<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993 COMMISSION FILE NUMBER 1-6986
----------------
PUBLIC SERVICE COMPANY OF NEW MEXICO
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
NEW MEXICO 85-0019030
(I.R.S. Employer
(State or other jurisdiction Identification No.)
of incorporation or organization)
87158
ALVARADO SQUARE
ALBUQUERQUE, NEW MEXICO (Zip Code)
(Address of principal executive
offices)
Registrant's telephone number, including area code: (505) 848-2700
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
<C> <S>
Common Stock, $5.00 Par Value New York Stock Exchange
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
(TITLE OF CLASS)
CUMULATIVE PREFERRED STOCK ($100 STATED VALUE AND WITHOUT SINKING FUND)
COMPRISED OF THE FOLLOWING SERIES:
1965 Series, 4.58% 8.48% Series 8.80% Series
8.75% CUMULATIVE PREFERRED STOCK ($100 STATED VALUE AND WITH A PERIODIC SINKING
FUND)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. YES [X] NO [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The total number of shares of the Company's Common Stock outstanding as of
January 31, 1994 was 41,774,083. On such date, the aggregate market value of
the voting stock held by non-affiliates of the Company, as computed by
reference to the New York Stock Exchange composite transaction closing price of
$13 1/4 per share reported by the Wall Street Journal, was $553,506,600.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following document are incorporated by reference into the
indicated part of this report:
Proxy Statement to be filed with the Securities and Exchange Commission
pursuant to Regulation 14A relating to the annual meeting of stockholders to be
held on April 27, 1994--PART III.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
GLOSSARY................................................................... iii
PART I
ITEM 1. BUSINESS........................................................... 1
THE COMPANY.............................................................. 1
ELECTRIC OPERATIONS...................................................... 2
Service Area and Customers............................................. 2
Power Sales............................................................ 2
Sources of Power....................................................... 4
Fuel and Water Supply.................................................. 4
NATURAL GAS OPERATIONS................................................... 7
Acquisition of Natural Gas Operations.................................. 7
Proposed Sale of Gathering and Processing Assets....................... 7
Gas Company of New Mexico Division..................................... 7
Gathering Company...................................................... 8
Processing Company..................................................... 8
Natural Gas Supply..................................................... 8
Natural Gas Sales...................................................... 9
RATES AND REGULATION..................................................... 10
January 12, 1994 Stipulation........................................... 10
FPPCAC................................................................. 10
Fossil-Fueled Plant Decommissioning Costs.............................. 11
Postretirement Benefits................................................ 11
Consolidation Issues................................................... 11
Natural Gas Supply Matters............................................. 12
Other Natural Gas Matters.............................................. 12
ENVIRONMENTAL FACTORS.................................................... 13
ITEM 2. PROPERTIES......................................................... 14
ELECTRIC................................................................. 14
Coal-fired Plants...................................................... 14
Nuclear Plant.......................................................... 14
Other Electric Properties.............................................. 16
NATURAL GAS.............................................................. 17
WATER.................................................................... 17
OTHER INFORMATION........................................................ 17
ITEM 3. LEGAL PROCEEDINGS.................................................. 18
NATURAL GAS SUPPLY LITIGATION............................................ 18
PVNGS WATER SUPPLY LITIGATION............................................ 18
SAN JUAN RIVER ADJUDICATION.............................................. 19
PVNGS PROPERTY TAXES..................................................... 19
OTHER PROCEEDINGS........................................................ 19
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................ 21
SUPPLEMENTAL ITEM. EXECUTIVE OFFICERS OF THE COMPANY....................... 21
</TABLE>
i
<PAGE>
PART II
<TABLE>
<S> <C>
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS............................................................ 23
ITEM 6. SELECTED FINANCIAL DATA........................................... 24
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.............................................. 25
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA....................... F-1
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE............................................... E-1
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.................. E-1
ITEM 11. EXECUTIVE COMPENSATION........................................... E-1
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT... E-1
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................... E-1
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K.......................................................... E-1
SIGNATURES................................................................ E-17
</TABLE>
ii
<PAGE>
GLOSSARY
<TABLE>
<C> <S>
AEPCO............................... Arizona Electric Power Cooperative
AFUDC............................... Allowance for funds used during construction
AG.................................. New Mexico Attorney General
Amoco............................... Amoco Production Company
Anaheim............................. City of Anaheim, California
APPA................................ Arizona Power Pooling Association
APS................................. Arizona Public Service Company
BCD................................. Bellamah Community Development
BHP................................. BHP Minerals International, Inc.
BLM................................. Bureau of Land Management
BTU................................. British Thermal Unit
Century............................. Century Power Corporation
Conoco.............................. Conoco, Inc.
decatherm........................... 1,000,000 BTUs
DOE................................. United States Department of Energy
EIP................................. Eastern Interconnection Project
El Paso............................. El Paso Electric Company
EPA................................. United States Environmental Protection Agency
EPNG................................ El Paso Natural Gas Company
Farmington.......................... City of Farmington, New Mexico
FERC................................ Federal Energy Regulatory Commission
Four Corners........................ Four Corners Power Plant
FPPCAC.............................. Fuel and Purchased Power Cost Adjustment Clause
Gathering Company................... Sunterra Gas Gathering Company, a wholly-owned subsidiary
of the Company
GCNM................................ Gas Company of New Mexico, a division of the Company
IID................................. Imperial Irrigation District in Southern California
Kv.................................. Kilovolt
KWh................................. Kilowatt Hour
Los Alamos.......................... The County of Los Alamos, New Mexico
mcf................................. Thousand cubic feet
Meadows............................. Meadows Resources, Inc., a wholly-owned subsidiary of the
Company
M-S-R............................... M-S-R Public Power Agency, a California public power agency
MW.................................. Megawatt
MWh................................. Megawatt Hour
NMPUC............................... New Mexico Public Utility Commission
NRC................................. United States Nuclear Regulatory Commission
OCD................................. New Mexico Oil Conservation Division
OLE................................. Ojo Line Extension
PGAC................................ GCNM's Purchased Gas Adjustment Clause
Plains.............................. Plains Electric Generation and Transmission Cooperative,
Inc.
PSCo................................ Public Service Company of Colorado
Processing Company.................. Sunterra Gas Processing Company, a wholly-owned subsidiary
of the Company
PVNGS............................... Palo Verde Nuclear Generating Station
RICO................................ Racketeer Influenced and Corrupt Organizations Act
Salt River Project.................. Salt River Project Agricultural Improvement and Power
District
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
SCE................................. Southern California Edison Company
SCPPA............................... Southern California Public Power Authority
SDCW................................ Sangre de Cristo Water Company, a division of the Company
SDG&E............................... San Diego Gas and Electric Company
SFAS................................ Statement of Financial Accounting Standards
SJCC................................ San Juan Coal Company
SJGS................................ San Juan Generating Station
Southern Union...................... Southern Union Company
SPS................................. Southwestern Public Service Company
TNP................................. Texas-New Mexico Power Company
throughput.......................... Volumes of gas delivered, whether or not owned by GCNM
or Gathering Company
Tucson.............................. Tucson Electric Power Company
UAMPS............................... Utah Associated Municipal Power Systems
USEC................................ United States Enrichment Corporation
</TABLE>
iv
<PAGE>
PART I
ITEM 1. BUSINESS
THE COMPANY
Public Service Company of New Mexico (the "Company") was incorporated in the
State of New Mexico in 1917 and has its principal offices at Alvarado Square,
Albuquerque, New Mexico 87158 (telephone number 505-848-2700). The Company is a
public utility engaged in the generation, transmission, distribution and sale
of electricity and in the gathering, processing, transmission, distribution and
sale of natural gas within the State of New Mexico. The Company also owns
facilities for the pumping, storage, transmission, distribution and sale of
water in Santa Fe, New Mexico.
On January 11, 1993, the Company announced its intention to dispose of the
Company's natural gas gathering and natural gas processing assets and SDCW. On
February 12, 1994, an agreement was executed for the sale of substantially all
of the gas gathering and processing assets of Gathering Company and Processing
Company and for the sale of the Northwest and Southeast gas gathering and
processing facilities of GCNM. On February 28, 1994, the Company and the City
of Santa Fe signed a purchase and sale agreement for the sale of the Company's
water utility division. (See PART II, ITEM 7.--"MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--Sale of Gas
Gathering and Processing Assets" and "--Sale of SDCW.")
The total population of the area served by one or more of the Company's
utility services is estimated to be approximately 1.1 million, of which 52.0%
live in the greater Albuquerque area.
For the year ended December 31, 1993, the Company derived 67.5% of its
utility operating revenues from electric operations, 31.0% from natural gas
operations and 1.5% from water operations.
As of December 31, 1993, the Company employed 2,619 persons.
Financial information relating to amounts of revenue and operating income and
identifiable assets attributable to the Company's industry segments is
contained in Note 12 of the notes to consolidated financial statements.
1
<PAGE>
ELECTRIC OPERATIONS
SERVICE AREA AND CUSTOMERS
The Company's electric operations serve four principal markets. Sales to
retail customers and sales to firm-requirements wholesale customers, sometimes
referred to collectively as "system" sales, comprise two of these markets. The
third market consists of other contracted sales to utilities for which the
Company commits to deliver a specified amount of capacity (measured in MW) or
energy (measured in MWh) over a given period of time. The fourth market
consists of economy energy sales made on an hourly basis to utilities at
fluctuating, spot-market rates. Sales to the third and fourth markets are
sometimes referred to collectively as "off-system" sales.
The Company provides retail electric service to a large area of north central
New Mexico, including the cities of Albuquerque, Santa Fe, Rio Rancho, Las
Vegas, Belen and Bernalillo. The Company also provides retail electric service
to Deming in southwestern New Mexico and to Clayton in northeastern New Mexico.
As of December 31, 1993, approximately 313,000 retail electric customers were
served by the Company, the largest of which accounted for approximately 3.6% of
the Company's total electric revenues for the year ended December 31, 1993.
The Company holds 23 long-term, non-exclusive franchise agreements for its
electric retail operations, expiring between August 1996 and November 2028. The
City of Albuquerque (the "City") franchise expired in early 1992. Customers in
the area covered by the City franchise represent approximately 46.0% of the
Company's 1993 total electric operating revenues, and no other franchise area
represents more than 7.0%. These franchises are agreements that provide the
Company access to public rights-of-way for placement of the Company's electric
facilities. The Company remains obligated under state law to provide service to
customers in the franchise area even in the absence of a franchise agreement
with the City. (See PART II, ITEM 7.--"MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--OTHER ISSUES FACING THE
COMPANY--Albuquerque Franchise Issues".)
POWER SALES
For the years 1989 through 1993, retail KWh sales have grown at a compound
annual rate of approximately 3.1%. However, the growth rate has been lower than
had been anticipated at the time the Company committed to construct new
generating units in the 1970's. As a result, the Company has excess capacity
and has marketed most of such capacity in the off-system sales market.
Additionally, the Company is attempting to reduce its excess capacity through
asset sales. (See PART II, ITEM 7.--"MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--OTHER ISSUES FACING THE
COMPANY--Excess Capacity Sales/Wholesale Power Market".) The Company has
contracted to sell and continues to market power at prices which only recover
variable costs and a portion of the fixed costs of its excess capacity.
Remaining energy produced by excess capacity is then sold in the economy energy
market at prices which average only slightly above incremental operating costs.
The Company's system and off-system sales (revenues and energy consumption) and
system peak demands in summer and winter are shown in the following tables:
ELECTRIC SALES BY MARKET
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Retail........................... $471,099 $455,387 $444,594 $427,505 $413,644
Firm-requirements wholesale...... 18,468 20,173 22,390 25,739 27,679
SPS contract..................... -- -- -- -- 109,773
Other contracted off-system
sales........................... 56,214+ 62,348 55,581 70,640 52,804
Economy energy sales*............ 25,213+ 40,770 29,665 26,052 14,507
</TABLE>
2
<PAGE>
ELECTRIC SALES BY MARKET
(MEGAWATT HOURS)
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Retail....................... 5,446,788 5,358,246 5,139,954 5,048,830 4,909,592
Firm-requirements wholesale.. 342,137 322,177 308,390 376,040 397,792
SPS contract................. -- -- -- -- 1,618,694
Other contracted off-system
sales....................... 1,450,966 1,198,250 1,223,212 1,743,196 1,079,972
Economy energy sales*........ 1,582,113 2,164,991 1,559,939 1,378,270 735,558
</TABLE>
- --------
* Pursuant to FERC Order No. 529, all spot market economy sale transactions
were reclassified from net purchased power to revenue.
+ Due to the provision for the loss associated with the M-S-R contingent power
purchase contract recognized in 1992, revenues from other contracted off-
system sales and economy energy sales were reduced by a total of $20.5
million. (See Note 2 of the notes to consolidated financial statements.)
SYSTEM PEAK DEMAND*
(MEGAWATTS)
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Summer............................................ 1,104 1,053 1,018 1,051 1,006
Winter............................................ 982 992 955 897 896
</TABLE>
- --------
* System peak demand relates to retail and firm-requirements wholesale markets
only.
During 1993 and 1992, the Company's sales in the off-system markets accounted
for approximately 34.4 percent and 37.2 percent, respectively, of its total KWh
sales and approximately 17.2 percent (before reduction of revenues from the M-
S-R contingent power purchase contract, which were accounted for in the
determination of the provision for loss recorded in 1992) and 17.8 percent,
respectively, of its total revenues from energy sales. During 1993, the
Company's major off-system sale contracts in effect were with SDG&E, APPA,
AEPCO, IID and PSCo.
The SDG&E contract requires SDG&E to purchase 100 MW from the Company through
April 2001. On October 27, 1993, SDG&E filed a complaint with the FERC against
the Company, alleging that certain charges under this 1985 power purchase
agreement are unjust, unreasonable and unduly discriminatory. SDG&E is
requesting that the FERC investigate the rates charged under the agreement and
establish a refund date effective as of December 26, 1993. The relief, if
granted, would reduce annual demand charges paid by SDG&E by up to $11 million
per year from the effective refund date through April 2001, subject to certain
limitations if the FERC has not acted within 15 months. The Company responded
to the complaint on December 8, 1993, and SDG&E and the Company filed
subsequent pleadings. The Company believes that the complaint is without merit,
and the Company intends to vigorously resist the complaint.
The APPA contract requires APPA to purchase varying amounts of power from the
Company through May 2008. Under the terms of the agreement, APPA will increase
its purchase starting June 1, 1994 from 33 MW to 89 MW, decreasing in October
1994 to 74 MW. The AEPCO contract requires AEPCO to purchase from 9 MW to 15 MW
of power through May 31, 1994, depending upon AEPCO's customer requirements.
The IID contract requires IID to purchase 56 MW of power from the Company
through February 1995 and an additional 25 MW of power in the months of April
through October during the term of the contract. On April 27, 1993, PSCo and
the Company entered into an agreement whereby the Company will sell 75 MW of
capacity and associated energy to PSCo from October 1, 1993 through September
30, 1994.
The Company furnishes firm-requirements wholesale power in New Mexico to the
cities of Farmington and Gallup, TNP and Plains. Plains may terminate its
contract for 10 MW at any time with one year's advance notice. The Company
expects to receive a termination notice from Plains but cannot predict the
3
<PAGE>
timing of such notice. In February 1993, the Company began a new 10 year firm
power contract with the City of Gallup. Under terms of its contract, TNP has
increased its purchase, beginning January 1994, from a peak of 25 MW to 36 MW.
No firm-requirements wholesale customer accounted for more than 1.4% of the
Company's total electric operating revenues for the year ended December 31,
1993.
For other information concerning the competitive conditions affecting off-
system sales, see PART II, ITEM 7.--"MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--OTHER ISSUES FACING THE
COMPANY--Excess Capacity Sales/Wholesale Power Market".
SOURCES OF POWER
As of December 31, 1993, the total net generation capacity of facilities
owned or leased by the Company was 1,541 MW. The Company's electric generating
stations in commercial service as of December 31, 1993, were as follows:
<TABLE>
<CAPTION>
NET MW
GENERATION
TYPE NAME LOCATION CAPACITY
---- ---- -------- ----------
<S> <C> <C> <C>
Nuclear..................... PVNGS (a) Wintersburg, Arizona 390
Coal........................ SJGS (b) Waterflow, New Mexico 785
Coal........................ Four Corners (c) Fruitland, New Mexico 192
Gas/Oil..................... Reeves (d) Albuquerque, New Mexico 154
Gas/Oil..................... Las Vegas (d) Las Vegas, New Mexico 20
-----
1,541
=====
</TABLE>
- --------
(a) The Company is entitled to 10.2% of the power and energy generated by
PVNGS. The Company has a 10.2% ownership interest in Unit 3 and has
leasehold interests in Units 1 and 2 (see ITEM 2.--"PROPERTIES--ELECTRIC--
Nuclear Plant").
(b) SJGS Units 1, 2 and 3 are 50% owned by the Company; SJGS Unit 4 is 45.485%
owned by the Company.
(c) Four Corners Units 4 and 5 are 13% owned by the Company.
(d) These stations are used for peaking capacity and transmission support
requirements only.
In addition, the Company has power purchase contracts with M-S-R for 105 MW
through April 1995 and with SPS for up to 100 MW of interruptible power through
April 1995 and up to 200 MW from May 1995 through May 2011. The Company may
reduce its purchases from SPS by 25 MW annually upon three years' notice. Also,
the Company has 39 MW of contingent capacity obtained from El Paso under a
transmission capacity for generation capacity trade arrangement. In addition,
the Company is interconnected with various utilities for economy interchanges
and mutual assistance in emergencies.
FUEL AND WATER SUPPLY
The percentages of the Company's generation of electricity (on the basis of
KWh) fueled by coal, nuclear fuel and gas and oil, and the average costs to the
Company of those fuels (in cents per million BTU), during the past five years
were as follows:
<TABLE>
<CAPTION>
COAL NUCLEAR GAS AND OIL
------------------ ------------------ ------------------
PERCENT OF AVERAGE PERCENT OF AVERAGE PERCENT OF AVERAGE
---------- ------- ---------- ------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
1989.................. 89.3 139.3 10.3 76.3 0.4 364.1
1990.................. 74.6 152.0 25.2 73.1 0.2 310.3
1991.................. 67.1 167.9 32.9 67.9 -- 216.5
1992.................. 69.2 161.7 30.5 59.8 0.3 239.7
1993.................. 72.9 164.7 26.7 58.1 0.4 331.7
</TABLE>
4
<PAGE>
The estimated generation mix for 1994 is 74.4% coal, 25.3% nuclear and 0.3%
gas and oil. Due to locally available natural gas and oil supplies, the
utilization of locally available coal deposits and the generally abundant
supply of nuclear fuel, the Company believes that adequate sources of fuel are
available for its generating stations.
Coal
The coal requirements for SJGS are being supplied by SJCC, a wholly-owned
subsidiary of BHP, from certain Federal, state and private coal leases under a
coal sales agreement, pursuant to which SJCC will supply processed coal for
operation of SJGS until 2017. BHP guaranteed the obligations of SJCC under the
agreement, which contemplates the delivery of approximately 132 million tons of
coal during its remaining term. Such amount would supply substantially all the
requirements of SJGS through approximately 2017. The primary sources of coal
are a mine adjacent to SJGS and a mine located approximately 25 miles northeast
of SJGS in the La Plata area of northwestern New Mexico. The average cost of
fuel, including ash disposal and land reclamation costs, for SJGS for the years
1991, 1992 and 1993 was 183.3 cents, 175.5 cents and 177.4 cents, respectively,
per million BTU ($36.63, $34.28 and $34.59 per ton, respectively).
Four Corners is supplied with coal under a fuel agreement between the owners
and BHP, under which BHP agreed to supply all the coal requirements for the
life of the plant. BHP holds a long-term coal mining lease, with options for
renewal, from the Navajo Nation and operates a strip mine adjacent to Four
Corners with the coal supply expected to be sufficient to supply the units for
their estimated useful lives. The average cost of fuel, including ash disposal
and land reclamation costs, for the years 1991, 1992 and 1993 at Four Corners
was 112.6 cents, 114.3 cents and 114.9 cents, respectively, per million BTU
($19.94, $20.19 and $20.11 per ton, respectively).
Natural Gas
The natural gas used as fuel for the Company's Albuquerque electric
generating plant (Reeves) is delivered by GCNM. (See "NATURAL GAS OPERATIONS".)
In addition to rate changes under filed tariffs, the Company's cost of gas
increases or decreases according to the average cost of gas supplied by GCNM or
other sources.
Nuclear Fuel
The fuel cycle for PVNGS is comprised of the following stages: (1) the mining
and milling of uranium ore to produce uranium concentrates, (2) the conversion
of uranium concentrates to uranium hexafluoride, (3) the enrichment of uranium
hexafluoride, (4) the fabrication of fuel assemblies, (5) the utilization of
fuel assemblies in reactors, and (6) the storage of spent fuel and the disposal
thereof. The PVNGS participants made arrangements to obtain quantities of
uranium concentrates anticipated to be sufficient to meet operational
requirements through 1996. Existing contracts and options could be utilized to
meet approximately 75% of requirements in 1997 and 50% of requirements from
1998 through 2000. Spot purchases in the uranium market will be made, as
appropriate. The PVNGS participants contracted for all conversion services
required through 1994 and for up to 65% of conversion services required through
1998, with options to continue through the year 2000. The PVNGS participants,
including the Company, have an enrichment services contract with USEC which
obligates USEC to furnish enrichment services required for the operation of the
three PVNGS units over a term expiring in November 2014, with annual options to
terminate each year of the contract with ten years prior notice. The
participants exercised this option, terminating 30% of requirements for 1996
through 1998 and 100% of requirements during the years 1999 through 2002. In
addition, existing contracts will provide fuel assembly fabrication services
for at least ten years from the date of operation of each PVNGS unit and
through contract options, approximately fifteen additional years are available.
Existing spent fuel storage facilities at PVNGS have sufficient capacity with
certain modifications to store all fuel expected to be discharged from normal
operation of all of the PVNGS units through at least the year
5
<PAGE>
2005. Pursuant to the Nuclear Waste Policy Act of 1982, as amended in 1987 (the
"Waste Act"), DOE is obligated to accept and dispose of all spent nuclear fuel
and other high-level radioactive wastes generated by all domestic power
reactors. The NRC, pursuant to the Waste Act, also requires operators of
nuclear power reactors to enter into spent fuel disposal contracts with DOE.
APS, on its own behalf and on behalf of the other PVNGS participants, executed
a spent fuel disposal contract with DOE. The Waste Act also obligates DOE to
develop the facilities necessary for the permanent disposal of all spent fuel
generated and to be generated by domestic power reactors and to have the first
such facility in operation by 1998 under prescribed procedures. In November
1989, DOE reported that such a permanent disposal facility will not be in
operation until 2010. As a result, under DOE's current criteria for shipping
allocation rights, PVNGS's spent fuel shipments to the DOE permanent disposal
facility would begin in approximately 2025. In addition, APS believes that on-
site storage of spent fuel may be required beyond the life of the PVNGS Units.
APS currently believes that alternative interim spent fuel storage methods are
or will be available on-site or off-site for use by PVNGS to allow its
continued operation beyond 2005 and to safely store spent fuel until DOE's
scheduled shipments from PVNGS begin.
Water Supply
Water for Four Corners and SJGS is obtained from the San Juan River. (See
ITEM 3.--"LEGAL PROCEEDINGS--SAN JUAN RIVER ADJUDICATION".) BHP holds rights to
San Juan River water and has committed a portion of such rights to Four
Corners. The Company and Tucson have a contract with the United States Bureau
of Reclamation for consumption of 16,200 acre feet of water per year for SJGS,
which contract expires in 2005, and in addition, the Company was granted the
authority to consume 8,000 acre feet of water per year under a state permit
that is held by BHP. The Company is of the opinion that sufficient water is
under contract for SJGS until 2005.
On January 29, 1993, the U.S. Fish and Wildlife Service proposed a portion of
the San Juan River as critical habitat for two fish species. This designation
may impact uses of the river and its flood plains and will require certain
analysis under the Endangered Species Act of 1973 of all significant Federal
actions. Renewal of the SJGS water contract is considered a significant Federal
action. The Company is currently unable to assess any impacts to operations but
is reviewing the issue and commenting to the agencies.
Sewage effluent used for cooling purposes in the operation of the PVNGS units
has been obtained under contracts with certain municipalities in the area. The
contracted quantity of effluent exceeds the amount required for the three PVNGS
units. The validity of these effluent contracts is the subject of litigation in
state and Federal courts. (See ITEM 3.--"LEGAL PROCEEDINGS--PVNGS WATER SUPPLY
LITIGATION".)
6
<PAGE>
NATURAL GAS OPERATIONS
ACQUISITION OF NATURAL GAS OPERATIONS
On January 28, 1985, the Company acquired substantially all of the New Mexico
natural gas utility assets of Southern Union (principally a natural gas retail
distribution system operated by Southern Union as the Gas Company of New Mexico
division and now operated by the Company as GCNM) and Sunbelt acquired all of
the stock of Southern Union Gathering Company (subsequently renamed Sunterra
Gas Gathering Company), a wholly-owned subsidiary of Southern Union, in
connection with the settlement of antitrust litigation against Southern Union
in which the Company and others were plaintiffs. In a separate transaction, a
wholly-owned subsidiary of Sunbelt acquired from Southern Union all of the
stock of Southern Union Processing Company (subsequently renamed Sunterra Gas
Processing Company) on December 31, 1986. In January 1990, the Company acquired
all of the common stock of Gathering Company and Processing Company from
Sunbelt and the Sunbelt subsidiary, respectively. Together with GCNM, Gathering
Company and Processing Company are referred to as the Company's natural gas
operations.
PROPOSED SALE OF GATHERING AND PROCESSING ASSETS
On February 12, 1994, the Company, Gathering Company and Processing Company
entered an agreement to sell substantially all of their gas gathering and
processing facilities. The Company believes that the sale, which requires prior
NMPUC approval, will improve its flexibility in accessing competitively priced,
reliable and secure gas supplies. (See PART II, ITEM 7.--"MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--Sale
of Gas Gathering and Processing Assets".)
GAS COMPANY OF NEW MEXICO DIVISION
The Company distributes natural gas through GCNM to most of the major
communities in New Mexico, including Albuquerque and Santa Fe, serving
approximately 371,000 customers as of December 31, 1993. The Albuquerque
metropolitan area accounts for approximately 54% of the Company's total
customers. The Company holds long-term, non-exclusive franchises with varying
expiration dates in all incorporated communities requiring franchise
agreements. The expiration dates for the Company's franchises in Albuquerque
and Santa Fe are 1998 and 1995, respectively. GCNM's customer base includes
both "sales-service" customers and "transportation-service" customers. Sales-
service customers purchase natural gas and receive transportation and delivery
services from GCNM for which GCNM receives both cost-of-gas and cost-of-service
revenues. Cost-of-gas revenues collected from sales service customers are a
recovery of the cost of purchased gas in accordance with NMPUC rules and
regulations and, in that sense, do not affect the net earnings of the Company.
Transportation-service customers, who procure gas independently of GCNM and
contract with GCNM for transportation and related services, provide GCNM with
cost-of-service revenues only. Transportation services are provided both to gas
marketers generally for delivery to locations throughout GCNM's distribution
systems and to natural gas producers generally for delivery to other interstate
pipelines.
For the twelve months ended December 31, 1993, GCNM had throughput of
approximately 89.6 million decatherms, including sales of 43.5 million
decatherms to sales-service customers. No single customer accounted for more
than 6.5% of GCNM's therm sales in 1993.
GCNM's total operating revenues for the year ended December 31, 1993, were
approximately $235.2 million. Cost-of-gas revenues, received from sales-service
customers, accounted for approximately 46% of GCNM's total operating revenues.
Since a major portion of GCNM's load is related to heating, levels of therm
sales are affected by the weather. Approximately 45% of GCNM's total therm
sales in 1993 occurred in the months of January, February, November and
December.
7
<PAGE>
During the 1980's, FERC and NMPUC orders relating to the nondiscriminatory
transportation of gas in certain instances, as well as other changes in the
natural gas industry, led to increased competition for sales of natural gas
within New Mexico. An order issued by the NMPUC requires New Mexico gas
utilities to offer transportation service to all customers. Thus, GCNM's
customers may choose to purchase natural gas from sources other than GCNM and
require transportation by GCNM, subject to the capacity of GCNM's system.
During 1993, approximately 51% of GCNM's total gas throughput was related to
transportation gas deliveries. GCNM's transportation rates are unbundled, and
transportation customers only pay for the amount of transportation service they
receive from GCNM.
GATHERING COMPANY
Gathering Company is engaged in the ownership and operation of gas gathering
facilities primarily in the San Juan Basin in northwestern New Mexico, the
purchase of gas from sources in the San Juan Basin, the sale of natural gas to
GCNM and third parties and the gathering of natural gas for third parties. In
1993, Gathering Company sold approximately 13.7 million decatherms of natural
gas to GCNM and gathered 45.8 million decatherms of natural gas for third
parties.
In January 1990, Gathering Company entered into a natural gas sale and
gathering contract with GCNM. The contract allows Gathering Company to recover
from GCNM, effective January 1988, substantially all of its operating costs,
net of its third-party revenues (including revenues received from Processing
Company), and to earn a regulated return on its investment in its operating
assets. In addition, Gathering Company is permitted under the contract to
charge to GCNM all payments made arising from take-or-pay obligations and from
contract reformation. (See "RATES AND REGULATION--Natural Gas Supply Matters".)
PROCESSING COMPANY
Processing Company processes natural gas for GCNM, Gathering Company and
others. The natural gas is processed at Processing Company's plants under
separate contracts. Both GCNM and Gathering Company executed contracts with
Processing Company in January 1990. The GCNM contract provides that GCNM will
reimburse Processing Company for all of its operating costs, net of its third-
party revenues (including fees from Gathering Company), and provides a return
on Processing Company's investment in its operating assets, in return for
providing the service of processing GCNM's natural gas. Additionally,
Processing Company reimburses GCNM for all revenues from liquid by-products
derived from GCNM's throughput processed at the plants. Such revenues,
including all third party processing fees, are ultimately credited to GCNM's
sales-service customers through the PGAC. The Gathering Company's contract with
Processing Company provides the same service for Gathering Company and in
return for such service, Gathering Company pays Processing Company a fee per
mcf of gas which is processed on behalf of Gathering Company. Processing
Company reimburses Gathering Company for all revenues from liquid by-products
derived from Gathering Company's throughput processed at the plants.
NATURAL GAS SUPPLY
GCNM obtains its supply of natural gas primarily from New Mexico wells
pursuant to contracts with producers and brokers. A significant portion of
GCNM's natural gas supply is provided through Gathering Company. (See
"Gathering Company".) The contracts of GCNM and Gathering Company are generally
sufficient to meet GCNM's peak-day demand.
GCNM serves certain cities which depend on EPNG or Transwestern Pipeline
Company for transportation of gas supplies. Because these cities are not
directly connected to GCNM's transmission facilities, gas purchased from or
transported by these companies is the sole supply source for those cities. Such
transportation is regulated by FERC. As a result of FERC Order 636, it is
expected that GCNM's cost for supplying those cities and for any natural gas
delivered to other interconnecting points on GCNM's system will increase. It is
anticipated that such increases will not materially affect GCNM's total cost of
gas charged to all of its sales-service customers. It is also anticipated that
any increased costs would qualify for collection by GCNM through its PGAC.
8
<PAGE>
At the time of the Company's acquisition of GCNM and Gathering Company, GCNM
obtained its natural gas supply generally pursuant to long-term contracts with
producers that obligated GCNM and Gathering Company to take volumes of gas in
excess of GCNM's sales-service customers' annual demand. At that time, GCNM and
Gathering Company were able to sell all excess gas to interstate pipelines. At
about the same time as the acquisition of the gas operations, the FERC began
promulgating a series of orders that have dramatically altered the way gas is
bought, transported and sold nationwide. In essence, these orders allowed
customers of the interstate pipelines to purchase non-pipeline supplies and use
the interstate pipeline's transmission facilities to transport that gas. Since
GCNM and Gathering Company traditionally had sold off-peak excess supplies to
interstate pipelines, the regulatory changes dramatically altered the Company's
ability to market these non-peak supplies. The inability of the Company to
market its non-peak supplies at competitive prices led to breach of contract
claims from some producers.
GCNM and Gathering Company responded to the changes in the Federal and state
regulations by seeking reformation or termination of certain natural gas
purchase contracts with producers which required GCNM and Gathering Company to
take gas in excess of demand. This effort has enabled GCNM to better match its
obligations to take gas with the demands of its sales-service customers.
Virtually all of the claims relating to natural gas contracts have been settled
in recent years and those contracts have been reformed or terminated. (See ITEM
3.--"LEGAL PROCEEDINGS--Natural Gas Supply Litigation".) In addition, by
increasing supply sourcing options through the construction of new pipeline
interconnects, GCNM has created further flexibility to provide reliable
supplies without incurring, for the most part, take-or-pay contractual
obligations with producers. As a result, the Company expects to have minimal
exposure to litigation resulting from the Company's 1993 natural gas purchasing
activities.
During 1993 and in the future, requirements of GCNM's gas supply contracts
with take-or-pay obligations have been or will be met through GCNM's baseload
demands. By purchasing swing and peaking supplies which do not have year-round
take-or-pay obligations, GCNM will be able to meet the seasonal demand swings
associated with its predominately residential and commercial sales-service
markets. GCNM may purchase natural gas through contracts which contain
reservation fees. The NMPUC is currently examining in GCNM's PGAC continuation
filing whether reservation fees which have been paid to suppliers for standing
ready to serve GCNM's needs during the contract's purchase period should be
recovered from sales-service customers through the PGAC or should be recovered
in some other fashion. In addition, with the implementation of FERC Order 636,
GCNM could have natural gas storage and peak supply services available that it
has not had before.
NATURAL GAS SALES
The following table shows gas throughput by customer class:
GAS THROUGHPUT
(MILLIONS OF DECATHERMS)
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
----- ----- ----- ---- ----
<S> <C> <C> <C> <C> <C>
Residential........................................ 28.0 27.1 26.2 25.2 23.2
Commercial......................................... 10.4 10.6 11.4 11.3 10.7
Industrial......................................... 0.9 0.7 0.8 1.3 1.5
Public authorities................................. 2.5 4.2 4.9 5.3 5.5
Irrigation......................................... 1.3 1.1 1.4 1.8 2.0
Sales for resale................................... 1.0 2.0 1.4 3.5 4.6
Unbilled........................................... (0.6) 0.6 -- -- --
Transportation*.................................... 91.8 73.6 62.6 42.5 19.6
Spot market sale................................... -- 0.9 1.6 8.1 11.1
Brokerage.......................................... -- -- -- -- 0.8
----- ----- ----- ---- ----
135.3 120.8 110.3 99.0 79.0
===== ===== ===== ==== ====
</TABLE>
9
<PAGE>
The following table shows gas revenues by customer class:
GAS REVENUES
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Residential....................... $149,796 $125,313 $137,436 $137,633 $130,130
Commercial........................ 44,575 37,222 46,676 49,575 47,876
Industrial........................ 3,369 2,063 2,754 4,993 5,693
Public authorities................ 9,694 12,313 17,711 20,392 21,757
Irrigation........................ 4,418 2,713 4,495 5,934 7,001
Sales for resale.................. 3,137 4,460 3,848 7,253 9,874
Unbilled.......................... (1,573) 716 -- -- --
Transportation*................... 26,729 18,753 16,997 11,939 7,618
Liquids........................... 18,724 26,427 30,500 39,086 25,294
Processing fees................... 9,761 6,795 5,819 3,127 448
Spot market sales................. -- 1,410 1,771 13,880 19,810
Brokerage......................... -- -- -- -- 1,378
Other............................. 2,457 4,974 9,062 8,292 5,948
-------- -------- -------- -------- --------
$271,087 $243,159 $277,069 $302,104 $282,827
======== ======== ======== ======== ========
</TABLE>
- --------
* Customer-owned gas.
RATES AND REGULATION
The Company is subject to the jurisdiction of the NMPUC with respect to its
retail electric, gas and water rates, service, accounting, issuance of
securities, construction of new generation and transmission facilities and
other matters. The FERC has jurisdiction over rates and other matters related
to wholesale electric sales.
JANUARY 12, 1994 STIPULATION
On January 12, 1994, the Company and the NMPUC staff and primary intervenor
groups (the AG, the New Mexico Industrial Energy Consumers, the City of
Albuquerque, the United States Executive Agencies and the New Mexico Retail
Association) ("interested parties") entered into a stipulation ("stipulation")
which addresses retail electric prices, generation assets and certain financial
concerns of the Company. The Company filed the stipulation with the NMPUC,
recommending that electric retail rates be reduced by $30 million. (See PART
II, ITEM 7.--"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS--January 12, 1994 Stipulation".)
FPPCAC
The Company has electric FPPCACs covering its retail and firm-requirements
wholesale customers. There is an approximate 60-day time lag in implementation
of the FPPCAC for billing purposes, except for firm-requirements wholesale
customers for which there is an approximate 30-day time lag.
On December 22, 1993, the Company and primary intervenors entered into a
stipulation, agreeing to eliminate the FPPCAC from the Company's retail
billings, and set the base fuel cost (defined in the stipulation as fuel costs
plus net purchased power costs less off-system sales revenues) as a component
of the cost of service effective with the order in the Company's next general
rate case. In return, the Company would be allowed to keep any savings it
achieves by efficient fuel management or increases in off-system sales revenues
10
<PAGE>
between rate cases. In future rate cases, any fuel savings achieved by the
Company or increases in off-system sales revenues would be factored into the
new rates. Based on the current relative stability of the Company's fuel cost,
the Company does not anticipate any material adverse impact on the Company's
financial condition or results of operations as a result of this change. The
Company filed testimony in support of the stipulation on February 24, 1994.
Hearings on the case are scheduled in March 1994. The methodology for
establishing the base fuel costs has been incorporated into the cost of service
filed with the January 12, 1994 stipulation. (See PART II, ITEM 7.--
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--January 12, 1994 Stipulation".)
The Company's FPPCAC for its firm-requirement wholesale customers has been at
variance with the filed FERC tariffs. As a result, the Company filed a petition
with FERC on October 28, 1993 to request deviation from the filed FERC tariffs
for the period of July 1985 through January 1993. The Company's filing
indicated that the four firm-requirement wholesale customers benefitted during
that time period relative to the energy costs they would have been billed under
the application of the filed FERC tariffs. The four affected customers concur
with the Company's position and have filed a certificate of concurrence with
FERC. The Company does not anticipate any material adverse impacts on the
Company's financial condition or results of operations as a result of this
issue.
FOSSIL-FUELED PLANT DECOMMISSIONING COSTS
The Company expects to incur decommissioning costs for its fossil-fueled
generating stations. The Company filed for recovery of decommissioning costs by
factoring them into its depreciation rates included in the Company's
depreciation rate study filed with the NMPUC on June 30, 1993. (See Part II,
ITEM 7.--"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS--OTHER ISSUES FACING THE COMPANY--Fossil-Fueled Plant
Decommissioning Costs".)
POSTRETIREMENT BENEFITS
The Company adopted SFAS No. 106, Employers' Accounting for Postretirement
Benefits Other Than Pensions, effective January 1, 1993. SFAS No. 106 requires
accrual of postretirement benefits during the years employees provide services.
Prior to 1993, the costs of these benefits were expensed on a pay-as-you-go
basis. On December 20, 1993, the NMPUC issued a final order in a NMPUC case
regarding an inquiry into SFAS No. 106. In its final order, the NMPUC adopted a
policy which provides for accrual accounting for the postretirement benefit
costs, funding requirements into an irrevocable trust and specific reporting
for the benefit costs in future rate cases. The order also provides for
specific waiver provisions with respect to the external trust funding
requirements and a deferral of the benefit costs in excess of the pay-as-you-go
basis. The Company has requested recovery of the full accrual amount of SFAS
No. 106 expense in the stipulation for its electric business unit. (See PART
II, ITEM 7.--"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS--January 12, 1994 Stipulation".) The Company will address
the recovery of the amounts related to the gas business unit in a future rate
case. The Company currently intends to fund the amount of the annual costs in
1994.
CONSOLIDATION ISSUES
Pursuant to a prior NMPUC order, the Company filed an application on December
21, 1993 for NMPUC approval to combine certain customer service functions of
its gas and electric utility divisions in order to achieve cost savings. At the
same time, the Company filed a separate request for a declaratory order from
the NMPUC confirming that the Company's realignment of senior corporate
officers' responsibilities during 1993 complies with a 1984 NMPUC order placing
certain organizational restrictions on the operation of the gas and electric
divisions. On February 7, 1994, the NMPUC consolidated the two proceedings
because both involve the permissible extent of the relationship between the
Company's gas and electric operations. The Company awaits a pre-hearing
conference and setting of a schedule in this matter.
11
<PAGE>
NATURAL GAS SUPPLY MATTERS
On December 18, 1989, the NMPUC issued an order approving a stipulation
relating to imbalances in GCNM's gas supply and demand. This stipulation
provides for the partial recovery of certain gas costs arising from reformation
of gas purchase contracts and from claims by certain producers relating to
take-or-pay obligations, contract pricing and other matters. The mechanism
established by the order does not apply to any suits not settled or for which
no initial judgement on the merits had been rendered by December 31, 1993.
Under the order, GCNM bears 25% of producer take-or-pay costs (including such
costs paid by GCNM to Gathering Company under their gas sale and gas gathering
contract) for claims settled. GCNM will be permitted to recover from its sales
and transportation customers the remaining 75% of take-or-pay costs over a
period of years. The order allows GCNM to recover from its customers all take-
or-pay costs assessed by interstate pipelines. The order also provides that
GCNM may recover all costs (including costs paid by GCNM to Gathering Company
under their natural gas sale and gathering contract) determined by the NMPUC to
be prudently incurred or just and reasonable (on a case-by-case basis) as the
result of the settlement or litigation of claims ("MDL contract claims")
arising from certain intrastate natural gas purchase contracts that were the
subject of the antitrust litigation that resulted in the Company's acquisition
of GCNM from Southern Union in January 1985.
On March 29, 1993, GCNM was ordered to submit testimony concerning the
allocation of certain take-or-pay settlement amounts paid to Unicon Producing
Company ("Unicon"), Pioneer Exploration Company, Oryx Energy Company and EPNG.
GCNM is currently recovering 75% of approximately $16 million incurred to
settle the disputes with such companies. On October 22 and October 26, 1993,
the NMPUC staff and the AG, respectively, filed testimony claiming that some of
the amounts paid to Unicon were not for settlement of take-or-pay claims and
therefore not recoverable under the NMPUC's December 18, 1989 order. Under the
positions taken by the NMPUC staff and the AG, GCNM would be unable to collect
approximately $3 million of the amount being recovered. The hearings have been
held, briefs have been submitted and the Company now awaits the recommended
decision of the hearing examiner. The Company believes that the settlement
amounts have been properly allocated to the take-or-pay claims under the
December 18, 1989 order and will vigorously defend its position that the amount
it seeks to collect is all recoverable under that order.
On July 12, 1993, the NMPUC issued an order granting motions filed by GCNM,
the NMPUC staff and the AG concerning settlements among GCNM, Gathering
Company, Amoco, Conoco, Mobil Producing Texas and New Mexico, Texaco, Inc. and
Texaco Production Inc. The order required GCNM to file testimony concerning the
amounts paid in the settlements, the allocation of such amounts between take-
or-pay and contract pricing issues, and the prudence of the settlements
involving the contract pricing issues. On December 15, 1993, GCNM filed
testimony. The Company believes that the amounts it seeks to recover have been
properly allocated and prudently incurred, and will vigorously pursue a final
order confirming and permitting recovery. The hearing examiner has set a
hearing for August 23, 1994. GCNM is seeking to recover approximately $27.5
million as producer take-or-pay costs and $9 million for MDL contract claims or
other contract pricing costs. Pursuant to the December 1989 order, GCNM began
collecting the producer take-or-pay costs on July 1, 1993, subject to refund.
OTHER NATURAL GAS MATTERS
GCNM's retail gas rate schedules contain a PGAC which provides for timely
recovery of the cost of gas purchased by GCNM for resale to its sales-service
customers. On August 20, 1990, GCNM filed its biannual application for
continued use of its PGAC pursuant to NMPUC rules. On January 19, 1993, the
NMPUC issued its final order which provided for the continuation of GCNM's PGAC
substantially in its present form. The final order also required GCNM to file
its PGAC continuation filing by April 20, 1993 and specifically ordered GCNM to
explain how its composite gas procurement strategy will be affected by the
announced intention to sell all or major portions of Gathering Company's and
Processing Company's assets. (See PART II, ITEM 7.--"MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--Sale of Gas
Gathering and Processing Assets".) On April 20, 1993,
12
<PAGE>
GCNM filed its application for continued use of its PGAC. A hearing is set for
April 26, 1994. The NMPUC, through its review of the PGAC costs, has
jurisdiction over amounts charged to GCNM by Gathering Company and Processing
Company and for gas purchases and for gathering and processing services
provided to GCNM. The NMPUC has ordered that recovery of such costs in excess
of 1990/1991 levels be deferred and examined in a separate proceeding that the
Company anticipates filing by June 1994.
ENVIRONMENTAL FACTORS
The Company, in common with other electric and gas utilities, is subject to
stringent regulations for protection of the environment by both state and
Federal authorities. PVNGS is subject to the jurisdiction of the NRC, which has
authority to issue permits and licenses and to regulate nuclear facilities in
order to protect the health and safety of the public from radioactive hazards
and to conduct environmental reviews pursuant to the National Environmental
Policy Act. The Company believes that it is in compliance, in all material
respects, with the environmental laws. The Company does not currently expect
that material expenditures for environmental control facilities will be
required in 1994 and 1995.
The Clean Air Act amendments of 1990 (the "Act") impose stringent limits on
emissions of sulfur dioxide and nitrogen oxides from fossil-fueled electric
generating plants. The Act is intended to reduce air contamination from every
sizeable source of air pollution in the nation. Electric utilities with fossil-
fueled generating units will be affected particularly by the section of the Act
which deals with acid rain. To be in compliance with the Act, many utilities
will be faced with installing expensive sulfur dioxide removal equipment,
securing low sulfur coal, buying sulfur dioxide emission allowances, or a
combination of these. Due to the existing air pollution control equipment on
the coal-fired SJGS and Four Corners, the Company believes that it will not be
faced with any material capital expenditures in order to be in compliance with
the acid rain provision of the Act. Under other provisions of the Act, the
Company will be required to obtain operating permits for its coal- and gas-
fired generating units and to pay annual fees associated with the operating
permit program. A monitoring requirement of the Act requires SJGS and Four
Corners to have flow monitors on all units by January 1, 1995. The existing
continuous emission monitoring systems are being evaluated to determine if they
will meet the new monitoring requirements of the Act. The Company does not
believe that the new monitoring requirements of the Act will result in a
material capital expenditure.
The Act also established the Grand Canyon Visibility Transport Commission
("Commission") and charged it with assessing adverse impacts on visibility at
the Grand Canyon. The Commission broadened its scope to assess visibility
impairment in mandatory Class I areas (parks and wilderness areas) located in
the Colorado Plateau ("Golden Circle"). The Commission must report to the EPA
by November 1995 on its findings and make recommendations regarding what
actions, if any, should be pursued in order to remedy the visibility impairment
in the Golden Circle. Depending on the recommendations of the Commission, the
EPA may require stricter controls on sources that may be contributing to the
visibility impairment. Both SJGS and Four Corners are located near the Golden
Circle. The exact nature and cost of additional controls, if any, that may be
required as a result of the recommendations cannot be estimated at this time.
For other environmental issues facing the Company, see PART II, ITEM 7.--
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--OTHER ISSUES FACING THE COMPANY--Environmental Issues--Gas" and "--
Environmental Issue--Electric".
13
<PAGE>
ITEM 2. PROPERTIES
Substantially all of the Company's utility plant is mortgaged to secure its
first mortgage bonds.
ELECTRIC
COAL-FIRED PLANTS
SJGS is located in northwestern New Mexico, and consists of four units
operated by the Company. Units 1, 2, 3 and 4 at SJGS have net rated capacities
of 316 MW, 312 MW, 488 MW and 498 MW, respectively. SJGS Units 1 and 2 are
owned on a 50% shared basis with Tucson. Unit 3 is owned 50% by the Company,
41.8% by SCPPA and 8.2% by Century. Century has agreed to sell its remaining
8.2% interest to Tri-State Generation and Transmission Association, Inc. Unit 4
is owned 45.485% by the Company, 8.475% by Farmington, 28.8% by M-S-R, 7.2% by
Los Alamos and 10.04% by Anaheim. The Company has agreed to sell 35 MW of SJGS
Unit 4 to UAMPS. (See PART II, ITEM 7.--"MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--OTHER ISSUES FACING THE
COMPANY--Excess Capacity Sales/Wholesale Power Market".) The Company's net
aggregate ownership in SJGS is 785 MW. In connection with the Company's sale to
M-S-R in December 1983 of a 28.8% interest in SJGS Unit 4, the Company agreed
to purchase under certain conditions 73.53% (105 MW) of M-S-R's capacity
through April 30, 1995, an amount which may be reduced by M-S-R under certain
conditions. The Company also agreed to market the energy associated with the
remaining 26.47% portion of M-S-R's capacity through April 30, 1995. This
marketing arrangement may be terminated by M-S-R at any time upon 30 days
notice.
The Company also owns 192 MW of net rated capacity derived from its 13%
interest in Units 4 and 5 of Four Corners located in northwestern New Mexico on
land leased from the Navajo Nation and adjacent to available coal deposits.
Units 4 and 5 at Four Corners are jointly owned with SCE, APS, Salt River
Project, Tucson and El Paso and are operated by APS.
NUCLEAR PLANT
The Company's Interest in PVNGS. The Company is participating in the three
1,270 MW units of PVNGS, also known as the Arizona Nuclear Power Project, with
APS (the operating agent), Salt River Project, El Paso, SCE, SCPPA and The
Department of Water and Power of the City of Los Angeles. The Company has a
10.2% undivided interest in PVNGS, with its interests in Units 1 and 2 held
under leases. In September 1992, the Company purchased approximately 22% of the
beneficial interests in PVNGS Units 1 and 2 leases for approximately $17.5
million. The Company's ownership and leasehold interests in PVNGS amount to 130
MW per unit, or a total of 390 MW. PVNGS Units 1, 2 and 3 were declared in
commercial service by the Company in January 1986, September 1986 and January
1988, respectively. Commercial operation of PVNGS requires full power operating
licenses which were granted by the NRC. Maintenance of these licenses is
subject to NRC regulation.
Operation and Regulation. A stipulation adopted by the NMPUC on March 6, 1990
establishes a performance standard for the operation of PVNGS. Under the
performance standards, a "dead band" was established at capacity factors of 60%
through 75%, as measured by the capacity factor of all three PVNGS units over
the fuel cycle. Within the dead band, the Company would receive no reward or
penalty. The Company would be penalized with one-half of the additional fuel
costs incurred for PVNGS capacity factors of 50% to 60% and would be rewarded
with one-half of the avoided fuel costs if PVNGS operates at capacity factors
from 75% through 85%. Capacity factors above 85% or below 50% would reward or
penalize the Company by an amount equal to the additional fuel costs avoided or
incurred. During 1993, PVNGS Units 1, 2 and 3 had capacity factors of
approximately 67.5%, 46.1% and 84.4%, respectively, for a station capacity
factor of 66.0%. These performance standards would be terminated if the NMPUC
approves the stipulation entered into by the Company requesting elimination of
the FPPCAC. (See ITEM 1.--"RATES AND REGULATION--FPPCAC".)
14
<PAGE>
In July 1993, the NRC issued a Systematic Assessment of Licensee Performance
("SALP") for PVNGS for the period March 1, 1992 through May 31, 1993. The SALP
is the standard performance grading process used by the NRC to communicate to
the public in a formal manner how each nuclear plant operates. The ratings have
slightly declined since the previous assessment. Overall, however, the SALP
Board found the performance of licensed activities at PVNGS to be acceptable
and directed toward safe facility operation.
Steam Generator Tubes. For information concerning steam generator tubes, see
PART II, ITEM 7.--"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--OTHER ISSUES FACING THE COMPANY--Palo Verde Nuclear
Generating Station--Steam Generator Tubes".
Discrimination Allegations. By letter dated July 7, 1993, the NRC advised APS
that, as a result of a recommended decision and order by a Department of Labor
Administrative Law Judge (the "DOL ALJ") finding that APS discriminated against
a former contract employee at PVNGS because he engaged in "protected
activities" (as defined under Federal regulations), the NRC intended to
schedule an enforcement conference with APS.
Following the DOL ALJ's finding, APS investigated various elements of both
the substantive allegations and the manner in which the U.S. Department of
Labor (the "DOL") proceedings were conducted. As a result of that
investigation, APS determined that one of its employees had falsely testified
during the proceedings, that there were inconsistencies in the testimony of
another employee, and that certain documents were requested in, but not
provided during, discovery. The two employees in question are no longer with
APS. APS provided the results of its investigation to the DOL ALJ, who referred
matters relating to the conduct of the two former employees of APS to the U.S.
Attorney's office in Phoenix, Arizona. On December 15, 1993, APS and the former
contract employee who had raised the DOL claim entered into a settlement
agreement, a part of which remains subject to approval by the Secretary of
Labor.
By letter dated August 10, 1993, APS also provided the results of its
investigation to the NRC, and advised the NRC that, as a result of APS's
investigation, APS had changed its position opposing the finding of
discrimination. The NRC is investigating this matter and APS is fully
cooperating with the NRC in this regard.
Sale and Leaseback Transactions of PVNGS Units 1 and 2. In eleven
transactions consummated in 1985 and 1986, the Company sold and leased back its
entire 10.2% interest in PVNGS Units 1 and 2, together with portions of the
Company's undivided interest in certain PVNGS common facilities. In each
transaction, the Company sold interests to an owner trustee under an owner
trust agreement with an institutional equity investor. The owner trustees, as
lessors, leased the interests to the Company under lease agreements having
initial terms expiring January 15, 2015 (with respect to the Unit 1 leases) or
January 15, 2016 (with respect to the Unit 2 leases). Each lease provides an
option to the Company to extend the term of the lease as well as a repurchase
option. The aggregate lease payments for the Company's PVNGS leases are
approximately $66.3 million per year. Throughout the terms of the leases, the
Company continues to have full and exclusive authority and responsibility to
exercise and perform all of the rights and duties of a participant in PVNGS
under the Arizona Nuclear Power Project Participation Agreement and retains the
exclusive right to sell and dispose of its 10.2% share of the power and energy
generated by PVNGS Units 1 and 2. The Company also retains responsibility for
payment of its share of all taxes, insurance premiums, operating and
maintenance costs, costs related to capital improvements and decommissioning
and all other similar costs and expenses associated with the leased facilities.
On September 2, 1992, the Company purchased approximately 22% of the beneficial
interests in the PVNGS Units 1 and 2 leases for $17.5 million. For accounting
purposes, this transaction was recorded as a purchase with the Company
recording approximately $158.3 million as utility plant and $140.8 million as
long-term debt on the Company's consolidated balance sheet. The purchase is
expected to provide the Company with (1) the residual value of a certain
portion of the PVNGS Units at no cost, (2) reduced exposure to indemnification
provisions in the lease agreements and (3) added flexibility to cause the
retirement of the underlying lease obligation bonds ("LOBs"). (See also Notes 7
and 9 of the notes
15
<PAGE>
to consolidated financial statements.) The retirement of the LOBs would only be
caused if (1) adequate cash is available, (2) it is determined to be the best
use of funds, and (3) the appropriate approvals are obtained. In connection
with the stipulation, the Company wrote down the purchased beneficial interests
in PVNGS Units 1 and 2 leases to $46.7 million. (See PART II, ITEM 7.--
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--January 12, 1994 Stipulation.")
Each lease describes certain events, "Events of Loss" or "Deemed Loss
Events", the occurrence of which could require the Company to, among other
things, (1) pay the lessor and the equity investor, in return for such
investor's interest in PVNGS, cash in the amount provided in the lease, which
amount, primarily because of certain tax consequences, would exceed such equity
investor's outstanding equity investment, and (2) assume debt obligations
relating to the PVNGS lease. The "Events of Loss" generally relate to
casualties, accidents and other events at PVNGS, which would severely adversely
affect the ability of the operating agent, APS, to operate, and the ability of
the Company to earn a return on its interests in, PVNGS. The "Deemed Loss
Events" consist mostly of legal and regulatory changes (such as changes in law
making the sale and leaseback transactions illegal, or changes in law making
the lessors liable for nuclear decommissioning obligations). The Company
believes the probability of such "Events of Loss" or "Deemed Loss Events"
occurring is remote. Such belief is based on the following reasons: (a) to a
large extent, prevention of "Events of Loss" and some "Deemed Loss Events" is
within the control of the PVNGS participants, including the Company, and the
PVNGS operating agent, through the general PVNGS operational and safety
oversight process and (b) with respect to other "Deemed Loss Events," which
would involve a significant change in current law and policy, the Company is
unaware of any pending proposals or proposals being considered for introduction
in Congress or any state legislative or regulatory body that, if adopted, would
cause any such events.
PVNGS Decommissioning Funding. For information concerning PVNGS
decommissioning funding, see PART II, ITEM 7.--"MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--OTHER ISSUES FACING
THE COMPANY--PVNGS Decommissioning Funding".
PVNGS Liability and Insurance Matters. The PVNGS 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 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 occurring at any nuclear power plant
in the United States is approximately $79.3 million, subject to an annual limit
of $10 million per incident. Based upon the Company's 10.2% interest in the
three PVNGS units, the Company's maximum potential assessment per incident is
approximately $24.3 million, with an annual payment limitation of $3 million.
The insureds under this liability insurance include the PVNGS participants and
"any other person or organization with respect to his legal responsibility for
damage caused by the nuclear energy hazard". The PVNGS participants maintain
"all-risk" (including nuclear hazards) insurance for nuclear property damage
to, and decontamination of, property at PVNGS in the aggregate amount of $2.75
billion as of January 1, 1994, a substantial portion of which must be applied
to stabilization and decontamination. The Company has also secured insurance
against a portion of the increased cost of generation or purchased power
resulting from certain accidental outages of any of the three PVNGS units if
the outage exceeds 21 weeks.
OTHER ELECTRIC PROPERTIES
Four Corners and a portion of the facilities adjacent to SJGS are located on
land held under easements from the United States and also under leases from the
Navajo Nation, the enforcement of which leases might require Congressional
consent. The risk with respect to the enforcement of these easements and leases
is not deemed by the Company to be material. However, the Company is dependent
in some measure upon the
16
<PAGE>
willingness and ability of the Navajo Nation to protect these properties. (See
PART II, ITEM 7.--"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--OTHER ISSUES FACING THE COMPANY--A Transmission
Right-of-Way".)
As of December 31, 1993, the Company owned, jointly owned or leased 2,781
circuit miles of electric transmission lines, 5,218 miles of distribution
overhead lines, 2,826 cable miles of underground distribution lines (excluding
street lighting) and 215 substations.
On May 1, 1984, the Company's board of directors approved plans to proceed
with OLE, which involves construction of a 345 Kv transmission line connecting
the existing Ojo 345 Kv line to the existing Norton Station. For discussion of
issues relating to OLE, see PART II, ITEM 7.--"MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--OTHER ISSUES FACING
THE COMPANY--OLE Transmission Project".
