . . . . 1
2.02 Special Meetings. . . . . . . . . . . . . . . . . . 2
2.03 Place of Meetings . . . . . . . . . . . . . . . . . 2
2.04 Notice. . . . . . . . . . . . . . . . . . . . . . . 2
2.05 Quorum; Withdrawal of Quorum. . . . . . . . . . . . 2
2.06 Majority Vote . . . . . . . . . . . . . . . . . . . 2
2.07 Method of Voting; Proxies . . . . . . . . . . . . . 3
2.08 Closing of Transfer Records; Record Date. . . . . . 3
2.09 Action Without Meeting. . . . . . . . . . . . . . . 4
ARTICLE THREE: DIRECTORS. . . . . . . . . . . . . . . . . . . 4
3.01 Management. . . . . . . . . . . . . . . . . . . . . 4
3.02 Number; Election; Term; Qualification . . . . . . . 4
3.03 Changes in Number . . . . . . . . . . . . . . . . . 4
3.04 Removal . . . . . . . . . . . . . . . . . . . . . . 5
3.05 Vacancies . . . . . . . . . . . . . . . . . . . . . 5
3.06 Place of Meetings . . . . . . . . . . . . . . . . . 5
3.07 Regular Meetings. . . . . . . . . . . . . . . . . . 5
3.08 Special Meetings; Notice. . . . . . . . . . . . . . 5
3.09 Quorum; Majority Vote . . . . . . . . . . . . . . . 5
3.10 Compensation. . . . . . . . . . . . . . . . . . . . 6
3.11 Action Without Meeting. . . . . . . . . . . . . . . 6
ARTICLE FOUR: COMMITTEES. . . . . . . . . . . . . . . . . . . 6
4.01 Designation . . . . . . . . . . . . . . . . . . . . 6
4.02 Number; Qualification; Term . . . . . . . . . . . . 6
4.03 Authority . . . . . . . . . . . . . . . . . . . . . 6
4.04 Committee Changes . . . . . . . . . . . . . . . . . 8
4.05 Regular Meetings. . . . . . . . . . . . . . . . . . 8
4.06 Special Meetings. . . . . . . . . . . . . . . . . . 8
4.07 Quorum; Majority Vote . . . . . . . . . . . . . . . 8
4.08 Minutes . . . . . . . . . . . . . . . . . . . . . . 8
4.09 Compensation. . . . . . . . . . . . . . . . . . . . 8
4.10 Responsibility. . . . . . . . . . . . . . . . . . . 8
ARTICLE FIVE: GENERAL PROVISIONS RELATING TO MEETINGS . . . . 9
5.01 Waiver of Notice. . . . . . . . . . . . . . . . . . 9
5.02 Telephone and Similar Meetings. . . . . . . . . . . 9
i
<PAGE> 4
ARTICLE SIX: OFFICERS AND OTHER AGENTS. . . . . . . . . . . . 9
6.01 Number; Titles; Election; Term; Qualification . . . 9
6.02 Removal . . . . . . . . . . . . . . . . . . . . . . 9
6.03 Vacancies . . . . . . . . . . . . . . . . . . . . . 10
6.04 Authority . . . . . . . . . . . . . . . . . . . . . 10
6.05 Chairman of the Board . . . . . . . . . . . . . . . 10
6.06 President . . . . . . . . . . . . . . . . . . . . . 10
6.07 Vice President. . . . . . . . . . . . . . . . . . . 10
6.08 Treasurer . . . . . . . . . . . . . . . . . . . . . 10
6.09 Assistant Treasurers. . . . . . . . . . . . . . . . 11
6.10 Secretary . . . . . . . . . . . . . . . . . . . . . 11
6.11 Assistant Secretaries . . . . . . . . . . . . . . . 11
ARTICLE SEVEN: CERTIFICATES AND SHAREHOLDERS. . . . . . . . . 12
7.01 Certificated and Uncertificated Shares. . . . . . . 12
7.02 Certificates for Certificated Shares. . . . . . . . 12
7.03 Transfer of Shares. . . . . . . . . . . . . . . . . 12
7.04 Registered Shareholders . . . . . . . . . . . . . . 13
7.05 Regulations . . . . . . . . . . . . . . . . . . . . 13
ARTICLE EIGHT: MISCELLANEOUS PROVISIONS . . . . . . . . . . . 13
8.01 Dividends . . . . . . . . . . . . . . . . . . . . . 13
8.02 Books and Records . . . . . . . . . . . . . . . . . 13
8.03 Fiscal Year . . . . . . . . . . . . . . . . . . . . 14
8.04 Seal. . . . . . . . . . . . . . . . . . . . . . . . 14
8.05 Attestation by the Secretary. . . . . . . . . . . . 14
8.06 Resignation . . . . . . . . . . . . . . . . . . . . 14
8.07 Securities of Other Corporations. . . . . . . . . . 14
8.08 Amendment of Bylaws . . . . . . . . . . . . . . . . 14
8.09 Invalid Provisions. . . . . . . . . . . . . . . . . 15
8.10 Headings; Table of Contents . . . . . . . . . . . . 15
ARTICLE NINE: INDEMNIFICATION . . . . . . . . . . . . . . . . 15
ii
<PAGE> 5
BYLAWS
OF
[SURVIVING CORPORATION]
A Texas Corporation
PREAMBLE
These Bylaws are subject to, and governed by, the Texas
Business Corporation Act and the Amended and Restated Articles of
Incorporation of [Surviving Corporation] (the "Corporation"). In
the event of a direct conflict between the provisions of these
Bylaws and the mandatory provisions of the Texas Business
Corporation Act or the provisions of the Amended and Restated
Articles of Incorporation of the Corporation, such provisions of
the Texas Business Corporation Act or the Amended and Restated
Articles of Incorporation of the Corporation, as the case may be,
will be controlling.
ARTICLE ONE: OFFICES
1.01 Registered Office and Agent. The registered
office and registered agent of the Corporation shall be as
designated from time to time by the appropriate filing by the
Corporation in the office of the Secretary of State of Texas.
1.02 Other Offices. The Corporation may also have
offices at such other places, both within and without the State
of Texas, as the board of directors may from time to time
determine or the business of the Corporation may require.
ARTICLE TWO: SHAREHOLDERS
2.01 Annual Meetings. An annual meeting of
shareholders of the Corporation shall be held at the principal
office of the Corporation or such other location as specified in
the notice of such meeting pursuant to Section 2.03 of these
Bylaws on the second Tuesday in April of each year, if not a
legal holiday and, if a legal holiday, then on the next business
day following, at the hour of 9 o'clock a.m., local time. At
such meeting, the shareholders shall elect directors and transact
such other business as may properly be brought before the
meeting. In the case the annual meeting shall not be duly called
and held, the Secretary shall cause a special meeting in lieu of
and for the purpose of such annual meeting and all proceedings at
such special meeting shall have the same force and effect as at
an annual meeting.
<PAGE> 6
2.02 Special Meetings. A special meeting of the
shareholders may be called at any time by the Chairman, if there
shall be one, or by the President or by a majority of the board
of directors, or the holders of not less than ten percent of all
shares entitled to vote at such meeting. Only business within
the purpose or purposes described in the notice of special
meeting may be conducted at such special meeting.
2.03 Place of Meetings. The annual meeting of
shareholders may be held at any place within or without the State
of Texas designated by the board of directors. Special meetings
of shareholders may be held at any place within or without the
State of Texas designated by the person or persons calling such
special meeting as provided in Section 2.02 above. Meetings of
shareholders shall be held at the principal office of the
Corporation unless another place is designated for meetings in
the manner provided herein.
2.04 Notice. Except as otherwise provided by law,
written or printed notice stating the place, day, and hour of
each meeting of the shareholders and, in case of a special
meeting, the purpose or purposes for which the meeting is called,
shall be delivered not less than ten nor more than sixty days
before the date of the meeting by or at the direction of the
President, the Secretary, or the person calling the meeting, to
each shareholder of record entitled to vote at such meeting.
2.05 Quorum; Withdrawal of Quorum. A quorum shall be
present at a meeting of shareholders if the holders of a majority
of the shares entitled to vote are represented at the meeting in
person or by proxy, except as otherwise provided by law or the
Amended and Restated Articles of Incorporation. If a quorum
shall not be present at any meeting of shareholders, the
shareholders represented in person or by proxy at such meeting
may adjourn the meeting until such time and to such place as may
be determined by a vote of the holders of a majority of the
shares represented in person or by proxy at that meeting. Once a
quorum is present at a meeting of shareholders, the shareholders
represented in person or by proxy at the meeting may conduct such
business as may be properly brought before the meeting until it
is adjourned, and the subsequent withdrawal from the meeting of
any shareholder or the refusal of any shareholder represented in
person or by proxy to vote shall not affect the presence of a
quorum at the meeting.
2.06 Majority Vote. Except as otherwise provided by
law, the Restated Articles of Incorporation, or these Bylaws,
with respect to any matter or at any election, the affirmative
vote of the holders of a majority of the Corporation's shares
entitled to vote on that matter represented in person or by proxy
at a meeting at which a quorum is present shall be the act of the
shareholders.
<PAGE> 7
2.07 Method of Voting; Proxies. Every shareholder of
record shall be entitled at every meeting of shareholders to one
vote on each matter submitted to a vote, for every share standing
in his name on the original share transfer records of the
Corporation, except to the extent that the voting rights of the
shares of any class or classes are increased, limited, or denied
by the Amended and Restated Articles of Incorporation. Such
share transfer records shall be prima facie evidence as to the
identity of shareholders entitled to vote. At any meeting of
shareholders, every shareholder having the right to vote may vote
either in person or by a proxy executed in writing by the
shareholder or by his duly authorized attorney-in-fact. Each
such proxy shall be filed with the Secretary of the Corporation
before, or at the time of, the meeting.
2.08 Closing of Transfer Records; Record Date. For
the purpose of determining shareholders entitled to notice of, or
to vote at, any meeting of shareholders or any adjournment
thereof, or entitled to receive a distribution (other than a
distribution involving a purchase or redemption by the
Corporation of any of its own shares) or a share dividend, or in
order to make a determination of shareholders for any other
proper purpose (other than determining shareholders entitled to
consent to action by shareholders proposed to be taken without a
meeting of shareholders), the board of directors may provide that
the share transfer records of the Corporation shall be closed for
a stated period but not to exceed in any event sixty days. If
the share transfer records are closed for the purpose of
determining shareholders entitled to notice of, or to vote at, a
meeting of shareholders, such records shall be closed for at
least ten days immediately preceding such meeting. In lieu of
closing the share transfer records, the board of directors may
fix in advance a date as the record date for any such
determination of shareholders, such date in any case to be not
more than sixty days and, in case of a meeting of shareholders,
not less than ten days prior to the date on which the particular
action requiring such determination of shareholders is to be
taken. If the share transfer records are not closed and if no
record date is fixed for the determination of shareholders
entitled to notice of, or to vote at, a meeting of shareholders
or entitled to receive a distribution (other than a distribution
involving a purchase or redemption by the Corporation of any of
its own shares) or a share dividend, the date on which the notice
of the meeting is mailed or the date on which the resolution of
the board of directors declaring such distribution or share
dividend is adopted, as the case may be, shall be the record date
for such determination of shareholders. When a determination of
shareholders entitled to vote at any meeting of shareholders has
been made as provided in this Section 2.08, such determination
shall apply to any adjournment thereof except where the
determination has been made through the closing of the share
transfer records and the stated period of closing has expired.
<PAGE> 8
2.09 Action Without Meeting. Any action which may be
taken, or which is required by law or the Amended and Restated
Articles of Incorporation or Bylaws of the Corporation to be
taken, at any annual or special meeting of shareholders, may be
taken without a meeting, without prior notice, and without a
vote, if a consent or consents in writing, setting forth the
action so taken, shall have been signed by the holder or holders
of shares having not less than the minimum number of votes that
would be necessary to take such action at a meeting at which the
holders of all shares entitled to vote on the action were present
and voted. The signed consent or consents of shareholders shall
be placed in the minute books of the Corporation. The record
date for the purpose of determining shareholders entitled to
consent to any action pursuant to this Section 2.09 shall be
determined in accordance with Article 2.26.C of the Texas
Business Corporation Act.
ARTICLE THREE: DIRECTORS
3.01 Management. The powers of the Corporation shall
be exercised by or under the authority of, and the business and
affairs of the Corporation shall be managed under the direction
of, the board of directors.
3.02 Number; Election; Term; Qualification. The
number of directors which shall constitute the board of directors
shall be not less than one. The number of directors which shall
constitute the entire board of directors shall be determined by
resolution of the board of directors at any meeting thereof or by
the shareholders at any meeting thereof, but shall never be less
than one. At each annual meeting of shareholders, directors
shall be elected to hold office until the next annual meeting of
shareholders and until their successors are elected and
qualified. The term of any director who is an employee of the
Corporation (other than a President who retires) shall expire
concurrently with the termination of service of that director as
such an employee. No director need be a shareholder, a resident
of the State of Texas, or a citizen of the United States.
3.03 Changes in Number. No decrease in the number of
directors constituting the entire board of directors shall have
the effect of shortening the term of any incumbent director. Any
directorship to be filled by reason of an increase in the number
of directors may be filled by (i) the shareholders at any annual
or special meeting of shareholders called for that purpose or
(ii) the board of directors for a term of office continuing only
until the next election of one or more directors by the
shareholders; provided that the board of directors may not fill
more than two such directorships during the period between any
two successive annual meetings of shareholders.
<PAGE> 9
3.04 Removal. At any meeting of shareholders called
expressly for that purpose, any director or the entire board of
directors may be removed, with or without cause, by a vote of the
holders of a majority of the shares then entitled to vote on the
election of directors. Notwithstanding the foregoing, whenever
the holders of any class or series of shares are entitled to
elect one or more directors by the provisions of the Amended and
Restated Articles of Incorporation, only the holders of shares of
that class or series shall be entitled to vote for or against the
removal of any director elected by the holders of shares of that
class or series.
3.05 Vacancies. Any vacancy occurring in the board of
directors may be filled by (i) the shareholders at any annual or
special meeting of shareholders called for that purpose or (ii)
the affirmative vote of a majority of the remaining directors
though less than a quorum of the board of directors. A director
elected to fill a vacancy shall be elected to serve for the
unexpired term of his predecessor in office.
3.06 Place of Meetings. The board of directors may
hold its meetings in such place or places within or without the
State of Texas as the board of directors may from time to time
determine.
3.07 Regular Meetings. Regular meetings of the board
of directors may be held without notice at such times and places
as may be designated from time to time by resolution of the board
of directors and communicated to all directors.
3.08 Special Meetings; Notice. Special meetings of
the board of directors shall be held whenever called by the
Chairman, if there shall be one, the President or by any two
directors. The person calling any special meeting shall cause
notice of such special meeting, including therein the time and
place of such special meeting, to be given to each director at
least two days before such special meeting. Neither the business
to be transacted at, nor the purpose of, any special meeting of
the board of directors need be specified in the notice or waiver
of notice of any special meeting.
3.09 Quorum; Majority Vote. At all meetings of the
board of directors, a majority of the number of directors fixed
in the manner provided in these Bylaws shall constitute a quorum
for the transaction of business. If a quorum is not present at a
meeting, a majority of the directors present may adjourn the
meeting from time to time, without notice other than an
announcement at the meeting, until a quorum is present. The act
of a majority of the directors present at a meeting at which a
quorum is in attendance shall be the act of the board of
directors, unless the act of a greater number is required by law,
<PAGE> 10
the Amended and Restated Articles of Incorporation or these
Bylaws.
3.10 Compensation. Directors, in their capacity as
directors, may receive, by resolution of the board of directors,
a fixed sum and expenses of attendance, if any, for attending
meetings of the board of directors or a stated salary. No
director shall be precluded from serving the Corporation in any
other capacity or receiving compensation therefor.
3.11 Action Without Meeting. Any action which may be
taken, or which is required by law, the Amended and Restated
Articles of Incorporation, or these Bylaws to be taken, at a
meeting of the board of directors or any committee may be taken
without a meeting if a consent in writing, setting forth the
action so taken, shall have been signed by all of the members of
the board of directors or committee, as the case may be, and such
consent shall have the same force and effect, as of the date
stated therein, as a unanimous vote of such members of the board
of directors or committee, as the case may be, and may be stated
as such in any document or instrument filed with the Secretary of
State of Texas or in any certificate or to her document delivered
to any person. The consent may be in one or more counterparts so
long as each director or committee member signs one of the
counterparts. The signed consent shall be placed in the minute
books of the Corporation.
ARTICLE FOUR: COMMITTEES
4.01 Designation. The board of directors may, by
resolution adopted by a majority of the entire board of
directors, designate one or more committees.
4.02 Number; Qualification; Term. The board of
directors, by resolution adopted by a majority of the entire
board of directors, shall designate one or more of its members as
members of any committee and may designate one or more of its
members as alternate members of any committee, who may, subject
to any limitations imposed by the board of directors, replace
absent or disqualified members at any meeting of that committee.
The number of committee members may be increased or decreased
from time to time by resolution adopted by a majority of the
entire board of directors. Each committee member shall serve as
such until the earliest of (i) the expiration of his term as
director, (ii) his resignation as a committee member or as a
director, or (iii) his removal, as a committee member or as a
director.
4.03 Authority. Each committee, to the extent
expressly provided in the resolution establishing such committee,
shall have and may exercise all of the authority of the board of
<PAGE> 11
directors, including, without limitation, the authority to
authorize a distribution and to authorize the issuance of shares
of the Corporation. Notwithstanding the foregoing, however, no
committee shall have the authority of the board of directors in
reference to:
(a) amending the Amended and Restated Articles of
Incorporation, except that a committee may, to the
extent provided in the resolution designating that
committee, exercise the authority of the board of
directors vested in it in accordance with Article
2.13 of the Texas Business Corporation Act;
(b) proposing a reduction of the stated capital of the
Corporation in the manner permitted by Article
4.12 of the Texas Business Corporation Act;
(c) approving a plan of merger of share exchange of
the Corporation;
(d) recommending to the shareholders the sale, lease,
or exchange of all or substantially all of the
property and assets of the Corporation otherwise
than in the usual and regular course of its
business;
(e) recommending to the shareholders a voluntary
dissolution of the Corporation or a revocation
thereof;
(f) amending, altering, or repealing these Bylaws or
adopting new Bylaws of the Corporation;
(g) filling vacancies in the board of directors;
(h) filling vacancies in, or designating alternative
members of, any committee;
(i) filling any directorship to be filled by reason of
an increase in the number of directors;
(j) electing or removing officers of the Corporation
or members or alternate members of any committee;
(k) fixing the compensation of any member or alternate
member of any committee; or
(l) altering or repealing any resolution of the board
of directors that by its terms provides that it
shall not be amendable or repealable.
<PAGE> 12
4.04 Committee Changes. The board of directors shall
have the power at any time to fill vacancies in, to change the
membership of, and to discharge any committee.
4.05 Regular Meetings. Regular meetings of any
committee may be held without notice at such time and place as
may be designated from time to time by the committee and
communicated to all members thereof.
4.06 Special Meetings. Special meetings of any
committee may be held whenever called by any committee member.
The committee member calling any special meeting shall cause
notice of such special meeting, including therein the time and
place of such special meeting, to be given to each committee
member at least two days before such special meeting. Neither
the business to be transacted at, nor the purpose of, any special
meeting of any committee need be specified in the notice or
waiver of notice of any special meeting.
4.07 Quorum; Majority Vote. At meetings of any
committee, a majority of the number of members designated by the
board of directors shall constitute a quorum for the transaction
of business. If a quorum is not present at a meeting of any
committee, a majority of the members present may adjourn the
meeting from time to time, without notice other than an
announcement at the meeting, until a quorum is present. The act
of a majority of the members present at any meeting at which a
quorum is in attendance shall be the act of a committee, unless
the act of a greater number is required by law, the Amended and
Restated Articles of Incorporation, or these Bylaws.
4.08 Minutes. Each committee shall cause minutes of
its proceedings to be prepared and shall report the same to the
board of directors upon the request of the board of directors.
The minutes of the proceedings of each committee shall be
delivered to the secretary of the Corporation for placement in
the minute books of the Corporation.
4.09 Compensation. Committee members may, by
resolution of the board of directors, be allowed a fixed sum and
expenses of attendance, if any, for attending any committee
meetings or a stated salary.
4.10 Responsibility. The designation of any committee
and the delegation of authority to it shall not operate to
relieve the board of directors or any director of any
responsibility imposed upon it or such director by law.
<PAGE> 13
ARTICLE FIVE: GENERAL PROVISIONS RELATING TO MEETINGS
5.01 Waiver of Notice. Whenever by law, the Amended
and Restated Articles of Incorporation, or these Bylaws, any
notice is required to be given to any committee member,
shareholder, or director of the Corporation, a waiver thereof in
writing signed by the person or persons entitled to such notice,
whether before or after the time notice should have been given,
shall be equivalent to the giving of such notice. Attendance of
a committee member, shareholder, or director at a meeting shall
constitute a waiver of notice of such meeting, except where such
person attends for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not
lawfully called or convened.
5.02 Telephone and Similar Meetings. Shareholders,
directors, or committee members may participate in and hold a
meeting by means of a conference telephone or similar
communications equipment by means of which persons participating
in the meeting can hear each other. Participation in such a
meeting shall constitute presence in person at such meeting,
except where a person participates in the meeting for the express
purpose of objecting to the transaction of any business on the
ground that the meeting is not lawfully called or convened.
ARTICLE SIX: OFFICERS AND OTHER AGENTS
6.01 Number; Titles; Election; Term; Qualification.
The officers of the Corporation shall be a President, one or more
Vice Presidents (and, in the case of each Vice President, with
such descriptive title, if any, as the board of directors shall
determine), a Secretary, and a Treasurer. The Corporation may
also have a Chairman of the Board, one or more Assistant
Treasurers, one or more Assistant Secretaries, and such other
officers and such agents as the board of directors may from time
to time elect or appoint. The board of directors shall elect a
President, Vice President, Treasurer, and Secretary at its first
meeting at which a quorum shall be present after the annual
meeting of shareholders or whenever a vacancy exists. The board
of directors then, or from time to time, may also elect or
appoint one or more other officers or agents as it shall deem
advisable. Each officer and agent shall hold office for the term
for which he is elected or appointed and until his successor has
been elected or appointed and qualified. Any person may hold any
number of offices. No officer or agent need be a shareholder, a
director, a resident of the State of Texas, or a citizen of the
United States.
6.02 Removal. Any officer or agent elected or
appointed by the board of directors may be removed by the board
of directors whenever in its judgment the best interest of the
<PAGE> 14
Corporation will be served thereby, but such removal shall be
without prejudice to the contract rights, if any, of the person
so removed. Election or appointment of an officer or agent shall
not of itself create contract rights.
6.03 Vacancies. Any vacancy occurring in any office
of the Corporation may be filled by the board of directors.
6.04 Authority. Officers shall have such authority
and perform such duties in the management of the Corporation as
are provided in these Bylaws or as may be determined by
resolution of the board of directors not inconsistent with these
Bylaws.
6.05 Chairman of the Board. The Chairman of the Board
shall have such powers and duties as may be prescribed by the
board of directors.
6.06 President. Unless and to the extent that such
powers and duties are expressly delegated to a Chairman of the
Board by the board of directors, the President shall be the chief
executive officer of the Corporation and, subject to the
supervision of the board of directors, shall have general
management and control of the business and property of the
Corporation in the ordinary course of its business with all such
powers with respect to such general management and control as may
be reasonably incident to such responsibilities, including, but
not limited to, the power to employ, discharge, or suspend
employees and agents of the Corporation, to fix the compensation
of employees and agents, and to suspend, with or without cause,
any officer of the Corporation pending final action by the board
of directors with respect to continued suspension, removal, or
reinstatement of such officer. The President may, without
limitation, agree upon and execute all division and transfer
orders, bonds, contracts, and other obligations in the name of
the Corporation.
6.07 Vice Presidents. Each Vice President shall have
such powers and duties as may be prescribed by the board of
directors or as may be delegated from time to time by the
President and (in the order as designated by the board of
directors, or in the absence of such designation, as determined
by length of time each has held the office of Vice President
continuously) shall exercise the powers of the President during
that officer's absence or inability to act. As between the
Corporation and third parties, any action taken by a Vice
President in the performance of the duties of the President shall
be conclusive evidence of the absence or inability to act of the
President at the time such action was taken.
6.08 Treasurer. The Treasurer shall have custody of
the Corporation's funds and securities, shall keep full and
<PAGE> 15
accurate accounts of receipts and disbursements, and shall
deposit all moneys and valuable effects in the name and to the
credit of the Corporation in such depository or depositories as
may be designated by the board of directors. The Treasurer shall
audit all payrolls and vouchers of the Corporation, receive,
audit, and consolidate all operating and financial statements of
the Corporation and its various departments, shall supervise the
accounting and auditing practices of the Corporation, and shall
have charge of matters relating to taxation. Additionally, the
Treasurer shall have the power to endorse for deposit,
collection, or otherwise all checks, drafts, notes, bills of
exchange, and other commercial paper payable to the Corporation
and to give proper receipts and discharges for all payments to
the Corporation. The Treasurer shall perform such other duties
as may be prescribed by the board of directors or as may be
delegated from time to time by the President.
6.09 Assistant Treasurers. Each Assistant Treasurer
shall have such powers and duties as may be prescribed by the
board of directors or as may be delegated from time to time by
the President. The Assistant Treasurers (in the order as
designated by the board of directors or, in the absence of such
designation, as determined by the length of time each has held
the office of assistant treasurer continuously) shall exercise
the powers of the Treasurer during the officer's absence or
inability to act. As between the Corporation and third parties,
any action taken by an Assistant Treasurer in the performance of
the duties of the Treasurer shall be conclusive evidence of the
absence or inability to act of the Treasurer at the time such
action was taken.
6.10 Secretary. The Secretary shall maintain minutes
of all meetings of the board of directors, of any committee, and
of the shareholders or consents in lieu of such minutes in the
Corporation's minute books, and shall cause notice of such
meetings to be given when requested by any person authorized to
call such meetings. The Secretary may sign with the President,
in the name of the Corporation, all contracts of the Corporation
and affix the seal of the Corporation thereto. The Secretary
shall have charge of the certificate books, share transfer
records, stock ledgers, and such other stock books and papers as
the board of directors may direct, all of which shall at all
reasonable times be open to inspection by any director at the
office of the Corporation during business hours. The Secretary
shall perform such other duties as may be prescribed by the board
of directors or as may be delegated from time to time by the
President.
6.11 Assistant Secretaries. Each Assistant Secretary
shall have such powers and duties as may be prescribed by the
board of directors or as may be delegated from time to time by
the President. The Assistant Secretaries (in the order
<PAGE> 16
designated by the board of directors or, in the absence of such
designation, as determined by the length of time each has held
the office of assistant secretary continuously) shall exercise
the powers of the Secretary during that officer's absence or
inability to act. As between the Corporation and third parties,
any action taken by an Assistant Secretary in the performance of
the duties of the Secretary shall be conclusive evidence of the
absence or inability to act of the Secretary at the time such
action was taken.
ARTICLE SEVEN: CERTIFICATES AND SHAREHOLDERS
7.01 Certificated and Uncertificated Shares. The
shares of the Corporation may be either certificated shares or
uncertificated shares. As used herein, the term "certificated
shares" means shares represented by instruments in bearer or
registered form, and the term "uncertificated shares" means
shares not represented by instruments and the transfers of which
are registered upon books maintained for that purpose by or on
behalf of the Corporation.
7.02 Certificates for Certificated Shares. The
certificates representing certificated shares of stock of the
Corporation shall be in such form as shall be approved by the
board of directors in conformity with law. The certificates
shall be consecutively numbered, shall be entered as they are
issued in the books of the Corporation or in the records of the
Corporation's designated transfer agent, if any, and shall state
upon the face thereof: (a) that the Corporation is organized
under the laws of the State of Texas; (b) the name of the person
to whom issued; (c) the number and class of shares and the
designation of the series, if any, which such certificate
represents; (d) the par value of each share represented by such
certificate, or a statement that the shares are without par
value; and (e) such other matters as may be required by law. The
certificates shall be signed by the President or any Vice
President and also by the Secretary, an Assistant Secretary, or
any other officer, however, the signatures of any of such
officers may be facsimiles. The certificates may be sealed with
the seal of the Corporation or a facsimile thereof.
7.03 Transfer of Shares. Shares of stock of the
Corporation shall be transferable only on the books of the
Corporation by the shareholders thereof in person or by their
duly authorized attorneys or legal representatives. With respect
to certificated shares, upon surrender to the Corporation or the
transfer agent of the Corporation for transfer of a certificate
representing shares duly endorsed and accompanied by any
reasonable assurances that such endorsements are genuine and
effective as the Corporation may require and after compliance
with any applicable law relating to the collection of taxes, the
<PAGE> 17
Corporation or its transfer agent shall, if it has no notice of
an adverse claim or if it has discharged any duty with respect to
any adverse claim, issue one or more new certificates to the
person entitled thereto, cancel the old certificate, and record
the transaction upon its books. With respect to uncertificated
shares, upon deliver to the Corporation or the transfer agent of
the Corporation of an instruction originated by an appropriate
person (as prescribed by Section 8.308 of the Texas Uniform
Commercial Code as currently in effect and as the same may be
amended from time to time hereafter) and accompanied by any
reasonable assurances that such instruction is genuine and
effective as the Corporation may required and after compliance
with any applicable law relating to the collection of taxes, the
Corporation or its transfer agent shall, if it has no notice of
an adverse claim or has discharged any duty with respect to any
adverse claim, record the transaction upon its books, and shall
send to the new registered owner of such uncertificated shares,
and, if the shares have been transferred subject to a registered
pledge, to the registered pledgee, a written notice containing
the information required to be stated on certificates
representing shares of stock set forth in Section 7.02 above and
such additional information as may be required by Section 8.408
of the Texas Uniform Commercial Code as currently in effect and
as the same may be amended from time to time hereafter.
7.04 Registered Shareholders. The Corporation shall
be entitled to treat the shareholder of record as the shareholder
in fact of any shares and, accordingly, shall not be bound to
recognize any equitable or other claim to or interest in such
shares on the part of any other person, whether or not it shall
have actual or other notice thereof, except as otherwise provided
by law.
7.05 Regulations. The board of directors shall have
the power and authority to make all such rules and regulations as
it may deem expedient concerning the issue, transfer,
registration, or replacement of certificates representing shares
of stock of the Corporation.
ARTICLE EIGHT: MISCELLANEOUS PROVISIONS
8.01 Dividends. Subject to provisions of applicable
statutes and the Amended and Restated Articles of Incorporation,
dividends may be declared by and at the discretion of the board
of directors at any meeting and may be paid in cash, in property,
or in shares of stock of the Corporation.
8.02 Books and Records. The Corporation shall keep
books and records of account and shall keep minutes of the
proceedings of its shareholders, the board of directors, and each
committee of the board of directors. The Corporation shall keep
<PAGE> 18
at its registered office or principal place of business, or at
the office of its transfer agent or registrar, a record of the
original issuance of shares issued by the Corporation and a
record of each transfer of those shares that have been presented
to the Corporation for registration of transfer, giving the names
and addresses of all past and current shareholders and the number
of class of the shares held by each of such shareholders.
8.03 Fiscal Year. The fiscal year of the Corporation
shall be fixed by the board of directors; provided, that if such
fiscal year is not fixed by the board of directors and the board
of directors does not defer its determination of the fiscal year,
the fiscal year shall be the calendar year.
8.04 Seal. The seal, if any, of the Corporation shall
be in such form as may be approved from time to time by the board
of directors. If the board of directors approves a seal, the
affixation of such seal shall not be required to create a valid
and binding obligation against the Corporation.
8.05 Attestation by the Secretary. With respect to
any deed, deed of trust, mortgage, or other instrument executed
by the Corporation through its duly authorized officer or
officers, the attestation to such execution by the Secretary of
the Corporation shall not be necessary to constitute such deed,
deed of trust, mortgage, or other instrument a valid and binding
obligation against the Corporation unless the resolutions, if
any, of the board of directors authorizing such execution
expressly state that such attestation is necessary.
8.06 Resignation. Any director, committee member,
officer, or agent may resign by so stating at any meeting of the
board of directors or by giving written notice to the board of
directors, the president, or the secretary. Such resignation
shall take effect at the time specified in the statement made at
the board of directors' meeting or in the written notice, but in
no event may the effective time of such resignation be prior to
the time such statement is made or such notice is given. If no
effective time is specified in the resignation, the resignation
shall be effective immediately. Unless a resignation specifies
otherwise, it shall be effective without being accepted.
8.07 Securities of Other Corporations. The President
or any Vice President of the Corporation shall have the power and
authority to transfer, endorse for transfer, vote, consent, or
take any other action with respect to any securities of another
issuer which may be held or owned by the Corporation and to make,
execute, and deliver any waiver, proxy, or consent with respect
to any such securities.
8.08 Amendment of Bylaws. The power to amend or
repeal these Bylaws or to adopt new Bylaws is vested in the board
<PAGE> 19
of directors, but is subject to the right of the shareholders to
amend or repeal these Bylaws or to adopt new Bylaws.
8.09 Invalid Provisions. If any part of these Bylaws
is held invalid or inoperative for any reason, the remaining
parts, so far as is possible and reasonable, shall remain valid
and operative.
8.10 Headings; Table of Contents. The headings and
table of contents used in these Bylaws are for convenience only
and do not constitute matter to be construed in the
interpretation of these Bylaws.
ARTICLE NINE: INDEMNIFICATION
The Corporation shall indemnify every person who was or
is a party or is or was threatened to be made a party to any
action, suit, or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he or
she is or was a director, officer, employee, agent, or
controlling shareholder of the Corporation, or is or was serving
at the request of the Corporation as a director, officer,
employee, agent, or trustee of another corporation, partnership,
joint venture, trust, employee benefit plan, or other enterprise,
against judgments, penalties, fines, settlements and reasonable
expenses (including counsel fees), incurred by him or her in
connection with such action, suit or proceeding, to the full
extent permitted by applicable law. Such indemnification may, in
the discretion of the board of directors, include advances of his
or her expenses in advance of final disposition of such action,
suit or proceeding, subject to the provisions of any applicable
statute.
To the extent authorized by the Texas Business
Corporation Act, the Corporation shall have the authority to
enter into insurance or other arrangements, without specific
approval of the shareholders of the Corporation, with persons or
entities which are not regularly engaged in the business of
providing insurance coverage, on behalf of any person who is or
was a director, officer, employee or agent of the Corporation or
who is or was serving at the request of the Corporation as a
director, officer, partner, venturer, proprietor, trustee,
employee, agent or similar functionary of another foreign or
domestic corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other enterprise,
against any liability asserted against him or her and incurred by
him or her in such a capacity or arising out of his or her status
as such a person, whether or not the Corporation would have the
power to indemnify him or her against that liability under the
Texas Business Corporation Act. Without limiting the power of
the Corporation to procure or maintain any kind of insurance or
<PAGE> 20
other arrangement, the Corporation may, for the benefit of
persons indemnified by the Corporation, (i) create a trust fund,
(ii) establish any form of self-insurance, (iii) secure its
indemnification obligation by grant of any security interest or
other lien on the assets of the Corporation, or (iv) establish a
letter of credit, guaranty or surety arrangement. Any such
insurance or other arrangement may be procured, maintained or
established within the Corporation or its affiliates or with any
insurer or other person deemed appropriate by the board of
directors of the Corporation regardless of whether all or part of
the stock or other securities thereof are owned in whole or in
part by the Corporation. In the absence of fraud, the judgment
of the board of directors of the Corporation as to the terms and
conditions of such insurance or other arrangement and the
identity of the insurer or other person participating in any such
arrangement shall be conclusive, and such insurance or other
arrangement shall not be subject to voidability, nor subject the
directors approving such insurance or other arrangement to
liability, on any ground regardless of whether directors
participating in approving such insurance or other arrangement
shall be beneficiaries thereof.
The undersigned, the secretary of the Corporation,
hereby certifies that the foregoing bylaws were adopted by the
board of directors of the Corporation as of ________________ __,
19__.
________________, Secretary
<PAGE> 21
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 22
SCHEDULE 3.4(b)
Defaults, Etc., Resulting From Execution
of Agreement or Consummation of Transaction
None
<PAGE> 23
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 24
SCHEDULE 3.6
Changes or Events Occurring After
December 31, 1992
None
<PAGE> 25
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 26
SCHEDULE 3.7
Material Violations of Existing Permits, Franchises, Etc.
None
<PAGE> 27
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 28
Page 1 of 2
SCHEDULE 3.8(a)
Employee Benefit Plans Maintained By
El Paso Electric Company
1. El Paso Electric Company Retirement Income Plan.
2. El Paso Electric Company Savings Plan.
3. El Paso Electric Company Savings Plan for Collective
Bargaining Employees.
4. El Paso Electric Company Employee Stock Ownership Plan
(terminated effective December 31, 1992, awaiting
determination letter from Internal Revenue Service with
respect to Form 5310).
5. El Paso Electric Company Leveraged Employee Stock Ownership
Plan.
6. El Paso Electric Company Stock Purchase Plan.
7. El Paso Electric Company Stock Compensation Plan.
8. El Paso Electric Company Director Stock Compensation Plan.
9. El Paso Electric Company Employee Stock Option Plan.
10. El Paso Electric Company Phantom Stock Deferred Compensation
Plan.
11. El Paso Electric Company Supplemental Retirement and
Survivor Income Plan.
12. El Paso Electric Company Directors Retirement Plan.
13. Supplemental Benefit Agreement with David H. Wiggs, Jr.
14. Supplemental Retirement Benefit Agreement with Curtis Lynn
Hoskins.
15. El Paso Electric Company Medical Plan.
a. collective bargaining employee medical plan
b. non-collective bargaining employee medical plan
16. El Paso Electric Company Dental Plan.
17. El Paso Electric Company Life Insurance Plan (includes
available supplemental life insurance).
18. El Paso Electric Company Accidental Death and Dismemberment
Plan.
19. El Paso Electric Company Long-Term Disability Plan.
20. El Paso Electric Company Vacation and Personal Holiday
Program.
21. El Paso Electric Company Sick Leave Program.
22. El Paso Electric Company Sick Leave Productivity Plan.
23. El Paso Electric Company Safety Incentive Program (currently
applies only to non-collective bargaining employees).
24. El Paso Electric Company Tuition Reimbursement Program.
25. El Paso Electric Company Bonus Program for advanced degrees,
licenses or certifications.
26. El Paso Electric Company Employee Society.
27. El Paso Electric Company Employee Assistance Program.
<PAGE> 29
Schedule 3.8(a) (Continued)
28. El Paso Electric Company Retiree Medical Plan.
29. El Paso Electric Company Retiree Life Insurance Plan.
30. Severance Compensation Agreements with Individuals listed on
Schedules 6.6(c) or 6.6(d)
31. El Paso Electric Company Severance Compensation Program.
32. Payments to surviving spouses of certain retired employees
as authorized by resolution of the Board of Directors of El
Paso Electric Company.
33. Dennis Lane Supplemental Retirement Plan dated October 24,
1989.
34. Termination Agreement with James P. Maloney dated July 3,
1989.
35. Deferred Compensation payments made to three individuals.
36. El Paso Electric Company Executive Compensation Policy.
37. El Paso Electric Company Director Compensation Policy.
<PAGE> 30
SCHEDULE 3.8(b)
None
<PAGE> 31
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 32
SCHEDULE 3.8(c)
Plans, Programs, Agreements, Etc.,
that Could Result in Payments,
Acceleration of Payments, or Vesting as a
Result of the Proposed Transaction
1. Severance Compensation Program generally applicable to
employees.
2. Severance Compensation Agreements with individuals listed on
Schedule 6.6(c), as such schedule may be amended prior to
the Effective Time.
3. El Paso Electric Company Supplemental Retirement and
Survivor Income Plan.
4. El Paso Electric Company Employee Stock Option Plan.
5. El Paso Electric Company Phantom Stock Deferred Compensation
Plan.
6. El Paso Electric Company Directors Retirement Plan.
7. El Paso Electric Company Employee Stock Purchase Plan.
8. Supplemental Benefit Agreement with David H. Wiggs, Jr.
dated February 12, 1988.
9. Supplemental Retirement Benefit Agreement with Curtis L.
Hoskins dated December 16, 1991.
The method of calculating payments that could be made pursuant to
items (2), (3), (8), and (9) above is outlined on Exhibit A
hereto.
<PAGE> 33
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 34
SCHEDULE 3.8(c)
EXHIBIT A
EL PASO ELECTRIC COMPANY
Severance Compensation in the Event of a Change in Control
Followed by Termination
Pursuant to Severance Compensation Agreements
Lump Sum Severance Payment:
Three (3) times the average of the "Aggregate Annual
Compensation" (as defined below) paid to the employee during
the five calendar years preceding the change in control
"Aggregate Annual Compensation" for any particular calendar
year consists of: Rate of pay plus the value (at time of
award) of Phantom Stock awarded in that year plus the value
(determined as of the time of award by the Black Scholes
methodology) of Stock Options awarded in that year plus all
other compensation for the year, being cash payments or
other taxable compensation, the value at the effective time
of award of Company matching contributions under the 401(k)
Plan, and the fair market value (at the effective time of
award) of LESOP contributions
<PAGE> 35
Summary of Method of Calculating
Benefits Payable Under Severance Compensation Agreements
and Supplemental Retirement and
Survivor Income Plan ("SERP")
1. Input Information
a. Age as of Effective Time
b. Life Benefit PV Factors based on age as of Effective
Time and annuity beginning at:
55 years
60 years
65 years
c. Years of Service as of Effective Time
d. Qualified Plan Limits to calculate accrued benefits
under Retirement Income Plan
e. Aggregate Annual Compensation for 5 years prior to
Effective Time and actual assumed for year in which
Termination of Employment occurs, consisting of the sum
of the following:
(1) Base Salary for 5 years prior to Effective Time
and Year in which Termination of Employment Occurs
(2) Other Compensation for 5 years prior to Effective
Time and actual or assumed for year in which
Termination of Employment occurs
(3) Value of Stock Options Awarded for 5 years prior
to Effective Time and actual or assumed for year
in which Termination of Employment occurs
(4) Value of Phantom Stock awarded for 5 years prior
to Effective Time and actual or assumed for year
in which Termination of Employment occurs.
2. Retirement Income Plan - Calculation of benefits
attributable to three years of additional service
a. Regular 5-year Final Average Compensation (Qualified
Plan)
b. Average of Aggregate Annual Compensation for 3 years
Preceding Effective Time
c. Severance 5-year FAC - calculated using actual
Aggregate Annual Compensation for the two years
preceding the Effective Time and 2(b).
<PAGE> 36
d. Vested Benefit at Effective Time - based on 2(a)
e. Vested Benefit using Severance 5-year FAC -based on
2(c)
f. Severance Benefit (e-d)
g. Severance Lump Sum (PV of f)
3. SERP Severance Lump Sum - Calculation of Benefits
attributable to three years of additional service
a. Vested Benefit payable at age 65 under RIP
b. Vested Benefit payable at age 60 under RIP
c. Social Security Benefit payable at age 65
d. Accrued Benefit payable under SERP at later of actual
age or age 60
e. Accrued Benefit payable under SERP at age 60 w/3
additional years of service
f. Severance Benefit payable at age 60 (e-d)
g. Severance Lump Sum (PV of f)
4. SERP Lump Sum Election on Change in Control
a. Vested Benefit payable at age 65 under RIP
b. Vested Benefit payable at age 55 under RIP
c. Social Security Benefit payable at age 65
d. Accrued Benefit payable under SERP at latest of actual
age, assumed age of 60 (if applicable) or age 55
e. Reduction Factor for SERP (if actual or assumed age
less than 60)
f. Change in control Benefit payable - (d-(d*e))
g. Severance Lump Sum (PV of f)
5. Summary of Severance Benefits - General
a. Average Aggregate Annual Compensation for 5 years
preceding Effective Time
<PAGE> 37
b. Severance Compensation consisting of:
(1) 3 times Average Aggregate Annual Compensation
(2) Retirement Income Plan lump sum
(3) SERP severance lump sum
c. SERP Lump Sum Election on Change in Control
d. Total Benefit - sum of b and c
6. Modifications applicable to Curtis L. Hoskins pursuant to
his Severance Compensation Agreement:
a. Payments under 5(b)(2) and (b)(3) and 5(b)(c) above are
not made.
b. Lump sum of actuarial equivalent (present value) of
supplemental retirement benefits that would be accrued
and payable at age 60 under Supplemental Retirement
Benefit Agreement are paid instead. Calculation is
described as follows:
(1) Aggregate Annual Compensation for year prior to
Effective Time
(2) Assumed Aggregate Annual Compensation for year in
which Termination of Employment occurs
(3) 60% of greater of (1) or (2), reduced by annual
benefit under Utah Power & Light Plan and by
accrued benefit under Foxtrot Retirement Plan
(4) Present Value of (3).
c. Lump sum of actuarial equivalent of benefit that would
be accrued at age 60 under Foxtrot Retirement Plan,
assuming Final Average Compensation equal to the
greater of 6(b)(1) or 6(b)(2) above. Accrued benefit
formula is:
1.25% x FAC x years of service (8)
7. Modifications applicable to David H. Wiggs, Jr. pursuant to
his Supplemental Retirement:
The SERP Lump Sum Election on Change in Control is
calculated assuming an additional 16 years of service and
either age 60 or 55, whichever age will produce the larger
payment or benefit
<PAGE> 38
SCHEDULE 3.8(d)
Health and Life Insurance Provided to
Current Retirees and Obligations for
Future Provision of Health and Life Insurance
1. El Paso Electric Company provides health and life insurance
benefits to retired employees comparable to such benefits
provided to current employees. Retired employees pay
premiums for such benefits in an amount determined by the
Company, based on incidence of costs, which amount may be
greater than the amounts paid by current employees.
2. Pursuant to the Severance Compensation Agreements the
Company has entered into with the individuals set forth on
Schedule 6.6(c), as such schedule may be amended prior to
the Effective Time, the Company has agreed to provide
medical, dental, accident, life insurance and disability
coverage for a period of three years from the Date of
Termination (as defined in such agreements) pursuant to such
agreements.
3. Severance Compensation Program approved by the Board of
Directors for employees not covered by severance
compensation agreements described above provides for
continuation of medical, dental, accident, life insurance
and disability coverage for the period in which severance
benefits are paid.
<PAGE> 39
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 40
SCHEDULE 3.8(e)
Exceptions to Full Payment/Contribution
to Foxtrot Plans
1. El Paso Electric Company did not make any annual
contribution to the El Paso Electric Company Leveraged
Employee Stock Ownership Plan ("LESOP") for 1992. The LESOP
has failed to make quarterly interest payments due in 1992
and the final maturity payment of $2.5 million due October
22, 1992 on the $17.5 million loan form the Bank of New York
to the LESOP.
2. Pursuant to order of the Bankruptcy Court, El Paso Electric
Company has been restricted to payment of the lesser of
actual amounts or $2,000 per month to retired employees
receiving payments under the Supplemental Retirement Plan
and the Dennis Lane Supplemental Retirement Plan.
3. Payments required to be made after January 8, 1992, under
the Directors Retirement Plan, the Supplemental Retirement
Plan, the Dennis Lane Supplemental Retirement Plan, and the
Termination Agreement with James P. Maloney, as well as the
Deferred Compensation payments made to three individuals and
the payments made to the surviving spouses of certain
retired employees were not made on a timely basis until
entry of an order by the Bankruptcy Court authorizing such
payments, with the restrictions described immediately above.
<PAGE> 41
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 42
SCHEDULE 3.9
Environmental Matters
None
<PAGE> 43
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 44
SCHEDULE 3.10
Regulation as a Utility
None
<PAGE> 45
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 46
SCHEDULE 3.12
Property
None
<PAGE> 47
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 48
SCHEDULE 5.2(m)
1. Implementation of the Special Retirement Program for certain
individuals approved by the Board of Directors of El Paso
Electric Company.
2. Implementation of the executive and key employee bonus
program approved by the Board of Directors of El Paso
Electric Company.
3. Termination of the ESOP.
4. Termination of the LESOP.
5. Amendments to El Paso Electric Savings Plan and El Paso
Electric Savings Plan for Collective Bargaining Employees
(the "Savings Plans") contemplated in connection with the
transfer to the Putnam Companies of trustee and
administrative services effective April 1, 1993.
6. Amendment that may be required pursuant to Section 16 of
the Securities Exchange Act of 1934 with respect to the
Savings Plans, the Stock Option Plan, the Phantom Stock Plan
and the LESOP.
<PAGE> 49
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 50
SCHEDULE 6.6(c)
Individuals Who Have Entered Into
A Severance Compensation Agreement
J. Frank Bates
Lawrence Downum
John E. Droubay
Russell G. Gibson
Gary R. Hedrick
John C. Horne
Curtis L. Hoskins
William J. Johnson
Frederic Mattson
James Mayhew
Robert C. McNiel
Eduardo A. Rodriguez
William Royer
Ignacio Troncoso
David H. Wiggs, Jr.
Michael Blough
Dean Jacobson
Pedro Serrano
Susanne Sickles
Guillermo Silva, Jr.
James W. Skidmore
John Wacker
John Whitacre
Robert C. Hackett
Hermann Vogenbeck
See Exhibit A to Schedule 3.8(c).
<PAGE> 51
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 52
SCHEDULE 6.6(d)
1. Supplemental Benefit Agreement between El Paso Electric
Company and David H. Wiggs, Jr., dated February 12, 1988.
2. Supplemental Retirement Benefit Agreement between El Paso
Electric Company and Curtis Lynn Hoskins, dated December 16,
1991.
3. Severance Compensation Agreement between El Paso Electric
Company and Curtis Lynn Hoskins, dated as of December 16,
1991.
See Exhibit A to Schedule 3.8(c).
<PAGE> 53
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 54
SCHEDULE 6.6(i)
Individuals Who Have Entered Into
An Indemnity Agreement
J. Frank Bates Tad R. Smith
Lawrence Downum Evern Wall
John E. Droubay Bob Corbin
Russell G. Gibson Theta Fields
Gary R. Hedrick Gordon Heggem
John C. Horne Charles Mais
Curtis L. Hoskins James Maloney
William J. Johnson Joseph Wasiak
Frederic Mattson
James Mayhew
Robert C. McNiel
Eduardo A. Rodriguez
William Royer
Ignacio Troncoso
David H. Wiggs, Jr.
Michael Blough
Dean Jacobson
Pedro Serrano
Susanne Sickles
Guillermo Silva, Jr.
James W. Skidmore
John Wacker
John Whitacre
Hermann Vogenbeck
Sidney G. Baucom
Wilfred E. Binns
Wilson K. Cadman
James A. Cardwell
George Edwards, Jr.
Josefina Salas-Porras
Thomas C. Simpson
William Boyan
Robert Cutler
H. M. Daugherty, Jr.
Leonard Goodman
Richard Hickson
Hector Holguin
Ben L. Ivey
Travis Petty
John Schweitzer
William Skov
<PAGE> 55
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 1
EXHIBIT A-9
FORM OF ARTICLES OF MERGER
OF
CSW SUB, INC.
(A Texas Corporation)
WITH AND INTO
EL PASO ELECTRIC COMPANY
(A Texas Corporation)
------------------------
Pursuant to the provisions of Article 5.04 of the Texas
Business Corporation Act, the undersigned corporations adopt the
following Articles of Merger for the purpose of merging CSW Sub,
Inc. with and into El Paso Electric Company:
1. An Agreement and Plan of Merger, dated May 2,
1993, by and among El Paso Electric Company, a Texas
corporation, Central and South West Corporation, a Delaware
corporation, and CSW Sub, Inc., a Texas corporation (the
"Merger Agreement"), was approved by the shareholders of
each of El Paso Electric Company and CSW Sub, Inc. and the
Board of Directors in the manner prescribed by the Texas
Business Corporation Act and the laws of the State of
Delaware, Respectively. The Merger Agreement provides,
among other things, that (i) at the Effective Time (as
defined in the Merger Agreement), CSW Sub, Inc. shall be
merged with and into El Paso Electric Company and the
separate corporate existence of CSW Sub, Inc. shall cease;
(ii) El Paso Electric Company shall be the surviving
corporation in the merger and shall continue its corporate
existence under the laws of the State of Texas; (iii) the
Articles of Incorporation of El Paso Electric Company shall
be amended and restated in their entirety as set forth in
Annex A hereto; (iv) the merger shall have the effects set
forth in the Texas Business Corporation Act, with all
properties, liabilities and obligations of El Paso Electric
Company remaining with El Paso Electric Company as the
surviving corporation in the merger and all properties,
liabilities and obligations of CSW Sub, Inc. being allocated
and vested in El Paso Electric Company as the surviving
corporation in the merger.
<PAGE> 2
2. As to El Paso Electric Company and CSW Sub, Inc.,
the number of shares outstanding and the designation and
number of outstanding shares of each class entitled to vote
as a class on the Merger Agreement, are as follows:
Number of Shares
Entitled to Vote as a Class
---------------------------
Number of
Name of Shares Designation Number
Corporation Outstanding of Class of Shares
- ----------- ----------- ----------- ---------
(a) El Paso 35,534,963 Common 35,534,963
Electric Company
52,000 Series 10.75% 52,000
Preferred
97,600 Series 8.44% 97,600
Preferred
90,000 Series 8.95% 90,000
Preferred
100,000 Series 10.125% 100,000
Preferred
300,000 Series 11.375% 300,000
Preferred
15,000 Series 4.5% 15,000
Preferred
15,000 Series 4.12% 15,000
Preferred
20,000 Series 4.72% 20,000
Preferred
40,000 Series 4.56% 40,000
Preferred
52,450 Series 8.24% 52,450
Preferred
(b) CSW Sub, Inc. [ ] Common [ ]
<PAGE> 3
3. As to El Paso Electric Company and CSW Sub, Inc.,
the total number of shares voted for and against the Merger
Agreement, respectively, and, as to each class entitled to
vote thereon as a class, the number of shares of such class
voted for and against the Merger Agreement, are as follows:
Entitled to Vote as a Class
---------------------------
Total Total
Name of Voted Voted Voted Voted
Corporation For Against Class For Against
- ----------- ----- ------- ----- ----- -------
(a) El Paso [ ] 0
Electric
Company
Common [35,534,963]* 0
Series [52,000]* 0
10.75%
Preferred
Series [97,600]* 0
8.44%
Preferred
Series [90,000]* 0
8.95%
Preferred
Series [100,000]* 0
10.125%
Preferred
Series [300,000]* 0
11.375%
Preferred
Series [15,000]* 0
4.5%
Preferred
Series [15,000]* 0
4.12%
Preferred
Series [20,000]* 0
4.72%
Preferred
Series [40,000] 0
4.56%
Preferred
<PAGE> 4
Series [52,450]* 0
8.24%
Preferred
(b) CSW [ ] 0 Common [ ] 0
Sub, Inc.
______________________
* Pursuant to an order entered on ____, 1993, by the United
States Bankruptcy Court for the Western District of Texas,
Austin Division in In Re El Paso Electric Company, Case
Number 92-10148-FM, the holders of each class of capital
stock of El Paso Electric Company have been deemed to have
voted in favor of the Merger Agreement.
<PAGE> 5
4. As to Central and South West Corporation, the
approval of the Merger Agreement has been duly authorized by
all action required by the laws of the State of Delaware,
the state in which Central and South West Corporation is
incorporated.
IN WITNESS WHEREOF, the undersigned corporations have
caused these Articles of Merger to be executed by their
respective officers thereunto duly authorized as of this ___ day
of ___, 19__.
EL PASO ELECTRIC COMPANY
By:_____________________
Name:
Title:
CSW SUB, INC.
By:_____________________
Name:
Title:
CENTRAL AND SOUTH WEST CORPORATION
By:_____________________
Name:
Title:
<PAGE> 1
EXHIBIT A-10
(Form of face of certificate)
No. Shares
CENTRAL AND SOUTH WEST CORPORATION
Incorporated Under the Laws of the State of Delaware
Common Stock, $3.50 each Par Value
This certifies that __________________________ is the owner of
___________ full paid and non-assessable shares of the Common Stock of Central
and South West Corporation transferable on the books of said corporation by
the holder hereof in person or by duly authorized attorney, upon surrender of
this certificate properly endorsed. This certificate is not valid unless
countersigned by the Transfer Agent and registered by the Registrar.
This Certificate is transferable in New York, New York or Dallas,
Texas.
IN WITNESS WHEREOF, said corporation has caused the facsimile
signatures of its duly authorized officers to be affixed hereto.
Dated:
Countersigned:
CENTRAL AND SOUTH WEST CORPORATION
E. R. Brooks By:_______________________________
Chairman, President and Authorized Signature
Chief Executive Officer
ATTEST:
____________________________
Secretary
<PAGE> 2
(Form of reverse side of certificate)
ABBREVIATIONS
The following abbreviations, when used in the inscription on the
face of this certificate, shall be construed as though they were written out
in full according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of
survivorship and not as tenants
UNIF GIFT MIN ACT - ......Custodian.....
(Cust) (Minor)
under Uniform Gifts to Minors
Act................
(State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, _______________ hereby sell, assign and transfer unto
Please insert social security or other
identifying number of assignee
___________________________________
| |
|___________________________________|
______________________________________________________________________________
(Please print or typewrite name and address, including zip code, of assignee)
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
shares of the capital stock represented by the within Certificate, and do
hereby irrevocably constitute and appoint ____________________________________
Attorney to transfer the said stock on the books of the within named
Corporation with
full power of substitution in the premises.
Dated:______________________
________________________________________
NOTICE: The signature to this assignment
must correspond with the name as written
upon the face of the certificate in every
particular, without alteration or
enlargement or any change whatever.
<PAGE> 1
EXHIBIT A-16
TERM LOAN AGREEMENT
dated as of _____________, 199__
between
EL PASO ELECTRIC COMPANY
THE CREDITORS NAMED HEREIN, and
_________________,
as Agent
The Agent under, and as defined in, this document will be
selected (i) by holders of at least 50% of the Claims (as defined
in this document), as determined on the date of such selection,
or (ii) if such Agent has not been selected, and agreed to act in
such capacity, on or before October 31, 1994, by reorganized El
Paso Electric Company with the consent of holders of not less
than one-third of the Loans under, and as defined in this
document, as determined on the Effective Date. The Reference
Banks under, and as defined in, this document will be determined
by mutual agreement of reorganized El Paso Electric Company and
such Agent. Provisions of this document relevant to its
administration by such Agent, including the calculation of
interest rates, are subject to change as may be required by such
Agent, provided that the resulting provisions are substantially
consistent with the customary practices of such Agent. Without
limiting the foregoing, the calculation of the Base Rate under,
and as defined in this document, will be made according to a
formula customarily applied by such Agent to its domestic loans
priced by reference to its "base" or "prime" rate, which formula
may (according to such customary application) require that such
Base Rate be the higher of such "base" or "prime" rate and/or the
sum of a specified margin plus a rate determined by reference to
certificates of deposit and/or federal funds.
<PAGE> 2
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to
which it is attached but is inserted for convenience of reference
only.
Page
PRELIMINARY STATEMENTS:. . . . . . . . . . . . . . . . . . . . .1
ARTICLE I
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . .2
SECTION 1.01. Definitions. . . . . . . . . . . . . . . . .2
SECTION 1.02. Computation of Time Periods. . . . . . . . 11
SECTION 1.04. Interpretation . . . . . . . . . . . . . . 11
ARTICLE II
AMOUNTS AND TERMS OF THE LOAN. . . . . . . . . . . . . . . . . 12
SECTION 2.01. The Loans. . . . . . . . . . . . . . . . . 12
SECTION 2.02. Repayment. . . . . . . . . . . . . . . . . 12
SECTION 2.03. Interest . . . . . . . . . . . . . . . . . 12
SECTION 2.04. Prepayments. . . . . . . . . . . . . . . . 14
SECTION 2.05. Increased Costs, Etc.. . . . . . . . . . . 15
SECTION 2.06. Interest Rate Protection . . . . . . . . . 16
SECTION 2.07. Illegality, Etc. . . . . . . . . . . . . . 17
SECTION 2.08. Payments and Computations. . . . . . . . . 17
SECTION 2.09. U.S. Taxes . . . . . . . . . . . . . . . . 18
SECTION 2.10. Pro Rata Treatment . . . . . . . . . . . . 19
SECTION 2.11. Non-Receipt of Funds by the Agent. . . . . 20
SECTION 2.12. Set-Off; Sharing of Payments; Etc. . . . . 20
SECTION 2.13. Applicable Lending Offices . . . . . . . . 21
SECTION 2.14. Several Obligations; Remedies
Independent. . . . . . . . . . . . . . . 22
SECTION 2.15. Net Payments . . . . . . . . . . . . . . . 22
ARTICLE III
CONDITIONS TO CLOSING. . . . . . . . . . . . . . . . . . . . . 22
SECTION 3.01. Closing Documents. . . . . . . . . . . . . 22
i
<PAGE> 3
Page
ARTICLE IV
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . 25
SECTION 4.01. Representations and Warranties of the
Company. . . . . . . . . . . . . . . . . 25
ARTICLE V
COVENANTS OF THE COMPANY . . . . . . . . . . . . . . . . . . . 28
SECTION 5.01. Covenants of the Company . . . . . . . . . 28
(a) Reporting Requirements. . . . . . . . . . . . . 28
(b) Litigation. . . . . . . . . . . . . . . . . . . 30
(c) Preservation of Corporate Existence, Etc. . . . 31
(d) Maintenance of Insurance, Etc . . . . . . . . . 31
(e) Leverage Ratio. . . . . . . . . . . . . . . . . 31
(f) Interest Coverage Ratio . . . . . . . . . . . . 31
(g) Prohibition of Fundamental Changes. . . . . . . 31
(h) Compliance with ERISA . . . . . . . . . . . . . 32
(i) Limitation on Liens . . . . . . . . . . . . . . 32
(j) Compliance with Laws, Etc . . . . . . . . . . . 34
(k) Compliance with Environmental Laws. . . . . . . 34
(l) Visitation Rights . . . . . . . . . . . . . . . 35
(m) Maintenance of Properties, Etc. . . . . . . . . 35
(n) Change in Nature of Business. . . . . . . . . . 35
(o) Lien. . . . . . . . . . . . . . . . . . . . . . 35
(p) Maintain Books and Records. . . . . . . . . . . 35
(q) Additional Documents. . . . . . . . . . . . . . 35
(r) Subsidiaries and Affiliates . . . . . . . . . . 36
ARTICLE VI
EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 6.01. Events of Default. . . . . . . . . . . . . 36
ARTICLE VII
SECURITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 7.01. Issuance and Pledge of Bonds . . . . . . . 39
SECTION 7.02. Application of Moneys. . . . . . . . . . . 39
SECTION 7.03. Rights of Bondholders. . . . . . . . . . . 40
ii
<PAGE> 4
Page
ARTICLE VIII
THE AGENT. . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 8.01. Appointment, Powers and Immunities . . . . 40
SECTION 8.02. Reliance by Agent. . . . . . . . . . . . . 41
SECTION 8.03. Defaults . . . . . . . . . . . . . . . . . 41
SECTION 8.04. Rights as a Creditor . . . . . . . . . . . 42
SECTION 8.05. Indemnification. . . . . . . . . . . . . . 42
SECTION 8.06. Non-Reliance on Agent and Other
Creditors. . . . . . . . . . . . . . . . 42
SECTION 8.07. Failure to Act . . . . . . . . . . . . . . 43
SECTION 8.08. Resignation or Removal of Agent. . . . . . 44
SECTION 8.09. Agency Fee . . . . . . . . . . . . . . . . 44
ARTICLE IX
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 9.01. Amendments, Etc. . . . . . . . . . . . . . 44
SECTION 9.02. Notices, Etc . . . . . . . . . . . . . . . 45
SECTION 9.03. No Waiver; Remedies. . . . . . . . . . . . 45
SECTION 9.04. Costs, Expenses and Taxes. . . . . . . . .45
SECTION 9.05. Binding Effect; Assignments and
Participations . . . . . . . . . . . . . 46
SECTION 9.06. Indemnity. . . . . . . . . . . . . . . . . 48
SECTION 9.07. Further Assurances . . . . . . . . . . . . 48
SECTION 9.08. Severability . . . . . . . . . . . . . . . 49
SECTION 9.09. Headings . . . . . . . . . . . . . . . . . 49
SECTION 9.10. GOVERNING LAW. . . . . . . . . . . . . . . 49
SECTION 9.11. FORUM SELECTION; SUBMISSION TO
JURISDICTION . . . . . . . . . . . . . . 49
SECTION 9.12. WAIVER OF TRIAL BY JURY. . . . . . . . . . 50
SECTION 9.13. Counterparts . . . . . . . . . . . . . . . 50
SECTION 9.14. INTEGRATION. . . . . . . . . . . . . . . . 50
SECTION 9.15. Survival . . . . . . . . . . . . . . . . . 50
SECTION 9.16. Receipt of Non-Public Information. . . . . 50
SCHEDULE I - Certain Eligible Institutions
EXHIBIT A - Form of Notes
iii
<PAGE> 5
TERM LOAN AGREEMENT
TERM LOAN AGREEMENT, dated as of [the Effective Date],
between El Paso Electric Company, a Texas corporation (the
"Company"), each of the creditors of the Company that is a
signatory hereto identified under the caption "CREDITORS" on the
signature pages hereto or that, pursuant to Section 9.05(c),
shall become a "Creditor" hereunder (individually, a "Creditor"
and, collectively, the "Creditors"); and ________________, a
____________, as agent for the Creditors (in such capacity,
together with its successors in such capacity, the "Agent").
PRELIMINARY STATEMENTS:
WHEREAS, pursuant to that certain Credit Agreement
dated as of October 26, 1989 (as amended, the "Revolving Credit
Facility") among the Company, the banks identified therein
(together with their successors and assigns in such capacity, the
"Revolving Credit Banks") and Chemical Bank, as agent (the
"Revolver Agent"), the Revolving Credit Banks made available to
the Company, prior to the Petition Date, a revolving credit
facility in an aggregate principal amount of $150,000,000;
WHEREAS, on January 8, 1992 (the "Petition Date"), the
Company commenced a voluntary case (the "Bankruptcy Case") under
chapter 11 of title 11 of the United States Code (Case No. 92-
10148-FM) in the United States Bankruptcy Court for the Western
District of Texas, Austin Division (the "Bankruptcy Court"), and
thereafter has continued to operate its businesses and manage its
assets as a debtor-in-possession;
WHEREAS, on June 15, 1992, the Revolver Agent,
individually and on behalf of the Revolving Credit Banks, filed a
proof of claim in the Bankruptcy Court for all amounts due and
owing under the Revolving Credit Facility as of the Petition
Date, plus interest and fees that continued to accrue after the
Petition Date (collectively, the "Claims");
WHEREAS, on , 1993, the Bankruptcy Court
entered an order (the "Confirmation Order") confirming the
Modified Third Amended Plan of Reorganization of the Debtor
Providing for the Acquisition of El Paso Electric Company by
Central and South West Corporation filed on August 27, 1993 (as
<PAGE> 6
corrected as of September 15, 1993, the "Plan of
Reorganization");
WHEREAS, pursuant to Section 3.5 of the Plan of
Reorganization and in accordance with the terms thereof, a
portion of the Claims are to be discharged and satisfied by the
execution and delivery by the Company of this Agreement, which
provides, among other things, for the execution and delivery by
the Company to the Creditors of the Notes (as hereinafter
defined), which Notes shall be secured by the Pledged Bonds (as
hereinafter defined);
NOW, THEREFORE, in consideration of the premises and of
the mutual covenants and agreements contained in the Plan of
Reorganization and herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. As used in this Agreement,
the following terms have the following meanings:
"Affiliate" means, as to any Person, any other Person
that, directly or indirectly, controls, is controlled by or is
under common control with such Person or is a director or officer
of such Person. For purposes of this definition, the term
"control" (including the terms "controlling," "controlled by" and
"under common control with") of a Person means the possession,
direct or indirect, of the power to vote 5% or more of the Voting
Stock of such Person or to direct or cause the direction of the
management and policies of such Person, whether through the
ownership of Voting Stock, by contract or otherwise.
"Applicable Lending Office" means, for each Creditor,
the "Lending Office" of such Creditor (or of an affiliate of such
Creditor) designated for Base Rate Loans or Eurodollar Loans, as
the case may be, on the signature pages hereof or such other
office of such Creditor (or of an affiliate of such Creditor) as
such Creditor 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.
"Bank" means [name of Agent bank when acting in its
individual capacity].
<PAGE> 7
"Banking Institution" means any financial institution
subject to regulation under Regulation D of the Board of
Governors of the Federal Reserve System and any other banking
institution or trust company or similar organization incorporated
or organized under the laws of a country other than the United
States, or a political subdivision of a country other than the
United States.
"Bankruptcy Case" has the meaning assigned to that term
in the Preliminary Statement.
"Bankruptcy Code" means the Bankruptcy Reform Act of
1978, as heretofore and hereafter amended, and codified as title
11 of the United States Code.
"Bankruptcy Court" has the meaning assigned to that
term in the Preliminary Statement.
"Base Rate" means the rate of interest from time to
time announced by the Bank at the Principal Office as its prime
or commercial lending rate, as applicable. Each change in any
interest rate provided for herein based upon the Base Rate
resulting from a change in the Base Rate shall take effect at the
time of such change in the Base Rate.
"Base Rate Loan" means the portion of a Loan which
bears interest as provided in Section 2.03(a).
"Business Day" means a day of the year on which banks
are not required or authorized to close in New York City and, if
the applicable Business Day relates to any Eurodollar Loans, on
which dealings are carried on in the London interbank market.
"Capital Lease Obligation" means, with respect to any
lease of property which, in accordance with GAAP, appears on the
lessee's balance sheet as a capital lease, the amount of the
liability which should appear on such balance sheet.
"CERCLA" means the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended from
time to time.
"Claims" has the meaning assigned to that term in the
Preliminary Statement.
"Code" means the Internal Revenue Code of 1986, as
amended from time to time.
<PAGE> 8
"Confirmation Order" has the meaning assigned to that
term in the Preliminary Statement.
"Consolidated Subsidiary" means, for any Person, each
Subsidiary of such Person (whether now existing or hereafter
created or acquired) the financial statements of which shall be
(or should have been) consolidated with the financial statements
of such Person in accordance with GAAP.
"Debt" of any Person means, without duplication, (a)
all indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services (including,
without limitation, all obligations, contingent or otherwise, of
such Person in connection with acceptance facilities (other than
acceptance facilities entered into in connection with normal
course commercial trade transactions) and letter of credit
facilities to the extent such letter of credit facilities support
Debt), (b) all obligations of such Person evidenced by notes,
bonds, debentures or other similar instruments, (c) all
obligations of such Person created or arising under any
conditional sale or other title retention agreement with respect
to property acquired by such Person, (d) all Capitalized Lease
Obligations of such Person, (e) all obligations of such Person to
purchase, redeem, retire, defease or otherwise make any payment
in respect of any capital stock of or other ownership or profit
interest in such Person or any other Person or any warrants,
rights or options to acquire such capital stock, valued, in the
case of preferred stock, at the greater of its voluntary or
involuntary liquidation preference plus accrued and unpaid
dividends, (f) all Debt of others referred to in clauses (a)
through (e) above guaranteed directly or indirectly in any manner
by such Person, or in effect guaranteed directly or indirectly by
such Person through an agreement (i) to pay or purchase such Debt
or to advance or supply funds for the payment or purchase of such
Debt, (ii) to purchase, sell or lease (as lessee or lessor)
property, or to purchase or sell services, primarily for the
purpose of enabling the debtor to make payment of such Debt or to
assure the holder of such Debt against loss, (iii) to supply
funds to or in any other manner invest in the debtor (including
any agreement to pay for property or services irrespective of
whether such property is received or such services are rendered)
or (iv) otherwise to assure a creditor against loss, and (g) all
Debt referred to in clauses (a) through (e) above 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
(including, without limitation, accounts and contract rights)
owned by such Person, even though such Person has not assumed or
<PAGE> 9
become liable for the payment of such Debt. In cases where
recourse to any Person or any of its properties in respect of
Debt is limited, the amount of such Debt of such Person for
purposes hereof shall be so limited.
"EBITA" means, for any period, the sum, for the Company
and its Consolidated Subsidiaries (determined on a consolidated
basis without duplication in accordance with GAAP), of the
following: (a) net operating income (calculated before taxes,
Interest Expense, extraordinary items and unusual, non-cash, non-
recurring items and income or loss attributable to equity in
Affiliates) for such period plus (b) amortization (to the extent
deducted in determining net operating income) for such period.
"Effective Date" means the Effective Date (as defined
therein) of the Plan of Reorganization.
"Eligible Institution" means (i) a bank or trust
company organized under the laws of the United States of America,
of any State therein, of the District of Columbia, of any member
country, of the Organization for Economic Cooperation and
Development or of any political subdivision of any such country,
in each case having assets in excess of $500,000,000 (ii) an
insurance company organized under the laws of any State in the
United States of America or of the District of Columbia having
assets in excess of $500,000,000, (iii) any Creditor, (iv) any
Person listed on Schedule I hereto that, on the Effective Date,
holds a participation in a Claim, or (v) any other Person
consented to by the Company, which consent will not be
unreasonably withheld.
"Environmental Action" means any administrative,
regulatory or judicial action, suit, demand, demand letter,
claim, notice of non-compliance or violation, investigation,
proceeding, consent order or consent agreement relating in any
way to any Environmental Law or any Environmental Permit
including, without limitation, (a) any claim by any governmental
or regulatory authority for enforcement, investigation, cleanup,
removal, response, remedial or other actions or damages pursuant
to any Environmental Law and (b) any claim by any Person seeking
damages, contribution, indemnification, cost recovery,
compensation or injunctive relief resulting from Hazardous
Materials or arising from alleged injury or threat of injury to
health, safety or the environment.
"Environmental Law" means any federal, state or local
law, rule, regulation, order, writ, judgment, injunction, decree,
<PAGE> 10
determination or award relating to the environment, health,
safety or Hazardous Materials.
"Environmental Permit" means any permit, approval,
identification number, license or other authorization required
under any Environmental Law.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended from time to time, and the regulations
promulgated and rulings issued thereunder.
"ERISA Affiliate" means any Person who for purposes of
Title IV of ERISA is a member of the Company's controlled group,
or under common control with the Company, within the meaning of
Section 414 of the Internal Revenue Code of 1986, as amended.
"Eurodollar Loan" means the portion of a Loan which
bears interest at the Eurodollar Rate.
"Eurodollar Rate" means, for any Interest Period, an
interest rate per annum equal at all times during such Interest
Period to the sum of (x) the LIBO Rate for such Interest Period
plus (y) 1.50% per annum.
"Event of Default" has the meaning assigned to that
term in Section 6.01.
"Federal Funds Rate" means, for any day, the rate per
annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
equal to the weighted average of the rates on overnight Federal
funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Business Day next
succeeding such day, provided that (a) if the day for which such
rate is to be determined is not a Business Day, the Federal Funds
Rate for such day shall be such rate on such transactions on the
next preceding Business Day as so published on the next
succeeding Business Day and (b) if such rate is not so published
for any Business Day, the Federal Funds Rate for such Business
Day shall be the average rate charged to the Bank on such
Business Day on such transactions as determined by the Agent.
"Final Approval" means any authorizations, consents,
approvals, waivers, exceptions, variances, orders, licenses,
exemptions, publications, filings, notices to and declarations of
or with any governmental authority (other than routine reporting
requirements the failure to comply with which will not affect the
validity or enforceability of any of the Related Documents or
<PAGE> 11
have a Material Adverse Effect) or any other action in respect of
any governmental authority that is in full force and effect and
is not the subject of a pending appeal or reconsideration or
other review, and the time in which to make an appeal or request
the review or reconsideration of which has expired without any
appeal or request for review or reconsideration having been taken
or made.
"Final Order" means an order of the Bankruptcy Court
which (a) shall not have been reversed, stayed, modified or
amended and the time to appeal from, or to seek review or
rehearing of, shall have expired and as to which no appeal or
petition for review, rehearing or certiorari is pending or (b) if
appealed from, shall have been affirmed and the time to appeal
from such affirmance or to seek review or rehearing thereof shall
have expired or no further hearing, appeal or petition for
certiorari can be taken or granted.
"First Mortgage Bond Indenture" means the Indenture
dated as of _______________ between the Company and
_______________, as trustee, providing for the issuance by the
Company of its first mortgage bonds.
"First Mortgage Bonds" means bonds issued by the
Company under the First Mortgage Bond Indenture.
"First Mortgage Bonds, Series X" means Series X of the
First Mortgage Bonds in an aggregate principal or face amount
equal to one-third of the aggregate principal amount of the Loans
outstanding on the Effective Date.
"GAAP" means generally accepted accounting principles
in the United States of America as in effect from time to time.
"Governmental Person" means any national, state or
local government, any political subdivision or any government
instrumentality, authority, body or entity, including the Federal
Deposit Insurance Corporation, the Board of Governors of the
Federal Reserve System, any central bank or any comparable
authority.
"Hazardous Materials" means (a) petroleum or petroleum
products, asbestos in any form, radioactive or source material,
(b) any substances defined as or included in the definition of
"hazardous substances," "hazardous wastes," "hazardous
materials," "extremely hazardous wastes," "restricted hazardous
wastes," "toxic substances," "toxic pollutants," "contaminants"
or "pollutants," or words of similar import, under any
<PAGE> 12
Environmental Law and (c) any other substance exposure to which
is regulated under any Environmental Law.
"Indemnified Party" has the meaning assigned to that
term in Section 9.06.
"Indentures" means, collectively, the First Mortgage
Bond Indenture and the Second Mortgage Bond Indenture.
"Interest Coverage Ratio" means, as at any date, the
ratio of (a) EBITA for the period of four consecutive fiscal
quarters ending on or most recently ended prior to such date to
(b) Interest Expense for such period.
"Interest Expense" means, for any period, the sum, for
the Company and its Consolidated Subsidiaries (determined on a
consolidated basis without duplication in accordance with GAAP),
of the following: (a) all interest in respect of Debt including,
without limitation, interest capitalized during such period
(whether or not actually paid during such period), and including,
without limitation, all commissions and fees (other than up-front
fees), plus (b) the net amounts payable (or minus the net amounts
receivable) under Interest Rate Protection Agreements accrued
during such period (whether or not actually paid or received
during such period).
"Interest Period" has the meaning assigned to that term
in Section 2.03(b).
"Interest Rate Protection Agreement" means, for any
Person, an interest rate swap, cap or collar agreement, interest
rate future or option contract or similar arrangement providing
for the transfer or mitigation of interest risks either generally
or under specific contingencies.
"Leverage Ratio" means, at any time, the ratio of Total
Debt at such time to the sum of (a) Total Capital at such time
plus (b) Total Debt at such time.
"LIBO Rate" means, for any Interest Period, the
arithmetic mean (rounded upwards, if necessary, to the nearest
1/16 of 1%), as determined by the Agent, of the rates per annum
quoted by the respective Reference Banks at approximately
11:00 a.m. London time (or as soon thereafter as practicable) on
the date two Business Days prior to the first day of such
Interest Period for the offering by the respective Reference
Banks to leading banks in the London interbank market of Dollar
deposits having a term comparable to such Interest Period and in
<PAGE> 13
an amount comparable to the principal amount of the Eurodollar
Loan of the respective Reference Banks for such Interest Period.
If any Reference Bank does not timely furnish such information
for determination of any LIBO Rate, the Agent shall determine
such LIBO Rate on the basis of the information timely furnished
by the remaining Reference Banks.
"Lien" means any lien, security interest or other
charge or encumbrance of any kind, or any other type of
preferential arrangement, including, without limitation, the lien
or retained security title of a conditional vendor and any
easement, right of way or other encumbrance on title to real
property.
"Loans" has the meaning assigned to that term in
Section 2.01.
"Majority Creditors" means Creditors holding more than
50% of the aggregate unpaid principal amount of the Loans.
"Material Adverse Effect" means a material adverse
effect on (i) the property, business, operations, financial
condition, liabilities or capitalization of the Company and its
Subsidiaries taken as a whole, (ii) the ability of the Company to
perform its obligations under any of the Related Documents, (iii)
the validity or enforceability of any of the Related Documents,
(iv) the rights and remedies of the Agent or the Creditors or (v)
the timely payment of the principal of or interest on the Notes
or other amounts payable in connection herewith or therewith.
"Material Subsidiary" means, at any time, a Subsidiary
of the Company (a) whose assets at such time exceed 10% of the
assets of the Company and its Subsidiaries (on a consolidated
basis) or (b) whose earnings at such time exceed 10% of the
earnings of the Company and its Subsidiaries (on a consolidated
basis).
"Multiemployer Plan" means a multiemployer plan, as
defined in Section 4001(a)(3) of ERISA, to which the Company or
any ERISA Affiliate is making or accruing an obligation to make
contributions, or has within any of the preceding five plan years
made or accrued an obligation to make contributions, such plan
being maintained pursuant to one or more collective bargaining
agreements.
"Multiple Employer Plan" means a single employer plan,
as defined in Section 4001(a)(15) of ERISA, that (i) is
maintained for employees of the Company or an ERISA Affiliate and
<PAGE> 14
at least one Person other than the Company and its ERISA
Affiliates or (ii) was so maintained and in respect of which the
Company or an ERISA Affiliate could have liability under Section
4064 or 4069 of ERISA in the event such plan has been or were to
be terminated.
"Note" means a promissory note of the Company, in
substantially the form of Exhibit A.
"PBGC" means the Pension Benefit Guaranty Corporation
or any successor thereto.
"Person" means an individual, a corporation, a
partnership, an association, a business trust or any other entity
or organization, including a Governmental Person.
"Plan" means a Single Employer Plan or a Multiple
Employer Plan.
"Plan of Reorganization" has the meaning assigned to
that term in the Preliminary Statement.
"Pledged Bonds" means, collectively, the First Mortgage
Bonds, Series X, and the Second Mortgage Bonds, Series X.
"Principal Office" means the principal office of the
Bank, located on the date hereof at ____ ________ ________,
________, ________ _____.
"Reference Banks" means the Bank, ____________ and
____________ (or their respective Applicable Lending Offices, as
the case may be).
"Related Documents" means, collectively, this
Agreement, the Notes, the Indentures and the Pledged Bonds.
"Second Mortgage Bond Indenture" means the Indenture
dated as of __________ between the Company and _______________,
as trustee, providing for the issuance by the Company of its
second mortgage bonds.
"Second Mortgage Bonds" means bonds issued by the
Company under the Second Mortgage Bond Indenture.
"Second Mortgage Bonds, Series X" means Series X of the
Second Mortgage Bonds in an aggregate principal or face amount
equal to two-thirds of the aggregate principal amount of the
Loans outstanding on the Effective Date.
<PAGE> 15
"Single Employer Plan" means a single employer plan, as
defined in Section 4001(a)(15) of ERISA, that (i) is maintained
for employees of the Company or an ERISA Affiliate and no Person
other than the Company and its ERISA Affiliates or (ii) was so
maintained and in respect of which the Company or an ERISA
Affiliate could have liability under Section 4069 of ERISA in the
event such plan has been or were to be terminated.
"Submission Date" means the date the form of this
Agreement was filed with the Bankruptcy Court prior to the date
creditors must have voted on the Plan of Reorganization in
accordance with Section 7.6 of the Plan of Reorganization.
"Subsidiary" means, with respect to any Person, any
corporation, partnership or other entity of which at least a
majority of the Voting Stock is at the time directly or
indirectly owned or controlled by such Person or one or more
Subsidiaries of such Person or by such Person and one or more
Subsidiaries of such Person.
"Total Capital" means, as at any date, the sum for the
Company and its Consolidated Subsidiaries (determined on a
consolidated basis without duplication in accordance with GAAP),
of the following:
(a) the amount of capital stock (excluding treasury
stock and capital stock subscribed for and unissued and
preferred stock mandatorily redeemable in cash or redeemable
in cash at the option of the holder thereof), plus
(b) the amount of surplus and retained earnings (or,
in the case of a surplus or retained earnings deficit, minus
the amount of such deficit).
"Total Debt" means, as at any date, the aggregate
amount of all Debt of the Company and its Consolidated
Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP) (other than contingent
obligations in connection with acceptance facilities and letters
of credit).
"Voting Stock" means capital stock issued by a
corporation, or equivalent interests in any other Person, the
holders of which are ordinarily, in the absence of contingencies,
entitled to vote for the election of directors (or Persons
performing similar functions) of such Person, even though the
<PAGE> 16
right so to vote has been suspended by the happening of such a
contingency.
"Withdrawal Liability" has the meaning given such term
under Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. Computation of Time Periods. In this
Agreement, in the computation of a period of time from a
specified date to a later specified date, the word "from" means
"from and including" and the words "to" and "until" each means
"to but excluding".
SECTION 1.03. Accounting Terms. All accounting terms
not specifically defined herein shall be construed in accordance
with GAAP consistently applied, except as otherwise stated
herein.
SECTION 1.04. Interpretation. In this Agreement the
singular includes the plural and the plural the singular; words
importing any gender include the other genders; references to
statutes are to be construed as including all statutory
provisions consolidating, amending or replacing the statute
referred to; references to "writing" include printing, typing,
lithography and other means of reproducing words in a tangible
visible form; references to sections (or any subdivision of a
section), articles, schedules, annexes and exhibits are to those
of this Agreement unless otherwise indicated; the words
"including", "includes" and "include" shall be deemed to be
followed by the words "without limitation"; references to
agreements and other contractual instruments shall be deemed to
include all subsequent amendments and other modifications to such
instruments but only to the extent such amendments and other
modifications are not prohibited by the terms of this Agreement;
and references to Persons include their respective permitted
successors and assigns and, in the case of Governmental Persons,
Persons succeeding to their respective functions and capacities.
<PAGE> 17
ARTICLE II
AMOUNTS AND TERMS OF THE LOAN
SECTION 2.01. The Loans. As provided in the Plan of
Reorganization, the Company is issuing to each Creditor,
concurrently with the execution and delivery hereof, a Note,
appropriately completed to the order of such Creditor, in the
amount set forth opposite the name of such Creditor on the
signature pages hereto under the caption "Loan Amount" (as to
each Creditor, such amount is referred to as the "Loan" of such
Creditor and such amounts collectively are referred to as the
"Loans" of the Creditors), in satisfaction, to the extent
provided for in Section 3.5(A)(1) of the Plan of Reorganization,
of the Claims of such Creditor. Amounts repaid or prepaid
hereunder may not be reborrowed.
SECTION 2.02. Repayment. The Company shall pay to the
Agent for account of each Creditor the unpaid principal amount of
such Creditor's Loan in ___ substantially equal quarterly
installments commencing on the last Business Day of ___________,
199__ and on the last Business Day of each ____________,
____________, ____________ and ____________ thereafter through
and including ___________, 199__; provided, however, that the
last such installment shall be in the amount necessary to repay
in full the outstanding principal amount of the Loans at such
date.
SECTION 2.03. Interest. The Company shall pay to the
Agent for account of each Creditor interest on the unpaid
principal amount of such Creditor's Loan from the date of such
Creditor's Note until such principal amount shall be paid in
full, at the applicable rate set forth below:
(a) Base Rate. Except to the extent the Company shall
elect to pay interest on all or part of the unpaid principal
amount of the Loans for any Interest Period pursuant to
subsection (c) of this Section 2.03, the Company shall pay
interest on the unpaid principal of the Loans from the date of
the Notes until the principal amount of the Loans is paid in full
at a fluctuating rate per annum equal at all times to 0.50% per
annum above the Base Rate in effect from time to time, payable
quarterly on the last Business Day of each _____, _________,
_________ and ________ and on the date the Loans are paid in
full.
(b) Interest Periods. The Company may from time to
time elect to have the interest on all or part of the principal
<PAGE> 18
amount of the Loans determined and payable for a specified period
(an "Interest Period") in accordance with subsection (c) of this
Section 2.03. The first day of an Interest Period shall be
either the date of the Notes, the date the Company specifies as
the first day of a Eurodollar Loan, or the last day of the then
current Interest Period for a Eurodollar Loan. The duration of
each such Interest Period shall be, in respect of a Eurodollar
Loan, 3 months; provided, however, that (i) the Company may not
select any Interest Period which ends after any principal
repayment installment date unless, after giving effect to such
selection, the aggregate unpaid principal amount of Eurodollar
Loans having Interest Periods which end on or prior to such
principal repayment installment date and Base Rate Loans shall be
at least equal to the principal amount of the Loans due and
payable on and prior to such date and (ii) there may not be more
than four Interest Periods in effect for Eurodollar Loans at any
one time.
(c) Eurodollar Rate. The Company may from time to
time elect to pay interest on all or part of the principal amount
of the Loans (provided that the aggregate of any such partial
principal amount for all Loans having the same Interest Period
shall not be less than $10,000,000 or in integral multiples of
$1,000,000 in excess thereof) at the Eurodollar Rate for an
Interest Period by notice, specifying the principal amount and
the first day and duration of such Interest Period, received by
the Agent before 11:00 AM (New York City time) two Business Days
prior to the first day of such Interest Period, payable on the
last day of such Interest Period. The Agent will promptly notify
each Creditor of the contents of each such notice received from
the Company.
(d) Default Interest. The Company shall pay interest
on the unpaid principal amount of the Loans that is not paid when
due and on the unpaid amount of all interest, and other amounts
payable hereunder, that is not paid when due, payable on demand,
at a rate per annum equal at all times to 2% per annum above the
Base Rate in effect from time to time. Notwithstanding anything
in this Agreement to the contrary, upon the occurrence and during
the continuance of an Event of Default, the right of the Company
to make an election in respect of the Eurodollar Rate pursuant to
Section 2.03(c) shall terminate (i) automatically, in the case of
an Event of Default referred to in Section 6.01(a) or (b) or (ii)
upon notice to the Company by the Majority Creditors through the
Agent, in all other cases; provided that no termination referred
to in either of the preceding clauses (i) and (ii) shall affect
any Eurodollar Loan during any Interest Period in effect for such
<PAGE> 19
Eurodollar Loan at the time such notice is received by the
Company.
(e) Alternate Rate of Interest. In the event, and on
each occasion, that on the day two Business Days prior to the
commencement of any Interest Period for a Eurodollar Loan, the
Agent shall have determined (which determination shall be
conclusive and binding upon the Company absent manifest error)
that reasonable means do not exist for ascertaining the
applicable Eurodollar Rate, the Agent shall, as soon as
practicable thereafter, give written, facsimile or telegraphic
notice of such determination to the Company, and any request by
the Company for a Eurodollar Loan pursuant to subsection (c) of
this Section 2.03 shall be deemed a request for a Base Rate Loan.
After such notice shall have been given and until the
circumstances giving rise to such notice no longer exist, each
request for an Eurodollar Loan shall be deemed to be a request
for a Base Rate Loan.
(f) Promptly after the determination of any interest
rate provided for herein or any change therein, the Agent shall
give notice thereof to the Creditors to which such interest is
payable and to the Company.
SECTION 2.04. Prepayments. The Company may, upon at
least two Business Days' notice to the Agent stating the proposed
date and principal amount of the prepayment, and if such notice
is given to the Agent the Company shall, prepay the outstanding
principal amount of the Loans in whole or in part (each such
partial prepayment shall be in an aggregate principal amount for
all Loans not less than $1,000,000 and shall be applied to the
principal installments of the Notes in inverse order of
maturity), together with accrued interest to the date of such
prepayment on the principal amount prepaid; provided, however,
that any prepayment of a Eurodollar Loan shall be made on, and
only on, the last day of the Interest Period for such Eurodollar
Loan unless the Company shall pay to each Creditor in accordance
with Section 2.05(d) an amount sufficient to compensate such
Creditor for any loss, cost, or expense incurred by it by reason
of such prepayment on a day other than the last day of an
Interest Period. The Agent will promptly notify each Creditor of
the contents of each such notice received from the Company.
SECTION 2.05. Increased Costs, Etc. (a) If, due
either to (i) the introduction after the Submission Date of, or
any change (other than any change by way of imposition or
increase of reserve requirements in respect of Eurodollar Loans,
referred to in subsection (b) below), after the Submission Date,
<PAGE> 20
in or in the interpretation of, any law or regulation or (ii) the
compliance by a Creditor with any guideline or request issued or
made after the Submission Date by any central bank or other
governmental authority (whether or not having the force of law),
there shall be any increase in the cost to such Creditor of
agreeing to make or making, funding or maintaining Eurodollar
Loans or there shall be a reduction in any amount receivable by
such Creditor hereunder as a result, then the Company shall from
time to time, upon demand by such Creditor, pay to such Creditor
additional amounts sufficient to compensate such Creditor for
such increased cost or such reduction in amount. A certificate
as to the amount of such increased cost or such reduction in
amount, submitted to the Company and the Agent by such Creditor,
shall be conclusive and binding for all purposes, absent manifest
error.
(b) The Company shall pay to each Creditor additional
interest on the unpaid principal amount of each Eurodollar Loan,
from the date of such Eurodollar Loan until such principal amount
is paid in full, at an interest rate per annum equal at all times
during each Interest Period for such Loan to the remainder
obtained by subtracting (i) the LIBO Rate for the Interest Period
for such Loan from (ii) the rate obtained by dividing such LIBO
Rate by a percentage equal to 100% minus the reserve percentage
applicable 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 regulations
issued from time to time by the Board of Governors of the Federal
Reserve System (or any successor) for determining the maximum
reserve requirement (including, without limitation, any
emergency, supplemental or other marginal reserve requirement)
for such Creditor with respect to liabilities or assets
consisting of or including Eurocurrency liabilities having a term
equal to such Interest Period, payable on each date on which
interest is payable on such Eurodollar Loan. Such additional
interest shall be determined by such Creditor and notified to the
Company and the Agent.
(c) If a Creditor determines that 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 Submission Date, affects
the amount of capital required to be maintained by such Creditor
or any corporation controlling such Creditor and that the amount
of such capital is increased by or based upon the existence of
such Creditor's commitment hereunder and other commitments of
this type, then, upon demand by such Creditor, the Company shall
<PAGE> 21
immediately pay to such Creditor, from time to time as specified
by such Creditor, additional amounts sufficient to compensate
such Creditor or such corporation in the light of such
circumstances, to the extent that such Creditor reasonably
determines such increase in capital to be allocable to the
existence of such Creditor's commitment hereunder. A certificate
as to such amounts submitted to the Company and the Agent by such
Creditor, shall be conclusive and binding for all purposes,
absent manifest error.
(d) If, due to a change of interest rate on any
Eurodollar Loan pursuant to Section 2.06(b) or 2.07, any payment
pursuant to Section 2.04 of any Eurodollar Loan, any
acceleration of the maturity of the Loans and the Notes pursuant
to Section 6.01, or for any other reason, a Creditor is subject
to a change of interest rate, or receives payments of principal,
of any Eurodollar Loan other than on the last day of an Interest
Period relating to such Eurodollar Loan, the Company shall,
promptly upon demand by such Creditor, pay to such Creditor any
amounts required to compensate such Creditor for additional
losses, costs or expenses which it may reasonably incur as a
result of such change or payment, including, without limitation,
any loss, cost or expense incurred by reason of the liquidation
or reemployment of deposits or other funds acquired by such
Creditor to fund or maintain such Eurodollar Loan, but excluding
loss of anticipated profit. A certificate setting forth the
amount of such additional losses, costs or expenses, submitted by
such Creditor to the Company and the Agent, shall be conclusive
and binding for all purposes, absent manifest error.
(e) Notwithstanding any other provision in this
Section 2.05 to the contrary: (i) the Company is not responsible
for, and is not required to reimburse any Creditor for, any
amounts that would otherwise be payable by the Company pursuant
to subsection (a), (c) or (d) of this Section 2.05 to the extent
such amounts accrued 90 days or more prior to the date such
Creditor provides to the Company and the Agent a certificate
which sets forth such amounts owed to such Creditor by the
Company pursuant to such subsections and (ii) the Company is not
responsible for, and is not required to reimburse any Creditor
for, any amounts that would otherwise be payable by the Company
pursuant to this Section 2.05, unless such Creditor is a Banking
Institution.
(f) In calculating any amounts required to be paid by
the Company pursuant to this Section 2.05, each Creditor shall
make all determinations and allocations on a reasonable basis.
<PAGE> 22
SECTION 2.06. Interest Rate Protection. (a) If the
Company shall fail to select the duration of any Interest Period
for any Eurodollar Loan in accordance with the provisions
contained in Section 2.03(c), the Agent will forthwith so notify
the Company and such Eurodollar Loan will automatically, on the
last day of the then existing Interest Period therefor, convert
into a Base Rate Loan.
(b) On and after the date on which the aggregate
unpaid principal amount of the Loans shall be reduced, by payment
or prepayment or otherwise, to less than $10,000,000, the rate of
interest on the unpaid principal amount of the Loans shall be
0.50% per annum above the Base Rate in effect from time to time
and the right of the Company to make an election in respect of
the Eurodollar Rate pursuant to Section 2.03(c) shall terminate.
SECTION 2.07. Illegality, Etc. Notwithstanding any
other provision of this Agreement, if any Creditor that is a
Banking Institution shall notify the Company that the
introduction of or any change in or in the interpretation of any
law or regulation that occurs after the Submission Date makes it
unlawful, or any central bank or other governmental authority
asserts after the Submission Date that it is unlawful, for such
Creditor to perform its obligations hereunder to fund or maintain
Eurodollar Loans hereunder, (i) the right of the Company to
select the Eurodollar Rate for the Loan held by such Creditor,
and the obligation of such Creditor to maintain Eurodollar Loans,
shall be suspended until such Creditor shall notify the Company
that the circumstances causing such suspension no longer exist,
(ii) the rate of interest on the unpaid principal amount of the
Loan held by such Creditor shall thereupon be 0.50% per annum
above the Base Rate in effect from time to time, and (iii) all
payments and prepayments of principal that would otherwise be
applied to such Creditor's Eurodollar Loans shall be applied
instead to its Base Rate Loans.
SECTION 2.08. Payments and Computations. (a) The
Company shall make each payment under this Agreement and the
Notes not later than 12:00 noon (New York City time) on the day
when due in lawful money of the United States of America in same
day funds to the Agent at account number ____________ maintained
by the Agent with the Bank at the Principal Office.
(b) The Company hereby authorizes each Creditor, if
and to the extent payment is not made when due to such Creditor
under this Agreement or such Creditor's Note, to charge from time
to time against any or all of the Company's accounts with such
Creditor any amount so due.
<PAGE> 23
(c) All computations of interest based on the Base
Rate shall be made by the Agent on the basis of a year of 365 or
366 days, as the case may be, and all computations of interest
based on the LIBO Rate shall be made by the Agent on the basis of
a year of 360 days, in each case for the actual number of days
(including the first day but excluding the last day) occurring in
the period for which such interest is payable. Each
determination by the Agent of an interest rate hereunder shall be
conclusive and binding for all purposes, absent manifest error.
The Agent will promptly notify the Creditors of the determination
of an interest rate hereunder.
(d) Whenever any payment under this Agreement or the
Notes shall be stated to be due, or whenever the last day of any
Interest Period would otherwise occur, on a day which is not a
Business Day, such payment shall be made, and the last day of
such Interest Period shall occur, on the next succeeding Business
Day, and such extension of time shall in such case be included in
the computation of payment of interest; provided, however, if
such extension would cause payment of interest on or principal of
a Eurodollar Loan to be made, or the last day of an Interest
Period for a Eurodollar Loan to occur, in the next following
calendar month, such payment shall be made, and the last day of
such Interest Period shall occur, on the next preceding Business
Day.
(e) Whenever the first day of any Interest Period
occurs on a day of an initial calendar month for which there is
no numerically corresponding day in the calendar month that
succeeds such initial calendar month by the number of months
equal to the number of months in such Interest Period, such
Interest Period shall end on the last Business Day of such
succeeding calendar month. Notwithstanding anything to the
contrary contained herein, each Interest Period that 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) shall end on the last
Business Day of the appropriate subsequent calendar month.
(f) Each payment received by the Agent under this
Agreement or any Note for account of any Creditor shall be paid
by the Agent promptly to such Creditor, in immediately available
funds, for account of such Creditor's Applicable Lending Office
for its Loan or other obligation in respect of which such payment
is made.
<PAGE> 24
SECTION 2.09. U.S. Taxes. (a) The Company agrees to
pay to each Creditor that is not a U.S. Person such additional
amounts as are necessary in order that the net payment of any
amount due to such non-U.S. Person hereunder after deduction for
or withholding in respect of any U.S. Tax imposed with respect to
such payment (or in lieu thereof, payment of such U.S. Tax by
such non-U.S. Person), will not be less than the amount stated
herein to be then due and payable, provided that the foregoing
obligation to pay such additional amounts shall not apply:
(i) to any payment to a Creditor hereunder unless such
Creditor is, on the Submission Date (or on the date it
becomes a Creditor as provided in Section 9.05) and on the
date of any change in the Applicable Lending Office of such
Creditor after the date hereof, either entitled to submit a
Form 1001 (relating to such Creditor and entitling it to a
complete exemption from withholding on all interest to be
received by it hereunder in respect of the Loans) or Form
4224 (relating to all interest to be received by such
Creditor hereunder in respect of the Loans), or
(ii) to any U.S. Tax imposed solely by reason of the
failure by such non-U.S. Person to comply with applicable
certification, information, documentation or other reporting
requirements concerning the nationality, residence, identity
or connections with the United States of America of such
non-U.S. Person if such compliance is required by statute or
regulation of the United States of America as a precondition
to relief or exemption from such U.S. Tax.
For the purposes of this Section 2.09(a), (w) "Form 1001" shall
mean Form 1001 (Ownership, Exemption, or Reduced Rate
Certificate) of the Department of the Treasury of the United
States of America, (x) "Form 4224" shall mean Form 4224
(Exemption from Withholding of Tax on Income Effectively
Connected with the Conduct of a Trade or Business in the United
States) of the Department of the Treasury of the United States of
America (or in relation to either such Form such successor and
related forms as may from time to time be adopted by the relevant
taxing authorities of the United States of America to document a
claim to which such Form relates), (y) "U.S. Person" shall mean a
citizen, national or resident of the United States of America, a
corporation, partnership or other entity created or organized in
or under any laws of the United States of America, or any estate
or trust that is subject to Federal income taxation regardless of
the source of its income and (z) "U.S. Taxes" shall mean any
present or future tax, assessment or other charge or levy imposed
<PAGE> 25
by or on behalf of the United States of America or any taxing
authority thereof or therein.
(b) Within 30 days after paying any amount to the
Agent or any Creditor from which it is required by law to make
any deduction or withholding, and within 30 days after it is
required by law to remit such deduction or withholding to any
relevant taxing or other authority, the Company shall deliver to
the Creditor for delivery to such non-U.S. Person evidence
satisfactory to such Person of such deduction, withholding or
payment (as the case may be).
SECTION 2.10. Pro Rata Treatment. Except to the
extent otherwise provided herein: (a) the conversion of portions
of Loans from Base Rate Loans into Eurodollar Loans, and the
conversion of portions of Loans from Eurodollar Loans into Base
Rate Loans (other than conversions provided for by Section 2.07)
shall be made pro rata among the Creditors according to the
amounts of their respective Loans, and the Interest Period for
each Eurodollar Loan of each Creditor that commences on any day
shall be coterminous with the Interest Period for each Eurodollar
Loan of each Creditor that commences on such day; (b) each
payment or prepayment of principal of Loans by the Company shall
be made for account of the Creditors pro rata in accordance with
the respective unpaid principal amounts of the Loans held by
them; and (c) each payment of interest on Loans by the Company
shall be made for account of the Creditors pro rata in accordance
with the amounts of interest on such Loans then due and payable
to the respective Creditors.
SECTION 2.11. Non-Receipt of Funds by the Agent.
Unless the Agent shall have been notified by the Company prior to
the date on which the Company is to make payment to the Agent for
account of one or more of the Creditors hereunder (such payment
being herein called the "Required Payment"), which notice shall
be effective upon receipt, that the Company does not intend to
make the Required Payment to the Agent, the Agent may assume that
the Required Payment has been made and may, in reliance upon such
assumption (but shall not be required to), make the amount
thereof available to the intended recipient(s) on such date; and,
if the Company has not in fact made the Required Payment to the
Agent, the recipient(s) of such payment shall, on demand, repay
to the Agent the amount so made available together with interest
thereon in respect of each day during the period commencing on
the date (the "Advance Date") such amount was so made available
by the Agent until the date the Agent recovers such amount at a
rate per annum equal to the Federal Funds Rate for such day and,
if such recipient(s) shall fail promptly to make such payment,
<PAGE> 26
the Agent shall be entitled to recover such amount, on demand,
from the Company, together with interest as aforesaid. Any
payment by the Company to the Agent of interest on the Required
Payment shall pro tanto reduce the amount of interest payable by
the Company to the respective recipient(s) on the related
Loan(s).
SECTION 2.12. Set-Off; Sharing of Payments; Etc. (a)
The Company agrees that, in addition to (and without limitation
of) any right of set-off, banker's lien or counterclaim a
Creditor may otherwise have, each Creditor shall be entitled, at
its option, to offset balances held by it for account of the
Company at any of its offices, in Dollars or in any other
currency, against any principal of or interest on any of such
Creditor's Loans or any other amount payable to such Creditor
hereunder, that is not paid when due (regardless of whether such
balances are then due to the Company), in which case it shall
promptly notify the Company and the Agent thereof, provided that
such Creditor's failure to give such notice shall not affect the
validity thereof.
(b) If any Creditor shall obtain from the Company
payment of any principal of or interest on any Loan owing to it
or payment of any other amount under this Agreement or any other
Related Document through the exercise of any right of set-off,
banker's lien or counterclaim or similar right or otherwise
(other than from the Agent as provided herein), and, as a result
of such payment, such Creditor shall have received a greater
percentage of the principal of or interest on the Loans or such
other amounts then due hereunder or thereunder by the Company to
such Creditor than the percentage received by any other Creditor,
it shall promptly purchase from such other Creditors
participations in (or, if and to the extent specified by such
Creditor, direct interests in) the Loans or such other amounts,
respectively, owing to such other Creditors (or in interest due
thereon, as the case may be) in such amounts, and make such other
adjustments from time to time as shall be equitable, to the end
that all the Creditors shall share the benefit of such excess
payment (net of any expenses that may be incurred by such
Creditor in obtaining or preserving such excess payment) pro rata
in accordance with the unpaid principal of and/or interest on the
Loans or such other amounts, respectively, owing to each of the
Creditors. To such end all the Creditors shall make appropriate
adjustments among themselves (by the resale of participations
sold or otherwise) if such payment is rescinded or must otherwise
be restored.
<PAGE> 27
(c) The Company agrees that any Creditor so purchasing
such a participation (or direct interest) may exercise all rights
of set-off, banker's lien, counterclaim or similar rights with
respect to such participation as fully as if such Creditor were a
direct holder of Loans or other amounts (as the case may be)
owing to such Creditor in the amount of such participation.
(d) Nothing contained herein shall require any
Creditor to exercise any such right or shall affect the right of
any Creditor to exercise, and retain the benefits of exercising,
any such right with respect to any other indebtedness or
obligation of the Company. If, under any applicable bankruptcy,
insolvency or other similar law, any Creditor receives a secured
claim in lieu of a set-off to which this Section 2.12 applies,
such Creditor shall, to the extent practicable, exercise its
rights in respect of such secured claim in a manner consistent
with the rights of the Creditors entitled under this Section 2.12
to share in the benefits of any recovery on such secured claim.
SECTION 2.13. Applicable Lending Offices. The Base
Rate Loans and Eurodollar Loans maintained by each Creditor shall
be maintained at such Creditor's Applicable Lending Office for
Loans of such type. If any Creditor requests compensation from
the Company under any of Section 2.05(a), 2.05(c) or 2.09, such
Creditor will designate a different Applicable Lending Office for
the Loans of such Creditor affected by the events giving rise to
such request for compensation if such designation will avoid the
need for, or reduce the amount of, such compensation and will
not, in the reasonable opinion of such Creditor, be
disadvantageous to such Creditor, except that such Creditor shall
have no obligation to designate an Applicable Lending Office
located in the United States of America.
SECTION 2.14. Several Obligations; Remedies
Independent. Subject to the provisions of this Agreement
(including Article VI hereof) which provide that certain actions
can only be taken hereunder by the Majority Creditors, the
amounts payable by the Company at any time hereunder and under
the Notes to each Creditor shall be a separate and independent
debt, and each Creditor shall be entitled to protect and enforce
its rights arising out of this Agreement and the Notes, and it
shall not be necessary for any other Creditor or the Agent to
consent to, or be joined as an additional party in, any
proceedings for such purposes.
SECTION 2.15. Net Payments. All payments under this
Agreement and the Notes shall be made without set-off or
counterclaim.
<PAGE> 28
ARTICLE III
CONDITIONS TO CLOSING
SECTION 3.01. Closing Documents. The obligation of
the Agent and each Creditor to execute this Agreement is subject
to the conditions precedent that on or before the date hereof,
(i) the Agent shall have received the following, each dated the
Effective Date, unless otherwise specified below in form and
substance satisfactory to the Agent and each Creditor:
(a) the Notes, duly executed and completed;
(b) certified copies of the restated articles of
incorporation and bylaws of the Company, a certified copy of
the resolutions of the Board of Directors of the Company
approving the Related Documents and the other matters
contemplated hereby and thereby, and of all other documents
evidencing any other necessary corporate action;
(c) a copy of a certificate of the Secretary of State
of Texas dated a date reasonably close to the date hereof
listing the articles of incorporation of the Company and
each amendment thereto on file in his office and certifying
that (A) such amendments are the only amendments to the
Company's articles of incorporation on file in his office
and (B) the Company is duly incorporated, validly existing
and in good standing under the laws of such State;
(d) a telegram from such Secretary of State or such
other evidence satisfactory to each Creditor certifying that
the Company is duly incorporated, validly existing and in
good standing under the laws of such State on the date
hereof;
(e) originals (or copies certified to be true copies
by an appropriate officer of the Company) of all
governmental and regulatory approvals (including, without
limitation, the Federal Energy Regulatory Commission and the
New Mexico Public Service Commission approvals) legally
required to be obtained on the Effective Date for the
Company to enter into the Related Documents and to carry out
the transactions contemplated hereby and thereby;
(f) a certificate of the Secretary of the Company
certifying the incumbency and the names and true signatures
<PAGE> 29
of the officers of the Company authorized to sign this
Agreement, the Notes and the other documents to be delivered
by it hereunder, together with a certificate of another
officer of the Company as to the incumbency and specimen
signature of the Secretary of the Company;
(g) the Pledged Bonds, each duly completed, executed
and pledged to, and registered in the name of, the Agent
(for the benefit of the Creditors) by the Company under
Article VII;
(h) certified copies of the First Mortgage Bond
Indenture and the Second Mortgage Bond Indenture;
(i) a favorable opinion of Milbank, Tweed, Hadley &
McCloy, New York counsel for the Company (or other New York
counsel for the Company that is reasonably satisfactory to
the Majority Creditors), in form and substance reasonably
satisfactory to each Creditor;
(j) a favorable opinion of Vinson & Elkins, Texas
counsel for the Company (or other Texas counsel for the
Company that is reasonably satisfactory to the Majority
Creditors), in form and substance reasonably satisfactory to
each Creditor;
(k) a favorable opinion of Stoops & Burns, Arizona
counsel for the Company (or other Arizona counsel for the
Company that is reasonably satisfactory to the Majority
Creditors), in form and substance reasonably satisfactory to
each Creditor;
(l) a favorable opinion of Taichert, Wiggins, Virtue,
Wilson & Najjar, New Mexico regulatory counsel for the
Company (or other New Mexico regulatory counsel for the
Company that is reasonably satisfactory to the Majority
Creditors), in form and substance reasonably satisfactory to
each Creditor;
(m) a favorable opinion of [Milbank, Tweed, Hadley &
McCloy], federal regulatory counsel for the Company (or
other federal regulatory counsel for the Company that is
reasonably satisfactory to the Majority Creditors), in form
and substance reasonably satisfactory to each Creditor;
(n) written evidence, satisfactory to each Creditor,
that Series A and Series B of the First Mortgage Bonds and
Series A of the Second Mortgage Bonds have a rating of at
<PAGE> 30
least BBB- (or equivalent rating) by at least two of
Standard & Poor's Corporation, Moody's Investors Service,
Inc. and Duff & Phelps, Inc.;
(o) a certificate of the chairman, president or chief
financial officer of the Company, certifying (A) that the
Effective Date has occurred as of the time of delivery
thereof or will occur concurrently with the delivery thereof
and (B) that, after giving effect to the transactions
contemplated under the Plan: (x) no Default shall have
occurred and be continuing; and (y) the representations and
warranties made by the Company in Article IV hereof, and in
each of the other Related Documents, shall be true on and as
of the Effective Date with the same force and effect as if
made on and as of such date (or, if such representation or
warranty is expressly stated to have been made as of a
specific date, as of such specific date).
(p) evidence of the completion of all recordings and
filings of or with respect to the Indentures that the Agent
may deem necessary or desirable in order to perfect the
security interest created hereby and thereby; and
(ii) the following shall have occurred:
(a) the Confirmation Order shall have been entered at
least 10 days prior to the date hereof, no stay of such
order shall be in effect and each Creditor shall have
received a certified copy of such order;
(b) the Plan of Reorganization shall have been
substantially consummated without waiver of any condition or
other modification (other than waivers or modifications made
in accordance with Section 6.6 of the Plan of
Reorganization);
(c) the Effective Date shall have occurred or shall
occur substantially simultaneously with the delivery hereof
and of the Related Documents; and
(d) the Agent shall have received such other
approvals, opinions or documents as it or any Creditor may
reasonably request.
<PAGE> 31
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the
Company. The Company represents and warrants as follows:
(a) The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the
State of Texas and is duly qualified to do business in, and
is in good standing under the laws of, the States of Texas,
Arizona and New Mexico and has requisite corporate power and
authority, and all material governmental licenses,
authorizations and approvals necessary, to conduct its
business and to own its properties, except where the failure
to have the same would not result in a Material Adverse
Effect.
(b) The execution, delivery and performance by the
Company of this Agreement and the other Related Documents to
which it is a party are within the Company's corporate
powers, have been duly authorized by all necessary corporate
action, and do not contravene (i) the Company's articles of
incorporation or by-laws, which the Company has adopted
pursuant to the Plan of Reorganization or (ii) any law,
order, rule, regulation (including, without limitation, any
order, rule or regulation of the Federal Energy Regulatory
Commission, the New Mexico Public Service Commission or the
Public Utility Commission of Texas, or Regulation G, T, U or
X of the Board of Governors of the Federal Reserve System),
writ, judgment, injunction or decree applicable to the
Company or any contractual restriction binding on or
affecting the Company or any Subsidiary, and do not result
in or require the creation of any Lien of the Company or any
Subsidiary (except as provided in or contemplated by this
Agreement, the other Related Documents or the Plan of
Reorganization) upon or with respect to any properties of
the Company or any Subsidiary.
(c) No authorization or approval or other action by,
and no notice to or filing with, any governmental authority
or regulatory body is required for the due execution,
delivery and performance by the Company of this Agreement or
any other Related Document (including the issuance and
pledge of the First Mortgage Bonds, Series X and the Second
Mortgage Bonds, Series X and the creation and perfection of
the Liens on the property securing such Pledged Bonds)
except for (i) those that have been duly obtained or made
<PAGE> 32
and are in full force and effect and are Final Approvals and
(ii) the Confirmation Order.
(d) This Agreement has been duly and validly executed
by the Company and constitutes, and the other Related
Documents when delivered hereunder will constitute, legal,
valid and binding obligations of the Company enforceable
against the Company in accordance with their respective
terms.
(e) There is no pending or overtly threatened action,
investigation, proceeding or notification which has been
instituted after the Effective Date affecting the Company or
any of its Subsidiaries before any court, governmental
agency or arbitrator which is reasonably likely to have a
Material Adverse Effect.
(f) The Pledged Bonds (i) have been duly authorized,
executed, authenticated, issued, pledged and delivered in
the manner provided for in the respective Indentures and in
compliance with all applicable law; (ii) constitute the
legal, valid and binding obligations of the Company
enforceable against the Company in accordance with their
respective terms except insofar as enforceability may be
limited or otherwise affected by (a) bankruptcy, insolvency,
moratorium, reorganization or other similar laws of general
application relating to or affecting the rights and remedies
of creditors from time to time in effect and (b) general
principles of equity (regardless of whether enforceability
is considered in a proceeding in equity or at law);
(iii) are entitled to the security and benefits of the
respective Indentures; (iv) are secured equally and ratably
with and only with all other bonds issued and outstanding
and which may hereafter and thereafter be issued and
outstanding under the respective Indentures; (v) are secured
by duly perfected Liens on and security interests in the
collateral purported to secure such bonds in the respective
Indentures (which Liens are, in the case of the First
Mortgage Bonds, Series X, first in priority and rank pari
passu solely with the Liens and security interests granted
under the First Mortgage Bond Indenture and securing
outstanding First Mortgage Bonds, and, in the case of the
Second Mortgage Bonds, Series X, subordinated in priority
only to the Liens and security interests granted under the
First Mortgage Bond Indenture and securing outstanding First
Mortgage Bonds) and rank pari passu solely with the Liens
and security interests granted under the Second Mortgage
Bond Indenture and securing outstanding Second Mortgage
<PAGE> 33
Bonds); and (vi) constitute collateral security encumbered
by duly perfected Liens thereon and security interests
therein securing the obligations of the Company under this
Agreement and the Notes as purported to be provided in such
Indentures and herein and in the Note. The Company has
executed, issued and delivered all Pledged Bonds to the
Agent (for the benefit of the Creditors) and has made all
such duly perfected pledges thereof to the Agent as are
required to be executed, issued, delivered and made under
this Agreement and there are no other Liens on such Pledged
Bonds.
(g) The Company and its Subsidiaries have filed all
United States federal and state income tax returns and all
other material tax returns which are required to be filed by
them, and have paid all taxes due pursuant to such returns
or, to the extent deemed necessary or appropriate by the
Company and such Subsidiary, provided reserves for the
payment thereof, other than such taxes that the Company or
any Subsidiary is contesting in good faith by appropriate
legal proceedings.
(h) The Indentures create a valid and perfected Lien
on the Company's property as described in such Indentures as
collateral security for the Company's obligations under the
respective Indentures and the Pledged Bonds.
(i) The Company is not a "holding company" as such
term is defined in the Public Utility Holding Company Act of
1935, as amended, nor an "investment company", or a company
"controlled" by an "investment company", within the meaning
of the Investment Company Act of 1940, as amended.
(j) The Company and the ERISA Affiliates have
fulfilled their respective obligations under the minimum
funding standards of ERISA and the Code with respect to each
Plan and are in compliance with the presently applicable
provisions of ERISA and the Code (except where non-
compliance would not have a material Adverse Effect), and
have not incurred any liability to the PBGC (other than to
pay premiums under Section 4007 of ERISA) or any Plan or any
Multiemployer Plan (other than to make contributions in the
ordinary course of business). No reportable event, within
the meaning of Section 4043 of ERISA, has occurred with
respect to any Plan, except for any such event as to which
the 30-day notice requirement has been waived by the PBGC.
Schedule B (Actuarial Information) to the most recently
filed annual report (Form 5500 Series) for each Plan is
<PAGE> 34
complete and accurate and fairly presents the funding status
of such Plan, and since the date of such Schedule B there
has been no change in such funding status that can
reasonably be expected to have a Material Adverse Effect.
(k) The operations and properties of the Company and
each of its Subsidiaries comply in all material respects
with all Environmental Laws, the Company and each of its
Subsidiaries possess and are in compliance with all required
Environmental Permits and no circumstances exist that are or
would be reasonably likely to (i) form the basis of an
Environmental Action against the Company or any of its
Subsidiaries or any of their properties or (ii) cause any
such property to be subject to any restrictions on
ownership, occupancy, use or transferability under any
Environmental Law, except as would not be likely to have a
Material Adverse Effect and, none of the properties of the
Company or any of its Subsidiaries is listed or proposed for
listing on the National Priorities List under CERCLA or any
analogous state list.
(l) No Material Adverse Effect has occurred since the
Effective Date.
(m) The Confirmation Order has been entered and has
not been reversed, amended (except as consented to by the
Creditors in their sole discretion), stayed, vacated or
rescinded. The Creditors shall be entitled to enforce its
remedies under this Agreement without further application to
or order by the Bankruptcy Court.
ARTICLE V
COVENANTS OF THE COMPANY
SECTION 5.01. Covenants of the Company. Until the
principal amount of the Loans and any accrued interest thereon is
paid in full and all other amounts payable by the Company
hereunder are paid in full, the Company agrees that:
(a) Reporting Requirements. The Company shall deliver
to each Creditor:
(i) as soon as available and in any event within
45 days after the end of each of the first three
quarterly fiscal periods of each fiscal year of the
Company, consolidated and consolidating statements of
<PAGE> 35
income, retained earnings and cash flow of the Company
and its Consolidated Subsidiaries for such period and
for the period from the beginning of the respective
fiscal year to the end of such period, and the related
consolidated and consolidating balance sheets of the
Company and its Consolidated Subsidiaries at the end of
such period, setting forth in each case in comparative
form the corresponding consolidated and consolidating
figures for the corresponding period in the preceding
fiscal year, accompanied by a certificate of a senior
financial officer of the Company, which certificate
shall state that said consolidated financial statements
fairly present the consolidated financial condition and
results of operations of the Company and its
Consolidated Subsidiaries, and said consolidating
financial statements fairly present the respective
individual unconsolidated financial condition and
results of operations of the Company and of each of its
Consolidated Subsidiaries, in each case in accordance
with GAAP, consistently applied, as at the end of, and
for, such period (subject to normal year-end audit
adjustments);
<PAGE> 36
(ii) as soon as available and in any event within
90 days after the end of each fiscal year of the
Company, consolidated and consolidating statements of
income, retained earnings and cash flow of the Company
and its Consolidated Subsidiaries for such fiscal year
and the related consolidated and consolidating balance
sheets of the Company and its consolidated Subsidiaries
as at the end of such fiscal year, setting forth in
each case in comparative form the corresponding
consolidated and consolidating figures for the
preceding fiscal year, and accompanied (i) in the case
of said consolidated statements and balance sheet of
the Company, by an opinion thereon of independent
certified public accountants of recognized national
standing, which opinion shall state that said
consolidated financial statements fairly present the
consolidated financial condition and results of
operations of the Company and its Consolidated
Subsidiaries as at the end of, and for, such fiscal
year in accordance with GAAP, consistently applied, and
a certificate of such accountants stating that, in
making the examination necessary for their opinion,
they obtained no knowledge, except as specifically
stated, of any failure by the Company to comply with
Section 5.01(e), (f) or (i)(xi), and (ii) in the case
of said consolidating statements and balance sheets, by
a certificate of a senior financial officer of the
Company, which certificate shall state that said
consolidating financial statements fairly present the
respective individual unconsolidated financial
condition and results of operations of the Company and
of each of its Consolidated Subsidiaries, in each case
in accordance with GAAP, consistently applied, as at
the end of, and for, such fiscal year;
(iii) as soon as available copies of all proxy
statements, material reports, and registration statements
which the Company or any of its Subsidiaries files with
files with the Securities and Exchange Commission or
any national securities exchange (other than filings
made pursuant to the Public Utility Holding Company Act
of 1935, as amended, public offerings of securities
under employee benefit plans, customer stock purchase
plans or dividend reinvestment plans);
(iv) as soon as possible, and in any event within
two days, after the Company has knowledge of the
occurrence of each Event of Default continuing on the
<PAGE> 37
date of such statement, a statement from the chief
financial officer of the Company setting forth details
of such Event of Default and the action that the
Company has taken and proposes to take with respect
thereto;
(v) at the time the Company furnishes each set of
financial statements pursuant to paragraph (i) or (ii)
above, a certificate of a senior financial officer of
the Company setting forth in reasonable detail the
computations necessary to determine whether the Company
is in compliance with subsections (e), (f) and (i)(xi)
of this Section 5.01 as of the end of the respective
quarterly fiscal period or fiscal year and stating that
no event has occurred and is continuing that
constitutes an Event of Default or would constitute an
Event of Default but for the giving of notice or the
lapse of time, or both, or if any such event has
occurred and is then continuing, a statement as to the
nature thereof and the actions that the Company has
taken and proposes to take with respect thereto; and
(vi) such other financial data and information of
the Company or any of its Subsidiaries as the Agent or
any Creditor may from time to time reasonably request.
(b) Litigation. The Company will promptly give to
each Creditor notice of all actions, suits, investigations,
litigation or legal or arbitral proceedings, and of all
proceedings by or before any governmental or regulatory
authority or agency (and any material development in respect
of such legal or other proceedings), in each case, known to
the Company, which is reasonably likely to have a Material
Adverse Effect.
(c) Preservation of Corporate Existence, Etc. The
Company will (i) preserve and maintain its corporate
existence in the state of its incorporation and qualify and
remain qualified as a foreign corporation in each
jurisdiction in which such qualification is reasonably
necessary in view of its business, and (ii) pay and
discharge, and cause its Subsidiaries to pay and discharge,
all taxes, assessments and governmental charges upon its
income and its properties prior to the date on which
penalties are attached thereto, unless (A) such taxes,
assessments and governmental charges shall be contested in
good faith and by appropriate proceedings by the Company or
its Subsidiaries and (B) the Company or any such Subsidiary
<PAGE> 38
shall set aside on its books adequate reserves therefor to
the extent required by GAAP. Nothing contained in this
clause (c) of Section 5.01 shall be deemed to prohibit any
transaction permitted by clause (g) of this Section 5.01.
(d) Maintenance of Insurance, Etc. The Company will,
and will cause its Subsidiaries to, maintain insurance with
responsible insurance companies or associations or through
its own program of self-insurance in such amounts, with such
deductibles, and covering such risks as is usually carried
by companies engaged in similar business.
(e) Leverage Ratio. The Company will not permit the
Leverage Ratio to exceed 0.68 to 1 at any time on or after
the last day of the first full fiscal quarter of the Company
commencing after the Effective Date.
(f) Interest Coverage Ratio. The Company will not
permit the Interest Coverage Ratio to be less than 1.40 to 1
at any time on or after the last day of the first full
fiscal quarter of the Company commencing after the Effective
Date.
(g) Prohibition of Fundamental Changes. The Company
will not, and will not permit any of its Subsidiaries to,
enter into any transaction of merger, consolidation,
amalgamation, liquidation or dissolution; provided that the
Company may merge or consolidate with any other Person if
(i) in any such transaction in which the Company is a party,
the Company is the surviving corporation or (ii) in any such
transaction in which the Company is not a party, the
surviving corporation shall be a Subsidiary of the Company,
in each case so long as after giving effect thereto no Event
of Default would exist hereunder. The Company will not, and
will not permit any of its Subsidiaries to, convey, sell,
lease, transfer or otherwise dispose of, in one transaction
or a series of transactions, all or substantially all of its
business or assets, or assets (excluding (i) accounts
receivable (ii) obsolete or worn-out tools, equipment or
other property no longer used or useful in its business and
(iii) inventory or other property sold or disposed of in the
ordinary course of business and on ordinary business terms)
which in the aggregate have a net book value in excess of
$50,000,000, whether now owned or hereafter acquired, to any
other Person. Notwithstanding the foregoing provisions of
this subsection (g):
<PAGE> 39
(1) any Subsidiary of the Company may be merged or
consolidated with or into: (A) the Company if the Company
shall be the continuing or surviving corporation or (B) any
other Subsidiary of the Company; and
(2) any Subsidiary of the Company may sell, lease,
transfer or otherwise dispose of any or all of its Property
(upon voluntary liquidation or otherwise) to the Company or
a Subsidiary of the Company.
(h) Compliance with ERISA. The Company will not (i)
enter into any non-exempt prohibited transaction (as defined
in Section 4975 of the Code and in Section 406 of ERISA)
involving any Plan which may result in any liability of the
Company to any Person which (in the reasonable opinion of
the Majority Creditors) will have a Material Adverse Effect
or (ii) allow or suffer to exist any other event or
condition known to the Company which results in any
liability of the Company or any of its subsidiaries to the
PBGC, or in any Withdrawal Liability to any Multiemployer
Plan, which (in the reasonable opinion of the Majority
Creditors) will have a Material Adverse Effect. For
purposes of this Section 5.01(h), "liability" shall not
include termination insurance premiums payable under Section
4007 of ERISA. Upon request of any Creditor, the Company
shall promptly furnish to such Creditor a copy of Schedule B
(Actuarial Information) to the most recently filed annual
report (Form 5500 Series) of any Plan.
(i) Limitation on Liens. The Company will not, nor
will it permit any of its Subsidiaries to, create, incur,
assume or suffer to exist any Lien upon or with respect to
any of its property, whether now owned or hereafter
acquired, except:
(i) Liens created pursuant to the Related
Documents;
(ii) Liens created or otherwise in existence on
the Effective Date or contemplated by the Plan of
Reorganization;
(iii) Liens imposed by any governmental authority
for taxes, assessments or charges not yet due or which
are being contested in good faith and by appropriate
proceedings if adequate reserves with respect thereto
are maintained on the books of the Company or the
<PAGE> 40
affected Subsidiaries, as the case may be, in
accordance with GAAP;
(iv) carriers', warehousemen's, mechanics',
materialmen's, repairmen's or other like Liens arising
in the ordinary course of business which are not
overdue for a period of more than 60 days or which are
being contested in good faith and by appropriate
proceedings;
(v) pledges or deposits under worker's
compensation, unemployment insurance and other social
security legislation;
(vi) deposits to secure the performance of bids,
trade contracts (other than for borrowed money),
leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like
nature incurred in the ordinary course of business;
(vii) easements, rights-of-way, restrictions and
other similar encumbrances incurred in the ordinary
course of business and encumbrances consisting of
zoning restrictions, easements, licenses, restrictions
on the use of property or minor imperfections in title
thereto which, in the aggregate, are not material in
amount, and which do not in any case materially detract
from the value of the property subject thereto, render
title to the property encumbered thereby unmarketable,
materially adversely affect the use of such property
for its present purposes or interfere with the ordinary
conduct of the business of the Company or any of its
Subsidiaries;
(viii) Liens on property of any corporation which
becomes a Subsidiary of the Company after the date of
this Agreement, provided that such Liens are in
existence at the time such corporation becomes a
Subsidiary of the Company and were not created in
anticipation thereof, provided further that such Liens
shall not extend to cover any property of the Company
or any of its other Subsidiaries and such Liens shall
not cover property of such Subsidiary other than
property of the types covered by the terms of such
Liens at the time such Subsidiary is acquired;
(ix) Liens upon real and/or tangible personal
property acquired after the Effective Date (by
<PAGE> 41
purchase, construction or otherwise) by the Company or
any of its Subsidiaries, each of which Liens either (A)
existed on such property before the time of its
acquisition and was not created in anticipation
thereof, or (B) was created solely for the purpose of
securing Debt representing, or incurred to finance,
refinance or refund, the cost (including the cost of
construction) of such property; provided that no such
Lien shall extend to or cover any property of the
Company or such Subsidiary other than the property so
acquired and improvements thereon;
(x) banker's liens, rights of set-off and Liens
on documents presented under commercial letters of
credit, in each case granted to banks in accordance
with customary banking practices or arising by
operation of law;
(xi) additional Liens upon real and/or personal
property created after the date hereof, provided that,
on the date each such Lien is incurred, the lower of
(1) the fair market value of all property subject to
Liens permitted by this paragraph (xi) and not
otherwise permitted by this subsection (i) or (2) the
aggregate amount of all obligations secured by Liens
permitted by this paragraph (xi) and not otherwise
permitted by this subsection (i) shall not exceed 5% of
Total Capital on such date; and
(xii) any extension, renewal or replacement of the
foregoing, provided, however, that the Liens permitted
hereunder shall not be spread to cover any additional
Debt or property (other than a substitution of like
property).
(j) Compliance with Laws, Etc. The Company will
comply, and cause each of its Subsidiaries to comply, in all
material respects, with all applicable laws, rules,
regulations and orders, such compliance to include, without
limitation, compliance with ERISA, except where the failure
to so comply would not have a Material Adverse Effect.
(k) Compliance with Environmental Laws. The Company
will comply, and cause each of its Subsidiaries and all
lessees and other Persons occupying or operating on its
properties to comply, in all material respects, with all
Environmental Laws and Environmental Permits applicable to
its operations and properties; obtain and renew all
<PAGE> 42
Environmental Permits necessary for its operations and
properties; and conduct, and cause each of its Subsidiaries
to conduct, any investigation, study, sampling and testing,
and undertake any cleanup, removal, remedial or other action
required under any Environmental Law to remove and clean up
all Hazardous Materials from any of its properties, in
accordance with the requirements of all Environmental Laws;
provided, however, that neither the Company nor any of its
Subsidiaries shall be required to undertake any such
cleanup, removal, remedial or other action to the extent
that its obligation to do so is being contested in good
faith and by proper proceedings and reserves, where required
by GAAP, are being maintained with respect to such
circumstances.
(l) Visitation Rights. The Company will, at any
reasonable time and from time to time, permit the Agent or
any Creditor or any agents or representatives thereof, to
examine and make copies of and abstracts from the records
and books of account of, and examine the properties of, the
Company and any of its Subsidiaries, and to discuss the
affairs, finances and accounts of the Company and any of its
Subsidiaries with any of their officers or directors and
with their independent certified public accountants.
(m) Maintenance of Properties, Etc. The Company will
maintain and preserve, and cause each of its Subsidiaries to
maintain and preserve, all of its properties that are used
or useful in the conduct of its business in good working
order and condition, ordinary wear and tear excepted;
provided that this subsection (m) shall not prevent the sale
of any properties permitted by subsection (g) of this
Section 5.01.
(n) Change in Nature of Business. The Company will
not make, or permit any of its Subsidiaries to make, any
material change in the nature of its business as carried on
at the date hereof.
(o) Lien. The Company shall maintain the Lien hereby
created on the First Mortgage Bonds, Series X and the Second
Mortgage Bonds, Series X and the Liens created pursuant to
the Indentures for the benefit of the Creditors and defend,
preserve and protect such Lien against all claims of all
Persons.
(p) Maintain Books and Records. The Company shall
keep adequate records and books of account, in which
<PAGE> 43
complete entries will be made in accordance with GAAP
consistently applied.
(q) Additional Documents. As promptly as practicable
(but in any event not later than 30 days) after the
Effective Date, the Company will furnish to the Agent, with
sufficient copies for each Creditor, (i) certified copies of
the recorded counterparts of the Indentures evidencing the
filing thereof and (ii) certified copies of all notices
filed with respect to the Indentures.
(r) Subsidiaries and Affiliates. The Company shall
not, and shall not permit any of its Subsidiaries to, create
any Subsidiaries of the Company or to make any investment in
any Person except in compliance with the Public Utility
Holding Company Act of 1935, as amended, and the regulations
and orders of the Securities and Exchange Commission
thereunder.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the
following events ("Events of Default") shall occur and be
continuing:
(a) The Company shall default in the payment when due
of any principal of any Loan; or
(b) the Company shall default in the payment when due
of any interest on any Loan or any other amount payable by
it hereunder and such default shall continue unremedied for
five Business Days; or
(c) The Company or any of its Subsidiaries shall
default in the payment when due of any principal of or any
interest on any Debt aggregating $10,000,000 or more,or fail
to observe or perform any material term, covenant or
agreement contained in any agreement by which it is bound,
evidencing or securing Debt, in an aggregate amount of
$10,000,000 or more, or any other event shall occur or
condition shall exist under any agreement or instrument
relating to any such Debt, after the giving of any required
notice and for such period of time as would permit the
holder or holders thereof or of any obligations issued
thereunder to accelerate the maturity thereof, unless such
<PAGE> 44
failure or event or condition shall have been cured by the
Company or its affected Subsidiary, as the case may be, or
effectively waived by such holder or holders; or
(d) Any representation, warranty or certification made
or deemed made in any Related Document by the Company (or
any of its officers), or any certificate furnished to any
Creditor pursuant to the provisions thereof, shall prove to
have been false or misleading as of the time made or
furnished in any material respect; or
(e) The Company shall default in the performance of
any of its obligations under clause (a)(iv) of Section 5.01
or clauses (e), (f), (g) or (n) of Section 5.01; or a
consensual Lien shall be created by the Company or any of
its Subsidiaries in violation of Section 5.01(i); or the
Company shall default in its performance of any of its other
obligations under this Agreement or under any other Related
Document and such default in the performance of any such
other obligation shall continue unremedied for a period of
15 days after notice thereof to the Company by the Agent or
any Creditor; or
(f) There shall remain in force, undischarged,
unsatisfied and unstayed, for more than 30 days, whether or
not consecutive, any final judgment against the Company or
any of its Material Subsidiaries that, together with other
outstanding final judgments, undischarged, against the
Company and all of its Material Subsidiaries exceeds in the
aggregate $10,000,000 (for the purposes hereof, the term
"final judgment" shall mean a judgment which is not subject
to appeal); or
<PAGE> 45
(g) The Company or any of its Material Subsidiaries
shall make a general assignment for the benefit of
creditors, or admit in writing its inability to pay or
generally fail to pay its debts as they mature or become
due, or shall petition or apply for the appointment of a
trustee or other custodian, liquidator or receiver of the
Company or any of its Material Subsidiaries, as the case may
be, or any substantial part of its respective assets; or the
Company or any of its Material Subsidiaries shall commence
any case or other proceeding relating to the Company or any
of its Material Subsidiaries under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of
debt, dissolution or liquidation or similar law of any
jurisdiction, now or hereafter in effect, or the Company or
any of its Material Subsidiaries shall take any action to
authorize or in furtherance of any of the foregoing; or if
any such petition or application shall be filed or any such
case or other proceeding shall be commenced against the
Company or any of its Material Subsidiaries and the Company
or any of its Material Subsidiaries shall indicate its
approval thereof, consent thereto or acquiescence therein or
such petition or application shall not be dismissed on or
before the 60th day after the filing thereof; or
(h) A decree or order is entered appointing any
trustee, custodian, liquidator or receiver or adjudicating
the Company or any of its Material Subsidiaries bankrupt or
insolvent, or approving a petition in any such case or other
proceeding, or a decree or order for relief is entered in
respect of the Company or any of its Material Subsidiaries
in an involuntary case under federal bankruptcy laws as now
or hereafter reconstituted; or
(i) There shall have been asserted against the Company
by a Governmental Person or other Person, a written
complaint, claim or demand asserting any claims or
liabilities, whether accrued, absolute or contingent, based
on or arising from the presence, release or disposal of
Hazardous Materials by the Company or any of its
Subsidiaries that is reasonably likely to be determined
adversely to the Company or any of its Subsidiaries, and the
amount thereof (either individually or in the aggregate)
would, in such event, have a Material Adverse Effect (after
deducting any portion thereof that is reasonably expected to
be paid by other creditworthy Persons); or
(j) The Confirmation Order shall be (i) reversed,
revoked or vacated in whole or in part by any Final Order of
<PAGE> 46
a court of competent jurisdiction, or (ii) modified in a
manner or subjected to a stay that adversely affects the
Company's ability to perform any of its obligations
hereunder, as determined by the Creditors in their sole
discretion; or
(k) Central and South West Corporation shall cease,
directly or indirectly, to own (or otherwise shall cease,
directly or indirectly, to control the voting rights of) at
least 51% of the Voting Stock of the Company; or
(l) Any "Event of Default" under and as defined in the
Related Documents shall have occurred and be continuing; or
(m) Any regulatory approval as set forth in Section
3.01(e) or required to consummate the Plan of Reorganization
shall be rescinded if such rescission can not be appealed by
the Company and has a Material Adverse Effect; or
(n) Any material provisions of this Agreement or any
other Related Document shall at any time cease to be a
valid, binding obligation of the Company enforceable against
the Company, or any such agreement shall be declared to be
null and void, or the validity or enforceability thereof
shall be contested by the Company, or a proceeding shall be
commenced by any Governmental Person having jurisdiction
over the Company seeking to establish the invalidity or
unenforceability thereof, or the Company shall deny that it
has any further liability or obligation under this Agreement
or any Note or any other Related Document, or the Indentures
after delivery thereof shall for any reason (other than
pursuant to the terms thereof) cease to create valid and
perfected Liens on the Company's property purported to be
secured thereby, which Liens (i) in the case of Liens
securing the First Mortgage Bonds held as collateral, rank
first in priority or rank pari passu solely with the Liens
granted under the First Mortgage Bond Indenture and securing
outstanding First Mortgage Bonds or (ii) in the case of such
Liens securing the Second Mortgage Bonds held as collateral,
are subordinate in priority only to the Liens granted under
the First Mortgage Bond Indenture and securing outstanding
First Mortgage Bonds or rank pari passu solely with the
Liens granted under the Second Mortgage Bond Indenture and
securing outstanding Second Mortgage Bonds;
then, upon request of the Majority Creditors, the Agent will, by
notice to the Company, declare the Notes, all interest thereon
and all other amounts payable under this Agreement to be
<PAGE> 47
forthwith due and payable, whereupon the Notes, all such interest
and all such amounts shall become and be forthwith due and
payable, without presentment, demand, protest, or further notice
of any kind, all of which are hereby expressly waived by the
Company; provided, however, that, in the event of the occurrence
of an Event of Default pursuant to subsections (g) or (h) of this
Section 6.01, the Notes, all interest thereon and all other
amounts payable under this Agreement shall automatically become
and be due and payable, without presentment, demand, protest or
any notice of any kind, all of which are hereby expressly waived
by the Company.
ARTICLE VII
SECURITY
SECTION 7.01. Issuance and Pledge of Bonds.
Concurrently with the execution of this Agreement and delivery of
the Notes, the Company shall execute, issue, and deliver to the
Agent (for the benefit of each of the Creditors) the Pledged
Bonds as security for the payment of all obligations of the
Company now or hereafter existing under this Agreement or the
Notes in respect of principal and interest pursuant to and on the
term of this Agreement the Notes and the Indentures. The Company
hereby pledges to the Agent and grants to the Agent (in each case
for the benefit of the Creditors) a security interest in the
Pledged Bonds and all interest, cash, instruments and other
property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such
Bonds and proceeds of any and all of the foregoing.
SECTION 7.02. Application of Moneys. Any moneys
received by the Agent on account of the Pledged Bonds shall be
applied as follows: (a) moneys received on account of principal
of the Pledged Bonds shall be applied to the payment of unpaid
principal of the Notes then due and owing and (b) moneys received
on account of interest on the Pledged Bonds shall be applied to
the payment of accrued and unpaid interest on the Notes then due
and owing.
SECTION 7.03. Rights of Bondholders. The Agent as
holder of the Pledged Bonds shall have only such rights provided
to holders of bonds in the respective Indenture relating to such
Bonds. Without limiting the generality of the foregoing, (a) the
Pledged Bonds may not be sold, assigned, pledged or otherwise
transferred by the Agent or any Creditor, whether pursuant to the
Uniform Commercial Code after an Event of Default or otherwise,
<PAGE> 48
except to a successor Agent appointed in accordance with Section
8.08 to be held as security as provided in this Article VII, and
(b) no payment of principal of or interest on the Pledged Bonds,
shall be demanded or received except if, and to the extent that,
the corresponding payment remains unpaid (whether at stated
maturity or otherwise) hereunder or under the Notes. To the
extent that moneys recovered from the Pledged Bonds are
insufficient to pay in full the amount of principal and interest
due on the Notes and other amounts due hereunder, the Company
shall remain liable for any such deficiency under the terms of
this Agreement and the Notes.
<PAGE> 49
ARTICLE VIII
THE AGENT
SECTION 8.01. Appointment, Powers and Immunities. Each
Creditor hereby irrevocably appoints and authorizes the Agent to
act as its agent hereunder and under the other Related Documents
with such powers as are specifically delegated to the Agent by
the terms of this Agreement and of the other Related Documents,
together with such other powers as are reasonably incidental
thereto. The Agent (which term as used in this sentence and in
Section 8.05 and the first sentence of Section 8.06 shall include
reference to its affiliates and its own and its affiliates'
officers, directors, employees and agents): (a) shall have no
duties or responsibilities except those expressly set forth in
this Agreement and in the other Related Documents, and shall not
by reason of this Agreement or any other Related Document be a
trustee for any Creditor; (b) shall not be responsible to the
Creditors for any recitals, statements, representations or
warranties contained in this Agreement or in any other Related
Document, or in any certificate or other document referred to or
provided for in, or received by any of them under, this Agreement
or any other Related Document, or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this
Agreement, any Note or any other Related Document or any other
document referred to or provided for herein or therein or for any
failure by the Company or any other Person to perform any of its
obligations hereunder or thereunder; (c) shall not be required to
initiate or conduct any litigation or collection proceedings
hereunder or under any other Related Document; and (d) shall not
be responsible for any action taken or omitted to be taken by it
hereunder or under any other Related Document or under any other
document or instrument referred to or provided for herein or
therein or in connection herewith or therewith, except for its
own gross negligence or willful misconduct. The Agent may employ
agents and attorneys-in-fact and shall not be responsible for the
negligence or misconduct of any such agents or attorneys-in-fact
selected by it in good faith. The Agent may deem and treat the
payee of any Note as the holder thereof for all purposes hereof
unless and until a notice of the assignment or transfer thereof
shall have been filed with the Agent.
SECTION 8.02. Reliance by Agent. The Agent shall be
entitled to rely upon any certification, notice or other
communication (including, without limitation, any thereof by
telephone, telecopy, telex, telegram or cable) believed by it to
be genuine and correct and to have been signed or sent by or on
behalf of the proper Person or Persons, and upon advice and
<PAGE> 50
statements of legal counsel, independent accountants and other
experts selected by the Agent. As to any matters not expressly
provided for by this Agreement or any other Related Document, the
Agent shall in all cases be fully protected in acting, or in
refraining from acting, hereunder or thereunder in accordance
with instructions given by the Majority Creditors, and such
instructions of the Majority Creditors and any action taken or
failure to act pursuant thereto shall be binding on all of the
Creditors; provided, that the Agent shall be entitled to assume
that each Creditor is reasonably satisfied with the form and
substance of each document delivered to the Agent under Article
III hereof (and available for inspection by such Creditor on or
before the Effective Date) unless the Agent shall have received
notice from such Creditor setting forth its specific objection to
any such document.
SECTION 8.03. Defaults. The Agent shall not be deemed
to have knowledge or notice of the occurrence of an Event of
Default (other than non-payment of principal of or interest on
the Notes) unless the Agent has received notice from a Creditor
or the Company specifying such Event of Default and stating that
such notice is a "Notice of Default". In the event that the
Agent receives such a notice of the occurrence of an Event of
Default, the Agent shall give prompt notice thereof to the
Creditors (and shall give each Creditor prompt notice of each
such non-payment). The Agent shall (subject to Section 8.07)
take such action with respect to such Event of Default as shall
be directed by the Majority Creditors, provided that, unless and
until the Agent shall have received such directions, the Agent
may (but shall not be obligated to) take such action, or refrain
from taking such action, with respect to such Default as it shall
deem advisable in the best interest of the Creditors except to
the extent that this Agreement expressly requires that such
action be taken, or not be taken, only with the consent or upon
the authorization of the Majority Creditors or all of the
Creditors.
SECTION 8.04. Rights as a Creditor. In the event the
Agent shall hold a Loan or Note hereunder, the Bank (and any
successor acting as Agent) in its capacity as a Creditor
hereunder shall have the same rights and powers hereunder as any
other Creditor and may exercise the same as though it were not
acting as the Agent, and the term "Creditor" or "Creditors"
shall, unless the context otherwise indicates, include the Agent
in its individual capacity. The Bank (and any successor acting
as Agent) and its affiliates may (without having to account
therefor to any Creditor) accept deposits from, lend money to,
make investments in and generally engage in any kind of banking,
<PAGE> 51
trust or other business with the Company (and any of its
Subsidiaries or affiliates) as if it were not acting as the
Agent, and the Bank and its affiliates may accept fees and other
consideration from the Company for services in connection with
this Agreement or otherwise without having to account for the
same to the Creditors.
SECTION 8.05. Indemnification. The Creditors agree to
indemnify the Agent (to the extent not reimbursed under Section
9.08, but without limiting the obligations of the Company under
said Section 9.08) ratably in accordance with the aggregate
principal amount of the Loans held by the Creditors (or, if no
Loans are at the time outstanding, ratably in accordance with the
respective original principal amounts of their Notes), for any
and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of
any kind and nature whatsoever that may be imposed on, incurred
by or asserted against the Agent arising out of or by reason of
any investigation in or in any way relating to or arising out of
this Agreement or any other Related Document or any other
documents contemplated by or referred to herein or therein or the
transactions contemplated hereby or thereby (including, without
limitation, the costs and expenses that the Company is obligated
to pay under Section 9.04, but excluding, unless a Default has
occurred and is continuing, normal administrative costs and
expenses incident to the performance of its agency duties
hereunder) or the enforcement of any of the terms hereof or
thereof or of any such other documents, provided that no Creditor
shall be liable for any of the foregoing to the extent they arise
from the gross negligence or willful misconduct of the party to
be indemnified.
SECTION 8.06. Non-Reliance on Agent and Other
Creditors. Each Creditor agrees that it has, independently and
without reliance on the Agent or any other Creditor, and based on
such documents and information as it has deemed appropriate, made
its own credit analysis of the Company and its Subsidiaries and
decision to vote on the Plan of Reorganization and to enter into
this Agreement and that it will, independently and without
reliance upon the Agent or any other Creditor, and based on such
documents and information as it shall deem appropriate at the
time, continue to make its own analysis and decisions in taking
or not taking action under this Agreement or under any other
Related Document. The Agent shall not be required to keep itself
informed as to the performance or observance by the Company of
this Agreement or any of the other Related Documents or any other
document referred to or provided for herein or therein or to
inspect the properties or books of the Company or any of its
<PAGE> 52
Subsidiaries. Except for notices, reports and other documents
and information expressly required to be furnished to the
Creditors by the Agent hereunder or under the Related Documents,
the Agent shall not have any duty or responsibility to provide
any Creditor with any credit or other information concerning the
affairs, financial condition or business of the Company or any of
its Subsidiaries (or any of their affiliates) that may come into
the possession of the Agent or any of its affiliates.
The relationship between the Company, on the one hand,
and the Agent and the Creditors, on the other hand, is, and shall
at all times remain, solely that of a borrower and lenders;
neither the Agent nor the Creditors shall under any circumstances
be construed to be partners or joint venturers of the Company,
its Subsidiaries or its Affiliates; neither the Agent nor the
Creditors shall under any circumstance be deemed to be in a trust
or a fiduciary relationship with the Company, its Subsidiaries or
its Affiliates, or to owe any fiduciary duty to the Company, its
Subsidiaries or its Affiliates; neither the Agent nor the
Creditors undertake or assume any responsibility or duty to the
Company, its Subsidiaries or its Affiliates to select, review,
inspect, supervise, pass judgment upon or inform the Company, its
Subsidiaries or its Affiliates of any matter in connection with
their property or the operations of the Company, its Subsidiaries
or its Affiliates; the Company, its Subsidiaries and its
Affiliates shall rely entirely upon their own judgment with
respect to such matters; and any review, inspection, supervision,
exercise of judgment or supply of information undertaken or
assumed by the Agent or the Creditors in connection with such
matters is solely for the protection of the Agent and the
Creditors and neither the Company nor any Person is entitled to
rely thereon.
SECTION 8.07. Failure to Act. Except for action
expressly required of the Agent hereunder and under the other
Related Documents, the Agent shall in all cases be fully
justified in failing or refusing to act hereunder and thereunder
unless it shall receive further assurances to its satisfaction
from the Creditors of their indemnification obligations under
Section 8.05 against any and all liability and expense that may
be incurred by it by reason of taking or continuing to take any
such action.
SECTION 8.08. Resignation or Removal of Agent. Subject
to the appointment and acceptance of a successor Agent as
provided below, the Agent may resign at any time by giving notice
thereof to the Creditors and the Company, and the Agent may be
removed at any time with or without cause by the Majority
<PAGE> 53
Creditors. Upon any such resignation or removal, the Majority
Creditors shall have the right to appoint a successor Agent. If
no successor Agent shall have been so appointed by the Majority
Creditors and shall have accepted such appointment within 30 days
after the retiring Agent's giving of notice of resignation or the
Majority Creditors' removal of the retiring Agent, then the
retiring Agent may, on behalf of the Creditors, appoint a
successor Agent, that shall (unless otherwise consented to by the
Company) be a bank that has an office in New York, New York or in
Dallas or Houston, Texas with a combined capital and surplus of
at least $250,000,000. Upon the acceptance of any appointment as
Agent hereunder by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights,
powers, privileges and duties of the retiring Agent, and the
retiring Agent shall be discharged from its duties and
obligations hereunder. After any retiring Agent's resignation or
removal hereunder as Agent, the provisions of this Article VIII
shall continue in effect for its benefit in respect of any
actions taken or omitted to be taken by it while it was acting as
the Agent.
SECTION 8.09. Agency Fee. The Company shall pay to the
Agent from time to time an agency fee in such amounts and at such
times as the Company and the Agent may agree.
<PAGE> 54
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Amendments, Etc. Except as otherwise
expressly provided in this Agreement, any provision of this
Agreement may be modified or supplemented only by an instrument
in writing signed by the Company, the Agent and the Majority
Creditors, or by the Company and the Agent acting with the
consent of the Majority Creditors, and any provision of this
Agreement may be waived by the Majority Creditors in writing or
by the Agent acting with the consent of the Majority Creditors;
provided that: (a) no modification, supplement or waiver shall,
unless by an instrument signed by all of the Creditors or by the
Agent acting with the consent of all of the Creditors: (i)
extend the date fixed for the payment of principal of or interest
on any Loan or any fee hereunder, (ii) reduce the amount of any
such payment of principal, (iii) reduce the rate at which
interest accrues and is payable thereon or any fee is payable
hereunder, (iv) alter the rights or obligations of the Company to
prepay Loans or Notes, (v) alter the terms of this Section 9.01,
(vi) modify the definition of the term "Majority Creditors" or
modify in any other manner the number or percentage of the
Creditors required to make any determinations or waive any rights
hereunder or to modify any provision hereof, (vii) waive any of
the conditions precedent set forth in Article III; or (viii)
alter the provisions of Article VII hereof to permit the release
of First Mortgage Bonds or Second Mortgage Bonds as collateral
security for the Company's obligations hereunder and under the
Notes or to permit additional obligations to be secured by such
collateral security that is prior or equal to Lien granted to the
Agent under the Related Documents; and (b) any modification or
supplement of Article VIII shall require the consent of the
Agent.
<PAGE> 55
SECTION 9.02. Notices, Etc. All notices and other
communications provided for hereunder shall be in writing
(including telecopier, telegraphic, telex or cable communication)
and mailed, telecopied, telegraphed, telexed, cabled or
delivered, to the intended recipient at its address set forth on
the signature pages hereto or, as to each party, at such other
address as shall be designated by such party in a written notice
to the other party. Except as otherwise provided herein, all
such notices and communications shall, when mailed, telecopied,
telegraphed, telexed or cabled, be effective when deposited in
the mails, telecopied, delivered to the telegraph company,
confirmed by telex answerback or delivered to the cable company,
respectively, except that notices to the Agent pursuant to the
provisions of Article II shall not be effective until received by
the Agent.
SECTION 9.03. No Waiver; Remedies. No failure on the
part of the Agent or any Creditor to exercise, and no delay in
exercising, any right hereunder or under the Notes 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 provided in this
Agreement are cumulative and not exclusive of any remedies
provided by law.
SECTION 9.04. Costs, Expenses and Taxes. The Company
agrees to pay on demand all costs and expenses in connection with
the preparation, execution, delivery, administration (except
normal administrative costs and fees and expenses of counsel
related thereto prior to an Event of Default), modification and
amendment of this Agreement, the Notes and any other documents to
be delivered hereunder, including, without limitation, the
reasonable fees and out-of-pocket expenses of counsel for the
Agent and the Creditors, and local counsel who may be retained by
said counsel, with respect thereto, with respect to advising the
Agent and the Creditors as to their rights and responsibilities,
or the perfection or preservation of rights or interests, under
this Agreement, any other Related Document and such other
documents which may be delivered in connection with this
Agreement, with respect to negotiations with the Company or with
other creditors of the Company, any Person controlling the
Company or any of the Company's Subsidiaries arising out of any
Event of Default or any events or circumstances that may give
rise to an Event of Default and with respect to presenting claims
in or otherwise participating in or monitoring any bankruptcy,
insolvency or other similar proceeding involving creditor's
rights generally and any proceeding ancillary or in connection
<PAGE> 56
with the negotiation of any restructuring or "work-out" (whether
or not consummated). The Company further agrees to pay on demand
all costs and expenses of the Agent and the Creditors (including
reasonable counsel fees and expenses), in connection with the
enforcement (whether through negotiations, legal proceedings or
otherwise) of this Agreement, the Notes, and any other Related
Document and any other documents to be delivered hereunder,
including, without limitation, reasonable counsel fees and
expenses in connection with the enforcement of rights under this
Section 9.04. In addition, the Company shall pay any and all
stamp and other administrative taxes and fees payable or
determined to be payable in connection with the execution and
delivery of this Agreement, the Notes, and any other Related
Document and any other documents to be delivered hereunder, and
agrees to save the Agent and each Creditor harmless from and
against any and all liabilities with respect to or resulting from
any delay in paying or omission to pay such taxes and fees.
SECTION 9.05. Binding Effect; Assignments and
Participations. (a) This Agreement shall become effective when
it shall have been executed by the Company, the Agent and each
Creditor and thereafter shall be binding upon and inure to the
benefit of the Company, the Agent and each Creditor and their
respective successors and assigns, except that the Company shall
not have the right to assign its rights hereunder or any interest
herein without the prior written consent of each Creditor and the
Agent.
(b) A Creditor may sell or agree to sell to one or more
other Persons a participation in all or any part of any Loans
held by it, in which event each purchaser of a participation (a
"Participant") shall be entitled to the rights and benefits of
the provisions of Section 5.01(a)(vi) with respect to its
participation in such Loans as if (and the Company shall be
directly obligated to such Participant under such provisions as
if) such Participant were a "Creditor" for purposes of said
Section, but shall not have any other rights or benefits under
this Agreement or any Note or any other Related Document (the
Participant's rights against such Creditor in respect of such
participation to be those set forth in the agreements executed by
such Creditor in favor of the Participant). All amounts payable
by the Company to any Creditor under Section 2.05 and 2.09 in
respect of Loans held by it shall be determined as if such
Creditor had not sold or agreed to sell any participations in
such Loans, and as if such Creditor were maintaining such Loan in
the same way that it is maintaining the portion of such Loan in
which no participations have been sold. In no event shall a
Creditor that sells a participation agree with the Participant
<PAGE> 57
(unless such Participant is an Eligible Institution) to take or
refrain from taking any action hereunder or under any other
Related Document except that such Creditor may agree with the
Participant that it will not, without the consent of the
Participant, agree to (i) extend the date fixed for the payment
of principal of or interest on the related Loan or Loans payable
to the Participant, (ii) reduce the amount of any such payment of
principal, (iii) reduce the rate at which interest is payable
thereon to a level below the rate at which the Participant is
entitled to receive such interest, (iv) alter the rights or
obligations of the Company to prepay the related Loans, (v) alter
the provisions of Article VII hereof to permit the release of
First Mortgage Bonds or Second Mortgage Bonds as collateral
security for the Company's obligations hereunder and under the
Notes or to permit additional obligations to be secured by such
collateral security that is prior or equal to Lien granted to the
Agent under the Related Documents or (vi) consent to any
modification, supplement or waiver hereof or of any of the other
Related Documents to the extent that the same, under Section
9.01, requires the consent of each Creditor.
(c) Each Creditor may assign any of its Loans and its
Note to one or more Eligible Institutions; provided, that (i) any
such partial assignment shall be in an amount at least equal to
$5,000,000; and (ii) each such assignment by a Creditor of its
Loans or its Note shall be made in such manner so that the same
portion of its Loans and Note is assigned to the respective
assignee. Upon execution and delivery by the assignee to the
Company and the Agent of an instrument in writing pursuant to
which such assignee agrees to become a "Creditor" hereunder (if
not already a Creditor) having the Loans specified in such
instrument, the assignee shall have, to the extent of such
assignment (unless otherwise provided in such assignment with the
consent of the Company and the Agent), the obligations, rights
and benefits of a Creditor hereunder holding the Loans (or
portions thereof) assigned to it (in addition to the Loans, if
any, theretofore held by such assignee) and such assigning
Creditor shall, to the extent of such assignment, be released
from its obligations hereunder (and, the case of an assignment of
covering all or the remaining portion of an assigning Creditor's
rights and obligations under this Agreement, such Creditor shall
cease to be a party hereto). Upon each such assignment the
assigning Creditor shall pay the Agent an assignment fee of
$2,500.
(d) Within 5 Business Days after receipt of notice, the
Company, at its own expense, shall execute and deliver to the
Agent, in exchange for the surrendered Note or Notes, a new Note
<PAGE> 58
or Notes to the order of such assignee in a principal amount
equal to the principal amount of the Loan assigned to such
assignee. Such new Note or Notes shall be in an aggregate
principal amount equal to the aggregate principal amount of such
surrendered Note; such new Notes shall be dated the date of the
surrendered Notes which they replace and shall otherwise be in
substantially the form of Exhibit A hereto, as appropriate.
Canceled Notes shall be returned to the Company.
(e) Notwithstanding any other provision set forth in
this Agreement, any Creditor may at any time create a security
interest in all or any portion of its rights under this Agreement
and its Note in favor of any Federal Reserve Bank in accordance
with Regulation A of the Board of Governors of the Federal
Reserve System.
SECTION 9.06. Indemnity. The Company hereby
indemnifies and holds the Agent, each Creditor and each of their
affiliates and their officers, directors, employees, agents and
advisors (each, an "Indemnified Party") harmless from and against
any and all claims, damages, losses, liabilities and expenses
(including, without limitation, reasonable fees and expenses of
counsel) that may be incurred by or asserted or awarded against
any Indemnified Party (except to the extent any such claim,
damage, loss, liability or expense is found in a final,
non-appealable judgment by a court of competent jurisdiction to
have resulted from such Indemnified Party's gross negligence or
willful misconduct), in each case relating to or arising out of
or in connection with or by reason of:
(i) any representation, warranty or certification made
or deemed made in this Agreement or in any Note by the
Company (or any of its officers), or any certificate
furnished to any Creditor pursuant to the provisions hereof
or thereof, proving to have been false or misleading as of
the time made or furnished in any material respect;
(ii) any case or proceeding pursuant to any bankruptcy,
insolvency, reorganization, moratorium or similar law or any
restructuring of the Company; or
(iii) any cost or liability under any Environmental Law
arising out of the operations or assets of the Company.
SECTION 9.07. Further Assurances. The Company agrees
promptly to do such further acts and things, and to execute and
deliver such additional instruments (including, without
limitation, notices), at its own expense, as the Agent or any
<PAGE> 59
Creditor may at any time reasonably request in order better to
insure and confirm the Agent's and each Creditor's rights, powers
and remedies hereunder and under the Related Documents (including
in order to perfect or protect any pledge or security interest
granted or purported to be granted hereby or to enable the Agent
and the Creditors to exercise or enforce its or their rights and
remedies in respect hereof).
SECTION 9.08. Severability. Any provision of this
Agreement which is prohibited, unenforceable or not authorized in
any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition, unenforceability or
non-authorization without invalidating the remaining provisions
hereof or affecting the validity, enforceability or legality of
such provision in any other jurisdiction.
SECTION 9.09. Headings. Section headings in this
Agreement are included herein for convenience of reference only
and shall not constitute a part of this Agreement for any other
purpose.
SECTION 9.10. GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK, WITHOUT GIVING EFFECT TO CONFLICT OF LAW
PRINCIPLES.
SECTION 9.11. FORUM SELECTION; SUBMISSION TO
JURISDICTION. THE COMPANY HEREBY SUBMITS TO THE NONEXCLUSIVE
JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN
NEW YORK CITY FOR THE PURPOSES OF ALL LEGAL PROCEEDINGS ARISING
OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES, THE OTHER
RELATED DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY OR THE ACTIONS OR OMISSIONS OF THE AGENT OR THE CREDITORS
IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT OF
THIS AGREEMENT OR THE NOTES OR THE OTHER RELATED DOCUMENTS. THE
COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A
COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A
COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
TO THE EXTENT THAT THE COMPANY HAS OR HEREAFTER MAY
ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY
LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT
PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE)
WITH RESPECT TO ITSELF OR ITS PROPERTY, THE COMPANY HEREBY
IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS
<PAGE> 60
UNDER THIS AGREEMENT AND THE OTHER RELATED DOCUMENTS. THE
COMPANY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY
REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN
OR WITHOUT THE STATE OF TEXAS.
SECTION 9.12. WAIVER OF TRIAL BY JURY. EACH OF THE
COMPANY, THE AGENT AND THE CREDITORS HEREBY IRREVOCABLY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING
TO THIS AGREEMENT, THE NOTES, THE OTHER RELATED DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. THE COMPANY
ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT
CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF
EACH OTHER RELATED DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE CREDITORS ENTERING
INTO THIS AGREEMENT AND EACH SUCH OTHER RELATED DOCUMENT.
SECTION 9.13. 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.
SECTION 9.14. INTEGRATION. THIS AGREEMENT, TOGETHER
WITH THE OTHER RELATED DOCUMENTS, REPRESENTS THE FINAL AGREEMENT
BETWEEN THE PARTIES HERETO AS TO THE SUBJECT MATTER OF THIS
AGREEMENT AND THE OTHER RELATED DOCUMENTS AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES HERETO.
SECTION 9.15. Survival. The obligations of the Company
under Sections 2.05, 2.07, 2.09, 2.15 and 9.06 hereof and the
obligations of the Creditors under Section 8.05 hereof shall
survive the repayment of the Loans. In addition, each
representation and warranty made herein or pursuant hereto shall
survive the making of such representation and warranty.
SECTION 9.16. Receipt of Non-Public Information. Upon
written notice to the Company and the Agent, each Creditor shall
have the right at any time to elect to receive only Public
Information (as hereinafter defined) that the Company is required
to deliver hereunder and to waive its rights under the reporting
covenants of Section 5.01; provided that such Creditor designates
a recipient for the receipt of information concerning any
amendment, waiver, consent or other modification relating to this
Agreement. For the purposes of the preceding sentence, "Public
Information" shall mean (i) all reports, proxy statements and
<PAGE> 61
other statements or schedules that have been filed with the
Securities and Exchange Commission ("SEC") under the Securities
Exchange Act of 1934, as amended (the "1934 Act") by the Company
or any of its Subsidiaries, except reports filed pursuant to
Section 16(a) of the 1934 Act; (ii) all registration statements
and prospectuses that have been filed by the Company or any of
its Subsidiaries with the SEC under the Securities Act of 1933,
as amended, except those on Form S-8; (iii) any reports and other
information that have been disseminated generally to the holders
of all classes of the Company's publicly traded equity or debt
securities; and (iv) any press releases that have been issued by
the Company or any of its Subsidiaries.
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.
EL PASO ELECTRIC COMPANY
By_________________________
Title:
Address for Notices:
Attention:
Telex No.:
Telecopier No.:
Telephone No.:
<PAGE> 62
CREDITORS
[Complete this page for each Creditor.]
Loan Amount [NAME OF CREDITOR]
By_____________________
Title:
Lending Office for Base Rate Loans:
Lending Office for Eurodollar Loans:
Address for Notices:
Attention:
Telex No.:
Telecopier No.:
Telephone No.:
<PAGE> 63
________________,
as Agent
By_________________________
Title:
Address for Notices to the Bank as Agent:
Attention:
Telex No.:
(Answerback: )
Telecopier No.:
Telephone No.:
<PAGE> 64
EXHIBIT A
PROMISSORY NOTE
$_______________ Dated: _________, 199__
FOR VALUE RECEIVED, the undersigned, EL PASO ELECTRIC
COMPANY, a Texas corporation (the "Company"), HEREBY PROMISES TO
PAY to the order of _____________ (the "Creditor") the principal
sum of $[amount of the Creditor's Loan in figures] in such
installments and at such times as are specified in the Term Loan
Agreement referenced below.
The Company promises to pay interest on the principal
amount of the Loans from the date hereof until such principal
amount is paid in full, at such interest rates, and payable at
such times, as are specified in the Term Loan Agreement referred
to below.
Both principal and interest are payable in lawful money
of the United States of America to the Creditor at [insert name
and address of Agent] in same day funds. All payments made on
account of the principal amount hereof shall be recorded by the
Creditor and, prior to any transfer hereof, endorsed on the grid
attached hereto which is a part of this Promissory Note. The
failure by the Creditor to make any such recordation on its books
and records shall not limit or otherwise affect the obligations
of the Company hereunder or under the Term Loan Agreement
referred to below.
This Promissory Note is one of the Notes referred to in,
and is entitled to the benefits of, the Term Loan Agreement dated
as of ___________, 199__ (the "Term Loan Agreement"), between the
Company, the Creditors party thereto and [Agent], as Agent. The
Term Loan Agreement, among other things, contains provisions for
acceleration of the maturity hereof upon the happening of certain
stated events and also for prepayments on account of principal
hereof prior to the maturity hereof upon the terms and conditions
therein specified.
This Promissory Note shall be governed by, and construed
in accordance with, the laws of the State of New York, without
giving effect to conflict of law principles.
EL PASO ELECTRIC COMPANY
By____________________________
Title:
<PAGE> 65
PAYMENTS OF PRINCIPAL
- -----------------------------------------------------------------
> Amount of > >
> Principal Paid > Unpaid Principal > Notation
Date > or Prepaid > Balance > Made By
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
<PAGE> 1
EXHIBIT A-17
TERM LOAN AGREEMENT
dated as of ____________, 199__
between
EL PASO ELECTRIC COMPANY
and
CANADIAN IMPERIAL BANK OF COMMERCE
<PAGE> 2
TABLE OF CONTENTS
PAGE NO.
PRELIMINARY STATEMENTS . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I.
DEFINITIONS. . . . . . . . . . 2
SECTION 1.01. Definitions. . . . . . . . . . . . . . . . 2
SECTION 1.02. Computation of Time Periods. . . . . . . . 13
SECTION 1.03. Accounting Terms.. . . . . . . . . . . . . 13
SECTION 1.04. Interpretation.. . . . . . . . . . . . . . 13
ARTICLE II.
AMOUNTS AND TERM OF THE LOAN. . . . . . 14
SECTION 2.01. The Loan.. . . . . . . . . . . . . . . . . 14
SECTION 2.02. Repayment. . . . . . . . . . . . . . . . . 14
SECTION 2.03. Interest.. . . . . . . . . . . . . . . . . 14
SECTION 2.04. Prepayments. . . . . . . . . . . . . . . . 16
SECTION 2.05. Increased Costs, Etc.. . . . . . . . . . . 17
SECTION 2.06. Interest Rate Protection.. . . . . . . . . 19
SECTION 2.07. Illegality, Etc. . . . . . . . . . . . . . 19
SECTION 2.08. Payments and Computations. . . . . . . . . 20
SECTION 2.09. U.S. Taxes.. . . . . . . . . . . . . . . . 21
SECTION 2.10. Applicable Lending Office. . . . . . . . . 22
SECTION 2.11. Net Payments.. . . . . . . . . . . . . . . 22
SECTION 2.12. Maximum Interest.. . . . . . . . . . . . . 22
ARTICLE III.
CONDITIONS TO CLOSING . . . . . . . 24
SECTION 3.01. Closing Documents. . . . . . . . . . . . . 24
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES . . . . . 26
SECTION 4.01. Representations and Warranties of the
Company. . . . . . . . . . . . . . . . . . 26
ARTICLE V.
COVENANTS OF THE COMPANY. . . . . . . 30
SECTION 5.01. Covenants of the Company.. . . . . . . . . 30
ARTICLE VI.
EVENTS OF DEFAULT . . . . . . . . 37
SECTION 6.01. Events of Default. . . . . . . . . . . . . 37
ARTICLE VII.
SECURITY. . . . . . . . . . . 40
i
<PAGE> 3
TABLE OF CONTENTS
PAGE NO.
SECTION 7.01. Issuance and Pledge of Bonds.. . . . . . . 40
SECTION 7.02. Application of Moneys. . . . . . . . . . . 40
SECTION 7.03. Rights of Bondholders. . . . . . . . . . . 40
ARTICLE VIII.
MISCELLANEOUS . . . . . . . . . 41
SECTION 8.01. Amendments, Etc. . . . . . . . . . . . . . 41
SECTION 8.02. Notices, Etc.. . . . . . . . . . . . . . . 41
SECTION 8.03. No Waiver; Remedies. . . . . . . . . . . . 41
SECTION 8.04. Costs, Expenses and Taxes. . . . . . . . . 42
SECTION 8.05. Right of Set-off.. . . . . . . . . . . . . 42
SECTION 8.06. Binding Effect; Assignments and
Participations.. . . . . . . . . . . . . . 43
SECTION 8.07. Indemnity. . . . . . . . . . . . . . . . . 44
SECTION 8.08. Further Assurances.. . . . . . . . . . . . 45
SECTION 8.09. Severability.. . . . . . . . . . . . . . . 45
SECTION 8.10. Headings.. . . . . . . . . . . . . . . . . 45
SECTION 8.11. GOVERNING LAW. . . . . . . . . . . . . . . 45
SECTION 8.12. FORUM SELECTION AND SUBMISSION TO
JURISDICTION.. . . . . . . . . . . . . . . 45
SECTION 8.13. WAIVER OF TRIAL BY JURY. . . . . . . . . . 46
SECTION 8.14. Counterparts.. . . . . . . . . . . . . . . 46
SECTION 8.15. INTEGRATION. . . . . . . . . . . . . . . . 46
SECTION 8.16. Survival.. . . . . . . . . . . . . . . . . 46
EXHIBIT A Promissory Note
ii
<PAGE> 4
TERM LOAN AGREEMENT
TERM LOAN AGREEMENT, dated as of [the Effective Date],
between El Paso Electric Company, a Texas corporation (the
"Company"), and Canadian Imperial Bank of Commerce (the "Bank").
PRELIMINARY STATEMENTS:
(1) The Company entered into certain separate Letter of
Credit and Reimbursement Agreements dated as of June 1, 1986 with
Credit Suisse and dated as of August 1, 1985 with Westpac Banking
Corporation, Chicago Branch ("Westpac"), each as heretofore
amended, modified and supplemented from time to time (the
"Reimbursement Agreements") with respect to the Maricopa LCs (as
hereinafter defined) separately issued by Credit Suisse and
Westpac (together, the "Issuers").
(2) The Bank purchased a participation in each of the
Reimbursement Agreements and related Maricopa LCs and became
entitled to a portion of the rights of each Issuer under its
Reimbursement Agreement.
(3) On January 8, 1992, the Company commenced a
voluntary case (the "Bankruptcy Case") under chapter 11 of the
Bankruptcy Code (as hereinafter defined) (Case No. 92-10148-FM)
in the Bankruptcy Court (as hereinafter defined), and thereafter
has continued to operate its business and manage its assets as a
debtor-in-possession.
(4) Among the claims filed against the Company in the
Bankruptcy Case were those of the Issuers in respect of the
Reimbursement Agreements (the "Claims").
(5) On [ , 199 ], an order (the "Confirmation
Order") was entered by the court having jurisdiction over the
Bankruptcy Case (the "Bankruptcy Court") confirming the Plan of
Reorganization (as hereinafter defined), which Plan of
Reorganization provides, among other things, for the Company to
enter into this Agreement with the Bank.
(6) Pursuant to Section 3.7(A) of the Plan of
Reorganization and in accordance with the terms thereof and as
agreed to by the Company, those portions of the Claims in which
the Bank holds a participation interest are to be discharged and
satisfied by the execution and delivery by the Company of this
Agreement, which Agreement provides, among other things, for the
execution and delivery by the Company to the Bank of the Note (as
hereinafter defined), which Note shall be secured by the Second
Mortgage Bonds, Series Y-4 (as hereinafter defined).
<PAGE> 5
NOW, THEREFORE, in consideration of the premises and of
the mutual covenants and agreements contained in the Plan of
Reorganization and herein, the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.01. Definitions. As used in this Agreement,
the following terms have the following meanings:
"Affiliate" means, as to any Person, any other Person
that, directly or indirectly, controls, is controlled by or
is under common control with such Person or is a director or
officer of such Person. For purposes of this definition, the
term "control" (including the terms "controlling,"
"controlled by" and "under common control with") of a Person
means the possession, direct or indirect, of the power to
vote 5% or more of the Voting Stock of such Person or to
direct or cause the direction of the management and policies
of such Person, whether through the ownership of Voting
Stock, by contract or otherwise.
"Alternate Base Rate" means, on any date with respect to
all Alternate Base Rate Loans, a fluctuating interest rate
per annum as shall be in effect from time to time which rate
per annum shall at all times be equal to the highest of:
(a) the rate of interest most recently established by
the Bank at its New York office as its base rate for
Dollar loans in the United States;
(b) the CD Published Moving Rate most recently
determined by the Bank plus 1/2%; and
(c) the Federal Funds Rate most recently determined by
the Bank plus 1/2%.
Neither the Alternate Base Rate nor the base rate described
in clause (a) above is necessarily intended to be the lowest
rate of interest determined by the Bank in connection with
extensions of credit. Changes in the rate of interest on
that portion of the Loan maintained as Alternate Base Rate
Loans will take effect simultaneously with each change in the
Alternate Base Rate. The Bank will give notice promptly to
the Company of changes in the Alternate Base Rate, provided
that failure by the Bank to give such notice shall not affect
the Company's obligations hereunder.
"Alternate Base Rate Loan" means the portion of the Loan
which bears interest as provided in Section 2.03(a).
<PAGE> 6
"Bankruptcy Case" has the meaning assigned to that term
in Preliminary Statement (3).
"Banking Institution" means any financial institution
subject to regulation under Regulation D of the F.R.S. Board,
and any other banking institution or trust company or similar
organization incorporated or organized under the laws of a
country other than the United States, or a political
subdivision of a country other than the United States.
"Bankruptcy Code" means the Bankruptcy Reform Act of
1978, as heretofore and hereafter amended, and codified as
title 11 of the United States Code.
"Bankruptcy Court" has the meaning assigned to that term
in Preliminary Statement (5).
"Business Day" means a day of the year on which banks
are not required or authorized to close in New York City and,
if the applicable Business Day relates to any Eurodollar
Loans, on which dealings are carried on in the London
interbank market.
"Capital Lease Obligation" means, with respect to any
lease of property which, in accordance with GAAP, appears on
the lessee's balance sheet as a capital lease, the amount of
the liability which should appear on such balance sheet.
"CD Published Moving Rate" means, on any particular
date, the latest three-week moving average of daily secondary
market morning offering rates in the United States for three-
month certificates of deposit of major United States money
market lenders, such three-week moving average being
determined weekly for the three-week period ending on the
previous Friday by the Bank on the basis of:
(a) such rates reported by certificate of deposit
dealers to and published by the Federal Reserve Bank of
New York in the most recent Federal Reserve Statistical
Release Publication H.15 (Selected Interest Rates) (as
adjusted for reserves and assessments in the same manner
as the C/D Quoted Rate); or
(b) if such publication shall be suspended or
terminated, the C/D Quoted Rate determined by the Bank
on the basis of quotations for such rates received by
the Bank.
"C/D Quoted Rate" means, relative to any determination
of the CD Published Moving Rate in circumstances when
publication of the rates referred to in clause (a) of the
definition thereof has been suspended or terminated, the rate
of interest per annum determined by the Bank to be the sum
(adjusted to the nearest 1/100th of 1%, if any) of:
<PAGE> 7
(a) the rate obtained by dividing (i) the average
(rounded upward, if necessary, to the nearest 1/16th of
1%) of the bid rates quoted to the Bank in the secondary
market where the Bank conducts its United States funding
operations at approximately 10:00 a.m., New York City
time (or as soon thereafter as practicable), on the date
of determination by three certificate of deposit dealers
of recognized standing selected by the Bank for the
purchase at face value of three-month certificates of
deposit of the Bank in an amount approximately equal or
comparable to the amount of the Bank's portion of the
Loan outstanding hereunder with respect to which the C/D
Quoted Rate is being determined by (ii) a percentage
equal to 100% minus the average of the daily percentages
specified during such period by the F.R.S. Board for
determining the maximum reserve requirement (including,
but not limited to, any marginal reserve requirement)
for a member bank of the Federal Reserve System in
respect of liabilities consisting of or including (among
other liabilities) three-month Dollar nonpersonal time
deposits in the United States; and
(b) the daily average during such period of the
net annual assessment rates estimated by the Bank for
determining the then current annual assessment payable
by a member bank to the FDIC for FDIC's insuring Dollar
deposits of a member bank in the United States.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended from time
to time.
"Claims" has the meaning assigned to that term in
Preliminary Statement (4).
"Code" means the Internal Revenue Code of 1986, as
amended from time to time.
"Confirmation Order" has the meaning assigned to that
term in Preliminary Statement (5).
"Consolidated Subsidiary" means, for any Person, each
Subsidiary of such Person (whether now existing or hereafter
created or acquired) the financial statements of which shall
be (or should have been) consolidated with the financial
statements of such Person in accordance with GAAP.
"Credit Suisse LC" means that certain letter of credit
dated June 18, 1986, issued by Credit Suisse, as amended,
extended and supplemented, with respect to the Credit Suisse
PCBs.
"Credit Suisse PCBs" means the Pollution Control
Refunding Revenue Bonds, 1984 Series E (El Paso Electric
<PAGE> 8
Company Palo Verde Project) issued by Maricopa County,
Arizona Pollution Control Corporation in the original
principal amount of $37,100,000, which mature on December 1,
2014.
"Debt" of any Person means, without duplication, (a) all
indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services (including
without limitation, all obligations, contingent or otherwise,
of such Person in connection with acceptance facilities
(other than acceptance facilities entered into in connection
with normal course commercial trade transactions) and letter
of credit facilities to the extent such letter of credit
facilities support Debt), (b) all obligations of such Person
evidenced by notes, bonds, debentures or other similar
instruments, (c) all obligations of such Person created or
arising under any conditional sale or other title retention
agreement with respect to property acquired by such Person
(even though the rights and remedies of the seller or lender
under such agreement in the event of default are limited to
repossession or sale of such property), (d) all Capital Lease
Obligations of such Person, (e) all obligations of such
Person to purchase, redeem, retire, defease or otherwise make
any payment in respect of any capital stock of or other
ownership or profit interest in such Person or any other
Person or any warrants, rights or options to acquire such
capital stock, valued, in the case of preferred stock, at the
greater of its voluntary or involuntary liquidation
preference plus accrued and unpaid dividends, (f) all Debt of
others referred to in clauses (a) through (e) above
guaranteed directly or indirectly in any manner by such
Person, or in effect guaranteed directly or indirectly by
such Person through an agreement (i) to pay or purchase such
Debt or to advance or supply funds for the payment or
purchase of such Debt, (ii) to purchase, sell or lease (as
lessee or lessor) property, or to purchase or sell services,
primarily for the purpose of enabling the debtor to make
payment of such Debt or to assure the holder of such Debt
against loss, (iii) to supply funds to or in any other manner
invest in the debtor (including any agreement to pay for
property or services irrespective of whether such property is
received or such services are rendered) or (iv) otherwise to
assure a creditor against loss, and (g) all Debt referred to
in clauses (a) through (e) above 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 (including,
without limitation, accounts and contract rights) owned by
such Person, even though such Person has not assumed or
become liable for the payment of such Debt. In cases where
recourse to any Person or any of its properties in respect of
Debt is limited, the amount of such Debt of such Person for
purposes hereof shall be so limited.
<PAGE> 9
"Dollar" and the sign "$" mean lawful money of the
United States of America.
"EBITA" means, for any period, the sum, for the Company
and its Consolidated Subsidiaries (determined on a
consolidated basis without duplication in accordance with
GAAP), of the following: (a) net operating income
(calculated before taxes, Interest Expense, extraordinary
items and unusual, non-cash, non-recurring items and income
or loss attributable to equity in Affiliates) for such period
plus (b) amortization (to the extent deducted in determining
net operating income) for such period.
"Effective Date" means the Effective Date (as defined
therein) of the Plan of Reorganization.
"Eligible Institution" means (i) a bank or trust company
organized under the laws of the United States of America, of
any state therein, of the District of Columbia, of any member
country of the Organization for Economic Cooperation and
Development or of any political subdivision of any such
country, in each case having assets in excess of
$500,000,000, (ii) an insurance company organized under the
laws of any state in the United States of America or of the
District of Columbia having assets in excess of $500,000,000,
or (iii) any other Person consented to by the Company, which
consent shall not be unreasonably withheld.
"Eligible Participant" has the meaning assigned to that
term in Section 8.06(b).
"Environmental Action" means any administrative,
regulatory or judicial action, suit, demand, demand letter,
claim, notice of non-compliance or violation, investigation,
proceeding, consent order or consent agreement relating in
any way to any Environmental Law or any Environmental Permit
including, without limitation, (a) any claim by any
governmental or regulatory authority for enforcement,
investigation, cleanup, removal, response, remedial or other
actions or damages pursuant to any Environmental Law and (b)
any claim by any Person seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive
relief resulting from Hazardous Materials or arising from
alleged injury or threat of injury to health, safety or the
environment.
"Environmental Law" means any federal, state or local
law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award relating to the environment,
health, safety or Hazardous Materials.
"Environmental Permit" means any permit, approval,
identification number, license or other authorization
required under any Environmental Law.
<PAGE> 10
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended from time to time, and the
regulations promulgated and rulings issued thereunder.
"ERISA Affiliate" means any Person who for purposes of
Title IV of ERISA is a member of the Company's controlled
group, or under common control with the Company, within the
meaning of Section 414 of the Code.
"Eurodollar Loan" means the portion of the Loan which
bears interest at the Eurodollar Rate.
"Eurodollar Rate" means, for any Interest Period, an
interest rate per annum equal at all times during such
Interest Period to the sum of (x) the LIBO Rate for such
Interest Period plus (y) 1.50% per annum.
"Event of Default" has the meaning assigned to that term
in Section 6.01.
"FDIC" means the Federal Deposit Insurance Corporation
or any successor thereto.
"Federal Funds Rate" means, for any day, a fluctuating
interest rate per annum equal for such day to:
(a) 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 for such day (or, if such day is not a
Business Day, for the next preceding Business Day) by
the Federal Reserve Bank of New York in the most recent
Federal Reserve Statistical Release Publication H.15
(Selected Interest Rates); or
(b) if such rate is not so published for any day
which is a Business Day, the average of the quotations
for such day on such transactions received by the Bank
from three federal funds brokers of recognized standing
selected by it.
"Final Approval" means any authorizations, consents,
approvals, waivers, exceptions, variances, orders, licenses,
exemptions, publications, filings, notices to and
declarations of or with any governmental authority (other
than routine reporting requirements the failure to comply
with which will not affect the validity or enforceability of
any of the Related Documents or have a Material Adverse
Effect) or any other action in respect of any governmental
authority that is in full force and effect and is not the
subject of a pending appeal or motion for reconsideration or
other review, and the time in which to make an appeal or
request the review or reconsideration of which has expired
<PAGE> 11
without any appeal or request for review or reconsideration
having been taken or made.
"Final Order" means an order of the Bankruptcy Court
which (a) shall not have been reversed, stayed, modified or
amended and the time to appeal from, or to seek review or
rehearing of, shall have expired and as to which no appeal or
petition for review, rehearing or certiorari is pending or
(b) if appealed from, shall have been affirmed and the time
to appeal from such affirmance or to seek review or rehearing
thereof shall have expired or no further hearing, appeal or
petition for certiorari can be taken or granted.
"First Mortgage Bond Indenture" means the Indenture
dated as of ____________ between the Company and _______
_________________________ as trustee, providing for the
issuance by the Company of its first mortgage bonds.
"First Mortgage Bonds" means bonds issued by the Company
under the First Mortgage Bond Indenture.
"First Mortgage Bonds, Series A/B" means collectively,
the First Mortgage Bonds, Series A, and the First Mortgage
Bonds, Series B, in each case issued under the First Mortgage
Bond Indenture.
"F.R.S. Board" means the Board of Governors of the
Federal Reserve System or any successor thereto.
"GAAP" means generally accepted accounting principles in
the United States of America as in effect from time to time.
"Governmental Person" means any national, state or local
government, any political subdivision or any government
instrumentality, authority, body or entity, including the
FDIC, the F.R.S. Board, any central bank or any comparable
authority.
"Hazardous Materials" means (a) petroleum or petroleum
products, asbestos in any form, radioactive or source
material, (b) any substances defined as or included in the
definition of "hazardous substances", "hazardous wastes",
"hazardous materials", "extremely hazardous wastes",
"restricted hazardous wastes", "toxic substances", "toxic
pollutants", "contaminants" or "pollutants", or words of
similar import, under any Environmental Law and (c) any other
substance exposure to which is regulated under any
Environmental Law.
"Highest Lawful Rate" means the maximum interest rate
permitted by applicable law to be charged by the Bank.
"Indemnified Party" has the meaning assigned to that
term in Section 8.07.
<PAGE> 12
"Interest Coverage Ratio" means, as at any date, the
ratio of (a) EBITA for the period of four consecutive fiscal
quarters ending on or most recently ended prior to such date
to (b) Interest Expense for such period.
"Interest Expense" means, for any period, the sum, for
the Company and its Consolidated Subsidiaries (determined on
a consolidated basis without duplication in accordance with
GAAP), of the following: (a) all interest in respect of Debt
including, without limitation, interest capitalized during
such period (whether or not actually paid during such
period), including, without limitation, all commissions and
fees (other than up-front fees), plus (b) the net amounts
payable (or minus the net amounts receivable) under Interest
Rate Protection Agreements accrued during such period
(whether or not actually paid or received during such
period).
"Interest Period" has the meaning assigned to that term
in Section 2.03(b).
"Interest Rate Protection Agreement" means, for any
Person, an interest rate swap, cap or collar agreement,
interest rate future or option contracts or similar
arrangement providing for the transfer or mitigation of
interest risks either generally or under specific
contingencies.
"Issuers" has the meaning assigned to that term in
Preliminary Statement (1).
"Leverage Ratio" means, at any time, the ratio of Total
Debt at such time to the sum of (a) Total Capital at such
time plus (b) Total Debt at such time.
"LIBO Rate" means, relative to any Interest Period for
any Eurodollar Loans, the rate of interest equal to the
average (rounded upwards, if necessary, to the nearest 1/16
of 1%) of the rates per annum at which Dollar deposits in
immediately available funds are offered to the Bank's LIBOR
Office in the New York, New York interbank eurodollar market
as at or about 10:00 a.m. New York, New York 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 the Eurodollar
Loans and for a period approximately equal to such Interest
Period.
"LIBOR Office" means the office of the Bank designated
as such below its signature hereto or such other office of
the Bank as designated from time to time by notice from the
Bank to the Company, whether or not outside the United
<PAGE> 13
States, which shall be making or maintaining Eurodollar Loans
of the Bank hereunder.
"Lien" means any lien, security interest or other charge
or encumbrance of any kind, or any other type of preferential
arrangement, including, without limitation, the lien or
retained security title of a conditional vendor and any
easement, right of way or other encumbrance on title to real
property.
"Loan" has the meaning assigned to that term in Section
2.01.
"Maricopa PCBs" means, collectively, the Credit Suisse
PCBs and the Westpac PCBs.
"Material Adverse Effect" means a material adverse
effect on (i) the property, business, operations, financial
condition, liabilities or capitalization of the Company and
its Subsidiaries taken as a whole, (ii) the ability of the
Company to perform its obligations under any of the Related
Documents, (iii) the validity or enforceability of any of the
Related Documents, (iv) the rights and remedies of the Bank
or (v) the timely payment of the principal of or interest on
the Note or other amounts payable in connection herewith or
therewith.
"Material Subsidiary" means, at any time, a Subsidiary
of the Company (a) whose assets at such time exceed 10% of
the assets of the Company and its Subsidiaries (on a
consolidated basis) or (b) whose earnings at such time exceed
10% of the earnings of the Company and its Subsidiaries (on a
consolidated basis).
"Multiemployer Plan" means a multiemployer plan, as
defined in Section 4001(a)(3) of ERISA, to which the Company
or any ERISA Affiliate is making or accruing an obligation to
make contributions, or has within any of the preceding five
plan years made or accrued an obligation to make
contributions, such plan being maintained pursuant to one or
more collective bargaining agreements.
"Multiple Employer Plan" means a single employer plan,
as defined in Section 4001(a)(15) of ERISA, that (i) is
maintained for employees of the Company or an ERISA Affiliate
and at least one Person other than the Company and its ERISA
Affiliates or (ii) was so maintained and in respect of which
the Company or an ERISA Affiliate could have liability under
Section 4064 or 4069 of ERISA in the event such plan has been
or were to be terminated.
"Note" means a promissory note of the Company payable to
the Bank, in substantially the form of Exhibit A.
<PAGE> 14
"Participant" has the meaning assigned to that term in
Section 8.06.
"PBGC" means the Pension Benefit Guaranty Corporation or
any successor thereto.
"Person" means an individual, a corporation, a
partnership, an association, a business trust or any other
entity or organization, including a Governmental Person.
"Plan" means a Single Employer Plan or a Multiple
Employer Plan.
"Plan of Reorganization" means the Modified Third
Amended Plan of Reorganization of the Debtor Providing for
the Acquisition of El Paso Electric Company by Central and
South West Corporation filed on August 27, 1993 (as corrected
as of September 15, 1993).
"Reimbursement Agreements" has the meaning assigned to
that term in Preliminary Statement (1).
"Related Documents" means collectively, this Agreement,
the Note, the Second Mortgage Bond Indenture, and the Second
Mortgage Bonds, Series Y-4.
"Second Mortgage Bond Indenture" means the Indenture
dated as of _____________ between the Company and _______
________________, as trustee, providing for the issuance by
the Company of its second mortgage bonds.
"Second Mortgage Bonds" means bonds issued by the
Company under the Second Mortgage Bond Indenture.
"Second Mortgage Bonds, Series A" means Second Mortgage
Bonds, Series A issued under the Second Mortgage Bond
Indenture.
"Second Mortgage Bonds, Series Y-4" means Second
Mortgage Bonds, Series Y-4, issued under the Second Mortgage
Bond Indenture.
"Single Employer Plan" means a single employer plan, as
defined in Section 4001(a)(15) of ERISA, that (i) is
maintained for employees of the Company or an ERISA Affiliate
and no Person other than the Company and its ERISA Affiliates
or (ii) was so maintained and in respect of which the Company
or an ERISA Affiliate could have liability under Section 4069
of ERISA in the event such plan has been or were to be
terminated.
"Submission Date" means the date the form of this
Agreement was filed with the Bankruptcy Court prior to the
<PAGE> 15
date creditors must have voted on the Plan of Reorganization
in accordance with Section 7.6 of the Plan of Reorganization.
"Subsidiary" means, with respect to any Person, any
corporation, partnership or other entity of which at least a
majority of the Voting Stock is at the time directly or
indirectly owned or controlled by such Person or one or more
Subsidiaries of such Person or by such Person and one or more
Subsidiaries of such Person.
"Total Capital" means at any date, the sum for the
Company and its Consolidated Subsidiaries (determined on a
consolidated basis without duplication in accordance with
GAAP), of the following:
(a) the amount of capital stock (excluding treasury
stock and capital stock subscribed for and unissued and
preferred stock mandatorily redeemable in cash or redeemable
in cash at the option of the holder thereof), plus
(b) the amount of surplus and retained earnings (or, in
the case of a surplus or retained earnings deficit, minus the
amount of such deficit).
"Total Debt" means, as at any date, the aggregate amount
of all Debt of the Company and its Consolidated Subsidiaries
(determined on a consolidated basis without duplication in
accordance with GAAP) (other than contingent obligations in
connection with acceptance facilities and letters of credit).
"Voting Stock" means capital stock issued by a
corporation, or equivalent interests in any other Person, the
holders of which are ordinarily, in the absence of
contingencies, entitled to vote for the election of directors
(or Persons performing similar functions) of such Person,
even though the right so to vote has been suspended by the
happening of such a contingency.
"Westpac" has the meaning assigned to that term in
Preliminary Statement (1).
"Westpac LC" means that certain letter of credit dated
August 29, 1985, issued by Westpac, as amended, extended and
supplemented with respect to the Westpac PCB.
"Westpac PCBs" means the Pollution Control Refunding
Revenue Bonds, 1985 Series A (El Paso Electric Company Palo
Verde Project) issued by Maricopa County, Arizona Pollution
Control Corporation in the original principal amount of
$59,235,000, which mature on August 1, 2015.
"Withdrawal Liability" has the meaning assigned to that
term under Part I of Subtitle E of Title IV of ERISA.
<PAGE> 16
SECTION 1.02. Computation of Time Periods. In this
Agreement, in the computation of a period of time from a
specified date to a later specified date, the word "from" means
"from and including" and the words "to" and "until" each means
"to but excluding".
SECTION 1.03. Accounting Terms. All accounting terms
not specifically defined herein shall be construed in accordance
with GAAP consistently applied, except as otherwise stated
herein.
SECTION 1.04. Interpretation. In this Agreement the
singular includes the plural and the plural the singular; words
importing any gender include the other genders; references to
statutes are to be construed as including all statutory
provisions consolidating, amending or replacing the statute
referred to; references to "writing" include printing, typing,
lithography and other means of reproducing words in a tangible
visible form; references to sections (or any subdivision of a
section), articles, schedules, annexes and exhibits are to those
of this Agreement unless otherwise indicated; the words
"including", "includes" and "include" shall be deemed to be
followed by the words "without limitation"; references to
agreements and other contractual instruments shall be deemed to
include all subsequent amendments and other modifications to such
instruments but only to the extent such amendments and other
modifications are not prohibited by the terms of this Agreement;
and references to Persons include their respective permitted
successors and assigns and, in the case of Governmental Persons,
Persons succeeding to their respective functions and capacities.
ARTICLE II.
AMOUNTS AND TERM OF THE LOAN
SECTION 2.01. The Loan. As provided in the Plan of
Reorganization, the Company is issuing to the Bank, concurrently
with the execution and delivery hereof, the Note, appropriately
completed to the order of the Bank, in an amount equal to $___
(the "Loan"), in satisfaction, to the extent provided for in
Section 3.7(A) of the Plan of Reorganization, of the Bank's
participation interest in the Claims. Amounts repaid or prepaid
hereunder may not be reborrowed.
SECTION 2.02. Repayment. The Company shall repay the
unpaid principal amount of the Loan in substantially equal
quarterly installments commencing on the last Business Day of
_____________, 199_ and on the last Business Day of each
____________, _______________, __________________ and
______________ thereafter through and including _______________,
199_; provided, however, that the last such installment shall be
<PAGE> 17
in the amount necessary to repay in full the unpaid principal
amount of the Loan [1].
SECTION 2.03. Interest. The Company shall pay interest
on the unpaid principal amount of the Loan from the date of the
Note until such principal amount shall be paid in full, at the
applicable rate set forth below:
(a) Alternate Base Rate. Except to the extent the
Company shall elect to pay interest on all or part of the
unpaid principal amount of the Loan for any Interest Period
pursuant to subsection (c) of this Section 2.03, the Company
shall pay interest on the unpaid principal of the Loan from
the date of the Note until the principal amount of the Loan
is paid in full at a fluctuating rate per annum equal at all
times to .50% per annum above the Alternate Base Rate in
effect from time to time, payable quarterly on the last
Business Day of each __________, ________________,
__________________ and ________________ and on the date the
Loan is paid in full.
(b) Interest Periods. The Company may from time to
time elect to have the interest on all or part of the
principal amount of the Loan determined and payable for a
specified period (an "Interest Period") in accordance with
subsection (c) of this Section 2.03. The first day of an
Interest Period shall be either the date of the Note, the
date the Company specifies as the first day of a Eurodollar
Loan, or the last day of the then current Interest Period for
a Eurodollar Loan. The duration of each such Interest Period
shall be, in respect of a Eurodollar Loan, 1, 3 or 6 months;
provided, however, that the Company may not select any
Interest Period which ends after (x) ____________________,
199_ or (y) any principal repayment installment date unless,
after giving effect to such selection, the aggregate unpaid
principal amount of Eurodollar Loans having Interest Periods
which end on or prior to such principal repayment installment
date and Alternate Base Rate Loans shall be at least equal to
the principal amount of the Loan due and payable on and prior
to such date.
(c) Eurodollar Rate. The Company may from time to time
elect to pay interest on all or part of the principal amount
of the Loan (provided that any such partial principal amount
shall not be less than $1,000,000) at the Eurodollar Rate for
an Interest Period by notice, specifying the principal amount
and the first day and duration of such Interest Period,
received by the Bank before 12:00 Noon (New York City time)
three Business Days prior to the first day of such Interest
Period, payable on the last day of such Interest Period and,
- ---------------------------
[1] Payments shall be made in accordance with Section 3.7(A) of
the Plan of Reorganization.
<PAGE> 18
if such Interest Period has a duration of more than three
months, on each day which occurs during such Interest Period
every three months from the first day of such Interest
Period.
(d) Default Interest. The Company shall pay interest
(after as well as before judgment) on the unpaid principal
amount of the Loan that is not paid when due and on the
unpaid amount of all interest, and other amounts payable
hereunder, that is not paid when due, payable on demand, at a
rate per annum equal at all times to 2% per annum above the
Alternate Base Rate in effect from time to time.
Notwithstanding anything in this Agreement to the contrary,
upon the occurrence and during the continuance of an Event of
Default, the right of the Company to make an election in
respect of the Eurodollar Rate pursuant to Section 2.03(c)
shall terminate (i) automatically, in the case of an Event of
Default referred to in Section 6.01(a) or (b) or (ii) upon
notice to the Company by the Bank, in all other cases;
provided that no termination referred to in either of the
preceding clauses (i) and (ii) shall affect any Eurodollar
Loan during any Interest Period in effect for such Eurodollar
Loan at the time such notice is received by the Company.
(e) Alternate Rate of Interest. In the event, and on
each occasion, that, on the day two Business Days prior to
the commencement of any Interest Period for a Eurodollar
Loan, the Bank shall have determined (which determination
shall be conclusive and binding upon the Company absent
manifest error) that reasonable means do not exist for
ascertaining the applicable Eurodollar Rate (including
without limitation if Dollar deposits in the relevant amount
and for the relevant Interest Period are not available to the
Bank in the relevant market), the Bank shall, as soon as
practicable thereafter, give written, facsimile or
telegraphic notice of such determination to the Company, and
any request by the Company for a Eurodollar Loan pursuant to
subsection (c) of this Section 2.03 shall be deemed a request
for an Alternate Base Rate Loan. After such notice shall
have been given and until the circumstances giving rise to
such notice no longer exist, each request for an Eurodollar
Loan shall be deemed to be a request for an Alternate Base
Rate Loan.
(f) Promptly after the determination of any interest
rate provided for herein or any change therein, the Bank
shall give notice thereof to the Company.
SECTION 2.04. Prepayments. (a) Mandatory Prepayment.
Upon the remarketing or refunding of any Maricopa PCBs purchased
prior to the Effective Date through draws on the Credit Suisse LC
or the Westpac LC, as the case may be, the Company shall prepay,
in an amount equal to 50% of the net proceeds of any such
remarketing or refunding of any Maricopa PCBs purchased through
<PAGE> 19
draws on the Credit Suisse LC or 23.335% of the net proceeds of
any such remarketing or refunding of any Maricopa PCBs purchased
through draws on the Westpac LC, as the case may be, the
outstanding principal amount of the Loan (any such prepayment
shall be applied to the principal installments of the Note in the
inverse order of their maturities), together with accrued
interest to the date of such prepayment on the principal amount
prepaid and, if and to the extent any principal amount so
prepaid is a Eurodollar Loan and such prepayment is on a day
other than the last day of the Interest Period for such
Eurodollar Loan, an amount in accordance with Section 2.05(d) to
compensate the Bank for any loss, cost or expense incurred by it
by reason of such prepayment.
(b) Optional Prepayment. The Company may, upon at
least two Business Days' notice to the Bank stating the proposed
date and principal amount of the prepayment, and if such notice
is given to the Bank the Company shall, prepay the outstanding
principal amount of the Loan in whole or in part (each such
partial prepayment shall be in an aggregate principal amount not
less than $1,000,000 and shall be applied to the principal
installments of the Note in the inverse order of their
maturities), together with accrued interest to the date of such
prepayment on the principal amount prepaid; provided, however,
that any prepayment of a Eurodollar Loan shall be made on, and
only on, the last day of the Interest Period for such Eurodollar
Loan unless the Company shall pay to the Bank in accordance with
Section 2.05(d) an amount sufficient to compensate the Bank for
any loss, cost, or expense incurred by it by reason of such
prepayment on a day other than the last day of an Interest
Period.
SECTION 2.05. Increased Costs, Etc. (a) If, due
either to (i) the introduction after the Submission Date of, or
any change (other than any change by way of imposition or
increase of reserve requirements in respect of Eurodollar Loans,
referred to in subsection (b) below), after the Submission Date,
in or in the interpretation of, any law or regulation or (ii) the
compliance by the Bank with any guideline or request from any
central bank or other governmental authority issued or made after
the Submission Date (whether or not having the force of law),
there shall be any increase in the cost to the Bank as a result
of agreeing to make or making, funding or maintaining Eurodollar
Loans, or reduction in amount of any sum received in respect
thereof, then the Company shall from time to time, upon demand by
the Bank, pay to the Bank additional amounts sufficient to
compensate the Bank for such increased cost or such reduced
amount. A certificate as to the amount of such increased cost or
such reduced amount, submitted to the Company by the Bank, shall
be conclusive and binding for all purposes, absent manifest
error.
(b) The Company shall pay to the Bank additional
interest on the unpaid principal amount of each Eurodollar Loan,
<PAGE> 20
from the date of such Eurodollar Loan until such principal
amount is paid in full, at an interest rate per annum equal at
all times during each Interest Period for such Loan to the
remainder obtained by subtracting (i) the LIBO Rate for the
Interest Period for such Loan from (ii) the rate obtained by
dividing such LIBO Rate by a percentage equal to 100% minus the
reserve percentage applicable 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 regulations issued from time to time by the F.R.S. Board
(or any successor) for determining the maximum reserve
requirement (including, without limitation, any emergency,
supplemental or other marginal reserve requirement) for the Bank
with respect to liabilities or assets consisting of or including
Eurocurrency liabilities having a term equal to such Interest
Period, payable on each date on which interest is payable on such
Eurodollar Loan. Such additional interest shall be determined by
such Bank and notified to the Company.
(c) If the Bank determines that 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, made or phased-in after the Submission Date
(including, without limitation, any change in the interpretation
or administration thereof by such central bank or other
governmental authority), affects the amount of capital required
to be maintained by the Bank or any corporation controlling the
Bank and that the amount of such capital is increased by or based
upon the existence of the Bank's commitment hereunder and other
commitments of this type, then, upon demand by the Bank, the
Company shall immediately pay to the Bank, from time to time as
specified by the Bank, additional amounts sufficient to
compensate the Bank or such corporation in the light of such
circumstances, to the extent that the Bank reasonably determines
such increase in capital to be allocable to the existence of the
Bank's commitment hereunder. A certificate as to such amounts
submitted to the Company by the Bank, shall be conclusive and
binding for all purposes, absent manifest error.
(d) If, due to a change of interest rate on any
Eurodollar Loan pursuant to Section 2.06(b) or 2.07, any payment
pursuant to Section 2.04 of any Eurodollar Loan, any acceleration
of the maturity of such Loan and the Note pursuant to Section
6.01, or for any other reason, the Bank is subject to a change of
interest rate, or receives payments of principal, of any
Eurodollar Loan other than on the last day of an Interest Period
relating to such Eurodollar Loan, the Company shall, promptly
upon demand by the Bank, pay to the Bank any amounts required to
compensate the Bank for additional losses, costs or expenses
which it may reasonably incur as a result of such change or
payment, including, without limitation, any loss, cost or expense
incurred by reason of the liquidation or reemployment of deposits
or other funds acquired by the Bank to fund or maintain such
<PAGE> 21
Eurodollar Loan, but excluding loss of anticipated profit. A
certificate setting forth the amount of such additional losses,
costs or expenses, submitted by the Bank to the Company, shall be
conclusive and binding for all purposes, absent manifest error.
(e) Notwithstanding any other provision in this
Section 2.05 to the contrary (i) the Company is not responsible
for, and is not required to reimburse the Bank for, any amounts
that would otherwise be payable by the Company pursuant to
subsection (a), (c) or (d) of this Section 2.05 to the extent
such amounts accrued 90 days or more prior to the date the Bank
provides to the Company a certificate which sets forth such
amounts owed to the Bank by the Company pursuant to such
subsections and (ii) the Company is responsible for, and is
required to reimburse the Bank for, any amounts payable by the
Company pursuant to this Section 2.05, only so long as the Bank
is a Banking Institution.
(f) In calculating any amounts required to be paid by
the Company pursuant to this Section 2.05, the Bank shall make
all determinations and allocations on a reasonable basis.
SECTION 2.06. Interest Rate Protection. (a) If the
Company shall fail to select the duration of any Interest Period
for any Eurodollar Loan in accordance with the provisions
contained in Section 2.03(c), the Bank will forthwith so notify
the Company and such Eurodollar Loan will automatically, on the
last day of the then existing Interest Period therefor, convert
into an Alternate Base Rate Loan.
(b) On and after the date on which the unpaid principal
amount of the Loan shall be reduced, by payment or prepayment or
otherwise, to less than $1,000,000, the rate of interest on the
unpaid principal amount of the Loan shall be .50% per annum above
the Alternate Base Rate in effect from time to time and the right
of the Company to make an election in respect of the Eurodollar
Rate pursuant to Section 2.03(c) shall terminate.
SECTION 2.07. Illegality, Etc. Notwithstanding any
other provision of this Agreement, if the Bank shall at the time
be a Banking Institution and notify the Company that the
introduction of or any change in or in the interpretation of any
law or regulation that occurs after the Submission Date makes it
unlawful, or any central bank or other governmental authority
asserts after the Submission Date that it is unlawful, for the
Bank to perform its obligations to fund or maintain Eurodollar
Loans hereunder, (i) the right of the Company to select the
Eurodollar Rate, and the obligation of the Bank to maintain
Eurodollar Loans, shall be suspended until the Bank shall notify
the Company that the circumstances causing such suspension no
longer exist and (ii) the rate of interest on the unpaid
principal amount of the Loan shall thereupon be .50% per annum
above the Alternate Base Rate in effect from time to time.
<PAGE> 22
SECTION 2.08. Payments and Computations. (a) The
Company shall make each payment under this Agreement or the Note
not later than 12:00 Noon (New York City time) on the day when
due in lawful money of the United States of America to the Bank
at its address referred to in Section 8.02 in same day funds.
Funds received after that time shall be deemed to have been
received by the Bank on the next succeeding Business Day.
(b) The Company hereby authorizes the Bank, if and to
the extent payment is not made when due under this Agreement or
the Note, to charge from time to time against any or all of the
Company's accounts with the Bank any amount so due.
(c) All computations of interest based on the Alternate
Base Rate shall be made by the Bank on the basis of a year of 365
or 366 days, as the case may be, and all computations of interest
based on the LIBO Rate shall be made by the Bank on the basis of
a year of 360 days, in each case for the actual number of days
(including the first day but excluding the last day) occurring in
the period for which such interest is payable. Each
determination by the Bank of an interest rate hereunder shall be
conclusive and binding for all purposes, absent manifest error.
(d) Whenever any payment under this Agreement or the
Note shall be stated to be due, or whenever the last day of any
Interest Period would otherwise occur, on a day which is not a
Business Day, such payment shall be made, and the last day of
such Interest Period shall occur, on the next succeeding Business
Day, and such extension of time shall in such case be included in
the computation of payment of interest; provided, however, if
such extension would cause payment of interest on or principal of
a Eurodollar Loan to be made, or the last day of an Interest
Period for a Eurodollar Loan to occur, in the next following
calendar month, such payment shall be made, and the last day of
such Interest Period shall occur, on the next preceding Business
Day.
(e) Whenever the first day of any Interest Period
occurs on a day of an initial calendar month for which there is
no numerically corresponding day in the calendar month that
succeeds such initial calendar month by the number of months
equal to the number of months in such Interest Period, such
Interest Period shall end on the last Business Day of such
succeeding calendar month. Notwithstanding anything to the
contrary contained herein, each Interest Period that 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) shall end on the last
Business Day of the appropriate subsequent calendar month.
SECTION 2.09. U.S. Taxes.
(a) The Company agrees to pay to the Bank with respect
to any period during which it is not a U.S. Person such
<PAGE> 23
additional amounts as are necessary in order that the net payment
of any amount due to such non-U.S. Person hereunder after
deduction for or withholding in respect of any U.S. Tax imposed
with respect to such payment (or in lieu thereof, payment of such
U.S. Tax by such non-U.S. Person), will not be less than the
amount stated herein to be then due and payable, provided that
the foregoing obligation to pay such additional amounts shall not
apply:
(i) to any payment to the Bank hereunder unless the
Bank is, on the Submission Date (or on the date such Person
becomes the successor to, or the assignee of, the Bank as
provided in Section 8.06) and on the date of any change in
the applicable lending office of the Bank after the date
hereof, entitled to submit either a Form 1001 (relating to
the Bank and entitling it to a complete exemption from
withholding on all interest to be received by it hereunder in
respect of the Loan) or Form 4224 (relating to all interest
to be received by the Bank hereunder in respect of the Loan),
or
(ii) to any U.S. Tax imposed solely by reason of the
failure by such non-U.S. Person to comply with applicable
certification, information, documentation or other reporting
requirements concerning the nationality, residence, identity
or connections with the United States of America of such
non-U.S. Person if such compliance is required by statute or
regulation of the United States of America as a precondition
to relief or exemption from such U.S. Tax.
For the purposes of this Section 2.09(a), (w) "Form 1001" shall
mean Form 1001 (Ownership, Exemption, or Reduced Rate
Certificate) of the Department of the Treasury of the United
States of America, (x) "Form 4224" shall mean Form 4224
(Exemption from Withholding of Tax on Income Effectively
Connected with the Conduct of a Trade or Business in the United
States) of the Department of the Treasury of the United States of
America (or in relation to either such Form such successor and
related forms as may from time to time be adopted by the relevant
taxing authorities of the United States of America to document a
claim to which such Form relates), (y) "U.S. Person" shall mean a
citizen, national or resident of the United States of America, a
corporation, partnership or other entity created or organized in
or under any laws of the United States of America, or any estate
or trust that is subject to Federal income taxation regardless of
the source of its income and (z) "U.S. Taxes" shall mean any
present or future tax, assessment or other charge or levy imposed
by or on behalf of the United States of America or any taxing
authority thereof or therein.
(b) Within 30 days after paying any amount to the Bank
from which it is required by law to make any deduction or
withholding, and within 30 days after it is required by law to
remit such deduction or withholding to any relevant taxing or
<PAGE> 24
other authority, the Company shall deliver to the Bank evidence
satisfactory to the Bank of such deduction, withholding or
payment (as the case may be).
SECTION 2.10. Applicable Lending Office. If the Bank
requests compensation from the Company under any of Section
2.05(a), 2.05(c) or 2.09, the Bank will designate a different
applicable lending office for the portions of the Loan affected
by the events giving rise to such request for compensation if
such designation will avoid the need for, or reduce the amount
of, such compensation and will not, in the reasonable opinion of
the Bank, be disadvantageous to the Bank, except that the Bank
shall have no obligation to designate an applicable lending
office located in the United States of America.
SECTION 2.11. Net Payments. All payments under this
Agreement or the Note to the Bank shall be made without set-off
or counterclaim.
SECTION 2.12. Maximum Interest. It is the intention of
the parties hereto to conform strictly to applicable usury laws
and anything herein to the contrary notwithstanding, the
obligations of the Company to the Bank under this Agreement, the
Related Documents and any other document or instrument executed
in connection herewith or therewith, shall be subject to the
limitation that payments of interest to the Bank shall not be
required to the extent that receipt thereof would be in excess of
the Highest Lawful Rate, or otherwise contrary to provisions of
law applicable to the Bank limiting rates of interest which may
be charged or collected by the Bank. Accordingly, if the
transactions or the amount paid or otherwise agreed to be paid
for the use, forbearance or retention of money under this
Agreement, the Related Documents and any other document or
instrument executed in connection herewith or therewith would
exceed the Highest Lawful Rate or otherwise be usurious under
applicable law (including the federal and state laws of the
United States of America, or of any other jurisdiction whose laws
may be mandatorily applicable) with respect to the Bank then, in
that event, notwithstanding anything to the contrary in this
Agreement or the Related Documents and any other document or
instrument executed in connection herewith or therewith, it is
agreed as follows as to the Bank:
(a) in respect of the Bank, the provisions of this
Section 2.12 shall govern and control over any other provi-
sion in this Agreement, the Related Documents and any other
document or instrument executed in connection herewith or
therewith and each provision set forth therein is hereby so
limited;
(b) the aggregate of all consideration which
constitutes interest under applicable law that is contracted
for, charged or received under this Agreement, or under any
of the other aforesaid agreements or otherwise in connection
<PAGE> 25
with this Agreement of the Bank shall under no circumstances
exceed the amount of interest payable pursuant to the Highest
Lawful Rate, and all amounts owed under this Agreement, the
Related Documents and any other document or instrument
executed in connection herewith or therewith shall be held
subject to reduction and (i) the amount of interest which
would otherwise be payable to the Bank hereunder and under
the Related Documents and any other document or instrument
executed in connection herewith or therewith, shall be
reduced to the amount allowed under applicable law and (ii)
any unearned interest paid by the Company in excess of the
Highest Lawful Rate shall be credited to the Company by the
Bank (or, if such consideration shall have been paid in full,
refunded to the Company);
(c) all sums paid, or agreed to be paid, to the Bank
for the use, forbearance and detention of the indebtedness of
the Company to the Bank hereunder shall, to the extent
permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full term of such indebt-
edness until payment in full so that the actual rate of
interest is uniform throughout the full term thereof;
(d) if at any time the interest provided pursuant to
Sections 2.03 and 2.06, as the case may be, together with any
other fees payable pursuant to or in connection with this
Agreement and deemed interest under applicable law, with
respect to the Bank exceeds that amount which would have
accrued at the Highest Lawful Rate, the amount of interest
and any such fees to accrue to the Bank pursuant to this
Agreement shall be limited, notwithstanding anything to the
contrary in this Agreement, to that amount which would have
accrued at the Highest Lawful Rate for the Bank, but any
subsequent reductions, as applicable, shall not reduce the
interest to accrue pursuant to this Agreement below the
Bank's Highest Lawful Rate until the total amount of interest
payable to the Bank (including all consideration which
constitutes interest) equals the amount of interest which
would have been payable to the Bank (including all consider-
ation which constitutes interest) assuming a varying rate per
annum equal to the interest provided pursuant to Sections
2.03 and 2.06 at all times in effect, plus the amount of fees
which would have been received but for the effect of this
Section 2.12.
ARTICLE III.
CONDITIONS TO CLOSING
SECTION 3.01. Closing Documents. The obligation of the
Bank to execute this Agreement is subject to the conditions
precedent that on or before the date hereof, (i) the Bank shall
have received the following, each dated the date hereof, unless
<PAGE> 26
otherwise specified below, in form and substance satisfactory to
the Bank:
(a) the Note, duly executed and completed;
(b) certified copies of the restated articles of
incorporation and bylaws of the Company, a certified copy of
the resolutions of the Board of Directors of the Company
approving the Related Documents and the other matters
contemplated hereby and thereby, and of all other documents
evidencing any other necessary corporate action;
(c) a copy of a certificate of the Secretary of State
of Texas dated a date reasonably close to the date hereof
listing the articles of incorporation of the Company and each
amendment thereto on file in his office and certifying that
(A) such amendments are the only amendments to the Company's
articles of incorporation on file in his office and (B) the
Company is duly incorporated, validly existing and in good
standing under the laws of such State;
(d) a telegram from such Secretary of State or other
evidence satisfactory to the Bank certifying that the Company
is duly incorporated, validly existing and in good standing
under the laws of such State on the date hereof;
(e) originals (or copies certified to be true copies by
an appropriate officer of the Company) of all governmental
and regulatory approvals (including, without limitation, the
Federal Energy Regulatory Commission and the New Mexico
Public Service Commission approvals) legally required to be
obtained on the Effective Date for the Company to enter into
the Related Documents and to carry out the transactions
contemplated thereby;
(f) a certificate of the Secretary of the Company
certifying the incumbency and the names and true signatures
of the officers of the Company authorized to sign this
Agreement, the Note and the other documents to be delivered
by it hereunder, together with a certificate of another
officer of the Company as to the incumbency and specimen
signature of the Secretary of the Company;
(g) the Second Mortgage Bonds, Series Y-4, such series
having been duly completed, executed and pledged to the Bank
by the Company pursuant to Article VII and the Second
Mortgage Bond Indenture;
(h) evidence of the completion of all recordings and
filings of or with respect to the Second Mortgage Bond
Indenture that the Bank may deem necessary or desirable in
order to perfect the security interest created thereby;
<PAGE> 27
(i) a certified copy of the Second Mortgage Bond
Indenture;
(j) a favorable opinion of Milbank, Tweed, Hadley &
McCloy, New York counsel for the Company (or other New York
counsel for the Company that is reasonably satisfactory to
the Bank), in form and substance reasonably satisfactory to
the Bank;
(k) a favorable opinion of Vinson & Elkins, Texas
counsel for the Company (or other Texas counsel for the
Company that is reasonably satisfactory to the Bank), in form
and substance reasonably satisfactory to the Bank;
[reasonably acceptable to the Bank]
(l) a favorable opinion of Stoops & Burns, Arizona
counsel for the Company (or other Arizona counsel for the
Company that is reasonably satisfactory to the Bank), in form
and substance reasonably satisfactory to the Bank;
(m) a favorable opinion of Taichert, Wiggins, Virtue,
Wilson & Najjar, New Mexico regulatory counsel for the
Company (or other New Mexico regulatory counsel for the
Company that is reasonably satisfactory to the Bank), in form
and substance reasonably satisfactory to the Bank;
(n) a favorable opinion of [Milbank, Tweed, Hadley &
McCloy], federal regulatory counsel for the Company (or other
federal regulatory counsel for the Company that is reasonably
satisfactory to the Bank), in form and substance reasonably
satisfactory to the Bank;
(o) written evidence, satisfactory to the Bank, that
the First Mortgage Bonds, Series A/B and the Second Mortgage
Bonds, Series A, have a rating of at least BBB- (or
equivalent rating) by at least two of Standard & Poor's
Corporation, Moody's Investors Service, Inc. and Duff &
Phelps, Inc.;
(p) a certificate of the chairman, president or chief
financial officer of the Company, certifying (A) that the
Effective Date has occurred as of the time of delivery
thereof or will occur concurrently with delivery thereof and
(B) that, after giving effect to the transactions
contemplated under the Plan of Reorganization: (x) no event
has occurred and is continuing which constitutes an Event of
Default or would constitute an Event of Default but for the
giving of notice or the lapse of time or both and (y) the
representations and warranties made by the Company in Article
IV hereof, and in each of the other Related Documents, shall
be true and complete on and as of the Effective Date with the
same force and effect as if made on and as of such date (or,
if such representation or warranty is expressly stated to
<PAGE> 28
have been made as of a specific date, as of such specific
date); and
(ii) the following shall have occurred:
(a) the Confirmation Order shall have been entered at
least 10 days prior to the date hereof, no stay of such order
shall be in effect and the Bank shall have received a
certified copy of such order;
(b) the Plan of Reorganization shall have been
substantially consummated without waiver of any condition or
other modification (other than waivers or modifications made
in accordance with Section 6.6 of the Plan of
Reorganization);
(c) the Effective Date shall have occurred or shall
occur substantially simultaneously with the delivery of this
Agreement and of the other Related Documents; and
(d) the Bank shall have received such other approvals,
opinions or documents as the Bank may reasonably request.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the
Company. The Company represents and warrants as follows:
(a) The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the
State of Texas and is duly qualified to do business in, and
is in good standing under the laws of, the States of Texas,
Arizona and New Mexico and has requisite corporate power and
authority, and all governmental licenses, authorizations and
approvals necessary, to conduct its business and to own its
properties, except where the failure to have the same would
not result in a Material Adverse Effect.
(b) The execution, delivery and performance by the
Company of this Agreement and the other Related Documents to
which it is a party are within the Company's corporate
powers, have been duly authorized by all necessary corporate
action, and do not contravene (i) the Company's articles of
incorporation or by-laws, which the Company has adopted
pursuant to the Plan of Reorganization, or (ii) any law,
order, rule, regulation (including, without limitation, any
order, rule or regulation of the Federal Energy Regulatory
Commission, the New Mexico Public Service Commission or the
Public Utility Commission of Texas, or Regulation G, T, U or
X of the F.R.S. Board), writ, judgment, injunction or decree
applicable to the Company or any contractual restriction
<PAGE> 29
binding on or affecting the Company or any Subsidiary, and do
not result in or require the creation of any Lien upon or
with respect to any properties of the Company or any
Subsidiary (except as provided in or contemplated by this
Agreement, the other Related Documents or the Plan of
Reorganization).
(c) No authorization or approval or other action by,
and no notice to or filing with, any governmental authority
or regulatory body is required for the due execution,
delivery and performance by the Company of this Agreement or
any other Related Document (including the issuance and pledge
of the Second Mortgage Bonds, Series Y-4 and the creation and
perfection of the Liens on the property securing such Bonds)
except for (i) those that have been duly obtained or made and
are in full force and effect and are Final Approvals and (ii)
the Confirmation Order.
(d) This Agreement has been duly and validly executed
by the Company and constitutes, and the Note when delivered
hereunder will constitute legal, valid and binding
obligations of the Company enforceable against the Company in
accordance with their respective terms.
(e) There is no pending or overtly threatened action,
investigation, proceeding or notification which has been
instituted after the Effective Date affecting the Company or
any of its Subsidiaries before any court, governmental agency
or arbitrator, which is reasonably likely to have a Material
Adverse Effect.
(f) The Second Mortgage Bonds, Series Y-4 (i) have been
duly authorized, executed, authenticated, issued, pledged and
delivered in the manner provided for in the Second Mortgage
Bond Indenture and in compliance with all applicable law;
(ii) constitute the legal, valid and binding obligations of
the Company enforceable against the Company in accordance
with their terms and the terms of the Second Mortgage Bond
Indenture except insofar as enforceability may be limited or
otherwise affected by (a) bankruptcy, insolvency, moratorium,
reorganization or other similar laws of general application
relating to or affecting the rights and remedies of creditors
from time to time in effect and (b) general principles of
equity (regardless of whether enforceability is considered in
a proceeding in equity or at law); (iii) are entitled to the
security and benefits of the Second Mortgage Bond Indenture;
(iv) are secured equally and ratably with and only with all
other bonds issued and outstanding and which may hereafter
and thereafter be issued and outstanding under the Second
Mortgage Bond Indenture; (v) are secured by duly perfected
Liens on and security interests in the collateral purporting
to secure such bonds in the Second Mortgage Bond Indenture
which Liens are subordinated in priority only to the Liens
and security interests granted under the First Mortgage Bond
<PAGE> 30
Indenture and securing outstanding First Mortgage Bonds; and
(vi) constitute collateral security encumbered by valid duly
perfected Liens thereon and security interests therein
securing the obligations of the Company under this Agreement
and the Note as purported to be provided in such indenture
and herein and in the Note. The Company has executed, issued
and delivered all Second Mortgage Bonds, Series Y-4 to the
Bank and has made all such duly perfected pledges thereof to
the Bank as are required to be executed, issued, delivered
and made under this Agreement and there are no other Liens on
such Second Mortgage Bonds.
(g) The Second Mortgage Bond Indenture creates a valid
and perfected second Lien on the Company's property as
described in the Second Mortgage Bond Indenture as collateral
security for the Company's obligations under the Second
Mortgage Bond Indenture and the Second Mortgage Bonds, Series
Y-4.
(h) The Company is not a "holding company" as such term
is defined in the Public Utility Holding Company Act of 1935,
as amended, nor an "investment company", or a company
"controlled" by an "investment company", within the meaning
of the Investment Company Act of 1940, as amended.
(i) The Company and its Subsidiaries have filed all
United States federal and state income tax returns and all
other material tax returns which are required to be filed by
them, and have paid all taxes due pursuant to such returns
or, to the extent deemed necessary or appropriate by the
Company and such Subsidiary, provided reserves for the
payment thereof, other than such taxes that the Company or
any Subsidiary is contesting in good faith by appropriate
legal proceedings.
(j) The Company and the ERISA Affiliates have fulfilled
their respective obligations under the minimum funding
standards of ERISA and the Code with respect to each Plan and
are in compliance with the presently applicable provisions of
ERISA and the Code except where non-compliance would not have
a Material Adverse Effect, and have not incurred any
liability to the PBGC (other than to pay premiums under
Section 4007 of ERISA) or any Plan or any Multiemployer Plan
(other than to make contributions in the ordinary course of
business). No reportable event, within the meaning of
Section 4043 of ERISA, has occurred with respect to any Plan,
except for any such event as to which the 30-day notice
requirement has been waived by the PBGC. Schedule B
(Actuarial Information) to the most recently filed annual
report (Form 5500 Series) for each Plan is complete and
accurate and fairly presents the funding status of such Plan,
and since the date of such Schedule B there has been no
change in such funding status that can reasonably be expected
to have a Material Adverse Effect.
<PAGE> 31
(k) The operations and properties of the Company and
each of its Subsidiaries comply in all material respects with
all Environmental Laws, the Company and each of its
Subsidiaries possess and are in compliance with all required
Environmental Permits and no circumstances exist that are or
would be reasonably likely to (i) form the basis of an
Environmental Action against the Company or any of its
Subsidiaries or any of their properties or (ii) cause any
such property to be subject to any restrictions on ownership,
occupancy, use or transferability under any Environmental
Law, except as would not be likely to have a Material Adverse
Effect and, none of the properties of the Company or any of
its Subsidiaries is listed or proposed for listing on the
National Priorities List under CERCLA or any analogous state
list.
(l) No Material Adverse Effect has occurred since the
Effective Date.
(m) The Confirmation Order has been entered and has not
been reversed, amended (except as consented to by the Bank in
its sole discretion), stayed, vacated or rescinded. The Bank
shall be entitled to enforce its remedies under this
Agreement without further application to or order by the
Bankruptcy Court.
ARTICLE V.
COVENANTS OF THE COMPANY
SECTION 5.01. Covenants of the Company. Until the
principal amount of the Loan and any accrued interest thereon is
paid in full and all other amounts payable by the Company
hereunder are paid in full, unless the Bank shall otherwise agree
in writing, the Company agrees that:
(a) Reporting Requirements. The Company shall deliver
to the Bank:
(i) as soon as available and in any event within
45 days after the end of each of the first three
quarterly fiscal periods of each fiscal year of the
Company, consolidated and consolidating statements of
income, retained earnings and cash flow of the Company
and its Consolidated Subsidiaries for such period and
for the period from the beginning of the respective
fiscal year to the end of such period, and the related
consolidated and consolidating balance sheets of the
Company and its Consolidated Subsidiaries at the end of
such period, setting forth in each case in comparative
form the corresponding consolidated and consolidating
figures for the corresponding period in the preceding
fiscal year, accompanied by a certificate of a senior
<PAGE> 32
financial officer of the Company, which certificate
shall state that said consolidated financial statements
fairly present the consolidated financial condition and
results of operations of the Company and its
Consolidated Subsidiaries, and said consolidating
financial statements fairly present the respective
individual unconsolidated financial condition and
results of operations of the Company and of each of its
Consolidated Subsidiaries, in each case in accordance
with GAAP, consistently applied, as at the end of, and
for, such period (subject to normal year-end audit
adjustments);
(ii) as soon as available and in any event within
90 days after the end of each fiscal year of the
Company, consolidated and consolidating statements of
income, retained earnings and cash flow of the Company
and its Consolidated Subsidiaries for such fiscal year
and the related consolidated and consolidating balance
sheets of the Company and its Consolidated Subsidiaries
as at the end of such fiscal year, setting forth in each
case in comparative form the corresponding consolidated
and consolidating figures for the preceding fiscal year,
and accompanied (i) in the case of said consolidated
statements and balance sheet of the Company, by an
opinion thereon of independent certified public
accountants of recognized national standing, which
opinion shall state that said consolidated financial
statements fairly present the consolidated financial
condition and results of operations of the Company and
its Consolidated Subsidiaries as at the end of, and for,
such fiscal year in accordance with GAAP, consistently
applied, and a certificate of such accountants stating
that, in making the examination necessary for their
opinion, they obtained no knowledge, except as
specifically stated, of any failure by the Company to
comply with Section 5.01(e), (f) or (i)(xi), and (ii) in
the case of said consolidating statements and balance
sheets, by a certificate of a senior financial officer
of the Company, which certificate shall state that said
consolidating financial statements fairly present the
respective individual unconsolidated financial condition
and results of operations of the Company and of each of
its Consolidated Subsidiaries, in each case in
accordance with GAAP, consistently applied, as at the
end of, and for, such fiscal year;
(iii) as soon as available copies of all proxy
statements, material reports and registration statements
which the Company or any of its Subsidiaries files with
the Securities and Exchange Commission or any national
securities exchange (other than filings made pursuant to
the Public Utility Holding Company Act of 1935, as
amended, public offerings of securities under employee
<PAGE> 33
benefit plans, customer stock purchase plans or dividend
reinvestment plans);
(iv) as soon as possible and in any event within
two days after the Company has knowledge of the
occurrence of each Event of Default continuing on the
date of such statement, a statement from the chief
financial officer of the Company setting forth details
of such Event of Default and the action that the Company
has taken and proposes to take with respect thereto; and
(v) at the time the Company furnishes each set of
financial statements pursuant to paragraph (i) or (ii)
above, a certificate of a senior financial officer of
the Company setting forth in reasonable detail the
computations necessary to determine whether the Company
is in compliance with subsections (e), (f) and (i)(xi)
of this Section 5.01 as of the end of the respective
quarterly fiscal period or fiscal year and stating that
no event has occurred and is continuing which
constitutes an Event of Default or would constitute an
Event of Default but for the giving of notice or the
lapse of time, or both, or if any such event has
occurred and is continuing, a statement as to the nature
thereof and the actions that the Company has taken or
proposes to take with respect thereto; and
(vi) such other financial data and information of
the Company or any of its Subsidiaries as the Bank may
from time to time reasonably request.
(b) Litigation. The Company will promptly give to the
Bank notice of all actions, suits, investigations, litigation
or legal or arbitral proceedings, and of all proceedings by
or before any governmental or regulatory authority or agency
(and any material development in respect of such legal or
other proceedings), in each case, known to the Company, which
is reasonably likely to have a Material Adverse Effect.
(c) Preservation of Corporate Existence, Etc. The
Company will (i) preserve and maintain its corporate
existence in the state of its incorporation and qualify and
remain qualified as a foreign corporation in each
jurisdiction in which such qualification is reasonably
necessary in view of its business, and (ii) pay and
discharge, and cause its Subsidiaries to pay and discharge,
all taxes, assessments and governmental charges upon its
income and its properties prior to the date on which
penalties attach thereto, unless (A) such taxes, assessments
and governmental charges shall be contested in good faith and
by appropriate proceedings by the Company or its Subsidiaries
and (B) the Company or any such Subsidiary shall set aside on
its books adequate reserves therefor to the extent required
by GAAP. Nothing contained in this clause (c) of Section
<PAGE> 34
5.01 shall be deemed to prohibit any transaction permitted by
clause (g) of this Section 5.01.
(d) Maintenance of Insurance, Etc. The Company will,
and will cause its Subsidiaries to, maintain insurance with
responsible insurance companies or associations or through
its own program of self-insurance in such amounts, with such
deductibles, and covering such risks as is usually carried by
companies engaged in similar business.
(e) EBITA to Interest Coverage Ratio. The Company will
not permit the Interest Coverage Ratio to be less than 1.40
to 1 at any time on or after the last day of the first full
fiscal quarter of the Company commencing after the Effective
Date.
(f) Leverage Ratio. The Company will not permit the
Leverage Ratio to exceed 0.68 to 1 at any time on or after
the last day of the first full fiscal quarter of the Company
commencing after the Effective Date.
(g) Prohibition of Fundamental Changes. The Company
will not, and will not permit any of its Subsidiaries to,
enter into any transaction of merger, consolidation,
amalgamation, liquidation or dissolution; provided that the
Company or any of its Subsidiaries may merge or consolidate
with any other Person if (i) in any such transaction in which
the Company is a party, the Company is the surviving
corporation or (ii) in any such transaction in which the
Company is not a party, the surviving corporation shall be a
Subsidiary of the Company, in each case so long as after
giving effect thereto no Event of Default would exist
hereunder. The Company will not, and will not permit any of
its Subsidiaries to, convey, sell, lease, transfer or
otherwise dispose of, in one transaction or a series of
transactions, all or substantially all of its business or
assets or assets (excluding (i) accounts receivable, (ii)
obsolete or worn-out tools, equipment or other property no
longer used or useful in its business and (iii) inventory or
other property sold or disposed of in the ordinary course of
business and on ordinary business terms) which in the
aggregate have a net book value in excess of $50,000,000,
whether now owned or hereafter acquired, to any other Person.
Notwithstanding the foregoing provisions of this subsection
(g):
(1) any Subsidiary of the Company may be merged or
consolidated with or into: (A) the Company if the Company
shall be the continuing or surviving corporation or (B) any
other Subsidiary of the Company; and
(2) any Subsidiary of the Company may sell, lease,
transfer or otherwise dispose of any or all of its Property
<PAGE> 35
(upon voluntary liquidation or otherwise) to the Company or a
Subsidiary of the Company.
(h) Compliance with ERISA. The Company will not (i)
enter into any non-exempt prohibited transaction (as defined
in Section 4975 of the Code and in Section 406 of ERISA)
involving any Plan which may result in any liability of the
Company to any Person which (in the reasonable opinion of the
Bank) will have a Material Adverse Effect or (ii) allow or
suffer to exist any other event or condition known to the
Company which results in any liability of the Company or any
of its Subsidiaries to the PBGC or in any Withdrawal
Liability to any Multiemployer Plan, which (in the reasonable
opinion of the Bank) will be expected to have a Material
Adverse Effect on the financial position or operations of the
Company. For purposes of this Section 5.01(h), "liability"
shall not include termination insurance premiums payable
under Section 4007 of ERISA. Upon request of the Bank, the
Company shall promptly furnish to the Bank a copy of Schedule
B (Actuarial Information) to the most recently filed annual
report (Form 5500 Series) of any Plan.
(i) Limitation on Liens. The Company will not, nor
will it permit any of its Subsidiaries to, create, incur,
assume or suffer to exist any Lien upon or with respect to
any of its property, whether now owned or hereafter acquired,
except:
(i) Liens created pursuant to the Related
Documents or pursuant to the First Mortgage Bond
Indenture or the Second Mortgage Bond Indenture;
(ii) Liens created or otherwise in existence on
the Effective Date or contemplated by the Plan of
Reorganization;
(iii) Liens imposed by any governmental authority
for taxes, assessments or charges not yet due or which
are being contested in good faith and by appropriate
proceedings if adequate reserves with respect thereto
are maintained on the books of the Company or the
affected Subsidiaries, as the case may be, in accordance
with GAAP;
(iv) carriers', warehousemen's, mechanics',
materialmen's, repairmen's or other like Liens arising
in the ordinary course of business which are not overdue
for a period of more than 60 days or which are being
contested in good faith and by appropriate proceedings;
(v) pledges or deposits under worker's
compensation, unemployment insurance and other social
security legislation;
<PAGE> 36
(vi) deposits to secure the performance of bids,
trade contracts (other than for borrowed money), leases,
statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature
incurred in the ordinary course of business;
(vii) easements, rights-of-way, restrictions and
other similar encumbrances incurred in the ordinary
course of business and encumbrances consisting of zoning
restrictions, easements, licenses, restrictions on the
use of property or minor imperfections in title thereto
which, in the aggregate, are not material in amount, and
which do not in any case materially detract from the
value of the property subject thereto, render title to
the property encumbered thereby unmarketable, materially
adversely affect the use of such property for its
present purposes or interfere with the ordinary conduct
of the business of the Company or any of its
Subsidiaries;
(viii) Liens on property of any corporation which
becomes a Subsidiary of the Company after the date of
this Agreement, provided that such Liens are in
existence at the time such corporation becomes a
Subsidiary of the Company and were not created in
anticipation thereof, provided further that such Liens
shall not extend to cover any property of the Company or
any of its other Subsidiaries and such Liens shall not
cover property of such Subsidiary other than property of
the types covered by the terms of such Liens at the time
such Subsidiary is acquired;
(ix) Liens upon real and/or tangible personal
property acquired after the Effective Date (by purchase,
construction or otherwise) by the Company or any of its
Subsidiaries, each of which Liens either (A) existed on
such property before the time of its acquisition and was
not created in anticipation thereof, or (B) was created
solely for the purpose of securing Debt representing, or
incurred to finance, refinance or refund, the cost
(including the cost of construction) of such property;
provided that no such Lien shall extend to or cover any
property of the Company or such Subsidiary other than
the property so acquired and improvements thereon;
(x) banker's liens, rights of set-off and Liens on
documents presented under commercial letters of credit,
in each case granted to banks in accordance with
customary banking practices or arising by operation of
law;
(xi) additional Liens upon real and/or personal
property created after the date hereof, provided that,
on the date each such Lien is incurred, the lower of (1)
<PAGE> 37
the fair market value of all property subject to Liens
permitted by this paragraph (xi) and not otherwise
permitted by this subsection (i) or (2) the aggregate
amount of all obligations secured by Liens permitted by
this paragraph (xi) and not otherwise permitted by this
subsection (i) shall not exceed 5% of Total Capital on
such date; and
(xii) any extension, renewal or replacement of the
foregoing, provided, however, that the Liens permitted
hereunder shall not be spread to cover any additional
Debt or property (other than a substitution of like
property).
(j) Compliance with Laws, Etc. The Company will
comply, and cause each of its Subsidiaries to comply, in all
material respects, with all applicable laws, rules,
regulations and orders, such compliance to include, without
limitation, compliance with ERISA, except where the failure
to so comply would not have a Material Adverse Effect.
(k) Compliance with Environmental Laws. The Company
will comply, and cause each of its Subsidiaries and all
lessees and other Persons occupying or operating on its
properties to comply, in all material respects, with all
Environmental Laws and Environmental Permits applicable to
its operations and properties; obtain and renew all
Environmental Permits necessary for its operations and
properties; and conduct, and cause each of its Subsidiaries
to conduct, any investigation, study, sampling and testing,
and undertake any cleanup, removal, remedial or other action
required under any Environmental Law to remove and clean up
all Hazardous Materials from any of its properties, in
accordance with the requirements of all Environmental Laws;
provided, however, that neither the Company nor any of its
Subsidiaries shall be required to undertake any such cleanup,
removal, remedial or other action to the extent that its
obligation to do so is being contested in good faith and by
proper proceedings and reserves, where required by GAAP, are
being maintained with respect to such circumstances.
(l) Visitation Rights. The Company will, at any
reasonable time and from time to time, permit the Bank or any
agents or representatives thereof, to examine and make copies
of and abstracts from the records and books of account of,
and examine the properties of, the Company and any of its
Subsidiaries, and to discuss the affairs, finances and
accounts of the Company and any of its Subsidiaries with any
of their officers or directors and with their independent
certified public accountants.
(m) Maintenance of Properties, Etc. The Company will
maintain and preserve, and cause each of its Subsidiaries to
maintain and preserve, all of its properties that are used or
<PAGE> 38
useful in the conduct of its business in good working order
and condition, ordinary wear and tear excepted; provided that
this subsection (m) shall not prevent the sale of any
properties permitted by subsection (g) of this Section 5.01.
(n) Change in Nature of Business. The Company will not
make, or permit any of its Subsidiaries to make, any material
change in the nature of its business as carried on at the
date hereof.
(o) Lien. The Company shall maintain the Lien created
by or purported to be created by the Second Mortgage Bonds,
Series [Y-4] for the benefit of the Bank and defend, preserve
and protect such Lien against all claims of all Persons.
(p) Maintain Books and Records. The Company shall keep
adequate records and books of account, in which complete
entries will be made in accordance with GAAP consistently
applied.
(q) Additional Documents. As promptly as practicable
(but in any event not later than 30 days) after the Effective
Date, the Company will furnish to the Bank (i) certified
copies of the recorded counterparts of the First Mortgage
Bond Indenture evidencing the filing thereof and (ii)
certified copies of all notices filed with respect to the
First Mortgage Bond Indenture and the Second Mortgage Bond
Indenture.
(r) Certain Subsidiaries. The Company shall not, and
shall not permit any of its Subsidiaries to, create any
Subsidiaries of the Company or make any investment in any
Person except in compliance with the Public Utility Holding
Company Act of 1935, as amended, and the regulations and
orders of the Securities and Exchange Commission thereunder.
ARTICLE VI.
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the
following events ("Events of Default") shall occur and be
continuing:
(a) The Company shall default in the payment when due
of any principal of the Loan; or
(b) The Company shall default in the payment when due
of any interest on the Loan or any other amount payable by it
hereunder and such default shall continue unremedied for five
Business Days; or
<PAGE> 39
(c) The Company or any of its Subsidiaries shall
default in the payment when due of any principal of or any
interest on any Debt aggregating $10,000,000 or more, or fail
to observe or perform any material term, covenant or
agreement contained in any agreement by which it is bound,
evidencing or securing Debt, in an aggregate amount of
$10,000,000 or more, or any other event shall occur or
condition shall exist under any agreement or instrument
relating to any such Debt, after the giving of any required
notice and for such period of time as would permit the holder
or holders thereof or of any obligations issued thereunder to
accelerate the maturity thereof, unless such failure or event
or condition shall have been cured by the Company or such
Subsidiary, as the case may be, or effectively waived by such
holder or holders; or
(d) Any representation, warranty or certification made
or deemed made in any Related Document by the Company (or any
of its officers), or any certificate furnished to the Bank
pursuant to the provisions thereof, shall prove to have been
false or misleading as of the time made or furnished in any
material respect; or
(e) The Company shall default in the performance of any
of its obligations under clause (a)(vi) of Section 5.01 or
clauses (e), (f), (g), or (n) of Section 5.01; or a
consensual Lien shall be created by the Company or any of its
Subsidiaries in violation of Section 5.01(i); or the Company
shall default in its performance of any of its other
obligations under this Agreement or under any other Related
Document and such default in the performance of any such
other obligation shall continue unremedied for a period of 15
days after notice thereof to the Company by the Bank; or
(f) There shall remain in force, undischarged,
unsatisfied and unstayed, for more than 30 days, whether or
not consecutive, any final judgment against the Company or
any of its Material Subsidiaries that, together with other
outstanding final judgments, undischarged, against the
Company and all of its Material Subsidiaries exceeds in the
aggregate $10,000,000 (for the purposes hereof, the term
"final judgment" shall mean a judgment which is not subject
to appeal); or
(g) The Company or any of its Material Subsidiaries
shall make a general assignment for the benefit of creditors,
or admit in writing its inability to pay or generally fail to
pay its debts as they mature or become due, or shall petition
or apply for the appointment of a trustee or other custodian,
liquidator or receiver of the Company or any of its Material
Subsidiaries, as the case may be, or any substantial part of
its respective assets; or the Company or any of its Material
Subsidiaries shall commence any case or other proceeding
relating to the Company or any of its Material Subsidiaries
<PAGE> 40
under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation
or similar law of any jurisdiction, now or hereafter in
effect, or the Company or any of its Material Subsidiaries
shall take any action to authorize or in furtherance of any
of the foregoing; or if any such petition or application
shall be filed or any such case or other proceeding shall be
commenced against the Company or any of its Material
Subsidiaries and the Company or any of its Material
Subsidiaries shall indicate its approval thereof, consent
thereto or acquiescence therein or such petition or
application shall not be dismissed on or before the 60th day
after the filing thereof; or
(h) A decree or order is entered appointing any
trustee, custodian, liquidator or receiver or adjudicating
the Company or any of its Material Subsidiaries bankrupt or
insolvent, or approving a petition in any such case or other
proceeding, or a decree or order for relief is entered in
respect of the Company or any of its Material Subsidiaries in
an involuntary case under federal bankruptcy laws as now or
hereafter reconstituted; or
(i) There shall have been asserted against the Company
by a Governmental Person or other Person, a written
complaint, claim or demand asserting any claims or
liabilities, whether accrued, absolute or contingent, based
on or arising from the presence, release or disposal of
Hazardous Materials by the Company or any of its Subsidiaries
that is reasonably likely to be determined adversely to the
Company or any of its Subsidiaries, and the amount thereof
(either individually or in the aggregate) would, in such
event, have a Material Adverse Effect (after deducting any
portion thereof that is reasonably expected to be paid by
other creditworthy Persons); or
(j) The Confirmation Order shall be (i) reversed,
revoked or vacated in whole or in part by any Final Order of
a court of competent jurisdiction, or (ii) modified in a
manner or subjected to a stay that adversely affects the
Company's ability to perform any of its obligations
hereunder, as determined by the Bank in its sole discretion;
or
(k) Central and South West Corporation shall cease
directly or indirectly, to own (or otherwise shall cease,
directly or indirectly, to control the voting rights of) at
least 51% of the Voting Stock of the Company; or
(l) Any "Event of Default" under and as defined in the
Related Documents shall have occurred and be continuing; or
(m) Any regulatory approval as set forth in
Section 3.01(e) or required to consummate the Plan of
<PAGE> 41
Reorganization shall be rescinded if such rescission, in the
good faith judgment of the Bank, has a Material Adverse
Effect on the Company; or
(n) Any material provision of this Agreement or any
other Related Document shall at any time cease to be a valid,
binding obligation of the Company enforceable against the
Company, or any such agreement shall be declared to be null
and void, or the validity or enforceability thereof shall be
contested by the Company, or a proceeding shall be commenced
by any Governmental Person having jurisdiction over the
Company seeking to establish the invalidity or
unenforceability thereof, or the Company shall deny that it
has any further liability or obligation under this Agreement
or the Note or any other Related Document after delivery
thereof the Second Mortgage Bond Indenture shall for any
reason (other than pursuant to the terms thereof) cease to
create a valid and perfected second priority Lien on the
Company's property purported to be secured thereby
then, and in any such event, the Bank may, by notice to the
Company, declare the Note, all interest thereon and all other
amounts payable under this Agreement to be forthwith due and
payable, whereupon the Note, all such interest and all such
amounts shall become and be forthwith due and payable, without
presentment, demand, protest, or further notice of any kind, all
of which are hereby expressly waived by the Company; provided,
however, that, in the event of the occurrence of an Event of
Default pursuant to subsections (g) or (h) of this Section 6.01,
the Note, all interest thereon and all other amounts payable
under this Agreement shall automatically become and be due and
payable, without presentment, demand, protest or any notice of
any kind, all of which are hereby expressly waived by the
Company.
ARTICLE VII.
SECURITY
SECTION 7.01. Issuance and Pledge of Bonds.
Concurrently with the execution of this Agreement and delivery of
the Note, the Company shall execute, issue, and deliver to the
Bank the Second Mortgage Bonds, Series Y-4 as security for the
payment of all obligations of the Company now or hereafter
existing under this Agreement or the Note in respect of principal
and interest pursuant to and on the terms of this Agreement, the
Note and of the Second Mortgage Bond Indenture. The Company
hereby pledges to the Bank and grants to the Bank a security
interest in the Second Mortgage Bonds, Series Y-4 and all
interest, cash, instruments and other property from time to time
received, receivable or otherwise distributed in respect of or in
exchange for any or all of such Bonds and proceeds of any and all
of the foregoing.
<PAGE> 42
SECTION 7.02. Application of Moneys. Any moneys
received by the Bank on account of the Second Mortgage Bonds,
Series Y-4 shall be applied as follows: (a) moneys received on
account of principal of the Second Mortgage Bonds, Series Y-4
shall be applied to the payment of any unpaid principal of the
Note then due and owing and (b) moneys received on account of
interest on the Second Mortgage Bonds, Series Y-4 shall be
applied to the payment of any accrued and unpaid interest on the
Note then due and owing.
SECTION 7.03. Rights of Bondholders. The Bank, as
holder of the Second Mortgage Bonds, Series Y-4 shall have only
such rights provided to holders of bonds in the Second Mortgage
Bond Indenture. Without limiting the generality of the
foregoing, (a) the Second Mortgage Bonds, Series Y-4 may not be
sold, assigned, pledged or otherwise transferred by the Bank,
whether pursuant to the Uniform Commercial Code after an Event of
Default or otherwise except in connection with any assignment of
the Bank's rights and obligations under this Agreement and of the
Note as provided for herein and (b) no payment of principal of or
interest on the Second Mortgage Bonds, Series Y-4, or any other
amount payable thereunder, shall be demanded or received except
if, and to the extent that, the corresponding payment remains
unpaid hereunder or under the Note. To the extent that moneys
recovered from the Second Mortgage Bonds, Series Y-4, are
insufficient to pay in full the amount of principal and interest
due on the Note and other amounts due hereunder, the Company
shall remain liable for any such deficiency under the terms of
this Agreement and the Note.
ARTICLE VIII.
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. No amendment or waiver
of any provision of this Agreement or the Note, nor consent to
any departure by the Company therefrom, shall in any event be
effective unless the same shall be in writing and signed by the
Bank, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which
given.
SECTION 8.02. Notices, Etc. All notices and other
communications provided for hereunder shall be in writing
(including telecopier, telegraphic, telex or cable communication)
and mailed, telecopied, telegraphed, telexed, cabled or
delivered, if to the Company, at its address at
______________________________________________________ ,
Attention: _____________________ , telex No.__________ and in the
case of telecopier to _______________; and if to the Bank, at its
address at [425 Lexington Avenue, New York, New York 10017],
Attention:___________________________ Department,
________________ Group, telex No. _______ and in the case of
<PAGE> 43
telecopier to (212) _____________; or, as to each party, at such
other address as shall be designated by such party in a written
notice to the other party. All such notices and communications
shall, when mailed, telecopied, telegraphed, telexed or cabled,
be effective when deposited in the mails, telecopied, delivered
to the telegraph company, confirmed by telex answerback or
delivered to the cable company, respectively, except that notices
to the Bank pursuant to the provisions of Article II shall not be
effective until received by the Bank.
SECTION 8.03. No Waiver; Remedies. No failure on the
part of the Bank to exercise, and no delay in exercising, any
power or right hereunder or under the Note shall operate as a
waiver thereof; nor shall any single or partial exercise of any
such power or right preclude any other or further exercise
thereof or the exercise of any other power or right. The
remedies provided in this Agreement are cumulative and not
exclusive of any remedies provided by law.
SECTION 8.04. Costs, Expenses and Taxes. The Company
agrees to pay on demand all costs and expenses in connection with
the preparation, execution, delivery, administration (except
normal administrative costs and fees and expenses of counsel
related thereto prior to an Event of Default), waiver,
modification and amendment of this Agreement, the Note and any
other documents to be delivered hereunder, including, without
limitation, the reasonable fees and out-of-pocket expenses of
counsel for the Bank, and local counsel who may be retained by
said counsel, with respect thereto, with respect to advising the
Bank as to its rights and responsibilities, or the perfection or
preservation of rights or interests, under this Agreement, any
other Related Document and such other documents which may be
delivered in connection with this Agreement, with respect to
negotiations with the Company or with other creditors of the
Company, any Person controlling the Company or any of the
Company's Subsidiaries arising out of any Event of Default or any
events or circumstances that may give rise to an Event of Default
and with respect to presenting claims in or otherwise
participating in or monitoring any bankruptcy, insolvency or
other similar proceeding involving creditor's rights generally
and any proceeding ancillary thereto or in connection with the
negotiation of any restructuring or "work-out" (whether or not
consummated). The Company further agrees to pay on demand all
costs and expenses (including reasonable counsel fees and
expenses), in connection with the enforcement (whether through
negotiations, legal proceedings or otherwise) of this Agreement,
the Note, and any other Related Document and any other documents
to be delivered hereunder, including, without limitation,
reasonable counsel fees and expenses in connection with the
enforcement of rights under this Section 8.04. In addition, the
Company shall pay any and all stamp and other administrative
taxes and fees payable or determined to be payable in connection
with the execution and delivery of this Agreement, the Note, any
other Related Document or any other documents to be delivered
<PAGE> 44
hereunder, and agrees to save the Bank harmless from and against
any and all liabilities with respect to or resulting from any
delay in paying or omission to pay such taxes and fees.
SECTION 8.05. Right of Set-off. Upon the occurrence
and during the continuance of any Event of Default the 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 the Bank to or for the credit or the account of the Company
against any and all of the obligations of the Company now or
hereafter existing under this Agreement, the Note or any other
Related Document, whether or not the Bank shall have made any
demand under this Agreement or the Note and although such
obligations may be contingent or unmatured.
The Bank agrees promptly to notify the Company after any
such set-off and application, provided that the failure to give
such notice shall not affect the validity of such set-off and
application. The rights of the Bank under this Section are in
addition to other rights and remedies (including, without
limitation, other rights of set-off) which the Bank may have.
SECTION 8.06. Binding Effect; Assignments and
Participations. (a) This Agreement shall become effective when
it shall have been executed by the Company and the Bank and
thereafter shall be binding upon and inure to the benefit of the
Company and the Bank and their respective successors and assigns,
except that the Company shall not have the right to assign its
rights hereunder or any interest herein without the prior written
consent of the Bank. The Bank may assign to any Eligible
Institution all, but not less than all, of the Bank's rights and
benefits under this Agreement, the Note and the other Related
Documents, and to the extent of that assignment such assignee
shall have the same rights and benefits against the Company
hereunder and under the other Related Documents as it would have
had if such assignee were the Bank, except that, if the assignee
is not a commercial bank, the Alternate Base Rate and the LIBO
Rate shall be calculated as if such assignee were the Bank listed
on the signature page.
(b) The Bank may sell or agree to sell, to (i) any
Eligible Institution (each such Eligible Institution being an
"Eligible Participant") or (ii) to one or more other Persons
(each a "Restricted Participant"; and together with any Eligible
Participants being referred to herein as a "Participant"), a
participation in all or any part of the Loan. Each Participant
shall be entitled to the rights and benefits of the provisions of
Section 5.01(a)(vi), with respect to its participation in such
Loan as if (and the Company shall be directly obligated to such
Participant under such provisions as if) such Participant were
the "Bank" for purposes of said Section, but, except as set forth
below, shall not have any other rights or benefits under this
Agreement, the Note or any other Related Document (the
<PAGE> 45
Participant's rights against the Bank in respect of such
participation to be those set forth in the agreements executed by
the Bank in favor of the Participant). All amounts payable by
the Company to the Bank under Sections 2.05 and 2.09 in respect
of the Loan shall be determined as if the Bank had not sold or
agreed to sell any participations in the Loan, and as if the Bank
were maintaining the Loan in the same way that it is maintaining
the portion of the Loan in which no participations have been
sold. In the case of an Eligible Participant, the Bank may agree
with such Participant to take or refrain from taking action
hereunder or under any Related Document as the Bank and such
Participant shall determine, as set forth in the agreement
executed by the Bank in favor of such Participant. In no event
shall the Bank agree with any Restricted Participant to take or
refrain from taking any action hereunder or under any other
Related Document except that the Bank may agree with a Restricted
Participant that it will not, without the consent of such
Restricted Participant, agree to (i) extend the date fixed for
the payment of principal of or interest on the Loan payable to
such Restricted Participant, (ii) reduce the amount of any such
payment of principal, (iii) reduce the rate at which such
Restricted Participant is entitled to receive such interest, (iv)
alter the rights or obligations of the Company to prepay the
Loan, or (v) to release any collateral, including, without
limitation, the Second Mortgage Bonds, Series Y-4.
(c) Notwithstanding any other provision set forth in
this Agreement, the Bank may at any time create a security
interest in all or any portion of its rights under this
Agreement, the Note and the other Related Documents (including,
without limitation, the Loan owing to it) in favor of any Federal
Reserve Bank in accordance with Regulation A of the F.R.S. Board.
SECTION 8.07. Indemnity. The Company hereby
indemnifies and holds the Bank and each Participant and each of
their Affiliates and their officers, directors, employees, agents
and advisors (each, an "Indemnified Party") harmless from and
against any and all claims, damages, losses, liabilities and
expenses (including, without limitation, reasonable fees and
expenses of counsel) that may be incurred by (irrespective of
whether such Indemnified Party is a party to the action for which
indemnification is sought) or asserted or awarded against any
Indemnified Party (except to the extent any such claim, damage,
loss, liability or expense is found in a final, non-appealable
judgment by a court of competent jurisdiction to have resulted
from such Indemnified Party's gross negligence or willful
misconduct), in each case relating to or arising out of or in
connection with or by reason of:
(i) any representation, warranty or certification made
or deemed made in this Agreement or in the Note by the
Company (or any of its officers), or any certificate
furnished to any Creditor pursuant to the provisions hereof
<PAGE> 46
or thereof, proving to have been false or misleading as of
the time made or furnished in any material respect; or
(ii) any case or proceeding pursuant to any bankruptcy,
insolvency, reorganization, moratorium or similar law or any
restructuring of the Company; or
(iii) any cost or liability under any Environmental Law
arising out of the operations or assets of the Company.
SECTION 8.08. Further Assurances. The Company agrees
promptly to do such further acts and things, and to execute and
deliver such additional instruments (including, without
limitation, notices), at its own expense, as the Bank may at any
time reasonably request in order better to insure and confirm
the Bank's rights, powers and remedies hereunder and under the
other Related Documents (including in order to perfect or protect
any pledge or security interest granted or purported to be
granted hereby or to enable the Bank to exercise or enforce its
rights and remedies in respect hereof).
SECTION 8.09. Severability. Any provision of this
Agreement which is prohibited, unenforceable or not authorized in
any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition, unenforceability or
non-authorization without invalidating the remaining provisions
hereof or affecting the validity, enforceability or legality of
such provision in any other jurisdiction.
SECTION 8.10. Headings. Section headings in this
Agreement are included herein for convenience of reference only
and shall not constitute a part of this Agreement for any other
purpose.
SECTION 8.11. GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK, WITHOUT GIVING EFFECT TO CONFLICT OF LAW
PRINCIPLES.
SECTION 8.12. FORUM SELECTION AND SUBMISSION TO
JURISDICTION. THE COMPANY HEREBY SUBMITS TO THE EXCLUSIVE
JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN
NEW YORK CITY FOR THE PURPOSES OF ALL LEGAL PROCEEDINGS ARISING
OUT OF OR RELATING TO THIS AGREEMENT, THE NOTE, THE OTHER RELATED
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY OR
THE ACTIONS OR OMISSIONS OF THE BANK IN THE NEGOTIATION,
ADMINISTRATION, PERFORMANCE OR ENFORCEMENT OF THIS AGREEMENT OR
THE NOTE OR THE OTHER RELATED DOCUMENTS. THE COMPANY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF
ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT
ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN
AN INCONVENIENT FORUM. TO THE EXTENT THAT THE COMPANY HAS OR
<PAGE> 47
HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT
OF FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE,
ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR
OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE COMPANY
HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS
OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER RELATED DOCUMENTS.
THE COMPANY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF
PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL
SERVICE WITHIN OR WITHOUT THE STATE OF TEXAS.
SECTION 8.13. WAIVER OF TRIAL BY JURY. EACH OF THE
COMPANY AND THE BANK HEREBY IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN
ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT, THE NOTE, THE OTHER RELATED DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. THE COMPANY
ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT
CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF
EACH OTHER RELATED DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE BANK ENTERING INTO
THIS AGREEMENT AND EACH SUCH OTHER RELATED DOCUMENT.
SECTION 8.14. 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.
SECTION 8.15. INTEGRATION. THIS AGREEMENT REPRESENTS
THE FINAL AGREEMENT BETWEEN THE PARTIES HERETO AS TO THE SUBJECT
MATTER OF THIS AGREEMENT AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES HERETO.
SECTION 8.16. Survival. The obligations of the Company
under Sections 2.05, 2.07, 2.09, 8.07, 8.12 and 8.13 shall
survive the repayment of the Loan and payment in full of all
amounts payable by the Company under Section 8.04.
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.
EL PASO ELECTRIC COMPANY
By
Title:
CANADIAN IMPERIAL BANK OF COMMERCE
By
Title:
<PAGE> 48
EXHIBIT A
PROMISSORY NOTE
$______________
Dated:_______________, 19__ New York, New York
FOR VALUE RECEIVED, the undersigned, EL PASO ELECTRIC
COMPANY, a Texas corporation (the "Company"), HEREBY PROMISES TO
PAY to the order of CANADIAN IMPERIAL BANK OF COMMERCE (the
"Bank") the principal sum of $[amount of the Loan in figures]
(the "Loan") at the times and in the manner provided in the Term
Loan Agreement referred to below.
The Company promises to pay interest on the principal amount
of the Loan from the date hereof until such principal amount is
paid in full, at such interest rates, and payable at such times,
as are specified in the Term Loan Agreement referred to below.
Both principal and interest are payable in lawful money of
the United States of America to the Bank at ____________________
________________________ in same day funds. All payments made on
account of the principal amount hereof shall be recorded by the
Bank in its books and records and, prior to any transfers hereof,
endorsed on the grid attached hereto which is a part of this
Note. The failure by the Bank to make any such recordation on
its books and records shall not limit or otherwise affect the
obligations of the Company hereunder or under the Term Loan
Agreement referred to below.
This Promissory Note is the Note referred to in, and is
entitled to the benefits of, the Term Loan Agreement dated as of
_____________, 19__ (the "Term Loan Agreement"), between the
Company and the Bank. The Term Loan Agreement, among other
things, contains provisions for acceleration of the maturity
hereof upon the happening of certain stated events and also for
prepayments on account of principal hereof prior to the maturity
hereof upon the terms and conditions therein specified.
This Note is secured by Second Mortgage Bonds, Series Y-4,
referred to in the Term Loan Agreement.
EL PASO ELECTRIC COMPANY
By___________________________
Title:
<PAGE> 49
PAYMENTS OF PRINCIPAL
- -----------------------------------------------------------------
> Amount of > >
> Principal Paid > Unpaid Principal > Notation
Date > or Prepaid > Balance > Made By
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
<PAGE> 50
[DRAFT 11/04/93]
TERM LOAN AGREEMENT
dated as of , 199
between
EL PASO ELECTRIC COMPANY
and
CITIBANK, N.A.
<PAGE> 51
TABLE OF CONTENTS
Section Page
PRELIMINARY STATEMENTS ............................ 1
ARTICLE I
DEFINITIONS
Section 1.01 Definitions ...................... 2
Section 1.02 Computation of Time Periods ...... 11
Section 1.03 Accounting Terms ................. 11
Section 1.04 Interpretation ................... 11
ARTICLE II
AMOUNTS AND TERMS OF THE LOAN
Section 2.01 The Loan ......................... 12
Section 2.02 Repayment ........................ 12
Section 2.03 Interest ......................... 12
Section 2.04 Prepayments ...................... 14
Section 2.05 Increased Costs, Etc. ............ 15
Section 2.06 Interest Rate Protection ......... 17
Section 2.07 Illegality, Etc. ................. 17
Section 2.08 Payments and Computations ........ 17
Section 2.09 U.S. Taxes ....................... 18
Section 2.10 Applicable Lending Office ........ 19
Section 2.11 Net Payments ..................... 20
ARTICLE III
CONDITIONS TO CLOSING
Section 3.01 Closing Documents ................ 20
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01 Representations and Warranties of
the Company ................... 23
ARTICLE V
COVENANTS OF THE COMPANY
Section 5.01 Covenants of the Company ......... 26
i
<PAGE> 52
Section Page
ARTICLE VI
EVENTS OF DEFAULT
Section 6.01 Events of Default ................ 34
ARTICLE VII
SECURITY
Section 7.01 Issuance and Pledge of Bonds ..... 37
Section 7.02 Application of Moneys ............ 38
Section 7.03 Rights of Bondholders ............ 38
ARTICLE VIII
MISCELLANEOUS
Section 8.01 Amendments, Etc. ................. 38
Section 8.02 Notices, Etc. .................... 39
Section 8.03 No Waiver; Remedies .............. 39
Section 8.04 Costs, Expenses and Taxes ........ 39
Section 8.05 Right of Set-off ................. 40
Section 8.06 Binding Effect; Assignments and
Participations ................. 40
Section 8.07 Indemnity ........................ 42
Section 8.08 Further Assurances ............... 42
Section 8.09 Severability ..................... 43
Section 8.10 Headings ......................... 43
Section 8.11 Governing Law .................... 43
Section 8.12 Submission to Jurisdiction ....... 43
Section 8.13 Waiver of Trial By Jury .......... 43
Section 8.14 Counterparts ..................... 44
Section 8.15 Integration ...................... 44
Section 8.16 Survival ......................... 44
Schedule I Liens
EXHIBITS
Exhibit A Promissory Note
ii
<PAGE> 53
TERM LOAN AGREEMENT
TERM LOAN AGREEMENT, dated as of [the Effective Date],
between El Paso Electric Company, a Texas corporation (the
"Company"), and Citibank, N.A. (the "Bank").
PRELIMINARY STATEMENTS:
(1) On January 8, 1992, the Company commenced a
voluntary case (the "Bankruptcy Case") under chapter 11 of the
Bankruptcy Code (as hereinafter defined) (Case No. 92-10148-FM)
in the Bankruptcy Court (as hereinafter defined), and
thereafter has continued to operate its business and manage its
assets as a debtor-in-possession.
(2) Among the claims filed against the Company in the
Bankruptcy Case were those of the Bank in respect of the Letter
of Credit and Reimbursement Agreement, dated as of December 1,
1983, between the Company and the Bank (the "Claim").
(3) On [ , 199 ], an order was entered by the
court having jurisdiction over the Bankruptcy Case (the
"Bankruptcy Court") confirming the Plan of Reorganization (as
hereinafter defined), which Plan of Reorganization provided,
among other things, for the Company to enter into this
Agreement with the Bank.
(4) Pursuant to Section 3.7(A) of the Plan of
Reorganization and in accordance with the terms thereof and to
the extent provided therein the Claim is to be discharged and
satisfied by the execution and delivery by the Company of this
Agreement, which Agreement provides, among other things, for
the execution and delivery by the Company to the Bank of the
Note (as hereinafter defined), which Note shall be secured by
the Second Mortgage Bonds, Series Y[-1] (as hereinafter
defined).
NOW, THEREFORE, in consideration of the premises and
of the mutual covenants and agreements contained in the Plan of
Reorganization and herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. As used in this
Agreement, the following terms have the following meanings:
"Affiliate" means, as to any Person, any other Person
<PAGE> 54
that, directly or indirectly, controls, is controlled by or
is under common control with such Person or is a director
or officer of such Person. For purposes of this
definition, the term "control" (including the terms
"controlling," "controlled by" and "under common control
with") of a Person means the possession, direct or
indirect, of the power to vote 5% or more of the Voting
Stock of such Person or to direct or cause the direction of
the management and policies of such Person, whether through
the ownership of Voting Stock, by contract or otherwise.
"Alternate Base Rate" means a fluctuating interest
rate per annum as shall be in effect from time to time
which rate per annum shall at all times be equal to the
higher of:
(i) the rate of interest announced publicly by
the Bank in New York, New York, from time to time as
the Bank's base rate, each change in such rate to be
effective as of the Bank's opening of business on the
date such change occurs (extensions of credit made by
the Bank may bear interest at rates below, equal to or
above such rate); or
(ii) 1/2 of one percent above the latest
three-week moving average of secondary market morning
offering rates in the United States for three-month
certificates of deposit of major United States money
market banks, such three-week moving average being
determined weekly on each Monday (or, if any such day
is not a Business Day, on the next succeeding Business
Day) for the three-week period ending on the previous
Friday by the Bank on the basis of such rates reported
by certificate of deposit dealers to and published by
the Federal Reserve Bank of New York or, if such
publication shall be suspended or terminated, on the
basis of quotations for such rates received by the
Bank from three New York certificate of deposit
dealers of recognized standing, in either case
adjusted to the nearest 1/4 of one percent or, if
there is no nearest 1/4 of one percent, to the next
higher 1/4 of one percent.
"Alternate Base Rate Loan" means the portion of the
Loan which bears interest as provided in Section 2.03(a).
"Banking Institution" means any financial institution
subject to regulation under Regulation D of the Board of
Governors of the Federal Reserve System and any other
banking institution or trust company or similar
organization incorporated or organized under the laws of a
<PAGE> 55
country other than the United States, or a political
subdivision of a country other than the United States.
"Bankruptcy Case" has the meaning assigned to that
term in Preliminary Statement (1).
"Bankruptcy Code" means the Bankruptcy Reform Act of
1978, as heretofore and hereafter amended, and codified as
title 11 of the United States Code.
"Bankruptcy Court" has the meaning assigned to that
term in Preliminary Statement (3).
"Business Day" means a day of the year on which banks
are not required or authorized to close in New York City
and, if the applicable Business Day relates to any
Eurodollar Loans, on which dealings are carried on in the
London interbank market.
"Capital Lease Obligation" means, with respect to any
lease of property which, in accordance with GAAP, appears
on the lessee's balance sheet as a capital lease, the
amount of the liability which should appear on such balance
sheet.
"CERCLA" means the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as
amended, from time to time.
"Claim" has the meaning assigned to that term in
Preliminary Statement (2).
"Code" means the Internal Revenue Code of 1986, as
amended from time to time.
"Confirmation Order" means the order of the Bankruptcy
Court confirming the Plan of Reorganization.
"Consolidated Subsidiary" means, for any Person, each
Subsidiary of such Person (whether now existing or
hereafter created or acquired) the financial statements of
which shall be (or should have been) consolidated with the
financial statements of such Person in accordance with
GAAP.
"Debt" of any Person means, without duplication,
(a) all indebtedness of such Person for borrowed money or
for the deferred purchase price of property or services
(including without limitation, all obligations, contingent
or otherwise, of such Person in connection with acceptance
facilities (other than acceptance facilities entered into
<PAGE> 56
in connection with normal course commercial trade
transactions) and letter of credit facilities to the extent
such letter of credit facilities support Debt), (b) all
obligations of such Person evidenced by notes, bonds,
debentures or other similar instruments, (c) all
obligations of such Person created or arising under any
conditional sale or other title retention agreement with
respect to property acquired by such Person, (d) all
Capitalized Lease Obligations of such Person, (e) all
obligations of such Person to purchase, redeem, retire,
defease or otherwise make any payment in respect of any
capital stock of or other ownership or profit interest in
such Person or any other Person or any warrants, rights or
options to acquire such capital stock, valued, in the case
of preferred stock, at the greater of its voluntary or
involuntary liquidation preference plus accrued and unpaid
dividends, (f) all Debt of others referred to in clauses
(a) through (e) above guaranteed directly or indirectly in
any manner by such Person, or in effect guaranteed directly
or indirectly by such Person through an agreement (i) to
pay or purchase such Debt or to advance or supply funds for
the payment or purchase of such Debt, (ii) to purchase,
sell or lease (as lessee or lessor) property, or to
purchase or sell services, primarily for the purpose of
enabling the debtor to make payment of such Debt or to
assure the holder of such Debt against loss, (iii) to
supply funds to or in any other manner invest in the debtor
(including any agreement to pay for property or services
irrespective of whether such property is received or such
services are rendered) or (iv) otherwise to assure a
creditor against loss, and (g) all Debt referred to in
clauses (a) through (e) above 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
(including, without limitation, accounts and contract
rights) owned by such Person, even though such Person has
not assumed or become liable for the payment of such Debt.
In cases where recourse to any Person or any of its
properties in respect of Debt is limited, the amount of
such Debt of such Person for purposes hereof shall be so
limited.
"EBITA" means, for any period, the sum, for the
Company and its Consolidated Subsidiaries (determined on a
consolidated basis without duplication in accordance with
GAAP), of the following: (a) net operating income
(calculated before taxes, Interest Expense, extraordinary
items and unusual non-cash, non-recurring items and income
or loss attributable to equity in Affiliates) for such
period plus (b) amortization (to the extent deducted in
determining net operating income) for such period.
<PAGE> 57
"Effective Date" means the Effective Date (as defined
therein) of the Plan of Reorganization.
"Eligible Institution" means (i) a bank or trust
company organized under the laws of the United States of
America, of any state therein, of the District of Columbia,
of any member country of the Organization for Economic
Cooperation and Development or of any political subdivision
of any such country, in each case, having assets in excess
of $500,000,000, (ii) an insurance company organized under
the laws of any state in the United States of America or of
the District of Columbia having assets in excess of
$500,000,000 or (iii) any other Person consented to by the
Company, which consent shall not be unreasonably withheld.
"Eligible Participant" has the meaning assigned to
that term in Section 8.06(b).
"Environmental Action" means any administrative,
regulatory or judicial action, suit, demand, demand letter,
claim, notice of non-compliance or violation,
investigation, proceeding, consent order or consent
agreement relating in any way to any Environmental Law or
any Environmental Permit including, without limitation,
(a) any claim by any governmental or regulatory authority
for enforcement, investigation, cleanup, removal, response,
remedial or other actions or damages pursuant to any
Environmental Law and (b) any claim by any Person seeking
damages, contribution, indemnification, cost recovery,
compensation or injunctive relief resulting from Hazardous
Materials or arising from alleged injury or threat of
injury to health, safety or the environment.
"Environmental Law" means any federal, state or local
law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award relating to the environment,
health, safety or Hazardous Materials.
"Environmental Permit" means any permit, approval,
identification number, license or other authorization
required under any Environmental Law.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended from time to time, and the
regulations promulgated and rulings issued thereunder.
"ERISA Affiliate" means any Person who for purposes of
Title IV of ERISA is a member of the Company's controlled
group, or under common control with the Company, within the
meaning of Section 414 of the Internal Revenue Code of
1986, as amended.
<PAGE> 58
"Eurodollar Loan" means the portion of the Loan which
bears interest at the Eurodollar Rate.
"Eurodollar Rate" means, for any Interest Period, an
interest rate per annum equal at all times during such
Interest Period to the sum of (x) the LIBO Rate for such
Interest Period plus (y) 1.50% per annum.
"Event of Default" has the meaning assigned to that
term in Section 6.01.
"Final Approval" means any authorizations, consents,
approvals, waivers, exceptions, variances, orders,
licenses, exemptions, publications, filings, notices to and
declarations of or with any governmental authority (other
than routine reporting requirements the failure to comply
with which will not affect the validity or enforceability
of any of the Related Documents or have a Material Adverse
Effect) or any other action in respect of any governmental
authority that is in full force and effect and is not the
subject of a pending appeal or reconsideration or other
review, and the time in which to make an appeal or request
the review or reconsideration of which has expired without
any appeal or request for review or reconsideration having
been taken or made.
"Final Order" means an order of the Bankruptcy Court
which (a) shall not have been reversed, stayed, modified or
amended and the time to appeal from, or to seek review or
rehearing of, shall have expired and as to which no appeal
or petition for review, rehearing or certiorari is pending
or (b) if appealed from, shall have been affirmed and the
time to appeal from such affirmance or to seek review or
rehearing thereof shall have expired or no further hearing,
appeal or petition for certiorari can be taken or granted.
"First Mortgage Bond Indenture" means the Indenture
dated as of ____________ between the Company and _________
_____________, as trustee, providing for the issuance by
the Company of its first mortgage bonds.
"First Mortgage Bonds" means bonds issued by the
Company under the First Mortgage Bond Indenture.
"First Mortgage Bonds, Series A/B" means collectively
the First Mortgage Bonds, Series A and the First Mortgage
Bonds, Series B, in each case, issued under the First
Mortgage Bond Indenture.
"GAAP" means generally accepted accounting principles
in the United States of America as in effect from time to
time.
<PAGE> 59
"Governmental Person" means any national, state or
local government, any political subdivision or any
government instrumentality, authority, body or entity,
including the Federal Deposit Insurance Corporation, the
Board of Governors of the Federal Reserve System, any
central bank or any comparable authority.
"Hazardous Materials" means (a) petroleum or petroleum
products, asbestos in any form, radioactive or source
material, (b) any substances defined as or included in the
definition of "hazardous substances", "hazardous wastes",
"hazardous materials", "extremely hazardous wastes",
"restricted hazardous wastes", "toxic substances", "toxic
pollutants", "contaminants" or "pollutants", or words of
similar import, under any Environmental Law and (c) any
other substance exposure to which is regulated under any
Environmental Law.
"Indemnified Party" has the meaning assigned to that
term in Section 8.07.
"Interest Coverage Ratio" means, as at any date, the
ratio of (a) EBITA for the period of four consecutive
fiscal quarters ending on or most recently ended prior to
such date to (b) Interest Expense for such period.
"Interest Expense" means, for any period, the sum, for
the Company and its Consolidated Subsidiaries (determined
on a consolidated basis without duplication in accordance
with GAAP), of the following: (a) all interest in respect
of Debt including, without limitation, interest capitalized
during such period (whether or not actually paid during
such period), including, without limitation, all
commissions and fees (other than up-front fees), plus
(b) the net amounts payable (or minus the net amounts
receivable) under Interest Rate Protection Agreements
accrued during such period (whether or not actually paid or
received during such period).
"Interest Period" has the meaning assigned to that
term in Section 2.03(b).
"Interest Rate Protection Agreement" means, for any
Person, an interest rate swap, cap or collar agreement,
interest rate future or option contracts or similar
arrangement providing for the transfer or mitigation of
interest risks either generally or under specific
contingencies.
<PAGE> 60
"Leverage Ratio" means, at any time, the ratio of
Total Debt at such time to the sum of (a) Total Capital at
such time plus (b) Total Debt at such time.
"LIBO Rate" means, for any Interest Period, an
interest rate per annum equal to the rate of interest per
annum at which deposits in United States dollars are
offered by the principal office of the Bank in London,
England to prime banks in the London interbank market at
11:00 A.M. (London time) two Business Days before the first
day of such Interest Period for a period equal to such
Interest Period.
"Lien" means any lien, security interest or other
charge or encumbrance of any kind, or any other type of
preferential arrangement, including, without limitation,
the lien or retained security title of a conditional vendor
and any easement, right of way or other encumbrance on
title to real property.
"Loan" has the meaning assigned to that term in
Section 2.01.
"Maricopa LC" means that certain letter of credit
dated December 29, 1983, issued by Citibank, N.A., as
amended, extended and supplemented, with respect to the
Maricopa PCBs.
"Maricopa PCBs" means the Annual Tender Pollution
Control Revenue Bonds, 1983 Series A (El Paso Electric
Company Palo Verde Project) issued by Maricopa County,
Arizona Pollution Control Corporation in the original
principal amount of $63,500,000, which mature on July 1,
2014.
"Material Adverse Effect" means a material adverse
effect on (i) the property, business, operations, financial
condition, liabilities or capitalization of the Company and
its Subsidiaries taken as a whole, (ii) the ability of the
Company to perform its obligations under any of the Related
Documents, (iii) the validity or enforceability of any of
the Related Documents, (iv) the rights and remedies of the
Bank or (v) the timely payment of the principal of or
interest on the Note or other amounts payable in connection
herewith or therewith.
"Material Subsidiary" means, at any time, a Subsidiary
of the Company (a) whose assets at such time exceed 10% of
the assets of the Company and its Subsidiaries (on a
consolidated basis) or (b) whose earnings at such time
exceed 10% of the earnings of the Company and its
<PAGE> 61
Subsidiaries (on a consolidated basis).
"Multiemployer Plan" means a multiemployer plan, as
defined in Section 4001(a)(3) of ERISA, to which the
Company or any ERISA Affiliate is making or accruing an
obligation to make contributions, or has within any of the
preceding five plan years made or accrued an obligation to
make contributions, such plan being maintained pursuant to
one or more collective bargaining agreements.
"Multiple Employer Plan" means a single employer plan,
as defined in Section 4001(a)(15) of ERISA, that (i) is
maintained for employees of the Company or an ERISA
Affiliate and at least one Person other than the Company
and its ERISA Affiliates or (ii) was so maintained and in
respect of which the Company or an ERISA Affiliate could
have liability under Section 4064 or 4069 of ERISA in the
event such plan has been or were to be terminated.
"Note" means a promissory note of the Company, in
substantially the form of Exhibit A.
"Participant" has the meaning assigned to that term in
Section 8.06.
"PBGC" means the Pension Benefit Guaranty Corporation
or any successor thereto.
"Person" means an individual, a corporation, a
partnership, an association, a business trust or any other
entity or organization, including a Governmental Person.
"Plan" means a Single Employer Plan or a Multiple
Employer Plan.
"Plan of Reorganization" means the Modified Third
Amended Plan of Reorganization of the Debtor Providing for
the Acquisition of El Paso Electric Company by Central and
South West Corporation filed on August 27, 1993 (as
corrected as of September 15, 1993).
"Related Documents" means collectively, this
Agreement, the Note, the Second Mortgage Bond Indenture,
and the Second Mortgage Bonds, Series Y[-1].
"Second Mortgage Bond Indenture" means the Indenture
dated as of______________ between the Company and _________
______________, as trustee, providing for the issuance by
the Company of its second mortgage bonds.
"Second Mortgage Bonds" means bonds issued by the
<PAGE> 62
Company under the Second Mortgage Bond Indenture.
"Second Mortgage Bonds, Series A" means Second
Mortgage Bonds, Series A issued under the Second Mortgage
Bond Indenture.
"Second Mortgage Bonds, Series Y[-1]" means [ ].
"Single Employer Plan" means a single employer plan,
as defined in Section 4001(a)(15) of ERISA, that (i) is
maintained for employees of the Company or an ERISA
Affiliate and no Person other than the Company and its
ERISA Affiliates or (ii) was so maintained and in respect
of which the Company or an ERISA Affiliate could have
liability under Section 4069 of ERISA in the event such
plan has been or were to be terminated.
"Submission Date" means the date the form of this
Agreement was filed with the Bankruptcy Court prior to the
date creditors must have voted on the Plan of
Reorganization in accordance with Section 7.6 of the Plan
of Reorganization.
"Subsidiary" means, with respect to any Person, any
corporation, partnership or other entity of which at least
a majority of the Voting Stock is at the time directly or
indirectly owned or controlled by such Person or one or
more Subsidiaries of such Person or by such Person and one
or more Subsidiaries of such Person.
"Total Capital" means, as at any date, the sum for the
Company and its Consolidated Subsidiaries (determined on a
consolidated basis without duplication in accordance with
GAAP), of the following:
(a) the amount of capital stock (excluding
treasury stock and capital stock subscribed for and
unissued and preferred stock mandatorily redeemable in
cash or redeemable in cash at the option of the holder
thereof), plus
(b) the amount of surplus and retained earnings
(or, in the case of a surplus or retained earnings
deficit, minus the amount of such deficit).
"Total Debt" means, as at any date, the aggregate
amount of all Debt of the Company and its Consolidated
Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP)(other than contingent
obligations in connection with acceptance facilities and
letters of credit).
<PAGE> 63
"Voting Stock" means capital stock issued by a
corporation, or equivalent interests in any other Person,
the holders of which are ordinarily, in the absence of
contingencies, entitled to vote for the election of
directors (or Persons performing similar functions) of such
Person, even though the right so to vote has been suspended
by the happening of such a contingency.
"Withdrawal Liability" has the meaning given such term
under Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. Computation of Time Periods. In this
Agreement, in the computation of a period of time from a
specified date to a later specified date, the word "from" means
"from and including" and the words "to" and "until" each means
"to but excluding".
SECTION 1.03. Accounting Terms. All accounting terms
not specifically defined herein shall be construed in
accordance with GAAP consistently applied, except as otherwise
stated herein.
SECTION 1.04. Interpretation. In this Agreement the
singular includes the plural and the plural the singular; words
importing any gender include the other genders; references to
statutes are to be construed as including all statutory
provisions consolidating, amending or replacing the statute
referred to; references to "writing" include printing, typing,
lithography and other means of reproducing words in a tangible
visible form; references to sections (or any subdivision of a
section), articles, schedules, annexes and exhibits are to
those of this Agreement unless otherwise indicated; the words
"including", "includes" and "include" shall be deemed to be
followed by the words "without limitation"; references to
agreements and other contractual instruments shall be deemed to
include all subsequent amendments and other modifications to
such instruments but only to the extent such amendments and
other modifications are not prohibited by the terms of this
Agreement; and references to Persons include their respective
permitted successors and assigns and, in the case of
Governmental Persons, Persons succeeding to their respective
functions and capacities.
ARTICLE II
AMOUNTS AND TERMS OF THE LOAN
SECTION 2.01. The Loan. As provided in the Plan of
Reorganization, the Company is issuing to the Bank,
concurrently with the execution and delivery hereof, the Note,
appropriately completed to the order of the Bank, in an amount
equal to $__________ (the "Loan"), in satisfaction, to the
<PAGE> 64
extent provided for in Section 3.7(A) of the Plan of
Reorganization, of the Claim. Amounts repaid or prepaid
hereunder may not be reborrowed.
SECTION 2.02. Repayment. The Company shall repay the
unpaid principal amount of the Loan in accordance with the
Note, delivered to the Bank pursuant to Article III.
SECTION 2.03. Interest. The Company shall pay
interest on the unpaid principal amount of the Loan from the
date of the Note until such principal amount shall be paid in
full, at the applicable rate set forth below:
(a) Alternate Base Rate. Except to the extent the
Company shall elect to pay interest on all or part of the
unpaid principal amount of the Loan for any Interest Period
pursuant to subsection (c) of this Section 2.03, the
Company shall pay interest on the unpaid principal of the
Loan from the date of the Note until the principal amount
of the Loan is paid in full at a fluctuating rate per annum
equal at all times to .50% per annum above the Alternate
Base Rate in effect from time to time, payable quarterly on
the last Business Day of each ___________, ___________,
___________, and ___________ and on the date the Loan is
paid in full.
(b) Interest Periods. The Company may from time to
time elect to have the interest on all or part of the
principal amount of the Loan determined and payable for a
specified period (an "Interest Period") in accordance with
subsection (c) of this Section 2.03. The first day of an
Interest Period shall be either the date of the Note, the
date the Company specifies as the first day of a Eurodollar
Loan, or the last day of the then current Interest Period
for a Eurodollar Loan. The duration of each such Interest
Period shall be, in respect of a Eurodollar Loan, 1, 3 or 6
months; provided, however, that the Company may not select
any Interest Period which ends after any principal
repayment installment date unless, after giving effect to
such selection, the aggregate unpaid principal amount of
Eurodollar Loans having Interest Periods which end on or
prior to such principal repayment installment date and
Alternate Base Rate Loans shall be at least equal to the
principal amount of the Loan due and payable on and prior
to such date.
(c) Eurodollar Rate. The Company may from time to
time elect to pay interest on all or part of the principal
amount of the Loan (provided that any such partial
principal amount shall not be less than $1,000,000) at the
Eurodollar Rate for an Interest Period by notice,
<PAGE> 65
specifying the principal amount and the first day and
duration of such Interest Period, received by the Bank
before 11:00 AM (New York City time) two Business Days
prior to the first day of such Interest Period, payable on
the last day of such Interest Period and, if such Interest
Period has a duration of more than three months, on each
day which occurs during such Interest Period every three
months from the first day of such Interest Period.
(d) Default Interest. The Company shall pay interest
on the unpaid principal amount of the Loan that is not paid
when due and on the unpaid amount of all interest, and
other amounts payable hereunder, that is not paid when due,
payable on demand, at a rate per annum equal at all times
to 2% per annum above the Alternate Base Rate in effect
from time to time. Notwithstanding anything in this
Agreement to the contrary, upon the occurrence and during
the continuance of an Event of Default, the right of the
Company to make an election in respect of the Eurodollar
Rate pursuant to Section 2.03(c) shall terminate (i)
automatically, in the case of an Event of Default under
Section 6.01(a) or 6.01(b) or (ii) upon notice to the
Company by the Bank, in all other cases; provided that no
termination referred to in either of the preceding clauses
(i) or (ii) shall affect any Eurodollar Loan during an
Interest Period in effect for such Eurodollar Loan at the
time such notice is received by the Company.
(e) Alternate Rate of Interest. In the event, and on
each occasion, that, on the day two Business Days prior to
the commencement of any Interest Period for a Eurodollar
Loan, the Bank shall have determined (which determination
shall be conclusive and binding upon the Company absent
manifest error) that reasonable means do not exist for
ascertaining the applicable Eurodollar Rate, the Bank
shall, as soon as practicable thereafter, give written,
facsimile or telegraphic notice of such determination to
the Company, and any request by the Company for a
Eurodollar Loan pursuant to subsection (c) of this Section
2.03 shall be deemed a request for an Alternate Base Rate
Loan. After such notice shall have been given and until
the circumstances giving rise to such notice no longer
exist, each request for an Eurodollar Loan shall be deemed
to be a request for an Alternate Base Rate Loan.
(f) Promptly after the determination of any interest
rate provided for herein or any change therein, the Bank
shall give notice thereof to the Company.
SECTION 2.04. Prepayments. (a) Mandatory
Prepayment. Upon the remarketing or refunding of any Maricopa
<PAGE> 66
PCBs purchased prior to the Effective Date, through draws on
the Maricopa LC, the Company shall prepay, in an amount equal
to the net proceeds of any such remarketing or refunding, the
outstanding principal amount of the Loan (any such prepayment
shall be applied to the principal installments of the Note in
the inverse order of their maturities), together with accrued
interest to the date of such prepayment on the principal amount
prepaid and, if and to the extent any principal amount so
prepaid is a Eurodollar Loan and such prepayment is on a day
other than the last day of the Interest Period for such
Eurodollar Loan, an amount in accordance with Section 2.05(d)
to compensate the Bank for any loss, cost or expense incurred
by it by reason of such prepayment.
(b) Optional Prepayment. The Company may, upon at
least two Business Days' notice to the Bank stating the
proposed date and principal amount of the prepayment, and if
such notice is given to the Bank the Company shall, prepay the
outstanding principal amount of the Loan in whole or in part
(each such partial prepayment shall be in an aggregate
principal amount not less than $1,000,000 and shall be applied
to the principal installments of the Note in the inverse order
of their maturities), together with accrued interest to the
date of such prepayment on the principal amount prepaid;
provided, however, that any prepayment of a Eurodollar Loan
shall be made on, and only on, the last day of the Interest
Period for such Eurodollar Loan unless the Company shall pay to
the Bank in accordance with Section 2.05(d) an amount
sufficient to compensate the Bank for any loss, cost, or
expense incurred by it by reason of such prepayment on a day
other than the last day of an Interest Period.
SECTION 2.05. Increased Costs, Etc. (a) If, due
either to (i) the introduction after the Submission Date of, or
any change (other than any change by way of imposition or
increase of reserve requirements in respect of Eurodollar
Loans, referred to in subsection (b) below), after the
Submission Date, in or in the interpretation of, any law or
regulation or (ii) the compliance by the Bank with any
guideline or request issued or made after the Submission Date
by any central bank or other governmental authority (whether or
not having the force of law), there shall be any increase in
the cost to the Bank as a result of agreeing to make or making,
funding or maintaining Eurodollar Loans, or reduction in the
amount of any sum received in respect thereof, then the Company
shall from time to time, upon demand by the Bank, pay to the
Bank additional amounts sufficient to compensate the Bank for
such increased cost or reduced amount. A certificate as to the
amount of such increased cost or reduced amount, submitted to
the Company by the Bank, shall be conclusive and binding for
all purposes, absent manifest error.
<PAGE> 67
(b) The Company shall pay to the Bank additional
interest on the unpaid principal amount of each Eurodollar
Loan, from the date of such Eurodollar Loan until such
principal amount is paid in full, at an interest rate per annum
equal at all times during each Interest Period for such Loan to
the remainder obtained by subtracting (i) the LIBO Rate for the
Interest Period for such Loan from (ii) the rate obtained by
dividing such LIBO Rate by a percentage equal to 100% minus the
reserve percentage applicable 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 regulations issued from time to time by the
Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirement
(including, without limitation, any emergency, supplemental or
other marginal reserve requirement) for the Bank with respect
to liabilities or assets consisting of or including
Eurocurrency liabilities having a term equal to such Interest
Period, payable on each date on which interest is payable on
such Eurodollar Loan. Such additional interest shall be
determined by such Bank and notified to the Company.
(c) If the Bank determines that 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 Submission Date,
affects the amount of capital required to be maintained by the
Bank or any corporation controlling the Bank and that the
amount of such capital is increased by or based upon the
existence of the Bank's commitment hereunder and other
commitments of this type, then, upon demand by the Bank, the
Company shall immediately pay to the Bank, from time to time as
specified by the Bank, additional amounts sufficient to
compensate the Bank or such corporation in the light of such
circumstances, to the extent that the Bank reasonably
determines such increase in capital to be allocable to the
existence of the Bank's commitment hereunder. A certificate as
to such amounts submitted to the Company by the Bank, shall be
conclusive and binding for all purposes, absent manifest error.
(d) If, due to a change of interest rate on any
Eurodollar Loan pursuant to Section 2.06(b) or 2.07, any
payment pursuant to Section 2.04 of any Eurodollar Loan, any
acceleration of the maturity of such Loan and the Note pursuant
to Section 6.01, or for any other reason, the Bank is subject
to a change of interest rate, or receives payments of
principal, of any Eurodollar Loan other than on the last day of
an Interest Period relating to such Eurodollar Loan, the
Company shall, promptly upon demand by the Bank, pay to the
Bank any amounts required to compensate the Bank for additional
<PAGE> 68
losses, costs or expenses which it may reasonably incur as a
result of such change or payment, including, without
limitation, any loss, cost or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired
by the Bank to fund or maintain such Eurodollar Loan, but
excluding loss of anticipated profit. A certificate setting
forth the amount of such additional losses, costs or expenses,
submitted by the Bank to the Company, shall be conclusive and
binding for all purposes, absent manifest error.
(e) Notwithstanding any other provision in this
Section 2.05 to the contrary (i) the Company is not responsible
for, and is not required to reimburse the Bank for, any amounts
that would otherwise be payable by the Company pursuant to
subsection (a), (c) or (d) of this Section 2.05 to the extent
such amounts accrued 90 days or more prior to the date the Bank
provides to the Company a certificate which sets forth such
amounts owed to the Bank by the Company pursuant to such
subsections and (ii) the Company is responsible for, and is
required to reimburse the Bank for, any amounts payable by the
Company pursuant to this Section 2.05, only so long as the Bank
is a Banking Institution.
(f) In calculating any amounts required to be paid by
the Company pursuant to this Section 2.05, the Bank shall make
all determinations and allocations on a reasonable basis.
SECTION 2.06. Interest Rate Protection. (a) If the
Company shall fail to select the duration of any Interest
Period for any Eurodollar Loan in accordance with the
provisions contained in Section 2.03(c), the Bank will
forthwith so notify the Company and such Eurodollar Loan will
automatically, on the last day of the then existing Interest
Period therefor, convert into an Alternate Base Rate Loan.
(b) On and after the date on which the unpaid
principal amount of the Loan shall be reduced, by payment or
prepayment or otherwise, to less than $1,000,000, the rate of
interest on the unpaid principal amount of the Loan shall be
.50% per annum above the Alternate Base Rate in effect from
time to time and the right of the Company to make an election
in respect of the Eurodollar Rate pursuant to Section 2.03(c)
shall terminate.
SECTION 2.07. Illegality, Etc. Notwithstanding any
other provision of this Agreement, if the Bank shall at the
time be a Banking Institution and notify the Company that the
introduction of or any change in or in the interpretation of
any law or regulation that occurs after the Submission Date
makes it unlawful, or any central bank or other governmental
authority asserts after the Submission Date that it is
<PAGE> 69
unlawful, for the Bank to perform its obligations to fund or
maintain Eurodollar Loans hereunder, (i) the right of the
Company to select the Eurodollar Rate, and the obligation of
the Bank to maintain Eurodollar Loans, shall be suspended until
the Bank shall notify the Company that the circumstances
causing such suspension no longer exist and (ii) the rate of
interest on the unpaid principal amount of the Loan shall
thereupon be .50% per annum above the Alternate Base Rate in
effect from time to time.
SECTION 2.08. Payments and Computations. (a) The
Company shall make each payment under this Agreement or the
Note not later than 12:00 noon (New York City time) on the day
when due in lawful money of the United States of America to the
Bank at its address referred to in Section 8.02 in same day
funds.
(b) The Company hereby authorizes the Bank, if and to
the extent payment is not made when due under this Agreement or
the Note, to charge from time to time against any or all of the
Company's accounts with the Bank any amount so due.
(c) All computations of interest based on the
Alternate Base Rate shall be made by the Bank on the basis of a
year of 365 or 366 days, as the case may be, and all
computations of interest based on the LIBO Rate shall be made
by the Bank on the basis of a year of 360 days, in each case
for the actual number of days (including the first day but
excluding the last day) occurring in the period for which such
interest is payable. Each determination by the Bank of an
interest rate hereunder shall be conclusive and binding for all
purposes, absent manifest error.
(d) Whenever any payment under this Agreement or the
Note shall be stated to be due, or whenever the last day of any
Interest Period would otherwise occur, on a day which is not a
Business Day, such payment shall be made, and the last day of
such Interest Period shall occur, on the next succeeding
Business Day, and such extension of time shall in such case be
included in the computation of payment of interest; provided,
however, if such extension would cause payment of interest on
or principal of an Eurodollar Loan to be made, or the last day
of an Interest Period for a Eurodollar Loan to occur, in the
next following calendar month, such payment shall be made, and
the last day of such Interest Period shall occur, on the next
preceding Business Day.
(e) Whenever the first day of any Interest Period
occurs on a day of an initial calendar month for which there is
no numerically corresponding day in the calendar month that
succeeds such initial calendar month by the number of months
<PAGE> 70
equal to the number of months in such Interest Period, such
Interest Period shall end on the last Business Day of such
succeeding calendar month. Notwithstanding anything to the
contrary contained herein, each Interest Period that 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) shall end on the last
Business Day of the appropriate subsequent calendar month.
SECTION 2.09. U.S. Taxes. (a) The Company agrees to
pay to the Bank with respect to any period during which it is
not a U.S. Person such additional amounts as are necessary in
order that the net payment of any amount due to such non-U.S.
Person hereunder after deduction for or withholding in respect
of any U.S. Tax imposed with respect to such payment (or in
lieu thereof, payment of such U.S. Tax by such non-U.S.
Person), will not be less than the amount stated herein to be
then due and payable, provided that the foregoing obligation to
pay such additional amounts shall not apply:
(i) to any payment to the Bank hereunder unless the
Bank is, on the Submission Date (or on the date such Person
becomes the successor to, or the assignee of, the Bank as
provided in Section 8.06) and on the date of any change in
the applicable lending office of the Bank after the date
hereof, either entitled to submit a Form 1001 (relating to
the Bank and entitling it to a complete exemption from
withholding on all interest to be received by it hereunder
in respect of the Loan) or Form 4224 (relating to all
interest to be received by the Bank hereunder in respect of
the Loan), or
(ii) to any U.S. Tax imposed solely by reason of the
failure by such non-U.S. Person to comply with applicable
certification, information, documentation or other
reporting requirements concerning the nationality,
residence, identity or connections with the United States
of America of such non-U.S. Person if such compliance is
required by statute or regulation of the United States of
America as a precondition to relief or exemption from such
U.S. Tax.
For the purposes of this Section 2.09(a), (w) "Form 1001" shall
mean Form 1001 (Ownership, Exemption, or Reduced Rate
Certificate) of the Department of the Treasury of the United
States of America, (x) "Form 4224" shall mean Form 4224
(Exemption from Withholding of Tax on Income Effectively
Connected with the Conduct of a Trade or Business in the United
States) of the Department of the Treasury of the United States
of America (or in relation to either such Form such successor
and related forms as may from time to time be adopted by the
<PAGE> 71
relevant taxing authorities of the United States of America to
document a claim to which such Form relates), (y) "U.S. Person"
shall mean a citizen, national or resident of the United States
of America, a corporation, partnership or other entity created
or organized in or under any laws of the United States of
America, or any estate or trust that is subject to Federal
income taxation regardless of the source of its income and
(z) "U.S. Taxes" shall mean any present or future tax,
assessment or other charge or levy imposed by or on behalf of
the United States of America or any taxing authority thereof or
therein.
(b) Within 30 days after paying any amount to the
Bank from which it is required by law to make any deduction or
withholding, and within 30 days after it is required by law to
remit such deduction or withholding to any relevant taxing or
other authority, the Company shall deliver to the Bank evidence
satisfactory to the Bank of such deduction, withholding or
payment (as the case may be).
SECTION 2.10. Applicable Lending Office. If the Bank
requests compensation from the Company under any of Section
2.05(a), 2.05(c) or 2.09, the Bank will designate a different
applicable lending office for the portions of the Loan affected
by the events giving rise to such request for compensation if
such designation will avoid the need for, or reduce the amount
of, such compensation and will not, in the reasonable opinion
of the Bank, be disadvantageous to the Bank, except that the
Bank shall have no obligation to designate an applicable
lending office located in the United States of America.
SECTION 2.11. Net Payments. All payments under this
Agreement or the Note to the Bank (or any assignee of the Bank
or Participant pursuant to Section 8.06) shall be made without
set-off or counterclaim.
ARTICLE III
CONDITIONS TO CLOSING
SECTION 3.01. Closing Documents. The obligation of
the Bank to execute this Agreement is subject to the conditions
precedent that on or before the date hereof, (i) the Bank shall
have received the following, each dated the date hereof, unless
otherwise specified below in form and substance satisfactory to
the Bank:
(a) the Note, duly executed and completed;
(b) certified copies of the restated articles of
<PAGE> 72
incorporation and bylaws of the Company, a certified copy
of the resolutions of the Board of Directors of the Company
approving the Related Documents and the other matters
contemplated hereby and thereby, and of all other documents
evidencing any other necessary corporate action;
(c) a copy of a certificate of the Secretary of State
of Texas dated a date reasonably close to the date hereof
listing the articles of incorporation of the Company and
each amendment thereto on file in his office and certifying
that (A) such amendments are the only amendments to the
Company's articles of incorporation on file in his office
and (B) the Company is duly incorporated, validly existing
and in good standing under the laws of such State;
(d) a telegram from such Secretary of State or such
other evidence satisfactory to the Bank certifying that the
Company is duly incorporated, validly existing and in good
standing under the laws of such State on the date hereof;
(e) originals (or copies certified to be true copies
by an appropriate officer of the Company) of all
governmental and regulatory approvals (including, without
limitation, the Federal Energy Regulatory Commission and
the New Mexico Public Service Commission approvals) legally
required to be obtained on the Effective Date for the
Company to enter into the Related Documents and to carry
out the transactions contemplated thereby;
(f) a certificate of the Secretary of the Company
certifying the incumbency and the names and true signatures
of the officers of the Company authorized to sign this
Agreement, the Note and the other documents to be delivered
by it hereunder, together with a certificate of another
officer of the Company as to the incumbency and specimen
signature of the Secretary of the Company;
(g) the Second Mortgage Bonds, Series Y[-1], such
series having been duly completed, executed and pledged to
the Bank by the Company pursuant to Article VII and the
Second Mortgage Bond Indenture;
(h) evidence of the completion of all recordings and
filings of or with respect to the Second Mortgage Bond
Indenture that the Bank may deem necessary or desirable in
order to perfect the security interest created thereby;
(i) a certified copy of the Second Mortgage Bond
Indenture;
(j) a favorable opinion of Milbank, Tweed, Hadley &
<PAGE> 73
McCloy, New York counsel for the Company (or other New York
counsel for the Company that is reasonably satisfactory to
the Bank), in form and substance reasonably satisfactory to
the Bank;
(k) a favorable opinion of Vinson & Elkins, Texas
counsel for the Company (or other Texas counsel for the
Company that is reasonably satisfactory to the Bank), in
form and substance reasonably satisfactory to the Bank;
(l) a favorable opinion of Stoops & Burns, Arizona
counsel for the Company (or other Arizona counsel for the
Company that is reasonably satisfactory to the Bank), in
form and substance reasonably satisfactory to the Bank;
(m) a favorable opinion of Taichert, Wiggins, Virtue,
Wilson & Najjar, New Mexico regulatory counsel for the
Company (or other New Mexico regulatory counsel for the
Company that is reasonably satisfactory to the Bank), in
form and substance reasonably satisfactory to the Bank;
(n) a favorable opinion of [Milbank, Tweed, Hadley &
McCloy], federal regulatory counsel for the Company (or
other federal regulatory counsel for the Company that is
reasonably satisfactory to the Bank), in form and substance
reasonably satisfactory to the Bank;
(o) written evidence, satisfactory to the Bank, that
the First Mortgage Bonds, Series A/B, and the Second
Mortgage Bonds, Series A, have a rating of at least BBB-
(or equivalent rating) by at least two of Standard & Poor's
Corporation, Moody's Investors Service, Inc. and Duff &
Phelps, Inc.; and
(p) a certificate of the chairman, president or chief
financial officer of the Company, certifying (A) that the
Effective Date has occurred as of the time of delivery
thereof or will occur concurrently with the delivery
thereof and (B) that, after giving effect to the
transactions contemplated under the Plan of Reorganization:
(x) no event has occurred and is continuing which
constitutes an Event of Default or would constitute an
Event of Default but for the requirement that notice be
given or the lapse of time or both; and (y) the
representations and warranties made by the Company in
Article IV hereof, and in each of the other Related
Documents, shall be true on and as of the Effective Date
with the same force and effect as if made on and as of such
date (or, if such representation or warranty is expressly
stated to have been made as of a specific date, as of such
specific date); and
<PAGE> 74
(ii) the following shall have occurred:
(a) the Confirmation Order shall have been entered at
least 10 days prior to the date hereof, no stay of such
order shall be in effect and the Bank shall have received a
certified copy of such order;
(b) the Plan of Reorganization shall have been
substantially consummated without waiver of any condition
or other modification (other than waivers or modifications
made in accordance with Section 6.6 of the Plan of
Reorganization);
(c) the Effective Date shall have occurred or shall
occur substantially simultaneously with the delivery of
this Agreement and of the other Related Documents; and
(d) the Bank shall have received such other
approvals, opinions or documents as the Bank may reasonably
request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the
Company. The Company represents and warrants as follows:
(a) The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the
State of Texas and is duly qualified to do business in, and
is in good standing under the laws of, the States of Texas,
Arizona and New Mexico and has requisite corporate power
and authority, and all governmental licenses,
authorizations and approvals necessary, to conduct its
business and to own its properties, except where the
failure to have the same would not result in a Material
Adverse Effect.
(b) The execution, delivery and performance by the
Company of this Agreement and the other Related Documents
to which it is a party are within the Company's corporate
powers, have been duly authorized by all necessary
corporate action, and do not contravene (i) the Company's
articles of incorporation or by-laws, which the Company has
adopted pursuant to the Plan of Reorganization or (ii) any
law, order, rule, regulation (including, without
limitation, any order, rule or regulation of the Federal
Energy Regulatory Commission, the New Mexico Public Service
Commission or the Public Utility Commission of Texas, or
<PAGE> 75
Regulation G, T, U or X of the Board of Governors of the
Federal Reserve System), writ, judgment, injunction or
decree applicable to the Company or any contractual
restriction binding on or affecting the Company or any
Subsidiary, and do not result in or require the creation of
any Lien of the Company or any Subsidiary (except as
provided in or contemplated by this Agreement, the other
Related Documents or the Plan of Reorganization) upon or
with respect to any properties of the Company or any
Subsidiary.
(c) No authorization or approval or other action by,
and no notice to or filing with, any governmental authority
or regulatory body is required for the due execution,
delivery and performance by the Company of this Agreement
or any other Related Document (including the issuance and
pledge of the Second Mortgage Bonds, Series Y[-1] and the
creation and perfection of the Liens on the property
securing such Bonds) except for (i) those that have been
duly obtained or made and are in full force and effect and
are Final Approvals and (ii) the Confirmation Order.
(d) This Agreement has been duly and validly executed
by the Company and constitutes, and the Note when delivered
hereunder will constitute, legal, valid and binding
obligations of the Company enforceable against the Company
in accordance with their respective terms.
(e) There is no pending or overtly threatened action,
investigation, proceeding or notification which has been
instituted after the Effective Date affecting the Company
or any of its Subsidiaries before any court, governmental
agency or arbitrator which is reasonably likely to have a
Material Adverse Effect.
(f) The Second Mortgage Bonds, Series Y[-1] (i) have
been duly authorized, executed, authenticated, issued,
pledged and delivered in the manner provided for in the
Second Mortgage Bond Indenture and in compliance with all
applicable law; (ii) constitute the legal, valid and
binding obligations of the Company enforceable against the
Company in accordance with their terms and the terms of the
Second Mortgage Bond Indenture except insofar as
enforceability may be limited or otherwise affected by
(a) bankruptcy, insolvency, moratorium, reorganization or
other similar laws of general application relating to or
affecting the rights and remedies of creditors from time to
time in effect and (b) general principles of equity
(regardless of whether enforceability is considered in a
proceeding in equity or at law); (iii) are entitled to the
security and benefits of the Second Mortgage Bond
<PAGE> 76
Indenture; (iv) are secured equally and ratably with and
only with all other bonds issued and outstanding and which
may hereafter and thereafter be issued and outstanding
under the Second Mortgage Bond Indenture; (v) are secured
by duly perfected Liens on and security interests in the
collateral purported to secure such bonds in the Second
Mortgage Bond Indenture which Liens are subordinated in
priority only to the Liens and security interests granted
under the First Mortgage Bond Indenture and securing
outstanding First Mortgage Bonds; and (vi) constitute
collateral security encumbered by valid, duly perfected
Liens thereon and security interests therein securing the
obligations of the Company under this Agreement and the
Note as purported to be provided in such indenture and
herein and in the Note. The Company has executed, issued
and delivered all Second Mortgage Bonds, Series Y[-1] to
the Bank and has made all such duly perfected pledges
thereof to the Bank as are required to be executed, issued,
delivered and made under this Agreement and there are no
other Liens on such Second Mortgage Bonds.
(g) The Second Mortgage Bond Indenture creates a
valid and perfected second Lien on the Company's property
as described in the Second Mortgage Bond Indenture as
collateral security for the Company's obligations under the
Second Mortgage Bond Indenture and the Second Mortgage
Bonds, Series Y[-1].
(h) The Company is not a "holding company" as such
term is defined in the Public Utility Holding Company Act
of 1935, as amended, nor an "investment company", or a
company "controlled" by an "investment company", within the
meaning of the Investment Company Act of 1940, as amended.
(i) The Company and its Subsidiaries have filed all
United States federal and state income tax returns and all
other material tax returns which are required to be filed
by them, and have paid all taxes due pursuant to such
returns or, to the extent deemed necessary or appropriate
by the Company and such Subsidiary, provided reserves for
the payment thereof, other than such taxes that the Company
or any Subsidiary is contesting in good faith by
appropriate legal proceedings.
(j) The Company and the ERISA Affiliates have
fulfilled their respective obligations under the minimum
funding standards of ERISA and the Code with respect to
each Plan and are in compliance with the presently
applicable provisions of ERISA and the Code except where
non-compliance would not have a Material Adverse Effect,
and have not incurred any liability to the PBGC (other than
<PAGE> 77
to pay premiums under Section 4007 of ERISA) or any Plan or
any Multiemployer Plan (other than to make contributions in
the ordinary course of business). No reportable event,
within the meaning of Section 4043 of ERISA, has occurred
with respect to any Plan, except for any such event as to
which the 30-day notice requirement has been waived by the
PBGC. Schedule B (Actuarial Information) to the most
recently filed annual report (Form 5500 Series) for each
Plan is complete and accurate and fairly presents the
funding status of such Plan, and since the date of such
Schedule B there has been no change in such funding status
that can reasonably be expected to have a Material Adverse
Effect.
(k) No Material Adverse Effect has occurred since the
Effective Date.
(l) The Confirmation Order has been entered and has
not been reversed, amended (except as consented to by the
Bank in its sole discretion), stayed, vacated or rescinded.
The Bank shall be entitled to enforce its remedies under
this Agreement without further application to or order by
the Bankruptcy Court.
(m) The Company is in material compliance with all
Environmental Laws and is not exposed to any costs or
liabilities under any Environmental Laws except as would
not be reasonably likely to result in a Material Adverse
Effect on the Company.
(n) The operations and properties of the Company and
each of its Subsidiaries comply in all material respects
with all Environmental Laws, the Company and each of its
Subsidiaries possess and are in compliance with all
required Environmental Permits and no circumstances exist
that are or would be reasonably likely to (i) form the
basis of an Environmental Action against the Company or any
of its Subsidiaries or any of their properties or (ii)
cause any such property to be subject to any restrictions
on ownership, occupancy, use or transferability under any
Environmental Law, except as would not be likely to have a
Material Adverse Effect, and none of the properties of the
Company or any of its Subsidiaries is listed or proposed
for listing on the National Priorities or CERCLA List under
CERCLA or any analogous state list.
ARTICLE V
COVENANTS OF THE COMPANY
<PAGE> 78
SECTION 5.01. Covenants of the Company. Until the
principal amount of the Loan and any accrued interest thereon
is paid in full and all other amounts payable by the Company
hereunder are paid in full, the Company agrees that, unless the
Bank shall otherwise agree in writing:
(a) Reporting Requirements. The Company shall
deliver to the Bank:
(i) as soon as available and in any event within
45 days after the end of each of the first three
quarterly fiscal periods of each fiscal year of the
Company, consolidated and consolidating statements of
income, retained earnings and cash flow of the Company
and its Consolidated Subsidiaries for such period and
for the period from the beginning of the respective
fiscal year to the end of such period, and the related
consolidated and consolidating balance sheets of the
Company and its Consolidated Subsidiaries at the end
of such period, setting forth in each case in
comparative form the corresponding consolidated and
consolidating figures for the corresponding period in
the preceding fiscal year, accompanied by a
certificate of a senior financial officer of the
Company, which certificate shall state that said
consolidated financial statements fairly present the
consolidated financial condition and results of
operations of the Company and its Consolidated
Subsidiaries, and said consolidating financial
statements fairly present the respective individual
unconsolidated financial condition and results of
operations of the Company and of each of its
Consolidated Subsidiaries, in each case in accordance
with GAAP, consistently applied, as at the end of, and
for, such period (subject to normal year-end audit
adjustments);
(ii) as soon as available and in any event within
90 days after the end of each fiscal year of the
Company, consolidated and consolidating statements of
income, retained earnings and cash flow of the Company
and its Consolidated Subsidiaries for such fiscal year
and the related consolidated and consolidating balance
sheets of the Company and its Consolidated
Subsidiaries as at the end of such fiscal year,
setting forth in each case in comparative form the
corresponding consolidated and consolidating figures
for the preceding fiscal year, and accompanied (i) in
the case of said consolidated statements and balance
sheet of the Company, by an opinion thereon of
independent certified public accountants of recognized
<PAGE> 79
national standing, which opinion shall state that said
consolidated financial statements fairly present the
consolidated financial condition and results of
operations of the Company and its Consolidated
Subsidiaries as at the end of, and for, such fiscal
year in accordance with GAAP, consistently applied,
and a certificate of such accountants stating that, in
making the examination necessary for their opinion,
they obtained no knowledge, except as specifically
stated, of any failure by the Company to comply with
Section 5.01(e), (f) or (i)(xi) and (ii) in the case
of said consolidating statements and balance sheets,
by a certificate of a senior financial officer of the
Company, which certificate shall state that said
consolidating financial statements fairly present the
respective individual unconsolidated financial
condition and results of operations of the Company and
of each of its Consolidated Subsidiaries, in each case
in accordance with GAAP, consistently applied, as at
the end of, and for, such fiscal year;
(iii) as soon as available copies of all proxy
statements, material reports and registration
statements which the Company or any of its
Subsidiaries files with the Securities and Exchange
Commission or any national securities exchange (other
than filings made pursuant to the Public Utility
Holding Company Act of 1935, as amended, public
offerings of securities under employee benefit plans,
customer stock purchase plans or dividend reinvestment
plans);
(iv) as soon as possible and in any event within
two days after the Company has knowledge of the
occurrence of each Event of Default continuing on the
date of such statement, a statement from the chief
financial officer of the Company setting forth details
of such Event of Default and the action that the
Company has taken and proposes to take with respect
thereto;
(v) at the time the Company furnishes each set
of financial statements pursuant to paragraph (i) or
(ii) above, a certificate of a senior financial
officer of the Company setting forth in reasonable
detail the computations necessary to determine whether
the Company is in compliance with subsections (e), (f)
and (i)(xi) of this Section 5.01 as of the end of the
respective quarterly fiscal period or fiscal year and
stating that no event has occurred or is continuing
which constitutes an Event of Default or would
<PAGE> 80
constitute an Event of Default but for the requirement
that notice be given or the lapse of time or both or,
if any such event has occurred and is continuing, a
statement as to the nature thereof and the action that
the Company has taken or proposes to take with respect
thereto; and
(vi) such other financial data and information of
the Company or any of its Subsidiaries as the Bank may
from time to time reasonably request.
(b) Litigation. The Company will promptly give to
the Bank notice of all actions, suits, investigations,
litigation or legal or arbitral proceedings, and of all
proceedings by or before any governmental or regulatory
authority or agency (and any material development in
respect of such legal or other proceedings), in each case,
known to the Company, which is reasonably likely to have a
Material Adverse Effect.
(c) Preservation of Corporate Existence, Etc. The
Company will (i) preserve and maintain its corporate
existence in the state of its incorporation and qualify and
remain qualified as a foreign corporation in each
jurisdiction in which such qualification is reasonably
necessary in view of its business, and (ii) pay and
discharge, and cause its Subsidiaries to pay and discharge,
all taxes, assessments and governmental charges upon its
income and its properties prior to the date on which
penalties are attached thereto, unless (A) such taxes,
assessments and governmental charges shall be contested in
good faith and by appropriate proceedings by the Company or
its Subsidiaries and (B) the Company or any such Subsidiary
shall set aside on its books adequate reserves therefor to
the extent required by GAAP. Nothing contained in this
clause (c) of Section 5.01 shall be deemed to prohibit any
transaction permitted by clause (g) of this Section 5.01.
(d) Maintenance of Insurance, Etc. The Company will,
and will cause its Subsidiaries to, maintain insurance with
responsible insurance companies or associations or through
its own program of self-insurance in such amounts, with
such deductibles, and covering such risks as is usually
carried by companies engaged in similar business.
(e) EBITA to Interest Coverage Ratio. The Company
will not permit the Interest Coverage Ratio to be less than
1.40 to 1 at any time on or after the last day of the first
full fiscal quarter of the Company commencing after the
Effective Date.
<PAGE> 81
(f) Leverage Ratio. The Company will not permit the
Leverage Ratio to exceed 0.68 to 1 at any time on or after
the last day of the first full fiscal quarter of the
Company commencing after the Effective Date.
(g) Prohibition of Fundamental Changes. The Company
will not, and will not permit any of its Subsidiaries to,
enter into any transaction of merger, consolidation,
amalgamation, liquidation or dissolution; provided that the
Company or any of its Subsidiaries may merge or consolidate
with any other Person if (i) in any such transaction in
which the Company is a party, the Company is the surviving
corporation, (ii) in any such transaction in which the
Company is not a party, the surviving corporation shall be
a Subsidiary of the Company and (iii) after giving effect
thereto no Event of Default would exist hereunder. The
Company will not, and will not permit any of its
Subsidiaries to, convey, sell, lease, transfer or otherwise
dispose of, in one transaction or a series of transactions,
all or substantially all of its business or assets or
assets (excluding (i) accounts receivable, (ii) obsolete or
worn-out tools, equipment or other property no longer used
or useful in its business and (iii) inventory or other
property sold or disposed of in the ordinary course of
business and on ordinary business terms) which in the
aggregate have a net book value in excess of $50,000,000,
whether now owned or hereafter acquired, to any other
Person. Notwithstanding the foregoing provisions of this
subsection (g):
(1) any Subsidiary of the Company may be merged
or consolidated with or into: (A) the Company if the
Company shall be the continuing or surviving
corporation or (B) any other Subsidiary of the
Company; and
(2) any Subsidiary of the Company may sell,
lease, transfer or otherwise dispose of any or all of
its property (upon voluntary liquidation or otherwise)
to the Company or a Subsidiary of the Company.
(h) Compliance with ERISA. The Company will not
(i) enter into any non-exempt prohibited transaction (as
defined in Section 4975 of the Code and in Section 406 of
ERISA) involving any Plan which may result in any liability
of the Company to any Person which (in the reasonable
opinion of the Bank) will have a Material Adverse Effect or
(ii) allow or suffer to exist any other event or condition
known to the Company which results in any liability of the
Company or any of its Subsidiaries to the PBGC, or in any
Withdrawal Liability to any Multiemployer Plan, which (in
<PAGE> 82
the reasonable opinion of the Bank) will have a Material
Adverse Effect. For purposes of this Section 5.01(h),
"liability" shall not include termination insurance
premiums payable under Section 4007 of ERISA. Upon request
of the Bank, the Company shall promptly furnish to the Bank
a copy of Schedule B (Actuarial Information) to the most
recently filed annual report (Form 5500 Series) of any
Plan.
(i) Limitation on Liens. The Company will not, nor
will it permit any of its Subsidiaries to, create, incur,
assume or suffer to exist any Lien upon or with respect to
any of its property, whether now owned or hereafter
acquired, except:
(i) Liens created pursuant to the Related
Documents or pursuant to the First Mortgage Bond
Indenture or the Second Mortgage Bond Indenture;
(ii) Liens created or otherwise in existence on
the Effective Date or contemplated by the Plan of
Reorganization;
(iii) Liens imposed by any governmental authority
for taxes, assessments or charges not yet due or which
are being contested in good faith and by appropriate
proceedings if adequate reserves with respect thereto
are maintained on the books of the Company or the
affected Subsidiaries, as the case may be, in
accordance with GAAP;
(iv) carriers', warehousemen's, mechanics',
materialmen's, repairmen's or other like Liens arising
in the ordinary course of business which are not
overdue for a period of more than 60 days or which are
being contested in good faith and by appropriate
proceedings;
(v) pledges or deposits under worker's
compensation, unemployment insurance and other social
security legislation;
(vi) deposits to secure the performance of bids,
trade contracts (other than for borrowed money),
leases, statutory obligations, surety and appeal
bonds, performance bonds and other obligations of a
like nature incurred in the ordinary course of
business;
(vii) easements, rights-of-way, restrictions and
other similar encumbrances incurred in the ordinary
<PAGE> 83
course of business and encumbrances consisting of
zoning restrictions, easements, licenses, restrictions
on the use of property or minor imperfections in title
thereto which, in the aggregate, are not material in
amount, and which do not in any case materially
detract from the value of the property subject
thereto, render title to the property encumbered
thereby unmarketable, materially adversely affect the
use of such property for its present purposes or
interfere with the ordinary conduct of the business of
the Company or any of its Subsidiaries;
(viii) Liens on property of any corporation which
becomes a Subsidiary of the Company after the date of
this Agreement, provided that such Liens are in
existence at the time such corporation becomes a
Subsidiary of the Company and were not created in
anticipation thereof, provided further that such Liens
shall not extend to cover any property of the Company
or any of its other Subsidiaries and such Liens shall
not cover property of such Subsidiary other than
property of the types covered by the terms of such
Liens at the time such Subsidiary is acquired;
(ix) Liens upon real and/or tangible personal
property acquired after the Effective Date (by
purchase, construction or otherwise) by the Company or
any of its Subsidiaries, each of which Liens either
(A) existed on such property before the time of its
acquisition and was not created in anticipation
thereof, or (B) was created solely for the purpose of
securing Debt representing, or incurred to finance,
refinance or refund, the cost (including the cost of
construction) of such property; provided that no such
Lien shall extend to or cover any property of the
Company or such Subsidiary other than the property so
acquired and improvements thereon;
(x) banker's liens, rights of set-off and Liens
on documents presented under commercial letters of
credit, in each case granted to banks in accordance
with customary banking practices or arising by
operation of law;
(xi) additional Liens upon real and/or personal
property created after the date hereof, provided that,
on the date each such Lien is incurred, the lower of
(1) the fair market value of all property subject to
Liens permitted by this paragraph (xi) and not
otherwise permitted by this subsection (i) or (2) the
aggregate amount of all obligations secured by Liens
<PAGE> 84
permitted by this paragraph (xi) and not otherwise
permitted by this subsection (i) shall not exceed 5%
of Total Capital on such date; and
(xii) any extension, renewal or replacement of the
foregoing, provided, however, that the Liens permitted
hereunder shall not be spread to cover any additional
Debt or property (other than a substitution of like
property).
(j) Compliance with Laws, Etc. The Company will
comply, and cause each of its Subsidiaries to comply, in
all material respects, with all applicable laws, rules,
regulations and orders, such compliance to include, without
limitation, compliance with ERISA, except where the failure
to so comply would not have a Material Adverse Effect.
(k) Compliance with Environmental Laws. The Company
will comply, and cause each of its Subsidiaries and all
lessees and other Persons occupying or operating on its
properties to comply, in all material respects, with all
Environmental Laws and Environmental Permits applicable to
its operations and properties; obtain and renew all
Environmental Permits necessary for its operations and
properties; and conduct, and cause each of its Subsidiaries
to conduct, any investigation, study, sampling and testing,
and undertake any cleanup, removal, remedial or other
action required under any Environmental Law to remove and
clean up all Hazardous Materials from any of its
properties, in accordance with the requirements of all
Environmental Laws; provided, however, that neither the
Company nor any of its Subsidiaries shall be required to
undertake any such cleanup, removal, remedial or other
action to the extent that its obligation to do so is being
contested in good faith and by proper proceedings and
reserves, where required by GAAP, are being maintained with
respect to such circumstances.
(l) Visitation Rights. The Company will, at any
reasonable time and from time to time, permit the Bank or
any agents or representatives thereof, to examine and make
copies of and abstracts from the records and books of
account of, and examine the properties of, the Company and
any of its Subsidiaries, and to discuss the affairs,
finances and accounts of the Company and any of its
Subsidiaries with any of their officers or directors and
with their independent certified public accountants.
(m) Maintenance of Properties, Etc. The Company will
maintain and preserve, and cause each of its Subsidiaries
to maintain and preserve, all of its properties that are
<PAGE> 85
used or useful in the conduct of its business in good
working order and condition, ordinary wear and tear
excepted; provided that this subsection (m) shall not
prevent the sale of any properties permitted by subsection
(g) of this Section 5.01.
(n) Change in Nature of Business. The Company will
not make, or permit any of its Subsidiaries to make, any
material change in the nature of its business as carried on
at the date hereof.
(o) Lien. The Company shall maintain the Lien
created or purported to be created by the Second Mortgage
Bond Indenture for the benefit of the Bank and defend,
preserve and protect such Lien against all claims of all
Persons.
(p) Maintain Books and Records. The Company shall
keep adequate records and books of account, in which
complete entries will be made in accordance with GAAP
consistently applied.
(q) Additional Documents. As promptly as practicable
(but in any event not later than 30 days) after the
Effective Date, the Company will furnish to the Bank, (i)
certified copies of recorded counterparts of the First
Mortgage Bond Indenture evidencing the filing thereof and
(ii) certified copies of all notices filed with respect to
the First Mortgage Bond Indenture.
(r) Creation of Subsidiaries. The Company shall not,
and shall not permit any of its Subsidiaries to, create any
Subsidiaries of the Company or make any investment in any
Person except in compliance with the Public Utility Holding
Company Act of 1935, as amended, and the regulations and
orders of the Securities and Exchange Commission
thereunder.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the
following events ("Events of Default") shall occur and be
continuing:
(a) The Company shall default in the payment when due
of any principal of the Loan; or
(b) The Company shall default in the payment when due
<PAGE> 86
of any interest on the Loan or any other amount payable by
it hereunder and such default shall continue unremedied for
five Business Days; or
(c) The Company or any of its Subsidiaries shall
default in the payment when due of any principal of or any
interest on any Debt aggregating $10,000,000 or more, or
fail to observe or perform any material term, covenant or
agreement contained in any agreement by which it is bound,
evidencing or securing Debt, in an aggregate amount of
$10,000,000 or more, or any other event shall occur or
condition shall exist under any agreement or instrument
relating to any such Debt, after the giving of any required
notice and for such period of time as would permit the
holder or holders thereof or of any obligations issued
thereunder to accelerate the maturity thereof, unless such
failure or event or condition shall have been cured by the
Company or such Subsidiary, as the case may be, or
effectively waived by such holder or holders; or
(d) Any representation, warranty or certification
made or deemed made in any Related Document by the Company
(or any of its officers), or any certificate furnished to
the Bank pursuant to the provisions thereof, shall prove to
have been false or misleading as of the time made or
furnished in any material respect; or
(e) The Company shall default in the performance of
any of its obligations under clause (a)(iv) of Section 5.01
or clauses (e), (f), (g), or (n) of Section 5.01; or a
consensual Lien shall be created by the Company or any of
its Subsidiaries in violation of Section 5.01(i); or the
Company shall default in its performance of any of its
other obligations under this Agreement or under any other
Related Document and such default in the performance of any
such other obligation shall continue unremedied for a
period of 15 days after notice thereof to the Company by
the Bank; or
(f) There shall remain in force, undischarged,
unsatisfied and unstayed, for more than 30 days, whether or
not consecutive, any final judgment against the Company or
any of its Material Subsidiaries that, together with other
outstanding final judgments, undischarged, against the
Company and all of its Material Subsidiaries exceeds in the
aggregate $10,000,000 (for the purposes hereof, the term
"final judgment" shall mean a judgment which is not subject
to appeal); or
(g) The Company or any of its Material Subsidiaries
shall make a general assignment for the benefit of
<PAGE> 87
creditors, or admit in writing its inability to pay or
generally fail to pay its debts as they mature or become
due, or shall petition or apply for the appointment of a
trustee or other custodian, liquidator or receiver of the
Company or any of its Material Subsidiaries, as the case
may be, or any substantial part of its respective assets;
or the Company or any of its Material Subsidiaries shall
commence any case or other proceeding relating to the
Company or any of its Material Subsidiaries under any
bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation or similar
law of any jurisdiction, now or hereafter in effect, or the
Company or any of its Material Subsidiaries shall take any
action to authorize or in furtherance of any of the
foregoing; or if any such petition or application shall be
filed or any such case or other proceeding shall be
commenced against the Company or any of its Material
Subsidiaries and the Company or any of its Material
Subsidiaries shall indicate its approval thereof, consent
thereto or acquiescence therein or such petition or
application shall not be dismissed on or before the 60th
day after the filing thereof; or
(h) A decree or order is entered appointing any
trustee, custodian, liquidator or receiver or adjudicating
the Company or any of its Material Subsidiaries bankrupt or
insolvent, or approving a petition in any such case or
other proceeding, or a decree or order for relief is
entered in respect of the Company or any of its Material
Subsidiaries in an involuntary case under federal
bankruptcy laws as now or hereafter reconstituted; or
(i) There shall have been asserted against the
Company by a Governmental Person or other Person, a written
complaint, claim or demand asserting any claims or
liabilities, whether accrued, absolute or contingent, based
on or arising from the presence, release or disposal of
Hazardous Materials by the Company or any of its
Subsidiaries that is reasonably likely to be determined
adversely to the Company or any of its Subsidiaries, and
the amount thereof (either individually or in the
aggregate) would, in such event, have a Material Adverse
Effect (after deducting any portion thereof that is
reasonably expected to be paid by other creditworthy
Persons); or
(j) The Confirmation Order shall be (i) reversed,
revoked or vacated in whole or in part by any Final Order
of a court of competent jurisdiction, or (ii) modified in a
manner or subjected to a stay that adversely affects the
Company's ability to perform any of its obligations
<PAGE> 88
hereunder, as determined by the Bank in its sole
discretion; or
(k) Central and South West Corporation shall cease
directly or indirectly, to own (or otherwise shall cease,
directly or indirectly, to control the voting rights of) at
least 51% of the Voting Stock of the Company; or
(l) Any "Event of Default" under and as defined in
the Related Documents shall have occurred and be
continuing; or
(m) Any regulatory approval as set forth in
Section 3.01(e) or required to consummate the Plan of
Reorganization shall be rescinded if such rescission can
not be appealed by the Company and has a Material Adverse
Effect on the Company; or
(n) Any material provision of this Agreement or any
other Related Document shall at any time cease to be a
valid, binding obligation of the Company enforceable
against the Company, or any such agreement shall be
declared to be null and void, or the validity or
enforceability thereof shall be contested by the Company,
or a proceeding shall be commenced by any Governmental
Person having jurisdiction over the Company seeking to
establish the invalidity or unenforceability thereof, or
the Company shall deny that it has any further liability or
obligation under this Agreement or the Note or any other
Related Document after delivery thereof or the Second
Mortgage Bond Indenture shall for any reason (other than
pursuant to the terms thereof) cease to create a valid and
perfected second priority Lien on the Company's property
purported to be secured thereby;
then, and in any such event, the Bank may, by notice to the
Company, declare the Note, all interest thereon and all other
amounts payable under this Agreement to be forthwith due and
payable, whereupon the Note, all such interest and all such
amounts shall become and be forthwith due and payable, without
presentment, demand, protest, or further notice of any kind,
all of which are hereby expressly waived by the Company;
provided, however, that, in the event of the occurrence of an
Event of Default pursuant to subsections (g) or (h) of this
Section 6.01, the Note, all interest thereon and all other
amounts payable under this Agreement shall automatically become
and be due and payable, without presentment, demand, protest or
any notice of any kind, all of which are hereby expressly
waived by the Company.
<PAGE> 89
ARTICLE VII
SECURITY
SECTION 7.01. Issuance and Pledge of Bonds.
Concurrently with the execution of this Agreement and delivery
of the Note, the Company shall execute, issue, and deliver to
the Bank the Second Mortgage Bonds, Series Y[-l] as security
for the payment of all obligations of the Company now or
hereafter existing under this Agreement or the Note in respect
of principal and interest pursuant to and on the terms of this
Agreement, the Note and of the Second Mortgage Bond Indenture.
The Company hereby pledges to the Bank and grants to the Bank a
security interest in the Second Mortgage Bonds, Series Y[-l]
and all interest, cash, instruments and other property from
time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such Bonds and
proceeds of any and all of the foregoing.
SECTION 7.02. Application of Moneys. Any moneys
received by the Bank on account of the Second Mortgage Bonds,
Series Y[-1] shall be applied as follows: (a) moneys received
on account of principal of the Second Mortgage Bonds, Series
Y[-1] shall be applied to the payment of any unpaid principal
of the Note then due and owing and (b) moneys received on
account of interest on the Second Mortgage Bonds, Series Y[-1]
shall be applied to the payment of any accrued and unpaid
interest on the Note then due and owing.
SECTION 7.03. Rights of Bondholders. The Bank, as
holder of the Second Mortgage Bonds, Series Y[-l] shall have
all the rights (including, without limitation, voting rights)
provided to holders of bonds in the Second Mortgage Bond
Indenture and shall have only such rights. Without limiting
the generality of the foregoing, (a) the Second Mortgage Bonds,
Series Y[-1] may not be sold, assigned, pledged or otherwise
transferred by the Bank, whether pursuant to the Uniform
Commercial Code after an Event of Default or otherwise except
in connection with any assignment of the Bank's rights and
obligations under this Agreement and of the Note as provided
for herein and (b) no payment of principal of or interest on
the Second Mortgage Bonds, Series Y[-1], or any other amount
payable thereunder, shall be demanded or received except if,
and to the extent that, the corresponding payment remains
unpaid hereunder or under the Note. To the extent that moneys
recovered from the Second Mortgage Bonds, Series Y[-1], are
insufficient to pay in full the amount of principal and
interest due on the Note and other amounts due hereunder, the
Company shall remain liable for any such deficiency under the
terms of this Agreement and the Note.
<PAGE> 90
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. No amendment or
waiver of any provision of this Agreement or the Note, nor
consent to any departure by the Company therefrom, shall in any
event be effective unless the same shall be in writing and
signed by the Bank, and then such waiver or consent shall be
effective only in the specific instance and for the specific
purpose for which given.
SECTION 8.02. Notices, Etc. All notices and other
communications provided for hereunder shall be in writing
(including telecopier, telegraphic, telex or cable
communication) and mailed, telecopied, telegraphed, telexed,
cabled or delivered, if to the Company, at its address at
,
Attention: , telex No. and in
the case of telecopier ; and if to the Bank, at
its address at 399 Park Avenue, New York, New York 10043,
Attention: Department,
Group, telex No. and telecopier to
(212) ; or, as to each party, at such other address
as shall be designated by such party in a written notice to the
other party. All such notices and communications shall, when
mailed, telecopied, telegraphed, telexed or cabled, be
effective when deposited in the mails, telecopied, delivered to
the telegraph company, confirmed by telex answerback or
delivered to the cable company, respectively, except that
notices to the Bank pursuant to the provisions of Article II
shall not be effective until received by the Bank.
SECTION 8.03. No Waiver; Remedies. No failure on the
part of the Bank to exercise, and no delay in exercising, any
right hereunder or under the Note 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 provided in this
Agreement are cumulative and not exclusive of any remedies
provided by law.
SECTION 8.04. Costs, Expenses and Taxes. The Company
agrees to pay on demand all costs and expenses in connection
with the preparation, execution, delivery, administration
(except normal administrative costs and fees and expenses of
counsel related thereto prior to an Event of Default),
modification and amendment of this Agreement, the Note and any
other documents to be delivered hereunder, including, without
limitation, the reasonable fees and out-of-pocket expenses of
counsel for the Bank, and local counsel who may be retained by
<PAGE> 91
said counsel, with respect thereto, with respect to advising
the Bank as to its rights and responsibilities, or the
perfection or preservation of rights or interests, under this
Agreement, any other Related Document and such other documents
which may be delivered in connection with this Agreement, with
respect to negotiations with the Company or with other
creditors of the Company, any Person controlling the Company or
any of the Company's Subsidiaries arising out of any Event of
Default or any events or circumstances that may give rise to
an Event of Default and with respect to presenting claims in or
otherwise participating in or monitoring any bankruptcy,
insolvency or other similar proceeding involving creditor's
rights generally and any proceeding ancillary thereto or in
connection with the negotiation of any restructuring or
"work-out" (whether or not consummated). The Company further
agrees to pay on demand all costs and expenses (including
reasonable counsel fees and expenses), in connection with the
enforcement (whether through negotiations, legal proceedings or
otherwise) of this Agreement, the Note, and any other Related
Document and any other documents to be delivered hereunder,
including, without limitation, reasonable counsel fees and
expenses in connection with the enforcement of rights under
this Section 8.04. In addition, the Company shall pay any and
all stamp and other administrative taxes and fees payable or
determined to be payable in connection with the execution and
delivery of this Agreement, the Note, any other Related
Document or any other documents to be delivered hereunder, and
agrees to save the Bank harmless from and against any and all
liabilities with respect to or resulting from any delay in
paying or omission to pay such taxes and fees.