NATURAL GAS
The property owned by GCNM, as of December 31, 1993, consisted primarily of
natural gas gathering, storage, transmission and distribution systems. The
gathering systems consisted of approximately 1,184 miles (approximately 308
miles of which are leased to Gathering Company) of pipe with compression and
treatment facilities. Provisions for storage made by GCNM include ownership and
operation of an underground storage facility located near Albuquerque and an
agreement with owners of a unitized oil field located near Artesia, New Mexico,
in which GCNM has injection and redelivery rights. The transmission systems
consisted of approximately 1,355 miles of pipe with appurtenant compression
facilities. The distribution systems consisted of approximately 9,471 miles of
pipe.
GCNM leases approximately 128 miles of transmission pipe from the DOE for
transportation of natural gas to Los Alamos and to certain other communities in
northern New Mexico. The lease can be terminated by either party on 30 days
written notice, although the Company has the right to use the facility for two
years after termination.
The property of Gathering Company includes approximately 552 miles of
gathering pipe with appurtenant compression facilities.
Processing Company owns facilities located in northwestern New Mexico having
an aggregate design capacity for processing of natural gas of approximately
300,000 mcf per day.
The Company, Gathering Company and Processing Company have entered into an
agreement to sell substantially all of their natural gas gathering and
processing assets. (See PART II, ITEM 7.--"MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--Sale of Gas Gathering and
Processing Assets".)
WATER
The Company's water property consists of wells, water rights, pumping and
treatment plants, storage reservoirs and transmission and distribution mains.
The Company has reached agreement with the City of Santa Fe for the sale of its
water utility division. (See PART II, ITEM 7.--"MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--Sale of SDCW".)
OTHER INFORMATION
The electric and gas transmission and distribution lines are generally
located within easements and rights-of-way on public, private and Indian lands.
The Company leases interests in PVNGS Units 1 and 2 and related property, EIP
and associated equipment, data processing, communication, office and other
equipment, office space, utility poles (joint use), vehicles and real estate.
The Company also owns and leases service and office facilities in Albuquerque
and in other operating divisions throughout its service territory.
17
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
NATURAL GAS SUPPLY LITIGATION
A lawsuit was filed on August 31, 1990 in the United States District Court
for the District of New Mexico by a group of producers seeking damages under a
gas purchase contract. This action was brought by Caulkins Producing Company as
the operator and Caulkins Oil Co. (collectively "Caulkins"), Louis Dreyfus
Natural Gas Corp. ("Dreyfus") and Marathon Oil Company ("Marathon") for alleged
breach of a long-term natural gas purchase contract by GCNM. The suit alleged
that GCNM failed to take or pay for contracted quantities of natural gas for
the period of 1986 to the present, and further, that GCNM failed to take gas
ratably from the producers during the same period of time.
In August 1993, Caulkins, Dreyfus and GCNM reached an agreement settling all
disputes arising under the contract as to those parties for $7.9 million. The
parties also entered into gas purchase agreements which are favorable to GCNM
as part of the settlements. On October 14, 1993, the Company and Marathon
entered into an agreement settling all disputes between GCNM and Marathon. GCNM
paid Marathon $4.9 million on November 10, 1993 and obtained favorable terms in
new gas purchase and related contracts. The Company had previously made
sufficient reserves for losses in this litigation. Pursuant to a prior order of
the NMPUC, GCNM began collecting 75% of the amounts paid to settle this lawsuit
in January 1994.
PVNGS WATER SUPPLY LITIGATION
The validity of the primary effluent contract under which water necessary for
the operation of the PVNGS units is obtained was challenged in a suit filed in
January 1982 by the Salt River Pima-Maricopa Indian Community (the "community")
against the Department of the Interior, the Federal agency alleged to have
jurisdiction over the use of the effluent. The PVNGS participants, including
the Company, were named as additional defendants in the proceeding, which is
before the United States District Court for the District of Arizona. The
portion of the action challenging the effluent contract has been stayed until
the community litigates certain claims in the same action against the
Department of the Interior and other defendants. On October 21, 1988, Federal
legislation was enacted conforming to the requirements of a proposed settlement
that would terminate this case without affecting the validity of the primary
effluent contract. However, certain contingencies are to be performed before
the settlement is finalized and the suit is dismissed. One of these
contingencies is the approval of the settlement by the court in the Lower Gila
River Watershed litigation referred to below.
The Company understands that a summons served on APS in early 1986 required
all water claimants in the Lower Gila River Watershed of Arizona to assert any
claims to water on or before January 20, 1987, in an action pending in the
Maricopa County Superior Court. PVNGS is located within the geographic area
subject to the summons and the rights of the PVNGS participants to the use of
groundwater and effluent at PVNGS are potentially at issue in this action. APS,
as the PVNGS project manager, filed claims that dispute the court's
jurisdiction over the PVNGS participants' groundwater rights and their
contractual rights to effluent relating to PVNGS and, alternatively, seek
confirmation of such rights. No trial date has been set in this matter.
Although the foregoing matters remain subject to further evaluation, APS
expects that the described litigation will not have a material adverse impact
on the operation of PVNGS.
18
<PAGE>
SAN JUAN RIVER ADJUDICATION
In 1975, the State of New Mexico filed an action entitled State of New Mexico
v. United States, et al., in the District Court of San Juan County, New Mexico,
to adjudicate all water rights in the "San Juan River Stream System". The
Company was made a defendant in the litigation in 1976. The action was expected
to adjudicate water rights used at the Four Corners plant, at SJGS and at Santa
Fe. (See ITEM 1. "BUSINESS--ELECTRIC OPERATIONS--Fuel and Water Supply".) The
Company cannot at this time anticipate the effect, if any, of any water rights
adjudication on the present arrangements for water at SJGS and Four Corners,
nor can it determine what effect the action will have on water for Santa Fe. It
is the Company's understanding that final resolution of the case cannot be
expected for several years.
PVNGS PROPERTY TAXES
On June 29, 1990, an Arizona state tax law was enacted, effective as of
December 31, 1989, which adversely impacted the Company's earnings in the 1990,
1991, 1992 and 1993 tax years by approximately $5 million per year, before
income taxes and capitalized and deferred costs. On December 20, 1990, the
PVNGS participants, including the Company, filed a lawsuit in the Arizona Tax
Court, a division of the Maricopa County Superior Court, against the Arizona
Department of Revenue, the Treasurer of the State of Arizona, and various
Arizona counties, claiming, among other things, that portions of the new tax
law are unconstitutional. In December 1992, the court granted summary judgment
to the taxing authorities, holding that the law is constitutional. The PVNGS
participants appealed this decision to the Arizona Court of Appeals. The
Company cannot currently predict the ultimate outcome of this matter.
OTHER PROCEEDINGS
On March 31, 1993, certain individuals ("the New Mexico Plaintiffs"),
formerly affiliated with Bellamah Community Development ("BCD") whose general
partners include Meadows, filed suit ("the New Mexico suit") in the United
States District Court for the District of New Mexico against numerous parties,
including the Company, current and former employees of the Company or Meadows,
and MCB Financial Group, Inc., a Delaware corporation ("MCB"), 50% of which
stock is owned by Meadows. The New Mexico Plaintiffs have not requested any
monetary relief against the Company or certain current and former employees of
the Company and Meadows but have joined those parties in connection with
insurance coverage and bad faith insurance practices alleged against the
insurance company which had issued a directors and officers liability policy to
various entities, including MCB and BCD. The insurance allegations are made in
connection with claims which were then threatened by the Resolution Trust
Corporation ("RTC"), as receiver for Western Savings & Loan Association
("Western"), against the Company and others. The New Mexico Plaintiffs also
sued the RTC for a declaration that they are not liable for any claims asserted
by the RTC involving Western and BCD. The Company and the current and former
employees of the Company or Meadows counterclaimed against the New Mexico
Plaintiffs and cross-claimed against the insurance company and the RTC in
connection with insurance coverage and bad faith insurance practices. In
addition, the Company and the current and former employees of the Company or
Meadows cross-claimed against the RTC, seeking a declaration of non-liability.
The RTC moved to transfer the case to the United States District Court for
the District of Arizona. On February 7, 1994, an order was entered transferring
the case in its entirety. Prior to the transfer, however, the New Mexico
magistrate judge issued a proposed order which, if accepted by the district
judge, would require the parties to enter into mediation of all the claims. The
parties have agreed to a form of order dismissing without prejudice the claims
asserted in the New Mexico suit against MCB and against the RTC, recommending
the remand of the remaining claim for declaratory relief against the insurance
company to the Federal District Court in New Mexico, and ordering the mediation
of the claims asserted in the Arizona proceeding (described below) by the RTC
against all of the other parties in the New Mexico suit except the insurance
company and MCB.
19
<PAGE>
On April 16, 1993, the Company and certain current and former employees of
the Company or Meadows were named as defendants in two actions filed in the
United States District Court for the District of Arizona by the RTC, as
receiver for Western. The claims related to alleged actions of the Company's
employees in connection with a loan procured by BCD from Western and the
purchase by that partnership of property owned by Western in 1987. The RTC
apparently claims that the Company's liability stems from the actions of a
former employee who allegedly acted on behalf of the Company for the Company's
benefit. The RTC is claiming in excess of $40 million in actual damages from
the BCD/Western transactions and alternatively is claiming damages
substantially exceeding that amount on a joint and several liability theory for
injury to Western from an alleged conspiracy in which the Company and the other
defendants are alleged to be co-conspirators. The conspiracy allegations
involve all other transactions claimed by the RTC to have harmed Western but to
which BCD was not a party. The RTC claims the $40 million damages would be
trebled under application of Arizona law. The RTC may also seek attorneys fees
and costs. In February 1994, the RTC advised that the RTC would be seeking to
amend the complaint to allege civil conspiracy, common law fraud and aiding and
abetting breach of fiduciary duties, aiding and abetting common law fraud and
aiding and abetting violation of federal and Arizona RICO statutes against the
Company and is considering claims against Meadows and against the Company as
"successor to and alter ego" of Meadows.
Three of the individuals sued by the RTC have indemnity agreements with the
Company.
On March 3 and 4, 1994, the parties participated in a mediation session aimed
at settling the litigation. The session ended without a settlement. It is
anticipated that settlement discussions will continue although no dates have
been scheduled yet for future meetings.
In July 1993, the Company and certain current or former employees of the
Company or its subsidiaries were also named in an action filed in Federal
District Court in Arizona on behalf of a class of common stockholders of
Western. The allegations were similar to those filed in the RTC actions
described above. On January 24, 1994, motions to dismiss filed by the Company
and certain current or former employees of the Company or its subsidiaries were
granted by the Arizona court for lack of standing to bring the actions.
Although the plaintiffs may appeal the order of the court, the Company believes
the claims are without merit.
Although the Company continues to investigate all of the relevant claims
raised in all of the suits, the Company believes that a material loss to the
Company will not likely occur as a result of claims that have been or may be
asserted by any of the parties.
20
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
SUPPLEMENTAL ITEM. EXECUTIVE OFFICERS OF THE COMPANY
Executive officers, their ages, offices held with the Company in the past
five years and initial effective dates thereof, were as follows on December 31,
1993:
<TABLE>
<CAPTION>
NAME AGE OFFICE INITIAL EFFECTIVE DATE
---- --- ------ ----------------------
<C> <C> <S> <C>
J. T. Ackerman.. 52 Chairman of the Board August 1,1993
Chairman, President and Chief
Executive Officer May 23, 1991
President and Chief Executive
Officer June 19, 1990
President, Gas Company of New
Mexico Division February 5, 1985
President and Chief Executive
B. F. Montoya... 58 Officer August 1, 1993
Executive Vice President,
W. M. Eglinton*. 44 Transition Activities March 2, 1993
Executive Vice President and
Chief Operating Officer September 20, 1991
Executive Vice President and
Chief Operating Officer,
Electric and Water Operations September 1, 1988
Executive Vice President and
Chief Operating Officer,
Electric Operations June 1, 1988
Senior Vice President,
Operations, Electric Operations June 23, 1987
Senior Vice President,
Operations April 1, 1986
Senior Vice President and Chief
M. H. Maerki.... 53 Financial Officer December 7, 1993
Senior Vice President,
Administration and Chief
Financial Officer March 2, 1993
Senior Vice President and Chief
Financial Officer June 1, 1988
Chief Financial Officer, Meadows
Resources, Inc. May 24, 1984
Senior Vice President, Corporate
J. E. Sterba.... 38 Development December 7, 1993
Senior Vice President, Asset
Restructuring April 6, 1993
Senior Vice President, Retail
Electric and Water Services January 29, 1991
Senior Vice President, Business
Development Group, Electric and
Water Operations September 1, 1988
Vice President, Revenues
Management, Electric Operations January 27, 1987
Vice President, Revenues
Management May 1, 1986
Senior Vice President, Power
J. L. Godwin.... 50 Supply Resources December 7, 1993
Vice President, Electric Supply
Sourcing March 2, 1993
Senior Vice President, Wholesale
Marketing and Power Supply January 29, 1991
Vice President, Electric
Operations Group, Electric and
Water Operations September 1, 1988
Vice President, Power Supply,
Electric Operations April 26, 1988
Vice President, Power Production
and Manager, San Juan Station,
Electric Operations June 23, 1987
Senior Vice President, Utility
W. J. Real...... 45 Operations December 7, 1993
Senior Vice President, Customer
Service and Operations March 2, 1993
Executive Vice President, Gas
Operations June 19, 1990
Vice President, Operations Gas
Operations Regional Vice
President, Central Gas
Operations September 1, 1988
Regional Vice President, Central
Region, Gas Company of New
Mexico Division January 28, 1986
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
NAME AGE OFFICE INITIAL EFFECTIVE DATE
---- --- ------ ----------------------
<C> <C> <S> <C>
Senior Vice President,
Marketing and Customer
M. P. Bourque..... 46 Services December 7, 1993
Senior Vice President,
Marketing and Energy
Management March 2, 1993
Senior Vice President, Gas
Management Services June 19, 1990
Vice President, Gas Supply,
Gas Company of New Mexico
Division March 2, 1987
P. T. Ortiz....... 43 Senior Vice President,
Regulatory Policy, General
Counsel and Secretary December 7, 1993
Senior Vice President, Public
Policy and General Counsel
and Secretary March 2, 1993
Senior Vice President, General
Counsel and Corporate
Secretary February 4, 1992
Senior Vice President and
General Counsel October 14, 1991
Vice President, Human
J. A. Zanotti..... 53 Resources March 2, 1993
Senior Vice President, Human
Resources and Communications July 26, 1990
Vice President, Human
Resources and Staff Services,
Gas Company of New Mexico
Division September 1, 1988
District Vice President,
Southwest, Gas Company of New
Mexico Division April 26, 1988
Director, Public Affairs, Gas
Company of New Mexico
Division July 15, 1980
M. D. Christensen. 45 Vice President, Public Affairs December 7, 1993
Vice President, Communications July 22, 1991
</TABLE>
- --------
* W. M. Eglinton retired effective December 31, 1993.
All officers are elected annually by the board of directors of the Company.
All of the above executive officers have been employed by the Company and/or
its subsidiaries for more than five years in executive or management positions,
with the exception of P. T. Ortiz, M. D. Christensen and B. F. Montoya. Prior
to employment with the Company, P. T. Ortiz was employed by U S WEST
Communications during the period of January 1988 to October 1991 as Chief
Counsel--New Mexico and during the period of June 1985 to January 1988, as an
attorney by U S WEST Communications (then known as Mountain Bell). The
principal business of U S WEST Communications is telecommunications. Prior to
employment with the Company, M. D. Christensen was employed with Southern
California Gas since 1978. During the period 1990 through 1991, M. D.
Christensen was Vice President of Planning and for the period 1987 through
1990, M. D. Christensen was Vice President of Public Affairs. Prior to 1987, M.
D. Christensen held various management positions relating to marketing and
legislative services. Prior to employment with the Company, B. F. Montoya was
employed with Pacific Gas and Electric Company ("PG&E") since 1989. In 1991, he
was promoted to Senior Vice President and General Manager of the Gas Supply
Business Unit of PG&E. Prior to his employment with PG&E, B. F. Montoya spent
31 years in the Civil Engineer Corps of the U.S. Navy, performing a wide range
of management and utility-related assignments. B. F. Montoya achieved the rank
of Rear Admiral when he became Commander, Naval Facilities Engineering Command
and Chief of Civil Engineers.
22
<PAGE>
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is traded on the New York Stock Exchange. Ranges
of sales prices of the Company's common stock, reported as composite
transactions (Symbol: PNM) for 1993 and 1992, by quarters, are as follows:
<TABLE>
<CAPTION>
RANGE OF
SALES
QUARTER ENDED PRICES
- ------------- ----------
HIGH LOW
------ ---
<S> <C> <C>
1993:
December 31..................................................... 11 1/2 9 1/2
September 30.................................................... 13 7/8 10 5/8
June 30......................................................... 13 3/4 11 5/8
March 31........................................................ 12 5/8 9 7/8
Fiscal Year................................................... 13 7/8 9 1/2
1992:
December 31..................................................... 13 1/2 12
September 30.................................................... 14 1/8 12 1/2
June 30......................................................... 13 1/2 11
March 31........................................................ 11 7/8 9 3/8
Fiscal Year................................................... 14 1/8 9 3/8
</TABLE>
On January 31, 1994, there were 24,469 holders of record of the Company's
common stock.
CUMULATIVE PREFERRED STOCK
While isolated sales of the Company's cumulative preferred stock have
occurred in the past, the Company is not aware of any active trading market for
its cumulative preferred stock. Quarterly cash dividends were paid on each
series of the Company's cumulative preferred stock at their stated rates during
1993 and 1992.
For a discussion of dividend restrictions on the Company's common and
preferred stock, see Note 3 of notes to consolidated financial statements and
ITEM 7.--"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS--LIQUIDITY AND CAPITAL RESOURCES--Financing Capability
and Dividend Restrictions".
23
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS AND RATIOS)
<S> <C> <C> <C> <C> <C>
Total Operating
Revenues*.............. $ 873,878 $ 851,953 $ 857,168 $ 881,186 $ 929,817
Net Earnings (Loss)..... $ (61,486)** $ (104,255)+ $ 22,960 $ 442 $ 82,593
Earnings (Loss) per
Common Share........... $ (1.64)** $ (2.67)+ $ 0.32 $ (0.23) $ 1.73
Total Assets............ $2,212,189 $2,375,582 $2,344,332 $2,313,709 $2,387,005
Preferred Stock with
Mandatory Redemption
Requirements........... $ 24,386 $ 25,700 $ 26,982 $ 45,581 $ 49,268
Long-Term Debt, less
Current Maturities..... $ 957,622 $ 911,252 $ 786,279 $ 790,126 $ 801,706
Common Stock Data:
Dividends paid per
common share........... $ -- $ -- $ -- $ -- $ 0.38
Dividend pay-out ratio.. -- -- -- -- 22.0%
Market price per common
share
at year end............ $ 11.250 $ 12.375 $ 9.75 $ 8.375 $ 14.625
Book value per common
share
at year end............ $ 13.29 $ 15.00 $ 17.69 $ 17.36 $ 18.02
Average number of common
shares outstanding..... 41,774 41,774 41,774 41,774 41,774
Return on Average Common
Equity................. (10.7)% (15.0)% 1.8% (1.3)% 9.5%
Capitalization:
Common stock equity.... 34.8% 38.6% 45.8% 44.8% 45.3%
Preferred stock:
Without mandatory
redemption
requirements......... 3.7 3.6 3.7 3.6 3.5
With mandatory
redemption
requirements......... 1.5 1.6 1.7 2.8 3.0
Long-term debt, less
current maturities.... 60.0 56.2 48.8 48.8 48.2
---------- ---------- ---------- ---------- ----------
100.0% 100.0% 100.0% 100.0% 100.0%
========== ========== ========== ========== ==========
</TABLE>
- --------
* As discussed in note 1 to consolidated financial statements, the Company
changed its method of accounting for unbilled revenues in 1992.
** Includes the write-down of the 22% beneficial interests in PVNGS Units 1 and
2 leases purchased by the Company, the write-off of certain regulatory
assets and other deferred costs and the write-off of certain PVGNS Units 1
and 2 common costs, aggregating $108.2 million, net of taxes ($2.59 per
share).
+ Includes the write-down of the Company's investment in PVNGS Unit 3 and the
provision for loss associated with the M-S-R power purchase contract,
aggregating $126.2 million, net of taxes ($3.02 per share).
The selected financial data should be read in conjunction with the
consolidated financial statements, the notes to consolidated financial
statements and Management's Discussion and Analysis of Financial Condition and
Results of Operations.
24
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following is management's assessment of the Company's financial condition
and the significant factors affecting the results of operations. This
discussion should be read in conjunction with the Company's consolidated
financial statements.
On January 11, 1993, the Company announced specific actions which were
determined to be necessary in order to accelerate the Company's preparation for
the new challenges in the competitive electric energy market. Included in the
announcement was the Company's intention to file a plan ("framework filing")
with the NMPUC designed to lower electric prices by consolidating certain gas
and electric functions, restructuring assets and reducing operation and
maintenance expenses by $25 million annually. The Company separated the gas and
electric customer service consolidation issues from the balance of the
framework filing and filed for necessary approvals for the consolidation of the
customer service functions on December 21, 1993. On January 11, 1993, the
Company also announced its intention to dispose of the Company's natural gas
gathering and natural gas processing assets and SDCW. (See "Sale of Gas
Gathering and Processing Assets" and "Sale of SDCW".)
January 12, 1994 Stipulation
On January 12, 1994, the Company and the NMPUC staff and primary intervenor
groups (AG, the New Mexico Industrial Energy Consumers, the City of
Albuquerque, the United States Executive Agencies and the New Mexico Retail
Association) ("interested parties") entered into a stipulation ("stipulation")
which addresses retail electric prices, generation assets and certain financial
concerns of the Company. The Company filed the stipulation with the NMPUC,
recommending that electric retail rates be reduced by $30 million. This
reduction is accomplished primarily through the write-down of the 22%
beneficial interests in the PVNGS Units 1 and 2 leases purchased by the
Company, the write-off of certain regulatory assets and other deferred costs,
the write-off of certain PVNGS Units 1 and 2 common costs and the Company's
previously announced cost reduction efforts. In connection with the
stipulation, the Company has charged approximately $108.2 million, after-tax,
to the 1993 results of operations. Such after-tax charge resulted in the
Company continuing to have a deficit in retained earnings as of December 31,
1993. As a result, the Company is unable to resume payment of dividends on its
common stock. The Company evaluated the possibility of a quasi-reorganization
but does not intend to implement a quasi-reorganization at this time.
The stipulation contains provisions which call for PVNGS Units 1 and 2 to be
confirmed as "used and useful" for New Mexico customers pursuant to tests
previously set forth by the NMPUC. The stipulation also establishes transition
and gain allocation mechanisms to be implemented if generation assets are sold
or otherwise removed from rates. The interested parties acknowledged that
restructuring of the Company's generation mix may result in benefits to both
customers and stockholders and future generation asset sales may need to
include a mix of PVNGS and coal-fired generation. If any PVNGS unit included in
rates is sold, subleased, assigned, or removed from full cost of service
recovery for any reason, the difference between the cost of PVNGS units
included in rates and its sale price shall continue to be recovered through
rates. The Company's ability to record this difference as a regulatory asset,
for financial reporting purposes, will be subject to the continued
determination that the regulated portion of its electric operations meets the
provisions of SFAS No.71, Accounting for the Effects of Certain Types of
Regulation. The interested parties also agreed that the reduction in cost of
service resulting from any future refinancing or restructuring of the PVNGS
Units 1 and 2 leases shall be allocated 60% to shareholders and 40% to
customers. The stipulation affirms the Company's right to recover all fair,
just and reasonable costs arising from the decommissioning of its fossil-fueled
generating plants in service, including demolition, waste disposal,
environmental and site restoration. The stipulation also resolves the issues of
decertification and decommissioning of the Company's three retired fossil-
fueled generating stations resulting in the Company foregoing recovery of the
first $24.4 million of decommissioning costs associated with these stations.
The interested parties also agreed to use a
25
<PAGE>
targeted capital structure in the cost of service filed with the stipulation,
which recognized the Company's need to move toward investment grade guidelines.
In the stipulation, the Company expressed its intent not to seek general rate
changes and the interested parties expressed their intent not to cause the
filing of general rate changes before January 1, 1998. However, should
unforeseen circumstances occasion the need for a review of general rate levels
before January 1, 1998, the interested parties will meet before seeking a
change in rates.
The stipulation is subject to NMPUC approval. The Company believes that the
approval of the stipulation would result in a reduction of competitive risk and
regulatory uncertainty. However, there can be no assurance that the stipulation
will be approved by the NMPUC. If the stipulation is not approved in its
entirety, unless otherwise agreed to by all interested parties, the stipulation
shall be null and void.
On January 3, 1994, the NMPUC issued an order establishing investigations of
rates for both the Company and SPS. The order required the Company to file a
general rate case no later than July 1, 1994. However, at the prehearing
conference held on February 23, 1994, regarding the stipulation, the NMPUC
vacated the requirements of its original request and will allow the stipulation
to satisfy their requirements. Hearings on the stipulation have not been
scheduled; however, the Company and interested parties are scheduled to file
testimony on April 18, 1994. The NMPUC confirmed the oral rulings in a written
order issued on March 7, 1994.
On March 7, 1994, the Albuquerque City Council deadlocked on endorsing the
Mayor's signing of the stipulation. The Company is currently unable to
determine what impact, if any, the City Council's action might have on the
stipulation. However, the Company remains committed to the process and will
meet with the other parties who signed the stipulation to evaluate this new
development. The Company believes that the stipulation will continue through
the hearing process being established by the NMPUC.
Sale of Gas Gathering and Processing Assets
On January 11, 1993, the Company announced its intention to dispose of the
Company's natural gas gathering and natural gas processing assets. A purchaser
has now been selected following a competitive bidding process.
On February 12, 1994, an agreement was executed with Williams Gas
Processing--Blanco, Inc. ("Williams"), a subsidiary of the Williams Field
Services Group, Inc. of Tulsa, Oklahoma, for the sale of substantially all of
the assets of Gathering Company and Processing Company, and for the sale of the
Northwest and Southeast gas gathering and processing facilities of GCNM. The
agreement provides for a cash selling price of $155 million, subject to certain
adjustments. In addition, the Company and Williams entered into agreements for
gas gathering and processing services, which the Company believes to be
competitively priced, to be provided by Williams on the facilities being sold
for a period up to 15 years. The transaction is subject to applicable waiting
periods under the Federal Hart-Scott-Rodino Antitrust Improvements Act of 1976
and subject to approval by the NMPUC. If approved, the closing is expected to
take place in 1995. The closing is also subject to other customary closing
conditions, such as obtaining necessary material consents from lenders and
other third parties.
Under the sale agreement, the Company agreed to retain certain liabilities
pertaining to the assets being sold, including certain environmental
liabilities. Such retained environmental liabilities include liabilities under
environmental laws as of closing associated with (i) the mercury meter
remediation project, (ii) identified friable asbestos, (iii) environmental
permits required by various agencies, and (iv) pits at certain abandoned
compressor sites. The Company's retained environmental liabilities also include
liabilities associated with certain unlined disposal pits subject to an
existing New Mexico Oil Conservation Division ("OCD") order. The Company has
also agreed to retain liability for a portion of potential liabilities relating
to a contaminated landfill that has been declared a Federal superfund site.
Further, the Company agreed to indemnify Williams against other third party
environmental claims arising from pre-closing ownership, operations or
conditions and for breaches of environmental representations and warranties for
a period of
26
<PAGE>
five years after closing in an amount up to $10.6 million. The Company's
retained environmental liabilities described above are not subject to the $10.6
million cap. The Company has evaluated the potential impact of the above
retained environmental liabilities. The Company believes, after consideration
of established reserves, that the ultimate outcome of these environmental
issues will not have a material adverse effect on the Company's financial
condition or results of operations (see "OTHER ISSUES FACING THE COMPANY--
Environmental Issues--Gas"). The Company intends to offset costs associated
with the environmental liabilities with proceeds from the sale to the maximum
extent possible.
Under the agreement, the Company also agreed to indemnify Williams, subject
to equal sharing of the first $1.5 million, (i) against third party claims
(other than environmental) arising from pre-closing ownership, operations and
conditions for a period of two years after closing, (ii) for breaches of other
customary representations and warranties for a period of two years from the
date of closing, and (iii) for 30 days past the applicable statute of
limitations for breaches of the Company's tax representations. The Company also
agreed to indemnify Williams for three years after closing for third party
claims relating to certain property rights. Under the agreement, the Company
will, subject to prior NMPUC approval, guarantee the obligations of its
subsidiaries which are parties to the agreement.
The book value of the facilities being sold, plus regulatory assets and
deferred charges, is expected to be approximately $85 million. In addition, the
Company expects approximately $8 million to be incurred for transaction and
other ascertainable costs prior to closing. The Company anticipates that a
significant amount of income tax will become payable as a result of this
transaction.
Also, the NMPUC will determine the allocation of the resulting gain between
the Company's gas customers and shareholders. Therefore, the Company is not
able at this time to estimate the amount of any gain that would be allocated to
shareholders.
The Company believes that the sale of these assets will improve its
flexibility to take advantage of changing market conditions while maintaining
continued access to competitively priced, reliable and secure long-term gas
supplies.
Sale of SDCW
On July 29, 1993, Santa Fe city officials announced a verbal agreement under
which the City of Santa Fe (the "City") would purchase SDCW. Under the verbal
agreement, the Company would receive approximately $48 million for its water
utility division. The proposed agreement excluded from the sale certain Santa
Fe area real estate which the Company would either sell or trade separately.
The Company would also continue to operate the water utility for up to four
years for a fee under a proposed contract with the City. On September 3, 1993,
a nonbinding memorandum of understanding was entered into with the City, which
contains the general principles for the sale of the Company's water utility
division. The Company's board of directors authorized the sale on January 11,
1994. On February 23, 1994, the City Council authorized the transaction and the
Company and the City signed a purchase and sale agreement on February 28, 1994.
The Company anticipates filing for regulatory approvals in March 1994.
Consummation of a sale will require approval by the NMPUC. The Company expects
to consummate the sale by the end of 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Company's ability to generate sufficient amounts of cash to meet its
operating and capital cash requirements ("liquidity") is a function of the
rates it is allowed to charge and its ability to access the credit markets. The
Company's filed stipulation and potential longer-term effects of a more
competitive energy market are expected to affect the Company liquidity through
reductions in the level of rates charged for the Company's electric operations,
partially mitigated by the Company's cost reduction effort and anticipated
proceeds from sales of assets. The Company currently anticipates that cash
generated from internal sources will be sufficient to meet the capital
requirements during the 1994 through 1998 period.
27
<PAGE>
CAPITAL REQUIREMENTS
Total capital requirements include construction expenditures as well as other
major capital requirements. Construction projects of significance include
upgrading generating systems, upgrading and expanding the electric and gas
transmission and distribution systems and purchasing nuclear fuel. Total
capital requirements for 1993 and projections for 1994-1998 are shown below:
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
CONSTRUCTION EXPENDITURES:
Generation/Environmental/Production........ $ 21 $ 27 $ 20 $ 20 $ 17 $ 20
Distribution............................... 42 45 42 42 42 43
Transmission............................... 10 25 50* 24 12 16
Nuclear Fuel............................... 12 11 11 11 11 11
Common & General/Other..................... 12 21 18 20 18 19
---- ---- ---- ---- ---- ----
Total Construction Expenditures**........ 97 129 141 117 100 109
Contributions in aid of construction &
retirements............................... (9) (3) (5) (5) (5) (5)
Other Major Requirements***................ 92 71 29 29 46 20
---- ---- ---- ---- ---- ----
Total Capital Requirements............... $180 $197 $165 $141 $141 $124
==== ==== ==== ==== ==== ====
</TABLE>
- --------
* Includes expenditures for construction of OLE.
** Total construction expenditures do not include expenditures for SDCW after
1993 and for Gathering Company and Processing Company after 1994. (See "Sale
of Gas Gathering and Processing Assets" and "Sale of SDCW".)
*** Other major capital requirements include bond maturities/sinking funds,
debt retirement and preferred stock redemptions/preferred stock dividends.
Requirements for 1993 also include payments for gas contract settlements
and the severance program. Requirements for 1994 and 1997 include
retirement of approximately $45 million and approximately $15 million of
first mortgage bonds, respectively.
These estimates are under continuing review and subject to on-going
adjustment.
LIQUIDITY
In addition to cash flow from operations, the Company received cash proceeds
from certain asset sales and an asset securitization during 1993. On August 3,
1993, the Company received $60 million from the securitization relating to
amounts being recovered from gas customers relating to certain gas contract
settlements. On August 12, 1993, the Company also received $55 million from the
sale of a 10.04% undivided interest in SJGS Unit 4 to Anaheim. Proceeds
therefrom were used to pay off short-term debt and to establish short-term
investments. Also during 1993, pollution control revenue bonds totaling $182
million and EIP Secured Facility Bonds totaling $51.3 million were refunded and
replaced. The refundings will provide pre-tax interest savings of approximately
$5.5 million per year and $.4 million in reduced lease payments.
In addition, in 1993, the Company entered into a $100 million secured
revolving credit facility ("Facility") and the Company entered into an
additional $40 million credit facility collateralized by the Company's electric
customer accounts receivable (the "Accounts Receivable Securitization"). The
Accounts Receivable Securitization has a term of five years. Together with $11
million in local lines of credit, the Company thus has $151 million in
liquidity arrangements.
The Company currently estimates a total of $768 million for its capital
requirements for the period of 1994 through 1998. The Company expects that such
cash requirements are to be met primarily through internally-generated cash.
However, to cover differences in the amounts and timing of cash generation and
cash requirements, the Company intends to utilize short-term borrowings under
its liquidity arrangements, including the Facility.
28
<PAGE>
The Facility has an expiration date of June 13, 1995 and contains a provision
that could prevent additional borrowings in the event of a material adverse
change in the condition (financial or otherwise), results of operations,
assets, business or prospects of the Company. In respect to the total debt to
total capitalization test under the Facility and the letter of credit issued to
support certain pollution control bonds, the Company is allowed to exclude from
the calculation of total capitalization up to $200 million in pre-tax write-
offs resulting from the Company's restructuring efforts. The Company was
allowed to exclude, from the calculation, approximately $180 million in pre-tax
write-offs resulting from the stipulation. The maximum allowed ratio of the
Company's total debt to total capitalization under the Facility and the letter
of credit is 72%. As of December 31, 1993, such ratio was 68.3%.
The Company also expects to receive cash proceeds from additional asset sales
during 1994 and 1995. The Company is seeking to close the UAMPS transaction in
the first half of 1994. The purchase price for the 35 MW of SJGS Unit 4 is
approximately $40 million. In addition, the Company expects to consummate the
sale of the Company's water division to the City of Santa Fe for approximately
$48 million in the second half of 1994. The Company, along with its
subsidiaries, Gathering Company and Processing Company, also anticipates to
receive approximately $155 million from the sale of certain natural gas
gathering and processing assets. If these sales are consummated, the proceeds
from these sales which the Company is allowed to retain after tax payments and
sharing of the gains could be used to retire long-term debt. The sale of these
assets, as well as the amount of proceeds the Company would ultimately retain
and the use of those proceeds will be subject to a number of conditions and
various regulatory approvals.
FINANCING CAPABILITY AND DIVIDEND RESTRICTIONS
The Company's ability to raise external capital and the cost of such funds
depend on, among other things, its results of operations, credit ratings,
regulatory approvals and financial market conditions. During 1993, the
Company's securities which were not already rated below "investment grade" were
downgraded to below "investment grade" by the major rating agencies. The
immediate effect of the reduction in the Company's credit ratings by the major
rating agencies was to increase the Company's cost of short-term borrowings
under the Facility and the cost of the letter of credit supporting $37.3
million pollution control revenue bonds. The Company believes that the
downgrade of the above securities does not affect materially the Company's
current financial condition and results of operations.
One impact of the Company's current ratings, together with covenants in the
Company's PVNGS Unit 1 and Unit 2 lease agreements (see PART I, ITEM 2.--
"PROPERTIES--Nuclear Plant"), is to limit the Company's ability, without
consent of the owner participants and bondholders in the lease transactions,
(i) to enter into any merger or consolidation, or (ii) except in connection
with normal dividend policy, to convey, transfer, lease or dividend more than
5% of its assets, including cash, in any single transaction or series of
related transactions. The Facility and the Reimbursement Agreement impose
similar restrictions irrespective of credit ratings.
The issuance of first mortgage bonds by the Company is subject to earnings
coverage and bondable property provisions of the Company's first mortgage
indenture. The Company has the capability under the mortgage indenture, without
regard to the earnings test but subject to other conditions, to issue first
mortgage bonds on the basis of certain previously retired bonds. The Company
currently has no requirements for long-term financing during the 1994 through
1998 period. However, during this period, the Company could enter into long-
term financings for the purpose of strengthening its balance sheet and reducing
its cost of capital. In 1994, the Company plans to redeem $45 million of its 10
1/8% first mortgage bonds due 2004.
The Company's board of directors, which reviews the Company's dividend policy
on a continuing basis, has not declared dividends on its common stock since
January 1989. As of December 31, 1993, the Company had a deficit in retained
earnings of $120.8 million and is currently unable to resume payment of
dividends on its common stock. The resumption of common dividends is dependent
upon a number of factors including the outcome of the stipulation discussed
herein, earnings and financial condition of the Company and market
29
<PAGE>
conditions. The Company evaluated its ability to continue paying dividends on
its preferred stock under restrictions imposed by the Federal Power Act due to
the Company's negative retained earnings. By letter dated April 7, 1993, the
Company advised the FERC staff of the Company's position that payment of
preferred stock dividends would not be in violation of the Federal Power Act.
As a result, the Company has continued to declare and pay dividends on its
preferred stock on scheduled dates.
CAPITAL STRUCTURE:
The Company's capitalization, including short-term debt, at December 31 is
shown below:
<TABLE>
<CAPTION>
1993 1992 1991
----- ----- -----
<S> <C> <C> <C>
Common Equity.............................................. 34.8% 37.1% 45.0%
Preferred Stock............................................ 5.2 5.0 6.3
Long-term Debt (including current maturities).............. 60.0 54.8 47.9
Short-term Debt............................................ -- 3.1 .8
----- ----- -----
Total Capitalization*.................................... 100.0% 100.0% 100.0%
===== ===== =====
</TABLE>
- --------
* Total capitalization does not include the present value of the Company's
lease obligations for PVNGS Units 1 and 2 and EIP leases as debt, but does
include the debt associated with the beneficial interests in certain PVNGS
Units 1 and 2 leases purchased by the Company on September 2, 1992.
RESULTS OF OPERATIONS
The Company sustained a loss per common share in 1993 of $1.64, compared to a
loss of $2.67 per common share in 1992 and earnings of $.32 per common share in
1991. The loss experienced in 1993 was due primarily to the Company recording
an after-tax charge of $108.2 million to 1993 earnings resulting from the
stipulation filed with the NMPUC recommending that electric retail rates be
reduced by $30 million. The loss experienced in 1992 was due primarily to the
write-down of PVNGS Unit 3 and the provision for loss associated with the M-S-R
power purchase contract. This resulted in an $126.2 million after-tax charge to
1992 earnings.
Resources excluded from NMPUC jurisdictional rates continue to negatively
impact the Company's results of operations; however, as a result of the PVNGS
Unit 3 write-down and the provision for loss associated with the M-S-R power
purchase contract recorded in 1992, the Company experienced positive operating
income from the excluded resources during 1993.
Selected financial information for the excluded resources for 1993, 1992 and
1991, is shown below:
<TABLE>
<CAPTION>
1993 1992 1991
-------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Operating revenues.............................. $ 42,517* $ 60,063 $ 59,248
Operating income (loss)......................... $ 4,297 $ (13,912) $(17,324)
Net loss........................................ $ (5,553) $(145,835) $(33,729)
Net utility plant at year-end................... $159,387 $ 200,707 $377,262
</TABLE>
- --------
* Due to the provision for the loss associated with the M-S-R contingent power
purchase contract recognized in 1992, operating revenues were reduced by
$20.5 million.
The following discussion highlights other significant items which affected
the results of operations in 1993, 1992 and 1991, and certain items impacting
future earnings.
30
<PAGE>
Electric gross margin (electric operating revenues less fuel and purchased
power expense) increased $30.1 million in 1993 due primarily to increased gross
margin of $20.9 million from the excluded resources resulting from the 1992
provision for loss associated with the M-S-R power purchase contract and $9.3
million resulting from a 2.7% increase in jurisdictional energy sales of 145.5
million KWh. Electric gross margin also increased $15.2 million in 1992
compared to 1991 primarily resulting from a 4.3% increase in jurisdictional
energy sales of 161.3 million KWh, or $10.1 million, and an increase in off-
system sales revenues of $15.7 million due to increased sales activity in the
wholesale power market.
Gas operating revenues increased $27.9 million and gas purchased for resale
increased $27.4 million in 1993 when compared to 1992 due primarily to an
increase in transportation revenues and higher purchased gas costs (which are
recovered from customers through the PGAC). Purchased gas costs affect revenues
and gas purchased for resale equally. Gas operating revenues and gas purchased
for resale decreased $33.9 million and $33.0 million, respectively, in 1992
compared to 1991 mainly due to lower purchased gas costs.
Other operation and maintenance expenses increased $3.4 million in 1993 over
1992 primarily due to the $10.6 million effect of the Company's severance
program, increased pension and benefit expense of $4.8 million due to the
adoption of SFAS No. 106, Employer's Accounting for Postretirement Benefits
Other Than Pensions, higher electric regulatory expenses of $2.5 million due to
the framework filing and PVNGS related NRC fees, and higher PVNGS
decommissioning expense of $2.4 million. Such increases were partially offset
by a decrease in PVNGS lease expense of $12.2 million resulting from the
Company's purchase of approximately 22% of the beneficial interests in the
PVNGS Units 1 and 2 leases in September 1992 and a decrease in PVNGS operating
costs of $5.6 million as a result of the cost cutting efforts at PVNGS. Other
operation and maintenance expenses decreased $7.2 million in 1992 compared to
1991 primarily as a result of reduced lease payments resulting from the
Company's purchase of approximately 22% of the beneficial interests in the
PVNGS Units 1 and 2 leases and to a decrease in administrative and general
expenses. Another item contributing to the decrease was an accrual in the
second quarter of 1991 for estimated costs associated with the clean-up of
mercury at gas metering sites.
The Company recorded an after-tax charge of $108.2 million in 1993 as a
result of the stipulation. In 1992, the Company recorded an after-tax charge of
$126.2 million resulting from the write-down of the Company's investment in
PVNGS Unit 3 and the provision for loss associated with the M-S-R power
purchase contract (see note 2 of notes to consolidated financial statements).
Other, under the caption, Other Income and Deductions increased $16.1 million
from a year ago. Significant 1993 items, net of taxes, include the following:
(1) the gain of $7.5 million recognized from the sale of an investment, (2) the
gain of $5.6 million from the sale of generating facilities to Anaheim, (3) the
tax benefit of $2.0 million related to sharing the Anaheim gain with
jurisdictional customers, (4) tax benefits of $3.2 million due to the Federal
income tax rate change which will allow the Company to utilize its net
operating loss at a higher tax rate and (5) tax benefits of $1.4 million
resulting from the settlement of the Internal Revenue Service ("IRS")
examination of the years 1990 and 1991. Partially offsetting such increases
were: (1) additional provisions for legal and litigation expenses of $5.7
million, (2) a write-off of $4.6 million of other deferred costs, (3) a PVNGS
decommissioning fund adjustment of $2.8 million to recognize the cash surrender
value of the policies, (4) a write-off of $2.1 million resulting from costs
associated with refunding certain pollution control and, EIP bonds which
represents the amount related to FERC firm-requirement wholesale customers and
resources excluded from New Mexico jurisdictional rates, which cannot be
deferred for regulatory purposes and (5) a provision for gas environmental
costs of $1.8 million.
Significant 1992 items, net of taxes, included the following: (1) a $9.8
million charge recorded as a result of the Company's conclusion in the fourth
quarter of 1992 that it did not meet the criteria of SFAS No. 71, Accounting
for the Effects of Certain Types of Regulation, for recording electric
regulatory assets, (2) additional loss provision of $6.3 million related to gas
contract disputes, (3) recognition of an additional $2.3 million of PVNGS
decommissioning and decontamination costs related to the excluded resources,
(4) write-offs of $2.3 million resulting from the application of SFAS No. 101,
Accounting for the Discontinuance of
31
<PAGE>
Application of SFAS No. 71, to the Company's firm-requirement wholesale
customers, (5) write-downs of $2.2 million for various non-utility properties,
(6) a write-off of $2.2 million relating to a canceled transmission project,
(7) additional transaction privilege taxes of $2.1 million, and (8) a number of
other miscellaneous items of $2.3 million. Partially offsetting such charges
were the cumulative effect of the change in the method of accounting for
unbilled revenues of $12.7 million (see note 1 of notes to consolidated
financial statements) and the gain of $2.3 million recognized from the sale of
an investment.
Significant 1991 items, net of taxes, included the following: (1) additional
shareholder litigation expenses of $7.1 million, (2) an additional provision
for loss of $2.5 million for disputes related to gas purchase contracts, (3)
losses of $2.4 million related to the M-S-R energy brokerage agreement caused
by the poor wholesale power market and (4) the write-off of AFUDC and
depreciation related to Four Corners of $2.2 million. Partially offsetting such
charges was the recapture of damage payments of $2.8 million related to the
Company's exit from diversification activities.
Net interest charges increased $12.4 million in 1993 due primarily to: (1)
recording long-term debt of $141 million for the purchase of approximately 22%
of the beneficial interests in the PVNGS Units 1 and 2 leases in September
1992, (2) the recording of the interest component of the provision for loss on
the M-S-R power purchase contract which was recorded in 1992, and (3) interest
resulting from the IRS examination settlement. Net interest charges increased
$7.7 million in 1992 compared to 1991 primarily due to the interest expense
resulting from the purchase of approximately 22% of the beneficial interests in
the PVNGS Units 1 and 2 leases, interest owed to PGAC customers and the
interest payment related to the settlement of PVNGS transaction privilege
taxes.
OTHER ISSUES FACING THE COMPANY
Excess Capacity Sales/Wholesale Power Market
In its January 11, 1993 announcement, the Company stated its intention to
dispose of excess electric generating capacity not needed by New Mexicans
including, if possible, some or all of the Company's share of PVNGS. Excess
electric generating capacity includes excluded capacity, as well as excess
capacity which is currently in New Mexico jurisdictional rates and excess
capacity associated with the firm-requirement wholesale customers. As of
December 31, 1993, the Company's excluded capacity consists of 130 MW of PVNGS
Unit 3, 80 MW of San Juan Unit 4 and the 105 MW M-S-R power purchase contract.
The 105 MW purchase from M-S-R expires April 30, 1995.
In connection with the determination to sell PVNGS Unit 3, the Company has
made on-going assessments of its net realizable value. The Company continues to
evaluate its estimates of such amounts on an on-going basis but currently does
not anticipate additional write-downs or write-offs relating to PVNGS Unit 3.
The Company continues to seek prospective buyers.
On May 27, 1993, the Company executed a purchase and participation agreement
with UAMPS to sell not less than 6.024% (30 MW) and up to 8.03% (40 MW)
undivided ownership interest in SJGS Unit 4.On September 1, 1993, the Company
and UAMPS amended the purchase and participation agreement to establish the
UAMPS purchase of excluded SJGS Unit 4 capacity at 35 MW for approximately $40
million. On November 19, 1993, the Company filed an application with the NMPUC
for approval of this sale. On January 21, 1994, the Company, the NMPUC Staff
and the New Mexico Industrial Energy Consumers entered into a stipulation
requesting approval of the sale. Hearings were held February 15, 1994, and the
Company is awaiting a recommended decision. In addition, the Company made three
filings with the FERC associated with the sale and has received approval on two
and is awaiting the outcome of the remaining filing. Closing of the transaction
will depend on the fulfillment of numerous closing conditions and will be
subject to regulatory approvals from the NMPUC and the FERC. If approved, the
Company anticipates that the closing of the sale will be in the first half of
1994.
32
<PAGE>
Until such time as excess electric generating resources can be disposed of,
the Company continues to be dependent on the wholesale power market for the
recovery of its costs associated with the excluded portion of these excess
resources. The Company has experienced price competition in the wholesale
market due to the availability of surplus capacity from other utilities,
projected natural gas fuel prices and the existence of cogeneration,
independent power producers and self-generation as competing energy sources,
and expects such availability to continue. The Company has committed most of
its excess capacity to off-system sales during the 1994 to 2001 timeframe.
On October 27, 1993, SDG&E filed a complaint with the FERC against the
Company, alleging that certain charges under its 1985 power purchase agreement
are unjust, unreasonable and unduly discriminatory. SDG&E is requesting that
the FERC investigate the rates charged under the agreement and establish a
refund date effective as of December 26, 1993. The relief, if granted, would
reduce annual demand charges paid by SDG&E by up to $11 million per year from
the effective refund date through April 2001, subject to certain limitations if
the FERC has not acted within 15 months. The Company responded to the complaint
on December 8, 1993, and SDG&E and the Company filed subsequent pleadings. The
Company believes that the complaint is without merit, and the Company intends
to vigorously resist the complaint.
PVNGS Decommissioning Funding
The Company has a program for funding its share of decommissioning costs for
PVNGS. Under this program, the Company makes a series of annual deposits to an
external trust fund over the estimated useful life of each unit, and the trust
funds are being invested under a plan which allows the accumulation of funds
largely on a tax-deferred basis through the use of life insurance policies on
certain current and former employees. The annual trust deposit, approved by the
NMPUC in 1987, is currently $396,000 per unit. The NMPUC jurisdictional share
of this amount related to PVNGS Units 1 and 2 is currently included in retail
rates. The results of the 1992 decommissioning cost study indicate that the
Company's share of the PVNGS decommissioning costs will be approximately $143.2
million, an increase from $94.2 million based on the previous study (both
amounts are stated in 1993 dollars). The Company has determined that a
supplemental investment program will be needed as a result of both the cost
increase and the under performance of the existing investment program. However,
a supplemental funding program will not be established until clarification
and/or possible revisions to a FERC order issued in October 1993 regarding
restricted investment vehicles for nuclear decommissioning trusts are obtained.
Although a supplemental program will not be established pending resolution from
the FERC, the Company has requested recovery of the increased decommissioning
costs in the stipulation. The market value of the existing trust at the end of
1993 was approximately $11.0 million, including cash surrender value of the
policies.
A Transmission Right-of-Way
The Company has easements for right-of-way with the Navajo Nation for
portions of two transmission lines that emanate from SJGS and connect with Four
Corners and with a switching station in the Albuquerque area. One grant of
easement for approximately 4.2 miles of right-of-way for two parallel 345 Kv
transmission lines expired on January 17, 1993. The Company has been
negotiating with the Navajo Nation to renew the grant and in light of the
expiring grant of easement, requested the development of an interim agreement
under which the parties would operate until a long-term solution could be
reached.
On January 6, 1994, the Navajo Nation and the Company executed an agreement
whereby the Navajo Nation agreed not to object to the Company's operating and
maintaining the facilities on the easement for right-of-way until July 17, 1994
in return for a cash payment and transfer of title to land located near the
Navajo Nation. Additionally, the Navajo Nation and the Company agreed to exert
a good faith effort to reach a long-term right-of-way renewal agreement prior
to July 17, 1994. In pursuit of resolution of this issue, the Navajo Nation
sent the Company on February 4, 1994 a letter identifying non-monetary items
the Navajo Nation would be willing to negotiate as consideration for the grant
of easement. On February 11, 1994, the
33
<PAGE>
Navajo Nation and the Company met to establish a schedule for conducting their
negotiations. Additionally, the meeting was conducted for the purpose of the
Navajo Nation's presentation of their consultant's findings on the value of the
easement but did not represent these findings to be the Navajo Nation's
position for compensation for renewal of the easement. The Company is
evaluating the consultant's findings and has committed to submitting a proposal
to the Navajo Nation by mid-March. The Company continues to assess its options
but is not pursuing other alternatives unless it receives indications that
settlement cannot be reached in a satisfactory manner. The Company is currently
unable to predict the outcome of the negotiations or the costs resulting
therefrom.
OLE Transmission Project
In May 1984, the Company's Board of Directors approved plans to construct
OLE, a 345 Kv transmission line connecting the existing Ojo 345 Kv line to the
existing Norton Station. The Company has incurred approximately $15 million of
costs associated with OLE as of December 31, 1993, and it currently estimates
that project costs will total approximately $48 million. OLE is designed to
provide a needed improvement to the northern New Mexico transmission system and
to allow greater delivery of power from SJGS, Four Corners and PVNGS into the
Company's two largest service territories, the greater Albuquerque area and the
Santa Fe/Las Vegas area. The Company obtained right-of-way permits from two of
the three Federal agencies having authority over the lands involved in the
project. Federal district and appellate courts upheld the record of decision on
the OLE environmental impact statement. However, OLE faces considerable
opposition by persons concerned primarily about the environmental impacts of
the project.
On March 11, 1991, the Company filed for NMPUC approval for construction of
OLE. Hearings have been held and final briefs were filed in December 1992.
Until final approvals are received, the Company will use interim measures to
continue to provide reliable service. The Company is awaiting a final decision
from the NMPUC and has no indication of when a decision will be made.
Environmental Issues--Gas
The Company has evaluated the potential impacts of the following
environmental issues. The Company believes, after consideration of established
reserves, that the ultimate outcome of these environmental issues will not have
a material adverse effect on the Company's financial condition or results of
operations.
Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA")
Two CERCLA 104(e) orders were received from the EPA in late December 1993,
requesting information regarding shipment of wastes to the Lee Acres Landfill,
located on BLM land near the city of Bloomfield in San Juan County, New Mexico.
The landfill is currently listed on the National Priorities List as a superfund
site. GCNM and Gathering Company have assessed their records and other
information to determine whether wastes were ever shipped from their facilities
to the landfill during the period when they owned and operated the natural gas
facilities. GCNM and Gathering Company's assessment indicated that no hazardous
wastes or cause of such wastes were shipped from their facilities to the
landfill during this time period. Nonetheless, GCNM and Gathering Company could
be determined to be potentially responsible parties if the EPA determines GCNM
and Gathering Company shipped wastes to the site, and could be asked or
compelled to provide funds for site cleanup. GCNM and Gathering Company
prepared and submitted their response to the EPA on March 8, 1994.
Toxic Substances Control Act ("TSCA")
TSCA requires manufacturers and importers of organic chemicals, including
natural gas substances, to report a listing and quantity of certain toxic
chemicals to the EPA every four years. Naturally occurring substances such as
crude oil and unprocessed natural gas need not be reported. Due to the natural
gas industry's interpretation on when unprocessed natural gas becomes a
reportable substance, GCNM and Processing Company did not report TSCA
substances to the EPA in prior reporting years of 1986 and 1990. As a result of
the EPA's clarification on the limited scope of the exemption, GCNM and
Processing Company now have filed their reports for 1986 and 1990 and will
report such substances to the EPA in the 1994 reporting year. The companies may
be subject to administrative fines/penalties for their failure to report in
1986 and 1990. The maximum penalty allowed under the statute is $25,000/day for
every day the report has not been filed.
34
<PAGE>
Gas Wellhead Pit Remediation
Effective September 1992, the OCD issued a ruling which affects GCNM and
Gathering Company's natural gas gathering facilities located in the
northwestern part of New Mexico. The ruling prohibits the further discharge of
fluids associated with the production of natural gas into unlined open pits in
certain areas deemed environmentally sensitive due to their proximity to fresh
water supplies. In addition to the cessation of the discharge of fluids, the
ruling requires that GCNM and Gathering Company remediate the areas where
discharges have contaminated fresh water supplies. GCNM has submitted generic
closure plans for the pits, which have been approved by OCD and the BLM.
Air Permits
A recent environmental audit, associated with the Company's proposed sale of
certain gas assets, brought to light certain discrepancies regarding required
air permits associated with certain natural gas facilities. The audit
identified a total of thirteen facilities containing discrepancies. The vast
majority of the discrepancies are minor in nature and include discrepancies in
record keeping, equipment identification and inaccurate information in air
permit applications. The discrepancies at three of the facilities involve
permit issuance and modification and are more serious in nature. The Company is
subject to administrative fines/penalties by the New Mexico Environment
Department ("NMED") for these discrepancies.
The Company plans to meet with the NMED in March 1994 to discuss the nature
of the permit discrepancies and to propose methods and schedules to resolve the
discrepancies. The resolution process will include the filing of permit
applications, modifications and revisions where necessary. After reviewing the
applications, NMED will determine whether to grant the application,
modification or revision and make a determination whether to impose any
fines/penalties.
The CERCLA, air permits and gas wellhead pit remediation issues previously
discussed are part of the retained environmental liabilities under the sale
agreement with Williams (see Sale of Gas Gathering and Processing Assets).
Environmental Issue--Electric
The Company's current estimate to decommission its retired fossil-fueled
plants (see "Fossil-Fueled Plant Decommissioning Costs") includes approximately
$17.2 million for a groundwater remediation program at Person Station. The
Company, in compliance with a New Mexico Environment Action Directive, has
determined that ground water contamination exists in the deep and shallow water
aquifers. The Company is required to delineate the extent of the contamination
and remediate the contaminant in the ground water. The extent of the
contaminant plume in the deep water aquifer is not currently known, and the
estimate assumes that the deep ground water plume can be easily delineated with
a minimum number of monitoring wells. As part of the financial assurance
requirements of the Person Station Hazardous Waste Permit, the Company posted a
$3.7 million performance bond with a trustee. The remediation program continues
on schedule. The Company does not anticipate any material adverse impact on its
financial condition or the results of operations with respect to the
remediation program.
Fossil-Fueled Plant Decommissioning Costs
The Company's six owned or partially owned, in service and retired, fossil-
fueled generating stations are expected to incur dismantling and reclamation
costs as they are decommissioned. The Company's share of decommissioning costs
for all of its fossil-fueled generating stations is projected to be
approximately $126 million stated in 1992 dollars, including approximately $24
million for Person, Prager and Santa Fe Stations which have been retired.
In June of 1993, the Company filed for recovery of all estimated
decommissioning costs by factoring them into its depreciation rates included in
the Company's depreciation rate study filed with the NMPUC.
35
<PAGE>
As previously discussed, the Company and the interested parties entered into
the January 12, 1994 stipulation. The stipulation affirms the Company's right
to recover all fair, just and reasonable costs arising from the decommissioning
of its fossil-fueled generating plants in service, including demolition, waste
disposal, environmental and site restoration. The stipulation also resolves the
issues of decertification and decommissioning of the Company's three retired
fossil-fueled generating stations resulting in the Company foregoing recovery
of the first $24.4 million of decommissioning costs associated with these
stations. The stipulation is subject to NMPUC approval.
Palo Verde Nuclear Generating Station--Steam Generator Tubes
On December 26, 1993, PVNGS Unit 3 returned to service at approximately 85%
power following a mid-cycle outage during which APS inspected Unit 3's steam
generators. APS has informed the NRC that the inspection did not reveal the
type of tube degradation (axial cracking in upper bundle) experienced in Unit
2's steam generators; however, the inspection did reveal another more common
type of tube degradation (circumferential cracking at tubesheet) in Unit 3's
steam generators which has occurred in similarly-designed steam generators at
other plants. The next regular refueling outage for Unit 3 is scheduled to
begin in March 1994, at which time APS plans to inspect and chemically clean
that unit's steam generators.
On January 8, 1994, APS removed Unit 2 from service to inspect and chemically
clean its two steam generators during a mid-cycle outage. The inspection
revealed additional tube degradation of the type (axial cracking in upper
bundle) previously found in that unit's steam generators. The inspection has
also revealed the common type of tube degradation (circumferential cracking at
tubesheet) which has occurred in similarly-designed steam generators at other
plants. Based on these findings, APS expanded the scope of the inspection of
the Unit 2 steam generators and the planned duration of the outage until late
March. However, because APS's analysis of Unit 2's steam generators is ongoing,
APS cannot predict with certainty the timing of the restart of Unit 2. APS is
currently evaluating the need for an additional mid-cycle outage for Unit 2
during 1994.
Unit 1 and Unit 3 continue to operate at approximately 85% power since each
unit returned to service in November 1993 and December 1993, respectively,
after outages during which each unit's steam generators were inspected.
APS has performed, and is continuing, certain corrective actions including,
among other things, chemical cleaning, operating the units at reduced
temperatures, and, for some period, operating the units at approximately 85%
power. As a result of these corrective actions, all three units should be
returned to 100% power by mid 1995, and one or more of the units could be
returned to 100% power during the course of 1994. So long as the three units
are involved in mid-cycle outages and are operated at approximately 85% power,
the Company will incur replacement power costs and reduced wholesale sale
incentives of approximately $5.7 million during 1994, approximately 75% of
which will be recovered through the Company's FPPCAC.
El Paso Electric Company
The Company owns or leases a 10.2% interest in PVNGS and owns a 13% interest
in Four Corners Units 4 and 5, which are operated by APS. El Paso owns or
leases a 15.8% interest in PVNGS and owns a 7.0% interest in Four Corners Units
4 and 5.
On January 8, 1992, El Paso filed a voluntary petition to reorganize under
Chapter 11 of the United States Bankruptcy Code. On September 8, 1992, El Paso
filed a plan of reorganization with the bankruptcy court, which was later
amended pursuant to an October 26, 1992 filing with the court. On May 4, 1993,
El Paso and Central and South West Corporation ("CSW") announced a plan for
merger in connection with El Paso's Chapter 11 reorganization, under which El
Paso would become a wholly-owned subsidiary of CSW.
36
<PAGE>
A modified amended El Paso--CSW plan and disclosure statement dated August 27,
1993 has been filed with the bankruptcy court and was approved December 8,
1993. In order for the merger to be implemented, CSW and El Paso must receive
appropriate regulatory approvals, including approval of the NRC and the FERC.
In the El Paso--CSW FERC proceedings, the Company has intervened to protect its
interests relative to the various transmission issues raised by the El Paso--
CSW filings. The Company's regulatory filings in the FERC proceeding address
reliability and potential system impacts that may result to the Company from
the merger. At this time the Company is unable to predict the result of these
regulatory proceedings.
In addition to approving the El Paso--CSW plan, the bankruptcy court approved
the Cure and Assumption Agreement between El Paso and the PVNGS participants,
which provides for (i) various mutual releases and (ii) the execution of a
release by El Paso and any alleged claims regarding the 1989-90 PVNGS outages.
All such releases will be effective on the effective date of the El Paso--CSW
plan. The Cure and Assumption Agreement also provided for payment in full to
the PVNGS participants of pre-petition monies owed by El Paso. El Paso has made
the payment contingent upon its completion of the merger with CSW.
The bankruptcy court also approved the assumption by El Paso of several
wheeling agreements that El Paso and the Company agreed to extend as part of a
120 day transition agreement. In connection with the assumptions, El Paso paid
the Company approximately $2.3 million owed for pre and post-petition wheeling
services. Although the transition agreement has expired by its terms, the
parties have signed an agreement in principle for near-term and longer-term
wheeling services. The agreement would provide El Paso with a total of 80 MW of
transmission service until such time as El Paso installs a phase shifting
transformer ("PST") which is expected to be late 1995. The agreement would
provide El Paso with 20 MW of service after the PST is installed in exchange
for payment by El Paso of proportional costs incurred by the Company for
generation support of the transmission as well as wheeling charges. The Company
and El Paso have also agreed to negotiate both near-term and longer-term
operating procedures, which may include transfer by the Company of operating
agent status for the Southern New Mexico Transmission System to El Paso. The
Company will continue to retain its transmission rights (presently 75 MW) in
southern New Mexico. The wheeling agreement will be subject to regulatory
approval at FERC and will also be reviewed by the NMPUC in connection with
several regulatory filings of El Paso, both predating and in connection with
the El Paso-- CSW merger.
Albuquerque Franchise Issues
The Company's non-exclusive electric service franchise with the City of
Albuquerque (the "City") expired in early 1992. The franchise agreement
provided for the Company's use of City property for electric service rights-of-
way. The Company continues service to the area, which contributed 46% of the
Company's total 1993 electric operating revenues. The absence of a franchise
does not change the Company's right and obligation to serve those customers
under state law. In November 1991, the NMPUC issued an order concluding, among
other things, that the City could bid for services to its own facilities
(Albuquerque municipal loads generated approximately $17.0 million, $16 million
and $17 million in annual revenue for 1993, 1992 and 1991, respectively), but
not for service to other customers. In reaching this conclusion, the NMPUC
noted that New Mexico law reflects a legislative choice to vest the NMPUC with
exclusive control over utility rates and services. The NMPUC also noted that
the Company's obligation to serve its customers in Albuquerque will continue
irrespective of whether the municipal franchise is renewed. The City appealed
the NMPUC's order to the New Mexico Supreme Court (the "Court"). On April 21,
1993, the Court issued its decision on the City's appeal of the NMPUC order.
The Court ruled that a city can negotiate rates for its citizens in addition to
its own facility uses. The Court also ruled that any contracts with utilities
for electric rates are a matter of statewide concern and subject to approval,
disapproval or modification by the NMPUC. In addition, the Court reaffirmed the
NMPUC's exclusive power to designate providers of utility service within a
municipality and confirmed that municipal franchises were not licenses to serve
but rather to provide access to public rights-of-way.
37
<PAGE>
In 1992, representatives of the Company and the City met in attempts to
resolve the franchise renewal issue. Currently, the franchise renewal meetings
are in abeyance due to the City's interest in the outcome of the retail
wheeling legislation which was introduced in the 1993 state legislative
session. The Company continues to pay franchise fees to the City.
Retail Wheeling
During 1992, open access to transmission grids in the electric wholesale
market, as mandated by the National Energy Policy Act, stimulated interest in
the retail wheeling concept in New Mexico, resulting in the introduction of
legislation in the 1993 New Mexico state legislature. On March 6, 1993, the New
Mexico State Senate passed Senate Memorial 54, which calls for the concept of
retail wheeling to be studied by the Integrated Resource Planning Committee
which is an interim legislative committee, with a report to be made to the 1995
legislature. The Company has been providing information for the study effort.
The study is anticipated to be completed by December 1994.
38
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Management's Responsibility for Financial Statements....................... F-1
Report of Independent Public Accountants................................... F-2
Independent Auditor's Report............................................... F-3
Financial Statements:
Consolidated Statement of Earnings (Loss)................................ F-4
Consolidated Statement of Retained Earnings (Deficit).................... F-5
Consolidated Balance Sheet............................................... F-6
Consolidated Statement of Cash Flows..................................... F-7
Consolidated Statement of Capitalization................................. F-8
Notes to Consolidated Financial Statements............................... F-9
Supplementary Data:
Consolidated Financial Statement Schedules............................... F-31
Quarterly Operating Results.............................................. F-38
Comparative Operating Statistics......................................... F-39
</TABLE>
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS
The management of Public Service Company of New Mexico is responsible for the
preparation and presentation of the accompanying consolidated financial
statements. The consolidated financial statements have been prepared in
conformity with generally accepted accounting principles and include amounts
that are based on informed estimates and judgments of management.
Management maintains a system of internal accounting controls which it
believes is adequate to provide reasonable assurance that assets are
safeguarded, transactions are executed in accordance with management
authorization and the financial records are reliable for preparing the
consolidated financial statements. The system of internal accounting controls
is supported by written policies and procedures, by a staff of internal
auditors who conduct comprehensive internal audits and by the selection and
training of qualified personnel.
The Board of Directors, through its Audit Committee comprised entirely of
outside directors, meets periodically with management, internal auditors and
the Company's independent auditors to discuss auditing, internal control and
financial reporting matters. To ensure their independence, both the internal
auditors and independent auditors have full and free access to the Audit
Committee.
The independent auditors, Arthur Andersen & Co., are engaged to audit the
Company's consolidated financial statements in accordance with generally
accepted auditing standards.
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and the Stockholders of
Public Service Company of New Mexico:
We have audited the accompanying consolidated balance sheet and statement of
capitalization of Public Service Company of New Mexico (a New Mexico
corporation) and subsidiaries as of December 31, 1993, and the related
consolidated statements of earnings (loss), retained earnings (deficit), and
cash flows for the year then ended. In connection with our audit of the
consolidated financial statements, we have also audited the financial statement
schedules V, VI and IX for the year ended December 31, 1993. These financial
statements and financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedules based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Public Service Company of New
Mexico and subsidiaries as of December 31, 1993, and the results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein. These financial statement
schedules are presented for purposes of complying with the Securities and
Exchange Commissions rules and are not part of the basic consolidated financial
statements.
As explained in Notes 1 and 6 to the financial statements, effective January
1, 1993, the Company adopted Statement of Financial Accounting Standards No.
106, Employers' Accounting for Postretirement Benefits Other Than Pensions, and
No. 109, Accounting for Income Taxes.
Arthur Andersen & Co.
Albuquerque, New Mexico
February 25, 1994
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Public Service Company of New Mexico:
We have audited the consolidated balance sheet and statement of
capitalization of Public Service Company of New Mexico and subsidiaries as of
December 31, 1992, and the related statements of earnings (loss), retained
earnings (deficit) and cash flows for each of the years in the two-year period
ended December 31, 1992. In connection with our audits of the consolidated
financial statements, we also have audited the financial statement schedules V,
VI and IX for each of the years in the two-year period ended December 31, 1992.
These consolidated financial statements and financial statement schedules are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements and financial
statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Public
Service Company of New Mexico and subsidiaries as of December 31, 1992, and the
results of their operations and their cash flows for each of the years in the
two-year period ended December 31, 1992, in conformity with generally accepted
accounting principles. Also in our opinion, the related financial statement
schedules, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly, in all material respects, the
information set forth therein.
The Company has substantial excess electric generating capacity, the cost and
amount of which continue to negatively impact financial condition and results
of operations as well as the level of New Mexico retail rates. The Company has
adopted certain plans and is evaluating other options to address the negative
effects related to its excess capacity. Because the ultimate outcome of these
matters, including NMPUC regulatory responses thereto, is not presently
determinable, the recovery of (i) the Company's remaining direct investment in
Palo Verde Nuclear Generating Station (PVNGS) Unit 3, and (ii) its lease costs
related to PVNGS Units 1 and 2, is uncertain. Accordingly, neither a provision
for any additional loss related to PVNGS Unit 3 nor any provision for loss
related to PVNGS Units 1 and 2 has been recognized in the accompanying 1992
consolidated financial statements.
As discussed in note 1 of notes to consolidated financial statements, the
Company changed its method of accounting for unbilled revenues in 1992.
KPMG PEAT MARWICK
Albuquerque, New Mexico
March 11, 1993
F-3
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS (LOSS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1993 1992 1991
-------- --------- --------
(IN THOUSANDS EXCEPT PER
SHARE AMOUNTS)
<S> <C> <C> <C>
Operating Revenues (note 1):
Electric....................................... $589,728 $ 596,323 $568,486
Gas............................................ 271,087 243,159 277,069
Water.......................................... 13,063 12,471 11,613
-------- --------- --------
Total operating revenues.................... 873,878 851,953 857,168
-------- --------- --------
Operating Expenses:
Fuel and purchased power (note 1).............. 140,674 177,325 164,711
Gas purchased for resale....................... 125,940 98,517 131,479
Other operation expenses....................... 274,023 273,141 282,418
Maintenance and repairs........................ 56,821 54,309 52,229
Depreciation and amortization.................. 77,326 79,256 76,053
Taxes, other than income taxes................. 40,089 40,579 39,214
Income taxes (note 5).......................... 25,721 16,891 13,811
-------- --------- --------
Total operating expenses.................... 740,594 740,018 759,915
-------- --------- --------
Operating income................................ 133,284 111,935 97,253
-------- --------- --------
Other Income and Deductions:
Allowance for equity funds used during
construction.................................. -- 68 1,105
Write-down of PVNGS Unit 3 and the provision
for loss associated with the M-S-R power
purchase contract (note 2).................... -- (221,324) --
Write-down of PVNGS Units 1 and 2 leases,
regulatory assets and other deferred costs
(note 2)...................................... (178,954) -- --
Other.......................................... (12,792) (28,895) (13,284)
Income tax benefit (note 5).................... 82,799 107,371 3,618
-------- --------- --------
Net other income and deductions............. (108,947) (142,780) (8,561)
-------- --------- --------
Income (loss) before interest charges....... 24,337 (30,845) 88,692
-------- --------- --------
Interest Charges:
Interest on long-term debt.................... 72,525 63,826 59,928
Other interest charges........................ 13,719 10,735 7,608
Allowance for borrowed funds used during
construction................................. (421) (1,151) (1,804)
-------- --------- --------
Net interest charges........................ 85,823 73,410 65,732
-------- --------- --------
Net Earnings (Loss)............................. (61,486) (104,255) 22,960
Preferred Stock Dividend Requirements........... 6,829 7,105 9,474
-------- --------- --------
Net Earnings (Loss) Available for Common Stock.. $(68,315) $(111,360) $ 13,486
======== ========= ========
Average Number of Common Shares Outstanding..... 41,774 41,774 41,774
======== ========= ========
Net Earnings (Loss) per Share of Common Stock... $ (1.64) $ (2.67) $ 0.32
======== ========= ========
Dividends Paid per Share of Common Stock........ $ -- $ -- $ --
======== ========= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF RETAINED EARNINGS (DEFICIT)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1993 1992 1991
--------- --------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at Beginning of Year..................... $ (52,533) $ 60,189 $46,703
Net earnings (loss).............................. (61,486) (104,255) 22,960
Redemption of cumulative preferred stock......... -- (1,362) --
Dividends:
Cumulative preferred stock..................... (6,829) (7,105) (9,474)
Common stock................................... -- -- --
--------- --------- -------
Balance at End of Year........................... $(120,848) $ (52,533) $60,189
========= ========= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1993 1992
ASSETS ---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Utility Plant, at original cost except PVNGS Unit 3
and the 22% beneficial interests in PVNGS Units 1 & 2
leases (notes 1, 2, 3 and 7):
Electric plant in service............................ $1,789,100 $1,985,197
Gas plant in service................................. 511,527 485,637
Water plant in service............................... 54,325 55,819
Common plant in service.............................. 47,581 36,510
Plant held for future use............................ 375 1,258
---------- ----------
2,402,908 2,564,421
Less accumulated depreciation and amortization....... 846,234 812,737
---------- ----------
1,556,674 1,751,684
Construction work in progress........................ 109,333 87,547
Nuclear fuel, net of accumulated amortization of
$30,425 and $25,476................................. 37,925 37,830
---------- ----------
Net utility plant.................................. 1,703,932 1,877,061
---------- ----------
Other Property and Investments:
Non-utility property, at cost, net of accumulated
depreciation, partially pledged..................... 6,489 9,369
Other investments, at cost, partially pledged........ 27,477 31,683
---------- ----------
Total other property and investments............... 33,966 41,052
---------- ----------
Current Assets:
Cash................................................. 20,510 21,080
Temporary investments, at cost....................... 47,850 185
Receivables.......................................... 147,223 135,847
Income taxes receivable.............................. 10,400 9,225
Fuel, materials and supplies, at average cost........ 48,086 51,308
Gas in underground storage, at average cost.......... 8,599 9,014
Other current assets................................. 11,347 7,039
---------- ----------
Total current assets............................... 294,015 233,698
---------- ----------
Deferred charges...................................... 180,276 223,771
---------- ----------
$2,212,189 $2,375,582
========== ==========
CAPITALIZATION AND LIABILITIES
Capitalization (note 3):
Common stock equity:
Common stock outstanding--41,774,083 shares.......... $ 208,870 $ 208,870
Additional paid-in capital........................... 470,149 470,149
Excess pension liability, net of tax (note 6)........ (2,795) --
Retained earnings (deficit) since January 1, 1989.... (120,848) (52,533)
---------- ----------
Total common stock equity.......................... 555,376 626,486
Cumulative preferred stock without mandatory
redemption requirements............................. 59,000 59,000
Cumulative preferred stock with mandatory redemption
requirements........................................ 24,386 25,700
Long-term debt, less current maturities.............. 957,622 911,252
---------- ----------
Total capitalization............................... 1,596,384 1,622,438
---------- ----------
Current Liabilities:
Short-term debt...................................... -- 51,550
Accounts payable..................................... 116,905 170,644
Current maturities of long-term debt (note 3)........ 18,903 13,524
Accrued interest and taxes........................... 29,992 29,361
Other current liabilities............................ 51,364 36,596
---------- ----------
Total current liabilities.......................... 217,164 301,675
---------- ----------
Deferred Credits:
Accumulated deferred investment tax credits (note
5).................................................. 78,462 86,783
Accumulated deferred income taxes (note 5)........... 47,283 98,141
Other deferred credits............................... 272,896 266,545
---------- ----------
Total deferred credits............................. 398,641 451,469
---------- ----------
Commitments and Contingencies (notes 2 and 6 through
11).................................................. $2,212,189 $2,375,582
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1993 1992 1991
--------- ---------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net earnings (loss).......................... $(61,486) $(104,255) $22,960
Adjustments to reconcile net earnings (loss)
to net cash flows from operating activities:
Depreciation and amortization.............. 95,415 100,510 97,226
Allowance for equity funds used during
construction.............................. -- (68) (1,105)
Accumulated deferred investment tax credit. (8,321) (21,390) (8,323)
Accumulated deferred income tax............ (63,393) (88,664) 25,539
Write-down of PVNGS Unit 3 and the
provision for loss associated
with the M-S-R power purchase contract.... -- 221,324 --
Gain on sale of utility property........... (7,350) -- --
Gain on sale of other property and
investments............................... (12,394) -- (4,346)
Write-down of PVNGS Units 1 and 2 leases,
regulatory assets and other deferred
costs..................................... 178,954 -- --
Changes in certain assets and liabilities:
Receivables.............................. (12,551) (29,224) (787)
Fuel, materials and supplies............. 3,222 621 (3,916)
Deferred charges......................... 20,936 (31,427) (27,312)
Accounts payable......................... (53,973) 13,671 29,592
Accrued interest and taxes............... 631 (155) (1,401)
Deferred credits......................... (7,137) 38,997 (17,372)
Other.................................... 10,571 10,654 (2,602)
Other, net................................. 14,181 7,612 (1,110)
--------- ---------- -------
Net cash flows from operating activities. 97,305 118,206 107,043
--------- ---------- -------
Cash Flows From Investing Activities:
Utility plant additions...................... (100,784) (95,009) (79,894)
Palo Verde lease purchase.................... -- (17,523) --
Utility plant sales.......................... 49,302 -- --
Other property additions..................... (2,554) (8,564) (6,827)
Other property sales......................... 19,912 68 15,878
Temporary investments, net................... (47,665) 3,920 (2,061)
--------- ---------- -------
Net cash flows from investing activities. (81,789) (117,108) (72,904)
--------- ---------- -------
Cash Flows From Financing Activities:
Redemptions and repurchases of preferred
stock....................................... (600) (19,067) (3,462)
Bond refinancing costs....................... (8,960) -- --
Proceeds from asset securitization........... 60,475 -- --
Repayments of long-term debt................. (8,842) (2,456) (12,938)
Net increase (decrease) in short-term debt... (51,550) 38,550 (2,000)
Dividends paid............................... (6,609) (7,750) (9,622)
--------- ---------- -------
Net cash flows from financing activities. (16,086) 9,277 (28,022)
--------- ---------- -------
Increase (Decrease) in Cash................... (570) 10,375 6,117
Cash at Beginning of Period................... 21,080 10,705 4,588
--------- ---------- -------
Cash at End of Year........................... $ 20,510 $ 21,080 $10,705
========= ========== =======
Supplemental cash flow disclosures:
Interest paid................................ $ 83,248 $ 72,630 $66,200
========= ========== =======
Income taxes paid............................ $ 13,978 $ 11,848 $ 2,065
========= ========== =======
Supplemental schedule of noncash investing and financing activities:
On September 2, 1992, the Company acquired approximately 22% of the
lessors' interests in the PVNGS Units 1 and 2 leases. In conjunction with
the acquisition, long-term debt was recorded as follows:
Utility plant acquired..................... $ 158,282
Cash paid for beneficial interests and
transaction costs......................... (17,523)
----------
Long-term debt recorded.................... $ (140,759)
==========
</TABLE>
Cash consists of currency on hand and demand deposits.
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CAPITALIZATION
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1993 1992
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Common Stock Equity (note 3):
Common Stock, par value $5 per share...................... $ 208,870 $ 208,870
Additional paid-in capital................................ 470,149 470,149
Excess pension liability, net of tax (note 6)............. (2,795) --
Retained earnings (deficit) since January 1, 1989......... (120,848) (52,533)
---------- ----------
Total common stock equity............................... 555,376 626,486
---------- ----------
<CAPTION>
SHARES CURRENT
STATED OUTSTANDING AT REDEMPTION
VALUE DECEMBER 31, 1993 PRICE
------ ----------------- ----------
<S> <C> <C> <C> <C> <C>
Cumulative Preferred
Stock (note 3):
Without mandatory redemption
requirements:
1965 Series, 4.58%.. $100 130,000 $102.00 13,000 13,000
8.48% Series........ 100 200,000 100.00 20,000 20,000
8.80% Series........ 100 260,000 100.00 26,000 26,000
------- ---------- ----------
590,000 59,000 59,000
======= ---------- ----------
With mandatory redemption
requirements:
8.75% Series........ 100 256,861 102.90 25,686 26,286
Redeemable within
one year........... 13,000 1,300 586
------- ---------- ----------
243,861 24,386 25,700
------- ---------- ----------
Long-Term Debt (note 3):
<CAPTION>
ISSUE AND FINAL MATURITY INTEREST RATES
- ------------------------ -----------------
<S> <C> <C> <C> <C> <C>
First mortgage bonds:
1997................ 5 7/8% 15,400 15,551
1999 through 2002... 7 1/4% to 8 1/8% 44,639 44,978
2004 through 2007... 8 1/8% to 10 1/8% 92,461 92,766
2008................ 9% 57,386 57,386
Pollution control
revenue bonds:
1993 through 2023... 5.9% to 7 3/4% 537,045 437,045
2022................ Variable rate 37,300 37,300
---------- ----------
Total first
mortgage bonds... 784,231 685,026
Pollution control
revenue bonds:
2003 through 2013... 10% to 10 1/4% -- 100,000
Lease obligation bonds
of First PV Funding
Corporation:
1996 through 2016... 8.95% to 10.3% 137,164 140,759
Asset securitization.. 56,137 --
Other, including
unamortized premium
and (discount)....... (1,007) (1,009)
---------- ----------
Total long-term
debt............... 976,525 924,776
Less current
maturities........... 18,903 13,524
---------- ----------
Long-term debt, less
current maturities. 957,622 911,252
---------- ----------
Total Capitalization.... $1,596,384 $1,622,438
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(1)SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Systems of Accounts
The Company maintains its accounts for utility operations primarily in
accordance with the uniform systems of accounts prescribed by the Federal
Energy Regulatory Commission ("FERC") and the National Association of
Regulatory Utility Commissioners ("NARUC"), and adopted by the New Mexico
Public Utility Commission ("NMPUC").
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
subsidiaries in which it owns a majority voting interest. All significant
intercompany transactions and balances have been eliminated.
Utility Plant
Utility plant, with the exception of Palo Verde Nuclear Generating Station
("PVNGS") Unit 3 and the Company's purchased 22% beneficial interests in the
PVNGS Units 1 and 2 leases, is stated at original cost, which includes
capitalized payroll-related costs such as taxes, pension and other fringe
benefits, administrative costs and an allowance for funds used during
construction ("AFUDC"). Utility plant includes certain electric assets not
subject to NMPUC regulation. The results of operations of such electric assets
are included in operating income. (See note 2.)
It is Company policy to charge repairs and minor replacements of property to
maintenance expense and to charge major replacements to utility plant. Gains or
losses resulting from retirements or other dispositions of operating property
in the normal course of business are credited or charged to the accumulated
provision for depreciation.
Depreciation and Amortization
Provision for depreciation and amortization of utility plant is made at
annual straight-line rates approved by the NMPUC. The average rates used are as
follows:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Electric plant................ 2.98% 2.94% 2.90%
Gas plant..................... 3.12% 2.91% 3.13%
Water plant................... 2.62% 2.62% 2.58%
Common plant.................. 4.90% 4.92% 6.53%
</TABLE>
The provision for depreciation of certain equipment is charged to clearing
accounts and subsequently allocated to operating expenses or construction
projects based on the use of the equipment.
Depreciation of non-utility property is computed on the straight-line method.
Amortization of nuclear fuel is computed based on the units of production
method.
Allowance for Funds Used During Construction
As provided by the uniform systems of accounts, AFUDC, a noncash item, is
charged to utility plant. AFUDC represents the cost of borrowed funds
(allowance for borrowed funds used during construction) and
F-9
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1993, 1992 AND 1991
(1)SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
a return on other funds (allowance for equity funds used during construction).
The Company capitalizes AFUDC on construction work in progress and nuclear fuel
in the process of enrichment to the extent allowed by regulatory commissions.
With the January 11, 1993 announcement, the Company determined that beginning
with the fourth quarter of 1992, it would suspend recording AFUDC on
construction work in progress pending the outcome of the framework filing (see
note 2). The Company did record AFUDC on nuclear fuel in process during this
time.
AFUDC is computed using the maximum rate permitted by the FERC. The total
AFUDC rates used were 4.37%, 5.27%, and 8.96% for 1993, 1992 and 1991,
respectively, compounded semi-annually.
Fuel, Purchased Power and Gas Purchase Costs
The Company uses the deferral method of accounting for the portion of base
fuel costs (defined as fuel costs plus net purchased power costs less off-
system sales revenues) and gas purchase costs which is reflected in subsequent
periods under fuel and purchased power cost adjustment clauses and gas
adjustment clauses. Future recovery of these costs is based on orders issued by
the regulatory commissions.
Amortization of Debt Discount, Premium and Expense
Discount, premium and expense related to the issuance and retirement of long-
term debt are amortized over the lives of the respective issues. Costs
associated with retirement of long-term debt related to the Company's NMPUC
jurisdictional customers were written off as part of the January 12, 1994
stipulation. (See note 2.)
Income Taxes
Certain revenue and expense items in the consolidated statement of earnings
(loss) are recorded for financial reporting purposes in years different from
those in which they are recorded for income tax purposes. Customers under NMPUC
jurisdiction are charged currently for the tax effects of certain of these
differences (normalization). However, the income tax effects of certain other
differences result in reductions of income tax expense for ratemaking purposes
in the current year as required by the NMPUC (flow-through). This flow-through
method is used primarily for minor differences between book and tax
depreciation. A 1990 NMPUC order in an electric rate case required reversal of
the flow-through treatment previously accorded the premiums on retirement of
first mortgage bonds and losses on hedging transactions, and retroactively
required tax normalization of these items. Additional tax normalization is
required by generally accepted accounting principles ("GAAP") for all temporary
differences not subject to NMPUC rate regulation.
Deferred income taxes are recorded to reflect tax normalization using the
liability method. Deferred tax liabilities are computed using the enacted tax
rates scheduled to be in effect when the temporary differences reverse. For
regulated operations, any changes in tax rates applied to accumulated deferred
income taxes may not be immediately recognized because of ratemaking and tax
accounting provisions contained in the Tax Reform Act of 1986. For items
accorded flow-through treatment under NMPUC orders, deferred income taxes and
the future ratemaking effects of such taxes, as well as corresponding
regulatory assets and liabilities, are recorded.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 109, Accounting for Income Taxes. SFAS No.
109 requires the use of the liability method for
F-10
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1993, 1992 AND 1991
(1)SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
recording deferred income taxes on temporary differences between income tax and
financial reporting using the enacted tax rates at which such differences are
expected to reverse. The Company had previously adopted SFAS No. 96, which also
required the use of the liability method. For that reason, the adoption of SFAS
No. 109 had no material effect upon 1993 operating results.
The Revenue Reconciliation Act of 1993, enacted in August of 1993, contains a
provision which raises the corporate Federal income tax rate from 34 to 35
percent, retroactive to January 1, 1993. The effects of this change were
recorded during 1993. Neither this nor any other provision of this Act is
expected to have any material impact on the Company's financial condition or
its results of operations.
Change in Accounting for Unbilled Revenues
Prior to January 1, 1992, the Company recognized utility revenues when
billed. To provide a better matching of the Company's revenues from sales with
the related costs, effective January 1, 1992, the Company changed its method of
accounting to record estimated revenues from sales of utility services provided
subsequent to monthly billing cycle dates but prior to the end of the
accounting period. The cumulative effect of this accounting change as of
January 1, 1992, net of taxes, was $12.7 million or $.30 per common share and
was included in 1992 net earnings as a component of other income and
deductions. The effect of the accounting change on 1992 net income, exclusive
of the cumulative effect, was to increase net earnings and net earnings per
common share by $1.7 million and $.04, respectively. Had the accrual method
been applied in 1991, net earnings for that year would not have been materially
different from that shown in the consolidated statement of earnings. The effect
of this accounting change has resulted in a decrease in net earnings and net
earnings per common share by $1.0 million and $.02, respectively, for the
twelve months ended December 31, 1993.
(2)ELECTRIC OPERATIONS STIPULATION AND WRITE-OFFS
On January 11, 1993, the Company announced specific actions which were
determined to be necessary in order to accelerate the Company's preparation for
the new challenges in the competitive electric energy market. Included in the
announcement was the Company's intention to file a plan ("framework filing")
with the NMPUC designed to lower electric prices by consolidating certain gas
and electric functions, restructuring assets and reducing operation and
maintenance expenses by $25 million annually. The Company separated the gas and
electric customer service consolidation issues from the balance of the
framework filing.
In its January 11, 1993 announcement, the Company also stated its intention
to dispose of excess electric generating capacity not needed by New Mexicans
including, if possible, some or all of the Company's share of PVNGS. Excess
electric generating capacity includes excluded capacity, as well as excess
capacity which is currently in New Mexico jurisdictional rates and excess
capacity associated with the firm-requirement wholesale customers. As of
December 31, 1993, the Company's excluded capacity consists of 130 MW of PVNGS
Unit 3, 80 MW of San Juan Generating Station ("SJGS") Unit 4 and the 105 MW M-
S-R Public Power Agency ("M-S-R") power purchase contract. As a result of the
Company's decision to attempt to sell PVNGS Unit 3, the Company estimated the
net realizable value of PVNGS Unit 3 and the M-S-R power purchase contract and
recorded an after-tax loss of $126.2 million at December 31, 1992. The Company
continues to evaluate its estimate of such amounts on an on-going basis but
currently does not anticipate additional write-downs or write-offs of PVNGS
Unit 3 and the M-S-R power purchase contract. The Company continues to seek
prospective buyers for the PVNGS units.
F-11
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1993, 1992 AND 1991
(2)ELECTRIC OPERATIONS STIPULATION AND WRITE-OFFS--(CONTINUED)
On January 12, 1994, the Company and the NMPUC staff and primary intervenor
groups (the New Mexico Attorney General, the New Mexico Industrial Energy
Consumers, the City of Albuquerque, the United States Executive Agencies and
the New Mexico Retail Association) ("interested parties") entered into a
stipulation ("stipulation") which addresses retail electric prices, generation
assets and certain financial concerns of the Company. The Company filed the
stipulation with the NMPUC, recommending that electric retail rates be reduced
by $30 million. This reduction is accomplished primarily through the write-down
of the 22% beneficial interests in the PVNGS Units 1 and 2 leases purchased by
the Company, the write-off of certain regulatory assets and other deferred
costs, the write-off of certain PVNGS Units 1 and 2 common costs and the
Company's previously announced cost reduction efforts. In connection with the
stipulation, the Company has charged approximately $108.2 million, after-tax,
to the 1993 results of operations. Such after-tax charge resulted in the
Company continuing to have a deficit in retained earnings as of December 31,
1993. As a result, the Company is unable to resume payment of dividends on its
common stock. The Company evaluated the possibility of a quasi-reorganization
but does not intend to implement a quasi-reorganization at this time.
The stipulation is subject to NMPUC approval. The Company believes that the
approval of the stipulation would result in a reduction of competitive risk and
regulatory uncertainty. However, there can be no assurance that the stipulation
will be approved by the NMPUC. If the stipulation is not approved in its
entirety, unless otherwise agreed to by all interested parties, the stipulation
shall be null and void.
On January 3, 1994, the NMPUC issued an order establishing investigations of
rates for both the Company and Southwestern Public Service Company ("SPS"). The
order required the Company to file a general rate case no later than July 1,
1994. However, at the prehearing conference held on February 23, 1994,
regarding the stipulation, the NMPUC vacated the requirements of its original
request and will allow the stipulation to satisfy their requirements. Hearings
on the stipulation have not been scheduled; however, the Company and interested
parties are scheduled to file testimony on April 18, 1994. The NMPUC confirmed
the oral rulings in a written order issued on March 7, 1994.
On March 7, 1994, the Albuquerque City Council deadlocked on endorsing the
Mayor's signing of the stipulation. The Company is currently unable to
determine what impact, if any, the City Council's action might have on the
stipulation. However, the Company remains committed to the process and will
meet with the other parties who signed the stipulation to evaluate this new
development. The Company believes that the stipulation will continue through
the hearing process being established by the NMPUC.
F-12
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1993, 1992 AND 1991
(3)CAPITALIZATION
Changes in common stock, additional paid-in capital and cumulative preferred
stock are as follows:
<TABLE>
<CAPTION>
CUMULATIVE PREFERRED STOCK
-------------------------------------
WITHOUT MANDATORY WITH MANDATORY
REDEMPTION REDEMPTION
COMMON STOCK REQUIREMENTS REQUIREMENTS
-------------------- ----------------- -------------------
ADDITIONAL NUMBER AGGREGATE NUMBER AGGREGATE
NUMBER OF AGGREGATE PAID-IN OF STATED OF STATED
SHARES PAR VALUE CAPITAL SHARES VALUE SHARES VALUE
---------- --------- ---------- ------- --------- -------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1990................... 41,774,083 $208,870 $469,688 590,000 $59,000 629,163 $45,581
Redemption of preferred
stock................. -- -- 135 -- -- (12,642) (1,264)
Redemption within one
year.................. -- -- -- -- -- (346,700) (17,335)
---------- -------- -------- ------- ------- -------- -------
Balance at December 31,
1991................... 41,774,083 208,870 469,823 590,000 59,000 269,821 26,982
Redemption of preferred
stock................. -- -- 326 -- -- (6,960) (696)
Redemption within one
year.................. -- -- -- -- -- (5,861) (586)
---------- -------- -------- ------- ------- -------- -------
Balance at December 31,
1992................... 41,774,083 208,870 470,149 590,000 59,000 257,000 25,700
Redemption of preferred
stock................. -- -- -- -- -- (139) (14)
Redemption within one
year.................. -- -- -- -- -- (13,000) (1,300)
---------- -------- -------- ------- ------- -------- -------
Balance at December 31,
1993................... 41,774,083 $208,870 $470,149 590,000 $59,000 243,861 $24,386
========== ======== ======== ======= ======= ======== =======
</TABLE>
Common Stock
The number of authorized shares of common stock with par value of $5 per
share is 80 million shares.
The payment of cash dividends on the common stock of the Company is subject
to certain restrictions, including those contained in the Company's mortgage
indenture, which effectively prevent the payment of dividends on common stock
unless the Company has positive retained earnings. The Company's board of
directors, which reviews the Company's dividend policy on a continuing basis,
has not declared dividends on its common stock since January 1989. As of
December 31, 1993, the Company had a deficit in retained earnings of $120.8
million and is, therefore, currently unable to resume payment of dividends on
its common stock. The resumption of common dividends is dependent upon a number
of factors including the outcome of the stipulation discussed in note 2,
earnings and financial condition of the Company and market conditions.
Cumulative Preferred Stock
The number of authorized shares of cumulative preferred stock is 10 million
shares. The earnings tests in the Company's Restated Articles of Incorporation
currently restrict the issuance of preferred stock.
The Company, upon 30 days notice, may redeem the cumulative preferred stock
at stated redemption prices plus accrued and unpaid dividends. Redemption
prices are at reduced premiums in future years. On February 10, 1992, the
Company redeemed all 346,700 shares of its Cumulative Preferred Stock, 12.52%
series, $50.00 stated value at a redemption price of $52.97 per share plus
accrued and unpaid dividends.
The Company evaluated its ability to continue paying dividends on its
preferred stock under restrictions imposed by the Federal Power Act due to the
Company's negative retained earnings. By letter dated April 7, 1993, the
Company advised the FERC staff of the Company's position that payment of
preferred stock dividends would not be in violation of the Federal Power Act.
As a result, the Company continued to declare and pay dividends on its
preferred stock on scheduled dates.
F-13
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1993, 1992 AND 1991
(3)CAPITALIZATION--(CONTINUED)
Mandatory redemption requirements for 1994 through 1998 are $1.3 million
annually. During any period that the Company is unable to pay preferred
dividends, if that should occur, the Company would be prohibited by its
Articles of Incorporation from making future mandatory redemption payments.
Long-Term Debt
Substantially all utility plant is pledged to secure the Company's first
mortgage bonds. A portion of certain series of long-term debt will be redeemed
serially prior to their due dates. The issuance of first mortgage bonds by the
Company is subject to earnings coverage and bondable property provisions of the
Company's first mortgage indenture. The Company has the capability under the
mortgage indenture, without regard to the earnings test but subject to other
conditions, to issue first mortgage bonds on the basis of certain previously
retired bonds.
In November 1992, pollution control revenue refunding bonds, 1992 Series A,
in the principal amount of $37.3 million, were issued. Such bonds are supported
by a letter of credit ("LOC") and are collaterally secured by certain first
mortgage bonds issued by the Company. The LOC will expire on November 26, 1995,
unless extended or renewed, and prior thereto may be terminated or replaced by
an alternate LOC or alternate security. As the Company believes it has the
ability to extend the LOC, the $37.3 million is not included in the aggregate
maturities.
The aggregate amounts (in thousands) of maturities for 1994 through 1998 on
long-term debt outstanding at December 31, 1993 (including estimates of
remittance of collections for the Asset Securitization discussed below) are as
follows:
<TABLE>
<S> <C>
1994.............................................................. $18,903
1995.............................................................. $20,608
1996.............................................................. $21,090
1997.............................................................. $37,582
1998.............................................................. $12,432
</TABLE>
On August 3, 1993, the Company received $60 million from the securitization
relating to amounts being recovered from gas customers relating to certain gas
contract settlements. Proceeds were used to pay down short-term debt. Pollution
control revenue bonds totaling $182 million and EIP Secured Facility Bonds
totaling $51.3 million were refunded and replaced during 1993. The refundings
will provide pre-tax interest savings of approximately $5.5 million per year
and $.4 million in reduced lease payments.
Fair Value of Financial Instruments
Effective January 1, 1992, the Company adopted SFAS No. 107, Disclosures
about Fair Value of Financial Instruments, which requires the disclosure of the
fair value of all financial instruments. As of December 31, 1993, the fair
value of the Company's long-term debt and preferred stock (including current
maturities) is estimated to be approximately $986 million and $75 million,
respectively, based on market quotes obtained from the Company's investment
bankers.
F-14
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1993, 1992 AND 1991
(4)REVOLVING CREDIT FACILITY AND OTHER CREDIT FACILITIES
At December 31, 1993, the Company had a $100 million secured revolving credit
facility (the "Facility") with the expiration date of June 13, 1995. The
Company must pay commitment fees of .5% per year on the total amount of the
Facility. The Company also has a $40 million credit facility, collaterialized
by the Company's electric customer account receivable (the "Accounts Receivable
Securitization"). Such credit facility has a term of five years. Together with
$11 million in local lines of credit, the Company has $151 million in liquidity
arrangements. As of December 31,1993, there were no borrowings outstanding
under the Facility, the Accounts Receivable Securitization or any of the local
lines of credit.
(5)INCOME TAXES
Income taxes consist of the following components:
<TABLE>
<CAPTION>
1993 1992 1991
-------- --------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Current Federal income tax...................... $ 12,502 $ 19,285 $ (436)
Current State income tax........................ -- 3,292 4
Deferred Federal income tax..................... (52,827) (76,808) 16,494
Deferred State income tax....................... (8,433) (14,859) 2,453
Investment tax credit carryforward.............. -- 1,036 (2,240)
Amortization of accumulated investment tax cred-
its............................................ (5,036) (6,113) (6,082)
Recognition of accumulated deferred investment
tax credits relating to PVNGS Unit 3 (1992) and
other utility property (1993).................. (3,284) (16,313) --
-------- --------- -------
Total income taxes............................ $(57,078) $ (90,480) $10,193
======== ========= =======
Charged to operating expenses................... $ 25,721 $ 16,891 $13,811
Charged (credited) to other income and deduc-
tions.......................................... (82,799) (107,371) (3,618)
-------- --------- -------
Total income taxes............................ $(57,078) $ (90,480) $10,193
======== ========= =======
</TABLE>
The Company's provision for income taxes differed from the Federal income tax
computed at the statutory rate for each of the years shown. The differences are
attributable to the following factors:
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Federal income tax at statutory rates............. $(41,497) $(66,210) $11,272
Investment tax credits............................ (5,036) (6,113) (6,082)
Depreciation of flow-through items................ 1,719 2,027 2,367
Gains on the sale and leaseback of PVNGS Units 1
and 2............................................ (514) (491) (491)
Reversal of basis difference resulting from sale
of investment.................................... -- -- 1,328
State income tax.................................. (5,585) (9,249) 1,582
Write-down of PVNGS Unit 3........................ -- (9,529) --
Gain on sale of utility property.................. (3,169) -- --
Federal income tax rate change to 35%............. (2,527) -- --
Other............................................. (469) (915) 217
-------- -------- -------
Total income taxes.............................. $(57,078) $(90,480) $10,193
======== ======== =======
</TABLE>
F-15
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1993, 1992 AND 1991
(5)INCOME TAXES--(CONTINUED)
Deferred income taxes result from certain differences between the recognition
of income and expense for tax and financial reporting purposes, as described in
note 1. The major sources of these differences for which deferred taxes have
been provided and the tax effects of each are as follows:
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Deferred fuel costs............................... $ 4,549 $ 10,938 $ 6,380
Depreciation and cost recovery.................... 17,668 14,632 14,489
Write-down of PVNGS Unit 3........................ -- (62,259) --
Loss provision for the M-S-R power purchase con-
tract............................................ 6,335 (15,464) --
Contributions in aid of construction.............. (4,491) (2,435) (1,932)
Unbilled revenues................................. -- 11,136 (2,036)
Alternative minimum tax in excess of regular tax.. (13,808) 526 2,696
Net operating losses utilized (carryforward)...... 15,067 (38,565) 4,066
PVNGS decommissioning............................. (3,962) (2,925) (652)
Write-down of interests in PVNGS Units 1 and 2.... (51,585) -- --
Hedge loss write-off.............................. (3,908) -- --
Loss on reacquired debt write-off................. (5,561) -- --
Gain on sale of utility property.................. (11,321) -- --
Contribution to 401(h) plan....................... (3,226) -- --
PVNGS decontamination............................. -- (2,590) --
Reserve for litigation............................ (1,979) -- --
Other............................................. (5,038) (4,661) (4,064)
-------- -------- -------
Total deferred taxes provided................... $(61,260) $(91,667) $18,947
======== ======== =======
</TABLE>
The gross accumulated deferred income tax liability as of December 31, 1993
was $303.9 million and consisted principally of $265.1 million relating to
accelerated tax depreciation. The gross accumulated deferred income tax asset
was $256.6 million, the largest element of which was $84.4 million relating to
unutilized net operating loss carryforwards, the balance being comprised
primarily of numerous items previously recognized as expenses for financial
accounting purposes which had not been deducted for tax purposes. In addition,
the balance of deferred income taxes at December 31, 1993 includes amounts for
temporary differences related to deferred gains on sale and leaseback
transactions, settlements of gas contract disputes, deferred investment tax
credits and regulatory assets and liabilities.
At December 31, 1993, the Company had net operating loss carryforwards for
Federal income tax purposes of $21.6 million, $133.9 million, $15.1 million,
and $46.6 million which expire in 2003, 2004, 2005 and 2007, respectively. For
purposes of New Mexico state income tax, these carryforwards, if unused, would
expire in 2003, 2004, 2005 and 1997, respectively. New Mexico law provides a
five-year carryforward for all net operating losses incurred after 1990. The
Company anticipates that all of these carryforwards will be fully utilized
before expiration, and the financial statements reflect that expectation.
The application of SFAS No. 109 to regulated enterprises results in the
creation of regulatory assets and liabilities. At December 31, 1993 and 1992,
deferred charges included regulatory assets of $75.2 million and $65.9 million,
respectively, and deferred credits included regulatory liabilities of $69.9
million and $73.1 million, respectively.
F-16
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1993, 1992 AND 1991
(5)INCOME TAXES--(CONTINUED)
The Company defers investment tax credits related to utility assets and
amortizes them over the estimated useful lives of those assets. Investment tax
credits related to non-utility assets have been flowed through in earlier
years.
In 1993, the Company reached a settlement with the Internal Revenue Service
regarding income taxes for the years 1990 through 1991. The primary effect of
the settlement is an acceleration of certain previously deferred items into
current income tax expense.
(6)EMPLOYEE AND POST-EMPLOYMENT BENEFITS
Pension Plan
The Company and its subsidiaries have a pension plan covering substantially
all of their employees, including officers. The plan is non-contributory and
provides for benefits to be paid to eligible employees at retirement based
primarily upon years of service with the Company and their average of highest
annual base salary for three consecutive years. The Company's policy is to fund
actuarially-determined contributions. Contributions to the plan reflect
benefits attributed to employees' years of service to date and also for
services expected to be provided in the future. Plan assets primarily consist
of common stock, fixed income securities (United States government
obligations), cash equivalents and real estate.
The components of pension cost (in thousands) are as follows:
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Service cost...................................... $ 7,263 $ 7,701 $ 6,027
Interest cost..................................... 16,849 15,537 13,204
Actual return on plan assets...................... (18,148) (7,547) (35,903)
Asset gain deferred (amortized)................... (167) (10,466) 20,422
Other............................................. (711) (1,130) (1,130)
-------- -------- --------
Net periodic pension cost......................... 5,086 4,095 2,620
Curtailment loss.................................. 1,657 -- --
-------- -------- --------
Total pension expense............................. $ 6,743 $ 4,095 $ 2,620
======== ======== ========
</TABLE>
F-17
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1993, 1992 AND 1991
(6)EMPLOYEE AND POST-EMPLOYMENT BENEFITS--(CONTINUED)
The following sets forth the plan's funded status and amounts (in thousands)
at December 31, 1993 and 1992:
<TABLE>
<CAPTION>
1993 1992
-------- --------
<S> <C> <C>
Vested benefits............................................ $205,909 $160,304
Non-vested benefits........................................ 8,191 6,222
-------- --------
Accumulated benefit obligation............................. 214,100 166,526
Effect of future compensation levels....................... 44,500 38,420
-------- --------
Projected benefit obligation............................... 258,600 204,946
Fair value of plan assets.................................. 212,475 192,660
-------- --------
Projected benefit obligation in excess of assets........... 46,125 12,286
Unrecognized prior service cost............................ (282) (364)
Net unrecognized loss from past experience different from
assumed and the effects of changes in assumptions......... (54,876) (17,768)
Unamortized asset at transition, being amortized through
the year 2002............................................. 9,306 10,470
Additional liability (unfunded accumulated benefits in ex-
cess of accrued pension cost)............................. 1,352 --
-------- --------
Accrued pension liability.................................. $ 1,625 $ 4,624
======== ========
</TABLE>
The weighted average discount rate used to measure the projected benefit
obligation was 7.0% for 1993 and 8.0% for 1992 and the expected long-term rate
of return on plan assets was 9.0% for 1993 and 9.5% for 1992. The rate of
increase in future compensation levels based on age-related scales was 4.1% for
1993 and 5.0% for 1992.
As of December 31, 1993, the Company recognized $2.8 million, net of tax, as
a separate component of common stock equity, for the amount of additional
pension liability in excess of the unrecognized prior service cost in
accordance with SFAS No. 87, Employers' Accounting for Pensions.
Other Postretirement Benefits
The Company adopted SFAS No. 106, Employers' Accounting for Postretirement
Benefits Other Than Pensions, effective January 1, 1993. The Company provides
medical and dental benefits to eligible retirees. Currently, retirees are
offered the same benefits as active employees after reflecting Medicare
coordination. The components of postretirement benefit cost (in thousands) for
1993 are as follows:
<TABLE>
<S> <C>
Service cost........................................................... $ 1,175
Interest cost.......................................................... 2,974
Actual return on plan assets........................................... (56)
Transition obligation amortization..................................... 1,857
-------
Net periodic postretirement benefit cost............................... 5,950
Curtailment loss....................................................... 4,295
-------
Total postretirement benefit expense................................... $10,245
=======
</TABLE>
F-18
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1993, 1992 AND 1991
(6)EMPLOYEE AND POST-EMPLOYMENT BENEFITS--(CONTINUED)
The following sets forth the plan's funded status and amounts (in thousands)
at December 31, 1993:
<TABLE>
<S> <C>
Accumulated benefit obligations for:
Retirees............................................................ $24,007
Fully eligible employees............................................ 1,120
Active employees.................................................... 22,144
-------
Accumulated benefit obligation........................................ 47,271
Fair value of plan assets............................................. 2,118
-------
Funded status......................................................... (45,153)
Net unrecognized loss................................................. 3,956
Unrecognized transition obligation (being amortized through the year
2012)................................................................ 34,525
-------
Accrued postretirement liability...................................... $(6,672)
=======
</TABLE>
Prior to 1993, the costs of these benefits were expensed on a pay-as-you-go
basis. The cost of providing these benefits was $1,531,000 and $1,139,000 for
1992 and 1991, respectively. As of December 31, 1993, the discount rate used to
measure the postretirement benefit obligation was 7.0% and the health care cost
trend rate was 6%. The effect of a 1% increase in the health care trend rate
assumption would increase the accumulated postretirement benefit obligation as
of December 31, 1993 by approximately $10.2 million and the aggregate service
and interest cost components of net periodic postretirement benefit cost for
1993 by approximately $1.0 million. On December 20, 1993, the NMPUC issued a
final order in a NMPUC case regarding an inquiry into SFAS No. 106. In its
final order, the NMPUC adopted a policy which provides for accrual accounting
for the postretirement benefit costs, funding requirements into an irrevocable
trust and specific reporting for the benefit costs in future rate cases. The
order also provides for specific waiver provisions with respect to the external
trust funding requirements and a deferral of the benefit costs in excess of the
pay-as-you-go basis. The Company has requested recovery of the full accrual
amount of SFAS No. 106 expense in the stipulation for its electric business
unit (see note 2). The Company will address the recovery of the amounts related
to the gas business unit in a future rate case. The Company currently intends
to fund the full amount of these costs in 1994.
Employee Stock Ownership Plan
Effective January 1, 1989, the Company adopted an Employee Stock Ownership
Plan covering substantially all of its employees. Under the plan, the Company
makes cash contributions which are utilized to purchase the Company's common
stock on the open market. Contributions to the plan were approximately $5.3
million in 1989. No contributions or accruals were made in 1990, 1991 and 1992
and effective March 1, 1993, the plan has been cancelled.
Performance Stock Plan
As approved by the Company's shareholders on May 25, 1993, the Company
adopted a nonqualified stock option plan (Performance Stock Plan) covering a
group of management employees. Under the terms of the plan which became
effective on July 1, 1993, options to purchase shares of the Company's common
stock are granted with an exercise price equal to the fair market value of the
stock at the date of grant. On July 1, 1993, the Company granted 370,000 shares
to the covered employees under the plan at an exercise price of
F-19
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1993, 1992 AND 1991
(6)EMPLOYEE AND POST-EMPLOYMENT BENEFITS--(CONTINUED)
$13.75 per share. The remaining 1,630,000 shares approved under the plan are
reserved for future grants. Options may be exercised following vesting as
described in the plan. Currently no options are eligible for exercise.
Executive Retirement Program
In addition, the Company had an executive retirement program for a group of
management employees. The program was intended to attract, motivate and retain
key management employees. The Company's projected benefit obligation for this
program, as of December 31, 1993, was $18.5 million, of which the accumulated
and vested benefit obligation was $17.4 million. In addition, in 1993, the
Company recognized an additional liability of $7.2 million for the amount of
unfunded accumulated benefits in excess of accrued pension costs. The net
periodic pension cost for 1993, 1992 and 1991 was $2.1 million, $2.0 million
and $1.8 million, respectively. In 1989, the Company established an irrevocable
grantor trust in connection with the executive retirement program. Under the
terms of the trust, the Company may, but is not obligated to, provide funds to
the trust, which was established with an independent trustee, to aid it in
meeting its obligations under such program. Funds in the amount of
approximately $12.7 million (fair market value of $13.0 million) were provided
to the trust in 1989. No additional funds have been provided to the trust.
(7)CONSTRUCTION PROGRAM AND JOINTLY-OWNED PLANTS
It is estimated that the Company's construction expenditures for 1994 will be
approximately $129 million, including expenditures on jointly-owned projects.
The Company's proportionate share of expenses for the jointly-owned plants is
included in operating expenses in the consolidated statement of earnings.
At December 31, 1993, the Company's interest (including leasehold interests
in PVNGS Units 1 and 2 for power entitlement) and investments in jointly-owned
generating facilities are:
<TABLE>
<CAPTION>
CONSTRUCTION
PLANT IN ACCUMULATED WORK IN COMPOSITE
STATION (FUEL TYPE) SERVICE DEPRECIATION PROGRESS INTEREST
------------------- -------- ------------ ------------ ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
San Juan Generating Station
(Coal).......................... $762,437 $285,818 $ 8,026 48.5%
Palo Verde Nuclear Generating
Station (Nuclear)............... $174,873* $ 28,159* $17,556* 10.2%
Four Corners Generating Station
Units 4 and 5 (Coal)............. $114,230 $ 32,490 $ 3,324 13.0%
</TABLE>
- --------
* Includes the Company's interest in PVNGS Unit 3, the Company's interest in
common facilities for all PVNGS units and the 22% beneficial interests in
PVNGS Units 1 and 2 leases purchased on September 2, 1992.
San Juan Generating Station
The Company operates and jointly owns SJGS. At December 31, 1993, SJGS Units
1 and 2 are owned on a 50% shared basis with Tucson Electric Power Company
("Tucson"), Unit 3 is owned 50% by the Company, 41.8% by Southern California
Public Power Authority and 8.2% by Century Power Corporation ("Century"),
(Century has agreed to sell its remaining 8.2% interest to Tri-State Generation
and
F-20
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1993, 1992 AND 1991
(7)CONSTRUCTION PROGRAM AND JOINTLY-OWNED PLANTS--(CONTINUED)
Transmission Association, Inc.). Unit 4 is owned 45.485% by the Company, 8.475%
by the City of Farmington, 28.8% by M-S-R, 7.2% by the County of Los Alamos and
10.04% by the City of Anaheim, California.
On May 27, 1993, the Company executed a purchase and participation agreement
with Utah Associated Municipal Power Systems ("UAMPS") to sell not less than
6.024% (30 MW) and up to 8.03% (40 MW) undivided ownership interest in SJGS
Unit 4. On September 1, 1993, the Company and UAMPS amended the purchase and
participation agreement to establish the UAMPS purchase at 35 MW for
approximately $40 million. On November 19, 1993, the Company filed an
application with the NMPUC for approval of this sale. On January 21, 1994, the
Company, the NMPUC staff, and the New Mexico Industrial Energy Consumers
entered into a stipulation requesting approval of the sale. Hearings were held
February 15, 1994, and the Company is awaiting a recommended decision. In
addition, the Company made three filings with the FERC associated with the sale
and has received approval on two and is awaiting the outcome of the remaining
filing. Closing of the transaction will depend on the fulfillment of numerous
closing conditions and will be subject to regulatory approvals from the NMPUC
and the FERC. If approved, the Company anticipates that the closing of the sale
will be in the first half of 1994.
Palo Verde Nuclear Generating Station
The Company has a 10.2% interest in PVNGS. Commercial operation commenced in
1986 for Unit 1 and Unit 2 and 1988 for Unit 3. In 1985 and 1986, the Company
completed sale and leaseback transactions for its undivided interests in Units
1 and 2 and certain related common facilities.
On September 2, 1992, the Company purchased approximately 22% of the
beneficial interests in PVNGS Units 1 and 2 leases for approximately $17.5
million. For accounting purposes, this transaction was recorded as a purchase
with the Company recording approximately $158.3 million as utility plant
(written down to $46.7 million as a result of the stipulation, see note 2) and
$140.8 million as long-term debt on the Company's consolidated balance sheet.
The PVNGS 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
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
occurring at any nuclear power plant in the United States is approximately
$79.3 million, subject to an annual limit of $10 million per incident. Based
upon the Company's 10.2% interest in the three PVNGS units, the Company's
maximum potential assessment per incident is approximately $24 million, with an
annual payment limitation of $3 million. The insureds, under this liability
insurance include the PVNGS participants and "any other person or organization
with respect to his legal responsibility for damage caused by the nuclear
energy hazard".
The PVNGS participants maintain "all-risk" (including nuclear hazards)
insurance for nuclear property damage to, and decontamination of, property at
PVNGS in the aggregate amount of $2.75 billion as of January 1, 1994, a
substantial portion of which must first be applied to stabilization and
decontamination. The Company has also secured insurance against a portion of
the increased cost of generation or purchased power resulting from certain
accidental outages of any of the three PVNGS units if such outage exceeds 21
weeks.
F-21
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1993, 1992 AND 1991
(7)CONSTRUCTION PROGRAM AND JOINTLY-OWNED PLANTS--(CONTINUED)
The Company has a program for funding its share of decommissioning costs for
PVNGS. Under this program, the Company will make a series of annual deposits to
an external trust fund over the estimated useful life of each unit, and the
trust funds are being invested under a plan which allows the accumulation of
funds largely on a tax-deferred basis through the use of life insurance
policies on certain current and former employees. The annual trust deposit,
approved by the NMPUC in 1987, is currently $396,000 per unit. The NMPUC
jurisdictional share of this amount related to PVNGS Units 1 and 2 is currently
included in retail rates. The results of the 1992 decommissioning cost study
indicate that the Company's share of the PVNGS decommissioning costs will be
approximately $143.2 million, an increase from $94.2 million based on the
previous study (both amounts are stated in 1993 dollars). Additional expense
associated with the decommissioning cost increase has been included in the cost
of service filed with the NMPUC in the stipulation (see note 2). The Company
has determined that a supplemental investment program will be needed as a
result of both the cost increase and the underperformance of the existing
investment program. However, a supplemental funding program will not be
established until clarification and/or possible revisions to a FERC order
issued in October 1993 regarding restricted investment vehicles for nuclear
decommissioning trusts are obtained. The market value of the existing trust at
the end of 1993 was approximately $11.0 million, including cash surrender value
of the insurance policies.
El Paso Electric Company
The Company owns or leases a 10.2% interest in PVNGS and owns a 13% interest
in the Four Corners Power Plant ("Four Corners") Units 4 and 5, which are
operated by Arizona Public Service Company ("APS"). El Paso Electric Company
("El Paso") owns or leases a 15.8% interest in PVNGS and owns a 7.0% interest
in Four Corners Units 4 and 5.