SECTION 8.05. Right of Set-off. Upon the occurrence
and during the continuance of any Event of Default the 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 the Bank to or for the credit or the account of the
Company against any and all of the obligations of the Company
now or hereafter existing under this Agreement, the Note or any
other Related Document, whether or not the Bank shall have made
any demand under this Agreement or the Note and although such
obligations may be contingent or unmatured.
The Bank agrees promptly to notify the Company after
any such set-off and application, provided that the failure to
give such notice shall not affect the validity of such set-off
and application. The rights of the Bank under this Section are
in addition to other rights and remedies (including, without
limitation, other rights of set-off) which the Bank may have.
<PAGE> 92
SECTION 8.06. Binding Effect; Assignments and
Participations. (a) This Agreement shall become effective
when it shall have been executed by the Company and the Bank
and thereafter shall be binding upon and inure to the benefit
of the Company and the Bank and their respective successors and
assigns, except that the Company shall not have the right to
assign its rights hereunder or any interest herein without the
prior written consent of the Bank. The Bank may assign to any
Eligible Institution all, but not less than all, of the Bank's
rights and benefits under this Agreement, the Note and the
other Related Documents, and to the extent of that assignment
such assignee shall have the same rights and benefits against
the Company hereunder and under the other Related Documents as
it would have had if such assignee were the Bank, except that,
if the assignee is not a commercial bank, the Alternate Base
Rate and the LIBO Rate shall be calculated as if such assignee
were the Bank listed on the signature page.
(b) The Bank may sell or agree to sell, to (i) any
Eligible Institution (each such Eligible Institution being an
"Eligible Participant") or (ii) to one or more other Persons
(each a "Restricted Participant"; and together with any
Eligible Participants being referred to herein as a
"Participant"), a participation in all or any part of the Loan.
Each Participant shall be entitled to the rights and benefits
of the provisions of Section 5.01(a)(vi) with respect to its
participation in such Loan as if (and the Company shall be
directly obligated to such Participant under such provisions as
if) such Participant were the "Bank" for purposes of said
Section, but, except as set forth below, shall not have any
other rights or benefits under this Agreement, the Note or any
other Related Document (the Participant's rights against the
Bank in respect of such participation to be those set forth in
the agreements executed by the Bank in favor of the
Participant). All amounts payable by the Company to the Bank
under Section 2.05 and 2.09 in respect of the Loan shall be
determined as if the Bank had not sold or agreed to sell any
participations in the Loan, and as if the Bank were maintaining
the Loan in the same way that it is maintaining the portion of
the Loan in which no participations have been sold. In the
case of an Eligible Participant, the Bank may agree with such
Participant to take or refrain from taking action hereunder or
under any Related Document as the Bank and such Participant
shall determine, as set forth in the agreement executed by the
Bank in favor of such Participant. In no event shall the Bank
agree with any Restricted Participant to take or refrain from
taking any action hereunder or under any other Related Document
except that the Bank may agree with a Restricted Participant
that it will not, without the consent of such Restricted
Participant, agree to (i) extend the date fixed for the payment
of principal of or interest on the Loan payable to such
<PAGE> 93
Restricted Participant, (ii) reduce the amount of any such
payment of principal, (iii) reduce the rate at which interest
is payable thereon to a level below the rate at which such
Restricted Participant is entitled to receive such interest,
(iv) alter the rights or obligations of the Company to prepay
the Loan, or (v) release any collateral, including, without
limitation, the Second Mortgage Bonds, Series Y[-1].
(c) Notwithstanding any other provision set forth in
this Agreement, the Bank may at any time create a security
interest in all or any portion of its rights under this
Agreement, the Note and the other Related Documents (including,
without limitation, the Loan owing to it) in favor of any
Federal Reserve Bank in accordance with Regulation A of the
Board of Governors of the Federal Reserve System.
SECTION 8.07. Indemnity. The Company hereby
indemnifies and holds the Bank and each Participant and each of
their Affiliates and their officers, directors, employees,
agents and advisors (each, an "Indemnified Party") harmless
from and against any and all claims, damages, losses,
liabilities and expenses (including, without limitation,
reasonable fees and expenses of counsel) that may be incurred
by or asserted or awarded against any Indemnified Party (except
to the extent any such claim, damage, loss, liability or
expense is found in a final, non-appealable judgment by a court
of competent jurisdiction to have resulted from such
Indemnified Party's gross negligence or willful misconduct), in
each case relating to or arising out of or in connection with
or by reason of:
(i) any representation, warranty or certification
made or deemed made in this Agreement or in the Note by the
Company (or any of its officers), or any certificate
furnished to the Bank pursuant to the provisions hereof or
thereof, proving to have been false or misleading as of the
time made or furnished in any material respect;
(ii) any case or proceeding pursuant to any
bankruptcy, insolvency, reorganization, moratorium or
similar law or any restructuring of the Company; or
(iii) any cost or liability under any Environmental Law
arising out of the operations or assets of the Company.
SECTION 8.08. Further Assurances. The Company agrees
promptly to do such further acts and things, and to execute and
deliver such additional instruments (including, without
limitation, notices), at its own expense, as the Bank may at
any time reasonably request in order better to insure and
confirm the Bank's rights, powers and remedies hereunder and
<PAGE> 94
under the other Related Documents (including in order to
perfect or protect any pledge or security interest granted or
purported to be granted hereby or to enable the Bank to
exercise or enforce its rights and remedies in respect hereof).
SECTION 8.09. Severability. Any provision of this
Agreement which is prohibited, unenforceable or not authorized
in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition, unenforceability
or non-authorization without invalidating the remaining
provisions hereof or affecting the validity, enforceability or
legality of such provision in any other jurisdiction.
SECTION 8.10. Headings. Section headings in this
Agreement are included herein for convenience of reference only
and shall not constitute a part of this Agreement for any other
purpose.
SECTION 8.11. GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK, WITHOUT GIVING EFFECT TO CONFLICT OF LAW
PRINCIPLES.
SECTION 8.12. SUBMISSION TO JURISDICTION. THE
COMPANY HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW
YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY
FOR THE PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS AGREEMENT, THE NOTE, THE OTHER RELATED
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY OR
THE ACTIONS OR OMISSIONS OF THE BANK IN THE NEGOTIATION,
ADMINISTRATION, PERFORMANCE OR ENFORCEMENT OF THIS AGREEMENT OR
THE NOTE OR THE OTHER RELATED DOCUMENTS. THE COMPANY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF
THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND
ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM.
TO THE EXTENT THAT THE COMPANY HAS OR HEREAFTER MAY
ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY
LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT
PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE)
WITH RESPECT TO ITSELF OR ITS PROPERTY, THE COMPANY HEREBY
IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS
UNDER THIS AGREEMENT AND THE OTHER RELATED DOCUMENTS. THE
COMPANY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS
BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE
WITHIN OR WITHOUT THE STATE OF TEXAS.
SECTION 8.13. WAIVER OF TRIAL BY JURY. EACH OF THE
<PAGE> 95
COMPANY AND THE BANK HEREBY IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN
ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT, THE NOTE, THE OTHER RELATED DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. THE COMPANY
ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND
SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER
PROVISION OF EACH OTHER RELATED DOCUMENT TO WHICH IT IS A
PARTY) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE
BANK ENTERING INTO THIS AGREEMENT AND EACH SUCH OTHER RELATED
DOCUMENT.
SECTION 8.14. 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.
SECTION 8.15. INTEGRATION. THIS AGREEMENT REPRESENTS
THE FINAL AGREEMENT BETWEEN THE PARTIES HERETO AS TO THE
SUBJECT MATTER OF THIS AGREEMENT AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES HERETO.
SECTION 8.16. Survival. The obligations of the
Company under Sections 2.05, 2.09, 8.07, 8.12 and 8.13 shall
survive the repayment of the Loans and the payment in full of
all amounts payable by the Company under Section 8.04.
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.
EL PASO ELECTRIC COMPANY
By
Title:
CITIBANK, N.A.
By
Vice President
<PAGE> 96
EXHIBIT A
PROMISSORY NOTE
$_______________________________ Dated:_____________, 19____
FOR VALUE RECEIVED, the undersigned, EL PASO ELECTRIC
COMPANY, a Texas corporation (the "Company"), HEREBY PROMISES
TO PAY to the order of CITIBANK, N.A. (the "Bank") the
principal sum of $[amount of the Loan in figures] [in an
initial payment of $ on , 19 and
thereafter] in substantially equal consecutive quarterly
installments on the last Business Day of ,
, and in each year, commencing
on , 19 and ending on , 19 ; provided,
however, that the last such installment shall be in the amount
necessary to repay in full the unpaid principal amount hereof.
The Company promises to pay interest on the principal
amount of the Loan from the date hereof until such principal
amount is paid in full, at such interest rates, and payable at
such times, as are specified in the Term Loan Agreement
referred to below.
Both principal and interest are payable in lawful
money of the United States of America to the Bank at
in same day funds. All
payments made on account of the principal amount hereof shall
be recorded by the Bank and, prior to any transfer hereof,
endorsed on the grid attached hereto which is a part of this
Promissory Note. The failure by the Bank to make any such
recordation on its books and records shall not limit or
otherwise affect the obligations of the Company hereunder or
under the Term Loan Agreement referred to below.
This Promissory Note is the Note referred to in, and
is entitled to the benefits of, the Term Loan Agreement dated
as of , 19 (the "Term Loan Agreement"), between
the Company and the Bank. The Term Loan Agreement, among other
things, contains provisions for acceleration of the maturity
hereof upon the happening of certain stated events and also for
prepayments on account of principal hereof prior to the maturity
hereof upon the terms and conditions therein
specified.
This Promissory Note is secured by Second Mortgage
Bond, Series Y[-1] referred to in the Term Loan Agreement.
EL PASO ELECTRIC COMPANY
By
Title:
<PAGE> 97
PAYMENTS OF PRINCIPAL
- -----------------------------------------------------------------
> Amount of > >
> Principal Paid > Unpaid Principal > Notation
Date > or Prepaid > Balance > Made By
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
<PAGE> 98
[DRAFT 11/04/93]
TERM LOAN AGREEMENT
dated as of , 199
between
EL PASO ELECTRIC COMPANY
and
CREDIT SUISSE
<PAGE> 99
TABLE OF CONTENTS
Section Page
PRELIMINARY STATEMENTS ............................ 1
ARTICLE I
DEFINITIONS
Section 1.01 Definitions ...................... 1
Section 1.02 Computation of Time Periods ...... 11
Section 1.03 Accounting Terms ................. 11
Section 1.04 Interpretation ................... 11
ARTICLE II
AMOUNTS AND TERMS OF THE LOAN
Section 2.01 The Loan ......................... 12
Section 2.02 Repayment ........................ 12
Section 2.03 Interest ......................... 12
Section 2.04 Prepayments ...................... 14
Section 2.05 Increased Costs, Etc. ............ 15
Section 2.06 Interest Rate Protection ......... 17
Section 2.07 Illegality, Etc. ................. 17
Section 2.08 Payments and Computations ........ 18
Section 2.09 U.S. Taxes ....................... 19
Section 2.10 Applicable Lending Office ........ 20
Section 2.11 Net Payments ..................... 20
ARTICLE III
CONDITIONS TO CLOSING
Section 3.01 Closing Documents ................ 20
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01 Representations and Warranties of
the Company ................... 23
ARTICLE V
COVENANTS OF THE COMPANY
Section 5.01 Covenants of the Company ......... 26
i
<PAGE> 100
Section Page
ARTICLE VI
EVENTS OF DEFAULT
Section 6.01 Events of Default ................ 34
ARTICLE VII
SECURITY
Section 7.01 Issuance and Pledge of Bonds ..... 37
Section 7.02 Application of Moneys ............ 38
Section 7.03 Rights of Bondholders ............ 38
ARTICLE VIII
MISCELLANEOUS
Section 8.01 Amendments, Etc. ................. 38
Section 8.02 Notices, Etc. .................... 38
Section 8.03 No Waiver; Remedies .............. 39
Section 8.04 Costs, Expenses and Taxes ........ 39
Section 8.05 Right of Set-off ................. 40
Section 8.06 Binding Effect; Assignments and
Participations ................. 40
Section 8.07 Indemnity ........................ 42
Section 8.08 Further Assurances ............... 42
Section 8.09 Severability ..................... 42
Section 8.10 Headings ......................... 43
Section 8.11 Governing Law .................... 43
Section 8.12 Submission to Jurisdiction ....... 43
Section 8.13 Waiver of Trial By Jury .......... 43
Section 8.14 Counterparts ..................... 44
Section 8.15 Integration ...................... 44
Section 8.16 Survival ......................... 44
Schedule I Liens
EXHIBITS
Exhibit A Promissory Note
ii
<PAGE> 101
TERM LOAN AGREEMENT
TERM LOAN AGREEMENT, dated as of [the Effective Date],
between El Paso Electric Company, a Texas corporation (the
"Company"), and Credit Suisse (the "Bank").
PRELIMINARY STATEMENTS:
(1) On January 8, 1992, the Company commenced a
voluntary case (the "Bankruptcy Case") under chapter 11 of the
Bankruptcy Code (as hereinafter defined) (Case No. 92-10148-FM)
in the Bankruptcy Court (as hereinafter defined), and thereafter
has continued to operate its business and manage its assets as a
debtor-in-possession.
(2) Among the claims filed against the Company in the
Bankruptcy Case were those of the Bank in respect of the Letter
of Credit and Reimbursement Agreement, dated as of June 1, 1986,
between the Company and the Bank (the "Claim").
(3) On [ , 199 ], an order was entered by the
court having jurisdiction over the Bankruptcy Case (the
"Bankruptcy Court") confirming the Plan of Reorganization (as
hereinafter defined), which Plan of Reorganization provided,
among other things, for the Company to enter into this Agreement
with the Bank.
(4) Pursuant to Section 3.7(A) of the Plan of
Reorganization and in accordance with the terms thereof and to
the extent provided therein the Claim is to be discharged and
satisfied by the execution and delivery by the Company of this
Agreement, which Agreement provides, among other things, for the
execution and delivery by the Company to the Bank of the Note (as
hereinafter defined), which Note shall be secured by the Second
Mortgage Bonds, Series Y-2 (as hereinafter defined).
NOW, THEREFORE, in consideration of the premises and of
the mutual covenants and agreements contained in the Plan of
Reorganization and herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. As used in this Agreement,
the following terms have the following meanings:
<PAGE> 102
"Affiliate" means, as to any Person, any other Person
that, directly or indirectly, controls, is controlled by or
is under common control with such Person or is a director or
officer of such Person. For purposes of this definition,
the term "control" (including the terms "controlling,"
"controlled by" and "under common control with") of a Person
means the possession, direct or indirect, of the power to
vote 5% or more of the Voting Stock of such Person or to
direct or cause the direction of the management and policies
of such Person, whether through the ownership of Voting
Stock, by contract or otherwise.
"Alternate Base Rate" means a fluctuating interest rate
per annum as shall be in effect from time to time which rate
per annum shall at all times be equal to the higher of:
(i) the rate of interest announced publicly by
the Bank in New York, New York, from time to time as
the Bank's base rate, each change in such rate to be
effective as of the Bank's opening of business on the
date such change occurs (extensions of credit made by
the Bank may bear interest at rates below, equal to or
above such rate); or
(ii) the Federal Funds Rate plus .50 percent.
"Alternate Base Rate Loan" means the portion of the
Loan which bears interest as provided in Section 2.03(a).
"Banking Institution" means any financial institution
subject to regulation under Regulation D of the Board of
Governors of the Federal Reserve System and any other
banking institution or trust company or similar organization
incorporated or organized under the laws of a country other
than the United States, or a political subdivision of a
country other than the United States.
"Bankruptcy Case" has the meaning assigned to that term
in Preliminary Statement (1).
"Bankruptcy Code" means the Bankruptcy Reform Act of
1978, as heretofore and hereafter amended, and codified as
title 11 of the United States Code.
"Bankruptcy Court" has the meaning assigned to that
term in Preliminary Statement (3).
<PAGE> 103
"Business Day" means a day of the year on which banks
are not required or authorized to close in New York City
and, if the applicable Business Day relates to any
Eurodollar Loans, on which dealings are carried on in the
London interbank market.
"Capital Lease Obligation" means, with respect to any
lease of property which, in accordance with GAAP, appears on
the lessee's balance sheet as a capital lease, the amount of
the liability which should appear on such balance sheet.
"CERCLA" means the Comprehensive Environmental
Response, Compensation, and Liability Act, as amended from
time to time.
"CIBC" means Canadian Imperial Bank of Commerce.
"Claim" has the meaning assigned to that term in
Preliminary Statement (2).
"Code" means the Internal Revenue Code of 1986, as
amended from time to time.
"Confirmation Order" means the order of the Bankruptcy
Court confirming the Plan of Reorganization.
"Consolidated Subsidiary" means, for any Person, each
Subsidiary of such Person (whether now existing or hereafter
created or acquired) the financial statements of which shall
be (or should have been) consolidated with the financial
statements of such Person in accordance with GAAP.
"Debt" of any Person means, without duplication,
(a) all indebtedness of such Person for borrowed money or
for the deferred purchase price of property or services
(including without limitation, all obligations, contingent
or otherwise, of such Person in connection with acceptance
facilities (other than acceptance facilities entered into in
connection with normal course trade transactions) and letter
of credit facilities to the extent such letter of credit
facilities support Debt), (b) all obligations of such Person
evidenced by notes, bonds, debentures or other similar
instruments, (c) all obligations of such Person created or
arising under any conditional sale or other title retention
agreement with respect to property acquired by such Person,
(d) all Capitalized Lease Obligations of such Person,
(e) all obligations of such Person to purchase, redeem,
retire, defease or otherwise make any payment in respect of
<PAGE> 104
any capital stock of or other ownership or profit interest
in such Person or any other Person or any warrants, rights
or options to acquire such capital stock, valued, in the
case of preferred stock, at the greater of its voluntary or
involuntary liquidation preference plus accrued and unpaid
dividends, (f) all Debt of others referred to in clauses (a)
through (e) above guaranteed directly or indirectly in any
manner by such Person, or in effect guaranteed directly or
indirectly by such Person through an agreement (i) to pay or
purchase such Debt or to advance or supply funds for the
payment or purchase of such Debt, (ii) to purchase, sell or
lease (as lessee or lessor) property, or to purchase or sell
services, primarily for the purpose of enabling the debtor
to make payment of such Debt or to assure the holder of such
Debt against loss, (iii) to supply funds to or in any other
manner invest in the debtor (including any agreement to pay
for property or services irrespective of whether such
property is received or such services are rendered) or
(iv) otherwise to assure a creditor against loss, and
(g) all Debt referred to in clauses (a) through (e) above
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 (including, without limitation,
accounts and contract rights) owned by such Person, even
though such Person has not assumed or become liable for the
payment of such Debt. In cases where recourse to any Person
or any of its properties in respect of Debt is limited, the
amount of such Debt of such Person for purposes hereof shall
be so limited.
"EBITA" means, for any period, the sum, for the Company
and its Consolidated Subsidiaries (determined on a
consolidated basis without duplication in accordance with
GAAP), of the following: (a) net operating income
(calculated before taxes, Interest Expense, extraordinary
items and unusual non-cash, non-recurring items and income
or loss attributable to equity in Affiliates) for such
period plus (b) amortization (to the extent deducted in
determining net operating income) for such period.
"Effective Date" means the Effective Date (as defined
therein) of the Plan of Reorganization.
"Eligible Institution" means (i) a bank or trust
company organized under the laws of the United States of
America, of any state therein, of the District of Columbia,
of any member country of the Organization for Economic
Cooperation and Development or of any political subdivision
<PAGE> 105
of any such country, in each case, having assets in excess
of $500,000,000, (ii) an insurance company organized under
the laws of any state in the United States of America or of
the District of Columbia having assets in excess of
$500,000,000 or (iii) any other Person consented to by the
Company, which consent shall not be unreasonably withheld.
"Eligible Participant" has the meaning assigned to that
term in Section 8.06(b).
"Environmental Action" means any administrative,
regulatory or judicial action, suit, demand, demand letter,
claim, notice of non-compliance or violation, investigation,
proceeding, consent order or consent agreement relating in
any way to any Environmental Law or any Environmental Permit
including, without limitation, (a) any claim by any
governmental or regulatory authority for enforcement,
investigation, cleanup, removal, response, remedial or other
actions or damages pursuant to any Environmental Law and
(b) any claim by any Person seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive
relief resulting from Hazardous Materials or arising from
alleged injury or threat of injury to health, safety or the
environment.
"Environmental Law" means any federal, state or local
law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award relating to the environment,
health, safety or Hazardous Materials.
"Environmental Permit" means any permit, approval,
identification number, license or other authorization
required under any Environmental Law.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended from time to time, and the
regulations promulgated and rulings issued thereunder.
"ERISA Affiliate" means any Person who for purposes of
Title IV of ERISA is a member of the Company's controlled
group, or under common control with the Company, within the
meaning of Section 414 of the Internal Revenue Code of 1986,
as amended.
"Eurodollar Loan" means the portion of the Loan which
bears interest at the Eurodollar Rate.
<PAGE> 106
"Eurodollar Rate" means, for any Interest Period, an
interest rate per annum equal at all times during such
Interest Period to the sum of (x) the LIBO Rate for such
Interest Period plus (y) 1.50% per annum.
"Event of Default" has the meaning assigned to that
term in Section 6.01.
"Federal Funds Rate" means, for any period, a
fluctuating interest rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) equal for each day
during such period to 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 for such day, (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so
published for any day which is a Business Day, the average
of the quotations for such day on such transactions received
by the Agent from three Federal funds brokers of recognized
standing selected by it.
"Final Approval" means any authorizations, consents,
approvals, waivers, exceptions, variances, orders, licenses,
exemptions, publications, filings, notices to and
declarations of or with any governmental authority (other
than routine reporting requirements the failure to comply
with which will not affect the validity or enforceability of
any of the Related Documents or have a Material Adverse
Effect) or any other action in respect of any governmental
authority that is in full force and effect and is not the
subject of a pending appeal or reconsideration or other
review, and the time in which to make an appeal or request
the review or reconsideration of which has expired without
any appeal or request for review or reconsideration having
been taken or made.
"Final Order" means an order of the Bankruptcy Court
which (a) shall not have been reversed, stayed, modified or
amended and the time to appeal from, or to seek review or
rehearing of, shall have expired and as to which no appeal
or petition for review, rehearing or certiorari is pending
or (b) if appealed from, shall have been affirmed and the
time to appeal from such affirmance or to seek review or
rehearing thereof shall have expired or no further hearing,
appeal or petition for certiorari can be taken or granted.
<PAGE> 107
"First Mortgage Bond Indenture" means the Indenture
dated as of between the Company and
, as trustee, providing for the issuance by the
Company of its first mortgage bonds.
"First Mortgage Bonds" means bonds issued by the
Company under the First Mortgage Bond Indenture.
"First Mortgage Bonds, Series A/B" means, collectively,
the First Mortgage Bonds, Series A and the First Mortgage
Bonds, Series B, in each case issued under the First
Mortgage Bond Indenture.
"GAAP" means generally accepted accounting principles
in the United States of America as in effect from time to
time.
"Governmental Person" means any national, state or
local government, any political subdivision or any
government instrumentality, authority, body or entity,
including the Federal Deposit Insurance Corporation, the
Board of Governors of the Federal Reserve System, any
central bank or any comparable authority.
"Hazardous Materials" means (a) petroleum or petroleum
products, asbestos in any form, radioactive or source
material, (b) any substances defined as or included in the
definition of "hazardous substances", "hazardous wastes",
"hazardous materials", "extremely hazardous wastes",
"restricted hazardous wastes", "toxic substances", "toxic
pollutants", "contaminants" or "pollutants", or words of
similar import, under any Environmental Law and (c) any
other substance exposure to which is regulated under any
Environmental Law.
"Indemnified Party" has the meaning assigned to that
term in Section 8.07.
"Interest Coverage Ratio" means, as at any date, the
ratio of (a) EBITA for the period of four consecutive fiscal
quarters ending on or most recently ended prior to such date
to (b) Interest Expense for such period.
"Interest Expense" means, for any period, the sum, for
the Company and its Consolidated Subsidiaries (determined on
a consolidated basis without duplication in accordance with
GAAP), of the following: (a) all interest in respect of
Debt including, without limitation, interest capitalized
<PAGE> 108
during such period (whether or not actually paid during such
period), including, without limitation, all commissions and
fees (other than up-front fees), plus (b) the net amounts
payable (or minus the net amounts receivable) under Interest
Rate Protection Agreements accrued during such period
(whether or not actually paid or received during such
period).
"Interest Period" has the meaning assigned to that term
in Section 2.03(b).
"Interest Rate Protection Agreement" means, for any
Person, an interest rate swap, cap or collar agreement,
interest rate future or option contracts or similar
arrangement providing for the transfer or mitigation of
interest risks either generally or under specific
contingencies.
"Leverage Ratio" means, at any time, the ratio of Total
Debt at such time to the sum of (a) Total Capital at such
time plus (b) Total Debt at such time.
"LIBO Rate" means, for any Interest Period, an interest
rate per annum equal to the rate of interest per annum at
which deposits in United States dollars are offered by the
principal office of the Bank in London, England to prime
banks in the London interbank market at 11:00 A.M. (London
time) two Business Days before the first day of such
Interest Period for a period equal to such Interest Period.
"Lien" means any lien, security interest or other
charge or encumbrance of any kind, or any other type of
preferential arrangement, including, without limitation, the
lien or retained security title of a conditional vendor and
any easement, right of way or other encumbrance on title to
real property.
"Loan" has the meaning assigned to that term in Section
2.01.
"Maricopa LC" means that certain letter of credit dated
June 18, 1986, issued by the Bank, as amended, extended and
supplemented, with respect to the Maricopa PCBs.
"Maricopa PCBs" means the Pollution Control Refunding
Revenue Bonds, 1984 Series E (El Paso Electric Company Palo
Verde Project) issued by Maricopa County, Arizona Pollution
<PAGE> 109
Control Corporation in the original principal amount of
$37,100,000, which mature on December 1, 2014.
"Material Adverse Effect" means a material adverse
effect on (i) the property, business, operations, financial
condition, liabilities or capitalization of the Company and
its Subsidiaries taken as a whole, (ii) the ability of the
Company to perform its obligations under any of the Related
Documents, (iii) the validity or enforceability of any of
the Related Documents, (iv) the rights and remedies of the
Bank or (v) the timely payment of the principal of or
interest on the Note or other amounts payable in connection
herewith or therewith.
"Material Subsidiary" means, at any time, a Subsidiary
of the Company (a) whose assets at such time exceed 10% of
the assets of the Company and its Subsidiaries (on a
consolidated basis) or (b) whose earnings at such time
exceed 10% of the earnings of the Company and its
Subsidiaries (on a consolidated basis).
"Multiemployer Plan" means a multiemployer plan, as
defined in Section 4001(a)(3) of ERISA, to which the Company
or any ERISA Affiliate is making or accruing an obligation
to make contributions, or has within any of the preceding
five plan years made or accrued an obligation to make
contributions, such plan being maintained pursuant to one or
more collective bargaining agreements.
"Multiple Employer Plan" means a single employer plan,
as defined in Section 4001(a)(15) of ERISA, that (i) is
maintained for employees of the Company or an ERISA
Affiliate and at least one Person other than the Company and
its ERISA Affiliates or (ii) was so maintained and in
respect of which the Company or an ERISA Affiliate could
have liability under Section 4064 or 4069 of ERISA in the
event such plan has been or were to be terminated.
"Note" means a promissory note of the Company, in
substantially the form of Exhibit A.
"Participant" has the meaning assigned to that term in
Section 8.06.
"PBGC" means the Pension Benefit Guaranty Corporation
or any successor thereto.
<PAGE> 110
"Person" means an individual, a corporation, a
partnership, an association, a business trust or any other
entity or organization, including a Governmental Person.
"Plan" means a Single Employer Plan or a Multiple
Employer Plan.
"Plan of Reorganization" means the Modified Third
Amended Plan of Reorganization of the Debtor Providing for
the Acquisition of El Paso Electric Company by Central and
South West Corporation filed on August 27, 1993 (as
corrected as of September 15, 1993).
"Related Documents" means collectively, this Agreement,
the Note, the Second Mortgage Bond Indenture, and the Second
Mortgage Bonds, Series Y-2.
"Second Mortgage Bond Indenture" means the Indenture
dated as of between the Company and
, as trustee, providing for the issuance by the
Company of its second mortgage bonds.
"Second Mortgage Bonds" means bonds issued by the
Company under the Second Mortgage Bond Indenture.
"Second Mortgage Bonds, Series A" means the Second
Mortgage Bonds, Series A issued under the Second Mortgage
Bond Indenture.
"Second Mortgage Bonds, Series Y-2" means the Second
Mortgage Bonds, Series Y-2 issued under the Second Mortgage
Bond Indenture.
"Single Employer Plan" means a single employer plan, as
defined in Section 4001(a)(15) of ERISA, that (i) is
maintained for employees of the Company or an ERISA
Affiliate and no Person other than the Company and its ERISA
Affiliates or (ii) was so maintained and in respect of which
the Company or an ERISA Affiliate could have liability under
Section 4069 of ERISA in the event such plan has been or
were to be terminated.
"Submission Date" means the date the form of this
Agreement was filed with the Bankruptcy Court prior to the
date creditors must have voted on the Plan of Reorganization
in accordance with Section 7.6 of the Plan of
Reorganization.
<PAGE> 111
"Subsidiary" means, with respect to any Person, any
corporation, partnership or other entity of which at least a
majority of the Voting Stock is at the time directly or
indirectly owned or controlled by such Person or one or more
Subsidiaries of such Person or by such Person and one or
more Subsidiaries of such Person.
"Total Capital" means, as at any date, the sum for the
Company and its Consolidated Subsidiaries (determined on a
consolidated basis without duplication in accordance with
GAAP), of the following:
(a) the amount of capital stock (excluding
treasury stock and capital stock subscribed for and
unissued and preferred stock mandatorily redeemable in
cash or redeemable in cash at the option of the holder
thereof), plus
(b) the amount of surplus and retained earnings
(or, in the case of a surplus or retained earnings
deficit, minus the amount of such deficit).
"Total Debt" means, as at any date, the aggregate
amount of all Debt of the Company and its Consolidated
Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP)(other than contingent
obligations in connection with acceptance facilities and
letters of credit).
"Voting Stock" means capital stock issued by a
corporation, or equivalent interests in any other Person,
the holders of which are ordinarily, in the absence of
contingencies, entitled to vote for the election of
directors (or Persons performing similar functions) of such
Person, even though the right so to vote has been suspended
by the happening of such a contingency.
"Withdrawal Liability" has the meaning given such term
under Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. Computation of Time Periods. In this
Agreement, in the computation of a period of time from a
specified date to a later specified date, the word "from" means
"from and including" and the words "to" and "until" each means
"to but excluding".
SECTION 1.03. Accounting Terms. All accounting terms
not specifically defined herein shall be construed in accordance
<PAGE> 112
with GAAP consistently applied, except as otherwise stated
herein.
SECTION 1.04. Interpretation. In this Agreement the
singular includes the plural and the plural the singular; words
importing any gender include the other genders; references to
statutes are to be construed as including all statutory
provisions consolidating, amending or replacing the statute
referred to; references to "writing" include printing, typing,
lithography and other means of reproducing words in a tangible
visible form; references to sections (or any subdivision of a
section), articles, schedules, annexes and exhibits are to those
of this Agreement unless otherwise indicated; the words
"including", "includes" and "include" shall be deemed to be
followed by the words "without limitation"; references to
agreements and other contractual instruments shall be deemed to
include all subsequent amendments and other modifications to such
instruments but only to the extent such amendments and other
modifications are not prohibited by the terms of this Agreement;
and references to Persons include their respective permitted
successors and assigns and, in the case of Governmental Persons,
Persons succeeding to their respective functions and capacities.
ARTICLE II
AMOUNTS AND TERMS OF THE LOAN
SECTION 2.01. The Loan. As provided in the Plan of
Reorganization, the Company is issuing to the Bank, concurrently
with the execution and delivery hereof, the Note, appropriately
completed to the order of the Bank, in an amount equal to
$___________ (the "Loan"), in satisfaction, to the extent
provided for in Section 3.7(A) of the Plan of Reorganization, of
the Claim. Amounts repaid or prepaid hereunder may not be
reborrowed.
SECTION 2.02. Repayment. The Company shall repay the
unpaid principal amount of the Loan in substantially equal
quarterly installments commencing on the last Business Day of
________, 199_ and on the last Business Day of each ________,
________, ________ and ________ thereafter through and including
________, 199_; provided, however, that the last such installment
<PAGE> 113
shall be in the amount necessary to repay in full the unpaid
principal amount of the Loan.
SECTION 2.03. Interest. The Company shall pay
interest on the unpaid principal amount of the Loan from the date
of the Note until such principal amount shall be paid in full, at
the applicable rate set forth below:
(a) Alternate Base Rate. Except to the extent the
Company shall elect to pay interest on all or part of the
unpaid principal amount of the Loan for any Interest Period
pursuant to subsection (c) of this Section 2.03, the Company
shall pay interest on the unpaid principal of the Loan from
the date of the Note until the principal amount of the Loan
is paid in full at a fluctuating rate per annum equal at all
times to .50% per annum above the Alternate Base Rate in
effect from time to time, payable quarterly on the last
Business Day of each ________, _________, ________, and
__________ and on the date the Loan is paid in full.
(b) Interest Periods. The Company may from time to
time elect to have the interest on all or part of the
principal amount of the Loan determined and payable for a
specified period (an "Interest Period") in accordance with
subsection (c) of this Section 2.03. The first day of an
Interest Period shall be either the date of the Note, the
date the Company specifies as the first day of a Eurodollar
Loan, or the last day of the then current Interest Period
for a Eurodollar Loan. The duration of each such Interest
Period shall be, in respect of a Eurodollar Loan, 1, 3 or 6
months; provided, however, that the Company may not select
any Interest Period which ends after (x) ___________, 199__
or (y) any principal repayment installment date unless,
after giving effect to such selection, the aggregate unpaid
principal amount of Eurodollar Loans having Interest Periods
which end on or prior to such principal repayment
installment date and Alternate Base Rate Loans shall be at
least equal to the principal amount of the Loan due and
payable on and prior to such date.
(c) Eurodollar Rate. The Company may from time to
time elect to pay interest on all or part of the principal
amount of the Loan (provided that any such partial principal
amount shall not be less than $1,000,000) at the Eurodollar
<PAGE> 114
Rate for an Interest Period by notice, specifying the
principal amount and the first day and duration of such
Interest Period, received by the Bank before 11:00 AM (New
York City time) two Business Days prior to the first day of
such Interest Period, payable on the last day of such
Interest Period and, if such Interest Period has a duration
of more than three months, on each day which occurs during
such Interest Period every three months from the first day
of such Interest Period.
(d) Default Interest. The Company shall pay interest
on the unpaid principal amount of the Loan that is not paid
when due and on the unpaid amount of all interest, and other
amounts payable hereunder, that is not paid when due,
payable on demand, at a rate per annum equal at all times to
2% per annum above the Alternate Base Rate in effect from
time to time. Notwithstanding anything in this Agreement to
the contrary, upon the occurrence and during the continuance
of an Event of Default, the right of the Company to make an
election in respect of the Eurodollar Rate pursuant to
Section 2.03(c) shall terminate (i) automatically, in the
case of an Event of Default under Section 6.01(a) or 6.01(b)
or (ii) upon notice to the Company by the Bank, in all other
cases; provided that no termination referred to in either of
the preceding clauses (i) or (ii) shall affect any
Eurodollar Loan during an Interest Period in effect for such
Eurodollar Loan at the time any notice is received by the
Company.
(e) Alternate Rate of Interest. In the event, and on
each occasion, that, on the day two Business Days prior to
the commencement of any Interest Period for a Eurodollar
Loan, the Bank shall have determined (which determination
shall be conclusive and binding upon the Company absent
manifest error) that reasonable means do not exist for
ascertaining the applicable Eurodollar Rate, the Bank shall,
as soon as practicable thereafter, give written, facsimile
or telegraphic notice of such determination to the Company,
and any request by the Company for a Eurodollar Loan
pursuant to subsection (c) of this Section 2.03 shall be
deemed a request for an Alternate Base Rate Loan. After
such notice shall have been given and until the
circumstances giving rise to such notice no longer exist,
each request for an Eurodollar Loan shall be deemed to be a
request for an Alternate Base Rate Loan.
<PAGE> 115
(f) Promptly after the determination of any interest
rate provided for herein or any change therein, the Bank
shall give notice thereof to the Company.
SECTION 2.04. Prepayments. (a) Mandatory Prepayment.
Upon the remarketing or refunding of any Maricopa PCBs purchased
prior to the Effective Date, through draws on the Maricopa LC,
the Company shall prepay, in an amount equal to 50% of the net
proceeds of any such remarketing or refunding, the outstanding
principal amount of the Loan (any such prepayment shall be
applied to the principal installments of the Note in the inverse
order of their maturities), together with accrued interest to the
date of such prepayment on the principal amount prepaid and, if
and to the extent any principal amount so prepaid is a Eurodollar
Loan and such prepayment is on a day other than the last day of
the Interest Period for such Eurodollar Loan, an amount in
accordance with Section 2.05(d) to compensate the Bank for any
loss, cost or expense incurred by it by reason of such
prepayment.
(b) Optional Prepayment. The Company may, upon at
least two Business Days' notice to the Bank stating the proposed
date and principal amount of the prepayment, and if such notice
is given to the Bank the Company shall, prepay the outstanding
principal amount of the Loan in whole or in part (each such
partial prepayment shall be in an aggregate principal amount not
less than $1,000,000 and shall be applied to the principal
installments of the Note in the inverse order of their
maturities), together with accrued interest to the date of such
prepayment on the principal amount prepaid; provided, however,
that any prepayment of a Eurodollar Loan shall be made on, and
only on, the last day of the Interest Period for such Eurodollar
Loan unless the Company shall pay to the Bank in accordance with
Section 2.05(d) an amount sufficient to compensate the Bank for
any loss, cost, or expense incurred by it by reason of such
prepayment on a day other than the last day of an Interest
Period.
SECTION 2.05. Increased Costs, Etc. (a) If, due
either to (i) the introduction after the Submission Date of, or
any change (other than any change by way of imposition or
increase of reserve requirements in respect of Eurodollar Loans,
referred to in subsection (b) below), after the Submission Date,
in or in the interpretation of, any law or regulation or (ii) the
compliance by the Bank with any guideline or request issued or
made after the Submission Date by any central bank or other
governmental authority (whether or not having the force of law),
there shall be any increase in the cost to the Bank as a result
<PAGE> 116
of agreeing to make or making, funding or maintaining Eurodollar
Loans, or reduction in the amount of any sum received in respect
thereof, then the Company shall from time to time, upon demand by
the Bank, pay to the Bank additional amounts sufficient to
compensate the Bank for such increased cost or reduced amount. A
certificate as to the amount of such increased cost or reduced
amount, submitted to the Company by the Bank, shall be conclusive
and binding for all purposes, absent manifest error.
(b) The Company shall pay to the Bank additional
interest on the unpaid principal amount of each Eurodollar Loan,
from the date of such Eurodollar Loan until such principal amount
is paid in full, at an interest rate per annum equal at all times
during each Interest Period for such Loan to the remainder
obtained by subtracting (i) the LIBO Rate for the Interest Period
for such Loan from (ii) the rate obtained by dividing such LIBO
Rate by a percentage equal to 100% minus the reserve percentage
applicable 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 regulations
issued from time to time by the Board of Governors of the Federal
Reserve System (or any successor) for determining the maximum
reserve requirement (including, without limitation, any
emergency, supplemental or other marginal reserve requirement)
for the Bank with respect to liabilities or assets consisting of
or including Eurocurrency liabilities having a term equal to such
Interest Period, payable on each date on which interest is
payable on such Eurodollar Loan. Such additional interest shall
be determined by such Bank and notified to the Company.
(c) If the Bank determines that 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 Submission Date, affects
the amount of capital required to be maintained by the Bank or
any corporation controlling the Bank and that the amount of such
capital is increased by or based upon the existence of the Bank's
commitment hereunder and other commitments of this type, then,
upon demand by the Bank, the Company shall immediately pay to the
Bank, from time to time as specified by the Bank, additional
amounts sufficient to compensate the Bank or such corporation in
the light of such circumstances, to the extent that the Bank
reasonably determines such increase in capital to be allocable to
the existence of the Bank's commitment hereunder. A certificate
as to such amounts submitted to the Company by the Bank, shall be
conclusive and binding for all purposes, absent manifest error.
<PAGE> 117
(d) If, due to a change of interest rate on any
Eurodollar Loan pursuant to Section 2.06(b) or 2.07, any payment
pursuant to Section 2.04 of any Eurodollar Loan, any acceleration
of the maturity of such Loan and the Note pursuant to Section
6.01, or for any other reason, the Bank is subject to a change of
interest rate, or receives payments of principal, of any
Eurodollar Loan other than on the last day of an Interest Period
relating to such Eurodollar Loan, the Company shall, promptly
upon demand by the Bank, pay to the Bank any amounts required to
compensate the Bank for additional losses, costs or expenses
which it may reasonably incur as a result of such change or
payment, including, without limitation, any loss, cost or expense
incurred by reason of the liquidation or reemployment of deposits
or other funds acquired by the Bank to fund or maintain such
Eurodollar Loan, but excluding loss of anticipated profit.
A certificate setting forth the amount of such additional losses,
costs or expenses, submitted by the Bank to the Company, shall be
conclusive and binding for all purposes, absent manifest error.
(e) Notwithstanding any other provision in this
Section 2.05 to the contrary (i) the Company is not responsible
for, and is not required to reimburse the Bank for, any amounts
that would otherwise be payable by the Company pursuant to
subsection (a), (c) or (d) of this Section 2.05 to the extent
such amounts accrued 90 days or more prior to the date the Bank
provides to the Company a certificate which sets forth such
amounts owed to the Bank by the Company pursuant to such
subsections and (ii) the Company is responsible for, and is
required to reimburse the Bank for, any amounts payable by the
Company pursuant to this Section 2.05, only so long as the Bank
is a Banking Institution.
(f) In calculating any amounts required to be paid by
the Company pursuant to this Section 2.05, the Bank shall make
all determinations and allocations on a reasonable basis.
SECTION 2.06. Interest Rate Protection. (a) If the
Company shall fail to select the duration of any Interest Period
for any Eurodollar Loan in accordance with the provisions
contained in Section 2.03(c), the Bank will forthwith so notify
the Company and such Eurodollar Loan will automatically, on the
last day of the then existing Interest Period therefor, convert
into an Alternate Base Rate Loan.
(b) On and after the date on which the unpaid
principal amount of the Loan shall be reduced, by payment or
prepayment or otherwise, to less than $1,000,000, the rate of
interest on the unpaid principal amount of the Loan shall be .50%
<PAGE> 118
per annum above the Alternate Base Rate in effect from time to
time and the right of the Company to make an election in respect
of the Eurodollar Rate pursuant to Section 2.03(c) shall
terminate.
SECTION 2.07. Illegality, Etc. Notwithstanding any
other provision of this Agreement, if the Bank shall at the time
be a Banking Institution and notify the Company that the
introduction of or any change in or in the interpretation of any
law or regulation that occurs after the Submission Date makes it
unlawful, or any central bank or other governmental authority
asserts after the Submission Date that it is unlawful, for the
Bank to perform its obligations to fund or maintain Eurodollar
Loans hereunder, (i) the right of the Company to select the
Eurodollar Rate, and the obligation of the Bank to maintain
Eurodollar Loans, shall be suspended until the Bank shall notify
the Company that the circumstances causing such suspension no
longer exist and (ii) the rate of interest on the unpaid
principal amount of the Loan shall thereupon be .50% per annum
above the Alternate Base Rate in effect from time to time.
SECTION 2.08. Payments and Computations. (a) The
Company shall make each payment under this Agreement or the Note
not later than 12:00 noon (New York City time) on the day when
due in lawful money of the United States of America to the Bank
at its address referred to in Section 8.02 in same day funds.
(b) The Company hereby authorizes the Bank, if and to
the extent payment is not made when due under this Agreement or
the Note, to charge from time to time against any or all of the
Company's accounts with the Bank any amount so due.
(c) All computations of interest based on the
Alternate Base Rate shall be made by the Bank on the basis of a
year of 365 or 366 days, as the case may be, and all computations
of interest based on the LIBO Rate shall be made by the Bank on
the basis of a year of 360 days, in each case for the actual
number of days (including the first day but excluding the last
day) occurring in the period for which such interest is payable.
Each determination by the Bank of an interest rate hereunder
shall be conclusive and binding for all purposes, absent manifest
error.
(d) Whenever any payment under this Agreement or the
Note shall be stated to be due, or whenever the last day of any
Interest Period would otherwise occur, on a day which is not a
Business Day, such payment shall be made, and the last day of
such Interest Period shall occur, on the next succeeding Business
<PAGE> 119
Day, and such extension of time shall in such case be included in
the computation of payment of interest; provided, however, if
such extension would cause payment of interest on or principal of
an Eurodollar Loan to be made, or the last day of an Interest
Period for a Eurodollar Loan to occur, in the next following
calendar month, such payment shall be made, and the last day of
such Interest Period shall occur, on the next preceding Business
Day.
(e) Whenever the first day of any Interest Period
occurs on a day of an initial calendar month for which there is
no numerically corresponding day in the calendar month that
succeeds such initial calendar month by the number of months
equal to the number of months in such Interest Period, such
Interest Period shall end on the last Business Day of such
succeeding calendar month. Notwithstanding anything to the
contrary contained herein, each Interest Period that 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) shall end on the last
Business Day of the appropriate subsequent calendar month.
SECTION 2.09. U.S. Taxes. (a) The Company agrees to
pay to the Bank with respect to any period during which it is not
a U.S. Person such additional amounts as are necessary in order
that the net payment of any amount due to such non-U.S. Person
hereunder after deduction for or withholding in respect of any
U.S. Tax imposed with respect to such payment (or in lieu
thereof, payment of such U.S. Tax by such non-U.S. Person), will
not be less than the amount stated herein to be then due and
payable, provided that the foregoing obligation to pay such
additional amounts shall not apply:
(i) to any payment to the Bank hereunder unless the
Bank is, on the Submission Date (or on the date such Person
becomes the successor to, or the assignee of, the Bank as
provided in Section 8.06) and on the date of any change in
the applicable lending office of the Bank after the date
hereof, either entitled to submit a Form 1001 (relating to
the Bank and entitling it to a complete exemption from
withholding on all interest to be received by it hereunder
in respect of the Loan) or Form 4224 (relating to all
interest to be received by the Bank hereunder in respect of
the Loan), or
(ii) to any U.S. Tax imposed solely by reason of the
failure by such non-U.S. Person to comply with applicable
certification, information, documentation or other reporting
<PAGE> 120
requirements concerning the nationality, residence, identity
or connections with the United States of America of such
non-U.S. Person if such compliance is required by statute or
regulation of the United States of America as a precondition
to relief or exemption from such U.S. Tax.
For the purposes of this Section 2.09(a), (w) "Form 1001" shall
mean Form 1001 (Ownership, Exemption, or Reduced Rate
Certificate) of the Department of the Treasury of the United
States of America, (x) "Form 4224" shall mean Form 4224
(Exemption from Withholding of Tax on Income Effectively
Connected with the Conduct of a Trade or Business in the United
States) of the Department of the Treasury of the United States of
America (or in relation to either such Form such successor and
related forms as may from time to time be adopted by the relevant
taxing authorities of the United States of America to document a
claim to which such Form relates), (y) "U.S. Person" shall mean a
citizen, national or resident of the United States of America, a
corporation, partnership or other entity created or organized in
or under any laws of the United States of America, or any estate
or trust that is subject to Federal income taxation regardless of
the source of its income and (z) "U.S. Taxes" shall mean any
present or future tax, assessment or other charge or levy imposed
by or on behalf of the United States of America or any taxing
authority thereof or therein.
(b) Within 30 days after paying any amount to the Bank
from which it is required by law to make any deduction or
withholding, and within 30 days after it is required by law to
remit such deduction or withholding to any relevant taxing or
other authority, the Company shall deliver to the Bank evidence
satisfactory to the Bank of such deduction, withholding or
payment (as the case may be).
SECTION 2.10. Applicable Lending Office. If the Bank
requests compensation from the Company under any of Section
2.05(a), 2.05(c) or 2.09, the Bank will designate a different
applicable lending office for the portions of the Loan affected
by the events giving rise to such request for compensation if
such designation will avoid the need for, or reduce the amount
of, such compensation and will not, in the reasonable opinion of
the Bank, be disadvantageous to the Bank, except that the Bank
shall have no obligation to designate an applicable lending
office located in the United States of America.
SECTION 2.11. Net Payments. All payments under this
Agreement or the Note to the Bank (or any assignee of the Bank or
<PAGE> 121
Participant pursuant to Section 8.06) shall be made without
set-off or counterclaim.
ARTICLE III
CONDITIONS TO CLOSING
SECTION 3.01. Closing Documents. The obligation of
the Bank to execute this Agreement is subject to the conditions
precedent that on or before the date hereof, (i) the Bank shall
have received the following, each dated the date hereof, unless
otherwise specified below in form and substance satisfactory to
the Bank:
(a) the Note, duly executed and completed;
(b) certified copies of the restated articles of
incorporation and bylaws of the Company, a certified copy of
the resolutions of the Board of Directors of the Company
approving the Related Documents and the other matters
contemplated hereby and thereby, and of all other documents
evidencing any other necessary corporate action;
(c) a copy of a certificate of the Secretary of State
of Texas dated a date reasonably close to the date hereof
listing the articles of incorporation of the Company and
each amendment thereto on file in his office and certifying
that (A) such amendments are the only amendments to the
Company's articles of incorporation on file in his office
and (B) the Company is duly incorporated, validly existing
and in good standing under the laws of such State;
(d) a telegram from such Secretary of State or such
other evidence satisfactory to the Bank certifying that the
Company is duly incorporated, validly existing and in good
standing under the laws of such State on the date hereof;
(e) originals (or copies certified to be true copies
by an appropriate officer of the Company) of all
governmental and regulatory approvals (including, without
limitation, the Federal Energy Regulatory Commission and the
New Mexico Public Service Commission approvals) legally
required to be obtained on the Effective Date for the
Company to enter into the Related Documents and to carry out
the transactions contemplated thereby;
<PAGE> 122
(f) a certificate of the Secretary of the Company
certifying the incumbency and the names and true signatures
of the officers of the Company authorized to sign this
Agreement, the Note and the other documents to be delivered
by it hereunder, together with a certificate of another
officer of the Company as to the incumbency and specimen
signature of the Secretary of the Company;
(g) the Second Mortgage Bonds, Series Y-2, such series
having been duly completed, executed and pledged to the Bank
by the Company pursuant to Article VII and the Second
Mortgage Bond Indenture;
(h) evidence of the completion of all recordings and
filings of or with respect to the Second Mortgage Bond
Indenture that the Bank may deem necessary or desirable in
order to perfect the security interest created thereby;
(i) a certified copy of the Second Mortgage Bond
Indenture;
(j) a favorable opinion of Milbank, Tweed, Hadley &
McCloy, New York counsel for the Company (or other New York
counsel for the Company that is reasonably satisfactory to
the Bank), in form and substance reasonably satisfactory to
the Bank;
(k) a favorable opinion of Vinson & Elkins, Texas
counsel for the Company (or other Texas counsel for the
Company that is reasonably satisfactory to the Bank), in
form and substance reasonably satisfactory to the Bank;
(l) a favorable opinion of Stoops & Burns, Arizona
counsel for the Company (or other Arizona counsel for the
Company that is reasonably satisfactory to the Bank), in
form and substance reasonably satisfactory to the Bank;
(m) a favorable opinion of Taichert, Wiggins, Virtue,
Wilson & Najjar, New Mexico regulatory counsel for the
Company (or other New Mexico regulatory counsel for the
Company that is reasonably satisfactory to the Bank), in
form and substance reasonably satisfactory to the Bank;
(n) a favorable opinion of [Milbank, Tweed, Hadley &
McCloy], federal regulatory counsel for the Company (or
other federal regulatory counsel that is reasonably
satisfactory to the Bank), in form and substance reasonably
satisfactory to the Bank;
<PAGE> 123
(o) written evidence, satisfactory to the Bank, that
the First Mortgage Bonds, Series A/B, and the Second
Mortgage Bonds, Series A, have a rating of at least BBB- (or
equivalent rating) by at least two of Standard & Poor's
Corporation, Moody's Investors Service, Inc. and Duff &
Phelps, Inc.; and
(p) a certificate of the chairman, president or chief
financial officer of the Company, certifying (A) that the
Effective Date has occurred as of the time of delivery
thereof or will occur concurrently with the delivery thereof
and (B) that, after giving effect to the transactions
contemplated under the Plan of Reorganization: (x) no event
has occurred and is continuing which constitutes an Event of
Default or would constitute an Event of Default but for the
requirement that notice be given or the lapse of time or
both; and (y) the representations and warranties made by the
Company in Article IV hereof, and in each of the other
Related Documents, shall be true on and as of the Effective
Date with the same force and effect as if made on and as of
such date (or, if such representation or warranty is
expressly stated to have been made as of a specific date, as
of such specific date); and
(ii) the following shall have occurred:
(a) the Confirmation Order shall have been entered at
least 10 days prior to the date hereof, no stay of such
order shall be in effect and the Bank shall have received a
certified copy of such order;
(b) the Plan of Reorganization shall have been
substantially consummated without waiver of any condition or
other modification (other than waivers or modifications made
in accordance with Section 6.6 of the Plan of
Reorganization);
(c) the Effective Date shall have occurred or shall
occur substantially simultaneously with the delivery of this
Agreement and of the other Related Documents; and
(d) the Bank shall have received such other approvals,
opinions or documents as the Bank may reasonably request.
<PAGE> 124
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the
Company. The Company represents and warrants as follows:
(a) The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the
State of Texas and is duly qualified to do business in, and
is in good standing under the laws of, the States of Texas,
Arizona and New Mexico and has requisite corporate power and
authority, and all governmental licenses, authorizations and
approvals necessary, to conduct its business and to own its
properties, except where the failure to have the same would
not result in a Material Adverse Effect.
(b) The execution, delivery and performance by the
Company of this Agreement and the other Related Documents to
which it is a party are within the Company's corporate
powers, have been duly authorized by all necessary corporate
action, and do not contravene (i) the Company's articles of
incorporation or by-laws, which the Company has adopted
pursuant to the Plan of Reorganization or (ii) any law,
order, rule, regulation (including, without limitation, any
order, rule or regulation of the Federal Energy Regulatory
Commission, the New Mexico Public Service Commission or the
Public Utility Commission of Texas, or Regulation G, T, U or
X of the Board of Governors of the Federal Reserve System),
writ, judgment, injunction or decree applicable to the
Company or any contractual restriction binding on or
affecting the Company or any Subsidiary, and do not result
in or require the creation of any Lien of the Company or any
Subsidiary (except as provided in or contemplated by this
Agreement, the other Related Documents or the Plan of
Reorganization) upon or with respect to any properties of
the Company or any Subsidiary.
(c) No authorization or approval or other action by,
and no notice to or filing with, any governmental authority
or regulatory body is required for the due execution,
delivery and performance by the Company of this Agreement or
any other Related Document (including the issuance and
pledge of the Second Mortgage Bonds, Series Y-2 and the
creation and perfection of the Liens on the property
securing such Bonds) except for (i) those that have been
duly obtained or made and are in full force and effect and
are Final Approvals and (ii) the Confirmation Order.
<PAGE> 125
(d) This Agreement has been duly and validly executed
by the Company and constitutes, and the Note when delivered
hereunder will constitute, legal, valid and binding
obligations of the Company enforceable against the Company
in accordance with their respective terms.
(e) There is no pending or overtly threatened action,
investigation, proceeding or notification which has been
instituted after the Effective Date affecting the Company or
any of its Subsidiaries before any court, governmental
agency or arbitrator which is reasonably likely to have a
Material Adverse Effect.
(f) The Second Mortgage Bonds, Series Y-2 (i) have
been duly authorized, executed, authenticated, issued,
pledged and delivered in the manner provided for in the
Second Mortgage Bond Indenture and in compliance with all
applicable law; (ii) constitute the legal, valid and binding
obligations of the Company enforceable against the Company
in accordance with their terms and the terms of the Second
Mortgage Bond Indenture except insofar as enforceability may
be limited or otherwise affected by (a) bankruptcy,
insolvency, moratorium, reorganization or other similar laws
of general application relating to or affecting the rights
and remedies of creditors from time to time in effect and
(b) general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at
law); (iii) are entitled to the security and benefits of the
Second Mortgage Bond Indenture; (iv) are secured equally and
ratably with and only with all other bonds issued and
outstanding and which may hereafter and thereafter be issued
and outstanding under the Second Mortgage Bond Indenture;
(v) are secured by duly perfected Liens on and security
interests in the collateral purported to secure such bonds
in the Second Mortgage Bond Indenture which Liens are
subordinated in priority only to the Liens and security
interests granted under the First Mortgage Bond Indenture
and securing outstanding First Mortgage Bonds; and
(vi) constitute collateral security encumbered by valid,
duly perfected Liens thereon and security interests therein
securing the obligations of the Company under this Agreement
and the Note as purported to be provided in such indenture
and herein and in the Note. The Company has executed,
issued and delivered all Second Mortgage Bonds, Series Y-2
to the Bank and has made all such duly perfected pledges
thereof to the Bank as are required to be executed, issued,
delivered and made under this Agreement and there are no
other Liens on such Second Mortgage Bonds.
<PAGE> 126
(g) The Second Mortgage Bond Indenture creates a valid
and perfected second Lien on the Company's property as
described in the Second Mortgage Bond Indenture as
collateral security for the Company's obligations under the
Second Mortgage Bond Indenture and the Second Mortgage
Bonds, Series Y-2.
(h) The Company is not a "holding company" as such
term is defined in the Public Utility Holding Company Act of
1935, as amended, nor an "investment company", or a company
"controlled" by an "investment company", within the meaning
of the Investment Company Act of 1940, as amended.
(i) The Company and its Subsidiaries have filed all
United States federal and state income tax returns and all
other material tax returns which are required to be filed by
them, and have paid all taxes due pursuant to such returns
or, to the extent deemed necessary or appropriate by the
Company and such Subsidiary, provided reserves for the
payment thereof, other than such taxes that the Company or
any Subsidiary is contesting in good faith by appropriate
legal proceedings.
(j) The Company and the ERISA Affiliates have
fulfilled their respective obligations under the minimum
funding standards of ERISA and the Code with respect to each
Plan and are in compliance with the presently applicable
provisions of ERISA and the Code except where non-compliance
would not have a Material Adverse Effect, and have not
incurred any liability to the PBGC (other than to pay
premiums under Section 4007 of ERISA) or any Plan or any
Multiemployer Plan (other than to make contributions in the
ordinary course of business). No reportable event, within
the meaning of Section 4043 of ERISA, has occurred with
respect to any Plan, except for any such event as to which
the 30-day notice requirement has been waived by the PBGC.
Schedule B (Actuarial Information) to the most recently
filed annual report (Form 5500 Series) for each Plan is
complete and accurate and fairly presents the funding status
of such Plan, and since the date of such Schedule B there
has been no change in such funding status that can
reasonably be expected to have a Material Adverse Effect.
(k) No Material Adverse Effect has occurred since the
Effective Date.
(l) The Confirmation Order has been entered and has
not been reversed, amended (except as consented to by the
<PAGE> 127
Bank in its sole discretion), stayed, vacated or rescinded.
The Bank shall be entitled to enforce its remedies under
this Agreement without further application to or order by
the Bankruptcy Court.
(m) The operations and properties of the Company and
each of its Subsidiaries comply in all material respects
with all Environmental Laws, the Company and each of its
Subsidiaries possess and are in compliance with all
Environmental Permits and no circumstances exist that are or
would be reasonably likely to (i) form the basis of an
Environmental Action against the Company or any of its
Subsidiaries or any of their properties, or (ii) cause any
such property to be subject to any restriction on ownership,
occupation, use or transferability under any Environmental
Law, except as could not be likely to have a Material
Adverse Effect, and none of the property of the Company or
any of its Subsidiaries is listed or proposed for listing on
the National Priority List under CERCLA or any analogous
state list.
ARTICLE V
COVENANTS OF THE COMPANY
SECTION 5.01. Covenants of the Company. Until the
principal amount of the Loan and any accrued interest thereon is
paid in full and all other amounts payable by the Company
hereunder are paid in full, the Company agrees that, unless the
Bank shall otherwise agree in writing:
(a) Reporting Requirements. The Company shall deliver
to the Bank:
(i) as soon as available and in any event within
45 days after the end of each of the first three
quarterly fiscal periods of each fiscal year of the
Company, consolidated and consolidating statements of
income, retained earnings and cash flow of the Company
and its Consolidated Subsidiaries for such period and
for the period from the beginning of the respective
fiscal year to the end of such period, and the related
consolidated and consolidating balance sheets of the
Company and its Consolidated Subsidiaries at the end of
such period, setting forth in each case in comparative
form the corresponding consolidated and consolidating
figures for the corresponding period in the preceding
<PAGE> 128
fiscal year, accompanied by a certificate of a senior
financial officer of the Company, which certificate
shall state that said consolidated financial statements
fairly present the consolidated financial condition and
results of operations of the Company and its
Consolidated Subsidiaries, and said consolidating
financial statements fairly present the respective
individual unconsolidated financial condition and
results of operations of the Company and of each of its
Consolidated Subsidiaries, in each case in accordance
with GAAP, consistently applied, as at the end of, and
for, such period (subject to normal year-end audit
adjustments);
(ii) as soon as available and in any event within
90 days after the end of each fiscal year of the
Company, consolidated and consolidating statements of
income, retained earnings and cash flow of the Company
and its Consolidated Subsidiaries for such fiscal year
and the related consolidated and consolidating balance
sheets of the Company and its Consolidated Subsidiaries
as at the end of such fiscal year, setting forth in
each case in comparative form the corresponding
consolidated and consolidating figures for the
preceding fiscal year, and accompanied (i) in the case
of said consolidated statements and balance sheet of
the Company, by an opinion thereon of independent
certified public accountants of recognized national
standing, which opinion shall state that said
consolidated financial statements fairly present the
consolidated financial condition and results of
operations of the Company and its Consolidated
Subsidiaries as at the end of, and for, such fiscal
year in accordance with GAAP, consistently applied, and
a certificate of such accountants stating that, in
making the examination necessary for their opinion,
they obtained no knowledge, except as specifically
stated, of any failure by the Company to comply with
Section 5.01(e), (f) or (i)(xi), and (ii) in the case
of said consolidating statements and balance sheets, by
a certificate of a senior financial officer of the
Company, which certificate shall state that said
consolidating financial statements fairly present the
respective individual unconsolidated financial
condition and results of operations of the Company and
of each of its Consolidated Subsidiaries, in each case
in accordance with GAAP, consistently applied, as at
the end of, and for, such fiscal year;
<PAGE> 129
(iii) as soon as available copies of all proxy
statements, material reports and registration
statements which the Company or any of its Subsidiaries
files with the Securities and Exchange Commission or
any national securities exchange (other than filings
made pursuant to the Public Utility Holding Company Act
of 1935, as amended, public offerings of securities
under employee benefit plans, customer stock purchase
plans or dividend reinvestment plans);
(iv) as soon as possible and in any event within
two days after the Company has knowledge of the
occurrence of each Event of Default continuing on the
date of such statement, a statement from the chief
financial officer of the Company setting forth details
of such Event of Default and the action that the
Company has taken and proposes to take with respect
thereto;
(v) at the time the Company furnishes each set of
financial statements pursuant to paragraph (i) or (ii)
above, a certificate of a senior financial officer of
the Company setting forth in reasonable detail the
computations necessary to determine whether the Company
is in compliance with subsections (e), (f) and (i)(x)
of this Section 5.01 as of the end of the respective
quarterly fiscal period or fiscal year and stating that
no event has occurred and is continuing which
constitutes an Event of Default or would constitute an
Event of Default but for the requirement that notice be
given or the lapse of time or both or, if any such
event has occurred and is continuing, a statement as to
the nature thereof and the action that the Company has
taken or proposes to take with respect thereto; and
(vi) such other financial data and information of
the Company or any of its Subsidiaries as the Bank may
from time to time reasonably request.
(b) Litigation. The Company will promptly give to the
Bank notice of all actions, suits, investigations,
litigation or legal or arbitral proceedings, and of all
proceedings by or before any governmental or regulatory
authority or agency (and any material development in respect
of such legal or other proceedings), in each case, known to
the Company, which is reasonably likely to have a Material
Adverse Effect.
<PAGE> 130
(c) Preservation of Corporate Existence, Etc. The
Company will (i) preserve and maintain its corporate
existence in the state of its incorporation and qualify and
remain qualified as a foreign corporation in each
jurisdiction in which such qualification is reasonably
necessary in view of its business, and (ii) pay and
discharge, and cause its Subsidiaries to pay and discharge,
all taxes, assessments and governmental charges upon its
income and its properties prior to the date on which
penalties are attached thereto, unless (A) such taxes,
assessments and governmental charges shall be contested in
good faith and by appropriate proceedings by the Company or
its Subsidiaries and (B) the Company or any such Subsidiary
shall set aside on its books adequate reserves therefor to
the extent required by GAAP. Nothing contained in this
clause (c) of Section 5.01 shall be deemed to prohibit any
transaction permitted by clause (g) of this Section 5.01.
(d) Maintenance of Insurance, Etc. The Company will,
and will cause its Subsidiaries to, maintain insurance with
responsible insurance companies or associations or through
its own program of self-insurance in such amounts, with such
deductibles, and covering such risks as is usually carried
by companies engaged in similar business.
(e) EBITA to Interest Coverage Ratio. The Company
will not permit the Interest Coverage Ratio to be less than
1.40 to 1 at any time on or after the last day of the first
full fiscal quarter of the Company commencing after the
Effective Date.
(f) Leverage Ratio. The Company will not permit the
Leverage Ratio to exceed 0.68 to 1 at any time on or after
the last day of the first full fiscal quarter of the Company
commencing after the Effective Date.
(g) Prohibition of Fundamental Changes. The Company
will not, and will not permit any of its Subsidiaries to,
enter into any transaction of merger, consolidation,
amalgamation, liquidation or dissolution; provided that the
Company or any of its Subsidiaries may merge or consolidate
with any other Person if (i) in any such transaction in
which the Company is a party, the Company is the surviving
corporation or (ii) in any such transaction in which the
Company is not a party, the surviving corporation shall be a
Subsidiary of the Company, in each case so long as after
giving effect thereto no Event of Default would exist
hereunder. The Company will not, and will not permit any of
<PAGE> 131
its Subsidiaries to, convey, sell, lease, transfer or
otherwise dispose of, in one transaction or a series of
transactions, all or substantially all of its business or
assets, or assets (excluding (i) accounts receivable, (ii)
obsolete or worn-out tools, equipment or other property no
longer used or useful in its business and (iii) inventory or
other property sold or disposed of in the ordinary course of
business and on ordinary business terms) which in the
aggregate have a net book value in excess of $50,000,000,
whether now owned or hereafter acquired, to any other
Person. Notwithstanding the foregoing provisions of this
subsection (g):
(1) any Subsidiary of the Company may be merged
or consolidated with or into: (A) the Company if the
Company shall be the continuing or surviving
corporation or (B) any other Subsidiary of the Company;
and
(2) any Subsidiary of the Company may sell,
lease, transfer or otherwise dispose of any or all of
its property (upon voluntary liquidation or otherwise)
to the Company or a Subsidiary of the Company.
(h) Compliance with ERISA. The Company will not
(i) enter into any non-exempt prohibited transaction (as
defined in Section 4975 of the Code and in Section 406 of
ERISA) involving any Plan which may result in any liability
of the Company to any Person which (in the reasonable
opinion of the Bank) will have a Material Adverse Effect or
(ii) allow or suffer to exist any other event or condition
known to the Company which results in any liability of the
Company or any of its Subsidiaries to the PBGC, or in any
Withdrawal Liability to any Multiemployer Plan, which (in
the reasonable opinion of the Bank) will have a Material
Adverse Effect. For purposes of this Section 5.01(h),
"liability" shall not include termination insurance premiums
payable under Section 4007 of ERISA. Upon request of the
Bank, the Company shall promptly furnish to the Bank a copy
of Schedule B (Actuarial Information) to the most recently
filed annual report (Form 5500 Series) of any Plan.
(i) Limitation on Liens. The Company will not, nor
will it permit any of its Subsidiaries to, create, incur,
assume or suffer to exist any Lien upon or with respect to
any of its property, whether now owned or hereafter
acquired, except:
<PAGE> 132
(i) Liens created pursuant to the Related
Documents or pursuant to the First Mortgage Bond
Indenture or the Second Mortgage Bond Indenture;
(ii) Liens created or otherwise in existence on
the Effective Date or contemplated by the Plan of
Reorganization;
(iii) Liens imposed by any governmental authority
for taxes, assessments or charges not yet due or which
are being contested in good faith and by appropriate
proceedings if adequate reserves with respect thereto
are maintained on the books of the Company or the
affected Subsidiaries, as the case may be, in
accordance with GAAP;
(iv) carriers', warehousemen's, mechanics',
materialmen's, repairmen's or other like Liens arising
in the ordinary course of business which are not
overdue for a period of more than 60 days or which are
being contested in good faith and by appropriate
proceedings;
(v) pledges or deposits under worker's
compensation, unemployment insurance and other social
security legislation;
(vi) deposits to secure the performance of bids,
trade contracts (other than for borrowed money),
leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like
nature incurred in the ordinary course of business;
(vii) easements, rights-of-way, restrictions and
other similar encumbrances incurred in the ordinary
course of business and encumbrances consisting of
zoning restrictions, easements, licenses, restrictions
on the use of property or minor imperfections in title
thereto which, in the aggregate, are not material in
amount, and which do not in any case materially detract
from the value of the property subject thereto, render
title to the property encumbered thereby unmarketable,
materially adversely affect the use of such property
for its present purposes or interfere with the ordinary
conduct of the business of the Company or any of its
Subsidiaries;
<PAGE> 133
(viii) Liens on property of any corporation which
becomes a Subsidiary of the Company after the date of
this Agreement, provided that such Liens are in
existence at the time such corporation becomes a
Subsidiary of the Company and were not created in
anticipation thereof, provided further that such Liens
shall not extend to cover any property of the Company
or any of its other Subsidiaries and such Liens shall
not cover property of such Subsidiary other than
property of the types covered by the terms of such
Liens at the time such Subsidiary is acquired;
(ix) Liens upon real and/or tangible personal
property acquired after the Effective Date (by
purchase, construction or otherwise) by the Company or
any of its Subsidiaries, each of which Liens either
(A) existed on such property before the time of its
acquisition and was not created in anticipation
thereof, or (B) was created solely for the purpose of
securing Debt representing, or incurred to finance,
refinance or refund, the cost (including the cost of
construction) of such property; provided that no such
Lien shall extend to or cover any property of the
Company or such Subsidiary other than the property so
acquired and improvements thereon;
(x) banker's liens, rights of set-off and Liens
on documents presented under commercial letters of
credit, in each case granted to banks in accordance
with customary banking practices or arising by
operation of law;
(xi) additional Liens upon real and/or personal
property created after the date hereof, provided, that
on the date each such Lien is incurred, the lower of
(1) the fair market value of all property subject to
Liens permitted by this paragraph (xi) and not
otherwise permitted by this subsection (i) or (2) the
aggregate amount of all obligations secured by Liens
permitted by this paragraph (xi) and not otherwise
permitted by this subsection (i) shall not exceed 5% of
Total Capital on such date; and
(xii) any extension, renewal or replacement of the
foregoing, provided, however, that the Liens permitted
hereunder shall not be spread to cover any additional
Debt or property (other than a substitution of like
property).
<PAGE> 134
(j) Compliance with Laws, Etc. The Company will
comply, and cause each of its Subsidiaries to comply, in all
material respects, with all applicable laws, rules,
regulations and orders, such compliance to include, without
limitation, compliance with ERISA, except where the failure
to so comply would not have a Material Adverse Effect.
(k) Compliance with Environmental Laws. The Company
will comply, and cause each of its Subsidiaries and all
lessees and other Persons occupying or operating on its
properties to comply, in all material respects, with all
Environmental Laws and Environmental Permits applicable to
its operations and properties; obtain and renew all
Environmental Permits necessary for its operations and
properties; and conduct, and cause each of its Subsidiaries
to conduct, any investigation, study, sampling and testing,
and undertake any cleanup, removal, remedial or other action
required under any Environmental Law to remove and clean up
all Hazardous Materials from any of its properties, in
accordance with the requirements of all Environmental Laws;
provided, however, that neither the Company nor any of its
Subsidiaries shall be required to undertake any such
cleanup, removal, remedial or other action to the extent
that its obligation to do so is being contested in good
faith and by proper proceedings and reserves, where required
by GAAP, are being maintained with respect to such
circumstances.
(l) Visitation Rights. The Company will, at any
reasonable time and from time to time, permit the Bank or
any agents or representatives thereof, to examine and make
copies of and abstracts from the records and books of
account of, and examine the properties of, the Company and
any of its Subsidiaries, and to discuss the affairs,
finances and accounts of the Company and any of its
Subsidiaries with any of their officers or directors and
with their independent certified public accountants.
(m) Maintenance of Properties, Etc. The Company will
maintain and preserve, and cause each of its Subsidiaries to
maintain and preserve, all of its properties that are used
or useful in the conduct of its business in good working
order and condition, ordinary wear and tear excepted;
provided that this subsection (m) shall not prevent the sale
of any properties permitted by subsection (g) of this
Section 5.01.
<PAGE> 135
(n) Change in Nature of Business. The Company will
not make, or permit any of its Subsidiaries to make, any
material change in the nature of its business as carried on
at the date hereof.
(o) Lien. The Company shall maintain the Lien created
or purported to be created by the Second Mortgage Bond
Indenture for the benefit of the Bank and defend, preserve
and protect such Lien against all claims of all Persons.
(p) Maintain Books and Records. The Company shall
keep adequate records and books of account, in which
complete entries will be made in accordance with GAAP
consistently applied.
(q) Additional Documents. As promptly as practicable
(but in any event not later than 30 days) after the
Effective Date, the Company will furnish to the Bank, (i)
certified copies of the recorded counterparts of the First
Mortgage Bond Indenture and evidencing the filing thereof
and (ii) certified copies of all notices filed with respect
to the First Mortgage Bond Indenture.
(r) Creation of Subsidiaries. The Company shall not,
and shall not permit any of its Subsidiaries to, create any
Subsidiaries of the Company or make any investment in any
Person except in compliance with the Public Utility Holding
Company Act of 1935, as amended, and the regulations and
orders of the Securities and Exchange Commission thereunder.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the
following events ("Events of Default") shall occur and be
continuing:
(a) The Company shall default in the payment when due
of any principal of the Loan; or
(b) The Company shall default in the payment when due
of any interest on the Loan or any other amount payable by
it hereunder and such default shall continue unremedied for
five Business Days; or
<PAGE> 136
(c) The Company or any of its Subsidiaries shall
default in the payment when due of any principal of or any
interest on any Debt aggregating $10,000,000 or more, or
fail to observe or perform any material term, covenant or
agreement contained in any agreement by which it is bound,
evidencing or securing Debt, in an aggregate amount of
$10,000,000 or more, or any other event shall occur or
condition shall exist under any agreement or instrument
relating to any such Debt, after the giving of any required
notice and for such period of time as would permit the
holder or holders thereof or of any obligations issued
thereunder to accelerate the maturity thereof, unless such
failure or event or condition shall have been cured by the
Company or such Subsidiary, as the case may be, or
effectively waived by such holder or holders; or
(d) Any representation, warranty or certification made
or deemed made in any Related Document by the Company (or
any of its officers), or any certificate furnished to the
Bank pursuant to the provisions thereof, shall prove to have
been false or misleading as of the time made or furnished in
any material respect; or
(e) The Company shall default in the performance of
any of its obligations under clause (a)(vi) of Section 5.01
or clauses (e), (f), (g), or (n) of Section 5.01; or a
consensual Lien shall be created by the Company or any of
its Subsidiaries in violation of Section 5.01(i); or the
Company shall default in its performance of any of its other
obligations under this Agreement or under any other Related
Document and such default in the performance of any such
other obligation shall continue unremedied for a period of
15 days after notice thereof to the Company by the Bank; or
(f) There shall remain in force, undischarged,
unsatisfied and unstayed, for more than 30 days, whether or
not consecutive, any final judgment against the Company or
any of its Material Subsidiaries that, together with other
outstanding final judgments, undischarged, against the
Company and all of its Material Subsidiaries exceeds in the
aggregate $10,000,000 (for the purposes hereof, the term
"final judgment" shall mean a judgment which is not subject
to appeal); or
(g) The Company or any of its Material Subsidiaries
shall make a general assignment for the benefit of
creditors, or admit in writing its inability to pay or
generally fail to pay its debts as they mature or become
<PAGE> 137
due, or shall petition or apply for the appointment of a
trustee or other custodian, liquidator or receiver of the
Company or any of its Material Subsidiaries, as the case may
be, or any substantial part of its respective assets; or the
Company or any of its Material Subsidiaries shall commence
any case or other proceeding relating to the Company or any
of its Material Subsidiaries under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of
debt, dissolution or liquidation or similar law of any
jurisdiction, now or hereafter in effect, or the Company or
any of its Material Subsidiaries shall take any action to
authorize or in furtherance of any of the foregoing; or if
any such petition or application shall be filed or any such
case or other proceeding shall be commenced against the
Company or any of its Material Subsidiaries and the Company
or any of its Material Subsidiaries shall indicate its
approval thereof, consent thereto or acquiescence therein or
such petition or application shall not be dismissed on or
before the 60th day after the filing thereof; or
(h) A decree or order is entered appointing any
trustee, custodian, liquidator or receiver or adjudicating
the Company or any of its Material Subsidiaries bankrupt or
insolvent, or approving a petition in any such case or other
proceeding, or a decree or order for relief is entered in
respect of the Company or any of its Material Subsidiaries
in an involuntary case under federal bankruptcy laws as now
or hereafter reconstituted; or
(i) There shall have been asserted against the Company
by a Governmental Person or other Person, a written
complaint, claim or demand asserting any claims or
liabilities, whether accrued, absolute or contingent, based
on or arising from the presence, release or disposal of
Hazardous Materials by the Company or any of its
Subsidiaries that is reasonably likely to be determined
adversely to the Company or any of its Subsidiaries, and the
amount thereof (either individually or in the aggregate)
would, in such event, have a Material Adverse Effect (after
deducting any portion thereof that is reasonably expected to
be paid by other creditworthy Persons); or
(j) The Confirmation Order shall be (i) reversed,
revoked or vacated in whole or in part by any Final Order of
a court of competent jurisdiction, or (ii) modified in a
manner or subjected to a stay that adversely affects the
Company's ability to perform any of its obligations
<PAGE> 138
hereunder, as determined by the Bank in its sole discretion;
or
(k) Central and South West Corporation shall cease
directly or indirectly, to own (or otherwise shall cease,
directly or indirectly, to control the voting rights of) at
least 51% of the Voting Stock of the Company; or
(l) Any "Event of Default" under and as defined in the
Related Documents shall have occurred and be continuing; or
(m) Any regulatory approval as set forth in
Section 3.01(e) or required to consummate the Plan of
Reorganization shall be rescinded if such rescission can not
be appealed by the Company and has a Material Adverse Effect
on the Company; or
(n) Any material provision of this Agreement or any
other Related Document shall at any time cease to be a
valid, binding obligation of the Company enforceable against
the Company, or any such agreement shall be declared to be
null and void, or the validity or enforceability thereof
shall be contested by the Company, or a proceeding shall be
commenced by any Governmental Person having jurisdiction
over the Company seeking to establish the invalidity or
unenforceability thereof, or the Company shall deny that it
has any further liability or obligation under this Agreement
or the Note or any other Related Document after delivery
thereof or the Second Mortgage Bond Indenture shall for any
reason (other than pursuant to the terms thereof) cease to
create a valid and perfected second priority Lien on the
Company's property purported to be secured thereby;
then, and in any such event, the Bank may, by notice to the
Company, declare the Note, all interest thereon and all other
amounts payable under this Agreement to be forthwith due and
payable, whereupon the Note, all such interest and all such
amounts shall become and be forthwith due and payable, without
presentment, demand, protest, or further notice of any kind, all
of which are hereby expressly waived by the Company; provided,
however, that, in the event of the occurrence of an Event of
Default pursuant to subsections (g) or (h) of this Section 6.01,
the Note, all interest thereon and all other amounts payable
under this Agreement shall automatically become and be due and
payable, without presentment, demand, protest or any notice of
any kind, all of which are hereby expressly waived by the
Company.
<PAGE> 139
ARTICLE VII
SECURITY
SECTION 7.01. Issuance and Pledge of Bonds.
Concurrently with the execution of this Agreement and delivery of
the Note, the Company shall execute, issue, and deliver to the
Bank the Second Mortgage Bonds, Series Y-2 as security for the
payment of all obligations of the Company now or hereafter
existing under this Agreement or the Note in respect of principal
and interest, pursuant to and on the terms of this Agreement, the
Note and of the Second Mortgage Bond Indenture. The Company
hereby pledges to the Bank and grants to the Bank a security
interest in the Second Mortgage Bonds, Series Y-2 and all
interest, cash, instruments and other property from time to time
received, receivable or otherwise distributed in respect of or in
exchange for any or all of such Bonds and proceeds of any and all
of the foregoing.
SECTION 7.02. Application of Moneys. Any moneys
received by the Bank on account of the Second Mortgage Bonds,
Series Y-2 shall be applied as follows: (a) moneys received on
account of principal of the Second Mortgage Bonds, Series Y-2
shall be applied to the payment of any unpaid principal of the
Note then due and owing and (b) moneys received on account of
interest on the Second Mortgage Bonds, Series Y-2 shall be
applied to the payment of any accrued and unpaid interest on the
Note then due and owing.
SECTION 7.03. Rights of Bondholders. The Bank, as
holder of the Second Mortgage Bonds, Series Y-2 shall have only
such rights provided to holders of bonds in the Second Mortgage
Bond Indenture. Without limiting the generality of the
foregoing, (a) the Second Mortgage Bonds, Series Y-2 may not be
sold, assigned, pledged or otherwise transferred by the Bank,
whether pursuant to the Uniform Commercial Code after an Event of
Default or otherwise except in connection with any assignment of
the Bank's rights and obligations under this Agreement and of the
Note as provided for herein and (b) no payment of principal of or
interest on the Second Mortgage Bonds, Series Y-2, or any other
amount payable thereunder, shall be demanded or received except
if, and to the extent that, the corresponding payment remains
unpaid hereunder or under the Note. To the extent that moneys
recovered from the Second Mortgage Bonds, Series Y-2, are
insufficient to pay in full the amount of principal and interest
due on the Note and other amounts due hereunder, the Company
shall remain liable for any such deficiency under the terms of
this Agreement and the Note.
<PAGE> 140
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. No amendment or waiver
of any provision of this Agreement or the Note, nor consent to
any departure by the Company therefrom, shall in any event be
effective unless the same shall be in writing and signed by the
Bank, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which
given.
SECTION 8.02. Notices, Etc. All notices and other
communications provided for hereunder shall be in writing
(including telecopier, telegraphic, telex or cable communication)
and mailed, telecopied, telegraphed, telexed, cabled or
delivered, if to the Company, at its address at
_____________________________________________________________,
Attention:_______________________, telex No. _________ and in the
case of telecopier ___ ___________; and if to the Bank, at its
address at ______________________________, Attention:
___________________ Department, ________________ Group, telex No.
_______ and telecopier to (212) ____________; or, as to each
party, at such other address as shall be designated by such party
in a written notice to the other party. All such notices and
communications shall, when mailed, telecopied, telegraphed,
telexed or cabled, be effective when deposited in the mails,
telecopied, delivered to the telegraph company, confirmed by
telex answerback or delivered to the cable company, respectively,
except that notices to the Bank pursuant to the provisions of
Article II shall not be effective until received by the Bank.
SECTION 8.03. No Waiver; Remedies. No failure on the
part of the Bank to exercise, and no delay in exercising, any
right hereunder or under the Note 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 provided in this
Agreement are cumulative and not exclusive of any remedies
provided by law.
SECTION 8.04. Costs, Expenses and Taxes. The Company
agrees to pay on demand all costs and expenses in connection with
the preparation, execution, delivery, administration (except
normal administrative costs and fees and expenses of counsel
related thereto prior to an Event of Default), modification and
amendment of this Agreement, the Note and any other documents to
<PAGE> 141
be delivered hereunder, including, without limitation, the
reasonable fees and out-of-pocket expenses of counsel for the
Bank, and local counsel who may be retained by said counsel, with
respect thereto, with respect to advising the Bank as to its
rights and responsibilities, or the perfection or preservation of
rights or interests, under this Agreement, any other Related
Document and such other documents which may be delivered in
connection with this Agreement, with respect to negotiations with
the Company or with other creditors of the Company, any Person
controlling the Company or any of the Company's Subsidiaries
arising out of any Event of Default or any events or
circumstances that may give rise to an Event of Default and with
respect to presenting claims in or otherwise participating in or
monitoring any bankruptcy, insolvency or other similar proceeding
involving creditor's rights generally and any proceeding
ancillary thereto or in connection with the negotiation of any
restructuring or "work-out" (whether or not consummated). The
Company further agrees to pay on demand all costs and expenses
(including reasonable counsel fees and expenses), in connection
with the enforcement (whether through negotiations, legal
proceedings or otherwise) of this Agreement, the Note, and any
other Related Document and any other documents to be delivered
hereunder, including, without limitation, reasonable counsel fees
and expenses in connection with the enforcement of rights under
this Section 8.04. In addition, the Company shall pay any and
all stamp and other administrative taxes and fees payable or
determined to be payable in connection with the execution and
delivery of this Agreement, the Note, any other Related Document
or any other documents to be delivered hereunder, and agrees to
save the Bank harmless from and against any and all liabilities
with respect to or resulting from any delay in paying or omission
to pay such taxes and fees.
SECTION 8.05. Right of Set-off. Upon the occurrence
and during the continuance of any Event of Default the 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 the Bank to or for the credit or the account of the Company
against any and all of the obligations of the Company now or
hereafter existing under this Agreement, the Note or any other
Related Document, whether or not the Bank shall have made any
demand under this Agreement or the Note and although such
obligations may be contingent or unmatured.
The Bank agrees promptly to notify the Company after
any such set-off and application, provided that the failure to
<PAGE> 142
give such notice shall not affect the validity of such set-off
and application. The rights of the Bank under this Section are
in addition to other rights and remedies (including, without
limitation, other rights of set-off) which the Bank may have.
SECTION 8.06. Binding Effect; Assignments and
Participations. (a) This Agreement shall become effective when
it shall have been executed by the Company and the Bank and
thereafter shall be binding upon and inure to the benefit of the
Company and the Bank and their respective successors and assigns,
except that the Company shall not have the right to assign its
rights hereunder or any interest herein without the prior written
consent of the Bank. The Bank may assign to any Eligible
Institution all, but not less than all, of the Bank's rights and
benefits under this Agreement, the Note and the other Related
Documents, and to the extent of that assignment such assignee
shall have the same rights and benefits against the Company
hereunder and under the other Related Documents as it would have
had if such assignee were the Bank, except that, if the assignee
is not a commercial bank, the Alternate Base Rate and the LIBO
Rate shall be calculated as if such assignee were the Bank listed
on the signature page.
(b) The Bank may sell or agree to sell, to (i) any
Eligible Institution (each such Eligible Institution being an
"Eligible Participant") or (ii) to one or more other Persons
(each a "Restricted Participant"; and together with any Eligible
Participants being referred to herein as a "Participant"), a
participation in all or any part of the Loan. Each Participant
shall be entitled to the rights and benefits of the provisions of
Section 5.01(a)(vi) with respect to its participation in such
Loan as if (and the Company shall be directly obligated to such
Participant under such provisions as if) such Participant were
the "Bank" for purposes of said Section, but, except as set forth
below, shall not have any other rights or benefits under this
Agreement, the Note or any other Related Document (the
Participant's rights against the Bank in respect of such
participation to be those set forth in the agreements executed by
the Bank in favor of the Participant). All amounts payable by
the Company to the Bank under Section 2.05 and 2.09 in respect of
the Loan shall be determined as if the Bank had not sold or
agreed to sell any participations in the Loan, and as if the Bank
were maintaining the Loan in the same way that it is maintaining
the portion of the Loan in which no participations have been
sold. In the case of an Eligible Participant, the Bank may agree
with such Participant to take or refrain from taking action
hereunder or under any Related Document as the Bank and such
Participant shall determine, as set forth in the agreement
<PAGE> 143
executed by the Bank in favor of such Participant. In no event
shall the Bank agree with any Restricted Participant to take or
refrain from taking any action hereunder or under any other
Related Document except that the Bank may agree with a Restricted
Participant that it will not, without the consent of such
Restricted Participant, agree to (i) extend the date fixed for
the payment of principal of or interest on the Loan payable to
such Restricted Participant, (ii) reduce the amount of any such
payment of principal, (iii) reduce the rate at which interest is
payable thereon to a level below the rate at which such
Restricted Participant is entitled to receive such interest,
(iv) alter the rights or obligations of the Company to prepay the
Loan, or (v) release any collateral, including, without
limitation, the Second Mortgage Bonds, Series Y-2.
(c) Notwithstanding any other provision set forth in
this Agreement, the Bank may at any time create a security
interest in all or any portion of its rights under this
Agreement, the Note and the other Related Documents (including,
without limitation, the Loan owing to it) in favor of any Federal
Reserve Bank in accordance with Regulation A of the Board of
Governors of the Federal Reserve System.
SECTION 8.07. Indemnity. The Company hereby
indemnifies and holds the Bank and each Participant and each of
their Affiliates and their officers, directors, employees, agents
and advisors (each, an "Indemnified Party") harmless from and
against any and all claims, damages, losses, liabilities and
expenses (including, without limitation, reasonable fees and
expenses of counsel) that may be incurred by or asserted or
awarded against any Indemnified Party (except to the extent any
such claim, damage, loss, liability or expense is found in a
final, non-appealable judgment by a court of competent
jurisdiction to have resulted from such Indemnified Party's gross
negligence or willful misconduct), in each case relating to or
arising out of or in connection with or by reason of:
(i) any representation, warranty or certification made
or deemed made in this Agreement or in any Note by the
Company (or any of its officers), or any certificate
furnished to the Bank pursuant to the provisions hereof or
thereof, proving to have been false or misleading as of the
time made or furnished in any material respect;
(ii) any case or proceeding pursuant to any bankruptcy,
insolvency, reorganization, moratorium or similar law or any
restructuring of the Company; or
<PAGE> 144
(iii) any cost or liability under any Environmental Law
arising out of the operations or assets of the Company.
SECTION 8.08. Further Assurances. The Company agrees
promptly to do such further acts and things, and to execute and
deliver such additional instruments (including, without
limitation, notices), at its own expense, as the Bank may at any
time reasonably request in order better to insure and confirm the
Bank's rights, powers and remedies hereunder and under the other
Related Documents (including in order to perfect or protect any
pledge or security interest granted or purported to be granted
hereby or to enable the Bank to exercise or enforce its rights
and remedies in respect hereof).
SECTION 8.09. Severability. Any provision of this
Agreement which is prohibited, unenforceable or not authorized in
any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition, unenforceability or
non-authorization without invalidating the remaining provisions
hereof or affecting the validity, enforceability or legality of
such provision in any other jurisdiction.
SECTION 8.10. Headings. Section headings in this
Agreement are included herein for convenience of reference only
and shall not constitute a part of this Agreement for any other
purpose.
SECTION 8.11. GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK, WITHOUT GIVING EFFECT TO CONFLICT OF LAW
PRINCIPLES.
SECTION 8.12. SUBMISSION TO JURISDICTION. THE COMPANY
HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND
OF ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY FOR THE
PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO
THIS AGREEMENT, THE NOTE, THE OTHER RELATED DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY OR THE ACTIONS OR
OMISSIONS OF THE BANK IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE OR ENFORCEMENT OF THIS AGREEMENT OR THE NOTE OR THE
OTHER RELATED DOCUMENTS. THE COMPANY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH
PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH
PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
<PAGE> 145
TO THE EXTENT THAT THE COMPANY HAS OR HEREAFTER MAY
ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY
LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT
PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE)
WITH RESPECT TO ITSELF OR ITS PROPERTY, THE COMPANY HEREBY
IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS
UNDER THIS AGREEMENT AND THE OTHER RELATED DOCUMENTS. THE
COMPANY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY
REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN
OR WITHOUT THE STATE OF TEXAS.
SECTION 8.13. WAIVER OF TRIAL BY JURY. EACH OF THE
COMPANY AND THE BANK HEREBY IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN
ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT, THE NOTE, THE OTHER RELATED DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. THE COMPANY
ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT
CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF
EACH OTHER RELATED DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE BANK ENTERING INTO
THIS AGREEMENT AND EACH SUCH OTHER RELATED DOCUMENT.
SECTION 8.14. 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.
SECTION 8.15. INTEGRATION. THIS AGREEMENT REPRESENTS
THE FINAL AGREEMENT BETWEEN THE PARTIES HERETO AS TO THE SUBJECT
MATTER OF THIS AGREEMENT AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES HERETO.
SECTION 8.16. Survival. The obligations of the
Company under Sections 2.05, 2.09, 8.07, 8.12 and 8.13 shall
survive the repayment of the Loans and the payment in full of all
amounts payable by the Company under Section 8.04.
<PAGE> 146
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.
EL PASO ELECTRIC COMPANY
By
Title:
CREDIT SUISSE
By
Vice President
<PAGE> 147
EXHIBIT A
PROMISSORY NOTE
$___________________________ Dated:_________________, 19____
FOR VALUE RECEIVED, the undersigned, EL PASO ELECTRIC
COMPANY, a Texas corporation (the "Company"), HEREBY PROMISES TO
PAY to the order of CREDIT SUISSE (the "Bank") the principal sum
of $[amount of the Loan in figures] (the "Loan") at the time and
in the manner provided in the Term Loan Agreement referred to
below.
The Company promises to pay interest on the principal
amount of the Loan from the date hereof until such principal
amount is paid in full, at such interest rates, and payable at
such times, as are specified in the Term Loan Agreement referred
to below.
Both principal and interest are payable in lawful money
of the United States of America to the Bank at __________________
_____________________________________ in same day funds. All
payments made on account of the principal amount hereof shall be
recorded by the Bank in its books and records and, prior to any
transfer hereof, endorsed on the grid attached hereto which is a
part of this Promissory Note. The failure by the Bank to make
any such recordation on its books and records shall not limit or
otherwise affect the obligations of the Company hereunder or
under the Term Loan Agreement referred to below.
This Promissory Note is the Note referred to in, and is
entitled to the benefits of, the Term Loan Agreement dated as of
____________, 19___ (the "Term Loan Agreement"), between the
Company and the Bank. The Term Loan Agreement, among other
things, contains provisions for acceleration of the maturity
hereof upon the happening of certain stated events and also for
prepayments on account of principal hereof prior to the maturity
hereof upon the terms and conditions therein specified.
This Promissory Note is secured by the Second Mortgage
Bonds, Series Y-2, referred to in the Term Loan Agreement.
EL PASO ELECTRIC COMPANY
By
Title:
<PAGE> 148
PAYMENTS OF PRINCIPAL
- -----------------------------------------------------------------
> Amount of > >
> Principal Paid > Unpaid Principal > Notation
Date > or Prepaid > Balance > Made By
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
<PAGE> 149
[DRAFT 11/03/93]
TERM LOAN AGREEMENT
dated as of , 199
between
EL PASO ELECTRIC COMPANY
and
WESTPAC BANKING CORPORATION
<PAGE> 150
TABLE OF CONTENTS
Page No.
PRELIMINARY STATEMENTS . . . . . . . . . . . . . . . . . . . . .1
Article I. DEFINITIONS . . . . . . . . . . . . . . . . . . .2
SECTION 1.1. Definitions . . . . . . . . . . . . . . . . . . .2
SECTION 1.2. Computation of Time Periods . . . . . . . . . . 10
SECTION 1.3. Accounting Terms. . . . . . . . . . . . . . . . 10
SECTION 1.4. Interpretation. . . . . . . . . . . . . . . . . 10
ARTICLE II. AMOUNTS AND TERMS OF THE LOAN . . . . . . . . . 10
SECTION 2.1. The Loan. . . . . . . . . . . . . . . . . . . . 10
SECTION 2.2. Repayment . . . . . . . . . . . . . . . . . . . 11
SECTION 2.3. Interest. . . . . . . . . . . . . . . . . . . . 11
SECTION 2.4. Prepayments . . . . . . . . . . . . . . . . . . 12
SECTION 2.5. Increased Costs, Etc. . . . . . . . . . . . . . 13
SECTION 2.6. Interest Rate Protection. . . . . . . . . . . . 15
SECTION 2.7. Illegality, Etc . . . . . . . . . . . . . . . . 15
SECTION 2.8. Payments and Computations . . . . . . . . . . . 15
SECTION 2.9. U.S. Taxes. . . . . . . . . . . . . . . . . . . 16
SECTION 2.10. Applicable Lending Office . . . . . . . . . . . 17
SECTION 2.11. Net Payments. . . . . . . . . . . . . . . . . . 17
ARTICLE III. CONDITIONS TO CLOSING . . . . . . . . . . . . . 17
SECTION 3.1. Closing Documents . . . . . . . . . . . . . . . 17
ARTICLE IV. REPRESENTATIONS AND WARRANTIES. . . . . . . . . 20
SECTION 4.1. Representations and Warranties of the Company . 20
ARTICLE V. COVENANTS OF THE COMPANY. . . . . . . . . . . . 23
SECTION 5.1. Covenants of the Company. . . . . . . . . . . . 23
ARTICLE VI. EVENTS OF DEFAULT . . . . . . . . . . . . . . . 29
SECTION 6.1. Events of Default . . . . . . . . . . . . . . . 29
ARTICLE VII. SECURITY. . . . . . . . . . . . . . . . . . . . 32
SECTION 7.1. Issuance and Pledge of Bonds. . . . . . . . . . 32
SECTION 7.2. Application of Moneys . . . . . . . . . . . . . 32
SECTION 7.3. Rights of Bondholders . . . . . . . . . . . . . 32
ARTICLE VIII. MISCELLANEOUS . . . . . . . . . . . . . . . . . 32
SECTION 8.1. Amendments, Etc . . . . . . . . . . . . . . . . 32
SECTION 8.2. Notices, Etc. . . . . . . . . . . . . . . . . . 33
SECTION 8.3. No Waiver; Remedies . . . . . . . . . . . . . . 33
SECTION 8.4. Costs, Expenses and Taxes . . . . . . . . . . . 33
i
<PAGE> 151
SECTION 8.5. Right of Set-off. . . . . . . . . . . . . . . . 34
SECTION 8.6. Binding Effect; Assignments and Participations. 34
SECTION 8.7. Indemnity . . . . . . . . . . . . . . . . . . . 35
SECTION 8.8. Further Assurances. . . . . . . . . . . . . . . 36
SECTION 8.9. Severability. . . . . . . . . . . . . . . . . . 36
SECTION 8.10. Headings. . . . . . . . . . . . . . . . . . . . 36
SECTION 8.11. GOVERNING LAW . . . . . . . . . . . . . . . . . 36
SECTION 8.12. SUBMISSION TO JURISDICTION. . . . . . . . . . . 36
SECTION 8.13. WAIVER OF TRIAL BY JURY . . . . . . . . . . . . 37
SECTION 8.14. Counterparts. . . . . . . . . . . . . . . . . . 37
SECTION 8.15. INTEGRATION . . . . . . . . . . . . . . . . . . 37
SECTION 8.16. Survival. . . . . . . . . . . . . . . . . . . . 37
SECTION 8.17. Change in Lending Office. . . . . . . . . . . . 37
EXHIBITS
EXHIBIT A PROMISSORY NOTE
ii
<PAGE> 152
TERM LOAN AGREEMENT
TERM LOAN AGREEMENT, dated as of [the Effective Date],
between El Paso Electric Company, a Texas corporation (the
"Company"), and Westpac Banking Corporation (the "Bank").
PRELIMINARY STATEMENTS:
(1) On January 8, 1992, the Company commenced a
voluntary case (the "Bankruptcy Case") under chapter 11 of the
Bankruptcy Code (as hereinafter defined) (Case No. 92-10148-FM)
in the Bankruptcy Court (as hereinafter defined), and thereafter
has continued to operate its business and manage its assets as a
debtor-in-possession.
(2) Among the claims filed against the Company in the
Bankruptcy Case were those of the Bank in respect of the Letter
of Credit and Reimbursement Agreement, dated as of August 1,
1985, between the Company and the Bank (the "Claim").
(3) On [ , 199 ], an order was
entered by the court having jurisdiction over the Bankruptcy Case
(the "Bankruptcy Court") confirming the Plan of Reorganization
(as hereinafter defined), which Plan of Reorganization provided,
among other things, for the Company to enter into this Agreement
with the Bank.
(4) Pursuant to Section 3.7(A) of the Plan of
Reorganization and in accordance with the terms thereof and to
the extent provided therein the Claim is to be discharged and
satisfied by the execution and delivery by the Company of this
Agreement, which Agreement provides, among other things, for the
execution and delivery by the Company to the Bank of the Note (as
hereinafter defined), which Note shall be secured by the Second
Mortgage Bonds, Series Y[-3] (as hereinafter defined).
NOW, THEREFORE, in consideration of the premises and of
the mutual covenants and agreements contained in the Plan of
Reorganization and herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions. As used in this Agreement,
the following terms have the following meanings:
"Affiliate" means, as to any Person, any other Person
that, directly or indirectly, controls, is controlled by or
is under common control with such Person or is a director or
officer of such Person. For purposes of this definition,
the term "control" (including the terms "controlling,"
"controlled by" and "under common control with") of a Person
<PAGE> 153
means the possession, direct or indirect, of the power to
vote 5% or more of the Voting Stock of such Person or to
direct or cause the direction of the management and policies
of such Person, whether through the ownership of Voting
Stock, by contract or otherwise.
"Alternate Base Rate" means for each day that interest
rate per annum as shall be equal to the higher of:
(i) the rate of interest established by the Bank in
New York, New York, from time to time as the Bank's base
rate in effect on such day, each change in such rate to be
effective as of the Bank's opening of business on the date
such change occurs (extensions of credit made by the Bank
may bear interest at rates below, equal to or above such
rate); or
(ii) the sum of (x) one percent and (y) the Fed Funds
Rate on such day.
"Alternate Base Rate Loan" means the portion of the
Loan which bears interest as provided in Section 2.3(a).
"Banking Institution" means any financial institution
subject to regulation under Regulation D of the Board of
Governors of the Federal Reserve System and any other
banking institution or trust company or similar organization
incorporated or organized under the laws of a country other
than the United States, or a political subdivision of a
country other than the United States.
"Bankruptcy Case" has the meaning assigned to that term
in Preliminary Statement (1).
"Bankruptcy Code" means the Bankruptcy Reform Act of
1978, as heretofore and hereafter amended, and codified as
title 11 of the United States Code.
"Bankruptcy Court" has the meaning assigned to that
term in Preliminary Statement (3).
"Business Day" means a day of the year on which banks
are not required or authorized to close in New York City
and, if the applicable Business Day relates to any
Eurodollar Loans, on which dealings are carried on in the
London interbank market.
"Capital Lease Obligation" means, with respect to any
lease of property which, in accordance with GAAP, appears on
the lessee's balance sheet as a capital lease, the amount of
the liability which should appear on such balance sheet.
"CERCLA" means the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended
<PAGE> 154
from time to time.
"Claim" has the meaning assigned to that term in
Preliminary Statement (2).
"Code" means the Internal Revenue Code of 1986, as
amended from time to time.
"Confirmation Order" means the order of the Bankruptcy
Court confirming the Plan of Reorganization.
"Consolidated Subsidiary" means, for any Person, each
Subsidiary of such Person (whether now existing or hereafter
created or acquired) the financial statements of which shall
be (or should have been) consolidated with the financial
statements of such Person in accordance with GAAP.
"Debt" of any Person means, without duplication,
(a) all indebtedness of such Person for borrowed money or
for the deferred purchase price of property or services
(including without limitation, all obligations, contingent
or otherwise, of such Person in connection with acceptance
facilities (other than acceptance facilities entered into in
connection with normal course commercial trade transactions)
and letter of credit facilities to the extent such letter of
credit facilities support Debt), (b) all obligations of such
Person evidenced by notes, bonds, debentures or other
similar instruments, (c) all obligations of such Person
created or arising under any conditional sale or other title
retention agreement with respect to property acquired by
such Person, (d) all Capitalized Lease Obligations of such
Person, (e) all obligations of such Person to purchase,
redeem, retire, defease or otherwise make any payment in
respect of any capital stock of or other ownership or profit
interest in such Person or any other Person or any warrants,
rights or options to acquire such capital stock, valued, in
the case of preferred stock, at the greater of its voluntary
or involuntary liquidation preference plus accrued and
unpaid dividends, (f) all Debt of others referred to in
clauses (a) through (e) above guaranteed directly or
indirectly in any manner by such Person, or in effect
guaranteed directly or indirectly by such Person through an
agreement (i) to pay or purchase such Debt or to advance or
supply funds for the payment or purchase of such Debt,
(ii) to purchase, sell or lease (as lessee or lessor)
property, or to purchase or sell services, primarily for the
purpose of enabling the debtor to make payment of such Debt
or to assure the holder of such Debt against loss, (iii) to
supply funds to or in any other manner invest in the debtor
(including any agreement to pay for property or services
irrespective of whether such property is received or such
services are rendered) or (iv) otherwise to assure a
creditor against loss, and (g) all Debt referred to in
clauses (a) through (e) above secured by (or for which the
<PAGE> 155
holder of such Debt has an existing right, contingent or
otherwise, to be secured by) any Lien on property
(including, without limitation, accounts and contract
rights) owned by such Person, even though such Person has
not assumed or become liable for the payment of such Debt.
In cases where recourse to any Person or any of its
properties in respect of Debt is limited, the amount of such
Debt of such Person for purposes hereof shall be so limited.
"EBITA" means, for any period, the sum, for the Company
and its Consolidated Subsidiaries (determined on a
consolidated basis without duplication in accordance with
GAAP), of the following: (a) net operating income
(calculated before taxes, Interest Expense, extraordinary
items and unusual non-cash, non-recurring items and income
or loss attributable to equity in Affiliates) for such
period plus (b) amortization (to the extent deducted in
determining net operating income) for such period.
"Effective Date" means the Effective Date (as defined
therein) of the Plan of Reorganization.
"Eligible Institution" means (i) a bank or trust
company organized under the laws of the United States of
America, of any state therein, of the District of Columbia,
of any member country of the Organization for Economic
Cooperation and Development or of any political subdivision
of any such country, in each case having assets in excess of
$500,000,000, (ii) an insurance company organized under the
laws of any state in the United States of America or of the
District of Columbia having assets in excess of $500,000,000
or (iii) any other Person consented to by the Company, which
consent shall not be unreasonably withheld.
"Eligible Participant" has the meaning assigned as that
term in Section 8.6.(b).
"Environmental Action" means any administrative,
regulatory or judicial action, suit, demand, demand letter,
claim, notice of non-compliance or violation, investigation,
proceeding, consent order or consent agreement relating in
any way to any Environmental Law or any Environmental Permit
including, without limitation, (a) any claim by any
governmental or regulatory authority for enforcement,
investigation, cleanup, removal, response, remedial or other
actions or damages pursuant to any Environmental Law and
(b) any claim by any Person seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive
relief resulting from Hazardous Materials or arising from
alleged injury or threat of injury to health, safety or the
environment.
"Environmental Law" means any federal, state or local
law, rule, regulation, order, writ, judgment, injunction,
<PAGE> 156
decree, determination or award relating to the environment,
health, safety or Hazardous Materials.
"Environmental Permit" means any permit, approval,
identification number, license or other authorization
required under any Environmental Law.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended from time to time, and the
regulations promulgated and rulings issued thereunder.
"ERISA Affiliate" means any Person who for purposes of
Title IV of ERISA is a member of the Company's controlled
group, or under common control with the Company, within the
meaning of Section 414 of the Internal Revenue Code of 1986,
as amended.
"Eurodollar Loan" means the portion of the Loan which
bears interest at the Eurodollar Rate.
"Eurodollar Rate" means, for any Interest Period, an
interest rate per annum equal at all times during such
Interest Period to the sum of (x) the LIBO Rate for such
Interest Period plus (y) 1.50% per annum.
"Event of Default" has the meaning assigned to that
term in Section 6.1.
"Fed Funds Rate" means for each day the rate per annum
(rounded upwards, if necessary, to the nearest 1/100th of
1%) equal to the weighted average of the rates on overnight
Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on
the Business Day next succeeding such day, provided that (i)
if the day for which such rate is to be determined is not a
Business Day, the Federal Funds Rate for such day shall be
such rate on such transactions on the next preceding
Business Day as so published on the next succeeding Business
Day, and (ii) if such rate is not so published for any day,
the Federal Funds Rate for such day shall be the average
rate charged to the Bank on such day on such transactions as
determined by the Bank.
"Final Approval" means any authorizations, consents,
approvals, waivers, exceptions, variances, orders, licenses,
exemptions, publications, filings, notices to and
declarations of or with any governmental authority (other
than routine reporting requirements the failure to comply
with which will not affect the validity or enforceability of
any of the Related Documents or have a Material Adverse
Effect) or any other action in respect of any governmental
authority that is in full force and effect and is not the
<PAGE> 157
subject of a pending appeal or reconsideration or other
review, and the time in which to make an appeal or request
the review or reconsideration of which has expired without
any appeal or request for review or reconsideration having
been taken or made.
"Final Order" means an order of the Bankruptcy Court
which (a) shall not have been reversed, stayed, modified or
amended and the time to appeal from, or to seek review or
rehearing of, shall have expired and as to which no appeal
or petition for review, rehearing or certiorari is pending
or (b) if appealed from, shall have been affirmed and the
time to appeal from such affirmance or to seek review or
rehearing thereof shall have expired or no further hearing,
appeal or petition for certiorari can be taken or granted.
"First Mortgage Bond Indenture" means the Indenture
dated as of between the Company
and , as trustee,
providing for the issuance by the Company of its first
mortgage bonds.
"First Mortgage Bonds" means bonds issued by the
Company under the First Mortgage Bond Indenture.
"First Mortgage Bonds, Series A/B" means collectively,
the First Mortgage Bonds, Series A, and the First Mortgage
Bonds, Series B, in each case issued under the First
Mortgage Bond Indenture.
"GAAP" means generally accepted accounting principles
in the United States of America as in effect from time to
time.
"Governmental Person" means any national, state or
local government, any political subdivision or any
government instrumentality, authority, body or entity,
including the Federal Deposit Insurance Corporation, the
Board of Governors of the Federal Reserve System, any
central bank or any comparable authority.
"Hazardous Materials" means (a) petroleum or petroleum
products, asbestos in any form, radioactive or source
material, (b) any substances defined as or included in the
definition of "hazardous substances", "hazardous wastes",
"hazardous materials", "extremely hazardous wastes",
"restricted hazardous wastes", "toxic substances", "toxic
pollutants", "contaminants" or "pollutants", or words of
similar import, under any Environmental Law and (c) any
other substance exposure to which is regulated under any
Environmental Law.
"Indemnified Party" has the meaning assigned to that
term in Section 8.7.
<PAGE> 158
"Interest Coverage Ratio" means, as at any date, the
ratio of (a) EBITA for the period of four consecutive fiscal
quarters ending on or most recently ended prior to such date
to (b) Interest Expense for such period.
"Interest Expense" means, for any period, the sum, for
the Company and its Consolidated Subsidiaries (determined on
a consolidated basis without duplication in accordance with
GAAP), of the following: (a) all interest in respect of
Debt including, without limitation, interest capitalized
during such period (whether or not actually paid during such
period), including, without limitation, all commissions and
fees (other than up-front fees), plus (b) the net amounts
payable (or minus the net amounts receivable) under Interest
Rate Protection Agreements accrued during such period
(whether or not actually paid or received during such
period).
"Interest Period" has the meaning assigned to that term
in Section 2.3(b).
"Interest Rate Protection Agreement" means, for any
Person, an interest rate swap, cap or collar agreement,
interest rate future or option contracts or similar
arrangement providing for the transfer or mitigation of
interest risks either generally or under specific
contingencies.
"Leverage Ratio" means, at any time, the ratio of Total
Debt to Total Capital at such time.
"LIBOR Rate" means, for any Interest Period, an
interest rate per annum equal to the rate of interest per
annum at which deposits in United States dollars are offered
by the principal office of the Bank in London, England to
prime banks in the London interbank market at 11:00 A.M.
(London time) two Business Days before the first day of such
Interest Period for a period equal to such Interest Period.
"Lien" means any lien, security interest or other
charge or encumbrance of any kind, or any other type of
preferential arrangement, including, without limitation, the
lien or retained security title of a conditional vendor and
any easement, right of way or other encumbrance on title to
real property.
"Loan" has the meaning assigned to that term in Section
2.1.
"Maricopa LC" means that certain letter of credit dated
August 29, 1985, issued by the Bank, as amended, extended
and supplemented, with respect to the Maricopa PCBs.
<PAGE> 159
"Maricopa PCBs" means the Pollution Control Refunding
Revenue Bonds, 1985 Series A (El Paso Electric Company Palo
Verde Project) issued by Maricopa County, Arizona Pollution
Control Corporation in the original principal amount of
$59,235,000, which mature on August 1, 2015.
"Material Adverse Effect" means a material adverse
effect on (i) the property, business, operations, financial
condition, liabilities or capitalization of the Company and
its Subsidiaries taken as a whole, (ii) the ability of the
Company to perform its obligations under any of the Related
Documents, (iii) the validity or enforceability of any of
the Related Documents, (iv) the rights and remedies of the
Bank or (v) the timely payment of the principal of or
interest on the Note or other amounts payable in connection
herewith or therewith.
"Material Subsidiary" means, at any time, a Subsidiary
of the Company (a) whose assets at such time exceed 10% of
the assets of the Company and its Subsidiaries (on a
consolidated basis) or (b) whose earnings at such time
exceed 10% of the earnings of the Company and its
Subsidiaries (on a consolidated basis).
"Multiemployer Plan" means a multiemployer plan, as
defined in Section 4001(a)(3) of ERISA, to which the Company
or any ERISA Affiliate is making or accruing an obligation
to make contributions, or has within any of the preceding
five plan years made or accrued an obligation to make
contributions, such plan being maintained pursuant to one or
more collective bargaining agreements.
"Multiple Employer Plan" means a single employer plan,
as defined in Section 4001(a)(15) of ERISA, that (i) is
maintained for employees of the Company or an ERISA
Affiliate and at least one Person other than the Company and
its ERISA Affiliates or (ii) was so maintained and in
respect of which the Company or an ERISA Affiliate could
have liability under Section 4064 or 4069 of ERISA in the
event such plan has been or were to be terminated.
"Note" means a promissory note of the Company, in
substantially the form of Exhibit A.
"Participant" has the meaning assigned to that term in
Section 8.6.
"PBGC" means the Pension Benefit Guaranty Corporation
or any successor thereto.
"Person" means an individual, a corporation, a
partnership, an association, a business trust or any other
entity or organization, including a Governmental Person.
<PAGE> 160
"Plan" means a Single Employer Plan or a Multiple
Employer Plan.
"Plan of Reorganization" means the Modified Third
Amended Plan of Reorganization of the Debtor Providing for
the Acquisition of El Paso Electric Company by Central and
South West Corporation filed on August 27, 1993 (as
corrected as of September 15, 1993).
"Related Documents" means collectively, this Agreement,
the Note, the Second Mortgage Bond Indenture, and the Second
Mortgage Bonds, Series Y[-3].
"Second Mortgage Bond Indenture" means the Indenture
dated as of ______________________________ between the
Company and ___________, as trustee, providing for the
issuance by the Company of its second mortgage bonds.
"Second Mortgage Bonds" means bonds issued by the
Company under the Second Mortgage Bond Indenture.
"Second Mortgage Bonds, Series A" means Second Mortgage
Bonds, Series A, issued under the Second Mortgage Bond
Indenture.
"Second Mortgage Bonds, Series Y[-3]" means [ ].
"Single Employer Plan" means a single employer plan, as
defined in Section 4001(a)(15) of ERISA, that (i) is
maintained for employees of the Company or an ERISA
Affiliate and no Person other than the Company and its ERISA
Affiliates or (ii) was so maintained and in respect of which
the Company or an ERISA Affiliate could have liability under
Section 4069 of ERISA in the event such plan has been or
were to be terminated.
"Submission Date" means the date the form of this
Agreement was filed with the Bankruptcy Court prior to the
date creditors must have voted on the Plan of Reorganization
in accordance with Section 7.6 of the Plan of
Reorganization.
"Subsidiary" means, with respect to any Person, any
corporation, partnership or other entity of which at least a
majority of the Voting Stock is at the time directly or
indirectly owned or controlled by such Person or one or more
Subsidiaries of such Person or by such Person and one or
more Subsidiaries of such Person.
"Total Capital" means, as at any date, the sum for the
Company and its Consolidated Subsidiaries (determined on a
consolidated basis without duplication in accordance with
GAAP), of the following:
<PAGE> 161
(a) the amount of capital stock (excluding
treasury stock and capital stock subscribed for and
unissued and preferred stock mandatorily redeemable in
cash or redeemable in cash at the option of the holder
thereof), plus
(b) the amount of surplus and retained earnings
(or, in the case of a surplus or retained earnings
deficit, minus the amount of such deficit).
"Total Debt" means, as at any date, the aggregate
amount of all Debt of the Company and its Consolidated
Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP)(other than contingent
obligations in connection with acceptance facilities and
letters of credit).
"Voting Stock" means capital stock issued by a
corporation, or equivalent interests in any other Person,
the holders of which are ordinarily, in the absence of
contingencies, entitled to vote for the election of
directors (or Persons performing similar functions) of such
Person, even though the right so to vote has been suspended
by the happening of such a contingency.
"Withdrawal Liability" has the meaning given such term
under Part I of Subtitle E of Title IV of ERISA.
SECTION 1.2 Computation of Time Periods. In this
Agreement, in the computation of a period of time from a
specified date to a later specified date, the word "from" means
"from and including" and the words "to" and "until" each means
"to but excluding".
SECTION 1.3 Accounting Terms. All accounting terms
not specifically defined herein shall be construed in accordance
with GAAP consistently applied, except as otherwise stated
herein.
SECTION 1.4 Interpretation. In this Agreement the
singular includes the plural and the plural the singular; words
importing any gender include the other genders; references to
statutes are to be construed as including all statutory
provisions consolidating, amending or replacing the statute
referred to; references to "writing" include printing, typing,
lithography and other means of reproducing words in a tangible
visible form; references to sections (or any subdivision of a
section), articles, schedules, annexes and exhibits are to those
of this Agreement unless otherwise indicated; the words
"including", "includes" and "include" shall be deemed to be
followed by the words "without limitation"; references to
agreements and other contractual instruments shall be deemed to
include all subsequent amendments and other modifications to such
instruments but only to the extent such amendments and other
<PAGE> 162
modifications are not prohibited by the terms of this Agreement;
and references to Persons include their respective permitted
successors and assigns and, in the case of Governmental Persons,
Persons succeeding to their respective functions and capacities.
ARTICLE II
AMOUNTS AND TERMS OF THE LOAN
SECTION 2.1 The Loan. As provided in the Plan of
Reorganization, the Company is issuing to the Bank, concurrently
with the execution and delivery hereof, the Note, appropriately
completed to the order of the Bank, in an amount equal to $
(the "Loan"), in satisfaction, to the extent provided for in
Section 3.7(A) of the Plan of Reorganization, of the Claim.
Amounts repaid or prepaid hereunder may not be reborrowed.
SECTION 2.2 Repayment. The Company shall repay the
unpaid principal amount of the Loan in _____________
substantially equal consecutive quarterly installments on the
last Business Day of ___________, ___________, ____________, and
___________ in each year, commencing on ___________, 19__ and
ending on _________, 19__; provided; however, that the last such
installment shall be in the amount necessary to repay in full the
unpaid principal amount hereof.*
SECTION 2.3 Interest. The Company shall pay interest
on the unpaid principal amount of the Loan from the date of the
Note until such principal amount shall be paid in full, at the
applicable rate set forth below:
(a) Alternate Base Rate. Except to the extent the
Company shall elect to pay interest on all or part of the
unpaid principal amount of the Loan for any Interest Period
pursuant to subsection (c) of this Section 2.3, the Company
shall pay interest on the unpaid principal of the Loan from
the date of the Note until the principal amount of the Loan
is paid in full at a fluctuating rate per annum equal at all
times to .50% per annum above the Alternate Base Rate in
effect from time to time, payable quarterly on the last
Business Day of each _______, _______, _______, and _______
and on the date the Loan is paid in full.
(b) Interest Periods. The Company may from time to
time elect to have the interest on all or part of the
principal amount of the Loan determined and payable for a
specified period (an "Interest Period") in accordance with
subsection (c) of this Section 2.3. The first day of an
Interest Period shall be either the date of the Note, the
date the Company specifies as the first day of a Eurodollar
Loan, or the last day of the then current Interest Period
for a Eurodollar Loan. The duration of each such Interest
Period shall be, in respect of a Eurodollar Loan, 1, 3 or 6
<PAGE> 163
months; provided, however, that the Company may not select
any Interest Period which ends after any principal repayment
installment date unless, after giving effect to such
selection, the aggregate unpaid principal amount of
Eurodollar Loans having Interest Periods which end on or
prior to such principal repayment installment date and
Alternate Base Rate Loans shall be at least equal to the
principal amount of the Loan due and payable on and prior to
such date.
(c) Eurodollar Rate. The Company may from time to
time elect to pay interest on all or part of the principal
amount of the Loan (provided that any such partial principal
amount shall not be less than $1,000,000) at the Eurodollar
Rate for an Interest Period by notice, specifying the
principal amount and the first day and duration of such
Interest Period, received by the Bank before 11:00 AM (New
York City time) two Business Days prior to the first day of
such Interest Period, payable on the last day of such
Interest Period and, if such Interest Period has a duration
of more than three months, on each day which occurs during
such Interest Period every three months from the first day
of such Interest Period.
(d) Default Interest. The Company shall pay interest
on the unpaid principal amount of the Loan that is not paid
when due and on the unpaid amount of all interest, and other
amounts payable hereunder, that is not paid when due,
payable on demand, at a rate per annum equal at all times to
2% per annum above the Alternate Base Rate in effect from
time to time. Notwithstanding anything in this Agreement to
the contrary, upon the occurrence and during the continuance
of an Event of Default, the right of the Company to make an
election in respect of the Eurodollar Rate pursuant to
Section 2.3(c) shall, terminate (i) automatically, in the
case of an Event of Default under Section 6.1(a) or 6.1(b)
or (ii) upon notice to the Company by the Bank, in all other
cases; provided that no termination referred to in either of
the preceding clauses (i) or (ii) shall affect any
Eurodollar Loan during an Interest Period in effect for such
Eurodollar Loan at the time such notice is received by the
Company.
(e) Alternate Rate of Interest. In the event, and on
each occasion, that, on the day two Business Days prior to
the commencement of any Interest Period for a Eurodollar
Loan, the Bank shall have determined (which determination
shall be conclusive and binding upon the Company absent
manifest error) that reasonable means do not exist for
ascertaining the applicable Eurodollar Rate, the Bank shall,
as soon as practicable thereafter, give written, facsimile
or telegraphic notice of such determination to the Company,
and any request by the Company for a Eurodollar Loan
pursuant to subsection (c) of this Section 2.3 shall be
<PAGE> 164
deemed a request for an Alternate Base Rate Loan. After
such notice shall have been given and until the
circumstances giving rise to such notice no longer exist,
each request for an Eurodollar Loan shall be deemed to be a
request for an Alternate Base Rate Loan.
(f) Promptly after the determination of any interest
rate provided for herein or any change therein, the Bank
shall give notice thereof to the Company.
SECTION 2.4 Prepayments. (a) Mandatory Prepayment.
Upon the remarketing or refunding of any Maricopa PCBs purchased
prior to the Effective Date, through draws on the Maricopa LC,
the Company shall prepay, in an amount equal to the net proceeds
of any such remarketing or refunding, the outstanding principal
amount of the Loan (any such prepayment shall be applied to the
principal installments of the Note in the inverse order of their
maturities), together with accrued interest to the date of such
prepayment on the principal amount prepaid and, if and to the
extent any principal amount so prepaid is a Eurodollar Loan and
such prepayment is on a day other than the last day of the
Interest Period for such Eurodollar Loan, an amount in accordance
with Section 2.5(d) to compensate the Bank for any loss, cost or
expense incurred by it by reason of such prepayment. [Any
prepayment pursuant to this Section 2.4(a) shall be made on a pro
rata basis with prepayments made to Canadian Imperial Bank of
Commerce ("CIBC") under the Term Loan Agreement dated as of the
date hereof between CIBC and the Company to the extent the Loan
being prepaid thereunder arises from a participation payment by
CIBC to the Bank with respect to a drawing on the Bank's Maricopa
PCB LC referred to in the Plan.]
(b) Optional Prepayment. The Company may, upon at
least two Business Days' notice to the Bank stating the proposed
date and principal amount of the prepayment, and if such notice
is given to the Bank the Company shall, prepay the outstanding
principal amount of the Loan in whole or in part (each such
partial prepayment shall be in an aggregate principal amount not
less than $1,000,000 and shall be applied to the principal
installments of the Note in the inverse order of their
maturities), together with accrued interest to the date of such
prepayment on the principal amount prepaid; provided, however,
that any prepayment of a Eurodollar Loan shall be made on, and
only on, the last day of the Interest Period for such Eurodollar
Loan unless the Company shall pay to the Bank in accordance with
Section 2.5(d) an amount sufficient to compensate the Bank for
any loss, cost, or expense incurred by it by reason of such
prepayment on a day other than the last day of an Interest
Period.
SECTION 2.5 Increased Costs, Etc. (a) If, due
either to (i) the introduction after the Submission Date of, or
any change (other than any change by way of imposition or
<PAGE> 165
increase of reserve requirements in respect of Eurodollar Loans,
referred to in subsection (b) below), after the Submission Date,
in or in the interpretation of, any law or regulation or (ii) the
compliance by the Bank with any guideline or request issued or
made after the Submission Date by any central bank or other
governmental authority (whether or not having the force of law),
there shall be any increase in the cost to the Bank as a result
of agreeing to make or making, funding or maintaining Eurodollar
Loans, or reduction in the amount of any sum received in respect
thereof, then the Company shall from time to time, upon demand by
the Bank, pay to the Bank additional amounts sufficient to
compensate the Bank for such increased cost or reduced amount. A
certificate as to the amount of such increased cost or reduced
amount, submitted to the Company by the Bank, shall be conclusive
and binding for all purposes, absent manifest error.
(b) The Company shall pay to the Bank additional
interest on the unpaid principal amount of each Eurodollar Loan,
from the date of such Eurodollar Loan until such principal amount
is paid in full, at an interest rate per annum equal at all times
during each Interest Period for such Loan to the remainder
obtained by subtracting (i) the LIBO Rate for the Interest Period
for such Loan from (ii) the rate obtained by dividing such LIBO
Rate by a percentage equal to 100% minus the reserve percentage
applicable 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 regulations
issued from time to time by the Board of Governors of the Federal
Reserve System (or any successor) for determining the maximum
reserve requirement (including, without limitation, any
emergency, supplemental or other marginal reserve requirement)
for the Bank with respect to liabilities or assets consisting of
or including Eurocurrency liabilities having a term equal to such
Interest Period, payable on each date on which interest is
payable on such Eurodollar Loan. Such additional interest shall
be determined by such Bank and notified to the Company.
(c) If the Bank determines that 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 Submission Date, affects
the amount of capital required to be maintained by the Bank or
any corporation controlling the Bank and that the amount of such
capital is increased by or based upon the existence of the Bank's
commitment hereunder and other commitments of this type, then,
upon demand by the Bank, the Company shall immediately pay to the
Bank, from time to time as specified by the Bank, additional
amounts sufficient to compensate the Bank or such corporation in
the light of such circumstances, to the extent that the Bank
reasonably determines such increase in capital to be allocable to
the existence of the Bank's commitment hereunder. A certificate
as to such amounts submitted to the Company by the Bank, shall be
conclusive and binding for all purposes, absent manifest error.
<PAGE> 166
(d) If, due to a change of interest rate on any
Eurodollar Loan pursuant to Section 2.6(b) or 2.7, any payment
pursuant to Section 2.4 of any Eurodollar Loan, any acceleration
of the maturity of such Loan and the Note pursuant to Section
6.1, or for any other reason, the Bank is subject to a change of
interest rate, or receives payments of principal, of any
Eurodollar Loan other than on the last day of an Interest Period
relating to such Eurodollar Loan, the Company shall, promptly
upon demand by the Bank, pay to the Bank any amounts required to
compensate the Bank for additional losses, costs or expenses
which it may reasonably incur as a result of such change or
payment, including, without limitation, any loss, cost or expense
incurred by reason of the liquidation or reemployment of deposits
or other funds acquired by the Bank to fund or maintain such
Eurodollar Loan, but excluding loss of anticipated profit.
A certificate setting forth the amount of such additional losses,
costs or expenses, submitted by the Bank to the Company, shall be
conclusive and binding for all purposes, absent manifest error.
(e) Notwithstanding any other provision in this
Section 2.5 to the contrary (i) the Company is not responsible
for, and is not required to reimburse the Bank for, any amounts
that would otherwise be payable by the Company pursuant to
subsection (a), (c) or (d) of this Section 2.5 to the extent such
amounts accrued 90 days or more prior to the date the Bank
provides to the Company a certificate which sets forth such
amounts owed to the Bank by the Company pursuant to such
subsections and (ii) the Company is responsible for, and is
required to reimburse the Bank for, any amounts payable by the
Company pursuant to this Section 2.5, only so long as the Bank is
a Banking Institution.
(f) In calculating any amounts required to be paid by
the Company pursuant to this Section 2.5, the Bank shall make all
determinations and allocations on a reasonable basis.
SECTION 2.6 Interest Rate Protection. (a) If the
Company shall fail to select the duration of any Interest Period
for any Eurodollar Loan in accordance with the provisions
contained in Section 2.3(c), the Bank will forthwith so notify
the Company and such Eurodollar Loan will automatically, on the
last day of the then existing Interest Period therefor, convert
into an Alternate Base Rate Loan.
(b) On and after the date on which the unpaid
principal amount of the Loan shall be reduced, by payment or
prepayment or otherwise, to less than $1,000,000, the rate of
interest on the unpaid principal amount of the Loan shall be .50%
per annum above the Alternate Base Rate in effect from time to
time and the right of the Company to make an election in respect
of the Eurodollar Rate pursuant to Section 2.3(c) shall
terminate.
<PAGE> 167
SECTION 2.7 Illegality, Etc. Notwithstanding any
other provision of this Agreement, if the Bank shall at the time
be a Banking Institution and notify the Company that the
introduction of or any change in or in the interpretation of any
law or regulation that occurs after the Submission Date makes it
unlawful, or any central bank or other governmental authority
asserts after the Submission Date that it is unlawful, for the
Bank to perform its obligations to fund or maintain Eurodollar
Loans hereunder, (i) the right of the Company to select the
Eurodollar Rate, and the obligation of the Bank to maintain
Eurodollar Loans, shall be suspended until the Bank shall notify
the Company that the circumstances causing such suspension no
longer exist and (ii) the rate of interest on the unpaid
principal amount of the Loan shall thereupon be .50% per annum
above the Alternate Base Rate in effect from time to time.
SECTION 2.8 Payments and Computations. (a) The
Company shall make each payment under this Agreement or the Note
not later than noon (New York City time) on the day when due in
lawful money of the United States of America to the Bank at its
address referred to in Section 8.2 in same day funds.
(b) The Company hereby authorizes the Bank, if and to
the extent payment is not made when due under this Agreement or
the Note, to charge from time to time against any or all of the
Company's accounts with the Bank any amount so due.
(c) All computations of interest based on the
Alternate Base Rate shall be made by the Bank on the basis of a
year of 365 or 366 days, as the case may be, and all computations
of interest based on the LIBO Rate shall be made by the Bank on
the basis of a year of 360 days, in each case for the actual
number of days (including the first day but excluding the last
day) occurring in the period for which such interest is payable.
Each determination by the Bank of an interest rate hereunder
shall be conclusive and binding for all purposes, absent manifest
error.
(d) Whenever any payment under this Agreement or the
Note shall be stated to be due, or whenever the last day of any
Interest Period would otherwise occur, on a day which is not a
Business Day, such payment shall be made, and the last day of
such Interest Period shall occur, on the next succeeding Business
Day, and such extension of time shall in such case be included in
the computation of payment of interest; provided, however, if
such extension would cause payment of interest on or principal of
an Eurodollar Loan to be made, or the last day of an Interest
Period for a Eurodollar Loan to occur, in the next following
calendar month, such payment shall be made, and the last day of
such Interest Period shall occur, on the next preceding Business
Day.
(e) Whenever the first day of any Interest Period
occurs on a day of an initial calendar month for which there is
<PAGE> 168
no numerically corresponding day in the calendar month that
succeeds such initial calendar month by the number of months
equal to the number of months in such Interest Period, such
Interest Period shall end on the last Business Day of such
succeeding calendar month. Notwithstanding anything to the
contrary contained herein, each Interest Period that 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) shall end on the last
Business Day of the appropriate subsequent calendar month.
SECTION 2.9 U.S. Taxes. (a) The Company agrees to
pay to the Bank with respect to any period during which it is not
a U.S. Person such additional amounts as are necessary in order
that the net payment of any amount due to such non-U.S. Person
hereunder after deduction for or withholding in respect of any
U.S. Tax imposed with respect to such payment (or in lieu
thereof, payment of such U.S. Tax by such non-U.S. Person), will
not be less than the amount stated herein to be then due and
payable, provided that the foregoing obligation to pay such
additional amounts shall not apply:
(i) to any payment to the Bank hereunder unless the
Bank is, on the Submission Date (or on the date such Person
becomes the successor to, or the assignee of, the Bank as
provided in Section 8.6) and on the date of any change in
the applicable lending office of the Bank after the date
hereof, either entitled to submit a Form 1001 (relating to
the Bank and entitling it to a complete exemption from
withholding on all interest to be received by it hereunder
in respect of the Loan) or Form 4224 (relating to all
interest to be received by the Bank hereunder in respect of
the Loan), or
(ii) to any U.S. Tax imposed solely by reason of the
failure by such non-U.S. Person to comply with applicable
certification, information, documentation or other reporting
requirements concerning the nationality, residence, identity
or connections with the United States of America of such
non-U.S. Person if such compliance is required by statute or
regulation of the United States of America as a precondition
to relief or exemption from such U.S. Tax.
For the purposes of this Section 2.9(a), (w) "Form 1001" shall
mean Form 1001 (Ownership, Exemption, or Reduced Rate
Certificate) of the Department of the Treasury of the United
States of America, (x) "Form 4224" shall mean Form 4224
(Exemption from Withholding of Tax on Income Effectively
Connected with the Conduct of a Trade or Business in the United
States) of the Department of the Treasury of the United States of
America (or in relation to either such Form such successor and
related forms as may from time to time be adopted by the relevant
taxing authorities of the United States of America to document a
claim to which such Form relates), (y) "U.S. Person" shall mean a
<PAGE> 169
citizen, national or resident of the United States of America, a
corporation, partnership or other entity created or organized in
or under any laws of the United States of America, or any estate
or trust that is subject to Federal income taxation regardless of
the source of its income and (z) "U.S. Taxes" shall mean any
present or future tax, assessment or other charge or levy imposed
by or on behalf of the United States of America or any taxing
authority thereof or therein.
(b) Within 30 days after paying any amount to the
Bank
from which it is required by law to make any deduction or
withholding, and within 30 days after it is required by law to
remit such deduction or withholding to any relevant taxing or
other authority, the Company shall deliver to the Bank evidence
satisfactory to the Bank of such deduction, withholding or
payment (as the case may be).
SECTION 2.10 Applicable Lending Office. If the Bank
requests compensation from the Company under any of Section
2.5(a), 2.5(c) or 2.9, the Bank will designate a different
applicable lending office for the portions of the Loan affected
by the events giving rise to such request for compensation if
such designation will avoid the need for, or reduce the amount
of, such compensation and will not, in the reasonable opinion of
the Bank, be disadvantageous to the Bank, except that the Bank
shall have no obligation to designate an applicable lending
office located in the United States of America.
SECTION 2.11 Net Payments. All payments under this
Agreement or the Note to the Bank (or any assignee of the Bank or
Participant pursuant to Section 8.6) shall be made without
set-off or counterclaim.
ARTICLE III
CONDITIONS TO CLOSING
SECTION 3.1 Closing Documents. The obligation of
the Bank to execute this Agreement is subject to the conditions
precedent that on or before the date hereof, (i) the Bank shall
have received the following, each dated the date hereof, unless
otherwise specified below in form and substance satisfactory to
the Bank:
(a) the Note, duly executed and completed;
(b) certified copies of the restated articles of
incorporation and bylaws of the Company, a certified copy of
the resolutions of the Board of Directors of the Company
approving the Related Documents and the other matters
contemplated hereby and thereby, and of all other documents
evidencing any other necessary corporate action;
<PAGE> 170
(c) a copy of a certificate of the Secretary of State
of Texas dated a date reasonably close to the date hereof
listing the articles of incorporation of the Company and
each amendment thereto on file in his office and certifying
that (A) such amendments are the only amendments to the
Company's articles of incorporation on file in his office
and (B) the Company is duly incorporated, validly existing
and in good standing under the laws of such State;
(d) a telegram from such Secretary of State or such
other evidence satisfactory to the Bank certifying that the
Company is duly incorporated, validly existing and in good
standing under the laws of such State on the date hereof;
(e) originals (or copies certified to be true copies by
an appropriate officer of the Company) of all governmental
and regulatory approvals (including, without limitation, the
Federal Energy Regulatory Commission and the New Mexico
Public Service Commission approvals) legally required to be
obtained on the Effective Date for the Company to enter into
the Related Documents and to carry out the transactions
contemplated thereby;
(f) a certificate of the Secretary of the Company
certifying the incumbency and the names and true signatures
of the officers of the Company authorized to sign this
Agreement, the Note and the other documents to be delivered
by it hereunder, together with a certificate of another
officer of the Company as to the incumbency and specimen
signature of the Secretary of the Company;
(g) the Second Mortgage Bonds, Series Y[-3], such
series having been duly completed, executed and pledged to
the Bank by the Company pursuant to Article VII and the
Second Mortgage Bond Indenture;
(h) evidence of the completion of all recordings and
filings of or with respect to the Second Mortgage Bond
Indenture that the Bank may deem necessary or desirable in
order to perfect the security interest created thereby;
(i) a certified copy of the Second Mortgage Bond
Indenture;
(j) a favorable opinion of Milbank, Tweed, Hadley &
McCloy, New York counsel for the Company, or other New York
counsel for the Company reasonably satisfactory to the Bank,
in form and substance reasonably satisfactory to the Bank;
(k) a favorable opinion of Vinson & Elkins, Texas
counsel for the Company, or, other Texas counsel for the
Company reasonably satisfactory to the Bank, in form and
substance reasonably satisfactory to the Bank;
<PAGE> 171
(l) a favorable opinion of Stoops & Burns, Arizona
counsel for the Company, or other Arizona counsel for the
Company reasonably satisfactory to the Bank, in form and
substance reasonably satisfactory to the Bank;
(m) a favorable opinion of Taichert, Wiggins, Virtue,
Wilson & Najjar, New Mexico regulatory counsel for the
Company, or other New Mexico counsel for the Company
reasonably satisfactory to the Bank, in form and substance
reasonably satisfactory to the Bank;
(n) a favorable opinion of [Milbank, Tweed, Hadley &
McCloy], federal regulatory counsel for the Company, or
other counsel reasonably satisfactory to the Bank, in form
and substance reasonably satisfactory to the Bank;
(o) written evidence, satisfactory to the Bank, that
the First Mortgage Bonds, Series [ ], and the Second
Mortgage Bonds, Series [ ], have a rating of at least BBB-
(or equivalent rating) by at least two of Standard & Poor's
Corporation, Moody's Investors Service, Inc. and Duff &
Phelps, Inc.; and
(p) a certificate of the chairman, president or chief
financial officer of the Company, certifying (A) that the
Effective Date has occurred as of the time of delivery
thereof or will occur concurrently with the delivery thereof
and (B) that, after giving effect to the transactions
contemplated under the Plan of Reorganization: (x) no event
has occurred and is continuing which constitutes an Event of
Default or would constitute an Event of Default but for the
requirement that notice be given or the elapse of time or
both; and (y) the representations and warranties made by the
Company in Article IV hereof, and in each of the other
Related Documents, shall be true on and as of the Effective
Date with the same force and effect as if made on and as of
such date (or, if such representation or warranty is
expressly stated to have been made as of a specific date, as
of such specific date);
and (ii) the following shall have occurred:
(a) the Confirmation Order shall have been entered at
least 10 days prior to the date hereof, no stay of such
order shall be in effect and the Bank shall have received a
certified copy of such order;
(b) the Plan of Reorganization shall have been
substantially consummated without waiver of any condition or
other modification (other than waivers or modifications made
in accordance with Section 6.6 of the Plan of
Reorganization);
<PAGE> 172
(c) the Effective Date shall have occurred or shall
occur substantially simultaneously with the delivery of this
Agreement and of the other Related Documents; and
(d) the Bank shall have received such other
approvals, opinions or documents as the Bank may reasonably
request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.1 Representations and Warranties of the
Company. The Company represents and warrants as follows:
(a) The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the
State of Texas and is duly qualified to do business in, and
is in good standing under the laws of, the States of Texas,
Arizona and New Mexico and has requisite corporate power and
authority, and all governmental licenses, authorizations and
approvals necessary, to conduct its business and to own its
properties, except where the failure to have the same would
not result in a Material Adverse Effect.
(b) The execution, delivery and performance by the
Company of this Agreement and the other Related Documents to
which it is a party are within the Company's corporate
powers, have been duly authorized by all necessary corporate
action, and do not contravene (i) the Company's articles of
incorporation or by-laws, which the Company has adopted
pursuant to the Plan of Reorganization or (ii) any law,
order, rule, regulation (including, without limitation, any
order, rule or regulation of the Federal Energy Regulatory
Commission, the New Mexico Public Service Commission or the
Public Utility Commission of Texas, or Regulation G, T, U or
X of the Board of Governors of the Federal Reserve System),
writ, judgment, injunction or decree applicable to the
Company or any contractual restriction binding on or
affecting the Company or any Subsidiary, and do not result
in or require the creation of any Lien of the Company or any
Subsidiary (except as provided in or contemplated by this
Agreement, the other Related Documents or the Plan of
Reorganization) upon or with respect to any properties of
the Company or any Subsidiary.
(c) No authorization or approval or other action by,
and no notice to or filing with, any governmental authority
or regulatory body is required for the due execution,
delivery and performance by the Company of this Agreement or
any other Related Document (including the issuance and
pledge of the Second Mortgage Bonds, Series Y[-3] and the
creation and perfection of the Liens on the property
securing such Bonds) except for (i) those that have been
duly obtained or made and are in full force and effect and
<PAGE> 173
are Final Approvals and (ii) the Confirmation Order.
(d) This Agreement has been duly and validly executed
by the Company and constitutes, and the Note when delivered
hereunder will constitute, legal, valid and binding
obligations of the Company enforceable against the Company
in accordance with their respective terms.
(e) There is no pending or overtly threatened action,
investigation, proceeding or notification which has been
instituted after the Effective Date affecting the Company or
any of its Subsidiaries before any court, governmental
agency or arbitrator which is reasonably likely to have a
Material Adverse Effect.
(f) The Second Mortgage Bonds, Series Y[-3] (i) have
been duly authorized, executed, authenticated, issued,
pledged and delivered in the manner provided for in the
Second Mortgage Bond Indenture and in compliance with all
applicable law; (ii) constitute the legal, valid and binding
obligations of the Company enforceable against the Company
in accordance with their terms and the terms of the Second
Mortgage Bond Indenture except insofar as enforceability may
be limited or otherwise affected by (a) bankruptcy,
insolvency, moratorium, reorganization or other similar laws
of general application relating to or affecting the rights
and remedies of creditors from time to time in effect and
(b) general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at
law); (iii) are entitled to the security and benefits of the
Second Mortgage Bond Indenture; (iv) are secured equally and
ratably with and only with all other bonds issued and
outstanding and which may hereafter and thereafter be issued
and outstanding under the Second Mortgage Bond Indenture;
(v) are secured by duly perfected Liens on and security
interests in the collateral purported to secure such bonds
in the Second Mortgage Bond Indenture which Liens are
subordinated in priority only to the Liens and security
interests granted under the First Mortgage Bond Indenture
and securing outstanding First Mortgage Bonds; and
(vi) constitute collateral security encumbered by valid,
duly perfected Liens thereon and security interests therein
securing the obligations of the Company under this Agreement
and the Note as purported to be provided in such indenture
and herein and in the Note. The Company has executed,
issued and delivered all Second Mortgage Bonds, Series Y[-3]
to the Bank and has made all such duly perfected pledges
thereof to the Bank as are required to be executed, issued,
delivered and made under this Agreement and there are no
other Liens on such Second Mortgage Bonds.
(g) The Second Mortgage Bond Indenture creates a valid
and perfected second Lien on the Company's property as
described in the Second Mortgage Bond Indenture as
<PAGE> 174
collateral security for the Company's obligations under the
Second Mortgage Bond Indenture and the Second Mortgage
Bonds, Series Y[-3].
(h) The Company is not a "holding company" as such
term is defined in the Public Utility Holding Company Act of
1935, as amended, nor an "investment company", or a company
"controlled" by an "investment company", within the meaning
of the Investment Company Act of 1940, as amended.
(i) The Company and its Subsidiaries have filed all
United States federal and state income tax returns and all
other material tax returns which are required to be filed by
them, and have paid all taxes due pursuant to such returns
or, to the extent deemed necessary or appropriate by the
Company and such Subsidiary, provided reserves for the
payment thereof, other than such taxes that the Company or
any Subsidiary is contesting in good faith by appropriate
legal proceedings.
(j) The Company and the ERISA Affiliates have
fulfilled their respective obligations under the minimum
funding standards of ERISA and the Code with respect to each
Plan and are in compliance with the presently applicable
provisions of ERISA and the Code except where non-compliance
would not have a Material Adverse Effect, and have not
incurred any liability to the PBGC (other than to pay
premiums under Section 4007 of ERISA) or any Plan or any
Multiemployer Plan (other than to make contributions in the
ordinary course of business). No reportable event, within
the meaning of Section 4043 of ERISA, has occurred with
respect to any Plan, except for any such event as to which
the 30-day notice requirement has been waived by the PBGC.
Schedule B (Actuarial Information) to the most recently
filed annual report (Form 5500 Series) for each Plan is
complete and accurate and fairly presents the funding status
of such Plan, and since the date of such Schedule B there
has been no change in such funding status that can
reasonably be expected to have a Material Adverse Effect.
(k) No Material Adverse Effect has occurred since the
Effective Date.
(l) The Confirmation Order has been entered and has not
been reversed, amended (except as consented to by the Bank
in its sole discretion), stayed, vacated or rescinded. The
Bank shall be entitled to enforce its remedies under this
Agreement without further application to or order by the
Bankruptcy Court.
(m) The operations and properties of the Company and
each of its Subsidiaries comply in all material respects
with all Environmental Laws, the Company and each of its
Subsidiaries possess and are in compliance with all required
<PAGE> 175
Environmental Permits and no circumstances exist that are or
would be reasonably likely to (i) form the basis of an
Environmental Action against the Company or any of its
Subsidiaries or any of their properties or (ii) cause any
such property to be subject to any restrictions on
ownership, occupancy, use or transferability under any
Environmental Law, except as would not be likely to have a
Material Adverse Effect and, none of the properties of the
Company or any of its Subsidiaries is listed or proposed for
listing on the National Priorities List under CERCLA or any
analogous state list.
ARTICLE V
COVENANTS OF THE COMPANY
SECTION 5.1 Covenants of the Company. Until the
principal amount of the Loan and any accrued interest thereon is
paid in full and all other amounts payable by the Company
hereunder are paid in full, the Company agrees that, unless the
Bank shall otherwise agree in writing:
(a) Reporting Requirements. The Company shall deliver
to the Bank:
(i) as soon as available and in any event within
45 days after the end of each of the first three
quarterly fiscal periods of each fiscal year of the
Company, consolidated and consolidating statements of
income, retained earnings and cash flow of the Company
and its Consolidated Subsidiaries for such period and
for the period from the beginning of the respective
fiscal year to the end of such period, and the related
consolidated and consolidating balance sheets of the
Company and its Consolidated Subsidiaries at the end of
such period, setting forth in each case in comparative
form the corresponding consolidated and consolidating
figures for the corresponding period in the preceding
fiscal year, accompanied by a certificate of a senior
financial officer of the Company, which certificate
shall state that said consolidated financial statements
fairly present the consolidated financial condition and
results of operations of the Company and its
Consolidated Subsidiaries, and said consolidating
financial statements fairly present the respective
individual unconsolidated financial condition and
results of operations of the Company and of each of its
Consolidated Subsidiaries, in each case in accordance
with GAAP, consistently applied, as at the end of, and
for, such period (subject to normal year-end audit
adjustments);
(ii) as soon as available and in any event within
90 days after the end of each fiscal year of the
<PAGE> 176
Company, consolidated and consolidating statements of
income, retained earnings and cash flow of the Company
and its Consolidated Subsidiaries for such fiscal year
and the related consolidated and consolidating balance
sheets of the Company and its Consolidated Subsidiaries
as at the end of such fiscal year, setting forth in
each case in comparative form the corresponding
consolidated and consolidating figures for the
preceding fiscal year, and accompanied (i) in the case
of said consolidated statements and balance sheet of
the Company, by an opinion thereon of independent
certified public accountants of recognized national
standing, which opinion shall state that said
consolidated financial statements fairly present the
consolidated financial condition and results of
operations of the Company and its Consolidated
Subsidiaries as at the end of, and for, such fiscal
year in accordance with GAAP, consistently applied, and
a certificate of such accountants stating that, in
making the examination necessary for their opinion,
they obtained no knowledge, except as specifically
stated, of any failure by the Company to comply with
Section 5.1(e) or (f), and (ii) in the case of said
consolidating statements and balance sheets, by a
certificate of a senior financial officer of the
Company, which certificate shall state that said
consolidating financial statements fairly present the
respective individual unconsolidated financial
condition and results of operations of the Company and
of each of its Consolidated Subsidiaries, in each case
in accordance with GAAP, consistently applied, as at
the end of, and for, such fiscal year;
(iii) as soon as available copies of all proxy
statements, material reports and registration
statements which the Company or any of its Subsidiaries
files with the Securities and Exchange Commission or
any national securities exchange (other than filings
made pursuant to the Public Utility Holding Company Act
of 1935, as amended, public offerings of securities
under employee benefit plans, customer stock purchase
plans or dividend reinvestment plans);
(iv) as soon as possible and in any event
within two days after the Company has knowledge of the
occurrence of each Event of Default continuing on the
date of such statement, a statement from the chief
financial officer of the Company setting forth details
of such Event of Default and the action that the
Company has taken and proposes to take with respect
thereto;
<PAGE> 177
(v) at the time the Company furnishes each set of
financial statements pursuant to paragraph (i) or (ii)
above, a certificate of a senior financial officer of
the Company (A) setting forth in reasonable detail the
computations necessary to determine whether the Company
is in compliance with subsections (e) and (f) of this
Section 5.1 as of the end of the respective quarterly
fiscal period or fiscal year and (B) stating that no
event has occurred and is continuing which constitutes
an Event of Default or would constitute an Event of
Default but for the requirement that notice be given or
the lapse of time or both or, if such event has
occurred and is continuing, a statement as to the
nature thereof and the action that the Company has
taken or proposes to take with respect thereto; and
(vi) such other financial data and information of
the Company or any of its Subsidiaries as the Bank may
from time to time reasonably request.
(b) Litigation. The Company will promptly give to the
Bank notice of all actions, suits, investigations,
litigation or legal or arbitral proceedings, and of all
proceedings by or before any governmental or regulatory
authority or agency (and any material development in respect
of such legal or other proceedings), in each case, known to
the Company, which is reasonably likely to have a Material
Adverse Effect.
(c) Preservation of Corporate Existence, Etc. The
Company will (i) preserve and maintain its corporate
existence in the state of its incorporation and qualify and
remain qualified as a foreign corporation in each
jurisdiction in which such qualification is reasonably
necessary in view of its business, and (ii) pay and
discharge, and cause its Subsidiaries to pay and discharge,
all taxes, assessments and governmental charges upon its
income and its properties prior to the date on which
penalties are attached thereto, unless (A) such taxes,
assessments and governmental charges shall be contested in
good faith and by appropriate proceedings by the Company or
its Subsidiaries and (B) the Company or any such Subsidiary
shall set aside on its books adequate reserves therefor to
the extent required by GAAP. Nothing contained in this
clause (c) of Section 5.1 shall be deemed to prohibit any
transaction permitted by clause (g) of this Section 5.1.
(d) Maintenance of Insurance, Etc. The Company will,
and will cause its Subsidiaries to, maintain insurance with
responsible insurance companies or associations or through
its own program of self-insurance in such amounts, with such
deductibles, and covering such risks as is usually carried
by companies engaged in similar business.
<PAGE> 178
(e) EBITA to Interest Coverage Ratio. The Company
will not permit the Interest Coverage Ratio to be less than
1.40 to 1 at any time on or after the last day of the first
full fiscal quarter of the Company commencing after the
Effective Date.
(f) Total Debt to Total Capital. The Company will not
permit the Leverage Ratio to exceed 0.68 to 1 at any time on
or after the last day of the first full fiscal quarter of
the Company commencing after the Effective Date.
(g) Prohibition of Fundamental Changes. The Company
will not, and will not permit any of its Subsidiaries to,
enter into any transaction of merger, consolidation,
amalgamation, liquidation or dissolution; provided that the
Company or any of its Subsidiaries may merge or consolidate
with any other Person if (i) in any such transaction in
which the Company is a party, the Company is the surviving
corporation, (ii) in any such transaction in which the
Company is not a party, the surviving corporation shall be a
Subsidiary of the Company and (iii) after giving effect
thereto no Event of Default would exist hereunder. The
Company will not, and will not permit any of its
Subsidiaries to, convey, sell, lease, transfer or otherwise
dispose of, in one transaction or a series of transactions,
all or substantially all of its business or assets or,
assets (excluding (i) accounts receivable, (ii) obsolete or
worn-out tools, equipment or other property no longer used
or useful in its business and (iii) inventory or other
property sold or disposed of in the ordinary course of
business and on ordinary business terms) which in the
aggregate have a net book value in excess of $50,000,000,
whether now owned or hereafter acquired, to any other
Person. Notwithstanding the foregoing provisions of this
subsection (g):
(1) any Subsidiary of the Company may be
merged
or consolidated with or into: (A) the Company if the
Company shall be the continuing or surviving
corporation or (B) any other Subsidiary of the Company;
and
(2) any Subsidiary of the Company may sell,
lease, transfer or otherwise dispose of any or all of
its property (upon voluntary liquidation or otherwise)
to the Company or a Subsidiary of the Company.
(h) Compliance with ERISA. The Company will not (i)
enter into any non-exempt prohibited transaction (as defined
in Section 4975 of the Code and in Section 406 of ERISA)
involving any Plan which may result in any liability of the
Company to any Person which (in the reasonable opinion of
the Bank) will have a Material Adverse Effect or (ii) allow
<PAGE> 179
or suffer to exist any other event or condition known to the
Company which results in any liability of the Company or any
of its Subsidiaries to the PBGC, or in any Withdrawal
Liability to any Multiemployer Plan, which (in the
reasonable opinion of the Bank) will have a Material Adverse
Effect. For purposes of this Section 5.01(h), "liability"
shall not include termination insurance premiums payable
under Section 4007 of ERISA. Upon request of the Bank, the
Company shall promptly furnish to the Bank a copy of
Schedule B (Actuarial Information) to the most recently
filed annual report (Form 5500 Series) of any Plan.
(i) Limitation on Liens. The Company will not,
nor will it permit any of its Subsidiaries to, create,
incur, assume or suffer to exist any Lien upon or with
respect to any of its property, whether now owned or
hereafter acquired, except:
(ii) Liens created pursuant to the Related
Documents or pursuant to the First Mortgage Bond
Indenture or the Second Mortgage Bond Indenture;
(iii) Liens created or otherwise in existence on
the Effective Date or contemplated by the Plan of
Reorganization;
(iv) Liens imposed by any governmental authority
for taxes, assessments or charges not yet due or which
are being contested in good faith and by appropriate
proceedings if adequate reserves with respect thereto
are maintained on the books of the Company or the
affected Subsidiaries, as the case may be, in
accordance with GAAP;
(v) carriers', warehousemen's, mechanics',
materialmen's, repairmen's or other like Liens arising
in the ordinary course of business which are not
overdue for a period of more than 60 days or which are
being contested in good faith and by appropriate
proceedings;
(vi) pledges or deposits under worker's
compensation, unemployment insurance and other social
security legislation;
(vii) deposits to secure the performance of bids,
trade contracts (other than for borrowed money),
leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like
nature incurred in the ordinary course of business;
(viii) easements, rights-of-way, restrictions and
other similar encumbrances incurred in the ordinary
course of business and encumbrances consisting of
<PAGE> 180
zoning restrictions, easements, licenses, restrictions
on the use of property or minor imperfections in title
thereto which, in the aggregate, are not material in
amount, and which do not in any case materially detract
from the value of the property subject thereto, render
title to the property encumbered thereby unmarketable,
materially adversely affect the use of such property
for its present purposes or interfere with the ordinary
conduct of the business of the Company or any of its
Subsidiaries;
(ix) Liens on property of any corporation which
becomes a Subsidiary of the Company after the date of
this Agreement, provided that such Liens are in
existence at the time such corporation becomes a
Subsidiary of the Company and were not created in
anticipation thereof, provided further that such Liens
shall not extend to cover any property of the Company
or any of its other Subsidiaries and such Liens shall
not cover property of such Subsidiary other than
property of the types covered by the terms of such
Liens at the time such Subsidiary is acquired;
(x) Liens upon real and/or tangible personal
property acquired after the Effective Date (by
purchase, construction or otherwise) by the Company or
any of its Subsidiaries, each of which Liens either
(A) existed on such property before the time of its
acquisition and was not created in anticipation
thereof, or (B) was created solely for the purpose of
securing Debt representing, or incurred to finance,
refinance or refund, the cost (including the cost of
construction) of such property; provided that no such
Lien shall extend to or cover any property of the
Company or such Subsidiary other than the property so
acquired and improvements thereon;
(xi) banker's liens, rights of set-off and Liens
on documents presented under commercial letters of
credit, in each case granted to banks in accordance
with customary banking practices or arising by
operation of law;
(xii) additional Liens upon real and/or personal
property created after the date hereof, provided that,
on the date each such Lien is incurred, the lower of
(1) the fair market value of all property subject to
Liens permitted by this paragraph (xi) and not
otherwise permitted by this subsection (i) or (2) the
aggregate amount of all obligations secured by Liens
permitted by this paragraph (xi) and not otherwise
permitted by this subsection (i) shall not exceed 5% of
Total Capital on such date; and
<PAGE> 181
(j) any extension, renewal or replacement of the
foregoing, provided, however, that the Liens permitted
hereunder shall not be spread to cover any additional Debt
or property (other than a substitution of like property).
(k) Compliance with Laws, Etc. The Company will
comply, and cause each of its Subsidiaries to comply, in all
material respects, with all applicable laws, rules,
regulations and orders, such compliance to include, without
limitation, compliance with ERISA, except where the failure
to so comply would not have a Material Adverse Effect.
(l) Compliance with Environmental Laws. The Company
will comply, and cause each of its Subsidiaries and all
lessees and other Persons occupying or operating on its
properties to comply, in all material respects, with all
Environmental Laws and Environmental Permits applicable to
its operations and properties; obtain and renew all
Environmental Permits necessary for its operations and
properties; and conduct, and cause each of its Subsidiaries
to conduct, any investigation, study, sampling and testing,
and undertake any cleanup, removal, remedial or other action
required under any Environmental Law to remove and clean up
all Hazardous Materials from any of its properties, in
accordance with the requirements of all Environmental Laws;
provided, however, that neither the Company nor any of its
Subsidiaries shall be required to undertake any such
cleanup, removal, remedial or other action to the extent
that its obligation to do so is being contested in good
faith and by proper proceedings and reserves, where required
by GAAP, are being maintained with respect to such
circumstances.
(m) Visitation Rights. The Company will, at any
reasonable time and from time to time, permit the Bank or
any agents or representatives thereof, to examine and make
copies of and abstracts from the records and books of
account of, and examine the properties of, the Company and
any of its Subsidiaries, and to discuss the affairs,
finances and accounts of the Company and any of its
Subsidiaries with any of their officers or directors and
with their independent certified public accountants.
(n) Maintenance of Properties, Etc. The Company will
maintain and preserve, and cause each of its Subsidiaries to
maintain and preserve, all of its properties that are used
or useful in the conduct of its business in good working
order and condition, ordinary wear and tear excepted;
provided that this subsection (m) shall not prevent the sale
of any properties permitted by subsection (g) of this
Section 5.1.
(o) Change in Nature of Business. The Company will not
make, or permit any of its Subsidiaries to make, any
<PAGE> 182
material change in the nature of its business as carried on
at the date hereof.
(p) Lien. The Company shall maintain the Lien created
or purported to be created by the Second Mortgage Bond
Indenture for the benefit of the Bank and defend, preserve
and protect such Lien against all claims of all Persons.
(q) Maintain Books and Records. The Company shall keep
adequate records and books of account, in which complete
entries will be made in accordance with GAAP consistency
applied.
(r) Additional Documents. As promptly as practicable
(but in any event not later than 30 days) after the
Effective Date, the Company will furnish to the Bank,
(i) certified copies of recorded counterparts of the First
Mortgage Bond Indenture evidencing the filing thereof and
(ii) certified copies of all notices filed with respect to
the First Mortgage Bond Indenture.
(s) Creation of Subsidiaries. The Company shall not,
and shall not permit any of its Subsidiaries to, create any
Subsidiaries of the Company or make any investment in any
Person except in compliance with the Public Utility Holding
Company Act of 1935, as amended, and the regulations and
orders of the Securities and Exchange Commission thereunder.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.1 Events of Default. If any of the
following events ("Events of Default") shall occur and be
continuing:
(a) The Company shall default in the payment when due
of any principal of the Loan; or
(b) The Company shall default in the payment when due
of any interest on the Loan or any other amount payable by
it hereunder and such default shall continue unremedied for
five Business Days; or
(c) The Company or any of its Subsidiaries shall
default in the payment when due of any principal of or any
interest on any Debt aggregating $10,000,000 or more, or
fail to observe or perform any material term, covenant or
agreement contained in any agreement by which it is bound,
evidencing or securing Debt, in an aggregate amount of
$10,000,000 or more, or any other event shall occur or
condition shall exist under any agreement or instrument
relating to any such Debt, after the giving of any required
notice and for such period of time as would permit the
holder or holders thereof or of any obligations issued
<PAGE> 183
thereunder to accelerate the maturity thereof, unless such
failure or event or condition shall have been cured by the
Company or such Subsidiary, as the case may be, or
effectively waived by such holder or holders; or
(d) Any representation, warranty or certification made
or deemed made in any Related Document by the Company (or
any of its officers), or any certificate furnished to the
Bank pursuant to the provisions thereof, shall prove to have
been false or misleading as of the time made or furnished in
any material respect; or
(e) The Company shall default in the performance of any
of its obligations under clause (a)(iv) of Section 5.1 or
clauses (e), (f), (g), or (n) of Section 5.1; or a
consensual Lien shall be created by the Company or any of
its Subsidiaries in violation of Section 5.1(i); or the
Company shall default in its performance of any of its other
obligations under this Agreement or under any other Related
Document and such default in the performance of any such
other obligation shall continue unremedied for a period of
15 days after notice thereof to the Company by the Bank; or
(f) There shall remain in force, undischarged,
unsatisfied and unstayed, for more than 30 days, whether or
not consecutive, any final judgment against the Company or
any of its Material Subsidiaries that, together with other
outstanding final judgments, undischarged, against the
Company and all of its Material Subsidiaries exceeds in the
aggregate $10,000,000 (for the purposes hereof, the term
"final judgment" shall mean a judgment which is not subject
to appeal); or
(g) The Company or any of its Material Subsidiaries
shall make a general assignment for the benefit of
creditors, or admit in writing its inability to pay or
generally fail to pay its debts as they mature or become
due, or shall petition or apply for the appointment of a
trustee or other custodian, liquidator or receiver of the
Company or any of its Material Subsidiaries, as the case may
be, or any substantial part of its respective assets; or the
Company or any of its Material Subsidiaries shall commence
any case or other proceeding relating to the Company or any
of its Material Subsidiaries under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of
debt, dissolution or liquidation or similar law of any
jurisdiction, now or hereafter in effect, or the Company or
any of its Material Subsidiaries shall take any action to
authorize or in furtherance of any of the foregoing; or if
any such petition or application shall be filed or any such
case or other proceeding shall be commenced against the
Company or any of its Material Subsidiaries and the Company
or any of its Material Subsidiaries shall indicate its
approval thereof, consent thereto or acquiescence therein or
<PAGE> 184
such petition or application shall not be dismissed on or
before the 60th day after the filing thereof; or
(h) A decree or order is entered appointing any
trustee, custodian, liquidator or receiver or adjudicating
the Company or any of its Material Subsidiaries bankrupt or
insolvent, or approving a petition in any such case or other
proceeding, or a decree or order for relief is entered in
respect of the Company or any of its Material Subsidiaries
in an involuntary case under federal bankruptcy laws as now
or hereafter reconstituted; or
(i) There shall have been asserted against the Company
by a Governmental Person or other Person, a written
complaint, claim or demand asserting any claims or
liabilities, whether accrued, absolute or contingent, based
on or arising from the presence, release or disposal of
Hazardous Materials by the Company or any of its
Subsidiaries that is reasonably likely to be determined
adversely to the Company or any of its Subsidiaries, and the
amount thereof (either individually or in the aggregate)
would, in such event, have a Material Adverse Effect (after
deducting any portion thereof that is reasonably expected to
be paid by other creditworthy Persons); or
(j) The Confirmation Order shall be (i) reversed,
revoked or vacated in whole or in part by any Final Order of
a court of competent jurisdiction, or (ii) modified in a
manner or subjected to a stay that adversely affects the
Company's ability to perform any of its obligations
hereunder, as determined by the Bank in its sole discretion;
or
(k) Central and South West Corporation shall cease
directly or indirectly, to own (or otherwise shall cease,
directly or indirectly, to control the voting rights of) at
least 51% of the Voting Stock of the Company; or
(l) Any "Event of Default" under and as defined in the
Related Documents shall have occurred and be continuing; or
(m) Any regulatory approval as set forth in
Section 3.1(e) or required to consummate the Plan of
Reorganization shall be rescinded if such rescission can not
be appealed by the Company and has a Material Adverse Effect
on the Company; or
(n) Any material provision of this Agreement or any
other Related Document shall at any time cease to be a
valid, binding obligation of the Company enforceable against
the Company, or any such agreement shall be declared to be
null and void, or the validity or enforceability thereof
shall be contested by the Company, or a proceeding shall be
commenced by any Governmental Person having jurisdiction
<PAGE> 185
over the Company seeking to establish the invalidity or
unenforceability thereof, or the Company shall deny that it
has any further liability or obligation under this Agreement
or the Note or any other Related Document after delivery
thereof or the Second Mortgage Bond Indenture shall for any
reason (other than pursuant to the terms thereof) cease to
create a valid and perfected second priority Lien on the
Company's property purported to be secured thereby;
then, and in any such event, the Bank may, by notice to the
Company, declare the Note, all interest thereon and all other
amounts payable under this Agreement to be forthwith due and
payable, whereupon the Note, all such interest and all such
amounts shall become and be forthwith due and payable, without
presentment, demand, protest, or further notice of any kind, all
of which are hereby expressly waived by the Company; provided,
however, that, in the event of the occurrence of an Event of
Default pursuant to subsections (g) or (h) of this Section 6.1,
the Note, all interest thereon and all other amounts payable
under this Agreement shall automatically become and be due and
payable, without presentment, demand, protest or any notice of
any kind, all of which are hereby expressly waived by the
Company.
ARTICLE VII
SECURITY
SECTION 7.1 Issuance and Pledge of Bonds.
Concurrently with the execution of this Agreement and delivery of
the Note, the Company shall execute, issue, and deliver to the
Bank the Second Mortgage Bonds, Series Y[-3] as security for the
payment of all obligations of the Company now or hereafter
existing under this Agreement or the Note in respect of principal
and interest, pursuant to and on the terms of this Agreement, the
Note and of the Second Mortgage Bond Indenture. The Company
hereby pledges to the Bank and grants to the Bank a security
interest in the Second Mortgage Bonds, Series Y[-3] and all
interest, cash, instruments and other property from time to time
received, receivable or otherwise distributed in respect of or in
exchange for any or all of such Bonds and proceeds of any and all
of the foregoing.
SECTION 7.2 Application of Moneys Any moneys
received by the Bank on account of the Second Mortgage Bonds,
Series Y[-3] shall be applied as follows: (a) moneys received on
account of principal of the Second Mortgage Bonds, Series Y[-3]
shall be applied to the payment of any unpaid principal of the
Note then due and owing and (b) moneys received on account of
interest on the Second Mortgage Bonds, Series Y[-3] shall be
applied to the payment of any accrued and unpaid interest on the
Note then due and owing.
SECTION 7.3 Rights of Bondholders. The Bank, as
holder of the Second Mortgage Bonds, Series Y[-3] shall have only
<PAGE> 186
such rights provided to holders of bonds in the Second Mortgage
Bond Indenture. Without limiting the generality of the
foregoing, (a) the Second Mortgage Bonds, Series Y[-3] may not be
sold, assigned, pledged or otherwise transferred by the Bank,
whether pursuant to the Uniform Commercial Code after an Event of
Default or otherwise except in connection with any assignment of
the Bank's rights and obligations under this Agreement and of the
Note as provided for herein and (b) no payment of principal of or
interest on the Second Mortgage Bonds, Series Y[-3], or any other
amount payable thereunder, shall be demanded or received except
if, and to the extent that, the corresponding payment remains
unpaid hereunder or under the Note. To the extent that moneys
recovered from the Second Mortgage Bonds, Series Y[-3], are
insufficient to pay in full the amount of principal and interest
due on the Note and other amounts due hereunder, the Company
shall remain liable for any such deficiency under the terms of
this Agreement and the Note.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Amendments, Etc. No amendment or waiver
of any provision of this Agreement or the Note, nor consent to
any departure by the Company therefrom, shall in any event be
effective unless the same shall be in writing and signed by the
Bank, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which
given.
SECTION 8.2 Notices, Etc. All notices and other
communications provided for hereunder shall be in writing
(including telecopier, telegraphic, telex or cable communication)
and mailed, telecopied, telegraphed, telexed, cabled or
delivered, if to the Company, at its address at
_________________________________________ Attention:
__________________________________, telex No. _____________
___________ and in the case of telecopier ____ __________; and if
to the Bank, at its address at 335 Madison Avenue, New York, New
York 10017-4681, Attention:
_______________________________________
Department, ____________________________________ Group, telex No.
_______ telecopier to (212) ______________; or, as to each party,
at such other address as shall be designated by such party in a
written notice to the other party. All such notices and
communications shall, when mailed, telecopied, telegraphed,
telexed or cabled, be effective when deposited in the mails,
telecopied, delivered to the telegraph company, confirmed by
telex answerback or delivered to the cable company, respectively,
except that notices to the Bank pursuant to the provisions of
Article II shall not be effective until received by the Bank.
SECTION 8.3 No Waiver; Remedies. No failure on the
part of the Bank to exercise, and no delay in exercising, any
right hereunder or under the Note shall operate as a waiver
thereof; nor shall any single or partial exercise of any such
<PAGE> 187
right preclude any other or further exercise thereof or the
exercise of any other right. The remedies provided in this
Agreement are cumulative and not exclusive of any remedies
provided by law.
SECTION 8.4 Costs, Expenses and Taxes. The Company
agrees to pay on demand all costs and expenses in connection with
the preparation, execution, delivery, administration (except
normal administrative costs and fees and expenses of counsel
related thereto prior to an Event of Default), modification and
amendment of this Agreement, the Note and any other documents to
be delivered hereunder, including, without limitation, the
reasonable fees and out-of-pocket expenses of counsel for the
Bank, and local counsel who may be retained by said counsel, with
respect thereto, with respect to advising the Bank as to its
rights and responsibilities, or the perfection or preservation of
rights or interests, under this Agreement, any other Related
Document and such other documents which may be delivered in
connection with this Agreement, with respect to negotiations with
the Company or with other creditors of the Company, any Person
controlling the Company or any of the Company's Subsidiaries
arising out of any Event of Default or any events or
circumstances that may give rise to an Event of Default and with
respect to presenting claims in or otherwise participating in or
monitoring any bankruptcy, insolvency or other similar proceeding
involving creditor's rights generally and any proceeding
ancillary thereto or in connection with the negotiation of any
restructuring or "work-our" (whether or not consummated). The
Company further agrees to pay on demand all costs and expenses
(including reasonable counsel fees and expenses), in connection
with the enforcement (whether through negotiations, legal
proceedings or otherwise) of this Agreement, the Note, and any
other Related Document and any other documents to be delivered
hereunder, including, without limitation, reasonable counsel fees
and expenses in connection with the enforcement of rights under
this Section 8.4. In addition, the Company shall pay any and all
stamp and other administrative taxes and fees payable or
determined to be payable in connection with the execution and
delivery of this Agreement, the Note, any other Related Document
or any other documents to be delivered hereunder, and agrees to
save the Bank harmless from and against any and all liabilities
with respect to or resulting from any delay in paying or omission
to pay such taxes and fees.
SECTION 8.5 Right of Set-off. Upon the occurrence
and during the continuance of any Event of Default the 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 the Bank to or for the credit or the account of the Company
against any and all of the obligations of the Company now or
hereafter existing under this Agreement, the Note or any other
Related Document, whether or not the Bank shall have made any
<PAGE> 188
demand under this Agreement or the Note and although such
obligations may be contingent or unmatured.
The Bank agrees promptly to notify the Company after
any such set-off and application, provided that the failure to
give such notice shall not affect the validity of such set-off
and application. The rights of the Bank under this Section are
in addition to other rights and remedies (including, without
limitation, other rights of set-off) which the Bank may have.
SECTION 8.6 Binding Effect; Assignments and
Participations. (a) This Agreement shall become effective when
it shall have been executed by the Company and the Bank and
thereafter shall be binding upon and inure to the benefit of the
Company and the Bank and their respective successors and assigns,
except that the Company shall not have the right to assign its
rights hereunder or any interest herein without the prior written
consent of the Bank. The Bank may assign to any Eligible
Institution all, but not less than all, of the Bank's rights and
benefits under this Agreement, the Note and the other Related
Documents, and to the extent of that assignment such assignee
shall have the same rights and benefits against the Company
hereunder and under the other Related Documents as it would have
had if such assignee were the Bank, except that, if the assignee
is not a commercial bank, the Alternate Base Rate and the LIBO
Rate shall be calculated as if such assignee were the Bank.
(b) The Bank may sell or agree to sell, to (i) any
Eligible Institution (each such Eligible Institution being an
"Eligible Participant") or (ii) to one or more other Persons
(each a "Restricted Participant"; and together with any Eligible
Participants being referred to herein as a "Participant"), a
participation in all or any part of the Loan. Each Participant
shall be entitled to the rights and benefits of the provisions of
Section 5.1(a)(vi) with respect to its participation in such Loan
as if (and the Company shall be directly obligated to such
Participant under such provisions as if) such Participant were
the "Bank" for purposes of said Section, but, except as set forth
below, shall not have any other rights or benefits under this
Agreement, the Note or any other Related Document (the
Participant's rights against the Bank in respect of such
participation to be those set forth in the agreements executed by
the Bank in favor of the Participant). All amounts payable by
the Company to the Bank under Section 2.5 and 2.9 in respect of
the Loan shall be determined as if the Bank had not sold or
agreed to sell any participations in the Loan, and as if the Bank
were maintaining the Loan in the same way that it is maintaining
the portion of the Loan in which no participations have been
sold. In the case of an Eligible Participant, the Bank may agree
with such Participant to take or refrain from taking action
hereunder or under any Related Document as the Bank and such
Participant shall determine, as set forth in the agreement
executed by the Bank in favor of such Participant, with respect
to taking or refraining from taking action hereunder or under any
<PAGE> 189
other Related Document. In no event shall the Bank agree with
any Restricted Participant to take or refrain from taking any
action hereunder or under any other Related Document except that
the Bank may agree with a Restricted Participant that it will
not, without the consent of such Restricted Participant, agree to
(i) extend the date fixed for the payment of principal of or
interest on the Loan payable to such Restricted Participant,
(ii) reduce the amount of any such payment of principal,
(iii) reduce the rate at which interest is payable thereon to a
level below the rate at which such Restricted Participant is
entitled to receive such interest, (iv) alter the rights or
obligations of the Company to prepay the Loan, or (v) release any
collateral, including, without limitation, the Second Mortgage
Bonds, Series Y[-3].
(c) Notwithstanding any other provision set forth in
this Agreement, the Bank may at any time create a security
interest in all or any portion of its rights under this
Agreement, the Note and the other Related Documents (including,
without limitation, the Loan owing to it) in favor of any Federal
Reserve Bank in accordance with Regulation A of the Board of
Governors of the Federal Reserve System.
SECTION 8.7 Indemnity. The Company hereby indemnifies
and holds the Bank and each Participant and each of their
Affiliates and their officers, directors, employees, agents and
advisors (each, an "Indemnified Party") harmless from and against
any and all claims, damages, losses, liabilities and expenses
(including, without limitation, reasonable fees and expenses of
counsel) that may be incurred by or asserted or awarded against
any Indemnified Party (except to the extent any such claim,
damage, loss, liability or expense is found in a final,
non-appealable judgment by a court of competent jurisdiction to
have resulted from such Indemnified Party's gross negligence or
willful misconduct), in each case relating to or arising out of
or in connection with or by reason of:
(a) any representation, warranty or certification made
or deemed made in this Agreement or in the Note by the
Company (or any of its officers), or any certificate
furnished to the Bank pursuant to the provisions hereof or
thereof, proving to have been false or misleading as of the
time made or furnished in any material respect;
(b) any case or proceeding pursuant to any
bankruptcy,
insolvency, reorganization, moratorium or similar law or any
restructuring of the Company; or
(c) any cost or liability under any Environmental Law
arising out of the operations or assets of the Company.
SECTION 8.8 Further Assurances. The Company agrees
promptly to do such further acts and things, and to execute and
deliver such additional instruments (including, without
<PAGE> 190
limitation, notices), at its own expense, as the Bank may at any
time reasonably request in order better to insure and confirm the
Bank's rights, powers and remedies hereunder and under the other
Related Documents (including in order to perfect or protect any
pledge or security interest granted or purported to be granted
hereby or to enable the Bank to exercise or enforce its rights
and remedies in respect hereof).
SECTION 8.9 Severability. Any provision of this
Agreement which is prohibited, unenforceable or not authorized in
any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition, unenforceability or
non-authorization without invalidating the remaining provisions
hereof or affecting the validity, enforceability or legality of
such provision in any other jurisdiction.
SECTION 8.10 Headings. Section headings in this
Agreement are included herein for convenience of reference only
and shall not constitute a part of this Agreement for any other
purpose.
SECTION 8.11 GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK, WITHOUT GIVING EFFECT TO CONFLICT OF LAW
PRINCIPLES.
SECTION 8.12 SUBMISSION TO JURISDICTION. THE COMPANY
HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND
OF ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY FOR THE
PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO
THIS AGREEMENT, THE NOTE, THE OTHER RELATED DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY OR THE ACTIONS OR
OMISSIONS OF THE BANK IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE OR ENFORCEMENT OF THIS AGREEMENT OR THE NOTE OR THE
OTHER RELATED DOCUMENTS. THE COMPANY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH
PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH
PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
TO THE EXTENT THAT THE COMPANY HAS OR HEREAFTER MAY
ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY
LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT
PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE)
WITH RESPECT TO ITSELF OR ITS PROPERTY, THE COMPANY HEREBY
IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS
UNDER THIS AGREEMENT AND THE OTHER RELATED DOCUMENTS. THE
COMPANY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY
REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN
OR WITHOUT THE STATE OF TEXAS.
<PAGE> 191
SECTION 8.13 WAIVER OF TRIAL BY JURY. EACH OF THE
COMPANY AND THE BANK HEREBY IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN
ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT, THE NOTE, THE OTHER RELATED DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. THE COMPANY
ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT
CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF
EACH OTHER RELATED DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE BANK ENTERING INTO
THIS AGREEMENT AND EACH SUCH OTHER RELATED DOCUMENT.
SECTION 8.14 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.
SECTION 8.15 INTEGRATION. THIS AGREEMENT REPRESENTS
THE FINAL AGREEMENT BETWEEN THE PARTIES HERETO AS TO THE SUBJECT
MATTER OF THIS AGREEMENT AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES HERETO.
SECTION 8.16 Survival The obligations of the Company
under Sections 2.5, 2.9, 8.7, 8.12 and 8.13 shall survive the
repayment of the Loans and all amounts payable by the Company
under Section 8.4.
SECTION 8.17 Change in Lending Office. The Bank may
from time to time change its lending office at which the Loan is
booked; provided, the provisions of this Agreement, including
without limitation Section 2.10 hereof, shall apply to the Loan
maintained at each such lending office.
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.
EL PASO ELECTRIC COMPANY
By______________________
Title:
WESTPAC BANKING CORPORATION
By________________________
Vice President
<PAGE> 192
EXHIBIT A
PROMISSORY NOTE
$__________________________ Dated:_______________________, 19____
FOR VALUE RECEIVED, the undersigned, EL PASO ELECTRIC
COMPANY, a Texas corporation (the "Company"), HEREBY PROMISES TO
PAY to the order of WESTPAC BANKING CORPORATION (the "Bank") the
principal sum of $[amount of the Loan in figures] in installments
as provided in the Term Loan Agreement referred to below.
The Company promises to pay interest on the principal
amount of the Loan from the date hereof until such principal
amount is paid in full, at such interest rates, and payable at
such times, as are specified in the Term Loan Agreement referred
to below.
Both principal and interest are payable in lawful money
of the United States of America to the Bank at ________________
_______________________________________ in same day funds. All
payments made on account of the principal amount hereof shall be
recorded by the Bank and, prior to any transfer hereof, endorsed
on the grid attached hereto which is a part of this Promissory
Note.
This Promissory Note is the Note referred to in, and is
entitled to the benefits of, the Term Loan Agreement dated as of
________________________, 19____ (the "Term Loan Agreement"),
between the Company and the Bank. The Term Loan Agreement, among
other things, contains provisions for acceleration of the
maturity hereof upon the happening of certain stated events and
also for prepayments on account of principal hereof prior to the
maturity hereof upon the terms and conditions therein specified.
EL PASO ELECTRIC COMPANY
By______________________
Title:
<PAGE> 193
PAYMENTS OF PRINCIPAL
- -----------------------------------------------------------------
> Amount of > >
> Principal Paid > Unpaid Principal > Notation
Date > or Prepaid > Balance > Made By
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
<PAGE> 1
EXHIBIT A-18
[DRAFT 11/04/93]
TERM LOAN AGREEMENT
dated as of ____________, 199__
among
EL PASO ELECTRIC COMPANY, as Borrower,
______________________________
______________________________
______________________________,
as Lenders
and
CANADIAN IMPERIAL BANK OF COMMERCE, as Agent
for the Lenders
<PAGE> 2
TABLE OF CONTENTS
PAGE NO.
PRELIMINARY STATEMENTS . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I.
DEFINITIONS. . . . . . . . . . 2
SECTION 1.01. Definitions. . . . . . . . . . . . . . . . 2
SECTION 1.02. Computation of Time Periods. . . . . . . . 13
SECTION 1.03. Accounting Terms.. . . . . . . . . . . . . 14
SECTION 1.04. Interpretation.. . . . . . . . . . . . . . 14
ARTICLE II.
AMOUNTS AND TERMS OF THE LOAN . . . . 14
SECTION 2.01. The Loans. . . . . . . . . . . . . . . . 14
SECTION 2.02. Repayment. . . . . . . . . . . . . . . . 14
SECTION 2.03. Interest.. . . . . . . . . . . . . . . . 15
SECTION 2.04. Prepayments. . . . . . . . . . . . . . . 17
SECTION 2.05. Increased Costs, Etc.. . . . . . . . . . 17
SECTION 2.06. Interest Rate Protection.. . . . . . . . 19
SECTION 2.07. Illegality, Etc. . . . . . . . . . . . . 20
SECTION 2.08. Payments and Computations. . . . . . . . 20
SECTION 2.09. U.S. Taxes.. . . . . . . . . . . . . . . 21
SECTION 2.10. Applicable Lending Office. . . . . . . . 22
SECTION 2.11. Net Payments.. . . . . . . . . . . . . . 22
SECTION 2.12. Maximum Interest.. . . . . . . . . . . . 23
SECTION 2.13. Sharing of Payments. . . . . . . . . . . 24
SECTION 2.14. Pro Rata Treatment.. . . . . . . . . . . 25
ARTICLE III.
CONDITIONS TO CLOSING . . . . . . 25
SECTION 3.01. Closing Documents. . . . . . . . . . . . 25
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES . . . . 28
SECTION 4.01. Representations and Warranties of the
Company. . . . . . . . . . . . . . . . . 28
ARTICLE V.
COVENANTS OF THE COMPANY. . . . . . 31
SECTION 5.01. Covenants of the Company.. . . . . . . . 31
ARTICLE VI.
EVENTS OF DEFAULT . . . . . . . 39
SECTION 6.01. Events of Default. . . . . . . . . . . . 39
i
<PAGE> 3
TABLE OF CONTENTS
PAGE NO.
ARTICLE VII.
SECURITY. . . . . . . . . . 42
SECTION 7.01. Issuance and Pledge of Bonds.. . . . . . 42
SECTION 7.02. Application of Moneys. . . . . . . . . . 42
SECTION 7.03. Rights of Bondholders. . . . . . . . . . 42
ARTICLE VIII.
THE AGENT . . . . . . . . . 43
SECTION 8.01. Actions; Indemnity. . . . . . . . . 43
SECTION 8.02. Funding Reliance, etc.. . . . . . . 43
SECTION 8.03. Exculpation.. . . . . . . . . . . . 44
SECTION 8.04. Successor.. . . . . . . . . . . . . 44
SECTION 8.05. Loans by CIBC.. . . . . . . . . . . 45
SECTION 8.06. Credit Decisions. . . . . . . . . . 45
SECTION 8.07. Copies, etc.. . . . . . . . . . . . 46
SECTION 8.08. Agency Fee. . . . . . . . . . . . . 46
ARTICLE IX.
MISCELLANEOUS
SECTION 9.01. Amendments, Etc. . . . . . . . . . . . . 46
SECTION 9.02. Notices, Etc.. . . . . . . . . . . . . . 47
SECTION 9.03. No Waiver; Remedies. . . . . . . . . . . 47
SECTION 9.04. Costs, Expenses and Taxes. . . . . . . . 48
SECTION 9.05. Right of Set-off.. . . . . . . . . . . . 48
SECTION 9.06. Binding Effect; Assignments and
Participations.. . . . . . . . . . . . . 49
SECTION 9.07. Indemnity. . . . . . . . . . . . . . . . 51
SECTION 9.08. Further Assurances.. . . . . . . . . . . 51
SECTION 9.09. Severability.. . . . . . . . . . . . . . 51
SECTION 9.10. Headings.. . . . . . . . . . . . . . . . 52
SECTION 9.11. GOVERNING LAW. . . . . . . . . . . . . . 52
SECTION 9.12. FORUM SELECTION AND SUBMISSION TO
JURISDICTION.. . . . . . . . . . . . . . 52
SECTION 9.13. WAIVER OF TRIAL BY JURY. . . . . . . . . 52
SECTION 9.14. Counterparts.. . . . . . . . . . . . . . 53
SECTION 9.15. INTEGRATION. . . . . . . . . . . . . . . 53
SECTION 9.16. Survival.. . . . . . . . . . . . . . . . 53
EXHIBIT A Promissory Note
ii
<PAGE> 4
TERM LOAN AGREEMENT
TERM LOAN AGREEMENT, dated as of [the Effective Date],
among El Paso Electric Company, a Texas corporation (the
"Company"), Canadian Imperial Bank of Commerce ("CIBC"), each of
the other financial institutions as are or may become parties
hereto (collectively, with CIBC, the "Lenders") and CIBC, as
agent for the Lenders (in such capacity and together with any
successors, (the "Agent").
PRELIMINARY STATEMENTS:
(1) The Company is a party to (i) a certain Purchase
Contract dated as of January 4, 1979 (as amended, modified and
supplemented from time to time, the "Purchase Contract") with
Newton I. Waldman, Esq. ("Waldman"), as trustee for the Rio
Grande Resources Trust ("RGRT"), a trust established for the
purpose of financing the purchase and enrichment of nuclear fuel
for use by the Company in connection with its participation in
the Palo Verde Nuclear Plant and (ii) certain Assignment
Agreements (as defined in the Purchase Contract, and together
with the Purchase Contract and other instruments, documents and
agreements related thereto, as amended and supplemented, the
"RGRT Agreements").
(2) Pursuant to a certain Credit Agreement dated as of
January 4, 1979 (as amended, modified and supplemented from time
to time, the "Credit Agreement") between Bank of America National
Trust and Savings Association ("BofA"), successor by merger to
Security Pacific National Bank, The Bank of New York, successor
by merger to Empire National Bank, and Waldman, as trustees of
RGRT, BofA agreed to extend credit in connection with the RGRT
Agreements, up to an aggregate principal amount of $125 million.
(3) On January 8, 1992, the Company commenced a
voluntary case (the "Bankruptcy Case") under chapter 11 of the
Bankruptcy Code (as hereinafter defined) (Case No. 92-10148-FM)
in the Bankruptcy Court (as hereinafter defined), and thereafter
has continued to operate its business and manage its assets as a
debtor-in-possession.
(4) Among the claims filed against the Company in the
Bankruptcy Case were those of RGRT and the Credit Bank (as
defined in the Credit Agreement) in respect of the RGRT
Agreements and the Credit Agreement (the "Claim").
(5) In April 1993, CIBC replaced BofA as the Credit
Bank under the Credit Agreement.
(6) On [ , 199 ] (the "Confirmation Date"), an order
(the "Confirmation Order") was entered by the court having
jurisdiction over the Bankruptcy Case (the "Bankruptcy Court")
<PAGE> 5
confirming the Plan of Reorganization (as hereinafter defined),
which Plan of Reorganization provides, among other things, for
the Company to enter into this Agreement with the Lenders and the
Agent.
(7) As of the Confirmation Date, each of the Lenders is
a participant in the Loans made by the Credit Bank under the
Credit Agreement and, accordingly, is a participant in the Claim
of the Credit Bank.
(8) Pursuant to Section 3.8(A)(1) of the Plan of
Reorganization and in accordance with the terms thereof, a
portion of the Claim is to be discharged and satisfied by the
execution and delivery by the Company of this Agreement, which
Agreement provides, among other things, for the execution and
delivery by the Company to the Lenders of the Notes (as
hereinafter defined), which Notes shall be secured by the Second
Mortgage Bonds, Series Z (as hereinafter defined).
NOW, THEREFORE, in consideration of the premises and of
the mutual covenants and agreements contained in the Plan of
Reorganization and herein, the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.01. Definitions. As used in this Agreement,
the following terms have the following meanings:
"Affiliate" means, as to any Person, any other Person
that, directly or indirectly, controls, is controlled by or
is under common control with such Person or is a director or
officer of such Person. For purposes of this definition, the
term "control" (including the terms "controlling,"
"controlled by" and "under common control with") of a Person
means the possession, direct or indirect, of the power to
vote 5% or more of the Voting Stock of such Person or to
direct or cause the direction of the management and policies
of such Person, whether through the ownership of Voting
Stock, by contract or otherwise.
"Alternate Base Rate" means, on any date with respect to
all Alternate Base Rate Loans, a fluctuating interest rate
per annum as shall be in effect from time to time which rate
per annum shall at all times be equal to the highest of:
(a) the rate of interest most recently established by
CIBC at its New York office as its base rate for Dollar
loans in the United States;
(b) the CD Published Moving Rate most recently
determined by the Agent plus 1/2%; and
<PAGE> 6
(c) the Federal Funds Rate most recently determined by
the Agent plus 1/2%.
Neither the Alternate Base Rate nor the base rate described
in clause (a) above is necessarily intended to be the lowest
rate of interest determined by CIBC or the Agent in
connection with extensions of credit. Changes in the rate of
interest on that portion of the Loan maintained as Alternate
Base Rate Loans will take effect simultaneously with each
change in the Alternate Base Rate. The Agent will give
notice promptly to the Company of changes in the Alternate
Base Rate, provided that failure by the Agent to give such
notice shall not affect the Company's obligations hereunder.
"Alternate Base Rate Loan" means the portion of the Loan
which bears interest as provided in Section 2.03(a).
"Banking Institution" means any financial institution
subject to regulation under Regulation D of the F.R.S. Board,
and any other banking institution or trust company or similar
organization incorporated or organized under the laws of a
country other than the United States, or a political
subdivision of a country other than the United States.
"Bankruptcy Case" has the meaning assigned to that term
in Preliminary Statement (3).
"Bankruptcy Code" means the Bankruptcy Reform Act of
1978, as heretofore and hereafter amended, and codified as
title 11 of the United States Code.
"Bankruptcy Court" has the meaning assigned to that term
in Preliminary Statement (6).
"Business Day" means a day of the year on which banks
are not required or authorized to close in New York City and,
if the applicable Business Day relates to any Eurodollar
Loans, on which dealings are carried on in the London
interbank market.
"Capital Lease Obligation" means, with respect to any
lease of property which, in accordance with GAAP, appears on
the lessee's balance sheet as a capital lease, the amount of
the liability which should appear on such balance sheet.
"CD Published Moving Rate" means, on any particular
date, the latest three-week moving average of daily secondary
market morning offering rates in the United States for three-
month certificates of deposit of major United States money
market lenders, such three-week moving average being
determined weekly for the three-week period ending on the
previous Friday by the Agent on the basis of:
<PAGE> 7
(a) such rates reported by certificate of deposit
dealers to and published by the Federal Reserve Bank of
New York in the most recent Federal Reserve Statistical
Release Publication H.15 (Selected Interest Rates) (as
adjusted for reserves and assessments in the same manner
as the C/D Quoted Rate); or
(b) if such publication shall be suspended or
terminated, the C/D Quoted Rate determined by the Agent
on the basis of quotations for such rates received by
the Agent.
"C/D Quoted Rate" means, relative to any determination
of the CD Published Moving Rate in circumstances when
publication of the rates referred to in clause (a) of the
definition thereof has been suspended or terminated, the rate
of interest per annum determined by the Agent to be the sum
(adjusted to the nearest 1/100th of 1%, if any) of:
(a) the rate obtained by dividing (i) the average
(rounded upward, if necessary, to the nearest 1/16th of
1%) of the bid rates quoted to the Agent in the
secondary market where CIBC conducts its United States
funding operations at approximately 10:00 a.m., New York
City time (or as soon thereafter as practicable), on the
date of determination three certificate of deposit
dealers of recognized standing selected by the Agent for
the purchase at face value of three-month certificates
of deposit of CIBC in an amount approximately equal or
comparable to the amount of CIBC's portion of the Loan
outstanding hereunder with respect to which the C/D
Quoted Rate is being determined by (ii) a percentage
equal to 100% minus the average of the daily percentages
specified during such period by the F.R.S. Board for
determining the maximum reserve requirement (including,
but not limited to, any marginal reserve requirement)
for a member bank of the Federal Reserve System in
respect of liabilities consisting of or including (among
other liabilities) three-month Dollar nonpersonal time
deposits in the United States; and
(b) the daily average during such period of the
net annual assessment rates estimated by the Agent for
determining the then current annual assessment payable
by a member bank to the FDIC for FDIC's insuring Dollar
deposits of a member bank in the United States.
"CERCLA" means the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended
from time to time.
"Claim" has the meaning assigned to that term in
Preliminary Statement (4).
<PAGE> 8
"Code" means the Internal Revenue Code of 1986, as
amended from time to time.
"Confirmation Date" has the meaning assigned to that
term in Preliminary Statement (6).
"Confirmation Order" has the meaning assigned to that
term in Preliminary Statement (6).
"Consolidated Subsidiary" means, for any Person, each
Subsidiary of such Person (whether now existing or hereafter
created or acquired) the financial statements of which shall
be (or should have been) consolidated with the financial
statements of such Person in accordance with GAAP.
"Credit Agreement" has the meaning assigned to that term
in Preliminary Statement (6).
"Debt" of any Person means, without duplication, (a) all
indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services (including
without limitation, all obligations, contingent or otherwise,
of such Person in connection with acceptance facilities
(other than acceptance facilities entered into in connection
with normal course commercial trade transactions) and letter
of credit facilities to the extent such letter of credit
facilities support Debt), (b) all obligations of such Person
evidenced by notes, bonds, debentures or other similar
instruments, (c) all obligations of such Person created or
arising under any conditional sale or other title retention
agreement with respect to property acquired by such Person
(even though the rights and remedies of the seller or lender
under such agreement in the event of default are limited to
repossession or sale of such property), (d) all Capital Lease
Obligations of such Person, (e) all obligations of such
Person to purchase, redeem, retire, defease or otherwise make
any payment in respect of any capital stock of or other
ownership or profit interest in such Person or any other
Person or any warrants, rights or options to acquire such
capital stock, valued, in the case of preferred stock, at the
greater of its voluntary or involuntary liquidation
preference plus accrued and unpaid dividends, (f) all Debt of
others referred to in clauses (a) through (e) above
guaranteed directly or indirectly in any manner by such
Person, or in effect guaranteed directly or indirectly by
such Person through an agreement (i) to pay or purchase such
Debt or to advance or supply funds for the payment or
purchase of such Debt, (ii) to purchase, sell or lease (as
lessee or lessor) property, or to purchase or sell services,
primarily for the purpose of enabling the debtor to make
payment of such Debt or to assure the holder of such Debt
against loss, (iii) to supply funds to or in any other manner
invest in the debtor (including any agreement to pay for
property or services irrespective of whether such property is
<PAGE> 9
received or such services are rendered) or (iv) otherwise to
assure a creditor against loss, and (g) all Debt referred to
in clauses (a) through (e) above 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 (including,
without limitation, accounts and contract rights) owned by
such Person, even though such Person has not assumed or
become liable for the payment of such Debt. In cases where
recourse to any Person or any of its properties in respect of
Debt is limited, the amount of such Debt of such Person for
purposes hereof shall be so limited.
"Dollar" and the sign "$" mean lawful money of the
United States of America.
"EBITA" means, for any period, the sum, for the Company
and its Consolidated Subsidiaries (determined on a
consolidated basis without duplication in accordance with
GAAP), of the following: (a) net operating income
(calculated before taxes, Interest Expense, extraordinary
items and unusual, non-cash, non-recurring items and income
or loss attributable to equity in Affiliates) for such period
plus (b) amortization (to the extent deducted in determining
net operating income) for such period.
"Effective Date" means the Effective Date (as defined
therein) of the Plan of Reorganization.
"Eligible Institution" means (i) a bank or trust company
organized under the laws of the United States of America, of
any state therein, of the District of Columbia, of any member
country of the Organization for Economic Cooperation and
Development or of any political subdivision of any such
country, in each case having assets in excess of
$500,000,000, (ii) an insurance company organized under the
laws of any state in the United States of America or of the
District of Columbia having assets in excess of $500,000,000
or (iii) any other Person consented to by the Company, which
consent shall not be unreasonably withheld.
"Eligible Participant" has the meaning assigned to that
term in Section 9.06(c).
"Environmental Action" means any administrative,
regulatory or judicial action, suit, demand, demand letter,
claim, notice of non-compliance or violation, investigation,
proceeding, consent order or consent agreement relating in
any way to any Environmental Law or any Environmental Permit
including, without limitation, (a) any claim by any
governmental or regulatory authority for enforcement,
investigation, cleanup, removal, response, remedial or other
actions or damages pursuant to any Environmental Law and (b)
any claim by any Person seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive
<PAGE> 10
relief resulting from Hazardous Materials or arising from
alleged injury or threat of injury to health, safety or the
environment.
"Environmental Law" means any federal, state or local
law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award relating to the environment,
health, safety or Hazardous Materials.
"Environmental Permit" means any permit, approval,
identification number, license or other authorization
required under any Environmental Law.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended from time to time, and the
regulations promulgated and rulings issued thereunder.
"ERISA Affiliate" means any Person who for purposes of
Title IV of ERISA is a member of the Company's controlled
group, or under common control with the Company, within the
meaning of Section 414 of the Internal Revenue Code of 1986,
as amended.
"Eurodollar Loan" means the portion of a Loan which
bears interest at the Eurodollar Rate.
"Eurodollar Rate" means, for any Interest Period, an
interest rate per annum equal at all times during such
Interest Period to the sum of (x) the LIBO Rate for such
Interest Period plus (y) 1.50% per annum.
"Event of Default" has the meaning assigned to that term
in Section 6.01.
"FDIC" means the Federal Deposit Insurance Corporation
or any successor thereto.
"Federal Funds Rate" means, for any day, a fluctuating
interest rate per annum equal for such day to:
(a) 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 for such day (or, if such day is not a
Business Day, for the next preceding Business Day) by
the Federal Reserve Bank of New York in the most recent
Federal Reserve Statistical Release Publication H.15
(Selected Interest Rates); or
(b) if such rate is not so published for any day
which is a Business Day, the average of the quotations
for such day on such transactions received by CIBC from
three federal funds brokers of recognized standing
selected by it.
<PAGE> 11
"Fee Letter" has the meaning assigned to that term in
Section 8.08.
"Final Approval" means any authorizations, consents,
approvals, waivers, exceptions, variances, orders, licenses,
exemptions, publications, filings, notices to and
declarations of or with any governmental authority (other
than routine reporting requirements the failure to comply
with which will not affect the validity or enforceability of
any of the Related Documents or have a Material Adverse
Effect) or any other action in respect of any governmental
authority that is in full force and effect and is not the
subject of a pending appeal or motion for reconsideration or
other review, and the time in which to make an appeal or
request the review or reconsideration of which has expired
without any appeal or request for review or reconsideration
having been taken or made.
"Final Order" means an order of the Bankruptcy Court
which (a) shall not have been reversed, stayed, modified or
amended and the time to appeal from, or to seek review or
rehearing of, shall have expired and as to which no appeal or
petition for review, rehearing or certiorari is pending or
(b) if appealed from, shall have been affirmed and the time
to appeal from such affirmance or to seek review or rehearing
thereof shall have expired or no further hearing, appeal or
petition for certiorari can be taken or granted.
"First Mortgage Bond Indenture" means the Indenture
dated as of between the Company and
____________, as trustee, providing for the issuance by the
Company of its first mortgage bonds.
"First Mortgage Bonds" means bonds issued by the Company
under the First Mortgage Bond Indenture.
"First Mortgage Bonds, Series A/B" means collectively,
the First Mortgage Bonds, Series A and the First Mortgage
Bonds, Series B, in each case issued under the First Mortgage
Bond Indenture.
"F.R.S. Board" means the Board of Governors of the
Federal Reserve System or any successor thereto.
"GAAP" means generally accepted accounting principles in
the United States of America as in effect from time to time.
"Governmental Person" means any national, state or local
government, any political subdivision or any government
instrumentality, authority, body or entity, including the
FDIC, the F.R.S. Board, any central bank or any comparable
authority.
<PAGE> 12
"Hazardous Materials" means (a) petroleum or petroleum
products, asbestos in any form, radioactive or source
material, (b) any substances defined as or included in the
definition of "hazardous substances", "hazardous wastes",
"hazardous materials", "extremely hazardous wastes",
"restricted hazardous wastes", "toxic substances", "toxic
pollutants", "contaminants" or "pollutants", or words of
similar import, under any Environmental Law and (c) any other
substance exposure to which is regulated under any
Environmental Law.
"Highest Lawful Rate" means, with respect to any Lender,
the maximum interest rate permitted by applicable law to be
charged by such Lender.
"Indemnified Party" has the meaning assigned to that
term in Section 9.07.
"Interest Coverage Ratio" means, as at any date, the
ratio of (a) EBITA for the period of four consecutive fiscal
quarters ending on or most recently ended prior to such date
to (b) Interest Expense for such period.
"Interest Expense" means, for any period, the sum, for
the Company and its Consolidated Subsidiaries (determined on
a consolidated basis without duplication in accordance with
GAAP), of the following: (a) all interest in respect of Debt
including, without limitation, interest capitalized during
such period (whether or not actually paid during such
period), including, without limitation, all commissions and
fees (other than up-front fees), plus (b) the net amounts
payable (or minus the net amounts receivable) under Interest
Rate Protection Agreements accrued during such period
(whether or not actually paid or received during such
period).
"Interest Period" has the meaning assigned to that term
in Section 2.03(b).
"Interest Rate Protection Agreement" means, for any
Person, an interest rate swap, cap or collar agreement,
interest rate future or option contracts or similar
arrangement providing for the transfer or mitigation of
interest risks either generally or under specific
contingencies.
"Lender Assignment" means a Lender Assignment Agreement
substantially in the form of Exhibit C annexed hereto.
"Leverage Ratio" means, at any time, the ratio of Total
Debt at such time to the sum of (a) Total Capital at such
time plus (b) Total Debt at such time.
<PAGE> 13
"LIBO Rate" means, relative to any Interest Period for
any Eurodollar Loan, the rate of interest equal to the
average (rounded upwards, if necessary, to the nearest 1/16
of 1%) of the rates per annum at which Dollar deposits in
immediately available funds are offered to CIBC's LIBOR
Office in the New York, New York interbank eurodollar market
as at or about 10:00 a.m. New York, New York 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 CIBC's
Eurodollar Loan and for a period approximately equal to such
Interest Period.
"LIBOR Office" means, relative to any Lender, the office
of such Lender designated as such below its signature hereto
or such other office of a Lender as designated from time to
time by notice from such Lender to the Company, whether or
not outside the United States, which shall be making or
maintaining Eurodollar Loans of such Lender hereunder.
"Lien" means any lien, security interest, or other
charge or encumbrance of any kind, or any other type of
preferential arrangement, including, without limitation, the
lien or retained security title of a conditional vendor and
any easement, right of way or other encumbrance on title to
real property.
"Loans" has the meaning assigned to that term in Section
2.01.
"Material Adverse Effect" means a material adverse
effect on (i) the property, business, operations, financial
condition, liabilities or capitalization of the Company and
its Subsidiaries taken as a whole, (ii) the ability of the
Company to perform its obligations under any of the Related
Documents, (iii) the validity or enforceability of any of the
Related Documents, (iv) the rights and remedies of the Agent
or the Lenders or (v) the timely payment of the principal of
or interest on the Notes or other amounts payable in
connection herewith or therewith.
"Material Subsidiary" means, at any time, a Subsidiary
of the Company (a) whose assets at such time exceed 10% of
the assets of the Company and its Subsidiaries (on a
consolidated basis) or (b) whose earnings at such time exceed
10% of the earnings of the Company and its Subsidiaries (on a
consolidated basis).
"Multiemployer Plan" means a multiemployer plan, as
defined in Section 4001(a)(3) of ERISA, to which the Company
or any ERISA Affiliate is making or accruing an obligation to
make contributions, or has within any of the preceding five
<PAGE> 14
plan years made or accrued an obligation to make
contributions, such plan being maintained pursuant to one or
more collective bargaining agreements.
"Multiple Employer Plan" means a single employer plan,
as defined in Section 4001(a)(15) of ERISA, that (i) is
maintained for employees of the Company or an ERISA Affiliate
and at least one Person other than the Company and its ERISA
Affiliates or (ii) was so maintained and in respect of which
the Company or an ERISA Affiliate could have liability under
Section 4064 or 4069 of ERISA in the event such plan has been
or were to be terminated.
"Note" means a promissory note of the Company payable to
a Lender, in substantially the form of Exhibit A.
"Participant" has the meaning assigned to that term in
Section 9.06.
"Percentage" means, relative to any Lender, the
percentage set forth opposite its signature hereto, or set
forth in the Lender Assignment, as such percentage may be
adjusted from time to time pursuant to Lender Assignment
executed by such Lender and its assignee(s) and delivered
pursuant to Section 9.06(b).
"PBGC" means the Pension Benefit Guaranty Corporation or
any successor thereto.
"Person" means an individual, a corporation, a
partnership, an association, a business trust or any other
entity or organization, including a Governmental Person.
"Plan" means a Single Employer Plan or a Multiple
Employer Plan.
"Plan of Reorganization" means the Modified Third
Amended Plan of Reorganization of the Debtor Providing for
the Acquisition of El Paso Electric Company by Central and
South West Corporation filed on August 27, 1993 (as corrected
as of September 15, 1993).
"Purchase Contract" has the meaning assigned to that
term Preliminary Statement (1).
"Related Documents" means collectively, this Agreement,
the Note, the Second Mortgage Bond Indenture, and the Second
Mortgage Bonds, Series Z.
<PAGE> 15
"Required Lenders" means, at any time, Lenders holding
more than 50% of the then aggregate outstanding principal
amount of the Notes then held by the Lenders.
"RGRT" has the meaning assigned to that term in
Preliminary Statement (1).
"RGRT Agreements" has the meaning assigned to that term
in Preliminary Statement (1).
"Second Mortgage Bond Indenture" means the Indenture
dated as of between the Company and _________,
as trustee, providing for the issuance by the Company of its
second mortgage bonds.
"Second Mortgage Bonds" means bonds issued by the
Company under the Second Mortgage Bond Indenture.
"Second Mortgage Bonds, Series A" means Second Mortgage
Bonds, Series A issued under the Second Mortgage Bond
Indenture.
"Second Mortgage Bonds, Series Z" means Series Z of the
Second Mortgage Bonds issued by the Company in an aggregate
principal or face amount equal to the aggregate principal
amount of the Loans outstanding on the Effective Date and
pledged to the Agent on behalf of the Lenders.
"Single Employer Plan" means a single employer plan, as
defined in Section 4001(a)(15) of ERISA, that (i) is
maintained for employees of the Company or an ERISA Affiliate
and no Person other than the Company and its ERISA Affiliates
or (ii) was so maintained and in respect of which the Company
or an ERISA Affiliate could have liability under Section 4069
of ERISA in the event such plan has been or were to be
terminated.
"Submission Date" means the date the form of this
Agreement was filed with the Bankruptcy Court prior to the
date Lenders must have voted on the Plan of Reorganization in
accordance with Section 7.6 of the Plan of Reorganization.
"Subsidiary" means, with respect to any Person, any
corporation, partnership or other entity of which at least a
majority of the Voting Stock is at the time directly or
indirectly owned or controlled by such Person or one or more
Subsidiaries of such Person or by such Person and one or more
Subsidiaries of such Person.
"Total Capital" means at any date, the sum for the
Company and its Consolidated Subsidiaries (determined on a
<PAGE> 16
consolidated basis without duplication in accordance with
GAAP), of the following:
(a) the amount of capital stock (excluding treasury
stock and capital stock subscribed for and unissued and
preferred stock mandatorily redeemable in cash or redeemable
in cash at the option of the holder thereof), plus
(b) the amount of surplus and retained earnings (or, in
the case of a surplus or retained earnings deficit, minus the
amount of such deficit).
"Total Debt" means, as at any date, the aggregate amount
of all Debt of the Company and its Consolidated Subsidiaries
(determined on a consolidated basis without duplication in
accordance with GAAP) (other than contingent obligations in
connection with acceptance facilities and letters of credit).
"Voting Stock" means capital stock issued by a
corporation, or equivalent interests in any other Person, the
holders of which are ordinarily, in the absence of
contingencies, entitled to vote for the election of directors
(or Persons performing similar functions) of such Person,
even though the right so to vote has been suspended by the
happening of such a contingency.
"Waldman" has the meaning assigned to that term in
Preliminary Statement (1).
"Withdrawal Liability" has the meaning given such term
under Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. Computation of Time Periods. In this
Agreement, in the computation of a period of time from a
specified date to a later specified date, the word "from" means
"from and including" and the words "to" and "until" each means
"to but excluding".
SECTION 1.03. Accounting Terms. All accounting terms
not specifically defined herein shall be construed in accordance
with GAAP consistently applied, except as otherwise stated
herein.
SECTION 1.04. Interpretation. In this Agreement the
singular includes the plural and the plural the singular; words
importing any gender include the other genders; references to
statutes are to be construed as including all statutory
provisions consolidating, amending or replacing the statute
referred to; references to "writing" include printing, typing,
lithography and other means of reproducing words in a tangible
visible form; references to sections (or any subdivision of a
<PAGE> 17
section), articles, schedules, annexes and exhibits are to those
of this Agreement unless otherwise indicated; the words
"including", "includes" and "include" shall be deemed to be
followed by the words "without limitation"; references to
agreements and other contractual instruments shall be deemed to
include all subsequent amendments and other modifications to such
instruments but only to the extent such amendments and other
modifications are not prohibited by the terms of this Agreement;
and references to Persons include their respective permitted
successors and assigns and, in the case of Governmental Persons,
Persons succeeding to their respective functions and capacities.
ARTICLE II.
AMOUNTS AND TERMS OF THE LOANS
SECTION 2.01. The Loans. (a) As provided in Section
3.8(A)(1) of the Plan of Reorganization, each Lender severally
agrees, on the terms of this Agreement, to accept, in
satisfaction of its participation in a portion of the Claim, to
the extent provided in such section of the Plan of
Reorganization, a term loan in the principal amount of its
Percentage of such portion (each a "Loan" and collectively, the
"Loans"). Amounts repaid or prepaid hereunder may not be
reborrowed.
(b) Each Loan shall be evidenced by a Note completed to the
order of the Lender to be executed and delivered by the Company
on the Effective Date in the principal amount of its Loan.
SECTION 2.02. Repayment. The Company shall pay to the
Agent for the account of each Lender the unpaid principal amount
of the Loans in substantially equal quarterly installments
commencing on the last Business Day of ________, 199_ and on the
last Business Day of each ________, ____________, ____________
and ____________ thereafter through and including __________,
199_; provided, however, that the last such installment shall be
in the amount necessary to repay in full the unpaid principal
amount of the Loans.[1]
SECTION 2.03. Interest. The Company shall pay to the
Agent for the account of each Lender interest on the unpaid
principal amount of the Loan of such Lender from the date of the
Note of such Lender until the principal amount of such Loan shall
be paid in full, at the applicable rate set forth below:
- ------------------------------
[1] Payments shall be made in accordance with Section 3.8(A)(1)
of the Plan of Reorganization
<PAGE> 18
(a) Alternate Base Rate. Except to the extent the
Company shall elect to pay interest on all or part of the
unpaid principal amount of the Loans for any Interest Period
pursuant to subsection (c) of this Section 2.03, the Company
shall pay interest on the unpaid principal of the Loans from
the date of the Notes until the principal amount of the Loans
is paid in full at a fluctuating rate per annum equal at all
times to .50% per annum above the Alternate Base Rate in
effect from time to time, payable quarterly on the last
Business Day of each _________, _____________, _____________
and __________ and on the date the Loans are paid in full.
(b) Interest Periods. The Company may from time to
time elect to have the interest on all or part of the
principal amount of the Loans determined and payable for a
specified three-month period (an "Interest Period") in
accordance with subsection (c) of this Section 2.03 and
subject to the provisions of Section 2.08. The first day of
an Interest Period shall be either the date of the Note, the
date the Company specifies as the first day of an Interest
Period for a Eurodollar Loan, or the last day of the then
current Interest Period for a Eurodollar Loan; provided,
however, that (i) the Company may not select any Interest
Period which ends after (x) ______________, 199_ or (y) any
principal repayment installment date unless, after giving
effect to such selection, the aggregate unpaid principal
amount of Eurodollar Loans having Interest Periods which end
on or prior to such principal repayment installment date and
Alternate Base Rate Loans shall be at least equal to the
principal amount of the Loans due and payable on and prior to
such date and (ii) the Company shall not select Interest
Periods to be in effect at any one time which have expiration
dates occurring on more than four different dates.
(c) Eurodollar Rate. The Company may from time to time
elect to pay interest on all or part of the principal amount
of the Loans (provided that any such partial principal amount
shall not be less than $10,000,000 and shall be in an
integral multiple of $1,000,000) at the Eurodollar Rate for
an Interest Period by written notice, specifying the
principal amount and the first day of such Interest Period,
received by the Agent before 12:00 Noon (New York City time)
three Business Days prior to the first day of such Interest
Period, payable on the last day of such Interest Period. The
Agent will promptly notify each Lender of the contents of
each such notice received from the Company.
(d) Default Interest. The Company shall pay, but only
to the extent permitted by law, interest (after as well as
before judgment) on the unpaid principal amount of any Loan
that is not paid when due (whether on the Final Maturity
<PAGE> 19
Date, by acceleration or otherwise) and on the unpaid amount
of all interest, and other amounts payable hereunder, that is
not paid when due, payable on demand, at a rate per annum
equal at all times to 2% per annum above the Alternate Base
Rate in effect from time to time. Notwithstanding anything
in this Agreement to the contrary, upon the occurrence and
during the continuance of an Event of Default, the right of
the Company to make an election in respect of the Eurodollar
Rate pursuant to Section 2.03(c) shall terminate (i)
automatically, in the case of an Event of Default referred to
in Section 6.01(a) or (b) or (ii) upon notice to the Company
by the Agent, in all other cases; provided that no
termination referred to in either of the preceding clauses
(i) and (ii) shall affect any Eurodollar Loan during any
Interest Period in effect for such Eurodollar Loan at the
time such notice is received by the Company.
(e) Alternate Rate of Interest. In the event, and on
each occasion, that, on the day two Business Days prior to
the commencement of any Interest Period for a Eurodollar
Loan, the Agent shall have determined (which determination
shall be conclusive and binding upon the Company absent
manifest error) that reasonable means do not exist for
ascertaining the applicable Eurodollar Rate (including
without limitation if Dollar deposits in the relevant amount
are not available to CIBC for the Interest Period in the
relevant market), the Agent shall, as soon as practicable
thereafter, give written, facsimile or telegraphic notice of
such determination to the Company, and any request by the
Company for a Eurodollar Loan pursuant to subsection (c) of
this Section 2.03 shall be deemed a request for an Alternate
Base Rate Loan. After such notice shall have been given and
until the circumstances giving rise to such notice no longer
exist, each request for an Eurodollar Loan shall be deemed to
be a request for an Alternate Base Rate Loan.
(f) Notice of Interest Rate. Promptly after the
determination of any interest rate provided for herein or any
change therein, the Agent shall give notice thereof to the
Company.
SECTION 2.04. Prepayments. The Company may, upon at
least three Business Days' notice to the Agent stating the
proposed date and principal amount of the prepayment, and if such
notice is given to the Agent the Company shall, prepay the
outstanding principal amount of the Loans in whole or in part
(each such partial prepayment shall be in an aggregate principal
amount not less than $1,000,000 and an integral multiple of
$500,000 and shall be applied to the principal installments of
the Notes in the inverse order of their maturities), together
with accrued interest to the date of such prepayment on the
<PAGE> 20
principal amount prepaid; provided, however, that any prepayment
of a Eurodollar Loan shall be made on, and only on, the last day
of the Interest Period for such Eurodollar Loan unless the
Company shall pay to each Lender in accordance with Section
2.05(d) an amount sufficient to compensate such Lender for any
loss, cost, or expense incurred by it by reason of such
prepayment on a day other than the last day of an Interest
Period.
SECTION 2.05. Increased Costs, Etc. (a) If, due
either to (i) the introduction after the Submission Date of, or
any change (other than any change by way of imposition or
increase of reserve requirements in respect of Eurodollar Loans,
referred to in subsection (b) below), after the Submission Date,
in or in the interpretation of, any law or regulation or (ii) the
compliance by a Lender with any guideline or request from any
central bank or other governmental authority issued or made after
the Submission Date (whether or not having the force of law),
there shall be any increase in the cost to such Lender as a
result of agreeing to make or making, funding or maintaining
Eurodollar Loans, or reduction in the amount of any sum received
in respect thereof, then the Company shall from time to time,
upon demand by such Lender, pay to such Lender additional amounts
sufficient to compensate such Lender for such increased cost or
such reduced amount. A certificate as to the amount of such
increased cost or such reduced amount, submitted to the Company
by such Lender, shall be conclusive and binding for all purposes,
absent manifest error.
(b) The Company shall pay to each Lender additional
interest on the unpaid principal amount of each Eurodollar Loan,
from the date of such Eurodollar Loan until such principal
amount is paid in full, at an interest rate per annum equal at
all times during each Interest Period for such Loan to the
remainder obtained by subtracting (i) the LIBO Rate for the
Interest Period for such Loan from (ii) the rate obtained by
dividing such LIBO Rate by a percentage equal to 100% minus the
reserve percentage applicable 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 regulations issued from time to time by the F.R.S. Board
(or any successor) for determining the maximum reserve
requirement (including, without limitation, any emergency,
supplemental or other marginal reserve requirement) for such
Lender with respect to liabilities or assets consisting of or
including Eurocurrency liabilities having a term equal to such
Interest Period, payable on each date on which interest is
payable on such Eurodollar Loan. Such additional interest shall
be determined by such Lender and notified to the Company.
<PAGE> 21
(c) If a Lender determines that 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, made or phased-in after the Submission Date
(including without limitation any change in the interpretation or
administration thereof by such central bank or other governmental
authority), affects the amount of capital required to be
maintained by such Lender or any corporation controlling such
Lender and that the amount of such capital is increased by or
based upon the existence of such Lender's commitment hereunder
and other commitments of this type, then, upon demand by such
Lender, the Company shall immediately pay to such Lender, from
time to time as specified by such Lender, additional amounts
sufficient to compensate such Lender or such corporation in the
light of such circumstances, to the extent that such Lender
reasonably determines such increase in capital to be allocable to
the existence of such Lender's commitment hereunder. A
certificate as to such amounts submitted to the Company by such
Lender, shall be conclusive and binding for all purposes, absent
manifest error.
(d) If, due to a change of interest rate on any
Eurodollar Loan pursuant to Section 2.06(b) or 2.07, any payment
pursuant to Section 2.04 of any Eurodollar Loan, any acceleration
of the maturity of the Loans and the Notes pursuant to Section
6.01, or for any other reason, a Lender is subject to a change of
interest rate, or receives payments of principal, of any
Eurodollar Loan other than on the last day of an Interest Period
relating to such Eurodollar Loan, the Company shall, promptly
upon demand by such Lender, pay to such Lender any amounts
required to compensate such Lender for additional losses, costs
or expenses which it may reasonably incur as a result of such
change or payment, including, without limitation, 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 Eurodollar Loan, but excluding loss of anticipated
profit. A certificate setting forth the amount of such
additional losses, costs or expenses, submitted by such Lender to
the Company, shall be conclusive and binding for all purposes,
absent manifest error.
(e) Notwithstanding any other provision in this
Section 2.05 to the contrary (i) the Company is not responsible
for, and is not required to reimburse any Lender for, any amounts
that would otherwise be payable by the Company pursuant to
subsection (a), (c) or (d) of this Section 2.05 to the extent
such amounts accrued 90 days or more prior to the date such
Lender provides to the Company a certificate which sets forth
such amounts owed to such Lender by the Company pursuant to such
subsections and (ii) the Company is responsible for, and is
required to reimburse any Lender for, any amounts payable by the
<PAGE> 22
Company pursuant to this Section 2.05, only so long as such
Lender is a Banking Institution.
(f) In calculating any amounts required to be paid by
the Company pursuant to this Section 2.05 to any Lender, such
Lender shall make all determinations and allocations on a
reasonable basis.
SECTION 2.06. Interest Rate Protection. (a) If the
Company shall fail to elect to pay interest at the Eurodollar
Rate for an Interest Period subsequent to the Interest Period
then in effect, if any, in accordance with the provisions
contained in Section 2.03(c), the Agent will forthwith so notify
the Company and the related Eurodollar Loan will automatically,
on the last day of the then existing Interest Period therefor,
convert into an Alternate Base Rate Loan.
(b) On and after the date on which the unpaid principal
amount of any Loan shall be reduced, by payment or prepayment or
otherwise, to less than $10,000,000, the rate of interest on the
unpaid principal amount of the Loans shall be .50% per annum
above the Alternate Base Rate in effect from time to time and the
right of the Company to make an election in respect of the
Eurodollar Rate pursuant to Section 2.03(c) shall terminate.
SECTION 2.07. Illegality, Etc. Notwithstanding any
other provision of this Agreement, if any Lender that is a
Banking Institution shall notify the Company that the
introduction of or any change in or in the interpretation of any
law or regulation that occurs after the Submission Date makes it
unlawful, or any central bank or other governmental authority
asserts after the Submission Date that it is unlawful, for such
Lender to perform its obligations to fund or maintain Eurodollar
Loans hereunder, (i) the right of the Company to select the
Eurodollar Rate, and the obligation of such Lender to maintain
Eurodollar Loans, shall be suspended until such Lender shall
notify the Company that the circumstances causing such suspension
no longer exist and (ii) the rate of interest on the unpaid
principal amount of the Loan held by such Lender shall thereupon
be .50% per annum above the Alternate Base Rate in effect from
time to time.
SECTION 2.08. Payments and Computations. (a) The
Company shall make each payment under this Agreement and the
Notes not later than 12:00 Noon (New York City time) on the day
when due in lawful money of the United States of America to the
Agent for the pro rata account of the Lenders entitled to receive
such payment, to such account as the Agent shall specify from
time to time by notice to the Company, in same day or immediately
available funds. Funds received after that time shall be deemed
to have been received by the Agent on the next succeeding
<PAGE> 23
Business Day. The Agent shall promptly remit in same day funds
to each Lender its share, if any, of such payments received by
the Agent for the account of such Lender.
(b) The Company hereby authorizes each Lender, if and
to the extent payment owing to such Lender is not made when due
under this Agreement or the Notes, to charge from time to time
against any or all of the Company's accounts with such Lender any
amount so due.
(c) All computations of interest based on the Alternate
Base Rate shall be made by the Agent on the basis of a year of
365 or 366 days, as the case may be, and all computations of
interest based on the LIBO Rate shall be made by the Agent on the
basis of a year of 360 days, in each case for the actual number
of days (including the first day but excluding the last day)
occurring in the period for which such interest is payable. Each
determination by the Agent of an interest rate hereunder shall be
conclusive and binding for all purposes, absent manifest error.
(d) Whenever any payment under this Agreement or the
Notes shall be stated to be due, or whenever the last day of any
Interest Period would otherwise occur, on a day which is not a
Business Day, such payment shall be made, and the last day of
such Interest Period shall occur, on the next succeeding Business
Day, and such extension of time shall in such case be included in
the computation of payment of interest; provided, however, if
such extension would cause payment of interest on or principal of
a Eurodollar Loan to be made, or the last day of an Interest
Period for a Eurodollar Loan to occur, in the next following
calendar month, such payment shall be made, and the last day of
such Interest Period shall occur, on the next preceding Business
Day.
(e) Whenever the first day of any Interest Period
occurs on a day of an initial calendar month for which there is
no numerically corresponding day in the calendar month that
succeeds such initial calendar month by the number of months
equal to the number of months in such Interest Period, such
Interest Period shall end on the last Business Day of such
succeeding calendar month. Notwithstanding anything to the
contrary contained herein, each Interest Period that 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) shall end on the last
Business Day of the appropriate subsequent calendar month.
SECTION 2.09. U.S. Taxes.
(a) The Company agrees to pay to each Lender with
respect to any period during which it is not a U.S. Person such
<PAGE> 24
additional amounts as are necessary in order that the net payment
of any amount due to such non-U.S. Person hereunder after
deduction for or withholding in respect of any U.S. Tax imposed
with respect to such payment (or in lieu thereof, payment of such
U.S. Tax by such non-U.S. Person), will not be less than the
amount stated herein to be then due and payable, provided that
the foregoing obligation to pay such additional amounts shall not
apply:
(i) to any payment to a Lender hereunder unless such
Lender is, on the Submission Date (or on the date such Person
becomes the successor to, or the assignee of, such Lender as
provided in Section 9.06) and on the date of any change in
the applicable lending office of such Lender after the date
hereof, entitled to submit either a Form 1001 (relating to
such Lender and entitling it to a complete exemption from
withholding on all interest to be received by it hereunder in
respect of the Loan) or Form 4224 (relating to all interest
to be received by such Lender hereunder in respect of the
Loans), or
(ii) to any U.S. Tax imposed solely by reason of the
failure by such non-U.S. Person to comply with applicable
certification, information, documentation or other reporting
requirements concerning the nationality, residence, identity
or connections with the United States of America of such
non-U.S. Person if such compliance is required by statute or
regulation of the United States of America as a precondition
to relief or exemption from such U.S. Tax.
For the purposes of this Section 2.09(a), (w) "Form 1001" shall
mean Form 1001 (Ownership, Exemption, or Reduced Rate
Certificate) of the Department of the Treasury of the United
States of America, (x) "Form 4224" shall mean Form 4224
(Exemption from Withholding of Tax on Income Effectively
Connected with the Conduct of a Trade or Business in the United
States) of the Department of the Treasury of the United States of
America (or in relation to either such Form such successor and
related forms as may from time to time be adopted by the relevant
taxing authorities of the United States of America to document a
claim to which such Form relates), (y) "U.S. Person" shall mean a
citizen, national or resident of the United States of America, a
corporation, partnership or other entity created or organized in
or under any laws of the United States of America, or any estate
or trust that is subject to Federal income taxation regardless of
the source of its income and (z) "U.S. Taxes" shall mean any
present or future tax, assessment or other charge or levy imposed
by or on behalf of the United States of America or any taxing
authority thereof or therein.
<PAGE> 25
(b) Within 30 days after paying any amount to the Agent
or any Lender from which it is required by law to make any
deduction or withholding, and within 30 days after it is required
by law to remit such deduction or withholding to any relevant
taxing or other authority, the Company shall deliver to the
Lender evidence satisfactory to such Person of such deduction,
withholding or payment (as the case may be).
SECTION 2.10. Applicable Lending Office. If a Lender
requests compensation from the Company under any of Section
2.05(a), 2.05(c) or 2.09, such Lender will designate a different
applicable lending office for the portions of the Loan affected
by the events giving rise to such request for compensation if
such designation will avoid the need for, or reduce the amount
of, such compensation and will not, in the reasonable opinion of
such Lender, be disadvantageous to such Lender (including without
limitation from an economic, legal or regulatory standpoint),
except that such Lender shall have no obligation to designate an
applicable lending office located in the United States of
America.
SECTION 2.11. Net Payments. All payments under this
Agreement or the Notes to the Agent and the Lenders shall be made
without set-off or counterclaim.
SECTION 2.12. Maximum Interest. It is the intention of
the parties hereto to conform strictly to applicable usury laws
and anything herein to the contrary notwithstanding, the
obligations of the Company to the Lenders under this Agreement,
the Related Documents and any other document or instrument
executed in connection herewith or therewith, shall be subject to
the limitation that payments of interest to a Lender shall not be
required to the extent that receipt thereof would be in excess of
the Highest Lawful Rate, or otherwise contrary to provisions of
law applicable to such Lender limiting rates of interest which
may be charged or collected by such Lender. Accordingly, if the
transactions or the amount paid or otherwise agreed to be paid
for the use, forbearance or retention of money under this
Agreement, the Related Documents and any other document or
instrument executed in connection herewith or therewith would
exceed the Highest Lawful Rate or otherwise be usurious under
applicable law (including the federal and state laws of the
United States of America, or of any other jurisdiction whose laws
may be mandatorily applicable) with respect to any Lender then,
in that event, notwithstanding anything to the contrary in this
Agreement or the Related Documents and any other document or
instrument executed in connection herewith or therewith, it is
agreed as follows as to such Lender:
(a) in respect of such Lender, the provisions of this
Section 2.12 shall govern and control over any other provi-
<PAGE> 26
sion in this Agreement, the Related Documents and any other
document or instrument executed in connection herewith or
therewith and each provision set forth therein is hereby so
limited;
(b) the aggregate of all consideration which
constitutes interest under applicable law that is contracted
for, charged or received under this Agreement, or under any
of the other aforesaid agreements or otherwise in connection
with this Agreement by such Lender shall under no
circumstances exceed the amount of interest payable pursuant
to the Highest Lawful Rate, and all amounts owed under this
Agreement, the Related Documents and any other document or
instrument executed in connection herewith or therewith shall
be held subject to reduction and (i) the amount of interest
which would otherwise be payable to such Lender hereunder and
under the Related Documents and any other document or
instrument executed in connection herewith or therewith,
shall be reduced to the amount allowed under applicable law
and (ii) any unearned interest paid by the Company in excess
of the Highest Lawful Rate shall be credited to the Company
by such Lender (or, if such consideration shall have been
paid in full, refunded to the Company);
(c) all sums paid, or agreed to be paid, to such Lender
for the use, forbearance and detention of the indebtedness of
the Company to such Lender hereunder shall, to the extent
permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full term of such indebt-
edness until payment in full so that the actual rate of
interest is uniform throughout the full term thereof;
(d) if at any time the interest provided pursuant to
Sections 2.03 and 2.06, as the case may be, together with any
other fees payable pursuant to or in connection with this
Agreement and deemed interest under applicable law, with
respect to any Lender exceeds that amount which would have
accrued at the Highest Lawful Rate, the amount of interest
and any such fees to accrue to such Lender pursuant to this
Agreement shall be limited, notwithstanding anything to the
contrary in this Agreement, to that amount which would have
accrued at the Highest Lawful Rate for such Lender, but any
subsequent reductions, as applicable, shall not reduce the
interest to accrue pursuant to this Agreement below such
Lender's Highest Lawful Rate until the total amount of
interest payable to such Lender (including all consideration
which constitutes interest) equals the amount of interest
which would have been payable to such Lender (including all
consideration which constitutes interest) assuming a varying
rate per annum equal to the interest provided pursuant to
Sections 2.03 and 2.06 at all times in effect, plus the
<PAGE> 27
amount of fees which would have been received but for the
effect of this Section 2.12.
SECTION 2.13. Sharing of Payments. If any Lender shall
obtain any payment or other recovery (whether voluntary,
involuntary, by application of setoff or otherwise) on account of
any Loan (other than pursuant to the terms of Sections 2.05 or
2.09) in excess of its pro rata share of payments then or
therewith obtained by all Lenders, such Lender shall purchase
from the other Lenders such participations in Loans made by them
as shall be necessary to cause such purchasing Lender to share
the excess payment or other recovery ratably with each of them;
provided, however, that if all or any portion of the excess
payment or other recovery is thereafter recovered from such
purchasing Lender, the purchase shall be rescinded and each
Lender which has sold a participation to the purchasing Lender
shall repay to the purchasing Lender the purchase price to the
ratable extent of such recovery together with an amount equal to
such selling Lender's ratable share (according to the proportion
of (a) the amount of each selling Lender's required repayment to
the purchasing Lender, to (b) 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. The Company agrees that any Lender so purchasing a
participation from another Lender pursuant to this Section may,
to the fullest extent permitted by law, exercise all rights of
payment (including, without limitation, pursuant to Section 9.05)
with respect to such participation as fully as if such Lender
were a direct creditor of the Company in the amount of such
participation. If under any applicable bankruptcy, insolvency or
other similar law, any Lender receives a secured claim in lieu of
a setoff to which this Section applies, such Lender shall, to the
extent practicable, exercise its rights in respect of such
secured claim in a manner consistent with the rights of the
Lenders entitled under this Section to share in the benefits of
any recovery on such secured claim.
SECTION 2.14. Pro Rata Treatment. Except to the extent
otherwise provided herein: (a) the conversion of portions of
Loans from Alternate Base Rate Loans into Eurodollar Loans, and
the conversion of portions of Loans from Eurodollar Loans into
Alternate Base Rate Loans (other than conversions provided for by
Section 2.07) shall be made pro rata among the Lenders according
to the amounts of their respective Loans, and the Interest Period
for each Eurodollar Loan of each Lender that commences on any day
shall be coterminous with the Interest Period for each Eurodollar
Loan of each Lender that commences on such day; (b) each payment
or prepayment of principal of Loans by the Company shall be made
for account of the Lenders pro rata in accordance with the
respective unpaid principal amounts of the Loans held by them;
and (c) each payment of interest on Loans by the Company shall be
<PAGE> 28
made for account of the Lenders pro rata in accordance with the
amounts of interest on such Loans then due and payable to the
respective Lenders.
ARTICLE III.
CONDITIONS TO CLOSING
SECTION 3.01. Closing Documents. The obligation of the
Agent and each Lender to execute this Agreement is subject to the
conditions precedent that on or before the date hereof, (i) the
Agent shall have received the following (with sufficient copies
for each Lender), each dated the Effective Date, unless otherwise
specified below, in form and substance satisfactory to the Agent:
(a) the Notes, duly executed and completed;
(b) certified copies of the restated articles of
incorporation and bylaws of the Company, a certified copy of
the resolutions of the Board of Directors of the Company
approving the Related Documents and the other matters
contemplated hereby and thereby, and of all other documents
evidencing any other necessary corporate action;
(c) a copy of a certificate of the Secretary of State
of Texas dated a date reasonably close to the date hereof
listing the articles of incorporation of the Company and each
amendment thereto on file in his office and certifying that
(A) such amendments are the only amendments to the Company's
articles of incorporation on file in his office and (B) the
Company is duly incorporated, validly existing and in good
standing under the laws of such State;
(d) a telegram from such Secretary of State or other
evidence satisfactory to each Lender certifying that the
Company is duly incorporated, validly existing and in good
standing under the laws of such State on the date hereof;
(e) originals (or copies certified to be true copies by
an appropriate officer of the Company) of all governmental
and regulatory approvals (including, without limitation, the
Federal Energy Regulatory Commission and the New Mexico
Public Service Commission approvals) legally required to be
obtained on the Effective Date necessary for the Company to
enter into the Related Documents and to carry out the
transactions contemplated hereby and thereby;
(f) a certificate of the Secretary of the Company
certifying the incumbency and the names and true signatures
of the officers of the Company authorized to sign this
<PAGE> 29
Agreement, the Note and the other documents to be delivered
by it hereunder, together with a certificate of another
officer of the Company as to the incumbency and specimen
signature of the Secretary of the Company;
(g) the Second Mortgage Bonds, Series Z, such series
having been duly completed, executed and pledged to the Agent
for the benefit of the Lenders by the Company pursuant to
Article VII and the Second Mortgage Bond Indenture;
(h) evidence of the completion of all recordings and
filings of or with respect to the Second Mortgage Bond
Indenture that the Agent and each Lender may deem necessary
or desirable in order to perfect the security interest
created thereby;
(i) a certified copy of the Second Mortgage Bond
Indenture;
(j) a favorable opinion of Milbank, Tweed, Hadley &
McCloy, New York counsel for the Company (or other New York
counsel for the Company that is reasonably satisfactory to
the Lenders), in form and substance reasonably satisfactory
to each Lender;
(k) a favorable opinion of Vinson & Elkins, Texas
counsel for the Company (or other Texas counsel for the
Company that is reasonably satisfactory to the Lenders), in
form and substance reasonably satisfactory to each Lender;
(l) a favorable opinion of Stoops & Burns, Arizona
counsel for the Company (or other Arizona counsel for the
Company that is reasonably satisfactory to the Lenders), in
form and substance reasonably satisfactory to each Lender;
(m) a favorable opinion of Taichert, Wiggins, Virtue,
Wilson & Najjar, New Mexico regulatory counsel for the
Company (or other New Mexico regulatory counsel that is
reasonably satisfactory to the Lenders), in form and
substance reasonably satisfactory to each Lender;
(n) a favorable opinion of [Milbank, Tweed, Hadley &
McCloy], federal regulatory counsel for the Company (or other
federal regulatory counsel for the Company that is reasonably
acceptable to the Lenders), in form and substance reasonably
satisfactory to each Lender;
(o) written evidence, satisfactory to each Lender, that
the First Mortgage Bonds, Series A/B and the Second Mortgage
Bonds, Series A, have a rating of at least BBB- (or
equivalent rating) by at least two of Standard & Poor's
<PAGE> 30
Corporation, Moody's Investors Service, Inc. and Duff &
Phelps, Inc.;
(p) a certificate of the chairman, president or chief
financial officer of the Company, certifying (A) that the
Effective Date has occurred as of the time of delivery
thereof or will occur concurrently with delivery thereof and
(B) that, after giving effect to the transactions
contemplated under the Plan of Reorganization: (x) no event
has occurred and is continuing which constitutes an Event of
Default or would constitute an Event of Default but for the
giving of notice or the lapse of time or both; and (y) the
representations and warranties made by the Company in Article
IV hereof, and in each of the other Related Documents, shall
be true and complete on and as of the Effective Date with the
same force and effect as if made on and as of such date (or,
if such representation or warranty is expressly stated to
have been made as of a specific date, as of such specific
date);
(q) the Fee Letter, executed and delivered by the
Company; and
(ii) the following shall have occurred:
(a) the Confirmation Order shall have been entered at
least 10 days prior to the date hereof, no stay of such order
shall be in effect and the Agent and each Lender shall have
received a certified copy of such order;
(b) the Plan of Reorganization shall have been
substantially consummated without waiver of any condition or
other modification (other than waivers or modifications made
in accordance with Section 6.6 of the Plan of
Reorganization);
(c) the Effective Date shall have occurred or shall
occur substantially simultaneously with the delivery of this
Agreement and of the other Related Documents; and
(d) the Agent shall have received such other approvals,
opinions or documents as any Lender may reasonably request.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the
Company. The Company represents and warrants as follows:
<PAGE> 31
(a) The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the
State of Texas and is duly qualified to do business in, and
is in good standing under the laws of, the States of Texas,
Arizona and New Mexico and has requisite corporate power and
authority, and all governmental licenses, authorizations and
approvals necessary, to conduct its business and to own its
properties, except where the failure to have the same would
not result in a Material Adverse Effect.
(b) The execution, delivery and performance by the
Company of this Agreement and the other Related Documents to
which it is a party are within the Company's corporate
powers, have been duly authorized by all necessary corporate
action, and do not contravene (i) the Company's articles of
incorporation or by-laws, which the Company has adopted
pursuant to the Plan of Reorganization, or (ii) any law,
order, rule, regulation (including, without limitation, any
order, rule or regulation of the Federal Energy Regulatory
Commission, the New Mexico Public Service Commission or the
Public Utility Commission of Texas, or Regulation G, T, U or
X of the F.R.S. Board, writ, judgment, injunction or decree
applicable to the Company or any contractual restriction
binding on or affecting the Company or any Subsidiary, and do
not result in or require the creation of any Lien upon or
with respect to any properties of the Company or any
Subsidiary (except as provided in or contemplated by this
Agreement, the other Related Documents or the Plan of
Reorganization).
(c) No authorization or approval or other action by,
and no notice to or filing with, any governmental authority
or regulatory body is required for the due execution,
delivery and performance by the Company of this Agreement or
any other Related Document (including the issuance and pledge
of the Second Mortgage Bonds, Series Z and the creation and
perfection of the Liens on the property securing such Bonds)
except for (i) those that have been duly obtained or made and
are in full force and effect and are Final Approvals and (ii)
the Confirmation Order.
(d) This Agreement has been duly and validly executed
by the Company and constitutes, and the Notes when delivered
hereunder will constitute legal, valid and binding
obligations of the Company enforceable against the Company in
accordance with their respective terms.
(e) There is no pending or overtly threatened action,
investigation, proceeding or notification which has been
instituted after the Effective Date affecting the Company or
any of its Subsidiaries before any court, governmental agency
<PAGE> 32
or arbitrator which is reasonably likely to have a Material
Adverse Effect.
(f) The Second Mortgage Bonds, Series Z (i) have been
duly authorized, executed, authenticated, issued, pledged and
delivered in the manner provided for in the Second Mortgage
Bond Indenture and in compliance with all applicable law;
(ii) constitute the legal, valid and binding obligations of
the Company enforceable against the Company in accordance
with their terms and the terms of the Second Mortgage Bond
Indenture except insofar as enforceability may be limited or
otherwise affected by (a) bankruptcy, insolvency, moratorium,
reorganization or other similar laws of general application
relating to or affecting the rights and remedies of creditors
from time to time in effect and (b) general principles of
equity (regardless of whether enforceability is considered in
a proceeding in equity or at law); (iii) are entitled to the
security and benefits of the Second Mortgage Bond Indenture;
(iv) are secured equally and ratably with and only with all
other bonds issued and outstanding and which may hereafter
and thereafter be issued and outstanding under the Second
Mortgage Bond Indenture; (v) are secured by duly perfected
Liens on and security interests in the collateral purporting
to secure such bonds in the Second Mortgage Bond Indenture
which Liens are subordinated in priority only to the Liens
and security interests granted under the First Mortgage Bond
Indenture and securing outstanding First Mortgage Bonds; and
(vi) constitute collateral security encumbered by valid, duly
perfected Liens thereon and security interests therein
securing the obligations of the Company under this Agreement
and the Notes as purported to be provided in such indenture
and herein and in the Note. The Company has executed, issued
and delivered all Second Mortgage Bonds, Series Z to the
Agent and has made all such duly perfected pledges thereof to
the Agent as are required to be executed, issued, delivered
and made under this Agreement and there are no other Liens on
such Second Mortgage Bonds.
(g) The Second Mortgage Bond Indenture creates a valid
and perfected second Lien on the Company's property as
described in the Second Mortgage Bond Indenture as collateral
security for the Company's obligations under the Second
Mortgage Bond Indenture and the Second Mortgage Bonds, Series
Z.
(h) The Company is not a "holding company" as such term
is defined in the Public Utility Holding Company Act of 1935,
as amended, nor an "investment company", or a company
"controlled" by an "investment company", within the meaning
of the Investment Company Act of 1940, as amended.
<PAGE> 33
(i) The Company and its Subsidiaries have filed all
United States federal and state income tax returns and all
other material tax returns which are required to be filed by
them, and have paid all taxes due pursuant to such returns
or, to the extent deemed necessary or appropriate by the
Company and such Subsidiary, provided reserves for the
payment thereof, other than such taxes that the Company or
any Subsidiary is contesting in good faith by appropriate
legal proceedings.
(j) The Company and the ERISA Affiliates have fulfilled
their respective obligations under the minimum funding
standards of ERISA and the Code with respect to each Plan and
are in compliance with the presently applicable provisions of
ERISA and the Code except where non-compliance would not have
a Material Adverse Effect, and have not incurred any
liability to the PBGC (other than to pay premiums under
Section 4007 of ERISA) or any Plan or any Multiemployer Plan
(other than to make contributions in the ordinary course of
business). No reportable event, within the meaning of
Section 4043 of ERISA, has occurred with respect to any Plan,
except for any such event as to which the 30-day notice
requirement has been waived by the PBGC. Schedule B
(Actuarial Information) to the most recently filed annual
report (Form 5500 Series) for each Plan is complete and
accurate and fairly presents the funding status of such Plan,
and since the date of such Schedule B there has been no
change in such funding status that can reasonably be expected
to have a Material Adverse Effect.
(k) The operations and properties of the Company and
each of its Subsidiaries comply in all material respects with
all Environmental Laws, the Company and each of its
Subsidiaries possess and are in compliance with all required
Environmental Permits and no circumstances exist that are or
would be reasonably likely to (i) form the basis of an
Environmental Action against the Company or any of its
Subsidiaries or any of their properties or (ii) cause any
such property to be subject to any restrictions on ownership,
occupancy, use or transferability under any Environmental
Law, except as would not be likely to have a Material Adverse
Effect and, none of the properties of the Company or any of
its Subsidiaries is listed or proposed for listing on the
National Priorities List under CERCLA or any analogous state
list.
(l) No Material Adverse Effect has occurred since the
Effective Date.
(m) The Confirmation Order has been entered and has not
been reversed, amended (except as consented to by the Lenders
<PAGE> 34
in their sole discretion), stayed, vacated or rescinded. The
Lenders shall be entitled to enforce their remedies under
this Agreement without further application to or order by the
Bankruptcy Court.
ARTICLE V.
COVENANTS OF THE COMPANY
SECTION 5.01. Covenants of the Company. Until the
principal amount of the Loans and any accrued interest thereon is
paid in full and all other amounts payable by the Company
hereunder are paid in full, unless the Required Lenders shall
otherwise agree in writing, the Company agrees that:
(a) Reporting Requirements. The Company shall deliver
to each Lender:
(i) as soon as available and in any event within
45 days after the end of each of the first three
quarterly fiscal periods of each fiscal year of the
Company, consolidated and consolidating statements of
income, retained earnings and cash flow of the Company
and its Consolidated Subsidiaries for such period and
for the period from the beginning of the respective
fiscal year to the end of such period, and the related
consolidated and consolidating balance sheets of the
Company and its Consolidated Subsidiaries at the end of
such period, setting forth in each case in comparative
form the corresponding consolidated and consolidating
figures for the corresponding period in the preceding
fiscal year, accompanied by a certificate of a senior
financial officer of the Company, which certificate
shall state that said consolidated financial statements
fairly present the consolidated financial condition and
results of operations of the Company and its
Consolidated Subsidiaries, and said consolidating
financial statements fairly present the respective
individual unconsolidated financial condition and
results of operations of the Company and of each of its
Consolidated Subsidiaries, in each case in accordance
with GAAP, consistently applied, as at the end of, and
for, such period (subject to normal year-end audit
adjustments);
(ii) as soon as available and in any event within
90 days after the end of each fiscal year of the
Company, consolidated and consolidating statements of
income, retained earnings and cash flow of the Company
and its Consolidated Subsidiaries for such fiscal year
<PAGE> 35
and the related consolidated and consolidating balance
sheets of the Company and its Consolidated Subsidiaries
as at the end of such fiscal year, setting forth in each
case in comparative form the corresponding consolidated
and consolidating figures for the preceding fiscal year,
and accompanied (i) in the case of said consolidated
statements and balance sheet of the Company, by an
opinion thereon of independent certified public
accountants of recognized national standing, which
opinion shall state that said consolidated financial
statements fairly present the consolidated financial
condition and results of operations of the Company and
its Consolidated Subsidiaries as at the end of, and for,
such fiscal year in accordance with GAAP, consistently
applied, and a certificate of such accountants stating
that, in making the examination necessary for their
opinion, they obtained no knowledge, except as
specifically stated, of any failure by the Company to
comply with Section 5.01(e), (f) or (i)(xi), and (ii) in
the case of said consolidating statements and balance
sheets, by a certificate of a senior financial officer
of the Company, which certificate shall state that said
consolidating financial statements fairly present the
respective individual unconsolidated financial condition
and results of operations of the Company and of each of
its Consolidated Subsidiaries, in each case in
accordance with GAAP, consistently applied, as at the
end of, and for, such fiscal year;
(iii) as soon as available copies of all proxy
statements, material reports and registration statements
which the Company or any of its Subsidiaries files with
the Securities and Exchange Commission or any national
securities exchange (other than filings made pursuant to
the Public Utility Holding Company Act of 1935, as
amended, public offerings of securities under employee
benefit plans, customer stock purchase plans or dividend
reinvestment plans);
(iv) as soon as possible and in any event within
two days after the Company has knowledge of the
occurrence of each Event of Default continuing on the
date of such statement, a statement from the chief
financial officer of the Company setting forth details
of such Event of Default and the action that the Company
has taken and proposes to take with respect thereto; and
(v) at the time the Company furnishes each set of
financial statements pursuant to paragraph (i) or (ii)
above, a certificate of a senior financial officer of
the Company setting forth in reasonable detail the
<PAGE> 36
computations necessary to determine whether the Company
is in compliance with subsections (e), (f) and (i)(xi)
of this Section 5.01 as of the end of the respective
quarterly fiscal period or fiscal year and stating that
no event has occurred and is continuing which
constitutes an Event of Default or would constitute an
Event of Default but for the giving of notice or the
lapse of time or both or, if any such event has occurred
and is continuing, a statement as to the nature thereof
and the actions that the Company has taken or proposes
to take with respect thereto; and
(vi) such other financial data and information of
the Company or any of its Subsidiaries as the Agent or
any Lender may from time to time reasonably request.
(b) Litigation. The Company will promptly give to each
Lender notice of all actions, suits, investigations,
litigation or legal or arbitral proceedings, and of all
proceedings by or before any governmental or regulatory
authority or agency (and any material development in respect
of such legal or other proceedings), in each case, known to
the Company, which is reasonably likely to have a Material
Adverse Effect.
(c) Preservation of Corporate Existence, Etc. The
Company will (i) preserve and maintain its corporate
existence in the state of its incorporation and qualify and
remain qualified as a foreign corporation in each
jurisdiction in which such qualification is reasonably
necessary in view of its business, and (ii) pay and
discharge, and cause its Subsidiaries to pay and discharge,
all taxes, assessments and governmental charges upon its
income and its properties prior to the date on which
penalties attach thereto, unless (A) such taxes, assessments
and governmental charges shall be contested in good faith and
by appropriate proceedings by the Company or its Subsidiaries
and (B) the Company or any such Subsidiary shall set aside on
its books adequate reserves therefor to the extent required
by GAAP. Nothing contained in this clause (c) of Section
5.01 shall be deemed to prohibit any transaction permitted by
clause (g) of this Section 5.01.
(d) Maintenance of Insurance, Etc. The Company will,
and will cause its Subsidiaries to, maintain insurance with
responsible insurance companies or associations or through
its own program of self-insurance in such amounts, with such
deductibles, and covering such risks as is usually carried by
companies engaged in similar business.
<PAGE> 37
(e) EBITA to Interest Coverage Ratio. The Company will
not permit the Interest Coverage Ratio to be less than 1.40
to 1 at any time on or after the last day of the first full
fiscal quarter of the Company commencing after the Effective
Date.
(f) Leverage Ratio. The Company will not permit the
Leverage Ratio to exceed 0.68 to 1 at any time on or after
the last day of the first full quarter of the Company
commencing after the Effective Date.
(g) Prohibition of Fundamental Changes. The Company
will not, and will not permit any of its Subsidiaries to,
enter into any transaction of merger, consolidation,
amalgamation, liquidation or dissolution; provided that the
Company or any of its Subsidiaries may merge or consolidate
with any other Person if (i) in any such transaction in which
the Company is a party, the Company is the surviving
corporation or (ii) in any such transaction in which the
Company is not a party, the surviving corporation shall be a
Subsidiary of the Company, in each case so long as after
giving effect thereto no Event of Default would exist
hereunder. The Company will not, and will not permit any of
its Subsidiaries to, convey, sell, lease, transfer or
otherwise dispose of, in one transaction or a series of
transactions, all or substantially all of its business or
assets or assets (excluding (i) accounts receivable, (ii)
obsolete or worn-out tools, equipment or other property no
longer used or useful in its business, and (iii) inventory or
other property sold or disposed of in the ordinary course of
business and on ordinary business terms) which in the
aggregate have a net book value in excess of $50,000,000,
whether now owned or hereafter acquired, to any other Person.
Notwithstanding the foregoing provisions of this subsection
(g):
(1) any Subsidiary of the Company may be
merged or consolidated with or into: (A) the
Company if the Company shall be the continuing or
surviving corporation or (B) any other Subsidiary
of the Company; and
(2) any Subsidiary of the Company may sell,
lease, transfer or otherwise dispose of any or all
of its Property (upon voluntary liquidation or
otherwise) to the Company or a Subsidiary of the
Company.
(h) Compliance with ERISA. The Company will not (i)
enter into any non-exempt prohibited transaction (as defined
in Section 4975 of the Code and in Section 406 of ERISA)
<PAGE> 38
involving any Plan which may result in any liability of the
Company to any Person which (in the reasonable opinion of the
Required Lenders) will have a Material Adverse Effect or (ii)
allow or suffer to exist any other event or condition known
to the Company which results in any liability of the Company
or any of its Subsidiaries to the PBGC or in any Withdrawal
Liability to any Multiemployer Plan, which (in the reasonable
opinion of the Required Lenders) will be expected to have a
Material Adverse Effect on the financial position or
operations of the Company. For purposes of this Section
5.01(h), "liability" shall not include termination insurance
premiums payable under Section 4007 of ERISA. Upon request
of any Lender, the Company shall promptly furnish to the
Lenders a copy of Schedule B (Actuarial Information) to the
most recently filed annual report (Form 5500 Series) of any
Plan.
(i) Limitation on Liens. The Company will not, nor
will it permit any of its Subsidiaries to, create, incur,
assume or suffer to exist any Lien upon or with respect to
any of its property, whether now owned or hereafter acquired,
except:
(i) Liens created pursuant to the Related
Documents or pursuant to the First Mortgage Bond
Indenture or the Second Mortgage Bond Indenture;
(ii) Liens created or otherwise in existence on
the Effective Date or contemplated by the Plan of
Reorganization;
(iii) Liens imposed by any governmental authority
for taxes, assessments or charges not yet due or which
are being contested in good faith and by appropriate
proceedings if adequate reserves with respect thereto
are maintained on the books of the Company or the
affected Subsidiaries, as the case may be, in accordance
with GAAP;
(iv) carriers', warehousemen's, mechanics',
materialmen's, repairmen's or other like Liens arising
in the ordinary course of business which are not overdue
for a period of more than 60 days or which are being
contested in good faith and by appropriate proceedings;
(v) pledges or deposits under worker's
compensation, unemployment insurance and other social
security legislation;
(vi) deposits to secure the performance of bids,
trade contracts (other than for borrowed money), leases,
<PAGE> 39
statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature
incurred in the ordinary course of business;
(vii) easements, rights-of-way, restrictions and
other similar encumbrances incurred in the ordinary
course of business and encumbrances consisting of zoning
restrictions, easements, licenses, restrictions on the
use of property or minor imperfections in title thereto
which, in the aggregate, are not material in amount, and
which do not in any case materially detract from the
value of the property subject thereto, render title to
the property encumbered thereby unmarketable, materially
adversely affect the use of such property for its
present purposes or interfere with the ordinary conduct
of the business of the Company or any of its
Subsidiaries;
(viii) Liens on property of any corporation which
becomes a Subsidiary of the Company after the date of
this Agreement, provided that such Liens are in
existence at the time such corporation becomes a
Subsidiary of the Company and were not created in
anticipation thereof, provided further that such Liens
shall not extend to cover any property of the Company or
any of its other Subsidiaries and such Liens shall not
cover property of such Subsidiary other than property of
the types covered by the terms of such Liens at the time
such Subsidiary is acquired;
(ix) Liens upon real and/or tangible personal
property acquired after the Effective Date (by purchase,
construction or otherwise) by the Company or any of its
Subsidiaries, each of which Liens either (A) existed on
such property before the time of its acquisition and was
not created in anticipation thereof, or (B) was created
solely for the purpose of securing Debt representing, or
incurred to finance, refinance or refund, the cost
(including the cost of construction) of such property;
provided that no such Lien shall extend to or cover any
property of the Company or such Subsidiary other than
the property so acquired and improvements thereon;
(x) banker's liens, rights of set-off and Liens on
documents presented under commercial letters of credit,
in each case granted to banks in accordance with
customary banking practices or arising by operation of
law;
(xi) additional Liens upon real and/or personal
property created after the date hereof, provided that,
<PAGE> 40
on the date each such Lien is incurred, the lower of (1)
the fair market value of all property subject to Liens
permitted by this paragraph (xi) and not otherwise
permitted by this subsection (i) or (2) the aggregate
amount of all obligations secured by Liens permitted by
this paragraph (xi) and not otherwise permitted by this
subsection (i) shall not exceed 5% of Total Capital on
such date; and
(xii) any extension, renewal or replacement of the
foregoing, provided, however, that the Liens permitted
hereunder shall not be spread to cover any additional
Debt or property (other than a substitution of like
property).
(j) Compliance with Laws, Etc. The Company will
comply, and cause each of its Subsidiaries to comply, in all
material respects, with all applicable laws, rules,
regulations and orders, such compliance to include, without
limitation, compliance with ERISA, except where the failure
to so comply would not have a Material Adverse Effect.
(k) Compliance with Environmental Laws. The Company
will comply, and cause each of its Subsidiaries and all
lessees and other Persons occupying or operating on its
properties to comply, in all material respects, with all
Environmental Laws and Environmental Permits applicable to
its operations and properties; obtain and renew all
Environmental Permits necessary for its operations and
properties; and conduct, and cause each of its Subsidiaries
to conduct, any investigation, study, sampling and testing,
and undertake any cleanup, removal, remedial or other action
required under any Environmental Law to remove and clean up
all Hazardous Materials from any of its properties, in
accordance with the requirements of all Environmental Laws;
provided, however, that neither the Company nor any of its
Subsidiaries shall be required to undertake any such cleanup,
removal, remedial or other action to the extent that its
obligation to do so is being contested in good faith and by
proper proceedings and reserves, where required by GAAP, are
being maintained with respect to such circumstances.
(l) Visitation Rights. The Company will, at any
reasonable time and from time to time, permit the Agent or
any Lender or any agents or representatives thereof, to
examine and make copies of and abstracts from the records and
books of account of, and examine the properties of, the
Company and any of its Subsidiaries, and to discuss the
affairs, finances and accounts of the Company and any of its
Subsidiaries with any of their officers or directors and with
their independent certified public accountants.
<PAGE> 41
(m) Maintenance of Properties, Etc. The Company will
maintain and preserve, and cause each of its Subsidiaries to
maintain and preserve, all of its properties that are used or
useful in the conduct of its business in good working order
and condition, ordinary wear and tear excepted; provided that
this subsection (m) shall not prevent the sale of any
properties permitted by subsection (g) of this Section 5.01.
(n) Change in Nature of Business. The Company will not
make, or permit any of its Subsidiaries to make, any material
change in the nature of its business as carried on as of the
Effective Date.
(o) Lien. The Company shall maintain the Lien created
by or purported to be created by the Second Mortgage Bonds,
Series Z and the Liens created pursuant to the Second
Mortgage Bond Indenture for the benefit of the Lenders and
defend, preserve and protect such Lien against all claims of
all Persons.
(p) Maintain Books and Records. The Company shall keep
adequate records and books of account, in which complete
entries will be made in accordance with GAAP consistently
applied.
(q) Additional Documents. As promptly as practicable
(but in any event not later than 30 days) after the Effective
Date, the Company will furnish to the Agent, with sufficient
copies for each Creditor, (i) certified copies of the
recorded counterparts of the First Mortgage Bond Indenture
evidencing the filing thereof and (ii) certified copies of
all notices filed with respect to the First Mortgage Bond
Indenture and the Second Mortgage Bond Indenture.
(r) Creation of Subsidiaries. The Company shall not,
and shall not permit any of its Subsidiaries to, create any
Subsidiaries of the Company or make any investment in any
Person except in compliance with the Public Utility Holding
Company Act of 1935, as amended, and the regulations and
orders of the Securities and Exchange Commission thereunder.
<PAGE> 42
ARTICLE VI.
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the
following events ("Events of Default") shall occur and be
continuing:
(a) The Company shall default in the payment when due
of any principal of any Loan; or
(b) The Company shall default in the payment when due
of any interest on any Loan or any other amount payable by it
hereunder and such default shall continue unremedied for five
Business Days; or
(c) The Company or any of its Subsidiaries shall
default in the payment when due of any principal of or any
interest on any Debt aggregating $10,000,000 or more, or fail
to observe or perform any material term, covenant or
agreement contained in any agreement by which it is bound,
evidencing or securing Debt, in an aggregate amount of
$10,000,000 or more, or any other event shall occur or
condition shall exist under any agreement or instrument
relating to any such Debt, after the giving of any required
notice and for such period of time as would permit the holder
or holders thereof or of any obligations issued thereunder to
accelerate the maturity thereof, unless such failure or event
or condition shall have been cured by the Company or such
Subsidiary, as the case may be, or effectively waived by such
holder or holders; or
(d) Any representation, warranty or certification made
or deemed made in any Related Document by the Company (or any
of its officers), or any certificate furnished to any Lender
pursuant to the provisions thereof, shall prove to have been
false or misleading as of the time made or furnished in any
material respect; or
(e) The Company shall default in the performance of any
of its obligations under clause (a)(iv) of Section 5.01 or
clauses (e), (f), (g), or (n) of Section 5.01; or a
consensual Lien shall be created by the Company or any of its
Subsidiaries in violation of Section 5.01(i); or the Company
shall default in its performance of any of its other
obligations under this Agreement or under any other Related
Document and such default in the performance of any such
other obligation shall continue unremedied for a period of 15
days after notice thereof to the Company by the Agent or any
Lender; or
<PAGE> 43
(f) There shall remain in force, undischarged,
unsatisfied and unstayed, for more than 30 days, whether or
not consecutive, any final judgment against the Company or
any of its Material Subsidiaries that, together with other
outstanding final judgments, undischarged, against the
Company and all of its Material Subsidiaries exceeds in the
aggregate $10,000,000 (for the purposes hereof, the term
"final judgment" shall mean a judgment which is not subject
to appeal); or
(g) The Company or any of its Material Subsidiaries
shall make a general assignment for the benefit of creditors,
or admit in writing its inability to pay or generally fail to
pay its debts as they mature or become due, or shall petition
or apply for the appointment of a trustee or other custodian,
liquidator or receiver of the Company or any of its Material
Subsidiaries, as the case may be, or any substantial part of
its respective assets; or the Company or any of its Material
Subsidiaries shall commence any case or other proceeding
relating to the Company or any of its Material Subsidiaries
under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation
or similar law of any jurisdiction, now or hereafter in
effect, or the Company or any of its Material Subsidiaries
shall take any action to authorize or in furtherance of any
of the foregoing; or if any such petition or application
shall be filed or any such case or other proceeding shall be
commenced against the Company or any of its Material
Subsidiaries and the Company or any of its Material
Subsidiaries shall indicate its approval thereof, consent
thereto or acquiescence therein or such petition or
application shall not be dismissed on or before the 60th day
after the filing thereof; or
(h) A decree or order is entered appointing any
trustee, custodian, liquidator or receiver or adjudicating
the Company or any of its Material Subsidiaries bankrupt or
insolvent, or approving a petition in any such case or other
proceeding, or a decree or order for relief is entered in
respect of the Company or any of its Material Subsidiaries in
an involuntary case under federal bankruptcy laws as now or
hereafter reconstituted; or
(i) There shall have been asserted against the Company
by a Governmental Person or other Person, a written
complaint, claim or demand asserting any claims or
liabilities, whether accrued, absolute or contingent, based
on or arising from the presence, release or disposal of
Hazardous Materials by the Company or any of its Subsidiaries
that is reasonably likely to be determined adversely to the
Company or any of its Subsidiaries, and the amount thereof
<PAGE> 44
(either individually or in the aggregate) would, in such
event, have a Material Adverse Effect (after deducting any
portion thereof that is reasonably expected to be paid by
other creditworthy Persons); or
(j) The Confirmation Order be (i) reversed, revoked or
vacated in whole or in part by any Final Order of a court of
competent jurisdiction, or (ii) modified in a manner or
subjected to a stay that adversely affects the Company's
ability to perform any of its obligations hereunder, as
determined by the Lenders in their sole discretion; or
(k) Central and South West Corporation shall cease
directly or indirectly, to own (or otherwise shall cease,
directly or indirectly, to control the voting rights of) at
least 51% of the Voting Stock of the Company; or
(l) Any "Event of Default" under and as defined in the
Related Documents shall have occurred and be continuing; or
(m) Any regulatory approval as set forth in
Section 3.01(e) or required to consummate the Plan of
Reorganization shall be rescinded if such rescission, in the
good faith judgment of the Lenders, has a Material Adverse
Effect on the Company; or
(n) Any material provision of this Agreement or any
other Related Document shall at any time cease to be a valid,
binding obligation of the Company enforceable against the
Company, or any such agreement shall be declared to be null
and void, or the validity or enforceability thereof shall be
contested by the Company, or a proceeding shall be commenced
by any Governmental Person having jurisdiction over the
Company seeking to establish the invalidity or
unenforceability thereof, or the Company shall deny that it
has any further liability or obligation under this Agreement
or any Notes or any other Related Documents after delivery
thereof, or the Second Mortgage Bond Indenture shall for any
reason (other than pursuant to the terms thereof) cease to
create a valid and perfected second priority Lien on the
Company's property purported to be secured thereby
then, and in any such event, the Agent may, and upon request of
the Required Lenders shall, by notice to the Company, declare the
Notes, all interest thereon and all other amounts payable under
this Agreement to be forthwith due and payable, whereupon the
Notes, all such interest and all such amounts shall become and be
forthwith due and payable, without presentment, demand, protest,
or further notice of any kind, all of which are hereby expressly
waived by the Company; provided, however, that, in the event of
the occurrence of an Event of Default pursuant to subsections (g)
<PAGE> 45
or (h) of this Section 6.01, the Notes, all interest thereon and
all other amounts payable under this Agreement shall
automatically become and be due and payable, without presentment,
demand, protest or any notice of any kind, all of which are
hereby expressly waived by the Company.
ARTICLE VII.
SECURITY
SECTION 7.01. Issuance and Pledge of Bonds.
Concurrently with the execution of this Agreement and delivery of
the Notes, the Company shall execute, issue, and deliver to the
Agent for the benefit of each of the Lenders, the Second Mortgage
Bonds, Series Z as security for the payment of all obligations of
the Company now or hereafter existing under this Agreement or the
Notes in respect of principal and interest pursuant to and on the
terms of this Agreement, the Notes and the Second Mortgage Bond
Indenture. The Company hereby pledges to the Agent and grants to
the Agent a security interest in the Second Mortgage Bonds,
Series Z and all interest, cash, instruments and other property
from time to time received, receivable or otherwise distributed
in respect of or in exchange for any or all of such Bonds and
proceeds of any and all of the foregoing.
SECTION 7.02. Application of Moneys. Any moneys
received by the Agent on account of the Second Mortgage Bonds,
Series Z shall be applied as follows: (a) moneys received on
account of principal of the Second Mortgage Bonds, Series Z shall
be applied to the payment of any unpaid principal of the Notes
then due and owing and (b) moneys received on account of interest
on the Second Mortgage Bonds, Series Z shall be applied to the
payment of any accrued and unpaid interest on the Notes then due
and owing.
SECTION 7.03. Rights of Bondholders. The Agent, as
holder of the Second Mortgage Bonds, Series Z shall have only
such rights provided to holders of bonds in the Second Mortgage
Bond Indenture. Without limiting the generality of the
foregoing, (a) the Second Mortgage Bonds, Series Z may not be
sold, assigned, pledged or otherwise transferred by the Agent
(except to a successor Agent appointed in accordance with Section
8.04 to be held as security as provided in this Article VII) or
any Lender, whether pursuant to the Uniform Commercial Code after
an Event of Default or otherwise except in connection with any
assignment of any of the Lenders' rights and obligations under
this Agreement and the Notes as provided for herein and (b) no
payment of principal of or interest on the Second Mortgage Bonds,
Series Z, or any other amount payable thereunder, shall be
demanded or received except if, and to the extent that, the
corresponding payment remains unpaid hereunder or under the
<PAGE> 46
Notes. To the extent that moneys recovered from the Second
Mortgage Bonds, Series Z, are insufficient to pay in full the
amount of principal and interest due on the Notes and other
amounts due hereunder, the Company shall remain liable for any
such deficiency under the terms of this Agreement and the Notes.
ARTICLE VIII.
THE AGENT
SECTION 8.01. Actions; Indemnity. Each Lender hereby
appoints CIBC as its Agent under and for purposes of this
Agreement, the Notes and each other Related Document. Each
Lender authorizes the Agent to act on behalf of such Lender under
this Agreement, the Notes and each other Related Document and, in
the absence of other written instructions from the Required
Lenders received from time to time by the Agent (with respect to
which the Agent agrees that it will comply, except as otherwise
provided in this Agreement or as otherwise advised by counsel),
to exercise such powers hereunder and thereunder as are
specifically delegated to or required of the Agent by the terms
hereof and thereof, together with such powers as may be
reasonably incidental thereto. Each Lender (including CIBC)
agrees to indemnify the Agent (which indemnity shall survive the
termination of this Agreement), pro rata according to such
Lender's Percentage, from and against any and all liabilities,
obligations, losses, damages, claims, costs or expenses of any
kind or nature whatsoever which may at any time be imposed on,
incurred by, or asserted against, the Agent (including by any
Lender) in any way relating to or arising out of this Agreement,
the Notes and any other Related Document, including reasonable
attorneys' fees, and as to which such Agent is not reimbursed by
the Company; provided, however, that no Lender shall be liable
for the payment of any portion of such liabilities, obligations,
losses, damages, claims, costs or expenses resulting solely from
such Agent's gross negligence or willful misconduct. The Agent
shall not be required to take any action hereunder, under the
Notes or under any other Related Document, or to prosecute or
defend any suit in respect of this Agreement, the Notes or any
other Related Document, unless it is indemnified hereunder to its
satisfaction. If any indemnity in favor of the Agent shall be or
become in the Agent's determination, inadequate, the Agent may
call for additional indemnification from the Lenders and cease to
do the acts indemnified against hereunder until such additional
indemnity is given.
SECTION 8.02. Funding Reliance, etc. Unless the Agent
shall have been notified by the Company prior to the date on
which the Company is to make payment to the Agent for the account
of one or more Lenders hereunder, which notice shall be effective
upon receipt, that the Company does not intend to make such
<PAGE> 47
payment to the Agent on the date specified therefor, the Agent
may (but should not be required to) assume that such payment has
been made and, in reliance upon such assumption, may (but should
not be required to) make available to the Lenders a corresponding
amount. If and to the extent that the Company shall not have
made such amount available to the Agent, such Lenders severally
agree to repay the Agent forthwith on demand such corresponding
amount together with interest thereon, for each day from the date
the Agent made such amount available to the Lender to the date
such amount is repaid to the Agent, at the interest rate
applicable at the time to the Loans scheduled to be repaid and if
such Lender shall fail promptly to make such payment, the Agent
shall be entitled to recover such amount on demand from the
Company, together with interest as aforesaid.
SECTION 8.03. Exculpation. Neither the Agent nor any
directors, officers, employees or agents of the Agent shall be
liable to any Lender for any action taken or omitted to be taken
under this Agreement or any other Related Document herewith or
therewith, except for its own willful misconduct or gross
negligence, nor responsible for any recitals or warranties herein
or therein, nor for the effectiveness, enforceability, validity
or due execution of this Agreement or any other Related Document,
nor to make any inquiry respecting the performance by the Company
of its obligations hereunder or under any other Related Document.
Any such inquiry which may be made by the Agent shall not
obligate it to make any further inquiry or to take any action.
The Agent shall be entitled to rely upon advice of counsel
concerning legal matters and upon any notice, consent,
certificate, statement or writing which the Agent believes to be
genuine and to have been presented by a proper Person. The Agent
shall be entitled to assume that each Lender is reasonably
satisfied with the form and substance of each document delivered
to the Agent under Article III hereof (and available for
inspection by such Lender on or before the Effective Date) unless
the Agent shall have received notice from such Lender setting
forth its specific objection to any such document.
SECTION 8.04. Successor. The Agent may resign as such
at any time upon at least 30 days' prior notice to the Company
and all Lenders. The Agent may be removed, with or without
cause, by the Required Lenders. If, upon such 30 days notice,
the Agent at any time shall resign or shall have been removed,
Required Lenders (with the consent of the Company if such
successor Agent shall not be an existing Lender, which consent
will not be unreasonably withheld) may appoint a successor Agent
which is a Lender or shall, within 15 days of such appointment,
become a Lender pursuant to Section 9.06, which shall thereupon
become the Agent hereunder. If no successor Agent shall have
been so appointed by the Required Lenders, and shall have
accepted such appointment, within 30 days after the retiring
<PAGE> 48
Agent's giving notice of resignation, then the retiring Agent
may, on behalf of the Lenders, appoint a successor Agent, which
shall be one of the Lenders or a commercial banking institution
organized under the laws of the United States of America (or any
State thereof) or a U.S. branch or agency of a commercial banking
institution, and having a combined capital and surplus of at
least $250,000,000. Upon the acceptance of any appointment as
Agent hereunder by a successor Agent, the retiring Agent shall
deliver the Second Mortgage Bonds, Series Z to the successor
Agent and such successor Agent shall be entitled to receive from
the retiring Agent (i) a portion of any fee paid by the Company
to the retiring Agent in its capacity as Agent and for the
account of such Agent, pro rata as a proportion of the amount of
time remaining in the period covered by such fee and (ii) such
documents of transfer and assignment as such successor Agent may
reasonably request, and such successor Agent shall thereupon
succeed to and become vested with all rights, powers, privileges
and duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations under this Agreement.
After any retiring Agent's resignation hereunder as the Agent,
the provisions of
(a) this Article VIII shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was the
Agent under this Agreement; and
(b) Sections 9.04 and 9.07 shall continue to inure to its
benefit.
SECTION 8.05. Loans by CIBC. CIBC and each Affiliate
of CIBC shall have the same rights and powers with respect to (x)
the Loans made by it or any of its Affiliates, and (y) the Notes
held by it or any of its Affiliates as any other Lender and may
exercise the same as if it were not the Agent or Affiliate of the
Agent. Each of CIBC and its Affiliates may accept deposits from,
act as trustee under indentures of, lend money to, and generally
engage in any kind of business with the Company or any Affiliate
of the Company as if CIBC, were not the Agent hereunder without
having to account for the same to the Lenders.
SECTION 8.06. Credit Decisions. Each Lender
acknowledges that it has, independently of the Agent and each
other Lender, and based on such Lender's review of the financial
information of the Company, this Agreement, the other Related
Documents and such other documents, information and
investigations as such Lender has deemed appropriate, made its
own credit decision to vote in favor of the Plan of
Reorganization and accept the Company's Note in satisfaction of a
portion of its participation interest in the Claim. Each Lender
also acknowledges that it will, independently of the Agent and
each other Lender, and based on such other documents, information
<PAGE> 49
and investigations as it shall deem appropriate at any time,
continue to make its own credit decisions as to exercising or not
exercising from time to time any rights and privileges available
to it under this Agreement or any other Related Document.
The relationship between the Company, on the one hand,
and the Agent and the Lenders, on the other hand, is, and shall
at all times remain, solely that of a borrower and lenders;
neither the Agent nor the Lenders shall under any circumstances
be construed to be partners or joint venturers of the Company,
its Subsidiaries or its Affiliates; neither the Agent nor the
Lenders shall under any circumstances be deemed to be in a trust
or a fiduciary relationship with the Company, its Subsidiaries or
its Affiliates, or to owe any fiduciary duty to the Company, its
Subsidiaries or its Affiliates; neither the Agent nor the Lenders
undertake or assume any responsibility or duty to the Company,
its Subsidiaries or its Affiliates to select, review, inspect,
supervise, pass judgment upon or inform the Company, its
Subsidiaries or its Affiliates of any matter in connection with
their Property or the operations of the Company, its Subsidiaries
or its Affiliates; the Company, its Subsidiaries and its
Affiliates shall rely entirely upon their own judgment with
respect to such matters; and any review, inspection, supervision,
exercise of judgment or supply of information undertaken or
assumed by the Agent or the Lenders in connection with such
matters is solely for the protection of the Agent and the Lenders
and neither the Company nor any Person is entitled to rely
thereon.
SECTION 8.07. Copies, etc. The Agent shall give prompt
notice to each Lender of each notice or request required or
permitted to be given to the Agent by the Company pursuant to the
terms of this Agreement (unless concurrently delivered to the
Lenders by the Company). The Agent will distribute to each
Lender each document or instrument received for the account of
such Lender and copies of all other documentation received by the
Agent from the Company for distribution to the Lenders by the
Agent in accordance with the terms of this Agreement.
SECTION 8.08. Agency Fee. Until payment in full of the
principal of and interest on the Loans and all other amounts
payable by the Company hereunder, the Company will pay to the
Agent the fees provided for in that certain letter agreement (the
"Fee Letter") dated as of the Effective Date between the Company
and the Agent on the dates and in the amounts specified therein.
ARTICLE IX.
MISCELLANEOUS
<PAGE> 50
SECTION 9.01. Amendments, Etc. No amendment or waiver
of any provision of this Agreement or the Notes, nor consent to
any departure by the Company therefrom, shall in any event be
effective unless the same shall be in writing and signed by the
Company and the Required Lenders, or by the Company and the Agent
acting with the consent of 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,
that (a) no amendment, modification or waiver shall, unless by an
instrument signed by all of the Lenders or by the Agent acting
with the consent of all of the Lenders: (i) modify any
requirement hereunder that any particular action be taken by all
the Lenders or by the Required Lenders (ii) modify this Section
9.01 or the definition of "Required Lenders"; (iii) extend the
due date for, or reduce the amount of, any scheduled repayment or
prepayment of principal of or interest on any Loan (or reduce the
principal amount of or rate of interest on any Loan); (iv) alter
the provisions of Article VII to permit the release of Second
Mortgage Bonds, Series Z as collateral security for the
obligations hereunder and under the Notes or to permit additional
obligations to be secured by such collateral security that is
prior or equal to the Lien granted to the Agent under the Related
Documents; and (b) any modification or supplement of Article VIII
shall require the consent of the Agent.
SECTION 9.02. Notices, Etc. All notices and other
communications provided for hereunder shall be in writing
(including telecopier, telegraphic, telex or cable communication)
and mailed, telecopied, telegraphed, telexed, cabled or
delivered, if to the Company, at its address at
_______________________________________________________,
Attention: ______________________, telex No. _________ and
telecopier to ____________; if to the Agent, at its address at
[425 Lexington Avenue, New York, New York 10017], Attention:
_________________________ Department, ________________ Group,
telex No. _______ and in the case of telecopier to (212)
___________; and if to a Lender, at its address, telex number or
telecopier number set forth on the signature pages hereof; or, as
to each party, at such other address as shall be designated by
such party in a written notice to the other party. All such
notices and communications shall, when mailed, telecopied,
telegraphed, telexed or cabled, be effective when deposited in
the mails, telecopied, delivered to the telegraph company,
confirmed by telex answerback or delivered to the cable company,
respectively, except that notices to the Agent pursuant to the
provisions of Article II shall not be effective until received by
the Agent.
SECTION 9.03. No Waiver; Remedies. No failure on the
part of the Agent or any Lender to exercise, and no delay in
exercising, any power or right hereunder or under the Notes shall
<PAGE> 51
operate as a waiver thereof; nor shall any single or partial
exercise of any such power or right preclude any other or further
exercise thereof or the exercise of any other power or right. No
notice to or demand on the Company in any case shall entitle it
to any notice or demand in similar or other circumstances. No
waiver or approval by the Agent or any Lender under this
Agreement or the Notes shall, except as may be otherwise stated
in such waiver or approval be applicable to subsequent
transactions. No waiver or approval hereunder shall require any
similar or dissimilar waiver or approval thereafter to be granted
hereunder. The remedies provided in this Agreement are
cumulative and not exclusive of any remedies provided by law.
SECTION 9.04. Costs, Expenses and Taxes. The Company
agrees to pay on demand all costs and expenses in connection with
the preparation, execution, delivery, administration (except
normal administrative costs and fees and expenses of counsel
related thereto prior to an Event of Default), waiver,
modification and amendment of this Agreement, the Notes and any
other documents to be delivered hereunder, including, without
limitation, the reasonable fees and out-of-pocket expenses of
counsel for the Agent and the Lenders, and local counsel who may
be retained by said counsel, with respect thereto, with respect
to advising the Agent and the Lenders as to their rights and
responsibilities, or the perfection or preservation of rights or
interests, under this Agreement, any other Related Document and
such other documents which may be delivered in connection with
this Agreement, with respect to negotiations with the Company or
with other creditors of the Company, any Person controlling the
Company or any of the Company's Subsidiaries arising out of any
Event of Default or any events or circumstances that may give
rise to an Event of Default and with respect to presenting claims
in or otherwise participating in or monitoring any bankruptcy,
insolvency or other similar proceeding involving creditor's
rights generally and any proceeding ancillary thereto or in
connection with the negotiation of any restructuring or "work-
out" (whether or not consummated). The Company further agrees to
pay on demand all costs and expenses of the Agent and the Lenders
(including reasonable counsel fees and expenses), in connection
with the enforcement (whether through negotiations, legal
proceedings or otherwise) of this Agreement, the Notes, and any
other Related Document and any other documents to be delivered
hereunder, including, without limitation, reasonable counsel fees
and expenses in connection with the enforcement of rights under
this Section 9.04. In addition, the Company shall pay any and
all stamp and other administrative taxes and fees payable or
determined to be payable in connection with the execution and
delivery of this Agreement, the Notes, any other Related Document
or any other documents to be delivered hereunder, and agrees to
save the Agent and the Lenders harmless from and against any and
<PAGE> 52
all liabilities with respect to or resulting from any delay in
paying or omission to pay such taxes and fees.
SECTION 9.05. Right of Set-off. Upon the occurrence
and during the continuance of any Event of Default, the Agent and
each of the Lenders are 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 the Agent or such Lenders to or
for the credit or the account of the Company against any and all
of the obligations of the Company now or hereafter existing
under this Agreement, the Notes or any other Related Document,
whether or not the Agent or such Lenders shall have made any
demand under this Agreement or the Notes and although such
obligations may be contingent or unmatured.
The Agent and the Lenders agree promptly to notify the
Company after any such set-off and application, provided that the
failure to give such notice shall not affect the validity of such
set-off and application. The rights of the Agent and the Lenders
under this Section are in addition to other rights and remedies
(including, without limitation, other rights of set-off) which
the Agent and the Lenders may have under this Agreement, the
Related Documents and applicable law.
SECTION 9.06. Binding Effect; Assignments and
Participations. (a) This Agreement shall become effective when
it shall have been executed by the Company, the Agent and the
Lenders and thereafter shall be binding upon and inure to the
benefit of the Company, the Agent and the Lenders and their
respective successors and assigns, except that the Company shall
not have the right to assign its rights hereunder or any interest
herein without the prior written consent of the Agent and each of
the Lenders.
(b) Each of the Lenders may assign and delegate to any
Eligible Institution all or a portion of such Lender's rights and
benefits under this Agreement, its Note and the other Related
Documents; provided, that any such partial assignment shall be in
an amount at least equal to $5,000,000; and provided further,
that the Company and the Agent shall be entitled to continue to
deal solely and directly with the assigning Lender in connection
with the interests so assigned and delegated to an assignee until
(i) written notice of such assignment and delegation, together
with payment instructions, addresses and related information with
respect to the assignee, shall have been given to the Company and
the Agent by such Lender and assignee, (ii) such assignee shall
have executed and delivered to the Agent a Lender Assignment and
(iii) the Agent shall have received a processing fee in the
amount of $2,500 from the assigning Lender. From and after the
date that the foregoing conditions (i), (ii) and (iii) have been
<PAGE> 53
satisfied, (x) to the extent of the assignment, such assignee
shall have the same rights and benefits against the Company
hereunder and under the other Related Documents as it would have
had if such assignee were such Lender, and (y) the assigning
Lender, to the extent that rights and obligations hereunder have
been assigned and delegated by it in connection with the Lender
Assignment, shall be released from its obligations hereunder and
under the other Related Documents arising from and after the date
of such assignment (and in the case of an assignment of all of an
assigning Lender's remaining rights and obligations hereunder,
such Lender shall cease to be a party hereto). Within five
Business Days after receipt of notice, the Company, at its own
expense, shall execute and deliver to the Agent (for delivery to
the relevant assignee) a new Note evidencing such assignee's
assigned portion of the Loan, and if the assigning Lender has
retained a portion of the Loan, a replacement Note in the
principal amount of the portion of the Loan retained by such
assigning Lender (such Note to be in exchange for, but not in
payment of, the Note held by such assigning Lender). Each such
Note shall be dated the date of the predecessor Note. The
predecessor Note shall be marked "exchanged" by the assigning
Lender and delivered to the Company. Any attempted assignment
and delegation not made in accordance with this Section 9.06(b)
shall be null and void.
(c) A Lender may sell or agree to sell, to (i) any
Eligible Institution (each such Eligible Institution being an
"Eligible Participant") or (ii) to one or more other Persons
(each a "Restricted Participant"; and together with any Eligible
Participants being referred to herein as a "Participant"), a
participation in all or any part of its Loan. Each Participant
shall be entitled to the rights and benefits of the provisions of
Section 5.01(a)(vi) with respect to its participation in such
Loan as if (and the Company shall be directly obligated to such
Participant under such provisions as if) such Participant were a
Lender for purposes of said Section, but, except as set forth
below, shall not have any other rights or benefits under this
Agreement, the Notes or any other Related Document (the
Participant's rights against such Lender in respect of such
participation to be those set forth in the agreements executed by
such Lender in favor of the Participant). All amounts payable by
the Company to such Lender under Sections 2.05 and 2.09 in
respect of its Loan shall be determined as if such Lender had not
sold or agreed to sell any participations in such Loan, and as if
such Lender were maintaining its Loan in the same way that it is
maintaining the portion of such Loan in which no participations
have been sold. In the case of an Eligible Participant, such
Lender may agree with such Participant to take or refrain from
taking action hereunder or under any Related Document as such
Lender and such Participant shall determine, as set forth in the
agreement executed by such Lender in favor of such Participant.
<PAGE> 54
In no event shall such Lender agree with any Restricted
Participant to take or refrain from taking any action hereunder
or under any other Related Document except that such Lender may
agree with a Restricted Participant that it will not, without the
consent of such Restricted Participant, agree to (i) extend the
date fixed for the payment of principal of or interest on the
Loan payable to such Restricted Participant, (ii) reduce the
amount of any such payment of principal, (iii) reduce the rate at
which such Restricted Participant is entitled to receive such
interest, (iv) alter the rights or obligations of the Company to
prepay the Loan, or (v) release any collateral, including,
without limitation, the Second Mortgage Bonds, Series Z. Upon
the sale by a Lender of a participation in all or part of its
Loan, such Lender shall notify the Agent in writing as to the
number of participations sold and the aggregate dollar amount of
the Loans held by the Participants.
(d) Notwithstanding any other provision set forth in
this Agreement, any Lender may at any time create a security
interest in all or any portion of its rights under this
Agreement, the Notes and the other Related Documents (including,
without limitation, the Loan owing to it) in favor of any Federal
Reserve Bank in accordance with Regulation A of the F.R.S. Board.
SECTION 9.07. Indemnity. The Company hereby
indemnifies and holds the Agent, each Lender and each Participant
and each of their Affiliates and their officers, directors,
employees, agents and advisors (each, an "Indemnified Party")
harmless from and against any and all claims, damages, losses,
liabilities and expenses (including, without limitation,
reasonable fees and expenses of counsel) that may be incurred by
(irrespective of whether such Indemnified Party is a party to the
action for which indemnification is sought) or asserted or
awarded against any Indemnified Party (except to the extent any
such claim, damage, loss, liability or expense is found in a
final, non-appealable judgment by a court of competent
jurisdiction to have resulted from such Indemnified Party's gross
negligence or willful misconduct), in each case relating to or
arising out of or in connection with or by reason of:
(i) any representation, warranty or certification made
or deemed made in this Agreement or in any Note by the
Company (or any of its officers), or any certificate
furnished to the Bank pursuant to the provisions hereof or
thereof, proving to have been false or misleading as of the
time made or furnished in any material respect;
(ii) any case or proceeding pursuant to any bankruptcy,
insolvency, reorganization, moratorium or similar law or any
restructuring of the Company; or
<PAGE> 55
(iii) any cost or liability under any Environmental Law
arising out of the operations or assets of the Company.
SECTION 9.08. Further Assurances. The Company agrees
promptly to do such further acts and things, and to execute and
deliver such additional instruments (including, without
limitation, notices), at its own expense, as the Agent or any
Lender may at any time reasonably request in order better to
insure and confirm the Agent's and the Lenders' rights, powers
and remedies hereunder and under the other Related Documents
(including in order to perfect or protect any pledge or security
interest granted or purported to be granted hereby or to enable
the Agent and the Lenders to exercise or enforce their rights and
remedies in respect hereof).
SECTION 9.09. Severability. Any provision of this
Agreement which is prohibited, unenforceable or not authorized in
any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition, unenforceability or
non-authorization without invalidating the remaining provisions
hereof or affecting the validity, enforceability or legality of
such provision in any other jurisdiction.
SECTION 9.10. Headings. Section headings in this
Agreement are included herein for convenience of reference only
and shall not constitute a part of this Agreement for any other
purpose.
SECTION 9.11. GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK, WITHOUT GIVING EFFECT TO CONFLICT OF LAW
PRINCIPLES.
SECTION 9.12. FORUM SELECTION AND SUBMISSION TO
JURISDICTION. THE COMPANY HEREBY SUBMITS TO THE EXCLUSIVE
JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN
NEW YORK CITY FOR THE PURPOSES OF ALL LEGAL PROCEEDINGS ARISING
OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES, THE OTHER
RELATED DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY OR THE ACTIONS OR OMISSIONS OF THE AGENT OR THE LENDERS
IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT OF
THIS AGREEMENT OR THE NOTE OR THE OTHER RELATED DOCUMENTS. THE
COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A
COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A
COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT
THAT THE COMPANY HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM
JURISDICTION OF ANY COURT OF FROM ANY LEGAL PROCESS (WHETHER
THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT,
<PAGE> 56
ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO
ITSELF OR ITS PROPERTY, THE COMPANY HEREBY IRREVOCABLY WAIVES
SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT
AND THE OTHER RELATED DOCUMENTS. THE COMPANY FURTHER IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE
PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF
TEXAS.
SECTION 9.13. WAIVER OF TRIAL BY JURY. EACH OF THE
COMPANY, THE AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO TRIAL
BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT, THE NOTE, THE OTHER RELATED DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. THE COMPANY
ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT
CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF
EACH OTHER RELATED DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDERS ENTERING INTO
THIS AGREEMENT AND EACH SUCH OTHER RELATED DOCUMENT.
SECTION 9.14. 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.
SECTION 9.15. INTEGRATION. THIS AGREEMENT REPRESENTS
THE FINAL AGREEMENT BETWEEN THE PARTIES HERETO AS TO THE SUBJECT
MATTER OF THIS AGREEMENT AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES HERETO.
SECTION 9.16. Survival. The obligations of the Company
under Sections 2.05, 2.07, 2.09, 9.07, 9.12 and 9.13 shall
survive the repayment of the Loans and the payment in full of all
amounts payable by the Company under Section 9.04.
<PAGE> 57
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.
EL PASO ELECTRIC COMPANY
By
Title:
PERCENTAGE LENDERS
__% CANADIAN IMPERIAL BANK OF COMMERCE,
Individually and as Agent
__% [OTHER LENDERS]
By
Title:
Address for Notices:
Telex No.:
Telecopier No.:
<PAGE> 58
EXHIBIT A
PROMISSORY NOTE
$______________
Dated:_______________, 19__ New York, New York
FOR VALUE RECEIVED, the undersigned, EL PASO ELECTRIC
COMPANY, a Texas corporation (the "Company"), HEREBY PROMISES TO
PAY to the order of [Name of Lender] (the "Lender") the principal
sum of $[amount of the Loan in figures] (the "Loan") at the times
and in the manner provided in the Term Loan Agreement.
The Company promises to pay interest on the principal amount
of the Loan from the date hereof until such principal amount is
paid in full, at such interest rates, and payable at such times,
as are specified in the Term Loan Agreement referred to below.
Both principal and interest are payable in lawful money of
the United States of America to the Lender at ________________
______________________________________ in same day funds. All
payments made on account of the principal amount hereof shall be
recorded by the Lender in its books and records and, prior to any
transfer hereof, endorsed on the grid attached hereto which is a
part of this Note. The failure by the Lender to make any such
recordation on its books and records shall not limit or otherwise
affect the obligations of the Company hereunder or under the Term
Loan Agreement referred to below.
This Promissory Note is the Note referred to in, and is
entitled to the benefits of, the Term Loan Agreement dated as of
_____________, 19__ (the "Term Loan Agreement"), among the
Company, Canadian Imperial Bank of Commerce, individually and as
agent and the lenders signatory thereto. The Term Loan
Agreement, among other things, contains provisions for
acceleration of the maturity hereof upon the happening of certain
stated events and also for prepayments on account of principal
hereof prior to the maturity hereof upon the terms and conditions
therein specified.
This Note is secured by Second Mortgage Bonds, Series Z,
referred to in the Term Loan Agreement.
EL PASO ELECTRIC COMPANY
By___________________________
Title:
<PAGE> 59
PAYMENTS OF PRINCIPAL
- -----------------------------------------------------------------
> Amount of > >
> Principal Paid > Unpaid Principal > Notation
Date > or Prepaid > Balance > Made By
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
<PAGE> 1
EXHIBIT A-19
[DRAFT 11/03/93]
TERM LOAN AGREEMENT
dated as of _____________, 199__
between
EL PASO ELECTRIC COMPANY
THE CREDITORS NAMED HEREIN, and
_________________,
as Agent
The Agent under, and as defined in, this document will be
selected (i) by holders of at least 50% of the Claims (as defined
in this document), as determined on the date of such selection,
or (ii) if such Agent has not been selected, and agreed to act in
such capacity, on or before October 31, 1994, by reorganized El
Paso Electric Company with the consent of holders of not less
than one-third of the Loans under, and as defined in, this
document, as determined on the Effective Date. The Reference
Banks under, and as defined in, this document will be determined
by mutual agreement of reorganized El Paso Electric Company and
such Agent. Provisions of this document relevant to its
administration by such Agent, including the calculation of
interest rates, are subject to change as may be required by such
Agent, provided that the resulting provisions are substantially
consistent with the customary practices of such Agent. Without
limiting the foregoing, the calculation of the Base Rate under,
and as defined in, this document, will be made according to a
formula customarily applied by such Agent to its domestic loans
priced by reference to its "base" or "prime" rate, which formula
may (according to such customary application) require that such
Base Rate be the higher of such "base" or "prime" rate and/or the
sum of a specified margin plus a rate determined by reference to
certificates of deposit and/or federal funds.
<PAGE> 2
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to
which it is attached but is inserted for convenience of reference
only.
Page
PRELIMINARY STATEMENTS:. . . . . . . . . . . . . . . . . . . . 1
ARTICLE I
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.01. Definitions. . . . . . . . . . . . . . . . 2
SECTION 1.02. Computation of Time Periods. . . . . . . . 10
SECTION 1.03. Accounting Terms . . . . . . . . . . . . . 10
SECTION 1.04. Interpretation . . . . . . . . . . . . . . 10
ARTICLE II
AMOUNTS AND TERMS OF THE LOAN. . . . . . . . . . . . . . . . . 11
SECTION 2.01. The Loans. . . . . . . . . . . . . . . . . 11
SECTION 2.02. Repayment. . . . . . . . . . . . . . . . . 11
SECTION 2.03. Interest . . . . . . . . . . . . . . . . . 12
SECTION 2.04. Prepayments .. . . . . . . . . . . . . . . 13
SECTION 2.05. Increased Costs, Etc . . . . . . . . . . . 14
SECTION 2.06. Interest Rate Protection . . . . . . . . . 16
SECTION 2.07. Illegality, Etc .. . . . . . . . . . . . . 16
SECTION 2.08. Payments and Computations. . . . . . . . . 17
SECTION 2.09. U.S. Taxes. . . . . . . . . . . . . . . . 18
SECTION 2.10. Pro Rata Treatment. . . . . . . . . . . . 19
SECTION 2.11. Non-Receipt of Funds by the Agent. . . . . 19
SECTION 2.12. Set-Off; Sharing of Payments; Etc. . . . . 20
SECTION 2.13. Applicable Lending Offices . . . . . . . . 21
SECTION 2.14. Several Obligations; Remedies
Independent. . . . . . . . . . . . . . . 21
SECTION 2.15. Net Payments . . . . . . . . . . . . . . . 22
ARTICLE III
CONDITIONS TO CLOSING .. . . . . . . . . . . . . . . . . . . . 22
SECTION 3.01. Closing Documents. . . . . . . . . . . . . 22
ARTICLE IV
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . 24
SECTION 4.01. Representations and Warranties of the
Company. . . . . . . . . . . . . . . . . 24
i
<PAGE> 3
Page
ARTICLE V
COVENANTS OF THE COMPANY . . . . . . . . . . . . . . . . . . 26
SECTION 5.01. Covenants of the Company . . . . . . . . 26
(a) Reporting Requirements. . . . . . . . . . . . 27
(b) Litigation. . . . . . . . . . . . . . . . . . 29
(c) Preservation of Corporate Existence, Etc. . . 29
(d) Maintenance of Insurance, Etc . . . . . . . . 29
(e) Leverage Ratio. . . . . . . . . . . . . . . . 29
(f) Interest Coverage Ratio . . . . . . . . . . . 29
(g) Prohibition of Fundamental Changes. . . . . . 29
(h) Compliance with ERISA . . . . . . . . . . . . 30
(i) Limitation on Liens . . . . . . . . . . . . . 31
(j) Compliance with Laws, Etc . . . . . . . . . . 32
(k) Compliance with Environmental Laws. . . . . . 33
(l) Visitation Rights . . . . . . . . . . . . . . 33
(m) Maintenance of Properties, Etc. . . . . . . . 33
(n) Change in Nature of Business. . . . . . . . . 33
(o) Maintain Books and Records. . . . . . . . . . 33
(p) Subsidiaries and Investments. . . . . . . . . 34
ARTICLE VI
EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . 34
SECTION 6.01. Events of Default. . . . . . . . . . . . 34
ARTICLE VII
THE AGENT. . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 7.01. Appointment, Powers and Immunities . . . 37
SECTION 7.02. Reliance by Agent. . . . . . . . . . . . 37
SECTION 7.03. Defaults . . . . . . . . . . . . . . . . 38
SECTION 7.04. Rights as a Creditor . . . . . . . . . . 38
SECTION 7.05. Indemnification. . . . . . . . . . . . . 38
SECTION 7.06. Non-Reliance on Agent and Other
Creditors. . . . . . . . . . . . . . . 39
SECTION 7.07. Failure to Act . . . . . . . . . . . . . 40
SECTION 7.08. Resignation or Removal of Agent. . . . . 40
SECTION 7.09. Agency Fee . . . . . . . . . . . . . . . 41
ARTICLE VIII
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 8.01. Amendments, Etc. . . . . . . . . . . . . 41
SECTION 8.02. Notices, Etc . . . . . . . . . . . . . . 41
SECTION 8.03. No Waiver; Remedies. . . . . . . . . . . 41
ii
<PAGE> 4
Page
SECTION 8.04. Costs, Expenses and Taxes. . . . . . . . 42
SECTION 8.05. Binding Effect; Assignments and
Participations . . . . . . . . . . . . 42
SECTION 8.06. Indemnity. . . . . . . . . . . . . . . . 44
SECTION 8.07. Severability . . . . . . . . . . . . . . 45
SECTION 8.08. Headings . . . . . . . . . . . . . . . . 45
SECTION 8.09. GOVERNING LAW. . . . . . . . . . . . . . 45
SECTION 8.10. FORUM SELECTION; SUBMISSION TO
JURISDICTION . . . . . . . . . . . . . 45
SECTION 8.11. WAIVER OF TRIAL BY JURY. . . . . . . . . 46
SECTION 8.12. Counterparts . . . . . . . . . . . . . . 46
SECTION 8.13. INTEGRATION. . . . . . . . . . . . . . . 46
SECTION 8.14. Survival.. . . . . . . . . . . . . . . . 46
SCHEDULE I - Certain Eligible Institutions
EXHIBIT A - Form of Notes
iii
<PAGE> 5
TERM LOAN AGREEMENT
TERM LOAN AGREEMENT, dated as of [the Effective Date],
between El Paso Electric Company, a Texas corporation (the
"Company"), each of the creditors of the Company that is a
signatory hereto identified under the caption "CREDITORS" on the
signature pages hereto or that, pursuant to Section 8.05(c),
shall become a "Creditor" hereunder (individually, a "Creditor"
and, collectively, the "Creditors"); and ________________, a
____________, as agent for the Creditors (in such capacity,
together with its successors in such capacity, the "Agent").
PRELIMINARY STATEMENTS:
(1) On January 8, 1992, the Company commenced a
voluntary case (the "Bankruptcy Case") under Chapter 11 of the
Bankruptcy Code (as hereinafter defined) (Case No. 92-10148-FM)
in the Bankruptcy Court (as hereinafter defined), and thereafter
has continued to operate its business and manage its assets as a
debtor-in-possession.
(2) Among the claims filed against the Company in the
Bankruptcy Case were Allowed Class 11 Claims and Allowed Class 13
Claims (as defined in the Plan of Reorganization, as defined
herein).
(3) On ____________, 199__, an order was entered by
the court having jurisdiction over the Bankruptcy Case (the
"Bankruptcy Court") confirming the Plan of Reorganization (as
hereinafter defined), which Plan of Reorganization provided,
among other things, for the Company to enter into this Agreement
with the Creditors and the Agent.
(4) Pursuant to Sections 3.13(A) and 3.15(A)(1) of the
Plan of Reorganization and in accordance with the terms thereof
and to the extent provided therein a portion of such Allowed
Class 11 and Allowed Class 13 Claims (the "Claims") are to be
discharged and satisfied by the execution and delivery by the
Company of this Agreement, which Agreement provides, among other
things, for the execution and delivery by the Company to the
Creditors of the Notes.
NOW, THEREFORE, in consideration of the premises and of
the mutual covenants and agreements contained in the Plan of
Reorganization and herein, the parties hereto agree as follows:
<PAGE> 6
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. As used in this Agreement,
the following terms have the following meanings:
"Affiliate" means, as to any Person, any other Person
that, directly or indirectly, controls, is controlled by or is
under common control with such Person or is a director or officer
of such Person. For purposes of this definition, the term
"control" (including the terms "controlling," "controlled by" and
"under common control with") of a Person means the possession,
direct or indirect, of the power to vote 5% or more of the Voting
Stock of such Person or to direct or cause the direction of the
management and policies of such Person, whether through the
ownership of Voting Stock, by contract or otherwise.
"Applicable Lending Office" means, for each Creditor,
the "Lending Office" of such Creditor (or of an affiliate of such
Creditor) designated for Base Rate Loans or Eurodollar Loans, as
the case may be, on the signature pages hereof or such other
office of such Creditor (or of an affiliate of such Creditor) as
such Creditor 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.
"Bank" means [name of Agent bank when acting in its
individual capacity].
"Banking Institution" means any financial institution
subject to regulation under Regulation D of the Board of
Governors of the Federal Reserve System and any other banking
institution or trust company or similar organization incorporated
or organized under the laws of a country other than the United
States, or a political subdivision of a country other than the
United States.
"Bankruptcy Case" has the meaning assigned to that term
in the Preliminary Statement.
"Bankruptcy Code" means the Bankruptcy Reform Act of
1978, as heretofore and hereafter amended, and codified as title
11 of the United States Code.
"Bankruptcy Court" has the meaning assigned to that
term in the Preliminary Statement.
"Base Rate" means the rate of interest from time to
time announced by the Bank at the Principal Office as its prime
or commercial lending rate, as applicable. Each change in any
interest rate provided for herein based upon the Base Rate
<PAGE> 7
resulting from a change in the Base Rate shall take effect at the
time of such change in the Base Rate.
"Base Rate Loan" means the portion of a Loan which
bears interest as provided in Section 2.03(a).
"Business Day" means a day of the year on which banks
are not required or authorized to close in New York City and, if
the applicable Business Day relates to any Eurodollar Loans, on
which dealings are carried on in the London interbank market.
"Capital Lease Obligation" means, with respect to any
lease of property which, in accordance with GAAP, appears on the
lessee's balance sheet as a capital lease, the amount of the
liability which should appear on such balance sheet.
"CERCLA" means the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended from
time to time.
"Claims" has the meaning assigned to that term in the
Preliminary Statement.
"Code" means the Internal Revenue Code of 1986, as
amended from time to time.
"Confirmation Order" means the order of the Bankruptcy
Court confirming the Plan of Reorganization.
"Consolidated Subsidiary" means, for any Person, each
Subsidiary of such Person (whether now existing or hereafter
created or acquired) the financial statements of which shall be
(or should have been) consolidated with the financial statements
of such Person in accordance with GAAP.
"Debt" of any Person means, without duplication, (a)
all indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services (including
without limitation, all obligations, contingent or otherwise, of
such Person in connection with acceptance facilities (other than
acceptance facilities entered into in connection with normal
course commercial trade transactions) and letter of credit
facilities to the extent such letter of credit facilities support
Debt), (b) all obligations of such Person evidenced by notes,
bonds, debentures or other similar instruments, (c) all
obligations of such Person created or arising under any
conditional sale or other title retention agreement with respect
to property acquired by such Person, (d) all Capitalized Lease
Obligations of such Person, (e) all obligations of such Person to
purchase, redeem, retire, defease or otherwise make any payment
in respect of any capital stock of or other ownership or profit
<PAGE> 8
interest in such Person or any other Person or any warrants,
rights or options to acquire such capital stock, valued, in the
case of preferred stock, at the greater of its voluntary or
involuntary liquidation preference plus accrued and unpaid
dividends, (f) all Debt of others referred to in clauses (a)
through (e) above guaranteed directly or indirectly in any manner
by such Person, or in effect guaranteed directly or indirectly by
such Person through an agreement (i) to pay or purchase such Debt
or to advance or supply funds for the payment or purchase of such
Debt, (ii) to purchase, sell or lease (as lessee or lessor)
property, or to purchase or sell services, primarily for the
purpose of enabling the debtor to make payment of such Debt or to
assure the holder of such Debt against loss, (iii) to supply
funds to or in any other manner invest in the debtor (including
any agreement to pay for property or services irrespective of
whether such property is received or such services are rendered)
or (iv) otherwise to assure a creditor against loss, and (g) all
Debt referred to in clauses (a) through (e) above 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
(including, without limitation, accounts and contract rights)
owned by such Person, even though such Person has not assumed or
become liable for the payment of such Debt. In cases where
recourse to any Person or any of its properties in respect of
Debt is limited, the amount of such Debt of such Person for
purposes hereof shall be so limited.
"EBITA" means, for any period, the sum, for the Company
and its Consolidated Subsidiaries (determined on a consolidated
basis without duplication in accordance with GAAP), of the
following: (a) net operating income (calculated before taxes,
Interest Expense, extraordinary items and unusual, non-cash, non-
recurring items and income or loss attributable to equity in
Affiliates) for such period plus (b) amortization (to the extent
deducted in determining net operating income) for such period.
"Effective Date" means the Effective Date (as defined
therein) of the Plan of Reorganization.
"Eligible Institution" means (i) a bank or trust
company organized under the laws of the United States of America,
of any State therein, of the District of Columbia, of any member
country of the Organization for Economic Cooperation and
Development or of any political subdivision of any such country,
in each case having assets in excess of $500,000,000, (ii) an
insurance company organized under the laws of any State in the
United States of America or of the District of Columbia having
assets in excess of $500,000,000, (iii) any Creditor, (iv) any
Person listed on Schedule I hereto that, on the Effective Date,
holds a participation in a Claim, or (v) any other Person
consented to by the Company, which consent shall not be
unreasonably withheld.
<PAGE> 9
"Environmental Action" means any administrative,
regulatory or judicial action, suit, demand, demand letter,
claim, notice of non-compliance or violation, investigation,
proceeding, consent order or consent agreement relating in any
way to any Environmental Law or any Environmental Permit
including, without limitation, (a) any claim by any governmental
or regulatory authority for enforcement, investigation, cleanup,
removal, response, remedial or other actions or damages pursuant
to any Environmental Law and (b) any claim by any Person seeking
damages, contribution, indemnification, cost recovery,
compensation or injunctive relief resulting from Hazardous
Materials or arising from alleged injury or threat of injury to
health, safety or the environment.
"Environmental Law" means any federal, state or local
law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award relating to the environment, health,
safety or Hazardous Materials.
"Environmental Permit" means any permit, approval,
identification number, license or other authorization required
under any Environmental Law.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended from time to time, and the regulations
promulgated and rulings issued thereunder.
"ERISA Affiliate" means any Person who for purposes of
Title IV of ERISA is a member of the Company's controlled group,
or under common control with the Company, within the meaning of
Section 414 of the Internal Revenue Code of 1986, as amended.
"Eurodollar Loan" means the portion of a Loan which
bears interest at the Eurodollar Rate.
"Eurodollar Rate" means, for any Interest Period, an
interest rate per annum equal at all times during such Interest
Period to the sum of (x) the LIBO Rate for such Interest Period
plus (y) 2% per annum.
"Event of Default" has the meaning assigned to that
term in Section 6.01.
"Federal Funds Rate" means, for any day, the rate per
annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
equal to the weighted average of the rates on overnight Federal
funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Business Day next
succeeding such day, provided that (a) if the day for which such
rate is to be determined is not a Business Day, the Federal Funds
Rate for such day shall be such rate on such transactions on the
<PAGE> 10
next preceding Business Day as so published on the next
succeeding Business Day and (b) if such rate is not so published
for any Business Day, the Federal Funds Rate for such Business
Day shall be the average rate charged to the Bank on such
Business Day on such transactions as determined by the Agent.
"Final Approval" means any authorizations, consents,
approvals, waivers, exceptions, variances, orders, licenses,
exemptions, publications, filings, notices to and declarations of
or with any governmental authority (other than routine reporting
requirements the failure to comply with which will not affect the
validity or enforceability of this Agreement or any of the Notes
or have a Material Adverse Effect) or any other action in respect
of any governmental authority that is in full force and effect
and is not the subject of a pending appeal or reconsideration or
other review, and the time in which to make an appeal or request
the review or reconsideration of which has expired without any
appeal or request for review or reconsideration having been taken
or made.
"Final Order" means an order of the Bankruptcy Court
which (a) shall not have been reversed, stayed, modified or
amended and the time to appeal from, or to seek review or
rehearing of, shall have expired and as to which no appeal or
petition for review, rehearing or certiorari is pending or (b) if
appealed from, shall have been affirmed and the time to appeal
from such affirmance or to seek review or rehearing thereof shall
have expired or no further hearing, appeal or petition for
certiorari can be taken or granted.
"First Mortgage Bond Indenture" means the Indenture
dated as of _______________ between the Company and
_______________, as trustee, providing for the issuance by the
Company of its first mortgage bonds.
"First Mortgage Bonds" means bonds issued by the
Company under the First Mortgage Bond Indenture.
"GAAP" means generally accepted accounting principles
in the United States of America as in effect from time to time.
"Governmental Person" means any national, state or
local government, any political subdivision or any government
instrumentality, authority, body or entity, including the Federal
Deposit Insurance Corporation, the Board of Governors of the
Federal Reserve System, any central bank or any comparable
authority.
"Hazardous Materials" means (a) petroleum or petroleum
products, asbestos in any form, radioactive or source material,
(b) any substances defined as or included in the definition of
"hazardous substances," "hazardous wastes," "hazardous
<PAGE> 11
materials," "extremely hazardous wastes," "restricted hazardous
wastes," "toxic substances," "toxic pollutants," "contaminants"
or "pollutants," or words of similar import, under any
Environmental Law and (c) any other substance exposure to which
is regulated under any Environmental Law.
"Indemnified Party" has the meaning assigned to that
term in Section 8.06.
"Indentures" means, collectively, the First Mortgage
Bond Indenture and the Second Mortgage Bond Indenture.
"Interest Coverage Ratio" means, as at any date, the
ratio of (a) EBITA for the period of four consecutive fiscal
quarters ending on or most recently ended prior to such date to
(b) Interest Expense for such period.
"Interest Expense" means, for any period, the sum, for
the Company and its Consolidated Subsidiaries (determined on a
consolidated basis without duplication in accordance with GAAP),
of the following: (a) all interest in respect of Debt including,
without limitation, interest capitalized during such period
(whether or not actually paid during such period), and including,
without limitation, all commissions and fees (other than up-front
fees), plus (b) the net amounts payable (or minus the net amounts
receivable) under Interest Rate Protection Agreements accrued
during such period (whether or not actually paid or received
during such period).
"Interest Period" has the meaning assigned to that term
in Section 2.03(b).
"Interest Rate Protection Agreement" means, for any
Person, an interest rate swap, cap or collar agreement, interest
rate future or option contract or similar arrangement providing
for the transfer or mitigation of interest risks either generally
or under specific contingencies.
"Leverage Ratio" means, at any time, the ratio of Total
Debt at such time to the sum of (a) Total Capital at such time
and (b) Total Debt at such time.
"LIBO Rate" means, for any Interest Period, the
arithmetic mean (rounded upwards, if necessary, to the nearest
1/16 of 1%), as determined by the Agent, of the rates per annum
quoted by the respective Reference Banks at approximately
11:00 a.m. London time (or as soon thereafter as practicable) on
the date two Business Days prior to the first day of such
Interest Period for the offering by the respective Reference
Banks to leading banks in the London interbank market of Dollar
deposits having a term comparable to such Interest Period and in
an amount comparable to the principal amount of the Eurodollar
<PAGE> 12
Loan of the respective Reference Banks for such Interest Period.
If any Reference Bank does not timely furnish such information
for determination of any LIBO Rate, the Agent shall determine
such LIBO Rate on the basis of the information timely furnished
by the remaining Reference Banks.
"Lien" means any lien, security interest or other
charge or encumbrance of any kind, or any other type of
preferential arrangement, including, without limitation, the lien
or retained security title of a conditional vendor and any
easement, right of way or other encumbrance on title to real
property.
"Loans" has the meaning assigned to that term in
Section 2.01.
"Majority Creditors" means Creditors holding at least
50% of the aggregate unpaid principal amount of the Loans.
"Material Adverse Effect" means a material adverse
effect on (i) the property, business, operations, financial
condition, liabilities or capitalization of the Company and its
Subsidiaries taken as a whole, (ii) the ability of the Company to
perform its obligations under this Agreement or any of the Notes,
(iii) the validity or enforceability of this Agreement or any of
the Notes, (iv) the rights and remedies of the Agent or the
Creditors or (v) the timely payment of the principal of or
interest on the Notes or other amounts payable in connection
herewith or therewith.
"Material Subsidiary" means, at any time, a Subsidiary
of the Company (a) whose assets at such time exceed 10% of the
assets of the Company and its Subsidiaries (on a consolidated
basis) or (b) whose earnings at such time exceed 10% of the
earnings of the Company and its Subsidiaries (on a consolidated
basis).
"Multiemployer Plan" means a multiemployer plan, as
defined in Section 4001(a)(3) of ERISA, to which the Company or
any ERISA Affiliate is making or accruing an obligation to make
contributions, or has within any of the preceding five plan years
made or accrued an obligation to make contributions, such plan
being maintained pursuant to one or more collective bargaining
agreements.
"Multiple Employer Plan" means a single employer plan,
as defined in Section 4001(a)(15) of ERISA, that (i) is
maintained for employees of the Company or an ERISA Affiliate and
at least one Person other than the Company and its ERISA
Affiliates or (ii) was so maintained and in respect of which the
Company or an ERISA Affiliate could have liability under Section
<PAGE> 13
4064 or 4069 of ERISA in the event such plan has been or were to
be terminated.
"Note" means a promissory note of the Company, in
substantially the form of Exhibit A.
"PBGC" means the Pension Benefit Guaranty Corporation
or any successor thereto.
"Person" means an individual, a corporation, a
partnership, an association, a business trust or any other entity
or organization, including a Governmental Person.
"Plan" means a Single Employer Plan or a Multiple
Employer Plan.
"Plan of Reorganization" means the Modified Third
Amended Plan of Reorganization of the Debtor Providing for the
Acquisition of El Paso Electric Company by Central and South West
Corporation filed on August 27, 1993 (as corrected as of
September 15, 1993).
"Principal Office" means the principal office of the
Bank, located on the date hereof at ____ ________ ________,
________, ________ _____.
"Reference Banks" means the Bank, ____________ and
____________ (or their respective Applicable Lending Offices, as
the case may be).
"Second Mortgage Bond Indenture" means the Indenture
dated as of __________ between the Company and _______________,
as trustee, providing for the issuance by the Company of its
second mortgage bonds.
"Second Mortgage Bonds" means bonds issued by the
Company under the Second Mortgage Bond Indenture.
"Single Employer Plan" means a single employer plan, as
defined in Section 4001(a)(15) of ERISA, that (i) is maintained
for employees of the Company or an ERISA Affiliate and no Person
other than the Company and its ERISA Affiliates or (ii) was so
maintained and in respect of which the Company or an ERISA
Affiliate could have liability under Section 4069 of ERISA in the
event such plan has been or were to be terminated.
"Submission Date" means the date the form of this
Agreement was filed with the Bankruptcy Court prior to the date
creditors must have voted on the Plan of Reorganization in
accordance with Section 7.6 of the Plan of Reorganization.
<PAGE> 14
"Subsidiary" means, with respect to any Person, any
corporation, partnership or other entity of which at least a
majority of the Voting Stock is at the time directly or
indirectly owned or controlled by such Person or one or more
Subsidiaries of such Person or by such Person and one or more
Subsidiaries of such Person.
"Total Capital" means, as at any date, the sum for the
Company and its Consolidated Subsidiaries (determined on a
consolidated basis without duplication in accordance with GAAP),
of the following:
(a) the amount of capital stock (excluding treasury
stock and capital stock subscribed for and unissued and
preferred stock mandatorily redeemable in cash or redeemable
in cash at the option of the holder thereof), plus
(b) the amount of surplus and retained earnings (or,
in the case of a surplus or retained earnings deficit, minus
the amount of such deficit).
"Total Debt" means, as at any date, the aggregate
amount of all Debt of the Company and its Consolidated
Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP) (other than contingent
obligations in connection with acceptance facilities and letters
of credit).
"Voting Stock" means capital stock issued by a
corporation, or equivalent interests in any other Person, the
holders of which are ordinarily, in the absence of contingencies,
entitled to vote for the election of directors (or Persons
performing similar functions) of such Person, even though the
right so to vote has been suspended by the happening of such a
contingency.
"Withdrawal Liability" has the meaning given such term
under Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. Computation of Time Periods. In this
Agreement, in the computation of a period of time from a
specified date to a later specified date, the word "from" means
"from and including" and the words "to" and "until" each means
"to but excluding".
SECTION 1.03. Accounting Terms. All accounting terms
not specifically defined herein shall be construed in accordance
with GAAP consistently applied, except as otherwise stated
herein.
SECTION 1.04. Interpretation. In this Agreement the
singular includes the plural and the plural the singular; words
<PAGE> 15
importing any gender include the other genders; references to
statutes are to be construed as including all statutory
provisions consolidating, amending or replacing the statute
referred to; references to "writing" include printing, typing,
lithography and other means of reproducing words in a tangible
visible form; references to sections (or any subdivision of a
section), articles, schedules, annexes and exhibits are to those
of this Agreement unless otherwise indicated; the words
"including", "includes" and "include" shall be deemed to be
followed by the words "without limitation"; references to
agreements and other contractual instruments shall be deemed to
include all subsequent amendments and other modifications to such
instruments but only to the extent such amendments and other
modifications are not prohibited by the terms of this Agreement;
and references to Persons include their respective permitted
successors and assigns and, in the case of Governmental Persons,
Persons succeeding to their respective functions and capacities.
ARTICLE II
AMOUNTS AND TERMS OF THE LOAN
SECTION 2.01. The Loans. As provided in the Plan of
Reorganization, the Company is issuing to each Creditor,
concurrently with the execution and delivery hereof, a Note,
appropriately completed to the order of such Creditor, in the
amount set forth opposite the name of such Creditor on the
signature pages hereto under the caption "Loan Amount" (as to
each Creditor, such amount is referred to as the "Loan" of such
Creditor and such amounts collectively are referred to as the
"Loans" of the Creditors), in satisfaction, to the extent
provided for in Section 3.15(A)(1) of the Plan of Reorganization,
of the Claims of such Creditor. Amounts repaid or prepaid
hereunder may not be reborrowed.
SECTION 2.02. Repayment. The Company shall pay to the
Agent for account of each Creditor the unpaid principal amount of
such Creditor's Loan in ___ substantially equal quarterly
installments commencing on the last Business Day of ___________,
199__ and on the last Business Day of each March, June, September
and December thereafter through and including ___________, 200__;
provided, however, that the last such installment shall be in the
amount necessary to repay in full the outstanding principal
amount of the Loans at such date.[1]
- ----------------------------------------
[1] It is understood that the quarterly principal payments will
commence at the end of the quarter after the earlier of the
fifth anniversary of (i) the Effective Date and (ii)
December 31, 1994, and the Loans will mature on the seventh
anniversary of the earlier of (i) the Effective Date and
(ii) December 31, 1994; provided, however, that the maturity
(continued)
<PAGE> 16
SECTION 2.03. Interest. The Company shall pay to the
Agent for account of each Creditor interest on the unpaid
principal amount of such Creditor's Loan from the date of such
Creditor's Note until such principal amount shall be paid in
full, at the applicable rate set forth below:
(a) Base Rate. Except to the extent the Company shall
elect to pay interest on all or part of the unpaid principal
amount of the Loans for any Interest Period pursuant to
subsection (c) of this Section 2.03, the Company shall pay
interest on the unpaid principal of the Loans from the date of
the Notes until the principal amount of the Loans is paid in full
at a fluctuating rate per annum equal at all times to 1% per
annum above the Base Rate in effect from time to time, payable
quarterly on the last Business Day of each March, June, September
and December and on the date the Loans are paid in full.
(b) Interest Periods. The Company may from time to
time elect to have the interest on all or part of the principal
amount of the Loans determined and payable for a specified period
(an "Interest Period") in accordance with subsection (c) of this
Section 2.03. The first day of an Interest Period shall be
either the date of the Notes, the date the Company specifies as
the first day of a Eurodollar Loan, or the last day of the then
current Interest Period for a Eurodollar Loan. The duration of
each such Interest Period shall be, in respect of a Eurodollar
Loan, 1, 3 or 6 months; provided, however, that (i) the Company
may not select any Interest Period which ends after any principal
repayment installment date unless, after giving effect to such
selection, the aggregate unpaid principal amount of Eurodollar
Loans having Interest Periods which end on or prior to such
principal repayment installment date and Base Rate Loans shall be
at least equal to the principal amount of the Loans due and
payable on and prior to such date and (ii) there may not be more
than six Interest Periods in effect for Eurodollar Loans at any
one time.
(c) Eurodollar Rate. The Company may from time to
time elect to pay interest on all or part of the principal amount
of the Loans (provided that the aggregate of any such partial
principal amount for all Loans shall not be less than $1,000,000)
at the Eurodollar Rate for an Interest Period by notice,
specifying the principal amount and the first day and duration of
such Interest Period, received by the Agent before 11:00 AM (New
- ------------------------------------
[1] (...continued)
and amortization schedule of the Loans will be adjusted
prior to the Effective Date, if necessary, such that the
maturity of the Loans is not greater than the maturity of
the Company's Series A Senior Notes, as their maturity may
be elected by Central and South West Corporation pursuant to
Section 3.14(A)(2) of the Plan of Reorganization.
<PAGE> 17
York City time) two Business Days prior to the first day of such
Interest Period, payable on the last day of such Interest Period
and, if such Interest Period has a duration of more than three
months, on each day which occurs during such Interest Period
every three months from the first day of such Interest Period.
The Agent will promptly notify each Creditor of the contents of
each such notice received from the Company.
(d) Default Interest. The Company shall pay interest
on the unpaid principal amount of the Loans that is not paid when
due and on the unpaid amount of all interest, and other amounts
payable hereunder, that is not paid when due, payable on demand,
at a rate per annum equal at all times to 2-1/2% per annum above
the Base Rate in effect from time to time. Notwithstanding
anything in this Agreement to the contrary, upon the occurrence
and during the continuance of an Event of Default, the right of
the Company to make an election in respect of the Eurodollar Rate
pursuant to Section 2.03(c) shall terminate (i) automatically, in
the case of an Event of Default referred to in Section 6.01(a) or
(b) or (ii) upon notice to the Company by the Majority Creditors
through the Agent, in all other cases; provided that no
termination referred to in either of the preceding clauses (i)
and (ii) shall affect any Eurodollar Loan during any Interest
Period in effect for such Eurodollar Loan at the time such notice
is received by the Company.
(e) Alternate Rate of Interest. In the event, and on
each occasion, that on the day two Business Days prior to the
commencement of any Interest Period for a Eurodollar Loan, the
Agent shall have determined (which determination shall be
conclusive and binding upon the Company absent manifest error)
that reasonable means do not exist for ascertaining the
applicable Eurodollar Rate, the Agent shall, as soon as
practicable thereafter, give written, facsimile or telegraphic
notice of such determination to the Company, and any request by
the Company for a Eurodollar Loan pursuant to subsection (c) of
this Section 2.03 shall be deemed a request for a Base Rate Loan.
After such notice shall have been given and until the
circumstances giving rise to such notice no longer exist, each
request for an Eurodollar Loan shall be deemed to be a request
for a Base Rate Loan.
(f) Promptly after the determination of any interest
rate provided for herein or any change therein, the Agent shall
give notice thereof to the Creditors to which such interest is
payable and to the Company.
SECTION 2.04. Prepayments. (a) The Company may, upon
at least two Business Days' notice to the Agent stating the
proposed date and principal amount of the prepayment, and if such
notice is given to the Agent the Company shall, prepay the
outstanding principal amount of the Loans in whole or in part
<PAGE> 18
(each such partial prepayment shall be in an aggregate principal
amount for all Loans not less than $1,000,000 and shall be
applied to the principal installments of the Notes in inverse
order of maturity), together with accrued interest to the date of
such prepayment on the principal amount prepaid; provided,
however, that any prepayment of a Eurodollar Loan shall be made
on, and only on, the last day of the Interest Period for such
Eurodollar Loan unless the Company shall pay to each Creditor in
accordance with Section 2.05(d) an amount sufficient to
compensate such Creditor for any loss, cost, or expense incurred
by it by reason of such prepayment on a day other than the last
day of an Interest Period. The Agent will promptly notify each
Creditor of the contents of each such notice received from the
Company.
(b) If at any time less than 33-1/3% of the aggregate
principal amount of Series A Senior Notes referred to in Section
3.14(A)(1) of the Plan of Reorganization originally issued on the
Effective Date remains Outstanding, then the Company shall, upon
two Business Days' notice from the Agent prepay the entire
outstanding principal amount of the Loans, including any amounts
payable pursuant to Section 2.05(d). For the purposes hereof,
"Outstanding" shall include the remaining unpaid principal amount
of the Series A Senior Notes other than those owned or held by
Central and South West Corporation or any of its Subsidiaries.
SECTION 2.05. Increased Costs, Etc. (a) If, due
either to (i) the introduction after the Submission Date of, or
any change (other than any change by way of imposition or
increase of reserve requirements in respect of Eurodollar Loans,
referred to in subsection (b) below), after the Submission Date,
in or in the interpretation of, any law or regulation or (ii) the
compliance by a Creditor with any guideline or request issued or
made after the Submission Date by any central bank or other
governmental authority (whether or not having the force of law),
there shall be any increase in the cost to such Creditor of
agreeing to make or making, funding or maintaining Eurodollar
Loans or there shall be a reduction in any amount receivable by
such Creditor hereunder as a result, then the Company shall from
time to time, upon demand by such Creditor, pay to such Creditor
additional amounts sufficient to compensate such Creditor for
such increased cost or such reduction in amount. A certificate
as to the amount of such increased cost or such reduction in
amount, submitted to the Company and the Agent by such Creditor,
shall be conclusive and binding for all purposes, absent manifest
error.
(b) The Company shall pay to each Creditor additional
interest on the unpaid principal amount of each Eurodollar Loan,
from the date of such Eurodollar Loan until such principal amount
is paid in full, at an interest rate per annum equal at all times
during each Interest Period for such Loan to the remainder
<PAGE> 19
obtained by subtracting (i) the LIBO Rate for the Interest Period
for such Loan from (ii) the rate obtained by dividing such LIBO
Rate by a percentage equal to 100% minus the reserve percentage
applicable 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 regulations
issued from time to time by the Board of Governors of the Federal
Reserve System (or any successor) for determining the maximum
reserve requirement (including, without limitation, any
emergency, supplemental or other marginal reserve requirement)
for such Creditor with respect to liabilities or assets
consisting of or including Eurocurrency liabilities having a term
equal to such Interest Period, payable on each date on which
interest is payable on such Eurodollar Loan. Such additional
interest shall be determined by such Creditor and notified to the
Company and the Agent (such notification to include, without
limitation, a certification by such Creditor that it is in a
reservable Eurodollar funding position for each day for which
such additional interest is requested).
(c) If a Creditor determines that 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 Submission Date, affects
the amount of capital required to be maintained by such Creditor
or any corporation controlling such Creditor and that the amount
of such capital is increased by or based upon the existence of
such Creditor's commitment hereunder and other commitments of
this type, then, upon demand by such Creditor, the Company shall
immediately pay to such Creditor, from time to time as specified
by such Creditor, additional amounts sufficient to compensate
such Creditor or such corporation in the light of such
circumstances, to the extent that such Creditor reasonably
determines such increase in capital to be allocable to the
existence of such Creditor's commitment hereunder. A certificate
as to such amounts submitted to the Company and the Agent by such
Creditor, shall be conclusive and binding for all purposes,
absent manifest error.
(d) If, due to a change of interest rate on any
Eurodollar Loan pursuant to Section 2.06(b) or 2.07, any payment
pursuant to Section 2.04 of any Eurodollar Loan, any
acceleration of the maturity of the Loans and the Notes pursuant
to Section 6.01, or for any other reason, a Creditor is subject
to a change of interest rate, or receives payments of principal,
of any Eurodollar Loan other than on the last day of an Interest
Period relating to such Eurodollar Loan, the Company shall,
promptly upon demand by such Creditor, pay to such Creditor any
amounts required to compensate such Creditor for additional
losses, costs or expenses which it may reasonably incur as a
result of such change or payment, including, without limitation,
<PAGE> 20
any loss, cost or expense incurred by reason of the liquidation
or reemployment of deposits or other funds acquired by such
Creditor to fund or maintain such Eurodollar Loan, but excluding
loss of anticipated profit. A certificate setting forth the
amount of such additional losses, costs or expenses, submitted by
such Creditor to the Company and the Agent, shall be conclusive
and binding for all purposes, absent manifest error.
(e) Notwithstanding any other provision in this
Section 2.05 to the contrary: (i) the Company is not responsible
for, and is not required to reimburse any Creditor for, any
amounts that would otherwise be payable by the Company pursuant
to subsection (a), (c) or (d) of this Section 2.05 to the extent
such amounts accrued 90 days or more prior to the date such
Creditor provides to the Company and the Agent a certificate
which sets forth such amounts owed to such Creditor by the
Company pursuant to such subsections and (ii) the Company is not
responsible for, and is not required to reimburse any Creditor
for, any amounts that would otherwise be payable by the Company
pursuant to this Section 2.05, unless such Creditor is a Banking
Institution.
(f) In calculating any amounts required to be paid by
the Company pursuant to this Section 2.05, each Creditor shall
make all determinations and allocations on a reasonable basis.
SECTION 2.06. Interest Rate Protection. (a) If the
Company shall fail to select the duration of any Interest Period
for any Eurodollar Loan in accordance with the provisions
contained in Section 2.03(c), the Agent will forthwith so notify
the Company and such Eurodollar Loan will automatically, on the
last day of the then existing Interest Period therefor, convert
into a Base Rate Loan.
(b) On and after the date on which the aggregate
unpaid principal amount of the Loans shall be reduced, by payment
or prepayment or otherwise, to less than $1,000,000, the rate of
interest on the unpaid principal amount of the Loans shall be 1%
per annum above the Base Rate in effect from time to time and the
right of the Company to make an election in respect of the
Eurodollar Rate pursuant to Section 2.03(c) shall terminate.
SECTION 2.07. Illegality, Etc. Notwithstanding any
other provision of this Agreement, if any Creditor that is a
Banking Institution shall notify the Company that the
introduction of or any change in or in the interpretation of any
law or regulation that occurs after the Submission Date makes it
unlawful, or any central bank or other governmental authority
asserts after the Submission Date that it is unlawful, for such
Creditor to perform its obligations hereunder to fund or maintain
Eurodollar Loans hereunder, (i) the right of the Company to
select the Eurodollar Rate for the Loan held by such Creditor,
<PAGE> 21
and the obligation of such Creditor to maintain Eurodollar Loans,
shall be suspended until such Creditor shall notify the Company
that the circumstances causing such suspension no longer exist,
(ii) the rate of interest on the unpaid principal amount of the
Loan held by such Creditor shall thereupon be 1% per annum above
the Base Rate in effect from time to time, and (iii) all payments
and prepayments of principal that would otherwise be applied to
such Creditor's Eurodollar Loans shall be applied instead to its
Base Rate Loans.
SECTION 2.08. Payments and Computations. (a) The
Company shall make each payment under this Agreement and the
Notes not later than 12:00 noon (New York City time) on the day
when due in lawful money of the United States of America in same
day funds to the Agent at account number ____________ maintained
by the Agent with the Bank at the Principal Office.
(b) The Company hereby authorizes each Creditor, if
and to the extent payment is not made when due to such Creditor
under this Agreement or such Creditor's Note, to charge from time
to time against any or all of the Company's accounts with such
Creditor any amount so due.
(c) All computations of interest based on the Base
Rate shall be made by the Agent on the basis of a year of 365 or
366 days, as the case may be, and all computations of interest
based on the LIBO Rate shall be made by the Agent on the basis of
a year of 360 days, in each case for the actual number of days
(including the first day but excluding the last day) occurring in
the period for which such interest is payable. Each
determination by the Agent of an interest rate hereunder shall be
conclusive and binding for all purposes, absent manifest error.
The Agent will promptly notify the Creditors of the determination
of an interest rate hereunder.
(d) Whenever any payment under this Agreement or the
Notes shall be stated to be due, or whenever the last day of any
Interest Period would otherwise occur, on a day which is not a
Business Day, such payment shall be made, and the last day of
such Interest Period shall occur, on the next succeeding Business
Day, and such extension of time shall in such case be included in
the computation of payment of interest; provided, however, if
such extension would cause payment of interest on or principal of
a Eurodollar Loan to be made, or the last day of an Interest
Period for a Eurodollar Loan to occur, in the next following
calendar month, such payment shall be made, and the last day of
such Interest Period shall occur, on the next preceding Business
Day.
(e) Whenever the first day of any Interest Period
occurs on a day of an initial calendar month for which there is
no numerically corresponding day in the calendar month that
<PAGE> 22
succeeds such initial calendar month by the number of months
equal to the number of months in such Interest Period, such
Interest Period shall end on the last Business Day of such
succeeding calendar month. Notwithstanding anything to the
contrary contained herein, each Interest Period that 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) shall end on the last
Business Day of the appropriate subsequent calendar month.
(f) Each payment received by the Agent under this
Agreement or any Note for account of any Creditor shall be paid
by the Agent promptly to such Creditor, in immediately available
funds, for account of such Creditor's Applicable Lending Office
for its Loan or other obligation in respect of which such payment
is made.
SECTION 2.09. U.S. Taxes.
(a) The Company agrees to pay to each Creditor that is
not a U.S. Person such additional amounts as are necessary in
order that the net payment of any amount due to such
non-U.S. Person hereunder after deduction for or withholding in
respect of any U.S. Tax imposed with respect to such payment (or
in lieu thereof, payment of such U.S. Tax by such
non-U.S. Person), will not be less than the amount stated herein
to be then due and payable, provided that the foregoing
obligation to pay such additional amounts shall not apply:
(i) to any payment to a Creditor hereunder unless such
Creditor is, on the Submission Date (or on the date it
becomes a Creditor as provided in Section 8.05) and on the
date of any change in the Applicable Lending Office of such
Creditor after the date hereof, either entitled to submit a
Form 1001 (relating to such Creditor and entitling it to a
complete exemption from withholding on all interest to be
received by it hereunder in respect of the Loans) or
Form 4224 (relating to all interest to be received by such
Creditor hereunder in respect of the Loans), or
(ii) to any U.S. Tax imposed solely by reason of the
failure by such non-U.S. Person to comply with applicable
certification, information, documentation or other reporting
requirements concerning the nationality, residence, identity
or connections with the United States of America of such
non-U.S. Person if such compliance is required by statute or
regulation of the United States of America as a precondition
to relief or exemption from such U.S. Tax.
For the purposes of this Section 2.09(a), (w) "Form 1001" shall
mean Form 1001 (Ownership, Exemption, or Reduced Rate
Certificate) of the Department of the Treasury of the United
<PAGE> 23
States of America, (x) "Form 4224" shall mean Form 4224
(Exemption from Withholding of Tax on Income Effectively
Connected with the Conduct of a Trade or Business in the United
States) of the Department of the Treasury of the United States of
America (or in relation to either such Form such successor and
related forms as may from time to time be adopted by the relevant
taxing authorities of the United States of America to document a
claim to which such Form relates), (y) "U.S. Person" shall mean a
citizen, national or resident of the United States of America, a
corporation, partnership or other entity created or organized in
or under any laws of the United States of America, or any estate
or trust that is subject to Federal income taxation regardless of
the source of its income and (z) "U.S. Taxes" shall mean any
present or future tax, assessment or other charge or levy imposed
by or on behalf of the United States of America or any taxing
authority thereof or therein.
(b) Within 30 days after paying any amount to the
Agent or any Creditor from which it is required by law to make
any deduction or withholding, and within 30 days after it is
required by law to remit such deduction or withholding to any
relevant taxing or other authority, the Company shall deliver to
the Creditor for delivery to such non-U.S. Person evidence
satisfactory to such Person of such deduction, withholding or
payment (as the case may be).