On January 8, 1992, El Paso filed a voluntary petition to reorganize under
Chapter 11 of the United States Bankruptcy Code. On September 8, 1992, El Paso
filed a plan of reorganization with the bankruptcy court, which was later
amended pursuant to an October 26, 1992 filing with the court. On May 4, 1993,
El Paso and Central and South West Corporation ("CSW") announced a plan for
merger in connection with El Paso's Chapter 11 reorganization, under which El
Paso would become a wholly-owned subsidiary of CSW. A modified amended El
Paso--CSW plan and disclosure statement dated August 27, 1993 has been filed
with the bankruptcy court and was approved December 8, 1993. In order for the
merger to be implemented, CSW and El Paso must receive appropriate regulatory
approvals, including approval of the NRC and the FERC. In the El Paso--CSW FERC
proceedings, the Company has intervened to protect its interests relative to
the various transmission issues raised by the El Paso--CSW filings. The
Company's regulatory filings in the FERC proceeding address reliability and
potential system impacts that may result to the Company from the merger. At
this time the Company is unable to predict the result of these regulatory
proceedings.
In addition to approving the El Paso-CSW plan, the bankruptcy court approved
the Cure and Assumption Agreement between El Paso and the PVNGS participants,
which provides for (i) various mutual releases and (ii) the execution of a
release by El Paso and any alleged claims regarding the 1989-90 PVNGS outages.
All such releases will be effective on the effective date of the El Paso-CSW
plan. The Cure and Assumption Agreement also provided for payment in full to
the PVNGS participants of pre-petition monies owed by El Paso. El Paso has made
the payment contingent upon its completion of the merger with CSW.
The bankruptcy court also approved the assumption by El Paso of several
wheeling agreements that El Paso and the Company agreed to extend as part of a
120 day transition agreement. In connection with the
F-22
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1993, 1992 AND 1991
(7)CONSTRUCTION PROGRAM AND JOINTLY-OWNED PLANTS--(CONTINUED)
assumptions, El Paso paid the Company approximately $2.3 million owed for pre
and post-petition wheeling services. Although the transition agreement has
expired by its terms, the parties have signed an agreement in principle for
near-term and longer-term wheeling services. The agreement would provide El
Paso with a total of 80 MW of transmission service until such time as El Paso
installs a phase shifting transformer ("PST") which is expected to be late
1995. The agreement would provide El Paso with 20 MW of service after the PST
is installed in exchange for payment by El Paso of proportional costs incurred
by the Company for generation support of the transmission as well as wheeling
charges. The Company and El Paso have also agreed to negotiate both near-term
and longer-term operating procedures, which may include transfer by the Company
of operating agent status for the Southern New Mexico Transmission System to El
Paso. The Company will continue to retain its transmission rights (presently 75
MW) in southern New Mexico. The wheeling agreement will be subject to
regulatory approval by the FERC and will also be reviewed by the NMPUC in
connection with several regulatory filings of El Paso, both predating and in
connection with the El Paso-CSW merger.
(8)LONG-TERM POWER CONTRACTS AND FRANCHISES
The Company entered into contracts for the purchase of electric power. Under
a contract with M-S-R, which expires in early 1995, the Company is obligated to
pay certain minimum amounts and a variable component representing the expenses
associated with the energy purchased and debt service costs associated with
capital improvements. Total payments under this contract amounted to
approximately $42 million for 1993, and approximately $40 million and $41
million for each of the years 1992 and 1991, respectively. The minimum payment
for 1994 under this contract is $26.7 million, with a minimum of $9.0 million
for the first four months of 1995, at which time this contract expires. The
Company, based on the January 11, 1993 announcement, recorded a provision for
loss associated with the M-S-R power purchase contract in its 1992 results of
operation. (See note 2.)
The Company has a long-term contract with SPS to purchase interruptible power
which began in June 1991. Total payments under this contract amounted to
approximately $10.8 million in 1993. Minimum payments under the contract amount
to approximately $7.0 million for 1994 and approximately $11.7 million and $14
million for each of the years 1995 and 1996, respectively. In addition, the
Company will be required to pay for any energy purchased under the contract.
The amount of minimum payments after 1995 will depend on whether the Company
exercises certain options to either reduce or increase its purchase
obligations.
The Company holds long-term, non-exclusive franchises of varying durations in
all incorporated communities except for the City of Albuquerque (the "City").
The Company's non-exclusive electric service franchise with the City expired in
early 1992. The franchise agreement provided for the Company's use of City
property for electric service rights-of-way. The Company continues service to
the area, which contributed 46.0% of the Company's total 1993 electric
operating revenues. The absence of a franchise does not change the Company's
right and obligation to serve those customers under state law. In November
1991, the NMPUC issued an order concluding, among other things, that the City
could bid for services to its own facilities (Albuquerque municipal loads
generated approximately $17 million, $16 million and $17 million in annual
revenues for 1993, 1992 and 1991, respectively), but not for service to other
customers. In reaching this conclusion, the NMPUC noted that New Mexico law
reflects a legislative choice to vest the NMPUC with exclusive control over
utility rates and services. The NMPUC also noted that the Company's obligation
F-23
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1993, 1992 AND 1991
(8)LONG-TERM POWER CONTRACTS AND FRANCHISES--(CONTINUED)
to serve its customers in Albuquerque will continue irrespective of whether the
municipal franchise is renewed. The City appealed the NMPUC's order to the New
Mexico Supreme Court ("Court") solely on the grounds of the City's authority to
bid for rates for its citizens. On April 21, 1993, the Court issued its
decision on the City's appeal of the NMPUC order. The Court ruled that a city
can negotiate rates for its citizens in addition to its own facility uses. The
Court also ruled that any contracts with utilities for electric rates are a
matter of statewide concern and subject to approval, disapproval or
modification by the NMPUC. In addition, the Court reaffirmed the NMPUC's
exclusive power to designate providers of utility service within a municipality
and confirmed that municipal franchises were not licenses to serve but rather
to provide access to public rights-of-way.
In 1992, representatives of the Company and the City met in attempts to
resolve the franchise renewal issue. Currently, the franchise renewal meetings
are in abeyance due to the City's interest in the outcome of the retail
wheeling legislation which was introduced in the 1993 state legislative
session. The Company continues to pay franchise fees to the City.
During 1992, open access to transmission grids in the electric wholesale
market, as mandated by the National Energy Policy Act, stimulated interest in
the retail wheeling concept in New Mexico, resulting in the introduction of
legislation in the 1993 New Mexico state legislature. On March 6, 1993, the New
Mexico State Senate passed Senate Memorial 54, which calls for the concept of
retail wheeling to be studied by the Integrated Resource Planning Committee,
which is an interim legislative committee, with a report to be made to the 1995
legislature. The Company has been providing information for the study effort.
The study is anticipated to be completed by December 1994.
(9)LEASE COMMITMENTS
The Company classifies its leases in accordance with generally accepted
accounting principles. The Company leases Units 1 and 2 of PVNGS, transmission
facilities, office buildings and other equipment under operating leases. The
aggregate lease payments for the PVNGS leases are $66.3 million per year over
base lease terms expiring in 2015 and 2016. Prior to 1992, the aggregate lease
payments for the PVNGS leases were $84.6 million per year over the base lease
terms; however, this amount was reduced by the purchase of approximately 22% of
the beneficial interests in the PVNGS Units 1 and 2 leases (see note 7). The
1992 aggregate lease payments for the PVNGS leases were approximately $76.4
million. Each PVNGS lease contains renewal and fair market value purchase
options at the end of the base lease term. For regulatory purposes, these
leases continue to be classified as operating leases and costs continue to be
recovered in NMPUC jurisdictional rates.
Future minimum operating lease payments (in thousands) at December 31, 1993
are:
<TABLE>
<S> <C>
1994.......................................................... $ 76,039
1995.......................................................... 76,550
1996.......................................................... 76,474
1997.......................................................... 76,402
1998.......................................................... 76,321
Later years................................................... 1,254,248
----------
Total minimum lease payments................................ $1,636,034
==========
</TABLE>
F-24
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1993, 1992 AND 1991
(9)LEASE COMMITMENTS--(CONTINUED)
Operating lease expense, inclusive of PVNGS, was approximately $80.6 million
in 1993, $91.1 million in 1992 and $96.8 million in 1991. The aggregate minimum
payments to be received in future periods under noncancelable subleases are
approximately $7.6 million.
(10)ENVIRONMENTAL ISSUES AND FOSSIL-FUELED PLANT DECOMMISSIONING COSTS
The Company has evaluated the potential impacts of the following
environmental issues. The Company believes, after consideration of established
reserves, that the ultimate outcome of these environmental issues will not have
a material adverse effect on the Company's financial condition or results of
operations.
Environmental Issues--Gas
Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA")
Two CERCLA 104(e) orders were received from the United States Environmental
Protection Agency ("EPA") in late December 1993 requesting information
regarding shipment of wastes to the Lee Acres Landfill, located on Bureau of
Land Management ("BLM") land near the city of Bloomfield in San Juan County,
New Mexico. The landfill is currently listed on the National Priorities List as
a superfund site. Gas Company of New Mexico, a division of the Company ("GCNM")
and Sunterra Gas Gathering Company, a wholly-owned subsidiary of the Company
("Gathering Company") have assessed their records and other information to
determine whether wastes were ever shipped from their facilities to the
landfill during the period when they owned and operated the natural gas
facilities. GCNM and Gathering Company's assessment indicated that no hazardous
wastes or cause of such wastes were shipped from their facilities to the
landfill during this time period. Nonetheless, GCNM and Gathering Company could
be determined to be potentially responsible parties if the EPA determines GCNM
and Gathering Company shipped wastes to the site, and could be asked or
compelled to provide funds for site cleanup. GCNM and Gathering Company
prepared and submitted their response to the EPA on March 8, 1994.
Toxic Substances Control Act ("TSCA")
TSCA requires manufacturers and importers of organic chemicals, including
natural gas substances, to report a listing and quantity of certain toxic
chemicals to the EPA every four years. Naturally occurring substances such as
crude oil and unprocessed natural gas need not be reported. Due to the natural
gas industry's interpretation on when unprocessed natural gas becomes a
reportable substance, GCNM and Processing Company did not report TSCA
substances to the EPA in prior reporting years 1986 and 1990. As a result of
the EPA's clarification on the limited scope of the exemption, GCNM and
Processing Company now have filed their reports for 1986 and 1990 and will
report such substances to the EPA in the 1994 reporting year. The maximum
penalty allowed under the statute is $25,000/day for every day the report has
not been filed. The companies may be subject to administrative fines/penalties
for their failure to report in 1986 and 1990.
Gas Wellhead Pit Remediation
Effective September 1992, the New Mexico Oil Conservation Division ("OCD")
issued a ruling which affects GCNM and Gathering Company's natural gas
gathering facilities located in the northwestern part of New Mexico. The ruling
prohibits the further discharge of fluids associated with the production of
natural gas into unlined open pits in certain areas, deemed environmentally
sensitive due to their proximity to fresh water supplies. In addition to the
cessation of the discharge of fluids, the ruling requires that GCNM and
Gathering Company remediate the areas where discharges have contaminated fresh
water supplies. GCNM has submitted generic closure plans for the pits, which
have been approved by OCD and the BLM.
F-25
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1993, 1992 AND 1991
(10)ENVIRONMENTAL ISSUES AND FOSSIL-FUELED PLANT DECOMMISSIONING COSTS--
(CONTINUED)
Air Permits
A recent environmental audit, associated with the Company's proposed sale of
certain gas assets, brought to light certain discrepancies regarding required
air permits associated with certain natural gas facilities. The audit
identified a total of thirteen facilities containing discrepancies. The vast
majority of the discrepancies are minor in nature and include discrepancies in
record keeping, equipment identification and inaccurate information in air
permit applications. The discrepancies at three of the facilities involve
permit issuance and modification and are more serious in nature. The Company is
subject to administrative fines/penalties by the New Mexico Environment
Department ("NMED") for these discrepancies.
The Company plans to meet with the NMED in March 1994 to discuss the nature
of the permit discrepancies and to propose methods and schedules to resolve the
discrepancies. The resolution process will include the filing of permit
applications, modifications and revisions where necessary. After reviewing the
applications, NMED will determine whether to grant the application,
modification or revision and make a determination whether to impose any
fines/penalties.
The CERCLA, air permits and gas wellhead pit remediation issues previously
discussed are part of the retained environmental liabilities under the sale
agreement with Williams Gas Processing--Blanco, Inc. ("Williams"), a subsidiary
of the Williams Field Services Group, Inc. of Tulsa, Oklahoma. (See note 11.)
Environmental Issue--Electric
Included in the estimate of $24.4 million to decommission the Company's
retired fossil-fuel plants is approximately $17.2 million for a groundwater
remediation program at Person Station. The Company, in compliance with a New
Mexico Environment Action Directive, has determined that ground water
contamination exists in the deep and shallow water aquifers. The Company is
required to delineate the extent of the contamination and remediate the
contaminant in the ground water. The extent of the contaminant plume in the
deep water aquifer is not currently known, and the estimate assumes that the
deep ground water plume can be easily delineated with a minimum number of
monitoring wells. As part of the financial assurance requirements of the Person
Station Hazardous Waste Permit, the Company posted a $3.7 million performance
bond with a trustee. The remediation program continues to be on schedule and
the Company does not anticipate any material adverse impact on its financial
condition or the results of operations with respect to the remediation program.
Fossil-Fueled Plant Decommissioning Costs
The Company's six owned or partially owned in service and retired fossil-
fueled generating stations are expected to incur dismantling and reclamation
costs as they are decommissioned. The Company's share of decommissioning costs
for all of its fossil-fueled generating stations is projected to be
approximately $126 million stated in 1992 dollars, including approximately $24
million for the Person, Prager and Santa Fe Stations, which have been retired.
In June of 1993, the Company filed for recovery of all estimated
decommissioning costs by factoring them into its depreciation rates included in
the Company's depreciation rate study filed with the NMPUC.
As previously discussed, the Company and the interested parties entered into
the January 12, 1994 stipulation. The stipulation affirms the Company's right
to recover all fair, just and reasonable costs arising
F-26
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1993, 1992 AND 1991
(10)ENVIRONMENTAL ISSUES AND FOSSIL-FUELED PLANT DECOMMISSIONING COSTS--
(CONTINUED)
from the decommissioning of its fossil-fueled generating plants in service,
including demolition, waste disposal, environmental and site restoration. The
stipulation also resolves the issues of decertification and decommissioning of
the Company's three retired fossil-fueled generating stations resulting in the
Company foregoing recovery of the first $24.4 million of decommissioning costs
associated with these stations. The stipulation is subject to NMPUC approval.
(11)ASSET SALES
Sale of Gas Gathering and Processing Assets
On January 11, 1993, the Company announced its intention to dispose of the
Company's natural gas gathering and natural gas processing assets. A purchaser
has now been selected following a competitive bidding process.
On February 12, 1994, an agreement was executed with Williams for the sale of
substantially all of the assets of Gathering Company and Sunterra Gas
Processing Company, a wholly-owned subsidiary of the Company and for the sale
of the Northwest and Southeast gas gathering and processing facilities of GCNM.
The agreement provides for a cash selling price of $155 million, subject to
certain adjustments. In addition, the Company and Williams entered into
agreements for gas gathering and processing services, which the Company
believes to be competitively priced, to be provided by Williams on the
facilities being sold for a period up to 15 years. The transaction is subject
to applicable waiting periods under the Federal Hart-Scott-Rodino Antitrust
Improvements Act of 1976 and subject to approval by the NMPUC. If approved, the
closing is expected to take place in 1995. The closing is also subject to other
customary closing conditions, such as obtaining necessary material consents
from lenders and other third parties.
Under the sale agreement, the Company agreed to retain certain liabilities
pertaining to the assets being sold, including certain environmental
liabilities. Such retained environmental liabilities include liabilities under
environmental laws as of closing associated with (i) the mercury meter
remediation project, (ii) identified friable asbestos, (iii) environmental
permits required by various agencies, and (iv) pits at certain abandoned
compressor sites. The Company's retained environmental liabilities also include
liabilities associated with certain unlined disposal pits subject to an
existing New Mexico Oil Conservation Division order. The Company has also
agreed to retain liability for a portion of potential liabilities relating to a
contaminated landfill that has been declared a Federal superfund site. Further,
the Company agreed to indemnify Williams against other third party
environmental claims arising from pre-closing ownership, operations or
conditions and for breaches of environmental representations and warranties for
a period of five years after closing in an amount up to $10.6 million. The
Company's retained environmental liabilities described above are not subject to
the $10.6 million cap. The Company has evaluated the potential impact of the
above retained environmental liabilities. The Company believes, after
consideration of established reserves, that the ultimate outcome of these
environmental issues will not have a material adverse effect on the Company's
financial condition or results of operations. The Company intends to offset
costs associated with the environmental liabilities with proceeds from the
sale.
Under the agreement, the Company also agreed to indemnify Williams, subject
to equal sharing of the first $1.5 million (i) against third party claims
(other than environmental) arising from pre-closing ownership, operations and
conditions for a period of two years after closing, (ii) for breaches of other
customary
F-27
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1993, 1992 AND 1991
(11)ASSET SALES--(CONTINUED)
representations and warranties for a period of two years from the date of
closing, and (iii) for 30 days past the applicable statute of limitations for
breaches of the Company's tax representations. The Company also agreed to
indemnify Williams for three years after closing for third party claims
relating to certain property rights. Under the agreement, the Company will,
subject to prior NMPUC approval, guarantee the obligations of its subsidiaries
which are parties to the agreement.
The book value of the facilities being sold, plus regulatory assets and
deferred charges, is expected to be approximately $85 million. In addition, the
Company expects approximately $8 million to be incurred for transaction and
other ascertainable costs prior to closing. The Company anticipates that a
significant amount of income tax will become payable as a result of this
transaction.
Also, the NMPUC will determine the allocation of the resulting gain between
the Company's gas customers and shareholders. Therefore, the Company is not
able at this time to estimate the amount of any gain that would be allocated to
shareholders.
The Company believes that the sale of these assets will improve its
flexibility to take advantage of changing market conditions while maintaining
continued access to competitively priced, reliable and secure long-term gas
supplies.
Sale of Sangre de Cristo Water Company
On July 29, 1993, Santa Fe city officials announced a verbal agreement under
which the City of Santa Fe ("Santa Fe") would purchase the Sangre de Cristo
Water Company ("SDCW"), a division of the Company. Under the verbal agreement,
the Company would receive approximately $48 million for its water utility
division. The proposed agreement excluded from the sale certain Santa Fe area
real estate which the Company would either sell or trade separately. The
Company would also continue to operate the water utility for up to four years
for a fee under a proposed contract with Santa Fe. The Company's board of
directors authorized the sale on January 11, 1994. On February 23, 1994, the
Santa Fe City Council authorized the sales transaction, and the Company and
Santa Fe signed a purchase and sale agreement on February 28, 1994. The Company
anticipates filing for regulatory approvals in March 1994. Consummation of a
sale will require approval by the NMPUC. The Company expects to consummate the
sale by the end of 1994.
F-28
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1993, 1992 AND 1991
(12)SEGMENT INFORMATION
The financial information pertaining to the Company's electric, gas (see note
1) and other operations for the years ended December 31, 1993, 1992 and 1991
are as follows:
<TABLE>
<CAPTION>
ELECTRIC* GAS OTHER TOTAL
---------- -------- ------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
1993:
Operating revenues.................... $ 589,728 $271,087 $13,063 $ 873,878
Operating expenses excluding income
taxes................................ 467,659 239,859 7,355 714,873
---------- -------- ------- ----------
Pre-tax operating income.............. 122,069 31,228 5,708 159,005
Operating income tax.................. 19,184 5,347 1,190 25,721
---------- -------- ------- ----------
Operating income...................... $ 102,885 $ 25,881 $ 4,518 $ 133,284
========== ======== ======= ==========
Depreciation and amortization expense. $ 59,298 $ 16,859 $ 1,169 $ 77,326
========== ======== ======= ==========
Construction expenditures............. $ 67,886 $ 26,593 $ 2,847 $ 97,326
========== ======== ======= ==========
Identifiable assets:
Net utility plant.................... $1,324,110 $333,862 $45,960 $1,703,932
Other................................ 257,153 240,908 10,196 508,257
---------- -------- ------- ----------
Total assets....................... $1,581,263 $574,770 $56,156 $2,212,189
========== ======== ======= ==========
1992:
Operating revenues.................... $ 596,323 $243,159 $12,471 $ 851,953
Operating expenses excluding income
taxes................................ 513,919 203,129 6,079 723,127
---------- -------- ------- ----------
Pre-tax operating income.............. 82,404 40,030 6,392 128,826
Operating income tax.................. 7,138 7,879 1,874 16,891
---------- -------- ------- ----------
Operating income...................... $ 75,266 $ 32,151 $ 4,518 $ 111,935
========== ======== ======= ==========
Depreciation and amortization expense. $ 61,832 $ 16,290 $ 1,134 $ 79,256
========== ======== ======= ==========
Construction expenditures............. $ 51,924 $ 25,461 $17,410 $ 94,795
========== ======== ======= ==========
Identifiable assets:
Net utility plant.................... $1,513,224 $317,341 $46,496 $1,877,061
Other................................ 275,775 210,791 11,955 498,521
---------- -------- ------- ----------
Total assets....................... $1,788,999 $528,132 $58,451 $2,375,582
========== ======== ======= ==========
1991:
Operating revenues.................... $ 568,486 $277,069 $11,613 $ 857,168
Operating expenses excluding income
taxes................................ 503,428 236,403 6,273 746,104
---------- -------- ------- ----------
Pre-tax operating income.............. 65,058 40,666 5,340 111,064
Operating income tax.................. 2,114 10,222 1,475 13,811
---------- -------- ------- ----------
Operating income...................... $ 62,944 $ 30,444 $ 3,865 $ 97,253
========== ======== ======= ==========
Depreciation and amortization expense. $ 59,469 $ 15,452 $ 1,132 $ 76,053
========== ======== ======= ==========
Construction expenditures............. $ 54,431 $ 24,620 $ 8,520 $ 87,571
========== ======== ======= ==========
Identifiable assets:
Net utility plant.................... $1,554,776 $306,655 $43,882 $1,905,313
Other................................ 254,157 167,669 17,193 439,019
---------- -------- ------- ----------
Total assets....................... $1,808,933 $474,324 $61,075 $2,344,332
========== ======== ======= ==========
</TABLE>
- --------
* Includes the resources excluded from NMPUC regulation (see note 2).
F-29
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1993, 1992 AND 1991
(12)SEGMENT INFORMATION--(CONTINUED)
On January 11, 1993, the Company announced its intention to dispose of SDCW
and all or major portions of the natural gas gathering and natural gas
processing assets (see note 2). Such sales require NMPUC approval.
(13)SUPPLEMENTAL INCOME STATEMENT INFORMATION
Taxes, other than income taxes, charged to operating expenses were as
follows:
<TABLE>
<CAPTION>
1993 1992 1991
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Ad valorem.............................................. $20,413 $21,211 $19,809
City franchise.......................................... 7,457 7,242 6,983
Payroll................................................. 8,807 7,736 7,938
Other................................................... 3,412 4,390 4,484
------- ------- -------
Total................................................. $40,089 $40,579 $39,214
======= ======= =======
</TABLE>
Amortization of intangibles, royalties, and advertising costs were less than
1% of revenues in each of the above periods.
F-30
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
SCHEDULE V--PROPERTY, PLANT AND EQUIPMENT
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<TABLE>
<CAPTION>
BALANCE AT OTHER CHANGES
CLASSIFICATION BEGINNING ADDITIONS ----------------- BALANCE AT
DECEMBER 31, 1993 OF YEAR AT COST RETIREMENTS ADD DEDUCT END OF YEAR
----------------- ---------- --------- ----------- ------ --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Utility plant:
Electric plant in
sevice:
Intangible............ $ 28,344 $ 1,757 $ 3,012 $ -- $ 2,134 $ 24,955
Production............ 1,208,465 15,079 -- -- 177,644 1,045,900
Transmission.......... 220,074 -- -- -- 3,913 216,161
Distribution.......... 416,726 6,892 611 40 120 422,927
General............... 70,988 1,180 -- -- 4,323 67,845
Acquisition
adjustment........... 40,600 -- -- -- 29,288 11,312
---------- ------- ------- ------ --------- ----------
1,985,197 24,908 3,623 40 217,422 1,789,100
---------- ------- ------- ------ --------- ----------
Gas plant in service:
Intangible............ 14,939 187 -- 240 -- 15,366
Production............ 113,638 1,126 5 193 -- 114,952
Natural gas storage... 4,804 -- -- -- -- 4,804
Transmission.......... 74,101 3,881 100 1 -- 77,883
Distribution.......... 234,335 15,692 154 1 -- 249,874
General............... 43,820 5,493 572 -- 93 48,648
---------- ------- ------- ------ --------- ----------
485,637 26,379 831 435 93 511,527
---------- ------- ------- ------ --------- ----------
Water plant in service:
Intangible............ 151 -- -- -- -- 151
Source of supply
plant................ 9,400 -- -- -- 68 9,332
Pumping plant......... 3,599 -- -- -- 1,221 2,378
Water treatment plant. 4,038 -- -- 1 -- 4,039
Transmission and
distribution......... 36,476 -- -- 34 226 36,284
General............... 2,155 -- -- -- 14 2,141
---------- ------- ------- ------ --------- ----------
55,819 -- -- 35 1,529 54,325
---------- ------- ------- ------ --------- ----------
Common plant in
service:
Intangible............ 11,152 7,230 736 -- -- 17,646
General............... 25,358 2,180 -- 2,397 -- 29,935
---------- ------- ------- ------ --------- ----------
36,510 9,410 736 2,397 -- 47,581
---------- ------- ------- ------ --------- ----------
Construction work in
progress............... 87,547 23,953 -- 1,494 3,661 109,333
Electric plant held for
future use............. 1,258 -- -- 255 1,138 375
Nuclear fuel............ 63,306 11,801 6,694 -- 63 68,350
---------- ------- ------- ------ --------- ----------
Total utility plant.. 2,715,274 96,451 11,884 4,656 223,906 2,580,591
Non-utility property.... 10,266 875 8 -- 3,535 7,598
---------- ------- ------- ------ --------- ----------
Total property, plant
and equipment....... $2,725,540 $97,326 $11,892 $4,656 $ 227,441 $2,588,189
========== ======= ======= ====== ========= ==========
<CAPTION>
DESCRIPTION OF OTHER
CHANGES
--------------------
<S> <C> <C>
Transfers between accounts............................... $4,059 $ 4,059
Write-down of PVNGS Units 1 and 2 Purchased.............. -- 156,196
Sale of SJGS Unit 4 (50MW) to City of Anaheim............ -- 59,810
Miscellaneous corrections and adjustments................ 597 7,376
------ ---------
$4,656 $227,441
====== =========
</TABLE>
(continued)
F-31
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
SCHEDULE V--PROPERTY, PLANT AND EQUIPMENT--(CONTINUED)
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<TABLE>
<CAPTION>
BALANCE AT OTHER CHANGES
CLASSIFICATION BEGINNING ADDITIONS ------------------ BALANCE AT
DECEMBER 31, 1992 OF YEAR AT COST RETIREMENTS ADD DEDUCT END OF YEAR
----------------- ---------- --------- ----------- -------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Utility plant:
Electric plant in
service:
Intangible............ $ 29,265 $ 706 $ 374 $ 1,383 $ 2,636 $ 28,344
Production............ 1,264,361 10,683 8,581 142,847 200,845 1,208,465
Transmission.......... 221,892 316 771 220 1,583 220,074
Distribution.......... 402,733 18,670 2,504 378 2,551 416,726
General............... 72,531 845 1,461 158 1,085 70,988
Acquisition
adjustment........... -- -- -- 40,600 -- 40,600
---------- ------- ------- -------- --------- ----------
1,990,782 31,220 13,691 185,586 208,700 1,985,197
---------- ------- ------- -------- --------- ----------
Gas plant in service:
Intangible............ 14,835 54 1 51 -- 14,939
Production............ 111,068 2,911 438 108 11 113,638
Natural gas storage... 4,804 -- -- -- -- 4,804
Transmission.......... 68,476 5,678 69 16 -- 74,101
Distribution.......... 223,108 12,186 934 -- 25 234,335
General............... 43,183 2,448 1,788 30 53 43,820
---------- ------- ------- -------- --------- ----------
465,474 23,277 3,230 205 89 485,637
---------- ------- ------- -------- --------- ----------
Water plant in service:
Intangible............ 190 -- -- -- 39 151
Source of supply
plant................ 8,729 632 -- 39 -- 9,400
Pumping plant......... 2,402 1,197 -- -- -- 3,599
Water treatment plant. 4,038 -- -- -- -- 4,038
Transmission and
distribution......... 35,620 892 37 1 -- 36,476
General............... 2,190 26 61 -- -- 2,155
---------- ------- ------- -------- --------- ----------
53,169 2,747 98 40 39 55,819
---------- ------- ------- -------- --------- ----------
Common plant in serv-
ice:
Intangible............ 12,284 6,384 7,515 -- 1 11,152
General............... 25,425 2,290 2,759 403 1 25,358
---------- ------- ------- -------- --------- ----------
37,709 8,674 10,274 403 2 36,510
---------- ------- ------- -------- --------- ----------
Construction work in
progress.............. 75,007 18,850 -- -- 6,310 87,547
Electric plant held for
future use............ 1,258 -- -- -- -- 1,258
Nuclear fuel........... 76,367 9,651 22,712 -- -- 63,306
---------- ------- ------- -------- --------- ----------
Total utility plant.. 2,699,766 94,419 50,005 186,234 215,140 2,715,274
Non-utility property.... 11,896 376 22 2,678 4,662 10,266
---------- ------- ------- -------- --------- ----------
Total property, plant
and equipment....... $2,711,662 $94,795 $50,027 $188,912 $ 219,802 $2,725,540
========== ======= ======= ======== ========= ==========
<CAPTION>
DESCRIPTION OF OTHER
CHANGES
--------------------
<S> <C> <C>
Transfers between accounts............................... $ 514 $ 514
Transfers of expired contract deposits to plant in serv-
ice..................................................... -- 2,258
Purchase of 22% beneficial interests in the PVNGS Units 1
and 2 leases 184,424 --
Write-down of PVNGS Unit 3............................... -- 210,722
Write-down of non-utility property....................... -- 3,418
Miscellaneous corrections and adjustments................ 3,974 2,890
-------- ---------
$188,912 $219,802
======== =========
</TABLE>
(continued)
F-32
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
SCHEDULE V--PROPERTY, PLANT AND EQUIPMENT--(CONTINUED)
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<TABLE>
<CAPTION>
BALANCE AT OTHER CHANGES
CLASSIFICATION BEGINNING ADDITIONS ------------- BALANCE AT
DECEMBER 31, 1991 OF YEAR AT COST RETIREMENTS ADD DEDUCT END OF YEAR
----------------- ---------- --------- ----------- ------ ------ -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Utility plant:
Electric plant in
sevice:
Intangible............ $ 31,024 $ 1,862 $ 26 $ 4 $3,599 $ 29,265
Production............ 1,235,215 28,015 1,099 2,230 -- 1,264,361
Transmission.......... 215,430 7,068 666 141 81 221,892
Distribution.......... 390,470 15,326 2,628 215 650 402,733
General............... 66,104 6,420 277 303 19 72,531
---------- ------- ------- ------ ------ ----------
1,938,243 58,691 4,696 2,893 4,349 1,990,782
---------- ------- ------- ------ ------ ----------
Gas plant in service:
Intangible............ 9,479 5,362 -- 5 11 14,835
Production............ 110,189 679 315 515 -- 111,068
Natural gas storage... 4,761 -- -- 43 -- 4,804
Transmission.......... 66,969 1,023 161 645 -- 68,476
Distribution.......... 214,717 8,920 1,622 1,093 -- 223,108
General............... 39,699 3,994 711 201 -- 43,183
---------- ------- ------- ------ ------ ----------
445,814 19,978 2,809 2,502 11 465,474
---------- ------- ------- ------ ------ ----------
Water plant in service:
Intangible............ 151 39 -- -- -- 190
Source of supply
plant................ 7,510 938 -- 281 -- 8,729
Pumping plant......... 2,375 27 -- -- -- 2,402
Water treatment plant. 4,038 -- -- -- -- 4,038
Transmission and
distribution......... 33,721 1,975 75 -- 1 35,620
General............... 2,151 39 -- -- -- 2,190
---------- ------- ------- ------ ------ ----------
49,946 3,018 75 281 1 53,169
---------- ------- ------- ------ ------ ----------
Common plant in
service:
Intangible............ 18,364 1,661 7,741 -- -- 12,284
General............... 21,721 4,093 356 -- 33 25,425
---------- ------- ------- ------ ------ ----------
40,085 5,754 8,097 -- 33 37,709
---------- ------- ------- ------ ------ ----------
Construction work in
progress............... 86,127 (11,120) -- -- -- 75,007
Electric plant held for
future use............. 1,258 -- -- -- -- 1,258
Nuclear fuel............ 77,475 9,981 8,019 47 3,117 76,367
---------- ------- ------- ------ ------ ----------
Total utility plant.. 2,638,948 86,302 23,696 5,723 7,511 2,699,766
Non-utility property.... 10,687 1,269 207 665 518 11,896
---------- ------- ------- ------ ------ ----------
Total property, plant
and equipment....... $2,649,635 $87,571 $23,903 $6,388 $8,029 $2,711,662
========== ======= ======= ====== ====== ==========
<CAPTION>
DESCRIPTION OF OTHER
CHANGES
--------------------
<S> <C> <C>
Transfers between accounts............................... $ 32 $ 32
Transfers of expired contract deposits to plant in serv-
ice..................................................... -- 496
Transfers of termination fees to deferred debits......... -- 2,685
Miscellaneous corrections and adjustments................ 6,356 4,816
------ ------
$6,388 $8,029
====== ======
</TABLE>
F-33
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
SCHEDULE VI--ACCUMULATED DEPRECIATION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<TABLE>
<CAPTION>
ADDITIONS
---------------------
BALANCE AT CHARGED TO CHARGED TO OTHER CHANGES BALANCE
DESCRIPTION BEGINNING OPERATING OTHER -------------- AT END
DECEMBER 31, 1993 OF YEAR EXPENSES ACCOUNTS RETIREMENTS ADD DEDUCT OF YEAR
----------------- ---------- ---------- ---------- ----------- ------ ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Utility plant:
Accumulated provision
for depreciation of
utility plant:
Electric plant in
service.............. $599,256 $55,698 $ 619 $ 719 $ 186 $41,744 $613,296
Gas plant in service.. 173,617 14,351 1,037 772 1,022 459 188,796
Water plant in
service.............. 12,437 1,338 43 -- -- 4 13,814
Common plant in
service.............. 7,998 755 1,309 -- 324 -- 10,386
-------- ------- ------- ------- ------ ------- --------
793,308 72,142 3,008 1,491 1,532 42,207 826,292
Accumulated provision
for amortization of
intangible assets--
franchises and computer
software............... 20,208 6,135 -- 3,747 624 2,441 20,779
Accumulated provision
for amortization of
nuclear fuel........... 25,476 -- 11,643 6,694 -- -- 30,425
Retirement work in pro-
gress.................. (779) -- -- (8) -- 68 (839)
-------- ------- ------- ------- ------ ------- --------
Total utility plant.. 838,213 78,277 14,651 11,924 2,156 44,716 876,657
Non-utility property.... 897 -- 218 8 3 -- 1,110
-------- ------- ------- ------- ------ ------- --------
$839,110 78,277 $14,869 $11,932 $2,159 $44,716 $877,767
======== ======= ======= ====== ======= ========
Other................... (951)
-------
$77,326
=======
<CAPTION>
DESCRIPTION OF OTHER ADDITIONS AND CHANGES
------------------------------------------
<S> <C> <C> <C> <C> <C>
Depreciation and amortization of equipment
charged to clearing accounts for distribution
in accordance with use....................... $ 3,008 $ -- $ --
Amortization of nuclear fuel charged to fuel
and purchased power ......................... 11,643 -- --
Depreciation of non-utility property charged
to other income and deductions............... 218 -- --
Transfers between accounts.................... -- 1,349 1,349
Write-down of PVNGS Units 1 & 2 purchased..... -- -- 24,629
Sale of SJGS Unit 4 (50 MW) to City of Ana-
heim......................................... -- -- 17,783
Miscellaneous corrections and adjustments..... -- 810 955
------- ------ -------
$14,869 $2,159 $44,716
======= ====== =======
</TABLE>
(continued)
F-34
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
SCHEDULE VI--ACCUMULATED DEPRECIATION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT--(CONTINUED)
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<TABLE>
<CAPTION>
ADDITIONS
------------------
BALANCE CHARGED
AT TO CHARGED OTHER CHANGES BALANCE
DESCRIPTION BEGINNING OPERATING TO OTHER ---------------- AT END
DECEMBER 31, 1992 OF YEAR EXPENSES ACCOUNTS RETIREMENTS ADD DEDUCT OF YEAR
----------------- --------- --------- -------- ----------- ------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Utility plant:
Accumulated provision
for depreciation of
utility plant:
Electric plant in
service.............. $556,954 $58,165 $ 583 $13,727 $27,374 $30,093 $599,256
Gas plant in service.. 163,034 12,378 797 2,558 -- 34 173,617
Water plant in
service.............. 11,197 1,310 43 115 2 -- 12,437
Common plant in
service.............. 13,068 1,203 797 7,096 74 48 7,998
-------- ------- ------- ------- ------- ------- --------
744,253 73,056 2,220 23,496 27,450 30,175 793,308
Accumulated provision
for amortization of
intangible assets--
franchises and computer
software............... 17,847 6,554 30 4,195 -- 28 20,208
Accumulated provision
for amortization of
nuclear fuel........... 34,273 -- 13,915 22,712 -- -- 25,476
Retirement work in
progress............... (1,920) -- -- (1,302) 3 164 (779)
-------- ------- ------- ------- ------- ------- --------
Total utility plant. 794,453 79,610 16,165 49,101 27,453 30,367 838,213
Non-utility property.... 856 -- 41 -- -- -- 897
-------- ------- ------- ------- ------- ------- --------
$795,309 79,610 $16,206 $49,101 $27,453 $30,367 $839,110
======== ======= ======= ======= ======= ========
Other................... (354)
-------
$79,256
=======
<CAPTION>
DESCRIPTION OF OTHER ADDITIONS AND
CHANGES
- ----------------------------------
<S> <C> <C> <C> <C> <C>
Depreciation and amortization of equipment
charged to clearing accounts for
distribution in accordance with use........ $2,250 $ -- $ --
Amortization of nuclear fuel charged to fuel
and purchased power........................ 13,915 -- --
Depreciation of non-utility property charged
to other income and deductions............. 41 -- --
Purchase of 22% beneficial interests in the
PVNGS Units 1 and 2 leases................. -- 26,565 --
Write-down of PVNGS Unit 3.................. -- -- 29,397
Transfers between accounts.................. -- 351 351
Miscellaneous corrections and adjustments... -- 537 619
------- ------- -------
$16,206 $27,453 $30,367
======= ======= =======
</TABLE>
(continued)
F-35
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
SCHEDULE VI--ACCUMULATED DEPRECIATION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT--(CONTINUED)
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<TABLE>
<CAPTION>
ADDITIONS
------------------
BALANCE CHARGED
AT TO CHARGED OTHER CHANGES BALANCE
DESCRIPTION BEGINNING OPERATING TO OTHER ---------------- AT END
DECEMBER 31, 1991 OF YEAR EXPENSES ACCOUNTS RETIREMENTS ADD DEDUCT OF YEAR
----------------- --------- --------- -------- ----------- ------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Utility plant:
Accumulated provision
for depreciation of
utility plant:
Electric plant in
service.............. $506,490 $55,108 $ 552 $ 4,690 $ 1,600 $ 2,106 $556,954
Gas plant in service.. 149,132 12,796 934 (207) -- 35 163,034
Water plant in
service.............. 9,722 1,251 43 79 282 22 11,197
Common plant in
service.............. 10,930 1,880 624 357 12 21 13,068
-------- ------- -------- ------- ------- ------- --------
676,274 71,035 2,153 4,919 1,894 2,184 744,253
Accumulated provision
for amortization of
intangible
assets--franchises and
computer software...... 20,196 5,430 119 7,767 29 160 17,847
Accumulated provision
for amortization of
nuclear fuel........... 26,743 -- 15,549 8,019 -- -- 34,273
Retirement work in
progress............... 1,274 -- -- 3,194 -- -- (1,920)
-------- ------- -------- ------- ------- ------- --------
Total utility plant. 724,487 76,465 17,821 23,899 1,923 2,344 794,453
Non-utility property.... 818 -- 41 3 -- -- 856
-------- ------- -------- ------- ------- ------- --------
$725,305 76,465 $ 17,862 $23,902 $ 1,923 $ 2,344 $795,309
======== ======== ======= ======= ======= ========
Other................... (412)
-------
$76,053
=======
<CAPTION>
DESCRIPTION OF OTHER ADDITIONS AND
CHANGES
- ----------------------------------
<S> <C> <C> <C> <C> <C>
Depreciation and amortization of equipment
charged to clearing accounts for
distribution in accordance with use........ $ 2,272 $ -- $ --
Amortization of nuclear fuel charged to fuel
and
purchased power............................ 15,549 -- --
Depreciation of non-utility property charged
to other income and deductions............. 41 -- --
Transfers between accounts.................. -- 21 21
Miscellaneous corrections and adjustments... -- 1,902 2,323
-------- ------- -------
$17,862 $ 1,923 $ 2,344
======== ======= =======
</TABLE>
F-36
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
SCHEDULE IX--SHORT-TERM BORROWINGS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<TABLE>
<CAPTION>
WEIGHTED MAXIMUM AVERAGE AVERAGE
AVERAGE AMOUNT AMOUNT INTEREST
BALANCE AT INTEREST OUTSTANDING OUTSTANDING RATE
CATEGORY OF AGGREGATE END OF RATE AT END DURING THE DURING THE DURING THE
SHORT-TERM BORROWINGS YEAR OF YEAR YEAR YEAR YEAR
- --------------------- ---------- ----------- ----------- ----------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
December 31, 1993:
Notes payable to
banks................ -- -- $109,000 $51,090 4.75%
December 31, 1992:
Notes payable to
banks................ $51,550 4.46% $ 75,000 $45,908 5.03%
December 31, 1991:
Notes payable to
banks................ $13,000 6.05% $ 37,300 $24,324 7.63%
</TABLE>
- --------
The average amount outstanding during the year is calculated by using average
monthly balances. The average interest rate during the year is calculated by
dividing average interest expense by the average amount outstanding during the
year.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
F-37
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
QUARTERLY OPERATING RESULTS
The unaudited operating results by quarters for 1993 and 1992 are as follows:
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- -------- ------------ -----------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
1993:
Operating Revenues................ $248,558 $190,828 $203,751 $ 230,741
Operating Income.................. $ 26,351 $ 30,679 $ 37,895 $ 38,359
Net Earnings (Loss) (1)........... $ 11,960 $ 5,653 $ 23,946 $(103,045)
Net Earnings (Loss) per Share (1). $ 0.25 $ 0.09 $ 0.53 $ (2.51)
1992:(2)
Operating Revenues................ $236,778 $189,452 $206,273 $ 219,450
Operating Income.................. $ 32,047 $ 20,855 $ 29,094 $ 29,935
Net Earnings (Loss) (3)........... $ 16,183 $ 5,081 $ 8,482 $(134,001)
Net Earnings (Loss) per Share (3). $ 0.34 $ 0.08 $ 0.16 $ (3.25)
</TABLE>
In the opinion of management of the Company, all adjustments (consisting of
normal recurring accruals) necessary for a fair statement of the results of
operations for such periods have been included.
- --------
(1) On January 12, 1994, the Company and the NMPUC staff and the interested
parties entered into a stipulation which addresses retail electric prices,
generation assets and the financial concerns of the Company. The Company
filed the stipulation with the NMPUC, recommending that electric retail
rates be reduced by $30 million. This reduction is accomplished primarily
through the write-down of the 22% beneficial interests in the PVNGS Units 1
& 2 leases purchased by the Company, the write-off of certain regulatory
assets and other deferred costs, the write-off of certain PVNGS Units 1 & 2
common costs and the Company's previously announced cost reduction efforts.
In connection with the stipulation, the Company has charged approximately
$108.2 million, after-tax, to the 1993 results of operations. (See PART II,
ITEM 7. --"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS--January 12, 1994 Stipulation".)
(2) To provide a better matching of the Company's revenues from sales with the
related costs, effective January 1, 1992, the Company changed its method of
accounting to record estimated revenues from sales of utility services
provided subsequent to monthly billing cycle dates but prior to the end of
the accounting period. The cumulative effect of this accounting change as
of January 1, 1992, net of income taxes, was $12.7 million and has been
reflected in the above schedule in the quarter ended December 31 in its
entirety. The effect of this change has not been reflected in each quarter
as it would not cause a material difference. See note 1 of notes to
consolidated financial statements.
(3) On January 11, 1993, the Company announced specific actions which were
determined to be necessary in order to accelerate the Company's preparation
for the new challenges in the competitive energy market. One element of the
January 11, 1993 announcement was the decision to attempt to sell PVNGS
Unit 3. As a result of such decision the Company has estimated the net
realizable value of PVNGS Unit 3 and the M-S-R power purchase contract, and
recorded an after-tax loss of $126.2 million at December 31, 1992. In
addition, during the fourth quarter of 1992, the Company recorded a write-
down of other charges, aggregating $15.9 million, net of taxes. (See PART
II, ITEM 7. --"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS".)
F-38
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
COMPARATIVE OPERATING STATISTICS
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
ELECTRIC SERVICE
Energy Sales--KWh (in
thousands):
Residential............ 1,683,213 1,650,491 1,606,993 1,575,622 1,527,108
Commercial............. 2,398,725 2,353,152 2,299,213 2,270,380 2,203,037
Industrial............. 1,145,369 1,087,357 1,025,420 999,823 961,251
Other ultimate
customers............. 219,481 267,246 208,328 203,005 218,196
---------- ---------- ---------- ---------- ----------
Total sales to
ultimate customers... 5,446,788 5,358,246 5,139,954 5,048,830 4,909,592
Sales for resale....... 3,375,216 3,685,418 3,091,541 3,497,506 3,832,016
---------- ---------- ---------- ---------- ----------
Total KWh sales....... 8,822,004 9,043,664 8,231,495 8,546,336 8,741,608
========== ========== ========== ========== ==========
Electric Revenues (in
thousands):
Residential............ $ 163,131 $ 158,190 $ 155,162 $ 147,059 $ 141,465
Commercial............. 218,263 211,086 207,929 200,041 192,273
Industrial............. 74,157 69,590 67,031 66,351 64,519
Other ultimate
customers............. 15,548 16,521 14,472 14,054 15,387
---------- ---------- ---------- ---------- ----------
Total revenues to
ultimate customers... 471,099 455,387 444,594 427,505 413,644
Sales for resale....... 99,895* 123,291 107,636 122,431 204,763
---------- ---------- ---------- ---------- ----------
Total revenues from
energy sales......... 570,994 578,678 552,230 549,936 618,407
Miscellaneous electric
revenues.............. 18,734 17,645 16,256 17,446 16,481
---------- ---------- ---------- ---------- ----------
Total electric
revenues............. $ 589,728 $ 596,323 $ 568,486 $ 567,382 $ 634,888
========== ========== ========== ========== ==========
Customers at Year End:
Residential............ 278,357 271,155 264,425 259,546 254,864
Commercial............. 33,568 32,504 31,666 31,295 31,402
Industrial............. 381 386 385 392 393
Other ultimate
customers............. 576 537 499 454 415
---------- ---------- ---------- ---------- ----------
Total ultimate
customers............ 312,882 304,582 296,975 291,687 287,074
Sales for Resale....... 37 47 33 34 33
---------- ---------- ---------- ---------- ----------
Total customers....... 312,919 304,629 297,008 291,721 287,107
========== ========== ========== ========== ==========
Reliable Net Capabili-
ty--KW................. 1,541,000 1,591,000 1,591,000 1,591,000 1,591,000
Coincidental Peak De-
mand--KW 1,104,000 1,053,000 1,018,000 1,051,000 1,006,000
Average Fuel Cost per
Million BTU............ $ 1.3844 $ 1.3263 $ 1.3696 $ 1.3384 $ 1.3445
BTU per KWh of Net Gen-
eration................ 11,036 11,039 11,086 11,181 11,034
WATER SERVICE
Water Sales--Gallon (in
thousands) 3,414,950 3,224,271 2,996,587 3,001,391 3,179,711
Revenues (in thousands). $ 13,063 $ 12,471 $ 11,613 $ 11,700 $ 12,102
Customers at Year End... 22,743 22,098 21,522 21,134 20,565
</TABLE>
- --------
* Due to the provision for the loss associated with the M-S-R contingent power
purchase contract recognized in 1992, operating revenues were reduced by
$20.5 million. (See Note 2 of the notes to consolidated financial
statements.)
Note: In 1991, the Company implemented a FERC order requiring classification of
economy sales as operating revenues. Prior period amounts have been
reclassified for comparability purposes.
F-39
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
COMPARATIVE OPERATING STATISTICS
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
GAS SERVICE
Gas Throughput--Decatherms (in
thousands)
GCNM:
Residential.................... 28,031 27,063 26,237 25,190 23,253
Commercial..................... 10,428 10,590 11,375 11,344 10,730
Industrial..................... 923 707 766 1,278 1,478
Public authorities............. 2,473 4,199 4,951 5,300 5,492
Irrigation..................... 1,259 1,134 1,374 1,780 2,010
Sales for resale............... 1,041 2,035 1,357 3,539 4,557
Unbilled....................... (636) 649 -- -- --
Brokerage...................... -- -- -- -- 776
-------- -------- -------- -------- --------
GCNM sales..................... 43,519 46,377 46,060 48,431 48,296
Transportation throughput...... 46,059 48,674 38,976 31,717 16,041
-------- -------- -------- -------- --------
GCNM throughput................ 89,578 95,051 85,036 80,148 64,337
Gathering Company:
Spot market sales.............. -- 858 1,624 8,112 11,081
Transportation throughput...... 45,754 24,889 23,631 10,785 3,597
-------- -------- -------- -------- --------
Total gas throughput.......... 135,332 120,798 110,291 99,045 79,015
======== ======== ======== ======== ========
Gas Revenues (in thousands)
GCNM:
Residential.................... $149,796 $125,313 $137,436 $137,633 $130,130
Commercial..................... 44,575 37,222 46,676 49,575 47,876
Industrial..................... 3,369 2,063 2,754 4,993 5,693
Public authorities............. 9,694 12,313 17,711 20,392 21,757
Irrigation..................... 4,418 2,713 4,495 5,934 7,001
Sales for resale............... 3,137 4,460 3,848 7,253 9,874
Unbilled....................... (1,573) 716 -- -- --
Brokerage...................... -- -- -- -- 1,378
-------- -------- -------- -------- --------
Revenues from gas sales........ 213,416 184,800 212,920 225,780 223,709
Transportation................. 19,376 14,861 13,386 10,246 6,788
Other.......................... 2,453 4,974 9,062 8,292 5,948
-------- -------- -------- -------- --------
GCNM gas revenues.............. 235,245 204,635 235,368 244,318 236,445
Gathering Company:
Spot market sales.............. 4 1,410 1,771 13,880 19,810
Transportation................. 7,353 3,892 3,611 1,693 830
Processing Company:
Sales of liquids............... 18,724 26,427 30,500 39,086 25,294
Processing fees................ 9,761 6,795 5,819 3,127 448
-------- -------- -------- -------- --------
Total gas revenues............ $271,087 $243,159 $277,069 $302,104 $282,827
======== ======== ======== ======== ========
Customers at Year End
GCNM:
Residential.................... 337,768 329,385 320,546 312,899 306,604
Commercial..................... 30,151 29,765 29,608 29,305 28,949
Industrial..................... 72 61 72 81 103
Public authorities............. 1,958 2,004 2,153 2,125 2,242
Irrigation..................... 951 1,012 1,043 1,224 1,252
Sales for resale............... 3 4 7 4 7
Transportation................. 37 43 41 40 28
Brokerage...................... -- -- -- -- 1
-------- -------- -------- -------- --------
GCNM customers................. 370,940 362,274 353,470 345,678 339,186
Gathering Company:
Off-system sales............... 1 2 13 12 13
Transportation................. 21 16 8 9 5
Processing Company............... 25 22 21 20 23
-------- -------- -------- -------- --------
Total customers............... 370,987 362,314 353,512 345,719 339,227
======== ======== ======== ======== ========
</TABLE>
F-40
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On January 5, 1993, the Company notified its certifying accountants, KPMG
Peat Marwick ("KPMG"), that the client-auditor relationship between the Company
and KPMG will be terminated effective with the completion of the 1992 financial
audit. Additionally, the Company announced its new certifying accountants,
Arthur Andersen & Co., to serve as independent accountants for fiscal year
1993. The decision to change accountants was recommended by management and the
Audit Committee and approved by the Company's board of directors, and was
ratified at the Company's annual meeting of stockholders held on May 25, 1993.
The information required by Item 304 of Regulation S-K has been "previously
reports", as that term is defined in Rule 12b-2, in a Current Report on Form 8-
K dated January 8, 1993.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Reference is hereby made to "Election of Directors" in the Company's Proxy
Statement relating to the annual meeting of stockholders to be held on April
27, 1994 (the "1994 Proxy Statement") and to PART I, SUPPLEMENTAL ITEM--
"EXECUTIVE OFFICERS OF THE COMPANY".
ITEM 11. EXECUTIVE COMPENSATION
Reference is hereby made to "Executive Compensation" in the 1994 Proxy
Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Reference is hereby made to "Voting Information", "Election of Directors" and
"Stock Ownership of Certain Executor Officer" in the 1994 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Reference is hereby made to the 1994 Proxy Statement for such disclosure, if
any, as may be required by this item.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) -- 1. See Index to Financial Statements under Item 8.
(a) -- 2. The following consolidated financial information for the years
1993, 1992, and 1991 is submitted under Item 8.
Schedule V-- Property, plant and equipment.
Schedule VI-- Accumulated depreciation and amortization of property,
plant and equipment.
Schedule IX-- Short-term borrowings.
All other schedules are omitted for the reason that they are not applicable,
not required or the information is otherwise supplied.
E-1
<PAGE>
(a) -- 3-A. Exhibits Filed:
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
2.1 Purchase and Sale Agreement By and Among Public Service Company of New
Mexico, sunterra Gas Gathering Company, Sunterra Gas Processing
Company (Sellers) and Williams Gas Processing--Blanco, Inc. (Buyer)
2.2 Agreement to Purchase and Sell Between City of Santa Fe, New Mexico
and Public Service Company of New Mexico
3.2 Bylaws of Public Service Company of New Mexico With All Amendments to
and Including March 1, 1994
10.50 Public Service Company of New Mexico Section 415 Plan
10.51 First Amendment to the Public Service Company of New Mexico Executive
Retention Plan
10.52 First Amendment to the Public Service Company of New Mexico
Performance Stock Plan
10.53 January 12, 1994 Stipulation
10.54 Employment, Retirement and Release Agreement By and Between the Public
Service Company of New Mexico and William M. Eglinton
10.55 Receivable Purchase Agreement Dated as of August 2, 1983 Among Public
Service Company of New Mexico (Seller) and CXC Incorporated
(Purchaser) and Citicorp North America, Inc. (Agent)
10.56 U.S. $40,000,000 Receivables Purchase Agreement Dated December 21,
1993 Among Public Service Company of New Mexico (Seller) and Corporate
Receivables Corporation (Investor) and Citicorp North America, Inc.
(Agent)
10.57 U.S. $100,000,000 Revolving Credit Agreement Dated as of December 14,
1993 Among Public Service Company of New Mexico (Borrower) and The
Banks Named Herein (Banks) and Chemical Bank and Citibank, N.A. (Co-
Agents)
10.58 Amendment No. 8 effective September 12, 1983, to the Arizona Nuclear
Power Project Participation Agreement (refiled)
10.59* Amended and Restated Lease dated as of September 1, 1993, between The
First National Bank of Boston, Lessor, and the Company, Lessee. (EIP
Lease)
10.61 Participation Agreement dated as of June 30, 1983 among Security Trust
Company, as Trustee, the Company, Tucson Electric Power Company and
certain financial institutions relating to the San Juan Coal Trust
(refiled).
10.62 Agreement of the Company pursuant to Item 601(b)(4)(iii) of Regulation
S-K (refiled).
23.1 Consent of Arthur Andersen & Co.
23.2 Consent of KPMG Peat Marwick.
</TABLE>
(a) -- 3-B. Exhibits Incorporated By Reference:
In addition to those Exhibits shown above, the Company hereby incorporates
the following Exhibits pursuant to Exchange Act Rule 12b-32 and Regulation
201.24 by reference to the filings set forth below:
E-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION FILED AS EXHIBIT: FILE NO.
------- ----------- ----------------- --------
<C> <S> <C> <C>
ARTICLES OF INCORPORATION AND BY-LAWS
3.1 Restated Articles of 4-(b) to Registration 2-99990
Incorporation of the Company, as Statement No. 2-99990 of
amended through May 10, 1985. the Company.
INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES
4.1 Indenture of Mortgage and Deed 4-(d) to Registration 2-99990
of Trust dated as of June 1, Statement No. 2-99990 of
1947, between the Company and the Company.
The Bank of New York (formerly
Irving Trust Company), as
Trustee, together with the Ninth
Supplemental Indenture dated as
of January 1, 1967, the Twelfth
Supplemental Indenture dated as
of September 15, 1971, the
Fourteenth Supplemental
Indenture dated as of December
1, 1974 and the Twenty-second
Supplemental Indenture dated as
of October 1, 1979 thereto
relating to First Mortgage Bonds
of the Company.
4.2 Portions of sixteen supplemental 4-(e) to Registration 2-99990
indentures to the Indenture of Statement No. 2-99990 of
Mortgage and Deed of Trust dated the Company.
as of June 1, 1947, between the
Company and The Bank of New York
(formerly Irving Trust Company),
as Trustee, relevant to the
declaration or payment of
dividends or the making of other
distributions on or the purchase
by the Company of shares of the
Company's Common Stock.
MATERIAL CONTRACTS
10.1 Supplemental Indenture of Lease 4-D to Registration 2-26116
dated as of July 19, 1966 Statement No. 2-26116 of
between the Company and other the Company.
participants in the Four Corners
Project and the Navajo Indian
Tribal Council.
10.1.1 Amendment and Supplement No. 1 10.1.1 to Annual Report of 1-6986
to Supplemental and Additional the Registrant on Form 10-
Indenture of Lease dated April K for fiscal year ended
25, 1985 between the Navajo December 31, 1985.
Tribe of Indians and Arizona
Public Service Company, El Paso
Electric Company, Public Service
Company of New Mexico, Salt
River Project Agricultural
Improvement and Power District,
Southern California Edison
Company, and Tucson Electric
Power Company.
10.2 Fuel Agreement, as supplemented, 4-H to Registration 2-35042
dated as of September 1, 1966 Statement No. 2-35042 of
between Utah Construction & the Company.
Mining Co. and the participants
in the Four Corners Project
including the Company.
10.3 Fourth Supplement to Four 10.3 to Annual Report of 1-6986
Corners Fuel Agreement No. 2 the Registrant on Form 10-
effective as of January 1, 1981, K for fiscal year ended
between Utah International Inc. December 31, 1991.
and the participants in the Four
Corners Project, including the
Company.
10.4 Contract between the United 5-L to Registration 2-41010
States and the Company dated Statement No. 2-41010 of
April 11, 1968, for furnishing the Company.
water.
</TABLE>
E-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION FILED AS EXHIBIT: FILE NO.
------- ----------- ----------------- --------
<C> <S> <C> <C>
10.4.1 Amendatory Contract between the 5-R to Registration 2-60021
United States and the Company Statement No. 2-60021 of
dated September 29, 1977, for the Company.
furnishing water.
10.5 Co-Tenancy Agreement between the 5-O to Registration 2-44425
Company and Tucson Gas & Statement No. 2-44425 of
Electric Company dated February the Company.
15, 1972, pertaining to the San
Juan generating plant.
10.5.1 Modifications No. 1 to San Juan 10.10 to Annual Report of 1-6986
Project Agreements. the Registrant on Form 10-
K for fiscal year ended
December 31, 1991.
10.5.2 Modifications No. 3 to San Juan 10-KK to Annual Report of 1-6986
Project Agreements dated July the Registrant on Form 10-
17, 1984. K for fiscal year ended
December 31, 1984.
10.5.3 Modification No. 4 to Co-Tenancy 10.5.1 to Annual Report of 1-6986
Agreement between the Company the Registrant on Form 10-
and Tucson Electric Power K for fiscal year ended
Company dated October 25, 1984. December 31, 1985.
10.5.4 Modification No. 5 to Co-Tenancy 10.5.2 to Annual Report of 1-6986
Agreement between the Company the Registrant on Form 10-
and Tucson Electric Power K for fiscal year ended
Company dated July 1, 1985. December 31, 1985.
10.6 San Juan Project Construction 5-R to Registration 2-50338
Agreement between the Company Statement No. 2-50338 of
and Tucson Gas & Electric the Company.
Company, executed December 21,
1973.
10.60 Reimbursement Agreement, dated 4.5 to Registration 33-65418
as of November 1, 1992 between Statement No. 33-65418 of
Public Service Company of New the Company.
Mexico and Canadian Imperial
Bank of Commerce, New York
Agency
10.6.1 Modification No. 4 to San Juan 10.6.1 to Annual Report of 1-6986
Project Construction Agreement the Registrant on Form 10-
between the Company and Tucson K for fiscal year ended
Electric Power Company dated December 31, 1985.
October 25, 1984.
10.6.2 Modification No. 5 to San Juan 10.6.2 to Annual Report of 1-6986
Project Construction Agreement the Registrant on Form 10-
between the Company and Tucson K for fiscal year ended
Electric Power Company dated December 31, 1985.
July 1, 1985.
10.7 San Juan Project Operating 5-S to Registration 2-50338
Agreement between the Company Statement No. 2-50338 of
and Tucson Gas & Electric the Company.
Company, executed December 21,
1973.
10.7.1 Modification No. 4 to San Juan 10.7.1 to Annual Report of 1-6986
Project Operating Agreement the Registrant on Form 10-
between the Company and Tucson K for fiscal year ended
Electric Power Company dated December 31, 1985.
October 25, 1984.
</TABLE>
E-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION FILED AS EXHIBIT: FILE NO.
------- ----------- ----------------- --------
<C> <S> <C> <C>
10.7.2 Modification No. 5 to San Juan 10.7.2 to Annual Report of 1-6986
Project Operating Agreement the Registrant on Form 10-
between the Company and Tucson K for fiscal year ended
Electric Power Company dated December 31, 1985.
July 1, 1985.
10.8 Arizona Nuclear Power Project 5-T to Registration 2-50338
Participation Agreement among Statement No. 2-50338 of
the Company and Arizona Public the Company.
Service Company, Salt River
Project Agricultural Improvement
and Power District, Tucson Gas &
Electric Company and El Paso
Electric Company, dated August
23, 1973.
10.8.1 Amendments No. 1 through No. 6 10.8.1 to Annual Report of 1-6986
to Arizona Nuclear Power Project the Registrant on Form 10-
Participation Agreement. K for fiscal year ended
December 31, 1991.
10.8.2 Amendment No. 7 effective April 10.8.2 to Annual Report of 1-6986
1, 1982, to the Arizona Nuclear the Registrant on Form 10-
Power Project Participation K for fiscal year ended
Agreement (refiled). December 31, 1991.
10.8.4 Amendment No. 9 to Arizona 10-JJ to Annual Report of 1-6986
Nuclear Power Project the Registrant on Form 10-
Participation Agreement dated as K for fiscal year ended
of June 12, 1984. December 31, 1984.
10.8.5 Amendment No. 10 to Arizona 10.8.7 to Annual Report of 1-6986
Nuclear Power Project the Registrant on Form 10-
Participation Agreement dated as K for fiscal year ended
of November 21, 1985. December 31, 1985.
10.8.6 Amendment No. 11 to Arizona 10.8.8 to Annual Report of 1-6986
Nuclear Power Project the Registrant on Form 10-
Participation Agreement dated K for fiscal year ended
June 13, 1986 and effective December 31, 1986.
January 10, 1987.
10.8.7 Amendment No. 12 to Arizona 19.1 to the Company's 1-6986
Nuclear Power Project Quarterly Report on Form
Participation Agreement dated 10-Q for the quarter ended
June 14, 1988, and effective September 30, 1990.
August 5, 1988.
10.8.8 Amendment No. 13 to the Arizona 10.8.10 to Annual Report 1-6986
Nuclear Power Project of the Registrant on Form
Participation Agreement dated 10-K for fiscal year ended
April 4, 1990, and effective December 31, 1990.
June 15, 1991.
10.9 Coal Sales Agreement executed 10.9 to Annual Report of 1-6986
August 18, 1980 among San Juan the Registrant on Form 10-
Coal Company, the Company and K for fiscal year ended
Tucson Electric Power Company, December 31, 1991.
together with Amendments No.
One, Two, Four, and Six thereto.
</TABLE>
E-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION FILED AS EXHIBIT: FILE NO.
------- ----------- ----------------- --------
<C> <S> <C> <C>
10.9.1 Amendment No. Three to Coal 10-NN to Annual Report of 1-6986
Sales Agreement dated April 30, the Registrant on Form 10-
1984 among San Juan Coal K for fiscal year ended
Company, the Company and Tucson December 31, 1984
Electric Power Company. (confidentiality treatment
was requested and exhibit
was not filed therewith).
10.9.2 Amendment No. Five to Coal Sales 10.9.2 to Annual Report of 1-6986
Agreement dated May 29, 1990 the Registrant on Form 10-
among San Juan Coal Company, the K for fiscal year ended
Company and Tucson Electric December 31, 1991
Power Company. (confidentiality treatment
was requested as to
portions of the exhibit,
and such portions were
omitted from the exhibit
filed and were filed
separately with the
Securities and Exchange
Commission).
10.9.3 Amendment No. Seven to Coal 19.3 to the Company's 1-6986
Sales Agreement, dated as of Quarterly Report on Form
July 27, 1992 among San Juan 10-Q for the quarter ended
Coal Company, the Company and September 30, 1992
Tucson Electric Power Company. (confidentiality treatment
was requested as to
portions of this exhibit,
and such portions were
omitted from the exhibit
filed and were filed
separately with the
Securities and Exchange
Commission).
10.9.4 First Supplement to Coal Sales 19.4 to the Company's 1-6986
Agreement, dated as of July 27, Quarterly Report on Form
1992 among San Juan Coal 10-Q for the quarter ended
Company, the Company and Tucson September 30, 1992
Electric Power Company. (confidentiality treatment
was requested as to
portions of this exhibit,
and such portions were
omitted from the exhibit
filed and were filed
separately with the
Securities and Exchange
Commission).
10.11.1 Amendment No. 1 to the Early 10.11.1 to Annual Report 1-6986
Purchase and Participation of the Registrant on Form
Agreement between Public Service 10-K for fiscal year ended
Company of New Mexico and M-S-R December 31, 1987.
Public Power Agency, executed as
of December 16, 1987, for San
Juan Unit 4.
10.12 Amended and Restated San Juan 10-OO to Annual Report of 1-6986
Unit 4 Purchase and the Registrant on Form 10-
Participation Agreement dated as K for fiscal year ended
of December 28, 1984 between the December 31, 1984.
Company and the Incorporated
County of Los Alamos.
</TABLE>
E-6
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION FILED AS EXHIBIT: FILE NO.
------- ----------- ----------------- --------
<C> <S> <C> <C>
10.14 Participation Agreement among 10.14 to Annual Report of 1-6986
the Company, Tucson Electric the Registrant on Form 10-
Power Company and certain K for fiscal year ended
financial institutions relating December 31, 1992.
to the San Juan Coal Trust
dated as of December 31, 1981
(refiled).
10.16 Interconnection Agreement dated 10.16 to Annual Report of 1-6986
November 23, 1982, between the the Registrant on Form 10-
Company and Southwestern Public K for fiscal year ended
Service Company (refiled). December 31, 1992.
10.18* Facility Lease dated as of 28(a) to the Company's 1-6986
December 16, 1985, between The Current Report on Form 8-K
First National Bank of Boston, dated December 31, 1985.
as Owner Trustee, and Public
Service Company of New Mexico.
10.18.1* Amendment No. 1 dated as of 28.1 to the Company's 1-6986
July 15, 1986, to Facility Current Report on Form 8-K
Lease dated as of December 16, dated July 17, 1986.
1985.
10.18.2* Amendment No. 2 dated as of 28.1 to the Company's 1-6986
November 18, 1986, to Facility Current Report on Form 8-K
Lease dated as of December 16, dated November 25, 1986.
1985.
10.18.3* Amendment No. 3 dated as of 10.21.3 to Annual Report 1-6986
March 30, 1987, to Facility of the Registrant on Form
Lease dated as of December 16, 10-K for fiscal year ended
1985. December 31, 1987.
10.19 Facility Lease dated as of July 28.1 to the Company's 1-6986
31, 1986, between The First Quarterly Report on Form
National Bank of Boston, as 10-Q for the quarter ended
Owner Trustee, and Public June 30, 1986.
Service Company of New Mexico.
10.19.1 Amendment No. 1 dated as of 28.5 to the Company's 1-6986
November 18, 1986, Facility Current Report on Form 8-K
Lease dated as of July 31, dated November 25, 1986.
1986.
10.19.2 Amendment No. 2 dated as of 10.22.2 to Annual Report 1-6986
December 11, 1986, to Facility of the Registrant on Form
Lease dated as of July 31, 10-K for fiscal year ended
1986. December 31, 1986.
10.19.3 Amendment No. 3 dated as of 10.22.3 to Annual Report 1-6986
April 8, 1987, to Facility of the Registrant on Form
Lease dated as of July 31, 10-K for fiscal year ended
1986. December 31, 1987.
10.20* Facility Lease dated as of 28.1 to the Company's 1-6986
August 12, 1986, between The Current Report on Form 8-K
First National Bank of Boston, dated August 18, 1986.
as Owner Trustee, and Public
Service Company of New Mexico.
10.20.1* Amendment No. 1 dated as of 28.9 to the Company 1-6986
November 18, 1986, to Facility Current Report on Form 8-K
Lease dated as of August 12, dated November 25, 1986.
1986.
</TABLE>
E-7
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION FILED AS EXHIBIT: FILE NO.
------- ----------- ----------------- --------
<C> <S> <C> <C>
10.20.2 Amendment No. 2 dated as of 10.23.2 to Annual Report 1-6986
November 25, 1986, to Facility of the Registrant on Form
Lease dated as of August 12, 10-K for fiscal year ended
1986. December 31, 1986.
10.21 Facility Lease dated as of 28.1 to the Company's 1-6986
December 15, 1986, between The Current Report on Form 8-K
First National Bank of Boston, dated December 17, 1986.
as Owner Trustee, and Public
Service Company of New Mexico
(Unit 1 Transaction).
10.21.1 Amendment No. 1 dated as of 10.24.1 to Annual Report 1-6986
April 8, 1987, to Facility of the Registrant on Form
Lease dated as of December 15, 10-K for fiscal year ended
1986. December 31, 1987.
10.22 Facility Lease dated as of 28.9 to the Company's 1-6986
December 15, 1986, between The Current Report on Form 8-K
First National Bank of Boston, dated December 17, 1986.
as Owner Trustee, and Public
Service Company of New Mexico
(Unit 2 Transaction).
10.22.1 Amendment No. 1 dated as of 10.25.1 to Annual Report 1-6986
April 8, 1987, to Facility of the Registrant on Form
Lease dated as of December 15, 10-K for fiscal year ended
1986. December 31, 1987.
10.23** Restated and Amended Public 19.5 to the Company's 1-6986
Service Company of New Mexico Quarterly Report on Form
Accelerated Management 10-Q for the quarter ended
Performance Plan (1988). September 30, 1988.
(August 16, 1988.)
10.23.1** First Amendment to Restated 19.6 to the Company's 1-6986
and Amended Public Service Quarterly Report on Form
Company of New Mexico 10-Q for the quarter ended
Accelerated Management September 30, 1988.
Performance Plan (1988).
(August 30, 1988.)
10.23.2** Second Amendment to Restated 10.26.2 to Annual Report 1-6986
and Amended Public Service of the Registrant on Form
Company of New Mexico 10-K for fiscal year ended
Accelerated Management December 31, 1989.
Performance Plan (1988).
(December 29, 1989).
10.24** Management Life Insurance Plan 10.39 to Annual Report of 1-6986
(July 1985) of the Company. the Registrant on Form 10-
K for fiscal year ended
December 31, 1985.
10.25** Amended and Restated Medical 19.6 to the Company's 1-6986
Reimbursement Plan of Public Quarterly Report on Form
Service Company of New Mexico. 10-Q for the quarter ended
March 31, 1987.
10.25.1** Second Restated and Amended 10.25.1 to Annual Report 1-6986
Public Service Company of New of the Registrant on Form
Mexico Executive Medical Plan. 10-K for the fiscal year
ended December 31, 1992
</TABLE>
E-8
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION FILED AS EXHIBIT: FILE NO.
------- ----------- ----------------- --------
<C> <S> <C> <C>
10.27 Amendment No. 2 dated as of 10.53 to Annual Report of 1-6986
April 10, 1987, to the Facility the Registrant on Form 10-
Lease dated as of August 12, K for fiscal year ended
1986, between The First National December 31, 1987.
Bank of Boston, as Owner
Trustee, and Public Service
Company of New Mexico. (Unit 2
Transaction.) (This is an
amendment to a Facility Lease
which is substantially similar
to the Facility Lease filed as
Exhibit 28.1 to the Company's
Current Report on Form 8-K dated
August 18, 1986.)
10.28 Amendment No. 3 dated as of 10.54 to Annual Report of 1-6986
March 30, 1987, to the Facility the Registrant on Form 10-
Lease dated as of December 16, K for fiscal year ended
1985, between The First National December 31, 1987.
Bank of Boston, as Owner
Trustee, and Public Service
Company of New Mexico. (Unit 1
Transaction.) (This is an
amendment to a Facility Lease
which is substantially similar
to the Facility Lease filed as
Exhibit 28(a) to the Company's
Current Report on Form 8-K dated
December 31, 1985.)
10.29 Decommissioning Trust Agreement 10.55 to Annual Report of 1-6986
between Public Service Company the Registrant on Form 10-
of New Mexico and First K for fiscal year ended
Interstate Bank of Albuquerque December 31, 1987.
dated as of July 31, 1987.
10.30 New Mexico Public Service 10.56 to Annual Report of 1-6986
Commission Order dated July 30, the Registrant on Form 10-
1987, and Exhibit 1 thereto, in K for fiscal year ended
NMPUC Case No. 2004, regarding December 31, 1987.
the PVNGS decommissioning trust
fund.
10.31** Executive Retention Agreements. 10.42 to Annual Report of 1-6986
the Registrant on Form 10-
K for fiscal year ended
December 31, 1990.
10.32** Supplemental Employee Retirement 19.4 to the Company's 1-6986
Agreements dated August 4, 1989. Quarterly Report on Form
10-Q for the quarter ended
September 30, 1989.
10.33** Supplemental Employee Retirement 10.47 to Annual Report of 1-6986
Agreement dated March 6, 1990. the Registrant on Form 10-
K for fiscal year ended
December 31, 1989.
10.34 Settlement Agreement between 10.48 to Annual Report of 1-6986
Public Service Company of New the Registrant on Form 10-
Mexico and Creditors of Meadows K for fiscal year ended
Resources, Inc. dated November December 31, 1989.
2, 1989.
10.34.1 First amendment dated April 24, 19.1 to the Company's 1-6986
1992 to the Settlement Agreement Quarterly Report on Form
dated November 2, 1989 among 10-Q for the quarter ended
Public Service Company of New September 30, 1992.
Mexico, the lender parties
thereto and collateral agent.
</TABLE>
E-9
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION FILED AS EXHIBIT: FILE NO.
------- ----------- ----------------- --------
<C> <S> <C> <C>
10.35 Amendment dated April 11, 1991 19.1 to the Company's 1-6986
among Public Service Company Quarterly Report on Form
of New Mexico, certain banks 10-Q for the quarter ended
and Chemical Bank and September 30, 1991.
Citibank, N.A., as agents for
the banks.
10.36 San Juan Unit 4 Purchase and 19.2 to the Company's 1-6986
Participation Agreement Public Quarterly Report on Form
Service Company of New Mexico 10-Q for the quarter ended
and the City of Anaheim, March 31, 1991.
California dated April 26,
1991.
10.36.1 Second stipulation in the 10.38 to Annual Report of 1-6986
matter of application of the Registrant on Form 10-
Public Service Company of New K for fiscal year ended
Mexico for NMPSC approval to December 31, 1992.
sell a 10.04% undivided
interest in San Juan
Generating Station Unit 4 to
the City of Anaheim,
California, and for related
orders and approvals.
10.37** Executive Retention Plan. 10.37 to Annual Report of 1-6986
the Registrant on Form 10-
K for fiscal year ended
December 31, 1991.
10.38 Restated and Amended San Juan 10.2.1 to the Company's
Unit 4 Purchase and Quarterly Report on Form
Participation Agreement 10-Q for the quarter ended
between Public Service Company September 30, 1993.
of New Mexico and Utah
Associated Municipal Power
Systems
10.39 Purchase agreement dated 10.39 to Annual Report of 1-6986
February 7, 1992 between the Registrant on Form 10-
Burnham Leasing Corporation K for fiscal year ended
and Public Service Company of December 31, 1991.
New Mexico.
10.40** Director Restricted Stock 10.40 to Annual Report of 1-6986
Retainer Plan. the Registrant on Form 10-
K for fiscal year ended
December 31, 1991.
10.40.1** First Amendment to the Public 19.3 to the Company's 1-6986
Service Company of New Mexico Quarterly Report on Form
Director Restricted Stock 10-Q for the quarter ended
Retainer Plan March 31, 1993.
10.41 Waste Disposal Agreement, 19.5 to the Company's 1-6986
dated as of July 27, 1992 Quarterly Report on Form
among San Juan Coal Company, 10-Q for the quarter ended
the Company and Tucson September 30, 1992
Electric Power Company. (confidentiality treatment
was requested as to
portions of this exhibit,
and such portions were
omitted from the exhibit
and were filed separately
with the Securities and
Exchange Commission).
</TABLE>
E-10
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION FILED AS EXHIBIT: FILE NO.
------- ----------- ----------------- --------
<C> <S> <C> <C>
10.42 Stipulation in the matter of 10.42 to Annual Report of 1-6986
the application of Gas Company the Registrant on Form 10-
of New Mexico for an order K for fiscal year ended
authorizing recovery of MDL December 31, 1992.
costs through Rate Rider
Number 8.
10.43** Description of certain Plans 10.43 to Annual Report of 1-6986
which include executive the Registrant on Form 10-
officers as participants. K for fiscal year ended
December 31, 1992.
10.44** Public Service Company of New 10.44 to Annual Report of 1-6986
Mexico--Non-Union Voluntary the Registrant on Form 10-
Separation Program. K for fiscal year ended
December 31, 1992.
10.44.1** First Amendment dated April 6, 19.2 to the Company's 1-6986
1993 to the First Restated and Quarterly Report on Form
Amended Public Service Company 10-Q for the quarter ended
of New Mexico Non-Union March 31, 1993.
Severance Pay Plan dated
August 1, 1992.
10.45** Public Service Company of New 99.1 to Registration 33-65418
Mexico Performance Stock Plan. Statement No. 33-65418 of
the Company.
10.46** Public Service Company of New 10.1 to the Company's 1-6986
Mexico Asset Sales Incentive Quarterly Report on Form
Plan. 10-Q for the quarter ended
June 30, 1993.
10.47** Compensation Arrangement with 10.3 to the Company's 1-6986
Chief Executive Officer. Quarterly Report on Form
10-Q for the quarter ended
June 30, 1993.
10.47.1** Pension Service Adjustment 10.3.1 to the Company's 1-6986
Agreement for Benjamin F. Quarterly Report on Form
Montoya. 10-Q for the quarter ended
September 30, 1993.
10.47.2** Severance Agreement for 10.3.2 to the Company's 1-6986
Benjamin F. Montoya. Quarterly Report on Form
10-Q for the quarter ended
September 30, 1993.
10.47.3** Executive Retention Agreement 10.3.3 to the Company's 1-6986
for Benjamin F. Montoya. Quarterly Report on Form
10-Q for the quarter ended
September 30, 1993.
10.48** Public Service Company of New 10.4 to the Company's 1-6986
Mexico OBRA '93 Retirement Quarterly Report on Form
Plan. 10-Q for the quarter ended
September 30, 1993.
ADDITIONAL EXHIBITS
16.1 Letter re. Change in 16.1 to the Company's 1-6986
Certifying Accountant. Current Report Form 8-K
dated January 8, 1993.
</TABLE>
E-11
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION FILED AS EXHIBIT: FILE NO.
------- ----------- ----------------- --------
<C> <S> <C> <C>
22 Certain subsidiaries of the 22 to Annual Report of the 1-6986
registrant. Registrant on Form 10-K
for fiscal year ended
December 31, 1992.
99.1 Collateral Trust Indenture dated 28(i) to the Company's 1-6986
as of December 16, 1985, among Current Report on Form 8-K
First PV Funding Corporation, dated December 31, 1985.
Public Service Company of New
Mexico and Chemical Bank, as
Trustee.
99.1.1 Series 1986A Bond Supplemental 28.4 to the Company's 1-6986
Indenture dated as of July 15, Current Report on Form 8-K
1986, to Collateral Trust dated July 17, 1986.
Indenture dated as of December
16, 1985.
99.1.2 Series 1986B Bond Supplemental 28.1.2 to the Company's 1-6986
Indenture dated as of November Current Report on Form 8-K
18, 1986, to Collateral Trust dated November 25, 1986.
Indenture dated as of December
16, 1985.
99.1.3 Unit 1 Supplemental Indenture of 28.8 to the Company's 1-6986
Pledge (Lease Obligation Bonds, Current Report on Form 8-K
Series 1986B) dated as of dated December 17, 1986.
December 15, 1986, to the
Collateral Trust Indenture dated
as of December 16, 1985.
99.1.4 Unit 2 Supplemental Indenture of 28.16 to the Company's 1-6986
Pledge (Lease Obligation Bonds, Current Report on Form 8-K
Series 1986B) dated as of dated December 17, 1986.
December 15, 1986, to the
Collateral Trust Indenture dated
as of December 16, 1985.
99.2* Participation Agreement dated as 2 to the Company's Current 1-6986
of December 16, 1985, among the Report on Form 8-K dated
Owner Participant named therein, December 31, 1985.
First PV Funding Corporation.
The First National Bank of
Boston, in its individual
capacity and as Owner Trustee
(under a Trust Agreement dated
as of December 16, 1985 with the
Owner Participant), Chemical
Bank, in its individual capacity
and as Indenture Trustee (under
a Trust Indenture, Mortgage,
Security Agreement and
Assignment of Rents dated as of
December 16, 1985 with the Owner
Trustee), and Public Service
Company of New Mexico, including
Appendix A definitions.
99.2.1* Amendment No. 1 dated as of July 2.1 to the Company's 1-6986
15, 1986, to Participation Current Report on Form 8-K
Agreement dated as of December dated July 17, 1986.
16, 1985.
99.2.2* Amendment No. 2 dated as of 2.1 to the Company's 1-6986
November 18, 1986, to Current Report on Form 8-K
Participation Agreement dated as dated November 25, 1986.
of December 16, 1985.
99.3* Trust Indenture, Mortgage, 28(b) to the Company's 1-6986
Security Agreement and Current Report on Form 8-K
Assignment of Rents dated as of dated December 31, 1985.
December 16, 1985, between The
First National Bank of Boston,
as Owner Trustee, and Chemical
Bank, as Indenture Trustee.
</TABLE>
E-12
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION FILED AS EXHIBIT: FILE NO.
------- ----------- ----------------- --------
<C> <S> <C> <C>
99.3.1* Supplemental Indenture No. 1 28.2 to the Company's 1-6986
dated as of July 15, 1986, to Current Report on Form 8-K
the Trust Indenture, Mortgage, dated July 17, 1986.
Security Agreement and
Assignment of Rents dated as of
December 16, 1985.
99.3.2* Supplemental Indenture No. 2 28.2 to the Company's 1-6986
dated as of November 18, 1986, Current Report on Form 8-K
to the Trust Indenture, dated November 25, 1986.
Mortgage, Security Agreement and
Assignment of Rents dated as of
December 16, 1985.
99.4* Assignment, Assumption and 28(e) to the Company's 1-6986
Further Agreement dated as of Current Report on Form 8-K
December 16, 1985, between dated December 31, 1985.
Public Service Company of New
Mexico and The First National
Bank of Boston, as Owner
Trustee.
99.5 Participation Agreement dated as 2.1 to the Company's 1-6986
of July 31, 1986, among the Quarterly Report on Form
Owner Participant named therein, 10-Q for the quarter ended
First PV Funding Corporation. June 30, 1986.
The First National Bank of
Boston, in its individual
capacity and as Owner Trustee
(under a Trust Agreement dated
as of July 31, 1986, with the
Owner Participant), Chemical
Bank, in its individual capacity
and as Indenture Trustee (under
a Trust Indenture, Mortgage,
Security Agreement and
Assignment of Rents dated as of
July 31, 1986, with the Owner
Trustee), and Public Service
Company of New Mexico, including
Appendix A definitions.
99.5.1 Amendment No. 1 dated as of 28.4 to the Company's 1-6986
November 18, 1986, to Current Report on Form 8-K
Participation Agreement dated as dated November 25, 1986.
of July 31, 1986.
99.6 Trust Indenture, Mortgage, 28.2 to the Company's 1-6986
Security Agreement and Quarterly Report on Form
Assignment of Rents dated as of 10-Q for the quarter ended
July 31, 1986, between The First June 30, 1986.
National Bank of Boston, as
Owner Trustee, and Chemical
Bank, as Indenture Trustee.
99.6.1 Supplemental Indenture No. 1 28.6 to the Company's 1-6986
dated as of November 18, 1986, Current Report on Form 8-K
to the Trust Indenture, dated November 25, 1986.
Mortgage, Security Agreement and
Assignments of Rents dated as of
July 31, 1986.
99.7 Assignment, Assumption, and 28.3 to the Company's 1-6986
Further Agreement dated as of Quarterly Report on Form
July 31, 1986, between Public 10-Q for the quarter ended
Service Company of New Mexico June 30, 1986.
and The First National Bank of
Boston, as Owner Trustee.
</TABLE>
E-13
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION FILED AS EXHIBIT: FILE NO.
------- ----------- ----------------- --------
<C> <S> <C> <C>
99.8* Participation Agreement dated as 2.1 to the Company's 1-6986
of August 12, 1986, among the Current Report on Form 8-K
Owner Participant named therein, dated August 18, 1986.
First PV Funding Corporation.
The First National Bank of
Boston, in its individual
capacity and as Owner Trustee
(under a Trust Agreement dated
as of August 12, 1986, with the
Owner Participant), Chemical
Bank, in its individual capacity
and as Indenture Trustee (under
a Trust Indenture, Mortgage,
Security Agreement and
Assignment of Rents dated as of
August 12, 1986, with the Owner
Trustee), and Public Service
Company of New Mexico, including
Appendix A definitions.
99.8.1* Amendment No. 1 dated as of 28.8 to the Company's 1-6986
November 18, 1986, to Current Report on Form 8-K
Participation Agreement dated as dated November 25, 1986.
of August 12, 1986.
99.9* Trust Indenture, Mortgage, 28.2 to the Company's 1-6986
Security Agreement and Current Report on Form 8-K
Assignment of Rents dated as of dated August 18, 1986.
August 12, 1986, between The
First National Bank of Boston,
as Owner Trustee, and Chemical
Bank, as Indenture Trustee.
99.9.1* Supplemental Indenture No. 1 28.10 to the Company's 1-6986
dated as of November 18, 1986, Current Report on Form 8-K
to the Trust Indenture, dated November 25, 1986.
Mortgage, Security Agreement and
Assignment of Rents dated as of
August 12, 1986.
99.10* Assignment, Assumption, and 28.3 to the Company's 1-6986
Further Agreement dated as of Current Report on Form 8-K
August 12, 1986, between Public dated August 18, 1986.
Service Company of New Mexico
and The First National Bank of
Boston, as Owner Trustee.
99.11 Participation Agreement dated as 2.1 to the Company's 1-6986
of December 15, 1986, among the Current Report on Form 8-K
Owner Participant named therein, dated December 17, 1986.
First PV Funding Corporation.
The First National Bank of
Boston, in its individual
capacity and as Owner Trustee
(under a Trust Agreement dated
as of December 15, 1986, with
the Owner Participant), Chemical
Bank, in its individual capacity
and as Indenture Trustee (under
a Trust Indenture, Mortgage,
Security Agreement and
Assignment of Rents dated as of
December 15, 1986, with the
Owner Trustee), and Public
Service Company of New Mexico,
including Appendix A definitions
(Unit 1 Transaction).
99.12 Trust Indenture, Mortgage, 28.2 to the Company's 1-6986
Security Agreement and Current Report on Form 8-K
Assignment of Rents dated as of dated December 17, 1986.
December 15, 1986, between The
First National Bank of Boston,
as Owner Trustee, and Chemical
Bank, as Indenture Trustee (Unit
1 Transaction).
</TABLE>
E-14
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION FILED AS EXHIBIT: FILE NO.
------- ----------- ----------------- --------
<C> <S> <C> <C>
99.13 Assignment, Assumption and 28.3 to the Company's 1-6986
Further Agreement dated as of Current Report on Form 8-K
December 15, 1986, between dated December 17, 1986.
Public Service Company of New
Mexico and The First National
Bank of Boston, as Owner Trustee
(Unit 1 Transaction).
99.14 Participation Agreement dated as 2.2 to the Company's 1-6986
of December 15, 1986, among the Current Report on Form 8-K
Owner Participant named therein, dated December 17, 1986.
First PV Funding Corporation,
The First National Bank of
Boston, in its individual
capacity and as Owner Trustee
(under a Trust Agreement dated
as of December 15, 1986, with
the Owner Participant), Chemical
Bank, in its individual capacity
and as Indenture Trustee (under
a Trust Indenture, Mortgage,
Security Agreement and
Assignment of Rents dated as of
December 15, 1986, with the
Owner Trustee), and Public
Service Company of New Mexico,
including Appendix A definitions
(Unit 2 Transaction).
99.15 Trust Indenture, Mortgage, 28.10 to the Company's 1-6986
Security Agreement and Current Report on Form 8-K
Assignment of Rents dated as of dated December 17, 1986.
December 15, 1986, between the
First National Bank of Boston,
as Owner Trustee, and Chemical
Bank, as Indenture Trustee (Unit
2 Transaction).
99.16 Assignment, Assumption, and 28.11 to the Company's 1-6986
Further Agreement dated as of Current Report on Form 8-K
December 15, 1986, between dated December 17, 1986.
Public Service Company of New
Mexico and The First National
Bank of Boston, as Owner Trustee
(Unit 2 Transaction).
99.17* Waiver letter with respect to 28.12 to the Company's 1-6986
"Deemed Loss Event" dated as of Current Report on Form 8-K
August 18, 1986, between the dated August 18, 1986.
Owner Participant named therein,
and Public Service Company of
New Mexico.
99.18* Waiver letter with respect to 28.13 to the Company's 1-6986
"Deemed Loss Event" dated as of Current Report on Form 8-K
August 18, 1986, between the dated August 18, 1986.
Owner Participant named therein,
and Public Service Company of
New Mexico.
99.19 Agreement No. 13904 (Option and 28.19 to Annual Report of 1-6986
Purchase of Effluent), dated the Registrant on Form 10-
April 23, 1973, among Arizona K for fiscal year ended
Public Service Company, Salt December 31, 1986.
River Project Agricultural
Improvement and Power District,
the Cities of Phoenix, Glendale,
Mesa, Scottsdale, and Tempe, and
the Town of Youngtown.
99.20 Agreement for the Sale and 28.20 to Annual Report of 1-6986
Purchase of Wastewater Effluent, the Registrant on Form 10-
dated June 12, 1981, among K for fiscal year ended
Arizona Public Service Company, December 31, 1986.
Salt River Project Agricultural
Improvement and Power District
and the City of Tolleson, as
amended.
</TABLE>
E-15
<PAGE>
- --------
* One or more additional documents, substantially identical in all material
respects to this exhibit, have been entered into, relating to one or more
additional sale and leaseback transactions. Although such additional
documents may differ in other respects (such as dollar amounts and
percentages), there are no material details in which such additional
documents differ from this exhibit.
** Designates each management contract or compensatory plan arrangement
required to be identified pursuant to paragraph 3 of Item 14(a) of Form 10-
K.
(b) Reports on Form 8-K:
During the quarter ended December 31, 1993, and during the period beginning
January 1, 1994 and ending March 8, 1994, the Company filed, on the dates
indicated, the following reports on Form 8-K.
<TABLE>
<CAPTION>
DATED: FILED: RELATING TO:
------ ------ ------------
<C> <C> <S>
August 12, 1993 October 15, 1993 Relating to natural gas supply litigation
and pricing issues, refunding activities,
sale of 50 MW of San Juan Generating
Station Unit 4 and Palo Verde Nuclear
Generating Station
December 8, 1993 January 13, 1994 Framework filing stipulation, S&P's credit
ratings, liquidity facilities, fuel and
purchased power cost adjustment clause, a
transmission right-of-way and director
resignation
December 15, 1993 February 25, 1994 Proposed Sale of Gas Gathering and
Processing Assets and Palo Verde Nuclear
Generating Station
</TABLE>
E-16
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
Public Service Company of New Mexico
(Registrant)
Date: March 8, 1994 By /s/ B. F. Montoya
-----------------------------------
B. F. Montoya
President and Chief Executive
Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
--------- -------- ----
<S> <C> <C>
/s/ B. F. Montoya Principal Executive Officer March 8, 1994
- ------------------------------------ and Director
B. F. Montoya
President and Chief Executive
Officer
/s/ M. H. Maerki Principal Financial Officer March 8, 1994
- ------------------------------------
M. H. Maerki
Senior Vice President and
Chief Financial Officer
/s/ D. M. Burnett Principal Accounting Officer March 8, 1994
- ------------------------------------
D. M. Burnett
Corporate Controller and
Chief Accounting Officer
/s/ J. T. Ackerman Chairman of the Board March 8, 1994
- ------------------------------------
J. T. Ackerman
/s/ R. G. Armstrong Director March 8, 1994
- ------------------------------------
R. G. Armstrong
Director March , 1994
- ------------------------------------
J. A. Godwin
/s/ L. H. Lattman Director March 8, 1994
- ------------------------------------
L. H. Lattman
/s/ R. U. Ortiz Director March 8, 1994
- ------------------------------------
R. U. Ortiz
/s/ R. M. Price Director March 8, 1994
- ------------------------------------
R. M. Price
/s/ P. F. Roth Director March 8, 1994
- ------------------------------------
P. F. Roth
</TABLE>
E-17
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION OF EXHIBITS PAGE
------- ----------------------- ------------
<C> <S> <C>
2.1 Purchase and Sale Agreement By and Among Public Service
Company of New Mexico, Sunterra Gas Gathering Company,
Sunterra Gas Processing Company (Sellers) and Williams
Gas Processing--Blanco, Inc. (Buyer)
2.2 Agreement to Purchase and Sell Between City of Santa
Fe, New Mexico and Public Service Company of New Mexico
3.2 Bylaws of Public Service Company of New Mexico With All
Amendments to and Including March 1, 1994
10.50 Public Service Company of New Mexico Section 415 Plan
10.51 First Amendment to the Public Service Company of New
Mexico Executive Retention Plan
10.52 First Amendment to the Public Service Company of New
Mexico Performance Stock Plan
10.53 January 12, 1994 Stipulation
10.54 Employment Retirement and Release Agreement By and
Between the Public Service Company of New Mexico and
William M. Eglinton
10.55 Receivable Purchase Agreement Dated as of August 2,
1993, Among Public Service Company of New Mexico
(Seller) and CXC Incorporated (Purchaser) and Citicorp
North America, Inc. (Agent)
10.56 U.S. $40,000,000 Receivables Purchase Agreement Dated
December 21, 1993 Among Public Service Company of New
Mexico (Seller) and Corporate Receivables Corporation
(Investor) and Citicorp North America, Inc. (Agent)
10.57 U.S. $100,000,000 Revolving Credit Agreement Dated as
of December 14, 1993 Among Public Service Company of
New Mexico (Borrower) and The Banks Named Herein
(Banks) and Chemical Bank and Citibank, N.A. (Co-
Agents)
10.58 Amendment No. 8 effective September 12, 1983, to the
Arizona Nuclear Power Project Participation Agreement
(refiled)
10.59* Amended and Restated Lease dated as of September 1,
1993, between The First National Bank of Boston,
Lessor, and the Company, Lessee (EIP Lease).
10.61 Participation Agreement dated as of June 30, 1983 among
Security Trust Company, as Trustee, the Company, Tucson
Electric Power Company and certain financial
institutions relating to the San Juan Coal Trust
(refiled)
10.62 Agreement of the Company pursuant to Item
601(b)(4)(iii) of Regulation S-K (refiled)
23.1 Consent of Arthur Andersen & Co.
23.2 Consent of KPMG Peat Marwick
</TABLE>
<PAGE>
EXHIBIT 2.1
PURCHASE AND SALE AGREEMENT
dated as of February 12, 1994
BY AND AMONG
PUBLIC SERVICE COMPANY OF NEW MEXICO
SUNTERRA GAS GATHERING COMPANY
SUNTERRA GAS PROCESSING COMPANY
(SELLERS)
AND
WILLIAMS GAS PROCESSING - BLANCO, INC.
(BUYER)
<PAGE>
INDEX
Page
----
ARTICLE I. DEFINITIONS .................................................. 1
-----------
Section 1.01 Defined Terms ......................................... 1
-------------
ARTICLE II. PURCHASE AND SALE .......................................... 25
-----------------
Section 2.01 Purchase and Sale of Property ........................ 25
-----------------------------
Section 2.02 Assumption of Liabilities ............................ 25
-------------------------
Section 2.03 Revisions to Property Descriptions ................... 25
----------------------------------
ARTICLE III. CLOSING; PURCHASE PRICE ................................... 25
-----------------------
Section 3.01 Closing Date ......................................... 25
------------
Section 3.02 Purchase Price ....................................... 26
--------------
Section 3.03 Determination of Individual Unadjusted Purchase
-----------------------------------------------
Prices .............................................. 26
------
Section 3.04 Determination of Closing Payment ..................... 26
--------------------------------
Section 3.05 Adjustments to the Purchase Price .................... 27
---------------------------------
Section 3.06 Final Settlement ..................................... 28
----------------
Section 3.07 Allocation of Purchase Price ......................... 29
----------------------------
ARTICLE IV. SELLERS' REPRESENTATIONS ................................... 29
------------------------
Section 4.01 Organization; Authority .............................. 29
-----------------------
Section 4.02 Corporate Authority and Approval ..................... 29
--------------------------------
Section 4.03 No Violation ......................................... 30
------------
Section 4.04 Compliance with Laws and Regulations ................. 30
------------------------------------
Section 4.05 Taxes ................................................ 31
-----
Section 4.06 Litigation ........................................... 31
----------
Section 4.07 Environmental ........................................ 31
-------------
Section 4.08 Gas Plant Property and Pipeline Property ............. 32
----------------------------------------
Section 4.09 Contracts ............................................ 32
---------
Section 4.10 Title to Property .................................... 32
-----------------
Section 4.11 Holding Company; Investment Company .................. 33
-----------------------------------
Section 4.12 Employee Benefits .................................... 33
-----------------
Section 4.13 National Labor Relations Act, as Amended ............. 33
----------------------------------------
Section 4.14 Employment Law Compliance ............................ 33
-------------------------
Section 4.15 Historical Operating Data and Financial Statements ... 34
--------------------------------------------------
Section 4.16 No Third Party Options ............................... 34
----------------------
Section 4.17 FERC Regulation ...................................... 34
---------------
Section 4.18 Environmental Assessments ............................ 34
-------------------------
Section 4.19 Deeds ................................................ 34
-----
Section 4.20 Plant Operations ..................................... 34
----------------
Section 4.21 Historical Sales Information ......................... 34
----------------------------
-i-
<PAGE>
Section 4.22 Design Information ................................... 34
------------------
Section 4.23 SCADA System ......................................... 35
------------
Section 4.24 Cathodic Protection .................................. 35
-------------------
Section 4.25 Gathering and Processing Contracts ................... 35
----------------------------------
ARTICLE V. BUYER'S REPRESENTATIONS ..................................... 35
-----------------------
Section 5.01 Organization; Authority .............................. 35
-----------------------
Section 5.02 Corporate Authority and Approval ..................... 35
--------------------------------
Section 5.03 No Violation ......................................... 36
------------
Section 5.04 Litigation ........................................... 36
----------
Section 5.05 Funds Available ...................................... 36
---------------
Section 5.06 Financial Statements ................................. 36
--------------------
Section 5.07 Holding Company; Investment Company .................. 37
-----------------------------------
Section 5.08 Qualification ........................................ 37
-------------
ARTICLE VI. COVENANTS OF SELLERS ....................................... 37
--------------------
Section 6.01 Hart-Scott-Rodino Act; Other Consents ................ 37
-------------------------------------
Section 6.02 NMPUC Approval ....................................... 37
--------------
Section 6.03 Conditions to Closing ................................ 38
---------------------
Section 6.04 Operation of the Property ............................ 38
-------------------------
Section 6.05 Access ............................................... 39
------
Section 6.06 Approvals ............................................ 39
---------
Section 6.07 Deliveries at Closing ................................ 39
---------------------
Section 6.08 WARN Notification. ................................... 40
-----------------
Section 6.09 Additional Covenants of Sellers ...................... 40
-------------------------------
Section 6.10 Elimination of Gas Imbalances Among Sellers. ......... 41
-------------------------------------------
Section 6.11 Vehicles ............................................. 41
--------
Section 6.12 SCADA ................................................ 41
-----
Section 6.13 Certain Missing Rights-of-Way ........................ 41
-----------------------------
ARTICLE VII. COVENANTS OF BUYER ........................................ 41
------------------
Section 7.01 Hart-Scott-Rodino Act; Other Consents ................ 41
-------------------------------------
Section 7.02 NMPUC Approval ....................................... 42
--------------
Section 7.03 Conditions to Closing ................................ 42
---------------------
Section 7.04 Contact With Third Parties Regarding Property ........ 42
---------------------------------------------
Section 7.05 Review of Records .................................... 42
-----------------
Section 7.06 Deliveries at Closing ................................ 43
---------------------
ARTICLE VIII. BUYER'S CONDITIONS TO CLOSING ............................ 43
-----------------------------
Section 8.01 Conditions Precedent to Buyer's Obligations .......... 43
-------------------------------------------
ARTICLE IX. SELLERS' CONDITIONS TO CLOSING ............................. 44
Section 9.01 Conditions Precedent to Sellers' Obligations ......... 44
--------------------------------------------
-ii-
<PAGE>
ARTICLE X. TAXES ....................................................... 46
-----
Section 10.01 Compliance with Reporting Requirements .............. 46
--------------------------------------
Section 10.02 Liability For Taxes ................................. 46
-------------------
ARTICLE XI. CERTAIN EMPLOYEE MATTERS ................................... 47
------------------------
Section 11.01 Hiring of Employees ................................. 47
-------------------
Section 11.02 Certain Plans and Other Arrangements ................ 49
------------------------------------
Section 11.03 Certain Preclosing Employment Matters ............... 50
-------------------------------------
Section 11.04 Cooperation ......................................... 52
-----------
ARTICLE XII. EXTENT AND SURVIVAL OF REPRESENTATIONS,
---------------------------------------
WARRANTIES, COVENANTS AND AGREEMENTS; INDEMNIFICATION .............. 53
-----------------------------------------------------
Section 12.01 Scope of Representations ............................ 53
------------------------
Section 12.02 Survival ............................................ 53
--------
Section 12.03 Indemnification of Buyer ............................ 54
------------------------
Section 12.04 Indemnification of Sellers .......................... 55
--------------------------
Section 12.05 Indemnification Procedures .......................... 56
--------------------------
Section 12.06 Insurance Proceeds .................................. 60
------------------
Section 12.07 Exclusivity ......................................... 61
-----------
Section 12.08 Indemnity Limitations ............................... 61
---------------------
ARTICLE XIII. TERMINATION .............................................. 62
-----------
Section 13.01 Termination ......................................... 62
-----------
Section 13.02 Effect of Agreement Upon Termination ................ 63
------------------------------------
ARTICLE XIV. OTHER AGREEMENTS .......................................... 64
----------------
Section 14.01 Settlement of Income and Expenses Received or Paid .. 64
--------------------------------------------------
Section 14.02 Discharge of Liabilities ............................ 64
------------------------
Section 14.03 Certain Transition Agreements ....................... 64
-----------------------------
Section 14.04 Gathering For Bundled Contracts ..................... 65
-------------------------------
Section 14.05 Delivery and Maintenance of Records ................. 65
-----------------------------------
Section 14.06 Names ............................................... 67
-----
Section 14.07 Financial Accommodations ............................ 67
------------------------
Section 14.08 Arbitration ......................................... 67
-----------
Section 14.09 Waiver .............................................. 70
------
Section 14.10 Environmental Remediation ........................... 70
-------------------------
Section 14.11 Equipment Removal ................................... 71
-----------------
Section 14.12 Inventory Purchase Option ........................... 71
-------------------------
Section 14.13 Use of Communications Tower ......................... 72
---------------------------
Section 14.14 T-1 Telephone Circuit ............................... 72
---------------------
Section 14.15 Sharing of Epoxy-Coated Pipe Recovery ............... 72
-------------------------------------
Section 14.16 Consents Not Obtained ............................... 72
---------------------
Section 14.17 National Labor Relations Act ........................ 73
----------------------------
-iii-
<PAGE>
ARTICLE XV. MISCELLANEOUS PROVISIONS ................................... 73
------------------------
Section 15.01 Notices ............................................. 73
-------
Section 15.02 Exclusive Agreement ................................. 74
-------------------
Section 15.03 Choice of Law; Amendments; Headings ................. 74
-----------------------------------
Section 15.04 Assignments and Third Parties ....................... 74
-----------------------------
Section 15.05 Brokers ............................................. 75
-------
Section 15.06 Severability ........................................ 75
------------
Section 15.07 Counterparts ........................................ 75
------------
Section 15.08 Further Assurances .................................. 75
------------------
Section 15.09 Waiver of Compliance with Bulk Transfer Laws ........ 75
--------------------------------------------
Section 15.10 Announcements ....................................... 75
-------------
Section 15.11 Waiver .............................................. 76
------
-iv-
<PAGE>
Schedules and exhibits are omitted. These are identified in the index to
the Purchase and Sale Agreement. The Company agrees to furnish supplementally
a copy of any omitted schedule or exhibit to the Securities and Exchange
Commission upon request.
SCHEDULES AND EXHIBITS
----------------------
Schedule 1.01(a)(i) - PNM Pipelines
Schedule 1.01(a)(ii) - Gathering Pipelines
Schedule 1.01(a)(iii) - PNM Gas Plants
Schedule 1.01(a)(iv) - Processing Gas Plants
Schedule 1.01(a)(v) - PNM Joint Easements
Schedule 1.01(a)(vi) - Gathering Joint Easements
Schedule 1.01(a)(vii) - Processing Joint Easements
Schedule 1.01(b)(i)(w) - PNM Contracts
Schedule 1.01(b)(i)(y) - PNM Retained Liabilities
Schedule 1.01(b)(i)(z) - PNM Transferred Vehicles
Schedule 1.01(b)(ii)(x) - Gathering Excluded Contracts
Schedule 1.01(b)(ii)(y) - Gathering Retained Liabilities
Schedule 1.01(b)(ii)(z) - Gathering Transferred Vehicles
Schedule 1.01(b)(iii)(x) - Processing Excluded Contracts
Schedule 1.01(b)(iii)(y) - Processing Retained Liabilities
Schedule 1.01(b)(iii)(z) - Processing Transferred Vehicles
Schedule 1.01(c) - Dogie Campsite
Schedule 1.01(d)(i) - Certain PNM Retained Assets
Schedule 1.01(d)(ii) - Certain Gathering Retained Assets
Schedule 1.01(d)(iii) - Certain Processing Retained Assets
Schedule 1.01(e)(i) - PNM Litigation
-v-
<PAGE>
Schedule 1.01(e)(ii) - Gathering Litigation
Schedule 1.01(e)(iii) - Processing Litigation
Schedule 1.01(f) - Map
Schedule 1.01(h) - Certain Permitted Encumbrances - Gas Plants and
Pipelines
Schedule 1.01(i)(i) - Operations and Designated Employees
Schedule 4.03 - Certain Conflicts
Schedule 4.04 - Certain Potential Non-compliance with Laws
Schedule 4.06 - Litigation Relating to Sellers
Schedule 4.07 - Environmental Matters
Schedule 4.08 - Certain Matters Relating to Plant and Equipment
Schedule 4.09 - Potential Contractual Defaults
Schedule 4.12 - Plans
Schedule 4.15 - Historical Operating and Financial Statements
Schedule 4.17 - Rate Regulated Property
Schedule 4.18 - Environmental Assessments
Schedule 4.19 - Transfers of Fee Property
Schedule 4.20 - Plant Operations
Schedule 4.21 - Historical Sales Information
Schedule 4.22 - Design Information
Schedule 6.04(b) - Prior Operating Commitments
Schedule 14.06 - Names Authorized for Use
Exhibit A - Easement Agreement
-vi-
<PAGE>
Exhibit B-1 - PNM General Conveyance
Exhibit B-2 - Gathering General Conveyance
Exhibit B-3 - Processing General Conveyance
Exhibit C - Gas Gathering and Processing Contracts
Exhibit D - Operations and Balancing Agreements
Exhibit E - Gas Purchase Option
Exhibit F - Gas Storage Option
Exhibit G - Communications Rights Letter
-vii-
<PAGE>
PURCHASE AND SALE AGREEMENT
---------------------------
This Purchase and Sale Agreement, dated as of February 12, 1994 (the
"Signing Date"), is by and among Public Service Company of New Mexico, a New
Mexico corporation ("PNM"), Sunterra Gas Gathering Company, a New Mexico
corporation and a wholly owned subsidiary of PNM ("Gathering Company"), and
Sunterra Gas Processing Company, a New Mexico corporation and a wholly owned
subsidiary of PNM ("Processing Company") (collectively "Sellers" and
individually "Seller"), and Williams Gas Processing - Blanco Inc., a Delaware
corporation ("Buyer" and together with Sellers, the "Parties," and each of
Sellers and Buyer, a "Party").
RECITALS
--------
WHEREAS, PNM desires to sell to Buyer the PNM Property (as hereinafter
defined) which is used by PNM's operating division commonly known as the Gas
Company of New Mexico ("GCNM"), Gathering Company desires to sell to Buyer the
Gathering Property (as hereinafter defined) and Processing Company desires to
sell to Buyer the Processing Property (as hereinafter defined), upon the terms
and subject to the conditions hereinafter set forth; and
WHEREAS, Buyer desires to purchase from PNM, Gathering Company and
Processing Company, respectively, the PNM Property, the Gathering Property and
the Processing Property, upon the terms and subject to the conditions
hereinafter set forth; and
WHEREAS, PNM desires to transfer to Buyer the PNM Liabilities (as
hereinafter defined), Gathering Company desires to transfer to Buyer the
Gathering Liabilities (as hereinafter defined) and Processing Company desires to
transfer to Buyer the Processing Liabilities (as hereinafter defined), upon the
terms and subject to the conditions hereinafter set forth; and
WHEREAS, Buyer desires to assume from PNM, Gathering Company and
Processing Company, respectively, the PNM Liabilities, the Gathering Liabilities
and the Processing Liabilities, upon the terms and subject to the conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the respective representations,
warranties, covenants, agreements and conditions contained herein, the Parties
agree as follows:
ARTICLE I. DEFINITIONS
-----------
Section 1.01 Defined Terms. The terms set forth below in this
-------------
Article I shall have the meanings ascribed to them below or in the part of this
Agreement referred to below:
"AAA" - as defined in Section 12.05(h).
<PAGE>
"Accountant" - as defined in Section 3.06.
"Affiliate" - any person, firm, corporation or other legal entity
controlling, controlled by or under common control with the party in
question. A person shall be presumed to control any corporation of which
he, she or it owns more than fifty percent (50%) of the voting securities
or any partnership of which he, she or it is a general partner.
"Agreement" - this Purchase and Sale Agreement and all Exhibits and
Schedules hereto, all of which constitute a part of this Agreement.
"Allocated Values" - as defined in Section 3.07.
"Assumed Liabilities" - as defined in Section 12.04.
"Board" - as defined in Section 14.08(b).
"Bundled Contracts" - those PNM Contracts providing for both gathering
and transmission services for third parties.
"Business" - the Gathering Business, PNM Business and Processing
Business.
"Business Day" - any day other than Saturday, Sunday or other day on
which federally chartered commercial banks in Albuquerque, New Mexico are
authorized by law to close.
"Buyer" - as defined in the preamble.
"Buyer Financial Statements" - as defined in Section 5.07.
"Buyer Hiring Period" - the period commencing on the first day after
regulatory approval with respect to the Sale is obtained and ending on the
day before the Closing Date.
"Buyer Indemnified Loss" - as defined in Section 12.03.
"Buyer's Qualified Plan" - as defined in Section 11.02(b).
"Chairman" - as defined in Section 14.08(b).
"Claim Notice" - as defined in Section 12.05(a).
"Closing" - the closing of the Sale.
-2-
<PAGE>
"Closing Date" - as defined in Section 3.01.
"Closing Time" - 12:01 a.m. Albuquerque, New Mexico time, on the
Closing Date.
"Closing Payment" - as defined in Section 3.04.
"Code" - the Internal Revenue Code of 1986, as amended.
"Communications Rights Letter" - a letter agreement regarding
temporary use of a certain radio frequency held by PNM to be entered into
by PNM and Buyer on the terms set forth in Exhibit G.
"Confidentiality Agreement" - that certain letter agreement regarding
confidentiality between Guarantor and PNM dated October 21, 1993.
"Contracts" - the PNM Contracts, the Gathering Contracts and the
Processing Contracts.
"Defensible Title" - title that can be successfully defended against
any adverse claims.
"Designated Employees" - each Operations Employee of Sellers whose
name, corresponding job description and GARP eligibility is set forth on
the listing required to be provided (within sixty (60) days after the
Signing Date) by Sellers to Buyer in accordance with Section 11.01, as
adjusted from time to time in accordance with the provisions of Section
11.01.
"Easement Agreement" - that certain easement agreement regarding the
Retained Easements and the Joint Easements to be entered into between
Sellers and Buyer, attached hereto as Exhibit A.
"Easements" - easements, surface leases, rights-of-way, servitudes,
permits and other rights to use lands owned or leased by another Person.
"Effective Date" - April 1, 1995, provided there is no request for
additional information or documentary material pursuant to Section 803.20
of the regulations promulgated under the Hart-Scott-Rodino Act. If such a
request is made, then the Effective Date shall be postponed by the number
of days that elapse between the date of such request and (i) 20 days
following substantial compliance with such a request by all parties to whom
such a request is directed, if the reviewing agency does not employ a
"quick look" procedure, or (ii) 20 days following the filing of such
additional information
-3-
<PAGE>
and documentary material as may be satisfactory to the reviewing agency, if
a "quick look" procedure is followed.
"Effective Time" - 12:01 a.m. Albuquerque, New Mexico time, on the
Effective Date.93
"Election Period" - as defined in Section 12.05(a).
"Employee" - means any person who, as of the Closing Date, is a
current or former employee of Sellers or their respective Affiliates.
"Environmental Laws" - federal, state or municipal laws, rules and
regulations governing, regulating or relating to pollution or the
protection of the environment, including, but not limited to, the Resource
Conservation and Recovery Act of 1976, as amended, the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as
amended, the Superfund Amendments and Reauthorization Act of 1986, as
amended, and all similar state, municipal and local laws, ordinances,
rules, regulations, orders, directives, determinations and requirements
each as in effect on the Signing Date for purposes of the representations
given on the Signing Date and as in effect on the Closing Date for all
other purposes of this Agreement.
"Epoxy - Coated Pipe" - that certain fusion bonded epoxy - coated pipe
sold to Gathering Company and/or PNM from and after approximately May, 1985
by, among others, McJunkin Corporation, Amfac Pipe & Supply, Vinson Supply
Company, Consolidated Pipe & Supply, TexTube, Inc., Grant Supply Company
and/or Tyler-Dawson and further described (as to the portion purchased by
PNM) in Complaint No. CV-93-10572 filed in the Second Judicial District
Court of Bernalillo County, New Mexico on November 24, 1993.
"ERISA" - the Employee Retirement Income Security Act of 1974, as
amended.
"ESI Audits" - the Abbreviated Compliance Audits and Phase I
Environmental Assessments prepared for PNM by Environmental Services Inc.
and dated March, 1993.
"Excluded Property Claims" - Seller's claims and causes of action of
any kind whatsoever (whether absolute or contingent, inchoate or vested)
(a) which arise from or are attributable to the PNM Retained Assets, the
Gathering Retained Assets, the Processing Retained Assets, or any other
assets being retained by Sellers, (b) which relate to the PNM Retained
Liabilities, the Gathering Retained Liabilities or the Processing Retained
Liabilities, (c) which relate to matters for which any Seller is
potentially liable pursuant to Section 4.07 or Section 12.03(d) of this
Agreement and which are asserted by any Seller against a third party or
parties on or before the fifth anniversary of the Closing Date or (d) which
otherwise relate to the Property and which
-4-
<PAGE>
are asserted by any Seller against a third party or parties on or before
the second anniversary of the Closing Date.
"Exhibit" - an exhibit to this Agreement.
"Final Settlement Date" - as defined in Section 3.06.
"GARP" - shall mean the Gathering GARP, PNM GARP and Processing GARP
collectively.
"GARP-Eligible Employees" - any individual who is employed by Sellers
and who is identified on Schedule 1.01 (i)(i) as a participant in a GARP as
---------------------
of the Signing Date.
"Gas" - natural gas, casinghead gas and other hydrocarbons and
associated non-hydrocarbons in a gaseous state following primary separation
by mechanical separators, including Plant Products.
"Gas Gathering and Processing Contracts" - those certain gas gathering
and processing contracts to be entered into between PNM, Gathering Company
and Buyer, attached hereto as Exhibit C.