SECTION 2.10. Pro Rata Treatment. Except to the
extent otherwise provided herein: (a) the conversion of portions
of Loans from Base Rate Loans into Eurodollar Loans, and the
conversion of portions of Loans from Eurodollar Loans into Base
Rate Loans (other than conversions provided for by Section 2.07)
shall be made pro rata among the Creditors according to the
amounts of their respective Loans, and the Interest Period for
each Eurodollar Loan of each Creditor that commences on any day
shall be coterminous with the Interest Period for each Eurodollar
Loan of each Creditor that commences on such day; (b) each
payment or prepayment of principal of Loans by the Company shall
be made for account of the Creditors pro rata in accordance with
the respective unpaid principal amounts of the Loans held by
them; and (c) each payment of interest on Loans by the Company
shall be made for account of the Creditors pro rata in accordance
with the amounts of interest on such Loans then due and payable
to the respective Creditors.
SECTION 2.11. Non-Receipt of Funds by the Agent.
Unless the Agent shall have been notified by the Company prior to
the date on which the Company is to make payment to the Agent for
account of one or more of the Creditors hereunder (such payment
being herein called the "Required Payment"), which notice shall
be effective upon receipt, that the Company does not intend to
make the Required Payment to the Agent, the Agent may assume that
the Required Payment has been made and may, in reliance upon such
<PAGE> 24
assumption (but shall not be required to), make the amount
thereof available to the intended recipient(s) on such date; and,
if the Company has not in fact made the Required Payment to the
Agent, the recipient(s) of such payment shall, on demand, repay
to the Agent the amount so made available together with interest
thereon in respect of each day during the period commencing on
the date (the "Advance Date") such amount was so made available
by the Agent until the date the Agent recovers such amount at a
rate per annum equal to the Federal Funds Rate for such day and,
if such recipient(s) shall fail promptly to make such payment,
the Agent shall be entitled to recover such amount, on demand,
from the Company, together with interest as aforesaid. Any
payment by the Company to the Agent of interest on the Required
Payment shall pro tanto reduce the amount of interest payable by
the Company to the respective recipient(s) on the related
Loan(s).
SECTION 2.12. Set-Off; Sharing of Payments; Etc.
(a) The Company agrees that, in addition to (and without
limitation of) any right of set-off, banker's lien or
counterclaim a Creditor may otherwise have, each Creditor shall
be entitled, at its option, to offset balances held by it for
account of the Company at any of its offices, in Dollars or in
any other currency, against any principal of or interest on any
of such Creditor's Loans or any other amount payable to such
Creditor hereunder, that is not paid when due (regardless of
whether such balances are then due to the Company), in which case
it shall promptly notify the Company and the Agent thereof,
provided that such Creditor's failure to give such notice shall
not affect the validity thereof.
(b) If any Creditor shall obtain from the Company
payment of any principal of or interest on any Loan owing to it
or payment of any other amount under this Agreement or any Note
through the exercise of any right of set-off, banker's lien or
counterclaim or similar right or otherwise (other than from the
Agent as provided herein), and, as a result of such payment, such
Creditor shall have received a greater percentage of the
principal of or interest on the Loans or such other amounts then
due hereunder or thereunder by the Company to such Creditor than
the percentage received by any other Creditor, it shall promptly
purchase from such other Creditors participations in (or, if and
to the extent specified by such Creditor, direct interests in)
the Loans or such other amounts, respectively, owing to such
other Creditors (or in interest due thereon, as the case may be)
in such amounts, and make such other adjustments from time to
time as shall be equitable, to the end that all the Creditors
shall share the benefit of such excess payment (net of any
expenses that may be incurred by such Creditor in obtaining or
preserving such excess payment) pro rata in accordance with the
unpaid principal of and/or interest on the Loans or such other
amounts, respectively, owing to each of the Creditors. To such
<PAGE> 25
end all the Creditors shall make appropriate adjustments among
themselves (by the resale of participations sold or otherwise) if
such payment is rescinded or must otherwise be restored.
(c) The Company agrees that any Creditor so purchasing
such a participation (or direct interest) may exercise all rights
of set-off, banker's lien, counterclaim or similar rights with
respect to such participation as fully as if such Creditor were a
direct holder of Loans or other amounts (as the case may be)
owing to such Creditor in the amount of such participation.
(d) Nothing contained herein shall require any
Creditor to exercise any such right or shall affect the right of
any Creditor to exercise, and retain the benefits of exercising,
any such right with respect to any other indebtedness or
obligation of the Company. If, under any applicable bankruptcy,
insolvency or other similar law, any Creditor receives a secured
claim in lieu of a set-off to which this Section 2.12 applies,
such Creditor shall, to the extent practicable, exercise its
rights in respect of such secured claim in a manner consistent
with the rights of the Creditors entitled under this Section 2.12
to share in the benefits of any recovery on such secured claim.
SECTION 2.13. Applicable Lending Offices. The Base
Rate Loans and Eurodollar Loans maintained by each Creditor shall
be maintained at such Creditor's Applicable Lending Office for
Loans of such type. If any Creditor requests compensation from
the Company under any of Section 2.05(a), 2.05(c) or 2.09, such
Creditor will designate a different Applicable Lending Office for
the Loans of such Creditor affected by the events giving rise to
such request for compensation if such designation will avoid the
need for, or reduce the amount of, such compensation and will
not, in the reasonable opinion of such Creditor, be
disadvantageous to such Creditor, except that such Creditor shall
have no obligation to designate an Applicable Lending Office
located in the United States of America.
SECTION 2.14. Several Obligations; Remedies
Independent. Subject to the provisions of this Agreement
(including Article VI hereof) which provide that certain actions
can only be taken hereunder by the Majority Creditors, the
amounts payable by the Company at any time hereunder and under
the Notes to each Creditor shall be a separate and independent
debt, and each Creditor shall be entitled to protect and enforce
its rights arising out of this Agreement and the Notes, and it
shall not be necessary for any other Creditor or the Agent to
consent to, or be joined as an additional party in, any
proceedings for such purposes.
SECTION 2.15. Net Payments. All payments under this
Agreement and the Notes shall be made without set-off or
counterclaim.
<PAGE> 26
ARTICLE III
CONDITIONS TO CLOSING
SECTION 3.01. Closing Documents. The obligation of
the Agent and each Creditor to execute this Agreement is subject
to the conditions precedent that on or before the date hereof,
(i) the Agent shall have received the following, each dated the
Effective Date, unless otherwise specified below in form and
substance satisfactory to the Agent and each Creditor:
(a) the Notes, duly executed and completed;
(b) certified copies of the restated articles of
incorporation and bylaws of the Company, a certified copy of
the resolutions of the Board of Directors of the Company
approving this Agreement and the Notes and the other matters
contemplated hereby and thereby, and of all other documents
evidencing any other necessary corporate action;
(c) a copy of a certificate of the Secretary of State
of Texas dated a date reasonably close to the date hereof
listing the articles of incorporation of the Company and
each amendment thereto on file in his office and certifying
that (A) such amendments are the only amendments to the
Company's articles of incorporation on file in his office
and (B) the Company is duly incorporated, validly existing
and in good standing under the laws of such State;
(d) a telegram from such Secretary of State or such
other evidence satisfactory to each Creditor certifying that
the Company is duly incorporated, validly existing and in
good standing under the laws of such State on the date
hereof;
(e) originals (or copies certified to be true copies
by an appropriate officer of the Company) of all
governmental and regulatory approvals (including, without
limitation, the Federal Energy Regulatory Commission and the
New Mexico Public Service Commission approvals) legally
required to be obtained on the Effective Date for the
Company to enter into this Agreement and the Notes and to
carry out the transactions contemplated hereby and thereby;
(f) a certificate of the Secretary of the Company
certifying the incumbency and the names and true signatures
of the officers of the Company authorized to sign this
Agreement, the Notes and the other documents to be delivered
by it hereunder, together with a certificate of another
officer of the Company as to the incumbency and specimen
signature of the Secretary of the Company;
<PAGE> 27
(g) a favorable opinion of Milbank, Tweed, Hadley &
McCloy, New York counsel for the Company (or other New York
counsel for the Company that is reasonably satisfactory to
the Majority Creditors), in form and substance reasonably
satisfactory to each Creditor;
(h) a favorable opinion of Vinson & Elkins, Texas
counsel for the Company (or other Texas counsel for the
Company that is reasonably satisfactory to the Majority
Creditors), in form and substance reasonably satisfactory to
each Creditor;
(i) a favorable opinion of Stoops & Burns, Arizona
counsel for the Company (or other Arizona counsel for the
Company that is reasonably satisfactory to the Majority
Creditors), in form and substance reasonably satisfactory to
each Creditor;
(j) a favorable opinion of Taichert, Wiggins, Virtue,
Wilson & Najjar, New Mexico regulatory counsel for the
Company (or other New Mexico regulatory counsel for the
Company that is reasonably satisfactory to the Majority
Creditors), in form and substance reasonably satisfactory to
each Creditor;
(k) a favorable opinion of [Milbank, Tweed, Hadley &
McCloy], federal regulatory counsel for the Company (or
other federal regulatory counsel for the Company that is
reasonably satisfactory to the Majority Creditors), in form
and substance reasonably satisfactory to each Creditor;
(l) written evidence, satisfactory to each Creditor,
that Series A and Series B of the First Mortgage Bonds and
Series B of the Second Mortgage Bonds have a rating of at
least BBB- (or equivalent rating) by at least two of
Standard & Poor's Corporation, Moody's Investors Service,
Inc. and Duff & Phelps, Inc.; and
(m) a certificate of the chairman, president or chief
financial officer of the Company, certifying (A) that the
Effective Date has occurred as of the time of delivery
thereof or will occur concurrently with the delivery thereof
and (B) that, after giving effect to the transactions
contemplated under the Plan: (x) no Default shall have
occurred and be continuing; and (y) the representations and
warranties made by the Company in Article IV hereof, and in
each of the other Related Documents, shall be true on and as
of the Effective Date with the same force and effect as if
made on and as of such date (or, if such representation or
warranty is expressly stated to have been made as of a
specific date, as of such specific date);
<PAGE> 28
and (ii) the following shall have occurred:
(a) the Confirmation Order shall have been entered at
least 10 days prior to the date hereof, no stay of such
order shall be in effect and each Creditor shall have
received a certified copy of such order;
(b) the Plan of Reorganization shall have been
substantially consummated without waiver of any condition or
other modification (other than waivers or modifications made
in accordance with Section 6.6 of the Plan of
Reorganization);
(c) the Effective Date shall have occurred or shall
occur substantially simultaneously with the delivery hereof
and of the Notes; and
(d) the Agent shall have received such other
approvals, opinions or documents as it or any Creditor may
reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the
Company. The Company represents and warrants as follows:
(a) The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the
State of Texas and is duly qualified to do business in, and
is in good standing under the laws of, the States of Texas,
Arizona and New Mexico and has requisite corporate power and
authority, and all material governmental licenses,
authorizations and approvals necessary, to conduct its
business and to own its properties, except where the failure
to have the same would not result in a Material Adverse
Effect.
(b) The execution, delivery and performance by the
Company of this Agreement and the Notes are within the
Company's corporate powers, have been duly authorized by all
necessary corporate action, and do not contravene (i) the
Company's articles of incorporation or by-laws, which the
Company has adopted pursuant to the Plan of Reorganization
or (ii) any law, order, rule, regulation (including, without
limitation, any order, rule or regulation of the Federal
Energy Regulatory Commission, the New Mexico Public Service
Commission or the Public Utility Commission of Texas, or
Regulation G, T, U or X of the Board of Governors of the
Federal Reserve System), writ, judgment, injunction or
<PAGE> 29
decree applicable to the Company or any contractual
restriction binding on or affecting the Company or any
Subsidiary, and do not result in or require the creation of
any Lien of the Company or any Subsidiary (except as
provided in or contemplated by this Agreement, the Notes or
the Plan of Reorganization) upon or with respect to any
properties of the Company or any Subsidiary.
(c) No authorization or approval or other action by,
and no notice to or filing with, any governmental authority
or regulatory body is required for the due execution,
delivery and performance by the Company of this Agreement or
any Note except for (i) those that have been duly obtained
or made and are in full force and effect and are Final
Approvals and (ii) the Confirmation Order.
(d) This Agreement has been duly and validly executed
by the Company and constitutes, and the Notes when delivered
hereunder will constitute, legal, valid and binding
obligations of the Company enforceable against the Company
in accordance with their respective terms.
(e) There is no pending or overtly threatened action,
investigation, proceeding or notification which has been
instituted after the Effective Date affecting the Company or
any of its Subsidiaries before any court, governmental
agency or arbitrator which is reasonably likely to have a
Material Adverse Effect.
(f) The Company is not a "holding company" as such
term is defined in the Public Utility Holding Company Act of
1935, as amended, nor an "investment company", or a company
"controlled" by an "investment company", within the meaning
of the Investment Company Act of 1940, as amended.
(g) The Company and its Subsidiaries have filed all
United States federal and state income tax returns and all
other material tax returns which are required to be filed by
them, and have paid all taxes due pursuant to such returns
or, to the extent deemed necessary or appropriate by the
Company and such Subsidiary, provided reserves for the
payment thereof, other than such taxes that the Company or
any Subsidiary is contesting in good faith by appropriate
legal proceedings.
(h) The Company and the ERISA Affiliates have
fulfilled their respective obligations under the minimum
funding standards of ERISA and the Code with respect to each
Plan and are in compliance with the presently applicable
provisions of ERISA and the Code (except where non-
compliance would not have a Material Adverse Effect), and
have not incurred any liability to the PBGC (other than to
<PAGE> 30
pay premiums under Section 4007 of ERISA) or any Plan or any
Multiemployer Plan (other than to make contributions in the
ordinary course of business). No reportable event, within
the meaning of Section 4043 of ERISA, has occurred with
respect to any Plan, except for any such event as to which
the 30-day notice requirement has been waived by the PBGC.
Schedule B (Actuarial Information) to the most recently
filed annual report (Form 5500 Series) for each Plan is
complete and accurate and fairly presents the funding status
of such Plan, and since the date of such Schedule B there
has been no change in such funding status that can
reasonably be expected to have a Material Adverse Effect.
(i) The operations and properties of the Company and
each of its Subsidiaries comply in all material respects
with all Environmental Laws, the Company and each of its
Subsidiaries possess and are in compliance with all required
Environmental Permits and no circumstances exist that are or
would be reasonably likely to (i) form the basis of an
Environmental Action against the Company or any of its
Subsidiaries or any of their properties or (ii) cause any
such property to be subject to any restrictions on
ownership, occupancy, use or transferability under any
Environmental Law, except as would not be likely to have a
Material Adverse Effect and, none of the properties of the
Company or any of its Subsidiaries is listed or proposed for
listing on the National Priorities List under CERCLA or any
analogous state list.
(j) No Material Adverse Effect has occurred since the
Effective Date.
(k) The Confirmation Order has been entered and has
not been reversed, amended (except as consented to by the
Creditors in their sole discretion), stayed, vacated or
rescinded. The Creditors shall be entitled to enforce its
remedies under this Agreement without further application to
or order by the Bankruptcy Court.
ARTICLE V
COVENANTS OF THE COMPANY
SECTION 5.01. Covenants of the Company. Until the
principal amount of the Loans and any accrued interest thereon is
paid in full and all other amounts payable by the Company
hereunder are paid in full, the Company agrees that:
(a) Reporting Requirements. The Company shall deliver
to each Creditor:
<PAGE> 31
(i) as soon as available and in any event within
45 days after the end of each of the first three
quarterly fiscal periods of each fiscal year of the
Company, consolidated and consolidating statements of
income, retained earnings and cash flow of the Company
and its Consolidated Subsidiaries for such period and
for the period from the beginning of the respective
fiscal year to the end of such period, and the related
consolidated and consolidating balance sheets of the
Company and its Consolidated Subsidiaries at the end of
such period, setting forth in each case in comparative
form the corresponding consolidated and consolidating
figures for the corresponding period in the preceding
fiscal year, accompanied by a certificate of a senior
financial officer of the Company, which certificate
shall state that said consolidated financial statements
fairly present the consolidated financial condition and
results of operations of the Company and its
Consolidated Subsidiaries, and said consolidating
financial statements fairly present the respective
individual unconsolidated financial condition and
results of operations of the Company and of each of its
Consolidated Subsidiaries, in each case in accordance
with GAAP, consistently applied, as at the end of, and
for, such period (subject to normal year-end audit
adjustments);
(ii) as soon as available and in any event within
90 days after the end of each fiscal year of the
Company, consolidated and consolidating statements of
income, retained earnings and cash flow of the Company
and its Consolidated Subsidiaries for such fiscal year
and the related consolidated and consolidating balance
sheets of the Company and its Consolidated Subsidiaries
as at the end of such fiscal year, setting forth in
each case in comparative form the corresponding
consolidated and consolidating figures for the
preceding fiscal year, and accompanied (i) in the case
of said consolidated statements and balance sheet of
the Company, by an opinion thereon of independent
certified public accountants of recognized national
standing, which opinion shall state that said
consolidated financial statements fairly present the
consolidated financial condition and results of
operations of the Company and its Consolidated
Subsidiaries as at the end of, and for, such fiscal
year in accordance with GAAP, consistently applied, and
a certificate of such accountants stating that, in
making the examination necessary for their opinion,
they obtained no knowledge, except as specifically
stated, of any failure by the Company to comply with
Section 5.01(e), (f) or (i)(xi), and (ii) in the case
<PAGE> 32
of said consolidating statements and balance sheets, by
a certificate of a senior financial officer of the
Company, which certificate shall state that said
consolidating financial statements fairly present the
respective individual unconsolidated financial
condition and results of operations of the Company and
of each of its Consolidated Subsidiaries, in each case
in accordance with GAAP, consistently applied, as at
the end of, and for, such fiscal year;
(iii) as soon as available copies of all proxy
statements, material reports and registration
statements which the Company or any of its Subsidiaries
files with the Securities and Exchange Commission or
any national securities exchange (other than filings
made pursuant to the Public Utility Holding Company Act
of 1935, as amended, public offerings of securities
under employee benefit plans, customer stock purchase
plans or dividend reinvestment plans);
(iv) as soon as possible, and in any event within
two days, after the Company has knowledge of the
occurrence of each Event of Default continuing on the
date of such statement, a statement from the chief
financial officer of the Company setting forth details
of such Event of Default and the action that the
Company has taken and proposes to take with respect
thereto;
(v) at the time the Company furnishes each set of
financial statements pursuant to paragraph (i) or (ii)
above, a certificate of a senior financial officer of
the Company setting forth in reasonable detail the
computations necessary to determine whether the Company
is in compliance with subsections (e), (f) and (i)(xi)
of this Section 5.01 as of the end of the respective
quarterly fiscal period or fiscal year and stating that
no event has occurred and is continuing that
constitutes an Event of Default or would constitute an
Event of Default but for the giving of notice or the
lapse of time, or both, or if any such event has
occurred and is then continuing, a statement as to the
nature thereof and the actions that the Company has
taken and proposes to take with respect thereto; and
(vi) such other financial data and information of
the Company or any of its Subsidiaries as the Agent or
any Creditor may from time to time reasonably request.
(b) Litigation. The Company will promptly give to
each Creditor notice of all actions, suits, investigations,
litigation or legal or arbitral proceedings, and of all
<PAGE> 33
proceedings by or before any governmental or regulatory
authority or agency (and any material development in respect
of such legal or other proceedings), in each case, known to
the Company, which is reasonably likely to have a Material
Adverse Effect.
(c) Preservation of Corporate Existence, Etc. The
Company will (i) preserve and maintain its corporate
existence in the state of its incorporation and qualify and
remain qualified as a foreign corporation in each
jurisdiction in which such qualification is reasonably
necessary in view of its business, and (ii) pay and
discharge, and cause its Subsidiaries to pay and discharge,
all taxes, assessments and governmental charges upon its
income and its properties prior to the date on which
penalties are attached thereto, unless (A) such taxes,
assessments and governmental charges shall be contested in
good faith and by appropriate proceedings by the Company or
its Subsidiaries and (B) the Company or any such Subsidiary
shall set aside on its books adequate reserves therefor to
the extent required by GAAP. Nothing contained in this
clause (c) of Section 5.01 shall be deemed to prohibit any
transaction permitted by clause (g) of this Section 5.01.
(d) Maintenance of Insurance, Etc. The Company will,
and will cause its Subsidiaries to, maintain insurance with
responsible insurance companies or associations or through
its own program of self-insurance in such amounts, with such
deductibles, and covering such risks as is usually carried
by companies engaged in similar business.
(e) Leverage Ratio. The Company will not permit the
Leverage Ratio to exceed 0.68 to 1 at any time on or after
the last day of the first full fiscal quarter of the Company
commencing after the Effective Date.
(f) Interest Coverage Ratio. The Company will not
permit the Interest Coverage Ratio to be less than 1.40 to 1
at any time on or after the last day of the first full
fiscal quarter of the Company commencing after the Effective
Date.
(g) Prohibition of Fundamental Changes. The Company
will not, and will not permit any of its Subsidiaries to,
enter into any transaction of merger, consolidation,
amalgamation, liquidation or dissolution; provided that the
Company or any of its Subsidiaries may merge or consolidate
with any other Person if (i) in any such transaction in
which the Company is a party, the Company is the surviving
corporation or (ii) in any such transaction in which the
Company is not a party, the surviving corporation shall be a
Subsidiary of the Company, in each case so long as after
<PAGE> 34
giving effect thereto no Event of Default would exist
hereunder. The Company will not, and will not permit any of
its Subsidiaries to, convey, sell, lease, transfer or
otherwise dispose of, in one transaction or a series of
transactions, all or substantially all of its business or
assets, or assets (excluding (i) accounts receivable,
(ii) obsolete or worn-out tools, equipment or other property
no longer used or useful in its business and (iii) inventory
or other property sold or disposed of in the ordinary course
of business and on ordinary business terms) which in the
aggregate have a net book value in excess of $50,000,000,
whether now owned or hereafter acquired, to any other
Person. Notwithstanding the foregoing provisions of this
subsection (g):
(1) any Subsidiary of the Company may be merged
or consolidated with or into: (A) the Company if the
Company shall be the continuing or surviving
corporation or (B) any other Subsidiary of the Company;
and
(2) any Subsidiary of the Company may sell,
lease, transfer or otherwise dispose of any or all of
its Property (upon voluntary liquidation or otherwise)
to the Company or a Subsidiary of the Company.
(h) Compliance with ERISA. The Company will not (i)
enter into any non-exempt prohibited transaction (as defined
in Section 4975 of the Code and in Section 406 of ERISA)
involving any Plan which may result in any liability of the
Company to any Person which (in the reasonable opinion of
the Majority Creditors) will have a Material Adverse Effect
or (ii) allow or suffer to exist any other event or
condition known to the Company which results in any
liability of the Company or any of its Subsidiaries to the
PBGC, or in any Withdrawal Liability to any Multiemployer
Plan, which (in the reasonable opinion of the Majority
Creditors) will have a Material Adverse Effect. For
purposes of this Section 5.01(h), "liability" shall not
include termination insurance premiums payable under Section
4007 of ERISA. Upon request of any Creditor, the Company
shall promptly furnish to such Creditor a copy of Schedule B
(Actuarial Information) to the most recently filed annual
report (Form 5500 Series) of any Plan.
(i) Limitation on Liens. The Company will not, nor
will it permit any of its Subsidiaries to, create, incur,
assume or suffer to exist any Lien upon or with respect to
any of its property, whether now owned or hereafter
acquired, except:
(i) Liens created pursuant to the Indentures;
<PAGE> 35
(ii) Liens created or otherwise in existence on
the Effective Date or contemplated by the Plan of
Reorganization;
(iii) Liens imposed by any governmental authority
for taxes, assessments or charges not yet due or which
are being contested in good faith and by appropriate
proceedings if adequate reserves with respect thereto
are maintained on the books of the Company or the
affected Subsidiaries, as the case may be, in
accordance with GAAP;
(iv) carriers', warehousemen's, mechanics',
materialmen's, repairmen's or other like Liens arising
in the ordinary course of business which are not
overdue for a period of more than 60 days or which are
being contested in good faith and by appropriate
proceedings;
(v) pledges or deposits under worker's
compensation, unemployment insurance and other social
security legislation;
(vi) deposits to secure the performance of bids,
trade contracts (other than for borrowed money),
leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like
nature incurred in the ordinary course of business;
(vii) easements, rights-of-way, restrictions and
other similar encumbrances incurred in the ordinary
course of business and encumbrances consisting of
zoning restrictions, easements, licenses, restrictions
on the use of property or minor imperfections in title
thereto which, in the aggregate, are not material in
amount, and which do not in any case materially detract
from the value of the property subject thereto, render
title to the property encumbered thereby unmarketable,
materially adversely affect the use of such property
for its present purposes or interfere with the ordinary
conduct of the business of the Company or any of its
Subsidiaries;
(viii) Liens on property of any corporation which
becomes a Subsidiary of the Company after the date of
this Agreement, provided that such Liens are in
existence at the time such corporation becomes a
Subsidiary of the Company and were not created in
anticipation thereof, provided further that such Liens
shall not extend to cover any property of the Company
or any of its other Subsidiaries and such Liens shall
not cover property of such Subsidiary other than
<PAGE> 36
property of the types covered by the terms of such
Liens at the time such Subsidiary is acquired;
(ix) Liens upon real and/or tangible personal
property acquired after the Effective Date (by
purchase, construction or otherwise) by the Company or
any of its Subsidiaries, each of which Liens either (A)
existed on such property before the time of its
acquisition and was not created in anticipation
thereof, or (B) was created solely for the purpose of
securing Debt representing, or incurred to finance,
refinance or refund, the cost (including the cost of
construction) of such property; provided that no such
Lien shall extend to or cover any property of the
Company or such Subsidiary other than the property so
acquired and improvements thereon;
(x) banker's liens, rights of set-off and Liens
on documents presented under commercial letters of
credit, in each case granted to banks in accordance
with customary banking practices or arising by
operation of law;
(xi) additional Liens upon real and/or personal
property created after the date hereof, provided that,
on the date each such Lien is incurred, the lower of
(1) the fair market value of all property subject to
Liens permitted by this paragraph (xi) and not
otherwise permitted by this subsection (i) or (2) the
aggregate amount of all obligations secured by Liens
permitted by this paragraph (xi) and not otherwise
permitted by this subsection (i) shall not exceed 5% of
Total Capital on such date; and
(xii) any extension, renewal or replacement of the
foregoing, provided, however, that the Liens permitted
hereunder shall not be spread to cover any additional
Debt or property (other than a substitution of like
property).
(j) Compliance with Laws, Etc. The Company will
comply, and cause each of its Subsidiaries to comply, in all
material respects, with all applicable laws, rules,
regulations and orders, such compliance to include, without
limitation, compliance with ERISA, except where the failure
to so comply would not have a Material Adverse Effect.
(k) Compliance with Environmental Laws. The Company
will comply, and cause each of its Subsidiaries and all
lessees and other Persons occupying or operating on its
properties to comply, in all material respects, with all
Environmental Laws and Environmental Permits applicable to
<PAGE> 37
its operations and properties; obtain and renew all
Environmental Permits necessary for its operations and
properties; and conduct, and cause each of its Subsidiaries
to conduct, any investigation, study, sampling and testing,
and undertake any cleanup, removal, remedial or other action
required under any Environmental Law to remove and clean up
all Hazardous Materials from any of its properties, in
accordance with the requirements of all Environmental Laws;
provided, however, that neither the Company nor any of its
Subsidiaries shall be required to undertake any such
cleanup, removal, remedial or other action to the extent
that its obligation to do so is being contested in good
faith and by proper proceedings and reserves, where required
by GAAP, are being maintained with respect to such
circumstances.
(l) Visitation Rights. The Company will, at any
reasonable time and from time to time, permit the Agent or
any Creditor or any agents or representatives thereof, to
examine and make copies of and abstracts from the records
and books of account of, and examine the properties of, the
Company and any of its Subsidiaries, and to discuss the
affairs, finances and accounts of the Company and any of its
Subsidiaries with any of their officers or directors and
with their independent certified public accountants.
(m) Maintenance of Properties, Etc. The Company will
maintain and preserve, and cause each of its Subsidiaries to
maintain and preserve, all of its properties that are used
or useful in the conduct of its business in good working
order and condition, ordinary wear and tear excepted;
provided that this subsection (m) shall not prevent the sale
of any properties permitted by subsection (g) of this
Section 5.01.
(n) Change in Nature of Business. The Company will
not make, or permit any of its Subsidiaries to make, any
material change in the nature of its business as carried on
at the date hereof.
(o) Maintain Books and Records. The Company shall
keep adequate records and books of account, in which
complete entries will be made in accordance with GAAP
consistently applied.
(p) Subsidiaries and Investments. The Company shall
not, and shall not permit any of its Subsidiaries to, create
any Subsidiaries of the Company or make any investment in
any Person except in compliance with the Public Utility
Holding Company Act of 1935, as amended, and the regulations
and orders of the Securities and Exchange Commission
thereunder.
<PAGE> 38
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the
following events ("Events of Default") shall occur and be
continuing:
(a) The Company shall default in the payment when due
of any principal of any Loan; or
(b) the Company shall default in the payment when due
of any interest on any Loan or any other amount payable by it
hereunder and such default shall continue unremedied for five
Business Days; or
(c) The Company or any of its Subsidiaries shall
default in the payment when due of any principal of or any
interest on any Debt aggregating $10,000,000 or more, or fail
to observe or perform any material term, covenant or
agreement contained in any agreement by which it is bound,
evidencing or securing Debt, in an aggregate amount of
$10,000,000 or more, or any other event shall occur or
condition shall exist under any agreement or instrument
relating to any such Debt, after the giving of any required
notice and for such period of time as would permit the holder
or holders thereof or of any obligations issued thereunder to
accelerate the maturity thereof, unless such failure or event
or condition shall have been cured by the Company or its
affected Subsidiary, as the case may be, or effectively
waived by such holder or holders; or
(d) Any representation, warranty or certification made
or deemed made in this Agreement or in any Note by the
Company (or any of its officers), or any certificate
furnished to any Creditor pursuant to the provisions hereof
or thereof, shall prove to have been false or misleading as
of the time made or furnished in any material respect; or
(e) The Company shall default in the performance of any
of its obligations under clause (a)(iv) of Section 5.01 or
clauses (e), (f), (g) or (n) of Section 5.01; or a consensual
Lien shall be created by the Company or any of its
Subsidiaries in violation of Section 5.01(i); or the Company
shall default in its performance of any of its other
obligations under this Agreement or under any Note and such
default in the performance of any such other obligation shall
continue unremedied for a period of 15 days after notice
thereof to the Company by the Agent or any Creditor; or
<PAGE> 39
(f) There shall remain in force, undischarged,
unsatisfied and unstayed, for more than 30 days, whether or
not consecutive, any final judgment against the Company or
any of its Material Subsidiaries that, together with other
outstanding final judgments, undischarged, against the
Company and all of its Material Subsidiaries, exceeds in the
aggregate $10,000,000 (for the purposes hereof, the term
"final judgment" shall mean a judgment which is not subject
to appeal); or
(g) The Company or any of its Material Subsidiaries
shall make a general assignment for the benefit of creditors,
or admit in writing its inability to pay or generally fail to
pay its debts as they mature or become due, or shall petition
or apply for the appointment of a trustee or other custodian,
liquidator or receiver of the Company or any of its Material
Subsidiaries, as the case may be, or any substantial part of
its respective assets; or the Company or any of its Material
Subsidiaries shall commence any case or other proceeding
relating to the Company or any of its Material Subsidiaries
under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation
or similar law of any jurisdiction, now or hereafter in
effect, or the Company or any of its Material Subsidiaries
shall take any action to authorize or in furtherance of any
of the foregoing; or if any such petition or application
shall be filed or any such case or other proceeding shall be
commenced against the Company or any of its Material
Subsidiaries and the Company or any of its Material
Subsidiaries shall indicate its approval thereof, consent
thereto or acquiescence therein or such petition or
application shall not be dismissed on or before the 60th day
after the filing thereof; or
(h) A decree or order is entered appointing any
trustee, custodian, liquidator or receiver or adjudicating
the Company or any of its Material Subsidiaries bankrupt or
insolvent, or approving a petition in any such case or other
proceeding, or a decree or order for relief is entered in
respect of the Company or any of its Material Subsidiaries in
an involuntary case under federal bankruptcy laws as now or
hereafter reconstituted; or
(i) There shall have been asserted against the Company
by a Governmental Person or other Person, a written
complaint, claim or demand asserting any claims or
liabilities, whether accrued, absolute or contingent, based
on or arising from the presence, release or disposal of
Hazardous Materials by the Company or any of its Subsidiaries
that is reasonably likely to be determined adversely to the
Company or any of its Subsidiaries, and the amount thereof
(either individually or in the aggregate) would, in such
<PAGE> 40
event, have a Material Adverse Effect (after deducting any
portion thereof that is reasonably expected to be paid by
other creditworthy Persons); or
(j) The Confirmation Order shall be (i) reversed,
revoked or vacated in whole or in part by any Final Order of
a court of competent jurisdiction, or (ii) modified in a
manner or subjected to a stay that adversely affects the
Company's ability to perform any of its obligations
hereunder, as determined by the Creditors in their sole
discretion; or
(k) Central and South West Corporation shall cease,
directly or indirectly, to own (or otherwise shall cease,
directly or indirectly, to control the voting rights of) at
least 51% of the Voting Stock of the Company; or
(l) Any regulatory approval as set forth in Section
3.01(e) or required to consummate the Plan of Reorganization
shall be rescinded if such rescission can not be appealed by
the Company and has a Material Adverse Effect;
then, upon request of the Majority Creditors, the Agent will, by
notice to the Company, declare the Notes, all interest thereon
and all other amounts payable under this Agreement to be
forthwith due and payable, whereupon the Notes, all such interest
and all such amounts shall become and be forthwith due and
payable, without presentment, demand, protest, or further notice
of any kind, all of which are hereby expressly waived by the
Company; provided, however, that, in the event of the occurrence
of an Event of Default pursuant to subsections (g) or (h) of this
Section 6.01, the Notes, all interest thereon and all other
amounts payable under this Agreement shall automatically become
and be due and payable, without presentment, demand, protest or
any notice of any kind, all of which are hereby expressly waived
by the Company.
ARTICLE VII
THE AGENT
SECTION 7.01. Appointment, Powers and Immunities. Each
Creditor hereby irrevocably appoints and authorizes the Agent to
act as its agent hereunder and under the Notes with such powers
as are specifically delegated to the Agent by the terms of this
Agreement and of the Notes, together with such other powers as
are reasonably incidental thereto. The Agent (which term as used
in this sentence and in Section 7.05 and the first sentence of
Section 7.06 shall include reference to its affiliates and its
own and its affiliates' officers, directors, employees and
agents): (a) shall have no duties or responsibilities except
<PAGE> 41
those expressly set forth in this Agreement and in the Notes, and
shall not by reason of this Agreement or any Note be a trustee
for any Creditor; (b) shall not be responsible to the Creditors
for any recitals, statements, representations or warranties
contained in this Agreement or in any Note, or in any certificate
or other document referred to or provided for in, or received by
any of them under, this Agreement or any Note, or for the value,
validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any Note or any other document
referred to or provided for herein or therein or for any failure
by the Company or any other Person to perform any of its
obligations hereunder or thereunder; (c) shall not be required to
initiate or conduct any litigation or collection proceedings
hereunder or under any Note; and (d) shall not be responsible for
any action taken or omitted to be taken by it hereunder or under
any Note or under any other document or instrument referred to or
provided for herein or therein or in connection herewith or
therewith, except for its own gross negligence or willful
misconduct. The Agent may employ agents and attorneys-in-fact
and shall not be responsible for the negligence or misconduct of
any such agents or attorneys-in-fact selected by it in good
faith. The Agent may deem and treat the payee of any Note as the
holder thereof for all purposes hereof unless and until a notice
of the assignment or transfer thereof shall have been filed with
the Agent.
SECTION 7.02. Reliance by Agent. The Agent shall be
entitled to rely upon any certification, notice or other
communication (including, without limitation, any thereof by
telephone, telecopy, telex, telegram or cable) believed by it to
be genuine and correct and to have been signed or sent by or on
behalf of the proper Person or Persons, and upon advice and
statements of legal counsel, independent accountants and other
experts selected by the Agent. As to any matters not expressly
provided for by this Agreement or any Note, the Agent shall in
all cases be fully protected in acting, or in refraining from
acting, hereunder or thereunder in accordance with instructions
given by the Majority Creditors, and such instructions of the
Majority Creditors and any action taken or failure to act
pursuant thereto shall be binding on all of the Creditors;
provided, that the Agent shall be entitled to assume that each
Creditor is reasonably satisfied with the form and substance of
each document delivered to the Agent under Article III hereof
(and available for inspection by such Creditor on or before the
Effective Date) unless the Agent shall have received notice from
such Creditor setting forth its specific objection to any such
document.
SECTION 7.03. Defaults. The Agent shall not be deemed
to have knowledge or notice of the occurrence of a Default (other
than the non-payment of principal or interest) unless the Agent
has received notice from a Creditor or the Company specifying
<PAGE> 42
such Default and stating that such notice is a "Notice of
Default". In the event that the Agent receives such a notice of
the occurrence of a Default, the Agent shall give prompt notice
thereof to the Creditors (and shall give each Creditor prompt
notice of each such non-payment). The Agent shall (subject to
Section 7.07) take such action with respect to such Default as
shall be directed by the Majority Creditors, provided that,
unless and until the Agent shall have received such directions,
the Agent may (but shall not be obligated to) take such action,
or refrain from taking such action, with respect to such Default
as it shall deem advisable in the best interest of the Creditors
except to the extent that this Agreement expressly requires that
such action be taken, or not be taken, only with the consent or
upon the authorization of the Majority Creditors or all of the
Creditors.
SECTION 7.04. Rights as a Creditor. In the event the
Agent shall hold a Loan or Note hereunder, the Bank (and any
successor acting as Agent) in its capacity as a Creditor
hereunder shall have the same rights and powers hereunder as any
other Creditor and may exercise the same as though it were not
acting as the Agent, and the term "Creditor" or "Creditors"
shall, unless the context otherwise indicates, include the Agent
in its individual capacity. The Bank (and any successor acting
as Agent) and its affiliates may (without having to account
therefor to any Creditor) accept deposits from, lend money to,
make investments in and generally engage in any kind of banking,
trust or other business with the Company (and any of its
Subsidiaries or affiliates) as if it were not acting as the
Agent, and the Bank and its affiliates may accept fees and other
consideration from the Company for services in connection with
this Agreement or otherwise without having to account for the
same to the Creditors.
SECTION 7.05. Indemnification. The Creditors agree to
indemnify the Agent (to the extent not reimbursed under
Section 8.08, but without limiting the obligations of the Company
under said Section 8.08) ratably in accordance with the aggregate
principal amount of the Loans held by the Creditors (or, if no
Loans are at the time outstanding, ratably in accordance with the
respective original principal amounts of their Notes), for any
and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of
any kind and nature whatsoever that may be imposed on, incurred
by or asserted against the Agent arising out of or by reason of
any investigation in or in any way relating to or arising out of
this Agreement or any Note or any other documents contemplated by
or referred to herein or therein or the transactions contemplated
hereby or thereby (including, without limitation, the costs and
expenses that the Company is obligated to pay under Section 8.04,
but excluding, unless a Default has occurred and is continuing,
normal administrative costs and expenses incident to the
<PAGE> 43
performance of its agency duties hereunder) or the enforcement of
any of the terms hereof or thereof or of any such other
documents, provided that no Creditor shall be liable for any of
the foregoing to the extent they arise from the gross negligence
or willful misconduct of the party to be indemnified.
SECTION 7.06. Non-Reliance on Agent and Other
Creditors. Each Creditor agrees that it has, independently and
without reliance on the Agent or any other Creditor, and based on
such documents and information as it has deemed appropriate, made
its own credit analysis of the Company and its Subsidiaries and
decision to vote on the Plan of Reorganization and to enter into
this Agreement and that it will, independently and without
reliance upon the Agent or any other Creditor, and based on such
documents and information as it shall deem appropriate at the
time, continue to make its own analysis and decisions in taking
or not taking action under this Agreement or under any Note. The
Agent shall not be required to keep itself informed as to the
performance or observance by the Company of this Agreement or any
of the Notes or any other document referred to or provided for
herein or therein or to inspect the properties or books of the
Company or any of its Subsidiaries. Except for notices, reports
and other documents and information expressly required to be
furnished to the Creditors by the Agent hereunder or under the
Notes, the Agent shall not have any duty or responsibility to
provide any Creditor with any credit or other information
concerning the affairs, financial condition or business of the
Company or any of its Subsidiaries (or any of their affiliates)
that may come into the possession of the Agent or any of its
affiliates. The relationship between the Company, on the one
hand, and the Agent and the Creditors, on the other hand, is, and
shall at all times remain, solely that of a borrower and lenders;
neither the Agent nor the Creditors shall under any circumstances
be construed to be partners or joint venturers of the Company,
its Subsidiaries or its Affiliates; neither the Agent nor the
Creditors shall under any circumstance be deemed to be in a trust
or a fiduciary relationship with the Company, its Subsidiaries or
its Affiliates, or to owe any fiduciary duty to the Company, its
Subsidiaries or its Affiliates; neither the Agent nor the
Creditors undertake or assume any responsibility or duty to the
Company, its Subsidiaries or its Affiliates to select, review,
inspect, supervise, pass judgment upon or inform the Company, its
Subsidiaries or its Affiliates of any matter in connection with
their Property or the operations of the Company, its Subsidiaries
or its Affiliates; the Company, its Subsidiaries and its
Affiliates shall rely entirely upon their own judgment with
respect to such matters; and any review, inspection, supervision,
exercise of judgment or supply of information undertaken or
assumed by the Agent or the Creditors in connection with such
matters is solely for the protection of the Agent and the
Creditors and neither the Company nor any Person is entitled to
rely thereon.
<PAGE> 44
SECTION 7.07. Failure to Act. Except for action
expressly required of the Agent hereunder and under the Notes,
the Agent shall in all cases be fully justified in failing or
refusing to act hereunder and thereunder unless it shall receive
further assurances to its satisfaction from the Creditors of
their indemnification obligations under Section 7.05 against any
and all liability and expense that may be incurred by it by
reason of taking or continuing to take any such action.
SECTION 7.08. Resignation or Removal of Agent. Subject
to the appointment and acceptance of a successor Agent as
provided below, the Agent may resign at any time by giving notice
thereof to the Creditors and the Company, and the Agent may be
removed at any time with or without cause by the Majority
Creditors. Upon any such resignation or removal, the Majority
Creditors shall have the right to appoint a successor Agent. If
no successor Agent shall have been so appointed by the Majority
Creditors and shall have accepted such appointment within 30 days
after the retiring Agent's giving of notice of resignation or the
Majority Creditors' removal of the retiring Agent, then the
retiring Agent may, on behalf of the Creditors, appoint a
successor Agent, that shall (unless otherwise consented to by the
Company) be a bank that has an office in New York, New York or in
Dallas or Houston, Texas with a combined capital and surplus of
at least $250,000,000. Upon the acceptance of any appointment as
Agent hereunder by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights,
powers, privileges and duties of the retiring Agent, and the
retiring Agent shall be discharged from its duties and
obligations hereunder. After any retiring Agent's resignation or
removal hereunder as Agent, the provisions of this Article VIII
shall continue in effect for its benefit in respect of any
actions taken or omitted to be taken by it while it was acting as
the Agent.
SECTION 7.09. Agency Fee. The Company shall pay to the
Agent from time to time an agency fee in such amounts and at such
times as the Company and the Agent may agree.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. Except as otherwise
expressly provided in this Agreement, any provision of this
Agreement may be modified or supplemented only by an instrument
in writing signed by the Company, the Agent and the Majority
Creditors, or by the Company and the Agent acting with the
consent of the Majority Creditors, and any provision of this
Agreement may be waived by the Majority Creditors in writing or
by the Agent acting with the consent of the Majority Creditors;
<PAGE> 45
provided that: (a) no modification, supplement or waiver shall,
unless by an instrument signed by all of the Creditors or by the
Agent acting with the consent of all of the Creditors:
(i) extend the date fixed for the payment of principal of or
interest on any Loan or any fee hereunder, (ii) reduce the amount
of any such payment of principal, (iii) reduce the rate at which
interest accrues and is payable thereon or any fee is payable
hereunder, (iv) alter the rights or obligations of the Company to
prepay Loans or Notes, (v) alter the terms of this Section 8.01,
(vi) modify the definition of the term "Majority Creditors" or
modify in any other manner the number or percentage of the
Creditors required to make any determinations or waive any rights
hereunder or to modify any provision hereof, or (vii) waive any
of the conditions precedent set forth in Article III; and (b) any
modification or supplement of Article VII shall require the
consent of the Agent.
SECTION 8.02. Notices, Etc. All notices and other
communications provided for hereunder shall be in writing
(including telecopier, telegraphic, telex or cable communication)
and mailed, telecopied, telegraphed, telexed, cabled or
delivered, to the intended recipient at its address set forth on
the signature pages hereto or, as to each party, at such other
address as shall be designated by such party in a written notice
to the other party. Except as otherwise provided herein, all
such notices and communications shall, when mailed, telecopied,
telegraphed, telexed or cabled, be effective when deposited in
the mails, telecopied, delivered to the telegraph company,
confirmed by telex answerback or delivered to the cable company,
respectively, except that notices to the Agent pursuant to the
provisions of Article II shall not be effective until received by
the Agent.
SECTION 8.03. No Waiver; Remedies. No failure on the
part of the Agent or any Creditor to exercise, and no delay in
exercising, any right hereunder or under the Notes 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 provided in this
Agreement are cumulative and not exclusive of any remedies
provided by law.
SECTION 8.04. Costs, Expenses and Taxes. The Company
agrees to pay on demand all costs and expenses in connection with
the preparation, execution, delivery, administration (except
normal administrative costs and fees and expenses of counsel
related thereto prior to an Event of Default), modification and
amendment of this Agreement, the Notes and any other documents to
be delivered hereunder, including, without limitation, the
reasonable fees and out-of-pocket expenses of counsel for the
Agent and the Creditors, and local counsel who may be retained by
said counsel, with respect thereto, with respect to advising the
<PAGE> 46
Agent and the Creditors as to their rights and responsibilities,
or the perfection or preservation of rights or interests, under
this Agreement, any Note and such other documents which may be
delivered in connection with this Agreement, with respect to
negotiations with the Company or with other creditors of the
Company, any Person controlling the Company or any of the
Company's Subsidiaries arising out of any Event of Default or any
events or circumstances that may give rise to an Event of Default
and with respect to presenting claims in or otherwise
participating in or monitoring any bankruptcy, insolvency or
other similar proceeding involving creditor's rights generally
and any proceeding ancillary thereto or in connection with the
negotiation of any restructuring or "work-out" (whether or not
consummated). The Company further agrees to pay on demand all
costs and expenses of the Agent and the Creditors (including
reasonable counsel fees and expenses), in connection with the
enforcement (whether through negotiations, legal proceedings or
otherwise) of this Agreement, the Notes and any other documents
to be delivered hereunder, including, without limitation,
reasonable counsel fees and expenses in connection with the
enforcement of rights under this Section 8.04. In addition, the
Company shall pay any and all stamp and other administrative
taxes and fees payable or determined to be payable in connection
with the execution and delivery of this Agreement, the Notes, and
any other documents to be delivered hereunder, and agrees to save
the Agent and each Creditor harmless from and against any and all
liabilities with respect to or resulting from any delay in paying
or omission to pay such taxes and fees.
SECTION 8.05. Binding Effect; Assignments and
Participations. (a) This Agreement shall become effective when
it shall have been executed by the Company, the Agent and each
Creditor and thereafter shall be binding upon and inure to the
benefit of the Company, the Agent and each Creditor and their
respective successors and assigns, except that the Company shall
not have the right to assign its rights hereunder or any interest
herein without the prior written consent of each Creditor and the
Agent.
(b) A Creditor may sell or agree to sell to one or more
other Persons a participation in all or any part of any Loans
held by it, in which event each purchaser of a participation (a
"Participant") shall be entitled to the rights and benefits of
the provisions of Section 5.01(a)(vi) with respect to its
participation in such Loans as if (and the Company shall be
directly obligated to such Participant under such provisions as
if) such Participant were a "Creditor" for purposes of said
Section, but shall not have any other rights or benefits under
this Agreement or any Note (the Participant's rights against such
Creditor in respect of such participation to be those set forth
in the agreements executed by such Creditor in favor of the
Participant). All amounts payable by the Company to any Creditor
<PAGE> 47
under Section 2.05 and 2.09 in respect of Loans held by it shall
be determined as if such Creditor had not sold or agreed to sell
any participations in such Loans, and as if such Creditor were
maintaining such Loan in the same way that it is maintaining the
portion of such Loan in which no participations have been sold.
In no event shall a Creditor that sells a participation agree
with the Participant (unless such Participant is an Eligible
Institution) to take or refrain from taking any action hereunder
or under any Note except that such Creditor may agree with the
Participant that it will not, without the consent of the
Participant, agree to (i) extend the date fixed for the payment
of principal of or interest on the related Loan or Loans payable
to the Participant, (ii) reduce the amount of any such payment of
principal, (iii) reduce the rate at which interest is payable
thereon to a level below the rate at which the Participant is
entitled to receive such interest, (iv) alter the rights or
obligations of the Company to prepay the related Loans or
(v) consent to any modification, supplement or waiver hereof or
of any of the Notes to the extent that the same, under
Section 8.01, requires the consent of each Creditor.
(c) Each Creditor may assign any of its Loans and its
Note to one or more Eligible Institutions; provided, that (i) any
such partial assignment shall be in an amount at least equal to
$5,000,000; and (ii) each such assignment by a Creditor of its
Loans or its Note shall be made in such manner so that the same
portion of its Loans and Note is assigned to the respective
assignee. Upon execution and delivery by the assignee to the
Company and the Agent of an instrument in writing pursuant to
which such assignee agrees to become a "Creditor" hereunder (if
not already a Creditor) having the Loans specified in such
instrument, the assignee shall have, to the extent of such
assignment (unless otherwise provided in such assignment with the
consent of the Company and the Agent), the obligations, rights
and benefits of a Creditor hereunder holding the Loans (or
portions thereof) assigned to it (in addition to the Loans, if
any, theretofore held by such assignee) and such assigning
Creditor shall, to the extent of such assignment, be released
from its obligations hereunder (and, in the case of an assignment
covering all or the remaining portion of an assigning Creditor's
rights and obligations under this Agreement, such Creditor shall
cease to be a party hereto). Upon each such assignment the
assigning Creditor shall pay the Agent an assignment fee of
$2,500.
(d) Within 5 Business Days after receipt of notice
(which shall include a statement by the Agent that it possesses
the surrendered Note or Notes), the Company, at its own expense,
shall execute and deliver to the Agent, in exchange for the
surrendered Note or Notes, a new Note or Notes to the order of
such assignee in a principal amount equal to the principal amount
of the Loan assigned to such assignee. Such new Note or Notes
<PAGE> 48
shall be in an aggregate principal amount equal to the aggregate
principal amount of such surrendered Note; such new Notes shall
be dated the date of the surrendered Notes which they replace and
shall otherwise be in substantially the form of Exhibit A hereto,
as appropriate. Canceled Notes shall be returned to the Company.
(e) Notwithstanding any other provision set forth in
this Agreement, any Creditor may at any time create a security
interest in all or any portion of its rights under this Agreement
and its Note in favor of any Federal Reserve Bank in accordance
with Regulation A of the Board of Governors of the Federal
Reserve System.
SECTION 8.06. Indemnity. The Company hereby
indemnifies and holds the Agent, each Creditor and each of their
affiliates and their officers, directors, employees, agents and
advisors (each, an "Indemnified Party") harmless from and against
any and all claims, damages, losses, liabilities and expenses
(including, without limitation, reasonable fees and expenses of
counsel) that may be incurred by or asserted or awarded against
any Indemnified Party (except to the extent any such claim,
damage, loss, liability or expense is found in a final,
non-appealable judgment by a court of competent jurisdiction to
have resulted from such Indemnified Party's gross negligence or
willful misconduct), in each case relating to or arising out of
or in connection with or by reason of:
(i) any representation, warranty or certification made
or deemed made in this Agreement or in any Note by the
Company (or any of its officers), or any certificate
furnished to any Creditor pursuant to the provisions hereof
or thereof, proving to have been false or misleading as of
the time made or furnished in any material respect;
(ii) any case or proceeding pursuant to any bankruptcy,
insolvency, reorganization, moratorium or similar law or any
restructuring of the Company; or
(iii) any cost or liability under any Environmental Law
arising out of the operations or assets of the Company.
SECTION 8.07. Severability. Any provision of this
Agreement which is prohibited, unenforceable or not authorized in
any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition, unenforceability or
non-authorization without invalidating the remaining provisions
hereof or affecting the validity, enforceability or legality of
such provision in any other jurisdiction.
SECTION 8.08. Headings. Section headings in this
Agreement are included herein for convenience of reference only
<PAGE> 49
and shall not constitute a part of this Agreement for any other
purpose.
SECTION 8.09. GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK, WITHOUT GIVING EFFECT TO CONFLICT OF LAW
PRINCIPLES.
SECTION 8.10. FORUM SELECTION; SUBMISSION TO
JURISDICTION. THE COMPANY HEREBY SUBMITS TO THE NONEXCLUSIVE
JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN
NEW YORK CITY FOR THE PURPOSES OF ALL LEGAL PROCEEDINGS ARISING
OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY OR THE ACTIONS OR
OMISSIONS OF THE AGENT OR THE CREDITORS IN THE NEGOTIATION,
ADMINISTRATION, PERFORMANCE OR ENFORCEMENT OF THIS AGREEMENT OR
THE NOTES. THE COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN
SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN
SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
TO THE EXTENT THAT THE COMPANY HAS OR HEREAFTER MAY
ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY
LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT
PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE)
WITH RESPECT TO ITSELF OR ITS PROPERTY, THE COMPANY HEREBY
IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS
UNDER THIS AGREEMENT AND THE OTHER RELATED DOCUMENTS. THE
COMPANY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY
REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN
OR WITHOUT THE STATE OF TEXAS.
SECTION 8.11. WAIVER OF TRIAL BY JURY. EACH OF THE
COMPANY, THE AGENT AND THE CREDITORS HEREBY IRREVOCABLY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING
TO THIS AGREEMENT, THE NOTES OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY. THE COMPANY ACKNOWLEDGES AND AGREES THAT IT
HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION
(AND EACH OTHER PROVISION OF EACH OTHER RELATED DOCUMENT TO WHICH
IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT
FOR THE CREDITORS ENTERING INTO THIS AGREEMENT AND EACH SUCH
OTHER RELATED DOCUMENT.
SECTION 8.12. 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.
<PAGE> 50
SECTION 8.13. INTEGRATION. THIS AGREEMENT REPRESENTS
THE FINAL AGREEMENT BETWEEN THE PARTIES HERETO AS TO THE SUBJECT
MATTER OF THIS AGREEMENT AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES HERETO.
SECTION 8.14. Survival. The obligations of the Company
under Sections 2.05, 2.07, 2.09, 2.15 and 8.06 shall survive the
repayment of the Loans.
<PAGE> 51
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.
EL PASO ELECTRIC COMPANY
By_________________________
Title:
Address for Notices:
Attention:
Telex No.:
Telecopier No.:
Telephone No.:
<PAGE> 52
CREDITORS
[Complete this page for each Creditor.]
Loan Amount [NAME OF CREDITOR]
By_________________________
Title:
Lending Office for Base Rate Loans:
Lending Office for Eurodollar
Loans:
Address for Notices:
Attention:
Telex No.:
Telecopier No.:
Telephone No.:
<PAGE> 53
________________,
as Agent
By_________________________
Title:
Address for Notices to
the Bank as Agent:
Attention:
Telex No.:
(Answerback: )
Telecopier No.:
Telephone No.:
<PAGE> 54
EXHIBIT A
PROMISSORY NOTE
$_______________________ Dated: _________, 199__
FOR VALUE RECEIVED, the undersigned, EL PASO ELECTRIC
COMPANY, a Texas corporation (the "Company"), HEREBY PROMISES TO
PAY to the order of _____________ (the "Creditor") the principal
sum of $[amount of the Creditor's Loan in figures] in such
installments and at such times as are specified in the Term Loan
Agreement referred to below.
The Company promises to pay interest on the principal
amount of the Loans from the date hereof until such principal
amount is paid in full, at such interest rates, and payable at
such times, as are specified in the Term Loan Agreement referred
to below.
Both principal and interest are payable in lawful money
of the United States of America to the Creditor at [insert name
and address of Agent] in same day funds. All payments made on
account of the principal amount hereof shall be recorded by the
Creditor in its books and records and, prior to any transfer
hereof, endorsed on the grid attached hereto which is a part of
this Promissory Note. The failure by the Creditor to make any
such recordation on its books and records shall not limit or
otherwise affect the obligations of the Company hereunder or
under the Term Loan Agreement referred to below.
This Promissory Note is one of the Notes referred to in,
and is entitled to the benefits of, the Term Loan Agreement dated
as of ___________, 199__ (the "Term Loan Agreement"), between the
Company, the Creditors party thereto and [Agent], as Agent. The
Term Loan Agreement, among other things, contains provisions for
acceleration of the maturity hereof upon the happening of certain
stated events and also for prepayments on account of principal
hereof prior to the maturity hereof upon the terms and conditions
therein specified.
EL PASO ELECTRIC COMPANY
By____________________________
Title:
<PAGE> 55
PAYMENTS OF PRINCIPAL
- -----------------------------------------------------------------
> Amount of > >
> Principal Paid > Unpaid Principal > Notation
Date > or Prepaid > Balance > Made By
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
> > >
> > >
- -----------------------------------------------------------------
<PAGE> 1
EXHIBIT A-21
M E M O R A N D U M
Re: Central and South West Corporation
El Paso Electric Company
Reconciliation of First and Second Mortgage
Bond Indentures with Statement of Policy
The following is a comparison of certain of the terms
of (a) the proposed form of Indenture between El Paso Electric
Company, a Texas corporation ("Reorganized EPE"), and State
Street Bank and Trust Company, as trustee, for the issuance of
First Mortgage Bonds (the "FMB Indenture"), and (b) the proposed
form of Indenture between Reorganized EPE and IBJ Schroder Bank &
Trust Company, as trustee, for the issuance of Second Mortgage
Bonds (the "SMB Indenture", and together with the FMB Indenture,
the "Indentures"), with the provisions of the Statement of Policy
Regarding First Mortgage Bonds Subject to the Public Utility
Holding Company Act of 1935 (HCAR 35-13105; February 16, 1956)
(the "Statement"). The Statement, as originally adopted, was
applicable to applications or declarations filed under the Public
Utility Holding Company Act of 1935, as amended (the "1935 Act"),
after March 31, 1956. The Securities and Exchange Commission
(the "Commission") later adopted a modification of the policies
in the Statement regarding redemption provisions (See HCAR 35-
16369; May 8, 1969).
While historically conformity with the Statement has
generally been required, with deviations permitted in appropriate
circumstances, the Commission has recently termed the Statement
"anachronistic in today's financial markets" (HCAR 35-25059;
March 19, 1990), and has increasingly permitted deviations from
the Statement on a case-by-case basis. (See, e.g., HCAR 35-
25573; July 7, 1992 and West Texas Utilities Company, HCAR 35-
25928; November 19, 1993.)
Moreover, the Commission, in promulgating recent
amendments to Rule 52 under the 1935 Act (which affords an
exemption from Sections 6(a) and 7 of the 1935 Act for, among
other things, the issuance and sale of securities issued by
public utility subsidiary companies of registered holding
companies where the transaction has been authorized by the
appropriate state commission), reaffirmed its prior view that the
Statement is "no longer relevant to contemporary financial
markets", and eliminated the requirement of compliance with the
Statement as a condition to the exemption afforded by the Rule
(HCAR 35-25573; July 7, 1992). For those companies, however, not
entitled to use Rule 52 for the issuance and sale of their
securities (for example, because the applicable state commission
does not exercise jurisdiction over securities issuances), the
Commission stated that it would continue to permit, on a case-by-
case basis, the issuances of securities that do not conform to
the Statement.
<PAGE> 2
Upon consummation of the proposed acquisition of
Reorganized EPE by Central and South West Corporation ("CSW"),
Reorganized EPE will continue to be subject to the jurisdiction
of the Federal Energy Regulatory Commission, the Nuclear
Regulatory Commission, the United States Department of Energy,
the Public Utility Commission of Texas, the New Mexico Public
Utility Commission, and, in certain respects, various Texas
municipalities. However, the jurisdiction of these regulatory
bodies is not sufficient to trigger the exemptive provisions of
Rule 52, and therefore the Statement technically will remain
applicable to Reorganized EPE.
The comparison given below is in outline form and
organized to reflect the principal subject matters included in
the Statement. Except where specifically noted, the terms of the
FMB Indenture and the SMB Indenture are substantially identical.
Terms used herein but not defined have the meanings ascribed to
such terms in the relevant Indenture.
Redemption Provisions Generally
1. The Statement, as modified in 1969, provides that
bonds should be callable by the obligor for redemption at any
time subject to no more than a five-year refunding limitation,
upon reasonable notice and with reasonable redemption premiums.
Certain First Mortgage Bonds and Second Mortgage Bonds
(collectively, the "Bonds") to be issued under the Indentures
(Series A and B First Mortgage Bonds and Series A Second Mortgage
Bonds) will not be redeemable prior to the fifth anniversary of
their issuance.
With the exception of any pledged Bonds, the Indentures
require not less than thirty days' notice prior to a date fixed
for redemption. Although the Statement does not specify what
constitutes reasonable notice, the Commission has frequently
interpreted such notice provision as being adequate with regard
to the Statement. The Bonds specify the relevant redemption
premiums, if any, to be paid by Reorganized EPE.
The pledged Bonds will be redeemable only upon an
acceleration of the maturity of the obligations which such Bonds
secure. The redemption is to occur on the fifth business day
following a redemption demand by the holder of the pledged Bonds.
The redemption price for the pledged Bonds is the principal
amount thereof plus accrued interest thereon.
Issuance of Additional Bonds
2. The Statement, in subdivision (a)(1), allows a
principal amount of bonds to be issued upon the deposit of a like
amount of cash. Section 4.04 of each Indenture complies with
this provision.
<PAGE> 3
3. The Statement, in subdivision (a)(2), allows a
principal amount of bonds to be issued equal to a like principal
amount of retired bonds. Section 4.02 of each Indenture
generally complies with this provision, as the Indentures also
contain an ability to issue bonds against outstanding bonds the
retirement of which the necessary funds have been deposited with
the relevant Trustee.
4. The Statement, in subdivision (a)(3), allows a
principal amount of bonds to be issued equal to 60% of the
bondable value of net property additions.
Section 4.03 of the FMB Indenture permits the issuance
of additional First Mortgage Bonds up to a principal amount equal
to 66-2/3% of the sum of (a) a sum to be specified in respect of
expenditures for bondable property constructed or acquired by
Reorganized EPE prior to the Effective Date, plus (b) all net
expenditures made by Reorganized EPE for bondable property
acquired by Reorganized EPE through construction, purchase,
consolidation or otherwise at any time on or after the Effective
Date.
Section 4.03 of the SMB Indenture permits the issuance
of additional Second Mortgage Bonds up to a principal amount
equal to 33-1/3% of all net expenditures made by Reorganized EPE
for bondable property acquired by Reorganized EPE through
construction, purchase, consolidation or otherwise at any time on
or after the Effective Date.
5. The earnings test requirement described in
subdivision (a) of the Statement is generally complied with
pursuant to the provisions of Section 4.05 of the Indentures.
However, the Indentures permit (without the need for the earnings
test) a refunding at a higher interest rate within five years of
maturity, while the Statement only permits such a refunding
within two years of maturity.
Sinking and Improvement Funds
6. The Bonds to be issued on the Effective Date will
not contain any sinking or improvement fund provisions.
Supplemental indentures relating to future issuances of Bonds may
include such provisions for new series of Bonds if necessary of
appropriate.
Maintenance and Replacement Fund
7. Reorganized EPE has agreed in each Indenture to
expend in each year 2.5% of the average amount of Reorganized
EPE's depreciable property for (a) the maintenance and repair of
its mortgaged utility properties, (b) the construction or
acquisition of bondable property, or (c) the retirement, through
purchase or payment of Bonds issued under such Indenture, or
<PAGE> 4
redemption of such Bonds that are subject to redemption (other
than Series A and Series B First Mortgage Bonds and Series A
Second Mortgage Bonds).
Limitation on Dividends
8. The Indentures do not contain a dividend
limitation as contemplated by the Statement. Instead, the Series
A and Series B First Mortgage Bonds and the Series A Second
Mortgage Bonds contain the following covenants: (i) Reorganized
EPE will only pay dividends or make distributions on, or purchase
or acquire, its common stock out of GAAP net income after the
Effective Date plus $300 million, and (ii) for so long as any
original holders of such Bonds continue to hold such Bonds,
Reorganized EPE will not make such payments on its common stock
unless such Bonds have an Investment Grade Rating.
Property Additions Subject to a Prior Lien and
Prior Lien Obligations
9. The Indentures contain provisions concerning this
subject matter which are substantially similar to the existing
first mortgage indentures of the current CSW Electric Operating
Companies.
Section 13.01 of the FMB Indenture provides that the
property of another corporation with which Reorganized EPE shall
consolidate or merge or convey or transfer its assets shall not
be subject to any lien which after such event will be equal or
prior to the lien of the FMB Indenture on the property owned by
such corporation after such event, unless the amount of
obligations outstanding under and secured by such equal or prior
liens shall not exceed 66-2/3% of the value of the bondable
property of such corporation (and such property meets an earnings
test).
Section 13.01 of the SMB Indenture provides that the
property of another corporation with which Reorganized EPE shall
consolidate or merge or convey or transfer its assets shall not
be subject to any lien (other than the lien of the FMB Indenture)
which after such event will be equal or prior to the lien of the
SMB Indenture on the property owned by such corporation after
such event, unless (i) the amount of obligations outstanding
under and secured by such prior liens shall not exceed 66-2/3%,
and (ii) the amount of obligations outstanding under and secured
by such equal or prior liens shall not exceed 100%, of the value
of the bondable property of such corporation (and such property
meets an earnings test).
10. The Indentures do not contain any provisions
prohibiting the issuance of further prior lien bonds under their
governing indenture or providing for the retirement, or deposit
with the relevant Trustee, of such prior lien bonds. Such a
provision would be permitted by subdivision (k) of the Statement.
<PAGE> 5
Definitions and Miscellaneous Provisions of the Statement
11. The provisions of subdivision (l) of the Statement
require that only the cost or fair value of property additions,
whichever is less, may be used under an indenture. The
Indentures substantially comply with these requirements.
12. The provisions of subdivision (m) of the Statement
permits net property additions to be determined after excluding
or deducting from the amount of property additions an amount of
property additions equal to the greater of retirements (less
credits for cash or other substitutions) or the amount required
to be expended for property additions pursuant to the renewal and
replacement fund. Under the definition of "net expenditures" in
Section 4.03 of the Indentures, there is deducted from gross
expenditures (i) the amount of expenditures certified to comply
with sub-paragraph (b) of Section 5.15 of the Indentures (the
construction or acquisition of bondable property to satisfy the
maintenance and renewal covenant) and (ii) the amount of
retirements (less credit for (1) the amount of expenditures
certified to comply with sub-paragraphs (b) and (c) of Section
5.15 (construction or acquisition of property and the retirement
of Bonds), (2) the amount paid to the relevant Trustee to comply
with Section 5.15 and (3) the amount of net consideration
received by Reorganized EPE in connection with the release of
property from the lien of the Indentures).
13. The provisions of subdivision (n) of the
Statement, to the effect that duplicate credits generally may not
be taken with respect to property additions, cash, bonds, retired
bonds, prior lien obligations and other property under an
indenture, are complied with in the requirements for Officers'
Certificates throughout Articles IV and VIII of the Indentures.
14. The provisions of subdivision (o) of the
Statement, to the effect that bonds authenticated and delivered
under an indenture and prior lien obligations, which in either
case have been retired with money or other property constituting
funded property, may not be used for any purpose, are complied
with in Section 4.02 of the Indentures.
15. The restriction on the use of retired bonds
contained in subdivision (p) of the Statement is complied with in
Section 4.02 of the Indentures.
16. The provisions of subdivision (q) of the
Statement, regarding the calculation of net earnings, is
substantially complied with in the definition of "net earnings"
in Section 4.05 of the Indentures.
17. With reference to subdivision (r) of the
Statement, CSW will determine whether Reorganized EPE's
depreciation will be sufficient to depreciate its depreciable
properties over their estimated useful lives.
<PAGE> 6
18. The provisions of subdivision (s) of the Statement
are complied with in Section 4.05 of the Indentures.
19. The provisions of subdivisions (t) and (u) with
respect to earned surplus are inapplicable as the Indentures do
not contain restrictions on the payment of dividends relating to
earned surplus.
20. The provisions of the Indentures generally do not
contemplate the use of consolidated data as permitted in
appropriate cases by subdivision (v) of the Statement.
21. None of the provisions of the Indentures are in
contravention of the provisions deemed to be included pursuant to
Section 310 through 317 of the Trust Indenture Act of 1939, as
amended (the "TIA"). In addition, Section 18.03 of the
Indentures specifies that, if and to the extent that any
provision of the Indentures limits, qualifies or conflicts with
any duties imposed by the TIA, such imposed duties shall control.
Accordingly, subdivision (w) of the Statement is complied with.
Milbank, Tweed, Hadley & McCloy
January 7, 1994
<PAGE> 1
EXHIBIT A-22
M E M O R A N D U M
Re:Central and South West Corporation
El Paso Electric Company
Reconciliation of the Terms of Preferred
Stock with the Statement of Policy
The following is a comparison of certain of the terms
of the proposed form of Preferred Stock ("Preferred Stock") to be
issued by El Paso Electric Company, a Texas corporation
("Reorganized EPE"), which are contained in the proposed form of
Amended and Restated Articles of Incorporation of Reorganized EPE
(the "Articles"), with the provisions of the Statement of Policy
Regarding Preferred Stock Subject to the Public Utility Holding
Company Act of 1935 (HCAR 35-13106; February 16, 1956) (the
"Statement"). The Statement is applicable to applications or
declarations in respect of issues of preferred stock filed under
the Public Utility Holding Company Act of 1935, as amended (the
"1935 Act"). The Securities and Exchange Commission (the
"Commission") later adopted a modification of the policies in the
Statement regarding redemption provisions (HCAR 35-16758; June
22, 1970).
While historically conformity with the Statement has
generally been required, with deviations permitted in appropriate
circumstances, the Commission has recently termed the Statement
"anachronistic in today's financial markets" (HCAR 35-25059;
March 19, 1990), and has increasingly permitted deviations from
the Statement on a case-by-case basis. (See, e.g., HCAR 35-
25573; July 7, 1992 and Gulf Power Company, HCAR 35-25894;
September 27, 1993.)
Moreover, the Commission, in promulgating recent
amendments to Rule 52 under the 1935 Act (which affords an
exemption from Sections 6(a) and 7 of the 1935 Act for, among
other things, the issuance and sale of securities issued by
public utility subsidiary companies of registered holding
companies where the transaction has been authorized by the
appropriate state commission), reaffirmed its prior view that the
Statement is "no longer relevant to contemporary financial
markets", and eliminated the requirement of compliance with the
Statement as a condition to the exemption afforded by the Rule
(HCAR 35-25573; July 7, 1992). For those companies, however, not
entitled to use Rule 52 for the issuance and sale of their
securities (for example, because the applicable state commission
does not exercise jurisdiction over securities issuances), the
Commission stated that it would continue to permit, on a case-by-
case basis, issuances of securities that do not conform to the
Statement.
<PAGE> 2
Upon consummation of the proposed acquisition of
Reorganized EPE by Central and South West Corporation ("CSW"),
Reorganized EPE will continue to be subject to the jurisdiction
of the Federal Energy Regulatory Commission, the Nuclear
Regulatory Commission, the United States Department of Energy,
the Public Utility Commission of Texas, the New Mexico Public
Utility Commission, and, in certain respects, various Texas
municipalities. However, the jurisdiction of these regulatory
bodies is not sufficient to trigger the exemptive provisions of
Rule 52, and therefore the Statement technically will remain
applicable to Reorganized EPE.
Reorganized EPE's capitalization will consist of Common
Stock, Preferred Stock, and Preference Stock. The Preferred
Stock will be created at the time of the acquisition of
Reorganized EPE by CSW pursuant to applicable Statements of
Resolution. The Articles permit the Board of Directors of
Reorganized EPE to fix the designations, preferences, privileges
and voting powers of each series of Preference Stock at the time
of its issuance. No Preference Stock will be issued in
connection with the acquisition of Reorganized EPE by CSW.
Set forth below is a comparison in outline form of the
provisions of the Statement and of the related provisions of the
Articles with respect to Preferred Stock. The Articles are in
substantial compliance with the Statement. Where material
deviations exist, they are noted.
Cumulative Dividends; Reasonable Redemption Premiums and
Reasonable Notice of Redemption
1. The Statement provides that dividends on preferred
stock shall be cumulative. Reorganized EPE's Articles are
consistent with this standard, providing for cumulative cash
dividends on Preferred Stock.
2. The Statement, as modified in 1970, also provides
that preferred stock shall be callable by the issuer for
redemption at any time subject to no more than a five-year
refunding limitation, upon reasonable notice of redemption and
the payment of reasonable redemption premiums (as set forth in
the Statement).
Reorganized EPE's Articles provide that Reorganized EPE
may redeem the whole or any part of the Preferred Stock at any
time outstanding, at the then applicable redemption price thereof
as may be fixed by the Board of Directors prior to the issuance
of any such series of Preferred Stock. While the Statement does
not define "reasonable notice", Reorganized EPE's Articles
specify that, for Preferred Stock, notice of the time and place
of the redemption must be given to the holders of record of
Preferred Stock between 30 and 60 days prior to the date fixed
for redemption. Such notice shall be given by mail and
publication in a newspaper, printed in the English language and
<PAGE> 3
customarily published on each business day, of general
circulation in the Borough of Manhattan, City and State of New
York and in the City of Dallas, Texas or in any other manner
established by the Board of Directors with respect to a
particular series of Preferred Stock. These provisions appear to
satisfy the Statement's "reasonable notice" requirement.
Reorganized EPE's Articles permit the Board of
Directors to establish the schedule of redemption prices for each
series of Preferred Stock at the time of its issuance. The
Preferred Stock issued at the time of the acquisition of
Reorganized EPE by CSW will have redemption and sinking fund
provisions as provided for in the Plan (as defined in CSW's Form
U-1 Application-Declaration to which this memorandum is an
exhibit).
Rights of Holders of Preferred Stock to Elect Directors
3. The Statement provides that if dividends are in
arrears in an amount equal to four quarter-yearly payments or
more, the holders of all series of Preferred Stock voting
together as a class are entitled to elect the smallest number of
directors necessary to constitute a majority of the entire board
of directors until such time as all arrearages have been paid or
provided for. Such election of directors is to be made at a
meeting to be held between 45 and 90 days after the accrual of
this right.
Reorganized EPE's Articles are substantially consistent
with the provisions of the Statement. The Articles provide that
in the event Reorganized EPE is in default in making quarterly
Preferred Stock dividend payments in an amount equivalent to or
exceeding four full quarterly dividends, holders of preferred
stock, voting separately as a class and regardless of series,
have the right to elect the smallest number of directors
necessary to constitute a majority of the Board of Directors, and
that right continues until all dividends accrued and payable are
made current. Such meeting is to be held within 50 days after
delivery of a request therefor by any holder of Preferred Stock.
Issuance of Securities Representing Unsecured Debt
4. The Statement requires the consent of the holders
of a majority of the outstanding shares of preferred stock before
a company may issue or assume unsecured debt in excess of
specified amounts. Reorganized EPE's Articles do not contain a
restriction on the incurrence of unsecured debt. Pursuant to the
Plan, by virtue of acceptance of the Plan, all holders of "EPE
Preferred Stock Allowed Interests" (as defined in the Plan) were
deemed to have voted in favor of (a) incurrence of unsecured
indebtedness provided for or contemplated by the Plan and (b) the
provisions relating to Reorganized EPE Preferred Stock contained
in Reorganized EPE's Articles.
<PAGE> 4
Limitation on Junior Stock Dividends
5. The Statement restricts a company's ability to
declare dividends on a junior stock, i.e., a stock which is
junior to preferred stock as to dividends or assets (such as
preference stock or common stock). The restrictions include the
following two parts: (a) if the junior stock equity is less than
20% of the company's total capitalization (or if the declaration
of the dividend would result in the company's junior stock equity
being less than 20% of total capitalization), the company may not
declare junior stock dividends which, when aggregated with all
other junior stock dividends paid within the twelve-month period
prior to the month in which the dividend is to be declared, would
exceed 50% of the company's net income available for junior stock
dividends for the twelve-month period prior to the month in which
the dividend is declared; and (b) if the company's junior stock
equity is between 20% and 25% of its total capitalization (or if
the declaration of the dividend would result in the company's
junior stock equity being between 20% and 25% of its total
capitalization), the company may not declare junior stock
dividends which, when aggregated with all other junior stock
dividends paid within the twelve-month period prior to the month
in which the dividend is to be declared, would exceed 75% of the
company's net income available for junior stock dividends for the
twelve-month period prior to the month in which the dividend is
declared.
Reorganized EPE's Articles only contain general
restrictions on dividends on Common Stock or other junior stock.
According to the Articles, the declaration of Common Stock or
other junior stock dividends is subject to the prior rights and
preferences applicable to shares of the Preferred Stock.
Merger or Consolidation
6. The Statement prohibits a company from merging or
consolidating with or into another company, or from disposing of
all or substantially all of its assets unless ordered or approved
under the 1935 Act or unless a majority of the total number of
shares of preferred stock outstanding consents to such
transaction.
Reorganized EPE's Articles comply with this standard.
The Articles provide that Reorganized EPE cannot merge with or
into another company or dispose of all or substantially all of
its assets without the consent of a majority of the votes
entitled to be cast by the holders of the total number of shares
of Preferred Stock then outstanding. One exception to this
provision is that no such authorization in respect of the merger
of Reorganized EPE with or into any other company is required if
the company resulting from such merger will, immediately after
such merger, have only such authorized classes of stock and such
outstanding shares of stock as would have been permitted
immediately prior to such merger under the provisions of the
<PAGE> 5
Articles and if each holder of the Preferred Stock immediately
preceding such merger shall receive the same number of shares,
with the same rights and preferences, of the resulting company.
Alteration of Preferred Stock Provisions
7. The Statement provides that the consent of the
holders of at least two-thirds of the total number of shares of
preferred stock outstanding is required for any amendment,
alteration or repeal of the rights, preferences or powers of
preferred stock if it will adversely affect the holders of
preferred stock. Reorganized EPE's Articles are in conformity
with the requirements of the Statement.
Issuance of Additional Preferred Stock
8. The Statement limits the creation or authorization
of any stock with a rank senior to preferred stock without the
consent of two-thirds of the total number of outstanding shares
of preferred stock. The Statement also prohibits, without such
consent, the issuance of such senior stock more than twelve
months after the date the company was empowered to create such
senior stock.
Reorganized EPE's Articles are in substantial
compliance with these provisions. The Articles provide that in
the absence of the required vote of the Preferred Stock holders,
Reorganized EPE shall not create or authorize any class of stock
having a preference superior to the preferences of the Preferred
Stock as to assets or dividends, or create or authorize any
security convertible into shares of stock of any such kind.
9. The Statement also provides for a majority vote of
outstanding preferred stock before a company may issue additional
preferred stock or any stock ranking on a parity with the
preferred stock (with certain exceptions) unless the following
two conditions are satisfied: (a) for twelve consecutive months
within a period of fifteen months immediately prior to the
issuance, the company's gross income is at least equal to 1 1/2
times the annual interest charges on the company's debt and the
annual dividend requirements on all preferred stock, which will
be immediately outstanding after the issuance of such shares; and
(b) upon an involuntary liquidation of the company, the company's
junior stock equity at a minimum equals the amount to be paid on
preferred stock and all shares of stock ranking prior to or on a
parity with preferred stock. Further, upon involuntary
liquidation of the company, if for purposes of satisfying the
test in (b) above, the company is required to take into account
any earned surplus, then it may not pay dividends or acquire
junior stock which would reduce the junior stock equity to less
than the amount payable on preferred stock and all equal and
prior ranking stock.
<PAGE> 6
Reorganized EPE's Articles provide, among other
things, that the Company may not, without the affirmative vote of
two-thirds of the total number of outstanding shares of Preferred
Stock, issue additional shares of Preferred Stock or any shares
ranking on a parity with the Preferred Stock unless the net
earnings of the Company available for the payment of interest
charges on the Company's interest-bearing indebtedness,
determined after provision for depreciation and all taxes, and in
accordance with sound accounting practice, shall have been at
least one and one-half (1-1/2) times the aggregate of the annual
interest charges on the interest-bearing indebtedness of the
Company and annual dividend requirements on all shares of, or
ranking on a parity with, Preferred Stock to be outstanding
immediately after the proposed issue of such shares of, or
ranking on a parity with, Preferred Stock.
The Articles do not contain the capitalization
restriction described in (b) above.
Acquisition or Redemption of Preferred Stock
10. The Statement provides for approval by the
Commission under the 1935 Act for an acquisition of preferred
stock if the company is in arrears with respect to dividends on
preferred stock, unless all shares of preferred stock are to be
redeemed. Reorganized EPE's Articles contain no such provision
for Preferred Stock.
Voluntary Liquidation Preference
11. The Statement provides that in the case of a
voluntary liquidation, the amount to be paid to the holder of
each share of preferred stock is the current redemption price of
such share.
Reorganized EPE's Articles provide that upon voluntary
liquidation, the holders of Preferred Stock are entitled to
receive
the then applicable redemption price of their shares, plus, in
the case of each share, an amount equal to all dividends on such
share accrued and unpaid thereon to the date of payment upon such
liquidation, before any distribution of the assets to be
distributed shall be made to the holders of the Common Stock or
any other class of stock ranking junior to Preferred Stock.
These provisions are in substantial conformity with the
Statement.
Miscellaneous
12. The Statement permits the use of consolidated data
"in appropriate cases". Reorganized EPE's Articles are silent on
this point.
<PAGE> 7
13. The Statement also specifies that a share of
preferred stock is not to be deemed "outstanding" for various
purposes if its redemption has been provided for. Reorganized
EPE's Articles are in conformity with the Statement.
Other Provisions
14. Reorganized EPE's Articles contain other
deviations from the Statement in a number of minor respects
which, singly and in the aggregate, should not be deemed
material.
Milbank, Tweed, Hadley & McCloy
January 7, 1994
<PAGE> 1
EXHIBIT B-1
_________________________________________________________________
AGREEMENT AND PLAN
OF
MERGER
Among
EL PASO ELECTRIC COMPANY,
CENTRAL AND SOUTH WEST CORPORATION
and
CSW SUB, INC.
Dated as of May 3, 1993
As Amended on May 18, 1993
_________________________________________________________________
<PAGE> 2
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 3
TABLE OF CONTENTS
Page
ARTICLE I CERTAIN DEFINITIONS
Section 1.1 Certain Defined Terms; Etc............. 1
ARTICLE II MERGER AND CONVERSION OF SHARES
Section 2.1 The Merger............................. 13
Section 2.2 Articles of Incorporation and By-Laws.. 13
Section 2.3 Directors and Officers................. 13
Section 2.4 Closing................................ 14
Section 2.5 Effective Time; Conditions............. 14
Section 2.6 Closing of Transfer Books.............. 14
Section 2.7 No Dissenting Shares................... 14
Section 2.8 Conversion of Securities............... 15
Section 2.9 Restrictions on Transfer............... 17
Section 2.10 CSW To Make Cash and Certificates
Available............................. 19
ARTICLE III REPRESENTATIONS AND WARRANTIES OF EPE
Section 3.1 Organization and Qualification......... 21
Section 3.2 Capitalization......................... 21
Section 3.3 No Subsidiaries........................ 22
Section 3.4 Authority; Non-Contravention; Approvals 22
Section 3.5 Reports and Financial Statements....... 23
Section 3.6 Absence of Certain Changes or Events... 24
Section 3.7 Permits; No Violation of Law........... 24
Section 3.8 Employee Benefit Plans; ERISA.......... 24
Section 3.9 Environmental Protection............... 26
Section 3.10 Regulation as a Utility................ 26
Section 3.11 Registration Statement................. 26
Section 3.12 Property............................... 26
Section 3.13 No Brokers............................. 26
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF CSW AND BUYER
Section 4.1 Organization and Qualification......... 27
Section 4.2 CSW Common Stock....................... 27
Section 4.3 Authority; Non-Contravention; Approvals 27
Section 4.4 Reports and Financial Statements....... 29
Section 4.5 Absence of Certain Changes or Events... 29
Section 4.6 Registration Statement................. 29
Section 4.7 Vote Required.......................... 30
Section 4.8 No Brokers............................. 30
ARTICLE V CONDUCT OF BUSINESS PENDING THE MERGER
Section 5.1 Conduct of Business by Buyer and CSW... 30
Section 5.2 Conduct of Business by EPE............. 31
Section 5.3 No Solicitation by EPE................. 35
ARTICLE VI ADDITIONAL AGREEMENTS
Section 6.1 Access to Information.................. 36
Section 6.2 No-Action Request; Registration
Statement; Form U-1................... 37
i
<PAGE> 4
Page
Section 6.3 Consents and Approvals................. 37
Section 6.4 Notification of Certain Additional
Matters............................... 39
Section 6.5 Compliance with the Securities Act;
Exchange Listing...................... 40
Section 6.6 EPE Employees and Employee Benefits.... 40
Section 6.7 Directors' and Officers'
Indemnification....................... 43
Section 6.8 Reasonable Best Efforts................ 45
ARTICLE VII THE PLAN
Section 7.1 Prosecution of the Plan................ 45
Section 7.2 Plan Modification...................... 46
Section 7.3 Appeals................................ 46
ARTICLE VIII CONDITIONS
Section 8.1 Conditions to Effectiveness of the
Agreement............................. 47
Section 8.2 Conditions to All Parties' Obligations. 47
Section 8.3 Conditions to Obligation of CSW........ 48
Section 8.4 Conditions to Obligation of EPE........ 50
Section 8.5 Waiver of Conditions................... 51
ARTICLE IX TERMINATION AND TERMINATION FEES
Section 9.1 Termination............................ 51
Section 9.2 Effect of Termination.................. 53
Section 9.3 Termination Fees....................... 53
ARTICLE X GENERAL PROVISIONS
Section 10.1 Notices................................ 55
Section 10.2 Expenses............................... 55
Section 10.3 Assignment............................. 56
Section 10.4 Waivers................................ 56
Section 10.5 Binding Effect; Benefits............... 56
Section 10.6 Joinder by Buyer....................... 56
Section 10.7 Entire Agreement....................... 56
Section 10.8 Headings............................... 56
Section 10.9 GOVERNING LAW.......................... 57
Section 10.10 Public Announcements................... 57
Section 10.11 Amendments; Interpretation............. 57
Section 10.12 Disclosures............................ 57
Section 10.13 Counterparts........................... 57
Section 10.14 Specific Performance................... 57
Section 10.15 Plan Termination, Etc.................. 57
Section 10.16 Severability........................... 58
Exhibit A Form of Articles of Merger
Exhibit B Form of Amended and Restated Articles of
Incorporation of Surviving Corporation
Exhibit C Form of By-Laws of Surviving Corporation
ii
<PAGE> 5
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of May 3, 1993,
by and between El Paso Electric Company, a Texas corporation
("EPE") and Central and South West Corporation, a Delaware
corporation ("CSW"), and to be subsequently joined in by CSW Sub,
Inc., which will be a Texas corporation and a wholly owned
subsidiary of CSW ("Buyer") (the parties hereto are hereinafter
sometimes referred to collectively as the "Companies").
PRELIMINARY STATEMENT
EPE has commenced a voluntary case (the "Bankruptcy
Case") under Chapter 11 of the U.S. Bankruptcy Code (11 U.S.C.
Sections 101-1330) (the "Bankruptcy Code") and EPE is a debtor in
possession in the Bankruptcy Case. A plan of reorganization for
EPE has been filed with the United States Bankruptcy Court for
the Western District of Texas, Austin Division by EPE. Subject
to
the receipt of all required regulatory approvals, Buyer will be
formed by CSW to facilitate the transactions contemplated by this
Agreement. To implement the Plan, the Board of Directors of EPE
has determined that it would be in the best interests of EPE, and
the Board of Directors of CSW has determined that it would be in
the best interests of CSW, to enter into this Agreement to
provide for the merger of Buyer with and into EPE, whereby EPE
will be the surviving entity and become a wholly owned subsidiary
of CSW, all upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and
the covenants and agreements hereinafter set forth, and in
reliance on the representations and warranties referred to herein
and subject to the terms and conditions hereof, the parties
hereto hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 Certain Defined Terms; Etc. (a) For all
purposes of this Agreement, except where otherwise expressly
indicated, the following definitions apply:
"ACC" means the Arizona Corporation Commission.
"Additional Consideration" means the cash amounts
actually realized or saved (e.g., after deducting any amounts
previously assigned or otherwise committed by EPE to other
parties) from the Tangible Assets, the Intangible Assets and the
Reduction in Claims.
"Affiliate" means, with respect to any specified
Person, any Person that directly, or indirectly through one or
more intermediaries, controls, is controlled by, or is under
common control with, the Person specified.
<PAGE> 6
"Agreement" means this agreement and all schedules,
appendices and exhibits hereto, as the same may be amended from
time to time pursuant to Section 10.11.
"Alternative Plan" has the meaning ascribed to it in
Section 9.3(a).
"APS Claims" means one or more potential causes of
action against Arizona Public Service Company as operating agent
of the Palo Verde Nuclear Generating Station ("Palo Verde") for
damages in connection with certain outages at Palo Verde
beginning in 1989.
"Articles of Merger" means the Articles of Merger to be
entered into by EPE and Buyer to accomplish the Merger,
substantially in the form attached hereto as Exhibit A.
"Atomic Energy Act" means the Atomic Energy Act of
1954, as amended.
"Average Trading Price of CSW Common Stock" means the
average closing sales price, rounded to four decimal points, of a
share of CSW Common Stock, as reported in the Wall Street
Journal, NYSE Composite Transactions, for the 15 consecutive
trading day period ending on (and including) the sixth trading
day prior to the Confirmation Date.
"Bankruptcy Case" means the case under the Bankruptcy
Code, commenced on January 8, 1992, pursuant to the filing by EPE
of a voluntary petition for reorganization under the Bankruptcy
Code, which is pending in the Bankruptcy Court as Case No. 92-
10148-FM, and any and all of the Bankruptcy Court proceedings
related thereto.
"Bankruptcy Code" means Title 11 of the United States
Code, as amended.
"Bankruptcy Court" means the United States Bankruptcy
Court for the Western District of Texas, Austin Division or any
other court with jurisdiction over the Bankruptcy Case.
"Business Day" means and refers to any day (other than
a day which is a Saturday, Sunday or legal holiday in the State
of Texas) on which banks are open for business in the city of
Dallas, Texas.
"Buyer" means CSW Sub, Inc., a Texas corporation formed
by CSW to facilitate the transactions contemplated by the
Agreement.
"Buyer Material Adverse Effect" means a material
adverse effect on the business, operations, properties, assets,
condition (financial or other) or results of operations of Buyer.
<PAGE> 7
"Buyer Stockholder Approval" means the approval of the
Agreement by the holders of capital stock of CSW Sub, Inc. in
accordance with Article 5.03 of the TBCA.
"CAI" means the warrants owned by EPE to purchase
common stock of CAI Corporation.
"COBRA" means the Consolidated Budget Reconciliation
Act of 1985, as amended.
"Code" means the Internal Revenue Code of 1986, as
amended.
"Common Stock Exchange Ratio" means the fraction
determined by dividing $3.00 by the Average Trading Price of CSW
Common Stock.
"Companies" has the meaning ascribed to it in the
preamble.
"Confidentiality Agreements" means the confidentiality
agreements by and between CSW and EPE, each dated August 13,1992.
"Confirmation Date" means the date on which the
Confirmation Order is entered.
"Confirmation Order" means the order entered by the
Bankruptcy Court confirming the Plan.
"Court Order" means, as to any court, including the
Bankruptcy Court, administrative agency or other tribunal, an
order or judgment of such court, agency, or tribunal which is,
and remains, in force and effect, irrespective of whether the
order is subject to motion for rehearing, new trial or appeal.
"CSW" has the meaning ascribed to it in the preamble.
"CSW Common Stock" means the common stock of CSW, par
value $3.50 per share.
"CSW Common Stock Acquisition Fund" means, at the
Effective Time, the number of shares of CSW Common Stock that
would have accumulated in an escrow fund equal to the sum of the
following: (i) the number of shares of CSW Common Stock that
would have been purchased and placed in such escrow fund on the
Confirmation Date in an amount equal to the number of shares
determined by multiplying the aggregate number of shares of EPE
Common Stock outstanding on the Confirmation Date by the Common
Stock Exchange Ratio, (ii) the number of shares of CSW Common
Stock that would have been purchased and placed in such escrow
fund on the Confirmation Date, at the Average Trading Price of
CSW Common Stock with the proceeds of the Additional
Consideration realized prior to the Confirmation Date, but only
to the extent the aggregate amount of such Additional
<PAGE> 8
Consideration is equal to or less than the product of (A) $1.50
multiplied by (B) the number of shares of EPE Common Stock
outstanding on the Confirmation Date (such product hereinafter
referred to as the "Maximum Additional Consideration Amount"),
(iii) the number of shares of CSW Common Stock that would have
been purchased and placed in such escrow fund, at the closing
price for shares of CSW Common Stock on the dates Additional
Consideration is realized, between the Confirmation Date and the
Effective Date, with the proceeds of such Additional
Consideration, but only to the extent the aggregate amount of
such Additional Consideration, together with any Additional
Consideration realized under clause (ii) above, is equal to or
less than the Maximum Additional Consideration Amount, and (iv)
the number of shares equal to the aggregate dividends, assumed to
be paid in the form of shares of CSW Common Stock based on the
closing price of such shares on the respective dividend payment
dates (the "Dividend Shares"), that would have been paid (X) on
shares of CSW Common Stock placed in such escrow fund pursuant to
clauses (i) and (ii) above as though such shares were placed in
such escrow fund on the Confirmation Date, (Y) on shares of CSW
Common Stock placed in such escrow fund pursuant to clause (iii)
above as though such shares were placed in such escrow fund on
the respective dates on which the Additional Consideration is
realized and (Z) on shares of CSW Common Stock in such escrow
fund pursuant to clause (iv) above as though such Dividend Shares
were placed in such escrow fund on the respective CSW Common
Stock dividend payment dates therefor. For purposes of clause
(iv) above, dividends shall be considered paid on shares of CSW
Common Stock which are placed in such escrow fund pursuant to
clause (i), (ii), (iii) or (iv) above prior to the ex-dividend
dates for the payment of such dividends. For purposes of this
definition, all closing prices for shares of CSW Common Stock
shall be as reported in the Wall Street Journal, NYSE Composite
Transactions.
"CSW Financial Statements" means the audited
consolidated financial statements and unaudited consolidated
interim financial statements of CSW included in the CSW SEC
Reports.
"CSW Material Adverse Effect" means a material adverse
effect on the business, operations, franchises, properties,
assets, condition (financial or other) or results of operations
of CSW and its Subsidiaries taken as a whole.
"CSW Required Statutory Approvals" means (i) any
required approvals under the Federal Power Act, (ii) (A) an order
by the PUCT to the effect that the transactions contemplated
under this Agreement are in the public interest and (B) the
approval, if required, of municipalities or other local
governmental bodies in the State of Texas, in the case of each of
(A) and (B), pursuant to the PURA, (iii) any required approvals
under the NMPUA, the rules and regulations of the NMPSC and any
other governmental bodies in the State of New Mexico, pursuant to
the applicable New Mexico statutes, (iv) any required approvals
<PAGE> 9
under the applicable laws of the State of Arizona, the rules and
regulations of the ACC and any other governmental bodies in the
State of Arizona, pursuant to applicable Arizona statutes, (v)
any required approvals of the SEC pursuant to the Holding Company
Act, including, without limitation, approval for CSW to organize
CSW Sub, Inc. and to cause CSW Sub, Inc. to execute this
Agreement, (vi) the filings by CSW and EPE and expiration or
termination of the waiting period required by Title II of the HSR
Act, (vii) the filing of articles of merger with the Secretary of
State of Texas in accordance with the TBCA in connection with the
Merger, (viii) the filing by or on behalf of CSW of a notice of
registration and a registration statement with the SEC under the
Holding Company Act, (ix) an order of the NMPSC approving or
waiving jurisdiction with respect to the issuance of securities
by CSW and granting any other necessary approvals with respect to
the transactions contemplated by this Agreement, (x) any required
approvals of the NRC pursuant to the Atomic Energy Act, (xi) the
filing with the SEC pursuant to the Holding Company Act and the
Securities Act (if required) and the declaration of the
effectiveness thereof by the SEC and filings with and any
required approvals of the various blue sky authorities pursuant
to applicable state securities laws and (xii) any required
approvals of any governmental bodies in each relevant
jurisdiction granting rate relief in an amount and upon the terms
and conditions as the rate relief embodied in the Plan.
"CSW SEC Reports" means, collectively, each report,
schedule, registration statement and definitive proxy statement
filed by CSW or any of its Subsidiaries with the SEC since
December 31, 1988 pursuant to the Securities Act or the Exchange
Act.
"CSW Sub, Inc. Common Stock" means the common stock of
CSW Sub, Inc., par value $.01 per share.
"Director Stock Plan" has the meaning ascribed to it in
Section 3.2(b).
"Disclosure Statement" means the written statement
relating to the Plan and the Merger, dated May 5, 1993, in the
form filed in the Bankruptcy Court, describing the Plan (and the
transactions and events contemplated thereby) prepared in
accordance with Section 1125 of the Bankruptcy Code, as amended,
as such statement may be amended, modified or supplemented from
time to time in accordance with Section 7.2 hereof.
"Effective Date" means the day on which the Effective
Time occurs.
"Effective Date of the Plan" shall have the meaning
given to the term "Effective Date" in the Plan.
"Effective Time" has the meaning ascribed to it in
Section 2.5 hereof.
<PAGE> 10
"Environmental Claim" means any and all administrative
or judicial actions, suits, demands, demand letters, directives,
claims, liens or notices of noncompliance or violation by any
person or entity alleging that potential liability to pay
removal, response, remediation or cleanup costs, damages or
penalties or to undertake compliance actions arises out of (a)
the presence or release into the environmental of any Hazardous
Materials or (b) circumstances forming the basis of an alleged
violation of any Environmental Law; or (c) any and all claims by
any third party seeking damages, contribution, indemnification,
cost recovery, compensation or injunctive relief arising out of
the presence or Release of any Hazardous Materials.
"Environmental Laws" means any and all applicable
international, foreign, United States Federal, state and local
statutes and regulations relating to chemical or chemical waste
management, pollution control, or investigation and cleanup of
Hazardous Materials in the environment.
"EPE" has the meaning ascribed to it in the preamble.
"EPE Acquisition Transaction" has the meaning ascribed
to it in Section 5.3.
"EPE Common Stock" has the meaning ascribed to it in
Section 3.2(a).
"EPE Employment Agreements" has the meaning ascribed to
it in Section 3.8(a).
"EPE Financial Statements" means the audited
consolidated financial statements and unaudited consolidated
interim financial statements of EPE included in the EPE SEC
Reports.
"EPE Material Adverse Effect" means a material adverse
effect on the business, operations, franchises, properties,
assets, condition (financial or other) or results of operations
of EPE and its Subsidiaries taken as a whole.
"EPE Plans" has the meaning ascribed to it in Section
3.8(a).
"EPE Preferred Stock" has the meaning ascribed to it in
Section 3.2(a).
"EPE Proposal" has the meaning ascribed to it in
Section 5.3.
"EPE Record Holders" means the holders of record on the
books of EPE's Common Stock transfer agent as of the Effective
Time.
"EPE Required Statutory Approvals" means (i) any
required approvals under the Federal Power Act, (ii) an order by
<PAGE> 11
the PUCT to the effect that the transactions contemplated under
this Agreement are in the public interest pursuant to the PURA,
(iii) any required approvals under the NMPUA, the rules and
regulations of the NMPSC and any other governmental bodies in the
State of New Mexico, pursuant to the applicable New Mexico
statutes, (iv) any required approvals under the applicable laws
of the State of Arizona, the rules and regulations of the ACC and
any other governmental bodies in the State of Arizona, pursuant
to applicable Arizona statutes, (v) the filings by CSW and EPE
and expiration or termination of the waiting period required by
Title II of the HSR Act, (vi) the filing of articles of merger
with the Secretary of State of Texas in accordance with the TBCA
in connection with the Merger, (vii) any required approvals of
the NRC pursuant to the Atomic Energy Act, and (viii) any
required approvals of any governmental bodies in each relevant
jurisdiction granting rate relief in an amount and upon the terms
and conditions as the rate relief embodied in the Plan.
"EPE Retirement Plan" has the meaning ascribed to it in
Section 6.6(h).
"EPE's 1992 10-K" means the Annual Report on Form 10-K
for the fiscal year ended December 31, 1992, filed by EPE with
the SEC.
"EPE SEC Reports" means, collectively each report,
schedule, registration statement and definitive proxy statement
filed by EPE or any of its Subsidiaries with the SEC since
December 31, 1988 pursuant to the Securities Act or the Exchange
Act.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
"ESOP" has the meaning ascribed to it in Section
3.2(b).
"Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Exchange Agent" means one or more persons designated
by CSW to act as exchange agent hereunder with the advice and
consent of EPE, which advice and consent shall not be
unreasonably withheld.
"Failure of Confirmation" has the meaning ascribed to
it in Section 2.8(e).
"Federal Power Act" means the Federal Power Act of
1935, as amended.
"FERC" means the Federal Energy Regulatory Commission.
"Final Order" means, as to any court, administrative
agency or other tribunal, an order or judgment of such tribunal
<PAGE> 12
which is subject to motion for rehearing, new trial or appeal and
as to which (a) if subject to a motion for rehearing or new
trial, (i) the time for such motion has expired and no such
motion has been filed or (ii) such motion has been filed, it has
been overruled and the time for appeal has expired (regardless of
whether an appeal has been filed) or (b) if subject to appeal,
the time for such appeal has expired (regardless of whether an
appeal has been filed) or (c) if a Bankruptcy Court order that is
subject to appeal, (i) any appeal that has been taken has been
finally determined or dismissed, or (ii) the time for filing a
notice of appeal or petition for certiorari has expired and no
notice of appeal or petition for certiorari has been timely
filed.
"First Service Collateral" means certain cash proceeds
and collateral granted to EPE to secure payments of certain
annuities of First Service Life Insurance Company in which EPE
asserts a perfected security interest and which is currently held
by the Receiver pending final resolution of the litigation
described under "Item 3. Legal Proceedings - First Service Life
Civil Litigation" in EPE's 1992 10-K. The "collateral" is cash
held in escrow and 100% of the outstanding common stock of
Triangle Electric Company.
"First Service Litigation Fees" means the legal fees
and administrative costs believed by EPE to be recoverable from
the State of Texas as a result of certain actions by the State of
Texas in the litigation described under "Item 3. Legal
Proceedings - First Service Life Civil Litigation" in EPE's 1992
10-K, and the filing by EPE of a claim for recovery of such fees.
"Form U-1" has the meaning ascribed to it in Section
3.11.
"GAAP" means generally accepted accounting principles,
consistently applied throughout the subject period and the
corresponding preceding period(s).
"Governmental Authority" means any court, tribunal,
arbitrator, authority, agency, commission, department, unit,
official or other instrumentality of the United States, any
foreign country or any domestic or foreign state, county, city or
other political subdivision.
"Hazardous Materials" means (a) any petroleum or
petroleum products, radioactive material, asbestos in any form
that is friable, urea formaldehyde foam insulation, and
transformers or other equipment that contains dielectric fluid
containing levels of polychlorinated biphenyls (PCBs) and (b) any
chemicals, materials or substances which are now defined as or
included in the definition of "hazardous substances," "hazardous
wastes," "hazardous materials," "extremely hazardous wastes,"
"restricted hazardous wastes," "toxic substances," "toxic
pollutants," or words of similar import, under any Environmental
Law; and (c) any other chemical, material, substance or waste,
<PAGE> 13
discharge of which or exposure to which is prohibited, limited or
regulated by any Governmental Authority in a jurisdiction in
which EPE or its subsidiaries operate.
"Holding Company Act" means the Public Utility Holding
Company Act of 1935, as amended.
"HSR Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and rules and regulations
of the Federal Trade Commission promulgated thereunder.
"Information" has the meaning ascribed to it in the
Confidentiality Agreements.
"Indemnified Party" has the meaning ascribed to it in
Section 6.7(c).
"Intangible Assets" means the aggregate of: (i) all
amounts recovered from the First Service Collateral; (ii) all
recovered First Service Litigation Fees; (iii) the first Ten
Million Dollars ($10,000,000) of any amounts realized as the
result of the settlement or other resolution of the APS Claims;
and (iv) any amounts realized as the result of the Owner
Participant Claims.
"Interim Approval Order" has the meaning ascribed to it
in Section 8.1.
"LESOP" has the meaning ascribed to it in Section
3.2(b).
"Liability" means any costs or expenses (including
reasonable attorneys' fees), judgments, fines, levies, claims,
damages, liabilities or amounts paid in settlement of any claim,
action, suit, proceeding or investigation.
"Liquidation Trust" shall have the meaning given to
such term in the Plan.
"Liquidation Trustee" shall have the meaning given to
such term in the Plan.
"Lock-Up Period" has the meaning ascribed to it in
Section 2.9(a).
"Maximum Additional Consideration Amount" has the
meaning ascribed to it in the definition of CSW Common Stock
Acquisition Fund.
"Merger" shall mean the merger of Buyer with and into
EPE pursuant to this Agreement.
"NMPSC" means the New Mexico Public Service Commission.
<PAGE> 14
"NMPUA" means the New Mexico Public Utility Act, as
amended.
"NRC" means the Nuclear Regulatory Commission.
"NYSE" means The New York Stock Exchange, Inc.
"Owner Participant Claims" means one or more potential
causes of action against the "Owner Participants" of the "Palo
Verde Leases" arising out of the Owner Participants' alleged
wrongful conduct relating to the "Palo Verde Letters of Credit."
The foregoing quoted terms have the meaning ascribed to them in
the Plan. The factual background of the alleged wrongful acts is
described in the Disclosure Statement.
"Per Share CSW Stock Acquisition Fund" means the number
of shares in the CSW Common Stock Acquisition Fund at the
Effective Time divided by the number of outstanding shares of EPE
Common Stock at the Effective Time.
"Permits" means all permits, licenses, certificates,
franchises and other authorizations, consents and approvals of
any Governmental Authority necessary for any Person to conduct
its business as presently conducted.
"Person" shall mean and include an individual, a
partnership, a joint venture, a corporation, a trust, an estate,
an unincorporated organization and any Governmental Authority.
"Phantom Stock Plan" has the meaning ascribed to it in
Section 3.2(b).
"Plan" means the Third Amended Plan of Reorganization
for EPE, dated May 5, 1993, in the form attached to the
Disclosure Statement, as the Plan may be amended from time to
time in accordance with Section 7.2 hereof and confirmed by the
Bankruptcy Court pursuant to the Confirmation Order.
"Plan Amount" has the meaning ascribed to it in Section
2.8(e).
"Preferred Stock Exchange Ratio" means the fraction
determined by dividing (a) the sum of (i) Sixty-Million Dollars
($60,000,000) plus (ii) the aggregate dollar amount of dividends
(including dividends on dividends), at an annual rate of 7.875%,
that would have accrued between the Confirmation Date and the
Effective Date with respect to that number of shares of Surviving
Corporation Preferred Stock having an aggregate stated value of
Sixty Million Dollars ($60,000,000), calculated as if such
Surviving Corporation Preferred Stock had been issued on the
Confirmation Date and such dividends had been paid quarterly
commencing on the 90th day after the Confirmation Date, by
(b) Seventy-Eight Million Two Hundred Five Thousand Dollars
($78,205,000).
<PAGE> 15
"PUCT" means the Public Utility Commission of Texas.
"PURA" means the Public Utility Regulatory Act, Texas
Rev. Civ. Stat. Annot. art. 1446c, as amended.
"Reduction in Claims" means an amount equal to (i)
Thirty-Four Million Dollars ($34,000,000) less the amount paid to
settle or satisfy the claims filed in the Bankruptcy Case by the
Internal Revenue Service for the years 1983 through 1989; and
(ii) Nine Million Dollars ($9,000,000) less the portion of the
amount finally paid to the Palo Verde Participants (as such term
is defined in the Disclosure Statement) for all claims (exclusive
of interest and attorneys' fees and expenses) filed by the Palo
Verde Participants, which claims are governed by the terms of
that certain stipulation approved by the Bankruptcy Court on
February 13, 1992 (the "PV Claims").
"Registration Statement" means the Registration
Statement on Form S-4 which may be filed under the Securities Act
with the SEC by CSW in connection with the transactions
contemplated hereby for the purposes of registering the shares of
CSW Common Stock to be issued to the holders of EPE Common Stock
in the Merger.
"Regulatory Material Adverse Effect" has the meaning
ascribed to it in Section 8.3(g).
"Related Person" has the meaning ascribed to it in
Section 3.8(a).
"Release" means any release, spill, emission, leaking,
injection, deposit, disposal, discharge, dispersal, leaching or
migration into the atmosphere, soil, surface water, ground water
or property.
"Representatives" means, with respect to any company,
the directors, officers and employees of such company or its
Subsidiaries and its accountants, counsel, financial advisors and
other such representatives.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as
amended.
"Stock Compensation Plan" has the meaning ascribed to
it in Section 3.2(b).
"Stock Option Plan" has the meaning ascribed to it in
Section 3.2(b).
"Stock Purchase Plan" has the meaning ascribed to it in
Section 3.2(b).
<PAGE> 16
"Subject Shares" has the meaning ascribed to it in
Section 2.9(a).
"Subsidiary" means, with respect to any Person, any
corporation or other organization, whether incorporated or
unincorporated, of which more than fifty percent (50%) of either
the equity interests in, or the voting control of, such
corporation or other organization is, directly or indirectly,
through Subsidiaries or otherwise, beneficially owned by such
Person.
"Supplemental Retirement Plan" has the meaning ascribed
to it in Section 6.6(f).
"Surviving Corporation" has the meaning ascribed to it
in Section 2.1.
"Surviving Corporation Common Stock" means the common
stock of the Surviving Corporation, par value $.01 per share.
"Surviving Corporation Preferred Stock" means the
preferred stock having the terms set forth in the Surviving
Corporation's Amended and Restated Articles of Incorporation, the
form of which is attached hereto as Exhibit B, to be issued to
the holders of each class or series of the EPE Preferred Stock
upon consummation of the Merger.
"Tangible Assets" means CAI.
"Taxes" means any federal, state, county, local or
foreign taxes, charges, fees, levies, other assessments, or
withholding taxes or charges imposed by any Governmental
Authority, and includes any interest and penalties (civil or
criminal) on or additions to any such taxes and any expenses
incurred in connection with the determination, settlement or
litigation of any Tax liability.
"Tax Return" means a report, return or other
information (including any amendments) required to be supplied to
a Governmental Authority with respect to Taxes including, where
permitted or required, combined or consolidated returns for any
group of entities that includes EPE or any Subsidiary of EPE or
of any Person.
"TBCA" means The Texas Business Corporation Act, as
amended.
"Termination Date" means 18 months after the
Confirmation Date.
"Transfer" has the meaning ascribed to it in Section
2.9(a).
"Unauthorized Transfer" has the meaning ascribed to it
in Section 2.9(a).
<PAGE> 17
(b) Unless the context of this Agreement otherwise
requires, (i) words of any gender include each other gender; (ii)
words using the singular or plural number also include the plural
or singular number, respectively; (iii) the terms "hereof,"
"herein," "hereby" and derivative or similar words refer to this
entire Agreement; and (iv) the term "including" means "including,
but not limited to." Whenever this Agreement refers to a number
of days, such number shall refer to calendar days unless Business
Days are specified. All accounting terms used herein and not
expressly defined herein shall have the meanings given to them
under GAAP.
ARTICLE II
MERGER AND CONVERSION OF SHARES
Section 2.1 The Merger. Subject to the terms and
conditions of this Agreement and the Articles of Merger, and in
accordance with the provisions of the TBCA, at the Effective
Time, Buyer shall be merged with and into EPE and the separate
corporate existence of Buyer shall cease. EPE shall be the
surviving corporation in the Merger (hereinafter sometimes
referred to as the "Surviving Corporation") and shall continue
its corporate existence under the laws of the State of Texas. The
name of the Surviving Corporation shall continue to be "El Paso
Electric Company" or such other name as CSW in consultation with
EPE shall designate prior to the Effective Time, and the
Surviving Corporation shall continue to be headquartered in El
Paso, Texas. The Merger shall have the effects set forth in the
TBCA, with all properties, liabilities and obligations of EPE
remaining with EPE as the Surviving Corporation and all
properties, liabilities and obligations of Buyer being allocated
to and vested in EPE as the Surviving Corporation.
Section 2.2 Articles of Incorporation and By-Laws.
(a) The Amended and Restated Articles of Incorporation
substantially in the form attached hereto as Exhibit B shall be
the Amended and Restated Articles of Incorporation of the
Surviving Corporation immediately after the Effective Time and
are incorporated herein by reference.
(b) The By-Laws substantially in the form attached
hereto as Exhibit C shall be the By-Laws of the Surviving
Corporation immediately after the Effective Time and are
incorporated herein by reference.
Section 2.3 Directors and Officers.
(a) Immediately after the Effective Time, the Board of
Directors of the Surviving Corporation shall be comprised of
CSW's Chief Executive Officer, the Chief Executive Officer and
five (5) other officers of the Surviving Corporation and six (6)
outside directors who are residents of the Surviving
<PAGE> 18
Corporation's service area or such other persons as shall be
designated by CSW prior to the Effective Time. For a period of
three (3) years after the Effective Time, one member of the
Surviving Corporation's Board of Directors or one person who is a
resident of the Surviving Corporation's service area shall serve
on CSW's Board of Directors.
(b) The officers of the Surviving Corporation
immediately after the Effective Time shall be such persons as
shall be designated by CSW in consultation with EPE prior to the
Effective Time, who shall continue as officers of the Surviving
Corporation until their successors have been duly elected or
appointed and qualified or until their earlier death, resignation
or removal in accordance with the Surviving Corporation's
Articles of Incorporation and By-Laws.
Section 2.4 Closing. The closing of the transactions
contemplated by this Agreement shall take place at the offices of
Milbank, Tweed, Hadley & McCloy, 1 Chase Manhattan Plaza, New
York, New York, at 10:00 a.m., local time, on the third Business
Day immediately following the date on which the last of the
conditions set forth in Article VIII hereof is satisfied or
waived, or at such other place, time or date as EPE and CSW shall
agree.
Section 2.5 Effective Time; Conditions. If the
conditions precedent set forth in Article VIII of this Agreement
are satisfied or (where permissible) waived, Articles of Merger
substantially in the form of Exhibit A hereto shall be filed with
the Secretary of State of the State of Texas in accordance with
Articles 5.04 and 10.01 of the TBCA. The Merger shall become
effective upon the issuance of a certificate of merger by the
Secretary of State of the State of Texas or at such later time as
provided for in the Articles of Merger as may be permitted by
Article 5.05 of the TBCA (such time and date is herein referred
to as the "Effective Time"). Buyer shall pay the filing fees in
connection with the filing of the Articles of Merger with the
Secretary of State of the State of Texas required pursuant to
Article 10.01.A(3) of the TBCA.
Section 2.6 Closing of Transfer Books. From and after
the Effective Time, the stock transfer books of EPE shall be
closed and no transfer of shares of EPE Common Stock or EPE
Preferred Stock shall thereafter be made. If after the Effective
Time certificates formerly representing shares of EPE Common
Stock or EPE Preferred Stock are presented to the Surviving
Corporation, they shall be cancelled and exchanged for
certificates representing CSW Common Stock or Surviving
Corporation Preferred Stock, as the case may be, in accordance
with Section 2.10 hereof.
Section 2.7 No Dissenting Shares. Pursuant to Article
5.11 of the TBCA, holders of shares of capital stock of EPE do
not have the right to dissent from this Agreement. Under the
Confirmation Order, holders of EPE Common Stock and EPE
<PAGE> 19
Preferred Stock will have been deemed to have voted in favor of
the Merger and will have no right or authority to cause EPE not
to consummate the Merger.
Section 2.8 Conversion of Securities.
(a) Each share of CSW Sub, Inc. Common Stock
outstanding immediately prior to the Effective Time shall at the
Effective Time, by virtue of the Merger and without any action by
the holder thereof, be converted into and become one (1) share of
Surviving Corporation Common Stock. Each certificate which
immediately prior to the Effective Time represented outstanding
shares of CSW Sub, Inc. Common Stock shall, on and after the
Effective Time, represent an equal number of shares of Surviving
Corporation Common Stock.
(b) Each share of EPE Common Stock or EPE Preferred
Stock which is held in the treasury of EPE immediately prior to
the Effective Time, and each share of EPE Common Stock or EPE
Preferred Stock owned by CSW or CSW Sub, Inc. immediately prior
to the Effective Time, shall, at the Effective Time, be cancelled
and shall cease to exist.
(c)(i) Each share of EPE Common Stock outstanding
immediately prior to the Effective Time shall at the Effective
Time, by virtue of the Merger and without any further action by
the holder thereof, be converted into the right to receive a
number of shares of CSW Common Stock equal to the Per Share CSW
Stock Acquisition Fund. EPE Record Holders shall also be entitled
to receive distributions from the Liquidation Trust, subject to
and pursuant to Section 2.8(c)(ii) of this Agreement.
(ii) Each certificate which immediately prior to the
Effective Time represented outstanding shares of EPE Common Stock
shall, on and after the Effective Time, be deemed for all
purposes to represent the right to receive the number of shares
of CSW Common Stock into which the shares of EPE Common Stock
represented by such certificate shall have been converted
pursuant to Section 2.8(c)(i). All such shares of CSW Common
Stock shall be distributed to the EPE Record Holders as soon as
practicable following the Effective Time.
(iii) At the Effective Date, if the Maximum Additional
Consideration Amount has not theretofore been realized, the
Surviving Corporation shall establish the Liquidation Trust and
shall assign thereto all of its rights to and interests in the
Tangible Assets and the Intangible Assets to the extent not
theretofore liquidated and shall deposit in the Liquidation Trust
amounts of cash sufficient, in the opinion of the Liquidation
Trustee, to fund the Liquidation Trustee's expenses in pursuit of
liquidation of such Tangible Assets and Intangible Assets;
provided, however, that EPE shall not be required to deposit an
amount which is greater than One Million Dollars ($1,000,000) for
such purpose; and, provided, further, that the Liquidation
Trustee's fees and expenses shall thereafter be funded by the
<PAGE> 20
cash realized from the liquidation of such assets. If and to the
extent realized following the Effective Time and prior to the
termination of the Liquidation Trust, CSW shall, or shall cause
the Surviving Corporation to, deposit into the Liquidation Trust
an amount of cash which is equal to the Reduced Claim Amount
minus any portion thereof which was realized prior to the
Effective Date.
(iv) The Liquidation Trustee shall, from time to time,
distribute cash from the Liquidation Trust pursuant to the terms
thereof. Distributions from the Liquidation Trust shall be made
to the EPE Record Holders, on a pro rata basis, up to an amount
equal to the difference between the Maximum Additional
Consideration Amount and the amount of Additional Consideration
realized prior to the Effective Time. The Liquidation Trust shall
be terminated upon the issuance of an order by the Bankruptcy
Court approving a request by the Liquidation Trustee for such
termination or as otherwise provided in Section 5.2(E) (ii) of
the Plan.
(v) Upon any termination of the Liquidation Trust any
remaining assets in the Liquidation Trust shall be distributed to
the Surviving Corporation.
(d) Each share of EPE Preferred Stock issued and
outstanding immediately prior to the Effective Time shall at the
Effective Time, by virtue of the Merger and without any further
action by the holder thereof, be converted into the right to
receive such number of shares and/or, subject to Section 2.10(b)
of this Agreement, fraction of one share of Surviving Corporation
Preferred Stock as equals the Preferred Stock Exchange Ratio.
Each certificate which immediately prior to the Effective Time
represented outstanding shares of EPE Preferred Stock shall, on
and after the Effective Time, be deemed for all purposes to
represent the right to receive the number of shares of Surviving
Corporation Preferred Stock into which the shares of EPE
Preferred Stock shall have been converted pursuant to this
Section 2.8(d).
(e) In consideration of EPE's agreement to file the
Plan, CSW agrees that, from and after the initial filing of the
Plan, CSW will provide to holders of EPE Common Stock an amount
equal to the aggregate consideration set forth in this Section
2.8 applicable to such EPE Common Stock holders (the "Plan
Amount") in any transaction or plan pursuant to which CSW
acquires EPE (and CSW will not participate in any acquisition of
EPE under any other plan unless such plan provides the holders of
EPE Common Stock with such consideration), even if CSW exercises
its rights to terminate this Agreement as permitted herein and
even if the Interim Approval Order referenced in Section 8.1 is
not entered; provided, however, that this Section 2.8(e) shall be
inapplicable if a Failure of Confirmation occurs. As used herein,
"Failure of Confirmation" shall mean either (i) that subsequent
to balloting on the Plan and a hearing on confirmation if
promptly sought by EPE, it becomes apparent under all
<PAGE> 21
circumstances that the Plan cannot be confirmed; or (ii) refuses
to enter the Confirmation Order; or (iii) the withdrawal by EPE
of the Plan, as it may be amended from time to time; or (iv) the
filing by EPE of a stand-alone plan of reorganization
inconsistent with the terms of this Agreement; or (v) this
Agreement is terminated by CSW pursuant to Section 9.1(b)(ii).
Damages for breach of this Section 2.8(e) shall be governed by
Section 9.3 hereof.
Section 2.9 Restrictions on Transfer.
(a) Except for Permitted Transfers, no Person receiving
shares of CSW Common Stock pursuant to Section 2.8 hereof (all
such shares received by any Person hereinafter referred to as the
"Subject Shares"), may, at any time prior to the date which is
eight (8) months following the Effective Date (the "Lock-Up
Period") sell, transfer, pledge, or otherwise dispose of
("Transfer") any Subject Shares or any interest therein to any
other person. Any purported transfer of any subject shares or
interest therein in violation of this Section 2.9(a) (an
"Unauthorized Transfer") will be null and void. CSW will not be
required to register, recognize, or give effect to any
Unauthorized Transfer and the purported transferees of any
Subject Shares or any interest therein pursuant to an
Unauthorized Transfer will not acquire any right in such shares.
(b) Notwithstanding the provisions of Section 2.9(a),
none of the restrictions on Transfer set forth therein shall
apply to any Person who together with any affiliates of such
Person, receives no more than 5,000 shares of CSW Common Stock
pursuant to Section 2.8 hereof or otherwise pursuant to the Plan.
(c) All certificates representing Subject Shares will
conspicuously bear a legend substantially in the form of the
following:
"The shares evidenced by this certificate are
subject to restrictions prohibiting the public
sale, transfer, pledge, or other public
disposition ("Transfer") of such shares to any
individual, partnership, firm, corporation, or
other entity, except in accordance with the terms
and subject to the conditions set forth in such
restrictions. CSW will not be required to
register, recognize, or give effect to any
unauthorized Transfer of such shares, and any
purported transferee thereof pursuant to an
unauthorized transaction will not acquire any
right therein. CSW will furnish a copy of such
restrictions to the holder of record of this
certificate without charge upon written request
to CSW at its principal place of business."
<PAGE> 22
(d)(i) Upon any Transfer of Subject Shares by any
holder in accordance with subparagraph (f) of this Section, CSW
will, upon surrender of the certificate or certificates
evidencing such Subject Shares to the transfer agent and the
presentation of documentation in form and substance satisfactory
to CSW evidencing compliance with the applicable provisions of
subparagraph (f) of this Section, in accordance with the written
instructions of such holder (or, in the case of a Transfer of
Subject Shares in accordance with clause (i) or (ii) of
subparagraph (f) of this Section, the written instructions of the
holder's administrator, estate, or legal representative or heirs,
successors, or assigns or spouse or former spouse, as the case
may be), in each case, insofar as such instructions do not
conflict with any provision of this Section, (i) cause to be
delivered for the account of such holder one or more certificates
evidencing the number of Subject Shares to be so Transferred in
accordance with Section 2.9 (which certificates will bear the
legend provided for in Section 2.9(c)) and (ii) cause to be
delivered to such holder one or more new certificates, bearing
the legend provided for in Section 2.9(c), evidencing its
remaining Subject Shares, if any, evidenced by the certificate or
certificates so surrendered.
(e) No service charge will be made for any transfer or
exchange of certificates evidencing Subject Shares provided for
in this Section 2.9, but CSW may require payment of a sum
sufficient to cover any tax or other governmental charge that may
be imposed in connection with the issuance of any such
certificate in the name of any Person other than the Person in
whose name the certificate of certificates presented for transfer
or exchange were issued or that otherwise may be imposed by
applicable law.
(f) Notwithstanding the provisions of Section 2.9,
Subject Shares may be Transferred to (any such Transfer, a
"Permitted Transfer"):
(i) any holder's administrator, estate, or legal
representative as a consequence of the holder's
death or incapacity or to the holder's heirs,
successors, or assigns pursuant to the laws of
descent, distribution, or inheritance;
(ii) any holder's spouse or former spouse pursuant to
a property settlement agreement, order of
dissolution of marriage, or other similar
proceeding relating to the separation or divorce
of the holder and his or her spouse; or
(iii) to any Person pursuant to a privately negotiated
transaction, including, without limitation, a
pledge or similar grant of a security interest,
in which the Person acquiring the Subject Shares
<PAGE> 23
or a security interest therein agrees in a written
instrument, in form and substance reasonably
satisfactory to CSW, to be bound by the terms of
this Section 2.9 such that the Subject Shares to
be acquired by such Person, including, without
limitation, pursuant to foreclosure or the
exercise of any other available remedy, will
remain subject to this Section 2.9.
Notwithstanding anything to the contrary herein
contained, Subject Shares transferred pursuant to any of clauses
(i), (ii), and (iii) of subparagraph (f) of this Section will
continue to be Subject Shares following such Transfer and the
transfers thereof will be deemed to be bound by such restrictions
upon receipt thereof.
(g) The restrictions on the Transfer of Subject Shares
provided for in this Section 2.9 are independent of any
restrictions thereon that may be imposed under applicable law.
Accordingly, nothing contained in this Section 2.9 should be
construed as constituting an expression of any view as to whether
or not any particular Transfer of any securities by CSW or any
particular holder requires registration, qualification, or other
action under the Securities Act or the "blue sky" or securities
laws of any jurisdiction or any other applicable law. Each holder
will be required to determine for itself whether or not such
action is required in connection with any such Transfer by such
holder, and none of the parties hereto, or any director, officer,
or other representative of any of the foregoing, will have any
liability by reason of any such determination.
Section 2.10 CSW To Make Cash and Certificates
Available.
(a) CSW shall make available to the Exchange Agent
promptly after the Effective Time an amount in cash sufficient to
make any cash payments required in lieu of fractional shares
pursuant to Section 2.10(b) and sufficient shares of CSW Common
Stock to permit the Exchange Agent to make the distributions of
cash and CSW Common Stock provided for hereunder. The Surviving
Corporation shall make available to the Exchange Agent promptly
after the Effective Time an amount of cash sufficient to make any
cash payments required in lieu of fractional shares pursuant to
Section 2.10(b) and sufficient shares of Surviving Corporation
Preferred Stock to permit the Exchange Agent to make the
distributions of Surviving Corporation Preferred Stock provided
for hereunder. The Exchange Agent shall not be entitled to vote
or exercise any rights of ownership with respect to such shares
held by it from time to time hereunder, except that it shall
receive and hold all dividends or other distributions paid or
distributed with respect to such shares for the account of the
persons entitled thereto.
(b) As promptly as practicable after the Effective Time
occurs, the Exchange Agent shall cause to be mailed to each
<PAGE> 24
record holder of certificates formerly representing shares of EPE
Common Stock and/or shares of EPE Preferred Stock, as of the
close of business on the day on which the Effective Time occurs,
a form letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss of certificates or other
documents shall pass, only upon proper delivery of certificates
or other documents to the Exchange Agent) and instructions for
use in effecting the surrender of certificates for conversion and
exchange thereof. Each holder of shares of (i) EPE Common Stock
converted into the right to receive shares of CSW Common Stock
pursuant to Section 2.8(c) or (ii) EPE Preferred Stock converted
into the right to receive shares of Surviving Corporation
Preferred Stock pursuant to Section 2.8(d), shall, upon surrender
to the Exchange Agent for cancellation in accordance with the
terms and conditions of the letter of transmittal of one or more
certificates formerly representing such shares, be entitled to
receive certificates representing the number of whole shares of
CSW Common Stock or Surviving Corporation Preferred Stock to be
issued in respect of the aggregate number of such shares of EPE
Common Stock or EPE Preferred Stock previously represented by the
stock certificates surrendered in accordance with Sections 2.8(c)
and (d). No holder of a certificate formerly representing shares
of EPE Common Stock or EPE Preferred Stock may receive any
certificates representing shares of CSW Common Stock or Surviving
Corporation Preferred Stock, or cash in lieu of any fractional
shares thereof, until surrender of such holder's certificates
representing such shares. Notwithstanding any other provision of
this Agreement, (i) no certificates or scrip for fractional
shares of CSW Common Stock or Surviving Corporation Preferred
Stock shall be issued; (ii) no dividend, stock split or interest
shall relate to any such fractional shares; and (iii) such
fractional interests shall not entitle the owner thereof to vote
or to any other rights of a shareholder. In lieu of any such
fractional shares, each holder of a certificate formerly
representing shares of EPE Common Stock or EPE Preferred Stock
who would otherwise have been entitled to a fraction of a share
of CSW Common Stock or Surviving Corporation Preferred Stock upon
surrender of such certificates for exchange pursuant to Article
II shall be entitled to receive from the Exchange Agent a cash
payment in lieu of such fractional share equal to (i) in the case
of a fractional share of CSW Common Stock, such fraction
multiplied by the closing sales price of a share of CSW Common
Stock on the Effective Date, as reported in The Wall Street
Journal, NYSE Composite Transactions or (ii) in the case of a
fractional share of Surviving Corporation Preferred Stock, such
fraction multiplied by the stated value per share for one (1)
share of Surviving Corporation Preferred Stock. No interest shall
be paid to any such holder on the cash payable with respect to
fractional shares of CSW Common Stock or Surviving Corporation
Preferred Stock.
(c) The cash paid and shares of CSW Common Stock or
Surviving Corporation Preferred Stock issued upon the surrender
of certificates in accordance with the terms hereof shall be
deemed to have been paid and properly issued in full satisfaction
<PAGE> 25
of all rights pertaining to such shares of EPE Common Stock or
EPE Preferred Stock, as the case may be.
(d) Any cash held by the Exchange Agent that remains
unclaimed twelve (12) months after the Effective Time shall be
returned to CSW, and any holder of a certificate formerly
representing shares of EPE Common Stock or EPE Preferred Stock
who has not presented his certificates as contemplated by this
Section 2.10 shall thereafter look only to CSW or the Surviving
Corporation for exchange and payment. Any cash that remains
unclaimed twenty-four (24) months after the Effective Time shall
become the property of CSW or the Surviving Corporation, as the
case may be. Notwithstanding any other provision of this Section
2.10 to the contrary, neither the Exchange Agent nor any party
hereto shall be liable to a holder of shares of EPE Common Stock
or EPE Preferred Stock for any shares of CSW Common Stock or
Surviving Corporation Preferred Stock or dividends or
distributions thereon delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF EPE
EPE represents and warrants to CSW as follows:
Section 3.1 Organization and Qualification. (a) EPE is
a corporation duly organized, validly existing and in good
standing under the laws of the State of Texas and has the
requisite power and authority to own, lease and operate its
assets and properties and to carry on its business as it is now
being conducted. EPE is qualified or licensed to do business and
is in good standing in each jurisdiction in which the properties
owned, leased or operated by it or the nature of the businesses
conducted by it makes such qualification or licensing necessary,
except where the failure to be so qualified and in good standing
will not, when taken together with all other such failures, have
an EPE Material Adverse Effect.
(b) True, accurate and complete copies of EPE's
Articles of Incorporation and By-laws, as in effect on the date
hereof, have heretofore been delivered to CSW.
Section 3.2 Capitalization. (a) The authorized capital
stock of EPE consists of 100,000,000 shares of Common Stock, no
par value, and 2,000,000 shares of Preferred Stock, cumulative,
no par value. As of December 31, 1992, 35,534,963 shares of EPE
Common Stock (the "EPE Common Stock"), and 52,000 shares of
Series 10.75% Preferred Stock, 97,600 shares of Series 8.44%
Preferred Stock, 90,000 shares of Series 8.95% Preferred Stock,
100,000 shares of Series 10.125% Preferred Stock, 300,000 shares
of Series 11.375% Preferred Stock, 15,000 shares of Series 4.5%
Preferred Stock, 15,000 shares of Series 4.12% Preferred Stock,
20,000 shares of Series 4.72% Preferred Stock, 40,000
<PAGE> 26
shares of Series 4.56% Preferred Stock, and 52,450 shares of
Series 8.24% Preferred Stock (collectively, the "EPE Preferred
Stock") were issued and outstanding. All of the issued and
outstanding shares of EPE Common Stock and EPE Preferred Stock
are validly issued, fully paid, nonassessable and free of
preemptive rights.
(b) As of the date hereof, there are no outstanding
subscriptions, options, calls, contracts, commitments,
understandings, restrictions, arrangements, rights or warrants,
including any right of conversion or exchange under any
outstanding security, instrument or other agreement obligating
EPE or any Subsidiary of EPE to issue, deliver or sell, or cause
to be issued, delivered or sold, additional shares of the capital
stock of EPE or obligating EPE or any Subsidiary of EPE to grant,
extend or enter into any such agreement or commitment, except for
and pursuant to the EPE Employee Stock Purchase Plan (the "Stock
Purchase Plan"), the EPE Employee Stock Compensation Plan (the
"Stock Compensation Plan"), the EPE Leveraged Employee Stock
Ownership Plan and Trust (the "LESOP"), the EPE Tax Credit
Employee Stock Ownership Plan (the "ESOP"), the EPE Employee
Stock Option Plan (the "Stock Option Plan") and the EPE Phantom
Stock Deferred Compensation Plan (the "Phantom Stock Plan").
Except as set forth on Schedule 3.2 hereto, there are no voting
trusts, proxies or other agreements or understandings to which
EPE or any Subsidiary of EPE is a party or is bound with respect
to the voting of any shares of capital stock of EPE.
Section 3.3 No Subsidiaries. As of the date hereof, EPE
has no direct or indirect Subsidiary.
Section 3.4 Authority; Non-Contravention; Approvals.
(a) Subject to the Confirmation Order, EPE has full corporate
power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation by EPE of the
transactions contemplated hereby have been duly authorized by
EPE's Board of Directors and no other corporate proceedings on
the part of EPE are necessary to authorize the execution and
delivery of this Agreement and the consummation by EPE of the
transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by EPE and, subject to receipt
of the Confirmation Order, this Agreement constitutes a valid and
binding agreement of EPE enforceable against EPE in accordance
with its terms, except that such enforceability may be limited by
bankruptcy, insolvency, moratorium or other similar laws
affecting or relating to enforcement of creditors' rights
generally and is subject to general principles of equity.
(b) Subject to receipt of the Confirmation Order and
except as set forth on Schedule 3.4(b) hereto, the execution and
delivery of this Agreement by EPE does not and the consummation
by EPE of the transactions contemplated hereby will not violate,
conflict with or result in a breach of any provision of, or
constitute a default (or any event which, with notice or lapse of
<PAGE> 27
time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or
result in a right of termination or acceleration under, or result
in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of EPE under any
of the terms, conditions or provisions of (i) its articles of
incorporation or by-laws, (ii) subject to obtaining EPE Required
Statutory Approvals, any statute, law, ordinance, rule,
regulation, judgment, decree, order, injunction, writ, franchise,
permit or license of any Governmental Authority applicable to EPE
or any of its properties or assets, or (iii) any note, bond,
mortgage, indenture, deed of trust, license, franchise, permit,
concession, contract, lease or other instrument, obligation or
agreement of any kind to which EPE is now a party or by which EPE
or any of its properties or assets may be bound or affected,
excluding from the foregoing clauses (ii) and (iii) such
violations, conflicts, breaches, defaults, terminations,
accelerations or creations of liens, security interests, charges
or encumbrances that would not, in the aggregate, have an EPE
Material Adverse Effect or materially adversely affect the
ability of EPE to consummate the transactions contemplated
hereby.
(c) Except for the Plan, the Confirmation Order and the
EPE Required Statutory Approvals, no declaration, filing or
registration with, or notice to, or authorization, consent or
approval of any Governmental Authority is necessary for the
consummation by EPE of the transactions contemplated hereby,
other than such filings, registrations, authorizations, consents
or approvals which, if not obtained or made, will not, in the
aggregate, have an EPE Material Adverse Effect or materially
adversely affect the ability of EPE to consummate the
transactions contemplated hereby.
Section 3.5 Reports and Financial Statements. Since
December 31, 1988, EPE has filed all material forms, statements,
reports and documents (including all exhibits, amendments and
supplements thereto) required to be filed by it under each of the
Securities Act, the Exchange Act, PURA, NMPUA, any applicable
laws, rules or regulations of the State of Arizona, the Atomic
Energy Act and the Federal Power Act and the respective rules and
regulations thereunder, all of which complied in all material
respects with all applicable requirements of the appropriate act
and the rules and regulations thereunder in effect on the date
such report was filed. EPE has previously delivered to CSW copies
of each of the EPE SEC Reports. As of their respective dates, the
EPE SEC Reports did not contain any untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading. The EPE Financial Statements have been prepared in
accordance with GAAP (except as may be indicated therein or in
the notes thereto) and fairly present the financial position of
EPE as of the dates thereof and the results of their operations
and changes in financial position for the periods then ended,
<PAGE> 28
subject, in the case of the unaudited interim financial
statements, to normal year-end and audit adjustments and any
other adjustments described therein.
Section 3.6 Absence of Certain Changes or Events.
Except as set forth on Schedule 3.6 hereto or as set forth in the
EPE SEC Reports, since December 31, 1992, EPE has operated its
business in the ordinary course and there has not been any EPE
Material Adverse Effect.
Section 3.7 Permits; No Violation of Law. EPE has all
Permits necessary to conduct its businesses as presently
conducted. Except as set forth on Schedule 3.7 hereto, EPE is not
in violation of any Permit, franchise, law, statute, order, rule,
regulation, ordinance, or judgment of any Governmental Authority,
except for violations which, in the aggregate, do not have an EPE
Material Adverse Effect.
Section 3.8 Employee Benefit Plans; ERISA. (a) Each
"employee benefit plan," as defined in Section 3(3) of ERISA, and
each other benefit or compensation plan, program or arrangement
maintained by EPE or any entity under common control with EPE
within the meaning of Section 414(b) or (c) of the Code (a
"Related Person") for, or in respect of, one or more employees,
former employees, directors or former directors (the "EPE Plans")
complies in all material respects with all applicable
requirements of law, and no "reportable event" or "prohibited
transaction" (as such terms are defined in ERISA) or termination
has occurred with respect to any EPE Plan under circumstances
which present a risk of material liability of EPE to any
governmental entity or other person. The EPE Plans are listed on
Schedule 3.8(a) and the most current and accurate copies and
descriptions, as applicable and to the extent available, of all
of the EPE Plans previously have been provided upon request, or
made available, to CSW. Except as set forth on Schedule 3.8(a),
EPE is not a party to, and none of its employees is covered by,
any agreements relating to employment or termination of
employment. Current and accurate copies of all such agreements to
which EPE is a party or which cover any of its employees (the
"EPE Employment Agreements") previously have been provided upon
request, or made available, to CSW. EPE has previously provided
CSW with the amounts that EPE has agreed or committed to pay, as
of April 30, 1993 (without giving effect to any restrictions
imposed on an interim basis by the Bankruptcy Court), to former
employees or surviving spouses of retirees other than amounts
pursuant to, or from, the EPE Retirement Plan and the
Supplemental Retirement Plan.
(b) Each EPE Plan intended to qualify under Section
401(a) of the Code is so qualified and, except as disclosed on
Schedule 3.8(b), a determination letter has been issued by the
Internal Revenue Service with respect to the qualification of
each EPE Plan and any related trust, and no circumstances exist
which would adversely affect such qualification. Except as
disclosed on Schedule 3.8(b), each EPE Plan which is subject to
<PAGE> 29
Part 3 of Subtitle B of Title I of ERISA or Section 412 of the
Code has been maintained in compliance with the minimum funding
standards of ERISA and the Code and no such EPE Plan has incurred
any "accumulated funding deficiency" (as defined in Section 412
of the Code and Section 302 of ERISA) whether or not waived. EPE
does not have any withdrawal liability under Section 4201 of
ERISA with respect to a "multiemployer plan," within the meaning
of Section 4001(a)(3) of ERISA, and no circumstances exist, to
the best of EPE's knowledge, that could reasonably be expected to
result in such withdrawal liability.
(c) Except as disclosed on Schedule 3.8(c), neither the
execution or delivery of this Agreement, nor the consummation of
the transactions contemplated hereby (either alone or together
with any additional or subsequent events), shall constitute an
event under any EPE Plan, EPE Employment Agreement, loan or other
agreement that may result in any payment (whether of severance
pay or otherwise), restriction or limitation upon the assets of
any EPE Plan, forgiveness of indebtedness, acceleration of
payment or funding, vesting, or increase in benefits or
compensation with respect to any current or former employee or
director of EPE.
(d) Except as required by applicable statute or as set
forth on Schedule 3.8(d), EPE (i) does not provide any health or
life insurance or other welfare benefits to any of its former or
retired employees, which benefits would be material either
individually or in the aggregate to EPE or (ii) has not promised
in oral or written form to provide any health or life insurance
or other welfare benefits to any of its employees individually or
as a group upon their termination of employment or retirement,
which benefits would be material either individually or in the
aggregate to EPE. The accumulated post-retirement benefit
obligation with respect to such benefits under Statement of
Financial Accounting Standards No. 106, as of January 1, 1993,
is, in EPE's good faith estimate, approximately $43.4 million.
(e) Except as disclosed on Schedule 3.8(e) or in the
EPE SEC Reports, full payment has been timely made of all amounts
which EPE is required as of the date of this Agreement to have
paid as a contribution under any EPE Plan or collective
bargaining agreement pursuant to applicable law, or the terms of
such EPE Plan or collective bargaining agreement.
(f) Neither EPE nor any Related Person has incurred,
nor reasonably expects to incur, any liability in respect of any
EPE Plan or otherwise under Sections 4062, 4063, 4064 or 4069 of
ERISA.
(g) EPE is in compliance with all reporting and
disclosure obligations under ERISA and the Code with respect to
the EPE Plans, including, without limitation, the COBRA
requirements, except where the failure to be in compliance does
not, individually or in the aggregate, have an EPE Material
Adverse Effect.
<PAGE> 30
Section 3.9 Environmental Protection. (a) Except as set
forth on Schedule 3.9 hereto, EPE is in compliance with all
applicable Environmental Laws, except where the failure to be in
compliance would not have an EPE Material Adverse Effect.
(b) Except as set forth in the EPE SEC Reports or on
Schedule 3.9 hereto, there is no Environmental Claim pending or,
to the knowledge of EPE, threatened against EPE or any joint
ventures which, if adversely determined, individually or in the
aggregate would have an EPE Material Adverse Effect.
Section 3.10 Regulation as a Utility. EPE operates and
is regulated as a public utility only in the States of Texas and
New Mexico. Except as set forth on Schedule 3.10 hereto, EPE is
not subject to regulation as a public utility or public service
company (or similar designation) by any other state in the United
States or any foreign country.
Section 3.11 Registration Statement. None of the
information to be supplied by EPE for inclusion in (a) the
Registration Statement (in the event the Registration Statement
is filed pursuant to Section 6.2 hereof) or (b) the application-
declaration to be filed by CSW with the SEC pursuant to the
Holding Company Act (the "Form U-1"), will at the respective
times such documents are filed or become effective contain any
untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which
they are made, not misleading; provided, however, that no
representation or warranty shall be made by EPE with respect to
information supplied by CSW or its Subsidiaries specifically for
inclusion therein.
Section 3.12 Property. Except as set forth on Schedule
3.12, EPE has good and marketable title to each parcel of real
property owned by it and is in possession of and has good title
to, or has valid leasehold interests in, all tangible personal
property used in or reasonably necessary for the conduct of its
business, except for any such defects which, in the aggregate, do
not have an EPE Material Adverse Effect.
Section 3.13 No Brokers. Other than Barr Beatty Devlin
& Co., Incorporated, whose fee has been previously disclosed to
CSW, no broker, finder, or other party acting in a similar
capacity has been retained by EPE or is entitled to be paid based
upon any agreement, understanding or arrangement made by any such
Person in connection with any of the transactions contemplated by
this Agreement.
<PAGE> 31
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CSW AND BUYER
CSW on behalf of itself and on behalf of Buyer
represents and warrants to EPE as follows:
Section 4.1 Organization and Qualification. CSW is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. Upon its organization by
CSW, Buyer will be a corporation duly organized, validly existing
and in good standing under the laws of the State of Texas. CSW
has, and Buyer at or prior to the Effective Time will have, the
requisite power and authority to own, lease, and operate its
assets and properties it now owns, leases, and operates and to
carry on its business as it is now being conducted and is or will
be, as the case may be, qualified or licensed to do business and
is or will be, as the case may be, in good standing in each
jurisdiction in which the properties owned, leased or operated by
it or the nature of the businesses conducted by it makes such
qualification or licensing necessary, except where the failure to
be so qualified and in good standing will not, when taken
together with all other such failures, have a CSW Material
Adverse Effect or a Buyer Material Adverse Effect, as the case
may be.
Section 4.2 CSW Common Stock. The shares of CSW Common
Stock to be delivered to the holders of EPE Common Stock pursuant
to the terms hereof upon their issuance at the Effective Time,
will be duly authorized, validly issued, fully paid,
nonassessable, and not issued in violation of the preemptive
rights of any person.
Section 4.3 Authority; Non-Contravention; Approvals.
(a) CSW has, and Buyer at or prior to the Effective
Time will have, full corporate power and authority to enter into
this Agreement and, subject to the receipt of the CSW Required
Statutory Approvals and the receipt of the Buyer Stockholder
Approval, to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement by CSW has been, and the
execution and delivery of this Agreement by Buyer and the
consummation by CSW and Buyer of the transactions contemplated
hereby will, at or prior to the Effective Time, have been, duly
authorized by CSW's and Buyer's Boards of Directors and no other
corporate proceedings on the part of CSW or Buyer are necessary
to authorize the execution and delivery of this Agreement, and
the consummation by CSW and Buyer of the transactions
contemplated hereby. This Agreement has been duly and validly
executed and delivered by CSW and, assuming that this Agreement
constitutes a valid and binding agreement of EPE, and subject to
the receipt of CSW Required Statutory Approvals, this Agreement
constitutes a valid and binding agreement of CSW enforceable in
accordance with its terms except as such enforcement may be
limited by bankruptcy, insolvency or other similar laws affecting
<PAGE> 32
the enforcement of creditors' rights generally and the
availability of equitable remedies. This Agreement will, at or
prior to the Effective Time (and as soon as practicable following
receipt of required SEC approval under the Holding Company Act as
set forth in Section 1.1 hereof) be duly and validly executed and
delivered by Buyer and, assuming that this Agreement constitutes
a valid and binding agreement of EPE, subject to the receipt of
CSW Required Statutory Approvals, this Agreement constitutes a
valid and binding agreement of Buyer enforceable in accordance
with its terms except as such enforcement may be limited by
bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights generally and the availability
of equitable remedies.
(b) The execution and delivery of this Agreement by CSW
does not, and the execution and delivery of this Agreement by
Buyer and the consummation by each of CSW and Buyer of the
transactions contemplated hereby will not, violate, conflict with
or result in a breach of any provision of, or constitute a
default (or any event which, with notice or lapse of time or
both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or
result in a right of termination or acceleration under, or result
in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of CSW or any of
its Subsidiaries under, any of the terms, conditions or
provisions of, (i) subject to the receipt of the Buyer
Stockholder Approval, the articles of incorporation or by-laws of
CSW or any of its Subsidiaries, (ii) subject to obtaining the CSW
Required Statutory Approvals and receipt of the Buyer Stockholder
Approval, any statute, law, ordinance, rule, regulation,
judgment, decree, order, injunction, writ, franchise, permit or
license of any Governmental Authority applicable to CSW or any of
its Subsidiaries or any of their respective properties or assets,
or (iii) any note, bond, mortgage, indenture, deed of trust,
license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind to which CSW or
any of its Subsidiaries is now a party or by which CSW or any of
its Subsidiaries or any of their respective properties or assets
may be bound or affected, excluding from the foregoing clauses
(ii) and (iii) such violations, conflicts, breaches, defaults,
terminations, accelerations or creations of liens, security
interests, charges or encumbrances that would not, in the
aggregate, have a CSW Material Adverse Effect or Buyer Material
Adverse Effect, as the case may be.
(c) Except for the Plan, the Confirmation Order and the
CSW Required Statutory Approvals, no declaration, filing or
registration with, or notice to, or authorization, consent or
approval of any Governmental Authority is necessary for the
consummation by CSW or Buyer of the transactions contemplated
hereby, other than such filings, registrations, authorizations,
consents or approvals which, if not obtained or made, will not,
in the aggregate, have a CSW Material Adverse Effect or a Buyer
Material Adverse Effect, as the case may be, or materially
<PAGE> 33
adversely affect the ability of CSW or Buyer to consummate the
transactions contemplated hereby.
Section 4.4 Reports and Financial Statements. Since
December 31, 1988, CSW and each of its Subsidiaries required to
make filings under the Securities Act, the Exchange Act, the
Atomic Energy Act, the Federal Power Act or the Holding Company
Act have filed with the SEC, the State Public Utility Commissions
of Texas, Oklahoma, Louisiana and Arkansas, the NRC or the FERC,
as the case may be, all material forms, statements, reports and
documents (including all exhibits, amendments and supplements
thereto) required to be filed by them under each of the
Securities Act, the Exchange Act, the applicable state public
utility statutes of Texas, Oklahoma, Louisiana and Arkansas, the
Atomic Energy Act, the Federal Power Act and the Holding Company
Act and the respective rules and regulations thereunder, all of
which complied in all material respects with all applicable
requirements of the appropriate act and the rules and regulations
thereunder in effect on the date such report was filed. CSW has
previously delivered to EPE copies of each of the CSW SEC
Reports. As of their respective dates, the CSW SEC Reports did
not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances
under which they were made, not misleading. The CSW Financial
Statements have been prepared in accordance with GAAP (except as
may be indicated therein or in the notes thereto) and fairly
present the financial position of CSW and its Subsidiaries as of
the dates thereof and the results of their operations and changes
in financial position for the periods then ended, subject, in the
case of the unaudited consolidated interim financial statements,
to normal year-end audit adjustments and any other adjustments
described therein.
Section 4.5 Absence of Certain Changes or Events.
Except as set forth on the CSW SEC Reports, since December 31,
1992, CSW has operated its businesses in the ordinary course and
there has not been any CSW Material Adverse Effect.
Section 4.6 Registration Statement. In the event the
Registration Statement is filed pursuant to Section 6.2 hereof,
none of the information to be supplied by CSW or its Subsidiaries
for inclusion in (a) the Registration Statement or (b) the Form
U-1 will at the respective times such documents are filed or
become effective contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. The
Registration Statement and the Form U-1 will comply as to form in
all material respects with all applicable laws, including the
provisions of the Securities Act, the Exchange Act and the
Holding Company Act and the applicable rules and regulations
promulgated thereunder, except that no representation or warranty
is made by CSW with respect to information supplied by EPE
specifically for inclusion therein.
<PAGE> 34
Section 4.7 Vote Required. (a) No vote of holders of
shares of capital stock of CSW shall be required to approve this
Agreement and the transactions contemplated hereby.
(b) The affirmative vote of the holders of at least
two-thirds of the outstanding shares of CSW Sub, Inc. Common
Stock is the only vote required of the holders of any class or
series of the capital stock of CSW Sub, Inc. to approve this
Agreement and the transactions contemplated hereby.
Section 4.8 No Brokers. Other than Morgan Stanley &
Co., Incorporated, whose fee shall be payable by CSW, no broker,
finder or other party acting in a similar capacity has been
retained by CSW or is entitled to be paid based upon any
agreement, understanding or arrangement made by any such Person
in connection with any of the transactions contemplated by this
Agreement.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
Section 5.1 Conduct of Business by Buyer and CSW. After
the date hereof and prior to the earlier to occur of the
Effective Time or earlier termination of this Agreement, Buyer
will not incur directly or indirectly any liabilities or
obligations except those incurred in connection with the
consummation of this Agreement and the transactions contemplated
hereby, and will not engage directly or indirectly in any
business or activities of any type or any kind whatsoever and
will not enter into any agreements or arrangements with any
person or entity, or be subject to or bound by any obligation or
undertaking, which is not contemplated by this Agreement. Except
as contemplated by this Agreement (including, without limitation,
the provisos to this Section 5.1), after the date hereof and
prior to the Effective Time or earlier termination of this
Agreement, unless EPE shall otherwise consent in writing (which
consent shall not unreasonably be withheld) or unless there shall
be an appropriate adjustment to the number of shares in the CSW
Common Stock Acquisition Fund which adequately reflects the value
of any of the following actions, as of the date of such actions,
taken by CSW or any of its Subsidiaries, CSW and its Subsidiaries
shall not:
(a) declare, set aside or pay any extraordinary or
special dividend or distribution on any of the capital stock of
CSW;
(b) make or agree to make extraordinary above-market
purchases of any capital stock of CSW, except pursuant to a stock
repurchase program to the extent permitted by the SEC under the
Holding Company Act; provided, that CSW shall not repurchase
stock within sixty (60) days prior to the Confirmation Date or
Effective Time, except in ordinary course and consistent with
<PAGE> 35
prior practice to meet the needs of the dividend reinvestment and
stock purchase plan and the thrift long-term incentive and other
employee and director benefit plans presently in effect or as
hereafter amended.
Section 5.2 Conduct of Business by EPE. Except as
required by law, as permitted or required by this Agreement or
under the Plan, after the date hereof and prior to the Effective
Time or earlier termination of this Agreement, EPE shall:
(a) conduct its business in the usual, regular and
ordinary course of business in a manner consistent with
past practice and sound utility practice, subject to
its obligations as a debtor-in-possession pursuant to
the Bankruptcy Code;
(b) use its best efforts to preserve intact its
respective business organizations and goodwill, keep
available the services of its key employees, and
preserve the goodwill and business relationships with
suppliers, distributors, customers, and others with
which it has business relationships;
(c) maintain with financially responsible
insurance companies insurance in such amounts and
against such risks and losses as are customary for
companies engaged in the electric utility industry and
employing methods of generating electric power and fuel
sources similar to those methods employed and fuels
used by EPE;
(d) use its best efforts to maintain in effect all
existing franchises (except with respect to its
franchise in Las Cruces, New Mexico), certificates of
convenience and necessity and Permits pursuant to which
it operates in its respective service territories, and
notify CSW promptly in the event that it becomes aware
of any problem, complaint or proceeding which could
result in the termination or non- renewal of any such
franchise, certificate of convenience and necessity or
Permit;
(e) unless CSW shall otherwise consent in writing
(which consent shall not unreasonably be withheld) not
amend or propose to amend its articles of incorporation
or by-laws;
(f) unless CSW shall otherwise consent in writing
(which consent shall not unreasonably be withheld) not
declare, set aside or pay any dividend or distribution
payable in cash, stock, property or otherwise;
<PAGE> 36
(g) unless CSW shall otherwise consent in writing
(which consent shall not unreasonably be withheld) not
issue, sell, pledge or dispose of, authorize or propose
the issuance, sale, pledge or disposal of, or agree to
issue, sell, pledge or dispose of, any additional
shares of its capital stock, or any options, warrants,
calls, commitments or rights of any kind to acquire any
shares of its capital stock or any debt or equity
securities convertible into or exchangeable for shares
of its capital stock, or any other securities in
respect of, in lieu of or in substitution for, shares
of its capital stock, except for any such issuances,
sales, pledges or dispositions in the ordinary course
and consistent with prior practice, with respect to the
Stock Purchase Plan, the Stock Compensation Plan, the
LESOP, the ESOP, the Stock Option Plan or the Phantom
Stock Plan;
(h) unless CSW shall otherwise consent in writing
(which consent shall not unreasonably be withheld) not
redeem, purchase, acquire, split, combine, reclassify
or recapitalize or offer or propose to purchase,
acquire, reclassify or recapitalize (or authorize any
such actions) any shares of its capital stock, except
for any such transactions in the ordinary course and
consistent with prior practice, with respect to the
Stock Purchase Plan, the Stock Compensation Plan, the
LESOP, the ESOP, the Stock Option Plan or the Phantom
Stock Plan;
(i) unless CSW shall otherwise consent in writing
(which consent shall not unreasonably be withheld) not
incur, assume or guarantee any indebtedness other than
in the ordinary course of its business consistent with
prior practice;
(j) unless CSW shall otherwise consent in writing
(which consent shall not unreasonably be withheld) not
merge or consolidate with or into any other
corporation;
(k) except in the ordinary course of business, or
unless CSW shall otherwise consent in writing (which
consent shall not unreasonably be withheld), not (i)
commence construction of any new generating units,
wholesale transmission facilities, or other projects
which, in the aggregate, have annualized budgeted
expenditures in excess of Ten Million Dollars
($10,000,000), (ii) obligate itself to purchase or
otherwise acquire, or to sell or otherwise dispose of,
or to share, any additional generating, transmission or
delivery capacity, (iii) obligate itself to deliver
electricity through the distribution system of a third
party or become obligated to allow or permit a third
<PAGE> 37
party to deliver electricity through its distribution
system, (iv) engage in any single transaction or series
of transactions with the same party for the wholesale
bulk sale of capacity in excess of 100 megawatts in the
aggregate, or (v) enter into any contractual obligation
not in the ordinary course of business;
(l) not engage in any activity which would cause a
change in the status of EPE or any of its Subsidiaries
under the Holding Company Act, or any activities a
direct or indirect Subsidiary of a registered holding
company would not be permitted to engage in under the
Holding Company Act;
(m) unless CSW shall otherwise consent in writing
(which consent shall not be unreasonably withheld),
except as set forth in Schedule 5.2(m), or except in
the ordinary course of business consistent with past
practice, not (i) enter into, adopt, terminate or amend
any bonus, profit sharing, compensation, severance,
termination, pension, retirement, deferred
compensation, employment, severance, collective
bargaining or other employee benefit agreement, plan,
program or arrangement for the benefit or welfare of,
or in respect of, any current or former director,
officer or employee, (ii) increase in any manner the
compensation or benefits of, or in respect of, any
current or former director, officer or employee or
(iii) pay any benefit not required by any existing
plan, arrangement, program or agreement (including,
without limitation, the granting of stock options,
phantom stock, stock appreciation rights, shares of
restricted stock or performance units);
(n) confer on a regular and frequent basis with
one or more representatives of CSW to discuss ongoing
operations and surveys relating to any Environmental
Claim;
(o) not take any action that would or is
reasonably likely to result in any of its
representations and warranties in this Agreement being
untrue at the Closing Date or in any of the conditions
to EPE's obligation to consummate the Merger under this
Agreement not being satisfied;
(p) advise CSW of any change or event which has
had or could reasonably be expected to have an EPE
Material Adverse Effect and any change or event which
would have been required to be disclosed on a schedule
to this Agreement if such change or event had occurred
before the date of this Agreement; and
<PAGE> 38
(q) unless CSW shall otherwise consent in writing
(which consent shall not unreasonably be withheld)
except as otherwise provided in Section 5.3, not seek,
solicit or consent to the entry of an order of any
court vacating, amending or modifying the Plan or the
Confirmation Order;
(r) maintain and operate its respective businesses
and operations in compliance with all Environmental
Laws, including without limitation all rules,
regulations, Permits, licenses, judgments, orders,
consent decrees or other authorizations or approvals of
any Governmental Authority relating to the use,
treatment, storage, disposal or Release of Hazardous
Materials, except for such failures to comply which, in
the aggregate, would not cause an EPE Material Adverse
Effect;
(s) provide written notice to CSW of any Release
of Hazardous Materials, by or affecting EPE or any of
its direct or indirect subsidiaries, that reasonably
could be expected to result in an EPE Material Adverse
Effect, of which EPE or any of its direct or indirect
subsidiaries shall receive written notice, or of which
they shall have actual knowledge, within 30 days of
receipt of such written notice or actual knowledge;
(t) provide written notice to CSW of any
Environmental Claims, or facts which might form the
basis of Environmental Claims, of which EPE or any of
its direct or indirect Subsidiaries shall receive
written notice, or of which they shall have actual
knowledge, within 30 days of receipt of such written
notice or actual knowledge; and
(u) make only reasonable expenditures in
connection with the liquidation of the Tangible Assets,
Intangible Assets and Reduction in Claims.
Notwithstanding anything to the contrary contained in
this Agreement, after the date hereof, EPE will consult with CSW
concerning all regulatory matters, including without limitation,
(i) decisions with respect to the position of EPE before state
and Federal regulatory authorities, (ii) required regulatory
filings and general relations with regulatory agencies, (iii)
regulatory applications, notices, petitions, appeals and filings
with respect to the Merger and other business of EPE and (iv)
designations of counsel with respect to and the management and
supervision of all such regulatory applications, notices,
petitions, appeals and filings.
Section 5.3 No Solicitation by EPE. Unless so directed
by a Court Order of the Bankruptcy Court (which order shall not
have been sought, consented to or solicited by or at the
direction of the Board of Directors of EPE), neither the Board of
<PAGE> 39
Directors of EPE nor any member thereof nor any Person acting at
its direction shall, directly or indirectly, (a) solicit or
encourage submission of any inquiries, proposals or offers by or
(b) participate in any discussions or negotiations with, or
disclose any information concerning EPE to, or afford any access
to the properties, books or records of EPE or any of its
Subsidiaries to, or otherwise assist, facilitate or encourage, or
enter into any agreement or understanding with, any Person (other
than CSW, its affiliates, agents and Representatives) in
connection with any possible proposal inconsistent with this
Agreement (an "EPE Proposal") regarding a sale or acquisition of
any of the capital stock or any other equity interest in EPE or
any of its Subsidiaries inconsistent with this Agreement, or a
merger, consolidation or business combination involving EPE or
any of its Subsidiaries, or the liquidation or reorganization of
EPE or any of its Subsidiaries, or a sale of all or any material
portion of the assets of EPE or any of its Subsidiaries or any
materially similar transaction (a "EPE Acquisition Transaction");
provided, however, nothing in this Section 5.3 shall restrict EPE
from responding to written demands or orders from any government
body or regulatory agency seeking information concerning, or to
hold discussions relating to, possible business combinations
involving EPE. EPE will immediately cease any and all existing
activities, discussions or negotiations with any parties
conducted heretofore with respect to any of the foregoing
restricted activities. EPE agrees not to release any third party
from any confidentiality or standstill agreement to which EPE is
a party and to use its best efforts to enforce its rights
thereunder to the full extent of the law. Notwithstanding the
foregoing, prior to the obtaining of the Confirmation Order, EPE
may, to the extent required by a Court Order of the Bankruptcy
Court or by the fiduciary duties of its Board of Directors under
applicable law (as determined in good faith by the Board of
Directors of EPE based on the advice of outside counsel),
participate in discussions or negotiations with, furnish
information to, and afford access to the properties, books and
records of EPE and its Subsidiaries to, any Person (including
without limitation any Person with whom discussions or
negotiations have previously been conducted) in connection with a
possible EPE Proposal by such Person. EPE will notify CSW
immediately if any inquiry or proposal is made or any such
information or access is requested in connection with an EPE
Proposal or potential EPE Proposal and, except and only to the
extent limited by the provisions of a confidentiality agreement
with a third party in effect on the date of this Agreement,
promptly provide to CSW the details of such inquiry, proposal or
access. EPE will cooperate with CSW in resisting any Court Order
referred to in this Section 5.3.
<PAGE> 40
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1 Access to Information.
(a) CSW, Buyer and their Subsidiaries shall afford to
EPE and the EPE Representatives full access during normal
business hours upon reasonable notice throughout the period prior
to the Effective Time to all of their respective facilities,
properties, books, contracts, commitments and records and, during
such period, make available to EPE (i) a copy of each report,
schedule and other document filed or received by any of them
pursuant to the requirements of federal or state securities laws
or filed by any of them with the SEC, the State Public Utility
Commissions of Texas, Oklahoma, Louisiana or Arkansas, the NRC or
FERC and (ii) any other information concerning their respective
businesses, properties and personnel as EPE may reasonably
request; provided, that no investigation pursuant to this Section
6.1(a) made by EPE or any EPE Representatives shall affect any
representations or warranties made herein by CSW or cause a
condition to the obligations of the respective parties to
consummate the transactions contemplated hereby to be deemed to
be satisfied or waived, if, in the absence of such investigation,
such condition would not have been otherwise satisfied or waived.
All information furnished to or obtained by EPE and the EPE
Representatives pursuant to this Section 6.1(a) shall be subject
to the provisions of the Confidentiality Agreements.
(b) EPE shall afford to CSW and the CSW Representatives
full access during normal business hours upon reasonable notice
throughout the period prior to the Effective Time to all of their
respective facilities, properties, books, contracts, commitments
and records and, during such period, will (i) in the case of any
material report, schedule or other document, promptly furnish a
copy thereof to CSW, and in all other cases, promptly make
available to CSW a copy of each report, schedule and other
document filed or received by any of them pursuant to the
requirements of federal or state securities laws or filed by any
of them with the SEC, the NMPSC, the PUCT, the ACC, the NRC or
FERC and (ii) furnish promptly to CSW any other information
concerning their respective businesses, properties and personnel
as CSW may reasonably request; provided, that no investigation
pursuant to this Section 6.1(b) made by CSW or any CSW
Representatives shall affect any representations or warranties
made herein by EPE or cause a condition to the obligations of the
respective parties to consummate the transactions contemplated
hereby to be deemed to be satisfied or waived, if, in the absence
of such investigation, such condition would not have been
otherwise satisfied or waived. All information furnished to or
obtained by CSW and the CSW Representatives pursuant to this
Section 6.1(b) shall be subject to the provisions of the
Confidentiality Agreements.
<PAGE> 41
Section 6.2 No-Action Request; Registration Statement;
Form U-1. As soon as practicable after the date hereof, CSW and
EPE will file with the SEC a written request for confirmation
(the "no action response") that (i) the issuance of the Surviving
Corporation Preferred Stock and the CSW Common Stock in the
Merger and (ii) any resales of such stock, except for any such
sales by "affiliates" of EPE or CSW, as the case may be, in
either case, are exempt from the registration requirements under
the Securities Act. As soon as is reasonably practicable after
the Confirmation Date, CSW and EPE shall prepare, and CSW or, as
the case may be, CSW and EPE shall file, the Form U-1 and, in the
event that CSW and EPE cannot obtain a no action response from
the SEC prior to the Confirmation Date, the Registration
Statement, and shall use all reasonable efforts to respond
promptly to any comments of the SEC relating to the Registration
Statement, to have the Registration Statement declared effective
by the SEC as promptly as practicable. CSW, Buyer and EPE shall
take any action required to be taken under applicable state blue
sky or securities laws in connection with the issuance of CSW
Common Stock and Surviving Corporation Preferred Stock in the
Merger. CSW, Buyer and EPE shall promptly furnish to each other
all information, and take such other actions, as may reasonably
be requested in connection with any action by any of them in
connection with the preceding sentence. The information provided
and to be provided by CSW, Buyer and EPE, respectively, for use
in the Registration Statement shall be true and correct in all
material respects without omission of any material fact which is
required to make such information not false or misleading.
Section 6.3 Consents and Approvals.
(a) CSW and EPE shall each file or cause to be filed
with the Federal Trade Commission and the United States
Department of Justice any notifications required to be filed
under the HSR Act with respect to the transactions contemplated
hereby. The parties shall consult with each other as to the
appropriate time of filing such notifications and shall use their
best efforts to make such filings at the agreed upon time, to
respond promptly to any requests for additional information made
by either of such agencies, and to cause the waiting periods
under the HSR Act to terminate or expire at the earliest possible
date after the date of filing. CSW and EPE shall equally share
all filing fees under the HSR Act.
(b) CSW and EPE shall cooperate with each other and
promptly (i) prepare and file all necessary documentation, (ii)
effect all necessary applications, notices, petitions and filings
and execute all agreements and documents, (iii) use all
reasonable efforts to obtain all necessary Permits, consents,
approvals and authorizations of all Governmental Authorities, and
(iv) use all reasonable efforts to obtain all necessary Permits,
consents, approvals and authorizations of all other parties, in
the case of each of the foregoing clauses (i), (ii), (iii) and
(iv), necessary or advisable to consummate the transactions
<PAGE> 42
contemplated by this Agreement (including, without limitation,
the CSW Required Statutory Approvals and the EPE Required
Statutory Approvals) or required by the terms of any note, bond,
mortgage, indenture, deed of trust, license, franchise, Permit,
concession, contract, lease or other instrument to which EPE, CSW
or any of their respective Subsidiaries is a party or by which
any of them is bound. EPE shall have the right to review and
approve in advance all characterizations of the information
relating to EPE; CSW shall have the right to review and approve
in advance all characterizations of the information relating to
CSW and Buyer; and each of EPE and CSW shall have the right to
review and approve in advance all characterizations of the
information relating to the transactions contemplated by this
Agreement, in each case which appear in any filing made in
connection with the transactions contemplated hereby, and in each
case including, without limitation, characterizations with
respect to such party's business operations, properties, assets,
condition (financial or other), projections, litigation, rate-
proceedings, or results of operations, or relating to the
transactions contemplated by this Agreement; provided, however,
that any such approval shall not be unreasonably withheld or
delayed by CSW or EPE, as the case may be. The Companies agree
that they shall consult and cooperate with and assist each other
with respect to the obtaining of all such necessary Permits,
consents, approvals and authorizations of all third parties and
Governmental Authorities. CSW shall designate lead counsel,
whose fees shall be paid by CSW, with respect to and shall
control all applications, notices, petitions and filings (joint
or otherwise) relating to the CSW Required Statutory Approvals
and the EPE Required Statutory Approvals; provided, however, that
EPE may, at its option and expense, designate its own separate
legal counsel of record to represent EPE in coordination with CSW
in connection with all such applications, notices, petitions and
filings. In the event that EPE designates its own counsel of
record with respect to such regulatory filings to be made by EPE,
subject to applicable rules of the regulatory body and applicable
ethical standards, EPE shall cause counsel designated by CSW as
lead counsel to act as co-counsel of record with respect to such
filings. Any actions taken by either party pursuant to this
paragraph shall not be deemed to be a waiver of any actual
conflict that may exist with respect to the participation of any
such counsel.
(c) A PURA Section 43 rate proceeding shall be filed on
behalf of EPE, which shall be deemed to be an EPE Required
Statutory Approval, and shall be filed as soon as possible
following the issuance of the Confirmation Order (the "EPE Rate
Proceeding"). EPE authorizes CSW to seek, and CSW agrees to seek,
and to direct CSW's lead counsel to seek, bonded rates (with EPE
responsible for all bond costs), pursuant to PURA Section 43 at
levels not less than the levels set forth in the Plan to be
effective at the earliest possible date. EPE agrees that it will
not seek rate relief pursuant to PURA Section 43 from any
regulatory authority before the filing of the EPE Rate Proceeding
<PAGE> 43
or while the EPE Rate Proceeding is pending, except upon the
occurrence of one of the conditions of (i) or (ii) below. CSW
will use reasonable efforts to preserve EPE's ability to file
independent PURA Section 43 proceedings with and seek rates from
appropriate regulatory authorities based upon EPE's own cost of
service components (assuming no merger with CSW Sub, Inc. is
consummated), in the event that EPE seeks rate relief in any
independent proceeding not precluded by this Agreement. EPE shall
be permitted to file and pursue an independent rate proceeding,
if:
(i) EPE has not obtained in the EPE Rate Proceeding
bonded rates in the annual amount specified in the Plan within
seven (7) months of the Confirmation Date; or
(ii) At any time after the first anniversary of the
Confirmation Date, EPE, in its exercise of reasonable judgment,
determines that reasonable progress in obtaining satisfactory
rate relief specified in the Plan is not being made in the EPE
Rate Proceeding.
If EPE files any independent PURA Section 43 proceedings
described above, it shall designate, at its own expense, lead
counsel and EPE and its counsel agree to consult with CSW and its
designated counsel, who shall be co-counsel, regarding the
prosecution of any such proceeding.
(d) CSW shall consult with EPE (and any separate legal
counsel designated by EPE as provided above) before proposing or
entering into any stipulation or agreement with any Governmental
Authority or any third party in connection with any foreign,
United States Federal, state or local governmental consents and
approvals legally required for the consummation of the Merger and
shall not propose or enter into any such stipulation or agreement
which would have an EPE Material Adverse Effect without EPE's
prior written consent, which EPE may, in its sole discretion,
withhold; provided, however, that EPE agrees that it shall not
withhold its consent to any stipulation or agreement required by
any Governmental Authority which is applicable to EPE after the
Effective Time.
Section 6.4 Notification of Certain Additional Matters.
(a) EPE shall give CSW prompt notice of (i) any actual notice to
EPE or communication to any officer or director with respect to
the occurrence of, a default (or event which, with notice of
lapse of time or both, would become a default) received by EPE or
any officer or director subsequent to the date of this Agreement
and before the Effective Time, under any note, bond, mortgage,
indenture, deed of trust, license, franchise, Permit, concession,
contract, lease or other instrument, obligation or agreement of
any kind to which EPE is a party or by which EPE or any of its
respective properties or assets are bound where such default may
reasonably be expected to have an EPE Material Adverse Effect,
(ii) any written notice from any third party alleging that the
<PAGE> 44
consent of such third party is or may be required in connection
with the transactions contemplated by this Agreement, and (iii)
any actual notice to EPE or communication to any officer or
director of EPE by any Governmental Authority with respect to any
EPE Required Statutory Approvals.
(b) CSW shall give EPE prompt notice of (i) any actual
notice to CSW or communication to any officer or director with
respect to the occurrence of, a default (or event which, with
notice or lapse of time or both, would become a default) received
by CSW or any officer or director subsequent to the date of this
Agreement and before the Effective Time, under any note, bond,
mortgage, indenture, deed of trust, license, franchise, Permit,
concession, contract, lease or other instrument, obligation or
agreement of any kind to which CSW is a party or by which CSW or
any of its properties or assets are bound where such default may
reasonably be expected to have a CSW Material Adverse Effect,
(ii) any written notice from any third party alleging that the
consent of such third party is or may be required in connection
with the transactions contemplated by this Agreement, and (iii)
any actual notice to CSW or communication to any officer or
director of CSW by any Governmental Authority with respect to any
CSW Required Statutory Approvals.
Section 6.5 Compliance with the Securities Act;
Exchange Listing. (a) Prior to the Effective Time, EPE shall
deliver to CSW, and CSW shall deliver to EPE, a letter
identifying all persons who may be deemed to be, at such time,
"affiliates" of such party for purposes of Rule 145 under the
Securities Act. Each of EPE and CSW shall use all reasonable
efforts to cause each person named in the letter it delivers to
the other to deliver at or prior to the Effective Time a written
agreement with respect to sales of securities issued in the
Merger, containing provisions as are customary for transactions
similar to those contemplated by this Agreement and in a form
reasonably acceptable to the parties hereto.
(b) CSW shall use reasonable efforts to effect, at or
before the Effective Time, authorization for listing on the NYSE
upon official notice of issuance, of the shares of CSW Common
Stock to be issued pursuant to the Merger.
Section 6.6 EPE Employees and Employee Benefits.
(a) From and after the Effective Time, and subject to
the following provisions of this Section 6.6, (i) CSW and
Surviving Corporation shall have sole discretion over the hiring,
retention and firing of employees of Surviving Corporation, and
(ii) the terms and conditions of employment of all persons
employed by Surviving Corporation shall be as determined by CSW
and Surviving Corporation, in their sole discretion, from time to
time.
<PAGE> 45
(b) From and after the Effective Time, CSW shall cause
Surviving Corporation to honor and comply with the provisions of
each collective bargaining agreement covering employees of
Surviving Corporation, as in effect on April 30, 1993, and as the
same may be amended, replaced or superseded in accordance with
Section 5.2(m) of this Agreement.
(c) With respect to each person identified in Schedule
6.6(c), as such schedule may be amended through the Effective
Time, CSW shall cause Surviving Corporation to honor and comply
with the provisions of the severance compensation agreement, as
the term of such agreement may be extended from time to time,
between such person and EPE, in the form of agreement in use by
EPE on April 30, 1993. If any such person is employed by
Surviving Corporation from and after the Effective Time,
Surviving Corporation may require such person, as a condition to
such employment, to amend such agreement in a manner mutually
agreeable to such person and Surviving Corporation. With respect
to each employee of EPE on the date immediately prior to the
Effective Date and not identified on Schedule 6.6(c) hereto, CSW
shall cause the Surviving Corporation to honor and comply with
the provisions of the severance compensation program as approved
by EPE's Board of Directors prior to the date of this Agreement.
(d) With respect to each executive officer identified
in Schedule 6.6(d), as such schedule may be amended through the
Effective Time, (i) if such person is not employed by Surviving
Corporation as of the Effective Time, CSW shall cause Surviving
Corporation to honor and comply with the provisions of the
supplemental retirement agreement between EPE and such executive
officer, as in effect on April 30, 1993, and (ii) if such person
is employed by Surviving Corporation from and after the Effective
Time, CSW shall cause Surviving Corporation to honor and comply
with the provisions of such agreement, as the same may be amended
by such person and Surviving Corporation.
(e) Effective as of the Effective Time, (i) the Stock
Purchase Plan, the Phantom Stock Plan, the Director Stock Plan,
the Stock Option Plan and the Stock Compensation Plan shall be
terminated, and (ii) any option to purchase EPE Common Stock
granted under the Stock Purchase Plan or the Stock Option Plan
shall, to the extent such option has not been exercised, be
converted into an option to purchase a number of shares of CSW
Common Stock equal to (x) the number of shares of EPE Common
Stock subject to such option times (y) the Per Share CSW Stock
Acquisition Fund. The exercise price per share of CSW Common
Stock in such substituted option following such conversion shall
be equal to (X) the exercise price per share of EPE Common Stock
subject to such option divided by (Y) the Per Share CSW Stock
Acquisition Fund. Otherwise, the terms and conditions of the
exercise of such option shall be the same as are applicable to
such option to purchase EPE Common Stock; provided, however, that
no such option to purchase CSW Common Stock shall terminate,
lapse, become unexercisable or be in any other way adversely
<PAGE> 46
affected as a result of the optionee's termination of employment
(whether voluntary or involuntary) with Surviving Corporation or
CSW. As soon as reasonably practicable after the Closing Date,
each participant under the Phantom Stock Plan shall receive, in a
single sum cash payment, the value of his or her account under
the Phantom Stock Plan.
(f) Effective as of the Effective Time, the life
insurance policies owned by EPE under the EPE Supplemental
Retirement and Survivor Income Plan for Key Employees (the
"Supplemental Retirement Plan") shall either be held by the
Surviving Corporation or transferred to the trust established
under such plan. CSW shall cause Surviving Corporation to honor
and comply with the provisions of the Supplemental Retirement
Plan, as in effect on April 30, 1993, subject to the ability to
amend, modify or terminate such plan after the Effective Time
pursuant to Section 7.3 of such plan. From and after the
Effective Time, benefits to current retirees under the
Supplemental Retirement Plan shall be paid in accordance with the
provisions of said plan as of April 30, 1993, without giving
effect to any restrictions imposed on an interim basis by the
Bankruptcy Court. From and after the Effective Time, CSW shall
cause Surviving Corporation to honor and comply with EPE's
agreements or commitments to pay to the former employees and
surviving spouses of retirees described in the last sentence of
Section 3.8(a) of this Agreement the amounts described therein
(without giving effect to any restrictions imposed on an interim
basis by the Bankruptcy Court).
(g) Effective as of the Effective Time, the EPE
Directors Retirement Plan shall be terminated. Benefits accrued
and unpaid under said plan as of the Effective Time with respect
to each person covered thereunder shall be paid to such person as
provided in said plan. Each director of EPE at the Effective Time
who is covered under the EPE Directors Retirement Plan and who,
as of the Effective Time, has fewer than five years of service as
a director of EPE shall be treated, under said plan, as if he had
five years of service as a director of EPE as of the Effective
Time. Any director of EPE immediately prior to the Closing Date
who subsequently becomes a director of CSW shall become a
participant under the CSW Directors Deferred Compensation Plan.
(h) Subject to the requirements of all applicable laws
and collective bargaining agreements, CSW shall cause Surviving
Corporation to maintain, for a period of two years after the
Effective Time, the EPE Savings Plan and the EPE Savings Plan For
Collective Bargaining Employees (i) with terms and provisions no
less favorable, in the aggregate, than the terms and provisions
of said plans as of the Effective Time, and (ii) with terms and
provisions governing loans no less favorable than the terms and
provisions governing loans under said plans as of the Effective
Time. At such time as the EPE Savings Plan or the EPE Savings
Plan for Collective Bargaining Employees is terminated or
replaced, or merged with and into the CSW Thrift Plus Plan (or
<PAGE> 47
any successor to such plan), CSW or Surviving Corporation shall,
to the extent permitted by applicable law, take such action as is
necessary to permit repayment of outstanding loans held by the
participants in the EPE Savings Plan or the EPE Savings Plan for
Collective Bargaining Employees, as applicable, over the
remaining period of such loans, regardless of the employment
status of such participants. Subject to the preceding sentence
and the requirements of all applicable laws, CSW shall cause the
employees of Surviving Corporation not covered under a collective
bargaining agreement, and retirees of EPE (to the extent such
retirees are covered by comparable EPE Plans immediately prior to
the Effective Time), to be covered by CSW's employee benefit
plans, with such transition period with respect to any benefit
plan as is appropriate, in CSW's determination, for such plan.
The employee benefits to be provided to the employees of
Surviving Corporation who are covered under a collective
bargaining agreement shall be in accordance with the provisions
of such collective bargaining agreement. If any employee of
Surviving Corporation becomes a participant in any employee
benefit plan, program, policy or arrangement of CSW, Surviving
Corporation or any of their affiliates, such employee shall be
given credit under such plan, program, policy or arrangement for
all service with EPE prior to becoming such a participant for
purposes of eligibility, vesting and benefit accrual to the
extent such service is credited, for each such respective
purpose, under the corresponding benefit plan, program, policy or
arrangement of EPE; provided, however, that with respect to any
participant under the Retirement Income Plan for Employees of EPE
(the "EPE Retirement Plan") in respect of whom assets and
liabilities under the EPE Retirement Plan are not transferred to
the CSW Pension Plan, benefits accrued under the CSW Pension Plan
shall be offset by benefits accrued under the EPE Retirement
Plan.
(i) Unless prohibited by applicable law, from and after
the Effective Time CSW shall cause Surviving Corporation to honor
and comply with the provisions of the Indemnity Agreement, in the
form of the agreement in use by EPE on April 30, 1993, between
EPE and each current and former director and employee identified
in Schedule 6.6(i), as such schedule may be amended through the
Effective Time.
Section 6.7 Directors' and Officers' Indemnification.
(a) The Articles of Incorporation and By-Laws of the
Surviving Corporation shall not be amended, repealed or otherwise
modified for a period of six years from the Effective Time in any
manner that would adversely affect the indemnification rights
thereunder of individuals who at or prior to the Effective Time
were directors, officers, employees or agents of EPE, or who are
directors, officers, employees or agents of the Surviving
Corporation after the Effective Time, unless such modification is
required by law.
<PAGE> 48
(b)(i) Surviving Corporation shall maintain in effect
for six years from the Effective Time the current policies of
directors' and officers' liability insurance maintained by EPE
covering directors and officers of EPE serving at or prior to the
Effective Time with respect to claims arising from occurrences
prior to the Effective Time.
(ii) Surviving Corporation shall maintain for a period
of at least three years following the Effective Time policies of
directors' and officers' liability insurance covering the
individuals who are directors and/or officers of the Surviving
Corporation at any time during such period, which policies shall,
at all times, contain terms and conditions which are at least as
favorable to the covered directors and officers as those
contained in the most favorable directors' and officers'
liability insurance policy provided by CSW or any of its
Subsidiaries.
(c) After the Effective Time, the Surviving Corporation
shall, to the fullest extent permitted under applicable law,
indemnify and hold harmless each present and former director and
officer of EPE or any of its Subsidiaries (each an "Indemnified
Party" and collectively, the "Indemnified Parties") against any
Liabilities in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of, relating to or
in connection with any action or omission occurring prior to the
Effective Time in connection with such person's serving as an
officer or director of EPE or any of its Subsidiaries or arising
out of or pertaining to the transactions contemplated by this
Agreement. An Indemnified Party shall use his best efforts to
subrogate the Surviving Corporation to any rights he may have to
recover amounts paid by the Surviving Corporation pursuant to
this paragraph (c) from any third party, and an Indemnified Party
shall not be entitled to indemnification pursuant to this
Agreement or any other agreement with the Surviving Corporation
for the cost or amount of any Liability for which he has received
reimbursement or an indemnification payment from some other
source or for which, for any reason, he suffers no loss or
liability. The foregoing indemnity shall not apply with respect
to any conduct of the Indemnified Party which is determined by a
Court Order which is not subject to further appeal to have
constituted intentional misconduct or a knowing violation of the
law. Such indemnification shall include indemnity for the
Indemnified Party's own negligence, whether sole or concurrent.
In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective
Time), (i) the Surviving Corporation shall pay the reasonable
fees and expenses of counsel selected by the Indemnified Parties,
which counsel shall be reasonably satisfactory to the Surviving
Corporation, promptly after statements therefor are received and
(ii) the Surviving Corporation shall cooperate in the defense of
any such matter; provided, however, that the Surviving
Corporation shall not be liable for any settlement effected
<PAGE> 49
without its written consent. The Indemnified Parties as a group
may retain only one law firm with respect to each related matter
except to the extent there is, in the sole opinion of counsel to
an Indemnified Party, under applicable standards of professional
conduct, a conflict on any significant issue between positions of
any two or more Indemnified Parties.
(d) In the event the Surviving Corporation or any of
its successors or assigns (i) consolidates with or merges into
any other Person and shall not be the continuing or surviving
corporation or entity of such consolidation or merger or (ii)
transfers all or substantially all of its properties and assets
to any Person, then and in each case, proper provision shall be
made so that the successors and assigns of the Surviving
Corporation, shall assume the obligations set forth in this
Section 6.7.
Section 6.8 Reasonable Best Efforts. Each of the
parties hereto agrees to use reasonable best efforts to take, or
cause to be taken, all action, and to do, or cause to be done,
all things reasonably necessary, proper or advisable under
applicable laws and regulations to consummate and make effective
the transactions contemplated by this Agreement, except, as
regards EPE, as it may be limited by its duties and obligations
under the Bankruptcy Code. Both parties shall consult on a
reasonable and frequent basis regarding matters relating to the
operations of EPE prior to Closing.
ARTICLE VII
THE PLAN
Section 7.1 Prosecution of the Plan.
(a) EPE and CSW shall each use their best efforts, and
cooperate, assist and consult with each other, to secure approval
of the Disclosure Statement and Plan and consummation of the
transactions contemplated by the Plan and the Merger Agreement.
EPE and CSW shall consult with, and seek the advice of, one
another regarding pleadings which either of them might file, or
positions either of them might take, with the Bankruptcy Court in
connection with, or which might reasonably affect, the approval
of the Disclosure Statement and Plan and consummation of the
transactions contemplated by the Plan and the Merger Agreement.
Except as each may in good faith determine is required in the
exercise of its respective duties, and, with respect to EPE, is
not inconsistent with its duties and obligations under the
Bankruptcy Code, neither EPE nor CSW shall file any pleading or
take other action in the Bankruptcy Court with respect to any
matter relating to, or that could reasonably affect, the
confirmation of the Plan and consummation of the transactions
contemplated by the Plan and the Merger Agreement as the other,
in the reasonable exercise of its judgment, shall not approve.
<PAGE> 50
(b) The parties shall undertake to minimize the fees
and expenses of professionals associated with the conduct of the
Bankruptcy Case after the Confirmation Date, and shall seek
appropriate orders from the Bankruptcy Court, related to the
functioning of committees, employment of professionals and other
matters, to help accomplish that objective.
Section 7.2 Plan Modification. Neither the Plan nor the
Disclosure Statement shall be amended, modified, or supplemented
without the mutual consent of EPE and CSW; provided, however,
that such consent shall not be unreasonably withheld; and
provided, further, that, without CSW's consent, EPE may make
technical amendments, modifications, or supplements to the Plan
that do not conflict with any representation, warranty, covenant,
or other term or provision of this Agreement or modify the
substantive treatment of any class of Claims or Interests. The
parties hereto acknowledge and agree that it would not be
unreasonable for CSW to decline to consent to any Plan
modification which would require the payment of additional
consideration by CSW under the Plan or which would adversely
affect the business, operation, franchises, properties, assets,
or condition (financial or other) of the Surviving Corporation.
Notwithstanding the foregoing, CSW shall be free to propose
modifications to the provisions of the Plan related to treatment
of creditors and preferred stockholders if necessary in its
reasonable judgment to secure confirmation of the Plan that would
be effective either before or after the Effective Time, as the
case may be, and EPE shall advance the Plan modifications
requested by CSW with respect to each such provision; provided,
that the cost of all instruments purchased pursuant to Section
5.1(c) of the Plan (net of any gains realized on hedging
transactions) and all other payments by or costs to EPE resulting
from any such modifications in the Plan (except for the amounts
of post-confirmation date interest which are paid to accepting
classes 11, 12 and 13 at the rates set forth in the Plan as
initially filed) which are not borne by the creditors of EPE (in
the form of reduced claims or otherwise in a manner reasonably
acceptable to EPE) shall be borne by CSW (unless CSW terminates
this Agreement pursuant to Section 9.1(b)(ii), Section
9.1(b)(iii) or Section 9.1(b)(vii) hereof) in the event the
Merger is for any reason not consummated.
Section 7.3 Appeals. After the Effective Date of the
Plan, if the Confirmation Order or any other orders of the
Bankruptcy Court relating to this Agreement, the Disclosure
Statement, the solicitation of acceptance of the Plan or
confirmation of the Plan shall be appealed by any party (or a
petition for certiorari or motion for reconsideration, amendment,
clarification, modification, vacation, stay, rehearing or
reargument shall be filed with respect to any such order), EPE
will cooperate in taking such reasonable steps diligently to
prosecute such appeal, petition or motion or diligently to defend
against such appeal, petition or motion as CSW shall request, and
Buyer shall cooperate in such efforts, and each of CSW and EPE
shall use its best efforts to obtain an expedited resolution of
any such appeal, petition or motion.
<PAGE> 51
ARTICLE VIII
CONDITIONS
Section 8.1 Conditions to Effectiveness of the
Agreement. Notwithstanding the execution and delivery of this
Agreement by EPE and CSW, this Agreement (except for Section
2.8(e) and the last proviso of Section 7.2 hereof, which shall be
effective and binding upon the initial filing of the Plan in the
Bankruptcy Court) shall not be effective and binding upon the
parties until and unless the Confirmation Order is entered by the
Bankruptcy Court; provided, however, that immediately upon and
after execution and delivery of this Merger Agreement (i) EPE and
CSW shall each be bound to use their best efforts to seek entry
of a Bankruptcy Court Order (the "Interim Approval Order") which,
in form and substance reasonably acceptable to CSW and EPE,
provides that the following provisions of this Merger Agreement
shall, upon entry of such order, be immediately effective and
binding upon CSW and EPE: Articles V, VI, VII, VIII, IX and X, to
the extent applicable prior to the Confirmation Date (the
"Interim Provisions"); and (ii) EPE and CSW shall not take any
action which would result in such parties' being in breach of
their respective obligations under the Merger Agreement on the
Confirmation Date. Upon entry of the Interim Approval Order, the
Interim Provisions shall be effective and binding upon CSW and
EPE.
Section 8.2 Conditions to All Parties' Obligations. The
respective obligations of each party to effect the transactions
to be effected by such party pursuant to this Agreement shall be
subject to the fulfillment at or prior to the Effective time of
the following conditions:
(a) CSW shall have obtained a no-action response from
the SEC or the Registration Statement shall have become effective
in accordance with the provisions of the Securities Act and the
Holding Company Act, respectively, and no stop order suspending
such effectiveness shall have been issued and remain in effect;
(b) all applicable HSR Act filings shall have been made
and the waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated;
all CSW Required Statutory Approvals and EPE Required Statutory
Approvals shall have been obtained and shall have become Final
Orders and be in effect at the Effective Time (other than any
such consents and approvals the failure to obtain which would not
have a CSW Material Adverse Effect or an EPE Material Adverse
Effect;
(c) no Governmental Authority shall have enacted a law,
rule, regulation or ordinance, or issued an order, which would
have an EPE Material Adverse Effect, a CSW Material Adverse
Effect or a material adverse effect upon the prospects for the
business of CSW or the Surviving Corporation after the Merger;
<PAGE> 52
(d) the Confirmation Order shall have been entered by
the Bankruptcy Court, in form and substance reasonably
satisfactory to CSW and EPE, and at least ten (10) days shall
have elapsed since the issuance and entry of the Confirmation
Order, no stay shall have been entered and shall be in effect
with respect to such Confirmation Order, and consummation of the
Merger shall not be precluded by any order, stay, or injunction
of any court of competent jurisdiction;
(e) the Effective Date of the Plan shall have occurred;
and
(f) neither the United States Supreme Court, nor the
United States Court of Appeals for the Fifth Circuit nor the
United States District Court for the Western District of Texas
shall have entered an order or issued an opinion, nor shall the
Bankruptcy Code, the Federal Rules of Bankruptcy Procedure or any
applicable local bankruptcy court rules have been amended in a
manner, so that the benefits and protection that would be
provided to EPE, CSW, Buyer and their Subsidiaries by the
provisions of the Confirmation Order would be less in any
material respect than under current law.
Section 8.3 Conditions to Obligation of CSW and Buyer.
The obligation of CSW and Buyer to effect the transactions
contemplated by this Agreement shall be subject to
the fulfillment at or prior to the Effective Time of the
following conditions:
(a) EPE shall have performed in all material respects
its covenants and agreements contained in this Agreement required
to be performed at or prior to the Closing Date;
(b) all representations and warranties made by EPE in
this Agreement shall be true and correct in all material respects
as of the date made, and on and as of the Closing Date, with the
same force and effect as though made on and as of the Closing
Date (i.e., a representation that a state of facts exists on or
as of the date hereof shall be deemed to be a representation that
such state of facts exists on or as of the Closing Date, and a
representation that a state of facts has or has not changed
between a date prior to the date hereof and the date hereof shall
be deemed to be a representation that such state of facts has or
has not changed between such prior date and the Closing Date),
except as affected by the transactions contemplated hereby;
(c) CSW shall have received a certificate signed by the
chief executive officer and chief financial officer of EPE dated
the Closing Date to the effect that, to the best of each such
officer's knowledge, the conditions set forth in Sections 8.2(a)
and (b) have been satisfied;
<PAGE> 53
(d) no preliminary or permanent injunction or other
order or decree by any foreign, United States Federal or state
court preventing consummation of the Merger or materially
changing the terms and conditions of the Plan, the Confirmation
Order or this Agreement shall have been issued and be continuing
in effect; the Merger and the other transactions contemplated
hereby or by the Plan or the Confirmation Order shall not be
prohibited and the terms and conditions of the Plan, the
Confirmation Order or this Agreement shall not be required to be
materially changed under any applicable foreign, United States or
state law, rule or regulation or by the Bankruptcy Court; and no
action, suit, proceeding or investigation by or before any court
or other Governmental Authority or appeal thereof other than with
respect to the Confirmation Order shall be pending challenging
the Merger or any of the other transactions contemplated by this
Agreement or by the Plan which, in the reasonable opinion of CSW,
could have an EPE Material Adverse Effect or a material adverse
effect on the Surviving Corporation;
(e) that the adversary proceeding between EPE and The
First National Bank of Boston, as Owner Trustee, DBP Corp., as
agent for the Owner Trustee, Harris Trust and Savings Bank, as
Indenture Trustee for the holders of certain Secured Lease
Obligation Bonds and LaSalle National Bank, as Indenture Trustee
for the holders of certain Lease Obligation Bonds with respect to
the Palo Verde Nuclear Generating Station shall have been
resolved and finally determined prior to the Effective Date and
shall not contain any other terms or conditions which would
result in an EPE Material Adverse Effect or have a material
adverse effect on the Surviving Corporation as measured against
the proposal for resolution of such proceeding set forth in the
Plan and the Disclosure Statement and shall provide for the
transfer of good and marketable title from the Owner Trustee to
EPE of the leased Palo Verde assets;
(f) no EPE Material Adverse Effect shall have occurred
and there shall exist no fact or circumstance which may
reasonably be expected to give rise to an EPE Material Adverse
Effect;
(g)(i) All federal, state and local governmental
consents and approvals required for the consummation of the
Merger including, without limitation, the CSW Required Statutory
Approvals and the EPE Required Statutory Approvals, shall have
been obtained and be in effect at the Effective Time (other than
any such consents and approvals the failure to obtain which (a)
would not have a material adverse effect on the business,
operations, properties, assets, condition (financial or other),
rates or results of operations of CSW and EPE and their
Subsidiaries taken as a whole, and (b) in the case of the state
and local governmental approvals, would not have a material
adverse effect on the business, operations, properties, assets,
condition (financial or other), rates or results of operations of
EPE and its Subsidiaries and affiliates operating in the States
<PAGE> 54
of Texas and New Mexico (taking into account the actual consent
or order of such regulatory authority as compared to the desired
regulatory treatment based on the outline of the regulatory plans
summarized in Annex 1 to the Plan) (either (a) or (b) a
"Regulatory Material Adverse Effect"), and (ii) the CSW Required
Statutory Approvals and EPE Required Statutory Approvals shall
have become Final Orders and shall not be subject to terms and
conditions which, in the aggregate, would result in a Regulatory
Material Adverse Effect. For purposes of this Section 8.3(g) a
FERC order which contains conditions not substantially more
onerous than those imposed in recent FERC orders with respect to
mergers involving electric utility companies shall not be deemed
to result in a Regulatory Material Adverse Effect;
(h) all necessary consents of all entities, if any, who
are parties to any note, bond, mortgage, indenture, deed of
trust, license, franchise, Permit, concession, contract, lease or
other instrument to which EPE or any of its Subsidiaries is a
party or by which any of their respective assets or properties is
bound shall have been obtained; and
(i) the Surviving Corporation First and Second Mortgage
Indentures shall have been qualified under the Trust Indenture
Act of 1939 (if and to the extent required).
Section 8.4 Conditions to Obligation of EPE. The
obligation of EPE to effect the transactions contemplated by this
Agreement shall be subject to the fulfillment at or prior to the
Effective Time of the following conditions:
(a) CSW shall have performed in all material respects
its covenants and agreements contained in this Agreement required
to be performed at or prior to the Closing Date;
(b) EPE shall have received a certificate signed by an
executive officer of CSW and a certificate signed by an executive
officer of CSW Sub, Inc. dated the Closing Date, to the effect
that, to the best of each such officer's knowledge, the condition
set forth in Sections 8.4(a) and 8.4(e) with respect to the
company of which he is an executive officer has been satisfied;
(c) The shares of CSW Common Stock to be issued to
holders of EPE Common Stock in the Merger shall be validly
issued, fully paid, nonassessable, free of preemptive rights and
free and clear of any liens, claims, encumbrances, security
interests, equities, charges and options of any nature whatsoever
and shall have been authorized for listing on the NYSE upon
official notice of issuance;
(d) no CSW Material Adverse Effect shall have occurred;
(e) all representations and warranties made by CSW in
this Agreement shall be true and correct in all material respects
as of the date made, and on and as of the Closing Date, with the
<PAGE> 55
same force and effect as though made on and as of the Closing
Date (i.e., a representation that a state of facts exists on or
as of the date hereof shall be deemed to be a representation that
such state of facts exists on or as of the Closing Date, and a
representation that a state of facts has or has not changed
between such prior date and the Closing Date), except as affected
by the transactions contemplated hereby; and
(f) no preliminary or permanent injunction or other
order or decree by any foreign, United States Federal or state
court preventing consummation of the Merger or materially
changing the terms and conditions of the Plan, the Confirmation
Order or this Agreement shall have been issued and be continuing
in effect; the Merger and other transactions contemplated hereby
or by the Plan or the Confirmation Order shall not be prohibited
and the terms and conditions of the Plan, the Confirmation Order
or this Agreement shall not be required to be materially changed
under any applicable foreign, United States or state law, rule or
regulation or by the Bankruptcy Court; and no action, suit,
proceeding or investigation by or before any court or other
Governmental Authority or appeal thereof other than with respect
to the Confirmation Order shall be pending challenging the Merger
or any of the other transactions contemplated by this Agreement
or by the Plan which, in the reasonable opinion of EPE, could
have a CSW Material Adverse Effect or a material adverse effect
on the Surviving Corporation.
Section 8.5 Waiver of Conditions. Any party, on its own
behalf, may waive any of the conditions to the Merger described
in this Article VIII and may extend or reduce any time period
described in this Article VIII without requiring action or
approval of its shareholders. To be effective, a waiver or an
extension or reduction of a time period must be in writing,
executed on behalf of the Board of Directors of such party and
delivered to the other parties.
ARTICLE IX
TERMINATION AND TERMINATION FEES
Section 9.1 Termination. This Agreement may be
terminated at any time prior to the Effective Time:
(a) by mutual written consent approved by the Boards of
Directors of CSW and EPE; or
(b) by CSW, by written notice to the Board of Directors
of EPE, in the event that: (i) (A) any closing condition
specified in Article VIII including, without limitation, receipt
of the EPE Required Statutory Approvals and CSW Required
Statutory Approvals is reasonably determined by CSW to have
become incapable of being satisfied on or before the Termination
Date, as extended pursuant to Section 9.1(d) hereof, or (B) any
<PAGE> 56
order is entered denying any of the CSW Required Statutory
Approvals or EPE Required Statutory Approvals; provided, that
such incapacity has not been caused by a material breach by CSW
of any of its covenants hereunder; (ii) there has been any
material breach of any representation, warranty, covenant or
agreement of EPE hereunder and such breach shall not have been
remedied within ten (10) days after receipt by EPE of notice in
writing from CSW specifying the nature of such breach and
requesting that it be remedied; (iii) the Board of Directors of
EPE or any committee thereof or the Bankruptcy Court (A) shall
withdraw or modify in any manner adverse to CSW its approval or
recommendation of the Plan, including, without limitation,
confirmation of another plan of reorganization pursuant to which
the Merger is not consummated, or (B) shall approve or recommend
any EPE Proposal by or EPE Acquisition Transaction with a party
other than CSW or an affiliate of CSW, or (C) shall resolve to
take any of the actions specified in clauses (A) or (B); (iv) the
Bankruptcy Court shall refuse to approve the provisions of
Section 9.3 hereof; (v) (X) CSW determines, in its reasonable
judgment, that satisfactory progress is not being made with
respect to resolution of the Owner Participant Claims, or (Y) CSW
and EPE are unable to enter into an agreement with the Owner
Participants prior to the Effective Date which involves a
settlement and release of the Owner Participant Claims on terms
that are mutually acceptable to CSW and EPE; (vi) within ninety
(90) days after the filing of the Plan, the Bankruptcy Court
shall not have entered an order approving the Disclosure
Statement; (vii) the Bankruptcy Court shall have issued an order
denying confirmation of the Plan; (viii) the Court shall have
issued an order modifying or terminating exclusivity and any
third party (other than CSW) files a competing plan of
reorganization for EPE; or (ix) EPE shall have filed an
independent PURA Section 43 proceeding; or
(c) by EPE, by written notice to the Board of Directors
of CSW, in the event that: (i) any order is entered denying any
of the EPE Required Statutory Approvals or CSW Required Statutory
Approvals, or any other closing condition specified in Article
VIII is reasonably determined by EPE to have become incapable of
being satisfied on or before the Termination Date; provided, that
such incapacity has not been caused by a material breach by EPE
of any of its covenants hereunder; (ii) there has been any
material breach of any representation, warranty, covenant or
agreement or CSW hereunder and such breach shall not have been
remedied within ten (10) days after receipt by CSW of notice in
writing from EPE specifying the nature of such breach and
requesting that it be remedied; (iii) the Board of Directors of
CSW or any committee thereof or the Bankruptcy Court (A) shall
withdraw or modify in any manner adverse to EPE its approval or
recommendation of the Plan, this Agreement or the Merger or (B)
shall resolve to take any of the actions specified in clause (A);
or (iv) EPE shall determine in a manner consistent with its
obligations under Section 5.3 hereof to engage in an EPE
Acquisition Transaction with a party other than CSW or an
affiliate of CSW;
<PAGE> 57
(d) by CSW or the Board of Directors of EPE, by written
notice to the other, in the event that: (i) the Effective Time
has not occurred on or before the Termination Date, unless the
same has been extended by mutual consent of the parties for up to
twenty-four (24) months after the Confirmation Date (the
"Extended Termination Date"), in which event either party may
terminate this Agreement if the Effective Time has not occurred
on or before the Extended Termination Date; (ii) the Confirmation
Date has not occurred on or before six (6) months after the date
of this Agreement; or (iii) prior to the Effective Date of the
Plan, the Plan is terminated or the Confirmation Order is vacated
or reversed by a Final Order of a court having jurisdiction.
Section 9.2 Effect of Termination. In the event of
termination of this Agreement by either the Board of Directors of
EPE or CSW as provided above, this Agreement shall forthwith
become void (other than Section 2.8(e), the last proviso of
Section 7.2 hereof, Section 9.3 and Article X hereof, which shall
remain in full force and effect) and there shall be no further
liability on the part of EPE, CSW or Buyer, or their respective
officers or directors, to any other party hereunder except for
any liability under such Section and Article.
Section 9.3 Termination Fees. (a) If this Agreement is
terminated by EPE pursuant to Section 9.1(c)(iv) hereof, by CSW
pursuant to Section 9.1(b)(iii)(B) hereof, or by CSW if a
competing third party plan is confirmed by the Bankruptcy Court
prior to termination of this Agreement, then EPE shall pay to CSW
Fifty Million Dollars ($50,000,000) payable as follows: (i)
Twenty-Five Million Dollars ($25,000,000) shall be paid upon
confirmation of such competing third-party plan or any
plan embodying an EPE Acquisition Transaction; and (ii) Twenty-
Five Million Dollars ($25,000,000) shall be paid upon the
consummation of any such acquisition contemplated by such plan.
If this Agreement is terminated by CSW pursuant to Section
9.1(b)(ii), or if this Agreement is terminated by EPE pursuant to
Section 9.1(d)(i) and the Board of Directors of EPE does not
extend the Termination Date to a date not later than the Extended
Termination Date after written request by CSW, which request is
made because one or more conditions to the obligations of EPE, on
the one hand, or CSW and Buyer, on the other hand, hereunder has
not been satisfied or waived at the Termination Date and which
states that CSW believes in good faith and on reasonable grounds
that the unsatisfied condition or conditions can be satisfied
within the requested extension period, then EPE shall pay to CSW
a termination fee of Twenty-Five Million Dollars ($25,000,000).
If this Agreement is terminated by EPE pursuant to Section
9.1(c)(ii), or if this Agreement is terminated by CSW pursuant to
Section 9.1(d)(i) and the Board of Directors of CSW does not
extend the Termination Date to a date not later than the Extended
Termination Date after written request by EPE, which request is
made because one or more conditions to the obligations of CSW or
Buyer, on the one hand, or EPE, on the other hand, hereunder has
not been satisfied or waived at the Termination Date and which
<PAGE> 58
states that EPE believes in good faith and on reasonable grounds
that the unsatisfied condition or conditions can be satisfied
within the requested extension period, then CSW shall pay to EPE
a termination fee of Twenty-Five Million Dollars ($25,000,000).
In addition to any termination fee payable by CSW to EPE under
this Section 9.3, CSW (i) shall pay to EPE any amounts which CSW
is obligated to pay pursuant to the last proviso of Section 7.2,
and (ii) shall pay to the holders of EPE Common Stock, as soon as
practicable after the effective date of another plan of
reorganization (the "Alternative Plan") for EPE in which CSW is a
participant and providing for the acquisition by CSW (or any
affiliate of CSW) of EPE, an amount equal to the difference
between (A) the Plan Amount as defined in Section 2.8(e) and (B)
the aggregate amount of consideration actually paid to the
holders of EPE Common Stock under the Alternative Plan; provided,
however, that no such payment shall be made if there has been a
Failure of Confirmation as defined in Section 2.8(e).
(b) All termination fees described in this Section
9.3(a) shall be a first priority administrative expense pursuant
to Sections 507(a)(1) and 503(b)(1)(A) of the Bankruptcy Code in
EPE's Bankruptcy Case currently pending in the Bankruptcy Court.
The parties hereto acknowledge that such amounts represent the
actual, necessary costs and expenses of preserving the estate of
EPE during the Bankruptcy Case. Such amounts are in the nature of
liquidated damages and are in lieu of any other payments. EPE
acknowledges that, by virtue of CSW's claims under Article 9 of
this Agreement, CSW is a "party in interest" within the meaning
of Bankruptcy Code Section 1109.
<PAGE> 59
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Notices. All notices and other
communications hereunder shall be in writing and shall be given
(and shall be deemed to have been duly given upon receipt) by
delivery in person (including by courier), by cable, telegram or
telex, by registered or certified mail (postage prepaid, return
receipt requested), by overnight courier or by facsimile to the
parties at the following addresses (or at such other address for
a party as shall be specified by like notice):
(a) If to EPE, to:
El Paso Electric Company
303 North Oregon Street
El Paso, Texas 79901
Attn: President
with a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
4100 First City Center
1700 Pacific Avenue
Dallas, Texas 75201-4618
Attn: Allen P. Miller, P.C.
(b) If to CSW or Buyer, to:
Central and South West Corporation
1616 Woodall Rodgers Freeway
Dallas, Texas 75202
Attn: G. Holman King
with a copy to:
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
Attn: Joris M. Hogan, Esq.
Section 10.2 Expenses. Each party shall bear its own
out-of-pocket expenses relating to this Agreement and the
transactions contemplated hereby, whether or not such
transactions are consummated.
<PAGE> 60
Section 10.3 Assignment. Neither this Agreement
(including the documents and instruments referred to herein), nor
any of the rights, interests or obligations hereunder, shall be
assigned by any of the parties hereto, including by operation of
law, without the prior written consent of the other parties.
Notwithstanding the foregoing, no consent shall be necessary for
CSW to assign this Agreement to any of its affiliates; provided,
that such an assignment shall not release CSW from any of its
obligations under this Agreement.
Section 10.4 Waivers. No action taken pursuant to this
Agreement, including any investigation by or on behalf of any
party, shall be deemed to constitute a waiver by such party
taking such action of compliance by any other party with any
representation, warranty, covenant or agreement contained herein.
The waiver by or on behalf of any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as
a waiver of any subsequent breach.
Section 10.5 Binding Effect; Benefits. This Agreement
shall inure to the benefit of the parties hereto and shall be
binding upon the parties hereto and their respective successors
and permitted assigns. Except as otherwise set forth herein,
nothing in this Agreement, expressed or implied, is intended to
confer on any Person, other than the parties hereto or their
respective successors and permitted assigns, any rights,
remedies, obligations, or liabilities under or by reason of this
Agreement.
Section 10.6 Joinder by Buyer. As soon as practicable
after receipt of all necessary CSW Regulatory Approvals with
respect to the organization of Buyer and Buyer's issuance of its
capital stock to CSW, CSW will cause the organization of Buyer
and Buyer's approval and execution of this Agreement.
Section 10.7 Entire Agreement. This Agreement, the Plan
and the Confirmation Order constitute the entire agreement and
supersede all prior agreements, representations, warranties,
statements, promises, and understandings, whether written or
oral, with respect to the subject matter hereof (other than the
Confidentiality Agreements between the parties, which shall
continue in effect except for paragraph 7 of the Confidentiality
Agreement executed by EPE and agreed to by CSW, which shall be of
no force or effect), and cannot be changed or terminated orally.
No party hereto shall be bound by or charged with any written or
oral agreements, representations, warranties, statements,
promises, or understandings not specifically set forth in this
Agreement, the Plan and the Confirmation Order, or in any
certificates and instruments to be delivered pursuant hereto on
or before the Closing.
Section 10.8 Headings. The section and other headings
contained in this Agreement are for reference purposes
only and shall not be deemed to be a part of this Agreement or to
affect the meaning or interpretation of this Agreement.
<PAGE> 61
Section 10.9 GOVERNING LAW. THIS AGREEMENT SHALL BE
CONSTRUED AS TO BOTH VALIDITY AND PERFORMANCE AND ENFORCED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS.
Section 10.10 Public Announcements. Prior to the
Closing, Buyer and CSW, on the one hand, and EPE, on the other
hand, shall cooperate in connection with all actions to
publicize, advertise, announce, or disclose to any governmental
authority or other third person the execution or terms of this
Agreement or the transactions contemplated hereby.
Section 10.11 Amendments; Interpretation. This
Agreement may not be modified or changed except by an instrument
or instruments in writing signed by each of CSW, Buyer (after
Buyer has executed and delivered this Agreement pursuant to
Section 10.6 hereof) and EPE. This Agreement may be amended in
writing at any time prior to the Effective Time by mutual consent
of the Board of Directors of the parties, without any action or
approval by shareholders of such parties; provided, that any such
amendment shall not be materially inconsistent with the terms and
conditions contained in this Agreement and the Plan.
Section 10.12 Disclosures. Any disclosure by either
party hereto pursuant to any specific provision of this Agreement
shall be deemed a disclosure for all other purposes of this
Agreement.
Section 10.13 Counterparts. This Agreement may be
executed in any number of counterparts, each of which, when
executed, shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
Section 10.14 Specific Performance. The parties hereto
recognize that any breach of the terms of this Agreement may give
rise to irreparable harm for which money damages would not be an
adequate remedy, and accordingly agree that, in addition to other
remedies, the non-breaching party will be entitled to enforce the
terms of this Agreement by a decree of specific performance
without the necessity of proving the inadequacy of a remedy of
money damages.
Section 10.15 Plan Termination, Etc. If, prior to the
Effective Date of the Plan, the Plan is abandoned or if the
Confirmation Order is vacated or reversed, this Agreement shall
become void, and there shall be no further liability on the part
of any party hereto or their respective officers and directors to
any other party hereunder; provided, however, that this Section
10.15 shall not be deemed to prejudice the rights of the parties
hereto pursuant to Section 2.8(e), the last proviso of Section
7.2, Section 9.3 and this Article X.
<PAGE> 62
Section 10.16 Severability. If any term, covenant or
restriction of this Agreement is held by a court of competent
jurisdiction or other authority to be invalid, void,
unenforceable or against its regulatory policy, such provision
shall thereupon become ineffective; but only to the most limited
extent possible and the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or
invalidated.
<PAGE> 63
IN WITNESS WHEREOF, EPE and CSW have caused this
Agreement to be signed by their respective officers thereunto
duly authorized as of the date stated below; provided, that it
shall be sufficient if Buyer signs the Agreement at any time
prior to the Effective Time.
SUBJECT TO THE APPROVAL OF THE
BANKRUPTCY COURT IN THE BANKRUPTCY
CASE AS PROVIDED IN THIS AGREEMENT
EL PASO ELECTRIC COMPANY
By: /s/ DAVID H. WIGGS JR.
David H. Wiggs Jr.
Date: May 18, 1993 Chairman of the Board,
President and
Chief Executive Officer
CENTRAL AND SOUTH WEST CORPORATION
By: /s/ E. R. BROOKS
E. R. Brooks
Date: May 18, 1993 Chairman of the Board,
President and
Chief Executive Officer
CSW SUB, INC.
By:
Name:
Date:______________ Title:
<PAGE> 64
_________________________________________________________________
SECOND AMENDMENT DATED AS OF AUGUST 26, 1993
TO
AGREEMENT AND PLAN
OF
MERGER
Among
EL PASO ELECTRIC COMPANY,
CENTRAL AND SOUTH WEST CORPORATION
and
CSW SUB, INC.
Dated as of May 3, 1993
as amended on May 18, 1993
_________________________________________________________________
<PAGE> 65
Amendment, dated as of August 26, 1993 ("Second
Amendment"), to Agreement and Plan of Merger, among El Paso
Electric Company ("EPE"), Central and South West Corporation
("CSW"), and CSW Sub, Inc., dated as of May 3, 1993, as amended
on May 18, 1993 (the "Merger Agreement").
The Merger Agreement was executed by the parties other
than CSW Sub, Inc. (the "Parties") as of May 3, 1993 and amended
on May 18, 1993, and the Parties have determined that it is
advisable and in the best interests of such Parties to make the
following additional amendments to the Merger Agreement.
Now therefore, in consideration of the premises and
other good and valuable consideration, receipt of which is hereby
acknowledged, the Parties hereby agree as follows:
1. Article I, Section 1.1, is hereby amended as
follows:
(a) The definition of "Intangible Assets" is
changed to read as follows:
"Intangible Assets" means the aggregate of:
(i) all amounts recovered from the First Service
Collateral; (ii) all recovered First Service
Litigation Fees; (iii) either (w) the first Ten
Million Dollars ($10,000,000) of any amounts
realized as the result of the APS Claims, or (x)
the APS Deemed Claim Amount (as defined below);
and (iv) either (y) any amounts realized as the
result of the Owner Participant Claims, or (z) the
Owner Participant Deemed Claim Amount (as defined
below). The "APS Deemed Claim Amount" means any
amounts realized as the result of a non-litigated
settlement on or prior to the Confirmation Date of
the APS Claims, which amounts (whether or not
actually realized) shall be deemed as of one day
prior to the Effective Date to be $3,800,000; and
"Owner Participant Deemed Claim Amount" means any
amounts realized as the result of a non-litigated
settlement on or prior to the Confirmation Date of
the Owner Participant Claims, which amounts
(whether or not actually realized) shall be deemed
as of one day prior to the Effective Date to be
$10,000,000; provided, however, that the APS
Deemed Claim Amount and the Owner Participant
Deemed Claim Amount shall, in the aggregate, not
exceed such amount as is required for EPE to
achieve the Maximum Additional Consideration
Amount. Any APS Deemed Claim Amount or Owner
Participant Deemed Claim Amount (in each case, as
so reduced) shall be deemed to be added to the CSW
Common Stock Acquisition Fund as of one day prior
to the Effective Date.
<PAGE> 66
(b) The definition of "Preferred Stock
Exchange Ratio" is changed to read as follows:
"Preferred Stock Exchange Ratio" means
0.8695096 which is the fraction determined by
dividing (a) Sixty-Eight Million Dollars
($68,000,000), by (b) Seventy-Eight Million Two
Hundred Five Thousand Dollars ($78,205,000).
2. (a) Article II, Section 2.8(d), is amended by
adding the following clause immediately at the end of
the first sentence thereof:
"; provided, however, that all or any portion
of the EPE Preferred Stock outstanding immediately
prior to the Effective Time may, at the election
of CSW pursuant to the terms of the Plan, be
converted into the right to receive CSW Common
Stock or cash, as the case may be."
(b) Article II, Section 2.8(d) is further amended
by modifying the last sentence thereof to read as
follows:
"Each certificate which immediately prior to
the Effective Time represented outstanding shares
of EPE Preferred Stock shall, on and after the
Effective Time, be deemed for all purposes to
represent the right to receive the number of
shares of Surviving Corporation Preferred Stock or
CSW Common Stock, as the case may be, into which
the shares of EPE Preferred Stock shall have been
converted pursuant to this Section 2.8(d)."
3. Article II, Section 2.10(b), is amended by
modifying the second sentence thereof to read as
follows:
"Each holder of shares of (i) EPE Common
Stock converted into the right to receive shares
of CSW Common Stock pursuant to Section 2.8(c) or
(ii) EPE Preferred Stock converted into the right
to receive shares of Surviving Corporation
Preferred Stock or CSW Common Stock, as the case
may be, pursuant to Section 2.8(d), shall, upon
surrender to the Exchange Agent for cancellation
in accordance with the terms and conditions of the
letter of transmittal of one or more certificates
formerly representing such shares, be entitled to
receive certificates representing the number of
whole shares of CSW Common Stock or Surviving
Corporation Preferred Stock, as the case may be,
to be issued in respect of the aggregate number of
such shares of EPE Common Stock or EPE Preferred
<PAGE> 67
Stock previously represented by the stock
certificates converted in accordance with Section
2.8(c) and (d)."
4. Article VII, Section 7.2, is amended by deleting
the last sentence thereof and inserting in lieu thereof
the following:
"If the Merger is for any reason not
consummated (unless CSW terminates the Merger
Agreement pursuant to Section 9.1(b)(ii), Section
9.1(b)(iii) or Section 9.1(b)(vii) hereof), then
CSW shall be required to pay to EPE an aggregate
amount equal to the sum of the following: (i) the
cost of all instruments (after subtracting any
gains realized either before or after the date of
termination of the Merger Agreement on such
hedging instruments) purchased pursuant to Section
5.1(C) of the Modified Third Amended Plan of
Reorganization, as filed in the Bankruptcy Court
on July 30, 1993 (the "Modified Third Amended
Plan"), plus (ii) one-sixth of all cash interest
payments paid prior to the date of termination of
the Merger Agreement, or accrued or incurred prior
to the date of termination of the Merger Agreement
and subsequently paid, by EPE pursuant to the
Modified Third Amended Plan to creditors in
Classes 11, 12 and 13, as defined in the Modified
Third Amended Plan, plus (iii) the cost to EPE, if
any, of indemnifying the Palo Verde Indenture
Trustees (as defined in the Modified Third Amended
Plan) against any and all losses and claims,
including but not limited to reasonable related
costs and expenses, incurred by such Palo Verde
Indenture Trustees which result from steps taken
on or after the Confirmation Date that are in
furtherance of the provisions of the Plan or at
the request of EPE to facilitate the transfers
described in Section 3.14(A)(3) of the Modified
Third Amended Plan, plus (iv) one-half of the
aggregate fees and expenses to be paid on or after
the Confirmation Date pursuant to the Modified
Third Amended Plan of Classes 1, 2, 3 and 12, as
defined in the Modified Third Amended Plan, and to
Canadian Imperial Bank of Commerce, a member of
Class 5 under the Modified Third Amended Plan;
provided, however, that CSW shall be required to
pay only, in the case of clauses (i), (ii) and
(iv) above, such costs or interest payments, as
the case may be, paid prior to the date of
termination of the Merger Agreement, or accrued or
incurred prior to the date of termination of the
Merger Agreement and subsequently paid, by EPE
and, in the case of clause (iii) above, such costs
<PAGE> 68
of indemnifying the Palo Verde Indenture Trustees
(as defined in the Modified Third Amended Plan)
which result from steps taken on or after the
Confirmation Date that are in furtherance of the
provisions of the Plan or at the request of EPE to
facilitate the transfers described in Section
3.14(A)(3) of the Modified Third Amended Plan. CSW
shall discuss with EPE any modifications to the
provisions of the Plan related to treatment of
creditors and preferred stockholders.
Notwithstanding the foregoing, CSW shall have the
right to propose modifications to the provisions
of the Plan related to treatment of creditors and
preferred stockholders to secure confirmation of
the Plan, and EPE shall advance the Plan
modifications requested by CSW with respect to
each such provision; provided, however, that EPE's
obligation to advance any such proposed Plan
modifications which may be effective before the
Effective Time, shall be subject to (x) CSW
delivering a written agreement in form
satisfactory to EPE pursuant to which CSW will
bear 100% of the costs reflected in or resulting
from such modification, whether or not EPE might
have been required to pay such costs in any event
or (y) execution by EPE and CSW of a mutually
satisfactory written agreement as to the extent of
CSW's obligations for the costs to EPE which
result from such modifications in the event the
Merger is for any reason not consummated (unless
CSW terminates the Merger Agreement pursuant to
Section 9.1(b)(ii), Section 9.1(b)(iii) or Section
9.1(b)(vii) hereof). It is the express intention
of the Parties hereto that the costs to be borne
by CSW, if any, under this Section 7.2 shall be
limited solely to those costs specified in clauses
(i) through (iv) of the third full sentence of
this Section 7.2 and to those costs specified in
the agreements, if any, referred to in clauses (x)
and (y) of the fifth full sentence of this Section
7.2. Nothing in this Section 7.2 shall limit the
parties' obligations under Section 9.3 of this
Merger Agreement."
5. Article VIII, Section 8.1, is amended by deleting
the first complete parenthetical in the first sentence
thereof and inserting in lieu thereof the following:
"(except for Section 2.8(e) and the third,
fourth, fifth and sixth full sentences of Section
7.2 hereof, which shall be effective and binding
as of the initial filing of the Plan in the
Bankruptcy Court)"
<PAGE> 69
6. Article IX, Section 9.1(b) is amended by modifying
(vi) to read as follows:
"within one-hundred and forty (140) days
after the filing of the Plan, the Bankruptcy Court
shall not have entered an order approving the
Disclosure Statement;"
7. Article IX, Section 9.2, is amended by deleting
the first complete parenthetical and inserting in lieu
thereof the following:
"(other than Section 2.8(e) and the third,
fourth, fifth and sixth full sentences of Section
7.2, Section 9.3 and Article X hereof, which
remain in full force and effect)"
8. Article IX, Section 9.3 is amended by deleting
clause (i) contained in the last sentence thereof and
inserting in lieu thereof the following:
"(i) shall pay to EPE any amounts which CSW
is obligated to pay pursuant to clauses (i)
through (iv) of the third full sentence of Section
7.2 and pursuant to those agreements, if any,
referred to in the fifth full sentence of Section
7.2,"
9. Article X, Section 10.15, is amended by deleting
the last proviso thereof and inserting in lieu thereof
the following:
"; provided, however, that this Section 10.15
shall not be deemed to prejudice the rights of the
parties hereto pursuant to Section 2.8(e), the
third, fourth, fifth and sixth full sentences of
Section 7.2, Section 9.3 and this Article X."
The foregoing constitute the only amendments effected
by this Second Amendment, and all other provisions of the Merger
Agreement continue in full force and effect as contained therein.
IN WITNESS WHEREOF, the Parties have caused this
Amendment to be signed by their respective officers thereunto
duly authorized as of the date stated below; provided that it
shall be sufficient if CSW Sub, Inc. signs the Merger Agreement,
as amended by this Amendment, at any time prior to the Effective
Time.
<PAGE> 70
SUBJECT TO THE APPROVAL OF THE
BANKRUPTCY COURT IN THE BANKRUPTCY CASE
AS PROVIDED IN THIS AGREEMENT
EL PASO ELECTRIC COMPANY
By: /s/ DAVID H. WIGGS, JR.
Date: August 26, 1993 David H. Wiggs, Jr.
Chairman of the Board
President and
Chief Executive Officer
CENTRAL AND SOUTH WEST CORPORATION
Date: August 26, 1993 By: /s/ E.R. BROOKS
E.R. Brooks
Chairman of the Board,
President and
Chief Executive Officer
CSW SUB, INC.
By:________________________________
Name:______________________________
Date: _______________ Title:_____________________________
<PAGE> 71
_________________________________________________________________
THIRD AMENDMENT DATED AS OF DECEMBER 1, 1993
TO
AGREEMENT AND PLAN
OF
MERGER
Among
El Paso Electric Company,
Central and South West Corporation
and
CSW Sub, Inc.
Dated as of May 3, 1993
as amended on May 18, 1993
_________________________________________________________________
<PAGE> 72
Amendment, dated as of December 1, 1993 ("Third
Amendment"), to Agreement and Plan of Merger, among El Paso
Electric Company ("EPE"), Central and South West Corporation
("CSW"), and CSW Sub, Inc., dated as of May 3, 1993, as amended
on May 18, 1993 and August 26, 1993, respectively (the "Merger
Agreement").
The Merger Agreement was executed by the parties other
than CSW Sub, Inc. (the "Parties") as of May 3, 1993 and amended
on May 18, 1993 and August 26, 1993, respectively, and the
Parties have determined that it is in the best interests of such
Parties to make the following additional amendment to the Merger
Agreement.
Now therefore, in consideration of the premises and
other good and valuable consideration, receipt of which is hereby
acknowledged, the Parties hereby agree as follows:
1. The Definition of "CSW Required Statutory
Approvals" in Article I, Section 1.1, is amended by modifying
(xii) to read as follows:
"any required approvals of any governmental bodies in
each relevant jurisdiction granting rate relief in an
amount and upon the terms and conditions as the rate
relief embodied in the Plan or in Exhibit E to the
Disclosure Statement."
2. The Definition of "EPE Required Statutory
Approvals" in Article I, Section 1.1, is amended by modifying
(viii) to read as follows:
"any required approvals of any governmental bodies in
each relevant jurisdiction granting rate relief in an
amount and upon the terms and conditions as the rate
relief embodied in the Plan or in Exhibit E to the
Disclosure Statement."
3. Article VII, Section 7.2, is amended by modifying
the last line of (i) to read as follows:
"July 30, 1993, and as further amended on or prior to
the date hereof (the "Modified Third Amended Plan"),
plus"
The foregoing constitutes the only amendment effected
by this Third Amendment, and all other provisions of the Merger
Agreement continue in full force and effect as contained therein.
<PAGE> 73
IN WITNESS WHEREOF, the Parties have caused this
Amendment to be signed by their respective officers thereunto
duly authorized as of the date stated below; provided that it
shall be sufficient if CSW Sub, Inc. signs the Merger Agreement,
as amended by this Amendment, at any time prior to the Effective
Time.
SUBJECT TO THE APPROVAL OF THE
BANKRUPTCY COURT IN THE BANKRUPTCY
CASE AS PROVIDED IN THIS AGREEMENT
EL PASO ELECTRIC COMPANY
Date: December 1, 1993 By: /s/ DAVID H. WIGGS, JR.
David H. Wiggs, Jr.
Chairman of the Board,
President and Chief
Executive Officer
CENTRAL AND SOUTH WEST CORPORATION
Date: December 1, 1993 By: /s/ E.R. BROOKS
E.R. Brooks
Chairman of the Board,
President and Chief Executive
Officer
CSW Sub, Inc.
Date: ________________ By: _____________________________
Name: ___________________________
Title: ___________________________
<PAGE> 74
SCHEDULE 3.2(b)
Voting Trusts, Proxies, Agreements or Understandings
El Paso Electric Company will be bound by proxies delivered in
connection with the Annual Meeting of Shareholders scheduled to
be held June 22, 1993.
<PAGE> 1
EXHIBIT B-2
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE WESTERN DISTRICT OF TEXAS
AUSTIN DIVISION
IN RE: S
S
EL PASO ELECTRIC COMPANY, S CASE NO. 92-10148-FM
S (Chapter 11)
DEBTOR. S
MODIFIED THIRD AMENDED PLAN OF REORGANIZATION
OF
THE DEBTOR
PROVIDING FOR THE ACQUISITION OF
EL PASO ELECTRIC COMPANY
BY
CENTRAL AND SOUTH WEST CORPORATION
CORRECTED: 12/6/93
<PAGE> 2
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 3
TABLE OF CONTENTS
Page
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I DEFINITIONS. . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II CLASSIFICATION OF CLAIMS AND INTERESTS . . . . . .21
2.1 Class 1 Claims (Allowed Claims arising from or
related to the EPE First Mortgage Bonds) . . . . . .21
2.2 Class 2 Claims (Allowed Claims arising from or
related to the EPE Second Mortgage Bonds). . . . . .22
2.3 Class 3 Claims (Allowed Claims arising from or
related to the Revolving Credit Facility). . . . . .22
2.4 Classes 4(a) Through 4(i) Claims (Allowed Claims
arising from or related to Maricopa Loan
Agreements and Maricopa PCBs). . . . . . . . . . . .22
2.5 Class 5(a) Through 5(c) Claims (Allowed Claims
arising from or relating to the Maricopa PCB LCs). .23
2.6 Class 6 Claims (Allowed Claims arising from or
relating to the RGRT Agreement and other RGRT
Allowed Claims). . . . . . . . . . . . . . . . . . .23
2.7 Class 7 Claims (Other Allowed Secured Claims). . . .23
2.8 Class 8 Claims (Allowed Priority Claims) . . . . . .23
2.9 Class 9 Claims (Allowed customer refund and
deposit Claims). . . . . . . . . . . . . . . . . . .23
2.10 Classes 10(a) and 10(b) Claims (Allowed Claims
arising from or related to the Farmington
Agreement and the Farmington Series A 1983 PCB). . .23
2.11 Class 11 Claims (Allowed Claims arising from or
relating to the Farmington PCB LC) . . . . . . . . .24
2.12 Classes 12(a) and 12(b) Claims (Allowed Claims
arising from or relating to the Palo Verde Leases,
the Lease Obligation Bonds and the Secured Lease
Obligation Bonds.) . . . . . . . . . . . . . . . . .24
2.13 Class 13 Claims (Allowed Claims not classified
elsewhere) . . . . . . . . . . . . . . . . . . . . .25
2.14 Class 14 Claims (Allowed Claims of small creditors
-- administrative convenience Class) . . . . . . . .25
2.15 Class 15 Interests (Allowed EPE Preferred Stock
Interests) . . . . . . . . . . . . . . . . . . . . .25
2.16 Class 16 Interests (Allowed EPE Common Stock
Interests) . . . . . . . . . . . . . . . . . . . . .26
ARTICLE III TREATMENT OF CLAIMS AND INTERESTS . . . . . . . .26
3.1 Administrative Expenses. . . . . . . . . . . . . . .26
3.2 Priority Tax Claims. . . . . . . . . . . . . . . . .26
3.3 Class 1 Claims (Allowed Claims arising from or
related to the EPE First Mortgage Bonds) . . . . . .27
(i)
<PAGE> 4
Section Page
3.4 Class 2 Claims (Allowed Claims arising from or
related to the EPE Second Mortgage Bonds). . . . . .30
3.5 Class 3 Claims (Allowed Claims arising from or
related to the Revolving Credit Facility . . . . . .33
3.6 Classes 4(a) Through 4(i) Claims (Allowed Claims
arising from or related to Maricopa Loan
Agreements and Maricopa PCBs). . . . . . . . . . . .39
3.7 Classes 5(a) Through 5(c) Claims (Allowed Claims
arising from or relating to the Maricopa PCB LCs). .40
3.8 Class 6 Claims (Allowed Claims arising from or
relating to the RGRT Agreement and other RGRT
Allowed Claims). . . . . . . . . . . . . . . . . . .47
3.9 Class 7 Claims (Other Allowed Secured Claims). . . .51
3.10 Class 8 Claims (Allowed priority Claims) . . . . . .51
3.11 Class 9 Claims (Allowed customer refund and
deposit Claims). . . . . . . . . . . . . . . . . . .51
3.12 Classes 10(a) and 10(b) Claims (Allowed Claims
arising from or related to the Farmington
Agreement and the Farmington Series A 1983 PCB). . .51
3.13 Class 11 Claims (Allowed Claims arising from or
relating to the Farmington PCB LC) . . . . . . . . .52
3.14 Class 12(a) Claims (Allowed Claims Relating to
Palo Verde Leases, the Secured Lease Obligation
Bonds and the Lease Obligation Bonds, Except
Allowed Claims Included in Class 12(b)) and Class
12(b) Claims (Allowed Claims of Owner
Participants). . . . . . . . . . . . . . . . . . . .57
3.15 Class 13 Claims (Allowed Claims not classified
elsewhere) . . . . . . . . . . . . . . . . . . . . .62
3.16 Class 14 Claims (Allowed claims of small
creditors administrative convenience Class). . . .65
3.17 Class 15 Interests (Allowed EPE Preferred Stock
Interests) . . . . . . . . . . . . . . . . . . . . .66
3.18 Class 16 Interests (Allowed EPE Common Stock
Interests) . . . . . . . . . . . . . . . . . . . . .68
ARTICLE IV TREATMENT OF EXECUTORY CONTRACTS
AND UNEXPIRED LEASES . . . . . . . . . . . . . .69
4.1 Assumption . . . . . . . . . . . . . . . . . . . . .69
4.2 Cure Payments and Release of Liability . . . . . . .70
4.3 Rejected Contracts . . . . . . . . . . . . . . . . .70
ARTICLE V IMPLEMENTATION OF PLAN. . . . . . . . . . . . . . .72
5.1 Actions Occurring On and After The Date The
Confirmation Order is Entered. . . . . . . . . . . .72
5.2 Actions Occurring On The Effective Date. . . . . . .78
5.3 Distributions Occurring On And After The Effective
Date . . . . . . . . . . . . . . . . . . . . . . . .81
(ii)
<PAGE> 5
Section Page
5.4 Procedure For Determination Of Claims And
Interests. . . . . . . . . . . . . . . . . . . . . .84
5.5 Restrictions on Transfer; Issuance of CSW Common
Stock. . . . . . . . . . . . . . . . . . . . . . . .85
5.6 Exemption from Securities Laws . . . . . . . . . . .87
ARTICLE VI CONDITIONS TO CONFIRMATION AND EFFECTIVE DATE
AND PROVISION FOR MODIFICATION OF THE PLAN. . . .88
6.1 Conditions to Confirmation . . . . . . . . . . . . .88
6.2 Conditions to Occurrence of Effective Date . . . . .88
6.3 Waiver of Conditions . . . . . . . . . . . . . . . .89
6.4 Effect of Nonoccurrence of Conditions to the
Effective Date . . . . . . . . . . . . . . . . . . .90
6.5 Non-consensual Confirmation. . . . . . . . . . . . .90
6.6 Modification of the Plan . . . . . . . . . . . . . .90
6.7 Revocation of Plan . . . . . . . . . . . . . . . . .92
ARTICLE VII MISCELLANEOUS . . . . . . . . . . . . . . . . . .93
7.1 Retention of Jurisdiction. . . . . . . . . . . . . .93
7.2 Retention Of Causes Of Action. . . . . . . . . . . .94
7.3 Unclaimed Property . . . . . . . . . . . . . . . . .95
7.4 Limitation of Liability. . . . . . . . . . . . . . .96
7.5 Terms Binding. . . . . . . . . . . . . . . . . . . .96
7.6 Additional Terms of Securities and Other
Instruments. . . . . . . . . . . . . . . . . . . . .96
7.7 Inconsistencies. . . . . . . . . . . . . . . . . . .97
7.8 Governing Law. . . . . . . . . . . . . . . . . . . .97
7.9 Severability . . . . . . . . . . . . . . . . . . . .97
SCHEDULE A . . . . . . . . . . . . . . . . . . . . . . . . .SA-1
SCHEDULE B . . . . . . . . . . . . . . . . . . . . . . . . .SB-1
SCHEDULE C . . . . . . . . . . . . . . . . . . . . . . . . .SC-1
SCHEDULE D . . . . . . . . . . . . . . . . . . . . . . . . .SD-1
SCHEDULE E . . . . . . . . . . . . . . . . . . . . . . . . .SE-1
(iii)
<PAGE> 6
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 7
El Paso Electric Company, debtor and debtor in
possession herein ("EPE" or "Debtor"), proposes the following
plan pursuant to Chapter 11 of the Bankruptcy Code (the "Code")
and pursuant to and in connection with the Agreement and Plan of
Merger by and between the Debtor and Central and South West
Corporation ("CSW").
INTRODUCTION
This Plan of Reorganization encompasses a reorgani-
zation of the Debtor pursuant to which the Debtor will become a
direct wholly-owned subsidiary of CSW. Under the Plan, existing
creditors and existing equity security holders of the Debtor will
receive cash and/or securities of the Debtor and/or CSW.
Pursuant to a merger agreement among the Debtor, CSW and a
wholly-owned subsidiary of CSW to be organized solely to effect
the merger and, effective simultaneously with the effectiveness
of the Plan, such wholly-owned subsidiary of CSW will merge with
and into the Debtor; and CSW will become the owner of all of the
issued and outstanding shares of common stock of the Reorganized
Debtor.
Reference is made to the Disclosure Statement accompany-
ing this Plan, including the Exhibits thereto (the "Disclosure
Statement"), for a discussion of the Debtor's history, business,
results of operations, and properties, and for a summary and
analysis of this Plan. All creditors and equity security holders
are encouraged to consult the Disclosure Statement before voting
to accept or reject this Plan. NO SOLICITATION MATERIALS, OTHER
THAN THE DISCLOSURE STATEMENT AND RELATED MATERIALS TRANSMITTED
THEREWITH AND APPROVED BY THE BANKRUPTCY COURT, HAVE BEEN
AUTHORIZED BY THE BANKRUPTCY COURT FOR USE IN SOLICITING
ACCEPTANCES OR REJECTIONS OF THIS PLAN.
ARTICLE I
DEFINITIONS
In addition to such other terms as are defined in other
sections of this Plan, the following terms (which appear in this
Plan as capitalized terms) shall have the meanings set forth
below, such meanings to be applicable to both the singular and
plural forms of the terms defined. A term used in the Plan and
not defined herein or elsewhere in the Plan but that is defined
in the Code has the meaning set forth in the Code.
1.1 "Additional Consideration" means the cash amounts
actually realized or saved (e.g., after deducting any amounts
previously assigned or otherwise committed by the Debtor to other
parties) from the Tangible Assets, the Intangible Assets and the
Reduction in Claims.
<PAGE> 8
1.2 "Affiliate" means, with respect to any specified
Person, any Person that directly, or indirectly through one or
more intermediaries, controls, is controlled by, or is under
common control with, the Person specified.
1.3 "Allowed Claim" means a Claim against the Debtor
to the extent that:
a. (1) the Claim was timely filed or the Claim
was listed in the Schedules prepared and
filed with the Bankruptcy Court and not
listed as disputed, contingent or
unliquidated as to amount; and
(2) the Debtor or any other party in
interest entitled to do so does not file
an objection prior to the Effective Date
or such other date as may be established
by this Plan or the Bankruptcy Court;
b. the Claim is allowed by a Final Order of the
Bankruptcy Court; or
c. the Claim is allowed by this Plan.
1.4 "Allowed Interest" means an Interest as to which
(i) neither the Debtor, Reorganized EPE, nor any other party in
interest entitled to do so has filed an objection within a time
fixed by the Bankruptcy Court, or (ii) the Interest is allowed by
a Final Order of the Bankruptcy Court, or the (iii) Interest is
allowed by this Plan.
1.5 "Allowed Secured Claim" means an Allowed Claim
secured by an Encumbrance on or interest in property of the
Debtor or that is subject to setoff under Section 553 of the
Code, but only to the extent of the value of the Creditor's
interest in the Debtor's interest in such property or to the
extent of the amount subject to setoff, which value shall be
determined as provided in Section 506(a) of the Code.
1.6 "Articles of Incorporation" means the Restated
Articles of Incorporation of El Paso Electric Company filed with
the Office of the Secretary of State of Texas on September 20,
1988.
1.7 "Bankruptcy Court" means the United States
Bankruptcy Court for the Western District of Texas, Austin
Division in which the Chapter 11 Petition of the Debtor was filed
on January 8, 1992, or any other court with jurisdiction over the
Case.
1.8 "Bankruptcy Rules" means the Rules of Practice and
Procedure in Bankruptcy prescribed by the United States Supreme
<PAGE> 9
Court pursuant to 28 U.S.C. Section 2075 as the same were in
effect on the Petition Date and as amended thereafter to the
extent applicable to the Case.
1.9 "Bar Date" means June 15, 1992, which is the date
by which Claims had to be filed with the Bankruptcy Court
pursuant to the Order and Notice dated February 18, 1992, or such
other date prior to the Confirmation Date by which particular
Claims and Interests must be filed as the Bankruptcy Court has
ordered or such other date established by this Plan.
1.10 "Business Day" means and refers to any day (other
than a day which is a Saturday, Sunday or legal holiday in the
State of Texas) on which banks are open for business in the city
of Dallas, Texas.
1.11 "CAI" means the warrants owned by EPE to purchase
common stock of CAI Corporation.
1.12 "Case" means the above captioned and numbered
reorganization proceeding of the Debtor under Chapter 11 of the
Code.
1.13 "Causes of Action" means all claims and causes of
action now owned or hereafter acquired by the Debtor, whether
arising under any contract or under the Code or other federal or
state law, including, without limitation, any causes of action
arising under Sections 544, 545, 547, 548, 549, 550, 551 or other
sections of the Code.
1.14 "Claim" means "claim" as defined in Section 101(5)
of the Code.
1.15 "Claims against APS" means one or more potential
causes of action against Arizona Public Service Company as
operating agent of the Palo Verde Nuclear Generating Station for
damages in connection with certain outages at the Palo Verde
Nuclear Generating Station in 1989 and 1990.
1.16 "Class 12(a) Distribution Amount" shall have the
meaning ascribed to such term in Section 3.14(A) of the Plan.
1.17 "Class 13 Disputed Claim" means any Claim that is
disputed by the Debtor or that is contingent or unliquidated as
to amount which would be an Allowed Class 13 Claim if such Claim
were to become an Allowed Claim; provided, that Class 13 Disputed
Claims shall not include (a) the claims by the Internal Revenue
Service for the years 1983 through 1989, (b) any Class 5(a),
5(b), 5(c), 6 or 11 Claim which is treated as a Class 13 Claim
pursuant to the Plan, (c) any Claim for which the Debtor is
insured, to the extent of such insurance, (d) any Claim arising
from or related to the rejection of an executory contract or
unexpired lease under Section 365 of the Code, (e) any Claims
<PAGE> 10
arising from or related to any environmental contamination or
remediation or the release or threatened release of any hazardous
substances up to $10 million in the aggregate of all such
environmental contamination, remediation or release Claims,
(f) any Claim that was neither listed in the Schedules nor filed
with the Bankruptcy Court by the Bar Date, and (g) any Claim
which, if Allowed, will not result in an additional distribution
pursuant to this Plan.
1.18 "Class 15 Distribution Amount" shall have the
meaning ascribed to such term in Section 3.17 of the Plan.
1.19 "Code" means the United States Bankruptcy Code,
11 U.S.C. Sections 101 et seq., as amended from time to time.
1.20 "Committees" means the Creditors Committee and the
Equity Committee.
1.21 "Common Stock Exchange Ratio" means the fraction
determined by dividing $3.00 by the CSW Share Value.
1.22 "Confirmation" means "confirmation" as used in
Section 1129 of the Code.
1.23 "Confirmation Date" means the date on which the
Confirmation Order is entered by the Bankruptcy Court.
1.24 "Confirmation Hearing" means the hearing at which
the Bankruptcy Court considers Confirmation of the Plan.
1.25 "Confirmation Order" means an order of the
Bankruptcy Court, which need not be a Final Order, confirming the
Plan.
1.26 "Creditor" means "creditor" as defined in Section
101(10) of the Code.
1.27 "Creditors Committee" means the Official Committee
of Unsecured Creditors of El Paso Electric Company appointed by
the United States Trustee in the Case, as modified by the
addition, resignation, or removal of members from time to time.
1.28 "CSW" means Central and South West Corporation, a
Delaware corporation.
1.29 "CSW Class 12/13 Determination Date Share Value"
means an amount equal to the average closing sale price, rounded
to four decimal places, of a share of CSW Common Stock, as
reported in the Wall Street Journal, New York Stock Exchange
Composite Transactions, for the sixty (60) consecutive trading
day period ending on (and including) the sixth trading day
immediately prior to (a) the Effective Date (i) with respect to
shares of CSW Common Stock to be issued or released to Creditors
on the Effective Date, and (ii) for purposes of determining the
<PAGE> 11
number of shares of CSW Common Stock which would be otherwise
distributed to holders of Allowed Claims or Interests in Classes
11, 12(a), 13 or 15 that are to receive cash pursuant to Section
5.3(C) of the Plan, (b) the date which is the ninetieth day after
the Effective Date with respect to shares of CSW Common Stock to
be issued or released to Creditors on that date, (c) the date
which is the one-hundred and eightieth day after the Effective
Date with respect to shares of CSW Common Stock to be issued or
released to Creditors on that date, (d) the date which is the
two-hundred and fortieth day after the Effective Date with
respect to shares of CSW Common Stock to be issued or released to
holders of Allowed Class 15 Interests on that date, and (e) the
date which is the three-hundred and sixty-fifth day after the
Effective Date with respect to shares issued or released to
Creditors on that date.
1.30 "CSW Class 12/13 Share Value" means the CSW Class
12/13 Determination Date Share Value; provided, however, that if
the average closing sale price with respect to subparagraphs (a),
(b), (c), (d), and (e) of Section 1.29 as applicable: (i) is
equal to an amount that is between ninety-five percent (95%) and
one hundred and five percent (105%) of CSW Share Value, then the
CSW Class 12/13 Share Value shall be equal to the CSW Share
Value, (ii) is greater than or equal to one hundred and five
percent (105%) of CSW Share Value, then CSW Class 12/13 Share
Value shall equal ninety-five and twenty-four hundredths percent
(95.24%) of CSW Class 12/13 Determination Date Share Value, or
(iii) is less than or equal to ninety-five percent (95%) of CSW
Share Value then CSW Class 12/13 Share Value shall equal one
hundred five and twenty-six hundredths percent (105.26%) of CSW
Class 12/13 Determination Date Share Value.
1.31 "CSW Class 15 Notice" shall have the meaning
ascribed to such term in Section 3.17 of the Plan.
1.32 "CSW Common Stock" means the common stock, par
value $3.50 per share, of CSW.
1.33 "CSW Common Stock Acquisition Fund" means, as of
the Effective Date, the number of shares of CSW Common Stock that
would have accumulated in an escrow fund equal to the sum of the
following: (i) the number of shares of CSW Common Stock that
would have been purchased and placed in such escrow fund on the
Confirmation Date in an amount equal to the number of shares
determined by multiplying the aggregate number of shares of EPE
Common Stock outstanding on the Confirmation Date by the Common
Stock Exchange Ratio; (ii) the number of shares of CSW Common
Stock that would have been purchased and placed in such escrow
fund on the Confirmation Date, at the CSW Share Value, with the
proceeds of the Additional Consideration realized prior to the
Confirmation Date, but only to the extent the aggregate amount of
such Additional Consideration is equal to or less than the
product of (A) $1.50 multiplied by (B) the number of shares of
EPE Common Stock outstanding on the Confirmation Date (such
<PAGE> 12
product hereinafter referred to as the "Maximum Additional
Consideration Amount"); (iii) the number of shares of CSW Common
Stock that would have been purchased and placed in such escrow
fund, at the closing price for shares of CSW Common Stock on the
dates Additional Consideration is realized, between the
Confirmation Date and the Effective Date, with the proceeds of
such Additional Consideration, but only to the extent the
aggregate amount of such Additional Consideration, together with
any Additional Consideration realized under clause (ii) above is
equal to or less than the Maximum Additional Consideration
Amount; and (iv) the number of shares equal to the aggregate
dividends, assumed to be paid in the form of shares of CSW Common
Stock based on the closing price of such shares on the respective
dividend payment dates (the "Dividend Shares"), that would have
been paid (X) on shares of CSW Common Stock placed in such escrow
fund pursuant to clauses (i) and (ii) above as though such shares
were placed in such escrow fund on the Confirmation Date, (Y) on
shares of CSW Common Stock placed in such escrow fund pursuant to
clause (iii) above as though such shares were placed in such
escrow fund on the respective dates on which the Additional
Consideration is realized, and (Z) on shares of CSW Common Stock
placed in such escrow fund pursuant to clause (iv) above, as
though such Dividend Shares were placed in such escrow fund on
the respective CSW Common Stock dividend payment dates therefor.
For purposes of clause (iv) above, dividends shall be considered
paid on shares of CSW Common Stock which are placed in such
escrow fund pursuant to clause (i), (ii), (iii), or (iv) above
prior to the ex-dividend date for the payment of such dividends.
For purposes of this definition, all closing prices for shares of
CSW Common Stock shall be as reported in the Wall Street Journal,
New York Stock Exchange Composite Transactions.
1.34 "CSW Share Value" means an amount equal to the
average closing sale price, rounded to four decimal places, of a
share of CSW Common Stock, as reported in the Wall Street
Journal, New York Stock Exchange Composite Transactions, for the
fifteen (15) consecutive trading day period ending on (and
including) the sixth trading day immediately prior to the
Confirmation Date.
1.35 "CSW Sub" means the wholly-owned subsidiary of
CSW, which will be organized by CSW under the laws of the State
of Texas and merged with and into the Debtor on the Effective
Date, as described in Section 5.2(B) of this Plan.
1.36 "Disclosure Statement" means the Disclosure
Statement respecting this Plan approved by order of the Bank-
ruptcy Court, and all supplements and exhibits thereto filed by
the Debtor.
1.37 "Disputed Claim" means a Claim against the Debtor
which is not an Allowed Claim.
<PAGE> 13
1.38 "Disputed Interest" means an Interest in the
Debtor which is not an Allowed Interest.
1.39 "Dividend Shares" shall have the meaning ascribed
to such term in the definition of the term "CSW Common Stock
Acquisition Fund" in Section 1.33 of the Plan.
1.40 "Effective Date" means a Business Day selected by
the Debtor and CSW that shall be no later than sixty (60) days
after the conditions to Confirmation and to occurrence of the
Effective Date, set forth in Sections 6.1 and 6.2, respectively,
of this Plan have either been satisfied or have been waived
pursuant to Section 6.3 of this Plan.
1.41 "Encumbrance" means, with respect to any interest
in property, any mortgage, lien, pledge, charge, security
interest, easement, or encumbrance of any kind whatsoever
affecting such interest in property.
1.42 "EPE Common Stock" means all common stock, no par
value, or options to purchase common stock (except that such
options shall not be counted as EPE Common Stock for purposes of
determining the CSW Common Stock Acquisition Fund as defined in
Section 1.33 of the Plan), of the Debtor, issued and outstanding
immediately prior to the Effective Date.
1.43 "EPE Debt Securities" means each of the existing
EPE First Mortgage Bonds and EPE Second Mortgage Bonds.
1.44 "EPE Equity Securities" means the existing EPE
Preferred Stock and the EPE Common Stock.
1.45 "EPE First Mortgage Bond Indenture" means that
certain Indenture of Mortgage, relating to First Mortgage Bonds,
dated October 1, 1946, between the Debtor and State Street Trust
Company, as Trustee, as supplemented and amended.
1.46 "EPE First Mortgage Bonds" means the mortgage
bonds issued pursuant to the EPE First Mortgage Bond Indenture.
1.47 "EPE Preferred Stock" means any or all of the
separate series of preferred stock (further defined in Sections
1.118 through 1.127 of the Plan) issued by the Debtor and
outstanding immediately prior to the Effective Date.
1.48 "EPE Second Mortgage Bond Indenture" means that
certain Indenture of Mortgage, relating to Second Mortgage Bonds,
dated as of June 1, 1981, between the Debtor and First City
National Bank of El Paso, as Trustee, as supplemented and
amended.
1.49 "EPE Second Mortgage Bonds" means the mortgage
bonds issued pursuant to the EPE Second Mortgage Bond Indenture.
<PAGE> 14
1.50 "EPE Securities" means the EPE Debt Securities and
EPE Equity Securities.
1.51 "Equity Committee" means the Official Committee of
Equity Security Holders of El Paso Electric Company appointed by
the United States Trustee in the Case, as modified by the
addition, resignation, or removal of members from time to time.
1.52 "Farmington" means the City of Farmington, New
Mexico.
1.53 "Farmington Agreement" means that Installment Sale
Agreement entered into between Farmington and the Debtor, dated
as of November 1, 1983, in connection with the issuance of the
Farmington Series A 1983 PCB.
1.54 "Farmington LC Terms" shall have the meaning
ascribed to such term in Section 3.13(A) of the Plan.
1.55 "Farmington Series A 1983 PCB" means the Annual
Tender Pollution Control Revenue Refunding Bonds, 1983 Series A
(El Paso Electric Company Four Corners Project) issued by
Farmington in the original principal amount of $35,805,000 which
mature on November 1, 2013.
1.56 "Farmington PCB LC" means that certain Letter of
Credit dated December 6, 1983, issued by Citibank N.A., as
amended, extended and supplemented, with respect to the
Farmington Series A 1983 PCB.
1.57 "Final Order" means, as to any court, adminis-
trative agency or other tribunal, an order or judgment of such
tribunal as entered on its docket as to which the time to appeal
or petition for rehearing or certiorari has expired and as to
which no appeal or petition for rehearing or certiorari is
pending or, if an appeal or petition for rehearing or certiorari
has been timely filed or taken, the order or judgment of the
tribunal has been affirmed (or such appeal or petition has been
dismissed as moot) by the highest court (or other tribunal having
appellate jurisdiction over the order or judgment) to which the
order was appealed or the petition for rehearing or certiorari
has been denied, and the time to take any further appeal or to
seek further rehearing or certiorari has expired.
1.58 "First Service Collateral" means certain cash
proceeds and collateral granted to EPE to secure payments of
certain annuities of First Service Life Insurance Company in
which the Debtor asserts a perfected security interest and which,
as of May 5, 1993, was held by the Receiver pending final
resolution of the litigation described under "Item 3. Legal
Proceedings - First Service Life Civil Litigation" in the Annual
Report on Form 10-K of EPE for the year ended December 31, 1992,
as well as EPE's fee interest in that collateral consisting of
<PAGE> 15
approximately $2.3 million, plus interest thereon and 100% of the
outstanding common stock of Triangle Electric Company.
1.59 "First Service Litigation Fees" means the legal
fees and administrative costs asserted by the Debtor to be
recoverable from the State of Texas as a result of certain
actions by the State of Texas in the litigation described under
"Item 3. Legal Proceedings - First Service Life Civil
Litigation" in the Annual Report on Form 10-K of EPE for the year
ended December 31, 1992, and the filing by the Debtor of a claim
for recovery of such fees.
1.60 "FMB Series 4.625% 1992" means the first mortgage
bonds issued pursuant to that certain Seventh Supplemental
Mortgage Indenture between the Debtor and State Street Bank and
Trust Company dated as of February 1, 1962.
1.61 "FMB Series 6.75% 1998" means the first mortgage
bonds issued pursuant to that certain Ninth Supplemental Mortgage
Indenture between the Debtor and State Street Bank and Trust
Company dated as of May 1, 1968.
1.62 "FMB Series 7.75% 2001" means the first mortgage
bonds issued pursuant to that certain Tenth Supplemental Mortgage
Indenture between the Debtor and State Street Bank and Trust
Company dated as of April 1, 1971.
1.63 "FMB Series 9% 2004" means the first mortgage
bonds issued pursuant to that certain Eleventh Supplemental
Mortgage Indenture between the Debtor and State Street Bank and
Trust Company dated as of November 1, 1974.
1.64 "FMB Series 10.5% 2005" means the first mortgage
bonds issued pursuant to that certain Twelfth Supplemental
Mortgage Indenture between the Debtor and State Street Bank and
Trust Company dated as of November 1, 1975.
1.65 "FMB Series 8.5% 2007" means the first mortgage
bonds issued pursuant to that certain Fourteenth Supplemental
Mortgage Indenture between the Debtor and State Street Bank and
Trust Company dated as of April 1, 1977.
1.66 "FMB Series 9.95% 2004" means the first mortgage
bonds issued pursuant to that certain Sixteenth Supplemental
Mortgage Indenture between the Debtor and State Street Bank and
Trust Company dated as of May 1, 1979.
1.67 "FMB Series 13.25% 1994" means the first mortgage
bonds issued pursuant to that certain Nineteenth Supplemental
Mortgage Indenture between the Debtor and State Street Bank and
Trust Company dated as of May 1, 1984.
<PAGE> 16
1.68 "FMB Series 11.1% 2001" means the first mortgage
bonds issued pursuant to that certain Twenty-Third Supplemental
Mortgage Indenture between the Debtor and State Street Bank and
Trust Company dated as of January 1, 1990.
1.69 "FMB Series 1989 Floating Rate" means the first
mortgage bonds issued pursuant to that certain Twenty-Second
Supplemental Mortgage Indenture between the Debtor and State
Street Bank and Trust Company dated as of October 1, 1989.
1.70 "Funding Corporations" means El Paso Funding
Corporation and Del Norte Funding Corporation.
1.71 "Hedged Amount" shall have the meaning ascribed to
such term in Section 5.1(C) of the Plan.
1.72 "Hedged CSW Common Stock" shall have the meaning
ascribed to such term in Section 5.1(C) of the Plan.
1.73 "Initial Lock-Up Period" shall have the meaning
ascribed to such term in Section 5.5(A) of the Plan.
1.74 "Intangible Assets" means the sum of (i) all
amounts recovered from the First Service Collateral; (ii) all
recovered First Service Litigation Fees; (iii) the first Ten
Million Dollars ($10,000,000) of any amounts realized, or deemed
to have been realized, as the result of the settlement or other
resolution of the Claims against APS; and (iv) any amounts
realized, or deemed to have been realized, as the result of one
or more potential causes of action against the Owner Participants
arising out of the Owner Participants' alleged wrongful conduct
relating to the Palo Verde Letters of Credit.
1.75 "Investment Grade Rating" means, with respect to
(i) the Reorganized EPE Series A First Mortgage Bonds, (ii) the
Reorganized EPE Series B First Mortgage Bonds, (iii) the
Reorganized EPE Series A Second Mortgage Bonds, (iv) the
Reorganized EPE Series C First Mortgage Bonds, and (v) the
Reorganized EPE Series B Second Mortgage Bonds, a provisional or
actual rating of BBB- or better (or equivalent rating) by at
least two (2) of Moody's Investors Service, Inc., Standard &
Poor's Corporation and Duff & Phelps, Inc.; provided, however,
that such rating shall be an actual rating on the date of
issuance.
1.76 "Interest" means all rights (including unpaid
dividends) arising from any equity security (as defined in
Section 101(16) of the Code) of the Debtor, including, without
limitation, the EPE Preferred Stock and EPE Common Stock.
1.77 "Lease Obligation Bondholders" means holders of
Lease Obligation Bonds.
<PAGE> 17
1.78 "Lease Obligation Bonds" means (i) the 9.375% and
10.75% Lease Obligation Series 1986 Bonds issued by El Paso
Funding Corporation, and (ii) the 8.10%, 9.20%, and 10.375% Lease
Obligation Series 1986A Bonds issued by El Paso Funding Corpora-
tion.
1.79 "LIBOR" means a rate of interest, per annum, equal
to the London interbank offered rate, as determined from time to
time, and for such periods specified, in accordance with the
terms of any bond, note, agreement, or other evidence of
indebtedness under this Plan as to which such LIBOR rate is
applicable.
1.80 "Liquidation Trust" means the trust which is to be
established by EPE on the Effective Date pursuant to
Section 5.2(E) of this Plan.
1.81 "Liquidation Trustee" means the trustee of the
Liquidation Trust.
1.82 "Maricopa LC Terms" shall have the meaning
ascribed to such term in Section 3.7(A) of the Plan.
1.83 "Maricopa County" means Maricopa County, Arizona
Pollution Control Corporation, a non-profit corporation and
political subdivision of the State of Arizona.
1.84 "Maricopa Loan Agreement 1983" means that
certain Loan Agreement entered into between Maricopa County and
the Debtor dated as of December 1, 1983, in connection with the
issuance of the Maricopa Series A 1983 PCB.
1.85 "Maricopa Loan Agreement 1984" means that
certain Loan Agreement entered into between Maricopa County and
the Debtor dated as of December 1, 1984, as amended and
supplemented, in connection with the issuance of the Maricopa
Series E 1984 PCB.
1.86 "Maricopa Loan Agreement 1985" means that
certain Loan Agreement entered into between Maricopa County and
the Debtor dated as of August 1, 1985, in connection with the
issuance of the Maricopa Series A 1985 PCB.
1.87 "Maricopa Loan Agreements" means, individually and
collectively, the Maricopa Loan Agreement - 1983, the Maricopa
Loan Agreement - 1984, and the Maricopa Loan Agreement - 1985.
1.88 "Maricopa PCBs" means individually and
collectively the Maricopa Series A 1983 PCB, the Maricopa Series
E 1984 PCB, and the Maricopa Series A 1985 PCB.
<PAGE> 18
1.89 "Maricopa PCB 1983 LC" means that certain Letter
of Credit dated December 29, 1983, issued by Citibank N.A., as
amended, extended and supplemented, with respect to the Maricopa
Series A 1983 PCB.
1.90 "Maricopa PCB 1984 LC" means that certain Letter
of Credit dated June 18, 1986, issued by Credit Suisse, as
amended, extended and supplemented, with respect to the Maricopa
Series E 1984 PCB.
1.91 "Maricopa PCB 1985 LC" means that certain Letter
of Credit dated August 29, 1985, issued by Westpac Banking
Corporation, Chicago Branch, as amended, extended and
supplemented, with respect to the Maricopa Series A 1985 PCB.
1.92 "Maricopa PCB LCs" means individually and
collectively the Maricopa PCB 1983 LC, the Maricopa PCB 1984 LC,
and the Maricopa PCB 1985 LC.
1.93 "Maricopa Series A 1983 PCB" means the Annual
Tender Pollution Control Revenue Bonds, 1983 Series A (El Paso
Electric Company Palo Verde Project) issued by Maricopa County in
the original principal amount of $63,500,000, which mature on
July 1, 2014.
1.94 "Maricopa Series E 1984 PCB" means the Pollution
Control Revenue Refunding Bonds, 1984 Series E (El Paso Electric
Company Palo Verde Project) issued by Maricopa County in the
original principal amount of $37,100,000 which mature on or about
December 1, 2014.
1.95 "Maricopa Series A 1985 PCB" means the Pollution
Control Revenue Refunding Bonds, 1985 Series A (El Paso Electric
Company Palo Verde Project) issued by Maricopa County in the
original principal amount of $59,235,000 which mature on or about
August 1, 2015.
1.96 "Market Basket Rate" means, with respect to
certain series of bonds, notes or Reorganized EPE Preferred Stock
to be distributed pursuant to this Plan, the interest rate (or
dividend rate) for such series determined pursuant to Schedule D
attached hereto and incorporated by reference herein (in the case
of bonds or notes to be distributed to holders of Class 1, 2, 3,
6, 11, 12(a), and 13 Allowed Claims) and pursuant to Schedule E
attached hereto and incorporated by reference herein (in the case
of Reorganized EPE Preferred Stock to be distributed to holders
of Class 15 Allowed Interests).
1.97 "Maximum Additional Consideration Amount" shall
have the meaning ascribed to such term in the definition of "CSW
Common Stock Acquisition Fund" in Section 1.33 of the Plan.
1.98 "Merger" means the merger of CSW Sub with and into
EPE pursuant to the Merger Agreement.
<PAGE> 19
1.99 "Merger Agreement" means the Agreement and Plan of
Merger among EPE, CSW and CSW Sub in the form attached as Exhibit
B to the Disclosure Statement, and as it may be amended or
supplemented, from time to time, by agreement of the Debtor and
CSW.
1.100 "NMPUC" means the New Mexico Public Utility
Commission.
1.101 "OP Settlement" means the resolution of claims
reflecting the terms set forth in Section 3.14(B) of this Plan.
1.102 "Owner Participants" means the beneficiaries of
the Owner Trusts and their successors and assigns.
1.103 "Owner Trusts" means the trusts which, as of the
Petition Date, hold title to the property which is the subject of
the Palo Verde Leases, and their successors and assigns.
1.104 "Owner Trustees" means the trustees of the Owner
Trusts and their successors and assigns.
1.105 "Palo Verde Indenture Trustees" means LaSalle
National Bank and Harris Trust and Savings Bank, in their
capacities as successor trustees under (i) those certain
collateral trust indentures described in Schedule A attached
hereto under which the Lease Obligation Bonds and the Secured
Lease Obligation Bonds, respectively, were issued, and (ii) those
certain trust indenture mortgages, security agreements and
assignments of rents described in Schedule A attached hereto
under which the Owner Trustees issued certain notes to the
Funding Corporations, together with any predecessor, successor
and assigns in interest of LaSalle National Bank and Harris Trust
Savings Bank.
1.106 "Palo Verde Leasehold Interests" means all
interests in property and all contract rights of the Owner
Trustees, the Owner Participants, the Lease Obligation
Bondholders, the Secured Lease Obligation Bondholders, the
Funding Corporations, the Palo Verde Indenture Trustees, and any
other Person, and their successors and assigns in interest,
arising from or related to EPE's participation in the Palo Verde
Nuclear Generating Station.
1.107 "Palo Verde Leases" means, to the extent they
give rise to any obligations of, or Claims against, the Debtor,
those documents described in Schedule A attached hereto and
incorporated by reference, together with all other agreements,
documents and instruments evidencing or relating to the sale and
leaseback by the Debtor of its interest in Palo Verde Nuclear
Generating Station Unit 2 and approximately 39.5% of its interest
in Palo Verde Nuclear Generating Station Unit 3 and certain
common plant and other Palo Verde Nuclear Generating Station
related assets, but does not include (i) that certain Arizona
Nuclear Power Project Participation Agreement, dated August 23,
<PAGE> 20
1973, as amended and supplemented (and the other Project
Agreements, as defined therein), or (ii) reimbursement agreements
executed and delivered in connection with the Palo Verde Letters
of Credit. Nothing contained herein shall act as a determination
as to the characterization of the Palo Verde Leases in the event
that the Effective Date does not occur.
1.108 "Palo Verde Letters of Credit" means (i) those
letters of credit bearing numbers CLC-901/855022, CLC-901/855023,
CLC-901/855024, CLC-901/855025, CLC-901/855026, CLC-901/855027,
and CLC-901/855028 issued pursuant to two Reimbursement
Agreements between the Debtor and Chemical Bank, both dated as of
May 1, 1988, (ii) those letters of credit bearing numbers CLC-
901/755171 and CLC-901/755172 issued pursuant to that certain
Reimbursement Agreement between the Debtor and Chemical Bank
dated as of December 1, 1987, and (iii) that letter of credit
bearing number LCI35803 issued pursuant to that certain
Reimbursement Agreement between the Debtor and Marine Midland
Bank, N.A. dated as of April 1, 1987, and all amendments and
supplements to the foregoing.
1.109 "Palo Verde Nuclear Generating Station" means
that certain 3,810 megawatt nuclear generating facility consist-
ing of three generating units located near Phoenix, Arizona, in
which Debtor, as owner or lessee, had a 15.8% undivided interest
on the Petition Date.
1.110 "Per Share CSW Common Stock Acquisition Fund"
means the number of shares in the CSW Common Stock Acquisition
Fund as of the Effective Date divided by the number of outstand-
ing shares of EPE Common Stock as of the Effective Date.
1.111 "Person" includes an individual, a partnership,
a joint venture, a corporation, a trust, an estate, an
unincorporated organization and any governmental unit.
1.112 "Petition Date" means January 8, 1992, the date
on which the petition initiating the Case was filed with the
Bankruptcy Court.
1.113 "Plan" means this Plan of Reorganization, as
amended from time to time, and all addenda, exhibits, schedules
and other attachments hereto, as the same may be amended from
time to time, all of which are incorporated herein by reference.
1.114 "Preferred Stock First Exchange Ratio" means the
following: 0.8695096.
1.115 "Preferred Stock Second Exchange Ratio" means
the fraction determined by dividing (a) the Specified Class 15
Distribution Amount by (b) the Class 15 Distribution Amount.
1.116 "Preferred Stock Third Exchange Ratio" means the
fraction determined as set forth below:
<PAGE> 21
((1-Preferred Stock Second Exchange Ratio) x $100 x Preferred
Stock First Exchange Ratio)
CSW Class 12/13 Share Value
1.117 "Pro rata" means proportionately so that with
respect to an Allowed Claim or Allowed Interest, the ratio of
(i)(I) the amount of payments or other property distributed on
account of a particular Allowed Claim or Allowed Interest to (II)
the amount of the Allowed Claim or Allowed Interest, is the same
as the ratio of (ii)(I) the amount of payments or other property
distributed on account of all Allowed Claims or Allowed Interests
which are entitled to receive such payments or other property to
(II) the amount of all Allowed Claims or Allowed Interests which
are entitled to receive such payments or other property.
1.118 "PS SERIES 10.75%" means that series of
redemption required EPE Preferred Stock issued pursuant to the
Debtor's existing Articles of Incorporation.
1.119 "PS SERIES 8.44%" means that series of
redemption required EPE Preferred Stock issued pursuant to the
Debtor's existing Articles of Incorporation.
1.120 "PS SERIES 8.95%" means that series of
redemption required EPE Preferred Stock issued pursuant to the
Debtor's existing Articles of Incorporation.
1.121 "PS SERIES 10.125%" means that series of
redemption required EPE Preferred Stock issued pursuant to the
Debtor's existing Articles of Incorporation.
1.122 "PS SERIES 11.375%" means that series of
redemption required EPE Preferred Stock issued pursuant to the
Debtor's existing Articles of Incorporation.
1.123 "PS SERIES 4.5%" means that series of EPE
Preferred Stock issued pursuant to the Debtor's existing Articles
of Incorporation.
1.124 "PS SERIES 4.12%" means that series of EPE
Preferred Stock issued pursuant to the Debtor's existing Articles
of Incorporation.
1.125 "PS SERIES 4.72%" means that series of EPE
Preferred Stock issued pursuant to the Debtor's existing Articles
of Incorporation.
1.126 "PS SERIES 4.56%" means that series of EPE
Preferred Stock issued pursuant to the Debtor's existing Articles
of Incorporation.
<PAGE> 22
1.127 "PS SERIES 8.24%" means that series of EPE
Preferred Stock issued pursuant to the Debtor's existing Articles
of Incorporation.
1.128 "PUCT" means the Public Utility Commission of
Texas.
1.129 "PV Claims" shall have the meaning ascribed to
such term in the definition of the term "Reduction in Claims" in
this Article I.
1.130 "Record Date" means the date fixed by the
Bankruptcy Court or designated by the Debtor, prior to
distribution of ballots for voting on the Plan, as the record
date for determination of the holders of EPE Securities and,
subject to the terms of Section 2.12, the holders of Lease
Obligation Bonds and Secured Lease Obligation Bonds that may vote
on the Plan.
1.131 "Reduction in Claims" means an amount equal to
the sum of (i) Thirty-Four Million Dollars ($34,000,000) less the
amount paid to settle or satisfy the claims filed in the Case by
the Internal Revenue Service for the years 1983 through 1989; and
(ii) Nine Million Dollars ($9,000,000) less the portion of the
amount finally paid to the Palo Verde participants for all claims
(exclusive of interest and attorneys' fees and expenses) filed by
those utility participants in the Palo Verde Nuclear Generating
Station, which claims are governed by the terms of that certain
stipulation approved by the Bankruptcy Court on February 13, 1992
(collectively, "PV Claims").
1.132 "Reorganized EPE" means El Paso Electric
Company, a Texas corporation, as the corporation surviving the
Merger and as reorganized under and pursuant to the Plan.
1.133 "Reorganized EPE Articles of Incorporation"
means the Amended and Restated Articles of Incorporation of
Reorganized EPE.
1.134 "Reorganized EPE Bonds" means the Reorganized
EPE First Mortgage Bonds and the Reorganized EPE Second Mortgage
Bonds.
1.135 "Reorganized EPE Class 3A Secured Notes" means
secured notes which Reorganized EPE will issue to holders of
Allowed Claims in Class 3 receiving Treatment A pursuant to the
terms of the Plan.
1.136 "Reorganized EPE Class 5A Secured Notes" means
secured notes which Reorganized EPE will issue to holders of
Allowed Claims in Classes 5(a), 5(b) and 5(c) pursuant to the
terms of the Plan.
<PAGE> 23
1.137 "Reorganized EPE Class 6A Secured Notes" means
secured notes which Reorganized EPE will issue to holders of
Allowed Claims in Class 6 receiving Treatment A pursuant to the
terms of the Plan.
1.138 "Reorganized EPE Class 11 Senior Notes" means
the senior notes of Reorganized EPE to be issued under a term
loan agreement to holders of Allowed Claims in Class 11 pursuant
to the terms of the Plan.
1.139 "Reorganized EPE Class 13 Senior Floating Rate
Notes" means the unsecured floating interest rate senior notes of
Reorganized EPE to be issued under a term loan agreement to
holders of Allowed Claims in Class 11 and Class 13 pursuant to
the terms of the Plan.
1.140 "Reorganized EPE Class 13 Senior Fixed Rate
Notes" means the fixed interest rate unsecured senior notes of
Reorganized EPE to be issued under an indenture to holders of
Allowed Claims in Class 11 and Class 13 pursuant to the terms of
the Plan.
1.141 "Reorganized EPE Class 13 Senior Notes" means
the Reorganized EPE Class 13 Senior Floating Rate Notes and the
Reorganized EPE Class 13 Senior Fixed Rate Notes to be issued to
holders of Allowed Claims in Classes 11 and 13 pursuant to the
terms of the Plan.
1.142 "Reorganized EPE First Mortgage Bond Indenture"
means the First Mortgage Bond Indenture pursuant to which
Reorganized EPE will issue the Reorganized EPE First Mortgage
Bonds and the Reorganized EPE Pledged First Mortgage Bonds.
1.143 "Reorganized EPE First Mortgage Bonds" means the
Series A, Series B, and Series C first mortgage bonds and the
Series X pledged first mortgage bonds of Reorganized EPE which
Reorganized EPE will issue pursuant to the terms of the Plan
secured on a pari passu basis by a first priority security
interest in and lien upon the property of Reorganized EPE granted
to the indenture trustee under the Reorganized EPE First Mortgage
Bond Indenture.
1.144 "Reorganized EPE Pledged Bonds" means the
Reorganized EPE Pledged First Mortgage Bonds and the Reorganized
EPE Pledged Second Mortgage Bonds.
1.145 "Reorganized EPE Pledged First Mortgage Bonds"
means the Series X pledged first mortgage bonds of Reorganized
EPE which Reorganized EPE will issue and pledge pursuant to the
terms of the Plan secured on a pari passu basis by a first
priority security interest in and lien upon the property of
Reorganized EPE granted to the indenture trustee under the
Reorganized EPE First Mortgage Bond Indenture.
<PAGE> 24
1.146 "Reorganized EPE Pledged Second Mortgage Bonds"
means the Series X, Series Y, and Series Z pledged second
mortgage bonds of Reorganized EPE which Reorganized EPE will
issue and pledge pursuant to the terms of the Plan secured on a
pari passu basis by a second priority security interest in and
lien upon the property of Reorganized EPE granted to the
indenture trustee under the Reorganized EPE Second Mortgage Bond
Indenture.
1.147 "Reorganized EPE Preferred Stock" means the
preferred stock of Reorganized EPE as set forth in the Reorgan-
ized EPE Articles of Incorporation which Reorganized EPE will
issue pursuant to the terms of the Plan.
1.148 "Reorganized EPE Second Mortgage Bond Indenture"
means the Second Mortgage Bond Indenture pursuant to which
Reorganized EPE will issue the Reorganized EPE Second Mortgage
Bonds and the Reorganized EPE Pledged Second Mortgage Bonds.
1.149 "Reorganized EPE Second Mortgage Bonds" means
the Series A and Series B second mortgage bonds and the Series X,
Series Y, and Series Z and any other pledged second mortgage
bonds of Reorganized EPE to be issued pursuant to the terms of
the Plan secured on a pari passu basis by a second priority
security interest in and lien upon the property of Reorganized
EPE granted to the indenture trustee under the Reorganized EPE
Second Mortgage Bond Indenture.
1.150 "Reorganized EPE Senior Notes" means the
Reorganized EPE Class 11 Senior Notes, Reorganized EPE Class 13
Senior Notes and the Reorganized EPE Series A Senior Notes.
1.151 "Reorganized EPE Series A First Mortgage Bonds"
means the Series A Reorganized EPE First Mortgage Bonds which
Reorganized EPE will issue to holders of Allowed Claims in Class
1 pursuant to the terms of the Plan.
1.152 "Reorganized EPE Series A-I Notes" means the
Series A-I Notes of Reorganized EPE to be issued under an
indenture to holders of Allowed Claims in Classes 12(a) and 12(b)
pursuant to the terms of Section 3.14(C) of the Plan.
1.153 "Reorganized EPE Series A-II Notes" means the
Series A-II Notes of Reorganized EPE to be issued under an
indenture to holders of Allowed Claims in Classes 12(a) and 12(b)
pursuant to the terms of Section 3.14(C) of the Plan.
1.154 "Reorganized EPE Series A Second Mortgage Bonds"
means the Series A Reorganized EPE Second Mortgage Bonds which
Reorganized EPE will issue to holders of Allowed Claims in Class
2 pursuant to the terms of the Plan.
<PAGE> 25
1.155 "Reorganized EPE Series A Senior Notes" means
the Series A Senior Notes of Reorganized EPE to be issued under
an indenture to holders of Allowed Claims in Class 12(a) pursuant
to the terms of Section 3.14(A) of the Plan.
1.156 "Reorganized EPE Series B First Mortgage Bonds"
means the Series B Reorganized EPE First Mortgage Bonds which
Reorganized EPE will issue to holders of Allowed Claims in Class
1 pursuant to the terms of the Plan.
1.157 "Reorganized EPE Series B Second Mortgage Bonds"
means the Series B Reorganized EPE Second Mortgage Bonds which
Reorganized EPE will issue to holders of Allowed Claims in Class
3 receiving Treatment B pursuant to the Plan; to holders of
Allowed Claims in Classes 5(a), 5(b), and 5(c) as described in
Section 3.7(B) of the Plan; and to holders of Allowed Claims in
Class 6 as described in Section 3.8(B) of the Plan, in each case
pursuant to the terms of the Plan.
1.158 "Reorganized EPE Series C First Mortgage Bonds"
means the Series C Reorganized EPE First Mortgage Bonds which
Reorganized EPE will issue to holders of Allowed Claims in
Class 3 receiving Treatment B pursuant to the terms of the Plan.
1.159 "Reorganized EPE Series X Pledged First Mortgage
Bonds" means the Series X Reorganized EPE Pledged First Mortgage
Bonds which Reorganized EPE will issue and pledge to holders of
Allowed Claims in Class 3 receiving Treatment A pursuant to the
terms of the Plan.
1.160 "Reorganized EPE Series X Pledged Second
Mortgage Bonds" means the Series X Reorganized EPE Pledged Second
Mortgage Bonds which Reorganized EPE will issue and pledge to
holders of Allowed Claims in Class 3 receiving Treatment A
pursuant to the terms of the Plan.
1.161 "Reorganized EPE Series Y Pledged Second
Mortgage Bonds" means the Series Y Reorganized EPE Pledged Second
Mortgage Bonds which Reorganized EPE will issue and pledge to
holders of Allowed Claims in Classes 5(a), 5(b), and 5(c)
pursuant to the terms of the Plan.
1.162 "Reorganized EPE Series Z Pledged Second
Mortgage Bonds" means the Series Z Reorganized EPE Pledged Second
Mortgage Bonds which Reorganized EPE will issue and pledge to
certain holders of Allowed Claims in Class 6 receiving
Treatment A pursuant to the terms of the Plan.
1.163 "Revolving Credit Banks" means Canadian Imperial
Bank of Commerce (Atlanta Agency); Bank of New York; Citibank,
N.A.; Security Pacific National Bank; Mellon Bank, N.A.; First
City, Texas Houston, N.A.; Bank of America National Trust and
<PAGE> 26
Savings Association; and Chemical Bank, individually and as
agent, and their successors and assigns.
1.164 "Revolving Credit Facility" means that certain
revolving lending arrangement evidenced by the Credit Agreement
dated as of October 26, 1989, between the Debtor and Chemical
Bank, as agent, and the Revolving Credit Banks, as amended and
supplemented.
1.165 "RGRT" means the Rio Grande Resources Trust.
1.166 "RGRT Agreement" means that Purchase Contract
dated as of January 4, 1979, between Newton I. Waldman, Esq., as
Trustee, and the Debtor, the Assignment Agreements referenced
therein, and all other instruments, documents and agreements
related thereto, as amended and supplemented.
1.167 "Schedules" means the schedules filed by the
Debtor with the Clerk of the Bankruptcy Court pursuant to
Bankruptcy Rule 1007, as such schedules have been or may be
amended or supplemented by the Debtor from time to time.
1.168 "Secured Lease Obligation Bonds" means the
9.05%, 9.95%, and 11.25% Secured Lease Obligation Series 1988
Bonds issued by Del Norte Funding Corporation.
1.169 "Secured Lease Obligation Bondholders" means
holders of the Secured Lease Obligation Bonds.
1.170 "Specified Class 15 Distribution Amount" shall
have the meaning ascribed to such term in Section 3.17 of the
Plan.
1.171 "SMB Series D Floating Rate" means the second
mortgage bonds issued pursuant to that certain Third Supplemental
Mortgage Indenture between the Debtor and First City National
Bank of El Paso dated as of December 1, 1983.
1.172 "SMB Series E Floating Rate" means the second
mortgage bonds issued pursuant to that certain Fourth
Supplemental Mortgage Indenture between the Debtor and First City
National Bank of El Paso dated as of December 1, 1984.
1.173 "SMB Series F Floating Rate" means the second
mortgage bonds issued pursuant to that certain Fifth Supplemental
Mortgage Indenture between the Debtor and First City National
Bank of El Paso dated as of August 1, 1985.
1.174 "SMB Series I Floating Rate" means the second
mortgage bonds issued pursuant to that certain Ninth Supplemental
Mortgage Indenture between the Debtor and First City, Texas El
Paso, N.A. dated as of October 1, 1989.
<PAGE> 27
1.175 "SMB Series J 1997" means the second mortgage
bonds issued pursuant to that certain Tenth Supplemental Mortgage
Indenture between the Debtor and First City, Texas -- El Paso,
N.A. dated as of December 1, 1990.
1.176 "SMB Series K 2005" means the second mortgage
bonds issued pursuant to that certain Tenth Supplemental Mortgage
Indenture between the Debtor and First City, Texas -- El Paso,
N.A. dated as of December 1, 1990.
1.177 "SMB Series L 1999" means the second mortgage
bonds issued pursuant to that certain Eleventh Supplemental
Mortgage Indenture between the Debtor and First City, Texas -- El
Paso, N.A. dated as of June 1, 1991.
1.178 "Tangible Assets" means CAI.
1.179 "Unauthorized Transfer" shall have the meaning
ascribed to such term in Section 5.5 of the Plan.
ARTICLE II
CLASSIFICATION OF CLAIMS AND INTERESTS
The following is a designation of the Classes of
Claims and Interests under this Plan. Administrative claims and
priority tax claims of the kind specified in Code Sections
507(a)(1) and 507(a)(7), respectively, have not been classified
and are excluded from the following Classes in accordance with
Code Section 1123(a)(1). If the Bankruptcy Court, on or prior to
the Confirmation Date, determines that Section 1122 of the Code
requires a Class or sub-Class of creditors to be divided into
sub-Classes or further sub-Classes, as the case may be, this Plan
shall be deemed to be modified accordingly. A Claim or Interest
shall be deemed classified in a particular Class only to the
extent that the Claim or Interest qualifies within the
description of that Class and shall be deemed classified in a
different Class to the extent that any remainder of the Claim or
Interest qualifies within the description of such different
Class. A Claim or Interest is in a particular Class only to the
extent that the Claim or Interest is an Allowed Secured Claim,
Allowed Claim, or Allowed Interest in that Class.
CLAIMS.
2.1 Class 1 Claims (Allowed Claims arising from or
related to the EPE First Mortgage Bonds). Class 1 consists of
the Allowed Claims arising under or related to the following
issues of existing EPE First Mortgage Bonds and related
agreements, including purchase agreements:
<PAGE> 28
ISSUE
FMB Series 4.625% 1992
FMB Series 6.75% 1998
FMB Series 7.75% 2001
FMB Series 9% 2004
FMB Series 10.5% 2005
FMB Series 8.5% 2007
FMB Series 9.95% 2004
FMB Series 13.25% 1994
FMB Series 11.1% 2001
2.2 Class 2 Claims (Allowed Claims arising from or
related to the EPE Second Mortgage Bonds). Class 2 consists of
the Allowed Claims arising under or related to the following
issues of existing EPE Second Mortgage Bonds and related
agreements, including purchase agreements:
ISSUE
SMB Series J 1997
SMB Series K 2005
SMB Series L 1999
2.3 Class 3 Claims (Allowed Claims arising from or
related to the Revolving Credit Facility). Class 3 consists of
the Allowed Claims arising under or related to the Revolving
Credit Facility, together with the FMB Series 1989 Floating Rate
and the SMB Series I Floating Rate which secure such Claims.
2.4 Classes 4(a) Through 4(i) Claims (Allowed Claims
arising from or related to Maricopa Loan Agreements and Maricopa
PCBs). Classes 4(a) through 4(i) consist, respectively, of the
Allowed Claims arising from or related to: (a) the Maricopa Loan
Agreement - 1983, (b) the Maricopa Loan Agreement - 1984, (c) the
Maricopa Loan Agreement - 1985, (d) the Maricopa Series A 1983
PCB, (e) the Maricopa Series E 1984 PCB, (f) the Maricopa Series
A 1985 PCB, (g) the SMB Series D Floating Rate, (h) the SMB
Series E Floating Rate, and (i) the SMB Series F Floating Rate.
<PAGE> 29
2.5 Class 5(a) Through 5(c) Claims (Allowed Claims
arising from or relating to the Maricopa PCB LCs).
A. Class 5(a) (Allowed Claims relating to the
Maricopa PCB 1983 LC). Class 5(a) consists of all
Allowed Claims arising from or related to the Maricopa
PCB 1983 LC including, without limitation, Allowed
Claims for reimbursement and subrogation arising from
or related thereto.
B. Class 5(b) (Allowed Claims relating to the
Maricopa PCB 1984 LC). Class 5(b) consists of Allowed
Claims arising from or related to the Maricopa PCB 1984
LC including, without limitation, Allowed Claims for
reimbursement and subrogation arising from or related
thereto.
C. Class 5(c) (Allowed Claims relating to the
Maricopa PCB 1985 LC). Class 5(c) consists of Allowed
Claims arising from or related to the Maricopa PCB 1985
LC including, without limitation, Allowed Claims for
reimbursement and subrogation arising from or related
thereto.
2.6 Class 6 Claims (Allowed Claims arising from or
relating to the RGRT Agreement and other RGRT Allowed Claims).
Class 6 consists of all Allowed Claims arising from or related
to the RGRT Agreement and all other Allowed Claims otherwise
asserted by (A) the RGRT or (B) successors and assigns in
interest of Claims previously held by the RGRT on account of such
interest.
2.7 Class 7 Claims (Other Allowed Secured Claims).
Class 7 consists of Allowed Secured Claims that are not otherwise
classified pursuant to this Plan.
2.8 Class 8 Claims (Allowed Priority Claims). Class 8
consists of Allowed Claims, if any, with priority pursuant to
Code Sections 507(a)(3), 507(a)(4), and 507(a)(6).
2.9 Class 9 Claims (Allowed customer refund and
deposit Claims). Class 9 consists of all Allowed Claims by the
Debtor's customers for refunds or for deposits which are not
Class 8 Claims.
2.10 Classes 10(a) and 10(b) Claims (Allowed Claims
arising from or related to the Farmington Agreement and the
Farmington Series A 1983 PCB). Classes 10(a) and 10(b) consist,
respectively, of all Allowed Claims arising from or related to
(a) the Farmington Agreement and (b) the Farmington Series A 1983
PCB.
<PAGE> 30
2.11 Class 11 Claims (Allowed Claims arising from or
relating to the Farmington PCB LC). Class 11 consists of all
Allowed Claims arising from or related to the Farmington PCB LC
including, without limitation, Allowed Claims for reimbursement
and subrogation arising from or related thereto.
2.12 Classes 12(a) and 12(b) Claims (Allowed Claims
arising from or relating to the Palo Verde Leases, the Lease
Obligation Bonds and the Secured Lease Obligation Bonds.) Class
12(a) consists of all Allowed Claims arising from or related to
the Palo Verde Leases, the Secured Lease Obligation Bonds, and
the Lease Obligation Bonds, including, without limitation, any
and all Allowed Claims arising from or related to the rejection
of the Palo Verde Leases, Allowed Claims for administrative rent,
Allowed Claims for payment for conveyance of any interest in
Unit 2 or 3 of the Palo Verde Nuclear Generating Station and all
other claims (whether sounding in tort, contract or otherwise)
which are Allowed Claims, except Allowed Claims included in Class
12(b).
Class 12(b) consists of all Allowed Claims of any
Owner Participant and all Allowed Claims of any Owner Trustee or
Owner Trust other than claims of any such Owner Trustee or Owner
Trust on behalf of or for the benefit of the Palo Verde Indenture
Trustees, Lease Obligation Bonds or Secured Lease Obligation
Bonds, including, without limitation, Allowed Claims arising from
or related to the Palo Verde Leases or their rejection, Allowed
Claims for administrative rent, Allowed Claims for payment for
conveyance of any interest in Unit 2 or 3 of the Palo Verde
Nuclear Generating Station and all other claims (whether sounding
in tort, contract or otherwise) which are Allowed Claims.
If Class 12(a) accepts the Plan in accordance with
Section 1126(c) of the Code, then upon confirmation of the Plan,
Class 12(a) will be treated as Creditors entitled to
distributions under this Plan. If Class 12(b) accepts the Plan
in accordance with Section 1126(c) of the Code, then upon
confirmation of the Plan, Class 12(b) will be treated as
Creditors entitled to distributions under this Plan. In the
event that such Classes do not accept the Plan in accordance with
Section 1126(c) of the Code, the Plan is not confirmed, or the
Plan does not become effective, the Debtor reserves all rights to
assert, and nothing herein shall affect any determination, that
the Secured Lease Obligation Bondholders, the Lease Obligation
Bondholders, the Funding Corporations, or the Owner Participants
or the trustees for such Bondholders or Owner Participants, are
not Creditors and do not hold Allowed Claims. If Class 12(a)
accepts the Plan in accordance with Section 1126(c) of the Code,
and the Plan is not confirmed or the Plan does not become
effective, the Secured Lease Obligation Bondholders, the Lease
Obligation Bondholders, and the Palo Verde Indenture Trustees
reserve all rights to assert, and nothing contained herein shall
<PAGE> 31
affect any determination, that they are Creditors and that their
Claims should be allowed in an amount exceeding $700 million.
2.13 Class 13 Claims (Allowed Claims not classified
elsewhere). Class 13 consists of all Allowed Claims that are not
included in Classes 1 through 12 or Class 14 of the Plan and
includes, without limitation, all Allowed Claims arising from or
related to: (i) the Palo Verde Letters of Credit, including
without limitation, Allowed Claims for reimbursement and subro-
gation related thereto, (ii) that certain Term Loan Agreement
between the Bank of New York, the El Paso Electric Company
Leveraged Employee Stock Ownership Plan and Trust, and the Debtor
as Guarantor, dated as of October 1, 1987, as amended, and (iii)
that certain Term Loan Agreement between EPE and the Bank of
America, dated as of January 3, 1985.
2.14 Class 14 Claims (Allowed Claims of small creditors
- -- administrative convenience Class). Class 14 consists of
Allowed Claims in an amount which is $100,000 or less or which
has been reduced to $100,000 at the election of the holder, which
would otherwise have been classified in Class 13 in the absence
of the existence of Class 14 under this Plan; provided, however,
that if the Bankruptcy Court determines that this Class is not an
appropriate separate Class under applicable provisions of the
Code, then the size of Allowed Claims entitled to Class 14
treatment shall be reduced accordingly, including to zero if
required, so that this Class satisfies applicable Code
provisions, and the balance of Class 14 Claims above that amount
shall be treated as Claims in Class 13.
INTERESTS.
2.15 Class 15 Interests (Allowed EPE Preferred Stock
Interests). Class 15 consists of the Allowed Interests of
holders of the following issues of EPE Preferred Stock:
ISSUE
PS Series 10.75%
PS Series 8.44%
PS Series 8.95%
PS Series 10.125%
PS Series 11.375%
PS Series 4.5%
PS Series 4.12%
PS Series 4.72%
<PAGE> 32
PS Series 4.56%
PS Series 8.24%
2.16 Class 16 Interests (Allowed EPE Common Stock
Interests). Class 16 consists of the Allowed Interests of
holders of EPE Common Stock and options respecting EPE Common
Stock.
ARTICLE III
TREATMENT OF CLAIMS AND INTERESTS
The treatment of and consideration to be provided to holders
of Allowed Claims and Allowed Interests pursuant to the Plan
shall be in full settlement, release, and discharge of such
Allowed Claims and Allowed Interests; provided, however, that
such discharge of a debt of EPE shall not affect the liability
of any other entity on, or the property of any other entity
encumbered to secure payment of, such debt, except as otherwise
provided in this Plan.
ADMINISTRATIVE EXPENSES AND UNCLASSIFIED CLAIMS.
3.1 Administrative Expenses. Subject to the provi-
sions of Section 5.4 of the Plan, each holder of an administra-
tive expense or cost entitled to priority under Code Sections
507(a)(1) and 503(b) shall receive (i) cash equal to the amount
of such administrative expense or cost on the Effective Date, or
(ii) at the option of Reorganized EPE, payment in accordance with
the ordinary business terms of such expense or cost, except to
the extent that any such holder shall have agreed to less
favorable treatment of such administrative expense or cost.
3.2 Priority Tax Claims. Holders of tax Claims
entitled to priority under Section 507(a)(7) of the Code shall,
on the Effective Date, receive one of the two following treat-
ments, at the option of Reorganized EPE:
(A) cash equal to the amount of its Allowed Claim; or
(B) a promissory note in the principal amount of its
Allowed Claim. Interest shall accrue under the note
from and after the Effective Date at the rate of 5% or
such higher or lower rate as is determined by the
Bankruptcy Court to be appropriate under Section
1129(a)(9)(C) of the Code and shall be paid semi-
annually in arrears. The principal amount of the note
shall be paid in full on a date or dates six (6) years,
or at such earlier date as Reorganized EPE shall elect,
after the date of assessment of such Allowed Claim.
<PAGE> 33
Notwithstanding anything herein to the contrary, the holder of a
Claim entitled to priority under Section 507(a)(7) of the Code
may be paid a principal amount not exceeding the amount of such
Allowed Claim on such other date(s) and upon such other payment
terms as may be agreed upon by such holder and the Debtor.
CLASSIFIED CLAIMS.
3.3 Class 1 Claims (Allowed Claims arising from or
related to the EPE First Mortgage Bonds).
Class 1 Claims shall be Allowed Claims in the sum of
(a) the principal amount of the EPE First Mortgage Bonds; (b)
interest on the EPE First Mortgage Bonds accrued and unpaid prior
to the Petition Date at the non-default rate set forth in the EPE
First Mortgage Bonds; (c) interest on the EPE First Mortgage
Bonds accrued and unpaid from and after the Petition Date at the
non-default rate set forth in the EPE First Mortgage Bonds; (d)
interest on the unpaid interest amounts described in clauses (b)
and (c) above at the per annum rate of 90 day LIBOR plus 200
basis points, from the due date of each such installment of
interest through the Effective Date; (e) reasonable fees, costs
and charges of the trustee (including fees and expenses of legal
counsel) under the EPE First Mortgage Bond Indenture; and (f)
reasonable fees and expenses of Rothschild Inc. and Weil, Gotshal
& Manges incurred in connection with representation of certain of
the Class 1 Claim holders.
Allowed Claims in Class 1 shall be discharged and
satisfied in full by distribution of the Reorganized EPE First
Mortgage Bonds described in this Section 3.3 on the Effective
Date and, in the case of item (d) described in the preceding
sentence, by the payment of cash on the Effective Date, and, in
the case of items (e) and (f) described in the preceding
sentence, by payment in cash as soon as practicable after the
Confirmation Date and thereafter, as incurred prior to the
Effective Date, by payment in cash not less than quarterly. The
principal amount of the Reorganized EPE First Mortgage Bonds
issued on account of the Class 1 Allowed Claims shall be equal to
the unpaid amount of such Class 1 Allowed Claims excluding
items (d), (e), and (f) above. Reorganized EPE First Mortgage
Bonds shall be issued in satisfaction of Class 1 Allowed Claims
as follows: (a) $100 million in aggregate principal amount of
Reorganized EPE Series A First Mortgage Bonds shall be distri-
buted Pro rata to holders of Class 1 Allowed Claims; and (b) the
remainder of the Class 1 Allowed Claims shall be satisfied by a
Pro rata distribution of Reorganized EPE Series B First Mortgage
Bonds in a principal amount equal to the difference between the
aggregate amount of the Allowed Claims in Class 1 (excluding the
sum of items (d), (e) and (f) above) and $100 million.
The Reorganized EPE Series A First Mortgage Bonds shall
mature on the fifth anniversary of the Effective Date, or such
<PAGE> 34
other maturity as CSW may elect by notice given to holders of
Class 1 Allowed Claims receiving Reorganized EPE Series A First
Mortgage Bonds at least 30 days prior to the Effective Date. The
Reorganized EPE Series B First Mortgage Bonds shall mature on the
fifteenth anniversary of the Effective Date or such other
maturity as CSW may elect by notice given to holders of Class 1
Allowed Claims receiving Reorganized EPE Series B First Mortgage
Bonds at least 30 days prior to the Effective Date. If
maturities are elected for either the Reorganized EPE Series A
First Mortgage Bonds or the Reorganized EPE Series B First
Mortgage Bonds, other than the fifth or the fifteenth anniversary
of the Effective Date, respectively, they must be a maturity of
not less than five nor more than thirty years, and if longer than
fifteen years, must be in increments of five years (i.e. twenty,
twenty-five or thirty years). The Reorganized EPE Series A First
Mortgage Bonds and the Reorganized EPE Series B First Mortgage
Bonds shall provide for the accrual of interest commencing on the
Effective Date at a per annum rate equal to a Market Basket Rate
to be determined based on the actual maturity of each series of
such bonds.
The Reorganized EPE Series A First Mortgage Bonds and
the Reorganized EPE Series B First Mortgage Bonds shall provide
for the payment of interest semi-annually in arrears. The
Reorganized EPE Series A First Mortgage Bonds and the Reorganized
EPE Series B First Mortgage Bonds will not be redeemable by
Reorganized EPE prior to the fifth anniversary of the Effective
Date. On and after that date, such Reorganized EPE First
Mortgage Bonds will be redeemable, in whole or in part, at
premium redemption prices equal to the sum of (i) the aggregate
outstanding principal amount of such Reorganized EPE First
Mortgage Bonds plus (ii) a redemption premium calculated in
accordance with Schedule B (attached hereto and incorporated by
reference herein) plus (iii) accrued but unpaid interest to the
redemption date. The Reorganized EPE Series A and Series B First
Mortgage Bonds will be publicly tradeable under Section 1145 of
the Code and upon issuance will have an actual Investment Grade
Rating.
The Reorganized EPE Series A First Mortgage Bonds and
the Reorganized EPE Series B First Mortgage Bonds distributed in
respect of Class 1 Allowed Claims will contain covenants and
other terms consistent with the foregoing and modern indenture
practice and as set forth in the documents filed with the
Bankruptcy Court in accordance with Section 7.6 of the Plan. The
covenants in such documents will include (i) prohibitions in a
supplemental indenture on dividend payments and other specified
restricted payments if such payments, in the aggregate, at any
time exceed an amount equal to the sum of (x) Reorganized EPE's
net income, as determined under generally accepted accounting
principles, after the Effective Date plus (y) Three Hundred
Million Dollars ($300 million), (ii) prohibitions in a
supplemental indenture on the retirement of Reorganized EPE First
<PAGE> 35
Mortgage Bonds to satisfy annual maintenance and improvement
obligations, and (iii) covenants of general applicability similar
to those contained in mortgage bonds of CSW subsidiaries other
than Reorganized EPE, as adjusted in light of modern indenture
practice. The covenants will also include, in a supplemental
indenture, Reorganized EPE's commitment to those Creditors who
hold Class 1 Allowed Claims on the Effective Date that, so long
as any of the original holders of the Reorganized EPE Series A
and B First Mortgage Bonds distributed in respect of Allowed
Class 1 Claims continue to hold such Reorganized EPE First
Mortgage Bonds, no dividends or other specified restricted
payments will be made at any time that Reorganized EPE First
Mortgage Bonds do not have an Investment Grade Rating, except as
follows. At any time that the Reorganized EPE Series A and
Series B First Mortgage Bonds do not have an Investment Grade
Rating, Reorganized EPE may seek the consent of remaining
original holders to amend, modify or waive the covenant described
in the preceding sentence. The unanimous consent of the
remaining original holders of Reorganized EPE Series A and Series
B First Mortgage Bonds shall be required to amend, modify or
waive the aforementioned covenant. If unanimous consent to the
amendment, modification or waiver is not received, unanimous
consent shall be deemed to have been received and Reorganized EPE
may pay dividends and make other specified restricted payments if
Reorganized EPE offers to redeem the Reorganized EPE First
Mortgage Bonds held by dissenting remaining original holders at
par plus accrued interest and Reorganized EPE in fact so redeems
the Reorganized EPE First Mortgage Bonds of such holders that so
elect.
Any holder of Class 1 Allowed Claims may elect, by
written notice to EPE and CSW delivered not later than 5 days
prior to the Effective Date, to have Reorganized EPE cause there
to be underwritten and sold in a secondary offering, registered
with the Securities and Exchange Commission (the "SEC") if
required, any or all of such holder's Reorganized EPE First
Mortgage Bonds; provided, however, that in no event shall
Reorganized EPE be required to cause there to be underwritten
more than fifty percent (50%) of the aggregate principal amount
of all such bonds issued on account of Class 1 Allowed Claims.
To the extent that holders of more than fifty percent (50%) in
aggregate principal amount of Class 1 Allowed Claims elect to
require Reorganized EPE to underwrite a sale of such holders'
Reorganized EPE First Mortgage Bonds issued on account of such
claims, the amount of such bonds to be so underwritten shall be
reduced on a Pro rata basis so that the aggregate amount of all
such bonds being underwritten does not exceed fifty percent (50%)
in the aggregate principal amount of all such bonds issued. In
the event such election is timely exercised, Reorganized EPE
shall cause such sale to occur not later than 60 days after the
Effective Date. Reorganized EPE shall be responsible for all
costs and expenses of such sale, including customary and
reasonable legal fees of one counsel for the selling security
<PAGE> 36
holders. Reorganized EPE and holders of Class 1 Allowed Claims
electing to sell in accordance with the above will enter into a
customary registration rights agreement pursuant to which
Reorganized EPE will agree, among other things, to indemnify such
holders against certain claims and such holders will agree to
indemnify Reorganized EPE in connection with written information
provided by such holders specifically for inclusion in the
registration statement relating to the sale. To the extent that
such sale does not provide the holder with net proceeds equal to
the outstanding principal amount plus accrued interest of the
Reorganized EPE First Mortgage Bonds to be sold, then Reorganized
EPE shall promptly pay such holder cash in an amount equal to
such deficiency, if any.
Notwithstanding the foregoing, Reorganized EPE may, at
the election of CSW exercised on or prior to the Effective Date,
satisfy all or any portion of Class 1 Allowed Claims by remitting
to the holders of such Allowed Claims cash in lieu of an equal
principal amount of Reorganized EPE First Mortgage Bonds, to be
applied first Pro rata to those holders of such Allowed Claims
that have elected to cause such holder's Reorganized EPE First
Mortgage Bonds to be underwritten and sold, and then Pro rata in
respect of all other Class 1 Allowed Claims. To the extent that
such holders receive cash in lieu of Reorganized EPE First
Mortgage Bonds, the amount of cash received shall reduce CSW's
obligation to underwrite Reorganized EPE First Mortgage Bonds
pursuant to the preceding paragraph on a dollar for dollar basis.
In addition to the foregoing, interest shall be paid to
holders of Class 1 Allowed Claims as provided in Section 5.1(B)
of the Plan.
3.4 Class 2 Claims (Allowed Claims arising from or
related to the EPE Second Mortgage Bonds).
Class 2 Claims shall be Allowed Claims in the sum of
(a) the principal amount of the EPE Second Mortgage Bonds; (b)
interest on the EPE Second Mortgage Bonds accrued and unpaid
prior to the Petition Date at the non-default rate set forth in
the EPE Second Mortgage Bonds; (c) interest on the EPE Second
Mortgage Bonds accrued and unpaid from and after the Petition
Date at the non-default rate set forth in the EPE Second Mortgage
Bonds; (d) interest on the unpaid interest amounts described in
clauses (b) and (c) above at the per annum rate of 90 day LIBOR
plus 200 basis points from the due date of each such installment
of interest through the Effective Date; (e) reasonable fees,
costs and charges of the trustee (including fees and expenses of
legal counsel) under the EPE Second Mortgage Bond Indenture; and
(f) reasonable fees and expenses of Rothschild Inc. and Weil,
Gotshal & Manges incurred in connection with representation of
certain of the Class 2 Claim holders.
<PAGE> 37
Allowed Claims in Class 2 shall be discharged and
satisfied in full by distribution of the Reorganized EPE Series A
Second Mortgage Bonds described in this Section 3.4 on the
Effective Date, and, in the case of item (d) described in the
preceding sentence, by the payment of cash on the Effective Date,
and, in the case of items (e) and (f) described in the preceding
sentence, by payment in cash as soon as practicable after the
Confirmation Date and thereafter, as incurred prior to the
Effective Date, by payment in cash not less than quarterly. The
principal amount of the Reorganized EPE Series A Second Mortgage
Bonds issued on account of the Class 2 Allowed Claim shall be
equal to the unpaid amount of such Class 2 Allowed Claims
excluding items (d), (e), and (f) above.
The Reorganized EPE Series A Second Mortgage Bonds
shall provide for the accrual of interest commencing on the
Effective Date at a per annum rate equal to a Market Basket Rate
to be determined based on the actual maturity of such bonds and
shall mature on the tenth anniversary of the Effective Date or
such other maturity as CSW may elect by notice given to holders
of Class 2 Allowed Claims receiving Reorganized EPE Series A
Second Mortgage Bonds at least 30 days prior to the Effective
Date. If a maturity other than the tenth anniversary of the
Effective Date is elected, it must be a maturity of not less than
five nor more than thirty years, and if longer than fifteen
years, it must be in increments of five years (i.e. twenty,
twenty-five or thirty years).
The Reorganized EPE Series A Second Mortgage Bonds
shall provide for the payment of interest semi-annually in
arrears. The Reorganized EPE Series A Second Mortgage Bonds will
not be redeemable by Reorganized EPE prior to the fifth
anniversary of the Effective Date. On and after that date, the
Reorganized EPE Series A Second Mortgage Bonds will be
redeemable, in whole or in part, at premium redemption prices
equal to the sum of (i) the aggregate outstanding principal
amount of such Reorganized EPE Second Mortgage Bonds plus (ii) a
redemption premium calculated in accordance with Schedule B plus
(iii) accrued but unpaid interest to the redemption date. The
Reorganized EPE Series A Second Mortgage Bonds will be publicly
tradeable under Section 1145 of the Code and upon issuance will
have an Investment Grade Rating.
The Reorganized EPE Series A Second Mortgage Bonds
distributed in respect of Class 2 Allowed Claims will contain
covenants and other terms consistent with the foregoing and
modern indenture practice and as set forth in the documents filed
with the Bankruptcy Court in accordance with Section 7.6 of the
Plan. The covenants in such documents will include (i)
prohibitions in a supplemental indenture on dividend payments and
other specified restricted payments if such payments, in the
aggregate, at any time exceed an amount equal to the sum of (x)
Reorganized EPE's net income, as determined under generally
<PAGE> 38
accepted accounting principles, after the Effective Date plus (y)
Three Hundred Million Dollars ($300 million), (ii) prohibitions
in a supplemental indenture on the retirement of Reorganized EPE
Series A Second Mortgage Bonds to satisfy annual maintenance and
improvement obligations, and (iii) covenants of general
applicability similar to those contained in mortgage bonds of CSW
subsidiaries other than Reorganized EPE, as adjusted in light of
modern indenture practice. The covenants will also include, in a
supplemental indenture, Reorganized EPE's commitment to those
Creditors who hold Class 2 Allowed Claims on the Effective Date
that, so long as any of the original holders of the Reorganized
EPE Series A Second Mortgage Bonds distributed in respect of
Class 2 Allowed Claims continue to hold such Reorganized EPE
Second Mortgage Bonds, no dividends or other specified restricted
payments will be made at any time that Reorganized EPE Series A
Second Mortgage Bonds do not have an Investment Grade Rating,
except as follows. At any time that the Reorganized EPE Series A
Second Mortgage Bonds do not have an Investment Grade Rating,
Reorganized EPE may seek the consent of remaining original
holders to amend, modify or waive the covenant described in the
preceding sentence. The unanimous consent of the remaining
original holders of Reorganized EPE Series A Second Mortgage
Bonds shall be required to amend, modify or waive the
aforementioned covenant. If unanimous consent to the amendment,
modification or waiver is not received, unanimous consent shall
be deemed to have been received and Reorganized EPE may pay
dividends and make the other specified restricted payments if
Reorganized EPE offers to redeem the Reorganized EPE Second
Mortgage Bonds held by dissenting remaining original holders at
par plus accrued interest and Reorganized EPE in fact so redeems
the Reorganized EPE Second Mortgage Bonds of such holders that so
elect.
Any holder of Class 2 Allowed Claims may elect, by
written notice to EPE and CSW delivered not later than 5 days
prior to the Effective Date, to have Reorganized EPE cause there
to be underwritten and sold in a secondary offering, registered
with the SEC if required, any or all of such holder's Reorganized
EPE Second Mortgage Bonds; provided, however, that in no event
shall Reorganized EPE be required to cause there to be
underwritten more than fifty percent (50%) of the aggregate
principal amount of all such bonds issued on account of Class 2
Allowed Claims. To the extent that holders of more than fifty
percent (50%) in the aggregate principal amount of Class 2
Allowed Claims elect to require Reorganized EPE to underwrite a
sale of such holders' Reorganized EPE Second Mortgage Bonds
issued on account of such claims, the amount of such bonds to be
so underwritten shall be reduced on a Pro rata basis so that the
aggregate amount of all such bonds being underwritten does not
exceed fifty percent (50%) in the aggregate principal amount of
all such bonds issued. In the event such election is timely
exercised, Reorganized EPE shall cause such sale to occur not
later than 60 days after the Effective Date. Reorganized EPE
<PAGE> 39
shall be responsible for all costs and expenses of such sale,
including customary and reasonable legal fees of one counsel for
the selling security holders. Reorganized EPE and holders of
Class 2 Allowed Claims electing to sell in accordance with the
above will enter into a customary registration rights agreement
pursuant to which Reorganized EPE will agree, among other things,
to indemnify such holders against certain claims and such holders
will agree to indemnify Reorganized EPE in connection with
written information provided by such holders specifically for
inclusion in the registration statement relating to the sale. To
the extent that such sale does not provide the holder with net
proceeds equal to the outstanding principal amount plus accrued
interest of the Reorganized EPE Second Mortgage Bonds to be sold,
then Reorganized EPE shall promptly pay such holder cash in an
amount equal to such deficiency, if any.
Notwithstanding the foregoing, Reorganized EPE may, at
the election of CSW exercised on or prior to the Effective Date,
satisfy all or any portion of Class 2 Allowed Claims by remitting
to the holders of such Allowed Claims cash in lieu of an equal
principal amount of Reorganized EPE Second Mortgage Bonds to be
applied first Pro rata to those holders of such Allowed Claims
that have elected to cause such holder's Reorganized EPE Second
Mortgage Bonds to be underwritten and sold, and then Pro rata in
respect of all other Class 2 Allowed Claims. To the extent such
holders receive cash in lieu of Reorganized EPE Second Mortgage
Bonds, the amount of cash received shall reduce CSW's obligation
to underwrite the EPE Second Mortgage Bonds pursuant to the
preceding paragraph on a dollar for dollar basis.
In addition to the foregoing, interest shall be paid to
holders of Class 2 Allowed Claims as provided in Section 5.1(B)
of the Plan.
3.5 Class 3 Claims (Allowed Claims arising from or
related to the Revolving Credit Facility).
A. If Class 3 accepts the Plan in accordance with
Section 1126(c) of the Code, Class 3 Claims shall be Allowed
Claims in the sum of (a) the outstanding principal amount of the
Revolving Credit Facility on the Petition Date; (b) interest
accrued and unpaid through June 30, 1992, at the non-default rate
under the Revolving Credit Facility; (c) reasonable fees and
expenses of the Revolving Credit Banks and the Agent incurred
before and after the Petition Date as provided for under the
Revolving Credit Facility; (d) interest on the unpaid interest
amounts described in clause (b) above at (i) the non-default rate
set forth in the Revolving Credit Facility through the
Confirmation Date and (ii) LIBOR plus 150 basis points from the
Confirmation Date through the Effective Date; and (e) interest
amounts, if any, payable pursuant to Section 3.5(C) of this Plan.
<PAGE> 40
If Class 3 accepts the Plan in accordance with Section 1126(c) of
the Code, holders of Allowed Class 3 Claims shall receive
Treatment A or Treatment B, as follows:
1. Treatment A. Allowed Class 3 Claims (other than
those that are to receive Treatment B pursuant to an election by
the holder thereof in the manner set forth in the first paragraph
of Section 3.5(A)(2) below) shall be discharged and satisfied in
full by distribution under a new term loan agreement of
Reorganized EPE Class 3A Secured Notes in the principal amount of
such Allowed Class 3 Claims less the amount of such Allowed
Class 3 Claims described in item (c) in the immediately preceding
paragraph (which portion of Allowed Class 3 Claims shall be paid
in cash as soon as practicable after the Confirmation Date, and
thereafter periodically on a current basis, but no less often
than quarterly, to the Effective Date) and less the amount of
such Allowed Class 3 Claims described in items (d) and (e) in the
immediately preceding paragraph (which portion of Allowed Class 3
Claims shall be paid in cash on the Effective Date). Such
Reorganized EPE Class 3A Secured Notes shall be secured by bonds,
one-third of which shall be Reorganized EPE Series X Pledged
First Mortgage Bonds and two-thirds of which shall be Reorganized
EPE Series X Pledged Second Mortgage Bonds. Such Reorganized EPE
Series X Pledged First Mortgage Bonds and Reorganized EPE Series
X Pledged Second Mortgage Bonds will have interest and payment
terms identical to those of such Reorganized EPE Class 3A Secured
Notes. The Reorganized EPE Series X Pledged First Mortgage Bonds
and Series X Pledged Second Mortgage Bonds will be issued and
deposited as security for the payment of the obligations
represented by such Reorganized EPE Class 3A Secured Notes.
However, no payment of interest or principal shall be demanded or
received on the Reorganized EPE Series X Pledged First Mortgage
Bonds or Reorganized EPE Series X Pledged Second Mortgage Bonds
except if, and to the extent that, the corresponding payment
remains unpaid under the Reorganized EPE Class 3A Secured Notes
after the due date thereof.
The Reorganized EPE Class 3A Secured Notes to be
distributed pursuant to Treatment A will bear interest at a rate
equal to 3-month LIBOR plus 150 basis points (or, at the option
of Reorganized EPE, at the agent bank's adjusted reference rate
plus 50 basis points) from and after the Effective Date, payable
at the end of each interest period. As used in this Plan of
Reorganization, the term "adjusted reference rate" means, with
respect to any bank, a rate determined with reference to such
bank's "base" or "prime" rate, such determination made according
to a formula customarily applied by such bank to its domestic
loans priced with reference to such "base" or "prime" rate, which
formula may require that such rate be the higher of such "base"
or "prime" rate and the sum of a specified margin plus a rate
determined with reference to certificates of deposit and/or
federal funds. Such Reorganized EPE Class 3A Secured Notes will
mature on the earlier of December 31, 1997 and the last business
<PAGE> 41
day of the month in which the third anniversary of the Effective
Date shall occur (or such earlier date as may be designated by
Reorganized EPE) and will be payable in equal quarterly principal
installments commencing on the earlier of (x) December 31, 1994,
and (y) the last business day of the month in which the first
anniversary of the Effective Date shall have occurred. If,
however, the Effective Date occurs after December 31, 1994, any
quarterly principal installment(s) (beginning with the December
31, 1994, installment) that would otherwise have been payable
prior to the Effective Date shall not be required to be paid
until (and shall be payable in addition to any quarterly
principal installment, scheduled to be paid on) the last business
day of the month in which the Effective Date occurs. Such
Reorganized EPE Class 3A Secured Notes will be prepayable at any
time in whole or in part without premium subject only to breakage
costs, if any, in connection with the LIBOR option. Such
Reorganized EPE Class 3A Secured Notes will not be publicly
tradeable and will be assignable only to "Eligible Institutions"
(to be defined in the term loan agreement, such definition to
include a limitation by asset size and/or rating) and in such
minimum denominations as shall be agreed and specified in the
term loan agreement.
The new term loan agreement and related notes and
pledged mortgage bonds will contain covenants and terms set forth
in the documents filed with the Bankruptcy Court in accordance
with Section 7.6 of the Plan, which shall include material
covenants appropriate for secured senior (non-publicly tradeable)
bank debt of a utility whose senior debt securities have a rating
similar to those of Reorganized EPE, but in no event materially
less favorable to the holders of Allowed Class 3 Claims who elect
Treatment A than those generally found in similar agreements, if
any, of other CSW electric operating subsidiaries. Such
covenants will include a negative pledge; a minimum ratio of
earnings before interest, amortization and taxes to interest
expense; and a maximum ratio of debt to total capital.
Notwithstanding the foregoing, Reorganized EPE may, at
the election of CSW exercised on or prior to the Effective Date,
satisfy all or any portion of Allowed Class 3 Claims that are to
receive Treatment A by remitting to holders of such Allowed
Claims, Pro rata, cash in lieu of an equal principal amount of
Reorganized EPE Class 3A Secured Notes.
2. Treatment B. Alternatively, each holder of an
Allowed Class 3 Claim may elect, by written notice to EPE and CSW
delivered not later than 90 days prior to the Effective Date, to
have its Allowed Class 3 Claim (or any portion thereof) treated
as set forth in this Section 3.5(A)(2); provided that in no event
shall the aggregate amount of all Allowed Class 3 Claims
receiving Treatment B exceed fifty percent (50%) of the aggregate
amount of all Allowed Class 3 Claims (prior to giving effect to
any such elections). To the extent that holders of Allowed Class
3 Claims elect Treatment B for Allowed Class 3 Claims
<PAGE> 42
constituting more than fifty percent (50%) in aggregate amount of
Allowed Class 3 Claims, the amount of such Claims (for which
Treatment B was elected) of each such holder that shall receive
Treatment B shall be reduced proportionately (and instead shall
receive Treatment A to the extent of such reduction) so that the
aggregate amount of all Allowed Class 3 Claims receiving
Treatment B does not exceed fifty percent (50%) in aggregate
amount of all Allowed Class 3 Claims (prior to giving effect to
any such elections).
Allowed Class 3 Claims receiving Treatment B pursuant
to an election by the holder thereof in the manner set forth
above shall be discharged and satisfied in full by distribution
of Reorganized EPE Series C First Mortgage Bonds and Reorganized
EPE Series B Second Mortgage Bonds in a principal amount equal to
one-third and two-thirds, respectively, of the amount of such
Allowed Class 3 Claims less the amount of such Claims described
in item (c) of the first paragraph of this Section 3.5(A) (which
Allowed Class 3 Claims shall be paid in cash as soon as
practicable after the Confirmation Date, and thereafter
periodically on a current basis, but not less often than
quarterly, to the Effective Date) and less the amount of such
Allowed Claims described in items (d) and (e) of the first
paragraph of this Section 3.5(A) (which portion of Allowed Claims
shall be paid in cash on the Effective Date). Reorganized EPE
Series C First Mortgage Bonds shall mature on the eighth anniver-
sary of the Effective Date or such shorter maturity as CSW may
elect by notice given to holders of Allowed Class 3 Claims
receiving Reorganized EPE Series C First Mortgage Bonds at least
30 days prior to the Effective Date and shall accrue interest
from the Effective Date at a Market Basket Rate to be determined
based on the actual maturity of such bonds. Reorganized EPE
Series B Second Mortgage Bonds shall mature on the eighth
anniversary of the Effective Date or such shorter maturity as CSW
may elect by notice given to holders of Allowed Class 3 Claims
receiving Reorganized EPE Series B Second Mortgage Bonds at least
30 days prior to the Effective Date and shall accrue interest
from the Effective Date at a Market Basket Rate to be determined
based on the actual maturity of such bonds. Reorganized EPE
Series C First Mortgage Bonds and Reorganized EPE Series B Second
Mortgage Bonds will be publicly tradeable under Section 1145 of
the Code and upon issuance will have an Investment Grade Rating.
The Reorganized EPE Series C First Mortgage Bonds and the
Reorganized EPE Series B Second Mortgage Bonds will be redeemable
at the option of Reorganized EPE at any time in whole or in part
at a redemption price equal to the outstanding principal amount
of such Bonds plus a redemption premium calculated pursuant to
Schedule C attached hereto and incorporated by reference herein
plus accrued interest, provided that prior to the fourth
anniversary of the Effective Date such Bonds will be redeemable
at the option of Reorganized EPE at any time in whole or in part
at a redemption price equal to the lesser of (x) the sum of the
outstanding principal amount of such Bonds plus a redemption
<PAGE> 43
premium calculated pursuant to Schedule C plus accrued interest
and (y) the greater of (i) the outstanding principal amount of
such Bonds plus accrued interest and (ii) the present value of
remaining interest and principal payments on such Bonds,
discounted at a rate equal to the sum of (a) the original issue
spread over the yield on the treasury security, as of the
Effective Date, which has a maturity date closest to the average
life of such Bonds, and (b) the yield on the treasury security
which has a maturity date closest to the remaining average life
of such Bonds, calculated as of the date of determination of such
redemption price.
The Reorganized EPE Series C First Mortgage Bonds and
Reorganized EPE Series B Second Mortgage Bonds distributed in
respect of Class 3 Claims receiving Treatment B under Class 3
will contain covenants similar to those relating to the
Reorganized EPE Series A and Series B First Mortgage Bonds and
the Series A Second Mortgage Bonds (but not including limitations
on retirement of such bonds or limitations on dividends and other
restricted payments) and other terms consistent with the
foregoing and with modern indenture practice and as set forth in
the documents filed with the Bankruptcy Court in accordance with
Section 7.6 of the Plan.
Notwithstanding the foregoing, Reorganized EPE may, at
the election of CSW exercised on or prior to the Effective Date,
satisfy all or any portion of Allowed Class 3 Claims that are to
receive Treatment B by remitting on a Pro rata basis to the
holders of such Allowed Claims, cash in lieu of an equal
principal amount of any or all of the Reorganized EPE Series C
First Mortgage Bonds or the Reorganized EPE Series B Second
Mortgage Bonds otherwise to be distributed in respect of such
Class 3 Allowed Claims.
B. If Class 3 does not accept the Plan in accordance
with Section 1126(c) of the Code, then the provisions of Section
3.5(A) of this Plan shall not apply. In such event, Class 3
Claims shall be determined in accordance with Sections 1.3(a),
1.3(b) and 1.5 of this Plan and applicable provisions of the Code
and Bankruptcy Rules. Allowed Class 3 Claims shall be discharged
and satisfied in full by distribution of Reorganized EPE Class 3A
Secured Notes with the terms described below on the Effective
Date in the principal amount of Class 3 Allowed Secured Claims,
including, if and to the extent provided for by Section 506(b) of
the Code, (i) any Allowed Claims for post-petition interest on
such Allowed Secured Claims, less any post-petition interest
payments made on or prior to the Effective Date and (ii) any
Allowed Claims for reasonable fees, costs or charges provided for
under the Agreement under which such Claims arose, less any
amounts paid on account of such fees, costs or charges on or
prior to the Effective Date.
<PAGE> 44
The Reorganized EPE Class 3A Secured Notes referred to
in this Section 3.5(B) will bear interest at a rate equal to 90-
day LIBOR plus 150 basis points (or, at the option of Reorganized
EPE, at the "base" or "prime" rate plus 50 basis points) from and
after the Effective Date, payable at the end of each interest
period. Such Reorganized EPE Class 3A Secured Notes will mature,
and be repayable in a single principal installment, on the fifth
anniversary of the Effective Date. Such Reorganized EPE Class 3A
Secured Notes will be prepayable at any time in whole or in part
without premium subject only to breakage costs, if any, in
connection with the LIBOR option. Such Reorganized EPE Class 3A
Secured Notes will not be publicly tradeable and will be
assignable only to "Eligible Institutions" (to be defined in the
term loan agreement, such definition to include a limitation by
asset size and/or rating) and in such minimum denominations as
shall be agreed and specified in the term loan agreement.
The Reorganized EPE Class 3A Secured Notes referred to
in this Section 3.5(B) shall be secured by bonds, one-third of
which shall be Reorganized EPE Series X Pledged First Mortgage
Bonds and two-thirds of which shall be Reorganized EPE Series X
Pledged Second Mortgage Bonds. Such Reorganized EPE Series X
Pledged First Mortgage Bonds and Reorganized EPE Series X Pledged
Second Mortgage Bonds will have interest and payment terms
identical to those of such Reorganized EPE Class 3A Secured
Notes. The Reorganized EPE Series X Pledged First Mortgage Bonds
and Series X Pledged Second Mortgage Bonds will be issued and
deposited as security for the payment of the obligations
represented by such Reorganized EPE Class 3A Secured Notes.
However, no payment of interest or principal shall be demanded or
received on the Reorganized EPE Series X Pledged First Mortgage
Bonds or Reorganized EPE Series X Pledged Second Mortgage Bonds
except if, and to the extent that, the corresponding payment
remains unpaid under the Reorganized EPE Class 3A Secured Notes
after the due date thereof.
The new term loan agreement and related notes and
pledged mortgage bonds will contain covenants and terms set forth
in the documents filed with the Bankruptcy Court in accordance
with Section 7.6 of the Plan, which shall include material
covenants appropriate for secured senior (non-publicly tradeable)
bank debt of a utility whose senior debt securities have a rating
similar to those of Reorganized EPE, but in no event materially
less favorable to the holders of Allowed Class 3 Claims than
those generally found in similar agreements, if any, of other CSW
electric operating subsidiaries. Such covenants will include a
negative pledge; a minimum ratio of earnings before interest,
amortization and taxes to interest expense; and a maximum ratio
of debt to total capital.
C. Interest Prior to Effective Date. If Class 3
accepts the Plan in accordance with Section 1126(c) of the Code,
then in the event that interest accruing at the non-default
contract rate on the principal amount outstanding under the
<PAGE> 45
Revolving Credit Facility for each monthly period from and after
August 1993, and ending on the Confirmation Date is not paid
currently (or within 15 days following the end of such month) to
the holders of Allowed Class 3 Claims, interest for such month
shall be deemed to have accrued during such month at the default
rate and shall be paid in cash, without interest on interest, on
the Effective Date. In addition to the foregoing, interest shall
accrue and be paid on the principal amount outstanding under the
Revolving Credit Facility for the period from the Confirmation
Date to the Effective Date as provided in Section 5.1(B) of the
Plan.
3.6 Classes 4(a) Through 4(i) Claims (Allowed Claims
arising from or related to Maricopa Loan Agreements and Maricopa
PCBs).
Class 4(a) (Claims under Maricopa Loan Agreement - 1983).
Class 4(b) (Claims under Maricopa Loan Agreement - 1984).
Class 4(c) (Claims under Maricopa Loan Agreement - 1985).
Class 4(d) (Claims under Maricopa Series A 1983 PCB).
Class 4(e) (Claims under Maricopa Series E 1984 PCB).
Class 4(f) (Claims under Maricopa Series A 1985 PCB).
Class 4(g) (Claims under SMB Series D Floating Rate).
Class 4(h) (Claims under SMB Series E Floating Rate).
Class 4(i) (Claims under SMB Series F Floating Rate).
Allowed Class 4(a), 4(b), 4(c), 4(g), 4(h) and 4(i)
Claims and Allowed Class 4(d), 4(e) and 4(f) Claims, if any,
shall at the option of Reorganized EPE, exercised on the
Effective Date, either (i) be cured and reinstated pursuant to
Section 1124(2) of the Code, or (ii) be left unaltered pursuant
to Section 1124(1) of the Code. If Section 1124(2) treatment is
elected, (i) Reorganized EPE shall cure any and all defaults
under the applicable Maricopa Loan Agreements and the applicable
Maricopa PCBs, and the EPE Second Mortgage Bonds securing such
claims, that occurred before or after the commencement of the
Case, other than a default of a kind specified in Section
365(b)(2) of the Code; (ii) Reorganized EPE shall compensate the
holder for any damages incurred as a result of any reasonable
reliance on any contractual provision or applicable law that
entitles the holder to demand or receive accelerated payment of
such Claim after the occurrence of a default; (iii) the original
maturity for such Maricopa Loan Agreements and such Maricopa
PCBs, and the EPE Second Mortgage Bonds securing such claims,
shall be reinstated (or, at the option of Reorganized EPE, in
accordance with legal, equitable and contractual rights of the
applicable parties, such EPE Second Mortgage Bonds shall be
replaced by new Reorganized EPE Second Mortgage Bonds with the
same scheduled maturity, interest rate, and payment terms as such
EPE Second Mortgage Bonds); and (iv) any other legal, equitable,
or contractual rights of holders of Class 4(a), 4(b), 4(c), 4(d),
4(e), 4(f), 4(g), 4(h), and 4(i) Claims shall remain unaltered.
<PAGE> 46
To the extent Section 1124(1) treatment is elected, the legal,
equitable and contractual rights to which such Claim entitles the
holder of such Claim shall be unaltered by the Plan. Class 4(a)
through 4(i) Allowed Claims are unimpaired.
Apart, and independent, from the provisions of this
Plan, but pursuant to documents filed with the Bankruptcy Court
in accordance with Section 7.6 of the Plan and in accordance with
the legal and contractual rights of the parties, subject to the
tax exempt status of the Maricopa PCBs being maintained, it is
contemplated that (i) the Maricopa PCBs held by or on behalf of
EPE or the issuer of the related Maricopa PCB LC will, subject in
the case of the Maricopa Series A 1985 PCBs to the related
Maricopa LC issuer's consent, be remarketed at par as soon as
practicable after the Confirmation Date, and (ii) , subject to
the tax exempt status of refunded bonds being maintained, the
Maricopa PCBs will be refunded on or soon after the Effective
Date. In connection therewith, it is also contemplated that,
subject to the tax exempt status of the Maricopa PCBs being
maintained, certain modifications will be made to the indentures
or resolutions governing the respective Maricopa PCBs. Such
modifications shall include a term providing that the interest
rate on all Maricopa Series A 1985 PCBs will be reset on the
Confirmation Date to a market rate for similar tax-exempt bonds.
3.7 Classes 5(a) Through 5(c) Claims (Allowed Claims
arising from or relating to the Maricopa PCB LCs).
Class 5(a) Claim (Allowed Claim Relating to Maricopa PCB
1983 LC).
Class 5(b) Claim (Allowed Claim Relating to Maricopa PCB
1984 LC).
Class 5(c) Claim (Allowed Claim Relating to Maricopa PCB
1985 LC).
A. If any of the issuers of the letters of credit
giving rise to Claims in Classes 5(a), 5(b) or 5(c) provides (or,
pursuant to Section 3.7(D) of this Plan, is deemed to provide) a
new letter of credit on the terms described in Section 3.7(E) of
this Plan and in documents filed with the Bankruptcy Court in
accordance with Section 7.6 of this Plan (the "Maricopa LC
Terms"), which shall include provisions for reimbursement claims
under each of the new letters of credit to be secured by
Reorganized EPE Second Mortgage Bonds, then the Class 5(a), 5(b),
and 5(c) Claims in each Class which provides such letters of
credit shall be Allowed Claims in the sum of (i) unreimbursed
amounts drawn before and after the Petition Date under the
letters of credit, (ii) interest on the amount of unreimbursed
draws the proceeds of which were used to pay interest on the
Maricopa PCBs, calculated at the non-default contract rate from
the date of the draw to and including July 7, 1993, (iii)
interest on the amount of any unreimbursed draws, the proceeds of
<PAGE> 47
which were used to purchase Maricopa PCBs, calculated at 90 day
LIBOR plus 62.5 basis points from the date of such draws to and
including July 7, 1993, net of interest accrued during such
period on the purchased Maricopa PCB which has been paid to the
Class 5(a), 5(b) or 5(c) holder whose Maricopa PCB LC was used to
purchase the Maricopa PCB, (iv) unpaid letter of credit fees
accrued before and after the Petition Date, (v) interest on the
amount of unreimbursed draws the proceeds of which were used to
pay interest on the Maricopa PCBs, calculated at the non-default
contract rate from July 8, 1993 to and including the Effective
Date, (vi) interest on the amount of any unreimbursed draws, to
purchase or redeem Maricopa PCBs, calculated at the following per
annum rates from July 8, 1993 to and including the Effective
Date, net of interest accrued during such period on a purchased
Maricopa PCB which has been paid to the Class 5(a), 5(b), or 5(c)
holder whose Maricopa PCB LC was used to purchase the Maricopa
PCB: (a) Class 5(a) at 90 day LIBOR plus 87.5 basis points, (b)
Class 5(b) at 90 day LIBOR plus 62.5 basis points, and (c) Class
5(c) at the prime rate (or equivalent index) announced from time
to time by Westpac Banking Corporation, and (vii) reasonable
costs and expenses (including fees and expenses of legal counsel
of each of the issuers and of Canadian Imperial Bank of Commerce
(the "Participant") which was the only participant in the
issuers' Claims as of the Petition Date) incurred before and
after the Petition Date in connection with the Maricopa PCBs, the
Maricopa PCB LCs and the Maricopa Loan Agreements.
Such Allowed Claims shall be discharged and satisfied
in full by the distribution on the Effective Date of Reorganized
EPE Class 5A Secured Notes under new term loan agreements in an
aggregate amount equal to the unpaid amount of Allowed Class
5(a), 5(b), and 5(c) Claims described in items (i), (ii) and
(iii) of the immediately preceding paragraph and by the following
cash payments:
(a) As soon as practicable after the Confirmation
Date, the Debtor will pay in cash to each holder of a
Class 5(a), 5(b) and 5(c) Allowed Claim and to the
Participant all accrued and unpaid costs and expenses
described in item (vii) of the immediately preceding
paragraph;
(b) From and after the Confirmation Date to and
including the Effective Date, the Debtor will pay to
each holder of a Class 5(a), 5(b) and 5(c) Allowed
Claim and to the Participant the following amounts in
cash: (x) quarterly and on the Effective Date, all
accrued and unpaid costs and expenses described in item
(vii) of the immediately preceding paragraph, and
(y) promptly upon any draw, all amounts drawn on any
Maricopa PCB LC for payment of interest on the Maricopa
PCBs; and
<PAGE> 48
(c) On the Effective Date, the Debtor will pay in cash
to the holder of each Class 5(a), 5(b) and 5(c) Allowed
Claim and to the Participant, items (iv), (v) and (vi)
described in the immediately preceding paragraph.
The Reorganized EPE Class 5A Secured Notes will bear
interest at a rate of LIBOR (resetting, at the option of
Reorganized EPE, at 1, 3 or 6 months) plus 150 basis points (or,
at the option of Reorganized EPE, at the respective bank's
adjusted reference rate plus 50 basis points), payable at the end
of each interest period (but in any event not less often than
quarterly).
There will be a separate term loan agreement with
respect to the Reorganized EPE Class 5A Secured Notes distributed
to each of Class 5(a), Class 5(b) and Class 5(c). Such term loan
agreements shall have substantially similar terms and conditions.
Each Class 5(a), Class 5(b) and Class 5(c) holder which has
participants in its Claims shall be issued separate Reorganized
Class 5A Secured Notes for the portion of its Allowed Claim which
is so participated and such separate notes shall be transferred
by the Allowed Claim holder to the participant.
The Reorganized EPE Class 5A Secured Notes will be
prepayable at any time in whole or in part without premium
subject only to breakage costs, if any, in connection with the
LIBOR option. The Reorganized EPE Class 5A Secured Notes will
mature on the earlier of December 31, 1997, and the last business
day of the month in which the third anniversary of the Effective
Date shall occur and will be payable in equal quarterly principal
installments commencing on the earlier of (x) December 31, 1994,
and (y) the last business day of the month in which the first
anniversary of the Effective Date shall have occurred. If,
however, the Effective Date occurs after December 31, 1994, any
quarterly principal installment(s) that would have otherwise been
payable prior to the Effective Date shall not be required to be
paid until (and shall be payable in addition to any quarterly
principal installments scheduled to be paid on) the last business
day of the month in which the Effective Date occurs.
The Reorganized EPE Class 5A Secured Notes under each
term loan agreement shall be secured by Reorganized EPE Series Y
Pledged Second Mortgage Bonds in a principal amount equal to the
aggregate principal amount of such Reorganized EPE Class 5A
Secured Notes. The Reorganized EPE Series Y Pledged Second
Mortgage Bonds will have interest and payment terms which mirror
those of such Reorganized EPE Class 5A Secured Notes. Such
Reorganized EPE Series Y Pledged Second Mortgage Bonds will be
issued and deposited as security for the payment of the
obligations represented by the Reorganized EPE Class 5A Secured
Notes; provided however, no payment of interest or principal
shall be demanded or received on the Reorganized EPE Series Y
Pledged Second Mortgage Bonds except if, and to the extent that,
<PAGE> 49
the corresponding payment remains unpaid under the Reorganized
EPE Class 5A Secured Notes after the due date thereof. The
Reorganized EPE Class 5A Secured Notes issued to each issuer will
provide that net proceeds of any remarketing or refunding after
the Effective Date of any Maricopa PCBs purchased prior to the
Effective Date through draws on such issuer's letter of credit
will be applied to repay the principal of such Reorganized EPE
Class 5A Secured Notes. Such Reorganized EPE Class 5A Secured
Notes will not be publicly tradeable and will be assignable only
to "Eligible Institutions" (to be defined in each term loan
agreement, such definition to include limitation by asset size
and/or rating) and in such minimum denominations as shall be
agreed and specified in each term loan agreement.