"Gas Plant Property" - the machinery, equipment, fixtures, pipes,
valves, fittings, vessels and other tangible personal property of every
kind and nature owned by PNM or Processing Company, as applicable, and
affixed to, located at or primarily used in connection with the PNM Gas
Plants or the Processing Gas Plants, as applicable, including, without
limitation, any compressor station owned by PNM or Processing Company as
owner of a Gas Plant for compressing inlet and residue Gas from the Gas
Plants, but excluding without limitation those items described on Schedules
---------
1.01(d)(i) and 1.01(d)(iii) and any tangible personal property located on
---------------------------
the Signing Date in the Albuquerque, New Mexico offices of Sellers.
"Gas Plants" - the PNM Gas Plants and the Processing Gas Plants.
"Gas Purchase Option" - a gas purchase option agreement to be entered
into between PNM and Buyer on the terms set forth in Exhibit E.
"Gas Storage Option" - a gas storage option agreement to be entered
into between PNM and Buyer on the terms set forth on Exhibit F.
"Gathering Business" - the gas gathering business and operations being
conducted on the Signing Date by Gathering Company in the San Juan Basin in
the State of New Mexico through the use of the Property.
-5-
<PAGE>
"Gathering Closing Payment" - as defined in Section 3.04.
"Gathering Company" - as defined in the preamble.
"Gathering Contracts" - all contracts to which Gathering Company is a
party that are used in connection with the ownership and operation of the
Gathering Pipelines, including, without limitation, Gas gathering contracts
used in connection with such ownership or operation but excluding the
Gathering Excluded Contracts.
"Gathering Excluded Contracts" - all Gas purchase contracts to which
Gathering Company is a party and the contracts listed on Schedule
--------
1.01(b)(ii)(x).
--------------
"Gathering GARP" - the Sunterra Gas Gathering Company Gas Asset
Retention Plan, dated effective April 1, 1993.
"Gathering General Conveyance" - a conveyance instrument substantially
in the form of Exhibit B-2.
"Gathering Liabilities" - as defined in Section 12.04.
"Gathering Pipelines" - collectively, the land, Easements and other
real property interests described in Schedule 1.01(a)(ii), together with
--------------------
the Gas pipelines and related facilities located thereon, as in certain
cases more fully depicted on the map attached hereto as Schedule 1.01(f),
----------------
and all pipelines of 4" diameter or less running from gas wells or
abandoned gas wells to pipelines located on the land, easements and other
real property interests described on Schedule 1.01(a)(ii), provided that
--------------------
Gathering Company shall retain, and there shall be excluded from the
definition of Gathering Pipelines, (a) the Gas pipelines and other
equipment designated as "Retained Assets" in Schedule 1.01(a)(vi) and (b)
--------------------
subject to the Easement Agreement, either a nonexclusive right to use, or a
segregated portion of, each Joint Easement containing such pipelines and
other equipment, the form and extent of such retained interest in each
Joint Easement to be determined by the requirements of the granting
instrument (and grantor) and to be to the reasonable satisfaction of each
party.
"Gathering Property" -
(1) All of Gathering Company's right, title and interest in and to:
(a) The Gathering Pipelines;
(b) The Pipeline Property;
(c) The Gathering Contracts;
-6-
<PAGE>
(d) The Gathering Transferred Vehicles;
(e) All Governmental Licenses to the extent applicable to the
Property, but not also applicable to assets being retained by
Sellers, to the extent freely transferable to Buyer except for
any payment of a transfer fee;
(f) The Property Claims; and
(g) The Records relating to the Gathering Property;
including without limitation any Gathering Pipelines and Pipeline Property
resulting from Required Capital Expenditures or any Optional Capital
Expenditures approved by Buyer pursuant to Section 6.04(b), but excluding
the Gathering Retained Assets, and
(2) The Software License from Gathering Company
"Gathering Purchase Price" - as defined in Section 3.02.
"Gathering Purchase Price Adjustment" - as defined in Section 3.04.
"Gathering Retained Assets" -
(a) All assets, including without limitation all accounts receivable
with respect to the Gathering Property, but excluding any Plant
Product imbalances or Gas imbalances for which a Purchase Price
Adjustment is made, that are, or would be required to be, accrued
and recognized consistent with prior practices as current assets
under generally acceptable accounting principles as of the
Closing Time;
(b) Any vehicles and construction machinery located at or on the
Gathering Property other than the Gathering Transferred Vehicles;
(c) All information and materials relating to the Gathering Property
that are stored in a computer or on a computer disk or tape but
that are not reasonably severable from the general corporate
records of any Seller; provided, however, that each Seller shall
use reasonable efforts to make such information available to
Buyer if such information is necessary for the conduct of the
Business by Buyer;
(d) All Gathering Excluded Contracts;
(e) The Retained Easements applicable to the Gathering Property;
-7-
<PAGE>
(f) The regulator station and the supervisory control and data
acquisition ("SCADA") controls at the Chaco compressor site on
the Gathering Pipeline and associated remote transmitting unit
used on the Signing Date for monitoring the San Juan Triangle,
San Juan Interconnect and San Juan Compressor;
(g) Subject to the Easement Agreement, a nonexclusive right to use
(with Buyer), or a segregated portion of, the Joint Easements and
any pipeline and equipment in the Joint Easements that are not
designated as Gathering Property in Schedule 1.01 (a) (vi);
----------------------
(h) All Epoxy-coated pipe in inventory;
(i) Those items described in Schedule 1.01(d)(ii); and
--------------------
(j) The Excluded Property Claims attributable to Gathering Company.
"Gathering Retained Liabilities" -
(a) All liabilities, including without limitation all Property
Expenses with respect to the Gathering Property, but excluding
any Plant Product imbalances and Gas imbalances for which a
Purchase Price Adjustment is made, that are, or would be required
to be, accrued and recognized consistent with prior practice as
current liabilities under generally accepted accounting
principles as of the Closing Time;
(b) Federal or state income tax liability with respect to the
Gathering Property and the Gathering Business incurred prior to
the Closing Time;
(c) Any liability of Gathering Company for the litigation described
in Schedule 1.01(e)(ii);
--------------------
(d) Any indebtedness of Gathering Company under that certain Term
Loan Agreement with PNM dated as of March 1, 1990, and any other
indebtedness for borrowed money, and any obligations under any
associated mortgage, deed of trust or security agreement securing
payment thereof;
(e) Any liability or other obligation of Gathering Company, , whether
actual, contingent, known or unknown, which in any way relates to
any: (i) "employee benefit plan," as such term is defined in
Section 3 (3) of ERISA, including, but not limited to, employee
benefit plans, such as foreign plans, which are not subject to
the provisions of ERISA and any
-8-
<PAGE>
multiemployer plan as defined in Section 4001(a)(3) of ERISA or
Section 414(f) of the Code (all items described in this
Subsection (i) are hereinafter defined in this Agreement as
"Plans"); and (ii) personnel policy, stock option plan,
collective bargaining agreement (or work agreement), bonus plan
or arrangement, incentive award plan or arrangement, vacation
policy, severance pay plan, policy or agreement, deferred
compensation agreement or arrangement, executive compensation or
supplemental income arrangement, retiree benefit plan or
arrangement, fringe benefit program or practice (whether or not
taxable), employee loan, consulting agreement, employment
agreement and each other employee benefit plan, agreement,
arrangement, program, practice or understanding which is not
described in Subsection (i) above (all items described in this
Subsection (ii) are hereinafter defined in this Agreement as
"Benefit Program or Agreements" and the Plans and Benefit Program
or Agreements are hereinafter collectively defined in this
Agreement as the "Employee Benefit Plans"), to the extent such
liability is not expressly made the responsibility of Buyer
pursuant to Article XI. In this regard, except for those
liabilities expressly made the responsibility of Buyer pursuant
to Article XI, Gathering Company's liabilities shall include, but
shall not be limited to, the full cost and expense of any
entitlement of benefits under all Employee Benefit Plans
(including benefits payable due to the Sale) which are, have been
or will be sponsored, maintained or contributed to by Gathering
Company for the benefit of any Employee without regard to whether
claims for such benefits are received, or such benefits become
payable, before or after the Closing Date. In addition,
Gathering Company shall bear all liabilities or other obligations
arising under or resulting from any collective bargaining
agreement (or work agreement) to which it is, or was at any time,
a party.
(f) Any liability or other obligation of Gathering Company , whether
actual, contingent, known or unknown, arising out of or resulting
from the application to Gathering Company of any statute, rule,
regulation, law or agreement regarding employment or otherwise
claimed by any Employee with respect to employment by Gathering
Company, except those GARP liabilities with respect to a Buyer
GARP Employee that are expressly made the responsibility of Buyer
pursuant to Article XI and those liabilities that are expressly
made the responsibility of Buyer pursuant to Section 12.04 (c)
and (d);
(g) Any liability of Gathering Company with respect to the Gathering
Retained Assets, subject to any differing contractual
arrangements between the parties;
-9-
<PAGE>
(h) Any liabilities set forth on Schedule 1.01(b)(ii)(y); and
-----------------------
(i) Any liabilities of Gathering Company with respect to items (a)(i)
and (ii) of the Permitted Encumbrances in existence on or before
the Closing Date.
"Gathering Transferred Vehicles" - any vehicles and construction
machinery specifically described on Schedule 1.01(b)(ii)(z), less
-----------------------
retirements and plus replacements pursuant to Seller's past practices,
subject to Section 6.11.
"GCNM" - as defined in the recitals.
"General Conveyances" - the PNM General Conveyance, the Gathering
General Conveyance and the Processing General Conveyance.
"Governmental Authority" - the United States of America, any state,
commonwealth, territory or possession thereof and any tribe, and any
political subdivision of any of the foregoing, including, but not limited
to, courts, departments, commissions, boards, bureaus, agencies or other
instrumentalities.
"Governmental Licenses" - licenses, permits, certificates of public
convenience and necessity, consents and other similar licenses issued by
any Governmental Authority.
"Guarantor" - as defined in Section 5.06.
"Guarantor Unaudited Financial Statements" - as defined in Section
5.06.
"Hart-Scott-Rodino Act" - the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the rules and regulations promulgated
thereunder.
"Indemnified Party" - as defined in Section 12.05(a).
"Indemnifying Party" - as defined in Section 12.05(a).
"Indemnity Notice" - as defined in Section 12.05(d).
"Interim Period" - the time period, if any, between the Effective Time
and the Closing Time.
"Interim Period Compensation" - $9,637.00 per day, to be allocated
among the PNM Property, the Gathering Property and the Processing Property
in proportion to the relative sizes of the unadjusted PNM Purchase Price,
the Unadjusted Gathering Purchase Price and the Unadjusted Processing
Purchase Price.
-10-
<PAGE>
"Joint Easements" - those Easements used by both Pipelines or other
equipment included in the Property and Pipelines or other equipment being
retained by any Seller which are listed on Schedule 1.01(a)(v), Schedule
-----------------------------
1.01(a)(vi), or Schedule 1.01(a)(vii).
-------------------------------------
"Listed Plans" - as defined in Section 4.12.
"Losses" - any and all actual and direct (but not consequential)
claims, liabilities, losses, costs (including court costs), expenses and
damages, wherever arising or incurred (including, without limitation,
amounts paid in settlement and reasonable attorneys' fees and
disbursements), exceeding individually $10,000 (individually, a "Loss").
"Material Adverse Effect" - (a) with respect to the Property or the
Business, any adverse effect on the Property or the Business, taken as a
whole, and (b) with respect to Buyer, any adverse effect on the business,
financial condition, operations or assets of Buyer, taken as a whole,
which, in the case of both (a) and (b) above, exceeds $10,000,000 for
purposes of determining whether conditions to Closing have been satisfied,
or exceeds $25,000 for all other purposes under this Agreement; provided
that the term "Material Adverse Effect" shall not in either case include
the effects of changes in general economic, industry or market conditions
or changes in law or regulatory policy.
"Material Contracts" - those Contracts that (a) individually provide
for annual revenues or expenditures of or by any Seller in excess of
$50,000, (b) provide third party insurance or indemnity in connection with
the acquisition, installation, construction, operation, repair, or removal
of real property, equipment or facilities, or (c) contain covenants
restricting any Seller's ability to (i) compete with any Person or (ii)
engage in any line of business.
"NMPUC" - New Mexico Public Utility Commission.
"Operations and Balancing Agreements" - those certain operations and
balancing agreements to be entered into between PNM, Gathering Company and
Buyer, attached hereto as Exhibit D.
"Operations Employee" - each of the one hundred and sixty-seven (167)
employees of Sellers whose name is listed on Schedule 1.01 (i)(i), of which
--------------------
one hundred and thirty-two (132) employees are identified as GARP-Eligible
Employees on such schedule.
"Optional Capital Expenditures" - any capital expenditures to be made
after the Signing Date for improvements or additions to the Property (but
not maintenance or repair of existing Property or replacement of damaged or
malfunctioning Property with
-11-
<PAGE>
equivalent new Property) individually costing in excess of $25,000.00,
other than Required Capital Expenditures.
"Parties" - as defined in the preamble.
"Party" - as defined in the preamble.
"Permitted Encumbrances" - shall include:
(a) With respect to the Gas Plants and the Pipelines:
(i) Liens for property and similar taxes not yet due or, if
due, being contested in good faith by appropriate
proceedings;
(ii) Materialmen's, mechanics' and other similar liens or
charges arising in the ordinary course of business for
obligations not yet due or, if due, being contested in
good faith by appropriate proceedings;
(iii) Required Governmental Licenses customarily obtained
after the Closing, including without limitation consents
or new licenses from the granting Governmental
Authorities necessary for the transfer of Easements;
(iv) Other required consents to assignment for which written
consents are obtained from the appropriate Persons prior
to the Closing Date;
(v) Rights reserved to or vested in any Governmental
Authority to control or regulate any of the Pipelines or
the Gas Plants in any manner;
(vi) Liens arising under the Contracts and the Excluded
Contracts;
(vii) The terms and conditions of the Contracts, and of any
wellhead Gas purchase contracts in effect on the Signing
Date, binding on any Seller and relating to the ownership
or operation of any of the Pipelines or the Gas Plants, as
applicable;
(viii) Liens created pursuant to the Oil and Gas Products Lien
Act, N.M. Stat. Ann. (S)(S) 48-9-1 et seq. (1987);
-------
-12-
<PAGE>
(ix) Liens securing indebtedness for borrowed money that are
released at or prior to Closing;
(x) Any title defect which prevents any Seller from conveying
title to any part of the Property and which is waived by
Buyer in writing; and
(xi) Those matters listed on Schedule 1.01(h).
----------------
(b) With respect to the Pipelines only:
(i) Easements that do not interfere with the use of the
Pipelines for pipeline purposes.
"Person" - any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization or
government (or agency or political subdivision thereof, including any
Governmental Authority).
"Pipeline Property" - the buildings, structures, fixtures, stations,
compressors, facilities, improvements, equipment, appurtenances and other
tangible personal property of every kind and nature owned by PNM or
Gathering Company, as applicable, and located at the Pipelines or primarily
used in connection with the PNM Pipelines or the Gathering Pipelines, or
the PNM Business or the Gathering Business, as applicable, but excluding
without limitation those items described on Schedules 1.01(d)(i) and
------------------------
1.01(d)(ii) and any tangible personal property located on the Signing Date
-----------
in the Albuquerque, New Mexico offices of Sellers.
"Pipelines" - the PNM Pipelines and the Gathering Pipelines. Any
individual part of the Pipelines is referred to hereinafter as a
"Pipeline."
"Plant Products" - liquids and liquefiable hydrocarbons and non-
hydrocarbons recovered from Gas processed in the Gas Plants.
"PNM" - as defined in the preamble.
"PNM Business" - the gas gathering and processing business and
operations being conducted on the Signing Date by PNM in the San Juan and
Permian Basins in the State of New Mexico through the use of the Property.
"PNM Closing Payment" - as defined in Section 3.04.
"PNM Contracts" - the contracts listed on Schedule 1.01(b)(i)(w),
----------------------
provided, however, that PNM Contracts shall include only those portions of
the Bundled Contracts
-13-
<PAGE>
listed on Schedule 1.01(b)(i)(w) that relate to gathering Gas upstream from
----------------------
the Gas Plants.
"PNM GARP" - the Public Service Company of New Mexico Gas Asset
Retention Plan, dated effective April 1, 1993.
"PNM Gas Plants" - collectively, the land, Easements and other real
property interests described on Schedule 1.01(a)(iii), together with the
---------------------
gas processing plants located thereon, as in certain cases more fully
depicted on the map attached hereto as Schedule 1.01(f), provided that PNM
----------------
shall retain, and there shall be excluded from the definition of PNM Gas
Plants, (a) the Gas plants and other equipment designated as "Retained
Assets" in Schedule 1.01(a)(v) and (b) subject to the Easement Agreement,
-------------------
either a nonexclusive right to use, or a segregated portion of, each Joint
Easement containing such Gas plants and other equipment, the form and
content of such retained interest in each Joint Easement to be determined
by the requirements of the granting instrument (and grantor), and to be to
the reasonable satisfaction of each party.
"PNM General Conveyance" - an instrument of conveyance and assumption
substantially in the form of Exhibit B-1.
"PNM Liabilities" - as defined in Section 12.04.
"PNM Pipelines" - collectively, the land, Easements and other real
property interests described in Schedule 1.01(a)(i), together with the Gas
-------------------
pipelines and related facilities located thereon, as in certain cases more
fully depicted on the map attached hereto as Schedule 1.01(f), and all
----------------
pipelines of 4" diameter or less running from gas wells or abandoned gas
wells to pipelines located on the land, Easements and other real property
interests described in Schedule 1.01(a)(i), provided PNM shall retain, and
-------------------
there shall be excluded from the definition of PNM Pipelines, (a) the Gas
pipelines and other equipment designated as "Retained Assets" in Schedule
--------
1.01(a)(v) and (b) subject to the Easement Agreement, either a nonexclusive
----------
right to use, or a segregated portion of, each Joint Easement containing
such pipelines and other equipment, the form and content of such retained
interest in each Joint Easement to be determined by the requirements of the
granting instrument (and grantor), and to be to the reasonable satisfaction
of each party.
"PNM Property" -
(1) All of PNM's right, title and interest in and to:
(a) The PNM Pipelines;
(b) The Pipeline Property;
-14-
<PAGE>
(c) the PNM Gas Plants;
(d) the Gas Plant Property;
(e) The PNM Contracts;
(f) The PNM Transferred Vehicles;
(g) All Governmental Licenses to the extent applicable to the
Property, but not also applicable to assets being retained by
Sellers, to the extent freely transferable to Buyer except for
any payment of a transfer fee;
(h) The flow end devices, remote transmitting units, and transmitter
equipment supplied by PNM pursuant to Section 6.12;
(i) The Property Claims; and
(j) The Records relating to the PNM Property;
including without limitation any PNM Pipelines, PNM Gas Plants,
Pipeline Property and Gas Plant Property resulting from Required Capital
Expenditures or Optional Capital Expenditures approved by Buyer pursuant to
Section 6.04(b), but excluding the PNM Retained Assets, and
(2) The Software License from PNM.
"PNM Purchase Price" - as defined in Section 3.02.
"PNM Purchase Price Adjustment" - as defined in Section 3.04.
"PNM Retained Assets" -
(a) All assets, including without limitation, all accounts receivable
with respect to the PNM Property, but excluding any Plant Product
imbalances or Gas imbalances for which a Purchase Price
Adjustment is made, that are, or would be required to be, accrued
and recognized consistent with prior practices as current assets
under generally accepted accounting principles as of the Closing
Time;
(b) Any vehicles and construction machinery located at or on the PNM
Property other than the PNM Transferred Vehicles;
-15-
<PAGE>
(c) All information and materials related to the PNM Property that
are stored in a computer or on a computer disk or tape but that
are not reasonably severable from the general corporate records
of any Seller; provided, however, that each Seller shall use
reasonable efforts to make such information available to Buyer if
such information is necessary for the conduct of the Business by
Buyer;
(d) Those portions of the Bundled Contracts that relate to the
transmission of Gas downstream from the Gas Plants;
(e) Any rights against producers as a result of such producers'
underdeliveries of Gas gathered under the Bundled Contracts and
any rights against El Paso Natural Gas Company or Transwestern
Pipeline Company as a result of PNM's overdeliveries from the PNM
Pipelines to El Paso's or Transwestern's pipeline, as applicable;
(f) All natural gas odorizer units located on the Property;
(g) The communications tower and electrical control center at the Gas
Plant at Kutz, including related test equipment, A/C power meters
and telephone interface;
(h) The controls for the SCADA system for the Amine Gas Plant that
are located in PNM's dispatch office for the area, including
without limitation the Baker/BJ Software Measurement and Control
System;
(i) The SCADA system remote transmitting units and transducers at 4"
National, TW Antelope, EPNG Antelope, Avalon Plant, Amine Plant,
Dagger Draw Compressor, Cunningham Junction and elsewhere in Lea
and Eddy counties, New Mexico.
(j) The SCADA system remote transmitting units and transducers at the
Dogie and Blanco Compressor sites;
(k) The T-1 telephone circuit that terminates in the telephone
equipment room in the operations building at the Gas Plant at
Kutz and associated cables;
(l) The Retained Easements applicable to the PNM Property;
(m) Subject to the Easement Agreement, nonexclusive right to use
(with Buyer), or a segregated portion of, the Joint Easements and
any pipelines and equipment in the Joint Easements that are not
designated as PNM Property in Schedule 1.01(a)(v);
-------------------
-16-
<PAGE>
(n) All Epoxy-coated pipe in inventory;
(o) The obsolete gas processing plant presently stored at the
Huerfano compressor site and the four mercury meter houses
currently stored at the West Kutz Compressor Station;
(p) The Dogie Campsite property described on Schedule 1.01(c);
----------------
(q) Those items described in Schedule 1.01(d)(i); and
-------------------
(r) The Excluded Property Claims attributable to PNM.
"PNM Retained Liabilities" -
(a) All liabilities including without limitation all Property
Expenses with respect to the PNM Property but excluding Plant
Product imbalances or Gas imbalances for which a Purchase Price
Adjustment is made, that are, or would be required to be, accrued
and recognized consistent with past practices as current
liabilities under generally accepted accounting principles, as of
the Closing Time;
(b) Federal or state income tax liability of PNM with respect to the
PNM Property and the PNM Business incurred prior to the Closing
Time;
(c) Any liability of PNM for the litigation described in Schedule
--------
1.01(e)(i);
----------
(d) Any indebtedness of PNM under that certain Indenture of Mortgage
and Deed of Trust with The Bank of New York (formerly Irving
Trust Company) as Trustee, dated as of June 1, 1947, as
supplemented and amended to date, and any other indebtedness for
borrowed money, and any obligations under any associated
mortgage, deed of trust or security agreement securing payment
thereof;
(e) Any liability or other obligation of PNM or its Affiliates,
whether actual, contingent, known or unknown, which in any way
relates to any Employee Benefit Plans to the extent such
liability is not expressly made the responsibility of Buyer
pursuant to Article XI. In this regard, except for those
liabilities expressly made the responsibility of Buyer pursuant
to Article XI, PNM's liabilities shall include, but shall not be
limited to, the full cost and expense of any entitlement of
benefits under all Employee Benefit Plans (including benefits
payable due to the Sale) which are, have been or will be
sponsored, maintained or contributed to by PNM or its
-17-
<PAGE>
Affiliates for the benefit of any Employee without regard to
whether claims for such benefits are received, or such benefits
become payable, before or after the Closing Date. In addition,
PNM shall bear all liabilities or other obligations arising under
or resulting from any collective bargaining agreement (or work
agreement) to which it (or its Affiliates) is or was at any time
a party.
(f) Any liability or other obligation of PNM or its Affiliates,
whether actual, contingent, known or unknown, arising out of or
resulting from the application to PNM or its Affiliates of any
statute, rule, regulation, law or agreement regarding employment
or otherwise claimed by any Employee with respect to employment
by PNM or its Affiliates, except those GARP liabilities with
respect to a Buyer GARP Employee that are expressly made the
responsibility of Buyer pursuant to Article XI and those
liabilities that are expressly made the responsibility of Buyer
pursuant to Section 12.04(c) and (d);
(g) Any obligations to producers as a result of such producers'
overdeliveries of Gas gathered under the Bundled Contracts and
any obligations to El Paso Natural Gas Company or Transwestern
Pipeline Company as a result of PNM's underdeliveries from the
PNM Pipelines to El Paso's or Transwestern's pipeline, as
applicable;
(h) Any liability of PNM with respect to the PNM Retained Assets,
subject to any differing contractual arrangements between the
parties;
(i) Any liabilities set forth on Schedule 1.01(b)(i)(y); and
----------------------
(j) Any liabilities of PNM with respect to items (a)(i) and (ii) of
the Permitted Encumbrances in existence on or before the Closing
Date.
"PNM Transferred Vehicles" - any vehicles and construction machinery
specifically described on Schedule 1.01(b)(i)(z), less retirements and plus
----------------------
replacements pursuant to Sellers' past practices, subject to Section 6.11.
"PNM Unaudited Financial Statements" - as defined in Section 4.15.
"Preliminary Settlement Statement" - as defined in Section 3.04.
"Processing Business" - the gas processing business and operations
being conducted on the Signing Date by Processing Company in the San Juan
Basin in the State of New Mexico through the use of the Property.
-18-
<PAGE>
"Processing Closing Payment" - as defined in Section 3.04.
"Processing Company" - as defined in the preamble.
"Processing Contracts" - all contracts to which Processing Company is
a party that are used in connection with the ownership and operation of the
Processing Gas Plants, including, without limitation, Gas processing
contracts used in connection with such ownership or operation but excluding
the Processing Excluded Contracts.
"Processing Excluded Contracts" - all contracts listed on Schedule
--------
1.01(b)(iii)(x).
---------------
"Processing GARP" - the Sunterra Gas Processing Company Gas Asset
Retention Plan, dated effective April 1, 1993.
"Processing Gas Plants" - collectively, the land, Easements and other
real property interests described on Schedule 1.01(a)(iv), together with
--------------------
the gas processing plants located thereon, as in certain cases more fully
depicted on the map attached hereto as Schedule 1.01(f), provided that
----------------
Processing shall retain, and there shall be excluded from the definition of
Processing Gas Plants, (a) the Gas plants and other equipment designated as
"Retained Assets" in Schedule 1.01(a)(vii) and (b) subject to the Easement
---------------------
Agreement, either a nonexclusive right to use, or a segregated portion of,
each Joint Easement containing such Gas plants and other equipment,, the
form and content of such retained in each Joint Interest Easement to be
determined by the requirements of the granting instrument (and grantor),
and to be to the reasonable satisfaction of each party.
"Processing General Conveyance" - an instrument of conveyance and
assumption substantially in the form of Exhibit B-3.
"Processing Liabilities" - as defined in Section 12.04.
"Processing Property" -
(1) All of Processing Company's right, title and interest in and to:
(a) The Processing Gas Plants;
(b) The Gas Plant Property;
(c) The Processing Contracts;
(d) The Processing Transferred Vehicles;
-19-
<PAGE>
(e) All Governmental Licenses to the extent applicable to the
Property, but not also applicable to assets being retained by
Sellers, to the extent freely transferable to Buyer except for
any payment of a transfer fee;
(f) The Property Claims; and
(g) The Records relating to the Processing Property;
including without limitation any Processing Gas Plants and Gas Plant
Property resulting from Required Capital Expenditures or any Optional
Capital Expenditures approved by Buyer pursuant to Section 6.04(b) but
excluding the Processing Retained Assets, and
(2) The Software License from Processing Company
"Processing Purchase Price" - as defined in Section 3.02.
"Processing Purchase Price Adjustment" - as defined in Section 3.04.
"Processing Retained Assets" -
(a) All assets, including without limitation all accounts receivable
with respect to the Processing Property, but excluding any Plant
Products imbalances or Gas imbalances for which a Purchase Price
Adjustment is made, that are, or would be required to be, accrued
and recognized consistent with prior practices as current assets
under generally accepted accounting principles as of the Closing
Time.
(b) Any vehicles and construction machinery located at or on the
Processing Property other than the Processing Transferred
Vehicles;
(c) All information and materials relating to the Processing Property
that are stored in a computer or on a computer disk or tape but
that are not reasonably severable from the general corporate
records of any Seller; provided, however, that each Seller shall
use reasonable efforts to make such information available to
Buyer if such information is necessary for the conduct of the
Business by Buyer;
(d) All Processing Excluded Contracts;
(e) The Retained Easements applicable to the Processing Property;
-20-
<PAGE>
(f) Subject to the Easement Agreement, a nonexclusive right to use
(with Buyer), or a segregated portion of, the Joint Easements and
any pipelines and equipment in the Joint Easements that are not
designated as Processing Property in Schedule 1.01(a)(vii);
---------------------
(g) Those items described on Schedule 1.01(d)(iii); and
---------------------
(h) The Excluded Property Claims attributable to Processing.
"Processing Retained Liabilities" -
(a) All liabilities including without limitation Property Expenses
with respect to the Processing Property but excluding Plant
Product imbalances or Gas imbalances for which a Purchase Price
Adjustment is made, that are, or would be required to be, accrued
and recognized consistent with past practices as current
liabilities under generally accepted accounting principles, as of
the Closing Time;
(b) Federal or state income tax liability of Processing Company with
respect to the Processing Property and the Processing Business
incurred prior to the Closing Time;
(c) Any liability of Processing Company for the litigation described
in Schedule 1.01(e)(iii);
---------------------
(d) Any indebtedness of Processing Company under that certain Term
Loan Agreement with PNM dated January 4, 1990, and any other
indebtedness for borrowed money, and any obligations under any
associated mortgage, deed of trust or security agreement securing
payment thereof;
(e) Any liability or other obligation of Processing Company, whether
actual, contingent, known or unknown, which in any way relates to
any Employee Benefit Plans to the extent such liability is not
expressly made the responsibility of Buyer pursuant to Article
XI. In this regard, except for those liabilities expressly made,
the responsibility of Buyer pursuant to Article XI, Processing
Company's liabilities shall include, but shall not be limited to,
the full cost and expense of any entitlement of benefits under
all Employee Benefit Plans (including benefits payable due to the
Sale) which are, have been or will be sponsored, maintained or
contributed to by Processing Company for the benefit of any
Employee without regard to whether claims for such benefits are
received, or such benefits become payable, before or after the
Closing Date. In addition, Processing Company shall bear all
liabilities or other obligations arising
-21-
<PAGE>
under or resulting from any collective bargaining agreement (or
work agreement) to which it is, or was at any time, a party.
(f) Any liability or other obligation of Processing Company, whether
actual, contingent, known or unknown, arising out of or resulting
from the application to Processing Company of any statute, rule,
regulation, law or agreement regarding employment or otherwise
claimed by any Employee with respect to employment by Processing
Company, except those GARP liabilities with respect to a Buyer
GARP Employee that are expressly made the responsibility of Buyer
pursuant to Article XI and those liabilities that are expressly
made the responsibility of Buyer pursuant to Section 12.04(c) and
(d);
(g) Any liability of Processing Company with respect to the
Processing Retained Assets, subject to any differing contractual
arrangements between the parties;
(h) Any liabilities set forth on Schedule 1.01(b)(iii)(y); and
------------------------
(i) Any liabilities of Processing Company with respect to items
(a)(i) and (ii) of the Permitted Encumbrances in existence on or
before the Closing Date.
"Processing Transferred Vehicles" - any vehicles and construction
machinery specifically described on Schedule 1.01(b)(iii)(z), less
------------------------
retirements and plus replacements pursuant to Sellers' past practices,
subject to Section 6.11.
"Property" - the PNM Property, the Gathering Property and the
Processing Property.
"Property Claims" - Sellers' claims and causes of action of any kind
whatsoever (whether absolute or contingent, inchoate or vested) against
parties other than Buyer, any Seller or any of their Affiliates, and
arising from or attributable to the Property on or prior to the Closing
Date, provided that Sellers shall retain, and there shall be excluded from
the definition of Property Claims, the Excluded Property Claims.
"Property Expenses" - all direct operating expenses and capital
expenditures arising in the ordinary course of business with respect to the
PNM Property, the Gathering Property or the Processing Property, as
applicable, but excluding without limitation Required Capital Expenditures,
Optional Capital Expenditures and the costs of purchasing Gas to which
Sellers take or have taken title in the PNM Pipelines or the Gathering
Pipelines.
-22-
<PAGE>
"Purchase Price" - as defined in Section 3.02.
"Purchase Price Adjustments" - as defined in Section 3.05.
"Records" - all existing financial, operating, accounting, tax,
business, marketing and other files, documents, instruments, papers, books,
ledgers and records relating to the PNM Property, the Gathering Property or
the Processing Property, as applicable (to the extent the same are
reasonably severable from the relevant Seller's corporate records), but
excluding (a) work product of Sellers' legal counsel, (b) documents
relating to the negotiation and consummation of the transactions
contemplated by this Agreement, (c) computer software and (d) documents
whose disclosure or transfer is prohibited or restricted by third party
agreement, unless the necessary consent of the third party or parties has
been obtained.
"Related Instruments" - the General Conveyances, the Gas Gathering and
Processing Contracts, the Operations and Balancing Agreements, the Gas
Purchase Option, the Gas Storage Option, the Easement Agreement, the
Communications Rights Letter and any other documents as may be necessary to
effect the transactions contemplated by this Agreement.
"Representatives" - the Affiliates of a Person and its and their
directors, officers, employees, agents and advisors.
"Required Capital Expenditures" - any capital expenditure to be made
after the Signing Date for improvements or additions to the Property (but
not maintenance or repair of existing Property or replacement of damaged or
malfunctioning Property with equivalent new Property) individually costing
in excess of $25,000 that is required by (a) any Governmental Authority,
but excluding any Retained Liabilities, or (b) the terms of any contract or
agreement as in effect on the Signing Date by which any Seller is bound.
"Restricted Records" - any Records that are subject to any transfer
restriction. If any Restricted Records may be transferred to Buyer upon
the payment of a fee or the satisfaction of another condition, and Buyer
pays such fee or satisfies such condition, such Records shall cease to be
Restricted Records.
"Retained Easements" - irrevocable, non-exclusive easements in, on,
over and under the Gas Plants and Pipelines for the benefit of Sellers and
any affiliates of Sellers, their successors and assigns, for access to and
for the use, operation, construction, maintenance, repair, modification and
replacement of various PNM Retained Assets, Gathering Retained Assets and
Processing Retained Assets, and other assets of Sellers, and the furnishing
of utilities for such assets, as further described in the General
Conveyances and subject to the terms of the Easement Agreement.
-23-
<PAGE>
"Retained Employee Hiring Deadline" - the date that is sixty (60) days
after the Signing Date.
"Retained Liabilities" - collectively, the PNM Retained Liabilities,
the Gathering Retained Liabilities and the Processing Retained Liabilities
(individually, a "Retained Liability").
"Rules" - as defined in Section 14.08(a).
"Sale" - the sale of the Property pursuant to this Agreement and the
other transactions contemplated hereby, but expressly excluding any resale
or transfer of the Property proposed by Buyer.
"Seller" - as defined in the preamble.
"Seller Indemnified Loss" - as defined in Section 12.04.
"Sellers" - as defined in the preamble.
"Schedule" - a schedule to this Agreement.
"Settlement Report" - as defined in Section 3.05.
"Signing Date" - as defined in the preamble.
"Software Licenses" - nonexclusive, nontransferable, royalty-free
licenses issued by each respective Seller to Buyer for use of all software
owned by each respective Seller and used in the operation of the Property,
including without limitation the "Gas Information Management System".
"Spot Price" - the index price for San Juan Basin deliveries or
Permian Basin deliveries, as applicable, into El Paso Natural Gas Company
as reported in the first issue of Inside FERC Gas Market Report for the
month in which the Closing occurs;provided, however, if such publication
shall no longer report such price, then an equivalent index price in such
other publication as the Parties may agree to substitute therefor. The San
Juan Basin index price shall be applicable to Gas overdeliveries and
underdeliveries with respect to Pipelines located in San Juan, Rio Arriba
and Sandoval Counties, New Mexico and the Permian Basin index price shall
be applicable to Gas overdeliveries and underdeliveries with respect to
Pipelines located in Eddy and Lea Counties, New Mexico.
"Third-Party Claim" - as defined in Section 12.05(a).
"Unadjusted Gathering Purchase Price" - as defined in Section 3.02.
-24-
<PAGE>
"Unadjusted PNM Purchase Price" - as defined in Section 3.02.
"Unadjusted Processing Purchase Price" - as defined in Section 3.02.
"Unadjusted Purchase Price" - as defined in Section 3.02.
"Union" - Oil, Chemical and Atomic Workers' Union, AFL-CIO Local
2-953.
"WARN" - Worker Adjustment and Retraining Notification Act.
ARTICLE II. PURCHASE AND SALE
-----------------
Section 2.01 Purchase and Sale of Property. Subject to the terms and
-----------------------------
conditions of this Agreement, at the Closing PNM, Gathering Company and
Processing Company, respectively, shall sell, transfer and convey to Buyer, and
Buyer shall purchase from PNM, Gathering Company and Processing Company,
respectively, all of (a) the PNM Property, (b) the Gathering Property and (c)
the Processing Property.
Section 2.02 Assumption of Liabilities. Subject to the terms and
-------------------------
conditions of this Agreement, at the Closing Buyer shall assume from PNM,
Gathering Company and Processing Company, respectively, and pay, perform and
discharge, as applicable, the PNM Liabilities, the Gathering Liabilities and the
Processing Liabilities on the terms set forth in Article XII, provided that PNM,
Gathering Company and Processing Company, respectively, shall retain the PNM
Retained Liabilities, the Gathering Retained Liabilities and the Processing
Retained Liabilities.
Section 2.03 Revisions to Property Descriptions. Sellers and Buyer
----------------------------------
recognize and agree that Schedule 1.01, Parts (i) through (vii) may not
--------------------------------------
correctly identify all Easements and other real property interests constituting
a part of the Gas Plants and the Pipelines, and the Parties agree to cooperate
with each other to prepare, supplement and amend such schedule in order to have
a complete and accurate description of such Easements and other real property
interests before the Closing. Any additions of new Easements and other real
property interests not presently described on Schedule 1.01, Parts (i) through
--------------
(vii), or shown on Schedule 1.01(f), shall be acceptable to each Party in its
----------------
sole discretion.
ARTICLE III. CLOSING; PURCHASE PRICE
-----------------------
Section 3.01 Closing Date. Unless Buyer and Seller shall otherwise
------------
agree, the Closing shall take place at the offices of Sellers in Albuquerque,
New Mexico thirty days after the date upon which the conditions referred to in
Articles VIII and IX have been satisfied (the "Closing Date"), or such earlier
date as the parties may agree, provided that the Closing shall
-25-
<PAGE>
not occur after August 1, 1995 unless Buyer and Seller otherwise agree in
writing or Buyer with prior written notice to Sellers shall at its option extend
such deadline by a period not to exceed 90 days.
Section 3.02 Purchase Price. The aggregate purchase price to be paid
--------------
by Buyer for the Property shall be One Hundred Fifty-five Million Dollars,
($155,000,000.00) (the "Unadjusted Purchase Price"), as adjusted pursuant to
Section 3.05 (the "Purchase Price"). On the Closing Date, upon the terms and
subject to the conditions of this Agreement, Buyer shall pay by wire transfer of
immediately available funds a sum equal to the PNM Closing Payment (as
hereinafter defined) to the account of PNM, Account No. 191537670 at First
Security Bank of New Mexico, ABA Routing Number 107000275, a sum equal to the
Gathering Closing Payment (as hereinafter defined) to the account of Gathering
Company, Account No. 191520961 at First Security Bank of New Mexico, ABA Routing
Number 107000275, and a sum equal to the Processing Closing Payment (as
hereinafter defined) to the account of Processing Company, Account No. 191569482
at First Security Bank of New Mexico, ABA Routing No. 107000275 (or such other
account and bank as may be designated by any such Seller to Buyer at least two
business days prior to the Closing Date).
Section 3.03 Determination of Individual Unadjusted Purchase Prices.
------------------------------------------------------
Between the Signing Date and thirty days prior to Sellers' proposed filing of
proceedings before the NMPUC under Section 6.02, Buyer and Sellers shall agree
upon an allocation of the Unadjusted Purchase Price among the PNM Property, the
Gathering Property and the Processing Property (such allocated portions being
referred to herein as the "Unadjusted PNM Purchase Price", the "Unadjusted
Gathering Purchase Price" and the "Unadjusted Processing Purchase Price",
respectively).
Section 3.04 Determination of Closing Payment. Not later than 10
--------------------------------
days prior to the Closing Date, Sellers shall prepare (with input from and
consultation with Buyer) and deliver to Buyer a preliminary settlement statement
("Preliminary Settlement Statement"), using the best information available to
Sellers, estimating the amounts of the Purchase Price Adjustments (as
hereinafter defined). The net amount shown on the Preliminary Settlement
Statement with respect to PNM shall be added to or subtracted from the
Unadjusted PNM Purchase Price, and the total shall constitute the amount of cash
to be paid by Buyer to PNM at the Closing (the "PNM Closing Payment"), the net
amount shown on the Preliminary Settlement Statement with respect to Gathering
Company shall be added to or subtracted from the Unadjusted Gathering Purchase
Price, and the total shall constitute the amount of cash to be paid by Buyer to
Gathering Company at the Closing (the "Gathering Closing Payment") and, the net
amount shown on the Preliminary Settlement Statement with respect to Processing
Company shall be added to or subtracted from the Unadjusted Processing Purchase
Price, and the total shall constitute the amount of cash to be paid by Buyer to
Processing Company at the Closing (the "Processing Closing Payment" and,
collectively with the PNM Closing Payment and the Gathering Closing Payment, the
"Closing Payment").
-26-
<PAGE>
Section 3.05 Adjustments to the Purchase Price. As soon as
---------------------------------
practicable, and in any event within 90 days following the Closing Date, Sellers
shall prepare (with input from and consultation with Buyer) and deliver to Buyer
a final settlement statement (the "Settlement Report") setting forth with
respect to the Unadjusted PNM Purchase Price, the Unadjusted Gathering Purchase
Price and the Unadjusted Processing Purchase Price, respectively:
(a) Upward adjustments in such unadjusted purchase price equal to the
sum of, with respect to the PNM Property, the Gathering Property or the
Processing Property, as applicable:
(i) The amount of any Optional Capital Expenditures approved by
Buyer pursuant to Section 6.04 and the amount of any
Required Capital Expenditures, in each case as incurred by
the relevant Seller through the ownership or operation of
the relevant Property from the Signing Date through the
Closing Date;
(ii) The net aggregate value, if any, at the Closing Time of
producers' underdeliveries of Gas gathered under the
Gathering Contracts, or the PNM Contracts other than the
Bundled Contracts, as applicable, plus the net aggregate
value, if any, of overdeliveries by the Gathering Pipelines
or the PNM Pipelines, as applicable, to Northwest Pipeline
Corporation's or Williams Gas Processing Company's
pipelines, with overdeliveries and underdeliveries valued at
the applicable Spot Price; and
(iii) The net aggregate value, if any, at the Closing Time of
Plant Products imbalances owed to the relevant Seller by
third parties as a result of sales by those third parties in
excess of the shares to which they were entitled, with the
imbalance for each Plant Product valued at the respective
Mt. Belvieu OPIS NON TET average price at Closing for each
component, net of transportation and fractionation charges.
(b) Downward adjustments in such unadjusted purchase prices equal to
the sum of, with respect to the PNM Property, the Gathering Property or the
Processing Property, as applicable:
(i) The Interim Period Compensation accruing with respect to the
relevant Property for each day, if any, of the Interim
Period;
(ii) The net aggregate value, if any, at the Closing Time of
producers' overdeliveries of Gas gathered under the
Gathering Contracts, or the PNM Contracts other than the
Bundled Contracts, as
-27-
<PAGE>
applicable, plus the net aggregate value, if any, of
underdeliveries by the Gathering Pipelines or the PNM
Pipelines, as applicable, to Northwest Pipeline
Corporation's or William's Processing Company's pipelines,
with overdeliveries and underdeliveries valued at the
applicable Spot Price;
(iii) The net aggregate value, if any, at the Closing Time of
Plant Products imbalances owed to third parties by the
relevant Seller as a result of sales by the Seller in excess
of the share to which it was entitled, with the imbalance
for each Plant Product valued at the respective Mt. Belvieu
OPIS NON TET average price at Closing for each component,
net of transportation and fractionation charges;and
(iv) The original purchase cost of all Epoxy-Coated Pipe retained
by Sellers as PNM Retained Assets, Gathering Retained Assets
or Processing Retained Assets.
(the net amount of such upward and downward adjustments being known as,
respectively, the "PNM Purchase Price Adjustment," the "Gathering Purchase Price
Adjustment" and the "Processing Purchase Price Adjustment" and, collectively,
the "Purchase Price Adjustments").
Section 3.06 Final Settlement. Buyer shall have the right for 90
----------------
days after receipt of the Settlement Report to audit and take exception to the
Purchase Price Adjustments listed by Sellers in the Settlement Report. The
Settlement Report shall become final and binding on the Parties on the 90th day
following the delivery thereof to Buyer except as to any item for which Buyer
provides Sellers with written notice of Buyer's objection thereto prior to such
date. After the 90th day, either Buyer or Sellers may require that Arthur
Andersen or such other nationally recognized independent accounting firm as may
be selected by mutual agreement of Buyer and Sellers (the "Accountant") review
the Settlement Report and finally determine the actual amounts of the disputed
portions of the Purchase Price Adjustments, if any. The fees and expenses of
the Accountant relating to such review and procedures shall be shared one-half
by Buyer and one-half by Sellers. The Accountant's determination shall be made
within 30 days after the date that the Accountant receives the Settlement
Report, and such determination shall be final and binding on Buyer and Sellers.
Within 30 days after the earlier of (a) the expiration of the 90-day response
period without written objection by Buyer, (b) the date on which Buyer and
Sellers have agreed in writing on the amount of any Purchase Price Adjustment or
(c) the date on which the Accountant finally determines the disputed portion of
the Purchase Price Adjustments (the earlier such date being referred to herein
as the "Final Settlement Date"), (i) Buyer shall pay to the relevant Seller the
amount by which the PNM Unadjusted Purchase Price as adjusted by the PNM
Purchase Price Adjustment (the "PNM Purchase Price") exceeds the PNM Closing
Payment, the Gathering Unadjusted Purchase Price, as adjusted by the
-28-
<PAGE>
Gathering Purchase Price Adjustment (the "Gathering Purchase Price") exceeds the
Gathering Closing Payment and/or the Processing Unadjusted Purchase Price, as
adjusted by the Processing Purchase Price Adjustment (the "Processing Purchase
Price") exceeds the Processing Closing Payment, as applicable, or (ii) the
relevant Seller shall pay to Buyer the amount by which the PNM Closing Payment
exceeds the PNM Purchase Price, the Gathering Closing Payment exceeds the
Gathering Purchase Price and/or the Processing Closing Payment exceeds the
Processing Purchase Price, as applicable.
Section 3.07 Allocation of Purchase Price. Promptly after the Final
----------------------------
Settlement Date, Buyer and Sellers shall seek to reach an agreement upon the
allocation of the PNM Purchase Price among the assets constituting the PNM
Property an allocation of the Gathering Purchase Price among the assets
constituting the Gathering Property and an allocation of the Processing Purchase
Price among the assets constituting the Processing Property (the "Allocated
Values"). If Buyer and Sellers are not able to agree on the Allocated Values
within 60 days after the Final Settlement Date, either Buyer or Sellers may
require that the disputed Allocated Values be determined by the Accountant. The
Accountant's determination shall be made within 30 days after the disputed
Allocated Values are submitted to the Accountant, and such determination shall
be final and binding on Buyer and Sellers. Buyer and Sellers agree that they
will not take positions inconsistent with the Allocated Values in tax returns,
notices to Governmental Authorities or other documents relating to the
transactions contemplated by this Agreement.
ARTICLE IV. SELLERS' REPRESENTATIONS
------------------------
Each Seller hereby individually and severally represents and warrants
to Buyer, as to itself and its own Property and operations only, that:
Section 4.01 Organization; Authority. Such Seller is a corporation
-----------------------
duly organized, validly existing and in good standing under the laws of the
State of New Mexico and has full corporate power and authority to execute and
deliver this Agreement, to conduct its business as presently conducted and to
perform its obligations under this Agreement. In the case of PNM, such Seller
is also qualified to do business as a foreign corporation in and is in good
standing in Arizona.
Section 4.02 Corporate Authority and Approval. Such Seller has all
--------------------------------
requisite corporate power and authority to execute and deliver this Agreement
and the Related Instruments to which such Seller is a party, to consummate the
transactions contemplated hereby and thereby and to perform all the terms and
conditions hereof and thereof to be performed by it. The execution and delivery
by such Seller of this Agreement and the Related Instruments to which such
Seller is a party, the performance by such Seller of all the terms and
conditions hereof and thereof to be performed by it and the consummation of the
transactions contemplated hereby and thereby have been duly authorized and
approved by all requisite corporate action on the part of
-29-
<PAGE>
such Seller. This Agreement constitutes, and each of the Related Instruments to
which such Seller is a party, when executed by each such Seller and Buyer, as
applicable, will constitute, the valid and binding obligation of such Seller
enforceable against such Seller in accordance with its terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting the enforcement of
creditors' rights generally and to general principles of equity (regardless of
whether considered in a proceeding in equity or at law).
Section 4.03 No Violation. Except as set forth in Schedule 4.03,
------------ -------------
this Agreement and the execution and delivery hereof by such Seller do not, and
the fulfillment of and compliance with the terms and conditions hereof and the
consummation of the transactions contemplated hereby will not:
(a) Violate or conflict with any provision of the certificate of
incorporation or bylaws, each as amended to date, of such Seller;
(b) Violate or conflict with or require any consent, authorization or
approval under any provision of any law or administrative regulation or any
judicial, administrative or arbitration order, award, judgment, writ,
injunction or decree applicable to or binding upon such Seller (except the
approval of the NMPUC and the expiration or early termination of the
applicable waiting period under the Hart-Scott-Rodino Act);
(c) Result in a breach of, constitute a default or violation under
(whether with notice or lapse of time or both) or require any consent,
authorization or approval under any mortgage, indenture, loan or credit
agreement or any other agreement or instrument evidencing indebtedness for
money borrowed to which such Seller is a party or by which any of its
properties or assets is bound; or
(d) Result in the creation or imposition of any lien, charge,
security interest or other encumbrance upon the PNM Property, the Gathering
Property or the Processing Property, as applicable,
which violation, conflict, breach, default, absence of consent, lien, charge,
security interest or other encumbrance with respect to the matters specified in
clauses (a) through (d) of this Section 4.03 would have a Material Adverse
Effect with respect to the Property.
Section 4.04 Compliance with Laws and Regulations. Except as set
------------------------------------
forth in Schedule 4.04, and except with respect to any Environmental Laws (which
-------------
are addressed in Section 4.07), to the knowledge of such Seller, such Seller's
ownership and operation of its respective Property is in compliance with all
applicable laws, regulations, orders, judgments or decrees of any Governmental
Authority having jurisdiction over the Property; provided, however, that no
Seller makes any representation or warranty as to compliance by such Seller with
the Natural Gas Act, the Natural Gas Policy Act of 1978, the Natural Gas
Wellhead
-30-
<PAGE>
Decontrol Act of 1991, the Pipeline Safety Act of 1992 and the Pipeline Safety
Reauthorization Act of 1988 other than the representation and warranty that such
Seller has followed customary practices of major reputable Gas purchasers,
gatherers and processors with respect to compliance with regulations and orders
issued under such acts as in effect at the time of such compliance, where
failure to follow such practices would have a Material Adverse Effect with
respect to the Property.
Section 4.05 Taxes. All taxes, assessments and charges by
-----
Governmental Authorities which are due and payable by such Seller with respect
to the PNM Property and the PNM Business, the Gathering Property and the
Gathering Business or the Processing Property and the Processing Business, as
applicable, have been paid, other than those taxes, assessments and charges by
Governmental Authorities being contested in good faith for which adequate
provisions have been made.
Section 4.06 Litigation. Except as set forth on Schedule 4.06 there
---------- -------------
is no action, suit, or proceeding pending or, to the knowledge of such Seller
(including its in-house legal counsel) threatened against such Seller (i) which
could reasonably be expected to materially hinder such Seller's ability to
consummate the transactions contemplated by this Agreement or, (ii) which
specifically concerns the Property and Business or the Sale and would, if
adversely determined, have a Material Adverse Effect with respect to the
Property or the Business.
Section 4.07 Environmental. Such Seller:
-------------
(a) Has operated the PNM Property, the Gathering Property or the
Processing Property, as applicable, in compliance in all respects with all
applicable Environmental Laws, except such violations as would not have a
Material Adverse Effect with respect to the Property;
(b) Has obtained all Governmental Licenses which are required under
any Environmental Law applicable to the PNM Property, the Gathering
Property or the Processing Property, as applicable, except to the extent
that the failure to obtain any such Governmental License would not have a
Material Adverse Effect with respect to the Property;
(c) Has not received written notice from any Governmental Authority
of any unresolved violation of or pending or threatened action, suit,
inquiry, proceeding or investigation relating to any Environmental Law
applicable to the PNM Property, the Gathering Property or the Processing
Property, as applicable, which unresolved violation or investigation would
have a Material Adverse Effect with respect to the Property; and
(d) Has not received written notice from any Governmental Authority
of any legally required environmental removal, remediation or clean-up
obligation with respect
-31-
<PAGE>
to the Property or the Business that would have a Material Adverse Effect
on the Property;
other than matters, circumstances or conditions described in the documents
listed on Schedule 4.07. No Seller makes any representation or warranty about
-------------
any compliance, or failure to comply, with any Environmental Law except as set
forth in this Section 4.07.
Section 4.08 Gas Plant Property and Pipeline Property. Except as
----------------------------------------
disclosed on Schedule 4.08, the Gas Plant Property and the Pipeline Property
-------------
have been maintained in reasonable operating condition and repair and are
adequate to perform normal operations consistent with such Seller's recent
practices, including without limitation normal operations at the pressures
required under the Gas Gathering and Processing Contracts and/or under any of
the Contracts, ordinary wear and tear excluded, except where the failure to
maintain would not have a Material Adverse Effect with respect to the Property.
Section 4.09 Contracts. Sellers have provided Buyer with complete
---------
copies of the Material Contracts and all amendments thereto. Except as
otherwise disclosed on Schedule 4.09 the Material Contracts are in full force
-------------
and effect. No third party to any Material Contract has prepaid more than 30
days in advance any amounts due thereunder. Such Seller has not waived its
remedies for default by, or expressly waived any other rights against, a third
party under any Material Contract. Such Seller has made all payments due
thereunder, if any, except those being contested in good faith, and has
performed all of its material obligations under such Material Contracts, except
for such failures to make payments or perform obligations which would not have a
Material Adverse Effect with respect to the Property. Except as otherwise
disclosed on Schedule 4.09, there are, to the knowledge of Sellers, no written
-------------
proposals or threats by third parties to cancel, revise or fail to renew any
Material Contract or fail to renew, cancel or revise any Easement.
Section 4.10 Title to Property. As to PNM and Processing Company,
-----------------
such Seller has or on the Closing Date will have Defensible Title to the
portions of the Gas Plants owned by such Seller in fee, and sufficient title for
the purposes for which such property is used by such Seller to the portions of
such Seller's Gas Plants consisting of easements, rights-of-way and similar real
property interests, in each case free and clear of all mortgages, liens,
charges, security interests, or other encumbrances except Permitted
Encumbrances. As to PNM and Gathering Company, to the knowledge of such Seller
no adverse title claims are pending or threatened with respect to any portion of
the PNM Pipelines or the Gathering Pipelines, respectively, except as set forth
in Schedule 4.06, and such Seller owns its rights in the same free and clear of
-------------
all mortgages, liens, charges, security interests or other encumbrances except
Permitted Encumbrances, provided that Sellers make no representation under this
Section 4.10 with respect to any Easements designated as "Abandoned" on Schedule
--------
1.01(a)(i) or Schedule 1.01(a)(ii).
- ---------- ---------------------
-32-
<PAGE>
Section 4.11 Holding Company; Investment Company. Such Seller is not
-----------------------------------
a "holding company," or a "subsidiary company" of a "holding company," or an
affiliate of a "holding company" or of a "subsidiary company" of a "holding
company" within the meaning of the Public Utility Holding Company Act of 1935,
as amended. Such Seller is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
Section 4.12 Employee Benefits.
-----------------
(a) Part 1 of Schedule 4.12 hereto lists all plans of such Seller
-------------
which are "employee benefit plans" within the meaning of Section
3(3) of ERISA and that are applicable to Designated Employees
(the "Listed Plans").
(b) Part 2 of Schedule 4.12 lists each written stock option plan,
-------------
collective bargaining agreement, bonus plan, incentive award
plan, severance pay plan or agreement, deferred compensation
agreement, executive compensation or supplemental income
agreement, employment agreement and other written agreement or
plan in effect with respect to the employment of any Designated
Employee by such Seller on the Signing Date (the "Other Employee
Plans").
(c) Such Seller has delivered, as applicable, true and correct copies
of all of the Listed Plans, the Other Employee Plans, and related
trust documents, including any amendments thereto and any
relevant summary plan descriptions. There has also been
furnished to Buyer, with respect to each of the Listed Plans,
and, as applicable, Other Employee Plans required to file such
report, the most recent report on Form 5500.
Section 4.13 National Labor Relations Act, as Amended. To the
-----------------------------------------
knowledge of such Seller, such Seller has complied in all material respects with
all material requirements and provisions of all collective bargaining agreements
or work agreements including, but not limited to, those requirements and
provisions regarding any change of control provision, including, but not limited
to, any notice requirement of said provisions.
Section 4.14 Employment Law Compliance. To the knowledge of such
-------------------------
Seller, such Seller has complied in all material respects with all laws relating
to employment of the Designated Employees, including, without limitation, those
laws relating to wages, hours, collective bargaining, unemployment insurance,
workers' compensation, equal employment opportunity, payment and withholding of
taxes, the Immigration Reform and Control Act, the Workers Adjustment and
Retraining Act, the Occupational Safety and Health Act, the Drug Free Workplace
Act, the National Labor Relations Act, as amended, and ERISA.
-33-
<PAGE>
Section 4.15 Historical Operating Data and Financial Statements. To
--------------------------------------------------
the knowledge of such Seller, all historical operating data and financial
information identified on Schedule 4.15 and delivered in writing to Buyer was
-------------
accurate in all material respects as of the date provided. The interim
financial statements of PNM, consisting of the unaudited balance sheet and the
three months and nine months related statement of income and cash flow and the
notes thereto (the "PNM Unaudited Financial Statements"), as at September 30,
1993 are unaudited but, subject to normal year-end adjustments, (i) have been
prepared in accordance with generally accepted accounting principles
consistently applied and consistent with PNM's past practices and (ii) fairly
present the financial position of PNM as of the date indicated and the results
of operations and changes in the financial position of PNM for the period then
ended. PNM has delivered to Buyer true and correct copies of the PNM Unaudited
Financial Statements.
Section 4.16 No Third Party Options. There are no existing
----------------------
agreements, options, commitments, or rights with or to any person to acquire any
of such Seller's assets, properties or rights included in the Property.
Section 4.17 FERC Regulation. Except as set forth on Schedule 4.17,
--------------- -------------
none of the Property is certificated under Section 7(c) of the Natural Gas Act,
and none of the Property is now subject to rate regulation or a filed tariff
under Sections 4 or 5 of the Natural Gas Act.
Section 4.18 Environmental Assessments. Except as set forth on
-------------------------
Schedule 4.18, and except with respect to the Retained Liabilities, no written
- -------------
environmental assessment of the Property has been prepared by a third party on
behalf of such Seller within the 5-year period preceding the Signing Date.
Section 4.19 Deeds. Such Seller has provided Buyer full and complete
-----
copies of all deeds under which such Seller holds fee title to any real property
that is a part of the Property. Except as set forth on Schedule 4.19, and
-------------
subject to the Permitted Encumbrances, such Seller has not transferred any
right, title or interest in any such fee property.
Section 4.20 Plant Operations. To the knowledge of such Seller, the
----------------
information set forth on Schedule 4.20 with respect to composite field gas
-------------
composition at the Gas Plant inlets, operating efficiencies, recovery factors
and throughput accurately reflects in all material respects such Seller's past
experience with respect to the Gas Plants described.
Section 4.21 Historical Sales Information. To the knowledge of such
----------------------------
Seller, the historical sales information set forth on Schedule 4.21 accurately
-------------
reflects in all material respects such Seller's past experience with respect to
the Property.
Section 4.22 Design Information. To the knowledge of such Seller,
------------------
the information set forth on Schedule 4.22 regarding pipeline MAOP and other
-------------
facilities design specifications is accurate in all material respects.
-34-
<PAGE>
Section 4.23 SCADA System. Subject to Buyer obtaining any necessary
------------
permits, licenses to use any necessary software and the right to use one or more
radio frequencies from the Federal Communications Commission, the Perkin-Elmer
SCADA System connected to the Pipeline Property, Pipelines and Gas Plants in San
Juan and Rio Arriba Counties, New Mexico and transferred to Buyer hereunder is
capable of providing information from the Pipeline Property, Pipelines and Gas
Plants consistent with such Seller's operations as of the Signing Date.
Section 4.24 Cathodic Protection. The cathodic protection systems
-------------------
transferred to Buyer hereunder or for which Buyer and one or more Sellers shall
be entitled to joint use will protect the Pipelines and Gas Plants to at least
the same extent that Sellers' cathodic protection protected the Pipelines and
Gas Plants immediately prior to the Closing Date and is capable of meeting or
exceeding the performance specifications required by the U.S. Department of
Transportation regulations (currently contained in 49 C.F.R. Part 192) where
those regulations so require. Buyer and Sellers shall agree upon satisfactory
joint use arrangements for those portions of the cathodic protection system that
presently provide service jointly to the Pipelines and Gas Plants and facilities
Sellers are retaining.
Section 4.25 Gathering and Processing Contracts. The Contracts
----------------------------------
include all contracts under which any Seller is providing gas gathering and/or
processing services, other than contracts between Sellers.
ARTICLE V. BUYER'S REPRESENTATIONS
-----------------------
Buyer represents and warrants to Sellers that:
Section 5.01 Organization; Authority. Buyer is a corporation duly
-----------------------
organized, validly existing and in good standing under the laws of the State of
Delaware. Buyer is qualified to do business as a foreign corporation in and is
in good standing in each jurisdiction in which the ownership of its property or
the conduct of its business makes such qualification necessary, except where
failure to be so qualified would not have a Material Adverse Effect with respect
to Buyer.
Section 5.02 Corporate Authority and Approval. Buyer has all
--------------------------------
requisite corporate power and authority to execute and deliver this Agreement
and the Related Instruments to which it is a party, to consummate the
transactions contemplated hereby and thereby and to perform all the terms and
conditions hereof and thereof to be performed by it. The execution and delivery
by Buyer of this Agreement and the Related Instruments to which Buyer is a
party, the performance by Buyer of all the terms and conditions hereof and
thereof to be performed by Buyer and the consummation of the transactions
contemplated hereby and thereby have been duly authorized and approved by all
requisite corporate action on the part of Buyer. This Agreement constitutes,
and each of the Related Instruments to which Buyer is a party, when executed by
-35-
<PAGE>
each Seller and Buyer, as applicable, will constitute, the valid and binding
obligation of Buyer enforceable against Buyer in accordance with its terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting the
enforcement of creditors' rights generally and to general principles of equity
(regardless of whether considered in a proceeding in equity or at law).
Section 5.03 No Violation. This Agreement and the execution and
------------
delivery hereof by Buyer do not, and the fulfillment and compliance with the
terms and conditions hereof and the consummation of the transactions
contemplated hereby will not:
(a) Violate or conflict with any provision of the certificate of
incorporation or bylaws, each as amended to date, of Buyer;
(b) Violate or conflict with or require any consent, authorization or
approval under any provision of any law or administrative regulation or any
judicial, administrative or arbitration order, award, judgment, writ,
injunction or decree applicable to or binding upon Buyer (except the
approval of the NMPUC and the expiration or early termination of the
applicable waiting period under the Hart-Scott-Rodino Act); or
(c) Result in a breach of, constitute a default or violation under
(whether with notice or lapse of time or both) or require any consent,
authorization or approval under any mortgage, contract, indenture, loan or
credit agreement or any other agreement or instrument evidencing
indebtedness for money borrowed to which Buyer is a party or by which any
of its properties or assets is bound,
which violation, conflict, breach, default, absence of consent, lien, charge,
security interest or other encumbrance with respect to matters specified in
clauses (a) through (c) of this Section 5.03 would have a Material Adverse
Effect with respect to Buyer.
Section 5.04 Litigation. There is no action, suit or proceeding,
----------
pending or, to the knowledge of Buyer (including its in-house legal counsel),
threatened against Buyer which would have a Material Adverse Effect with respect
to Buyer or would materially hinder Buyer's ability to consummate the
transactions contemplated by this Agreement and to assume the Assumed
Liabilities.
Section 5.05 Funds Available. Buyer has, or will have on and after
---------------
the Closing Date, sufficient cash, available lines of credit or other sources of
immediately available funds to enable it to pay the Closing Payment and any
Purchase Price Adjustment.
Section 5.06 Financial Statements. The interim financial statements
--------------------
of Williams Field Services Group, Inc. ("Guarantor"), consisting of the
unaudited balance sheet and the related statement of income and cash flow and
the notes thereto (the "Guarantor Unaudited Financial Statements"), as at
September 30, 1993 are unaudited but, subject to normal year-end
-36-
<PAGE>
adjustments, (i) have been prepared in accordance with generally accepted
accounting principles consistently applied and (ii) fairly present the financial
position of Guarantor as of the date indicated and the results of operations and
changes in the financial position of Guarantor for the quarter then ended.
Guarantor has delivered to Sellers true and correct copies of the Guarantor
Unaudited Financial Statements.
Section 5.07 Holding Company; Investment Company. Buyer is not a
-----------------------------------
"holding company," or a "subsidiary company" of a "holding company," or an
affiliate of a "holding company" or of a "subsidiary company" of a "holding
company" within the meaning of the Public Utility Holding Company Act of 1935,
as amended. Buyer is not an "investment company" or a company "controlled" by
an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
Section 5.08 Qualification. Buyer has, or as of the Closing Date
-------------
will have, all Governmental Licenses necessary or required to own and operate
the Property, and to perform any obligation of any Seller under any Contract,
the Gas Gathering and Processing Contracts, the Operations and Balancing
Agreements, the Gas Purchase Option and the Gas Supply Option.
ARTICLE VI. COVENANTS OF SELLERS
--------------------
Sellers covenant and agree with Buyer that, except as may be approved
by Buyer in writing, which approval shall not be unreasonably withheld or
delayed:
Section 6.01 Hart-Scott-Rodino Act; Other Consents. Sellers agree to
-------------------------------------
make as promptly as practicable all filings necessary in connection with the
Hart-Scott-Rodino Act and to use all reasonable efforts to obtain and make and
to assist Buyer in obtaining and making, as appropriate, (a) all necessary
consents, authorizations and approvals, (b) all filings necessary for the
consummation of the transactions contemplated by this Agreement, and (c) all
Governmental Licenses necessary for Buyer's operation of the Property after
Closing.
Section 6.02 NMPUC Approval. Sellers, at their sole expense, shall
--------------
retain all attorneys and other advisors necessary to represent Sellers before
the NMPUC in connection with the Sale. Sellers agree to submit as promptly as
possible all filings necessary to commence proceedings before the NMPUC for
approval of the Sale and shall use their reasonable efforts to obtain such
approval, provided that Sellers shall not be required to accept any proposed
conditions from the NMPUC that Sellers, in their sole discretion, deem
disadvantageous, relating to (a) the treatment of the proceeds of the sale of
the Property, (b) the conduct of any Seller's continuing business, (c) the terms
and conditions of the Related Instruments, the Sale or any future contractual
arrangements between Buyer and any Seller or (d) ratemaking or other regulation
by the NMPUC. Sellers shall provide Buyer with copies of any NMPUC filings (or
portions thereof) regarding the Sale and an opportunity to comment on same prior
to submitting the filings to the NMPUC.
-37-
<PAGE>
Section 6.03 Conditions to Closing. Subject to Section 6.02, each
---------------------
Seller shall use its respective reasonable efforts to satisfy the conditions to
the Closing set forth in Article VIII and Article IX to be satisfied by such
Seller.
Section 6.04 Operation of the Property. From the Signing Date to the
-------------------------
Closing Date:
(a) Each Seller shall use its respective reasonable efforts to
operate and maintain the PNM Property, the Gathering Property or the
Processing Property, as applicable, in reasonable operating condition and
repair adequate to perform normal operations consistent with such Seller's
past practices; and
(b) The appropriate Seller shall, except with respect to commitments
already made prior to the Signing Date, as set forth on Schedule 6.04(b),
----------------
obtain Buyer's prior written approval (which approval may not, except in
the case of subparagraph (i) below, be unreasonably withheld) before (i)
making any Optional Capital Expenditures with respect to the PNM Property
or the PNM Business, the Gathering Property or the Gathering Business or
the Processing Property or the Processing Business, as applicable; (ii)
voluntarily terminating, reducing the price under, or amending any third
party gathering or processing contract; (iii) entering into any Material
Contract binding on any of the Property, or Buyer in its capacity as owner
of the Property, after the Closing Date, except for any month-to-month
renewals of any existing contracts that terminate not more than one month
after the Closing Date; (iv) voluntarily abandoning any Easement that
constitutes part of the Property; (v) selling, transferring or otherwise
disposing of any Property except in the ordinary course of business; or
(vi) encumbering any of the Property except in the ordinary course of
business and other than any encumbrances that do not materially detract
from the value of the Property; and
(c) Each Seller shall provide Buyer with advance notice of, and
permit Buyer to participate in (but not control), negotiations of gathering
and processing agreements applicable to the Property between the Signing
Date and the Closing Date. Furthermore, Sellers authorize Buyer to contact
Sellers' customers and prospective customers regarding the terms and
conditions of gathering and processing agreements (and amendments,
replacements, or extensions thereof) to take effect on or after the Closing
Date and to negotiate and execute such agreements, provided that Sellers
are given prior written notice of any such discussion, negotiation, or
execution and are consulted regarding same;
provided that each Seller is expressly authorized (in its sole discretion) (A)
(i) to alter existing wellhead connections to permit producers to substitute
their own pipe for pipe owned by such Seller and/or to install their own
compressors and treatment facilities (provided that, unless Seller is
contractually obligated on the Signing Date to permit such installation, Buyer
may disapprove any proposed installation of facilities for the removal of liquid
or liquefiable
-38-
<PAGE>
hydrocarbons other than conventional oil-gas separators that do not
substantially alter the temperature of the Gas) and (ii) to remove and dispose
of, for the applicable Seller's account, any of that Seller's Property that is
no longer used as a result of such changes, (B) to alter existing piping, valves
and measurement facilities at points that will become interconnections between
the Property and assets retained by Seller as Seller may deem necessary or
appropriate in preparation for the Sale and (C) make at its own expense any
Optional Capital Expenditure proposed pursuant to Section 6.04(b)(i) but not
approved by Buyer. Without the prior written approval of Buyer, Seller shall
not renew or extend in bundled form any Bundled Contract that expires or
terminates after the Signing Date, unless any such renewal or extension is
terminable on one month's notice or less.
Section 6.05 Access. From the Signing Date to the Closing Date,
------
Sellers shall, upon reasonable advance notice and during normal business hours,
allow Buyer and its Representatives, at Buyer's sole risk and expense, and for
the purpose of investigating the Property in connection with the transactions
contemplated by this Agreement, to:
(a) Inspect and become familiar with the Property;
(b) Subject to the right of Sellers to have their own Representatives
present, consult with Sellers' attorneys, accountants, engineers and other
Representatives concerning the ownership, use or operation of the Property;
and
(c) Examine the Records.
Section 6.06 Approvals. Any approval of Buyer required pursuant to
---------
Section 6.04 shall be deemed granted within 10 Business Days of the delivery of
any Seller's written notice to Buyer requesting the same unless Buyer responds
otherwise during that period. Buyer directs that all such requests should be
sent to Jerry Gollnick and Craig Rich at the address and fax number set forth in
Section 15.01. Either of the foregoing named individuals shall have the
authority to grant approvals hereunder on behalf of Buyer.
Section 6.07 Deliveries at Closing.
---------------------
(a) PNM agrees to deliver to Buyer at the Closing, executed by PNM:
(i) the PNM General Conveyance, (ii) the Gas Gathering and Processing
Contracts, (iii) the Operations and Balancing Agreements, (iv) the Gas
Purchase Option, (v) the Gas Storage Option, (vi) the Easement Agreement,
and (vii) the Communications Rights Letter;
(b) Gathering Company agrees to deliver to Buyer at the Closing,
executed by Gathering Company, (i) the Gathering General Conveyance, (ii)
the Gas Gathering and Processing Contracts, (iii) the Operations and
Balancing Agreements and (iv) the Easement Agreement; and
-39-
<PAGE>
(c) Processing Company agrees to deliver to Buyer at the Closing,
executed by Processing Company, (i) the Processing General Conveyance and
(ii) the Easement Agreement.
Section 6.08 WARN Notification. Each Seller shall provide all
-----------------
Designated Employees employed by it with written notification of the Sale at
least 60 days prior to the Closing Date.
Section 6.09 Additional Covenants of Sellers. From the Signing Date
-------------------------------
to the Closing Date:
(a) Each Seller shall use reasonable efforts to preserve and maintain
in force all of its licenses, permits, registrations, franchises, and bonds
applicable to the Property.
(b) Each Seller shall use reasonable efforts to comply with all laws,
ordinances, rules, regulations, and orders applicable to the Property, the
noncompliance with which would result in a Material Adverse Effect on the
Property.
(c) No Seller shall announce or institute any material personnel
changes or employee commitments or contracts for any Designated Employee or
changes in Employee Benefit Plans, including granting any increase in the
compensation of any Designated Employee, other than (i) changes in
personnel, commitments, contracts or compensation in the ordinary course of
business, consistent with past practices, (ii) changes made pursuant to
successor collective bargaining agreements and (iii) any substantially
uniform changes to Employee Benefit Plans applicable to a majority of the
employees of PNM and its Affiliates, other than severance and change in
control Employee Benefit Plans.
(d) Each Seller shall promptly inform Buyer if, to Seller's
knowledge, any of the representations and warranties in Sections 4.06,
4.07(b), 4.07(c), 4.07(d), 4.17 and 4.18 becomes materially incomplete or
incorrect at any time from the Signing Date to the Closing Date because of
an event or development occurring after the Signing Date or, to Seller's
knowledge, the PNM Property, Gathering Property or Processing Property may
have been operated after the Signing Date in a manner not in compliance in
all respects with all applicable Environmental Laws, and in such Seller's
reasonable opinion such potential violation may be material to the Property
or Business.
(e) Sellers shall either maintain in effect their excess liability
insurance policies with respect to the Property and the Business that are
in effect on the Signing Date or obtain and maintain in effect equivalent
"tail coverage" for such periods (2 years or 5 years after the Closing
Date, as the case may be) as Sellers may have an obligation to indemnify
Buyer pursuant to Section 12.03 for third-party claims covered by such
insurance. With respect to the periods set forth above, no Seller shall
(other than
-40-
<PAGE>
through contract terminations in the ordinary course of business) cancel
any third party indemnity rights regarding the Property or the Business to
which such Seller is entitled as of the Signing Date.
Section 6.10 Elimination of Gas Imbalances Among Sellers. By the
-------------------------------------------
Closing Time, Sellers shall eliminate all net underdeliveries and overdeliveries
of Gas between any Seller and any other Seller with respect to the Business or
the Property.
Section 6.11 Vehicles. The Gathering Transferred Vehicles, PNM
--------
Transferred Vehicles and Processing Transferred Vehicles transferred to Buyer at
Closing shall collectively include without limitation a group of 64 trucks
having an average mileage of no greater than 50,000 miles. Sellers shall
convert the leases on their five leased trucks used with the Property to their
ownership prior to the Closing.
Section 6.12 SCADA. PNM shall, at its expense, replace the existing
-----
SCADA equipment at the Avalon Plant, the Amine Plant, the National Interconnect,
and Cunningham Junction with Total Flow end devices, remote terminal units, and
transmitter equipment meeting Buyer's specifications.
Section 6.13 Certain Missing Rights-of-Way. Each Seller, at its own
-----------------------------
cost and expense (other than license issuance fees paid by Buyer pursuant to
Section 10.02(b)), shall use its reasonable efforts to obtain an easement,
right-of-way or other equivalent real property right in respect of any property
on which any pipeline that constitutes Gathering Property, PNM Property or
Pipeline Property, as applicable, is situated but for which such Seller has no
such property right on the Signing Date. Sellers shall by the Closing Date hold
such rights for at least 98 percent of the length (in rods) of all Pipelines
after excluding any Pipelines in a gathering system subject to Section 12.03(f).
This requirement shall not constitute a representation as to the quality of
title to any particular property interest; the only such representation is that
contained in Section 4.10.
ARTICLE VII. COVENANTS OF BUYER
------------------
Buyer covenants and agrees with Sellers that, except as may be
approved by PNM in writing, which approval shall not be unreasonably withheld or
delayed:
Section 7.01 Hart-Scott-Rodino Act; Other Consents. Buyer agrees to
-------------------------------------
make as promptly as practicable all filings necessary in connection with the
Hart-Scott-Rodino Act and to use its reasonable efforts to obtain and make and
to assist each Seller, as applicable, in obtaining and making, as appropriate,
(a) all necessary consents, authorizations and approvals and (b) all filings
necessary for the consummation of the transactions contemplated by this
Agreement. Buyer, at its sole expense, shall retain attorneys and other
advisors acceptable to Sellers in their reasonable discretion to represent Buyer
and Sellers in obtaining all consents,
-41-
<PAGE>
authorizations and approvals from, and to make all filings (except the initial
Hart-Scott-Rodino Act filing) with, any state or federal agency other than the
NMPUC necessary to consummate the sale; provided that Sellers, at their option
and expense, shall be entitled to engage additional attorneys and/or advisors to
represent Sellers in connection with such approvals and filings.
Section 7.02 NMPUC Approval. Buyer shall use reasonable efforts to
--------------
assist Sellers in obtaining the required approval of the Sale by the NMPUC,
shall work to resolve the concerns of any intervenors regarding post-closing
operations and shall bear its own costs for such assistance and work, provided
that Buyer shall not be required to accept any proposed conditions from the
NMPUC that Buyer in its sole discretion deems disadvantageous (a) relating to
the terms and conditions of the Related Instruments, the sale or any future
contractual arrangements between Buyer and any Seller, or (b) otherwise limiting
the rates or service conditions that Buyer may establish for the Property or the
business Buyer will conduct following Closing, excluding general
nondiscriminatory access requirements. If Buyer intends to resell any of the
Property to a third party in connection with or shortly following the Closing,
Buyer shall disclose such intent to the NMPUC, shall furnish to the NMPUC any
information that it may reasonably require or request to evaluate the proposed
resale and shall bear any costs of presenting and advocating any resale it may
desire. Buyer shall provide Sellers with copies of any NMPUC filings (or
portions thereof) regarding the Sale and an opportunity to comment on same prior
to submitting the filings to the NMPUC.
Section 7.03 Conditions to Closing. Subject to Section 7.02, Buyer
---------------------
shall use its reasonable efforts to satisfy the conditions to the Closing set
forth in Article VIII and Article IX to be satisfied by Buyer.
Section 7.04 Contact With Third Parties Regarding Property. Prior to
---------------------------------------------
the Closing Date, Buyer or any Representative of Buyer shall not, without the
prior written consent of PNM, enter into discussions with any Governmental
Authority regarding the Property or any liability or obligation that may arise
from, relate to or attach to any part of the Property; provided, however, that
Buyer may respond to requests and questions from any Governmental Authority
after giving prior written notice to Sellers and may enter into discussions with
the Federal Trade Commission and the United States Department of Justice
regarding the Hart-Scott-Rodino Act filings and, if Buyer deems such discussions
necessary, may enter into informal conferences with the Federal Energy
Regulatory Commission regarding the operation of the Property after the Sale.
Section 7.05 Review of Records. Any information, data or records of
-----------------
any Seller, including Records, obtained and/or reviewed by Buyer or its
Representatives pursuant to Section 6.05 shall be maintained confidential by
such persons prior to the Closing in accordance with the restrictions on
"Evaluation Material" contained in the Confidentiality Agreement. Buyer and its
Representatives shall conduct any investigation made pursuant to Section 6.05 in
a manner that does not unreasonably interfere with the normal operation of the
Property, and
-42-
<PAGE>
shall not, prior to the Closing, conduct any environmental testing or sampling
on or with respect to the Property without the prior written consent of PNM.
Section 7.06 Deliveries at Closing. Buyer agrees to deliver to the
---------------------
applicable Sellers at the Closing, executed by Buyer: (a) the PNM General
Conveyance, (b) the Gathering General Conveyance, (c) the Processing General
Conveyance, (d) the Gas Gathering and Processing Contracts, (e) the Operations
and Balancing Agreements, (f) the Gas Purchase Option, (g) the Gas Storage
Option, (h) the Easement Agreement and (i) the Communications Rights Letter. In
addition, Buyer shall deliver to each Seller at the Closing its respective
portion of the Closing Payment, pursuant to the procedure provided in Section
3.02.
ARTICLE VIII. BUYER'S CONDITIONS TO CLOSING
-----------------------------
Section 8.01 Conditions Precedent to Buyer's Obligations. The
-------------------------------------------
obligations of Buyer to proceed with the Closing are subject to the satisfaction
on or prior to the Closing Date of all of the following conditions, any one or
more of which may be waived, in whole or in part, in writing by Buyer:
(a) Compliance. Each Seller shall have complied in all material
----------
respects with each of its covenants, agreements and obligations contained
herein and each of its representations and warranties contained in Article
IV hereof shall be true in all material respects on and as of the Signing
Date and the Closing Date. Individual breaches of each representation or
warranty containing a "Material Adverse Effect" exception shall be
aggregated for purposes of determining whether the conditions to Closing
with respect to that representation or warranty have been satisfied.
Breaches of such representations and warranties shall be considered on an
individual basis for other purposes of this Agreement.
(b) Officer's Certificate. Buyer shall have received a certificate,
---------------------
dated the Closing Date, of an executive officer of each Seller certifying
as to the matters specified in Section 8.01(a) hereof.
(c) No Orders. The Closing shall not violate any order or decree
---------
with respect to the transactions contemplated by this Agreement issued by
any court or governmental body having competent jurisdiction over such
transactions.
(d) Consents. Buyer and each Seller shall have obtained all
--------
consents, waivers and authorizations necessary or required to be obtained
by such Party in order to consummate the Sale, except where the failure to
obtain any such consent, waiver or authorization would not materially
interfere with the consummation of the Sale, the applicable waiting periods
provided pursuant to the Hart-Scott-Rodino Act shall have lapsed or been
terminated and the NMPUC shall have approved the Sale without any
conditions that Buyer, in its sole discretion, deems unacceptable (i) with
respect to the
-43-
<PAGE>
terms and conditions of the Related Instruments, the Sale or any future
contractual arrangements between Buyer and any Seller or (ii) otherwise
limiting the rates or service conditions that Buyer may establish for the
Property or the business Buyer will conduct following Closing, excluding
general nondiscriminatory access requirements.
(e) Secretary's Certificate. Buyer shall have received (i) a
-----------------------
certificate, dated the Closing Date, of the secretary or assistant
secretary of each Seller attaching certified copies of its certificate of
incorporation and bylaws, each as amended to date, and resolutions of its
board of directors authorizing the execution, delivery and performance of
this Agreement and the Related Instruments, as applicable, and authorizing
all other transactions contemplated by this Agreement and (ii) an
incumbency certificate of each Seller.
(f) Release of Liens and Mortgages. Buyer shall have received all
------------------------------
necessary releases of liens and mortgages encumbering the Property and
securing (i) indebtedness of Gathering Company to PNM pursuant to Term Loan
Agreement dated as of March 1, 1990, (ii) indebtedness of Processing
Company to PNM pursuant to Term Loan Agreement dated January 4, 1990, (iii)
indebtedness of PNM to The Bank of New York et. al. under Indenture of
Mortgage and Deed of Trust dated as of June 1, 1947, or (iv) any other
indebtedness for borrowed money, or any renewals, extensions, refinancings
or modifications thereof.
(g) Additional Documents. Buyer shall have received original copies
--------------------
of the following documents executed by each Seller, as appropriate: (i)
the PNM General Conveyance, (ii) the Gathering General Conveyance, (iii)
the Processing General Conveyance, (iv) the Gas Gathering and Processing
Contracts, (v) the Operations and Balancing Agreements, (vi) the Gas
Purchase Option, (viii) the Gas Storage Option, (viii) the Easement
Agreement, and (ix) the Communications Rights Letter.
(h) Adverse Change. Since the Signing Date, there shall have been no
--------------
changes in or losses to the Property or the Business, not cured by any
Seller or Sellers at their option, which have had, individually or in the
aggregate, a Material Adverse Effect on the Property or the Business.
ARTICLE IX. SELLERS' CONDITIONS TO CLOSING
------------------------------
Section 9.01 Conditions Precedent to Sellers' Obligations. The
--------------------------------------------
obligations of each Seller to proceed with the Closing are subject to the
satisfaction on or prior to the Closing Date of all of the following conditions,
any one or more of which may be waived, in whole or in part, in writing by any
Seller:
-44-
<PAGE>
(a) Compliance. Buyer shall have complied in all material respects
----------
with each of its covenants, agreements and obligations contained herein and
each of its representations and warranties contained in Article V hereof
shall be true in all material respects on and as of the Signing Date and
the Closing Date. Individual breaches of each representation or warranty
containing a "Material Adverse Effect" exception shall be aggregated for
purposes of determining whether the conditions to Closing with respect to
that representation or warranty have been satisfied. Breaches of such
representations and warranties shall be considered on an individual basis
for other purposes of this Agreement.
(b) Officer's Certificate. Sellers shall have received a
---------------------
certificate, dated the Closing Date, of an executive officer of Buyer
certifying as to the matters specified in Section 9.01(a) hereof.
(c) No Orders. The Closing shall not violate any order or decree
---------
with respect to the transactions contemplated by this Agreement issued by
any court or governmental body having competent jurisdiction over such
transactions.
(d) Consents. Buyer and each Seller shall have obtained all
--------
consents, waivers and authorizations necessary or required to be obtained
by such Party in order to consummate the Sale, except where the failure to
obtain any such consent, waiver or authorization would not materially
interfere with the consummation of the Sale, the applicable waiting periods
provided pursuant to the Hart-Scott-Rodino Act shall have lapsed or been
terminated and the NMPUC shall have approved the Sale without any
conditions that are unacceptable to any Seller, in its sole discretion,
with respect to (i) the treatment of the proceeds of the Sale of the
Property, (ii) the conduct of any Seller's continuing business, (iii) the
terms and conditions of the Related Instruments, the Sale or any future
contractual arrangements between Buyer and any Seller or (iv) ratemaking or
other regulation by the NMPUC.
(e) Secretary's Certificate. Sellers shall have received (i) a
-----------------------
certificate, dated the Closing Date, of the secretary or assistant
secretary of Buyer attaching certified copies of its certificate of
incorporation and bylaws, each as amended to date, and resolutions of its
board of directors authorizing the execution, delivery and performance of
this Agreement and the Related Instruments, as applicable, and authorizing
all other transactions contemplated by this Agreement and (ii) an
incumbency certificate of Buyer.
(f) Release of Third Party Liens. PNM shall have received all
----------------------------
necessary releases of liens and mortgages encumbering the PNM Property and
securing indebtedness of PNM to The Bank of New York et. al. under
Indenture of Mortgage and Deed of Trust dated as of June 1, 1947, or any
renewals, extensions, refinancings or modifications thereof.
-45-
<PAGE>
(g) Payment of Purchase Price. Each Seller shall have received
-------------------------
payment of its respective portion of the Closing Payment pursuant to
Section 3.04.
(h) Additional Documents. Sellers shall have received original
--------------------
copies of the following documents executed by Buyer: (i) the PNM General
Conveyance, (ii) the Gathering General Conveyance, (iii) the Processing
General Conveyance, (iv) the Gas Gathering and Processing Contracts, (v)
the Operations and Balancing Agreements, (vi) the Gas Purchase Option,
(vii) the Gas Storage Option, (viii) the Easement Agreement, and (ix) the
Communications Rights Letter.
ARTICLE X. TAXES
-----
Section 10.01 Compliance with Reporting Requirements. If either
--------------------------------------
Sellers or Buyer determines that this transaction is subject to the reporting
requirements of Section 1060 of the Code, Buyer and Sellers shall file a Form
8594 with the Internal Revenue Service in accordance with the allocations of the
Purchase Price under Section 3.07.
Section 10.02 Liability For Taxes.
-------------------
(a) All accrued but unpaid ad valorem taxes and all other taxes with
respect to the Property and Business shall be prorated on a daily basis and
(i) Sellers shall be liable for the portion thereof which is apportioned to
the period prior to the Closing Time and (ii) Buyer shall be liable for the
portion thereof which is apportioned to the period beginning on and after
the Closing Time. The party that receives statements for ad valorem taxes
due during the tax year in which Closing occurs shall pay such taxes and,
upon presentment of copies of such tax statements and appropriate evidence
of payment thereof, shall be promptly reimbursed by the other party hereto
for the share of such taxes payable by such other party.
(b) Buyer shall be liable for any sales, use, gross receipts,
documentary, recording, stamp, transfer or similar taxes and Government
License transfer fees (including license issuance fees equivalent to
transfer fees), arising from the Sale. To the extent permitted by statute,
Buyer shall be responsible for remitting the amount of any such taxes to
the appropriate Governmental Authority and filing any returns or reports
required in connection therewith.
(c) If Buyer receives a refund of any taxes for which any Seller is
liable or any Seller receives a refund of any taxes for which Buyer is
liable, the Party receiving the refund shall, within 30 days of receipt,
remit such refund to the other Party.
-46-
<PAGE>
ARTICLE XI. CERTAIN EMPLOYEE MATTERS
------------------------
Section 11.01 Hiring of Employees.
--------------------
(a) From the Signing Date through one year following the Closing
Date, neither Buyer nor any of its Affiliates shall offer employment to any
employee of Sellers who is currently employed by Sellers at the time of the
offer, other than offers on the terms set forth below to employees who are
Designated Employees at the time of the offer, unless either: (i) all
Sellers who employ such employee terminate such employee or such Sellers
consent in writing to the employment of such employee by Buyer or any
Affiliate thereof or (ii) pursuant to paragraph (b) of this Section 11.01.
In addition, neither Buyer nor any of its Affiliates shall offer employment
to any Designated Employee prior to the Buyer Hiring Period, unless either
all Sellers who employ such Designated Employee terminate such Designated
Employee or Sellers consent in writing to the employment of such Designated
Employee by Buyer or any Affiliate thereof. During the Buyer Hiring
Period, (i) Buyer and its Affiliates shall be free to offer employment to
any person then a Designated Employee, such employment to take effect upon
Closing, and (ii) Sellers shall not, without Buyer's written consent, offer
employment to any Designated Employee. Subject to paragraph (e) of this
Section 11.01, after the Closing, Buyer, Sellers, and any of their
Affiliates shall be free to offer employment to any Designated Employee not
previously hired under this Section 11.01.
(b) During the sixty (60) day period commencing on the Signing Date,
Sellers shall provide up to fifty-seven (57) of the Operations Employees
with the opportunity to accept job positions which will require the
performance of services for the Gas Company of New Mexico transmission
system after Closing. On or prior to the sixtieth (60th) day following the
Signing Date, Sellers shall provide Buyer with the initial listing of
Designated Employees (who will initially fill the Designated Employee
positions on Schedule 1.01(i)(i)), which shall consist of no more than one
---------------------
hundred and ten (110) employees (by name, by position and by GARP
eligibility) of which at least twenty-eight (28) shall be employees holding
positions subject to the collective bargaining agreement of Sellers;
however, no more than eighty-two (82) of the one hundred and ten (110)
employees shall be GARP-Eligible Employees. If any of the Designated
Employees terminates employment (voluntarily or involuntarily) with Sellers
for any reason whatsoever, or transfers to a position not set forth on the
Designated Employee list, such employee shall be removed from the
Designated Employee list. Sellers and Buyer shall follow the procedures of
Section 11.03 in replacing such employee. If such terminated or
transferred employee is replaced by (i) an Operations Employee, the
selected employee shall be added to the Designated Employee list; (ii) a
Contract Employee (as defined in Section 11.03), the Contract Employee
shall not be added to the Designated Employee list ; or (iii) an employee
of Sellers who is not an Operations Employee, such employee shall not be
added to the Designated Employee list. During the period between
-47-
<PAGE>
the Signing Date and the Closing Date, the initial number of employees on
the Designated Employees list (i.e., 110) will be subject to the reductions
and increases provided for in this paragraph (b); however, the number of
such employees shall never exceed one hundred and ten (110). Moreover,
during the period beginning on the Signing Date and ending on the Closing
Date, the number of employees on the Designated Employee list who are GARP
Eligible Employees will be subject to the reductions and increases provided
for in this paragraph (b); however, the number of GARP-Eligible Employees
on such list shall never exceed eight-two (82).
On or before the last day of the Buyer Hiring Period, Buyer shall
offer (subject to the Closing) employment on terms with respect to GARP
Eligible Employees that do not constitute "Constructive Termination" under
the GARP to at least ninety percent (90%) of the employees who are
Designated Employees on the day before Closing. The selection of such
Designated Employees to whom Buyer offers employment shall be made by Buyer
in its sole discretion. As promptly as possible, Buyer shall notify
Sellers in writing of the conditions under which each Designated Employee
has accepted or rejected employment with Buyer.
Except as provided in the preceding paragraph, Buyer shall not be
required to hire any employee of Sellers; however, if Buyer, in its
discretion, decides to hire a GARP-Eligible Employee of Sellers on or
before the Closing Date, Buyer shall be responsible for the GARP benefits,
if any, to which such employee is entitled. In this regard, Buyer shall
have the right, but not the obligation, to hire any Operations Employee who
Sellers make available and who is not on the Designated Employee list
during the Buyer Hiring Period, and if Buyer decides to hire any such
employee, Buyer shall assume the GARP liability, if any, with respect to
such employee.
(c) Buyer hereby assumes and agrees to perform the "Company"
obligations under the GARP, as required by Article VIII of the GARP, with
respect to each GARP-Eligible Employee who accepts employment with Buyer as
of the Closing Date (a "Buyer GARP Employee"). In this regard, Buyer shall
adopt a severance pay plan for the Buyer GARP Employees that is identical
to the GARP except for the changes necessary to reflect its assumption of
the GARP obligations, such as changing: the term "Company: to mean the
Buyer, the term "Board" to mean the Board of Directors of the Buyer, and
the term "Committee" to a committee appointed by the President of the
Buyer. In addition, Sellers shall retain, as a Retained Liability, the
liability and responsibility to pay all amounts and benefits to which each
Buyer GARP Employee hired by the Buyer is entitled to under all Employee
Benefit Plans other than the GARP obligations assumed by the Buyer under
this Section 11.01. If any Designated Employee rejects Buyer's offer of
employment, Buyer shall identify such Designated Employee to Sellers. The
relevant Seller shall terminate or continue such Designated Employee's
employment and Sellers shall retain the GARP obligation, if any, with
respect to such Designated Employee, as well as all other amounts and
benefits to which such Designated Employee is entitled,
-48-
<PAGE>
including, but not limited to, all amounts and benefits under all Employee
Benefit Plans. Before paying GARP benefits to a Buyer GARP Employee, Buyer
shall obtain from such Buyer GARP Employee an executed release of all
claims by such Buyer GARP Employee against Sellers substantially in the
form previously provided by Buyer to Sellers, modified as Buyer and Sellers
mutually agree is required by New Mexico law. Sellers agree that on and
after the Signing Date, they shall not, and shall not permit any of their
Affiliates to, either:(i) add any Employee to the list of GARP Eligible
Employees set forth in Schedule 1.01(i)(i); or (ii) amend, modify or
--------------------
terminate the GARP with respect to any GARP Eligible Employee in a manner
that increases the GARP obligation with respect to that employee.
(d) Sellers shall endeavor to assist Buyer in effecting an orderly
change in employment of each employee of Sellers hired by Buyer. Upon
request, Sellers shall provide Buyer with the right to interview such
employee's supervisor and with information as to title, employment history,
performance appraisals, if any, for the past three (3) years, and
compensation level of such employee, subject to any limitations imposed by
applicable law and existing policies of the applicable Seller pertaining to
medical claims and records, employee assistance program records, customer
records, court orders, drug testing information, or similar items except
where such information must be provided to Buyer as required by law.
Except for such disclosure as would be permissible under Section 15.10, and
except for disclosure in any legal proceeding with any employee or former
employee of Sellers, Buyer shall keep confidential any information that
Sellers designate as confidential when supplied.
(e) For a period of one (1) year following the Closing Date, Buyer or
its Affiliates shall not hire any employee terminated by Sellers to whom
Sellers paid GARP benefits in connection with the Sale, unless Buyer or its
Affiliates reimburses the applicable Seller for any GARP benefits paid to
such employee by such Seller. However, the preceding sentence shall only
apply if, at the Closing, Sellers provide a list of such employees
terminated by Sellers at the Closing and Sellers continue to update such
list and provide Buyer or its Affiliates with such updated list up to and
through the sixty (60) day period following the Closing. Buyer or its
Affiliates shall not reimburse the relevant Seller for any GARP benefits
paid to any such employee described in this paragraph (e) hired by the
Buyer or its Affiliates whose name does not appear on the aforementioned
list at the time Buyer or its Affiliates extends its offer of employment.
Section 11.02 Certain Plans and Other Arrangements. With respect to
------------------------------------
medical and dental benefits, Buyer agrees that each offer of employment made to
a Designated Employee will (i) include eligibility for the Designated Employee
and his or her eligible dependents under a group health plan (within the meaning
of Section 607(1) of ERISA) maintained by Buyer or one of its Affiliates, which
plan (a) will be the same plan as is provided to similarly situated employees of
Williams Field Services Group, Inc., (b) provides medical and dental benefits
(in accordance with the terms of such plan) effective as of the date of such
Designated Employee's
-49-
<PAGE>
employment with the Buyer or its Affiliates, (c) credits such Designated
Employee, for the year during which his or her employment with Buyer or one of
its Affiliates begins, with any deductibles already incurred during such year
under the Sellers' group health plan and (d) waives any preexisting condition
restrictions to the extent necessary to provide immediate coverage as of the
date of such Designated Employee's employment with Buyer or one of its
Affiliates (but only to the extent that coverage for such condition was provided
under Sellers' group health plan and would be covered under Buyer's group health
plan if it were not preexisting), (ii) recognize up to five (5) years of the
Designated Employee's years of service for participation and vesting purposes
under the Sellers' tax-qualified employee pension plans for purposes of
determining participation and vesting (but not benefit accruals) under the tax-
qualified employee pension plans maintained by Buyer and its Affiliates, and
(iii) recognize such Designated Employee's most recent period of continuous
service with the Sellers for purposes of participation, vesting and benefit
determination under the vacation policy and short-term disability plan
established or maintained by Buyer and its Affiliates and in which such
Designated Employee is eligible to participate with respect to each Designated
Employee who accepts an offer of employment from Buyer or one of its Affiliates.
Sellers will promptly provide Buyer with the information necessary to permit
Buyer to credit deductibles, waive preexisting conditions and recognize years of
service as provided in the preceding sentence and Buyer and Sellers will
coordinate their efforts so that such Designated Employee's employment with
Sellers will be terminated immediately prior to the commencement of such
Designated Employee's employment with Buyer or one of its Affiliates.
Section 11.03 Certain Preclosing Employment Matters.
-------------------------------------
(a) From the Retained Employee Hiring Deadline through the Closing
Date, if a vacancy occurs in a Designated Employee position that the
applicable Seller, in its sole discretion, wishes to fill, the applicable
Seller shall fill such vacancy in accordance with this Section 11.03(a).
If a vacancy occurs in a position designated on Schedule 1.01(i)(i) as
--------------------
"manager" or "supervisor," Sellers shall confer with Buyer as to whether
the position should be filled or eliminated. If after conferring with
Buyer, and after due consideration for the efficient operation of the
Gathering, Processing and PNM Property, such Seller determines, in its sole
discretion, that the vacant position must be filled, such Seller shall
first, to the extent required by such Seller's company policies, attempt to
fill the position internally with an Operations Employee. If such Seller's
policies do not require that attempts be made to fill it internally, or if
the attempts in filling the vacancy are unsuccessful, such Seller shall
fill such vacancy with a Contract Employee as defined below; provided that
Buyer makes available to such Seller an employee of Buyer who is reasonably
suitable for such position by training, background or otherwise and is
otherwise satisfactory to such Seller in its sole discretion. Such
employee of Buyer shall be deemed an independent contractor of the
applicable Seller for all purposes (a "Contract Employee"). If a vacancy
occurs in any Designated Employee position other than one designated on
Schedule 1.01(i)(i) as "manager" or "supervisor," such Seller may fill such
-------------------
vacancy with an Operations Employee. If such vacancy is not filled by an
-50-
<PAGE>
Operations Employee, Sellers shall consult with Buyer and Buyer and Sellers
shall use their reasonable efforts to fill such vacancy with a Contract
Employee. This Section 11.03(a) shall be subject to any applicable
provisions of any collective bargaining agreement to which Sellers are a
party.
Sellers shall promptly notify Buyer upon the occurrence of any vacancy
described above that is to be filled by a Contract Employee. Buyer shall
promptly thereafter submit to Sellers a list of proposed Contract Employees
to fill such vacancy, together with information detailing the employment
history and qualifications of each such proposed Contract Employee. Upon
request by Sellers, Buyer shall supplement its list of proposed Contract
Employees. Buyer shall make all such proposed Contract Employees available
to Sellers for interviews, including the ability to interview other
employees of Buyer in order that Sellers may determine whether they wish to
engage a particular proposed Contract Employee. The selection of the
Contract Employee to fill such vacancy shall be in the sole discretion of
Sellers. Sellers may terminate their engagement of any such Contract
Employee at any time, with or without cause.
Sellers shall not be obligated to engage any Contract Employee until
Buyer and Sellers have entered into a mutually agreeable contract for
services (the "Services Agreement"), pursuant to which each Contract
Employee shall be engaged. If requested by Sellers, each Contract Employee
shall enter into a confidentiality agreement reasonably acceptable to
Sellers. Sellers shall pay to Buyer for the services of any such Contract
Employee the contract fee provided under the Services Agreement. Contract
Employees shall not be eligible for any compensation, fringe benefits or
other benefits from Sellers. Buyer shall be solely responsible for, and
shall indemnify Sellers against, all taxes, compensation, and benefits
relating to such Contract Employees. Each Party shall provide workers'
compensation and excess employer liability coverage, to the extent required
by law, with respect to its employees. To the extent it is established by
clear and convincing evidence that the gross negligence or willful
misconduct of a Contract Employee caused, in whole or in part, personal
injury to an employee of any Seller, or damage to the property of any
Seller, Buyer shall indemnify and hold harmless Sellers for their actual
out-of-pocket expenses (but not punitive damages or loss of profits) caused
by such injury or damage. To the extent it is established by clear and
convincing evidence that the gross negligence or willful misconduct of an
employee of Sellers caused, in whole or in part, personal injury to a
Contract Employee of Buyer, or damage to the property of Buyer, the
applicable Seller shall indemnify and hold harmless Buyer for its actual
out-of-pocket expenses (but not punitive damages or loss of profits) caused
by such injury or damage.
(b) From the Signing Date through the Closing Date, up to nine
employees of Buyer may observe the operations of the Property during
Sellers' normal business hours at locations mutually agreeable to Sellers
and Buyer. Sellers, at no cost to Buyer, shall provide such employees of
Buyer with office space, reasonable business telephone
-51-
<PAGE>
service and minor office supplies. Buyer shall be solely responsible for
all other costs associated with such employees of Buyer. If requested by
Sellers, such employees shall execute a release of liability on terms
reasonably acceptable to Sellers. All requests by such employees of Buyer
for information regarding the Property or the Business shall be directed to
the appropriate employees of Sellers. No employee of Buyer under this
Section 11.03(b) shall have authority to bind Sellers or to direct the
activities of employees of Sellers. All such employees of Buyer shall
adhere to and comply with Sellers' rules and regulations regarding safety,
security and job-site procedures.
Section 11.04 Cooperation. Buyer and its Affiliates shall cooperate
-----------
with Sellers and their Affiliates in connection with any labor disputes
involving current or former employees of Sellers, including making former
employees of any Seller who are hired by Buyer and documents relevant to the
dispute, to the extent that they are in Buyer's control, reasonably available to
Sellers, any Governmental Authority or any attorney employed or retained by any
Seller. For a period of six (6) years after the Closing Date, Sellers and their
Affiliates shall cooperate with Buyer and its Affiliates in connection with any
claim, action, demand or proceeding against Buyer which relates to any
terminations of employment of Sellers' employees hired by Buyer, any claims for
severance pay asserted or related to the GARPs, discrimination claims against
Buyer, and claims regarding Buyer's employee benefit plans and similar matters
with respect to Buyer's employment of (or failure to employ) such employee.
Such cooperation by Sellers and their Affiliates shall include, without
limitation, the furnishing of any relevant documentation or information
reasonably requested by Buyer and reasonable access to any agent and/or employee
of any Seller with knowledge of relevant information, including without
limitation, information regarding terminations of employment of Designated
Employees, the employment history of Designated Employees with the Sellers and
their Affiliates, claims for severance pay or appeals of denied claims for
severance pay by Designated Employees under the existing severance plans of the
relevant Seller, including the GARPs, subject in all cases to any limitations
imposed by applicable law and existing contracts and policies of the applicable
Seller, such as without limitation its policies regarding confidentiality of
employee and customer records, medical claims and records, employee assistance
program records, customer records, court orders, drug testing information, or
similar items except where such information must be provided to Buyer as
required by law. Sellers also shall provide information reasonably requested by
Buyer relating to any collective bargaining agreement. Except for such
disclosure that would be permissible under Section 15.10, and except for
disclosure in any legal proceeding with any employee or former employee of Buyer
or Sellers, each Party shall keep confidential any information provided
hereunder that the other Party designates as confidential when supplied.
-52-
<PAGE>
ARTICLE XII. EXTENT AND SURVIVAL OF REPRESENTATIONS,
--------------------------------------
WARRANTIES, COVENANTS AND AGREEMENTS; INDEMNIFICATION
-----------------------------------------------------
Section 12.01 Scope of Representations.
------------------------
(a) Except as and to the extent expressly set forth in Article IV
hereof, Section 15.05 hereof, the certificates contemplated hereby and the
General Conveyances, each Seller makes no, and disclaims any,
representations or warranties whatsoever, whether express or implied. Each
Seller disclaims all liability and responsibility for any other statement
or information made or communicated (orally or in writing) to Buyer, its
Affiliates, or any stockholder, officer, director, employee, agent, advisor
or representative of either (including, but not limited to, any opinion,
information or advice which may have been provided to any such Person by
any Representative of any Seller or any other Person) wherever and however
made, including, but not limited to, those statements made and that
information communicated during any negotiations, in materials in any data
room or in the Confidential Offering Memorandum distributed on behalf of
Sellers by Morgan, Stanley & Co. and any supplements or amendments thereto.
(b) Except as and to the extent expressly set forth in Article V
hereof, Section 15.05 hereof, and the certificates contemplated hereby,
Buyer makes no, and disclaims any, representations or warranties
whatsoever, whether express or implied. Buyer disclaims all liability and
responsibility for any other statement or information made or communicated
(orally or in writing) to any Seller, its Affiliates or any stockholder,
officer, director, employee, agent, advisor or representative of any such
Person (including, but not limited to, any opinion, information or advice
which may have been provided to any such Person by any Representative of
Buyer or any other Person), wherever and however made, including, but not
limited to, those statements made during any negotiations.
(c) Any representation "to the knowledge" of any Party is limited to
matters within the actual conscious awareness of the executive officers of
such Party and any manager or managers of such Party who have primary
responsibility for the substantive area or operations in question who
report directly to such executive officers.
Section 12.02 Survival. The representations and warranties made by
--------
the Parties in Articles IV and V of this Agreement and in the certificates
contemplated hereby shall survive the Closing Date (i) until the earlier of the
date on which the expenditure cap in Section 12.05 (g) is reached or the fifth
anniversary of the Closing Date with respect to the representations and
warranties in Section 4.07, (ii) until 30 days after the expiration of the
applicable statute of limitations with respect to the representations and
warranties in Section 4.05, and (iii) for 2 years with respect to all other
representations and warranties. The covenants of the Parties in Articles VI and
VII of this Agreement shall expire on the Closing Date. Such representations,
warranties and covenants shall be of no further force and effect after the date
of their expiration,
-53-
<PAGE>
provided that there shall be no termination of any bona fide claim asserted
pursuant to this Agreement with respect to such a representation, warranty or
covenant prior to its expiration date. The remainder of this Agreement shall
survive the Closing Date without time limit except as expressly provided herein.
Section 12.03 Indemnification of Buyer. From and after the Closing
------------------------
Date, each Seller agrees individually and severally to indemnify and defend
Buyer against, and hold Buyer harmless from, any Loss or Losses actually
sustained by Buyer arising out of or resulting from:
(a) such Seller's Retained Liabilities,
(b) any inaccuracy in or breach of any of such Seller's
representations and warranties in Article IV or Section 15.05 or any of the
covenants made by such Seller in Article VI or in the certificates
contemplated hereby,
(c) any noncompliance by such Seller with any bulk transfer laws that
may be applicable to the transactions contemplated by this Agreement,
(d) any claims or actions asserted by third parties (including
without limitation Governmental Authorities) with respect to noncompliance
of such Seller's Property with any Environmental Law, a remediation
requirement for such Seller's Property under any Environmental Law, or a
violation by such Seller's Property of any Environmental Law, to the extent
resulting from the ownership, operation or condition of such Property on or
before the Closing Date and excluding Losses relating to Retained
Liabilities for which indemnity is provided in Section 12.03(a) and Losses
relating to the Lee Acres Landfill described in Section 14.10(b), if any,
(e) any claims or actions asserted by third parties (including
without limitation Governmental Authorities) with respect to any matters
not subject to Sections 12.03(a), 12.03(b), 12.03(c), 12.03(d), or 12.03(f)
and not relating to the Lee Acres Landfill described in Section 14.10(b)
that arise from or in connection with the ownership, operation or condition
of such Seller's Property or Business on or before the Closing Date,
(f) any claims or actions asserted by third parties (including
without limitation Governmental Authorities) with respect to any Seller's
failure to have property rights (other than BLM or state rights-of-way)
during any period prior to Closing for any of its gathering facilities
comprising part of any separate and distinct gathering system in San Juan
County, New Mexico that on the Signing Date was lacking more than 3700 rods
of necessary property rights in addition to any missing BLM or state
rights-of-way,
any such Loss or Losses being referred to herein as a "Buyer Indemnified Loss".
Notwithstanding the foregoing, Buyer and Sellers shall bear equally Buyer
Indemnified Losses
-54-
<PAGE>
under subsections (b), (c), and (e) above up to the amount of $1,500,000 and
Sellers shall bear, and Buyer shall be indemnified for, Buyer Indemnified Losses
under subsections (b), (c) and (e) above beyond $1,500,000. The indemnities in
subsection (b) above shall terminate as of the termination date of the
applicable representation, warranty or covenant except as to matters for which a
Claim Notice or an Indemnity Notice (as defined below) has been furnished to
Sellers on or before such date. The indemnities in subsections (c) and (e)
above shall terminate on the second anniversary of the Closing Date except as to
matters for which a Claim Notice or an Indemnity Notice has been furnished to
Sellers on or before such date. The indemnities in subsection (f) above shall
terminate on the third anniversary of the Closing Date except as to matters for
which a Claim Notice or an Indemnity Notice has been furnished to Sellers on or
before such date. The indemnities in subsection (d) above shall terminate on
the earlier of the date on which the expenditure cap in Section 12.05(g) is
reached or the fifth anniversary of the Closing Date except as to matters for
which a Claim Notice or an Indemnity Notice has been furnished to Sellers on or
before such date. The indemnities in subsection (a) above shall continue
without time limit.
Section 12.04 Indemnification of Sellers. From and after the Closing
--------------------------
Date, Buyer agrees to indemnify and defend each Seller against, and hold each
Seller harmless from, any Loss or Losses actually sustained by such Seller
arising out of or resulting from:
(a) any inaccuracy in or breach of any of Buyer's representations and
warranties in Article V or Section 15.05 or any of the covenants made by
Buyer in Article VII or in the certificates contemplated hereby,
(b) any claims or actions asserted by third parties (including
without limitation Governmental Authorities), other than claims or actions
for which any Seller would be required to indemnify Buyer under Section
12.03 at the time the Claim Notice or Indemnity Notice is given, arising
from or in connection with the ownership, operation or condition of the PNM
Property or the PNM Business, whether before or after the Closing Date (the
"PNM Liabilities"), the ownership, operation or condition of the Gathering
Property or the Gathering Business, whether before or after the Closing
Date (the "Gathering Liabilities"), and/or the ownership, operation or
condition of the Processing Property or the Processing Business, whether
before or after the Closing Date (the "Processing Liabilities," and,
collectively with the PNM Liabilities and the Gathering Liabilities, the
"Assumed Liabilities"),
(c) (i) any GARP liability with respect to any Buyer GARP Employee
hired by Buyer, (ii) any claims by any Designated Employee arising from any
offer of employment or failure of Buyer to offer employment to such
Designated Employee, except where such offer or failure is required by the
terms of this Agreement or the GARPS, (iii) any failure by Buyer to obtain
a fully valid and enforceable release of claims from a Buyer GARP Employee
prior to the payment of GARP benefits, as required under Section 11.01(c);
-55-
<PAGE>
(d) any claims by any former employee of Sellers who was employed by
any Seller on or after the Signing Date (i) whom Sellers have terminated or
for whom Sellers have given written consent for Buyer to consider for
employment and (ii) whom Buyer interviews for employment, provided such
claims relate to an offer by Buyer of employment or failure by Buyer to
offer employment,
any such Loss or Losses being referred to herein as a "Seller Indemnified Loss";
provided, however, that Buyer and Sellers shall bear equally Seller Indemnified
Losses under subsections (a) and (b) above, other than Seller Indemnified Losses
with respect to matters of the type described in Section 12.03(d), up to the
amount of $1,500,000 and Buyer shall bear, and Sellers shall be indemnified for,
all Seller Indemnified Losses with respect to matters of the type described in
Section 12.03(d), and other Seller Indemnified Losses under subsections (a) and
(b) above that exceed $1,500,000. The indemnities in subsection (a) above shall
terminate as of the termination date of the applicable representation, warranty
or covenant except as to matters for which a Claim Notice or an Indemnity Notice
has been furnished to Buyer on or before such date. The indemnities in
subsections (b) , (c) and (d) above shall continue without time limit.
Section 12.05 Indemnification Procedures. All claims for
--------------------------
indemnification under this Agreement shall be asserted and resolved as follows:
(a) A Party claiming indemnification under this Agreement (an
"Indemnified Party") shall, within sixty days (or such shorter time period
as is required to respond to litigation or an administrative proceeding)
after any executive officer of such Party, or any manager of such Party
having primary responsibility for the substantive area or operations in
question and who reports directly to such executive officers, obtains
actual knowledge of any third-party claim or claims ("Third-Party Claim")
asserted against the Indemnified Party which could give rise to a right of
indemnification under this Agreement, (i) notify the Party from whom
indemnification is sought (the "Indemnifying Party") and (ii) transmit to
the Indemnifying Party a written notice ("Claim Notice") describing in
reasonable detail the nature of the Third-Party Claim, a copy of all papers
served with respect to such claim (if any), an estimate, if reasonably
possible, of the amount of damages attributable to the Third-Party Claim
and the basis of the Indemnified Party's request for indemnification under
this Agreement. The Indemnifying Party shall not be obligated to indemnify
the Indemnified Party against any Loss for which the Indemnified Party
fails to provide a Claim Notice within the time period specified in this
Section 12.05(a).
Within 30 days after receipt of any Claim Notice (the "Election
Period"), the Indemnifying Party shall notify the Indemnified Party (i)
whether (and to what extent)
-56-
<PAGE>
the Indemnifying Party disputes its potential liability to the
Indemnified Party under this Article XII with respect to such Third-Party
Claim and (ii) whether, if it admits its liability under this Article
XII, the Indemnifying Party desires, at the sole cost and expense of the
Indemnifying Party, to defend the Indemnified Party against such
Third-Party Claim.
(b) If the Indemnifying Party notifies the Indemnified Party within
the Election Period that the Indemnifying Party does not dispute its
potential liability to the Indemnified Party under this Article XII and
that the Indemnifying Party elects to assume the defense of the Third-Party
Claim, then the Indemnifying Party shall have the right to defend, at its
sole cost and expense, such Third-Party Claim by all appropriate
proceedings, which proceedings shall be prosecuted diligently by the
Indemnifying Party to a final conclusion or settled at the discretion of
the Indemnifying Party in accordance with this Section 12.05(b). The
Indemnifying Party shall have full control of such defense and proceedings,
including any compromise or settlement thereof. If requested by the
Indemnifying Party, the Indemnified Party shall, at the sole cost and
expense of the Indemnifying Party, cooperate with the Indemnifying Party
and its counsel in contesting any Third-Party Claim which the Indemnifying
Party elects to contest, including, without limitation, the making of any
related counterclaim against the person asserting the Third-Party Claim or
any cross-complaint against any person. The Indemnified Party may
participate in, but not control, any defense or settlement of any Third-
Party Claim controlled by the Indemnifying Party pursuant to this Section
12.05 and shall bear its own costs and expenses with respect to such
participation. Notwithstanding anything in this Section 12.05 to the
contrary, for actions, suits or proceedings other than those subject to
indemnification by Sellers pursuant to Section 12.03(d), the Indemnifying
Party shall not, without the written consent of the Indemnified Party, (i)
settle or compromise such action, suit or proceeding or consent to the
entry of any judgment unless an unconditional term of such settlement or
judgment is the delivery by the claimant or plaintiff to the Indemnified
Party of a written release from all liability in respect of such action,
suit or proceeding or (ii) settle or compromise any action, suit or
proceeding in any manner that may materially and adversely affect the
Indemnified Party other than as a result of money damages or other money
payments. For actions, suits and proceedings subject to indemnification by
Sellers pursuant to Section 12.03(d), Sellers shall not, without the
written consent of Buyer, settle or compromise such action, suit or
proceeding or consent to the entry of any judgment for an amount for which
Buyer would be partially liable pursuant to Section 12.05(g).