The term loan agreements governing the Reorganized EPE
Class 5A Secured Notes, the Reorganized EPE Class 5A Secured
Notes, and the Reorganized EPE Series Y Pledged Second Mortgage
Bonds will be set forth in documents filed with the Bankruptcy
Court in accordance with Section 7.6 of the Plan. Such terms
will include material covenants appropriate for secured senior
(non-publicly tradeable) bank debt of a utility whose senior debt
securities have a rating similar to those of Reorganized EPE, but
in no event materially less favorable to the holders of Claims in
Classes 5(a), 5(b) and 5(c) than those generally found in similar
agreements, if any, of other CSW electric operating subsidiaries.
Such covenants will include a negative pledge; a minimum ratio of
earnings before interest, amortization and taxes to interest
expense; and a maximum ratio of debt to total capital.
Subject to (i) the receipt of an opinion of bond
counsel that none of the following will result in the loss of
tax-exempt status of the Maricopa PCBs either at the time of such
actions or on the Effective Date (taking into account the
transactions and events contemplated to occur on such date) and
(ii) there being no material adverse consequences to Reorganized
EPE from such actions, Maricopa PCBs held by or on behalf of EPE
or the issuer of the related Maricopa PCB LCs will be remarketed
at par or otherwise sold to third parties at par as soon as
practicable after the Confirmation Date and in connection
therewith modifications will be made to the related indentures or
resolutions governing such Maricopa PCBs to delete the
prohibition, if any, on remarketing after the Debtor's
bankruptcy; provided, however, that no remarketing shall occur
prior to the Effective Date with respect to the Maricopa Series A
1985 PCBs without the consent of the issuer of the related
Maricopa PCB LC. Certain limited additional modifications
acceptable to CSW and EPE may be made to such related indentures
or resolutions at such time. The proceeds of any remarketing of
Maricopa PCBs on or prior to the Effective Date shall be paid to
(i) the issuer of the letter of credit (if applicable), in
reimbursement of outstanding amounts, if any, previously drawn
under the letter of credit to purchase such Maricopa PCBs or (ii)
to the extent not paid to such issuer as provided in clause (i)
<PAGE> 50
above, the holder of the relevant Maricopa PCBs at the time of
remarketing or refunding.
During the period prior to the Effective Date, the
Debtor shall not exercise any right it may have to redeem any
Maricopa Series A 1985 PCBs.
As noted in Section 3.6 of the Plan, it is contemplated
that, subject to the tax exempt status of the Maricopa PCBs being
maintained, the Maricopa PCBs will be refunded on or soon after
the Effective Date and in connection with such refunding certain
modifications will be made to the indentures or resolutions
governing such Maricopa PCBs. It is also contemplated that the
new letter of credit to be issued with respect to each series of
Maricopa PCBs in replacement of the Maricopa PCB LC currently
supporting such series will be issued on the refunding date for
the relevant series of Maricopa PCBs or, in the event that a
refunding would jeopardize the tax exempt status of such Maricopa
PCBs, such new letter of credit will be issued on the Effective
Date or as soon thereafter as practicable. In the event any of
the Maricopa PCBs of any series are not refunded on the Effective
Date and the new letter of credit supporting such series is not
issued on the Effective Date then (i) unless otherwise agreed
between Reorganized EPE and the issuer of the relevant letter of
credit and subject to the tax exempt status of such Maricopa PCBs
being maintained, the refunding of such Maricopa PCBs will occur
on the first applicable date for such refunding pursuant to the
terms of the indenture or resolution for such Maricopa PCBs
following the Effective Date and (ii) unless otherwise agreed
between Reorganized EPE and the issuer of the relevant letter of
credit, on the Effective Date (a) subject to the tax exempt
status of such Maricopa PCBs being maintained, the relevant
indenture or resolution, the relevant reimbursement agreement and
the relevant related documents for such Maricopa PCBs will be
modified to provide the issuer of the Maricopa PCB LC which
supports such Maricopa PCBs an option to purchase such Maricopa
PCBs upon the occurrence of an event of default under the related
indenture or resolution, in lieu of a failed remarketing or in
lieu of a redemption of such Maricopa PCBs, or (b) all
obligations under the reimbursement agreement related to the
Maricopa PCB LC which supports such Maricopa PCBs incurred after
the Effective Date will be collateralized by Reorganized EPE
Second Mortgage Bonds.
B. If any of Class 5(a), 5(b), or 5(c) does not
accept the Plan in accordance with Section 1126(c) of the Code or
if the issuer of the related Maricopa PCB LC fails to provide
(and shall not be deemed pursuant to Section 3.7(D) of this Plan
to have provided) a new letter of credit on the relevant Maricopa
LC Terms, then, in either event, the provisions of Section 3.7(A)
of the Plan shall not apply to such Class, and Claims in such
Class shall be determined by a Final Order to be allowed or not
allowed and secured or unsecured in accordance with Sections
1.3(a), 1.3(b) and 1.5 of this Plan and applicable provisions of
<PAGE> 51
the Code and Bankruptcy Rules. To the extent it is determined by
a Final Order that any Allowed Class 5(a), 5(b) or 5(c) Claims
are Allowed Secured Claims, then such Allowed Secured Claims
shall be discharged and satisfied in full by distribution of
Reorganized EPE Series B Second Mortgage Bonds on the Effective
Date in the principal amount of such Allowed Secured Claims,
including, if and to the extent provided by Section 506(b) of the
Code, (i) any Allowed Claims for post-petition interest on such
Allowed Secured Claims, less any post-petition interest payments
made on or prior to the Effective Date with respect to such
Claims and (ii) any reasonable fees, costs or charges provided
for under the agreement under which such Claims arose. The
Reorganized EPE Series B Second Mortgage Bonds distributed
pursuant to this Section 3.7(B) will have terms identical to the
Reorganized EPE Series B Second Mortgage Bonds described in
Section 3.5(A)(2) of the Plan. To the extent that the Bankruptcy
Court determines by a Final Order that any portion of a Class
5(a), 5(b), or 5(c) Allowed Claim is not an Allowed Secured
Claim, then the Class 5(a), 5(b), or 5(c) Allowed Claim which is
not an Allowed Secured Claim shall be paid in full on the
Effective Date and discharged through the issuance to or for the
benefit of holders of such Class 5(a), 5(b), or 5(c) Allowed
Claims, Pro rata, of Reorganized EPE Class 13 Senior Fixed Rate
Notes, in an amount equal to the amount of the unsecured portion
of the Allowed Claims, without post-petition interest, fees,
costs and other charges except as otherwise allowed or required
to be paid by the Bankruptcy Court. The Reorganized EPE Class 13
Senior Fixed Rate Notes shall have the same terms as the
Reorganized EPE Class 13 Senior Fixed Rate Notes described in
Section 3.15(A), except that the sixty percent (60%) limitation
shall not apply to the amount of the Reorganized EPE Class 13
Senior Fixed Rate Notes issued under this Section 3.7(B).
C. If (i) Class 5(a), 5(b) or 5(c) accepts the Plan
in accordance with Section 1126(c) of the Code and (ii) the
Effective Date occurs, then such acceptance of the Plan by such
Class shall be a commitment by the issuer of the letter of credit
that gave rise to the Allowed Class 5(a), 5(b), and 5(c) Claims
in such Class to provide a new letter of credit on the terms
described in the Maricopa LC Terms, provided, however, that if
the treatment of Class 5(a), 5(b) or 5(c) is modified from the
treatment for such Class set forth in the Plan (including the
Maricopa LC Terms) which such Class accepted and such Class does
not approve or accept (and is not deemed, pursuant to the
Bankruptcy Code or the Bankruptcy Rules, to have approved or
accepted) such modification, then the issuer of the letter of
credit that gave rise to the Allowed Class 5(a), 5(b), and 5(c)
Claims in such modified Class shall not be committed to issue
such new letter of credit. The commitment of the letter of
credit issuer shall not be released by the provisions of Section
7.2(B) of this Plan.
<PAGE> 52
D. Notwithstanding anything to the contrary in this
Plan, for purposes of determining the treatment to be received
pursuant to the Plan by Class 5(a), 5(b) or 5(c), the issuer of
the letter of credit giving rise to Claims in Class 5(a), 5(b) or
5(c), as the case may be, shall be deemed to have provided a new
letter of credit on the Maricopa LC Terms if:
(i) such issuer commits, pursuant to
paragraph C of Section 3.7 of this Plan, to issue such
new letter of credit and the Debtor or Reorganized EPE,
as the case may be, determines to have a different
financial institution issue such new letter of credit,
or
(ii) such issuer commits, pursuant to
paragraph C of Section 3.7 of this Plan, to issue such
new letter of credit, and, prior to such issuer issuing
such new letter of credit, a different financial
institution, which financial institution is
satisfactory to the Debtor or Reorganized EPE, as the
case may be, commits to issue such new letter of credit
in place of such issuer, or
(iii) such issuer commits, pursuant to paragraph C of
Section 3.7 of this Plan, to issue such new letter of
credit, and, prior to such issuer issuing such new letter of
credit, the letter of credit is not required because the
related Maricopa PCBs have been redeemed or canceled (other
than due to any action or inaction of the issuer of the
letter of credit including a failure on the part of the
issuer to extend the termination date of the letter of
credit).
E. The new letters of credit which are to replace the
Maricopa PCB 1983 LC, the Maricopa PCB 1984 LC and the Maricopa
PCB 1985 LC will have initial terms ending on (i) in the case of
the Maricopa PCB 1983 LC, the earlier of December 31, 1997 and
the third anniversary of the Effective Date, (ii) in the case of
the Maricopa PCB 1984 LC, the date which is the last day of the
fourth month following the earlier of December 31, 1998 and the
fourth anniversary of the Effective Date and (iii) in the case of
the Maricopa PCB 1985 LC, the earlier of December 31, 1998 and
the fourth anniversary of the Effective Date, plus, in each case,
a one-year extension at the option of Reorganized EPE. Each
letter of credit issuer shall be entitled to a commission of
0.75% per annum for the period ending on the first anniversary of
the earlier of the Effective Date and December 31, 1994 (such
earlier date being the "Commencement Date"), 0.875% per annum for
the period ending on the second anniversary of the Commencement
Date, 1.00% per annum for the period ending on the third
anniversary of the Commencement Date, 1.125% per annum for the
period ending on the fourth anniversary of the Commencement Date,
1.25% per annum for the period ending on the fifth anniversary of
the Commencement Date, and 1.375% per annum for the period ending
<PAGE> 53
on the sixth anniversary of the Commencement Date, in each case
payable quarterly in arrears. In addition, each such letter of
credit shall provide for a transfer fee of 1/4% and a drawing fee
of $100 per draw. The post-Effective Date reimbursement
agreement claims of the issuer of such letter of credit shall be
collateralized by Reorganized EPE Pledged Second Mortgage Bonds.
3.8 Class 6 Claims (Allowed Claims arising from or
relating to the RGRT Agreement and other RGRT Allowed Claims).
A. If Class 6 accepts the Plan in accordance with
Section 1126(c) of the Code, Class 6 Claims shall be Allowed
Claims in the sum of (a) the aggregate principal amount
outstanding under the RGRT Agreement as of the Petition Date
(i.e., $60,490,317 with respect to nuclear fuel financing and
$9,756,000 with respect to the note payable); (b) an amount equal
to 85% of interest accrued and unpaid through September 10, 1993
on the amount described in item (a) above (excluding any interest
on interest) at the non-default contract rate under the RGRT
Agreement; and (c) reasonable fees and expenses incurred before
and after the Petition Date by the credit bank as provided for
under the RGRT Agreement. If Class 6 accepts the Plan in
accordance with Section 1126(c) of the Code, holders of Allowed
Class 6 Claims shall receive, pursuant to their election at the
time they vote on the Plan, Treatment A and/or Treatment B, as
follows (provided that each holder who fails to make a timely
election or does not timely return a ballot will be deemed to
have elected Treatment A if Class 6 accepts the Plan):
1. Treatment A. To the extent that Allowed Class 6
Claims are to receive Treatment A pursuant to an election by the
holder thereof in the manner set forth above, such Allowed Class
6 Claims shall be discharged and satisfied in full by
distribution under a new term loan agreement of Reorganized EPE
Class 6A Secured Notes in the principal amount of such Allowed
Class 6 Claims less the amount of such Claims described in item
(b) in the immediately preceding paragraph (which portion of
Allowed Claims shall be paid in cash on the Effective Date) and
less the amount of such Claims described in item (c) in the
immediately preceding paragraph (which portion of Allowed Claims
shall be paid in cash as soon as practicable after the
Confirmation Date, and thereafter periodically on a current
basis, but no less often than quarterly, to the Effective Date).
Such Reorganized EPE Class 6A Secured Notes shall be secured by
Reorganized EPE Series Z Pledged Second Mortgage Bonds in a
principal amount equal to the aggregate principal amount of such
Reorganized EPE Class 6A Secured Notes. Such Reorganized EPE
Series Z Pledged Second Mortgage Bonds will have interest and
payment terms which are identical to those of such Reorganized
EPE Class 6A Secured Notes. The Reorganized EPE Series Z Pledged
Second Mortgage Bonds will be issued and deposited as security
for the payment of the obligations represented by such
Reorganized EPE Class 6A Secured Notes; provided however, no
payment of interest or principal shall be demanded or received on
<PAGE> 54
the Reorganized EPE Series Z Pledged Second Mortgage Bonds except
if, and to the extent that, the corresponding payment remains
unpaid under the Reorganized EPE Class 6A Secured Notes after the
due date thereof.
The Reorganized EPE Class 6A Secured Notes to be
distributed pursuant to Treatment A will bear interest at a rate
equal to 3-month LIBOR plus 150 basis points (or, at the option
of Reorganized EPE, at the agent bank's adjusted reference rate
plus 50 basis points) from and after the Effective Date, payable
at the end of each interest period (but in any event not less
often than quarterly). Such Reorganized EPE Class 6A Secured
Notes will mature on the earlier of December 31, 1998, and the
last business day of the month in which the fourth anniversary of
the Effective Date shall occur (or such earlier date as may be
agreed to by Reorganized EPE) and will be payable in equal
quarterly principal installments commencing on the earlier of (x)
December 31, 1994 and (y) the last business day of the month in
which the first anniversary of the Effective Date shall have
occurred. If, however, the Effective Date occurs after
December 31, 1994, any quarterly installment(s) (beginning with
the December 31, 1994, installment) that would otherwise have
been payable prior to the Effective Date shall not be required to
be paid until (and shall be payable in addition to any quarterly
principal installment scheduled to be paid on) the last business
day of the month in which the Effective Date occurs. Such
Reorganized EPE Class 6A Secured Notes will be prepayable at any
time in whole or in part without premium subject only to breakage
costs, if any, in connection with the LIBOR option. Such
Reorganized EPE Class 6A Secured Notes will not be publicly
tradeable and will be assignable only to "Eligible Institutions"
(to be defined in the term loan agreement, such definition to
include a limitation by asset size and/or rating) and in such
minimum denomination as shall be agreed and specified in the term
loan agreement.
The term loan agreement and related notes and pledged
mortgage bonds governing the Reorganized EPE Class 6A Secured
Notes will contain terms set forth in documents filed with the
Bankruptcy Court in accordance with Section 7.6 of the Plan,
which shall include material covenants appropriate for secured
senior (non-publicly tradeable) bank debt of a utility whose
senior debt securities have a rating similar to those of
Reorganized EPE, but in no event materially less favorable to the
holders of Allowed Class 6 Claims who elect Treatment A than
those generally found in similar agreements, if any, of other CSW
electric operating subsidiaries. Such covenants will include a
negative pledge; a minimum ratio of earnings before interest,
amortization and taxes to interest expense; and a maximum ratio
of debt to total capital.
<PAGE> 55
Each Class 6 Claim holder which has participants in its
Claims shall be issued separate Reorganized EPE Class 6A Secured
Notes for the portion of its Allowed Claim which is so
participated and such separate Notes shall be transferred by the
Allowed Claim holder to the participants.
Notwithstanding the foregoing, Reorganized EPE may, at
the election of CSW exercised on or prior to the Effective Date,
satisfy all or any portion of Allowed Class 6 Claims that are to
receive Treatment A by remitting to the holders of such Allowed
Claims, Pro rata, cash in lieu of an equal principal amount of
Reorganized EPE Class 6A Secured Notes.
2. Treatment B. Alternatively, each holder of an
Allowed Class 6 Claim shall have the option to elect to have its
Allowed Class 6 Claim (or any portion thereof) treated as set
forth in this Section 3.8(A)(2). To the extent Allowed Class 6
Claims are to receive Treatment B pursuant to an election by the
holder thereof in the manner set forth above, such Claims shall
be discharged and satisfied in full by distribution of
Reorganized EPE Series B Second Mortgage Bonds in a principal
amount equal to the amount of such Allowed Class 6 Claims less
the amount of such Claims described in item (b) of the first
paragraph of Section 3.8(A) (which Allowed Claims shall be paid
in cash on the Effective Date) and less the amount of such Claims
described in item (c) of the first paragraph of Section 3.8(A)
(which portion of Allowed Claims shall be paid in cash as soon as
practicable after the Confirmation Date, and thereafter
periodically on a current basis, but no less often than
quarterly, to the Effective Date). Such Reorganized EPE Series B
Second Mortgage Bonds shall have terms identical to the
Reorganized EPE Series B Second Mortgage Bonds described in
Section 3.5(A)(2).
Each Class 6 holder which has participants in its
Claims shall be issued separate Reorganized EPE Series B Second
Mortgage Bonds for the portion of its Allowed Claim which is so
participated and such separate Bonds shall be transferred by the
Allowed Claim holder to the participants.
Notwithstanding the foregoing, Reorganized EPE may, at
the election of CSW exercised on or prior to the Effective Date,
satisfy all or any portion of Allowed Class 6 Claims that are to
receive Treatment B by remitting to the holders of such Allowed
Claims, Pro rata, cash in lieu of an equal principal amount of
Reorganized EPE Series B Second Mortgage Bonds.
3. Interest Prior to Effective Date. In addition to
the foregoing, if Class 6 accepts the Plan in accordance with
Section 1126(c) of the Code, interest will accrue on the
aggregate principal amount outstanding under the RGRT Agreement
(i) from September 10, 1993 through and including the
Confirmation Date, at the contract (non-default) rate set forth
in the RGRT Agreement and (ii) from the Confirmation Date through
<PAGE> 56
and including the Effective Date, at 90-day LIBOR plus 200 basis
points, and such interest shall be payable as provided in Section
5.1(B) of the Plan.
B. If Class 6 does not accept the Plan in accordance
with Section 1126(c) of the Code, then the provisions of Section
3.8(A) of this Plan shall not apply. In such event, Class 6
Claims shall be determined by a Final Order to be Allowed or not
Allowed and secured or unsecured in accordance with
Sections 1.3(a), 1.3(b), and 1.5 of this Plan and applicable
provisions of the Code and Bankruptcy Rules. To the extent it is
determined by a Final Order that any Allowed Class 6 Claims are
Allowed Secured Claims, then such Allowed Secured Claims shall be
discharged and satisfied in full by distribution on the Effective
Date of Reorganized EPE Class 6A Secured Notes with the terms
described below in the principal amount of such Allowed Secured
Claims, including if and to the extent provided by Section 506(b)
of the Code, (i) any Allowed Claims for post-petition interest on
such Allowed Secured Claims less any post-petition interest
payments made on or prior to the Effective Date with respect to
such Claims and (ii) any reasonable fees, costs or charges
provided for under the agreement under which such Claims arose,
less any amounts paid on account of such fees, costs and other
charges prior to the Effective Date. The Reorganized EPE Class
6A Secured Notes distributed pursuant to this Section 3.8(B) will
have the same terms as the Reorganized EPE Class 6A Notes
described in Section 3.8(A)(1) (and will be issued under a term
loan agreement having the same terms as the term loan agreement
described in Section 3.8(A)(1)), except that (i) such Notes will
mature, and be repayable in a single principal installment, on
the fifth anniversary of the Effective Date and (ii) such Notes
will be secured by Reorganized EPE Series Z Pledged Second
Mortgage Bonds (having interest and payment terms which are
identical to those of such Reorganized EPE Class 6A Secured
Notes) or, if and to the extent that such collateral does not
comply with Section 1129(b)(2)(A) of the Code, such other
collateral as the Bankruptcy Court may determine is necessary to
comply with Section 1129(b)(2)(A) of the Code. To the extent
that the Bankruptcy Court determines by a Final Order that any
Allowed Class 6 Claims are not Allowed Secured Claims, then the
portion of the Allowed Class 6 Claims which are not Allowed
Secured Claims shall be paid in full on the Effective Date and
discharged through the issuance to or for the benefit of holders
of such Allowed Claims, Pro rata, of Reorganized EPE Class 13
Senior Fixed Rate Notes, in an amount equal to the amount of such
Allowed Claims, without post-petition interest, fees, costs and
other charges except as otherwise allowed or required to be paid
by the Bankruptcy Court. The Reorganized EPE Class 13 Senior
Fixed Rate Notes shall have the same terms as the Reorganized EPE
Class 13 Senior Fixed Rate Notes described in Section 3.15(A),
except that the sixty percent (60%) limitation shall not apply to
the amount of the Reorganized EPE Class 13 Senior Fixed Rate
Notes issued under this Section 3.8(B).
<PAGE> 57
C. The RGRT Agreement shall be treated as a secured
(or unsecured) financing agreement and not as an executory
contract or unexpired lease. All property subject to the RGRT
Agreement shall be the sole property of Reorganized EPE.
3.9 Class 7 Claims (Other Allowed Secured Claims).
For purposes of the Plan, each Allowed Secured Claim in Class 7
shall be deemed classified in a separate Class. On the Effective
Date, each holder of an Allowed Secured Claim in Class 7, in full
satisfaction of such Claim, shall, at the option of the Debtor
and CSW, receive one of the following treatments: (i) receive
cash equal to the amount of such Allowed Claim; (ii) such Allowed
Claim shall be reinstated so that the Plan shall leave unaltered
the legal, equitable, and contractual rights to which such holder
is entitled; (iii) (A) any and all defaults under any instrument
evidencing such Allowed Claim that occurred before or after the
commencement of the Case, other than a default of a kind
specified in Section 365(b)(2) of the Code, shall be cured; (B)
such holder shall be compensated for any damages incurred as a
result of any reasonable reliance on any contractual provision or
applicable law that entitles such holder to demand or receive
accelerated payment of such Allowed Claim after the occurrence of
a default; (C) the original maturity for the obligations under
such instruments shall be reinstated; and (D) any other legal,
equitable, or contractual rights of such holder shall remain
unaltered; or (iv) receive the collateral securing such Allowed
Claim. Alternatively, notwithstanding any other provision of
this Section 3.9, the Debtor and CSW and the holder of an Allowed
Claim in Class 7 may agree upon any other treatment of such Claim
without any further requirement of Bankruptcy Court approval,
which treatment may include the preservation of such holder's
lien; provided, however, that such treatment shall not provide
for such holder to receive consideration having a present value
in excess of the amount of such Allowed Claim. Class 7 Claims
are unimpaired.
3.10 Class 8 Claims (Allowed priority Claims). The
Plan shall leave unaltered the legal, equitable, and contractual
rights to which the holders of Allowed Class 8 Claims are
entitled. Class 8 Claims are unimpaired.
3.11 Class 9 Claims (Allowed customer refund and
deposit Claims). The Plan shall leave unaltered the legal,
equitable, and contractual rights to which the holders of Allowed
Class 9 Claims are entitled. Class 9 Claims are unimpaired.
3.12 Classes 10(a) and 10(b) Claims (Allowed Claims
arising from or related to the Farmington Agreement and the
Farmington Series A 1983 PCB). Allowed Class 10(a) Claims and
Allowed Class 10(b) Claims, if any, shall at the option of
Reorganized EPE, exercised on the Effective Date, either (i) be
cured and reinstated pursuant to Section 1124(2) of the Code or
(ii) be left unaltered pursuant to Section 1124(1) of the Code.
If Section 1124(2) treatment is elected, (i) any and all defaults
<PAGE> 58
under the Farmington Agreement and the Farmington Series A 1983
PCB that occurred before or after the commencement of the Case,
other than a default of a kind specified in Section 365(b)(2) of
the Code shall be cured; (ii) the holder shall be compensated for
any damages incurred as a result of any reasonable reliance on
any contractual provision or applicable law that entitles the
holder to demand or receive accelerated payment of such Claim
after the occurrence of a default; (iii) the original maturity
for the obligations under the Farmington Agreement and the
Farmington Series A 1983 PCB shall be reinstated; and (iv) any
other legal, equitable, or contractual rights of holders of
Class 10(a) and 10(b) Claims shall remain unaltered. If Section
1124(1) treatment is elected, the legal, equitable and
contractual rights to which such Claim entitles the holder of
such Claim shall be unaltered by the Plan. Class 10(a) and 10(b)
Claims are unimpaired.
Apart, and independent, from the provisions of this
Plan, but pursuant to documents filed with the Bankruptcy Court
in accordance with Section 7.6 of the Plan and in accordance with
the legal and contractual rights of the parties, it is
contemplated that the Farmington PCBs held by or on behalf of EPE
or the issuer of the Farmington PCB LC on the Effective Date will
be remarketed or that the Farmington PCBs will be refunded on or
soon after the Effective Date. In connection therewith, it is
also contemplated that certain modifications will be made to the
resolution governing the Farmington PCBs.
3.13 Class 11 Claims (Allowed Claims arising from or
relating to the Farmington PCB LC).
A. If the issuer of the letter of credit giving rise
to the Claims in Class 11 provides (or, pursuant to Section
3.13(C) of the Plan, is deemed to provide) a new letter of credit
on the terms described in the documents filed with the Bankruptcy
Court in accordance with Section 7.6 of the Plan (the "Farmington
LC Terms"), which shall include provisions for reimbursement of
claims under the new letter of credit to be secured by
Reorganized EPE Second Mortgage Bonds, then Class 11 Claims shall
be Allowed Claims in the sum of (i) unreimbursed amounts drawn
before and after the Petition Date under the Farmington PCB LC,
and (ii) unpaid letter of credit fees accrued before and after
the Petition Date with respect to the Farmington PCB LC.
Allowed Class 11 Claims shall, in the case of (a)
unreimbursed amounts drawn before and after the Petition Date
under the Farmington PCB LC (other than amounts, if any, drawn to
pay the principal amount of the purchase price of Farmington
Series A 1983 PCBs in circumstances under which the purchased
PCBs have not been canceled or extinguished) and (b) unpaid
letter of credit fees accrued before and after the Petition Date
with respect to the Farmington PCB LC, be discharged and
satisfied in full by distribution to the holder thereof of (i)
Reorganized EPE Class 13 Senior Notes in a principal amount equal
<PAGE> 59
to 30% of the amount of the Allowed Class 11 Claims (other than
Allowed Class 11 Claims, if any, to be satisfied by distribution
of Reorganized EPE Class 11 Senior Notes) of such holder, (ii) a
number of shares of CSW Common Stock determined by dividing 60%
of the amount of the Allowed Class 11 Claims (other than Allowed
Class 11 Claims, if any, to be satisfied by distribution of
Reorganized EPE Class 11 Senior Notes) of such holder by the CSW
Class 12/13 Share Value (subject to the provisions of Section 5.5
hereof), and (iii) Reorganized EPE Class 13 Senior Notes in a
principal amount of 5.5% of the Allowed Class 11 Claims (other
than Allowed Class 11 Claims, if any, to be satisfied by
distribution of Reorganized EPE Class 11 Notes) of such holder
or, at the option of Reorganized EPE exercised on the Effective
Date, a number of shares of CSW Common Stock determined by
dividing 5.5% of the amount of the Allowed Class 11 Claims (other
than Allowed Class 11 Claims, if any, to be satisfied by
distribution of Reorganized EPE Class 11 Senior Notes) of such
holder by the CSW Class 12/13 Share Value.
An Allowed Class 11 Claim holder's receipt of CSW
Common Stock shall be treated as if such holder had exchanged a
portion of its Claims for EPE Common Stock and then transferred
such EPE Common Stock to CSW for CSW Common Stock. The Reorgan-
ized EPE Class 13 Senior Notes issued to holders of Class 11
Allowed Claims will have terms identical to, and will be governed
by the same term loan agreement or indenture as, the Reorganized
EPE Class 13 Senior Notes issued to holders of Allowed Class 13
Claims.
In the event that on or prior to the Effective Date
there is a drawing on the Farmington PCB LC to pay the principal
amount of the purchase price of any Farmington Series A 1983 PCBs
in circumstances under which such PCBs have not been canceled or
extinguished, Allowed Class 11 Claims arising from such draw
shall be discharged and satisfied in full (to the extent not paid
out of proceeds of a remarketing or refunding of such Farmington
Series A 1983 PCBs prior to Effective Date) by distribution to
the holder thereof of the Reorganized EPE Class 11 Senior Notes
under a separate term loan agreement in the principal amount of
such Allowed Class 11 Claims. The Reorganized EPE Class 11
Senior Notes will have interest, maturity, amortization and
covenant terms identical to Reorganized EPE Class 13 Senior
Floating Rate Notes, except that the Reorganized EPE Class 11
Senior Notes will include provisions for the mandatory prepayment
thereof from the proceeds of any remarketing or refunding of the
Farmington Series A 1983 PCBs paid for or purchased with a draw
on the Farmington PCB LC.
Holders of Allowed Class 11 Claims shall elect, at the
time they vote on the Plan, and in accordance with such election,
shall be entitled to receive, Reorganized EPE Class 13 Senior
Notes in the form of (a) Reorganized EPE Class 13 Senior Fixed
Rate Notes or (b) Reorganized EPE Class 13 Senior Floating Rate
Notes, provided, however, that in no event may any holder elect
<PAGE> 60
to receive more than sixty percent (60%) of the aggregate
principal amount of Reorganized EPE Class 13 Senior Notes to
which it is entitled in respect of Class 11 Allowed Claims in the
form of Reorganized EPE Class 13 Senior Fixed Rate Notes. If
Class 11 accepts the Plan and a holder of a Class 11 Claim fails
to make an election or does not return a ballot, such holder will
be deemed to have elected to receive Reorganized EPE Class 13
Senior Floating Rate Notes for the full amount of the Reorganized
EPE Class 13 Senior Notes to which such holder is entitled.
Subject to there being no material adverse consequences
to Reorganized EPE, including the loss of tax-exempt status of
the Farmington Series A PCBs, from such actions, the Debtor will
use its reasonable best efforts to remarket the Farmington Series
A 1983 PCBs after the Confirmation Date and prior to the
Effective Date in accordance with the terms of the existing
documents governing such remarketings. In the event that prior
to the Effective Date there is a draw on the Farmington PCB LC to
pay the principal amount of the purchase price of any Farmington
PCB and such Farmington PCB is not canceled or redeemed, then
upon any remarketing or refunding thereof (i) on or prior to the
Effective Date such proceeds shall be remitted to the issuer of
the Farmington PCB LC and (ii) after the Effective Date the
proceeds from any remarketing or refunding of the Farmington PCBs
(to the extent not previously remitted to such holder) shall be
paid to the Class 11 Allowed Claim holders Pro rata on account of
their Reorganized EPE Class 11 Senior Notes.
As noted in Section 3.12 of this Plan, it is
contemplated that, subject to the tax exempt status of the
Farmington Series A 1983 PCBs being maintained, the Farmington
Series A 1983 PCBs will be refunded on or soon after the
Effective Date and in connection with such refunding certain
modifications will be made to the resolution governing the
Farmington Series A 1983 PCBs. It is also contemplated that the
new letter of credit to be issued with respect to the Farmington
Series A 1983 PCBs in replacement of the Farmington PCB LC will
be issued on the refunding date for the Farmington Series A 1983
PCBs, or, in the event that a refunding would jeopardize the tax
exempt status of the Farmington Series A 1983 PCBs, such new
letter of credit will be issued on the Effective Date or as soon
thereafter as practicable. In the event Farmington Series A 1983
PCBs are not refunded on the Effective Date and the new letter of
credit is not issued on the Effective Date then (i) unless
otherwise agreed between Reorganized EPE and the issuer of the
Farmington PCB LC and subject to the tax exempt status of the
Farmington Series A 1983 PCBs being maintained, such refunding
will occur on the first applicable date for such refunding
pursuant to the terms of the resolution for the Farmington Series
A 1983 PCBs following the Effective Date and (ii) unless
otherwise agreed between Reorganized EPE and the issuer of the
Farmington PCB LC, on the Effective Date the reimbursement
agreement related to the Farmington PCB LC will provide that all
<PAGE> 61
obligations thereunder incurred after the Effective Date will be
collateralized by Reorganized EPE Second Mortgage Bonds.
In addition to the foregoing, holders of Allowed Class
11 Claims receiving treatment pursuant to this Section 3.13(A)
will accrue interest from and after June 25, 1993 through and
including the Effective Date at the per annum rate of 3-month
LIBOR plus 200 basis points on a principal amount equal to (i)
ninety-five and one-half percent (95.5%) of the principal amount
of Class 11 Allowed Claims (other than Class 11 Allowed Claims to
be satisfied through the issuance of Reorganized EPE Class 11
Senior Notes) and (ii) one hundred percent (100%) of then
outstanding Class 11 Allowed Claims to be satisfied through the
issuance of Reorganized EPE Class 11 Senior Notes, and such
interest will be paid pursuant to Section 5.1(B) of the Plan.
B. If (i) Class 11 accepts the Plan in accordance
with Section 1126(c) of the Code, and (ii) the Effective Date
occurs, then such acceptance of the Plan by Class 11 shall be a
commitment by the issuer of the letter of credit that gave rise
to the Class 11 Claims to provide a new letter of credit on the
Farmington LC Terms provided, however, that if the treatment of
Class 11 is modified from the treatment for Class 11 set forth in
the Plan (including the Farmington LC Terms) which Class 11
accepted and Class 11 does not approve or accept (or is not
deemed, pursuant to the Code or the Bankruptcy Rules, to have
approved or accepted) such modification, then the issuer of the
letter of credit that gave rise to the Class 11 Claims shall not
be committed to issue such new letter of credit. The commitment
of the letter of credit issuer shall not be released by the
provisions of Section 7.2(B) of this Plan.
C. Notwithstanding anything to the contrary in this
Plan, for purposes of determining the treatment to be received
pursuant to this Plan by Class 11, the issuer of the letter of
credit giving rise to Claims in Class 11 shall be deemed to have
provided a new letter of credit on the Farmington LC Terms if:
(i) such issuer commits, pursuant to paragraph
B of Section 3.13 of this Plan, to issue such new
letter of credit and the Debtor or Reorganized EPE, as
the case may be, determines to have a different
financial institution issue such new letter of credit,
(ii) such issuer commits, pursuant to paragraph
B of Section 3.13 of this Plan, to issue such new
letter of credit, and, prior to such issuer issuing
such new letter of credit, a different financial
institution, which financial institution is
satisfactory to the Debtor or Reorganized EPE, as the
case may be, commits to issue such new letter of credit
in place of such issuer, or
<PAGE> 62
(iii) such issuer commits, pursuant to paragraph B of
Section 3.13 of this Plan, to issue such new letter of
credit, and, prior to such issuer issuing such new letter of
credit, the letter of credit is not required because the
Farmington PCBs have been redeemed or canceled (other than
due to any action or inaction of the issuer of the letter of
credit including a failure on the part of the issuer to
extend the termination date of the letter of credit).
D. If the Farmington PCB LC is not replaced (and is
not deemed pursuant to Section 3.13(C) to have been replaced) on
the Farmington LC Terms or if Class 11 does not accept the Plan
in accordance with Section 1126(c) of the Code, then, in either
event, the provisions of Section 3.13(A) of this Plan shall not
apply and Allowed Class 11 Claims shall be paid in full on the
Effective Date and discharged through the issuance to or for the
benefit of holders of such Allowed Claims, Pro rata, of (i)
Reorganized EPE Class 13 Senior Fixed Rate Notes, in an amount
equal to one-third the amount of such Allowed Claims, and without
post-petition interest except as otherwise Allowed by the
Bankruptcy Court or required to be paid by the Bankruptcy Court;
and (ii) a number of shares of CSW Common Stock, determined by
dividing two-thirds of the amount of the Allowed Class 11 Claims
of such holder (without post-petition interest, fees, costs, and
other charges except as otherwise allowed or required to be paid
by the Bankruptcy Court), by the CSW Class 12/13 Determination
Date Share Value (subject to the provisions of Section 5.5
hereof). The Reorganized EPE Class 13 Senior Fixed Rate Notes
shall have the same terms as the Reorganized EPE Class 13 Senior
Fixed Rate Notes described in Section 3.15(A), except that the
sixty percent limitation shall not apply to the amount of the
Reorganized EPE Class 13 Senior Fixed Rate Notes issued under
this Section 3.13(D).
E. The new letter of credit to be provided to replace
the Farmington PCB LC shall have a term ending on the last day of
the sixth month after the agreed final maturity for the
Reorganized EPE Class 13 Senior Floating Rate Notes as set forth
in Section 3.15 hereof. Reorganized EPE shall pay a commission
on such letter of credit of 0.625% per annum for the period
ending on the first anniversary of the earlier of the Effective
Date and December 31, 1994 (such earlier date being the
"Commencement Date"), 0.75% per annum for the period ending on
the second anniversary of the Commencement Date, 0.875% per annum
for the period ending on the third anniversary of the
Commencement Date, 1.00% per annum for the period ending on the
fourth anniversary of the Commencement Date, 1.125% per annum for
the period ending on the fifth anniversary of the Commencement
Date, 1.25% per annum for the period ending on the sixth
anniversary of the Commencement Date, 1.625% per annum for the
period ending on the seventh anniversary of the Commencement Date
and 2.00% per annum for the period ending on the eighth
anniversary of the Commencement Date, in each case payable
quarterly in arrears. In addition, such letter of credit shall
<PAGE> 63
provide for a transfer fee of 1/4% and a drawing fee of $100 per
draw. The post-Effective Date reimbursement agreement claims of
the issuer of the letter of credit shall be collateralized by
Reorganized EPE Pledged Second Mortgage Bonds.
3.14 Class 12(a) Claims (Allowed Claims Relating to
Palo Verde Leases, the Secured Lease Obligation Bonds and the
Lease Obligation Bonds, Except Allowed Claims Included in Class
12(b)) and Class 12(b) Claims (Allowed Claims of Owner
Participants).
A. Class 12(a) Consensual Treatment of the Claims of
the holders of the Lease Obligation Bonds and Secured Lease
Obligation Bonds. If Class 12(a) (the holders of the Lease
Obligation Bonds and Secured Lease Obligation Bonds) accepts the
Plan in accordance with Section 1126(c) of the Code, then:
1. Class 12(a) Claims shall be Allowed Claims in
the amount of $700 million, which Claims shall be discharged and
satisfied in full, by means of the transactions described below,
through the distribution of securities in the amount of 95.5% of
the Class 12(a) Allowed Claims (the "Class 12(a) Distribution
Amount") by the Pro rata issuance to the Palo Verde Indenture
Trustees on behalf of holders of Class 12(a) Allowed Claims of
(i) an aggregate principal amount of unsecured Reorganized EPE
Series A Senior Notes under an indenture equal to no less than
one-third and no more than two-thirds of the Class 12(a)
Distribution Amount, and (ii) an aggregate number of shares of
CSW Common Stock equal to (x) the remainder of the Class 12(a)
Distribution Amount divided by (y) the CSW Class 12/13 Share
Value (subject to the provisions of Section 5.5 hereof). The
receipt of any distribution under this Section 3.14(A) of the
Plan by a Palo Verde Indenture Trustee on behalf of a holder of
Class 12(a) Claims shall constitute, as of the Effective Date,
(i) in the event Class 12(b) accepts the Plan in accordance with
Section 1126(c) of the Code, and the OP Settlement is approved by
the Bankruptcy Court, a release of all Claims of such holder and
such Palo Verde Indenture Trustees related to transactions
involving the Debtor, including, without limitation, transactions
related to the Palo Verde Nuclear Generating Station and the Palo
Verde Leases, which such holder may have against the Funding
Corporations, the Owner Participants, the Owner Trustees or the
Owner Trusts, and the Palo Verde Indenture Trustees shall execute
a release to the Owner Participants and Owner Trustees so
providing or (ii) at EPE's election in the event Class 12(b) does
not accept the Plan in accordance with Section 1126(c) of the
Code or the OP Settlement is not approved by the Bankruptcy
Court, a transfer of all such claims against the Funding
Corporations, the Owner Participants, the Owner Trustees or the
Owner Trusts by such holder to the Debtor or its designee.
<PAGE> 64
2. The Reorganized EPE Series A Senior Notes
will provide for the accrual of interest commencing on the
Effective Date at a rate per annum equal to a Market Basket Rate,
will mature at the end of the quarter immediately following the
tenth anniversary of the earlier of the Effective Date or
December 31, 1994. The term of the Reorganized EPE Series A
Senior Notes may, at the election of CSW made not later than the
Effective Date of the Plan, be adjusted, provided that such term
may not exceed ten (10) years. The Reorganized EPE Series A
Senior Notes will be redeemable at the option of Reorganized EPE
at any time in whole or in part at a redemption price equal to
the outstanding principal amount of such Notes plus a redemption
premium calculated pursuant to Schedule C plus accrued interest,
provided that prior to the fourth anniversary of the Effective
Date such Notes will be redeemable at the option of Reorganized
EPE at any time in whole or in part at a redemption price equal
to the lesser of (x) the sum of the outstanding principal amount
of such Notes plus a redemption premium calculated pursuant to
Schedule C, plus accrued interest and (y) the greater of (i) the
outstanding principal amount of such Notes plus accrued interest
and (ii) the present value of remaining interest and principal
payments on such Notes, discounted at a rate equal to the sum of
(a) the original issue spread over the yield on the treasury
security, as of the Effective Date, which has a maturity date
closest to the average life of such Notes plus (b) the yield on
the treasury security which has a maturity date closest to the
remaining average life of such Notes, calculated as of the date
of determination of such redemption price. The Reorganized EPE
Series A Senior Notes shall contain covenants (including an anti-
layering provision) and be subject to certain other terms in
documents filed with the Bankruptcy Court pursuant to Section 7.6
of this Plan. The Reorganized EPE Series A Senior Notes will be
publicly tradeable under Section 1145 of the Code. In addition
to the foregoing, the Class 12(a) Distribution Amount as to Class
12(a) Allowed Claims will accrue interest retroactive from and
after July 29, 1993 through and including the Effective Date at
the rate of 90 day LIBOR plus 200 basis points, and such interest
shall be payable as provided in Section 5.1(B) of this Plan.
3. Upon the Effective Date, all right, title,
liens, claims, and interests of holders of Class 12(a) Claims and
all Claims of the Lease Obligation Bondholders, Secured Lease
Obligation Bondholders, the Palo Verde Indenture Trustees, and
the Funding Corporations, and the Owner Trusts and Owner Trustees
on behalf of the Palo Verde Indenture Trustees for the Lease
Obligation Bonds and the Secured Lease Obligation Bonds, in or
relating to the Palo Verde Nuclear Generating Station and the
Palo Verde Leases shall be deemed to have been discharged and
paid in full, and of no further effect, and all right, title and
interest of such persons in such facilities shall, in a manner
reasonably satisfactory to the Palo Verde Indenture Trustees,
CSW, and Reorganized EPE be transferred to and be deemed vested
in Reorganized EPE free and clear of all liens, claims, and
interests by any such parties. The Palo Verde Indenture Trustees
<PAGE> 65
will take all reasonable steps to facilitate the transfer as
requested by the Debtor or Reorganized EPE. The Debtor and
Reorganized EPE will indemnify the Palo Verde Indenture Trustees
against any and all losses and claims, including, but not limited
to reasonable related costs and expenses, incurred by the Palo
Verde Indenture Trustees that result from steps taken on or after
the Confirmation Date which are in furtherance of the provisions
of the Plan or at the request of the Debtor or the Reorganized
Debtor, as the case may be to facilitate the transfer.
4. As of the Effective Date, a judgment dismis-
sing with prejudice all claims and counterclaims which were or
could have been asserted by the Palo Verde Indenture Trustees or
the holders of Class 12(a) Claims against the Debtor or by the
Debtor against the Palo Verde Indenture Trustees or the holders
of Class 12(a) Claims in Adversary Proceeding 92-1285 FM shall be
submitted to the Court for entry in such proceeding and the
Debtor and the Palo Verde Indenture Trustees shall exchange
mutual releases of any and all rights, claims and causes of
action they may have against each other related to the Palo Verde
Leases.
5. As of the Effective Date, Reorganized EPE
will indemnify the Palo Verde Indenture Trustees for all
losses, costs and expenses (including reasonable attorneys' fees)
and liabilities incurred if the Debtor asserts any rights, claims
or causes of action against any person or entity concerning the
Palo Verde Nuclear Generating Station if any such assertion
results in a right, claim or cause of action being asserted by
that person or entity against the Palo Verde Indenture Trustees
provided that, except for fees and expenses, liability hereunder
is limited to costs resulting from a final judgment or a
settlement entered into with the consent of Reorganized EPE.
B. Class 12(b) Consensual Treatment. If Class 12(b)
accepts the Plan in accordance with Section 1126(c) of the Code
and the OP Settlement is approved by the Bankruptcy Court, then:
1. The OP Settlement shall become binding on all
holders of Class 12(b) Claims, subject to the occurrence of the
Effective Date. The Class 12(b) Allowed Claims shall be
discharged and satisfied in full in accordance with the terms of
the OP Settlement.
2. Upon the Effective Date, all Class 12(b)
Claims shall be deemed to have been discharged and paid in full,
and of no further effect, and all right, title, liens, claims,
and interests of holders of Class 12(b) Claims, and all right,
title and interest of the holders of Class 12(b) Claims in the
Palo Verde Nuclear Generating Station and the Palo Verde Leases
shall, in a manner reasonably satisfactory to CSW and Reorganized
EPE, be transferred to and be deemed vested in Reorganized EPE
free and clear of all liens, claims, and interests by any such
parties. Upon the Effective Date, the Owner Participants shall
<PAGE> 66
also obtain the benefit of any releases described in Sections
3.14(A)(1), 3.14(A)(4), 3.14(B)(3), and 7.2(D); provided,
however, that the Owner Participants grant mutual releases to the
same entities and to the Debtor.
3. As of the Effective Date, a judgment
dismissing with prejudice all claims and counterclaims which were
or could have been asserted by the holders of Class 12(b) Claims
against the Debtor or by the Debtor against the holders of
Class 12(b) Claims in Adversary Proceeding 92-1285 FM shall be
submitted to the Court for entry in such proceeding and all
rights, claims and causes of action of the Debtor, on one hand,
and the holders of Class 12(b) Claims, on the other hand, related
to the Palo Verde Leases and the Palo Verde Letters of Credit
shall, except as set forth in the Plan and any settlement
agreement executed to implement its provisions, be mutually
released.
4. Upon the Effective Date, to the fullest
extent possible under applicable law based on the acceptance of
the Plan by Class 12(a) and the acceptance of the Plan by
Class 12(b), or an order of the Court under Section 3.14(C) as
the case may be, all right, title, liens, claims, and interests
of holders of Class 12(a) Claims and all Claims of the Lease
Obligation Bondholders, Secured Lease Obligation Bondholders, the
Palo Verde Indenture Trustees, the Funding Corporations, the
Owner Trusts and the Owner Trustees in or relating to the Palo
Verde Nuclear Generating Station and the Palo Verde Leases shall
be deemed to have been discharged and paid in full, and of no
further effect, and all right, title, and interest in such
facilities shall, in a manner reasonably satisfactory to CSW, and
Reorganized EPE be transferred to and be deemed vested in
Reorganized EPE free and clear of all liens, claims, and
interests by any such parties.
5. The Debtor and the holders of Class 12(b)
Claims may, prior to the Confirmation Date, enter into one or
more agreements ("Settlement Agreements") to implement the terms
of the OP Settlement. Such Settlement Agreements may, but need
not, include provisions to facilitate the transfers and other
actions contemplated under the OP Settlement and for the
continuation after the Effective Date of existing contractual
indemnities between the Debtor and the holders of Class 12(b)
Claims, subject to reduction of such indemnities as appropriate
by the amounts of letters of credit previously drawn by such
holders. If executed, the Settlement Agreements will be filed
with the Court as soon as practicable prior to the Confirmation
Date and to the extent necessary deemed incorporated into the
Plan.
C. Class 12(a) and Class 12(b) Non-Consensual
Treatment. If either Class 12(a) or Class 12(b) does not accept
the Plan in accordance with Section 1126(c) of the Code or if the
OP Settlement is not approved by the Bankruptcy Court, then:
<PAGE> 67
1. The treatment of the non-assenting Class
12(a) or Class 12(b) (or the treatment of Class 12(b), if the OP
Settlement is not approved by the Bankruptcy Court) set forth in
Section 3.14(A) or 3.14(B), as the case may be, shall not apply
(but shall apply, in any event, to Class 12(a) if it accepts the
Plan or to Class 12(b) if it accepts the Plan and the Bankruptcy
Court approves the OP Settlement). Instead, the Bankruptcy Court
shall determine, as to such Class 12(a) or Class 12(b), whether
each Class 12(a) or Class 12(b) Claim, as the case may be, shall
be an Allowed Claim and the amount thereof. Class 12(a) and
Class 12(b) Claims so allowed by the Bankruptcy Court shall be
paid in full on the Effective Date and discharged through the
issuance to or for the benefit of the holders of such Allowed
Claims, on a Pro rata basis, and as set forth in Section 5.3(b)
of (i) payment, as provided in Section 3.1 of the Plan, equal to
the amount of administrative rent, if any, allowed and payable
with respect to such Claims, as determined by the Bankruptcy
Court; (ii) to the extent such Claims are Allowed Secured Claims,
Reorganized EPE Series A-I Notes, in an amount equal to the
amount of such Allowed Secured Claims (less the aggregate amount
paid on account of administrative rent as may be determined by
the Bankruptcy Court) and (iii) to the extent such Allowed Claims
are not Allowed Secured Claims and do not constitute
administrative rent, payment of which is provided for in clause
(i) above, (X) Reorganized EPE Series A-II Notes, provided that
the aggregate principal amount of such Reorganized EPE Series
A-II Notes issued under this clause (iii), when added to the
aggregate principal amount of the Reorganized EPE Series A-I
Notes issued under clause (ii) above, shall not be less than two-
thirds of such Allowed Class 12(a)and Allowed Class 12(b) Claims
under this subsection and (Y) an aggregate number of shares of
CSW Common Stock equal to (1) the remainder of such Allowed
Claims, if any, divided by (2) the CSW Class 12/13 Determination
Date Share Value (subject to the provisions of Section 5.5
hereof). The Reorganized EPE Series A-I and A-II Notes shall
have the same maturity described herein for the Reorganized EPE
Series A Senior Notes, shall bear interest at the Market Basket
Rate, shall be redeemable at any time in whole or in part at
redemption prices calculated in the manner specified in Section
3.14(A)(2) for the Reorganized EPE Series A Senior Notes, and
shall have other terms and conditions described in documents
filed with the Bankruptcy Court pursuant to Section 7.6 of the
Plan, except that such Reorganized EPE Series A-I Notes shall be
secured by interests in Units 2 and 3 of the Palo Verde Nuclear
Generating Station. It is a condition of this Plan that the
aggregate amount of the Class 12(a) and Class 12(b) Allowed
Claims under this Section 3.14(C) shall not exceed $700 million
or such higher amount as may be accepted, in writing, by CSW.
2. Upon the Effective Date, and to the extent so
provided in a Bankruptcy Court order entered in connection with
its determination of the amount and nature of Class 12(a) and
Class 12(b) Allowed Claims receiving the treatment set forth in
this Section 3.14(C), all Claims of the Lease Obligation
<PAGE> 68
Bondholders, Secured Lease Obligation Bondholders, Palo Verde
Indenture Trustees, Funding Corporations, Owner Trusts, Owner
Trustees, and Owner Participants in or relating to the Palo Verde
Nuclear Generating Station shall be deemed to have been
discharged and paid in full, and of no further effect, and all
right, title, liens, claims, and interests of holders of Class
12(a) and Class 12(b) Claims, and all right, title and interest
of the Owner Trustee and Owner Participants in such facilities
shall be deemed vested in Reorganized EPE free and clear of all
liens, claims, and interests by any such parties, except as
expressly provided with respect to the Reorganized EPE Series A-I
Notes under Section 3.14(C)(1).
D. If the Plan is confirmed under Section 3.14(A),
Section 3.14(B) or Section 3.14(C), the affirmative vote of any
holder of Lease Obligation Bonds or Secured Lease Obligation
Bonds in connection with the Plan shall constitute a directive by
such holder to the appropriate Palo Verde Indenture Trustee
pursuant to the indenture under which such debt instrument was
issued to take such steps as may be required to transfer the
Pledged Lessor Notes (as defined in the Collateral Trust
Indentures described in Schedule A) to an entity designated by
CSW in exchange for the consideration set forth in or determined
pursuant to Section 3.14(A), Section 3.14(B), or Section 3.14(C),
as the case may be. Such transfer shall occur on the Effective
Date, immediately prior to the effectiveness of the Merger.
3.15 Class 13 Claims (Allowed Claims not classified
elsewhere).
A. If Class 13 accepts the Plan in accordance with
Section 1126(c) of the Code, reimbursement claims arising from
the Palo Verde Letters of Credit shall be Allowed Class 13 Claims
to the extent of at least the amount of the letter of credit draw
giving rise to such reimbursement claims. The principal amount
of such Claims, as used in this section 3.15, shall mean the
amount of such draw. If Class 13 accepts the Plan in accordance
with Section 1126(c) of the Code, Allowed Class 13 Claims shall
be discharged and satisfied in full by distribution to the
holders thereof of (i) Reorganized EPE Class 13 Senior Notes
under a new term loan agreement or indenture in an aggregate
principal amount equal to 30% of the principal amount and, to the
extent accrued prior to the Petition Date, interest and fees,
including letter of credit fees and reasonable attorneys' fees,
but exclusive of all interest, fees, costs and other charges
accrued on and after the Petition Date (such amount hereinafter
referred to as the "Class 13 Base Amount"), of Allowed Class 13
Claims of such holder, (ii) a number of shares of CSW Common
Stock determined by dividing 60% of the Class 13 Base Amount of
Allowed Class 13 Claims of such holder by the CSW Class 12/13
Share Value (subject to the provisions of Section 5.5 hereof),
and (iii) Reorganized EPE Class 13 Senior Notes in a principal
amount of 5.5% of the Class 13 Base Amount of Allowed Class 13
Claims of such holder or, at the option of Reorganized EPE
<PAGE> 69
exercised on the Effective Date, a number of shares of CSW Common
Stock determined by dividing 5.5% of the Class 13 Base Amount of
Allowed Class 13 Claims of such holder by the CSW Class 12/13
Share Value (subject to the provisions of Section 5.5 hereof).
Such holder's receipt of CSW Common Stock shall be treated as if
such holder had exchanged a portion of its Claims for EPE Common
Stock and then transferred such EPE Common Stock to CSW for CSW
Common Stock.
Holders of Class 13 Allowed Claims shall elect, at the
time they vote on the Plan, either Treatment A or Treatment B, as
follows (provided that each holder who fails to make a timely
election or does not timely return a ballot will be deemed to
have elected Treatment A if Class 13 accepts the Plan):
1. Treatment A. Holders of Allowed Class 13 Claims
may elect to receive all or a portion of the Reorganized EPE
Class 13 Senior Notes to which they are entitled in the form of
Reorganized EPE Class 13 Senior Floating Rate Notes. The
Reorganized EPE Class 13 Senior Floating Rate Notes shall bear
interest at a rate equal to 3-month LIBOR plus 200 basis points
(or, at the option of Reorganized EPE, at the agent bank's
adjusted reference rate plus 100 basis points) from and after the
Effective Date, payable at the end of each interest period and
not less frequently than quarterly. The Reorganized EPE Class 13
Senior Floating Rate Notes will be prepayable at any time in
whole or in part without premium, subject only to breakage costs,
if any, in connection with the LIBOR funding periods. The
Reorganized EPE Class 13 Senior Floating Rate Notes will mature
on the seventh anniversary of the earlier of (i) the Effective
Date and (ii) December 31, 1994, and will be payable in equal
quarterly principal installments commencing at the end of the
quarter after the earlier of the fifth anniversary of (i) the
Effective Date and (ii) December 31, 1994; provided, however,
that the maturity and amortization schedule of the Class 13
Senior Floating Rate Notes will be adjusted prior to the
Effective Date, if necessary, such that the maturity of the Class
13 Senior Floating Rate Notes is not greater than the maturity of
the Reorganized EPE Series A Senior Notes, as their final
maturity may be elected by CSW pursuant to Section 3.14(A)(2).
If at any time less than 33 1/3% of the Reorganized EPE Series A
Senior Notes issued on the Effective Date remain outstanding,
Reorganized EPE will redeem all the then outstanding EPE Class 13
Senior Floating Rate Notes. The Reorganized EPE Class 13 Senior
Floating Rate Notes shall be governed by a new term loan
agreement.
The new term loan agreement governing the Reorganized
EPE Class 13 Senior Floating Rate Notes shall contain other terms
set forth in documents filed with the Bankruptcy Court pursuant
to Section 7.6 of the Plan. Such terms will include covenants
appropriate for unsecured senior (non-publicly tradeable) bank
debt of a utility whose senior debt securities have a rating
similar to those of Reorganized EPE, but in no event materially
<PAGE> 70
less favorable to the holders of Class 13 Claims than those
generally found in similar agreements, if any, of other CSW
electric operating subsidiaries. Such material covenants will
include a negative pledge; a minimum ratio of earnings before
interest, amortization and taxes to interest expense; a maximum
ratio of debt to total capital; and an anti-layering provision.
The Reorganized EPE Class 13 Senior Floating Rate Notes will not
be publicly tradeable and will be assignable only to "Eligible
Institutions" (to be defined in the term loan agreement, such
definition to include a limitation by asset size and/or rating)
and in such minimum denominations as shall be agreed and
specified in the term loan agreement.
2. Treatment B. Alternatively, holders of Allowed
Class 13 Claims may elect to receive the Reorganized EPE Class 13
Senior Notes to which they are entitled in the form of
Reorganized EPE Class 13 Senior Fixed Rate Notes; provided, that
in no event shall the aggregate amount of Reorganized EPE Class
13 Senior Fixed Rate Notes issued on account of Class 13 Allowed
Claims exceed sixty percent (60%) of the aggregate amount of all
Reorganized EPE Class 13 Senior Notes issued on account of Class
13 Allowed Claims (prior to giving effect to such election). To
the extent that holders of Class 13 Allowed Claims elect to
receive more than sixty percent (60%) of the aggregate amount of
Reorganized EPE Class 13 Senior Notes to be issued pursuant to
the Plan on account of all Class 13 Allowed Claims in the form of
Reorganized EPE Class 13 Senior Fixed Rate Notes, each holder
electing to receive Reorganized EPE Class 13 Senior Fixed Rate
Notes shall have its distribution of such notes reduced on a Pro
rata basis (and replaced with a distribution of a like amount of
Reorganized EPE Class 13 Senior Floating Rate Notes) so that the
aggregate amount of Reorganized EPE Senior Fixed Rate Notes
distributed on account of all Class 13 Allowed Claims does not
exceed sixty percent (60%) of the aggregate amount of Reorganized
EPE Class 13 Senior Notes distributed on account of all Class 13
Allowed Claims.
The Reorganized EPE Class 13 Senior Fixed Rate Notes
shall bear interest at a Market Basket Rate from and after the
Effective Date, payable semi-annually, in arrears and will mature
on the ninth anniversary of the earlier of (i) the Effective Date
and (ii) December 31, 1994. The Reorganized EPE Class 13 Senior
Fixed Rate Notes will be redeemable at the option of Reorganized
EPE at any time in whole or in part at a redemption price equal
to the outstanding principal amount of such Notes plus a
redemption premium calculated pursuant to Schedule C plus accrued
interest, provided that prior to the fourth anniversary of the
Effective Date such notes will be redeemable at the option of
Reorganized EPE at any time in whole or in part at a redemption
price equal to the lesser of (x) the sum of the outstanding
principal amount of such notes plus a redemption premium
calculated pursuant to Schedule C, plus accrued interest and (y)
the greater of (i) the outstanding principal amount of such Notes
plus accrued interest and (ii) the present value of remaining
<PAGE> 71
interest and principal payments on such Notes, discounted at a
rate equal to the sum of (a) the original issue spread over the
yield on the treasury security, as of the Effective Date which
has a maturity date closest to the average life of such Notes,
plus (b) the yield on the treasury security which has a maturity
date closest to the remaining average life of such Notes,
calculated as of the date of determination of such redemption
price.
The Reorganized EPE Class 13 Senior Fixed Rate Notes
shall be publicly tradeable under Section 1145 of the Code and
shall contain such other terms and conditions as are filed with
the Bankruptcy Court in accordance with Section 7.6 of this Plan,
including an anti-layering provision.
In addition to the foregoing, holders of Class 13
Allowed Claims will accrue interest from and after June 25, 1993
through and including the Effective Date at the rate per annum of
90 day LIBOR plus 200 basis points on an amount equal to ninety-
five and one-half percent (95.5%) of the Class 13 Base Amount
(excluding any attorneys fees included in calculating the Class
13 Base Amount) of the Class 13 Allowed Claim of such holder, and
such interest shall be payable as provided in Section 5.1(B) of
this Plan.
B. If Class 13 does not accept the Plan in accordance
with Section 1126(c) of the Code, then the treatment of Class 13
set forth in Section 3.15(A) shall not apply. Instead, Class 13
Claims shall be Allowed Claims to the extent they comply with
Section 1.3(a) or 1.3(b) of the Plan. Class 13 Allowed Claims
shall be paid in full on the Effective Date and discharged
through the issuance to or for the benefit of holders of such
Allowed Claims, Pro rata, of (i) Reorganized EPE Class 13 Senior
Fixed Rate Notes, in an amount equal to one-third the amount of
such Allowed Claims, and without post-petition interest, fees,
costs or charges except as otherwise allowed by the Bankruptcy
Court or required to be paid by the Bankruptcy Court; and (ii) a
number of shares of CSW Common Stock, determined by dividing two-
thirds of the amount of the Allowed Class 13 Claims of such
holder (without post-petition interest, fees, costs and other
charges except as otherwise allowed or required to be paid by the
Bankruptcy Court), by the CSW Class 12/13 Determination Date
Share Value (subject to the provisions of Section 5.5 hereof).
Such Reorganized EPE Class 13 Senior Fixed Rate Notes shall have
the same terms as the Reorganized EPE Class 13 Senior Fixed Rate
Notes described in Section 3.15(A), except that the sixty percent
(60%) limitation shall not apply to the amount of the Reorganized
EPE Class 13 Senior Fixed Rate Notes issued under this Section
3.15(B).
3.16 Class 14 Claims (Allowed claims of small
creditors administrative convenience Class). Allowed Class 14
Claims shall be paid in full in cash. Allowed Class 14 Claims
are unimpaired.
<PAGE> 72
INTERESTS.
3.17 Class 15 Interests (Allowed EPE Preferred Stock
Interests).
If Class 15 accepts the Plan in accordance with Section
1126(d) of the Code, the Class 15 Interests shall be Allowed
Interests in the sum of (a) the aggregate dollar amount of the
redemption prices on the Effective Date with respect to the EPE
Preferred Stock and (b) the aggregate dollar amount of dividends
accrued and unpaid prior to the Petition Date with respect to the
EPE Preferred Stock. The Allowed Interests in Class 15 shall be
discharged and satisfied in full through the distribution, by
means of the transactions described below, of securities having a
value as calculated below in the amount of $68 million (the
"Class 15 Distribution Amount").
Holders of Allowed Class 15 Interests shall receive
Treatment A set forth below; provided that, at the election of
CSW exercised within one year of the Confirmation Date by written
notice to holders of Allowed Class 15 Interests (the "CSW Class
15 Notice"), such holders of Allowed Class 15 Interests shall
receive Treatment B set forth below. The CSW Class 15 Notice
shall specify a dollar amount (the "Specified Class 15
Distribution Amount"), which dollar amount shall be equal to the
aggregate liquidation values of the shares of Reorganized EPE
Preferred Stock which CSW elects to cause Reorganized EPE to
issue in the Merger; provided that such Specified Class 15
Distribution Amount shall not exceed the Class 15 Distribution
Amount.
1. Treatment A. Each share of EPE Preferred Stock issued
and outstanding immediately prior to the Effective Date shall, at
the Effective Date, by virtue of the Merger and without any
further action by the holder thereof, be converted into the right
to receive such number of shares of Reorganized EPE Preferred
Stock as equals the Preferred Stock First Exchange Ratio.
2. Treatment B. At the election of CSW exercised within
one year of the Confirmation Date by delivery to holders of
Allowed Class 15 Interests of the CSW Class 15 Notice, each share
of EPE Preferred Stock issued and outstanding immediately prior
to the Effective Date shall, at the Effective Date, by virtue of
the Merger and without any further action by the holder thereof,
be converted into the right to receive (i) such number of shares
of Reorganized EPE Preferred Stock as equals the Preferred Stock
Second Exchange Ratio multiplied by the Preferred Stock First
Exchange Ratio and (ii) subject to the provisions of Section 5.5
hereof, such number of shares of CSW Common Stock as equals the
Preferred Stock Third Exchange Ratio.
Each certificate which immediately prior to the
Effective Date represented such outstanding shares of EPE
Preferred Stock shall, on and after the Effective Date, be deemed
<PAGE> 73
for all purposes to represent the right to receive the number of
shares of Reorganized EPE Preferred Stock or CSW Common Stock or
combination thereof, as the case may be, into which the shares of
EPE Preferred Stock represented by such certificate shall have
been converted pursuant to the Merger. The Reorganized EPE
Preferred Stock shall provide for dividends payable at a rate per
annum equal to the Market Basket Rate. The Reorganized EPE
Preferred Stock shall be publicly tradeable under Section 1145 of
the Code on the Effective Date. The Reorganized EPE Preferred
Stock will be redeemable at the option of Reorganized EPE at any
time in whole or in part at a redemption price equal to the sum
of the liquidation values of such Preferred Stock plus a
redemption premium calculated pursuant to Schedule C plus accrued
dividends, provided that prior to the fourth anniversary of the
Effective Date such Preferred Stock will be redeemable at the
option of Reorganized EPE at any time in whole or in part at a
redemption price equal to the lesser of (x) the sum of the
liquidation values of such Preferred Stock plus a redemption
premium calculated pursuant to Schedule C plus accrued dividends
and (y) the greater of (i) the liquidation value of such
Preferred Stock plus accrued dividends and (ii) the present value
of the remaining dividend and mandatory redemption payments on
such Preferred Stock discounted at a rate equal to the sum of (a)
the original issue spread over the yield on the treasury
security, as of the Effective Date, which has a maturity date
closest to the average life of such Preferred Stock plus (b) the
yield on the treasury security which has a maturity date closest
to the remaining average life of such Preferred Stock, calculated
as of the date of determination of such redemption price. In
addition, Reorganized EPE shall redeem (I) on each of the
eleventh, twelfth, thirteenth and fourteenth anniversaries of the
Effective Date, one-twentieth of the Reorganized EPE Preferred
Stock issued on the Effective Date and (II) on the fifteenth
anniversary of the Effective Date, all outstanding Reorganized
EPE Preferred Stock, in each case at a redemption price equal to
the liquidation value of such Preferred Stock. The Reorganized
EPE Preferred Stock shall contain such other terms as are
consistent with the terms set forth herein and substantially
similar to the terms contained in the governing instruments of
certain electric utility subsidiaries of CSW in respect of
recently issued preferred stock, as shall be set forth in the
Reorganized EPE Articles of Incorporation filed with the
Bankruptcy Court in accordance with Section 7.6 of this Plan.
The Reorganized EPE Articles of Incorporation shall
contain, on the Effective Date, provisions complying with Code
Section 1123(a)(6), including provisions restricting the issuance
of nonvoting equity securities and providing for appropriate
distributions of voting power. Reorganized EPE Articles of
Incorporation will not contain any provision which limits the
amount of unsecured indebtedness which may be incurred by
Reorganized EPE or require any vote of holders of Reorganized EPE
Preferred Stock to permit incurrence of such indebtedness. If
<PAGE> 74
Class 15 accepts the Plan, all holders of EPE Preferred Stock
Allowed Interests will be deemed to have voted in favor of
(a) incurrence of unsecured indebtedness provided for or
contemplated by the Plan and (b) the provisions relating to
Reorganized EPE Preferred Stock contained in the Reorganized EPE
Articles of Incorporation.
In addition, if Class 15 accepts the Plan in accordance
with Section 1126(d) of the Code, periodic payments shall accrue
from and after August 20, 1993 to the Effective Date at the rate
of 90-day LIBOR plus 200 basis points on the Class 15
Distribution Amount and shall be paid in cash on the Confirmation
Date and thereafter quarterly until the Effective Date and then
on the Effective Date. Each member accepting the Plan or
receiving such payments waives any right under the EPE charter to
elect a majority of the EPE board of directors.
3.18 Class 16 Interests (Allowed EPE Common Stock
Interests).
(A) Subject to the provisions of Section 3.18(B) and
5.5 of the Plan, Allowed Interests in Class 16 shall be
discharged and satisfied in full as follows:
(i) Each share of EPE Common Stock outstanding
immediately prior to the Effective Date shall, at the Effective
Date, by virtue of the Merger and without any further action by
the holder thereof, be converted into the right to receive a
number of shares of CSW Common Stock equal to the Per Share CSW
Common Stock Acquisition Fund;
(ii) Each certificate which immediately prior to the
Effective Date represented such outstanding shares of EPE Common
Stock shall, on and after the Effective Date, be deemed for all
purposes to represent the right to receive the number of shares
of CSW Common Stock into which the shares of EPE Common Stock
represented by such certificate shall have been converted
pursuant to the Merger; and
(iii) Holders of Allowed Interests in Class 16 shall
also be entitled to receive distributions from the Liquidation
Trust, subject to and pursuant to Section 5.3(F) of this Plan.
B. Notwithstanding the provisions of Section 3.18(A)
above, effective as of the Effective Date, all options to
purchase EPE Common Stock granted under the EPE Stock Purchase
Plan or the EPE Stock Option Plan shall, to the extent such
option has not been exercised, be converted into an option to
purchase a number of shares of CSW Common Stock equal to (x) the
number of shares of EPE Common Stock subject to such option times
(y) the Per Share CSW Common Stock Acquisition Fund. The
exercise price per share of CSW Common Stock in such substituted
option following such conversion shall be equal to (a) the
<PAGE> 75
exercise price per share of EPE Common Stock subject to such
option divided by (b) the Per Share CSW Common Stock Acquisition
Fund. Otherwise, the terms and conditions of the exercise of
such option shall be the same as are applicable to such option to
purchase EPE Common Stock; provided, however, that no such option
to purchase CSW Common Stock shall terminate, lapse, become
unexercisable or be in any other way adversely affected as a
result of the optionee's termination of employment (whether
voluntary or involuntary), with Reorganized EPE or CSW. As soon
as reasonably practicable after the Effective Date, each
participant under the EPE Phantom Stock Plan shall receive, in a
single sum cash payment, the value of his or her account under
the EPE Phantom Stock Plan. The Director Stock Compensation Plan
has not been implemented and will be terminated as of the
Effective Date.
ARTICLE IV
TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES
4.1 Assumption. Each executory contract or unexpired
lease of the Debtor which has not expired by its own terms prior
to the Effective Date, is not rejected during the Case or under
the Plan, and is not subject to a motion for rejection filed
before the Confirmation Date, shall, by the terms of the
Confirmation Order, be assumed by EPE pursuant to Sections 365
and 1123(b)(2) of the Code effective on the Effective Date. All
assumed contracts, unexpired leases, franchises and permits shall
be vested in and continue in effect for the benefit of Reorgan-
ized EPE. Upon the Effective Date, (i) the Arizona Nuclear Power
Project Participation Agreement, dated August 23, 1973, as
amended and supplemented, (ii) the Arizona Nuclear Power Project
High Voltage Switchyard Participation Agreement, executed as of
August 20, 1981, as amended and supplemented, (iii) the Arizona
Nuclear Power Project Valley Transmission System Participation
Agreement, executed as of August 20, 1981, as amended and supple-
mented, (iv) all other Project Agreements (as defined in the
above-referenced Arizona Nuclear Power Project Participation
Agreement); and (v) the supply agreement between the Debtor and
Meridian Oil shall all be among those executory contracts
assumed. Unless that certain Cure and Assumption Agreement,
dated November 19, 1993, (the "Cure Agreement") has been
terminated in accordance with its terms: (a) the assumption of
the agreements denoted in (i), (ii), (iii) and (iv) of the
preceding sentence and, to the extent provided in the Cure
Agreement, the assumption of other "ANPP Assumed Agreements" (as
defined in the Cure Agreement) shall be an additional condition
precedent to the Effective Date of this Plan, (b) the procedure
set forth in the Cure Agreement shall be the exclusive method to
assume such agreements, and (c) notwithstanding anything to the
contrary in this Plan, including but not limited to Section 7.7
hereof, or in the Merger Agreement, in the event of any
inconsistency between the Plan or the Merger Agreement and the
Cure Agreement, the Cure Agreement will control.
<PAGE> 76
4.2 Cure Payments and Release of Liability. All
cure payments which may be required by Code Section 365(b)(1)
under any executory contracts or unexpired leases which are
assumed or assumed and assigned under this Plan shall be made by
Reorganized EPE as soon as practicable after the Effective Date,
but not later than thirty (30) days after the Effective Date;
provided, however, in the event of a dispute regarding the amount
of any cure payments, the cure of any other defaults, the ability
of Reorganized EPE to provide adequate assurance of future
performance, or any other matter pertaining to assumption or
assignment, Reorganized EPE shall make such cure payments and
cure such other defaults and provide adequate assurance of future
performance, all as may be required by Code Section 365(b)(1),
following the entry of a Final Order resolving such dispute. To
the extent that a party to an assumed executory contract or
unexpired lease has not filed an appropriate pleading with the
Bankruptcy Court on or before the twenty-fifth (25th) day after
the Effective Date disputing the amount of any cure payments
offered to it by Reorganized EPE, disputing the cure of any other
defaults, or disputing the provisions of adequate assurance of
future performance, then such party shall be deemed to have
waived its right to dispute such matters.
4.3 Rejected Contracts.
A. Palo Verde Leases. Unless the Debtor expressly
elects to assume the Palo Verde Leases on or prior to the
Confirmation Date, the Palo Verde Leases shall be deemed rejected
by the terms of the Plan to the extent that the Palo Verde Leases
shall not previously have been rejected by operation of law or
order of the Bankruptcy Court.
B. Other Rejected Contracts. Executory contracts
and unexpired leases other than the Palo Verde Leases may be
rejected by motions filed with the Bankruptcy Court prior to the
Confirmation Date, in which event, unless the Bankruptcy Court
otherwise provides, such executory contracts and unexpired leases
will be deemed rejected on the Effective Date.
C. Claims from Rejected Contracts and Leases.
Except as otherwise provided in any order of the Bankruptcy Court
setting a Bar Date, any claims for damages arising from the
rejection of an executory contract or unexpired lease not filed
prior to the Confirmation Date, must be filed within thirty (30)
days after the earlier of (i) the entry of the order approving
rejection of such executory contract or unexpired lease or (ii)
the Confirmation Date. Any such Claims not filed within such
thirty (30) day period shall be deemed barred and may not
thereafter be asserted.
<PAGE> 77
D. Assumption of Management Employment Agreements,
Collective Bargaining Agreements, Employment Agreements, and
Retiree Benefits Agreements. Certain employee programs of the
Debtor will be implemented, modified or terminated as more
particularly set forth in the Merger Agreement, and subject to
such further modifications as the Debtor, with CSW's consent, may
implement. Subject to such modifications or terminations,
effective on the Effective Date, all executory contracts between
the Debtor and its current and former employees and surviving
spouses, including collective bargaining agreements, agreements
with management employees, severance agreements, and agreements
with respect to retiree or surviving spouse benefits, including
plans qualified under the Employee Retirement Income Security Act
of 1974, as amended, and all plans not so qualified, and all
other benefits provided any of its employees, will be deemed
assumed by the Debtor pursuant to Sections 365 and 1123(b)(2) of
the Code, to the extent such sections are applicable, without
further action on the part of the Debtor, except to the extent
that Debtor seeks termination or modification of such agreements
prior to Confirmation. Agreements related to retiree or
surviving spouse benefits which are not executory shall be
performed by Reorganized EPE according to their terms. From and
after the Confirmation Date, the Debtor shall pay all benefits to
current retirees and surviving spouses as and when accrued except
to the extent limited by order of the Bankruptcy Court, if any.
The Debtor shall assume on the Confirmation Date the provisions
of the indemnity agreement, in the form of the agreement in use
by EPE on April 30, 1993, with respect to each current and former
director and employee identified in Schedule 6.6(i) of the Merger
Agreement, as such schedule may be amended through the Effective
Date.
The Debtor currently intends to continue and maintain
the El Paso Electric Company Retirement Income Plan and to comply
with any funding and other requirements relative thereto,
including the requirement that contributions to such plans be
made in accordance with Internal Revenue Code Section 412 and 28
U.S.C. Section 1082 excepting only as such plan may be terminated
after the Effective Date in accordance with its terms and
applicable (other than Code) law. The Reorganized Debtor will
continue to be contributing sponsor of the Retirement Income Plan
for Employees of El Paso Electric Company within the meaning of
the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), 29 U.S.C. Sections 1001 et. seq. Unless and until the
El Paso Electric Company Retirement Income Plan has been
terminated, the Debtor and Reorganized EPE will have no
obligations to pay debt due to the Pension Benefit Guaranty
Corporation ("PBGC") under Section 4062 of ERISA for any unfunded
benefit liabilities of such plans and, accordingly, any
liabilities due to the PBGC for any unfunded benefit liabilities
shall not be affected in any way by the Case, including the
discharge of the Debtor thereunder.
<PAGE> 78
ARTICLE V
IMPLEMENTATION OF PLAN
5.1 Actions Occurring On and After The Date The
Confirmation Order is Entered.
A. Management and Operation of EPE. After the
Confirmation Date and prior to the Effective Date, EPE will be
managed by substantially the same personnel that managed and
operated EPE on the Petition Date, subject to such changes as may
be determined by the Board of Directors of EPE and subject to the
provisions of the Merger Agreement.
B. Interim Distributions. (i) On and after the
Confirmation Date and through the Effective Date (a) if and only
if the holders of not less than two-thirds in amount of the
Allowed Claims in Class 1 who vote accept the Plan in accordance
with Section 1126(c) of the Code, interest accruing from and
after February 1, 1993, shall continue to be paid monthly, in
arrears, to holders of Allowed Class 1 Claims on the principal
amount of the EPE First Mortgage Bonds at the contract (non-
default) rate set forth therein, nevertheless if less than two-
thirds in amount of the Allowed Claims in Class 1 who vote accept
the Plan, the Debtor shall continue to comply with the Interim
Order regarding post-petition interest dated March 31, 1993,
unless otherwise ordered by the Bankruptcy Court; (b) if and only
if Class 2 accepts the Plan in accordance with Section 1126(c) of
the Code, interest accruing from and after February 1, 1993,
shall continue to be paid monthly, in arrears, to holders of
Allowed Class 2 Claims on the principal amount of the EPE Second
Mortgage Bonds at the contract (non-default) rate set forth
therein, nevertheless if Class 2 does not accept the Plan, the
Debtor shall continue to comply with the Interim Order regarding
post-petition interest dated March 31, 1993 unless otherwise
ordered by the Bankruptcy Court; (c) if and only if Class 3
accepts the Plan in accordance with Section 1126(c) of the Code,
interest shall accrue from the Confirmation Date to the Effective
Date, on the principal amount outstanding under the Revolving
Credit Facility at the contract (non-default) rate and shall be
paid to holders of Allowed Class 3 Claims monthly in arrears,
nevertheless if Class 3 does not accept the Plan, the Debtor
shall continue to comply with the Interim Order regarding post-
petition interest dated March 31, 1993 unless otherwise ordered
by the Bankruptcy Court; (d) if and only if Class 6 accepts the
Plan in accordance with Section 1126(c) of the Code, interest
which has accrued pursuant to Section 3.8(A)(3) of this Plan
shall be paid to the holders of Allowed Class 6 Claims in cash on
the Confirmation Date, to the extent accrued, and thereafter
through the Effective Date, as accrued, in cash at the end of
each interest period (but in any event not less often than
quarterly and on the Effective Date); (e) if and only if Class 11
accepts the Plan in accordance with Section 1126(c) of the Code,
accrued interest set forth in the last paragraph of Section
3.13(A) of this Plan shall be paid to holders of Class 11 Allowed
<PAGE> 79
Claims on the Confirmation Date and thereafter quarterly until
the Effective Date and then on the Effective Date; (f) if and
only if Class 5(a), 5(b), or 5(c) accepts the Plan in accordance
with Section 1126(c) of the Code, interest and letter of credit
fees shall be paid on the Effective Date to Class 5(a), 5(b), and
5(c) Allowed Claim holders whose Class accepted the Plan to the
extent set forth in Section 3.7 of this Plan, provided, however,
that if Class 5(a), 5(b), or 5(c) does not accept the Plan, the
Debtor shall continue to comply with the Interim Order, dated
March 31, 1993 regarding post-petition interest unless otherwise
ordered by the Bankruptcy Court; (g) if and only if Class 13
accepts the Plan in accordance with Section 1126(c) of the Code,
then interest which has accrued pursuant to the penultimate
paragraph of Section 3.15 of this Plan shall be paid in cash on
the Confirmation Date, to the extent accrued, and thereafter
payable, as accrued, in cash quarterly prior to the Effective
Date, and on the Effective Date; (h) if and only if Class 12(a)
accepts the Plan in accordance with Section 1126(c) of the Code,
then (X) interest from July 29, 1993 shall be payable to the Palo
Verde Indenture Trustees on behalf of the holders of Allowed
Class 12(a) Claims at the rate of 90-day LIBOR plus 200 basis
points on the Class 12(a) Distribution Amount, in cash on the
Confirmation Date to the extent accrued, and thereafter paid, as
accrued, in cash quarterly prior to the Effective Date and on the
Effective Date, (Y) on the Confirmation Date, the Debtor will pay
the Palo Verde Indenture Trustees the amount of $3.5 million in
full and complete settlement of all fees and expenses incurred
prior to or on the Confirmation Date, by the Palo Verde Indenture
Trustees and Class 12(a) bondholders, including the fees and
expenses of their professional advisors, subject to necessary
Bankruptcy Court approvals, if any, and (Z) between the
Confirmation Date and the Effective Date, the Debtor will pay the
reasonable fees and expenses of the Palo Verde Indenture
Trustees, including the fees and expenses of their professional
advisors, on a quarterly basis, subject to necessary Bankruptcy
Court approvals, if any, and (i) if and only if Class 15 accepts
the Plan in accordance with Section 1126(d) of the Code, periodic
payments shall accrue from and after August 20, 1993, to the
Effective Date at the rate of 90-day LIBOR plus 200 basis points
on the Class 15 Distribution Amount and shall be paid in cash on
the Confirmation Date and thereafter quarterly until the
Effective Date and then on the Effective Date.
(ii)(a) In the event that there is no Effective Date
with respect to the Plan, or the Plan is revoked or withdrawn
pursuant to Section 6.7 of the Plan, all interim interest
payments made to holders of Claims in Classes 11 and 13 under the
Plan shall nevertheless be retained by such holders, without any
reduction or offset of their prepetition claims; provided,
however, that acceptance of interim interest payments by holders
of Claims in Classes 11 and 13 shall constitute a complete
satisfaction of any claims for interest, any administrative
claims, and any fees and expenses for the period commencing on
<PAGE> 80
the Petition date through the date such interim interest payments
cease. Nothing herein shall constitute a waiver by holders of
Claims in Classes 11 and 13 of interest claims accruing prior to
the Petition Date or interest or administrative claims accruing
after the date such interim interest payments cease.
(b) In the event that there is no Effective Date with
respect to the Plan, or the Plan is revoked or withdrawn pursuant
to Section 6.7 of the Plan, the principal amount of Allowed Class
12(a) Claims shall be immediately and irrevocably reduced on a
pro rata basis by an amount equal to one-third of the interest
paid to the holders of Allowed Class 12(a) Claims. With respect
to the remaining two-thirds of the interest paid, the Debtor and
the holders of Class 12(a) Claims each fully reserve their rights
to have the Bankruptcy Court determine how such two-thirds of the
interest paid shall be applied or treated.
(c) In the event that there is no Effective Date with
respect to the Plan, or the Plan is revoked or withdrawn pursuant
to Section 6.7 of the Plan, the total Allowed Class 15 Interests
shall be reduced on a pro rata basis by an amount equal to the
total periodic payments paid to the holders of Allowed Class 15
Interests in accordance with the provisions of this section
5.1(B).
(d) Nothing in this subsection (ii) shall constitute
an acknowledgment that, or affect any determination of whether,
holders of such Claims or Class 15 Interests are entitled to fees
and expenses, administrative rent or post-petition interest or
dividends; provided, however, holders of claims in Classes 11 and
13 shall in all events retain, free of any assertion of Claim
reduction, credit, or offset, interim payments received pursuant
to subparagraph 5.1(B)(ii)(a).
(e) Except as provided above with respect to Classes
1, 2, 3, 5(a), 5(b) and 5(c), no Class that has not accepted the
Plan shall receive any payments prior to the Effective Date
unless the Bankruptcy Court otherwise orders on or after the
Confirmation Date.
(iii) Payments and distributions to each holder of a
Disputed Claim or Disputed Interest, to the extent that it
ultimately becomes an Allowed Claim or Allowed Interest, shall be
made in accordance with the provisions of the Plan governing the
Class of Claims or Interests to which the respective holder of
such Claim or Interest belongs. As soon as practicable after the
date that the order or judgment of the Bankruptcy Court allowing
such Claim or Interest becomes a Final Order, any property that
would have been distributed prior to the date on which a Disputed
Claim or Disputed Interest becomes an Allowed Claim or Allowed
Interest shall be distributed, together with interest, if any, at
the rate provided for the Class to which such Claim or Interest
belongs, and together with any dividends, payments or other
distributions made on account of such property from the date such
<PAGE> 81
distributions would have been due had such Claim or Interest then
been an Allowed Claim or Allowed Interest to the date such
distributions are made.
(iv) Notwithstanding any other provision of this
Plan, each Creditor asserting a Claim for reimbursement of
professional fees and expenses, including legal and financial
advisor fees, shall serve EPE, CSW, the Committees, the United
States Trustee and any other parties enumerated by the Bankruptcy
Court with no less than twenty (20) days prior notice of the
amount and nature of such Claim and provide such parties-in-
interest with an opportunity to object to the reasonableness of
such Claim. Claims by a creditor for reimbursement of
professional fees and expenses shall not be required to conform
to the requirements applicable to fee applications submitted to
the Bankruptcy Court in this case but shall include such
information as the Bankruptcy Court may require. To the extent
no timely objections are filed by the Debtor, CSW or any other
party-in-interest, such Claim shall be paid as set forth in the
Plan. To the extent timely objection is filed and not
subsequently withdrawn, the reasonableness of such Claim shall be
determined by the Bankruptcy Court. Unless otherwise expressly
set forth in the Plan, a party may provide requisite twenty (20)
days notice called for by this subsection prior to the
Confirmation Date, and if no objection is filed, such
reimbursement Claims shall be paid on the Confirmation Date or as
soon as practicable thereafter. This subsection (iv) shall not
apply to the payment to the Palo Verde Indenture Trustees set
forth in Section 5.1(B)(h)(Y), unless otherwise ordered by the
Bankruptcy Court.
C. Purchase Of Financial Derivatives As Hedge.
Subject to a mutually satisfactory agreement between the Debtor
and CSW providing for reimbursement of the Debtor by CSW of the
costs of the hedging transactions referred to below, and approval
thereof by the Bankruptcy Court, on and after the Confirmation
Date, the Debtor (i) may, in Debtor's sole discretion, purchase,
sell or exercise options or similar financial derivatives
(whether publicly traded or privately negotiated) or purchase
insurance (collectively, the "Hedging Transactions") for the
purpose of hedging or insuring against a decline in the value of
shares of CSW Common Stock to be issued to Classes 11, 12(a), and
13 pursuant to the Plan and any increase in market rates of
interest on the debt to be issued to Classes 1, 2, 3, 6, 11,
12(a) and 13 pursuant to the Plan, and (ii) provided such a
reimbursement agreement is in full force and effect, shall engage
in such Hedging Transaction for the purpose of hedging or
insuring against a decline in the value of shares of CSW Common
Stock to be issued to Classes 11, 12(a) and 13 pursuant to the
Plan solely at the direction of CSW provided that CSW shall have
received such regulatory approval, if any, as CSW and the Debtor
deem sufficient to permit CSW to engage in such Hedging
Transactions for its own account or to direct the Debtor to
engage in such Hedging Transaction.
<PAGE> 82
The aggregate purchase price of the instruments
purchased to effect such Hedging Transactions (net of any gains
realized on Hedging Transactions) will not exceed (i) in the case
of Hedging Transactions for the purpose of hedging or insuring
against an increase in market rates of interest, an amount (the
"Debt Hedged Amount") equal to 5% of the sum of (a) the Allowed
Claims in each of Classes 1, 2, 3 and 6 and (b) one-third of the
Allowed Claims in each of Classes 11, 12(a) and 13 and (ii) in
the case of Hedging Transactions for the purpose of hedging or
insuring against a decline in the market value of CSW Common
Stock, an amount (the "Equity Hedged Amount") equal to 5% of two-
thirds of the Allowed Claims in each of Classes 11, 12(a) and 13.
Notwithstanding the foregoing, the aggregate purchase price of
such instruments (net of any gains realized on Hedging
Transactions) which hedge or insure the period covering the first
six (6) months following the Confirmation Date shall not exceed
one-third of the Debt Hedged Amount and the Equity Hedged Amount,
respectively, and the aggregate purchase price of such
instruments (net of any gains realized on Hedging Transactions)
which hedge or insure the period covering the first twelve (12)
months following the Confirmation Date shall not exceed two-
thirds of the Debt Hedged Amount and Equity Hedged Amount,
respectively.
D. Continuation Of Committees. The Committees shall
continue to exist after the Confirmation Date until the Effective
Date with the same power and authority as they had prior to the
Confirmation Date. Upon and after the Confirmation Date, the
Official Creditors Committee shall function by majority vote.
The Official Equity Committee shall, by majority vote, subject to
approval of the Bankruptcy Court, have the power to appoint and
discharge the Liquidation Trustee. Between the Confirmation Date
and the Effective Date the Debtor will pay the reasonable fees
and expenses of the Unsecured Creditors Committee attorneys,
accountants, investment bankers (not to exceed $7,500 per month)
and the Equity Committee attorneys, on a quarterly basis, subject
to any necessary Bankruptcy Court approval.
E. Notice to Creditors and Creditors Committee
1. Between the Confirmation Date and the Effective
Date the Debtor shall provide the Official Creditors' Committee,
any holder identified to the Debtor of a claim in Classes 1 and 2
in excess of $20 million who elects to participate, the
representative of the holders of claims in Classes 5(a), 5(b),
5(c), 6 and 11, and the Indenture Trustees for the holders of
Claims in Classes 1, 2, and 12(a) and the Equity Committee
(collectively the "Oversight Committee") with notice of the
following: (i) any proposed waiver by the Debtor of a breach of
the Merger Agreement by CSW; (ii) any proposed material
modification of either the Plan or the Merger Agreement; (iii)
any proposed Plan revocation or termination by the Debtor,
including, but not limited to, revocation or termination arising
<PAGE> 83
from a termination of the Merger Agreement; (iv) any proposed
waiver of any of the conditions set forth in Section 6.2 of this
Plan or Sections 8.2 or 8.4 of the Merger Agreement; (v) any
proposed extension of the date set forth in Section 6.4 of the
Plan or of the date for consummating the Merger; (vi) any
proposed capital expenditure in an expected amount of more than
$50 million, which would not reasonably be incurred except for
the anticipated closing of the merger; and (vii) any decision by
the Debtor to file an independent rate proceeding. The Debtor
shall make reasonable effort to provide such notice not less than
twenty (20) days in advance of the scheduled event so as to
permit any of these parties to consult with either CSW or the
Debtor about the intended actions.
2. Between the Confirmation Date and the Effective
Date, the Creditors Committee, the Equity Committee, the holders
of claims in Classes 1, 2, 3, 5(a), 5(b), 5(c), 6, 11, 12(a), 13,
and 14, the indenture trustees for the EPE First Mortgage Bonds
and the EPE Second Mortgage Bonds, the Palo Verde Indenture
Trustees on behalf of the holders of Class 12(a) and the holders
of Class 15 Allowed Interests Claims shall be parties in interest
in all proceedings in the Bankruptcy Court with the same rights
to participate in such proceedings as such persons had prior to
Confirmation.
3. Nothing in this Section shall provide the
Bankruptcy Court with any greater or lesser authority or
jurisdiction to hear and determine any matter relating to the
Debtor and the Case as the Bankruptcy Court would otherwise have.
F. Post Confirmation Oversight
Between the Confirmation Date and the Effective Date,
the Debtor and CSW shall at the request of the Oversight
Committee make available appropriate members of senior management
to meet or confer by telephone not more frequently than once
every three months, unless a more frequent meeting is scheduled
by the Debtor or the Oversight Committee (provided that the
Oversight Committee shall not schedule any such briefings more
frequently than monthly) (each a "Periodic Briefing") with the
Oversight Committee. Notices required under the above paragraph
may be communicated at such briefing. Absent exceptional
circumstances, the Oversight Committee representatives shall
consist of principals and not attorneys or financial advisors
whose fees will be reimbursed by the Debtor. At each Periodic
Briefing, the Debtor and CSW shall advise the Oversight Committee
of material developments concerning the operations and conduct of
the business of the Debtor, material activities undertaken or
proposed to be undertaken by the Debtor and the status of and
progress being made by the Debtor and CSW with respect to the
satisfaction of the conditions to the consummation of the Merger
and Effective Date of the Plan. The Debtor shall also provide
the Oversight Committee with a capital expenditure budget at
least once every calendar year. The Oversight Committee shall
<PAGE> 84
hold all information obtained from the Debtor and CSW at such
Periodic Briefings that is not otherwise publicly available in
strict confidence, and shall not disclose such information to any
third parties without the written consent of the Debtor and CSW
except as compelled by court order or as directed by applicable
regulatory authority.
Copies of any press releases issued by CSW or the
Debtor relating to effectuating the merger, as well as copies of
any 8-K's and 10-K's, monthly financial reports and any other
financial reports filed by the Debtor with the Bankruptcy Court
shall upon their issuance be provided to members of the Oversight
Committee.
G. Approvals
The Debtor will provide to the Oversight Committee,
before or within thirty (30) days after Confirmation of the Plan,
a plan and schedule in the form approved by CSW for filing
specific regulatory cases and proceedings necessary to achieve
all necessary regulatory approvals for the transactions
contemplated by the Plan ("Approvals"). CSW and the Debtor will
use their reasonable best efforts to achieve the Approvals. CSW
and the Debtor will, before or within thirty (30) days after
Confirmation of the Plan, provide such assurances to the
Oversight Committee as are reasonably requested concerning any
compromises which may be accepted by CSW, the Debtor and/or the
Reorganized Debtor in achieving the Approvals. The Oversight
Committee shall hold such plan, schedules and assurances and all
information related thereto in strict confidence. As set forth
in section 6.6 of the Plan, the Plan will not be modified to
reduce the amount of the consideration to be paid to the various
Classes of creditors under this Plan as a result of any
compromises which may be accepted by CSW and/or the Reorganized
Debtor in achieving the Approvals, absent the acceptance,
pursuant to the Code, of such modification by such affected
Class.
5.2 Actions Occurring On The Effective Date.
A. Revesting of Assets. Except as provided in this
Plan, all property of the estate, to the fullest extent of
Section 541 of the Code, and any and all other rights and assets
of EPE of every kind and nature shall, on the Effective Date of
the Plan, revest in Reorganized EPE free and clear of all liens,
Claims, Interests, and Encumbrances.
B. Merger of Reorganized EPE and CSW Sub. CSW Sub
will be organized and will execute the Merger Agreement upon the
receipt of required approvals of the SEC under the Public Utility
Holding Company Act of 1935. Subject to the terms and conditions
of the Merger Agreement and the Articles of Merger to be entered
into by the Debtor and CSW Sub to accomplish the Merger, and in
accordance with the provisions of the Texas Business Corporation
<PAGE> 85
Act, as amended, CSW Sub shall be merged with and into the Debtor
and the separate corporate existence of CSW Sub shall cease on
the Effective Date. The Debtor shall be the surviving
corporation in the Merger and shall continue its corporate
existence under the laws of the State of Texas. The Merger shall
have the effects set forth in the Texas Business Corporation Act,
as amended, with all properties, liabilities and obligations of
the Debtor remaining with Reorganized EPE as the surviving
corporation and all properties, liabilities and obligations of
CSW Sub being allocated to and vested in Reorganized EPE as the
surviving corporation.
C. Conversion of Securities. Each share of CSW Sub
common stock outstanding immediately prior to the Effective Date
shall, at the Effective Date, by virtue of the Merger and without
any action by the holder thereof, be converted into and become
one (1) share of Reorganized EPE common stock.
D. Amended Articles of Incorporation And Corporate
Governance.
1. Articles of Incorporation. The Debtor's Articles
of Incorporation shall be amended and restated as provided in the
Merger Agreement and as necessary so that, on the Effective Date,
the Reorganized EPE Articles of Incorporation shall comply with
Section 1123(a)(6) of the Code by, inter alia, providing for
restrictions on issuance of nonvoting equity securities and an
appropriate distribution of voting power as to the Classes of
securities possessing voting power, including adequate provisions
for the election of directors representing any Class of equity
securities having a preference over another Class of equity
securities with respect to dividends in the event of default in
the payment of such dividends.
2. Corporate Governance. The individuals serving as
officers and directors of the Debtor on the Confirmation Date
will continue in such office after Confirmation and prior to the
Effective Date of the Plan until replaced in accordance with the
Bylaws or Articles of Incorporation of EPE. CSW shall designate,
in a written statement to be filed with the Bankruptcy Court
prior to the Effective Date, the names and affiliations of the
individuals intended to serve as directors and officers of
Reorganized EPE to the extent such individuals differ from those
identified in the previous sentence. Those directors and
officers shall assume office and shall continue to serve in such
capacities until replaced in accordance with the Bylaws or
Articles of Incorporation of Reorganized EPE. Reorganized EPE
shall be authorized to enter into employment contracts with its
officers. As of the Effective Date, Reorganized EPE shall be
governed in all respects by the Reorganized EPE Articles of
Incorporation.
<PAGE> 86
E. Establishment of Liquidation Trust; Transfer of
Assets. (i) On the Effective Date, if the Maximum Additional
Consideration Amount has not been realized, EPE shall establish
the Liquidation Trust and shall assign thereto all of its rights
to and interests in the Tangible Assets and the Intangible Assets
to the extent not theretofore liquidated or if, and to the extent
applicable law prohibits such assignment of title, shall assign
such rights for purposes of collection and distribution in
accordance with the terms hereof. On the Effective Date, EPE
shall deposit in the Liquidation Trust amounts of cash
sufficient, in the reasonable opinion of the Liquidation Trustee,
to fund the Liquidation Trustee's expenses in pursuit of
liquidation of such Tangible Assets and Intangible Assets;
provided, however, that EPE shall not be required to deposit an
amount which is greater than One Million Dollars ($1,000,000) for
such purpose; and provided further, that the Liquidation
Trustee's fees and expenses shall thereafter be funded by the
cash realized from the liquidation of such assets. If, and to
the extent realized by Reorganized EPE following the Effective
Date and prior to the termination of the Liquidation Trust, CSW
shall, or shall cause Reorganized EPE to, deposit into the
Liquidation Trust an amount of cash which is equal to the amount
of such Reduction in Claims minus any portion thereof which was
realized prior to the Effective Date. The Liquidation Trustee
shall be selected by the Equity Committee.
(ii) The Liquidation Trust shall terminate on the
earliest to occur of (i) the date of a Final Order of the
Bankruptcy Court terminating the Liquidation Trust, (ii) the date
upon which all of the Tangible Assets and Intangible Assets are
liquidated or otherwise reduced to cash and all of the Reductions
in Claims are determined (and distributions therefor have been
made pursuant to the terms of the Liquidation Trust) or (iii) the
Liquidation Trust has distributed to holders of Allowed Class 16
Claims an amount of cash equal to the difference between (A) the
Maximum Additional Consideration Amount and (B) the amount of
Additional Consideration realized prior to the Effective Date.
Upon any such termination of the Liquidation Trust any
remaining assets in the Liquidation Trust shall be distributed to
Reorganized EPE.
F. Continuation of Debtor's Business. Reorganized
EPE shall, after the Effective Date, continue the business
previously conducted by the Debtor prior to the Effective Date.
Without limiting the generality of the foregoing, Reorganized EPE
shall be entitled to exercise any right or privilege under any
permit or franchise wherever such permit or franchise was or
could have been exercised by the Debtor immediately prior to the
Effective Date.
<PAGE> 87
G. Discharge. The Confirmation Order shall act as a
discharge on the Effective Date of any and all Claims against,
and all debts and liabilities of, the Debtor, as provided in Code
Sections 524 and 1141.
5.3 Distributions Occurring On And After The Effective
Date.
A. Distributions. Subject to the provisions of
Section 5.5 of this Plan, all distributions to be made under this
Plan shall be made as soon as practicable after the Effective
Date to holders of record on such date as set by the Bankruptcy
Court for Plan distribution purposes.
B. Holders of Debt and Equity Securities Entitled to
Receive Distributions. Except to the extent otherwise provided
in this Plan or in an order of the Bankruptcy Court, any distri-
bution under this Plan in respect of Allowed Claims under or
evidenced by EPE Debt Securities, Secured Lease Obligation Bonds
or Lease Obligation Bonds shall be made to the indenture trustee
(if any) for such EPE Debt Securities, Secured Lease Obligation
Bonds and Lease Obligation Bonds which shall, subject to the
rights of such indenture trustee as against holders of EPE Debt
Securities, Secured Lease Obligation Bonds and Lease Obligation
Bonds issued under the applicable indenture, transmit, upon
surrender of the EPE Debt Securities Secured Lease Obligation
Bonds and Lease Obligation Bonds as set forth in Section 5.3(E)
of this Plan, such property to holders of EPE Debt Securities,
Secured Lease Obligation Bonds or Lease Obligation Bonds issued
under such indenture which are holders of record on the date
provided in Section 5.3(A) of this Plan (which shall be deemed to
include, without limitation, persons entitled to be treated as
such under Bankruptcy Rule 3003(d) or, in the case of bearer
instruments, the entities which present such instruments for
payment, whose claims have not been disallowed). The reasonable
fees and expenses of an indenture trustee incurred solely in
connection with making such distributions, unless otherwise paid
hereunder, shall be paid by Reorganized EPE to the extent so
required in the indenture or as otherwise agreed between
Reorganized EPE and such indenture trustee, and in any case
subject to required approvals of the Bankruptcy Court, if any.
Distributions on account of EPE Equity Securities shall be made
only to holders of record of such Equity Securities on the date
provided in Section 5.3(A) of this Plan (which shall be deemed to
include, without limitation, persons entitled to be treated as
such under Bankruptcy Rule 3003(d)) whose equity interests are
Allowed Interests.
<PAGE> 88
C. Cash Payment in Lieu of CSW Common Stock. In lieu
of distributing shares of CSW Common Stock, CSW may, in its sole
discretion, elect to pay to holders of Allowed Claims or Allowed
Interests, as the case may be, in any or all of Classes 11,
12(a), 13, and 15 cash on the Effective Date in an amount equal
to the value as of the Effective Date of any or all of the shares
of CSW Common Stock which would be otherwise distributed to such
holders in respect of such Allowed Claims or Allowed Interests,
as the case may be; provided, however, that with respect to each
Class as to which CSW makes such election such cash payments
shall be made Pro Rata to holders of Allowed Claims or Allowed
interests, as the case may be, in such Class; and provided,
further, that CSW may only exercise such election with respect to
holders of Class 11, 12 or 13 Allowed Claims if, pursuant to such
election, the holders of Allowed Claims in each such Class
receive the same proportion of cash to their Allowed Claims as
the holders of Allowed Claims in such other Classes. In no event
may CSW elect to pay Class 15 or Class 16 in cash, in lieu of
Reorganized EPE Preferred Stock or CSW Common Stock, as
applicable, on the Effective Date unless CSW has also elected to
pay cash in lieu of all CSW Common Stock to which Class 11, Class
12(a), and Class 13 Allowed Claim holders are entitled pursuant
to the Plan.
D. Fractional Interests. The calculation of
securities to be distributed to holders of Allowed Claims or
Allowed Interests may mathematically entitle the holder of such a
Claim or Interest to a fractional interest in one or more of such
securities. Notwithstanding such entitlement, Reorganized EPE
First Mortgage Bonds, Reorganized EPE Second Mortgage Bonds
(other than in each case Reorganized EPE Pledged Bonds),
Reorganized EPE Series A Senior Notes, Reorganized EPE Series A-I
Notes, Reorganized EPE Series A-II Notes, and Reorganized EPE
Class 13 Senior Fixed Rate Notes will be issued and distributed
only in denominations of $1,000. To the extent that any holder
would be entitled to a fractional denomination of Reorganized EPE
First Mortgage Bonds, Reorganized EPE Second Mortgage Bonds,
Reorganized EPE Series A Senior Notes, Reorganized EPE Series A-I
Notes, Reorganized EPE Series A-II Notes or Reorganized EPE Class
13 Senior Fixed Rate Notes but for this provision, such holder's
Claim relating thereto shall either be paid by Reorganized EPE in
cash, or at Reorganized EPE's option, rounded up to entitle such
holder to a full denomination. CSW Common Stock and Reorganized
EPE Preferred Stock will be issued and distributed in whole
shares, and not in fractional shares. To the extent that any
holder would be entitled to a fractional share of CSW Common
Stock or Reorganized EPE Preferred Stock but for this provision,
such holder shall be paid by Reorganized EPE in cash an amount
equal to (i) in the case of a fractional share of CSW Common
Stock that would be distributed to a holder of Allowed Claims in
Class 11, 12 or 13 or Allowed Interests in Class 15 or 16, the
fraction of said share multiplied by the closing price of a share
of CSW Common Stock, as reported in The Wall Street Journal, New
York Stock Exchange Composite Transactions, on the Effective Date
<PAGE> 89
or (ii) in the case of a fractional share of Reorganized EPE
Preferred Stock, such fraction multiplied by $100. For purposes
of this Section, holders of Allowed Claims or Allowed Interests
under or evidenced by securities shall, in the case of securities
held in street name, mean the beneficial holders thereof.
E. Surrender Of Securities. As a condition to
participation under this Plan (i) a holder of EPE Securities that
desires to receive the property to be distributed on account of
such EPE Securities shall surrender the EPE Securities to
Reorganized EPE or its designee or, in the case of EPE Debt
Securities, to the indenture trustees of the EPE Debt Securities,
who shall cancel or surrender such securities, (ii) a holder of a
note of the Debtor other than an EPE Security that desires to
receive the property to be distributed on account of an Allowed
Claim based on that note shall surrender the note to Reorganized
EPE or its designee, and (iii) a holder of a Lease Obligation
Bond or a Secured Lease Obligation Bond that desires to receive
the property to be distributed on account of an Allowed Claim
based on such instrument shall surrender such instrument to
Reorganized EPE or its designee.
If a holder of an EPE Security or a note of the Debtor
or a Lease Obligation Bond or a Secured Lease Obligation Bond is
unable to surrender such security or note because it has been
destroyed, lost or stolen, such holder may receive a distribution
with respect to such security or note upon request to Reorganized
EPE or, in the case of EPE Debt Securities, to the indenture
trustees of the EPE Debt Securities, in an acceptable form with:
(i) proof of such holder's title to such security or note; (ii)
proof of the destruction or theft of such security or note, or an
affidavit to the effect that the same has been lost and after
diligent search cannot be found; and (iii) such indemnification
as may be required by Reorganized EPE to indemnify Reorganized
EPE, or in the case of an EPE Debt Security such indemnification
as may be required by the indenture trustee of such EPE Debt
Security to indemnify such indenture trustee, and all other
persons deemed appropriate by such indenture trustee, and all
other persons deemed appropriate by Reorganized EPE, against any
loss, action, suit or other claim whatsoever which may be made as
a result of such holder's receipt of a distribution on account of
such security or note under this Plan.
In the event of a transfer of ownership of EPE
Securities which are not registered on the transfer records of
the Debtor, the securities or cash to be distributed or paid may
be distributed or paid to a transferee of an Allowed Claim or
<PAGE> 90
Allowed Interest if an executed letter of transmittal in form
satisfactory to Reorganized EPE is presented to Reorganized EPE
(or in the case of an EPE Debt Security, if an executed letter of
transmittal in a form satisfactory to the indenture trustee for
such EPE Debt Security is presented to such indenture trustee),
accompanied by such documents as are required to evidence and
effect such transfer and by evidence that any applicable transfer
taxes have been paid.
F. Distributions From Liquidation Trust. The
Liquidation Trustee shall, from time to time, distribute cash
from the Liquidation Trust pursuant to the terms hereof and
thereof. Distributions from the Liquidation Trust shall be made
to the holders of Allowed Interests in Class 16 who are holders
of record of EPE Equity Securities on the date provided in
Section 5.3(A) of this Plan on a Pro rata basis, up to an amount
equal to the difference between the Maximum Additional
Consideration Amount and the Additional Consideration realized
prior to the Effective Date. Upon any termination of the
Liquidation Trust any remaining assets in the Liquidation Trust
shall be distributed to Reorganized EPE.
5.4 Procedure For Determination Of Claims And
Interests.
A. Bar Date For Administrative Claims. All applica-
tions for final compensation of professional persons for services
rendered prior to the Effective Date and all other requests for
payment of administrative costs and expenses incurred prior to
the Effective Date pursuant to Code Sections 507(a)(1) or 503(b)
(except for claims for taxes, trade debt and customer deposits
and credits incurred in the ordinary course of business after the
Petition Date) shall be filed no later than 30 days after the
Effective Date. Any such claim which is not filed within this
time deadline shall be forever barred. Notwithstanding Section
5.4(B) hereof, objections to administrative claims of
professionals seeking reimbursement from the estate timely filed
under this section may be filed no later than 20 days after the
filing of any such claim.
B. Objection To Claims And Interests. (i) Notwith-
standing the occurrence of the Confirmation Date, and except as
any Claim or Interest has otherwise been allowed under this Plan,
the Debtor may object to the allowance of any Claim or Interest,
including, but not limited to, Claims for an administrative
expense or cost, on or before the Effective Date. The Debtor
shall file with the Bankruptcy Court prior to the Confirmation
Date a list of certain Class 13 Claims which it does not then
dispute. For the purposes of this Plan the Debtor shall be
precluded from disputing such listed claims if this Plan is
confirmed, so long as this Plan is not subsequently revoked or
terminated. No distribution shall be made on account of any
Claim or Interest which is not Allowed. To the extent any
<PAGE> 91
property is distributed to an entity on account of a Claim or
Interest which is not an Allowed Claim or Allowed Interest, such
property shall promptly be returned to Reorganized EPE.
(ii) After the Effective Date, only Reorganized EPE
shall have authority to file objections, litigate to judgment,
settle, or withdraw objections to Claims and Interests. After
the Effective Date, Reorganized EPE shall be entitled to
compromise or settle any Disputed Claim or Disputed Interest not
subject to the Liquidation Trust without approval of the
Bankruptcy Court.
5.5 Restrictions on Transfer; Issuance of CSW Common
Stock.
(A) Except for certain "Permitted Transfers" set forth
in Section 2.9(f) of the Merger Agreement (and certain transfers
required under applicable regulatory laws for which the Debtor
intends to make provision), no holder of an Allowed Class 15
Interest or an Allowed Class 16 Interest that is entitled to
receive shares of CSW Common Stock in respect of such Allowed
Class 15 Interest or Allowed Class 16 Interest pursuant to the
Plan may, at any time prior to the date which is the two-hundred
and fortieth day following the Effective Date (the "Initial Lock-
Up Period") sell, transfer, pledge, or otherwise dispose of (any
sale, transfer, pledge or other disposition being referred to in
this Section 5.5 as a "transfer") any such shares or any interest
therein to any other Person.
To enforce the above restriction with respect to
Allowed Class 15 Interests, (i) all such shares issued in respect
thereof shall be issued on the two-hundred and fortieth day
following the Effective Date when the number of such shares
issuable to the holders thereof is determinable (including any
stock dividends paid by CSW which would have accrued on such
shares had such shares been issued on the Effective Date), and
(ii) upon such two-hundred and fortieth day following the
Effective Date, CSW shall pay an amount equivalent to cash
dividends (if any) which would have accrued during the Initial
Lock-up Period to the holders of Allowed Class 15 Interests based
on the number of shares that, except for the provisions of this
subparagraph (A), would have been issued to such holders on the
Effective Date. To enforce the above restriction with respect to
Allowed Class 16 Interests, (i) all such shares issued in respect
thereof shall be issued on the Effective Date in the names of the
holders thereof and immediately deposited into escrow for the
Initial Lock-up Period, pursuant to the terms of an Escrow
Agreement in the form filed with the Bankruptcy Court on
November 5, 1993, pursuant to Section 7.6 hereof, and (ii) during
the Initial Lock-up Period, cash dividends (if any) shall be paid
by CSW to the holders of shares of CSW Common Stock issued in
<PAGE> 92
respect of Allowed Class 16 Interests, and stock dividends (if
any) shall be deposited in escrow and released to such holders
upon the two-hundred and fortieth day following the Effective
Date.
(B) Except for certain "Permitted Transfers" set forth
in Section 2.9(f) of the Merger Agreement, holders of Allowed
Claims in Classes 11, 12 and 13 that are entitled to receive
shares of CSW Common Stock in respect of such Allowed Claim
pursuant to the Plan may not transfer such shares or any interest
therein except as follows:
MAXIMUM PERCENTAGE OF
EACH HOLDER'S SHARES
DATE OF TRANSFER ELIGIBLE TO BE TRANSFERRED
Prior to the date which is 33%
the ninetieth day after the
Effective Date
From (and including) the date
which is after the ninetieth day
after the Effective Date through
(but excluding) the date which is
the one-hundred and eightieth day
after the Effective Date
("First Lock-Up Period") 66%
From (and including) the date
which is the one-hundred and eightieth
day after the Effective Date
("Second Lock-Up Period") 100%
To enforce the above restrictions, during the First and Second
Lock-Up Periods, (i) only shares which are eligible to be
transferred shall be issued to the holders entitled thereto, on
the dates corresponding to such lock-up periods when the number
of such shares issuable to the holders thereof is determinable
(including any stock dividends paid by CSW which would have
accrued on such shares had such shares been issued on the
Effective Date), and (ii) upon the one-hundred and eightieth day
following the Effective Date, CSW shall pay an amount equivalent
to cash dividends (if any) which would have accrued (less the
amount of cash dividends previously paid) to such holders based
on the number of shares that, except for the provisions of this
subparagraph (B), would have been issued to such holders on the
Effective Date.
<PAGE> 93
(C) CSW Common Stock distributed under Section
3.14(C).1 or Section 3.15(B) shall not be transferred prior to
the date which is the three hundred and sixty-fifth day after the
Effective Date. During the lock-up period under this
subparagraph (C), (i) shares which are not eligible to be
transferred may remain unissued until transferable or may be
legended and may be held by a designated third party for the
account of holders who are entitled to receive such shares, and
(ii) cash dividends shall accrue and be paid to such holders
based on the number of shares that except for the provisions of
this subparagraph (C) would have been issued to such holders on
the Effective Date.
(D) Any purported transfer of any shares of CSW Common
Stock or any interest therein in violation of this Section 5.5
(an "Unauthorized Transfer") will be null and void. CSW will not
be required to register, recognize, or give effect to any
Unauthorized Transfer and the purported transferees of any such
shares or any interest therein pursuant to an Unauthorized
Transfer will not acquire any right in such shares.
(E) Notwithstanding the provisions of Section 5.5(A),
(B), (C) and (D) above, none of the restrictions on transfer set
forth therein shall apply to any Person who, together with any
Affiliates of such Person, would, but for the provisions of
subparagraphs (A), (B) and (C) of this Section 5.5., receive no
more than an aggregate amount of 5,000 shares as of the Effective
Date of CSW Common Stock pursuant to the Plan. Such shares of
CSW Common Stock shall be issued to such person on the Effective
Date.
5.6 Exemption from Securities Laws. All notes,
instruments, stock and other securities distributed pursuant to
this Plan shall be entitled to the benefits and exemptions
provided by Section 1145 of the Code to the maximum extent
allowed by law and equity.
As soon as practicable after the Confirmation Date, CSW
and EPE will file with the SEC a written request for confirmation
(the "No Action Response") that (i) the issuance of (a) the CSW
Common Stock, (b)Reorganized EPE Preferred Stock and (c)
Liquidation Trust interests to creditors and shareholders of EPE,
as the case may be, pursuant to the Plan, (ii) any resale of such
securities, except for any such sales by underwriters or by
"affiliates" of EPE or CSW, as the case may be, in either case,
are exempt from the registration requirements under the
Securities Act of 1933, and (iii) the requirements of 14(a) and
14(c) of the Exchange Act and Regulations 14A and 14C adopted
thereunder do not apply to solicitation of votes on the Plan. In
the event that CSW and EPE do not obtain a No Action Response
from the SEC prior to the Effective Date, CSW and EPE shall cause
to be filed the Registration Statement registering the shares of
CSW Common Stock, Reorganized EPE Preferred Stock or Liquidation
Trust interests, as the case may be, issuable under the Plan on
<PAGE> 94
the Effective Date. CSW and EPE shall use all reasonable efforts
to respond promptly to any comments of the SEC relating to the
Registration Statement and to have the Registration Statement
declared effective by the SEC as promptly as practicable. CSW
and EPE shall take any action required to be taken under
applicable state Blue Sky or state securities laws in connection
with the issuance of the CSW Common Stock and Reorganized EPE
Preferred Stock and Liquidation Trust Interests pursuant to the
Plan.
CSW shall use its reasonable best efforts to effect, on
or before the Effective Date, authorization for listing on the
New York Stock Exchange, upon official notice of issuance, of the
shares of CSW Common Stock to be issued pursuant to the Plan.
ARTICLE VI
CONDITIONS TO CONFIRMATION AND EFFECTIVE DATE
AND PROVISION FOR MODIFICATION OF THE PLAN
6.1 Conditions to Confirmation. It shall be a condi-
tion to Confirmation of this Plan that, at or prior to
Confirmation, each of the following conditions shall have
occurred or been waived pursuant to Section 6.3 below:
A. That the Confirmation Order shall be in form and
substance acceptable to the Debtor and CSW.
B. That the Merger Agreement shall be executed by all
parties thereto (except that CSW Sub will thereafter execute the
Merger Agreement in accordance with an order of the SEC approving
such execution) and shall be in full force and effect, subject to
any conditions subsequent contained therein.
6.2 Conditions to Occurrence of Effective Date. The
following are conditions to the Effective Date as defined in
Section 1.40 of the Plan:
A. That the Confirmation Order has been issued, at
least ten (10) days have elapsed since the Confirmation Date, and
no stay of the Confirmation Order is in effect.
B. That the Reorganized EPE Articles of Incorporation
shall have been filed with the Texas Secretary of State, if and
to the extent state law so requires.
C. That the Reorganized EPE First and Second Mortgage
Bond Indentures and the indentures under which the Reorganized
EPE Series A Senior Notes, Reorganized EPE Series A-I Notes,
Reorganized EPE Series A-II Notes and Reorganized EPE Class 13
Senior Fixed Rate Notes will be issued and shall have been
qualified under the Trust Indenture Act of 1939, if and to the
extent required.
<PAGE> 95
D. That all conditions to the Merger contained in the
Merger Agreement shall have been satisfied or waived and the
Merger shall have been consummated or will be consummated on the
Effective Date.
E. That the Debtor shall have filed a written notice
with the Bankruptcy Court stating that the conditions to
effectiveness of the Plan which have not been waived in
accordance with Section 6.3 of the Plan have been satisfied.
F. That the sum of (i) the amount estimated, under
Section 502(c) of the Bankruptcy Code, with respect to the Class
13 Disputed Claims remaining as of the Effective Date and (ii)
the Class 13 Disputed Claims existing as of the Confirmation Date
that were either listed in the Schedules or filed with the
Bankruptcy Court by the Bar Date which become Class 13 Allowed
Claims at or prior to the Effective Date shall not exceed Twenty
Million Dollars ($20,000,000).
G. That each of the publicly tradeable Reorganized
EPE First Mortgage Bonds, and the publicly tradeable Reorganized
EPE Second Mortgage Bonds shall have received an Investment Grade
Rating.
6.3 Waiver of Conditions. Subject to Section
1129(a)(6) of the Code, 5.1(E) of the Plan, CSW and the Debtor
(and, in the case of Section 6.2(F) CSW alone under all
circumstances without Bankruptcy Court approval) jointly may
waive all or any portion of any of the conditions to Confirmation
or to the Effective Date described in the Plan except Sections
6.2(C) and 6.2(G) at any time without notice, except notice as
provided in Section 5.1(E) of the Plan and, absent written
objection received by the Debtor and CSW not more than twenty
(20) days after notice is provided in accordance with Section
5.1(E)(i) of the Plan, without leave or order of the Bankruptcy
Court. The Debtor and CSW with the approval of the Bankruptcy
Court, may extend or reduce any time period described in Section
6.4 of the Plan; provided, however, that to the extent the Debtor
requests Bankruptcy Court approval of an extension of any time
period, such time period shall automatically be deemed extended
between the date the Debtor files its request with the Bankruptcy
Court and the date the Bankruptcy Court issues an order
determining whether to approve or deny the Debtor's request. If
a proper objection to a waiver of Section 6.2 conditions is
timely received by the Debtor, then the Debtor and/or CSW as
appropriate may waive such conditions with approval of the
Bankruptcy Court or, in the case of Section 6.2(F), without
Bankruptcy Court approval.
<PAGE> 96
6.4 Effect of Nonoccurrence of Conditions to the
Effective Date. If each of the conditions to the Effective Date
has not occurred or been duly waived by the 913th day after the
Confirmation Date, or by such later date as may be established in
accordance with Section 6.3 of the Plan, then, upon motion by any
party in interest made after the deadline for satisfying (or
obtaining waivers of) the conditions to the Effective Date (as
such deadline may be extended hereunder), and prior to the time
that each of said conditions has occurred or been duly waived,
the Confirmation Order may be vacated by the Bankruptcy Court in
the Bankruptcy Court's discretion. Notwithstanding the
foregoing, however, the Confirmation Order may not be vacated
after each of the conditions to the Effective Date has either
occurred or been waived.
6.5 Non-consensual Confirmation. In the event that
any impaired Class of Claims or Interests shall fail to accept
the Plan in accordance with Section 1129(a)(8) of the Code, the
Plan may be confirmed in accordance with Section 1129(b) of the
Code either under the terms provided herein or as such terms may
be modified in accordance with Sections 6.6 and 5.1(E) of the
Plan or in accordance with the first paragraph of Article II of
the Plan.
6.6 Modification of the Plan.
A. Any Plan modification (other than technical
amendments, modifications or supplements to the Plan or any
ancillary or effectuating documents relating thereto that do not
conflict with any representation, warranty, covenant, or other
term or provision of the Merger Agreement or modify the substan-
tive treatment of any Class of Claims or Interests) made by the
Debtor shall be made subject to the prior written consent of CSW
in accordance with Section 7.2 of the Merger Agreement. CSW, in
accordance with Section 7.2 of the Merger Agreement, shall also
have the right to amend or modify this Plan with respect to the
treatment of any Class of Claims and EPE Preferred Stock Inter-
ests, and the provisions of any ancillary or effectuating
documents relating thereto, prior or subsequent to the entry of
the Confirmation Order, subject to the Code and Bankruptcy Rules.
If any Class hereunder does not accept the Plan, or the treatment
of any accepting Class is determined to not comply with the
requirements of the Code for plan Confirmation, then before, at,
or during the Confirmation Hearing the Debtor may propose, and/or
the Bankruptcy Court may determine, interest or dividend rates,
provisions regarding Allowance of Claims or other terms and
conditions applicable to such Class or a different creditor
classification from that set forth herein. Such rates and terms
and conditions may be more favorable or less favorable to the
holders of Claims or Interests in such Classes than the treatment
set forth herein. Upon the Debtor's filing of a statement so
specifying, the Plan shall be deemed amended to reflect such
modified treatment of such Class. Irrespective of whether a
<PAGE> 97
Class has accepted the Plan, provided that a Plan modification
does not directly, materially and adversely change the treatment
of the Claim of any creditor or the Interest of any equity
security holder which has not accepted in writing the
modification, the Plan shall be deemed accepted by all creditors
and security holders which have previously accepted the Plan,
subject, however, to the Bankruptcy Court's determination,
pursuant to Section 1127(d) of the Code or otherwise, that
holders of Claims or Interests should be afforded an opportunity
to change such holders' prior acceptance or rejection. After
entry of the Confirmation Order, the Debtor or Reorganized EPE,
as the case may be, may upon order of the Bankruptcy Court amend
or modify this Plan, in accordance with Section 1127(b) of the
Code, or remedy any defect or omission or reconcile any incon-
sistency in this Plan or in the documents filed in accordance
with Section 7.6 of this Plan in such manner as may be necessary
to carry out the purpose and intent of this Plan.
B. On or after the Confirmation Date, and to the
extent allowable under the Code, CSW, upon the written consent of
all holders of materially adversely affected Claims or Interests,
may adjust payments, terms, and provisions of the Plan and the
documents filed in accordance with Section 7.6 of the Plan,
whether prior to, on or after the Effective Date, to various
Classes of Claims and Interests without having to further amend
this Plan; provided, that any adjustment respecting payments to
be made prior to the Effective Date shall be made in accordance
with the terms of the Merger Agreement.
C. To the extent that there are modifications to the
Plan relating to the treatment of Class 11, Class 12(a) or Class
13, then, in the event either of the non-modified Classes has
accepted the Plan pursuant to Code Section 1126(c), the Debtor
shall be required to modify the treatment of such non-modified
Class or Classes which accepted the Plan so that the holders of
Allowed Claims in such non-modified Class or Classes receive a
benefit with respect to their Claims that is no less favorable
than that received by holders of the Class or Classes whose
treatment first was modified. By accepting the Plan, Class 11,
Class 12(a), and Class 13 agree that Class 11, Class 12(a), and
Class 13 votes shall not be resolicited on account of a
modification to the treatment of their Allowed Claim under the
Plan pursuant to this paragraph.
D. Notwithstanding the foregoing, the treatment of
Class 16 may not be modified to provide greater consideration to
Interest holders in such Class on account of their Allowed
Interests than the maximum amount which such Interest holders
could receive pursuant to the corrected Plan as filed on May 18,
1993.
<PAGE> 98
6.7 Revocation of Plan. Subject to the terms and
conditions of Section 9 of the Merger Agreement and as to the
Debtor subject to the notice provisions of Section 5.1(E) herein,
each of the Debtor and CSW reserves the right, any time prior to
the Effective Date, with or without approval of the Bankruptcy
Court, to revoke or withdraw the Plan. In the event the Plan is
revoked or withdrawn, then except as provided in this Section 6.7
of the Plan, the Plan and the Confirmation Order shall be of no
further force or effect and all payments to be made after the
Confirmation Date pursuant to this Plan shall cease to be
effective as of the earlier of the day the Debtor or CSW sought
such revocation or termination or the day on which CSW or the
Debtor terminates the Merger Agreement, provided that unless
otherwise ordered by the Bankruptcy Court the Debtor shall
continue to pay interest in accordance with the March 31, 1993
Interim Order regarding post-petition interest, and provided
further that, if Class 1 and Class 2 accept the Plan, payments on
or after the Confirmation Date on account of claims or interests
in Classes 6, 11, 12, 13 and 15 shall be disregarded for purposes
of calculating the Debtor's cash balances under such Interim
Order. To the extent any executory contracts or leases are to be
assumed or rejected pursuant to this Plan or the Confirmation
Order and to the extent that any Claim becomes an Allowed Claim
or is disallowed pursuant to this Plan then, if this Plan is
withdrawn or revoked, such assumption or rejection and such Claim
allowance or disallowance shall be of no force or effect;
provided, however, that nothing herein shall revoke or render
ineffective any rejection of the Palo Verde Leases which occurred
prior to the Confirmation Date pursuant to Section 365(d)(4) of
the Code. If the Plan is revoked or is withdrawn, then any
payment made pursuant to Sections 5.1(B)(i)(a), (b) and (c) shall
be deemed to have been made on account of any Allowed Claim for
post-petition interest and any payment made pursuant to Sections
5.1(B)(i), (d) and (f) of the Plan shall be deemed to have been
made: (i) first, on account of any Allowed Claim of the
recipient of the payment with priority pursuant to Sections
365(d)(3), 507(a)(1) or 503(b) of the Code, and (ii) second, on
account of any other Allowed Claim of the recipient of the
payment. For purposes of the preceding sentence, Allowed Claim
shall mean an Allowed Claim other than pursuant to Section 1.3(c)
of the Plan. If the Plan is revoked or withdrawn, then any
payment made pursuant to Sections 5.1(B)(i)(e), (g), (h) or (i)
shall be deemed to have been made or applied as set forth in
Section 5.1(b)(ii).
<PAGE> 99
ARTICLE VII
MISCELLANEOUS
7.1 Retention of Jurisdiction. Following the Effec-
tive Date, the Bankruptcy Court shall retain such jurisdiction as
is set forth in this Plan. Without in any manner limiting the
scope of the foregoing, the Bankruptcy Court shall retain
jurisdiction for the following purposes:
A. To determine the allowability, classification,
priority or subordination of claims and interests upon objection,
or to estimate pursuant to Section 502(c) of the Code the amount
of any Claim which is or is anticipated to be contingent or
unliquidated as of the Effective Date, or proceedings to sub-
ordinate Claims or Interests brought by any party in interest
with standing to bring such objection or proceeding, which shall
be deemed to include CSW;
B. To construe and to take any action to enforce this
Plan, issue such orders as may be necessary for the implementa-
tion, execution, and consummation of this Plan, including, with-
out limiting the generality of the foregoing, orders to expedite
regulatory decisions for the implementation of this Plan and to
ensure conformity with the terms and conditions of this Plan and
other orders of the Bankruptcy Court, notwithstanding any
otherwise applicable non-bankruptcy law;
C. To determine any and all applications for allow-
ance of compensation and expense reimbursement for periods on or
before the Effective Date and to determine any other request for
payment of administrative expenses;
D. To determine all matters which may be pending
before the Bankruptcy Court on or before the Effective Date;
E. To resolve any dispute regarding the implemen-
tation or interpretation of this Plan or the Merger Agreement
which arises at any time before the Case is closed, including
determination, to the extent a dispute arises, of the entities
entitled to a distribution within any particular Class of Claims
or Interests and of the scope and nature of Reorganized EPE's
obligations to cure defaults under assumed contracts, leases,
franchises and permits;
F. To determine any and all applications pending on
the Confirmation Date for the rejection, assumption or assignment
of executory contracts or unexpired leases and the allowance of
any Claim resulting therefrom;
G. To determine all applications, adversary proceed-
ings, contested matters and other litigated matters which were
brought or which could have been brought on or before the
Effective Date;
<PAGE> 100
H. To determine such other matters and for such other
purposes as may be provided in the Confirmation Order;
I. To modify this Plan pursuant to Code Section 1127,
or to remedy any apparent nonmaterial defect or omission in this
Plan, or to reconcile any nonmaterial inconsistency in this Plan
so as to carry out its intent and purposes; and
J. To determine any matter with respect to the
Liquidation Trust, including, without limitation, matters with
respect to sales, compromises and settlements by the Liquidation
Trustee, distributions from the Liquidation Trust, and
termination of the Liquidation Trust.
Prior to the Effective Date, the Bankruptcy Court shall
retain jurisdiction with respect to each of the foregoing items
and all other matters which were subject to its jurisdiction
prior to the Confirmation Date, subject to such modifications, to
Sections 363(b) and 364(b) of the Code and other applicable
restrictions on the Debtor, as the Bankruptcy Court on or after
the Confirmation Date may deem appropriate. The foregoing
provisions of this section 7.1 shall not provide the Bankruptcy
Court with greater subject matter jurisdiction than it may be
provided by applicable law.
7.2 Retention Of Causes Of Action.
A. Pursuant to Section 1123(b)(3)(B) of the Code,
except as provided in Section 7.2(B) herein, and the other
releases expressly set forth in this Plan, the Debtor and
Reorganized EPE on behalf of themselves and holders of Allowed
Claims and Allowed Interests shall retain all Causes of Action
which the Debtor had or had power to assert immediately prior to
Confirmation of the Plan, including without limitation, actions
for the avoidance and recovery pursuant to Section 550 of the
Code of transfers avoidable by reason of Sections 544, 545, 547,
548, 549 or 553(b) of the Code and may commence or continue in
any appropriate court or tribunal any suit or other proceeding
for the enforcement of such Causes of Action. All Causes of
Action shall remain the property of the Debtor and Reorganized
EPE unless expressly assigned hereunder. Nothing contained in
this Plan shall constitute a waiver of the rights, if any, of the
Debtor or Reorganized EPE to a jury trial with respect to any
Cause of Action or objection to any Claim.
Without limiting the generality of the foregoing,
except as provided in this Plan or as the Debtor may agree in
writing and the Bankruptcy Court may approve, the Debtor and
Reorganized EPE expressly reserve any and all claims they may
have against the lessors under the Palo Verde Leases, the Owner
Participants, and the holders of the Secured Lease Obligation
Bonds and the Lease Obligation Bonds, and all their successors,
heirs, and assigns and also reserve any and all claims they may
have against Arizona Public Service Company. Furthermore, except
<PAGE> 101
as provided in Sections 7.2(B) and (D) herein, and the other
releases expressly set forth in this Plan, the allowance of any
Claim or Interest in the Plan or by order of the Bankruptcy Court
shall not affect or in any way extinguish, resolve, or bar the
claims of the Debtor and Reorganized EPE against any such Claim
or Interest holder or prior holder of any such Claim or Interest
under any doctrine or theory of law including, but not limited
to, principles of res judicata, legal estoppel, or equitable
estoppel.
B. If any of Classes 3, 5(a), 5(b), 5(c), 6, 11 or 13
accepts the Plan in accordance with Section 1126(c) of the Code,
then, upon the Effective Date, each such Class which accepted the
Plan and any participant in the Claims held by such Class shall
be released from Causes of Action with respect to the Claims in
such Classes and shall be released from any and all claims of any
party in interest from causes of action under or arising from
orders entered in this Case providing for the payment of interest
in respect of the Claims in such Classes prior to the Effective
Date.
C. Releases relating to Class 12 are contained in
Sections 3.14(A).1., 3.14(A).4., and 3.14(B).3.
D. If Class 12(b) accepts the Plan in accordance with
Section 1126(c) of the Code and the OP Settlement is approved by
the Bankruptcy Court, then in consideration for the holders of
Class 12(b) Claims contributing value to the Debtor's estate, and
unless the Bankruptcy Court otherwise orders on the Confirmation
Date, the acceptance of the Plan or the receipt of any
distribution under the Plan by any entity shall constitute a
release as of the Effective Date of all claims related to the
Palo Verde Nuclear Generating Station, the Palo Verde Leases, the
Palo Verde Letters of Credit, and the documents listed on
Schedule A to the Plan that such entity may have against the
Owner Participants, the Owner Trustees and the Owner Trusts,
provided, however, the Owner Participants grant mutual releases
to the same entities and to the Debtor.
7.3 Unclaimed Property. All property which is
unclaimed for two years after distribution thereof by mail to the
latest mailing address filed of record with the Bankruptcy Court
for the party entitled thereto or if no such mailing address has
been so filed, the mailing address reflected in the Schedule of
Assets and Liabilities filed by the Debtor, as amended, or in the
case of the holder of EPE Securities for which there is a
trustee, indenture trustee or fiscal agent, or transfer agent or
registrar to the latest mailing address maintained of record by
the pertinent trustee, indenture trustee or fiscal agent, or, if
no mailing address is maintained of record, to the pertinent
trustee, indenture trustee or fiscal agent, or transfer agent or
registrar, shall become property of Reorganized EPE.
<PAGE> 102
7.4 Limitation of Liability. CSW and representa-
tives, agents and employees of CSW, CSW Sub, EPE and Reorganized
EPE shall have no liability to any creditors or equity holders of
the Debtor for actions taken under this Plan, in connection
therewith or with respect thereto in good faith including,
without limitation, failure to obtain Confirmation of this Plan
or to satisfy any condition or conditions, or refusal to waive
any condition or conditions, precedent to Confirmation or to the
occurrence of the Effective Date. Further, CSW, the Committees,
the individual members of the Committees, the officers,
directors, employees, attorneys or agents of the foregoing and of
CSW, CSW Sub, the Debtor and Reorganized EPE will not have or
incur any liability to any holder of a Claim, holder of an
Interest, other party-in-interest herein or any other Person for
any act or omission in connection with or arising out of their
administration of this Plan or the property to be distributed
under this Plan, except for gross negligence or willful
misconduct, and in all respects such persons will be entitled to
rely upon the advice of counsel with respect to their duties and
responsibilities under this Plan. Nothing in this Section 7.4
shall modify, impair or release any obligation of CSW to the
Debtor pursuant or related to the Merger Agreement.
7.5 Terms Binding. On the Effective Date, all
provisions of this Plan, including all agreements, instruments
and other documents filed in accordance with Section 7.6 of the
Plan and executed by Reorganized EPE in connection with this
Plan, shall be binding upon Reorganized EPE, all Claim and
Interest holders, and all other entities which are affected in
any manner by the Plan. All agreements, instruments and other
documents filed in connection with the Plan pursuant to Section
7.6 shall have full force and effect, and shall bind all parties
thereto as of the Effective Date, whether or not such exhibits
shall actually be executed by parties other than Reorganized EPE,
issued, delivered or recorded on the Effective Date or
thereafter.
7.6 Additional Terms of Securities and Other
Instruments. The securities of Reorganized EPE, the new term
loan agreements and the new indentures to be entered into
pursuant to this Plan and the notes issued thereunder, the notes
to be otherwise issued pursuant to this Plan, the new letters of
credit to be issued in respect of Classes 5(a), 5(b), and 5(c)
and Class 11 Claims, the terms of the Liquidation Trust, the
mechanism for setting the Market Basket Rate, and all other
securities or agreements issued or entered into pursuant to the
Plan shall contain such other terms, not inconsistent with the
provisions of this Plan, as are reflected in the forms of such
securities and agreements and related documents filed with the
Bankruptcy Court at least ten days prior to the deadline
established by the Bankruptcy Court by the Debtor for voting on
the Plan. All such securities, agreements and related documents
shall be satisfactory in form and substance to the Palo Verde
Indenture Trustees in the exercise of their reasonable judgment.
<PAGE> 103
Any modification of the documents shall be treated as a Plan
modification in accordance with Section 6.6 hereof.
7.7 Inconsistencies. In the event that there is any
inconsistency between this Plan and the Disclosure Statement, any
exhibit to the Plan or any other instrument or document created
or executed pursuant to the Plan, the Plan shall govern;
provided, however, that the Merger Agreement shall govern and
override any inconsistency with any other document or instrument.
7.8 Governing Law. Except to the extent that the Code
or any other federal law is applicable or to the extent the law
of a different jurisdiction is validly elected by the Debtor and
CSW, the rights, duties and obligations arising under this Plan
shall be governed in accordance with the substantive laws of the
United States of America and, to the extent federal law is not
applicable, the State of Texas.
7.9 Severability. If the Bankruptcy Court determines
at the Confirmation Hearing that any provision of the Plan is
invalid or unenforceable, such provision shall be severable from
the Plan and null and void and such determination shall in no way
limit or affect the enforceability or operative effect of any or
all other portions of the Plan.
<PAGE> 104
Dated: September 15, 1993
EL PASO ELECTRIC COMPANY
By:
David H. Wiggs, Jr., Chief
Executive Officer and President
J. Ronald Trost
Shalom L. Kohn
Bryan Krakauer
SIDLEY & AUSTIN
One First National Plaza
Chicago, Illinois 60603
(312) 853-7756
Daniel C. Stewart
Berry D. Spears
WINSTEAD SECHREST & MINICK P.C.
100 Congress Ave., Suite 800
Austin, Texas 78701-4042
(512) 474-4330
COUNSEL TO EL PASO ELECTRIC COMPANY
<PAGE> 105
SCHEDULE A
1. Collateral Trust Indenture, dated as of August 1, 1986,
among El Paso Funding Corporation, the Company and First
City National Bank of Houston, as Trustee.
a. Series 1986 Bond Supplemental Indenture, dated as
of October 15, 1986, to Collateral Trust Indenture
dated as of August 1, 1986.
b. Series 1986A Bond Supplemental Indenture, dated as
of December 1, 1986, to Collateral Trust Indenture
dated as of August 1, 1986.
2. Trust Indenture Mortgages, Security Agreements and
Assignments of Rents, dated as of August 1, 1986, between
First City National Bank of Houston, as Indenture Trustee,
and The First National Bank of Boston, as Owner Trustee.*
a. Supplemental Indentures No. 1, dated as of
October 15, 1986 to Trust Indenture Mortgages,
Security Agreements and Assignments of Rent dated
as of August 1, 1986.*
b. Supplemental Indentures No. 2, dated as of May 1,
1988 to Trust Indenture Mortgages, Security
Agreements and Assignments of Rent dated as of
August 1, 1986.*
3. Participation Agreements, dated as of August 1, 1986, among
the Participants named therein, El Paso Funding Corporation,
as Loan Participant, The First National Bank of Boston, in
its individual capacity and as Owner Trustee under Trust
Agreements dated as of August 1, 1986 with the Owner
Participants named therein, First City National Bank of
Houston, in its individual capacity and as Indenture Trustee
under a Trust Indenture, Mortgage, Security Agreement and
Assignment of Rents dated as of August 1, 1986 with the
Owner Trustee, as Indenture Trustee, and the Company.
(Participants-Alexander Hamilton Life Insurance Co. of
America; Burnham Leasing Corporation; Chrysler Financial
Corporation; Commercial Federal Investment Corporation;
Energy Investment Inc. and Palatine Hills Leasing, Inc.)*
a. Amendment No. 1, dated as of October 1, 1986, to
Participation Agreements dated as of August 1,
1986.*
b. Amendment No. 2, dated as of May 1, 1988, to
Participation Agreements dated as of August 1,
1986.*
<PAGE> 106
c. Amendment No. 3, dated as of October 1, 1989, to
Participation Agreements dated as of August 1,
1986.*
4. Facility Leases, dated as of August 1, 1986, between The
First National Bank of Boston, as Owner Trustee (under Trust
Agreements dated as of August 1, 1986 with each Partic-
ipant), and the Company.*
a. Amendment No. 1, dated as of October 1, 1986, to
Facility Leases dated as of August 1, 1986 between
The First National Bank of Boston, as Owner
Trustee, and the Company.*
b. Amendment No. 2, dated as of December 31, 1987, to
Facility Leases dated as of August 1, 1986 between
The First National Bank of Boston, as Owner
Trustee, and the Company.*
c. Amendment No. 3, dated as of May 1, 1988, to
Facility Leases dated as of August 1, 1986 between
The First National Bank of Boston, as Owner
Trustee, and the Company.*
d. Amendment No. 4, dated as of October 1, 1989, to
Facility Leases dated as of August 1, 1986 between
The First National Bank of Boston, as Owner
Trustee, and the Company.*
5. Trust Agreements, dated August 1, 1986, between each of
Alexander Hamilton Life Insurance Company of America,
Burnham Leasing Corporation, Chrysler Financial Corporation,
Commercial Federal Investment Corporation, Energy Investment
Inc. and Palatine Hills Leasing, Inc., each as an Owner
Participant, and The First National Bank of Boston, as Owner
Trustee.*
6. Extension Letters, dated August 18, 1986, from the Owner
Participants named therein, El Paso Funding Corporation, The
First National Bank of Boston, individually and as Owner
Trustee, First City National Bank of Houston, as Indenture
Trustee, and the Company, severally, to First City National
Bank of Houston, as Collateral Trust Trustee.*
7. Assignment, Assumption and Further Agreements, dated as of
August 1, August 18 and August 22, 1986, between the Company
and The First National Bank of Boston, as Owner Trustee.*
a. Amendment No. 1, dated as of October 1, 1986 to
Assignment, Assumption and Further Agreements.*
b. Amendment No. 2, dated as of May 1, 1988, to
Assignment, Assumption and Further Agreements.*
<PAGE> 107
8. Mortgage Releases dated August 13, 1986 from First City
National Bank of El Paso and State Street Bank and Trust
Company, as Trustees, to the Company.*
9. Deeds and Bills of Sale, dated as of August 18 and
August 22, 1986, between the Company as Seller, and The
First National Bank of Boston, Owner Trustee, as Buyer.*
10. Deeds, dated as of August 18 and August 22, 1986, from the
Company to The First National Bank of Boston, as Owner
Trustee.*
11. Deeds and Assignment of Beneficial Interests, dated as of
August 18 and August 22, 1986, between the Company and The
First National Bank of Boston, as Owner Trustee.*
12. Decommissioning Trust Agreement, dated as of August 1, 1986,
among the Company, The First National Bank of Boston, as
Owner Trustee under eight separate Trust Agreements, and
Security Pacific Bank Washington, N.A., as Decommissioning
Trustee.
13. Decommissioning Security Agreement, dated as of August 1,
1986, among the Company, The First National Bank of Boston,
as Owner Trustee, and Security Pacific Bank Washington,
N.A., as Decommissioning Trustee.*
14. Trust Indentures, Mortgages, Security Agreements and
Assignments of Rents, dated as of December 1, 1986, between
The First National Bank of Boston, as Owner Trustee, and
First City National Bank of Houston, as Indenture Trustee.**
a. Supplemental Indenture No. 1, dated as of May 1,
1988, to Trust Indenture, Mortgage, Security
Agreement and Assignment of Rents, dated as of
December 1, 1986.**
15. Participation Agreement, dated as of December 1, 1986, among
Chrysler Financial Corporation, as Owner Participant, El
Paso Funding Corporation, as Loan Participant, The First
National Bank of Boston, in its individual capacity and as
Owner Trustee under a Trust Agreement dated as of
December 1, 1986 with Chrysler Financial Corporation, First
City National Bank of Houston, in its individual capacity
and as Indenture Trustee under a Trust Indenture, Mortgage,
Security Agreement and Assignment of Rents dated as of
December 1, 1986, with the Owner Trustee, as Indenture
Trustee, and the Company.
a. Amendment No. 1, dated as of May 1, 1988, to
Participation Agreement dated as of December 1,
1986.
<PAGE> 108
b. Amendment No. 2, dated as of October 1, 1989, to
Participation Agreement dated as of December 1,
1986.
16. Facility Lease, dated as of December 1, 1986, between The
First National Bank of Boston, as Owner Trustee (under a
Trust Agreement dated as of December 1, 1986 with Chrysler
Financial Corporation) and the Company.
a. Amendment No. 1, dated as of December 31, 1987,
to Facility Lease dated as of December 1, 1986,
between The First National Bank of Boston, as
Owner Trustee, and the Company.
b. Amendment No. 2, dated as of May 1, 1988, to
Facility Lease dated as of December 1, 1986,
between The First National Bank of Boston, as
Owner Trustee, and the Company.
c. Amendment No. 3, dated as of October 1, 1989, to
Facility Lease dated as of December 1, 1986,
between The First National Bank of Boston, as
Owner Trustee, and the Company.
17. Deeds and Bills of Sale, dated as of December 18, 1986,
between the Company, as Seller, and The First National Bank
of Boston, Owner Trustee, as Buyer.**
18. Deeds, dated as of December 18, 1986, from the Company to
The First National Bank of Boston, Owner Trustee, as
Buyer.**
19. Deeds and Assignments of Beneficial Interest, dated as of
December 18, 1986, between the Company and The First
National Bank of Boston, as Owner Trustee.**
20. Extension Letter, dated December 18, 1986, from the Owner
Participant named therein, El Paso Funding Corporation, The
First National Bank of Boston, individually and as Owner
Trustee, First City National Bank of Houston, as Indenture
Trustee, and the Company, severally, to First City National
Bank of Houston, as Collateral Trust Trustee.**
21. Participation Agreement, dated as of December 1, 1986, among
Commercial Federal Investment Corporation, as Owner Partic-
ipant, El Paso Funding Corporation, as Loan Participant, The
First National Bank of Boston, in its individual capacity
and as Owner Trustee under a Trust Agreement dated as of
December 1, 1986 with Commercial Federal Investment Corpora-
tion, First City National Bank of Houston, in its individual
capacity and as Indenture Trustee under a Trust Indenture,
Mortgage, Security Agreement and Assignment of Rents dated
as of December 1, 1986, with the Owner Trustee, as Indenture
Trustee, and the Company.
<PAGE> 109
a. Amendment No. 1, dated as of May 1, 1988, to
Participation Agreement dated as of December 1,
1986.
b. Amendment No. 2, dated as of October 1, 1989, to
Participation Agreement dated as of December 1,
1986.
22. Facility Lease, dated as of December 1, 1986, between The
First National Bank of Boston, as Owner Trustee (under a
Trust Agreement dated as of December 1, 1986 with Commercial
Federal Investment Corporation) and the Company.
a. Amendment No. 1, dated as of December 31, 1987, to
Facility Lease dated as of December 1, 1986,
between The First National Bank of Boston, as
Owner Trustee, and the Company.
b. Amendment No. 2, dated as of May 1, 1988, to
Facility Lease dated as of December 1, 1986,
between The First National Bank of Boston, as
Owner Trustee, and the Company.
c. Amendment No. 3, dated as of October 1, 1989, to
Facility Lease dated as of December 1, 1986,
between The First National Bank of Boston, as
Owner Trustee, and the Company.
23. Trust Agreements, dated as of December 1, 1986, between the
Owner Participant named therein and The First National Bank
of Boston.
24. Assignment, Assumption and Further Agreements, dated as of
December 1, 1986, between the Company and the Owner
Participant named therein.**
25. Decommissioning Security Agreements, dated as of December 1,
1986, among the Company, The First National Bank of Boston,
as Owner Trustee, and Security Pacific Bank Washington,
N.A., as Decommissioning Trustee.**
26. Mortgage Releases dated December 15, 1986 from First City
National Bank of El Paso and State Street Bank and Trust
Company, as Trustees, to the Company.
27. Extension Letter, dated October 5, 1986 and addressed to the
Collateral Trust Trustee by the Loan Participant and the
Company.
28. Collateral Trust Indenture, dated as of December 1, 1987,
among Del Norte Funding Corporation, the Company and
Chemical Bank, as Trustee.
<PAGE> 110
a. Series 1988 Bond Supplemental Indenture, dated as
of February 1, 1988, to Collateral Trust Indenture
dated as of December 1, 1987.
29. Participation Agreements, dated as of December 1, 1987,
among the Participants named therein, Del Norte Funding
Corporation, as Loan Participant, The First National Bank of
Boston, in its individual capacity and as Owner Trustee
under Trust Agreements dated as of November 1, 1987 with the
Owner Participants named therein, Chemical Bank, in its
individual capacity and as Indenture Trustee under a Trust
Indenture, Mortgage, Security Agreement and Assignment of
Facility Lease dated as of December 1, 1987 with the Owner
Trustee, as Indenture Trustee, and the Company
(Participants-Palo Verde Leasing Corporation and Security
Pacific Capital Leasing Corporation).**
a. Amendment No. 1, dated as of February 1, 1988, to
Participation Agreements, dated as of December 1,
1987.**
30. Facility Leases, dated as of December 1, 1987, between The
First National Bank of Boston, as Owner Trustee under Trust
Agreements dated as of December 1, 1987 with each
Participant, and the Company.**
a. Amendment No. 1, dated as of February 1, 1988, to
Facility Leases dated as of December 1, 1987
between The First National Bank of Boston, as
Owner Trustee, and the Company.**
31. Trust Agreements, dated November 1, 1987, between each of
Palo Verde Leasing Corporation and Security Pacific Capital
Leasing Corporation, each as Owner Participant, and The
First National Bank of Boston, as Owner Trustee.
32. Trust Indentures, Mortgage, Security Agreement and
Assignment of Facility Lease, dated as of December 1, 1987,
between The First National Bank of Boston, as Owner Trustee,
and Chemical Bank, as Indenture Trustee.**
a. Supplemental Indentures No. 1, dated as of
February 1, 1988, to Trust Indenture, Mortgage,
Security Agreement and Assignment of Facility
Lease dated as of December 1, 1987.**
33. Extension Letter, dated December 31, 1988, from the Owner
Participant named therein, Del Norte Funding Corporation,
The First National Bank of Boston, individually and as Owner
Trustee, Chemical Bank, as Indenture Trustee, and the
Company, severally, to Chemical Bank, as Collateral Trust
Trustee.**
34. Mortgage Releases.
<PAGE> 111
35. Tax Indemnification Agreement, dated as of December 1, 1987
between the Company and each of the Participants.
36. Assignment, Assumption and Further Agreement, dated as of
December 1, 1987, between the Company and The First National
Bank of Boston, as Owner Trustee.**
a. Amendment No. 1, dated as of December 31, 1987,
to Facility Lease dated as of December 1, 1986,
between The First National Bank of Boston, as
Owner Trustee, and the Company.
b. Amendment No. 2, dated as of May 1, 1988, to
Facility Lease dated as of December 1, 1986,
between The First National Bank of Boston, as
Owner Trustee, and the Company.
c. Amendment No. 3, dated as of October 1, 1989, to
Facility Lease dated as of December 1, 1986,
between The First National Bank of Boston, as
Owner Trustee, and the Company.
37. Deed and Bill of Sale, dated as of December 31, 1987,
between the Company, as Seller, and The First National Bank
of Boston, Owner Trustee, as Buyer.**
38. Deed, dated as of December 31, 1987, from the Company to The
First National Bank of Boston, as Owner Trustee.**
39. Decommissioning Trust Agreement, dated as of December 1,
1987, among the Company, The First National Bank of Boston,
as Owner Trustee under separate Trust Agreements with the
Owner Participants, and First City, Texas-El Paso, N.A., as
Decommissioning Trustee.**
40. Decommissioning Security Agreement, dated as of December 1,
1987, among the Company, The First National Bank of Boston,
as Owner Trustee, and First City, Texas-El Paso, N.A., as
Decommissioning Trustee.**
* A total of six documents have been entered into, one relat-
ing to each of the Owner Participants. These documents
differ as to dollar amounts, percentages, tax indemnity
matters and dates of execution, but in other respects there
are no material differences among such documents. All six
documents are hereby included in this Schedule "A".
** Two documents have been entered into, one relating to each
of the Owner Participants. These documents differ as to
dollar amounts and percentages, but in other respects there
are no material differences between such documents. Both
documents are hereby included in this Schedule "A".
<PAGE> 112
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
<PAGE> 113
<TABLE>
<CAPTION>
SCHEDULE B
Determination of Redemption Premium
The redemption premiums for Reorganized EPE debt securities which are to be determined in
accordance with this Schedule B shall be calculated in the following manner: for a
Reorganized EPE security with an original term (rounded to the nearest year) as set forth in
the table below, and for a given redemption date, the redemption premium as a percentage of
the outstanding principal amount of such security shall equal the interest rate per annum of
the security when originally issued multiplied by the applicable percentage from the table
below. For example, if Reorganized EPE issued a security with a 10 year maturity with an
interest rate of 7.000%, the redemption premiums as a percentage of principal determined in
accordance with this Schedule B would be 3.5%, 2.3%, 1.2%, 0.0% and 0.0% during each of the
sixth, seventh, eighth, ninth and tenth year the security was outstanding, respectively.
Redemption
Date
Occurs
in the
Year
Preceding
the
Specified
Anniversary
of the Term of Reorganized EPE Security (years)
Effective
Date 1 2 3 4 5 6 7 8 9 10 11 12 or more
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 N/C N/C N/C N/C N/C N/C N/C N/C N/C N/C N/C N/C
2 -- N/C N/C N/C N/C N/C N/C N/C N/C N/C N/C N/C
3 -- -- N/C N/C N/C N/C N/C N/C N/C N/C N/C N/C
4 -- -- -- -- N/C N/C N/C N/C N/C N/C N/C N/C
5 -- -- -- -- N/C N/C N/C N/C N/C N/C N/C N/C
6 -- -- -- -- -- 0.0% 0.0% 16.7% 28.6% 50.0% 50.0% 50.0%
7 -- -- -- -- -- -- 0.0% 0.0% 14.3% 33.3% 37.5% 40.0%
8 -- -- -- -- -- -- -- 0.0% 0.0% 16.7% 25.0% 30.0%
9 -- -- -- -- -- -- -- -- 0.0% 0.0% 12.5% 20.0%
10 -- -- -- -- -- -- -- -- -- 0.0% 0.0% 10.0%
11 -- -- -- -- -- -- -- -- -- -- 0.0% 0.0%
12 or more 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
</TABLE>
<PAGE> 114
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 115
<TABLE>
<CAPTION>
SCHEDULE C
Determination of Redemption Premium
The redemption premiums for Reorganized EPE debt and equity securities which are to be
determined in accordance with this Schedule C shall be calculated in the following manner:
for a Reorganized EPE security with an original term (rounded to the nearest year) as set
forth in the table below, and for a given redemption date, the redemption premium as a
percentage of the outstanding principal amount (or liquidation value) of such security shall
equal the interest rate (or dividend rate) per annum of the security when originally issued
multiplied by the applicable percentage from the table below. For example, if Reorganized
EPE issued a security with a five year maturity (or mandatory redemption on the fifth
anniversary of issuance) with an interest rate (dividend rate) of 6.000%, the redemption
premiums as a percentage of the principal amount (or liquidation value) determined in
accordance with this Schedule C would be 6.0%, 4.5%, 3.0%, 1.5% and 0.0% during each of the
first, second, third, fourth and fifth year the security was outstanding, respectively.
Redemption
Date
Occurs
in the
Year
Preceding
the
Specified
Anniversary
of the
Effective Term of Reorganized EPE Security (years)
Date 1 2 3 4 5 6 7 8 9 10 11 or more
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 0.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
2 -- 0.0% 50.0% 66.7% 75.0% 80.0% 83.3% 85.7% 87.5% 88.9% 90.0%
3 -- -- 0.0% 33.3% 50.0% 60.0% 66.7% 71.4% 75.0% 77.8% 80.0%
4 -- -- -- 0.0% 25.0% 40.0% 50.0% 57.1% 62.5% 66.7% 70.0%
5 -- -- -- -- 0.0% 20.0% 33.3% 42.9% 50.0% 55.6% 60.0%
6 -- -- -- -- -- 0.0% 16.7% 28.6% 37.5% 44.4% 50.0%
7 -- -- -- -- -- -- 0.0% 14.3% 25.0% 33.3% 40.0%
8 -- -- -- -- -- -- -- 0.0% 12.5% 22.2% 30.0%
9 -- -- -- -- -- -- -- -- 0.0% 11.1% 20.0%
10 -- -- -- -- -- -- -- -- -- 0.0% 10.0%
11 or more 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
</TABLE>
<PAGE> 116
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
<PAGE> 117
SCHEDULE D
Method for Determining Rates on Reorganized EPE Debt Securities
For securities of Reorganized EPE whose interest rate is to be
set pursuant to this Schedule D, the rate will be based upon a
market basket of securities of comparable rating and maturity as
described below. In the event the Reorganized EPE security
receives different provisional or actual credit ratings from
Moody's and S&P, separate market baskets will be created for each
rating and the interest rate will be set based on an average of
the two baskets.
Basket for Reorganized EPE Debt Securities Receiving Investment
Grade Rating from Both Moody's and S&P
The interest rate will be set by calculating the median (as
adjusted below) as of the tenth business day preceding the
Effective Date of the average of the bid and ask closing yields
to maturity as quoted by Bloomberg Financial Markets of a basket
of comparable electric utility bonds. The basket will include
all publicly traded electric utility bonds appearing on Bloomberg
(excluding lease obligation bonds and bonds with sinking funds)
with outstanding principal of more than $75 million, yielding
within 75 basis points of the comparable yield appearing on the
Bloomberg fair market yield curve for utilities (interpolated as
necessary, "Eligible Securities"), a credit rating by both S&P
and Moody's comparable to the provisional or actual credit
ratings received by the Reorganized EPE security from S&P and
Moody's and a remaining average life within one year (or six
months, in the event that the average life of the Reorganized EPE
security is five years or less) of the average life of the
Reorganized EPE security. If less than five bonds meet these
criteria, additional bonds with a remaining average life within
one year (or six months, as the case may be) of that of the
Reorganized EPE security and a credit rating from S&P and Moody's
which is one rating gradation higher or lower will be included,
provided that lower rated securities will be included only if
rated investment grade by Moody's & S&P. If such higher or lower
rated bonds are added to the market basket, their yields will be
adjusted upwards or downwards to reflect the differential in
yields between bonds of a comparable remaining average life for
the relevant ratings, as reported at the close of the tenth
business day prior to the Effective Date in the Bloomberg fair
market yield curve for utilities (interpolated, if necessary).
In the event that less than five bonds meet these extended
criteria, or quotations for the Bloomberg yield curve are
unavailable, an equal number of Eligible Securities of shorter
and longer maturities (but as near as possible to the average
life of the Reorganized EPE Security) will be added to the basket
so that at least five bonds are included in the market basket.
In the event the Reorganized EPE security receives different
provisional or actual investment grade credit ratings from
<PAGE> 118
Moody's and S&P, separate market baskets will be created for each
rating and the interest rate for the Reorganized EPE security
will be based on an average of the rates resulting from the two
baskets.
Basket for Reorganized EPE Debt Securities Receiving Non-
Investment Grade Rating from Both Moody's and S&P
In the event the Reorganized EPE security receives a provisional
or actual BB+ rating from S&P and a provisional or actual Ba1
rating from Moody's, a 100 basis point premium will be added to
the rate determined for an appropriate BBB-/Baa3 basket as
provided above. In the event that the Reorganized EPE security
receives a provisional or actual BB (flat) rating from S&P and a
provisional or actual Ba2 rating from Moody's, a 140 basis point
premium will be added to the rate determined for an appropriate
BBB-/Baa3 basket as provided above. In the event the Reorganized
EPE security receives different provisional or actual non-
investment grade credit ratings from Moody's and S&P, separate
interest rates (including the premiums referred to above) will be
determined for each rating and the interest rate for the
Reorganized EPE security will be based on the average of such
interest rates.
Basket for Reorganized EPE Debt Securities Receiving Split
Investment Grade/Non-Investment Grade Rating from Moody's and S&P
In the event the Reorganized EPE security receives split
provisional or actual investment grade/non-investment grade
ratings from S&P and Moody's, separate interest rates (including,
if applicable, the premium described above) will be determined
for each rating as provided above and the interest rate for the
Reorganized EPE security will be based on the average of such
interest rates.
Market Basket Notice
The Debtor shall furnish to the Oversight Committee, as soon as
practicable prior to the Effective Date, prior notice in
reasonable detail of the composition of the market baskets and
computations of the interest rates.
Adjustments to Market Basket Rates Determined Above
1. Securities issued to Classes 1 and 2 with +5 b.p.
maturities of greater than five years +1 b.p.
for each
full year
of
maturity
above 5
years
<PAGE> 119
2. Fixed rate securities issued to Classes +11 b.p.
3, 6, 11, 12 and 13 (other than Reorganized +1 b.p.
EPE Series C First Mortgage Bonds issued for each
to Class 3) full year
of
maturity
above 1
year
3. Reorganized EPE Series C First +16 b.p.
Mortgage Bonds issued to Class 3 +1 b.p.
for each
full
year of
maturity
above 1
year
<PAGE> 120
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 121
SCHEDULE E
Method for Determining Rate on Reorganized EPE Preferred Stock
The dividend rate for Reorganized EPE Preferred Stock will be
based upon a market basket of preferred stock of comparable
rating and maturity as described below. In the event the
Reorganized EPE Preferred Stock receives different provisional or
actual credit ratings from Moody's and S&P, separate market
baskets will be created for each rating and the dividend rate
will be set based on an average of the two baskets. In the event
that credit ratings are unavailable at the Confirmation Date,
market basket rates will be created for each rating category as
of the Confirmation Date and applied based on the rating
ultimately received on the Effective Date.
Basket for Reorganized EPE Preferred Stock Receiving Investment
Grade Rating from Both Moody's and S&P
The dividend rate will be 25 basis points over the median as of
the Confirmation Date of the average of the bid and ask closing
yields to maturity as quoted by Bloomberg Financial Markets of a
basket of comparable electric utility preferred stock (or such
other price quotes as are deemed appropriate by Salomon Brothers,
Morgan Stanley and CSW). The basket will include all publicly
traded electric utility preferred stock appearing on Bloomberg
with outstanding principal of more than $25 million, a credit
rating by both S&P and Moody's comparable to the provisional or
actual credit ratings received by the Reorganized EPE Preferred
Stock from S&P and Moody's and a remaining average life within
one year of the average life of the Reorganized EPE Preferred
Stock at issuance. If less than five issues of preferred stock
meet these criteria, the remaining average life time frame will
be shortened or lengthened, in each case by an equal amount,
until at least five issues of preferred stock are included in the
market basket. If an additional preferred stock security is
added to the basket pursuant to the preceding sentence and quotes
from the Bloomberg utility fair market yield curve are published,
then the yield on such security shall be adjusted upwards or
downwards, as the case may be, to account for the difference in
yield as quoted on the Confirmation Date by the Bloomberg utility
fair market yield curve for bonds of a comparable credit rating
(interpolated if necessary) between the maturity of such security
and the average life of the Reorganized EPE security at issuance.
In the event the Reorganized EPE Preferred Stock receives
different provisional or actual investment grade credit ratings
from Moody's and S&P, separate market baskets will be created for
each rating and the dividend rate for the Reorganized EPE
Preferred Stock will be based on an average of the rates
resulting from the two baskets.
<PAGE> 122
Basket for Reorganized EPE Preferred Stock Receiving Non-
Investment Grade Rating from Both Moody's and S&P
In the event the Reorganized EPE Preferred Stock receives a
provisional or actual BB+ rating from S&P and a provisional or
actual Ba1 rating from Moody's, a 100 basis point premium will be
added to the rate determined for an appropriate BBB-/Baa3 basket
as provided above. In the event that the Reorganized EPE
Preferred Stock receives a provisional or actual BB (flat) rating
from S&P and a provisional or actual Ba2 rating from Moody's, a
140 basis point premium will be added to the rate determined for
an appropriate BBB-/Baa3 basket as provided above. In the event
the Reorganized EPE Preferred Stock receives different
provisional or actual non-investment grade credit ratings from
Moody's and S&P, separate dividend rates (including the premiums
referred to above) will be determined for each rating and the
dividend rate for the Reorganized EPE Preferred Stock will be
based on the average of such dividend rates.
Basket for Reorganized EPE Preferred Stock Receiving Split
Investment Grade/Non-Investment Grade Rating from Moody's and S&P
In the event the Reorganized EPE Preferred Stock receives split
provisional or actual investment grade/non-investment grade
ratings from S&P and Moody's, separate dividend rates (including,
if applicable, the premium described above) will be determined
for each rating as provided above and the dividend rate for the
Reorganized EPE Preferred Stock will be based on the average of
such dividend rates.
Market Basket Notice
The Debtor shall furnish to the Oversight Committee, as soon as
practicable after the Confirmation Date, notice in reasonable
detail of the composition of the market baskets and computations
of the dividend rate.
<PAGE> 1
EXHIBIT B-3
UNITED STATES BANKRUPTCY COURT
WESTERN DISTRICT OF TEXAS
AUSTIN DIVISION
___________________________________
IN RE: :
:
EL PASO ELECTRIC COMPANY, : CASE NO. 92-10148-FM
: (Chapter 11)
DEBTOR. :
___________________________________
DISCLOSURE STATEMENT TO MODIFIED THIRD AMENDED
PLAN OF REORGANIZATION OF THE DEBTOR
PROVIDING FOR THE ACQUISITION OF EL PASO
ELECTRIC COMPANY BY CENTRAL AND SOUTH WEST CORPORATION
AUGUST 27, 1993
SIDLEY & AUSTIN
One First National Plaza
Chicago, Illinois 60603
WINSTEAD SECHREST & MINICK P.C.
100 Congress Avenue, Suite 800
Austin, Texas 78701
Co-Counsel to
Debtor-In-Possession
Corrected: 9/15/93
<PAGE> 2
NOTICE:
11 U.S.C. Subsection 1125(b) PROHIBITS SOLICITATION OF
AN ACCEPTANCE OR REJECTION OF A PLAN OF REORGANIZATION UNLESS A
COPY OF THE PLAN OF REORGANIZATION OR A SUMMARY THEREOF IS
ACCOMPANIED OR PRECEDED BY A COPY OF A DISCLOSURE STATEMENT
APPROVED BY THE BANKRUPTCY COURT.
THIS DISCLOSURE STATEMENT HAS NOT BEEN APPROVED OR
DISAPPROVED BY, AND THE SECURITIES OFFERED HAVE NOT BEEN REGIS-
TERED WITH OR APPROVED OR RECOMMENDED BY, THE SECURITIES AND
EXCHANGE COMMISSION OR ANY SECURITIES REGULATORY AUTHORITY OF ANY
STATE, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THE STATEMENTS CONTAINED HEREIN. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 3
TABLE OF CONTENTS
Page
I. INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . 1
A. The Debtor and the Bankruptcy Case . . . . . . . . . 2
B. The Disclosure Statement . . . . . . . . . . . . . . 6
C. Sources of Information . . . . . . . . . . . . . . . 7
D. Summary of the Plan. . . . . . . . . . . . . . . . . 7
1. Business Combination between the Debtor and
CSW . . . . . . . . . . . . . . . . . . . . . . 7
2. Classification and Treatment of Claims and
Interests . . . . . . . . . . . . . . . . . . . 9
3. Rejection of Palo Verde Leases and Transfer
of the Palo Verde Interests to Reorganized
EPE . . . . . . . . . . . . . . . . . . . . . .30
4. Conditions to Confirmation and Effectiveness
of the Plan . . . . . . . . . . . . . . . . . .31
II. DESCRIPTION OF THE DEBTOR . . . . . . . . . . . . . . . . 33
A. Background Information Regarding the Debtor. . . . . 33
B. Regulation . . . . . . . . . . . . . . . . . . . . . 51
C. The Debtor's Operations in Chapter 11. . . . . . . . 56
1. Overview of the Debtor's Operations . . . . . . 56
2. Retention of Professionals and Appointment of
Committees. . . . . . . . . . . . . . . . . . . 56
(a) The Debtor's Retention of Bankruptcy
Counsel. . . . . . . . . . . . . . . . . . 56
(b) The Debtor's Retention of Other
Professionals. . . . . . . . . . . . . . . 57
(c) Official Committees and the Retention
of Professionals Thereby (at Debtor's
expense) . . . . . . . . . . . . . . . . . 57
3. Operating Results During Chapter 11 . . . . . . 58
4. Summary of Significant Orders Entered During
the Case. . . . . . . . . . . . . . . . . . . . 59
(a) Exclusivity. . . . . . . . . . . . . . . . 59
(b) Administrative Orders. . . . . . . . . . . 60
(c) Palo Verde Station, Palo Verde Leases
and Other Real Estate Leases . . . . . . . 61
(d) Interest Payments. . . . . . . . . . . . . 62
(e) Administrative Claims. . . . . . . . . . . 63
III. ACQUISITION OF DEBTOR BY CSW AND FUTURE BUSINESS
OF THE DEBTOR. . . . . . . . . . . . . . . . . . . . . . .65
A. Ownership of the Debtor by CSW . . . . . . . . . . . 65
B. Summary of Terms of the Merger Agreement . . . . . . 67
1. The Merger. . . . . . . . . . . . . . . . . . . 67
2. Effective Time. . . . . . . . . . . . . . . . . 69
3. Certain Covenants . . . . . . . . . . . . . . . 70
4. No Solicitation by the Debtor . . . . . . . . . 70
5. Additional Agreements . . . . . . . . . . . . . 71
6. Employees and Employee Benefit Plans. . . . . . 72
i
<PAGE> 4
Page
7. Directors' and Officers' Indemnification. . . . 74
8. Conditions to the Merger. . . . . . . . . . . . 75
9. Termination . . . . . . . . . . . . . . . . . . 77
10. Effect of Termination; Payment of Fees. . . . . 78
11. Provision Regarding EPE Common Stock Holders. . 79
C. Business of Reorganized EPE. . . . . . . . . . . . . 79
D. General Description of Regulatory Matters Relating
to the Plan. . . . . . . . . . . . . . . . . . . . . 81
1. Definitions . . . . . . . . . . . . . . . . . . 82
2. Interaction of the Code and Regulatory
Authority . . . . . . . . . . . . . . . . . . . 82
3. Proposed Texas Rate Treatment . . . . . . . . . 83
(a) Regulatory Background. . . . . . . . . . . 83
(b) Proposed Texas Rate Plan . . . . . . . . . 85
4. Proposed New Mexico Rate Treatment. . . . . . . 88
(a) Regulatory . . . . . . . . . . . . . . . . 88
(b) Proposed New Mexico Rate Plan. . . . . . . 91
5. NRC and Atomic Energy Act Issues. . . . . . . . 92
6. FERC and Federal Power Act Issues . . . . . . . 93
7. SEC and PUHCA Issues. . . . . . . . . . . . . . 99
8. Department of Energy and the Federal Power
Act . . . . . . . . . . . . . . . . . . . . . .100
E. Information Relevant to the Risks Posed to
Creditors Under the Plan . . . . . . . . . . . . . .100
1. Rate Matters. . . . . . . . . . . . . . . . . .101
2. Existing Rate Case Appeals. . . . . . . . . . .101
3. Certain Risks Relating to Projections . . . . .102
4. Nonapproval by PUCT, NMPUC, NRC, FERC, SEC
and Other Regulatory Authorities. . . . . . . .102
5. Risk of Delay or Non-Occurrence of the
Confirmation Date and the Effective Date. . . .102
6. Risk of Additional Costs in Connection with
Palo Verde. . . . . . . . . . . . . . . . . . .103
7. Risk of Allowance of Disputed Claims. . . . . .105
8. Market for Securities Issued Under the Plan . .105
9. Effect of Potential Loss of Sales . . . . . . .105
IV. DESCRIPTION OF SIGNIFICANT SCHEDULED CLAIMS AND
INTERESTS . . . . . . . . . . . . . . . . . . . . . . . .106
A. Claims Generally . . . . . . . . . . . . . . . . . .106
B. Scheduled Claims . . . . . . . . . . . . . . . . . .106
1. Secured Claims. . . . . . . . . . . . . . . . .109
2. Unsecured Claims. . . . . . . . . . . . . . . .114
(a) Unsecured Pollution Control Bonds. . . . .114
(b) Bank Notes . . . . . . . . . . . . . . . .115
(c) Letter of Credit Reimbursement Claims
Related to Palo Verde Station. . . . . . .115
(i) The December 26, 1991 Letter of
Credit Draws Involving Palo Verde
Unit 2. . . . . . . . . . . . . . . .115
ii
<PAGE> 5
Page
(ii) The January 9, 1992 Letter of
Credit Draws Involving Palo Verde
Unit 3. . . . . . . . . . . . . . . .116
(d) Miscellaneous Unsecured Claims . . . . . .116
C. Significant Disputed Claims. . . . . . . . . . . . .118
1. Palo Verde Lease Claims . . . . . . . . . . . .118
(a) Background . . . . . . . . . . . . . . . .119
(b) The Palo Verde Lease Rejection
Litigation . . . . . . . . . . . . . . . .120
2. Environmental Claims. . . . . . . . . . . . . .122
3. Other Litigation. . . . . . . . . . . . . . . .124
4. Unsecured Priority Claims . . . . . . . . . . .126
D. Interest Holders . . . . . . . . . . . . . . . . . .128
V. SUMMARY OF PLAN OF REORGANIZATION . . . . . . . . . . . .128
A. Claims and Interests . . . . . . . . . . . . . . . .128
B. Treatment of Classes of Claims and Interests . . . .134
1. Definition of Allowed Claim and Allowed
Interest. . . . . . . . . . . . . . . . . . . .134
2. Treatment of Administrative Expenses and
Priority Tax Claims . . . . . . . . . . . . . .135
(a) Administrative Expenses. . . . . . . . . .135
(b) Priority Tax Claims. . . . . . . . . . . .135
3. Treatment of Classes Not Impaired Under Plan. .136
(a) Classes 4(a) through 4(i) Claims
(Allowed Claims Arising from or Related
to the Maricopa Loan Agreements and
Maricopa PCBs) . . . . . . . . . . . . . .137
(b) Class 7 Claims (Other Allowed Secured
Claims). . . . . . . . . . . . . . . . . .138
(c) Class 8 Claims (Allowed Priority
Claims). . . . . . . . . . . . . . . . . .138
(d) Class 9 Claims (Allowed Customer Refund
and Deposit Claims). . . . . . . . . . . .139
(e) Classes 10(a) and 10(b) Claims (Allowed
Claims arising from or related to the
Farmington Agreement and the Farmington
Series A 1983 PCBs). . . . . . . . . . . .139
(f) Class 14 Claims (Allowed Claims of Small
Creditors -- Administrative Convenience
Class) . . . . . . . . . . . . . . . . . .139
4. Treatment of Classes Impaired Under Plan. . . .139
(a) Class 1 (Allowed Claims Arising from or
Related to EPE First Mortgage Bonds of
the Debtor) and Class 2 (Allowed Claims
Arising from or Related to EPE Second
Mortgage Bonds of the Debtor). . . . . . .140
(i) Plan treatment of Class 1 . . . . . .140
(ii) Plan treatment of Class 2. . . . . .143
(b) Class 3 Claims (Allowed Claims of
Revolving Credit Banks Arising from or
iii
<PAGE> 6
Page
Related to the Revolving Credit
Facility). . . . . . . . . . . . . . . . .146
(c) Class 5(a)-(c) Claims (Allowed Claims
Relating to the Maricopa PCB LCs). . . . .151
(d) Class 6 Claims (Allowed Claims Arising
from or Relating to the RGRT Agreement
and other RGRT Allowed Claims) . . . . . .158
(e) Class 11 Claims (Allowed Claims arising
from or relating to the Farmington PCB
LC). . . . . . . . . . . . . . . . . . . .162
(f) Classes 12(a) and 12(b) Claims (Allowed
Claims Arising from or Related to the
Palo Verde Leases, the Lease Obligation
Bonds and the Secured Lease Obligation
Bonds) . . . . . . . . . . . . . . . . . .167
(g) Class 13 Claims (Allowed Claims Not
Classified Elsewhere). . . . . . . . . . .174
(h) Class 15 (Allowed EPE Preferred Stock
Interests) . . . . . . . . . . . . . . . .178
(i) Class 16 (Allowed EPE Common Stock
Interests) . . . . . . . . . . . . . . . .181
(j) Restrictions on Transfers of CSW Common
Stock. . . . . . . . . . . . . . . . . . .186
(k) Cash Payment in Lieu of CSW Common
Stock. . . . . . . . . . . . . . . . . . .188
VI. CONDITIONS TO CONFIRMATION UNDER THE PLAN . . . . . . . .188
VII. CONDITIONS TO EFFECTIVENESS OF THE PLAN. . . . . . . . . 189
VIII.MEANS FOR EXECUTION OF PLAN. . . . . . . . . . . . . . . 190
A. Merger. . . . . . . . . . . . . . . . . . . . . . . 190
B. Regulatory Approval. .. . . . . . . . . . . . . . . 191
C. The Agreements Between the Debtor and Various
Third Parties . . . . . . . . . . . . . . . . . . . 191
1. Amendments to Articles of Incorporation. . . . 191
2. Cancellation and Distribution of Securities. . 191
3. Management Employment Agreements, Collective
Bargaining Agreements, Employment Agreements
and Retiree Benefits Agreements. . . . . . . . 194
D. Effect of Plan Confirmation . . . . . . . . . . . . 197
1. Discharge. . . . . . . . . . . . . . . . . . . 197
2. Revesting. . . . . . . . . . . . . . . . . . . 197
3. Retention and Enforcement of Causes of
Action . . . . . . . . . . . . . . . . . . . . 197
4. Post-Consummation Effect of Evidences of
Claims or Interests. . . . . . . . . . . . . . 198
5. Term of Injunctions or Stays . . . . . . . . . 198
6. Executory Contracts and Unexpired Leases . . . 198
(a) Palo Verde Leases . . . . . . . . . . . . 198
(b) Executory Contracts . . . . . . . . . . . 199
(c) Other Agreements. . . . . . . . . . . . . 199
iv
<PAGE> 7
Page
7. Distributions. . . . . . . . . . . . . . . . . 201
8. Unclaimed Distributions. . . . . . . . . . . . 201
9. Modification of Plan . . . . . . . . . . . . . 201
10. Revocation of Plan . . . . . . . . . . . . . . 203
11. Purchase Of Financial Derivatives As Hedge . . 203
12. Payment Dates. . . . . . . . . . . . . . . . . 204
13. Successors and Assigns . . . . . . . . . . . . 204
14. Interim Distributions. . . . . . . . . . . . . 204
15. Continuation of Committees . . . . . . . . . . 208
16. Notice to Creditors and Committees . . . . . . 208
17. Post Confirmation Oversight. . . . . . . . . . 209
18. Approvals. . . . . . . . . . . . . . . . . . . 210
19. Limitation of Liability. . . . . . . . . . . . 210
E. Ownership and Resale of Plan Securities . . . . . . 211
F. Certain Terms of Reorganization Securities. . . . . 212
1. General First Mortgage Bond Provisions . . . . 213
2. General Second Mortgage Bond Provisions. . . . 219
3. General Preferred Stock Provisions . . . . . . 225
4. Series A Senior Note and Class 13 Senior
Fixed Rate Note Provisions . . . . . . . . . . 226
G. Claims Reconciliation and Objection Process . . . . 228
H. Retention of Jurisdiction . . . . . . . . . . . . . 229
1. Continued Jurisdiction of the Bankruptcy
Court. . . . . . . . . . . . . . . . . . . . . 229
2. Failure of Court to Exercise Jurisdiction. . . 231
IX. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. . . . . . . . . 231
A. General Tax Considerations. . . . . . . . . . . . . 231
B. Tax Consequences to Debtor. . . . . . . . . . . . . 232
1. Net Operating Losses and Other Tax
Attributes . . . . . . . . . . . . . . . . . . 232
2. Discharge of Indebtedness. . . . . . . . . . . 232
3. Deductions . . . . . . . . . . . . . . . . . . 235
4. Alternative Minimum Tax. . . . . . . . . . . . 235
5. IRC Section 382 Limitation . . . . . . . . . . 235
6. Debtor Gain on Distributions of Assets . . . . 236
C. The Liquidation Trust . . . . . . . . . . . . . . . 236
1. Characterization of the Liquidation Trust. . . 236
2. Taxation of the Liquidation Trust and its
Beneficiaries. . . . . . . . . . . . . . . . . 237
D. Federal Income Tax Consequences to Holders of
Claims and Interests. . . . . . . . . . . . . . . . 239
1. Administrative Claims and Claim Holders Being
Paid in Full in Cash . . . . . . . . . . . . . 239
2. Claim Holders Not Being Paid in Full in Cash . 239
3. Original Issue Discount and Market Discount. . 244
4. Character of Gain or Loss. . . . . . . . . . . 245
5. Treatment of Preferred Stock Interests . . . . 246
6. Common Stock Interests . . . . . . . . . . . . 248
X. FEASIBILITY OF THE PLAN. . . . . . . . . . . . . . . . . 249
v
<PAGE> 8
Page
XI. FINANCIAL INFORMATION, DATA, VALUATIONS AND
PROJECTIONS RELEVANT TO THE DEBTOR'S CURRENT
AND FUTURE OPERATIONS. . . . . . . . . . . . . . . . . . 253
XII. ALTERNATIVES TO THE PLAN. . . . . . . . . . . . . . . . .258
XIII.FUTURE MANAGEMENT OF THE DEBTOR. . . . . . . . . . . . . 258
A. Interim Management. . . . . . . . . . . . . . . . . 258
B. Directors and Executive Officers of the Debtor. . . 259
C. Executive Compensation. . . . . . . . . . . . . . . 264
D. Compensation and Benefits Plans . . . . . . . . . . 264
E. Post-Effective Date Management. . . . . . . . . . . 265
XIV. CONDITIONS PRECEDENT TO CONFIRMATION OF THE PLAN
UNDER THE CODE . . . . . . . . . . . . . . . . . . . . . 265
A. The Confirmation Hearing and Objections . . . . . . 265
B. Confirmation Requirements . . . . . . . . . . . . . 266
C. Satisfaction of Conditions Precedent to
Confirmation Under the Plan and the Code. . . . . . 269
1. Satisfaction of Conditions to Confirmation
Pursuant to the Plan . . . . . . . . . . . . . 269
2. Satisfaction of Conditions Precedent to
Confirmation Under the Code. . . . . . . . . . 270
(a) Best Interests Test . . . . . . . . . . . 270
(b) Acceptance by Impaired Classes. . . . . . 274
(c) Confirmation Without Acceptance by All
Impaired Classes. . . . . . . . . . . . . 275
(d) Voting Instructions . . . . . . . . . . . 276
XV.OTHER MATTERS. . . . . . . . . . . . . . . . . . . . . . . 277
A. Collectibility of Accounts Receivable . . . . . . . 277
B Voidable Transfer Analysis. . . . . . . . . . . . . . .279
C Asset Valuation . . . . . . . . . . . . . . . . . . . .281
D Tax Attributes of the Debtor. . . . . . . . . . . . . .282
XVI. RECOMMENDATION . . . . . . . . . . . . . . . . . . . . . 282
XVII.CONCLUSION. . . . . . . . . . . . . . . . . . . . . . . .282
vi
<PAGE> 9
Exhibits
A. Modified Third Amended Plan of Reorganization of El Paso
Electric Company dated August 27, 1993
B. Agreement and Plan of Merger Agreement between El Paso
Electric Company, Central and South West Corporation and CSW
Sub, Inc., as amended
C. [Intentionally Deleted]
D. Order of Bankruptcy Court Approving Disclosure Statement
E. Reorganized EPE Rate Path
F. El Paso Electric Company Annual Report on Form 10-K for the
Year Ended December 31, 1992, El Paso Electric Company
Current Reports on Form 8-K dated April 14, 1993, May 5,
1993, May 26, 1993 and June 4, 1993, El Paso Electric
Company Quarterly Report on Form 10-Q for the Quarter Ended
March 31, 1993, and El Paso Electric Company Report on Form
10-Q for the Quarter Ended June 30, 1993
G. Central and South West Corporation Annual Report on Form
10-K for the year Ended December 31, 1992, Central and South
West Corporation Current Report on Form 8-K dated August 16,
1993, Central and South West Corporation Quarterly Report on
Form 10-Q for the Quarter Ended March 31, 1993, and Central
and South West Corporation Quarterly Report on Form 10-Q for
the Quarter Ended June 30, 1993
H. Central and South West Corporation Proxy Statements, dated
March 13, 1993; Description of Benefits Program
I. Report of Paul Gioia, dated August 12, 1993
vii
<PAGE> 10
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 11
INTRODUCTORY STATEMENT
THIS DISCLOSURE STATEMENT CONTAINS A SUMMARY OF CERTAIN
PROVISIONS OF THE MODIFIED THIRD AMENDED PLAN OF REORGANIZATION
DATED AUGUST 25, 1993 (THE "PLAN"), PROPOSED BY EL PASO ELECTRIC
COMPANY, AS DEBTOR AND DEBTOR IN POSSESSION (THE "DEBTOR"),
PURSUANT TO THE AGREEMENT AND PLAN OF MERGER BY AND BETWEEN THE
DEBTOR, CENTRAL AND SOUTH WEST CORPORATION ("CSW") AND CSW SUB,
INC. (THE "MERGER AGREEMENT") AND SUMMARIES OF CERTAIN OTHER
DOCUMENTS RELATING TO THE CONSUMMATION OF THE PLAN OR THE TREAT-
MENT OF CERTAIN PARTIES-IN-INTEREST, AND CERTAIN FINANCIAL INFOR-
MATION RELATING THERETO. WHILE THE DEBTOR BELIEVES THAT THESE
SUMMARIES ARE FAIR AND ACCURATE AND PROVIDE ADEQUATE INFORMATION
WITH RESPECT TO THE DOCUMENTS SUMMARIZED, SUCH SUMMARIES ARE
QUALIFIED TO THE EXTENT THAT THEY DO NOT SET FORTH THE ENTIRE
TEXT OF SUCH DOCUMENTS. EACH HOLDER OF AN IMPAIRED CLAIM OR AN
IMPAIRED INTEREST SHOULD REVIEW THE ENTIRE PLAN BEFORE CASTING A
BALLOT.
NO PARTY IS AUTHORIZED BY THE DEBTOR TO GIVE ANY
INFORMATION WITH RESPECT TO THE PLAN OTHER THAN THAT CONTAINED IN
THIS DISCLOSURE STATEMENT. THE DEBTOR HAS NOT AUTHORIZED ANY
REPRESENTATIONS CONCERNING THE DEBTOR, ITS ANTICIPATED CONFIGU-
RATION OR OPERATIONS AFTER CONFIRMATION OF THE PLAN, OR THE VALUE
OF ITS BUSINESS AND PROPERTY OTHER THAN AS SET FORTH IN THIS
DISCLOSURE STATEMENT.
TO THE EXTENT INFORMATION IN THIS DISCLOSURE STATEMENT
RELATES TO THE DEBTOR, THE DEBTOR HAS PROVIDED THE INFORMATION IN
THIS DISCLOSURE STATEMENT. TO THE EXTENT INFORMATION IN THIS
DISCLOSURE STATEMENT RELATES TO CSW AND ITS SUBSIDIARIES, CSW HAS
PROVIDED SUCH INFORMATION TO THE DEBTOR. EXCEPT TO THE EXTENT
THAT INFORMATION RELATES TO CSW, CSW HAS NOT MADE AN INDEPENDENT
INVESTIGATION OF THE INFORMATION SET FORTH HEREIN NOR MADE ANY
REPRESENTATION OR WARRANTY AS TO THE ACCURACY OR COMPLETENESS OF
THE INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT.
NOTHING CONTAINED IN THIS DISCLOSURE STATEMENT, EXPRESS
OR IMPLIED, IS INTENDED TO GIVE RISE TO ANY COMMITMENT OR
OBLIGATION OF THE DEBTOR, THE REORGANIZED DEBTOR OR CSW WITH
RESPECT TO ANY OTHER PERSON OR ENTITY OR SHALL CONFER UPON ANY
PERSON ANY RIGHTS, BENEFITS OR REMEDIES OF ANY NATURE WHATSOEVER.
EXCEPT AS HEREAFTER NOTED, THE INFORMATION CONTAINED
HEREIN IS GENERALLY INTENDED TO DESCRIBE FACTS AND CIRCUMSTANCES
ONLY AS OF AUGUST 25, 1993, AND NEITHER THE DELIVERY OF THE DIS-
CLOSURE STATEMENT NOR THE CONFIRMATION OF THE PLAN WILL CREATE
ANY IMPLICATION, UNDER ANY CIRCUMSTANCES, THAT THE INFORMATION
CONTAINED HEREIN OR THEREIN IS CORRECT AT ANY TIME AFTER THE DATE
HEREOF OR THEREOF THAT THE DEBTOR, OR, TO THE EXTENT SUCH
INFORMATION RELATES TO CSW, CSW WILL BE UNDER ANY OBLIGATION TO
UPDATE SUCH INFORMATION IN THE FUTURE.
<PAGE> 12
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 13
I. INTRODUCTION
El Paso Electric Company, as debtor and debtor in
possession (the "Debtor" and, for purposes of that period of time
after the Effective Date of the Plan, "Reorganized EPE"), trans-
mits this Disclosure Statement (the "Disclosure Statement")
pursuant to Section 1125(b) of Title 11, United States Code, 11
U.S.C. Subsection 101 et seq. (the "Code"), to all known impaired
creditors and all impaired equity security holders of the Debtor,
in connection with the solicitation of their acceptance of the
Debtor's Modified Third Amended Plan of Reorganization, dated
July 30, 1993 (the "Plan"). A copy of the Plan, which has
heretofore been filed with the Clerk of the Bankruptcy Court, is
annexed hereto and made a part hereof as Exhibit A. (Capitalized
terms not defined herein have the meanings ascribed to them in
the Plan unless otherwise noted.)
The Plan proposes a reorganization of the Debtor pur-
suant to which the Debtor will become a wholly-owned subsidiary
of Central and South West Corporation, a Delaware corporation
("CSW"). Under the Plan, existing creditors and existing equity
security holders of the Debtor will receive for their claims cash
and/or securities of Reorganized EPE and/or CSW, or will have
their claims cured and reinstated pursuant to Code Section 1124.
Pursuant to an Agreement and Plan of Merger, as amended (the
"Merger Agreement"), which is incorporated by reference and
attached hereto as Exhibit B, among the Debtor, CSW and CSW Sub,
Inc., a wholly-owned special purpose subsidiary of CSW ("CSW
Sub"), and effective simultaneously with the effectiveness of the
Plan, CSW Sub will merge (the "Merger") with and into the Debtor,
and CSW will become the owner of all of the issued and
outstanding shares of common stock of Reorganized EPE.
The Debtor's reorganization case under Chapter 11 of
the Code is currently pending before the Honorable Frank R.
Monroe, United States Bankruptcy Judge for the Western District
of Texas, Austin Division (the "Bankruptcy Court").
Chapter 11 is the principal business reorganization
chapter of the Code. Under Chapter 11 of the Code, a debtor is
authorized to reorganize its business for the benefit of its
creditors and stockholders. In addition to permitting
rehabilitation of the debtor, another goal of Chapter 11 is to
promote equality of treatment of creditors and equity security
holders of equal rank with respect to the restructuring of debt.
In furtherance of these two goals, upon the filing of a petition
for reorganization under Chapter 11, Section 362(a) of the Code
generally provides for an automatic stay of substantially all
acts and proceedings against the debtor and its property,
including all attempts to collect claims or enforce liens that
arose prior to the commencement of the debtor's case under
Chapter 11. Recognizing that negotiation plays a central role in
the reorganization process, Code Section 1102 provides for the
establishment of creditor and interest holder committees to aid
<PAGE> 14
in the negotiation process. Both an Official Unsecured Creditors
Committee and an Official Equity Holders Committee, as defined
herein, have been appointed in this case. After careful
consideration, both committees support acceptance of the Plan.
Confirmation and consummation of a plan of
reorganization are the principal objectives of a Chapter 11
reorganization case. A plan of reorganization sets forth the
means for satisfying claims against, and interests in, a debtor.
Confirmation of a plan of reorganization by the Bankruptcy Court
makes the plan binding upon the debtor, any issuer of securities
under the plan, any person acquiring property under the plan and
any creditor, or equity security holder, of the debtor. Subject
to certain limited exceptions, the confirmation order discharges
a debtor from any debt that arose prior to the date of
confirmation of the plan and substitutes therefor the obligations
specified under the confirmed plan.
A. The Debtor and the Bankruptcy Case
The Debtor's business consists principally of the
generation and distribution of electricity through an
interconnected system to approximately 255,000 customers in El
Paso, Texas, and an area of the Rio Grande Valley in western
Texas and southern New Mexico. The Debtor also sells electricity
under contracts with wholesale customers located in southern
California and Mexico in addition to selling power on a wholesale
basis to Texas-New Mexico Power Company. A more detailed
description of the Debtor's business and operations is set forth
in "Description of the Debtor" herein and also in Part I, Item 1,
in the Debtor's Annual Report on Form 10-K for the year ended
December 31, 1992 (the "1992 Annual Report") attached hereto as
Exhibit F.
The Debtor's prepetition financial difficulties were
directly related to (i) the magnitude of its investment in Palo
Verde; (ii) its inability over a period of several years to
obtain rates which would recover fully its cost of service,
including recovery of, and a return on, its investment in the
nuclear generating facilities at the Palo Verde Nuclear
Generating Station near Phoenix, Arizona (the "Palo Verde
Station" or "Palo Verde"); and (iii) substantial regulatory
disallowances. For a detailed description of rate cases, the
regulatory disallowances and other regulatory matters, see
Part I, Item 1, "Business -- Regulation" of the 1992 Annual
Report. The Texas Public Utility Commission ("PUCT") Staff
believes it important to note that the Debtor agreed to the rates
and regulatory disallowances in Docket No. 7460, which is the
basis for much of the Debtor's current rate structure. The PUCT
Staff asserts that the rates in every order since Docket No. 7460
have been in excess of what the Debtor estimated in Docket No.
<PAGE> 15
7460 it would need. Although the Debtor did execute and enter
into a stipulated agreement in Docket No. 7460 which became the
basis of the Palo Verde Units 1 and 2 rate moderation plan, the
Debtor asserts that it has not received full recognition of all
additional costs which have occurred since that time.
Some of the persons who intervened in the Debtor's
regulatory proceedings have asserted that the Debtor's diversi-
fication into non-utility businesses also contributed to the
Debtor's prepetition financial difficulties. The Debtor's
diversification program into real estate and non-utility
operating companies through two subsidiaries began in 1977 and
was terminated in 1989. All diversified holdings, including the
subsidiaries, were sold by January 1990. These diversification
efforts resulted in an after-tax loss of approximately $112
million.
Prior to filing its petition for reorganization with
the Bankruptcy Court, the Debtor attempted to negotiate a
financial restructuring with its primary lenders which was
initially to be completed by the end of November, 1991. That
financial restructuring contemplated (i) the extension of
maturities of certain existing obligations through 1993, (ii)
approximately $83 million of additional secured financing and
(iii) renewals or replacements of existing letters of credit
issued to certain companies that own, through trusts, interests
in Palo Verde Station (the "Owner Participants"). Both the
Federal Energy Regulatory Commission ("FERC") and the New Mexico
Public Utility Commission (the "NMPUC"), which regulate aspects
of the Debtor's business as described herein, had approved this
restructuring. The PUCT, which also regulates aspects of the
Debtor's business, was not required to approve the restructuring
under applicable statutes.
The Debtor's 1991 financial restructuring was, in part,
dependant on the results of a rate case which the Debtor filed
with the PUCT (Docket No. 9945) in December 1990 requesting a
rate increase of approximately $131.3 million and the inclusion
in rate base of the Texas jurisdictional portion of Unit 3 of
Palo Verde Station ("Palo Verde Unit 3"). During 1991, while the
Texas rate case was in progress, several extensions and waivers
were granted to the Debtor by its lenders in an attempt to
complete the financial restructuring. On November 12, 1991, the
PUCT issued its final order in Docket No. 9945 which authorized a
$47 million rate increase and excluded certain of the Debtor's
costs in Palo Verde Unit 3 from current rates, but provided for
their inclusion in rates on a phased-in basis over five years.
For a description of such final order, see Part I, Item 1,
"Business -- Regulation -- Texas Rate Matters" in the 1992 Annual
Report. The delayed timing and unexpected adverse nature of the
order made the Debtor's attempts to negotiate the restructuring
<PAGE> 16
more difficult. The PUCT Staff also contends that the Debtor has
asserted that creditor procrastination in the fall and winter of
1991 also precipitated the Debtor's bankruptcy.
Negotiations between the Debtor and its primary lenders
continued through late December 1991 when, on December 26 and 27,
the Owner Participants in the Unit 2 Palo Verde Station ("Palo
Verde Unit 2") sale and leaseback transactions drew on the
letters of credit posted by the Debtor. As a consequence, the
letter of credit banks asserted reimbursement claims against the
Debtor totalling approximately $208 million which had not been
contemplated in the restructuring. Accordingly, the financial
restructuring was no longer possible, including the additional
financing contemplated in the restructuring. The Debtor ceased
paying principal, interest and fees on portions of its secured
and unsecured debt and failed to make lease payments of approx-
imately $19.3 million due on January 2, 1992 in respect of Palo
Verde Unit 2 and Palo Verde Unit 3.
As a result of the Debtor's inability to restructure
its financial arrangements, including the substantial amount of
additional debt resulting from the letter of credit draws, the
Debtor concluded that it could not meet its obligations as they
became due. The Debtor decided it had no practical alternative
other than to seek protection under Chapter 11 of the Code to
deal with its obligations in an orderly manner and to preserve
its options regarding operating assets, including the portions of
the Palo Verde Station that it leased. On January 8, 1992 (the
"Petition Date"), the Debtor filed a voluntary petition for
reorganization under Chapter 11 of the Code with the Bankruptcy
Court (the "Case"). On January 9, 1992, the Owner Participants
in the Debtor's sale and leaseback transactions on Palo Verde
Unit 3 drew amounts aggregating approximately $80.4 million on
their letters of credit resulting in an additional claim against
the Debtor in that amount.
During the course of the Case, the Debtor's management
has continued to manage the operations and affairs of the Debtor,
subject to the authority of its Board of Directors, as debtor in
possession under the jurisdiction of the Bankruptcy Court, while
the Debtor attempted to formulate and to obtain approval of a
plan of reorganization which will allow the Debtor to emerge from
bankruptcy as a financially viable entity with restructured
Claims and Interests and a continued ability to provide reliable
electric service to its customers. The Bankruptcy Court's orders
dated April 29, 1992, and August 25, 1992 granted the Debtor the
exclusive right to propose a plan of reorganization in the Case
until September 8, 1992 and the exclusive right to solicit
acceptances thereof until December 23, 1992. On September 8,
1992 the Debtor filed a proposed Plan of Reorganization and
proposed disclosure statement with the Bankruptcy Court.
<PAGE> 17
On November 12, 1992, the Debtor filed its Second
Amended Plan of Reorganization and Second Amended Disclosure
Statement with the Bankruptcy Court, which Second Amended
Disclosure Statement was approved by the Bankruptcy Court on
November 19, 1992. On December 8, 1992, the Debtor began
solicitation of ballots on the Second Amended Plan by mailing a
notice of the confirmation hearing, which had been set for
February 3, 1993, together with a copy of the Second Amended
Disclosure Statement and Plan of Reorganization and a ballot to
holders of claims against or interests in the Debtor, as well as
to holders of the Debtor's common stock. Following a ruling by
the Bankruptcy Court on December 15, 1992 dismissing certain
claims of the Debtor related to the application of $288.4 million
of proceeds on letters of credit that were drawn in December 1991
and January 1992, the Debtor suspended solicitation of votes by
creditors and stockholders on the Second Amended Plan on December
23, 1992. The ruling, which later was vacated on May 26, 1993,
was made in a pending adversary proceeding brought by the Debtor
relating to the rejection of leases of interests in Palo Verde
Units 2 and 3. On December 23, 1992, the Bankruptcy Court ruled
that the Debtor's exclusive period to file a plan of
reorganization continued pursuant to Bankruptcy Rule 3016 until
such time as confirmation of the Debtor's Second Amended Plan, as
it may be amended, is denied or the Bankruptcy Court authorizes
another party to file a competing plan of reorganization.
On January 15, 1993, the Bankruptcy Court appointed
Michael P. Kirschner, an attorney with the law firm of Hastie &
Kirschner with extensive experience in bankruptcy law, as an
independent mediator (the "Mediator") to assist and facilitate
the resolution of certain issues in the Case and the development
of a consensual plan of reorganization. Mr. Kirschner has been
authorized to meet with all parties to the Case; to monitor the
negotiations between the parties; to meet with parties that
indicate interest in acquiring the Debtor to determine whether
the party has the desire and ability to do so and to recommend a
procedure by which such third parties can file respective plans
for acquiring the Debtor; and to attend meetings between regula-
tory authorities and the Debtor and/or third parties who are
interested in acquiring the Debtor. On March 17, 1993, upon a
motion filed by the Mediator, the Bankruptcy Court authorized the
retention of Paul Gioia as a regulatory expert. Mr. Gioia,
former chairman of the New York Public Service Commission, will
assist the Mediator in the area of utility rates and regulation.
On May 3, 1993, the Debtor entered into the Merger
Agreement with CSW. The Merger Agreement is subject to, among
other things, confirmation of a Plan consistent with its terms.
On May 5, 1993, the Debtor filed its Third Amended Plan
of Reorganization pursuant to and in connection with the Merger
<PAGE> 18
Agreement. A Modified Third Amended Plan was filed on July 30,
1993, and subsequently amended by a plan dated August 27, 1993 as
corrected on September 15, 1993. As more fully described below
and in the Plan, the Plan contemplates a merger between the
Debtor and a subsidiary of CSW whereby, on the Effective Date of
the Plan, the reorganized Debtor would become a wholly owned
subsidiary of CSW.
On August 12, 1993, Mr. Gioia filed his report with the
Bankruptcy Court setting forth his expert opinion as to a
realistic viable rate path applicable to a stand-alone
reorganization plan for the Debtor that could realistically be
expected to be approved by the PUCT. The text of Mr. Gioia's
report and Schedule 1-A thereto are attached hereto as Exhibit I.
The PUCT Staff, the City of El Paso and the Texas Office of
Public Utility Counsel ("OPC") disagree with many of the
statements, methodologies and conclusions of Mr. Gioia's report
and do not agree that it accurately reflects Texas law or any
probable outcome before the applicable regulatory authorities.
B. The Disclosure Statement
This Disclosure Statement has been approved by the
Bankruptcy Court, pursuant to an order dated August 27, 1993, a
copy of which is attached hereto as Exhibit D (the "Disclosure
Statement Approval Order"), as containing information of a kind
and in sufficient detail to enable hypothetical, reasonable
investors, typical of the holders of impaired Claims or
Interests, to make an informed judgment with respect to voting to
accept or reject the Plan and is being transmitted in connection
with the Plan to provide adequate information to enable holders
of Claims or Interests entitled to vote on the Plan ("Voting
Claims or Interests") to make an informed judgment with respect
to such vote.
APPROVAL BY THE BANKRUPTCY COURT OF THIS DISCLOSURE
STATEMENT DOES NOT CONSTITUTE AN ENDORSEMENT OF ANY OF THE REPRE-
SENTATIONS CONTAINED IN THIS DISCLOSURE STATEMENT OR IN THE PLAN,
NOR DOES IT CONSTITUTE AN ENDORSEMENT OF THE PLAN ITSELF.
EACH HOLDER OF A VOTING CLAIM OR INTEREST SHOULD
CAREFULLY REVIEW THE MATERIAL SET FORTH IN THIS DISCLOSURE
STATEMENT AND THE EXHIBITS HERETO IN ORDER TO MAKE AN INDEPENDENT
DETERMINATION AS TO WHETHER TO VOTE FOR ACCEPTANCE OR REJECTION
OF THE PLAN. IN ADDITION, ALTHOUGH THE DEBTOR HAS MADE EVERY
____________________
[1] The only Classes of Claims or Interests that will
receive ballots to accept or reject the Plan are (i) those that
are deemed impaired under the Plan and (ii) holders of common
stock and preferred stock issued by the Debtor.
<PAGE> 19
EFFORT TO BE ACCURATE HEREIN, EACH HOLDER OF A VOTING CLAIM OR
INTEREST SHOULD APPROPRIATELY REVIEW THE ENTIRE PLAN AND THE
EXHIBITS THERETO BEFORE CASTING A BALLOT.
Accompanying this Disclosure Statement are:
1. A copy of the Disclosure Statement Approval Order,
together with the notice approved by the Bankruptcy Court, which,
among other things, fixes the time for:
(a) filing acceptances and rejections of the
Plan;
(b) the hearing on confirmation of the Plan (the
"Confirmation Hearing"); and
(c) filing objections to confirmation of the
Plan; and
2. A ballot for accepting or rejecting the Plan for
the holders of Voting Claims or Interests (the "Ballot").
C. Sources of Information
The information contained in this Disclosure Statement
was derived from the Debtor's books and records (such as its
general purpose financial statements, regulatory books of
account, and corporate records); Securities and Exchange Commis-
sion ("SEC"), PUCT and other public filings; and consultations
with the Debtor's officers, senior management, key personnel and
various of its outside professionals, including accounting and
financial advisors. To the extent information in this Disclosure
Statement relates to CSW and its subsidiaries, CSW has provided
such information to the Debtor.
D. Summary of the Plan
The following Plan summary is qualified in its entirety
by reference to the Plan, which is attached hereto as Exhibit A,
and to the more detailed description of provisions for the
Classes under the Plan set forth under "Summary of Plan of
Reorganization" herein.
1. Business Combination between the Debtor and
CSW
The Plan of Reorganization proposes a reorganization of
the Debtor pursuant to which the Debtor will become a wholly-
owned subsidiary of CSW. Under the Plan, existing creditors and
existing equity security holders of the Debtor will receive for
their claims cash and/or securities of Reorganized EPE and/or CSW
<PAGE> 20
or will have their claims cured and reinstated pursuant to Code
Section 1124. Pursuant to the Merger Agreement, a copy of which
is incorporated herein by reference and attached hereto as
Exhibit B, and effective simultaneously with the effectiveness of
the Plan, CSW Sub will merge with and into the Debtor, and CSW
will become the owner of all of the issued and outstanding shares
of common stock of Reorganized EPE. Reorganized EPE will
continue to operate as a public utility company and as a direct,
wholly-owned, operating subsidiary of CSW.
CSW, a Delaware corporation, is a registered holding
company under the Public Utility Holding Company Act of 1935, as
amended (the "PUHCA"). CSW owns all of the outstanding shares of
common stock of Central Power and Light Company ("CPL"), Public
Service Company of Oklahoma ("PSO"), Southwestern Electric Power
Company ("SWEPCO") and West Texas Utilities Company ("WTU")
(collectively, the "Electric Operating Companies"), Transok, Inc.
("Transok"), CSW Credit, Inc., and CSW Energy, Inc. In November
1991, CSW Financial, Inc. was merged into CSW, which previously
owned all of the outstanding shares of common stock of CSW
Financial, Inc. In addition, CSW owns 80% of the outstanding
shares of common stock of CSW Leasing, Inc. The Electric
Operating Companies are public utility companies engaged in
generating, purchasing, transmitting, distributing and selling
electricity. For further information regarding the business,
operations and financial performance of CSW, reference is made to
the Central and South West Corporation Annual Report on Form 10-K
for the year ended December 31, 1992, a copy of which is attached
hereto as Exhibit G.
Certain conditions specified in the Plan and the Merger
Agreement must be satisfied or waived prior to the Effective Date
of the Plan in order for the Merger to be consummated and the
Plan to become effective. A summary of such conditions is set
forth in Section VII herein, "Conditions to Occurrence of Effec-
tive Date of the Plan" and Section III.B herein, "Summary of
Terms of the Merger Agreement" and reference is made to the terms
of the Plan and the Merger Agreement, which are attached hereto
as Exhibits A and B, respectively.
On or after the Confirmation Date, but prior to the
Effective Date, the business, operations, activities and affairs
of the Debtor will be subject to restrictions on interim opera-
tions contained in the Merger Agreement. After the Effective
Date, Reorganized EPE will be managed by a modified board of
directors and executive officers, as discussed more fully in
Section XIII herein under "Future Management of the Debtor," and
shall be governed by the Reorganized EPE Amended and Restated
Articles of Incorporation.
<PAGE> 21
2. Classification and Treatment of Claims and
Interests
The Plan provides for separate classes of Claims or
Interests (individually, a "Class," and collectively, the
"Classes"). The following chart describing the classification
and treatment of the Classes is a brief summary of the terms of
the Plan. Certain holders of Claims will be impaired to varying
degrees under the Plan, while other holders of Claims and/or
Interests will be unimpaired. As discussed below, "impairment"
is a technical concept under the Code which refers to any change
in the contractual or other rights of a creditor or interest
holder. The description of distribution percentages refers to
the treatment to be received if the class accepts the Plan
pursuant to Section 1126 of the Code.
<PAGE> 22
Summary Chart of Claims and Interests
and the Treatment thereof
CLASS 1
DESCRIPTION: First Mortgage Bonds and related agreements
including purchase agreements, excluding bonds held as
collateral.
ESTIMATE OF ALLOWED[2] CLAIM OR INTEREST AMOUNT (AS OF PETITION
DATE): Claims in principal amount of $300 million, together with
interest in the amount of $3.8 million.
TREATMENT:
Impaired--Claims discharged through issuance of Reorganized EPE
First Mortgage Bonds in the principal amount of the Allowed
Claims of the holders of Class 1 Claims (except for Allowed
Claims for interest on the unpaid interest on the EPE First
Mortgage Bonds accrued and unpaid prior to, and from and after,
the Petition Date, which will be paid in cash on the Effective
Date, and for certain reasonable fees, costs and charges of the
trustee, and the reasonable fees and expenses incurred by
Rothschild Inc., and Weil, Gotshal & Manges in connection with
representation of certain Class 1 claim holders, which will be
paid as soon as practicable after the Confirmation Date). $100
million of Reorganized EPE Series A First Mortgage Bonds will be
issued and shall mature in five years or at such other maturity
as CSW may elect at least 30 days prior to the Effective Date.
The remainder of the principal amount of the Allowed Class 1
Claims will be satisfied by the issuance of Reorganized EPE
Series B First Mortgage Bonds that will mature in fifteen years
or at such other maturity as CSW may elect at least 30 days prior
to the Effective Date. If maturities are elected for either the
Reorganized EPE Series A First Mortgage Bonds or the Reorganized
EPE Series B First Mortgage Bonds, other than the fifth or the
fifteenth anniversary of the Effective Date, respectively, they
must be a maturity of not less than five nor more than thirty
years, and if longer than fifteen years, must be in increments of
five years (i.e. twenty, twenty-five or thirty years). On and
after the fifth anniversary of the Effective Date, such
Reorganized EPE First Mortgage Bonds will be redeemable, in whole
or in part, at premium redemption prices described in the Plan.
In the event the maturity of such Reorganized EPE First Mortgage
Bonds is adjusted, then the premium redemption prices will be
adjusted. All such Reorganized EPE First Mortgage Bonds shall
provide for the accrual of interest commencing on the Effective
Date at a rate per annum equal to a Market Basket Rate to be
determined based on the actual maturity and rating of each series
____________________
[2] These estimates are for descriptive purposes only,
and shall not constitute an admission as to the Debtor's
obligations on any such claims.
<PAGE> 23
of such bonds. The Reorganized EPE Series A and Series B First
Mortgage Bonds will be publicly tradeable under Section 1145 of
the Code and upon issuance will have an Investment Grade Rating.
See Section V of this Disclosure Statement.
Any holder of Class 1 Allowed Claims may elect, not later than 5
days prior to the Effective Date, to have Reorganized EPE cause
there to be underwritten and sold any or all of such Reorganized
EPE First Mortgage Bonds; provided, however, in no event shall
Reorganized EPE be required to underwrite a sale of more than
fifty percent (50%) of the aggregate principal amount of all such
bonds issued on account of Class 1 Allowed Claims. To the extent
that holders of more than 50% in the aggregate principal amount
of Class 1 Allowed Claims elect to require Reorganized EPE to
underwrite a sale of such holders' Reorganized EPE First Mortgage
Bonds issued on account of such claims, the amount of such bonds
to be underwritten shall be reduced on a Pro rata basis. To the
extent that the sale does not provide the holder with net
proceeds equal to the outstanding principal amount plus accrued
interest of the Reorganized EPE First Mortgage Bonds to be sold,
Reorganized EPE shall promptly pay to such holder cash equal to
the deficiency, if any. Notwithstanding the foregoing,
Reorganized EPE may, at the election of CSW, satisfy all or any
portion of Class 1 Allowed Claims by remitting to the holders of
such Claims Pro rata, cash in lieu of an equal principal amount
of Reorganized EPE First Mortgage Bonds, to be applied first Pro
rata to those holders of such Allowed Claims that have elected to
have their bonds underwritten, and then Pro rata in respect of
all other Class 1 Allowed Claims.
PERCENT DISTRIBUTION ON ACCOUNT OF PREPETITION CLAIMS OR
INTERESTS (Consensual Treatment): 100% of Allowed Claim
CLASS 2
DESCRIPTION: Second Mortgage Bonds and related agreements
including purchase agreements, excluding bonds held as
collateral.
ESTIMATE OF ALLOWED CLAIM OR INTEREST AMOUNT (as of Petition
Date): Claims in principal amount of $165 million together with
interest in the amount of $2 million.
TREATMENT:
Impaired--Claims discharged through the issuance of Reorganized
EPE Series A Second Mortgage Bonds in the principal amount of the
Allowed Claims of the holders of Class 2 Claims (except for
Allowed Claims for interest on the unpaid interest on the EPE
Second Mortgage Bonds accrued and unpaid prior to, and from and
after, the Petition Date, which will be paid in cash on the
Effective Date, certain reasonable fees, costs and charges of the
trustee, and the reasonable fees and expenses incurred by certain
<PAGE> 24
professionals in connection with representation of certain Class
2 claim holders, which will be paid as soon as practicable after
the Confirmation Date). Such Reorganized EPE Series A Second
Mortgage Bonds will mature in ten years, or at such other time as
CSW may elect at least 30 days prior to the Effective Date. If a
maturity other than the tenth anniversary of the Effective Date
is elected, it must be a maturity of not less than five nor more
than thirty years, and if longer than fifteen years, it must be
in increments of five years (i.e. twenty, twenty-five or thirty
years). On and after the fifth anniversary of the Effective
Date, such Reorganized EPE Second Mortgage Bonds will be
redeemable, in whole or in part, at premium redemption prices
described in the Plan. In the event the maturity of such
Reorganized EPE Second Mortgage Bonds is adjusted, then the
premium redemption prices will be adjusted. All such Reorganized
EPE Series A Second Mortgage Bonds shall provide for the accrual
of interest commencing on the Effective Date at a rate per annum
equal to a Market Basket Rate to be determined based on the
actual maturity and rating of such bond. The Reorganized EPE
Series A Second Mortgage Bonds will be publicly tradeable under
Section 1145 of the Code and upon issuance will have an
Investment Grade Rating. See Section V of this Disclosure
Statement.
Any holder of Class 2 Allowed Claims may elect, not later than 5
days prior to the Effective Date, to have Reorganized EPE cause
there to be underwritten and sold any or all of such holder's
Reorganized EPE Second Mortgage Bonds; provided, however, in no
event shall Reorganized EPE be required to underwrite a sale of
more than fifty percent (50%) of the aggregate principal amount
of all such bonds issued on account of Class 2 Allowed Claims.
To the extent that holders of more than 50% in the aggregate
principal amount of Class 2 Allowed Claims elect to require
reorganized EPE to underwrite a sale of such holders' Reorganized
EPE Second Mortgage Bonds issued on account of such claims, the
amount of such bonds to be underwritten shall be reduced on a Pro
rata basis. To the extent that the sale does not provide the
holder with net proceeds equal to the outstanding principal
amount plus accrued interest of the Reorganized EPE Second
Mortgage Bonds to be sold, Reorganized EPE shall promptly pay to
such holder cash equal to the deficiency, if any.
Notwithstanding the foregoing, Reorganized EPE may, at the
election of CSW, satisfy all or any portion of Class 2 Allowed
Claims by remitting to the holders of such Claims, Pro rata, cash
in lieu of an equal principal amount of Reorganized EPE Second
Mortgage Bonds, to be applied first Pro rata to those holders of
such Allowed Claims that have elected to have their bonds
underwritten, and then Pro rata in respect of all other Class 2
Allowed Claims.
PERCENT DISTRIBUTION ON ACCOUNT OF PREPETITION CLAIMS OR
INTERESTS (Consensual Treatment): 100% of Allowed Claim
<PAGE> 25
CLASS 3
DESCRIPTION: Revolving Credit Facility and First Mortgage Bonds
and Second Mortgage Bonds held as collateral for such facility.
ESTIMATE OF ALLOWED CLAIM OR INTEREST AMOUNT (as of Petition
Date): Claims in principal amount of $150 million, together with
interest in the amount of $3 million.
TREATMENT:
Impaired--If Class 3 accepts the Plan, holders of Class 3 Claims
will elect to receive one of two treatments. Allowed Claims
receiving Treatment A will be discharged by distribution of
Reorganized EPE Class 3A Secured Notes under a new term loan
agreement in the amount of such Claims (except for Allowed Claims
for certain reasonable fees and expenses and interest amounts,
which pursuant to the Plan will be paid in cash on or prior to
the Effective Date). Such Reorganized EPE Class 3A Secured Notes
will be secured by bonds, one third of which shall be Reorganized
EPE Series X Pledged First Mortgage Bonds and two-thirds of which
shall be Reorganized EPE Series X Pledged Second Mortgage Bonds.
Such Reorganized EPE Class 3A Secured Notes will bear interest at
the rate of 90-day LIBOR plus 150 basis points (or, at the option
of Reorganized EPE, at a "base" or "prime" rate plus 50 basis
points), will mature on the earlier of December 31, 1997 and the
last business day of the month in which the third anniversary of
the Effective Date occurs (or such earlier date as may be
designated by Reorganized EPE) and will be payable in equal
quarterly installments commencing on the earlier of December 31,
1994 (or, if the Effective Date occurs after December 31, 1994,
the last business day of the month in which the Effective Date
occurs) and the last business day of the month in which the first
anniversary of the Effective Date occurs. Such Reorganized EPE
Class 3A Secured Notes will be prepayable at any time without
premium, will not be publicly tradeable and will contain
restrictions on assignability. Holders of Allowed Class 3 Claims
may elect, not later than 90 days prior to the Effective Date, to
have their Allowed Class 3 Claims (or any portion thereof)
receive Treatment B; provided that in no event shall the
aggregate amount of all Allowed Class 3 Claims receiving
Treatment B exceed fifty percent (50%) of the aggregate amount of
all Allowed Class 3 Claims (prior to giving effect to any such
elections). To the extent that holders of Allowed Class 3 Claims
elect Treatment B for Allowed Class 3 Claims constituting more
than fifty percent (50%) in aggregate amount of Allowed Class 3
Claims, the amount of such Claims (for which Treatment B was
elected) of each such holder that shall receive Treatment B shall
be reduced proportionately (and instead shall receive Treatment A
to the extent of such reduction) so that the aggregate amount of
all Allowed Class 3 Claims receiving Treatment B does not exceed
fifty percent (50%) in aggregate amount of all Allowed Class 3
Claims (prior to giving effect to any such elections). Claims
receiving Treatment B will be discharged by distribution of
<PAGE> 26
Reorganized EPE Series C First Mortgage Bonds and Reorganized EPE
Series B Second Mortgage Bonds in an amount equal to one-third
and two-thirds, respectively, of the amount of such Claims
(except for Allowed Claims for certain reasonable fees and
expenses and interest amounts which, pursuant to the Plan, will
be paid in cash on or prior to the Effective Date). Such Bonds
shall mature in eight years or such shorter maturity as CSW may
elect at least 30 days prior to the Effective Date. All such
Reorganized EPE Series C First Mortgage Bonds and Series B Second
Mortgage Bonds shall provide for the accrual of interest
commencing on the Effective Date at a per annum rate equal to a
Market Basket Rate. Such bonds will be publicly tradeable under
Section 1145 of the Code, will be redeemable in whole or in part
at any time at premium redemption prices described in the Plan,
and upon issuance will have an Investment Grade Rating. Class 3
Claim holders will be paid interest monthly at the non-default
rate from August, 1993, to the Confirmation Date (or, if not so
paid currently for any such month, shall accrue at the default
rate for such month and be payable on the Effective Date). If
and only if Class 3 accepts the Plan, then Allowed Class 3 Claim
holders will be paid interest monthly in arrears at the contract
(non-default) rate from the Confirmation Date to the Effective
Date.
If Class 3 does not accept the Plan pursuant to Section 1126(c)
of the Code, then the treatment of Class 3 set forth above shall
not apply. Instead, Class 3 Claims shall be determined in
accordance with the provisions of the Code and the Bankruptcy
Rules. Allowed Class 3 Claims shall be discharged by
distribution of Reorganized EPE Class 3A Secured Notes. Such
Reorganized EPE Class 3A Secured Notes will mature, and be
repayable in a single principal installment, on the fifth
anniversary of the Effective Date. Such Reorganized EPE Class
3A Secured Notes shall be secured by bonds, one-third of which
shall be Reorganized EPE Series X Pledged First Mortgage Bonds
and two-thirds of which shall be Reorganized EPE Series X Pledged
Second Mortgage Bonds. Such Reorganized EPE Class 3A Secured
Notes will bear interest at a rate equal to 90-day LIBOR plus 150
basis points (or, at the option of Reorganized EPE, at the "base"
or "prime" rate plus 50 basis points) from and after the
Effective Date, payable at the end of the interest period. Such
Reorganized EPE Class 3A Secured Notes will be prepayable at any
time without premium, will not be publicly tradeable and will
contain restrictions on assignability. See Section V of this
Disclosure Statement.
PERCENT DISTRIBUTION ON ACCOUNT OF PREPETITION CLAIMS OR
INTERESTS (Consensual Treatment): 100% of Allowed Claim
<PAGE> 27
CLASS 4(a) to 4(i)
DESCRIPTION: Claims relating to the Maricopa Pollution Control
Bonds, Maricopa Loan Agreements and Second Mortgage Bonds held as
collateral with respect thereto.
ESTIMATE OF ALLOWED CLAIM OR INTEREST AMOUNT (as of Petition
Date): Claims in amount of $160 million, (Duplicative of Class
5(a), 5(b) and 5(c) Claims.)
TREATMENT:
Unimpaired--Bonds cured and reinstated or legal, equitable and
contractual rights left unaltered on the Effective Date. Subject
to the tax exempt status of the Maricopa PCBs being maintained,
it is contemplated that (i) the Maricopa PCBs held by or on
behalf of EPE or the issuer of the related Maricopa PCB LC will,
subject in the case of the Maricopa Series A 1985 PCBs to the
related Maricopa LC issuer's consent, be remarketed at par as
soon as practicable after the Confirmation Date, and (ii) the
Maricopa PCBs will be refunded on or soon after the Effective
Date. In connection therewith, it is also contemplated that
certain modifications will be made to the indentures and
resolutions governing the respective Maricopa PCBs. Such
modifications shall include a term providing that the interest
rate on all Maricopa Series A 1985 PCBs will be reset on the
Confirmation Date to a market rate for similar tax-exempt bonds.
See Section V of this Disclosure Statement.
PERCENT DISTRIBUTION ON ACCOUNT OF PREPETITION CLAIMS OR
INTERESTS (Consensual Treatment): 100% of Allowed Claim
CLASS 5(a) to 5(c)
DESCRIPTION: Claims relating to the letters of credit issued with
respect to the Maricopa Pollution Control Bonds
ESTIMATE OF ALLOWED CLAIM OR INTEREST AMOUNT (as of Petition
Date): Claims in principal amount of $160 million, together with
interest in the amount of $2 million, (Duplicative of Class 4(a),
4(b), 4(c), 4(d), 4(e), 4(f), 4(g), 4(h) and 4(i) Claims.)
TREATMENT:
Impaired--If any letter of credit issuer provides (or, as
described in Section V, is deemed to provide) a replacement
letter of credit on the terms described herein, its Allowed
Claims will be discharged, on the Effective Date, by distribution
of (i) Reorganized EPE Class 5A Secured Notes under a separate
new term loan agreement for each of Class 5(a), 5(b), and 5(c)
secured by Reorganized EPE Series Y Pledged Second Mortgage
Bonds, bearing an interest rate of LIBOR (resetting, at the
<PAGE> 28
option of Reorganized EPE, at 1, 3 or 6 months) plus 150 basis
points (or, at the option of Reorganized EPE, at a "base" or
"prime" rate plus 50 basis points) and containing a maturity and
principal repayment schedule identical to the Reorganized EPE
Class 3A Secured Notes to be distributed in respect of the Claims
of holders of Class 3 Claims who elect Treatment A thereunder;
(ii) cash as soon as practicable after the Confirmation Date and
quarterly thereafter until the Effective Date in satisfaction of
all reasonable costs and expenses incurred by the holders of
Class 5(a), 5(b) or 5(c) Allowed Claims and Canadian Imperial
Bank of Commerce as a participant in such Classes in connection
with the Maricopa PCBs, the Maricopa PCB LCs, and the Maricopa
Loan Agreements; (iii) cash, promptly upon any draw, to reimburse
amounts drawn on any Maricopa PCB LC for payment of interest on
the Maricopa PCBs; and (iv) cash, on the Effective Date, in
satisfaction (X) of unpaid letter of credit fees accrued before
and after the Petition Date, (Y) interest on the amount of
unreimbursed draws the proceeds of which are used to pay interest
on the Maricopa PCBs, calculated at the non-default contract rate
from July 8, 1993 to and including the Effective Date, and (Z)
interest on the amount of any unreimbursed draws on a Maricopa
PCB LC to purchase or redeem Maricopa PCBs, calculated at the
following per annum rates, net of interest accrued during such
period on a purchased Maricopa PCB which has been paid to the
Class 5(a), 5(b) or 5(c) holder whose Maricopa PCB LC was used to
purchase the Maricopa PCB: (a) Class 5(a) at 90 day LIBOR plus
87.5 basis points, (b) Class 5(b) at 90 day LIBOR plus 62.5 basis
points, and (c) Class 5(c) at the prime rate (or equivalent
index) announced from time to time by Westpac Banking
Corporation. Such Reorganized EPE Class 5A Secured Notes will be
prepayable at any time without premium, will not be publicly
tradeable and will contain certain restrictions on assignability.
If any letter of credit issuer does not provide (and is not
deemed pursuant to the Plan to have provided) a replacement
letter of credit, or if Class 5(a), 5(b) or 5(c) does not accept
the Plan, then, in either event to the extent that the related
Allowed Claims are determined, by Final Order of the Bankruptcy
Court, to be secured Claims, such Claims will be discharged by
distribution of Reorganized EPE Series B Second Mortgage Bonds
with terms identical to those described in Section 3.5(A).2 of
the Plan, and to the extent that any portion of the related
Allowed Claims are determined to be unsecured Claims, such Claims
shall be paid in full on the Effective Date and discharged
through the issuance of Reorganized EPE Class 13 Senior Fixed
Rate Notes, in an amount equal to the amount of such Allowed
Claims, and without post-petition interest, fees, costs and other
charges except as allowed by the Bankruptcy Court. The
Reorganized EPE Class 13 Senior Fixed Rate Notes shall have the
same terms as the Reorganized EPE Class 13 Senior Fixed Rate
Notes described in Section 3.15(A) of the Plan, except that the
sixty percent (60%) limitation shall not apply to the amount of
Reorganized EPE Class 13 Senior Fixed Rate Notes issued under
<PAGE> 29
Section 3.7(B) of the Plan. See Section V of this Disclosure
Statement.
PERCENT DISTRIBUTION ON ACCOUNT OF PREPETITION CLAIMS OR
INTERESTS (Consensual Treatment): 100% of Allowed Claim
CLASS 6
DESCRIPTION: Claims relating to Rio Grande Resources Trust
Agreement
ESTIMATE OF ALLOWED CLAIM OR INTEREST AMOUNT (as of Petition
Date): Claims in principal amount of $70.3 million.
TREATMENT:
Impaired--If Class 6 accepts the Plan, then holders of Claims
will elect to receive one of two treatments for their Allowed
Claims (which shall include an amount equal to 85% of interest
accrued and unpaid through September 10, 1993 at the non-default
contract rate). Allowed Claims receiving Treatment A will be
discharged by distribution of Reorganized EPE Class 6A Secured
Notes under a new term loan agreement in the amount of such
Claims (except for Allowed Claims for certain reasonable fees and
expenses and interest amounts, which will be paid in cash on or
prior to the Effective Date). Such Reorganized EPE Class 6A
Secured Notes will be secured by Reorganized EPE Series Z Pledged
Second Mortgage Bonds. Such Reorganized EPE Class 6A Secured
Notes will bear an interest rate of 90-day LIBOR plus 150 basis
points (or, at the option of Reorganized EPE, at a "base" or
"prime" rate plus 50 basis points), will mature on the earlier of
December 31, 1998 and the last business day of the month in which
the fourth anniversary of the Effective Date occurs (or such
earlier date as may be agreed to by Reorganized EPE) and will be
payable in equal quarterly principal installments commencing on
the earlier of December 31, 1994 (or, if the Effective Date
occurs after December 31, 1994, the last business day of the
month in which the Effective Date occurs) and the last business
day of the month in which the first anniversary of the Effective
Date occurs. Such Reorganized EPE Class 6A Secured Notes will be
prepayable at any time without premium, will not be publicly
tradeable and will contain certain restrictions on assignability.
Allowed Claims receiving Class 6 Treatment B will be discharged
by distribution of Reorganized EPE Series B Second Mortgage Bonds
in the amount of such Claims (except for Allowed Claims for
certain reasonable fees and expenses and interest amounts, which
will be paid in cash on or prior to the Effective Date). Such
Reorganized EPE Series B Second Mortgage Bonds will have terms
identical to the Reorganized EPE Series B Second Mortgage Bonds
described in Section 3.5(A).2 of the Plan.
<PAGE> 30
If Class 6 does not accept the Plan in accordance with Section
1126(c) of the Code, then the provisions of Section 3.8(A) of the
Plan described above shall not apply. In such event, Class 6
Claims shall be determined by a Final Order to be allowed or not
allowed and secured or unsecured in accordance with Sections
1.3(a), 1.3(b), and 1.5 of the Plan and applicable provisions of
the Code and Bankruptcy Rules. To the extent it is determined by
a Final Order that any Allowed Class 6 Claims are Allowed Secured
Claims, then such Allowed Secured Claims shall be discharged and
satisfied in full by distribution of Reorganized EPE Class 6A
Secured Notes on the Effective Date in the principal amount of
such Allowed Secured Claims, including to the extent provided by
Section 506(b) of the Code (i) any Allowed Claims for post-
petition interest on such Allowed Secured Claims less any post-
petition interest payments made on or prior to the Effective Date
with respect to such Claims and (ii) any reasonable fees, costs
or charges provided for under the agreement under which such
claims arose. The Reorganized EPE Class 6A Secured Notes
distributed pursuant to Section 3.8 (B) of the Plan and will have
the same terms as the Reorganized EPE Class 6A Notes described in
Section 3.8(A).1 of the Plan (and will be issued under a term
loan agreement having the same terms as the term loan agreement
described in Section 3.8(A).1), except that (i) such Notes will
be secured by Reorganized EPE Series Z Pledged Second Mortgage
Bonds (having interest and payment terms which are identical to
those of such Notes) or, if and to the extent that such
collateral does not comply with Section 1129(b)(2)(A) of the
Code, such other collateral as the Bankruptcy Court may determine
is necessary to comply with Section 1129(b)(2)(A) of the Code and
(ii) such Notes will mature, and be repayable in a single
principal installment, on the fifth anniversary of the Effective
Date. To the extent that the Bankruptcy Court determines by a
Final Order that any Allowed Class 6 Claims are not Allowed
Secured Claims, then the portion of the Allowed Class 6 Claims
which are not an Allowed Secured Claims shall be discharged
through the issuance on the Effective Date to or for the benefit
of holders of such Allowed Claims, Pro rata, of Reorganized EPE
Class 13 Senior Fixed Rate Notes, in an amount equal to the
amount of such Allowed Claims, and without post-petition
interest, fees, costs and other charges except as otherwise
allowed by the Bankruptcy Court. The Reorganized EPE Class 13
Senior Fixed Rate Notes shall have the same terms as the
Reorganized EPE Class 13 Senior Fixed Rate Notes described in
Section 3.15(A) of the Plan, except that the sixty percent (60%)
limitation shall not apply to the amount of the Reorganized EPE
Class 13 Senior Fixed Rate Notes issued under Section 3.8(B) of
the Plan.
If Class 6 accepts the Plan, interest will accrue on the
aggregate principal amount outstanding under the RGRT Agreement
(i) from September 10, 1993 through and including the
Confirmation Date, at the contract (non-default) rate and (ii)
from the Confirmation Date through and including the Effective
Date, at 90-day LIBOR plus 200 basis points, and such interest
<PAGE> 31
shall be payable as provided in Section 5.1(B) of the Plan.
Holders will be paid interest not less often than quarterly at
the rate of LIBOR plus 200 basis points from the Confirmation
Date to the Effective Date. See Section V of this Disclosure
Statement.
PERCENT DISTRIBUTION ON ACCOUNT OF PREPETITION CLAIMS OR
INTERESTS (Consensual Treatment): 100% of Allowed Claim
CLASS 7
DESCRIPTION: Allowed Secured Claims not classified elsewhere
ESTIMATE OF ALLOWED CLAIM OR INTEREST AMOUNT (as of Petition
Date): Claim of $177,189 (disputed).
TREATMENT:
Unimpaired--For purposes of the Plan, each Allowed Secured Claim
in Class 7 shall be deemed classified in a separate Class. On
the Effective Date, each holder of an Allowed Secured Claim in
Class 7, in full satisfaction of such Claim, shall, at the option
of the Debtor and CSW, receive one of the following treatments:
(i) receive cash equal to the amount of such Allowed Claim; (ii)
such Allowed Claim shall be reinstated so that the Plan shall
leave unaltered the legal, equitable, and contractual rights to
which such holder is entitled; (iii) (A) any and all defaults
under any instrument evidencing such Claim that occurred before
or after the commencement of the Case, other than a default of a
kind specified in Section 365(b)(2) of the Code, shall be cured;
(B) such holder shall be compensated for any damages incurred as
a result of any reasonable reliance on any contractual provision
or applicable law that entitles such holder to demand or receive
accelerated payment of such Claim after the occurrence of a
default; (C) the original maturity for the obligations under such
instruments shall be reinstated; and (D) any other legal,
equitable, or contractual rights of such holder shall remain
unaltered; or (iv) receive the collateral securing such Allowed
Claim. Alternatively, the Debtor and CSW and the holder of an
Allowed Claim in Class 7 may agree upon any other treatment of
such Claim without any further requirement of Bankruptcy Court
approval, which treatment may include the preservation of such
holder's lien; provided, however, that such treatment shall not
provide for such holder to receive consideration having a present
value in excess of the amount of such Allowed Claim. See Section
V of this Disclosure Statement.
PERCENT DISTRIBUTION ON ACCOUNT OF PREPETITION CLAIMS OR
INTERESTS (Consensual Treatment): 100% of Allowed Claim
<PAGE> 32
CLASS 8
DESCRIPTION: Allowed Priority Claims
ESTIMATE OF ALLOWED CLAIM OR INTEREST AMOUNT (as of Petition
Date): Claims in amount of less than $1 million.
TREATMENT:
Unimpaired -- legal rights unaltered. See Section V of this
Disclosure Statement.
PERCENT DISTRIBUTION ON ACCOUNT OF PREPETITION CLAIMS OR
INTERESTS (Consensual Treatment): 100% of Allowed Claim
CLASS 9
DESCRIPTION: Allowed Claims by the Debtor's customers for refunds
or for deposits
ESTIMATE OF ALLOWED CLAIM OR INTEREST AMOUNT (as of Petition
Date): Claims Not Determined.
TREATMENT:
Unimpaired -- legal rights unaltered. See Section V of this
Disclosure Statement.
PERCENT DISTRIBUTION ON ACCOUNT OF PREPETITION CLAIMS OR
INTERESTS (Consensual Treatment): 100% of Allowed Claim
CLASS 10(a) and 10(b)
DESCRIPTION: Claims relating to the Farmington Pollution Control
Bonds and Farmington Installment Sale Agreement
ESTIMATE OF ALLOWED CLAIM OR INTEREST AMOUNT (as of Petition
Date): Claims in amount of $35.8 million, (Duplicative of
Class 11 Claims.)
TREATMENT:
Unimpaired--cured and reinstated or legal, equitable and
contractual rights left unaltered on the Effective Date. It is
contemplated that the Farmington PCBs will be remarketed or
refunded on or soon after the Effective Date and, in connection
therewith, certain modifications will be made to the resolution
governing the Farmington PCBs. See Section V of this Disclosure
Statement.
<PAGE> 33
PERCENT DISTRIBUTION ON ACCOUNT OF PREPETITION CLAIMS OR
INTERESTS (Consensual Treatment): 100% of Allowed Claim
CLASS 11
DESCRIPTION: Claims relating to the letter of credit issued with
respect to the Farmington Pollution Control Bonds
ESTIMATE OF ALLOWED CLAIM OR INTEREST AMOUNT (as of Petition
Date): Claims in amount of $35.8 million, (Duplicative of
Class 10(a) and 10(b) Claims.)
TREATMENT:
Impaired--If the issuer of the letter of credit provides (or, as
described in Section V, is deemed to provide) a replacement
letter of credit as described herein, then Allowed Class 11
Claims will be discharged by distribution of (i) Reorganized EPE
Class 13 Senior Notes in a principal amount equal to 30% of the
amount of the Allowed Class 11 Claims (other than Allowed Class
11 Claims, if any, to be satisfied by distribution of Reorganized
EPE Class 11 Senior Notes), (ii) a number of shares of CSW Common
Stock (certain of which will be subject to restrictions on
transfer for certain periods after the Effective Date, as
described herein) determined by dividing 60% of the amount of
such Allowed Class 11 Claims of such holder by the CSW Class
12/13 Share Value, as defined in the Plan, and (iii) Reorganized
EPE Class 13 Senior Notes in a principal amount of 5.5% of such
Allowed Class 11 Claims of such holder or, at Reorganized EPE's
option, a number of shares of CSW Common Stock determined by
dividing 5.5% of the amount of such Allowed Class 11 Claims of
such holder by the CSW Class 12/13 Share Value. The Reorganized
EPE Class 13 Senior Notes will have terms identical to, and will
be governed by the same term loan agreement or indenture as, the
Reorganized EPE Class 13 Senior Notes issued to holders of
Allowed Class 13 Claims. In the event that on or prior to the
Effective Date there is a drawing on the Farmington PCB LC to pay
the principal amount or the purchase price of any Farmington
Series A 1983 PCBs in circumstances under which such PCBs have
not been canceled or extinguished, Class 11 Allowed Claims
arising from such draw shall be discharged and satisfied in full
(to the extent not paid out of proceeds of a remarketing or
refunding of such Farmington Series A 1983 PCBs prior to
Effective Date) by distribution to the holder thereof of the
Reorganized EPE Class 11 Senior Notes under a separate term loan
agreement in the principal amount of such Class 11 Allowed Claim.
The Reorganized EPE Class 11 Senior Notes will have interest,
maturity, amortization and covenant terms identical to
Reorganized EPE Class 13 Senior Floating Rate Notes, except that
the Reorganized EPE Class 11 Senior Notes will include provisions
for the mandatory prepayment thereof from the proceeds of any
<PAGE> 34
remarketing or refunding of the Farmington Series A 1983 PCBs
paid for or purchased with a draw on the Farmington PCB LC.
Class 11 Claim holders will accrue interest from and after June
25, 1993 through the Effective Date at the per annum rate of 90
day LIBOR plus 200 basis points on the principal amount
calculated in accordance with the formula set forth in the last
paragraph of Section 3.13(A). of the Plan, and such interest will
be paid as provided in Section 5.1(B) of the Plan.
If the letter of credit issuer does not issue a replacement
letter of credit (and is not deemed to have issued a replacement
letter of credit) or if Class 11 does not accept the Plan, then,
in either event, Allowed Class 11 Claims shall be discharged
through the issuance on the Effective Date of (i) Reorganized EPE
Class 13 Senior Fixed Rate Notes, in an amount equal to one-third
of the amount of such Allowed Claims, without post-petition
interest, fees, costs and other charges except as allowed by the
Bankruptcy Court and (ii) a number of shares of CSW Common Stock
determined by dividing two-thirds of the amount of the Allowed
Class 11 Claims, without post-petition interest, fees, costs and
other charges except as allowed by the Bankruptcy Court, by the
CSW Class 12/13 Determination Date Share Value. The Reorganized
EPE Class 13 Senior Fixed Rate Notes shall have the same terms as
the Reorganized EPE Class 13 Senior Fixed Rate Notes described in
Section 3.15(A) of the Plan, except that the sixty percent (60%)
limitation shall not apply to the amount of Reorganized EPE Class
13 Senior Fixed Rate Notes issued under Section 3.13(D) of the
Plan. See Section V of this Disclosure Statement.
PERCENT DISTRIBUTION ON ACCOUNT OF PREPETITION CLAIMS OR
INTERESTS (Consensual Treatment): 95.5% of Allowed Claim
CLASS 12(a) and 12(b)
DESCRIPTION: 12(a) Claims relating to Palo Verde Leases, Lease
Obligation Bonds and Secured Lease Obligation Bonds. 12(b)
undetermined (disputed)
ESTIMATE OF ALLOWED CLAIM OR INTEREST AMOUNT (as of Petition
Date): Claims (if Plan accepted) in amount of $700 million.
TREATMENT:
Impaired--If Class 12(a) (the holders of the Lease Obligation
Bonds and the Secured Lease Obligation Bonds) accepts the Plan,
then Class 12(a) Claims will be Allowed in the amount of $700
million and such Allowed Claims will be discharged through the
distribution of securities in the amount of 95.5% of the Allowed
Class 12(a) Claims (the "Class 12(a) Distribution Amount") by the
pro rata issuance of (i) an aggregate principal amount of
unsecured Reorganized EPE Series A Senior Notes under an
indenture equal to no less than one-third and no more than two-
<PAGE> 35
thirds of the Class 12(a) Distribution Amount, and (ii) an
aggregate number of shares of CSW Common Stock (certain of which
will be subject to restrictions on transfer for certain periods
after the Effective Date, as described herein) equal to (x) the
remainder of the Class 12(a) Distribution Amount divided by (y)
the CSW Class 12/13 Share Value. Due to certain restrictions on
trading, CSW Common Stock will be distributed in three
installments on the Effective Date, 90 days after the Effective
Date and 180 days after the Effective Date. The CSW Class 12/13
Share Value will be determined pursuant to the average trading
prices of CSW Common Stock for three 60 consecutive trading day
periods ending on the 6th trading date prior to each
distribution, but subject to a 5% "outside collar" as more fully
described in the definition of CSW Class 12/13 Share Value in the
Plan. The Reorganized EPE Series A Senior Notes will provide for
the accrual of interest commencing on the Effective Date at a
rate per annum equal to a Market Basket Rate, as described in
Section V, will be redeemable at the option of Reorganized EPE
with the applicable premium at any time and will be publicly
tradeable under Section 1145 of the Code. Prior to the fourth
anniversary of the Effective Date, the Notes may be redeemed in
whole or in part at a redemption price equal to the lesser of
(x) that amount which is the present value of remaining interest
and principal payments on the Notes and (y) 100% of the principal
amount of the Notes outstanding. If they accept the Plan, the
Class 12(a) Claim holders will accrue interest from and after
July 29, 1993 through and including the Effective Date at the
rate of 90 day LIBOR plus 200 basis points on an amount equal to
the Class 12(a) Distribution Amount of such holder, and such
interest will be payable as provided in Section 5.1(B) of the
Plan and to the extent permitted under applicable law.
If the Owner Participants (Class 12(b)) accept the Plan and the
OP Settlement is approved by the Court, then the OP Settlement
shall become binding on all Owner Participants, subject to the
occurrence of the Effective Date. The Class 12(b) Allowed Claims
shall be discharged and satisfied in full in accordance with the
terms of the OP Settlement.
If either Class 12(a) or Class 12(b) does not accept the Plan or
if the OP Settlement is not approved by the Bankruptcy Court,
then the treatment of non-assenting Class 12(a) or Class 12(b),
or the treatment of Class 12(b) if the OP Settlement is not
approved by the Bankruptcy Court, set forth in Section 3.14(A) or
3.14(B), as the case may be, shall not apply. Instead, the Court
shall determine whether each Class 12(a) or Class 12(b) Claim
shall be an Allowed Claim and the amount thereof, and such
Allowed Claims shall be paid and discharged through the Pro rata
issuance of (i) cash to the extent of any Allowed Administrative
Claim; (ii) Reorganized EPE Series A-I Notes, in an amount equal
to 100% of their Allowed Secured Claims, payment of which will be
secured by interests in Units 2 and 3 of the Palo Verde Nuclear
Generating Station (less any amount paid for administrative
rent), and (iii) the balance, if any, in Reorganized EPE Series
<PAGE> 36
A-II Notes and CSW Common Stock. The aggregate amount of Series
A-I Notes and Series A-II Notes shall range between one-third and
two-thirds of the total amount of Class 12(a) and Class 12(b)
Claims so Allowed. The balance of such Allowed Claims will be
satisfied by the distribution of CSW Common Stock subject to a
one year lock-up provision in an amount equal to such balance
divided by the CSW Class 12/13 Determination Date Share Value.
Such Reorganized EPE Series A-I Notes shall have the same terms
as the Reorganized EPE Series A Senior Notes, except that they
shall be secured by interests in Units 2 and 3 of the Palo Verde
Nuclear Generating Station. It is a condition to the Plan that
the aggregate amount of such Class 12(a) and 12(b) Allowed Claims
do not exceed $700 million. See Section V of this Disclosure
Statement.
PERCENT DISTRIBUTION ON ACCOUNT OF PREPETITION CLAIMS OR
INTERESTS (Consensual Treatment): 12(a) 95.5% of Allowed Claim;
12(b) undetermined
CLASS 13
DESCRIPTION: General Unsecured Claims
ESTIMATE OF ALLOWED CLAIM OR INTEREST AMOUNT (as of Petition
Date): Claims in amount of $372,608.
TREATMENT:
Impaired If Class 13 accepts the Plan, Allowed Class 13 Claims
will be discharged by distribution of (i) Reorganized EPE
Class 13 Senior Notes under a new term loan agreement or
indenture in an aggregate principal amount equal to 30% of the
principal amount and, to the extent accrued prior to the Petition
Date, interest and fees, including letter of credit fees and
reasonable attorneys' fees, but exclusive of all interest, fees,
costs and other charges accrued on and after the Petition Date
(such amount is the "Class 13 Base Amount") of such Allowed Class
13 Claims, (ii) a number of shares of CSW Common Stock (certain
of which will be subject to restrictions on transfer for certain
periods after the Effective Date, as described in Section V)
determined by dividing 60% of the Class 13 Base amount of such
Class 13 Claims by the CSW Class 12/13 Share Value, and (iii)
Reorganized EPE Class 13 Senior Notes in a principal amount of
5.5% of the Class 13 Base amount of the Class 13 Allowed Claims
of such holder, or at Reorganized EPE's option, a number of
shares of CSW Common Stock determined by dividing 5.5% of the
Class 13 Base amount of such Class 13 Allowed Claims of such
holder by the CSW Class 12/13 Share Value. Holders of Class 13
Allowed Claims shall elect one of two treatments. Holders of
Allowed Claims electing Treatment A will receive all or a portion
of the Reorganized EPE Class 13 Senior Notes to which they are
entitled in the form of Reorganized EPE Class 13 Senior Floating
<PAGE> 37
Rate Notes. The Reorganized EPE Class 13 Senior Floating Rate
Notes shall bear interest at a per annum rate of 90-day LIBOR
plus 200 basis points (or, at the option of Reorganized EPE, at
the "base" or "prime" rate plus 100 basis points) from and after
the Effective Date, payable at the end of each interest period.
The Reorganized EPE Class 13 Senior Floating Rate Notes shall be
governed by a new term loan agreement. The Reorganized EPE Class
13 Senior Floating Rate Notes will not be publicly tradeable and
will contain restrictions on assignability.
Alternatively, pursuant to Treatment B, holders of Allowed Class
13 Claims may elect to receive the Reorganized EPE Class 13
Senior Notes to which they are entitled in the form of
Reorganized EPE Class 13 Senior Fixed Rate Notes; provided, that
in no event shall the aggregate amount of Reorganized EPE Class
13 Senior Fixed Rate Notes issued on account of Class 13 Allowed
Claims exceed sixty percent (60%) of the aggregate amount of all
Reorganized EPE Class 13 Senior Notes issued on account of Class
13 Allowed Claims (prior to giving effect to such election). To
the extent that holders of Class 13 Allowed Claims elect to
receive more than sixty percent (60%) of the aggregate amount of
Reorganized EPE Class 13 Senior Notes to be issued pursuant to
the Plan on account of all Class 13 Allowed Claims in the form of
Reorganized EPE Class 13 Senior Fixed Rate Notes, each holder
electing to receive Reorganized EPE Class 13 Senior Fixed Rate
Notes shall have its distribution of such notes reduced on a Pro
rata basis (and replaced with a distribution of a like amount of
Reorganized EPE Class 13 Senior Floating Rate Notes) so that the
aggregate amount of Reorganized EPE Senior Fixed Rate Notes
distributed on account of all Class 13 Allowed Claims does not
exceed sixty percent (60%) of the aggregate amount of Reorganized
EPE Class 13 Senior Notes distributed on account of all Class 13
Allowed Claims. The Reorganized EPE Class 13 Senior Fixed Rate
Notes shall bear interest at a Market Basket Rate from and after
the Effective Date, payable semi-annually in arrears, and will
mature on the ninth anniversary of the earlier of (i) the
Effective Date and (ii) December 31, 1994. Such Notes will be
redeemable in whole or in part at any time at premium redemption
prices described in the Plan. The Reorganized EPE Class 13
Senior Fixed Rate Notes will be publicly tradeable under Section
1145 of the Code.
Class 13 Claim holders will accrue interest retroactive from and
after June 25, 1993 through and including the Effective Date at
the rate of 90 day LIBOR plus 200 basis points on an amount equal
to ninety-five and one-half percent (95.5%) of the Class 13 Base
Amount of the Class 13 Allowed Claim of such holder, calculated
in accordance with the formula set forth in the last paragraph of
Section 3.15(A) of the Plan, and such interest will be paid as
provided in Section 5.1(B) of the Plan.
If Class 13 does not accept the Plan pursuant to Section 1126(c)
of the Code, then the treatment of Class 13 set forth in Section
3.15(A) shall not apply. Instead, Class 13 Claims shall be
<PAGE> 38
Allowed Claims to the extent they comply with Section 1.3(a) or
1.3(b) of the Plan. Class 13 Allowed Claims shall be paid in
full on the Effective Date and discharged through the issuance to
or for the benefit of holders of such Allowed Claims, Pro rata,
of Reorganized EPE Class 13 Senior Fixed Rate Notes, in an amount
equal to the amount of such Allowed Claims, and without post-
petition interest, fees, costs and other charges except as
otherwise allowed by the Bankruptcy Court. Such Reorganized EPE
Class 13 Senior Fixed Rate Notes shall have the same terms as the
Reorganized EPE Class 13 Senior Fixed Rate Notes described above
other than the sixty percent limitation referred to above. See
Section V of this Disclosure Statement.
PERCENT DISTRIBUTION ON ACCOUNT OF PREPETITION CLAIMS OR
INTERESTS (Consensual Treatment): 95.5% of Allowed Claim
CLASS 14
DESCRIPTION: Administrative Convenience Claims ($100,000 or less)
ESTIMATE OF ALLOWED CLAIM OR INTEREST AMOUNT (as of Petition
Date): Claims in amount of less than $2 million.
TREATMENT:
Unimpaired--paid full in cash. See Section V of this Disclosure
Statement.
PERCENT DISTRIBUTION ON ACCOUNT OF PREPETITION CLAIMS OR
INTERESTS (Consensual Treatment): 100% of Allowed Claim
CLASS 15
DESCRIPTION: Preferred Stock Interests
ESTIMATE OF ALLOWED CLAIM OR INTEREST AMOUNT (as of Petition
Date): $79,088,000 (redemption prices at 12/31/94 based on
current outstanding) plus $3,889,100 in accumulated prepetition
dividends (if Plan accepted).
TREATMENT:
Impaired--Interests discharged through the conversion on the
Effective Date pursuant to the Merger of each share of EPE
Preferred Stock into the right to receive such number of shares
of Reorganized EPE Preferred Stock as equals the fraction
determined by dividing (a) $68 million by (b) $78,205,000 (par
value of outstanding EPE Preferred Stock). Within one year of
the Confirmation Date, CSW may elect to distribute CSW Common
<PAGE> 39
Stock instead of all or any portion of the Reorganized EPE
Preferred Stock. If CSW makes such election, the aggregate value
of securities received by Class 15 Interest holders will be the
same as if CSW had not made such election. CSW Common Stock
will be subject to certain restrictions on transfer after the
Effective Date, as described herein. Due to the foregoing
restrictions on transfer, certain CSW Common Stock will not be
distributed until the two-hundred and fortieth day after the
Effective Date. The number of shares of CSW Common Stock to be
distributed on such date will be determined by reference to the
average trading prices of CSW Common Stock for the 60 consecutive
trading day period ending on the 6th trading date prior to such
distribution, but subject to a 5% "outside collar" as more fully
described in the definition of CSW Class 12/13 Share Value in the
Plan. The Reorganized EPE Preferred Stock will provide for divi-
dends payable at a rate equal to a Market Basket Rate as
described in Schedule E to the Plan, will be redeemable at the
option of Reorganized EPE with the applicable premium plus
accrued dividends at any time and will be publicly tradeable
under Section 1145 of the Code. If Class 15 accepts the Plan,
the Class 15 Interest holders will accrue interest from and after
August 20, 1993 through and including the Effective Date at the
rate of 90 day LIBOR plus 200 basis points on an amount equal to
the Pro rata portion of the Class 15 Distribution Amount of such
holder, and such interest will be payable in cash on the
Confirmation Date and quarterly thereafter until the Effective
Date and then on the Effective Date, as provided in Section
5.1(B) of the Plan. See Section V of this Disclosure Statement.
PERCENT DISTRIBUTION ON ACCOUNT OF PREPETITION CLAIMS OR
INTERESTS (Consensual Treatment): To receive securities in the
amount of $68 million.
CLASS 16
DESCRIPTION: Common Stock Interests
ESTIMATE OF ALLOWED CLAIM OR INTEREST AMOUNT (as of Petition
Date): Approximately 35.5 million shares of Common Stock issued
and outstanding and options for 1,033,300 shares of common stock
outstanding.
TREATMENT:
Impaired--Interests discharged through the conversion on the
Effective Date pursuant to the Merger of each share of Common
Stock of the Debtor into shares of CSW Common Stock (which may
not be transferred for a period of eight months after the
Effective Date with respect to certain holders and except under
certain circumstances as set forth in Section V.4(j) herein and
in the Merger Agreement) with a value determined as described
herein (but not to exceed $4.50 per share) equal to the sum of
<PAGE> 40
(i) $3.00 plus (ii) a pro rata share of any proceeds received by
the Debtor prior to the Effective Date from dispositions of
certain tangible and intangible assets described herein and the
amount of any reductions prior to the Effective Date of certain
specified claims described herein. Holders of such Allowed
Interests will also receive additional shares of CSW Common Stock
with a value equal to the amount of dividends (including
dividends on dividends) between the Confirmation Date and the
Effective Date on the number of shares of CSW Common Stock deter-
mined as provided in the preceding sentence. Holders of Allowed
Class 16 Interests may also receive distributions from the
Liquidation Trust described below. Pursuant to the Merger,
options to purchase Common Stock of the Debtor will be converted
into options to purchase shares of CSW Common Stock, as described
herein. See Section V of this Disclosure Statement.
PERCENT DISTRIBUTION ON ACCOUNT OF PREPETITION CLAIMS OR
INTERESTS (Consensual Treatment): $3.00 to $4.50 per share in CSW
Common Stock.
In addition to the distributions described above,
payments shall be made to certain Classes of creditors accruing
on various dates described above and payable commencing on the
Confirmation Date for post-petition interest, fees and expenses,
all as described in Section 5.1 of the Plan. The treatments for
Classes 3, 5(a), 5(b), 5(c), 6, 11, 12(a), 12(b), and 13, in the
event any such Classes do not accept the Plan, may be subject to
potential modification, if any, that the Court determines is
necessary for the Plan to comply with Section 1129(b) of the
Code. The Plan also allows the Debtor to modify the treatment of
any class which does not vote in favor of the Plan.
Class 16 Liquidation Trust. The Plan provides that if
on the Effective Date the $4.50 per share limitation on the value
of CSW Common Stock to be distributed in respect of EPE Common
Stock described above has not been met, then as of the Effective
Date the Debtor will establish a liquidation trust (the "Liquida-
tion Trust") and will assign thereto all of the Debtor's rights
<PAGE> 41
to and interests in certain Tangible Assets and Intangible Assets
which are not disposed of or determined prior to the Effective
Date as well as net proceeds from Reduction in Claims realized
after the Effective Date and will deposit in the Liquidation
Trust an amount (not to exceed $1,000,000) for expenses of the
trustee of the Liquidation Trust.
Any cash proceeds in the Liquidation Trust (after
payment of expenses related to the operation of the Liquidation
Trust) resulting from dispositions after the Effective Date of
such Tangible Assets and Intangible Assets or from such
Reductions in Claims determined after the Effective Date shall be
distributed in the following order of priority: (i) first, pro
rata to holders of Allowed Interests in Class 16 until the $4.50
per share limitation described above with respect to Class 16
treatment has been reached; and (ii) second, to Reorganized EPE
after payment of the amounts set forth in (i) above.
The assets and claims potentially subject to the
Liquidation Trust and otherwise allocated to the benefit of
existing EPE common shareholders to allow them to potentially
increase their recoveries from $3.00 to $4.50 per share consist
of: (a) warrants to purchase common stock of CAI Corporation
(described in Section II.A of this Disclosure Statement), (b)
First Service Collateral consisting of $2.3 million in cash,
interest thereon, and 100% of the common stock of Triangle
Electric Company (described in Section II.A of the Disclosure
Statement), (c) fee claims asserted by the Debtor in connection
with the First Service Litigation (described in Section II.A of
the Disclosure Statement), (d) the first Ten Million Dollars of
any amounts realized or deemed to be realized on settlement or
resolution of claims against Arizona Public Service (described in
Section II-A of the Disclosure Statement) and (e) any amount
realized or deemed to be realized as a result of one or more
potential causes of action against the Palo Verde owner
sale/leaseback participants (described in Section II.A of the
Disclosure Statement), (f) the difference between the Allowed
Claim amount of the Internal Revenue Service claim and $34
million, to the extent the IRS claim is less than $34 Million
(described in Section IV.C.4 of the Disclosure Statement), (g) $9
Million less the portion of the amounts paid to the Palo Verde
Participants for all claims (exclusive of interest and attorney
fees) filed by the Utility Participants in connection with the
operation of Palo Verde (described in Section II.C(3) of the
Disclosure Statement).
It is the opinion of the Debtor's management that the
ultimate value of the assets and claims described in the
preceding paragraph could attain $1.50 per share; although, there
are numerous contingencies regarding the actual amount and the
date upon which such amounts will ultimately be realized and the
<PAGE> 42
Debtor can not provide any assurances as to the actual amount
which will be realized.
CSW Option to Distribute Cash. The Plan also provides
that, in lieu of distributing shares of CSW Common Stock, CSW
may, in its sole discretion, pay to holders of Allowed Claims in
any or all of Classes 11, 12(a) and 13 cash in an amount equal to
the value as of the Effective Date of the shares of CSW Common
Stock which would otherwise be distributed to such holders in
respect of such Allowed Claims; provided, however, that with
respect to each Class as to which CSW makes such election such
cash payments shall be made pro rata to holders of Allowed Claims
in such Class; and provided, further, that CSW may only exercise
such election with respect to holders of Class 11, Class 12(a) or
Class 13 Allowed Claims if, pursuant to such election, the
holders of Allowed Claims in each such Class receive the same
proportion of cash to their Allowed Claims as the holders of
Allowed Claims in such other Classes. In no event may CSW elect
to pay Class 15 or Class 16 in cash, in lieu of Reorganized EPE
Preferred Stock or CSW Common Stock, as applicable, unless CSW
has also elected to pay cash in lieu of all CSW Common Stock to
which Class 11, 12(a) and Class 13 Allowed Claim holders are
entitled pursuant to the Plan.
The treatment accorded all classes is subject to
modification in accordance with applicable Code and Bankruptcy
Rule provisions and as set forth in Sections 6.5 and 6.6 of the
Plan. The Debtor reserves the right to seek confirmation of the
Plan as modified pursuant to Section 1129(b) of the Code or
otherwise.
3. Rejection of Palo Verde Leases and Transfer of the
Palo Verde Interests to Reorganized EPE
The Plan provides, unless the Debtor instructs
otherwise by the Confirmation Date, for the rejection of the
Debtor's leases relating to the Palo Verde Station to the extent
that those leases have not already been rejected by operation of
law on September 8, 1992 in accordance with Section 365(d)(4) of
the Code as leases of non-residential real property. Claims
arising from rejection of those leases are classified as Class 12
claims pursuant to the Plan.
The Merger Agreement provides, as a condition to the
effectiveness of the Merger (and, therefore, also as a condition
to the effectiveness of the Plan), that Reorganized EPE shall
become the owner of the Palo Verde Leasehold Interests free and
clear of any claims, liens or encumbrances of any nature, except
for any such claims, liens or encumbrances arising under the
Arizona Nuclear Power Project Participation Agreement, dated
August 23, 1973, as amended and supplemented, and related agree-
<PAGE> 43
ments. This provision, which may be waived by CSW, assumes that
(i) Class 12(b) will accept the Plan which provides for transfer
of the Palo Verde Leasehold Interests to Reorganized EPE,
(ii) Reorganized EPE is determined to be the owner of such
interests, or (iii) Reorganized EPE will otherwise obtain
ownership of such interests.
4. Conditions to Confirmation and Effectiveness of
the Plan
The Code imposes a number of voting and other
requirements respecting confirmation of a plan. These Code
requirements are described in Section XIV "Conditions Precedent
to Confirmation of the Plan under the Code" herein. The Plan
itself contains a number of additional conditions to
confirmation. "Confirmation," as used herein, occurs on the
"Confirmation Date." The list which follows is a brief summary
of the additional conditions to confirmation contained in the
Plan and is qualified by reference to the Plan, which is attached
hereto as Exhibit A, and to the more detailed description of
provisions for such conditions to confirmation set forth in
Section VI under "Conditions to Confirmation Under the Plan"
herein:
(i) The Confirmation Order shall be in form and
substance acceptable to the Debtor and CSW.
(ii) The Merger Agreement shall be executed by all
parties thereto (except for CSW Sub, which shall
execute the Merger Agreement promptly after the SEC
approves the same under the PUHCA) and shall be in full
force and effect, subject to any conditions subsequent
contained therein.
The Merger Agreement contains a number of requirements
which must be met, or waived by the Debtor and/or CSW, in order
for the Merger Agreement to be in full force and effect on the
Confirmation Date. For a description of certain conditions to
the Debtor's and CSW's respective obligations contained in the
Merger Agreement, see "Summary of the Terms of the Merger
Agreement" in Section III.B herein.
The Plan also provides for other conditions to effec-
tiveness of the Plan, including the following:
(a) The Confirmation Order shall have been issued, at
least ten (10) days shall have elapsed since the
Confirmation Date, and no stay of the Confirmation Order
shall be in effect.
<PAGE> 44
(b) The Reorganized EPE Articles of Incorporation
shall have been filed with the Texas Secretary of
State, if and to the extent state law requires.
(c) The Reorganized EPE First and Second Mortgage
Bond Indentures and the indentures pursuant to which
the Series A Senior Notes and the Reorganized EPE Class
13 Senior Fixed Rate Notes shall be issued shall have
been qualified under the Trust Indenture Act of 1939,
if and to the extent required.
(d) That all conditions to the Merger contained
in the Merger Agreement shall have been satisfied or
waived and the Merger will be consummated on the
Effective Date.
(e) The Debtor shall have filed a written notice
with the Bankruptcy Court stating that the conditions
to effectiveness of the Plan which have not been waived
in accordance with the provisions of the Plan have been
satisfied.
(f) The sum of (i) the amount estimated under
Section 502(c) of the Code, with respect to contingent
or disputed Class 13 claims which remain contingent or
disputed at the Effective Date, and (ii) such claims
which become Allowed Class 13 Claims at or prior to the
Effective Date, shall not exceed $20 million.
(g) Each of the Reorganized EPE Series A First
Mortgage Bonds, the Reorganized EPE Series B First
Mortgage Bonds and the Reorganized EPE Series A Second
Mortgage Bonds shall have received an Investment Grade
Rating.
The Merger Agreement contains a number of requirements
which must be met, or waived by the Debtor and/or CSW, in order
for the Merger to be consummated on the Effective Date. For a
description of such requirements, see "Summary of the Terms of
the Merger Agreement" in Section III.B herein. The Plan provides
that certain of the conditions to the Effective Date may be
waived by CSW and the Debtor.
Section 1129(a)(6) of the Code provides that a court
shall confirm a Plan only if "[a]ny governmental regulatory
commission with jurisdiction, after confirmation of the plan,
over the rates of the debtor has approved any rate change pro-
vided for in the plan, or such rate change is expressly condi-
tioned upon such approval." As described below under Section
III.B "Summary of the Terms of the Merger Agreement," the
conditions to effectiveness of the Merger (and, therefore, the
<PAGE> 45
Plan), require the Debtor and CSW to obtain such regulatory
approvals as are necessary to implement the provisions of the
Plan and consummate the Merger. See Section VII under
"Conditions to Effectiveness of the Plan" herein for a more
detailed description of the conditions to effectiveness and see
Sections III.B, VIII.B & C and D.1 herein respecting regulatory
approval.
II. DESCRIPTION OF THE DEBTOR
A. Background Information Regarding the Debtor
The following information provides a brief summary of
the business of the Debtor. More complete information about the
Debtor is contained in the Debtor's 1992 Annual Report and
Current Report on Form 8-K dated April 14, 1993 (the "April 14,
1998 Form 8-K"), as filed with the SEC, which are attached hereto
as Exhibit F (the "SEC Reports").
History of the Debtor, Overview of the Debtor's
Operations and Description of Principal Assets
The Debtor was incorporated in Texas in 1901. Its
business is the generation and distribution of electricity
through an interconnected system to approximately 255,000
customers in El Paso, Texas, and an area of the Rio Grande Valley
in western Texas and southern New Mexico and to wholesale
customers located in southern California and Mexico in addition
to selling power on a wholesale basis to Texas - New Mexico Power
Company ("TNP").
The Debtor's service area extends approximately 110
miles northwesterly from El Paso to the Caballo Dam in New Mexico
and approximately 120 miles southeasterly from El Paso to Van
Horn, Texas. The service area has an estimated population of
761,000, including approximately 613,000 in the metropolitan area
of El Paso. Copper smelting and refining, oil refining, garment
manufacturing, cattle raising and agriculture are significant
industries in El Paso, which is also an important transportation
and distribution center. At December 31, 1992, the Debtor's
largest retail customers included a steel rolling mill and
fabricator, a copper refinery, oil refineries, a smelter in El
Paso and military installations, namely the U.S. Army Air Defense
Center at Ft. Bliss in El Paso and the White Sands Missile Range
and Holloman Air Force Base in New Mexico. Two of the Debtor's
largest retail customers, an oil refinery and the steel rolling
mill and fabricator, have filed Chapter 11 bankruptcy
proceedings. See Item 7, "Results of Operations" in the 1992
Annual Report. At December 31, 1992, the Debtor's largest
wholesale customers included Commission Federal de Electricidad,
<PAGE> 46
the national electric utility of Mexico ("CFE"), the Imperial
Irrigation District, an irrigation district located in California
("IID"), and TNP.
Approximately 62% of the Debtor's total revenues for
the year ended December 31, 1992 were generated from sales of
electricity to Texas customers, principally in the City of El
Paso, at rates approved by the PUCT. Sales of electricity to New
Mexico customers, principally in the City of Las Cruces and to
certain military installations, represented approximately 16% of
the Debtor's total revenues for such period at rates approved by
the NMPUC, with approximately 7% of the Debtor's operating
revenues being derived solely from City of Las Cruces residents.
The balance of the Debtor's revenues was generated through (i)
negotiated long-term contracts which are approved by FERC (which
represented approximately 14% of the Debtor's revenues for the
year ended December 31, 1992); and (ii) sales to CFE pursuant to
a long-term contract and economy energy sales that are based upon
current market prices (collectively, 8% of the Debtor's revenues
for such period).
The Debtor's major franchises are with the cities of
El Paso, Texas, and Las Cruces, New Mexico. For a fee, the
franchises grant the Debtor the right to utilize the public
rights-of-way and to place its facilities and structures neces-
sary to serve its retail customers within such cities. The
franchise with the City of El Paso expires in March 2001 and does
not contain renewal provisions. The long-term franchise the
Debtor had with the City of Las Cruces expired in March 1993,
and the Debtor and the City of Las Cruces have entered into a
one-year franchise agreement, terminable on sixty-days' notice
by either party, while negotiations on a long-term franchise
continue.
For the reasons set forth below, the Debtor believes
that such franchises do not govern the Debtor's right or obliga-
tion to serve such customers. Instead, the right and obligation
to serve these customers is subject to the jurisdiction of the
PUCT with respect to El Paso and the NMPUC with respect to Las
Cruces. The PUCT has certified the Debtor's Texas service
territory, which includes the City of El Paso. The NMPUC has not
certified the Debtor's New Mexico service territory; the Debtor's
right to serve the City is established by a "grandfather" clause
in the New Mexico Public Utility Act.
The City of El Paso franchise, which does not expire
until the year 2001, grants the City an option to purchase essen-
tially all of the Debtor's property at fair market value on the
termination date of the franchise. Fair market value is defined
as "reproduction cost new," adjusted for changes occurring during
the final year of the franchise, less observed depreciation,
<PAGE> 47
obsolescence, or inadequacies, and excluding goodwill, any going
concern value, and any value of the franchise. The franchise
further provides that the option to purchase on the termination
date shall survive any sale of all of the Debtor's property,
including a merger or other business combination, prior to the
termination date of the franchise. The franchise is assignable,
upon notice to the City within 30 days after such assignment,
provided that the assignment recognizes the City's option to
purchase at the termination of the franchise.
The City of El Paso franchise also grants the City the
right to forfeit the franchise if it determines that the Debtor
is not providing "efficient public service" at "reasonable
rates." Upon such determination or the failure of an assignee to
give notice to the City within the 30-day period as described
above, the franchise grants the City the immediate right to
exercise its option to purchase the Debtor's property.
On February 8, 1993, Southern Union Gas Company
("Southern Union") filed a request with the City of El Paso that
Southern Union's present franchise to provide gas service be
amended to permit Southern Union to provide electric service to
the City of El Paso. Such proposed service would compete with
service provided by the Debtor. The City of El Paso has not
acted on Southern Union's request. Southern Union has not
applied to the PUCT for a certificate of public convenience and
necessity ("CCN") or a CCN to construct necessary facilities for
such service, although such CCNs would be required in addition
to the requested amendment to Southern Union's franchise.
Currently, the Debtor holds the only franchise with the City of
El Paso to provide electric service inside the City, as well as
the only CCN from the PUCT authorizing electric service inside
the City. The Debtor will oppose any request by Southern Union
for a CCN to provide electric service inside the City of El Paso,
but the Debtor cannot predict whether a CCN would be granted to
Southern Union if one is requested from the PUCT or whether the
City of El Paso will amend Southern Union's franchise.
Representatives of the City of El Paso have announced
that the City is considering various options with regard to the
franchise granted to the Debtor by the City, including non-
renewal of the franchise, granting of competing franchises, and
establishment of cogeneration facilities.
Within the City of Las Cruces, the Debtor currently has
73% of its facilities and structures (by line miles) on private
rights-of-way or owned land and 27% of its facilities and struc-
tures (by line miles) located on public rights-of-way owned by
the City.
<PAGE> 48
There exist certain disagreements between the Debtor
and the City of Las Cruces regarding the respective
jurisdictional authority of the NMPUC and a municipality.
The NMPUC has general and exclusive jurisdiction to regulate
every public utility with respect to the public utility's rates,
services and securities and has jurisdiction to approve
contractual rates between the public utilities and
municipalities. The City asserts that the NMPUC does not
regulate the areas of service of municipal utilities or the rates
of municipal utilities, that the area of service for municipal
utilities is defined in the New Mexico Municipal Code, and that
the governing body of a municipality has jurisdiction over the
establishment of municipal utility rates.
On April 21, 1993, the New Mexico Supreme Court in the
case of City of Albuquerque v. New Mexico Public Service
Commission et al., Case No. 20,254, 32 N.M. State Bar Bull. 463
(N.M. 1993), upheld certain of the Debtor's assertions regarding
the NMPUC's jurisdiction and authority in connection with the
limitations on a municipality's franchise authority. The New
Mexico Supreme Court also held that municipalities do have the
right to contract for electric utility rates subject to the
agreement by the public utility and the NMPUC. The City of Las
Cruces asserts that the New Mexico Supreme Court did not decide
the issue of the relationship of the parties upon expiration of
the utility franchise when the municipality and the utility are
not in agreement as to renewal or extension of the franchise.
Although this New Mexico Supreme Court decision may not
lead to a resolution of all the disagreements between the Debtor
and the City of Las Cruces prior to the confirmation of the Plan,
a number of uncertainties regarding the Debtor's CCN rights and
the City of Las Cruces franchise authority have been removed.
As a result of its interpretation of that decision and New Mexico
state law, the City of Las Cruces claims that there remain a
number of uncertainties regarding the relationship between the
Debtor and the City of Las Cruces upon the expiration of the
franchise. There is no assurance that the Debtor and the City
will resolve their disputes.
The City of Las Cruces asserts that it will only
consider renewal of the franchise in the event that there is
significant rate relief through agreement with the utility
approved by the NMPUC. In the event such an agreement is not
reached, the City's position is that the Debtor will not secure a
long-term franchise from the City.
According to the City of Las Cruces, it is considering
alternatives which include 1) purchase of the distribution system
of the Debtor, 2) condemnation of the distribution system of the
Debtor within the municipal limits, and 3) construction of its
<PAGE> 49
own distribution system and purchase of power from other sources
or purchase of power from the Debtor. According to the City, in
the event it is unable to purchase the system or condemn the
system, the City of Las Cruces may attempt construction of its
own distribution system and require that the Debtor remove those
portions of the Debtor's system within the City rights of way and
in other areas of the City. In the event that the City of Las
Cruces constructs its separate distribution system, the City of
Las Cruces asserts that it has no obligation to pay the Debtor
any compensation for its distribution system within the City of
Las Cruces. The City of Las Cruces has issued a contract for
engineering services to design a distribution system for the
proposed municipal utility.
On March 25, 1993, the City of Las Cruces provided the
Debtor with an outline of its proposal to purchase the Debtor's
facilities to serve customers within the City of Las Cruces. On
May 24, 1993, the Debtor notified the City of Las Cruces that it
had reached a merger agreement with CSW and would not agree with
the City's outline of the proposal to purchase the Debtor's
facilities.
According to the City, the offer which was rejected by
the Debtor was significantly higher than the original cost less
depreciation amount used under the Debtor's analysis in the event
of liquidation stated hereinafter in this Disclosure Statement.
The Debtor does not agree with the City's characterization of the
amount offered by the City as being greater than original cost
less depreciation because the City's offer included an
unspecified amount for both facilities and demand related fuel
costs.
The Debtor is party to two distinct contracts with the
Air Force and the Army regarding the provision of certain retail
electric service at Holloman Air Force Base and White Sands
Missile Range in New Mexico. The Debtor's right to provide that
service was authorized by the NMPUC in 1956 by the issuance of a
CCN to the Debtor. These contracts with the Air Force and Army
are due to expire on February 28, 1994 and December 31, 1993,
respectively. The Army has formally notified the Debtor that it
intends to conduct a competitive bidding procedure to determine
the provider of this service commencing upon or after expiration
of this contract. On June 15, 1993, the Air Force issued a
request for proposal from prospective electric utility service
providers to provide electric service to Holloman Air Force Base
upon expiration of its service agreement with the Debtor. The
Debtor believes that the procurement of retail electric service
by the United States Department of Defense by such competitive
procedures is prohibited by applicable federal procurement law
and that participation by public utilities in such competitive
<PAGE> 50
procedures to attempt to obtain the right to provide this
particular retail electric service would be contrary to New
Mexico utility regulatory law and a violation of the Debtor's
state-authorized right to provide this service, although there is
no assurance that the Debtor's view will prevail. On April 1,
1993, the Debtor filed a Petition for Declaratory Order with the
NMPUC seeking, among other things, a declaration that Debtor
currently is the only public utility authorized under New Mexico
utility regulatory law to offer and provide this particular
retail electric service at Holloman Air Force Base and White
Sands Missile Range. This proceeding has been docketed as NMPUC
Case No. 2505, and a hearing examiner's decision is pending. On
August 12, 1993 the Debtor filed a bid in response to the Air
Force's solicitation, and it also filed a protest to the bid
solicitation with the General Accounting Office challenging the
lawfulness and adequacy of the solicitation. Although the Debtor
believes it is more probable than not that it will continue to
have the right and obligation to provide this particular electric
service after expiration of the existing contracts with the Air
Force and the Army, there is no assurance that this will be the
case.
The Debtor has a long-term firm power sales agreement
with IID providing for the sale of 100 MW of firm capacity to IID
through April 2002. Beginning in May 1992 the Debtor also began
providing contingent capacity of 50 MW to IID.
The Debtor has a firm power sales agreement with TNP
providing for sales to TNP in the amount of 79 MW in 1993 and 75
MW thereafter through 2002, subject to provisions in the
agreement that allow a reduction to a minimum of 25 MW in the
amount of demand on a yearly basis. In December 1992 TNP
provided the Company notice that it will reduce the contract
demand to 25 MW for the year 1994, while preserving its option to
maintain or reduce its contract demand in subsequent years.
On April 3, 1991, the Debtor and CFE entered into an
agreement providing for firm power sales of electricity by the
Debtor to CFE for consumption by the City of Juarez, Mexico. The
agreement provides for firm sales of capacity and associated
energy to CFE over a base term commencing May 1, 1991 and ending
December 31, 1996. The agreement may be extended for one-year
periods after that date upon the agreement of the parties. The
obligations of CFE under the agreement are subject to continued
budgetary authorization by the Ministry of Programming and
Budgeting of Mexico for each calendar year. The agreement
currently requires that the Debtor provide CFE with 120-150 MW of
capacity and continue to provide that level over its remaining
term. Pricing for the power sales includes an escalating
capacity charge and full recovery of energy costs, both of which
<PAGE> 51
were based on the market conditions in the southwestern United
States at the time the agreement was executed and delivered.
The Debtor's principal tangible assets as of the
Petition Date were its generating facilities, which had a net
generating capacity of 1,497 MW, consisting of an entitlement of
600 MW from Palo Verde Units 1, 2 and 3, an entitlement of 104 MW
from Four Corners, 246 MW from the Rio Grande Power Station, 478
MW from the Newman Power Station and 69 MW from the Copper
Station, and its transmission and distribution facilities. These
material tangible assets are more fully described as follows:
Four Corners. The Four Corners Generating Project (the
"Four Corners Project" or "Four Corners") consists of five coal-
fired generating units located in northwestern New Mexico, each
with a 739 MW capability. Three units (Units I, II and III) are
owned and operated solely by Arizona Public Service Company
("APS"). Units 4 and 5 are jointly owned by the following
electric utilities: APS, which also operates Units 4 and 5;
Public Service Company of New Mexico ("PNM"); Salt River Project
Agricultural Improvement and Power District ("Salt River
Project"); Southern California Edison Company ("SCE"); Tucson
Electric Power Company ("TEP") and the Debtor (collectively, the
"Participants"). The Debtor has an undivided 7% interest in
Units 4 and 5 of Four Corners. Four Corners is located on land
held under easements from the federal government and also under a
lease from the Navajo Nation. Certain of the transmission lines
and almost all of the contracted coal sources for Four Corners
are also located on the Navajo Nation. Units 4 and 5 are located
adjacent to a surface-mined supply of coal. Units 4 and 5 are
among the lowest cost coal-fired resources in the western United
States.
The Debtor's rights and obligations with respect to the
Four Corners Project are governed by several interrelated agree-
ments (the "Four Corners Agreements") to which the Participants
are parties. The more important of the Four Corners Agreements
are described below:
1. Co-Tenancy Agreement, dated July 19, 1966, as
amended, which sets forth the relative rights and interests of
the parties with respect to the construction, use, and ownership
of the Four Corners Project. Among other things, the Co-Tenancy
Agreement provides that the Debtor has a 7% entitlement to the
net effective generating capacity of Units 4 and 5. The term of
the Co-Tenancy Agreement is 50 years.
2. Operating Agreement, effective as of March 1,
1967, as amended, which sets forth the responsibilities of APS,
as the operating agent, and the other Participants with respect
to the operation and maintenance of the Four Corners Project.
<PAGE> 52
Among other things, the Operating Agreement provides for the
allocation of operation and maintenance expenses among the
Participants in an amount proportional to their interests. The
Debtor's current total monthly share of such costs is approxi-
mately $1.1 million.
3. Supplemental and Additional Indenture of Lease
effective as of July 19, 1966, between the Navajo Tribe of
Indians, as Lessor, and the Participants, as Lessees, which
confers land rights for the Four Corners Project and certain
associated facilities. The Participants individually remit a
yearly lease payment of approximately $32,000 to the Lessor. The
initial term of the lease is 50 years.
4. Four Corners Fuel Agreement Number 2, dated
September 1, 1966, as amended, which provides for the purchase
and sale of the fuel (coal) necessary to operate Units 4 and 5.
The initial term of the agreement is 35 years.
The Debtor's monthly share of operation and mainten-
ance, capital and fuel costs under the Four Corners Agreements is
approximately $1.1 million. The Debtor has been paying those
costs incurred after the Petition Date, but has not paid any
amounts incurred prepetition. In December 1992, the Debtor filed
a motion in the Bankruptcy Court to assume the Four Corners
Agreements which was objected to by APS and remains pending. The
prepetition claims related to the Four Corners Agreements are
approximately $1.2 million.
Rio Grande Power Station. The Rio Grande Power
Station, located in Dona Ana County, New Mexico, adjacent to
El Paso, Texas, consists of three steam-electric generating units
owned by the Debtor which have an aggregate capability of 246 MW
when operating entirely on natural gas. When natural gas at the
station is curtailed, the units operate primarily on fuel oil.
Newman Power Station. The Newman Power Station,
located in El Paso, Texas, consists of three generating units
with an aggregate capability of 266 MW and one combined-cycle
unit with a capability of 212 MW, all of which are owned by the
Debtor. The units regularly operate on natural gas, but also are
capable of operating on fuel oil.
Copper Station. The Copper Station, located in El
Paso, Texas, consists of a 69 MW combustion turbine capable of
operating on fuel oil or natural gas and is used for peaking
purposes. The combustion turbine and other generating equipment
at the station were sold and leased-back by the Debtor in 1980
pursuant to a twenty-year lease with an option to renew of up to
seven years. Copper Lease payments are approximately $1,722,000
per year. The Debtor has been paying such costs incurred after
<PAGE> 53
the Petition Date and no material unpaid amounts were incurred
prepetition. In December 1992, the Debtor filed a motion with
the Bankruptcy Court to assume all of the agreements related to
the sale and lease back transaction which was granted.
Transmission Lines. The Debtor owns the following
transmission facilities:
1. A 313-mile long, 345 kilovolt ("KV") transmission
line and associated substation equipment known as the Arizona
Interconnection Project (the "AIP"). The transmission line
originates at the Springerville Generating Station in
Springerville, Arizona, and terminates at the Debtor's Diablo
Substation near the Rio Grande Power Station. The AIP enables
the Company to import energy from the Arizona and New Mexico
power grids.
2. A 230-mile long, 345 KV transmission line from the
Arroyo Substation near Las Cruces, New Mexico, to Albuquerque,
New Mexico, at which point the Debtor's entitlement from Four
Corners is delivered from 150 miles of transmission lines owned
by PNM. This 345 KV transmission line regularly carries power
from the Four Corners Project, where the Debtor has a major
interconnection with the other five Participants in the Four
Corners Project.
3. Undivided interests in a 200-mile long, 345 KV
transmission line from the Newman Power Station across southern
New Mexico to Greenlee, Arizona. Specifically, the Debtor owns
an undivided 40% interest in the 60-mile Greenlee, Arizona, to
Lordsburg, New Mexico, segment; an undivided 57.2% interest in
the 50-mile Lordsburg, New Mexico, to Deming, New Mexico,
segment; and a 100% interest in the 90-mile Deming, New Mexico,
to El Paso, Texas, segment. This line provides interconnections
with TEP to provide transmission for the Debtor's entitlement
from the Four Corners Project and Palo Verde Station and also
adds stability, flexibility and reliability to the Debtor's
system.
4. An undivided 66% interest in a 125-mile long, 345
KV transmission line running between the Debtor's Amrad
Substation near the Newman Power Station and the Eddy County
Substation near Artesia, New Mexico. The line terminates with a
direct current converter facility connected with Southwestern
Public Service Company ("SPS"), providing the Debtor and the
line's co-owner, TNP, with limited (200 MW) access to the Texas
power market.
The Debtor is also a party with TEP to a Power Exchange
and Transmission Agreement, dated April 19, 1982 and an Inter-
connection Agreement, dated June 28, 1991 (the "TEP Agreements"),
<PAGE> 54
which provide a means, among other things, for the Debtor to
obtain power from Palo Verde. The Debtor currently plans to
assume the TEP Agreements pursuant to the Plan, although it is
continuing to review its options regarding assumption or
rejection of the TEP Agreements and the implications thereof.
With respect to the Debtor's transmission capacity,
there exists a binding Arbitration Order ("Order") dated
December 16, 1990 and Federal District Court Judgment ("Judg-
ment") confirming the Order between the Debtor and PNM. The
Order and Judgment affect the ability of the Debtor and PNM to
import power into their respective service areas. Currently,
there is a dispute between PNM and the Debtor regarding the
interpretation of the Arbitration Order.
The Debtor's position regarding the application of the
Order is that it requires a reassessment of the Debtor's and
PNM's import capability because of changed circumstances. The
Debtor contends the changed circumstances significantly increase
the Debtor's import capability and that the Debtor's current
import capability is not deficient.
PNM's position is that the conditions requiring a
reassessment have not occurred. Additionally, PNM contends that
the Debtor has a current import capability deficiency and a
reassessment would not materially reduce the Debtor's current
import deficiency.
The Debtor acknowledges that it is PNM's position that
the Debtor is importing power across PNM's system in excess of
the level authorized by the Arbitration Order. The Debtor and
PNM disagree on the interpretation of the Arbitration Order and
its implementation under changed circumstances. PNM contends
that these import levels utilize its transmission system and has
therefore continued to invoice the Debtor as provided for by the
Interim Transmission Agreement and Agreement to Arbitrate
("Interim Agreement"). The Debtor has not paid post-petition
invoices for the use of PNM's system amounting to approximately
$2.5 million to date, and PNM has filed an Administrative
Priority Proof of Claim for said amounts.
The Debtor and PNM are negotiating an agreement to resolve
the transmission dispute wherein it is anticipated that
resolution of these amounts will be determined. Throughout the
course of these negotiations, it is PNM's understanding that the
Debtor intends to assume the Interim Agreement and to remit full
payment of the post-petition arrearages owed under the Interim
Agreement. The amounts and method of payment will be set forth
in detail in the agreement being negotiated. Should the parties
fail to negotiate such an agreement, a failure to do so will not
act as a waiver by any party as set forth herein.
<PAGE> 55
On April 1, 1993, the Debtor filed Docket No. 2478 at the
NMPUC, pursuant to an NMPUC order, requesting among other things
that the NMPUC determine that a restudy of the import capability
of the New Mexico bulk power transmission system is necessary due
to changed circumstances affecting the power import capabilities
of the Northern New Mexico Transmission System and Southern New
Mexico Transmission System. On April 27, 1993, the Hearing
Examiner found that the relief the Debtor was seeking had not
been adequately identified and provided the Debtor additional
time to amend its pleadings. Subsequently, on July 23, 1993, the
Debtor submitted a request to the NMPUC to place NMPUC Docket No.
2478 in abeyance pending the outcome of the Debtor's phase
shifter filing, which was also filed on July 23, 1993. In that
filing, the Debtor applied for a CCN to construct and operate a
phase shifting transformer device on its transmission system
which Debtor claims will assist in the resolution of its
transmission dispute with PNM. In written testimony submitted to
the NMPUC identifying the need for this device, PNM believes the
Debtor has described its current and future deficiencies to
import power in a manner consistent with PNM's position.
Although the Debtor would expect to be successful in these
proceedings, it is unable to provide assurances that it will be
successful.
The Debtor is also a party with PNM to various transmission
agreements. At the present time, the Debtor intends to assume
the following transmission agreements relating to the Debtor's
import of power in the State of New Mexico:
1. Interconnection Agreement of July 19, 1966 between the
Debtor and PNM, together with all Service Schedules and
Amendments thereto.
2. The Revised Inland Power Pool Agreement dated November
23, 1983, as amended and supplemented, together with
all Service Schedules and Amendments thereto.
3. Contract No. 14-06-500-1605, Interconnection contract
between the United States of America Bureau of
Reclamation and CPS (now known as TNP). The Debtor,
Plains Electric Generation and Transmission
Cooperative, Inc., and PNM, for Rio Grande Project,
dated October 2, 1969, and associated letter dated
October 1969 from the United States Department of the
Interior to Tucson Gas and Electric Company, the
Debtor, and PNM.
4. The Southwest New Mexico Transmission Project
Participation Agreement among PNM, CPS (now known as
TNP) and the Debtor, dated April 11, 1977, as amended.
<PAGE> 56
5. This Interim Transmission Capability Agreement and
Agreement to Arbitrate between the Debtor and PNM dated
March 30, 1990.
Palo Verde Nuclear Generating Station. As of the
Petition Date, the Debtor owned or leased a 15.8% interest in
each of Palo Verde Units 1, 2 and 3 and the Common Plant. Each
Palo Verde Unit has an operating capability of 1,270 MW. The
Debtor owns 100% of its interest in Unit 1 and 60.5% of its
interest in Unit 3, and it leased 100% of its interest in Unit 2
and 39.5% of its interest in Unit 3. The utilities that share in
power and energy entitlements and bear certain allocated costs
with respect to the Palo Verde Station include the Debtor and six
other utilities: APS, SCE, PNM, Southern California Public Power
Authority, Salt River Project and the Los Angeles Department of
Water and Power (collectively, the "Palo Verde Participants").
The Debtor's rights and obligations with respect to the
Palo Verde Station, exclusive of rights or obligations arising in
respect of the Palo Verde Leases, are governed by several inter-
related agreements to which the Palo Verde Participants are a
party, the most material of which are as follows:
1. Arizona Nuclear Power Project Participation Agree-
ment, dated August 23, 1973, as amended (the "ANPP
Participation Agreement"). The ANPP Participation
Agreement provides for the use of Palo Verde
generated power by each Palo Verde Participant.
It is also the principal agreement governing the
relationship, rights and obligations of the Palo
Verde Participants in connection with the Palo
Verde Units. Pursuant to the ANPP Participation
Agreement, each Palo Verde Participant must fund
its proportionate share of operation and main-
tenance, capital and fuel costs of Palo Verde
Station. The Debtor's total monthly share of
these costs is approximately $8 million, including
the portion attributable to the leased portions of
Palo Verde Station of approximately $4 million per
month.
2. Arizona Nuclear Power Project High Voltage Switch-
yard Participation Agreement, executed as of
August 20, 1981, as amended (the "ANPP Switchyard
Agreement"). The ANPP Switchyard Agreement pro-
vides for the use of Palo Verde related switchyard
facilities by the Debtor and other Palo Verde
Participants.
<PAGE> 57
3. Arizona Nuclear Power Project Valley Transmission
System Participation Agreement, executed as of
August 20, 1981, as amended (the "ANPP Transmis-
sion Agreement"). The ANPP Transmission Agreement
provides for the use of transmission facilities by
the Debtor and other Palo Verde Participants.
On February 13, 1992, the Bankruptcy Court approved a
stipulation between the Debtor and APS, as the operating agent of
Palo Verde, pursuant to which the Debtor agreed to pay its
proportionate share of all Palo Verde invoices delivered to the
Debtor after February 6, 1992. The Debtor agreed to make these
payments until such time as an order is entered by the Bankruptcy
Court, if ever, authorizing or directing the Debtor's rejection
of the Participation Agreement governing the relationship among
the Palo Verde Participants. If the Debtor defaults, APS and the
other Palo Verde Participants may take steps to pursue remedies,
including seeking the imposition of a deadline to assume or
reject the Participation Agreement. The stipulation also speci-
fies that approximately $9 million of the Debtor's Palo Verde
payment obligations are to be considered prepetition general
unsecured claims of the other Palo Verde Participants.
The Debtor intends to assume the ANPP Participation
Agreement, the ANPP Switchyard Agreement and the ANPP Transmis-
sion Agreement and believes that payment of its liabilities
arising under these agreements will cure the Debtor's defaults
thereunder and allow for such assumption. The Palo Verde
Participants have in the past contended, however, that the ANPP
Participation Agreement is not assumable by the Debtor without
the consent of the other Palo Verde Participants for reasons
which include the occurrence of noncurable defaults or that the
agreement may be somewhat more costly to cure than projected by
the Debtor. The Palo Verde Participants, for example, asserted
that (i) the Debtor's rejection of the Palo Verde Leases may
constitute an unauthorized transfer of interests and alteration
of the ownership scheme pursuant to and thereby in breach of
the ANPP Participation Agreement and render it noncurable and
unassumable without consent of all of the other Palo Verde
Participants, (ii) rejection of the Palo Verde Leases may result
in a breach of the ANPP Participation Agreement, in which event
there could be additional damages resulting to and claimed by the
Palo Verde Participants, (iii) the Debtor's posture in the Palo
Verde Lease litigation regarding the nature of the Palo Verde
Leases is contrary to the ANPP Participation Agreement and
(iv) the Debtor's failure to pay timely Arizona ad valorem taxes
may have breached the ANPP Participation Agreement and related
Palo Verde Agreements, in which event that breach could become an
obstacle to assumption of those contracts. The Palo Verde
Participants, and others, have also contended that the Debtor's
ability to cure and assume the ANPP Participation Agreement, the
<PAGE> 58
ANPP Switchyard Agreement and the ANPP Transmission Agreement is
a condition to the feasibility and implementation of, and the
Debtor's ability to confirm, the Plan.
The Debtor does not believe that there are any
noncurable defaults under the ANPP Participation Agreement, the
ANPP Switchyard Agreement, the ANPP Transmission Agreement or
related agreements. If the Debtor is not able to assume these
agreements on a consensual basis, then, at or prior to confirma-
tion of the Plan, the Debtor intends to resolve Plan feasibility
and implementation issues related to these agreements by seeking
and obtaining a Bankruptcy Court determination that the Debtor is
entitled, and is able, to assume the ANPP Participation Agree-
ment, the ANPP Switchyard Agreement, the ANPP Transmission Agree-
ment or related agreements or is otherwise assured of the future
receipt of power attributable to the Debtor's Palo Verde
interests.
The Debtor is informed that the Palo Verde Participants
may also contend that significant administrative claims may be
asserted against the Debtor related to Palo Verde in addition to
the approximately $10 million of claims which have been projected
by the Debtor in connection with an assumption of the ANPP
Participation Agreement. In particular, they may contend that if
any portion of the post-petition taxes attributable to the
Debtor's interest in Palo Verde remains unpaid at the Effective
Date, then those taxes will, as to the Debtor's owned interests,
and may, as to its leased interests, constitute administrative
obligations of and result in administrative claims against the
estate. Payment of taxes without penalty, as well as cure,
payment and performance of all executory contracts which are
assumed, are administrative obligations which are included in the
Debtor's financial projections; however, it is possible that the
Debtor may have to pay a penalty rate of interest on past due
real estate taxes. Arizona statutes, for example, impose a 16%
per annum rate of interest on delinquent taxes.
The Palo Verde Participants further maintain that,
even if the Debtor rejects the ANPP Participation Agreement and
related agreements, the Debtor can never be released from all its
legal obligations under the ANPP Participation Agreement so long
as it intends to receive any benefit under the ANPP Participation
Agreement and pay the associated obligations therefor, and even
if the Debtor rejects its participation in Palo Verde, can never
discharge unilaterally certain of its related obligations, such
as its obligations for decommissioning.
Operation of a nuclear generating unit requires an
operating license from the NRC. Full power operating licenses
for Palo Verde Units 1, 2 and 3 were issued to APS by the NRC in
June 1985, April 1986 and November 1987, respectively. The full
<PAGE> 59
power operating licenses are valid for a period of approximately
40 years. The Debtor is separately licensed by the NRC to
possess its owned and leased interests in Palo Verde Station.
The Debtor is required to fund its share of the
estimated costs to decommission Palo Verde Station. The Debtor
has established decommissioning funds with independent trustees
and as of December 31, 1992, the trustees held approximately
$11.3 million for decommissioning, which is reflected in the
Debtor's balance sheet as deferred charges and deferred credits.
The Debtor has continued to fund its share of
decommissioning costs for Palo Verde Station under the ANPP
Participation Agreement. Following is a summary of amounts
funded to date and of future accumulation projections for the
Debtor's owned portion and the portion currently subject to
lease:
($000)
Owned Leased Total
Balance as of 12/31/91 $ 3,456 $ 3,880 $ 7,336
Thru 03/31/93:
Contributions 2,548 2,001 4,549
Earnings 266 379 645
Balance as of 3/31/93 6,270 6,260 12,530
Projected Funding:
Balance of 1992 813 584 1,397
1993 1,594 1,296 2,890
1994 2,248 1,828 4,076
1995 2,337 1,900 4,237
Post 1995 168,159 141,916 310,075
Projected earnings 633,925 583,314 1,217,239
Total Projected
Accumulations: $814,533 $736,514 $1,551,047
The chart above projects both funding and earnings on
funds accumulated. The Debtor's projections assume an after-tax
yield on funds invested of 7.33%. Of the total projected
accumulations of $1.551 billion, approximately 78% is projected
to come from earnings, with the balance being funded by annual
contributions. Financial projections of the Debtor included in
the Plan reflect the latest cost projections discussed below.
The Debtor's projected cash contributions increase yearly by an
amount equivalent to expected inflation. The estimated costs for
accounting purposes are accounted for on a straight-line basis
with any differences between cash contributions and straight-line
amortization being recognized as a liability on the balance
sheet.
<PAGE> 60
The Debtor's funding requirements are derived from
engineering cost estimates performed on a three-year cycle. The
Palo Verde Participants voted to select an external engineering
firm to perform the cost estimate specific to the Palo Verde
Station, TLG Engineering, Inc. ("TLG"). TLG's 1992 assessment of
the cost of decommissioning Palo Verde Station determined that
the Debtor will have to fund approximately $212 million (stated
in 1992 dollars) for its share of such cost. This estimate
reflects a 76% increase from the last estimate made in 1989, due
primarily to an increase in the estimated cost associated with
the permanent burial of radioactive waste. The increase is
directly related to the uncertainty surrounding the availability
and cost of low-level radioactive waste repositories.
Congress has established requirements for each state to
dispose of radioactive waste generated within its borders. The
requirements may be satisfied through the use of "Compacts,"
which are agreements formed among groups of states whereby each
participant acts as a "host" for waste disposal for all Compact
participants for a specified period through the operation of a
low-level waste disposal within its borders. Arizona belongs to
the Southwestern Compact with California, North Dakota and South
Dakota. California is designated as the first host state with
Arizona second. The scheduled opening of the Ward Valley site in
California is currently estimated to be delayed up to two years
because of the recent re-opening of public hearings related to
the site. In addition, the California legislature has enacted
several surcharges to be applied on a per-unit basis to the waste
buried at Ward Valley. Current legislation is pending in the
California state legislature for additional surcharges, which are
as yet unquantified. Although the Palo Verde Station is esti-
mated to undergo decommissioning during the period in which
Arizona will act as host for the Southwestern Compact, the uncer-
tainty and costs experienced in California demonstrate possible
roadblocks that may be repeated in the future when Arizona opens
a repository.
Until a new low-level waste disposal site opens and
operates for a number of years, stable estimates of the cost to
bury radioactive waste are not anticipated and increases in the
cost to decommission the Palo Verde Station may be experienced.
The Debtor's projections assume average annual escalation of
5.29% in the cost to decommission. Because the cost escalation
for any given year may be substantially different, there can be
no assurance that the escalation assumed in its projections will
provide adequate funds to decommission Palo Verde Station.
The Palo Verde Participants have insurance for public
liability payments resulting from nuclear energy hazards to the
full limit of liability under federal law. This potential
liability is covered by primary liability insurance provided by
<PAGE> 61
commercial insurance carriers in the amount of $200 million and
the balance by an industry-wide retrospective assessment program.
The maximum assessment per reactor under the retrospective rating
program for each nuclear incident is approximately $66 million,
subject to an annual limit of $10 million per incident. Based
upon the Debtor's current 15.8% interest in Palo Verde Units 1, 2
and 3, the Debtor's maximum potential assessment per incident is
approximately $31.3 million, with an annual payment limitation of
$4.74 million.
The Palo Verde Participants also maintain "all risk"
(including nuclear hazards) insurance for property damage to, and
decontamination of, property at Palo Verde in the aggregate
amount of $2.625 billion, a substantial portion of which must
first be applied to stabilization and decontamination. The
Debtor has additionally secured insurance against a portion of
any increased cost of generation or purchased power which may
result from the accidental outage of any of the three units if
the outage exceeds 21 weeks.
The Debtor may have causes of action arising out of the
failure of APS, the operating agent of Palo Verde Station, to
operate and maintain Palo Verde Station in the manner required by
federal law and regulations and by contract. The potential
claims against APS include possible breach by APS, as operator,
of contractual and fiduciary obligations relating to Palo Verde.
These claims may be of significant value. The investigation and
evaluation of the potential claims against APS is focused upon
the extended 1989-90 outages at Palo Verde Units 1, 2, and 3, and
the causes thereof. During that time, the three Palo Verde units
were out of service for approximately 900 days, with each of the
units, on a combined basis, being subject to Confirmatory Action
Letters issued by the U.S. Nuclear Regulatory Commission. At a
hearing before the Bankruptcy Court on October 14, 1992, the
retention of experts to assist in evaluating the potential claims
was approved. The direct damages to the Debtor as a result of
the outages may include unbudgeted Operation and Maintenance
costs in 1989 and 1990, which were directly attributable to the
outages as well as replacement power costs incurred by the Debtor
also directly attributable to the unscheduled outages. APS is
likely to deny any liability to the Debtor and vigorously defend
any claim filed against it. The Debtor is not able to provide
assurance as to the amount of damages it would recover if
litigation is commenced. The PUCT Staff has advised that to the
extent costs attributable to the Palo Verde outages have been
paid by ratepayers, the Staff may contend that any recoveries
from APS should inure to the benefit of the ratepayers. APS
believes, although the Debtor disagrees, that significant facts
and issues bar any such claim by the Debtor (see Section V, B(4),
infra).
<PAGE> 62
Other Assets. The Debtor is contemplating commencement
of litigation against the Owner Participants in the Palo Verde
Unit 2 and Unit 3 sale/leaseback transactions. Unless the
settlement with Class 12(b) contemplated in the Plan is effected,
the claims which the Debtor contemplates filing derived in part
from an oral agreement between the Debtor, the Letter of Credit
Banks and most of the Owner Participants which extended the
expiration date of the letters of credit for a period of 120
days.
Despite the agreement with most of the Owner
Participants to an extension of the expiration of the letters of
credit, the Owner Participants drew on the letters of credit, in
the amount of $208 million on December 26-27, 1991, and $80.4
million on January 9, 1992, certifying that an Event of Default
had occurred under the Palo Verde Leases. As a result of the
draws on the letters of credit, the Debtor incurred $288.4
million in liability under Reimbursement Agreements with the
Letter of Credit Banks. Additionally, the draws on the letters
of credit thwarted the Debtor's attempt to restructure its
financing arrangements and, within a matter of a few days, forced
the Debtor to file its voluntary bankruptcy petition.
As a result of the draws on the letters of credit, the
Debtor has suffered substantial damages and believes that it is
entitled to pursue both contract and tort causes of action
against the Owner Participants as well as other claims. The
potential damage claims could include the amount of the draws on
the letters of credit, consequential and incidental damages,
claims for unjust enrichment, attorneys' fees and interest, as
well as punitive damages. The Owner Participants would likely
deny any liability to the Debtor and vigorously defend any
lawsuit filed against them. At this stage, the Debtor is not
able to provide any assurance as to the amount of damages it
would recover if litigation is commenced.
Other assets of the Debtor include a claim to
collateral granted to the Debtor by First Service Life Insurance
Company ("First Service") to secure payment of annuities
purchased by the Debtor from First Service. Such collateral
consists of all of the outstanding stock of Triangle Electric
Supply Company, an electrical supply company located in El Paso,
Texas, and funds that had been held in a joint escrow account
between the Debtor and the receiver appointed by the State of
Texas to liquidate First Service during the pendency of
litigation. The Debtor initiated a declaratory judgment action
in 1988 in a State District Court in Austin, Texas, to recover
the collateral. For a description of the declaratory judgment
action and related litigation, see Part 1, Item 3, "Legal
Proceedings - First Service Life Civil Litigation," in the 1992
Annual Report and the April 14, 1993 Form 8-K, the May 26, 1993
<PAGE> 63
Form 8-K and the June 4, 1993 Form 8-K. The litigation has been
resolved pursuant to a settlement approved by the State District
Court in Texas and the Bankruptcy Court. Pursuant to the terms
of the settlement order, the Debtor has received all of the
collateral and all ancillary claims against the Debtor have been
dismissed. Pursuant to the settlement, the Debtor has agreed to
prosecute vigorously its claim against the State of Texas seeking
recovery of attorneys' fees incurred by the Debtor in defending
an action filed by the State of Texas against the Debtor on the
grounds that such action was frivolous. The Debtor will retain
one-third of any such fees recovered and, pursuant to the
settlement, will pay the remaining two-thirds to a trust account
for the benefit of the settling holders of annuities. The State
District Court has denied the claim on the ground that the
actions of the receiver do not constitute action of a state
agency. The Debtor intends to appeal this decision. The Debtor
is not able to provide any assurance (i) with respect to the
value that will be realized from the Triangle stock or (ii) with
respect to the amount of any recovery of attorneys' fees from the
action against the State of Texas; however, in the Debtor's
opinion, even under favorable circumstances the recovery and
realization is not likely to be more than $30 million.
The Debtor owns warrants to purchase stock constituting
forty-nine percent (49%) of CAI Corporation for a cost of
$500,000. The Debtor acquired such warrants as part of the
proceeds from the sale of its investment in preferred stock of
Commercial Federal Savings & Loan in December 1989. CAI Corpora-
tion owns 1,250,000 shares of the common stock of Commercial
Federal Corporation, which constitute approximately 9.9% of the
outstanding shares of common stock of Commercial Federal Corpora-
tion. As of July 29, 1993, Commercial Federal Corporation traded
on NASDAQ at a closing sales price of $25 per share. The Debtor
cannot provide any assurance of the value of common stock of CAI
Corporation or Commercial Federal Corporation at the time of or
following exercise of such warrants, or the ability to realize
maximum value in respect of such warrants.
B. Regulation
The Debtor is a public utility operating under the
Public Utility Regulatory Act ("PURA") in Texas, the Public
Utility Act in New Mexico ("NMPUA") and the Federal Power Act
("FPA"). Jurisdictional authority under such statutes may be
affected by the Debtor's rights and responsibilities under the
Code. The Debtor is regulated in many aspects of its business,
but most significantly as to the rates it can charge its
customers. The amount of the Debtor's revenues is directly
regulated by applicable state and federal authorities.
<PAGE> 64
Subject to the jurisdiction of the Bankruptcy Court and
the provisions of the Plan, to the extent applicable, the follow-
ing authorities regulate the business operations and assets of
the Debtor:
Texas. The rates and services of the Debtor within
Texas municipalities are regulated by those municipalities that
have not surrendered their jurisdiction to the PUCT and
in unincorporated areas by the PUCT. The Debtor's largest
municipality in its Texas service area is the City of El Paso.
The PUCT has exclusive de novo appellate jurisdiction to review
municipal rate orders and ordinances, and the PUCT's decisions
are subject to judicial review.
The PUCT has jurisdiction to grant and amend CCNs for
service territory and certain facilities, including generation
and transmission facilities. Although the PUCT does not have the
authority to approve mergers and transfers of utility assets,
mergers and certain transfers of utility assets must be reported
to the PUCT within a reasonable time for it to investigate
whether they are consistent with the public interest. Upon a
finding that such a transfer is not in the public interest, the
PUCT is required to take the effects of such transaction into
consideration in future ratemaking proceedings and to disallow
the effects of such transaction if it will unreasonably affect
rates or service. The PUCT does not have jurisdiction over the
issuance of securities by Texas utilities.
The current Texas jurisdictional rates of the Debtor
were obtained in Docket No. 9945, which the Debtor filed on
December 28, 1990 with the PUCT. It included a request for the
scheduled fourth base-rate increase under the Docket No. 7460
rate moderation plan on Palo Verde Units 1 and 2 and for the
recovery, also on a moderated basis, of the Texas jurisdictional
portion of the Debtor's investment in Palo Verde Unit 3, includ-
ing the lease payments, net of deferred gain, on the Debtor's
sales and leasebacks of a portion of its interest in Palo Verde
Unit 3. The Debtor's combined request was for $131.3 million,
which included approximately $49 million related to the Palo
Verde Units 1 and 2 rate moderation plan and approximately $82.3
million related to Palo Verde Unit 3. Of the total request,
approximately $38 million was to be in cash with the balance
deferred for subsequent recovery.
The PUCT issued its final order in Docket No. 9945 on
November 12, 1991. The Order approved a total increase in Texas
base revenues of approximately $47 million, with $37 million in
cash and $10 million of phase-in deferrals. Of the $37 million
cash increase, approximately $30 million related to the Debtor's
request for Palo Verde Unit 3 and represented operating and
maintenance expenses, decommissioning expenses and ad valorem
<PAGE> 65
taxes, as well as an allowance for purchased power capacity. The
PUCT's order did not include in rates any current return of or
return on the owned portions of Palo Verde Unit 3, nor did it
include the lease payments on the leased portions of Palo Verde
Unit 3. These costs were to be included in future Texas rates on
a phased-in basis, as discussed below.
The PUCT disallowed approximately $32 million of
Palo Verde Unit 3 capital costs, on a total company basis, as
imprudently incurred. The PUCT also disallowed $9.8 million, on
a total company basis, of previously deferred costs related to
the 1989-90 outages of Palo Verde Units 1 and 2.
With respect to the rate base treatment of Palo Verde
Unit 3, the PUCT, contrary to the Hearing Examiners' recommenda-
tion to include Palo Verde Unit 3 in rates, adopted an inventory
plan. Under the inventory plan, the fixed costs of Palo Verde
Unit 3 were to be included subsequently in Texas rates. In
justifying the inventory plan, the PUCT found that (i) the Debtor
was imprudent in not attempting to sell an interest in Palo Verde
between 1978 and 1981, (ii) the Debtor failed to demonstrate that
it would have been unable to sell such interest if it had
attempted to do so and (iii) as a result of such imprudent
action, the addition of Palo Verde Unit 3 to the Debtor's system
would result in then unacceptable excess capacity. However, the
PUCT further found that Palo Verde Unit 3 would become "used and
useful" to the Texas jurisdiction in the following percentages:
0% in Docket No. 9945 and, 40%, 65%, 85% and 100% thereafter.
For a detailed description of certain significant rate and
regulatory proceedings in which the Debtor is involved and
appeals from certain regulatory decisions pending in the Texas
courts, reference is made to Part I, Item 1, "Business --
Regulation -- Texas Rate Matters," of the 1992 Annual Report.
The PUCT Staff has advised the Debtor that, in its
view, the regulatory treatment received by the Debtor with
respect to its Palo Verde investments was justified under state
law and was comparable to treatment historically received in
Texas and other jurisdictions by other utilities participating in
nuclear power plant projects. The PUCT asserts that Texas law,
like that of some other states, requires regulators to review
such costs for reasonableness and to determine whether such
investments result in "used and useful" capacity. The PUCT Staff
has advised the Debtor that, in its view, the impact of less-
than-full allowance of Palo Verde costs may have been magnified
for the Debtor, as compared to other utilities, because of (i)
the relatively high degree of reliance which the Debtor placed
upon nuclear power and (ii) the $112 million after-tax loss
experienced by the Debtor as a result of its diversification into
non-utility businesses. In the view of the Debtor, the Debtor's
loss resulting from diversification into non-utility businesses
<PAGE> 66
was not a material cause of its prepetition financial difficul-
ties.
The Debtor and three intervenors (the City of El Paso,
the Office of Public Utility Counsel, and the State of Texas, as
ratepayer) appealed the PUCT's decision in Docket No. 9945 to the
state district court in Travis County, Texas. These appeals are
set for argument on the merits on October 15, 1993.
New Mexico. The NMPUC has authority over the Debtor's
rates and services in New Mexico; prior approval of the issuance,
assumption or guarantee of securities; the creation of liens on
property within the state; prior approval of consolidations,
mergers and acquisition of some or all of the stock of another
utility; prior approval of the sale, lease, rental, purchase or
acquisition of any public utility plant or property constituting
all or any part of an operating unit or system; the valuation of
utility property and business; prior approval of certain
extensions, improvements and additions; approval of Class I
transactions and prior approval of certain Class II transactions
(as those transactions are defined by the New Mexico Public
Utility Act); prior approval of abandonment of facilities and
decertification of utility plant. The NMPUC Staff has stated
that it will vigorously oppose any attempt to cause the
Bankruptcy Court to exercise jurisdiction reserved to the NMPUC
under the NMPUA.
The New Mexico jurisdictional rates of the Debtor are
substantially governed by a Final Order Approving Stipulation in
NMPUC Case No. 2009 issued on May 18, 1987 (the "Stipulation").
As part of the Stipulation, the Debtor agreed to three annual
rate increases of no greater than 3% per year and, after the
third increase, to base rates remaining constant until the
earlier of (i) December 31, 1994 or (ii) such time as the cost of
service deferrals and the deferred debit referred to in the
Stipulation were fully recovered and then-current revenues
exceeded the then-current cost of service. Under the Plan, the
Debtor intends to comply with the Final Order Approving the
Stipulation in NMPUC Case No. 2009 and will not seek to increase
its base rates until after December 31, 1994.
The Debtor's New Mexico jurisdictional rates were based
on the inclusion of Palo Verde Units 1 and 2 costs and the
permanent exclusion of Unit 3 costs. At such time as the
Debtor's New Mexico service territory requires additional
capacity, the Debtor may request that additional capacity be
included in the Debtor's New Mexico rates at prices that reflect
then-available market prices for equivalent sources of long-term
firm capacity. The Debtor anticipates that it will require
substantially all of the capacity represented by Unit 3 (or its
replacement) in New Mexico by 1995.
<PAGE> 67
Federal Energy Regulatory Commission. The FERC
regulates specified activities of "public utilities" under the
FPA. The FPA defines public utilities as persons owning or
operating jurisdictional facilities. The Debtor is a public
utility under the FPA. Under the FPA, the FERC has jurisdiction
over rates charged for wholesale sales of electricity, issuances
of securities, certain dispositions of assets, and interlocking
directors, among other things. The Debtor is currently making
wholesale sales of electric power to IID and TNP, which are
regulated by the FERC.
Under the FPA and the Department of Energy ("DOE")
Organization Act ("DOE ACT"), the DOE authorizes persons to
transmit electric energy from the United States to another
country. The Debtor holds an authorization to transmit electric
energy to CFE.
Nuclear Regulatory Commission. Palo Verde Station is
subject to the jurisdiction of the NRC, which has authority to
issue permits and licenses and to regulate nuclear facilities to
protect the health and safety of the public from radiation
hazards and to conduct environmental reviews pursuant to the
National Environmental Policy Act. Before any nuclear power
plant can become operational, an operating license from the NRC
is required. The NRC has granted facility operating licenses for
Palo Verde Units 1, 2 and 3 for terms of 40 years each beginning
December 31, 1984, December 9, 1985 and March 25, 1987, respec-
tively. Full power operating licenses for Palo Verde Units 1, 2
and 3 were issued to APS by the NRC in June 1985, April 1986 and
November 1987, respectively. In addition, the Debtor is
separately licensed by the NRC to possess its proportionate owned
and leased shares in Palo Verde.
The Atomic Energy Act of 1954, as amended, 42 U.S.C.
Subsection 2011 et. seq. (Atomic Energy Act), provides that a
license to own a nuclear generating facility and any right under
that license may not be transferred or in any manner disposed of,
directly or indirectly, to any person through transfer of control
unless the NRC finds that such transfer of control is in
accordance with the Atomic Energy Act and consents to the trans-
fer. Consistent with these statutory provisions, and NRC
regulations implementing these provisions, any transfers under
the merger plan to third parties, to the Reorganized EPE, or to
CSW, of any of EPE's interests in and/or NRC licenses for Palo
Verde, including transfers of stock affecting the control of the
Reorganized EPE, will require that appropriate applications be
made on a timely basis to NRC and that NRC approvals for the
transfers be obtained, prior to the Effective Date. Depending on
the final timing of the transfers relating to the merger, NRC
approvals may be requested through either one or more applica-
tions to NRC. The specific time required for NRC review cannot
<PAGE> 68
be predicted and will be somewhat dependent on whether one or
more applications must be reviewed and approved by NRC. In
addition, formal notice to the NRC is required under EPE's
current NRC license conditions when material changes occur in the
terms of the EPE Palo Verde lease agreements.
C. The Debtor's Operations in Chapter 11
1. Overview of the Debtor's Operations
Since the Petition Date, the Case has been pending
before the Honorable Frank R. Monroe, United States Bankruptcy
Judge. During this period, the Debtor has functioned as debtor
in possession pursuant to Sections 1107 and 1108 of the Code and
has continued to operate its business substantially as before the
filing of the petition. The Bankruptcy Court has exercised
supervisory powers over the operations of the Debtor with respect
to the employment of attorneys, investment bankers, and other
professionals, transactions out of the Debtor's ordinary course
of business or otherwise requiring bankruptcy court approval
under the Code, and payments on account of prepetition claims
related to certain existing security holders, ratepayers, deposit
claimants, certain trade creditors, taxing entities and employees
of the Debtor.
The Debtor has been paying when due obligations that
have arisen subsequent to the Petition Date, including all of its
obligations to pay operating and maintenance, capital and fuel
costs associated with its 15.8% interest in Palo Verde pursuant
to the ANPP Participation Agreement and to fund its share of
decommissioning costs of Palo Verde; however, except for the
payment of certain interest pursuant to a Bankruptcy Court order,
the Debtor has not been paying obligations accruing under its
existing financing arrangements, and has not been paying
administrative rent pursuant to the Palo Verde Leases pending a
determination as to the post-petition amounts owed with respect
to such leases.
2. Retention of Professionals and Appointment of
Committees
(a) The Debtor's Retention of Bankruptcy
Counsel
As of the Petition Date, the Bankruptcy Court author-
ized the Debtor's retention of the firms of Sidley & Austin and
Winstead Sechrest & Minick P.C., as reorganization counsel for
the Debtor.
<PAGE> 69
(b) The Debtor's Retention of Other Professionals
The Bankruptcy Court approved the employment of Barr
Beatty Devlin & Co., Incorporated ("Barr Beatty") as investment
banker and financial advisor for the Debtor, effective as of
February 20, 1992. The Bankruptcy Court reserved final judgment
on the reasonableness of the total compensation to be paid to
Barr Beatty. Other professionals have also been retained by the
Debtor. See Section II.C.4.e herein, for a complete listing of
all professionals retained in this case.
(c) Official Committees and the Retention
of Professionals Thereby (at Debtor's
expense)
On January 24, 1992, the Bankruptcy Court, by and
through the U.S. Trustee, appointed the Official Committee of
Unsecured Creditors pursuant to Section 1102(a) of the Code (the
"Official Unsecured Creditors Committee"). The Official
Unsecured Creditors Committee has met, organized, and remained
active in the day-to-day course of the Case. The Official
Unsecured Creditors Committee received authorization to retain
and has retained the law firm of Haynes & Boone, L.L.P. as
official counsel. The Official Unsecured Creditors Committee
also received authorization to retain and has retained Price
Waterhouse and Alex Brown and Sons, Inc. to perform certain
financial consulting services.
The present members of the Official Unsecured Creditors
Committee are as follows:
Co-Chairs
Citibank, N.A.
Barclays Bank PLC
Voting Members
The Nippon Credit Bank, Ltd.
Ex Officio Members
Arizona Public Service Company
On April 16, 1992, the Bankruptcy Court, by and through
the U.S. Trustee, appointed an Official Committee of Equity
Holders (the "Official Equity Holders Committee") comprised of
three common stockholders and one preferred stockholder. This
Committee was authorized to and did retain as counsel the law
firms of Lord, Bissell & Brook and Martinec, Hargadon & Wise
(local counsel). The Official Equity Holders Committee also
retained Salomon Brothers Inc. as its financial advisor pursuant
<PAGE> 70
to authority granted by the Bankruptcy Court under a limited
engagement.
The current members of the Equity Holders Committee are
as follows:
Chairman
Wellington Management Company
Shares: 2,271,900 Common
Voting Members
Milton F. Lewis
Shares: 61,000 Common
Nationwide Insurance Companies
Shares: 30,000 $8.95 Dividend
Preferred Stock
22,000 $10.125 Dividend
Preferred Stock
Dimensional Fund Advisors, Inc.
Shares: 252,600 Common
3. Operating Results During Chapter 11
The Debtor's operating results for the year ended
December 31, 1992 and management's discussion thereof are set
forth in the Debtor's 1992 Annual Report, which is attached as
Exhibit F hereto. As of September 9, 1993, the Debtor had
approximately $224 million in cash and anticipates it would have
approximately $242 million immediately prior to Plan
confirmation, if confirmation were to occur on September 30,
1993. Bankruptcy-related expenditures and payment of certain
post-petition interest are the main cash expenditures prior to
confirmation.
The foregoing amounts do not include additional
payments the Debtor will be required to make in connection with
certain administrative obligations and prepetition claims
associated with contracts the Debtor plans to assume, which,
pursuant to the Plan, need not be paid until the Effective Date
of the Plan. The more significant payments required in
connection with the payment of administrative obligations and the
assumption of executory contracts and unexpired leases pursuant
to the Plan, to the extent not previously paid, may include the
following:
<PAGE> 71
Arizona Public Service Company
("APS") (figure subject to 9.2 million
dispute and counterclaim of
at least $3.8 million)
Fuel and Purchased Power 7.9
Total $17.1 million
The foregoing list of administrative obligations does
not reflect any administrative rent claim arising from the Palo
Verde Leases. Palo Verde Lease administrative claims, if any,
are excluded, inter alia, because they will be discharged and
satisfied pursuant to the treatment accorded Class 12 Creditors
pursuant to the Plan. The APS amount set forth above represents
the prepetition claim associated with the ANPP Participation
Agreement and the Four Corners Operating Agreement, both of which
the Debtor anticipates it will assume. The Palo Verde
Participants have asserted potentially greater claims with regard
to Palo Verde. The Debtor also has claims against APS which may
offset claims by APS against the Debtor. Fuel and purchased
power are prepetition amounts associated with various fuel
contracts that the Debtor intends to assume. These amounts,
along with post-petition interest, professional fees and other
small payments at confirmation will bring the Debtor's cash
balance to approximately $157.5 million (inclusive of all Interim
Payments required under the Plan), assuming the Plan is effective
December 31, 1994. However, there can be no assurance that the
Plan will be effective December 31, 1994. APS and the other Palo
Verde Participants contend, although the Debtor may disagree,
that the figures set forth in the above chart are not accurate
and, in any event, not subject to any dispute or counterclaim,
other than specific contractual setoffs. APS and the other Palo
Verde Participants contend, although the Debtor disagrees, that
the ANPP Participation Agreement cannot be cured and assumed
without each participant utility's express consent.
4. Summary of Significant Orders Entered During
the Case
As in any major Chapter 11 case, certain motions,
applications and orders have been filed and entered on the
Bankruptcy Court's official docket. The following information
relates to certain significant orders entered in the Case.
(a) Exclusivity
Upon motions of the Debtor, the Bankruptcy Court
extended the Debtor's exclusive periods for filing a plan of
reorganization and soliciting acceptances thereof to September 8,
1992 and December 23, 1992, respectively. On December 23, 1992,
the Bankruptcy Court ruled that the Debtor's exclusivity period
<PAGE> 72
continues pursuant to Bankruptcy Rule 3016 until such time as
confirmation of the Debtor's Second Amended Plan is denied or the
Bankruptcy Court authorizes another party to file a competing
plan of reorganization. On July 16, 1993, SPS filed a Motion in
opposition to the setting of a hearing on this Disclosure
Statement.
(b) Administrative Orders
On February 18, 1992, the Bankruptcy Court entered an
order setting (i) the Bar Date for the filing of proofs of claims
at June 15, 1992, (ii) requirements for creditors to file notices
of appearance in the Case and (iii) limitations on the number of
parties to be served with motions and other administrative
procedures. The Bankruptcy Court granted the Debtor's motion to
extend the Debtor's time to file Schedules of Assets and Liabili-
ties, Statement of Financial Affairs and List of Executory
Contracts. Such Schedules, Statement and List were filed with
the Bankruptcy Court on February 25, 1992. On May 25, 1993, the
Bankruptcy Court entered an Order setting August 31, 1993 as the
Bar Date for filing certain environmental claims.
Subsequent to the Petition Date, the Bankruptcy Court
entered orders allowing the Debtor (i) to honor checks which had
been issued, but were unpaid, as of the Petition Date, (ii) to
pay trade vendors whose prepetition claims were less than, equal
to, or reduced to $10,000, (iii) to pay certain customer refunds
and deposits in the ordinary course of business, (iv) to pay
specified prepetition taxes owed to various governmental entities
in its service area, and (v) to settle the allocation of
prepetition and post-petition amounts due under the ANPP Partic-
ipation Agreement.
On November 2, 1992, the Debtor paid approximately
$7.5 million to counties in Arizona for payment of post-petition
property taxes on the Debtor's owned utility property in Arizona,
including its owned interest in Palo Verde. On November 10,
1992, the Bankruptcy Court entered an order authorizing the
payment of prepetition and post-petition taxes on the Debtor's
property located in Arizona, including both its owned and leased
interests in Palo Verde. The order provides that payments with
respect to the leased portion of Palo Verde for the periods prior
to the filing of the bankruptcy petition and after September 8,
1992 are made under a reservation of rights such that if the
Bankruptcy Court determines the Debtor is not liable for such
taxes, the Debtor will receive either a refund or a credit
against future Maricopa County property taxes, or other appro-
priate relief ordered by the Bankruptcy Court. Pursuant to the
Order, on November 13, 1992, the Debtor paid approximately $12.9
million of prepetition taxes for 1991 on both the owned and
leased portions of Palo Verde that were due May 1, 1992 and
<PAGE> 73
approximately $6.3 million for the first half payment of 1992
property taxes related to the leased portion of Palo Verde that
were due November 2, 1992. On May 3, 1993, the Debtor paid when
due approximately $6.2 million for the second half payment of
1992 property taxes related to the leased portion of Palo Verde
and approximately $7.5 million for such property taxes related to
the owned portion. On June 24, 1993, the Bankruptcy Court
approved the terms of a settlement reached between the Debtor and
the Arizona Department of Revenue with respect to an alleged
deficiency of Arizona income taxes for the years 1984-1987.
Pursuant to the settlement, the Debtor paid approximately $4
million in settlement of all income tax liability for such years.
In return, the Department of Revenue's assessment of
approximately $46.4 million, including interest accrued through
the Petition Date, was satisfied and its proof of claim in that
amount expunged. Maricopa County, Arizona, and the Debtor are
currently in dispute over the County's claims for interest and/or
penalties; APS and the other Palo Verde Participants contend,
although the Debtor disagrees, that failure to resolve this issue
may further impact the Debtor's attempts to cure and assume the
ANPP and related agreements.
(c) Palo Verde Station, Palo Verde Leases
and Other Real Estate Leases
On February 13, 1992, the Bankruptcy Court approved a
stipulation between the Debtor and APS, as the operating agent of
Palo Verde Station, pursuant to which the Debtor agreed to pay
its proportionate share of all Palo Verde Station invoices
delivered to the Debtor after February 6, 1992. The Debtor
agreed to make these payments until such time as an order is
entered by the Bankruptcy Court, if ever, authorizing or direct-
ing the Debtor's rejection of the ANPP Participation Agreement.
As long as the Debtor continues to make these payments, APS and
the other Palo Verde Participants have agreed not to file a
motion prior to December 31, 1992 seeking a deadline for the
assumption or rejection of the ANPP Participation Agreement. If
the Debtor defaults, APS and the other Palo Verde Participants
may take steps to pursue other remedies. The stipulation also
specified that approximately $9.2 million of the Debtor's Palo
Verde Station payment obligations invoiced prior to February 7,
1992 are to be considered prepetition general unsecured claims of
the other Palo Verde Participants.
With respect to the Palo Verde Leases, the Bankruptcy
Court extended the period during which the Debtor could decide
whether to assume or reject such leases, as well as other real
estate leases of the Debtor, to September 8, 1992. The Debtor
filed an action in the Bankruptcy Court on September 9, 1992
seeking a determination, among other things, that the Palo Verde
Leases are real property leases and were rejected by operation of
<PAGE> 74
law on September 8, 1992. For a description of the Bankruptcy
Court's order granting partial summary judgment in this proceed-
ing and the subsequent vacating of such order, see "The Palo
Verde Lease Rejection Litigation" under Section IV "Description
of Significant Scheduled Claims and Interests" herein.
The Debtor also filed a motion on July 23, 1992, which
was granted on August 25, 1992, regarding the assumption of
certain unexpired real estate leases other than the Palo Verde
Leases and other related matters. In that motion, the Debtor
requested authority to assume all of its unexpired real estate
leases with the following exceptions: (i) the lease for the
Debtor's principal offices (the "Mills Building Lease"), (ii) the
lease related to the Debtor's sale and leaseback transaction
involving generation equipment at the Copper Station (the "Copper
Lease"), to the extent the Copper Lease may in any respect be an
unexpired lease of non-residential real property, and (iii) the
lease, as amended, entered into with the Navajo Nation in connec-
tion with the construction and operation of Four Corners (the
"Navajo Lease"). With regard to the Mills Building Lease, the
Copper Lease and the Navajo Lease, the Debtor obtained an exten-
sion for at least until December 23, 1992, in which to assume or
reject these leases. On October 23, 1992, the Debtor filed a
motion to assume the Mills Building Lease, as amended to change
its expiration date to December 31, 1993, which was approved.
The Debtor has paid or will pay all post-petition lease payments
on the Mills Building Lease, Copper Lease and Navajo Lease. The
Debtor filed motions to assume the Copper Lease and Navajo Lease
in December 1992. The Court granted the Copper Lease assumption
motion, but no orders have yet been entered with respect to the
Navajo Lease motion. See also Section III under "Future Business
of the Debtor" herein.
(d) Interest Payments
On September 30, 1992, in response to a motion by
certain secured creditors, the Bankruptcy Court entered an order
authorizing payment of interest to those secured creditors
classified by the Plan as holders of claims in Classes 1, 2, 3
and 5, subject to certain defined limitations, including the
retention by the Debtor of minimum cash balances. On October 27,
1992, the Bankruptcy Court entered an Agreed Order to clarify
certain ambiguities in the September 30, 1992 Order and to
authorize the payment of interest at the contract non-default
rates from July 1, 1992 through November 30, 1992. On December
29, 1992, the Bankruptcy Court entered an Agreed Order that
authorized the payment of interest to the same creditors for
December 1, 1992 through January 31, 1993, on generally the same
terms as the prior Agreed Order. A Stipulation entered April 1,
1993 provides for continued payment of interest to the same
creditors subsequent to January 31, 1993 until the Effective Date
<PAGE> 75
on generally the same terms as the prior Agreed Orders. The
Debtor has made payment of interest for the months of February
through July, 1993. With respect to three series of pollution
control bonds, the Debtor has reserved its right to repayment
from banks issuing letters of Credit supporting such bonds of
interest amounts paid pursuant to the Stipulation and Agreed
Orders entered to date, in the event the Bankruptcy Court
determines such payments were payments of unsecured claims. For
a further discussion of amounts that the Debtor has paid pursuant
to the Agreed Order, see Part II, Item 7, "Management's Discus-
sion and Analysis of Financial Condition and Results of Opera-
tions - Obligations Subject to Compromise" of the 1992 Annual
Report.
(e) Administrative Claims
Administrative expenses include, among other things,
fees and expenses of attorneys, accountants, and other profes-
sionals (collectively, the "Case Professionals") retained by the
Debtor and the Official Committees. Such fees and expenses are
subject to approval by the Bankruptcy Court after appropriate
notice and a hearing at which any creditor or party-in-interest
may object or comment. The PUCT Staff has advised the Debtor
that it may litigate the inclusion of these amounts for
ratemaking purposes. Pursuant to the Merger Agreement,
administrative expenses will include amounts payable to CSW by
the Debtor pursuant to the Merger Agreement and the Interim
Approval Order. Such fees are calculated generally as the
product of the customary hourly billing rate and the aggregate
hours billed by such Case Professionals. As of June 30, 1993,
the Debtor had paid $29,547,087.53 to Case Professionals pursuant
to the terms and conditions of that certain Order Establishing
Procedures for Allowance of Fees and Payment of Interim
Compensation and Reimbursement of Expenses to Case Professionals
and Appointing a Fee Examiner dated June 5, 1992 (the "Fee
Order"). The following chart provides specific details related
to such payments.
<PAGE>
<PAGE> 76
<TABLE>
<CAPTION>
Amount Billed Amount Paid
--------------------------- ------------------------
Professional Billing Period Fees Expenses Fees Expenses
- ------------ ------------------ ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Akin, Gump, Strauss, Hauer & Feld 1-08-92 - 3-31-93 3,538,745.06 660,960.10 3,336,748.63 614,858.28
Alex Brown & Sons, Inc. 2-12-93 - 7-12-93 250,000.00 0 250,000.00 0
Barr, Beatty, Devlin Co. 1-08-92 - 6-30-93 2,520,000.00 64,602.15 2,520,000.00 64,602.15
BBD Financial Corp. 1-08-92 - 6-30-93 120,000.00 0 120,000.00 0
Bracewell & Patterson 1-08-92 - 5-31-93 473,716.00 113,163.98 446,473.55 102,601.56
Brown & Bain 8-18-92 - 4-30-93 129,555.00 7,468.48 112,836.77 7,086.33
Bruder, Gentile & Marcoux 1-08-92 - 6-30-93 180,485.71 11,074.58 160,799.58 10,536.06
Clark, Thomas & Winters 1-08-92 - 6-30-93 1,907,583.95 189,567.11 1,683,491.78 169,541.03
Cohen & Throne 1-08-92 - 6-30-93 1,472,136.44 72,664.16 1,300,833.56 69,777.71
Haynes & Boone 1-08-92 - 5-30-93 2,357,342.64 382,959.94 1,702,184.52 301,563.66
Kemp, Smith, Duncan & Hammond 1-08-92 - 7-31-92 561,519.00 36,349.95 536,087.01 36,349.95
KPMG Peat Marwick 1-08-92 - 6-30-93 1,604,193.10 38,503.26 1,524,931.23 34,493.33
Lipson, Dallas & Weiser 1-08-92 - 6-30-93 241,770.00 13,953.47 229,701.88 12,564.90
Lord, Bissell & Brook 4-01-92 - 5-30-93 1,172,222.90 121,109.89 926,007.59 109,966.23
Martinec Hargadon & Wise, & P.C. 4-01-92 - 1-31-93 28,498.75 12,817.31 28,498.75 12,817.31
Mudge, Rose Guthrie Alexander & Ferdon 6-08-92 - 6-30-92 55,233.50 744.29 55,233.50 744.29
Price Waterhouse 1-08-92 - 5-31-93 2,254,209.20 327,868.40 1,875,927.37 302,705.95
Salomon Brothers 1-14-93 - 9-15-93 750,000.00 32,945.00 750,000.00 32,945.00
T.A. Sandenaw 9-01-92 - 5-31-93 5,448.93 198.13 4,086.70 178.32
Sidley & Austin 1-08-92 - 4-30-93 5,763,990.25 571,715.24 4,702,432.03 521,109.34
Small, Craig & Werkenthin 1-08-92 - 3-31-93 2,080,835.00 233,367.14 2,032,354.13 224,080.31
Strasburger & Price L.L.P. 6-01-92 - 3-31-93 148,279.50 7,789.92 141,967.87 7,419.82
Stuart, Maue, Mitchell & James LTD. 6-05-92 - 5-31-93 738,757.50 12,258.54 738,757.50 12,258.54
Sutin Thayer and Browne 5-01-92 - 12-31-92 12,000.00 43.10 12,000.00 43.10
Weinbrenner, Richards, Paulowsky & Ramirez 1-08-92 - 8-31-92 8,678.29 407.61 6,508.70 366.85
Wilson & Najjar 7-01-92 - 12-31-92 30,000.00 2,427.91 30,000.00 2,427.91
Winstead Sechrest & Minick 1-08-92 - 5-31-93 1,761,551.95 264,843.62 1,426,329.34 241,857.61
------------ ----------- ------------- ------------
Total 30,166,752.67 3,179,803.28 26,654,191.99 2,892,895.54
/TABLE
<PAGE>
<PAGE> 77
The foregoing do not include fees and expenses of creditors and
certain indenture trustees which the Debtor may be obligated to
reimburse pursuant to the Plan and/or the Code.
The Debtor has obtained authority from the Bankruptcy
Court to retain Barr Beatty & New Harbor as its financial
advisor. Under such engagement, Barr Beatty & New Harbor is paid
a total of $150,000 per month. In addition, and subject to
Bankruptcy Court approval, the Debtor reimburses Barr Beatty &
New Harbor for reasonable out-of-pocket expenses. The Official
Unsecured Creditors Committee received approval from the
Bankruptcy Court to retain Price Waterhouse as its financial
advisor on an hourly basis, as well as reimbursement for its
reasonable out-of-pocket expenses and to retain Alex Brown as
additional financial advisors. The Official Equity Holders
Committee has retained Salomon Brothers as its financial advisors
under a limited engagement.
<PAGE> 78
If approved by the Bankruptcy Court, the fees of the
Case Professionals will be allowed as administrative expenses.
In addition to the fees based on hourly rates and hours worked or
the monthly fee established for Barr Beatty, upon request and
after notice and a hearing, the Bankruptcy Court may approve the
award or allowance of additional fees to the Case Professionals
as administrative expenses. Such an award of additional fees
would be based on various criteria established by the Code and as
interpreted by relevant case law, with any such fees being
subject to objection and comment by parties-in-interest.
Based on fees and expenses incurred to date, the Debtor
estimates total fees and expenses for all Case Professionals will
approximate between $45 million and $60 million, not including
any additional fees that a Case Professional may seek from the
Bankruptcy Court, assuming that the Plan becomes effective on
December 31, 1994 and may increase to the extent the Effective
Date is delayed after that date. Further, because the Debtor has
been authorized to make interim payments to Case Professionals
pursuant to the Fee Order, the Debtor estimates that the cash
required on the Effective Date to pay the Administrative Claims
that are fee claims should not exceed $11.7 Million under the
same assumption. The PUCT and the NMPUC Staff have expressed
concern over the amount of administrative fees and expenses
incurred in the bankruptcy case and have indicated an intent to
closely scrutinize any requested recovery of such fees and
expenses in rates. The City of El Paso and OPC have expressed
similar concerns.
The Bankruptcy Court appointed Stuart, Maue, Mitchell &
James Ltd. as the Bankruptcy Court's expert and fee examiner.
The fee examiner has rendered various reports. Upon the
suggestion of the Mediator in his Initial Status Report, dated
March 24, 1993, the Debtor filed a motion to terminate the
appointment of the fee examiner, which motion was approved by the
Bankruptcy Court.
All unpaid fees of the United States Trustee will be
paid on the Effective Date. Such fees have been paid as they
have been incurred during the pendency of the Case.
III. ACQUISITION OF DEBTOR BY CSW AND FUTURE BUSINESS
OF THE DEBTOR
A. Ownership of the Debtor by CSW
The Plan provides that, upon the Effective Date, all of
the common stock of the Reorganized Debtor will be owned by CSW.
CSW is a registered holding company under the PUHCA, as amended,
and owns all of the outstanding shares of common stock of CPL,
<PAGE> 79
PSO, SWEPCO, WTU, Transok, Central and South West Services, Inc.
("CSWS"), CSW Credit, Inc., and CSW Energy, Inc. ("CSWE"). In
November 1991, CSW Financial, Inc. was merged into CSW, which
owned all of the outstanding shares of common stock of CSW Finan-
cial, Inc. In addition, CSW owns 80% of the outstanding shares
of common stock of CSW Leasing, Inc. The Electric Operating
Companies are public utility companies engaged in generating,
purchasing, transmitting, distributing and selling electricity.
For further information regarding the business operations and
financial performance of CSW, reference is made to the Central
and South West Corporation Annual Report on Form 10-K for the
year ended December 31, 1992, attached hereto as Exhibit G.
CPL and WTU operate in portions of south and central
west Texas, respectively; PSO operates in portions of eastern and
southwestern Oklahoma; and SWEPCO operates in portions of north-
eastern Texas, northwestern Louisiana and western Arkansas.
Transok is an intrastate natural gas gathering, processing and
transmission company that processes, transports and sells natural
gas to PSO as well as to the other electric operating companies
and nonaffiliates. CSWS performs, at cost, various accounting,
engineering, tax, legal, financial, electronic data processing,
accounting, engineering, centralized economic dispatching of
electric power and other services for the CSW System. CSW
Credit, Inc. purchases accounts receivable of the Operating
Companies and nonaffiliated electric utilities. CSWE pursues
cogeneration projects and other energy ventures. CSW Leasing,
Inc. invests in leveraged leases.
As of December 31, 1992, the electric operating
companies supplied service as follows:
Service Area
Estimated Approximate
Company Population Square Miles
CPL 1,898,000 44,000
PSO 1,010,000 30,000
SWEPCO 849,000 25,000
WTU 406,000 53,000
CSW System 4,116,000 152,000
As of December 31, 1992, the electric operating
companies supplied electric service to approximately 1,599,000
retail customers. In addition, they supplied, at wholesale, all
or a portion of the electric energy requirements of 7 munici-
palities and 25 rural electric cooperatives. The largest cities
served by the electric operating companies at retail are Corpus
Christi, Abilene, Laredo, San Angelo and Longview in Texas; Tulsa
and Lawton in Oklahoma; Shreveport and Bossier City in Louisiana;
and Texarkana in Arkansas and Texas.
<PAGE> 80
In 1992, the CSW System companies contributed the
following percentages to aggregate operating revenues, operating
income and net income for common stock.
CPL PSO SWEPCO WTU Other
Operating Revenues 34% 19% 23% 9% 15%
Operating Income 45% 13% 24% 10% 8%
Net Income for Common Stock 52% 11% 23% 9% 5%
The relative contributions of the CSW System companies
to the aggregate operating revenues, operating income and net
income for common stock differ somewhat from year to year due to
variations in the rate of changes in fuel costs reflected in
charges to customers, timing and amount of rate changes, and
amounts of CWIP included in rate base. In 1992, approximately
64% of the CSW System's electric revenues were earned in Texas,
22% in Oklahoma, 8% in Louisiana and 6% in Arkansas.
A copy of CSW's Form 10-K Annual Report for the year
ended December 31, 1992 is attached hereto as Exhibit G.
B. Summary of Terms of the Merger Agreement
The following is a brief summary of certain provisions
of the Merger Agreement, which is attached as Exhibit B to this
Disclosure Statement and is incorporated herein by reference.
This summary is qualified in its entirety by reference to the
Merger Agreement. Capitalized terms not otherwise defined herein
shall have the meanings given to them in the Merger Agreement.
1. The Merger
The Merger Agreement provides that, following the
satisfaction of certain specified conditions, including, without
limitation, approval of the Plan by the Bankruptcy Court, CSW
Sub, a wholly-owned subsidiary of CSW, shall be merged with and
into the Debtor (the "Merger") and the separate corporate
existence of CSW Sub shall cease. Reorganized EPE shall be the
surviving corporation in the Merger and shall continue its
corporate existence under the laws of the State of Texas. The
name of Reorganized EPE shall continue to be El Paso Electric
Company or such other name as CSW shall determine prior to the
Effective Time and Reorganized EPE shall continue to be
headquartered in El Paso, Texas.
The Restated Articles of Incorporation and By-laws of
the Debtor shall be amended in connection with the Merger and
shall be the Restated Articles of Incorporation and By-laws of
Reorganized EPE. Immediately after the Effective Time, the Board
of Directors of Reorganized EPE shall be comprised of CSW's Chief
<PAGE> 81
Executive Officer, the Chief Executive Officer of Reorganized
EPE, five (5) other officers of Reorganized EPE and six (6)
outside directors who are residents of Reorganized EPE's service
area or such other persons as shall be designated by CSW prior to
the Effective Time. The officers of Reorganized EPE immediately
after the Effective Time shall be such persons as shall be desig-
nated by CSW in consultation with EPE prior to the Effective
Time.
Upon consummation of the Merger, each share of EPE
Common Stock outstanding immediately prior to the Effective Time
(other than any such shares which are held in the treasury of the
Debtor or owned by CSW or CSW Sub) shall be converted into the
right to receive shares of CSW Common Stock (which may not be
transferred for a period of eight months after the Effective Date
except for holders of 5,000 or fewer shares of CSW Common Stock
and except in certain limited circumstances) in the following
amount: such number of shares of CSW Common Stock as would have
a value determined as described herein (but not to exceed $4.50
per share) equal to the sum of (i) $3.00 plus (ii) a Pro rata
share of any proceeds received by the Debtor prior to the Effec-
tive Time from dispositions of certain tangible and intangible
assets or reductions in certain Claims described herein, plus
(iii) the dividends (including dividends on such dividends) that
would be paid on the amounts described in items (i) and (ii)
above assuming such amounts were used to purchase CSW Common
Stock. Each share of EPE Preferred Stock shall receive the
treatment described in Section V.4.h hereof. Options to purchase
Common Stock of the Debtor will be converted into options to
purchase shares of CSW Common Stock, as described herein.
Holders of EPE Common Stock may also receive distributions from
the Liquidation Trust provided for under the Merger Agreement.
For a description of the Liquidation Trust, see the discussion
under V.B.4(i) below.
Pursuant to the Merger Agreement, CSW has agreed that
from and after the initial filing of the Plan, CSW will provide
to holders of Common Stock of the Debtor an amount equal to the
aggregate consideration described in the preceding paragraph in
any transaction or plan pursuant to which CSW acquires the Debtor
(and CSW will not participate in any acquisition of the Debtor
under any other plan unless such plan provides such holders with
such consideration, even if CSW exercises its rights to terminate
the Merger Agreement and even if an interim approval order
(providing that certain provisions of the Merger Agreement shall
be binding on CSW and the Debtor) is not entered. The foregoing
provision shall not apply if (i) subsequent to balloting on the
Plan, and a hearing on confirmation, if promptly sought by EPE,
it becomes apparent under all the circumstances that the Plan
cannot be confirmed; (ii) the Debtor withdraws the Plan (as it
may be amended from time to time); (iii) the Debtor files a
<PAGE> 82
stand-alone plan of reorganization inconsistent with the Merger
Agreement or (iv) the Merger Agreement is terminated by CSW
pursuant to the provision allowing CSW to terminate the Merger
Agreement if there has been a material breach of any
representation, warranty, covenant or agreement of the Debtor
under the Merger Agreement and such breach is not remedied within
10 days after notice from CSW.
As promptly as practicable after the Effective Time, a
form letter of transmittal and instructions for surrender of EPE
Stock certificates for conversion pursuant to the Merger
Agreement shall be mailed to each record holder of certificates
representing shares of EPE Common Stock and/or shares of EPE
Preferred Stock. Upon surrender to the Exchange Agent of share
certificates representing shares of EPE Common Stock or EPE
Preferred Stock, the holder of such certificates shall receive
certificates representing the number of shares of CSW Common
Stock or Reorganized EPE Preferred Stock, as the case may be, in
the amounts described above. In lieu of any fractional shares of
CSW Common Stock, each holder of a certificate representing
shares of EPE Common Stock or EPE Preferred Stock who would
otherwise have been entitled to a fraction of a share of CSW
Common Stock or Reorganized EPE Preferred Stock, as the case may
be, upon surrender of such certificate shall be entitled to
receive (i) in the case of CSW Common Stock, a cash payment in
lieu of such fractional share equal to such fraction multiplied
by the closing sales price of CSW Common Stock reported in the
Wall Street Journal, New York Stock Exchange Composite
Transactions on the Effective Date, and (ii) in the case of
Reorganized EPE Preferred Stock, a cash payment in lieu of such
fractional share equal to the product of such fraction multiplied
by $100. THE DEBTOR'S SHAREHOLDERS SHOULD NOT SEND IN ANY EPE
COMMON STOCK OR EPE PREFERRED STOCK CERTIFICATES UNTIL THEY
RECEIVE A TRANSMITTAL FORM.
2. Effective Time
The Merger will be consummated if and when each of the
conditions described under "Certain Conditions" is satisfied or
(where permissible) waived and the parties file Articles of
Merger with the Secretary of State of the State of Texas. The
Merger will become effective upon the issuance of a certificate
of merger by such Secretary of State or at such later time as may
be provided for in the Articles of Merger.
The NMPUC Staff states that the NMPUA provides that
NMPUC approval is also a condition precedent to the effectiveness
of the Merger.
<PAGE> 83
3. Certain Covenants
Pursuant to the Merger Agreement, CSW and CSW Sub have
agreed that, during the period from the date of the Merger
Agreement until the earlier to occur of the Effective Time or
earlier termination of the Merger Agreement, CSW Sub will not
incur any liabilities or obligations or otherwise engage in
business or activities except in connection with the consummation
of the Merger Agreement. In addition, unless consented to by the
Debtor (which consent cannot be unreasonably withheld) or unless
there is an appropriate adjustment to the Common Stock Exchange
Ratio adequately reflecting the value of any of the following
actions taken by CSW or any of its Subsidiaries, CSW and its
Subsidiaries shall not (a) declare, set aside or pay any extra-
ordinary or special dividend or distribution on any of the
capital stock of CSW, or (b) make or agree to make extraordinary
above-market purchases of its stock, except as permitted by the
SEC under the PUHCA; and provided further, that within sixty (60)
days prior to the Confirmation Date or the Effective Time CSW
will not make any such repurchases unless they are in the
ordinary course and consistent with prior practice to meet the
needs of certain specified CSW employee benefit programs
presently in effect or as hereafter amended.
In addition, the Debtor has agreed to comply with
certain operating restrictions during the period from the date of
the Merger Agreement until the earlier to occur of the Effective
Time or earlier termination of the Merger Agreement, except as
required by law or consented to by CSW (which consent cannot be
unreasonably withheld).
4. No Solicitation by the Debtor
The Merger Agreement provides that unless so directed
by a Court Order, neither the Debtor nor any person acting at its
direction shall, directly or indirectly, (a) solicit or encourage
any inquiries, proposals or offers by, (b) participate in any
discussions or negotiations concerning, or disclose or afford any
access to any information, or otherwise assist, facilitate or
encourage, or enter into any agreement or understanding with, any
person relating to any merger, consolidation or business
combination or sale or acquisition of all or any material portion
of the assets of, or any equity interest in the Debtor or any of
its subsidiaries that is not consistent with the Merger Agreement
(an "EPE Proposal"). The Merger Agreement also provides that,
notwithstanding the foregoing, prior to the entry of the
Confirmation Order, the Debtor may, to the extent required by a
Court Order or by the fiduciary duties of its Board of Directors
under applicable law, participate in discussions or negotiations
regarding a possible EPE Proposal. The Debtor is required to
<PAGE> 84
notify and provide information to CSW immediately with respect to
any such inquiry or EPE Proposal.
5. Additional Agreements
The Merger Agreement provides that each party to the
agreement will (a) afford the other party and its representatives
access to all of its respective facilities, properties, books,
contracts, commitments and records and make available copies of
all reports and other documents filed by such party with certain
Federal or state governmental or regulatory authorities; (b) if
and to the extent necessary, cooperate in the preparation and
filing of a Registration Statement and the Declaration to be
filed with the SEC, and to take any other actions required to be
taken under applicable state blue sky or securities laws in
connection with the issuance of CSW Common Stock and Reorganized
EPE Preferred Stock in the Merger; (c) take all actions required
to file with the Federal Trade Commission and the United States
Department of Justice the required notifications under the HSR
Act with respect to the transactions contemplated by the Merger
Agreement and to take any other actions to cause the waiting
periods under the HSR Act to terminate or expire at the earliest
possible date; and (d) cooperate in the preparation and filing of
all necessary documents, applications, notices, petitions and
filings and use all reasonable efforts to obtain all necessary
Permits, consents, approvals and authorizations of all govern-
mental or regulatory authorities and all other third parties,
necessary or advisable to consummate the transactions
contemplated by the Merger Agreement.
Pursuant to the Merger Agreement, CSW will designate
lead counsel and control all applications, petitions and filings
relating to the regulatory approvals required with respect to the
Merger, and the Debtor is permitted to designate its own legal
counsel to represent it in connection with such filings. As soon
as practicable after the issuance of an order by the Bankruptcy
Court confirming the Plan, the Debtor and CSW will file all
federal and state regulatory applications and other notices or
filings for the purpose of obtaining necessary regulatory
approvals in connection with the consummation of the Plan and the
Merger.
CSW additionally agrees to (a) consult with the Debtor
before proposing or entering into any stipulation or agreement
with any governmental or regulatory authority or any third party
in connection with any consents or approvals legally required for
the consummation of the Merger and (b) use reasonable efforts to
cause the shares of CSW Common Stock to be issued pursuant to the
Merger to be listed for trading on the NYSE at or before the
Effective Time.
<PAGE> 85
In addition, each of the Debtor and CSW agrees to
notify the other promptly of (a) the receipt of any notice or
communication with respect to certain matters which could
reasonably be expected to have a CSW Material Adverse Effect or
an EPE Material Adverse Effect, as the case may be, (b) any
notice from any third party alleging that the consent of such
third party is or may be required in connection with the
transactions contemplated by the Merger Agreement, or (c) any
actual notice or communication to or from any governmental or
regulatory authority with respect to any required regulatory
approvals. APS and the other Palo Verde Participants contend,
although the Debtor may disagree, that the Debtor and CSW will
need to reach arrangements with APS and the other Palo Verde
Participants and Four Corners Participants on the nature and role
of the Debtor and CSW in the Palo Verde Projects after the
Confirmation Date and the Effective Date, including designation
of personnel and access to information.
6. Employees and Employee Benefit Plans
After the Merger, CSW and Reorganized EPE will control
the hiring, retention and firing of employees of Reorganized EPE.
Subject to the requirements of all applicable laws and transition
periods for certain plans, all Reorganized EPE employees not
covered under a collective bargaining agreement will be covered
by CSW's employee benefit plans and those employees covered under
a collective bargaining agreement will continue to receive all
benefits in accordance with the provisions of such agreements.
Reorganized EPE will honor all collective bargaining agreements,
and, with respect to certain managers and key employees, the
provisions of the Debtor's severance compensation and indemnity
agreements and preexisting supplemental retirement agreements.
At the Effective Time, Reorganized EPE shall honor
(i) severance compensation agreements, in the forms of agreement
in effect on April 30, 1993, or (ii) the severance compensation
program approved by EPE's Board of Directors prior to the date of
the Merger Agreement, as applicable. If any person covered by a
severance compensation agreement is employed by Reorganized EPE
after the Effective Time, such employment may be subject to a
mutually agreeable amendment to the severance agreement. At the
Effective Time, Reorganized EPE will also honor (i) supplemental
retirement agreements, as in effect on April 30, 1993, with
respect to certain executive officers of EPE not employed by
Reorganized EPE and honor supplemental retirement agreements with
respect to certain executive officers employed by Reorganized EPE
as such agreements may be amended by such person and Reorganized
EPE; and (ii) the Supplemental Retirement and Survivor Income
Plan for Key Employees (the "Supplemental Retirement Plan"), as
in effect on April 30, 1993, subject to amendment, modification
and termination pursuant to the terms thereof, and the life
<PAGE> 86
insurance policies owned by EPE under such plan shall either be
held by Reorganized EPE or transferred to the trust established
under such plan. From and after the Effective Time, payments to
surviving spouses and to current retirees will be made as
provided under the operating documents as of April 30, 1993
without giving effect to any restrictions imposed on an interim
basis by the Bankruptcy Court.
The Stock Purchase Plan, the Phantom Stock Plan, the
Director Stock Plan, the Stock Option Plan and the Stock
Compensation Plan shall be terminated as of the Effective Time of
the merger. Any outstanding option to purchase EPE Common Stock
granted under the Stock Purchase Plan or the Stock Option Plan
shall, to the extent such options have not been exercised, be
converted into an option to purchase the number of shares of CSW
Common Stock which the holder of such option would have been
entitled to receive upon exercise of such option immediately
prior to the Effective Time. Each participant under the Phantom
Stock Plan shall receive a single cash payment equal to the value
of such participant's account thereunder.
The EPE Directors Retirement Plan shall be terminated
as of the Effective Date. Until termination, benefits will con-
tinue to accrue and participants and beneficiaries thereunder in
pay status will continue to receive payments, subject to any res-
trictions imposed by order of the Bankruptcy Court. Upon termi-
nation, all current and former directors with accrued benefits
under the Director's Retirement Plan will receive the present
value of their unpaid accrued benefit in lump-sum payments. Any
director of the Debtor who, at the Effective Time, has not served
as a director for at least five years will be assumed to have
served for five years in determining the benefits payable under
the Directors Retirement Plan.
Reorganized EPE shall maintain, for a period of two
years after the Effective Time, the EPE Savings Plan and the EPE
Savings Plan For Collective Bargaining Employees with terms and
provisions no less favorable, in the aggregate, than the terms
and provisions of such plans as of the Effective Time.
Subject to certain limitations set forth in Section 6.6
(h) of the Merger Agreement, employees of Reorganized EPE not
covered under a collective bargaining agreement will be covered
by CSW's employee benefit plans after the Effective Time.
Employees of Reorganized EPE subject to collective bargaining
agreements shall receive benefits in accordance with such
collective bargaining agreements.
<PAGE> 87
7. Directors' and Officers' Indemnification
The Merger Agreement provides that, for a period of six
years from the Effective Time, the Articles of Incorporation and
By-Laws of the Surviving Corporation shall not be amended,
repealed or otherwise modified in any manner that would adversely
affect the indemnification rights of individuals who at or prior
to the Effective Time were directors, officers, employees or
agents of the Debtor, or who are directors, officers, employees
or agents of Reorganized EPE after the Effective Time, unless
such modification is required by law.
Following the Effective Time, Reorganized EPE agrees to
indemnify each present and former director and officer of the
Debtor or any of its Subsidiaries against any costs, expenses,
judgments, fines, and settlement payments in connection with any
claim, action, suit, proceeding or investigation, arising out of,
relating to or in connection with any action or omission occur-
ring prior to the Effective Time in connection with such person's
serving as an officer or director of the Debtor or any of its
Subsidiaries or arising out of or pertaining to the transactions
contemplated by the Merger Agreement. The indemnification does
not apply to any conduct by an indemnified party that is
determined to constitute intentional misconduct or a knowing
violation of the law, but does include indemnification for the
indemnified party's own negligence, whether sole or concurrent.
In addition, the Merger Agreement requires Reorganized EPE to
maintain in effect for six years after the Effective Time
directors' and officers' liability insurance covering officers
and directors of the Debtor (with respect to events occurring
prior to the Effective Time) and for at least three years with
respect to events occurring after the Effective Time.
Subject to applicable law, at the Effective Time,
Reorganized EPE shall honor and comply with the provisions of the
indemnity agreement, as in effect on April 30, 1993, between EPE
and specified directors and officers.
To the extent the Debtor will assume prepetition
indemnity contracts with its officers and/or directors, the staff
of the SEC questions the Debtor's characterization of indemnity
contracts as executory contracts. To the extent these contracts
are not executory contracts within the meaning of Section 365 of
the Code, Claims arising under the contracts might be
appropriately characterized as prepetition unsecured Claims.
<PAGE> 88
8. Conditions to the Merger
The respective obligations of each party to effect the
Merger are subject to the following conditions (unless waived by
the party whose performance or obligations are subject to the
satisfaction of such condition): (a) receipt of a no-action
letter from the SEC or effectiveness of a Registration Statement
in accordance with the provisions of the Securities Act and the
PUHCA, respectively, and the absence of any stop order relating
thereto; (b) expiration and termination of the waiting period
under the HSR Act and receipt of all CSW Required Statutory
Approvals and EPE Required Statutory Approvals which shall have
become Final Orders and be in effect at the Effective Time (other
than any such consents and approvals which the failure to obtain
would not have a material adverse effect); (c) the absence of any
law, rule, regulation or ordinance, or issuance of a order, which
would have a material adverse effect upon the Debtor or the
prospects for the business of Reorganized EPE after the Merger;
(d) the Confirmation Order, in form and substance reasonably
satisfactory to CSW and EPE, shall have been entered and no
order, stay, or injunction of any court of competent jurisdiction
shall have been issued and be in effect that would prevent the
consummation of the Merger; (e) the Effective Date of the Plan
shall have occurred; and (f) no change in the law as of the date
of the Merger Agreement shall have occurred, so that the benefits
and protection that would be provided to the parties by the
provisions of the Confirmation Order would be materially less
than under the law in effect at the date on which the Merger
Agreement was executed.
In addition, the obligation of CSW and CSW Sub to
effect the Merger shall be subject to the following conditions
(unless waived by CSW and CSW Sub): (a) the Debtor shall have
performed in all material respects its covenants and agreements
contained in the Merger Agreement; (b) the Debtor's representa-
tions and warranties shall have been true and accurate when made
and (where applicable) on and as of the Closing Date; (c) receipt
of a certificate signed by the chief executive officer and chief
financial officer of the Debtor with respect to the satisfaction
of the conditions in (a) and (b) above; (d) the absence of any
(i) Bankruptcy Court order, preliminary or permanent injunction
or other order or decree or (ii) applicable law, rule or
regulation, as the case may be, preventing consummation of the
Merger or requiring a change in the terms and conditions of the
Plan, the Confirmation Order or the Merger Agreement; (e) the
absence of any action, suit, proceeding or investigation
challenging the Merger or any of the other transactions
contemplated by the Merger Agreement or the Plan which, in the
reasonable opinion of CSW, could have a material adverse effect
on the Debtor or Reorganized EPE; (f) resolution of the adversary
proceeding pending before the Bankruptcy Court with respect to
<PAGE> 89
the Palo Verde assets on terms or conditions which do not result
in an EPE Material Adverse Effect or have a material adverse
effect on Reorganized EPE as measured against the proposal for
resolution of such proceeding set forth in the Plan; (g) the
absence of any EPE Material Adverse Effect or any fact or
circumstance which reasonably may be expected to give rise to a
Debtor Material Adverse Effect; (h) receipt of all governmental
consents and approvals required for the consummation of the
Merger (other than those which the failure to obtain would not
have a material adverse effect on the business, operations,
properties, assets, condition (financial or other), rates or
results of operations of the parties); (i) receipt of all neces-
sary consents of third parties who are parties to certain mate-
rial agreements of the Debtor; and (j) qualification of
Reorganized EPE First and Second Mortgage Indentures and the
indentures pursuant to which the Series A Senior Notes and the
Reorganized EPE Class 13 Senior Fixed Rate Notes shall be issued
under the Trust Indenture Act of 1939 (if and to the extent
required).
The obligation of the Debtor to effect the Merger is
subject to the following additional conditions (unless waived by
the Debtor): (a) CSW shall have performed in all material
respects its covenants and agreements contained in the Merger
Agreement; (b) receipt of a certificate signed by CSW's chief
executive officer and chief financial officer with respect to the
satisfaction of the condition set forth in (a) above; (c) the
shares of CSW Common Stock to be issued in the Merger shall have
been validly issued and authorized for listing on the NYSE; (d)
the absence of any CSW Material Adverse Effect; (e) CSW's
representations and warranties shall have been true and correct
when made and (where applicable) on and as of the Closing Date;
(f) the absence of any (i) Bankruptcy Court order, preliminary or
permanent injunction or other order or decree of (ii) applicable
law, rule or regulation preventing consummation of the Merger or
requiring a change in the terms and conditions of the Plan, the
Confirmation Order or the Merger Agreement; and (f) the absence
of any action, suit, proceeding or investigation challenging the
Merger or any other transactions contemplated by the Merger
Agreement or the Plan which, in the reasonable opinion of EPE,
could have a material adverse effect on CSW or Reorganized EPE.
As to any court, administrative agency or other
tribunal (other than a Bankruptcy Court order subject to appeal),
the Merger Agreement defines as a "Final Order" an order or
judgment of such tribunal which is subject to motion for
rehearing, new trial or appeal and as to which (a) if subject to
a motion for rehearing or new trial, (i) the time for such motion
has expired and no such motion has been filed or (ii) such motion
has been filed, it has been overruled and the time for appeal has
expired (regardless of whether an appeal has been filed) or (b)
<PAGE> 90
if subject to appeal, the time for such appeal has expired
(regardless of whether an appeal has been filed). Thus, the
Merger Agreement does not require that a regulatory approval
become non-appealable as a condition of the effectiveness of the
Merger.
9. Termination
CSW has the right to terminate the Merger Agreement
upon the occurrence or failure to occur of any of the following
events (each, a "CSW Termination Event"):
(i) the date on which EPE's exclusive right to file a
plan of reorganization under Section 1121 of the Code terminates
and any third party (other than CSW) files a competing plan of
reorganization for EPE; (ii) 90 days following the filing with
the Bankruptcy Court of the Plan if the Bankruptcy Court shall
not have entered an order approving the Disclosure Statement by
such date; (iii) the date on which the Board of Directors of EPE
or any committee thereof (a) shall withdraw or modify in any
manner adverse to CSW its approval or recommendation of the Plan,
the Merger Agreement, or the Merger, or (b) shall approve or
recommend any EPE Proposal by or EPE Acquisition Transaction with
a party other than CSW or an affiliate of CSW, or (c) shall
resolve to take any of the actions specified in clauses (a) or
(b); (iv) a material breach by EPE of any representation or
covenant or warranty under the Merger Agreement; (v) the date on
which the Bankruptcy Court shall have entered an order confirming
a plan of reorganization for EPE which does not effect the
Merger; (vi) the date on which the Bankruptcy Court denies
approval of the termination fee provisions of the Merger Agree-
ment; (vii) CSW reasonably determines that the conditions
precedent to the Merger cannot be satisfied; (viii) any statutory
approval required by CSW or the Debtor to consummate the Merger
is denied; (ix) CSW determines, in its reasonable judgment, that
satisfactory progress is not being made with respect to
resolution of the claims of the Debtor against the Owner
Participants; (x) no agreement satisfactory to CSW and the Debtor
resolving the claims against the Owner Participants is reached
prior to the Effective Date; or (xi) if EPE files an independent
PURA Section 43 proceeding.
EPE has the right to terminate the Merger Agreement
upon the earliest to occur of the following (each, an "EPE
Termination Event"):
(i) required statutory approvals are not obtained or
EPE reasonably determines that any other closing condition cannot
be satisfied; (ii) material breach by CSW of any representation
or covenant or warranty under the Merger Agreement; (iii) the
date on which the Board of Directors of CSW or any committee
thereof (a) shall withdraw or modify in any manner adverse to EPE
<PAGE> 91
its approval or recommendation of the Plan, the Merger Agreement
or the Merger, or shall resolve to take any such action; or (iv)
EPE shall determine in a manner consistent with its fiduciary
duties as a debtor in possession to engage in an EPE acquisition
transaction with a party unrelated to CSW.
Either EPE or CSW may terminate this Merger Agreement
in the event that (i) the Effective Time has not occurred within
18 months (or, if extended by the parties, within 24 months) of
the Confirmation Date; (ii) the Confirmation Date has not
occurred within six (6) months after the date of the Merger
Agreement; or (iii) prior to the Effective Date, the Plan is
terminated or the Confirmation Order is vacated or reversed.
10. Effect of Termination; Payment of Fees
In the event of a termination of the Merger Agreement,
the Merger Agreement shall become void (other than certain
specified provisions of the Agreement including the obligation to
of each party pay a termination fee in certain events), and there
shall be no further liability on the part of EPE, CSW or CSW Sub
thereunder.
Termination fees are payable only in limited
circumstances. If a termination occurs for the following
reasons, EPE shall be liable to CSW for a termination fee in the
amount of $50 million: (i) EPE decides to engage in an
acquisition transaction with a party other than CSW, (ii) EPE
shall approve or recommend any proposal inconsistent with the
Merger Agreement by, or an acquisition transaction with, a party
other than CSW or (iii) a competing third party plan is confirmed
by the Bankruptcy Court prior to termination of the Merger
Agreement. Such $50 million termination fee shall be payable
only as follows: (i) $25 million upon the confirmation (if any)
of such competing plan, and (ii) $25 million upon the
consummation of any acquisition contemplated by such plan. If a
termination occurs for the following reasons, either CSW or EPE,
as the case may be, shall be liable to the other for a
termination fee in the amount of $25 million: (i) the Effective
Time, as defined in the Merger Agreement, has not occurred within
18 months ("Termination Date") after the entry of an order
confirming the Plan and either CSW or EPE, as the case may be,
refuses to extend the Termination Date by not more than 6 months
following a good faith request by the other or (ii) EPE or CSW,
as the case may be, materially breaches the Merger Agreement and
fails to cure such breach within ten days of receipt of the
notice thereof.
EPE and CSW have also agreed to allocate certain other
costs between them as set forth in the Second Amendment Dated as
of August 26, 1993 to Agreement and Plan of Merger Among El Paso
<PAGE> 92
Electric Company, Central and South West Corporation and CSW Sub,
Inc.
11. Provision Regarding EPE Common Stock Holders
The Merger Agreement further provides that, in
consideration of EPE filing the Plan, CSW will provide to EPE
Common Stock holders an amount equal to the aggregate
consideration to be afforded them under Section 2.8 of the Merger
Agreement in any transaction in which CSW acquires EPE (and CSW
will not participate in any other plan unless such plan provides
for such consideration) even if CSW exercises its right to
terminate the Merger Agreement. This provision, however, does
not apply if (i) after balloting and hearing on Confirmation of
the Plan (if promptly sought by EPE) it becomes apparent under
all circumstances that the Plan cannot be confirmed, (ii) EPE
withdraws the Plan, or (iii) EPE files a stand-alone plan
inconsistent with the terms of the Merger Agreement.
C. Business of Reorganized EPE
The Debtor anticipates that, subsequent to the Effec-
tive Date, Reorganized EPE, as a wholly-owned subsidiary of CSW,
will continue to generate and distribute electricity to retail
and wholesale customers and otherwise operate its business in
substantially the same manner as it did prior to the Petition
Date. The Debtor anticipates that Reorganized EPE's service area
will continue to grow. The Debtor currently projects growth in
kilowatt hour ("KWH") sales through the year 2000 of approxi-
mately 2% annually.
The Debtor achieved record peak demand in 1992, reach-
ing a record total system peak demand of 1,302 MW on July 7,
1992. This increase was primarily related to increased CFE and
IID sales. The Debtor provides CFE with 120 to 150 MW of firm
power on a seasonal basis pursuant to a contract with a base term
terminating in December 1996, which may be extended by mutual
agreement. CFE is in the process of evaluating power supply
options, including construction of new generating facilities in
Mexico and purchasing power from other United States entities,
for additional power needs in the next decade. The Debtor
believes that Reorganized EPE will have a competitive advantage
with regard to providing additional power to CFE because of the
Debtor's long-term relationship with CFE and the quality of the
Debtor's service, including its system reliability and economic
value of energy. The Debtor believes that the Mexico market has
the potential for continued growth. Because of such potential,
the Debtor continues to follow opportunities to provide energy in
Mexico and expects Reorganized EPE to do the same. Subject to
available financial resources, Reorganized EPE intends to be an
active competitor in any future energy opportunities to the
<PAGE> 93
Mexico market. The Debtor provides 100 MW of firm power and 50
MW of contingent power to IID under a contract which expires in
April 2002.
The Debtor's anticipated revenues are based on annual
demand and energy sales projections that, exclusive of wholesale
sales, increase at an annual average of approximately 2% over the
forecast period. The basis for this growth estimate is set forth
in Section X "Feasibility of the Plan" herein and in Appendix A
to this Disclosure Statement.
The Debtor anticipates that its present generating
capacity, including 600 MW generated at Palo Verde, will be
sufficient to service Reorganized EPE's short-term and
medium-term needs. The Debtor's total capacity as discussed
above totals 1,497 MW, consisting of an entitlement of 600 MW
from Palo Verde Units 1, 2 and 3, 246 MW from Rio Grande Power
Station, 478 MW from Newman Power Station, 69 MW from Copper
Station and an entitlement of 104 MW from Units 4 and 5 at Four
Corners.
In the longer term, Reorganized EPE may replace and/or
increase capacity through the construction of new generating
facilities. The bulk of capital expenditures in the short and
medium term will be made solely for the construction of new
transmission facilities. In the long term, capital expenditures
primarily reflect construction of new generating stations. The
projected capital expenditures will either be paid for from
internally generated funds or will be financed externally as
Reorganized EPE's financial position permits. The Debtor has
estimated the projected capital expenditures requirements based
on the projected needs, the change in historical costs of main-
tenance and anticipated changes in construction of transmission,
generation and distribution facilities, as well as the changes in
such costs over time. The Debtor does not contemplate the need
for outside financing to finance capital expenditures until at
least five years after the Effective Date of the Plan.
The Debtor also has a group of existing demand-side
management programs in place, including audit programs for
residential, commercial and industrial customers, a school
efficiency program, a thermal energy storage program and an
energy storage program that the Debtor anticipates Reorganized
EPE will continue after the Effective Date. The Debtor expects
these demand-side management programs to achieve the following
load reductions, as measured by cumulative annual peak MW
reductions, beginning with a reduction of 26 MW in 1992 and
increasing each year to 80 MW in the year 2000, as follows:
<PAGE> 94
Cumulative MW
Year Reduction
1992 26 MW
1993 31
1994 39
1995 45
1996 56
1997 63
1998 70
1999 77
2000 80
The Debtor currently leases its principal corporate
offices from Franklin Land & Resources, Inc., under the Mills
Building Lease, which has a term from March 1, 1978 to
December 31, 1993, as amended. On October 23, 1992, the Debtor
filed a motion, which was subsequently approved, to assume the
Mills Building Lease, as so amended, pursuant to Section
365(b)(1) of the Code. No prepetition amounts are owing on the
Mills Building Lease and the Debtor has paid, will continue to
pay, all post-petition lease payments on a timely basis with
respect to these leaseholds.
The Debtor owns the Centre Building, an office building
adjacent to the Mills Building. The Debtor currently intends to
relocate some operations currently housed in the Mills Building
to the Centre Building. Upon expiration of the Mills Building
Lease, the Debtor intends to obtain any additional space required
for company operations through renegotiation of space in the
Mills Building or elsewhere, as dictated by the then-prevailing
economic conditions relating to leased space. The current market
for leased space in El Paso is favorable to the Debtor.
The Debtor's projections of its anticipated revenues
and expenses, cash flow, its post-confirmation balance sheet, and
its capital expenditure budget are set forth and discussed in
detail in Section X "Feasibility of the Plan" and in Section XI
"Financial Information, Data, Valuation and Projections Relevant
to the Debtor's Current and Future Obligations" herein.
D. General Description of Regulatory Matters Relating to
the Plan
The discussions of regulatory matters contained in the
following and other sections of the Disclosure Statement describe
certain actions that the Debtor and/or CSW intend to take as of
August 25, 1993, to satisfy the regulatory conditions precedent
to consummation of the Merger and the effectiveness of the Plan
as set forth in the Merger Agreement. The Debtor and CSW,
however, reserve the right to take or seek such alternative and
<PAGE> 95
different actions and/or relief from that described herein as
they may from time to time deem appropriate.
1. Definitions
For purposes of this Disclosure Statement:
"Rate path" means rates or rate concepts that have been
approved and that extend over a period of time.
"Rate path acceptable to CSW" means a rate path that
provides Reorganized EPE, in CSW's judgment, with economic
benefits sufficiently in conformance with the rate path attached
hereto as Exhibit E.
2. Interaction of the Code and Regulatory Authority.
Section 1129(a)(6) of the Code provides that a plan of
reorganization may be confirmed only if any regulatory government
authority with jurisdiction, after confirmation of the plan, over
rates of the debtor has approved any rate change provided in the
plan, or such rate change is expressly conditioned on such
approval. The effectiveness of the Plan is expressly conditioned
upon, as further discussed below, obtaining Texas and New Mexico
rate orders establishing certain ratemaking, accounting and
regulatory treatments acceptable to CSW unless this condition is
waived by CSW and the Debtor.
The "notwithstanding" provision of Section
1123(a)(5)(A) of the Code arguably preempts regulatory agency
approval of certain other aspects of the Plan, which ordinarily
would be subject to regulatory review or approval in the absence
of Debtor's Bankruptcy Case. The Plan does not require such
preemption to be asserted and, unless waived by CSW, the
consummation of the Merger and thus the effectiveness of the Plan
is conditioned upon certain regulatory actions by various federal
and state authorities, as discussed below, which normally apply
outside of a Chapter 11 bankruptcy case.
The NMPUC Staff, the PUCT, the City of El Paso and OPC
have advised the Debtor that they will vigorously oppose any
attempt to cause the Bankruptcy Court to exercise jurisdiction
exclusively reserved to the NMPUC under the NMPUA (N.M.S.A. 1978
Subsection 62-3-1 et. seq.) or to the PUCT and the City of El
Paso under PURA (Tex. Rev. Civ. Stat. Ann. art. 1446c).
<PAGE> 96
3. Proposed Texas Rate Treatment
(a) Regulatory Background
The Debtor is a public utility company as defined in
the PURA and is subject to regulation with respect to rates,
accounting, standards of service, and certification of service
area and facilities by the PUCT. The PUCT is also authorized to
review acquisitions of utility plant and mergers involving a
public utility to determine whether such transactions are
consistent with the public interest. In addition, incorporated
municipalities, such as the City of El Paso (the "City"), have
original jurisdiction over the rates and services of a public
utility within the municipality's boundaries. Municipal rate
determinations can be appealed to the PUCT for de novo review.
The effectiveness of the Plan and the Merger are
conditioned upon the receipt by Reorganized EPE and CSW of the
following Texas regulatory approvals and determinations unless
such conditions are waived by CSW and the Debtor:
(i) a final order of the PUCT under Section 43 of
PURA satisfactory to CSW and the Debtor authorizing the
first step base rate increase to be effective for
Reorganized EPE in 1994 under the rate plan set forth
in Exhibit E attached hereto, both in areas of PUCT
original jurisdiction and in areas subject to appeals
to the PUCT from municipal determinations, and
authorizing certain ratemaking, accounting and
regulatory treatments of the assets, expenditures,
costs and revenues of Reorganized EPE, also as
contemplated by the rate path contained in Exhibit E;
(ii) a final order of the PUCT under Section 63
of PURA satisfactory to CSW and the Debtor to the
effect that the combination of Reorganized EPE with CSW
contemplated under the Plan is in the public interest
and authorizing certain regulatory treatments expected
to result from the combination; and
(iii) a final order of the PUCT under Section 63
of PURA satisfactory to CSW and the Debtor to the
effect that the repurchase by Reorganized EPE of the
previously leased Palo Verde Unit 2 and 3 assets and
the ratemaking treatment for the repurchased assets as
plant-in-service in rate base at the net depreciated
original book cost are in the public interest.
The PUCT Staff has indicated that it may disagree with
the Debtor and CSW's proposed ratemaking treatment of the
repurchased leased Palo Verde Unit 2 and 3 assets. While CSW and
<PAGE> 97
the Debtor believe that there is a legal basis and precedent for
the PUCT to reach determinations and authorize certain ratemaking
treatments in a proceeding under Section 63 of PURA,
representatives of the City of El Paso have advised the Debtor
that they disagree.
Following confirmation of the Plan, the Debtor will
file applications with the PUCT seeking the regulatory approvals
and determinations described in (i) and (iii) above, and will
file with the City and other applicable municipalities the
requisite applications for the first step base rate increase
under the rate plan set forth in Exhibit E attached hereto. Also
upon confirmation of the Plan, CSW and the Debtor will jointly
file an application with the PUCT seeking the regulatory
determinations described in (ii) above. As stated previously,
the Debtor and CSW reserve the right to take or seek alternative
and different actions and/or relief from that described herein as
they may from time to time deem appropriate.
In order to obtain the PUCT approvals and determina-
tions sought, the Debtor and CSW will have the burden of
presenting evidence and proving that the approvals and
ratemaking, accounting and regulatory treatments they seek are in
accordance with the relevant provisions of Texas law and the
PUCT's rules. Subject to the current uncertainty under Texas law
regarding the methodology used to compute federal income tax
expense for ratemaking purposes and the uncertainty regarding
deferred accounting issues, the Debtor and CSW believe that the
approvals and ratemaking, accounting and regulatory treatments
they seek are in accordance with the relevant provisions of Texas
law and the PUCT's rules; however, no assurances can be given
that the PUCT will grant the approvals or make the determinations
sought by the Debtor and CSW.
Under Section 43 of PURA, the PUCT is required to reach
a decision in a rate case within 185 days following the filing of
a rate application. This time period, however, is extended by
two days for every day the hearings exceed fifteen days. Thus,
the period in which the PUCT must decide a rate case may be
extended where lengthy evidentiary hearings are required.
However, a utility may implement new rates under bond and subject
to refund after the 185-day period described above has elapsed.
No time period limit applies to PUCT proceedings to review a
utility merger or acquisition of utility plant. Based on recent
proceedings before the PUCT, Debtor and CSW believe that,
depending on the level of opposition, the regulatory proceedings
to approve the initial base rate increase and to review the
repurchase of the Palo Verde leased assets and the merger could
be completed in as little as nine months, but could take up to
eighteen months; however, no assurances can be given as to the
ultimate length of these proceedings. The PUCT has never before
<PAGE> 98
been presented with a merger or base rate increase application
involving a debtor in a Chapter 11 reorganization case under the
Code, and, therefore, there is no experience upon which to assess
what effect that matter might have with respect to either
expediting or delaying the issuance of the PUCT's orders.
(b) Proposed Texas Rate Plan
Subject to the reservation by the Debtor and CSW to
seek alternative and different actions and/or relief as they may
from time to time deem appropriate, the Texas rate plan is
conditioned on the issuance of a final order by the PUCT in a
rate proceeding authorizing a base rate increase for 1994 that
contains approvals satisfactory to CSW and Debtor of the elements
of the rate plan as set forth in Exhibit E hereto. The elements
of the Texas rate plan set forth in Exhibit E hereto may be
summarized as follows: An additional Texas jurisdictional base
rate increase of $25 million for Reorganized EPE to be made
effective in 1994 (7.6% based on projected total revenues). CSW
and the Debtor believe that the amount of the base rate increase
to which Reorganized EPE would be entitled under Texas law in
1994 is substantially larger than $25 million; however, to
moderate the effect on customers if the Merger is consummated,
the parties to the Merger have offered between themselves to
limit the initial base rate increase upon a merger to $25
million. Such offer is not binding on other parties to the rate
case, including the PUCT Staff, the City of El Paso and OPC, who
may contest even a $25 million increase. Conditioned upon the
final effectiveness of the initial Texas base rate increase in
1994 and approval of satisfactory ratemaking, accounting and
regulatory treatments, Reorganized EPE will agree not to seek a
base rate increase in Texas to be effective prior to January 1,
1997, subject to specified force majeure events for certain
matters beyond the control of the Company. Starting with the
1997 Texas base rate increase through 2001, Reorganized EPE will
agree to not seek a base rate increase more often than every
other year, i.e., 1997, 1999, 2001, with the base rate increases
limited to 8 percent of total revenues prior to the increase,
subject to a fixed threshold on the base rate revenue deficiency
absorption by Reorganized EPE. The offers by Reorganized EPE (i)
to agree to freeze base rates for the period from the
effectiveness of the 1994 Texas base rate increase through
January 1, 1997, (ii) to limit the amount of base rate increases
and (iii) to limit the frequency of base rate increases in the
1997-2001 period are dependent on its reaching agreement with the
participants in the Texas rate proceeding for the initial 1994
base rate increase and the PUCT entering an order consistent with
such agreement. If such agreement is not reached and/or a PUCT
order is not entered consistent with it, Reorganized EPE will be
free to pursue any and all rights to which it may be entitled
under law. For ratemaking purposes, the repurchased Palo Verde
<PAGE> 99
Unit 2 and 3 leased assets will be included in the rate base as
plant-in-service at the net depreciated original book cost of the
assets, estimated by CSW and the Debtor to be $615 million as of
December 31, 1992. The PUCT Staff has advised the Debtor that it
may disagree with such estimate. Base rates prior to 2001 will
be moderated by means of a mechanism called Mirror CWIP. For the
purposes of this Disclosure Statement, it is assumed that an
aggregate amount of $95 million of Mirror CWIP is amortized over
seven years. Mirror CWIP liability amortization produces a
credit to current cost of service which reduces current revenue
requirements, while a corresponding Mirror CWIP asset allows the
reduced revenue requirements to be recovered over the period
following the completion of the amortization of the liability.
During the rate freeze period between the initial Texas
jurisdictional base rate increase effective in 1994, and the base
rate increase effective on or after January 1, 1997, Reorganized
EPE will retain all net revenues from sales to Mexico and from
any incremental off-system sales. Costs of interconnecting
Reorganized EPE with CSW will be proposed for inclusion in
Reorganized EPE's rates only to the extent that off-setting
benefits from the interconnection -- e.g., fuel, wheeling and/or
capacity savings -- can be demonstrated. Any fuel savings
resulting from merged operations will be passed through to the
customers through the fuel reconciliation process. The Texas
rate plan is also based on: ratemaking recognition and
amortization of rate moderation and accounting deferrals
previously authorized for the Debtor by the PUCT in a manner
consistent with current judicial decisions; use of the return
method for calculating federal income taxes; 50%-50% sharing
between ratepayers and the Company during the 1997-2001 period of
non-fuel operation and maintenance ("O&M") savings resulting from
the merger of Reorganized EPE with CSW; and amortization of at
least $18 million of bankruptcy costs to cost of service over a
ten-year period with no return on the unamortized balance and the
actual amount of bankruptcy costs found reasonable and necessary
being subject to adjustment in the base rate proceeding for 1997.
The issue of whether the use of the return method for calculating
federal income taxes is appropriate under Texas law is uncertain,
and in recent PUCT cases the PUCT has stated its intent to employ
an "actual taxes paid" approach. However, if the PUCT were to
base the income tax computation on the methodology employed in
recent PUCT orders (which orders have recognized the need to
avoid violating the normalization requirements of the Internal
Revenue Code), the Debtor and CSW do not believe that their
ability to support the initial $25 million Texas base rate
increase would be materially affected. The OPC contends that
there is no question that the "actual taxes paid" method is
required by Texas law.
As discussed above under the caption "Regulatory
Background," and subject to the current uncertainty under Texas
<PAGE> 100
law regarding the methodology used to compute federal income tax
expense for ratemaking purposes and the uncertainty regarding
deferred accounting issues, Debtor and CSW believe the
ratemaking, accounting and regulatory treatments underlying the
Texas rate plan conform to applicable Texas law and PUCT rules;
however, no assurances can be given that the PUCT will grant the
approvals and make the determinations required for the Texas rate
plan. Moreover, while among the conditions to the effectiveness
of the Plan and Merger is the issuance of a satisfactory final
PUCT order in the initial rate case for the 1994 Texas base rate
increase, that order cannot set rates for the base rate increases
contemplated for 1997 and subsequent years. Reorganized EPE will
be required in the future to initiate timely proceedings to
secure the regulatory approvals for these subsequent base rate
increases. While the Debtor and CSW believe that the subsequent
base rate increases in the amounts set forth in Exhibit E will be
justified given reasonable assumptions of future revenues,
capital expenditures, economic conditions and cost of service
under the ratemaking, accounting and regulatory treatments to be
authorized by the PUCT in the 1994 base rate case order, no
assurances can be given that even if the PUCT acts favorably on
the 1994 base rate increase request, it will approve the
subsequent base rate increases. In all events, the assumptions
as to future revenues, capital expenditures, economic conditions
and cost of service which have been used to develop the Texas
rate plan, while presently considered to be reasonable, may or
may not be actually realized in the future.
The OPC is an independent State agency established to
represent residential and small commercial consumers on utility
matters. By State statute and PUCT rule, the OPC is authorized
to intervene as a matter of right in PUCT proceedings. In
addition to the right of intervention in PUCT dockets, the OPC
has the right to appeal a PUCT decision. The OPC has
participated in discussions with CSW concerning the proposed rate
path acceptable to CSW. The OPC has informed the Debtor and CSW
that it does not believe that Texas law would entitle Reorganized
EPE to the base rate increases set forth in Exhibit E.
Consequently, the OPC disputes that Reorganized EPE would be
entitled to a first year increase in excess of $25 million or
that it would be entitled to the subsequent increases set forth
in Exhibit E. OPC and CSW have agreed, however, to continue
discussions in an effort to reach an agreement on a rate path.
Notwithstanding the beliefs of CSW and the Debtor that
the Texas base rate increases set forth in Exhibit E are
justified under the applicable law and under assumptions which
the Debtor and CSW consider to be reasonable as to Reorganized
EPE's future cost of service, revenues, capital expenditures and
economic conditions, representatives of the City of El Paso have
<PAGE> 101
advised the Debtor that the rates proposed in the Plan are not
acceptable.
The OPC has also advised the Debtor and CSW that if it
is unable to reach agreement on the rate path for Reorganized
EPE, it may intervene or file comments in other proceedings,
including those before the FERC, the SEC, the Department of
Justice and the NRC, in order to protect the interests of Texas
ratepayers, including those of the Debtor and of any other
utilities (including SPS, CPL, SWEPCO and WTU) which could be
affected by the Merger.
The PURA Section 43 rate proceeding to obtain the
initial 1994 Texas jurisdictional base rate increase set forth in
Exhibit E hereto ("Merger Rate Proceeding") will be based upon
the Merger contemplated by the Plan becoming effective. It is
the intention of both the Debtor and CSW to implement the new
base rates under bond as promptly as possible under applicable
statutory provisions and to implement permanent base rates as
expeditiously as possible following the Confirmation Date.
However, in the event that (i) bonded rates in the amounts
specified for 1994 in the Plan are not obtained within 7 months
of the Confirmation Date or (ii) the Debtor determines at any
time after the first anniversary of the Confirmation Date that
reasonable progress in obtaining the rate relief specified for
1994 in the Plan is not being made, the Debtor may file and
pursue with appropriate regulatory agencies separate rate
proceedings independent from the Merger Rate Proceeding. CSW has
agreed to use reasonable efforts to preserve the Debtor's ability
to file independent rate proceedings and to seek rates from
appropriate regulatory authorities based on the Debtor's own cost
of service components (assuming the Merger is not consummated) in
the event the Debtor seeks rate relief in any independent
proceeding not precluded by the Merger Agreement.
4. Proposed New Mexico Rate Treatment
(a) Regulatory Background
The Debtor is a public utility under the NMPUA and is
subject to regulation by the NMPUC. The NMPUC has authority over
the Debtor's rates and services in New Mexico, prior approval of
the issuance, assumption or guarantee of securities; the creation
of liens on property within the state; prior approval of
consolidations, mergers and acquisition of some or all of the
stock of another utility; prior approval of the sale, lease,
rental, purchase or acquisition of any public utility plant or
property constituting all or any part of an Operating Unit or
System; the valuation of utility property and business; prior
approval of certain extensions, improvements and additions;
approval of Class I transactions and prior approval of certain
<PAGE> 102
Class II transactions (as those transactions are defined by the
NMPUA); prior approval of abandonment of facilities and
decertification of utility plant.
The effectiveness of the Merger Agreement, and
therefore the Plan and the Merger are, unless waived by CSW and
the Debtor, conditioned on the receipt by Reorganized EPE and CSW
of the following New Mexico regulatory approvals and
determinations:
(i) a final order of the NMPUC satisfactory to
the Debtor and CSW pursuant to the NMPUA approving the
combination of Debtor with CSW;
(ii) a final rate-setting order of the NMPUC
satisfactory to the Debtor and CSW pursuant to the
NMPUA authorizing the base rate increase for
Reorganized EPE to be effective as of January 1, 1995,
under the rate plan set forth in Exhibit E attached
hereto and authorizing certain ratemaking, accounting
and regulatory treatments of the assets, expenditures,
costs and revenues of Reorganized EPE;
(iii) a final order of the NMPUC satisfactory to
the Debtor and CSW pursuant to the NMPUA authorizing
the issuance by Reorganized EPE of the securities
required for the consummation of the Plan;
(iv) a final determination by the NMPUC that none
of the transactions between the Debtor and CSW
contemplated by either the Plan or Merger Agreement
involve a Class II transaction or, if the NMPUC
determines that a Class II transaction is involved, a
satisfactory final order by the NMPUC approving a
diversification plan relating to the combination of the
Debtor with CSW and the transactions between the Debtor
and other CSW subsidiaries which are conducted in the
normal course of operations of the CSW system; and
(v) A final order determining that Reorganized
EPE does not require a new CCN as a result of the
transactions between the Debtor and CSW as contemplated
in either the Plan or Merger Agreement, and if the
NMPUC determines that a new CCN is required from the
NMPUC, a satisfactory final order issuing a new CCN to
Reorganized EPE.
Following confirmation of the Plan, the Debtor will
file applications seeking the regulatory approvals and
determinations described in (ii),(iii), (iv) and (v) above, and
the Debtor and CSW will jointly file an application seeking the
<PAGE> 103
regulatory approvals and determinations sought by (i) above. As
stated previously, the Debtor and CSW reserve the right to take
or seek alternative and different actions and/or relief from that
described herein as they may from time to time deem appropriate.
In order to obtain the NMPUC approvals and
determinations sought, the Debtor and CSW will have the burden of
presenting evidence and proving that the approvals and
ratemaking, accounting and regulatory treatments they seek are in
accordance with the relevant provisions of New Mexico law and the
NMPUC's existing rules, policies and precedents and is otherwise
in the public interest. While the Debtor and CSW believe that
the approvals and ratemaking, accounting and regulatory
treatments they seek are in accordance with the relevant
provisions of New Mexico law and the NMPUC's rules, policies and
precedents and is otherwise in the public interest no assurances
can be given that the NMPUC will grant the approvals requested or
make the determinations sought by Debtor and CSW.
Under the NMPUA, the NMPUC has up to nine months
following an initial 30-day notice period in which to investigate
and conduct hearings on a proposed rate increase. The suspension
period may be extended by the NMPUC for an additional three
months, during which period the utility can place the increased
rates into effect under bond and subject to refund. While no
assurances can be given, the Debtor and CSW believe that the
necessary New Mexico regulatory proceedings can be completed
within 18 months of filing the applications with the NMPUC.
Unlike the Texas regulatory scheme, municipalities in
New Mexico have no ratemaking regulatory authority over the
Debtor. However, under the Debtor's current one-year street
franchise with the City of Las Cruces, the City has the
contractual right to consent to a transfer of rights granted by
that franchise to a new company. While the Debtor believes that
the City of Las Cruces' consent is not required for the
transactions contemplated under the Plan, should the City
maintain that such approval is necessary and refuse to grant such
approval, the Debtor intends either to terminate this one-year
municipal street franchise with the City or to negotiate a new
street franchise which will either assure the City's consent to
such transfer or not include a prior consent provision. As
stated above, the Debtor does not believe that it needs a
municipal street franchise under New Mexico law to continue its
utility operations within the City of Las Cruces. The City,
however, may have the ability to prevent the issuance of a new
CCN to Reorganized EPE by refusing issuance of a municipal street
franchise to Reorganized EPE if such new CCN is required by the
NMPUA. A municipal street franchise is required for a new CCN
and the City has the power to refuse issuance of such a street
franchise under applicable New Mexico law. The Debtor believes
<PAGE> 104
the City has a duty under New Mexico statutes to grant the Debtor
or its successor in interest a reasonable municipal street
franchise for the maximum term authorized by New Mexico law (25
years) and has no power to refuse the grant of such a franchise.
The Debtor believes a new CCN is not required by the merger under
NMPUC precedent and applicable law. However, the Debtor cannot
assure that the NMPUC or the New Mexico courts will agree with
these positions.
The City of Las Cruces asserts that: (i) any assignment of
the franchise requires the consent of Las Cruces; (ii) the New
Mexico Supreme Court has not yet decided the relationship of a
public utility and a municipality upon expiration of a municipal
franchise; (iii) use of municipal property without a franchise
would constitute trespass; (iv) it is impossible for the Debtor
to design a distribution system within Las Cruces without using
municipal property; and (v) the NMPUC would require a municipal
franchise as a condition precedent to issuing a CCN.
(b) Proposed New Mexico Rate Plan
Subject to the reservation by the Debtor and CSW to
seek alternative and different actions and/or relief as they may
from time to time deem appropriate, the New Mexico rate plan is
dependent on the issuance by the NMPUC of a final order in a rate
proceeding to establish a base rate increase for 1995 that
contains approval satisfactory to CSW and the Debtor of the
elements of the rate plan set forth in Exhibit E hereto. The
elements of the New Mexico rate plan set forth in Exhibit E
hereto can be summarized as follows: An initial New Mexico
jurisdictional base rate increase of $6 million will be proposed
to be effective for Reorganized EPE on January 1, 1995. For
ratemaking purposes, the repurchased Palo Verde Unit 2 asset will
be included in rate base as plant-in-service at the net
depreciated original book cost of the asset, estimated to be $441
million as of December 31, 1992. Pursuant to the Stipulation, no
Palo Verde Unit 3 costs (including one-third of Palo Verde common
costs and of the AIP) will be included in rates. Consistent with
the Stipulation, the New Mexico portion of the first 100 MW of
firm generation resources required by the Debtor over its
existing generation, not including Palo Verde Unit 3, will be
priced at the total cost charged by SPS for firm capacity sales
to distribution cooperatives in Eastern New Mexico. The New
Mexico portion of the second 100 MW of such firm generation
resources will be priced at the cost of comparable new firm
utility-type generation resources. Bankruptcy costs of $18
million will be amortized to total cost of service over a
ten-year period, with no return on the unamortized balance.
Conditioned upon the final effectiveness of the New Mexico base
rate increase effective on January 1, 1995, and approval of
satisfactory ratemaking, accounting and regulatory treatments,
<PAGE> 105
Reorganized EPE will agree not to seek a subsequent base rate
increase to be effective prior to January 1, 1998, subject to
force majeure events for certain specified matters beyond the
control of the Reorganized EPE. Should a proceeding be
instituted to reduce Reorganized EPE's base rates during the
1995-1997 period, the non-fuel operations and maintenance ("O&M")
cost savings resulting from the merger of Reorganized EPE with
CSW will be allowed as an item in the cost of service to offset
any base rate reduction, but not to support a base rate increase.
Any fuel savings resulting from the merger will be passed-through
to the ratepayers through the fuel reconciliation process.
The City of Las Cruces has informed the Debtor that the
rate path proposed in Exhibit E is unacceptable to the City of
Las Cruces. The City of Las Cruces has asserted that it is
unlikely that it will enter into a franchise agreement with
Reorganized EPE based upon the rate path proposed in Exhibit E.
Except for the proposed rate treatment for the non-fuel
O&M cost-savings resulting from the Merger and the recovery of
the $18 million in bankruptcy costs which the Debtor and CSW
believe are consistent with New Mexico Law and the public
interest, the Debtor and CSW believe the ratemaking, accounting
and regulatory treatments underlying the New Mexico rate plan
conform to applicable New Mexico law and existing NMPUC rules,
policies and precedent; however, no assurances can be given that
the NMPUC will grant the approvals and make the determinations
required for the New Mexico rate plan.
The staff of the NMPUC has informed all potential plan
proponents that it will oppose the inclusion of bankruptcy costs
in rates unless it can be clearly shown that these costs benefit
ratepayers. The staff of the NMPUC has further received
indications of opposition to the inclusion of bankruptcy costs in
rates by parties who are potential intervenors in a New Mexico
rate case. The Debtor believes that, as the Mediator's
regulatory expert determined in connection with his analysis of a
stand-alone Texas rate path, the bankruptcy process has
benefitted ratepayers.
5. NRC and Atomic Energy Act Issues
The Debtor holds an NRC operating license in connection
with its ownership interests in Palo Verde. The operating
license authorizes the Debtor to be a participant in the
facility. The Atomic Energy Act of 1954, as amended (the "Atomic
Energy Act"), provides that such license or any rights thereunder
may not be transferred or in any manner disposed of, directly or
indirectly, to any person through transfer or control unless the
NRC finds that such transfer is in accordance with the Atomic
Energy Act. The Debtor and CSW will seek approval from the NRC
<PAGE> 106
to reflect the fact that after the Reorganization, Reorganized
EPE -- although continuing to own its interest in Palo Verde --
will become an operating company subsidiary of CSW. The NRC will
also be provided formal timely notice, in accordance with current
NRC license conditions, of any material changes in the Palo Verde
Leases.
Finally, pursuant to Section 105(c) of the Atomic
Energy Act, the NRC has authority to consider "whether the
activities under the license would create or maintain a situation
inconsistent with the anti trust laws." Such review is required
in cases of virtually all construction permits for nuclear plants
and may be required for applications for operating licenses if
there are "significant changes" in the licensee's activities or
proposed activities since the construction permit antitrust
review. The NRC may also review, in the case of a license
transfer request whether "significant changes" have occurred
since the completion of a previous antitrust review.
6. FERC and Federal Power Act Issues
Under the FPA, FERC regulates certain activities of
"public utilities." As defined by the FPA, public utilities are
persons that own or operate jurisdictional facilities. 16 U.S.C.
Section 824(e). Jurisdictional facilities are defined as
facilities (other than power generation or local distribution
facilities) that are used either to sell power for resale or to
transmit power in interstate commerce. 16 U.S.C. Section 824(b).
Jurisdictional facilities consist principally of interstate
transmission facilities.
The Debtor is a public utility under the FPA because it
owns and operates interstate transmission facilities. The Debtor
also makes wholesale sales of electric power that are regulated
by the FERC. Section 203 of the FPA requires that a public
utility intending to "dispose of the whole of its facilities
subject to the jurisdiction of the FERC, or any part thereof of a
value in excess of $50,000" must first secure an order of the
FERC authorizing it to do so. Section 204 of the FPA requires
that a "public utility" may not "issue any security, or assume
any obligation or liability, . . . in respect of the security of
another person, unless and until, and then only to the extent
that," the FERC authorizes such issuance or undertaking unless
the public utility is "organized and operating in a State under
the laws of which its issuance of securities is regulated by a
State commission." 16 U.S.C. Section 824c(a). The Debtor is
organized and operates in the State of Texas. Texas law does not
require public utility companies to seek state regulatory
approval of the issuance of securities. Section 205 of the FPA
requires public utilities to file with the FERC rates, charges
and other terms and conditions of service applicable to any sale
<PAGE> 107
for resale or transmission of electric energy in interstate
commerce, and to file any change in such rates, charges or terms
and conditions of service. Section 205 and 206 of the FPA
authorize the FERC, after hearing, to determine whether existing
or changed rates or charges, or other terms and conditions of
service, are unjust, unreasonable, or unduly discriminatory and,
if any such finding is made, to fix and determine the rates
and terms of service to be thereafter observed. 16 U.S.C.
Sections 824d(a)-(e) and 824e(a).
Under the Plan, CSW would become the owner of the
common stock of the Debtor. The FERC regards the acquisition of
a controlling interest in the common stock of a public utility as
a disposition of control of the public utility's jurisdictional
facilities. Hence, under Section 203 of the FPA, the Debtor will
seek to obtain an order of the FERC authorizing the Debtor to
dispose of its jurisdictional facilities in accordance with the
Plan. Also, pursuant to Section 205 of the FPA, the Debtor and
the CSW Electric Operating Companies plan to file with the FERC
an amended CSW System Operating Agreement that will, among other
things, include the Debtor as a party.
In addition, to implement the Plan, the Debtor and the
CSW Electric Operating Companies may have to seek an order of the
FERC under Section 211 of the FPA. Section 211 of the FPA
authorizes the FERC, upon application of any electric utility and
after giving public notice and affording an opportunity for an
evidentiary hearing, to issue an order requiring any other
electric utility that operates a transmission system to provide
transmission services including any enlargement of transmission
capacity needed to provide such services, if the Commission finds
that such order is in the public interest and will not
unreasonably impair the continued reliability of the electric
systems affected by the order.
The Debtor and the CSW Electric Operating Companies
have determined that the least-cost means of capturing the
operating efficiencies to be derived from the coordinated
operation of the Debtor's generating units with those of the CSW
Electric Operating Companies is to secure the right to transmit
power and energy over the transmission system of Southwestern
Public Service Company ("SPS"). CSW has conducted load flow
studies that indicate that the Southwest Power Pool transmission
network may require strengthening to accommodate the power
transfers between the Debtor and the existing CSW electric system
needed to optimize coordinated post-merger system operations.
Such system strengthening would not include any new transmission
line construction or transmission line upgrades on the SPS
transmission system, and is currently not expected to require any
state regulatory approval, but could require new transmission
line construction on the PSO transmission system. CSW currently
<PAGE> 108
estimates that the cost of the required system upgrades would not
exceed $30 million.
The Debtor has requested that SPS provide appropriate
necessary transmission services. Initially, SPS denied the
request. As justification for its refusal, SPS asserted: (1)
that the FPA does not require a transmitting utility to
involuntarily provide transmission service when the intended
purpose of the service is to permit merging utilities to
coordinate their operations; and (2) that a request for service
in connection with CSW's acquisition of the Debtor would, in any
event, not be proper until such time as all merger-related
regulatory approvals are obtained. The Debtor and CSW believe
that neither the statute nor the legislative history of the
provisions of the FPA that give the FERC authority to compel
transmitting utilities to provide transmission service for other
electric utilities provides support for SPS's contentions.
Subsequently, SPS has offered to study the request for
transmission service, but at a cost and on conditions that the
Debtor and the CSW Electric Operating Companies consider
unreasonable and inconsistent with SPS's obligations under the
FPA to respond in good faith to their request that SPS provide
transmission service.
By letter dated August 19, 1993, the Debtor and the CSW
Electric Operating Companies have offered to meet with SPS to
discuss CSW's studies of the feasibility of having SPS provide
the requested transmission services and the upgrades on the
Southwest Power Pool System required to assure the availability
of the transfer capability needed to accommodate the coordination
of the EPE and CSW systems through use of the SPS transmission
system. In the event that SPS continues to oppose the efforts of
the Debtor and the CSW Electric Operating Companies to contract
for the rights to so use SPS's transmission system, the Debtor
and the CSW Electric Operating Companies intend to file an
application pursuant to Section 211 of the FPA for an order
requiring SPS to provide the necessary services.
Under Section 212 of the FPA and established FERC
precedent relating to transmission service pricing, rates and
charges for mandatory transmission service pursuant to Section
211 of the FPA should ensure that costs incurred in providing the
transaction services, and properly allowable to the provision of
such services, are recoverable from the applicant for such order.
CSW believes that the new construction required to relieve
transfer capability constraints on the SPS system will provide
significant reliability benefits to SPS and its customers, and
will contend before the FERC that the cost of the new
construction should be equitably shared.
<PAGE> 109
The CSW Electric Operating Companies have previously
obtained an order under sections 210-212 of the FPA ordering
other utilities to interconnect their transmission systems with
those of the CSW Electric Operating Companies, although none were
obtained to facilitate a merger or acquisition. Notwithstanding
this prior experience of the CSW Operating Companies, SPS asserts
that it believes the issue of whether Section 211, which was
amended by Congress in 1992, may be used to establish an
interconnection between merging utilities to permit them to
coordinate their operations in the event of a merger is one of
first impression before the FERC. As a consequence, SPS asserts
that numerous other utilities may intervene and seek to be heard
in any proceeding to obtain a section 211 order and that such
proceeding is likely to be vigorously contested. SPS further
asserts that there is no assurance as to how long any such
proceeding may take. The Debtor and CSW believe that the
statutory right of access to the SPS transmission system is
sufficiently clear to allow an order to be issued by the FERC
within the period required for effectiveness of the Merger.
The PUCT in the past has intervened in cases before the
FERC which could potentially affect electric consumers in Texas
and the PUCT has advised the Debtor and CSW that it will
carefully consider such issues as they relate to the combination
of the Debtor with CSW. As previously discussed, the OPC may
intervene in any Section 211 proceeding before the FERC.
In the event that the Debtor were to be unsuccessful in
obtaining the necessary transmission service from SPS, the Debtor
and CSW would pursue a more costly, but technically feasible,
alternative of constructing new transmission facilities between
the Southwest Power Pool side of the North HVDC Interconnection
(which ties together WTU and PSO) and the Debtor's Eddy County
HVDC interconnection with SPS. Such facilities would not
directly involve or affect the operations of CSW's electric
utility subsidiaries that operate in the Electric Reliability
Council of Texas (ERCOT) or of other ERCOT utilities. The
construction of such facilities is estimated to cost $120 million
and would require state regulatory approval.
To the extent that construction or upgrading of
transmission facilities subject to the certification requirements
of Section 54 of PURA is required to interconnect the
transmission systems of the Debtor and the CSW Electric Operating
Companies, it is the intention of the Debtor and CSW to cause the
necessary applications to be filed with the PUCT for issuance of
CCNs for such facilities, consistent with whatever FERC
authorizations are issued with respect to such facilities. The
issuance of CCNs by the PUCT for transmission facilities to
interconnect the transmission systems of the Debtor and the CSW
Electric Operating Companies is not a condition to the
<PAGE> 110
effectiveness of the Plan or Merger. The PUCT Staff has advised
the Debtor and CSW that, based upon past experience with
applications for CCNs for major transmission facilities, the
process to obtain a CCN before the PUCT would likely be lengthy
and difficult, with no assurance of success.
CSW has also considered the construction of high
voltage direct current ("HVDC") interconnections between the
transmission systems of existing CSW Electric Operating Companies
operating in the ERCOT and adjacent power pools, which could be
used to coordinate the operations of the Debtor and the existing
CSW System. Certain of CSW's existing Electric Operating
Companies are subject to contractual obligations to seek orders
of the FERC pursuant to Sections 210-212 of the FPA in the event
any new HVDC interconnection between ERCOT and an adjacent power
pool is planned to be constructed and used in interstate
commerce. If CSW decides to construct such additional HVDC
interconnections, it may be obligated to file an application with
the FERC asking that the FERC order Texas Utilities Electric
Company, Houston Lighting and Power Company and other utilities
to remain interconnected with the Electric Operating Companies
that operate in ERCOT, CPL and WTU, or declare that the
jurisdictional status of such ERCOT utilities will not be
affected by the construction and use of such additional HVDC
interconnections. Under Section 210 of the FPA, a mandatory
interconnection order will be issued when, after giving notice
and an opportunity for an evidentiary hearing, the FERC
determines that such order is in the public interest and would
encourage the overall conservation of energy or capital, optimize
the efficient use of facilities and resources, or improve the
reliability of any electric utility system to which the order
applies. Other ERCOT companies opposed CSW's earlier efforts to
construct interconnections between CSW's ERCOT and non-ERCOT
Electric Operating Companies. However, based on a settlement of
FERC proceedings, the FERC ultimately ordered the construction of
two HVDC interconnections between ERCOT and the Southwest Power
Pool and required other ERCOT utilities to remain interconnected
with CSW's ERCOT Electric Operating Companies and to provide
certain transmission services to facilitate transfers of power
across such HVDC interconnections. Under the FPA, the intrastate
jurisdictional status of such other ERCOT utilities was protected
because such interconnections and transmission services were
required to be provided pursuant to FERC orders. In the event
that CSW decides to pursue the establishment of additional
interconnections between ERCOT and adjacent power pools, it is
likely that other ERCOT utilities will seek to intervene in any
related FERC proceedings.
Under Section 203 of the FPA, FERC will approve a
merger if it finds it to be "consistent with the public
interest." In making its public interest determination, FERC
<PAGE> 111
typically looks at six criteria: (1) Whether their proposed
merger will have an adverse effect on the rates and operating
costs of the merging utilities and/or their surviving corpora-
tion; (2) whether the merger will have a negative impact on the
existing competitive situation; (3) whether the proposed
accounting treatment is consistent with FERC regulations; (4)
whether the purchase price is reasonable; (5) whether the
acquiring utility has coerced the acquired utility into accepting
the merger; and (6) whether the proposed merger will impair
effective regulation either by the FERC or the appropriate state
commissions.
Recent FERC proceedings under Section 203 commenced to
consider utility mergers have often involved allegations that the
proposed combination would have anticompetitive effects which
should be ameliorated by the applicants' offering to provide firm
and non-firm transmission services to their competitors in the
relevant bulk power geographic and product markets under tariffs
of general availability. CSW expects to file with the FERC for
approval of the Reorganization Plan "open access" transmission
service tariffs which are modeled on similar tariffs which have
been found by the FERC to be just and reasonable and adequate
restraints on the exercise of monopoly control over transmission
facilities. Notwithstanding the filing of such tariffs, the FERC
may order evidentiary hearings to be held to consider competitive
or other issues.
While no assurance can be given as to whether the FERC
will approve the transactions contemplated under the Plan or
grant to CSW an order under Section 211 of the FPA, or the terms
or conditions on which such approvals will be granted, CSW and
the Debtor believe that valid factual and legal bases exist for
the granting of the FERC approvals required for the consummation
of the Plan and Merger. Also, while no assurance can be given
when such approvals will be received, CSW and the Debtor believe,
based on recent FERC precedent, that such FERC approvals can be
received within the time periods required to obtain the state
regulatory approvals for the Merger.
It is a condition to the obligations of CSW, CSW Sub
and the Debtor under the Merger Agreement that, unless waived by
the Debtor and CSW, a FERC order approving the Merger not contain
conditions substantially more onerous than those in recent FERC
orders with respect to mergers involving electric utility
companies.
The Debtor has certain agreements for the sale of power
at wholesale to customers in southern California and New Mexico
that are subject to FERC jurisdiction. Debtor does not
contemplate changing the rates or terms of service for these
<PAGE> 112
transactions as a result of the transactions contemplated by this
plan.
7. SEC and PUHCA Issues.
CSW is a holding company as defined in Section 2(a)(7)
of the PUHCA and is registered under such Act. As a registered
holding company, CSW is required pursuant to Section 9 of the
PUHCA to obtain the approval of the SEC before consummating the
Merger. Under Section 10 of the PUHCA, the SEC is directed to
approve a proposed merger unless it finds that (a) the
acquisition would tend towards interlocking relations or a
concentration of control of public- utility companies, of a kind
or to an extent detrimental to the public interest or the
interest of investors or consumers; (b) the consideration to be
paid in connection with the acquisition is not reasonable or does
not bear a fair relation to the sums invested in or the earning
capacity of the utility assets underlying the securities to be
acquired; or (c) the acquisition would unduly complicate the
capital structure of the applicant's holding company system or
would be detrimental to the public interest or the interest of
investors or consumers or the proper functioning of such holding
company system. In order to approve a proposed acquisition, the
SEC must also find that the acquisition would tend towards the
economical and efficient development of an integrated public
utility system and would otherwise conform to the PUHCA's
integration and corporate simplification standards.
SEC approval under the PUHCA will also be required for
certain proposed transactions relating to the Merger. SEC
approval will be required for the formation of CSW Sub. In
addition, SEC approval under Sections 6(a) and 7 and Rule 50 (as
to which CSW will request an exception) under the PUHCA may be
required in connection with (i) the issuance of CSW common stock
to the holders of EPE Common Stock or EPE Preferred Stock and
certain Classes of Creditors, and (ii) the issuance of
Reorganized EPE securities to holders Claims or Interests.
CSW plans to file an Application-Declaration on Form U-
1 with the SEC under the PUHCA with respect to the formation of
CSW Sub, the Merger of CSW Sub with and into the Debtor and, if
required, the various securities issuances in connection
therewith.
In connection with its review of other applications for
the approval of mergers involving registered holding companies
under the standards described above, the SEC has, in part,
focused its inquiry on whether the utility assets proposed to be
merged are physically interconnected or capable of physical
interconnection. CSW intends to satisfy the requirements of
physical interconnection by entering into an agreement with SPS
<PAGE> 113
under which the Debtor and CSW would have access to the
transmission system of SPS. As is discussed in more detail in
Section III.D.6, it may be necessary to obtain an order of the
FERC under Section 211 of the FPA in order to gain such access.
In addition to the proposed interconnection through the SPS
transmission system, CSW will present several other alternatives
(involving either direct physical or contractual interconnection)
to connecting the Debtor to the CSW system in its application
under the PUHCA. CSW believes that the proposed SPS contract
path, as well as each of the other alternatives, fulfills the
requirements under the PUHCA.
It is a condition to the obligations of CSW and CSW Sub
under the Merger Agreement that, unless waived by CSW and the
Debtor, the SEC issue its approval of the formation of CSW Sub,
the Merger of CSW Sub with and into the Debtor and (if
applicable) the various securities issuances in connection
therewith.
While no assurance can be given that the SEC will
approve the transactions contemplated under the Plan, or when
such approvals will be received, CSW believes that such approvals
can be obtained within twelve to eighteen months from the
confirmation of the Plan.
8. Department of Energy and the Federal Power Act
Under the FPA and DOE Act, the DOE authorizes persons
to transmit electric energy from the United States. The Debtor
holds an authorization to transmit electric energy to CFE. Under
the Plan, CSW would become the owner of the common stock of the
Debtor. The DOE requires that notice of a succession of owner-
ship be filed with the Department. In general, this notice
should be filed at least 30 days prior to the effective date of
any change in ownership. The Debtor will file notice of succes-
sion of ownership with the DOE.
E. Information Relevant to the Risks Posed to
Creditors Under the Plan
The following is a summary of certain matters that
should be considered, together with all other relevant matters,
in connection with the Plan. This summary is not intended to be
a complete list of important matters that persons voting on the
Plan should consider. Holders of Voting Claims or Interests in
the Debtor should analyze and evaluate the Plan and the other
information set forth in this Disclosure Statement and the
Exhibits hereto with their respective advisors in determining
whether to vote to accept or reject the Plan.
<PAGE> 114
1. Rate Matters
The effectiveness of the Plan is conditioned upon
Reorganized EPE obtaining regulatory approvals required to imple-
ment the provisions of the Plan, although this condition may be
waived by the Debtor and CSW. The financial assumptions under-
lying the Plan assume, among other things, that Reorganized EPE
will secure regulatory approvals necessary to implement the rate
treatment set forth in Exhibit E. There is no assurance that
this rate treatment will be obtained. The rate treatment sought,
and the issues presented in seeking such approvals, are described
in Sections III.D.3 and III.D.4 of this Disclosure Statement. To
the extent CSW and the Debtor waive this condition respecting
rate treatment approvals, it could have an effect on the
financial condition of Reorganized EPE.
The Plan and the Merger Agreement do not require that
any rate order become non-appealable as a condition to the
Effective Date, but contemplates that Reorganized EPE's rate path
will be implemented as part of its Plan upon approval by
appropriate regulatory authorities. However, a condition to the
effectiveness of the Merger is that no action, suit, proceeding
or investigation before any court or other governmental authority
or appeal thereof be pending challenging the Merger or any other
transaction contemplated by the Plan or Merger Agreement which,
in the reasonable opinion of CSW, could have a EPE Material
Adverse Effect or a material adverse effect on Reorganized EPE.
If the order of a regulatory authority approving Reorganized
EPE's rates is reversed, it could affect the financial condition
of Reorganized EPE.
2. Existing Rate Case Appeals
Reversal or significant modification of PUCT orders now
on appeal in the Texas court system could have a impact on the
Debtor's financial situation. The outcomes on appeal could
include possible refunds to customers. Due to the lack of
settlement with parties to the appeals, the litigation risks
inherent in such appeals appear likely to continue while new
cases are being heard by the PUCT. In particular, resolution of
the following appeals could materially affect the Debtor either
positively or negatively, depending on the outcome:
(i) Docket No. 7460 - rate case relating to Palo
Verde Units 1 and 2;
(ii) Docket No. 9945 - rate case relating to Palo
Verde Unit 3;
<PAGE> 115
(iii) Docket No. 8078 - approval of sale and leaseback
of Palo Verde Unit 3;
(iv) Docket No. 8363 - rate case relating to rate
moderation plan and approval of sale and
leaseback of Palo Verde Unit 2;
(v) Docket No. 9069 - deferred accounting treatment
for certain costs related to Palo Verde Unit 3;
and
(vi) Docket No. 9165 - rate case relating to Palo
Verde Units 1 and 2.
3. Certain Risks Relating to Projections
THE DEBTOR AND CSW HAVE PREPARED THE PROJECTIONS
INCLUDED IN THIS DISCLOSURE STATEMENT IN CONNECTION WITH THE
PLANNING AND DEVELOPMENT OF THE PLAN. THE PROJECTIONS ASSUME
THAT THE PLAN WILL BE SUCCESSFULLY IMPLEMENTED ON THE TERMS DES-
CRIBED IN THIS DISCLOSURE STATEMENT. ALTHOUGH THE DEBTOR AND CSW
BELIEVE THAT THOSE ESTIMATES AND ASSUMPTIONS ARE REASONABLE,
CAREFULLY PREPARED AND BASED UPON PROPER ASSUMPTIONS, THEY ARE
SUBJECT TO BUSINESS, ECONOMIC AND OTHER UNCERTAINTIES INHERENT IN
DEVELOPING PROJECTIONS, AS DISCUSSED IN SECTION X "FEASIBILITY OF
THE PLAN" HEREIN AND APPENDIX A TO THIS DISCLOSURE STATEMENT.
4. Nonapproval by PUCT, NMPUC, NRC, FERC, SEC
and Other Regulatory Authorities
A condition to the effectiveness of the Merger and,
hence, to the Effective Date of the Plan is that regulatory
approvals which are required to implement the provisions of the
Plan and consummate the Merger be obtained. Although the Debtor
and CSW anticipate that each of the required approvals from PUCT,
NMPUC, NRC, FERC, SEC and other regulatory agencies will be
obtained, there can be no assurance that such approvals will be
obtained or, if they are obtained, as to the timing thereof, or
that conditions on approval will not be imposed by PUCT, NMPUC,
NRC, FERC or the SEC. The regulatory approvals to be sought, and
issues presented in seeking such approvals, are described in
Section III.D. of this Disclosure Statement.
5. Risk of Delay or Non-Occurrence of the
Confirmation Date and the Effective Date
Confirmation of the Plan and the Effective Date are
subject to various conditions set forth in the Plan and in the
Merger Agreement, which must be satisfied or waived prior to
entry of a Confirmation Order and the occurrence of the Effective
Date. There may be delay in satisfying the conditions to
confirmation and to the Effective Date, and there is no assurance
that these conditions will be met. Reference should be made to
the Merger Agreement, as well as the Plan, for a description of
those conditions. The Plan contemplates a period of up to two
years or more after the Confirmation Date for meeting the
<PAGE> 116
conditions set forth in the Plan and Merger Agreement for the
Effective Date to occur.
Pending satisfaction of the conditions to confirmation
or to the Effective Date, the Debtor will take the position that
its exclusive period to seek consummation of a plan of
reorganization continues. If this position prevails, alternate
plans could be filed only if the proponent of such plan obtains
leave of the Bankruptcy Court to do so, the Confirmation Order is
vacated or the Debtor withdraws its Plan.
6. Risk of Additional Costs in Connection with
Palo Verde
In the event there is an extended outage at the Palo
Verde Station, the Debtor could be responsible for substantial
outage costs plus the costs of replacement power, which could
reduce the Debtor's income and the ability of the Debtor to
satisfy its obligations under the Plan. In 1989 and 1990, Palo
Verde Unit 1 was shut down for approximately fifteen months, Palo
Verde Unit 2 was shut down for approximately six months and Palo
Verde Unit 3 was shut down for approximately ten months, for a
combined total of approximately 900 days.
On March 14, 1993, APS, as operating agent of Palo
Verde, declared an "alert" at Palo Verde Unit 2 due to a tube
rupture in a Unit 2 steam generator. An alert is the next to the
lowest of the four NRC emergency classifications at a nuclear
power plant. Palo Verde Unit 2 was removed from service on
March 15, 1993, and the alert was terminated. Unit 2 then began
its regular eighty (80) day refueling outage, which had
originally been scheduled to begin on March 20, 1993. The NRC
has now authorized the restart of Unit 2.
By a Confirmatory Action Letter dated June 4, 1993, the
NRC accepted and confirmed the commitments made by APS to the NRC
in a June 2, 1993 letter related to providing information to the
NRC of the investigation and analysis of the tube rupture and
inspection of the Unit 2 steam generators. In addition, APS
agreed not to restart Unit 2 without concurrence of the NRC.
On June 25, 1993, APS received another letter from the
NRC regarding the tube rupture, which included additional
requests for analysis to be performed in connection with the
ongoing root cause investigation. In particular, the NRC
requested that the analysis address: (1) the adequacy of the
inspection program being implemented in connection with the steam
generator in Unit 2, including the scope and frequency of
testing, and (2) the implications of the Unit 2 inspection
results for Units 1 and 3 of Palo Verde, including a comparative
assessment of steam generator and secondary plant design and
<PAGE> 117
experiences, operations and tube inspection results. In
addition, the NRC requested a safety assessment of continued
operation of Units 1 and 3 with potentially degraded tubes. The
NRC requested that the assessment of the implications on Units 1
and 3 be provided to the NRC by July 26, 1993.
APS sent a report dated July 18, 1993, to the NRC
indicating that APS had determined that the steam generator tube
rupture was due to intergranular attack/intergranular stress
corrosion cracking ("IGA/IGSCC"). APS's report identified
several environmental and chemical factors that APS believes
contributed to the IGA/IGSCC. APS has indicated that corrective
actions have been developed to mitigate the effects of the
factors that contribute to IGA/IGSCC and that APS is continuing
to evaluate the importance of each factor. APS recommended to
the NRC that the Unit 2 steam generator tubes be inspected no
later than six months after the start of the next operating cycle
of Unit 2. The NRC on August 19, 1993, concurred in the restart
of Unit 2 and its operation for a six-month period. As of August
24, 1993, APS is in the process of restarting Unit 2.
APS also provided the NRC a letter and report dated
July 25, 1993, addressing the implications of the Unit 2
inspection results to Units 1 and 3 and the safety assessment of
the continued operation of Units 1 and 3. In the July 25, 1993
letter and report, APS presented its analysis and conclusions
that operation of Units 1 and 3 to their next scheduled refueling
outages does not pose an undue risk considering the findings of
the root cause analysis performed for the Unit 2 steam generator
tube rupture and that the accelerated degradation experienced in
Unit 2 is not expected to be found in Units 1 and 3 at such
refueling outages through inspections to be conducted during the
outages. These outages are scheduled for early September 1993
and March 1994, respectively. In its August 19, 1993
correspondence, the NRC indicated that it had no objection to the
continued operation of Unit 1 on this time frame or to the
continued operation of Unit 3, subject to further assessment as a
result of the testing of steam generator tubes in Unit 1 during
its scheduled refueling outage. The NRC also requested steam
generator tube inspection plans for the upcoming Unit 1
inspection within thirty days and an inspection plan for the Unit
2 mid-cycle inspection and other information within ninety days.
The NRC indicated that it requested the additional information to
determine whether additional action by the NRC is necessary with
respect to the operating interval for Unit 1, the operating
interval for Unit 2 following the mid-cycle inspection and the
continued operation of Unit 3 until its next refueling outage.
To date, the Debtor has not paid any significant
additional costs as a result of the Unit 2 tube rupture. The
Debtor is not presently able to determine the total costs that
<PAGE> 118
will be incurred as a result of the tube rupture and corrective
actions.
7. Risk of Allowance of Disputed Claims
There are a number of disputed priority and non-
priority claims, including customer refund claims, against the
Debtor that may not be determined prior to confirmation of the
Plan. These claims are described in "Significant Disputed
Claims" under Section IV "Description of Significant Scheduled
Claims and Interests" herein, and include tax claims which are
asserted in the aggregate amount in excess of $55 million and
other disputed claims. The Debtor has reserved in the projected
financial statements approximately $13 million on account of
these claims, which it believes is adequate for such purpose.
However, should those claims be allowed in an amount materially
greater than that reserved, Reorganized EPE will be required to
satisfy such claims not subject to offset either by a deferred
cash payment with interest (in the case of priority tax claims).
Such claims will not, in the Debtor's opinion, have an adverse,
material impact on the financial condition of Reorganized EPE.
APS believes, although the Debtor disagrees, that the Debtor has
not stated the extent of disputed claims and their potential
impact on the proposed Plan including which party bears the risk
of increases in the claim in each Class.
8. Market for Securities Issued Under the Plan
The market value of the securities to be issued by
Reorganized EPE under the Plan will depend on the future perform-
ance of Reorganized EPE, as well as other factors and conditions
generally affecting the securities markets. The Reorganized EPE
First Mortgage Bonds and the Reorganized EPE Second Mortgage
Bonds not held as collateral and the Reorganized EPE Series A
Senior Notes will be publicly tradeable under Section 1145 of the
Code; however, such Bonds and Notes will not be authorized for
listing and trading on an exchange or an automated quotation
system and the Debtor is unable to predict with certainty the
trading price at which transactions in its securities may be
effected, on or after the Effective Date. The Plan provides that
upon issuance the Reorganized EPE First Mortgage Bonds and the
Reorganized EPE Second Mortgage Bonds distributed in respect of
Class 1 and Class 2 Claims will have an Investment Grade Rating.
9. Effect of Potential Loss of Sales
The Debtor's wholesale customers and its large retail
customers may have, in varying degrees, alternate economic
sources of power. The Debtor cannot estimate the extent, if any,
to which such customers will continue as customers of the Debtor
on mutually acceptable terms. Wholesale and large retail
<PAGE> 119
customers are identified in Section II "Description of the Debtor
- -- Background and Information Regarding the Debtor" herein. The
impact of losing certain large customers is discussed in Section
X "Feasibility of the Plan" herein and Appendix A to this
Disclosure Statement. According to the City of Las Cruces, in
the event it decides not to renew its franchise with the Debtor,
there may be an impact on the Debtor of losing approximately
eight percent (8%) of its revenues.
IV. DESCRIPTION OF SIGNIFICANT SCHEDULED CLAIMS AND INTERESTS
A. Claims Generally
On February 18, 1992, the Bankruptcy Court entered an
order establishing a bar date of June 15, 1992 for the filing of
proofs of claim in the Case; subsequently, separate bar dates of
September 30, 1992 was established for certain customer claims
and a subsequent bar date of August 31, 1993 was established for
certain Claims related to the Col-Tex Site (as hereinafter
defined). The Debtor filed its Schedule of Liabilities with the
Bankruptcy Court on February 25, 1992 (the "Schedules"). As of
June 15, 1992, approximately 420 proofs of claim or interest had
been filed with the Bankruptcy Court. As of August, 1993,
approximately 65 additional proofs of claim or interest have been
filed with the Bankruptcy Court. The Debtor is in the process of
reviewing each proof of claim, many of which are voluminous, in
an effort to reconcile the claimants and the claimed amounts with
the Debtor's books and records. The Debtor's counsel is also in
the process of analyzing the factual and legal basis of many of
the proofs of claim. Following such analyses and reconciliation,
the Debtor will contact claimants regarding variances between the
Debtor's books and records and the asserted claim amounts.
Additionally, certain institutional claimants (including the
Revolving Credit Banks (as defined herein)) have asserted
contingent and unliquidated claims, in addition to their
liquidated claims, and claims for post-petition interest at the
post-default rate and interest-on-interest which are not
reflected herein. As necessary, the Debtor will file formal
objections to claims with the Bankruptcy Court. The following is
a discussion of the scheduled claims as well as significant
disputed claims in the Case.
B. Scheduled Claims
<PAGE> 120
The following table outlines the significant categories
of outstanding claims against the Debtor as of December 31, 1992,
as reflected on the Debtor's Schedules:[3]
- ------------------------------
[3] These amounts do not include any disputed claims,
such as the priority claim in the approximate amount of $36.9
million and the general unsecured claim in the approximate amount
of $16.8 million filed by the Internal Revenue Service, not does
it include customer refund claims.
<PAGE> 121
As of December 31, 1992
(in thousands)
Secured Claims:
First Mortgage Bonds Outstanding Principal
4-5/8% Series, issued 1962, due 1992. . . . . . . $10,385
6-3/4% Series, issued 1968, due 1998. . . . . . . 24,800
7-3/4% Series, issued 1971, due 2001. . . . . . . 15,838
9% Series, issued 1974, due 2004. . . . . . . . . 20,000
10-1/2% Series, issued 1975, due 2005 . . . . . . 15,000
8-1/2% Series, issued 1977, due 2007. . . . . . . 25,000
9.95% Series, issued 1979, due 2004 . . . . . . . 17,559
13-1/4% Series, issued 1984, due 1994 . . . . . . 17,700
11.10% Series, issued 1990, due 2001. . . . . . . 153,000
Prepetition interest on First Mortgage Bonds. . . 3,840
--------
303,122
Second Mortgage Bonds Outstanding Principal
11.58% Series, issued 1990, due 1997. . . . . . . 35,000
12.63% Series, issued 1990, due 2005. . . . . . . 105,000
12.02% Series, issued 1991, due 1999. . . . . . . 25,000
Prepetition interest on Second Mortgage Bonds . . 1,968
--------
166,968
Pollution Control Bonds secured by Second Mortgage Bonds:
Variable rate bonds, due 2014, including $1,658,000
on deposit with trustee. . . . . . . . . . . . 61,797
Variable rate refunding bonds, due 2014 . . . . . 37,100
Variable rate refunding bonds, due 2015 . . . . . 59,235
--------
158,132
Revolving credit facility secured by First
and Second Mortgage Bonds . . . . . . . . . . . . 150,000
Pre-petition interest on revolving credit facility . 2,586
Nuclear fuel financing (RGRT). . . . . . . . . . . . 60,490
Note payable (RGRT)**. . . . . . . . . . . . . . . . 9,756
Fuel oil financing (Big Bend). . . . . . . . . . . . 5,730
--------
Total Secured Claims. . . . . . . . . . . . . . 856,784
Unsecured Claims:
Notes payable to banks (Bank of New York***,
Bank of America). . . . . . . . . . . . . . . . . 27,620
Letters of Credit draws related
to Palo Verde Station . . . . . . . . . . . . . . 182,211
Provision for Letters of Credit draws related
to Palo Verde Station**** . . . . . . . . . . . . 80,404
Marine Midland Letter of Credit draw
related to Palo Verde Station . . . . . . . . . 26,308
Pollution control bonds, variable rate, refunding
bonds, due 2013, including $3,850,000
on deposit with trustee . . . . . . . . . . . . . 36,255
<PAGE> 122
Letters of Credit fees . . . . . . . . . . . . . . . 1,412
Stock incentive plan . . . . . . . . . . . . . . . . 259
Trade claims exceeding $10,000 and
miscellaneous fees . . . . . . . . . . . . . . . . 18,139
--------
Total Unsecured Claims. . . . . . . . . . . . . 372,608
--------
$1,229,392
In addition, although not scheduled as a Claim, rejection of the
Palo Verde Leases gives rise to Claims by the Palo Verde Lessors.
The Allowed amount of these Claims is in dispute and has been the
subject of litigation, as is described below. The Plan provides
for full resolution of such disputed Claims if Class 12(a) and
12(b) accept the Plan and the Bankruptcy Court approves the OP
Settlement, as described below. In the event Class 12(a) or
12(b) does not accept the Plan, or the Bankruptcy Court does not
approve the OP Settlement, then the Debtor reserves all its
rights to dispute the entire amount of Class 12(a) or (b) claims.
______________________
** This claim was filed as an unsecured claim but may be
asserted as a secured claim.
*** This claim appears in the Debtor's Schedules as a secured
claim because it is secured by the Debtor's common stock,
but the claim is an unsecured claim against the Debtor.
**** The letter of credit draw of $80,404,000 occurred on
January 9, 1992.
<PAGE> 123
These scheduled claims consist of the following:
1. Secured Claims
First Mortgage Bonds. The Debtor's First Mortgage
Bonds are issued under an Indenture of Mortgage dated as of
October 1, 1946, as amended and supplemented (the "First Mortgage
Indenture"), between the Debtor and State Street Bank and Trust
Company of Boston, Massachusetts, as Indenture Trustee for First
Mortgage Bondholders (the "First Mortgage Trustee"), and are
secured by substantially all of the Debtor's utility plant.
Under the First Mortgage Indenture the Debtor was entitled to
issue bonds on the basis of (i) 60% of unfunded net additions to
the Debtor's utility property, (ii) cash deposited with the
trustee and (iii) retirement of First Mortgage Bonds or refund-
able debt, provided that earnings available for interest are at
least equal to twice the annual interest requirements on all
bonds to be outstanding and on all prior lien debt.
The Debtor has approximately $299.3 million aggregate
principal amount of First Mortgage Bonds outstanding, which
amount does not include $50 million aggregate principal amount of
First Mortgage Bonds that are pledged as security for payments
under the Debtor's revolving credit facility (the "Revolving
Credit Facility"). Approximately $30 million in interest accrues
annually on the First Mortgage Bonds currently outstanding.
Claims due to the holders of the First Mortgage Bonds (not
including such pledged First Mortgage Bonds) are reflected on the
Debtor's Schedules as $303,122,112, consisting of the principal
amount owed plus interest accrued up to the Petition Date. The
First Mortgage Bondholders have also asserted claims for post-
petition interest at the post-default rate, interest-on-interest,
and fees and expenses which amounts are not reflected herein.
First Mortgage Bond Claims are treated as Class 1
Claims pursuant to the Plan. The Indenture Trustee for the First
Mortgage Bonds has also asserted Claims for reimbursement of fees
and expenses and other charges.
Second Mortgage Bonds. The Debtor's Second Mortgage
Bonds are issued under an Indenture of Mortgage dated as of
June 1, 1981, as amended and supplemented (the "Second Mortgage
Indenture"), between the Debtor and IBJ Schroder Bank & Trust, as
trustee (the "Second Mortgage Trustee"), and are secured by a
second lien on substantially all of the Debtor's utility plant.
The lien on the property securing the Second Mortgage Bonds is
subordinate to the lien securing the First Mortgage Bonds. Under
the Second Mortgage Indenture, the Debtor was entitled to issue
bonds on the basis of 40% of the value of unfunded net additions
to the Debtor's utility property or to the extent of the
principal amount of retired Second Mortgage Bonds.
<PAGE> 124
The Debtor has $165 million aggregate principal amount
of Second Mortgage Bonds outstanding, which amount does not
include approximately $158 million and $100 million aggregate
principal amount of Second Mortgage Bonds that are pledged as
security for the payment of Maricopa PCBs (as defined below) and
the Revolving Credit Facility, respectively. Approximately $20.3
million of interest accrues annually on currently outstanding
Second Mortgage Bonds. Claims due to the holders of the Second
Mortgage Bonds (not including such pledged Second Mortgage Bonds)
are reflected on the Debtor's Schedules at $166,968,287, consist-
ing of the principal amount owed plus interest accrued up to the
Petition Date. The Second Mortgage Bondholders have also
asserted Claims for interest on interest and fees and expenses,
which amounts are not reflected above.
Second Mortgage Bond Claims are treated as Class 2
Claims pursuant to the Plan.
The holders of certain EPE First and Second Mortgage
Bonds have agreed with CSW that if the Plan is accepted by the
holders of not less than two-thirds in amount of each of the
First Mortgage Bonds and the Second Mortgage Bonds that cast
ballots with respect to the Plan, but for some reason the Plan
does not become effective, then the treatment of the First and
Second Mortgage Bond Holders will, unless otherwise agreed, be
the same in any other transaction in which CSW directly or
indirectly acquires a significant portion of EPE.
Revolving Credit Facility. The Revolving Credit
Facility provided the Debtor with borrowings from time to time up
to a maximum of $150 million pursuant to the Revolving Credit
Facility dated as of October 26, 1989 between the Debtor and
Canadian Imperial Bank of Commerce (Atlanta Agency); Bank of New
York; Citibank, N.A. ("Citibank"); Security Pacific National
Bank; Mellon Bank, N.A.; First City, Texas -- Houston, N.A.; Bank
of America National Trust and Savings Association; and Chemical
Bank, individually and as Agent (the "Revolving Credit Banks").
The Debtor currently has a total of $150 million principal amount
outstanding under the Revolving Credit Facility. The Debtor has
provided as collateral for the Revolving Credit Facility $100
million of Second Mortgage Bonds Series I, Floating Rate (the
"SMB Series I Floating Rate") issued under the Second Mortgage
Indenture and $50 million of First Mortgage Bonds Series 1989
Floating Rate (the "FMB Series 1989 Floating Rate") issued under
the First Mortgage Indenture. Interest on the Revolving Credit
Facility is calculated at the administering bank's current quoted
prime rate plus 1%.
The amount of the Claim due under the Revolving Credit
Facility, as reflected on the Debtor's Schedules, is
$152,585,617, which amount includes principal plus interest
<PAGE> 125
accrued and unpaid on the Petition Date. The Revolving Credit
Banks have also asserted a claim for fees and expenses, post-
petition interest at the post-default rate and interest-on-
interest, which amounts are not reflected herein.
Claims arising in respect of the Revolving Credit
Facility are treated as Class 3 Claims pursuant to the Plan.
Pollution Control Bonds. Proceeds from the issuance of
pollution control revenue bonds (the "Pollution Control Bonds")
were used by the Debtor to pay the cost of acquiring, construct-
ing, reconstructing, improving, maintaining or furnishing pollu-
tion control facilities at Palo Verde Station and Four Corners.
Interest payments on these bonds are largely tax exempt to the
recipient. Consequently, Pollution Control Bonds have been, and
will likely continue to be, an attractive source of financing for
the Debtor. Certain of the Pollution Control Bonds are secured
by Second Mortgage Bonds. There are approximately $159.8 million
of tax exempt secured Pollution Control Bonds outstanding, con-
sisting of three issues: $63,500,000 aggregate principal amount
of Maricopa County, Arizona Annual Tender Pollution Control
Revenue Bonds, 1983 Series A (the "Maricopa Series A 1983 PCBs");
$37,100,000 aggregate principal amount of Maricopa County,
Arizona Adjustable Tender Pollution Control Refunding Revenue
Bonds, 1984 Series E (the "Maricopa Series E 1984 PCBs"); and
$59,235,000 aggregate principal amount of Maricopa County,
Arizona Adjustable Tender Pollution Control Refunding Revenue
Bonds, 1985 Series A (the "Maricopa Series A 1985 PCBs") (the
Maricopa Series A 1983 PCBs, the Maricopa Series E 1984 PCBs and
the Maricopa Series A 1985 PCBs are collectively referred to as
the "Maricopa PCBs"). Because of the different terms of the
instruments, and because of dissimilarities in the amounts, rate
and maturities of the letters of credit backing each series of
Maricopa PCB issue, each such letter of credit is treated as a
separate class under the Plan pursuant to Code Section 1122(a).
The Maricopa Series A 1983 PCBs were issued by the
Maricopa County Arizona Pollution Control Corporation ("Maricopa"
or "MPCC") and are payable out of revenues and receipts of
Maricopa under a Loan Agreement dated as of December 1, 1983 (the
"Maricopa Loan Agreement -- 1983") between the Debtor and
Maricopa. The Debtor has pledged as collateral security for its
obligations under such loan agreement the Debtor's Second Mort-
gage Bonds, Series D, Floating Rate, Due 2014 (the "SMB Series D
Floating Rate") in an aggregate principal amount equal to the
Maricopa Series A 1983 PCBs. In addition, Citibank issued a
letter of credit (the "Maricopa PCB 1983 LC") which permits
drawings to pay certain amounts, including principal of and
certain interest on, the Maricopa Series A 1983 PCBs, and the
Debtor entered into a Reimbursement Agreement with Citibank which
<PAGE> 126
requires the Debtor to reimburse Citibank for draws under the
Maricopa PCB 1983 LC.
The Maricopa Series E 1984 PCBs were issued by Maricopa
and are payable out of revenues and receipts of Maricopa under a
Loan Agreement dated as of December 1, 1984 (the "Maricopa Loan
Agreement -- 1984") between the Debtor and Maricopa. The Debtor
has pledged as collateral security for its obligations under such
loan agreement the Debtor's Second Mortgage Bonds, Series E,
Floating Rate, Due 2014 (the "SMB Series E Floating Rate") in an
aggregate principal amount equal to the Maricopa Series E 1984
PCBs. In addition, Credit Suisse ("Credit Suisse") issued a
letter of credit (the "Maricopa PCB 1984 LC") which permits draw-
ings to pay certain amounts, including principal of and certain
interest on, the Maricopa Series E 1984 PCBs, and the Debtor
entered into a Reimbursement Agreement with Credit Suisse which
requires the Debtor to reimburse Credit Suisse for draws under
the Maricopa PCB 1984 LC. In May 1992, the Maricopa Series E
1984 PCBs were accelerated and the Maricopa PCB 1984 LC was drawn
upon for approximately $37.9 million. The Debtor has not
reimbursed Credit Suisse for the draw and has been informed by
Credit Suisse that the Maricopa Series E 1984 PCBs, which remain
outstanding, are being held as collateral to secure the reim-
bursement obligations of the Debtor to Credit Suisse under the
Reimbursement Agreement.
The Maricopa Series A 1985 PCBs were issued by Maricopa
and are payable out of revenues and receipts of Maricopa under a
Loan Agreement dated as of August 1, 1985 (the "Maricopa Loan
Agreement -- 1985") between the Debtor and Maricopa. The Debtor
has pledged as collateral security for its obligations under such
loan agreement the Debtor's Second Mortgage Bonds, Series F,
Floating Rate, Due 2015 (the "SMB Series F Floating Rate") in an
aggregate principal amount equal to the Maricopa Series A 1985
PCBs. In addition, Westpac Banking Corporation ("Westpac")
issued a letter of credit (the "Maricopa PCB 1985 LC") which
permits drawings to pay certain amounts, including principal of
and certain interest on, the Maricopa Series A 1985 PCBs, and the
Debtor entered into a Reimbursement Agreement with Westpac which
requires the Debtor to reimburse Westpac for draws under the
Maricopa PCB 1985 LC.
Claims arising from each series of Maricopa PCBs are
duplicative both of claims arising from the Second Mortgage Bonds
securing such bonds and claims under the loan agreements between
Maricopa and the Debtor. Together these claims are reflected in
the Debtor's Schedules as a claim for the aggregate outstanding
principal amount of the Maricopa PCBs plus interest accrued prior
to the Petition Date. The total aggregate claims as a result of
the Maricopa PCBs is approximately $162,586,000, as reflected on
the Debtor's Schedules. In addition, the banks which issued
<PAGE> 127
letters of credit with respect to the Maricopa PCBs have
contingent claims against the Debtor which became non-contingent
to the extent the letters of credit have been drawn.
Claims arising in respect of the Maricopa PCBs, the
collateral Second Mortgage Bonds and the loan agreements between
Maricopa and the Debtor are treated as Classes 4(a) through 4(i)
pursuant to the Plan. Claims arising in respect of the letters
of credit with respect to the Maricopa PCBs are treated as
Classes 5(a) through 5(c) pursuant to the Plan. Claims arising
under the Maricopa PCBs themselves may not be Allowed Claims
against the Debtor because the Maricopa PCBs are issued by
Maricopa and not by the Debtor.
Nuclear Fuel Financing. The Debtor is a party to a
nuclear fuel purchase contract (the "RGRT Agreement") with a
third party grantor trust, Rio Grande Resources Trust ("RGRT"),
established for the purpose of financing the purchase and
enrichment of nuclear fuel for use by the Debtor in connection
with its 15.8% interest in Palo Verde Station. To finance its
obligations, the trust has a credit agreement providing for
borrowings up to $125 million. Amounts owed pursuant to such
facility, together with other obligations owed the RGRT, are
secured by loaded and unloaded nuclear fuel. The RGRT contends
that such obligations are also secured by Palo Verde Station
power, energy and revenues, although that contention is disputed
by the Debtor.
The amount of the Claim due under the RGRT as reflected
in the Debtor's Schedules is $60,559,014 arising from the fuel
facility and $9,932,085 arising from a separate note obligation.
The RGRT has also asserted Claims for post-petition interest and
fees and expenses.
Claims asserted by the RGRT are treated as Class 6
Claims pursuant to the Plan.
City of El Paso. Although not scheduled, the City of
El Paso filed a claim in the amount of $177,189 pursuant to an
order of the Bankruptcy Court dated March 23, 1992 for certain
prepetition regulatory expenses which were denied by the PUCT,
but which are subject to appeal by the City of El Paso. The City
of El Paso asserts a set-off right for such claim. To the extent
allowed, the City of El Paso Claim will be treated as a Class 7
Claim pursuant to the Plan. The City of El Paso Claim is
disputed by the Debtor.
Fuel Oil Financing. The Debtor is a party to a fuel
oil supply contract with a third party grantor trust, Big Bend
Resources Trust ("Big Bend"), established for the purpose of
financing the Debtor's fuel oil requirements. The Debtor had
<PAGE> 128
approximately $5.6 million of debt outstanding under such financ-
ing agreement on the Petition Date which was secured by fuel oil
subject to the Big Bend Trust and which was reflected as a
secured claim on the Debtor's Schedules.
On August 21, 1992, the Court approved a joint stipula-
tion pursuant to which Big Bend shall sell fuel oil to third
parties and to the Debtor, and the net proceeds from such sales
will be applied to Big Bend's claim against the Debtor. The fuel
oil subject to the Trust was not sold, however, because, inter
alia, the prospective purchaser filed a Chapter 11 case and
ceased operations. However, on August 6, 1993, the Court
approved a modification to the joint stipulation pursuant to
which Big Bend shall sell fuel oil to another third party and the
Debtor, and the net proceeds from such sales will be applied to
Big Bend's claim against the Debtor. Except to the extent the
oil supply contract is an executory contract subject to rejection
under Section 365 of the Code and not a security agreement, this
is a Class 7 secured claim to the extent of the value of the fuel
oil and an unsecured claim against the Debtor treated as a
Class 13 Claim pursuant to the Plan to the extent of any
remaining Allowed Claim.
2. Unsecured Claims
(a) Unsecured Pollution Control Bonds
Farmington Series A 1983 PCBs. The City of Farmington,
New Mexico ("Farmington"), issued $35,805,000 aggregate principal
amount of City of Farmington, New Mexico Annual Tender Pollution
Control Revenue Refunding Bonds, 1983 Series A (the "Farmington
Series A 1983 PCBs") payable out of revenues and receipts of the
City of Farmington under an Installment Sale Agreement dated as
of November 1, 1983 (the "Farmington Agreement -- 1983") between
the Debtor and the City of Farmington. The interest payments on
Farmington Series A 1983 PCBs are also tax exempt. Citibank
issued a letter of credit (the "Farmington PCB LC") which permits
drawings to pay certain amounts, including principal of and
certain interest on, the Farmington Series A 1983 PCBs, and the
Debtor entered into a Reimbursement Agreement with Citibank which
requires the Debtor to reimburse Citibank for draws under the
Farmington PCB LC.
Claims due under the Farmington Agreement -- 1983 and
the Farmington Series A PCBs are duplicative, are reflected on
the Debtor's Schedules in the amount of $36,254,800, and are
treated as Class 10(a) and 10(b) Claims, respectively, pursuant
to the Plan. Claims under the Farmington Series A PCBs may not
be Allowed Claims against the Debtor because such bonds are
issued by the City of Farmington, not by the Debtor. The
Farmington PCB LC reimbursement obligation is a contingent claim
<PAGE> 129
which becomes non-contingent as letter of credit draws occur.
The Farmington PCB LC reimbursement claim is treated as a Class
11 Claim pursuant to the Plan.
(b) Bank Notes
Bank of New York. The Bank of New York has a claim
reflected in the Debtor's Schedules at $2,502,889 which arises
from a Term Loan Agreement between the Bank of New York and the
El Paso Electric Company Leveraged Employee Stock Ownership Plan
and Trust, and with the Debtor as Guarantor. This claim may be
secured by certain shares of Common Stock owned by the El Paso
Electric Company Leveraged Employee Stock Ownership Plan and
Trust but is unsecured against the Debtor. This claim is treated
as a Class 13 Claim pursuant to the Plan.
Bank of America. Bank of America has an unsecured
claim against the Debtor pursuant to a Credit Agreement dated
January 3, 1985, which is reflected on the Debtor's Schedules in
the amount of $25,117,586. This claim is treated as a Class 13
Claim pursuant to the Plan.
(c) Letter of Credit Reimbursement Claims
Related to Palo Verde Station
The following letter of credit claims related to Palo
Verde Station Letters of Credit are treated as Class 13 Claims
pursuant to the Plan:
(i) The December 26, 1991 Letter of
Credit Draws Involving Palo Verde
Unit 2
The May 1, 1988 Reimbursement Agreements. Marine
Midland Bank (as successor to Chemical Bank), as administrating
bank, and certain other participating banks have claims for
reimbursement under two separate reimbursement agreements, both
dated May 1, 1988, between the Debtor and such banks, for the
issuance of Palo Verde Letters of Credit related to the sale/
leaseback transactions on Palo Verde Unit 2. On December 26,
1991, certain Palo Verde Unit 2 Owner Participants made draws
under these Palo Verde Letters of Credit and, as a result, Marine
Midland Bank and the participating banks under the May 1, 1988
reimbursement agreements have reimbursement claims (excluding
contingent and/or unliquidated claims) in the aggregate amount of
$182,210,905, which is reflected on the Debtor's Schedules. The
Official Unsecured Creditors Committee will take the position
that each of the participating banks that is a party to (or the
successor to a party to) the May 1, 1988 reimbursement agreements
may vote in Class 13 to accept or reject the Plan.
<PAGE> 130
The April 1, 1987 Reimbursement Agreement. Marine
Midland Bank has claims for reimbursement under a reimbursement
agreement dated April 1, 1987, between the Debtor and Marine
Midland Bank. Commercial Federal Investment Corporation, an
Owner Participant in the Palo Verde Unit 2 sale/leaseback trans-
action, made a draw under a Letter of Credit, and, as a result,
Marine Midland Bank has a reimbursement claim in the amount of
$26,511,356. The Debtor reflected the amount of the claim due
under the reimbursement agreement as $26,308,466 on the Debtor's
Schedules.
(ii) The January 9, 1992 Letter of
Credit Draws Involving Palo Verde
Unit 3
The December 1, 1987 Reimbursement Agreement. Marine
Midland Bank (as successor to Chemical Bank), as administrating
bank, and certain other participating banks have claims for
reimbursement under a reimbursement agreement, dated December 1,
1987, between the Debtor and these participating banks, for the
issuance of Palo Verde Letters of Credit related to the sale/
leaseback transactions on Palo Verde Unit 3. On January 9, 1992,
certain Palo Verde Unit 3 Owner Participants made draws under
these Palo Verde Letters of Credit, and, as a result, Marine
Midland Bank and the participating banks under the December 1,
1987 reimbursement agreement have additional reimbursement claims
as of January 9, 1992 (excluding contingent and/or unliquidated
claims) of $80,403,874, which is reflected on the Debtor's
Schedules. The Official Unsecured Creditors Committee will take
the position that each of the participating banks that is a party
to (or the successor to a party to) the December 1, 1987
reimbursement agreement may vote in Class 13 to accept or reject
the Plan.
(d) Miscellaneous Unsecured Claims
Letters of Credit Fees. Chemical Bank, Citibank,
Credit Suisse, Marine Midland Bank and Westpac all have unsecured
claims against the Debtor arising from fees related to letters of
credit issued by those banks. The Debtor's Schedules reflect the
amount of such claims as of the Petition Date to be $1,411,562.
These claims are treated as Class 5(a), 5(b), 5(c), 11 and 13
Claims, as the case may be, pursuant to the Plan. Additionally,
a number of trustees, agents or proposed agents have filed
separate proofs of claim for fees and expenses which aggregate in
excess of $2,000,000.
Stock Incentive Plan. Various employees of the Debtor
have unsecured claims arising from the Debtor's stock incentive
plan. The Debtor has determined the aggregate amount of such
claims based on the value of vested benefits as of December 31,
<PAGE> 131
1991 to be approximately $259,141, which is reflected on the
Debtor's Schedules. Except to the extent these claims arise from
executory contracts which will be assumed pursuant to the Plan,
these claims are treated as priority claims (Class 8) or small
creditor -- administrative convenience claims (Class 14) pursuant
to the Plan.
Trade Claims in Excess of $10,000. The Debtor listed
various trade claims in an amount above $10,000, together with
certain prepetition fees owing primarily to attorneys, in a total
amount of $18,139,037 in the Debtor's Schedules. A number of
these creditors filed claims in excess of their scheduled amount.
In addition, there may be a number of creditors holding trade
claims which were not scheduled filed claims in amounts in excess
of $10,000. The majority of these claims arise from executory
contracts (e.g., a supply agreement with Meridian Oil and the
ANPP Participation Agreement) and unexpired leases (e.g., a lease
of a turbine at the Copper Station) which the Debtor intends to
assume in conjunction with the Plan. Remaining claims are
treated as Class 14 Claims (to the extent less than or equal to
$100,000) and Class 13 Claims pursuant to the Plan.
Trade Claims of Less than $10,000. On February 13,
1992, the Bankruptcy Court entered its order authorizing the
Debtor to pay certain trade claims in an amount not to exceed
$10,000 per claim. Nevertheless, approximately 40 creditors
filed trade claims in amounts less than $10,000, even though such
claims were addressed by the Bankruptcy Court's order. The
Debtor is in the process of reconciling such claims with its
books and records and will obtain withdrawals of such claims,
object to such claims or pay such claims pursuant to Class 14 of
the Plan, as appropriate.
Customer Refund and Deposit Claims. Depending on the
outcome of pending rate appeals, the Debtor may be required to
refund certain amounts collected in rates since 1988. As
discussed above, the Debtor has an over-collected balance of fuel
cost, including interest, of $1.6 million as of December 31,
1992. The $1.6 million includes approximately $4.9 million of
performance standard penalties, including interest, related to
Palo Verde which would not normally be dealt with outside of a
formal fuel reconciliation proceeding. For a detailed
description of certain significant rate and regulatory
proceedings in which the Debtor is involved and appeals from
certain regulatory decisions pending in the Texas courts,
reference is made to Part I, Item 1, "Business -- Regulation --
Texas Rate Matters" in the 1992 Annual Report. The likelihood
and amount of any refund is uncertain at this time because the
ultimate outcome of the pending regulatory appeals is unknown and
also because the Debtor cannot predict the effect of mitigating
factors not addressed in the pending appeals.
<PAGE> 132
On September 28, 1992, the Debtor filed a proof of
claim with the Bankruptcy Court on behalf of its various customer
constituencies with respect to any pre-petition contingent and
unliquidated claims these customers may have arising out of or
relating to the pending rate appeals. The proof of claim states
that it is filed without prejudice to the Debtor's right to
challenge such claims and in no way constitutes an admission by
the Debtor as to the amount, validity or enforceability of such
claims. Refund and deposit claims are treated as Class 9 Claims
pursuant to the Plan.
C. Significant Disputed Claims
The following are significant disputed claims (some of
which were not scheduled) asserted against the Debtor.
1. Palo Verde Lease Claims
The First National Bank of Boston, as Owner Trustee
(the "Owner Trustee"), on behalf of certain Owner Participants,
filed nine claims in connection with the Palo Verde Units 2 and 3
sale/leaseback transactions. Each claim was filed in an unspeci-
fied total amount for amounts alleged to be owing under the Palo
Verde Leases and the related participation agreements and for an
indemnity claim under such participation agreements. In addi-
tion, DBP Corp., as agent for the Owner Trustee, filed a proof of
claim. DBP Corp. is a successor to Burnham Leasing Corp., an
Owner Participant. This claim was filed as an unliquidated
priority claim for amounts allegedly due under the sale/leaseback
transaction documents. Harris Trust and Savings Bank ("Harris"),
as indenture trustee for the holders of Secured Lease Obligation
Bonds described below issued by Del Norte Funding Corporation in
connection with the sale and leaseback of Palo Verde Unit 3
("Secured Lease Obligation Bonds"), filed four claims. In
addition, LaSalle National Bank ("LaSalle"), as indenture trustee
for the holders of Lease Obligation Bonds described below issued
by El Paso Funding Corporation in connection with the sale and
leaseback of Palo Verde Unit 2 ("Lease Obligation Bonds"), filed
four claims. Each of Harris' claims is filed in an unspecified
total amount, but states that such claim may exceed $200,000,000.
Each of LaSalle's claims is filed in an unspecified total amount,
but states that such claim may exceed $542,663,000. These claims
were filed for rent and other amounts allegedly due from the
Debtor under the Palo Verde Leases, damages for the Debtor's
rejection of the Palo Verde Leases, breach of covenants,
representations and warranties contained in certain transactional
documents, and alleged liability arising under federal and state
securities laws, common law fraud, misrepresentation and unjust
enrichment as a result of the bondholders' alleged reliance on
certain covenants, representations and warranties contained in
the transaction documents. Each trustee also asserts that
<PAGE> 133
virtually all of its claims are entitled to administrative
priority. The Debtor has denied that any of Harris, LaSalle, the
Lease Obligation Bondholders or the Secured Lease Obligation
Bondholders hold Allowed Claims against the Debtor. The Plan
proposes a resolution of this issue.
(a) Background
In 1973, the Debtor became a participant in agreements
to construct the Palo Verde Station, consisting of three nuclear
generating units. The Debtor had a 15.8% interest in Palo Verde
Station, representing 200 MW of electric generating capacity in
each of the three units.
In 1986 and 1987, the Debtor entered into a series of
transactions under which it sold and leased back its interests in
Palo Verde Unit 2, approximately one-third of its interest in the
Common Plant and 39.5% of its interest in Palo Verde Unit 3. The
Debtor executed the Palo Verde Leases with the First National
Bank of Boston, as trustee for various trusts. The Owner
Participants are the beneficiaries of the trusts. The Debtor's
sale and leaseback transactions were approved by the NRC on
August 15, 1986 and December 2, 1987, subject to all applicable
provisions of the AEA. The NRC has taken the position that it
approved these transactions as financing transactions, not lease
transactions.
The Palo Verde Leases had basic terms expiring in the
year 2013 for Palo Verde Unit 2 and the year 2017 for Palo Verde
Unit 3. The annual rent under the leases totalled approximately
$91 million. The Debtor was also responsible for the payment of
property taxes, operating and maintenance costs, and certain
other expenses associated with the leased interests in Palo Verde
Station.
As part of the sale and leaseback transactions, the
Lessors borrowed $743 million from two single-purpose corpora-
tions, El Paso Funding Corporation and Del Norte Funding Corpora-
tion, which in turn issued Lease Obligation Bonds and Secured
Lease Obligation Bonds. As of the Petition Date, approximately
$698 million of principal and $27 million of accrued interest
were outstanding under these bonds. The Debtor did not issue or
guarantee payment of these bonds. However, the bonds are
indirectly secured by the Lessors' pledge of certain rights
against the Debtor under the Palo Verde Leases, and the rent
payable by the Debtor under the Palo Verde Leases was calculated
to provide sufficient funds for the timely payment of interest
and principal on the bonds.
In connection with the Palo Verde Leases, the Debtor
obtained letters of credit for the benefit of the Owner Partic-
<PAGE> 134
ipants. Shortly before the Debtor filed its Chapter 11 petition,
the Palo Verde Unit 2 Owner Participants drew approximately $208
million on their letters of credit. Shortly after the filing,
the Palo Verde Unit 3 Owner Participants drew approximately $80
million on their letters of credit.
(b) The Palo Verde Lease Rejection Litigation
On September 9, 1992, the Debtor filed an adversary
proceeding against the Lessors and the Indenture Trustees for the
Secured Lease Obligation Bonds and the Lease Obligation Bonds
(the "Bonds"). The Debtor sought a declaratory judgment that the
Palo Verde Leases are leases of real property under the Code, and
therefore (i) the leases were rejected pursuant to the Code and
(ii) the Debtor's liability for damages resulting from the
rejection of the leases is limited to approximately $273 million.
In addition, the Debtor sought a declaratory judgment that its
liability for lease rejection was fully satisfied by the proceeds
of $288.4 million of letters of credit provided by the Debtor in
connection with the leases.
On December 15, 1992, the Bankruptcy Court granted
partial summary judgment against the Debtor with respect to one
issue on lease rejection damages, holding that the proceeds of
the letters of credit do not satisfy or offset the maximum claim
allowable in the event the leases were determined to be real
estate leases. On May 26, 1993, the Bankruptcy Court vacated its
decision of December 15, 1992.
In the adversary proceeding the Owner Trustee asserts
that the transactions constitute a lease of personal property.
The Indenture Trustees, on behalf of all bond holders, join in
this assertion and alternatively assert that the Bond holders are
creditors of EPE because, in their view, the transactions are in
substance secured financing arrangements. The Bankruptcy Court
has suspended further consideration of the other issues related
to the proceeding and directed the parties to the litigation to
seek a consensual resolution of the issue.
If the Bankruptcy Court were to grant the Debtor's
motion for summary judgment with respect to issues on which it
has not ruled, then the Palo Verde Leases would be deemed to be
true leases of real property, the leases would be deemed to have
been rejected on September 8, 1992, and the Debtor's liability
for lease rejection damages would be limited under the Code to
three years of the rent reserved under the leases. The Debtor
contends that this statutory amount is $273 million. The
defendants in the adversary proceeding contend that the statutory
amount should include credits to them for other Palo Verde
expenses, but they have not disclosed an amount thereof. The
defendants also contend that rejection of the leases would breach
<PAGE> 135
other contractual provisions and warranties and give them the
right to recover additional damages that are not subject to the
statutory limit. The amount of such alleged damages has not been
specified, but the indenture trustees assert that total damages
may exceed the outstanding amount of lease obligation bonds ($698
million in principal plus accrued interest).
If the Bankruptcy Court were to find that the Palo
Verde transactions were in substance financing transactions, then
the Debtor could, among other things, restructure those
transactions under Section 1129(b) of the Code. The Palo Verde
Indenture Trustees assert that under such circumstances the
Claims of the Owner Trustees and the Palo Verde Indenture
Trustees would be allowed as secured claims in the amount of the
value of the property subject to the transactions, and the
remaining claims would be allowed as unsecured claims.
If the Bankruptcy Court were to find that the Palo
Verde Leases are true leases of personal property, then the
leases would not be deemed to have been rejected on September 8,
1992. Unless the Debtor elects to the contrary prior to
confirmation, the Plan provides for rejection of the leases
pursuant to the Code, in which case the Lessors could claim
damages as provided in the leases. Under one method of
calculating damages, the amount would be approximately $736
million minus the fair value of the property subject to the
leases. The Palo Verde Indenture Trustees assert that under
another method of calculating damages, the damages could be the
present value of all rental payments due over the life of the
leases. The Debtor is unable to determine the fair value of the
property at this time.
The Plan provides a resolution of these issues. If the
Bond holders accept the Plan pursuant to Section 1126(c) of the
Code, all Class 12(a) Claims, including but not limited to
administrative rent claims, will be Allowed Claims in the
aggregate amount of $700 million and be accorded a 95.5%
recovery. If the Owner Participants (Class 12(b)) accept the
Plan pursuant to Section 1126(c) of the Code, and the Court
approves the settlement, all disputes between them and the Debtor
will be resolved. If Class 12(a) or Class 12(b) does not vote
for the Plan, all objections to the Allowance of Claims of the
dissenting class and all claims by the Debtor against the
dissenting class are expressly preserved, as are the rights of
Class 12(a) and Class 12(b) to argue that their claims should be
allowed in full. In this situation, the Plan provides the
holders of Class 12(a) Claims and Class 12(b) Claims, as the case
may be, to receive notes and CSW stock in an amount equal to the
Allowed amount of such Claims provided the total amount does not
exceed $700 million. In objecting to the allowance of Class
12(a) and Class 12(b) Claims, the Debtor will assert that such
<PAGE> 136
Class 12(a) and Class 12(b) Allowed Claims are far less than $700
million and the Owner Trustee and the Palo Verde Indenture
Trustees will assert that the Class 12(a) and Class 12(b) Claims
should be allowed in an amount that greatly exceeds $700 million.
If the Owner Trustee and the Palo Verde Indenture Trustees are
successful, the condition of the Plan that Class 12(a) and Class
12(b) allowed claims not exceed $700 million may not be
satisfied. See the discussion commencing in Section VI A.D.4(f)
of this Disclosure Statement for a more complete description of
the treatments of Class 12(a) and 12(b).
2. Environmental Claims
Col-Tex Refining Site. The Texas Water Commission
("TWC") has identified the Debtor as a potentially responsible
party ("PRP") for clean-up costs pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act of 1980,
42 U.S.C. Sections 9601, 9607, as amended by the Superfund
Amendments and Reauthorization Act of 1986, and the Texas Solid
Waste Disposal Act, at the Col-Tex Refinery Texas Superfund Site
in Colorado City, Mitchell County, Texas (the "Col-Tex Site").
The Col-Tex Site listed on the State Superfund Registry. The
Col-Tex Site consists of 25 acres south of State Highway 377 and
immediately west of Colorado City, Texas. The Col-Tex Site was
the location of several oil refining companies which owned and/or
operated the Col-Tex Site from the 1920s to the late 1960s.
The State of Texas, on behalf of TWC, has filed a claim
for remediation and oversight costs and has requested that the
claim be accorded administrative expense priority designation.
The TWC's position is that the Debtor is a PRP and is therefore
jointly and severally liable for the full cost of clean-up and
oversight at the Col-Tex Site. The TWC estimates site assessment
costs to be approximately $3 million and the total clean-up costs
to be approximately $22 million. The Debtor also received notice
on January 12, 1993 of the State of Texas' review of liability in
connection with the expansion of the Col-Tex Site to an area
referred to as Col-Tex II. The Debtor has been identified as a
PRP in connection with this expanded site, but its position with
respect to liability there is consistent with its position with
respect to the Col-Tex Site. The TWC submits that all of these
costs should be designated as administrative expenses of the
bankruptcy estate pursuant to 11 U.S.C. Sections 503(b)(1)(A) and
507(a)(1).
The Debtor's position with respect to the TWC's claim
is summarized in the following four paragraphs:
(a) It is the Debtor's position that it is not a
proper PRP and that it will not participate in remediation of the
Col-Tex Site. Under Section 361.271 of the Texas Solid Waste
<PAGE> 137
Disposal Act (the "TSWDA"), only current and former owners and
operators of a solid waste facility and persons involved in
transport, storage, processing, or disposal of solid waste at the
facility can be deemed to be a responsible party. The Debtor is
not a proper PRP at the Col-Tex Site because its only relation-
ship to the site was to safely store diesel fuel for 22 months in
an above-ground storage tank; diesel fuel is a valuable product,
not a "waste," and therefore not a "solid waste;" and diesel
fuel is not a "hazardous substance" because, as used in the
TSWDA, the term "hazardous substances" is defined to explicitly
exclude petroleum, or any fraction thereof.
(b) The Debtor is not an owner of a solid waste
facility because the Debtor does not currently own and has never
owned the Col-Tex Site or any part thereof. The Debtor's sole
relation to the Col-Tex Site was the short-term lease of one
tank.
(c) The Debtor is not currently and has never been an
operator of the Col-Tex Site or any part thereof. Although in
certain fact-specific situations a lessee of a facility may be
deemed an owner or operator, the Debtor did not have sufficient
control over the leased tank to be held responsible as an owner
or operator of the Col-Tex Site. The Debtor was never involved
in the transportation, storage, processing, or disposal of a
solid waste at the Col-Tex Site. The Debtor's activities at the
Col-Tex Site were limited in nature and scope, were highly
constrained, and were completely unrelated to the disposal or
release of any solid waste or hazardous substance.
(d) Finally, it is the Debtor's position that there is
no basis for concluding that the diesel fuel stored in the leased
tank ever permeated a layer of water which prevented contact
between the fuel and the tank bottom, or that there was ever a
release of diesel fuel from the leased tank or that a release
from the leased tank could have migrated to the area where
seepage is visible.
Santa Fe Station. The Santa Fe Station property was
the site of a coal gasification plant in the late nineteenth
century. In August 1989, the TWC notified the Debtor that the
TWC, together with the EPA, had conducted a study of 33 coal
gasification sites in Texas. The TWC stated that while by-
products from coal gasification plants may or may not result in
hazardous substances being present in the soil, no apparent
threat to human health, safety or the environment exists, and the
TWC required no action with respect to the coal gasification
plant at the Santa Fe Station site. Should remediation of the
coal gasification plant be required, in the future, the cost
could exceed $2 million. The Debtor does not expect the TWC to
require remediation of the coal gasification plant. The Debtor
<PAGE> 138
has listed the TWC as an unsecured creditor with a contingent,
unliquidated and disputed claim in the schedules to the State-
ment of Financial Affairs filed in the Bankruptcy Court on
February 25, 1992. The TWC has not filed a proof of claim with
respect to the Santa Fe Station.
Rio Grande Power Station. The Debtor has notified the
New Mexico Environment Department ("NMED") of a spill of approxi-
mately 510 barrels of fuel oil which occurred at the Rio Grande
Power Station in August 1986. The New Mexico Water Quality Act
provides for a potential penalty of $1,000 for each day of
violation, which for a five-year period could result in a penalty
of approximately $2 million. The Debtor has been in close
communication with the NMED and does not believe that a penalty
of such magnitude will be assessed. The initial site assessment
has been completed and a remediation plan has been submitted to
NMED and remediation is currently progressing according to the
Plan. Although assessment continues and the remediation plan has
not yet been approved, potential clean-up costs are currently
estimated to be $700,000 to $1 million to be incurred over the
next five to ten years. The NMED has filed a proof of claim in
the Case reflecting an alleged obligation in an unspecified sum
based on alleged ground water or soil contamination at the Rio
Grande Power Station.
3. Other Litigation
The Debtor has pending against it numerous other
lawsuits that arose in the ordinary course of operation of its
business. Included among such lawsuits are the following: (i)
employment-related actions alleging discrimination in hiring or
promotion decisions based on the individual's sex and/or national
origin, (ii) actions in which the individual(s) came into contact
with a live electric line of the Debtor, suffered injuries and
allege that the Debtor's negligence was the proximate cause of
those injuries and (iii) personal injury actions involving a
variety of incidents in which the claimant alleges that negli-
gence on the part of the Debtor or its employees caused the
individual's injury. The amounts of damages alleged in such
lawsuits range from nominal to substantial, depending on the
nature of the action. Each of the personal injury claimants must
submit to a mediation procedure established by an order of the
Bankruptcy Court on July 14, 1992 prior to obtaining relief from
the automatic stay to liquidate such claims in a non-bankruptcy
forum. The Debtor also has pending against it several lawsuits
that allege substantial damages and that are related to the
activities of, or are based on, the Debtor's interest in its
former subsidiaries, which were sold in or prior to January 1990.
Pursuant to its risk management analysis and practices, the
Debtor maintains liability insurance with coverage and deductible
amounts that the Debtor has determined are appropriate in rela-
<PAGE> 139
tion to the nature and number of lawsuits that are expected in
connection with the operation of an electric utility. This
liability insurance, however, does not cover certain commercial
litigation claims.
Claims asserted against the Debtor in connection with
the First Service Life Insurance Company litigation either have
been dismissed with prejudice or settled, with no Claims against
the Debtor being Allowed. The First Service Life Litigation
Claims are described in Part I, Item 3, "Legal Proceedings --
First Service Life Civil Litigation," to the 1992 Annual Report
attached hereto as Exhibit F and the terms of the settlement is
described in Reports filed on Form 8-K dated April 14, 1993,
May 26, 1993 and June 4, 1993. Claims against the Debtor in
connection with the P&C Lacelaw Trust Litigation are also
discussed in the same section of the 1992 Annual Report.
Litigation is also pending between the Debtor and
Plains Electric Generation and Transmission Cooperative, Inc.
("Plains"). Pursuant to such litigation, Plains is seeking
specific performance of a Letter of Understanding, dated June 23,
1987. The Letter of Understanding provides, in pertinent part,
that (i) Plains and the Debtor believed that the AIP could be
enhanced through the addition of compensation devices to provide
additional transfer capability into southern New Mexico, (ii) the
parties, through joint studies, would confirm such potential
additional transfer capability, (iii) if additional transfer
capability were confirmed, Plains would have the option to
purchase up to 50 MW of transfer capability in the Enhanced AIP
(the AIP, including the compensation devices), (iv) the transfer
capability acquired by Plains through the exercise of the option
would be exchanged for equal transfer capability in the Debtor's
West Mesa transmission line and (v) the parties would negotiate
an acceptable Participation and Operating Agreement. The parties
conducted the joint studies, and based on the assumptions con-
tained therein, concluded that additional transfer capability
could be obtained through the addition of a static VAR generator
in southern New Mexico and a similar device in northern New
Mexico. In June 1988, Plains provided written notice to the
Debtor that it intended to exercise the option and the parties
began negotiations concerning a Participation and Operating
Agreement. In December 1991, the negotiations between Plains and
the Debtor on a Participation and Operating Agreement reached an
impasse with regard to economic issues and satisfactory arrange-
ments between PNM and Plains. The Debtor requested arbitration
of the issues separating the parties and Plains filed its action
for specific performance or, alternatively, unspecified damages.
Plains has also filed an unliquidated claim in this proceeding.
It is the position of Plains that the Letter of Understanding
constitutes an executory agreement, but Plains reserves the right
to modify this position. The Letter of Understanding may or may
<PAGE> 140
not be an executory agreement. The Debtor has not committed to
assumption of the Letter of Understanding as an executory
contract, but reserves the right to resolve such matter (which
may include assumption) through the Plan and claims resolution
process. Plains has filed a motion in the Bankruptcy Court
seeking to compel the Debtor to decide to assume or reject its
"executory contract." The Debtor has opposed Plains' motion.
The Court has not yet ruled on the relief requested by Plains.
PNM has filed proofs of claim for amounts allegedly
owed to it by EPE pursuant to various agreements between the
parties. As part of its proofs of claim, PNM asserts that these
are amounts owed pre- and post-petition pursuant to the Interim
Transmission Capability Agreement and Agreement to Arbitrate and
other transmission agreements between the parties. Substantial
negotiations have been conducted between PNM and the Debtor to
reach an agreement between the parties. These negotiations may
result in an amended Interim Agreement.
If the parties fail to successfully negotiate an
amended agreement, nothing in this Disclosure Statement shall act
as a waiver or estoppel by a party to pursue its respective
rights, claims and remedies, including, if necessary, PNM's right
to object to the Debtor's Plan.
The Debtor believes that the amount of the "other
litigation" claims that will ultimately be allowed by the
Bankruptcy Court, and which are uninsured, is not material.
4. Unsecured Priority Claims
PBGC Claims. Although not scheduled, the Pension
Benefit Guaranty Corporation ("PBGC") filed two claims in the
respective amounts of $5,052,300 and $431,381. The first claim
was filed as a contingent claim for estimated unfunded benefit
liabilities for the possible termination (assumed to be June 15,
1992) of the Retirement Income Plan for Employees of El Paso
Electric Company (the "Pension Plan"). The second claim was
filed as a contingent claim on behalf of the Pension Plan for the
Debtor's minimum funding contributions through the termination
date, which is assumed to be June 15, 1992. This plan is not
being terminated and the Debtor has made monthly payments during
1992 toward its minimum funding requirement and is current with
respect to that funding requirement. Consequently, there are
likely to be no allowed PBGC claims against the Debtor.
Federal Tax Claims. The Internal Revenue Service (the
"Service") filed a second revised proof of claim on February 22,
1993 in the total amount of $53,676,025, which revised proof of
claim replaces the original proof of claim totalling $96,542,529.
The reason for the decrease is (i) the voluntary incorporation by
<PAGE> 141
the Service of a settlement reached by the Service and APS
involving certain issues related to construction and operation
costs associated with Palo Verde Station and verification of
proper utilization of certain investment tax credits and
(ii)recalculation of alleged penalties due. Of the total amount
of the revised proof of claim, $12,235,846 is the amount of
additional tax alleged to be due, $24,653,880 represents interest
alleged to have accrued thereon, and the balance, $16,786,299 is
asserted as an unsecured penalty claim. The Debtor believes that
it has meritorious positions with respect to remaining issues and
intends to dispute the validity of the claim and defend against
the asserted tax deficiency. Accordingly, the Debtor believes
that the ultimate Allowed Claim of the Service will be less than
that asserted in the revised proof of claim and that the Debtor
should not be liable for any penalties asserted by the Service,
although there is no assurance that such Claims will be Allowed
for amounts less than asserted.
As of December 31, 1992, the Debtor had reserved
approximately $12 million as a general contingency in the event
of an unfavorable outcome related to all outstanding tax claims.
This reserve includes a provision for the Service's claim.
State Tax Claims. The most significant state tax claim
was a claim filed by the Arizona Department of Revenue in the
amount of $46,383,273 for tax years 1984-1987. Of the claimed
amount, approximately $43,581,693 was claimed as a priority claim
with the balance of $2,801,580 asserted as an unsecured penalty
claim. On June 24, 1993, the Bankruptcy Court approved the terms
of a settlement reached between the Debtor and the Arizona
Department of Revenue with respect to an alleged deficiency of
Arizona income taxes for the years 1984-1987. Pursuant to the
settlement, the Debtor paid approximately $4 million in
settlement of all income tax liability for such years. In
return, the Department of Revenue's assessment of approximately
$46.4 million, including interest accrued through the Petition
Date, was satisfied and its proof of claim in that amount
expunged.
Local Tax Claims. Pursuant to orders of the Bankruptcy
Court entered in the Case, the Debtor has paid its prepetition
taxes owing to local governmental authorities which are not being
disputed. Notwithstanding this fact, a number of local
governmental authorities filed claims in the Case, primarily for
unpaid interest on prepetition taxes. None of these claims
exceeds $350,000, except for Maricopa County, Arizona, which
filed a claim for $12,845,321, plus interest, for the second half
payment of 1991 property taxes that were due May 1, 1992. All of
such claims, except for accrued interest, were paid in November
1992 pursuant to an order entered by the Bankruptcy Court.
<PAGE> 142
With respect to the prepetition taxes alleged to be
owed on property located in Arizona, the Bankruptcy Court entered
an order authorizing the payment of such taxes on the Debtor's
property located in Arizona, including both its owned and leased
interests in Palo Verde. The order provides that payments with
respect to the leased portion of Palo Verde for the periods prior
to the Petition Date and after September 8, 1992 are made under a
reservation of rights such that if the Bankruptcy Court deter-
mines the Debtor is not liable for such taxes, the Debtor will
receive either a refund or a credit against future Maricopa
County property taxes, or other appropriate relief ordered by the
Bankruptcy Court. Pursuant to the Order, on November 13, 1992,
the Debtor paid approximately $12.9 million of prepetition taxes
for 1991 on both the owned and leased portions of Palo Verde that
were due May 1, 1992 and approximately $6.3 million for the first
half payment of 1992 property taxes related to the leased portion
of Palo Verde that were due November 2, 1992.
D. Interest Holders
Preferred Stock. The Debtor has ten series of
Preferred Stock outstanding, the terms of which were established
pursuant to the articles of incorporation of the Debtor. The
aggregate par value of all such outstanding Preferred Stock is
approximately $78 million. Interests in respect of the Preferred
Stock are treated as Class 15 Claims. No shares of Preferred
Stock are held beneficially by executive officers or directors of
the Debtor.
Common Stock. There are approximately 35.5 million
shares of Common Stock of the Debtor issued and outstanding.
Executive officers and directors of the Debtor have beneficial
ownership, as such term is defined in Rule 13d-3 promulgated
under the Securities Exchange Act of 1934, of approximately 3.08%
of the outstanding shares of Common Stock of the Debtor as of
March 31, 1993, consisting of 92,955 shares held directly and
indirectly and options to purchase 1,033,300 shares that are
exercisable within sixty (60) days of March 31, 1993. Interests
in respect of Common Stock are treated as Class 16 Claims
pursuant to the Plan.
V. SUMMARY OF PLAN OF REORGANIZATION
A. Claims and Interests
The Plan divides the holders of Claims and Interests,
except Administrative claims and priority tax claims, into 27
separate and distinct Classes pursuant to Code Section 1122(a)
<PAGE> 143
and sets forth the treatment offered each Class.[4] A Claim or
Interest is in a particular class only to the extent that the
Claim or Interest is an Allowed Secured Claim, an Allowed Claim
or an Allowed Interest in that class.
Class 1 consists of the Allowed Claims arising under or
related to the following series of existing EPE First Mortgage
Bonds and related agreements, including purchase agreements:
Approximate Outstanding
Aggregate Principal
Series Amount
Series 4.625%, due 1992 $10,385,000
Series 6.75%, due 1998 $24,800,000
Series 7.75%, due 2001 $15,838,000
Series 9%, due 2004 $20,000,000
Series 10.5%, due 2005 $15,000,000
Series 8.5%, due 2007 $25,000,000
Series 9.95%, due 2004 $17,559,000
Series 13.25%, due 1994 $17,700,000
Series 11.1%, due 2001 $153,000,000
Class 2 consists of the Allowed Claims arising under or
related to the following series of existing EPE Second Mortgage
Bonds and related agreements, including purchase agreements:
Approximate Outstanding
Aggregate Principal
Series Amount
Series J 11.58%, due 1997 $35,000,000
Series K 12.63%, due 2005 $105,000,000
Series L 12.02%, due 1999 $25,000,000
Class 3 consists of the Allowed Claims arising under or
related to the Revolving Credit Facility, together with the FMB
Series 1989 Floating Rate and the SMB Series I Floating Rate
which secure such Claims. The approximate outstanding principal
amount of Class 3 Claims is $150,000,000.
Classes 4(a) through 4(i) consist, respectively, of the
Allowed Claims arising from or related to: (a) the Maricopa Loan
Agreement -- 1983, (b) the Maricopa Loan Agreement -- 1984,
(c) the Maricopa Loan Agreement -- 1985 (the Maricopa Loan
Agreement -- 1983, the Maricopa Loan Agreement -- 1984 and the
- -----------------------------
[4] The Service disputes the classification of claims
described herein. See Section B.2(b), "Priority Tax Claims" in
this Section V.
<PAGE> 144
Maricopa Loan Agreement -- 1985 are collectively referred to as
the "Maricopa Loan Agreements"), (d) the Maricopa Series A 1983
PCBs issued by Maricopa in the original principal amount of
$63,500,000, (e) the Maricopa Series E 1984 PCBs issued by
Maricopa in the original principal amount of $37,100,000, (f) the
Maricopa Series A 1985 PCBs issued by Maricopa in the original
principal amount of $59,235,000, (g) the SMB Series D Floating
Rate, (h) the SMB Series E Floating Rate and (i) the SMB Series F
Floating Rate. The approximate outstanding principal amount of
Class 4(a) and 4(g) Claims is $63,500,000; Class 4(b) and 4(h)
Claims is $37,100,000; and Class 4(c) and 4(i) Claims is
$59,235,000. Class 4(d), 4(e) or 4(f) Claims against the Debtor
possibly may not be Allowed Claims because Maricopa, rather than
the Debtor, is the issuer of the Maricopa PCBs.
Class 5(a) consists of all Allowed Claims arising from
or related to the Maricopa PCB 1983 LC, issued by Citibank with
respect to the obligations evidenced by the Maricopa Series A
1983 PCBs, including, without limitation, Allowed Claims for
reimbursement and subrogation arising from or related thereto.
The amount of non-contingent Class 5(a) Claims includes the out-
standing letter of credit draws by the trustee for the Maricopa
Series A 1983 PCBs, accrued and unpaid interest on those drawn
amounts, reasonable expenses and unpaid letter of credit fees.
Class 5(b) consists of all Allowed Claims arising from
or related to the Maricopa PCB 1984 LC, issued by Credit Suisse
with respect to the obligations evidenced by the Maricopa Series
E 1984 PCBs, including, without limitation, Allowed Claims for
reimbursement and subrogation arising from or related thereto.
The amount of non-contingent Class 5(b) Claims includes the out-
standing letter of credit draws by the trustee for the Maricopa
Series E 1984 PCBs, accrued and unpaid interest on those drawn
amounts, reasonable expenses and unpaid letter of credit fees.
Class 5(c) consists of all Allowed Claims arising from
or related to the Maricopa PCB 1985 LC, issued by Westpac with
respect to the obligations evidenced by the Maricopa Series A
1985 PCBs, including, without limitation, Allowed Claims for
reimbursement and subrogation arising from or related thereto.
The amount of non-contingent Class 5(c) Claims includes the out-
standing letter of credit draws by the trustee for the Maricopa
Series A 1985 PCBs, accrued and unpaid interest on those drawn
amounts, reasonable expenses and unpaid letter of credit fees.
Class 6 consists of all Allowed Claims arising from or
related to the RGRT Agreement and all other Allowed Claims
otherwise asserted by (A) the RGRT or (B) successors and assigns
in interest of Claims previously held by the RGRT on account of
such interest. The approximate outstanding principal amount of
Class 6 Claims is $70,246,317.
<PAGE> 145
Class 7 consists of Allowed Secured Claims that are not
otherwise classified pursuant to the Plan.
Class 8 consists of Allowed Claims, if any, with
priority pursuant to Sections 507(a)(3), 507(a)(4), and 507(a)(6)
of the Code. Class 8 Claims consist primarily of employee
Allowed Claims for prepetition wages and employee benefits to the
extent of the statutory limits for such amounts and customer
deposit Allowed Claims to the extent of the statutory limits for
such amounts. Most liquidated Class 8 Claims have already been
paid pursuant to prior order of the Bankruptcy Court.
Class 9 consists of all Allowed Claims of the Debtor's
customers for refunds or for deposits which are not Class 8
Claims. Many Class 9 claims are contingent and unliquidated;
consequently, the outstanding amount of Class 9 Claims is not
known.
Classes 10(a) and 10(b) consist, respectively, of all
Allowed Claims arising from or related to (a) the Farmington
Agreement -- 1983 and (b) the Farmington Series A 1983 PCBs
issued by the City of Farmington, New Mexico, which mature on
November 1, 2013. The approximate outstanding principal amount
of Class 10(a) Claims is approximately $35,805,000. Class 10(b)
Claims against the Debtor possibly may not be Allowed Claims
because Farmington, rather than the Debtor, is the issuer of the
Farmington Series A 1983 PCBs.
Class 11 consists of all Allowed Claims arising from or
related to the Farmington PCB LC, issued by Citibank with respect
to the obligations evidenced by the Farmington Series A 1983
PCBs, including, without limitation, Allowed Claims for reim-
bursement and subrogation arising from or related thereto. The
amount of non-contingent Class 11 Claims includes the outstanding
letter of credit draws by the trustee for the Farmington Series A
1983 PCBs, accrued and unpaid interest on those drawn amounts,
reasonable expenses, and unpaid letter of credit fees.
Class 12(a) consists of all Allowed Claims arising from
or related to the Palo Verde Leases, the Secured Lease Obligation
Bonds, and the Lease Obligation Bonds, including, without limita-
tion, any and all Allowed Claims arising from or related to the
Palo Verde Leases or their rejection, Allowed Claims for
administrative rent, Allowed Claims for payment for conveyance of
any interest in Unit 2 or 3 of the Palo Verde Nuclear Generating
Station and all other claims (whether sounding in tort, contract
or otherwise) which are Allowed Claims, except claims included in
Class 12(b). Class 12(b) consists of all Allowed Claims of any
Owner Participant and all Allowed Claims of any Owner Trustee or
Owner Trust other than claims of any such Owner Trustee or Owner
Trust on behalf of or for the benefit of the Palo Verde Indenture
<PAGE> 146
Trustees, Lease Obligation Bonds or Secured Lease Obligation
Bonds, including without limitation, Allowed Claims arising from
or related to the Palo Verde Leases or their rejection, Allowed
Claims for administrative rent, Allowed Claims for payment for
conveyance of any interest in Unit 2 or 3 of the Palo Verde
Nuclear Generating Station and all other claims (whether sounding
in tort, contract or otherwise) which are Allowed Claims.
If Class 12(a) accepts the Plan in accordance with
Section 1126(c) of the Code, then upon confirmation of the Plan,
Class 12(a) will be treated as Creditors entitled to
distributions under the Plan. If Class 12(b) accepts the Plan in
accordance with Section 1126(c) of the Code, then upon
confirmation of the Plan, Class 12(b) will be treated as
Creditors entitled to distributions under this Plan. In the
event that such Classes do not accept the Plan in accordance with
Section 1126(c) of the Code, the Plan is not confirmed, or the
Plan does not become effective, the Debtor reserves all rights to
assert, and nothing in the Plan herein shall affect any
determination, that the Secured Lease Obligation Bondholders, the
Lease Obligation Bondholders, the Funding Corporation, or the
Owner Participants or the trustees for such Bondholders or Owner
Participants, are not Creditors and do not hold Allowed Claims;
and the Secured Lease Obligation Bondholders, the Lease
Obligation Bondholders, and the trustees for such bondholders
reserve all rights to assert, and nothing contained herein shall
affect any determination, that they are creditors and that their
claims should be Allowed Claims in an amount exceeding $700
million.
Class 13 consists of all Allowed Claims that are not
included in Classes 1 through 12 or Class 14 of the Plan and
includes, without limitation, all Allowed Claims arising from or
related to (i) the Palo Verde letters of credit, including with-
out limitation Allowed Claims for reimbursement and subrogation
related thereto, including the outstanding letter of credit
draws, accrued and unpaid interest on the drawn amounts,
prepetition reasonable expenses and attorneys' fees and
prepetition unpaid letter of credit fees; (ii) that certain Term
Loan Agreement between the Bank of New York, the El Paso Electric
Company Leveraged Employee Stock Ownership Plan and Trust, and
the Debtor as Guarantor, dated as of October 1, 1987, scheduled
on the Debtor's Statement of Financial Affairs in the amount of
$2,509,283.33; (iii) that certain Term Loan Agreement between EPE
and the Bank of America, dated as of January 3, 1985; and (iv)
the claim of National Westminster Bank USA ("NAT WEST") and Peter
Sorenson, not in his individual capacity but as successor
individual Co-Trustee of the Big Bend Resources Trust in the
amount of $5,608,356.81, less those amounts received by NAT WEST
pursuant to that certain Order dated August 6, 1993. Other Class
13 claims have either been scheduled by the Debtor or have been
<PAGE> 147
timely filed by the applicable Bar Date. The Debtor will file,
at least thirty (30) days prior to the Confirmation Date, a list
of certain Class 13 Claims it does not dispute for the purposes
of the Plan and on the assumption that the Class holders of such
Claims votes in favor of the Plan and it becomes effective.
Certain Class 13 Claims are disputed or unliquidated;
consequently the outstanding amount of Class 13 Claims is not
known.
Class 14 consists of small creditors and claims grouped
for administrative convenience of the estate and consists of
Allowed Claims existing on the Petition Date in an amount which
is $100,000 or less or which have been reduced to $100,000 at the
election of the holder, which would otherwise have been classi-
fied in Class 13 in the absence of the existence of Class 14
under the Plan; provided, however, that if the Bankruptcy Court
determines that Class 14 is not an appropriate separate Class
under applicable provisions of the Code, then the size of Allowed
Claims entitled to Class 14 treatment shall be reduced
accordingly, including to zero if required, so that Class 14
satisfies applicable Code provisions, and the balance of Class 14
Claims above that amount shall be treated as Class 13 Claims.
The approximate outstanding amount of Class 14 Claims, assuming a
$100,000 threshold, is likely to be less than $2,000,000. These
Allowed Unsecured Claims are separately classified because of the
administrative convenience of such classification as well as
because they are different in kind and nature from other
unsecured claims. Certain secured bondholders have informed the
Debtor that they may contend that $100,000 is an inappropriately
high level of "convenience class" in the absence of any showing
that solicitation costs should approach $100,000 per claim.
Class 15 consists of the Allowed Interests of holders
of the following issues of EPE Preferred Stock of the Debtor:
Approximate Total Unpaid and
Total Par Redemption Accumulated
Value of Prices As Of Dividends as
Issue Issue 12/31/94 of 1/08/92
Series 10.75% $ 5,200,000 $ 5,330,000 $ 291,800
Series 8.44% $ 9,760,000 $ 9,965,936 $ 429,900
Series 8.95% $ 9,000,000 $ 9,201,600 $ 420,400
Series 10.125% $10,000,000 $10,000,000 $ 528,400
Series 11.375% $30,000,000 $30,000,000 $1,781,000
Series 4.5% $ 1,534,000 $ 1,635,000 $ 35,200
Series 4.12% $ 1,506,000 $ 1,559,700 $ 32,300
<PAGE> 148
Series 4.72% $ 2,001,000 $ 2,080,000 $ 49,300
Series 4.56% $ 4,000,000 $ 4,000,000 $ 95,200
Series 8.24% $ 5,157,000 $ 5,315,283 $ 225,600
The amount of Allowed Interests in Class 15 may be
determined by the Court to be more or less than the total of the
columns in the above table. If Class 15 accepts the Plan, the
amount of Allowed Interests in Class 15 will be equal to the sum
of the redemption prices of the EPE Preferred Stock at the
Effective Date (which, for example, if the Effective Date is
December 31, 1994, will be the redemption prices listed in the
above table) plus accrued and unpaid prepetition dividends.
Class 16 consists of the Allowed Interests of holders of EPE
Common Stock and options respecting EPE Common Stock. There are
approximately 35.5 million shares of EPE Common Stock issued and
outstanding.
B. Treatment of Classes of Claims and Interests
The treatment of and consideration to be provided to
holders of Allowed Claims and Allowed Interests pursuant to the
Plan shall be in full settlement, release and discharge of such
Allowed Claims and Allowed Interests; provided, however, that
such discharge of a debt of the Debtor shall not affect the
liability of any other entity on, or the property of any other
entity encumbered to secure payment of, such debt, except as
otherwise provided in the Plan.
1. Definition of Allowed Claim and Allowed Interest
Under the Plan, an Allowed Claim is a Claim against the
Debtor to the extent that (1)(a) the Claim was timely filed or
the Claim was listed on the Schedules prepared and filed with the
Bankruptcy Court by the Debtor and not listed as disputed, con-
tingent or unliquidated as to amount and (b) the Debtor, Reorgan-
ized EPE, or any other party in interest entitled to do so does
not file an objection prior to the Effective Date or such other
date as may be established by the Plan or the Bankruptcy Court;
(2) the Claim is allowed by a Final Order of the Bankruptcy Court
or (3) the Claim is allowed by the Plan.
Under the Plan, an Allowed Interest is an Interest as
to which (a) neither the Debtor, Reorganized EPE, nor any other
party in interest entitled to do so has filed an objection within
a time fixed by the Bankruptcy Court, or (b) the Interest is
allowed by a Final Order of the Bankruptcy Court.
<PAGE> 149
2. Treatment of Administrative Expenses and
Priority Tax Claims
(a) Administrative Expenses
Subject to the bar date for filing applications set
forth in Section 5.4 of the Plan and described below, each holder
of an administrative expense or cost entitled to priority under
Code Sections 507(a)(1) and 503(b) shall receive (i) cash equal
to the amount of such administrative expense or cost on the
Effective Date or (ii) at the option of the Reorganized EPE,
payment in accordance with the ordinary business terms of such
expense or cost, except to the extent that any such holder shall
have agreed to less favorable treatment of such administrative
expense or cost. Section 5.4(A) of the Plan provides that all
applications for final compensation of professional persons for
services rendered prior to the Effective Date and all other
requests for payment of administrative costs and expenses
incurred prior to the Effective Date pursuant to Code
Sections 507(a)(1) or 503(b) (except for claims for taxes, trade
debt and customer deposits and credits incurred in the ordinary
course of business after the Petition Date) shall be filed no
later than 30 days after the Effective Date. Any such claim
which is not filed within this time deadline shall be forever
barred. Objections to administrative claims of professionals
seeking reimbursement from the estate timely filed under this
section may be filed no later than 20 days after the filing of
any such claim.
(b) Priority Tax Claims
Section 3.2 of the Plan provides that holders of tax
Claims entitled to priority under Section 507(a)(7) of the Code
shall, on the Effective Date, receive one of the two following
treatments, at the option of Reorganized EPE:
(A) cash equal to the amount of its Allowed Claim; or
(B) a promissory note in the principal amount of its
Allowed Claim. Interest shall accrue under the
note from and after the Effective Date at the rate
of 5% or at such higher or lower rate as is deter-
mined by the Bankruptcy Court to be appropriate
under Section 1129(a)(9)(C) of the Code and shall
be paid semi-annually in arrears. The principal
amount of the note shall be paid in full on a
date or dates six years or at such earlier date as
Reorganized EPE shall elect after the date of
assessment of such Allowed Claim.
<PAGE> 150
Section 3.2 of the Plan provides that the holder of a Claim
entitled to priority under Section 507(a)(7) of the Code may be
paid a principal amount not exceeding the amount of such Allowed
Claim on such other date or dates and upon such other payment
terms as may be agreed upon by such holder and the Debtor.
The Service has previously informed the Debtor that the
Service will challenge a 5% interest rate on any Allowed Claim it
may hold with priority under Section 507(a)(2) of the Code.
Consequently, if the Service persists in this position, the
interest rate provided on account of such Allowed Claim will
likely be such rate or a higher or lower rate determined in
accordance with Section 1129(a)(9)(C) of the Code.
The Service has also previously informed the Debtor
that it objects to the extent that, under the Plan, the Debtor
attempts to pay the Service a balloon payment at the expiration
of the six-year period. The Service insists upon equal payments
not less often than quarterly.
The Service also has previously stated that it intends
to object to the treatment of Priority Tax Claims as unfair
because such treatment enables the Debtor to pay some of the
Priority Tax Claims in full, at its option, while extending
others. The Service believes that such disparate treatment is
impermissible.
While the Service admits that the provisions of Code
Section 1123(a) do not require that the Priority Tax Claims of
the Service be classified as a voting class, the Service has
previously stated that it will object to the Plan's exclusion of
the Service from a specific class to the extent that such
exclusion is used to circumvent the priority payment regime under
the Code by allowing more favorable treatment of classes whose
claims are junior in priority to those of the Service.
Finally, the Service has previously stated that it
objects to the extent that the Plan does not comply with Code
Section 1129(a)(9)(C) and contends that such objection, if
sustained by the Bankruptcy Court, may prevent confirmation of
the Plan.
3. Treatment of Classes Not Impaired Under Plan
By virtue of the provisions of Article III of the Plan,
the Allowed Claims in Classes 4(a), 4(b), 4(c), 4(d), 4(e), 4(f),
4(g), 4(h), 4(i), 7, 8, 9, 10(a), 10(b) and 14 are unimpaired
under the Plan.
<PAGE> 151
(a) Classes 4(a) through 4(i) Claims
(Allowed Claims Arising from or Related
to the Maricopa Loan Agreements and
Maricopa PCBs)
Section 3.6 of the Plan provides that Allowed Class
4(a), 4(b), 4(c), 4(g), 4(h), and 4(i) Claims and Allowed
Class 4(d), 4(e), and 4(f) Claims, if any, shall, at the option
of Reorganized EPE, exercised on the Effective Date, either
(A) be cured and reinstated pursuant to Section 1124(2) of the
Code, or (B) be left unaltered pursuant to Section 1124(1) of the
Code. If the Section 1124(2) treatment is elected,
(i) Reorganized EPE shall cure any and all defaults under the
applicable Maricopa Loan Agreements and the applicable Maricopa
PCBs, and the EPE Second Mortgage Bonds securing such claims,
that occurred before or after the commencement of the Case, other
than a default of a kind specified in Section 365(b)(2) of the
Code, (ii) Reorganized EPE shall compensate the holder for any
damages incurred as a result of any reasonable reliance on any
contractual provision or applicable law that entitles the holder
to demand or receive accelerated payment of such Claim after the
occurrence of a default, (iii) the original maturity for such
Maricopa Loan Agreements and such Maricopa PCBs, and the EPE
Second Mortgage Bonds securing such claims, shall be reinstated
(or, at the option of Reorganized EPE in accordance with legal,
equitable and contractual rights of the applicable parties, such
EPE Second Mortgage Bonds shall be replaced by new Reorganized
EPE Second Mortgage Bonds with the same scheduled maturity,
interest rate, and payment terms as such EPE Second Mortgage
Bonds), and (iv) any other legal, equitable, or contractual
rights of holders of Class 4(a), 4(b), 4(c), 4(d), 4(e), 4(f),
4(g), 4(h) and 4(i) Claims shall remain unaltered. To the extent
Section 1124(1) treatment is elected, the legal, equitable and
contractual rights to which such Claim entitles the holder of
such Claim shall be unaltered by the Plan.
Apart, and independent, from the provisions of this
Plan, but pursuant to documents filed with the Bankruptcy Court
in accordance with Section 7.6 of the Plan and in accordance with
the legal and contractual right of the parties, subject to the
tax exempt status of the Maricopa PCBs being maintained, it is
contemplated that (i) the Maricopa PCBs held by or on behalf of
EPE or the issuer of the related Maricopa PCB LC will, subject in
the case of the Maricopa Series A 1985 PCBs to the related
Maricopa LC issuer's consent, be remarketed at par as soon as
practicable after the Confirmation Date, and (ii) subject to the
tax exempt status of refunded bonds being maintained, the
Maricopa PCBs will be refunded on or soon after the Effective
Date. In connection therewith, it is also contemplated that,
subject to the tax exempt status of the Maricopa PCBs being
maintained, certain modifications will be made to the indentures
<PAGE> 152
or resolutions governing the respective Maricopa PCBs. Such
modifications shall include a term providing that the interest
rate on all Maricopa Series A 1985 PCBs will be reset on the
Confirmation Date to a market rate for similar tax-exempt bonds.
It is contemplated that the Maricopa PCBs issued in connection
with any such refunding will be unsecured.
The post-Effective Date reimbursement agreement claims
of the issuer of each letter of credit backing the Maricopa PCBs
will be collateralized by Reorganized EPE Second Mortgage Bonds.
(b) Class 7 Claims (Other Allowed Secured Claims)
Section 3.9 of the Plan provides that for purposes of
the Plan, each Allowed Secured Claim in Class 7 shall be deemed
classified in a separate Class. On the Effective Date, each
holder of an Allowed Secured Claim in Class 7, in full satisfac-
tion of such Claim, shall, at the option of the Debtor and CSW,
receive one of the following treatments: (i) receive cash equal
to the amount of such Allowed Claim, (ii) such Allowed Claim
shall be reinstated so that the Plan shall leave unaltered the
legal, equitable, and contractual rights to which such holder is
entitled, (iii) (A) any and all defaults under any instrument
evidencing such Allowed Claim that occurred before or after the
commencement of the Case, other than a default of a kind
specified in Section 365(b)(2) of the Code, shall be cured, (B)
such holder shall be compensated for any damages incurred as a
result of any reasonable reliance on any contractual provision or
applicable law that entitles such holder to demand or receive
accelerated payment of such Allowed Claim after the occurrence of
a default, (C) the original maturity for the obligations under
such instruments shall be reinstated, and (D) any other legal,
equitable, or contractual rights of such holder shall remain
unaltered, or (iv) receive the collateral securing such Allowed
Claim. Alternatively, Section 3.9 of the Plan provides that the
Debtor and CSW and the holder of an Allowed Claim in Class 7 may
agree upon any other treatment of such Claim without any further
requirement of Bankruptcy Court approval, which treatment may
include the preservation of such holder's lien; provided,
however, that such treatment shall not provide for such holder to
receive consideration having a present value in excess of the
amount of such Allowed Claim.
(c) Class 8 Claims (Allowed Priority Claims)
Section 3.10 of the Plan provides that the legal,
equitable, and contractual rights to which the holders of Allowed
Class 8 Claims are entitled will be unaltered.
<PAGE> 153
(d) Class 9 Claims (Allowed Customer Refund and
Deposit Claims)
Section 3.11 of the Plan provides that the legal,
equitable, and contractual rights to which the holders of Allowed
Class 9 Claims are entitled will be unaltered.
(e) Classes 10(a) and 10(b) Claims (Allowed
Claims arising from or related to the
Farmington Agreement and the Farmington
Series A 1983 PCBs)
Section 3.12 of the Plan provides that Allowed Class
10(a) and 10(b) Claims, if any, shall at the option of
Reorganized EPE, exercised on the Effective Date, either (i) be
cured and reinstated pursuant to Section 1124(2) of the Code or
(ii) be left unaltered pursuant to Section 1124(1) of the Code.
If Section 1124(2) treatment is elected, (i) any and all defaults
under the Farmington Agreement and the Farmington Series A 1983
PCB that occurred before or after the commencement of the Case,
other than a default of a kind specified in Section 365(b)(2) of
the Code shall be cured, (ii) the holder shall be compensated for
any damages incurred as a result of any reasonable reliance on
any contractual provision or applicable law that entitles the
holder to demand or receive accelerated payment of such Claim
after the occurrence of a default, (iii) the original maturity
for the obligations under the Farmington Agreement and the
Farmington Series A 1983 PCBs shall be reinstated, and (iv) any
other legal, equitable, or contractual rights of holders of
Class 10(a) and 10(b) Claims shall remain unaltered. If
Section 1124(1) treatment is elected, the legal, equitable and
contractual rights to which such Claim entitles the holder of
such Claim shall be unaltered by the Plan.
It is contemplated that the Farmington PCBs will be
remarketed or will be refunded on or soon after the Effective
Date. In connection therewith, it is also contemplated that,
subject to the tax-exempt status of the Farmington PCBs being
maintained, modifications will be made to the resolution
governing the Farmington PCBs.
(f) Class 14 Claims (Allowed Claims of Small
Creditors -- Administrative Convenience
Class)
Class 14 Allowed Claims shall be paid in full in cash.
4. Treatment of Classes Impaired Under Plan
By virtue of the provisions of Article III of the Plan,
the Allowed Claims in Classes 1, 2, 3, 5(a), 5(b), 5(c), 6, 11,
<PAGE> 154
12(a), 12(b) and 13, and the Allowed Interests in Classes 15 and
16 are impaired under the Plan. Each of these thirteen impaired
Classes is a separate Class and is entitled to a separate Class
vote under the Plan. If, however, the Bankruptcy Court
determines that certain classes or sub-classes should be
subdivided into further sub-classes, the holders of Allowed
Claims in each of such sub-classes will be entitled to a separate
class vote and the treatment proposed for each Class in the Plan
as filed shall be applicable, pro rata, to such sub-classes.
(a) Class 1 (Allowed Claims Arising from or
Related to EPE First Mortgage Bonds of
the Debtor) and Class 2 (Allowed Claims
Arising from or Related to EPE Second
Mortgage Bonds of the Debtor)
(i) Plan treatment of Class 1
Section 3.3 of the Plan provides for the treatment of
Allowed Class 1 Claims as follows:
Class 1 Claims shall be Allowed Claims in the sum of
(a) the principal amount of the EPE First Mortgage Bonds of the
Debtor; (b) interest on such EPE First Mortgage Bonds accrued and
unpaid prior to the Petition Date at the non-default rate set
forth in such EPE First Mortgage Bonds; (c) interest on such EPE
First Mortgage Bonds accrued and unpaid from and after the
Petition Date at the non-default rate set forth therein; (d)
interest on the unpaid interest amounts described in clauses (b)
and (c) above at the per annum rate of 90 day LIBOR plus 200
basis points, from the due date of each such installment of
interest through the Effective Date; (e) reasonable fees, costs
and charges of the trustee (including fees and expenses of legal
counsel) under the EPE First Mortgage Indenture; and (f)
reasonable fees and expenses of Rothschild Inc. and Weil,
Gotshal & Manges incurred in connection with representation of
certain of the Class 1 Claim holders.
Allowed Claims in Class 1 shall be discharged and
satisfied in full by distribution of Reorganized EPE First
Mortgage Bonds with the terms described herein and in Section 3.3
of the Plan on the Effective Date and, in the case of item (d) of
the preceding paragraph, by the payment of cash on the Effective
Date, and, in the case of items (e) and (f) described in the
preceding paragraph, by payment in cash as soon as practicable
after the Confirmation Date and, thereafter, as incurred prior to
the Effective Date, paid not less than quarterly. The forms of
the Reorganized EPE First Mortgage Bonds applicable to Class 1
Allowed Claims and the Reorganized EPE First Mortgage Bond
Indenture will be filed with the Bankruptcy Court at least ten
days prior to the deadline established for voting on the Plan and
<PAGE> 155
available for inspection in the Bankruptcy Court files or through
the Debtor's attorneys. The principal amount of the Reorganized
EPE First Mortgage Bonds on account of the Class 1 Allowed Claims
shall be equal to the unpaid amount of such Class 1 Allowed
Claims excluding the sum of items (d), (e), and (f) above.
Reorganized EPE First Mortgage Bonds shall be issued in
satisfaction of Class 1 Allowed Claims as follows: (a) $100
million in aggregate principal amount of a series of Reorganized
EPE Series A First Mortgage Bonds (the "Reorganized EPE Series A
First Mortgage Bonds") shall be distributed pro rata to holders
of Class 1 Allowed Claims; and (b) the remainder of the Class 1
Allowed Claims shall be satisfied by a pro rata distribution of
Reorganized EPE Series B First Mortgage Bonds (the "Reorganized
EPE Series B First Mortgage Bonds") in a principal amount equal
to the difference between the aggregate amount of the Allowed
Claims in Class 1 (excluding the sum of items (d), (e) and (f)
above) and $100 million.
The Reorganized EPE Series A First Mortgage Bonds shall
mature on the fifth anniversary of the Effective Date, or such
other maturity as CSW may elect by notice given to holders of
Allowed Class 1 Claims receiving Reorganized EPE Series A First
Mortgage Bonds at least 30 days prior to the Effective Date. The
Reorganized EPE Series B First Mortgage Bonds shall mature on the
fifteenth anniversary of the Effective Date, or such other
maturity as CSW may elect, by notice given to holders of Allowed
Class 1 Claims receiving Reorganized EPE Series B First Mortgage
Bonds at least 30 days prior to the Effective Date. If
maturities are elected for either the Reorganized EPE Series A
First Mortgage Bonds or the Reorganized EPE Series B First
Mortgage Bonds, other than the fifth or fifteenth anniversary of
the Effective Date, respectively, they must be a maturity of not
less than five nor more than thirty years, and if longer than
fifteen years, must be in increments of five years (i.e. twenty,
twenty-five or thirty years). The Reorganized EPE Series A First
Mortgage Bonds and the Reorganized EPE Series B First Mortgage
Bonds shall provide for the accrual of interest commencing on the
Effective Date at a Market Basket Rate, based upon a basket of
utility bonds of comparable rating and maturity, determined in
accordance with the procedures set forth in Schedule D of the
Plan. The Reorganized EPE Series A First Mortgage Bonds and the
Reorganized EPE Series B First Mortgage Bonds shall provide for
the payment of interest semi-annually in arrears.
The Reorganized EPE Series A First Mortgage Bonds and
the Reorganized EPE Series B First Mortgage Bonds will not be
redeemable by Reorganized EPE prior to the fifth anniversary of
the Effective Date. On and after such date, the Reorganized EPE
First Mortgage Bonds will be redeemable, in whole or in part, at
premium redemption prices equal to the sum of (i) the aggregate
<PAGE> 156
outstanding principal amount of such Reorganized EPE First
Mortgage Bonds plus (ii) a redemption premium calculated in
accordance with Schedule B to the Plan plus (iii) accrued but
unpaid interest to the redemption date. The Reorganized EPE
Series A and Series B First Mortgage Bonds will be publicly
tradeable under Section 1145 of the Code and upon issuance will
have an Investment Grade Rating.
In addition to the foregoing, as provided by Section
5.1(B) of the Plan, on and after the Confirmation Date and
through the Effective Date, holders of Allowed Class 1 Claims
shall continue to be paid interest on the principal amount of the
EPE First Mortgage Bonds at the non-default rate set forth
therein.
Any holder of Allowed Class 1 Claims may elect, by
written notice to EPE and CSW delivered not later than 5 days
prior to the Effective Date, to have Reorganized EPE cause there
to be underwritten and sold in a secondary offering, and
registered with the SEC if required, any or all of such holder's
Reorganized EPE First Mortgage Bonds; provided, however, that in
no event shall Reorganized EPE be required to cause there to be
underwritten more than fifty percent (50%) of the aggregate
principal amount of all such bonds issued on account of Class 1
Allowed Claims. To the extent that holders of more than fifty
percent (50%) in aggregate principal amount of Class 1 Allowed
Claims elect to require Reorganized EPE to underwrite a sale of
such holders' Reorganized EPE First Mortgage Bonds issued on
account of such claims, the amount of such bonds to be so
underwritten shall be reduced on a Pro rata basis so that the
aggregate amount of all such bonds being underwritten does not
exceed fifty percent (50%) in the aggregate principal amount of
all such bonds issued. In the event such election is timely
exercised, Reorganized EPE shall cause such sale to occur not
later than 60 days after the Effective Date. Reorganized EPE
shall be responsible for all costs and expenses of such sale
including customary and reasonable legal fees of one counsel for
the selling security holders. Reorganized EPE and holders of
Class 1 Allowed Claims electing to sell in accordance with the
above will enter into a customary registration rights agreement
pursuant to which Reorganized EPE will agree, among other things,
to indemnify such holders against certain claims and such holders
will agree to indemnify Reorganized EPE in connection with
written information provided by such holders specifically for
inclusion in the registration statement relating to the sale. To
the extent that the sale does not provide the holder with net
proceeds equal to the outstanding principal amount plus accrued
interest of the Reorganized EPE First Mortgage Bonds to be sold,
then Reorganized EPE shall promptly pay such holder cash in an
amount equal to such deficiency, if any.
<PAGE> 157
Notwithstanding the foregoing, Reorganized EPE may, at
the election of CSW exercised on or prior to the Effective Date,
satisfy all or any portion of Class 1 Allowed Claims by remitting
to the holders of such Allowed Claims cash in lieu of an equal
principal amount of Reorganized EPE First Mortgage Bonds to be
applied first Pro rata to these holders of such Allowed Claims
that have elected to cause such holder's Reorganized EPE First
Mortgage Bonds to be underwritten and sold, and then Pro rata in
respect of all other Class 1 Allowed Claims. To the extent that
such holders receive cash in lieu of Reorganized EPE First
Mortgage Bonds, the amount of cash received shall reduce CSW's
obligation to underwrite Reorganized EPE First Mortgage Bonds
pursuant to the preceding paragraph on a dollar for dollar basis.
The Reorganized EPE Series A and Series B First
Mortgage Bonds will also be subject to the provisions described
in "General First Mortgage Bond Provisions" under Part F of
Section VIII - "Means for Execution of Plan" herein.
(ii) Plan treatment of Class 2
Section 3.4 of the Plan provides for the treatment of
Allowed Class 2 Claims as follows:
Class 2 Claims shall be Allowed Claims in the sum of
(a) the principal amount of the Second Mortgage Bonds of the
Debtor; (b) interest on such Second Mortgage Bonds accrued and
unpaid prior to the Petition Date at the non-default rate set
forth in such Second Mortgage Bonds; (c) interest on such Second
Mortgage Bonds accrued and unpaid from and after the Petition
Date at the non-default rate set forth in such Second Mortgage
Bonds; (d) interest on the unpaid interest amounts described in
clauses (b) and (c) above at the per annum rate of 90 day LIBOR
plus 200 basis points (from the due date of each such installment
of interest through the Effective Date); (e) reasonable fees,
costs and charges of the trustee (including fees and expenses of
legal counsel) under the EPE Second Mortgage Indenture; and (f)
the reasonable fees and expenses of Rothschild Inc. and Weil,
Gotshal & Manges incurred in connection with representation of
certain of the Class 2 Claim holders.
Allowed Claims in Class 2 shall be discharged and
satisfied in full by distribution of Reorganized EPE Series A
Second Mortgage Bonds with the terms described herein and in
Section 3.4 of the Plan on the Effective Date, and, in the case
of item (d) of the preceding paragraph, by the payment of cash on
the Effective Date and, in the case of items (e) and (f)
described in the preceding paragraph, by payment in cash as soon
as practicable after the Confirmation Date and, thereafter, as
incurred prior to the Effective Date, paid not less than
quarterly. The forms of the Reorganized EPE Second Mortgage
<PAGE> 158
Bonds applicable to Class 2 Allowed Claims and the Reorganized
EPE Second Mortgage Indenture will be filed with the Bankruptcy
Court at least ten days prior to the deadline established for
voting on the Plan and to be available for inspection in the
Bankruptcy Court files or through the Debtor's attorneys. The
principal amount of the Reorganized EPE Series A Second Mortgage
Bonds issued on unpaid account of the Class 2 Allowed Claim shall
be equal to the amount of such Class 2 Allowed Claims excluding
the sum of items (d), (e), and (f) above.
The Reorganized EPE Series A Second Mortgage Bonds
shall provide for the accrual of interest commencing on the
Effective Date at a Market Basket Rate, based upon a basket of
utility bonds of comparable rating and maturity, determined in
accordance with the procedures set forth in schedule D to the
Plan. The Reorganized EPE Series A Second Mortgage Bonds shall
provide for the payment of interest semi-annually in arrears.
The Reorganized EPE Series A Second Mortgage Bonds will mature on
the tenth anniversary of the Effective Date, or such other
maturity as CSW may elect by notice given to holders of Allowed
Class 2 Claims receiving Reorganized EPE Series A Second Mortgage
Bonds at least 30 days prior to the Effective Date. If a
maturity other than the tenth anniversary of the Effective Date
is elected, it must be a maturity of not less than five nor more
than thirty years, and if longer than fifteen years, it must be
in increments of five years (i.e. twenty, twenty-five or thirty
years).
The Reorganized EPE Series A Second Mortgage Bonds will
not be redeemable by Reorganized EPE prior to the fifth
anniversary of the Effective Date. On and after that date, the
Reorganized EPE Series A Second Mortgage Bonds will be
redeemable, in whole or in part, at premium redemption prices
equal to the sum of (i) the aggregate outstanding principal
amount of such Reorganized EPE Series A Second Mortgage Bonds
plus (ii) a redemption premium calculated in accordance with
Schedule B to the Plan plus accrued but unpaid interest to the
redemption date. The Reorganized EPE Second Mortgage Bonds will
be publicly tradeable under Section 1145 of the Code and upon
issuance will have an Investment Grade Rating.
In addition to the foregoing, as provided by Section
5.1(B) of the Plan, on and after the Confirmation Date and
through the Effective Date, holders of Allowed Class 2 Claims
shall continue to be paid interest on the principal amount of the
EPE Secured Mortgage Bonds at the non-default rate set forth
therein.
Any holder of Class 2 Allowed Claims may elect, by
written notice to EPE and CSW delivered not later than 5 days
prior to the Effective Date, to have Reorganized EPE cause there
<PAGE> 159
to be underwritten and sold in a secondary offering, registered
with the SEC if required, any or all of such holder's Reorganized
EPE Second Mortgage Bonds; provided, however, that in no event
shall Reorganized EPE be required to underwrite a sale of more
than fifty percent (50%) of the aggregate principal amount of all
such bonds issued on account of Allowed Class 2 Claims. To the
extent that holders of more than fifty percent (50%) in the
aggregate principal amount of Allowed Class 2 Claims elect to
require Reorganized EPE to underwrite a sale of such holders'
Reorganized EPE Second Mortgage Bonds issued on account of such
claims, the amount of such bonds to be so underwritten shall be
reduced on a Pro rata basis so that the aggregate amount of all
such bonds being underwritten does not exceed fifty percent (50%)
in the aggregate principal amount of all such bonds issued. In
the event such election is timely exercised, Reorganized EPE
shall cause such sale to occur not later than 60 days after the
Effective Date. Reorganized EPE shall be responsible for all
costs and expenses of such sale, including customary and
reasonable legal fees of one counsel for the selling security
holders. Reorganized EPE and holders of Class 2 Allowed Claims
electing to sell in accordance with the above will enter into a
customary registration rights agreement pursuant to which
Reorganized EPE will agree to indemnify such holders against
certain claims and such holders will agree, among other things,
to indemnify Reorganized EPE in connection with written
information provided by such holders specifically for inclusion
in the registration statement relating to the sale. To the
extent that such sale does not provide the holder with net
proceeds equal to the outstanding principal amount plus accrued
interest of the Reorganized EPE Second Mortgage Bonds to be sold,
then Reorganized EPE shall promptly pay such holder cash in an
amount equal to such deficiency, if any.
Notwithstanding the foregoing, Reorganized EPE may, at
the election of CSW exercised on or prior to the Effective Date,
satisfy all or any portion of Allowed Class 2 Claims by remitting
to the holders of such Allowed Claims, Pro rata, cash in lieu of
an equal principal amount of Reorganized EPE Second Mortgage
Bonds to be applied first Pro rata to those holders of such
Allowed Claims that have elected to cause such holders'
Reorganized EPE Second Mortgage Bonds to be underwritten and
sold, and then Pro rata in respect of all other Class 2 Allowed
Claims. To the extent such holders receive cash in lieu of
Reorganized EPE Second Mortgage Bonds, the amount of cash
received shall reduce CSW's obligation to underwrite the EPE
Second Mortgage Bonds pursuant to the preceding paragraph on a
dollar for dollar basis.
In addition to the foregoing, as provided in Section
5.1(B) of the Plan, the Reorganized EPE Series A Second Mortgage
Bonds will also be subject to the provisions described in
<PAGE> 160
"General Second Mortgage Bond Provisions" under Part F of Section
VIII - "Means for Execution of Plan" herein.
(b) Class 3 Claims (Allowed Claims of
Revolving Credit Banks Arising from
or Related to the Revolving Credit
Facility)
Section 3.5 of the Plan provides for the treatment of
Allowed Class 3 Claims as follows (provided that each holder who
fails to make a timely election or does not timely return a
ballot will be deemed to have elected Treatment A if Class 3
accepts the Plan):
A. If Class 3 accepts the Plan in accordance with
Section 1126(c) of the Code, Class 3 Claims shall be Allowed
Claims in the sum of (a) the outstanding principal amount of the
Revolving Credit Facility on the Petition Date; (b) interest
accrued and unpaid through June 30, 1992, at the non-default rate
under the Revolving Credit Facility; (c) reasonable fees and
expenses of the Revolving Credit Banks and Agent incurred before
and after the Petition Date as provided for under the Revolving
Credit Facility; (d) interest on the unpaid interest amounts
described in clause (b) above at (i) the non-default rate set
forth in the Revolving Credit Facility through the Confirmation
Date and (ii) LIBOR plus 150 basis points from the Confirmation
Date through the Effective Date; and (e) interest amounts, if
any, payable pursuant to Section 3.5(C) of the Plan. If Class 3
accepts the Plan in accordance with Section 1126(c) of the Code,
holders of Allowed Class 3 Claims shall receive, pursuant to the
Plan, Treatment A or Treatment B, as described below.
1. Treatment A. Allowed Class 3 Claims (other than
those that are to receive Treatment B pursuant to an election by
the holder thereof in the manner set forth in part 2 below) shall
be discharged and satisfied in full by distribution under a new
term loan agreement of Reorganized EPE Class 3A Secured Notes in
the principal amount of such Allowed Class 3 Claims less the
amount of such Allowed Class 3 Claims for reasonable fees and
expenses described in item (c) in the immediately preceding
paragraph (which portion of Allowed Class 3 Claims shall be paid
in cash as soon as practicable after the Confirmation Date and
thereafter periodically on a current basis, but no less often
than quarterly, to the Effective Date) and less the amount of
such Allowed Class 3 Claims described in items (d) and (e) in the
immediately preceding paragraph (which portion of Allowed Class 3
Claims shall be paid in cash on the Effective Date). Such
Reorganized EPE Class 3A Secured Notes shall be secured by bonds,
one-third of which shall be Reorganized EPE Series X Pledged
First Mortgage Bonds and two-thirds of which shall be Reorganized
EPE Series X Pledged Second Mortgage Bonds. Such Reorganized EPE
<PAGE> 161
Series X Pledged First Mortgage Bonds and Reorganized EPE Series
X Pledged Second Mortgage Bonds will have interest and payment
terms identical to those of such Reorganized EPE Class 3A Secured
Notes. The Reorganized EPE Series X Pledged First Mortgage Bonds
and Reorganized EPE Series X Pledged Second Mortgage Bonds will
be issued and deposited as security for the payment of the
obligations represented by such Reorganized EPE Class 3A Secured
Notes. However, no payment of interest or principal shall be
demanded or received on the Reorganized EPE Series X Pledged
First Mortgage Bonds or Reorganized EPE Series X Pledged Second
Bonds except if, and to the extent that, the corresponding
payment remains unpaid under the Reorganized EPE Class 3A Secured
Notes after the due date thereof.
The Reorganized EPE Class 3A Secured Notes to be
distributed pursuant to Treatment A will bear interest at a rate
equal to 90-day LIBOR plus 150 basis points (or, at the option of
Reorganized EPE, at the "base" or "prime" rate plus 50 basis
points) from and after the Effective Date, payable at the end of
each interest period. Such Reorganized EPE Class 3A Secured
Notes will mature on the earlier of December 31, 1997 and the
last business day of the month in which the third anniversary of
the Effective Date shall occur (or such earlier date as may be
designated by Reorganized EPE) and will be payable in equal
quarterly principal installments commencing on the earlier of (x)
December 31, 1994, and (y) the last business day of the month in
which the first anniversary of the Effective Date shall have
occurred. If, however, the Effective Date occurs after December
31, 1994, any quarterly installment(s) (beginning with the
December 31, 1994, installment) that would otherwise have been
payable prior to the Effective Date shall not be required to be
paid until (and shall be payable in addition to any quarterly
principal installment, scheduled to be paid on) the last business
day of the month in which the Effective Date occurs. Such
Reorganized EPE Class 3A Secured Notes will be prepayable at any
time in whole or in part without premium subject only to breakage
costs, if any, in connection with the LIBOR option. Such
Reorganized EPE Class 3A Secured Notes will not be publicly
tradeable and will be assignable only to Eligible Institutions
(to be defined in the term loan agreement, such definition to
include a limitation by asset size and/or rating) and in such
minimum denominations as shall be agreed and specified in the
term loan agreement.
The new term loan agreement and related notes and
pledged mortgage bonds will contain covenants and terms set forth
in the documents filed with the Bankruptcy Court in accordance
with Section 7.6 of the Plan which shall include material
covenants appropriate for secured senior (non-publicly tradeable)
bank debt of a utility whose senior debt securities have a rating
similar to those of Reorganized EPE, but in no event materially
<PAGE> 162
less favorable to the holders of Allowed Class 3 Claims who elect
Treatment A than those generally found in similar agreements, if
any, of other CSW electric operating subsidiaries. Such
covenants will include a limited negative pledge; a minimum ratio
of earnings before interest, amortization and taxes to interest
expense; and a maximum ratio of debt to total capital.
Notwithstanding the foregoing, Reorganized EPE may, at
the election of CSW exercised on or prior to the Effective Date,
satisfy all or any portion of Allowed Class 3 Claims that are to
receive Treatment A by remitting to holders of such Allowed
Claims Pro rata, cash in lieu of an equal principal amount of
Reorganized EPE Class 3A Secured Notes.
2. Treatment B. Alternatively, each holder of an
Allowed Class 3 Claim may elect, by written notice to EPE and CSW
delivered not later than 90 days prior to the Effective Date, to
have its Allowed Class 3 Claim (or any portion thereof) receive
Treatment B; provided that in no event shall the aggregate amount
of all Allowed Class 3 Claims receiving Treatment B exceed fifty
percent (50%) of the aggregate amount of all Allowed Class 3
Claims (prior to giving effect to any such elections). To the
extent that holders of Allowed Class 3 Claims elect Treatment B
for Allowed Class 3 Claims constituting more than fifty percent
(50%) in aggregate amount of Allowed Class 3 Claims, the amount
of such Claims (for which Treatment B was elected) of each such
holder that shall receive Treatment B shall be reduced
proportionately (and instead shall receive Treatment A to the
extent of such reduction) so that the aggregate amount of all
Allowed Class 3 Claims receiving Treatment B does not exceed
fifty percent (50%) in aggregate amount of all Allowed Class 3
Claims (prior to giving effect to any such elections). Allowed
Class 3 Claims receiving Treatment B shall be discharged and
satisfied in full by distribution of Reorganized EPE Series C
First Mortgage Bonds and Reorganized EPE Series B Second Mortgage
Bonds in a principal amount equal to one-third and two-thirds,
respectively, of the amount of such Allowed Class 3 Claims less
the amount of such Claims for reasonable fees and expenses and
interest described in item (c) of the first paragraph of Section
3.5(A) of the Plan (which Allowed Class 3 Claims shall be paid in
cash as soon as practicable after the Confirmation Date, and
thereafter periodically on a current basis, but not less often
than quarterly, to the Effective Date) and less the amount of
such Allowed Claims described in items (d) and (e) in the first
paragraph of Section 3.5(A) of the Plan (which portion of Allowed
Claims shall be paid in cash on the Effective Date). Such
Reorganized EPE Series C First Mortgage Bonds shall mature on the
eighth anniversary of the Effective Date or such other shorter
maturity as CSW may elect by notice given to holders of Allowed
Class 3 Claims receiving Reorganized EPE Series C First Mortgage
Bonds at least 30 days prior to the Effective Date and shall
<PAGE> 163
accrue interest from the Effective Date at a Market Basket Rate,
based upon a basket of utility bonds of comparable rating and
maturity, determined in accordance with the procedures set forth
in Schedule D to the Plan. Reorganized EPE Series B Second
Mortgage Bonds shall mature on the eighth anniversary of the
Effective Date or such shorter maturity as CSW may elect by
notice given to holders of Allowed Class 3 Claims receiving
Reorganized EPE Series B Second Mortgage Bonds at least 30 days
prior to the Effective Date and shall accrue interest from the
Effective Date at a Market Basket Rate, based upon a basket of
utility bonds of comparable rating and maturity, determined in
accordance with the procedures set forth in Schedule D to the
Plan. Such Reorganized EPE Series C First Mortgage Bonds and
Reorganized EPE Series B Second Mortgage Bonds will be publicly
tradeable under Section 1145 of the Code and upon issuance will
have an Investment Grade Rating. The Reorganized EPE Series C
First Mortgage Bonds and the Reorganized EPE Series B Second
Mortgage Bonds will be redeemable at the option of Reorganized
EPE at any time in whole or in part at a redemption price equal
to the outstanding principal amount of such Bonds plus a
redemption premium calculated pursuant to Schedule C of the Plan
plus accrued interest, provided that prior to the fourth
anniversary of the Effective Date such Bonds will be redeemable
at the option of Reorganized EPE at any time in whole or in part
at a redemption price equal to the lesser of (x) the sum of the
outstanding principal amount of such Bonds plus a redemption
premium calculated pursuant to Schedule C, plus accrued interest
and (y) the greater of (i) the outstanding principal amount of
such Bonds plus accrued interest and (ii) the present value of
remaining interest and principal payments of such Bonds,
discounted at a rate equal to the sum of (a) the original issue
spread over the yield on the treasury security, as of the
Effective Date, which has a maturity date closest to the average
life of such Bonds, and (b) the yield on the treasury security
which has a maturity date closest to the remaining average life
of such Bonds, calculated as of the date of determination of such
redemption price.
The Reorganized EPE Series C First Mortgage Bonds and
Reorganized EPE Series B Second Mortgage Bonds distributed in
respect of Class 3 Claims receiving Treatment B under Class 3
will contain covenants similar to those relating to the
Reorganized EPE Series A and Series B First Mortgage Bonds (but
not including limitations on retirement of such bonds or
limitations on dividends and other restricted payments) and other
terms consistent with the foregoing and with modern indenture
practice and also be subject to the provisions as described in
"General First Mortgage Bond Provisions" and "General Second
Mortgage Bond Provisions," respectively.
<PAGE> 164
Notwithstanding the foregoing, Reorganized EPE may, at
the election of CSW exercised on or prior to the Effective Date,
satisfy all or any portion of Allowed Class 3 Claims that are to
receive Treatment B by remitting on a Pro rata basis to the
holders of such Allowed Claims, cash in lieu of an equal
principal amount of any or all Reorganized EPE Series C First
Mortgage Bonds or Reorganized EPE Series B Second Mortgage Bonds
otherwise to be distributed in respect of such Class 3 Allowed
Claims.
B. If Class 3 does not accept the Plan in accordance
with Section 1126(c) of the Code, then the provisions of Section
3.5(A) of the Plan described above shall not apply. In such
event Class 3 Claims shall be determined in accordance with
Sections 1.3(a), 1.3(b) and 1.5 of the Plan and applicable
provisions of the Code and Bankruptcy Rules. Allowed Class 3
Claims shall be discharged and satisfied in full by distribution
of Reorganized EPE Class 3A Secured Notes with the terms
described below on the Effective Date in the principal amount of
Class 3 Allowed Secured Claims, including, if and to the extent
provided for by section 506(b) of the Code (i) any Allowed Claims
for post-petition interest on such Allowed Secured Claims less
any post-petition interest payments made on or prior to the
Effective Date and (ii) any Allowed Claims for reasonable fees,
costs or charges provided for under the agreement under which
such Claims arose, less any amounts paid on account of such fees,
costs or charges on or prior to the Effective Date.
The Reorganized EPE Class 3A Secured Notes referred to
in Section 3.5(B) of the Plan will bear interest at a rate equal
to 90-day LIBOR plus 150 basis points (or, at the option of
Reorganized EPE, at the "base" or "prime" rate plus 50 basis
points) from and after the Effective Date, payable at the end of
each interest period. Such Reorganized EPE Class 3A Secured
Notes will mature, and be repayable in a single principal
installment, on the fifth anniversary of the Effective Date.
Such Reorganized EPE Class 3A Secured Notes will be prepayable at
any time in whole or in part without premium subject only to
breakage costs, if any, in connection with the LIBOR option.
Such Reorganized EPE Class 3A Secured Notes will not be publicly
tradeable and will be assignable only to "Eligible Institutions"
(to be defined in the term loan agreement, such definition to
include a limitation by asset size and/or rating) and in such
minimum denominations as shall be agreed and specified in the
term loan agreement.
The Reorganized EPE Class 3A Secured Notes referred to
in Section 3.5(B) of the Plan shall be secured by bonds, one-
third of which shall be Reorganized EPE Series X Pledged First
Mortgage Bonds and two-thirds of which shall be Reorganized EPE
Series X Pledged Second Mortgage Bonds. Such Reorganized EPE
<PAGE> 165
Series X Pledged Second Mortgage Bonds will have interest and
payment terms identical to those of such Reorganized EPE Class 3A
Secured Notes. The Reorganized EPE Series X Pledged First
Mortgage Bonds and Series X Pledged Second Mortgage Bonds will be
issued and deposited as security for the payment of the
obligations represented by such Reorganized EPE Class 3A Secured
Notes. However, no payment of interest or principal shall be
demanded or received on the Reorganized EPE Series X Pledged
First Mortgage Bonds or Reorganized EPE Series X Pledged Second
Mortgage Bonds except if, and to the extent that, the
corresponding payment remains unpaid under the Reorganized EPE
Class 3A Secured Notes after the due date thereof.
The new term loan agreement and related notes and
pledged mortgage bonds will contain covenants and terms set forth
in the documents filed with the Bankruptcy Court in accordance
with Section 7.6 of the Plan, which shall include material
covenants appropriate for secured senior (non-publicly tradeable)
bank debt of a utility whose senior debt securities have a rating
similar to those of Reorganized EPE, but in no event materially
less favorable to the holders of Allowed Class 3 Claims than
those generally found in similar agreements of other, if any, CSW
electric operating subsidiaries. Such covenants will include a
negative pledge; a minimum ratio of earnings before interest,
amortization and taxes to interest expense; and a maximum ratio
of debt to total capital.
C. Interest Prior to Effective Date. If Class 3
accepts the Plan in accordance with Section 1126(c) of the Code,
then in the event that interest accruing at the non-default
contract rate on the principal amount outstanding under the
Revolving Credit Facility for each monthly period from and after
August 1993, and ending on the Confirmation Date is not paid
currently (or within 15 days following the end of such month) to
the holders of Allowed Class 3 Claims, interest for such month
shall be deemed to have accrued during such month at the default
rate and shall be paid in cash, without interest on interest, on
the Effective Date. In addition to the foregoing, interest shall
accrue and be paid on the principal amount outstanding under the
Revolving Credit Facility for the period from the Confirmation
Date to the Effective Date as provided in Section 5.1(B) of the
Plan.
(c) Class 5(a)-(c) Claims (Allowed Claims
Relating to the Maricopa PCB LCs)
Section 3.7 of the Plan provides for the treatment of
Allowed Class 5(a), 5(b) and 5(c) Claims as follows:
If any of the issuers of the letters of credit giving
rise to Claims in Classes 5(a), 5(b), or 5(c) provide (or, as
<PAGE> 166
described in Section 3.7(D) of the Plan, is deemed to provide)
new letters of credit on the terms described in Section 3.7(E) of
the Plan and in documents filed with the Court in accordance with
Section 7.6 of the Plan (the "Maricopa LC Terms"), which shall
include provisions for reimbursement claims under each of the new
letters of credit to be secured by Reorganized EPE Second
Mortgage Bonds, then the Class 5(a), 5(b), and 5(c) Claims in
each Class which provides such letters of credit shall be Allowed
Claims in the sum of (i) unreimbursed amounts drawn before and
after the Petition Date under the letters of credit, (ii)
interest on the amount of unreimbursed draws the proceeds of
which were used to pay interest on the Maricopa PCBs, calculated
at the non-default contract rate from the date of the draw to and
including July 7, 1993, (iii) interest on the amount of an
unreimbursed draw, the proceeds of which were used to purchase
Maricopa PCBs, calculated at 90 day LIBOR plus 62.5 basis points
from the date of such draws to and including July 7, 1993, net of
interest accrued during such period on the purchased Maricopa PCB
which has been paid to the Class 5(a), 5(b) or 5(c) holder whose
Maricopa PCB LC was used to purchase the Maricopa PCB, (iv)
unpaid letter of credit fees accrued before and after the
Petition Date, (v) interest on the amount of unreimbursed draws
the proceeds of which were used to pay interest on the Maricopa
PCBs, calculated at the non-default contract rate from July 8,
1993 to and including the Effective Date, (vi) interest on the
amount of any unreimbursed draws, to purchase or redeem Maricopa
PCBs, calculated at the following per annum rates from July 8,
1993 to and including the Effective Date, net of interest accrued
during such period on a purchased Maricopa PCB which has been
paid to the Class 5(a), 5(b), or 5(c) holder whose Maricopa PCB
LC was used to purchase or redeem the Maricopa PCB: (a) Class
5(a) at 90 day LIBOR plus 87.5 basis points, (b) Class 5(b) at 90
day LIBOR plus 62.5 basis points, and (c) Class 5(c) at the prime
rate (or equivalent index) announced from time to time by Westpac
Banking Corporation, and (vii) reasonable costs and expenses
(including fees and expenses of legal counsel of each of the
issuers and Canadian Imperial Bank of Commerce (the
"Participant") which was the only participant in the issuers'
Claims as of the Petition Date) incurred before and after the
Petition Date in connection with the Maricopa PCBs, the Maricopa
PCB LCs and the Maricopa Loan Agreements.
Such Allowed Claims shall be discharged and satisfied
in full by the distribution on the Effective Date of Reorganized
EPE Class 5A Secured Notes under new term loan agreements in an
aggregate amount equal to the unpaid amount of Allowed Class
5(a), 5(b), and 5(c) Claims described in items (i), (ii) and
(iii) of the immediately preceding paragraph and by the following
cash payments:
<PAGE> 167
(a) As soon as practicable after the Confirmation
Date, the Debtor will pay in cash to each holder of a
Class 5(a), 5(b) and 5(c) Allowed Claim and to the
Participant all accrued and unpaid costs and expenses
described in item (vii) of the immediately preceding
paragraph;
(b) From and after the Confirmation Date to and
including the Effective Date, the Debtor will pay to
each holder of a Class 5(a), 5(b) and 5(c) Allowed
Claim and to the Participant the following amounts in
cash: (x) quarterly and on the Effective Date, all
accrued and unpaid costs and expenses described in item
(vii) of the immediately preceding paragraph, and (y)
promptly upon any draw, all amounts drawn on any
Maricopa PCB LC for payment of interest on the Maricopa
PCBs; and
(c) On the Effective Date Debtor will pay in cash to
the holder of each Class 5(a), 5(b) and 5(c) Allowed
Claim and to the Participant, items (iv), (v) and (vi)
described in the immediately preceding paragraph.
The Reorganized EPE Class 5A Secured Notes will bear
interest at a rate of LIBOR (resetting, at the option of
Reorganized EPE, at 1, 3 or 6 months) plus 150 basis points (or,
at the option of Reorganized EPE, at a "base" or "prime" rate
plus 50 basis points), payable at the end of each interest period
(but in any event not less often than quarterly).
There will be a separate term loan agreement with
respect to the Reorganized EPE Class 5A Secured Notes distributed
to each of Class 5(a), Class 5(b) and Class 5(c). Such term loan
agreements shall have substantially similar terms and conditions.
Each such Class 5(a), Class 5(b) and Class 5(c) holder which has
participants in their Claims shall be issued separate Reorganized
EPE Class 5A Secured Notes for the portion of its Allowed claim
which is so participated and such separate notes may be
transferred by the Allowed claim holder to the participant.
The Reorganized EPE Class 5A Secured Notes will be
prepayable at any time in whole or in part without premium
subject only to breakage costs, if any, in connection with the
LIBOR option. The Reorganized EPE Class 5A Secured Notes will
mature on the earlier of December 31, 1997, and the last business
day of the month in which the third anniversary of the Effective
Date shall occur and will be payable in equal quarterly principal
installments commencing on the earlier of (x) December 31, 1994,
and (y) the last business day of the month in which the first
anniversary of the Effective Date shall have occurred. If,
however, the Effective Date occurs after December 31, 1994, any
<PAGE> 168
quarterly principal installment(s) that would have otherwise been
payable prior to the Effective Date shall not be required to be
paid until (and shall be payable in addition to any quarterly
principal installments scheduled to be paid on) the last business
day of the month in which the Effective Date occurs.
The Reorganized EPE Class 5A Secured Notes under each
term loan agreement shall be secured by Reorganized EPE Series Y
Pledged Second Mortgage Bonds in a principal amount equal to the
aggregate principal amount of such Reorganized EPE Class 5A
Secured Notes. The Reorganized EPE Series Y Pledged Second
Mortgage Bonds will have interest and payment terms which mirror
those of such Reorganized EPE Class 5A Secured Notes. Such
Reorganized EPE Series Y Pledged Second Mortgage Bonds will be
issued and deposited as security for the payment of the
obligations represented by the Reorganized EPE Class 5A Secured
Notes; provided, however, no payment of interest or principal
shall be demanded or received on the Reorganized EPE Series Y
Pledged Second Mortgage Bonds except if, and to the extent that,
the corresponding payment remains unpaid under the Reorganized
EPE Class 5A Secured Notes after the due date thereof. The
Reorganized EPE Class 5A Secured Notes issued to each issuer will
provide that net proceeds of any remarketing or refunding after
the Effective Date of any Maricopa PCBs purchased prior to the
Effective Date through draws on such issuer's letter of credit
will be applied to repay the principal of such Reorganized EPE
Class 5A Secured Notes. Such Reorganized EPE Class 5A Secured
Notes will not be publicly tradeable and will be assignable only
to "Eligible Institutions" (to be defined in each term loan
agreement, such definition to include limitation by asset size
and/or rating) and in such minimum denominations as shall be
agreed and specified in each term loan agreement.
The term loan agreements governing the Reorganized EPE
Class 5A Secured Notes, the Reorganized EPE Class 5A Secured
Notes and the Reorganized EPE Series Y Pledged Second Mortgage
Bonds will be set forth in documents filed with the Bankruptcy
Court in accordance with Section 7.6 of the Plan. The term loan
agreements will include material covenants appropriate for
secured senior (non-publicly tradeable) bank debt of a utility
whose senior debt securities have a rating similar to those of
Reorganized EPE, but in no event materially less favorable to the
holders of Claims in Classes 5(a), 5(b) and 5(c) than those
generally found in similar agreements, if any, of other CSW
electric operating subsidiaries. Such covenants will include a
negative pledge; a minimum ratio of earnings before interest,
amortization and taxes to interest expense; and a maximum ratio
of debt to total capital.
Subject to (i) the receipt of an opinion of bond
counsel that none of the following will result in the loss of
<PAGE> 169
tax-exempt status of the Maricopa PCBs either at the time of such
actions or on the Effective Date (taking into account the
transactions and events contemplated to occur on such date) and
(ii) there being no material adverse consequences to Reorganized
EPE from such actions, Maricopa PCBs held by or on behalf of EPE
or the issuer of the related Maricopa PCB LCs will be remarketed
at par or otherwise sold to third parties at par as soon as
practicable after the Confirmation Date and in connection
therewith modifications will be made to the related indentures or
resolutions governing such Maricopa PCBs to delete the
prohibition, if any, on remarketing after the Debtor's
bankruptcy, provided, however, that no remarketing shall occur
prior to the Effective Date with respect to the Maricopa Series A
1985 PCBs without the consent of the issuer of the related PCB
LC. Certain limited additional modifications acceptable to CSW
and EPE may be made to such related indentures or resolutions at
such time. The proceeds of any remarketing of Maricopa PCBs on
or prior to the Effective Date shall be paid to (i) the issuer of
the letter of credit (if applicable), in reimbursement of
outstanding amounts, if any, previously drawn under the letter of
credit to purchase such Maricopa PCBs or (ii) to the extent not
paid to such issuer as provided in clause (i) above, the holder
of the relevant Maricopa PCBs at the time of remarketing or
refunding.
During the period prior to the Effective Date, the
Debtor shall not exercise any right it may have to redeem any
Maricopa Series A 1985 PCBs.
As noted in Section 3.6 of the Plan, it is contemplated
that, subject to the tax exempt status of the Maricopa PCBs being
maintained, the Maricopa PCBs will be refunded on or soon after
the Effective Date and in connection with such refunding certain
modifications will be made to the indentures or resolutions
governing such Maricopa PCBs. It is also contemplated that the
new letter of credit to be issued with respect to each series of
Maricopa PCBs in replacement of the Maricopa PCB LC currently
supporting such series will be issued on the refunding date for
the relevant series of Maricopa PCBs or, in the event that a
refunding would jeopardize the tax exempt status of such Maricopa
PCBs, such new letter of credit will be issued on the Effective
Date or as soon thereafter as practicable. In the event any of
the Maricopa PCBs of any series are not refunded on the Effective
Date and the new letter of credit supporting such series is not
issued on the Effective Date then (i) unless otherwise agreed
between Reorganized EPE and the issuer of the relevant letter of
credit and subject to the tax exempt status of such Maricopa PCBs
being maintained, the refunding of such Maricopa PCBs will occur
on the first applicable date for such refunding pursuant to the
terms of the resolution for such Maricopa PCBs following the
Effective Date and (ii) unless otherwise agreed between
<PAGE> 170
Reorganized EPE and the issuer of the relevant letter of credit
on the Effective Date (a) subject to the tax exempt status of
such Maricopa PCBs being maintained, the relevant indenture or
resolution, the relevant reimbursement agreement and the relevant
related documents for such Maricopa PCBs will be modified to
provide the issuer of the Maricopa PCB LC which supports such
Maricopa PCBs an option to purchase such Maricopa PCBs upon the
occurrence of an event of default under the related indenture or
resolution, in lieu of a failed remarketing or in lieu of a
redemption of such Maricopa PCBs or (b) the reimbursement
agreement related to the Maricopa PCB LC which supports such
Maricopa PCBs will provide that all obligations thereunder
incurred after the Effective Date will be collateralized by
Reorganized EPE Second Mortgage Bonds.
If any of Class 5(a), 5(b), or 5(c) does not accept the
Plan pursuant to Section 1126(c) of the Code or if an issuer
fails to provide (and is not deemed to have provided) a new
letter of credit on the relevant Maricopa LC Terms, then, in
either event, the provisions of Section 3.7(A) of the Plan
described above shall not apply to such Class and its Allowed
Class 5(a), 5(b), and 5(c) Claims shall be determined by a Final
Order to be allowed or not allowed and secured or unsecured in
accordance with Sections 1.3(a), 1.3(b) and 1.5 of the Plan and
applicable provisions of the Code and Bankruptcy Rules. To the
extent it is determined by a Final Order that the Allowed Claims
in Classes 5(a), 5(b) or 5(c) are Allowed Secured Claims, then
such Allowed Secured Claims shall be discharged and satisfied in
full by distribution of Reorganized EPE Series B Second Mortgage
Bonds on the Effective Date in the principal amount of such
Allowed Secured Claims, including if and to the extent provided
by Section 506(b)of the Code, (i) any Allowed Claims for post-
petition interest on such Allowed Secured Claims less any post-
petition interest payments made on or prior to the Effective Date
with respect to such Claims and (ii) any reasonable fees, costs
or charges provided for under the agreement under which such
claims arose. The Reorganized EPE Series B Second Mortgage Bonds
distributed pursuant to Section 3.7(B) of the Plan will have
terms identical to the Reorganized EPE Series B Second Mortgage
Bonds described in Section 3.5(A)(2) of the Plan. To the extent
that the Bankruptcy Court determines by a Final Order that any
portion of a Class 5(a), 5(b), or 5(c) Allowed Claim is not an
Allowed Secured Claim, then the Class 5(a), 5(b), or 5(c) Allowed
Claim which is not an Allowed Secured Claim shall be paid in full
on the Effective Date and discharged through the issuance to or
for the benefit of holders of such Class 5(a), 5(b), or 5(c)
Allowed Claims, Pro rata, of Reorganized EPE Class 13 Senior
Fixed Rate Notes, in an amount equal to the amount of the
unsecured portion of the Allowed Claims, without post-petition
interest, fees, costs and other charges except as otherwise
allowed by the Bankruptcy Court. The Reorganized EPE Class 13
<PAGE> 171
Senior Fixed Rate Notes shall have the same terms as the
Reorganized EPE Class 13 Senior Fixed Rate Notes described in
Section 3.15(A) of the Plan, except that the sixty percent (60%)
limitation shall not apply to the amount of the Reorganized EPE
Class 13 Senior Fixed Rate Notes issued under Section 3.7(B) of
the Plan.
If (i) Class 5(a), 5(b), or 5(c) accepts the Plan,
pursuant to Section 1126(c) of the Code, and (ii) the Effective
Date occurs, then such acceptance of the Plan by such Class shall
be a commitment by the issuer of the letter of credit that gave
rise to the Allowed Class 5(a), 5(b), and 5(c) Claims in such
Class to provide a new letter of credit on the Maricopa LC Terms,
provided, however, that if the treatment of Class 5(a), 5(b), or
5(c) is modified from the treatment for such Class set forth in
the Plan which such Class accepted and such Class does not
approve or accept (and is not deemed, pursuant to the Code or the
Bankruptcy Rules, to have approved or accepted) such
modification, then the issuer of the letter of credit that gave
rise to the Claims in such modified Class shall not be committed
to issue such new letter of credit. The commitment of the letter
of credit issuer shall not be released by the provisions of
Section 7.2(B) of the Plan.
Notwithstanding anything to the contrary in the Plan,
for purposes of determining the treatment to be received pursuant
to the Plan by Class 5(a), 5(b) or 5(c), the issuer of the letter
of credit giving rise to Claims in Class 5(a), 5(b) or 5(c), as
the case may be, shall be deemed to have provided a new letter of
credit on the Maricopa LC Terms if: (i) such issuer commits,
pursuant to paragraph C of Section 3.7 of the Plan, to issue such
new letter of credit and the Debtor or Reorganized EPE, as the
case may be, determines to have a different financial institution
issue such new letter of credit, or (ii) such issuer commits,
pursuant to paragraph C of Section 3.7 of the Plan, to issue such
new letter of credit, and, prior to such issuer issuing such new
letter of credit, a different financial institution, which
financial institution is satisfactory to the Debtor or
Reorganized EPE, as the case may be, commits to issue such new
letter of credit in place of such issuer, or (iii) such issuer
commits, pursuant to paragraph C of Section 3.7 of the Plan, to
issue such new letter of credit, and, prior to such issuer
issuing such new letter of credit, the letter of credit is not
required because the related Maricopa PCBs have been redeemed or
canceled (other than due to any action or inaction of the issuer
of the letter of credit including a failure on the part of the
issuer to extend the termination date of the letter of credit).
<PAGE> 172
The new letters of credit which are to replace the
Maricopa PCB 1983 LC, the Maricopa PCB 1984 LC and the Maricopa
PCB 1985 LC will have initial terms ending on (i) in the case of
the Maricopa PCB 1983 LC, the earlier of December 31, 1997 and
the third anniversary of the Effective Date, (ii) in the case of
the Maricopa PCB 1984 LC, the date which is the last day of the
fourth month following the earlier of December 31, 1998 and the
fourth anniversary of the Effective Date and (iii) in the case of
the Maricopa PCB 1985 LC, the earlier of December 31, 1998 and
the fourth anniversary of the Effective Date, plus, in each case,
a one-year extension at the option of Reorganized EPE. Each
letter of credit issuer shall be entitled to a commission of
0.75% per annum for the period ending on the first anniversary of
the earlier of the Effective Date and December 31, 1994 (such
earlier date being the "Commencement Date"), 0.875% per annum for
the period ending on the second anniversary of the Commencement
Date, 1.00% per annum for the period ending on the third
anniversary of the Commencement Date, 1.125% per annum for the
period ending on the fourth anniversary of the Commencement Date,
1.25% per annum for the period ending on the fifth anniversary of
the Commencement Date, and 1.375% per annum for the period ending
on the sixth anniversary of the Commencement Date, in each case
payable quarterly in arrears. In addition, each such letter of
credit shall provide for a transfer fee of 1/4% and a drawing fee
of $100 per draw. The post-Effective Date reimbursement
agreement claims of the issuer of such letter of credit shall be
collateralized by Reorganized EPE Pledged Second Mortgage Bonds.
(d) Class 6 Claims (Allowed Claims Arising
from or Relating to the RGRT Agreement
and other RGRT Allowed Claims)
Section 3.8 of the Plan provides for the treatment of
Allowed Class 6 Claims as follows:
A. If Class 6 accepts the Plan in accordance with
Section 1126(c) of the Code, Class 6 Claims shall be Allowed
Claims in the sum of (a) the aggregate principal amount
outstanding under the RGRT Agreement as of the Petition Date
(i.e., $60,490,317 with respect to nuclear fuel financing and
$9,756,000 with respect to the note payable), (b) an amount equal
to 85% of interest accrued and unpaid through September 10, 1993
on the amount described in item (a) above (excluding any interest
on interest) at the non-default contract rate under the RGRT
Agreement, and (c) reasonable fees and expenses by the credit
bank incurred before and after the Petition Date as provided for
under the RGRT Agreement. If Class 6 accepts the Plan in
accordance with Section 1126(c) of the Code, holders of Allowed
Class 6 Claims shall receive, pursuant to their election at the
time they vote on the Plan, Treatment A and/or Treatment B, as
follows (provided that each holder who fails to make a timely
<PAGE> 173
election or who does not timely return a ballot will be deemed to
have elected Treatment A if Class 6 accepts the Plan):
1. Treatment A. To the extent that Allowed Class 6
Claims are to receive Treatment A pursuant to an election by the
holder thereof in the manner described above, such Allowed Class
6 Claims shall be discharged and satisfied in full by
distribution under a new term loan agreement of Reorganized EPE
Class 6A Secured Notes in the principal amount of such Allowed
Class 6 Claims less the amount of such Claims described in item
(b) in the immediately preceding paragraph (which portion of
Allowed Claims shall be paid in cash on the Effective Date) and
less the amount of such Claims described in item (c) in the
immediately preceding paragraph (which portion of Allowed Claims
shall be paid in cash as soon as practicable after the
Confirmation Date, and thereafter periodically on a current
basis, but no less often than quarterly, to the Effective Date).
Such Reorganized EPE Class 6A Secured Notes shall be secured by
Reorganized EPE Series Z Pledged Second Mortgage Bonds in a
principal amount equal to the aggregate principal amount of such
Reorganized EPE Class 6A Secured Notes. The Reorganized EPE
Series Z Pledged Second Mortgage Bonds will have interest and
payment terms which are identical to those of such Reorganized
EPE Class 6A Secured Notes. Such Reorganized EPE Series Z
Pledged Second Mortgage Bonds will be issued and deposited as
security for the payment of the obligations represented by
Reorganized EPE Class 6A Secured Notes; provided, however, no
payment of interest or principal shall be demanded or received on
the Reorganized EPE Series Z Pledged Second Mortgage Bonds except
if, and to the extent that, the corresponding payment remains
unpaid under the Reorganized EPE Class 6A Secured Notes after the
due date thereof.
The Reorganized EPE Class 6A Secured Notes to be
distributed pursuant to Treatment A will bear interest at a rate
equal to 90-day LIBOR plus 150 basis points (or, at the option of
Reorganized EPE, at a "base" or "prime" rate, plus 50 basis
points) from and after the Effective Date, payable at the end of
each interest period (but in any event not less often than
quarterly). Such Reorganized EPE Class 6A Secured Notes will
mature on the earlier of December 31, 1998, and the last business
day of the month in which the fourth anniversary of the Effective
Date shall occur (or such earlier date as may be agreed to by
Reorganized EPE) and will be payable in equal quarterly principal
installments commencing on the earlier of (x) December 31, 1994
and (y) the last business day of the month in which the first
anniversary of the Effective Date shall have occurred. If,
however, the Effective Date occurs after December 31, 1994, any
quarterly principal installment(s) (beginning with the December
31, 1994, installment) that would otherwise have been payable
prior to the Effective Date shall not be required to be paid
<PAGE> 174
until (and shall be payable in addition to any quarterly
installment scheduled to be paid on) the last business day of the
month in which the Effective Date occurs. Such Reorganized EPE
Class 6A Secured Notes will be prepayable at any time in whole or
in part without premium subject only to breakage costs, if any,
in connection with the LIBOR option. Such Reorganized EPE Class
3A Secured Notes will not be publicly tradeable and will be
assignable only to "Eligible Institutions" (to be defined in the
term loan agreement, such definition to include a limitation by
asset size and/or rating) and in such minimum denominations as
shall be agreed and specified in the term loan agreement.
The term loan agreement and related Notes and pledged
mortgage bonds governing the Reorganized EPE Class 6A Secured
Notes will contain terms set forth in the documents filed with
the Court in accordance with Section 7.6 of the Plan, which shall
include material covenants appropriate for secured senior (non-
publicly tradeable) bank debt of a utility whose senior debt
securities have a rating similar to those of Reorganized EPE, but
in no event materially less favorable to the holders of Allowed
Class 6 Claims who elect Treatment A than those generally found
in similar agreements, if any, of other CSW electric operating
subsidiaries. Such covenants will include a negative pledge; a
minimum ratio of earnings before interest, amortization and taxes
in interest expense; and a maximum ratio of debt to total
capital.
Each Class 6 Claimholder which has participants in its
Claims shall be issued separate Reorganized EPE Class 6A Secured
Notes for the portion of its Allowed Claim which is so
participated and such separate notes shall be transferred by the
Allowed Claims holder to the participants.
Notwithstanding the foregoing, Reorganized EPE may, at
the election of CSW exercised on or prior to the Effective Date,
satisfy all or any portion of Allowed Class 6 Claims that are to
receive Treatment A by remitting to the holders of such Allowed
Claims, Pro rata, cash in lieu of an equal principal amount of
Reorganized EPE Class 6A Secured Notes.
2. Treatment B. Alternatively, each holder of an
Allowed Class 6 Claim shall have the option to elect to have its
Allowed Class 6 Claim (or any portion thereof) treated as set
forth in Section 3.8(A)(2) of the Plan. Allowed Class 6 Claims
receiving Treatment B pursuant to an election by the holder
thereof in the manner set forth above, shall be discharged and
satisfied in full by distribution of Reorganized EPE Series B
Second Mortgage Bonds in a principal amount equal to the amount
of such Allowed Class 6 Claims less the amount of such Claims
described in item (b) of the first paragraph of Section 3.8(A) of
the Plan (which Allowed Claims shall be paid in cash on the
<PAGE> 175
Effective Date) and less the amount of such Claims described in
item (c) of the first paragraph of Section 3.8(A) of the Plan
(which portion of Allowed Claims shall be paid in cash as soon as
practicable after the Confirmation Date, and thereafter,
periodically on a current basis but no less often then quarterly
to the Effective Date). Such Reorganized EPE Series B Second
Mortgage Bonds shall have terms identical to the Reorganized EPE
Second Mortgage Bonds described in Section 3.5(A)(2)of the Plan.
Each Class 6 holder which has participants in its
Claims shall be issued separate Reorganized EPE Series B Second
Mortgage Bonds for the portion of its Allowed Claim which is so
participated and such separate Bonds shall be transferred by the
Allowed Claim holder to the participants.
Notwithstanding the foregoing, Reorganized EPE may, at
the election of CSW exercised on or prior to the Effective Date,
satisfy all or any portion of Allowed Class 6 Claims receiving
Treatment B by remitting to the holders of such Allowed Claims,
pro rata, cash in lieu of an equal principal amount of
Reorganized Series B Second Mortgage Bonds.
3. Interest Prior to the Effective Date. In addition
to the foregoing, if Class 6 accepts the Plan in accordance with
Section 1126(c) of the Code, interest will accrue on the
aggregate principal amount outstanding under the RGRT Agreement
(i) from September 10, 1993 through and including the
Confirmation Date, at the contract (non-default) rate set forth
in the RGRT Agreement and (ii) from the Confirmation Date through
and including the Effective Date, at 90-day LIBOR plus 200 basis
points, and such interest shall be payable as provided in Section
5.1(B) of the Plan.
B. If Class 6 does not accept the Plan in accordance
with Section 1126(c) of the Code, then the provisions of Section
3.8(A) of the Plan described above shall not apply. In such
event, Class 6 Claims shall be determined by a Final Order to be
Allowed or not Allowed and secured or unsecured in accordance
with Sections 1.3(a), 1.3(b) and 1.5 of the Plan and applicable
provisions of the Code and Bankruptcy Rules. To the extent it is
determined by a Final Order that any Allowed Class 6 Claims are
Allowed Secured Claims, such Allowed Secured Claims shall be
discharged and satisfied in full by distribution on the Effective
Date of Reorganized EPE Class 6A Secured Notes with the terms
described below in the principal amount of such Allowed Secured
Claims, including, if and to the extent provided by Section
506(b) of the Code, (i) any Allowed Claims for post-petition
interest on such Allowed Secured Claims less any post-petition
interest payments made on or prior to the Effective Date with
respect to such Claims and (ii) any reasonable fees, costs or
charges provided for under the agreement under which such claims
<PAGE> 176
arose, less any amounts paid on account of such fees, costs or
charges prior to the Effective Date. The Reorganized EPE Class
6A Secured Notes distributed pursuant to Section 3.8 (B) of the
Plan will have the same terms as the Reorganized EPE Class 6A
Notes described in Section 3.8(A)(1) of the Plan (and will be
issued under a term loan agreement having the same terms as the
term loan agreement described in Section 3.8(A)(1) of the Plan),
except that (i) such Notes will mature and be repayable in a
single principal installment, on the fifth anniversary of the
Effective Date and (ii) such Notes will be secured by Reorganized
EPE Series Z Pledged Second Mortgagee Bonds (having interest and
payment terms which are identical to those of such Reorganized
EPE Class 6A Secured Notes) or, if and to the extent that such
collateral does not comply with Section 1129(b)(2)(A) of the
Code, such other collateral as the Bankruptcy Court may determine
is necessary to comply with Section 1129(b)(2)(A) of the Code.
To the extent that the Bankruptcy Court determines by a Final
Order that any Allowed Class 6 Claims are not Allowed Secured
Claims, then the portion of the Allowed Class 6 Claim which are
not an Allowed Secured Claim shall be paid in full on the
Effective Date and discharged through the issuance to or for the
benefit of holders of such Allowed Claims, Pro rata, of
Reorganized EPE Class 13 Senior Fixed Rate Notes, in an amount
equal to the amount of such Allowed Claims (without post-petition
interest, fees, costs or charges except as otherwise allowed by
the Bankruptcy Court). The Reorganized EPE Class 13 Senior Fixed
Rate Notes shall have the same terms as the Reorganized EPE Class
13 Senior Fixed Rate Notes described in Section 3.15(A) of the
Plan, except that the sixty percent (60%) limitation shall not
apply to the amount of Reorganized EPE Class 13 Senior Fixed Rate
Notes issued under Section 3.8(B) of the Plan.
C. The RGRT Agreement shall be treated as a secured (or
unsecured) financing agreement and not as an executory contract
or unexpired lease. All property subject to the RGRT Agreement
shall be the sole property of Reorganized EPE.
(e) Class 11 Claims (Allowed Claims arising from
or relating to the Farmington PCB LC)
Section 3.13 of the Plan provides for the treatment of
Allowed Class 11 Claims as follows:
A. If the issuer of the letter of credit giving rise
to the Allowed Claims in Class 11 provides (or, pursuant to
Section 3.13(C) of the Plan, is deemed to provide) a new letter
of credit on the terms described in the documents filed with the
Court in accordance with Section 7.6 of the Plan (the "Farmington
LC Terms"), which shall include provision for reimbursement of
claims under the new letter of credit to be secured by
Reorganized EPE Second Mortgage Bonds, then Class 11 Claims shall
<PAGE> 177
be Allowed Claims in the sum of (i) unreimbursed amounts drawn
before and after the Petition Date under the Farmington PCB LC,
and (ii) unpaid letter of credit fees accrued before and after
the Petition Date with respect to the Farmington PCB LC. Such
Allowed Class 11 Claims shall, in the case of (a) unreimbursed
amounts drawn before and after the Petition Date under the
Farmington PCB LC (other than amounts, if any, drawn to pay the
principal amount of the purchase price of Farmington Series A
1983 PCBs in circumstances under which the purchased PCBs have
not been canceled or extinguished), and (b) unpaid letter of
credit fees accrued before and after the Petition Date with
respect to the Farmington PCB LC, be discharged and satisfied in
full by distribution on the Effective Date to the holder thereof
of (i) Reorganized EPE Class 13 Senior Notes in a principal
amount equal to 30% of the amount of the Allowed Class 11 Claims
(other than Allowed Class 11 Claims, if any, to be satisfied by
distribution of Reorganized EPE Class 11 Senior Notes) of such
holder, (ii) a number of shares of CSW Common Stock determined by
dividing 60% of the amount of the Allowed Class 11 Claims (other
than Allowed Class 11 Claims, if any, to be satisfied by
distribution of Reorganized EPE Class 11 Senior Notes) of such
holder by the CSW Class 12/13 Share Value, and (iii) Reorganized
EPE Class 13 Senior Notes in a principal amount of 5.5% of the
Allowed Class 11 Claims (other than Allowed Class 11 Claims, if
any, to be satisfied by distribution of the Reorganized EPE Class
11 Notes) of such holder or, at the option of Reorganized EPE
exercised on the Effective Date, a number of shares of CSW Common
Stock determined by dividing 5.5% of the amount of the Allowed
Class 11 Claims (other than Allowed Class 11 Claims, if any, to
be satisfied by distribution of the Reorganized EPE Class 11
Senior Notes) of such holder by the CSW Class 12/13 Share Value.
An Allowed Class 11 Claim holder's receipt of CSW Common Stock
shall be treated as if such holder had exchanged a portion of its
Claims for EPE Common Stock and then transferred such EPE Common
Stock to CSW for CSW Common Stock. The Reorganized EPE Class 13
Senior Notes issued to holders of Allowed Class 11 Claims will
have terms identical to, and will be governed by the same term
loan agreement or indenture as, the Reorganized EPE Class 13
Senior Notes issued to holders of Allowed Class 13 Claims.
In the event that on or prior to the Effective Date
there is a drawing on the Farmington PCB LC to pay the principal
amount of the purchase price of any Farmington Series A 1983 PCBs
in circumstances under which such PCBs have not been canceled or
extinguished, Class 11 Allowed Claims arising from such draw
shall be discharged and satisfied in full (to the extent not paid
out of proceeds of a remarketing or refunding of such Farmington
Series A 1983 PCBs prior to the Effective Date) by distribution
to the holder thereof of Reorganized EPE Class 11 Senior Notes
under a separate term loan agreement in the principal amount of
such Class 11 Allowed Claim. The Reorganized EPE Class 11 Senior
<PAGE> 178
Notes will have interest, maturity, amortization and covenant
terms identical to Reorganized EPE Class 13 Senior Floating Rate
Notes, except that the Reorganized EPE Class 11 Senior Notes will
include provisions for the mandatory prepayment thereof from the
proceeds of any remarketing or refunding of the Farmington
Series A 1983 PCBs paid for or purchased with a draw on the
Farmington PCB LC.
Holders of Class 11 Allowed Claims shall elect, at the
time they vote on the Plan, and in accordance with such election,
shall be entitled to receive, Reorganized EPE Class 13 Senior
Notes in the form of (a) Reorganized EPE Class 13 Senior Fixed
Rate Notes or (b) Reorganized EPE Class 13 Senior Floating Rate
Notes, provided, however, that in no event may any holder elect
to receive more than sixty percent (60%) of the aggregate
principal amount of the Reorganized EPE Class 13 Senior Notes to
which it is entitled in respect of Class 11 Allowed Claims in the
form of Reorganized EPE Class 13 Fixed Rate Senior Notes. If
Class 11 accepts the Plan and if a holder of a Class 11 claim
fails to make an election or does not return a ballot, such
holder will be deemed to have elected to receive Reorganized EPE
Class 13 Senior Floating Rate Notes for the full amount of the
Reorganized EPE Class 13 Senior Notes to which such holder is
entitled.
Subject to there being no material adverse consequences
to Reorganized EPE, including the loss of tax exempt status of
the Farmington Series A PCBs, from such actions, the Debtor will
use its reasonable best efforts to remarket the Farmington
Series A 1983 PCBs after the Confirmation Date and prior to the
Effective Date in accordance with the terms of the existing
documents governing such remarketings. In the event that prior
to the Effective Date there is a draw on the Farmington PCB LC to
pay the principal amount of the purchase price of any Farmington
PCB and such Farmington PCB is not canceled or redeemed, then
upon any remarketing or refunding thereof (i) on or prior to the
Effective Date such proceeds shall be remitted to the issuer of
the Farmington PCB LC and (ii) after the Effective Date the
proceeds from any remarketing or refunding of the Farmington PCBs
(to the extent not previously remitted to such holder) shall be
paid to the Allowed Class 11 Claim holders Pro rata on account of
their Reorganized EPE Class 11 Senior Notes.
As noted in Section 3.12 of the Plan, it is
contemplated that, subject to the tax exempt status of the
Farmington Series A 1983 PCBs being maintained, the Farmington
Series A 1983 PCBs will be refunded on or soon after the
Effective Date and in connection with such financings certain
modifications will be made to the resolution governing the
Farmington Series A 1983 PCBs. It is also contemplated that the
new letter of credit to be issued with respect to the Farmington
<PAGE> 179
Series A 1983 PCBs in replacement of the Farmington PCB LC will
be issued on the refunding date for the Farmington Series A 1983
PCBs or, in the event that a refunding would jeopardize the tax
exempt status of the Farmington Series A 1983 PCBs, such new
letter of credit will be issued on the Effective Date or as soon
thereafter as practicable. In the event the Farmington Series A
1983 PCBs are not refunded on the Effective Date then (i) unless
otherwise agreed between Reorganized EPE and the issuer of the
Farmington PCB LC and subject to the tax exempt status of
Farmington Series A 1983 PCBs being maintained, such refunding
will occur on the first applicable date for such refunding
pursuant to the terms of the resolution for the Farmington Series
A 1983 PCBs following the Effective Date and (ii) unless
otherwise agreed between Reorganized EPE and the issuer of the
Farmington PCB LC, on the Effective Date the reimbursement
agreement related to the Farmington PCB LC will provide that all
obligations thereunder incurred after the Effective Date will be
collateralized by Reorganized EPE Second Mortgage Bonds.
In addition to the foregoing, holders of Allowed Class
11 Claims receiving treatment pursuant to Section 3.13(A) of the
Plan as described above will accrue interest from and after
June 25, 1993 through and including the Effective Date at the per
annum rate of 90 day LIBOR plus 200 basis points on a principal
amount equal to (i) ninety five and one-half percent (95.5%) of
the principal amount of Allowed Class 11 Claims (other than
Allowed Class 11 Claims to be satisfied through issuance of
Reorganized EPE Class 11 Senior Notes) and (ii) one hundred
percent (100%) of then outstanding Class 11 Allowed Claims to be
satisfied through the issuance of Reorganized EPE Class 11 Senior
Notes, and such interest will be paid pursuant to Section 5.1(B)
of the Plan.
The new letter of credit to be provided to replace the
Farmington PCB LC shall have a term ending on the last day of the
sixth month after the agreed final maturity for the Class 13
Senior Floating Rate Notes as set forth in Section 3.15 of the
Plan. Reorganized EPE shall pay a commission on such letter of
credit of 0.625% per annum for the period ending on the first
anniversary of the earlier of the Effective Date and December 31,
1994 (such earlier date being the "Commencement Date"), 0.75% per
annum for the period ending on the second anniversary of the
Commencement Date, 0.875% per annum for the period ending on the
third anniversary of the Commencement Date, 1.00% per annum for
the period ending on the fourth anniversary of the Commencement
Date, 1.125% per annum for the period ending on the fifth
anniversary of the Commencement Date, 1.25% per annum for the
period ending on the sixth anniversary of the Commencement Date,
1.625% per annum for the period ending on the seventh anniversary
of the Commencement Date and 2.00% per annum for the period
ending on the eighth anniversary of the Commencement Date, in
<PAGE> 180
each case payable quarterly in arrears. In addition, such letter
of credit shall provide for a transfer fee of 1/4% and a drawing
fee of $100 per draw. The post-Effective Date reimbursement
agreement claims of the issuer of the letter of credit shall be
collateralized by Reorganized EPE Pledged Second Mortgage Bonds.
B. If (i) Class 11 accepts the Plan in accordance with
Section 1126(c) of the Code, and (ii) the Effective Date occurs,
then such acceptance of the Plan by Class 11 shall be a
commitment by the issuer of the letter of credit that gave rise
to the Allowed Class 11 Claims to provide a new letter of credit
on the Farmington LC Terms provided, however, that if the
treatment of Class 11 is modified from the treatment for Class 11
set forth in the Plan (including the Farmington LC terms) which
Class 11 accepted and Class 11 does not approve or accept (or is
not deemed, pursuant to the Code or the Bankruptcy Rules, to have
approved or accepted) such modification, then the issuer of the
letter of credit that gave rise to the Allowed Class 11 Claims
shall not be committed to issue such new letter of credit. The
commitment of the letter of credit issuer shall not be released
by the provisions of Section 7.2(B) of the Plan.
C. Notwithstanding anything to the contrary in the
Plan, for purposes of determining the treatment to be received
pursuant to the Plan by Class 11, the issuer of the letter of
credit giving rise to Claims in Class 11 shall be deemed to have
provided a new letter of credit on the Farmington LC Terms
described herein if: (i) such issuer commits, pursuant to
paragraph B of Section 3.13 of the Plan, to issue such new letter
of credit and the Debtor or Reorganized EPE, as the case may be,
determines to have a different financial institution issue such
new letter of credit, (ii) such issuer commits, pursuant to
paragraph B of Section 3.13 of the Plan, to issue such new letter
of credit, and, prior to such issuer issuing such new letter of
credit, a different financial institution, which financial
institution is satisfactory to the Debtor or Reorganized EPE, as
the case may be, commits to issue such new letter of credit in
place of such issuer, or (iii) such issuer commits, pursuant to
paragraph B of Section 3.13 of the Plan, to issue such new letter
of credit, and, prior to such issuer issuing such new letter of
credit, the letter of credit is not required because the
Farmington PCBs have been redeemed or canceled (other than due to
any action or inaction of the issuer of the letter of credit
including a failure on the part of the issuer to extend the
termination date of the letter of credit).
D. If the Farmington PCB LC is not replaced (and is
not deemed pursuant to the Plan to have been replaced) on the
Farmington LC Terms or if Class 11 does not accept the Plan in
accordance with Section 1126(c) of the Code, then, in either
event, the provisions of Section 3.13(A) of the Plan described in
<PAGE> 181
Part A above shall not apply and Allowed Class 11 Claims shall be
paid in full on the Effective Date and discharged through the
issuance to or for the benefit of holders of such Allowed Claims,
Pro rata of (i) Reorganized EPE Class 13 Senior Fixed Rate Notes,
in an amount equal to one-third the amount of such Allowed
Claims, and without post-petition interest, fees, costs or
charges except as otherwise allowed by the Bankruptcy Court; and
(ii) a number of shares of CSW Common Stock, determined by
dividing two-thirds of the amount of the Allowed Class 11 Claims
of such holder (without post-petition interest, fees, costs, or
charges except as otherwise allowed by the Bankruptcy Court), by
the CSW Class 12/13 Determination Date Share Value. The
Reorganized EPE Class 13 Senior Fixed Rate Notes shall have the
same terms as the Reorganized EPE Class 13 Senior Fixed Rate
Notes described in Section 3.15(A) of the Plan, except that the
sixty percent limitation shall not apply to the amount of the
Reorganized EPE Class 13 Senior Fixed Rate Notes issued under
Section 3.13(D) of the Plan.
(f) Classes 12(a) and 12(b) Claims (Allowed
Claims Arising from or Related to the
Palo Verde Leases, the Lease Obligation
Bonds and the Secured Lease Obligation
Bonds)
Section 3.14 of the Plan provides for the treatment of
Allowed Classes 12(a) and 12(b) Claims as follows:
A. If Class 12(a)(the holders of the Lease Obligation
Bonds and Secured Lease Obligations Bonds) accepts the Plan in
accordance with Section 1126(c) of the Code, then: Class 12(a)
Claims shall be Allowed Claims in the amount of $700 million,
which Claims shall be discharged and satisfied in full, by means
of the transactions described below, through the distribution of
securities in the amount of 95.5% of the Class 12(a) Allowed
Claims (the "Class 12(a) Distribution Amount") by the Pro rata
issuance to the Palo Verde Indenture Trustees on behalf of
holders of Allowed Class 12(a) Claims of (i) an aggregate
principal amount of unsecured Reorganized EPE Series A Senior
Notes under an indenture equal to no less than one-third and no
more than two-thirds of the Class 12(a) Distribution Amount, and
(ii) an aggregate number of shares of CSW Common Stock equal to
(x) the remainder of the Class 12(a) Distribution Amount divided
by (y) the CSW Class 12/13 Share Value. In addition, the receipt
of any distribution under Section 3.14(A) of the Plan by a Palo
Verde Indenture Trustee on behalf of a holder of Class 12(a)
Claims shall constitute, as of the Effective Date, (i) in the
event Class 12(b) accepts the Plan in accordance with Section
1126(c) of the Code and the OP Settlement is approved by the
Court, a release of all Claims of such holder and such Palo Verde
<PAGE> 182
Indenture Trustees related to transactions involving the Debtor,
including, without limitation, transactions related to the Palo
Verde Nuclear Generating Station and the Palo Verde Leases, which
such holder may have against the Funding Corporations, the Owner
Participants, the Owner Trustees or the Owner Trusts, and the
Palo Verde Indenture Trustees shall execute a release to the
Owner Participants and Owner Trustees providing, or (ii) at EPE's
election, in the event Class 12(b) does not accept the Plan in
accordance with Section 1126(c) of the Code or the Court does not
approve the OP Settlement, a transfer of all such claims against
the Owner Participants, the Funding Corporations, the Owner
Trustees or the Owner Trusts by such holder to the Debtor or its
designee.
The Reorganized EPE Series A Senior Notes will provide
for the accrual of interest commencing on the Effective Date at a
rate per annum equal to a Market Basket Rate, based upon a basket
of utility bonds of comparable rating and maturity, determined in
accordance with Schedule D of the Plan. The Reorganized EPE
Series A Senior Notes will mature at the end of the quarter
immediately following the tenth anniversary of the earlier of the
Effective Date or December 31, 1994. The term of the Reorganized
EPE Series A Senior Notes may, at the election of CSW made not
later than the Effective Date of the Plan, be adjusted, provided
that such term may not exceed ten (10) years. The Reorganized
EPE Series A Senior Notes will be redeemable at the option of
Reorganized EPE at any time in whole or in part at a redemption
price equal to the outstanding principal amount of such Notes
plus a redemption premium calculated pursuant to Schedule C to
the Plan plus accrued interest, provided that prior to the fourth
anniversary of the Effective Date such Notes will be redeemable
at the option of Reorganized EPE at any time in whole or in part
at a redemption price equal to the lesser of (x) the sum of the
outstanding principal amount of such Notes plus a redemption
premium calculated pursuant to Schedule C to the Plan, plus
accrued interest and (y) the greater of (i) the outstanding
principal amount of such Notes plus accrued interest and (ii) the
present value of remaining interest and principal payments of
such Notes, discounted at a rate equal to the sum of (a) the
original issue spread over the yield on the treasury security, as
of the Effective Date, which has a maturity date closest to the
average life of such Notes, and (b) the yield on the treasury
security which has a maturity date closest to the remaining
average life of such Notes, calculated as of the date of
determination of such redemption price. The Reorganized EPE
Series A Senior Notes shall contain covenants (including an anti-
layering provision) and be subject to certain other terms in
documents filed with the Court pursuant to Section 7.6 of the
Plan. The Reorganized EPE Series A Senior Notes will be publicly
tradeable under Section 1145 of the Code. The form of
Reorganized EPE Series A Senior Notes and the related indenture
<PAGE> 183
will be filed with the Bankruptcy Court at least ten days prior
to the deadline established for voting on the Plan and available
for inspection at the Office of the clerk of the Bankruptcy Court
or through the Debtor's attorneys.
In addition to the foregoing, the Class 12(a)
Distribution Amount as to Class 12(a) Allowed Claims will accrue
interest retroactive from and after July 29, 1993 through and
including the Effective Date at the rate of 90 day LIBOR plus 200
basis points, and such interest shall be payable as provided in
Section 5.1.B. of the Plan.
The shares of CSW Common Stock which are received by
holders of Allowed Claims in Class 12(a) will be subject to
restrictions on transfer for certain periods after the Effective
Date, as more fully described below in Section V.B.4(j)
"Restrictions on Transfers of CSW Common Stock." In addition,
the Plan provides that in lieu of distributing CSW Common Stock,
CSW may elect to pay holders of Allowed Class 12(a) Claims cash
in an amount equal to the value of the CSW Common Stock on the
Effective Date, as more fully described below under Section
V.B.4(k) "Cash Payment in Lieu of CSW Common Stock."
Upon the Effective Date, all right, title, liens,
claims and interests of holders of Class 12(a) Claims, including
all Claims of the Lease Obligation Bondholders, Secured Lease
Obligation Bondholders, the Palo Verde Indenture Trustees, the
Funding Corporations, and the Owner Trusts and the Owner Trustees
on behalf of the Palo Verde Indenture Trustees for the Lease
Obligation Bonds and the Secured Lease Obligation Bonds, in or
relating to the Palo Verde Nuclear Generating Station, shall be
deemed to have been discharged and paid in full, and of no
further effect, and all right, title and interest of such persons
in such facilities shall, in a manner reasonably satisfactory to
the Indenture Trustees, CSW and Reorganized EPE, be transferred
to and be deemed vested in Reorganized EPE free and clear of all
liens, claims, and interests by any such parties. The Palo Verde
Indenture Trustees will take all reasonable steps to facilitate
the transfer as requested by the Debtor or Reorganized EPE. The
Debtor and Reorganized EPE will indemnify the Palo Verde
Indenture Trustees against any and all losses and claims,
including, but not limited to reasonable related costs and
expenses, incurred by the Palo Verde Indenture Trustees that
result from steps taken on or after the Confirmation Date which
are in furtherance of the provisions of the Plan, or at the
request of the Debtor or Reorganized EPE, as the case may be, to
facilitate the transfer.
As of the Effective Date, a judgment dismissing with
prejudice all claims and counterclaims which were or could have
been asserted by the holders of Class 12(a) Claims including, the
<PAGE> 184
Palo Verde Indenture Trustees against the Debtor or by the Debtor
against the Palo Verde Indenture Trustees or the holders of Class
12(a) Claims in Adversary Proceeding 92-1285 FM shall be
submitted to the Court for entry in such proceeding and all
rights, claims and causes of action of the Debtor, on one hand,
and the holders of Class 12(b) Claims, on the other hand, related
to the Palo Verde Leases and the Palo Verde Letters of Credit
shall, except as set forth in the Plan and any settlement
agreement executed to implement its provisions, be mutually
released. The Debtor and the Palo Verde Indenture Trustees shall
exchange mutual releases of any and all rights, claims and causes
of action they may have against each other related to the Palo
Verde Leases.
As of the Effective Date, Reorganized EPE will
indemnify the Palo Verde Indenture Trustees for all losses,
costs, expenses, and liabilities incurred if the Debtor asserts
any rights, claims or causes of action against any person or
entity concerning the Palo Verde Nuclear Generating Station and
if any such assertion results in a right, claim or cause of
action being asserted by that person or entity against the Palo
Verde Indenture Trustees provided that, except for fees and
expenses, liability under such indemnity is limited to costs
resulting from a final judgment or a settlement entered into with
the consent of Reorganized EPE.
In addition, if and only if Class 12(a) accepts the
Plan in accordance with Section 1126(c) of the Bankruptcy Code,
then (X) on the Confirmation Date, the Debtor will pay the Palo
Verde Indenture Trustees the amount of $3.5 million in full and
complete settlement of all fees and expenses incurred prior to or
on the Confirmation Date, of the Palo Verde Indenture Trustees
and Class 12(a) bondholders, including the fees and expenses of
their professional advisors, subject to necessary Bankruptcy
Court approvals, if any, and (Y) between the Confirmation Date
and the Effective Date, the Debtor will pay the reasonable fees
and expenses of the Palo Verde Indenture Trustees, including the
fees and expenses of their professional advisors, on a quarterly
basis, subject to necessary Bankruptcy Court approval, if any.
The Debtor and the Palo Verde Indenture Trustees have
further agreed, as set forth in a term sheet annexed to a
pleading filed by the Palo Verde Indenture Trustees with the
Bankruptcy Court, that if Class 12(a) accepts the Plan, the
treatment of Class 13 set forth in the Plan shall not be improved
to be more favorable than the treatment to be given to
Class 12(a) and the treatments of EPE Preferred and Common
Stockholders shall not be modified to exceed the maximum amount
provided under the corrected Plan as filed on May 18, 1993. The
Palo Verde Indenture Trustees have consented to the treatment set
forth in the Plan.
<PAGE> 185
To preserve the agreement between the Debtor and the
Palo Verde Indenture Trustees, Bondholders holding large amounts
of bonds have agreed to certain restrictions on their ability to
transfer their bonds past the record date to be set by the Court
for voting purposes. The Debtor has agreed to seek a continuance
of a motion seeking to compel large Bondholders to register their
claims with the Court.
It is further agreed that the Debtor, Palo Verde
Indenture Trustees and holders of Lease Obligation and Secured
Lease Obligation Bonds reserve all rights, claims and causes of
action in the event that the Plan is not confirmed or does not
become effective and the agreement's provisions, except those
pertaining to interest paid after the Confirmation Date and the
indemnification of the Palo Verde Indenture Trustee relating to
transfer of interests in Palo Verde Units 2 and 3, will be of no
force and effect. Further, the agreements by the Palo Verde
Indenture Trustees and the Debtor are conditioned on performance
by the other and the Debtor has the option to terminate its
obligations if Class 12(a) fails to accept the Plan, 25% of the
Bondholders, formally or informally, object to the Plan or
support a motion to terminate the Debtor's exclusive period in
which to file a Plan.
B. If Class 12(b) accepts the Plan in accordance with
Section 1126(c) of the Code and the OP Settlement (i.e., the
consensual treatment of Class 12(b)) is approved by the
Bankruptcy Court, then: the OP Settlement shall become binding
on all Owner Participants, subject to the occurrence of the
Effective Date. The Class 12(b) Allowed Claims shall be
discharged and satisfied in full in accordance with the terms of
the OP Settlement.
Upon the Effective Date, all Claims of the Owner
Participants in or relating to the Palo Verde Nuclear Generating
Station and the Palo Verde Leases shall be deemed to have been
discharged and paid in full, and of no further effect, and all
right, title, liens, claims, and interests of holders of the
Class 12(b) Claims, and all right, title and interests of the
Owner Participants in such facilities shall, in a manner
reasonably satisfactory to CSW and Reorganized EPE, be
transferred to and be deemed vested in Reorganized EPE free and
clear of all liens, claims, and interests by any such parties.
Upon the Effective Date the Owner Participants shall also obtain
the benefit of the releases described in Sections 3.14.A.1.,
3.14.A.4., 3.14.B.3. and 7.2.D. of the Plan; provided, however,
that the Owner Participants grant mutual releases to the parties
granting such releases.
As of the Effective Date, a judgment dismissing with
prejudice all claims and counterclaims which were or could have
<PAGE> 186
been asserted by the holders of Class 12(b) Claims against the
Debtor or by the Debtor against the holders of Class 12(b) Claims
in Adversary Proceeding 92-1285 FM shall be submitted to the
Court for entry in such proceeding and the Debtor and the Owner
Participants shall exchange mutual releases of any and all
rights, claims and causes of action they may have against each
other.
Upon the Effective Date, to the fullest extent possible
under applicable law based on the acceptance of the Plan by Class
12(a) and the acceptance of the Plan by Class 12(b), or an order
of the Bankruptcy Court under Section 3.14(C) of the Plan as the
case may be, all right, title, liens, claims, and interests of
holders of Class 12(a) Claims and all Claims of the Lease
Obligation Bondholders, Secured Lease Obligation Bondholders, the
Palo Verde Indenture Trustees, the Funding Corporations, the
Owner Trusts and the Owner Trustees in or relating to the Palo
Verde Nuclear Generating Station and the Palo Verde Leases shall
be deemed to have been discharged and paid in full, and of no
further effect, and all right, title and interest in such
facilities shall, in a manner reasonably satisfactory to CSW, and
Reorganized EPE be transferred to and be deemed vested in
Reorganized EPE free and clear of all liens, claims and interests
by any such parties.
The Debtor and the holders of Class 12(b) Claims may,
prior to the Confirmation Date, enter into one or more agreements
("Settlement Agreements") to implement the terms of the OP
Settlement. Such Settlement Agreements may, but need not,
include provisions to facilitate the transfers and other actions
contemplated under the OP Settlement and for the continuation
after the Effective Date of existing contractual indemnities
between the Debtor and the holders of Class 12(b) Claims, subject
to reduction of such indemnities as appropriate by the amounts of
letters of credit previously drawn by such holders. If executed,
the Settlement Agreements will be filed with the Court as soon as
practicable prior to the Confirmation Date and to the extent
necessary deemed incorporated into the Plan.
C. If either Class 12(a) or Class 12(b) does not
accept the Plan in accordance with Section 1126(c) of the Code or
if the OP Settlement is not approved by the Court, then: the
treatment of the non-assenting Class 12(a) or Class 12(b) (or the
treatment of Class 12(b) if the OP Settlement is not approved by
the Court), set forth in Section 3.14(A) or 3.14 (B) of the Plan,
as the case may be, shall not apply (but shall apply, in any
event, to Class 12(b) if it accepts the Plan and the Bankruptcy
Court approves the OP Settlement).
Instead, the Court shall determine, as to such Class
12(a) or Class 12(b) Claims, whether each Class 12(a) or Class
<PAGE> 187
12(b) Claim, as the case may be, shall be an Allowed Claim and
the amount thereof. Class 12(a) and Class 12(b) Claims so
allowed by the Court shall be paid in full on the Effective Date
and discharged through the issuance to or for the benefit of the
holders of such Allowed Claims, on a Pro rata basis and as set
forth in Section 5.3(b) of the Plan, of (i) payment, as provided
in Section 3.1 of the Plan, equal to the amount of administrative
rent, if any, allowed and payable with respect to such Claims, as
determined by the Bankruptcy Court; (ii) to the extent such
Claims are Allowed Secured Claims, Reorganized EPE Series A-I
Notes, in an amount equal to the amount of such Allowed Secured
Claims (less the aggregate amount paid on account of
administrative rent as may be determined by the Bankruptcy
Court); and (iii) to the extent such Allowed Claims are not
Allowed Secured Claims and do not constitute administrative rent
or post-petition interest, payment of which is provided for in
clause (i) above, (X) Reorganized EPE Series A-II Notes, provided
that the aggregate principal amount of such Series A-II Notes
issued under this clause (iii), when added to the aggregate
principal amount of such Reorganized EPE Series A-I notes issued
under clause (ii) above, shall not be less than two-thirds of
such Allowed Class 12(a) and Allowed Class 12(b) Claims under
this subsection, and (Y) an aggregate number of shares of CSW
Common Stock (subject to a one-year lock-up provision) equal to
(1) the remainder of such Allowed Claims, if any, divided by
(2) the CSW Class 12/13 Determination Date Share Value. The
Reorganized EPE Series A-I and A-II Notes shall have the same
maturity described herein for the Reorganized EPE Series A Senior
Notes, shall bear interest at the Market Basket Rate, shall be
redeemable at any time in whole or in part at redemption prices
calculated in the manner specified in Section 3.14(A)(2) of the
Plan for the Reorganized EPE Series A Senior Notes, and shall
have other terms and conditions described in documents filed with
Court pursuant to Section 7.6 of the Plan, except that such
Reorganized EPE Series A-I Notes shall be secured by interests in
Units 2 and 3 of the Palo Verde Nuclear Generating Station. It
is a condition of the Plan that the aggregate amount of the Class
12(a) and Class 12(b) Allowed Claims under Section 3.14(C) of the
Plan shall not exceed $700 million or such higher amount as may
be accepted, in writing, by CSW.
Upon the Effective Date, and to the extent so provided
in a Bankruptcy Court order entered in connection with its
determination of the amount and nature of Class 12(a) and Class
12(b) Allowed Claims receiving the treatment set forth in Section
3.14(C) of the Plan, all Claims of the Lease Obligation
Bondholders, Secured Lease Obligation Bondholders, Palo Verde
Indenture Trustees, Funding Corporations, Owner Trusts, Owner
Trustees, and Owner Participants in or relating to the Palo Verde
Nuclear Generating Station shall be deemed to have been
discharged and paid in full, and of no further effect, and all
<PAGE> 188
right, title liens, claims and interests of holders of Class
12(a) and Class 12(b) Claims, and all right, title and interest
of the Owner Trustee and Owner Participants in such facilities
shall be deemed vested in Reorganized EPE free and clear of all
liens, claims, and interests by any such parties, except as
expressly provided in Section 3.14(C)(1) of the Plan.
D. If the Plan is confirmed under Section 3.14(A),
Section 3.14(B) or Section 3.14(C), the affirmative vote of any
holder of Lease Obligation Bonds or Secured Lease Obligation
Bonds in connection with the Plan shall constitute a directive to
the appropriate Palo Verde Indenture Trustee pursuant to the
indenture under which such debt instrument was issued to take
such steps as may be required to transfer the Pledged Lessor
Notes (as defined in the Collateral Trust Indentures described in
Schedule A) to an entity designed by CSW in exchange for the
consideration set forth in, or determined pursuant to, Section
3.14(A), Section 3.14(B), or Section 3.14(C), as the case may be.
Such transfer shall occur on the Effective Date, immediately
prior to the effectiveness of the Merger.
(g) Class 13 Claims (Allowed Claims Not
Classified Elsewhere)
Section 3.15 of the Plan provides for the treatment of
Allowed Class 13 Claims as follows:
A. If Class 13 accepts the Plan in accordance with
Section 1126(c) of the Code, reimbursement claims arising from
the Palo Verde Letters of Credit shall be Allowed Class 13 Claims
to the extent of at least the amount of the letter of credit draw
giving rise to such reimbursement claims. The principal amount
of such claims, as used in Section 3.15 of the Plan, shall mean
the amount of such draw. If Class 13 accepts the Plan in
accordance with Section 1126(c) of the Code, Allowed Class 13
Claims shall be discharged and satisfied in full by distribution
to the holders thereof of (i) Reorganized EPE Class 13 Senior
Notes under a new term loan agreement or indenture in an
aggregate principal amount equal to 30% of the principal amount
and, to the extent accrued prior to the Petition Date, interest
and fees, including letter of credit fees and reasonable
attorneys' fees, but exclusive of all interest, fees, costs and
other charges accrued after the Petition Date, (such amount
hereinafter referred to as the "Class 13 Base Amount"), of the
Allowed Class 13 Claims of such holder, (ii) a number of shares
of CSW Common Stock determined by dividing 60% of the amount of
the Class 13 Base Amount of Allowed Class 13 Claims of such
holder by the CSW Class 12/13 Value, and (iii) Reorganized EPE
Class 13 Senior Notes in a principal amount of 5.5% of the Class
13 Base Amount of the Class 13 Allowed Claims of such holder or,
at the option of Reorganized EPE exercised on the Effective Date,
<PAGE> 189
a number of shares of CSW Common Stock determined by dividing
5.5% of the Class 13 Base Amount of the Class 13 Allowed Claims
of such holder by the CSW Class 12/13 Share Value. Such holder's
receipt of CSW Common Stock shall be treated as if such holder
had exchanged a portion of its Claims for EPE Common Stock and
then transferred such EPE Common Stock to CSW for CSW Common
Stock.
Holders of Class 13 Claims shall elect, at the time
they vote on the Plan, either Treatment A or Treatment B, as
follows (provided that each holder who fails to make an election
or does not timely return a ballot will be deemed to have elected
Treatment A if Class 13 accepts the Plan):
1. Treatment A. Holders of Allowed Class 13 Claims
may elect to receive all or a portion of the Reorganized EPE
Class 13 Senior Notes to which they are entitled in the form of
Reorganized EPE Class 13 Senior Floating Rate Notes. The
Reorganized EPE Class 13 Senior Floating Rate Notes shall bear
interest at a per annum rate of 90-day LIBOR plus 200 basis
points (or, at the option of Reorganized EPE, at the "base" or
"prime" rate plus 100 basis points) from and after the Effective
Date, payable at the end of each interest period, but not less
than quarterly. The Reorganized EPE Class 13 Senior Floating
Rate Notes will be prepayable at any time in whole or in part
without premium, subject only to breakage costs, if any, in
connection with the LIBOR funding periods. The Reorganized EPE
Class 13 Senior Floating Rate Notes will mature on the seventh
anniversary of the earlier of (i) the Effective Date and (ii)
December 31, 1994, and will be payable in equal quarterly
principal installments commencing at the end of the quarter after
the earlier of the fifth anniversary of (i) the Effective Date
and (ii) December 31, 1994; provided, however, that the maturity
and amortization schedule of the Class 13 Senior Floating Rate
Notes will be adjusted prior to the Effective Date, if necessary,
such that the maturity of the Class 13 Senior Floating Rate Notes
is not greater than the maturity of the Reorganized EPE Series A
Senior Notes, as their final maturity may be elected by CSW
pursuant to Section 3.14(A)(2) of the Plan. If at any time less
than 33 1/3% of the Reorganized EPE Series A Senior Notes issued
on the Effective Date remain outstanding, Reorganized EPE will
redeem all the then outstanding EPE Class 13 Senior Floating Rate
Notes. The Reorganized EPE Class 13 Senior Floating Rate Notes
shall be governed by a new term loan agreement.
The new term loan agreement governing the Reorganized
EPE Class 13 Senior Floating Rate Notes shall contain other terms
set forth in documents filed with the Bankruptcy Court pursuant
to Section 7.6 of the Plan. Such terms will include covenants
appropriate for unsecured senior (non-publicly tradeable) bank
debt of a utility whose senior debt securities have a rating
<PAGE> 190
similar to those of Reorganized EPE, but in no event materially
less favorable to the holders of Class 13 Claims than those
generally found in similar agreements, if any, of other CSW
electric operating subsidiaries. Such material covenants will
include a negative pledge; a minimum ratio of earnings before
interest, amortization and taxes to interest expense; a maximum
ratio of debt to total capital; and an anti-layering provision.
The Reorganized EPE Class 13 Senior Floating Rate Notes will not
be publicly tradeable and will be assignable only to Eligible
Institutions (to be defined in the term loan agreement, such
definition to include a limitation by asset size and/or rating)
and in such minimum denominations as shall be agreed and
specified in the term loan agreement.
2. Treatment B. Alternatively, holders of Allowed
Class 13 Claims may elect to receive the Reorganized EPE Class 13
Senior Notes to which they are entitled in the form of
Reorganized EPE Class 13 Senior Fixed Rate Notes; provided, that
in no event shall the aggregate amount of Reorganized EPE Class
13 Senior Fixed Rate Notes issued on account of Class 13 Allowed
Claims exceed sixty percent (60%) of the aggregate amount of all
Reorganized EPE Class 13 Senior Notes issued on account of Class
13 Allowed Claims (prior to giving effect to such election). To
the extent that holders of Class 13 Allowed Claims elect to
receive more than sixty percent (60%) of the aggregate amount of
Reorganized EPE Class 13 Senior Notes to be issued pursuant to
the Plan on account of all Class 13 Allowed Claims in the form of
Reorganized EPE Class 13 Senior Fixed Rate Notes, each holder
electing to receive Reorganized EPE Class 13 Senior Fixed Rate
Notes shall have its distribution of such notes reduced on a pro
rata basis (and replaced with a distribution of a like amount of
Reorganized EPE Class 13 Senior Floating Rate Notes) so that the
aggregate amount of Reorganized EPE Senior Fixed Rate Notes
distributed on account of all Class 13 Allowed Claims does not
exceed sixty percent (60%) of the aggregate amount of Reorganized
EPE Class 13 Senior Notes distributed on account of all Class 13
Allowed Claims.
The Reorganized EPE Class 13 Senior Fixed Rate Notes
shall accrue interest from the Effective Date at a Market Basket
Rate, based upon a basket of utility bonds of comparable rating
and maturity determined in accordance with the procedures set
forth in Schedule D to the Plan. The Reorganized EPE Senior
Fixed Rate Notes will pay interest semi-annually, in arrears and
will mature on the ninth anniversary of the earlier of (i) the
Effective Date and (ii) December 31, 1994. The Reorganized Class
13 Senior Fixed Rate Notes will be redeemable at the option of
Reorganized EPE at any time in whole or in part at a redemption
price equal to the outstanding principal amount of such Notes
plus a redemption premium calculated pursuant to Schedule C to
the Plan plus accrued interest, provided that prior to the fourth
<PAGE> 191
anniversary of the Effective Date such notes will be redeemable
at the option of Reorganized EPE at any time in whole or in part
at a redemption price equal to the lesser of (x) the sum of the
outstanding principal amount of such notes plus a redemption
premium calculated pursuant to Schedule C to the Plan, plus
accrued interest and (y) the greater of (i) the outstanding
principal amount of such notes plus accrued interest and (ii) the
present value of remaining interest and principal payments of
such notes, discounted at a rate equal to the sum of (a) the
original issue spread over the yield on the treasury security, as
of the Effective Date, which has a maturity date closest to the
average life of such notes, and (b) the yield on the treasury
security which has a maturity date closest to the remaining
average life of such notes, calculated as of the date of
determination of such redemption price.
The Reorganized EPE Class 13 Senior Fixed Rate Notes
shall be publicly tradeable under Section 1145 of the Code and
shall contain such other terms and conditions as are filed with
the Court in accordance with Section 7.6 of this Plan, including
an anti-layering provision.
In addition to the foregoing, holders of Class 13
Allowed Claims will accrue interest from and after June 25, 1993
through and including the Effective Date at the rate per annum of
90 day LIBOR plus 200 basis points on an amount equal to ninety-
five and one-half percent (95.5%) of the Class 13 Base Amount
(excluding any attorneys fees included in calculating the Class
13 Base Amount) of the Class 13 Allowed Claim of such holder, and
such interest shall be payable as provided in Section 5.1(B) of
the Plan.
B. If Class 13 does not accept the Plan in accordance
with Section 1126(c) of the Code, then the treatment of Class 13
set forth in Section 3.15(A) of the Plan described above shall
not apply. Instead, Class 13 Claims shall be Allowed Claims to
the extent they comply with Section 1.3(a) or 1.3(b) of the Plan.
Class 13 Allowed Claims shall be paid in full on the Effective
Date and discharged through the issuance to or for the benefit of
holders of such Allowed Claims, Pro rata, of (i) Reorganized EPE
Class 13 Senior Fixed Rate Notes, in an amount equal to one-third
the amount of such Allowed Claims, and without post-petition
interest, fees, costs or charges except as otherwise allowed or
required to be paid by the Bankruptcy Court; and, (ii) subject to
a one-year lock up provision a number of shares of CSW Common
Stock, determined by dividing two-thirds of the amount of the
Allowed Class 13 Claims of such holder (without post-petition
interest, fees, costs or charges, except as otherwise or required
to be paid allowed by the Bankruptcy Court), by the CSW Class
12/13 Determination Date Share Value. The shares of CSW Common
Stock which are received by holders of Allowed Claims in Class 13
<PAGE> 192
will be subject to restrictions on transfer for certain periods
after the Effective Date, as more fully described in Section
V.B.4(j) " Restrictions on Transfers of CSW Common Stock." In
addition, the Plan provides that in lieu of distributing CSW
Common Stock, CSW may elect to pay holders of Allowed Class 13
Claims cash in an amount equal to the value of the CSW Common
Stock on the Effective Date, as more fully described below under
Section V.B.4(k) "Cash Payment in Lieu of CSW Common Stock. Such
Reorganized EPE Class 13 Senior Fixed Rate Notes shall have the
same terms as the Reorganized EPE Class 13 Senior Fixed Rate
notes described in Section 3.15(A) of the Plan, except that the
sixty percent (60%) limitation shall not apply to the amount of
the Reorganized EPE Class 13 Senior Fixed Rate Notes issued under
this Section 3.15(B).
(h) Class 15 (Allowed EPE Preferred Stock
Interests)
Section 3.17 of the Plan provides for the treatment of
Allowed Class 15 Interests as follows:
If Class 15 accepts the Plan in accordance with Section
1126(d) of the Code, the Class 15 Interests shall be Allowed
Interests in the sum of (a) the aggregate dollar amount of the
redemption prices on the Effective Date with respect to the EPE
Preferred Stock and (b) the aggregate dollar amount of dividends
accrued and unpaid prior to the Petition Date with respect to the
EPE Preferred Stock. The Allowed Interests in Class 15 shall be
discharged and satisfied in full, through the distribution, by
means of the transactions described below, of securities having a
value as calculated below in the amount of $68 million (the
"Class 15 Distribution Amount"). Holders of Allowed Class 15
Interests shall receive Treatment A set forth below; provided
that, at the election of CSW exercised within one year of the
Confirmation Date by written notice to holders of Allowed Class
15 Interests (the "CSW Class 15 Notice"), such holders of Allowed
Class 15 Interests shall receive Treatment B set forth below.
The CSW Class 15 Notice shall specify a dollar amount (the
"Specified Class 15 Distribution Amount"), which dollar amount
shall be equal to the aggregate liquidation values of the shares
of Reorganized EPE Preferred Stock which CSW elects to cause
Reorganized EPE to issue in the Merger; provided that such
Specified Class 15 Distribution Amount shall not exceed the Class
15 Distribution Amount.
1. Treatment A. Each share of EPE Preferred Stock issued
and outstanding immediately prior to the Effective Date shall, at
the Effective Date, by virtue of the Merger and without any
further action by the holder thereof, be converted into the right
to receive such number of shares of Reorganized EPE Preferred
Stock as equals the Preferred Stock First Exchange Ratio.
<PAGE> 193
2. Treatment B. At the election of CSW exercised within
one year of the Confirmation Date by delivery to holders of
Allowed Class 15 Interests of the CSW Class 15 Notice, each share
of EPE Preferred Stock issued and outstanding immediately prior
to the Effective Date shall, at the Effective Date, by virtue of
the Merger and without any further action by the holder thereof,
be converted into the right to receive (i) such number of shares
of Reorganized EPE Preferred Stock as equals the Preferred Stock
Second Exchange Ratio multiplied by the Preferred Stock First
Exchange Ratio and (ii) such number of shares of CSW Common Stock
as equals the Preferred Stock Third Exchange Ratio.
For example,
1. If CSW does not deliver a CSW Class 15 Notice, a
holder of Allowed Interests in Class 15 will receive
0.8695096 share of Reorganized EPE Preferred Stock for
each share of EPE Preferred Stock such holder owns.
2. If CSW delivers a CSW Class 15 Notice in which CSW
elects to cause Reorganized EPE to issue, for example,
$34,000,000 in aggregate liquidation value of
Reorganized EPE Preferred Stock (and assuming, for
purposes of this calculation, that the CSW Class 12/13
Share Value is $30.00 per share), a holder of Allowed
Interests in Class 15 will receive the following for
each share of EPE Preferred Stock such holder owns:
a) Number of Shares of Reorganized EPE Preferred
Stock:
$34,000,000 x 0.8695096
$68,000,000
= 0.4347548
plus
b) Number of Shares of CSW Common Stock:
1 - 34 million x $100 x 0.8695096
68 million
____________________________________
$30.00
= 1.449183
Each certificate which immediately prior to the
Effective Date represented outstanding shares of EPE Preferred
Stock shall, on and after the Effective Date, be deemed for all
purposes to represent the right to receive the number of shares
<PAGE> 194
of Reorganized EPE Preferred Stock or CSW Common Stock, or
combination thereof, as the case may be, into which the shares of
EPE Preferred Stock represented by such certificate shall have
been converted pursuant to the Merger. The Reorganized EPE
Preferred Stock shall provide for dividends payable at a rate per
annum equal to the Market Basket Rate as set forth in Schedule E
to the Plan. The Reorganized EPE Preferred Stock shall be
publicly tradeable under Section 1145 of the Code on the
Effective Date.
The Reorganized EPE Preferred Stock will be redeemable
at the option of Reorganized EPE at any time in whole or in part
at a redemption price equal to the sum of the liquidation values
of such Preferred Stock plus a redemption premium calculated
pursuant to Schedule C to the Plan plus accrued dividends,
provided that prior to the fourth anniversary of the Effective
Date such Preferred Stock will be redeemable at the option of
Reorganized EPE at any time in whole or in part at a redemption
price equal to the lesser of (x) the sum of the liquidation
values of such Preferred Stock plus a redemption premium
calculated pursuant to Schedule C to the Plan plus accrued
dividends and (y) the greater of (i) the liquidation value of
such Preferred Stock plus accrued dividends and (ii) the present
value of the remaining dividend and mandatory redemption payments
on such Preferred Stock discounted at a rate equal to the sum of
(a) the original issue spread over the yield on the treasury
security, as of the Effective Date, which has a maturity date
closest to the average life of such Preferred Stock and (b) the
yield on the treasury security which has a maturity date closest
to the remaining average life of such Preferred Stock, calculated
as of the date of determination of such redemption price.
In addition, Reorganized EPE shall redeem (I) on each
of the eleventh, twelfth, thirteenth and fourteenth anniversaries
of the Effective Date, one-twentieth of the Reorganized EPE
Preferred Stock issued on the Effective Date, and (II) on the
fifteenth anniversary of the Effective Date, all outstanding
Reorganized EPE Preferred Stock, in each case at a redemption
price equal to the liquidation value of such Preferred Stock.
The Reorganized EPE Articles of Incorporation shall contain, on
the Effective Date, provisions complying with Code Section
1123(a)(6), including provisions restricting the issuance of
nonvoting equity securities and providing for appropriate
distributions of voting power. The Reorganized EPE Articles of
Incorporation will not contain any provision which limits the
amount of unsecured indebtedness which may be incurred by
Reorganized EPE or require any vote of holders of Reorganized EPE
Preferred Stock to permit incurrence of such indebtedness. If
Class 15 accepts the Plan, all holders of EPE Preferred Stock
Allowed Interests will be deemed to have voted in favor of
(a) incurrence of unsecured indebtedness provided for or
<PAGE> 195
contemplated by the Plan and (b) the provisions relating to
Reorganized EPE Preferred Stock contained in the Reorganized EPE
Articles of Incorporation. The Reorganized EPE Preferred Stock
shall contain such other terms as are consistent with the terms
set forth herein and in the Form of Amended and Restated Articles
of Incorporation of Surviving Corporation appended as Exhibit B
to the Merger Agreement and substantially similar to the terms
contained in the governing instruments of certain electric
utility operating subsidiaries of CSW in respect of recently
issued preferred stock, as shall be set forth in the Reorganized
EPE Articles of Incorporation filed with the Court in accordance
with Section 7.6 of the Plan.
For a description of certain other terms of Reorganized
EPE Preferred Stock, see "General Preferred Stock Provisions"
under Section VIII "Means of Execution of Plan" herein.
In addition, if Class 15 accepts the Plan in accordance
with Section 1126(d) of the Code, periodic payments shall accrue
from and after August 20, 1993 to the Effective Date at the rate
of 90-day LIBOR plus 200 basis points on the Class 15
Distribution Amount and shall be paid in cash on the Confirmation
Date and thereafter quarterly until the Effective Date and then
on the Effective Date. Each member accepting the Plan or
receiving such payments waives any right under the EPE charter to
elect a majority of the EPE board of directors.
(i) Class 16 (Allowed EPE Common Stock
Interests)
Section 3.18 of the Plan provides for the treatment of
Allowed Class 16 Interests as follows:
A. Debtor Common Stock. Subject to Section 3.18(B) of
the Plan described below, Section 3.18(A) of the Plan provides
that Allowed Interests in Class 16 shall be discharged and
satisfied in full as follows:
(i) Each share of EPE Common Stock outstanding
immediately prior to the Effective Date shall, at the Effective
Date, by virtue of the Merger and without any further action by
the holder thereof, be converted into the right to receive a
number of shares of CSW Common Stock equal to the Per Share CSW
Stock Acquisition Fund. The Per Share CSW Common Stock
Acquisition Fund shall consist of the number of shares of CSW
Common Stock in the CSW Common Stock Acquisition Fund as of the
Effective Date divided by the number of outstanding shares of EPE
Common Stock as of the Effective Date (other than shares to be
canceled in accordance with Section 2.8(b) of the Merger
Agreement). The CSW Common Stock Acquisition Fund, as of the
Effective Date, shall consist of the number of shares of CSW
<PAGE> 196
Common Stock that would have accumulated in an escrow fund equal
to the sum of the following:
(1) the number of shares of CSW Common Stock that
would have been purchased and placed in such escrow
fund on the Confirmation Date in an amount equal to the
number of shares determined by multiplying (x) the
aggregate number of shares of EPE Common Stock
outstanding on the Confirmation Date by (y) the Common
Stock Exchange Ratio, which the Plan defines as the
fraction determined by dividing (x) $3.00 by (y) the
Average Trading Price of CSW Common Stock;
(2) the number of shares of CSW Common Stock that
would have been purchased and placed in such escrow
fund on the Confirmation Date, at the Average Trading
Price of CSW Common Stock with the proceeds from the
Tangible Assets, the Intangible Assets and the
Reduction in Claims (each as defined in the Plan and as
described below) (the "Additional Consideration")
realized prior to the Confirmation Date, but only to
the extent the aggregate amount of such Additional
Consideration is equal to or less than the product of
(A) $1.50 multiplied by (B) the number of shares of EPE
Common Stock outstanding on the Confirmation Date (such
product hereinafter referred to as the "Maximum
Additional Consideration Amount");
(3) the number of shares of CSW Common Stock that
would have been purchased and placed in such escrow
fund at the closing price for shares of CSW Common
Stock on the dates the Additional Consideration is
realized between the Confirmation Date and the
Effective Date with the proceeds of such Additional
Consideration; but only to the extent the aggregate
amount of such Additional Consideration, together with
any Additional Consideration realized under clause (2)
above is equal to or less than the Maximum Additional
Consideration Amount; and
(4) the number of shares of CSW Common Stock
equal to the aggregate dividends, assumed to be paid in
the form of shares of CSW Common Stock based on the
closing price of such shares on the respective dividend
payment dates (the "Dividend Shares"), that would have
been paid (x) on shares of CSW Common Stock placed in
such escrow fund pursuant to subparagraphs (1) and (2)
above as though such shares were placed in such escrow
fund on the Confirmation Date, (y) on shares of CSW
Common Stock placed in such escrow fund pursuant to
subparagraph (3) above as though such shares were
<PAGE> 197
placed in such escrow fund on the respective dates on
which the Additional Consideration is realized and
(z) on shares of CSW Common Stock placed in such escrow
fund pursuant to subparagraph (4), as though such
Dividend Shares were placed in such escrow fund on the
respective CSW Common Stock dividend payment dates
therefor; provided that for purposes of this
subparagraph (4), dividends shall be considered paid on
shares of CSW Common Stock in such escrow fund only if
such shares are deemed to have been placed in such
escrow fund pursuant to Subparagraphs (1) - (4) prior
to the ex-dividend date for the payment of such
dividends.
The "Tangible Assets" consist of warrants owned by the
Debtor to purchase common stock of CAI Corporation. The
"Intangible Assets" consist of the aggregate of (i) certain cash
proceeds and collateral, consisting of cash held in escrow and
100% of the outstanding common stock of Triangle Electric
Company, granted to the Debtor to secure payments of certain
annuities of First Service Life Insurance Company in which the
Debtor asserts a perfected security interest and which is
currently held by the Receiver pending final resolution of the
litigation described under "Item 3. Legal Proceedings -- First
Service Life Civil Litigation" in the 1992 Annual Report; (ii)
the legal fees and administrative costs believed by the Debtor to
be recoverable from the State of Texas as a result of certain
actions by the State of Texas in such litigation and the filing
by the Debtor of a claim for recovery of such fees, (iii) the
first $10,000,000 of amounts realized as the result of the
settlement or other resolution of one or more potential causes of
action against APS as operating agent of Palo Verde Station for
damages in connection with certain outages at Palo Verde Station
beginning in 1989, and (iv) any amounts realized as a result of
one or more potential causes of action against the Owner
Participants arising out of their alleged wrongful conduct
relating to the Palo Verde Letters of Credit.
For a description of the Tangible Assets and certain
Intangible Assets, see "Other Assets" under item II.A,
"Description of the Debtor" above.
The "Reduction in Claims" means an amount, if any,
equal to (i) $34,000,000 less the amount paid to settle or
satisfy the Tax Claims described below and (ii) $9,000,000 less
the portion of the amount finally paid to the Palo Verde
Participants for the PV Claims described below. The Tax Claims
consist of all claims filed by the Internal Revenue Service in
the Case with respect to the years 1983 through 1989, and the PV
Claims consist of all claims (exclusive of interest and
attorneys' fees and expenses) filed by the Palo Verde Partic-
<PAGE> 198
ipants, which claims are governed by the terms of the stipulation
approved by the Bankruptcy Court on February 13, 1992.
(ii) Each certificate which immediately prior to the
Effective Date represented outstanding shares of EPE Common Stock
shall, on and after the Effective Date, be deemed for all
purposes to represent the right to receive the number of shares
of CSW Common Stock into which the shares of EPE Common Stock
represented by such certificate shall have been converted
pursuant to the Merger.
(iii) Holders of Allowed Interests in Class 16 shall
also be entitled to receive distributions from the Liquidation
Trust, subject to and pursuant to Section 5.3(F) of the Plan, as
described below.
The shares of CSW Common Stock which are received by
holders of Allowed Claims in Class 16 may not be transferred for
a period of eight months following the Effective Date, as more
fully described below in Section V.B.4.(j) "Restrictions on
Transfers of CSW Common Stock."
B. Liquidation Trust. The Plan provides that on the
Effective Date if the Maximum Additional Consideration Amount has
not been realized, then (i) the Debtor shall establish a
liquidation trust (the "Liquidation Trust") and shall assign
thereto all of the Debtor's rights to and interests in the
Tangible Assets and the Intangible Assets to the extent not
theretofore liquidated or if, and to the extent, applicable law
prohibits such assignment of title, shall assign such rights for
purposes of collection and distribution in accordance with terms
hereof. On the Effective Date the Debtor shall deposit in the
Liquidation Trust amounts of cash sufficient, in the reasonable
opinion of the trustee of the Liquidation Trust (the "Liquidation
Trustee"), to fund the Liquidation Trustee's expenses in pursuit
of liquidation of such Tangible Assets and Intangible Assets
after the Effective Date; provided, however, that the Debtor
shall not be required to deposit an amount which is greater than
$1,000,000 for such purpose; and provided further, that the
Liquidation Trustee's fees and expenses shall thereafter be
funded by the cash realized from the liquidation of such assets
and (ii) if and to the extent realized following the Effective
Date and prior to the termination of the Liquidation Trust, CSW
shall, or shall cause Reorganized EPE to deposit into the
Liquidation Trust an amount of cash which is equal to the amount
of such Reduction in Claim minus any portion thereof which was
realized prior to the Effective Date.
The Liquidation Trust shall terminate on the earliest
to occur of (i) the date of a Final Order of the Bankruptcy Court
terminating the Liquidation Trust, (ii) the date upon which all
<PAGE> 199
of the Tangible Assets and Intangible Assets are liquidated or
otherwise reduced to cash and all of the Reductions in Claims are
determined (and distributions therefor have been made pursuant to
the terms of the Liquidation Trust) or (iii) the Liquidation
Trust has distributed to holders of Allowed Class 16 Claims an
amount of cash equal to the difference between (A) the Maximum
Additional Consideration Amount and (B) the amount of Additional
Consideration realized prior to the Effective Date.
Upon any such termination of the Liquidation Trust any
remaining assets in the Liquidation Trust shall be distributed to
Reorganized EPE.
The Liquidation Trustee shall, from time to time,
distribute cash from the Liquidation Trust pursuant to the terms
of the Plan and such Liquidation Trust. Distributions from the
Liquidation Trust shall be made to the holders of Allowed Inter-
ests in Class 16 who are holders of record of EPE Equity
Securities as of the Effective Date, on a pro rata basis, up to
an amount per share equal to the difference between the Maximum
Additional Consideration Amount and the amount of Additional
Consideration realized prior to the Effective Date. Upon any
termination of the Liquidation Trust any remaining assets in the
Liquidation Trust shall be distributed to Reorganized EPE.
Arizona Public Service believes, although the Debtor disagrees,
that the Liquidation Trust is a feature of the proposed Plan that
is unconfirmable. Further, APS contends, although the Debtor
disagrees, that the alleged "one or more potential causes of
action against APS" referred to at Section V, 4(i) (supra), are
not assignable and suffer from the following defects: 1) EPE has
filed sworn testimony stating that no basis for such a suit
exists; 2) none of the other five (5) participant utilities in
Palo Verde have filed suit for recovery against APS over the 1989
outage; 3) the $1 Million amount to be placed in the Liquidating
Trust by EPE would be entirely insufficient to cover the cost of
the multiple-years required for the Liquidating Trustee's
prosecution of such extremely complex litigation; 4) significant
doubt exists that EPE has any factual basis for prosecuting such
a suit; 5) significant legal obstacles exist to such a suit,
including limitations against suits asserting liability of the
Operating Agent under the contractual terms of the ANPP
Participation Agreement, e.q., damage limitations and exclusions
of liability other than for conduct with willful intent to harm;
6) such a suit is inconsistent with EPE's own rate-case plan; and
7) such a suit, even in the unlikely event of success, would
result in any proceeds being paid to EPE rate payers, and not to
any EPE shareholder group. The Debtor disagrees with each of
these contentions.
<PAGE> 200
C. Stock Options. Notwithstanding Section 3.18(A) of
the Plan described above, Section 3.18(B) of the Plan provides
that, effective as of the Effective Date, (i) the EPE Stock
Purchase Plan, the EPE Phantom Stock Plan, the EPE Director Stock
Plan, the EPE Stock Option Plan and the EPE Stock Compensation
Plan shall be terminated, and (ii) any option to purchase EPE
Common Stock granted under the EPE Stock Purchase Plan or the EPE
Stock Option Plan shall, to the extent such option has not been
exercised, be converted into an option to purchase a number of
shares of CSW Common Stock equal to (x) the number of shares of
EPE Common Stock subject to such option times (y) the Per Share
CSW Common Stock Acquisition Fund. The exercise price per share
of CSW Common Stock in such substituted option following such
conversion shall be equal to (a) the exercise price per share of
EPE Common Stock subject to such option dividend by (b) the Per
Share CSW Common Stock Acquisition Fund. Otherwise, the terms
and conditions of the exercise of such option shall be the same
as are applicable to such option to purchase CSW Common Stock;
provided, however, that no such option to purchase CSW Common
Stock shall terminate, lapse, become unexercisable or be in any
other way adversely affected as a result of the optionee's
termination of employment (whether voluntary or involuntary),
with Reorganized EPE or CSW. As soon as reasonably practicable
after the Effective Date, each participant under the EPE Phantom
Stock Plan shall receive, in a single sum cash payment, the value
of his or her account under the EPE Phantom Stock Plan.
(j) Restrictions on Transfers of CSW Common Stock
Except for certain "Permitted Transfers," set forth in
Section 2.9(f) of the Merger Agreement (and certain transfers
required under applicable regulatory laws for which the Debtor
intends to make provision), Section 5.5(A) of the Plan provides
that no holder of an Allowed Class 15 Interest or an Allowed
Class 16 Interest that receives shares of CSW Common Stock in
respect of such Allowed Class 15 Interest or Allowed Class 16
Interest pursuant to the Plan may, at any time prior to the date
which is the two-hundred and fortieth day following the Effective
Date (the "Initial Lock-Up Period") sell, transfer, pledge, or
otherwise dispose of (any sale, transfer, pledge or other
disposition being referred to herein as a "transfer") any such
shares or any interest therein to any other Person. During the
Initial Lock-Up Period, (i)such shares may be legended and may be
held by a designated third party for the account of such holder
and (ii) dividends on such shares shall be paid directly to such
holder. All such shares will be distributed to such holder on
that date which is the last day of the Initial Lock-Up Period.
Except for certain "Permitted Transfers" set forth in
Section 2.9(f) of the Merger Agreement, the Plan provides that
holders of Allowed Claims in Classes 11, 12 and 13 that receive
<PAGE> 201
shares of CSW Common Stock in respect of such Allowed Claim
pursuant to the Plan may transfer such shares or any interest
therein except as follows:
MAXIMUM PERCENTAGE OF
EACH HOLDER'S SHARES
DATE OF TRANSFER ELIGIBLE TO BE TRANSFERRED
Prior to the date which is 3 33%
months after the Effective Date
From (and including) the date
which is the ninetieth day after
the Effective Date through (but
excluding) the date which is the
one hundred-eightieth day after
the Effective Date 66%
("First Lock-Up Period")
From (and including) the date
which is one hundred-eightieth
day after the Effective Date
100%
("Second Lock-Up Period")
During the First and Second Lock-Up Periods, (i) shares which are
not eligible to be transferred may be legended and may be held by
a designated third party for the account of such holder and
(ii) no dividends shall be paid to such holder on such shares
until that date which is the last day of the Second Lock-Up
Period.
The number of shares of CSW Common Stock to be
distributed on the last day of the Initial, First or Second Lock-
Up Period, as the case may be, will be determined by reference to
the average trading prices of CSW Common Stock for the preceding
60 consecutive trading day period ending on the 6th trading date
prior to each distribution of CSW Common Stock under this Section
5.5, but subject to a 5% "outside collar" as more fully described
in the definition of CSW Class 12/13 Share Value in the Plan.
Any purported transfer of any shares of CSW Common
Stock or any interest therein in violation of this Section 5.5
(an "Unauthorized Transfer") will be null and void. CSW will not
be required to register, recognize, or give effect to any
Unauthorized Transfer and the purported transferees of any such
shares or any interest therein pursuant to an Unauthorized
Transfer will not acquire any right in such shares.
Notwithstanding the provisions of Section 5.5(A), (B)
and (C) of the Plan, none of the restrictions on transfer set
<PAGE> 202
forth therein shall apply to any person who, together with any
Affiliates of such Person, would, but for the provisions of
subparagraph (A), (B), and (C) of Section 5.5 of the Plan receive
no more than an aggregate amount of 5,000 shares as of the
Effective Date of CSW Common Stock pursuant to the Plan.
(k) Cash Payment in Lieu of CSW Common Stock
The Plan provides that in lieu of distributing shares
of CSW Common Stock, CSW may, in its sole discretion, elect to
pay to holders of Allowed Claims in any or all of Classes 11,
12(a), and 13, cash in an amount equal to the value as of the
Effective Date of any or all of the shares of CSW Common Stock
which would otherwise be distributed to such holders in respect
of such Allowed Claims; provided, however, that with respect to
each Class as to which CSW makes such election such cash payments
will be made pro rata to holders of Allowed Claims in such Class;
and provided, further, that CSW may only exercise such election
with respect to holders of Class 11, Class 12(a), or Class 13
Allowed Claims, if pursuant to such election, the holders of
Allowed Claims in each such Class receive the same proportion of
cash to their Allowed Claims as the holders of Allowed Claims in
such other Classes. In no event may CSW elect to pay Class 15 or
Class 16 in cash, in lieu of Reorganized EPE Preferred Stock or
CSW Common Stock, as applicable, on the Effective Date unless CSW
has also elected to pay cash in lieu of all CSW Common Stock to
which Class 11, Class 12(a), and Class 13 Allowed Claim holders
are entitled pursuant to the Plan.
VI. CONDITIONS TO CONFIRMATION UNDER THE PLAN
The Plan requires that each of the following conditions
occur or be waived pursuant to Section 6.3 of the Plan in order
for the Plan to be confirmed:
A. The Confirmation Order shall be in form and
substance acceptable to the Debtor and CSW.
B. The Merger Agreement shall be executed by all
parties thereto (except that CSW Sub will thereafter execute
the Merger Agreement in accordance with an order of the SEC
approving such execution) and shall be in full force and
effect, subject to any conditions subsequent contained
therein. APS and the other Palo Verde Participants contend,
in addition, that the Plan cannot be confirmed without the
Debtor prevailing at the confirmation hearing on its
intended cure and assumption of the ANPP Participation
Agreement and related agreements.
<PAGE> 203
VII. CONDITIONS TO EFFECTIVENESS OF THE PLAN
The following are conditions to the Effective Date as
defined in Section 1.40 of the Plan:
A. The Confirmation Order has been issued, at least
ten (10) days have elapsed since the Confirmation Date, and
no stay of the Confirmation Order is in effect.
B. The Reorganized EPE Articles of Incorporation
shall have been filed with the Texas Secretary of State, if
and to the extent state law so requires.
C. The Reorganized EPE First and Second Mortgage Bond
Indentures and the indentures under which the Reorganized
EPE Series A Senior Notes, Reorganized EPE Series A-I Notes,
Reorganized EPE Series A-II Notes and the Reorganized EPE
Class 13 Senior Fixed Rate Notes will be issued and shall
have been qualified under the Trust Indenture Act of 1939,
if and to the extent such qualification is required by such
Act.
D. All conditions to the Merger contained in the
Merger Agreement shall have been satisfied or waived and the
Merger shall have been consummated or will be consummated on
the Effective Date.
E. The Debtor shall have filed a written notice with
the Bankruptcy Court stating that the conditions to effec-
tiveness of the Plan which have not been waived in accord-
ance with Section 6.3 of the Plan have been satisfied.
F. The sum of (i) the amount estimated, under Section
502(c) of the Code, with respect to the Class 13 Disputed
Claims remaining as of the Effective Date and (ii) the
Class 13 Disputed Claims existing as of the Confirmation
Date that were either listed in the Schedules or filed with
the Bankruptcy Court by the Bar Date which become Class 13
Allowed Claims at or prior to the Effective Date shall not
exceed Twenty Million Dollars ($20,000,000).
G. Each of the publicly tradeable Reorganized EPE
Series A First Mortgage Bonds and the publicly tradeable
Reorganized EPE Second Mortgage Bonds shall have received an
Investment Grade Rating.
Subject to Section 1129(a)(6) of the Code, and
Section 5.1(E) of the Plan, the Debtor and CSW (and, in the case
of Section 6.2 (F), CSW alone under all circumstances without
Bankruptcy Court approval) may waive all or any portion of any of
<PAGE> 204
the conditions to Confirmation or to the Effective Date described
in the Plan, except Sections 6.2(C) and 6.2(G) of the Plan at any
time without notice, except notice as provided in Section 5.1 (E)
of the Plan and, absent written objection received by the Debtor
and CSW not more than twenty (20) days after notice is provided
in accordance with Section 5.1 (E)(i) of the Plan, without leave
or order of the Bankruptcy Court. The Debtor and CSW, with the
approval of the Bankruptcy Court, may extend or reduce any time
period provided in Section 6.4 of the Plan and described in the
next paragraph; provided, however, that to the extent the Debtor
requests Bankruptcy Court approval of an extension of any time
period, such time period shall automatically be deemed extended
between the date the Debtor files its request with the Bankruptcy
Court and the date the Bankruptcy Court issues an order
determining whether to approve or deny the Debtor's request. If
a proper objection to a waiver of Plan Section 6.2 conditions is
timely, received by the Debtor, then the Debtor and/or CSW as
appropriate may waive such conditions with approval of the
Bankruptcy Court, or, in the case of Section 6.2 (F), without
Bankruptcy Court approval.
If each of the conditions to the Effective Date has not
occurred or been duly waived within 913 days after the Confirma-
tion Date, or by such later date as may be established in accord-
ance with Section 6.3 of the Plan as described above, then, upon
motion by any party in interest made after the deadline for
satisfying (or obtaining waivers of) the conditions to the Effec-
tive Date (as such deadline may be extended under the Plan), and
prior to the time that each of said conditions has occurred or
been duly waived, the Confirmation Order may be vacated by the
Bankruptcy Court in the Bankruptcy Court's discretion. Notwith-
standing the foregoing, however, the Confirmation Order may not
be vacated after each of the conditions to the Effective Date has
either occurred or been waived. APS and the other Palo Verde
Participants contend, although the Debtor disagrees, that while
the cure and assumption of the ANPP is not stated as a condition
precedent to the Effective Date, the Plan could not become
effective unless the ANPP has been assumed and cured by a final
order of the Bankruptcy Court.
VIII. MEANS FOR EXECUTION OF PLAN
A. Merger
CSW will organize CSW Sub as a wholly-owned subsidiary
and CSW Sub will execute the Merger Agreement upon the receipt of
required regulatory approvals under the Public Utility Holding
Company Act of 1935. Subject to the terms and conditions of the
Merger Agreement, and in accordance with the provisions of the
Texas Business Corporation Act, as amended (the "TBCA"), CSW Sub
shall be merged with and into the Debtor and the separate
<PAGE> 205
corporate existence of CSW Sub shall cease on the Effective Date.
The Debtor will be the surviving corporation in the Merger and
shall continue its corporate existence under the laws of the
State of Texas as a direct wholly-owned subsidiary of CSW. The
Merger shall have the effects set forth in the TBCA, with
Reorganized EPE retaining all its properties, liabilities and
obligations as the surviving corporation and all properties,
liabilities and obligations of CSW Sub being allocated to and
vested in the Debtor.
The NMPUC Staff states that the NMPUA provides that
NMPUC approval is a condition precedent to the effectiveness of
the Merger.
B. Regulatory Approval
As described under Section III.D. of this Disclosure
Statement, the effectiveness of the Merger and therefore, the
Plan is conditioned upon obtaining certain regulatory approvals
required to implement the Plan.
C. The Agreements Between the Debtor and Various Third
Parties
1. Amendments to Articles of Incorporation
The Debtor's Articles of Incorporation shall be amended
and restated as provided in the Merger Agreement and as necessary
so that, on the Effective Date, the Reorganized EPE Articles of
Incorporation shall comply with Section 1123(a)(6) of the Code
by, inter alia, providing for restrictions on issuance of
nonvoting equity securities and an appropriate distribution of
voting power as to the classes of securities possessing voting
power, including adequate provisions for the election of
directors representing any class of equity securities having a
preference over another class of equity securities with respect
to dividends in the event of default in the payment of such
dividends.
2. Cancellation and Distribution of Securities
Surrender of Securities. As a condition to
participation under this Plan (i) a holder of EPE Securities that
desires to receive the property to be distributed on account of
such EPE Securities shall surrender the EPE Securities to
Reorganized EPE or its designee or, in the case of EPE Debt
Securities, to the indenture trustees of the EPE Debt Securities,
who shall cancel or surrender such securities (ii) a holder of a
note of the Debtor other than an EPE Security that desires to
receive the property to be distributed on account of an Allowed
Claim based on that note shall surrender the note to Reorganized
<PAGE> 206
EPE or its designee and (iii) a holder of a Lease Obligation Bond
or a Secured Lease Obligation Bond that desires to receive the
property to be distributed on account of an Allowed Claim based
on such instrument shall surrender such instrument to Reorganized
EPE or its designee.
If a holder of an EPE Security or a note of the Debtor
or a Lease obligation Bond or a Secured Lease Obligation Bond is
unable to surrender such security or note because it has been
destroyed, lost or stolen, such holder may receive a distribution
with respect to such security or note upon request to Reorganized
EPE, or, in the case of EPE Debt Securities, to the indenture
trustees of the EPE Debt Securities in an acceptable form with:
(i) proof of such holder's title to such security or note;
(ii) proof of the destruction or theft of such security or note,
or an affidavit to the effect that the same has been lost and
after diligent search cannot be found; and (iii) such
indemnification as may be required by Reorganized EPE to
indemnify Reorganized EPE, or in the case of an EPE Debt
Security, such indemnification as may be required by the
indenture trustee of such EPE Debt Security to indemnify such
indenture trustee and all other persons deemed appropriate by
such indenture trustee, and all other persons deemed appropriate
by Reorganized EPE, against any loss, action, suit or other claim
whatsoever which may be made as a result of such holder's receipt
of a distribution on account of such security or note under this
Plan.
In the event of a transfer of ownership of EPE
Securities which are not registered on the transfer records of
the Debtor, the securities or cash to be distributed or paid may
be distributed or paid to a transferee of an Allowed Claim or
Allowed Interest if an executed letter of transmittal in form
satisfactory to Reorganized EPE is presented to Reorganized EPE
(or in the case of an EPE Debt Security, if an executed letter of
transmittal in a form satisfactory to the indenture trustee for
such EPE Debt Security is presented to such indenture trustee),
accompanied by such documents as are required to evidence and,
effect such transfer and by evidence that any applicable transfer
taxes have been paid.
Holders of Debt and Equity Securities Entitled to
Receive Distributions. All distributions of securities to be
made under the Plan shall be made by Reorganized EPE as soon as
practicable after the Effective Date to holders of record on such
date as set by the Bankruptcy Court for Plan distribution
purposes. Except to the extent otherwise provided in the Plan or
in an order of the Bankruptcy Court, any distribution under the
Plan in respect of Allowed Claims under or evidenced by EPE Debt
Securities, Secured Lease Obligation Bonds or the Lease
Obligation Bonds shall be made to the indenture trustee (if any)
<PAGE> 207
who shall, subject to the rights of such indenture trustee as
against holders of securities issued under the applicable
indenture, transmit, upon surrender of such securities and bonds,
such property to holders of EPE Debt Securities, Secured Lease
Obligation Bonds or Lease Obligation Bonds issued under the
applicable indenture who are holders of record on the date
provided in Section 5.3(A) of the Plan or the Debtor (which
holders shall be deemed to include, without limitation, persons
entitled to be treated as such under Bankruptcy Rule 3003(d) or,
in the case of bearer instruments, the entities who present such
instruments for payment, whose claims have not been disallowed).
The reasonable fees and expenses of an indenture trustee incurred
solely in connection with making such distributions, unless
otherwise paid hereunder, shall be paid by Reorganized EPE to the
extent so required in the indenture or as otherwise agreed
between Reorganized EPE and such indenture trustee, and in any
case subject to the required approvals of the Bankruptcy Court,
if any. Distributions on account of EPE Equity Securities shall
be made only to holders of record of such equity securities on
the date provided in Section 5.3(A) of the Plan (which shall be
deemed to include, without limitation, persons entitled to be
treated as such under Bankruptcy Rule 3003(d)) whose equity
interests are Allowed Interests.
Fractional Interests. The calculation of securities to
be distributed to holders of Allowed Claims or Allowed Interests
may mathematically entitle the holder of such a Claim or Interest
to a fractional interest in one or more of such securities.
Notwithstanding such entitlement, Reorganized EPE First Mortgage
Bonds, Reorganized EPE Second Mortgage Bonds (other than in each
case Reorganized EPE Pledged Bonds), Reorganized EPE Series A
Senior Notes Reorganized EPE Series A-1 Notes, Reorganized EPE
Series A-II Notes and Reorganized EPE Class 13 Senior Fixed Rate
Notes will be issued and distributed only in denominations of
$1,000. To the extent that any holder would be entitled to a
fractional denomination of Reorganized EPE First Mortgage Bonds,
Reorganized EPE Second Mortgage Bonds, Reorganized EPE Series A
Senior Notes, Reorganized EPE Series A-I Notes, Reorganized EPE
Series A-II Notes, or Reorganized Class 13 Senior Fixed Rates
Notes, but for this provision, such holder's Claim relating
thereto shall either be paid by Reorganized EPE in cash, or at
Reorganized EPE's option, rounded up to entitle such holder to a
full denomination. CSW Common Stock and Reorganized EPE
Preferred Stock will be issued and distributed in whole shares,
and not in fractional shares. To the extent that any holder
would be entitled to a fractional share of CSW Common Stock or
Reorganized EPE Preferred Stock but for this provision, such
holder shall be paid by Reorganized EPE in cash in an amount
equal to (i) in the case of a fractional share of CSW Common
Stock that would be distributed to a holder of Allowed Claims in
Class 11, 12 or 13 or Allowed Interests in Class 15 or Class 16,
<PAGE> 208
the fraction of said share multiplied by the closing price of a
share of CSW Common Stock on the Effective Date, as reported in
The Wall Street Journal, NYSE Composite Transactions, on the
Effective Date, or (ii) in the case of a fractional share of
Reorganized EPE Preferred Stock, such fraction multiplied by
$100. Holders of Allowed Claims or Allowed Interests under or
evidenced by securities shall, in the case of securities held in
street name, mean the beneficial holders thereof.
3. Management Employment Agreements, Collective
Bargaining Agreements, Employment Agreements and
Retiree Benefits Agreements
Certain employee programs of the Debtor will be
implemented, modified or terminated as more particularly set
forth in the Merger Agreement, and subject to such modification
as the Debtor, with CSW's consent, may implement. Subject to
such modifications or terminations, effective on the Effective
Date, all executory contracts between the Debtor and its current
and former employees and surviving spouses, including collective
bargaining agreements, agreements with management employees,
severance agreements, and agreements with respect to retiree or
surviving spouses benefits, including plans qualified under the
Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and all plans not so qualified, and all other benefits
provided any of its employees, will be deemed assumed by the
Debtor pursuant to Sections 365 and 1123(b)(2) of the Code, to
the extent such sections are applicable, without further action
on the part of the Debtor, except to the extent that Debtor seeks
termination or modification of such agreements prior to Confirma-
tion. Agreements related to retiree or surviving spouse benefits
which are not executory shall be performed by the Debtor or, as
applicable, Reorganized EPE according to their terms. From and
after the Confirmation Date, the Debtor shall pay all benefits to
current retirees and surviving spouses as and when accrued except
to the extent limited by Order of the Bankruptcy Court, if any.
The Debtor currently intends to continue and maintain
the El Paso Electric Company Retirement Income Plan at least
until the Effective Date and to comply with any funding and other
requirements relative thereto, including the requirement that
contributions to such plans be made in accordance with Internal
Revenue Code Section 412 and 28 U.S.C. Section 1082 excepting
only as such plan may be terminated after the Effective Date in
accordance with its terms and applicable (other than Code)law.
The Reorganized Debtor will continue to be a contributing sponsor
of the Retirement Income Plan for Employees of El Paso Electric
Company within the meaning of ERISA. Following the Effective
Date, the El Paso Electric Company Retirement Income Plan may be
terminated or merged with a CSW defined benefit plan in
accordance with applicable law. Unless and until the Plan is
<PAGE> 209
terminated, the Debtor and Reorganized EPE will have no
obligations to pay debt due to the Pension Benefit Guaranty
Corporation ("PBGC") under Section 4062 of ERISA for any unfunded
benefit liabilities of such plans and, accordingly, any
liabilities due to the PBGC for any unfunded benefit liabilities
shall not be affected in any way by the Case, including the
discharge of the Debtor thereunder. Reorganized EPE employees
who become participants in the CSW pension plan will receive
credit for service under the Debtor's Retirement Income Plan for
purposes of eligibility, vesting and accrual of benefits.
The following employee programs shall be modified
and/or terminated as set forth herein:
a. The Debtor's Employee Stock Purchase Plan (the
"ESPP") shall be terminated as of the Effective Date. Holders of
existing EPE options under the ESPP will be granted the right to
purchase CSW Common Stock;
b. The Debtor's Employee Stock Compensation Plan shall
be terminated on the Effective Date;
c. Ownership of life insurance policies under the
Debtor's Supplemental Retirement and Survivor Income Plan for Key
Employees (the "Supplemental Retirement Plan") shall be held by
Reorganized EPE or transferred to a separate trust pursuant to
provisions of the Supplemental Retirement Plan following the
Effective Date. After the Effective Date, retired participants
under the Supplemental Plan, retirees with separate contracts,
and those surviving spouses who are covered by the Debtor's
special surviving spouse benefit program shall be paid benefits
as provided under the operative documents as in effect on April
30, 1993, without giving effect to any restrictions imposed by
the Bankruptcy Court on an interim basis and in the manner
provided by the Supplemental Retirement Plan. The terms of the
Supplemental Retirement Plan, the individual retirement
contracts, and the surviving spouse benefit program shall be
honored for covered active employees, covered former employees or
surviving spouses, as applicable.
d. The Debtor's Phantom Stock Plan shall be terminated
as of the Effective Date. Holders of phantom stock shares will
receive a cash payment in an amount equal to the value of the
shares in his or her account on the Effective Date;
e. The Debtor's Directors' Retirement Plan (the
"Directors' Retirement Plan") shall be terminated as of the
Effective Date. Retired directors and current Directors who have
earned a future benefit under the Directors' Retirement Plan will
receive a lump-sum payment of the actuarial present value of
their earned benefit. This payment will be calculated using the
<PAGE> 210
1983 Group Annuity Mortality Table and an 8% interest assumption.
Directors of the Debtor with less than five years service as of
the Effective Date will be treated as having five-years service
for purposes of determining benefits payable under the Directors
Retirement Plan.
f. The Debtor's Directors' Stock Compensation Plan,
which has never been implemented by EPE, shall be terminated on
the Effective Date;
g. Unexercised EPE options under the Debtor's Employee
Stock Option Plan shall be converted into an option to purchase
the number of shares of CSW Common Stock which the holder of such
option would have been entitled to receive upon exercise of such
option immediately prior to the Effective Time;
h. The Debtor's Savings Plan and Savings Plan for
Collective Bargaining Employees (the "Savings Plans") will be
maintained for a minimum period of two years following the
Effective Date, with terms and provisions no less favorable, in
the aggregate, than terms and provisions in effect at the
Effective Date. At the time one or both plans is terminated or
replaced by or merged into the CSW Thrift Plus Plan (or a
successor plan), CSW or Reorganized EPE will take action as
necessary and as permitted by applicable law to permit repayment
of outstanding loans held by participants in the Debtor's Savings
Plans over the remaining period of such loans, regardless of the
employment status of such participants.
i. Other than with respect to the Savings Plans
described in the preceding paragraph, CSW will cause employees of
Reorganized EPE not covered by a collective bargaining agreement
to be covered by CSW's employee benefit plans following
appropriate transition periods. The employee benefits to be
provided to employees of Reorganized EPE who are covered by a
collective bargaining agreement will be in accordance with the
provisions of the collective bargaining agreement. If an
employee of Reorganized EPE becomes a participant in an employee
benefit plan, program, policy or arrangement of CSW, Reorganized
EPE or another affiliate of CSW, the employee shall be given
credit under such plan for all service with the Debtor or
Reorganized EPE prior to becoming a participant in such plan for
purposes of eligibility, vesting and benefit accrual for such
plan if such service is credited under the comparable Debtor
plan.
j. For further information regarding certain of CSW's
employee benefit plans, reference is made to the Central and
South West Corporation Proxy Statements, dated February 20, 1992
and March 12, 1993 and other information, attached hereto as
Exhibit O.
<PAGE> 211
D. Effect of Plan Confirmation
1. Discharge
The Confirmation Order shall act as a discharge on the
Effective Date of any and all Claims against, and all debts and
liabilities of, the Debtor, as provided in Code Sections 524 and
1141. The Palo Verde Participants assert that certain
obligations under the ANPP Participation Agreement are not
dischargeable. The Debtor disputes this assertion.
2. Revesting
On the Effective Date, except as provided in the Plan,
all property of the estate, to the fullest extent of Section 541
of the Code, and any and all other rights and assets of the
Debtor of every kind and nature shall, revest in Reorganized EPE
free and clear of all Claims, liens, Interests and Encumbrances.
3. Retention and Enforcement of Causes of Action
Pursuant to Section 1123(b)(3)(B) of the Code, except
as provided in Sections 3.14(A), 3.14(B), and 7.2(B) of the Plan
and the other releases expressly provided for in the Plan, the
Debtor and Reorganized EPE on behalf of themselves and holders of
Allowed Claims and Allowed Interests shall retain all causes of
action which the Debtor had or had power to assert immediately
prior to confirmation of the Plan, including without limitation,
actions for the avoidance and recovery pursuant to Section 550 of
the Code of transfers avoidable by reason of Sections 544, 545,
547, 548, 549 or 553(b) of the Code and may commence or continue
in any appropriate court or tribunal any suit or other proceeding
for the enforcement of such Causes of Action. All Causes of
Action shall remain the property of the Debtor and Reorganized
EPE unless expressly assigned under the Plan. Nothing contained
in the Plan shall constitute a waiver of the rights, if any, of
the Debtor or Reorganized EPE to a jury trial with respect to any
Cause of Action or objection to any Claim.
Without limiting the generality of the foregoing,
except as provided in the Plan or as the Debtor may agree in
writing and the Bankruptcy Court may approve, the Debtor and
Reorganized EPE expressly reserve any and all claims they may
have against the lessors under the Palo Verde Leases, the Owner
Participants, and the holders of the Secured Lease Obligation
Bonds and the Lease Obligation Bonds, and all their successors,
heirs, and assigns and also reserve any and all claims they may
have against APS. Nothing herein precludes the settlement of
such Claims independent of the Plan, as may be approved by order
of the Bankruptcy Court. Furthermore, except as provided in
Sections 7.2(B) and (D) of the Plan and the other releases
<PAGE> 212
expressly in the Plan, the allowance of any Claim or Interest in
the Plan or by order of the Bankruptcy Court shall not affect or
in any way extinguish, resolve, or bar the claims of the Debtor
and Reorganized EPE against any such Claim or Interest holder or
prior holder of any such Claim or Interest under any doctrine or
theory of law, including, but not limited to, principles of res
judicata, legal estoppel, or equitable estoppel.
If any of Classes 3, 5(a), 5(b), 5(c), 6, 11, or 13
accepts the Plan in accordance with Section 1126(c) of the Code,
then, upon the Effective Date, each such Class which accepted the
Plan and any participant in the Claims held by such Class shall
be released from Causes of Action with respect to the Claims in
such Class and shall be released from any and all claims of any
party in interest from causes of action under or arising from
orders entered in this Case providing for the payment of interest
in respect of the Claims in such Classes prior to the Effective
Date.
4. Post-Consummation Effect of Evidences of
Claims or Interests
Notes, stock certificates and other evidences of Claims
against or Interests in the Debtor shall, effective upon the
Effective Date, represent only the right to participate in the
distributions contemplated by the Plan.
5. Term of Injunctions or Stays
Unless otherwise provided, all injunctions or stays,
whether by operation by law or by Court order, provided for in
the Case pursuant to Sections 105 or 362 of the Code or otherwise
and in effect on the Confirmation Date shall remain in full force
and effect until the Effective Date.
6. Executory Contracts and Unexpired Leases
The Plan, by the terms of the Confirmation Order, pro-
vides for assumption, rejection and reformation of the Debtor's
executory contracts and unexpired leases not previously assumed
or rejected prior to the Confirmation Date as follows:
(a) Palo Verde Leases
Unless the Debtor expressly elects to assume
the Palo Verde Leases on or prior to the
Confirmation Date, the Palo Verde Leases, to the
extent not previously rejected, will be deemed
rejected by the terms of the Plan and 1123(b)(2)
of the Code, without further action on the part of
the Debtor. Upon rejection of the Palo Verde
<PAGE> 213
Leases, all obligations of the Debtor with respect
to payments under the leases to the Lessors shall
cease. APS and the other Palo Verde Participants
contend, although the Debtor disagrees, that the
Debtor's Disclosure Statement fails to explain the
consequences of a rejection of the Palo Verde
leases and that a prohibited transfer under 11
U.S.C. Section 363(h) may be a direct or indirect
result of the Debtor's proposed actions.
(b) Executory Contracts
Each executory contract or unexpired lease of
the Debtor that has not expired by its own terms
prior to the Effective Date, is not rejected
during the Case or under the Plan and is not
subject to a motion for rejection filed before the
Confirmation Date, will be assumed by Reorganized
EPE pursuant to Sections 365 and 1123(b)(2) of the
Code effective on the Effective Date. All assumed
contracts, unexpired leases, franchises and
permits will be vested in and continue in effect
for the benefit of Reorganized EPE.
(c) Other Agreements
The Four Corners Agreements, the ANPP Partic-
ipation Agreement, the ANPP Switchyard Agreement,
the ANPP Transmission Agreement, all other Project
Agreements (as defined in the ANPP Transmission
Agreement), and the supply agreement between the
Debtor and Meridian Oil will be assumed by the
Debtor under the Plan. Except as noted herein,
the Debtor anticipates that most of its remaining
executory contracts and leases not related to the
Palo Verde Leases will be assumed pursuant to the
Plan to the extent not previously assumed. But
see the discussion in Section II.A. herein
respecting issues regarding assumption of the ANPP
Participation Agreement and related agreements.
Specifically, APS and the other Palo Verde
Participants contend, although the Debtor
disagrees, that: 1) cure and assumption of the
ANPP is not possible without their express
consent; 2) the specific procedures for cure and
assumption are not specifically described and
appear to render the Plan unconfirmable; 3)
jurisdictional issues may exist; and 4) other
issues exist regarding cure and assumption,
including the request that EPE must provide
adequate assurance of future performance.
<PAGE> 214
All cure payments which may be required by Code
Section 365(b)(1) under any executory contracts or unexpired
leases that are assumed or assumed and assigned under the Plan
shall be made by Reorganized EPE as soon as practicable after the
Effective Date, but not later than thirty (30) days after the
Effective Date. In the event of a dispute regarding the amount
of any cure payments, the cure of any defaults, the ability of
Reorganized EPE to provide adequate assurance of future
performance, or any other matter pertaining to assumption or
assignment, Reorganized EPE will make such cure payments and cure
such other defaults and provide adequate assurance of future
performance, all as may be required by Code Section 365(b)(1),
following the entry of a Final Order resolving such dispute. To
the extent that a party to an assumed executory contract or
unexpired lease has not filed an appropriate pleading with the
Bankruptcy Court on or before the twenty-fifth (25th) day after
the Effective Date disputing the amount of any cure payments
offered to it by Reorganized EPE, disputing the cure of any other
defaults, or disputing the provisions of adequate assurance of
future performance, then such party shall be deemed to have
waived its right to dispute such matters.
Executory contracts and unexpired leases not previously
rejected may be rejected by motions filed with the Bankruptcy
Court prior to the Confirmation Date, in which event, unless the
Bankruptcy Court otherwise provides, such executory contracts and
unexpired leases will be deemed rejected on the Effective Date.
To the extent either the RGRT Agreement or the Big Bend fuel oil
supply contract (the "Big Bend Agreement") are executory
contracts or unexpired leases pursuant to Section 365 of the
Code, the RGRT Agreement and the Big Bend Agreement shall be
deemed to be rejected on the Effective Date.
Except as may be otherwise provided in any order of the
Bankruptcy Court setting a bar date, any claims for damages
arising from the rejection of an executory contract or unexpired
lease not filed prior to Confirmation Date must be filed within
thirty (30) days after the earlier of (i) the entry of the order
approving rejection of such executory contract or unexpired lease
or (ii) the Confirmation Date. Any such Claims not filed within
such thirty (30) day period shall be deemed barred and may not
thereafter be asserted.
<PAGE> 215
To the extent the Confirmation Order is revoked or
vacated then the assumption or rejection of any executory
contracts or leases pursuant to the Confirmation Order shall
likewise be vacated or revoked.
7. Distributions
Subject to the provisions of Section 5.5 of the Plan,
all distributions to be made under the Plan shall be made as soon
as practicable after the Effective Date to holders of record on
such date as is set by the Bankruptcy Court for Plan distribution
purposes.
8. Unclaimed Distributions
Any property which is unclaimed for two years after
distribution thereof by mail to the latest mailing address filed
of record with the Bankruptcy Court for the party entitled
thereto or if no such mailing address has been so filed, the
mailing address reflected in the Schedule of Assets and
Liabilities filed by the Debtor, as amended, or in the case of
the holder of securities for which there is a trustee, indenture
trustee or fiscal agent, or transfer agent or registrar to the
latest mailing address maintained of record by the pertinent
trustee, indenture trustee or fiscal agent, or, if no mailing
address is maintained of record, to the pertinent trustee,
indenture trustee or fiscal agent, or transfer agent or
registrar, shall become property of Reorganized EPE.
9. Modification of Plan
Any Plan modification (other than technical amendments,
modifications or supplements to the Plan, or any ancillary or
effectuating documents relating thereto that do not conflict with
any representation, warranty, covenant, or other term or
provision of the Merger Agreement or modify the substantive
treatment of any Class of Claims or Interests) made by the Debtor
shall be made subject to the prior written consent of CSW in
accordance with Section 7.2 of the Merger Agreement. CSW, in
accordance with Section 7.2 of the Merger Agreement, shall also
have the right to amend or modify this Plan with respect to the
treatment of any Class of Claims and EPE Preferred Stock
Interests, and the provisions of any ancillary or effectuating
documents relating thereto, prior or subsequent to the entry of
the Confirmation Order, subject to the Code and Bankruptcy Rules.
If any Class hereunder does not accept the Plan, or the treatment
of any accepting Class is determined to not comply with the
requirements of the Code for plan Confirmation, then before, at,
or during the Confirmation Hearing the Debtor may propose, and/or
the Bankruptcy Court may determine, interest or dividend rates,
provisions regarding Allowance of Claims or other terms and
<PAGE> 216
conditions applicable to such Class or a different creditor
classification from that set forth herein. Such rates and terms
and conditions may be more favorable or less favorable to the
holders of Claims or Interests in such Classes than the treatment
set forth herein. Upon the Debtor's filing of a statement so
specifying, the Plan shall be deemed amended to reflect such
modified treatment of such Class. Irrespective of whether a
Class has accepted the Plan, provided that a Plan modification
does not directly, materially and adversely change the treatment
of the Claim of any creditor or the Interest of any equity
security holder which has not accepted in writing the modifi-
cation, the Plan shall be deemed accepted by all creditors and
security holders which have previously accepted the Plan,
subject, however, to the Bankruptcy Court's determination,
pursuant to Section 1127(d) of the Code or otherwise, that
holders of Claims or Interests should be afforded an opportunity
to change such holders' prior acceptance or rejection. After
entry of the Confirmation Order, the Debtor or Reorganized EPE,
as the case may be, may upon order of the Bankruptcy Court amend
or modify this Plan, in accordance with Section 1127(b) of the
Code, or remedy any defect or omission or reconcile any incon-
sistency in this Plan or in the documents filed in accordance
with Section 7.6 of the Plan in such manner as may be necessary
to carry out the purpose and intent of this Plan.
On or after the Confirmation Date, and to the extent
allowable under the Code, CSW, upon the written consent of all
holders of materially adversely affected Claims or Interests, may
adjust payments, terms, and provisions of the Plan and the
documents filed in accordance with Section 7.6 of the Plan,
whether prior to, on or after the Effective Date, to various
classes of Claims and Interests without having to further amend
the Plan, provided, that any adjustment respecting payments to be
made prior to the Effective Date shall be made in accordance with
the terms of the Merger Agreement.
To the extent that there are modifications to the Plan
relating to the treatment of Class 11, Class 12(a) or Class 13,
then, in the event either of the other two classes has accepted
the Plan pursuant to Code Section 1126(c), the Debtor shall be
required to modify the treatment of such other Class or Classes
which accepted the Plan so that the holders of Allowed Claims in
such other Class or Classes receive a benefit with respect to
their Claims that is no less favorable to that received by
holders of the Class or Classes whose treatment first was
modified. By accepting the Plan, Class 11, Class 12(a), and
Class 13 agree that Class 11, Class 12(a), and Class 13 votes
shall not be resolicited on account of a modification to the
treatment of their Allowed Claim under the Plan pursuant to this
paragraph.
<PAGE> 217
Notwithstanding the foregoing, the treatment of Class
16 may not be modified to provide greater consideration to
Interest holders in such Classes on account of their Allowed
Interests than the maximum amount which such Interest holders
could receive pursuant to the corrected Plan as filed on May 18,
1993.
10. Revocation of Plan
Subject to the terms and conditions of Section 9 of the
Merger Agreement and as to the Debtor subject to the notice
provisions of Section 5.1(E) of the Plan, each of the Debtor and
CSW reserves the right, any time prior to the Effective Date,
with or without approval of the Bankruptcy Court, to revoke or
withdraw the Plan. In the event the Plan is revoked or
withdrawn, then, except as provided in Section 6.7 of the Plan,
the Plan and the Confirmation Order shall be of no further force
or effect and all payments to be made after the Confirmation Date
pursuant to this Plan shall cease to be effective as of the
earlier of the day the Debtor sought such revocation or
termination or the day on which CSW or the Debtor terminates the
Merger Agreement, provided that unless otherwise ordered by the
Bankruptcy Court, the Debtor shall continue to pay interest in
accordance with the March 31, 1993 Interim Order regarding post-
petition interest and provided further that, if Class 1 and Class
2 accept the Plan, payment on or after the Confirmation Date on
account of Claims or Interests in Classes 6, 11, 12, 13 and 15
shall be disregarded for purposes of calculating the Debtor's
cash balances under such Interim Order. To the extent any
executory contracts or leases are to be assumed or rejected
pursuant to this Plan or the Confirmation Order and to the extent
that any Claim becomes an Allowed Claim or is disallowed pursuant
to the Plan then, if the Plan is withdrawn or revoked, such
assumption or rejection and such Claim allowance or disallowance
shall be of no force or effect; provided, however, that nothing
herein shall revoke or render ineffective any rejection of the
Palo Verde Leases which occurred prior to the Confirmation Date
pursuant to Section 365(d)(4) of the Code.
11. Purchase Of Financial Derivatives As Hedge.
On or after the Confirmation Date, CSW will have the
option to require the Debtor to purchase financial derivatives
for the purpose of hedging against a decline in value of shares
of Hedged CSW Common Stock (as defined below) between the
Confirmation Date and the Effective Date. The aggregate purchase
price of such instruments (net of any gain realized on hedging
transactions) will not exceed an amount (the "Hedged Amount")
equal to 7.5% of the aggregate amounts of the Allowed Claims in
each Class that are to be satisfied under the Plan by
distribution of an amount of CSW Common Stock determined by
<PAGE> 218
reference to the value of CSW Common Stock as determined by a 60-
day average trading price of CSW Common Stock prior to the
Effective Date (the "Hedged CSW Common Stock"). Notwithstanding
the foregoing, the aggregate purchase price of such instruments
(net of any gains realized on hedging transactions) which hedge
the period covering the first six (6) months following the
Confirmation Date shall not exceed 1/3 of the Hedged Amount, and
the aggregate purchase price of such instruments (net of any
gains realized on hedging transactions) which hedges the period
covering the first twelve (12) months following the Confirmation
Date shall not exceed 2/3 of the Hedged Amount.
12. Payment Dates
Whenever any payment to be made under the Plan is due
on a day other than a Business Day, such payment will instead be
made, without interest, on the next Business Day.
13. Successors and Assigns
The rights, benefits and obligations of any person
named or referred to in the Plan will be binding upon, and will
inure to the benefit of, the heir, executor, administrator,
successor or assignee of such person.
14. Interim Distributions
The Plan is a product of lengthy negotiations with
representatives of each of the creditor classes involving
substantial concessions by the Debtor, as requested by those
representatives, to gain creditor support. If, however, a Class
does not accept the Plan, interest prior to the Effective Date
will not be accrued and paid, except as set forth below for
Classes 1, 2, 3, and as to which the Court entered orders
requiring the payment of interest which are to retain certain
rights under such orders. Certain parties, including the Staff
of the SEC, question the appropriateness of conditioning such
interest or other treatment provisions upon acceptance by each
such class.
On and after the Confirmation Date and through the
Effective Date (a) if Class 1 accepts and only if the holders of
not less than two-thirds in the amount of the Allowed Claims the
Plan in accordance with Section 1126(c) of the Code, interest
accruing from and after February 1, 1993, shall continue to be
paid monthly, in arrears, to holders of Allowed Class 1 Claims on
the principal amount of the EPE First Mortgage Bonds at the
contract (non-default) rate set forth therein, provided, however,
if less than two-thirds in amount of the Allowed Claims in Class
1 accept the Plan, the Debtor shall continue to comply with the
Interim Order regarding post-petition interest dated March 31,
<PAGE> 219
1993 unless otherwise ordered by the Bankruptcy Court; (b) if and
only if Class 2 accepts the Plan in accordance with Section
1126(c) of the Code, interest accruing from and after February 1,
1993, shall continue to be paid monthly, in arrears, to holders
of Allowed Class 2 Claims on the principal amount of the EPE
Second Mortgage Bonds at the contract (non-default) rate set
forth therein, nevertheless, if Class 2 does not accept the Plan,
the Debtor shall continue to comply with the Interim Order
regarding post-petition interest dated March 31, 1993 unless
otherwise ordered by the Bankruptcy Court; (c) if and only if
Class 3 accepts the Plan pursuant to Section 1126(c) of the Code,
interest shall accrue from the Confirmation Date to the Effective
Date, on the principal amount outstanding under the Revolving
Credit Facility at the contract (non-default) rate and shall be
paid to holders of Allowed Class 3 Claims monthly in arrears,
nevertheless, if Class 3 does not accept the Plan, the Debtor
shall continue to comply with the Interim Order regarding post-
petition interest dated March 31, 1993 unless otherwise ordered
by the Bankruptcy Court; (d) if and only if Class 6 accepts the
Plan in accordance with Section 1126(c) of the Code, interest
which has accrued pursuant to Section 3.8(A)(3) of the Plan shall
be paid to the holders of Allowed Class 6 Claims in cash on the
Confirmation Date, to the extent accrued, and thereafter through
the Effective Date, as accrued, in cash at the end of each
interest period (but in any event not less often than quarterly
and on the Effective Date); (e) if and only if Class 11 accepts
the Plan in accordance with Section 1126(c) of the Code, accrued
interest set forth in the last paragraph of Section 3.13(A) of
the Plan shall be paid to holders of Class 11 Allowed Claims on
the Confirmation Date and thereafter quarterly until the
Effective Date and then on the Effective Date; (f) if and only if
Class 5(a), 5(b), or 5(c) accepts the Plan in accordance with
Section 1126(c) of the Code, interest and letter of credit fees
shall be paid on the Effective Date to Class 5(a), 5(b), and 5(c)
Allowed Claim holders whose Class accepted the Plan to the extent
set forth in Section 3.7 of this Plan, provided, however, that if
Class 5(a), 5(b), or 5(c) does not accept the Plan, the Debtor
shall continue to comply with the Interim Order dated March 31,
1993 regarding post-petition interest unless otherwise ordered;
(g) if and only if Class 13 accepts the Plan in accordance with
Section 1126(c) of the Code, then interest which has accrued
pursuant to the penultimate paragraph of Section 3.15 of the Plan
shall be paid in cash on the Confirmation Date, to the extent
accrued, and thereafter payable, as accrued, in cash quarterly
prior to the Effective Date, and on the Effective Date and (h) if
and only if Class 12(a) accepts the Plan in accordance with
Section 1126(c) of the Code, then (X) interest from July 29, 1993
shall be payable to the Palo Verde Indenture Trustees on behalf
of the holders of Allowed Class 12(a) Claims at the rate of 90-
day LIBOR plus 200 basis points on the Class 12(a) Distribution
Amount, in cash on the Confirmation Date to the extent accrued,
<PAGE> 220
and thereafter paid, as accrued, in cash quarterly prior to the
Effective Date and on the Effective Date; (Y) on the Confirmation
Date, the Debtor, will pay the Indenture Trustees the amount of
$3.5 million in full and complete settlement of all fees and
expenses incurred prior to or on the Confirmation Date, of the
Palo Verde Indenture Trustee and Class 12(a) bondholders,
including the fees and expenses of their professional advisors,
subject to necessary Bankruptcy Court approvals, if any; and (Z)
between the Confirmation Date and the Effective Date, the Debtor
will pay the reasonable fees and expenses of the Palo Verde
Indenture Trustees, including the fees and expenses of their
professional advisors, on a quarterly basis, subject to necessary
Court approval, if any, and (i) if and only if Class 15 accepts
the Plan in accordance with Section 1126(d) of the Code, periodic
payments shall accrue from and after August 20, 1993 to the
Effective Date at the rate of 90-day LIBOR plus 200 basis points
on the Class 15 Distribution Amount and shall be paid in cash on
the Confirmation Date and thereafter quarterly until the
Effective Date and then on the Effective Date. Except as
provided above with respect to Classes 1, 2 and 3, no Class that
has not accepted the Plan shall receive any payments prior to the
Effective Date unless the Bankruptcy Court otherwise orders on or
after the Confirmation Date.
If the Plan is revoked or is withdrawn, then any
payment made pursuant to Sections 5.1(B)(i)(a) and (b) shall be
deemed to have been made on account of any Allowed Claim for
post-petition interest and any payment made pursuant to Plan
Sections 5.1(B)(i),(c), (d) and (f) of the Plan shall be deemed
to have been made: (i) first, on account of any Allowed Claim of
the recipient of the payment with priority pursuant to Sections
365(d)(3), 507(a)(1) or 503(b) of the Code, and (ii) second, on
account of any other Allowed Claim of the recipient of the
payment. For purposes of the preceding sentence, an Allowed
Claim shall mean an Allowed Claim other than pursuant to Section
1.3(c) of the Plan. If the Plan is revoked or withdrawn, then
any payment made pursuant to Sections 5.1(B) (i), (e), (g), (h)
or (i) of the Plan shall be deemed to have been made or applied
as set forth in Section 5.1(B)(ii) of the Plan, provided that
unless otherwise ordered by the Bankruptcy Court the Debtor shall
continue to pay interest in accordance with the March 31, 1993
Interim Order regarding post-petition interest and provided
further that, if Class 1 and Class 2 accept the Plan, payments on
or after the Confirmation Date on account of claims or interests
in Classes 6, 11, 12, 13 and 15 shall be disregarded for purposes
of calculating the Debtor's cash balances under such Interim
Order.
In the event that there is no Effective Date with
respect to the Plan, or the Plan is revoked or withdrawn pursuant
to Section 6.7 of the Plan, all interim interest payments made to
<PAGE> 221
holders of claims in Classes 11 and 13 under the Plan shall
nevertheless be retained by such holders, without any reduction
or offset of their prepetition claims. Acceptance of interim
interest payments by holders of claims in Classes 11 and 13 shall
constitute a complete satisfaction of any claims for interest,
any administrative claims, and any fees and expenses for the
period commencing on the Petition Date through the date such
interim interest payments cease. Nothing herein shall constitute
a waiver by holders of claims in Classes 11 and 13 of interest
claims accruing prior to the Petition Date or interest or
administrative claims accruing after the date such interim
interest payments cease.
In the event that there is no Effective Date with
respect to the Plan, or the Plan is revoked or withdrawn pursuant
to Section 6.7 of the Plan, the principal amount of Allowed Class
12(a) Claims shall be immediately and irrevocably reduced on a
Pro rata basis by an amount equal to one-third of the interest
paid to the holders of Allowed Class 12(a) Claims. With respect
to the remaining two-thirds of the interest paid, the Debtor and
the holders of Class 12(a) Claims each fully reserve their rights
to have the Bankruptcy Court determine how such two-thirds of the
interest paid shall be applied or treated.
Payments and distributions to each holder of a Disputed
Claim or Disputed Interest, to the extent that it ultimately
becomes an Allowed Claim or Allowed Interest, shall be made in
accordance with the provisions of the Plan governing the class of
Claims or Interests to which the respective holder of such Claim
or Interest belongs. As soon as practicable after the date that
the order or judgment of the Bankruptcy Court allowing such Claim
or Interest becomes a Final Order, any property that would have
been distributed prior to the date on which a Disputed Claim or
Disputed Interest becomes an Allowed Claim or Allowed Interest
shall be distributed, together with interest, if any, at the rate
provided for the class to which such Claim or Interest belongs,
and together with any dividends, payments or other distributions
made on account of such property from the date such distributions
would have been due had such Claim or Interest then been an
Allowed Claim or Allowed Interest to the date such distributions
are made.
Notwithstanding any other provision of this Plan, each
Creditor or Interest Holder asserting a Claim for reimbursement
of professional fees and expenses, including legal and financial
advisor fees, shall serve EPE, CSW, the Committees, the United
States Trustee and any other parties enumerated by the Bankruptcy
Court with no less than twenty (20) day prior notice of the
amount and nature of such Claim and provide such parties-in-
interest with an opportunity to object to the reasonableness of
such Claim. Claims by a Creditor for reimbursement of
<PAGE> 222
professional fees and expenses shall not be required to conform
to the requirements applicable to fee applications submitted to
the Bankruptcy Court in this case but shall include such
information as the Bankruptcy Court may require. To the extent
no timely objections are filed by the Debtor, CSW or any other
party-in-interest, such Claim shall be paid as set forth in the
Plan. To the extent timely objection is filed and not
subsequently withdrawn, the reasonableness of such Claim shall be
determined by the Court. Unless otherwise expressly set forth in
the Plan, a party may provide the requisite 20 day notice called
for by this subsection prior to the Confirmation Date and if no
objection is filed, shall receive payment on the Confirmation
Date or as soon as practicable thereafter. This paragraph shall
not apply to the payment to the Palo Verde Indenture Trustees set
forth in Section 5.1(B)(h)(Y), unless otherwise ordered by the
Bankruptcy Court.
APS believes the Disclosure Statement does not disclose
potential issues relating to interim distributions and interim
events prior to the Effective Date.
15. Continuation of Committees
The Committees shall continue to exist after the
Confirmation Date until the Effective Date with the same power
and authority as they had prior to the Confirmation Date. Upon
and after the Confirmation Date, the Official Creditors
Committee shall function by majority vote. The Official Equity
Committee shall, by majority vote, have the power to appoint and
discharge the Liquidation Trustee. Between the Confirmation Date
and the Effective Date the Debtor will pay the reasonable fees
and expenses of the Unsecured Creditors Committee attorneys,
accountants, and investment bankers (not to exceed $7,500 per
month) and the Equity Committee attorneys, on a quarterly basis,
subject to necessary Bankruptcy Court approval.
16. Notice to Creditors and Committees
Between the Confirmation Date and the Effective
Date the Debtor shall provide the Official Creditors' Committee,
any holder identified to the Debtor of a claim in Classes 1 and 2
in excess of $20 million who elects to participate, the
representative of the holders of claims in Classes 5(a), 5(b) and
5(c), 6 and 11, and the Indenture Trustees for the holders of
Claims in Classes 1, 2, and 12(a) and the Equity Committee
(collectively the "Oversight Committee") with notice of the
following: (i) any proposed waiver by the Debtor of a breach of
the Merger Agreement by CSW; (ii) any proposed material
modification of either the Plan or the Merger Agreement; (iii)
any proposed Plan revocation or termination by the Debtor,
including, but not limited to revocation or termination arising
<PAGE> 223
from a termination of the Merger Agreement; (iv) any proposed
waiver of any of the conditions set forth in Section 6.2 of the
Plan and Sections 8.2 and 8.4 of the Merger Agreement; (v) any
proposed extension of the date set forth in Section 6.4 of the
Plan or of the date for consummating the Merger; (vi) any
proposed capital expenditure in an expected amount of more than
$50 million, which would not reasonably be incurred except for
the anticipated closing of the merger; and (vii) any decision by
the Debtor to file an independent rate proceeding. The Debtor
shall make reasonable effort to provide such notice not less than
twenty (20) days in advance of the scheduled event so as to
permit any of these parties to consult with either CSW or the
Debtor about the intended actions.
Between the Confirmation Date and the Effective Date,
the Official Creditors' Committee, the Equity Committee, the
holders of Claims and interests in Classes 1, 2, 3, 5(a), 5(b),
5(c), 6, 11, 12(a), 13, 14 the indenture trustees for the EPE
First and Second Bonds, and the EPE Second Mortgage Bonds and the
Palo Verde Indenture Trustees on behalf of the holders of Class
12(a) Claims shall be parties in interest in all proceedings in
the Bankruptcy Court with the same rights to participate in such
proceedings as such persons had prior to the Confirmation Date.
Nothing in this Section shall provide the Bankruptcy Court with
any greater or lesser authority or jurisdiction to hear and
determine any matter relating to the Debtor and the Case as the
Bankruptcy Court would otherwise have.
17. Post Confirmation Oversight
Between the Confirmation Date and the Effective Date,
the Debtor and CSW shall at the request of the Oversight
Committee make available appropriate members of senior management
to meet or confer by telephone not more frequently than once
every three months, unless a more frequent meeting is scheduled
by the Debtor or the Oversight Committee provided that the
Oversight Committee shall not schedule any such briefing more
frequently than monthly (each a "Periodic Briefing") with the
Oversight Committee. Notices required under the above paragraph
may be communicated at such meeting. Absent exceptional
circumstances, the Oversight Committee representatives shall
consist of principals and not attorneys or financial advisors
whose fees will be reimbursed by the Debtor. At each Periodic
Briefing, the Debtor and CSW shall advise the Oversight Committee
of material developments concerning the operations and conduct of
the business of the Debtor, material activities undertaken or
proposed to be undertaken by the Debtor and the status of and
progress being made by the Debtor and CSW with respect to the
satisfaction of the conditions to the consummation of the Merger
and Effective Date of the Plan. The Debtor shall also provide
the Oversight Committee with a capital expenditure budget at
<PAGE> 224
least once every calendar year. The Oversight Committee shall
hold all information obtained from the Debtor and CSW at such
Periodic Briefings that is not otherwise publicly available in
strict confidence, and shall not disclose such information to any
third parties without the written consent of the Debtor and CSW
except as compelled by court order or as directed by applicable
regulatory authorities.
Copies of any press releases issued by CSW or the
Debtor relating to effectuating the merger, as well as copies of
any 8-K's and 10-K's and monthly financial reports and any other
financial reports filed by the Debtor with the Bankruptcy Court
shall upon their issuance be provided to members of the Oversight
Committee.
18. Approvals
The Debtor will provide to the Oversight Committee,
before or within thirty days after Confirmation of the Plan, a
plan and schedule in the form approved by CSW for filing specific
regulatory cases and proceedings necessary to achieve all
necessary regulatory approvals for the transactions contemplated
by the Plan ("Approvals"). CSW and the Debtor will use their
reasonable best efforts to achieve the Approvals. CSW and the
Debtor will, before or within thirty days after Confirmation of
the Plan, provide such assurances to the Oversight Committee as
are reasonably requested concerning any compromises which may be
accepted by CSW, the Debtor and/or the Reorganized Debtor in
achieving the Approvals. The Oversight Committee shall hold such
plan, schedules and assurances and all information related
thereto in strict confidence. As set forth in section 6.6 of the
Plan, the Plan will not be modified to reduce the amount of the
consideration to be paid to the various classes of creditors
under this Plan as a result of any compromises which may be
accepted by CSW and/or the Reorganized Debtor in achieving the
Approvals, absent the acceptance, pursuant to the Code, of such
modification by such affected Class.
19. Limitation of Liability.
Section 7.4 of the Plan provides that CSW and
representatives, agents and employees of CSW, CSW Sub, EPE and
Reorganized EPE shall have no liability to any creditors or
equity holders of the Debtor for actions taken under this Plan,
in connection therewith or with respect thereto in good faith
including, without limitation, failure to obtain Confirmation of
this Plan or to satisfy any condition or conditions, or refusal
to waive any condition or conditions, precedent to Confirmation
or to the occurrence of the Effective Date. Further, CSW, the
Committees, the individual members of the Committees, the
officers, directors, employees, attorneys or agents of the
<PAGE> 225
foregoing and of CSW Sub, EPE and Reorganized EPE will not have
or incur any liability to any holder of a Claim, holder of an
Interest, other party-in-interest herein or any other Person for
any act or omission in connection with or arising out of their
administration of this Plan or the negligence or willful
misconduct, and in all respects such persons will be entitled to
rely upon the advice of counsel with respect to their duties and
responsibilities under the Plan. Nothing in Section 7.4 of the
Plan shall modify, impair or release any obligation of CSW to the
Debtor pursuant or related to the Merger Agreement.
E. Ownership and Resale of Plan Securities
A condition to effectiveness of the Plan is the quali-
fication, under the Trust Indenture Act of 1939, of Reorganized
EPE First and Second Mortgage Indentures and the indentures which
the Reorganized EPE Series A Senior Notes and the Reorganized EPE
Class 13 Senior Notes will be issued if and to the extent such
qualification is required by such Act. If required, appropriate
applications will be filed with the SEC seeking such qualifica-
tions.
Reorganized EPE First and Second Mortgage Bonds and
Reorganized EPE Preferred Stock and Reorganized EPE Senior Notes
and CSW Common Stock issued under the terms of the Plan
(collectively, the "Reorganization Securities") will not be
registered under the Securities Act of 1933, as amended (the
"1933 Act"), or under any state or local securities laws in
reliance upon the exemption from registration contained in
Section 1145 of the Code. Section 1145 provides that the
registration provisions of the 1933 Act or of any state or local
law requiring registration of securities shall not apply to an
offer to exchange, or the exchange of, securities (or securities
and cash) of the Debtor or an affiliate participating in a joint
plan with the Debtor, or of a successor to the Debtor under the
plan for Claims against or Interests in, or claims for
administrative expenses of, the Debtor. For securities laws
purposes, the SEC has interpreted these terms broadly and issued
no action letters in instances where the issuer of securities
technically may not be an affiliate or successor of the Debtor.
In general, unless a holder of Reorganization Securi-
ties is an "underwriter," as that term is defined in Section 1145
of the Code, with respect to Reorganization Securities, such
Reorganization Securities may be resold by such holder without
registration under the 1933 Act or under state securities laws.
An underwriter is defined in Section 1145 of the Code as a person
or entity who (i) purchases a claim against or interest in the
Debtor with a view to the distribution of the Reorganization
Securities received on account of such claim or interest, (ii)
offers to sell Reorganization Securities on behalf of the holders
<PAGE> 226
thereof (except certain offers to sell fractional interests),
(iii) offers to buy the Reorganization Securities with a view to
the distribution thereof pursuant to an agreement made in
connection with the Plan, or (iv) is a "controlling person" of
the Debtor (generally a person directly or indirectly controlling
or controlled by, or under direct or indirect common control
with, the Debtor). In such cases, the Reorganization Securities
may be resold only pursuant to an effective registration
statement covering such securities, in privately negotiated
transactions in which the transferee will be subject to
restrictions on transfer, or in accordance with Rule 144 under
the 1933 Act, or other applicable rules and regulations of the
SEC, and in compliance with applicable state and foreign
securities laws, except that persons who are "underwriters" as
described in clauses (i) through (iii) above may freely engage in
"ordinary trading transactions" in Reorganization Securities.
What constitutes "ordinary trading transactions" within the
meaning of Section 1145 of the Code is the subject of
interpretive letters of the staff of the SEC.
Brokers or dealers effecting sales of Reorganization
Securities will have an obligation under Section 1145(a)(4) of
the Code for a period of 40 days after the Effective Date to
provide the purchaser with a copy of this Disclosure Statement
(and any supplements hereto, if ordered by the Bankruptcy Court)
at or before the time of delivery of such securities.
THE DISCUSSION ABOVE IS A SUMMARY OF THE GENERAL EFFECT
OF THE REGISTRATION PROVISIONS OF THE SECURITIES LAWS UPON
ISSUANCE AND RESALE OF SECURITIES RECEIVED UNDER THE PLAN. THE
EFFECTS MAY VARY BASED ON THE INDIVIDUAL CIRCUMSTANCES OF EACH
HOLDER OF A CLAIM OR INTEREST RECEIVING SECURITIES. THE SECURI-
TIES AND EXCHANGE COMMISSION HAS NOT REVIEWED OR PASSED UPON ANY
ASPECT OF THESE MATTERS. EACH RECIPIENT OF SECURITIES UNDER THE
PLAN IS URGED TO CONSULT WITH HIS OR HER OWN COUNSEL WITH RESPECT
TO THE EFFECT OF FEDERAL, STATE AND FOREIGN SECURITIES LAWS UPON
HIM OR HER, INCLUDING BUT NOT LIMITED TO WHETHER OR NOT HE OR SHE
IS AN UNDERWRITER AS DEFINED IN SECTION 1145(b) OF THE CODE
(WHETHER BY VIRTUE OF BEING AN AFFILIATE OF THE ISSUER OR
OTHERWISE) AND THE EFFECT OF ANY APPLICABLE FOREIGN OR STATE LAW
RESTRICTIONS ON RESALES OF SECURITIES.
F. Certain Terms of Reorganization Securities
The following is a summary only, and is subject in all
respects to the terms of the Plan and the documents filed in
accordance with Section 7.6 of the Plan. The Plan and the actual
filed documents may differ in non-material respects from the
following.
<PAGE> 227
1. General First Mortgage Bond Provisions
The Reorganized EPE First Mortgage Bonds will be issued
as new series of fully registered first mortgage bonds under and
secured by the lien of the Reorganized EPE First Mortgage Bond
Indenture. Pursuant to the Plan, Reorganized EPE Series A and
Series B First Mortgage Bonds shall be issued in connection with
the Debtor's existing First Mortgage Bonds (Class 1) and
Reorganized EPE Series C First Mortgage Bonds shall be issued in
connection with the Revolving Credit Facility (Class 3). In
addition, Reorganized EPE Series X Pledged First Mortgage Bonds
will be issued as pledged bonds to holders of Class 3 Claims.
See Section V "Summary of the Plan of Reorganization" herein.
The bonds of all series issued or which may be issued under the
Reorganized EPE First Mortgage Indenture are hereinafter referred
to as "First Mortgage Bonds."
Date, Interest Rate, Payment, Exchange and Transfer
The Reorganized EPE Series A and Series B First Mort-
gage Bonds will be dated as of the Effective Date and will mature
on the dates and will bear interest at the rates described in
Section V "Summary of Plan of Reorganization" herein. Interest
will be payable semi-annually in arrears. Principal of the
Reorganized EPE First Mortgage Bonds is payable at the principal
corporate trust office of the Trustee, except that in case of the
redemption of the Reorganized EPE First Mortgage Bonds, Reorgan-
ized EPE may designate in the redemption notice other offices or
agencies at which, at the option of the holders, the Reorganized
EPE First Mortgage Bonds may be surrendered for redemption and
payment. Interest will be payable by check and will, except for
payment of defaulted interest, be paid to holders registered at
the close of business on a record date established 15 days prior
to the interest payment date.
The Reorganized EPE Series A First Mortgage Bonds shall
mature on the fifth anniversary of the Effective Date, or such
other maturity as CSW may elect by notice given to holders of
Class 1 Allowed Claims receiving Reorganized EPE Series A First
Mortgage Bonds at least 30 days prior to the Effective Date. The
Reorganized EPE Series B First Mortgage Bonds shall mature on the
fifteenth anniversary of the Effective Date or such other
maturity as CSW may elect by notice given to holders of Class 1
Allowed Claims receiving Reorganized EPE Series B First Mortgage
Bonds at least 30 days prior to the Effective Date. If
maturities are elected for either the Reorganized EPE Series A
First Mortgage Bonds or the Reorganized EPE Series B First
Mortgage Bonds, other than the maturities described above, they
must be a maturity of not less than five nor more than thirty
years, and if longer than fifteen years, must be in increments of
five years (i.e. twenty, twenty-five or thirty years). The
<PAGE> 228
Reorganized EPE Series A First Mortgage Bonds and the Reorganized
EPE Series B First Mortgage Bonds shall provide for the accrual
of interest commencing on the Effective Date at a per annum rate
equal to a Market Basket Rate to be determined based on the
actual maturity of each series of such bond.
The Reorganized EPE Series A First Mortgage Bonds and
the Reorganized EPE Series B First Mortgage Bonds shall provide
for the payment of interest semi-annually in arrears. The
Reorganized EPE Series A First Mortgage Bonds and the Reorganized
EPE Series B First Mortgage Bonds will not be redeemable by
Reorganized EPE prior to the fifth anniversary of the Effective
Date. On and after that date, such Reorganized EPE First
Mortgage Bonds will be redeemable, in whole or in part, at
premium redemption prices equal to the sum of (i) the aggregate
outstanding principal amount of such Reorganized EPE First
Mortgage Bonds plus (ii) a redemption premium calculated in
accordance with Schedule B to the Plan plus (iii) accrued but
unpaid interest to the redemption date. The Reorganized EPE
Series A and Series B First Mortgage Bonds will be publicly
tradeable under Section 1145 of the Code and upon issuance will
have an Investment Grade Rating.
The Reorganized EPE Series C First Mortgage Bonds will
be redeemable at the option of Reorganized EPE any time in whole
or in part at redemption prices specified in the Plan.
The Reorganized EPE First Mortgage Bonds may be
presented for transfer or exchange of denominations at the office
of the First Mortgage Trustee without payment of any charge other
than for any stamp tax or other governmental charge.
Security and Priority
The Reorganized EPE First Mortgage Bonds will be
secured equally and ratably with all First Mortgage Bonds of
other series by a valid and direct first mortgage, senior to all
other indebtedness of Reorganized EPE, on all bondable property
of Reorganized EPE and on its franchises and permits, subject,
however, to permitted encumbrances. The Reorganized EPE First
Mortgage Indenture permits Reorganized EPE to acquire bondable
property subject to prior liens. The Reorganized EPE First
Mortgage Indenture requires that there shall be subjected to the
lien thereof all property (except property of the character
expressly excepted and subject to certain limitations in cases of
mergers and consolidations) which Reorganized EPE may hereafter
acquire.
There are excepted from the lien of the Reorganized EPE
First Mortgage Bond Indenture all cash, accounts receivable,
fuel, contracts, other choses in action, and securities, unless
<PAGE> 229
specifically mortgaged and pledged or expressly required so to
be; goods, merchandise and appliances held for sale; materials
and supplies; transportation and office equipment; oil, gas, coal
and other minerals underlying mortgaged lands; and all other
property which is not bondable property.
Except with respect to Reorganized EPE's plant site at
the Four Corners Project and certain generating equipment at the
Copper Station, legal title to all principal units and other
important items of plant is held in fee, with exceptions and
subject to reservations and encumbrances as are customarily
encountered in the public utility business and which do not
materially interfere with their use. The combustion turbine and
certain other generating equipment at the Copper Station is
leased from a bank trustee pursuant to a lease in a sale/lease-
back transaction. The interest of Reorganized EPE in the plant
site of the Four Corners Project is held under a long-term lease
from the Navajo Nation and easements from the United States.
Issuance of Bonds and Withdrawal of Cash Deposited
The principal amount of First Mortgage Bonds which may
be issued under the Reorganized EPE First Mortgage Bond Indenture
is not limited. First Mortgage Bonds of any series (other than
the Reorganized EPE First Mortgage Bonds) may be issued from time
to time on the basis of 66 2/3% of property additions, provided
that earnings are at least twice the annual interest requirements
on all bonds of Reorganized EPE to be outstanding and on all
prior lien bonds of Reorganized EPE.
Covenants
The Reorganized EPE First Mortgage Bond Indenture will
include the following covenants on the part of Reorganized EPE:
(i) to maintain and preserve the lien of the indenture; (ii) to
pay principal, premium, if any, and interest on the Reorganized
EPE First Mortgage Bonds; (iii) to pay taxes; (iv) to maintain
customary insurance; (v) to maintain property; (vi) to merge,
consolidate, or sell all or substantially all of its assets only
upon complying with certain conditions; and (vii) covenants of
general applicability similar to those contained in the mortgage
bonds of CSW's operating subsidiaries other than Reorganized EPE
as adjusted in light of modern indenture practice. The covenants
will also include, in the case of Reorganized EPE Series A First
Mortgage Bonds and Reorganized EPE Series B First Mortgage Bonds
in a supplemental indenture, (i) a covenant on the part of
Reorganized EPE to pay dividends and any other restricted
payments only if said payments are made only out of GAAP net
income after the Effective Date plus $300 million; (ii) a
covenant not to retire the Reorganized EPE Series A and Series B
First Mortgage Bonds to satisfy annual maintenance and
<PAGE> 230
improvement obligations; and (iii) Reorganized EPE's commitment
to those Creditors who hold Class 1 Allowed Claims on the
Effective Date that, so long as any of the original holders of
the Reorganized EPE Series A and B First Mortgage Bonds
distributed in respect of Class 1 Allowed Claims continue to hold
such Bonds, no dividends or other specified restricted payments
will be made at any time that such Reorganized EPE First Mortgage
Bonds do not have an Investment Grade Rating. At any time that
the Reorganized EPE Series A and Series B First Mortgage Bonds do
not have an Investment Grade Rating, Reorganized EPE may seek the
consent of remaining original holders to amend, modify or waive
the covenant described in the preceding sentence. The unanimous
consent of the remaining original holders of Reorganized EPE
Series A and Series B First Mortgage Bonds shall be required to
amend, modify or waive the aforementioned covenant. If unanimous
consent to the amendment, modification or waiver is not received,
unanimous consent shall be deemed to have been received and
Reorganized EPE may pay dividends and make other specified
restricted payments if Reorganized EPE offers to redeem the
Reorganized EPE First Mortgage Bonds held by dissenting holders
at par plus accrued interest and Reorganized EPE in fact so
redeems the Reorganized EPE First Mortgage Bonds of such holders
that so elect.
Defaults
A default is defined in the Reorganized EPE First
Mortgage Bond Indenture as (i) failure to pay principal or
premium when due, (ii) failure to pay interest for 60 days after
becoming due, (iii) failure to satisfy sinking fund obligations
for 60 days after becoming due, (iv) failure for 90 days after
notice to observe other covenants or conditions, (v) entry of an
order for reorganization or appointment of a trustee or receiver
and continuance of such order of appointment unstayed for 90
days, and (vi) certain adjudications, petitions or consents in
bankruptcy, insolvency or reorganization proceedings.
A vote of the holders of a majority of the First
Mortgage Bonds is necessary to require the First Mortgage Trustee
to exercise any remedy under the Reorganized EPE First Mortgage
Indenture. The First Mortgage Trustee is entitled to receive
reasonable indemnity and under certain circumstances is not
required to act. Uncured defaults (except in payment of
principal, premium or interest) may be waived under specified
circumstances.
A certificate of Reorganized EPE as to absence of
default is required to be furnished to the First Mortgage Trustee
annually.
<PAGE> 231
Comparison of Certain Indenture Provisions
The following is a brief comparison of certain material
provisions of the Reorganized EPE First Mortgage Bonds described
in this Disclosure Statement with the existing First Mortgage
Bonds of the Debtor. Such comparison is not complete and
reference is hereby made to the detailed provisions of the
Reorganized EPE First Mortgage Indenture and the existing First
Mortgage Indenture summarized elsewhere herein which will be on
file with the Bankruptcy Court and available for inspection at
least ten days prior to the deadline established by the
Bankruptcy Court for voting on the Plan. The following does not
pertain to Reorganized EPE First Mortgage Bonds issued as
collateral.
Reorganized EPE Existing First
First Mortgage Bonds Mortgage Bonds
Maturity Date The same for all Differs for each
Class members series of Bonds,
receiving Bonds, as as set forth under
set forth under Section V(A) of
Section V(B)(4) of this Disclosure
this Disclosure Statement.
Statement.
Interest Rate The same for all Differs for each
Class members series of Bonds,
receiving Bonds, as as set forth under
set forth under Section V(A) of
Section V(B)(4) of this Disclosure
this Disclosure Statement.
Statement.
Redemption The same for all Differs for each
Class members receiv- series of Bonds,
ing Bonds, as set each of which,
forth under Section under varying
V(B)(4) of this specified circum-
Disclosure Statement. stances, provide
for certain
redemption
premiums.
Interest Payment Semi-annual dates Differs by series
Dates to be determined. of Bonds.
Sinking Fund None Differs for each
Provisions series of Bonds.
<PAGE> 232
Security; Priority First mortgage on Same.
certain property, as
described under
"Security and
Priority" above.
Defaults Events described (i) Failure to pay
under "Defaults" principal or
above. premium when due,
(ii) failure to
pay interest for
30 days after
becoming due,
(iii) failure to
satisfy sinking,
improvement,
maintenance or
replacement fund
obligations for 60
days after becom-
ing due, (iv)
failure for 90
days after notice
to observe other
covenants or con-
ditions, (v) entry
of an order for
reorganization or
appointment of a
trustee or
receiver and
continuance of
such order of
appointment
unstayed for 90
days, (vi) certain
adjudications,
petitions or con-
sents in bank-
ruptcy, insolvency
or reorganization
proceedings and
(vii) rendering of
a judgment in
excess of $500,000
for payment of
moneys and its
continuance
unsatisfied or
unstayed for 90
days.
<PAGE> 233
2. General Second Mortgage Bond Provisions
The Reorganized EPE Second Mortgage Bonds will be
issued as new series of fully registered second mortgage bonds
under and secured by the lien of the Reorganized EPE Second
Mortgage Indenture. Pursuant to the Plan, Reorganized EPE
Series A Second Mortgage Bonds shall be issued in connection with
the Debtor's existing Second Mortgage Bonds (Class 2), Reorgan-
ized EPE Series B Second Mortgage Bonds shall be issued in
connection with the Revolving Credit Facility (Class 3) and
Reorganized EPE Series B Second Mortgage Bonds shall be issued in
connection with the RGRT agreements (Class 6). Reorganized EPE
Second Mortgage Bonds Series X, Y or Z shall be issued as pledged
bonds to holders of Class 3, 5 and 6 Claims. There are issued
and outstanding three series of Second Mortgage Bonds (Series D,
E and F) issued in connection with the issuance and sale of the
Maricopa PCBs (Classes 4(g), 4(h) and 4(i)). Each of the Second
Mortgage Series D, E, and F Bonds will remain outstanding without
change in their terms or, at the option of the Debtor, such
Second Mortgage Bonds will be replaced by new Reorganized EPE
Second Mortgage Bonds with the same scheduled maturity, interest
rate and payment terms as such Second Mortgage Bonds pursuant to
the Plan, provided, however, in the event of a refunding of the
Maricopa PCBs on or after the Effective Date, it is contemplated
that the replacement Maricopa PCBs issued in connection with such
refunding will be unsecured. In addition, the reimbursement
claims of the issuers of replacement letters of credit for the
Maricopa PCB LCs (Classes 5(a), 5(b) and 5(c)) and for the
Farmington PCB LC (Class 11) will be collateralized by Reorgan-
ized EPE Second Mortgage Bonds. See Section V "Summary of Plan
of Reorganization" herein. The bonds of all series issued or
which may be issued under the Reorganized EPE Second Mortgage
Indenture are hereinafter referred to as "Second Mortgage Bonds."
Date, Interest Rate, Payment, Exchange and Transfer
The Reorganized EPE Second Mortgage Bonds (with the
exception of Series X, Y, Z and any other pledged second mortgage
bonds) will be dated as of the Effective Date, will mature on the
dates and will bear interest at the rates described in Section V
"Summary of Plan of Reorganization" herein. Interest will be
payable semi-annually in arrears. Principal of the Reorganized
EPE Second Mortgage Bonds is payable at the principal corporate
trust office of the Second Mortgage Trustee, except that in case
of the redemption of the Reorganized EPE Second Mortgage Bonds,
Reorganized EPE may designate in the redemption notice other
offices or agencies at which, at the option of the holders, the
Reorganized EPE Second Mortgage Bonds may be surrendered for
redemption and payment. Interest will be payable by check and
will, except for payment of defaulted interest, be paid to
<PAGE> 234
holders registered at the close of business on a record date to
be established 15 days prior to the interest payment date.
Reorganized EPE Series A Second Mortgage Bonds shall
provide for the accrual of interest commencing on the Effective
Date at a per annum rate equal to a Market Basket Rate (to be
determined based on the actual maturity of such bonds) and shall
mature on the tenth anniversary of the Effective Date or such
other maturity as CSW may elect by notice given to holders of
Class 2 Allowed Claims receiving Reorganized EPE Series A Second
Mortgage Bonds at least 30 days prior to the Effective Date. If
a maturity other than the tenth anniversary of the Effective Date
is elected, it must be a maturity of not less than five nor more
than thirty years, and if longer than fifteen years, it must be
in increments of five years (i.e. twenty, twenty-five or thirty
years).
The Reorganized EPE Series A Second Mortgage Bonds
shall provide for the payment of interest semi-annually in
arrears. The Reorganized EPE Series A Second Mortgage Bonds will
not be redeemable by Reorganized EPE prior to the fifth
anniversary of the Effective Date. On and after that date, the
Reorganized EPE Series A Second Mortgage Bonds will be
redeemable, in whole or in part, at premium redemption prices
equal to the sum of (i) the aggregate outstanding principal
amount of such Reorganized EPE Second Mortgage Bonds plus (ii) a
redemption premium calculated in accordance with Schedule B
attached to the Plan plus (iii) accrued but unpaid interest to
the redemption date. The Reorganized EPE Series A Second
Mortgage Bonds will be publicly tradeable under Section 1145 of
the Code and upon issuance will have an Investment Grade Rating.
The Reorganized EPE Series B Second Mortgage Bonds
shall mature on the eighth anniversary of the Effective Date or
such shorter maturity as CSW may elect by notice to holders of
Allowed Class 3 Claims receiving Reorganized EPE Series B Second
Mortgage Bonds at least 30 days prior to the Effective Date, and
shall bear interest at a Market Basket Rate. The Reorganized EPE
Series B Second Mortgage Bonds will be redeemable at the option
of Reorganized EPE at any time in whole or in part at premium
redemption prices equal to the outstanding principal amount of
such Bonds plus a redemption premium, provided that prior to the
fourth anniversary of the Effective Date such Bonds will be
redeemable at the option of Reorganized EPE at any time in whole
or in part at a redemption price calculated as set forth in the
Plan.
The Reorganized EPE Second Mortgage Bonds may be
presented for transfer or exchange of denominations at the office
of the Second Mortgage Trustee without payment of any charge
other than for any stamp tax or other governmental charge.
<PAGE> 235
Security and Priority
The Reorganized EPE Second Mortgage Bonds will be
secured equally and ratably with all other Second Mortgage Bonds
of other series (including the outstanding Series D, E and F
Second Mortgage Bonds, in the event such Second Mortgage Bonds
remain outstanding as described above) by a valid and direct
second mortgage on all bondable property of Reorganized EPE and
on its franchises and permits, subject, however, to prior liens
and permitted encumbrances (each as defined in the Reorganized
EPE Second Mortgage Indenture), including the lien of the
Reorganized EPE First Mortgage Indenture. The Reorganized EPE
Second Mortgage Indenture permits the Reorganized EPE to accept
bondable property subject to other prior liens. The Reorganized
EPE Second Mortgage Indenture requires that there shall be
submitted to the lien thereof all property (except property of
the character expressly excepted and subject to certain
limitations in cases of mergers and consolidations) which
Reorganized EPE may hereafter acquire.
There are excepted from the lien of the Reorganized EPE
Second Mortgage Indenture all cash, accounts receivable, fuel,
contracts, other choices in action, and securities, unless
specifically mortgaged and pledged or expressly required so to
be; goods, merchandise and appliances held for sale; materials
and supplies; transportation and office equipment; oil, gas, coal
and other minerals underlying mortgaged lands; and all other
property which is not bondable property.
Except as described above under "General First Mortgage
Bond Provisions" above, legal title to all principal units and
other important items of plant is held in fee as described
therein.
Covenants
The Reorganized EPE Second Mortgage Bond Indenture will
include the following covenants on the part of Reorganized EPE:
(i) to maintain and preserve the lien of the indenture; (ii) to
pay principal, premium, if any, and interest on the Reorganized
EPE Second Mortgage Bonds; (iii) to pay taxes; (iv) to maintain
customary insurance; (v) to maintain property; (vi) to merge,
consolidate, or sell assets only upon complying with certain
conditions; (vii) all covenants of general applicability similar
to those contained in the mortgage bonds of CSW's operating
subsidiaries other than Reorganized EPE as adjusted in light of
modern indenture practice. The covenants in the case of the
Reorganized EPE Series A Second Mortgage Bonds will also include,
in a supplemental indenture, (i) a covenant on the part of
Reorganized EPE to pay dividends and other restricted payments
only if said payments are made only out of GAAP net income after
<PAGE> 236
the Effective Date plus $300 million; (ii) a covenant not to
retire the Second Mortgage Bonds to satisfy annual maintenance
and improvement obligations; and (iii) Reorganized EPE's
commitment to those Creditors who hold Class 2 Allowed Claims on
the Effective Date that, so long as any of the original holders
of the Reorganized EPE Series A Second Mortgage Bonds distributed
in respect of Class 2 Allowed Claims continue to hold such Bonds,
no dividends or other specified restricted payments will be made
at any time that Reorganized EPE Series A Second Mortgage Bonds
do not have an Investment Grade Rating. At any time that the
Reorganized EPE Series A Second Mortgage Bonds do not have an
Investment Grade Rating, Reorganized EPE may seek the consent of
remaining original holders to amend, modify or waive the covenant
described in the preceding sentence. The unanimous consent of
the remaining original holders of Reorganized EPE Series A Second
Mortgage Bonds shall be required to amend, modify or waive the
aforementioned covenant. If unanimous consent to the amendment,
modification or waiver is not received, unanimous consent shall
be deemed to have been received and Reorganized EPE may pay
dividends and make the other specified restricted payments if
Reorganized EPE offers to redeem the Reorganized EPE Second
Mortgage Bonds held by Dissenting holders at par plus accrued
interest and Reorganized EPE in fact so redeems their Reorganized
EPE Second Mortgage Bond of such holders that so elect.
Issuance Tests
The Reorganized EPE Second Mortgage Bond Indenture will
provide that additional Reorganized EPE Second Mortgage Bonds may
be issued only upon the basis of (i) a specified percentage of
bondable property; (ii) retired bonds; or (iii) the deposit of
cash. In connection with any issuance of bonds on the basis of
(i) or (ii) above, Reorganized EPE will be required under certain
circumstances to demonstrate compliance with a net earnings test
requiring net earnings to be at least two times annual interest
requirements.
Defaults
A default is defined in the Reorganized EPE Second
Mortgage Bond Indenture as (i) failure to pay principal or
premium when due, (ii) failure to pay interest for 30 days after
becoming due, (iii) failure to satisfy any sinking, improvement,
maintenance or replacement fund obligations for 60 days after
becoming due, (iv) failure for 90 days after notice to observe
other covenants or conditions, (v) entry of an order for
reorganization or appointment of a trustee or receiver and
continuance of such order or appointment unstayed for 90 days
(for certain events of bankruptcy, insolvency and reorganization)
and (vi) certain adjudications, petitions or consents in
bankruptcy, insolvency or reorganization proceedings.
<PAGE> 237
A vote of the holders of a majority in principal amount
of the Second Mortgage Bonds outstanding under the Reorganized
EPE Second Mortgage Indenture may require the Second Mortgage
Trustee to exercise any remedy under the Reorganized EPE Second
Mortgage Indenture. The Second Mortgage Trustee is entitled to
receive reasonable indemnity and under certain circumstances is
not required to act. Uncured defaults (except in payment of
principal, premium or interest) may be waived under specified
conditions.
Comparison of Certain Indenture Provisions
The following is a brief comparison of certain material
provisions of the Reorganized EPE Second Mortgage Bonds described
in this Disclosure Statement with the existing Second Mortgage
Bonds of the Debtor. Such comparison is not complete and
reference is hereby made to the detailed provisions of the
Reorganized EPE Second Mortgage Bond Indenture and the existing
Second Mortgage Bond Indenture summarized elsewhere herein and
which, commencing on or before the date solicitation of votes
begins respecting the Plan, are on file with the Bankruptcy Court
and available for inspection.
Reorganized EPE Existing Second
Second Mortgage Bonds Mortgage Bonds
Maturity Date Except as to Bonds Differs for each
issued as collateral, series of Bonds,
the same for all as set forth under
Class members receiv- Section V(A) of
ing Bonds, as set this Disclosure
forth under Section Statement.
V(B)(4) of this Dis-
closure Statement.
Interest Rate Except as to Bonds Differs for each
issued as collateral, series Bonds, as
the same for all set forth under
Class members Section V(A) of
receiving Bonds, as this Disclosure
set forth under Statement.
Section V(B)(4) of
this Disclosure
Statement.
Redemption Except as to Bonds Differs for each
issued as collateral, series of Bonds.
the same for all
Class members receiv-
ing Bonds, as set
forth under Section
<PAGE> 238
V(B)(4) of this
Disclosure Statement.
Dates Except as to Bonds Differs for each
issued as collateral, series of Bonds.
semi-annual dates to
be determined.
Provisions None. Differs for each
series of Bonds.
Security; Priority Second mortgage on Same.
certain property, as
described under
"Security and
Priority" above.
Defaults Except as to Bonds (i) Failure to pay
issued as collateral, principal or
events described premium when due,
under "Defaults" (ii) failure to
above. pay interest for
30 days after
becoming due, (iii)
failure to satisfy
sinking,
improvement,
maintenance or
replacement fund
obligations for 60
days after becoming
due, (iv) failure
for 90 days after
notice to observe
other covenants or
conditions, (v)
entry of an order
for reorganization
or appointment of a
trustee or receiver
and continuance of
such order of
appointment unstayed
for 90 days, (vi)
certain
adjudications,
petitions or
consents in
bankruptcy,
insolvency or
reorganization
proceedings and
<PAGE> 239
(vii) rendering of a
judgment in excess
of $500,000 for pay-
ment of moneys and
its continuance
unsatisfied or
unstayed for 90
days.
3. General Preferred Stock Provisions
The Reorganized EPE Articles of Incorporation will
authorize shares of Preferred Stock, par value $100 and $25 per
share, which may be divided into and issued in one or more
series. The authorized number of shares of any series, the
designation of such series and the terms and characteristics
thereof shall be fixed at any time prior to issuance thereof by
resolution of the Board of Directors. All shares of each series
must be alike in every particular. The Preferred Stock of all
series must be of the same class and of equal rank and identical
in all respects, except as to series designation, dividend rates,
redemption features, liquidation preference, sinking fund,
conversion and voting, which will be established by the Board of
Directors.
All series of Reorganized EPE Preferred Stock will have
the benefit of and be subject to the following provisions:
(a) Dividends shall be cumulative.
(b) Liquidation preference over Common Stock.
(c) Optional redemption by Reorganized EPE.
(d) Without the affirmative vote of at least two-
thirds of the outstanding Reorganized EPE
Preferred Stock, Reorganized EPE may not (A)
amend the terms of outstanding Reorganized
EPE Preferred Stock adversely to holders;
(B) create or authorize shares of stock
ranking senior to the Reorganized EPE
Preferred Stock; or (C) issue additional
shares of Reorganized EPE Preferred Stock
unless for any twelve (12) consecutive
calendar months within the last fifteen (15)
calendar months, the net earnings of
Reorganized EPE available for the payment of
interest shall have been at least a specified
number times the aggregate of the annual
<PAGE> 240
interest charges on the interest bearing
indebtedness of Reorganized EPE and annual
dividend requirements on all shares ranking
on a parity with the Reorganized EPE
Preferred Stock.
(e) Without the affirmative vote of a majority of
the outstanding Reorganized EPE Preferred
Stock, Reorganized EPE may not (A) merge or
dispose of all or substantially all of its
assets, except under certain circumstances;
or (B) increase the authorized number of
shares of Reorganized EPE Preferred Stock.
(f) Right to elect directors in the event of
dividend arrearages.
4. Series A Senior Note and Class 13 Senior Fixed
Rate Note Provisions
Pursuant to the Plan, Reorganized EPE Series A Senior
Notes shall be issued to holders of Allowed Claims in Class 12(a)
and Reorganized EPE Senior Fixed Rate Notes shall be issued to
holders of Allowed Claims in Class 13 who elect such treatment
pursuant to the Plan. See Section V "Summary of the Plan or
Reorganization" herein. If the conditions set forth in Section
3.14(A) of the Plan are satisfied, holders of Allowed Class 12(a)
Claims shall receive Series A Senior Notes as provided therein.
Otherwise, such notes shall be Reorganized EPE Series A-I Notes
and A-II Notes, the terms of which shall be set in the manner
described in Section 3.14(C) of the Plan, and such Series A-I
Notes shall be collateralized by interests in Palo Verde Units 2
and 3 and transfer of the Series A-II Notes shall be subject to a
one-year lock-up period. Pursuant to the provisions of Section
3.15 of the Plan, holders of Allowed Class 13 Claims shall
receive Class 13 Senior Fixed Rate Notes as provided therein.
Date, Interest Rate, Redemption and Other Provisions
The Reorganized EPE Series A Senior Notes and the
Reorganized EPE Class 13 Senior Fixed Rate Notes will be dated as
of the Effective Date and will mature on the dates and will bear
interest at the rates described in Section V "Summary of Plan of
Reorganization" herein. The Reorganized EPE Series A Senior
Notes shall be callable at the option of Reorganized EPE at any
time.
The interest rates, redemption terms and maturity dates
of the Reorganized Series A Senior Notes and Class 13 Senior
Fixed Rate Notes are described in Section V "Summary of Plan of
Reorganization" herein. The Reorganized EPE Senior Series A
<PAGE> 241
Senior Notes and the Reorganized EPE Class 13 Senior Fixed Rate
Notes will be publicly tradeable under Section 1145 of the Code.
Reference is hereby made to the detailed provisions of the Notes
that will be on file with the Bankruptcy Court and available for
inspection at least ten days prior to the deadline established by
the Bankruptcy Court for voting on the Plan.
Security and Priority
The Reorganized EPE Series A Senior Notes will be
unsecured obligations of Reorganized EPE and will rank on a
parity with all other unsecured and unsubordinated indebtedness
of Reorganized EPE.
Covenants
The unsecured indenture under which the Reorganized EPE
Series A Senior Notes and the Reorganized EPE Senior Fixed Rate
Notes are issued will include an anti-layering provision and
covenants on the part of Reorganized EPE to do the following:
(i) maintain corporate existence; (ii) pay principal, premium, if
any, and interest on the Reorganized EPE Series A Senior Notes
and the Reorganized EPE Class 13 Senior Fixed Rate Notes; (iii)
pay taxes; (iv) maintain property; and (v) merge, consolidate, or
sell assets only upon complying with certain conditions.
Events of Default
Events of Default will include (i) failure to pay
principal or premium when due under any Senior Note; (ii) failure
to pay interest for thirty days after becoming due under any
Senior Note; (iii) failure for ninety days after notice to
observe other covenants; (iv) cross-default relating to certain
other outstanding debt securities of Reorganized EPE; (v) entry
of an order for reorganization or appointment of a trustee or
receiver and continuance of such order unstayed for 90 days; and
(vi) certain adjudications, petitions or consents in bankruptcy,
insolvency or reorganization proceedings.
5. Exemption from Securities Laws.
All notes, instruments, stock and other securities
distributed pursuant to the Plan shall be entitled to the
benefits and exemptions provided by Section 1145 of the Code to
the maximum extent allowed by law and equity and those notes,
instruments, stock and other securities designed to be publicly
tradeable shall be so tradeable within the terms of Section 1145
of the Code.
As soon as practicable after the Confirmation Date, CSW and
EPE will file with the SEC a written request for confirmation
<PAGE> 242
(the "No Action Response") that (i) the issuance of the (a) CSW
Common Stock, (b) Reorganized EPE Preferred Stock, and (c)
Liquidation Trust interests to creditors and shareholders of EPE,
as the case may be, pursuant to the Plan, (ii) any resale of such
securities, except for any such sales by underwriters or by
"affiliates" of EPE or CSW, as the case may be, in either case,
are exempt from the registration requirements under the
Securities Act of 1933, and (iii) the requirements of Sections
14(a) and 14(c) of the Exchange Act and Regulations 14A and 14C
adopted thereunder do not apply to the solicitation of votes on
the Plan. In the event that CSW and EPE do not obtain a No
Action Response from the SEC prior to the Effective Date, CSW
shall cause to be filed the Registration Statement registering
the shares of CSW Common Stock, Reorganized EPE Preferred Stock
or Liquidation Trust interests, as the case may be, issuable
under the Plan on the Effective Date. CSW shall use all
reasonable efforts to respond promptly to any comments of the SEC
relating to the Registration Statement and to have the
Registration Statement declared effective by the SEC as promptly
as practicable. CSW shall take any action required to be taken
under applicable state Blue Sky or securities laws in connection
with the issuance of the CSW Common Stock pursuant to the Plan.
CSW shall use its reasonable best efforts to effect, on
or before the Effective Date, authorization for listing on the
New York Stock Exchange, upon official notice of issuance, of the
shares of CSW Common Stock to be issued pursuant to the Plan.
G. Claims Reconciliation and Objection Process
Under the Plan, it is anticipated that all proofs of
claim filed against the Debtor's estate will be addressed by the
reconciliation of such claims with the Debtor's books and
records, by objections when necessary, the entry of orders fixing
such claims, or by stipulations which will be executed by the
interested parties. Holders of disputed Claims shall be entitled
to receive distributions from Reorganized EPE on account of such
Claims to the extent such Claims are subsequently allowed, in
accordance with the treatment afforded holders of such Allowed
Claims under the Plan. To the extent that claims are not
resolved prior to the Effective Date, Reorganized EPE shall
undertake to resolve such claims after the Effective Date.
Notwithstanding the occurrence of the Confirmation
Date, and except as any Claim or Interest has otherwise been
allowed under this Plan, the Debtor may object to the allowance
of any Claim or Interest, including but not limited to, Claims
for administrative expense or cost, on or before the Effective
Date. The Debtor shall file with the Bankruptcy Court prior to
the Confirmation Date, a list of Class 13 Claims which it does
not then dispute. For purposes of this Plan, the Debtor shall be
<PAGE> 243
precluded from disputing such listed Claims if this Plan is
Confirmed so long as this Plan is not subsequently revoked or
terminated. No distribution shall be made on account of any
Claim or Interest which is not allowed. To the extent that any
property is distributed to an entity or account of a Claim or
Interest which is not an Allowed Claim or Allowed Interest, such
property shall promptly be returned to Reorganized EPE.
After the Effective Date, only Reorganized EPE shall
have authority to file objections, litigate to judgment, settle
or withdraw objections to Claims and Interests. After the
Effective Date, Reorganized EPE shall be entitled to compromise
or settle any Disputed Claim or Disputed Interest not subject to
the Liquidation Trust without approval of the Bankruptcy Court.
H. Retention of Jurisdiction
1. Continued Jurisdiction of the Bankruptcy
Court
Following the Confirmation Date and the Effective Date
of the Plan, the Bankruptcy Court shall retain such jurisdiction
as is set forth in the Plan. Without in any manner limiting the
scope of the foregoing, the Bankruptcy Court shall retain
jurisdiction for the following purposes:
(a) To determine the allowability, classifica-
tion, priority or subordination of claims and interests
upon objection, or to estimate pursuant to Section
502(c) of the Code the amount of any Claim which is or
is anticipated to be contingent or unliquidated as of
the Effective Date, or proceedings to subordinate
Claims or Interests brought by any party in interest
with standing to bring such objection or proceeding
which shall be deemed to include CSW;
(b) To construe and to take any action to enforce
the Plan, issue such orders as may be necessary for the
implementation, execution, and consummation of the
Plan, including, without limiting the generality of the
foregoing, orders to expedite regulatory approvals for
the implementation of the Plan and to ensure conformity
with the terms and conditions of the Plan and other
orders of the Bankruptcy Court, notwithstanding any
otherwise applicable non-bankruptcy law;
(c) To determine any and all applications for
allowance of compensation and expense reimbursement for
periods on or before the Effective Date and to deter-
mine any other request for payment of administrative
expenses;
<PAGE> 244
(d) To determine all matters which may be pending
before the Bankruptcy Court on or before the Effective
Date;
(e) To resolve any dispute regarding the imple-
mentation or interpretation of the Plan or the Merger
Agreement which arises at any time before the Case is
closed, including determination, to the extent a
dispute arises, of the entities entitled to a
distribution within any particular Class of Claims or
Interests and of the scope and nature of Reorganized
EPE's obligations to cure defaults under assumed
contracts, leases, franchises and permits;
(f) To determine any and all applications pending
on the Confirmation Date for the rejection, assumption
or assignment of executory contracts or unexpired
leases and the allowance of any Claim resulting
therefrom;
(g) To determine all applications, adversary
proceedings, contested matters and other litigated
matters which were brought or which could have been
brought on or before the Effective Date;
(h) To determine such other matters and for such
other purposes as may be provided in the Confirmation
Order;
(i) To modify the Plan pursuant to Code Section
1127, or to remedy any apparent nonmaterial defect or
omission in the Plan, or to reconcile any nonmaterial
inconsistency in the Plan so as to carry out its intent
and purposes; and
(j) To determine any matter respecting the
Liquidation Trust, including, but not limited to,
matters with respect to compromises and settlements by
the Liquidation Trustee and distributions from the
Liquidation Trust.
Prior to the Effective Date, the Bankruptcy Court shall
retain jurisdiction with respect to each of the foregoing items,
and all other matters which were subject to its jurisdiction
prior to the Confirmation Date, subject to such modifications, to
Sections 363(b) and 364(b) of the Code and other applicable
restrictions on the Debtor, as the Bankruptcy Court on or after
the Confirmation Date may deem appropriate.
In connection with Items (b), (e), and (h) above, the
NMPUC Staff, the PUCT and the City of El Paso have advised the
<PAGE> 245
Debtor that they will vigorously oppose any attempt to cause the
Bankruptcy Court to exercise jurisdiction exclusively reserved to
the NMPUC under the NMPUA (N.M.S.A. 1978 Section 62-3-1 et seq.)
or to the PUCT and the City of El Paso under PURA (Tex. Rev. Civ.
Stat. Ann. art 1446c). As to Item (f) above, the Four Corners
and Palo Verde Participants have in the past contended that all
issues respecting assumption must be decided on or prior to
confirmation.
2. Failure of Court to Exercise Jurisdiction
If the Bankruptcy Court abstains from exercising or
declines to exercise jurisdiction, or is otherwise without
jurisdiction over any matter arising out of the Case, the terms
relating to such matter shall not prohibit or limit the exercise
of jurisdiction by any other court or administrative agency
having competent jurisdiction with respect to such matter.
IX. CERTAIN FEDERAL INCOME TAX CONSEQUENCES
A. General Tax Considerations
Set forth below is a summary of the more significant
United States federal income tax consequences to the Debtor and
to United States holders of Claims and Interests upon the
consummation of the transactions contemplated by the Plan. In
some instances these tax consequences are uncertain, due in part
to the complexity of the Plan and unsettled tax law. No attempt
is made here to describe any state or local tax consequences of
the Plan.
In general, consummation of transactions contemplated
by the Plan will not cause the Debtor to recognize income by
reason of the discharge of its indebtedness, but, subject to
certain exceptions, that discharge will likely reduce the
Debtor's net operating losses ("NOLs") that otherwise would have
been available to be carried forward to future years. In
addition, the transactions will cause the Debtor's ability to use
its NOLs to be restricted. Holders of Claims and Interests may
realize income, gain, loss or deduction as a result of the Plan
which income, gain, loss or deduction may or may not be
recognized, depending upon the circumstances giving rise to their
Claims and Interests, the type of consideration received, and
their federal income tax accounting method. The Debtor has not
received an opinion of counsel as to the federal income tax
consequences of Plan consummation.
Events subsequent to the date of this Disclosure
Statement, such as the enactment of tax legislation or the
promulgation of tax regulations or court decisions involving
<PAGE> 246
analogous questions, could change the federal income tax
consequences of the transactions contemplated by the Plan.
THE TAX CONSEQUENCES TO HOLDERS OF CLAIMS AND INTERESTS
MAY VARY BASED ON THE CIRCUMSTANCES OF THE HOLDERS. MOREOVER,
THE TAX CONSEQUENCES OF SOME ASPECTS OF THE PLAN ARE UNCERTAIN
DUE TO THE LACK OF APPLICABLE LEGAL PRECEDENT AND THE POSSIBILITY
OF CHANGES IN THE LAW. ACCORDINGLY, EACH HOLDER OF A CLAIM OR
INTEREST IS STRONGLY URGED TO CONSULT WITH ITS OWN TAX ADVISOR
REGARDING THE FEDERAL, STATE AND LOCAL TAX CONSEQUENCES OF THE
PLAN.
B. Tax Consequences to Debtor
1. Net Operating Losses and Other Tax Attributes
The Debtor estimates that as of December 31, 1992, it
had NOL carryovers of approximately $188.7 million and capital
loss carryovers of approximately $3 million, which loss
carryovers would generally be available to offset ordinary
taxable income and capital gain in future years. The Debtor also
estimates that as of December 31, 1992, it had approximately
$28.5 million of business tax credits that would be available,
subject to certain limitations, to offset federal income tax in
future years. As more fully described below, as a result of the
transactions contemplated by the Plan, the Debtor's NOLs will be
(i) reduced by reason of the realization of cancellation of
indebtedness ("COD") income discussed in paragraph B.2 of this
Section IX and any gain realized as a result of the distribution
of assets discussed in paragraph B.6 of this Section IX, (ii)
increased by the deductions referred to in paragraph B.3 of this
Section IX and (iii) limited by section 382 of the Internal
Revenue Code of 1986, as amended ("IRC"), as discussed in
paragraph B.5 of this Section IX.
2. Discharge of Indebtedness
Under the IRC, a taxpayer generally must include as COD
income the excess of any debt canceled under the Plan over the
consideration paid for the cancellation, except to the extent
payment of that indebtedness would have given rise to a deduc-
tion. But when such discharge occurs in a case under Title 11 of
the Code, COD income is excluded from gross income. When COD
income has been excluded under the Title 11 exception, the amount
of COD income that would otherwise have been included in income
reduces a debtor's favorable tax attributes in the following
order: NOLs, business tax credits, capital loss carryovers, a
debtor's basis in property and foreign tax credits. COD income
gives rise to neither income recognition nor the reduction of tax
attributes if the "stock-for-debt" exception applies. The
"stock-for-debt" exception applies if (i) debt is exchanged for
<PAGE> 247
debtor stock, (ii) the amount of stock issued for the debt is not
"nominal or token" and (iii) with respect to an unsecured
creditor, the ratio of the value of stock received by the
unsecured creditor to the amount of the indebtedness canceled or
exchanged for that stock in the workout is not less than fifty
percent of such ratio computed for all unsecured creditors
participating in the workout.
Under the Plan, different classes of creditors will
exchange their Allowed Claims for different combinations of cash,
property, debt and CSW stock. The COD consequences of these
exchanges will depend on the nature and amount of the
consideration.
Holders of certain Classes of Claims (e.g., Adminis-
trative Convenience Claims) will be paid only in cash. To the
extent these Allowed Claims have not been reduced in bankruptcy
and are paid in full, including any interest accrued on the
Claims and previously deducted by the Debtor, no COD income is
realized and the Debtor need not reduce its tax attributes. The
Debtor will realize COD income and be required to reduce its tax
attributes to the extent the Claims are reduced in bankruptcy or
are not paid in full.
No COD income will be realized upon payments to holders
of Claims for damages in which the amount of the damages are set
by the Plan.
Holders of debt Claims will receive indebtedness of the
Debtor, and, in some cases, cash or property, in satisfaction of
their Allowed Claims. The following rules apply to the exchange
of these Claims ("Old Debt") for new indebtedness ("New Debt") of
the Debtor:
The Old Debt may be treated as merely modified and not
canceled if the terms of the New Debt issued in exchange for the
Old Debt do not differ materially from the terms of the Old Debt.
To the extent the Old Debt is viewed as not canceled, the Debtor
will not realize COD income. Generally, under the Plan, the
terms of New Debt differ materially from the terms of Old Debt.
If the terms of the New Debt differ materially from the
terms of the Old Debt, the Old Debt will be viewed as exchanged
for the New Debt. In that event, the Debtor will realize COD
income and will be required to reduce its tax attributes to the
extent the adjusted issue price of the Old Debt (plus any accrued
but unpaid stated interest not treated as original issue
discount) exceeds the sum of (i) any cash and the fair market
value of any property received for the Old Debt and (ii) the
issue price of the New Debt.
<PAGE> 248
The adjusted issue price of the Old Debt equals its
original "issue price" (generally, in the case of debt issued for
cash, the amount of cash for which the debt was issued) plus any
original issue discount accrued thereon.
The issue price of New Debt issued in exchange for the
Old Debt will depend on whether either the New Debt or the Old
Debt is publicly traded, i.e., whether such debt is traded on an
exchange or an over-the-counter market having an interdealer
quotation system. If the New Debt is publicly traded, its issue
price will equal its market value determined as of the first date
on which the New Debt is publicly traded. If the New Debt is not
publicly traded but the Old Debt is publicly traded, the issue
price of the New Debt will equal the market value of the Old Debt
on the date of the exchange. If neither the New Debt nor the Old
Debt is publicly traded, then the issue price of the New Debt
will equal its face amount, assuming, as seems likely, the
interest on the New Debt will be at least equal to the
"applicable federal rate" ("AFR"). The AFR is, in general, the
interest rate on federal government debt of comparable maturity
as announced monthly by the Internal Revenue Service. In
September of 1993, the AFR for debt with a maturity of 3 years or
less was 3.91% compounded annually; the AFR for debt with a
maturity of over 3 years but less than 9 years was 5.35%
compounded annually and the AFR for debt with a maturity of over
9 years was 6.28% compounded annually. If the interest rates on
any New Debt provided under the Plan do not equal the AFR, the
issue price of the New Debt will be determined by discounting all
payments under the New Debt at the AFR. Under the proposed Plan,
it is likely the New First Mortgage Bonds and New Second Mortgage
Bonds will be treated as publicly traded; it is possible that
other New Debt will also be publicly traded. If any portion of
the New Debt is issued with respect to the reasonable costs and
expenses of the holders of Old Debt, that portion will not be
included in the calculation of potential COD income realization
discussed in this paragraph.
Certain holders of Old Debt (e.g., Farmington PCB LCs
and General Unsecured Claims) may receive cash, property, New
Debt and CSW stock in satisfaction of their Allowed Claims. The
receipt by holders of Old Debt of CSW stock will be treated as an
acquisition by the Debtor of the Old Debt for Debtor Common Stock
followed by an acquisition of the Debtor Common Stock by CSW for
CSW stock. To the extent that CSW indirectly acquires Old Debt
at a discount (i.e., at less than the Old Debt's adjusted issue
price), the Debtor may realize COD income. It is possible that
some or all of that COD income may not be recognized under the
"stock-for-debt" exception. In addition, the Debtor may
recognize COD on any direct exchange by the Debtor of Old Debt
for New Debt. Considering acquisitions by CSW together with
exchanges by the Debtor, the Debtor will realize COD income and
<PAGE> 249
may be required to reduce its tax attributes to the extent the
adjusted issue price of the discharged Old Debt exceeds the sum
of (i) cash, (ii) the fair market value of any CSW stock and
other property received and (iii) the issue price of the New Debt
paid in satisfaction of the discharged Old Debt. For this
purpose, as described above, any portion of New Debt, cash or
property paid or issued with respect to the reasonable costs and
expenses of the holders of Old Debt is not taken into account.
3. Deductions
Under the Plan the Palo Verde Leases are rejected
unless the Debtor elects otherwise. Assuming such rejection
terminates the Debtor's rights under such Leases, the Debtor
should ultimately be entitled to deductions for amounts payable
under the Plan to the holders of Claims arising under the Palo
Verde Leases and for amounts previously disbursed by issuers of
the Palo Verde Letters of Credit (other than amounts paid to
acquire the facility or previously deducted by the Debtor). In
addition, the Debtor should be entitled to deductions for
prepetition and post-petition interest on Debtor debt to the
extent the liability to pay any such amount is fixed by the
confirmation of the Plan, but only to the extent any such amount
was not previously deducted.
4. Alternative Minimum Tax
In general, a corporation is liable for the alternative
minimum tax ("AMT") if the AMT exceeds the corporation's regular
tax liability. The AMT rate is twenty percent of the alternative
minimum taxable income ("AMTI"). AMTI equals a corporation's
taxable income as adjusted for certain exclusions from income and
for certain deductions. In computing a corporation's regular tax
liability, all of the income recognized in a taxable year may be
offset by the carryover of NOLs and capital loss carryovers. In
computing AMT, only ninety percent of a corporation's AMTI may be
offset by NOL carryovers.
5. IRC Section 382 Limitation
IRC section 382 (in conjunction with IRC section 383)
provides rules governing the use of NOLs and other tax attributes
following significant changes in the ownership of a corporation's
stock. Subject to certain exceptions applicable to Chapter 11
proceedings, IRC section 382 provides that, following an "owner-
ship change" in a corporation with NOLs (a "Loss Corporation"),
the amount of the Loss Corporation's taxable income that can be
offset by its pre-ownership change NOLs and recognized built-in
losses cannot exceed an amount equal to the value of the Loss
Corporation immediately before the ownership change multiplied by
the long-term tax-exempt rate (5.47% in September 1993) (the
<PAGE> 250
"Section 382 Limitation"). For a Loss Corporation in bankruptcy,
value includes any increase in value resulting from any surrender
or cancellation of creditors' claims in exchange for the Loss
Corporation's stock. The rule governing built-in losses should
not apply to the Debtor. The reorganization under which CSW
acquires ownership of the Debtor's Common Stock will result in
the Debtor undergoing an ownership change and becoming subject to
the Section 382 Limitation.
6. Debtor Gain on Distributions of Assets
As explained more fully in paragraph C of this
Section IX, the Debtor will contribute certain assets ("Trust
Assets") to a Liquidation Trust. That contribution will be
treated as a distribution of an interest in the Trust Assets to
the Liquidation Trust's beneficiaries, the holders of Debtor
Common Stock. The Debtor will recognize gain (but not loss)
under IRC section 311 to the extent the fair market value of any
distributed interests exceeds their allocable basis. The Debtor
does not anticipate that recognized gain, if any, will be
material. The Debtor expects to offset any gain with current
NOLs or NOL carryforwards. If it offsets the gain with NOL
carryforwards it may be liable for AMT.
C. The Liquidation Trust
The Debtor expects to place certain assets in the
Liquidation Trust. Upon liquidation of the Trust Assets, the
proceeds will be distributed (after payment of Liquidation Trust
expenses) to holders of Debtor Common Stock and then to the
Reorganized Debtor.
1. Characterization of the Liquidation Trust
Though the law is unsettled as to the tax
characterization of the Liquidation Trust, the Debtor believes
that the appropriate treatment of the Liquidation Trust is as a
grantor trust whose assets are owned by the holders of Debtor
Common Stock and the Reorganized Debtor. Consistent with that
characterization, the Debtor will be deemed to have distributed
undivided interests in the Trust Assets to the holders of Debtor
Common Stock and to have retained an undivided interest in the
Trust Assets. The holders of Debtor Common Stock and the Debtor
will then be deemed to contribute their undivided interests in
the Trust Assets to the Liquidation Trust in exchange for their
interests in the Liquidation Trust. Interests in the Liquidation
Trust are not transferable. If the Liquidation Trust is not
treated as a trust, it may be treated as either an association
taxable as a corporation or a partnership. Treatment of the
Liquidation Trust as an association taxable as a corporation
would subject the income of the Liquidation Trust to double
<PAGE> 251
taxation, once at the level of the Liquidation Trust and again
(as a dividend) on distribution of that income (less any tax paid
on the income) to the Liquidation Trust beneficiaries. If the
Liquidation Trust is treated as a partnership, its taxation would
be substantially similar to the taxation described below under
paragraph C.2 of the Section IX.
The discussion in this Section IX assumes that the
Liquidation Trust will be treated as a grantor trust. It should
be noted that one consequence of this treatment is that a taxable
exchange of Debtor Common Stock for interests in the Trust is
likely to be viewed as a closed transaction upon which any
recognized gain or loss is recognized at the time of the
exchange. As discussed below in paragraph D.6 of this Section
IX, special rules for gain and loss recognition apply if the
exchange of Debtor Common Stock for CSW Common Stock and an
interest in the Liquidation Trust is viewed as part of a
reorganization under IRC section 368. Because payments from the
Liquidation Trust will be made over time, it is possible that a
taxable exchange could be treated as a transaction on which the
recognition of gain or loss is deferred in whole or in part. In
that event, a portion of any payment might be treated as imputed
interest. The Internal Revenue Service is unlikely to assert
this treatment with respect to exchanges on which a gain is
recognized. If an exchange on which gain is recognized is viewed
as including a deferred payment, installment sale treatment would
not be available because the Debtor Common Stock is publicly
traded. The Internal Revenue Service may seek to defer the
recognition of a loss on an exchange on the theory that the
amount of the loss is not reasonably ascertainable until the
Liquidation Trust is liquidated.
2. Taxation of the Liquidation Trust and its
Beneficiaries
For federal income tax purposes, the Liquidation Trust
(if, as expected, it is treated as a grantor trust) will not be
taxable as a separate entity. Instead, each beneficiary of the
Liquidation Trust will be deemed to own an undivided interest in
the Trust Assets and to be taxable on its allocable share of
income, gain, deduction or loss arising from the holding or
disposition of the Trust Assets. The Debtor's NOLs and credits
will not be available to reduce the Liquidation Trust's income
and gain (except to the extent that income or gain is allocated
to the Debtor).
The method of allocating income, gain, deduction or
loss among the Liquidation Trust beneficiaries is unclear. The
Trust Agreement will provide that as to the sale or disposition
of any Trust Asset, each beneficiary will recognize gain or loss
measured by the difference between (i) that beneficiary's share
<PAGE> 252
of the cash or the fair market value of any proceeds received in
exchange for the asset so sold or disposed over (ii) its adjusted
tax basis in its share of the asset. For this purpose, each
Liquidation Trust beneficiary other than the Reorganized Debtor
will have a basis in its undivided interest in each Trust Asset
equal to the fair market value of that interest at the time of
its deemed distribution to the beneficiary, i.e., the time the
Trust Assets are transferred to the Liquidation Trust. The
Reorganized Debtor will have a basis in its interest in each
Trust Asset equal to a portion of its initial basis in that Trust
Asset (that portion representing the same proportion of that
initial basis as the fair market value of the Reorganized
Debtor's retained interest in the Trust Asset represents of the
total fair market value of that Trust Asset.) Each beneficiary's
share of the cash or fair market value of any proceeds will equal
the amount of the cash or proceeds that would be distributed to
the beneficiary (taking into account all prior distributions) if
the Liquidation Trust were first to distribute all its remaining
assets at a value equal to the fair market value of those assets
at the time of their contribution to the Liquidation Trust and
then to distribute the proceeds of the sale or other disposition.
The Liquidation Trust will further provide that any other net
income or net loss will be allocated in a similar manner. Thus,
net income will be allocated among the Liquidation Trust
beneficiaries by reference to the manner in which cash equal to
such income would be distributed if, immediately prior to that
distribution, the Liquidation Trust were first to distribute all
its remaining assets at a value equal to their fair market value
at the time of their contribution to the Liquidation Trust; net
loss will be allocated by reference to the beneficiary that would
bear the loss if the loss were immediately followed by the
Liquidation Trust distributing all its assets at a value equal to
their fair market value at the time of their contribution to the
Liquidation Trust. These calculations may be adjusted to take
into account Liquidation Trust operations after Trust Assets were
transferred to the Liquidation Trust (e.g., the existence of
undistributed Liquidation Trust income). Additional income (or
reduced losses) may be allocated to the Debtor to take into
account the difference between the fair market value and basis of
its interest in Trust Assets at the time of their contribution to
the Liquidation Trust.
The Liquidation Trust will file an annual information
return with the Internal Revenue Service which will report
information as to its allocation of income and loss to the
holders of Liquidation Trust interests and will provide the
holders of those interests with sufficient information to enable
them to report that income and loss on their tax returns. It
should be noted that Liquidation Trust beneficiaries may be
allocated income or gain with respect to Liquidation Trust
activities regardless of whether the Liquidation Trust makes any
<PAGE> 253
cash distribution to the beneficiaries in that year. Further, in
any given year, the income allocated to a beneficiary need not
correspond to the cash distributed to that beneficiary.
APS and the other Palo Verde Participants contend,
although the Debtor disagrees, that the above-described tax
consequences of the Liquidation Trust are inconsistent with the
Proposed Plan and applicable law and rights of other parties.
D. Federal Income Tax Consequences to Holders of Claims
and Interests
1. Administrative Claims and Claim Holders Being Paid
in Full in Cash
Unless an Administrative Claim holder and the Debtor
agree otherwise, the holder will be paid in full, either in cash
or, at the option of the Debtor, in accordance with the ordinary
business terms giving rise to the Claim. Payment of an
Administrative Claim may result in income to the holder to the
extent the holder has not already accrued the amount of the Claim
as income. A holder who reduces the amount of his Claim to an
amount less than the amount already accrued as income may incur a
loss upon the Claim's being satisfied under the Plan. The same
rules apply to other fully paid Claim holders.
2. Claim Holders Not Being Paid in Full in Cash
The federal income tax consequences to Claim Holders
not being paid in full arising from the Plan will vary depending
upon, among other things, whether or not the Claim holder's Claim
is a long-term obligation classified as a "security" for federal
income tax purposes (a "Tax Security").
The term "security" is not defined in the IRC, but is
generally regarded as stock or a long-term debt instrument.
While the precise limits are unclear, a debt instrument with an
original term of as little as five years may qualify and an
instrument with an original term of ten years will qualify.
Claim holders should consult their tax advisors to determine
whether their Claims constitute Tax Securities.
2.1. Claims Not Constituting Tax Securities
On the exchange of its Claim (other than any Claim for
interest or for costs and expenses) for cash or property,
including CSW stock, each Claim holder whose Claim is not a Tax
Security will generally be entitled to a bad debt deduction or a
charge against its bad debt reserve (or, in limited
circumstances, to a capital loss) to the extent the adjusted tax
basis of its Claim exceeds its "amount realized," the sum of the
<PAGE> 254
amount of cash received, the issue price of new debt instruments
received and the fair market value of stock and other property
received (other than amounts received with respect to interest or
costs or expenses). If the sum of these items is greater than
the adjusted tax basis of the Claim, the Claim holder will
recognize taxable income (or, in limited circumstances, capital
gain). Recognition of taxable income may occur, for example,
where a Claim represents income not yet reported on the cash
method of tax accounting, or when all or a portion of the Claim
has been deducted as a bad debt. As discussed in paragraph B.2
of this Section IX, the issue price of a new debt obligation
will, if the debt obligation is not publicly traded (and not
exchanged for debt that is publicly traded), generally be its
face amount, except where the instrument does not bear adequate
stated interest, and, if the debt obligation is publicly traded,
its initial trading price. Claim holders whose Claims do not
constitute Tax Securities receiving new debt obligations should
consult their own tax advisors with respect to the effect of
these rules on them. The tax basis of property received by Claim
holders whose Claims do not constitute Tax Securities in exchange
for those Claims, other than Claims for interest, will be the
amount of such property that is included in the holder's amount
realized on the exchange. The holding period for property
received in the exchange will begin with the exchange.
2.2. Claims Constituting Tax Securities
The treatment of Claims constituting Tax Securities
depends in part on whether the merger of CSW Sub into the Debtor
qualifies as a tax-free reorganization under IRC section
368(a)(2)(E). IRC section 368(a)(2)(E) will apply to the merger
if the holders of Debtor stock exchange for CSW voting stock an
amount of stock in the Debtor that represents control of the
Debtor. Control for this purpose is defined as stock possessing
at least 80% of the total combined voting power of all classes
entitled to vote and at least 80% of the total number of shares
of all other classes of the corporation. The Debtor has
outstanding voting Debtor Common Stock and voting Debtor
Preferred stock. CSW will acquire the Debtor Common Stock for
CSW Common Stock, cash, or some combination thereof. Holders of
Debtor Preferred Stock may receive CSW Common Stock, Reorganized
Debtor Common Stock and Debtor Preferred Stock, cash, or some
combination thereof. If CSW acquires a sufficient amount of
Debtor Preferred Stock for CSW Common Stock so that it acquires
80% of the combined voting power of the Debtor Common Stock and
the Debtor Preferred Stock for CSW Stock, IRC section
368(a)(2)(E) will apply. Otherwise, IRC section 368(a)(2)(E)
will not apply.
If IRC section 368(a)(2)(E) applies, a Tax Security
holder that exchanges its debt for CSW Common Stock, Reorganized
<PAGE> 255
Debtor debt and cash (or other property) will probably be treated
as engaged in two tax-free exchanges: an exchange of debt for
CSW Common Stock to which IRC section 368(a)(2)(E) applies and an
exchange of debt for Reorganized Debtor debt which should be
treated as a "recapitalization" qualifying as a "reorganization"
under IRC section 368(a)(1)(E). It is likely, but not certain,
that the portion of the Tax Security holder's debt being treated
as exchanged under the IRC section 368(a)(1)(E) reorganization
should bear the same ratio to that portion of the Tax Security
holder's debt being treated as exchanged under the IRC section
368(a)(2)(E) reorganization as the fair market value of the
consideration received in the first reorganization bears to the
fair market value of the consideration received in the second
reorganization. The basis of the Tax Security should be
allocated between the reorganizations in these same proportions.
As to each reorganization, the Tax Security holder will generally
not recognize loss (except as to debt exchanged for accrued
interest) and will recognize gain as follows: First, income will
be recognized to the extent that the value received for accrued
interest is more than the amount of accrued interest previously
included in income for federal income tax purposes. For a more
detailed discussion of the tax consequences of the receipt of
interest and of the receipt of reimbursement of fees, charges or
expenses, see paragraph D.2.3 of this Section IX. Second, Claim
holders who receive cash or other property in either
reorganization (other than CSW stock or Reorganized Debtor debt
qualifying as a Tax Security) will recognize any gain realized in
that reorganization up to the "boot" they receive, i.e., the sum
of (x) any cash, (y) the fair market value of any other property
and (z) as to the IRC section 368(a)(1)(E) reorganization, the
excess of the portion of the principal amount of any Tax Security
received in that reorganization that is not attributable to the
payment of accrued interest, fees, charges, or expenses over the
principal amount of any Tax Security exchanged therefor. It is
likely the latter amount described in clause (z) equals the
excess of the issue price of that portion of a Tax Security
received in the exchange that is not attributable to payment of
accrued interest, fees, charges or expenses over the adjusted
issue price of the exchanged Tax Security. Special rules may
apply to holders of Tax Securities on which market discount has
accrued. See paragraph D.3.2 of this Section IX. Also note that
the rules described above apply separately to blocks of Claims
(i.e. Claims with differing basis or holding periods).
If IRC section 386(a)(2)(E) is not applicable, the Plan
probably constitutes a combination of a taxable purchase by CSW
of the Debtor's Common Stock, an indirect acquisition by CSW of a
portion of the Debtor's debt and a "recapitalization" qualifying
as a "reorganization" under IRC section 368(a)(1)(E). The Debtor
expects to treat a Claim holder that exchanges a Claim that
constitutes a Tax Security for cash, CSW stock and Reorganized
<PAGE> 256
Debtor debt and other property as having exchanged a portion of
its Tax Security for Debtor stock and as then exchanging its
Debtor stock for CSW stock. The portion deemed so exchanged
would be the same proportion of a Claim holder's total Tax
Security as the fair market value of the CSW stock represents of
the total consideration received by the Claim holder from all
sources. The Claim holder will allocate the basis of its Tax
Security between the portion indirectly exchanged for CSW stock
and the remaining portion in proportion to the fair market value
of those portions. The Claim holder will recognize gain or loss
on its indirect exchange of a portion of its Claim for CSW stock
to the extent that the value of the CSW stock it receives exceeds
or is less than the basis allocated to the portion of the Tax
Security exchanged for CSW stock. A Tax Security holder's basis
in its CSW stock will equal the fair market value of that stock.
Its holding period in that stock will begin with the indirect
exchange.
As to the remaining portion of its debt (that portion
not deemed indirectly exchanged for CSW stock), the Tax Security
holder will be deemed to have exchanged its debt for Reorganized
Debtor debt, cash and other property in a tax-free IRC section
368(a)(1)(E) recapitalization. The consequences of that
recapitalization are essentially those of the IRC section
368(a)(1)(E) recapitalization described above, i.e., the Tax
Security Holder will generally not recognize loss and will
recognize gain in the manner described above.
A Tax Security holder who receives (i) no property
other than cash, or (ii) nothing in exchange for its Claim, will
recognize gain or loss based on the amount of cash received, if
any, compared with the adjusted tax basis of its Claim.
The basis of property other than CSW stock or Tax
Securities received in exchange for a Tax Security will be equal
to the fair market value of the property, and the holding period
of the property will begin with the exchange. The foregoing rule
will also apply to the receipt of CSW stock if the exchange of a
Tax Security for CSW stock is not treated as governed by IRC
section 368(a)(2)(E).
If the exchange of a Tax Security for CSW stock is
treated as a reorganization under IRC section 368(a)(2)(E), a Tax
Security holder's basis in the CSW stock (other than CSW stock
received in exchange for Claims for interest and costs, fees and
expenses) will equal the holder's basis in the Claims surrendered
for that CSW stock (which does not include the holder's basis in
Claims for interest and costs, fees and expenses), reduced by the
amount of "boot" (as defined above) received for such Claims
(other than Claims for interest and costs, fees and expenses),
and increased by the amount of gain recognized on the exchange.
<PAGE> 257
The holding period for CSW stock received in exchange for Tax
Securities will include the period during which the Claim holder
held the Tax Securities exchanged therefor, provided the Tax
Securities were held as a capital asset on the exchange date.
The same rule will apply to the Claim holder's receipt of
Reorganized Debtor debt qualifying as a Tax Security in exchange
for Claims. The Tax Security holder's aggregate basis in Tax
Securities received in exchange for Claims (other than Claims for
interest and costs, fees and expenses) will equal the holder's
basis in the surrendered Claims (other than Claims for interest
and costs, fees and expenses), reduced by the amount of "boot"
(as defined above) received for such Claims (other than Claims
for interest and costs, fees and expenses), and increased by the
amount of gain recognized on the exchange. That aggregate basis
will be apportioned among the received Tax Securities in
proportion to their relative fair market values on the date of
exchange. The holding period for the received Tax Securities
will include the period the Claim holder held the Tax Securities
exchanged therefor, provided the Tax Securities were held as a
capital asset on the exchange date. The rules above describing
the computation and the basis and holding period consequences of
an exchange of Tax Securities for CSW Common Stock or Tax
Securities in tax-free reorganizations apply separately to blocks
of Tax Securities (i.e., Claims constituting Tax Securities with
differing bases or holding periods).
2.3. Receipt of Interest; Costs and Expenses
Claim holders will recognize ordinary income to the
extent they receive any cash or property allocable to interest
income they have not previously included in federal taxable
income. The proper allocation of amounts received in exchange
for the discharge of a Claim at a discount between principal and
interest is unclear and may be affected by, among other things,
the rules in the IRC relating to imputed interest, original issue
discount and accrued market discount. Claim holders should
consult their own tax advisors to determine the amount of
consideration received under the Plan allocable to interest.
In the event that the amount of cash, securities and
other property allocable to interest on a Claim holder's Claim is
less than the amount previously included as interest on the Claim
in the Claim holder's federal taxable income, the unpaid interest
may be deducted, generally as a loss or as an adjustment to a
reserve for bad debts.
Reimbursements for costs, fees and expenses will be
includible in a Claim holder's income to the extent these amounts
were already allowable as deductions to it.
<PAGE> 258
3. Original Issue Discount and Market Discount
3.1. Original Issue Discount
The original issue discount ("OID") rules provide an
extremely complex system for determining and taxing the interest
component of debt instruments. Under the IRC, a holder of a debt
instrument that has OID must include a portion of the OID in
income in each taxable year (or portion thereof) the holder holds
the debt instrument, even if the holder has not received a cash
payment. The issuer deducts a corresponding OID amount. The IRC
defines OID as the difference between the issue price and the
stated redemption price at maturity of a debt instrument. The
"stated redemption price at maturity" means the total of all
payments due to the holder of the instrument, other than any
interest based on a fixed rate and payable unconditionally at
least annually.
Under the Plan, subject to certain de minimis rules,
OID can be created on the exchange of Claims for New Debt in two
instances: in case the New Debt or the Claim exchanged for the
New Debt is publicly traded and the relevant trading price is
less than the New Debt's stated redemption price at maturity and
in the case the New Debt is not publicly traded, is exchanged for
a Claim that is not publicly traded and the New Debt does not
bear adequate interest, i.e., interest at least equal to the
applicable AFR. In either case, in effect, a portion of the
principal of the "new" debt instrument will be treated as imputed
interest under the OID rules.
3.2. Market Discount
Certain Claim holders may hold bonds subject to market
discount. Generally market discount is defined as the excess of
the stated redemption price of a bond at maturity over the
holder's tax basis in that bond immediately after its acquisition
from a party other than the issuer. Holders are required to
treat as ordinary income any gain recognized upon the exchange of
a market discount bond for New Debt or other property to the
extent of the market discount accrued during the owner's period
of ownership, unless the holder has elected to include market
discount in income as it accrues. It is not clear whether
holders must recognize ordinary income to the extent of accrued
market discount on a bond if gain is realized upon an exchange of
that bond but not recognized because of the applicability of
certain nonrecognition provisions, including those governing tax-
free reorganizations under IRC section 368(a)(1)(E) or IRC
section 368(a)(2)(E). While the market discount rules generally
override the IRC nonrecognition provisions, the IRC provides that
"under regulations" the market discount rules will not override
the reorganization provisions. While it is clear that Congress
<PAGE> 259
intended that regulations to this effect be issued, such
regulations have not yet been issued. Unless the holder has
elected to accrue market discount income currently, certain
interest deductions allocable to accrued market discount are
deferred. Market discount usually accrues ratably over the
period from the holder's acquisition of the bond to its date of
maturity, though a holder may elect to accrue market discount on
an economic yield basis. Special rules apply to bonds that have
both market discount and OID. A holder is deemed to hold debt at
a premium if its basis in a bond at acquisition exceeds its
stated redemption price at maturity. Premium may be used to
offset OID on a bond or may be deductible.
It is possible the Plan will result in a holder holding
New Debt with either market discount or a premium if, under the
rules discussed above, the holder will have a basis in the debt
that is less than or exceeds the New Debt's stated redemption
price at maturity.
3.3. Imputed Interest
Under certain circumstances, distributions to certain
Claim holders may be deferred until after the Effective Date. In
that case, a portion of the amount ultimately received by such
Claim holders may be recharacterized as interest. Any amount so
recharacterized will not be included in the computation of gain
or loss described in paragraph D.2 of this Section IX.
4. Character of Gain or Loss
The character of gain or loss recognized by a Claim
holder as capital or ordinary, and, in the case of capital gain
or loss, as short-term or long-term, will depend on a number of
factors, including: (i) the nature and origin of the Claim; (ii)
the tax status of the Claim holder; (iii) whether the holder is a
financial institution; (iv) whether the Claim is a capital asset
in the hands of the holder; (v) whether the Claim has been held
for more than one year; (vi) the extent to which the holder
previously claimed a loss, bad debt deduction or charge to a
reserve for bad debts with respect to the Claim; and (vii)
whether, in the case of a Claim arising from certain indebtedness
issued after July 18, 1984 with a term of more than one year, for
which no election was made to include market discount in income
currently, the difference between the holder's basis in the
indebtedness immediately after it was acquired and the amount of
the indebtedness exceeded any then unaccrued original issue
discount.
Each Claim holder should consult its own tax advisors
as to the applicability of the general rules discussed above to
its particular situation.
<PAGE> 260
5. Treatment of Preferred Stock Interests
Current holders of Debtor Preferred Stock will receive
either: (i) Reorganized Debtor Preferred Stock; (ii) CSW Common
Stock; (iii) cash; or (iv) some combination of the three. To the
extent holders of Debtor Preferred Stock exchange that stock for
Reorganized Debtor Preferred Stock, the exchange will qualify as
a tax-free exchange under IRC section 1036 and as a tax-free
recapitalization pursuant to IRC section 368(a)(1)(E). A holder
of Preferred Stock will be treated as receiving a distribution
under IRC section 305 to the extent it receives Reorganized
Debtor Preferred Stock with respect to unpaid cumulative
dividends on its Debtor Preferred Stock and the receipt of that
Reorganized Debtor Preferred Stock increases its proportionate
interest in the assets or earnings and profits of the Debtor.
Under that rule, a holder will be deemed to receive a
distribution to the extent that the aggregate liquidation
preference of the Reorganized Debtor Preferred Stock received by
it exceeds the liquidation preference of its Debtor Preferred
Stock exchanged for the Reorganized Debtor Preferred Stock, up to
an amount equal to the unpaid cumulative dividends on such stock.
The distribution will be taxable as a dividend to the extent of
the holder's share of the Debtor's current and accumulated
earnings and profits. Any excess of such distribution over a
holder's share of the Debtor's current and accumulated earnings
and profits will first be applied in reduction of the holder's
tax basis for such stock and then constitute capital gain to
persons holding such stock as capital assets. The Debtor has not
to date undertaken an examination of whether it has any
accumulated earnings and profits and cannot forecast whether it
would have current earnings and profits in the year of the
distribution or in any year in which dividends are paid on the
Reorganized Debtor Preferred Stock.
Holders of Reorganized Debtor Preferred Stock that have
received that Reorganized Debtor Preferred Stock in exchange for
their Debtor Preferred Stock will have a basis in that
Reorganized Debtor Preferred Stock equal to the basis of the
Debtor Preferred Stock increased by the amount of any dividend
income recognized on the exchange. The holding period for the
Reorganized Debtor Preferred Stock will include the holding
period for the exchanged Debtor Preferred Stock, assuming the
Debtor Preferred Stock was held as a capital asset.
Dividend distributions with respect to Reorganized
Debtor Preferred Stock (including distributions in additional
shares of Reorganized Debtor Preferred Stock) should constitute
dividends for federal income tax purposes, provided the Debtor
has adequate current or accumulated earnings and profits. Any
distribution on a share of Reorganized Debtor Preferred Stock in
excess of current and accumulated earnings and profits will be
<PAGE> 261
treated as a tax-free return of capital (reducing the holder's
tax basis in the share) to the extent of the holder's basis in
the share, and thereafter as long-term or short-term capital gain
(assuming the share is held as a capital asset).
If a corporation issues preferred stock redeemable at a
price higher than the issue price, and that difference exceeds a
"reasonable" redemption premium, the difference will be treated
as a constructive distribution to the holders over the period of
time during which the preferred stock cannot be redeemed. The
"issue price" is generally the fair market value of the stock
upon issuance. The Revenue Reconciliation Act of 1990 altered
the tax treatment of unreasonable redemption premiums (and
arguably expanded the scope of the rules) for preferred stock
issued after October 9, 1990. In general, The Revenue
Reconciliation Act of 1990 provides that, under regulations that
have not yet been issued, if a redemption premium is treated as a
constructive distribution, the premium will be taken into account
under economic accrual principles similar to the OID rules,
subject also to the OID de minimis exception.
If the holders of Debtor Preferred Stock receive CSW
Common Stock or cash in addition to, or instead of, receiving
Reorganized Debtor Preferred Stock, the tax consequences will
depend on whether the Plan constitutes a tax-free reorganization
under IRC section 368(a)(2)(E). If it does not (i.e., as
explained in paragraph D.2.2 of this Section IX, if CSW does not
acquire control of the Debtor in exchange for CSW Common Stock),
the exchange of Debtor Preferred Stock for CSW Common Stock and
cash will be treated as a taxable exchange of the Debtor
Preferred Stock for the CSW Common Stock and cash. Holders of
Debtor Preferred Stock will recognize gain or loss to the extent
the sum of the cash and the fair market value of the CSW Common
Stock exceeds or is less than the basis of the Debtor Preferred
Stock exchanged for the CSW Common Stock and cash. The holder's
basis in the CSW Common Stock will be its fair market value and
the holding period in the stock will begin with the exchange.
If a holder of Debtor Preferred Stock exchanges that
stock for CSW Common Stock and cash in a transaction to which IRC
section 368(a)(2)(E) applies, the holder will not recognize loss
on the exchange and will recognize any gain on the exchange only
to the extent of the cash it receives. Such gain will usually be
treated as a capital gain but, in certain circumstances,
depending on the holder's indirect continuing interest in the
Debtor, it may be treated as a dividend to the extent of the
holder's share of the Debtor's accumulated earnings and profits.
The holder's basis in the CSW Common Stock will equal the
holder's basis in the Debtor Preferred Stock surrendered for that
CSW Stock reduced by the cash received by the holder and
increased by the amount of gain recognized on the exchange. The
<PAGE> 262
holding period for the CSW Common Stock received will include the
period during which the holder held the Debtor Preferred Stock
exchanged therefor, provided the Debtor Preferred Stock was held
as a capital asset on the exchange date. These rules apply
separately to separate blocks of Debtor Preferred Stock, i.e.,
blocks with differing bases or holding periods.
6. Common Stock Interests
Each holder of Debtor Common Stock will exchange its
Debtor Common Stock for an interest in the Liquidation Trust and:
(i) CSW Common Stock; (ii) cash; or (iii) some combination of CSW
Common Stock and cash. If the Plan constitutes a tax-free
reorganization under IRC Section 368(a)(2)(E), the holder of
Debtor Common Stock will not recognize loss on the exchange and
will recognize any gain on the exchange only to the extent of the
cash and the fair market value of the undivided interest in Trust
Assets it is deemed to receive. Such gain will usually be
treated as a capital gain, but in certain circumstances, depend-
ing on the holder's indirect continuing interest in the Debtor,
it may be treated as a dividend to the extent of the holder's
share of the Debtor's accumulated earnings and profits. The
holder's basis in the CSW Common Stock will equal the holder's
basis in the Debtor Common Stock surrendered for that CSW stock,
reduced by the cash and the fair market value of the interest in
Trust Assets received by the holder and increased by the amount
of gain recognized on the exchange. The holding period for the
CSW Common Stock received will include the period during which
the holder held the Debtor Common Stock exchanged therefor,
provided the Debtor Common Stock was held as a capital asset on
the exchange date. These rules apply separately to exchanges of
separate blocks of Debtor Common Stock, i.e., blocks with
differing bases or holding periods.
If the Plan does not constitute a tax-free reorganization
under IRC section 368(a)(2)(E), the holder's receipt of an
interest in the Liquidation Trust should be viewed as a partial
redemption of its stock for an undivided interest in the Trust
Assets. The holder's receipt of CSW stock and cash should be
treated as a purchase by CSW of that portion of its Debtor Common
Stock not redeemed by the Debtor. The Debtor redemption and the
CSW purchase should be integrated as a single transaction, so
that a holder of Debtor Common Stock should recognize gain (or
loss) measured by the excess (or deficiency) of the cash and the
fair market value of the CSW Common Stock and the undivided
interest in the Trust Assets over the holder's basis in its
Debtor Common Stock. The holder's basis in the CSW Common Stock
will be its fair market value and the holding period in the stock
will begin with the exchange.
<PAGE> 263
See Paragraph C of this Section IX for the treatment of
the holders of Debtor Common Stock in their capacity as holders
of interests in the Liquidation Trust.
EACH HOLDER OF A CLAIM OR INTEREST IS STRONGLY URGED TO
CONSULT WITH ITS OWN TAX ADVISOR REGARDING THE FEDERAL, STATE AND
LOCAL TAX CONSEQUENCES OF THE PLAN.
X. FEASIBILITY OF THE PLAN
Pursuant to the Code, the Bankruptcy Court must
determine that confirmation of a plan of reorganization is not
likely to be followed by the liquidation or need for further
financial reorganization of the Debtor. The Debtor believes the
Plan meets this requirement.
The Plan is premised upon, among other things,
implementation of the rate paths described in Exhibit E attached
hereto or upon other rate paths which are satisfactory to CSW and
the Debtor. The following Projected Schedule of Cash Flow and
Debt Service is based on the assumption that the reorganized
Debtor obtains the rate paths set forth in Exhibit E. Based on
this assumption, the Debtor believes that, after the Effective
Date, there is little likelihood that the reorganized Debtor will
default on any of its Plan obligations.
Following are the Debtor's projections of its future
cash flows, including its ability to service Plan obligations,
assuming, for purposes of this analysis, that the Plan becomes
effective on December 31, 1994. The Projections in Section X and
in Section XI are based on broad assumptions described below.
There will generally be a difference between projections of
future performance and actual results because certain events and
circumstances may not occur as expected. These events could be
material. While the Debtor believes the future results as
presented are reasonable, there can be no assurance that these
future operating results will be realized. Consequently, the
Projections included herein should not be regarded as a
representation by the Debtor, the Debtor's advisors or any other
person, including CSW, that the projected results will be
achieved.
APS and the other Palo Verde Participants contend,
although the Debtor disagrees, that the Debtor's Plan is not
feasible without obtaining the express consent of APS and the
other Palo Verde Participants.
<PAGE>
<PAGE> 264
<TABLE>
<CAPTION>
EL PASO ELECTRIC COMPANY
PROJECTED SCHEDULE OF CASH FLOW AND DEBT SERVICE
(UNAUDITED)
$(000)
ACQUI-
PRE-ACQUISITION PERIOD SITION ADJUSTED POST-ACQUISITION PERIOD
---------------------- ADJUST- -------- --------------------------------------------------------------------
12/31/93 12/31/94 MENTS 12/31/94 12/31/95 12/31/96 12/93/97 12/31/98 12/31/99 12/31/00 12/31/01
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATIONS BEFORE INTEREST
186,144 195,346 0 195,346 232,916 231,862 241,714 242,422 248,244 244,048 240,008
CAPITAL EXPENDITURES
(68,578) (83,039) 0 (83,039) (72,523) (77,121) (66,821) (58,449) (66,794) (67,739) (60,763)
CASH FLOWS AFTER CAPITAL EXPENDITURES
117,566 112,307 0 112,307 160,393 154,741 174,893 183,973 181,450 176,309 179,245
CASH FLOWS FROM ISSUANCE OF SHORT TERM DEBT
0 0 0 0 0 5,959 (3,323) (2,636) 0 0 0
CASH FLOWS FROM ISSUANCE OF LONG TERM DEBT
0 0 0 0 0 0 0 0 100,000 0 0
CASH FLOWS FROM ISSUANCE OF COMMON STOCK
0 0 0 0 0 (5,000) (35,000) (55,000) (50,000) (30,000) (30,000)
See accompanying notes to projected financial statements.
Immaterial rounding differences exist within the projected financial statements.
</TABLE>
<PAGE> 265
<TABLE>
<CAPTION>
EL PASO ELECTRIC COMPANY
PROJECTED SCHEDULE OF CASH FLOW AND DEBT SERVICE (continued)
(UNAUDITED)
$(000)
ACQUI-
PRE-ACQUISITION PERIOD SITION ADJUSTED POST-ACQUISITION PERIOD
---------------------- ADJUST- -------- --------------------------------------------------------------------
12/31/93 12/31/94 MENTS 12/31/94 12/31/95 12/31/96 12/93/97 12/31/98 12/31/99 12/31/00 12/31/01
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PAYMENT OF CERTAIN CLAIMS
0 0 (71,557) (71,557) 0 0 0 0 0 0 0
CASH FLOWS FROM OTHER FINANCING ACTIVITIES
6,582 6,939 53,106 60,045 130,570 598 984 1,617 3,675 1,246 1,299
CASH FLOW AVAILABLE TO SERVICE DEBT
124,148 119,246 (18,451) 100,795 290,963 156,298 137,554 127,954 235,125 147,555 150,554
INTEREST PAYMENTS:
FIRST MORTGAGE BONDS (CLASS 1)
(29,957) (32,558) 0 (32,558) (22,815) (22,815) (22,815) (22,815) (22,815) (16,315) (16,315)
SECOND MORTGAGE BONDS (CLASS 2)
(20,319) (21,967) 0 (21,967) (12,814) (12,814) (12,814) (12,814) (12,814) (12,814) (12,814)
POLLUTION CONTROL BONDS (CLASS 4, 5, 10 & 11)
(4,266) (10,950) 0 (10,950) (10,198) (10,065) (10,044) (10,534) (11,023) (11,513) (11,513)
See accompanying notes to projected financial statements.
Immaterial rounding differences exist within the projected financial statements.
</TABLE>
<PAGE> 266
<TABLE>
<CAPTION>
EL PASO ELECTRIC COMPANY
PROJECTED SCHEDULE OF CASH FLOW AND DEBT SERVICE (continued)
(UNAUDITED)
$(000)
ACQUI-
PRE-ACQUISITION PERIOD SITION ADJUSTED POST-ACQUISITION PERIOD
---------------------- ADJUST- -------- --------------------------------------------------------------------
12/31/93 12/31/94 MENTS 12/31/94 12/31/95 12/31/96 12/93/97 12/31/98 12/31/99 12/31/00 12/31/01
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
RCF BANK'S DEBT (CLASS 3)
(9,562) (10,758) 0 (10,758) (2,844) (327) 0 0 0 0 0
LONG TERM NOTES (CLASS 12 & 13)
(23,808) (56,784) 0 (56,784) (16,682) (10,532) (8,545) (7,452) (10,824) (12,412) (9,769)
RGRT NOTES (CLASS 6)
(1,613) (4,105) 0 (4,105) (1,396) (397) 0 0 0 0 0
OTHER LONG TERM DEBT
(901) (819) 0 (819) (728) (629) (519) (398) (265) (119) 0
SHORT TERM DEBT
0 0 0 0 0 (66) (13) 0 0 0 0
TOTAL INTEREST PAYMENTS
(90,426) (137,941) 0 (137,941) (67,477) (57,645) (54,750) (54,013) (57,741) (53,173) (50,411)
See accompanying notes to projected financial statements.
Immaterial rounding differences exist within the projected financial statements.
</TABLE>
<PAGE> 267
<TABLE>
<CAPTION>
EL PASO ELECTRIC COMPANY
PROJECTED SCHEDULE OF CASH FLOW AND DEBT SERVICE (continued)
(UNAUDITED)
$(000)
ACQUI-
PRE-ACQUISITION PERIOD SITION ADJUSTED POST-ACQUISITION PERIOD
---------------------- ADJUST- -------- --------------------------------------------------------------------
12/31/93 12/31/94 MENTS 12/31/94 12/31/95 12/31/96 12/93/97 12/31/98 12/31/99 12/31/00 12/31/01
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CASH AVAILABLE AFTER INTEREST SERVICE
33,722 (18,695) (18,451) (37,146) 223,486 98,653 82,804 73,941 177,384 94,382 100,133
PRINCIPAL REPAYMENTS:
FIRST MORTGAGE BONDS (CLASS 1)
0 0 0 0 0 0 0 0 (100,000) 0 0
SECOND MORTGAGE BONDS (CLASS 2)
0 0 0 0 0 0 0 0 0 0 0
POLLUTION CONTROL BONDS (CLASS 5)
0 0 (6,443) (6,443) (3,359) (1,115) 0 0 0 0 0
RCF BANK'S DEBT (CLASS 3)
0 0 (93,184) (93,184) (48,582) (16,125) 0 0 0 0 0
LONG TERM NOTES (CLASS 12 & 13)
0 0 0 0 (150,172) (38,977) (33,684) 0 (34,669) (34,669) (34,669)
See accompanying notes to projected financial statements.
Immaterial rounding differences exist within the projected financial statements.
</TABLE>
<PAGE> 268
<TABLE>
<CAPTION>
EL PASO ELECTRIC COMPANY
PROJECTED SCHEDULE OF CASH FLOW AND DEBT SERVICE (continued)
(UNAUDITED)
$(000)
ACQUI-
PRE-ACQUISITION PERIOD SITION ADJUSTED POST-ACQUISITION PERIOD
---------------------- ADJUST- -------- --------------------------------------------------------------------
12/31/93 12/31/94 MENTS 12/31/94 12/31/95 12/31/96 12/93/97 12/31/98 12/31/99 12/31/00 12/31/01
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
RGRT NOTES (CLASS 6)
0 0 (41,535) (41,535) (16,559) (12,283) 0 0 0 0 0
OTHER LONG TERM DEBT
(820) (903) 0 (903) (993) (1,094) (1,203) (1,324) (1,457) (1,603) 0
TOTAL PRINCIPAL REPAYMENTS
(820) (903) (141,162) (142,065) (219,665) (69,594) (34,887) (1,324) (136,126) (36,272) (34,669)
CASH AVAILABLE AFTER PRINCIPAL PAYMENTS
32,902 (19,598) (159,613) (179,211) 3,821 29,059 47,917 72,617 41,258 58,110 65,464
PREFERRED DIVIDEND PAYMENTS
(1,558) (3,968) 0 (3,968) (4,590) (4,590) (4,590) (4,590) (4,590) (4,590) (4,590)
COMMON DIVIDEND PAYMENTS
0 0 0 0 0 (38,700) (43,327) (46,919) (51,791) (57,566) (58,684)
See accompanying notes to projected financial statements.
Immaterial rounding differences exist within the projected financial statements.
</TABLE>
<PAGE> 269
<TABLE>
<CAPTION>
EL PASO ELECTRIC COMPANY
PROJECTED SCHEDULE OF CASH FLOW AND DEBT SERVICE (continued)
(UNAUDITED)
$(000)
ACQUI-
PRE-ACQUISITION PERIOD SITION ADJUSTED POST-ACQUISITION PERIOD
---------------------- ADJUST- -------- --------------------------------------------------------------------
12/31/93 12/31/94 MENTS 12/31/94 12/31/95 12/31/96 12/93/97 12/31/98 12/31/99 12/31/00 12/31/01
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CASH AVAILABLE AFTER DIVIDENDS
31,344 (23,566) (159,613) (183,179) (769) (14,231) 0 21,108 (15,123) (4,046) 2,190
BEGINNING CASH AND TEMPORARY INVESTMENTS BALANCE
166,835 198,179 0 198,179 15,000 14,231 0 0 21,108 5,985 1,939
ENDING CASH AND TEMPORARY INVESTMENTS BALANCE
198,179 174,613 (159,613) 15,000 14,231 0 0 21,108 5,985 1,939 4,129
See accompanying notes to projected financial statements.
Immaterial rounding differences exist within the projected financial statements.
</TABLE>
<PAGE>
<PAGE> 270
Based on these projected cash flows, and assuming an
Effective Date of the Plan on December 31, 1994, the Debtor and
CSW estimate that the reorganized Debtor will have the ability,
although not the obligation, to pay or refinance a significant
amount of the obligations relating to Class 12(a) and 13 claims
on the Effective Date. The cash flow projections also indicate
the ability to pay in full the balance of the obligations
relating to Class 3 Claims relating to the Revolving Credit
Facility prior to the third anniversary of the Effective Date.
Assumptions Underlying Projected Schedule of Cash Flow
and Debt Service
The Projected Schedule of Cash Flow and Debt Service
set forth above is drawn from the projected financial statements
included in Section XI of this Disclosure Statement, and thus
necessarily is based on the underlying assumptions used to
develop the projected financial statements, which assumptions are
described in Appendix A of this Disclosure Statement. As indi-
cated above, these cash flow projections assume that Reorganized
EPE will be entitled to recover rates from its customers in
accordance with the rate path described in this Disclosure
Statement and Exhibit E hereof.
The capital expenditure projections contained in the
cash flow projections are based upon the Debtor's current fore-
cast of expenditures for transmission and distribution facili-
ties, generation expansion plans in later years covered by the
forecast period and other miscellaneous items. The Debtor
believes the capital expenditure projections are adequate to
ensure high quality reliable service to its customers.
Cash from operations after paying capital expenditures
is available to service the Plan obligations under the Plan;
projected payments on these Plan obligations are set forth in the
cash flow projections.
The cash flow projections are also based upon projec-
tions of operating and maintenance costs, fuel and purchased
power costs, and revenue and ad valorem taxes. The foregoing
projections assume that the Palo Verde Leases have been rejected,
and that title to the Palo Verde Assets has been transferred to
Reorganized EPE free and clear of any and all Claims, liens or
encumbrances.
All projections contained herein are based on the
assumption that no wholesale power contracts will be renegotiated
or terminated other than as discussed in Section III "Future
Business of the Debtor" under "Business of the Reorganized EPE"
herein.
<PAGE> 271
In sum, the projected cash flows show that the Plan is
feasible in that the Debtor will have sufficient funds to service
all Plan obligations.
XI. FINANCIAL INFORMATION, DATA, VALUATIONS AND PROJECTIONS
RELEVANT TO THE DEBTOR'S CURRENT AND FUTURE OPERATIONS
In addition to the Schedule of Cash Flow and Debt
Service projections presented in the foregoing feasibility
analysis, the Debtor has prepared certain projections adjusted to
reflect the terms of the Plan (the "Projections") of Reorganized
EPE's balance sheet and results of operations for the years 1993
through 2001. The Projections should be read in conjunction with
the assumptions, qualifications and explanations set forth in
Appendix A of this Disclosure Statement, the historical
consolidated financial information (including the notes and
schedules thereto) of the Debtor and the other information set
forth in this Disclosure Statement. Neither the Debtor's nor
CSW's independent auditors have examined or compiled the
Projections, and accordingly assume no responsibility for them.
<PAGE>
<PAGE> 272
<TABLE>
<CAPTION>
EL PASO ELECTRIC COMPANY
PROJECTED BALANCE SHEETS
(UNAUDITED)
$(000)
ACQUI-
SITION POST-ACQUISITION PERIOD
PRE-ACQUISITION PERIOD ADJUST- ADJUSTED
12/31/92 12/31/93 12/31/94 MENTS 12/31/94 12/31/95 12/31/96 12/93/97 12/31/98 12/31/99 12/31/00 12/31/01
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
UTILITY PLANT:
ELECTRIC PLANT IN SERVICE
1,726,450 1,806,187 1,897,657 653,432 2,551,089 2,640,226 2,721,868 2,791,922 2,851,180 2,917,451 2,987,065 3,051,366
(A)
LESS ACCUMULATED DEPRECIATION
(387,086) (459,227) (533,614) 0 (533,614) (625,799) (719,704) (813,845) (909,624) (1,006,326) (1,103,753) (1,199,483)
NET PLANT IN SERVICE
1,339,364 1,346,960 1,364,043 653,432 2,017,475 2,014,427 2,002,164 1,978,077 1,941,556 1,911,125 1,883,312 1,851,883
CONSTRUCTION WORK IN PROGRESS
41,946 35,332 31,344 0 31,344 20,761 17,849 16,482 17,252 18,363 17,775 18,505
NET UTILITY PLANT
1,381,310 1,382,292 1,395,387 653,432 2,048,819 2,035,188 2,020,013 1,994,559 1,958,808 1,929,488 1,901,087 1,870,388
CASH AND TEMPORARY INVESTMENTS
166,835 198,179 174,613 (159,613) 15,000 14,231 0 0 21,108 5,985 1,939 4,129
(B)
MIRROR CWIP ASSET
0 0 0 92,270 92,270 89,582 86,894 84,206 81,518 78,830 76,178 73,490
(C)
OTHER ASSETS
154,760 185,980 215,613 (35,022) 180,591 109,946 115,187 120,527 125,541 130,119 135,121 139,846
(B)
TOTAL ASSETS
1,702,905 1,766,451 1,785,613 551,067 2,336,680 2,248,947 2,222,094 2,199,292 2,186,975 2,144,422 2,114,325 2,087,853
See accompanying notes to projected financial statements.
Immaterial rounding differences exist within the projected financial statements.
</TABLE>
<PAGE> 273
<TABLE>
<CAPTION>
EL PASO ELECTRIC COMPANY
PROJECTED BALANCE SHEETS (continued)
(UNAUDITED)
$(000)
ACQUI-
SITION POST-ACQUISITION PERIOD
PRE-ACQUISITION PERIOD ADJUST- ADJUSTED
12/31/92 12/31/93 12/31/94 MENTS 12/31/94 12/31/95 12/31/96 12/93/97 12/31/98 12/31/99 12/31/00 12/31/01
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CAPITALIZATION AND LIABILITIES:
CAPITALIZATION:
COMMON STOCK
(220,508) (311,892) (327,653) 1,096,916 769,263 820,706 830,301 813,934 775,687 749,031 740,735 729,402
(D)
PREFERRED STOCK
81,464 81,464 81,464 (13,464) 68,000 68,000 68,000 68,000 68,000 68,000 68,000 68,000
(D)
LONG-TERM DEBT
1,439,431 1,518,682 1,600,462 (483,565) 1,116,897 950,107 880,475 846,460 846,191 809,897 774,325 743,472
(D)
SHORT-TERM DEBT
0 0 0 0 0 0 5,959 2,636 0 0 0 0
TOTAL CAPITALIZATION
1,300,387 1,288,254 1,354,273 599,887 1,954,160 1,838,813 1,784,735 1,731,030 1,689,878 1,626,928 1,583,060 1,540,874
LIABILITIES:
DEFERRED TAXES
46,028 137,381 95,342 17,822 113,164 143,969 176,146 203,981 218,521 237,066 251,492 253,668
(E)
DEFERRED ITC
74,455 45,355 46,346 0 46,346 44,618 42,902 47,653 62,964 63,122 61,418 59,726
MIRROR CWIP LIABILITY
0 0 0 81,396 81,396 67,824 54,252 40,680 27,108 13,536 0 0
(C)
See accompanying notes to projected financial statements.
Immaterial rounding differences exist within the projected financial statements.
</TABLE>
<PAGE> 274
<TABLE>
<CAPTION>
EL PASO ELECTRIC COMPANY
PROJECTED BALANCE SHEETS (continued)
(UNAUDITED)
$(000)
ACQUI-
SITION POST-ACQUISITION PERIOD
PRE-ACQUISITION PERIOD ADJUST- ADJUSTED
12/31/92 12/31/93 12/31/94 MENTS 12/31/94 12/31/95 12/31/96 12/93/97 12/31/98 12/31/99 12/31/00 12/31/01
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OTHER LIABILITIES
282,035 295,461 289,652 (148,038) 141,614 153,723 164,059 175,948 188,504 203,770 218,355 233,585
(A)
TOTAL LIABILITIES
402,518 478,197 431,340 (48,820) 382,520 410,134 437,359 468,262 497,097 517,494 531,265 546,979
TOTAL CAPITALIZATION & LIABILITIES
1,702,905 1,766,451 1,785,613 551,067 2,336,680 2,248,947 2,222,094 2,199,292 2,186,975 2,144,422 2,114,325 2,087,853
See accompanying notes to projected financial statements.
Immaterial rounding differences exist within the projected financial statements.
</TABLE>
<PAGE> 275
<TABLE>
<CAPTION>
EL PASO ELECTRIC COMPANY
PROJECTED STATEMENTS OF OPERATIONS
(UNAUDITED)
ACQUI-
SITION POST-ACQUISITION PERIOD
PRE-ACQUISITION PERIOD ADJUST- ADJUSTED
12/31/93 12/31/94 MENTS 12/31/94 12/31/95 12/31/96 12/93/97 12/31/98 12/31/99 12/31/00 12/31/01
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES
535,808 551,122 0 551,122 568,636 582,888 577,149 598,559 644,555 666,550 703,300
OPERATING EXPENSES:
FUEL & PURCHASED POWER
117,085 111,282 0 111,282 116,030 125,154 103,003 112,455 126,508 134,562 148,641
OPERATIONS & MAINTENANCE
250,575 253,753 0 253,753 181,164 186,181 187,612 194,189 202,421 208,520 220,178
DEPRECIATION & AMORTIZATION
54,251 56,345 0 56,345 78,892 81,106 81,532 82,814 83,728 84,698 85,579
OTHER TAXES
56,015 55,848 0 55,848 57,942 59,969 62,973 65,113 68,065 70,315 73,184
INCOME TAXES
(38,478) (35,318) 0 (35,318) 30,437 31,307 36,853 38,032 45,012 47,514 45,758
TOTAL OPERATING EXPENSES
439,448 441,910 0 441,910 464,465 483,717 471,973 492,603 525,734 545,609 573,340
OPERATING INCOME
96,360 109,212 0 109,212 104,171 99,171 105,176 105,956 118,821 120,941 129,960
OTHER INCOME:
AFUDC
5,296 5,210 0 5,210 2,185 2,298 1,670 1,236 1,502 1,375 1,284
MIRROR CWIP AMORTIZATION NET
0 0 0 0 13,572 13,572 13,572 13,572 13,572 13,572 0
See accompanying notes to projected financial statements.
Immaterial rounding differences exist within the projected financial statements.
</TABLE>
<PAGE> 276
<TABLE>
<CAPTION>
EL PASO ELECTRIC COMPANY
PROJECTED STATEMENTS OF OPERATIONS (continued)
(UNAUDITED)
$(000)
ACQUI-
SITION POST-ACQUISITION PERIOD
PRE-ACQUISITION PERIOD ADJUST- ADJUSTED
12/31/93 12/31/94 MENTS 12/31/94 12/31/95 12/31/96 12/93/97 12/31/98 12/31/99 12/31/00 12/31/01
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST INCOME
0 0 0 0 5,725 3,047 3,959 5,166 7,859 6,136 6,961
OTHER INCOME, NET
(153) 1,558 0 1,558 0 0 0 0 0 0 0
TOTAL OTHER INCOME
5,143 6,768 0 6,768 21,482 18,917 19,201 19,974 22,933 21,083 8,245
INCOME BEFORE INTEREST CHARGES
101,503 115,980 0 115,980 125,653 118,088 124,377 125,930 141,754 142,024 138,205
INTEREST CHARGES
76,974 115,909 0 115,909 69,622 60,205 57,829 57,670 62,031 58,166 56,266
NET INCOME (LOSS) BEFORE REORGANIZATION ITEMS
24,529 71 0 71 56,031 57,883 66,548 68,260 79,723 83,858 81,939
REORGANIZATION ITEMS, NET
(12,472) (8,490) 0 (8,490) 0 0 0 0 0 0 0
NET INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE
12,057 (8,419) 0 (8,419) 56,031 57,883 66,548 68,260 79,723 83,858 81,939
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE
(96,044) 0 0 0 0 0 0 0 0 0 0
NET INCOME (LOSS)
(83,987) (8,419) 0 (8,419) 56,031 57,883 66,548 68,260 79,723 83,858 81,939
See accompanying notes to projected financial statements.
Immaterial rounding differences exist within the projected financial statements.
</TABLE>
<PAGE> 277
<TABLE>
<CAPTION>
EL PASO ELECTRIC COMPANY
PROJECTED STATEMENTS OF CASH FLOW
(UNAUDITED)
$(000)
ACQUI-
SITION POST-ACQUISITION PERIOD
PRE-ACQUISITION PERIOD ADJUST- ADJUSTED
12/31/93 12/31/94 MENTS 12/31/94 12/31/95 12/31/96 12/93/97 12/31/98 12/31/99 12/31/00 12/31/01
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PREFERRED DIVIDENDS
0 0 0 0 4,590 4,590 4,590 4,590 4,590 4,590 4,590
NET INCOME (LOSS) APPLICABLE TO COMMON STOCK
(83,987) (8,419) 0 (8,419) 51,441 53,293 61,958 63,670 75,133 79,268 77,349
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) APPLICABLE TO COMMON STOCK
(83,987) (8,419) 0 (8,419) 51,441 53,293 61,958 63,670 75,133 79,268 77,349
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE
96,044 0 0 0 0 0 0 0 0 0 0
DEFERRED TAXES AND ITC, NET
(41,189) (41,048) 0 (41,048) 29,077 30,461 32,586 29,851 10,945 6,842 484
DEPRECIATION & AMORTIZATION
72,141 74,387 0 74,387 94,873 96,593 96,829 98,467 99,390 100,115 98,418
MIRROR CWIP AMORTIZATION NET
0 0 0 0 (13,572) (13,572) (13,572) (13,572) (13,572) (13,572) 0
OTHER NON CASH INCOME
(5,010) (12,611) 0 (12,611) (81,539) 55 (306) (903) 4,831 5,424 (465)
AFUDC
(5,296) (5,210) 0 (5,210) (2,185) (2,298) (1,670) (1,236) (1,502) (1,375) (1,284)
CHANGE IN ASSETS
(31,220) (29,633) 0 (29,633) 70,645 (5,241) (5,340) (5,014) (4,578) (5,002) (4,725)
See accompanying notes to projected financial statements.
Immaterial rounding differences exist within the projected financial statements.
</TABLE>
<PAGE> 278
<TABLE>
<CAPTION>
EL PASO ELECTRIC COMPANY
PROJECTED STATEMENTS OF CASH FLOW (continued)
(UNAUDITED)
$(000)
ACQUI-
SITION POST-ACQUISITION PERIOD
PRE-ACQUISITION PERIOD ADJUST- ADJUSTED
12/31/93 12/31/94 MENTS 12/31/94 12/31/95 12/31/96 12/93/97 12/31/98 12/31/99 12/31/00 12/31/01
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CHANGE IN LIABILITIES
92,677 75,971 0 75,971 12,109 10,336 11,889 12,556 15,266 14,585 15,230
NET CASH PROVIDED BY OPERATING ACTIVITIES
94,160 53,437 0 53,437 160,849 169,627 182,374 183,819 185,913 186,285 185,007
CASH FLOWS FROM INVESTING ACTIVITIES:
PLANT ADDITIONS
(68,578) (83,039) 0 (83,039) (72,523) (77,121) (66,821) (58,449) (66,794) (67,739) (60,763)
CASH FLOWS FROM FINANCING ACTIVITIES:
ISSUANCE OF COMMON STOCK
0 0 0 0 0 (5,000) (35,000) (55,000) (50,000) (30,000) (30,000)
ISSUANCE OF PREFERRED STOCK
0 0 0 0 0 0 0 0 0 0 0
ISSUANCE OF LONG TERM DEBT
0 0 0 0 0 0 0 0 100,000 0 0
COMMON STOCK DIVIDENDS
0 0 0 0 0 (38,700) (43,327) (46,919) (51,791) (57,566) (58,684)
RETIREMENTS OF LONG TERM DEBT
(820) (903) (141,162) (142,065) (219,665) (69,594) (34,887) (1,324) (136,126) (36,272) (34,669)
ISSUANCE OF SHORT-TERM DEBT
0 0 0 0 0 5,959 (3,323) (2,636) 0 0 0
OTHER FINANCING ACTIVITIES
6,582 6,939 (18,451) (11,512) 130,570 598 984 1,617 3,676 1,246 1,299
See accompanying notes to projected financial statements.
Immaterial rounding differences exist within the projected financial statements.
</TABLE>
<PAGE> 279
<TABLE>
<CAPTION>
EL PASO ELECTRIC COMPANY
PROJECTED STATEMENTS OF CASH FLOW (continued)
(UNAUDITED)
$(000)
ACQUI-
SITION POST-ACQUISITION PERIOD
PRE-ACQUISITION PERIOD ADJUST- ADJUSTED
12/31/93 12/31/94 MENTS 12/31/94 12/31/95 12/31/96 12/93/97 12/31/98 12/31/99 12/31/00 12/31/01
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES
5,762 6,036 (159,613) (153,577) (89,095) (106,737) (115,553) (104,262) (134,242) (122,592) (122,054)
NET INCREASE (DECREASE) IN CASH AND TEMPORARY INVESTMENTS
31,344 (23,566) (159,613) (183,179) (769) (14,231) 0 21,108 (15,123) (4,046) 2,190
BEGINNING CASH AND TEMPORARY INVESTMENTS BALANCE
166,835 198,179 0 198,179 15,000 14,231 0 0 21,108 5,985 1,939
ENDING CASH AND TEMPORARY INVESTMENTS BALANCE
198,179 174,613 (159,613) 15,000 14,231 0 0 21,108 5,985 1,939 4,129
See accompanying notes to projected financial statements.
Immaterial rounding differences exist within the projected financial statements.
</TABLE>
<PAGE>
<PAGE> 280
Notes to Projected Financial Statements:
The acquisition will be accounted for as a purchase
transaction and will include the issuance of new securities.
Accordingly, assets, liabilities and capitalization are stated at
fair value at the Effective Date. Further, it is assumed that
the Reorganized EPE will meet the criteria of SFAS No. 71 and,
therefore, has projected the re-adoption of its provisions at the
Effective Date. The total value of the new securities expected
to be issued aggregate $2.1 billion, which is comprised of $769
million of CSW Common Stock for the purchase of the outstanding
common shares and settlement of certain debt of the Debtor;
$1.265 billion of new Reorganized EPE debt securities, excluding
the potential reduction of approximately $141 million of debt
which is expected to be available as of the Effective Date (the
projections herein reflect the use of $141 million of cash
available on the Effective Date to pay down debt); and $68
million of new Reorganized EPE preferred stock. In addition,
certain claims totalling approximately $72 million will be paid
with cash available at the Effective Date.
The following adjustments record the provisions of the
Plan, the effect of purchase accounting and the effect of the
readoption of SFAS No. 71:
(A) To record the acquisition of previously leased portion
of Palo Verde Nuclear Generating Station and to adjust
assets and liabilities Service to fair value.
(B) To record additional cash for sale of accounts
receivable, net of cash paid at closing to cure and
reinstate certain Claims, pay certain expected fees and
to satisfy certain other Claims and potential debt
paydown.
(C) To record Mirror CWIP asset and liability upon
readoption of SFAS No. 71.
(D) To adjust capital accounts to give effect to the
issuance of CSW Common Stock in exchange for Debtor's
common stock and long term debt and to record
cancellation of certain obligations.
(E) To adjust deferred income taxes to reflect effect of
above adjustments.
For a more detailed discussion of the above notes to
the projected financial statements, as well as the other
assumptions to the Projections, see Appendix A of this Disclosure
Statement.
<PAGE> 281
XII. ALTERNATIVES TO THE PLAN
If the Plan described in this Disclosure Statement is
not confirmed or does not become effective the Debtor may propose
an amended plan of reorganization that would also entail a merger
or corporate combination with a subsidiary of CSW. In addition,
subject to the terms of the Merger Agreement, if the Plan is not
confirmed or, if confirmed, does not become effective, the Debtor
would consider a stand alone plan or, a restructuring under FERC
jurisdiction, or a merger or business combination with a person
not affiliated with CSW.
SPS has also attempted to propose a reorganization plan
in this chapter 11 case. SPS filed a motion and a cross-motion,
for an order authorizing it to file a plan. As an exhibit to
that cross-motion, SPS filed with the Bankruptcy Court, on August
18, 1993, a copy of the plan that it would file if it were
permitted to do so ("The SPS Plan").
The SPS Plan would provide for a merger of SPS with the
Debtor. SPS contends that the recoveries offered to certain
classes of creditors under the SPS Plan are greater than the
recoveries under the Debtor's Plan. The SPS Plan provides
recoveries to certain creditor classes, to preferred
shareholders, and to common shareholders that are inferior to the
treatment provided under the Debtor's Plan. For example, the SPS
Plan provides for a maximum recovery of $1 per share to existing
common shareholders, compared to the $3 to $4.50 per share in the
present Plan. The Debtor has opposed filing of the SPS Plan.
XIII. FUTURE MANAGEMENT OF THE DEBTOR
A. Interim Management
After the Confirmation Date and prior to the Effective
Date, the Debtor will be managed by substantially the same
personnel that managed and operated the Debtor on the Petition
Date, subject to such changes as may be determined by the Board
of Directors of the Debtor and subject to the restrictions set
forth in the Merger Agreement. CSW and the Debtor shall use
reasonable best efforts to achieve all regulatory approvals
required for the Effective Date to occur and, subject to strict
confidentiality requirements, provide the Official Creditors
Committee and the Palo Verde Indenture Trustee with its plan,
including a schedule, for filing specific regulatory cases and
proceedings.
Subject to any requirement of Bankruptcy Court approval
under Section 1129(a)(5) of the Code, the individuals serving as
officers and directors of the Debtor on the Confirmation Date
will continue in such office after confirmation and prior to the
Effective Date of the Plan unless replaced in accordance with the
Articles of Incorporation and applicable Bylaws. CSW shall
<PAGE> 282
designate, in a written statement to be filed with the Bankruptcy
Court prior to the Effective Date, the names and affiliations of
the individuals intended to serve as directors and senior
officers of Reorganized EPE to the extent such individuals differ
from those identified in the previous sentence. Those directors
and officers shall assume office and shall continue to serve in
such capacities until replaced in accordance with the Bylaws or
Articles of Incorporation of Reorganized EPE. Reorganized EPE
shall be authorized to enter into employment contracts with its
officers. As of the Effective Date, Reorganized EPE shall be
governed in all respects by the Reorganized EPE Articles of
Incorporation.
Information regarding the officers and directors of the
Debtor as of the Confirmation Date is set forth immediately
below.
B. Directors and Executive Officers of the Debtor
Executive Officers of the Debtor
Current Position and Business
Experience During the
Name Birthdate Past Five Years
David H. Wiggs, Jr. 05/01/47 Chairman of the Board since
May 1989; Chief Executive
Officer since March 1989;
President and a Director since
January 1988; Chief Operating
Officer from January 1988 to
March 1989.
Curtis L. Hoskins 04/02/37 Director since April 1992;
Executive Vice President and
Chief Operating Officer since
May 1990; Executive Vice
President, PacifiCorp (Utah
Power & Light Division), Salt
Lake City, Utah, from January
1989 to April 1989.
William J. Johnson 07/11/41 Senior Vice President --
Financial Group since December
1987; Chief Financial Officer
since December 1986.
William W. Royer 11/30/44 Senior Vice President since
January 1990; Senior Vice
President -- Corporate
Services from January 1988
through March 1989; Vice
President from December 1985
<PAGE> 283
to January 1988; President,
Franklin Land and Resources,
Inc., El Paso, Texas, from
March 1989 to January 1990;
President, Triangle Electric
Supply Company, El Paso, Texas
from October 1988 to March
1989.
Ignacio R. Troncoso 09/25/46 Senior Vice President --
Operations Group since May
1989; Senior Vice President --
Transmission and Distribu-
tion/Engineering from December
1987 to May 1989.
Lawrence M.
Downum, Jr. 02/02/39 Vice President -- Corporate
Services since July 1989; Vice
President since December 1983.
Eduardo A.
Rodriguez 10/04/55 Vice President since April
1992; Secretary since January
1989; General Counsel since
February 1988; Assistant
Secretary from June 1986 to
January 1989.
Frederic E. Mattson 02/02/45 Vice President -- Power Supply
since June 1989; Assistant
Vice President -- Energy
Resource and Planning from
August 1988 to June 1989;
Manager -- Resource Develop-
ment/Contracts from March 1981
to August 1988.
J. Frank Bates 05/06/50 Vice President -- Customer
Services since June 1989;
Assistant Vice President --
Customer Services from
November 1987 to June 1989.
John E. Droubay 06/21/38 Vice President and Treasurer
since September 1990;
President, Chief Executive
Officer and Chairman of the
Board, Energy Mutual Insurance
Company and Electric Life
Insurance Company, Salt Lake
City, Utah, from May 1989 to
September 1990; Treasurer,
Utah Power & Light Company,
<PAGE> 284
Salt Lake City, Utah, from May
1981 to January 1989.
Russell G. Gibson 12/30/52 Controller and Chief
Accounting Officer since
September 1989; for more than
3 years prior thereto, partner
and member, Coopers & Lybrand
(certified public
accountants).
Gary R. Hedrick 10/04/54 Vice President --
Financial Planning and Rate
Administration since September
1990; Treasurer from February
1988 to September 1990;
Assistant Vice President,
Finance from February 1990 to
September 1990.
John C. Horne 11/17/48 Vice President -- Transmission
Systems Division since August
1989; Group Manager -- Trans-
mission and Distribution from
November 1987 to August 1989.
Robert C. McNiel 01/26/47 Vice President -- New Mexico
Division since December 1989;
Assistant Vice President --
New Mexico Division from July
1989 to December 1989; Manager
- Energy Marketing from
February 1988 to July 1989.
James A. Mayhew 01/10/55 Vice President -- Rate and
Energy Utilization since
September 1990; Vice President
-- Rates & Regulatory Affairs
from August 1989 to September
1990; Assistant Vice President
-- Rates & Regulatory Affairs
from June 1989 to August 1989.
* * * * *
<PAGE> 285
Directors Of The Debtor
Principal Occupation and Employment
During the Past Five Years
Employment During
Name Birthdate Since the Past Five Years
Class I Directors Whose Terms Expire In 1996
Josefina A. Salas-Porras 09/30/26 1979 Educator (consultant
in second language
and multi-cultural
training); Trustee,
Freedom Forum,
Arlington, Virginia
(charitable
foundation).
Sidney G. Baucom 10/01/30 1992 Of Counsel (since
1989), Jones, Waldo,
Holbrook &
McDonough, Salt Lake
City, Utah (law
firm); Executive
Vice President,
General Counsel and
Director for more
than two years prior
to March 1989, Utah
Power & Light
Company, Salt Lake
City, Utah.
Curtis L. Hoskins 04/02/37 1992 see above
Class II Directors Whose Terms Expire In 1994
Wilfred E. Binns 09/13/34 1983 President and sole
share- holder, Binns
Construction &
Realty, Inc., Las
Cruces, New Mexico.
David H. Wiggs, Jr. 05/01/47 1988 see above
George W. 04/30/39 1992 President and Chief
Edwards, Jr. Executive Officer,
Kansas City Southern
Railway Company of
Kansas City,
Missouri since April
- -------------------------
* When no dates are given, person has held position for more than
five years.
<PAGE> 286
1991; Executive Vice
President, Kansas
City Southern
Industries, Kansas
City, Missouri,
since April, 1991;
Chairman of the
Board and Chief
Executive Officer,
United Illuminating
Company, New Haven,
Connecticut, from
1985 to 1991.
Class III Directors Whose Terms Expire In 1995
Thomas C. Simpson 10/24/41 1983 President and
principal
shareholder, Simpson
Farms, Inc., Las
Cruces, New Mexico.
James A. Cardwell 03/01/32 1990 President and
principal
shareholder,
Cardwell
Investments, Inc.,
El Paso, Texas
(multi- business
holding and
investment company).
Wilson K. 09/07/27 1992 Chairman of the
Cadman Board, President and
Chief Executive
Officer, Kansas Gas
& Electric Company,
Wichita, Kansas,
until his retirement
in May 1992.
* * * * *
<PAGE> 287
C. Executive Compensation
The following information is furnished with respect to
each of the five most highly compensated executive officers of
the Debtor and the executive officers of the Debtor as a group,
while serving as such, based on annualized salaries as of
March 31, 1993:
Name of Individual
or Number of Capacities Cash
Persons in Group in Which Served Compensation
David H. Wiggs, Jr. . . . . Chairman of the
Board, President
and Chief
Executive Officer $ 397,500
Curtis L. Hoskins . . . . . Executive Vice
President and
Chief Operating
Officer $ 220,000
William J. Johnson. . . . . Senior Vice
President -
Financial Group
and Chief
Financial Officer $ 155,875
Ignacio R. Troncoso . . . . Senior Vice
President -
Operations Group $ 139,750
Eduardo A. Rodriguez. . . . Vice President, $ 137,500
General Counsel
and Secretary
All Executive Officers
as a Group (15 persons) . . . . . . . . . . . . $2,179,832
D. Compensation and Benefits Plans
Appendix B contains a summary of the employee benefit
plans in which the executive officers and directors, as indi-
cated, of the Debtor currently participate and a summary of their
proposed treatment under the Plan and Merger, subject to the
modifications disclosed in the Merger Agreement and summarized in
Appendix B.
- --------------------------------------
* Includes salaries and employee contributions pursuant to the
401(k) savings plan. Such officers may also receive cash
payments for accrued and unused vacation time pursuant to
generally applicable policy of the Debtor.
<PAGE> 288
E. Post-Effective Date Management
The Restated Articles of Incorporation and By-laws of
Debtor shall be amended in connection with the Merger and shall
be the Restated Articles of Incorporation and By-laws of Reorgan-
ized EPE, and will remain such until amended as provided by law.
Immediately after the Effective Time (as defined in the Merger
Agreement), the Board of Directors of the Surviving Corporation
(as defined in the Merger Agreement), shall be comprised of CSW's
Chief Executive Officer, the Chief Executive Officer of
Reorganized EPE, five (5) other officers of Reorganized EPE and
six (6) outside directors who are residents of Reorganized EPE's
service area or such other persons as shall be designated by CSW
prior to the Effective Time. The officers of Reorganized EPE
immediately after the Effective Time shall be designated by CSW
in consultation with Reorganized EPE, who shall continue as
officers of Reorganized EPE until their successors have been duly
elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the Reorganized EPE's
Articles of Incorporation and By-laws.
XIV. CONDITIONS PRECEDENT TO CONFIRMATION OF THE PLAN
UNDER THE CODE
A. The Confirmation Hearing and Objections
In order for the Plan to be consummated, the Bankruptcy
Court must confirm the Plan in accordance with Section 1129 of
the Code. The Bankruptcy Court has scheduled a hearing on con-
firmation of the Plan (the "Confirmation Hearing") at 11:00 A.M.,
on December 6, 1993, before the Honorable Frank R. Monroe, United
States Bankruptcy Judge, Courtroom No. 1, 816 Congress Avenue,
Austin, Texas. The Confirmation Hearing on the Plan may be
adjourned from time to time without further notice except for the
announcement of such adjournment by the Bankruptcy Court at such
hearing.
APS and the other Palo Verde Participants believe,
although the Debtor disagrees, that the Liquidating Trustee, his
or her compensation, background, duties, and future operating
relationships to the Equity Committee, EPE, and CSW are material
disclosures and that such disclosures are necessary to meet
confirmation requirements, including under 11 U.S.C.
Section 1129(a)(5).
Section 1128(b) of the Code provides that any party-in-
interest may object to confirmation of the Plan. Pursuant to the
Disclosure Statement Approval Order, any objections to
confirmation of the Plan must be in writing, must set forth the
objecting party's standing to assert such objection, and the
basis of such objection, and must be filed with the Bankruptcy
Court and served upon the Debtor, the Debtor's counsel and those
<PAGE> 289
parties listed on the Master Service List maintained in this
Case, together with proof of service, on or before 5:00 P.M.
(Central Standard Time) on November 15, 1993.
Objections to confirmation are governed by Bankruptcy
Rule 9014 and the Disclosure Statement Approval Order. PURSUANT
TO ORDER OF THE BANKRUPTCY COURT, UNLESS AN OBJECTION TO CON-
FIRMATION IS DULY AND TIMELY FILED, THE BANKRUPTCY COURT IS NOT
REQUIRED TO CONSIDER ANY SUCH OBJECTION.
B. Confirmation Requirements
In order for a plan of reorganization to be confirmed,
the Code requires, among other things, that such plan be proposed
in good faith, that the proponent of such plan disclose specified
information concerning payments made or promised to insiders, and
that such plan comply with the applicable provisions of Chapter
11 of the Code. Section 1129(a) of the Code also imposes
requirements that each dissenting member of a class receive at
least as much under the plan as it would receive in a Chapter 7
liquidation of the debtor, that at least one class of impaired
claims has accepted the plan, that confirmation of such plan is
not likely to be followed by the need for further financial
reorganization, and that such plan be "fair and equitable" with
respect to each class of claims or interests which is impaired
under the plan and fails to accept the plan by the required
majorities. The bankruptcy court shall confirm a plan only if it
finds that all of the applicable requirements enumerated in
Section 1129(a) of the Code have been met, or, if only the
requirements of Section 1129(a)(8) have not been met, all of the
applicable requirements enumerated in Section 1129(b) of the Code
have been met. The legal requirements are in addition to the
conditions to confirmation and to the Effective Date which are
set forth in the Plan and discussed above.
Section 1129(a) provides that:
(1) The plan must comply with the applicable
provisions of the Code.
(2) The proponent of the plan must comply with
the applicable provisions of the Code.
(3) The plan must be proposed in good faith and
not by any means forbidden by law.
(4) Any payment made or to be made by the
proponent, by the debtor, or by a person issuing
securities or acquiring property under the plan, for
services or for costs and expenses in or in connection
with the case, or in connection with the plan and
incident to the case, must have been approved by, or is
<PAGE> 290
subject to the approval of, the court as reasonable;
[sic]
(5)(A)(i) The proponent of the plan must
disclose the identity and affiliations of any
individual proposed to serve, after confirmation
of the plan, as a director, officer, or voting
trustee of the debtor, an affiliate of the debtor
participating in a joint plan with the debtor, or
a successor to the debtor under the plan; and
(ii) the appointment to, or continuance in, such
office of such individual must be consistent with the
interests of creditors and equity security holders and
with public policy; and
(B) the proponent of the plan must disclose
the identity of any insider that will be employed
or retained by the reorganized debtor, and the
nature of any compensation for such insider.
(6) Any governmental regulatory commission with
jurisdiction, after confirmation of the plan, over the
rates of the debtor must approve any rate change
provided for in the plan, or such rate change must be
expressly conditioned on such approval.
(7) With respect to each impaired class of
claims or interests
(A) each holder of a claim or interest
of such class
(i) must accept the plan; or
(ii) must receive or retain under the plan
on account of such claim or interest property of a
value, as of the effective date of the plan, that
is not less than the amount that such holder would
so receive or retain if the debtor were liquidated
under chapter 7 of the Code on such date; or
(B) if section 1111(b)(2) of this
title applies to the claims of such class,
each holder of a claim of such class must
receive or retain under the plan on account
of such claim property of a value, as of the
effective date of the plan, that is not less
than the value of such holder's interest in
the estate's interest in the property that
secures such claims.
<PAGE> 291
(8) With respect to each class of claims or
interests
(A) such class must accept the plan; or
(B) such class must not be impaired
under the plan.
(9) Except to the extent that the holder of a
particular claim has agreed to a different treatment of
such claim, the plan must provide that
(A) with respect to a claim of a kind
specified in section 507(a)(1) or 507(a)(2)
of the Code, on the effective date of the
plan, the holder of such claim will receive
on account of such claim cash equal to the
allowed amount of such claim;
(B) with respect to a class of claims
of a kind specified in section 507(a)(3),
507(a)(4), 507(a)(5) or 507(a)(6) of the
Code, each holder of a claim of such class
will receive
(i) if such class has
accepted the plan, deferred cash
payments of a value, as of the
effective date of the plan, equal
to the allowed amount of such
claim; or
(ii) if such class has not
accepted the plan, cash on the
effective date of the plan equal to
the allowed amount of such claim;
and
(C) with respect to a claim of a kind
specified in section 507(a)(7) of the Code,
the holder of such claim must receive on
account of such claim deferred cash payments,
over a period not exceeding six years after
the date of assessment of such claim, of a
value, as of the effective date of the plan,
equal to the allowed amount of such claim.
(10) If a class of claims is impaired under the
plan, at least one class of claims that is impaired
under the plan must accept the plan, determined without
including any acceptance of the plan by any insider.
<PAGE> 292
(11) Confirmation of the plan must not likely be
followed by the liquidation, or the need for further
financial reorganization, of the debtor or any
successor to the debtor under the plan, unless such
liquidation or reorganization is proposed in the plan.
(12) All fees payable under section 1930, as
determined by the court at the hearing on confirmation
of the plan, must have been paid or the plan must
provide for the payment of all such fees on the
effective date of the plan.
(13) The plan must provide for the continuation
after its effective date of payment of all retiree
benefits, as that term is defined in section 1114 of
the Code, at the level established pursuant to
subsection (e)(1)(B) or (g) of section 1114 of the
Code, at any time prior to confirmation of the plan,
for the duration of the period the debtor has obligated
itself to provide such benefits.
If all classes of impaired claims do not accept the
Plan (Code Section 1129(a)(8)), the Debtor will seek to confirm
the Plan under Section 1129(b) of the Code. The Plan provides
for any non-assenting Class of creditors in accordance with that
Section.
THE DEBTOR BELIEVES THAT THE PLAN SATISFIES OR WILL SATISFY, AS
OF THE CONFIRMATION DATE, ALL OF THE REQUIREMENTS FOR
CONFIRMATION; HOWEVER, THE DEBTOR HAS ALSO RESERVED THE RIGHT,
PURSUANT TO SECTIONS 6.5 AND 6.6 OF THE PLAN, TO FURTHER MODIFY
THE PLAN TO COMPLY WITH SUCH REQUIREMENTS
As noted previously, the Plan divides the Claims
(excluding Administrative Expenses and Priority Tax Claims) and
Interests into 26 Classes and sets forth the treatment afforded
each Class. Claimants in Classes 4(a), 4(b), 4(c), 4(d), 4(e),
4(f), 4(g), 4(h), 4(i), 7, 8, 9, 10(a), 10(b), 14 are not
impaired under the Plan. Accordingly, holders of Claims in such
Classes are conclusively presumed to have accepted the Plan and
are not offered the opportunity to vote. Because claimants in
Classes 1, 2, 3, 5(a), 5(b), 5(c), 6, 11, 12(a), 12(b), 13, 15
and 16 are impaired,the holders of Claims in such Classes are be
entitled to vote on the Plan.
C. Satisfaction of Conditions Precedent to
Confirmation Under the Plan and the Code
1. Satisfaction of Conditions to Confirmation
Pursuant to the Plan
The conditions to confirmation pursuant to the Plan are
described in Section VI herein.
<PAGE> 293
2. Satisfaction of Conditions Precedent to
Confirmation Under the Code
(a) Best Interests Test
Section 1129(a)(7) requires, with respect to each
impaired Class, that each holder of an Allowed Claim or Interest
in such Class either (a) has accepted the Plan or (b) will
receive or retain under the Plan on account of such Claim or
Interest, property of a value, as of the Effective Date, that is
not less than the amount that such person(s) would receive or
retain if the Debtor were liquidated under Chapter 7 of the Code
on the Effective Date. This is the so-called "best interests
test." This test considers, hypothetically, the fair salable
value of the Debtor's assets, the costs that would be incurred
and the additional liabilities that would arise. The
hypothetical Chapter 7 return to creditors is then calculated,
giving effect to secured claims, distribution priorities
established by the Code and subordination agreements.
Analysis of the hypothetical liquidation value of a
public utility is a complex exercise involving consideration of
the fair salable value of assets subject to significant
regulation, posing a danger of potentially significant
liabilities and incurring excessive costs during the period
necessary to obtain appropriate approvals. Perhaps most
significant, under state and federal law the assets of a public
utility are dedicated to the public convenience and necessity.
Ownership of assets of a public utility is subject to substantial
regulation, and the process of obtaining necessary regulatory
consents could require substantial time. In recent utility
acquisitions, the necessary approvals have taken at least one
year and generally longer.
The Debtor has analyzed a hypothetical sale of its
assets. The analysis presented here assumes that (i) all
regulatory issues are resolved and (ii) the Debtor's principal
assets can be broken up into categories and put to their highest
and best use, irrespective of their current dedication to a
particular service territory and is based on examination of the
market for such assets. Such an analysis may likely lead to
values at the high end of the range because changing these
assumptions necessarily entails lower value. Similarly such a
liquidation analysis is different from, and necessarily does not
affect, the condemnation value of the Debtor's assets under New
Mexico or Texas laws, which is intended to measure the fair
market value of the Debtor's business and plant as a going
concern.
The Debtor's principal assets can be categorized into
different classes: generating plant, transmission lines and
distribution properties.
<PAGE> 294
Class 1: Generating plant. The Debtor owns the
following generating capacity:
Name Capacity Fuel
Four Corners 104 MW Coal
Rio Grande 246 Gas (Oil Backup)
Newman 478 Gas (Oil Backup)
Copper 69 Gas (Oil Backup)
Palo Verde 320 Nuclear
A potential purchaser of these units would need to
supply its own transmission for any of these units, because the
Debtor's transmission lines link these facilities with the El
Paso service territory. Under recent legislation (the Energy
Policy Act of 1992, H.R. 776) these services could become
available, at a price, to a purchaser.
Recent sales of coal-fired facilities in the south-
western United States have been at prices ranging from $650 -
$1,100\KW. All of these sales have been subject to regulatory
approvals and have included transmission services. On the
assumptions that a buyer could be found who could obtain the
required regulatory approvals and that transmission services were
available at cost-of-service, a sale of the coal-fired generation
could generate a total value of approximately $85 million. This
figure is likely overstated in that it does not take into account
the distress sale aspects of a Chapter 7 liquidation and the
various rights of the Navajo Nation with respect to Four Corners.
Current replacement cost for new single cycle combus-
tion turbine gas-fired generation ranges from approximately $300
- - $350/KW. Based on the heat rate efficiencies of the Debtor's
existing gas-fired generating facilities, a sale of its remaining
fossil fuel facilities could potentially generate approximately
$150 million. No discount for distress sale is included in this
figure.
The determination of the liquidation valuation of the
owned Palo Verde assets is problematic for a number of reasons,
which include: (1) the operations and maintenance costs of Palo
Verde under current and foreseeable market conditions (after
giving consideration to fuel cost differentials) exceed the total
cost of obtaining comparable amounts of energy from non-nuclear
sources, such as gas or combined cycle plants; (2) any potential
value of a nuclear facility to a potential purchaser is
substantially affected by the regulatory and financial risks and
responsibilities associated with ownership of a nuclear power
plant; and (3) the hypothetical sale of the Debtor's owned
interest in Palo Verde in liquidation would probably come to
market at approximately the same time as the portion of that
facility formerly leased by the Debtor, further depressing any
offer price which may be made. For purposes of this hypothetical
<PAGE> 295
analysis, however, the owned portion of Palo Verde is ascribed a
nominal value of $900/KW, or approximately $288 million in
aggregate.
Class 2: Transmission. The Debtor's transmission
system could be valuable if sold on a liquidation basis free from
the obligation to serve the Debtor's current service territory.
Without consideration of the federal regulatory approvals
required to transmit power to Mexico, this system would allow a
purchaser to move significant amounts of power into the Mexican
market. This large market can be efficiently served by the
Debtor's transmission system. Without state or federal regula-
tion requiring service to existing customers (assumed away as
part of this liquidation analysis), this would be of significant
value. Under the assumption of no regulation and no obligation
to service existing load, the attainable value for the Debtor's
transmission properties could be as high as $350 million. This
figure is based on the transmission capacity of 1.3 million KW
and a transmission unit price of 3.5 to 4 mills.
Class 3: Distribution. The Debtor's local distribu-
tion assets, sold without any associated generation or trans-
mission assets, would be of relatively low value. Unlike the
treatment of generating assets under pending federal legislation,
distribution assets would remain subject to state regulation.
A liquidation would imply a sale for other use or scrap of the
distribution system, and not for sale as a going concern. Pro-
ceeds from a liquidation sale for scrap could amount to $50
million. For purposes of this analysis, however, distribution
assets are included at their net book value, or approximately
$151 million.
Other assets, such as receivables, are valued at
estimated realization value on a liquidation basis. This range
of value is appropriate because such assets are individually
small and will be economically difficult to collect upon or
liquidate unless purchased in an acquisition of the Debtor's
distribution assets. Cash assumed to be available at confirma-
tion is, of course, reflected at its full amount. Prepaid
expenses, intangibles, and other assets are assumed to have no
value on liquidation.
The results of this hypothetical liquidation analysis
are summarized in the table provided below. It must be noted,
however, that this analysis almost certainly overstates the
liquidation value of the Debtor. As noted above, the liquidation
value is premised on two highly unrealistic assumptions -- that
the purchaser will not be subject to the risk and the periods of
delay attributable to the need for regulatory approvals, and that
upon purchase, the Debtor's assets could be devoted to their
highest and best use, rather than dedicated to their current
service. In addition, this valuation of assets does not incorpo-
rate any discounts on purchase price associated with a distress
<PAGE> 296
sale. Finally, this analysis does not include the costs asso-
ciated with a liquidation, and the impact of liquidation under
Chapter 7 in triggering additional liabilities, including taxes
attributable to gains on depreciated assets, pension obligations,
additional claims under executory contracts, and like items.
Thus, the liquidation analysis set forth below represents the
upper limits of what might be attained through a liquidation,
assuming one were possible.
LIQUIDATION ANALYSIS
(IN MILLIONS)
ASSET CATEGORY LIQUIDATION VALUE
Generating plant
Coal fired generation $ 85
Gas fired generation 150
Nuclear generation 288
Transmission lines 350
Distribution properties 151
Total Gen., Tran, and Dist. $1,024
Cash and Temporary Investments 264
Accounts Receivable 40
Inventory 30
TOTAL $1,358
The Plan treats approximately $2.1 billion of debt,
providing Allowed Secured Claims of approximately $950 million
and Priority Claims with 100% recovery and Allowed Unsecured
Claims of approximately $1.06 billion with 95.5% recovery. This
recovery for unsecured creditors thus exceeds such creditors'
hypothetical recovery under Chapter 7. Moreover, since in
Chapter 7 there would be no recovery for equity, the Plan's
provision of recoveries for equity similarly satisfies the best
interests test of Section 1129(a)(7) of the Code. APS believes,
although the Debtor may disagree, that other offers may
constitute a more appropriate measure of the minimum value to
conditions that could satisfy the "best interests" test.
Similarly, APS believes that the Plan proposes direct and
indirect value to shareholders, notwithstanding the restrictions
<PAGE> 297
of 11 U.S.C. Section 1129(b)(2)(B), although the Debtor disagrees
with any suggestion that such treatment is improper.
(b) Acceptance by Impaired Classes
The Code requires as a condition to confirmation that
each class of claims or interests that is impaired under a
proposed plan of reorganization accept such a plan, with the
exception described in the section entitled "Confirmation Without
Acceptance By All Impaired Classes" below.
A class that is not "impaired" under a plan shall be
conclusively presumed to have accepted such plan; solicitation of
acceptances with respect to any such class is not required. A
class is "impaired" unless (i) the legal, equitable and contrac-
tual rights to which the claim or interest entitles the holder of
such claim or interest are not modified, (ii) with respect to a
claim or interest, (a) the effect of any default is cured and the
original terms of the obligation are reinstated, (b) the plan
compensates the holders of claims or interests for any damages
incurred as a result of any reasonable reliance by such holders
on any contractual provision or applicable law entitling such
holders to demand or receive accelerated payments after the
occurrence of a default and (c) the plan does not otherwise alter
the legal, equitable, or contractual rights to which the holders
of such claims or interests are entitled or (iii) the plan of
reorganization provides that on the effective date, the holder of
the claim or interest receives, on account of such claim or
interest, cash equal to the allowed amount of such claim, or,
with respect to any interest, the greater of (a) any fixed
liquidation preference to which the interest holder is entitled
or (b) any fixed price at which the debtor may redeem the
security.
A class of impaired claims has accepted a plan of
reorganization when such plan has been accepted by creditors
(other than an entity designated under Section 1126(e) of the
Code) that hold at least two-thirds in dollar amount and more
than one-half in number of the allowed claims of such class held
by creditors (other than any entity designated under Section
1126(e) of the Code) that actually vote to accept or reject the
plan. A class of interests has accepted the plan if the plan has
been accepted by holders of interests of at least two-thirds in
amount of the allowed interests of such class that actually vote
to accept or reject the plan. Holders of claims or interests who
fail to vote are not counted as either accepting or rejecting the
plan.
A class of claims or interests that does not receive or
retain any property under a plan of reorganization is deemed not
to have accepted the plan, although members of that class are
permitted to consent, or waive objections, to its confirmation.
<PAGE> 298
(c) Confirmation Without Acceptance by All
Impaired Classes
In the event that any impaired Class of Claims or
Interests does not accept or is deemed not to have accepted a
plan of reorganization, pursuant to section 1129(b) of the Code,
the Bankruptcy Court may still confirm the Plan at the request of
the debtor if, as to each impaired Class which has not accepted
the plan, the plan "does not discriminate unfairly" and is "fair
and equitable."
With respect to a non-accepting class of impaired
secured claims, "fair and equitable" includes the requirement
that (i) each holder of a claim in such class retains its liens
to the extent of its allowed claim and receives deferred cash
payments at least equal to the allowed amount of its claim with a
present value as of the effective date of such plan at least
equal to the value of such creditor's interest in the debtor's
interest in the property securing the creditor's liens, (ii) if
property subject to the lien of such holder is sold free and
clear of that lien, with that lien attaching to the proceeds of
the sale, and such lien proceeds will be treated in accordance
with clauses (i) or (iii) hereof or (iii) the impaired secured
creditor realizes the "indubitable equivalent" of its claim under
the plan.
With respect to a non-accepting class of impaired
unsecured claims, "fair and equitable" includes the requirement
that (i) each impaired unsecured creditor receives or retains
property of a value equal to the amount of its allowed claim or
(ii) the holders of claims and interests in classes that are
junior to the claims of the dissenting class will not receive or
retain any property under the plan. The Debtor anticipates that
Classes 12 and 13 will eventually accept the Plan and that the
cram-down provisions of Section 1129(b) will not be resorted to
in respect of such classes; in the event that Classes 12 and 13
do not accept the Plan, however, significant litigation could
develop and the Court could be faced with the complex issues
presented by the Debtor's adversary proceeding with the Owner
Trustee and the Palo Verde Indenture Trustees.
With respect to a non-accepting class of impaired
equity interests, "fair and equitable" includes the requirement
under Code Section 1129(b)(2)(C) that (i) each holder of an
impaired interest in such class receives or retains property of a
value equal to the greatest of (a) the allowed amount of any
fixed liquidation preference to which such holder is entitled,
(b) any fixed redemption price to which such holder is entitled,
or (c) the value of such interest or (ii) the holders of all
interests that are junior to the interests of the dissenting
class will not receive or retain any property under the plan.
<PAGE> 299
In the event that an impaired Class votes or is deemed
not to have accepted the Plan, the Debtor will seek to confirm
the Plan pursuant to Section 1129(b) of the Code with respect to
such Class and will ask the Bankruptcy Court to determine at the
Confirmation Hearing that the Plan is fair and equitable and does
not discriminate unfairly against such impaired Class.
If the Court, prior to the Confirmation Date,
determines that Section 1122 of the Code requires a Class or sub-
Classes of creditors to be bifurcated into sub-Classes or further
sub-Classes, as the case may be, the Plan shall be deemed to be
modified accordingly and the treatment proposed for each Class in
the Plan as filed shall be applicable, pro rata, to such sub-
classes.
(d) Voting Instructions
As a holder of a Voting Claim which will be impaired,
your vote on the Plan is important. If you hold a Voting Claim
or Interest, a Ballot to be used for voting to accept or reject
the Plan is enclosed with this Disclosure Statement. Completed
Ballots should be either returned in the enclosed envelope or
sent to:
McCormick & Pryor
26 Broadway
New York, NY 10004
Attn: Mr. John McCormick
To the extent that any of the Debtor's securities are
held in the name of an entity (the "nominal holder") other than
that of the beneficial holder of such security, and to the extent
that such beneficial securityholder is entitled to vote on the
Plan pursuant to Code Section 1126, the Debtor shall provide for
reimbursement, as an administrative expense, of all the
reasonable expenses of the nominal holder in distributing the
Plan, Disclosure Statement, ballots and other Plan election
materials to said beneficial securityholder.
In the event that any Claim or Interest is disputed as
of the Plan voting period, then, pursuant to Bankruptcy
Rule 3018(a), the holder of such disputed claim may petition the
Bankruptcy Court, after notice and hearing, to allow the Claim or
Interest temporarily for voting purposes in an amount which the
Bankruptcy Court deems proper.
<PAGE> 300
BALLOTS MUST BE RECEIVED ON OR BEFORE 5:00 P.M.
CENTRAL STANDARD TIME, ON NOVEMBER 15, 1993 (THE "BALLOT DATE").
ANY BALLOTS RECEIVED AFTER THAT TIME WILL NOT BE COUNTED. ANY
BALLOT WHICH IS NOT EXECUTED BY A PERSON AUTHORIZED TO SIGN SUCH
BALLOT WILL NOT BE COUNTED.
BY ENCLOSING A BALLOT, THE DEBTOR IS NOT REPRESENTING
THAT YOU ARE ENTITLED TO VOTE ON THE PLAN. BY INCLUDING A CLAIM
AMOUNT ON THE BALLOT, THE DEBTOR IS NEITHER ACKNOWLEDGING THAT
YOU HAVE AN ALLOWED CLAIM OR INTEREST IN THAT AMOUNT NOR WAIVING
ANY RIGHTS IT MAY HAVE TO OBJECT TO YOUR VOTE OR CLAIM.
IF YOU HAVE ANY QUESTIONS REGARDING THE PROCEDURES FOR
VOTING ON THE PLAN, CONTACT McCORMICK & PRYOR, 26 BROADWAY, NEW
YORK, NEW YORK 10004, (212) 968-9090 OR ONE OF THE FOLLOWING
ATTORNEYS FOR THE DEBTOR:
SIDLEY & AUSTIN WINSTEAD SECHREST & MINICK P.C.
One First National Plaza 100 Congress Avenue, Ste. 800
Chicago, IL 60603 Austin, TX 78701
(312) 853-7000 (512) 474-4330
Attn: David W. Wirt Attn: Paul E. Heath
XV. OTHER MATTERS
A. Collectibility of Accounts Receivable
Approximately 73% of the Debtor's total revenues for
the year ended December 31, 1993 were generated from sales of
electricity to Texas and New Mexico retail customers. The
balance of the Debtor's revenues are generated through: (i)
negotiated long-term contracts with wholesale customers, (ii)
sales to CFE pursuant to a long-term contract and (iii) economy
energy sales to other utilities which are based on current market
prices. For the three months ending March 31, 1993, IID, a FERC
jurisdictional wholesale customer, accounted for 10.8% of
operating revenues. No retail customer accounted for more than
3% of the Debtor's revenues.
At March 31, 1993, accounts receivable aggregated $48
million as follows:
(In thousands)
Retail:
Billed revenue $31,028
Accrued unbilled revenues 11,075
-------
Sub-total 42,103
Wholesale - sales for resale 10,086
Economy sales 426
Other 1,379
------
<PAGE> 301
Total 53,994
Less uncollectible reserve 5,826
------
$48,168
Since 1987, the Debtor's revenues have increased at an
average annual rate of approximately 9.0%. Such growth has
resulted in a corresponding growth in the Debtor's outstanding
accounts receivable balances. A substantial portion of the
Debtor's recent sales growth is tied to (i) the growth in sales
to CFE resulting from a contract entered into in May 1991, (ii) a
50 MW increase in contingent sales to IID beginning in May 1991,
(iii) increase in sales to a local industrial customer beginning
August 1991 and (iv) periodic increases in rates in each of the
Debtor's regulatory jurisdictions. Notwithstanding the growth in
sales as discussed above, the Debtor experiences some seasonality
in its sales volume and outstanding receivables by quarter
because of climate changes in the service territory. Typically,
the June through September months experience warmer temperatures
which result in increased electricity sales. Similarly, average
accounts receivable during June through September is typically
greater than the average balance of the other months.
Generally, the Debtor's historical bad debt expense
approximates industry averages, and with the exception of three
commercial customers representing aggregate annual revenues to
the Debtor of approximately $13.8 million who are experiencing
financial difficulties, the Debtor believes that substantially
all accounts receivable are collectible. Two of the three
commercial customers, El Paso Refinery, L.P. and Border Steel
Rolling Mills, Inc., filed for reorganization under Chapter 11 of
the Code on October 23, 1992 and March 4, 1993, respectively.
The Debtor has a pre-petition unsecured claim of approximately
$1.9 million against the refinery, and had annual revenues of
approximately $7 million from the customer prior to bankruptcy.
In November 1992, the Court ordered the refinery to cease
operations except those necessary to operate in a warm shut down
mode. On November 25, 1992, the Court appointed an examiner with
expanded powers and duties who was subsequently given exclusive
control over the debtor's cash and bank accounts and disposition
of other assets. On May 4, 1993, a group of secured creditors
foreclosed upon certain of the refinery's assets. Such secured
creditors have stated that they are currently negotiating to
restart the operations of the facility. As of March 4, 1993,
Border Steel owed the Debtor approximately $2.7 million, which
will be treated as an unsecured pre-petition claim in the
customer's bankruptcy case. The customer's operations have
slowed greatly in the period immediately following the bankruptcy
filing, but it is too early to assess whether there will be any
long-term impact on the level of sales to this customer. Because
of the uncertainty of recovery of the pre-petition amount owed
<PAGE> 302
the Debtor by Border Steel and El Paso Refinery, the Debtor has
recorded a loss reserve equal to 100% of the amounts.
As of December 31, 1992, overdue outstanding accounts
receivable due to the Debtor approximated $6.3 million which
includes $4.6 million of prepetition amounts related to Border
Steel and El Paso Refinery.
B. Voidable Transfer Analysis
The Plan provides for payment of at least ninety
percent (95.5%) of Allowed Claims. Under these circumstances,
pursuit of avoidance claims is unlikely to provide any
significant benefit to the estate. Nevertheless, in conformance
with the Local Rules of the Bankruptcy Court, the following is a
description of voidable transfers.
Fraudulent Transfers. Generally speaking, fraudulent
transfer law is designed to avoid two types of transactions: (i)
conveyances that constitute "actual fraud" upon creditors and
(ii) conveyances that constitute "constructive fraud" upon
creditors. In the bankruptcy context, fraudulent transfer
liability arises under Sections 548 and 544 of the Code. Section
548 permits a bankruptcy trustee or debtor in possession to
"reach back" for a period of one (1) year and avoid fraudulent
transfers made by the debtor or fraudulent obligations incurred
by the debtor. Section 544 permits a trustee or debtor in
possession to apply applicable state fraudulent transfer law.
Assuming that Texas state law were to apply, a bankruptcy trustee
could challenge conveyances, transfers or obligations made or
incurred by the Debtor within the past four (4) years. However,
under Section 544 of the Code, it is necessary to establish that,
at the time of the challenged conveyance or obligation, that
there in fact existed a creditor whose claim was unpaid as of the
Petition Date.
The Debtor has not conducted an analysis to determine
whether any transfers during the applicable limitations periods
might (assuming insolvency) be characterized as fraudulent
conveyances.
Preferences. Under federal bankruptcy law, a trustee
in bankruptcy may avoid transfers of assets of a debtor as a
"preferential transfer." To constitute a preferential transfer,
the transfer must be (i) of the debtor's property, (ii) to or for
the benefit of a creditor, (iii) for or on account of an antece-
dent debt, (iv) made while the debtor was insolvent, (v) made
within ninety (90) days before the filing of a bankruptcy peti-
tion or made within one (1) year if to an "insider" and (vi) a
transfer that enables the creditor to receive more than it would
receive under a Chapter 7 liquidation of the debtor's assets.
The Code creates a rebuttable presumption that a debtor was
<PAGE> 303
insolvent during the ninety (90) days immediately prior to the
filing of the bankruptcy petition.
Within the ninety (90) day period immediately preceding
the Petition Date, substantial payments were made by the Debtor.
Payments were made for the following:
(i) outside services (legal, accounting, finan-
cial advisors and consulting);
(ii) parts, equipment and real and personal
property lease payment (not including Palo
Verde Leases);
(iii) local, state and federal taxes (including
property, sales, gross receipts and employee
withholding);
(iv) fuel (primarily natural gas) and related
transportation costs;
(v) interest and principal payments on outstand-
ing obligations; and
(vi) trade vendors and miscellaneous obligations.
The Debtor has not conducted a full analysis of the
payments described above to determine the propriety of such
payments or their susceptibility to avoidance as preferences. A
complete analysis would include a review of the amount of pay-
ment, the nature of goods or services or other obligations that
gave rise to the payment in each of the above-described cate-
gories of payments, and availability of the various statutory
defenses to preference liability. Although the analysis is not
yet completed, the Debtor has determined that a substantial
portion of the payments made during the ninety (90) day period
immediately preceding the Petition Date were payments of fees and
expenses for professionals (legal, accounting and financial
advisors). Such professionals were retained by the Debtor and
certain of its primary creditors in connection with the ill-fated
financial restructuring that the Debtor pursued with its primary
creditors. In the Debtor's opinion, while the amount of such
payments is not insignificant, most of such payments were
appropriately paid in the ordinary course of operations, and the
recapture of such amounts would not change the proposed recovery
to the Debtor's creditors pursuant to the Plan. In addition,
recovered preferences likely would result in the reinstatement of
the obligations to which the avoided payments relate. Inasmuch
as the Plan contemplates payment of at least 95.5% of Allowed
Claims, the net effect of a preference recovery and claim
reinstatement would likely result in minimal benefit to the
Debtor's estate.
<PAGE> 304
C. Asset Valuation
Local Bankruptcy Rule 3017 for the United States
Bankruptcy Court for the Western District of Texas requires a
description of the available assets, their value at the time the
case was filed, their value at the time of filing the Plan and
the source of the valuations.
Under applicable state and federal law, a regulated
public utility company is entitled to recover the reasonable and
necessary costs of providing service, including a reasonable
opportunity to earn a full and fair return on and of prudent
investment incurred to provide utility services to its rate
payers. This is the regulatory compact between public utility
companies and their rate payers, as administered by state and
federal regulatory commissions pursuant to state and federal
constitutional requirements. Applied properly, the rates of a
public utility should be sufficient to provide for service of the
capital which financed such assets, including required interest
payments, preferred stock dividends and an allowed rate of return
on common equity that lies within an acceptable market range for
common equity investments of comparable risk levels. The City of
El Paso asserts that Texas law contains no reference to a
regulatory compact or to the concept that a utility is somehow
guaranteed a return on its expenditures.
At December 31, 1992, the Debtor had approximately
$1,703 million of net assets on its regulatory books of account,
including approximately $167 million of cash and temporary
investments. Under the terms of the Debtor's proposed rates
under the Plan, the net assets on its regulatory books of account
will increase by approximately $615 million as a result of the
repurchase of the leased Palo Verde Unit 2 and 3 assets. These
values are not determinative of the values of the Debtor as a
going concern. As of October 26, 1992, the Debtor has not made
any final determination as to such "going concern" value and the
Debtor believes it is not necessary to include such information
in this Disclosure Statement. The Debtor believes that as of
May 1, 1993 there have been no other material changes to the net
book value of its assets or its regulatory books other than
normal course capital expenditures and scheduled depreciation and
amortization and an additional approximately $167 million of
accumulated cash and temporary investments. The net book value
of net regulatory assets is not indicative of the market value of
the Debtor as an entity.
The NMPUC Staff has advised the Debtor that its
position is that regulatory assets may only be created by, and
with the approval of, state regulatory authorities and that such
assets cannot be created in, or by, the Bankruptcy Court.
According to the NMPUC Staff, whose opinion the Debtor believes
is too restricted, the value of a regulated public utility's
assets which are included in the rate base is determined by
<PAGE> 305
regulatory net book value as approved by relevant regulators and
the rates of return those regulators allow on the capital
financing those assets. The value of assets excluded from rate
base is determined by market forces.
D. Tax Attributes of the Debtor
The Debtor estimates its tax NOL carryforwards as of
December 31, 1992 are $44,500,000 from 1988, $82,100,000 from
1990, and $62,100,000 from 1991, which expire in 2003, 2005, and
2006 respectively. The Debtor also has a tax capital loss of
approximately $2,800,000 which expires in 1995. The Debtor has
investment tax credit carryforwards of approximately $28,500,000
of which $11,800,000 will expire in 2001, $11,000,000 will expire
in 2002, and $5,700,000 will expire in 2005. The Debtor also has
approximately $500,000 of AMT credit carryforwards and
approximately $69,400,000 of AMT NOL carryforwards.
XVI. RECOMMENDATION
The Debtor believes that the Plan is preferable to the
available alternatives because it provides a greater and more
timely distribution to creditors and shareholders of the estate
than would otherwise result. In addition, any alternative other
than confirmation of the Plan could result in extensive delays
and increased administration expenses resulting in potentially
smaller distributions to the holders of Claims and Interests.
XVII. CONCLUSION
The Debtor urges all holders of Claims or Interests
which are or may be impaired under the Plan to vote to accept the
Plan and to evidence such acceptance by returning their Ballots
so that they will be received by November 15, 1993.
<PAGE> 306
THE DEBTOR URGES ALL HOLDERS OF CLAIMS AND INTERESTS TO
VOTE IN FAVOR OF THE PLAN.
Respectfully submitted this 15th day of September 1993.
EL PASO ELECTRIC COMPANY
By: ______________________________
David H. Wiggs, Jr.,
Chief Executive Officer
and President
Counsel to the Debtor:
J. Ronald Trost
Shalom L. Kohn
Bryan Krakauer
SIDLEY & AUSTIN
One First National Plaza
Chicago, Illinois 60603
(312) 853-7756
Daniel C. Stewart
Berry D. Spears
WINSTEAD SECHREST & MINICK P.C.
100 Congress Ave., Suite 800
Austin, Texas 78701-4042
(512) 474-4330
<PAGE> 307
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 308
Exhibit O
Brief Statement Summarizing
CSW Choice Benefits
CSW System employees are provided a full range of retirement and
health care benefit options.
In the area of health care, the program consists of multiple
types of health care plans designed around the latest managed
care approaches. HMO and Exclusive Provider Networks are offered
in the major metropolitan areas while $200 and $500 deductible
indemnity plans are available in non-network areas. All plans
have pre-certification requirements, a managed prescription drug
benefit, a healthy pregnancy program, and separate mental health/
substance abuse benefits using an EAP gatekeeper. Coverage is
available on a pre-tax basis with participants paying approxi-
mately 20% of the cost of their coverage choice. Pre-tax
reimbursement plans are available for medical items not covered
by the traditional plans.
Retirement benefits are provided through a non-contributory
pension plan that is available after 1 year of service. Supple-
mental retirement benefits are available through participation in
a 401 K plan providing a 50% match for up to a 6% employee
contribution. This match increases to 75% after 20 years of
service.
Traditional term life and AD&D coverages are offered in the
program.
<PAGE> 309
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 310
APPENDIX A
PRINCIPAL ASSUMPTIONS FOR AND DESCRIPTION
OF PROJECTIONS
The Projections contained in Sections X, "Feasibility
of the Plan" and XI, "Financial Information, Data, Valuations and
Projections Relevant to the Debtor's Current and Future
Operations" of this Disclosure Statement should be read in
conjunction with assumptions (discussed below), qualifications
and explanations set forth herein and in the Disclosure
Statement, and the historical consolidated financial information
(including the notes and schedules thereto) of the Debtor. The
Debtor's and CSW's independent auditors have not examined or
compiled the Projections, which were prepared by the Debtor's and
CSW's internal personnel along with external investment advisors,
and accordingly assume no responsibility for them.
Assumptions
1. Demand and Energy Sales. Projected revenues are
based on annual demand and energy sales projections that increase
at an annual average of approximately 2% over the forecast
period. For the majority of retail customer classes growth
projections for the energy forecast were made using a combination
of short-term forecasting and long-term forecasting econometric
models. These models project for each rate class the expected
growth in energy (KWH) giving consideration to the impacts of
system losses, conservation programs and cogeneration.
Significant factors which affect the growth rates for retail
jurisdictions include weather, growth of large customer sales and
the overall economic development of the service territory. Sales
for resale are based on existing wholesale contracts and FERC
regulated native system sales.
Sales growth to customers in the Debtor's retail
jurisdictions is projected to average approximately 2.4% annually
over actual 1992 sales amounts during the forecast period. Sales
growth in total sales is projected to average approximately .2%
annually during the period. This takes into consideration the
fact that the wholesale contract between the Debtor and CFE has
an expiration date of December 31, 1996 and TNP has informed the
Debtor that effective January 1, 1994 they will decrease their
contract by 50 MW for 1994. The Projections assume that the TNP
load will continue at the reduced level throughout the forecast
period.
Two of the Debtor's largest retail customers are
currently in Chapter 11 as previously discussed in Section II,
"Description of the Debtor" and Section XV, "Other Matters." The
Projections assume that sales to these customers will approximate
the historical levels throughout the forecast period.
<PAGE> 311
Although the Debtor believes the energy forecast used
in deriving the operating revenues used in the Projections is
based on reasonable, carefully prepared and proper assumptions,
such revenue Projections are subject to business, economic and
other uncertainties inherent in developing projections.
The following table represents the demand and sales
forecast used in the Debtor's projections.
<PAGE>
<PAGE> 312
<TABLE>
<CAPTION>
KW
Average
Annual
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Growth
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
<C>
Native
System
Demand 974 995 1,103 1,041 1,058 1,085 1,112 1,140 1,169 1,199
2.34%
Percentage
Growth
from
Previous
Year 2.16% 10.85% (5.62)% 1.63% 2.55% 2.49% 2.52% 2.54% 2.57%
Total
System
Demand 1,302 1,333 1,347 1,326 1,344 1,221 1,247 1,275 1,305 1,335
.28%
Percentage
Growth
from
Previous
Year 2.38% 1.05% (1.56)% 1.36% (9.15)% 2.13% 2.25% 2.35% 2.30%
MWH Sales
Average
Annual
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Growth
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
- -------
Residen-
tial 1,395 1,410 1,446 1,507 1,558 1,612 1,666 1,722 1,781 1,825
3.03%
Commercial
and
Industrial
- -Small 1,555 1,594 1,635 1,697 1,745 1,795 1,848 1,906 1,974 2,033
3.02%
</TABLE>
<PAGE> 313
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Growth
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
<C>
Commercial
and
Industrial
- -Large 912 957 964 970 952 964 977 990 1,004 1,015
1.20%
Sales
to
Public
Author-
ities 997 1,015 1,021 1,019 1,035 1,052 1,069 1,089 1,109 1,129
1.39%
Total
Retail 4,859 4,976 5,066 5,193 5,290 5,423 5,560 5,707 5,868 6,002
2.38%
Sales
for
Resale 2,361 2,680 2,240 2,256 2,268 1,338 1,334 1,350 1,359 1,356
- -5.98%
Total
Sales 7,220 7,656 7,306 7,449 7,558 6,761 6,894 7,057 7,227 7,358
.21%
Percentage
Growth
from
Previous
Year 6.04% (4.57)% 1.96% 1.46% (10.55)% 1.97% 2.36% 2.41% 1.81%
</TABLE>
<PAGE>
<PAGE> 314
Historically, retail energy sales have increased at an
average of approximately 4% annually while total sales increased
at almost 6% because of the additional sales associated with
wholesale contracts and sales to Mexico. The following informa-
tion represents the Debtor's historical sales for the last 5
years.
KW
Average
Annual
1988 1989 1990 1991 1992 Growth
---- ---- ---- ---- ---- -------
Native
System
Demand 840 916 920 929 974 3.77%
Yearly
Growth 9.05% .44% .98% 4.84%
Total
System
Demand 1,002 1,076 1,098 1,142 1,302 6.27%
Yearly
Growth 7.39% 2.04% 4.01% 14.01%
MWH
Sales
Average
Annual
1988 1989 1990 1991 1992 Growth
---- ---- ---- ---- ---- -------
Resi-
dential 1,246 1,300 1,319 1,343 1,395 2.86%
Commercial
&
Industrial
Small 1,398 1,451 1,484 1,512 1,555 2.70%
Commercial
&
Industrial
Large 698 763 784 864 912 6.91%
Sales
to
Public
Author-
ities 908 948 954 957 997 2.37%
<PAGE> 315
Total
Retail 4,250 4,462 4,541 4,676 4,859 3.40%
Sales
for
Resale 1,271 1,411 1,443 1,718 2361 16.74%
Total
Sales 5,521 5,873 5,984 6,394 7,220 6.94%
Yearly
Growth 6.38% 1.89% 6.85% 12.92%
The Projections assume that the Debtor's franchise with
the City of Las Cruces, which currently expires in March 1994, is
either renegotiated or extended on essentially the same terms and
conditions as the current agreement or if no renegotiation or
extension of the franchise occurs prior to expiration of the
franchise that the Debtor has the legal right and authority under
State law to continue providing electric service within the City
of Las Cruces through the forecast period.
<PAGE> 316
Under almost any conceivable circumstance, even if all
of the Debtor's legal arguments respecting its right to continue
to provide service to Las Cruces without a franchise were
rejected, the Debtor believes that it will continue to provide
electric service to the City of Las Cruces in the absence of a
franchise for a significant time period subsequent to 1993. The
Debtor owns approximately 1,300 miles of distribution lines in
Las Cruces. Additionally, the Debtor owns a large amount of
equipment necessary to provide direct service to individual
customers located in Las Cruces such as substations, poles,
transformers, street lights and meters. The Debtor believes that
the City of Las Cruces would require at least five (5) years to
rebuild and replace the Debtor's equipment in the City of Las
Cruces. During this rebuilding and replacement period, the City
of Las Cruces would need to continue to obtain power from
Reorganized EPE and there should be no appreciable effect on the
Debtor's cash flows. The City of Las Cruces, however, may
attempt to construct the distribution system in phases, may
attempt to purchase power from third parties, and may attempt to
seek wheeling agreements from Reorganized EPE.
To the extent that Reorganized EPE ultimately loses
revenues currently projected to be received from the City of Las
Cruces, this loss would partially offset by a decrease in genera-
tion costs and purchased power requirements. Additionally, even
if the City of Las Cruces were able to build a distribution
system, Reorganized EPE may be a competitive bidder in providing
the generation source of Las Cruces' electricity needs.
According to the City, in the event that the City of
Las Cruces decides to condemn the Debtor's distribution system
within the City of Las Cruces, the City may request an order of
immediate entry which would transfer the distribution system to
the City immediately upon approval by the court. The City of Las
Cruces asserts that it would have the right to apply to FERC and
obtain an order to require the Debtor to wheel wholesale power to
the City of Las Cruces over the lines of the Debtor under such
terms and conditions as are approved by FERC. This could result
in the loss of the distribution system by the Debtor and a loss
of revenue from the sale of power within the City of Las Cruces.
The Debtor disagrees with the positions and conclusions of the
City of Las Cruces. The figures contained in the Disclosure
Statement do not reflect any of the contingencies concerning loss
of revenue within the City of Las Cruces.
As previously discussed, the contracts to provide
electric service to Holloman Air Force Base and White Sands
Missile Range expire in early 1994. Such contracts currently
provide approximately $8 million of the Debtor's annual base
revenues. The Projections assume that these contracts will be
renewed or extended on similar terms and rate levels. The loss
of revenues, should the Debtor be unable to renew or extend the
<PAGE> 317
military contracts, would be partially offset by lower generation
and purchased power costs.
Because the rate moratorium approved in NMPUC Case No.
2009 will likely end December 31, 1994, the effects of the loss
of City of Las Cruces load or the military contracts may be
further offset by a potential increase in rates to other customer
classes because of the resulting re-allocation of costs to such
classes in the New Mexico jurisdiction. The staff of
the NMPUC has advised the Debtor that it would oppose a
reallocation of costs to other New Mexico customers in the event
that Reorganized EPE loses the City of Las Cruces load or its
current military contracts. The PUCT Staff has asserted its view
that the loss of revenues from either the City of Las Cruces or
any of the military bases currently served by the Debtor would be
very significant and detrimental to the Debtor's long term
interests, notwithstanding the partial offsets by lower
generation and purchased power costs.
2. Cost of Operating and Decommissioning Palo Verde.
The Projections include the costs for operating Debtor's interest
in Palo Verde and are based on the latest five-year forecast from
the Palo Verde operating agent. Should there be changes to
operating schedules or operating regulations, including nuclear
operations at Palo Verde, there could be positive or negative
variances from current projections. Further, the Projections
include the straight line accrual of decommissioning expense to
record the current estimate of approximately $212 million (stated
in 1992 dollars) for decommissioning. The Projections reflect
funding of this obligation over the service life of the Palo
Verde units. Because very few nuclear plants have begun the
decommissioning process, however, it is difficult to predict
decommissioning costs, and such cost estimates therefore may be
understated or overstated. See related discussion on decommis-
sioning under Section II.A in the Disclosure Statement.
3. Confirmation of the Plan. The Projections assume
that the Plan will be confirmed on or about August 1, 1993 and
will become effective on or about December 31, 1994 according to
the terms set forth therein. The conditions to the effectiveness
of the Plan which are incorporated into the Projections are set
forth in Section VI "Conditions to Confirmation under the Plan"
and Section VII "Conditions to Effectiveness of the Plan" of this
Disclosure Statement.
4. Economic Conditions. The Projections assume
modest economic growth rates and increases in the prime lending
rate anticipated in the ensuing years.
5. Basis of Presentation. The American Institute of
Certified Public Accountants has issued a Statement of Position
on Financial Reporting by Entities in Reorganization Under the
Code (the "Reorganization SOP"). The Reorganization SOP is
<PAGE> 318
intended to provide guidance for financial reporting by Chapter
11 debtors during and following their Chapter 11 cases. The
Projections have been prepared in accordance with the guidelines
set forth in the Reorganization SOP up to the effective date of
the Plan.
For purposes of presentation, the Debtor has not
reflected the effects of the Plan as of the Confirmation Date
but, rather, has deferred the recognition to the Effective Date,
insofar as material unsatisfied conditions exist at the Confirma-
tion Date that are precedent to the Plan becoming binding on all
parties of interest, as discussed in Section VII, "Conditions to
Effectiveness of the Plan".
The total value of the new securities expected to be
issued aggregate $2.1 billion, which is comprised of $769 million
of CSW common stock for the purchase of the outstanding common
shares and settlement of certain debt of the Debtor; $1.265
billion of new Reorganized EPE debt securities, excluding the
potential reduction of approximately $141 million of debt which
is expected to be available as of the Effective Date (the
projections herein reflect the use of $141 million of cash
available at the Effective Date to pay down debt); and $68
million of new Reorganized EPE Preferred Stock. The exchange
price for the Debtor's common stock is equal to $3.00 per share
of the Debtor's common stock outstanding adjusted for the
disposition of certain tangible and intangible assets and
settlement of certain claims, not to exceed $1.50 per share, as
discussed in Section III.B "Summary of the Terms of the Merger
Agreement." For purposes of the Projections, the Debtor has
assumed that the exchange price is $3.00 per share at the
Effective Date without any adjustment as discussed above. The
acquisition will be accounted for by the "purchase method,"
whereby the assets and liabilities of the Debtor are restated to
reflect expected fair market value at the date of acquisition.
For purposes of the Projections, it is assumed that the purchase
price is equal to the fair value of the assets acquired and
liabilities assumed and accordingly, no goodwill has been
recorded.
Coincident with the acquisition, Reorganized EPE has
assumed that it will meet the criteria of SFAS No. 71 because the
Debtor and CSW expect that the Debtor's regulators will approve
the rate paths contemplated in the Projections. Accordingly,
Reorganized EPE has reflected a Mirror CWIP asset and a Mirror
CWIP liability in the amount of $92 million and $81 million,
respectively, at January 1, 1995. It is assumed that any other
regulatory assets recognized by Reorganized EPE's regulators have
been included in the determination of fair value of the assets
acquired and accordingly are reflected in plant in service in the
projected balance sheets.
<PAGE> 319
6. Interest Rates for Reorganization Securities. The
Projections are based on the interest rates for Reorganized
Securities if the affected Classes accept the Plan. If such
classes do not accept the Plan, the Plan contemplates that the
Bankruptcy Court could determine the Plan could be confirmed only
if the terms of the securities issued pursuant to the Plan were
modified and that the Plan would be confirmed only if such
modifications were acceptable to the Debtor and CSW.
The Plan allows that certain classes have options with
respect to the form and terms of securities issued in settlement
of such claims. Although the Projections were prepared assuming
certain options would be selected, the Debtor and CSW believe the
selection of options has no material effect on the Projections.
7. Other Post-Retirement Benefits. Effective
January 1, 1993 the Debtor began reporting its financial results
pursuant to Financial Accounting Standards Board Statement No.
106 -- Employers' Accounting for Postretirement Benefits Other
Than Pensions ("SFAS No. 106"). As of January 1, 1993, the
Debtor had an accumulated postretirement benefit obligation
("Transition Obligation") of approximately $43.4 million. The
Debtor has elected to amortize the Transition Obligation over 20
years.
The accounting under SFAS No. 106 is significantly
different from the Debtor's prior practice of accounting for
postretirement benefits other than pensions. The Debtor
previously recognized the postretirement benefit costs when paid
while SFAS No. 106 requires the accrual of service cost for the
postretirement benefits earned by employees each year and a
charge to operating income for imputed interest on the liability.
The Projections include the result of accounting under
SFAS No. 106. Operating expense included in the Projections
includes costs related to postretirement benefits of
approximately $7.2 million (includes approximately $2.2 million
related to the amortization of the Transition Obligation). The
annual cost of postretirement benefits escalates in each year of
the Projections, after 1993, at the same escalation factor
utilized in other areas of the forecast.
8. Income Taxes. Effective January 1, 1993, the
Debtor began reporting its financial results pursuant to
Financial Accounting Standards Board Statement No. 109 --
Accounting for Income Taxes ("SFAS No. 109"). SFAS No. 109
requires that income taxes be accounted for under the asset and
liability method rather than the deferral method which was
required under Accounting Principles Board Opinion No. 11 --
Accounting for Income Taxes ("APB 11"). The Debtor ceased
reporting its financial results under APB 11 effective December
31, 1992. The recognition and measurement of deferred tax assets
and liabilities under SFAS No. 109 and APB 11 differ signifi-
<PAGE> 320
cantly. Under SFAS No. 109, deferred income taxes are recognized
for the tax consequences of "temporary differences" that arise
between the financial reporting basis and the tax basis of the
Debtor's assets and liabilities. The deferred taxes are
recognized at the tax rate in effect when such amounts are
realized or settled and are recognized in each of the Debtor's
taxing jurisdictions.
As a result of the adoption of the asset and liability
method of accounting for income taxes prescribed in SFAS No. 109,
the Debtor recognized a charge to earnings in its statement of
operations on January 1, 1993 of approximately $96 million. This
charge to earnings is reflected in the 1993 projected statement
of operations as a "cumulative effect of a change in accounting
principle", included in the Projections. The charge to earnings
recognized upon adoption of SFAS No. 109 includes the recognition
of a valuation allowance of approximately $260 million. The
valuation allowance has been recognized to adjust the estimated
value of the tax attributes under the Debtor's current circum-
stances. At the Effective Date, the deferred income tax balances
have been adjusted in the Projections to reflect the tax
attributes of the assets following the application of "purchase
accounting."
9. LIBOR. The Projections assume LIBOR is 3.50% for
1993 and increases by .33% each year of the forecast period,
based upon the advice of the Debtor's and CSW's financial
advisors.
10. Accrual of Interest on First and Second Mortgage
Bonds.
The Plan provides for the issuance of additional debt
to settle the claims for unpaid prepetition and post-petition
interest and cash payments for interest on interest of the First
and Second Mortgage Bondholders and of holders of Claims arising
from or related to the Revolving Credit Facility. Under the
Plan, interest is accrued at non-default contract rates.
The Debtor's First and Second Mortgage Indentures
provide for the accrual of interest on all unpaid interest.
Additionally, the Revolving Credit Facility, which is secured by
$50 million of First Mortgage Bonds and $100 million of Second
Mortgage Bonds, and certain of the series of Second Mortgage
Bonds provide for default interest over the stated coupon rates.
Taking both interest on interest and default rates into
consideration, the accrued and unpaid prepetition and
post-petition amounts owing as of December 31, 1994 would be
approximately $20.8 million on First Mortgage Bonds,
approximately $13.4 million on Second Mortgage Bonds and
approximately $7.9 million on the Revolving Credit Facility
Bonds. These amounts include approximately $3.9 million of
prepetition interest on First Mortgage Bonds, $2.0 million of
prepetition interest on Second Mortgage Bonds and approximately
<PAGE> 321
$2.6 million of prepetition interest on the First and Second
Mortgage Bonds that secure the Revolving Credit Facility.
11. Issuance of New Letters of Credit.
The Debtor's and CSW's projected cash flows and
financial statements contemplate the issuance of four (4) letters
of credit by Citibank, Credit Suisse, and Westpac to secure
outstanding Pollution Control Bonds on terms acceptable to the
Debtor. As of May 3, 1993 the Debtor or CSW has not obtained a
binding commitment from these issuing banks as to the terms and
provisions of replacement letters of credit. Nevertheless, each
of these banks has informally indicated a willingness to issue
letters of credit with the terms set forth in the Plan under
certain terms and conditions.
12. Description of the Projections.
The Projected Balance Sheets contain: (a) the projected
financial position of the Debtor prior to the assumed consumma-
tion of transactions contemplated by the Plan at December 31,
1994; (b) the projected adjustments to such projected financial
position required to reflect the consummation of the Plan; (c)
the projected financial position of Reorganized EPE, after giving
effect to the acquisition adjustments, as of December 31, 1994;
and (d) the Projected financial position of Reorganized EPE as of
December 31, 1995 through 2001. The acquisition adjustments
reflect the assumed effects of consummation of the transactions
contemplated by the Plan, including the: (a) acquisition of the
previously leased portion of the Palo Verde Nuclear Generating
Station; (b) settlement of various liabilities related to certain
claims and fees; (c) re-adoption of SFAS No. 71, and (d) applica-
tion of "purchase accounting" for the purchase of the outstanding
common shares of the Debtor by CSW. The various acquisition
adjustments are described in the Notes to the Projected Financial
Statements. The Projected Balance Sheet as of December 31, 1994
has been prepared based upon the balance sheet as of December 31,
1992, brought forward to December 31, 1994 to reflect the
projected results of operations for the Debtor for the years
ending December 31, 1993 and 1994, as reflected in the Projected
Statements of Operations and the Projected Statements of Cash
Flows.
The Projected Statements of Operations contain: (a)
the projected results of operations of the Debtor for the years
ending December 31, 1993 and 1994 prior to the assumed consum-
mation of transactions contemplated by the Plan at December 31,
1994; (b) the projected adjustments to such projected results of
operations required to reflect the consummation of the Plan; (c)
the projected results of operations of Reorganized EPE after
giving effect to the acquisition adjustments for the year ending
December 31, 1994; and (d) the projected results of operations of
<PAGE> 322
Reorganized EPE for the years ending December 31, 1995 through
December 31, 2001.
The Projected Statements of Cash Flow contain:
(a) the projected cash flows of the Debtor for the years ending
December 31, 1993 and 1994 prior to the assumed consummation of
transactions contemplated by the Plan at December 31, 1994; (b)
the projected adjustments to such projected cash flows to reflect
the consummation of the Plan; (c) the projected cash flows of
Reorganized EPE after giving effect to the acquisition adjust-
ments for the year ending December 31, 1994 and (d) the projected
cash flows of Reorganized EPE for the years ending December 31,
1995 through December 31, 2001.
While the Debtor believes that the assumptions under-
lying the Projections for the years 1993 through 2001, when
considered on an overall basis, are reasonable in light of
current circumstances, no assurance can be or is given that the
Projections will be realized. Holders of Claims and Interests
must make their own determinations as to the reasonableness of
such assumptions and the reliability of the Projections in
reaching their determinations of whether to accept or reject the
Plan.
<PAGE> 323
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 324
APPENDIX B
COMPENSATION AND BENEFITS PLANS
The following is a summary of the primary employee
benefit plans in which the executive officers and directors of
the Debtor, as indicated, currently participate and the proposed
treatment of such plans under the Merger Agreement and Plan.
Employee Stock Purchase Plan. Under the Debtor's
Employee Stock Purchase Plan, eligible employees, including the
executive officers, are granted options on January 1 and July 1
of each year to purchase from the Debtor as of the following
June 30 and December 31, respectively, shares of Common Stock at
a price equal to the lower of a discount from the market value of
the stock on the option grant date or the market price on the
option exercise date. The option price is a discount of not more
than 15% from the fair market value of Common Stock on each grant
date. No employee can purchase more than $25,000 of stock under
the plan in any year. All employees of the Debtor who have at
least six months of service are eligible to participate in the
plan. No executive officers have purchased shares through the
plan during 1992. At July 23, 1993, 116,128 shares were reserved
for future purchases under the plan. The Debtor's Employee Stock
Purchase Plan will be terminated at the Effective Date and
outstanding options immediately prior to the Effective Date will
be converted to options to purchase CSW Common Stock under the
terms of the Merger Agreement.
Employee Stock Compensation Plan. Under the Debtor's
Employee Stock Compensation Plan, the Compensation/Benefits
Committee of the Board may award newly-issued shares of Common
Stock to employees, including executive officers, selected by
such Committee as compensation and may use such shares in lieu of
cash to pay for various employee benefits. On February 6, 1991,
the Board approved the reservation of an additional 600,000
shares for issuance under the plan, subject to regulatory
approval. At this time, such approval has not been sought or
obtained. At December 31, 1992, 605,527 shares of Common Stock
were reserved for future issuance under the plan (including the
600,000 shares subject to regulatory approval). The Debtor's
Employee Stock Compensation Plan will be terminated at the
Effective Date and will have no further force and effect under
the terms of the Merger Agreement.
Savings Plans. The Debtor offers two savings plans
(the "Savings Plans"), one for its non-union employees, including
its executive officers, and one for employees who are members of
the collective bargaining unit. Employees who have completed one
year of service with the Debtor may participate in the applicable
plan. The plan allows eligible employees to defer income
taxation on up to 15% of their salaries if they elect to have the
Debtor contribute ("elective deferrals") such amounts (within
prescribed limits) to the plan on their behalf. For 1993, the
tax law further limits the maximum amount of such elective
<PAGE> 325
deferrals to $8,945. The Debtor may make additional
contributions in cash or Common Stock to match all or a portion
of an employee's elective deferrals not in excess of 6% of
compensation (the "basic election deferrals"). In 1992 the
Debtor made contributions in cash of 50% of an employee's basic
elective deferrals and has determined to continue the same
contribution. An employee's elective deferrals are always
vested, and employees become vested in employer contributions
after three years of service. Distributions are available upon
termination of employment or upon a determination of hardship,
and participants can borrow up to a set percentage of their
elective deferrals.
Pursuant to the Merger Agreement, the Savings Plans
will be maintained by Reorganized EPE for a period of at least
two years following the Effective Date, with terms and provisions
no less favorable, in the aggregate, than the terms and provi-
sions of the Savings Plans as of the Effective Date. After such
period, the Savings Plans may be terminated, replaced or merged
into a plan maintained by CSW, with provisions allowing repayment
of all outstanding loans over the remaining term of such loan, to
the extent possible under applicable law, without regard to the
employment status of the participant.
Leveraged Employee Stock Ownership Plan. The El Paso
Electric Company Leveraged Employee Stock Ownership Plan and
Trust (the "Leveraged ESOP") provides for a Debtor contribution
for each Plan Year in an amount which, in general, will not
exceed 15% of total compensation for the Plan Year of all
participating employees or other limitations imposed by
applicable law. Shares of Common Stock are allocated to the
accounts of participating employees based on the amount of
contribution by the Debtor and the relative compensation of
participating employees. The Debtor has the right to discontinue
or temporarily suspend contributions to the Leveraged ESOP. The
Debtor made no contributions to the Leveraged ESOP for 1992.
In October 1985, the Leveraged ESOP obtained an
Acquisition Loan of $20 million, which was secured by the shares
purchased with the proceeds of the loan and was guaranteed by the
Debtor (an "Acquisition Loan"). Proceeds of the Acquisition Loan
were used to purchase 1,297,051 shares of Common Stock in the
open market for allocation under the plan. Interest at a
specified percentage of prime rate is payable quarterly. The
final principal payment of $2,500,000 was due on October 22,
1992. The Debtor currently is in default under the Pledge and
Security Agreement related to its guaranty of the Leveraged
ESOP's Acquisition Loan. As a result of the Debtor's filing
under Chapter 11 of the Code, the Debtor has not made any
payments under its guaranty. The Leveraged ESOP did not make the
quarterly interest payments of approximately $32,000 that were
due each of April 1, 1992, July 1, 1992 and October 1, 1992 or
the final principal payment that was due October 22, 1992. See
Article IV of the Disclosure Statement for a description of the
<PAGE> 326
unsecured claim held by the lender. At December 31, 1992,
1,134,920 shares purchased by the Leveraged ESOP had been
allocated to the accounts of the participants and 162,131
unallocated shares were held as collateral for the Acquisition
Loan.
A participant's interest in his or her account in the
Leveraged ESOP vests after the completion of five years of
service or upon reaching normal retirement age of 65.
Distributions are available upon termination of employment and
are made in the form of whole shares of Common Stock credited to
the participant's account and cash for the value of any
fractional share or any unexpended balance in the account. A
participant has the right to direct the voting of the Common
Stock credited to his or her account.
The Board of Directors of the Debtor has approved the
termination of the Leveraged ESOP and the distribution of assets
to participants following the resolution of the remaining
interest and principal obligations related to the Acquisition
Loan. The termination and distribution are contingent upon
receipt of favorable rulings from appropriate federal agencies,
which the Debtor anticipates may take one or more years to
obtain. Under current provisions of the Internal Revenue Code,
participants who receive distributions following the termination
of the plan can "rollover" the distribution into another
qualified plan, such as an individual retirement account, within
a prescribed period of time and avoid any adverse tax
consequences. Otherwise, a participant generally will incur a
penalty for early withdrawal and be required to pay applicable
tax on the amount of the distribution.
If the Leveraged ESOP has not been terminated and
assets distributed prior to the Effective Date, Reorganized EPE
may choose to terminate, amend, modify or maintain the Leveraged
ESOP. Any shares of the Debtor's Common Stock held within the
Leveraged ESOP trust at the Effective Date will be converted to
shares of CSW Common Stock on the same basis as other shares of
the Debtor's Common Stock.
Tax Credit Employee Stock Ownership Plan. The Debtor
maintains an Employee Stock Ownership Plan which qualified as a
payroll-based tax credit employee stock ownership plan (the
"PAYSOP") under prior tax law. The PAYSOP has been inactive
since December 31, 1986 except for maintaining the participants'
accounts existing on December 31, 1986. Under the PAYSOP, a
participant has the right to direct voting on the Common Stock
credited to his or her account. Each participant in the PAYSOP
has at all times a nonforfeitable vested interest in
contributions allocated to his or her account. Distributions
generally are available upon termination of employment. However,
upon request by a participant, and with the consent of the PAYSOP
trustee, shares that have been held in a participant's account
for 84 months may be distributed to the participant.
<PAGE> 327
Distributions are made in full shares of Common Stock and cash in
lieu of any fractional share.
The Board of Directors of the Debtor approved the
termination of the PAYSOP effective December 31, 1992 and the
distribution of assets to participants. A request for approval
of the termination was filed with the Internal Revenue Service on
or about March 17, 1993 and the Debtor anticipates that the
process of obtaining approvals from appropriate federal agencies
and subsequent distribution of plan assets may take in excess of
one year. Termination of the plan will eliminate the
administration costs of the plan, which have been borne by the
Debtor. Under current provisions of the Internal Revenue Code,
participants who receive distributions following the termination
of the plan can "rollover" the distribution into another
qualified plan, such as an individual retirement account, within
a prescribed period of time and avoid any adverse tax
consequences. Otherwise, a participant generally will incur a
penalty for early withdrawal and be required to pay applicable
tax on the distribution. If the Plan assets have not been
distributed prior to the Effective Date, the shares of the
Debtor's Common Stock held in the trust will be converted to
shares of CSW Common Stock on the same basis as other outstanding
shares of the Debtor's Common Stock.
Employee Stock Option Plan. The El Paso Electric
Company Stock Option Plan (the "Employee Stock Option Plan")
authorizes the issuance of up to 3,000,000 shares of Common Stock
thereunder (subject to increase or decrease for changes in the
capital structure of the Debtor due to such actions as merger,
reorganization or recapitalization).
The Compensation/Benefits Committee of the Board is
authorized to grant either Incentive Stock Options under section
422A of the Tax Code or non-qualified stock options pursuant to
the Employee Stock Option Plan and to determine the number of
options to be granted to any particular employee. All options
granted to date have been non-qualified stock options. Under the
terms of the Employee Stock Option Plan, the options may be
exercised from the date of the grant until the expiration of the
term of the option, which cannot exceed ten years from the date
of the grant, in whole or in such installments as the
Compensation/Benefits Committee determines. Stock option awards
are not transferable other than by will or by the laws of descent
and distribution and may be exercised during the grantee's
lifetime only by the grantee. The number of shares subject to
options is adjusted proportionately for stock dividends, stock
splits and similar changes. Each holder of options has the
right, immediately prior to any dissolution or liquidation of the
Debtor or in the event of the acquisition of 50% or more of the
outstanding Common Stock of the Debtor as a result of any cash
tender offer or exchange offer, other than one made by the
Debtor, to exercise his or her options in whole or in part, to
the extent that they have not been previously exercised, without
<PAGE> 328
regard to any installment exercise provisions. Options covering
2,996,025 of the 3,000,000 shares authorized for issuance under
the Employee Stock Option Plan are currently outstanding and the
remaining 3,975 options have been exercised. At present,
approximately 50 employees (including executive officers) are
eligible to participate in the plan.
The table below lists outstanding stock options for the
five most highly compensated executive officers for 1993, all
current executive officers as a group (15 persons) and all
current employees (excluding executive officers) as a group (34
persons) who have been granted options from January 1, 1988
through December 31, 1992. The number of options set forth in
the table corresponds to the number of shares to which such
options relate.
Under the Merger Agreement, the Employee Stock Option
Plan will be terminated at the Effective Date and the outstanding
options immediately prior to the Effective Date will be converted
to options to purchase CSW Common Stock. The options following
the conversion will have the same terms and conditions as prior
to the conversion except that the options will not expire if the
individual terminates employment with Reorganized EPE.
<PAGE>
<PAGE> 329
<TABLE>
<CAPTION>
All
Current All
Executive Current
David H. Curtis William J. Ignacio R. Eduardo A. Officers Employees
Wiggs, Jr. Hoskins Johnson Troncoso Rodriguez as a Group as a
Group
---------- ------- ---------- ---------- ---------- ----------
- ----------
<S> <C> <C> <C> <C> <C> <C>
Options granted January 1, 1988 to December 31, 1992*
938,761 401,059 195,101 176,329 231,386 2,679,800 326,300
Average per share exercise price**
$4.25 $3.51 $4.16 $4.20 $3.59 $4.20 $5.16
Options outstanding at December 31, 1992
938,761 401,059 195,101 176,329 231,386 2,679,800 321,325
<FN>
- ----------------------------------
* Options for 906,500 shares granted November 19, 1990 are exercisable in installments such
that 25% of the options was exercisable immediately and an additional 25% is exercisable each
year on the anniversary date of the award. Options for 750,000 shares granted May 18, 1992
and 722,100 shares granted November 17, 1992 also are exercisable in installments with
increments of 25%, provided, however, that none of such options are exercisable until the
Effective Date of the Debtor's Plan of Reorganization. All options exercisable in
installments become immediately exercisable in the event of a change in control of the
Debtor, as defined in the plan. All other options are exercisable immediately.
** The exercise price for each award has been the fair market value of the shares subject to
the option on the date of the award.
</TABLE>
<PAGE>
<PAGE> 330
Retirement Plan. The Debtor maintains a tax-qualified
non-contributory defined retirement benefit plan (the "Retirement
Plan"), which provides annual retirement benefits for officers
and employees with more than one year of service, subject to age
and period-of-employment conditions. Contributions to the
Retirement Plan are actuarially determined each year. Normal
retirement age of officers and employees of the Debtor is 65
years. The annual benefits, commencing at normal retirement age,
for each participating employee are equal to 1.25% of the average
earnings of the employee during the five years immediately
preceding retirement multiplied by the number of years of service
(as defined). The Retirement Plan provides for early retirement
with reduced benefits at age 60 and also provides that any
employee who is at least 55 years of age and has 30 years of
service, or any combination of years of service plus age over 55
totaling 85, may retire and receive benefits under the Retirement
Plan with no reduction of such benefits due to early retirement.
Pursuant to the Merger Agreement and subject to the requirements
of applicable law, after the Effective Date, CSW will cause
employees not covered by a collective bargaining agreement to be
covered by CSW's employee benefit plans, including their pension
plan, with credit for service with the Debtor for purposes of
eligibility, vesting, and benefit accruals. Retirement benefits
to be provided to employees of the Debtor covered by a collective
bargaining agreement will be as provided in such agreement.
Supplemental Retirement Plan and Individual Retirement
Contracts. The Debtor also maintains a Supplemental Retirement
and Survivor Income Plan (the "Supplemental Retirement Plan") to
provide additional retirement benefits to executive officers and
certain key employees. The Supplemental Retirement Plan is a
non-qualified, unfunded plan, and the Board of Directors
designates those employees eligible to participate therein. The
Board has designated all present officers and approximately five
other employees of the Debtor as participants. In addition,
there are approximately 26 retired participants and surviving
spouses who are receiving monthly benefit payments under the
Supplemental Retirement Plan. In addition, certain current
retirees have separate retirement contracts with the Debtor, and
surviving spouses of certain former employees have been granted
surviving spouse benefits. The Supplemental Retirement Plan
provides that a participant retiring at age 60 who has 20 years
of service will receive an annual retirement benefit, payable
monthly, equal to 60% of his final salary (reduced by his
Retirement Plan benefit and by his primary Social Security
benefit payable at age 65). The participant's final salary is
defined as the greater of his annual salary plus fees,
commissions, bonuses and incentive compensation in whatever form
paid for the year immediately prior to his retirement or the
participant's annual salary plus such additional amounts
described above for the year of his retirement. The benefit of a
participant retiring at or after age 60 with less than 20 years
of service is reduced by 5% for each year of service less than 20
years. At the discretion of the Compensation/Benefits Committee,
<PAGE> 331
early retirement with reduced benefits is permitted for employees
reaching age 55 and having ten years of service. The
Supplemental Retirement Plan provides for (i) a pre-retirement
death benefit for the surviving spouse of a participant equal to
250% of the participant's final salary at the time of death and
(ii) post-retirement death benefit protection computed on the
basis of the number of years since retirement in which death
occurs and a specified percentage of the participant's final
salary. Benefits under the Supplemental Retirement Plan are paid
out of general corporate funds, which may be placed in an
irrevocable trust established for that purpose. The trust has
been structured so that (i) prior to payment of benefits to a
participant or beneficiary, the trust's assets will be subject to
the claims of the Debtor's general creditors and (ii) no
participant or beneficiary has any right or title to, or interest
in, any particular asset of the Debtor or the trust. As of the
current date, no funds have been placed in the trust and the
trust remains inactive.
In the event of a change in control of the Debtor, as
defined in the Supplemental Retirement Plan, participants in the
Supplemental Retirement Plan whose employment is terminated
within two years following such change in control may be entitled
to receive the retirement benefit under the Supplemental
Retirement Plan for which they qualify, payable in a lump sum,
determined actuarially, or payable monthly, at the participant's
option. Participants who are not qualified for retirement
benefits under the Supplemental Retirement Plan at the time of
such termination of employment become entitled to a benefit based
upon the early retirement benefit under the Supplemental
Retirement Plan, using actual years of service and assuming
minimum age of 55, payable, at the participant's option, (1)
either monthly for life, commencing upon the later of age 55 or
when the participant would have completed ten years of service
had the participant remained an employee or (2) in a lump sum
determined actuarially. If a change in control of the Debtor
occurs, participants and beneficiaries who are receiving or
become entitled to receive benefits under the Supplemental
Retirement Plan, whether death or retirement benefits, are
entitled to elect to receive a lump sum payment, determined
actuarially, or may receive monthly benefits as otherwise
provided. The Debtor has purchased life insurance policies on
the lives of certain executive officers and key employees,
including all participants in the plan. The life insurance
policies are assets of the Debtor and can be used to pay the
obligations of the Debtor under the Supplemental Retirement Plan.
Prior to the Effective Date, the Debtor will continue
to make required payments to retired participants and to
surviving spouses under the Supplemental Retirement Plan,
individual retirement contract holders under the terms of such
contracts and covered surviving spouses under Debtor's surviving
spouse benefit program. Pursuant to the terms of the Merger
Agreement, CSW shall cause Reorganized EPE to honor the terms and
<PAGE> 332
provisions of the Supplemental Retirement Plan, the individual
contracts and the surviving spouse benefit program, with respect
to all persons covered by such plan, contracts or program, and
with respect to such plan or contracts as the same may be amended
in accordance with the provisions thereof following the Effective
Date. Generally, the Supplemental Retirement Plan cannot be
amended after the Effective Date without the consent of the
individuals who would be affected by such amendment.
The following table contains approximate annual retire-
ment benefits payable to executive officers and certain key
employees of the Debtor in certain salary classifications
pursuant to the Retirement Plan and the Supplemental Retirement
Plan, assuming retirement at age 65 in 1992. Benefits are
computed on annual straight life annuity amounts.
<PAGE>
<PAGE> 333
<TABLE>
<CAPTION>
Earnings
Credited for
Retirement
Plan Years of Service at Retirement
- --------------------------------------------------------------------------------------------------------
10 15 20 25 30 35 40 45
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 75,000 $ 10,800 $ 22,050 $ 33,300 $ 33,300 $ 33,300 $ 33,300 $ 34,286 $ 34,286
100,000 18,300 33,300 48,300 48,300 48,300 48,300 48,300 48,300
125,000 25,800 44,550 63,300 63,300 63,300 63,300 63,300 63,300
150,000 33,300 55,800 78,300 78,300 78,300 78,300 78,300 78,300
175,000 40,800 67,050 93,300 93,300 93,300 93,300 93,300 93,300
200,000 48,300 78,300 108,300 108,300 108,300 108,300 108,300 108,300
225,000 55,800 89,550 123,300 123,300 123,300 123,300 123,300 123,300
250,000 63,300 100,800 138,300 138,300 138,300 138,300 138,300 138,300
275,000 70,800 112,050 153,300 153,300 153,300 153,300 153,300 153,300
300,000 78,300 123,300 168,300 168,300 168,300 168,300 168,300 168,300
325,000 85,800 134,550 183,300 183,300 183,300 183,300 183,300 183,300
350,000 93,300 145,800 198,300 198,300 198,300 198,300 198,300 198,300
375,000 100,800 157,050 213,300 213,300 213,300 213,300 213,300 213,300
400,000 108,300 168,300 228,300 228,300 228,300 228,300 228,300 228,300
425,000 115,800 179,550 243,300 243,300 243,300 243,300 243,300 243,300
</TABLE>
<PAGE>
<PAGE> 334
Phantom Stock Plan. The Debtor maintains a Phantom
Stock Deferred Compensation Plan (the "Phantom Stock Plan"),
which provides for compensation awards to executive officers and
other employees whose continued employment is considered key to
the long-term success of the Debtor. The Phantom Stock Plan is
administered by the Compensation/Benefits Committee of the Board,
which, in its sole discretion, selects those executive officers
and employees who are eligible to receive awards under the plan.
Awards under the Phantom Stock Plan are expressed in shares of
Common Stock ("Plan Shares") credited to a participant's account.
The Plan Shares credited to a participant's account represent a
measure of value for purposes of determining the amount of
benefits payable to a participant on a distribution date and do
not require the Debtor to contribute actual shares of Common
Stock to a participant or his account. Amounts equivalent to
cash and stock dividends paid on the Common Stock are credited to
a participant's account based on the number of Plan Shares in his
account (the "Dividend Plan Shares"). Plan Shares credited to a
participant's account vest (such that the participant has a
nonforfeitable right to the value of the Plan Shares) based upon
the number of years of the participant's employment by the Debtor
that have passed since the Plan Shares were credited to the
account. Upon the award of Plan Shares, 20% of the shares vest
immediately. An additional 20% vest each full year that elapses
following the date of award of the Plan Shares, so that one-
hundred percent of the Plan Shares vest four years from the date
Plan Shares are awarded. Dividend Plan Shares vest at the time
and manner that the earliest Plan Shares they can be traced to
vest. Awards of Plan Shares generally are payable to a
participant upon the termination of employment with the Debtor
and, at the discretion of the Compensation/Benefits Committee, to
alleviate hardship (as defined) suffered by a participant. Upon
a participant's death, disability, retirement or termination of
employment for any reason within two years after a change in
control of the Debtor, the participant has the right to be paid
<PAGE> 335
the value of 100% of the Plan Shares credited to his account,
regardless of whether the Plans Shares otherwise have vested. In
the case of termination of employment with the Debtor for any
reason other than those specified above, the Participant is
entitled to receive the value of the vested Plan Shares credited
to his account. In the alternative, participants may elect at
the time they are first awarded Plan Shares to receive payment of
awards beginning one year after the Plan Shares are first
credited to the account and thereafter at the time and in the
percentage that the Plan Shares become vested. Awards are paid
to a participant based on the valuation of Plan Shares as of the
distribution date, which is based on the fair market value of the
Common Stock for a period of time prior to the valuation date.
The Compensation/Benefits Committee, in its sole discretion, may
pay awards under the Phantom Stock Plan in either a lump sum or
on a monthly basis for a period not to exceed one year, and may
pay such awards in cash, Common Stock, other property or a
combination thereof.
Since establishment of the Phantom Stock Plan in
December 1988 through March 31, 1993, Messrs. Wiggs, Hoskins,
Johnson, Troncoso, Rodriguez and all current participants
(approximately 25 people) have been awarded Plan Shares and have
had Dividend Plan Shares credited in the following amounts:
45,221 Plan Shares, 7,596 Plan Shares, 9,601 Plan Shares, 9,347
Plan Shares, 6,752 Plan Shares and 146,331 Plan Shares. The
valuation of Plan Shares as of March 30, 1993 was $2.41 per
share.
Pursuant to the terms of the Merger Agreement, the
Phantom Stock Plan will be terminated effective at the Effective
Date. As soon as reasonably practicable after the Closing Date,
each participant under the Phantom Stock Plan shall receive, in a
single sum cash payment, the value of his or her account under
the Phantom Stock Plan.
Severance Compensation Agreements. The Debtor has
entered into a severance compensation agreement (the "Severance
Compensation Agreement") with each of its 15 executive officers
and 10 other current employees. The Severance Compensation
Agreements are intended to assure the continued employment and
dedication of the covered executives and employees
notwithstanding the possibility or occurrence of a change in
control of the Debtor. Under the Severance Compensation
Agreements, the covered executive or employee is entitled to
severance compensation and benefits if there is a change in
control (as defined) of the Debtor during the terms of the
Severance Compensation Agreements and the executive's or
employee's employment by the Debtor is terminated (other than by
death, disability or retirement) by the Debtor for any reason, or
by the executive or employee for good reason (relating
principally to changes in the executive's or employee's
responsibility, pay and benefits) within two years from the
change in control of the Debtor. Each of the Severance
<PAGE> 336
Compensation Agreements is for a five-year term, unless a change
in control of the Debtor occurs during the term, in which case
the term expires upon the later of the expiration of the then
current five-year term or two years from the change in control of
the Debtor. Any termination by the Debtor or the executive or
employee of the executive's or employee's employment with the
Debtor for any reason prior to a change in control of the Debtor
terminates the Severance Compensation Agreement. Severance
compensation and benefits payable under the Severance
Compensation Agreements include a lump sum cash payment equal to
approximately three times the average Aggregate Annual
Compensation (which includes salary and other cash payments or
taxable compensation, the value of awards under the Phantom Stock
Plan and Employee Stock Option Plan, and the value of
contributions by the Debtor under the LESOP and Savings Plan)
paid to the executive or employee by the Debtor during the five
years preceding the change in control. The Severance
Compensation Agreements also provide for a lump sum cash payment
of amounts equal to the actuarial cash equivalent of additional
benefits that the executive or employee would have been entitled
to under the Retirement Plan and the Supplemental Retirement Plan
if credited with three additional years of service and further
provide for certain health and insurance benefits for a period of
time after termination of employment. The amounts payable under
the Severance Compensation Agreements may subject Reorganized EPE
and the executive or employee to adverse tax consequences
pursuant to the "golden parachute" provisions of the Tax Code.
Pursuant to the Merger Agreement, CSW has agreed to
cause Reorganized EPE to honor the terms of the Severance
Compensation Agreements following the Effective Date. If the
executive or employee is employed by Reorganized EPE after the
Effective Date, Reorganized EPE may seek to amend the Severance
Compensation Agreements to provide for certain reductions or
offsets to any severance compensation, as agreed to by the
executive or employee.
Supplemental Benefit Plan for Mr. Wiggs. The Debtor
and Mr. Wiggs, as a condition to his employment in January 1988,
entered into a supplemental benefit agreement which provides that
if, upon Mr. Wiggs' death, disability, termination of employment
or retirement or upon termination, modification, supplementation
or consolidation of the Retirement Plan or the Supplemental
Retirement Plan, the amount of benefits payable to Mr. Wiggs is
less than the amount that he would have received had he been
entitled to credit for his 16 years of service as outside legal
counsel to the Debtor, then Mr. Wiggs is entitled to the amount
of such difference as cash compensation. Pursuant to the Merger
Agreement, CSW has agreed to cause Reorganized EPE to honor the
terms of the supplemental benefit agreement.
Supplemental Retirement Benefit for Mr. Hoskins. The
Debtor and Mr. Hoskins, as a condition to his employment in May
1990, entered into a Supplemental Retirement Benefit Agreement
<PAGE> 337
dated December 16, 1991, but effective as of May 21, 1990. The
Agreement is designed to provide Mr. Hoskins the benefits he
would receive under the Debtor's Supplemental Retirement Plan had
he been employed by the Debtor for the approximately 23 years he
was employed by Utah Power & Light Company. The Agreement
provides a supplemental retirement benefit for Mr. Hoskins in
the event he retires from the Debtor after reaching age 60. The
supplemental retirement benefit is equal to 60% of Mr. Hoskins'
final compensation, reduced by his monthly entitlement under the
Debtor's Retirement Plan, the Primary Insurance Amount under
Social Security and his monthly entitlement under the Utah Power
& Light Company retirement plan. The Agreement also provides a
death benefit substantially equivalent to the death benefit
provided under the Debtor's Supplemental Retirement Plan
described above, with such benefit reduced by the survivor
benefit provided under the Utah Power & Light Company retirement
plan in the event Mr. Hoskins' spouse survives him. The
Agreement contains provisions related to changes in control of
the Debtor substantially equivalent to those contained in the
Debtor's Supplemental Retirement Plan, discussed above. Pursuant
to the Merger Agreement, CSW has agreed to cause Reorganized EPE
to honor the terms of the Supplemental Retirement Benefit
Agreement.
Directors' Retirement Plan. The El Paso Electric
Company Directors' Retirement Plan (the "Directors Retirement
Plan") is a non-qualified, unfunded plan that provides a
retirement income to non-employee directors equal to 50% of a
director's annual retainer, provided the director has served as a
director of the Debtor for at least five years. The retirement
income increases by 10% of the annual retainer for each
additional year of service as a director, to a maximum of 100%
for ten years of service. The annual retirement income is
payable for the life of the director and there is no death
benefit. The current annual retainer for non-employee directors
is $28,000 plus $1,000 for each meeting day in which the director
participates in excess of 14 meeting days per year. Employee
directors receive no additional compensation for serving as a
director. In the event of a change in control of the Company, as
defined in the Directors Retirement Plan, directors receiving or
who become eligible to receive benefits may elect to receive the
actuarial equivalent of remaining benefits in a lump sum payment.
Pursuant to the Merger Agreement, the Directors Retire-
ment Plan will be terminated effective at the Effective Date.
Each director of the Debtor will receive benefits under the
Directors Retirement based on the greater of actual years of
service as a director or five years.
Director Stock Compensation Plan. The El Paso Electric
Company Director Stock Compensation Plan (the "Director Stock
Compensation Plan") was adopted by the Board of Directors in 1991
and approved by the shareholders at the 1991 annual meeting, sub-
ject to regulatory approval. To the extent a director is
<PAGE> 338
eligible to receive the retainer for the fourth quarter of each
year, it would be paid in the form of Common Stock. If a
director has not served a full calendar year, a portion of the
retainer for the fourth quarter would be paid in the form of
Common Stock so that 25% of the total compensation paid to the
director would be in Common Stock and the remaining compensation
would be paid in cash. The issuance of the 300,000 shares of
Common Stock reserved for issuance under the plan is subject to
the prior approval of the FERC and the New Mexico Commission.
The Debtor has not sought such regulatory approvals; therefore,
the Director Stock Compensation Plan has not been implemented.
The Director Stock Compensation Plan will be terminated as of the
Effective Date.
<PAGE> 339
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 340
EXHIBITS A-I ARE INTENTIONALLY NOT INCLUDED WITH THIS FILING.
<PAGE> 1
EXHIBIT B-4
RESTATED AND AMENDED
OPERATING AGREEMENT
Among
Central Power and Light Company
Public Service Company of Oklahoma
Southwestern Electric Power Company
West Texas Utilities Company
Central and South West Services, Inc.
<PAGE> 2
RESTATED AND AMENDED
OPERATING AGREEMENT
TABLE OF CONTENTS
Article I
Term of Agreement. . . . . . . . . . . . . . . . . . . . .2
Article II
Definitions
2.01 Additional Intertransmission Facilities. . . . .2
2.03 Agreement. . . . . . . . . . . . . . . . . . . .3
2.04 Buyer's Decremental Energy Value . . . . . . . .3
2.05 Capacity Commitment. . . . . . . . . . . . . . .3
2.06 Capacity Commitment Charge . . . . . . . . . . .3
2.07 Central Control Center . . . . . . . . . . . . .3
2.08 Chief Executive Officer (CEO). . . . . . . . . .3
2.09 Company and Companies. . . . . . . . . . . . . .3
2.10 Company Capability . . . . . . . . . . . . . . .3
2.11 Company Demand . . . . . . . . . . . . . . . . .4
2.12 Company Hourly Capability. . . . . . . . . . . .4
2.13 Company Load Responsibility. . . . . . . . . . .4
2.14 Company Operating Capability . . . . . . . . . .5
2.15 Company Operating Reserve. . . . . . . . . . . .5
2.16 Company Peak Demand. . . . . . . . . . . . . . .5
2.17 Day. . . . . . . . . . . . . . . . . . . . . . .5
2.18 Economic Dispatch. . . . . . . . . . . . . . . .5
2.19 Energy . . . . . . . . . . . . . . . . . . . . .5
2.20 Entitlement Energy . . . . . . . . . . . . . . .5
2.21 Generating Unit. . . . . . . . . . . . . . . . .5
2.22 Hour . . . . . . . . . . . . . . . . . . . . . .5
2.23 Initial Intertransmission Facilities . . . . . .6
2.24 Internal Economy Energy. . . . . . . . . . . . .6
2.25 Intertransmission Facilities . . . . . . . . . .6
2.26 Joint Resource Plan. . . . . . . . . . . . . . .6
2.27 Joint Unit . . . . . . . . . . . . . . . . . . .6
2.28 Margin . . . . . . . . . . . . . . . . . . . . .6
2.29 Month. . . . . . . . . . . . . . . . . . . . . .7
2.30 Operating Committee. . . . . . . . . . . . . . .7
2.31 Own Load . . . . . . . . . . . . . . . . . . . .7
2.32 Parent Company . . . . . . . . . . . . . . . . .7
2.33 Planning Reserve Level . . . . . . . . . . . . .7
2.34 Pool Energy. . . . . . . . . . . . . . . . . . .7
2.35 Power. . . . . . . . . . . . . . . . . . . . . .7
2.36 Prorated Reserve Level . . . . . . . . . . . . .8
2.37 Reserve Capacity (Company or System) . . . . . .8
2.38 Seller's Incremental Energy Cost . . . . . . . .8
2.39 System . . . . . . . . . . . . . . . . . . . . .8
i
<PAGE> 3
Definitions (cont'd)
2.40 System Capability. . . . . . . . . . . . . . . .8
2.41 System Demand. . . . . . . . . . . . . . . . . .8
2.42 System Load Responsibility . . . . . . . . . . .8
2.43 System Operating Capability. . . . . . . . . . .9
2.44 System Operating Reserve . . . . . . . . . . . .9
2.45 System Peak Demand . . . . . . . . . . . . . . .9
2.46 Variable Cost. . . . . . . . . . . . . . . . . .9
2.47 Year . . . . . . . . . . . . . . . . . . . . . .9
Article III
Objectives
3.01 Purpose. . . . . . . . . . . . . . . . . . . . .10
Article IV
Agent
4.01 Responsibility of the Agent. . . . . . . . . . .10
4.02 Delegation and Acceptance of Authority . . . . .10
4.03 Reporting. . . . . . . . . . . . . . . . . . . .11
Article V
Operating Committee
5.01 Operating Committee. . . . . . . . . . . . . . .12
Article VI
Operations
6.01 Planning and Authorization of
Production Facilities. . . . . . . . . . . . .13
6.02 Planning Reserve Levels. . . . . . . . . . . . .13
6.03 Provision to Achieve Planning. . . . . . . . . .14
6.04 Capacity Sales and Purchases
and Reserve Shortfalls . . . . . . . . . . . .14
6.05 Intertransmission Facilities . . . . . . . . . .15
6.06 Energy Exchanges Among Companies . . . . . . . .15
6.07 Energy Exchange Pricing. . . . . . . . . . . . .15
6.08 Energy Exchanges with Non-Affiliated
Utilities. . . . . . . . . . . . . . . . . . .16
6.09 Transmission Losses. . . . . . . . . . . . . . .17
6.10 Communications and Other Facilities. . . . . . .17
ii
<PAGE> 4
Article VII
Central Control Center
7.01 Central Control Center . . . . . . . . . . . . .18
7.02 Expenses . . . . . . . . . . . . . . . . . . . .18
Article VIII
General
8.01 Regulatory Authorization . . . . . . . . . . . .18
8.02 Effect on Other Agreements . . . . . . . . . . .18
8.03 Schedules. . . . . . . . . . . . . . . . . . . .19
8.04 Measurements . . . . . . . . . . . . . . . . . .19
8.05 Billings . . . . . . . . . . . . . . . . . . . .19
8.06 Waivers. . . . . . . . . . . . . . . . . . . . .20
8.07 Successors and Assigns; No Third Party
Beneficiary. . . . . . . . . . . . . . . . . .20
8.08 Amendment. . . . . . . . . . . . . . . . . . . .20
8.09 Independent Contractors. . . . . . . . . . . . .21
8.10 Responsibility and Liability . . . . . . . . . .21
Schedules
A Joint Unit
B Company Units Which Are Not Joint Units
C Capacity Commitment Charge
D Initial Intertransmission Facilities
E Payments and Receipts for Pool
Energy Exchanges Among the Companies
F Payments and Receipts for Internal Economy
Energy Exchanges Among the Companies
G Distribution of Margin for Off-System
Energy Purchases and Sales
H Distribution of Operating Expenses of
the Central Control Center
I Distribution of Costs of Investment in
Intertransmission Facilities
J Capacity Commitment Units
K Planning-Reserve Criteria
L Statement of Practice Regarding
Off-System Energy Sales
iii
<PAGE> 5
RESTATED AND AMENDED
OPERATING AGREEMENT
Among
Central Power and Light Company
Public Service Company of Oklahoma
Southwestern Electric Power Company
West Texas Utilities Company
Central and South West Services, Inc.
THIS RESTATED AND AMENDED OPERATING AGREEMENT,
hereinafter called Agreement is made and entered into as of this
1st day of October, 1993 by and among Central Power and Light
Company, hereinafter called CPL; Public Service Company of
Oklahoma, hereinafter called PSO; Southwestern Electric Power
Company, hereinafter called SWEPCO; West Texas Utilities Company,
hereinafter called WTU; and Central and South West Services,
Inc., hereinafter called CSWS; all of whose common stock is
wholly owned by Central and South West Corporation.
WHEREAS, CPL, PSO, SWEPCO, and WTU are the owners and
operators of interconnected electric generation, transmission,
and distribution facilities with which they are engaged in the
business of generating, transmitting, and selling electric Power
and Energy to the general public and to other electric utilities;
and
WHEREAS, the Companies achieve economic benefits for
their customers through operation as a single interconnected
system, and through coordinated planning, construction, operation
and maintenance of their electric supply facilities; and
<PAGE> 6
WHEREAS, CSWS is qualified to act as Agent for the
Companies;
NOW THEREFORE, the parties hereto mutually agree as
follows:
ARTICLE I
TERM OF AGREEMENT
1.01 This Agreement shall become effective on such date
as is established by the Federal Energy Regulatory Commission.
This Agreement shall continue in force and effect for a period of
thirty (30) Years from the effective date hereinabove described,
and continue from Year to Year thereafter until terminated by one
or more of the parties upon five (5) Years written notice to the
other parties.
1.02 This agreement is intended to cover only
generation and Intertransmission Facilities and is not to affect
those matters set forth in orders of the United States Securities
and Exchange Commission authorizing certain cost allocation
methods for CSWS billings.
ARTICLE II
DEFINITIONS
For the purposes of this Agreement and of Schedules A
through L which are attached hereto and made a part hereof, the
following definitions shall apply:
2.01 Additional Intertransmission Facilities shall be
those Intertransmission Facilities which are not Initial
Intertransmission Facilities.
2.02 Agent for the Companies shall be CSWS.
<PAGE> 7
2.03 Agreement shall be this Agreement with all
attachments and schedules applying hereto and any amendments made
hereafter.
2.04 Buyer's Decremental Energy Value shall be the cost
that a buying Company avoids by reducing the generation of Energy
from its Company Operating Capability or by reducing its purchase
of Energy from others.
2.05 Capacity Commitment shall be generating capacity
committed by a Company to provide capability for another Company
to attain its Planning or Prorated Reserve Levels, whichever
shall be lower.
2.06 Capacity Commitment Charge shall be the charge
made by a Company supplying a Capacity Commitment to the Company
receiving the Capacity Commitment.
2.07 Central Control Center shall be a center operated
by the Agent for the optimal utilization of System resources for
the supply of Power and Energy.
2.08 Chief Executive Officer (CEO) shall be the Chief
Executive Officer of Central and South West Corporation or the
CEO's designee.
2.09 Company shall be one of the Central and South West
Corporation operating companies and Companies shall be the
Central and South West Corporation operating companies
collectively.
2.10 Company Capability shall be:
(a) The sum of the Company net plant capability in
megawatts; plus
<PAGE> 8
(b) The megawatt amount of purchases and exchanges
without reserves, under contract from other systems; less
(c) The megawatt amount of sales and exchanges
without reserves, under contract to other systems.
2.11 Company Demand shall be:
(a) The clock-hour demand in megawatts of a
Company's system represented by the simultaneous hourly input in
megawatt-hours from all sources into the system of a Company;
less
(b) The sum of the simultaneous hourly output in
megawatt-hours to other systems (exclusive of any wholesale
requirements obligations of the Company).
2.12 Company Hourly Capability for a Company shall be:
(a) The megawatt amount of dependable capability
of the Company's generating units on line, including its shares
of Joint Units and its shares of units owned jointly with
non-associated companies, during the Hour; plus
(b) The megawatt amount of capability committed to
the Company by other Companies or non-associated suppliers during
the Hour; less
(c) The megawatt amount of capability committed by
the Company to other Companies or non-associated purchasers
during the Hour; less
(d) Any capability required to provide operating
reserves.
2.13 Company Load Responsibility shall be as follows:
(a) Company Peak Demand; less
<PAGE> 9
(b) The megawatt-hour output of the Company served
on an interruptible basis during the hour of Company Peak Demand
plus;
(c) The contractual amount of sales and exchanges
with reserves during the period to other systems less;
(d) The contractual amount of purchases and
exchanges with reserves during the period from other systems.
2.14 Company Operating Capability shall be the
dependable net capability in megawatts of Generating Units of a
Company carrying load or ready to take load.
2.15 Company Operating Reserve shall be the excess of
Company Operating Capability over Company Demand expressed in
megawatts.
2.16 Company Peak Demand for a period shall be the
highest Company Demand for any hour during the period.
2.17 Day shall be a continuous 24-Hour period beginning
at 0001 Hours.
2.18 Economic Dispatch shall be the distribution of
total generation requirements among alternative sources for
system economy with due consideration of incremental generating
costs, incremental transmission losses, and system security.
2.19 Energy shall be work and shall be expressed in
megawatt-hours (MWH).
2.20 Entitlement Energy shall be the Energy from a
Joint Unit to which a Company is entitled by reason of its
ownership position in that unit, expressed in megawatt-hours.
<PAGE> 10
2.21 Generating Unit shall be an electric generator,
together with its prime mover and all auxiliary and appurtenant
devices and equipment designed to be operated as a unit for the
production of electric Power and Energy. The above is to include
equipment necessary for connection to the transmission system.
2.22 Hour shall be a clock-hour.
2.23 Initial Intertransmission Facilities shall be
those transmission facilities required for initial operation of
the Companies as a single interconnected system.
2.24 Internal Economy Energy shall be Energy supplied
and sold by one Company to another Company, under Economic
Dispatch, to meet a portion of the purchasing Company's Own Load
that could otherwise be supplied internally by purchasing
Company.
2.25 Intertransmission Facilities shall be those
transmission facilities which are required for the effective
utilization of System resources in the economic exchange of
capacity and Energy among the Companies and with other systems.
2.26 Joint Resource Plan shall be the formal documented
plan developed from time to time for all future Generating Units
and all Additional Intertransmission Facilities.
2.27 Joint Unit shall be any Generating Unit jointly
owned by two or more of the Companies.
2.28 (a) Margin on Sales shall be the difference
between:
(1) the revenue from off-System Energy sales made pursuant to
Section 6.08 and
<PAGE> 11
(2) the Seller's Incremental Energy Cost incurred in making such
sales.
(b) Margin on Purchases shall be the difference
between (1) the Buyer's Decremental Energy Value avoided as a
result of off-System Energy purchases made pursuant to Section
6.08 and (2) payments for off-System Energy purchases made
pursuant to Section 6.08.
(c) Margin for a given period shall be the sum of
the amounts developed in accordance with Sections 2.28 (a) and
2.28 (b).
2.29 Month shall be a calendar Month.
2.30 Operating Committee shall be the organization
established pursuant to section 5.01 and whose duties are more
fully set forth therein.
2.31 Own Load shall be Energy required to meet Company
Demand plus Energy associated with sales or exchanges with
reserves less Energy associated with purchases or exchanges with
reserves.
2.32 Parent Company shall be Central and South West
Corporation.
2.33 Planning Reserve Level shall be the megawatt
amount of required Reserve Capacity for a Company, expressed as a
percentage of its forecasted Company Load Responsibility.
2.34 Pool Energy shall be the Energy supplied and sold
by one Company to another Company to enable the purchasing
Company to meet a portion of its Own Load that such other Company
can not or does not plan to serve with its other resources. There
<PAGE> 12
shall be two categories of Pool Energy. Emergency Pool Energy
shall be the Energy required by a Company that becomes deficient
because of an unplanned occurrence (such as a generator unit trip
or a missed load forecast). Planned Pool Energy shall be the
Energy required by a Company to meet portions of its Own Load
when it determines that (a) it will be short of capacity when
planning for future operations or (b) such Energy can be taken to
economic advantage.
2.35 Power shall be the rate of doing work and shall be
expressed in megawatts (MW).
2.36 Prorated Reserve Level shall be a percentage
reserve level for each Company that when divided by that
Company's Planning Reserve Level gives the same quotient as that
for all other Companies.
2.37 Reserve Capacity (Company or System) shall be that
amount in megawatts by which Company or System Capability exceeds
Company or System Load Responsibility.
2.38 Seller's Incremental Energy Cost shall be the
Variable Cost which a selling Company incurs in order to supply
energy for resale.
2.39 System shall be the interconnected coordinated
electric generation and transmission systems of the Companies.
2.40 System Capability shall be the arithmetical sum in
megawatts of the individual Company Capabilities.
2.41 System Demand shall be the arithmetical sum of the
Companies' clock-hour demand in megawatts represented by:
<PAGE> 13
(a) The simultaneous hourly input in
megawatt-hours from all sources into the System; less
(b) The sum of the simultaneous hourly outputs in
megawatt hours to other systems (exclusive of any wholesale
requirements obligations of the Companies).
2.42 System Load Responsibility shall be as follows:
(a) System Peak Demand; less
(b) The megawatt-hour output of the Companies
served on an interruptible basis during the hour of System Peak
Demand; plus
(c) The arithmetic sum of all of the Companies'
contractual amount of sales and exchanges with reserves during
the period to other systems less;
(d) The arithmetic sum of all the Companies'
contractual amount of purchases and exchanges with reserves
during the period from other systems.
2.43 System Operating Capability shall be the
arithmetical sum in megawatts of the individual Company Operating
Capabilities.
2.44 System Operating Reserve shall be the arithmetical
sum of the individual Company Operating Reserves, expressed in
megawatts.
2.45 System Peak Demand for a period shall be the
highest System Demand for any hour during the period.
2.46 Variable Cost shall be a Company's incremental
generation cost or purchased energy cost.
2.47 Year shall be a calendar Year.
<PAGE> 14
ARTICLE III
OBJECTIVES
3.01 Purpose
The purpose of this Agreement is to provide the
contractual basis for coordinated planning, construction,
operation and maintenance of the System to achieve optimal
economies, consistent with reliable electric service, reasonable
utilization of natural resources, and environmental requirements.
ARTICLE IV
AGENT
4.01 Responsibility of the Agent
The Companies hereby designate CSWS as their Agent for
the purpose of:
(a) coordinating the planning, operating and
maintaining of the Generating Units and Intertransmission
Facilities of the Companies;
(b) design and construction of the Joint Units;
and
(c) design, construction, operation and
maintenance of the Central Control Center.
4.02 Delegation and Acceptance of Authority
The Companies hereby delegate to the Agent and the
Agent hereby accepts responsibility and authority for the duties
listed in Section 4.01 and elsewhere in this Agreement. The Agent
shall perform each of those duties in consultation with the
<PAGE> 15
Operating Committee except as herein expressly established
otherwise.
4.03 Reporting
The Agent shall provide periodic summary reports of its
activities under this Agreement to the Companies and shall keep
the Companies and the Operating Committee currently informed of
situations or problems which may adversely affect the outcome of
these activities. Furthermore, the Agent agrees to report to the
Companies or to the Operating Committee in such additional detail
as is requested on specific issues or projects under its
supervision as Agent.
ARTICLE V
OPERATING COMMITTEE
5.01 Operating Committee
The Operating Committee is the organization established
to ensure the coordinated operation of the System by making
recommendations to the CEO regarding operations under this
Agreement, thereby providing the basis for the CEO's direction of
the Agent in the performance of the Agent's duties under this
Agreement and for the performance of the CEO's responsibilities
described herein. The Operating Committee members will be
designated by the CEO, including a chairperson and at least one
member from the Agent and from each Company. Operating Committee
decisions shall be by a majority vote of those present and shall
be in the form of recommendations to the CEO. However, any member
not present may vote by proxy. In any non-unanimous decision the
<PAGE> 16
principles of the difference shall be reported to the CEO. The
chairperson shall vote only in case of a tie.
ARTICLE VI
OPERATIONS
6.01 Planning and Authorization of Production
Facilities
(a) Each Company shall forecast the generation
requirements to meet its Load Responsibility and its Planning
Reserve Level.
(b) A current Joint Resource Plan will be
maintained that will provide for the current forecasted System
Load Responsibility including the Planning Reserve Level. The
Generating Units identified in Schedule B shall be integrated
into the plan.
(c) All Generating Units placed in service after the
date of this Agreement shall be in accordance with the then
current Joint Resource Plan. Joint Units shall be authorized by
the Board of Directors of the Parent Company prior to the
commencement of detailed engineering of the units.
(d) For the purpose of this agreement the Generating
Units listed in Schedule B are not Joint Units.
(e) The Company designated by the CEO shall be
responsible for the staffing, operation and maintenance of each
authorized Joint Generating Unit.
<PAGE> 17
6.02 Planning Reserve Levels
The Operating Committee shall periodically review the
Planning Reserve Level for each Company and recommend any
modifications of such to the CEO.
6.03 Provision to Achieve Planning Reserve Levels
(a) Each Company shall own, or have available to
it under contract; such generating capability and other
facilities as are necessary to supply its Company Load
Responsibility plus its Planning Reserve Level.
(b) The Joint Resource Plan shall be periodically
reviewed and adjusted to provide the Companies their required
Planning Reserve Levels. Any Company with Reserve Capacity in
excess of its Planning Reserve Level for a future Year shall
commit such excess capacity to Companies with insufficient
Reserve Capacity to meet their Planning Reserve Level during that
Year. The deficit Companies shall make payments to the excess
Companies each Month of the Year the commitment applies in the
amount of the Capacity Commitment Charge in accordance with
Schedule C. In the event that the System Capability, including
outside capacity purchases, is insufficient to meet such Planning
Reserve Levels the System Capability shall be allocated to
provide each Company its Prorated Reserve Level.
(c) The Ownership percentages in future Joint
Units are established in accordance with Schedule A, but may be
reallocated in the Joint Resource Plan by recommendation of the
Operating Committee and authorization by the CEO.
<PAGE> 18
6.04 Capacity Sales and Purchases and Reserve
Shortfalls
(a) The Agent shall coordinate and otherwise
assist the Companies in making off-System capacity sales and
purchases.
(b) All capacity purchases and sales effective
beyond July 1, 1984 shall be coordinated by the Agent,
recommended by the Operating Committee, and approved by the CEO.
(c) The System Reserve Capacity shall be at the
disposal of any Company requiring such capacity. Should the
System be short of capacity as a result of an emergency and be
unable to purchase the deficit, each Company shall take such
actions as are necessary to bring System load and generation into
balance.
6.05 Intertransmission Facilities
(a) The ownership of the Initial Intertransmission
Facilities shall be in accordance with Schedule D.
(b) The Agent shall make periodic studies of bulk
Power supply transmission facilities and shall report to the
Operating Committee the results of such studies including any
Additional Intertransmission Facilities identified as necessary.
6.06 Energy Exchanges Among the Companies
The Agent shall schedule System Energy output to obtain
the lowest cost of Energy for serving System Demand consistent
with each Company's operating and security constraints, including
voltage control, stability, loading of facilities, operating
guides as recommended by the Operating Committee and approved by
<PAGE> 19
the CEO, fuel commitments, environmental requirements, and
continuity of service to customers.
6.07 Energy Exchange Pricing
For the purpose of pricing Energy exchange among the
Companies, System resources shall be utilized to serve System
requirements in the following order:
(a) Those Generating Units which are designated
not to be operated in the order of lowest to highest Variable
Cost due to Company operating constraints shall be allocated to
the Company requiring the Generating Unit.
(b) The lowest Variable Cost generation of each
Company's Hourly Capability shall first be allocated to serve its
Own Load.
(c) The next lowest Variable Cost portion of each
Company's remaining Hourly Capability shall be allocated to serve
Pool Energy requirements of Companies under System Economic
Dispatch. Pool Energy shall be priced in accordance with Schedule
E.
(d) The next lowest Variable Cost portion of each
Company's remaining Hourly Capability shall be used to supply
Internal Economy Energy to Companies under System Economic
Dispatch. Internal Economy Energy shall be priced in accordance
with Schedule F.
6.08 Energy Exchanges with Non-Affiliated Utilities
The Agent shall coordinate and direct off-System
purchases of Energy necessary to meet System requirements or
improve System economy, after Internal Economy Energy
<PAGE> 20
transactions have been effected. The Agent shall coordinate and
direct off-System sales of Energy available after meeting all of
the requirements of the System including the energy associated
with contractual requirements for off-System capacity sales. Such
off-System Energy purchases or sales shall be implemented by
decremental or incremental System Economic Dispatch as
appropriate. Any Margin on Energy purchases from off-System
utilities or Margin on Energy sales to off-System utilities shall
be distributed to the Companies in accordance with Schedule G.
Price quotations for such energy sales shall be determined in
accordance with Schedule L.
6.09 Transmission Losses
Transmission losses occasioned by the transfer of Power
and Energy among and between the Companies when recommended by
the Operating Committee shall be determined and accounted for in
accordance with procedures developed by the Agent, recommended by
the Operating Committee, and approved by the CEO.
6.10 Communications and Other Facilities
The Companies shall provide communications and other
facilities necessary for:
(a) The metering and control of the generating and
transmission facilities;
(b) The dispatch of electric Power and Energy; and
(c) For such other purposes as may be necessary
for optimum operation of the System.
<PAGE> 21
ARTICLE VII
CENTRAL CONTROL CENTER
7.01 Central Control Center
The Agent shall provide and operate a Central Control
Center adequately equipped and staffed to meet the requirements
of the Companies for efficient, economical and reliable operation
as contemplated by this Agreement.
7.02 Expenses
All expenses for operation of the Central Control
Center shall be paid by the Agent and billed monthly to each
Company, in accordance with Schedule H.
ARTICLE VIII
GENERAL
8.01 Regulatory Authorization
This Agreement is subject to certain regulatory
approvals and each Company and the Agent shall diligently seek
all necessary regulatory authorization for this Agreement.
8.02 Effect on Other Agreements
This Agreement shall not modify the obligations of any
Company under any agreement between that Company and others not
parties to this Agreement in effect at the date of this
Agreement, nor shall it modify the agreement between Southwestern
Electric Power Company and Public Service Company of Oklahoma as
it pertains to the obligations and rights with respect to the
South Central Electric Companies' several agreements.
<PAGE> 22
8.03 Schedules
The basis of compensation for the use of facilities and
for the Power and Energy provided or supplied by a Company to
another Company or Companies under this Agreement shall be in
accordance with arrangements agreed upon from time to time among
the Companies. Such arrangements shall be in the form of
Schedules, each of which, when signed by the parties thereto and
approved or accepted by appropriate regulatory authority, shall
become a part of this Agreement.
8.04 Measurements
All quantities of Power and Energy exchanged or flowing
between the systems of the Companies, shall be determined by
meters installed at each interconnection, unless otherwise agreed
to by the Companies involved.
8.05 Billings
Bills for services rendered hereunder shall be
calculated in accordance with applicable Schedules, and shall be
issued on or before the tenth working Day of the Month following
that in which such service was rendered and shall be payable on
or before the twentieth Day of such Month. After the thirtieth
Day, interest shall accrue on any balance due until paid at the
latest rate approved by the United States Securities and Exchange
Commission for loans among Companies in the Central and South
West System. Billings in good faith disputed and paid shall be
deemed to have been paid under protest.
<PAGE> 23
8.06 Waivers
Any waiver at any time by a Company of its rights with
respect to a default by any other Company under this Agreement
shall not be deemed a waiver with respect to any subsequent
default of similar or different nature, nor shall it prejudice
its right to deny waiver of similar default to a different
Company.
8.07 Successors and Assigns; No Third Party Beneficiary
This Agreement shall inure to and be binding upon the
successors and assigns of the respective parties hereto, but
shall not be assignable by any party without the written consent
of the other parties, except upon foreclosure of a mortgage or
deed of trust. Nothing expressed or mentioned or to which
reference is made in this Agreement is intended or shall be
construed to give any person or corporation other than the
parties hereto any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision herein
contained, expressly or by reference, or any Schedule hereto,
this Agreement, any such Schedule and any and all conditions and
provisions hereof and thereof being intended to be and being for
the sole exclusive benefit of the parties hereto, and for the
benefit of no other person or corporation.
8.08 Amendment
It is contemplated by the parties that it may be
appropriate from time to time to change, amend, modify or
supplement this Agreement or the Schedules which are attached to
this Agreement to reflect changes in operating practices or costs
<PAGE> 24
of operations or for other reasons. This Agreement may be
changed, amended, modified or supplemented by an instrument in
writing executed by all of the parties.
8.09 Independent Contractors
It is agreed among the Companies that by entering into
this Agreement the Companies shall not become partners, but as to
each other and to third persons, the Companies shall remain
independent contractors in all matters relating to this
Agreement.
8.10 Responsibility and Liability
The liability of the parties shall be several, not
joint or collective. Each party shall be responsible only for its
obligations, and shall be liable only for its proportionate share
of the costs and expenses as provided in this Agreement, and any
liability resulting herefrom. Each party hereto will defend,
indemnify, and save harmless the other parties hereto from and
against any and all liability, loss, costs, damages, and
expenses, including reasonable attorney's fees, caused by or
growing out of the gross negligence, willful misconduct, or
breach of this Agreement by such indemnifying party.
IN WITNESS WHEREOF, each of the Companies has caused
this Agreement and the attached Schedules to be signed in its
name and on its behalf by its Chief Executive Officer attested by
its Secretary, both being duly authorized. This Agreement and
attached Schedules shall become effective on such date as is
established by the Federal Energy Regulatory Commission.
<PAGE> 25
CENTRAL POWER AND LIGHT COMPANY
Attest
By
Secretary Chief Executive Officer
PUBLIC SERVICE COMPANY OF OKLAHOMA
Attest
By
Secretary Chief Executive Officer
SOUTHWESTERN ELECTRIC POWER COMPANY
Attest
By
Secretary Chief Executive Officer
WEST TEXAS UTILITIES COMPANY
Attest
By
Secretary Chief Executive Officer
CENTRAL AND SOUTH WEST SERVICES, INC.
Attest
By
Secretary Chief Executive Officer
<PAGE> 26
SCHEDULE A
JOINT UNIT
9.01 Purpose
The purpose of this Schedule is to provide the basis
for the Companies' participation in Joint Units.
9.02 Ownership
(a) Every Joint Unit shall be owned by the
Companies participating in the Joint Unit as tenants in common.
Ownership shares in each Joint Unit shall be allocated insofar as
practical to achieve a Prorated Reserve Level for all Companies
participating in the unit. The allocation shall be recommended by
the Operating Committee and authorized by the CEO prior to the
time the unit is authorized by the Board of Directors of the
Parent Company. However, each Company shall own at least fifty
(50) megawatts of each Joint Unit unless otherwise agreed to by
the Operating Committee. Each Company shall be responsible for
its prorata share of the costs of construction of the unit and
shall contribute such funds to the Agent as billed.
(b) When a new Joint Unit is installed at a site
already occupied by one or more existing Generating Units the
Agent, in consultation with the Operating Committee, shall
identify any existing facilities that will be common to the new
Joint Unit and the portion of the common facilities to be
allocated to the new Joint Unit. The owners of the new Joint Unit
shall compensate the owners of the existing common facilities for
the use of those common facilities.
<PAGE> 27
9.03 Contracts
The Companies shall execute a joint ownership agreement
for each Joint Unit, such agreement to set out all of the rights
and obligations of the parties relating to the specific Joint
Unit, including the allocation of fuel costs, the allocation of
other operation costs and the allocation of maintenance costs
among the owners.
<PAGE> 28
SCHEDULE B
COMPANY UNITS WHICH ARE NOT JOINT UNITS
10.01 Purpose
The purpose of this Schedule is to list the Generating
Units, placed in service after the date of the original Operating
Agreement dated September 28, 1983, which are not Joint Units.
10.02 Company Units Which Are Not Joint Units
The Company units which are not Joint Units are as
follows:
South Texas Project Unit Number 1 - CPL
South Texas Project Unit Number 2 - CPL
Dolet Hills Unit Number 1 - SWEPCO
Pirkey Unit Number 1 - SWEPCO
<PAGE> 29
SCHEDULE C
CAPACITY COMMITMENT CHARGE
11.01 Purpose
The purpose of this Schedule is to establish the basis
for Capacity Commitments between the Companies and the rates for
the Capacity Commitment Charge and associated energy.
11.02 Basis for Capacity Commitment
A committing Company shall make available to a
receiving Company unit capacity consisting of a portion of the
output of one or more specific generating units. The receiving
Company shall be entitled to receive energy from the specified
generating unit(s) up to an amount equal to an annual load factor
of sixty (60) percent or such other amount as is mutually
agreeable. The capacity commitment shall be for a twelve-month
period or as otherwise mutually agreed.
11.03 Provisions for Capacity Commitment Charge
The monthly Capacity Commitment Charge for each
specific generating unit(s) from which capacity is committed
shall be determined pursuant to the following formula:
A = (1/12) (B) (C/D) (E)
Where:
A = Monthly Capacity Commitment Charge for the
specified unit to be due each month regardless of the
availability of the specific unit.
B = 0.182 (fixed charge rate for the committing
Company).
<PAGE> 30
C = Committing Company's total dollar investment, at
original cost, in the specific generating unit as
of December 31 of the year prior to the year of
the Capacity Commitment, certified by the Chief
Financial officer of the Company.
D = Rated net dependable capability of the specific
generating unit in megawatts.
E = Megawatts of capacity committed from the
specified unit.
11.04 Provision for Energy Charge
The rate for energy received by a receiving Company
from specified unit(s) shall be the Variable Cost of energy
produced from each specified unit(s) plus ten (10) percent of
such cost or three (3) mills per kilowatt-hour, whichever is
less.
<PAGE> 31
SCHEDULE D
INITIAL INTERTRANSMISSION FACILITIES
12.01 Purpose
The purpose of this Schedule is to provide the
ownership of the Initial Intertransmission Facilities.
12.02 Allocation of Ownership
The ownership of the Initial Intertransmission
Facilities shall be as follows:
(a) Lawton-Oklaunion 345 kV Line
The ownership shall be 100 % by PSO.
(b) Oklaunion HVDC Back-to-Back Terminals
This 200 MW rated facility shall have the
following undivided ownership:
PSO - 87.5%
WTU - 12.5%
(c) Welsh-Monticello 345 kV Line
The ownership shall be 100% by SWEPCO.
However, the owners in the Welsh-Monticello
HVDC Terminals will pay annual facilities
charges per agreement filed in FERC Docket
EL79-8-002 to SWEPCO for use of this line in
proportion to their ownership interests in
the HVDC Terminals as described in (d) below.
<PAGE> 32
(d) Welsh-Monticello HVDC Back-to-Back Terminals
This 600 MW rated facility shall have the
following undivided ownership:
Central Power
and Light Company 25%
Houston Lighting &
Power Company 33 1/3%
Southwestern Electric
Power Company 25%
TU Electric Company 16 2/3%
Total 100%
12.03 Allocation of Operation and Maintenance Expenses
The operation and maintenance expenses of the Initial
Intertransmission facilities shall be paid for by each Company in
proportion to its ownership of such facilities.
<PAGE> 33
SCHEDULE E
PAYMENTS AND RECEIPTS FOR POOL ENERGY EXCHANGES
AMONG THE COMPANIES
13.01 Purpose
The purpose of this Schedule is to provide the basis
for determining payments and receipts among the Companies for
Pool Energy exchanges.
13.02 Hourly Calculations
The payments and receipts of Section 13.03 are
calculated Hourly, but are accumulated and billed Monthly among
the Companies.
13.03 Receipts and Payments
A selling Company shall receive from a purchasing
Company one hundred and ten percent (110%) of the Seller's
Incremental Energy Cost for Pool Energy sold. A purchasing
Company shall pay for Pool Energy received one hundred and ten
percent (110%) of its portion of the aggregate of the Seller's
Incremental Cost for Pool Energy. Where Pool Energy is purchased
simultaneously by more than one Company these charges shall be
prorated in proportion to the megawatt-hours of Pool Energy
purchased by each buyer.
<PAGE> 34
SCHEDULE F
PAYMENTS AND RECEIPTS FOR INTERNAL
ECONOMY ENERGY EXCHANGES AMONG THE COMPANIES
14.01 Purpose
The purpose of this Schedule is to provide the basis
for determining payments and receipts among the Companies for
Internal Economy Energy exchanges.
14.02 Hourly Calculations
The payments of Section 14.03 and receipts of Section
14.04 shall be calculated Hourly, accumulated and billed Monthly
among the Companies.
14.03 Payments
A purchasing Company shall pay the following amount for
Internal Economy Energy bought:
(a) The purchasing Company's portion of the
aggregate of Sellers' Incremental Energy
Costs for Internal Economy Energy where such
charges are prorated in proportion to the
amount of Internal Economy Energy purchased
by each Company; plus
(b) One-half of the difference between:
(1) The Buyer's Decremental Energy Value for
Internal Economy Energy purchased; and
(2) The amount determined in Section 14.03
(a).
<PAGE> 35
14.04 Receipts
A selling Company shall receive the following
amount for Internal Economy Energy sold:
(a) The Seller's Incremental Energy cost for
Internal Economy Energy sold; plus
(b) One-half of the difference between:
(1) The selling Company's portion of the
aggregate of the Buyers' Decremental
Energy Values for Internal Economy
Energy purchased where such values are
prorated in proportion to the amount of
Internal Economy Energy sold by each
Company; and
(2) The amount determined in Section 14.04
(a).
<PAGE> 36
SCHEDULE G
DISTRIBUTION OF MARGIN FOR OFF-SYSTEM
ENERGY PURCHASES AND SALES
15.01 Purpose
The purpose of this Schedule is to establish the basis
for distributing among the Companies the Margin on off-System
Energy purchases and sales.
15.02 Distribution of Margin
Any Margin on off-System Energy purchases and sales
shall be distributed to the Companies in proportion to the
relative magnitude of the sums for each Company of the Energy
generated or not generated by such Company in order to
participate in Internal Economy or off-System purchases or sales.
<PAGE> 37
SCHEDULE H
DISTRIBUTION OF OPERATING EXPENSES
OF THE CENTRAL CONTROL CENTER
16.01 Purpose
The purpose of this Schedule is to provide a basis for
the distribution among the Companies of the costs incurred by the
Agent in operating the Central Control Center.
16.02 Costs
Costs for the purpose of this Schedule shall include
all costs incurred in maintaining and operating the Central
Control Center including, among others, such items as salaries,
wages, rentals, the cost of materials and supplies, interest,
taxes, depreciation, transportation, travel expenses, consulting,
and other professional services.
16.03 Distribution of Costs
All costs shall be billed by Agent to the Companies in
proportion to the average of the maximum Company Peak Demands
experienced during the three previous calendar Years with the
following exception. In the event the Central Control Center
makes a study or performs a special service in which all
Companies are not thus proportionately interested, any resulting
cost shall be distributed to the interested parties in accordance
with the standard procedures of Agent authorized by the United
States Securities and Exchange Commission.
<PAGE> 38
SCHEDULE I
DISTRIBUTION OF COSTS OF INVESTMENT IN
INTERTRANSMISSION FACILITIES
17.01 Purpose
The purpose of this Schedule is to provide the basis
for the distribution among the Companies of the costs related to
investment in Intertransmission Facilities.
17.02 Investment Costs
For the purpose of this Schedule, the investment cost
of Intertransmission Facilities shall consist of: (1) 100% of the
book original cost of all HVDC interconnection facilities; (2)
100% of the book original cost of all alternating current
intertie transmission facilities of a capacity of 69 kV and
above; (3) 100% of the book original cost of all transmission
facilities needed to tie a jointly owned unit into the bulk
transmission system; and (4) 50% of non-intertie 345 kV line and
substation facilities. The intertie facilities referred to in
clause (2) above shall consist of all facilities from the last
substation having three or more lines connected thereto to the
point of interconnection with another utility (whether another
CSW Company or a non-CSW Company). For the purpose of this
Schedule the book original cost of intertransmission facilities
shall include direct cash expenditures, AFUDC and construction
overheads. There shall be excluded from the Intertransmission
Facilities investment of any Company that part of such
Intertransmission Facilities that is specifically committed by
contract to a non-associated company (prorated as appropriate
<PAGE> 39
when such commitment was for less than the preceding calendar
year). There shall be included in the Intertransmission
Facilities investment cost of any Company an amount equal to the
result of dividing by .1627 any annual facility or similar charge
paid by such Company to another (non-CSW) utility as
consideration for the use of specific transmission facilities
that if owned by the Company would be included in the Company's
investment cost determined in accordance with this Section 17.02.
17.03 Distribution of Costs
On or before January 31 of each year in respect of
which this Schedule is in effect, the cost of each of the
Companies related to Intertransmission Facilities shall be
determined by applying a 16.27% annual fixed charge rate to each
Company's investment cost for Intertransmission Facilities in
service as of December 31 of the preceding year determined in
accordance with Section 17.02 hereof. The ratio of each Company's
cost thus determined to the total of all such costs shall be
determined and compared to the ratio of each Company's peak load
for the preceding year expressed as a percentage of the sum of
such peak loads of all Companies. Those Companies whose cost
ratios are less than their respective peak load ratios shall pay
to those Companies whose costs ratios are greater than their
respective peak load ratios amounts calculated to equalize the
cost ratio of each Company to the peak load ratio of each Company
for each such year. Such amounts shall be paid in 12 equal
monthly installments in the year following the year in respect of
which such determinations are made.
<PAGE> 40
SCHEDULE J
CAPACITY COMMITMENT UNITS
18.01 Purpose
The purpose of this Schedule is to identify the
generating units of the Companies from which Capacity Commitments
shall be made pursuant to Section 6.03 and with reference to
which Capacity Commitment Charge shall be determined in
accordance with Schedule
C. 18.02 Commitment Units
Listed below are the generating units from which each
of the Companies shall commit Capacity to other Companies
pursuant to Section 6.03. Capacity Commitments shall be made from
the first listed unit of the committing Company unless or to the
extent that such unit is not expected to be available during the
commitment period. In such event, Capacity Commitments shall be
made from the second listed unit of the committing Company.
RATING YEAR
COMPANY/UNIT NAME (MW) INSTALLED
CPL
B. M. Davis #2 341 1976
Laredo #3 101 1975
PSO
Riverside #2 465 1976
Riverside #1 457 1974
SWEPCO
Knox Lee #5 344 1974
Wilkes #3 351 1971
WTU
Fort Phantom #2 204 1977
Fort Phantom #1 158 1974
<PAGE> 41
SCHEDULE K
PLANNING-RESERVE CRITERIA
19.01 Purpose
The purpose of this Schedule is to identify the
criteria which shall be used by the Companies in determining
their respective Planning Reserve Levels for purposes of
determining their respective Capacity Commitment obligations
under Section 6.03.
19.02 Planning Reserve Criteria
The Planning Reserve Level for each of the Companies
shall be equal to 15% of Company Load Responsibility.
<PAGE> 42
SCHEDULE L
STATEMENT OF PRACTICE
REGARDING OFF-SYSTEM
ENERGY SALES
20.01 Purpose
The purpose of this Schedule is to identify the basis
upon which price quotations for energy sales to an off-system
utility will be determined when any such utility makes a request
of a Company or the Agent to purchase System energy. The prices
for sales made shall be set by negotiation or in accordance with
filed rate schedules of the Companies and may include standard
industry adders.
20.02 Determination of Energy Price Quotations
The CSW Central Control Center will predispatch System
energy requirements based upon an estimate of on-line System
generation and such System energy requirements. Any request for
the purchase of System energy will result in a price quotation
based upon the incremental running cost of the next least costly
to operate System generating unit (that will be available to make
the sale requested during the time period that is the subject of
the request by the off-system utility) after System needs have
been met. In determining whether a generating unit will be
available to make a requested sale, the matters listed in Section
6.06 and the availability of adequate transmission capacity on
the System and on the systems of other utilities shall be
considered.
<PAGE> 1
EXHIBIT B-5
AGREEMENT
TO
AMEND
RESTATED AND AMENDED
OPERATING AGREEMENT
Among
Central Power and Light Company
Public Service Company of Oklahoma
Southwestern Electric Power Company
West Texas Utilities Company
Central and South West Services, Inc.
<PAGE> 2
AGREEMENT TO AMEND
RESTATED AND AMENDED
OPERATING AGREEMENT
This "AGREEMENT TO AMEND RESTATED AND AMENDED OPERATING
AGREEMENT" (Agreement to Amend) among Central Power and Light
Company (CPL), El Paso Electric Company (EPE), Public Service
Company of Oklahoma (PSO), Southwestern Electric Power Company
(SWEPCO), West Texas Utilities Company (WTU) and Central and
South West Services, Inc. (CSWS) is made and entered into as of
this day of January, 1994.
WHEREAS, each of CPL, PSO, SWEPCO, WTU and CSWS is a
wholly owned electric utility operating subsidiary of Central and
South West Corporation (CSW) and EPE will become a wholly owned
subsidiary of CSW in accordance with the "Agreement and Plan of
Merger among El Paso Electric Company, Central and South West
Corporation and CSW Sub, Inc.," dated May 3, 1993 and amended May
18, 1993 (the Merger Agreement);
WHEREAS, CPL, PSO, SWEPCO, WTU and CSWS are parties to
the "Restated and Amended Operating Agreement," dated October 1,
1993 (New Operating Agreement), which will become effective on
January 1, 1994 pursuant to an order of the Federal Energy
Regulatory Commission (FERC) issued November 15, 1993 in Docket
No. ER94-32-000, and thereafter will provide the basis, as
modified from time to time, for various types of economic
interchanges among, and the coordinated operation of, the
electric utility operating subsidiaries of CSW;
<PAGE> 3
WHEREAS, EPE will become an electric utility operating
subsidiary of CSW at the Effective Time of the Merger Agreement
and, at such time, is to become a party to the New Operating
Agreement, as such agreement is to be modified in accordance with
this Agreement to Amend; and
WHEREAS, CSWS is qualified to act as Agent for EPE,
CPL, PSO, SWEPCO and WTU;
NOW, THEREFORE, CPL, EPE, PSO, SWEPCO, WTU and CSWS
(the Parties) agree as follows:
1. CSWS shall act as the Agent for EPE, CPL, PSO,
SWEPCO and WTU with respect to this Agreement to Amend.
2. Except as provided for in subparagraph 3.15 of
this Agreement to Amend with respect to the revisions to Schedule
I described in such subparagraph 3.15, this Agreement to Amend
shall become effective, subject to its acceptance for filing by
the FERC under the Federal Power Act, as a supplement to the New
Operating Agreement at the Effective Time of the merger of CSW
Sub, Inc. with and into EPE pursuant to Article II, Section 2.5
of the Merger Agreement.
3. The Parties agree that EPE is to become bound by
(i) all provisions and Schedules of the New Operating Agreement
except Schedule I, at the Effective Time of the Merger Agreement
and (ii) Schedule I to the New Operating Agreement, as revised by
and when made effective in accordance with subparagraph 3.15. At
such time as the Merger Agreement becomes effective, the New
Operating Agreement shall be amended as follows:
<PAGE> 4
3.1 On the Title Page, insert "El Paso Electric
Company" between Central Power and Light Company and Public
Service Company of Oklahoma.
3.2 In the Table of Contents, insert: "2.21 ERCOT";
"2.34 Peak Load"; 2.39 Regional Peak"; "2.42 SPP"; "2.50 Transfer
Capability"; and "2.52 WSCC" in the appropriate place in the
enumerated list of definitions from 2.01 through 2.53.
3.3 In the Caption on page 1, insert El Paso Electric
Company in the same location as the name of such company appears
on the Title Page.
3.4 In the opening paragraph on page 1, insert "El
Paso Electric Company, hereinafter called EPE;" directly after
"hereinafter called CPL;"; and in the first WHEREAS clause,
insert "EPE," directly after "CPL,".
3.5 On page 5, insert sequentially, "2.21 ERCOT shall
mean the Electric Reliability Council of Texas."
3.6 Commencing on page 5, renumber each definition as
appropriate from the above definition of ERCOT to the last
definition, Year.
3.7 On page 7, insert sequentially, "2.34 Peak Load
for a period shall be Company Peak Demand less any load included
in Company Peak Demand which could have been curtailed under
tariff or contract provisions."
3.8 On page 8, insert sequentially, "2.39 Regional
Peak shall be the sum of Peak Loads for each Company belonging to
<PAGE> 5
the same reliability council (i.e., ERCOT, SPP, WSCC); and "2.42
SPP shall mean the Southwest Power Pool."
3.9 On page 9, insert sequentially, "2.50 Transfer
Capability for each reliability council region (i.e., ERCOT, SPP,
and WSCC) shall be the transfer capability provided by the HVDC
interconnection facilities that connect such reliability council
with another reliability council in which the Companies operate
which is owned or leased or purchased from others and used by the
Companies for their own accounts."
3.10 On page 10, insert sequentially, "2.52 WSCC shall
mean the Western Systems Coordinating Council."
3.11 On page 22, the signature page, insert below the
lines for Central Power and Light Company's Chief Executive
Officer's signature and attestation spaces for the execution by
El Paso Electric Company's Chief Executive Officer and
attestation by El Paso Electric Company's Secretary or Assistant
Secretary.
3.12 Revise SCHEDULE B (COMPANY UNITS WHICH ARE NOT
JOINT UNITS) to read as follows:
"SCHEDULE B
COMPANY UNITS THAT ARE JOINT UNITS
10.01 Purpose
The purpose of this Schedule is to list the Generating
Units placed in service after the date of the original Operating
Agreement dated September 28, 1993, which are Joint Units.
<PAGE> 6
10.02 Company Units that are Joint Units
The Company units which are Joint Units are:
Oklaunion Unit No. 1"
3.13 On SCHEDULE C (CAPACITY COMMITMENT CHARGE),
paragraph 11.03 (captioned "Provisions for Capacity Commitment
Charge") change
"B = 0.1816 (fixed charge rate for
the Committing Company)."
to
"B = 0. [1] (fixed charge
----------
rate for the Committing Company)."
3.14 On SCHEDULE D (INITIAL INTERTRANSMISSION
FACILITIES), in paragraph 12.02 (captioned "Allocation of
Ownership"), page D-2, insert below subparagraph (d):
"(e) Amrad to Artesia 345 KV transmission system and DC
Terminal. This 200 MW rated HVDC Back-to-Back Terminal
and 345 KV transmission line shall have the following
undivided ownership:
El Paso Electric Company 66-2/3%
Texas New Mexico Power Company 33-1/3%"
(Other related equipment ownership
percentages are slightly different.)
3.15 Effective as of midnight of the last day of the
calendar year that follows by at least three years the year in
which EPE becomes a wholly owned subsidiary of CSW, SCHEDULE I
(DISTRIBUTION OF COSTS OF INVESTMENT IN INTERTRANSMISSION
- ----------------------------
[1] The rate will be supplied when the revised New Operating
Agreement is filed with the FERC.
<PAGE> 7
FACILITIES) shall be revised in accordance with this subparagraph
3.15. In SCHEDULE I, in paragraph 17.02 (captioned "Investment
Cost"), page I-2, in line 5 from the top, change ".1627" to
- ------."[2] Additionally, renumber existing paragraph 17.03
(Distribution of Costs) as 17.04 and insert sequentially new
paragraphs 17.03, 17.04A, 17.04B, 17.04C and 17.05 to read as
follows:
"17.03 Investments Cost Categorization
To implement this Schedule I, each Company's investment
costs (as defined in Section 17.02) shall be sorted into two
categories. Category A investment costs shall consist of the (1)
investment costs related to all Intertransmission Facilities
owned by such Company and used to interconnect any two of SPP,
ERCOT or WSCC; and (2) all other transmission facility investment
cost incurred by such Company specifically for the purpose of
system integration. Category B investment costs shall consist of
such Company's investment costs (as defined in Section 17.02)
that are not assigned to Category A times a fraction that has as
its numerator Transfer Capability as of December 31 of the
preceding year for the reliability council in which such Company
operates its control area and as its denominator the Regional
Peak established in the preceding year. For purposes of this
Schedule I, WTU shall be deemed to operate entirely in ERCOT.
- ----------------------------
[2] The rate will be supplied when the revisions to Schedule I
provided for in this subparagraph 3.15 are filed with the FERC.
<PAGE> 8
17.04A Category A Costs
The investment cost of each Company for its Category A
Intertransmission Facilities as of December 31 of the preceding
year shall be determined in accordance with Sections 17.02 and
17.03. Such investment cost shall be multiplied by _____% [3] to
determine such Company's Category A costs for equalization. The
ratio of each Company's Category A costs for equalization to the
total of all Companies' costs for equalization shall be
determined and compared to the ratio of such Company's Peak Load
established in the preceding year to the total of all Companies'
Peak Loads for such year. Any Company whose Category A cost
ratio is less than its Peak Load ratio shall pay those Companies
whose Category A costs ratios are greater than their Peak Load
ratios amounts calculated to equalize the Category A cost ratio
of each Company to its Peak Load ratio for such year.
17.04B Category B Costs
The investment cost of each Company for its Category B
Intertransmission Facilities as of December 31 of the preceding
year shall be determined in accordance with Sections 17.02 and
17.03. Such investment cost shall be multiplied by _____% [4] to
determine such Company's Category B costs for equalization. The
ratio of each Company's Category B costs for equalization to the
- --------------------------------
[3] The rate will be supplied when the revisions to Schedule I
provided for in this subparagraph 3.15 are filed with the FERC.
[4] The rate will be supplied when the revisions to Schedule I
provided for in this subparagraph 3.15 are filed with the FERC,
and shall be the same rate contemplated by note 3, supra.
<PAGE> 9
total of all Companies' costs for equalization shall be
determined and compared to the ratio of such Company's Peak Load
established in the preceding year to the total of all Companies'
Peak Loads for such year. Any Company whose Category B cost
ratio is less than its Peak Load ratio shall pay those Companies
whose Category B cost ratios are greater than their Peak Load
ratios amounts calculated to equalize the Category B cost ratio
of each Company to its Peak Load ratio for such year.
17.04C Distribution of Equalization Payments
Category A and Category B transmission equalization
payments to be made or to be received by each Company shall be
summed. The aggregate amount to be received or paid by each
Company shall be paid or received in 12 equal installments in the
year following the year in respect of which such amounts have
been determined.
17.05 Effectiveness
This Schedule I shall become effective as of midnight
of the last day of the calendar year that follows by at least
three years the year in which EPE becomes a wholly owned
subsidiary of CSW."
3.16 On SCHEDULE J (CAPACITY COMMITMENT UNITS), in
paragraph 18.02 (captioned "Commitment Units") between the
commitment units for CPL and PSO, insert:
"EPE
Newman #4 212 1975
Rio Grande #8 150 1972"
<PAGE> 10
3.17 On SCHEDULE K (PLANNING-RESERVE CRITERIA), revise
paragraph 19.02 (captioned "Planning Reserve Criteria") to read:
"The Planning Reserve Level for each Company shall be
the minimum Planning Reserve Level applicable to the
Company under guidelines established by its NERC
regional reliability Council."
4. The Parties agree further that the CSW System
Internal Transmission Loss Compensation Procedure (as made
effective in FERC Docket No. ER86-277), the revised Transaction
Cost Compensation Procedure (as made effective in FERC Docket No.
ER92-760-000), and the Fixed Transaction Cost Compensation
Procedure (as made effective in FERC Docket No. ER92-241-000),
shall be amended as necessary to recognize EPE as a party to the
revised New Operating Agreement and a member of the CSW System.
Such revisions to the Internal Transmission Loss Compensation
Procedure and the Transaction Cost Compensation Procedure shall
become effective as of the date on which the revised New
Operating Agreement to which EPE is a party is first placed in
effect. Such revisions to the Fixed Transaction Cost
Compensation Procedure shall become effective as of the same date
on which revised Schedule I becomes effective.
5. This Agreement to Amend may be executed in several
identical counterparts, each of which shall be considered an
original and one and the same.
IN WITNESS WHEREOF, each of the Parties has caused this
Agreement to Amend to be signed in its name and on its behalf by
its Chief Executive Officer attested by its Secretary, both being
<PAGE> 11
duly authorized. This Agreement to Amend shall become effective
on such date as is established by the Federal Energy Regulatory
Commission.
CENTRAL POWER AND LIGHT COMPANY
Attest
By
Secretary Chief Executive Officer
Robert R. Carey
EL PASO ELECTRIC COMPANY
Attest
By
Secretary Chief Executive Officer
David H. Wiggs, Jr.
PUBLIC SERVICE COMPANY OF
OKLAHOMA
Attest
By
Secretary Chief Executive Officer
Robert L. Zemanek
SOUTHWESTERN ELECTRIC POWER
COMPANY
Attest
By
Secretary Chief Executive Officer
Richard H. Bremer
WEST TEXAS UTILITIES COMPANY
Attest
By
Secretary Chief Executive Officer
Glenn Files
CENTRAL AND SOUTH WEST
SERVICES, INC.
Attest
By
Secretary Chief Executive Officer
Harry D. Mattison
<PAGE> 1
EXHIBIT B-6
THIS AGREEMENT made and entered into by and among
CENTRAL AND SOUTH WEST SERVICES, INC. (the "Service Company"),
and CENTRAL AND SOUTH WEST CORPORATION, CENTRAL POWER AND LIGHT
COMPANY, PUBLIC SERVICE COMPANY OF OKLAHOMA, SOUTHWESTERN
ELECTRIC POWER COMPANY, WEST TEXAS UTILITIES COMPANY, TRANSOK,
INC., CSW CREDIT, INC., CSW ENERGY, INC., CSW FINANCIAL, INC.,
and CSW LEASING, INC., (hereinafter referred to, collectively,
as the "System Companies").
W I T N E S S E T H T H A T:
WHEREAS, pursuant to authority granted by orders of the
Securities and Exchange Commission, dated March 20, 1969 and
April 21, 1978, the Service company and the then existing System
Companies entered into Contracts, effective April 1, 1969 and May
1, 1978, wherein the Service Company agreed to provide and those
System Companies agreed to accept and pay for various management,
administrative, financial, technical and other services; and
WHEREAS, such services have been rendered at cost,
determined in accordance with the applicable rules and
regulations of the Securities and Exchange Commission under the
Public Utility Holding Company Act of 1935; and the allocation
of such costs among the System Companies have been made in
accordance with said order of said Commission, and;
WHEREAS, additional System Companies have come into
existence since the effective date of the most recent Contract
referred to above, and which Companies have like needs for
Service Company's services, and;
<PAGE> 2
WHEREAS, certain changes in the scope and character of
the services to be rendered and the method of allocating costs of
such services among the System Companies have become necessary;
and appropriate approvals to make such changes have been secured
from the Commission by orders dated December 30, 1982 and October
23, 1985, and;
WHEREAS, the Service Company and the System Companies
intend to enter into a new agreement to reflect such changes;
NOW THEREFORE, in consideration of the premises and of
the mutual agreements herein contained, the parties hereto agree
as follows:
1. Agreement to Provide Services.
The Service Company agrees to furnish to the System
Companies, upon the terms and conditions hereinafter set forth,
such of the following services at such times, for such periods in
such manner as the System Companies may from time to time require
and which the Service Company is equipped to perform:
(a) Consultation, analysis and advice in connection
with matters relating to operations, management, financing
and financial planning, engineering, system planning, law,
governmental and general business problems or questions.
(b) Consultation, analysis and advice in connection
with personnel relations and employee benefit plans.
(c) Tax services relating to the preparation and filing
of returns for federal, state and local taxes, and the
consolidation of such returns.
<PAGE> 3
(d) Assistance in connection with audits or returns by,
and participation in discussions of such returns with, the
Internal Revenue Service and other taxing bodies or
authorities.
(e) Consultation, analysis and advice in connection
with accounting matters and in preparation of accounts and
the consolidation of such accounts.
(f) Electronic data processing services, including
establishing and operating a data processing center,
processing of customer billing, revenues and
statistics, payrolls, property accounting, general
accounting, cash forecasts, load flow studies, and
various other business and engineering applications as
may from time to time be in the best interest of the
System Companies.
The Service Company will also provide the System
Companies with such special services, in addition to those
specified above, as may be required and which the Service Company
concludes it is equipped to perform. In supplying such services,
the Service Company may arrange, where it deems appropriate, for
the services of such experts, consultants, advisers and other
persons with necessary qualifications as are required for or
pertinent to the rendition of such services.
<PAGE> 4
2. Agreement to Take Services.
Each of the System Companies agrees to take from the
Service Company such of the services described in Paragraph 1
above and such additional general or special services, whether or
not now contemplated, as are required from time to time by the
System Companies and which the Service Company is equipped to
perform.
3. Compensation and Allocation.
As compensation for the services to be rendered
hereunder, each of the System Companies agrees to pay to the
Service Company all costs which reasonably can be identified and
related to particular transactions or services performed by the
Service Company for or on its behalf. Where more than one System
Company is involved in or has received benefits from a
transaction or service performed, cost will be allocated among
such companies on the basis most directly related to the
transaction or service performed. Allocated costs will be billed
using an appropriate formula as authorized by the Commission. The
Service Company shall render a monthly statement to each System
Company which shall reflect the billing information necessary to
identify the costs and allocation made and changed for that
month. Each System Company agrees to remit to the Service
Company all charges billed to it, within 15 days subsequent to
the month.
<PAGE> 5
4. Term of Agreement.
This Agreement shall become effective upon the 1st
day of September 1, 1988 and shall continue in force until
cancelled by any party hereto by at least 90 days' prior written
notice given to all other parties, in which event this Agreement
shall be terminated as to all parties.
This Agreement shall also be subject to termination or
modification at any time if and to the extent its performance may
or shall conflict with any rule, regulation or order of the
Securities and Exchange Commission adopted before or after the
effective date of this Agreement.
This Agreement cancels and supersedes the May 1, 1978
agreement entered into between Service Company and those System
Companies which were parties to such agreement.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed as of the 18th day of August, 1988.
CENTRAL AND SOUTH WEST CORPORATION
By____________________________________
Durwood Chalker, Chairman, President
and Chief Executive Officer
CENTRAL AND SOUTH WEST SERVICES, INC.
By____________________________________
Merle L. Borchelt, President and
Chief Executive Officer
<PAGE> 6
CENTRAL POWER AND LIGHT COMPANY
By____________________________________
T.V. Shockley, III, President and
Chief Executive Officer
PUBLIC SERVICE COMPANY OF OKLAHOMA
By____________________________________
M.E. Fate, Jr., President and
Chief Executive Officer
SOUTHWESTERN ELECTRIC POWER COMPANY
By____________________________________
J.W. Turk, Jr., President and
Chief Executive Officer
WEST TEXAS UTILITIES COMPANY
By____________________________________
G.D. Churchill, President and
Chief Executive Officer
TRANSOK, INC.
By____________________________________
B.J. Harris, President and
Chief Executive Officer
<PAGE> 7
CSW ENERGY, INC.
By____________________________________
Durwood Chalker, Chairman and
Chief Executive Officer
CSW FINANCIAL, INC.
By____________________________________
Durwood Chalker, Chairman and
Chief Executive Officer
CSW LEASING, INC.
By____________________________________
Durwood Chalker, Chairman
CSW CREDIT, INC.
By____________________________________
William F. Malec, President
<PAGE> 1
EXHIBIT B-8
SETTLEMENT AGREEMENT
BETWEEN
EL PASO ELECTRIC COMPANY
AND
ALEXANDER HAMILTON LIFE INSURANCE COMPANY OF AMERICA
November 1993
Michael Paul Kirschner, Mediator
Hastie & Kirschner
Attorneys and Counselors at Law
3000 First Oklahoma Tower * 210 West Park Avenue
Oklahoma City, Oklahoma 73102-5673
Telephone (405) 239-6404
Telecopier (405) 239-6403
<PAGE> 2
SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT is entered into as of
November 15, 1993, between EL PASO ELECTRIC COMPANY, a Texas
corporation, debtor and debtor in possession ("EPE"), and
ALEXANDER HAMILTON LIFE INSURANCE COMPANY OF AMERICA, a Michigan
corporation (the "Owner Participant").
IN CONSIDERATION OF THE MUTUAL AGREEMENTS CONTAINED
HEREIN, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, IT IS HEREBY
AGREED by and between the parties hereto as follows:
DEFINITIONS
1. As used herein, the following terms shall have the
following meanings:
"Bankruptcy Court" shall mean the United States
Bankruptcy Court for the Western District of Texas, or such other
court as shall have original jurisdiction over the Case.
"Case" shall mean the proceeding filed by EPE under
Title 11 of the United States Code and bearing Bankruptcy Court
case number 92-10148-FM.
"Claims" shall have the meaning assigned to such term
in the Release.
"Confirmation Order" shall mean an order confirming an
EPE Plan.
"CSW" shall mean Central and South West Corporation.
"Effective Date" shall mean the date on which an EPE
Plan incorporating, except in immaterial respects, the terms and
conditions of this Settlement Agreement shall become effective
according to such EPE Plan's terms.
"EPE Group" shall mean EPE and (i) each and every
person who controls EPE, is controlled by EPE or is under common
control with EPE (the "EPE Affiliated Group"); (ii) any
predecessor, successor or assign of any person included within
the EPE Affiliated Group; (iii) any Chapter 7 or Chapter 11
Trustee appointed by the Bankruptcy Court or any other court with
regard to any person included within the EPE Affiliated Group;
(iv) the respective present and former agents, directors,
officers, employees, advisors, attorneys and representatives of
any person included within the EPE Affiliated Group; (v) the
respective shareholders and creditors of the EPE Affiliated
Group; and (vi) in the case of any individuals falling within the
<PAGE> 3
scope of (iv) or (v), their respective heirs, receivers,
conservators, beneficiaries, executors, administrators,
successors and assigns. The term EPE Group shall not include CSW.
"EPE Plan" shall mean (i) the Modified Third Amended
Plan of Reorganization, filed on September 15, 1993 in the Case
(the "Third Amended Plan"), (ii) any other plan of reorganization
filed in the Case pursuant to which EPE, with its consent, is to
be acquired by CSW or a CSW affiliate, by merger or otherwise,
and (iii) any other plan of reorganization filed in the Case
supported by or acceptable to EPE if, within 10 days of the
filing thereof, EPE fails to provide written notice to the Owner
Participant that such plan does not constitute an EPE Plan for
purposes of this Settlement Agreement.
"Excepted Payments" shall have the meaning assigned to
such Term in Appendix A to the Participation Agreement.
"Facility Lease" shall have the meaning assigned to
such term in Appendix A to the Participation Agreement.
"Lease Debt Creditors" shall mean Harris Trust and
Savings Bank, as Successor Trustee for those certain $200,000,000
Secured Lease Obligation Bonds Series 1988, and any holders of
such bonds, and LaSalle National Bank, as Successor Trustee for
those certain $396,328,000 Lease Obligation Bonds Series 1986 and
those certain $146,305,000 Lease Obligation Bonds Series 1986A
(the Successor Trustees, collectively, the "Successor Indenture
Trustees"), and any holders of such bonds.
"Owner Participant Group" shall mean the Owner
Participant and (i) each and every person who controls the Owner
Participant, is controlled by the Owner Participant or is under
common control with the Owner Participant (the "Owner Participant
Affiliated Group"); (ii) any predecessor, successor or assign of
any person included within the Owner Participant Affiliated
Group; (iii) the respective present and former agents, directors,
officers, employees, advisors, attorneys and representatives of
any person included within the Owner Participant Affiliated
Group; (iv) the respective shareholders and creditors of the
Owner Participant Affiliated Group; (v) any Chapter 7 or Chapter
11 Trustee appointed by a court with regard to any person
included within the Owner Participant Affiliated Group; and (vi)
in the case of any individuals falling within the scope of (iii)
or (iv), their respective heirs, receivers, conservators,
beneficiaries, executors, administrators, successors and assigns.
"Owner Trustee" shall mean The First National Bank of
Boston ("FNBB"), as trustee under a trust agreement with the
Owner Participant.
<PAGE> 4
"Palo Verde Leases" shall mean, collectively, the
Facility Lease and the facility leases, as amended, between EPE
and FNBB (as trustee under separate trust agreements with the
other owner participants) with respect to the Arizona Nuclear
Power Project.
"Palo Verde Lease Litigation" shall mean an adversary
proceeding commenced on September 9, 1992 by EPE against FNBB, in
FNBB's capacity as Owner Trustee for each of the owner
participants (other than DBP Corp.), DBP Corp. and the Successor
Indenture Trustees, which case has been assigned Adversary
Proceeding No. 92- 1285-FM by the Bankruptcy Court.
"Palo Verde Letters of Credit" shall have the meaning
assigned to such term in the Release.
"Participation Agreement" shall mean the Participation
Agreement, as amended, among EPE, the Owner Participant and
others.
"Real Property Interest" shall have the meaning
assigned to such term in Appendix A to the Participation
Agreement.
"Release" shall mean the release in the form of Annex A
hereto.
"Settlement Agreement" shall mean this Settlement
Agreement, including all Annexes hereto.
"Transaction Documents" shall have the meaning assigned
to such term in Appendix A to the Participation Agreement.
"Trust Estate" shall have the meaning assigned to such
term in Appendix A to the Participation Agreement.
"Undivided Interest" shall have the meaning assigned to
such term in Appendix A to the Participation Agreement.
RIGHTS AND OBLIGATIONS PRIOR TO THE EFFECTIVE DATE
2. EPE's plan of reorganization will provide for the
terms and conditions set forth below (and EPE will not file,
pursue or support any plan that contains provisions inconsistent
with, or that does not embody the terms and conditions of, this
Settlement Agreement):
a Claims of the EPE Group, on the one hand, and the
Owner Participant Group and the Owner Trustee, on
the other hand, against one another shall be
mutually released pursuant to the Release (to the
extent provided therein), which Release will be
executed, delivered, and effective solely as of
the Effective Date.
<PAGE> 5
b Other than as provided in this Settlement
Agreement, the Owner Participant and the Owner
Trustee shall receive no distribution, recovery or
other consideration under an EPE Plan except that,
within 10 days of the date of entry of the
Confirmation Order (but not later than December
31, 1993 if such date occurs in 1993), EPE will
pay all fees, costs and expenses incurred by or on
behalf of the Owner Participant or Owner Trustee
from and after August 1, 1993 through and
including the date of entry of the Confirmation
Order in connection with the Palo Verde
Litigation, the Case, the Participation Agreement
or the transactions contemplated hereby or by any
of the foregoing (the amount of which as of
October 1, 1993 is $7,328.36).
c As of the Effective Date, (i) all right, title and
interest of the Owner Participant in the Trust
Estate and certain Excepted Payments shall be
conveyed to EPE or its designee, if paragraph 12.a
hereof is applicable, or (ii) if paragraph 12.b
hereof is applicable, there will be a conveyance
or transfer of the Trust Estate to EPE or EPE's
designee.
d As of the Effective Date, the receipt of any value
or consideration under any EPE Plan shall be
deemed to be (i) a release of the Owner
Participant and Owner Trustee by such recipient of
all claims related to the Palo Verde Leases, the
Palo Verde Letters of Credit, the documents listed
in Schedule A to the Third Amended Plan, and the
transactions contemplated hereby and thereby, and
(ii) a release of such recipient by the Owner
Trustee and Owner Participant of all such claims.
EPE shall defend such provisions against any
objections thereto. If the deemed release
described in this paragraph is not approved by the
Bankruptcy Court as to third parties other than
the Lease Debt Creditors and the issuers of or
participants in the Palo Verde Letters of Credit,
EPE may modify the EPE Plan accordingly as long as
the Confirmation Order provides that the deemed
release is effective as to the Lease Debt
Creditors and the issuers of and participants in
the Palo Verde Letters of Credit and that, at the
Effective Date, all third party claims against the
Owner Participant and Owner Trustee which are
derivative of the claims of EPE will be
extinguished.
<PAGE> 6
3. The Owner Participant and Southwestern Public
Service Company ("SPS") have entered into a letter of
understanding dated July 13, 1993. The Owner Participant will
not take any position as to the termination of EPE's exclusivity
through the filing of additional pleadings in the Case or by the
making of any statement in the Bankruptcy Court in support of any
motion to terminate EPE's exclusivity, unless EPE, in
contravention of its agreement not to do so, files, pursues or
supports confirmation of a plan of reorganization which does not
incorporate the terms of this Settlement Agreement or which
materially adversely affects the Owner Participant or any of its
affiliates.
4. The Owner Participant will vote to accept and/or
will cause the Owner Trustee to vote to accept the Third Amended
Plan and will vote to accept and/or cause the Owner Trustee to
vote to accept any other EPE Plan that is (x) consistent with and
incorporates the terms of this Settlement Agreement and (y) does
not materially adversely affect the Owner Participant or any of
its affiliates. The Owner Participant will not vote to reject or
object to, and will cause the Owner Trustee not to vote to reject
or object to, the Third Amended Plan, and will not vote to reject
or object to, and will cause the Owner Trustee not to vote to
reject or object to, any other EPE Plan that (i) is consistent
with and incorporates the terms of this Settlement Agreement and
(ii) does not materially adversely affect the Owner Participant
or any of its affiliates. Nothing in this Settlement Agreement
will limit the right of the Owner Participant or Owner Trustee or
any member of the Owner Participant Group to vote to accept or
reject or object to (A) any plan that is (a) inconsistent with or
does not incorporate the terms of this Settlement Agreement or
(b) materially adversely affects the Owner Participant or any of
its affiliates or (B) any plan other than an EPE Plan. For
purposes of this paragraph 4, it will be conclusively presumed
that an EPE Plan does not materially adversely affect the Owner
Participant or any of its affiliates if the Owner Participant
fails to provide EPE with written notice to the contrary within
20 days after receipt of such EPE Plan. EPE will not and the
Owner Participant will not, and will not direct the Owner Trustee
to, file any pleading in the Case that is contrary to or
inconsistent with the terms and conditions contained herein.
5. The Owner Participant agrees not to transfer,
prior to the Effective Date, any Claim against the EPE Group or
interest in the Facility Lease to anyone other than a person that
has agreed to be bound by this Settlement Agreement; provided,
however, that upon any withdrawal, termination or revocation of
the Third Amended Plan, the Owner Participant may thereafter
transfer any Claim against the EPE Group or interest in the
Facility Lease to anyone whether or not such person agrees to be
bound by this Settlement Agreement, and if such person has not
agreed to be so bound, this Settlement Agreement shall
automatically terminate without further action by any party
hereto. EPE agrees not to transfer, prior to the Effective Date,
<PAGE> 7
any Claim against the Owner Participant Group or Owner Trustee or
interest in the Facility Lease.
6. EPE shall disclose the contents of this Settlement
Agreement, pursuant to Section 3.14B.5. of the Third Amended
Plan. Between the date of entry of the Confirmation Order and
the Effective Date, the Owner Participant shall have all of the
rights accorded to the Oversight Committee (as defined in the
Third Amended Plan) pursuant to Section 5.1.E of the Third
Amended Plan.
7. Until the Effective Date occurs, EPE will not
pursue the Palo Verde Lease Litigation or commence any litigation
or otherwise file any Claim against the Owner Participant or
Owner Trustee and EPE will oppose any motion or other action by
any other person to pursue the Palo Verde Lease Litigation or
commence or file any such litigation or Claim or intervene
therein; provided, however, that nothing herein shall preclude
EPE from (i) taking steps which EPE reasonably deems necessary to
preserve its Claims and its ability to collect on such Claims, if
successful, and to protect EPE's rights in the event of the
proposed dissolution of the Owner Participant or Owner Trustee in
a bankruptcy or insolvency proceeding of the Owner Participant or
Owner Trustee (and EPE hereby agrees that EPE will not file nor
participate in the filing of any involuntary bankruptcy or
insolvency petition against the Owner Participant or Owner
Trustee) or (ii) seeking discovery, at EPE's own expense, against
the Owner Participant or Owner Trustee in connection with a plan
of reorganization proposed by or on behalf of SPS, or any other
plan of reorganization other than an EPE Plan, to the extent EPE
is otherwise entitled to request such discovery from the
Bankruptcy Court.
8. Until the Effective Date occurs, the Owner
Participant will not, and will not direct the Owner Trustee to,
pursue the Palo Verde Lease Litigation or commence any litigation
or file any additional Claim against EPE and at EPE's request,
the Owner Participant will, and/or will cause the Owner Trustee
to, file a pleading which will support EPE's opposition to any
motion or other action by any other person to pursue the Palo
Verde Lease Litigation or commence or file any such litigation or
Claim or intervene therein; provided, however, that nothing
herein shall preclude the Owner Participant or Owner Trustee from
(i) taking steps which the Owner Participant or Owner Trustee, as
the case may be, reasonably deems necessary to preserve the
Claims of such Owner Participant or Owner Trustee and to protect
the rights of such Owner Participant or Owner Trustee in the
event of the proposed dissolution of EPE or (ii) opposing EPE's
pursuit of any discovery referred to in paragraph 7 hereof.
<PAGE> 8
9. Within 10 days after the filing of any plan, EPE
will give the Owner Participant written notice of whether such
plan constitutes an EPE Plan referred to in clause (iii) of the
definition thereof. In the absence of such notice, such plan
shall be deemed to be an EPE Plan.
10. Prior to the Effective Date, EPE shall seek and
obtain all governmental approvals necessary to effect the
transactions contemplated hereby. The Owner Participant agrees
to cooperate with EPE, at EPE's expense, in obtaining such
approvals prior to the Effective Date.
11. Concurrently with the execution and delivery of
this Settlement Agreement, the Owner Participant, the Owner
Trustee, EPE and the Successor Indenture Trustees shall execute
and deliver a Tolling Agreement in the form of Annex E hereto.
RIGHTS AND OBLIGATIONS ON AND AFTER THE EFFECTIVE DATE
12. Subject to the satisfaction of the terms and
conditions contained in this Settlement Agreement, including
paragraph 13, on or as of the Effective Date:
a The Owner Participant will, subject to paragraph
12.b, transfer to EPE or, if EPE so requests,
EPE's designee, all of the Owner Participant's
right, title and interest in the Trust Estate and
certain Excepted Payments by the execution and
delivery of a Bill of Sale and Assignment
substantially in the form of Annex B hereto.
b At the request and expense of EPE, the Owner
Participant will, at the election of EPE, in lieu
of or in addition to the transfer referred to in
paragraph 12.a, (i) consent to the conveyance or
transfer of the Trust Estate to EPE or, if EPE so
requests, EPE's designee, and (ii) direct the
Owner Trustee to effect such conveyance or
transfer, which obligations shall be subject to
(a) EPE having obtained the required consent, if
any, of the applicable Successor Indenture Trustee
or a binding order (which has not been stayed) of
a court of competent jurisdiction effectively
overriding the requirement, if any, of such
consent, (b) such conveyance and transfer
complying with applicable law and third party
rights, if any, or EPE having obtained a binding
order (which has not been stayed) of a court of
competent jurisdiction effectively overriding any
requirement of such compliance, and (c) EPE having
provided such indemnities to the Owner Participant
and the Owner Trustee as either of them shall
<PAGE> 9
reasonably request regarding the conveyance or
transfer set forth in this paragraph 12.b.
c The parties hereto and the Owner Trustee shall
execute and deliver the Release.
d Reorganized EPE shall deliver to the Owner
Participant on the Effective Date an executed
letter in the form of Annex G hereto. The form
and contents of Annex G shall not be disclosed
prior to the Effective Date to any person or
entity, except that a copy thereof shall be
provided to the Bankruptcy Court under seal and to
the Successor Indenture Trustee (after execution
thereof). In the event the Effective Date does
not occur, neither the Owner Participant nor any
other person or entity shall refer to or otherwise
disclose the contents of Annex G, or its inclusion
in this Settlement Agreement, for any purpose.
e If paragraph 12.a is applicable, EPE or its
designee shall become the "Owner Participant"
under the documents described in Schedule A to the
Third Amended Plan for all purposes, and, if
paragraph 12.b is applicable, such documents shall
be terminated, altered, or amended in such manner
as the parties hereto shall agree, consistent with
the terms of this Settlement Agreement.
f Section 17 of the Participation Agreement shall
continue in full force and effect, but only with
respect to EPE's obligations under the first and
third sentences of the first paragraph and the
entire third paragraph of Section 10(b)(3)(xi),
and the entirety of Sections 13 (insofar as
indemnification is sought for Claims (as defined
in the Participation Agreement) asserted against
the Owner Participant, the Owner Trustee, the
First National Bank of Boston (in its individual
capacity), the Trust (as defined in the
Participation Agreement), the Trust Estate, or the
Lease Indenture Estate (as defined in the
Participation Agreement), or any Affiliate (as
defined in the Participation Agreement),
successor, assign, agent, officer, director or
employee of any of the foregoing, by a person
other than the Owner Participant, the Owner
Trustee or any successor or assign thereof) and 16
thereof (it being understood that the exclusions
from the general tax indemnity provisions of
Section 13(b) of the Participation Agreement with
respect to a "voluntary transfer" and with respect
to a "transferee" or a "subsequent transferee"
<PAGE> 10
shall not apply to the transactions contemplated
by this Settlement Agreement); provided, however,
that in order to prevent a double payment with
respect to a Loss or Losses (as defined in the
Participation Agreement), the aggregate amount of
such payments shall be reduced (without
duplication) by the appropriate portion of the
amount drawn by the Owner Participant under the
corresponding Palo Verde Letter of Credit to the
extent such portion is attributable (under
calculations performed in accordance with industry
practice) to the same adverse tax consequences
constituting such Loss or Losses. It is
understood that EPE's obligations under this
paragraph 12.f shall not extend to the payment of
Basic Rent, Fair Market Rental Value, Fair Market
Sales Value, Casualty Value, Special Casualty
Value, Termination Value, Enhanced Casualty Value
or Special Termination Value (as such terms are
defined in the Transaction Documents and
collectively referred to herein as "Scheduled
Amounts") or any amounts measured by Scheduled
Amounts or Supplemental Rent (to the extent
attributable to Scheduled Amounts or Excepted
Payments which are Assigned Property (as defined
in the Bill of Sale and Assignment attached hereto
as Annex B)). Notwithstanding anything contained
in this Settlement Agreement or the Release, EPE
shall continue to comply with Section 10(a)(2)(ii)
of the Facility Lease except that any notices or
certificates described in Section 10(a)(1)(i)(F)
of the Facility Lease (as such section relates to
Section 10(a)(2)(ii)) must be received by the
Owner Participant in order to be effective against
the Owner Participant but need not be received by
or delivered to the Indenture Trustee.
g EPE will pay any balance due of the amounts
described in paragraph 26 hereof.
13. The terms and conditions referred to in paragraph
12 include the following:
a The Confirmation Order shall (i) provide that an
Order of Dismissal with Prejudice in the form
attached hereto as Annex C shall be entered on or
after the Effective Date and a copy provided to
the Owner Participant and to the Successor
Indenture Trustee and (ii) comply with the last
sentence of paragraph 2.d, if applicable;
<PAGE> 11
b The Owner Participant, the Owner Trustee and the
Successor Indenture Trustees shall have executed
and delivered mutual releases substantially in the
form attached hereto as Annex D and an order of
the Bankruptcy Court complying with either the
first or the last sentence of paragraph 2.d shall
be in full force and effect and shall not have
been stayed;
c This Settlement Agreement shall be in full force
and effect and neither the Owner Participant nor
EPE shall be in default of any term or condition
hereof;
d All governmental approvals, if any, necessary to
effect the transactions contemplated hereby shall
have been obtained and be in full force and
effect;
e All consents of third parties, if any, necessary
to effect the actions contemplated above shall
have been obtained and be in full force and
effect;
f All documentation for the transactions
contemplated by this paragraph 13 and paragraphs
8, 12.a, 12.b, 12.e and 26 shall be reasonably
satisfactory in form and substance to the Owner
Participant and EPE; and
g The Owner Participant and the Owner Trustee shall
have received all amounts, if any, payable
pursuant to paragraphs 2.b, 18 and 26 hereof.
Conditions d and e above may be satisfied by the entry of a
binding order (which has not been stayed) of a court of competent
jurisdiction effectively overriding the requirement, if any, of
obtaining any third party consents or governmental approvals
referred to in such conditions.
TERMINATION AND EFFECTIVENESS
14. This Settlement Agreement may be terminated (a) on
30 days' written notice by either EPE or the Owner Participant if
no EPE Plan referred to in clause (i) or (ii) of the definition
thereof is being pursued and, in the case of termination by EPE,
EPE certifies in the termination notice that no EPE Plan referred
to in clause (i) or (ii) of the definition thereof is then
contemplated by EPE, or (b) on 5 days' written notice by either
the Owner Participant or EPE if EPE or the Owner Participant,
respectively, fails to comply with any term or condition of this
Settlement Agreement and does not cure such failure within such 5
days or (c) on 5 days' written notice from EPE that a settlement
agreement with one of the other owner participants with an
<PAGE> 12
interest in Unit 2 of the Palo Verde Nuclear Generating Station
has terminated pursuant to paragraph 5 of such settlement
agreement and that EPE is terminating all of the settlement
agreements with each of the owner participants with an interest
in such Unit.
15. This Settlement Agreement shall not be binding
upon any of the parties hereto until EPE and all of the owner
participants execute settlement agreements in a form similar to
this Settlement Agreement. This Settlement Agreement shall
terminate automatically without further action by any party
hereto if the Bankruptcy Court in the Case declines to approve
the settlement contained in this Settlement Agreement or any such
other settlement agreement.
16. Upon any termination of this Settlement Agreement,
all obligations of the parties hereto (except for the last 2
sentences of paragraph 12.d) shall cease.
REPRESENTATIONS AND WARRANTIES
17. EPE represents and warrants that no modification
to the merger agreement between EPE and CSW is necessary to
effectuate or consummate this Settlement Agreement.
18. Each party hereto represents and warrants that it
owns and has not transferred any of the Claims described in the
Release as being released by it or any of its interests in the
Facility Lease. Except as set forth in Annex F hereto, to the
knowledge of the Owner Participant, there exists no basis upon
which the Owner Participant, as of the date of this Settlement
Agreement, may assert any Claims against EPE, other than any such
Claims which will be extinguished pursuant to the Release. To the
knowledge of EPE, there exists no basis upon which EPE, as of the
date of this Settlement Agreement, may assert any Claim against
the Owner Participant, other than any such Claims which will be
extinguished pursuant to the Release. EPE shall pay all amounts
due with respect to the items set forth on Annex F irrespective
of whether such amounts are already incurred, invoiced or
assessed or arise hereafter.
19. Each party hereto agrees that the Third Amended
Plan (i) complies with the terms and conditions of this
Settlement Agreement, and (ii) does not materially adversely
affect the Owner Participant or any of its affiliates for
purposes of paragraph 4 hereof.
MISCELLANEOUS
20. Nothing in this Settlement Agreement shall operate
as an admission of liability or admission as to any issue by any
party, and this Settlement Agreement (and all negotiations,
discussions and drafts relating thereto) shall be subject to the
<PAGE> 13
provisions of Federal Rule of Evidence 408 and comparable
provisions of state law.
21. This Settlement Agreement may be executed in two
or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same
instrument.
22. This Settlement Agreement shall be governed in all
respects including validity, interpretation and effect, by, and
construed and enforced under, the law of the State of New York,
without giving effect to the principles of conflicts of law
thereof.
23. This Settlement Agreement is enforceable only by
the parties hereto and the Owner Trustee; provided, however,
that, after the Effective Date, any person who is a beneficiary
of a release (including the Release) contemplated by this
Settlement Agreement shall be entitled to enforce the provisions
of such release.
24. In addition to all other rights and remedies
provided in this Settlement Agreement, EPE and the Owner
Participant may (subject to any restrictions contained in this
Settlement Agreement) exercise any other right or remedy that may
be available under applicable law or proceed (or the Owner
Trustee may proceed) by appropriate court action to enforce the
terms hereof. The failure or delay of EPE or the Owner
Participant in exercising any right granted hereunder upon the
occurrence of any of the contingencies set forth herein shall not
constitute a waiver of any such right upon the continuance or
recurrence of any such contingencies or similar contingencies and
any single or partial exercise of any particular right by EPE or
the Owner Participant shall not exhaust the same or constitute a
waiver of any other right provided herein. No remedy under this
Settlement Agreement is intended to be exclusive, but each shall
be cumulative and in addition to any other remedy provided
hereunder or otherwise available to EPE or the Owner Participant
at law or in equity (subject to any restrictions contained in
this Settlement Agreement). Notwithstanding the foregoing, the
parties agree that in the event of a breach of this Settlement
Agreement, money damages will not be adequate to compensate the
non-breaching party, and, accordingly, either party or the Owner
Trustee may seek to specifically enforce the provisions of this
Settlement Agreement.
25. Except as otherwise specifically provided herein,
this Settlement Agreement shall be binding on all successors and
assigns of the parties hereto.
26. The parties shall cooperate with one another to
execute and deliver such other documents and to take such further
actions as shall be necessary or appropriate to effectuate the
<PAGE> 14
terms hereof; provided, however, that the Owner Participant and
the Owner Trustee shall each be reimbursed by EPE for its
reasonable expenses after the date of entry of the Confirmation
Order related to the execution and delivery of any such other
documents and the taking of any such further actions by the Owner
Participant or the Owner Trustee.
27. The descriptive headings of the paragraphs of this
Settlement Agreement are for convenience only and will not be
used in the construction of the content of this Settlement
Agreement.
28. Any notice required or permitted to be given by
any provision of this Settlement Agreement will be in writing and
will be deemed to have been given when delivered personally or by
facsimile, receipt confirmed, to the party designated to receive
such notice or on the date following the day sent by overnight
courier or on the 3rd business day after the same is sent by
certified mail, postage and charges prepaid, directed to the
following addresses or to such other additional addresses as any
party might designate by written notice to the other party:
El Paso Electric Company: El Paso Electric Company
Mills Building
303 North Oregon
El Paso, Texas 79901
Attention:
Chief Executive Officer
and Chairman of the Board
Facsimile: (915) 521-4754
With Copy to: Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: Shalom L. Kohn, Esq.
Facsimile: (312) 853-7312
With Copy to: Milbank, Tweed, Hadley & McCloy
One Chase Manhattan Plaza
New York, New York 10005
Attention: Joris M. Hogan, Esq.
Facsimile: (212) 530-5219
Owner Participant: Alexander Hamilton Life Insurance
Company of America
%Household Financial Services,
Inc.
2700 Sanders Road
Prospect Heights, Illinois 60070
Attention: Robert Walsh,
President
Facsimile: (708) 205-7411
<PAGE> 15
With Copy to: Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Attention: Richard M. Allen,
Esq.
Facsimile: (212) 474-3700
Parties to this Settlement Agreement shall be
entitled to conclusively rely on any notice given in the
foregoing manner to the parties at the addresses reflected
above, unless and until a different address or facsimile
number is provided to all parties and persons listed above.
Rejection or refusal to accept, or inability to deliver
because of changed addresses or because no notice of changed
address was given, shall be deemed a receipt of such notice.
IN WITNESS WHEREOF, the parties hereto have duly
authorized and executed this Settlement Agreement on the date
first above written.
EL PASO ELECTRIC COMPANY,
by /s/
Name: David H. Wiggs, Jr.
Title: Chairman and CEO
ALEXANDER HAMILTON LIFE INSURANCE
COMPANY OF AMERICA,
by /s/
Name:Robert E. Walsh
Title:Authorized Agent
Annex A: Form of Release and Agreement among EPE, Owner
Participant and Owner Trustee
Annex B: Form of Bill of Sale and Assignment
Annex C: Form of Order of Dismissal with Prejudice
Annex D: Form of Release and Agreement among Owner
Participant, Owner Trustee, and Successor Indenture
Trustees
Annex E: Form of Tolling Agreement
Annex F: Existing Claims
Annex G: Form of Letter re Causes of Action
<PAGE> 16
ANNEX A
RELEASE AND AGREEMENT
THIS RELEASE AND AGREEMENT (this "Release") is entered
into on , 199 , by and among EL PASO ELECTRIC COMPANY, a Texas
corporation, debtor and debtor in possession ("EPE"), ALEXANDER
HAMILTON LIFE INSURANCE COMPANY OF AMERICA, a Michigan
corporation (the "Owner Participant" and, collectively with each
of the other owner participants participating in the transactions
described in recital B below, the "Owner Participants"), and THE
FIRST NATIONAL BANK OF BOSTON (in its individual capacity,
"FNBB"), as trustee under a trust agreement with the Owner
Participant (the "Owner Trustee" and, collectively as trustee
under trust agreements with the Owner Participants, the "Owner
Trustees").
RECITALS
A. EPE is the debtor in a case pending under Chapter
11 of Title 11 of the United States Code (the "Bankruptcy Code")
in the United States Bankruptcy Court for the Western District of
Texas (the "Bankruptcy Court"), which case has been assigned Case
No. 92-10148-FM (the "EPE Chapter 11 Case").
B. EPE, the Owner Participant and the Owner Trustee
are parties to various agreements, documents and instruments that
evidence or relate to the sale and leaseback by EPE, in separate
transactions with the Owner Participants and Owner Trustees, of
EPE's entire undivided interest in Unit 2 of the Palo Verde
Nuclear Generating Station ("Palo Verde") and approximately 39.5%
of EPE's undivided interest in Unit 3 of Palo Verde and certain
common plant and other related assets.
C. FNBB, in its capacity as Owner Trustee for each of
the Owner Participants (other than DBP Corp.), and DBP Corp.
filed proofs of claim in the EPE Chapter 11 Case (the "Proofs of
Claim").
D. On September 9, 1992, EPE commenced an adversary
proceeding against FNBB, in its capacity as Owner Trustee for
each of the Owner Participants (other than DBP Corp.), DBP Corp.
and the Successor Indenture Trustees (the "Palo Verde Lease
Litigation Defendants"), which case was assigned Adversary
Proceeding No. 92-1285-FM (the "Palo Verde Lease Litigation").
The Proofs of Claim, and any objections by EPE thereto, were
consolidated into the Palo Verde Lease Litigation. In addition,
in discussions between the parties, certain issues were raised
surrounding the presentment and drawings by the Owner
Participants under certain letters of credit issued as part of
the aforesaid sale and leaseback transactions in the approximate
aggregate amount of $288.4 million (the "Palo Verde Letters of
Credit"). Such issues, including any claims described in
disclosure statements and plans of reorganization filed by EPE in
the EPE Chapter 11 Case with regard to the Owner Participants and
<PAGE> 17
the Palo Verde Letters of Credit, are herein called the "Owner
Participant Claims".
E. The Palo Verde Lease Litigation Defendants have
asserted various defenses, contentions and counterclaims (the
"Palo Verde Defendants' Claims"). In addition, with regard to
the Owner Participant Claims, the Owner Participants contend that
their actions surrounding the presentment and drawings of the
Palo Verde Letters of Credit, including such drawings, were
proper as a matter of law (the "Letter of Credit Defenses").
F. Pursuant to a Settlement Agreement dated as of
November 15, 1993 (including the Annexes thereto and paragraphs
12 and 13 thereof, the "Settlement Agreement"), EPE and the Owner
Participant (or a predecessor thereof) agreed to release certain
claims effective upon the Effective Date.
IN CONSIDERATION OF THE MUTUAL AGREEMENTS CONTAINED
HEREIN, and other good and valuable consideration, the receipt of
which is hereby acknowledged, IT IS HEREBY AGREED by and among
the parties hereto as follows:
AGREEMENTS
1. Except as otherwise defined herein, all
capitalized terms used herein shall have the meanings set forth
in the Settlement Agreement.
2. EPE, on behalf of itself and the EPE Group, hereby
forever releases and discharges the Owner Trustee and the Owner
Participant Group (the "Released Parties") from, and waives and
relinquishes, any and all claims, demands, debts, liabilities,
obligations, actions, causes of action, suits, sums of money,
accounts, reckonings, covenants, contracts, controversies,
agreements, promises and rights whatsoever, whenever arising,
known or unknown, suspected or unsuspected, contingent or fixed,
liquidated or unliquidated, matured or unmatured, in law, equity,
bankruptcy or otherwise (collectively, "Claims"), which EPE or
the EPE Group ever had, now has, or hereafter can, shall or may
have against any of the Released Parties for, upon, or by reason
of any matter, cause, transaction or thing whatsoever occurring
at any time prior to the Effective Date, including, without
limitation, any Claims which EPE or the EPE Group ever had, now
has, or hereafter can, shall or may have against any of the
Released Parties by reason of, arising from, relating to, or in
connection with the Palo Verde Lease Litigation, the Palo Verde
Letters of Credit, the Palo Verde Defendants' Claims, the Owner
Participant Claims, the documents listed on Schedule A to the
Third Amended Plan or the transactions contemplated by the
Participation Agreement, or based on or arising under 11 U.S.C.
Sections 502, 506, 507, 510, 544-553, inclusive, or any similar
provisions of federal or state law, and any right of indemnity,
<PAGE> 18
contribution or subrogation arising therefrom or relating
thereto; provided, however, that nothing herein shall release any
Claims of any member of the EPE Group (other than EPE) unrelated
to the Palo Verde Lease Litigation, the Palo Verde Letters of
Credit, the Palo Verde Defendants' Claims, the Owner Participant
Claims, or the transactions contemplated by the Settlement
Agreement or the Participation Agreement or the documents listed
on Schedule A to the Third Amended Plan; and provided, however
that nothing herein shall release any party from its obligations
set forth in, or that are assumed or continued pursuant to the
Settlement Agreement (including, without limitation, the Annexes
thereto and paragraphs 12 and 13 thereof).
3. The Owner Participant, on behalf of itself and the
Owner Participant Group, and the Owner Trustee hereby forever
release and discharge the EPE Group from, and waive and
relinquish, any and all Claims which the Owner Participant or the
Owner Participant Group or the Owner Trustee ever had, now has,
or hereafter can, shall or may have against the EPE Group for,
upon, or by reason of any matter, cause, transaction or thing
whatsoever occurring at any time prior to the Effective Date,
including, without limitation, any claims which the Owner
Participant or the Owner Participant Group or the Owner Trustee
ever had, now has, or hereafter can, shall or may have against
the EPE Group by reason of, arising from, relating to, or in
connection with the Palo Verde Lease Litigation, the Palo Verde
Letters of Credit, the Palo Verde Defendants' Claims, the Owner
Participant Claims, or the documents listed on Schedule A to the
Third Amended Plan or the transactions contemplated by the
Participation Agreement, or based on or arising under 11 U.S.C.
Sections 502, 506, 507, 510, 544- 553, inclusive, or any similar
provisions of federal or state law, and any right of indemnity,
contribution or subrogation arising therefrom or relating
thereto; excluding, however, from the foregoing any Claims of any
member of the Owner Participant Group (other than the Owner
Participant) or the Owner Trustee unrelated to the Palo Verde
Lease Litigation, the Palo Verde Letters of Credit, the Palo
Verde Defendants' Claims, the Owner Participant Claims, or the
transactions contemplated by the Settlement Agreement or the
Participation Agreement or the documents listed on Schedule A to
the Third Amended Plan; and provided, however that nothing herein
shall release any party from its obligations set forth in the
Settlement Agreement (including, without limitation, the Annexes
thereto and paragraphs 12 and 13 thereof).
4. Each of the parties hereby acknowledges and agrees
that all Claims under Section 1542 of the California Civil Code
and any other provision of law now or hereafter enacted,
adjudicated or sought to be adjudicated relating to the release
or waiver of unknown or unspecified claims are hereby
specifically and expressly released and waived. Each of the
parties understands that Section 1542 of the California Civil
Code provides that "[a] general release does not extend to claims
which the creditor does not know or suspect to exist in his favor
<PAGE> 19
at the time of executing the release, which if known by him must
have materially affected his settlement with the debtor". For
purposes of this Release, each of the parties acknowledges and
agrees that it may be considered to be both a "creditor" and a
"debtor" for all purposes and with respect to all Claims it may
now know or suspect to exist within the meaning of Section 1542
of the California Civil Code and any other provision of law now
or hereafter enacted, adjudicated or sought to be adjudicated
relating to the release or waiver of unknown or unspecified
claims.
5. This Release may be executed in two or more
counterparts, each of which shall be deemed an original, but all
of which shall constitute one and the same instrument.
6. This Release shall be binding upon the parties
hereto and their successors and assigns. Each party hereto
represents and warrants that it owns all the Claims described
herein which are being released hereunder and is duly authorized
to release such Claims.
7. This Release shall be governed in all respects,
including validity, interpretation and effect, by, and construed
and enforced under, the law of the State of New York, without
giving effect to the principles of conflict of laws thereof.
IN WITNESS WHEREOF, the parties hereto have duly
authorized and executed this Release as of the date first above
written.
EL PASO ELECTRIC COMPANY,
by
Name:
Title:
ALEXANDER HAMILTON LIFE INSURANCE COMPANY
OF AMERICA,
by
Name:
Title:
THE FIRST NATIONAL BANK OF BOSTON,
as Owner Trustee,
by
Name:
Title:
<PAGE> 20
ANNEX B
BILL OF SALE AND ASSIGNMENT, dated as
of , 199 , from ALEXANDER
HAMILTON LIFE INSURANCE COMPANY OF AMERICA, a
Michigan corporation (the "Owner Participant"),
to EL PASO ELECTRIC COMPANY, a Texas
corporation [1] ("El Paso").
WITNESSETH:
WHEREAS, the Owner Participant desires to convey and El
Paso desires to acquire the
Assigned Property (as hereinafter defined);
NOW, THEREFORE, in consideration of the premises and
of other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree
as follows:
ARTICLE I
Definitions
For purposes hereof, capitalized terms used but not
otherwise defined herein shall have the meanings assigned to such
terms in the Participation Agreement dated as of August 1, 1986,
among [a predecessor of] the Owner Participant, the First
National Bank of Boston, in its individual capacity and as Owner
Trustee, El Paso and others.
ARTICLE II
Assignment of Trust Estate
The Owner Participant does hereby grant, bargain,
convey, sell, assign, transfer and set over (collectively,
"transfer") to El Paso, on an as is, where is basis, free and
clear of Owner Participant's Liens but otherwise without
recourse, representation or warranty, express or implied, of any
nature whatsoever, all the Owner Participant's right, title and
interest in, to and under the Trust Estate and the Excepted
Payments, other than Excepted Payments referred to in clauses (i)
(to the extent such Supplemental Rent constitutes or is
attributable to payments to which the Owner Participant or any of
its affiliates (or the successors, assigns, agents, officers,
directors or employees of the Owner Participant) are entitled
under the Settlement Agreement
- -----------------------------------
[1] El Paso may designate a different transferee.
<PAGE> 21
dated as of November 15, 1993 between El Paso and the Owner
Participant (or any predecessor thereof)), (vi) and (vii) (and
(viii) to the extent attributable to the payments referred to in
clauses (i), (vi) or (vii)) of the definition of "Excepted
Payments" (the "Assigned Property"). The disclaimer of
representations and warranties set forth in the second sentence
of Section 6(b) of the Facility Lease is hereby incorporated
herein as fully as if set forth at this place. Such transfer
shall not alter the obligations of El Paso nor expand the rights
of the Owner Participant under the Settlement Agreement dated
as of November 15, 1993, between El Paso and the Owner
Participant (or a predecessor thereof) or the Release referred to
therein, whether or not such obligations or rights would
constitute an Excepted Payment.
ARTICLE III
Effectiveness of Transfer
The transfer of the Assigned Property shall become
effective without further action upon the execution and delivery
by the Owner Participant to El Paso of this Bill of Sale and
Assignment and the furnishing of a counterpart of this Bill of
Sale and Assignment to the Owner Trustee.
ARTICLE IV
Miscellaneous
SECTION 4.01. Successors and Assigns. This Bill of
Sale and Assignment shall be binding upon the Owner Participant
and its successors and shall inure to the benefit of El Paso and
its successors and assigns.
SECTION 4.02. Governing Law. This Bill of Sale and
Assignment shall be governed by and construed in accordance with
the law of the State of New York.
IN WITNESS WHEREOF, the undersigned has caused this
Bill of Sale and Assignment to be duly executed as of the day and
year first written above.
ALEXANDER HAMILTON LIFE INSURANCE
COMPANY OF AMERICA,
by
Name:
Title:
<PAGE> 22
ANNEX C
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE WESTERN DISTRICT OF TEXAS
AUSTIN DIVISION
)
In re EL PASO ELECTRIC COMPANY, ) Case No. 92-10148-FM
) (Chapter 11)
Debtor. )
)
) Adversary Proceeding
EL PASO ELECTRIC COMPANY, ) No. 92-1285-FM
)
Plaintiff and Counterclaimant, )
)
v. ) Adversary Complaint
) seeking a declaration
THE FIRST NATIONAL BANK OF BOSTON, ) of rights arising
DBP CORP., LaSALLE NATIONAL BANK, ) from the rejection of
and HARRIS TRUST AND SAVINGS BANK, ) leases of the Palo
) Verde Nuclear
Defendants and Claimants. ) Generating Station
)
ORDER OF DISMISSAL WITH PREJUDICE
IT IS HEREBY ORDERED AND ADJUDGED, pursuant to the
Order of Confirmation in Case No. 92-10148-FM (Chapter 11), that
the Complaint and Counterclaims in the above-referenced action
are each hereby dismissed with prejudice.
IT IS SO ORDERED:
Dated: , 199
Austin, Texas
United States Bankruptcy Judge
<PAGE> 23
ANNEX D
RELEASE AND AGREEMENT
THIS RELEASE AND AGREEMENT (this "Release") is entered
into on _______ ___, 199__, by and among ALEXANDER HAMILTON LIFE
INSURANCE COMPANY OF AMERICA, a Michigan corporation (the "Owner
Participant" and, collectively with each of the other owner
participants participating in the transactions described in
recital B below, the "Owner Participants"), THE FIRST NATIONAL
BANK OF BOSTON (in its individual capacity, "FNBB"), as trustee
under a trust agreement with the Owner Participant (the "Owner
Trustee" and, collectively as trustee under trust agreements with
the Owner Participants, the "Owner Trustees"), HARRIS TRUST AND
SAVINGS BANK, as Successor Trustee under indentures with certain
of the Owner Trustees, and LASALLE NATIONAL BANK, as Successor
Trustee under indentures with certain of the Owner Trustees
(collectively, the "Successor Indenture Trustees").
RECITALS
A. EPE is the debtor in a case pending under Chapter
11 of Title 11 of the United States Code (the "Bankruptcy Code")
in the United States Bankruptcy Court for the Western District of
Texas (the "Bankruptcy Court"), which case has been assigned Case
No. 92-10148-FM (the "EPE Chapter 11 Case").
B. EPE, the Owner Participant and the Owner Trustee
are parties to various agreements, documents and instruments that
evidence or relate to the sale and leaseback by EPE, in separate
transactions with the Owner Participants and Owner Trustees, of
EPE's entire undivided interest in Unit 2 of the Palo Verde
Nuclear Generating Station ("Palo Verde") and approximately 39.5%
of EPE's undivided interest in Unit 3 of Palo Verde and certain
common plant and other related assets.
C. FNBB, in its capacity as Owner Trustee for each of
the Owner Participants (other than DBP Corp.), DBP Corp. and the
Successor Indenture Trustees filed proofs of claim in the EPE
Chapter 11 Case (the "Proofs of Claim").
D. On September 9, 1992, EPE commenced an adversary
proceeding against FNBB, in its capacity as Owner Trustee for
each of the Owner Participants (other than DBP Corp.), DBP Corp.
and the Successor Indenture Trustees (the "Palo Verde Lease
Litigation Defendants"), which case was assigned Adversary
Proceeding No. 92-1285-FM (the "Palo Verde Lease Litigation").
<PAGE> 24
The Proofs of Claim, and any objections by EPE thereto, were
consolidated into the Palo Verde Lease Litigation. In addition,
in discussions between the parties, certain issues were raised
surrounding the presentment and drawings by the Owner
Participants under certain letters of credit issued as part of
the aforesaid sale and leaseback transactions in the approximate
aggregate amount of $288.4 million (the "Palo Verde Letters of
Credit"). Such issues, including any claims described in
disclosure statements and plans of reorganization filed by EPE in
the EPE Chapter 11 Case with regard to the Owner Participants and
the Palo Verde Letters of Credit, are herein called the "Owner
Participant Claims".
E. The Palo Verde Lease Litigation Defendants have
asserted various defenses, contentions and counterclaims (the
"Palo Verde Defendants' Claims"). In addition, with regard to
the Owner Participant Claims, the Owner Participants contend that
their actions surrounding the presentment and drawings of the
Palo Verde Letters of Credit, including such drawings, were
proper as a matter of law (the "Letter of Credit Defenses").
F. Pursuant to a Settlement Agreement dated as of
November 15, 1993, (including the Annexes thereto and paragraphs
12 and 13 thereof, the "Settlement Agreement"), EPE and the Owner
Participant (or a predecessor thereof) agreed to release certain
claims, effective upon the Effective Date.
IN CONSIDERATION OF THE MUTUAL AGREEMENTS CONTAINED
HEREIN, and other good and valuable consideration, the receipt of
which is hereby acknowledged, IT IS HEREBY AGREED by and among
the parties hereto as follows:
AGREEMENTS
1. Except as otherwise defined herein, all
capitalized terms used herein shall have the meanings set forth
in the Settlement Agreement.
2. The Successor Indenture Trustees, on behalf of
themselves and the Lease Debt Creditors, hereby forever release
and discharge the Owner Trustee and the Owner Participant Group
(the "Released Parties") from, and waive and relinquish, any and
all claims, demands, debts, liabilities, obligations, actions,
causes of action, suits, sums of money, accounts, reckonings,
covenants, contracts, controversies, agreements, promises and
<PAGE> 25
rights whatsoever, whenever arising, known or unknown, suspected
or unsuspected, contingent or fixed, liquidated or unliquidated,
matured or unmatured, in law, equity, bankruptcy or otherwise
(collectively, "Claims"), which the Successor Indenture Trustees
or Lease Debt Creditors ever had, now have, or hereafter can,
shall or may have against any of the Released Parties for, upon,
or by reason of any matter, cause, transaction or thing
whatsoever occurring at any time prior to the Effective Date,
including, without limitation, any Claims which the Successor
Indenture Trustees or Lease Debt Creditors ever had, now have, or
hereafter can, shall or may have against any of the Released
Parties by reason of, arising from, relating to, or in connection
with the Palo Verde Lease Litigation, the Palo Verde Letters of
Credit, the Palo Verde Defendants' Claims, or the Owner
Participant Claims, the documents listed in Schedule A to the
Third Amended Plan or the transactions contemplated by the
Participation Agreement, or based on or arising under 11 U.S.C.
Sections 502, 506, 507, 510, 544-553, inclusive, or any similar
provisions of federal or state law, and any right of indemnity,
contribution or subrogation arising therefrom or relating
thereto; excluding, however, from the foregoing any Claims of the
Successor Indenture Trustees or Lease Debt Creditors unrelated to
the Palo Verde Lease Litigation, the Palo Verde Letters of
Credit, the Palo Verde Defendants' Claims, the Owner Participant
Claims, or the transactions contemplated by the Settlement
Agreement or the Participation Agreement or the documents listed
on Schedule A to the Third Amended Plan.
3. The Owner Participant, on behalf of itself and the
Owner Participant Group, and the Owner Trustee hereby forever
release and discharge the Successor Indenture Trustees and Lease
Debt Creditors from, and waive and relinquish, any and all Claims
which the Owner Participant or FNBB or the Owner Participant
Group or the Owner Trustee ever had, now has, or hereafter can,
shall or may have against the Successor Indenture Trustees or
Lease Debt Creditors for, upon, or by reason of any matter,
cause, transaction or thing whatsoever occurring at any time
prior to the Effective Date, including, without limitation, any
claims which the Owner Participant or the Owner Participant Group
or the Owner Trustee ever had, now has, or hereafter can, shall
or may have against the Successor Indenture Trustees or Lease
Debt Creditors by reason of, arising from, relating to, or in
connection with the Palo Verde Lease Litigation, the Palo Verde
Letters of Credit, the Palo Verde Defendants' Claims, or the
Owner Participant Claims, the documents listed in Schedule A to
the Third Amended Plan or the transactions contemplated by the
<PAGE> 26
Participation Agreement, or based on or arising under 11 U.S.C.
Sections 502, 506, 507, 510, 544-553, inclusive, or any similar
provisions of federal or state law, and any right of indemnity,
contribution or subrogation arising therefrom or relating
thereto; excluding, however, from the foregoing any Claims of the
Owner Participant or FNBB or any member of the Owner Participant
Group or the Owner Trustee unrelated to the Palo Verde Lease
Litigation, the Palo Verde Letters of Credit, the Palo Verde
Defendants' Claims, the Owner Participant Claims, the
transactions contemplated by the Settlement Agreement or the
Participation Agreement or the documents listed in Schedule A to
the Third Amended Plan.
4. Each of the parties hereby acknowledges and agrees
that all Claims under Section 1542 of the California Civil Code
and any other provision of law now or hereafter enacted,
adjudicated or sought to be adjudicated relating to the release
or waiver of unknown or unspecified claims are hereby
specifically and expressly released and waived. Each of the
parties understands that Section 1542 of the California Civil
Code provides that "[a] general release does not extend to claims
which the creditor does not know or suspect to exist in his favor
at the time of executing the release, which if known by him must
have materially affected his settlement with the debtor". For
purposes of this Release, each of the parties acknowledges and
agrees that it may be considered to be both a "creditor" and a
"debtor" for all purposes and with respect to all Claims it may
now know or suspect to exist within the meaning of Section 1542
of the California Civil Code and any other provision of law now
or hereafter enacted, adjudicated or sought to be adjudicated
relating to the release or waiver of unknown or unspecified
claims.
5. This Release may be executed in two or more
counterparts, each of which shall be deemed an original, but all
of which shall constitute one and the same instrument.
6. This Release shall be binding upon the parties
hereto and their successors and assigns. Each party hereto
represents and warrants that it owns or holds all Claims
described herein which are being released hereunder.
7. This Release shall be governed in all respects,
including validity, interpretation and effect, by, and construed
and enforced under, the law of the State of New York, without
giving effect to the principles of conflict of laws thereof.
<PAGE> 27
IN WITNESS WHEREOF, the parties hereto have duly
authorized and executed this Release as of the date first above
written.
ALEXANDER HAMILTON LIFE INSURANCE
COMPANY OF AMERICA,
by
Name:
Title:
THE FIRST NATIONAL BANK OF BOSTON, as
Owner Trustee,
by
Name:
Title:
LASALLE NATIONAL BANK, as Successor
Indenture Trustee,
by
Name:
Title:
HARRIS TRUST AND SAVINGS BANK, as
Successor Indenture Trustee,
by
Name:
Title:
<PAGE> 28
ANNEX E
TOLLING AGREEMENT
This Tolling Agreement is made and entered into as of
November , 1993 by and among EL PASO ELECTRIC COMPANY, a Texas
corporation ("EPE"), ALEXANDER HAMILTON LIFE INSURANCE COMPANY OF
AMERICA, a Michigan corporation (the "Owner Participant"), THE
FIRST NATIONAL BANK OF BOSTON (in its individual capacity,
"FNBB"), as trustee under a trust agreement with the Owner
Participant (the "Owner Trustee" and, collectively as trustee
under trust agreements with all the owner participants, the
"Owner Trustees"), HARRIS TRUST AND SAVINGS BANK, as Successor
Trustee under indentures with certain of the Owner Trustees, and
LASALLE NATIONAL BANK, as Successor Trustee under indentures with
certain of the Owner Trustees (collectively, the "Successor
Indenture Trustees").
RECITALS
A. EPE is the debtor in a case pending under Chapter 11
of Title 11 of the United States Code (the "Bankruptcy Code") in
the United States Bankruptcy Court for the Western District of
Texas (the "Bankruptcy Court"), which case has been assigned Case
No. 92-10148-FM (the "EPE Chapter 11 Case").
B. EPE, the Owner Participant and the Owner Trustee are
parties to various agreements, documents and instruments that
evidence or relate to the sale and leaseback by EPE, in separate
transactions with the Owner Participants and Owner Trustees, of
EPE's entire undivided interest in Unit 2 of the Palo Verde
Nuclear Generating Station ("Palo Verde") and approximately 39.5%
of EPE's undivided interest in Unit 3 of Palo Verde and certain
common plant and other related assets.
C. FNBB, in its capacity as Owner Trustee for each of
the Owner Participants (other than DBP Corp.), DBP Corp. and the
Successor Indenture Trustees have filed proofs of claim in the
EPE Chapter 11 Case (the "Proofs of Claim").
D. On September 9, 1992, EPE commenced an adversary
proceeding against FNBB, in its capacity as Owner Trustee for
each of the Owner Participants (other than DBP Corp.), DBP Corp.
and the Successor Indenture Trustees (the "Palo Verde Lease
Litigation Defendants"), which case has been assigned Adversary
Proceeding No. 92-1285-FM (the "Palo Verde Lease Litigation").
The Proofs of Claim, and any objections by EPE thereto, have been
consolidated into the Palo Verde Lease Litigation. In addition,
in discussions between the parties, certain issues have been
raised surrounding the presentment and drawings by the Owner
Participants under certain letters of credit issued as part of
the aforesaid sale and leaseback transactions in the approximate
aggregate amount of $288.4 million (the "Palo Verde Letters of
Credit"). Such issues, including any claims described in
disclosure statements and plans of reorganization filed by EPE in
<PAGE> 29
the EPE Chapter 11 Case with regard to the Owner Participants and
the Palo Verde Letters of Credit, are herein called the "Owner
Participant Claims".
E. The Palo Verde Lease Litigation Defendants have
asserted various defenses, contentions and counterclaims (the
"Palo Verde Defendants' Claims"). In addition, with regard to
the Owner Participant Claims, the Owner Participants contend that
their actions surrounding the presentment and drawings of the
Palo Verde Letters of Credit, including such drawings, were
proper as a matter of law (the "Letter of Credit Defenses").
F. The Third Amended Plan contemplates, under certain
circumstances, a release of all claims relating to the Palo Verde
Lease Litigation, the Palo Verde Defendants' Claims, the Owner
Participant Claims, and the Letter of Credit Defenses, which
release would be subject to and effective only upon the Effective
Date.
G. The parties have entered into a settlement agreement
of even date herewith (the "Settlement Agreement"), which will
result in a mutual release (such release to become effective only
on the occurrence of the Effective Date) of all Claims between
EPE, on one hand, and the Owner Participant and Owner Trustee, on
the other hand, and for the cessation of litigation in the
interim.
H. This Tolling Agreement is intended to ensure that
the parties' claims against one another (and defenses thereto)
are preserved to the fullest extent pending the occurrence of the
Effective Date and the execution, delivery and effectiveness of
the mutual releases contemplated under the Settlement Agreement,
and that the parties are not prejudiced by the deferral of
litigation in accordance with the Settlement Agreement.
IN CONSIDERATION OF THE MUTUAL AGREEMENTS CONTAINED
HEREIN, and other good and valuable consideration, the receipt of
which is hereby acknowledged, IT IS HEREBY AGREED by and between
the parties hereto as follows:
1. All capitalized terms used but not otherwise
defined herein shall have the meanings assigned to such terms in
the Settlement Agreement.
2. All potential causes of action and claims which
EPE or the Lease Debt Creditors could have asserted as of the
date hereof against the Owner Participant or against the Owner
Trustee (and any defenses thereto) shall survive until the
termination of this Tolling Agreement, and no such cause of
action or claim (or defenses thereto) shall in any manner be
extinguished or impaired in any manner by reason of any
applicable statute of limitations, contractual restriction,
equitable doctrine or other basis under federal or state law,
including Section 108 of the Bankruptcy Code, which may limit
<PAGE> 30
EPE's ability to commence or prosecute such cause of action or
claim (or any Owner Participant's or Owner Trustee's defenses
thereto) by reason of a lapse of time, inaction or failure to
commence an action or give any notice as of a particular date
during the term of this Agreement; provided, however, that
nothing herein shall revive, to the extent barred or otherwise
non-actionable, any cause of action or claim (including any right
to relief or element of damage thereof) (or any defense) that is
now barred or otherwise non-actionable.
3. All potential causes of action and claims which
the Owner Participant or the Owner Trustee could have asserted as
of the date hereof against EPE or the Lease Debt Creditors (and
any defenses thereto) shall survive until the termination of this
Tolling Agreement, and no such cause of action or claim (or
defenses thereto) shall in any manner be extinguished or impaired
in any manner by reason of any applicable statute of limitations,
contractual restriction, equitable doctrine or other basis under
federal or state law, including Section 108 or Section 362 of the
Bankruptcy Code, which may limit the ability of the Owner
Participant or Owner Trustee to commence or prosecute such cause
of action or claim (or any Owner Participant's or Owner Trustee's
defenses thereto) by reason of a lapse of time, inaction, or
failure to commence an action or give any notice as of a
particular date during the term of this Agreement; provided,
however, that nothing herein shall revive, to the extent barred
or otherwise non-actionable, any cause of action or claim
(including any right to relief or element of damage thereof) (or
any defense) that is now barred or otherwise non- actionable.
4. All potential causes of action and claims which
EPE could have asserted as of the date hereof against the Lease
Debt Creditors (and any defenses thereto) shall survive until the
termination of this Tolling Agreement, and no such cause of
action or claim (or defenses thereto) shall in any manner be
extinguished or impaired in any manner by reason of any
applicable statute of limitations, contractual restriction,
equitable doctrine or other basis under federal or state law,
including Section 108 of the Bankruptcy Code, which may limit the
ability of EPE to commence or prosecute such cause of action or
claim (or any Lease Debt Creditor's defenses thereto) by reason
of a lapse of time, inaction, or failure to commence an action or
give any notice as of a particular date during the term of this
Agreement; provided, however, that nothing herein shall revive,
to the extent barred or otherwise non-actionable, any cause of
action or claim (including any right to relief or element of
damage thereof) (or any defense) that is now barred or otherwise
non-actionable.
5. This Tolling Agreement shall terminate, unless
extended by the parties hereto, on the earliest of (a) 30 days
after written notice by EPE or the Owner Participant of
<PAGE> 31
termination of the Settlement Agreement, (b) the Effective Date
or (c) September 15, 1997.
6. This Tolling Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
instrument.
7. This Tolling Agreement shall be governed in all
respects, including validity, interpretation and effect, by, and
construed and enforced under, the law of the state of New York,
without giving effect to the principles of conflict of laws
thereof.
8. Each party hereto covenants that it has the
requisite authority to enter into and be bound by the terms of
this Tolling Agreement.
9. This Tolling Agreement shall be binding upon the
parties hereto and their successors and assigns.
10. This Tolling Agreement shall not be binding unless
similar tolling agreements are executed and delivered by each of
the Owner Participants and the Successor Indenture Trustees.
11. This Tolling Agreement may not be modified in
whole or in part except pursuant to a written agreement among all
of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have duly
authorized and executed this Tolling Agreement as of the date
first above written.
EL PASO ELECTRIC COMPANY,
by
Name:
Title:
ALEXANDER HAMILTON LIFE INSURANCE COMPANY
OF AMERICA,
by
Name:
Title:
<PAGE> 32
THE FIRST NATIONAL BANK OF BOSTON,
as Owner Trustee,
by
Name:
Title:
HARRIS TRUST AND SAVINGS BANK, as
Successor Trustee and on behalf of
the Lease Debt Creditors for Unit 3
by
Name:
Title:
LASALLE NATIONAL BANK, as Successor
Trustee and on behalf of the Lease Debt
Creditors for Unit 2
by
Name:
Title:
<PAGE> 33
ANNEX F
EXISTING CLAIMS
1. Claims by the State of Arizona regarding
transaction privilege taxes.
2. Unpaid fees and expenses of the Owner Trustee
through and including the Effective Date.
<PAGE> 34
ANNEX G
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 35
SETTLEMENT AGREEMENT
BETWEEN
EL PASO ELECTRIC COMPANY
AND
SECURITY PACIFIC CAPITAL LEASING CORPORATION
November 1993
Michael Paul Kirschner, Mediator
Hastie & Kirschner
Attorneys and Counselors at Law
3000 First Oklahoma Tower * 210 West Park Avenue
Oklahoma City, Oklahoma 73102-5673
Telephone (405) 239-6404
Telecopier (405) 239-6403
<PAGE> 36
SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT is entered into as of
November 15, 1993, between EL PASO ELECTRIC COMPANY, a Texas
corporation, debtor and debtor in possession ("EPE"), and
SECURITY PACIFIC CAPITAL LEASING CORPORATION, a Delaware
corporation (the "Owner Participant").
IN CONSIDERATION OF THE MUTUAL AGREEMENTS CONTAINED
HEREIN, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, IT IS HEREBY
AGREED by and between the parties hereto as follows:
DEFINITIONS
1. As used herein, the following terms shall have the
following meanings:
"Bankruptcy Court" shall mean the United States
Bankruptcy Court for the Western District of Texas, or such other
court as shall have original jurisdiction over the Case.
"Case" shall mean the proceeding filed by EPE under
Title 11 of the United States Code and bearing Bankruptcy Court
case number 92-10148-FM.
"Claims" shall have the meaning assigned to such term
in the Release.
"Confirmation Order" shall mean an order confirming an
EPE Plan.
"CSW" shall mean Central and South West Corporation.
"Effective Date" shall mean the date on which an EPE
Plan incorporating, except in immaterial respects, the terms and
conditions of this Settlement Agreement shall become effective
according to such EPE Plan's terms.
"EPE Group" shall mean EPE and (i) each and every
person who controls EPE, is controlled by EPE or is under common
control with EPE (the "EPE Affiliated Group"); (ii) any
predecessor, successor or assign of any person included within
the EPE Affiliated Group; (iii) any Chapter 7 or Chapter 11
Trustee appointed by the Bankruptcy Court or any other court with
regard to any person included within the EPE Affiliated Group;
(iv) the respective present and former agents, directors,
officers, employees, advisors, attorneys and representatives of
any person included within the EPE Affiliated Group; (v) the
respective shareholders and creditors of the EPE Affiliated
Group; and (vi) in the case of any individuals falling within the
scope of (iv) or (v), their respective heirs, receivers,
<PAGE> 37
conservators, beneficiaries, executors, administrators,
successors and assigns. The term EPE Group shall not include CSW.
"EPE Plan" shall mean (i) the Modified Third Amended
Plan of Reorganization, filed on September 15, 1993 in the Case
(the "Third Amended Plan"), (ii) any other plan of reorganization
filed in the Case pursuant to which EPE, with its consent, is to
be acquired by CSW or a CSW affiliate, by merger or otherwise,
and (iii) any other plan of reorganization filed in the Case
supported by or acceptable to EPE if, within 10 days of the
filing thereof, EPE fails to provide written notice to the Owner
Participant that such plan does not constitute an EPE Plan for
purposes of this Settlement Agreement.
"Excepted Payments" shall have the meaning assigned to
such Term in Appendix A to the Participation Agreement.
"Facility Lease" shall have the meaning assigned to
such term in Appendix A to the Participation Agreement.
"Lease Debt Creditors" shall mean Harris Trust and
Savings Bank, as Successor Trustee for those certain $200,000,000
Secured Lease Obligation Bonds Series 1988, and any holders of
such bonds, and LaSalle National Bank, as Successor Trustee for
those certain $396,328,000 Lease Obligation Bonds Series 1986 and
those certain $146,305,000 Lease Obligation Bonds Series 1986A
(the Successor Trustees, collectively, the "Successor Indenture
Trustees"), and any holders of such bonds.
"Owner Participant Group" shall mean the Owner
Participant and (i) each and every person who controls the Owner
Participant, is controlled by the Owner Participant or is under
common control with the Owner Participant (the "Owner Participant
Affiliated Group"); (ii) any predecessor, successor or assign of
any person included within the Owner Participant Affiliated
Group; (iii) the respective present and former agents, directors,
officers, employees, advisors, attorneys and representatives of
any person included within the Owner Participant Affiliated
Group; (iv) the respective shareholders and creditors of the
Owner Participant Affiliated Group; (v) any Chapter 7 or Chapter
11 Trustee appointed by a court with regard to any person
included within the Owner Participant Affiliated Group; and (vi)
in the case of any individuals falling within the scope of (iii)
or (iv), their respective heirs, receivers, conservators,
beneficiaries, executors, administrators, successors and assigns.
"Owner Trustee" shall mean The First National Bank of
Boston ("FNBB"), as trustee under a trust agreement with the
Owner Participant.
<PAGE> 38
"Palo Verde Leases" shall mean, collectively, the
Facility Lease and the facility leases, as amended, between EPE
and FNBB (as trustee under separate trust agreements with the
other owner participants) with respect to the Arizona Nuclear
Power Project.
"Palo Verde Lease Litigation" shall mean an adversary
proceeding commenced on September 9, 1992 by EPE against FNBB, in
FNBB's capacity as Owner Trustee for each of the owner
participants (other than DBP Corp.), DBP Corp. and the Successor
Indenture Trustees, which case has been assigned Adversary
Proceeding No. 92- 1285-FM by the Bankruptcy Court.
"Palo Verde Letters of Credit" shall have the meaning
assigned to such term in the Release.
"Participation Agreement" shall mean the Participation
Agreement, as amended, among EPE, the Owner Participant and
others.
"Real Property Interest" shall have the meaning
assigned to such term in Appendix A to the Participation
Agreement.
"Release" shall mean the release in the form of Annex A
hereto.
"Settlement Agreement" shall mean this Settlement
Agreement, including all Annexes hereto.
"Tax Indemnification Agreement" shall have the meaning
assigned to such term in Appendix A to the Participation
Agreement.
"Transaction Documents" shall have the meaning assigned
to such term in Appendix A to the Participation Agreement.
"Trust Estate" shall have the meaning assigned to such
term in Appendix A to the Participation Agreement.
"Undivided Interest" shall have the meaning assigned to
such term in Appendix A to the Participation Agreement.
RIGHTS AND OBLIGATIONS PRIOR TO THE EFFECTIVE DATE
2. EPE's plan of reorganization will provide for the
terms and conditions set forth below (and EPE will not file,
pursue or support any plan that contains provisions inconsistent
with, or that does not embody the terms and conditions of, this
Settlement Agreement):
a Claims of the EPE Group, on the one hand, and the
Owner Participant Group and the Owner Trustee, on
the other hand, against one another shall be
<PAGE> 39
mutually released pursuant to the Release (to the
extent provided therein), which Release will be
executed, delivered, and effective solely as of
the Effective Date.
b Other than as provided in this Settlement
Agreement, the Owner Participant and the Owner
Trustee shall receive no distribution, recovery or
other consideration under an EPE Plan except that,
within 10 days of the date of entry of the
Confirmation Order (but not later than December
31, 1993 if such date occurs in 1993), EPE will
pay all fees, costs and expenses incurred by or on
behalf of the Owner Participant or Owner Trustee
through and including the date of entry of the
Confirmation Order in connection with the Palo
Verde Litigation, the Case, the Participation
Agreement or the transactions contemplated hereby
or by any of the foregoing (the amount of which as
of October 1, 1993 is $ 554,539.86).
c As of the Effective Date, (i) all right, title and
interest of the Owner Participant in the Trust
Estate and certain Excepted Payments shall be
conveyed to EPE or its designee, if paragraph 12.a
hereof is applicable, or (ii) if paragraph 12.b
hereof is applicable, there will be a conveyance
or transfer of the Trust Estate to EPE or EPE's
designee.
d As of the Effective Date, the receipt of any value
or consideration under any EPE Plan shall be
deemed to be (i) a release of the Owner
Participant and Owner Trustee by such recipient of
all claims related to the Palo Verde Leases, the
Palo Verde Letters of Credit, the documents listed
in Schedule A to the Third Amended Plan, and the
transactions contemplated hereby and thereby, and
(ii) a release of such recipient by the Owner
Trustee and Owner Participant of all such claims.
EPE shall defend such provisions against any
objections thereto. If the deemed release
described in this paragraph is not approved by the
Bankruptcy Court as to third parties other than
the Lease Debt Creditors and the issuers of or
participants in the Palo Verde Letters of Credit,
EPE may modify the EPE Plan accordingly as long as
the Confirmation Order provides that the deemed
release is effective as to the Lease Debt
Creditors and the issuers of and participants in
the Palo Verde Letters of Credit and that, at the
Effective Date, all third party claims against the
Owner Participant and Owner Trustee which are
derivative of the claims of EPE will be
extinguished.
<PAGE> 40
3. The Owner Participant and Southwestern Public
Service Company ("SPS") have entered into a letter of
understanding dated July 13, 1993. The Owner Participant will
not take any position as to the termination of EPE's exclusivity
through the filing of additional pleadings in the Case or by the
making of any statement in the Bankruptcy Court in support of any
motion to terminate EPE's exclusivity, unless EPE, in
contravention of its agreement not to do so, files, pursues or
supports confirmation of a plan of reorganization which does not
incorporate the terms of this Settlement Agreement or which
materially adversely affects the Owner Participant or any of its
affiliates.
4. The Owner Participant will vote to accept and/or
will cause the Owner Trustee to vote to accept the Third Amended
Plan and will vote to accept and/or cause the Owner Trustee to
vote to accept any other EPE Plan that is (x) consistent with and
incorporates the terms of this Settlement Agreement and (y) does
not materially adversely affect the Owner Participant or any of
its affiliates. The Owner Participant will not vote to reject or
object to, and will cause the Owner Trustee not to vote to reject
or object to, the Third Amended Plan, and will not vote to reject
or object to, and will cause the Owner Trustee not to vote to
reject or object to, any other EPE Plan that (i) is consistent
with and incorporates the terms of this Settlement Agreement and
(ii) does not materially adversely affect the Owner Participant
or any of its affiliates. Nothing in this Settlement Agreement
will limit the right of the Owner Participant or Owner Trustee or
any member of the Owner Participant Group to vote to accept or
reject or object to (A) any plan that is (a) inconsistent with or
does not incorporate the terms of this Settlement Agreement or
(b) materially adversely affects the Owner Participant or any of
its affiliates or (B) any plan other than an EPE Plan. For
purposes of this paragraph 4, it will be conclusively presumed
that an EPE Plan does not materially adversely affect the Owner
Participant or any of its affiliates if the Owner Participant
fails to provide EPE with written notice to the contrary within
20 days after receipt of such EPE Plan. EPE will not and the
Owner Participant will not, and will not direct the Owner Trustee
to, file any pleading in the Case that is contrary to or
inconsistent with the terms and conditions contained herein.
5. The Owner Participant agrees not to transfer,
prior to the Effective Date, any Claim against the EPE Group or
interest in the Facility Lease to anyone other than a person that
has agreed to be bound by this Settlement Agreement; provided,
however, that
<PAGE> 41
upon any withdrawal, termination or revocation of the Third
Amended Plan, the Owner Participant may thereafter transfer any
Claim against the EPE Group or interest in the Facility Lease to
anyone whether or not such person agrees to be bound by this
Settlement Agreement, and if such person has not agreed to be so
bound, this Settlement Agreement shall automatically terminate
without further action by any party hereto. EPE agrees not to
transfer, prior to the Effective Date, any Claim against the
Owner Participant Group or Owner Trustee or interest in the
Facility Lease.
6. EPE shall disclose the contents of this Settlement
Agreement, pursuant to Section 3.14B.5. of the Third Amended
Plan. Between the date of entry of the Confirmation Order and
the Effective Date, the Owner Participant shall have all of the
rights accorded to the Oversight Committee (as defined in the
Third Amended Plan) pursuant to Section 5.1.E of the Third
Amended Plan.
7. Until the Effective Date occurs, EPE will not
pursue the Palo Verde Lease Litigation or commence any litigation
or otherwise file any Claim against the Owner Participant or
Owner Trustee and EPE will oppose any motion or other action by
any other person to pursue the Palo Verde Lease Litigation or
commence or file any such litigation or Claim or intervene
therein; provided, however, that nothing herein shall preclude
EPE from (i) taking steps which EPE reasonably deems necessary to
preserve its Claims and its ability to collect on such Claims, if
successful, and to protect EPE's rights in the event of the
proposed dissolution of the Owner Participant or Owner Trustee in
a bankruptcy or insolvency proceeding of the Owner Participant or
Owner Trustee (and EPE hereby agrees that EPE will not file nor
participate in the filing of any involuntary bankruptcy or
insolvency petition against the Owner Participant or Owner
Trustee) or (ii) seeking discovery, at EPE's own expense, against
the Owner Participant or Owner Trustee in connection with a plan
of reorganization proposed by or on behalf of SPS, or any other
plan of reorganization other than an EPE Plan, to the extent EPE
is otherwise entitled to request such discovery from the
Bankruptcy Court.
8. Until the Effective Date occurs, the Owner
Participant will not, and will not direct the Owner Trustee to,
pursue the Palo Verde Lease Litigation or commence any litigation
or file any additional Claim against EPE and at EPE's request,
the Owner Participant will, and/or will cause the Owner Trustee
to, file a pleading which will support EPE's opposition to any
motion or other action by any other person to pursue the Palo
Verde Lease Litigation or commence or file any such litigation or
Claim or intervene therein; provided, however, that nothing
herein shall preclude the Owner Participant or Owner Trustee from
(i) taking steps which the Owner Participant or Owner Trustee, as
the case may be, reasonably deems necessary to preserve the
Claims of such Owner
<PAGE> 42
Participant or Owner Trustee and to protect the rights of such
Owner Participant or Owner Trustee in the event of the proposed
dissolution of EPE or (ii) opposing EPE's pursuit of any
discovery referred to in paragraph 7 hereof.
9. Within 10 days after the filing of any plan, EPE
will give the Owner Participant written notice of whether such
plan constitutes an EPE Plan referred to in clause (iii) of the
definition thereof. In the absence of such notice, such plan
shall be deemed to be an EPE Plan.
10. Prior to the Effective Date, EPE shall seek and
obtain all governmental approvals necessary to effect the
transactions contemplated hereby. The Owner Participant agrees
to cooperate with EPE, at EPE's expense, in obtaining such
approvals prior to the Effective Date.
11. Concurrently with the execution and delivery of
this Settlement Agreement, the Owner Participant, the Owner
Trustee, EPE and the Successor Indenture Trustees shall execute
and deliver a Tolling Agreement in the form of Annex E hereto.
RIGHTS AND OBLIGATIONS ON AND AFTER THE EFFECTIVE DATE
12. Subject to the satisfaction of the terms and
conditions contained in this Settlement Agreement, including
paragraph 13, on or as of the Effective Date:
a The Owner Participant will, subject to paragraph
12.b, transfer to EPE or, if EPE so requests,
EPE's designee, all of the Owner Participant's
right, title and interest in the Trust Estate and
certain Excepted Payments by the execution and
delivery of a Bill of Sale and Assignment
substantially in the form of Annex B hereto.
b At the request and expense of EPE, the Owner
Participant will, at the election of EPE, in lieu
of or in addition to the transfer referred to in
paragraph 12.a, (i) consent to the conveyance or
transfer of the Trust Estate to EPE or, if EPE so
requests, EPE's designee, and (ii) direct the
Owner Trustee to effect such conveyance or
transfer, which obligations shall be subject to
(a) EPE having obtained the required consent, if
any, of the applicable Successor Indenture Trustee
or a binding order (which has not been stayed) of
a court of competent jurisdiction effectively
overriding the requirement, if any, of such
consent, (b) such conveyance and transfer
complying with applicable law and third party
rights, if any, or EPE having obtained a binding
order (which has not been stayed) of a court of
competent jurisdiction effectively overriding any
<PAGE> 43
requirement of such compliance, and (c) EPE having
provided such indemnities to the Owner Participant
and the Owner Trustee as either of them shall
reasonably request regarding the conveyance or
transfer set forth in this paragraph 12.b.
c The parties hereto and the Owner Trustee shall
execute and deliver the Release, provided,
however, that nothing herein or in the Release
shall release the Claims held by Bank America
National Trust and Savings Association against the
EPE Group, or the Claims of the EPE Group against
Bank America National Trust and Savings
Association, as the case may be, arising with
respect to (i) any holding by Bank America
National Trust and Savings Association of
reimbursement obligations with respect to the Palo
Verde Letters of Credit, (ii) its status as a
Lease Debt Creditor or (iii) its status as a
general unsecured creditor of EPE other than with
respect to claims which would be classified as
Class 12 claims pursuant to the Third Amended
Plan.
d Reorganized EPE shall deliver to the Owner
Participant on the Effective Date an executed
letter in the form of Annex G hereto. The form
and contents of Annex G shall not be disclosed
prior to the Effective Date to any person or
entity, except that a copy thereof shall be
provided to the Bankruptcy Court under seal and to
the Successor Indenture Trustee (after execution
thereof). In the event the Effective Date does not
occur, neither the Owner Participant nor any other
person or entity shall refer to or otherwise
disclose the contents of Annex G, or its inclusion
in this Settlement Agreement, for any purpose.
e If paragraph 12.a is applicable, EPE or its
designee shall become the "Owner Participant"
under the documents described in Schedule A to the
Third Amended Plan for all purposes, and, if
paragraph 12.b is applicable, such documents shall
be terminated, altered, or amended in such manner
as the parties hereto shall agree, consistent with
the terms of this Settlement Agreement.
f Section 17 of the Participation Agreement shall
continue in full force and effect, but only with
respect to EPE's obligations under the first and
<PAGE> 44
fifth sentences in the first paragraph of Section
10(b)(3)(viii) and the entirety of Sections 13
(insofar as indemnification is sought for Claims
(as defined in the Participation Agreement)
asserted against the Owner Participant, the Owner
Trustee, the First National Bank of Boston (in its
individual capacity), the Trust (as defined in the
Participation Agreement), the Trust Estate, or the
Lease Indenture Estate (as defined in the
Participation Agreement), or any Affiliate (as
defined in the Participation Agreement),
successor, assign, agent, officer, director or
employee of any of the foregoing, by a person
other than the Owner Participant, the Owner
Trustee or any successor or assign thereof) and 16
thereof and the entire Tax Indemnification
Agreement (it being understood that the exclusions
from the general tax indemnity provisions of
Section 13(b) of the Participation Agreement with
respect to a "voluntary transfer" and with respect
to a "transferee" or a "subsequent transferee"
shall not apply to the transactions contemplated
by this Settlement Agreement); provided, however,
that in order to prevent a double payment with
respect to a Loss or Losses (as defined in the Tax
Indemnification Agreement), the aggregate amount
of such payments shall be reduced (without
duplication) by the appropriate portion of the
amount drawn by the Owner Participant under the
corresponding Palo Verde Letter of Credit to the
extent such portion is attributable (under
calculations performed in accordance with industry
practice) to the same adverse tax consequences
constituting such Loss or Losses. It is
understood that EPE's obligations under this
paragraph 12.f shall not extend to the payment of
Basic Rent, Fair Market Rental Value, Fair Market
Sales Value, Casualty Value, Special Casualty
Value, Termination Value, Enhanced Casualty Value
or Modified Special Casualty Value (as such terms
are defined in the Transaction Documents and
collectively referred to herein as "Scheduled
Amounts") or any amounts measured by Scheduled
Amounts or Supplemental Rent (to the extent
attributable to Scheduled Amounts or Excepted
Payments which are Assigned Property (as defined
in the Bill of Sale and Assignment attached hereto
as Annex B)). Notwithstanding anything contained
in this Settlement Agreement or the Release, EPE
shall continue to comply with Section 10(a)(2)(ii)
of the Facility Lease except that any notices or
certificates described in Section 10(a)(1)(i)(E)
of the Facility Lease (as such section relates to
Section 10(a)(2)(ii)) must be received by the
<PAGE> 45
Owner Participant in order to be effective against
the Owner Participant but need not be received by
or delivered to the Indenture Trustee.
g EPE will pay any balance due of the amounts
described in paragraph 26 hereof.
13. The terms and conditions referred to in paragraph
12 include the following:
a The Confirmation Order shall (i) provide that an
Order of Dismissal with Prejudice in the form
attached hereto as Annex C shall be entered on or
after the Effective Date and a copy provided to
the Owner Participant and to the Successor
Indenture Trustee and (ii) comply with the last
sentence of paragraph 2.d, if applicable;
b The Owner Participant, the Owner Trustee and the
Successor Indenture Trustees shall have executed
and delivered mutual releases substantially in the
form attached hereto as Annex D and an order of
the Bankruptcy Court complying with either the
first or the last sentence of paragraph 2.d shall
be in full force and effect and shall not have
been stayed;
c This Settlement Agreement shall be in full force
and effect and neither the Owner Participant nor
EPE shall be in default of any term or condition
hereof;
d All governmental approvals, if any, necessary to
effect the transactions contemplated hereby shall
have been obtained and be in full force and
effect;
e All consents of third parties, if any, necessary
to effect the actions contemplated above shall
have been obtained and be in full force and
effect;
f All documentation for the transactions
contemplated by this paragraph 13 and paragraphs
8, 12.a, 12.b, 12.e and 26 shall be reasonably
satisfactory in form and substance to the Owner
Participant and EPE; and
g The Owner Participant and the Owner Trustee shall
have received all amounts, if any, payable
pursuant to paragraphs 2.b, 18 and 26 hereof.
<PAGE> 46
Conditions d and e above may be satisfied by the entry of a
binding order (which has not been stayed) of a court of competent
jurisdiction effectively overriding the requirement, if any, of
obtaining any third party consents or governmental approvals
referred to in such conditions.
TERMINATION AND EFFECTIVENESS
14. This Settlement Agreement may be terminated (a) on
30 days' written notice by either EPE or the Owner Participant if
no EPE Plan referred to in clause (i) or (ii) of the definition
thereof is being pursued and, in the case of termination by EPE,
EPE certifies in the termination notice that no EPE Plan referred
to in clause (i) or (ii) of the definition thereof is then
contemplated by EPE, or (b) on 5 days' written notice by either
the Owner Participant or EPE if EPE or the Owner Participant,
respectively, fails to comply with any term or condition of this
Settlement Agreement and does not cure such failure within such 5
days or (c) on 5 days' written notice from EPE that a settlement
agreement with one of the other owner participants with an
interest in Unit 3 of the Palo Verde Nuclear Generating Station
has terminated pursuant to paragraph 5 of such settlement
agreement and that EPE is terminating all of the settlement
agreements with each of the owner participants with an interest
in such Unit.
15. This Settlement Agreement shall not be binding
upon any of the parties hereto until EPE and all of the owner
participants execute settlement agreements in a form similar to
this Settlement Agreement. This Settlement Agreement shall
terminate automatically without further action by any party
hereto if the Bankruptcy Court in the Case declines to approve
the settlement contained in this Settlement Agreement or any such
other settlement agreement.
16. Upon any termination of this Settlement Agreement,
all obligations of the parties hereto (except for the last 2
sentences of paragraph 12.d) shall cease.
REPRESENTATIONS AND WARRANTIES
17. EPE represents and warrants that no modification
to the merger agreement between EPE and CSW is necessary to
effectuate or consummate this Settlement Agreement.
18. Each party hereto represents and warrants that it
owns and has not transferred any of the Claims described in the
Release as being released by it or any of its interests in the
Facility Lease. Except as set forth in Annex F hereto, to the
knowledge of the Owner Participant, there exists no basis upon
which the Owner Participant, as of the date of this Settlement
Agreement, may assert any Claims against EPE, other than any such
Claims which will be extinguished pursuant to the Release. To the
<PAGE> 47
knowledge of EPE, there exists no basis upon which EPE, as of the
date of this Settlement Agreement, may assert any Claim against
the Owner Participant, other than any such Claims which will be
extinguished pursuant to the Release. EPE shall pay all amounts
due with respect to the items set forth on Annex F irrespective
of whether such amounts are already incurred, invoiced or
assessed or arise hereafter.
19. Each party hereto agrees that the Third Amended
Plan (i) complies with the terms and conditions of this
Settlement Agreement, and (ii) does not materially adversely
affect the Owner Participant or any of its affiliates for
purposes of paragraph 4 hereof.
MISCELLANEOUS
20. Nothing in this Settlement Agreement shall operate
as an admission of liability or admission as to any issue by any
party, and this Settlement Agreement (and all negotiations,
discussions and drafts relating thereto) shall be subject to the
provisions of Federal Rule of Evidence 408 and comparable
provisions of state law.
21. This Settlement Agreement may be executed in two
or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same
instrument.
22. This Settlement Agreement shall be governed in all
respects including validity, interpretation and effect, by, and
construed and enforced under, the law of the State of New York,
without giving effect to the principles of conflicts of law
thereof.
23. This Settlement Agreement is enforceable only by
the parties hereto and the Owner Trustee; provided, however,
that, after the Effective Date, any person who is a beneficiary
of a release (including the Release) contemplated by this
Settlement Agreement shall be entitled to enforce the provisions
of such release.
24. In addition to all other rights and remedies
provided in this Settlement Agreement, EPE and the Owner
Participant may (subject to any restrictions contained in this
Settlement Agreement) exercise any other right or remedy that may
be available under applicable law or proceed (or the Owner
Trustee may proceed) by appropriate court action to enforce the
terms hereof. The failure or delay of EPE or the Owner
Participant in exercising any right granted hereunder upon the
occurrence of any of the contingencies set forth herein shall not
constitute a waiver of any such right upon the continuance or
recurrence of any such contingencies or similar contingencies and
any single or partial exercise of any particular right by EPE or
the Owner Participant shall not exhaust the same or constitute a
<PAGE> 48
waiver of any other right provided herein. No remedy under this
Settlement Agreement is intended to be exclusive, but each shall
be cumulative and in addition to any other remedy provided
hereunder or otherwise available to EPE or the Owner Participant
at law or in equity (subject to any restrictions contained in
this Settlement Agreement). Notwithstanding the foregoing, the
parties agree that in the event of a breach of this Settlement
Agreement, money damages will not be adequate to compensate the
non-breaching party, and, accordingly, either party or the Owner
Trustee may seek to specifically enforce the provisions of this
Settlement Agreement.
25. Except as otherwise specifically provided herein,
this Settlement Agreement shall be binding on all successors and
assigns of the parties hereto.
26. The parties shall cooperate with one another to
execute and deliver such other documents and to take such further
actions as shall be necessary or appropriate to effectuate the
terms hereof; provided, however, that the Owner Participant and
the Owner Trustee shall each be reimbursed by EPE for its
reasonable expenses after the date of entry of the Confirmation
Order related to the execution and delivery of any such other
documents and the taking of any such further actions by the Owner
Participant or the Owner Trustee.
27. The descriptive headings of the paragraphs of this
Settlement Agreement are for convenience only and will not be
used in the construction of the content of this Settlement
Agreement.
28. Any notice required or permitted to be given by
any provision of this Settlement Agreement will be in writing and
will be deemed to have been given when delivered personally or by
facsimile, receipt confirmed, to the party designated to receive
such notice or on the date following the day sent by overnight
courier or on the 3rd business day after the same is sent by
certified mail, postage and charges prepaid, directed to the
following addresses or to such other additional addresses as any
party might designate by written notice to the other party:
El Paso Electric Company: El Paso Electric Company
Mills Building
303 North Oregon
El Paso, Texas 79901
Attention:
Chief Executive Officer
and Chairman of the Board
Facsimile: (915) 521-4754
<PAGE> 49
With Copy to: Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: Shalom L. Kohn, Esq.
Facsimile: (312) 853-7312
With Copy to: Milbank, Tweed, Hadley & McCloy
One Chase Manhattan Plaza
New York, New York 10005
Attention: Joris M. Hogan, Esq.
Facsimile: (212) 530-5219
Owner Participant: Security Pacific Capital Leasing
Corporation
c/o BankAmerica National Leasing
and Capital Group
Four Embarcadero Center
San Francisco, California 94111
Attention: Nicholas Falzone,
Vice President
Facsimile: (415) 765-7418
With Copy to: Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Attention: Richard M. Allen, Esq.
Facsimile: (212) 474-3700
Parties to this Settlement Agreement shall be entitled
to conclusively rely on any notice given in the foregoing manner
to the parties at the addresses reflected above, unless and until
a different address or facsimile number is provided to all
parties and persons listed above. Rejection or refusal to accept,
or inability to deliver because of changed addresses or because
no notice of changed address was given, shall be deemed a receipt
of such notice.
IN WITNESS WHEREOF, the parties hereto have duly
authorized and executed this Settlement Agreement on the date
first above written.
EL PASO ELECTRIC COMPANY,
by /s/
Name: David H. Wiggs, Jr.
Title:Chairman and CEO
<PAGE> 50
SECURITY PACIFIC CAPITAL LEASING CORPORATION,
by /s/
Name: VP D. KEITH COOMBS
Title:
Annex A: Form of Release and Agreement among EPE, Owner
Participant and Owner Trustee
Annex B: Form of Bill of Sale and Assignment
Annex C: Form of Order of Dismissal with Prejudice
Annex D: Form of Release and Agreement among Owner Participant,
Owner Trustee, and Successor Indenture Trustees
Annex E: Form of Tolling Agreement
Annex F: Existing Claims
Annex G: Form of Letter re Causes of Action
<PAGE> 51
ANNEX A
RELEASE AND AGREEMENT
THIS RELEASE AND AGREEMENT (this "Release") is entered
into on, 199, by and among EL PASO ELECTRIC COMPANY, a Texas
corporation, debtor and debtor in possession ("EPE"), SECURITY
PACIFIC CAPITAL LEASING CORPORATION, a Delaware corporation (the
"Owner Participant" and, collectively with each of the other
owner participants participating in the transactions described in
recital B below, the "Owner Participants"), and THE FIRST
NATIONAL BANK OF BOSTON (in its individual capacity, "FNBB"), as
trustee under a trust agreement with the Owner Participant (the
"Owner Trustee" and, collectively as trustee under trust
agreements with the Owner Participants, the "Owner Trustees").
RECITALS
A. EPE is the debtor in a case pending under Chapter 11
of Title 11 of the United States Code (the "Bankruptcy Code") in
the United States Bankruptcy Court for the Western District of
Texas (the "Bankruptcy Court"), which case has been assigned Case
No. 92-10148-FM (the "EPE Chapter 11 Case").
B. EPE, the Owner Participant and the Owner Trustee are
parties to various agreements, documents and instruments that
evidence or relate to the sale and leaseback by EPE, in separate
transactions with the Owner Participants and Owner Trustees, of
EPE's entire undivided interest in Unit 2 of the Palo Verde
Nuclear Generating Station ("Palo Verde") and approximately 39.5%
of EPE's undivided interest in Unit 3 of Palo Verde and certain
common plant and other related assets.
C. FNBB, in its capacity as Owner Trustee for each of
the Owner Participants (other than DBP Corp.), and DBP Corp.
filed proofs of claim in the EPE Chapter 11 Case (the "Proofs of
Claim").
D. On September 9, 1992, EPE commenced an adversary
proceeding against FNBB, in its capacity as Owner Trustee for
each of the Owner Participants (other than DBP Corp.), DBP Corp.
and the Successor Indenture Trustees (the "Palo Verde Lease
Litigation Defendants"), which case was assigned Adversary
Proceeding No. 92-1285-FM (the "Palo Verde Lease Litigation").
The Proofs of Claim, and any objections by EPE thereto, were
consolidated into the Palo Verde Lease Litigation. In addition,
in discussions between the parties, certain issues were raised
surrounding the presentment and drawings by the Owner
Participants under certain letters of credit issued as part of
the aforesaid sale and leaseback transactions in the approximate
aggregate amount of $288.4 million (the "Palo Verde Letters of
<PAGE> 52
Credit"). Such issues, including any claims described in
disclosure statements and plans of reorganization filed by EPE in
the EPE Chapter 11 Case with regard to the Owner Participants and
the Palo Verde Letters of Credit, are herein called the "Owner
Participant Claims".
E. The Palo Verde Lease Litigation Defendants have
asserted various defenses, contentions and counterclaims (the
"Palo Verde Defendants' Claims"). In addition, with regard to
the Owner Participant Claims, the Owner Participants contend that
their actions surrounding the presentment and drawings of the
Palo Verde Letters of Credit, including such drawings, were
proper as a matter of law (the "Letter of Credit Defenses").
F. Pursuant to a Settlement Agreement dated as of
November 15, 1993 (including the Annexes thereto and paragraphs
12 and 13 thereof, the "Settlement Agreement"), EPE and the Owner
Participant (or a predecessor thereof) agreed to release certain
claims effective upon the Effective Date.
IN CONSIDERATION OF THE MUTUAL AGREEMENTS CONTAINED
HEREIN, and other good and valuable consideration, the receipt of
which is hereby acknowledged, IT IS HEREBY AGREED by and among
the parties hereto as follows:
AGREEMENTS
1. Except as otherwise defined herein, all
capitalized terms used herein shall have the meanings set forth
in the Settlement Agreement.
2. EPE, on behalf of itself and the EPE Group, hereby
forever releases and discharges the Owner Trustee and the Owner
Participant Group (the "Released Parties") from, and waives and
relinquishes, any and all claims, demands, debts, liabilities,
obligations, actions, causes of action, suits, sums of money,
accounts, reckonings, covenants, contracts, controversies,
agreements, promises and rights whatsoever, whenever arising,
known or unknown, suspected or unsuspected, contingent or fixed,
liquidated or unliquidated, matured or unmatured, in law, equity,
bankruptcy or otherwise (collectively, "Claims"), which EPE or
the EPE Group ever had, now has, or hereafter can, shall or may
have against any of the Released Parties for, upon, or by reason
of any matter, cause, transaction or thing whatsoever occurring
at any time prior to the Effective Date, including, without
limitation, any Claims which EPE or the EPE Group ever had, now
has, or hereafter can, shall or may have against any of the
Released Parties by reason of, arising from, relating to, or in
connection with the Palo Verde Lease Litigation, the Palo Verde
<PAGE> 53
Letters of Credit, the Palo Verde Defendants' Claims, the Owner
Participant Claims, the documents listed on Schedule A to the
Third Amended Plan or the transactions contemplated by the
Participation Agreement, or based on or arising under 11 U.S.C.
Sections 502, 506, 507, 510, 544-553, inclusive, or any similar
provisions of federal or state law, and any right of indemnity,
contribution or subrogation arising therefrom or relating
thereto; provided, however, that nothing herein shall release any
Claims of any member of the EPE Group (other than EPE) unrelated
to the Palo Verde Lease Litigation, the Palo Verde Letters of
Credit, the Palo Verde Defendants' Claims, the Owner Participant
Claims, or the transactions contemplated by the Settlement
Agreement or the Participation Agreement or the documents listed
on Schedule A to the Third Amended Plan; and provided, however
that nothing herein shall release any party from its obligations
set forth in, or that are assumed or continued pursuant to the
Settlement Agreement (including, without limitation, the Annexes
thereto and paragraphs 12 and 13 thereof).
3. The Owner Participant, on behalf of itself and the
Owner Participant Group, and the Owner Trustee hereby forever
release and discharge the EPE Group from, and waive and
relinquish, any and all Claims which the Owner Participant or the
Owner Participant Group or the Owner Trustee ever had, now has,
or hereafter can, shall or may have against the EPE Group for,
upon, or by reason of any matter, cause, transaction or thing
whatsoever occurring at any time prior to the Effective Date,
including, without limitation, any claims which the Owner
Participant or the Owner Participant Group or the Owner Trustee
ever had, now has, or hereafter can, shall or may have against
the EPE Group by reason of, arising from, relating to, or in
connection with the Palo Verde Lease Litigation, the Palo Verde
Letters of Credit, the Palo Verde Defendants' Claims, the Owner
Participant Claims, or the documents listed on Schedule A to the
Third Amended Plan or the transactions contemplated by the
Participation Agreement, or based on or arising under 11 U.S.C.
Sections 502, 506, 507, 510, 544-553, inclusive, or any similar
provisions of federal or state law, and any right of indemnity,
contribution or subrogation arising therefrom or relating
thereto; excluding, however, from the foregoing any Claims of any
member of the Owner Participant Group (other than the Owner
Participant) or the Owner Trustee unrelated to the Palo Verde
Lease Litigation, the Palo Verde Letters of Credit, the Palo
Verde Defendants' Claims, the Owner Participant Claims, or the
transactions contemplated by the Settlement Agreement or the
Participation Agreement or the documents listed on Schedule A to
the Third Amended Plan; and provided, however that nothing herein
shall release any party from its obligations set forth in the
Settlement Agreement (including, without limitation, the Annexes
thereto and paragraphs 12 and 13 thereof). Nothing herein shall
release the Claims held by Bank America National Trust and
Savings Association against the EPE Group, or the Claims of the
<PAGE> 54
EPE Group against the Bank America National Trust and Savings
Association, as the case may be, arising with respect to (i) any
holding by Bank America National Trust and Savings Association of
reimbursement obligations with respect to the Palo Verde Letters
of Credit (ii) its status as a Lease Debt Creditor or (iii) its
status as a general unsecured creditor of EPE other than with
respect to Claims which would be classified as Class 12 Claims
pursuant to the Third Amended Plan.
4. Each of the parties hereby acknowledges and agrees
that all Claims under Section 1542 of the California Civil Code
and any other provision of law now or hereafter enacted,
adjudicated or sought to be adjudicated relating to the release
or waiver of unknown or unspecified claims are hereby
specifically and expressly released and waived. Each of the
parties understands that Section 1542 of the California Civil
Code provides that "[a] general release does not extend to claims
which the creditor does not know or suspect to exist in his favor
at the time of executing the release, which if known by him must
have materially affected his settlement with the debtor". For
purposes of this Release, each of the parties acknowledges and
agrees that it may be considered to be both a "creditor" and a
"debtor" for all purposes and with respect to all Claims it may
now know or suspect to exist within the meaning of Section 1542
of the California Civil Code and any other provision of law now
or hereafter enacted, adjudicated or sought to be adjudicated
relating to the release or waiver of unknown or unspecified
claims.
5. This Release may be executed in two or more
counterparts, each of which shall be deemed an original, but all
of which shall constitute one and the same instrument.
6. This Release shall be binding upon the parties
hereto and their successors and assigns. Each party hereto
represents and warrants that it owns all the Claims described
herein which are being released hereunder and is duly authorized
to release such Claims.
7. This Release shall be governed in all respects,
including validity, interpretation and effect, by, and construed
and enforced under, the law of the State of New York, without
giving effect to the principles of conflict of laws thereof.
<PAGE> 55
IN WITNESS WHEREOF, the parties hereto have duly
authorized and executed this Release as of the date first above
written.
EL PASO ELECTRIC COMPANY,
by
Name:
Title:
SECURITY PACIFIC CAPITAL LEASING
CORPORATION,
by
Name:
Title:
THE FIRST NATIONAL BANK OF BOSTON,
as Owner Trustee,
by
Name:
Title:
<PAGE> 56
ANNEX B
BILL OF SALE AND ASSIGNMENT, dated as of,
199, from SECURITY PACIFIC
CAPITAL LEASING CORPORATION, a Delaware
corporation (the "Owner Participant"), to
EL PASO ELECTRIC COMPANY, a Texas
corporation [1] ("El Paso").
WITNESSETH:
WHEREAS, the Owner Participant desires to convey and El
Paso desires to acquire the Assigned Property (as hereinafter
defined);
NOW, THEREFORE, in consideration of the premises and of
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
Definitions
For purposes hereof, capitalized terms used but not
otherwise defined herein shall have the meanings assigned to such
terms in the Participation Agreement dated as of December 1,
1987, among [a predecessor of] the Owner Participant, the First
National Bank of Boston, in its individual capacity and as Owner
Trustee, El Paso and others.
ARTICLE II
Assignment of Trust Estate
The Owner Participant does hereby grant, bargain,
convey, sell, assign, transfer and set over (collectively,
"transfer") to El Paso, on an as is, where is basis, free and
clear of Owner Participant's Liens but otherwise without
recourse, representation or warranty, express or implied, of any
nature whatsoever, all the Owner Participant's right, title and
interest in, to and under the Trust Estate and the Excepted
Payments, other than Excepted Payments and related Excepted
Rights referred to in clauses (i), (vi) and (vii) (and (viii) to
the extent attributable to the payments referred to in clauses
(i), (vi) or (vii)) of the definition of "Excepted Payments" (the
"Assigned Property"). The disclaimer of representations and
warranties set forth in the second sentence of Section 6(b) of
the Facility Lease is hereby incorporated herein as fully as if
set forth at this place. Such transfer shall not alter the
obligations of El Paso nor expand the rights of the Owner
- ---------------------------------
[1] El Paso may designate a different transferee.
<PAGE> 57
Participant under the Settlement Agreement dated as of November
15, 1993, between El Paso and the Owner Participant (or a
predecessor thereof) or the Release referred to therein, whether
or not such obligations or rights would constitute an Excepted
Payment or Excepted Right.
ARTICLE III
Effectiveness of Transfer
The transfer of the Assigned Property shall become
effective without further action upon the execution and delivery
by the Owner Participant to El Paso of this Bill of Sale and
Assignment and the furnishing of a counterpart of this Bill of
Sale and Assignment to the Owner Trustee.
ARTICLE IV
Miscellaneous
SECTION 4.01. Successors and Assigns. This Bill of
Sale and Assignment shall be binding upon the Owner Participant
and its successors and shall inure to the benefit of El Paso and
its successors and assigns.
SECTION 4.02. Governing Law. This Bill of Sale and
Assignment shall be governed by and construed in accordance with
the law of the State of New York.
IN WITNESS WHEREOF, the undersigned has caused this
Bill of Sale and Assignment to be duly executed as of the day and
year first written above.
SECURITY PACIFIC CAPITAL LEASING
CORPORATION,
by
Name:
Title:
<PAGE> 58
ANNEX C
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE WESTERN DISTRICT OF TEXAS
AUSTIN DIVISION
)
In re EL PASO ELECTRIC COMPANY, ) Case No. 92-10148-FM
) (Chapter 11)
Debtor. )
)
) Adversary Proceeding
EL PASO ELECTRIC COMPANY, ) No. 92-1285-FM
)
Plaintiff and Counterclaimant, )
)
v. ) Adversary Complaint
) seeking a declaration
THE FIRST NATIONAL BANK OF BOSTON, ) of rights arising
DBP CORP., LaSALLE NATIONAL BANK, ) from the rejection of
and HARRIS TRUST AND SAVINGS BANK, ) leases of the Palo
) Verde Nuclear
Defendants and Claimants. ) Generating Station
)
ORDER OF DISMISSAL WITH PREJUDICE
IT IS HEREBY ORDERED AND ADJUDGED, pursuant to the
Order of Confirmation in Case No. 92-10148-FM (Chapter 11), that
the Complaint and Counterclaims in the above-referenced action
are each hereby dismissed with prejudice.
IT IS SO ORDERED:
Dated: , 199
Austin, Texas
United States Bankruptcy Judge
<PAGE> 59
ANNEX D
RELEASE AND AGREEMENT
THIS RELEASE AND AGREEMENT (this "Release") is entered
into on, 199, by and among SECURITY PACIFIC CAPITAL LEASING
CORPORATION, a Delaware corporation (the "Owner Participant" and,
collectively with each of the other owner participants
participating in the transactions described in recital B below,
the "Owner Participants"), THE FIRST NATIONAL BANK OF BOSTON (in
its individual capacity, "FNBB"), as trustee under a trust
agreement with the Owner Participant (the "Owner Trustee" and,
collectively as trustee under trust agreements with the Owner
Participants, the "Owner Trustees"), HARRIS TRUST AND SAVINGS
BANK, as Successor Trustee under indentures with certain of the
Owner Trustees, and LASALLE NATIONAL BANK, as Successor Trustee
under indentures with certain of the Owner Trustees
(collectively, the "Successor Indenture Trustees").
RECITALS
A. EPE is the debtor in a case pending under Chapter
11 of Title 11 of the United States Code (the "Bankruptcy Code")
in the United States Bankruptcy Court for the Western District of
Texas (the "Bankruptcy Court"), which case has been assigned Case
No. 92-10148-FM (the "EPE Chapter 11 Case").
B. EPE, the Owner Participant and the Owner Trustee
are parties to various agreements, documents and instruments that
evidence or relate to the sale and leaseback by EPE, in separate
transactions with the Owner Participants and Owner Trustees, of
EPE's entire undivided interest in Unit 2 of the Palo Verde
Nuclear Generating Station ("Palo Verde") and approximately 39.5%
of EPE's undivided interest in Unit 3 of Palo Verde and certain
common plant and other related assets.
C. FNBB, in its capacity as Owner Trustee for each of
the Owner Participants (other than DBP Corp.), DBP Corp. and the
Successor Indenture Trustees filed proofs of claim in the EPE
Chapter 11 Case (the "Proofs of Claim").
D. On September 9, 1992, EPE commenced an adversary
proceeding against FNBB, in its capacity as Owner Trustee for
each of the Owner Participants (other than DBP Corp.), DBP Corp.
and the Successor Indenture Trustees (the "Palo Verde Lease
Litigation Defendants"), which case was assigned Adversary
<PAGE> 60
Proceeding No. 92-1285-FM (the "Palo Verde Lease Litigation").
The Proofs of Claim, and any objections by EPE thereto, were
consolidated into the Palo Verde Lease Litigation. In addition,
in discussions between the parties, certain issues were raised
surrounding the presentment and drawings by the Owner
Participants under certain letters of credit issued as part of
the aforesaid sale and leaseback transactions in the approximate
aggregate amount of $288.4 million (the "Palo Verde Letters of
Credit"). Such issues, including any claims described in
disclosure statements and plans of reorganization filed by EPE in
the EPE Chapter 11 Case with regard to the Owner Participants and
the Palo Verde Letters of Credit, are herein called the "Owner
Participant Claims".
E. The Palo Verde Lease Litigation Defendants have
asserted various defenses, contentions and counterclaims (the
"Palo Verde Defendants' Claims"). In addition, with regard to
the Owner Participant Claims, the Owner Participants contend that
their actions surrounding the presentment and drawings of the
Palo Verde Letters of Credit, including such drawings, were
proper as a matter of law (the "Letter of Credit Defenses").
F. Pursuant to a Settlement Agreement dated as of
November 15, 1993, (including the Annexes thereto and paragraphs
12 and 13 thereof, the "Settlement Agreement"), EPE and the Owner
Participant (or a predecessor thereof) agreed to release certain
claims, effective upon the Effective Date.
IN CONSIDERATION OF THE MUTUAL AGREEMENTS CONTAINED
HEREIN, and other good and valuable consideration, the receipt of
which is hereby acknowledged, IT IS HEREBY AGREED by and among
the parties hereto as follows:
AGREEMENTS
1. Except as otherwise defined herein, all
capitalized terms used herein shall have the meanings set forth
in the Settlement Agreement.
2. The Successor Indenture Trustees, on behalf of
themselves and the Lease Debt Creditors, hereby forever release
and discharge the Owner Trustee and the Owner Participant Group
(the "Released Parties") from, and waive and relinquish, any and
all claims, demands, debts, liabilities, obligations, actions,
<PAGE> 61
causes of action, suits, sums of money, accounts, reckonings,
covenants, contracts, controversies, agreements, promises and
rights whatsoever, whenever arising, known or unknown, suspected
or unsuspected, contingent or fixed, liquidated or unliquidated,
matured or unmatured, in law, equity, bankruptcy or otherwise
(collectively, "Claims"), which the Successor Indenture Trustees
or Lease Debt Creditors ever had, now have, or hereafter can,
shall or may have against any of the Released Parties for, upon,
or by reason of any matter, cause, transaction or thing
whatsoever occurring at any time prior to the Effective Date,
including, without limitation, any Claims which the Successor
Indenture Trustees or Lease Debt Creditors ever had, now have, or
hereafter can, shall or may have against any of the Released
Parties by reason of, arising from, relating to, or in connection
with the Palo Verde Lease Litigation, the Palo Verde Letters of
Credit, the Palo Verde Defendants' Claims, or the Owner
Participant Claims, the documents listed in Schedule A to the
Third Amended Plan or the transactions contemplated by the
Participation Agreement, or based on or arising under 11 U.S.C.
Sections 502, 506, 507, 510, 544-553, inclusive, or any similar
provisions of federal or state law, and any right of indemnity,
contribution or subrogation arising therefrom or relating
thereto; excluding, however, from the foregoing any Claims of the
Successor Indenture Trustees or Lease Debt Creditors unrelated to
the Palo Verde Lease Litigation, the Palo Verde Letters of
Credit, the Palo Verde Defendants' Claims, the Owner Participant
Claims, or the transactions contemplated by the Settlement
Agreement or the Participation Agreement or the documents listed
on Schedule A to the Third Amended Plan.
3. The Owner Participant, on behalf of itself and the
Owner Participant Group, and the Owner Trustee hereby forever
release and discharge the Successor Indenture Trustees and Lease
Debt Creditors from, and waive and relinquish, any and all Claims
which the Owner Participant or FNBB or the Owner Participant
Group or the Owner Trustee ever had, now has, or hereafter can,
shall or may have against the Successor Indenture Trustees or
Lease Debt Creditors for, upon, or by reason of any matter,
cause, transaction or thing whatsoever occurring at any time
prior to the Effective Date, including, without limitation, any
claims which the Owner Participant or the Owner Participant Group
or the Owner Trustee ever had, now has, or hereafter can, shall
or may have against the Successor Indenture Trustees or Lease
<PAGE> 62
Debt Creditors by reason of, arising from, relating to, or in
connection with the Palo Verde Lease Litigation, the Palo Verde
Letters of Credit, the Palo Verde Defendants' Claims, or the
Owner Participant Claims, the documents listed in Schedule A to
the Third Amended Plan or the transactions contemplated by the
Participation Agreement, or based on or arising under 11 U.S.C.
Sections 502, 506, 507, 510, 544-553, inclusive, or any similar
provisions of federal or state law, and any right of indemnity,
contribution or subrogation arising therefrom or relating
thereto; excluding, however, from the foregoing any Claims of the
Owner Participant or FNBB or any member of the Owner Participant
Group or the Owner Trustee unrelated to the Palo Verde Lease
Litigation, the Palo Verde Letters of Credit, the Palo Verde
Defendants' Claims, the Owner Participant Claims, the
transactions contemplated by the Settlement Agreement or the
Participation Agreement or the documents listed in Schedule A to
the Third Amended Plan. Nothing herein shall release the Claims
held by Bank America National Trust and Savings Association
against the Successor Indenture Trustees, or the Claims of the
Successor Indenture Trustees against Bank America National Trust
and Savings Association, arising with respect to (i) any holding
by Bank America National Trust and Savings Association of
reimbursement obligations with respect to the Palo Verde Letters
of Credit, (ii) its status as a Lease Debt Creditor or (iii) its
status as a general unsecured creditor of EPE other than with
respect to Claims which would be classified as Class 12 claims
pursuant to the Third Amended Plan.
4. Each of the parties hereby acknowledges and agrees
that all Claims under Section 1542 of the California Civil Code
and any other provision of law now or hereafter enacted,
adjudicated or sought to be adjudicated relating to the release
or waiver of unknown or unspecified claims are hereby
specifically and expressly released and waived. Each of the
parties understands that Section 1542 of the California Civil
Code provides that "[a] general release does not extend to claims
which the creditor does not know or suspect to exist in his favor
at the time of executing the release, which if known by him must
have materially affected his settlement with the debtor". For
purposes of this Release, each of the parties acknowledges and
agrees that it may be considered to be both a "creditor" and a
"debtor" for all purposes and with respect to all Claims it may
now know or suspect to exist within the meaning of Section 1542
<PAGE> 63
of the California Civil Code and any other provision of law now
or hereafter enacted, adjudicated or sought to be adjudicated
relating to the release or waiver of unknown or unspecified
claims.
5. This Release may be executed in two or more
counterparts, each of which shall be deemed an original, but all
of which shall constitute one and the same instrument.
6. This Release shall be binding upon the parties
hereto and their successors and assigns. Each party hereto
represents and warrants that it owns or holds all Claims
described herein which are being released hereunder.
7. This Release shall be governed in all respects,
including validity, interpretation and effect, by, and construed
and enforced under, the law of the State of New York, without
giving effect to the principles of conflict of laws thereof.
IN WITNESS WHEREOF, the parties hereto have duly
authorized and executed this Release as of the date first above
written.
SECURITY PACIFIC CAPITAL LEASING
CORPORATION,
by
Name:
Title:
THE FIRST NATIONAL BANK OF BOSTON,
as Owner Trustee,
by
Name:
Title:
HARRIS TRUST AND SAVINGS BANK,
as Successor Indenture Trustee,
by
Name:
Title:
LASALLE NATIONAL BANK, as
Successor Indenture Trustee,
by
Name:
Title:
<PAGE> 64
ANNEX E
TOLLING AGREEMENT
This Tolling Agreement is made and entered into as of
November, 1993 by and among EL PASO ELECTRIC COMPANY, a Texas
corporation ("EPE"), SECURITY PACIFIC CAPITAL LEASING
CORPORATION, a Delaware corporation (the "Owner Participant"),
THE FIRST NATIONAL BANK OF BOSTON (in its individual capacity,
"FNBB"), as trustee under a trust agreement with the Owner
Participant (the "Owner Trustee" and, collectively as trustee
under trust agreements with all the owner participants, the
"Owner Trustees"), HARRIS TRUST AND SAVINGS BANK, as Successor
Trustee under indentures with certain of the Owner Trustees, and
LASALLE NATIONAL BANK, as Successor Trustee under indentures with
certain of the Owner Trustees (collectively, the "Successor
Indenture Trustees").
RECITALS
A. EPE is the debtor in a case pending under Chapter
11 of Title 11 of the United States Code (the "Bankruptcy Code")
in the United States Bankruptcy Court for the Western District of
Texas (the "Bankruptcy Court"), which case has been assigned Case
No. 92-10148-FM (the "EPE Chapter 11 Case").
B. EPE, the Owner Participant and the Owner Trustee
are parties to various agreements, documents and instruments that
evidence or relate to the sale and leaseback by EPE, in separate
transactions with the Owner Participants and Owner Trustees, of
EPE's entire undivided interest in Unit 2 of the Palo Verde
Nuclear Generating Station ("Palo Verde") and approximately 39.5%
of EPE's undivided interest in Unit 3 of Palo Verde and certain
common plant and other related assets.
C. FNBB, in its capacity as Owner Trustee for each of
the Owner Participants (other than DBP Corp.), DBP Corp. and the
Successor Indenture Trustees have filed proofs of claim in the
EPE Chapter 11 Case (the "Proofs of Claim").
D. On September 9, 1992, EPE commenced an adversary
proceeding against FNBB, in its capacity as Owner Trustee for
each of the Owner Participants (other than DBP Corp.), DBP Corp.
and the Successor Indenture Trustees (the "Palo Verde Lease
Litigation Defendants"), which case has been assigned Adversary
Proceeding No. 92-1285-FM (the "Palo Verde Lease Litigation").
The Proofs of Claim, and any objections by EPE thereto, have been
consolidated into the Palo Verde Lease Litigation. In addition,
in discussions between the parties, certain issues have been
raised surrounding the presentment and drawings by the Owner
Participants under certain letters of credit issued as part of
the aforesaid sale and leaseback transactions in the approximate
aggregate amount of $288.4 million (the "Palo Verde Letters of
Credit"). Such issues, including any claims described in
<PAGE> 65
disclosure statements and plans of reorganization filed by EPE in
the EPE Chapter 11 Case with regard to the Owner Participants and
the Palo Verde Letters of Credit, are herein called the "Owner
Participant Claims".
E. The Palo Verde Lease Litigation Defendants have
asserted various defenses, contentions and counterclaims (the
"Palo Verde Defendants' Claims"). In addition, with regard to
the Owner Participant Claims, the Owner Participants contend that
their actions surrounding the presentment and drawings of the
Palo Verde Letters of Credit, including such drawings, were
proper as a matter of law (the "Letter of Credit Defenses").
F. The Third Amended Plan contemplates, under certain
circumstances, a release of all claims relating to the Palo Verde
Lease Litigation, the Palo Verde Defendants' Claims, the Owner
Participant Claims, and the Letter of Credit Defenses, which
release would be subject to and effective only upon the Effective
Date.
G. The parties have entered into a settlement
agreement of even date herewith (the "Settlement Agreement"),
which will result in a mutual release (such release to become
effective only on the occurrence of the Effective Date) of all
Claims between EPE, on one hand, and the Owner Participant and
Owner Trustee, on the other hand, and for the cessation of
litigation in the interim.
H. This Tolling Agreement is intended to ensure that
the parties' claims against one another (and defenses thereto)
are preserved to the fullest extent pending the occurrence of the
Effective Date and the execution, delivery and effectiveness of
the mutual releases contemplated under the Settlement Agreement,
and that the parties are not prejudiced by the deferral of
litigation in accordance with the Settlement Agreement.
IN CONSIDERATION OF THE MUTUAL AGREEMENTS CONTAINED
HEREIN, and other good and valuable consideration, the receipt of
which is hereby acknowledged, IT IS HEREBY AGREED by and between
the parties hereto as follows:
1. All capitalized terms used but not otherwise
defined herein shall have the meanings assigned to such terms in
the Settlement Agreement.
2. All potential causes of action and claims which
EPE or the Lease Debt Creditors could have asserted as of the
date hereof against the Owner Participant or against the Owner
Trustee (and any defenses thereto) shall survive until the
termination of this Tolling Agreement, and no such cause of
action or claim (or defenses thereto) shall in any manner be
extinguished or impaired in any manner by reason of any
<PAGE> 66
applicable statute of limitations, contractual restriction,
equitable doctrine or other basis under federal or state law,
including Section 108 of the Bankruptcy Code, which may limit
EPE's ability to commence or prosecute such cause of action or
claim (or any Owner Participant's or Owner Trustee's defenses
thereto) by reason of a lapse of time, inaction or failure to
commence an action or give any notice as of a particular date
during the term of this Agreement; provided, however, that
nothing herein shall revive, to the extent barred or otherwise
non- actionable, any cause of action or claim (including any
right to relief or element of damage thereof) (or any defense)
that is now barred or otherwise non-actionable.
3. All potential causes of action and claims which
the Owner Participant or the Owner Trustee could have asserted as
of the date hereof against EPE or the Lease Debt Creditors (and
any defenses thereto) shall survive until the termination of this
Tolling Agreement, and no such cause of action or claim (or
defenses thereto) shall in any manner be extinguished or impaired
in any manner by reason of any applicable statute of limitations,
contractual restriction, equitable doctrine or other basis under
federal or state law, including Section 108 or Section 362 of the
Bankruptcy Code, which may limit the ability of the Owner
Participant or Owner Trustee to commence or prosecute such cause
of action or claim (or any Owner Participant's or Owner Trustee's
defenses thereto) by reason of a lapse of time, inaction, or
failure to commence an action or give any notice as of a
particular date during the term of this Agreement; provided,
however, that nothing herein shall revive, to the extent barred
or otherwise non-actionable, any cause of action or claim
(including any right to relief or element of damage thereof) (or
any defense) that is now barred or otherwise non- actionable.
4. All potential causes of action and claims which
EPE could have asserted as of the date hereof against the Lease
Debt Creditors (and any defenses thereto) shall survive until the
termination of this Tolling Agreement, and no such cause of
action or claim (or defenses thereto) shall in any manner be
extinguished or impaired in any manner by reason of any
applicable statute of limitations, contractual restriction,
equitable doctrine or other basis under federal or state law,
including Section 108 of the Bankruptcy Code, which may limit the
ability of EPE to commence or prosecute such cause of action or
claim (or any Lease Debt Creditor's defenses thereto) by reason
of a lapse of time, inaction, or failure to commence an action or
give any notice as of a particular date during the term of this
Agreement; provided, however, that nothing herein shall revive,
to the extent barred or otherwise non-actionable, any cause of
action or claim (including any right to relief or element of
damage thereof) (or any defense) that is now barred or otherwise
non-actionable.
<PAGE> 67
5. This Tolling Agreement shall terminate, unless
extended by the parties hereto, on the earliest of (a) 30 days
after written notice by EPE or the Owner Participant of
termination of the Settlement Agreement, (b) the Effective Date
or (c) September 15, 1997.
6. This Tolling Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
instrument.
7. This Tolling Agreement shall be governed in all
respects, including validity, interpretation and effect, by, and
construed and enforced under, the law of the state of New York,
without giving effect to the principles of conflict of laws
thereof.
8. Each party hereto covenants that it has the
requisite authority to enter into and be bound by the terms of
this Tolling Agreement.
9. This Tolling Agreement shall be binding upon the
parties hereto and their successors and assigns.
10. This Tolling Agreement shall not be binding unless
similar tolling agreements are executed and delivered by each of
the Owner Participants and the Successor Indenture Trustees.
11. This Tolling Agreement may not be modified in
whole or in part except pursuant to a written agreement among all
of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have duly
authorized and executed this Tolling Agreement as of the date
first above written.
EL PASO ELECTRIC COMPANY,
by
Name:
Title:
SECURITY PACIFIC CAPITAL LEASING
CORPORATION,
by
Name:
Title:
<PAGE> 68
THE FIRST NATIONAL BANK OF BOSTON,
as Owner Trustee,
by
Name:
Title:
HARRIS TRUST AND SAVINGS BANK,
as Successor Trustee and on
behalf of the Lease Debt Creditors
for Unit 3
by
Name:
Title:
LASALLE NATIONAL BANK, as Successor
Trustee and on behalf of the Lease Debt
Creditors for Unit 2
by
Name:
Title:
<PAGE> 69
ANNEX F
EXISTING CLAIMS
1. Claims by the State of Arizona regarding
transaction privilege taxes.
2. Unpaid fees and expenses of the Owner Trustee
through and including the Effective Date.
<PAGE> 70
ANNEX G
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 71
SETTLEMENT AGREEMENT
BETWEEN
EL PASO ELECTRIC COMPANY
AND
COMMERCIAL FEDERAL INVESTMENT CORPORATION
November 1993
Michael Paul Kirschner, Mediator
Hastie & Kirschner
Attorneys and Counselors at Law
3000 First Oklahoma Tower * 210 West Park Avenue
Oklahoma City, Oklahoma 73102-5673
Telephone (405) 239-6404
Telecopier (405) 239-6403
<PAGE> 72
SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT is entered into as of
November 15, 1993, between EL PASO ELECTRIC COMPANY, a Texas
corporation, debtor and debtor in possession ("EPE"), and
COMMERCIAL FEDERAL INVESTMENT CORPORATION, a Nebraska corporation
(the "Owner Participant").
IN CONSIDERATION OF THE MUTUAL AGREEMENTS CONTAINED
HEREIN, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, IT IS HEREBY
AGREED by and between the parties hereto as follows:
DEFINITIONS
1. As used herein, the following terms shall have the
following meanings:
"Bankruptcy Court" shall mean the United States
Bankruptcy Court for the Western District of Texas, or such other
court as shall have original jurisdiction over the Case.
"Case" shall mean the proceeding filed by EPE under
Title 11 of the United States Code and bearing Bankruptcy Court
case number 92-10148-FM.
"Claims" shall have the meaning assigned to such term
in the Release.
"Confirmation Order" shall mean an order confirming an
EPE Plan.
"CSW" shall mean Central and South West Corporation.
"Effective Date" shall mean the date on which an EPE
Plan incorporating, except in immaterial respects, the terms and
conditions of this Settlement Agreement shall become effective
according to such EPE Plan's terms.
"EPE Group" shall mean EPE and (i) each and every
person who controls EPE, is controlled by EPE or is under common
control with EPE (the "EPE Affiliated Group"); (ii) any
predecessor, successor or assign of any person included within
the EPE Affiliated Group; (iii) any Chapter 7 or Chapter 11
Trustee appointed by the Bankruptcy Court or any other court with
regard to any person included within the EPE Affiliated Group;
(iv) the respective present and former agents, directors,
officers, employees, advisors, attorneys and representatives of
any person included within the EPE Affiliated Group; (v) the
respective shareholders and creditors of the EPE Affiliated
Group; and (vi) in the case of any individuals falling within the
scope of (iv) or (v), their respective heirs, receivers,
<PAGE> 73
conservators, beneficiaries, executors, administrators,
successors and assigns. The term EPE Group shall not include
CSW.
"EPE Plan" shall mean (i) the Modified Third Amended
Plan of Reorganization, filed on September 15, 1993 in the Case
(the "Third Amended Plan"), (ii) any other plan of reorganization
filed in the Case pursuant to which EPE, with its consent, is to
be acquired by CSW or a CSW affiliate, by merger or otherwise,
and (iii) any other plan of reorganization filed in the Case
supported by or acceptable to EPE if, within 10 days of the
filing thereof, EPE fails to provide written notice to the Owner
Participant that such plan does not constitute an EPE Plan for
purposes of this Settlement Agreement.
"Excepted Payments" shall have the meaning assigned to
such Term in Appendix A to the Participation Agreement.
"Facility Lease" shall have the meaning assigned to
such term in Appendix A to the Participation Agreement.
"Lease Debt Creditors" shall mean Harris Trust and
Savings Bank, as Successor Trustee for those certain $200,000,000
Secured Lease Obligation Bonds Series 1988, and any holders of
such bonds, and LaSalle National Bank, as Successor Trustee for
those certain $396,328,000 Lease Obligation Bonds Series 1986 and
those certain $146,305,000 Lease Obligation Bonds Series 1986A
(the Successor Trustees, collectively, the "Successor Indenture
Trustees"), and any holders of such bonds.
"Owner Participant Group" shall mean the Owner
Participant and (i) each and every person who controls the Owner
Participant, is controlled by the Owner Participant or is under
common control with the Owner Participant (the "Owner Participant
Affiliated Group"); (ii) any predecessor, successor or assign of
any person included within the Owner Participant Affiliated
Group; (iii) the respective present and former agents, directors,
officers, employees, advisors, attorneys and representatives of
any person included within the Owner Participant Affiliated
Group; (iv) the respective shareholders and creditors of the
Owner Participant Affiliated Group; (v) any Chapter 7 or Chapter
11 Trustee appointed by a court with regard to any person
included within the Owner Participant Affiliated Group; and (vi)
in the case of any individuals falling within the scope of (iii)
or (iv), their respective heirs, receivers, conservators,
beneficiaries, executors, administrators, successors and assigns.
"Owner Trustee" shall mean The First National Bank of
Boston ("FNBB"), as trustee under a trust agreement with the
Owner Participant.
<PAGE> 74
"Palo Verde Leases" shall mean, collectively, the
Facility Lease and the facility leases, as amended, between EPE
and FNBB (as trustee under separate trust agreements with the
other owner participants) with respect to the Arizona Nuclear
Power Project.
"Palo Verde Lease Litigation" shall mean an adversary
proceeding commenced on September 9, 1992 by EPE against FNBB, in
FNBB's capacity as Owner Trustee for each of the owner
participants (other than DBP Corp.), DBP Corp. and the Successor
Indenture Trustees, which case has been assigned Adversary
Proceeding No. 92- 1285-FM by the Bankruptcy Court.
"Palo Verde Letters of Credit" shall have the meaning
assigned to such term in the Release.
"Participation Agreement" shall mean the Participation
Agreement, as amended, among EPE, the Owner Participant and
others.
"Real Property Interest" shall have the meaning
assigned to such term in Appendix A to the Participation
Agreement.
"Release" shall mean the release in the form of Annex A
hereto.
"Settlement Agreement" shall mean this Settlement
Agreement, including all Annexes hereto.
"Transaction Documents" shall have the meaning assigned
to such term in Appendix A to the Participation Agreement.
"Trust Estate" shall have the meaning assigned to such
term in Appendix A to the Participation Agreement.
"Undivided Interest" shall have the meaning assigned to
such term in Appendix A to the Participation Agreement.
RIGHTS AND OBLIGATIONS PRIOR TO THE EFFECTIVE DATE
2. EPE's plan of reorganization will provide for the
terms and conditions set forth below (and EPE will not file,
pursue or support any plan that contains provisions inconsistent
with, or that does not embody the terms and conditions of, this
Settlement Agreement):
a Claims of the EPE Group, on the one hand, and the
Owner Participant Group and the Owner Trustee, on
the other hand, against one another shall be
mutually released pursuant to the Release (to the
extent provided therein), which Release will be
executed, delivered, and effective solely as of
the Effective Date.
<PAGE> 75
b Other than as provided in this Settlement
Agreement, the Owner Participant and the Owner
Trustee shall receive no distribution, recovery or
other consideration under an EPE Plan except that,
within 10 days of the date of entry of the
Confirmation Order (but not later than December
31, 1993 if such date occurs in 1993), EPE will
pay all fees, costs and expenses incurred by or on
behalf of the Owner Participant or Owner Trustee
from and after August 1, 1993 through and
including the date of entry of the Confirmation
Order in connection with the Palo Verde
Litigation, the Case, the Participation Agreement
or the transactions contemplated hereby or by any
of the foregoing (the amount of which as of
October 1, 1993 is $11,927.76).
c As of the Effective Date, (i) all right, title and
interest of the Owner Participant in the Trust
Estate and certain Excepted Payments shall be
conveyed to EPE or its designee, if paragraph 12.a
hereof is applicable, or (ii) if paragraph 12.b
hereof is applicable, there will be a conveyance
or transfer of the Trust Estate to EPE or EPE's
designee.
d As of the Effective Date, the receipt of any value
or consideration under any EPE Plan shall be
deemed to be (i) a release of the Owner
Participant and Owner Trustee by such recipient of
all claims related to the Palo Verde Leases, the
Palo Verde Letters of Credit, the documents listed
in Schedule A to the Third Amended Plan, and the
transactions contemplated hereby and thereby, and
(ii) a release of such recipient by the Owner
Trustee and Owner Participant of all such claims.
EPE shall defend such provisions against any
objections thereto. If the deemed release
described in this paragraph is not approved by the
Bankruptcy Court as to third parties other than
the Lease Debt Creditors and the issuers of or
participants in the Palo Verde Letters of Credit,
EPE may modify the EPE Plan accordingly as long as
the Confirmation Order provides that the deemed
release is effective as to the Lease Debt
Creditors and the issuers of and participants in
the Palo Verde Letters of Credit and that, at the
Effective Date, all third party claims against the
Owner Participant and Owner Trustee which are
derivative of the claims of EPE will be
extinguished.
<PAGE> 76
3. The Owner Participant and Southwestern Public
Service Company ("SPS") have entered into a letter of
understanding dated July 13, 1993. The Owner Participant will not
take any position as to the termination of EPE's exclusivity
through the filing of additional pleadings in the Case or by the
making of any statement in the Bankruptcy Court in support of any
motion to terminate EPE's exclusivity, unless EPE, in
contravention of its agreement not to do so, files, pursues or
supports confirmation of a plan of reorganization which does not
incorporate the terms of this Settlement Agreement or which
materially adversely affects the Owner Participant or any of its
affiliates.
4. The Owner Participant will vote to accept and/or
will cause the Owner Trustee to vote to accept the Third Amended
Plan and will vote to accept and/or cause the Owner Trustee to
vote to accept any other EPE Plan that is (x) consistent with and
incorporates the terms of this Settlement Agreement and (y) does
not materially adversely affect the Owner Participant or any of
its affiliates. The Owner Participant will not vote to reject or
object to, and will cause the Owner Trustee not to vote to reject
or object to, the Third Amended Plan, and will not vote to reject
or object to, and will cause the Owner Trustee not to vote to
reject or object to, any other EPE Plan that (i) is consistent
with and incorporates the terms of this Settlement Agreement and
(ii) does not materially adversely affect the Owner Participant
or any of its affiliates. Nothing in this Settlement Agreement
will limit the right of the Owner Participant or Owner Trustee or
any member of the Owner Participant Group to vote to accept or
reject or object to (A) any plan that is (a) inconsistent with or
does not incorporate the terms of this Settlement Agreement or
(b) materially adversely affects the Owner Participant or any of
its affiliates or (B) any plan other than an EPE Plan. For
purposes of this paragraph 4, it will be conclusively presumed
that an EPE Plan does not materially adversely affect the Owner
Participant or any of its affiliates if the Owner Participant
fails to provide EPE with written notice to the contrary within
20 days after receipt of such EPE Plan. EPE will not and the
Owner Participant will not, and will not direct the Owner Trustee
to, file any pleading in the Case that is contrary to or
inconsistent with the terms and conditions contained herein.
5. The Owner Participant agrees not to transfer,
prior to the Effective Date, any Claim against the EPE Group or
interest in the Facility Lease to anyone other than a person that
has agreed to be bound by this Settlement Agreement; provided,
however, that upon any withdrawal, termination or revocation of
the Third Amended Plan, the Owner Participant may thereafter
transfer any Claim against the EPE Group or interest in the
Facility Lease to anyone whether or not such person agrees to be
bound by this Settlement Agreement, and if such person has not
agreed to be so bound, this Settlement Agreement shall
<PAGE> 77
automatically terminate without further action by any party
hereto. EPE agrees not to transfer, prior to the Effective Date,
any Claim against the Owner Participant Group or Owner Trustee or
interest in the Facility Lease.
6. EPE shall disclose the contents of this Settlement
Agreement, pursuant to Section 3.14B.5. of the Third Amended
Plan. Between the date of entry of the Confirmation Order and
the Effective Date, the Owner Participant shall have all of the
rights accorded to the Oversight Committee (as defined in the
Third Amended Plan) pursuant to Section 5.1.E of the Third
Amended Plan.
7. Until the Effective Date occurs, EPE will not
pursue the Palo Verde Lease Litigation or commence any litigation
or otherwise file any Claim against the Owner Participant or
Owner Trustee and EPE will oppose any motion or other action by
any other person to pursue the Palo Verde Lease Litigation or
commence or file any such litigation or Claim or intervene
therein; provided, however, that nothing herein shall preclude
EPE from (i) taking steps which EPE reasonably deems necessary to
preserve its Claims and its ability to collect on such Claims, if
successful, and to protect EPE's rights in the event of the
proposed dissolution of the Owner Participant or Owner Trustee in
a bankruptcy or insolvency proceeding of the Owner Participant or
Owner Trustee (and EPE hereby agrees that EPE will not file nor
participate in the filing of any involuntary bankruptcy or
insolvency petition against the Owner Participant or Owner
Trustee) or (ii) seeking discovery, at EPE's own expense, against
the Owner Participant or Owner Trustee in connection with a plan
of reorganization proposed by or on behalf of SPS, or any other
plan of reorganization other than an EPE Plan, to the extent EPE
is otherwise entitled to request such discovery from the
Bankruptcy Court.
8. Until the Effective Date occurs, the Owner
Participant will not, and will not direct the Owner Trustee to,
pursue the Palo Verde Lease Litigation or commence any litigation
or file any additional Claim against EPE and at EPE's request,
the Owner Participant will, and/or will cause the Owner Trustee
to, file a pleading which will support EPE's opposition to any
motion or other action by any other person to pursue the Palo
Verde Lease Litigation or commence or file any such litigation or
Claim or intervene therein; provided, however, that nothing
herein shall preclude the Owner Participant or Owner Trustee from
(i) taking steps which the Owner Participant or Owner Trustee, as
the case may be, reasonably deems necessary to preserve the
Claims of such Owner Participant or Owner Trustee and to protect
the rights of such Owner Participant or Owner Trustee in the
event of the proposed dissolution of EPE or (ii) opposing EPE's
pursuit of any discovery referred to in paragraph 7 hereof.
<PAGE> 78
9. Within 10 days after the filing of any plan, EPE
will give the Owner Participant written notice of whether such
plan constitutes an EPE Plan referred to in clause (iii) of the
definition thereof. In the absence of such notice, such plan
shall be deemed to be an EPE Plan.
10. Prior to the Effective Date, EPE shall seek and
obtain all governmental approvals necessary to effect the
transactions contemplated hereby. The Owner Participant agrees to
cooperate with EPE, at EPE's expense, in obtaining such approvals
prior to the Effective Date.
11. Concurrently with the execution and delivery of
this Settlement Agreement, the Owner Participant, the Owner
Trustee, EPE and the Successor Indenture Trustees shall execute
and deliver a Tolling Agreement in the form of Annex E hereto.
RIGHTS AND OBLIGATIONS ON AND AFTER THE EFFECTIVE DATE
12. Subject to the satisfaction of the terms and
conditions contained in this Settlement Agreement, including
paragraph 13, on or as of the Effective Date:
a The Owner Participant will, subject to paragraph
12.b, transfer to EPE or, if EPE so requests,
EPE's designee, all of the Owner Participant's
right, title and interest in the Trust Estate and
certain Excepted Payments by the execution and
delivery of a Bill of Sale and Assignment
substantially in the form of Annex B hereto.
b At the request and expense of EPE, the Owner
Participant will, at the election of EPE, in lieu
of or in addition to the transfer referred to in
paragraph 12.a, (i) consent to the conveyance or
transfer of the Trust Estate to EPE or, if EPE so
requests, EPE's designee, and (ii) direct the
Owner Trustee to effect such conveyance or
transfer, which obligations shall be subject to
(a) EPE having obtained the required consent, if
any, of the applicable Successor Indenture Trustee
or a binding order (which has not been stayed) of
a court of competent jurisdiction effectively
overriding the requirement, if any, of such
consent, (b) such conveyance and transfer
complying with applicable law and third party
rights, if any, or EPE having obtained a binding
order (which has not been stayed) of a court of
competent jurisdiction effectively overriding any
requirement of such compliance, and (c) EPE having
provided such indemnities to the Owner Participant
and the Owner Trustee as either of them shall
reasonably request regarding the conveyance or
transfer set forth in this paragraph 12.b.
<PAGE> 79
c The parties hereto and the Owner Trustee shall
execute and deliver the Release.
d Reorganized EPE shall deliver to the Owner
Participant on the Effective Date an executed
letter in the form of Annex G hereto. The form and
contents of Annex G shall not be disclosed prior
to the Effective Date to any person or entity,
except that a copy thereof shall be provided to
the Bankruptcy Court under seal and to the
Successor Indenture Trustee (after execution
thereof). In the event the Effective Date does not
occur, neither the Owner Participant nor any other
person or entity shall refer to or otherwise
disclose the contents of Annex G, or its inclusion
in this Settlement Agreement, for any purpose.
e If paragraph 12.a is applicable, EPE or its
designee shall become the "Owner Participant"
under the documents described in Schedule A to the
Third Amended Plan for all purposes, and, if
paragraph 12.b is applicable, such documents shall
be terminated, altered, or amended in such manner
as the parties hereto shall agree, consistent with
the terms of this Settlement Agreement.
f Section 17 of the Participation Agreement shall
continue in full force and effect, but only with
respect to EPE's obligations under the first and
third sentences of the first paragraph and the
entire third paragraph of Section 10(b)(3)(xi),
and the entirety of Sections 13 (insofar as
indemnification is sought for Claims (as defined
in the Participation Agreement) asserted against
the Owner Participant, the Owner Trustee, the
First National Bank of Boston (in its individual
capacity), the Trust (as defined in the
Participation Agreement), the Trust Estate, or the
Lease Indenture Estate (as defined in the
Participation Agreement), or any Affiliate (as
defined in the Participation Agreement),
successor, assign, agent, officer, director or
employee of any of the foregoing, by a person
other than the Owner Participant, the Owner
Trustee or any successor or assign thereof) and 16
thereof (it being understood that the exclusions
from the general tax indemnity provisions of
Section 13(b) of the Participation Agreement with
respect to a "voluntary transfer" and with respect
to a "transferee" or a "subsequent transferee"
<PAGE> 80
shall not apply to the transactions contemplated
by this Settlement Agreement); provided, however,
that in order to prevent a double payment with
respect to a Loss or Losses (as defined in the
Participation Agreement), the aggregate amount of
such payments shall be reduced (without
duplication) by the appropriate portion of the
amount drawn by the Owner Participant under the
corresponding Palo Verde Letter of Credit to the
extent such portion is attributable (under
calculations performed in accordance with industry
practice) to the same adverse tax consequences
constituting such Loss or Losses. It is understood
that EPE's obligations under this paragraph 12.f
shall not extend to the payment of Basic Rent,
Fair Market Rental Value, Fair Market Sales Value,
Casualty Value, Special Casualty Value,
Termination Value, Enhanced Casualty Value or
Special Termination Value (as such terms are
defined in the Transaction Documents and
collectively referred to herein as "Scheduled
Amounts") or any amounts measured by Scheduled
Amounts or Supplemental Rent (to the extent
attributable to Scheduled Amounts or Excepted
Payments which are Assigned Property (as defined
in the Bill of Sale and Assignment attached hereto
as Annex B)). Notwithstanding anything contained
in this Settlement Agreement or the Release, EPE
shall continue to comply with Section 10(a)(2)(ii)
of the Facility Lease except that any notices or
certificates described in Section 10(a)(1)(i)(F)
of the Facility Lease (as such section relates to
Section 10(a)(2)(ii)) must be received by the
Owner Participant in order to be effective against
the Owner Participant but need not be received by
or delivered to the Indenture Trustee.
g EPE will pay any balance due of the amounts
described in paragraph 26 hereof.
13. The terms and conditions referred to in paragraph
12 include the following:
a The Confirmation Order shall (i) provide that an
Order of Dismissal with Prejudice in the form
attached hereto as Annex C shall be entered on or
after the Effective Date and a copy provided to
the Owner Participant and to the Successor
Indenture Trustee and (ii) comply with the last
sentence of paragraph 2.d, if applicable;
<PAGE> 81
b The Owner Participant, the Owner Trustee and the
Successor Indenture Trustees shall have executed
and delivered mutual releases substantially in the
form attached hereto as Annex D and an order of
the Bankruptcy Court complying with either the
first or the last sentence of paragraph 2.d shall
be in full force and effect and shall not have
been stayed;
c This Settlement Agreement shall be in full force
and effect and neither the Owner Participant nor
EPE shall be in default of any term or condition
hereof;
d All governmental approvals, if any, necessary to
effect the transactions contemplated hereby shall
have been obtained and be in full force and
effect;
e All consents of third parties, if any, necessary
to effect the actions contemplated above shall
have been obtained and be in full force and
effect;
f All documentation for the transactions
contemplated by this paragraph 13 and paragraphs
8, 12.a, 12.b, 12.e and 26 shall be reasonably
satisfactory in form and substance to the Owner
Participant and EPE; and
g The Owner Participant and the Owner Trustee shall
have received all amounts, if any, payable
pursuant to paragraphs 2.b, 18 and 26 hereof.
Conditions d and e above may be satisfied by the entry of a
binding order (which has not been stayed) of a court of competent
jurisdiction effectively overriding the requirement, if any, of
obtaining any third party consents or governmental approvals
referred to in such conditions.
TERMINATION AND EFFECTIVENESS
14. This Settlement Agreement may be terminated (a) on
30 days' written notice by either EPE or the Owner Participant if
no EPE Plan referred to in clause (i) or (ii) of the definition
thereof is being pursued and, in the case of termination by EPE,
EPE certifies in the termination notice that no EPE Plan referred
to in clause (i) or (ii) of the definition thereof is then
contemplated by EPE, or (b) on 5 days' written notice by either
the Owner Participant or EPE if EPE or the Owner Participant,
respectively, fails to comply with any term or condition of this
Settlement Agreement and does not cure such failure within such 5
days or (c) on 5 days' written notice from EPE that a settlement
agreement with one of the other owner participants with an
<PAGE> 82
interest in Unit 2 of the Palo Verde Nuclear Generating Station
has terminated pursuant to paragraph 5 of such settlement
agreement and that EPE is terminating all of the settlement
agreements with each of the owner Participants with an interest
in such Unit.
15. This Settlement Agreement shall not be binding
upon any of the parties hereto until EPE and all of the owner
participants execute settlement agreements in a form similar to
this Settlement Agreement. This Settlement Agreement shall
terminate automatically without further action by any party
hereto if the Bankruptcy Court in the Case declines to approve
the settlement contained in this Settlement Agreement or any such
other settlement agreement.
16. Upon any termination of this Settlement Agreement,
all obligations of the parties hereto (except for the last 2
sentences of paragraph 12.d) shall cease.
REPRESENTATIONS AND WARRANTIES
17. EPE represents and warrants that no modification
to the merger agreement between EPE and CSW is necessary to
effectuate or consummate this Settlement Agreement.
18. Each party hereto represents and warrants that it
owns and has not transferred any of the Claims described in the
Release as being released by it or any of its interests in the
Facility Lease. Except as set forth in Annex F hereto, to the
knowledge of the Owner Participant, there exists no basis upon
which the Owner Participant, as of the date of this Settlement
Agreement, may assert any Claims against EPE, other than any such
Claims which will be extinguished pursuant to the Release. To the
knowledge of EPE, there exists no basis upon which EPE, as of the
date of this Settlement Agreement, may assert any Claim against
the Owner Participant, other than any such Claims which will be
extinguished pursuant to the Release. EPE shall pay all amounts
due with respect to the items set forth on Annex F irrespective
of whether such amounts are already incurred, invoiced or
assessed or arise hereafter.
19. Each party hereto agrees that the Third Amended
Plan (i) complies with the terms and conditions of this
Settlement Agreement, and (ii) does not materially adversely
affect the Owner Participant or any of its affiliates for
purposes of paragraph 4 hereof.
MISCELLANEOUS
20. Nothing in this Settlement Agreement shall operate
as an admission of liability or admission as to any issue by any
party, and this Settlement Agreement (and all negotiations,
discussions and drafts relating thereto) shall be subject to the
<PAGE> 83
provisions of Federal Rule of Evidence 408 and comparable
provisions of state law.
21. This Settlement Agreement may be executed in two
or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same
instrument.
22. This Settlement Agreement shall be governed in all
respects including validity, interpretation and effect, by, and
construed and enforced under, the law of the State of New York,
without giving effect to the principles of conflicts of law
thereof.
23. This Settlement Agreement is enforceable only by
the parties hereto and the Owner Trustee; provided, however,
that, after the Effective Date, any person who is a beneficiary
of a release (including the Release) contemplated by this
Settlement Agreement shall be entitled to enforce the provisions
of such release.
24. In addition to all other rights and remedies
provided in this Settlement Agreement, EPE and the Owner
Participant may (subject to any restrictions contained in this
Settlement Agreement) exercise any other right or remedy that may
be available under applicable law or proceed (or the Owner
Trustee may proceed) by appropriate court action to enforce the
terms hereof. The failure or delay of EPE or the Owner
Participant in exercising any right granted hereunder upon the
occurrence of any of the contingencies set forth herein shall not
constitute a waiver of any such right upon the continuance or
recurrence of any such contingencies or similar contingencies and
any single or partial exercise of any particular right by EPE or
the Owner Participant shall not exhaust the same or constitute a
waiver of any other right provided herein. No remedy under this
Settlement Agreement is intended to be exclusive, but each shall
be cumulative and in addition to any other remedy provided
hereunder or otherwise available to EPE or the Owner Participant
at law or in equity (subject to any restrictions contained in
this Settlement Agreement). Notwithstanding the foregoing, the
parties agree that in the event of a breach of this Settlement
Agreement, money damages will not be adequate to compensate the
non-breaching party, and, accordingly, either party or the Owner
Trustee may seek to specifically enforce the provisions of this
Settlement Agreement.
25. Except as otherwise specifically provided herein,
this Settlement Agreement shall be binding on all successors and
assigns of the parties hereto.
26. The parties shall cooperate with one another to
execute and deliver such other documents and to take such further
actions as shall be necessary or appropriate to effectuate the
<PAGE> 84
terms hereof; provided, however, that the Owner Participant and
the Owner Trustee shall each be reimbursed by EPE for its
reasonable expenses after the date of entry of the Confirmation
Order related to the execution and delivery of any such other
documents and the taking of any such further actions by the Owner
Participant or the Owner Trustee.
27. The descriptive headings of the paragraphs of this
Settlement Agreement are for convenience only and will not be
used in the construction of the content of this Settlement
Agreement.
28. Any notice required or permitted to be given by
any provision of this Settlement Agreement will be in writing and
will be deemed to have been given when delivered personally or by
facsimile, receipt confirmed, to the party designated to receive
such notice or on the date following the day sent by overnight
courier or on the 3rd business day after the same is sent by
certified mail, postage and charges prepaid, directed to the
following addresses or to such other additional addresses as any
party might designate by written notice to the other party:
El Paso Electric Company: El Paso Electric Company
Mills Building
303 North Oregon
El Paso, Texas 79901
Attention:
Chief Executive Officer
and Chairman of the Board
Facsimile: (915) 521-4754
With Copy to: Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: Shalom L. Kohn, Esq.
Facsimile: (312) 853-7312
With Copy to: Milbank, Tweed, Hadley & McCloy
One Chase Manhattan Plaza
New York, New York 10005
Attention: Joris M. Hogan, Esq.
Facsimile: (212) 530-5219
Owner Participant: Commercial Federal Investment
Corporation
2120 South 72 Street
15th Floor
Omaha, Nebraska 68124
Attention: Ronald Cheffer,
Vice President
Facsimile: (402) 390-5143
<PAGE> 85
With Copy to: Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Attention: Richard M. Allen,
Esq.
Facsimile: (212) 474-3700
Parties to this Settlement Agreement shall be entitled
to conclusively rely on any notice given in the foregoing manner
to the parties at the addresses reflected above, unless and until
a different address or facsimile number is provided to all
parties and persons listed above. Rejection or refusal to
accept, or inability to deliver because of changed addresses or
because no notice of changed address was given, shall be deemed a
receipt of such notice.
IN WITNESS WHEREOF, the parties hereto have duly
authorized and executed this Settlement Agreement on the date
first above written.
EL PASO ELECTRIC COMPANY,
by
Name: David H. Wiggs, Jr.
Title:Chairman and CEO
COMMERCIAL FEDERAL INVESTMENT
CORPORATION,
by /s/
Name:Ronald P. Cheffer
Title:President
Annex A: Form of Release and Agreement among EPE, Owner
Participant and Owner Trustee
Annex B: Form of Bill of Sale and Assignment
Annex C: Form of Order of Dismissal with Prejudice
Annex D: Form of Release and Agreement among Owner Participant,
Owner Trustee, and Successor Indenture Trustees
Annex E: Form of Tolling Agreement
Annex F: Existing Claims
Annex G: Form of Letter re Causes of Action
<PAGE> 86
ANNEX A
RELEASE AND AGREEMENT
THIS RELEASE AND AGREEMENT (this "Release") is entered
into on , 19 , by and among EL PASO ELECTRIC COMPANY, a Texas
corporation, debtor and debtor in possession ("EPE"), COMMERCIAL
FEDERAL INVESTMENT CORPORATION, a Nebraska corporation (the
"Owner Participant" and, collectively with each of the other
owner participants participating in the transactions described in
recital B below, the "Owner Participants"), and THE FIRST
NATIONAL BANK OF BOSTON (in its individual capacity, "FNBB"), as
trustee under a trust agreement with the Owner Participant (the
"Owner Trustee" and, collectively as trustee under trust
agreements with the Owner Participants, the "Owner Trustees").
RECITALS
A. EPE is the debtor in a case pending under Chapter
11 of Title 11 of the United States Code (the "Bankruptcy Code")
in the United States Bankruptcy Court for the Western District of
Texas (the "Bankruptcy Court"), which case has been assigned Case
No. 92-10148-FM (the "EPE Chapter 11 Case").
B. EPE, the Owner Participant and the Owner Trustee
are parties to various agreements, documents and instruments that
evidence or relate to the sale and leaseback by EPE, in separate
transactions with the Owner Participants and Owner Trustees, of
EPE's entire undivided interest in Unit 2 of the Palo Verde
Nuclear Generating Station ("Palo Verde") and approximately 39.5%
of EPE's undivided interest in Unit 3 of Palo Verde and certain
common plant and other related assets.
C. FNBB, in its capacity as Owner Trustee for each of
the Owner Participants (other than DBP Corp.), and DBP Corp.
filed proofs of claim in the EPE Chapter 11 Case (the "Proofs of
Claim").
D. On September 9, 1992, EPE commenced an adversary
proceeding against FNBB, in its capacity as Owner Trustee for
each of the Owner Participants (other than DBP Corp.), DBP Corp.
and the Successor Indenture Trustees (the "Palo Verde Lease
Litigation Defendants"), which case was assigned Adversary
Proceeding No. 92-1285-FM (the "Palo Verde Lease Litigation").
The Proofs of Claim, and any objections by EPE thereto, were
consolidated into the Palo Verde Lease Litigation. In addition,
in discussions between the parties, certain issues were raised
surrounding the presentment and drawings by the Owner
Participants under certain letters of credit issued as part of
the aforesaid sale and leaseback transactions in the approximate
aggregate amount of $288.4 million (the "Palo Verde Letters of
Credit"). Such issues, including any claims described in
disclosure statements and plans of reorganization filed by EPE in
the EPE Chapter 11 Case with regard to the Owner Participants and
<PAGE> 87
the Palo Verde Letters of Credit, are herein called the "Owner
Participant Claims".
E. The Palo Verde Lease Litigation Defendants have
asserted various defenses, contentions and counterclaims (the
"Palo Verde Defendants' Claims"). In addition, with regard to the
Owner Participant Claims, the Owner Participants contend that
their actions surrounding the presentment and drawings of the
Palo Verde Letters of Credit, including such drawings, were
proper as a matter of law (the "Letter of Credit Defenses").
F. Pursuant to a Settlement Agreement dated as of
November 15, 1993 (including the Annexes thereto and paragraphs
12 and 13 thereof, the "Settlement Agreement"), EPE and the Owner
Participant (or a predecessor thereof) agreed to release certain
claims effective upon the Effective Date.
IN CONSIDERATION OF THE MUTUAL AGREEMENTS CONTAINED
HEREIN, and other good and valuable consideration, the receipt of
which is hereby acknowledged, IT IS HEREBY AGREED by and among
the parties hereto as follows:
AGREEMENTS
1. Except as otherwise defined herein, all
capitalized terms used herein shall have the meanings set forth
in the Settlement Agreement.
2. EPE, on behalf of itself and the EPE Group, hereby
forever releases and discharges the Owner Trustee and the Owner
Participant Group (the "Released Parties") from, and waives and
relinquishes, any and all claims, demands, debts, liabilities,
obligations, actions, causes of action, suits, sums of money,
accounts, reckonings, covenants, contracts, controversies,
agreements, promises and rights whatsoever, whenever arising,
known or unknown, suspected or unsuspected, contingent or fixed,
liquidated or unliquidated, matured or unmatured, in law, equity,
bankruptcy or otherwise (collectively, "Claims"), which EPE or
the EPE Group ever had, now has, or hereafter can, shall or may
have against any of the Released Parties for, upon, or by reason
of any matter, cause, transaction or thing whatsoever occurring
at any time prior to the Effective Date, including, without
limitation, any Claims which EPE or the EPE Group ever had, now
has, or hereafter can, shall or may have against any of the
Released Parties by reason of, arising from, relating to, or in
connection with the Palo Verde Lease Litigation, the Palo Verde
Letters of Credit, the Palo Verde Defendants' Claims, the Owner
Participant Claims, the documents listed on Schedule A to the
Third Amended Plan or the transactions contemplated by the
Participation Agreement, or based on or arising under 11 U.S.C.
Sections 502, 506, 507, 510, 544-553, inclusive, or any similar
provisions of federal or state law, and any right of indemnity,
contribution or subrogation arising therefrom or relating
<PAGE> 88
thereto; provided, however, that nothing herein shall release any
Claims of any member of the EPE Group (other than EPE) unrelated
to the Palo Verde Lease Litigation, the Palo Verde Letters of
Credit, the Palo Verde Defendants' Claims, the Owner Participant
Claims, or the transactions contemplated by the Settlement
Agreement or the Participation Agreement or the documents listed
on Schedule A to the Third Amended Plan; and provided, however
that nothing herein shall release any party from its obligations
set forth in, or that are assumed or continued pursuant to the
Settlement Agreement (including, without limitation, the Annexes
thereto and paragraphs 12 and 13 thereof).
3. The Owner Participant, on behalf of itself and the
Owner Participant Group, and the Owner Trustee hereby forever
release and discharge the EPE Group from, and waive and
relinquish, any and all Claims which the Owner Participant or the
Owner Participant Group or the Owner Trustee ever had, now has,
or hereafter can, shall or may have against the EPE Group for,
upon, or by reason of any matter, cause, transaction or thing
whatsoever occurring at any time prior to the Effective Date,
including, without limitation, any claims which the Owner
Participant or the Owner Participant Group or the Owner Trustee
ever had, now has, or hereafter can, shall or may have against
the EPE Group by reason of, arising from, relating to, or in
connection with the Palo Verde Lease Litigation, the Palo Verde
Letters of Credit, the Palo Verde Defendants' Claims, the Owner
Participant Claims, or the documents listed on Schedule A to the
Third Amended Plan or the transactions contemplated by the
Participation Agreement, or based on or arising under 11 U.S.C.
Sections 502, 506, 507, 510, 544-553, inclusive, or any similar
provisions of federal or state law, and any right of indemnity,
contribution or subrogation arising therefrom or relating
thereto; excluding, however, from the foregoing any Claims of any
member of the Owner Participant Group (other than the Owner
Participant) or the Owner Trustee unrelated to the Palo Verde
Lease Litigation, the Palo Verde Letters of Credit, the Palo
Verde Defendants' Claims, the Owner Participant Claims, or the
transactions contemplated by the Settlement Agreement or the
Participation Agreement or the documents listed on Schedule A to
the Third Amended Plan; and provided, however that nothing herein
shall release any party from its obligations set forth in the
Settlement Agreement (including, without limitation, the Annexes
thereto and paragraphs 12 and 13 thereof).
4. Each of the parties hereby acknowledges and agrees
that all Claims under Section 1542 of the California Civil Code
and any other provision of law now or hereafter enacted,
adjudicated or sought to be adjudicated relating to the release
or waiver of unknown or unspecified claims are hereby
specifically and expressly released and waived. Each of the
parties understands that Section 1542 of the California Civil
Code provides that "[a] general release does not extend to claims
which the creditor does not know or suspect to exist in his favor
<PAGE> 89
at the time of executing the release, which if known by him must
have materially affected his settlement with the debtor". For
purposes of this Release, each of the parties acknowledges and
agrees that it may be considered to be both a "creditor" and a
"debtor" for all purposes and with respect to all Claims it may
now know or suspect to exist within the meaning of Section 1542
of the California Civil Code and any other provision of law now
or hereafter enacted, adjudicated or sought to be adjudicated
relating to the release or waiver of unknown or unspecified
claims.
5. This Release may be executed in two or more
counterparts, each of which shall be deemed an original, but all
of which shall constitute one and the same instrument.
6. This Release shall be binding upon the parties
hereto and their successors and assigns. Each party hereto
represents and warrants that it owns all the Claims described
herein which are being released hereunder and is duly authorized
to release such Claims.
7. This Release shall be governed in all respects,
including validity, interpretation and effect, by, and construed
and enforced under, the law of the State of New York, without
giving effect to the principles of conflict of laws thereof.
IN WITNESS WHEREOF, the parties hereto have duly
authorized and executed this Release as of the date first above
written.
EL PASO ELECTRIC COMPANY,
by
Name:
Title:
COMMERCIAL FEDERAL INVESTMENT
CORPORATION,
by
Name:
Title:
THE FIRST NATIONAL BANK OF BOSTON,
as Owner Trustee,
by
Name:
Title:
<PAGE> 90
ANNEX B
BILL OF SALE AND ASSIGNMENT, dated as
of , 199 , from COMMERCIAL
FEDERAL INVESTMENT CORPORATION, a
Nebraska corporation (the "Owner
Participant"), to EL PASO ELECTRIC
COMPANY, a Texas corporation [1] ("El
Paso").
WITNESSETH:
WHEREAS, the Owner Participant desires to convey and El
Paso desires to acquire the Assigned Property (as hereinafter
defined);
NOW, THEREFORE, in consideration of the premises and of
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
Definitions
For purposes hereof, capitalized terms used but not
otherwise defined herein shall have the meanings assigned to such
terms in the Participation Agreement dated as of December 1,
1986, among [a predecessor of] the Owner Participant, the First
National Bank of Boston, in its individual capacity and as Owner
Trustee, El Paso and others.
ARTICLE II
Assignment of Trust Estate
The Owner Participant does hereby grant, bargain,
convey, sell, assign, transfer and set over (collectively,
"transfer") to El Paso, on an as is, where is basis, free and
clear of Owner Participant's Liens but otherwise without
recourse, representation or warranty, express or implied, of any
nature whatsoever, all the Owner Participant's right, title and
interest in, to and under the Trust Estate and the Excepted
Payments, other than Excepted Payments referred to in clauses (i)
(to the extent such Supplemental Rent constitutes or is
attributable to payments to which the Owner Participant or any of
its affiliates (or the successors, assigns, agents, officers,
directors or employees of the Owner Participant) are entitled
under the Settlement Agreement dated as of November 15, 1993
between El Paso and the Owner Participant (or any predecessor
- ---------------------------------
[1] El Paso may designate a different transferee.
<PAGE> 91
thereof)), (vi) and (vii) (and (viii) to the extent attributable
to the payments referred to in clauses (i), (vi) or (vii)) of the
definition of "Excepted Payments" (the "Assigned Property"). The
disclaimer of representations and warranties set forth in the
second sentence of Section 6(b) of the Facility Lease is hereby
incorporated herein as fully as if set forth at this place. Such
transfer shall not alter the obligations of El Paso nor expand
the rights of the Owner Participant under the Settlement
Agreement dated as of November 15, 1993, between El Paso and the
Owner Participant (or a predecessor thereof) or the Release
referred to therein, whether or not such obligations or rights
would constitute an Excepted Payment.
ARTICLE III
Effectiveness of Transfer
The transfer of the Assigned Property shall become
effective without further action upon the execution and delivery
by the Owner Participant to El Paso of this Bill of Sale and
Assignment and the furnishing of a counterpart of this Bill of
Sale and Assignment to the Owner Trustee.
ARTICLE IV
Miscellaneous
SECTION 4.01. Successors and Assigns. This Bill of Sale
and Assignment shall be binding upon the Owner Participant and
its successors and shall inure to the benefit of El Paso and its
successors and assigns.
SECTION 4.02. Governing Law. This Bill of Sale and
Assignment shall be governed by and construed in accordance with
the law of the State of New York.
IN WITNESS WHEREOF, the undersigned has caused this
Bill of Sale and Assignment to be duly executed as of the day and
year first written above.
COMMERCIAL FEDERAL INVESTMENT CORPORATION,
by
Name:
Title:
<PAGE> 92
ANNEX C
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE WESTERN DISTRICT OF TEXAS
AUSTIN DIVISION
)
In re EL PASO ELECTRIC COMPANY, ) Case No. 92-10148-FM
) (Chapter 11)
Debtor. )
)
) Adversary Proceeding
EL PASO ELECTRIC COMPANY, ) No. 92-1285-FM
)
Plaintiff and Counterclaimant, )
)
v. ) Adversary Complaint
) seeking a declaration
THE FIRST NATIONAL BANK OF BOSTON, ) of rights arising
DBP CORP., LaSALLE NATIONAL BANK, ) from the rejection of
and HARRIS TRUST AND SAVINGS BANK, ) leases of the Palo
) Verde Nuclear
Defendants and Claimants. ) Generating Station
)
ORDER OF DISMISSAL WITH PREJUDICE
IT IS HEREBY ORDERED AND ADJUDGED, pursuant to the
Order of Confirmation in Case No. 92-10148-FM (Chapter 11), that
the Complaint and Counterclaims in the above-referenced action
are each hereby dismissed with prejudice.
IT IS SO ORDERED:
Dated: , 199
Austin, Texas
United States Bankruptcy Judge
<PAGE> 93
ANNEX D
RELEASE AND AGREEMENT
THIS RELEASE AND AGREEMENT (this "Release") is entered
into on _______ ___, 199__, by and among COMMERCIAL FEDERAL
INVESTMENT CORPORATION, a Nebraska corporation (the "Owner
Participant" and, collectively with each of the other owner
participants participating in the transactions described in
recital B below, the "Owner Participants"), THE FIRST NATIONAL
BANK OF BOSTON (in its individual capacity, "FNBB"), as trustee
under a trust agreement with the Owner Participant (the "Owner
Trustee" and, collectively as trustee under trust agreements with
the Owner Participants, the "Owner Trustees"), HARRIS TRUST AND
SAVINGS BANK, as Successor Trustee under indentures with certain
of the Owner Trustees, and LASALLE NATIONAL BANK, as Successor
Trustee under indentures with certain of the Owner Trustees
(collectively, the "Successor Indenture Trustees").
RECITALS
A. EPE is the debtor in a case pending under Chapter
11 of Title 11 of the United States Code (the "Bankruptcy Code")
in the United States Bankruptcy Court for the Western District of
Texas (the "Bankruptcy Court"), which case has been assigned Case
No. 92-10148-FM (the "EPE Chapter 11 Case").
B. EPE, the Owner Participant and the Owner Trustee
are parties to various agreements, documents and instruments that
evidence or relate to the sale and leaseback by EPE, in separate
transactions with the Owner Participants and Owner Trustees, of
EPE's entire undivided interest in Unit 2 of the Palo Verde
Nuclear Generating Station ("Palo Verde") and approximately 39.5%
of EPE's undivided interest in Unit 3 of Palo Verde and certain
common plant and other related assets.
C. FNBB, in its capacity as Owner Trustee for each of
the Owner Participants (other than DBP Corp.), DBP Corp. and the
Successor Indenture Trustees filed proofs of claim in the EPE
Chapter 11 Case (the "Proofs of Claim").
D. On September 9, 1992, EPE commenced an adversary
proceeding against FNBB, in its capacity as Owner Trustee for
each of the Owner Participants (other than DBP Corp.), DBP Corp.
and the Successor Indenture Trustees (the "Palo Verde Lease
Litigation Defendants"), which case was assigned Adversary
Proceeding No. 92-1285-FM (the "Palo Verde Lease Litigation").
<PAGE> 94
The Proofs of Claim, and any objections by EPE thereto, were
consolidated into the Palo Verde Lease Litigation. In addition,
in discussions between the parties, certain issues were raised
surrounding the presentment and drawings by the Owner
Participants under certain letters of credit issued as part of
the aforesaid sale and leaseback transactions in the approximate
aggregate amount of $288.4 million (the "Palo Verde Letters of
Credit"). Such issues, including any claims described in
disclosure statements and plans of reorganization filed by EPE in
the EPE Chapter 11 Case with regard to the Owner Participants and
the Palo Verde Letters of Credit, are herein called the "Owner
Participant Claims".
E. The Palo Verde Lease Litigation Defendants have
asserted various defenses, contentions and counterclaims (the
"Palo Verde Defendants' Claims"). In addition, with regard to the
Owner Participant Claims, the Owner Participants contend that
their actions surrounding the presentment and drawings of the
Palo Verde Letters of Credit, including such drawings, were
proper as a matter of law (the "Letter of Credit Defenses").
F. Pursuant to a Settlement Agreement dated as of
November 15, 1993, (including the Annexes thereto and paragraphs
12 and 13 thereof, the "Settlement Agreement"), EPE and the Owner
Participant (or a predecessor thereof) agreed to release certain
claims, effective upon the Effective Date.
IN CONSIDERATION OF THE MUTUAL AGREEMENTS CONTAINED
HEREIN, and other good and valuable consideration, the receipt of
which is hereby acknowledged, IT IS HEREBY AGREED by and among
the parties hereto as follows:
AGREEMENTS
1. Except as otherwise defined herein, all
capitalized terms used herein shall have the meanings set forth
in the Settlement Agreement.
2. The Successor Indenture Trustees, on behalf of
themselves and the Lease Debt Creditors, hereby forever release
and discharge the Owner Trustee and the Owner Participant Group
(the "Released Parties") from, and waive and relinquish, any and
all claims, demands, debts, liabilities, obligations, actions,
causes of action, suits, sums of money, accounts, reckonings,
covenants, contracts, controversies, agreements, promises and
rights whatsoever, whenever arising, known or unknown, suspected
<PAGE> 95
or unsuspected, contingent or fixed, liquidated or unliquidated,
matured or unmatured, in law, equity, bankruptcy or otherwise
(collectively, "Claims"), which the Successor Indenture Trustees
or Lease Debt Creditors ever had, now have, or hereafter can,
shall or may have against any of the Released Parties for, upon,
or by reason of any matter, cause, transaction or thing
whatsoever occurring at any time prior to the Effective Date,
including, without limitation, any Claims which the Successor
Indenture Trustees or Lease Debt Creditors ever had, now have, or
hereafter can, shall or may have against any of the Released
Parties by reason of, arising from, relating to, or in connection
with the Palo Verde Lease Litigation, the Palo Verde Letters of
Credit, the Palo Verde Defendants' Claims, or the Owner
Participant Claims, the documents listed in Schedule A to the
Third Amended Plan or the transactions contemplated by the
Participation Agreement, or based on or arising under 11 U.S.C.
Sections 502, 506, 507, 510, 544-553, inclusive, or any similar
provisions of federal or state law, and any right of indemnity,
contribution or subrogation arising therefrom or relating
thereto; excluding, however, from the foregoing any Claims of the
Successor Indenture Trustees or Lease Debt Creditors unrelated to
the Palo Verde Lease Litigation, the Palo Verde Letters of
Credit, the Palo Verde Defendants' Claims, the Owner Participant
Claims, or the transactions contemplated by the Settlement
Agreement or the Participation Agreement or the documents listed
on Schedule A to the Third Amended Plan.
3. The Owner Participant, on behalf of itself and the
Owner Participant Group, and the Owner Trustee hereby forever
release and discharge the Successor Indenture Trustees and Lease
Debt Creditors from, and waive and relinquish, any and all Claims
which the Owner Participant or FNBB or the Owner Participant
Group or the Owner Trustee ever had, now has, or hereafter can,
shall or may have against the Successor Indenture Trustees or
Lease Debt Creditors for, upon, or by reason of any matter,
cause, transaction or thing whatsoever occurring at any time
prior to the Effective Date, including, without limitation, any
claims which the Owner Participant or the Owner Participant Group
or the Owner Trustee ever had, now has, or hereafter can, shall
or may have against the Successor Indenture Trustees or Lease
Debt Creditors by reason of, arising from, relating to, or in
connection with the Palo Verde Lease Litigation, the Palo Verde
Letters of Credit, the Palo Verde Defendants' Claims, or the
<PAGE> 96
Owner Participant Claims, the documents listed in Schedule A to
the Third Amended Plan or the transactions contemplated by the
Participation Agreement, or based on or arising under 11 U.S.C.
Sections 502, 506, 507, 510, 544-553, inclusive, or any similar
provisions of federal or state law, and any right of indemnity,
contribution or subrogation arising therefrom or relating
thereto; excluding, however, from the foregoing any Claims of the
Owner Participant or FNBB or any member of the Owner Participant
Group or the Owner Trustee unrelated to the Palo Verde Lease
Litigation, the Palo Verde Letters of Credit, the Palo Verde
Defendants' Claims, the Owner Participant Claims, the
transactions contemplated by the Settlement Agreement or the
Participation Agreement or the documents listed in Schedule A to
the Third Amended Plan.
4. Each of the parties hereby acknowledges and agrees
that all Claims under Section 1542 of the California Civil Code
and any other provision of law now or hereafter enacted,
adjudicated or sought to be adjudicated relating to the release
or waiver of unknown or unspecified claims are hereby
specifically and expressly released and waived. Each of the
parties understands that Section 1542 of the California Civil
Code provides that "[a] general release does not extend to claims
which the creditor does not know or suspect to exist in his favor
at the time of executing the release, which if known by him must
have materially affected his settlement with the debtor". For
purposes of this Release, each of the parties acknowledges and
agrees that it may be considered to be both a "creditor" and a
"debtor" for all purposes and with respect to all Claims it may
now know or suspect to exist within the meaning of Section 1542
of the California Civil Code and any other provision of law now
or hereafter enacted, adjudicated or sought to be adjudicated
relating to the release or waiver of unknown or unspecified
claims.
5. This Release may be executed in two or more
counterparts, each of which shall be deemed an original, but all
of which shall constitute one and the same instrument.
6. This Release shall be binding upon the parties
hereto and their successors and assigns. Each party hereto
represents and warrants that it owns or holds all Claims
described herein which are being released hereunder.
<PAGE> 97
7. This Release shall be governed in all respects,
including validity, interpretation and effect, by, and construed
and enforced under, the law of the State of New York, without
giving effect to the principles of conflict of laws thereof.
IN WITNESS WHEREOF, the parties hereto have duly
authorized and executed this Release as of the date first above
written.
COMMERCIAL FEDERAL INVESTMENT
CORPORATION,
by
Name:
Title:
THE FIRST NATIONAL BANK OF BOSTON, as
Owner Trustee,
by
Name:
Title:
LASALLE NATIONAL BANK, as Successor
Indenture Trustee,
by
Name:
Title:
HARRIS TRUST AND SAVINGS BANK, as
Successor Indenture Trustee,
by
Name:
Title:
<PAGE> 98
ANNEX E
TOLLING AGREEMENT
This Tolling Agreement is made and entered into as of
November , 1993 by and among EL PASO ELECTRIC COMPANY, a Texas
corporation ("EPE"), COMMERCIAL FEDERAL INVESTMENT CORPORATION, a
Nebraska corporation (the "Owner Participant"), THE FIRST
NATIONAL BANK OF BOSTON (in its individual capacity, "FNBB"), as
trustee under a trust agreement with the Owner Participant (the
"Owner Trustee" and, collectively as trustee under trust
agreements with all the owner participants, the "Owner
Trustees"), HARRIS TRUST AND SAVINGS BANK, as successor trustee
under indentures with certain of the owner trustees, and LASALLE
NATIONAL BANK, as Successor Trustee under indentures with certain
of the Owner Trustees (collectively, the "Successor Indenture
Trustees").
RECITALS
A. EPE is the debtor in a case pending under Chapter
11 of Title 11 of the United States Code (the "Bankruptcy Code")
in the United States Bankruptcy Court for the Western District of
Texas (the "Bankruptcy Court"), which case has been assigned Case
No. 92-10148-FM (the "EPE Chapter 11 Case").
B. EPE, the Owner Participant and the Owner Trustee
are parties to various agreements, documents and instruments that
evidence or relate to the sale and leaseback by EPE, in separate
transactions with the Owner Participants and Owner Trustees, of
EPE's entire undivided interest in Unit 2 of the Palo Verde
Nuclear Generating Station ("Palo Verde") and approximately 39.5%
of EPE's undivided interest in Unit 3 of Palo Verde and certain
common plant and other related assets.
C. FNBB, in its capacity as Owner Trustee for each of
the Owner Participants (other than DBP Corp.), DBP Corp. and the
Successor Indenture Trustees have filed proofs of claim in the
EPE Chapter 11 Case (the "Proofs of Claim").
D. On September 9, 1992, EPE commenced an adversary
proceeding against FNBB, in its capacity as Owner Trustee for
each of the Owner Participants (other than DBP Corp.), DBP Corp.
and the Successor Indenture Trustees (the "Palo Verde Lease
Litigation Defendants"), which case has been assigned Adversary
Proceeding No. 92-1285-FM (the "Palo Verde Lease Litigation").
The Proofs of Claim, and any objections by EPE thereto, have been
consolidated into the Palo Verde Lease Litigation. In addition,
in discussions between the parties, certain issues have been
raised surrounding the presentment and drawings by the Owner
Participants under certain letters of credit issued as part of
the aforesaid sale and leaseback transactions in the approximate
aggregate amount of $288.4 million (the "Palo Verde Letters of
Credit"). Such issues, including any claims described in
<PAGE> 99
disclosure statements and plans of reorganization filed by EPE in
the EPE Chapter 11 Case with regard to the Owner Participants and
the Palo Verde Letters of Credit, are herein called the "Owner
Participant Claims".
E. The Palo Verde Lease Litigation Defendants have
asserted various defenses, contentions and counterclaims (the
"Palo Verde Defendants' Claims"). In addition, with regard to the
Owner Participant Claims, the Owner Participants contend that
their actions surrounding the presentment and drawings of the
Palo Verde Letters of Credit, including such drawings, were
proper as a matter of law (the "Letter of Credit Defenses").
F. The Third Amended Plan contemplates, under certain
circumstances, a release of all claims relating to the Palo Verde
Lease Litigation, the Palo Verde Defendants' Claims, the Owner
Participant Claims, and the Letter of Credit Defenses, which
release would be subject to and effective only upon the Effective
Date.
G. The parties have entered into a settlement
agreement of even date herewith (the "Settlement Agreement"),
which will result in a mutual release (such release to become
effective only on the occurrence of the Effective Date) of all
Claims between EPE, on one hand, and the Owner Participant and
Owner Trustee, on the other hand, and for the cessation of
litigation in the interim.
H. This Tolling Agreement is intended to ensure that
the parties' claims against one another (and defenses thereto)
are preserved to the fullest extent pending the occurrence of the
Effective Date and the execution, delivery and effectiveness of
the mutual releases contemplated under the Settlement Agreement,
and that the parties are not prejudiced by the deferral of
litigation in accordance with the Settlement Agreement.
IN CONSIDERATION OF THE MUTUAL AGREEMENTS CONTAINED
HEREIN, and other good and valuable consideration, the receipt of
which is hereby acknowledged, IT IS HEREBY AGREED by and between
the parties hereto as follows:
1. All capitalized terms used but not otherwise
defined herein shall have the meanings assigned to such terms in
the Settlement Agreement.
2. All potential causes of action and claims which
EPE or the Lease Debt Creditors could have asserted as of the
date hereof against the Owner Participant or against the Owner
Trustee (and any defenses thereto) shall survive until the
termination of this Tolling Agreement, and no such cause of
action or claim (or defenses thereto) shall in any manner be
extinguished or impaired in any manner by reason of any
applicable statute of limitations, contractual restriction,
equitable doctrine or other basis under federal or state law,
<PAGE> 100
including section 108 of the Bankruptcy Code, which may limit
EPE's ability to commence or prosecute such cause of action or
claim (or any Owner Participant's or Owner Trustee's defenses
thereto) by reason of a lapse of time, inaction or failure to
commence an action or give any notice as of a particular date
during the term of this Agreement; provided, however, that
nothing herein shall revive, to the extent barred or otherwise
non-actionable, any cause of action or claim (including any right
to relief or element of damage thereof) (or any defense) that is
now barred or otherwise non-actionable.
3. All potential causes of action and claims which
the Owner Participant or the Owner Trustee could have asserted as
of the date hereof against EPE or the Lease Debt Creditors (and
any defenses thereto) shall survive until the termination of this
Tolling Agreement, and no such cause of action or claim (or
defenses thereto) shall in any manner be extinguished or impaired
in any manner by reason of any applicable statute of limitations,
contractual restriction, equitable doctrine or other basis under
federal or state law, including section 108 or section 362 of the
Bankruptcy Code, which may limit the ability of the Owner
Participant or Owner Trustee to commence or prosecute such cause
of action or claim (or any Owner Participant's or Owner Trustee's
defenses thereto) by reason of a lapse of time, inaction, or
failure to commence an action or give any notice as of a
particular date during the term of this Agreement; provided,
however, that nothing herein shall revive, to the extent barred
or otherwise non-actionable, any cause of action or claim
(including any right to relief or element of damage thereof) (or
any defense) that is now barred or otherwise non- actionable.
4. All potential causes of action and claims which
EPE could have asserted as of the date hereof against the Lease
Debt Creditors (and any defenses thereto) shall survive until the
termination of this Tolling Agreement, and no such cause of
action or claim (or defenses thereto) shall in any manner be
extinguished or impaired in any manner by reason of any
applicable statute of limitations, contractual restriction,
equitable doctrine or other basis under federal or state law,
including section 108 of the Bankruptcy Code, which may limit the
ability of EPE to commence or prosecute such cause of action or
claim (or any Lease Debt Creditor's defenses thereto) by reason
of a lapse of time, inaction, or failure to commence an action or
give any notice as of a particular date during the term of this
Agreement; provided, however, that nothing herein shall revive,
to the extent barred or otherwise non-actionable, any cause of
action or claim (including any right to relief or element of
damage thereof) (or any defense) that is now barred or otherwise
non-actionable.
5. This Tolling Agreement shall terminate, unless
extended by the parties hereto, on the earliest of (a) 30 days
after written notice by EPE or the Owner Participant of
<PAGE> 101
termination of the Settlement Agreement, (b) the Effective Date
or (c) September 15, 1997.
6. This Tolling Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
instrument.
7. This Tolling Agreement shall be governed in all
respects, including validity, interpretation and effect, by, and
construed and enforced under, the law of the state of New York,
without giving effect to the principles of conflict of laws
thereof.
8. Each party hereto covenants that it has the
requisite authority to enter into and be bound by the terms of
this Tolling Agreement.
9. This Tolling Agreement shall be binding upon the
parties hereto and their successors and assigns.
10. This Tolling Agreement shall not be binding unless
similar tolling agreements are executed and delivered by each of
the Owner Participants and the Successor Indenture Trustees.
11. This Tolling Agreement may not be modified in
whole or in part except pursuant to a written agreement among all
of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have duly
authorized and executed this Tolling Agreement as of the date
first above written.
EL PASO ELECTRIC COMPANY,
by
Name:
Title:
COMMERCIAL FEDERAL INVESTMENT
CORPORATION,
by
Name:
Title:
<PAGE> 102
THE FIRST NATIONAL BANK OF BOSTON,
as Owner Trustee,
by
Name:
Title:
HARRIS TRUST AND SAVINGS BANK, as
Successor Trustee and on behalf of the
Lease Debt Creditors for Unit 3
by
Name:
Title:
LASALLE NATIONAL BANK, as Successor
Trustee and on behalf of the Lease Debt
Creditors for Unit 2
by
Name:
Title:
<PAGE> 103
ANNEX F
EXISTING CLAIMS
1. Claims by the State of Arizona regarding
transaction privilege taxes.
2. Unpaid fees and expenses of the Owner Trustee
through and including the Effective Date.
<PAGE> 104
ANNEX G
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 105
SETTLEMENT AGREEMENT
BETWEEN
EL PASO ELECTRIC COMPANY
AND
EPC CORPORATION
November 1993
Michael Paul Kirschner, Mediator
Hastie & Kirschner
Attorneys and Counselors at Law
3000 First Oklahoma Tower * 210 West Park Avenue
Oklahoma City, Oklahoma 73102-5673
Telephone (405) 239-6404
Telecopier (405) 239-6403
<PAGE> 106
SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT is entered into as of
November 15, 1993, between EL PASO ELECTRIC COMPANY, a Texas
corporation, debtor and debtor in possession ("EPE"), and EPC
CORPORATION, a Delaware corporation (the "Owner Participant").
IN CONSIDERATION OF THE MUTUAL AGREEMENTS CONTAINED
HEREIN, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, IT IS HEREBY
AGREED by and between the parties hereto as follows:
DEFINITIONS
1. As used herein, the following terms shall have
the following meanings:
"Bankruptcy Court" shall mean the United States
Bankruptcy Court for the Western District of Texas, or such other
court as shall have original jurisdiction over the Case.
"Case" shall mean the proceeding filed by EPE under
Title 11 of the United States Code and bearing Bankruptcy Court
case number 92-10148-FM.
"Claims" shall have the meaning assigned to such term
in the Release.
"Confirmation Order" shall mean an order confirming
an EPE Plan.
"CSW" shall mean Central and South West Corporation.
"Effective Date" shall mean the date on which an EPE
Plan incorporating, except in immaterial respects, the terms and
conditions of this Settlement Agreement shall become effective
according to such EPE Plan's terms.
"EPE Group" shall mean EPE and (i) each and every
person who controls EPE, is controlled by EPE or is under common
control with EPE (the "EPE Affiliated Group"); (ii) any
predecessor, successor or assign of any person included within
the EPE Affiliated Group; (iii) any Chapter 7 or Chapter 11
Trustee appointed by the Bankruptcy Court or any other court with
regard to any person included within the EPE Affiliated Group;
(iv) the respective present and former agents, directors,
officers, employees, advisors, attorneys and representatives of
any person included within the EPE Affiliated Group; (v) the
respective shareholders and creditors of the EPE Affiliated
Group; and (vi) in the case of any individuals falling within the
scope of (iv) or (v), their respective heirs, receivers,
<PAGE> 107
conservators, beneficiaries, executors, administrators,
successors and assigns. The term EPE Group shall not include
CSW.
"EPE Plan" shall mean (i) the Modified Third Amended
Plan of Reorganization, filed on September 15, 1993 in the Case
(the "Third Amended Plan"), (ii) any other plan of reorganization
filed in the Case pursuant to which EPE, with its consent, is to
be acquired by CSW or a CSW affiliate, by merger or otherwise,
and (iii) any other plan of reorganization filed in the Case
supported by or acceptable to EPE if, within 10 days of the
filing thereof, EPE fails to provide written notice to the Owner
Participant that such plan does not constitute an EPE Plan for
purposes of this Settlement Agreement.
"Excepted Payments" shall have the meaning assigned
to such Term in Appendix A to the Participation Agreement.
"Facility Lease" shall have the meaning assigned to
such term in Appendix A to the Participation Agreement.
"Lease Debt Creditors" shall mean Harris Trust and
Savings Bank, as Successor Trustee for those certain $200,000,000
Secured Lease Obligation Bonds Series 1988, and any holders of
such bonds, and LaSalle National Bank, as Successor Trustee for
those certain $396,328,000 Lease Obligation Bonds Series 1986 and
those certain $146,305,000 Lease Obligation Bonds Series 1986A
(the Successor Trustees, collectively, the "Successor Indenture
Trustees"), and any holders of such bonds.
"Owner Participant Group" shall mean the Owner
Participant and (i) each and every person who controls the Owner
Participant, is controlled by the Owner Participant or is under
common control with the Owner Participant (the "Owner Participant
Affiliated Group"); (ii) any predecessor, successor or assign of
any person included within the Owner Participant Affiliated
Group; (iii) the respective present and former agents, directors,
officers, employees, advisors, attorneys and representatives of
any person included within the Owner Participant Affiliated
Group; (iv) the respective shareholders and creditors of the
Owner Participant Affiliated Group; (v) any Chapter 7 or Chapter
11 Trustee appointed by a court with regard to any person
included within the Owner Participant Affiliated Group; and (vi)
in the case of any individuals falling within the scope of (iii)
or (iv), their respective heirs, receivers, conservators,
beneficiaries, executors, administrators, successors and assigns.
"Owner Trustee" shall mean The First National Bank of
Boston ("FNBB"), as trustee under a trust agreement with the
Owner Participant.
<PAGE> 108
"Palo Verde Leases" shall mean, collectively, the
Facility Lease and the facility leases, as amended, between EPE
and FNBB (as trustee under separate trust agreements with the
other owner participants) with respect to the Arizona Nuclear
Power Project.
"Palo Verde Lease Litigation" shall mean an adversary
proceeding commenced on September 9, 1992 by EPE against FNBB, in
FNBB's capacity as Owner Trustee for each of the owner
participants (other than DBP Corp.), DBP Corp. and the Successor
Indenture Trustees, which case has been assigned Adversary
Proceeding No. 92- 1285-FM by the Bankruptcy Court.
"Palo Verde Letters of Credit" shall have the meaning
assigned to such term in the Release.
"Participation Agreement" shall mean the
Participation Agreement, as amended, among EPE, the Owner
Participant and others.
"Real Property Interest" shall have the meaning
assigned to such term in Appendix A to the Participation
Agreement.
"Release" shall mean the release in the form of Annex
A hereto.
"Settlement Agreement" shall mean this Settlement
Agreement, including all Annexes hereto.
"Transaction Documents" shall have the meaning assigned
to such term in Appendix A to the Participation Agreement.
"Trust Estate" shall have the meaning assigned to
such term in Appendix A to the Participation Agreement.
"Undivided Interest" shall have the meaning assigned
to such term in Appendix A to the Participation Agreement.
RIGHTS AND OBLIGATIONS PRIOR TO THE EFFECTIVE DATE
2. EPE's plan of reorganization will provide for
the terms and conditions set forth below (and EPE will not file,
pursue or support any plan that contains provisions inconsistent
with, or that does not embody the terms and conditions of, this
Settlement Agreement):
a Claims of the EPE Group, on the one hand, and the
Owner Participant Group and the Owner Trustee, on
the other hand, against one another shall be
mutually released pursuant to the Release (to the
extent provided therein), which Release will be
executed, delivered, and effective solely as of
the Effective Date.
<PAGE> 109
b Other than as provided in this Settlement
Agreement, the Owner Participant and the Owner
Trustee shall receive no distribution, recovery or
other consideration under an EPE Plan except that,
within 10 days of the date of entry of the
Confirmation Order (but not later than December
31, 1993 if such date occurs in 1993), EPE will
pay all fees, costs and expenses incurred by or on
behalf of the Owner Participant or Owner Trustee
from and after August 1, 1993 through and
including the date of entry of the Confirmation
Order in connection with the Palo Verde
Litigation, the Case, the Participation Agreement
or the transactions contemplated hereby or by any
of the foregoing (the amount of which as of
October 1, 1993 is $15,059.25).
c As of the Effective Date, (i) all right, title and
interest of the Owner Participant in the Trust
Estate and certain Excepted Payments shall be
conveyed to EPE or its designee, if paragraph 12.a
hereof is applicable, or (ii) if paragraph 12.b
hereof is applicable, there will be a conveyance
or transfer of the Trust Estate to EPE or EPE's
designee.
d As of the Effective Date, the receipt of any value
or consideration under any EPE Plan shall be
deemed to be (i) a release of the Owner
Participant and Owner Trustee by such recipient of
all claims related to the Palo Verde Leases, the
Palo Verde Letters of Credit, the documents listed
in Schedule A to the Third Amended Plan, and the
transactions contemplated hereby and thereby, and
(ii) a release of such recipient by the Owner
Trustee and Owner Participant of all such claims.
EPE shall defend such provisions against any
objections thereto. If the deemed release
described in this paragraph is not approved by the
Bankruptcy Court as to third parties other than
the Lease Debt Creditors and the issuers of or
participants in the Palo Verde Letters of Credit,
EPE may modify the EPE Plan accordingly as long as
the Confirmation Order provides that the deemed
release is effective as to the Lease Debt
Creditors and the issuers of and participants in
the Palo Verde Letters of Credit and that, at the
Effective Date, all third party claims against the
Owner Participant and Owner Trustee which are
derivative of the claims of EPE will be
extinguished.
<PAGE> 110
3. The Owner Participant and Southwestern Public
Service Company ("SPS") have entered into a letter of
understanding dated July 13, 1993. The Owner Participant will
not take any position as to the termination of EPE's exclusivity
through the filing of additional pleadings in the Case or by the
making of any statement in the Bankruptcy Court in support of any
motion to terminate EPE's exclusivity, unless EPE, in
contravention of its agreement not to do so, files, pursues or
supports confirmation of a plan of reorganization which does not
incorporate the terms of this Settlement Agreement or which
materially adversely affects the Owner Participant or any of its
affiliates.
4. The Owner Participant will vote to accept and/or
will cause the Owner Trustee to vote to accept the Third Amended
Plan and will vote to accept and/or cause the Owner Trustee to
vote to accept any other EPE Plan that is (x) consistent with and
incorporates the terms of this Settlement Agreement and (y) does
not materially adversely affect the Owner Participant or any of
its affiliates. The Owner Participant will not vote to reject or
object to, and will cause the Owner Trustee not to vote to reject
or object to, the Third Amended Plan, and will not vote to reject
or object to, and will cause the Owner Trustee not to vote to
reject or object to, any other EPE Plan that (i) is consistent
with and incorporates the terms of this Settlement Agreement and
(ii) does not materially adversely affect the Owner Participant
or any of its affiliates. Nothing in this Settlement Agreement
will limit the right of the Owner Participant or Owner Trustee or
any member of the Owner Participant Group to vote to accept or
reject or object to (A) any plan that is (a) inconsistent with or
does not incorporate the terms of this Settlement Agreement or
(b) materially adversely affects the Owner Participant or any of
its affiliates or (B) any plan other than an EPE Plan. For
purposes of this paragraph 4, it will be conclusively presumed
that an EPE Plan does not materially adversely affect the Owner
Participant or any of its affiliates if the Owner Participant
fails to provide EPE with written notice to the contrary within
20 days after receipt of such EPE Plan. EPE will not and the
Owner Participant will not, and will not direct the Owner Trustee
to, file any pleading in the Case that is contrary to or
inconsistent with the terms and conditions contained herein.
5. The Owner Participant agrees not to transfer,
prior to the Effective Date, any Claim against the EPE Group or
interest in the Facility Lease to anyone other than a person that
has agreed to be bound by this Settlement Agreement; provided,
however, that upon any withdrawal, termination or revocation of
the Third Amended Plan, the Owner Participant may thereafter
transfer any Claim against the EPE Group or interest in the
Facility Lease to anyone whether or not such person agrees to be
bound by this Settlement Agreement, and if such person has not
agreed to be so bound, this Settlement Agreement shall
automatically terminate without further action by any party
<PAGE> 111
hereto. EPE agrees not to transfer, prior to the Effective Date,
any Claim against the Owner Participant Group or Owner Trustee or
interest in the Facility Lease.
6. EPE shall disclose the contents of this
Settlement Agreement, pursuant to Section 3.14B.5. of the Third
Amended Plan. Between the date of entry of the Confirmation
Order and the Effective Date, the Owner Participant shall have
all of the rights accorded to the Oversight Committee (as defined
in the Third Amended Plan) pursuant to Section 5.1.E of the Third
Amended Plan.
7. Until the Effective Date occurs, EPE will not
pursue the Palo Verde Lease Litigation or commence any litigation
or otherwise file any Claim against the Owner Participant or
Owner Trustee and EPE will oppose any motion or other action by
any other person to pursue the Palo Verde Lease Litigation or
commence or file any such litigation or Claim or intervene
therein; provided, however, that nothing herein shall preclude
EPE from (i) taking steps which EPE reasonably deems necessary to
preserve its Claims and its ability to collect on such Claims, if
successful, and to protect EPE's rights in the event of the
proposed dissolution of the Owner Participant or Owner Trustee in
a bankruptcy or insolvency proceeding of the Owner Participant or
Owner Trustee (and EPE hereby agrees that EPE will not file nor
participate in the filing of any involuntary bankruptcy or
insolvency petition against the Owner Participant or Owner
Trustee) or (ii) seeking discovery, at EPE's own expense, against
the Owner Participant or Owner Trustee in connection with a plan
of reorganization proposed by or on behalf of SPS, or any other
plan of reorganization other than an EPE Plan, to the extent EPE
is otherwise entitled to request such discovery from the
Bankruptcy Court.
8. Until the Effective Date occurs, the Owner
Participant will not, and will not direct the Owner Trustee to,
pursue the Palo Verde Lease Litigation or commence any litigation
or file any additional Claim against EPE and at EPE's request,
the Owner Participant will, and/or will cause the Owner Trustee
to, file a pleading which will support EPE's opposition to any
motion or other action by any other person to pursue the Palo
Verde Lease Litigation or commence or file any such litigation or
Claim or intervene therein; provided, however, that nothing
herein shall preclude the Owner Participant or Owner Trustee from
(i) taking steps which the Owner Participant or Owner Trustee, as
the case may be, reasonably deems necessary to preserve the
Claims of such Owner Participant or Owner Trustee and to protect
the rights of such Owner Participant or Owner Trustee in the
event of the proposed dissolution of EPE or (ii) opposing EPE's
pursuit of any discovery referred to in paragraph 7 hereof.
<PAGE> 112
9. Within 10 days after the filing of any plan, EPE
will give the Owner Participant written notice of whether such
plan constitutes an EPE Plan referred to in clause (iii) of the
definition thereof. In the absence of such notice, such plan
shall be deemed to be an EPE Plan.
10. Prior to the Effective Date, EPE shall seek and
obtain all governmental approvals necessary to effect the
transactions contemplated hereby. The Owner Participant agrees
to cooperate with EPE, at EPE's expense, in obtaining such
approvals prior to the Effective Date.
11. Concurrently with the execution and delivery of
this Settlement Agreement, the Owner Participant, the Owner
Trustee, EPE and the Successor Indenture Trustees shall execute
and deliver a Tolling Agreement in the form of Annex E hereto.
RIGHTS AND OBLIGATIONS ON AND AFTER THE EFFECTIVE DATE
12. Subject to the satisfaction of the terms and
conditions contained in this Settlement Agreement, including
paragraph 13, on or as of the Effective Date:
a The Owner Participant will, subject to paragraph
12.b, transfer to EPE or, if EPE so requests,
EPE's designee, all of the Owner Participant's
right, title and interest in the Trust Estate and
certain Excepted Payments by the execution and
delivery of a Bill of Sale and Assignment
substantially in the form of Annex B hereto.
b At the request and expense of EPE, the Owner
Participant will, at the election of EPE, in lieu
of or in addition to the transfer referred to in
paragraph 12.a, (i) consent to the conveyance or
transfer of the Trust Estate to EPE or, if EPE so
requests, EPE's designee, and (ii) direct the
Owner Trustee to effect such conveyance or
transfer, which obligations shall be subject to
(a) EPE having obtained the required consent, if
any, of the applicable Successor Indenture Trustee
or a binding order (which has not been stayed) of
a court of competent jurisdiction effectively
overriding the requirement, if any, of such
consent, (b) such conveyance and transfer
complying with applicable law and third party
rights, if any, or EPE having obtained a binding
order (which has not been stayed) of a court of
competent jurisdiction effectively overriding any
requirement of such compliance, and (c) EPE having
provided such indemnities to the Owner Participant
and the Owner Trustee as either of them shall
<PAGE> 113
reasonably request regarding the conveyance or
transfer set forth in this paragraph 12.b.
c The parties hereto and the Owner Trustee shall
execute and deliver the Release.
d Reorganized EPE shall deliver to the Owner
Participant on the Effective Date an executed
letter in the form of Annex G hereto. The form and
contents of Annex G shall not be disclosed prior
to the Effective Date to any person or entity,
except that a copy thereof shall be provided to
the Bankruptcy Court under seal and to the
Successor Indenture Trustee (after execution
thereof). In the event the Effective Date does not
occur, neither the Owner Participant nor any other
person or entity shall refer to or otherwise
disclose the contents of Annex G, or its inclusion
in this Settlement Agreement, for any purpose.
e If paragraph 12.a is applicable, EPE or its
designee shall become the "Owner Participant"
under the documents described in Schedule A to the
Third Amended Plan for all purposes, and, if
paragraph 12.b is applicable, such documents shall
be terminated, altered, or amended in such manner
as the parties hereto shall agree, consistent with
the terms of this Settlement Agreement.
f Section 17 of the Participation Agreement shall
continue in full force and effect, but only with
respect to EPE's obligations under the first and
third sentences of the first paragraph and the
entire third paragraph of Section 10(b)(3)(xi),
and the entirety of Sections 13 (insofar as
indemnification is sought for Claims (as defined
in the Participation Agreement) asserted against
the Owner Participant, the Owner Trustee, the
First National Bank of Boston (in its individual
capacity), the Trust (as defined in the
Participation Agreement), the Trust Estate, or the
Lease Indenture Estate (as defined in the
Participation Agreement), or any Affiliate (as
defined in the Participation Agreement),
successor, assign, agent, officer, director or
employee of any of the foregoing, by a person
other than the Owner Participant, the Owner
Trustee or any successor or assign thereof) and 16
thereof (it being understood that the exclusions
from the general tax indemnity provisions of
Section 13(b) of the Participation Agreement with
respect to a "voluntary transfer" and with respect
to a "transferee" or a "subsequent transferee"
<PAGE> 114
shall not apply to the transactions contemplated
by this Settlement Agreement); provided, however,
that in order to prevent a double payment with
respect to a Loss or Losses (as defined in the
Participation Agreement), the aggregate amount of
such payments shall be reduced (without
duplication) by the appropriate portion of the
amount drawn by the Owner Participant under the
corresponding Palo Verde Letter of Credit to the
extent such portion is attributable (under
calculations performed in accordance with industry
practice) to the same adverse tax consequences
constituting such Loss or Losses. It is understood
that EPE's obligations under this paragraph 12.f
shall not extend to the payment of Basic Rent,
Fair Market Rental Value, Fair Market Sales Value,
Casualty Value, Special Casualty Value,
Termination Value, Enhanced Casualty Value or
Special Termination Value (as such terms are
defined in the Transaction Documents and
collectively referred to herein as "Scheduled
Amounts") or any amounts measured by Scheduled
Amounts or Supplemental Rent (to the extent
attributable to Scheduled Amounts or Excepted
Payments which are Assigned Property (as defined
in the Bill of Sale and Assignment attached hereto
as Annex B)). Notwithstanding anything contained
in this Settlement Agreement or the Release, EPE
shall continue to comply with Section 10(a)(2)(ii)
of the Facility Lease except that any notices or
certificates described in Section 10(a)(1)(i)(F)
of the Facility Lease (as such section relates to
Section 10(a)(2)(ii)) must be received by the
Owner Participant in order to be effective against
the Owner Participant but need not be received by
or delivered to the Indenture Trustee.
g EPE will pay any balance due of the amounts
described in paragraph 26 hereof.
13. The terms and conditions referred to in paragraph
12 include the following:
a The Confirmation Order shall (i) provide that an
Order of Dismissal with Prejudice in the form
attached hereto as Annex C shall be entered on or
after the Effective Date and a copy provided to
the Owner Participant and to the Successor
Indenture Trustee and (ii) comply with the last
sentence of paragraph 2.d, if applicable;
<PAGE> 115
b The Owner Participant, the Owner Trustee and the
Successor Indenture Trustees shall have executed
and delivered mutual releases substantially in the
form attached hereto as Annex D and an order of
the Bankruptcy Court complying with either the
first or the last sentence of paragraph 2.d shall
be in full force and effect and shall not have
been stayed;
c This Settlement Agreement shall be in full force
and effect and neither the Owner Participant nor
EPE shall be in default of any term or condition
hereof;
d All governmental approvals, if any, necessary to
effect the transactions contemplated hereby shall
have been obtained and be in full force and
effect;
e All consents of third parties, if any, necessary
to effect the actions contemplated above shall
have been obtained and be in full force and
effect;
f All documentation for the transactions
contemplated by this paragraph 13 and paragraphs
8, 12.a, 12.b, 12.e and 26 shall be reasonably
satisfactory in form and substance to the Owner
Participant and EPE; and
g The Owner Participant and the Owner Trustee shall
have received all amounts, if any, payable
pursuant to paragraphs 2.b, 18 and 26 hereof.
Conditions d and e above may be satisfied by the entry of a
binding order (which has not been stayed) of a court of competent
jurisdiction effectively overriding the requirement, if any, of
obtaining any third party consents or governmental approvals
referred to in such conditions.
TERMINATION AND EFFECTIVENESS
14. This Settlement Agreement may be terminated (a)
on 30 days' written notice by either EPE or the Owner Participant
if no EPE Plan referred to in clause (i) or (ii) of the
definition thereof is being pursued and, in the case of
termination by EPE, EPE certifies in the termination notice that
no EPE Plan referred to in clause (i) or (ii) of the definition
thereof is then contemplated by EPE, or (b) on 5 days' written
notice by either the Owner Participant or EPE if EPE or the Owner
Participant, respectively, fails to comply with any term or
condition of this Settlement Agreement and does not cure such
failure within such 5 days or (c) on 5 days' written notice from
EPE that a settlement agreement with one of the other owner
<PAGE> 116
participants with an interest in Unit 2 of the Palo Verde Nuclear
Generating Station has terminated pursuant to paragraph 5 of such
settlement agreement and that EPE is terminating all of the
settlement agreements with each of the owner participants with an
interest in such Unit.
15. This Settlement Agreement shall not be binding
upon any of the parties hereto until EPE and all of the owner
participants execute settlement agreements in a form similar to
this Settlement Agreement. This Settlement Agreement shall
terminate automatically without further action by any party
hereto if the Bankruptcy Court in the Case declines to approve
the settlement contained in this Settlement Agreement or any such
other settlement agreement.
16. Upon any termination of this Settlement
Agreement, all obligations of the parties hereto (except for the
last 2 sentences of paragraph 12.d) shall cease.
REPRESENTATIONS AND WARRANTIES
17. EPE represents and warrants that no modification
to the merger agreement between EPE and CSW is necessary to
effectuate or consummate this Settlement Agreement.
18. Each party hereto represents and warrants that
it owns and has not transferred any of the Claims described in
the Release as being released by it or any of its interests in
the Facility Lease. Except as set forth in Annex F hereto, to
the knowledge of the Owner Participant, there exists no basis
upon which the Owner Participant, as of the date of this
Settlement Agreement, may assert any Claims against EPE, other
than any such Claims which will be extinguished pursuant to the
Release. To the knowledge of EPE, there exists no basis upon
which EPE, as of the date of this Settlement Agreement, may
assert any Claim against the Owner Participant, other than any
such Claims which will be extinguished pursuant to the Release.
EPE shall pay all amounts due with respect to the items set forth
on Annex F irrespective of whether such amounts are already
incurred, invoiced or assessed or arise hereafter.
19. Each party hereto agrees that the Third Amended
Plan (i) complies with the terms and conditions of this
Settlement Agreement, and (ii) does not materially adversely
affect the Owner Participant or any of its affiliates for
purposes of paragraph 4 hereof.
MISCELLANEOUS
20. Nothing in this Settlement Agreement shall
operate as an admission of liability or admission as to any issue
by any party, and this Settlement Agreement (and all
negotiations, discussions and drafts relating thereto) shall be
<PAGE> 117
subject to the provisions of Federal Rule of Evidence 408 and
comparable provisions of state law.
21. This Settlement Agreement may be executed in two
or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same
instrument.
22. This Settlement Agreement shall be governed in
all respects including validity, interpretation and effect, by,
and construed and enforced under, the law of the State of New
York, without giving effect to the principles of conflicts of law
thereof.
23. This Settlement Agreement is enforceable only by
the parties hereto and the Owner Trustee; provided, however,
that, after the Effective Date, any person who is a beneficiary
of a release (including the Release) contemplated by this
Settlement Agreement shall be entitled to enforce the provisions
of such release.
24. In addition to all other rights and remedies
provided in this Settlement Agreement, EPE and the Owner
Participant may (subject to any restrictions contained in this
Settlement Agreement) exercise any other right or remedy that may
be available under applicable law or proceed (or the Owner
Trustee may proceed) by appropriate court action to enforce the
terms hereof. The failure or delay of EPE or the Owner
Participant in exercising any right granted hereunder upon the
occurrence of any of the contingencies set forth herein shall not
constitute a waiver of any such right upon the continuance or
recurrence of any such contingencies or similar contingencies and
any single or partial exercise of any particular right by EPE or
the Owner Participant shall not exhaust the same or constitute a
waiver of any other right provided herein. No remedy under this
Settlement Agreement is intended to be exclusive, but each shall
be cumulative and in addition to any other remedy provided
hereunder or otherwise available to EPE or the Owner Participant
at law or in equity (subject to any restrictions contained in
this Settlement Agreement). Notwithstanding the foregoing, the
parties agree that in the event of a breach of this Settlement
Agreement, money damages will not be adequate to compensate the
non-breaching party, and, accordingly, either party or the Owner
Trustee may seek to specifically enforce the provisions of this
Settlement Agreement.
25. Except as otherwise specifically provided
herein, this Settlement Agreement shall be binding on all
successors and assigns of the parties hereto.
26. The parties shall cooperate with one another to
execute and deliver such other documents and to take such further
actions as shall be necessary or appropriate to effectuate the
<PAGE> 118
terms hereof; provided, however, that the Owner Participant and
the Owner Trustee shall each be reimbursed by EPE for its
reasonable expenses after the date of entry of the Confirmation
Order related to the execution and delivery of any such other
documents and the taking of any such further actions by the Owner
Participant or the Owner Trustee.
27. The descriptive headings of the paragraphs of
this Settlement Agreement are for convenience only and will not
be used in the construction of the content of this Settlement
Agreement.
28. Any notice required or permitted to be given by
any provision of this Settlement Agreement will be in writing and
will be deemed to have been given when delivered personally or by
facsimile, receipt confirmed, to the party designated to receive
such notice or on the date following the day sent by overnight
courier or on the 3rd business day after the same is sent by
certified mail, postage and charges prepaid, directed to the
following addresses or to such other additional addresses as any
party might designate by written notice to the other party:
El Paso Electric Company: El Paso Electric Company
Mills Building
303 North Oregon
El Paso, Texas 79901
Attention:
Chief Executive Officer
and Chairman of the Board
Facsimile: (915) 521-4754
With Copy to: Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: Shalom L. Kohn, Esq.
Facsimile: (312) 853-7312
With Copy to: Milbank, Tweed, Hadley & McCloy
One Chase Manhattan Plaza
New York, New York 10005
Attention: Joris M. Hogan, Esq.
Facsimile: (212) 530-5219
Owner Participant: EPC Corporation
%Chrysler Capital Corporation
225 High Ridge Road
Stamford, Connecticut 06905
Attention: Thomas Watson,
Manager-Investments
and Administration
Facsimile: (203) 975-3916
<PAGE> 119
With Copy to: Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Attention: Richard M. Allen,
Esq.
Facsimile: (212) 474-3700
Parties to this Settlement Agreement shall be
entitled to conclusively rely on any notice given in the
foregoing manner to the parties at the addresses reflected
above, unless and until a different address or facsimile
number is provided to all parties and persons listed above.
Rejection or refusal to accept, or inability to deliver
because of changed addresses or because no notice of changed
address was given, shall be deemed a receipt of such notice.
IN WITNESS WHEREOF, the parties hereto have duly
authorized and executed this Settlement Agreement on the date
first above written.
EL PASO ELECTRIC COMPANY,
by /s/
Name: David H. Wiggs, Jr.
Title:Chairman and CEO
EPC CORPORATION,
by /s/
Name:William S. Bishop
Title:President
Annex A: Form of Release and Agreement among EPE, Owner
Participant and Owner Trustee
Annex B: Form of Bill of Sale and Assignment
Annex C: Form of Order of Dismissal with Prejudice
Annex D: Form of Release and Agreement among Owner
Participant, Owner Trustee, and Successor Indenture
Trustees
Annex E: Form of Tolling Agreement
Annex F: Existing Claims
Annex G: Form of Letter re Causes of Action
<PAGE> 120
ANNEX A
RELEASE AND AGREEMENT
THIS RELEASE AND AGREEMENT (this "Release") is entered
into on , 199 , by and among EL PASO ELECTRIC COMPANY, a Texas
corporation, debtor and debtor in possession ("EPE"), EPC
CORPORATION, a Delaware corporation (the "Owner Participant" and,
collectively with each of the other owner participants
participating in the transactions described in recital B below,
the "Owner Participants"), and THE FIRST NATIONAL BANK OF BOSTON
(in its individual capacity, "FNBB"), as trustee under a trust
agreement with the Owner Participant (the "Owner Trustee" and,
collectively as trustee under trust agreements with the Owner
Participants, the "Owner Trustees").
RECITALS
A. EPE is the debtor in a case pending under Chapter 11
of Title 11 of the United States Code (the "Bankruptcy Code") in
the United States Bankruptcy Court for the Western District of
Texas (the "Bankruptcy Court"), which case has been assigned Case
No. 92-10148-FM (the "EPE Chapter 11 Case").
B. EPE, the Owner Participant and the Owner Trustee are
parties to various agreements, documents and instruments that
evidence or relate to the sale and leaseback by EPE, in separate
transactions with the Owner Participants and Owner Trustees, of
EPE's entire undivided interest in Unit 2 of the Palo Verde
Nuclear Generating Station ("Palo Verde") and approximately 39.5%
of EPE's undivided interest in Unit 3 of Palo Verde and certain
common plant and other related assets.
C. FNBB, in its capacity as Owner Trustee for each of
the Owner Participants (other than DBP Corp.), and DBP Corp.
filed proofs of claim in the EPE Chapter 11 Case (the "Proofs of
Claim").
D. On September 9, 1992, EPE commenced an adversary
proceeding against FNBB, in its capacity as Owner Trustee for
each of the Owner Participants (other than DBP Corp.), DBP Corp.
and the Successor Indenture Trustees (the "Palo Verde Lease
Litigation Defendants"), which case was assigned Adversary
Proceeding No. 92-1285-FM (the "Palo Verde Lease Litigation").
The Proofs of Claim, and any objections by EPE thereto, were
consolidated into the Palo Verde Lease Litigation. In addition,
in discussions between the parties, certain issues were raised
surrounding the presentment and drawings by the Owner
Participants under certain letters of credit issued as part of
the aforesaid sale and leaseback transactions in the approximate
aggregate amount of $288.4 million (the "Palo Verde Letters of
Credit"). Such issues, including any claims described in
disclosure statements and plans of reorganization filed by EPE
in the EPE Chapter 11 Case with regard to the Owner Participants
<PAGE> 121
and the Palo Verde Letters of Credit, are herein called the
"Owner Participant Claims".
E. The Palo Verde Lease Litigation Defendants have
asserted various defenses, contentions and counterclaims (the
"Palo Verde Defendants' Claims"). In addition, with regard to the
Owner Participant Claims, the Owner Participants contend that
their actions surrounding the presentment and drawings of the
Palo Verde Letters of Credit, including such drawings, were
proper as a matter of law (the "Letter of Credit Defenses").
F. Pursuant to a Settlement Agreement dated as of
November 15, 1993 (including the Annexes thereto and paragraphs
12 and 13 thereof, the "Settlement Agreement"), EPE and the Owner
Participant (or a predecessor thereof) agreed to release certain
claims effective upon the Effective Date.
IN CONSIDERATION OF THE MUTUAL AGREEMENTS CONTAINED
HEREIN, and other good and valuable consideration, the receipt of
which is hereby acknowledged, IT IS HEREBY AGREED by and among
the parties hereto as follows:
AGREEMENTS
1. Except as otherwise defined herein, all capitalized
terms used herein shall have the meanings set forth in the
Settlement Agreement.
2. EPE, on behalf of itself and the EPE Group, hereby
forever releases and discharges the Owner Trustee and the Owner
Participant Group (the "Released Parties") from, and waives and
relinquishes, any and all claims, demands, debts, liabilities,
obligations, actions, causes of action, suits, sums of money,
accounts, reckonings, covenants, contracts, controversies,
agreements, promises and rights whatsoever, whenever arising,
known or unknown, suspected or unsuspected, contingent or fixed,
liquidated or unliquidated, matured or unmatured, in law, equity,
bankruptcy or otherwise (collectively, "Claims"), which EPE or
the EPE Group ever had, now has, or hereafter can, shall or may
have against any of the Released Parties for, upon, or by reason
of any matter, cause, transaction or thing whatsoever occurring
at any time prior to the Effective Date, including, without
limitation, any Claims which EPE or the EPE Group ever had, now
has, or hereafter can, shall or may have against any of the
Released Parties by reason of, arising from, relating to, or in
connection with the Palo Verde Lease Litigation, the Palo Verde
Letters of Credit, the Palo Verde Defendants' Claims, the Owner
Participant Claims, the documents listed on Schedule A to the
Third Amended Plan or the transactions contemplated by the
Participation Agreement, or based on or arising under 11 U.S.C.
Sections 502, 506, 507, 510, 544-553, inclusive, or any similar
provisions of federal or state law, and any right of indemnity,
contribution or subrogation arising therefrom or relating
<PAGE> 122
thereto; provided, however, that nothing herein shall release any
Claims of any member of the EPE Group (other than EPE) unrelated
to the Palo Verde Lease Litigation, the Palo Verde Letters of
Credit, the Palo Verde Defendants' Claims, the Owner Participant
Claims, or the transactions contemplated by the Settlement
Agreement or the Participation Agreement or the documents listed
on Schedule A to the Third Amended Plan; and provided, however
that nothing herein shall release any party from its obligations
set forth in, or that are assumed or continued pursuant to the
Settlement Agreement (including, without limitation, the Annexes
thereto and paragraphs 12 and 13 thereof).
3. The Owner Participant, on behalf of itself and the
Owner Participant Group, and the Owner Trustee hereby forever
release and discharge the EPE Group from, and waive and
relinquish, any and all Claims which the Owner Participant or the
Owner Participant Group or the Owner Trustee ever had, now has,
or hereafter can, shall or may have against the EPE Group for,
upon, or by reason of any matter, cause, transaction or thing
whatsoever occurring at any time prior to the Effective Date,
including, without limitation, any claims which the Owner
Participant or the Owner Participant Group or the Owner Trustee
ever had, now has, or hereafter can, shall or may have against
the EPE Group by reason of, arising from, relating to, or in
connection with the Palo Verde Lease Litigation, the Palo Verde
Letters of Credit, the Palo Verde Defendants' Claims, the Owner
Participant Claims, or the documents listed on Schedule A to the
Third Amended Plan or the transactions contemplated by the
Participation Agreement, or based on or arising under 11 U.S.C.
Sections 502, 506, 507, 510, 544- 553, inclusive, or any similar
provisions of federal or state law, and any right of indemnity,
contribution or subrogation arising therefrom or relating
thereto; excluding, however, from the foregoing any Claims of any
member of the Owner Participant Group (other than the Owner
Participant) or the Owner Trustee unrelated to the Palo Verde
Lease Litigation, the Palo Verde Letters of Credit, the Palo
Verde Defendants' Claims, the Owner Participant Claims, or the
transactions contemplated by the Settlement Agreement or the
Participation Agreement or the documents listed on Schedule A to
the Third Amended Plan; and provided, however that nothing herein
shall release any party from its obligations set forth in the
Settlement Agreement (including, without limitation, the Annexes
thereto and paragraphs 12 and 13 thereof).
4. Each of the parties hereby acknowledges and agrees
that all Claims under Section 1542 of the California Civil Code
and any other provision of law now or hereafter enacted,
adjudicated or sought to be adjudicated relating to the release
or waiver of unknown or unspecified claims are hereby
specifically and expressly released and waived. Each of the
parties understands that Section 1542 of the California Civil
Code provides that "[a] general release does not extend to claims
which the creditor does not know or suspect to exist in his favor
<PAGE> 123
at the time of executing the release, which if known by him must
have materially affected his settlement with the debtor". For
purposes of this Release, each of the parties acknowledges and
agrees that it may be considered to be both a "creditor" and a
"debtor" for all purposes and with respect to all Claims it may
now know or suspect to exist within the meaning of Section 1542
of the California Civil Code and any other provision of law now
or hereafter enacted, adjudicated or sought to be adjudicated
relating to the release or waiver of unknown or unspecified
claims.
5. This Release may be executed in two or more
counterparts, each of which shall be deemed an original, but all
of which shall constitute one and the same instrument.
6. This Release shall be binding upon the parties
hereto and their successors and assigns. Each party hereto
represents and warrants that it owns all the Claims described
herein which are being released hereunder and is duly authorized
to release such Claims.
7. This Release shall be governed in all respects,
including validity, interpretation and effect, by, and construed
and enforced under, the law of the State of New York, without
giving effect to the principles of conflict of laws thereof.
IN WITNESS WHEREOF, the parties hereto have duly
authorized and executed this Release as of the date first above
written.
EL PASO ELECTRIC COMPANY,
by
Name:
Title:
EPC CORPORATION,
by
Name:
Title:
THE FIRST NATIONAL BANK OF BOSTON,
as Owner Trustee,
by
Name:
Title:
<PAGE> 124
ANNEX B
BILL OF SALE AND ASSIGNMENT, dated as
of , 199 , from EPC
CORPORATION, a Delaware corporation (the
"Owner Participant"), to EL PASO ELECTRIC
COMPANY, a Texas corporation [1] ("El Paso").
WITNESSETH:
WHEREAS, the Owner Participant desires to convey and El
Paso desires to acquire the Assigned Property (as hereinafter
defined);
NOW, THEREFORE, in consideration of the premises and of
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
Definitions
For purposes hereof, capitalized terms used but not
otherwise defined herein shall have the meanings assigned to such
terms in the Participation Agreement dated as of December 1,
1986, among a predecessor of the Owner Participant, the First
National Bank of Boston, in its individual capacity and as Owner
Trustee, El Paso and others.
ARTICLE II
Assignment of Trust Estate
The Owner Participant does hereby grant, bargain,
convey, sell, assign, transfer and set over (collectively,
"transfer") to El Paso, on an as is, where is basis, free and
clear of Owner Participant's Liens but otherwise without
recourse, representation or warranty, express or implied, of any
nature whatsoever, all the Owner Participant's right, title and
interest in, to and under the Trust Estate and the Excepted
Payments, other than Excepted Payments referred to in clauses (i)
(to the extent such Supplemental Rent constitutes or is
attributable to payments to which the Owner Participant or any of
its affiliates (or the successors, assigns, agents, officers,
directors or employees of the Owner Participant) are entitled
under the Settlement Agreement dated as of November 15, 1993
between El Paso and the Owner Participant (or any predecessor
thereof)), (vi) and (vii) (and (viii) to the extent attributable
to the payments referred to in clauses (i), (vi) or (vii)) of the
- ---------------------------------
[1] El Paso may designate a different transferee.
<PAGE> 125
definition of "Excepted Payments" (the "Assigned Property"). The
disclaimer of representations and warranties set forth in the
second sentence of Section 6(b) of the Facility Lease is hereby
incorporated herein as fully as if set forth at this place. Such
transfer shall not alter the obligations of El Paso nor expand
the rights of the Owner Participant under the Settlement
Agreement dated as of November 15, 1993, between El Paso and the
Owner Participant (or a predecessor thereof) or the Release
referred to therein, whether or not such obligations or rights
would constitute an Excepted Payment.
ARTICLE III
Effectiveness of Transfer
The transfer of the Assigned Property shall become
effective without further action upon the execution and delivery
by the Owner Participant to El Paso of this Bill of Sale and
Assignment and the furnishing of a counterpart of this Bill of
Sale and Assignment to the Owner Trustee.
ARTICLE IV
Miscellaneous
SECTION 4.01. Successors and Assigns. This Bill of Sale
and Assignment shall be binding upon the Owner Participant and
its successors and shall inure to the benefit of El Paso and its
successors and assigns.
SECTION 4.02. Governing Law. This Bill of Sale and
Assignment shall be governed by and construed in accordance with
the law of the State of New York.
IN WITNESS WHEREOF, the undersigned has caused this
Bill of Sale and Assignment to be duly executed as of the day and
year first written above.
EPC CORPORATION,
by
Name:
Title:
<PAGE> 126
ANNEX C
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE WESTERN DISTRICT OF TEXAS
AUSTIN DIVISION
)
In re EL PASO ELECTRIC COMPANY, ) Case No. 92-10148-FM
) (Chapter 11)
Debtor. )
)
) Adversary Proceeding
EL PASO ELECTRIC COMPANY, ) No. 92-1285-FM
)
Plaintiff and Counterclaimant, )
)
v. ) Adversary Complaint
) seeking a declaration
THE FIRST NATIONAL BANK OF BOSTON, ) of rights arising
DBP CORP., LaSALLE NATIONAL BANK, ) from the rejection of
and HARRIS TRUST AND SAVINGS BANK, ) leases of the Palo
) Verde Nuclear
Defendants and Claimants. ) Generating Station
)
ORDER OF DISMISSAL WITH PREJUDICE
IT IS HEREBY ORDERED AND ADJUDGED, pursuant to the
Order of Confirmation in Case No. 92-10148-FM (Chapter 11), that
the Complaint and Counterclaims in the above-referenced action
are each hereby dismissed with prejudice.
IT IS SO ORDERED:
Dated: , 199
Austin, Texas
United States Bankruptcy Judge
<PAGE> 127
ANNEX D
RELEASE AND AGREEMENT
THIS RELEASE AND AGREEMENT (this "Release") is entered
into on _______ ___, 199__, by and among EPC CORPORATION, a
Delaware corporation (the "Owner Participant" and, collectively
with each of the other owner participants participating in the
transactions described in recital B below, the "Owner
Participants"), THE FIRST NATIONAL BANK OF BOSTON (in its
individual capacity, "FNBB"), as trustee under a trust agreement
with the Owner Participant (the "Owner Trustee" and, collectively
as trustee under trust agreements with the Owner Participants,
the "Owner Trustees"), HARRIS TRUST AND SAVINGS BANK, as
Successor Trustee under indentures with certain of the Owner
Trustees, and LASALLE NATIONAL BANK, as Successor Trustee under
indentures with certain of the Owner Trustees (collectively, the
"Successor Indenture Trustees").
RECITALS
A. EPE is the debtor in a case pending under Chapter 11
of Title 11 of the United States Code (the "Bankruptcy Code") in
the United States Bankruptcy Court for the Western District of
Texas (the "Bankruptcy Court"), which case has been assigned Case
No. 92-10148-FM (the "EPE Chapter 11 Case").
B. EPE, the Owner Participant and the Owner Trustee are
parties to various agreements, documents and instruments that
evidence or relate to the sale and leaseback by EPE, in separate
transactions with the Owner Participants and Owner Trustees, of
EPE's entire undivided interest in Unit 2 of the Palo Verde
Nuclear Generating Station ("Palo Verde") and approximately 39.5%
of EPE's undivided interest in Unit 3 of Palo Verde and certain
common plant and other related assets.
C. FNBB, in its capacity as Owner Trustee for each of
the Owner Participants (other than DBP Corp.), DBP Corp. and the
Successor Indenture Trustees filed proofs of claim in the EPE
Chapter 11 Case (the "Proofs of Claim").
D. On September 9, 1992, EPE commenced an adversary
proceeding against FNBB, in its capacity as Owner Trustee for
each of the Owner Participants (other than DBP Corp.), DBP Corp.
and the Successor Indenture Trustees (the "Palo Verde Lease
Litigation Defendants"), which case was assigned Adversary
Proceeding No. 92-1285-FM (the "Palo Verde Lease Litigation").
The Proofs of Claim, and any objections by EPE thereto, were
consolidated into the Palo Verde Lease Litigation. In addition,
in discussions between the parties, certain issues were raised
surrounding the presentment and drawings by the Owner
Participants under certain letters of credit issued as part of
the aforesaid sale and leaseback transactions in the approximate
aggregate amount of $288.4 million (the "Palo Verde Letters of
<PAGE> 128
Credit"). Such issues, including any claims described in
disclosure statements and plans of reorganization filed by EPE in
the EPE Chapter 11 Case with regard to the Owner Participants and
the Palo Verde Letters of Credit, are herein called the "Owner
Participant Claims".
E. The Palo Verde Lease Litigation Defendants have
asserted various defenses, contentions and counterclaims (the
"Palo Verde Defendants' Claims"). In addition, with regard to the
Owner Participant Claims, the Owner Participants contend that
their actions surrounding the presentment and drawings of the
Palo Verde Letters of Credit, including such drawings, were
proper as a matter of law (the "Letter of Credit Defenses").
f. Pursuant to a Settlement Agreement dated as off
November ____, 1993, (including the Annexes thereto and
paragraphs 12 and 13 thereof, the "Settlement Agreement"), EPE
and the Owner Participant (or a predecessor thereof) agreed to
release certain claims, effective upon the Effective Date.
IN CONSIDERATION OF THE MUTUAL AGREEMENTS CONTAINED
HEREIN, and other good and valuable consideration, the receipt of
which is hereby acknowledged, IT IS HEREBY AGREED by and among
the parties hereto as follows:
AGREEMENTS
1. Except as otherwise defined herein, all capitalized
terms used herein shall have the meanings set forth in the
Settlement Agreement.
2. The Successor Indenture Trustees, on behalf of
themselves and the Lease Debt Creditors, hereby forever release
and discharge the Owner Trustee and the Owner Participant Group
(the "Released Parties") from, and waive and relinquish, any and
all claims, demands, debts, liabilities, obligations, actions,
causes of action, suits, sums of money, accounts, reckonings,
covenants, contracts, controversies, agreements, promises and
rights whatsoever, whenever arising, known or unknown, suspected
<PAGE> 129
or unsuspected, contingent or fixed, liquidated or unliquidated,
matured or unmatured, in law, equity, bankruptcy or otherwise
(collectively, "Claims"), which the Successor Indenture Trustees
or Lease Debt Creditors ever had, now have, or hereafter can,
shall or may have against any of the Released Parties for, upon,
or by reason of any matter, cause, transaction or thing
whatsoever occurring at any time prior to the Effective Date,
including, without limitation, any Claims which the Successor
Indenture Trustees or Lease Debt Creditors ever had, now have, or
hereafter can, shall or may have against any of the Released
Parties by reason of, arising from, relating to, or in connection
with the Palo Verde Lease Litigation, the Palo Verde Letters of
Credit, the Palo Verde Defendants' Claims, or the Owner
Participant Claims, the documents listed in Schedule A to the
Third Amended Plan or the transactions contemplated by the
Participation Agreement or based on or arising under 11 U.S.C.
Sections 502, 506, 507, 510, 544-553, inclusive, or any similar
provisions of federal or state law, and any right of indemnity,
contribution or subrogation arising therefrom or relating
thereto; excluding, however, from the foregoing any Claims of the
Successor Indenture Trustees or Lease Debt Creditors unrelated to
the Palo Verde Lease Litigation, the Palo Verde Letters of
Credit, the Palo Verde Defendants' Claims, the Owner Participant
Claims, or the transactions contemplated by the Settlement
Agreement or the Participation Agreement or the documents listed
on Schedule A to the Third Amended Plan.
3. The Owner Participant, on behalf of itself and the
Owner Participant Group, and the Owner Trustee hereby forever
release and discharge the Successor Indenture Trustees and Lease
Debt Creditors from, and waive and relinquish, any and all Claims
which the Owner Participant or FNBB or the Owner Participant
Group or the Owner Trustee ever had, now has, or hereafter can,
shall or may have against the Successor Indenture Trustees or
Lease Debt Creditors for, upon, or by reason of any matter,
cause, transaction or thing whatsoever occurring at any time
prior to the Effective Date, including, without limitation, any
claims which the Owner Participant or the Owner Participant Group
or the Owner Trustee ever had, now has, or hereafter can, shall
or may have against the Successor Indenture Trustees or Lease
Debt Creditors by reason of, arising from, relating to, or in
connection with the Palo Verde Lease Litigation, the Palo Verde
Letters of Credit, the Palo Verde Defendants' Claims, or the
Owner Participant Claims, the documents listed in Schedule A to
the Third Amended Plan or the transactions contemplated by the
<PAGE> 130
Participation Agreement or based on or arising under 11 U.S.C.
Sections 502, 506, 507, 510, 544-553, inclusive, or any similar
provisions of federal or state law, and any right of indemnity,
contribution or subrogation arising therefrom or relating
thereto; excluding, however, from the foregoing any Claims of the
Owner Participant or FNBB or any member of the Owner Participant
Group or the Owner Trustee unrelated to the Palo Verde Lease
Litigation, the Palo Verde Letters of Credit, the Palo Verde
Defendants' Claims, the Owner Participant Claims, the
transactions contemplated by the Settlement Agreement or the
Participation Agreement or the documents listed in Schedule A to
the Third Amended Plan.
4. Each of the parties hereby acknowledges and agrees
that all Claims under Section 1542 of the California Civil Code
and any other provision of law now or hereafter enacted,
adjudicated or sought to be adjudicated relating to the release
or waiver of unknown or unspecified claims are hereby
specifically and expressly released and waived. Each of the
parties understands that Section 1542 of the California Civil
Code provides that "[a] general release does not extend to claims
which the creditor does not know or suspect to exist in his favor
at the time of executing the release, which if known by him must
have materially affected his settlement with the debtor". For
purposes of this Release, each of the parties acknowledges and
agrees that it may be considered to be both a "creditor" and a
"debtor" for all purposes and with respect to all Claims it may
now know or suspect to exist within the meaning of Section 1542
of the California Civil Code and any other provision of law now
or hereafter enacted, adjudicated or sought to be adjudicated
relating to the release or waiver of unknown or unspecified
claims.
5. This Release may be executed in two or more
counterparts, each of which shall be deemed an original, but all
of which shall constitute one and the same instrument.
6. This Release shall be binding upon the parties
hereto and their successors and assigns. Each party hereto
represents and warrants that it owns or holds all Claims
described herein which are being released hereunder.
7. This Release shall be governed in all respects,
including validity, interpretation and effect, by, and construed
and enforced under, the law of the State of New York, without
giving effect to the principles of conflict of laws thereof.
<PAGE> 131
IN WITNESS WHEREOF, the parties hereto have duly
authorized and executed this Release as of the date first above
written.
EPC CORPORATION,
by
Name:
Title:
THE FIRST NATIONAL BANK OF BOSTON, as
Owner Trustee,
by
Name:
Title:
LASALLE NATIONAL BANK, as Successor
Indenture Trustee,
by
Name:
Title:
HARRIS TRUST AND SAVINGS BANK, as
Successor Indenture Trustee,
by
Name:
Title:
<PAGE> 132
ANNEX E
TOLLING AGREEMENT
This Tolling Agreement is made and entered into as of
November , 1993 by and among EL PASO ELECTRIC COMPANY, a Texas
corporation ("EPE"), EPC CORPORATION, a Delaware corporation (the
"Owner Participant"), THE FIRST NATIONAL BANK OF BOSTON (in its
individual capacity, "FNBB"), as trustee under a trust agreement
with the Owner Participant (the "Owner Trustee" and, collectively
as trustee under trust agreements with all the owner
participants, the "Owner Trustees"), HARRIS TRUST AND SAVINGS
BANK, as Successor Trustee under indentures with certain of the
Owner Trustees, and LASALLE NATIONAL BANK, as Successor Trustee
under indentures with certain of the Owner Trustees
(collectively, the "Successor Indenture Trustees").
RECITALS
A. EPE is the debtor in a case pending under Chapter 11
of Title 11 of the United States Code (the "Bankruptcy Code") in
the United States Bankruptcy Court for the Western District of
Texas (the "Bankruptcy Court"), which case has been assigned Case
No. 92-10148-FM (the "EPE Chapter 11 Case").
B. EPE, the Owner Participant and the Owner Trustee are
parties to various agreements, documents and instruments that
evidence or relate to the sale and leaseback by EPE, in separate
transactions with the Owner Participants and Owner Trustees, of
EPE's entire undivided interest in Unit 2 of the Palo Verde
Nuclear Generating Station ("Palo Verde") and approximately 39.5%
of EPE's undivided interest in Unit 3 of Palo Verde and certain
common plant and other related assets.
C. FNBB, in its capacity as Owner Trustee for each of
the Owner Participants (other than DBP Corp.), DBP Corp. and the
Successor Indenture Trustees have filed proofs of claim in the
EPE Chapter 11 Case (the "Proofs of Claim").
D. On September 9, 1992, EPE commenced an adversary
proceeding against FNBB, in its capacity as Owner Trustee for
each of the Owner Participants (other than DBP Corp.), DBP Corp.
and the Successor Indenture Trustees (the "Palo Verde Lease
Litigation Defendants"), which case has been assigned Adversary
Proceeding No. 92-1285-FM (the "Palo Verde Lease Litigation").
The Proofs of Claim, and any objections by EPE thereto, have been
consolidated into the Palo Verde Lease Litigation. In addition,
in discussions between the parties, certain issues have been
raised surrounding the presentment and drawings by the Owner
Participants under certain letters of credit issued as part of
the aforesaid sale and leaseback transactions in the approximate
aggregate amount of $288.4 million (the "Palo Verde Letters of
<PAGE> 133
Credit"). Such issues, including any claims described in
disclosure statements and plans of reorganization filed by EPE in
the EPE Chapter 11 Case with regard to the Owner Participants and
the Palo Verde Letters of Credit, are herein called the "Owner
Participant Claims".
E. The Palo Verde Lease Litigation Defendants have
asserted various defenses, contentions and counterclaims (the
"Palo Verde Defendants' Claims"). In addition, with regard to the
Owner Participant Claims, the Owner Participants contend that
their actions surrounding the presentment and drawings of the
Palo Verde Letters of Credit, including such drawings, were
proper as a matter of law (the "Letter of Credit Defenses").
F. The Third Amended Plan contemplates, under certain
circumstances, a release of all claims relating to the Palo Verde
Lease Litigation, the Palo Verde Defendants' Claims, the Owner
Participant Claims, and the Letter of Credit Defenses, which
release would be subject to and effective only upon the Effective
Date.
G. The parties have entered into a settlement agreement
of even date herewith (the "Settlement Agreement"), which will
result in a mutual release (such release to become effective only
on the occurrence of the Effective Date) of all Claims between
EPE, on one hand, and the Owner Participant and Owner Trustee, on
the other hand, and for the cessation of litigation in the
interim.
H. This Tolling Agreement is intended to ensure that
the parties' claims against one another (and defenses thereto)
are preserved to the fullest extent pending the occurrence of the
Effective Date and the execution, delivery and effectiveness of
the mutual releases contemplated under the Settlement Agreement,
and that the parties are not prejudiced by the deferral of
litigation in accordance with the Settlement Agreement.
IN CONSIDERATION OF THE MUTUAL AGREEMENTS CONTAINED
HEREIN, and other good and valuable consideration, the receipt of
which is hereby acknowledged, IT IS HEREBY AGREED by and between
the parties hereto as follows:
1. All capitalized terms used but not otherwise defined
herein shall have the meanings assigned to such terms in the
Settlement Agreement.
2. All potential causes of action and claims which EPE
or the Lease Debt Creditors could have asserted as of the date
hereof against the Owner Participant or against the Owner Trustee
(and any defenses thereto) shall survive until the termination of
this Tolling Agreement, and no such cause of action or claim (or
defenses thereto) shall in any manner be extinguished or impaired
in any manner by reason of any applicable statute of limitations,
contractual restriction, equitable doctrine or other basis under
<PAGE> 134
federal or state law, including Section 108 of the Bankruptcy
Code, which may limit EPE's ability to commence or prosecute such
cause of action or claim (or any Owner Participant's or Owner
Trustee's defenses thereto) by reason of a lapse of time,
inaction or failure to commence an action or give any notice as
of a particular date during the term of this Agreement; provided,
however, that nothing herein shall revive, to the extent barred
or otherwise non-actionable, any cause of action or claim
(including any right to relief or element of damage thereof) (or
any defense) that is now barred or otherwise non-actionable.
3. All potential causes of action and claims which the
Owner Participant or the Owner Trustee could have asserted as of
the date hereof against EPE or the Lease Debt Creditors (and any
defenses thereto) shall survive until the termination of this
Tolling Agreement, and no such cause of action or claim (or
defenses thereto) shall in any manner be extinguished or impaired
in any manner by reason of any applicable statute of limitations,
contractual restriction, equitable doctrine or other basis under
federal or state law, including Section 108 or Section 362 of the
Bankruptcy Code, which may limit the ability of the Owner
Participant or Owner Trustee to commence or prosecute such cause
of action or claim (or any Owner Participant's or Owner Trustee's
defenses thereto) by reason of a lapse of time, inaction, or
failure to commence an action or give any notice as of a
particular date during the term of this Agreement; provided,
however, that nothing herein shall revive, to the extent barred
or otherwise non-actionable, any cause of action or claim
(including any right to relief or element of damage thereof) (or
any defense) that is now barred or otherwise non- actionable.
4. All potential causes of action and claims which EPE
could have asserted as of the date hereof against the Lease Debt
Creditors (and any defenses thereto) shall survive until the
termination of this Tolling Agreement, and no such cause of
action or claim (or defenses thereto) shall in any manner be
extinguished or impaired in any manner by reason of any
applicable statute of limitations, contractual restriction,
equitable doctrine or other basis under federal or state law,
including Section 108 of the Bankruptcy Code, which may limit the
ability of EPE to commence or prosecute such cause of action or
claim (or any Lease Debt Creditor's defenses thereto) by reason
of a lapse of time, inaction, or failure to commence an action or
give any notice as of a particular date during the term of this
Agreement; provided, however, that nothing herein shall revive,
to the extent barred or otherwise non-actionable, any cause of
action or claim (including any right to relief or element of
damage thereof) (or any defense) that is now barred or otherwise
non-actionable.
5. This Tolling Agreement shall terminate, unless
extended by the parties hereto, on the earliest of (a) 30 days
after written notice by EPE or the Owner Participant of
<PAGE> 135
termination of the Settlement Agreement, (b) the Effective Date
or (c) September 15, 1997.
6. This Tolling Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
instrument.
7. This Tolling Agreement shall be governed in all
respects, including validity, interpretation and effect, by, and
construed and enforced under, the law of the state of New York,
without giving effect to the principles of conflict of laws
thereof.
8. Each party hereto covenants that it has the
requisite authority to enter into and be bound by the terms of
this Tolling Agreement.
9. This Tolling Agreement shall be binding upon the
parties hereto and their successors and assigns.
10. This Tolling Agreement shall not be binding unless
similar tolling agreements are executed and delivered by each of
the Owner Participants and the Successor Indenture Trustees.
11. This Tolling Agreement may not be modified in whole
or in part except pursuant to a written agreement among all of
the parties hereto.
IN WITNESS WHEREOF, the parties hereto have duly
authorized and executed this Tolling Agreement as of the date
first above written.
EL PASO ELECTRIC COMPANY,
by
Name:
Title:
EPC CORPORATION,
by
Name:
Title:
<PAGE> 136
THE FIRST NATIONAL BANK OF BOSTON,
as Owner Trustee,
by
Name:
Title:
HARRIS TRUST AND SAVINGS BANK, as
Successor Trustee and on behalf of
the Lease Debt Creditors for Unit 3
by
Name:
Title:
LASALLE NATIONAL BANK, as Successor
Trustee and on behalf of the Lease Debt
Creditors for Unit 2
by
Name:
Title:
<PAGE> 137
ANNEX F
EXISTING CLAIMS
1. Claims by the State of Arizona regarding
transaction privilege taxes.
2. Unpaid fees and expenses of the Owner Trustee
through and including the Effective Date.
<PAGE> 138
ANNEX G
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 139
SETTLEMENT AGREEMENT
BETWEEN
EL PASO ELECTRIC COMPANY
AND
PALATINE HILLS LEASING, INC.
November 1993
Michael Paul Kirschner, Mediator
Hastie & Kirschner
Attorneys and Counselors at Law
3000 First Oklahoma Tower * 210 West Park Avenue
Oklahoma City, Oklahoma 73102-5673
Telephone (405) 239-6404
Telecopier (405) 239-6403
<PAGE> 140
SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT is entered into as of
November , 1993, between EL PASO ELECTRIC COMPANY, a Texas
corporation, debtor and debtor in possession ("EPE"), and
PALATINE HILLS LEASING, INC., a Delaware corporation (the "Owner
Participant").
IN CONSIDERATION OF THE MUTUAL AGREEMENTS CONTAINED
HEREIN, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, IT IS HEREBY
AGREED by and between the parties hereto as follows:
DEFINITIONS
1. As used herein, the following terms shall have the
following meanings:
"Bankruptcy Court" shall mean the United States
Bankruptcy Court for the Western District of Texas, or such other
court as shall have original jurisdiction over the Case.
"Case" shall mean the proceeding filed by EPE under
Title 11 of the United States Code and bearing Bankruptcy Court
case number 92-10148-FM.
"Claims" shall have the meaning assigned to such term
in the Release.
"Confirmation Order" shall mean an order confirming an
EPE Plan.
"CSW" shall mean Central and South West Corporation.
"Effective Date" shall mean the date on which an EPE
Plan incorporating, except in immaterial respects, the terms and
conditions of this Settlement Agreement shall become effective
according to such EPE Plan's terms.
"EPE Group" shall mean EPE and (i) each and every
person who controls EPE, is controlled by EPE or is under common
control with EPE (the "EPE Affiliated Group"); (ii) any
predecessor, successor or assign of any person included within
the EPE Affiliated Group; (iii) any Chapter 7 or Chapter 11
Trustee appointed by the Bankruptcy Court or any other court with
regard to any person included within the EPE Affiliated Group;
(iv) the respective present and former agents, directors,
officers, employees, advisors, attorneys and representatives of
any person included within the EPE Affiliated Group; (v) the
respective shareholders and creditors of the EPE Affiliated
Group; and (vi) in the case of any individuals falling within the
scope of (iv) or (v), their respective heirs, receivers,
<PAGE> 141
conservators, beneficiaries, executors, administrators,
successors and assigns. The term EPE Group shall not include CSW.
"EPE Plan" shall mean (i) the Modified Third Amended
Plan of Reorganization, filed on September 15, 1993 in the Case
(the "Third Amended Plan"), (ii) any other plan of reorganization
filed in the Case pursuant to which EPE, with its consent, is to
be acquired by CSW or a CSW affiliate, by merger or otherwise,
and (iii) any other plan of reorganization filed in the Case
supported by or acceptable to EPE if, within 10 days of the
filing thereof, EPE fails to provide written notice to the Owner
Participant that such plan does not constitute an EPE Plan for
purposes of this Settlement Agreement.
"Excepted Payments" shall have the meaning assigned to
such Term in Appendix A to the Participation Agreement.
"Facility Lease" shall have the meaning assigned to
such term in Appendix A to the Participation Agreement.
"Lease Debt Creditors" shall mean Harris Trust and
Savings Bank, as Successor Trustee for those certain $200,000,000
Secured Lease Obligation Bonds Series 1988, and any holders of
such bonds, and LaSalle National Bank, as Successor Trustee for
those certain $396,328,000 Lease Obligation Bonds Series 1986 and
those certain $146,305,000 Lease Obligation Bonds Series 1986A
(the Successor Trustees, collectively, the "Successor Indenture
Trustees"), and any holders of such bonds.
"Owner Participant Group" shall mean the Owner
Participant and (i) each and every person who controls the Owner
Participant, is controlled by the Owner Participant or is under
common control with the Owner Participant (the "Owner Participant
Affiliated Group"); (ii) any predecessor, successor or assign of
any person included within the Owner Participant Affiliated
Group; (iii) the respective present and former agents, directors,
officers, employees, advisors, attorneys and representatives of
any person included within the Owner Participant Affiliated
Group; (iv) the respective shareholders and creditors of the
Owner Participant Affiliated Group; (v) any Chapter 7 or Chapter
11 Trustee appointed by a court with regard to any person
included within the Owner Participant Affiliated Group; and (vi)
in the case of any individuals falling within the scope of (iii)
or (iv), their respective heirs, receivers, conservators,
beneficiaries, executors, administrators, successors and assigns.
"Owner Trustee" shall mean The First National Bank of
Boston ("FNBB"), as trustee under a trust agreement with the
Owner Participant.
<PAGE> 142
"Palo Verde Leases" shall mean, collectively, the
Facility Lease and the facility leases, as amended, between EPE
and FNBB (as trustee under separate trust agreements with the
other owner participants) with respect to the Arizona Nuclear
Power Project.
"Palo Verde Lease Litigation" shall mean an adversary
proceeding commenced on September 9, 1992 by EPE against FNBB, in
FNBB's capacity as Owner Trustee for each of the owner
participants (other than DBP Corp.), DBP Corp. and the Successor
Indenture Trustees, which case has been assigned Adversary
Proceeding No. 92- 1285-FM by the Bankruptcy Court.
"Palo Verde Letters of Credit" shall have the meaning
assigned to such term in the Release.
"Participation Agreement" shall mean the Participation
Agreement, as amended, among EPE, the Owner Participant and
others.
"Real Property Interest" shall have the meaning
assigned to such term in Appendix A to the Participation
Agreement.
"Release" shall mean the release in the form of Annex A
hereto.
"Settlement Agreement" shall mean this Settlement
Agreement, including all Annexes hereto.
"Transaction Documents" shall have the meaning assigned
to such term in Appendix A to the Participation Agreement.
"Trust Estate" shall have the meaning assigned to such
term in Appendix A to the Participation Agreement.
"Undivided Interest" shall have the meaning assigned to
such term in Appendix A to the Participation Agreement.
RIGHTS AND OBLIGATIONS PRIOR TO THE EFFECTIVE DATE
2. EPE's plan of reorganization will provide for the
terms and conditions set forth below (and EPE will not file,
pursue or support any plan that contains provisions inconsistent
with, or that does not embody the terms and conditions of, this
Settlement Agreement):
a Claims of the EPE Group, on the one hand, and the
Owner Participant Group and the Owner Trustee, on
the other hand, against one another shall be
mutually released pursuant to the Release (to the
extent provided therein), which Release will be
executed, delivered, and effective solely as of
the Effective Date.
<PAGE> 143
b Other than as provided in this Settlement
Agreement, the Owner Participant and the Owner
Trustee shall receive no distribution, recovery or
other consideration under an EPE Plan except that,
within 10 days of the date of entry of the
Confirmation Order (but not later than December
31, 1993 if such date occurs in 1993), EPE will
pay all fees, costs and expenses incurred by or on
behalf of the Owner Participant or Owner Trustee
from and after August 1, 1993 through and
including the date of entry of the Confirmation
Order in connection with the Palo Verde
Litigation, the Case, the Participation Agreement
or the transactions contemplated hereby or by any
of the foregoing (the amount of which as of
October 1, 1993 is $14,655.91).
c As of the Effective Date, (i) all right, title and
interest of the Owner Participant in the Trust
Estate and certain Excepted Payments shall be
conveyed to EPE or its designee, if paragraph 12.a
hereof is applicable, or (ii) if paragraph 12.b
hereof is applicable, there will be a conveyance
or transfer of the Trust Estate to EPE or EPE's
designee.
d As of the Effective Date, the receipt of any value
or consideration under any EPE Plan shall be
deemed to be (i) a release of the Owner
Participant and Owner Trustee by such recipient
of all claims related to the Palo Verde Leases,
the Palo Verde Letters of Credit, the documents
listed in Schedule A to the Third Amended Plan,
and the transactions contemplated hereby and
thereby, and (ii) a release of such recipient by
the Owner Trustee and Owner Participant of all
such claims. EPE shall defend such provisions
against any objections thereto. If the deemed
release described in this paragraph is not
approved by the Bankruptcy Court as to third
parties other than the Lease Debt Creditors and
the issuers of or participants in the Palo Verde
Letters of Credit, EPE may modify the EPE Plan
accordingly as long as the Confirmation Order
provides that the deemed release is effective as
to the Lease Debt Creditors and the issuers of and
participants in the Palo Verde Letters of Credit
and that, at the Effective Date, all third party
claims against the Owner Participant and Owner
Trustee which are derivative of the claims of EPE
will be extinguished.
<PAGE> 144
3. The Owner Participant and Southwestern Public
Service Company ("SPS") have entered into a letter of
understanding dated July 13, 1993. The Owner Participant will not
take any position as to the termination of EPE's exclusivity
through the filing of additional pleadings in the Case or by the
making of any statement in the Bankruptcy Court in support of any
motion to terminate EPE's exclusivity, unless EPE, in
contravention of its agreement not to do so, files, pursues or
supports confirmation of a plan of reorganization which does not
incorporate the terms of this Settlement Agreement or which
materially adversely affects the Owner Participant or any of its
affiliates.
4. The Owner Participant will vote to accept and/or
will cause the Owner Trustee to vote to accept the Third Amended
Plan and will vote to accept and/or cause the Owner Trustee to
vote to accept any other EPE Plan that is (x) consistent with and
incorporates the terms of this Settlement Agreement and (y) does
not materially adversely affect the Owner Participant or any of
its affiliates. The Owner Participant will not vote to reject or
object to, and will cause the Owner Trustee not to vote to reject
or object to, the Third Amended Plan, and will not vote to reject
or object to, and will cause the Owner Trustee not to vote to
reject or object to, any other EPE Plan that (i) is consistent
with and incorporates the terms of this Settlement Agreement and
(ii) does not materially adversely affect the Owner Participant
or any of its affiliates. Nothing in this Settlement Agreement
will limit the right of the Owner Participant or Owner Trustee or
any member of the Owner Participant Group to vote to accept or
reject or object to (A) any plan that is (a) inconsistent with or
does not incorporate the terms of this Settlement Agreement or
(b) materially adversely affects the Owner Participant or any of
its affiliates or (B) any plan other than an EPE Plan. For
purposes of this paragraph 4, it will be conclusively presumed
that an EPE Plan does not materially adversely affect the Owner
Participant or any of its affiliates if the Owner Participant
fails to provide EPE with written notice to the contrary within
20 days after receipt of such EPE Plan. EPE will not and the
Owner Participant will not, and will not direct the Owner Trustee
to, file any pleading in the Case that is contrary to or
inconsistent with the terms and conditions contained herein.
5. The Owner Participant agrees not to transfer, prior
to the Effective Date, any Claim against the EPE Group or
interest in the Facility Lease to anyone other than a person that
has agreed to be bound by this Settlement Agreement; provided,
however, that upon any withdrawal, termination or revocation of
the Third Amended Plan, the Owner Participant may thereafter
transfer any Claim against the EPE Group or interest in the
Facility Lease to anyone whether or not such person agrees to be
bound by this Settlement Agreement, and if such person has not
agreed to be so bound, this Settlement Agreement shall
automatically terminate without further action by any party
hereto. EPE agrees not to transfer, prior to the Effective Date,
<PAGE> 145
any Claim against the Owner Participant Group or Owner Trustee or
interest in the Facility Lease.
6. EPE shall disclose the contents of this Settlement
Agreement, pursuant to Section 3.14B.5. of the Third Amended
Plan. Between the date of entry of the Confirmation Order and the
Effective Date, the Owner Participant shall have all of the
rights accorded to the Oversight Committee (as defined in the
Third Amended Plan) pursuant to Section 5.1.E of the Third
Amended Plan.
7. Until the Effective Date occurs, EPE will not pursue
the Palo Verde Lease Litigation or commence any litigation or
otherwise file any Claim against the Owner Participant or Owner
Trustee and EPE will oppose any motion or other action by any
other person to pursue the Palo Verde Lease Litigation or
commence or file any such litigation or Claim or intervene
therein; provided, however, that nothing herein shall preclude
EPE from (i) taking steps which EPE reasonably deems necessary to
preserve its Claims and its ability to collect on such Claims, if
successful, and to protect EPE's rights in the event of the
proposed dissolution of the Owner Participant or Owner Trustee in
a bankruptcy or insolvency proceeding of the Owner Participant or
Owner Trustee (and EPE hereby agrees that EPE will not file nor
participate in the filing of any involuntary bankruptcy or
insolvency petition against the Owner Participant or Owner
Trustee) or (ii) seeking discovery, at EPE's own expense, against
the Owner Participant or Owner Trustee in connection with a plan
of reorganization proposed by or on behalf of SPS, or any other
plan of reorganization other than an EPE Plan, to the extent EPE
is otherwise entitled to request such discovery from the
Bankruptcy Court.
8. Until the Effective Date occurs, the Owner
Participant will not, and will not direct the Owner Trustee to,
pursue the Palo Verde Lease Litigation or commence any litigation
or file any additional Claim against EPE and at EPE's request,
the Owner Participant will, and/or will cause the Owner Trustee
to, file a pleading which will support EPE's opposition to any
motion or other action by any other person to pursue the Palo
Verde Lease Litigation or commence or file any such litigation or
Claim or intervene therein; provided, however, that nothing
herein shall preclude the Owner Participant or Owner Trustee from
(i) taking steps which the Owner Participant or Owner Trustee, as
the case may be, reasonably deems necessary to preserve the
Claims of such Owner Participant or Owner Trustee and to protect
the rights of such Owner Participant or Owner Trustee in the
event of the proposed dissolution of EPE or (ii) opposing EPE's
pursuit of any discovery referred to in paragraph 7 hereof.
<PAGE> 146
9. Within 10 days after the filing of any plan, EPE
will give the Owner Participant written notice of whether such
plan constitutes an EPE Plan referred to in clause (iii) of the
definition thereof. In the absence of such notice, such plan
shall be deemed to be an EPE Plan.
10. Prior to the Effective Date, EPE shall seek and
obtain all governmental approvals necessary to effect the
transactions contemplated hereby. The Owner Participant agrees to
cooperate with EPE, at EPE's expense, in obtaining such approvals
prior to the Effective Date.
11. Concurrently with the execution and delivery of
this Settlement Agreement, the Owner Participant, the Owner
Trustee, EPE and the Successor Indenture Trustees shall execute
and deliver a Tolling Agreement in the form of Annex E hereto.
RIGHTS AND OBLIGATIONS ON AND AFTER THE EFFECTIVE DATE
12. Subject to the satisfaction of the terms and
conditions contained in this Settlement Agreement, including
paragraph 13, on or as of the Effective Date:
a The Owner Participant will, subject to paragraph
12.b, transfer to EPE or, if EPE so requests,
EPE's designee, all of the Owner Participant's
right, title and interest in the Trust Estate and
certain Excepted Payments by the execution and
delivery of a Bill of Sale and Assignment
substantially in the form of Annex B hereto.
b At the request and expense of EPE, the Owner
Participant will, at the election of EPE, in lieu
of or in addition to the transfer referred to in
paragraph 12.a, (i) consent to the conveyance or
transfer of the Trust Estate to EPE or, if EPE so
requests, EPE's designee, and (ii) direct the
Owner Trustee to effect such conveyance or
transfer, which obligations shall be subject to
(a) EPE having obtained the required consent, if
any, of the applicable Successor Indenture Trustee
or a binding order (which has not been stayed) of
a court of competent jurisdiction effectively
overriding the requirement, if any, of such
consent, (b) such conveyance and transfer
complying with applicable law and third party
rights, if any, or EPE having obtained a binding
order (which has not been stayed) of a court of
competent jurisdiction effectively overriding any
requirement of such compliance, and (c) EPE having
provided such indemnities to the Owner Participant
and the Owner Trustee as either of them shall
<PAGE> 147
reasonably request regarding the conveyance or
transfer set forth in this paragraph 12.b.
c The parties hereto and the Owner Trustee shall
execute and deliver the Release.
d Reorganized EPE shall deliver to the Owner
Participant on the Effective Date an executed
letter in the form of Annex G hereto. The form and
contents of Annex G shall not be disclosed prior
to the Effective Date to any person or entity,
except that a copy thereof shall be provided to
the Bankruptcy Court under seal and to the
Successor Indenture Trustee (after execution
thereof). In the event the Effective Date does not
occur, neither the Owner Participant nor any other
person or entity shall refer to or otherwise
disclose the contents of Annex G, or its inclusion
in this Settlement Agreement, for any purpose.
e If paragraph 12.a is applicable, EPE or its
designee shall become the "Owner Participant"
under the documents described in Schedule A to the
Third Amended Plan for all purposes, and, if
paragraph 12.b is applicable, such documents shall
be terminated, altered, or amended in such manner
as the parties hereto shall agree, consistent with
the terms of this Settlement Agreement.
f Section 17 of the Participation Agreement shall
continue in full force and effect, but only with
respect to EPE's obligations under the first and
third sentences of the first paragraph and the
entire third paragraph of Section 10(b)(3)(xi),
and the entirety of Sections 13 (insofar as
indemnification is sought for Claims (as defined
in the Participation Agreement) asserted against
the Owner Participant, the Owner Trustee, the
First National Bank of Boston (in its individual
capacity), the Trust (as defined in the
Participation Agreement), the Trust Estate, or the
Lease Indenture Estate (as defined in the
Participation Agreement), or any Affiliate (as
defined in the Participation Agreement),
successor, assign, agent, officer, director or
employee of any of the foregoing, by a person
other than the Owner Participant, the Owner
Trustee or any successor or assign thereof) and 16
thereof (it being understood that the exclusions
from the general tax indemnity provisions of
Section 13(b) of the Participation Agreement with
respect to a "voluntary transfer" and with respect
to a "transferee" or a "subsequent transferee"
<PAGE> 148
shall not apply to the transactions contemplated
by this Settlement Agreement); provided, however,
that in order to prevent a double payment with
respect to a Loss or Losses (as defined in the
Participation Agreement), the aggregate amount of
such payments shall be reduced (without
duplication) by the appropriate portion of the
amount drawn by the Owner Participant under the
corresponding Palo Verde Letter of Credit to the
extent such portion is attributable (under
calculations performed in accordance with industry
practice) to the same adverse tax consequences
constituting such Loss or Losses. It is understood
that EPE's obligations under this paragraph 12.f
shall not extend to the payment of Basic Rent,
Fair Market Rental Value, Fair Market Sales Value,
Casualty Value, Special Casualty Value,
Termination Value, Enhanced Casualty Value or
Special Termination Value (as such terms are
defined in the Transaction Documents and
collectively referred to herein as "Scheduled
Amounts") or any amounts measured by Scheduled
Amounts or Supplemental Rent (to the extent
attributable to Scheduled Amounts or Excepted
Payments which are Assigned Property (as defined
in the Bill of Sale and Assignment attached hereto
as Annex B)). Notwithstanding anything contained
in this Settlement Agreement or the Release, EPE
shall continue to comply with Section 10(a)(2)(ii)
of the Facility Lease except that any notices or
certificates described in Section 10(a)(1)(i)(F)
of the Facility Lease (as such section relates to
Section 10(a)(2)(ii)) must be received by the
Owner Participant in order to be effective against
the Owner Participant but need not be received by
or delivered to the Indenture Trustee.
g EPE will pay any balance due of the amounts
described in paragraph 26 hereof.
13. The terms and conditions referred to in paragraph
12 include the following:
a The Confirmation Order shall (i) provide that an
Order of Dismissal with Prejudice in the form
attached hereto as Annex C shall be entered on or
after the Effective Date and a copy provided to
the Owner Participant and to the Successor
Indenture Trustee and (ii) comply with the last
sentence of paragraph 2.d, if applicable;
<PAGE> 149
b The Owner Participant, the Owner Trustee and the
Successor Indenture Trustees shall have executed
and delivered mutual releases substantially in the
form attached hereto as Annex D and an order of
the Bankruptcy Court complying with either the
first or the last sentence of paragraph 2.d shall
be in full force and effect and shall not have
been stayed;
c This Settlement Agreement shall be in full force
and effect and neither the Owner Participant nor
EPE shall be in default of any term or condition
hereof;
d All governmental approvals, if any, necessary to
effect the transactions contemplated hereby shall
have been obtained and be in full force and
effect;
e All consents of third parties, if any, necessary
to effect the actions contemplated above shall
have been obtained and be in full force and
effect;
f All documentation for the transactions
contemplated by this paragraph 13 and paragraphs
8, 12.a, 12.b, 12.e and 26 shall be reasonably
satisfactory in form and substance to the Owner
Participant and EPE; and
g The Owner Participant and the Owner Trustee shall
have received all amounts, if any, payable
pursuant to paragraphs 2.b, 18 and 26 hereof.
Conditions d and e above may be satisfied by the entry of a
binding order (which has not been stayed) of a court of competent
jurisdiction effectively overriding the requirement, if any, of
obtaining any third party consents or governmental approvals
referred to in such conditions.
TERMINATION AND EFFECTIVENESS
14. This Settlement Agreement may be terminated (a) on
30 days' written notice by either EPE or the Owner Participant if
no EPE Plan referred to in clause (i) or (ii) of the definition
thereof is being pursued and, in the case of termination by EPE,
EPE certifies in the termination notice that no EPE Plan referred
to in clause (i) or (ii) of the definition thereof is then
contemplated by EPE, or (b) on 5 days' written notice by either
the Owner Participant or EPE if EPE or the Owner Participant,
respectively, fails to comply with any term or condition of this
Settlement Agreement and does not cure such failure within such 5
days or (c) on 5 days' written notice from EPE that a settlement
agreement with one of the other owner participants with an
<PAGE> 150
interest in Unit 2 of the Palo Verde Nuclear Generating Station
has terminated pursuant to paragraph 5 of such settlement
agreement and that EPE is terminating all of the settlement
agreements with each of the owner participants with an interest
in such Unit.
15. This Settlement Agreement shall not be binding upon
any of the parties hereto until EPE and all of the owner
participants execute settlement agreements in a form similar to
this Settlement Agreement. This Settlement Agreement shall
terminate automatically without further action by any party
hereto if the Bankruptcy Court in the Case declines to approve
the settlement contained in this Settlement Agreement or any such
other settlement agreement.
16. Upon any termination of this Settlement Agreement,
all obligations of the parties hereto (except for the last 2
sentences of paragraph 12.d) shall cease.
REPRESENTATIONS AND WARRANTIES
17. EPE represents and warrants that no modification to
the merger agreement between EPE and CSW is necessary to
effectuate or consummate this Settlement Agreement.
18. Each party hereto represents and warrants that it
owns and has not transferred any of the Claims described in the
Release as being released by it or any of its interests in the
Facility Lease. Except as set forth in Annex F hereto, to the
knowledge of the Owner Participant, there exists no basis upon
which the Owner Participant, as of the date of this Settlement
Agreement, may assert any Claims against EPE, other than any such
Claims which will be extinguished pursuant to the Release. To the
knowledge of EPE, there exists no basis upon which EPE, as of the
date of this Settlement Agreement, may assert any Claim against
the Owner Participant, other than any such Claims which will be
extinguished pursuant to the Release. EPE shall pay all amounts
due with respect to the items set forth on Annex F irrespective
of whether such amounts are already incurred, invoiced or
assessed or arise hereafter.
19. Each party hereto agrees that the Third Amended
Plan (i) complies with the terms and conditions of this
Settlement Agreement, and (ii) does not materially adversely
affect the Owner Participant or any of its affiliates for
purposes of paragraph 4 hereof.
MISCELLANEOUS
20. Nothing in this Settlement Agreement shall operate
as an admission of liability or admission as to any issue by any
party, and this Settlement Agreement (and all negotiations,
discussions and drafts relating thereto) shall be subject to the
<PAGE> 151
provisions of Federal Rule of Evidence 408 and comparable
provisions of state law.
21. This Settlement Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
instrument.
22. This Settlement Agreement shall be governed in all
respects including validity, interpretation and effect, by, and
construed and enforced under, the law of the State of New York,
without giving effect to the principles of conflicts of law
thereof.
23. This Settlement Agreement is enforceable only by
the parties hereto and the Owner Trustee; provided, however,
that, after the Effective Date, any person who is a beneficiary
of a release (including the Release) contemplated by this
Settlement Agreement shall be entitled to enforce the provisions
of such release.
24. In addition to all other rights and remedies
provided in this Settlement Agreement, EPE and the Owner
Participant may (subject to any restrictions contained in this
Settlement Agreement) exercise any other right or remedy that may
be available under applicable law or proceed (or the Owner
Trustee may proceed) by appropriate court action to enforce the
terms hereof. The failure or delay of EPE or the Owner
Participant in exercising any right granted hereunder upon the
occurrence of any of the contingencies set forth herein shall not
constitute a waiver of any such right upon the continuance or
recurrence of any such contingencies or similar contingencies and
any single or partial exercise of any particular right by EPE or
the Owner Participant shall not exhaust the same or constitute a
waiver of any other right provided herein. No remedy under this
Settlement Agreement is intended to be exclusive, but each shall
be cumulative and in addition to any other remedy provided
hereunder or otherwise available to EPE or the Owner Participant
at law or in equity (subject to any restrictions contained in
this Settlement Agreement). Notwithstanding the foregoing, the
parties agree that in the event of a breach of this Settlement
Agreement, money damages will not be adequate to compensate the
non-breaching party, and, accordingly, either party or the Owner
Trustee may seek to specifically enforce the provisions of this
Settlement Agreement.
25. Except as otherwise specifically provided herein,
this Settlement Agreement shall be binding on all successors and
assigns of the parties hereto.
26. The parties shall cooperate with one another to
execute and deliver such other documents and to take such further
actions as shall be necessary or appropriate to effectuate the
<PAGE> 152
terms hereof; provided, however, that the Owner Participant and
the Owner Trustee shall each be reimbursed by EPE for its
reasonable expenses after the date of entry of the Confirmation
Order related to the execution and delivery of any such other
documents and the taking of any such further actions by the Owner
Participant or the Owner Trustee.
27. The descriptive headings of the paragraphs of this
Settlement Agreement are for convenience only and will not be
used in the construction of the content of this Settlement
Agreement.
28. Any notice required or permitted to be given by any
provision of this Settlement Agreement will be in writing and
will be deemed to have been given when delivered personally or by
facsimile, receipt confirmed, to the party designated to receive
such notice or on the date following the day sent by overnight
courier or on the 3rd business day after the same is sent by
certified mail, postage and charges prepaid, directed to the
following addresses or to such other additional addresses as any
party might designate by written notice to the other party:
El Paso Electric Company: El Paso Electric Company
Mills Building
303 North Oregon
El Paso, Texas 79901
Attention:
Chief Executive Officer
and Chairman of the Board
Facsimile: (915) 521-4754
With Copy to: Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: Shalom L. Kohn, Esq.
Facsimile: (312) 853-7312
With Copy to: Milbank, Tweed, Hadley & McCloy
One Chase Manhattan Plaza
New York, New York 10005
Attention: Joris M. Hogan, Esq.
Facsimile: (212) 530-5219
Owner Participant: Palatine Hills Leasing, Inc.
%Household Financial Services,
Inc.
2700 Sanders Road
Prospect Heights, Illinois 60070
Attention: Robert Walsh,
President
Facsimile: (708) 205-7411
<PAGE> 153
With Copy to: Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Attention: Richard M. Allen,
Esq.
Facsimile: (212) 474-3700
Parties to this Settlement Agreement shall be entitled
to conclusively rely on any notice given in the foregoing manner
to the parties at the addresses reflected above, unless and until
a different address or facsimile number is provided to all
parties and persons listed above. Rejection or refusal to accept,
or inability to deliver because of changed addresses or because
no notice of changed address was given, shall be deemed a receipt
of such notice.
IN WITNESS WHEREOF, the parties hereto have duly
authorized and executed this Settlement Agreement on the date
first above written.
EL PASO ELECTRIC COMPANY,
by /s/
Name: David H. Wiggs, Jr.
Title: Chairman and CEO
PALATINE HILLS LEASING, INC.,
by /s/
Name:Robert E. Walsh
Title:Executive Vice President
Annex A: Form of Release and Agreement among EPE, Owner
Participant and Owner Trustee
Annex B: Form of Bill of Sale and Assignment
Annex C: Form of Order of Dismissal with Prejudice
Annex D: Form of Release and Agreement among Owner
Participant, Owner Trustee, and Successor Indenture
Trustees
Annex E: Form of Tolling Agreement
Annex F: Existing Claims
Annex G: Form of Letter re Causes of Action
<PAGE> 154
ANNEX A
RELEASE AND AGREEMENT
THIS RELEASE AND AGREEMENT (this "Release") is entered
into on , 199 , by and among EL PASO ELECTRIC COMPANY, a
Texas corporation, debtor and debtor in possession ("EPE"),
PALATINE HILLS LEASING, INC., a Delaware corporation (the "Owner
Participant" and, collectively with each of the other owner
participants participating in the transactions described in
recital B below, the "Owner Participants"), and THE FIRST
NATIONAL BANK OF BOSTON (in its individual capacity, "FNBB"), as
trustee under a trust agreement with the Owner Participant (the
"Owner Trustee" and, collectively as trustee under trust
agreements with the Owner Participants, the "Owner Trustees").
RECITALS
A. EPE is the debtor in a case pending under Chapter 11
of Title 11 of the United States Code (the "Bankruptcy Code") in
the United States Bankruptcy Court for the Western District of
Texas (the "Bankruptcy Court"), which case has been assigned Case
No. 92-10148-FM (the "EPE Chapter 11 Case").
B. EPE, the Owner Participant and the Owner Trustee are
parties to various agreements, documents and instruments that
evidence or relate to the sale and leaseback by EPE, in separate
transactions with the Owner Participants and Owner Trustees, of
EPE's entire undivided interest in Unit 2 of the Palo Verde
Nuclear Generating Station ("Palo Verde") and approximately 39.5%
of EPE's undivided interest in Unit 3 of Palo Verde and certain
common plant and other related assets.
C. FNBB, in its capacity as Owner Trustee for each of
the Owner Participants (other than DBP Corp.), and DBP Corp.
filed proofs of claim in the EPE Chapter 11 Case (the "Proofs of
Claim").
D. On September 9, 1992, EPE commenced an adversary
proceeding against FNBB, in its capacity as Owner Trustee for
each of the Owner Participants (other than DBP Corp.), DBP Corp.
and the Successor Indenture Trustees (the "Palo Verde Lease
Litigation Defendants"), which case was assigned Adversary
Proceeding No. 92-1285-FM (the "Palo Verde Lease Litigation").
The Proofs of Claim, and any objections by EPE thereto, were
consolidated into the Palo Verde Lease Litigation. In addition,
in discussions between the parties, certain issues were raised
surrounding the presentment and drawings by the Owner
Participants under certain letters of credit issued as part of
the aforesaid sale and leaseback transactions in the approximate
aggregate amount of $288.4 million (the "Palo Verde Letters of
Credit"). Such issues, including any claims described in
disclosure statements and plans of reorganization filed by EPE in
the EPE Chapter 11 Case with regard to the Owner Participants and
<PAGE> 155
the Palo Verde Letters of Credit, are herein called the "Owner
Participant Claims".
E. The Palo Verde Lease Litigation Defendants have
asserted various defenses, contentions and counterclaims (the
"Palo Verde Defendants' Claims"). In addition, with regard to the
Owner Participant Claims, the Owner Participants contend that
their actions surrounding the presentment and drawings of the
Palo Verde Letters of Credit, including such drawings, were
proper as a matter of law (the "Letter of Credit Defenses").
F. Pursuant to a Settlement Agreement dated as of
November 15, 1993 (including the Annexes thereto and paragraphs
12 and 13 thereof, the "Settlement Agreement"), EPE and the Owner
Participant (or a predecessor thereof) agreed to release certain
claims effective upon the Effective Date.
IN CONSIDERATION OF THE MUTUAL AGREEMENTS CONTAINED
HEREIN, and other good and valuable consideration, the receipt of
which is hereby acknowledged, IT IS HEREBY AGREED by and among
the parties hereto as follows:
AGREEMENTS
1. Except as otherwise defined herein, all capitalized
terms used herein shall have the meanings set forth in the
Settlement Agreement.
2. EPE, on behalf of itself and the EPE Group, hereby
forever releases and discharges the Owner Trustee and the Owner
Participant Group (the "Released Parties") from, and waives and
relinquishes, any and all claims, demands, debts, liabilities,
obligations, actions, causes of action, suits, sums of money,
accounts, reckonings, covenants, contracts, controversies,
agreements, promises and rights whatsoever, whenever arising,
known or unknown, suspected or unsuspected, contingent or fixed,
liquidated or unliquidated, matured or unmatured, in law, equity,
bankruptcy or otherwise (collectively, "Claims"), which EPE or
the EPE Group ever had, now has, or hereafter can, shall or may
have against any of the Released Parties for, upon, or by reason
of any matter, cause, transaction or thing whatsoever occurring
at any time prior to the Effective Date, including, without
limitation, any Claims which EPE or the EPE Group ever had, now
has, or hereafter can, shall or may have against any of the
Released Parties by reason of, arising from, relating to, or in
connection with the Palo Verde Lease Litigation, the Palo Verde
Letters of Credit, the Palo Verde Defendants' Claims, the Owner
Participant Claims, the documents listed on Schedule A to the
Third Amended Plan or the transactions contemplated by the
Participation Agreement, or based on or arising under 11 U.S.C.
Sections 502, 506, 507, 510, 544-553, inclusive, or any similar
provisions of federal or state law, and any right of indemnity,
contribution or subrogation arising therefrom or relating
<PAGE> 156
thereto; provided, however, that nothing herein shall release any
Claims of any member of the EPE Group (other than EPE) unrelated
to the Palo Verde Lease Litigation, the Palo Verde Letters of
Credit, the Palo Verde Defendants' Claims, the Owner Participant
Claims, or the transactions contemplated by the Settlement
Agreement or the Participation Agreement or the documents listed
on Schedule A to the Third Amended Plan; and provided, however
that nothing herein shall release any party from its obligations
set forth in, or that are assumed or continued pursuant to the
Settlement Agreement (including, without limitation, the Annexes
thereto and paragraphs 12 and 13 thereof).
3. The Owner Participant, on behalf of itself and the
Owner Participant Group, and the Owner Trustee hereby forever
release and discharge the EPE Group from, and waive and
relinquish, any and all Claims which the Owner Participant or the
Owner Participant Group or the Owner Trustee ever had, now has,
or hereafter can, shall or may have against the EPE Group for,
upon, or by reason of any matter, cause, transaction or thing
whatsoever occurring at any time prior to the Effective Date,
including, without limitation, any claims which the Owner
Participant or the Owner Participant Group or the Owner Trustee
ever had, now has, or hereafter can, shall or may have against
the EPE Group by reason of, arising from, relating to, or in
connection with the Palo Verde Lease Litigation, the Palo Verde
Letters of Credit, the Palo Verde Defendants' Claims, the Owner
Participant Claims, or the documents listed on Schedule A to the
Third Amended Plan or the transactions contemplated by the
Participation Agreement, or based on or arising under 11 U.S.C.
Sections 502, 506, 507, 510, 544- 553, inclusive, or any similar
provisions of federal or state law, and any right of indemnity,
contribution or subrogation arising therefrom or relating
thereto; excluding, however, from the foregoing any Claims of any
member of the Owner Participant Group (other than the Owner
Participant) or the Owner Trustee unrelated to the Palo Verde
Lease Litigation, the Palo Verde Letters of Credit, the Palo
Verde Defendants' Claims, the Owner Participant Claims, or the
transactions contemplated by the Settlement Agreement or the
Participation Agreement or the documents listed on Schedule A to
the Third Amended Plan; and provided, however that nothing herein
shall release any party from its obligations set forth in the
Settlement Agreement (including, without limitation, the Annexes
thereto and paragraphs 12 and 13 thereof).
4. Each of the parties hereby acknowledges and agrees
that all Claims under Section 1542 of the California Civil Code
and any other provision of law now or hereafter enacted,
adjudicated or sought to be adjudicated relating to the release
or waiver of unknown or unspecified claims are hereby
specifically and expressly released and waived. Each of the
parties understands that Section 1542 of the California Civil
Code provides that "[a] general release does not extend to claims
which the creditor does not know or suspect to exist in his favor
<PAGE> 157
at the time of executing the release, which if known by him must
have materially affected his settlement with the debtor". For
purposes of this Release, each of the parties acknowledges and
agrees that it may be considered to be both a "creditor" and a
"debtor" for all purposes and with respect to all Claims it may
now know or suspect to exist within the meaning of Section 1542
of the California Civil Code and any other provision of law now
or hereafter enacted, adjudicated or sought to be adjudicated
relating to the release or waiver of unknown or unspecified
claims.
5. This Release may be executed in two or more
counterparts, each of which shall be deemed an original, but all
of which shall constitute one and the same instrument.
6. This Release shall be binding upon the parties
hereto and their successors and assigns. Each party hereto
represents and warrants that it owns all the Claims described
herein which are being released hereunder and is duly authorized
to release such Claims.
7. This Release shall be governed in all respects,
including validity, interpretation and effect, by, and construed
and enforced under, the law of the State of New York, without
giving effect to the principles of conflict of laws thereof.
IN WITNESS WHEREOF, the parties hereto have duly
authorized and executed this Release as of the date first above
written.
EL PASO ELECTRIC COMPANY,
by
Name:
Title:
PALATINE HILLS LEASING, INC.,
by
Name:
Title:
THE FIRST NATIONAL BANK OF BOSTON,
as Owner Trustee,
by
Name:
Title:
<PAGE> 158
ANNEX B
BILL OF SALE AND ASSIGNMENT, dated as
of , 199 , from PALATINE HILLS
LEASING, INC., a Delaware corporation (the
"Owner Participant"), to EL PASO ELECTRIC
COMPANY, a Texas corporation [1] ("El Paso").
WITNESSETH:
WHEREAS, the Owner Participant desires to convey and El
Paso desires to acquire the Assigned Property (as hereinafter
defined);
NOW, THEREFORE, in consideration of the premises and of
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
Definitions
For purposes hereof, capitalized terms used but not
otherwise defined herein shall have the meanings assigned to such
terms in the Participation Agreement dated as of August 1, 1986,
among [a predecessor of] the Owner Participant, the First
National Bank of Boston, in its individual capacity and as Owner
Trustee, El Paso and others.
ARTICLE II
Assignment of Trust Estate
The Owner Participant does hereby grant, bargain,
convey, sell, assign, transfer and set over (collectively,
"transfer") to El Paso, on an as is, where is basis, free and
clear of Owner Participant's Liens but otherwise without
recourse, representation or warranty, express or implied, of any
nature whatsoever, all the Owner Participant's right, title and
interest in, to and under the Trust Estate and the Excepted
Payments, other than Excepted Payments referred to in clauses (i)
(to the extent such Supplemental Rent constitutes or is
attributable to payments to which the Owner Participant or any of
its affiliates (or the successors, assigns, agents, officers,
directors or employees of the Owner Participant) are entitled
under the Settlement Agreement dated as of November 15, 1993
- ---------------------------------
[1] El Paso may designate a different transferee.
<PAGE> 159
between El Paso and the Owner Participant (or any predecessor
thereof)), (vi) and (vii) (and (viii) to the extent attributable
to the payments referred to in clauses (i), (vi) or (vii)) of the
definition of "Excepted Payments" (the "Assigned Property"). The
disclaimer of representations and warranties set forth in the
second sentence of Section 6(b) of the Facility Lease is hereby
incorporated herein as fully as if set forth at this place. Such
transfer shall not alter the obligations of El Paso nor expand
the rights of the Owner Participant under the Settlement
Agreement dated as of November 15, 1993, between El Paso and the
Owner Participant (or a predecessor thereof) or the Release
referred to therein, whether or not such obligations or rights
would constitute an Excepted Payment.
ARTICLE III
Effectiveness of Transfer
The transfer of the Assigned Property shall become
effective without further action upon the execution and delivery
by the Owner Participant to El Paso of this Bill of Sale and
Assignment and the furnishing of a counterpart of this Bill of
Sale and Assignment to the Owner Trustee.
ARTICLE IV
Miscellaneous
SECTION 4.01. Successors and Assigns. This Bill of Sale
and Assignment shall be binding upon the Owner Participant and
its successors and shall inure to the benefit of El Paso and its
successors and assigns.
SECTION 4.02. Governing Law. This Bill of Sale and
Assignment shall be governed by and construed in accordance with
the law of the State of New York.
IN WITNESS WHEREOF, the undersigned has caused this
Bill of Sale and Assignment to be duly executed as of the day and
year first written above.
PALATINE HILLS LEASING, INC.
by
Name:
Title:
<PAGE> 160
ANNEX C
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE WESTERN DISTRICT OF TEXAS
AUSTIN DIVISION
)
In re EL PASO ELECTRIC COMPANY, ) Case No. 92-10148-FM
) (Chapter 11)
Debtor. )
)
) Adversary Proceeding
EL PASO ELECTRIC COMPANY, ) No. 92-1285-FM
)
Plaintiff and Counterclaimant, )
)
v. ) Adversary Complaint
) seeking a declaration
THE FIRST NATIONAL BANK OF BOSTON, ) of rights arising
DBP CORP., LaSALLE NATIONAL BANK, ) from the rejection of
and HARRIS TRUST AND SAVINGS BANK, ) leases of the Palo
) Verde Nuclear
Defendants and Claimants. ) Generating Station
)
ORDER OF DISMISSAL WITH PREJUDICE
IT IS HEREBY ORDERED AND ADJUDGED, pursuant to the
Order of Confirmation in Case No. 92-10148-FM (Chapter 11), that
the Complaint and Counterclaims in the above-referenced action
are each hereby dismissed with prejudice.
IT IS SO ORDERED:
Dated: , 199
Austin, Texas
United States Bankruptcy Judge
<PAGE> 161
ANNEX D
RELEASE AND AGREEMENT
THIS RELEASE AND AGREEMENT (this "Release") is entered
into on _______ ___, 199__, by and among PALATINE HILLS LEASING,
INC., a Delaware corporation (the "Owner Participant" and,
collectively with each of the other owner participants
participating in the transactions described in recital B below,
the "Owner Participants"), THE FIRST NATIONAL BANK OF BOSTON (in
its individual capacity, "FNBB"), as trustee under a trust
agreement with the Owner Participant (the "Owner Trustee" and,
collectively as trustee under trust agreements with the Owner
Participants, the "Owner Trustees"), HARRIS TRUST AND SAVINGS
BANK, as Successor Trustee under indentures with certain of the
Owner Trustees, and LASALLE NATIONAL BANK, as Successor Trustee
under indentures with certain of the Owner Trustees
(collectively, the "Successor Indenture Trustees").
RECITALS
A. EPE is the debtor in a case pending under Chapter 11
of Title 11 of the United States Code (the "Bankruptcy Code") in
the United States Bankruptcy Court for the Western District of
Texas (the "Bankruptcy Court"), which case has been assigned Case
No. 92-10148-FM (the "EPE Chapter 11 Case").
B. EPE, the Owner Participant and the Owner Trustee are
parties to various agreements, documents and instruments that
evidence or relate to the sale and leaseback by EPE, in separate
transactions with the Owner Participants and Owner Trustees, of
EPE's entire undivided interest in Unit 2 of the Palo Verde
Nuclear Generating Station ("Palo Verde") and approximately 39.5%
of EPE's undivided interest in Unit 3 of Palo Verde and certain
common plant and other related assets.
C. FNBB, in its capacity as Owner Trustee for each of
the Owner Participants (other than DBP Corp.), DBP Corp. and the
Successor Indenture Trustees filed proofs of claim in the EPE
Chapter 11 Case (the "Proofs of Claim").
D. On September 9, 1992, EPE commenced an adversary
proceeding against FNBB, in its capacity as Owner Trustee for
each of the Owner Participants (other than DBP Corp.), DBP Corp.
and the Successor Indenture Trustees (the "Palo Verde Lease
Litigation Defendants"), which case was assigned Adversary
Proceeding No. 92-1285-FM (the "Palo Verde Lease Litigation").
The Proofs of Claim, and any objections by EPE thereto, were
consolidated into the Palo Verde Lease Litigation. In addition,
in discussions between the parties, certain issues were raised
surrounding the presentment and drawings by the Owner
Participants under certain letters of credit issued as part of
the aforesaid sale and leaseback transactions in the approximate
aggregate amount of $288.4 million (the "Palo Verde Letters of
<PAGE> 162
Credit"). Such issues, including any claims described in
disclosure statements and plans of reorganization filed by EPE in
the EPE Chapter 11 Case with regard to the Owner Participants and
the Palo Verde Letters of Credit, are herein called the "Owner
Participant Claims".
E. The Palo Verde Lease Litigation Defendants have
asserted various defenses, contentions and counterclaims (the
"Palo Verde Defendants' Claims"). In addition, with regard to the
Owner Participant Claims, the Owner Participants contend that
their actions surrounding the presentment and drawings of the
Palo Verde Letters of Credit, including such drawings, were
proper as a matter of law (the "Letter of Credit Defenses").
F. Pursuant to a Settlement Agreement dated as of
November 15, 1993, (including the Annexes thereto and paragraphs
12 and 13 thereof, the "Settlement Agreement"), EPE and the Owner
Participant (or a predecessor thereof) agreed to release certain
claims, effective upon the Effective Date.
IN CONSIDERATION OF THE MUTUAL AGREEMENTS CONTAINED
HEREIN, and other good and valuable consideration, the receipt of
which is hereby acknowledged, IT IS HEREBY AGREED by and among
the parties hereto as follows:
AGREEMENTS
1. Except as otherwise defined herein, all capitalized
terms used herein shall have the meanings set forth in the
Settlement Agreement.
2. The Successor Indenture Trustees, on behalf of
themselves and the Lease Debt Creditors, hereby forever release
and discharge the Owner Trustee and the Owner Participant Group
(the "Released Parties") from, and waive and relinquish, any and
all claims, demands, debts, liabilities, obligations, actions,
causes of action, suits, sums of money, accounts, reckonings,
covenants, contracts, controversies, agreements, promises and
<PAGE> 163
rights whatsoever, whenever arising, known or unknown, suspected
or unsuspected, contingent or fixed, liquidated or unliquidated,
matured or unmatured, in law, equity, bankruptcy or otherwise
(collectively, "Claims"), which the Successor Indenture Trustees
or Lease Debt Creditors ever had, now have, or hereafter can,
shall or may have against any of the Released Parties for, upon,
or by reason of any matter, cause, transaction or thing
whatsoever occurring at any time prior to the Effective Date,
including, without limitation, any Claims which the Successor
Indenture Trustees or Lease Debt Creditors ever had, now have, or
hereafter can, shall or may have against any of the Released
Parties by reason of, arising from, relating to, or in connection
with the Palo Verde Lease Litigation, the Palo Verde Letters of
Credit, the Palo Verde Defendants' Claims, or the Owner
Participant Claims, the documents listed in Schedule A to the
Third Amended Plan or the transactions contemplated by the
Participation Agreement, or based on or arising under 11 U.S.C.
Sections 502, 506, 507, 510, 544-553, inclusive, or any similar
provisions of federal or state law, and any right of indemnity,
contribution or subrogation arising therefrom or relating
thereto; excluding, however, from the foregoing any Claims of the
Successor Indenture Trustees or Lease Debt Creditors unrelated to
the Palo Verde Lease Litigation, the Palo Verde Letters of
Credit, the Palo Verde Defendants' Claims, the Owner Participant
Claims, or the transactions contemplated by the Settlement
Agreement or the Participation Agreement or the documents listed
on Schedule A to the Third Amended Plan.
3. The Owner Participant, on behalf of itself and the
Owner Participant Group, and the Owner Trustee hereby forever
release and discharge the Successor Indenture Trustees and Lease
Debt Creditors from, and waive and relinquish, any and all Claims
which the Owner Participant or FNBB or the Owner Participant
Group or the Owner Trustee ever had, now has, or hereafter can,
shall or may have against the Successor Indenture Trustees or
Lease Debt Creditors for, upon, or by reason of any matter,
cause, transaction or thing whatsoever occurring at any time
prior to the Effective Date, including, without limitation, any
claims which the Owner Participant or the Owner Participant Group
or the Owner Trustee ever had, now has, or hereafter can, shall
or may have against the Successor Indenture Trustees or Lease
Debt Creditors by reason of, arising from, relating to, or in
connection with the Palo Verde Lease Litigation, the Palo Verde
Letters of Credit, the Palo Verde Defendants' Claims, or the
Owner Participant Claims, the documents listed in Schedule A to
the Third Amended Plan or the transactions contemplated by the
<PAGE> 164
Participation Agreement, or based on or arising under 11 U.S.C.
Sections 502, 506, 507, 510, 544-553, inclusive, or any similar
provisions of federal or state law, and any right of indemnity,
contribution or subrogation arising therefrom or relating
thereto; excluding, however, from the foregoing any Claims of the
Owner Participant or FNBB or any member of the Owner Participant
Group or the Owner Trustee unrelated to the Palo Verde Lease
Litigation, the Palo Verde Letters of Credit, the Palo Verde
Defendants' Claims, the Owner Participant Claims, the
transactions contemplated by the Settlement Agreement or the
Participation Agreement or the documents listed in Schedule A to
the Third Amended Plan.
4. Each of the parties hereby acknowledges and agrees
that all Claims under Section 1542 of the California Civil Code
and any other provision of law now or hereafter enacted,
adjudicated or sought to be adjudicated relating to the release
or waiver of unknown or unspecified claims are hereby
specifically and expressly released and waived. Each of the
parties understands that Section 1542 of the California Civil
Code provides that "[a] general release does not extend to claims
which the creditor does not know or suspect to exist in his favor
at the time of executing the release, which if known by him must
have materially affected his settlement with the debtor". For
purposes of this Release, each of the parties acknowledges and
agrees that it may be considered to be both a "creditor" and a
"debtor" for all purposes and with respect to all Claims it may
now know or suspect to exist within the meaning of Section 1542
of the California Civil Code and any other provision of law now
or hereafter enacted, adjudicated or sought to be adjudicated
relating to the release or waiver of unknown or unspecified
claims.
5. This Release may be executed in two or more
counterparts, each of which shall be deemed an original, but all
of which shall constitute one and the same instrument.
6. This Release shall be binding upon the parties
hereto and their successors and assigns. Each party hereto
represents and warrants that it owns or holds all Claims
described herein which are being released hereunder.
7. This Release shall be governed in all respects,
including validity, interpretation and effect, by, and construed
and enforced under, the law of the State of New York, without
giving effect to the principles of conflict of laws thereof.
<PAGE> 165
IN WITNESS WHEREOF, the parties hereto have duly
authorized and executed this Release as of the date first above
written.
PALATINE HILLS LEASING, INC.,
by
Name:
Title:
THE FIRST NATIONAL BANK OF BOSTON, as
Owner Trustee,
by
Name:
Title:
LASALLE NATIONAL BANK, as Successor
Indenture Trustee,
by
Name:
Title:
HARRIS TRUST AND SAVINGS BANK, as
Successor Indenture Trustee,
by
Name:
Title:
<PAGE> 166
ANNEX E
TOLLING AGREEMENT
This Tolling Agreement is made and entered into as of
November , 1993 by and among EL PASO ELECTRIC COMPANY, a Texas
corporation ("EPE"), PALATINE HILLS LEASING, INC., a Delaware
corporation (the "Owner Participant"), THE FIRST NATIONAL BANK OF
BOSTON (in its individual capacity, "FNBB"), as trustee under a
trust agreement with the Owner Participant (the "Owner Trustee"
and, collectively as trustee under trust agreements with all the
owner participants, the "Owner Trustees"), HARRIS TRUST AND
SAVINGS BANK, as Successor Trustee under indentures with certain
of the Owner Trustees, and LASALLE NATIONAL BANK, as Successor
Trustee under indentures with certain of the Owner Trustees
(collectively, the "Successor Indenture Trustees").
RECITALS
A. EPE is the debtor in a case pending under Chapter 11
of Title 11 of the United States Code (the "Bankruptcy Code") in
the United States Bankruptcy Court for the Western District of
Texas (the "Bankruptcy Court"), which case has been assigned Case
No. 92-10148-FM (the "EPE Chapter 11 Case").
B. EPE, the Owner Participant and the Owner Trustee are
parties to various agreements, documents and instruments that
evidence or relate to the sale and leaseback by EPE, in separate
transactions with the Owner Participants and Owner Trustees, of
EPE's entire undivided interest in Unit 2 of the Palo Verde
Nuclear Generating Station ("Palo Verde") and approximately 39.5%
of EPE's undivided interest in Unit 3 of Palo Verde and certain
common plant and other related assets.
C. FNBB, in its capacity as Owner Trustee for each of
the Owner Participants (other than DBP Corp.), DBP Corp. and the
Successor Indenture Trustees have filed proofs of claim in the
EPE Chapter 11 Case (the "Proofs of Claim").
D. On September 9, 1992, EPE commenced an adversary
proceeding against FNBB, in its capacity as Owner Trustee for
each of the Owner Participants (other than DBP Corp.), DBP Corp.
and the Successor Indenture Trustees (the "Palo Verde Lease
Litigation Defendants"), which case has been assigned Adversary
Proceeding No. 92-1285-FM (the "Palo Verde Lease Litigation").
The Proofs of Claim, and any objections by EPE thereto, have been
consolidated into the Palo Verde Lease Litigation. In addition,
in discussions between the parties, certain issues have been
raised surrounding the presentment and drawings by the Owner
Participants under certain letters of credit issued as part of
the aforesaid sale and leaseback transactions in the approximate
aggregate amount of $288.4 million (the "Palo Verde Letters of
Credit"). Such issues, including any claims described in
disclosure statements and plans of reorganization filed by EPE in
<PAGE> 167
the EPE Chapter 11 Case with regard to the Owner Participants and
the Palo Verde Letters of Credit, are herein called the "Owner
Participant Claims".
E. The Palo Verde Lease Litigation Defendants have
asserted various defenses, contentions and counterclaims (the
"Palo Verde Defendants' Claims"). In addition, with regard to the
Owner Participant Claims, the Owner Participants contend that
their actions surrounding the presentment and drawings of the
Palo Verde Letters of Credit, including such drawings, were
proper as a matter of law (the "Letter of Credit Defenses").
F. The Third Amended Plan contemplates, under certain
circumstances, a release of all claims relating to the Palo Verde
Lease Litigation, the Palo Verde Defendants' Claims, the Owner
Participant Claims, and the Letter of Credit Defenses, which
release would be subject to and effective only upon the Effective
Date.
G. The parties have entered into a settlement agreement
of even date herewith (the "Settlement Agreement"), which will
result in a mutual release (such release to become effective only
on the occurrence of the Effective Date) of all Claims between
EPE, on one hand, and the Owner Participant and Owner Trustee, on
the other hand, and for the cessation of litigation in the
interim.
H. This Tolling Agreement is intended to ensure that
the parties' claims against one another (and defenses thereto)
are preserved to the fullest extent pending the occurrence of the
Effective Date and the execution, delivery and effectiveness of
the mutual releases contemplated under the Settlement Agreement,
and that the parties are not prejudiced by the deferral of
litigation in accordance with the Settlement Agreement.
IN CONSIDERATION OF THE MUTUAL AGREEMENTS CONTAINED
HEREIN, and other good and valuable consideration, the receipt of
which is hereby acknowledged, IT IS HEREBY AGREED by and between
the parties hereto as follows:
1. All capitalized terms used but not otherwise defined
herein shall have the meanings assigned to such terms in the
Settlement Agreement.
2. All potential causes of action and claims which EPE
or the Lease Debt Creditors could have asserted as of the date
hereof against the Owner Participant or against the Owner Trustee
(and any defenses thereto) shall survive until the termination of
this Tolling Agreement, and no such cause of action or claim (or
defenses thereto) shall in any manner be extinguished or impaired
in any manner by reason of any applicable statute of limitations,
contractual restriction, equitable doctrine or other basis under
federal or state law, including Section 108 of the Bankruptcy
Code, which may limit EPE's ability to commence or prosecute such
<PAGE> 168
cause of action or claim (or any Owner Participant's or Owner
Trustee's defenses thereto) by reason of a lapse of time,
inaction or failure to commence an action or give any notice as
of a particular date during the term of this Agreement; provided,
however, that nothing herein shall revive, to the extent barred
or otherwise non-actionable, any cause of action or claim
(including any right to relief or element of damage thereof) (or
any defense) that is now barred or otherwise non-actionable.
3. All potential causes of action and claims which the
Owner Participant or the Owner Trustee could have asserted as of
the date hereof against EPE or the Lease Debt Creditors (and any
defenses thereto) shall survive until the termination of this
Tolling Agreement, and no such cause of action or claim (or
defenses thereto) shall in any manner be extinguished or impaired
in any manner by reason of any applicable statute of limitations,
contractual restriction, equitable doctrine or other basis under
federal or state law, including Section 108 or Section 362 of the
Bankruptcy Code, which may limit the ability of the Owner
Participant or Owner Trustee to commence or prosecute such cause
of action or claim (or any Owner Participant's or Owner Trustee's
defenses thereto) by reason of a lapse of time, inaction, or
failure to commence an action or give any notice as of a
particular date during the term of this Agreement; provided,
however, that nothing herein shall revive, to the extent barred
or otherwise non-actionable, any cause of action or claim
(including any right to relief or element of damage thereof) (or
any defense) that is now barred or otherwise non- actionable.
4. All potential causes of action and claims which EPE
could have asserted as of the date hereof against the Lease Debt
Creditors (and any defenses thereto) shall survive until the
termination of this Tolling Agreement, and no such cause of
action or claim (or defenses thereto) shall in any manner be
extinguished or impaired in any manner by reason of any
applicable statute of limitations, contractual restriction,
equitable doctrine or other basis under federal or state law,
including Section 108 of the Bankruptcy Code, which may limit the
ability of EPE to commence or prosecute such cause of action or
claim (or any Lease Debt Creditor's defenses thereto) by reason
of a lapse of time, inaction, or failure to commence an action or
give any notice as of a particular date during the term of this
Agreement; provided, however, that nothing herein shall revive,
to the extent barred or otherwise non-actionable, any cause of
action or claim (including any right to relief or element of
damage thereof) (or any defense) that is now barred or otherwise
non-actionable.
5. This Tolling Agreement shall terminate, unless
extended by the parties hereto, on the earliest of (a) 30 days
after written notice by EPE or the Owner Participant of
<PAGE> 169
termination of the Settlement Agreement, (b) the Effective Date
or (c) September 15, 1997.
6. This Tolling Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
instrument.
7. This Tolling Agreement shall be governed in all
respects, including validity, interpretation and effect, by, and
construed and enforced under, the law of the state of New York,
without giving effect to the principles of conflict of laws
thereof.
8. Each party hereto covenants that it has the
requisite authority to enter into and be bound by the terms of
this Tolling Agreement.
9. This Tolling Agreement shall be binding upon the
parties hereto and their successors and assigns.
10. This Tolling Agreement shall not be binding unless
similar tolling agreements are executed and delivered by each of
the Owner Participants and the Successor Indenture Trustees.
11. This Tolling Agreement may not be modified in whole
or in part except pursuant to a written agreement among all of
the parties hereto.
IN WITNESS WHEREOF, the parties hereto have duly
authorized and executed this Tolling Agreement as of the date
first above written.
EL PASO ELECTRIC COMPANY,
by
Name:
Title:
PALATINE HILLS LEASING, INC.,
by
Name:
Title:
<PAGE> 170
THE FIRST NATIONAL BANK OF BOSTON,
as Owner Trustee,
by
Name:
Title:
HARRIS TRUST AND SAVINGS BANK, as
Successor Trustee and on behalf of
the Lease Debt Creditors for Unit 3
by
Name:
Title:
LASALLE NATIONAL BANK, as Successor
Trustee and on behalf of the Lease Debt
Creditors for Unit 2
by
Name:
Title:
<PAGE> 171
ANNEX F
EXISTING CLAIMS
1. Claims by the State of Arizona regarding
transaction privilege taxes.
2. Unpaid fees and expenses of the Owner Trustee
through and including the Effective Date.
<PAGE> 172
ANNEX G
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 173
SETTLEMENT AGREEMENT
BETWEEN
EL PASO ELECTRIC COMPANY
AND
PALO VERDE LEASING CORPORATION
November 1993
Michael Paul Kirschner, Mediator
Hastie & Kirschner
Attorneys and Counselors at Law
3000 First Oklahoma Tower * 210 West Park Avenue
Oklahoma City, Oklahoma 73102-5673
Telephone (405) 239-6404
Telecopier (405) 239-6403
<PAGE> 174
SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT is entered into as of
November , 1993, between EL PASO ELECTRIC COMPANY, a Texas
corporation, debtor and debtor in possession ("EPE"), and PALO
VERDE LEASING CORPORATION, a Delaware corporation (the "Owner
Participant").
IN CONSIDERATION OF THE MUTUAL AGREEMENTS CONTAINED
HEREIN, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, IT IS HEREBY
AGREED by and between the parties hereto as follows:
DEFINITIONS
1. As used herein, the following terms shall have the
following meanings:
"Bankruptcy Court" shall mean the United States
Bankruptcy Court for the Western District of Texas, or such other
court as shall have original jurisdiction over the Case.
"Case" shall mean the proceeding filed by EPE under
Title 11 of the United States Code and bearing Bankruptcy Court
case number 92-10148-FM.
"Claims" shall have the meaning assigned to such term
in the Release.
"Confirmation Order" shall mean an order confirming an
EPE Plan.
"CSW" shall mean Central and South West Corporation.
"Effective Date" shall mean the date on which an EPE
Plan incorporating, except in immaterial respects, the terms and
conditions of this Settlement Agreement shall become effective
according to such EPE Plan's terms.
"EPE Group" shall mean EPE and (i) each and every
person who controls EPE, is controlled by EPE or is under common
control with EPE (the "EPE Affiliated Group"); (ii) any
predecessor, successor or assign of any person included within
the EPE Affiliated Group; (iii) any Chapter 7 or Chapter 11
Trustee appointed by the Bankruptcy Court or any other court with
regard to any person included within the EPE Affiliated Group;
(iv) the respective present and former agents, directors,
officers, employees, advisors, attorneys and representatives of
any person included within the EPE Affiliated Group; (v) the
respective shareholders and creditors of the EPE Affiliated
Group; and (vi) in the case of any individuals falling within the
<PAGE> 175
scope of (iv) or (v), their respective heirs, receivers,
conservators, beneficiaries, executors, administrators,
successors and assigns. The term EPE Group shall not include CSW.
"EPE Plan" shall mean (i) the Modified Third Amended
Plan of Reorganization, filed on September 15, 1993 in the Case
(the "Third Amended Plan"), (ii) any other plan of reorganization
filed in the Case pursuant to which EPE, with its consent, is to
be acquired by CSW or a CSW affiliate, by merger or otherwise,
and (iii) any other plan of reorganization filed in the Case
supported by or acceptable to EPE if, within 10 days of the
filing thereof, EPE fails to provide written notice to the Owner
Participant that such plan does not constitute an EPE Plan for
purposes of this Settlement Agreement.
"Excepted Payments" shall have the meaning assigned to
such Term in Appendix A to the Participation Agreement.
"Facility Lease" shall have the meaning assigned to
such term in Appendix A to the Participation Agreement.
"Lease Debt Creditors" shall mean Harris Trust and
Savings Bank, as Successor Trustee for those certain $200,000,000
Secured Lease Obligation Bonds Series 1988, and any holders of
such bonds, and LaSalle National Bank, as Successor Trustee for
those certain $396,328,000 Lease Obligation Bonds Series 1986 and
those certain $146,305,000 Lease Obligation Bonds Series 1986A
(the Successor Trustees, collectively, the "Successor Indenture
Trustees"), and any holders of such bonds.
"Owner Participant Group" shall mean the Owner
Participant and (i) each and every person who controls the Owner
Participant, is controlled by the Owner Participant or is under
common control with the Owner Participant (the "Owner Participant
Affiliated Group"); (ii) any predecessor, successor or assign of
any person included within the Owner Participant Affiliated
Group; (iii) the respective present and former agents, directors,
officers, employees, advisors, attorneys and representatives of
any person included within the Owner Participant Affiliated
Group; (iv) the respective shareholders and creditors of the
Owner Participant Affiliated Group; (v) any Chapter 7 or Chapter
11 Trustee appointed by a court with regard to any person
included within the Owner Participant Affiliated Group; and (vi)
in the case of any individuals falling within the scope of (iii)
or (iv), their respective heirs, receivers, conservators,
beneficiaries, executors, administrators, successors and assigns.
"Owner Trustee" shall mean The First National Bank of
Boston ("FNBB"), as trustee under a trust agreement with the
Owner Participant.
<PAGE> 176
"Palo Verde Leases" shall mean, collectively, the
Facility Lease and the facility leases, as amended, between EPE
and FNBB (as trustee under separate trust agreements with the
other owner participants) with respect to the Arizona Nuclear
Power Project.
"Palo Verde Lease Litigation" shall mean an adversary
proceeding commenced on September 9, 1992 by EPE against FNBB, in
FNBB's capacity as Owner Trustee for each of the owner
participants (other than DBP Corp.), DBP Corp. and the Successor
Indenture Trustees, which case has been assigned Adversary
Proceeding No. 92- 1285-FM by the Bankruptcy Court.
"Palo Verde Letters of Credit" shall have the meaning
assigned to such term in the Release.
"Participation Agreement" shall mean the Participation
Agreement, as amended, among EPE, the Owner Participant and
others.
"Real Property Interest" shall have the meaning
assigned to such term in Appendix A to the Participation
Agreement.
"Release" shall mean the release in the form of Annex A
hereto.
"Settlement Agreement" shall mean this Settlement
Agreement, including all Annexes hereto.
"Tax Indemnification Agreement" shall have the meaning
assigned to such term in Appendix A to the Participation
Agreement.
"Transaction Documents" shall have the meaning assigned
to such term in Appendix A to the Participation Agreement.
"Trust Estate" shall have the meaning assigned to such
term in Appendix A to the Participation Agreement.
"Undivided Interest" shall have the meaning assigned to
such term in Appendix A to the Participation Agreement.
RIGHTS AND OBLIGATIONS PRIOR TO THE EFFECTIVE DATE
2. EPE's plan of reorganization will provide for the
terms and conditions set forth below (and EPE will not file,
pursue or support any plan that contains provisions inconsistent
with, or that does not embody the terms and conditions of, this
Settlement Agreement):
a Claims of the EPE Group, on the one hand, and the
Owner Participant Group and the Owner Trustee, on
<PAGE> 177
the other hand, against one another shall be
mutually released pursuant to the Release (to the
extent provided therein), which Release will be
executed, delivered, and effective solely as of
the Effective Date.
b Other than as provided in this Settlement
Agreement, the Owner Participant and the Owner
Trustee shall receive no distribution, recovery or
other consideration under an EPE Plan except that,
within 10 days of the date of entry of the
Confirmation Order (but not later than December
31, 1993 if such date occurs in 1993), EPE will
pay all fees, costs and expenses incurred by or on
behalf of the Owner Participant or Owner Trustee
through and including the date of entry of the
Confirmation Order in connection with the Palo
Verde Litigation, the Case, the Participation
Agreement or the transactions contemplated hereby
or by any of the foregoing (the amount of which as
of October 1, 1993 is $ 284,541.38).
c As of the Effective Date, (i) all right, title and
interest of the Owner Participant in the Trust
Estate and certain Excepted Payments shall be
conveyed to EPE or its designee, if paragraph 12.a
hereof is applicable, or (ii) if paragraph 12.b
hereof is applicable, there will be a conveyance
or transfer of the Trust Estate to EPE or EPE's
designee.
d As of the Effective Date, the receipt of any value
or consideration under any EPE Plan shall be
deemed to be (i) a release of the Owner
Participant and Owner Trustee by such recipient
of all claims related to the Palo Verde Leases,
the Palo Verde Letters of Credit, the documents
listed in Schedule A to the Third Amended Plan,
and the transactions contemplated hereby and
thereby, and (ii) a release of such recipient by
the Owner Trustee and Owner Participant of all
such claims. EPE shall defend such provisions
against any objections thereto. If the deemed
release described in this paragraph is not
approved by the Bankruptcy Court as to third
parties other than the Lease Debt Creditors and
the issuers of or participants in the Palo Verde
Letters of Credit, EPE may modify the EPE Plan
accordingly as long as the Confirmation Order
provides that the deemed release is effective as
<PAGE> 178
to the Lease Debt Creditors and the issuers of and
participants in the Palo Verde Letters of Credit
and that, at the Effective Date, all third party
claims against the Owner Participant and Owner
Trustee which are derivative of the claims of EPE
will be extinguished.
3. The Owner Participant and Southwestern Public
Service Company ("SPS") have entered into a letter of
understanding dated July 13, 1993. The Owner Participant will not
take any position as to the termination of EPE's exclusivity
through the filing of additional pleadings in the Case or by the
making of any statement in the Bankruptcy Court in support of any
motion to terminate EPE's exclusivity, unless EPE, in
contravention of its agreement not to do so, files, pursues or
supports confirmation of a plan of reorganization which does not
incorporate the terms of this Settlement Agreement or which
materially adversely affects the Owner Participant or any of its
affiliates.
4. The Owner Participant will vote to accept and/or
will cause the Owner Trustee to vote to accept the Third Amended
Plan and will vote to accept and/or cause the Owner Trustee to
vote to accept any other EPE Plan that is (x) consistent with and
incorporates the terms of this Settlement Agreement and (y) does
not materially adversely affect the Owner Participant or any of
its affiliates. The Owner Participant will not vote to reject or
object to, and will cause the Owner Trustee not to vote to reject
or object to, the Third Amended Plan, and will not vote to reject
or object to, and will cause the Owner Trustee not to vote to
reject or object to, any other EPE Plan that (i) is consistent
with and incorporates the terms of this Settlement Agreement and
(ii) does not materially adversely affect the Owner Participant
or any of its affiliates. Nothing in this Settlement Agreement
will limit the right of the Owner Participant or Owner Trustee or
any member of the Owner Participant Group to vote to accept or
reject or object to (A) any plan that is (a) inconsistent with or
does not incorporate the terms of this Settlement Agreement or
(b) materially adversely affects the Owner Participant or any of
its affiliates or (B) any plan other than an EPE Plan. For
purposes of this paragraph 4, it will be conclusively presumed
that an EPE Plan does not materially adversely affect the Owner
Participant or any of its affiliates if the Owner Participant
fails to provide EPE with written notice to the contrary within
20 days after receipt of such EPE Plan. EPE will not and the
Owner Participant will not, and will not direct the Owner Trustee
to, file any pleading in the Case that is contrary to or
inconsistent with the terms and conditions contained herein.
<PAGE> 179
5. The Owner Participant agrees not to transfer, prior
to the Effective Date, any Claim against the EPE Group or
interest in the Facility Lease to anyone other than a person that
has agreed to be bound by this Settlement Agreement; provided,
however, that upon any withdrawal, termination or revocation of
the Third Amended Plan, the Owner Participant may thereafter
transfer any Claim against the EPE Group or interest in the
Facility Lease to anyone whether or not such person agrees to be
bound by this Settlement Agreement, and if such person has not
agreed to be so bound, this Settlement Agreement shall
automatically terminate without further action by any party
hereto. EPE agrees not to transfer, prior to the Effective Date,
any Claim against the Owner Participant Group or Owner Trustee or
interest in the Facility Lease.
6. EPE shall disclose the contents of this Settlement
Agreement, pursuant to Section 3.14B.5. of the Third Amended
Plan. Between the date of entry of the Confirmation Order and the
Effective Date, the Owner Participant shall have all of the
rights accorded to the Oversight Committee (as defined in the
Third Amended Plan) pursuant to Section 5.1.E of the Third
Amended Plan.
7. Until the Effective Date occurs, EPE will not pursue
the Palo Verde Lease Litigation or commence any litigation or
otherwise file any Claim against the Owner Participant or Owner
Trustee and EPE will oppose any motion or other action by any
other person to pursue the Palo Verde Lease Litigation or
commence or file any such litigation or Claim or intervene
therein; provided, however, that nothing herein shall preclude
EPE from (i) taking steps which EPE reasonably deems necessary to
preserve its Claims and its ability to collect on such Claims, if
successful, and to protect EPE's rights in the event of the
proposed dissolution of the Owner Participant or Owner Trustee in
a bankruptcy or insolvency proceeding of the Owner Participant or
Owner Trustee (and EPE hereby agrees that EPE will not file nor
participate in the filing of any involuntary bankruptcy or
insolvency petition against the Owner Participant or Owner
Trustee) or (ii) seeking discovery, at EPE's own expense, against
the Owner Participant or Owner Trustee in connection with a plan
of reorganization proposed by or on behalf of SPS, or any other
plan of reorganization other than an EPE Plan, to the extent EPE
is otherwise entitled to request such discovery from the
Bankruptcy Court.
8. Until the Effective Date occurs, the Owner
Participant will not, and will not direct the Owner Trustee to,
pursue the Palo Verde Lease Litigation or commence any litigation
or file any additional Claim against EPE and at EPE's request,
the Owner Participant will, and/or will cause the Owner Trustee
to, file a pleading which will support EPE's opposition to any
motion or other action by any other person to pursue the Palo
Verde Lease Litigation or commence or file any such litigation or
Claim or intervene therein; provided, however, that nothing
<PAGE> 180
herein shall preclude the Owner Participant or Owner Trustee from
(i) taking steps which the Owner Participant or Owner Trustee, as
the case may be, reasonably deems necessary to preserve the
Claims of such Owner Participant or Owner Trustee and to protect
the rights of such Owner Participant or Owner Trustee in the
event of the proposed dissolution of EPE or (ii) opposing EPE's
pursuit of any discovery referred to in paragraph 7 hereof.
9. Within 10 days after the filing of any plan, EPE
will give the Owner Participant written notice of whether such
plan constitutes an EPE Plan referred to in clause (iii) of the
definition thereof. In the absence of such notice, such plan
shall be deemed to be an EPE Plan.
10. Prior to the Effective Date, EPE shall seek and
obtain all governmental approvals necessary to effect the
transactions contemplated hereby. The Owner Participant agrees to
cooperate with EPE, at EPE's expense, in obtaining such approvals
prior to the Effective Date.
11. Concurrently with the execution and delivery of
this Settlement Agreement, the Owner Participant, the Owner
Trustee, EPE and the Successor Indenture Trustees shall execute
and deliver a Tolling Agreement in the form of Annex E hereto.
RIGHTS AND OBLIGATIONS ON AND AFTER THE EFFECTIVE DATE
12. Subject to the satisfaction of the terms and
conditions contained in this Settlement Agreement, including
paragraph 13, on or as of the Effective Date:
<PAGE> 181
a The Owner Participant will, subject to paragraph
12.b, transfer to EPE or, if EPE so requests,
EPE's designee, all of the Owner Participant's
right, title and interest in the Trust Estate and
certain Excepted Payments by the execution and
delivery of a Bill of Sale and Assignment
substantially in the form of Annex B hereto.
b At the request and expense of EPE, the Owner
Participant will, at the election of EPE, in lieu
of or in addition to the transfer referred to in
paragraph 12.a, (i) consent to the conveyance or
transfer of the Trust Estate to EPE or, if EPE so
requests, EPE's designee, and (ii) direct the
Owner Trustee to effect such conveyance or
transfer, which obligations shall be subject to
(a) EPE having obtained the required consent, if
any, of the applicable Successor Indenture Trustee
or a binding order (which has not been stayed) of
a court of competent jurisdiction effectively
<PAGE> 182
overriding the requirement, if any, of such
consent, (b) such conveyance and transfer
complying with applicable law and third party
rights, if any, or EPE having obtained a binding
order (which has not been stayed) of a court of
competent jurisdiction effectively overriding any
requirement of such compliance, and (c) EPE having
provided such indemnities to the Owner Participant
and the Owner Trustee as either of them shall
reasonably request regarding the conveyance or
transfer set forth in this paragraph 12.b.
c The parties hereto and the Owner Trustee shall
execute and deliver the Release, provided,
however, that nothing herein or in the Release
shall release the Claims held by The First
National Bank of Chicago against the EPE Group, or
the Claims of the EPE Group against The First
National Bank of Chicago, as the case may be,
arising with respect to (i) any holding by The
First National Bank of Chicago of reimbursement
obligations with respect to the Palo Verde Letters
of Credit, (ii) its status as a Lease Debt
Creditor or (iii) its status as a general
unsecured creditor of EPE other than with respect
to claims which would be classified as Class 12
Claims pursuant to the Third Amended Plan.
d Reorganized EPE shall deliver to the Owner
Participant on the Effective Date an executed
letter in the form of Annex G hereto. The form and
contents of Annex G shall not be disclosed prior
to the Effective Date to any person or entity,
except that a copy thereof shall be provided to
the Bankruptcy Court under seal and to the
Successor Indenture Trustee (after execution
thereof). In the event the Effective Date does not
occur, neither the Owner Participant nor any other
person or entity shall refer to or otherwise
disclose the contents of Annex G, or its inclusion
in this Settlement Agreement, for any purpose.
e If paragraph 12.a is applicable, EPE or its
designee shall become the "Owner Participant"
under the documents described in Schedule A to the
Third Amended Plan for all purposes, and, if
paragraph 12.b is applicable, such documents shall
be terminated, altered, or amended in such manner
as the parties hereto shall agree, consistent with
the terms of this Settlement Agreement.
f Section 17 of the Participation Agreement shall
continue in full force and effect, but only with
<PAGE> 183
respect to EPE's obligations under the first and
fifth sentences in the first paragraph of Section
10(b)(3)(viii) and the entirety of Sections 13
(insofar as indemnification is sought for Claims
(as defined in the Participation Agreement)
asserted against the Owner Participant, the Owner
Trustee, the First National Bank of Boston (in its
individual capacity), the Trust (as defined in the
Participation Agreement), the Trust Estate, or the
Lease Indenture Estate (as defined in the
Participation Agreement), or any Affiliate (as
defined in the Participation Agreement),
successor, assign, agent, officer, director or
employee of any of the foregoing, by a person
other than the Owner Participant, the Owner
Trustee or any successor or assign thereof) and 16
thereof and the entire Tax Indemnification
Agreement (it being understood that the exclusions
from the general tax indemnity provisions of
Section 13(b) of the Participation Agreement with
respect to a "voluntary transfer" and with respect
to a "transferee" or a "subsequent transferee"
shall not apply to the transactions contemplated
by this Settlement Agreement); provided, however,
that in order to prevent a double payment with
respect to a Loss or Losses (as defined in the Tax
Indemnification Agreement), the aggregate amount
of such payments shall be reduced (without
duplication) by the appropriate portion of the
amount drawn by the Owner Participant under the
corresponding Palo Verde Letter of Credit to the
extent such portion is attributable (under
calculations performed in accordance with industry
practice) to the same adverse tax consequences
constituting such Loss or Losses. It is understood
that EPE's obligations under this paragraph 12.f
shall not extend to the payment of Basic Rent,
Fair Market Rental Value, Fair Market Sales Value,
Casualty Value, Special Casualty Value,
Termination Value, Enhanced Casualty Value or
Modified Special Casualty Value (as such terms are
defined in the Transaction Documents and
collectively referred to herein as "Scheduled
Amounts") or any amounts measured by Scheduled
Amounts or Supplemental Rent (to the extent
attributable to Scheduled Amounts or Excepted
Payments which are Assigned Property (as defined
in the Bill of Sale and Assignment attached hereto
as Annex B)). Notwithstanding anything contained
in this Settlement Agreement or the Release, EPE
shall continue to comply with Section 10(a)(2)(ii)
of the Facility Lease except that any notices or
certificates described in Section 10(a)(1)(i)(E)
of the Facility Lease (as such section relates to
<PAGE> 184
Section 10(a)(2)(ii)) must be received by the
Owner Participant in order to be effective against
the Owner Participant but need not be received by
or delivered to the Indenture Trustee.
g EPE will pay any balance due of the amounts
described in paragraph 26 hereof.
13. The terms and conditions referred to in paragraph
12 include the following:
a The Confirmation Order shall (i) provide that an
Order of Dismissal with Prejudice in the form
attached hereto as Annex C shall be entered on or
after the Effective Date and a copy provided to
the Owner Participant and to the Successor
Indenture Trustee and (ii) comply with the last
sentence of paragraph 2.d, if applicable;
b The Owner Participant, the Owner Trustee and the
Successor Indenture Trustees shall have executed
and delivered mutual releases substantially in the
form attached hereto as Annex D and an order of
the Bankruptcy Court complying with either the
first or the last sentence of paragraph 2.d shall
be in full force and effect and shall not have
been stayed;
c This Settlement Agreement shall be in full force
and effect and neither the Owner Participant nor
EPE shall be in default of any term or condition
hereof;
d All governmental approvals, if any, necessary to
effect the transactions contemplated hereby shall
have been obtained and be in full force and
effect;
e All consents of third parties, if any, necessary
to effect the actions contemplated above shall
have been obtained and be in full force and
effect;
f All documentation for the transactions
contemplated by this paragraph 13 and paragraphs
8, 12.a, 12.b, 12.e and 26 shall be reasonably
satisfactory in form and substance to the Owner
Participant and EPE; and
g The Owner Participant and the Owner Trustee shall
have received all amounts, if any, payable
pursuant to paragraphs 2.b, 18 and 26 hereof.
<PAGE> 185
Conditions d and e above may be satisfied by the entry
of a binding order (which has not been stayed) of a court of
competent jurisdiction effectively overriding the requirement, if
any, of obtaining any third party consents or governmental
approvals referred to in such conditions.
TERMINATION AND EFFECTIVENESS
14. This Settlement Agreement may be terminated (a) on
30 days' written notice by either EPE or the Owner Participant if
no EPE Plan referred to in clause (i) or (ii) of the definition
thereof is being pursued and, in the case of termination by EPE,
EPE certifies in the termination notice that no EPE Plan referred
to in clause (i) or (ii) of the definition thereof is then
contemplated by EPE, or (b) on 5 days' written notice by either
the Owner Participant or EPE if EPE or the Owner Participant,
respectively, fails to comply with any term or condition of this
Settlement Agreement and does not cure such failure within such 5
days or (c) on 5 days' written notice from EPE that a settlement
agreement with one of the other owner participants with an
interest in Unit 3 of the Palo Verde Nuclear Generating Station
has terminated pursuant to paragraph 5 of such settlement
agreement and that EPE is terminating all of the settlement
agreements with each of the owner participants with an interest
in such Unit.
15. This Settlement Agreement shall not be binding upon
any of the parties hereto until EPE and all of the owner
participants execute settlement agreements in a form similar to
this Settlement Agreement. This Settlement Agreement shall
terminate automatically without further action by any party
hereto if the Bankruptcy Court in the Case declines to approve
the settlement contained in this Settlement Agreement or any such
other settlement agreement.
16. Upon any termination of this Settlement Agreement,
all obligations of the parties hereto (except for the last 2
sentences of paragraph 12.d) shall cease.
REPRESENTATIONS AND WARRANTIES
17. EPE represents and warrants that no modification to
the merger agreement between EPE and CSW is necessary to
effectuate or consummate this Settlement Agreement.
18. Each party hereto represents and warrants that it
owns and has not transferred any of the Claims described in the
Release as being released by it or any of its interests in the
Facility Lease. Except as set forth in Annex F hereto, to the
knowledge of the Owner Participant, there exists no basis upon
which the Owner Participant, as of the date of this Settlement
Agreement, may assert any Claims against EPE, other than any such
Claims which will be extinguished pursuant to the Release. To the
<PAGE> 186
knowledge of EPE, there exists no basis upon which EPE, as of the
date of this Settlement Agreement, may assert any Claim against
the Owner Participant, other than any such Claims which will be
extinguished pursuant to the Release. EPE shall pay all amounts
due with respect to the items set forth on Annex F irrespective
of whether such amounts are already incurred, invoiced or
assessed or arise hereafter.
19. Each party hereto agrees that the Third Amended
Plan (i) complies with the terms and conditions of this
Settlement Agreement, and (ii) does not materially adversely
affect the Owner Participant or any of its affiliates for
purposes of paragraph 4 hereof.
MISCELLANEOUS
20. Nothing in this Settlement Agreement shall operate
as an admission of liability or admission as to any issue by any
party, and this Settlement Agreement (and all negotiations,
discussions and drafts relating thereto) shall be subject to the
provisions of Federal Rule of Evidence 408 and comparable
provisions of state law.
21. This Settlement Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
instrument.
22. This Settlement Agreement shall be governed in all
respects including validity, interpretation and effect, by, and
construed and enforced under, the law of the State of New York,
without giving effect to the principles of conflicts of law
thereof.
23. This Settlement Agreement is enforceable only by
the parties hereto and the Owner Trustee; provided, however,
that, after the Effective Date, any person who is a beneficiary
of a release (including the Release) contemplated by this
Settlement Agreement shall be entitled to enforce the provisions
of such release.
24. In addition to all other rights and remedies
provided in this Settlement Agreement, EPE and the Owner
Participant may (subject to any restrictions contained in this
Settlement Agreement) exercise any other right or remedy that may
be available under applicable law or proceed (or the Owner
Trustee may proceed) by appropriate court action to enforce the
terms hereof. The failure or delay of EPE or the Owner
Participant in exercising any right granted hereunder upon the
occurrence of any of the contingencies set forth herein shall not
constitute a waiver of any such right upon the continuance or
recurrence of any such contingencies or similar contingencies and
any single or partial exercise of any particular right by EPE or
<PAGE> 187
the Owner Participant shall not exhaust the same or constitute a
waiver of any other right provided herein. No remedy under this
Settlement Agreement is intended to be exclusive, but each shall
be cumulative and in addition to any other remedy provided
hereunder or otherwise available to EPE or the Owner Participant
at law or in equity (subject to any restrictions contained in
this Settlement Agreement). Notwithstanding the foregoing, the
parties agree that in the event of a breach of this Settlement
Agreement, money damages will not be adequate to compensate the
non-breaching party, and, accordingly, either party or the Owner
Trustee may seek to specifically enforce the provisions of this
Settlement Agreement.
25. Except as otherwise specifically provided herein,
this Settlement Agreement shall be binding on all successors and
assigns of the parties hereto.
26. The parties shall cooperate with one another to
execute and deliver such other documents and to take such further
actions as shall be necessary or appropriate to effectuate the
terms hereof; provided, however, that the Owner Participant and
the Owner Trustee shall each be reimbursed by EPE for its
reasonable expenses after the date of entry of the Confirmation
Order related to the execution and delivery of any such other
documents and the taking of any such further actions by the Owner
Participant or the Owner Trustee.
27. The descriptive headings of the paragraphs of this
Settlement Agreement are for convenience only and will not be
used in the construction of the content of this Settlement
Agreement.
28. Any notice required or permitted to be given by any
provision of this Settlement Agreement will be in writing and
will be deemed to have been given when delivered personally or by
facsimile, receipt confirmed, to the party designated to receive
such notice or on the date following the day sent by overnight
courier or on the 3rd business day after the same is sent by
certified mail, postage and charges prepaid, directed to the
following addresses or to such other additional addresses as any
party might designate by written notice to the other party:
El Paso Electric Company: El Paso Electric Company
Mills Building
303 North Oregon
El Paso, Texas 79901
Attention:
Chief Executive Officer
and Chairman of the Board
Facsimile: (915) 521-4754
<PAGE> 188
With Copy to: Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: Shalom L. Kohn, Esq.
Facsimile: (312) 853-7312
With Copy to: Milbank, Tweed, Hadley & McCloy
One Chase Manhattan Plaza
New York, New York 10005
Attention: Joris M. Hogan, Esq.
Facsimile: (212) 530-5219
Owner Participant: Palo Verde Leasing Corporation
One First National Plaza
Mail Suite 0502, 17th Floor
Chicago, Illinois 60670-0502
Attention: Maurice Moore,
President
Facsimile: (312) 732-2231
With Copy to: Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Attention: Richard M. Allen,
Esq.
Facsimile: (212) 474-3700
Parties to this Settlement Agreement shall be entitled
to conclusively rely on any notice given in the foregoing manner
to the parties at the addresses reflected above, unless and until
a different address or facsimile number is provided to all
parties and persons listed above. Rejection or refusal to accept,
or inability to deliver because of changed addresses or because
no notice of changed address was given, shall be deemed a receipt
of such notice.
IN WITNESS WHEREOF, the parties hereto have duly
authorized and executed this Settlement Agreement on the date
first above written.
EL PASO ELECTRIC COMPANY,
by /s/
Name: David H. Wiggs, Jr.
Title: Chairman and CEO
<PAGE> 189
PALO VERDE LEASING CORPORATION,
by /s/
Name:Maurice E. Moore
Title:President
Annex A: Form of Release and Agreement among EPE, Owner
Participant and Owner Trustee
Annex B: Form of Bill of Sale and Assignment
Annex C: Form of Order of Dismissal with Prejudice
Annex D: Form of Release and Agreement among Owner
Participant, Owner Trustee, and Successor Indenture
Trustees
Annex E: Form of Tolling Agreement
Annex F: Existing Claims
Annex G: Form of Letter re Causes of Action
<PAGE> 190
ANNEX A
RELEASE AND AGREEMENT
THIS RELEASE AND AGREEMENT (this "Release") is entered
into on , 199 , by and among EL PASO ELECTRIC COMPANY, a
Texas corporation, debtor and debtor in possession ("EPE"), PALO
VERDE LEASING CORPORATION, a Delaware corporation (the "Owner
Participant" and, collectively with each of the other owner
participants participating in the transactions described in
recital B below, the "Owner Participants"), and THE FIRST
NATIONAL BANK OF BOSTON (in its individual capacity, "FNBB"), as
trustee under a trust agreement with the Owner Participant (the
"Owner Trustee" and, collectively as trustee under trust
agreements with the Owner Participants, the "Owner Trustees").
RECITALS
A. EPE is the debtor in a case pending under Chapter 11
of Title 11 of the United States Code (the "Bankruptcy Code") in
the United States Bankruptcy Court for the Western District of
Texas (the "Bankruptcy Court"), which case has been assigned Case
No. 92-10148-FM (the "EPE Chapter 11 Case").
B. EPE, the Owner Participant and the Owner Trustee are
parties to various agreements, documents and instruments that
evidence or relate to the sale and leaseback by EPE, in separate
transactions with the Owner Participants and Owner Trustees, of
EPE's entire undivided interest in Unit 2 of the Palo Verde
Nuclear Generating Station ("Palo Verde") and approximately 39.5%
of EPE's undivided interest in Unit 3 of Palo Verde and certain
common plant and other related assets.
C. FNBB, in its capacity as Owner Trustee for each of
the Owner Participants (other than DBP Corp.), and DBP Corp.
filed proofs of claim in the EPE Chapter 11 Case (the "Proofs of
Claim").
D. On September 9, 1992, EPE commenced an adversary
proceeding against FNBB, in its capacity as Owner Trustee for
each of the Owner Participants (other than DBP Corp.), DBP Corp.
and the Successor Indenture Trustees (the "Palo Verde Lease
Litigation Defendants"), which case was assigned Adversary
Proceeding No. 92-1285-FM (the "Palo Verde Lease Litigation").
The Proofs of Claim, and any objections by EPE thereto, were
consolidated into the Palo Verde Lease Litigation. In addition,
in discussions between the parties, certain issues were raised
surrounding the presentment and drawings by the Owner
Participants under certain letters of credit issued as part of
the aforesaid sale and leaseback transactions in the approximate
aggregate amount of $288.4 million (the "Palo Verde Letters of
<PAGE> 191
Credit"). Such issues, including any claims described in
disclosure statements and plans of reorganization filed by EPE in
the EPE Chapter 11 Case with regard to the Owner Participants and
the Palo Verde Letters of Credit, are herein called the "Owner
Participant Claims".
E. The Palo Verde Lease Litigation Defendants have
asserted various defenses, contentions and counterclaims (the
"Palo Verde Defendants' Claims"). In addition, with regard to the
Owner Participant Claims, the Owner Participants contend that
their actions surrounding the presentment and drawings of the
Palo Verde Letters of Credit, including such drawings, were
proper as a matter of law (the "Letter of Credit Defenses").
F. Pursuant to a Settlement Agreement dated as of
November 15, 1993 (including the Annexes thereto and paragraphs
12 and 13 thereof, the "Settlement Agreement"), EPE and the Owner
Participant (or a predecessor thereof) agreed to release certain
claims effective upon the Effective Date.
IN CONSIDERATION OF THE MUTUAL AGREEMENTS CONTAINED
HEREIN, and other good and valuable consideration, the receipt of
which is hereby acknowledged, IT IS HEREBY AGREED by and among
the parties hereto as follows:
AGREEMENTS
1. Except as otherwise defined herein, all capitalized
terms used herein shall have the meanings set forth in the
Settlement Agreement.
2. EPE, on behalf of itself and the EPE Group, hereby
forever releases and discharges the Owner Trustee and the Owner
Participant Group (the "Released Parties") from, and waives and
relinquishes, any and all claims, demands, debts, liabilities,
obligations, actions, causes of action, suits, sums of money,
accounts, reckonings, covenants, contracts, controversies,
agreements, promises and rights whatsoever, whenever arising,
known or unknown, suspected or unsuspected, contingent or fixed,
liquidated or unliquidated, matured or unmatured, in law, equity,
bankruptcy or otherwise (collectively, "Claims"), which EPE or
the EPE Group ever had, now has, or hereafter can, shall or may
have against any of the Released Parties for, upon, or by reason
of any matter, cause, transaction or thing whatsoever occurring
at any time prior to the Effective Date, including, without
limitation, any Claims which EPE or the EPE Group ever had, now
has, or hereafter can, shall or may have against any of the
Released Parties by reason of, arising from, relating to, or in
connection with the Palo Verde Lease Litigation, the Palo Verde
<PAGE> 192
Letters of Credit, the Palo Verde Defendants' Claims, the Owner
Participant Claims, the documents listed on Schedule A to the
Third Amended Plan or the transactions contemplated by the
Participation Agreement, or based on or arising under 11 U.S.C.
Sections 502, 506, 507, 510, 544-553, inclusive, or any similar
provisions of federal or state law, and any right of indemnity,
contribution or subrogation arising therefrom or relating
thereto; provided, however, that nothing herein shall release any
Claims of any member of the EPE Group (other than EPE) unrelated
to the Palo Verde Lease Litigation, the Palo Verde Letters of
Credit, the Palo Verde Defendants' Claims, the Owner Participant
Claims, or the transactions contemplated by the Settlement
Agreement or the Participation Agreement or the documents listed
on Schedule A to the Third Amended Plan; and provided, however
that nothing herein shall release any party from its obligations
set forth in, or that are assumed or continued pursuant to the
Settlement Agreement (including, without limitation, the Annexes
thereto and paragraphs 12 and 13 thereof).
3. The Owner Participant, on behalf of itself and the
Owner Participant Group, and the Owner Trustee hereby forever
release and discharge the EPE Group from, and waive and
relinquish, any and all Claims which the Owner Participant or the
Owner Participant Group or the Owner Trustee ever had, now has,
or hereafter can, shall or may have against the EPE Group for,
upon, or by reason of any matter, cause, transaction or thing
whatsoever occurring at any time prior to the Effective Date,
including, without limitation, any claims which the Owner
Participant or the Owner Participant Group or the Owner Trustee
ever had, now has, or hereafter can, shall or may have against
the EPE Group by reason of, arising from, relating to, or in
connection with the Palo Verde Lease Litigation, the Palo Verde
Letters of Credit, the Palo Verde Defendants' Claims, the Owner
Participant Claims, or the documents listed on Schedule A to the
Third Amended Plan or the transactions contemplated by the
Participation Agreement, or based on or arising under 11 U.S.C.
Sections 502, 506, 507, 510, 544-553, inclusive, or any similar
provisions of federal or state law, and any right of indemnity,
contribution or subrogation arising therefrom or relating
thereto; excluding, however, from the foregoing any Claims of any
member of the Owner Participant Group (other than the Owner
Participant) or the Owner Trustee unrelated to the Palo Verde
Lease Litigation, the Palo Verde Letters of Credit, the Palo
Verde Defendants' Claims, the Owner Participant Claims, or the
transactions contemplated by the Settlement Agreement or the
Participation Agreement or the documents listed on Schedule A to
the Third Amended Plan; and provided, however that nothing herein
<PAGE> 193
shall release any party from its obligations set forth in the
Settlement Agreement (including, without limitation, the Annexes
thereto and paragraphs 12 and 13 thereof). Nothing herein shall
release the Claims held by The First National Bank of Chicago
against the EPE Group, or the Claims of the EPE Group against the
First National Bank of Chicago, as the case may be, arising with
respect to (i) any holding by The First National Bank of Chicago
of reimbursement obligations with respect to the Palo Verde
Letters of Credit (ii) its status as a Lease Debt Creditor or
(iii) its status as a general unsecured creditor of EPE other
than with respect to Claims which would be classified as Class 12
Claims pursuant to the Third Amended Plan.
4. Each of the parties hereby acknowledges and agrees
that all Claims under Section 1542 of the California Civil Code
and any other provision of law now or hereafter enacted,
adjudicated or sought to be adjudicated relating to the release
or waiver of unknown or unspecified claims are hereby
specifically and expressly released and waived. Each of the
parties understands that Section 1542 of the California Civil
Code provides that "[a] general release does not extend to claims
which the creditor does not know or suspect to exist in his favor
at the time of executing the release, which if known by him must
have materially affected his settlement with the debtor". For
purposes of this Release, each of the parties acknowledges and
agrees that it may be considered to be both a "creditor" and a
"debtor" for all purposes and with respect to all Claims it may
now know or suspect to exist within the meaning of Section 1542
of the California Civil Code and any other provision of law now
or hereafter enacted, adjudicated or sought to be adjudicated
relating to the release or waiver of unknown or unspecified
claims.
5. This Release may be executed in two or more
counterparts, each of which shall be deemed an original, but all
of which shall constitute one and the same instrument.
6. This Release shall be binding upon the parties
hereto and their successors and assigns. Each party hereto
represents and warrants that it owns all the Claims described
herein which are being released hereunder and is duly authorized
to release such Claims.
7. This Release shall be governed in all respects,
including validity, interpretation and effect, by, and construed
and enforced under, the law of the State of New York, without
giving effect to the principles of conflict of laws thereof.
<PAGE> 194
IN WITNESS WHEREOF, the parties hereto have duly
authorized and executed this Release as of the date first above
written.
EL PASO ELECTRIC COMPANY,
by
Name:
Title:
PALO VERDE LEASING CORPORATION,
by
Name:
Title:
THE FIRST NATIONAL BANK OF BOSTON,
as Owner Trustee,
by
Name:
Title:
<PAGE> 195
ANNEX B
BILL OF SALE AND ASSIGNMENT, dated as of
, 199 , from PALO VERDE
LEASING CORPORATION, a Delaware corporation
(the "Owner Participant"), to EL PASO
ELECTRIC COMPANY, a Texas corporation [1] ("El
Paso").
WITNESSETH:
WHEREAS, the Owner Participant desires to convey and El
Paso desires to acquire the Assigned Property (as hereinafter
defined);
NOW, THEREFORE, in consideration of the premises and of
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
Definitions
For purposes hereof, capitalized terms used but not
otherwise defined herein shall have the meanings assigned to such
terms in the Participation Agreement dated as of December 1,
1987, among [a predecessor of] the Owner Participant, the First
National Bank of Boston, in its individual capacity and as Owner
Trustee, El Paso and others.
ARTICLE II
Assignment of Trust Estate
The Owner Participant does hereby grant, bargain,
convey, sell, assign, transfer and set over (collectively,
"transfer") to El Paso, on an as is, where is basis, free and
clear of Owner Participant's Liens but otherwise without
recourse, representation or warranty, express or implied, of any
nature whatsoever, all the Owner Participant's right, title and
interest in, to and under the Trust Estate and the Excepted
Payments, other than Excepted Payments and related Excepted
Rights referred to in clauses (i), (vi) and (vii) (and (viii) to
the extent attributable to the payments referred to in clauses
(i), (vi) or (vii)) of the definition of "Excepted Payments" (the
"Assigned Property"). The disclaimer of representations and
warranties set forth in the second sentence of Section 6(b) of
the Facility Lease is hereby incorporated herein as fully as if
set forth at this place. Such transfer shall not alter the
obligations of El Paso nor expand the rights of the Owner
- ---------------------------------
[1] El Paso may designate a different transferee.
<PAGE> 196
Participant under the Settlement Agreement dated as of November
15, 1993, between El Paso and the Owner Participant (or a
predecessor thereof) or the Release referred to therein, whether
or not such obligations or rights would constitute an Excepted
Payment or Excepted Right.
ARTICLE III
Effectiveness of Transfer
The transfer of the Assigned Property shall become
effective without further action upon the execution and delivery
by the Owner Participant to El Paso of this Bill of Sale and
Assignment and the furnishing of a counterpart of this Bill of
Sale and Assignment to the Owner Trustee.
ARTICLE IV
Miscellaneous
SECTION 4.01. Successors and Assigns. This Bill of Sale
and Assignment shall be binding upon the Owner Participant and
its successors and shall inure to the benefit of El Paso and its
successors and assigns.
SECTION 4.02. Governing Law. This Bill of Sale and
Assignment shall be governed by and construed in accordance with
the law of the State of New York.
IN WITNESS WHEREOF, the undersigned has caused this
Bill of Sale and Assignment to be duly executed as of the day and
year first written above.
PALO VERDE LEASING CORPORATION,
by
Name:
Title:
<PAGE> 197
ANNEX C
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE WESTERN DISTRICT OF TEXAS
AUSTIN DIVISION
)
In re EL PASO ELECTRIC COMPANY, ) Case No. 92-10148-FM
) (Chapter 11)
Debtor. )
)
) Adversary Proceeding
EL PASO ELECTRIC COMPANY, ) No. 92-1285-FM
)
Plaintiff and Counterclaimant, )
)
v. ) Adversary Complaint
) seeking a declaration
THE FIRST NATIONAL BANK OF BOSTON, ) of rights arising
DBP CORP., LaSALLE NATIONAL BANK, ) from the rejection of
and HARRIS TRUST AND SAVINGS BANK, ) leases of the Palo
) Verde Nuclear
Defendants and Claimants. ) Generating Station
)
ORDER OF DISMISSAL WITH PREJUDICE
IT IS HEREBY ORDERED AND ADJUDGED, pursuant to the
Order of Confirmation in Case No. 92-10148-FM (Chapter 11), that
the Complaint and Counterclaims in the above-referenced action
are each hereby dismissed with prejudice.
IT IS SO ORDERED:
Dated: , 199
Austin, Texas
United States Bankruptcy Judge
<PAGE> 198
ANNEX D
RELEASE AND AGREEMENT
THIS RELEASE AND AGREEMENT (this "Release") is entered
into on , 199 , by and among PALO VERDE LEASING
CORPORATION, a Delaware corporation (the "Owner Participant" and,
collectively with each of the other owner participants
participating in the transactions described in recital B below,
the "Owner Participants"), THE FIRST NATIONAL BANK OF BOSTON (in
its individual capacity, "FNBB"), as trustee under a trust
agreement with the Owner Participant (the "Owner Trustee" and,
collectively as trustee under trust agreements with the Owner
Participants, the "Owner Trustees"), HARRIS TRUST AND SAVINGS
BANK, as Successor Trustee under indentures with certain of the
Owner Trustees, and LASALLE NATIONAL BANK, as Successor Trustee
under indentures with certain of the Owner Trustees
(collectively, the "Successor Indenture Trustees").
RECITALS
A. EPE is the debtor in a case pending under Chapter 11
of Title 11 of the United States Code (the "Bankruptcy Code") in
the United States Bankruptcy Court for the Western District of
Texas (the "Bankruptcy Court"), which case has been assigned Case
No. 92-10148-FM (the "EPE Chapter 11 Case").
B. EPE, the Owner Participant and the Owner Trustee are
parties to various agreements, documents and instruments that
evidence or relate to the sale and leaseback by EPE, in separate
transactions with the Owner Participants and Owner Trustees, of
EPE's entire undivided interest in Unit 2 of the Palo Verde
Nuclear Generating Station ("Palo Verde") and approximately 39.5%
of EPE's undivided interest in Unit 3 of Palo Verde and certain
common plant and other related assets.
C. FNBB, in its capacity as Owner Trustee for each of
the Owner Participants (other than DBP Corp.), DBP Corp. and the
Successor Indenture Trustees filed proofs of claim in the EPE
Chapter 11 Case (the "Proofs of Claim").
D. On September 9, 1992, EPE commenced an adversary
proceeding against FNBB, in its capacity as Owner Trustee for
each of the Owner Participants (other than DBP Corp.), DBP Corp.
and the Successor Indenture Trustees (the "Palo Verde Lease
Litigation Defendants"), which case was assigned Adversary
Proceeding No. 92-1285-FM (the "Palo Verde Lease Litigation").
<PAGE> 199
The Proofs of Claim, and any objections by EPE thereto, were
consolidated into the Palo Verde Lease Litigation. In addition,
in discussions between the parties, certain issues were raised
surrounding the presentment and drawings by the Owner
Participants under certain letters of credit issued as part of
the aforesaid sale and leaseback transactions in the approximate
aggregate amount of $288.4 million (the "Palo Verde Letters of
Credit"). Such issues, including any claims described in
disclosure statements and plans of reorganization filed by EPE in
the EPE Chapter 11 Case with regard to the Owner Participants and
the Palo Verde Letters of Credit, are herein called the "Owner
Participant Claims".
E. The Palo Verde Lease Litigation Defendants have
asserted various defenses, contentions and counterclaims (the
"Palo Verde Defendants' Claims"). In addition, with regard to the
Owner Participant Claims, the Owner Participants contend that
their actions surrounding the presentment and drawings of the
Palo Verde Letters of Credit, including such drawings, were
proper as a matter of law (the "Letter of Credit Defenses").
F. Pursuant to a Settlement Agreement dated as of
November 15, 1993, (including the Annexes thereto and paragraphs
12 and 13 thereof, the "Settlement Agreement"), EPE and the Owner
Participant (or a predecessor thereof) agreed to release certain
claims, effective upon the Effective Date.
IN CONSIDERATION OF THE MUTUAL AGREEMENTS CONTAINED
HEREIN, and other good and valuable consideration, the receipt of
which is hereby acknowledged, IT IS HEREBY AGREED by and among
the parties hereto as follows:
AGREEMENTS
1. Except as otherwise defined herein, all capitalized
terms used herein shall have the meanings set forth in the
Settlement Agreement.
2. The Successor Indenture Trustees, on behalf of
themselves and the Lease Debt Creditors, hereby forever release
and discharge the Owner Trustee and the Owner Participant Group
(the "Released Parties") from, and waive and relinquish, any and
all claims, demands, debts, liabilities, obligations, actions,
causes of action, suits, sums of money, accounts, reckonings,
covenants, contracts, controversies, agreements, promises and
<PAGE> 200
rights whatsoever, whenever arising, known or unknown, suspected
or unsuspected, contingent or fixed, liquidated or unliquidated,
matured or unmatured, in law, equity, bankruptcy or otherwise
(collectively, "Claims"), which the Successor Indenture Trustees
or Lease Debt Creditors ever had, now have, or hereafter can,
shall or may have against any of the Released Parties for, upon,
or by reason of any matter, cause, transaction or thing
whatsoever occurring at any time prior to the Effective Date,
including, without limitation, any Claims which the Successor
Indenture Trustees or Lease Debt Creditors ever had, now have, or
hereafter can, shall or may have against any of the Released
Parties by reason of, arising from, relating to, or in connection
with the Palo Verde Lease Litigation, the Palo Verde Letters of
Credit, the Palo Verde Defendants' Claims, or the Owner
Participant Claims, the documents listed in Schedule A to the
Third Amended Plan or the transactions contemplated by the
Participation Agreement, or based on or arising under 11 U.S.C.
Sections 502, 506, 507, 510, 544-553, inclusive, or any similar
provisions of federal or state law, and any right of indemnity,
contribution or subrogation arising therefrom or relating
thereto; excluding, however, from the foregoing any Claims of the
Successor Indenture Trustees or Lease Debt Creditors unrelated to
the Palo Verde Lease Litigation, the Palo Verde Letters of
Credit, the Palo Verde Defendants' Claims, the Owner Participant
Claims, or the transactions contemplated by the Settlement
Agreement or the Participation Agreement or the documents listed
on Schedule A to the Third Amended Plan.
3. The Owner Participant, on behalf of itself and the
Owner Participant Group, and the Owner Trustee hereby forever
release and discharge the Successor Indenture Trustees and Lease
Debt Creditors from, and waive and relinquish, any and all Claims
which the Owner Participant or FNBB or the Owner Participant
Group or the Owner Trustee ever had, now has, or hereafter can,
shall or may have against the Successor Indenture Trustees or
Lease Debt Creditors for, upon, or by reason of any matter,
cause, transaction or thing whatsoever occurring at any time
prior to the Effective Date, including, without limitation, any
claims which the Owner Participant or the Owner Participant Group
or the Owner Trustee ever had, now has, or hereafter can, shall
or may have against the Successor Indenture Trustees or Lease
Debt Creditors by reason of, arising from, relating to, or in
connection with the Palo Verde Lease Litigation, the Palo Verde
Letters of Credit, the Palo Verde Defendants' Claims, or the
Owner Participant Claims, the documents listed in Schedule A to
the Third Amended Plan or the transactions contemplated by the
<PAGE> 201
Participation Agreement, or based on or arising under 11 U.S.C.
Sections 502, 506, 507, 510, 544-553, inclusive, or any similar
provisions of federal or state law, and any right of indemnity,
contribution or subrogation arising therefrom or relating
thereto; excluding, however, from the foregoing any Claims of the
Owner Participant or FNBB or any member of the Owner Participant
Group or the Owner Trustee unrelated to the Palo Verde Lease
Litigation, the Palo Verde Letters of Credit, the Palo Verde
Defendants' Claims, the Owner Participant Claims, the
transactions contemplated by the Settlement Agreement or the
Participation Agreement or the documents listed in Schedule A to
the Third Amended Plan. Nothing herein shall release the Claims
held by The First National Bank of Chicago against the Successor
Indenture Trustees, or the Claims of the Successor Indenture
Trustees against the First National Bank of Chicago, arising with
respect to (i) any holding by The First National Bank of Chicago
of reimbursement obligations with respect to the Palo Verde
Letters of Credit, (ii) its status as a Lease Debt Creditor or
(iii) its status as a general unsecured creditor of EPE other
than with respect to Claims which would be classified as Class 12
Claims pursuant to the Third Amended Plan.
4. Each of the parties hereby acknowledges and agrees
that all Claims under Section 1542 of the California Civil code
and any other provision of law now or hereafter enacted,
adjudicated or sought to be adjudicated relating to the release
or waiver of unknown or unspecified claims are hereby
specifically and expressly released and waived. Each of the
parties understands that Section 1542 of the California Civil
Code provides that "[a] general release does not extend to claims
which the creditor does not know or suspect to exist in his favor
at the time of executing the release, which if known by him must
have materially affected his settlement with the debtor". For
purposes of this Release, each of the parties acknowledges and
agrees that it may be considered to be both a "creditor" and a
"debtor" for all purposes and with respect to all Claims it may
now know or suspect to exist within the meaning of Section 1542
of the California Civil Code and any other provision of law now
or hereafter enacted, adjudicated or sought to be adjudicated
relating to the release or waiver of unknown or unspecified
claims.
5. This Release may be executed in two or more
counterparts, each of which shall be deemed an original, but all
of which shall constitute one and the same instrument.
<PAGE> 202
6. This Release shall be binding upon the parties
hereto and their successors and assigns. Each party hereto
represents and warrants that it owns or holds all Claims
described herein which are being released hereunder.
7. This Release shall be governed in all respects,
including validity, interpretation and effect, by, and construed
and enforced under, the law of the State of New York, without
giving effect to the principles of conflict of laws thereof.
IN WITNESS WHEREOF, the parties hereto have duly
authorized and executed this Release as of the date first above
written.
PALO VERDE LEASING CORPORATION,
by
Name:
Title:
THE FIRST NATIONAL BANK OF BOSTON,
as Owner Trustee,
by
Name:
Title:
HARRIS TRUST AND SAVINGS BANK,
as Successor Indenture Trustee,
by
Name:
Title:
LASALLE NATIONAL BANK, as
Successor Indenture Trustee,
by
Name:
Title:
<PAGE> 203
ANNEX E
TOLLING AGREEMENT
This Tolling Agreement is made and entered into as of
November , 1993 by and among EL PASO ELECTRIC COMPANY, a Texas
corporation ("EPE"), PALO VERDE LEASING CORPORATION, a Delaware
corporation (the "Owner Participant"), THE FIRST NATIONAL BANK OF
BOSTON (in its individual capacity, "FNBB"), as trustee under a
trust agreement with the Owner Participant (the "Owner Trustee"
and, collectively as trustee under trust agreements with all the
owner participants, the "Owner Trustees"), HARRIS TRUST AND
SAVINGS BANK, as Successor Trustee under indentures with certain
of the Owner Trustees, and LASALLE NATIONAL BANK, as Successor
Trustee under indentures with certain of the Owner Trustees
(collectively, the "Successor Indenture Trustees").
RECITALS
A. EPE is the debtor in a case pending under Chapter 11
of Title 11 of the United States Code (the "Bankruptcy Code") in
the United States Bankruptcy Court for the Western District of
Texas (the "Bankruptcy Court"), which case has been assigned Case
No. 92-10148-FM (the "EPE Chapter 11 Case").
B. EPE, the Owner Participant and the Owner Trustee are
parties to various agreements, documents and instruments that
evidence or relate to the sale and leaseback by EPE, in separate
transactions with the Owner Participants and Owner Trustees, of
EPE's entire undivided interest in Unit 2 of the Palo Verde
Nuclear Generating Station ("Palo Verde") and approximately 39.5%
of EPE's undivided interest in Unit 3 of Palo Verde and certain
common plant and other related assets.
C. FNBB, in its capacity as Owner Trustee for each of
the Owner Participants (other than DBP Corp.), DBP Corp. and the
Successor Indenture Trustees have filed proofs of claim in the
EPE Chapter 11 Case (the "Proofs of Claim").
D. On September 9, 1992, EPE commenced an adversary
proceeding against FNBB, in its capacity as Owner Trustee for
each of the Owner Participants (other than DBP Corp.), DBP Corp.
and the Successor Indenture Trustees (the "Palo Verde Lease
Litigation Defendants"), which case has been assigned Adversary
Proceeding No. 92-1285-FM (the "Palo Verde Lease Litigation").
The Proofs of Claim, and any objections by EPE thereto, have been
consolidated into the Palo Verde Lease Litigation. In addition,
in discussions between the parties, certain issues have been
raised surrounding the presentment and drawings by the Owner
Participants under certain letters of credit issued as part of
<PAGE> 204
the aforesaid sale and leaseback transactions in the approximate
aggregate amount of $288.4 million (the "Palo Verde Letters of
Credit"). Such issues, including any claims described in
disclosure statements and plans of reorganization filed by EPE in
the EPE Chapter 11 Case with regard to the Owner Participants and
the Palo Verde Letters of Credit, are herein called the "Owner
Participant Claims".
E. The Palo Verde Lease Litigation Defendants have
asserted various defenses, contentions and counterclaims (the
"Palo Verde Defendants' Claims"). In addition, with regard to the
Owner Participant Claims, the Owner Participants contend that
their actions surrounding the presentment and drawings of the
Palo Verde Letters of Credit, including such drawings, were
proper as a matter of law (the "Letter of Credit Defenses").
F. The Third Amended Plan contemplates, under certain
circumstances, a release of all claims relating to the Palo Verde
Lease Litigation, the Palo Verde Defendants' Claims, the Owner
Participant Claims, and the Letter of Credit Defenses, which
release would be subject to and effective only upon the Effective
Date.
G. The parties have entered into a settlement agreement
of even date herewith (the "Settlement Agreement"), which will
result in a mutual release (such release to become effective only
on the occurrence of the Effective Date) of all Claims between
EPE, on one hand, and the Owner Participant and Owner Trustee, on
the other hand, and for the cessation of litigation in the
interim.
H. This Tolling Agreement is intended to ensure that
the parties' claims against one another (and defenses thereto)
are preserved to the fullest extent pending the occurrence of the
Effective Date and the execution, delivery and effectiveness of
the mutual releases contemplated under the Settlement Agreement,
and that the parties are not prejudiced by the deferral of
litigation in accordance with the Settlement Agreement.
IN CONSIDERATION OF THE MUTUAL AGREEMENTS CONTAINED
HEREIN, and other good and valuable consideration, the receipt of
which is hereby acknowledged, IT IS HEREBY AGREED by and between
the parties hereto as follows:
1. All capitalized terms used but not otherwise defined
herein shall have the meanings assigned to such terms in the
Settlement Agreement.
2. All potential causes of action and claims which EPE
or the Lease Debt Creditors could have asserted as of the date
hereof against the Owner Participant or against the Owner Trustee
<PAGE> 205
(and any defenses thereto) shall survive until the termination of
this Tolling Agreement, and no such cause of action or claim (or
defenses thereto) shall in any manner be extinguished or impaired
in any manner by reason of any applicable statute of limitations,
contractual restriction, equitable doctrine or other basis under
federal or state law, including Section 108 of the Bankruptcy
Code, which may limit EPE's ability to commence or prosecute such
cause of action or claim (or any Owner Participant's or Owner
Trustee's defenses thereto) by reason of a lapse of time,
inaction or failure to commence an action or give any notice as
of a particular date during the term of this Agreement; provided,
however, that nothing herein shall revive, to the extent barred
or otherwise non-actionable, any cause of action or claim
(including any right to relief or element of damage thereof) (or
any defense) that is now barred or otherwise non-actionable.
3. All potential causes of action and claims which the
Owner Participant or the Owner Trustee could have asserted as of
the date hereof against EPE or the Lease Debt Creditors (and any
defenses thereto) shall survive until the termination of this
Tolling Agreement, and no such cause of action or claim (or
defenses thereto) shall in any manner be extinguished or impaired
in any manner by reason of any applicable statute of limitations,
contractual restriction, equitable doctrine or other basis under
federal or state law, including Section 108 or Section 362 of the
Bankruptcy Code, which may limit the ability of the Owner
Participant or Owner Trustee to commence or prosecute such cause
of action or claim (or any Owner Participant's or Owner Trustee's
defenses thereto) by reason of a lapse of time, inaction, or
failure to commence an action or give any notice as of a
particular date during the term of this Agreement; provided,
however, that nothing herein shall revive, to the extent barred
or otherwise non-actionable, any cause of action or claim
(including any right to relief or element of damage thereof) (or
any defense) that is now barred or otherwise non- actionable.
4. All potential causes of action and claims which EPE
could have asserted as of the date hereof against the Lease Debt
Creditors (and any defenses thereto) shall survive until the
termination of this Tolling Agreement, and no such cause of
action or claim (or defenses thereto) shall in any manner be
extinguished or impaired in any manner by reason of any
applicable statute of limitations, contractual restriction,
equitable doctrine or other basis under federal or state law,
including Section 108 of the Bankruptcy Code, which may limit the
ability of EPE to commence or prosecute such cause of action or
claim (or any Lease Debt Creditor's defenses thereto) by reason
of a lapse of time, inaction, or failure to commence an action or
give any notice as of a particular date during the term of this
<PAGE> 206
Agreement; provided, however, that nothing herein shall revive,
to the extent barred or otherwise non-actionable, any cause of
action or claim (including any right to relief or element of
damage thereof) (or any defense) that is now barred or otherwise
non-actionable.
5. This Tolling Agreement shall terminate, unless
extended by the parties hereto, on the earliest of (a) 30 days
after written notice by EPE or the Owner Participant of
termination of the Settlement Agreement, (b) the Effective Date
or (c) September 15, 1997.
6. This Tolling Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
instrument.
7. This Tolling Agreement shall be governed in all
respects, including validity, interpretation and effect, by, and
construed and enforced under, the law of the state of New York,
without giving effect to the principles of conflict of laws
thereof.
8. Each party hereto covenants that it has the
requisite authority to enter into and be bound by the terms of
this Tolling Agreement.
9. This Tolling Agreement shall be binding upon the
parties hereto and their successors and assigns.
10. This Tolling Agreement shall not be binding unless
similar tolling agreements are executed and delivered by each of
the Owner Participants and the Successor Indenture Trustees.
11. This Tolling Agreement may not be modified in whole
or in part except pursuant to a written agreement among all of
the parties hereto.
IN WITNESS WHEREOF, the parties hereto have duly
authorized and executed this Tolling Agreement as of the date
first above written.
EL PASO ELECTRIC COMPANY,
by
Name:
Title:
<PAGE> 207
PALO VERDE LEASING CORPORATION,
by
Name:
Title:
THE FIRST NATIONAL BANK OF BOSTON,
as Owner Trustee,
by
Name:
Title:
HARRIS TRUST AND SAVINGS BANK,
as Successor Trustee and on
behalf of the Lease Debt Creditors
for Unit 3
by
Name:
Title:
LASALLE NATIONAL BANK, as Successor
Trustee and on behalf of the Lease
Debt Creditors for Unit 2
by
Name:
Title:
<PAGE> 208
ANNEX F
EXISTING CLAIMS
1. Claims by the State of Arizona regarding
transaction privilege taxes.
2. Unpaid fees and expenses of the Owner Trustee
through and including the Effective Date.
<PAGE> 209
ANNEX G
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 210
SETTLEMENT AGREEMENT
BETWEEN
EL PASO ELECTRIC COMPANY
AND
ENERGY INVESTMENTS INC.
November 1993
Michael Paul Kirschner, Mediator
Hastie & Kirschner
Attorneys and Counselors at Law
3000 First Oklahoma Tower * 210 West Park Avenue
Oklahoma City, Oklahoma 73102-5673
Telephone (405) 239-6404
Telecopier (405) 239-6403
<PAGE> 211
SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT is entered into as of
November 15, 1993, between EL PASO ELECTRIC COMPANY, a Texas
corporation, debtor and debtor in possession ("EPE"), and ENERGY
INVESTMENTS INC., a Missouri corporation (the "Owner
Participant").
IN CONSIDERATION OF THE MUTUAL AGREEMENTS CONTAINED
HEREIN, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, IT IS HEREBY
AGREED by and between the parties hereto as follows:
DEFINITIONS
1. As used herein, the following terms shall have the
following meanings:
"Bankruptcy Court" shall mean the United States
Bankruptcy Court for the Western District of Texas, or such other
court as shall have original jurisdiction over the Case.
"Case" shall mean the proceeding filed by EPE under
Title 11 of the United States Code and bearing Bankruptcy Court
case number 92-10148-FM.
"Claims" shall have the meaning assigned to such term
in the Release.
"Confirmation Order" shall mean an order confirming an
EPE Plan.
"CSW" shall mean Central and South West Corporation.
"Effective Date" shall mean the date on which an EPE
Plan incorporating, except in immaterial respects, the terms and
conditions of this Settlement Agreement shall become effective
according to such EPE Plan's terms.
"EPE Group" shall mean EPE and (i) each and every
person who controls EPE, is controlled by EPE or is under common
control with EPE (the "EPE Affiliated Group"); (ii) any
predecessor, successor or assign of any person included within
the EPE Affiliated Group; (iii) any Chapter 7 or Chapter 11
Trustee appointed by the Bankruptcy Court or any other court with
regard to any person included within the EPE Affiliated Group;
(iv) the respective present and former agents, directors,
officers, employees, advisors, attorneys and representatives of
any person included within the EPE Affiliated Group; (v) the
respective shareholders and creditors of the EPE Affiliated
Group; and (vi) in the case of any individuals falling within the
scope of (iv) or (v), their respective heirs, receivers,
<PAGE> 212
conservators, beneficiaries, executors, administrators,
successors and assigns. The term EPE Group shall not include CSW.
"EPE Plan" shall mean (i) the Modified Third Amended
Plan of Reorganization, filed on September 15, 1993 in the Case
(the "Third Amended Plan"), (ii) any other plan of reorganization
filed in the Case pursuant to which EPE, with its consent, is to
be acquired by CSW or a CSW affiliate, by merger or otherwise,
and (iii) any other plan of reorganization filed in the Case
supported by or acceptable to EPE if, within 10 days of the
filing thereof, EPE fails to provide written notice to the Owner
Participant that such plan does not constitute an EPE Plan for
purposes of this Settlement Agreement.
"Excepted Payments" shall have the meaning assigned to
such Term in Appendix A to the Participation Agreement.
"Facility Lease" shall have the meaning assigned to
such term in Appendix A to the Participation Agreement.
"Lease Debt Creditors" shall mean Harris Trust and
Savings Bank, as Successor Trustee for those certain $200,000,000
Secured Lease Obligation Bonds Series 1988, and any holders of
such bonds, and LaSalle National Bank, as Successor Trustee for
those certain $396,328,000 Lease Obligation Bonds Series 1986 and
those certain $146,305,000 Lease Obligation Bonds Series 1986A
(the Successor Trustees, collectively, the "Successor Indenture
Trustees"), and any holders of such bonds.
"Owner Participant Group" shall mean the Owner
Participant and (i) each and every person who controls the Owner
Participant, is controlled by the Owner Participant or is under
common control with the Owner Participant (the "Owner Participant
Affiliated Group"); (ii) any predecessor, successor or assign of
any person included within the Owner Participant Affiliated
Group; (iii) the respective present and former agents, directors,
officers, employees, advisors, attorneys and representatives of
any person included within the Owner Participant Affiliated
Group; (iv) the respective shareholders and creditors of the
Owner Participant Affiliated Group; (v) any Chapter 7 or Chapter
11 Trustee appointed by a court with regard to any person
included within the Owner Participant Affiliated Group; and (vi)
in the case of any individuals falling within the scope of (iii)
or (iv), their respective heirs, receivers, conservators,
beneficiaries, executors, administrators, successors and assigns.
"Owner Trustee" shall mean The First National Bank of
Boston ("FNBB"), as trustee under a trust agreement with the
Owner Participant.
<PAGE> 213
"Palo Verde Leases" shall mean, collectively, the
Facility Lease and the facility leases, as amended, between EPE
and FNBB (as trustee under separate trust agreements with the
other owner participants) with respect to the Arizona Nuclear
Power Project.
"Palo Verde Lease Litigation" shall mean an adversary
proceeding commenced on September 9, 1992 by EPE against FNBB, in
FNBB's capacity as Owner Trustee for each of the owner
participants (other than DBP Corp.), DBP Corp. and the Successor
Indenture Trustees, which case has been assigned Adversary
Proceeding No. 92- 1285-FM by the Bankruptcy Court.
"Palo Verde Letters of Credit" shall have the meaning
assigned to such term in the Release.
"Participation Agreement" shall mean the Participation
Agreement, as amended, among EPE, the Owner Participant and
others.
"Real Property Interest" shall have the meaning
assigned to such term in Appendix A to the Participation
Agreement.
"Release" shall mean the release in the form of Annex A
hereto.
"Settlement Agreement" shall mean this Settlement
Agreement, including all Annexes hereto.
"Transaction Documents" shall have the meaning assigned
to such term in Appendix A to the Participation Agreement.
"Trust Estate" shall have the meaning assigned to such
term in Appendix A to the Participation Agreement.
"Undivided Interest" shall have the meaning assigned to
such term in Appendix A to the Participation Agreement.
RIGHTS AND OBLIGATIONS PRIOR TO THE EFFECTIVE DATE
2. EPE's plan of reorganization will provide for the
terms and conditions set forth below (and EPE will not file,
pursue or support any plan that contains provisions inconsistent
with, or that does not embody the terms and conditions of, this
Settlement Agreement):
a Claims of the EPE Group, on the one hand, and the
Owner Participant Group and the Owner Trustee, on
the other hand, against one another shall be
mutually released pursuant to the Release (to the
extent provided therein), which Release will be
executed, delivered, and effective solely as of
the Effective Date.
<PAGE> 214
b Other than as provided in this Settlement
Agreement, the Owner Participant and the Owner
Trustee shall receive no distribution, recovery or
other consideration under an EPE Plan except that,
within 10 days of the date of entry of the
Confirmation Order (but not later than December
31, 1993 if such date occurs in 1993), EPE will
pay all fees, costs and expenses incurred by or on
behalf of the Owner Participant or Owner Trustee
from and after August 1, 1993 through and
including the date of entry of the Confirmation
Order in connection with the Palo Verde
Litigation, the Case, the Participation Agreement
or the transactions contemplated hereby or by any
of the foregoing (the amount of which as of
October 1, 1993 is $7,328.36).
c As of the Effective Date, (i) all right, title and
interest of the Owner Participant in the Trust
Estate and certain Excepted Payments shall be
conveyed to EPE or its designee, if paragraph 12.a
hereof is applicable, or (ii) if paragraph 12.b
hereof is applicable, there will be a conveyance
or transfer of the Trust Estate to EPE or EPE's
designee.
d As of the Effective Date, the receipt of any value
or consideration under any EPE Plan shall be
deemed to be (i) a release of the Owner
Participant and Owner Trustee by such recipient
of all claims related to the Palo Verde Leases,
the Palo Verde Letters of Credit, the documents
listed in Schedule A to the Third Amended Plan,
and the transactions contemplated hereby and
thereby, and (ii) a release of such recipient by
the Owner Trustee and Owner Participant of all
such claims. EPE shall defend such provisions
against any objections thereto. If the deemed
release described in this paragraph is not
approved by the Bankruptcy Court as to third
parties other than the Lease Debt Creditors and
the issuers of or participants in the Palo Verde
Letters of Credit, EPE may modify the EPE Plan
accordingly as long as the Confirmation Order
provides that the deemed release is effective as
to the Lease Debt Creditors and the issuers of and
participants in the Palo Verde Letters of Credit
and that, at the Effective Date, all third party
claims against the Owner Participant and Owner
Trustee which are derivative of the claims of EPE
will be extinguished.
<PAGE> 215
3. The Owner Participant and Southwestern Public
Service Company ("SPS") have entered into a letter of
understanding dated July 13, 1993. The Owner Participant will not
take any position as to the termination of EPE's exclusivity
through the filing of additional pleadings in the Case or by the
making of any statement in the Bankruptcy Court in support of any
motion to terminate EPE's exclusivity, unless EPE, in
contravention of its agreement not to do so, files, pursues or
supports confirmation of a plan of reorganization which does not
incorporate the terms of this Settlement Agreement or which
materially adversely affects the Owner Participant or any of its
affiliates.
4. The Owner Participant will vote to accept and/or
will cause the Owner Trustee to vote to accept the Third Amended
Plan and will vote to accept and/or cause the Owner Trustee to
vote to accept any other EPE Plan that is (x) consistent with and
incorporates the terms of this Settlement Agreement and (y) does
not materially adversely affect the Owner Participant or any of
its affiliates. The Owner Participant will not vote to reject or
object to, and will cause the Owner Trustee not to vote to reject
or object to, the Third Amended Plan, and will not vote to reject
or object to, and will cause the Owner Trustee not to vote to
reject or object to, any other EPE Plan that (i) is consistent
with and incorporates the terms of this Settlement Agreement and
(ii) does not materially adversely affect the Owner Participant
or any of its affiliates. Nothing in this Settlement Agreement
will limit the right of the Owner Participant or Owner Trustee or
any member of the Owner Participant Group to vote to accept or
reject or object to (A) any plan that is (a) inconsistent with or
does not incorporate the terms of this Settlement Agreement or
(b) materially adversely affects the Owner Participant or any of
its affiliates or (B) any plan other than an EPE Plan. For
purposes of this paragraph 4, it will be conclusively presumed
that an EPE Plan does not materially adversely affect the Owner
Participant or any of its affiliates if the Owner Participant
fails to provide EPE with written notice to the contrary within
20 days after receipt of such EPE Plan. EPE will not and the
Owner Participant will not, and will not direct the Owner Trustee
to, file any pleading in the Case that is contrary to or
inconsistent with the terms and conditions contained herein.
5. The Owner Participant agrees not to transfer, prior
to the Effective Date, any Claim against the EPE Group or
interest in the Facility Lease to anyone other than a person that
has agreed to be bound by this Settlement Agreement; provided,
however, that upon any withdrawal, termination or revocation of
the Third Amended Plan, the Owner Participant may thereafter
transfer any Claim against the EPE Group or interest in the
Facility Lease to anyone whether or not such person agrees to be
bound by this Settlement Agreement, and if such person has not
<PAGE> 216
agreed to be so bound, this Settlement Agreement shall
automatically terminate without further action by any party
hereto. EPE agrees not to transfer, prior to the Effective Date,
any Claim against the Owner Participant Group or Owner Trustee or
interest in the Facility Lease.
6. EPE shall disclose the contents of this Settlement
Agreement, pursuant to Section 3.14B.5. of the Third Amended
Plan. Between the date of entry of the Confirmation Order and the
Effective Date, the Owner Participant shall have all of the
rights accorded to the Oversight Committee (as defined in the
Third Amended Plan) pursuant to Section 5.1.E of the Third
Amended Plan.
7. Until the Effective Date occurs, EPE will not pursue
the Palo Verde Lease Litigation or commence any litigation or
otherwise file any Claim against the Owner Participant or Owner
Trustee and EPE will oppose any motion or other action by any
other person to pursue the Palo Verde Lease Litigation or
commence or file any such litigation or Claim or intervene
therein; provided, however, that nothing herein shall preclude
EPE from (i) taking steps which EPE reasonably deems necessary to
preserve its Claims and its ability to collect on such Claims, if
successful, and to protect EPE's rights in the event of the
proposed dissolution of the Owner Participant or Owner Trustee in
a bankruptcy or insolvency proceeding of the Owner Participant or
Owner Trustee (and EPE hereby agrees that EPE will not file nor
participate in the filing of any involuntary bankruptcy or
insolvency petition against the Owner Participant or Owner
Trustee) or (ii) seeking discovery, at EPE's own expense, against
the Owner Participant or Owner Trustee in connection with a plan
of reorganization proposed by or on behalf of SPS, or any other
plan of reorganization other than an EPE Plan, to the extent EPE
is otherwise entitled to request such discovery from the
Bankruptcy Court.
8. Until the Effective Date occurs, the Owner
Participant will not, and will not direct the Owner Trustee to,
pursue the Palo Verde Lease Litigation or commence any litigation
or file any additional Claim against EPE and at EPE's request,
the Owner Participant will, and/or will cause the Owner Trustee
to, file a pleading which will support EPE's opposition to any
motion or other action by any other person to pursue the Palo
Verde Lease Litigation or commence or file any such litigation or
Claim or intervene therein; provided, however, that nothing
herein shall preclude the Owner Participant or Owner Trustee from
(i) taking steps which the Owner Participant or Owner Trustee, as
the case may be, reasonably deems necessary to preserve the
Claims of such Owner Participant or Owner Trustee and to protect
the rights of such Owner Participant or Owner Trustee in the
event of the proposed dissolution of EPE or (ii) opposing EPE's
pursuit of any discovery referred to in paragraph 7 hereof.
<PAGE> 217
9. Within 10 days after the filing of any plan, EPE
will give the Owner Participant written notice of whether such
plan constitutes an EPE Plan referred to in clause (iii) of the
definition thereof. In the absence of such notice, such plan
shall be deemed to be an EPE Plan.
10. Prior to the Effective Date, EPE shall seek and
obtain all governmental approvals necessary to effect the
transactions contemplated hereby. The Owner Participant agrees to
cooperate with EPE, at EPE's expense, in obtaining such approvals
prior to the Effective Date.
11. Concurrently with the execution and delivery of
this Settlement Agreement, the Owner Participant, the Owner
Trustee, EPE and the Successor Indenture Trustees shall execute
and deliver a Tolling Agreement in the form of Annex E hereto.
RIGHTS AND OBLIGATIONS ON AND AFTER THE EFFECTIVE DATE
12. Subject to the satisfaction of the terms and
conditions contained in this Settlement Agreement, including
paragraph 13, on or as of the Effective Date:
a The Owner Participant will, subject to paragraph
12.b, transfer to EPE or, if EPE so requests,
EPE's designee, all of the Owner Participant's
right, title and interest in the Trust Estate and
certain Excepted Payments by the execution and
delivery of a Bill of Sale and Assignment
substantially in the form of Annex B hereto.
b At the request and expense of EPE, the Owner
Participant will, at the election of EPE, in lieu
of or in addition to the transfer referred to in
paragraph 12.a, (i) consent to the conveyance or
transfer of the Trust Estate to EPE or, if EPE so
requests, EPE's designee, and (ii) direct the
Owner Trustee to effect such conveyance or
transfer, which obligations shall be subject to
(a) EPE having obtained the required consent, if
any, of the applicable Successor Indenture Trustee
or a binding order (which has not been stayed) of
a court of competent jurisdiction effectively
overriding the requirement, if any, of such
consent, (b) such conveyance and transfer
complying with applicable law and third party
rights, if any, or EPE having obtained a binding
order (which has not been stayed) of a court of
competent jurisdiction effectively overriding any
<PAGE> 218
requirement of such compliance, and (c) EPE having
provided such indemnities to the Owner Participant
and the Owner Trustee as either of them shall
reasonably request regarding the conveyance or
transfer set forth in this paragraph 12.b.
c The parties hereto and the Owner Trustee shall
execute and deliver the Release.
d Reorganized EPE shall deliver to the Owner
Participant on the Effective Date an executed
letter in the form of Annex G hereto. The form and
contents of Annex G shall not be disclosed prior
to the Effective Date to any person or entity,
except that a copy thereof shall be provided to
the Bankruptcy Court under seal and to the
Successor Indenture Trustee (after execution
thereof). In the event the Effective Date does not
occur, neither the Owner Participant nor any other
person or entity shall refer to or otherwise
disclose the contents of Annex G, or its inclusion
in this Settlement Agreement, for any purpose.
e If paragraph 12.a is applicable, EPE or its
designee shall become the "Owner Participant"
under the documents described in Schedule A to the
Third Amended Plan for all purposes, and, if
paragraph 12.b is applicable, such documents shall
be terminated, altered, or amended in such manner
as the parties hereto shall agree, consistent with
the terms of this Settlement Agreement.
f Section 17 of the Participation Agreement shall
continue in full force and effect, but only with
respect to EPE's obligations under the first and
third sentences of the first paragraph and the
entire third paragraph of Section 10(b)(3)(xi),
and the entirety of Sections 13 (insofar as
indemnification is sought for Claims (as defined
in the Participation Agreement) asserted against
the Owner Participant, the Owner Trustee, the
First National Bank of Boston (in its individual
capacity), the Trust (as defined in the
Participation Agreement), the Trust Estate, or the
Lease Indenture Estate (as defined in the
Participation Agreement), or any Affiliate (as
defined in the Participation Agreement),
successor, assign, agent, officer, director or
employee of any of the foregoing, by a person
other than the Owner Participant, the Owner
Trustee or any successor or assign thereof) and 16
thereof (it being understood that the exclusions
from the general tax indemnity provisions of
<PAGE> 219
Section 13(b) of the Participation Agreement with
respect to a "voluntary transfer" and with respect
to a "transferee" or a "subsequent transferee"
shall not apply to the transactions contemplated
by this Settlement Agreement); provided, however,
that in order to prevent a double payment with
respect to a Loss or Losses (as defined in the
Participation Agreement), the aggregate amount of
such payments shall be reduced (without
duplication) by the appropriate portion of the
amount drawn by the Owner Participant under the
corresponding Palo Verde Letter of Credit to the
extent such portion is attributable (under
calculations performed in accordance with industry
practice) to the same adverse tax consequences
constituting such Loss or Losses. It is understood
that EPE's obligations under this paragraph 12.f
shall not extend to the payment of Basic Rent,
Fair Market Rental Value, Fair Market Sales Value,
Casualty Value, Special Casualty Value,
Termination Value, Enhanced Casualty Value or
Special Termination Value (as such terms are
defined in the Transaction Documents and
collectively referred to herein as "Scheduled
Amounts") or any amounts measured by Scheduled
Amounts or Supplemental Rent (to the extent
attributable to Scheduled Amounts or Excepted
Payments which are Assigned Property (as defined
in the Bill of Sale and Assignment attached hereto
as Annex B)). Notwithstanding anything contained
in this Settlement Agreement or the Release, EPE
shall continue to comply with Section 10(a)(2)(ii)
of the Facility Lease except that any notices or
certificates described in Section 10(a)(1)(i)(F)
of the Facility Lease (as such section relates to
Section 10(a)(2)(ii)) must be received by the
Owner Participant in order to be effective against
the Owner Participant but need not be received by
or delivered to the Indenture Trustee.
g EPE will pay any balance due of the amounts
described in paragraph 26 hereof.
13. The terms and conditions referred to in paragraph
12 include the following:
a The Confirmation Order shall (i) provide that an
Order of Dismissal with Prejudice in the form
attached hereto as Annex C shall be entered on or
after the Effective Date and a copy provided to
the Owner Participant and to the Successor
Indenture Trustee and (ii) comply with the last
<PAGE> 220
sentence of paragraph 2.d, if applicable;
b The Owner Participant, the Owner Trustee and the
Successor Indenture Trustees shall have executed
and delivered mutual releases substantially in the
form attached hereto as Annex D and an order of
the Bankruptcy Court complying with either the
first or the last sentence of paragraph 2.d shall
be in full force and effect and shall not have
been stayed;
c This Settlement Agreement shall be in full force
and effect and neither the Owner Participant nor
EPE shall be in default of any term or condition
hereof;
d All governmental approvals, if any, necessary to
effect the transactions contemplated hereby shall
have been obtained and be in full force and
effect;
e All consents of third parties, if any, necessary
to effect the actions contemplated above shall
have been obtained and be in full force and
effect;
f All documentation for the transactions
contemplated by this paragraph 13 and paragraphs
8, 12.a, 12.b, 12.e and 26 shall be reasonably
satisfactory in form and substance to the Owner
Participant and EPE; and
g The Owner Participant and the Owner Trustee shall
have received all amounts, if any, payable
pursuant to paragraphs 2.b, 18 and 26 hereof.
Conditions d and e above may be satisfied by the entry of a
binding order (which has not been stayed) of a court of competent
jurisdiction effectively overriding the requirement, if any, of
obtaining any third party consents or governmental approvals
referred to in such conditions.
TERMINATION AND EFFECTIVENESS
14. This Settlement Agreement may be terminated (a) on
30 days' written notice by either EPE or the Owner Participant if
no EPE Plan referred to in clause (i) or (ii) of the definition
thereof is being pursued and, in the case of termination by EPE,
EPE certifies in the termination notice that no EPE Plan referred
to in clause (i) or (ii) of the definition thereof is then
contemplated by EPE, or (b) on 5 days' written notice by either
the Owner Participant or EPE if EPE or the Owner Participant,
respectively, fails to comply with any term or condition of this
Settlement Agreement and does not cure such failure within such 5
<PAGE> 221
days or (c) on 5 days' written notice from EPE that a settlement
agreement with one of the other owner participants with an
interest in Unit 2 of the Palo Verde Nuclear Generating Station
has terminated pursuant to paragraph 5 of such settlement
agreement and that EPE is terminating all of the settlement
agreements with each of the owner participants with an interest
in such Unit.
15. This Settlement Agreement shall not be binding upon
any of the parties hereto until EPE and all of the owner
participants execute settlement agreements in a form similar to
this Settlement Agreement. This Settlement Agreement shall
terminate automatically without further action by any party
hereto if the Bankruptcy Court in the Case declines to approve
the settlement contained in this Settlement Agreement or any such
other settlement agreement.
16. Upon any termination of this Settlement Agreement,
all obligations of the parties hereto (except for the last 2
sentences of paragraph 12.d) shall cease.
REPRESENTATIONS AND WARRANTIES
17. EPE represents and warrants that no modification to
the merger agreement between EPE and CSW is necessary to
effectuate or consummate this Settlement Agreement.
18. Each party hereto represents and warrants that it
owns and has not transferred any of the Claims described in the
Release as being released by it or any of its interests in the
Facility Lease. Except as set forth in Annex F hereto, to the
knowledge of the Owner Participant, there exists no basis upon
which the Owner Participant, as of the date of this Settlement
Agreement, may assert any Claims against EPE, other than any such
Claims which will be extinguished pursuant to the Release. To the
knowledge of EPE, there exists no basis upon which EPE, as of the
date of this Settlement Agreement, may assert any Claim against
the Owner Participant, other than any such Claims which will be
extinguished pursuant to the Release. EPE shall pay all amounts
due with respect to the items set forth on Annex F irrespective
of whether such amounts are already incurred, invoiced or
assessed or arise hereafter.
19. Each party hereto agrees that the Third Amended
Plan (i) complies with the terms and conditions of this
Settlement Agreement, and (ii) does not materially adversely
affect the Owner Participant or any of its affiliates for
purposes of paragraph 4 hereof.
<PAGE> 222
MISCELLANEOUS
20. Nothing in this Settlement Agreement shall operate
as an admission of liability or admission as to any issue by any
party, and this Settlement Agreement (and all negotiations,
discussions and drafts relating thereto) shall be subject to the
provisions of Federal Rule of Evidence 408 and comparable
provisions of state law.
21. This Settlement Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
instrument.
22. This Settlement Agreement shall be governed in all
respects including validity, interpretation and effect, by, and
construed and enforced under, the law of the State of New York,
without giving effect to the principles of conflicts of law
thereof.
23. This Settlement Agreement is enforceable only by
the parties hereto and the Owner Trustee; provided, however,
that, after the Effective Date, any person who is a beneficiary
of a release (including the Release) contemplated by this
Settlement Agreement shall be entitled to enforce the provisions
of such release.
24. In addition to all other rights and remedies
provided in this Settlement Agreement, EPE and the Owner
Participant may (subject to any restrictions contained in this
Settlement Agreement) exercise any other right or remedy that may
be available under applicable law or proceed (or the Owner
Trustee may proceed) by appropriate court action to enforce the
terms hereof. The failure or delay of EPE or the Owner
Participant in exercising any right granted hereunder upon the
occurrence of any of the contingencies set forth herein shall not
constitute a waiver of any such right upon the continuance or
recurrence of any such contingencies or similar contingencies and
any single or partial exercise of any particular right by EPE or
the Owner Participant shall not exhaust the same or constitute a
waiver of any other right provided herein. No remedy under this
Settlement Agreement is intended to be exclusive, but each shall
be cumulative and in addition to any other remedy provided
hereunder or otherwise available to EPE or the Owner Participant
at law or in equity (subject to any restrictions contained in
this Settlement Agreement). Notwithstanding the foregoing, the
parties agree that in the event of a breach of this Settlement
Agreement, money damages will not be adequate to compensate the
non-breaching party, and, accordingly, either party or the Owner
Trustee may seek to specifically enforce the provisions of this
Settlement Agreement.
<PAGE> 223
25. Except as otherwise specifically provided herein,
this Settlement Agreement shall be binding on all successors and
assigns of the parties hereto.
26. The parties shall cooperate with one another to
execute and deliver such other documents and to take such further
actions as shall be necessary or appropriate to effectuate the
terms hereof; provided, however, that the Owner Participant and
the Owner Trustee shall each be reimbursed by EPE for its
reasonable expenses after the date of entry of the Confirmation
Order related to the execution and delivery of any such other
documents and the taking of any such further actions by the Owner
Participant or the Owner Trustee.
27. The descriptive headings of the paragraphs of this
Settlement Agreement are for convenience only and will not be
used in the construction of the content of this Settlement
Agreement.
28. Any notice required or permitted to be given by any
provision of this Settlement Agreement will be in writing and
will be deemed to have been given when delivered personally or by
facsimile, receipt confirmed, to the party designated to receive
such notice or on the date following the day sent by overnight
courier or on the 3rd business day after the same is sent by
certified mail, postage and charges prepaid, directed to the
following addresses or to such other additional addresses as any
party might designate by written notice to the other party:
El Paso Electric Company: El Paso Electric Company
Mills Building
303 North Oregon
El Paso, Texas 79901
Attention:
Chief Executive Officer
and Chairman of the Board
Facsimile: (915) 521-4754
With Copy to: Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: Shalom L. Kohn, Esq.
Facsimile: (312) 853-7312
With Copy to: Milbank, Tweed, Hadley & McCloy
One Chase Manhattan Plaza
New York, New York 10005
Attention: Joris M. Hogan, Esq.
Facsimile: (212) 530-5219
<PAGE> 224
Owner Participant: Energy Investments Inc.
% UtilCo. Group Inc.
7400 West 110 Street
Suite 320
Overland Park, Kansas 66210
Attention: Donald Claar,
President
Facsimile: (913) 338-3430
With Copy to: Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Attention: Richard M. Allen,
Esq.
Facsimile: (212) 474-3700
Parties to this Settlement Agreement shall be entitled
to conclusively rely on any notice given in the foregoing manner
to the parties at the addresses reflected above, unless and until
a different address or facsimile number is provided to all
parties and persons listed above. Rejection or refusal to accept,
or inability to deliver because of changed addresses or because
no notice of changed address was given, shall be deemed a receipt
of such notice.
IN WITNESS WHEREOF, the parties hereto have duly
authorized and executed this Settlement Agreement on the date
first above written.
EL PASO ELECTRIC COMPANY,
by /s/
Name: David H. Wiggs, Jr.
Title: Chairman and CEO
ENERGY INVESTMENTS INC.,
by /s/
Name:Donald K. Clark
Title:President
<PAGE> 225
Annex A: Form of Release and Agreement among EPE, Owner
Participant and Owner Trustee
Annex B: Form of Bill of Sale and Assignment
Annex C: Form of Order of Dismissal with Prejudice
Annex D: Form of Release and Agreement among Owner
Participant, Owner Trustee, and Successor Indenture
Trustees
Annex E: Form of Tolling Agreement
Annex F: Existing Claims
Annex G: Form of Letter re Causes of Action
<PAGE> 226
ANNEX A
RELEASE AND AGREEMENT
THIS RELEASE AND AGREEMENT (this "Release") is entered
into on , 199 , by and among EL PASO ELECTRIC COMPANY, a
Texas corporation, debtor and debtor in possession ("EPE"),
ENERGY INVESTMENTS INC., a Missouri corporation (the "Owner
Participant" and, collectively with each of the other owner
participants participating in the transactions described in
recital B below, the "Owner Participants"), and THE FIRST
NATIONAL BANK OF BOSTON (in its individual capacity, "FNBB"), as
trustee under a trust agreement with the Owner Participant (the
"Owner Trustee" and, collectively as trustee under trust
agreements with the Owner Participants, the "Owner Trustees").
RECITALS
A. EPE is the debtor in a case pending under Chapter 11
of Title 11 of the United States Code (the "Bankruptcy Code") in
the United States Bankruptcy Court for the Western District of
Texas (the "Bankruptcy Court"), which case has been assigned Case
No. 92-10148-FM (the "EPE Chapter 11 Case").
B. EPE, the Owner Participant and the Owner Trustee are
parties to various agreements, documents and instruments that
evidence or relate to the sale and leaseback by EPE, in separate
transactions with the Owner Participants and Owner Trustees, of
EPE's entire undivided interest in Unit 2 of the Palo Verde
Nuclear Generating Station ("Palo Verde") and approximately 39.5%
of EPE's undivided interest in Unit 3 of Palo Verde and certain
common plant and other related assets.
C. FNBB, in its capacity as Owner Trustee for each of
the Owner Participants (other than DBP Corp.), and DBP Corp.
filed proofs of claim in the EPE Chapter 11 Case (the "Proofs of
Claim").
D. On September 9, 1992, EPE commenced an adversary
proceeding against FNBB, in its capacity as Owner Trustee for
each of the Owner Participants (other than DBP Corp.), DBP Corp.
and the Successor Indenture Trustees (the "Palo Verde Lease
Litigation Defendants"), which case was assigned Adversary
Proceeding No. 92-1285-FM (the "Palo Verde Lease Litigation").
The Proofs of Claim, and any objections by EPE thereto, were
consolidated into the Palo Verde Lease Litigation. In addition,
in discussions between the parties, certain issues were raised
surrounding the presentment and drawings by the Owner
Participants under certain letters of credit issued as part of
the aforesaid sale and leaseback transactions in the approximate
aggregate amount of $288.4 million (the "Palo Verde Letters of
<PAGE> 227
Credit"). Such issues, including any claims described in
disclosure statements and plans of reorganization filed by EPE in
the EPE Chapter 11 Case with regard to the Owner Participants and
the Palo Verde Letters of Credit, are herein called the "Owner
Participant Claims".
E. The Palo Verde Lease Litigation Defendants have
asserted various defenses, contentions and counterclaims (the
"Palo Verde Defendants' Claims"). In addition, with regard to the
Owner Participant Claims, the Owner Participants contend that
their actions surrounding the presentment and drawings of the
Palo Verde Letters of Credit, including such drawings, were
proper as a matter of law (the "Letter of Credit Defenses").
F. Pursuant to a Settlement Agreement dated as of
November 15, 1993 (including the Annexes thereto and paragraphs
12 and 13 thereof, the "Settlement Agreement"), EPE and the Owner
Participant (or a predecessor thereof) agreed to release certain
claims effective upon the Effective Date.
IN CONSIDERATION OF THE MUTUAL AGREEMENTS CONTAINED
HEREIN, and other good and valuable consideration, the receipt of
which is hereby acknowledged, IT IS HEREBY AGREED by and among
the parties hereto as follows:
AGREEMENTS
1. Except as otherwise defined herein, all capitalized
terms used herein shall have the meanings set forth in the
Settlement Agreement.
2. EPE, on behalf of itself and the EPE Group, hereby
forever releases and discharges the Owner Trustee and the Owner
Participant Group (the "Released Parties") from, and waives and
relinquishes, any and all claims, demands, debts, liabilities,
obligations, actions, causes of action, suits, sums of money,
accounts, reckonings, covenants, contracts, controversies,
agreements, promises and rights whatsoever, whenever arising,
known or unknown, suspected or unsuspected, contingent or fixed,
liquidated or unliquidated, matured or unmatured, in law, equity,
bankruptcy or otherwise (collectively, "Claims"), which EPE or
the EPE Group ever had, now has, or hereafter can, shall or may
have against any of the Released Parties for, upon, or by reason
of any matter, cause, transaction or thing whatsoever occurring
at any time prior to the Effective Date, including, without
limitation, any Claims which EPE or the EPE Group ever had, now
has, or hereafter can, shall or may have against any of the
Released Parties by reason of, arising from, relating to, or in
<PAGE> 228
connection with the Palo Verde Lease Litigation, the Palo Verde
Letters of Credit, the Palo Verde Defendants' Claims, the Owner
Participant Claims, the documents listed on Schedule A to the
Third Amended Plan or the transactions contemplated by the
Participation Agreement, or based on or arising under 11 U.S.C.
Sections 502, 506, 507, 510, 544-553, inclusive, or any similar
provisions of federal or state law, and any right of indemnity,
contribution or subrogation arising therefrom or relating
thereto; provided, however, that nothing herein shall release any
Claims of any member of the EPE Group (other than EPE) unrelated
to the Palo Verde Lease Litigation, the Palo Verde Letters of
Credit, the Palo Verde Defendants' Claims, the Owner Participant
Claims, or the transactions contemplated by the Settlement
Agreement or the Participation Agreement or the documents listed
on Schedule A to the Third Amended Plan; and provided, however
that nothing herein shall release any party from its obligations
set forth in, or that are assumed or continued pursuant to the
Settlement Agreement (including, without limitation, the Annexes
thereto and paragraphs 12 and 13 thereof).
3. The Owner Participant, on behalf of itself and the
Owner Participant Group, and the Owner Trustee hereby forever
release and discharge the EPE Group from, and waive and
relinquish, any and all Claims which the Owner Participant or the
Owner Participant Group or the Owner Trustee ever had, now has,
or hereafter can, shall or may have against the EPE Group for,
upon, or by reason of any matter, cause, transaction or thing
whatsoever occurring at any time prior to the Effective Date,
including, without limitation, any claims which the Owner
Participant or the Owner Participant Group or the Owner Trustee
ever had, now has, or hereafter can, shall or may have against
the EPE Group by reason of, arising from, relating to, or in
connection with the Palo Verde Lease Litigation, the Palo Verde
Letters of Credit, the Palo Verde Defendants' Claims, the Owner
Participant Claims, or the documents listed on Schedule A to the
Third Amended Plan or the transactions contemplated by the
Participation Agreement, or based on or arising under 11 U.S.C.
Sections 502, 506, 507, 510, 544-553, inclusive, or any similar
provisions of federal or state law, and any right of indemnity,
contribution or subrogation arising therefrom or relating
thereto; excluding, however, from the foregoing any Claims of any
member of the Owner Participant Group (other than the Owner
Participant) or the Owner Trustee unrelated to the Palo Verde
Lease Litigation, the Palo Verde Letters of Credit, the Palo
Verde Defendants' Claims, the Owner Participant Claims, or the
transactions contemplated by the Settlement Agreement or the
Participation Agreement or the documents listed on Schedule A to
the Third Amended Plan; and provided, however that nothing herein
shall release any party from its obligations set forth in the
Settlement Agreement (including, without limitation, the Annexes
thereto and paragraphs 12 and 13 thereof).
<PAGE> 229
4. Each of the parties hereby acknowledges and agrees
that all Claims under Section 1542 of the California Civil Code
and any other provision of law now or hereafter enacted,
adjudicated or sought to be adjudicated relating to the release
or waiver of unknown or unspecified claims are hereby
specifically and expressly released and waived. Each of the
parties understands that Section 1542 of the California Civil
Code provides that "[a] general release does not extend to claims
which the creditor does not know or suspect to exist in his favor
at the time of executing the release, which if known by him must
have materially affected his settlement with the debtor". For
purposes of this Release, each of the parties acknowledges and
agrees that it may be considered to be both a "creditor" and a
"debtor" for all purposes and with respect to all Claims it may
now know or suspect to exist within the meaning of Section 1542
of the California Civil Code and any other provision of law now
or hereafter enacted, adjudicated or sought to be adjudicated
relating to the release or waiver of unknown or unspecified
claims.
5. This Release may be executed in two or more
counterparts, each of which shall be deemed an original, but all
of which shall constitute one and the same instrument.
6. This Release shall be binding upon the parties
hereto and their successors and assigns. Each party hereto
represents and warrants that it owns all the Claims described
herein which are being released hereunder and is duly authorized
to release such Claims.
7. This Release shall be governed in all respects,
including validity, interpretation and effect, by, and construed
and enforced under, the law of the State of New York, without
giving effect to the principles of conflict of laws thereof.
IN WITNESS WHEREOF, the parties hereto have duly
authorized and executed this Release as of the date first above
written.
EL PASO ELECTRIC COMPANY,
by
Name:
Title:
ENERGY INVESTMENTS INC.,
by
Name:
Title:
<PAGE> 230
THE FIRST NATIONAL BANK OF BOSTON,
as Owner Trustee,
by
Name:
Title:
<PAGE> 231
ANNEX B
BILL OF SALE AND ASSIGNMENT, dated as
of , 199 , from ENERGY
INVESTMENTS INC., a Missouri corporation
(the "Owner Participant"), to EL PASO
ELECTRIC COMPANY, a Texas corporation [1]
("El Paso").
WITNESSETH:
WHEREAS, the Owner Participant desires to convey and El
Paso desires to acquire the Assigned Property (as hereinafter
defined);
NOW, THEREFORE, in consideration of the premises and of
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
Definitions
For purposes hereof, capitalized terms used but not
otherwise defined herein shall have the meanings assigned to such
terms in the Participation Agreement dated as of August 1, 1986,
among [a predecessor of] the Owner Participant, the First
National Bank of Boston, in its individual capacity and as Owner
Trustee, El Paso and others.
ARTICLE II
Assignment of Trust Estate
The Owner Participant does hereby grant, bargain,
convey, sell, assign, transfer and set over (collectively,
"transfer") to El Paso, on an as is, where is basis, free and
clear of Owner Participant's Liens but otherwise without
recourse, representation or warranty, express or implied, of any
nature whatsoever, all the Owner Participant's right, title and
interest in, to and under the Trust Estate and the Excepted
Payments, other than Excepted Payments referred to in clauses (i)
(to the extent such Supplemental Rent constitutes or is
attributable to payments to which the Owner Participant or any of
its affiliates (or the successors, assigns, agents, officers,
directors or employees of the Owner Participant) are entitled
- ---------------------------------
[1] El Paso may designate a different transferee.
<PAGE> 232
under the Settlement Agreement dated as of November 15, 1993
between El Paso and the Owner Participant (or any predecessor
thereof)), (vi) and (vii) (and (viii) to the extent attributable
to the payments referred to in clauses (i), (vi) or (vii)) of the
definition of "Excepted Payments" (the "Assigned Property"). The
disclaimer of representations and warranties set forth in the
second sentence of Section 6(b) of the Facility Lease is hereby
incorporated herein as fully as if set forth at this place. Such
transfer shall not alter the obligations of El Paso nor expand
the rights of the Owner Participant under the Settlement
Agreement dated as of November 15, 1993, between El Paso and the
Owner Participant (or a predecessor thereof) or the Release
referred to therein, whether or not such obligations or rights
would constitute an Excepted Payment.
ARTICLE III
Effectiveness of Transfer
The transfer of the Assigned Property shall become
effective without further action upon the execution and delivery
by the Owner Participant to El Paso of this Bill of Sale and
Assignment and the furnishing of a counterpart of this Bill of
Sale and Assignment to the Owner Trustee.
ARTICLE IV
Miscellaneous
SECTION 4.01. Successors and Assigns. This Bill of Sale
and Assignment shall be binding upon the Owner Participant and
its successors and shall inure to the benefit of El Paso and its
successors and assigns.
SECTION 4.02. Governing Law. This Bill of Sale and
Assignment shall be governed by and construed in accordance with
the law of the State of New York.
IN WITNESS WHEREOF, the undersigned has caused this
Bill of Sale and Assignment to be duly executed as of the day and
year first written above.
ENERGY INVESTMENTS INC.,
by
Name:
Title:
<PAGE> 233
ANNEX C
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE WESTERN DISTRICT OF TEXAS
AUSTIN DIVISION
)
In re EL PASO ELECTRIC COMPANY, ) Case No. 92-10148-FM
) (Chapter 11)
Debtor. )
)
) Adversary Proceeding
EL PASO ELECTRIC COMPANY, ) No. 92-1285-FM
)
Plaintiff and Counterclaimant, )
)
v. ) Adversary Complaint
) seeking a declaration
THE FIRST NATIONAL BANK OF BOSTON, ) of rights arising
DBP CORP., LaSALLE NATIONAL BANK, ) from the rejection of
and HARRIS TRUST AND SAVINGS BANK, ) leases of the Palo
) Verde Nuclear
Defendants and Claimants. ) Generating Station
)
ORDER OF DISMISSAL WITH PREJUDICE
IT IS HEREBY ORDERED AND ADJUDGED, pursuant to the
Order of Confirmation in Case No. 92-10148-FM (Chapter 11), that
the Complaint and Counterclaims in the above-referenced action
are each hereby dismissed with prejudice.
IT IS SO ORDERED:
Dated: , 199
Austin, Texas
United States Bankruptcy Judge
<PAGE> 234
ANNEX D
RELEASE AND AGREEMENT
THIS RELEASE AND AGREEMENT (this "Release") is entered
into on , 199 , by and among ENERGY INVESTMENTS INC., a
corporation (the "Owner Participant" and, collectively with each
of the other owner participants participating in the transactions
described in recital B below, the "Owner Participants"), THE
FIRST NATIONAL BANK OF BOSTON (in its individual capacity,
"FNBB"), as trustee under a trust agreement with the Owner
Participant (the "Owner Trustee" and, collectively as trustee
under trust agreements with the Owner Participants, the "Owner
Trustees"), HARRIS TRUST AND SAVINGS BANK, as Successor Trustee
under indentures with certain of the Owner Trustees, and LASALLE
NATIONAL BANK, as Successor Trustee under indentures with certain
of the Owner Trustees (collectively, the "Successor Indenture
Trustees").
RECITALS
A. EPE is the debtor in a case pending under Chapter 11
of Title 11 of the United States Code (the "Bankruptcy Code") in
the United States Bankruptcy Court for the Western District of
Texas (the "Bankruptcy Court"), which case has been assigned Case
No. 92-10148-FM (the "EPE Chapter 11 Case").
B. EPE, the Owner Participant and the Owner Trustee are
parties to various agreements, documents and instruments that
evidence or relate to the sale and leaseback by EPE, in separate
transactions with the Owner Participants and Owner Trustees, of
EPE's entire undivided interest in Unit 2 of the Palo Verde
Nuclear Generating Station ("Palo Verde") and approximately 39.5%
of EPE's undivided interest in Unit 3 of Palo Verde and certain
common plant and other related assets.
C. FNBB, in its capacity as Owner Trustee for each of
the Owner Participants (other than DBP Corp.), DBP Corp. and the
Successor Indenture Trustees filed proofs of claim in the EPE
Chapter 11 Case (the "Proofs of Claim").
D. On September 9, 1992, EPE commenced an adversary
proceeding against FNBB, in its capacity as Owner Trustee for
each of the Owner Participants (other than DBP Corp.), DBP Corp.
and the Successor Indenture Trustees (the "Palo Verde Lease
<PAGE> 235
Litigation Defendants"), which case was assigned Adversary
Proceeding No. 92-1285-FM (the "Palo Verde Lease Litigation").
The Proofs of Claim, and any objections by EPE thereto, were
consolidated into the Palo Verde Lease Litigation. In addition,
in discussions between the parties, certain issues were raised
surrounding the presentment and drawings by the Owner
Participants under certain letters of credit issued as part of
the aforesaid sale and leaseback transactions in the approximate
aggregate amount of $288.4 million (the "Palo Verde Letters of
Credit"). Such issues, including any claims described in
disclosure statements and plans of reorganization filed by EPE in
the EPE Chapter 11 Case with regard to the Owner Participants and
the Palo Verde Letters of Credit, are herein called the "Owner
Participant Claims".
E. The Palo Verde Lease Litigation Defendants have
asserted various defenses, contentions and counterclaims (the
"Palo Verde Defendants' Claims"). In addition, with regard to the
Owner Participant Claims, the Owner Participants contend that
their actions surrounding the presentment and drawings of the
Palo Verde Letters of Credit, including such drawings, were
proper as a matter of law (the "Letter of Credit Defenses").
F. Pursuant to a Settlement Agreement dated as of
November , 1993, (including the Annexes thereto and paragraphs 12
and 13 thereof, the "Settlement Agreement"), EPE and the Owner
Participant (or a predecessor thereof) agreed to release certain
claims, effective upon the Effective Date.
IN CONSIDERATION OF THE MUTUAL AGREEMENTS CONTAINED
HEREIN, and other good and valuable consideration, the receipt of
which is hereby acknowledged, IT IS HEREBY AGREED by and among
the parties hereto as follows:
AGREEMENTS
1. Except as otherwise defined herein, all capitalized
terms used herein shall have the meanings set forth in the
Settlement Agreement.
2. The Successor Indenture Trustees, on behalf of
themselves and the Lease Debt Creditors, hereby forever release
and discharge the Owner Trustee and the Owner Participant Group
(the "Released Parties") from, and waive and relinquish, any and
all claims, demands, debts, liabilities, obligations, actions,
causes of action, suits, sums of money, accounts, reckonings,
covenants, contracts, controversies, agreements, promises and
<PAGE> 236
rights whatsoever, whenever arising, known or unknown, suspected
or unsuspected, contingent or fixed, liquidated or unliquidated,
matured or unmatured, in law, equity, bankruptcy or otherwise
(collectively, "Claims"), which the Successor Indenture Trustees
or Lease Debt Creditors ever had, now have, or hereafter can,
shall or may have against any of the Released Parties for, upon,
or by reason of any matter, cause, transaction or thing
whatsoever occurring at any time prior to the Effective Date,
including, without limitation, any Claims which the Successor
Indenture Trustees or Lease Debt Creditors ever had, now have, or
hereafter can, shall or may have against any of the Released
Parties by reason of, arising from, relating to, or in connection
with the Palo Verde Lease Litigation, the Palo Verde Letters of
Credit, the Palo Verde Defendants' Claims, or the Owner
Participant Claims, the documents listed in Schedule A to the
Third Amended Plan or the transactions contemplated by the
Participation Agreement, or based on or arising under 11 U.S.C.
Sections 502, 506, 507, 510, 544-553, inclusive, or any similar
provisions of federal or state law, and any right of indemnity,
contribution or subrogation arising therefrom or relating
thereto; excluding, however, from the foregoing any Claims of the
Successor Indenture Trustees or Lease Debt Creditors unrelated to
the Palo Verde Lease Litigation, the Palo Verde Letters of
Credit, the Palo Verde Defendants' Claims, the Owner Participant
Claims, or the transactions contemplated by the Settlement
Agreement or the Participation Agreement or the documents listed
on Schedule A to the Third Amended Plan.
3. The Owner Participant, on behalf of itself and the
Owner Participant Group, and the Owner Trustee hereby forever
release and discharge the Successor Indenture Trustees and Lease
Debt Creditors from, and waive and relinquish, any and all Claims
which the Owner Participant or FNBB or the Owner Participant
Group or the Owner Trustee ever had, now has, or hereafter can,
shall or may have against the Successor Indenture Trustees or
Lease Debt Creditors for, upon, or by reason of any matter,
cause, transaction or thing whatsoever occurring at any time
prior to the Effective Date, including, without limitation, any
claims which the Owner Participant or the Owner Participant Group
or the Owner Trustee ever had, now has, or hereafter can, shall
or may have against the Successor Indenture Trustees or Lease
Debt Creditors by reason of, arising from, relating to, or in
connection with the Palo Verde Lease Litigation, the Palo Verde
Letters of Credit, the Palo Verde Defendants' Claims, or the
Owner Participant Claims, the documents listed in Schedule A to
the Third Amended Plan or the transactions contemplated by the
<PAGE> 237
Participation Agreement, or based on or arising under 11 U.S.C.
Sections 502, 506, 507, 510, 544-553, inclusive, or any similar
provisions of federal or state law, and any right of indemnity,
contribution or subrogation arising therefrom or relating
thereto; excluding, however, from the foregoing any Claims of the
Owner Participant or FNBB or any member of the Owner Participant
Group or the Owner Trustee unrelated to the Palo Verde Lease
Litigation, the Palo Verde Letters of Credit, the Palo Verde
Defendants' Claims, the Owner Participant Claims, the
transactions contemplated by the Settlement Agreement or the
Participation Agreement or the documents listed in Schedule A to
the Third Amended Plan.
4. Each of the parties hereby acknowledges and agrees
that all Claims under Section 1542 of the California Civil Code
and any other provision of law now or hereafter enacted,
adjudicated or sought to be adjudicated relating to the release
or waiver of unknown or unspecified claims are hereby
specifically and expressly released and waived. Each of the
parties understands that Section 1542 of the California Civil
Code provides that "[a] general release does not extend to claims
which the creditor does not know or suspect to exist in his favor
at the time of executing the release, which if known by him must
have materially affected his settlement with the debtor". For
purposes of this Release, each of the parties acknowledges and
agrees that it may be considered to be both a "creditor" and a
"debtor" for all purposes and with respect to all Claims it may
now know or suspect to exist within the meaning of Section 1542
of the California Civil Code and any other provision of law now
or hereafter enacted, adjudicated or sought to be adjudicated
relating to the release or waiver of unknown or unspecified
claims.
5. This Release may be executed in two or more
counterparts, each of which shall be deemed an original, but all
of which shall constitute one and the same instrument.
6. This Release shall be binding upon the parties
hereto and their successors and assigns. Each party hereto
represents and warrants that it owns or holds all Claims
described herein which are being released hereunder.
7. This Release shall be governed in all respects,
including validity, interpretation and effect, by, and construed
and enforced under, the law of the State of New York, without
giving effect to the principles of conflict of laws thereof.
<PAGE> 238
IN WITNESS WHEREOF, the parties hereto have duly
authorized and executed this Release as of the date first above
written.
ENERGY INVESTMENTS INC.,
by
Name:
Title:
THE FIRST NATIONAL BANK OF BOSTON,
as Owner Trustee,
by
Name:
Title:
LASALLE NATIONAL BANK, as
Successor Indenture Trustee,
by
Name:
Title:
HARRIS TRUST AND SAVINGS BANK,
as Successor Indenture Trustee,
by
Name:
Title:
<PAGE> 239
ANNEX E
TOLLING AGREEMENT
This Tolling Agreement is made and entered into as of
November , 1993 by and among EL PASO ELECTRIC COMPANY, a Texas
corporation ("EPE"), ENERGY INVESTMENTS INC., a Missouri
corporation (the "Owner Participant"), THE FIRST NATIONAL BANK OF
BOSTON (in its individual capacity, "FNBB"), as trustee under a
trust agreement with the Owner Participant (the "Owner Trustee"
and, collectively as trustee under trust agreements with all the
owner participants, the "Owner Trustees"), HARRIS TRUST AND
SAVINGS BANK, as Successor Trustee under indentures with certain
of the Owner Trustees, and LASALLE NATIONAL BANK, as Successor
Trustee under indentures with certain of the Owner Trustees
(collectively, the "Successor Indenture Trustees").
RECITALS
A. EPE is the debtor in a case pending under Chapter 11
of Title 11 of the United States Code (the "Bankruptcy Code") in
the United States Bankruptcy Court for the Western District of
Texas (the "Bankruptcy Court"), which case has been assigned Case
No. 92-10148-FM (the "EPE Chapter 11 Case").
B. EPE, the Owner Participant and the Owner Trustee are
parties to various agreements, documents and instruments that
evidence or relate to the sale and leaseback by EPE, in separate
transactions with the Owner Participants and Owner Trustees, of
EPE's entire undivided interest in Unit 2 of the Palo Verde
Nuclear Generating Station ("Palo Verde") and approximately 39.5%
of EPE's undivided interest in Unit 3 of Palo Verde and certain
common plant and other related assets.
C. FNBB, in its capacity as Owner Trustee for each of
the Owner Participants (other than DBP Corp.), DBP Corp. and the
Successor Indenture Trustees have filed proofs of claim in the
EPE Chapter 11 Case (the "Proofs of Claim").
D. On September 9, 1992, EPE commenced an adversary
proceeding against FNBB, in its capacity as Owner Trustee for
each of the Owner Participants (other than DBP Corp.), DBP Corp.
and the Successor Indenture Trustees (the "Palo Verde Lease
Litigation Defendants"), which case has been assigned Adversary
Proceeding No. 92-1285-FM (the "Palo Verde Lease Litigation").
The Proofs of Claim, and any objections by EPE thereto, have been
consolidated into the Palo Verde Lease Litigation. In addition,
in discussions between the parties, certain issues have been
raised surrounding the presentment and drawings by the Owner
Participants under certain letters of credit issued as part of
the aforesaid sale and leaseback transactions in the approximate
<PAGE> 240
aggregate amount of $288.4 million (the "Palo Verde Letters of
Credit"). Such issues, including any claims described in
disclosure statements and plans of reorganization filed by EPE in
the EPE Chapter 11 Case with regard to the Owner Participants and
the Palo Verde Letters of Credit, are herein called the "Owner
Participant Claims".
E. The Palo Verde Lease Litigation Defendants have
asserted various defenses, contentions and counterclaims (the
"Palo Verde Defendants' Claims"). In addition, with regard to the
Owner Participant Claims, the Owner Participants contend that
their actions surrounding the presentment and drawings of the
Palo Verde Letters of Credit, including such drawings, were
proper as a matter of law (the "Letter of Credit Defenses").
F. The Third Amended Plan contemplates, under certain
circumstances, a release of all claims relating to the Palo Verde
Lease Litigation, the Palo Verde Defendants' Claims, the Owner
Participant Claims, and the Letter of Credit Defenses, which
release would be subject to and effective only upon the Effective
Date.
G. The parties have entered into a settlement agreement
of even date herewith (the "Settlement Agreement"), which will
result in a mutual release (such release to become effective only
on the occurrence of the Effective Date) of all Claims between
EPE, on one hand, and the Owner Participant and Owner Trustee, on
the other hand, and for the cessation of litigation in the
interim.
H. This Tolling Agreement is intended to ensure that
the parties' claims against one another (and defenses thereto)
are preserved to the fullest extent pending the occurrence of the
Effective Date and the execution, delivery and effectiveness of
the mutual releases contemplated under the Settlement Agreement,
and that the parties are not prejudiced by the deferral of
litigation in accordance with the Settlement Agreement.
IN CONSIDERATION OF THE MUTUAL AGREEMENTS CONTAINED
HEREIN, and other good and valuable consideration, the receipt of
which is hereby acknowledged, IT IS HEREBY AGREED by and between
the parties hereto as follows:
1. All capitalized terms used but not otherwise defined
herein shall have the meanings assigned to such terms in the
Settlement Agreement.
2. All potential causes of action and claims which EPE
or the Lease Debt Creditors could have asserted as of the date
hereof against the Owner Participant or against the Owner Trustee
(and any defenses thereto) shall survive until the termination of
this Tolling Agreement, and no such cause of action or claim (or
defenses thereto) shall in any manner be extinguished or impaired
<PAGE> 241
in any manner by reason of any applicable statute of limitations,
contractual restriction, equitable doctrine or other basis under
federal or state law, including Section 108 of the Bankruptcy
Code, which may limit EPE's ability to commence or prosecute such
cause of action or claim (or any Owner Participant's or Owner
Trustee's defenses thereto) by reason of a lapse of time,
inaction or failure to commence an action or give any notice as
of a particular date during the term of this Agreement; provided,
however, that nothing herein shall revive, to the extent barred
or otherwise non-actionable, any cause of action or claim
(including any right to relief or element of damage thereof) (or
any defense) that is now barred or otherwise non-actionable.
3. All potential causes of action and claims which the
Owner Participant or the Owner Trustee could have asserted as of
the date hereof against EPE or the Lease Debt Creditors (and any
defenses thereto) shall survive until the termination of this
Tolling Agreement, and no such cause of action or claim (or
defenses thereto) shall in any manner be extinguished or impaired
in any manner by reason of any applicable statute of limitations,
contractual restriction, equitable doctrine or other basis under
federal or state law, including Section 108 or Section 362 of the
Bankruptcy Code, which may limit the ability of the Owner
Participant or Owner Trustee to commence or prosecute such cause
of action or claim (or any Owner Participant's or Owner Trustee's
defenses thereto) by reason of a lapse of time, inaction, or
failure to commence an action or give any notice as of a
particular date during the term of this Agreement; provided,
however, that nothing herein shall revive, to the extent barred
or otherwise non-actionable, any cause of action or claim
(including any right to relief or element of damage thereof) (or
any defense) that is now barred or otherwise non- actionable.
4. All potential causes of action and claims which EPE
could have asserted as of the date hereof against the Lease Debt
Creditors (and any defenses thereto) shall survive until the
termination of this Tolling Agreement, and no such cause of
action or claim (or defenses thereto) shall in any manner be
extinguished or impaired in any manner by reason of any
applicable statute of limitations, contractual restriction,
equitable doctrine or other basis under federal or state law,
including Section 108 of the Bankruptcy Code, which may limit the
ability of EPE to commence or prosecute such cause of action or
claim (or any Lease Debt Creditor's defenses thereto) by reason
of a lapse of time, inaction, or failure to commence an action or
give any notice as of a particular date during the term of this
Agreement; provided, however, that nothing herein shall revive,
to the extent barred or otherwise non-actionable, any cause of
action or claim (including any right to relief or element of
damage thereof) (or any defense) that is now barred or otherwise
non-actionable.
<PAGE> 242
5. This Tolling Agreement shall terminate, unless
extended by the parties hereto, on the earliest of (a) 30 days
after written notice by EPE or the Owner Participant of
termination of the Settlement Agreement, (b) the Effective Date
or (c) September 15, 1997.
6. This Tolling Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
instrument.
7. This Tolling Agreement shall be governed in all
respects, including validity, interpretation and effect, by, and
construed and enforced under, the law of the state of New York,
without giving effect to the principles of conflict of laws
thereof.
8. Each party hereto covenants that it has the
requisite authority to enter into and be bound by the terms of
this Tolling Agreement.
9. This Tolling Agreement shall be binding upon the
parties hereto and their successors and assigns.
10. This Tolling Agreement shall not be binding unless
similar tolling agreements are executed and delivered by each of
the Owner Participants and the Successor Indenture Trustees.
11. This Tolling Agreement may not be modified in whole
or in part except pursuant to a written agreement among all of
the parties hereto.
IN WITNESS WHEREOF, the parties hereto have duly
authorized and executed this Tolling Agreement as of the date
first above written.
EL PASO ELECTRIC COMPANY,
by
Name:
Title:
ENERGY INVESTMENTS INC.,
by
Name:
Title:
<PAGE> 243
THE FIRST NATIONAL BANK OF BOSTON,
as Owner Trustee,
by
Name:
Title:
HARRIS TRUST AND SAVINGS BANK, as
Successor Trustee and on behalf of the
Lease Debt Creditors for Unit 3
by
Name:
Title:
LASALLE NATIONAL BANK, as Successor
Trustee and on behalf of the Lease Debt
Creditors for Unit 2
by
Name:
Title:
<PAGE> 244
ANNEX F
EXISTING CLAIMS
1. Claims by the State of Arizona regarding
transaction privilege taxes.
2. Unpaid fees and expenses of the Owner Trustee
through and including the Effective Date.
<PAGE> 245
ANNEX G
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 246
SETTLEMENT AGREEMENT
BETWEEN
EL PASO ELECTRIC COMPANY
AND
DBP CORP.
November 1993
Michael Paul Kirschner, Mediator
Hastie & Kirschner
Attorneys and Counselors at Law
3000 First Oklahoma Tower * 210 West Park Avenue
Oklahoma City, Oklahoma 73102-5673
Telephone (405) 239-6404
Telecopier (405) 239-6403
<PAGE> 247
SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT is entered into as of
November 15, 1993, between EL PASO ELECTRIC COMPANY, a Texas
corporation, debtor and debtor in possession ("EPE"), and DBP
CORP., a Delaware corporation (the "Owner Participant").
IN CONSIDERATION OF THE MUTUAL AGREEMENTS CONTAINED
HEREIN, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, IT IS HEREBY
AGREED by and between the parties hereto as follows:
DEFINITIONS
1. As used herein, the following terms shall have the
following meanings:
"Bankruptcy Court" shall mean the United States
Bankruptcy Court for the Western District of Texas, or such other
court as shall have original jurisdiction over the Case.
"Case" shall mean the proceeding filed by EPE under
Title 11 of the United States Code and bearing Bankruptcy Court
case number 92-10148-FM.
"Claims" shall have the meaning assigned to such term
in the Release.
"Confirmation Order" shall mean an order confirming an
EPE Plan.
"CSW" shall mean Central and South West Corporation.
"Effective Date" shall mean the date on which an EPE
Plan incorporating, except in immaterial respects, the terms and
conditions of this Settlement Agreement shall become effective
according to such EPE Plan's terms.
"EPE Group" shall mean EPE and (i) each and every
person who controls EPE, is controlled by EPE or is under common
control with EPE (the "EPE Affiliated Group"); (ii) any
predecessor, successor or assign of any person included within
the EPE Affiliated Group; (iii) any Chapter 7 or Chapter 11
Trustee appointed by the Bankruptcy Court or any other court with
regard to any person included within the EPE Affiliated Group;
(iv) the respective present and former agents, directors,
officers, employees, advisors, attorneys and representatives of
any person included within the EPE Affiliated Group; (v) the
respective shareholders and creditors of the EPE Affiliated
Group; and (vi) in the case of any individuals falling within the
scope of (iv) or (v), their respective heirs, receivers,
<PAGE> 248
conservators, beneficiaries, executors, administrators,
successors and assigns. The term EPE Group shall not include CSW.
"EPE Plan" shall mean (i) the Modified Third Amended
Plan of Reorganization, filed on September 15, 1993 in the Case
(the "Third Amended Plan"), (ii) any other plan of reorganization
filed in the Case pursuant to which EPE, with its consent, is to
be acquired by CSW or a CSW affiliate, by merger or otherwise,
and (iii) any other plan of reorganization filed in the Case
supported by or acceptable to EPE if, within 10 days of the
filing thereof, EPE fails to provide written notice to the Owner
Participant that such plan does not constitute an EPE Plan for
purposes of this Settlement Agreement.
"Excepted Payments" shall have the meaning assigned to
such Term in Appendix A to the Participation Agreement.
"Facility Lease" shall have the meaning assigned to
such term in Appendix A to the Participation Agreement.
"Lease Debt Creditors" shall mean Harris Trust and
Savings Bank, as Successor Trustee for those certain $200,000,000
Secured Lease Obligation Bonds Series 1988, and any holders of
such bonds, and LaSalle National Bank, as Successor Trustee for
those certain $396,328,000 Lease Obligation Bonds Series 1986 and
those certain $146,305,000 Lease Obligation Bonds Series 1986A
(the Successor Trustees, collectively, the "Successor Indenture
Trustees"), and any holders of such bonds.
"Owner Participant Group" shall mean the Owner
Participant and (i) each and every person who controls the Owner
Participant, is controlled by the Owner Participant or is under
common control with the Owner Participant (the "Owner Participant
Affiliated Group"); (ii) any predecessor, successor or assign of
any person included within the Owner Participant Affiliated
Group; (iii) the respective present and former agents, directors,
officers, employees, advisors, attorneys and representatives of
any person included within the Owner Participant Affiliated
Group; (iv) the respective shareholders and creditors of the
Owner Participant Affiliated Group; (v) any Chapter 7 or Chapter
11 Trustee appointed by a court with regard to any person
included within the Owner Participant Affiliated Group; and (vi)
in the case of any individuals falling within the scope of (iii)
or (iv), their respective heirs, receivers, conservators,
beneficiaries, executors, administrators, successors and assigns.
"Owner Trustee" shall mean The First National Bank of
Boston ("FNBB"), as trustee under a trust agreement with the
Owner Participant.
<PAGE> 249
"Palo Verde Leases" shall mean, collectively, the
Facility Lease and the facility leases, as amended, between EPE
and FNBB (as trustee under separate trust agreements with the
other owner participants) with respect to the Arizona Nuclear
Power Project.
"Palo Verde Lease Litigation" shall mean an adversary
proceeding commenced on September 9, 1992 by EPE against FNBB, in
FNBB's capacity as Owner Trustee for each of the owner
participants (other than DBP Corp.), DBP Corp. and the Successor
Indenture Trustees, which case has been assigned Adversary
Proceeding No. 92- 1285-FM by the Bankruptcy Court.
"Palo Verde Letters of Credit" shall have the meaning
assigned to such term in the Release.
"Participation Agreement" shall mean the Participation
Agreement, as amended, among EPE, the Owner Participant and
others.
"Real Property Interest" shall have the meaning
assigned to such term in Appendix A to the Participation
Agreement.
"Release" shall mean the release in the form of Annex A
hereto.
"Settlement Agreement" shall mean this Settlement
Agreement, including all Annexes hereto.
"Transaction Documents" shall have the meaning assigned
to such term in Appendix A to the Participation Agreement.
"Trust Estate" shall have the meaning assigned to such
term in Appendix A to the Participation Agreement.
"Undivided Interest" shall have the meaning assigned to
such term in Appendix A to the Participation Agreement.
RIGHTS AND OBLIGATIONS PRIOR TO THE EFFECTIVE DATE
2. EPE's plan of reorganization will provide for the
terms and conditions set forth below (and EPE will not file,
pursue or support any plan that contains provisions inconsistent
with, or that does not embody the terms and conditions of, this
Settlement Agreement):
a Claims of the EPE Group, on the one hand, and the
Owner Participant Group and the Owner Trustee, on
the other hand, against one another shall be
mutually released pursuant to the Release (to the
extent provided therein), which Release will be
executed, delivered, and effective solely as of
the Effective Date.
<PAGE> 250
b Other than as provided in this Settlement
Agreement, the Owner Participant and the Owner
Trustee shall receive no distribution, recovery or
other consideration under an EPE Plan except that,
within 10 days after the Effective Date, DBP Corp.
will be paid all fees, costs and expenses incurred
by or on behalf of DBP Corp. from and after August
1, 1993 through and including the date of entry of
the Confirmation Order in connection with the Palo
Verde Litigation, the Case, the Participation
Agreement or the transactions contemplated hereby
or by any of the foregoing (the amount of which as
of October 1, 1993 is $51,744.86), provided,
however, that nothing in this paragraph 2.b shall
limit, restrict or otherwise impair the operation
of paragraphs 18 and 26 of this Settlement
Agreement.
c As of the Effective Date, (i) all right, title and
interest of the Owner Participant in the Trust
Estate and certain Excepted Payments shall be
conveyed to EPE or its designee, if paragraph 12.a
hereof is applicable, or (ii) if paragraph 12.b
hereof is applicable, there will be a conveyance
or transfer of the Trust Estate to EPE or EPE's
designee.
d As of the Effective Date, the receipt of any value
or consideration under any EPE Plan shall be
deemed to be (i) a release of the Owner
Participant and Owner Trustee by such recipient
of all claims related to the Palo Verde Leases,
the Palo Verde Letters of Credit, the documents
listed in Schedule A to the Third Amended Plan,
and the transactions contemplated hereby and
thereby, and (ii) a release of such recipient by
the Owner Trustee and Owner Participant of all
such claims. EPE shall defend such provisions
against any objections thereto. If the deemed
release described in this paragraph is not
approved by the Bankruptcy Court as to third
parties other than the Lease Debt Creditors and
the issuers of or participants in the Palo Verde
Letters of Credit, EPE may modify the EPE Plan
accordingly as long as the Confirmation Order
provides that the deemed release is effective as
to the Lease Debt Creditors and the issuers of and
participants in the Palo Verde Letters of Credit
and that, at the Effective Date, all third party
claims against the Owner Participant and Owner
Trustee which are derivative of the claims of EPE
will be extinguished.
<PAGE> 251
3. The Owner Participant and Southwestern Public
Service Company ("SPS") have entered into a letter of
understanding dated July 13, 1993. The Owner Participant will not
take any position as to the termination of EPE's exclusivity
through the filing of additional pleadings in the Case or by the
making of any statement in the Bankruptcy Court in support of any
motion to terminate EPE's exclusivity, unless EPE, in
contravention of its agreement not to do so, files, pursues or
supports confirmation of a plan of reorganization which does not
incorporate the terms of this Settlement Agreement or which
materially adversely affects the Owner Participant or any of its
affiliates.
4. The Owner Participant will vote to accept and/or
will cause the Owner Trustee to vote to accept the Third Amended
Plan and will vote to accept and/or cause the Owner Trustee to
vote to accept any other EPE Plan that is (x) consistent with and
incorporates the terms of this Settlement Agreement and (y) does
not materially adversely affect the Owner Participant or any of
its affiliates. The Owner Participant will not vote to reject or
object to, and will cause the Owner Trustee not to vote to reject
or object to, the Third Amended Plan, and will not vote to reject
or object to, and will cause the Owner Trustee not to vote to
reject or object to, any other EPE Plan that (i) is consistent
with and incorporates the terms of this Settlement Agreement and
(ii) does not materially adversely affect the Owner Participant
or any of its affiliates. Nothing in this Settlement Agreement
will limit the right of the Owner Participant or Owner Trustee or
any member of the Owner Participant Group to vote to accept or
reject or object to (A) any plan that is (a) inconsistent with or
does not incorporate the terms of this Settlement Agreement or
(b) materially adversely affects the Owner Participant or any of
its affiliates or (B) any plan other than an EPE Plan. For
purposes of this paragraph 4, it will be conclusively presumed
that an EPE Plan does not materially adversely affect the Owner
Participant or any of its affiliates if the Owner Participant
fails to provide EPE with written notice to the contrary within
20 days after receipt of such EPE Plan. EPE will not and the
Owner Participant will not, and will not direct the Owner Trustee
to, file any pleading in the Case that is contrary to or
inconsistent with the terms and conditions contained herein.
5. The Owner Participant agrees not to transfer, prior
to the Effective Date, any Claim against the EPE Group or
interest in the Facility Lease to anyone other than a person that
has agreed to be bound by this Settlement Agreement; provided,
however, that upon any withdrawal, termination or revocation of
<PAGE> 252
the Third Amended Plan, the Owner Participant may thereafter
transfer any Claim against the EPE Group or interest in the
Facility Lease to anyone whether or not such person agrees to be
bound by this Settlement Agreement, and if such person has not
agreed to be so bound, this Settlement Agreement shall
automatically terminate without further action by any party
hereto. EPE agrees not to transfer, prior to the Effective Date,
any Claim against the Owner Participant Group or Owner Trustee or
interest in the Facility Lease.
6. EPE shall disclose the contents of this Settlement
Agreement, pursuant to Section 3.14B.5. of the Third Amended
Plan. Between the date of entry of the Confirmation Order and the
Effective Date, the Owner Participant shall have all of the
rights accorded to the Oversight Committee (as defined in the
Third Amended Plan) pursuant to Section 5.1.E of the Third
Amended Plan.
7. Until the Effective Date occurs, EPE will not pursue
the Palo Verde Lease Litigation or commence any litigation or
otherwise file any Claim against the Owner Participant or Owner
Trustee and EPE will oppose any motion or other action by any
other person to pursue the Palo Verde Lease Litigation or
commence or file any such litigation or Claim or intervene
therein; provided, however, that nothing herein shall preclude
EPE from (i) taking steps which EPE reasonably deems necessary to
preserve its Claims and its ability to collect on such Claims, if
successful, and to protect EPE's rights in the event of the
proposed dissolution of the Owner Participant or Owner Trustee in
a bankruptcy or insolvency proceeding of the Owner Participant or
Owner Trustee (and EPE hereby agrees that EPE will not file nor
participate in the filing of any involuntary bankruptcy or
insolvency petition against the Owner Participant or Owner
Trustee) or (ii) seeking discovery, at EPE's own expense, against
the Owner Participant or Owner Trustee in connection with a plan
of reorganization proposed by or on behalf of SPS, or any other
plan of reorganization other than an EPE Plan, to the extent EPE
is otherwise entitled to request such discovery from the
Bankruptcy Court.
8. Until the Effective Date occurs, the Owner
Participant will not, and will not direct the Owner Trustee to,
pursue the Palo Verde Lease Litigation or commence any litigation
or file any additional Claim against EPE and at EPE's request,
the Owner Participant will, and/or will cause the Owner Trustee
to, file a pleading which will support EPE's opposition to any
motion or other action by any other person to pursue the Palo
Verde Lease Litigation or commence or file any such litigation or
Claim or intervene therein; provided, however, that nothing
herein shall preclude the Owner Participant or Owner Trustee from
(i) taking steps which the Owner Participant or Owner Trustee, as
the case may be, reasonably deems necessary to preserve the
<PAGE> 253
Claims of such Owner Participant or Owner Trustee and to protect
the rights of such Owner Participant or Owner Trustee in the
event of the proposed dissolution of EPE or (ii) opposing EPE's
pursuit of any discovery referred to in paragraph 7 hereof.
9. Within 10 days after the filing of any plan, EPE
will give the Owner Participant written notice of whether such
plan constitutes an EPE Plan referred to in clause (iii) of the
definition thereof. In the absence of such notice, such plan
shall be deemed to be an EPE Plan.
10. Prior to the Effective Date, EPE shall seek and
obtain all governmental approvals necessary to effect the
transactions contemplated hereby. The Owner Participant agrees to
cooperate with EPE, at EPE's expense, in obtaining such approvals
prior to the Effective Date.
11. Concurrently with the execution and delivery of
this Settlement Agreement, the Owner Participant, the Owner
Trustee, EPE and the Successor Indenture Trustees shall execute
and deliver a Tolling Agreement in the form of Annex E hereto,
and EPE will deliver to the Owner Participant an executed letter
in the form of Annex H hereto.
RIGHTS AND OBLIGATIONS ON AND AFTER THE EFFECTIVE DATE
12. Subject to the satisfaction of the terms and
conditions contained in this Settlement Agreement, including
paragraph 13, on or as of the Effective Date:
a The Owner Participant will, subject to paragraph
12.b, transfer to EPE or, if EPE so requests,
EPE's designee, all of the Owner Participant's
right, title and interest in the Trust Estate and
certain Excepted Payments by the execution and
delivery of a Bill of Sale and Assignment
substantially in the form of Annex B hereto.
b At the request and expense of EPE, the Owner
Participant will, at the election of EPE, in lieu
of or in addition to the transfer referred to in
paragraph 12.a, (i) consent to the conveyance or
transfer of the Trust Estate to EPE or, if EPE so
requests, EPE's designee, and (ii) direct the
Owner Trustee to effect such conveyance or
transfer, which obligations shall be subject to
(a) EPE having obtained the required consent, if
<PAGE> 254
any, of the applicable Successor Indenture Trustee
or a binding order (which has not been stayed) of
a court of competent jurisdiction effectively
overriding the requirement, if any, of such
consent, (b) such conveyance and transfer
complying with applicable law and third party
rights, if any, or EPE having obtained a binding
order (which has not been stayed) of a court of
competent jurisdiction effectively overriding any
requirement of such compliance, and (c) EPE having
provided such indemnities to the Owner Participant
and the Owner Trustee as either of them shall
reasonably request regarding the conveyance or
transfer set forth in this paragraph 12.b.
c The parties hereto and the Owner Trustee shall
execute and deliver the Release.
d Reorganized EPE shall deliver to the Owner
Participant on the Effective Date an executed
letter in the form of Annex G hereto. The form and
contents of Annex G shall not be disclosed prior
to the Effective Date to any person or entity,
except that a copy thereof shall be provided to
the Bankruptcy Court under seal and to the
Successor Indenture Trustee (after execution
thereof). In the event the Effective Date does not
occur, neither the Owner Participant nor any other
person or entity shall refer to or otherwise
disclose the contents of Annex G, or its inclusion
in this Settlement Agreement, for any purpose.
e If paragraph 12.a is applicable, EPE or its
designee shall become the "Owner Participant"
under the documents described in Schedule A to the
Third Amended Plan for all purposes, and, if
paragraph 12.b is applicable, such documents shall
be terminated, altered, or amended in such manner
as the parties hereto shall agree, consistent with
the terms of this Settlement Agreement.
f Section 17 of the Participation Agreement shall
continue in full force and effect, but only with
respect to EPE's obligations under the first and
third sentences of the first paragraph and the
entire third paragraph of Section 10(b)(3)(xi),
and the entirety of Sections 13 (insofar as
indemnification is sought for Claims (as defined
in the Participation Agreement) asserted against
the Owner Participant, the Owner Trustee, the
First National Bank of Boston (in its individual
capacity), the Trust (as defined in the
<PAGE> 255
Participation Agreement), the Trust Estate, or the
Lease Indenture Estate (as defined in the
Participation Agreement), or any Affiliate (as
defined in the Participation Agreement),
successor, assign, agent, officer, director or
employee of any of the foregoing, by a person
other than the Owner Participant, the Owner
Trustee or any successor or assign thereof) and 16
thereof (it being understood that the exclusions
from the general tax indemnity provisions of
Section 13(b) of the Participation Agreement with
respect to a "voluntary transfer" and with respect
to a "transferee" or a "subsequent transferee"
shall not apply to the transactions contemplated
by this Settlement Agreement); provided, however,
that in order to prevent a double payment with
respect to a Loss or Losses (as defined in the
Participation Agreement), the aggregate amount of
such payments shall be reduced (without
duplication) by the appropriate portion of the
amount drawn by the Owner Participant under the
corresponding Palo Verde Letter of Credit to the
extent such portion is attributable (under
calculations performed in accordance with industry
practice) to the same adverse tax consequences
constituting such Loss or Losses. It is understood
that EPE's obligations under this paragraph 12.f
shall not extend to the payment of Basic Rent,
Fair Market Rental Value, Fair Market Sales Value,
Casualty Value, Special Casualty Value,
Termination Value, Enhanced Casualty Value or
Special Termination Value (as such terms are
defined in the Transaction Documents and
collectively referred to herein as "Scheduled
Amounts") or any amounts measured by Scheduled
Amounts or Supplemental Rent (to the extent
attributable to Scheduled Amounts or Excepted
Payments which are Assigned Property (as defined
in the Bill of Sale and Assignment attached hereto
as Annex B)). Notwithstanding anything contained
in this Settlement Agreement or the Release, EPE
shall continue to comply with Section 10(a)(2)(ii)
of the Facility Lease except that any notices or
certificates described in Section 10(a)(1)(i)(F)
of the Facility Lease (as such section relates to
Section 10(a)(2)(ii)) must be received by the
Owner Participant in order to be effective against
the Owner Participant but need not be received by
or delivered to the Indenture Trustee.
g EPE will pay any balance due of the amounts
described in paragraph 26 hereof.
<PAGE> 256
13. The terms and conditions referred to in paragraph
12 include the following:
a The Confirmation Order shall (i) provide that an
Order of Dismissal with Prejudice in the form
attached hereto as Annex C shall be entered on or
after the Effective Date and a copy provided to
the Owner Participant and to the Successor
Indenture Trustee and (ii) comply with the last
sentence of paragraph 2.d, if applicable;
b The Owner Participant, the Owner Trustee and the
Successor Indenture Trustees shall have executed
and delivered mutual releases substantially in the
form attached hereto as Annex D and an order of
the Bankruptcy Court complying with either the
first or the last sentence of paragraph 2.d shall
be in full force and effect and shall not have
been stayed;
c This Settlement Agreement shall be in full force
and effect and neither the Owner Participant nor
EPE shall be in default of any term or condition
hereof;
d All governmental approvals, if any, necessary to
effect the transactions contemplated hereby shall
have been obtained and be in full force and
effect;
e All consents of third parties, if any, necessary
to effect the actions contemplated above shall
have been obtained and be in full force and
effect;
f All documentation for the transactions
contemplated by this paragraph 13 and paragraphs
8, 12.a, 12.b, 12.e and 26 shall be reasonably
satisfactory in form and substance to the Owner
Participant and EPE; and
g The Owner Participant and the Owner Trustee shall
have received all amounts, if any, payable
pursuant to paragraphs 2.b, 18 and 26 hereof.
Conditions d and e above may be satisfied by the entry of a
binding order (which has not been stayed) of a court of competent
jurisdiction effectively overriding the requirement, if any, of
obtaining any third party consents or governmental approvals
referred to in such conditions.
<PAGE> 257
TERMINATION AND EFFECTIVENESS
14. This Settlement Agreement may be terminated (a) on
30 days' written notice by either EPE or the Owner Participant if
no EPE Plan referred to in clause (i) or (ii) of the definition
thereof is being pursued and, in the case of termination by EPE,
EPE certifies in the termination notice that no EPE Plan referred
to in clause (i) or (ii) of the definition thereof is then
contemplated by EPE, or (b) on 5 days' written notice by either
the Owner Participant or EPE if EPE or the Owner Participant,
respectively, fails to comply with any term or condition of this
Settlement Agreement and does not cure such failure within such 5
days or (c) on 5 days' written notice from EPE that a settlement
agreement with one of the other owner participants with an
interest in Unit 2 of the Palo Verde Nuclear Generating Station
has terminated pursuant to paragraph 5 of such settlement
agreement and that EPE is terminating all of the settlement
agreements with each of the owner participants with an interest
in such Unit.
15. This Settlement Agreement shall not be binding upon
any of the parties hereto until EPE and all of the owner
participants execute settlement agreements in a form similar to
this Settlement Agreement. This Settlement Agreement shall
terminate automatically without further action by any party
hereto if the Bankruptcy Court in the Case declines to approve
the settlement contained in this Settlement Agreement or any such
other settlement agreement.
16. Upon any termination of this Settlement Agreement,
all obligations of the parties hereto (except for the last 2
sentences of paragraph 12.d) shall cease.
REPRESENTATIONS AND WARRANTIES
17. EPE represents and warrants that no modification to
the merger agreement between EPE and CSW is necessary to
effectuate or consummate this Settlement Agreement.
18. Each party hereto represents and warrants that it
owns and has not transferred any of the Claims described in the
Release as being released by it or any of its interests in the
Facility Lease. Except as set forth in Annex F hereto, to the
knowledge of the Owner Participant, there exists no basis upon
which the Owner Participant, as of the date of this Settlement
Agreement, may assert any Claims against EPE, other than any such
Claims which will be extinguished pursuant to the Release. To the
knowledge of EPE, there exists no basis upon which EPE, as of the
date of this Settlement Agreement, may assert any Claim against
<PAGE> 258
the Owner Participant, other than any such Claims which will be
extinguished pursuant to the Release. EPE shall pay all amounts
due with respect to the items set forth on Annex F irrespective
of whether such amounts are already incurred, invoiced or
assessed or arise hereafter.
19. Each party hereto agrees that the Third Amended
Plan (i) complies with the terms and conditions of this
Settlement Agreement, and (ii) does not materially adversely
affect the Owner Participant or any of its affiliates for
purposes of paragraph 4 hereof.
MISCELLANEOUS
20. Nothing in this Settlement Agreement shall operate
as an admission of liability or admission as to any issue by any
party, and this Settlement Agreement (and all negotiations,
discussions and drafts relating thereto) shall be subject to the
provisions of Federal Rule of Evidence 408 and comparable
provisions of state law.
21. This Settlement Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
instrument.
22. This Settlement Agreement shall be governed in all
respects including validity, interpretation and effect, by, and
construed and enforced under, the law of the State of New York,
without giving effect to the principles of conflicts of law
thereof.
23. This Settlement Agreement is enforceable only by
the parties hereto and the Owner Trustee; provided, however,
that, after the Effective Date, any person who is a beneficiary
of a release (including the Release) contemplated by this
Settlement Agreement shall be entitled to enforce the provisions
of such release.
24. In addition to all other rights and remedies
provided in this Settlement Agreement, EPE and the Owner
Participant may (subject to any restrictions contained in this
Settlement Agreement) exercise any other right or remedy that may
be available under applicable law or proceed (or the Owner
Trustee may proceed) by appropriate court action to enforce the
terms hereof. The failure or delay of EPE or the Owner
Participant in exercising any right granted hereunder upon the
occurrence of any of the contingencies set forth herein shall not
constitute a waiver of any such right upon the continuance or
recurrence of any such contingencies or similar contingencies and
any single or partial exercise of any particular right by EPE or
the Owner Participant shall not exhaust the same or constitute a
waiver of any other right provided herein. No remedy under this
<PAGE> 259
Settlement Agreement is intended to be exclusive, but each shall
be cumulative and in addition to any other remedy provided
hereunder or otherwise available to EPE or the Owner Participant
at law or in equity (subject to any restrictions contained in
this Settlement Agreement). Notwithstanding the foregoing, the
parties agree that in the event of a breach of this Settlement
Agreement, money damages will not be adequate to compensate the
non-breaching party, and, accordingly, either party or the Owner
Trustee may seek to specifically enforce the provisions of this
Settlement Agreement.
25. Except as otherwise specifically provided herein,
this Settlement Agreement shall be binding on all successors and
assigns of the parties hereto.
26. The parties shall cooperate with one another to
execute and deliver such other documents and to take such further
actions as shall be necessary or appropriate to effectuate the
terms hereof; provided, however, that the Owner Participant and
the Owner Trustee shall each be reimbursed by EPE for its
reasonable expenses after the date of entry of the Confirmation
Order related to the execution and delivery of any such other
documents and the taking of any such further actions by the Owner
Participant or the Owner Trustee.
27. The descriptive headings of the paragraphs of this
Settlement Agreement are for convenience only and will not be
used in the construction of the content of this Settlement
Agreement.
28. Any notice required or permitted to be given by any
provision of this Settlement Agreement will be in writing and
will be deemed to have been given when delivered personally or by
facsimile, receipt confirmed, to the party designated to receive
such notice or on the date following the day sent by overnight
courier or on the 3rd business day after the same is sent by
certified mail, postage and charges prepaid, directed to the
following addresses or to such other additional addresses as any
party might designate by written notice to the other party:
El Paso Electric Company: El Paso Electric Company
Mills Building
303 North Oregon
El Paso, Texas 79901
Attention:
Chief Executive Officer
and Chairman of the Board
Facsimile: (915) 521-4754
<PAGE> 260
With Copy to: Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: Shalom L. Kohn, Esq.
Facsimile: (312) 853-7312
With Copy to: Milbank, Tweed, Hadley & McCloy
One Chase Manhattan Plaza
New York, New York 10005
Attention: Joris M. Hogan, Esq.
Facsimile: (212) 530-5219
Owner Participant: DBP Corp.
60 Broad Street
New York, New York 10004
Attention: Hobart Truesdell,
President
Facsimile: (212) 232-9913
With Copy to: White & Case
1155 Avenue of the Americas
New York, New York 10036
Attention: Owen C. Pell, Esq.
Facsimile: (212) 354-8113
Parties to this Settlement Agreement shall be entitled
to conclusively rely on any notice given in the foregoing manner
to the parties at the addresses reflected above, unless and until
a different address or facsimile number is provided to all
parties and persons listed above. Rejection or refusal to accept,
or inability to deliver because of changed addresses or because
no notice of changed address was given, shall be deemed a receipt
of such notice.
IN WITNESS WHEREOF, the parties hereto have duly
authorized and executed this Settlement Agreement on the date
first above written.
EL PASO ELECTRIC COMPANY,
by /s/
Name: David H. Wiggs, Jr.
Title:Chairman and CEO
<PAGE> 261
DBP CORP.,
by /s/
Name: Hobart G. Truesdell
Title: President
Annex A: Form of Release and Agreement among EPE, Owner
Participant and Owner Trustee
Annex B: Form of Bill of Sale and Assignment
Annex C: Form of Order of Dismissal with Prejudice
Annex D: Form of Release and Agreement among Owner
Participant, Owner Trustee, and Successor Indenture
Trustees
Annex E: Form of Tolling Agreement
Annex F: Existing Claims
Annex G: Form of Letter re Causes of Action
Annex H: Form of Letter re Litigation
<PAGE> 262
ANNEX A
RELEASE AND AGREEMENT
THIS RELEASE AND AGREEMENT (this "Release") is entered
into on , 199 , by and among EL PASO ELECTRIC COMPANY, a
Texas corporation, debtor and debtor in possession ("EPE"), DBP
CORP., a Delaware corporation (the "Owner Participant" and,
collectively with each of the other owner participants
participating in the transactions described in recital B below,
the "Owner Participants"), and THE FIRST NATIONAL BANK OF BOSTON
(in its individual capacity, "FNBB"), as trustee under a trust
agreement with the Owner Participant (the "Owner Trustee" and,
collectively as trustee under trust agreements with the Owner
Participants, the "Owner Trustees").
RECITALS
A. EPE is the debtor in a case pending under Chapter 11
of Title 11 of the United States Code (the "Bankruptcy Code") in
the United States Bankruptcy Court for the Western District of
Texas (the "Bankruptcy Court"), which case has been assigned Case
No. 92-10148-FM (the "EPE Chapter 11 Case").
B. EPE, the Owner Participant and the Owner Trustee are
parties to various agreements, documents and instruments that
evidence or relate to the sale and leaseback by EPE, in separate
transactions with the Owner Participants and Owner Trustees, of
EPE's entire undivided interest in Unit 2 of the Palo Verde
Nuclear Generating Station ("Palo Verde") and approximately 39.5%
of EPE's undivided interest in Unit 3 of Palo Verde and certain
common plant and other related assets.
C. FNBB, in its capacity as Owner Trustee for each of
the Owner Participants (other than DBP Corp.), and DBP Corp.
filed proofs of claim in the EPE Chapter 11 Case (the "Proofs of
Claim").
D. On September 9, 1992, EPE commenced an adversary
proceeding against FNBB, in its capacity as Owner Trustee for
each of the Owner Participants (other than DBP Corp.), DBP Corp.
and the Successor Indenture Trustees (the "Palo Verde Lease
Litigation Defendants"), which case was assigned Adversary
Proceeding No. 92-1285-FM (the "Palo Verde Lease Litigation").
The Proofs of Claim, and any objections by EPE thereto, were
consolidated into the Palo Verde Lease Litigation. In addition,
in discussions between the parties, certain issues were raised
surrounding the presentment and drawings by the Owner
Participants under certain letters of credit issued as part of
the aforesaid sale and leaseback transactions in the approximate
aggregate amount of $288.4 million (the "Palo Verde Letters of
<PAGE> 263
Credit"). Such issues, including any claims described in
disclosure statements and plans of reorganization filed by EPE in
the EPE Chapter 11 Case with regard to the Owner Participants and
the Palo Verde Letters of Credit, are herein called the "Owner
Participant Claims".
E. The Palo Verde Lease Litigation Defendants have
asserted various defenses, contentions and counterclaims (the
"Palo Verde Defendants' Claims"). In addition, with regard to the
Owner Participant Claims, the Owner Participants contend that
their actions surrounding the presentment and drawings of the
Palo Verde Letters of Credit, including such drawings, were
proper as a matter of law (the "Letter of Credit Defenses").
F. Pursuant to a Settlement Agreement dated as of
November 15, 1993 (including the Annexes thereto and paragraphs
12 and 13 thereof, the "Settlement Agreement"), EPE and the Owner
Participant (or a predecessor thereof) agreed to release certain
claims effective upon the Effective Date.
IN CONSIDERATION OF THE MUTUAL AGREEMENTS CONTAINED
HEREIN, and other good and valuable consideration, the receipt of
which is hereby acknowledged, IT IS HEREBY AGREED by and among
the parties hereto as follows:
AGREEMENTS
1. Except as otherwise defined herein, all capitalized
terms used herein shall have the meanings set forth in the
Settlement Agreement.
2. EPE, on behalf of itself and the EPE Group, hereby
forever releases and discharges the Owner Trustee and the Owner
Participant Group (the "Released Parties") from, and waives and
relinquishes, any and all claims, demands, debts, liabilities,
obligations, actions, causes of action, suits, sums of money,
accounts, reckonings, covenants, contracts, controversies,
agreements, promises and rights whatsoever, whenever arising,
known or unknown, suspected or unsuspected, contingent or fixed,
liquidated or unliquidated, matured or unmatured, in law, equity,
bankruptcy or otherwise (collectively, "Claims"), which EPE or
the EPE Group ever had, now has, or hereafter can, shall or may
have against any of the Released Parties for, upon, or by reason
of any matter, cause, transaction or thing whatsoever occurring
at any time prior to the Effective Date, including, without
limitation, any Claims which EPE or the EPE Group ever had, now
has, or hereafter can, shall or may have against any of the
Released Parties by reason of, arising from, relating to, or in
<PAGE> 264
connection with the Palo Verde Lease Litigation, the Palo Verde
Letters of Credit, the Palo Verde Defendants' Claims, the Owner
Participant Claims, the documents listed on Schedule A to the
Third Amended Plan or the transactions contemplated by the
Participation Agreement, or based on or arising under 11 U.S.C.
Sections 502, 506, 507, 510, 544-553, inclusive, or any similar
provisions of federal or state law, and any right of indemnity,
contribution or subrogation arising therefrom or relating
thereto; provided, however, that nothing herein shall release any
Claims of any member of the EPE Group (other than EPE) unrelated
to the Palo Verde Lease Litigation, the Palo Verde Letters of
Credit, the Palo Verde Defendants' Claims, the Owner Participant
Claims, or the transactions contemplated by the Settlement
Agreement or the Participation Agreement or the documents listed
on Schedule A to the Third Amended Plan; and provided, however
that nothing herein shall release any party from its obligations
set forth in, or that are assumed or continued pursuant to the
Settlement Agreement (including, without limitation, the Annexes
thereto and paragraphs 12 and 13 thereof).
3. The Owner Participant, on behalf of itself and the
Owner Participant Group, and the Owner Trustee hereby forever
release and discharge the EPE Group from, and waive and
relinquish, any and all Claims which the Owner Participant or the
Owner Participant Group or the Owner Trustee ever had, now has,
or hereafter can, shall or may have against the EPE Group for,
upon, or by reason of any matter, cause, transaction or thing
whatsoever occurring at any time prior to the Effective Date,
including, without limitation, any claims which the Owner
Participant or the Owner Participant Group or the Owner Trustee
ever had, now has, or hereafter can, shall or may have against
the EPE Group by reason of, arising from, relating to, or in
connection with the Palo Verde Lease Litigation, the Palo Verde
Letters of Credit, the Palo Verde Defendants' Claims, the Owner
Participant Claims, or the documents listed on Schedule A to the
Third Amended Plan or the transactions contemplated by the
Participation Agreement, or based on or arising under 11 U.S.C.
Sections 502, 506, 507, 510, 544-553, inclusive, or any similar
provisions of federal or state law, and any right of indemnity,
contribution or subrogation arising therefrom or relating
thereto; excluding, however, from the foregoing any Claims of any
member of the Owner Participant Group (other than the Owner
Participant) or the Owner Trustee unrelated to the Palo Verde
Lease Litigation, the Palo Verde Letters of Credit, the Palo
Verde Defendants' Claims, the Owner Participant Claims, or the
transactions contemplated by the Settlement Agreement or the
Participation Agreement or the documents listed on Schedule A to
the Third Amended Plan; and provided, however that nothing herein
shall release any party from its obligations set forth in the
Settlement Agreement (including, without limitation, the Annexes
thereto and paragraphs 12 and 13 thereof).
<PAGE> 265
4. Each of the parties hereby acknowledges and agrees
that all Claims under Section 1542 of the California Civil Code
and any other provision of law now or hereafter enacted,
adjudicated or sought to be adjudicated relating to the release
or waiver of unknown or unspecified claims are hereby
specifically and expressly released and waived. Each of the
parties understands that Section 1542 of the California Civil
Code provides that "[a] general release does not extend to claims
which the creditor does not know or suspect to exist in his favor
at the time of executing the release, which if known by him must
have materially affected his settlement with the debtor". For
purposes of this Release, each of the parties acknowledges and
agrees that it may be considered to be both a "creditor" and a
"debtor" for all purposes and with respect to all Claims it may
now know or suspect to exist within the meaning of Section 1542
of the California Civil Code and any other provision of law now
or hereafter enacted, adjudicated or sought to be adjudicated
relating to the release or waiver of unknown or unspecified
claims.
5. This Release may be executed in two or more
counterparts, each of which shall be deemed an original, but all
of which shall constitute one and the same instrument.
6. This Release shall be binding upon the parties
hereto and their successors and assigns. Each party hereto
represents and warrants that it owns all the Claims described
herein which are being released hereunder and is duly authorized
to release such Claims.
7. This Release shall be governed in all respects,
including validity, interpretation and effect, by, and construed
and enforced under, the law of the State of New York, without
giving effect to the principles of conflict of laws thereof.
IN WITNESS WHEREOF, the parties hereto have duly
authorized and executed this Release as of the date first above
written.
<PAGE> 266
EL PASO ELECTRIC COMPANY,
by
Name:
Title:
DBP CORP.,
by
Name:
Title:
THE FIRST NATIONAL BANK OF BOSTON,
as Owner Trustee,
by
Name:
Title:
<PAGE> 267
ANNEX B
BILL OF SALE AND ASSIGNMENT, dated as of
, 199 , from DBP CORP., a Delaware
corporation (the "Owner Participant"), to EL PASO
ELECTRIC COMPANY, a Texas corporation [1] ("El
Paso").
WITNESSETH:
WHEREAS, the Owner Participant desires to convey and El
Paso desires to acquire the Assigned Property (as hereinafter
defined);
NOW, THEREFORE, in consideration of the premises and of
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
Definitions
For purposes hereof, capitalized terms used but not
otherwise defined herein shall have the meanings assigned to such
terms in the Participation Agreement dated as of August 1, 1986,
among a predecessor of the Owner Participant, the First National
Bank of Boston, in its individual capacity and as Owner Trustee,
El Paso and others.
ARTICLE II
Assignment of Trust Estate
The Owner Participant does hereby grant, bargain,
convey, sell, assign, transfer and set over (collectively,
"transfer") to El Paso, on an as is, where is basis, free and
clear of Owner Participant's Liens but otherwise without
recourse, representation or warranty, express or implied, of any
nature whatsoever, all the Owner Participant's right, title and
interest in, to and under the Trust Estate and the Excepted
Payments, other than Excepted Payments referred to in clauses (i)
(to the extent such Supplemental Rent constitutes or is
attributable to payments to which the Owner Participant or any of
its affiliates (or the successors, assigns, agents, officers,
directors or employees of the Owner Participant) are entitled
under the Settlement Agreement dated as of November 15, 1993
- ---------------------------------
[1] El Paso may designate a different transferee.
<PAGE> 268
between El Paso and the Owner Participant (or any predecessor
thereof)), (vi) and (vii) (and (viii) to the extent attributable
to the payments referred to in clauses (i), (vi) or (vii)) of the
definition of "Excepted Payments" (the "Assigned Property"). The
disclaimer of representations and warranties set forth in the
second sentence of Section 6(b) of the Facility Lease is hereby
incorporated herein as fully as if set forth at this place. Such
transfer shall not alter the obligations of El Paso nor expand
the rights of the Owner Participant under the Settlement
Agreement dated as of November 15, 1993, between El Paso and the
Owner Participant (or a predecessor thereof) or the Release
referred to therein, whether or not such obligations or rights
would constitute an Excepted Payment.
ARTICLE III
Effectiveness of Transfer
The transfer of the Assigned Property shall become
effective without further action upon the execution and delivery
by the Owner Participant to El Paso of this Bill of Sale and
Assignment and the furnishing of a counterpart of this Bill of
Sale and Assignment to the Owner Trustee.
ARTICLE IV
Miscellaneous
SECTION 4.01. Successors and Assigns. This Bill of Sale
and Assignment shall be binding upon the Owner Participant and
its successors and shall inure to the benefit of El Paso and its
successors and assigns.
SECTION 4.02. Governing Law. This Bill of Sale and
Assignment shall be governed by and construed in accordance with
the law of the State of New York.
IN WITNESS WHEREOF, the undersigned has caused this
Bill of Sale and Assignment to be duly executed as of the day and
year first written above.
DBP CORP.,
by
Name:
Title:
<PAGE> 269
ANNEX C
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE WESTERN DISTRICT OF TEXAS
AUSTIN DIVISION
)
In re EL PASO ELECTRIC COMPANY, ) Case No. 92-10148-FM
) (Chapter 11)
Debtor. )
)
) Adversary Proceeding
EL PASO ELECTRIC COMPANY, ) No. 92-1285-FM
)
Plaintiff and Counterclaimant, )
)
v. ) Adversary Complaint
) seeking a declaration
THE FIRST NATIONAL BANK OF BOSTON, ) of rights arising
DBP CORP., LaSALLE NATIONAL BANK, ) from the rejection of
and HARRIS TRUST AND SAVINGS BANK, ) leases of the Palo
) Verde Nuclear
Defendants and Claimants. ) Generating Station
)
ORDER OF DISMISSAL WITH PREJUDICE
IT IS HEREBY ORDERED AND ADJUDGED, pursuant to the
Order of Confirmation in Case No. 92-10148-FM (Chapter 11), that
the Complaint and Counterclaims in the above-referenced action
are each hereby dismissed with prejudice.
IT IS SO ORDERED:
Dated: , 199
Austin, Texas
United States Bankruptcy Judge
<PAGE> 270
ANNEX D
RELEASE AND AGREEMENT
THIS RELEASE AND AGREEMENT (this "Release") is entered
into on , 199 , by and among DBP CORP., a Delaware
corporation (the "Owner Participant" and, collectively with each
of the other owner participants participating in the transactions
described in recital B below, the "Owner Participants"), THE
FIRST NATIONAL BANK OF BOSTON (in its individual capacity,
"FNBB"), as trustee under a trust agreement with the Owner
Participant (the "Owner Trustee" and, collectively as trustee
under trust agreements with the Owner Participants, the "Owner
Trustees"), HARRIS TRUST AND SAVINGS BANK, as Successor Trustee
under indentures with certain of the Owner Trustees, and LASALLE
NATIONAL BANK, as Successor Trustee under indentures with certain
of the Owner Trustees (collectively, the "Successor Indenture
Trustees").
RECITALS
A. EPE is the debtor in a case pending under Chapter 11
of Title 11 of the United States Code (the "Bankruptcy Code") in
the United States Bankruptcy Court for the Western District of
Texas (the "Bankruptcy Court"), which case has been assigned Case
No. 92-10148-FM (the "EPE Chapter 11 Case").
B. EPE, the Owner Participant and the Owner Trustee are
parties to various agreements, documents and instruments that
evidence or relate to the sale and leaseback by EPE, in separate
transactions with the Owner Participants and Owner Trustees, of
EPE's entire undivided interest in Unit 2 of the Palo Verde
Nuclear Generating Station ("Palo Verde") and approximately 39.5%
of EPE's undivided interest in Unit 3 of Palo Verde and certain
common plant and other related assets.
C. FNBB, in its capacity as Owner Trustee for each of
the Owner Participants (other than DBP Corp.), DBP Corp. and the
Successor Indenture Trustees filed proofs of claim in the EPE
Chapter 11 Case (the "Proofs of Claim").
D. On September 9, 1992, EPE commenced an adversary
proceeding against FNBB, in its capacity as Owner Trustee for
each of the Owner Participants (other than DBP Corp.), DBP Corp.
and the Successor Indenture Trustees (the "Palo Verde Lease
<PAGE> 271
Litigation Defendants"), which case was assigned Adversary
Proceeding No. 92-1285-FM (the "Palo Verde Lease Litigation").
The Proofs of Claim, and any objections by EPE thereto, were
consolidated into the Palo Verde Lease Litigation. In addition,
in discussions between the parties, certain issues were raised
surrounding the presentment and drawings by the Owner
Participants under certain letters of credit issued as part of
the aforesaid sale and leaseback transactions in the approximate
aggregate amount of $288.4 million (the "Palo Verde Letters of
Credit"). Such issues, including any claims described in
disclosure statements and plans of reorganization filed by EPE in
the EPE Chapter 11 Case with regard to the Owner Participants and
the Palo Verde Letters of Credit, are herein called the "Owner
Participant Claims".
E. The Palo Verde Lease Litigation Defendants have
asserted various defenses, contentions and counterclaims (the
"Palo Verde Defendants' Claims"). In addition, with regard to the
Owner Participant Claims, the Owner Participants contend that
their actions surrounding the presentment and drawings of the
Palo Verde Letters of Credit, including such drawings, were
proper as a matter of law (the "Letter of Credit Defenses").
F. Pursuant to a Settlement Agreement dated as of
November 15, 1993, (including the Annexes thereto and paragraphs
12 and 13 thereof, the "Settlement Agreement"), EPE and the Owner
Participant (or a predecessor thereof) agreed to release certain
claims, effective upon the Effective Date.
IN CONSIDERATION OF THE MUTUAL AGREEMENTS CONTAINED
HEREIN, and other good and valuable consideration, the receipt of
which is hereby acknowledged, IT IS HEREBY AGREED by and among
the parties hereto as follows:
AGREEMENTS
1. Except as otherwise defined herein, all capitalized
terms used herein shall have the meanings set forth in the
Settlement Agreement.
2. The Successor Indenture Trustees, on behalf of
themselves and the Lease Debt Creditors, hereby forever release
and discharge the Owner Trustee and the Owner Participant Group
(the "Released Parties") from, and waive and relinquish, any and
all claims, demands, debts, liabilities, obligations, actions,
causes of action, suits, sums of money, accounts, reckonings,
covenants, contracts, controversies, agreements, promises and
<PAGE> 272
rights whatsoever, whenever arising, known or unknown, suspected
or unsuspected, contingent or fixed, liquidated or unliquidated,
matured or unmatured, in law, equity, bankruptcy or otherwise
(collectively, "Claims"), which the Successor Indenture Trustees
or Lease Debt Creditors ever had, now have, or hereafter can,
shall or may have against any of the Released Parties for, upon,
or by reason of any matter, cause, transaction or thing
whatsoever occurring at any time prior to the Effective Date,
including, without limitation, any Claims which the Successor
Indenture Trustees or Lease Debt Creditors ever had, now have, or
hereafter can, shall or may have against any of the Released
Parties by reason of, arising from, relating to, or in connection
with the Palo Verde Lease Litigation, the Palo Verde Letters of
Credit, the Palo Verde Defendants' Claims, or the Owner
Participant Claims, the documents listed in Schedule A to the
Third Amended Plan or the transactions contemplated by the
Participation Agreement, or based on or arising under 11 U.S.C.
Sections 502, 506, 507, 510, 544-553, inclusive, or any similar
provisions of federal or state law, and any right of indemnity,
contribution or subrogation arising therefrom or relating
thereto; excluding, however, from the foregoing any Claims of the
Successor Indenture Trustees or Lease Debt Creditors unrelated to
the Palo Verde Lease Litigation, the Palo Verde Letters of
Credit, the Palo Verde Defendants' Claims, the Owner Participant
Claims, or the transactions contemplated by the Settlement
Agreement or the Participation Agreement or the documents listed
on Schedule A to the Third Amended Plan.
3. The Owner Participant, on behalf of itself and the
Owner Participant Group, and the Owner Trustee hereby forever
release and discharge the Successor Indenture Trustees and Lease
Debt Creditors from, and waive and relinquish, any and all Claims
which the Owner Participant or FNBB or the Owner Participant
Group or the Owner Trustee ever had, now has, or hereafter can,
shall or may have against the Successor Indenture Trustees or
Lease Debt Creditors for, upon, or by reason of any matter,
cause, transaction or thing whatsoever occurring at any time
prior to the Effective Date, including, without limitation, any
claims which the Owner Participant or the Owner Participant Group
or the Owner Trustee ever had, now has, or hereafter can, shall
or may have against the Successor Indenture Trustees or Lease
Debt Creditors by reason of, arising from, relating to, or in
connection with the Palo Verde Lease Litigation, the Palo Verde
Letters of Credit, the Palo Verde Defendants' Claims, or the
Owner Participant Claims, the documents listed in Schedule A to
the Third Amended Plan or the transactions contemplated by the
<PAGE> 273
Participation Agreement, or based on or arising under 11 U.S.C.
Sections 502, 506, 507, 510, 544-553, inclusive, or any similar
provisions of federal or state law, and any right of indemnity,
contribution or subrogation arising therefrom or relating
thereto; excluding, however, from the foregoing any Claims of the
Owner Participant or FNBB or any member of the Owner Participant
Group or the Owner Trustee unrelated to the Palo Verde Lease
Litigation, the Palo Verde Letters of Credit, the Palo Verde
Defendants' Claims, the Owner Participant Claims, the
transactions contemplated by the Settlement Agreement or the
Participation Agreement or the documents listed in Schedule A to
the Third Amended Plan.
4. Each of the parties hereby acknowledges and agrees
that all Claims under Section 1542 of the California Civil Code
and any other provision of law now or hereafter enacted,
adjudicated or sought to be adjudicated relating to the release
or waiver of unknown or unspecified claims are hereby
specifically and expressly released and waived. Each of the
parties understands that Section 1542 of the California Civil
Code provides that "[a] general release does not extend to claims
which the creditor does not know or suspect to exist in his favor
at the time of executing the release, which if known by him must
have materially affected his settlement with the debtor". For
purposes of this Release, each of the parties acknowledges and
agrees that it may be considered to be both a "creditor" and a
"debtor" for all purposes and with respect to all Claims it may
now know or suspect to exist within the meaning of Section 1542
of the California Civil Code and any other provision of law now
or hereafter enacted, adjudicated or sought to be adjudicated
relating to the release or waiver of unknown or unspecified
claims.
5. This Release may be executed in two or more
counterparts, each of which shall be deemed an original, but all
of which shall constitute one and the same instrument.
6. This Release shall be binding upon the parties
hereto and their successors and assigns. Each party hereto
represents and warrants that it owns or holds all Claims
described herein which are being released hereunder.
7. This Release shall be governed in all respects,
including validity, interpretation and effect, by, and construed
and enforced under, the law of the State of New York, without
giving effect to the principles of conflict of laws thereof.
<PAGE> 274
IN WITNESS WHEREOF, the parties hereto have duly
authorized and executed this Release as of the date first above
written.
DBP CORP.,
by
Name:
Title:
THE FIRST NATIONAL BANK OF BOSTON,
as Owner Trustee,
by
Name:
Title:
LASALLE NATIONAL BANK, as
Successor Indenture Trustee,
by
Name:
Title:
HARRIS TRUST AND SAVINGS BANK,
as Successor Indenture Trustee,
by
Name:
Title:
<PAGE> 275
ANNEX E
TOLLING AGREEMENT
This Tolling Agreement is made and entered into as of
November , 1993 by and among EL PASO ELECTRIC COMPANY, a Texas
corporation ("EPE"), DBP CORP., a Delaware corporation (the
"Owner Participant"), THE FIRST NATIONAL BANK OF BOSTON (in its
individual capacity, "FNBB"), as trustee under a trust agreement
with the Owner Participant (the "Owner Trustee" and, collectively
as trustee under trust agreements with all the owner
participants, the "Owner Trustees"), HARRIS TRUST AND SAVINGS
BANK, as Successor Trustee under indentures with certain of the
Owner Trustees, and LASALLE NATIONAL BANK, as Successor Trustee
under indentures with certain of the Owner Trustees
(collectively, the "Successor Indenture Trustees").
RECITALS
A. EPE is the debtor in a case pending under Chapter 11
of Title 11 of the United States Code (the "Bankruptcy Code") in
the United States Bankruptcy Court for the Western District of
Texas (the "Bankruptcy Court"), which case has been assigned Case
No. 92-10148-FM (the "EPE Chapter 11 Case").
B. EPE, the Owner Participant and the Owner Trustee are
parties to various agreements, documents and instruments that
evidence or relate to the sale and leaseback by EPE, in separate
transactions with the Owner Participants and Owner Trustees, of
EPE's entire undivided interest in Unit 2 of the Palo Verde
Nuclear Generating Station ("Palo Verde") and approximately 39.5%
of EPE's undivided interest in Unit 3 of Palo Verde and certain
common plant and other related assets.
C. FNBB, in its capacity as Owner Trustee for each of
the Owner Participants (other than DBP Corp.), DBP Corp. and the
Successor Indenture Trustees have filed proofs of claim in the
EPE Chapter 11 Case (the "Proofs of Claim").
D. On September 9, 1992, EPE commenced an adversary
proceeding against FNBB, in its capacity as Owner Trustee for
each of the Owner Participants (other than DBP Corp.), DBP Corp.
and the Successor Indenture Trustees (the "Palo Verde Lease
Litigation Defendants"), which case has been assigned Adversary
Proceeding No. 92-1285-FM (the "Palo Verde Lease Litigation").
The Proofs of Claim, and any objections by EPE thereto, have been
consolidated into the Palo Verde Lease Litigation. In addition,
in discussions between the parties, certain issues have been
raised surrounding the presentment and drawings by the Owner
Participants under certain letters of credit issued as part of
the aforesaid sale and leaseback transactions in the approximate
aggregate amount of $288.4 million (the "Palo Verde Letters of
Credit"). Such issues, including any claims described in
disclosure statements and plans of reorganization filed by EPE in
<PAGE> 276
the EPE Chapter 11 Case with regard to the Owner Participants and
the Palo Verde Letters of Credit, are herein called the "Owner
Participant Claims".
E. The Palo Verde Lease Litigation Defendants have
asserted various defenses, contentions and counterclaims (the
"Palo Verde Defendants' Claims"). In addition, with regard to the
Owner Participant Claims, the Owner Participants contend that
their actions surrounding the presentment and drawings of the
Palo Verde Letters of Credit, including such drawings, were
proper as a matter of law (the "Letter of Credit Defenses").
F. The Third Amended Plan contemplates, under certain
circumstances, a release of all claims relating to the Palo Verde
Lease Litigation, the Palo Verde Defendants' Claims, the Owner
Participant Claims, and the Letter of Credit Defenses, which
release would be subject to and effective only upon the Effective
Date.
G. The parties have entered into a settlement agreement
of even date herewith (the "Settlement Agreement"), which will
result in a mutual release (such release to become effective only
on the occurrence of the Effective Date) of all Claims between
EPE, on one hand, and the Owner Participant and Owner Trustee, on
the other hand, and for the cessation of litigation in the
interim.
H. This Tolling Agreement is intended to ensure that
the parties' claims against one another (and defenses thereto)
are preserved to the fullest extent pending the occurrence of the
Effective Date and the execution, delivery and effectiveness of
the mutual releases contemplated under the Settlement Agreement,
and that the parties are not prejudiced by the deferral of
litigation in accordance with the Settlement Agreement.
IN CONSIDERATION OF THE MUTUAL AGREEMENTS CONTAINED
HEREIN, and other good and valuable consideration, the receipt of
which is hereby acknowledged, IT IS HEREBY AGREED by and between
the parties hereto as follows:
1. All capitalized terms used but not otherwise defined
herein shall have the meanings assigned to such terms in the
Settlement Agreement.
2. All potential causes of action and claims which EPE
or the Lease Debt Creditors could have asserted as of the date
hereof against the Owner Participant or against the Owner Trustee
(and any defenses thereto) shall survive until the termination of
this Tolling Agreement, and no such cause of action or claim (or
defenses thereto) shall in any manner be extinguished or impaired
in any manner by reason of any applicable statute of limitations,
contractual restriction, equitable doctrine or other basis under
federal or state law, including Section 108 of the Bankruptcy
<PAGE> 277
Code, which may limit EPE's ability to commence or prosecute such
cause of action or claim (or any Owner Participant's or Owner
Trustee's defenses thereto) by reason of a lapse of time,
inaction or failure to commence an action or give any notice as
of a particular date during the term of this Agreement; provided,
however, that nothing herein shall revive, to the extent barred
or otherwise non-actionable, any cause of action or claim
(including any right to relief or element of damage thereof) (or
any defense) that is now barred or otherwise non-actionable.
3. All potential causes of action and claims which the
Owner Participant or the Owner Trustee could have asserted as of
the date hereof against EPE or the Lease Debt Creditors (and any
defenses thereto) shall survive until the termination of this
Tolling Agreement, and no such cause of action or claim (or
defenses thereto) shall in any manner be extinguished or impaired
in any manner by reason of any applicable statute of limitations,
contractual restriction, equitable doctrine or other basis under
federal or state law, including Section 108 or Section 362 of the
Bankruptcy Code, which may limit the ability of the Owner
Participant or Owner Trustee to commence or prosecute such cause
of action or claim (or any Owner Participant's or Owner Trustee's
defenses thereto) by reason of a lapse of time, inaction, or
failure to commence an action or give any notice as of a
particular date during the term of this Agreement; provided,
however, that nothing herein shall revive, to the extent barred
or otherwise non-actionable, any cause of action or claim
(including any right to relief or element of damage thereof) (or
any defense) that is now barred or otherwise non- actionable.
4. All potential causes of action and claims which EPE
could have asserted as of the date hereof against the Lease Debt
Creditors (and any defenses thereto) shall survive until the
termination of this Tolling Agreement, and no such cause of
action or claim (or defenses thereto) shall in any manner be
extinguished or impaired in any manner by reason of any
applicable statute of limitations, contractual restriction,
equitable doctrine or other basis under federal or state law,
including Section 108 of the Bankruptcy Code, which may limit the
ability of EPE to commence or prosecute such cause of action or
claim (or any Lease Debt Creditor's defenses thereto) by reason
of a lapse of time, inaction, or failure to commence an action or
give any notice as of a particular date during the term of this
Agreement; provided, however, that nothing herein shall revive,
to the extent barred or otherwise non-actionable, any cause of
action or claim (including any right to relief or element of
damage thereof) (or any defense) that is now barred or otherwise
non-actionable.
<PAGE> 278
5. This Tolling Agreement shall terminate, unless
extended by the parties hereto, on the earliest of (a) 30 days
after written notice by EPE or the Owner Participant of
termination of the Settlement Agreement, (b) the Effective Date
or (c) September 15, 1997.
6. This Tolling Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
instrument.
7. This Tolling Agreement shall be governed in all
respects, including validity, interpretation and effect, by, and
construed and enforced under, the law of the state of New York,
without giving effect to the principles of conflict of laws
thereof.
8. Each party hereto covenants that it has the
requisite authority to enter into and be bound by the terms of
this Tolling Agreement.
9. This Tolling Agreement shall be binding upon the
parties hereto and their successors and assigns.
10. This Tolling Agreement shall not be binding unless
similar tolling agreements are executed and delivered by each of
the Owner Participants and the Successor Indenture Trustees.
11. This Tolling Agreement may not be modified in whole
or in part except pursuant to a written agreement among all of
the parties hereto.
IN WITNESS WHEREOF, the parties hereto have duly
authorized and executed this Tolling Agreement as of the date
first above written.
EL PASO ELECTRIC COMPANY,
by
Name:
Title:
DBP CORP.,
by
Name:
Title:
<PAGE> 279
THE FIRST NATIONAL BANK OF BOSTON,
as Owner Trustee,
by
Name:
Title:
HARRIS TRUST AND SAVINGS BANK, as
Successor Trustee and on behalf of
the Lease Debt Creditors for Unit 3
by
Name:
Title:
LASALLE NATIONAL BANK, as Successor
Trustee and on behalf of the Lease
Debt Creditors for Unit 2
by
Name:
Title:
<PAGE> 280
ANNEX F
EXISTING CLAIMS
1. Claims by the State of Arizona regarding
transaction privilege taxes.
2. Unpaid fees and expenses of the Owner Trustee
through and including the Effective Date.
<PAGE> 281
ANNEX G
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 282
ANNEX H
[EL PASO ELECTRIC COMPANY LETTERHEAD]
November , 1993
Mr. Hobart Truesdell
President
DBP Corp.
60 Broad Street
New York, New York 10004-2367
Re: Palo Verde Letter of Credit Draw
Dear Mr. Truesdell:
Pursuant to the Settlement Agreement between El
Paso Electric Company ("EPE") and DBP Corp. (except as
otherwise defined herein, all capitalized terms used herein
shall have the meanings set forth in the Settlement Agreement
by and among EPE and DBP Corp. and the Release that is Annex
"A" to the Settlement Agreement), this letter will confirm
the status of EPE's investigation into potential claims
against the Owner Participants, including DBP Corp., as
successor in interest to Burnham Leasing Corporation
("Burnham Leasing").
As you know, EPE retained Mike Baggett of Winstead
Sechrest & Minick and Thomas T. Rogers of Small Craig &
Werkenthin to investigate whether EPE had any potential
claims against the Owner Participants with regard to the
draws on the Palo Verde Letters of Credit (the
"Investigation"). As we have informed you, the Investigation
has been extensive, and has included document review and
witness interviews of EPE's management and EPE's counsel.
There has been no formal or informal discovery from the Owner
<PAGE> 283
Mr. Hobart Truesdell
November ___, 1993
Page 2
Participants, including DBP Corp., and no formal discovery
has been initiated in any proceeding. The results of the
Investigation have been reported to the EPE Board.
EPE hereby acknowledges:
1. That prior to drawing its Palo Verde Letter
of Credit, Burnham Leasing made its position
clear that it would draw its Palo Verde
Letter of Credit unless it received a
Complying Letter of Credit as defined in and
as per the Participation Agreement.
2. That Burnham Leasing never agreed to refrain
from drawing its Palo Verde Letter of Credit
to the extent a Complying Letter of Credit
was not provided as per the Participation
Agreement.
3. That Burnham Leasing never agreed to modify,
amend or extend the expiry terms or date of
its Palo Verde Letter of Credit or with
regard to EPE's obligation to provide a
Complying Letter of Credit.
Accordingly, EPE hereby agrees that it will not pursue any
claims or causes of action against DBP Corp. for fraud,
misrepresentation, breach of any covenant of good faith and
fair dealing, promissory estoppel, breach of contract, or
punitive damages relating to Burnham Leasing's draw on its
Palo Verde Letter of Credit.
This will further confirm that as of the date of
this letter, EPE knows of no facts that would support any
other claim or cause of action against DBP Corp. for breach
of any covenant of good faith and fair dealing, fraud,
misrepresentation, promissory estoppel, breach of oral
contract or punitive damages. This also will confirm that
<PAGE> 284
Mr. Hobart Truesdell
November ___, 1993
Page 3
neither DBP Corp. nor Burnham Leasing were named as
defendants in the draft complaint provided to your counsel by
EPE. EPE, however, does believe that as of the date of this
letter, it may have other claims or causes of action relating
to Burnham Leasing's draw on its Palo Verde Letter of Credit.
This letter is not intended to affect such other claims or
causes of action.
DBP Corp. may rely upon this letter and use it as
evidence in any proceeding. This letter does not relate in
any way to any Owner Participant other than DBP Corp. and may
not be used as evidence in any proceeding as to any other
Owner Participant.
Sincerely,
by
[President & CEO]
El Paso Electric Company
<PAGE> 1
EXHIBIT B-9
APS SETTLEMENT AGREEMENT
<PAGE> 2
CURE AND ASSUMPTION AGREEMENT
This CURE AND ASSUMPTION AGREEMENT ("Agreement"), by
and among El Paso Electric Company, a Texas corporation ("EPE"),
Debtor and Debtor In Possession in its proceedings under Chapter
11 of Title 11 of the United States Code, 11 U.S.C. Sections 101-
1330 (the "Code") currently pending in the United States
Bankruptcy Court for the Western District of Texas (the "Court"),
Case No. 92-10148 FM (the "Case"); each of Arizona Public Service
Company ("APS"), Salt River Project Agricultural Improvement and
Power District ("SRP"), Southern California Edison Company
("SCE"), Public Service Company of New Mexico ("PNM"), Southern
California Public Power Authority ("SCPPA"), and the Department
of Water and Power of the City of Los Angeles ("LADWP"), as the
other participants, along with EPE (the "Participants"), in the
Arizona Nuclear Power Project ("ANPP") pursuant to the ANPP
Participation Agreement, dated as of August 23, 1973, as amended
by Amendment Nos. 1 through 13 thereto (the "Participation
Agreement"); each of APS, SRP, SCE, PNM, SCPPA, and LADWP, as the
other parties, along with EPE (the "Switchyard Participants"), to
the ANPP High Voltage Switchyard Participation Agreement, dated
as of August 20, 1981, as amended (the "Switchyard Agreement");
and each of APS, SRP, and PNM, as the other parties, along with
EPE (the "Valley Transmission Participants"), to the ANPP Valley
Transmission System Participation Agreement, dated as of August
20, 1981, as amended (the "Valley Transmission Agreement"), is
entered into as of November 19, 1993.
Capitalized terms used in this Agreement, unless
otherwise defined herein, shall have the meanings assigned to
such terms in the Participation Agreement. When used herein, the
term "Other Parties" shall mean each and all of the parties to
this Agreement other than EPE, and the term "Other Participants"
shall mean each and all of the Participants other than EPE. Where
used herein the term "Assume" shall mean "assume" as such term is
used in Section 365 of the Code. The terms "include" and
"including" are not limiting, regardless of whether accompanied
by the additional words "but not limited to," or words of similar
impact.
R E C I T A L S:
a. On January 8, 1992 (the "Petition Date"), EPE
filed its petition for relief under Chapter 11 of the Code in the
Court.
b. On February 13, 1992, the Court approved a
stipulation (the "Stipulation") between EPE and APS, as Operating
Agent, which among other things allocated $9,255,000 of the
invoices previously rendered to EPE under the Participation
Agreement as pre-petition general unsecured claims of the Other
Participants.
<PAGE> 3
c. On September 9, 1992, EPE filed a complaint which
commenced Adversary Proceeding No. 92-1285FM (including all
related proceedings and contested matters, if any, the "Lease
Litigation") before the Court.
d. EPE has proposed its "Modified Third Amended Plan
of Reorganization," as corrected September 15, 1993 (together
with any modified or amended plan proposed by EPE providing for
the acquisition of EPE by Central and South West Corporation
("CSW") by means of a merger between EPE and a wholly-owned,
special purpose subsidiary of CSW, with EPE as the surviving
corporation ("Reorganized EPE"), generally referred to as the
"Plan"). For purposes of this Agreement, references to the
"Effective Date" shall mean the Effective Date as provided in the
Plan, and references to EPE will be deemed to refer also to
Reorganized EPE with respect to any period on or after the
Effective Date, notwithstanding any separate references to
Reorganized EPE herein.
e. EPE and the Other Parties hereto desire to provide
in this Agreement for the terms and conditions under which EPE
would cure its defaults under and Assume the Participation
Agreement, the Switchyard Agreement, the Valley Transmission
Agreement, and related contracts described or scheduled herein.
f. The Other Participants believe that the
Participation Agreement and related agreements are contracts
and/or agreements that are not capable of being Assumed pursuant
to Code Section 365 without the consent of the Other
Participants; EPE disagrees and believes that said agreements are
subject to assumption under Code Section 365; notwithstanding
said positions, the Parties have agreed to settle and provide
that Assumption will be allowed pursuant to the terms of this
Agreement.
NOW, THEREFORE, in consideration of the mutual
covenants and conditions contained herein, and subject to the
terms and conditions stated herein, the parties hereto agree as
follows:
1. EPE Assumption. Subject to all of the terms and
conditions set forth in this Agreement, EPE agrees to
Assume, on the Effective Date, the Participation
Agreement, the Switchyard Agreement, the Valley
Transmission Agreement, and to the extent that EPE is
not precluded from such assumption, the following
executory agreements and unexpired leases relating to
the ownership, operation, and maintenance of ANPP, the
ANPP High Voltage Switchyard, and/or the "Transmission
System," as such term is defined in the Valley
Transmission Agreement (the "Valley Transmission
System"):
(a) all of the Project Agreements;
<PAGE> 4
(b) all Nuclear Fuel Agreements, and all nuclear
fuel agreements relating to the purchase, sale,
lease, transfer, disposition, storage,
transportation, mining, conversion, milling,
enrichment, processing, fabrication, and
reprocessing of any Nuclear Fuel for use in, used
in or removed from a Reactor entered into by the
Project Manager or the Operating Agent on behalf
of EPE or pursuant to which EPE is a party,
excluding the "RGRT Agreement" (as such term is
defined in the Plan);
(c) all agreements between EPE (or EPE and the
Other Participants or any of them) and any third
party for land, land rights, or water rights
relating to ANPP;
(d) certain agreements listed on Schedule 1
hereto relating to tax or other indemnification
obligations between EPE and the Other
Participants, or any of them (the "Tax
Agreements");
(e) certain agreements listed on Schedule 2
hereto entered into pursuant to or relating to the
Switchyard Agreement and/or the Valley
Transmission Agreement or relating to the ANPP
High Voltage Switchyard and/or the Valley
Transmission System or pursuant to which the ANPP
High Voltage Switchyard and/or the Valley
Transmission System are constructed, operated, or
owned by the participants; and
(f) certain agreements listed on Schedule 3
hereto entered into pursuant to or relating to the
Participation Agreement or relating to ANPP or
pursuant to which ANPP is constructed, operated,
or owned by the Participants
(collectively, the "ANPP Assumed Agreements").
Notwithstanding any provision of this Agreement to the
contrary, EPE shall have no obligation to assume the
Palo Verde Leases, and the Palo Verde Leases shall not
constitute ANPP Assumed Agreements. EPE agrees that the
Palo Verde Leases do not include the Tax Agreements.
After the Effective Date, nothing in the Case, the
Plan, or any order confirming the Plan (the
"Confirmation Order") shall entitle EPE to interfere
with, oppose, or deny prior operating procedures and
actions taken, conducted, and approved by the
Participants prior to the Effective Date, except in
accordance with procedures provided under the ANPP
Assumed Agreements. Any cure and Assumption by EPE of
<PAGE> 5
the ANPP Assumed Agreements shall be deemed to have
occurred only upon the Effective Date.
2. EPE Payments under the ANPP Assumed Agreements.
On, or promptly following, the date of entry of the
Confirmation Order (the "Confirmation Date"), subject
to all of the terms and conditions set forth in this
Agreement, as a condition of its Assumption of the ANPP
Assumed Agreements, EPE will pay the following amounts
to the following persons:
(a) the amount of $9,255,000.00 under the
Participation Agreement to the Operating Agent for
the benefit of all of the Other Participants;
(b) the amount of $38,658.50 under the Switchyard
Agreement, to SRP, as operating agent under the
Switchyard Agreement, for the benefit of all of
the Switchyard Participants, other than EPE; and
(c) the amount of $12,933.47 under the Valley
Transmission Agreement to SRP, as operating agent
under the Valley Transmission Agreement, for the
benefit of all of the Valley Transmission
Participants, other than EPE.
If this Agreement is terminated pursuant to Sections
8(c) or 11 hereof, the amounts specified in
subparagraphs (a) through (c) of this Section 2 shall
be returned and repaid by the Operating Agent, SRP as
operating agent under the Switchyard Agreement, and SRP
as operating agent under the Valley Transmission
Agreement, respectively, to EPE without interest
promptly upon receipt of a wire transfer number
evidencing transfer from EPE of the amounts described
in Section 3(i) of this Agreement.
3. Parties' Agreement To Actions. The parties agree
to the following actions and agreements:
(a) to the Assumption by EPE of the ANPP Assumed
Agreements on the Effective Date without further
requirements or steps to comply with Section 365
of the Code, and the Other Parties hereby waive as
of the Effective Date, any otherwise applicable
issues as to compliance with Section 365;
provided, however, that EPE may not so Assume
unless it (i) has paid its participant-share of
all outstanding and due invoices and assessments
presented by the operating agents under or
pursuant to the Participation Agreement, the
Switchyard Agreement, and the Valley Transmission
Agreement; (ii) is in compliance with all payment,
funding, and any other material obligations
<PAGE> 6
pursuant to Section 8A.7.2 of the Participation
Agreement; and (iii) otherwise has complied in all
material respects with the terms and conditions of
this Agreement; provided, however, that unless any
of the Other Parties informs EPE by written
notice, on or before the Confirmation Date, that
EPE is not in compliance with this Agreement, and
specifies the nature of such noncompliance, EPE
shall be deemed to be in compliance with this
Agreement as of the Confirmation Date;
(b) that EPE's payment of the amounts set forth
in Section 2 of this Agreement in compliance with
said Section shall constitute a complete and full
accord, satisfaction, settlement, and cure of all
payment defaults of EPE (as to which EPE is the
sole defaulting Participant) existing and known by
the Other Parties as of the date of a Court order
approving this Agreement (the "Court Approval
Date"), together with all interest thereon
accruing through and including the Confirmation
Date, under the Participation Agreement, the
Switchyard Agreement, the Valley Transmission
Agreement and all other ANPP Assumed Agreements;
provided, however, that nothing contained in this
Agreement or pursuant to any discharge or release
in or pursuant to the Plan, the Confirmation
Order, any order of the Court requiring the filing
of claims by a deadline (the "Bar Date"), or the
Code shall operate to relieve EPE of any other
liability or obligation it may have that is
asserted under any of the ANPP Assumed Agreements
for liabilities and obligations which are assessed
or asserted against EPE in common with one or more
of the Other Parties;
(c) that, on the Effective Date, except as to
claims that may be asserted and which are
preserved under Section 12 hereof, (i) EPE shall,
by the terms of this Agreement, be released and
discharged from (A) any and all claims, causes of
action, rights of termination, and all other
rights and remedies of any other kind and nature
at law or equity held by any of the Other Parties
arising from actions taken or failures to act by
EPE in the Lease Litigation prior to the Court
Approval Date and (B) any other defaults of EPE
under the ANPP Assumed Agreements existing and
known by the Other Parties prior to the Court
Approval Date, and (ii) the Other Parties shall,
by the terms of this Agreement, be released and
discharged from any and all claims, causes of
action, rights of termination and all other rights
and remedies of any other kind and nature at law
<PAGE> 7
or equity held by EPE arising from any defaults of
any of the Other Parties under the ANPP Assumed
Agreements existing and known by EPE prior to the
Court Approval Date; provided, however, that
nothing in this Agreement, or pursuant to the
Plan, the Confirmation Order, the Bar Date, or the
Code shall operate to relieve EPE and/or any of
the Other Parties of any liability or obligation
it or they may have that may be assessed or
asserted under any of the ANPP Assumed Agreements
against two or more of the participants in common,
and further provided, however, that nothing in
this paragraph shall diminish or impair the
Release referred to in Section 5 hereof;
(d) that the release and discharge by EPE
pursuant to Section 3(c)(ii) above shall be deemed
to apply to claims and causes of action against
the Other Parties solely in their capacities as
participants, but not in their capacities as
operating agents;
(e) that, on the Effective Date, except as to
claims that may be asserted and which are
preserved under Section 12 hereof, EPE shall, by
the terms of this Agreement, be released by the
Other Parties from any liability for attorneys'
fees and administrative costs or claims incurred
in connection with the Case at any time prior to
the Confirmation Date, not to include any such
attorneys' fees and administrative costs or claims
(i) that might arise from any of the Other
Parties' transactions with EPE regarding the sale
of power or transmission other than pursuant to
the ANPP Assumed Agreements; or (ii) that may be
asserted by any of the Other Parties which are
unrelated to the ANPP Assumed Agreements;
(f) that, notwithstanding any and all other
provisions of this Agreement, including without
limitation subparagraphs 3(c), (d), and (e) above,
if EPE shall assert in writing any claims, causes
of action, rights of termination or other rights
and remedies of any kind or nature at law or
equity existing and known by EPE prior to the
Court Approval Date and arising from any actual or
alleged act or failure to act prior to the Court
Approval Date ("Claims") by APS or SRP,
respectively, in their respective capacities as
operating agent under any of the ANPP Assumed
Agreements, any and all releases and discharges
granted by APS or SRP, respectively (whichever is
the subject of such Claims), to EPE pursuant to
subparagraph 3(c)(i)(B), (d), or (e) above shall
<PAGE> 8
forthwith become null, void and of no further
force or effect; and APS or SRP, respectively
(whichever is the subject of such Claims), shall
be entitled to assert any and all claims, causes
of actions, rights of termination and other rights
and remedies free of the provisions of
subparagraphs 3(c)(i)(B), (d), and (e) above and
of the releases and discharges to which reference
is made therein;
(g) that, immediately upon its receipt of the
payments specified in Section 2 of this Agreement,
APS, as Operating Agent, shall pay to EPE the
amount of $3,818,409.62 representing amounts
withheld by APS, as of the date hereof, and not
distributed to EPE under the Participation
Agreement;
(h) that, immediately upon its receipt of the
payments specified in Section 2 of this Agreement,
SRP, as operating agent under the Switchyard
Agreement and the Valley Transmission Agreement,
shall pay to EPE the respective amounts of
$8,047.92 and $12,708.88, representing amounts
withheld by SRP, as operating agent under such
agreements, as of the date hereof, and not
distributed to EPE under the Switchyard Agreement
and the Valley Transmission Agreement,
respectively;
(i) that if this Agreement is terminated pursuant
to Sections 8(c) or 11 hereof, the amounts
specified in subparagraphs (g) and (h) of this
Section 3 shall be returned and repaid without
interest to the respective operating agents by EPE
promptly and in any event within five (5) business
days of such termination; and
(j) that, on the Effective Date, solely for
purposes of the Plan, the Other Parties shall be
deemed to have withdrawn any and all proofs of
claims filed in the Case by APS, as Operating
Agent, SRP, as operating agent under the
Switchyard Agreement and the Valley Transmission
Agreement, and the Other Parties solely in their
capacities as parties to and/or participants under
the ANPP Assumed Agreements; provided, however,
that such action by the Other Parties shall have
no effect on any liability or obligation of EPE
hereunder or under the ANPP Assumed Agreements.
<PAGE> 9
The intent of this Agreement (including but not limited
to this Section 3) is that if, for example and not by
way of limitation, a claim such as an environmental
claim is made against any of the parties hereto for
damages commencing on the date of an act, event, or
occurrence whether before or after the Petition Date,
then EPE, as a participant under the Participation
Agreement, the Switchyard Agreement, and/or the Valley
Transmission Agreement, as the case may be, shall be
and remain liable for its pro rata share, based upon
its full participant interest pursuant to such
agreements, of any damages awarded on account of such
claim, notwithstanding any and all provisions or effect
of this Agreement, the Plan, the Confirmation Order,
the Bar Date, or the Code. To the extent this Agreement
releases, waives, or limits claims of the Other Parties
against EPE or of EPE against the Other Parties, as the
case may be, such claims are limited to those which
result solely from breaches of EPE or the Other Parties
but not to liabilities or obligations which are
assessed or asserted against EPE in common with one or
more of the Other Parties or which result, directly or
indirectly, from claims by entities other than the
Other Parties against EPE in common with one or more of
the Other Parties.
4. Interim Agreements. Subject to all of the terms
and conditions set forth in this Agreement, during the
period after the Confirmation Date and until and
including the earlier to occur of the Effective Date
and the date upon which this Agreement shall have been
terminated in accordance with Section 8(c) or 11
hereof:
(a) EPE and the Other Parties agree that, with
respect to all matters relating to the ANPP
Assumed Agreements, EPE and the Other Parties
shall be governed by the provisions of such ANPP
Assumed Agreements and this Agreement; provided,
however, that this section (i) shall not impair
EPE's right to assert, or prohibit EPE from
asserting, any argument or defense that the Court
should assume or exercise jurisdiction, and (ii)
shall not impair the Other Parties' right to
assert, or prohibit the Other Parties from
asserting, any argument or defense that the Court
should not assume or exercise jurisdiction.
Notwithstanding the preceding sentence, none of
the automatic stay of Section 362 of the Code, the
post-confirmation injunction of Sections 524 and
1141 under the Code, or any stay or injunction
under the Plan or the Confirmation Order shall be
applicable to any actions or remedies taken by the
<PAGE> 10
Other Parties under the ANPP Assumed Agreements
(including the giving of notice of default and
implementation of appropriate remedies and
enforcement procedures) to address any action or
inaction of EPE subsequent to the Confirmation
Date.
(b) Except as expressly provided in Section 3
hereof, nothing contained in this Agreement or
pursuant to the Plan, the Confirmation Order, the
Bar Date, or including without limitation any
discharge, injunction, or release pursuant to the
Plan or the Confirmation Order shall operate to
waive, affect, or restrict in any manner
whatsoever the rights of the Other Parties or of
EPE under any of the ANPP Assumed Agreements to
enforce in accordance therewith any and all rights
thereunder with respect to any default or breach
of EPE or the Other Parties under such agreements.
No waiver or release contained herein with respect
to any default or breach of EPE or the Other
Parties under any of the ANPP Assumed Agreements
will be deemed to have waived any subsequent
default or breach of EPE or the Other Parties
under any of the ANPP Assumed Agreements
notwithstanding the similarity of said subsequent
default or breach to similar defaults or breaches
of EPE or the Other Parties waived or released
herein; provided, however, that the Other Parties
agree that, except as provided in Section 3(a)
hereof, they will not assert any defaults or
breaches under the ANPP Assumed Agreements as a
bar to EPE's assumption of the ANPP Assumed
Agreements.
(c) Nothing contained in this Agreement, the
Case, the Plan, or the Confirmation Order shall
entitle EPE to interfere with, oppose, or deny
prior operating procedures and actions taken,
conducted, and approved by the ANPP Participants
pursuant to the ANPP Assumed Agreements, except in
accordance with procedures provided under the ANPP
Assumed Agreements.
5. Limited Waiver and Release. Concurrently with the
execution of this Agreement, EPE and APS will execute
the limited waiver of statute of limitations attached
hereto as Appendix A and made a part hereof by
reference (the "Limited Waiver"). On the Effective
Date, EPE and each of the Other Parties will execute
and deliver the release attached hereto as Appendix B
and made a part hereof by reference (the "Release").
<PAGE> 11
6. Form of Payments. All payments required pursuant
to Sections 2 and 3 of this Agreement shall be made by
wire transfer of cash or immediately available funds
pursuant to written instructions from the party to whom
payment is to be made.
7. No Amendment or Change. Nothing in this Agreement
shall constitute or be deemed to constitute any
amendment, change, or modification of any type or
nature of any of the ANPP Assumed Agreements.
8. The Plan.
(a) It is the intent of the Parties to this
Agreement that (i) this Agreement be approved by
the Court, become effective, and continue to be
effective and binding on EPE as a party hereto,
(ii) EPE's Assumption of the ANPP Assumed
Agreements in accordance with this Agreement is a
condition precedent to the effectiveness of the
Plan, (iii) subject to the provisions of Section
11(d) hereof, this Agreement will be the exclusive
procedure by which EPE can Assume the ANPP Assumed
Agreements, and (iv) notwithstanding anything to
the contrary in the Plan, including but not
limited to Section 7.7 thereof, or in the Merger
Agreement (as such term is defined in the Plan),
in the event of any inconsistency between the Plan
or the Merger Agreement and this Agreement, this
Agreement will control.
(b) EPE shall use all reasonable efforts, in good
faith, to obtain a Confirmation Order which
provides that (i) EPE's Assumption of the ANPP
Assumed Agreements in accordance with this
Agreement is a condition precedent to the
effectiveness of the Plan, (ii) subject to the
provisions of Section 11 hereof, this Agreement
will be the exclusive procedure by which EPE can
Assume the ANPP Assumed Agreements, and (iii)
notwithstanding anything to the contrary in the
Plan, including but not limited to Section 7.7
thereof, or in the Merger Agreement (as such term
is defined in the Plan), in the event of any
inconsistency between the Plan or the Merger
Agreement and this Agreement, this Agreement will
control.
(c) In the event that the Confirmation Order does
not contain all of the provisions of Section
8(b)(i), (ii) and (iii) set forth above, then any
of the Other Parties may terminate this Agreement,
in which case this Agreement shall be void and of
no further effect. Upon such a termination, any
<PAGE> 12
extensions provided under Section 9 or provided
under any separate stipulations of the parties
shall survive and control. If the Agreement is not
terminated by the Other Parties on or prior to the
Confirmation Date, then EPE shall be deemed to be
in full compliance with this Agreement on the
Confirmation Date, and unless terminated in
accordance with Section 11 herein, this Agreement
shall be the exclusive procedure through which EPE
may assume the ANPP Assumed Agreements.
(d) The Other Parties, solely in their capacities
as parties to, and/or participants under, the ANPP
Assumed Agreements, acknowledge and agree that so
long as this Agreement has been approved by an
Approval Order (as defined in Section 9(a) hereof)
in accordance with Section 9(a) hereof and has not
been terminated under Sections 8(c) or 11 hereof,
the Other Parties, solely in their capacities as
parties to and/or participants under the ANPP
Assumed Agreements, will not object to or vote for
or against the Plan;
(e) APS, as Operating Agent, will reasonably
cooperate in required Nuclear Regulatory
Commission proceedings and will assist in
providing information for other regulatory
proceedings (if any) required for the Assumption
of the ANPP Assumed Agreements pursuant to this
Agreement; and
(f) If the Plan is amended, EPE will make all best
efforts to ensure that the Plan will be consistent
with the terms of this Agreement.
9. Procedures and Timing.
(a) Promptly following the execution of this
Agreement by all of the parties hereto, the
parties hereto (and the Mediator, if he is
agreeable) shall jointly file motions for approval
of this Agreement. EPE shall use its best efforts
to obtain an order of the Court approving its
entry into this Agreement as provided in Section
10(b) hereof (the "Approval Order"). EPE agrees to
the extension, as to the Other Parties, of any
deadline that may otherwise be applicable to the
Other Parties, to dates determined by the Court,
for (i) filing objections or casting ballots on
the Plan (which deadline as so extended shall not
be prior to six (6) days after the entry of any
order denying the joint motion referred to above);
(ii) filing or completion of any pretrial
stipulation, order, or schedule regarding
<PAGE> 13
confirmation of the Plan; (iii) completion of any
discovery regarding confirmation of the Plan; or
(iv) presentation of any evidence or examination
of any witness in any hearing on confirmation of
the Plan; and in the event of any termination of
this Agreement (x) EPE and the Other Parties shall
cooperate with each other in good faith to enable
the Other Parties and EPE to make a full
presentation of their positions during the
confirmation proceedings, and (y) each of the
Other Parties shall have the right to object to
the Plan and to vote for or against confirmation
of the Plan;
(b) if, prior to the entry of the Approval Order,
any change of circumstance occurs in the Case or
under the Plan that is materially adverse to the
Other Parties under the terms of this Agreement or
under the ANPP Assumed Agreements, then, upon
written notice by any of the Other Parties, this
Agreement shall be void and without effect unless
such change of circumstances is expressly waived
by all of the Other Parties; provided, however,
that the extensions granted or for which provision
is made in subparagraph (a) above shall remain
applicable for at least seven (7) days after the
declaration by a Participant of a material adverse
change; and
(c) Subject to consent of the Mediator, EPE shall
provide the Other Parties access, on a
confidential basis, to a draft of the proposed
settlement of issues relating to the Lease
Litigation, including any proposed revision of any
agreements related to the Palo Verde Leases (as
such term is defined in the Plan). To the extent
that any settlement among EPE and the parties to
the Lease Litigation requires the consent of the
Other Participants, the Other Participants will
review the settlement in good faith, consistent
with Section 15 of the Participation Agreement,
and the required consent, if any, will not be
unreasonably withheld. After the Court Approval
Date, any agreement relating to the Lease
Litigation or modification of such agreement,
either in the Case or pursuant to the Plan, that
violates any of the ANPP Assumed Agreements shall
be addressed pursuant to the procedures under the
ANPP Assumed Agreements. The Other Participants
agree that, based solely on the description of the
consensual treatment of Class 6, Class 12(a), and
Class 12(b) (as such terms are defined in the
Modified Third Amended Plan of Reorganization, as
corrected September 15, 1993 (the "Current
<PAGE> 14
Plan")), as set forth in Section 3.8(A) and (C)
and Section 3.14(A) and (B) of the Current Plan,
and on the representations and warranties of EPE
set forth below in this Section 9(c)(i) and (ii),
the Other Participants agree to waive the
requirement under the Participation Agreement, if
any, for their consent to such consensual
treatment. Assuming that Classes 6, 12(a), and
12(b) accept the consensual treatment set forth in
Section 3.8(A) and (C) and Section 3.14(A) and (B)
of the Current Plan, EPE hereby represents and
warrants as of the Effective Date to the Other
Participants that:
(i) Reorganized EPE will not seek to be
treated or classified as, and will not be
deemed, a Transferee, as such term is defined
in Section 15.10 of the Participation
Agreement, and for all purposes of the
Participation Agreement, Reorganized EPE will
be deemed to have succeeded by operation of
law to all of the rights and obligations of
Reorganized EPE under the Participation
Agreement and to have been previously a
Participant thereunder; and
(ii) the liabilities or obligations of
Reorganized EPE with respect to its full 15.8
percent participant interest in the ANPP
shall not be affected, released, or waived as
a result of any release of Class 6 Claims,
Class 12(a) Claims, and Class 12(b) Claims,
and to the extent not covered by such
Classes, any of the Lease Obligation
Bondholders, Secured Lease Obligation
Bondholders, Palo Verde Indenture Trustees,
Funding Corporations, Owner Trustees, Owner
Trusts, and Owner Participants (as such terms
are defined in the Plan) under any provision
of the Plan, the OP Settlement, or the
Settlement Agreements (as such terms are
defined in the Plan) or otherwise in the Case
from any liability or obligation with respect
to ANPP or the Palo Verde Leases; and
Reorganized EPE agrees to indemnify the Other
Participants and hold them harmless to the
extent that any of said releases results in
any of the Other Participants becoming
obligated for more than their respective
participant interests; provided, however,
that Reorganized EPE's obligation to
indemnify the Other Participants hereunder
shall in no event result in payments by
<PAGE> 15
Reorganized EPE in respect of any such
liability or obligation which, in the
aggregate, per occurrence, exceed an amount
equal to EPE's proportionate Participant -
share in ANPP.
A further condition to the Other Parties' waiver
of consent pursuant to this Section 9(c) is that,
as of the Effective Date, neither the "OP
Settlement" (as defined in the Plan) or amendments
to the Plan shall materially and adversely affect
the Other Participants.
10. Conditions to Binding Effect; Persons Bound;
Assignments. If, between the date this Agreement is
executed and the Court Approval Date, the Other Parties
have not terminated this Agreement in accordance with
Section 9(b) hereof, this Agreement will become binding
upon EPE and the Other Parties on the earliest date
upon which all of the following have occurred: (a) this
Agreement has been executed and delivered by EPE and
each of the Other Parties; (b) an order of the Court
approving this Agreement has been entered; (c) at least
ten (10) days have elapsed since the date such order
was entered by the Court, and no stay of the order
approving this Agreement is in effect; and (d) EPE and
APS have executed and delivered the Limited Waiver.
This Agreement shall be binding upon and inure to the
benefit of EPE and each of the Other Parties and their
respective successors and assigns, including
Reorganized EPE; provided, however, that (i) the
requirement in subpart (c) of the preceding sentence
can be waived by EPE and Other Parties. None of the
parties hereto may assign any of its rights or
obligations hereunder except to a party who,
concurrently with such assignment, becomes a
Participant pursuant to and in accordance with the
Participation Agreement with respect to the assigning
person's interest in ANPP. Any person who becomes a
Participant shall be bound by this Agreement.
11. Termination. (a) During the period after the Court
Approval Date and on or prior to the Confirmation Date,
this Agreement will terminate and be of no further
force or effect in the event that: (i) confirmation of
the Plan is denied by the Court; (ii) the Plan is
withdrawn by EPE; or (iii) there is any change in the
Plan as on file on the Court Approval Date or in the
Case which materially and adversely affects any of the
Other Parties, in their reasonable discretion, and any
of the Other Parties so affected promptly shall have
notified EPE and each of the Other Parties of the same.
<PAGE> 16
(b) In the event that, on or prior to the Confirmation
Date, any of the Other Parties notifies EPE that it is
not in compliance with this Agreement, EPE or any of
the Other Parties shall have the right, on the earlier
to occur of (i) five business days after the date that
such notice was sent by facsimile transmission with
receipt confirmed or (ii) the Confirmation Date, to
declare this Agreement to be terminated and of no
further force and effect. Upon such a termination, any
extensions provided under Section 9 or provided under
any separate stipulations of the parties shall survive
and control.
(c) Notwithstanding that this Agreement shall have
become binding and shall not have been terminated prior
to the Confirmation Date, EPE and the Other Parties
shall have the right to declare this Agreement to be
terminated and of no further force and effect subject
to the provisions of Section 11(d) hereof in the event
that (i) the Plan is revoked in accordance with its
terms or (ii) the Confirmation Order is vacated.
(d) In the event that one or more of the conditions to
binding effect contained in Section 10 hereof are not
satisfied or are not waived or this Agreement shall
have been terminated in accordance with its terms: (i)
the parties agree that the Stipulation shall continue
to control issues between EPE and the Other Parties
pending any further order of the Court; and (ii) this
Agreement and the agreements and recitals set forth
herein will have no further force and effect and may
not be utilized in any subsequent proceeding or court;
provided, however, in the event of any termination of
this Agreement, any extensions provided under Section 9
or provided under any separate stipulations of the
parties shall survive and remain as a binding
requirement and agreement of EPE and the Other Parties.
12. Preservation of Certain EPE or PNM Rights, Claims
and Remedies. Nothing in this Agreement shall impair or
modify any right, claim, or remedy of EPE or PNM in
connection with the issues described in Appendix A of
the Transition Agreement, dated September 2, 1993,
between PNM and EPE (the "Transition Agreement") or
waive any default of EPE or PNM that may exist pursuant
to any agreement (collectively, the "Preserved
Claims"); provided, however:
(a) PNM and EPE agree that (i) PNM will not
assert a non-monetary default by EPE under the
ANPP Assumed Agreements as a bar to Assumption of
the ANPP Assumed Agreements by EPE pursuant to
this Agreement, and (ii) PNM or EPE will not
assert a non-monetary default by either PNM or EPE
<PAGE> 17
under the ANPP Assumed Agreements at any time
prior to or on the Confirmation Date;
(b) If (i) the Transition Agreement terminates
and EPE and PNM are unable to reach the Amended
Interim Agreement contemplated by the Transition
Agreement, and (ii) PNM or EPE determines that the
party contemplating the claim is itself materially
and adversely affected in its ability to import
remote generation as a result of EPE or PNM import
of generation entitlement from PVNGS, then PNM or
EPE may pursue any and all Preserved Claims after
the Confirmation Date; and
(c) In no event shall PNM or EPE assert prior to
the Confirmation Date that a default under the
Transition Agreement, the Interim Transmission
Agreement and Agreement to Arbitrate Between EPE
and PNM, or any other agreement may or shall
constitute a default under any of the ANPP Assumed
Agreements.
Except as provided in this Section 12, PNM and EPE will
be governed by the terms of this Agreement, including
the waivers and releases in Section 3 and in the
Release.
13. Governing Law. This Agreement will be governed by,
and construed in accordance with, the laws of the State
of Arizona.
14. Execution in Counterparts. This Agreement may be
executed in any number of counterparts.
15. Headings. Section headings in this Agreement are
included herein for convenience of reference only and
shall not constitute a part of this Agreement for any
other purpose.
16. Modification, Waiver, Etc. No amendment,
modification, supplement, waiver, or consent made
hereunder shall be effective unless in writing and
signed, in the case of an amendment, modification, or
supplement, by all of the parties hereto, and, in the
case of a waiver or consent, by the party or parties
making such waiver or consent.
17. Notices. Any and all notices with respect to this
Agreement shall be in writing, both by facsimile
transmission and by first class mail, directed as
follows:
<PAGE> 18
To EPE and Palo Verde Owners
Corporate Secretaries:
To EPE
Eduardo Rodriguez
303 Oregon Street
El Paso, Texas 79901
To APS
Nancy C. Loftin
400 N. 5th Street
Sta. 9068
Phoenix, Arizona 85004
To PNM
Patrick T. Ortiz
Alvarado Square
MS 0804
Albuquerque, New Mexico 87158
To SRP
William K. O'Neal
P.O. Box 52025
PAB 215
Phoenix, Arizona 85072
To SCE
Kenneth S. Stewart
2244 Walnut Grove Avenue
Room 330
Rosemead, California 91770
To LADWP
Judith K. Kasner
111 N. Hope Street
Room 1555
Los Angeles, California 90051
To SCPPA
Eldon A. Cotton
111 N. Hope Street
Room 1155
Los Angeles, California 90051
To Counsel:
To EPE
Bryan Krakauer
SIDLEY & AUSTIN
One First National Plaza
Chicago, IL 60603
<PAGE> 19
To APS
Donald L. Gaffney
SNELL & WILMER
One Arizona Center
400 E. Van Buren
Phoenix, AZ 85004-0001
To SRP
Gary Keltner
JENNINGS, STROUSS & SALMON
2 North Central, Suite 1600
Phoenix, AZ 85004-2393
To CSW
Joris M. Hogan
MILBANK, TWEED, HADLEY & McCLOY
One Chase Manhattan Plaza
New York, NY 10005
Except as otherwise provided in this Agreement, Notices
shall be deemed to be received upon the earlier to occur of,
(i) in the case of facsimile transmission, receipt by the
party to whom such notice is addressed, and (ii) in the case
of delivery by first class mail, on the third business day
following the date upon which the notice is mailed. During
the confirmation hearing, all notices hereunder to counsel
attending the hearing shall also be made by hand delivery.
EPE agrees that a representative of management from APS (the
"APS Representative") will receive all notices and/or
documents that are provided to the Oversight Committee, as
that term is defined in the Plan.
EL PASO ELECTRIC COMPANY
By: /s/ DAVID H. WIGGS
Its: Chairman and Chief Executive Officer
<PAGE> 20
ARIZONA PUBLIC SERVICE COMPANY
By: /s/ WILLIAM F. CONWAY
Its: Executive Vice President-Nuclear
<PAGE> 21
SALT RIVER PROJECT AGRICULTURAL
Attest: IMPROVEMENT AND POWER DISTRICT
By:____________________ By: /s/
Its:___________________ Its: Associate General Manager
Power,Construction & Engineering
Svcs
<PAGE> 22
SOUTHERN CALIFORNIA EDISON COMPANY
By: /s/
Its: Sr. Vice President
<PAGE> 23
PUBLIC SERVICE COMPANY OF
NEW MEXICO
By: /s/
Its: Sr. Vice President
<PAGE> 24
SOUTHERN CALIFORNIA PUBLIC
Attest: POWER AUTHORITY
By: /s/ [Glenda L. Robinson] By: /s/
Its: Administrative Secretary Its: Agent
<PAGE> 25
DEPARTMENT OF WATER AND POWER OF
Attest: THE CITY OF LOS ANGELES
By: /s/ [Glenda L. Robinson] By: /s/
Its:Administrative Secretary Its:Assistant General Manager-Power
<PAGE> 26
Schedule 1
TAX AGREEMENTS
1. That certain letter agreement, dated August 14,
1986, from Arizona Public Service Company ("APS"), El Paso
Electric Company ("EPE") and Public Service Company of New Mexico
("PNM"), addressed to Southern California Edison Company ("SCE"),
Re: "Arizona Public Service Company, El Paso Electric Company and
Public Service Company of New Mexico: Refinancing of Interests in
Palo Verde Nuclear Generating Station" (the "Indemnity Letter").
2. That certain Contribution Agreement, dated as of
August 14, 1986, by and between APS, EPE and PNM, relating to the
Indemnity Letter.
3. That certain letter agreement, dated August 21,
1986, from APS, EPE and PNM, addressed to SCE, amending the
Indemnity Letter.
4. That certain letter agreement, dated December 2,
1986, from APS, EPE and PNM, addressed to SCE, further amending
the Indemnity Letter.
5. Any similar agreement(s) entered into by EPE in
connection with EPE's 1987 sale/leaseback transactions.
6. Any indemnity agreements entered into between APS
and EPE whereby EPE indemnified APS for any liabilities arising
out of APS delivering Annual Reports of Operating Agent (relating
to PVNGS insurance) under EPE's sale/leaseback transactions.
7. Indemnity Agreement, effective as of December 29,
1983, between APS and EPE relating to the issuance of $63,500,000
principal amount of Annual Tender Pollution Control Revenue
Bonds, 1983 Series A (El Paso Electric Company Palo Verde
Project), and other indemnity agreements, if any, relating to
other pollution control bond issuances on behalf of EPE.
<PAGE> 27
Schedule 2
SWITCHYARD AND TRANSMISSION AGREEMENTS*
Those agreements, contracts, leases, purchase orders
and other documents shown on the attached Annex A.
_____________________
* "Agreements, contracts, leases, purchase orders and
other similar documents" are referred to collectively herein
as "Agreements." By generating the attached Annex A, the
Switchyard Participants and the Valley Transmission
Participants have made a good faith effort to list all
ongoing active Agreements currently in effect at or with
respect to the ANPP High Voltage Switchyard and the Valley
Transmission System. This list is subject to change at any
time as old Agreements expire, existing Agreements are
amended or are extended, and new Agreements are entered
into. The parties to the Cure and Assumption Agreement to
which this Schedule 2 is attached agree that the listing of
these Agreements is not intended to, and will not, limit the
liabilities and obligations of EPE as a Switchyard
Participant or as a Valley Transmission Participant in
common with the other such participants with respect to any
and all Agreements in effect or to be in effect at or with
respect to the ANPP High Voltage Switchyard and the Valley
Transmission System, whether or not listed hereon.
<PAGE> 28
Schedule 3
ANPP AGREEMENTS*
Those agreements, contracts, leases, purchase orders
and other documents shown on the attached computer-generated
Annex A and the attached Annex B.
_____________________
* "Agreements, contracts, leases, purchase orders and
other similar documents" are referred to collectively herein
as "Agreements." By generating the attached Annex A and
Annex B, the Participants have made a good faith effort to
list all ongoing active Agreements currently in effect at or
with respect to ANPP. This list is subject to change at any
time as old Agreements expire, existing Agreements are
amended or are extended, and new Agreements are entered
into. The parties to the Cure and Assumption Agreement to
which this Schedule 3 is attached agree that the listing of
these Agreements is not intended to, and will not, limit the
liabilities and obligations of EPE as a Participant in ANPP
in common with the Other Participants with respect to any
and all Agreements in effect or to be in effect at or with
respect to ANPP, whether or not listed hereon.
<PAGE> 29
ANNEX A and ANNEX B
This Annex is comprised of computer-generated tables and will be
included by amendment at a later date.
<PAGE> 30
Appendix A
AGREEMENT REGARDING ASSERTION OF CLAIMS
This AGREEMENT is by and between El Paso Electric
Company, a Texas corporation ("EPE") and Arizona Public Service
Company, an Arizona corporation ("APS"), individually and as
Operating Agent (the "Operating Agent") under the Arizona Nuclear
Power Project ("ANPP") Participation Agreement dated as of August
23, 1973, as amended by Amendment Nos. 1 through 13 thereto (the
"Participation Agreement").
WHEREAS, EPE has commenced a voluntary case under
Chapter 11 of the United States Bankruptcy Code (11 U.S.C.
Sections 101-1330) which is currently pending in the United
States Bankruptcy Court for the Western District of Texas (the
"Court"), Case No. 92-10148 FM (the "Bankruptcy Action"); and
WHEREAS, this Agreement is being executed in connection
with and as an integral part of that certain Cure and Assumption
Agreement dated as of November 19, 1993 among EPE, APS, and other
parties (the "Assumption Agreement");
WHEREAS, capitalized terms used herein and not
otherwise defined will have the meanings assigned to such terms
in the Assumption Agreement;
WHEREAS, Section 5 of the Assumption Agreement
contemplates execution of this Agreement by EPE and APS, and
execution of the Release by EPE, APS and each of the Other
Parties on the Effective Date;
WHEREAS, upon the Release becoming effective under
Section 2 of the Release, each Participant will release each
other Participant from certain claims (the "Released Claims");
and
WHEREAS, pursuant to the Plan, EPE and CSW have entered
into an Agreement and Plan of Merger dated as of May 3, 1993, as
amended on May 18, 1993, and August 27, 1993, and as may
hereafter be amended (the "Merger Agreement") providing for the
acquisition of EPE by CSW by means of a merger (the "Merger")
between EPE and a wholly-owned, special purpose subsidiary of
CSW.
WHEREAS, the Release shall be effective only upon the
"Effective Date" of the Merger (as that term is defined in the
Plan of Reorganization (the "Merger Effective Date"), but shall
have absolutely no force and effect and shall be null and void if
the Merger Agreement is terminated, it being the express
intention of EPE and APS that if the Merger is not fully
consummated, the Released Claims can be pursued by EPE and APS in
the same manner and with the same effect as if these Released
Claims were to be the subject of litigation and/or arbitration
instituted as of the day of the signing of this Agreement;
<PAGE> 31
NOW, THEREFORE, in consideration of the mutual
covenants and agreements of the parties contained herein, the
parties hereto agree as follows:
A. EPE and APS acknowledge and stipulate that: (i)
APS and EPE are parties to the Bankruptcy Action pending before
the Court; and (ii) as of the date of these execution of this
Agreement, APS and EPE each could exercise whatever right that
party has, if any, to commence litigation to adjudicate the
Release Claims and assert defenses against the other party.
Nothing herein will impair EPE's right to assert that the
Released Claims could, as of the date of execution of this
Agreement, be litigated before the Court and nothing herein will
prohibit APS from asserting any contrary position relating to the
appropriate forum for any such litigation.
B. Consistent with part F below, in the event that
the Merger Agreement is terminated according to its terms and
action is taken by filing a claim or initiating an arbitration
proceeding to adjudicate the Released Claims on or before ninety
(90) days from the date upon which the Assumption Agreement is
terminated:
(1) EPE and APS each agrees that the rights and
protections granted to them by the following two sentences
of Section 21.5.2 of the Arizona Nuclear Power Project
Participation Agreement are hereby relinquished and shall
not apply to any litigation or dispute between EPE and APS
to adjudicate the Released Claims: "A claim based on Willful
Action must be perfected by filing suit in a court of
competent jurisdiction within three years after the Willful
Action occurs. All claims made thereafter relating to the
same Willful Action shall be barred by this Section
21.5.2."; and
(2) the party against which Released Claims are
brought shall not assert a defense to those claims based
upon any period of limitation, whether prescribed by
regulation or applicable law or contract provision.
c. EPE and APS each consent to the entry of an order
by the Court (the "Approval Order") incorporating the terms of
this Agreement and providing that: (i) the terms of this
Agreement are binding upon EPE and APS; (ii) subject to part F(i)
below, any period of limitation that arises from applicable law,
regulation or contract provision that is applicable to the
Released Claims shall be suspended so that the period of
limitation will not expire prior to ninety (90) days after the
date upon which the Assumption Agreement is terminated; and (iii)
the Court will retain jurisdiction over EPE and APS to interpret
and enforce the Approval Order and this Agreement.
<PAGE> 32
D. Upon the execution of this Agreement, EPE and APS
shall cooperate to secure prompt entry of the Approval Order.
EPE and APS stipulate that entry of any order approving and/or
enforcing the terms of this Agreement is necessary and
appropriate (within the meaning of 11 U.S.C. Section 105) to
implement the Plan. APS and EPE reserve the right to contest the
content of such an order other than the Approval Order.
E. EPE and APS agree that each party will be deciding
whether to commence or to forgo commencing litigation to
adjudicate the Released Claims in reliance upon the provisions of
this Agreement.
F. Except as provided in this Agreement, nothing
herein shall be deemed to: (i) revive or make actionable any
claims that, as of the date of execution of this Agreement and
entry by the Court of the Approval Order, are already time-barred
by operation of any applicable limitation period, including, but
not limited to, Section 21.5.2 of the Participation Agreement; or
(ii) cause either APS (individually or as Operating Agent) or EPE
to waive any claim or defense available to either party,
including, but not limited to, those provided under Section
21.5.2 of the Participation Agreement or other applicable
statutes of limitation, other than as provided in this Agreement,
until release occurs pursuant to the terms of the Assumption
Agreement on the Effective Date.
G. If a court of competent jurisdiction determines
that any provision of this Agreement is not enforceable, that
provision may be severed from this Agreement and the remainder of
this Agreement shall remain in full force and effect.
H. This Agreement shall be binding upon the
signatories, their predecessors, successors, assigns, affiliated
entities, parents, subsidiaries and upon Reorganized EPE.
I. This Agreement may be executed in any number of
counterparts.
EL PASO ELECTRIC COMPANY
By: /s/
11/19/93 Its: Vice President and General Counsel
ARIZONA PUBLIC SERVICE COMPANY
By: /s/
11/19/93 Its: Controller
<PAGE> 33
Appendix B
RELEASE
This RELEASE is made as of ________, 199_, by and among
the Participants who are parties to the Arizona Nuclear Power
Project Participation Agreement dated as of August 23, 1973, as
amended by Amendment Nos. 1 through 13 thereto (the
"Participation Agreement"). Capitalized terms used herein and not
otherwise defined herein will have the meanings assigned to such
terms in the Cure and Assumption Agreement dated as of ,
199_ among El Paso Electric Company ("EPE") and the Other Parties
(the "Assumption Agreement").
WHEREAS, this Release is being executed in connection
with and as an integral part of the Assumption Agreement; and
WHEREAS, when used hereinafter, the terms
"Participants" and "Other Participants" will include the Project
Manager and the Operating Agent.
NOW, THEREFORE, in consideration of the mutual
covenants and agreements of the parties contained herein and in
the Assumption Agreement, the parties hereto agree as follows:
1. Release. Except as otherwise expressly stated
herein, each of the Participants hereby releases each other
Participant and each of their respective past and present
subsidiaries, affiliates, agents, officers, directors, and
employees (collectively, the "Released Parties") of and from all
causes of action, suits, claims, and demands whatsoever, in law
or in equity, whether based on contract, tort, or otherwise, and
whether or not based on active or passive negligence or Wilful
Action of any person, which any such Participant or any of their
respective subsidiaries or affiliates ever had or now has on
account of or by reason of any breach or default under the
Participation Agreement arising or existing on or prior to the
Petition Date, arising out of or relating to the outages at any
Generating Unit at ANPP commencing in 1989. Notwithstanding
anything to the contrary herein, nothing herein shall be
interpreted or deemed to release any Participant from any
obligation to perform all of its duties and fulfill all of its
responsibilities under and in strict compliance with the
Participation Agreement, any of the ANPP Assumed Agreements, or
otherwise with respect to ANPP from and after the date of
execution hereof.
2. Effective Date. This Release shall become
effective only upon (a) the execution and delivery hereof by all
parties hereto and (b) satisfaction of all conditions to
effectiveness of the Assumption Agreement and the effectiveness
<PAGE> 34
thereof as provided in paragraph 10 thereof, and, except as
provided below, thereafter this Release shall be binding upon and
inure to the benefit of each of the Participants and the other
Released Parties and their respective successors and assigns.
3. Governing Law. This Agreement will be governed by,
and construed in accordance with, the laws of the State of
Arizona.
4. Execution in Counterparts. This Agreement may be
executed in any number of counterparts.
EL PASO ELECTRIC COMPANY
By:___________________________
Its:__________________________
ARIZONA PUBLIC SERVICE COMPANY
By:___________________________
Its:__________________________
SALT RIVER PROJECT AGRICULTURAL
Attest and Countersign IMPROVEMENT AND POWER DISTRICT
___________________________ ______________________________
Its:_______________________ Its:__________________________
SOUTHERN CALIFORNIA EDISON COMPANY
By:___________________________
Its:__________________________
PUBLIC SERVICE COMPANY OF
NEW MEXICO
By:___________________________
Its:__________________________
SOUTHERN CALIFORNIA PUBLIC
Attest: POWER AUTHORITY
__________________________ By:___________________________
Its:______________________ Its:__________________________
<PAGE> 35
DEPARTMENT OF WATER AND POWER OF
Attest: THE CITY OF LOS ANGELES
___________________________ By:___________________________
Its:_______________________ Its:__________________________
Accepted and Agreed:
CENTRAL AND SOUTH WEST CORPORATION
By:___________________________
Its:__________________________
<PAGE> 1
EXHIBIT D-5
UNITED STATES OF AMERICA
BEFORE THE
FEDERAL ENERGY REGULATORY COMMISSION
Application of )
)
El Paso Electric Company and )
Central and South West Services, Inc., )
as agent for Public Service Company of ) Docket No. TX94-2-000
Oklahoma, West Texas Utilities Company, )
Southwestern Electric Power Company, )
and Central Power and Light Company )
APPLICATION OF EL PASO ELECTRIC COMPANY AND
CENTRAL AND SOUTH WEST SERVICES, INC., AS AGENT FOR
PUBLIC SERVICE COMPANY OF OKLAHOMA,
WEST TEXAS UTILITIES COMPANY,
SOUTHWESTERN ELECTRIC POWER COMPANY,
AND CENTRAL POWER AND LIGHT COMPANY,
FOR THE ISSUANCE OF AN ORDER PURSUANT TO
SECTIONS 211 AND 212 OF THE FEDERAL POWER ACT,
AS AMENDED, AND MOTIONS FOR SUMMARY DISPOSITION
AND FOR THE SETTING OF A TECHNICAL CONFERENCE
El Paso Electric Company (El Paso) and Central and
South West Services, Inc. (CSWS), as agent for Public Service
Company of Oklahoma (PSO), West Texas Utilities Company (WTU),
Southwestern Electric Power Company (SWEPCO) and Central Power
and Light Company (CPL)[1], hereby make application to the
Federal Energy Regulatory Commission (Commission) for the
issuance, pursuant to Sections 211, 212, 306, 307, 308, 309 and
311 of the Federal Power Act, as amended by the Energy Policy Act
____________________
[1] PSO, WTU, SWEPCO and CPL are sometimes referred to herein
as the CSW Operating Companies. El Paso and CSWS, as agent for
the CSW Operating Companies, are sometimes referred to herein as
the Applicants.
<PAGE> 2
of 1992 (P.L. No. 102-486)[2], of an order that requires
Southwestern Public Service Company (Southwestern) to transmit
power and energy between the control areas of El Paso and PSO.
Such transmission service is requested in order that the
Applicants may coordinate their system operations in the
least-cost manner and thereby maximize the benefits of El Paso's
becoming a member of the CSW System.
In accordance with the requirements of Section 211(a)
of the Act, at least 60 days prior to the date hereof El Paso and
the CSW Operating Companies made a good faith request of
Southwestern that such transmission services be provided on a
non-firm basis beginning on or about January 1, 1995 and on a
firm basis beginning on or about January 1, 1999. In response,
Southwestern has refused either to agree to provide the requested
services or to enter into an agreement on reasonable terms and
conditions to study the extent, if any, to which modifications of
Southwestern's transmission system would be required to enable
Southwestern to provide any or all of the requested services. In
addition, Southwestern has refused to explain its undocumented
assertion that substantial system modifications of Southwestern's
transmission system would be required to provide any of the
requested services and has failed to indicate specifically which
of its system facilities would be overloaded or otherwise
constrained if the requested services, or any of them, were to be
provided. As the justification for its refusals, Southwestern has
____________________
[2] The Federal Power Act as so amended is herein referred to
as the Act.
<PAGE> 3
contended that the Applicants' request for transmission services
is improper because, according to Southwestern, the Commission
has no authority under the Act to order a transmitting utility to
provide transmission service when the purpose for which
transmission service is requested is to effectuate a merger.
Southwestern has also contended that the Applicants' request is
premature. Southwestern has informed the Applicants that
Southwestern will entertain a request for transmission service
only after the Applicants have obtained all regulatory approvals
required for the merger of CSW and El Paso, and El Paso has
emerged from bankruptcy.
Accordingly, the Applicants respectfully request that
the Commission take the actions listed below:
A. issue an initial order in this proceeding finding that:
1. the Applicants have made a good faith request for
transmission service consistent with the Federal Power
Act, as amended, and the Commission's Good Faith
Policy;
2. contrary to Southwestern's unfounded claim, the
Applicants' request for service is not improper;
3. contrary to Southwestern's unfounded claim, the
Applicants' request for service was not premature;
4. Southwestern's response to the Applicants' request for
service was not made in good faith or in accordance
with the Commission's Good Faith Policy; and
5. the public interest will not be served by the
imposition of multiple charges for the "flexible point-
<PAGE> 4
to-point," bi-directional service the Applicants have
requested Southwestern to provide;
B. order Southwestern to attend a technical conference for the
purpose of determining the validity of the studies that the
Applicants have performed and assessing whether additional
studies are required to determine what, if any, system
modifications must be made before Southwestern can provide all of
the requested services;
C. based on the outcome of the technical conference and further
appropriate proceedings pursuant to Sections 211 and 212 of the
Act, issue a proposed order requiring Southwestern to provide up
to 133 MW of transmission service, as more fully described in
this Application; and provide the parties no more than 60 days to
reach agreement on the rates, terms and conditions on which such
services shall be provided; and
D. issue a final order requiring Southwestern to provide the
requested services on the terms to which the parties have agreed
or, failing such agreement, on terms that the Commission finds to
be just and reasonable and in accordance with Section 212 of the
Act.
In support of their Application, the Applicants state
as follows:
THE PARTIES
1. El Paso is a Texas corporation that has its
principal place of business in El Paso, Texas. El Paso is in the
business of generating, transmitting, distributing and selling
electricity to retail and wholesale customers, principally in and
<PAGE> 5
around El Paso, Texas, in an area of the Rio Grande Valley in
west Texas and in parts of southern New Mexico, including the
City of Las Cruces, New Mexico. El Paso also sells electricity
under contracts with wholesale customers located in southern
California and in Mexico. El Paso is an "electric utility" within
the meaning of Section 211 of the Act and a "public utility"
within the meaning of Section 201 of the Act. El Paso is a member
of the Western Systems Coordinating Council (WSCC). El Paso is
interconnected with Southwestern in Artesia, New Mexico at the
site of the Eddy County HVDC Interconnection. The Eddy County
Interconnection has a nominal transfer capability of 200 MW, of
which El Paso owns and is entitled to use 133 MW.[3]
2. Central and South West Services, Inc. is a wholly
owned subsidiary of Central and South West Corporation (CSW), a
registered electric utility holding company. CSWS makes this
filing on behalf of the four CSW Operating Companies. Each of the
CSW Operating Companies is engaged in the business of generating,
transmitting, distributing and selling electricity at retail and
at wholesale. Each of the CSW Operating Companies is both an
"electric utility" within the meaning of Section 211 of the Act
and a "public utility" within the meaning of Section 201 of the
Act.
3. PSO is an Oklahoma corporation that has its
principal place of business in Tulsa, Oklahoma. PSO serves
____________________
[3] El Paso currently purchases 50 MW of Firm power from
Southwestern to back up El Paso's sales of firm power to
Commission Federal de Electricidad. See the attached affidavit
of Frederic E. Mattson. The power Southwestern sells to El Paso
is delivered at the Eddy County HVDC Interconnection.
<PAGE> 6
eastern and southwestern Oklahoma and is interconnected with
other electric utility systems that operate in the Southwest
Power Pool (SPP), including Southwestern. Notably, PSO will
provide transmission service to Southwestern to enable
Southwestern to sell firm power to The Empire District Electric
Company [4], a transaction for which PSO and SWEPCO were both
disappointed bidders.
4. WTU is a Texas corporation that has its principal
place of business in Abilene, Texas. WTU serves parts of central
and west Texas. WTU is interconnected with other electric
utilities that operate in the Electric Reliability Council of
Texas (ERCOT), including CPL. However, part of WTU's service area
is located in the SPP. PSO's generators operate to serve WTU's
loads that are located in the SPP. Such loads are thus included
in the PSO control area. WTU's transmission facilities located in
the SPP are interconnected with transmission facilities owned and
operated by PSO and Southwestern, respectively.
5. SWEPCO is a Delaware corporation that has its
principal place of business in Shreveport, Louisiana. SWEPCO
operates in parts of northwestern Louisiana, northeastern Texas
and western Arkansas. SWEPCO is interconnected with other
electric utility systems that operate in the SPP, including PSO.
6. CPL is a Texas corporation that has its principal
place of business in Corpus Christi, Texas. CPL operates in the
southern portion of Texas and is interconnected with other ERCOT
utilities, including WTU's southern division.
____________________
[4] Public Service Company of Oklahoma, Docket No. ER93746000
(accepted for filing by letter order dated September 29, 1993).
<PAGE> 7
7. Southwestern is a New Mexico corporation that has
its principal place of business in Amarillo, Texas. Southwestern
is a "transmitting utility" within the meaning of Section 211 of
the Act and a "public utility" within the meaning of Section 201
of the Act. Southwestern's principal service areas are located in
west Texas and in eastern New Mexico. Southwestern is a member of
the SPP and its transmission system lies at the western end of
the SPP and of the Eastern Interconnection. To the east,
Southwestern is interconnected to PSO by a 345 KV transmission
line that terminates near the site of the North HVDC
Interconnection [5], which is located at Oklaunion, Texas, and by
a 230 KV line that terminates at PSO's Elk City, Oklahoma
substation [6]. To the west, Southwestern is interconnected with
El Paso and Public Service Company of New Mexico through HVDC
interconnections located at Artesia and Blackwater, New Mexico,
respectively. Thus, while Southwestern's system forms the tail
end of the SPP, Southwestern's system is the only bridge between
the SPP and the WSCC.
____________________
[5] The North HVDC Interconnection was constructed by PSO and
WTU pursuant to the Commission's order entered in Central Power
and Light Company, et al., 17 FERC paragraph 61,078 (1981), reh'g
18 FERC paragraph 61,100 (1982).
[6] As explained in the attached affidavit of Austin M. Tommey,
the 230 kV interconnection was established at Southwestern's
request in 1972 and the 345 kV interconnection was established at
Southwestern's request in 1985. Southwestern also has a 115 kV
interconnection with WTU at WTU's Shamrock substation and a 115
kV interconnection with the West Plains Energy division of
Utilicorp at Liberal, Kansas.
<PAGE> 8
8. In its own right, Southwestern has not filed with
the Commission any rate schedule under which it offers or
provides transmission service. In fact, Southwestern has refused
to provide transmission service to others, claiming that it is
unable to move power from east to west across its system into the
WSCC [7]. Furthermore, Southwestern is a participant in the
Western System Power Pool Agreement and, as indicated in the
informational filing made in Docket No. ER91-195-000 on July 30,
1993, Southwestern has made substantial sales into the WSCC for
its own account while refusing to others the right to send
electricity across Southwestern's system into the WSCC. According
to Southwestern's Form 1 reports, in 1991 and 1992 nearly 50% of
Southwestern's total non-firm, off-system energy sales were those
it made into the WSCC.
THE MERGER AGREEMENT
9. El Paso is currently operating its electric
utility business as the debtor in possession of its corporate
assets pending the reorganization of El Paso's business pursuant
to Chapter 11 of the United States Bankruptcy Code, 11 U.S.C.
Subsection 101 et seq. (1988) (Code). On August 27, 1993, El Paso
filed with the U.S. Bankruptcy Court for the Western District of
Texas, Austin Division, El Paso's Modified Third Amended Plan of
Reorganization (Plan). The Plan contemplates a reorganization of
El Paso's business pursuant to which El Paso will become a wholly
owned subsidiary of CSW. [8]
____________________
[7] See attached Affidavit of Frederic E. Mattson.
[8] Confirmation and consummation of a plan of reorganization
are the principal objectives of a Chapter 11 reorganization case.
(continued...)
<PAGE> 9
10. On September 15, 1993, the Bankruptcy Court
approved a Disclosure Statement that describes the Plan and is
currently being used in the solicitation of votes accepting or
rejecting the Plan by holders of claims against, or interests in,
El Paso. On or about December 6, 1993, the Bankruptcy Court is
expected to rule on whether the Plan may be confirmed.[9]
11. On September 17, 1993, the Bankruptcy Court issued
a written order that denied a motion filed by Southwestern
seeking permission to file a competing plan of reorganization.
The Bankruptcy Court denied the motion based on its finding that
there existed no creditor support for Southwestern's plan and
that to permit Southwestern to file a competing plan would merely
delay the reorganization of El Paso, contrary to the purposes of
Chapter 11 of the Code.
12. At the heart of the Plan lies an Agreement and
Plan of Merger among El Paso, CSW and CSW Sub, Inc. (a wholly
owned subsidiary of CSW formed for the purpose of effecting CSW's
acquisition of El Paso), dated as of May 3, 1993 and amended on
May 18, 1993 (Merger Agreement). A copy of the Merger Agreement
____________________
[8](...continued)
reorganization case. A plan of reorganization sets forth the
means for satisfying claims against, and interests in, a debtor.
Confirmation of a plan of reorganization by the Bankruptcy Court
makes the plan binding upon the debtor, any issuer of securities
under the plan, any person acquiring property under the plan and
any creditor, or equity security holder, of the debtor. Subject
to certain limited exceptions, the confirmation order discharges
a debtor from any debt that arose prior to the date of
confirmation of the plan and substitutes therefor the obligation
specified under the confirmed plan.
[9] After the Court confirms the Plan, CSW and El Paso will
file with the Commission an application for approval of the
CSW/EL Paso merger pursuant to Section 203 of the Act.
<PAGE> 10
is attached to this Application as Appendix A. At the Effective
Time of the merger, CSW Sub, Inc. will be merged with and into El
Paso and the separate corporate existence of CSW Sub, Inc. will
cease. El Paso will be the surviving corporation and continue its
separate corporate existence under the laws of the State of
Texas. After the merger, El Paso will be a wholly owned
subsidiary of CSW and the fifth electric utility operating
company of the CSW System.
THE REQUEST FOR SERVICE
13. After the merger is consummated, El Paso and CSWS
plan to operate the El Paso system in coordination with the
electric generating and transmission systems of the four CSW
Operating Companies. Such coordination will be carried out in
accordance with the terms of the Restated and Amended Operating
Agreement among CSWS and the CSW Operating Companies, as it will
be amended to join El Paso as a party. As a result of such
coordination, the expanded CSW System will experience lower
electricity production costs than would be experienced if the El
Paso system and the systems of the CSW Operating Companies
continued to be operated separately. El Paso and CSWS have
determined that the least-cost method of coordinating the
operations of the El Paso system and the existing CSW System is
to obtain firm and non-firm transmission services from
Southwestern.[10]
____________________
[10] As described in more detail infra, the Applicants believe
that only minor system modifications of the Southwestern and WTU
transmission systems, if any, will be required in order for the
requested transmission services to be provided without unduly
impairing the continued reliability of any other utility.
<PAGE> 11
14. Consequently, on May 10, 1993, Mr. E.R. Brooks,
Chairman of the Board and Chief Executive Officer of CSW
delivered, by hand, to the Chairman and Chief Executive Officer
of Southwestern, Mr. Bill D. Helton, a letter from the Chairman
of the Board, Chief Executive Officer and President of El Paso,
Mr. David H. Wiggs, Jr., requesting that such transmission
services be provided to El Paso and the CSW Operating Companies.
(A copy of this letter is attached as Appendix B.) The letter
explained:
As a participant in the coordinated central
dispatch of the CSW System, [El Paso] will
engage in internal economy energy
transactions with the Operating Companies.
For these transactions, [El Paso] will
require non-firm transmission service which
may be interrupted by [Southwestern] under
certain conditions. At times in the future,
[El Paso] anticipates that it will also
require firm transmission service from
[Southwestern] in order to import firm
capacity and associated energy provided by
the Operating Companies or to export firm
power and associated energy to one or more of
the Operating Companies. [El Paso] does not
now anticipate that such firm transmission
service would be required in any year in
amounts in excess of the 133 MW capacity of
the Eddy County Tie owned by [El Paso].
[El Paso] will require non-firm transmission
service as early as January 1, 1995. [El
Paso] does not now expect to require firm
service until January 1, 1999. The exact
date of commencement of service will depend
upon [El Paso's] obtaining the necessary
regulatory and other approvals needed to
consummate CSW's acquisition of control of
[El Paso].
The power and energy to be delivered by
[Southwestern] to [El Paso] will be delivered
to the [Southwestern] system at
[Southwestern's] points of interconnection
with Public Service Company of Oklahoma (PSO)
and the northern division of West Texas
<PAGE> 12
Utilities Company (WTU). The existing points
of interconnection between [Southwestern] and
the Operating Companies are listed on
Exhibit A hereto. The power and energy thus
received by [Southwestern] will then be
delivered across the [Southwestern]
transmission system to [Southwestern's]
interconnection with [El Paso] at Eddy
County. Power and energy to be delivered
from [El Paso] will be delivered to the
[Southwestern] system at Eddy County for
redelivery to [Southwestern's] points of
interconnection with PSO and WTU.
This description of the firm and non-firm transmission services
El Paso and the CSW Operating Companies have requested
Southwestern to provide is referred to herein as the "Request for
Service."
SOUTHWESTERN'S INITIAL RESPONSE
15. By letter dated June 4, 1993, Southwestern
rejected the Request for Service on two grounds. (A copy of this
letter is attached as Appendix C.) First, without citation of
authority, Southwestern charged that the Request for Service was
somehow "improper":
Southwestern does not believe that the
Federal Power Act revisions require mandatory
transmission service when the intended
purpose is to effectuate a merger between
non-interconnected parties over the territory
of a third party.
Appendix C at 1.
16. Second, Southwestern claimed that the Request for
Service had been made prematurely and, on that basis,
Southwestern refused to participate in a joint study of
Southwestern's ability to provide the requested services,
contending that such a study "would constitute a hypothetical
<PAGE> 13
exercise in the event that EPE and CSW do not successfully effect
emergence from bankruptcy or they do not obtain required
regulatory approvals for their proposed merger." Appendix C at 1.
17. Writing for El Paso and the CSW Operating
Companies, Mr. Wiggs responded by letter dated June 29, 1993.
(Copy attached as Appendix D.) In that letter, Mr. Wiggs
reiterated the Request for Service and explained that the reasons
offered by Southwestern for rejecting the Request for Service had
no basis in either the provisions of the Act or in the
legislative history of the Energy Policy Act of 1992. Appendix D
at 1-2.
18. With his June 29 letter, Mr. Wiggs enclosed a list
that showed by maximum transfer, year and direction of flow the
firm power transfers between the El Paso and PSO control areas
that El Paso and the CSW Operating Companies expect to make
beginning in 1999 and for which they require firm transmission
service on the Southwestern system. The June 29 letter also
explained that the extent to which EPE and the CSW Operating
Companies would require non-firm transmission service to make
energy transfers between the El Paso and PSO control areas would
depend upon the conditions prevailing from time to time but that,
because the transfers would be interruptible, no system
modifications would be required to accomplish such transactions.
Appendix D at 2.
19. Southwestern's June 4 response to Mr. Wiggs' May
10 letter had not come as a surprise. Since the fall of 1992,
Southwestern has been CSW's principal rival for the acquisition
<PAGE> 14
of El Paso. To El Paso, and those having claims against or
interests in El Paso, Southwestern's proposals for reorganizing
El Paso were less attractive than CSW's proposals. Consequently,
in the spring of 1993, Southwestern began an aggressive campaign
of actively disparaging CSW's proposal to merge with El Paso in
written and oral communications with representatives of, and
advisors to, holders of claims against, or other interests in, El
Paso's bankrupt estate.
20. One of Southwestern's principal strategies of
disparagement has been its claim that CSW must spend upwards of
$150,000,000 for new transmission lines in order to coordinate
the operations of El Paso with those of the CSW Operating
Companies. See Appendix E. Southwestern and its advisors have
long recognized that CSW would be required to fund substantial
new line construction only if El Paso and the CSW Operating
Companies could not obtain wheeling arrangements with
Southwestern. Consequently, several months before the Request for
Service was made, Southwestern and its advisors created from
whole cloth the theory that, at least in this case, Southwestern
is somehow exempt from the Commission's jurisdiction under
Section 211 of the Act, as amended:
Any . . . wheeling arrangement would require
a negotiated agreement between [Southwestern]
and C&SW; it could not be ordered by the
FERC. . . . In addition, we are advised that
the existing interconnections and most likely
transmission capacity of [Southwestern] are
capacity constrained and probably could not
sustain long-term flows of power between C&SW
and El Paso without adversely affecting
service and reliability on the [Southwestern]
system.
<PAGE> 15
Appendix E, Memorandum of Cahill Gordon & Reindel dated March 1,
1993 at 3-4 (emphasis supplied).
21. On July 21, 1993, the Commission published in the
Federal Register its "Policy Statement Regarding Good Faith
Requests for Transmission Services and Responses by Transmitting
Utilities Under Sections 211(a) and 213(a) of the Federal Power
Act, as Amended and Added by the Energy Policy Act of 1992" (Good
Faith Policy). 58 F.R. 38964 (1993).
22. On July 22, 1993, Southwestern responded to Mr.
Wiggs' June 29 letter. (Copy attached as Appendix F.) In that
letter, Southwestern's Chairman reiterated Southwestern's
position that the Request for Service was both premature and
improper, but failed once again to offer any legal basis to
support this claim.
23. In the July 22 letter, Southwestern claimed to be
willing to conduct transmission studies "to analyze when and how
the requested transmission services can be provided." However,
Southwestern made clear that its willingness to study the Request
for Service was without prejudice to Southwestern's position
"that a request for transmission service is improper when the
intended purpose is to effectuate a merger between non-connected
parties over the territory of a third party." Appendix F at 1.
24. In the July 22 letter, Southwestern argued that
its stated willingness to perform transmission studies was
"consistent with" the Good Faith Policy. Appendix F at 1-2. At
the same time Southwestern also asserted that:
. . . Southwestern's interconnections with
the SPP are not capable of importing firm
<PAGE> 16
power into Southwestern's system and maintain
system reliability. Southwestern's . . .
system was not designed to wheel bulk power
between the eastern and western grids of the
United States. The 230 kV Nichols/Elk City
transmission line was built in 1972 to sell
power to PSO in western Oklahoma. The 345 kV
Tuco/Oklaunion transmission line was built in
1985 to augment then existing
interconnections and insure reliability to
Southwestern's customers during the loss of a
Tolk Station Unit.
Appendix F at 2.
25. Southwestern has not informed El Paso and the CSW
Operating Companies that Southwestern can or will provide any
part of the requested services. Yet, neither in the July 22
letter nor at any time since has Southwestern identified the
specific constraints that prevent it from providing all or part
of the requested services or explained how specific constraints
prevent it from providing the requested services or the desired
level of firmness. Moreover, Southwestern did not include with
its July 22 letter, and since that time has not provided to the
Applicants, any studies, computer input or output data, planning,
operating and other documents, work papers, assumptions or any
other material that forms the basis for Southwestern's assertion
that it cannot provide the requested service on its existing
system.[11] Compare Good Faith Policy, 58 F.R. at 38,970.
26. Southwestern attached to its July 22 letter the
terms and conditions on which it claimed to be willing to perform
____________________
[11] As explained below, the only information that Southwestern
has provided the Applicants consists of a load flow study done
for a different purpose in 1989, which Southwestern itself claims
is inadequate for evaluating the Request for Service. See
Appendix K at 3.
<PAGE> 17
system studies. Such terms and conditions are unreasonable and
appear consciously designed to create continuing controversy and
thereby prevent agreement with respect to the Request for
Service.
27. For example, Southwestern quoted an estimated cost
for the study of $260,000, of which $156,000 was primarily for
the purchase of engineering software and $104,000 was for labor.
Although Southwestern owns software (Electrocon), which can be
used for load flow studies, Southwestern demanded that the
Applicants purchase for Southwestern new software (Power
Technologies, Inc.'s (PTI) PSS/E software), which Southwestern
has stated it intends to keep once the studies are completed.
Southwestern made this demand even though the software in
question can be made available to Southwestern far less
expensively in a number of ways. PSO owns the PSS/E software and
has offered to make it available for use in doing the necessary
studies. Alternatively, PTI, the vendor of the software, will
rent the software to Southwestern on an hourly basis. See
attached Affidavit of Harrison K. Clark at 2. Finally, the SPP
administrative office owns the software and will perform load
flow studies for SPP members on a time-available basis.[12]
28. The $260,000 quoted by Southwestern for a system
study is not a limit on the cost. In addition to the $260,000 for
____________________
[12] For example, in April 1989 Southwestern asked the SPP
staff to run transfer capability studies. In response to the
Applicants' questions regarding the basis for Southwestern's
claim that its system is constrained, Southwestern provided the
Applicants a summary of such studies at a September 28, 1993
meeting discussed below.
<PAGE> 18
computer software and internal labor expense, Southwestern
proposes also to bill the Applicants for the following:
A. outside services "such as consultants, legal,
clerical, and other contract services";
B. Southwestern's aviation equipment and
personnel;
C. materials and supplies;
D. travel, lodging, meals and associated
expenses;
E. any internal Southwestern data processing
charges not included in the $156,000; and
F. any other direct expenses "not itemized
above."
See Appendix B to Appendix F. In other words, Southwestern has
demanded that the Applicants give it a blank check to incur
expenses in the name of studying the Request for Service.
Southwestern has further demanded that the Applicants reimburse
Southwestern for such expenses by monthly electronic funds
transfers. However, Southwestern reserves to itself the right to
discontinue the study if payment is not made in 10 days, whether
or not the expenses it incurs are reasonable or necessary.[13]
29. In addition to its demand for carte blanche,
Southwestern also demanded that the Applicants answer each of 30
questions before commencing a study. In part, the questions asked
for information that had already been provided in the May 10 and
June 29 letters. In part, the questions asked for information
that has absolutely no relevance to whether, how and
____________________
[13] For example, Southwestern might well ask its legal
counsel, as the initial step in a "study" of the Request for
Service, to prepare an exhaustive memorandum detailing the
legislative history of the amendments to the Act effected by the
Energy Policy Act that supports the view that Southwestern cannot
be ordered to provide the requested services, bill the Applicants
for the attendant legal fees and then refuse to continue the
study when the Applicants refused to pay the costs so billed
because they were unnecessary to a proper study.
<PAGE> 19
when Southwestern could provide the requested services.[14] In
part, the questions asked for details that might be useful in
finding excuses for not providing the requested services, but
which were not at all required to answer the basic question
presented by the Request for Service--whether Southwestern's
existing transmission system can accommodate 133 MW transfers
between the El Paso and PSO control areas.[15]
30. To assure that transmission studies would be
conducted promptly and efficiently, using reasonable assumptions
and appropriate study methods, El Paso and the CSW Operating
Companies had, in the Request for Service, asked "to participate
substantially in the study, to be kept informed of the process
and to participate in making interim decisions as to study
methods and processes and the selection of outside
consultants."[16] Appendix B at 3. In response, Southwestern's
July 22 letter offered only the following:
____________________
[14] For example, Southwestern contended that it could not
conduct the required studies unless the Applicants first
explained whether the Applicants had investigated building new
transmission lines between El Paso and any of the CSW Operating
Companies (question 27) and provided the basis for the estimate
contained in the May 10 letter from Mr. Wiggs to Mr. Helton that
a rebuild of the existing 230 kV tie between PSO and Southwestern
would cost $40,000,000 (question 20). Obviously, these questions
were not asked in good faith pursuit of the Request for Service,
but as a means of discovering facts for use in later litigation
and as a justification for further delay.
[15] In other words, Southwestern consciously ignored the
Commission's admonition that "information clarifications sought
by the utility should be limited to the specific services being
requested." Good Faith Policy, 58 F.R. at 38967.
[16] See Northeast Utilities Service Company, 62 FERC paragraph
61,294 at 61,916 (1992) (utility requesting transmission service
should be permitted to play a substantial role in studying system
changes required to provide service).
<PAGE> 20
Southwestern shall provide to EPE/CSW the
study and related documentation, subject to
suitable non-disclosure agreements where
necessary, within 120 days following receipt
of all the information referred to in
paragraph 5 [answers to Southwestern's 30
questions "and such additional information
reasonably requested by Southwestern to
perform the study"].
See Exhibit A to Appendix F at 2.
THE APPLICANTS' STUDIES
31. In his June 29 letter, Mr. Wiggs had made it clear
that, if Southwestern continued its tactics of evasion and delay
in response to the Applicants' Request for Service and their
request that Southwestern agree to engage in a joint system
study, CSW and El Paso would go forward on their own to determine
whether there exist constraints on Southwestern's system that
could prevent Southwestern from providing the requested services.
Mr. Wiggs further explained that:
[El Paso] and CSW believe that data available
to PSO as a member of the Southwest Power
Pool will provide an adequate data base for
such studies. However, if [Southwestern]
believes that it has other data that if
available to CSW and [El Paso] would enable
the preparation of more accurate studies, CSW
and [El Paso] request that [Southwestern]
make such data available to them as soon as
possible.
Appendix D at 3. In its July 22 letter, Southwestern did not
indicate that it had such data or that access to such data would
be required for the preparation of valid transmission system
studies.[17]
____________________
[17] In its order adopting Form 715, the Commission found that
regional reliability council power flow data are generally
adequate to perform preliminary studies of the ability of a
(continued...)
<PAGE> 21
32. However, Southwestern's July 22 letter, coupled
with its original June 4 rejection of the Request for Service,
served to convince the Applicants that Southwestern had no
intention of cooperating in a good faith determination of whether
Southwestern's existing system would be capable of providing all
or part of the requested services or what system modifications
would be required for all of the requested services to be
provided. Consequently, the Applicants, under the guidance and
oversight of Mr. Harrison Clark of PTI, an acknowledged expert in
conducting transmission system capability and stability studies,
undertook to perform the required studies using base case data
Southwestern had provided to the SPP and the West Central
Subregion of the SPP. Those studies are discussed in the attached
affidavits of Mr. Clark and Austin M. Tommey of PSO. Attached to
Mr. Tommey's affidavit is a listing of the studies the Applicants
performed to determine what system modifications, if any, would
be needed in order for Southwestern to provide the requested
services, and output summaries and plots of the listed studies.
The studies were conducted at a cost of approximately $55,000.00,
including Mr. Clark's fees.
33. The Applicants' power flow, transfer capability
and transient stability studies indicated only that minor system
modifications may be required in order for Southwestern to
____________________
[17](...continued)
transmitting utility to provide transmission services. "New
Reporting Requirement Implementing Section 213(b) of the Federal
Power Act and Supporting Expanded Regulatory Responsibilities
Under the Energy Policy Act of 1992, and Conforming and Other
Changes to Form No. FERC-714," 58 F.R. 52420, 52435 (Oct. 8,
1993).
<PAGE> 22
provide all the requested services. Such modifications, if needed
at all, would consist of upgrading of autotransformers on WTU's
system at the Shamrock interconnection between Southwestern and
WTU, upgrading of autotransformers at Southwestern's Eddy County
and Tuco substations and installation of capacitor banks to
provide voltage support at the Oklaunion, Tuco and Shamrock
substations. The Applicants' studies that modeled these
improvements showed that Southwestern's system could accommodate
transfers of 133 MW between the PSO and El Paso control areas in
either direction of flow while maintaining transfer capability
adequate to sustain reliable system operations in accordance with
applicable SPP Reliability Criteria.[18]
34. The studies also indicated that there are no
limiting facilities on the systems of other transmitting
utilities that would prevent Southwestern from providing the
requested services in accordance with governing SPP Reliability
Criteria. See attached Affidavit of Austin M. Tommey at 7-8. This
is what one would expect given the location of the PSO,
Southwestern and El Paso control areas, and the fact that
Southwestern's principal interconnections in the SPP are with
PSO.
____________________
[18] As explained by PTI's Mr. Clark, the study findings as to
Southwestern's transformer capacity rest on the conservative
ratings that Southwestern as ascribed to the autotransformers
located at its substations and that, in the studies, such
autotransformers appear to overload even under normal conditions.
See attached Affidavit of Harrison K. Clark at 6.
<PAGE> 23
DISCUSSION OF THE STUDIES WITH SOUTHWESTERN
35. On August 19, 1993, E.R. Brooks, Chairman of CSW,
wrote to Southwestern's Chairman Helton in response to
Southwestern's July 22 letter and the study conditions that
Southwestern had proposed. (Copy attached as Appendix G.) In his
letter, Mr. Brooks explained why El Paso and the CSW Operating
Companies considered such conditions to be unreasonable and,
notwithstanding Southwestern's claim to the contrary, to be not
at all consistent with the Good Faith Policy. Mr. Brooks
disclosed that El Paso and CSW had run the necessary load flow
and transient stability studies and had determined, contrary to
the impression that Southwestern had left with PSO in discussions
held in 1989, "that the required system fortifications are not
nearly as substantial as we had earlier believed."[19] Appendix G
at 4.
____________________
[19] In October 1989, Southwestern invited PSO and other
utilities operating in the West Central Subregion of the SPP to
discuss further strengthening Southwestern's interconnections.
At that time, Southwestern provided to PSO and the other
utilities present the results of load flow studies Southwestern
had completed. Based upon results obtained from such load flow
studies, Southwestern indicated at the time that the construction
of additional 345 kV transmission line segments would increase
Southwestern's transfer capability with other SPP utilities and
have the effect of removing existing constraints on
Southwestern's ability to transfer power across its system.
Based on these and earlier discussions with Southwestern the
Applicants assumed in their preliminary analyses that adding a
new 345 kV transmission link between PSO and El Paso would be
necessary in order to permit Southwestern to provide the
requested services. As discussed below, later, more
comprehensive studies showed that any required system
modifications are far less substantial than the Applicants had
initially assumed. See attached Affidavit of Austin M. Tommey
at 8.
<PAGE> 24
36. In light of the fact that CSW and El Paso had
already performed appropriate studies using information that
Southwestern had provided for regional planning purposes and
those studies had indicated that the Request for Service could be
met without building new transmission lines on Southwestern's
system or making other significant system modifications, Mr.
Brooks suggested that the next sensible step would be for the
parties' planning engineers to meet and discuss the CSW/El Paso
studies and any relevant Southwestern studies, and "to determine
what further studies, if any, would be needed for Southwestern to
reach the conclusion that the requested services can be
provided." Appendix G at 5.
37. On August 27, 1993, Southwestern wrote its
response. (Copy attached as Appendix H.) Southwestern disputed
Mr. Brooks' assertion that Southwestern's study proposal was
unreasonable, but agreed to meet to examine and discuss CSW's
transmission studies. Once again, however, Southwestern was quick
to point out that its "agreement to review the studies'
assumptions and results does not change our position that the
request for transmission service is premature, incomplete and
improper." Appendix H at 1.
38. As to the results of the Applicants' studies,
Southwestern asserted:
Southwestern is doubtful that your studies
fully take into account the constraints and
contingencies which would affect reliable
operation of Southwestern's electrical system
and the future needs of Southwestern's
customers.
<PAGE> 25
Appendix H at 1. As to Mr. Brooks' complaint that Southwestern
had rejected the idea of performing joint studies, Southwestern
contended that Mr. Brooks had misstated Southwestern's proposal
and "explained" that:
Our proposal clearly requests your
information and studies. Our study results
will then be forwarded to you. There are no
requirements that CSW or [El Paso] engineers
be involved in "joint" transmission studies
of Southwestern's electrical system. . . .
It is necessary for Southwestern to analyze
its own system requirements based on our own
knowledge of our system and the needs of our
customers. We simply request you to exchange
the required detailed information so that
Southwestern can perform the detailed studies
that are essential for a power transfer of
this magnitude.
Appendix H at 2. Southwestern Chairman Helton also stated that
Southwestern's Vice President--Engineering and Operations, David
M. Wilks, would call to arrange an agreeable time for a meeting.
39. A week passed before Mr. Wilks called. Then, he
said his schedule would not permit a meeting to occur until
September 28, a full month after Southwestern's August 27 letter.
40. After unsuccessfully attempting to persuade Mr.
Wilks to meet at an earlier date and to meet in Amarillo where
any studies that Southwestern might have done with regard to the
Request for Service would presumably be located, El Paso and CSW
agreed to meet with Southwestern on September 28, 1993 and, at
Mr. Wilks' insistence, in CSW's Dallas offices.
41. On September 28, 1993, a meeting of Southwestern,
CSW and El Paso representatives was convened at CSW's Dallas
offices. The agenda for the meeting is attached as Appendix I.
<PAGE> 26
42. At the meeting, CSW representatives went over the
Request for Service to ensure that Southwestern correctly
understood the nature of the services that the Applicants are
seeking.[20] The CSW representatives also explained the load
flow, transfer capability and stability studies they had
performed and the results of those studies, which indicated that
no substantial modifications to the Southwestern system are
required in order to provide all of the requested services. See
Exhibit E to the attached Affidavit of Austin M. Tommey.
43. At the meeting, Southwestern explained that it had
done no studies in response to the Request for Service.
Southwestern further admitted that, in refusing past requests for
east to west transfers (SPP to WSCC) across its system, it had
"relied on its operating experience," not on definitive
transmission system studies. Southwestern also revealed that its
"Electrocon" software was not capable of performing stability
studies of the kind that the Applicants had performed.
44. The meeting then turned to a discussion of the "30
questions" appended to Southwestern's July 22 letter. Although
Southwestern acknowledged that it had previously received the
answers to certain of the questions, it refused to acknowledge
that it could undertake the necessary studies without answers to
all the questions.
45. The participants in the meeting then discussed the
conditions under which Southwestern would perform studies.
____________________
[20] It was clear from the meeting that Southwestern had no
misunderstanding of what the Applicants have asked Southwestern
to do.
<PAGE> 27
Southwestern continued to insist that it was appropriate for El
Paso and the CSW Operating Companies to fund Southwestern's
acquisition of the PSS/E software, which Southwestern's
representatives acknowledged they planned to keep for their own
internal uses. However, in response to the Applicants' view that
Southwestern's position was unreasonable, Southwestern agreed to
consider using its existing Electrocon software for transfer
studies and hiring a consultant to perform stability studies. As
to the matter of performing joint studies, Southwestern continued
to insist that performing studies regarding the use of its
transmission system was "our responsibility." According to
Southwestern, the role of the Applicants would be simply to
furnish the information Southwestern determined was needed to
perform the studies and to receive the results of the studies
once they were completed. Southwestern also insisted that to
complete the necessary studies would take no less than 120 days
from receipt of a signed study agreement and all data that
Southwestern determined to be needed to perform studies.
46. At the conclusion of the meeting, the Applicants
asked Southwestern's representatives to reconsider Southwestern's
position and to determine whether it could agree to the following
study ground rules:
* representatives of Southwestern, El Paso
and CSW would meet to review and agree
on study case definitions and
assumptions;
* representatives of Southwestern, El Paso
and CSW would meet to discuss and
determine the system reliability
criteria to be used in assessing the
Request for Service;
<PAGE> 28
* representatives of Southwestern, El Paso
and CSW would meet during the course of
the study to review work product and to
discuss interim results; and
* El Paso and CSW would have complete
access to computer input, output study data,
planning and operating data and
study workpapers so that, among other
things, CSW and El Paso could replicate
study results.
Southwestern agreed to reconsider its position and to telephone a
representative of the Applicants with Southwestern's response by
the close of business on Thursday, September 30, 1993. The
Applicants memorialized their request and Mr. Wilks' agreement to
respond by that time in a letter dated September 29, 1993,
addressed to Mr. Wilks. (Copy attached as Appendix J.) In
addition, pursuant to the Good Faith Policy, CSW and El Paso
requested that within 10 days Southwestern provide them with:
1. an identification of the specific
constraints that prevent Southwestern
from providing any or all of the
requested services;
2. an explanation of how such constraints
prevent [Southwestern] from providing
the requested services or the desired
level of firmness; and
3. all studies, computer input and output
data, planning, operating and other
documents, workpapers, assumptions and
other materials that formed the basis
for [Southwestern's] conclusions
regarding such constraints.
Appendix J at 2-3.
47. On October 4, 1993, Mr. Wilks responded in
writing. (Copy attached as Appendix K.) Mr. Wilks said that
Southwestern would be "discussing with qualified consultants"
performing studies using Southwestern's present software and
<PAGE> 29
using a consultant for "the subjects of which our software is
inadequate." Appendix K at 1-2. Mr. Wilks also stated that
because "Southwestern is a small company and does not have the
staff and resources to accomplish the complete analysis required
to assure no harm to Southwestern's customers," it could not
perform a complete analysis in 60 days, as El Paso and CSW had
requested. Appendix K at 2. In response to the Applicants'
request to participate substantially in the system studies to be
performed by Southwestern, Mr. Wilks explained that "Southwestern
will give you access to the information that you have requested
to the extent that the information is not competitively
sensitive" but "[t]hat said, Southwestern nonetheless will have
the sole responsibility for running the study." Appendix K at 3.
As to the request made by the Applicants for the basis for
Southwestern's assertion that the constraints on its system would
prevent its providing the requested services, Mr. Wilks advised:
As you are aware, during the meeting we not
only gave you our 1989 Transfer Capability
study showing the constraints, but we also
answered all of your questions with regard to
the study or the constraints.[21] If you have
any more specific questions, Southwestern
will answer them. Please be advised,
however, that this study was performed in
1989 for a different purpose and Southwestern
must conduct a new study to determine the
specific problems and needs which will arise
because of your transmission request. As to
your boilerplate request for information, we
will send you all of that information to the
____________________
[21] In response to the Applicants' questions regarding the
nature of the constraints that would prevent Southwestern from
providing the requested service, Southwestern pointed only to its
1989 study and referred to its "operating experience." In short,
Southwestern fell far short of providing complete answers to the
Applicants' questions.
<PAGE> 30
extent that the information is not
competitively sensitive as soon as the work
is completed.[22]
Appendix K at 3.
48. Mr. Wilks followed his October 4 letter with a
letter dated October 6, 1993. (Copy attached as Appendix L.)
Wilks' October 6 letter largely repeated matters contained in the
October 4 letter. However, Southwestern finally agreed that the
"critical studies" (the power flow, power transfer and stability
studies) could be completed within 60 days and suggested that the
cost of a consultant to perform the studies which Southwestern
was incapable of performing using its existing software[23] would
be about $150,000. Appendix L at 2. Interestingly, this is about
the same amount that Southwestern had sought for the purchase of
the PSS/E software, or nearly three times the internal and
consulting costs the Applicants incurred to study the impact on
Southwestern of performing the requested services.
49. The Applicants concluded that Southwestern's
letters of October 4 and October 6 raised as many questions as
____________________
[22] In other words, although Southwestern has claimed that
system constraints prevent it from providing any part of the
service that the Applicants have requested, Southwestern cannot
identify the constraints or provide any empirical basis for its
assertions until "the work" has been completed.
[23] Curiously, throughout the September 28 meeting and in its
subsequent letters, Southwestern acted as if it did not have
present direct access to the PSS/E software. However, on October
20, 1993, Southwestern's Mr. Wilks called CSW to ask whether the
Applicants had decided to agree to the study conditions that
Southwestern has proposed. Mr. Wilks explained then for the
first time that in August Southwestern "had taken the risk" of
ordering the PSS/E software from PTI and that he wanted to know
whether the Applicants were going to agree to pay for it or
whether Southwestern should send it back to the vendor.
<PAGE> 31
they answered. Therefore, on Friday, October 8, a representative
of the Applicants called Mr. Wilks to ask a number of questions
that his two letters had prompted. The Applicants' representative
reached Mr. Wilks the following Monday afternoon. Appendix M sets
forth the questions that were asked of Mr. Wilks and his answers.
Although the Applicants' efforts at negotiation with Southwestern
have not been entirely fruitless, as Mr. Wilks' letters of
October 4 and October 6, and his answers to the questions those
letters generated, amply demonstrate, substantial differences
between the parties remain as to what constitute reasonable study
costs and what the parties' respective roles should be in
studying Southwestern's ability to provide the requested
services.[24]
____________________
[24] On November 3, 1993 the Applicants received a revised
study proposal, which in substance is little different from the
proposals contained in Mr. Wilks' letters of October 4 and
October 6. Southwestern reduced its list of questions from 30 to
14 (thereby implicitly acknowledging that its original proposal
was not in accordance with the Good Faith Policy), but even then
a number of the questions sought answers that Southwestern had
long ago been given. The new proposal expressly sets forth as an
alternative to the purchase of software the option of funding
Southwestern's employment of an outside consultant and
Southwestern's estimate of consulting costs has gone down by
$15,000. Otherwise, the November 3 proposal was more of the
same, and, in fact, contained a new condition that the Applicants
agree to Southwestern being the sole judge of the required
facility additions on Southwestern's system. The new proposal
also preserves the positions previously taken by Southwestern
that the Applicants' Request for Service is premature,
incomplete, and improper. At a meeting between CSW's Chairman
Brooks and Southwestern's Chairman Helton on November 4, 1993,
Southwestern repeated its view that Section 211 was inapplicable
in this situation.
<PAGE> 32
MOTION FOR SUMMARY DISPOSITION
50. The Applicants respectfully request that the
Commission rule that their Request for Service was proper and
consistent with the Good Faith Policy that the Commission
promulgated subsequent to the time they made their request and
that Southwestern's failure to respond in good faith to the
Request for Service requires the Commission to take appropriate
action.
51. Mr. Wiggs' May 10 letter (Appendix B) to
Southwestern's Chairman Helton contained all of the then
available, pertinent information listed in the Good Faith Policy
the Commission subsequently promulgated as the components of a
good faith request for transmission service.
52. Mr. Wiggs' letter set forth the identity, address,
telephone number and facsimile number of the parties requesting
service and the persons Southwestern should contact regarding the
request (Component 1) and Mr. Wiggs' specifically stated that El
Paso was an "electric utility," as that term is defined in the
Act (Component 2).
53. Mr. Wiggs' May 10 letter did not contain an
express statement of the Applicants' intentions to satisfy the
"request for transmission services requirement of Section 211(a)
and 213(a) of the Act" (Component 3). However, the June 28 letter
Mr. Wiggs sent to reiterate the Request for Service made clear
that had been the Applicants' intention and acknowledged
that Southwestern had correctly construed the intention of the
May 10 letter in Southwestern's June 4 response.
<PAGE> 33
54. Mr. Wiggs explained in his May 10 letter the
nature of the services requested and indicated the points of
receipt and delivery on the Southwestern transmission system that
would be involved in providing the requested services (Component
4).[25] The May 10 letter also indicated the proposed dates for
initiating firm and non-firm services, respectively (Component
6)[26], and that the maximum transfer the Applicants would seek
to schedule across the Southwestern system (Component 7) would be
133 MW (the transfer capability of El Paso's interest in the Eddy
County HVDC Interconnection).
55. The May 10 letter did not contain a description of
the "expected transaction profile," including hourly delivery
data (Component 8) because such data were not available at the
____________________
[25] No information was given about other utilities likely to
provide transmission service in connection with the "wheel"
through Southwestern (Component 5) because Southwestern is the
only utility that lies between the PSO and El Paso control areas.
[26] No termination date was given because the nature of the
requested services is such that they are expected to go on
indefinitely. The Applicants expect to enter into a transmission
service agreement having a definite term (e.g., 30 years) and
"evergreen" renewal provisions. The Applicants believe that a
"good faith" course of dealing by an electric utility requesting
transmission service and the transmitting utility whose service
is sought is to enter into negotiations regarding the terms on
which the requested service will be provided. Indeed, this is
precisely the process by which the Transmission Service Agreement
between PSO and Southwestern came into being. As the result of
PSO's good faith response to Southwestern's request for the
transmission service, Southwestern now has the transmission
resource it needs in order to sell power to The Empire District
Electric Company over the period 1996-2001. However,
negotiations regarding the Request for Service cannot begin until
Southwestern makes clear its willingness, or is ordered, to
provide the services the Applicants have requested.
<PAGE> 34
time the May 10 letter was written.[27] However, the letter Mr.
Wiggs sent on June 29 (Appendix D) to reiterate the Request for
Service provided to Southwestern the quantities of firm power the
Applicants expect to transmit beginning in 1999, and indicated
that such firm power transactions would be conducted at a
relatively low monthly load factor.
56. The May 10 letter also indicated that both firm
and non-firm services were being requested (Component 9).
Although the May 10 letter did not "specify" the priority of
service the Applicants were willing to accept, or the conditions
under which they are willing to accept interruption or
curtailment, any deficiency in this regard was cured by the
Applicants' August 19 letter to Southwestern. See Appendix G
at 3.
57. The Request for Service was not connected to a
Request for Proposals (Component 10). In the May 10 letter, the
Applicants did not propose specific rates, terms and conditions
for the requested services. However, in their June 29 letter the
Applicants explained in broad outline the rates, terms and
conditions they thought appropriate for the requested services.
The Applicants further addressed this matter in their August 19
letter.
____________________
[27] Hourly load data are not needed in this case to determine
whether Southwestern can provide the requested service.
Southwestern has had the essential facts since May 10 when the
Request for Service was hand-delivered to Southwestern's Chairman
- -- that the Applicants wish to move up to 133 MW between the PSO
and El Paso control areas on a "firm" basis at any time of the
year. With this basic information Southwestern can analyze
whether its existing facilities are capable of providing the
requested services while maintaining reliable service to
Southwestern's native load customers and, if not, what the
limiting facilities are and what action will be required to
remove the limitation.
<PAGE> 35
58. In a sincere effort to reach voluntary agreement
with Southwestern and to avoid the necessity of filing this
Application, the Applicants have continued to provide
Southwestern additional information as it became available
(Component 12). See, e.g., Exhibit E to the attached Affidavit of
Austin M. Tommey. That effort failed, however. Southwestern has
continued to insist that the Commission has no authority to
require Southwestern to provide the requested services and
Southwestern has not yet offered to provide the services
voluntarily even though the Applicants have made clear from the
outset that they will provide appropriate compensation for any
system modifications that Southwestern must reasonably make to
provide the requested services. The only information that
Southwestern has provided the Applicants is a summary of a
transfer capability study Southwestern made in 1989 using 1989
summer peak base case data. See Exhibit F to Mr. Tommey's
Affidavit. That information was provided at the September 28
meeting, nearly five months after the Request for Service was
first made. Then, a week later, Southwestern announced that its
1989 study had little meaning with regard to the Request for
Service because "this study was performed in 1989 for a different
purpose and Southwestern must conduct a new study to determine
the specific problems and needs which will arise because of your
transmission request." Appendix K at 3.
<PAGE> 36
59. Given that the Request for Service was first made
several months before the Commission promulgated its Good Faith
Policy and that the Applicants have furnished Southwestern all of
the information required by the Good Faith Policy that is known
to them, there can be no question that the Applicants made a good
faith request for transmission service at least 60 days before
the date of filing of this application.[28] The Commission
should so rule.
60. The Applicants respectfully request that the
Commission rule that the Request for Service was not improper.
61. The Commission has previously ruled that:
Section 211 of the FPA does not place
any limit on what is meant by "transmission
services," nor does the legislative history
suggest any limitation on the nature of the
wholesale transmission services the
Commission can order under section 211.
Good Faith Policy, 58 F.R. at 38966. Southwestern has repeatedly
claimed that the Commission has no authority to order
Southwestern to provide the requested transmission service to the
Applicants because the service has been requested to enable the
Applicants' efficient post-merger operations. Nothing in the Act
or the legislative history of the Energy Policy Act suggests that
the Commission's authority is limited in this way. As amended,
the Act only requires that the Commission find that an order
requiring transmission service is in the public interest and
____________________
[28] Florida Municipal Power Agency v. Florida Power & Light
Company, Docket No. TX93-4-000 (October 28, 1993)("Florida"),
mimeo at 41 (strict application of the Good Faith Policy to
request for transmission service made before the policy was
issued would not be fair).
<PAGE> 37
that, after giving consideration to consistently applied regional
and national reliability standards, the order would not
unreasonably impair electric systems affected by the order.[29]
62. Ordering Southwestern to provide the requested
services and to make the system modifications needed for all the
requested services to be provided will be in the public interest.
Such an order will permit El Paso to emerge from bankruptcy as a
financially strong member of the CSW System and to capture
hundreds of millions of dollars of cost savings as a result.
Wheeling through the Southwestern system is clearly the least-
cost means of coordinating the system operations of El Paso and
the existing CSW Operating Companies.[30] The next least-cost
alternative would require building a new transmission line from
____________________
[29] Section 211(c)(2) of the Act prohibits the issuance of a
mandatory wheeling order that would require a transmitting
utility to wheel an amount of electric energy that replaces an
amount of electric energy that the transmitting utility had a
contract to sell. Southwestern is presently selling power to El
Paso to back up El Paso's firm power sale to CFE. The CFE sale
terminates on December 31, 1995. El Paso will honor its contract
obligations to Southwestern and none of the energy to be
transmitted to El Paso pursuant to the order the Applicants seek
will replace energy that El Paso is contractually obligated to
purchase from Southwestern.
[30] In its recent Florida decision, the Commission found:
In this case, network transmission service will
allow FMPA and its members greater flexibility to
economically dispatch their generation resources. This
flexibility should give them the opportunity to benefit
ratepayers by using their generation resources more
efficiently. Thus, it is in the public interest for
FMPA and its members to have the opportunity to achieve
greater efficiency savings and ratepayer savings.
Florida, mimeo at 39. These same considerations should lead the
Commission to find that the public interest will be served by
issuing the order sought in this case.
<PAGE> 38
the North HVDC Interconnection to the Eddy County Interconnection
at an estimated cost (in 1993 dollars) of approximately
$120,000,000 (excluding AFUDC).
63. In addition, the Applicants' wheeling payments to
Southwestern will redound to the benefit of Southwestern's
requirements customers who will be relieved of paying that share
of Southwestern's transmission revenue requirements.
64. The Applicants' studies show that, if minor system
modifications are made to the WTU and Southwestern systems, all
the requested services can be provided in a manner that is
consistent with the reliability criteria of the SPP and NERC and
that providing the requested services will not unduly impair the
continued reliability of any utility. See attached Affidavits of
Messrs. Clark and Tommey.
65. This Application and the attached affidavits and
other appendices constitute a strong prima facie case that the
standards for the issuance of a mandatory wheeling order under
Section 211 are met in this case.[31] Consequently, the
____________________
[31] Although the Commission must hold a hearing before making
its findings, the Commission need not convene an oral, trial-type
hearing unless a material issue of fact is in dispute and the
dispute cannot be resolved on the basis of written submissions.
Moreau v. FERC, 982 F.2d 556, 568 (D.C. Cir. 1993). See also
Louisiana Ass'n of Independent Producers and Royalty Owners v.
FERC, 958 F.2d 1101, 1113-15 (D.C. Cir. 1992); Pennsylvania
Public Util. Comm'n. v. FERC, 881 F.2d 1123, 1126 (D.C. Cir.
1989); Cities of Carlisle and Neola, Iowa v. FERC, 741 F.2d 429,
431 (D.C. Cir. 1984); Citizens of Allegan Cty., Inc. v. FPC, 414
F.2d 1125, 1129 (D.C. Cir. 1969). Thus far, Southwestern has
made only unsupported allegations that the Southwestern system
cannot accommodate the Applicants' request for transmission
service without Southwestern' first having to add new or upgrade
existing transmission lines. Southwestern's naked conjecture
does not create a genuine issue of material fact warranting an
(continued...)
<PAGE> 39
Commission should rule that Southwestern's assertion that the
Commission has no authority to issue a wheeling order in the
circumstances presented here is wrong.
66. The Applicants respectfully request that the
Commission rule that the Request for Service was not premature.
67. In its initial response, Southwestern contended
that it did not have to acknowledge the Request for Service until
the Applicants had obtained all required regulatory approvals for
El Paso's merger into CSW and El Paso had emerged from
bankruptcy. There is no basis in the statute or its legislative
history for this contention, either.
68. Indeed, if this delaying tactic is permitted to
stand unchecked, the purpose of expanding the Commission's
authority under Section 211 will be eviscerated. Under
Southwestern's theory, Southwestern could tell an independent
power producer (IPP) proposing to sell power to one of
Southwestern's wholesale customers that Southwestern will not
____________________
[31](...continued)
oral hearing. Citizens for Allegan County v. FERC, 414 F.2d at
1128; Iroquois Gas Transmission Co., 54 FERC paragraph 61,103
(1991). Even if in responding to this Application Southwestern
(for the first time) reveals some evidence that demonstrates that
Southwestern cannot accommodate the Request for Service without
making substantial system modifications, any dispute thus joined
will likely be limited to Southwestern's technical ability to
provide transmission service and will not require an ALJ to
determine a witness' credibility, motive or intent or involve
testimony regarding a past occurrence. Accordingly, any such
dispute may be resolved through additional written submissions
(perhaps developed with the assistance of technical conferences
with the Commission's staff) rather than through a full-blown
trial-type hearing. E.G., Public Service Co. of Indiana, 51 FERC
paragraph 61,367, reh'q, 52 FERC paragraph 61,260, order on
clarify., 53 FERC paragraph 61,131 (1990), appeal dismissed sub.
nom. Northern Indiana Public Service Co. v. FERC, 954 F.2d 736
(D.C. Cir. 1992).
<PAGE> 40
respond to a request for transmission service until the IPP has
obtained all permits for the construction of its generating unit
and a binding commitment from the Southwestern wholesale customer
to purchase power from the IPP. Obviously, an IPP seeking to sell
power must be able to evaluate the cost of transmission service
in making its proposal to a potential customer. By using the
stalling tactics that Southwestern has employed here,
Southwestern could prevent any IPP not directly connected to the
loads served in the Southwestern control area from ever entering
into a viable business arrangement. For this reason the
Commission has said that "a transmitting utility should permit
the party requesting service sufficient time to review agreements
and coordinate multiple stages of joint transactions." Good Faith
Policy, 58 F.R. at 38968.[32]
69. What Southwestern has done here is no different.
By insisting that the Applicants obtain all necessary regulatory
approvals and that El Paso emerge from bankruptcy before the
____________________
[32] Southwestern's contention that a request for transmission
service should not been made until the power supply transaction
in respect of which service is sought is certain to occur should
be contrasted to the response Southwestern received from PSO when
Southwestern requested that PSO provide the firm transmission
service Southwestern needed to bid on The Empire District
Electric Company's (EDE) 1991 request for proposals for the
supply of firm power in the period 1996-2001. Southwestern asked
that PSO negotiate a fixed rate for the required service and all
the other terms and conditions of service before Southwestern had
signed a contract with EDE to make the sale. Southwestern
demanded this course of proceeding so that it would know what
costs and risks it would have to undertake if EDE chose
Southwestern as its power supplier and so that it could maximize
the competitiveness of the price it quoted to EDE. PSO did as
Southwestern asked even though PSO, and, separately, its sister
company SWEPCO, had also been bidders for the EDE firm power
sale.
<PAGE> 41
Applicants can know whether, and at what cost, Southwestern will
provide the requested services, Southwestern seeks to leverage
its monopoly control over its transmission facilities, the only
transmission system that lies between the WSCC and the SPP, to
further Southwestern's rivalry with CSW for the acquisition of El
Paso. This blatantly anticompetitive behavior should not be
countenanced.
70. The Applicants respectfully request that the
Commission rule that Southwestern's response to the Request for
Service was not in good faith or in accord with the Good Faith
Policy.
71. The stalling tactics that Southwestern has
employed are clearly contrary to the Commission's notion of what
constitutes a good faith response to a request for transmission
service. Although Southwestern has asserted that it must make
significant modifications to its transmission system in order to
provide the requested services, to date Southwestern has wholly
failed to:
identify the specific constraints and their
duration that prevent it from providing all
the requested services and explain how these
constraints prevent it from providing all the
requested services or the desired level of
firmness.
Good Faith Policy, Reply component (5)(i). 58 F.R. at 38,970.
Moreover, Southwestern has also failed to provide to the
Applicants:
studies, computer input and output data,
planning, operating and other documents, work
papers, assumptions and any other material
that forms the basis for determining the
constraints.
<PAGE> 42
Good Faith Policy, Reply component (5)(ii)[33]. Id.
72. Although Southwestern has provided the Applicants
with a proposed agreement under which "the Applicant agrees to
reimburse the transmitting utility for all costs of performing
any studies necessary to determine what changes to the
transmitting utility's grid are needed to overcome the constraint
and provide the requested services, their cost, and the estimated
time to complete them," the terms offered by Southwestern are so
unreasonable that no reasonable judge would find the agreement to
have been offered in good faith.
73. The most obvious example of this is the claim
Southwestern makes that the Applicants should furnish it with
expensive power system simulator software, which Southwestern,
had it inquired, as perhaps it did, would have discovered it
could obtain on an hourly basis for a modest rental charge.
Southwestern's claim to such software is all the more
unreasonable because Southwestern expects to keep the software
when the studies are done even though the Applicants have offered
to make PSO's computing facilities, including PSO's copy of the
PSS/E software, available for the purpose of doing the necessary
studies.
74. Southwestern's response to the Applicants'
objections to Southwestern's study proposal has been to provide a
____________________
[33] Applicants surmise that this failure is the result of the
fact that none of such information exists simply because
Southwestern has failed to give good faith substantive attention
to the Request for Service. The only information Southwestern
has provided is a 1989 study which Southwestern has characterized
as useless in evaluating the Request for Service. See Appendix K
at 3.
<PAGE> 43
cost estimate for consulting services which is significantly
higher than the Applicants' own experience would suggest is
reasonable, and which Southwestern has admitted it developed
without seeking quotes from consulting firms.[34] The Applicants
are willing to reimburse Southwestern for reasonable study costs.
However, the blank check that Southwestern seeks is unwarranted
and it would be bad public policy to sanction any such demand by
a transmitting utility.
75. Furthermore, although Southwestern has
acknowledged that the Applicants are better equipped to perform
the necessary studies, Southwestern has been unwilling to share
responsibility for such studies, or even to make substantial use
of the studies the Applicants have already performed. Instead,
Southwestern would incur the unnecessary expense of re-running
the Applicants' studies, and insists on having "sole
responsibility" for specifying study assumptions and the relevant
reliability criteria. The Applicants believe that the Commission
desires that parties requesting transmission service and
transmitting utilities work together in performing engineering
evaluations of transmission requests and that the requesting
utility be a substantial participant in any study.[35]
76. Finally, although Applicants are confident that,
at the very least, in off-peak and shoulder hours Southwestern
____________________
[34] In its revised proposal of November 3, 1993, Southwestern
reduced its estimate of consulting costs from $150,000 to
$135,000. The reduced estimate is still out of line with the
Applicants' experience.
[35] See note 16, supra.
<PAGE> 44
can provide some non-firm transmission service from its existing
system, Southwestern has not informed the Applicants whether any
of the requested services can be provided without building new
facilities. Although the Good Faith Policy suggests that in
circumstances like these the transmitting utility should treat
the request for service as two separate transactions -- "one for
service on existing facilities and the other as a request
involving expansion decisions" -- Southwestern has failed to
acknowledge that at least some of the requested services can be
provided on Southwestern's existing system.
77. Southwestern exercises monopoly control over the
only bridge in the southwest between the Eastern Interconnection
and the WSCC. By withholding information and suggesting that
publicly available information is insufficient for the purpose of
determining whether service can be provided, Southwestern has
apparently sought to further its rivalry for the acquisition of
El Paso by leveraging its monopoly position. Southwestern's
behavior should be seen for what it is and found to be the
antithesis of the good faith response that the Commission's Good
Faith Policy expects transmitting utilities to make.
78. The Applicants have requested bi-directional or
"flexible point-to-point" service and the Applicants respectfully
request the Commission to declare that the public interest will
not allow multiple charges for each direction of flow.
79. In the September 28 meeting, the Applicants
explained to Southwestern that they are willing to pay the higher
of Southwestern's average embedded costs of transmission service
<PAGE> 45
or the incremental costs associated with such service. Applicants
further indicated, however, that because any required system
modifications will be minor, average embedded cost pricing is
likely to be the applicable method. Therefore, the Applicants
indicated that, once any system modifications that are required
to enable Southwestern to provide firm transmission service in
either direction are made, the Applicants are willing to carry
that portion of Southwestern's annual embedded average
transmission costs that is equal to a fraction that has as its
numerator 133 MW and as its denominator the peak load on
Southwestern's transmission system.[36]
80. Pricing the requested services in this manner
would be consistent with the Act and the Commission's evolving
pricing policies. As the Commission held in Florida, the purpose
of the Act "was to encourage the orderly development of plentiful
supplies of electricity . . . at reasonable prices." Florida at
38, quoting, NAACP v. FERC, 425 U.S. 662, 669-70 (1975).
Moreover, the Commission's Florida decision also acknowledged
that, as a general matter, increased flexibility in transmission
service will enhance competition by increasing transmission and
supply alternatives. Consequently the Commission "rejected
multiple point-to-point charges." The Applicants believe that a
similar preliminary finding is warranted in this case.
____________________
[36] Prior to that time, the Applicants propose to pay on an
hourly or daily basis appropriate charges for the transmission
service they actually use.
<PAGE> 46
MOTION FOR TECHNICAL CONFERENCE
81. The Applicants believe that an order requiring
Southwestern to attend a technical conference with the
Applicants, any intervenors and the Commission's advisory staff
would assist the Commission in reaching a prompt and proper
resolution of this Application. Acting as a mediator, the
advisory staff can objectively determine the validity of the
studies the Applicants have performed and assess whether
Southwestern's unwillingness to respond positively to the Request
for Service can be justified. At best, such a technical
conference could lead to a settlement of the dispute between
Southwestern and the Applicants. At the very least, such a
technical conference could narrow the issues with respect to
which a hearing is required. The Applicants, therefore,
respectfully move that the Commission, having ruled on the
matters with respect to which the Applicants have requested
summary disposition, require Southwestern to attend and
participate in a technical conference.
SERVICE
82. A copy of this Application has been served on those
parties required to be served by Order No. 560 of the Commission
issued on October 21, 1993. In addition, a copy of the text of
this Application (without the Appendices) has been served on all
transmitting utilities that are interconnected with Southwestern
or PSO and all electric utilities that are served from the
transmission systems of Southwestern and PSO or WTU's
transmission facilities that are operated in the PSO control
<PAGE> 47
area. Attached as Appendix N is a sworn statement that the
service requirements of Order No. 560 have been observed and as
Appendix O a form of notice of filing suitable for publication in
the Federal Register as required by Order No. 560.
83. All communications and notices with respect to
this filing should be served on:
Clark Evans Downs
Martin V. Kirkwood
JONES, DAY, REAVIS & POGUE
Metropolitan Square
1450 G Street, N.W.
Washington, D.C. 20005-2088
(202) 879-3883
(202) 737-2832 (FAX)
Merrill L. Kramer
AKIN, GUMP, STRAUSS, HAUER
& FELD, L.L.P.
1333 New Hampshire Avenue, N.W.
Washington, D.C. 20036
(202) 887-4444
(202) 887-4288 (FAX)
PRAYER FOR RELIEF
84. Wherefore, premises considered, El Paso Electric
Company and Central and South West Services, Inc., as agent for
the CSW Operating Companies, respectfully request that the
Commission, after an appropriate hearing, require Southwestern to
provide the requested transmission services and to construct any
modifications to Southwestern's transmission system required to
provide such services at rates and on terms and conditions that
<PAGE> 48
the Commission determines to be just and reasonable and in
accordance with the requirements of Section 211 and 212 of the
Act.
Respectfully submitted,
EL PASO ELECTRIC COMPANY
CENTRAL AND SOUTH WEST SERVICES, INC.
as agent for
PUBLIC SERVICE COMPANY OF OKLAHOMA,
WEST TEXAS UTILITIES COMPANY,
SOUTHWESTERN ELECTRIC POWER COMPANY,
AND CENTRAL POWER AND LIGHT COMPANY
By: /s/ CLARK EVANS DOWNS
One of their Attorneys
EL PASO ELECTRIC COMPANY
Merrill L. Kramer
AKIN, GUMP, STRAUSS, HAUER
& FELD, L.L.P.
1333 New Hampshire Avenue, N.W.
Washington, D.C. 20036
(202) 887-4444
Stephen R. Melton
AKIN, GUMP, STRAUSS, HAUER
& FELD, L.L.P.
1900 Pennzoil Place
South Tower
711 Louisiana Street
Houston, TX 77002
(713) 220-5800
(713) 236-0822 (FAX)
CENTRAL AND SOUTH WEST SERVICES, INC.
Clark Evans Downs
Martin V. Kirkwood
JONES, DAY, REAVIS & POGUE
Metropolitan Square
1450 G Street, N.W.
Washington, D.C. 20005-2088
(202) 879-3883
Dated: November 4, 1993
<PAGE>
<PAGE> 1
<TABLE>
<CAPTION>
EXHIBIT D-10
TEXAS JURISDICTIONAL RATE PATH
($000)
1994 1995 1996 1997 1998 1999 2000 2001
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Base Revenues [1] 267,192 297,852 304,892 309,846 347,581 356,237 386,141 397,203
Increase [2] 25,000 -- -- 29,500 -- 20,000 -- 13,000
------- ------- ------- ------- ------- ------- ------- -------
Total Base Revenues 292,192 297,852 304,892 339,346 347,581 376,237 386,141 410,203
Total Revenues 350,370 358,294 369,466 407,760 414,986 448,919 466,051 494,953
<FN>
- --------------------------
[1] Revenues at base rates prior to increase.
[2] The foregoing rate paths are proposed as a reasonable settlement of Reorganized EPE's rates and
are necessarily based upon a variety of assumptions regarding Reorganized EPE's future revenues,
capital expenditures, economic conditions and cost of service, which assumptions are considered to be
reasonable but may or may not be realized in the future. As stated in the Disclosure Statement, the
Debtor and CSW reserve the right to take or seek alternative and different actions and/or relief from
that described herein as they may from time to time deem appropriate. CSW and the Debtor believe that
the amount of the base rate increase to which Reorganized EPE would be entitled under Texas law in
1994 is substantially larger than $25 million; however, to moderate the effect on customers if the
Merger is consummated, the parties to the Merger have offered to limit the initial base rate increase
to $25 million. Applications to obtain the base rate increase to be effective in 1994 will be made in
conjunction with obtaining the regulatory approvals which are a condition to the effectiveness of the
Plan. The base rate increases for 1997, 1999 and 2001 are subject to Reorganized EPE initiating
timely rate proceedings in the future to secure the regulatory approvals for those rate increases.
While Debtor and CSW believe that the subsequent base rate increases in the amounts set forth above
will be justified given current reasonable assumptions of future revenues, capital expenditures,
economic conditions and cost of service under the ratemaking, accounting and regulatory treatments set
forth in paragraphs 2-8 of the Texas portion of this Exhibit G, no assurances can be given that even
if the PUCT acts favorably on the 1994 base rate increase, it will approve the subsequent base rate
increases.
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
NEW MEXICO JURISDICTIONAL RATE PATH
($000)
1994 1995 1996 1997 1998 1999 2000 2001
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Base Revenues [1] 70,567 72,788 80,931 83,148 85,499 87,840 90,181 92,577
Increase [2] -- 6,000 -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------
Total Base Revenues 70,567 78,788 80,931 83,148 85,499 87,840 90,181 92,577
Total Revenues 83,766 93,212 96,412 99,513 101,938 105,636 109,539 113,700
<FN>
- --------------------------
[1] Revenues at base rates prior to increase
[2] Increase assumed to be effective at beginning of year. The foregoing rate paths are proposed as
a reasonable settlement of Reorganized EPE's rates and are necessarily based upon a variety of
assumptions regarding Reorganized EPE's future revenues, capital expenditures, economic conditions and
cost of service, which assumptions are considered to be reasonable but may or may not be realized in
the future. As stated in the Disclosure Statement, the Debtor and CSW reserve the right to take or
seek alternative and different actions and/or relief from that described herein as they may from time
to time deem appropriate. The application to obtain the NMPUC's approval for the base rate increase
to be effective in 1995 will be made in conjunction with obtaining the regulatory approvals which are
a condition to the effectiveness of the Plan.
</TABLE>
<PAGE>
<PAGE> 3
The foregoing rate paths are proposed as reasonable
settlement of Reorganized EPE's rates and are necessarily based
upon a variety of assumptions regarding Reorganized EPE's future
revenues, capital expenditures, economic conditions and cost of
service, which assumptions are considered to be reasonable but
may or may not be realized in the future. Moreover, the
reasonableness and rate treatment of revenues, costs and capital
expenditures are subject to determination by the appropriate
regulatory authorities. As stated in the Disclosure Statement,
the Debtor and CSW reserve the right to take or seek alternative
and different actions and/or relief from that described herein as
they may from time to time deem appropriate. The objective of
these rate paths is to have the Reorganized EPE recover its cost
of service through a moderated approach, based on existing
regulatory approvals, merger with CSW and a cost of service which
incorporates the following rate treatments for, respectively, the
Texas and New Mexico jurisdictions.
TEXAS
1. Conditioned upon the final effectiveness of the initial 1994
$25 million Texas jurisdictional base rate increase (7.6%
based on projected total revenues) and order approving
satisfactory accounting, ratemaking and regulatory
treatments pursuant to paragraphs 2-8 below, Reorganized
EPE will agree not to seek a change in Texas jurisdictional
base rates to be effective prior to January 1, 1997, except
in the case of force majeure events described in Section 13
below, and to adopt the ratemaking treatments in paragraphs
9-13 below in future Texas proceedings. As noted
previously, CSW and the Debtor believe that the amount of
the base rate increase to which Reorganized EPE would be
entitled to under Texas law in 1994 is substantially larger
than $25 million.
2. The repurchase of the Palo Verde Units 2 and 3 leased assets
is found prudent and accorded rate base treatment as
plant-in-service having a reasonable net depreciated
original book cost of at least $615 million as of December
31, 1992. These assets continue to be depreciated at the
rates reasonably determined by the PUCT.
3. An aggregate Texas jurisdictional Mirror CWIP liability of
$95 million is amortized over seven years.
4. The rate moderation plan and accounting deferrals on the
regulatory books of the Debtor are accorded rate recognition
and are amortized to cost of service. Consistent with
current judicial decisions, the unauthorized balance of such
deferrals, other than accounting deferral carrying costs,
are included in rate base.
<PAGE> 4
5. Non-fuel operating and maintenance (O&M) synergies
attributable to the Merger are shared 50%-50% between the
Texas ratepayers and Reorganized EPE in any base rate
proceedings for the 1997, 1999 and 2001 base rate increases.
All savings in fuel costs resulting from the merged
operations will be passed-through to customers consistent
with the normal procedures for recovery of fuel costs.
6. Bankruptcy costs of at least $18 million are recognized for
ratemaking purposes and amortized to cost of service in
equal amounts over ten (10) years beginning when the Plan
becomes effective, with no return on the unamortized
balance. The actual amount of bankruptcy costs found
reasonable and necessary will be subject to adjustment in
the rate proceeding for the 1997 base rate increase.
7. During the 1994-1996 period, Reorganized EPE retains the
profits from sales to Mexico and from any other incremental
off-system sales.
8. The return method is used to calculate federal income tax
expense. The computation of federal income tax expense for
ratemaking purposes is subject to substantial uncertainty
under current Texas law and PUCT practice.
9. Under the rate plan, the costs to Reorganized EPE of
interconnecting Reorganized EPE and CSW will be included in
Reorganized EPE's rates only to the extent that off-setting
benefits -- e.g., fuel, wheeling and/or capacity savings --
can be demonstrated.
10. In the event a rate proceeding is instituted to reduce
Reorganized EPE's base rates under paragraph 42 of PURA
prior to 1997, Palo Verde Unit 3 capital costs, including
depreciation, pursuant to the Palo Verde Unit 3 inventory
percentages set forth in the order in Docket No. 9945 shall
be considered in determining whether Reorganized EPE's base
rate revenue requirement levels will be maintained.
11. Starting in 1997 through 2001, Texas jurisdictional base
rate increases are limited in frequency to not more than
every other year, i.e., 1997, 1999, 2001. The specific
levels of base rate revenue deficiency absorption for each
year (1997-2001) will be proposed in the Reorganized EPE
rate filing and will be intended to limit base rate revenue
increases to 8% of Texas total jurisdictional revenue
requirements based on current projections of annual costs.
12. Reorganized EPE's Texas jurisdiction costs subject to
reconciliation pursuant to Rule 23.23 or any prior PUCT
order are deemed reconciled through the period ended June
30, 1993. The over-recovery amount to be refunded pursuant
to the reconciliation, including nuclear performance
<PAGE> 5
standards, is $5.0 million; in addition, Imperial Irrigation
District revenues of $5.6 million will be refunded. The
refund will be made over the 12 months next following the
effectiveness of the Plan.
13. Conditioned upon the final effectiveness of the initial 1994
$25 million Texas jurisdictional base rate increase and
order containing satisfactory ratemaking, accounting and
regulatory treatments pursuant to paragraphs 1-8 above,
Reorganized EPE will agree not to petition for a change in
base rates to be effective prior to January 1, 1997, except
to address materially adverse effects of federal income tax
law or method calculation changes, legislative or
regulatory actions which have a material adverse impact on
Reorganized EPE's cost of service, material loss of customer
load, unforeseen and unforeseeable events which have a
material adverse impact on Reorganized EPE's cost of
service, or sustained double-digit inflation. Specific
threshold impact levels for the preceding force majeure
events will be proposed in the Reorganized EPE rate filing.
14. During the period from the final effectiveness of the
initial 1994 $25 million Texas jurisdictional base rate
increase through January 1, 1997, Reorganized EPE may
initiate proceedings in order to:
(a) change fixed fuel factors or otherwise provide for the
recovery of fuel costs, pursuant to the applicable fuel
reconciliation rules;
(b) refund or surcharge fuel over- or under-recoveries;
(c) implement or alter purchased power cost recovery
factors;
(d) add tariffs, riders, and terms and conditions that do
not increase Texas retail base rate charges for any
major rate class;
(e) add tariffs, riders, and terms and conditions to
address changed circumstances, address competitive
conditions or secure additional loads and resources or
implement cost effective demand side management
programs, including revenue and sales decoupling
mechanisms;
(f) address the occurrence of force majeure as defined in
paragraph 13 above; or
(g) refund or surcharge any amounts finally determined by
the PUCT to be required based on any currently pending
appeal of any PUCT order.
<PAGE> 6
15. Based on the projected base rate increase set forth in
paragraph 1 above, the Texas jurisdictional base rate
increase projected to be effective in 1997 is $29.5 million,
or 7.9% based on projected total revenues. The actual
amount of the base rate increase which Reorganized EPE could
seek at that time is, however, controlled by paragraph 11
above.
16. Based on the projected base rate increases set forth in
paragraphs 1 and 15 above, the Texas jurisdictional base
rate increase projected to be effective in 1999 is $20
million, or 4.7% based on projected total revenues. The
actual amount of the base rate increase which Reorganized
EPE could seek at that time is, however, controlled by
paragraph 11 above.
17. Based on the projected base rate increases set forth in
paragraphs 1, 15 and 16 above, the Texas jurisdictional base
rate increase effective in 2001 is $13 million, or 2.7%
based on projected total revenues. The actual amount of the
base rate increase which Reorganized EPE could seek at that
time is, however, controlled by paragraph 11 above.
<PAGE> 7
NEW MEXICO
1. Conditioned upon the final effectiveness of the initial 1995
$6 million New Mexico jurisdictional base rate increase and
order approving satisfactory accounting, ratemaking and
regulatory treatments pursuant to paragraphs 2-7 below,
Reorganized EPE will agree not to seek a change in New
Mexico jurisdictional base rates to be effective prior to
January 1, 1998, except in the case of force majeure events
described in paragraph 8 below.
2. The repurchase of the Palo Verde Unit 2 leased asset is
found prudent and accorded rate base treatment as
plant-in-service having a reasonable net depreciated
original book cost of $441 million as of December 31, 1992.
The asset continues to be depreciated at the rates
reasonably determined by the NMPUC.
3. The repurchased 39.5% of the Palo Verde Unit 3 leased asset
will be excluded from rates subject to the Stipulation Case
No. 2009.
4. The New Mexico portion of the first 100 MW of additional
total company firm resources is priced pursuant to paragraph
12 of the Case No. 2009 stipulation at the total cost
charged by SPS for firm capacity sales to municipal
cooperatives in eastern New Mexico. The New Mexico portion
of the second 100 MW of additional total company firm
resources is priced at the total cost of comparable new firm
utility-type generating resources.
5. The New Mexico portion of savings in fuel costs resulting
from the merged operations will be passed-through to
customers consistent with normal procedures for recovery of
fuel costs.
6. The New Mexico portion of bankruptcy costs of at least $18
million are recognized for ratemaking purposes and amortized
to cost of service in equal amounts over a ten (10) year
period beginning upon effectiveness of the Plan with no
return on the unamortized balance.
7. Should a proceeding be instituted to reduce Reorganized
EPE's base rates during the 1995-1997 period, the New Mexico
portion of non-fuel operations and maintenance (O&M) cost
savings resulting from the Merger of Reorganized EPE and CSW
will be allowed as an item in the cost of service to offset
any base rate reduction, but not to support a base rate
increase.
8. Conditioned upon the final effectiveness of the initial 1995
$6 million New Mexico jurisdictional base rate increase and
order containing satisfactory ratemaking, accounting and
<PAGE> 8
regulatory treatments pursuant to paragraphs 2-7 above,
Reorganized EPE will agree not to petition for a change in
base rates to be effective prior to January 1, 1998, except
to address materially adverse effects of federal income tax
law or method calculation changes, legislative or regulatory
actions which have a material adverse impact on Reorganized
EPE's cost of service, material loss of customer load,
unforeseen and unforeseeable events which have a material
adverse impact on reorganized EPE's cost of service, or
sustained double-digit inflation. Specific threshold impact
levels for the preceding force majeure events will be
proposed in the Reorganized EPE rate filing.
9. During the period from the final effectiveness of the
initial 1995 $6 million New Mexico jurisdictional base rate
increase through January 1, 1998, Reorganized EPE may
initiate proceedings in order to:
(a) change fixed fuel factors or otherwise provide for the
recovery of fuel costs, pursuant to the applicable fuel
reconciliation fuels;
(b) refund or surcharge fuel over- or under-recoveries;
(c) implement or alter purchased power cost recovery
factors;
(d) add tariffs, riders, and terms and conditions that do
not increase New Mexico retail base rate charges for
any major rate class;
(e) add tariffs, riders, and terms and conditions to
address changed circumstances, address competitive
conditions, or secure loads and resources or implement
cost effective demand side management programs,
including revenue and sales decoupling mechanisms;
(f) address the occurrence of force majeure as defined in
paragraph 8 above; or
(g) refund or surcharge any amounts finally determined by
the NMPUC to be required based on any appeal of any
NMPUC order.
<PAGE> 1
EXHIBIT D-11
UNITED STATES BANKRUPTCY COURT
WESTERN DISTRICT OF TEXAS
AUSTIN DIVISION
IN RE: S
S
EL PASO ELECTRIC COMPANY, S CASE NO. 92-10148-FM
S (CHAPTER 11)
Debtor. S
ORDER (i) APPROVING DISCLOSURE STATEMENT;
(ii) SETTING DATE FOR CONFIRMATION
HEARING AND FIXING DEADLINES FOR VOTING ON AND
OBJECTION TO THE PLAN; (iii) ESTABLISHING AND
APPROVING PROCEDURES RELATING TO THE SOLICITATION
OF ACCEPTANCES AND REJECTIONS OF THE PLAN; AND
(iv) FIXING THE LAST DATE FOR FILING AND HEARING
MOTIONS TO ALLOW DISPUTED CLAIMS FOR VOTING
On August 25 and 27, 1993, a hearing wad held before
the Honorable Frank Monroe, United States Bankruptcy Judge to
consider, pursuant to 11 U.S.C. S 1125 (1992), the approval of
the Disclosure Statement to Modified Third Amended Plan of
Reorganization of the Debtor Providing for the Acquisition of El
Paso Electric Company by Central and South West Corporation (the
"Disclosure Statement") filed by El Paso Electric Company (the
"Debtor").
The Court, having considered the Disclosure Statement
and those materials to be transmitted therewith, all timely filed
objections to the Disclosure Statement and the arguments of
counsel, finds that due and appropriate notice of the hearing and
the relief requested has been given to all parties in interest,
service of the notice of the hearing was proper and that good
cause appears for entry of this Order. All capitalized terms
employed herein shall have the meaning assigned to such
<PAGE> 2
capitalized terms as set forth in the Modified Third Amended Plan
of Reorganization.
Based upon the foregoing, IT IS HEREBY ORDERED, AND
NOTICE IS HEREBY GIVEN, THAT:
Approval of Disclosure Statement and Pertinent Dates
1. The Disclosure Statement is hereby APPROVED in all
respects pursuant to 11 U.S.C. Section 1125.
2. The hearing on confirmation of the Modified Third
Amended Plan of Reorganization of the Debtor Providing for the
Acquisition of El Paso Electric Company by Central and South West
Corporation (the "Plan") shall commence on December 6, 1993
(the "Confirmation Date") at 22:00 a.m. Central Standard Time
before the Honorable Frank B. Monroe, United States Bankruptcy
Judge, United States Bankruptcy Court for the Western District of
Texas, Courtroom No. 1, 816 Congress Avenue, Austin, Texas and
continue from day to day, as announced at such hearing.
3. A Pre-trial Hearing will be held before the
Honorable Frank R. Monroe, at the United States Bankruptcy Court,
816 Congress Ave., 14th Floor, Courtroom No. 1, Austin, Texas, on
Nov 19, 1993 at 9:30 a.m., to consider objections and other
matters to be decided at the Confirmation Hearing. The Pre-trial
<PAGE> 3
Hearing may be adjourned from time to time by oral notice at such
hearing.
4. Nov 15, 1993 at 5:00 p.m. Central Standard
Time is fixed as the last day for filing with the Bankruptcy
Court and serving written objections to confirmation of the Plan
by first class mail upon parties listed upon the Master Service
List and by hand delivery or facsimile, upon the following:
Debtor
El Paso Electric Company
P. 0. Box 982
El Paso, TX 79960
Attn: Eduardo A. Rodriguez
Fax: (915) 521-4754
Counsel for the Debtor
Sidley & Austin Winstead Sechrest &
One First National Plaza Minick P.C.
Chicago, IL 60603 100 Congress Avenue
Attn: Shalom L. Kohn Suite 800
Fax: (312) 853-7036 Austin, TX 78701
Attn: Berry D. Spears
Fax: (512) 370-2850
Counsel for Central and South West Corporation
Milbank, Tweed, Hadley & Sheinfeld, Maley & Kay,
Mccloy P.C.
One Chase Manhattan Plaza 1001 Fannin, Suite 3700
New York, NY 10005 Houston, TX 77002
Attn: Howard C. Buschman,III Attn: Henry Kaim
Fax: (212) 530-5219 Fax: (713) 658-9756
The Office of the United States Trustee
United States Trustee
300 E. 8th Street, Room 908
Austin, TX 78701
Attn: Christine March
Fax: (512) 482-5331
<PAGE> 4
Service of Solicitation Packages and Summary
5. On or before September 21, 1993 the Debtor shall
cause a Solicitation Package (as defined below) to be served on
all creditors listed in its schedules of liabilities filed with
this court, creditors whose executory contracts and leases are
being rejected under the Plan, all parties who have filed proofs
of claim with the Clerk of the Court, all parties in interest who
have requested special notice, all preferred stockholders, all
common stockholders and holders of Class 12(a) and 12(b) Claims
of record as of the Voting Record Date (as defined below); except
as provided in paragraphs 8, 9 and 10 below. Copies of the
Solicitation Package may also be obtained by written request to
McCormick & Pryor, 26 Broadway, New York, NY 10004, Attention:
Mr. John McCormick.
6. The "Solicitation Package" shall be comprised of:
(1) a copy of this Order; (2) the Disclosure Statement; (3) the
Plan; (4) a notice of deadline for submitting ballots
(substantially in the form filed with the Court); (5) an
appropriate ballot (substantially in the form filed with the
Court); (6) a return address envelope, postage pre-paid and (7)
an approved solicitation letter(s) from the Debtor (in
substantially the form filed with the Court). The Debtor is
authorized to make non-substantive modifications to the
Disclosure Statement and related documents as necessary prior to
<PAGE> 5
distribution in order to correct errors and make corrections of a
typographical and ministerial nature.
7. Any proposed substantive modifications to the
Disclosure Statement occurring after the entry of this Order but
prior to the mailing of the Solicitation Packages shall be heard
by this Court upon 24 hours facsimile notice given to (i) Haynes
& Boone, 3100 NationsBank Plaza, 901 Main Street, Dallas, Texas
75202-3714, Attention: Robert Albergotti, Attorneys For Official
Unsecured Creditors' Committee; (ii) Lord Bissell & Brook, 115 S.
LaSalle Street, Chicago, Illinois 60603, Attention: Benjamin
Waisbren, Attorneys For Official Equity Security Holders'
Committee; (iii) James E. Spiotto, 111 West Monroe Street,
Chicago, Illinois 60603, attorneys for the Palo Verde Indenture
Trustees; and (iv) Weil, Gotshal & Manges, 700 Louisiana, Suite
1600, Houston, Texas 77098, Attn: D. J. Baker, Attorneys for the
Secured Bondholders; and (v) Christine March, Office of the U.S.
Trustee, 300 E. 8th St., #908, Austin, Texas 78701.
8. Service of the Solicitation Package on creditors
listed in the Debtor's Schedules of Liabilities, parties to
executory contracts and leases to be rejected under the Plan,
creditors who have filed proofs of claim with the Clerk of the
Court and all parties in interest who have requested special
notice shall be by first class mail addressed to the creditor at
the address listed in the request for special notices or proof of
claim or, if no request or proof of claim has been filed by such
<PAGE> 6
creditor, at the address contained in the Debtor's books and
records.
9. Service of the Solicitation Package on the holders
of the Debtor's debt securities, the Debtor's preferred stock,
holders of the Debtor' s common stock, members of Class 12(a) and
members of Class 12(b) shall be as follows:
a. Pursuant to Bankruptcy Rule 3017(d), the
record date for determining the holders of all claims and
interests entitled to vote on the Plan be and the same hereby is
set as September 1, 1993 (the "Voting Record Date").
b. Pursuant to this Court's authority under 28
U.S.C. Sections 157 and 1334, 11 U.S.C. Section 105 and
Bankruptcy Rule 1007 (i) , each indenture trustee and stock
transfer agent shall promptly provide upon request the
Solicitation Agent or the Debtor with a list or mailing labels
containing the names and addresses of the respective registered
holders of record and number of shares or principal amount of
debt and equity securities held by each holder of record as of
the Voting Record Date.
c. Each person holding legal title for a
beneficial owner of a debt or equity security and each bank,
agent or broker or other holder for an owner of a debt or equity
security (such legal title holder, agent, broker, and bank being
<PAGE> 7
hereinafter referred to as the "Nominee") will cooperate with the
Solicitation Agent to determine the number of Solicitation
Packages needed by Nominee for distribution to such beneficial
owners. The Nominee shall, upon receipt of the Solicitation
Packages, forward the Solicitation Packages to the beneficial
owners. Such Nominee will have two options for obtaining the
votes of beneficial owners of securities, consistent with usual
customary practices for obtaining the votes of securities held in
street name: (i) the Nominee may "prevalidate" the individual
ballot contained in the Solicitation Package and then forward the
Solicitation Package to the beneficial owner of the securities,
which beneficial owner will then indicate its acceptance or
rejection of the Plan, and then return the individual ballot
directly to the Solicitation Agent in the return envelope to be
provided in the Solicitation Package, or (ii) the Nominee may
forward the Solicitation Package to the beneficial owner of the
securities for voting along with a return envelope provided by
and addressed to the Nominee, with the beneficial owner then
returning the individual ballot to the Nominee. If the
beneficial owner returns the ballot to the Nominee, the Nominee
will summarize the votes with its respective beneficial owners in
an affidavit (the "Affidavit of Voting Results") in accordance
with the instructions set forth in the Disclosure Statement and
this Order and then return the Affidavit of Voting Results to the
Solicitation Agent. The Affidavits of Voting Results shall
include, at a minimum, the number of beneficial holders voting to
accept and to reject the Plan who submitted ballots to the
<PAGE> 8
Nominee and the amount of such securities so voted. By
submitting an Affidavit of Voting Results, each such Nominee
certifies that the Affidavit of Voting Results accurately
reflects votes reflected on the ballots received from beneficial
owners holding such securities as of the Voting Record Date.
d. Pursuant to 28 U.S.C. Sections 157 and 1334,
11 U.S.C. Section 105 and Bankruptcy Rule 1007(i) and (j), the
Nominee holders shall maintain the individual ballots of its
beneficial owners and evidence of authority to vote on behalf of
such beneficial owner. No such ballots shall be destroyed or
otherwise disposed of or made unavailable without such action
first being approved by prior order of this Court.
e. The Debtor shall not pay any fees or
commissions to any stock transfer agent, indenture trustee, or
Nominee holder for compliance with this Order, except to
reimburse such entities for actual and necessary out-of-pocket
expenses for mailing and copy expenses incurred in complying with
the terms of this Order.
f. The Debtor shall serve a copy of this Order
on its stock transfer agent, each of its indenture trustees and
on each known Nominee. Any stock transfer agent, indenture
trustee, or Nominee holder who objects to this Order may file an
objection with this Court on or before ten days after service of
<PAGE> 9
this order, describing in detail the reasons that it should not
be bound by this Order.
10. Instead of the Solicitation Package, the Debtor
shall cause this Order and a Notice to Creditors Holding
Unimpaired Claims of Hearing to Consider Confirmation of Debtor's
Modified Third Amended Plan of Reorganization and Fixing Time for
Filing Objections Thereto, substantially in the form filed with
the Court (the "Hearing Notice") which notice is hereby approved,
to be served, by first class mail, on holders of claims in @ -
Classes 4(a), 4(b), 4(c), 4(d), 4(e), 4(f), 4(g), 4(h), 4(i), 7,
8, 9, 10(a), 10(b) and 14. All holders of unimpaired claims
shall be conclusively presumed to have accepted the Plan in
accordance with 11 U.S.C. Section 1126(f).
11. Pursuant to 11 U.S.C. 1122(b), the Plan's
designation of Class 14 consisting of every allowed unsecured
claim that is less than, equal to or reduced to $100,000 be and
the same hereby is approved as reasonable and necessary for
administrative convenience. Holders of claims in Class 13 which
elect to receive the treatment provided Class 14 claimholders
shall be treated as unimpaired.
12. As provided by Bankruptcy Rule 3003(c)(2), the
Debtor shall not be required to provide any part of the
Solicitation Package or notice to any creditor that has not filed
a proof of claim and whose claim has either not been scheduled or
<PAGE> 10
has been scheduled as disputed, contingent or unliquidated, and
has not been.temporarily allowed for voting purposes as set forth
herein.
13. The Debtor shall not be required to serve the
Solicitation Package or notice on any entity for which the notice
of the hearing on the Approval of the Disclosure Statement has
been returned by the United States Postal Service as
undeliverable unless the Debtor receives an accurate address for
such addressee.
14. A copy of the Hearing Notice shall be published in
The Wall Street Journal (national edition), the El Paso Times,
the El Paso Post, the Las Cruces Sun, and the Las Cruces Bulletin
on or before October 4, 1993.
15. The form and manner of notice approved in this
Order is adequate, appropriate, and satisfies the requirements of
the Bankruptcy Code and the Bankruptcy Rules to the extent
applicable to persons and entities affected thereby.
Procedures for Temporary Allowance
of Disputed Claims for Voting Purposes
16. If the Debtor files or has filed an objection to a
proof of claim at least forty-five (45) days prior to the
Confirmation Date, and the claimant desires to have the claim
allowed for voting purposes, then, unless such claim has been
<PAGE> 11
temporarily allowed for voting purposes pursuant to this Order,
the claimant must file and serve on the Debtor and interested
parties a motion to temporarily allow such claim or interest for
voting purposes pursuant to Bankruptcy Rule 3018(a) (an
"Allowance Motion") on or before twenty (20) days prior to the
Confirmation Date and obtain a hearing for such Allowance Motion
prior to the Confirmation Date. Any Allowance Motion which is
not so timely filed and served shall be deemed barred. Claimants
holding claims which are objected to and do not obtain temporary
allowance for voting purposes by Order of the Court in accordance
with the terms of this Order, shall not be allowed to vote on the
Plan. Notwithstanding the foregoing, the votes of the Palo Verde
Indenture Trustees and the holders of Class 12(a) Claims shall be
governed by paragraph number 22 of this Order and not by the
terms of this paragraph 16.
Form of Ballots; Last Date
for Voting of Ballots.
17. November 15, 1993 at 5:00 p.m. Central
Standard Time is fixed as the last day and time for submitting
written Ballots accepting or rejecting the Plan (the "Voting
Deadline"). The form of Ballots filed with the Court are hereby
approved.
18. With respect to holders of claims in Classes 5(a),
5(b), 5(c), 6, 11 and 13, ballots must be submitted to El Paso
Electric Company, Mills Building, 303 North Oregon Street, El
<PAGE> 12
Paso, Texas 79901, Attention: Mr. Guillermo (Willie) Silva, Jr.,
(Fax:(915) 542-3905) and must be actually received, whether by
mail, delivery or facsimile, by the Voting Deadline in order to
be counted as valid votes.
19. With respect to holders of claims and interests in
Classes 1, 2, 3, 15 and 16 and members of Classes 12(a) and
12(b), ballots must be submitted to the Nominees or to Debtor's
Solicitation Agent, McCormick & Pryor, 26 Broadway, New York, New
York 10004, Attention: Mr. John McCormick, (Fax: (212) 363-9433)
and must be actually received, whether by mail, delivery or
facsimile by the Voting Deadline in order to be counted as valid
votes. Beneficial holders of securities may submit their ballots
to the appropriate Nominee at the address identified in the
special instructions accompanying their ballots, and such Nominee
shall forward a Affidavit of Voting Results reflecting the votes
of all beneficial holders it represents as set forth above.
Affidavit of Voting Results prepared by Nominees must be received
by the Debtor or the Solicitation Agent within two business days
of the Voting Deadline, but may be sent by facsimile
transmission, provided that an original, signed Affidavit of
Voting Results is received within five (5) business days
thereafter.
20. With respect to Classes 3, 5(a), 5(b), 5(c), 6,
11, 12(b), and 13, except as may be hereafter ordered by the
Court, the amount of a claim that will be used to tally votes
<PAGE> 13
will be either (a) the claim amount listed in Debtor's schedules
if such claim is not listed as contingent, unliquidated or
disputed and for which no proof of claim has been timely filed;
(b) the liquidated amount specified in a proof of claim timely
filed with this Court to the extent the proof of claim is not the
subject of an objection to claim filed before the Confirmation
hearing; or (c) the amount temporarily allowed by this Court for
voting purposes after notice and a hearing pursuant to Bankruptcy
Rule 3018(a). If a creditor submits a ballot and the creditor
(a) has not timely filed a proof of claim and is not listed on
the Debtor's schedules or is listed as holding a claim which is
contingent, unliquidated or disputed or (b) holds a claim which
is subject to an objection, then such ballot will not be counted
unless such claim is temporarily allowed for voting purposes by
this Court in accordance with this Order.
21. With respect to Classes 1, 2, 15 and 16, except as
may be hereafter ordered by the Court, the Debtor shall count for
purposes of voting, the lesser of (a) the claim amount or number
of shares set forth on the ballot, if any amount is so indicated
or (b) the claim amount or number of shares set forth on any
applicable record holder lists, or certified by a Nominee, as of
the Record Date for that claimant or interest holder.
22. With respect to Classes 12(a), except as may be
hereafter ordered by the Court, the holders of the Lease
Obligation Bonds and the Secured Lease Obligation Bonds with
<PAGE> 14
respect to the such Bonds are deemed to be the only real parties
in interest entitled to vote in Class 12(a), which votes shall be
counted for purposes of the Plan in the principal amount of the
Bonds held by each beneficial holder. Nothing herein shall
constitute or affect any determination as to the nature,
validity, or allowability of the claims or rights of any entity
permitted hereunder to vote in Class 12(a), and the provisions
hereof with respect to voting shall have no applicability with
respect to the rights of such entities to vote with respect to
any Plan except the Modified Third Amended Plan.
23. Ballots received by the Debtor in the following
categories shall not be counted as an acceptance or rejection,
unless otherwise ordered by the Court:
a. ballots where the claimant, or his representative did
not use the authorized ballot form, or a form of ballot
substantially similar to such authorized form;
b. ballots not received by Debtor on or before the time
and date set forth by Court Order for such submission;
c. ballots where the claimant or his authorized
representative did not check one of the boxes
indicating acceptance or rejection of the Plan, or
checked both such boxes;
<PAGE> 15
d. ballots not signed by the claimant or his authorized
representative;
e. the individual or institution casting the ballot
(whether directly or as representative) was not a
holder of a claim as of the Voting Record Date and
therefore was not entitled to vote.
24. The Debtor and other parties-in-interest may seek
further clarification from the Court on vote tabulation and-the
solicitation process, and retain the right to object or raise any
issue with respect to any ballot.
25. Any objections, comments or responses not timely
filed and served in accordance with the provisions of this order
will be deemed waived.
DATED this 27 day of August 1993.
/s/ F. R. MONROE
UNITED STATES BANKRUPTCY JUDGE
<PAGE> 16
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 1
EXHIBIT D-12
UNITED STATES BANKRUPTCY COURT
WESTERN DISTRICT OF TEXAS
AUSTIN DIVISION
IN RE: S
S
EL PASO ELECTRIC COMPANY, S CASE NO. 92-10148-FM
S (CHAPTER 11)
Debtor S
SUPPLEMENTAL ORDER APPROVING DISCLOSURE STATEMENT
On September 15, 1993, a hearing was held before the
Honorable Frank Monroe, United States Bankruptcy Judge to
consider, pursuant to 11 U.S.C. Section 1125 (1992), the approval
of certain changes to the Disclosure Statement to Modified Third
Amended Plan of Reorganization of the Debtor Providing for the
Acquisition of El Paso Electric Company by Central and South West
Corporation (as corrected, the "Disclosure Statement") filed by
El Paso Electric Company (the "Debtor").
The Court, having considered the Disclosure Statement
and materials to be transmitted therewith, all timely filed
objections and the arguments of counsel, finds that due and
appropriate notice of the hearing and service of the notice of
the hearing was proper and that good cause appears for entry of
this Order. All capitalized terms employed herein shall have the
meaning assigned to such capitalized terms as set forth in the
Modified Third Amended Plan of Reorganization and the "August 27
Order" (as defined below).
<PAGE> 2
Based upon the foregoing, IT IS HEREBY ORDERED, AND
NOTICE IS HEREBY GIVEN, THAT:
1. The Disclosure Statement, as filed with the Court
on the date hereof, together with other materials and the
transmittal letter of the Debtor filed in connection therewith,
is hereby APPROVED in all respects pursuant to 11 U.S.C. Section
1125.
2. The Debtor is hereby allowed until and including
September 27, 1993 to comply with the requirements of paragraph 5
of the Court's Order (i) Approving Disclosure Statement; (ii)
Setting Date For Confirmation Hearing and Fixing Deadlines For
Voting On And Objection To The Plan; (iii) Establishing And
Approving Procedures Relating To The Solicitation Of Acceptances
And Rejections Of The Plan; And (iv) Fixing The Last Date For
Filing And Hearing Motions To Allow Disputed Claims For Voting,
dated August 27, 1993 (the "August 27 Order").
3. Holders of Claims against the Debtor evidenced by
proofs of claim filed and pending in this Case in an unliquidated
amount which are not Class 12(a) or Class 12(b) Claims shall only
be entitled to vote the portion of such Claims which are
unliquidated to the extent that such Claims are allowed for
voting purposes pursuant to Bankruptcy Rule 3018(a) in accordance
with the terms of the August 27 Order. All Claims which are
substantially in the nature of personal injury, employment
discrimination, or environmental Claims or which are the subject
<PAGE> 3
of pending state or federal court litigation in a court other
than this Court shall be treated as unliquidated claims in their
entirety for purposes of voting on the Debtor's Plan and the
procedures set forth in this paragraph.
4. The Debtor shall provide a copy of this Order and
the August 27 Order to all Claim holders who have filed a proof
of claim in this case which remains pending and is impaired
pursuant to the Plan and (i) which is in an unliquidated amount
or (ii) which is not otherwise entitled to vote on the Plan, at
least forty-five (45) days prior to the Confirmation Date.
5. Notwithstanding the provisions of paragraph 18 of
the August 27 Order, Ballots which are to be submitted to the
Debtor pursuant to the August 27 Order may in lieu thereof be
submitted to McCormick and Pryor prior to the Voting Deadline.
6. The Debtor need not send notice by mailing to
Creditors holding Class 8 and 9 Claims and references to such
Classes in paragraph 10 of the August 27 Order are hereby
deleted. The notice to be published pursuant to paragraph 14 of
the August 27 Order shall suffice to provide notice to holders of
Claims in Classes 8 and 9.
<PAGE> 4
7. Except as modified herein, the August 27 Order
shall remain in full force and effect.
DATED this 15th day of September, 1993.
/s/ F. R. MONROE
UNITED STATES BANKRUPTCY JUDGE
RETURN COPIES TO:
J. Ronald Trost
Shalom L. Kohn
Bryan Krakauer
SIDLEY & AUSTIN
One First National Plaza
Chicago, Illinois 60603
(312) 353-7756
and
Daniel C. Stewart
Berry D. Spears
Paul E. Heath
WINSTEAD SECHREST & MINICK P.C.
100 Congress Avenue, Suite 800
Austin, Texas 78701
(512) 474-4330
<PAGE> 1
EXHIBIT D-13
FILED Dec 8 1993 U.S. BANKRUPTCY COURT BY _____ DEPUTY.
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE WESTERN DISTRICT OF TEXAS
AUSTIN DIVISION
- - - - - - - - - - - - - - - - - - x
In re:
: Case No. 92-10148 FM
EL PASO ELECTRIC COMPANY
:
Debtor
:
- - - - - - - - - - - - - - - - - - x
ORDER AND JUDGMENT
CONFIRMING THE DEBTOR'S MODIFIED THIRD
AMENDED PLAN OF REORGANIZATION, AS
MODIFIED, UNDER CHAPTER 11 OF THE UNITED STATES
BANKRUPTCY CODE and GRANTING RELATED RELIEF
This matter coming on to be heard for a hearing (the
"Confirmation Hearing") for confirmation of the Debtor's Modified
Third Amended Plan of Reorganization under Chapter 11 of the
United States Bankruptcy Code, dated August 27, 1993 (corrected
September 15, 1993), filed by El Paso Electric Company ("EPE" or
"Debtor")(a copy of which is attached hereto as Exhibit a), and
the Debtor having modified such Plan by Modifications filed with
the Court on December 1 and December 6, 1993 (the
"Modifications") (copies of which are attached hereto as Exhibit
B)(as so corrected and modified, the "Plan");
On the basis of the record of this case, including the
evidence presented at the Confirmation Hearing, and on the basis
of the Findings of Fact and Conclusions of Law entered
contemporaneously herewith (whose definitions and the definitions
<PAGE> 2
contained in the Plan and Disclosure Statement are incorporated
herein by reference) and the Court's oral Findings of Fact and
Conclusions of Law on the record on December 6, 1993, which are
incorporated herein by reference, and a transcript of which shall
be filed by the Debtor as soon as practicable;
The Court having considered all objections
("Objections") to confirmation of the Plan and to this Order and
Judgment (hereinafter, "Order");
Now, upon the motion of the Debtor and after due
deliberation, the Court ORDERS, ADJUDGES AND DECREES THAT:
1. This Order shall be effective according to its
terms upon the entry thereof. The provisions of paragraphs 2
through 21, 25, and 33 through 40 of this Order, and this
paragraph 1, shall be operative upon the entry of this Order, and
the remaining provisions of this Order shall be operative solely
as of the Effective Date.
2. The Modifications are deemed accepted by all
classes of Creditors and equity security holders which have
previously accepted the Plan. The Plan, including the OP
Settlement and the APS Settlement, which are deemed incorporated
in the Plan, is confirmed.
3. The Merger Agreement, as amended, is approved and
the Debtor is authorized, subject to the provisions thereof and
of this Order, to carry out its terms.
4. The record of the Confirmation Hearing is closed.
5. To the extent any Objections to confirmation of
<PAGE> 3
the Plan have not been resolved or withdrawn prior to entry of
this Order or are not cured by the relief granted herein, all
such Objections are overruled. All withdrawn Objections are
deemed withdrawn with prejudice.
6. The Debtor is authorized and directed to comply
with the provisions of the Plan which, by their terms, apply
prior to the Effective Date, subject to the terms of this Order.
The provisions of Section 5.1 of the Plan shall become effective
and binding on the parties in this case as of the date hereof,
except that notwithstanding anything else in the Plan or this
Order, the Debtor's execution of any Hedging Transactions under
Section 5.1(C) of the Plan shall be subject to separate Court
approval, upon notice and hearing. Without limiting the
generality of the foregoing:
a. the Debtor is authorized to make the
distributions set forth in Sections 3 and 5.1(B) of the Plan
which are to occur prior to the Effective Date. The receipt of
such distributions by any person shall, in the case of holders of
Claims in Classes 11 and 13, constitute a complete satisfaction
of the claims of such holders for interest and other post-
petition payments to the extent set forth in Section
5.1(B)(ii)(a) of the Plan. In the case of any other person, the
receipt of such distributions shall have the effect and be
subject to the reservations of rights set forth in Section
5.1(B).
<PAGE> 4
b. Payments to the Palo Verde Indenture Trustees
required by Section 5.1(B)(h) of the Plan shall be made to each
of the Palo Verde Indenture Trustees pro rata according to the
outstanding principal amount of Lease Obligation Bonds and
Secured Lease Obligation Bonds.
c. The Debtor may, but is not required to,
engage the services of, and pay reasonable compensation to, one or
more entities or persons (which may include a person or entity
which has held or continues to hold Claims against the Debtor) to
assist and facilitate the distributions pursuant to Section
5.1(B) of the Plan or interim payments to holders of Claims in
Class 13.
d. The Committees herein shall continue after
the Confirmation Date to the extent set forth in Section 5.1(D)
of the Plan, and the Debtor and other parties hereto shall be
subject to the provisions for Notice, Post-Confirmation
Oversight, and Approvals set forth in Sections 5.1(E), (F), and
(G) of the Plan and paragraph 6 of the OP Settlement.
7. In accordance with section 1142 of the Bankruptcy
Code, all parties in interest herein are authorized and directed,
without the necessity of any further corporate action or other
approval, to take any action necessary or appropriate to
implement, effectuate and consummate the Plan, the Merger
Agreement, the OP Settlement, the APS Settlement, the documents
filed in accordance with section 7.6 of the Plan, and any
transactions contemplated thereby or by this Order in accordance
<PAGE> 5
with their respective terms (as such may be amended from time to
time in accordance with the applicable provisions of the Plan and
the Bankruptcy Code and Rules)(collectively, the "Provisions"),
to the extent that by their terms and the terms of this Order any
of the Provisions are to be effective prior to the Effective
Date, and to the extent that action prior to the Effective Date
is necessary or appropriate so the Provisions will be effective
on and after the Effective Date, including, without limitation,
the issuance, execution, and delivery of any document,
certificate, agreement or instrument and the transfer of any
security. The approvals and authorizations specifically set
forth in this Order are non-exclusive and are not intended to
limit the authority of the Debtor or Reorganized EPE to take any
and all actions necessary or appropriate to implement effectuate,
and consummate the Plan, this Order, and the other Provisions,
and the transactions contemplated thereby, as of the times that
they are to become effective.
8. Any of the President, any Vice President and any
Secretary of the Debtor is designated, upon the entry of this
Order, to execute, on behalf of the Debtor, any agreements, any
preferred stock designations, and any other certificate, articles
or other documents that such officer deems necessary or advisable
in order to consummate the merger and to otherwise effectuate the
Plan, the Merger Agreement, and the Provisions as of the time
they are to become effective. No further approval of the board
of directors or shareholders of the Debtor shall be required with
<PAGE> 6
respect to the implementation and consummation of the Plan, the
Merger Agreement, or the Provisions.
9. Without limiting the generality of the foregoing:
a. The Debtor is authorized to execute and
deliver documents and take any other action which, in the
Debtor's judgement, is appropriate or necessary for the purpose
of modifying the terms of any pollution control bonds issued in
connection with any of the Debtor's facilities, including
(without limitation) the Maricopa Series A 1983 PCBs and
Farmington Series A 1983 PCBs (all of such pollution control
bonds, individually and collectively, the "PCBs") to add
available interest modes and cause other related changes to
enable the refunding contemplated in the Plan to occur on or
shortly after the Effective Date. Without limitation, such
actions may include effecting a purchase of the PCBs in
connection with the expiration of the existing letters of credit,
a failed remarketing, or in lieu of redemption (a "Purchase").
In no event shall the Debtor allow the bonds to be redeemed
(other than in connection with a refunding) in lieu of any such
Purchase. In connection with any Purchase for the purpose of
adding interest modes and other changes or otherwise to enable
the refunding contemplated in the Plan to occur on or shortly
after the Effective Date, the Debtor is directed to reimburse the
applicable PCB LC Issuer (the "Issuer") for the draws to effect a
Purchase of PCBs under any PCB letter of credit, including
(without limitation) the Maricopa Series A 1983 PCB LC and the
<PAGE> 7
Farmington PCB LC (any of such letters of credit, individually
and collectively, a "PCB LC") with the proceeds of the
remarketing or refunding of the series of PCBs related to such
draws upon receipt by the Debtor of the proceeds (or as provided
in the Plan in the case of interest and fee payments), provided,
that the Issuer provides the Debtor with a reinstated, new or
amended PCB LC on at least as favorable terms as the drawn PCB
LC, if and to the extent such PCB LC is requested by the Debtor.
If, for any reason, the attempted refunding or remarketing of any
PCBs in connection with a Purchase described in this paragraph
does not result in the applicable Issuer being reimbursed for the
draw to effect the Purchase then, at the request of the Issuer,
the Issuer shall be permitted to purchase, and the Debtor shall
sell, the PCBs not remarketed or refunded for a purchase price
equal to the principal amount of such PCBs and such purchase
price shall be applied to reimburse the Issuer for the draw on
the applicable PCB LC to effect the Purchase. The Debtor shall
use its best efforts to remarket or refund any PCBs which are
acquired by the Debtor through a Purchase, whether or not the
Issuer purchases such PCBs. If the Issuer purchases any PCBs in
the event of a failed remarketing or refunding as provided in
this paragraph the Debtor will not redeem such PCBs so long as
the Issuer continues to hold such PCBs.
b. The Debtor is authorized to execute and
deliver documents and take any other action which, in the
Debtor's judgment is appropriate or necessary to cause the
<PAGE> 8
Issuers of the Maricopa PCB LCs or the Farmington PCB LC to
reissue or amend, or to extend the expiration date of, the PCB
LCs on such terms s the parties may agree provided that: (i)
prior to the Effective Date, except as modified by the Plan, the
Issuers will continue to accrue fees and other charges under the
Reimbursement Agreements with respect to the PCB LCs as reissued,
amended, or extended on the same terms as are presently set forth
in the Reimbursement Agreements; (ii) prior to the Effective
Date, except as modified by the Plan and the next sentence of
this Order, the Issuers' claims under the Reimbursement
Agreements as they relate to any period subsequent to the
expiration date of the LCs in effect on the Petition Date shall
have the same priority and status as the Issuers' existing claims
under the Reimbursement Agreements; and (iii) the Issuers shall
not assert an administrative priority for claims under the
Reimbursement Agreements arising from the extension, reissue or
amendment of, or issuance of new, PCB LCs. In connection with
any extension, reissue, or amendment of the Farmington PCB LC, or
issuance of a new LC, Citibank N.A. shall have an allowed pre-
petition unsecured claim for all amounts drawn on the Farmington
PCB LC, as reissued, extended, supplemented or amended, after
December 6, 1993 to make payments to holders of the Farmington
Series A 1983 PCBs and such claim shall have the same priority as
other allowed pre-petition unsecured claims.
c. The Debtor is authorized to pay all customary
fees and expenses of each of the PCB issuers, the PCB trustees,
<PAGE> 9
the remarketing and indexing agents, and their respective
counsel, in connection with any and all remarketing and refunding
of the PCBs after the Confirmation Date, without prior Court
order.
d. Any documents executed and actions taken in
accordance with the provisions of subparagraphs (a) through (b)
of this subparagraph shall be binding, enforceable, and not
avoidable under the Bankruptcy Code or other similar laws
affecting creditors' rights generally, notwithstanding any
failure of consummation of the Plan.
10. Pursuant to the Plan and in accordance with
section 1142 of the Bankruptcy Code, the Debtor is authorized to
file with the Secretary of State of the State of Texas, or with
any other governmental agency, board, bureau or office within or
without the State of Texas, the Restated Certificate of
Incorporation substantially in the form annexed as Exhibit B to
the Merger Agreement, and as appropriate, any By-Laws, to the
extent necessary or appropriate to ensure that, and such Restated
Certificate shall be, the Restated Certificate of Reorganized EPE
effective as of the Effective Date. The Secretaries of State of
the States of Texas and New Mexico (and any other governmental
entity) are authorized and directed to accept for filing and to
file any certificates or articles of merger, the Merger
Agreement, restated certificates of incorporation, certificates
of designation for preferred stock, or other instruments
necessary and to take any and all other actions necessary to give
<PAGE> 10
effect to the merger and such other transactions contemplated by
the Merger Agreement and the Plan.
11. Each of the actions taken, payments made and liens
and security interests granted on, after, or before the Effective
Date pursuant to provisions of the Plan and this Order shall be
valid, binding and enforceable and not preferential, fraudulent
or an otherwise avoidable transfer under the Bankruptcy Code or
under applicable law of the United States or any state, province
or other jurisdiction.
12. Pending the occurrence of the Effective Date, all
property transferred or otherwise dealt with in the Plan (except
for distributions to be made under the Plan prior to the
Effective Date) shall remain property of the Debtor's bankruptcy
estate, and such bankruptcy estate shall continue until the
occurrence of the Effective Date.
13. Pending the occurrence of the Effective Date, the
Debtor shall be subject to all the provisions of the Bankruptcy
Code, except as provided in the Plan or in this Order. Without
limiting the generality of the foregoing:
a. Unless otherwise ordered by the Court, the
automatic stay set forth in Section 362 of the Bankruptcy Code
shall continue in effect until the Effective Date, provided
however, that this provision shall not affect prior orders of
this Court granting relief from the stay or the provisions of the
APS Settlement.
<PAGE> 11
b. Notwithstanding confirmation of the Plan,
this Court retains exclusive jurisdiction over the Debtor's
Chapter 11 case, including pursuant to and for the purposes of
(a) sections 105(a) and 1127 of the Bankruptcy Code, (b) Section
7.1 of the Plan, and (c) for such other purposes as may be
necessary or useful to aid in the consummation of the Plan and
its implementation.
c. Nothing herein shall preclude the Debtor, or
any other party in interest, upon appropriate motion and notice,
to seek to relieve the Debtor from certain restrictions on or
obligations of a debtor in possession under the Bankruptcy Code.
14. The Debtor and the other parties to the OP
Settlement are authorized to comply with the provisions thereof
which are by their terms applicable prior to the Effective Date,
and to execute all documents and instruments and take all such
action as may be necessary or appropriate to implement the OP
Settlement, to the extent that its terms are to be effective
prior to or as of the Effective Date. The Debtor is authorized
to make the payments required under paragraph 2(b) of the OP
Settlement as soon as practicable after the date hereof.
15. In accordance with the APS Settlement, approved by
this Court on November 19, 1993, unless that certain Cure and
Assumption Agreement dated November 19, 1993 (the "Cure
Agreement") has been terminated in accordance with its terms: (a)
as provided in the Cure Agreement, the assumption of the "ANPP
Assumed Agreements" (as defined in the Cure Agreement) shall be
<PAGE> 12
an additional condition precedent to the Effective Date of the
Plan, (b) the procedure set forth in the Cure Agreement shall be
the exclusive method to assume such agreements, and (c)
notwithstanding anything to the contrary in the Plan, including
but not limited to Section 7.7 thereof, or in the Merger
Agreement, in the event of any inconsistency between the Plan or
the Merger Agreement, this Order and the Cure Agreement, the Cure
Agreement will control.
16. The Palo Verde Indenture Trustees are directed and
instructed to take all steps necessary to implement the terms of
the settlement with Class 12(a) set forth in Section 3.14(A) and
(D) of the Plan, in accordance with the terms thereof, both prior
to and as of the Effective Date. The payment of fees and
expenses to the Palo Verde Indenture Trustees under Section
5.1(B) of the Plan shall be without prejudice to the rights of
such Indenture Trustees to enforce their rights to payment of
fees and expenses, to the extent not otherwise satisfied, from
recoveries to the trust estate.
17. In accordance with Section 3.14(A)(1) and (B)(2)
of the Plan, and upon the written request of the Debtor, each
Owner Participant, Owner Trustee, and Successor Trustee is
directed to execute and deliver to the Debtor, in escrow, within
30 days of the Debtor's reasonably anticipated Effective Date, a
mutual release (in appropriate number of counterparts)
substantially in the form of Annex D to the OP Settlement, which
release shall not be effective unless the Effective Date occurs.
<PAGE> 13
18. In accordance with Section 4.3(C) of the Plan, all
proofs of claim with respect to Claims arising from the rejection
of executory contracts or unexpired leases shall be filed with
the Bankruptcy Court within thirty (30) days after the date of
entry of this Order, unless a separate order of the Court
approving such rejection requires filing by an earlier date, or
unless a stipulation entered into by the Debtor and a particular
claimant allows for filing a claim at a later date in order to
allow the Debtor to provide the information necessary to
calculate such claim. Any Claims arising from any such rejection
not filed within such times shall be forever barred from
assertion against the Debtors, their estates and property, or any
successor to the Debtor or CSW.
19. Each professional subject to Section 327 of the
Bankruptcy Code who holds or asserts an Administrative Claim for
compensation for services rendered and reimbursement of expenses
incurred against the Debtor through December 31, 1993 (the "Fee
Claim"), including, but not limited to, the costs and expenses of
preparing, filing, serving, and prosecuting any Fee Application,
shall file with the Bankruptcy Court and serve on all parties
required to receive notice, a fee application for such period on
or before March 1, 1994. The failure to file timely the fee
application as required under this paragraph shall result in the
Fee Claim being forever barred and discharged. To the extent
necessary, entry of this Order shall amend and supersede any
previously entered order of the Bankruptcy Court regarding
<PAGE> 14
procedures for the payment of Fee Claims. A Fee Claim with
respect to which a Fee Application has been properly filed and
served shall become an allowed administrative claim only to the
extent allowed by order of the Bankruptcy Court. Nothing herein
shall preclude such professionals from seeking fees and expenses,
pursuant to applicable provisions of the Bankruptcy Code,
Bankruptcy and Local Rules, and applicable orders of this Court,
with respect to periods after the Confirmation Date.
20. The "Order...Appointing Mediator..." dated January
15, 1993, is amended and recharacterized to provide that,
subsequent to the entry of this Order, and prior to the Effective
Date of the Plan, the Mediator shall exercise such oversight
responsibility of the Debtor as, in the Mediator's reasonable
discretion, is necessary to assist the parties in satisfying the
conditions to the occurrence of the Effective Date as set forth
in Section 6.2 of the Plan and to perform such other functions as
may be requested by any party in interest unless otherwise
directed by the Court. The "Order Appointing Expert to Assist
Mediator..." dated march 22, 1993, shall be amended and
recharacterized to provide that Mr. Gioia shall be available to
perform such services as the Mediator or the Court may request.
In the performance of their duties the Mediator and Mr. Gioia
shall continue to be compensated as professional persons pursuant
to the provisions of section 327 of the Bankruptcy Code, in
accordance with the procedure existing prior to the date hereof,
<PAGE> 15
and the Mediator shall be authorized to engage the services of
Hastie & Kirschner at the expense of the estate.
21. The Debtor is authorized to fix, and to give
notice to all banks, brokers, depositories, and other similar
financial intermediaries and "street name" holders of the record
date for distributions to creditors to be established pursuant to
Bankruptcy Rule 3021.
22. In accordance with section 1141 of the Bankruptcy
Code, the Plan and each of its provisions shall be binding upon
the Debtor and its successors and each other entity created
pursuant to the Plan, each Person or entity acquiring or
receiving property under the Plan, each lessor or lessee of
property to or from the Debtor, each holder of a Claim against or
Equity Interest in the Debtor, whether or not the Claim or
Equity Interest of such Creditor or Equity Interest Holder is
impaired under the Plan and whether or not such Creditor or
Equity Interest Holder has filed, or is deemed to have filed, a
proof of Claim or Equity Interest, or has accepted or rejected
the Plan, and each party to this case, and irrespective of
whether such provision of the Plan is specifically mentioned or
otherwise referred to in this Order.
23. In accordance with section 1141 of the Bankruptcy
Code, and except for any security interests, and except for any
joint property interests of other utility participants, which
security interests and joint property interests are provided
under the Plan, any property transferred or otherwise dealt with
<PAGE> 16
in the Plan shall be free and clear of all Claims against and
Equity Interests in the Debtor, and all such property of the
Debtor's estate shall, on the Effective Date, vest in the
entities designated in and provided for by the Plan.
24. As provided in Section 3.14 of the Plan, all
right, title and interest of each holder of Claims in Class 12(a)
or 12(b), including without limitation the Lease Obligation
Bondholders, the Secured Lease Obligation Bondholders, the Palo
Verde Indenture Trustees, the Funding Corporations, the Owner
Trusts and the Owner Trustees, in or relating to the Palo Verde
Nuclear Generating Station and the Palo Verde Leases, shall be
transferred to or be deemed transferred to and be deemed vested
in Reorganized EPE free and clear of all liens, claims, and
interests by any such parties, except as otherwise provided in
the OP Settlement.
25. As provided in Section 3.14(D) of the Plan, each
holder of Lease Obligation Bonds or Secured Lease Obligation
Bonds voting in favor of the Plan shall be deemed to have
directed the appropriate Palo Verde Indenture Trustee pursuant to
the indenture under which such debt instrument was issued to take
such steps as may be required to transfer in a timely manner the
Pledged Lessor Notes (as defined in the Collateral Trust
Indentures described in Schedule A to the Plan) to an entity to
be designated by CSW in a document filed with the Court prior to
the Effective Date, which transfer shall be effective only as of
<PAGE> 17
the Effective Date, and immediately prior to the effectiveness of
the Merger.
26. The transfers of assets and security interests by
the Debtor contemplated by the Plan, and the transfers to the
Debtor as set forth in Section 3.14 of the Plan or as described
in the preceding paragraph of this Order, will be legal, valid,
binding and effective transfers of property and will, to the
fullest extent permitted by the Bankruptcy Code, vest in the
transferee good title to such property, free and clear of all
liens, Claims and encumbrances, except as otherwise provided in
the Plan.
27. An "Order of Dismissal with Prejudice" in the form
attached to the OP Settlement as Annex C shall be entered on the
Effective Date, and a copy thereof provided to each Owner
Participant and to the Palo Verde Indenture Trustees. Promptly
after the Effective Date, the Debtor shall deliver an executed
counterpart of the executed release in the form of Annex D to the
OP Settlement, which was delivered to it in escrow, to each party
thereto.
28. In accordance with the Plan and section 1141 of
the Bankruptcy Code, except as otherwise specifically provided in
the Plan, the consideration distributed under the Plan shall be
in exchange for and in complete satisfaction, discharge, release,
and termination of, all Claims of any nature whatsoever against
the Debtor or any of its assets and all Equity Interests in the
Debtor; and except as otherwise provided herein or in the Plan
<PAGE> 18
(with respect to obligations which Debtor is required to perform
under the Plan), the Debtor shall be discharged and released
pursuant to section 1141(d)(1)(A) of the Bankruptcy Code from any
and all Claims, including but not limited to demands and
liabilities that arose before the Effective Date and all debts of
the kind specified in section 502(g), 502(h) or 502(i) of the
Bankruptcy Code, whether or not (a) a proof of claim based upon
such debt is filed or deemed filed under section 501 of the
Bankruptcy Code; (b) a Claim based upon such debt is allowed
under section 502 of the Bankruptcy Code; or (c) the holder of a
Claim based upon such debt has accepted the Plan. This Order
shall be judicial determination, effective on the occurrence of
the Effective Date, of discharge and termination of all
liabilities of and all Claims against, and all Equity Interests
in, the Debtor, except as otherwise specifically provided in the
Plan. Every holder of any discharged debt, Claim or Equity
Interest is permanently enjoined and precluded from asserting
against EPE, any successor or affiliate, or against its assets or
properties or any transferee thereof, any other or further Claim
or Equity Interest based upon any document, instrument or act,
omission, transaction or other activity of any kind or nature
that occurred prior to the Effective Date, except as expressly
set forth in the Plan.
29. In accordance with section 524 of the Bankruptcy
Code, this Order:
<PAGE> 19
a. voids any judgment at any time obtained, to
the extent that such judgment is a determination of the personal
liability of the Debtor with respect to any debt or Claim
discharged hereby; and
b. operates as an injunction against the
commencement or continuation of an action, the employment of
process, or an act, to collect, recover or offset any such debt
or Claim as a personal liability of the Debtor.
30. Reorganized EPE may use, operate and deal with its
assets, and may conduct and change its business, without any
supervision by the Bankruptcy Court or the Office of the United
States Trustee, and free of any restrictions imposed on the
Debtors by the Bankruptcy Code or by the Court during this
Chapter 11 case.
31. The OP Settlement is approved pursuant to
Bankruptcy Rule 9019(a) in the overall context of the Plan as a
just, equitable, reasonable, and non-discriminatory compromise of
the controversies and Claims resolved by such settlement, and
such settlement is binding on all Persons affected thereby.
32. The Debtor is authorized to assume all executory
contracts and unexpired leases as provided in the Plan, and to
reject all executory contracts and unexpired leases that are not
to be assumed under the Plan.
33. Pursuant to section 1145 of the Bankruptcy Code,
the issuance of the securities by the Debtor and by CSW to
holders of Claims or Interests or to a distribution or escrow
<PAGE> 20
agent or Indenture Trustee and the distribution thereof to
holders of Claims or Interests as provided by the Plan, shall be
exempt from the provisions of section 5 of the Securities Act of
1933, as amended (15 U.S.C. Section 77(e), as amended) and any
state or local law requiring registration for the offer or sale
of a security or registration or licensing of an issuer of,
underwrite of, or broker or dealer in, a security.
34. Pursuant to section 1146(c) of the Bankruptcy
Code, none of the issuance, transfer or exchange of a security
under the Plan, the making or delivery of an instrument of
transfer, the revesting, transfer or sale of any real or personal
property of the Debtor or real or personal property of any holder
of any Claim (including the Palo Verde Indenture Trustees, the
Palo Verde Bondholders, the Owner Trusts, the Owner Trustees or
the Owner Participants) or any Interest in accordance with the
Plan or Merger Agreement (including without limitation, the OP
Settlement), the creation and perfection of any lien or security
interest in connection therewith, or the merger transaction,
shall be subject to any sales, use, transfer, documentary,
recording, stamp or similar tax.
35. The Debtor shall file a notice with the Court
promptly upon the satisfaction and/or waiver of the conditions to
the Effective Date of the Plan. Upon the filing of such notice,
the Effective Date of the Plan shall have occurred and the Plan
shall be fully effective, and the provisions of this Order and
the Plan related to the period on or after the Effective Date
<PAGE> 21
shall come into full force and effect. The Debtor shall serve
copies of a notice of the Effective Date of the Plan,
substantially in the form attached hereto as Exhibit C, and cause
such notice to be published, in the same manner as specified in
paragraph 36 below with respect to this Order.
36. Pursuant to Bankruptcy Rule 3020(c), the Debtor
shall (i) promptly serve notice of the entry of this Order, in
substantially the form attached hereto as Exhibit D, as provided
in Bankruptcy Rule 2002(f) to all persons and entities listed on
the Master Service List, to be sent by first-class mail, postage
prepaid, except to such parties who may be served by hand or
facsimile or overnight courier, which service is hereby
authorized, and (ii) cause such notice to be published in The
Wall Street Journal, national edition and such other publications
as Debtors may designate.
37. Nothing in this Order, the Plan, or the Merger
Agreement shall constitute a determination that because CSW and
EPE are authorized to waive one or more provisions of the Merger
Agreement, that CSW or EPE is therefore authorized to waive,
modify, or violate any applicable state statutory requirements.
38. The rate changes provided in the Plan or the
Merger Agreement that require the approval of a governmental
regulatory commission are expressly conditioned on such approval
as contemplated by section 1129(a)(6) of the Bankruptcy Code.
39. The issues of whether this Court's approval of the
Plan or the Merger Agreement may (i) preempt any authority or
<PAGE> 22
jurisdiction of the New Mexico Public Utility Commission, the
Public Utility Commission of texas, or the City of El Paso, or
(ii) authorize this Court to issue any order to expedite any
regulatory decision, are not ripe for adjudication at this time.
The Court has made no determination as to such issues, if any, at
this time. No party in interest, including the NMPUC, the
Debtor, CSW, the PUCT, and the City of El Paso, has waived any
rights or legal arguments relating to such issues.
40. The provisions of this Order are integrated with
each other and are nonseverable and mutually dependent.
Dated: Austin, Texas
December 8, 1993
/s/ F.R.Monroe
Honorable Frank R. Monroe
United States Bankruptcy Judge
Order submitted by:
Berry D. Spears
Winstead Sechrest & Minick P.C.
100 Congress Avenue, Suite 800
Austin, Texas 78701
<PAGE> 1
EXHIBIT D-14
FILED Dec 8 1993 U.S. BANKRUPTCY COURT BY ____ DEPUTY.
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE WESTERN DISTRICT OF TEXAS
AUSTIN DIVISION
- - - - - - - - - - - - - - - - - - x
In re:
: Case No. 92-10148 FM
EL PASO ELECTRIC COMPANY
:
Debtor.
:
- - - - - - - - - - - - - - - - - - x
FINDINGS OF FACT AND CONCLUSIONS OF LAW RE: ORDER
CONFIRMING THE DEBTOR'S MODIFIED
THIRD AMENDED PLAN OF REORGANIZATION, AS MODIFIED
El Paso Electric Company ("EPE" or "Debtor"), having
filed with the Court the Debtor's Modified Third Amended Plan of
Reorganization under Chapter 11 of the United States Bankruptcy
Code, dated August 27, 1993 (corrected September 15, 1933), and
having modified such Plan by Modifications (the "Modifications")
filed with the Court on December 1 and December 6, 1993, (as so
corrected and modified, the "Plan"); and the Debtor's Disclosure
Statement, dated August 27, 1993 (corrected September 15, 1993)
(the "Disclosure Statement"), having been filed with and approved
by the Court pursuant to an order dated August 27, 1993
(supplemented September 15, 1993) (the "Disclosure Statement
Order"), as containing "adequate information" pursuant to section
1125 of title 11, United States Code (the "Bankruptcy Code"); and
copies of (a) the Plan, (b) the Disclosure Statement, (c) a
letter of the Debtor, (d) a letter of the Official Committee of
Equity Security Holders in a form approved by the Court, and
<PAGE> 2
(e) the appropriate ballot(s) (for those Creditors[1] entitled to
vote on the Plan), having been transmitted to all Creditors and
interest holders entitled to receive the same pursuant to the
Disclosure Statement Order, the United States Trustee, counsel
for the Official Committee of Unsecured Creditors and the
Official Committee of Equity Security Holders, all indenture
trustees and those parties who have filed notices of appearance
in the Debtor's Chapter 11 case pursuant to Bankruptcy Rule 2002,
the Securities and Exchange Commission, the District Director of
Internal Revenue for the district in which this Chapter 11 case
is pending, and the United States Attorney for the Western
District of Texas, all in accordance with the Disclosure
Statement Order; and the Disclosure Statement Order having fixed
(a) 5:00 p.m. Central Standard Time, on November 15, 1993 as the
last time and date by which all Ballots must be properly
completed, executed, marked and received by the Debtor or
McCormick & Prior, Solicitation Agent, at one of the addresses
specified for that purpose in the Disclosure Statement Order and
in the Published Notice described in the Disclosure Statement
Order, in order to be considered as acceptances or rejections of
the Plan; and (b) December 6, 1993 at 11:00 a.m., as the date and
time for the commencement of the hearing pursuant to sections
1128 and 1129 of the Bankruptcy Code (the "Confirmation Hearing")
to consider confirmation of the Plan and any objections thereto
(the "Objections"); and due notice of the Confirmation Hearing
- --------------------------------
[1] Capitalized terms used in this Order and not otherwise
defined shall have the respective meanings ascribed to such
terms in the Plan or Disclosure Statement.
<PAGE> 3
and the date by which Objections must be filed having been given
and published in accordance with the terms of the Disclosure
Statement Order; and the Confirmation Hearing having been held
before the Court on December 6, 1993; and the parties having
appeared for submission of the Findings and Order on December 7,
1993; and the Court having considered all objections to
confirmation of the Plan which have not been withdrawn; and upon
all the record of the Confirmation Hearing, the Court makes the
following Findings of Fact and Conclusions of Law:
FINDINGS OF FACT
1. On January 8, 1992 (the "Petition Date"), the
Debtor filed a petition for relief under Chapter 11 of the
Bankruptcy Code.
2. Since the Petition Date, the Debtor has continued
to operate its business as debtor-in-possession pursuant to
sections 1107 and 1108 of the Bankruptcy Code.
3. EPE is an electric utility operating in the States
of Texas and New Mexico.
4. EPE's rates for retail services are subject to
regulation by the States of Texas and New Mexico; its wholesale
rates are subject to regulation by the Federal Energy Regulatory
Commission ("FERC").
5. EPE's retail rates in Texas have been set under a
series of rate orders by the Public Utility Commission of Texas
("PUCT"), which speak for themselves and which established, among
other things, the reasonable and prudent levels of EPE's
investments in its assets, including Units 1, 2, and 3 of the
<PAGE> 4
Palo Verde Nuclear Generating Station ("Palo Verde") and the
extent to which those investments and assets would be deemed used
and useful, under applicable regulatory standards, in rendering
service to the public.
6. EPE's retail rates in New Mexico have been set
under a stipulated rate order in Case No. 2009 by the New Mexico
Public Utility Commission ("NMPUC") (formerly the New Mexico
Public Service Commission), which settled and established, among
other things, the extent of the reasonableness and prudence of
EPE's investments in Palo Verde Units 1 and 2, and the extent to
which those units were used and useful, and the reasonableness
and prudence of the financial obligations incurred in connection
therewith.
7. During the latter part of 1991, EPE diligently
negotiated with its bank and other creditors to restructure its
obligations to them based on the regulatory decisions regarding
EPE's rates. EPE successfully negotiated and documented an
agreement with its creditors on the basis of the Texas Hearing
Examiner's recommendation in In Application of El Paso Electric
Company for Authority to Change Rates, Docket No. 9945, 18 TEX.
P.U.C. BULL. 9 (Feb. 6, 1992) ("Docket No. 9945"), for a rate
increase of $83.9 million. EPE then renegotiated and
redocumented that agreement with its creditors when the PUCT
rejected the Hearing Examiner's recommendation on November 12,
1991, and awarded a rate increase of only $52.8 million. Id.
Notwithstanding EPE's best efforts, the restructuring could not
be completed after certain Palo Verde Owner Participants drew on
<PAGE> 5
$208 million of letters of credit on December 26 and 27, 1991.
8. Accordingly, EPE filed its petition under Chapter
11 of the Bankruptcy Code, in the reasonable and prudent exercise
of its business judgment, in order to protect its assets from its
creditors, maintain its business operations and satisfy its
duties as a regulated public utility to continue to provide
service to its customers, and restructure its obligations in an
orderly manner as contemplated by the Bankruptcy Code. Shortly
thereafter, certain other Palo Verde Owner Participants drew on
$80 million of letters of credit.
9. This case has been characterized by the active
involvement of various constituencies and parties in interest.
In addition to the Official Unsecured Creditors Committee
selected by the United States Trustee, the Court approved the
appointment of the Equity Committee to represent the interests of
preferred and common shareholders. Nearly all the holders of the
privately held First and Second Mortgage Bonds and the Indenture
Trustees for all the First and Second Mortgage Bonds have been
represented and actively participated in the case. The Palo
Verde Bondholders were represented through their respective
Indenture Trustees. These Bondholders are significant parties in
interest with respect to EPE's obligations under its
sale leasebacks (the "Palo Verde Leases") of its interests in
Palo
Verde Unit 2 and a portion of its interests in Palo Verde Unit 3
(the "Palo Verde Leased Assets"). In addition, EPE's regulators,
including the PUCT, NMPUC, and City of El Paso, as well as the
Texas Office of Public Utility Counsel ("OPUC"), have actively
<PAGE> 6
participated as parties in interest in the proceeding.
10. During the course of this case, EPE has conducted
its business and affairs in a reasonable, prudent, and proper
manner and properly discharged its obligations under the
Bankruptcy Code and applicable non-bankruptcy law.
11. Throughout this case, EPE has sought to emerge
from bankruptcy as a viable entity, either on a stand-alone basis
or in a business combination, as rapidly as possible, with the
continued ability to provide reliable electric service to its
customers. To that end, on September 8, 1992, EPE filed a plan
of reorganization providing for reorganization on a stand-alone
basis. That plan depended on EPE reducing its obligations with
respect to the Palo Verde Leased Assets, and, accordingly, EPE
commenced an adversary proceeding seeking determination of the
claims under the Palo Verde Leases, which leases EPE claimed had
been rejected by virtue of section 365(d)(4) of the Bankruptcy
Code. In the adversary proceeding, EPE sought a determination
that its liability for rejection of the Palo Verde Leases was
limited by Section 502(b)(6) of the Bankruptcy Code, and that the
letter of credit draws described in paragraphs 7 and 8 above
should be applied against this limit. On November 19, 1992, the
Court approved the disclosure statement with respect to such
plan, as amended, and EPE commenced the process of soliciting
acceptances of such plan.
12. On December 15, 1992, after full discovery and
argument in the adversary proceeding, this Court issued a ruling
(since withdrawn) rejecting EPE's theory that the letter of
<PAGE> 7
credit draws could be credited against the liability limited by
section 502(b)(6), if that provision were applicable. As a
result, EPE intensified its efforts to pursue a potential
business combination as a means for emerging from Chapter 11.
13. a. EPE's pursuit of a potential business
combination included an analysis of the entities which might have
an interest in a merger or acquisition, and, at their request,
sending thirteen of them an information package about EPE which
EPE and its investment bankers prepared. Of these, six obtained
detailed briefings and additional information from EPE under
confidentiality agreements or, in one case, after various court
proceedings on the subject, and four of them engaged in a formal
due diligence investigation of EPE's business.
b. As the process of merger discussions evolved,
the field narrowed to two bidders -- Southwestern Public Service
Company ("SPS") and Central and South West Corporation ("CSW") --
regarding a possible merger of the Debtor subject to confirmation
of a plan of reorganization. Each of these entities had held
extensive discussions with EPE's creditors, and their offers to
EPE reflected the results of those negotiations. It was also an
express condition of each such offer that there be a consensual
resolution of the Palo Verde litigation and that the reorganized
Debtor retain its rights to the Palo Verde Leased Assets, either
by continuing and renegotiating the Leases (in the case of SPS)
or by reacquiring the Leased Assets themselves (in the case of
CSW).
<PAGE> 8
c. After months of intensive merger negotiations
involving the Debtor's and CSW's executives, corporate attorneys
and regulatory teams, a Merger Agreement was signed by
representatives of the Debtor and CSW on May 3, 1993. Prior to
signing the Merger Agreement, the Debtor encouraged SPS to make a
bid of greater attractiveness to both the Debtor's creditors and
its shareholders than the CSW proposal. While SPS responded with
a bid that was marginally higher for creditors and preferred
shareholders, the SPS bid provided for minimal consideration for
the holders of the Debtor's common stock, so that the overall
enterprise value provided in the SPS offer was less than that
offered by CSW. Thus, the Debtor's Board of Directors Determined
that both the amount and structure of the SPS bid would have
resulted in a highly contested confirmation process, a serious
risk that an SPS plan would not be confirmable, and, at a
minimum, significant delay in EPE's emergence from Chapter 11.
Accordingly, the SPS bid was unsatisfactory in the sound business
judgment of the Debtor's board of directors.
d. On April 30 and May 2, 1993, after having
discussed possible business combinations on numerous prior
occasions, the EPE board of directors met to discuss final
approval of the CSW offer. Based on the value offered by the CSW
proposal and all the other information and facts available and
presented to the board, including the benefits to the Debtor's
creditors, shareholders and customers of the CSW proposal, the
superiority of the CSW bid to the SPS offer, the effect of that
superiority in increasing the likelihood of the prompt
<PAGE> 9
confirmation of a plan, the financial details of the transaction,
the ability of the proponents to obtain the requisite financing,
the benefits to being part of a utility holding company
considerably larger than SPS, the fact that the merger with CSW
provided for a rate path lower than that to which EPE believed it
was lawfully entitled and believed it would receive on a stand-
alone basis, and an analysis from EPE's investment advisors, Barr
Beatty Devlin, the EPE board unanimously decided that the CSW
proposal was the highest and best offer and should be accepted in
the best interests of the Debtor, its estate, its creditors, its
shareholders and its customers. The bidding process and the
Debtor's conduct of its negotiations for a business combination,
including its negotiations with CSW, were done in an arm's-length
fashion and in a good faith effort by EPE to fulfill its duties
as a debtor in possession to obtain the highest and best offer
for its creditors and shareholders, and to regain economic
stability for the benefit of its customers.
e. On May 5, 1993, the Debtor filed with the
Court its Third Amended Plan of Reorganization and Disclosure
Statement based on the Merger Agreement, and filed corrections to
those documents on May 18, 1993.
f. On May 26, 1993, a hearing was held on SPS's
motion to permit it to file a competing plan of reorganization
pursuant to Rule 3016(a) of the Federal Bankruptcy Rules. At the
conclusion of the hearing, the Court adjourned SPS's motion and
the hearing on approval of the Disclosure Statement for the
Debtor's Third Amended Plan without date, stating, in essence,
<PAGE> 10
that SPS and the Debtor and CSW needed to obtain a degree of
creditor support before proceeding further.
g. During the period from May 5, 1993 through
September 6, 1993, the Debtor and CSW and SPS conducted extensive
negotiations with creditor representatives to secure the support
of the several creditor groups for their respective plans. CSW
improved its offer to the various constituencies, without
increasing the rate path on which its proposal was premised. SPS
declined to use the mediation process established by the Court in
appointing Michael Kirschner as Mediator. The Debtor and CSW
worked with the Mediator. After extensive negotiations and
mediation sessions, the principal classes of secured and
unsecured creditors (Classes 1, 2, 4, 5, 11, and 13), the Palo
Verde bondholders (Class 12(a)), and the Equity Committee
(Classes 15 and 16) filed with the Court statements objecting to
the SPS motion for leave to file a competing plan and supporting
the Debtor's Plan.
h. On July 30, 1993, the Debtor filed its
amended disclosure statement and a Modified Third Amended Plan of
Reorganization. On August 27, 1993, the Court entered an order
approving the Disclosure Statement as corrected and entered a
further order approving further corrections thereto on September
15, 1993.
i. The Court also noticed the continuation of
the hearing on the SPS motion for permission to file a competing
plan for September 9, 1993. After hearing from counsel for SPS
and the Debtor, the Court entered an order on September 17, 1993
denying the SPS motion.
<PAGE> 11
14. Between September 21 and 27, 1993, in accordance
with the Disclosure Statement Order, the Debtor distributed
copies of the Disclosure Statement and Ballots to all known
Creditors and Equity Interest Holders entitled to vote thereon,
sent a notice in a form approved by the Court to known holders of
claims that are not impaired pursuant to section 1124 of the
Bankruptcy Code (which notice dealt only with the non-impairment
of, and the treatment under the Plan of, certain classes and
categories of Claims, but did not deal with the allowance or
disallowance of any specific claims), gave notice and caused
publication of a notice of the Confirmation Hearing, the last
date to file Ballots for accepting or rejecting the Plan, and to
file objections to the Plan, all as provided in said order.
15. a. On November 15, 1993, the Debtor entered into
a Settlement Agreement (the "OP Settlement") with the Palo Verde
Owner Participants, subject to approval by the Court, which would
generally be effective as of the Effective Date of the Plan.
Like the Plan, the OP Settlement provides, inter alia, upon the
Plan's Effective Date, for transfer to Reorganized EPE of the
interests in the Palo Verde Leased Assets acquired by the Owner
Trust, Owner Trustee and Owner Participants from the Debtor, in
exchange for a release by the Debtor of claims against the Owner
Participants and the Debtor's payment of certain fees and
expenses on Confirmation and thereafter.
<PAGE> 12
b. On November 19, 1993, the Court approved the
Settlement Agreement (the "APS Settlement") between the Debtor
and Arizona Public Service Company ("APS"), for itself and as
Operating Agent of, and on behalf of the other participants in,
the Palo Verde Nuclear Generation Station settling, effective as
of the Effective Date of the Plan, the dispute between the Debtor
and APS regarding the amount of and feasibility of cure by the
Debtor of its defaults under the ANPP Assumed Agreements (as
defined in the APS Settlement), which Agreements the Debtor is to
assume pursuant to the Plan and the APS Settlement, and certain
claims by the Debtor against APS.
c. The OP Settlement and APS Settlement are part
and parcel of the Plan, and intended to facilitate confirmation
of the Plan and consummation of the Merger contemplated therein.
16. The Plan has been accepted by overwhelming
majorities, and in most cases unanimous or near-unanimously, by
each Class of Creditors and Equity Security Holders. The vote
with respect to the Plan was as follows:
Percent of votes in favor
Class -------------------------
No. Class By amount By number
- ----- ----- --------- ---------
1 First Mortgage Bonds 99.7% 97.5%
2 Second Mortgage Bonds 100.0 100.0
3 Revolving Credit Facility 100.0 100.0
5 LCs for maricopa PCBs 100.0 100.0
6 Rio Grande Resources Trust 100.0 100.0
11 LCs for Farmington PCBs 100.0 100.0
<PAGE> 13
12(a) Palo Verde Bondholders 99.7 98.4
12(b) P.V. Owner Participants 100.0 100.0
13 General unsecured 99.9 97.4
By number
of shares
---------
15 Preferred stock 93.1
16 Common stock 97.9
17. The Plan represents a global compromise of the
many significant issues in this case, and is calculated to permit
EPE's rehabilitation and expedite its emergence from bankruptcy
on a consensual basis. This global compromise resolves the
claims and interests of creditors and shareholders in a manner
which is fair to each of them in the context of the treatments
afforded to all affected entities; and, in addition, provides the
ratepayers with significant benefits. The Plan's provisions in
effecting resolutions of these various entities' claims and
interests are intertwined, and were determined through extensive
negotiations on an arm's length basis, in a negotiation process
contemplated by the Bankruptcy Code and by this Court's prior
orders. In evaluating the Plan, as well as the several
compromises contained therein, this Court has considered not only
the standards for confirmation of plans under the Bankruptcy Code
but also, inter alia, the merits of these matters under dispute,
the possible respective outcomes and their probabilities; the
complexities and uncertainties of the litigation on those issues,
not only in the Bankruptcy Court but also with respect to the
<PAGE> 14
inevitable appeals on matters of the magnitude presented in this
case; and the importance of the resolution of these controversies
as part of an overall consensual plan in facilitating the
emergence of this debtor from Chapter 11.
18. The principal compromises in the Plan are in two
areas: (a) the Plan resolves and compromises claims and
interests and settles related potential litigation; and (b) the
creditors and equity interest holders (i) have foregone their
right to seek the full rate increases to which EPE as a stand-
alone entity may reasonably be entitled under applicable law;
(ii) have acquiesced in the pass-through to the ratepayers of
substantial cost savings associated with the bankruptcy and the
CSW merger; and (iii) have agreed to allow the Debtor to offer to
the ratepayers the additional rate concessions implicit in the
Rate Path in Exhibit E to the Disclosure Statement. The specific
compromises in the Plan include the following:
a. The Plan generally provides for payment in
full of the claims of secured creditors, including post-petition
interest, but with instruments that, after the Effective Date,
are likely to bear interest rates that are lower than the current
obligations. Unsecured claims generally will receive notes and
CSW common stock equal to 95.5% of their claims, and receive
post-petition interest from June 25, 1993 through the Effective
Date at LIBOR plus 200 basis points; this interest (in the case
of Classes 11 and 13 only) will be in lieu of all claims for
post-petition interest and other post-petition claims for the
<PAGE> 15
period from the commencement of the case to the date such
interest payments cease in the event the Effective Date does not
occur. Rio Grande Resources Trust creditors in Class 6 will be
paid in full, but forego 15% of their post-petition interest
claim prior to September 10, 1993. Various classes of claims are
unimpaired, including claims relating to Pollution Control Bonds
("PCB's"). The letters of credit in Classes 5 and 11 supporting
the PCB's will remain outstanding, under negotiated arrangements
that will permit the favorable PCB financing to be preserved for
the benefit of the Reorganized Debtor. The Claims related to the
Palo Verde Leases in Class 12(b) are compromised pursuant to the
OP Settlement (as defined in the Plan), and the Claims of the
Palo Verde Bondholders in Class 12(a) are treated in a manner
similar to the allowed claims of unsecured creditors. Preferred
shareholders in Class 15 will receive either CSW common stock or
new EPE preferred stock with a value of approximately $68
million, or 82% of their interests, and common shareholders in
Class 16 will receive, in CSW common stock, between $3 and $4.50
per share, depending on the collection of certain assets
designated for the recovery by that Class and the savings from
reduction in certain claims. The foregoing treatment of the
various classes represents a balanced and fair resolution of this
complex Chapter 11 case. In the context of this Plan and the CSW
bid, taken as a whole, and in light of the respective treatment
of creditors and equity security holders, the distributions and
settlements contained in the Plan are fair and equitable,
<PAGE> 16
constitute a reasonable and appropriate treatment and settlement
by EPE of the respective claims and rights of the parties,
including claims related to post-petition interest, are in the
best interests of the estate and accord with the provisions of
the Bankruptcy Code. The settlement of the Claims of Class 12(a)
negotiated by the Palo Verde Indenture Trustees and accepted by
the holders of Claims in Class 12(a) was an appropriate exercise
by the Palo Verde Indenture Trustees of their obligations to the
Bondholders, in that such settlement avoids the risks and costs
to the Bondholders of further pursuit of the Palo Verde
litigation, including the risk that the Debtor would prevail on
various issues in that proceeding and that the Bondholders would
receive recoveries significantly lower than those which they will
receive under the Plan.
b. The Plan, and the formal agreements filed on
November 5, 1993 under Section 7.6 of the Plan, reflect the
interest rates, maturities, and other terms and conditions of the
instruments and securities to be distributed to creditors. Such
interest rates, maturities, and other terms and conditions were
negotiated at arm's length, are appropriate for obligations of
that type by comparison with other electric utilities with
comparable financial and other characteristics to EPE, and
represent, in the context of the Plan taken as a whole, a fair
and reasonable resolution of such creditors' claims. These
securities will be issued for the discharge or lawful refunding
of Debtor's obligations, and in all cases, the creditors are
<PAGE> 17
giving valid consideration for the securities to be issued. In
many cases the amount offered to the creditors is less than the
consideration they furnished to the Debtor or the claims that
they could assert against the Debtor, and the securities will be
priced at current market rates as of the Effective Date, thereby
likely leading to a reduction in the Debtor's interest costs. In
addition, the issuance of such securities accomplishes the Plan's
objectives and permits the Debtor to emerge from Chapter 11. For
all these reasons, the issuance of the securities under the Plan
is an appropriate means of the implementation of the Plan under
section 1123(a)(5)(J) of the Bankruptcy Code.
c. The Plan provides for the restructuring of
the Palo Verde Leased Assets, in substitution for the current
Palo Verde Leases, as part of an overall compromise and
settlement with the holders of Claims in Class 12. In the
context of the Plan and the overall benefits it provides, there
was no practical or better alternative to this restructuring,
either for the Debtor or for the holders of Claims in Class 12.
The Palo Verde Leased Assets will continue to be used for the
benefit of EPE's operations and customers in the same manner and
to the same extent as they have been used for the generation of
power necessary to provide service to customers in EPE's service
territory both prepetition and during the course of this Case.
There is no change in the extent of EPE's utilization of the Palo
Verde facility, the percentage of its costs that EPE is to bear,
or the percentage of capacity it receives.
<PAGE> 18
d. Under the settlement with Class 12(a), the
holders of the Palo Verde Bonds will be treated as creditors of
the estate (as they had sought throughout this proceeding) and
receive consideration equal to 95.5% of their Claims, to be
allowed in the amount of $700 million, together with post-
petition interest at LIBOR plus 200 basis points from July 29,
1993. The Allowed Claim amount of $700 million represents a
significant reduction in the potential Claims of such
Bondholders, if all the disputed issues had been decided in their
favor. Depending on the outcome of the Palo Verde adversary
proceeding, such holders could hold potential unsecured Claims of
approximately $725 million, including pre-petition interest, plus
potential Administrative Claims for post-petition rent at the
contract rate of $91 million per year, or such other reasonable
rate as the Court might determine. Under the Plan, the liens of
the Palo Verde bondholders and the Palo Verde Indenture Trustees
will be discharged, and the Palo Verde Indenture Trustees will
transfer their rights with respect to the Palo Verde Leased
Assets to the Reorganized Debtor and exchange releases with the
holders of Class 12(b) Claims.
e. Under the OP Settlement with holders of
Claims in Class 12(b), the holders of the beneficial interests
the Palo Verde Leased Assets will transfer those interests to the
Reorganized Debtor, release their claims for an additional $58
million under the Palo Verde Leases, retain the $288 million
drawn under letters of credit, and be released from Claims by the
Debtor and other creditors.
<PAGE> 19
f. As a consequence of the Plan's settlements
and compromises with Classes 12(a) and 12(b), $956.9 million will
have been paid on account of the Palo Verde claims, including the
$288.4 million received by the Owner Participants pursuant to
their draws on the Palo Verde letters of credit, for the
reacquisition of the Palo Verde assets and lease rejection
damages. Of this amount, $605 million is reflective of the fair
market value based on the regulatory book value as of June 30,
1993 of the assets which are being reacquired, and $351.9 million
is attributable to lease rejection damages.
g. Based on the evidence and arguments presented
in the adversary proceeding, the Court is familiar with the
strengths and weaknesses in the Debtor's position. Although
there are theories on which the Debtor's Palo Verde liabilities
might have been less, there are also theories on which damages
might have been considerably greater, and the Court has evaluated
the various litigation alternatives based on the extensive record
of the Palo Verde adversary proceeding as well as the evidence
presented during the Confirmation Hearing. Litigation of the
issues, given the amounts involved in this case and the
importance of the issues, would be extensive and expensive, and
likely involve multiple appeals. In addition, continued
litigation of the Palo Verde claims would have precluded the
Debtor from entering into a favorable merger agreement that
resolves this proceeding. Both the Merger Agreement with CSW and
the SPS proposal were conditioned on settlement of the Palo Verde
<PAGE> 20
litigation and a retention of the rights with respect to the Palo
Verde Leased Assets by the Reorganized Debtor. The settlement of
the Palo Verde disputes permits EPE's exit from Chapter 11, under
a Plan which has been effected on a consensual basis and which
satisfies the claims and interests of the various constituencies
and Classes, including Classes junior or equal to Class 12 which
would be the ones most likely to benefit from a reduction in
Class 12 Claims. The resolution of EPE's Palo Verde Leases in
this manner, in the context of the Plan taken as a whole,
reflects the Debtor's sound business judgment, constitutes a fair
and equitable resolution and a reasonable and sensible settlement
by the Debtor and the Palo Verde Indenture Trustees of the
respective rights of the parties, is within the reasonable range
of litigation possibilities, and is in the best interests of the
estate and the Bondholders. The Palo Verde litigation could not
have been settled for a materially lower amount to obtain a
consensual plan. Under all the circumstances, it would not have
been appropriate for EPE to continue to litigate the adversary
proceeding.
h. The Plan also provides for the assumption by
Reorganized EPE of various executory contracts and leases.
Assumption of such contracts and leases, in the context of the
Plan taken as a whole, reflects the Debtor's sound business
judgment, and is reasonable and in the best interests of the
estate. The assets subject to such contracts and leases will
continue to be used for the benefit of EPE's operations and
<PAGE> 21
customers in the same manner and to the same extent as they were
used for the provision of necessary utility services to customers
in EPE's service territory both prepetition and during the course
of this Case.
i. The agreements assumed include various
agreements with Arizona Public Service Company and other
Participants in the Palo Verde Nuclear Generating Station, in
accordance with the APS Settlement previously approved by the
Court. The settlement with APS avoids costly and complex
litigation with respect to the claims being resolved, and ensures
EPE's continued right to receive Palo Verde power, through
assumption of the applicable agreements, and thus satisfies a
practical requirement of the Plan and CSW Merger. Accordingly,
in the context of the Plan and the overall compromises it
reflects, and to facilitate the prompt rehabilitation of EPE
under such Plan, the APS Settlement and compromise is
appropriate, fair and reasonable, supported by fair
consideration, and in the best interest of the estate.
j. The Plan and the CSW Merger which it
contemplates also afford significant and substantial benefits for
the ratepayers in EPE's service territory. In reviewing these
benefits, this Court is not suggesting that providing ratepayer
benefits is one of the purposes of Chapter 11 or that a
bankruptcy case lawfully could be used for that purpose. To the
contrary, it is the obligation of a debtor in possession to
maximize the value of the estate for the benefit of creditors and
<PAGE> 22
shareholders and not to seek to benefit ratepayers if that would
result in erosion of creditor recoveries or of estate values. In
the context of this case, however, EPE has been able to propose a
Plan which, as a result of the CSW Merger and other factors,
complies with a debtor's obligations to creditors and
shareholders under the Bankruptcy Code while providing ratepayer
benefits. Because of the compromises and treatments of the
various classes contained in the Plan, the Debtor, its creditors
and shareholders have accepted a Plan that forgoes the Debtor's
right to seek its full entitlements for stand-alone increased
rates, and that contemplates the benefits to ratepayers
associated with the CSW Merger and CSW's rate proposal.
k. The ratepayers are provided substantial
benefits since the rate increases which the Debtor could seek
from a stand-alone reorganization plan will be delayed and
reduced under the Plan and the CSW Merger. These benefits result
from savings in operating and financing costs which are projected
to result from the CSW Merger and the rate concessions which CSW
has proposed.
l. If the Debtor were reorganized on a stand-
alone basis, it would seek rates in Texas at least equal to those
found by Paul L. Gioia, the independent regulatory expert engaged
by the Mediator. On June 1, 1993, the Court directed Mr. Gioia
to determine the viable rate path which the Debtor, on a stand-
alone basis, would reasonably expect to obtain in a fully
litigated rate case before the PUCT. In his Report to the
<PAGE> 23
Mediator, which has been received in evidence, Mr. Gioia
concluded, based on conservative rate path assumptions, that the
Debtor could reasonably be entitled to Texas rate increases which
would be equivalent to a one-time increase of approximately $70
million, and that there is a possibility that the Debtor would be
entitled to even higher rates. Based on the evidence presented,
it is reasonable to conclude that the rates upon which the Third
Amended Plan, as modified, are based are reasonable and that they
are at the lower end of the range of reasonableness that the
Debtor as reorganized will be entitled to, and that those rates
are lower than those that the Debtor would reasonably be entitled
to on a stand-alone basis.
m. In contrast to this stand-alone rate level,
the Debtor and CSW have proposed a rate path compromise and
settlement in Exhibit E to EPE's Disclosure Statement which
contemplates an initial rate increase of $25 million in Texas,
an amount which is approximately $29 million a year below the $54
million initial rate increase set forth in the Gioia Report, and
which, in present value terms, represents a savings to Texas
customers over the next eight years of approximately $130 million
compared to amounts set forth in the Gioia Report.
n. The Plan and Merger are designed to provide
additional cost reductions and other benefits for customers:
(1) The centerpiece of the Plan is the
proposed CSW Merger, which provides an enterprise value for
creditors and shareholders under the CSW Merger of approximately
<PAGE> 24
$2.15 billion, exclusive of cash retained by EPE and paid out to
creditors and preferred shareholders prior to the Effective Date.
This amount exceeds the consideration offered by SPS by over $120
million. The value represented by the CSW Merger was determined
on an arm's length basis, in a sophisticated and competitive
market, after extensive bidding. Accordingly, based on the
acceptance of the Plan by creditors and interest holders, the CSW
proposal reflects the value for EPE on a reorganization basis,
and the Merger Agreement was an appropriate exercise of the
Debtor's business judgment.
(2) Although it is arguable that under the
Bankruptcy Code the additional enterprise value created through
the cost savings associated with bankruptcy and the CSW Merger
constitute property of the estate and should be preserved for the
benefit of the estate's creditors and shareholders, the
compromises implicit in the Plan, which have been accepted by
each of those classes, permits substantial cost reductions to be
passed through to ratepayers in the future.
(3) The CSW Merger is expected to generate
cost savings after the Effective Date, a substantial portion of
which will be applied for the benefit of ratepayers.
(4) The ratepayers benefit from the
reduction of interest rates on EPE's outstanding instruments
which EPE is able to achieve under the Plan without being subject
to prepayment or other fees contemplated under those documents.
<PAGE> 25
(5) The net present worth of the revenue
requirements associated with the restructuring of the Palo Verde
Leases will be lower than payments under the approach utilized by
the PUCT for the prior leases for Units 2 and 3 and by the NMPUC
for Unit 2. This restructuring provides the further benefit of
resolving the litigation and uncertainty associated with the
rejection of the Palo Verde Leases, and will ensure EPE's
continued ability to receive Palo Verde power for the benefit of
its customers.
(6) The Rate Path contained in Exhibit E
represents a settlement and compromise offer, seeking lower rate
increases than would appear to be justified by the prior
regulatory rulings, the capital structure approved herein in
connection with the Plan, and the applicable costs of providing
service to customers. The Exhibit E Rate Path does not seek a
recovery or rate base treatment which would add the $288 million
in letter of credit reimbursement obligations to the Debtors
regulatory net book value, notwithstanding the contention, which
would be advanced by EPE in a stand-alone rate case, that the
$288 million in letter of credit draws were a known and essential
part of the Palo Verde sale and leaseback transactions approved
by the PUCT and NMPUC and accordingly properly should be added to
rate base and included in rates. Further, CSW does not intend to
seek recovery by Reorganized EPE of certain bankruptcy costs
which EPE would seek to recover in a stand-alone rate case.
<PAGE> 26
19. The CSW Merger and its incorporation into the Plan
provide the highest enterprise value for creditors and interest
holders of the estate. Even though a higher value to creditors
and equity holders will result from the Plan, lower rates than
would otherwise be feasible will also result from the Plan and
the concessions and compromises of the various parties in
interest reflected therein. In the context of this case, it
would have been contrary to EPE's duties as debtor in possession
to pursue a plan which would result in a lower enterprise value.
The events of this case, including particularly the competitive
bidding process which involved SPS and the substantial preference
for the CSW Merger which was expressed by the constituencies in
this case, as reflected in prior court hearings, demonstrate that
no other alternative, including the alternative presented by the
SPS proposal, is or would have been appropriate for EPE at this
time. Even if such other alternative were feasible, moreover,
it would not be consistent with the objectives of the Bankruptcy
Code or the best interests of the estate to delay EPE's emergence
from Chapter 11 to pursue such other alternative.
20. The alternative of liquidation is extremely more
undesirable for the estate, and would be inconsistent with EPE's
public service obligations. Accordingly, liquidation is not an
alternative which EPE should have pursued. The liquidation of a
public utility presents unique issues and problems, in that
public utility property must remain dedicated to public service.
<PAGE> 27
The evidence establishes that to the extent EPE could have been
liquidated, such liquidation would involve piecemeal sales of its
various asset components and would yield values which, although
slightly more than the secured debt in this case, would give
unsecured creditors less than fifty percent of their claims, and
provide no recovery for shareholders. Accordingly, all classes
of unsecured creditors and interest holders would receive
significantly less in a liquidation than they would under the
Plan.
21. The CSW Merger will allow Reorganized EPE to
emerge from bankruptcy as a financially viable entity, will
assure Reorganized EPE's ability to comply with applicable
regulatory laws which require it to provide efficient and
reliable utility service and, as a result of the cost reductions
and efficiencies resulting from the improved financial condition
of Reorganized EPE and its status as an operating subsidiary of
CSW, will enable such service to be provided at a lower cost than
if the merger did not occur. Accordingly, the CSW Merger is an
appropriate means of the implementation of the Plan under Section
1123(a)(5)(J) of the Bankruptcy Code.
22. In bidding and in negotiating the Merger
Agreement with the Debtor and in negotiating with Creditors,
Preferred Stockholders and the Equity Committee and other parties
in interest, the Debtor and CSW have acted in good faith, in
compliance with the procedures established by the Court, and not
contrary to any applicable law. In soliciting the acceptance of
the Plan, the Debtor, CSW, the Official Committees, and the other
<PAGE> 28
principal creditor groups, and the officers, employees,
attorneys, investment bankers, representatives of each of the
Debtor, CSW, the Official Committees, and the other principal
creditor groups, acted in good faith and in accordance with the
applicable provisions of the Bankruptcy Code.
23. All conditions to confirmation, including those
set forth in Section 6.1 of the Plan, have been satisfied.
24. The Plan:
a. Specifies every class of Claims or Interests
that is not impaired under the Plan;
b. Specifies the treatment of any class of
Claims or Interests that is impaired under the Plan;
c. Provides the same treatment for each Claim or
Interest of a particular class, unless the holder of a particular
Claim or Interest agrees to a less favorable treatment of such
particular Claim or Interest;
d. Provides adequate means for the Plan's
implementation;
e. Provides for the inclusion in the charter of
the Debtor of a provision prohibiting the issuance of nonvoting
equity securities, and providing, as to the several classes of
securities possessing voting power, an appropriate distribution
of such power among such classes, including, in the case of any
class of equity securities having a preference over another
class of equity securities for the election of directors
representing such preferred class in the event of default in the
payment of such dividends; and
<PAGE> 29
f. Contains only provisions that are consistent
with the interests of creditors and equity security holders and
with public policy with respect to the manner of selection of any
officer, director, or trustee under the Plan and any successor to
such officer, director, or trustee.
25. The Plan has been proposed in good faith and not
by any means forbidden by law as required by Section 1129(a)(3)
of the Bankruptcy Code.
26. Any payment made or to be made by the Debtor, or
by a person issuing securities or acquiring property under the
Plan, for services or for costs and expenses in or in connection
with this Chapter 11 case, or in connection with the Plan and
incident to this Chapter 11 case, shall be subject to the
approval of the Court as reasonable as required by section
1129(a)(4) of the Bankruptcy Code.
27. At the Confirmation Hearing, the Debtor disclosed
the identity and affiliations of the individuals proposed to
serve, after confirmation of the Plan, as directors and officers
of the Debtor, who will continue to serve until replaced. Prior
to the Effective Date, CSW will file a statement with the Court
identifying the individuals who will serve as the Officers and
Board of Directors of Reorganized EPE. The Board will be
comprised of CSW's chief executive officer, the chief executive
officer and five other officers of Reorganized EPE and six
outside directors who are residents of Reorganized EPE's service
area or such other persons as shall be designated by CSW prior to
the Effective Date. The officers of Reorganized EPE immediately
<PAGE> 30
after the Effective Date shall be such persons as shall be
designated by CSW in consultation with the Debtor prior to the
Effective Date. The continuance or appointment of such
individuals as directors and to such offices is consistent with
the interests of Creditors and Equity Interest Holders and with
public policy, and the Debtor has disclosed the identity of any
insider that will be employed or retained by the Debtor, and the
nature of any compensation for such insider, all as required by
section 1129(a)(5)(A) of the Bankruptcy Code.
28. The rate changes provided in the Plan or the
Merger Agreement that require the approval of a governmental
regulatory commission are expressly conditioned on such approval
as contemplated by section 1129(a)(6) of the Bankruptcy Code.
29. The Plan has not been accepted by each holder of a
Claim or Equity Interest of every class that is impaired under
the Plan; however, each non-accepting holder of a Claim or Equity
Interest of each such class will receive or retain under the Plan
on account of such Claim or Equity Interest property of a value,
as of the Effective Date, that is not less than the amount that
such holder would so receive or retain if the Debtor were
liquidated under Chapter 7 of the Bankruptcy Code on such date as
required by section 1129(a)(7)(A) thereof.
30. All impaired classes have accepted the Plan in
terms of both number and amount pursuant to section 1126 of the
Bankruptcy Code, and accordingly the Plan complies with section
1129(a)(8) and (10) of the Bankruptcy Code.
<PAGE> 31
31. Confirmation of the Plan is not likely to be
followed by the liquidation, or the need for further financial
reorganization, of the Debtor, and accordingly the Plan complies
with section 1129(a)(11) of the Bankruptcy Code. The Texas rates
set forth in Exhibit E are substantially below, and the New
Mexico rates set forth in Exhibit E are consistent with, the
rates supported by the regulatory findings made in prior rate
cases by the PUCT and NMPUC regarding the Debtor's reasonable and
prudent investment in property and other regulatory
determinations and treatments. Those issues were previously
considered at length and resolved in prior proceedings before the
PUCT and NMPUC. See Application of El Paso Electric Company for
Authority to Change Rates, Docket No. 7460, 14 TEX. P.U.C. BULL.
929, 1250-51 (June 16, 1988), aff'd in part and rev'd in part on
other grounds, City of El Paso v. Public Util. Comm'n, 839 S.W.2d
895 (Tex. App.--Austin 1992, writ granted); Application of El
Paso Electric Company for Authority to Change Rates, Docket No.
9945, 18 TEX. P.U.C. BULL. 9, 560-62 (Feb. 6, 1992), aff'd in
part and rev'd in part, El Paso Elec. Co. v. Public Util. Common,
No. 92-05642 (299th Dist. Ct., Travis Co., Tex., Oct. 27, 1993);
Application of El Paso Electric Co., Docket No. 8363, 14 TEX.
PUC. BULL. 2834, 3064 (1989); Application of El Paso Electric
Co., Docket No. 8078, Slip Op. (1989); In the Matter of an
Investigation into Appropriate Rate Moderation Methodologies for
El Paso Electric Co., Case No. 2009 (New Mexico Public Utility
Commission, May 18, 1991). Thus, there appear to be no material
outstanding issues in Texas or New Mexico (Case No. 2009) as to
<PAGE> 32
either the prudent investment in or the used and useful character
of most of EPE's principal components of property and other
regulatory assets (except a systems operation building, certain
capital additions at Palo Verde placed in service after June 30,
1990, and the Palo Verde Unit 3 accounting deferrals, which have
yet to be resolved by the Texas regulatory authorities). The
Rate Path contained in Exhibit E is reasonable and is at the
lower end of the reasonable range of expectations as to the rates
which the PUCT and NMPUC are likely to approve upon the
conclusion of proceedings conducted by these regulatory
authorities. Accordingly, it is probable and reasonable to
expect that the Texas and New Mexico regulatory authorities will
approve the rates set forth in Exhibit E or their equivalent. In
addition, the projections of Reorganized EPE's operations,
coupled with the investment grade rating which under the Plan
must be obtained for its senior debt securities, make it probable
that the Debtor will be able to meet its financial obligations
under the Plan after the Effective Date.
32. Except to the extent that the holder of a
particular Claim has agreed to a different treatment of such
Claim (including, without limitation, such agreements relating to
certain deferrals and certain claims incurred in the ordinary
course of the Debtor's business), and except to the extent that
such Claims have been previously paid pursuant to a prior order
of this Court, the Plan provides, as required by section
1129(a)(9) of the Bankruptcy Code, that:
<PAGE> 33
a. with respect to an Allowed Claim of a kind
specified in section 507(a)(1) of the Bankruptcy Code (i.e.,
Allowed Administrative Claims, including Allowed
Superpriority Claims), on the Effective Date, the holder of
such Claim will receive on account of such Claim Cash equal
to the Allowed amount of such Claim as required by section
1129(a)(9)(A) of the Bankruptcy Code;
b. with respect to an Allowed Claim of a kind
specified in section 507(a)(3), 507(a)(4), or 507(a)(6) of
the Bankruptcy Code (i.e., Priority Wage Claims, Priority
Plan Contribution Claims, and Customer Deposits), the holder
of such Claim will receive Cash on the Effective Date equal
to the Allowed amount of such Claim as required by section
1129(a)(9)(B) of the Bankruptcy Code; and
c. with respect to an Allowed Claim of a kind
specified in section 507(a)(7) of the Bankruptcy Code (i.e.,
Priority Tax Claims), the holder of such Claim will receive
on account of such Claim deferred Cash payments, over a
period not exceeding six years after the date of assessment
of such Claim, of a value, as of the Effective Date, equal
to the Allowed amount of such Claim as required by section
1129(a)(9)(C) of the Bankruptcy Code.
33. All fees payable to date under 28 U.S.C. Section
1930 have been paid, and the Plan provides for the payment of all
such fees on the Effective Date as required by section
1129(a)(12) of the Bankruptcy Code.
34. Section 4.3(D) of the Plan provides for the
continuation, after the Effective Date, of payment of all Retiree
Benefits at the levels established pursuant to subsection
(e)(1)(B) or (g) of section 1114 of the Bankruptcy Code, at any
time prior to the Confirmation Date, for the duration of any
period the Debtors have obligated themselves to provide such
Retiree Benefits at such levels, as required by section
1129(a)(13) of the Bankruptcy Code.
35. The Modifications do not adversely change the
treatment of any creditor or any equity security holder.
<PAGE> 34
36. The Court's oral Findings of Fact on the record
on December 6, 1993 are incorporated herein by reference.
37. To the extent that any provision designated
herein as a Finding of Fact is more properly characterized as a
Conclusion of Law, it is adopted as such.
CONCLUSIONS OF LAW
1. This is a core proceeding within the meaning of 28
U.S.C. Section 157(b)(2)(L). This matter arises under Title 11,
and jurisdiction is vested in this Court to enter a final order
by virtue of 28 U.S.C. Section 1334(a) and (b), 28 U.S.C.
Section 151, 28 U.S.C. Sections 157(a) and (b)(1) and the
Standing Order of Reference in this District. These Findings of
Fact and Conclusions of Law are being entered under Bankruptcy
Rules 7052 and 9014.
2. The Plan complies with the applicable provisions
of the Bankruptcy Code as required by section 1129(a)(1) thereof.
3. The Plan designates appropriately, in conformance
with Section 1122 of the Code, classes of Claims, except Claims
of a kind specified in Section 507(a)(1), 507(a)(2), and
507(a)(7) of the Code, and classes of interests.
4. The Debtor was legally entitled to invoke the
protections of the Bankruptcy Code and filed this Case in good
faith. The Debtor has also conducted this case in a reasonable
and prudent manner, and in accordance with the provisions of the
Bankruptcy Code. The Debtor, as proponent of the Plan, has
complied with the applicable provisions of the Bankruptcy Code as
required by section 1129(a)(2) thereof.
<PAGE> 35
5. Notice and distribution of the Plan and the
Disclosure Statement were appropriate and complied with the
applicable provisions of the Bankruptcy Code and the Bankruptcy
Rules. The opportunity for a hearing on these matters was full
and adequate.
6. The Modifications are deemed accepted by all
creditors and equity security holders in accordance with
Bankruptcy Rule 3019, and the Modifications are deemed part of
the Plan under section 1127(a) of the Bankruptcy Code.
7. The Palo Verde Indenture Trustees have the power
to represent the holders of the Bonds and to recover all sums due
and owing to them under the Indentures, and the resolution of
this dispute by settlement, when combined with confirmation and
the Effective Date of the Plan, will bind all holders of the
Bonds.
8. In the context of the Plan, taken as a whole, the
OP Settlement, the APS Settlement, and the other settlements and
compromises contained in the Plan are just, within the bounds of
reasonableness, and are of substantial benefit to parties in
interest. Accordingly, the standards for approval of such
settlements under Bankruptcy Rule 9019(a) are satisfied.
9. The Merger Agreement is an appropriate exercise of
the Debtor's business judgment.
10. The findings of the Court concerning the rates
proposed in Exhibit E and prior determinations made by the PUCT
and NMPUC are necessary to the Court's conclusion that it should
<PAGE> 36
confirm the Plan under Section 1129(a) of the Bankruptcy Code.
Pursuant to Section 1129(a)(6) of the Bankruptcy Code, the Court
is not approving any rate changes provided for in the Plan.
11. The Debtor, CSW, the Official Committees, and the
other principal creditor groups, and their respective officers,
employees, attorneys, investment bankers, and representatives,
are entitled to the protections of Section 1125(e) of the
Bankruptcy Code and other applicable law.
12. The Court's oral Conclusions of Law on the record
on December 6, 1993 are incorporated herein by reference.
13. Nothing in the Court's Findings or Conclusions as
to the proposed settlement and compromise of any Claims under the
Plan shall be probative as to the merits of any such Claims or
the appropriateness of any settlement or compromise thereof in
the event the Plan does not become effective.
14. To the extent that any provision designated
herein as a Conclusion of Law is more properly characterized as a
Finding of Fact, it is adopted as such.
Dated: Austin, Texas
December 8, 1993
/s/
Honorable Frank R. Monroe
United States Bankruptcy Judge
Submitted by:
Berry D. Spears
Winstead Sechrest & Minick P.C.
100 Congress Avenue, Suite 800
Austin, Texas 78701
<PAGE> 1
EXHIBIT G-1
SECURITIES AND EXCHANGE COMMISSION
(Release No. 35-__________)
Filings Under the Public Utility Holding Company Act of 1935
_________ ___, 1994.
Notice is hereby given that the following filing has
been made with the Commission pursuant to provisions of the
Public Utility Holding Company Act of 1935, as amended (the
"Act"), and rules promulgated thereunder. All interested persons
are referred to the Application-Declaration for complete
statements of the proposed transaction summarized below. The
Application-Declaration and any amendments thereto are available
for public inspection through the Commission's Office of Public
Reference.
Interested persons wishing to comment or request a
hearing on the Application-Declaration should submit their views
in writing by January __, 1994 to the Secretary, Securities and
Exchange Commission, Washington, D.C. 20549, and serve a copy on
the applicant-declarant at the address specified below. Proof of
service (by affidavit or, in the case of an attorney at law, by
certificate) should be filed with the request. Any request for
hearing shall identify specifically the issues of fact or law
that are disputed. A person who so requests will be notified of
any hearing, if ordered, and will receive a copy of any notice or
order issued in the matter. After said date, the Application-
Declaration, as filed or as amended, may be granted and/or
permitted to become effective.
<PAGE> 2
Central and South West Corporation (70- )
Central and South West Corporation ("CSW"), a Delaware
corporation and a holding company registered under the Act,
submits this Application-Declaration pursuant to Sections 6(a),
7, 9(a), 10 and 13(f) of the Act and the rules thereunder,
requesting approval of CSW's proposed acquisition of El Paso
Electric Company ("EPE" and after completion of its
reorganization in bankruptcy, "Reorganized EPE"), the issuance of
securities in connection with the acquisition, the addition of
EPE to the CSW system service agreement, and certain related
transactions.
EPE is an electric public utility incorporated under
the laws of the State of Texas and a debtor-in-possession in
bankruptcy reorganization proceedings pending in the Bankruptcy
Court for the Western District of Texas (the "Transaction"). The
proposed Transaction is the result of nearly two years of
proceedings and negotiations of enormous complexity and expense
and resolves a bankruptcy that is only the second bankruptcy of a
major publicly traded electric utility company since the Great
Depression.
To effect the Transaction, EPE will merge with a shell
subsidiary to be established by CSW, with EPE the surviving
corporation. As a result of the Transaction, EPE will become a
wholly owned subsidiary of CSW. Simultaneously with the merger,
EPE's plan of reorganization will become effective. As part of
the reorganization and merger, in exchange for existing EPE
securities and claims against EPE, EPE's current stockholders and
<PAGE> 3
creditors will receive shares of common stock, $3.50 par value,
of CSW ("CSW Common Stock"), securities of reorganized EPE (the
"New EPE Securities"), and/or cash. The total Transaction
consideration will be approximately $2.1 billion, exclusive of
cash retained by EPE and paid out to EPE creditors and preferred
shareholders prior to the Effective Date. Because the plan of
reorganization and merger agreement allow CSW to substitute CSW
Common Stock for certain of the New EPE Securities and to
substitute cash for CSW Common Stock, the exact amount and
mixture of CSW Common Stock, New EPE Securities and cash has not
yet been determined. In addition, because the amount of
consideration to be paid to holders of EPE Common Stock is
subject to certain contingencies, the total Transaction
consideration may be somewhat higher than $2.1 billion. It is
currently anticipated that the consideration will consist of
approximately $773 million in CSW Common Stock, approximately
$1.19 billion in New EPE Securities, and approximately $149
million in cash.
CSW is an electric utility holding company. CSW owns
all of the outstanding shares of common stock of Central Power
and Light Company, Public Service Company of Oklahoma,
Southwestern Electric Power Company, West Texas Utilities Company
(collectively, the "CSW Electric Operating Companies"), Transok,
Inc., CSW Credit, Inc., CSW Energy, Inc., and Central and South
West Services, Inc. CSW owns 80% of the outstanding shares of
common stock of CSW Leasing, Inc. In addition, CSW Energy holds
interests in several power projects.
<PAGE> 4
The CSW Electric Operating Companies are public utility
companies engaged in generating, purchasing, transmitting,
distributing and selling electricity. They supply electric
service to approximately 1.6 million retail customers. Central
Power and Light and West Texas Utilities operate in south and
central west Texas, respectively; Public Service Company of
Oklahoma operates in eastern and southwestern Oklahoma; and
SWEPCO operates in northeastern Texas, northwestern Louisiana and
western Arkansas. Transok is a natural gas gathering,
transmission and processing company which transports for and
sells natural gas to Public Service Company of Oklahoma and for
the other CSW Electric Operating Companies, as well as processes,
transports and sells natural gas to and for non-affiliates. CSW
Services performs various accounting, engineering, tax, legal,
financial, electronic data processing, centralized power
dispatching and other services for the CSW System. CSW Credit
purchases accounts receivable of the CSW Electric Operating
Companies, Transok, and unaffiliated electric and gas utilities.
CSW Energy pursues cogeneration projects and other energy
ventures. CSW Leasing invests in leveraged leases.
EPE is engaged in the generation and distribution of
electricity through an interconnected system to approximately
261,000 retail customers in El Paso, Texas and an area of the Rio
Grande Valley in west Texas and southern New Mexico, and to
wholesale customers located in southern California, Texas, New
Mexico, and Mexico. EPE as one subsidiary which it expects to
dispose of in the first quarter of 1994.
<PAGE> 5
The Application-Declaration states that the Transaction
is expected to produce a number of benefits for CSW and EPE,
their customers, shareholders and creditors, and the communities
they serve, including benefits flowing from a consensual end to
the bankruptcy proceedings begun by EPE in January 1992. By
ending the bankruptcy proceedings, the Application-Declaration
states that the Transaction will provide substantial immediate
benefits to all EPE stakeholders and ratepayers and to the
citizens and States of Texas and New Mexico. Among other things,
the bankruptcy proceedings and related litigation have resulted
in substantial direct costs to the EPE estate. The Application-
Declaration states that these costs are expected to total between
$45 million and $60 million (assuming that the Transaction is
consummated and EPE emerges from bankruptcy on December 31, 1994)
or more (if the Transaction is consummated after that date or is
not consummated).
In addition, the Application-Declaration states that
the bankruptcy has (i) diverted EPE's resources away from the
operation of its business; (ii) created uncertainty for investors
and customers and impaired their ability to make long-term plans;
and (iii) had a negative effect on business expansion plans and
resulted in the loss of economic growth opportunities in EPE's
service areas. The Application-Declaration states that the
Transaction will create a financially viable EPE with an
investment-grade credit rating, which will reopen EPE's access to
the capital markets and reduce EPE's cost of capital, and that as
a result of the Transaction, EPE will become part of a
<PAGE> 6
financially secure system and will become a more reliable and
stable corporation.
Apart from bankruptcy-related benefits, the
Application-Declaration states that preliminary analysis has
identified approximately $420 million in potential net cost
savings and synergies during the period 1995-2004, including net
non-fuel operating and maintenance savings of $236,000,000, net
financial savings of $152,000,000, and net production and
transmission savings of $34,000,000.
In addition to quantified savings, the Application-
Declaration states that the Transaction is expected to result in
a number of benefits not yet quantified, including: expansion of
bulk power sales and purchase capability, which the Application-
Declaration states will result in a more economic mix of
generated and purchased power to meet system demand, an expansion
of opportunity to market bulk power, increased opportunities to
create additional revenue sources and/or reduce supply costs, and
better system reliability; coordination of resource planning,
which the Application-Declaration states will enable CSW and EPE
to take advantage of the expanded diversity and number of
resource options afforded by the combined generation and power
supply mix; and reduction in future operating systems
expenditures.
The consummation of the Transaction and the plan is
subject to a number of conditions, including entry of a final
order by the Bankruptcy Court confirming EPE's plan of
reorganization; receipt of all necessary regulatory approvals
<PAGE> 7
from the Commission, the Federal Energy Regulatory Commission
("FERC"), the Nuclear Regulatory Commission ("NRC"), and the
applicable state regulatory authorities; expiration or
termination of all applicable waiting periods under the
Hart-Scott-Rodino Act without action by the Department of Justice
or the Federal Trade Commission; receipt of rate orders from the
Public Utility Commission of Texas ("PUCT") and the New Mexico
Public Utility Commission ("NMPUC") establishing certain
ratemaking, accounting, and regulatory treatments; resolution of
certain contingent, disputed or allowed general unsecured claims
in an amount not to exceed $20,000,000; receipt of an investment-
grade rating for all publicly tradeable Reorganized EPE First
Mortgage Bonds and Reorganized EPE Second Mortgage Bonds;
transfer back to Reorganized EPE of good and marketable title to
certain leased assets of the Palo Verde Nuclear Generating
Station; and resolution of the adversary proceeding between EPE
and the Palo Verde Owner Participants without a material adverse
effect on EPE or Reorganized EPE.
The Application-Declaration states that a number of
these conditions have already been satisfied or have had
significant steps taken toward their satisfaction: EPE's plan of
reorganization has been approved overwhelmingly by EPE creditors
and stockholders and was confirmed by the Bankruptcy Court on
December 8, 1993; settlements were entered into on November 15,
1993 (and have been approved by the Bankruptcy Court) resolving
the adversary proceeding between the EPE and the Palo Verde Owner
Participants and providing for the transfer back to Reorganized
<PAGE> 8
EPE of title to certain interest in the Palo Verde Nuclear
Generating Station; a capital structure for Reorganized EPE has
been designed which Applicant believes will meet the rating
agencies' requirements for an investment-grade rating; and
applications have been (or will shortly be) filed with the FERC,
NRC, PUCT and NMPUC.
In addition to the conditions described above, the
parties' obligations to consummate the Transaction are subject to
a number of other conditions which must be satisfied or waived
under the plan of reorganization and the merger agreement.
In addition to this Commission, the Bankruptcy Court
for the Western District of Texas, PUCT, NMPUC, FERC, NRC and
U.S. Department of Energy have jurisdiction over various aspects
of the Transaction. In addition, the Application-Declaration
states that CSW and EPE will file notification and report forms
under the Hart-Scott-Rodino Antitrust Improvements Act with the
Federal Trade Commission and the Antitrust Division of the U.S.
Department of Justice. It is stated that no other state or local
regulatory body or agency and no other federal commission or
agency has jurisdiction over the Transaction.
In addition to Transaction approval, CSW is requesting
immediate authorization to engage in certain hedging transactions
while the Commission and other regulators are considering the
Transaction in order to afford certain protections against
changes in the market price of CSW Common Stock and interest
rates which might otherwise adversely affect the cost of the
Transaction to CSW.
<PAGE> 9
For the Commission, by the Division of Investment
Management, pursuant to delegated authority.
Jonathan G. Katz
Secretary
<PAGE> 1
EXHIBIT J-1
MORGAN STANLEY
MORGAN STANLEY & CO.
INCORPORATED
1251 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10020
(212) 703-4000
April 30, 1993
Central and South West Corporation
1616 Woodall Rodgers Freeway
Dallas, Texas 75266-0164
Members of the Board of Directors:
We understand that Central and South West Corporation ("CSW") and
El Paso Electric Company ("EPEC") propose to enter into an
Agreement and Plan of Merger and that EPEC and CSW propose a Plan
of Reorganization with the United States Bankruptcy Court for the
Western District of Texas, Austin Division (together, the
"Agreements") which provide, among other things, that CSW will
form a wholly-owned subsidiary which will merge (the "Merger")
with and into EPEC, with the result that EPEC will survive the
Merger as a wholly-owned subsidiary of CSW. The terms and
conditions of the Merger are more fully set forth in the
Agreements.
The Merger is subject to, among other things, (a) the creditors
of EPEC confirming the Plan of Reorganization, (b) CSW and EPEC
having received all necessary governmental and regulatory
approvals and consents for the proposed transaction and (c) CSW
and EPEC having obtained regulatory rate-making determinations
from the Texas and New Mexico public utility commissions which
are reasonably satisfactory to CSW based upon a rate plan for
EPEC which is discussed more fully in the Agreements.
You have asked for our opinion as to whether the consideration to
be paid by CSW to the creditors and equity holders of EPEC
pursuant to the Agreements is fair from a financial point of view
to CSW.
For purposes of the opinion set forth herein, we have:
(i) analyzed certain publicly available financial
statements and other information of EPEC and CSW;
(ii) analyzed certain internal financial statements and
other financial and operating data concerning EPEC
prepared by the management of EPEC;
(iii) analyzed certain financial projections concerning
EPEC prepared by the management of EPEC;
<PAGE> 2
(iv) discussed the past and current operations and
financial condition and the prospects of EPEC with
senior executives of EPEC;
(v) analyzed certain internal financial statements and
other financial operating data concerning CSW
prepared by the management of CSW;
(vi) analyzed certain financial projections concerning
CSW prepared by the management of CSW;
(vii) discussed the past and current operations and
financial condition and the prospects of CSW with
senior executives of CSW, and analyzed the pro
forma impact of the Agreements on CSW's earnings
per share, consolidated capitalization and
financial ratios;
(viii) reviewed the reported prices and trading activity
for the EPEC's common stock;
(ix) compared the financial performance of EPEC and the
prices and trading activity of the EPEC's common
stock with that of certain other comparable
publicly-traded companies and their securities;
(x) discussed the strategic objectives of the Merger
with CSW and reviewed the amount and timing of the
cost savings and synergies resulting from the
Merger projected by CSW;
(xi) reviewed the financial terms, to the extent
publicly available, of certain comparable
acquisition transactions;
(xii) participated in discussions and negotiations among
representatives of CSW and EPEC and their
financial and legal advisors;
(xiii) reviewed the Agreements, and certain related
documents; and
(xiv) performed such other analyses and examination and
considered such other factors as we have deemed
appropriate.
We have assumed and relied upon without independent verification
the accuracy and completeness of the information reviewed by us
for the purposes of this opinion. With respect to the financial
projections, we have assumed they have been reasonably prepared
on bases reflecting the best currently available estimates and
judgements of the respective future financial performances of
EPEC and CSW. In arriving at our opinion, we have relied,
without any independent evaluation, on the cost savings and
<PAGE> 3
synergies associated with the Merger as estimated by the
management of CSW and have noted the strategic importance
attached to the Merger by the management of CSW. We have not
made any independent valuation or appraisal of the assets or
liabilities of EPEC, nor have we been furnished with any such
appraisals. Our opinion is necessarily based on economic, market
and other conditions as in effect on, and the information made
available to us as of, the date hereof.
In rendering our opinion, we have also assumed that in the course
of obtaining both (a) the necessary regulatory and governmental
approvals for the proposed Merger and (b) regulatory approvals
for subsequent rate matters concerning the Merger, no restriction
will be imposed that will have a material adverse effect on the
contemplated benefits to CSW of the proposed Merger.
We have acted as financial advisor to the Board of Directors of
CSW in connection with this transaction and will receive a fee
for our services. In the past, Morgan Stanley & Co. Incorporated
and its affiliates have provided financial advisory and financing
services for CSW and have received fees for the rendering of
these services.
It is understood that this letter is for the information of the
Board of Directors of CSW only and may not be used for any other
purpose without our prior written consent.
Based on the foregoing, we are of the opinion on the date hereof
that the consideration to be paid by CSW to the creditors and
equity holders of EPEC pursuant to the Agreements is fair from a
financial point of view to CSW.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By:
Jeffrey R. Holzschuh
Principal
<PAGE> 1
EXHIBIT J-2
BARR BEATTY DEVLIN & CO.
May 3, 1993
Board of Directors
El Paso Electric Company
Mills Building
303 North Oregon Street
El Paso, Texas 79901
Members of the Board:
We understand that El Paso Electric Company ("EPE") is proposing
to enter into a Merger Agreement (the "Agreement") with Central
and South West Corporation ("CSR"). Under the terms of the
Agreement, a wholly-owned subsidiary of CSR shall be merged into
EPE with the surviving company being a wholly owned subsidiary of
CSR. We further understand that the consideration to be paid to
the common shareholders of EPE shall be in the form of CSR common
stock, subject to the option to pay in cash at CSR's sole
discretion, in an amount dependent upon, among other things, (i)
a base amount of $3.00 of CSR common stock per share of EPE
common stock outstanding at, and to be priced at the time a Plan
of Reorganization is confirmed by the Bankruptcy Court, (ii) the
liquidation and/or settlement value of certain items specifically
identified in the Agreement as the "Additional Consideration,"
(iii) dividends paid on CSR common stock after such confirmation
but prior to the date on which such Plan of Reorganization
becomes effective, and (iv) movements in the market price of CSR
common stock during the period from the confirmation date through
the effective date of such Plan of Reorganization. There may, in
certain circumstances, be additional consideration payable in
cash after the date of such Plan of Reorganization becomes
effective.
You have asked for our opinion as to whether the consideration to
be received by the common shareholders of EPE under the terms of
the Agreement is fair from a financial point of view.
In connection with rendering our opinion, we have, among other
things:
(i) reviewed audited financial statements of EPE and
CSR for the years ended December 31, 1989 through
1992;
(ii) reviewed and analyzed certain internal financial
information concerning EPE, including financial
projections through 2001 provided by management;
(iii) reviewed financial projections for CSR through
2002 provided by CSR management;
<PAGE> 2
El Paso Electric Co.
May 3, 1993
Page 2
(iv) reviewed the current operations of EPE with EPE
management;
(v) reviewed the current operations of CSR with CSR
management;
(vi) reviewed the trading values of certain publicly
traded companies with business characteristics
similar to those of EPE and CSR;
(vii) discussed with senior managements of EPE and CSR
the commercial rationale for the transaction;
(viii) reviewed with EPE's counsel its prospects for rate
relief, and the timing thereof, under the
alternative regulatory strategies available to
EPE, and the feasibility of pursuing such
alternatives within the bankruptcy context;
(ix) reviewed with EPE's counsel the impact on the
levels of claims and settlements embodied in the
draft Plan of Reorganization under various
alternative plans of reorganization;
(x) reviewed the draft Agreement as provided to the
EPE Board of Directors on May 2, 1993, and
discussed subsequent changes with EPE's counsel;
(xi) reviewed the draft Plan of Reorganization; and
(xii) performed such other analyses as we deemed
appropriate.
We have assumed and relied upon, without independent
verification, the accuracy and completeness of the information
reviewed by us for the purposes of this opinion. With respect to
the financial projections, we have assumed that they have been
reasonably prepared on bases reflecting the best currently
available estimates and judgements of the future financial
performance of EPE and CSR. We have not made any independent
valuation or appraisal of the assets or liabilities of EPE nor
have we been furnished with any such appraisals. Our opinion is
necessarily based on economic, market and other conditions as in
effect on, and the information made available to us as of the
date hereof. We have further relied upon the views of EPE
management and counsel as to the reasonableness of the amounts of
the claims and settlements reflected in the draft Plan of
Reorganization.
<PAGE> 3
El Paso Electric Co.
May 3, 1993
Page 3
We have acted as financial advisor to EPE, the Debtor and Debtor-
in-Possession in connection with this transaction and may receive
a success fee, subject to bankruptcy court approval, which fee
shall be paid by EPE.
It is understood that this letter is for the information of the
Board of Directors of EPE only and may not be used for any other
purpose without our prior written consent.
Based on the foregoing, and such other factors as we deem
relevant, we are of the opinion on the date hereof that the
consideration to be received by the common shareholders of EPE is
fair from a financial point of view.
Sincerely,
BARR BEATTY DEVLIN & CO.
INCORPORATED
/s/ JOHN F. BEATTY
John F. Beatty
Managing Director
<PAGE>
<PAGE> 1
<TABLE>
<CAPTION>
EXHIBIT FS-11
Central and South West Corporation and El Paso Electric Company
Pro-Forma Combined Capitalization Statement - SEC FILING
As of 6/30/93
[Millions]
[Unaudited]
Adjustments
-----------------------
CSW EPEC Debit Credit Pro-Forma
------- ------ ------ ------ ---------
<S> <C> <C> <C> <C> <C>
Capitalization:
Common stock $1,176 $339 $339 [1] $792 [1] $1,968
Retained earnings 1,719 (674) 674 [1,3] 1,719
------- ------- ------ ------ --------
Common stock equity 2,895 (335) 339 1,466 3,687
------- ------- ------ ------ --------
Preferred stock 361 81 91 [1] 78 [1,3] 429
Long-term debt 2,724 0 139 [1,2] 1,258 [1,3] 3,843
Obligations subject to compromise 0 1,484 1,484 [3] 0
Matured and short-term debt 1,324 0 1,274 [1,4,5] 1,274 [3] 1,324
------- ------ ------ ------ --------
Total capitalization $7,304 $1,230 $3,327 $4,076 $9,283
======= ====== ====== ====== ========
</TABLE>
<PAGE>
<PAGE>
EL PASO ELECTRIC
EXPLANATION OF ADJUSTMENTS-COMBINED CAPITALIZATION STATEMENT
- ------------------------------------------------------------
[$ IN MILLIONS]
Debit Credit
----- ------
[1] Goodwill $868
Common stock 339
Preferred stock 91
Long-term debt 8
Matured debt 906
Accumulated deficit $102
Common stock 792
Preferred stock 68
Long-term debt 1,250
Description:
To eliminate old capital structure and matured
debt and record new capital structure.
[2] Long-term debt $131
Cash $131
Description:
To record pay-down of long-term debt at closing.
[3] Nuclear fuel $4
Deferred plant costs 163
Phase in plan deferrals 68
Mirror CWIP asset 39
Letter of credit draws 288
Deferred bankruptcy costs 31
Other assets 192
Obligations subject to compromise 1,484
Construction work in progress $2
Accumulated depreciation and
amortization 18
Goodwill 572
Preferred stock 10
Long-term debt 8
Matured debt 1,274
Accounts payable 22
Accrued taxes 4
Accrued interest 111
Sale/leaseback related liabilities 116
Accumulated deferred income tax 94
Mirror CWIP liability 32
Other deferred credits 6
Description:
To adjust EPEC to post-bankruptcy presentation
including application of SFAS #71 prior to merger.
<PAGE>
EL PASO ELECTRIC
EXPLANATION OF ADJUSTMENTS-COMBINED CAPITALIZATION STATEMENT
- ------------------------------------------------------------
[$ IN MILLIONS]
Debit Credit
----- ------
[4] Matured debt $80
Accumulated depreciation 11
Electric plant in service $66
Goodwill 25
Description:
To record the elimination of the Commercial Federal
capitallease.
[5] Matured debt $288
Deferred letter of credit draws $288
Description:
To eliminate letter of credit draws related asset
and liability.
<PAGE>
<PAGE> 1
<TABLE>
<CAPTION>
EXHIBIT FS-12
Central and South West Corporation and El Paso Electric Corporation
Pro-Forma Income Statement - SEC FILING
For the Twelve Months Ended 6/30/93
[in Millions except per share amounts]
[Unaudited]
Post Pro-Forma
CSW EPEC Bankruptcy* Adjustments Pro-Forma
------ ---- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES $3,501 $535 $13 [15] $18 [4,8,11] 4,067
OPERATING EXPENSES AND TAXES
Fuel and purchased power 1,098 115 2 [15] 0 1,215
Gas purchased for resale 418 0 0 418
Operating and maintenance 777 252 (3) [15] (77) [2] 949
Depreciation and amortization 320 57 (18) [15] 32 [1,2,3, 391
9,10,12]
axes, other than federal income 177 57 (3) [15] 0 231
Federal income taxes 125 0 3 [15] 31 [14] 159
------ ---- ----------- ------------ ---------
2,915 481 (19) (14) 3,363
------ ---- ----------- ------------ ---------
OPERATING INCOME 586 54 32 32 704
------ ---- ----------- ------------ ---------
OTHER INCOME AND DEDUCTIONS 68 4 2 [15] 10 [2,3,6, 84
------ ---- ----------- ------------ 9,11] ---------
INCOME BEFORE INTEREST CHARGES 654 58 34 42 788
------ ---- ----------- ------------ ---------
INTEREST CHARGES 269 69 31 [15] (31) [3,5] 338
------ ---- ----------- ------------ ---------
NET INCOME (LOSS) BEFORE REORGANIZATION COSTS
& CUMULATIVE EFFECT OF ACCOUNTING CHANGE
385 (11) 3 73 450
------ ---- ----------- ------------ ---------
REORGANIZATION ITEMS 0 (20) 20 [15] 0 0
------ ---- ----------- ------------ ---------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Post Pro-Forma
CSW EPEC Bankruptcy* Adjustments Pro-Forma
------ ---- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
NET INCOME (LOSS) BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGE 385 (31) 23 73 450
------ ---- ----------- ------------ ---------
Cumulative effect of change in
accounting for income taxes 7 (96) 34 [15] 54 [7] (1)
------ ---- ----------- ------------ ---------
NET INCOME (LOSS) 392 (127) 57 127 449
Preferred stock dividends 20 0 7 [15] (2) [13] 25
NET INCOME FOR COMMON STOCK $372 ($127) $50 $129 $424
====== ===== =========== ============ =========
AVERAGE COMMON SHARES
OUTSTANDING 188.4 35.5 N/A N/A 214.65
====== ===== =========== ============ =========
EARNINGS PER SHARE OF COMMON STOCK:
BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGE $1.94 ($0.87) $1.98
CUMULATIVE EFFECT OF ACCOUNTING 0.00
CHANGE 0.03 (2.70) ---------
------ --------
AFTER CUMULATIVE EFFECT OF
ACCOUNTING CHANGE $1.97 ($3.57) $1.98
====== ======== =========
<FN>
___________________
* To adjust EPEC to post-bankruptcy presentation including application
of SFAS #71 prior to merger.
</TABLE>
<PAGE>
<PAGE>
EL PASO ELECTRIC
EXPLANATION OF PRO-FORMA ADJUSTMENTS-INCOME STATEMENT
- -----------------------------------------------------
[$ IN MILLIONS]
Debit Credit
----- ------
[1] Depreciation Expense $19
Goodwill $19
Description:
To record depreciation expense on Palo Verde
assets purchased.
[2] Other income & deductions $2
Goodwill 77
Operating & maintenance expenses $77
Depreciation expenses 2
Description:
To eliminate sales and leasebacks regulatory asset
and liability amortization.
[3] Depreciation and amortization $7
Other income and deductions 5
Interest expense 7
Goodwill $19
Description:
To eliminate rate moderation plan and deferred plant
cost carrying charge deferrals.
[4] Revenues $3
Goodwill $3
Description:
To eliminate long-term contract receivable accrual.
[5] Goodwill $38
Interest expense $38
Description:
To eliminate historical EPEC interest expense and
record EPEC interest under the new capital structure.
<PAGE>
EL PASO ELECTRIC
EXPLANATION OF PRO-FORMA ADJUSTMENTS-INCOME STATEMENT
- -----------------------------------------------------
[$ IN MILLIONS]
Debit Credit
----- ------
[6] Other income and deductions $6
Goodwill $6
Description:
To eliminate interest income on bankruptcy funds and
record interest income on post-merger cash and
temporary cash investments.
[7] Goodwill $54
Cumulative effect of accounting change. $54
Description:
To record the elimination of a portion of the income
impact of the cumulative effect of accounting change.
[8] Goodwill $26
Revenues $26
Description:
To reflect increase in revenues as a result of assumed
rate increase.
[9] Depreciation and amortization $2
Goodwill $16
Mirror CWIP liability amortization $18
Description:
To reflect additional Mirror CWIP asset and liability
amortization.
[10] Depreciation and amortization $5
Goodwill $5
Description:
To record the amortization of the rate moderation plan
deferrals and additional deferred plant cost
amortization.
<PAGE>
EL PASO ELECTRIC
EXPLANATION OF PRO-FORMA ADJUSTMENTS-INCOME STATEMENT
- -----------------------------------------------------
[$ IN MILLIONS]
Debit Credit
----- ------
[11] Revenues $5
Other income $5
Description:
To reclassify Mirror CWIP liability amortizations.
[12] Depreciation and amortization $1
Goodwill $1
Description:
To record amortization of goodwill.
[13] Goodwill $2
Preferred stock dividends $2
Description:
To eliminate the historical preferred stock dividends
and record preferred stock dividends applicable to
the new capital structure.
[14] Federal income taxes $31
Goodwill $31
Description:
To record the tax effect of the pro-forma adjustments.
[15] Fuel and purchased power $2
Federal income taxes 3
Interest charges 31
Goodwill 50
Preferred stock dividends 7
Operating and maintenance $3
Depreciation and amortization 18
Taxes, other than federal income 3
Other income and deductions 2
Reorganization items 20
Revenues 13
Cumulative effect of change in accounting
principle 34
Description:
To adjust EPEC to post-bankruptcy presentation
including application of SFAS #71 prior to merger.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Central and South West Corporation and El Paso Electric Company
Pro-Forma Balance Sheet - SEC FILING
Assets
As of 6/30/93
[Millions]
[Unaudited]
Adjustments
--------------------------
CSW EPEC Debit Credit Pro-Forma
--- ---- ----- ------ ---------
<S> <C> <C> <C> <C> <C>
Utility plant:
Electric plant in service $10,560 $1,640 $665 [1] $66 [2] $12,799
Construction work in progress 309 44 2 [12] 351
Nuclear fuel 153 109 4 [12] 266
Less-Accum. depr. and amort. (3,405) (420) 11 [2] 132 [1,12] (3,946)
-------- ------ ------- ------- -------
Net utility plant 7,617 1,373 680 200 9,470
-------- ------ ------- -------- -------
Current assets:
Cash and temporary investments 24 197 200 [5,11] 21
Accounts receivable 937 54 991
Inventories 278 35 313
Other 143 12 155
------- ------ --------- ------- -------
Total current assets 1,382 298 0 200 1,480
------- ------ --------- ------- -------
Deferred charges and other assets:
Deferred plant costs 518 0 163 [12] 7 [6] 674
Phase in plan deferrals 0 0 68 [12] 68
Mirror CWIP asset 337 0 111 [6,12] 448
Letter of credit draws 0 0 288 [12] 288 [3] 0
Bankruptcy costs 0 0 31 [12] 31 [6] 0
Long-term contract receivable 0 31 31 [8] 0
Goodwill 0 0 1,011 [all] 985 [all] 26
Other 364 28 209 [6,12] 140 [4,6] 461
------- ------ ------- ------- -------
Total deferred charges and other 1,219 59 1,881 1,482 1,677
------- ------ ------- ------- -------
Total assets $10,218 $1,730 $2,561 $1,882 $12,627
======= ====== ======= ======= =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Central and South West Corporation and El Paso Electric Company
Pro-Forma Balance Sheet - SEC FILING
Capitalization and Liabilities
As of 6/30/93
[Millions]
[Unaudited]
Adjustments
------------
CSW EPEC Debit Credit Pro-Forma
--- ---- ----- ------ ---------
<S> <C> <C> <C> <C> <C>
Capitalization:
Common stock $1,176 $339 $339 [10] $792 [10] $1,968
Retained earnings 1,719 (674) 674 [10,12] 1,719
------- ------- ------ ------ --------
Common stock equity 2,895 (335) 339 1,466 3,687
------- ------- ------ ------ --------
Preferred stock 361 81 91 [10] 78 [10,12] 429
Long-term debt 2,724 0 139 [10,11] 1,258 [10,12] 3,843
Obligations subject to compromise 0 1,484 1,484 [12] 0
------- ------ ------ ------ --------
Total capitalization 5,980 1,230 2,053 2,802 7,959
======= ====== ====== ====== ========
Current liabilities:
Matured and short-term debt 1,324 0 1,274 [2,3,10] 1,274 [12] 1,324
Accounts payable 211 23 22 [5] 22 [12] 234
Accrued taxes 51 27 4 [5] 4 [12] 78
Accrued interest 55 0 111 [5] 111 [12] 55
Other 117 29 146
------- ------- ------ ------ --------
Total current liabilities 1,758 79 1,411 1,411 1,837
------- ------- ------ ------ --------
Deferred credits and other liabilities:
Income taxes 1,810 146 149 [9] 94 [12] 1,901
Investment tax credits 343 70 413
Sale/leaseback related liabilities 0 146 262 [4] 116 [12] 0
Mirror CWIP liability 149 0 104 [6,12] 253
Other 178 59 14 [5] 41 [6,7,12] 264
------- ------- ------ ------ --------
Total deferred credits and other 2,480 421 425 355 2,831
------- ------- ------ ------ --------
Total capitalization and liabilities $10,218 $1,730 $3,889 $4,568 $12,627
======= ======= ====== ====== ========
</TABLE>
<PAGE>
<PAGE>
EL PASO ELECTRIC
EXPLANATION OF ADJUSTMENTS-BALANCE SHEET
- ---------------------------------------
[$ IN MILLIONS]
Debit Credit
----- ------
[1] Electric plant in service $665
Accumulated depreciation $114
Goodwill 551
Description:
To record the original cost of the previously leased portions
of Palo Verde Units 2 and 3, being acquired as part of the
reorganization and the associated accumulated depreciation
which would have been recorded since the in-service dates.
[2] Matured debt $80
Accumulated depreciation 11
Electric plant in service $66
Goodwill 25
Description:
To record the elimination of the Commercial Federal capital
lease.
[3] Matured debt $288
Deferred letter of credit draws $288
Description:
To eliminate letter of credit draws related asset and
liability.
[4] Sales and leasebacks related liabilities $262
Other assets $84
Goodwill 178
Description:
To record the elimination letter of sales and leasebacks
assets and liabilities.
[5] Accounts payable $22
Accrued taxes 4
Accrued interest 111
Other liabilities 14
Cash $69
Goodwill 82
Description:
To record settlement of certain bankruptcy-related claims.
<PAGE>
EL PASO ELECTRIC
EXPLANATION OF ADJUSTMENTS-BALANCE SHEET
- ---------------------------------------
[$ IN MILLIONS]
Debit Credit
----- ------
[6] Mirror CWIP asset $72
Other assets 17
Goodwill 97
Mirror CWIP liability $72
Other liabilities 20
Other assets 56
Deferred bankruptcy costs 31
Deferred plant costs 7
Description:
To adjust the balance of regulatory assets and liabilities
consistent with EPEC's rate request.
[7] Goodwill $15
Other liabilities $15
Description:
To record environmental and legal reserves.
[8] Goodwill $31
Long-term contract receivable $31
Description:
To record write-down of long term contract receivable.
[9] Accumulated deferred income tax $149
Goodwill $149
Description:
To record deferred tax effects of the merger.
[10] Goodwill $868
Common stock 339
Preferred stock 91
Long-term debt 8
Matured debt 906
Accumulated deficit $102
Common stock 792
Preferred stock 68
Long-term debt 1,250
Description:
To eliminate old capital structure and matured debt and
record new capital structure.
<PAGE>
EL PASO ELECTRIC
EXPLANATION OF ADJUSTMENTS-BALANCE SHEET
- ---------------------------------------
[$ IN MILLIONS]
Debit Credit
----- ------
[11] Long-term debt $131
Cash $131
Description:
To record pay-down of long-term debt at closing.
[12] Nuclear fuel $4
Deferred plant costs 163
Phase in plan deferrals 68
Mirror CWIP asset 39
Letter of credit draws 288
Deferred bankruptcy costs 31
Other assets 192
Obligations subject to compromise 1,484
Construction work in progress $2
Accumulated depreciation and amortization 18
Goodwill 572
Preferred stock 10
Long-term debt 8
Matured debt 1,274
Accounts payable 22
Accrued taxes 4
Accrued interest 111
Sale/leaseback related liabilities 116
Accumulated deferred income tax 94
Mirror CWIP liability 32
Other deferred credits 6
Description:
To adjust EPEC to post-bankruptcy presentation including
application of SFAS #71 prior to merger.