(c) If the Indemnifying Party fails to notify the Indemnified Party
within the Election Period that the Indemnifying Party elects to defend the
Indemnified Party pursuant to Section 12.05(b), or if the Indemnifying
Party elects to defend the Indemnified Party pursuant to Section 12.05(b)
but fails to diligently and promptly respond to, prosecute or settle the
Third-Party Claim, then the Indemnified Party shall have the right to
defend, at the sole cost and expense of the Indemnifying Party, the
-57-
<PAGE>
Third-Party Claim by all appropriate proceedings, which proceedings shall
be promptly and vigorously prosecuted by the Indemnified Party to a final
nonappealable order of a court of competent jurisdiction or settled. The
Indemnified Party shall have full control of such defense and proceedings;
provided, however, that the Indemnifying Party may elect to assume the
defense of the Third-Party Claim at any time prior to settlement or
determination by a final nonappealable order of a court of competent
jurisdiction by sending written notice to the Indemnified Party, including
a statement that it admits its liability under this Article XII if it has
not already done so. The Indemnified Party shall provide at least 30 days'
prior written notice of any proposed settlement of the Third-Party Claim,
and the Indemnified Party shall not, without the written consent of the
Indemnifying Party, (i) settle or compromise any action, suit or proceeding
or consent to the entry of any judgment unless an unconditional term of
such settlement or judgment is the delivery by the claimant or plaintiff to
the Indemnified Party of a written release from all liability in respect of
such action, suit or proceeding or (ii) settle or compromise any action,
suit or proceeding in any manner that may materially and adversely affect
the Indemnified Party other than as a result of money damages or other
money payments. The Indemnifying Party may participate in, but not
control, any defense or settlement controlled by the Indemnified Party
pursuant to this Section, and the Indemnifying Party shall bear its own
costs and expenses with respect to such participation. Notwithstanding the
foregoing, if the Indemnifying Party has delivered a written notice to the
Indemnified Party to the effect that the Indemnifying Party disputes its
potential liability to the Indemnified Party under this Article XII and if
such dispute is resolved in favor of the Indemnifying Party by final,
nonappealable order of a court of competent jurisdiction, the Indemnified
Party, not the Indemnifying Party, shall bear the costs and expenses of the
Indemnified Party's defense pursuant to this Section 12.05(c) and of the
Indemnifying Party's participation therein at the Indemnified Party's
request.
(d) In the event any Indemnified Party should have a claim against
any Indemnifying Party hereunder which does not involve a Third-Party
Claim, or knowledge of facts which could give rise to such a claim, the
Indemnified Party shall transmit to the Indemnifying Party a written notice
(the "Indemnity Notice") describing in reasonable detail the nature of the
claim, an estimate, if reasonably possible, of the amount of damages
attributable to such claim and the basis of the Indemnified Party's request
for indemnification under this Agreement. If the Indemnifying Party does
not notify the Indemnified Party within 60 days from its receipt of the
Indemnity Notice that the Indemnifying Party disputes such claim, the claim
specified by the Indemnified Party in the Indemnity Notice shall be deemed
a liability of the Indemnifying Party hereunder. If the Indemnifying Party
has timely disputed such claim, as provided above, such dispute shall be
resolved by arbitration under Section 14.08.
(e) Payments of all amounts owing by the Indemnifying Party pursuant
to Sections 12.05(b) and (c) shall be made within 30 days after the latest
of (i) the settlement of the Third-Party Claim, (ii) the expiration of the
period for appeal of a final
-58-
<PAGE>
adjudication of such Third-Party Claim or (iii) if the Indemnifying Party
disputes its liability, the date of the arbitral award with respect to the
Indemnifying Party's liability to the Indemnified Party under this
Agreement. Payments of all amounts owing by the Indemnifying Party
pursuant to Section 12.05(d) shall be made within 30 days after the later
of (x) the expiration of the 60-day Indemnity Notice period or (y) if the
Indemnifying Party disputes its liability, the date of the arbitral award
with respect to the Indemnifying Party's liability to the Indemnified Party
under this Agreement.
(f) Notwithstanding anything to the contrary contained elsewhere in
this Article XII, no Party shall be entitled to indemnification (i) for
aggregate Losses in excess of the Purchase Price or (ii) for any Losses to
the extent such Party exacerbated the Losses or intentionally encouraged a
third party to assert the claim resulting in such Losses, provided that the
filing of reports or other documents required by law or filings to obtain
permits or licenses from, and the submission of requests for public
information to, Governmental Authorities in a routine manner, or requesting
any Easements or other property rights required for the operation of the
Property or the business Buyer will conduct, shall not be considered
intentional encouragement of any resulting claim. In addition, no Party
shall be entitled to duplication of remedies for the same Loss under this
Agreement, any certificate contemplated by this Agreement and/or the
General Conveyances.
(g) Notwithstanding anything to the contrary contained elsewhere in
this Agreement, Sellers shall not be liable for Losses not reimbursed by
Sellers' third party insurance policies and incurred after the Closing Date
(i) arising out of or resulting from claims or actions asserted by third
parties (including without limitation Governmental Authorities) with
respect to noncompliance of the Property with any Environmental Law, a
remediation requirement for the Property under any Environmental Law, or a
violation by the Property of any Environmental Law, to the extent resulting
from the ownership, operation or condition of the Property on or before the
Closing Date, excluding Losses relating to the Lee Acres Landfill described
in Section 14.10(b) and Losses relating to Retained Liabilities, if any,
and/or (ii) resulting from inaccuracies or breaches of Section 4.07, that
exceed in aggregate $10,600,000. Buyer shall bear, and shall not be
indemnified for, all of such costs and Losses to the extent they exceed in
the aggregate $10,600,000.
(h) In the event that Sellers and Buyer should dispute whether a
third party claim for which indemnity is sought under Section 12.03(d)
involves noncompliance with, a remediation requirement under, or a
violation of any Environmental Law, then, prior to submitting the dispute
to arbitration pursuant to Section 14.08, the Parties shall first submit
the dispute to non-binding mediation. The parties shall jointly select a
mutually-acceptable mediator with no relationship to either party and no
interest in the matter in dispute within thirty (30) days after the
Indemnifying Party's response under Section 12.05(a). If the parties
cannot reach agreement within the prescribed period, the
-59-
<PAGE>
mediator shall be selected by the Phoenix, Arizona office of the American
Arbitration Association ("AAA"). The mediation shall be conducted in
accordance with the Commercial Mediation Rules of the American Arbitration
Association. Notwithstanding such rules, either Party shall be entitled to
terminate the mediation and submit the dispute to arbitration under Section
14.08 beginning ninety (90) days after selection of the mediator if no
settlement has been reached.
Section 12.06 Insurance Proceeds.
------------------
(a) In determining the amount of any loss, liability or expense for
which any Party is entitled to indemnification under this Agreement, the
gross amount thereof will be reduced by any insurance proceeds actually
realized by such Party; provided, however, that if such Party has been
indemnified hereunder but does not actually receive such insurance proceeds
until after being indemnified, such Party shall reimburse the Indemnifying
Party for amounts paid to or on behalf of such Party to the extent of the
insurance proceeds so received.
(b) Following the Closing Date, if Buyer should suffer any Buyer
Indemnified Loss covered by any of any Seller's insurance policies for
which Buyer is entitled to indemnification under this Article XII, and
Buyer wishes to make a claim against the issuer of such policy, such Seller
shall use its best efforts to assist Buyer in ascertaining and establishing
coverage, pursuing such claim and collecting under such policy. Such
Seller, however, shall not be required to incur any costs (including
attorneys' fees and demonstrable increases in insurance premiums), other
than normal overhead expenses, or to forego any similar claim of its own
with respect to the same occurrence, in assisting Buyer in these efforts.
(c) Following the Closing Date, if any Seller should suffer any
Seller Indemnified Loss covered by any of Buyer's insurance policies for
which such Seller is entitled to indemnification under this Article XII,
and such Seller wishes to make a claim against the issuer of such policy,
Buyer shall use its best efforts to assist such Seller in ascertaining and
establishing coverage, pursuing such claim and collecting under such
policy. Buyer, however, shall not be required to incur any costs
(including attorneys' fees and demonstrable increases in insurance
premiums), other than normal overhead expenses, or to forego any similar
claim of its own with respect to the same occurrence, in assisting such
Seller in these efforts.
(d) If both the Indemnifying Party and the Indemnified Party have
insurance coverage respecting a particular Loss for which indemnification
is provided pursuant to this Article XII, Buyer and Sellers agree that the
insurance coverage of the Indemnifying Party will be called upon before the
insurance coverage of the Indemnified Party is called upon.
-60-
<PAGE>
Section 12.07 Exclusivity. The indemnification procedures specified
-----------
in this Article XII shall be the exclusive remedy of any Party to this Agreement
for any breach of any representation or warranty in this Agreement or any
covenant in Articles VI, VII and XII of this Agreement or any representation,
warranty or covenant in the certificates contemplated hereby. Except for the
remedies expressly provided for by the terms of this Agreement (including the
Exhibits attached thereto and the Guaranty of Williams Field Services Group,
Inc. and the Guaranty of PNM following the signature page of this Agreement),
Sellers and Buyer each release, remise and forever discharge the other and its
or their affiliates and all such Persons' stockholders, officers, directors,
employees, agents, advisors and representatives from any and all suits, legal or
administrative proceedings, claims, demands, damages, losses, costs,
liabilities, interest, or causes of action whatsoever, in law or in equity,
known or unknown, which such Party or Parties might now or subsequently may
have, based on, relating to or arising out of this Agreement, Sellers' ownership
or operation of the Property, or the condition, quality, status or nature of the
Property, including, without limitation, rights to contribution under the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended, breaches of statutory or implied warranties, nuisance or other tort
actions, rights to punitive damages and common law right of contribution,
excluding, however, existing contractual rights between Buyer and any Seller
under contracts between them relating to the Property.
Section 12.08 Indemnity Limitations. The Parties do not believe that
---------------------
the provisions of either (S)(S) 56-7-1 or 56-7-2, N.M.S.A. (1978 Comp.), are
applicable to this Agreement. If an arbitrator or a court of competent
jurisdiction nevertheless determines that the provisions of (S)(S) 56-7-1 or
56-7-2, N.M.S.A. (1978 Comp.), are applicable to this Agreement, then any
agreement contained herein to indemnify against liability, claims, damages,
losses or expenses, including attorneys' fees, for or arising out of (i) death
or bodily injury to persons, (ii) damage or injury to property, (iii) any
other loss, damage or expense arising under clauses (i) or (ii) hereof, or
(iv) any combination of the matters referred to in clauses (i), (ii) and (iii)
hereof, shall not extend to liability, claims, damages, losses or expenses,
including attorneys' fees, arising out of:
(a) In the case that (S) 56-7-1, N.M.S.A. (1978 Comp.), is so
determined to be applicable:
(i) the preparation or approval of maps, drawings, opinions,
reports, surveys, change orders, designs or specifications
by the Indemnified Party or the agents or employees of the
Indemnified Party; or
(ii) the giving of or the failure to give directions or
instructions by the Indemnified Party, or the agents or
employees of the Indemnified Party, where such giving or
failure to give
-61-
<PAGE>
directions or instructions is the primary cause of bodily
injury to persons or damage to property; and
(b) In the case that (S) 56-7-2, N.M.S.A. (1978 Comp.), is so
determined to be applicable:
(i) the sole or concurrent negligence of the Indemnified Party
or the agents or employees of the Indemnified Party or any
independent contractor who is directly responsible to the
Indemnified Party; or
(ii) any accident which occurs in operations carried on at the
direction or under the supervision of the Indemnified Party
or any employee or representative of the Indemnified Party
or in accordance with methods and means specified by the
Indemnified Party or employees or representatives of the
Indemnified Party.
ARTICLE XIII. TERMINATION
-----------
Section 13.01 Termination. This Agreement and the transactions
-----------
contemplated by this Agreement may be terminated, at any time at or prior to the
Closing Date, as follows, except as otherwise provided in Section 13.02 below:
(a) By mutual agreement of the Parties;
(b) By Buyer or Sellers if the Closing shall not have occurred on or
before August 1, 1995 or such later date as shall have been determined as
provided in Section 3.01; provided, however, that no Party can so terminate
this Agreement if the Closing has failed to occur because such Party failed
to perform or observe its material agreements and covenants hereunder;
(c) By Buyer or Sellers if any Governmental Authority shall have
issued a final order, judgment or decree materially restraining, enjoining,
prohibiting or invalidating the consummation of the Sale;
-62-
<PAGE>
(d) By Buyer or Sellers if the NMPUC affirmatively rejects the Sale,
provided that the Party seeking to make use of this Section 13.01(d) shall
have exhausted all rights to reargue or appeal such rejection;
(e) By Sellers if the NMPUC requires conditions relating to (i) the
treatment of the proceeds of the Sale of the Property, (ii) the conduct of
any Seller's continuing business, (iii) the terms and conditions of the
Related Instruments, the Sale or any future contractual arrangements
between Buyer and any Seller or (iv) rate making or other regulation by the
NMPUC, which conditions are unacceptable to Sellers, provided that Sellers
shall have promptly filed and used reasonable efforts to pursue approval
pursuant to Section 6.02 and shall have exhausted all rights to reargue or
appeal such required conditions; and
(f) By Buyer if the NMPUC requires conditions (i) relating to the
terms and conditions of the Related Instruments, the Sale or any future
contractual arrangements between Buyer and any Seller or (ii) otherwise
limiting the rates or service conditions that Buyer may establish for the
Property or the business Buyer will conduct following Closing, excluding
general nondiscriminatory access requirements, which conditions are
unacceptable to Buyer, provided that Buyer shall have exhausted all
rights to reargue or appeal such required conditions.
, provided that, in the event of a proposed termination under (e) or (f), the
terminating Party shall provide the other Party with ten days prior notice to
allow time for discussion and consultation between the Parties.
Section 13.02 Effect of Agreement Upon Termination. If any Party
------------------------------------
exercises its rights to terminate this Agreement pursuant to this Article XIII,
then (a) except as expressly provided in this Section, no Party shall have any
rights or obligations under this Agreement, and such termination shall be
without liability to any Party to this Agreement or any stockholder or
Representative of such Party; (b) if this Agreement is terminated as a result of
the negligent or willful failure of Buyer to perform its obligations hereunder,
Buyer shall be fully liable for any and all damages actually sustained by
Sellers, provided that Buyer shall not be liable for any consequential damages
sustained or incurred by Sellers, nor for any punitive damages; (c) if this
Agreement is terminated as a result of the negligent or willful failure of any
Seller to perform its obligations hereunder, Sellers shall be fully liable for
any and all damages actually sustained or incurred by Buyer, provided that
Sellers shall not be liable for any consequential damages sustained or incurred
by Buyer, nor for any punitive damages; (d) the Confidentiality Agreement shall
remain in full force and effect in accordance with its terms with respect to
this transaction and the materials furnished to Buyer, its Representatives and
any Other Recipients, as defined in the Confidentiality Agreement, until the
later of (i) the expiration of the respective terms of the Confidentiality
Agreement or (ii) two years from the date of termination of this Agreement.
-63-
<PAGE>
ARTICLE XIV. OTHER AGREEMENTS
----------------
Section 14.01 Settlement of Income and Expenses Received or Paid.
--------------------------------------------------
After the Closing (a) Buyer shall remit to the appropriate Seller any revenues
or income (whether in the form of cash or otherwise) received by Buyer which is
attributable to the Property prior to the Closing (other than the Interim Period
Compensation for which Buyer is credited under Section 3.05(b)(i) and any other
compensation which Buyer and any Seller subsequently agree in writing is payable
to Buyer); (b) each Seller shall remit to Buyer any revenues or income (whether
in the form of cash or otherwise) received by such Seller which is attributable
to the Property after the Closing; (c) Buyer shall pay to any Seller, after
receipt of that Seller's invoice, (i) any Optional Capital Expenditures approved
by Buyer pursuant to Section 6.04 and any Required Capital Expenditures that in
each case are paid by such Seller and attributable to the ownership or operation
of the Property after the Signing Date and which are not reflected in the
Purchase Price Adjustment, and (ii) any Property Expenses paid by such Seller
which are attributable to the ownership or operation of the Property after the
Closing Date; and (d) the appropriate Seller shall pay to Buyer, after receipt
of Buyer's invoice, any Property Expenses paid by Buyer which are attributable
to the ownership or operation of the Property before the Closing Date and which
are not Gas or Plant Products imbalances for which a Purchase Price Adjustment
has been made. Right-of-way fees, lease payments, and other Property Expenses
that are paid periodically shall be prorated between Buyer and Sellers on the
same basis as ad valorem taxes are prorated under Section 10.02(a). Each Seller
shall bear any accrued vacation pay payable to any employees of such Seller
under such Seller's Employee Benefit Plans in connection with the termination of
their employment with such Seller.
Section 14.02 Discharge of Liabilities. From and after the Closing
------------------------
Date, Buyer shall, in accordance with its usual timely practices, fulfill, pay
and discharge all obligations, responsibilities and liabilities in respect of
the Assumed Liabilities.
Section 14.03 Certain Transition Agreements.
-----------------------------
(a) Sellers shall have up to forty-five (45) days following the
Closing to remove the PNM Retained Assets listed as item (i) in the
definition thereof and to cease use of the laboratory and chart house at
the Gas Plant at Kutz. During that period, Buyer shall supply to the
laboratory and chart house all utilities existing as of the Closing
(whether electricity, gas, water, sanitary sewer, telephone or other) at
Buyer's expense. In addition, Sellers hereby retain, for such forty-five
(45) day period only, nonexclusive easements on and over the Properties for
vehicular and pedestrian access to such PNM Retained Assets. Sellers may
authorize their respective employees, agents, and invitees to utilize the
easements herein retained. Each of Sellers and Buyer shall be entitled to
fully use and enjoy such easements concurrently, and neither shall have a
right superior to the other, provided that Sellers shall use reasonable
efforts to limit interference with Buyer's use of the Property. Sellers'
and Buyer's use of the easements retained under
-64-
<PAGE>
this Section 14.03(a) shall be subject to the indemnification provisions of
the Easement Agreement as if such easements were Retained Easements
thereunder.
(b) Employees of any Seller occupying housing included in the
Property and located at the Gas Plant at Lybrook on the Closing Date shall
be entitled to continue to have exclusive use and occupancy of such
housing, at no cost to such employees, for sixty (60) days after the
Closing, regardless of whether such employees are offered or accept
employment with Buyer. Furthermore, Buyer shall supply such housing, at
Buyer's expense, with all utilities being supplied to such housing by any
Seller on the Closing Date. During such 60-day period, Buyer shall be
responsible for necessary repairs to the roof, foundation, outer walls, and
structure of the housing, following notice of need for repair from the
affected employee, but may require that any other repairs desired by any
such employee be at the sole cost of the employee. Nothing in this Section
shall (i) prevent Buyer from altering this Section with respect to any
employee by a written lease agreement signed with such employee, (ii) give
any employee any rights under this Agreement, (iii) require Buyer to permit
alteration of or removal of fixtures from such housing, (iv) absolve any
employee from responsibility for waste or damage to such housing that he or
his licensors or invitees cause, ordinary wear and tear excepted, or (v)
prevent Buyer from taking whatever action, including evicting any such
employee, that Buyer deems reasonably necessary to prevent damage to
Buyer's property or to ensure the peaceful enjoyment thereof by any such
employee or his licensees or invitees or to protect the safety and security
of any persons on Buyer's property.
Section 14.04 Gathering For Bundled Contracts. After the Closing,
-------------------------------
Buyer shall continue to provide gathering services upstream from the Gas Plants
in accordance with the terms of each Bundled Contract, and PNM shall continue to
provide transmission services downstream from the Gas Plants in accordance with
the terms of each Bundled Contract, excluding any period when such parties are
permitted to suspend performance as a result of force majeure or a third party
default, for so long as each such Bundled Contract remains in effect. Buyer
shall be entitled to any fees payable under each Bundled Contract for gathering
services upstream from the Gas Plants and Seller shall be entitled to any fees
payable under each Bundled Contract for transmission services downstream from
the Gas Plants. Neither Buyer nor PNM shall voluntarily terminate or amend
(other than to reflect changes in names, addresses or parties) after the Closing
any portion of any Bundled Contract that has been partially assigned hereunder
without the prior written consent of the other. Any assignment by Buyer or PNM
of its interest in any such partially-assigned Bundled Contract shall be made
expressly subject to the terms of this Section 14.04.
Section 14.05 Delivery and Maintenance of Records.
-----------------------------------
(a) As promptly as practicable, but in any case within 90 days after
the Closing Date, or, with respect to Restricted Records, within 90 days
after the date that such Restricted Records cease to be Restricted Records,
Sellers will deliver or cause to
-65-
<PAGE>
be delivered to Buyer to a location designated by Buyer in Albuquerque, New
Mexico all such Records; provided, however, that Sellers may retain:
(i) Originals of all accounting, financial and tax Records, and
all meter charts, for the Property attributable to all
periods prior to the Closing Date; provided, however, that
Sellers shall provide Buyer with copies of all such
accounting, financial and tax Records and meter charts that
Buyer may reasonably request; and
(ii) Copies of any other Records that any Seller elects to
retain.
(b) Until the later of (i) eight years after the Closing Date and
(ii) two years after the expiration of any indemnification obligation of
Sellers to which such Records relate, Buyer shall:
(x) (A) Retain the Records obtained by Buyer, (B) furnish copies
of such Records to such Seller upon such Seller's written
request and at such Seller's sole expense and (C) make such
Records available to any Seller and its Representatives upon
reasonable notice and during normal business hours;
provided, however, that in the event that Buyer transfers
all or a portion of the Property to any third party during
such period, Buyer may transfer to such third party all or a
portion of the Records relating to the Property being
transferred only if Buyer retains the original of such
Records;
(y) Grant any Seller or Seller's Representatives reasonable
access to Buyer's Representatives on a mutually convenient
basis to obtain information, in addition to the Records,
with respect to the continuing obligations or rights, if
any, of Sellers under this Agreement or with respect to the
Property and use its reasonable efforts to cause any such
Representatives to cooperate with any Seller by testifying
or furnishing evidence, as applicable, at such Seller's
request in any proceedings relating to the Property or such
Seller's continuing obligations under this Agreement, if
any; and
(z) Provide any Seller or its Representatives with copies, at
Seller's expense, of materials and information received by
Buyer after the Closing relating to a claim made under
Article XII of this Agreement, excluding, however, attorney
work product and attorney-client communications with respect
to any such claim being brought by Buyer.
-66-
<PAGE>
Section 14.06 Names. As promptly as practicable, but in any case
-----
within 60 days after the Closing Date, Buyer shall eliminate the words "Public
Service Company of New Mexico," "Sunterra Gas Gathering Company," "Sunterra Gas
Processing Company" and "Gas Company of New Mexico" from its properties and
facilities, and, except with respect to such 60-day period for eliminating
existing usage, shall have no right to use any logos, trademarks or trade names
belonging to any Seller or any of their affiliates except the names set forth on
Schedule 14.06.
- --------------
Section 14.07 Financial Accommodations. Promptly following the
------------------------
Closing, Buyer shall obtain, or cause to be obtained in the name of Buyer,
replacements for the bonds, letters of credit and guarantees posted by any
Seller or any of its affiliates with any Governmental Authority and relating to
any of the Property. Buyer shall bear the cost of maintaining all such bonds,
letters of credit and guarantees posted by any Seller from the Closing Time
until replaced as provided herein.
Section 14.08 Arbitration.
-----------
(a) Any dispute, controversy or claim arising out of or related to
this Agreement, or the breach thereof, shall be exclusively and finally
settled by arbitration pursuant to this Section 14.08, subject to the terms
of Section 12.05(g). The arbitration proceedings shall be conducted in
accordance with the terms of this Section 14.08 and the Commercial
Arbitration Rules of the AAA, as modified by the AAA's, Supplementary
Procedures for Large, Complex Disputes, as in effect on the date hereof
(the "Rules"). Any procedural issues not determined under this Section or
such Rules shall be determined by the laws of New Mexico, including without
limitation the New Mexico Uniform Arbitration Act, N.M. Stat. Ann. (S)
44-7-1 et seq.
(b) Either Buyer or any Seller may invoke arbitration under this
Section 14.08 at any time by serving on the other Party or Parties a
written notice of arbitration, which shall specify with reasonable detail
(1) the matter in dispute, (2) the relief requested and (3) the grounds
therefor. The arbitration shall be heard and determined a board of three
(3) arbitrators (the "Board"), each of whom shall be impartial and
independent of the Parties to the dispute. The Party giving notice of the
arbitration shall appoint its Party arbitrator in such notice of
arbitration. The other Party shall appoint an arbitrator of its choice
within twenty (20) days after its receipt of the notice of arbitration.
The Parties shall jointly select and appoint the third arbitrator, who
shall be Chairman of the Board (the "Chairman"), and shall jointly
determine the fee that each arbitrator shall receive, within thirty (30)
days after the notified Party's receipt of the notice of arbitration. If
the Parties cannot reach agreement on a Chairman and/or fee, or if any
Party fails to appoint its Party-appointed arbitrator within the prescribed
period, the missing arbitrator(s) and/or fee shall be selected by the
Phoenix, Arizona office of the AAA pursuant to the selection process set
forth in the Rules as in effect on the date hereof, provided that all
potential arbitrators submitted to the Parties must be chosen from
-67-
<PAGE>
AAA's Large Complex Case Panel or from a panel of the Center for Public
Resources and further provided that any fee established by AAA must conform
to Section 14.08(g) below. If an arbitrator should die, withdraw or
otherwise become incapable of serving, a replacement shall be selected and
appointed in a like manner as the original arbitrator. Any arbitrator
appointed hereunder shall certify in writing that he is immediately
available to conduct such arbitration. Upon consultation with the other
arbitrators and the Parties, the Chairman shall, within ten (10) days after
appointment, establish a schedule for discovery and set dates for the
hearing. The Chairman shall preside at all hearings and executive sessions
of the Board. The Chairman may authorize depositions and issue subpoenas
in accordance with the New Mexico Uniform Arbitration Act. All decisions
of the Board shall be by a majority of the arbitrators, unless the Parties
agree otherwise.
(c) (i) The arbitration proceedings shall be held in Albuquerque,
Bernalillo County, New Mexico, at a place to be agreed upon by the
Parties.
(ii) A stenographic record of the proceedings shall be made and
supplied to the Board.
(iii) Unless the Parties agree otherwise, the Board shall
require witnesses to testify under oath or affirmation.
(iv) The Parties may offer such evidence as is relevant and
material to the dispute and shall produce such additional evidence as
the Board may deem necessary to the determination of the dispute.
(v) All evidence to be considered by the Board shall be
offered at the hearing and subject to cross-examination unless the
Parties agree otherwise. Exhibits shall be admitted into evidence by
the Board only upon the establishment of a proper foundation
concerning authenticity, unless the Parties agree otherwise.
(vi) There shall be no direct communication between any Party
and any arbitrator after the third arbitrator has been appointed and
the arbitrators' fee has been established except at the hearing and at
joint consultations between both Parties and the arbitrators on the
schedule as provided for in Section 14.08(b).
(vii) Unless the Parties agree otherwise, the arbitration
hearing (including any filing of briefs and submission of documents)
shall be closed within 60 days of the appointment of the third
arbitrator.
(d) The Board shall render its award in writing within thirty (30)
days following the close of the hearing. The Board shall render its award
only with respect
-68-
<PAGE>
to the specific issues submitted by either party, and shall base its
decision solely upon the evidence before it, applicable law and this
Agreement.
(e) Judgment upon the award may be entered and execution had or
application may be made for a judicial acceptance of the award and an order
of enforcement, as the case may be, in any court located in Bernalillo
County, New Mexico.
(f) The arbitration may proceed in the absence of a Party that, after
due notice, fails to be present. An award shall not be made solely on the
default of a Party, but the Board shall require the Party that is present
to submit such available evidence as may be reasonably required for the
making of an award.
(g) The Parties shall share equally the cost of the arbitration
proceedings, including the fees and expenses of the arbitrators and the
cost of the stenographic record. Each arbitrator shall be paid an
identical flat fee, which shall not vary, irrespective of the length of
service or number of hearings, and neither the AAA nor the Board shall have
any authority to authorize the payment of a fee on any other basis.
(h) All aspects of the arbitration shall be confidential, and the
Parties and arbitrators shall maintain the confidentiality of all
information related to the proceedings, including but not limited to
discovery, testimony and other evidence, briefs and the award, and shall
not disclose the same to any third party. Upon the motion of either Party,
and for good cause shown, the Board may make any order which justice
requires to protect a Party from the disclosure of proprietary, privileged
or confidential business information, including (1) that depositions or
hearings be conducted with no one present except persons designated by the
Board, and (2) that depositions, exhibits, other documents filed with the
Board or transcripts of the hearing be sealed and not be disclosed except
as specified by the Board. Notwithstanding the foregoing, each Party shall
be entitled to disclose such information (i) to its affiliates, attorneys,
financial or lending institutions, outside auditors, insurers, and entities
involved in negotiation or bidding for the acquisition of a Party, its
stock or assets, provided that the person or entity to which such
information is disclosed is obligated to hold it confidential, (ii) as may
be required by law or by regulation or order of Governmental Authority or
by the rules of any stock exchange applicable to such Party or its
affiliates, or as part of any Party's good faith attempt to comply with
disclosure obligations under any of the same, (iii) as Seller may deem
necessary or desirable to disclose to the NMPUC and (iv) as may be
necessary or desirable to enforce such Party's rights hereunder.
(i) The Board shall not distribute the stenographic record of the
proceedings to the Parties unless an action as may be permitted under the
Rules and the New Mexico Uniform Arbitration Act challenging the
arbitration proceedings is filed no later than sixty (60) days following
the issuance of the award. If no such action is timely filed, all copies
of the stenographic record shall be destroyed.
-69-
<PAGE>
(j) ANY CHALLENGE TO ANY REQUEST FOR ARBITRATION OR ARBITRATION
PROCEEDING HEREUNDER SHALL BE LITIGATED, IF AT ALL, IN AND BEFORE A STATE
OR FEDERAL COURT LOCATED IN BERNALILLO COUNTY, NEW MEXICO, TO THE
EXCLUSION OF THE COURTS OF ANY OTHER STATE OR COUNTY.
(k) Any obligation to arbitrate which is established by this Section
shall survive the termination or expiration of this Agreement.
Section 14.09 Waiver. To the maximum extent permitted by law, Buyer
------
hereby waives all provisions of the New Mexico Unfair Deceptive Trade Practices
Act Law, N.M. Stat. Ann. (S)(S) 57-12-1 et seq.
------
Section 14.10 Environmental Remediation.
-------------------------
(a) Sellers shall remediate or remedy the conditions described or
referred to in Schedule 1.01(b)(i)(y), Schedule 1.01(b)(ii)(y) and
---------------------- -----------------------
Schedule 1.01(b)(iii)(y) to the extent required by Environmental Laws.
------------------------
From the Closing Date, Buyer shall allow Sellers and their Representatives
access to the Property at no cost to Sellers to conduct any environmental
remediation with respect to environmental liabilities disclosed on Schedule
--------
1.01(b)(i)(y), Schedule 1.01(b)(ii)(y), or Schedule 1.01(b)(iii)(y) not yet
------------- ----------------------- ------------------------
completed to any Seller's satisfaction on the Closing Date. Buyer shall
not conduct (or have conducted on its behalf) any material remediation
obligations with respect to such liabilities except as may be required by
order of any Governmental Authority so long as any Seller is diligently
pursuing such remediation. In addition, without limiting the generality of
any other provision of this Agreement, Buyer agrees not to conduct (or have
conducted on its behalf) any material remediation operations on the
Property with respect to any violation of or obligation under any
Environmental Law possibly attributable to the period prior to Closing
without first giving Sellers notice of the remediation with reasonable
detail at least 45 days' prior thereto (or such shorter period of time as
shall be required by any Governmental Authority); provided that, beginning
five years after the Closing Date, Buyer may begin remediation operations
without so notifying Sellers with respect to any matter for which Sellers'
indemnification obligations have terminated pursuant to Section 12.03.
Each Seller shall have the option (in its sole discretion) to conduct (or
have conducted on its behalf) such remediation operations. If no Seller
shall have notified Buyer of its agreement to conduct such remediation
operations within such specified period, then Buyer may conduct (or have
conducted on its behalf) such operations. The performance by any Seller of
such remediation operations shall not cause such Seller to be liable to
Buyer or any third party for such violation or obligation if such Seller
would not otherwise be liable under the terms of Article XII or this
Section 14.10.
-70-
<PAGE>
(b) Buyer shall reimburse Sellers for forty percent (40%) of (i) any
cost or expense relating to any Seller's contesting its liability or
otherwise incurred by such Seller and relating to such Seller's status as a
potentially responsible party for the Lee Acres Landfill located in
Farmington, New Mexico as defined in the U.S. Environmental Protection
Agency's Request for Information dated December 27, 1993 and (ii) any
actual costs and expenses for the remediation of such landfill, but only
insofar as such liability, status, costs, or expenses under (i) or (ii)
arises from material from the Property or operation of the Gathering
Business, Processing Business and PNM Business (such material shall
hereinafter be referred to as "Property Material"). Any such liability,
status, costs, or expenses of any Seller shall be rebuttably presumed to
arise from Property Material except to the extent that the material
concerned consists of (i) drilling fluids, in which case such material
shall be rebuttably presumed not to be Property Material, or (ii)
transformers or other electric utility equipment, in which case Buyer shall
have no reimbursement obligation with respect thereto.
(c) Buyer and Sellers agree that any remediation activities
undertaken with respect to the Property shall be reasonable in extent and
cost effective and shall not be designed or implemented in such a manner as
to exceed what is required to cause a condition to be brought into
compliance with Environmental Law. All remediation activities conducted by
Seller under this Agreement shall be conducted to the extent reasonably
possible so as not to substantially interfere with Buyer's operation of the
Property including, without limitation, any shutdown of, or reduction of
throughput capacity of, any Buyer-owned facility. All remediation
activities conducted by Buyer with respect to the Property shall be
conducted to the extent reasonably possible so as not to substantially
interfere with Sellers' operation of the PNM Retained Assets, the Gathering
Retained Assets and the Processing Retained Assets including, without
limitation, any shutdown of, or reduction of throughput capacity of, any
Seller-owned facility.
Section 14.11 Equipment Removal. At the option of any Seller, or
-----------------
upon the request of Buyer, in each case as indicated by written notice to the
other within ten days after the Closing Date, Sellers shall remove any equipment
or other property that Sellers shall have installed or located on the Property
as a result of Optional Capital Expenditures after the Signing Date which Buyer
did not approve pursuant to Section 6.04(b) or otherwise; provided, however,
such removal shall be conducted to the extent possible so as not to
substantially interfere with Buyer's operation of the Property, including,
without limitation any shutdown or reduction of throughput capacity of any
Buyer-owned facility. Sellers shall complete any removal under this Section
14.11 within 90 days after the Closing Date.
Section 14.12 Inventory Purchase Option. For six months after the
-------------------------
Closing Date, any Seller shall have the option to repurchase from Buyer any of
the inventory located at the Gas Plants on the Closing Date. The purchase price
will be (i) Sellers' book value at Closing, if Buyer does not order a
replacement for the item purchased within 60 days thereafter or (ii)
-71-
<PAGE>
Buyer's actual repurchase and restocking costs (including, without limitation,
shipping and loading charges, but specifically excluding payments to Affiliates)
if Buyer does order a replacement for the item purchased by Sellers within 60
days thereafter. During the six-month option period, Buyer shall have the right
to use any of the original inventory and shall have the option to substitute
replacement pieces of the same type, make, model and quality.
Section 14.13 Use of Communications Tower. PNM grants to Buyer,
---------------------------
effective at Closing, a nonexclusive, nontransferable license to use the
communications towers described as Retained Assets for the limited purpose of
mounting radio, microwave or telecommunications transmitting and receiving
equipment, subject to tower capacity. Any such use shall not interfere with any
use of the tower then being made by PNM. Buyer's access to and use of the tower
shall be subject to such reasonable restrictions as PNM may from time to time
establish. Buyer agrees to indemnify and hold harmless PNM, on the terms set
forth in the Easement Agreement, against all claims, liabilities, losses, costs,
expenses and damages arising out of or resulting from Buyer's use of the tower.
If the existing tower is removed by PNM, destroyed or rendered unusable, this
license shall terminate.
Section 14.14 T-1 Telephone Circuit. PNM grants to Buyer, effective
---------------------
at Closing, a nonexclusive, nontransferable license to use the T-1 telephone
circuit that terminates in the telephone equipment room in the operations
building at the Gas Plant at Kutz for the limited purpose of transmitting
information to PNM. Buyer grants to PNM, effective at Closing, a right to
relocate the T-1 equipment within the Gas Plant site subject to the terms and
conditions set forth in the Easement Agreement. Buyer's use of the T-1
telephone circuit shall be subject to such restrictions as PNM may from time to
time establish. PNM may at any time remove the T-1 telephone circuit, or
suspend or terminate the license granted in this Section, by prior written
notice to Buyer; provided that as long as the circuit is in place and PNM is not
using all the T-1 capacity, Buyer shall have the right to use the available
capacity for the purpose described above.
Section 14.15 Sharing of Epoxy-Coated Pipe Recovery. Buyer shall be
-------------------------------------
entitled to a share of any net recovery by PNM or any of its Affiliates, after
deduction of costs, from any third party pursuant to any action, claim,
proceeding or settlement with respect to the design, manufacture or sale to PNM
or its Affiliates of Epoxy-Coated Pipe or its parts. The fraction of net
proceeds to which Buyer is entitled shall be equal to the fraction calculated by
dividing the linear feet of Epoxy-Coated Pipe installed prior to the Closing
Date on the Property by the total linear feet of Epoxy-Coated Pipe installed
prior to the Closing Date on any of PNM's or its Affiliates' property.
Section 14.16 Consents Not Obtained. To the extent that any Seller
---------------------
is unable to obtain a third party consent to transfer any lease, Contract or
other interest constituting a part of the Property and consequently does not
assign, transfer or sublease such Property to Buyer, such Seller shall, at
Buyer's written request delivered within a reasonable time after Closing, use
its reasonable efforts to make all benefits of such non-assigned interests
available to Buyer
-72-
<PAGE>
without any administrative cost to Buyer, and such Seller shall not be obligated
to incur any cost or expense after the Closing Date with respect to such
Property, all of which shall be for the account of Buyer.
Section 14.17 National Labor Relations Act. Buyer will be
----------------------------
responsible for its obligations under the National Labor Relations Act, if any,
with respect to the Union and any Union members that are employees of Buyer.
ARTICLE XV. MISCELLANEOUS PROVISIONS
------------------------
Section 15.01 Notices. Any notice, communication, request,
-------
instruction or other document required or permitted hereunder shall be given in
writing and delivered in person or sent by U.S. Mail, postage prepaid, return
receipt requested, or by telex, facsimile or telecopy, to the addresses of Buyer
or Sellers set forth below. Any such notice shall be effective upon receipt.
SELLERS:
Public Service Company of New Mexico
Alvarado Square
Albuquerque, New Mexico 87158
Attention: Ron Grossarth
Telephone: (505) 848-2700
Fax: (505) 848-2368
Sunterra Gas Gathering Company
Alvarado Square
Albuquerque, New Mexico 87158
Attention: Ron Grossarth
Telephone: (505) 848-2700
Fax: (505) 848-2368
Sunterra Gas Processing Company
Alvarado Square
Albuquerque, New Mexico 87158
Attention: Ron Grossarth
Telephone: (505) 848-2700
Fax: (505) 848-2368
-73-
<PAGE>
with a copy to:
Baker & Botts, L.L.P.
3000 One Shell Plaza
Houston, Texas 77002
Attention: David F. Asmus
Telephone: (713) 229-1539
Fax: (713) 229-1522
BUYER: Williams Gas Processing - Blanco, Inc.
P.O. Box 58900
Salt Lake City, Utah 84158-0900
Attention: Jerry Gollnick
Telephone: (801) 584-6505
Fax: (801) 584-7862
with a copy to:
Williams Field Services Company
P.O. Box 3102
Tulsa, OK 74101-3102
Attention: Craig Rich
Telephone: (918) 588-3090
Fax: (918) 588-3005
Any Party may, by written notice so delivered, change its address for notice
purposes hereunder.
Section 15.02 Exclusive Agreement. This Agreement, and the Exhibits
-------------------
and Schedules hereto, the Confidentiality Agreement and the Related Instruments
supersede all prior agreements between the Parties (written or oral) and are
intended as a complete and exclusive statement of the terms of the agreement
between the Parties.
Section 15.03 Choice of Law; Amendments; Headings. THIS AGREEMENT
-----------------------------------
SHALL BE GOVERNED BY THE LAW OF THE STATE OF NEW MEXICO, WITHOUT REGARD TO THE
CONFLICTS OF LAWS PROVISIONS THEREOF. This Agreement may be modified or amended
only by an agreement in writing signed by all Parties. The headings contained
in this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.
Section 15.04 Assignments and Third Parties. No Party hereto shall
-----------------------------
assign this Agreement or any part hereof without the prior written consent of
the other Party. Except as
-74-
<PAGE>
otherwise provided herein, this Agreement shall be binding upon and inure to the
benefit of the Parties hereto and their respective successors and assigns. No
such assignment shall release Buyer of any of its obligations to any Seller
under this Agreement. Nothing in this Agreement shall entitle any person other
than any Seller or Buyer, or their respective successors and assigns permitted
hereby, to any claim, cause of action, remedy or right of any kind.
Section 15.05 Brokers. Sellers represent and warrant to Buyer that
-------
no Seller has directly or indirectly employed any broker or finder to whom Buyer
shall have any liability in connection with this Agreement or the transactions
contemplated by this Agreement; and Buyer represents and warrants to each Seller
that Buyer has not directly or indirectly employed any broker or finder to whom
any Seller shall have any liability in connection with this Agreement or the
transactions contemplated by this Agreement.
Section 15.06 Severability. If any term or other provision of this
------------
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to either Party.
Section 15.07 Counterparts. This Agreement may be executed in any
------------
number of counterparts, and by different parties in separate counterparts, each
of which shall be deemed to be an original, but all of which together shall
constitute but one and the same agreement.
Section 15.08 Further Assurances. Sellers and Buyer agree to deliver
------------------
or cause to be delivered to each other on the Closing Date and at such other
times thereafter as shall be reasonably agreed any such additional instrument as
any of them may reasonably request in order to effect the purposes and intent of
this Agreement, including, but not limited to, any lease assignment forms
required by any Governmental Authority to transfer the Property.
Section 15.09 Waiver of Compliance with Bulk Transfer Laws. Buyer
--------------------------------------------
hereby waives compliance by Sellers with the provisions of any bulk transfer
laws that may be applicable to the transactions contemplated by this Agreement.
Section 15.10 Announcements. Prior to the Closing Date, neither
-------------
Sellers nor Buyer shall make written announcements or other written public
disclosures or issue press releases relating to the content of this Agreement or
the transactions contemplated hereby without the prior written approval of the
other Party to this Agreement to the form and content of the release or
disclosure, which approval shall not be unreasonably withheld. Notwithstanding
the foregoing, each Party shall be entitled to disclose such information without
limitation (i) to its affiliates, attorneys, financial or lending institutions,
outside auditors and insurers, (ii) as may be required by law or by regulation
or order of Governmental Authority or by the rules of any stock exchange
applicable to such Party or its affiliates, or as part of such Party's good
faith attempt to comply with disclosure obligations under any of the same, (iii)
as
-75-
<PAGE>
Seller may deem necessary or desirable to disclose to the NMPUC, the NMPUC staff
and/or any potential parties to the NMPUC proceeding for approval of the Sale;
(iv) to the extent necessary for such Party to obtain third party consents to
the Sale; and (v) as may be necessary or desirable to enforce such Party's
rights hereunder.
Section 15.11 Waiver. Buyer or Sellers may (a) extend the time for
------
the performance of any of the obligations or other acts of any other Party
hereto or (b) waive compliance with any of the agreements of any other Party or
with any conditions to its own obligations. Any agreement on the part of a
Party hereto to any such extension or waiver shall be valid only if set forth in
an instrument in writing signed on behalf of such Party.
EXECUTED by Sellers and by Buyer effective as of the Signing Date.
SELLERS:
-------
PUBLIC SERVICE COMPANY OF NEW MEXICO
By: /s/ Jeffry E. Sterba
--------------------------------------------------
Name: Jeffry E. Sterba
------------------------------------------------
Title: Senior Vice President - Corporate Development
-----------------------------------------------
SUNTERRA GAS GATHERING COMPANY
By: /s/ M. Phyllis Bourque
--------------------------------------------------
Name: M. Phyllis Bourque
------------------------------------------------
Title: Senior Vice President - Marketing & Customer
-----------------------------------------------
Services
SUNTERRA GAS PROCESSING COMPANY
By: /s/ M. Phyllis Bourque
--------------------------------------------------
Name: M. Phyllis Bourque
------------------------------------------------
Title: Senior Vice President - Marketing & Customer
-----------------------------------------------
Services
-76-
<PAGE>
BUYER: WILLIAMS GAS PROCESSING - BLANCO, INC.
-----
By: /s/ Lloyd A. Hightower
----------------------------------------
Name: Lloyd A. Hightower
--------------------------------------
Title: President - Williams Field Services
-------------------------------------
-77-
<PAGE>
WILLIAMS FIELD SERVICES GROUP, INC.
GUARANTY OF COLLECTION
For good and valuable consideration, and to induce the Sellers to
enter into this Purchase and Sale Agreement, Williams Field Services Group,
Inc., a Delaware corporation ("Guarantor"), hereby unconditionally guarantees to
each Seller the prompt collection of any arbitral award or judgment for the
payment of money entered pursuant to Section 14.08 of the Purchase and Sale
Agreement against Buyer in favor of such Seller in respect of Buyer's failure to
pay or perform its obligations under the Purchase and Sale Agreement in
accordance with the terms and conditions thereof (the "Obligations"). This
guaranty shall remain in full force and effect until Buyer has fully discharged
all Obligations. This is a guaranty of collection, not of payment, and it shall
be a condition precedent to any action by any Seller to enforce this guaranty
that such Seller shall have (i) obtained an arbitral award or judgment for the
payment of money entered pursuant to Section 14.08 of the Purchase and Sale
Agreement in favor of such Seller in respect of Buyer's failure to perform any
Obligation (an "Award") and (ii) the Buyer shall have failed to pay such Award
for a period of 30 days after the entry thereof. Any Seller may, without notice
to or consent of Guarantor (i) extend or alter, together with Buyer, the time,
manner, place or terms of payment or performance of the Obligations, (ii) waive,
or, together with Buyer, amend any terms of the Purchase and Sale Agreement or
(iii) release Buyer from any or all Obligations, without in any way changing,
releasing or discharging Guarantor from liability hereunder. Guarantor hereby
waives as defenses under this Guaranty any defenses (but not rights of set-off
or counterclaims) which Buyer or any other Person liable for the Obligations may
have or assert, other than defenses provided by the express terms of the
Purchase and Sale Agreement or this guaranty.
THIS GUARANTY SHALL BE GOVERNED BY THE LAW OF THE STATE OF NEW MEXICO,
WITHOUT REGARD TO THE CONFLICTS OF LAWS PROVISIONS THEREOF, and is expressly
made subject to Sections 14.08 and 15.06 of the Purchase and Sale Agreement.
EXECUTED on the _____ day of _____________, 1994.
WILLIAMS FIELD SERVICES GROUP, INC.
By: /s/ Lloyd A. Hightower
----------------------------------------
Name: Lloyd A. Hightower
----------------------------------------
Title: President - Williams Field Services
----------------------------------------
-78-
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO
GUARANTY OF COLLECTION
For good and valuable consideration, and to induce the Buyer to enter
into this Purchase and Sale Agreement, PNM hereby unconditionally guarantees to
Buyer the prompt collection of any arbitral award or judgment for the payment of
money entered pursuant to Section 14.08 of the Purchase and Sale Agreement
against Gathering Company or Processing Company in favor of Buyer in respect of
the failure of Gathering Company or Processing Company to pay or perform its
obligations under the Purchase and Sale Agreement in accordance with the terms
and conditions thereof (the "Obligations"). This guaranty shall remain in full
force and effect until Gathering Company and Processing Company have each fully
discharged all their respective Obligations. This is a guaranty of collection,
not of payment, and it shall be a condition precedent to any action by the Buyer
to enforce this guaranty that the Buyer shall have obtained an arbitral award or
judgment for the payment of money entered pursuant to Section 14.08 of the
Purchase and Sale Agreement in favor of Buyer in respect of the failure of
Gathering Company or Processing Company to perform any Obligation (an "Award")
and (ii) Gathering Company or Processing Company, as the case may be, shall have
failed to pay such Award for a period of 30 days after the entry thereof. Buyer
may, without notice to or consent of PNM (i) extend or alter, together with
either or both of Gathering Company and Processing Company, the time, manner,
place or terms of payment or performance of such Party's (ies') Obligations,
(ii) waive, or together with Sellers, amend any terms of the Purchase and Sale
Agreement or (iii) release either or both of Gathering Company and Processing
Company from any or all Obligations, without in any way changing, releasing or
discharging PNM from liability hereunder. PNM hereby waives as defenses under
this Guaranty any defenses (but not rights of set-off or counterclaims) which
either Gathering Company or Processing Company or any other Person liable for
the Obligations may have or assert, other than defenses provided by the express
terms of the Purchase and Sale Agreement or this guaranty.
This Guaranty shall have no force or effect until approved by the
NMPUC. THIS GUARANTY SHALL BE GOVERNED BY THE LAW OF THE STATE OF NEW MEXICO,
WITHOUT REGARD TO THE CONFLICTS OF LAWS PROVISIONS THEREOF, and is expressly
made subject to Sections 14.08 and 15.06 of the Purchase and Sale Agreement.
EXECUTED on the ________ day of ________________, 1994
PUBLIC SERVICE COMPANY OF NEW MEXICO
By: /s/ Benjamin F. Montoya
---------------------------------
Name: Benjamin F. Montoya
-------------------------------
Title: President and CEO - Public Service
-----------------------------------
Company of New Mexico
-79-
<PAGE>
LETTER AGREEMENT
This Letter Agreement is entered into by and among Public Service Company
of New Mexico, Sunterra Gas Gathering Company and Sunterra Gas Processing
Company (collectively "Sellers") and Williams Gas Processing - Blanco, Inc.
("Buyer") in connection with that certain Purchase and Sale Agreement
("Agreement") dated as of February 12, 1994 between Sellers and Buyer.
Capitalized terms used in the Letter Agreement, and not otherwise defined,
have the meaning given them in the Agreement
For adequate consideration, Sellers and Buyer agree as follows:
During the period prior to the Closing Date, Sellers and Buyer shall
attempt to identnify opportunties for Buyer to provide services to
Sellers in connection with the Properties or the Business. If Buyer and
Sellers shall identify any such opportunities they shall enter into
negotiations to determine whether such opportunities can be pursued on
mutually agreeable terms and conditions.
Sellers:
Public Service Company of New Mexico
By: /s/ Jeffry E. Sterba
---------------------------------
Title:
Sunterra Gas Gathering Company
By: M. Phyllis Bourque
----------------------------
Title:
Sunterra Gas Processing Company
By: M. Phyllis Bourque
----------------------------
Title:
AGREED TO ON BEHALF
OF BUYER:
Williams Gas Processing - Blanco, Inc.
By: /s/ Lloyd A. Hightower
----------------------------------
Title:
<PAGE>
EXHIBIT 2.2
AGREEMENT TO PURCHASE AND SELL
between
CITY OF SANTA FE, NEW MEXICO
and
PUBLIC SERVICE COMPANY OF NEW MEXICO
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
<C> <S> <C>
Section 1. Definitions and Rules of Construction........................... 1
- ---------- -------------------------------------
1.1 Defined Terms..................................................... 1
-------------
1.2 General........................................................... 10
-------
1.3 Accounting Terms.................................................. 10
----------------
1.4 Schedules......................................................... 10
---------
Section 2. Agreement to Sell and Purchase.................................. 10
------------------------------
2.1 Assets to be Purchased............................................ 10
----------------------
2.2 Excluded Assets................................................... 10
---------------
2.3 Donated Assets.................................................... 10
--------------
2.4 "AS IS" SALE...................................................... 11
------------
Section 3. Consideration................................................... 11
- ---------- -------------
3.1 Purchase Price.................................................... 11
--------------
3.2 Determination of the Purchase Price............................... 11
-----------------------------------
3.3 Payment of Purchase Price......................................... 12
-------------------------
3.4 Good Funds........................................................ 12
----------
Section 4. Assumed Liabilities and Excluded Obligations.................... 13
--------------------------------------------
4.1 Assumed Obligations............................................... 13
-------------------
4.2 Excluded Obligations.............................................. 13
--------------------
Section 5. Representations and Warranties of Seller........................ 14
----------------------------------------
5.1 Organization and Qualification.................................... 15
------------------------------
5.2 No Breach or Violation............................................ 15
----------------------
5.3 Authority and Validity............................................ 15
----------------------
5.4 Assets and Business Generally..................................... 16
-----------------------------
5.5 Equipment......................................................... 16
---------
5.6 Real Property..................................................... 16
-------------
5.7 Environmental Matters............................................. 18
---------------------
5.8 Compliance with Law; Governmental Permits......................... 19
-----------------------------------------
5.9 Patents, Trademarks and Copyrights................................ 20
----------------------------------
5.10 Contract Rights................................................... 20
---------------
5.11 Financial Statements.............................................. 22
--------------------
5.12 Legal Proceedings................................................. 24
-----------------
5.13 Tax Returns: Other Reports....................................... 24
---------------------------
5.14 Employment Matters................................................ 24
------------------
5.15 Finders and Brokers............................................... 26
-------------------
5.16 Water Transmission and Distribution Facilities and Water Rights... 26
---------------------------------------------------------------
5.17 Related Party Transactions........................................ 32
--------------------------
5.18 Insurance......................................................... 32
---------
5.19 Materials and Supplies............................................ 32
----------------------
5.20 Disclosure........................................................ 32
----------
Section 6. Purchaser's Representations and Warranties...................... 32
------------------------------------------
6.1 Corporate Status.................................................. 32
----------------
6.2 No Breach or Violation............................................ 33
----------------------
6.3 Purchaser Authorizations.......................................... 33
------------------------
</TABLE>
i
<PAGE>
<TABLE>
<C> <S> <C>
6.4 Enforceability................................................... 33
--------------
6.5 Litigation....................................................... 33
----------
6.6 Finders and Brokers.............................................. 33
-------------------
Section 7. Seller's Covenants.............................................. 34
------------------
7.1 Continuity and Maintenance of Operations......................... 34
----------------------------------------
7.2 Survey........................................................... 36
------
7.3 Title Insurance.................................................. 38
---------------
7.4 Inspection by Purchaser.......................................... 39
-----------------------
7.5 Environmental Investigation...................................... 40
---------------------------
7.6 Availability of Certain Governmental Permits..................... 41
--------------------------------------------
7.7 UCC Search....................................................... 41
----------
7.8 Books and Records................................................ 41
-----------------
7.9 No Solicitation.................................................. 42
---------------
7.10 Notification of Certain Matters.................................. 42
-------------------------------
7.11 Updated Schedules................................................ 42
-----------------
7.12 Required Consents; Satisfaction of Other Conditions............. 43
----------------------------------------------------
Section 8. Purchaser's Covenants........................................... 44
---------------------
8.1 Bonds............................................................ 44
-----
8.2 Confidentiality.................................................. 44
---------------
8.3 Retention of Records; Purchaser's Access......................... 44
----------------------------------------
8.4 Required Consents; Satisfaction of Other Conditions.............. 45
---------------------------------------------------
8.5 Notification of Certain Matters.................................. 45
-------------------------------
8.6 Rate Covenant.................................................... 45
-------------
Section 9. Other Covenants................................................. 46
- ---------- ---------------
9.1 Casualty and Condemnation........................................ 46
-------------------------
9.2 Transfer and Other Taxes......................................... 47
------------------------
9.3 Passage of Title and Risk of Loss................................ 47
---------------------------------
9.4 Application to PUC............................................... 48
------------------
9.5 Appeals.......................................................... 48
-------
9.6 Reimbursement of Legal Fees...................................... 48
---------------------------
9.7 Grant of Easements............................................... 48
------------------
9.8 Operating Agreement.............................................. 49
-------------------
9.9 Two Mile Dam..................................................... 49
------------
Section 10. Conditions to Closing........................................... 50
---------------------
10.1 Conditions to the Obligations of Purchaser and Seller............. 50
-----------------------------------------------------
10.2 Conditions to the Obligations of Purchaser........................ 51
------------------------------------------
10.3 Conditions to Obligations of Seller............................... 52
-----------------------------------
10.4 Waiver of Conditions.............................................. 53
--------------------
Section 11. Closing......................................................... 53
-------
11.1 Closing Date...................................................... 53
------------
11.2 Deliveries of Seller at Closing................................... 53
-------------------------------
11.3 Deliveries of Purchaser at Closing................................ 56
----------------------------------
11.4 Prorations and Credits............................................ 57
----------------------
</TABLE>
ii
<PAGE>
<TABLE>
<C> <S> <C>
Section 12. Termination..................................................... 57
-----------
12.1 Events of Termination............................................ 57
---------------------
12.2 Liabilities in Event of Termination.............................. 58
-----------------------------------
12.3 Procedure Upon Termination....................................... 58
---------------------------
Section 13. Survival of Representations and Warranties; Indemnification..... 58
-----------------------------------------------------------
13.1 Survival of Representations and Warranties....................... 58
------------------------------------------
13.2 Indemnification by Seller........................................ 59
-------------------------
13.3 Indemnification by Purchaser..................................... 59
----------------------------
13.4 Third Party Claims............................................... 60
------------------
Section 14. Miscellaneous................................................... 61
-------------
14.1 Parties Obligated and Benefitted................................. 61
--------------------------------
14.2 Notices.......................................................... 61
-------
14.3 Attorneys' Fees.................................................. 61
---------------
14.4 Right to Specific Performance.................................... 62
-----------------------------
14.5 Waiver........................................................... 62
------
14.6 Captions......................................................... 62
--------
14.7 Choice of Law.................................................... 62
-------------
14.8 Rights Cumulative................................................ 62
-----------------
14.9 Further Actions.................................................. 62
---------------
14.10 Time........................................................ 62
----
14.11 Late Payments............................................... 62
-------------
14.12 Counterparts................................................ 63
------------
14.13 Entire Agreement............................................ 63
----------------
14.14 Severability................................................ 63
------------
14.15 Construction................................................ 63
------------
14.16 Expenses.................................................... 63
--------
14.17 Savings Clause.............................................. 63
--------------
</TABLE>
- -----------
Schedules and exhibits are omitted. These are identified in the index to
the Purchase and Sale Agreement. The Company agrees to furnish supplementally a
copy of any omitted schedule or exhibit to the Securities and Exchange
Commission upon request.
iii
<PAGE>
AGREEMENT TO PURCHASE AND SELL
------------------------------
THIS AGREEMENT TO PURCHASE AND SELL (this "Agreement") is made as of the
28th day of February, 1994, by and between the CITY OF SANTA FE, NEW MEXICO, a
municipal corporation ("Purchaser"), and PUBLIC SERVICE COMPANY OF NEW MEXICO, a
New Mexico corporation ("Seller").
RECITALS
--------
WHEREAS, Seller, through its operating division, Sangre de Cristo Water
Company ("SDCW"), owns and operates the water system serving the City of Santa
Fe, New Mexico, and the surrounding area; and
WHEREAS, Purchaser desires to purchase, and Seller desires to sell,
substantially all of the assets of SDCW; and
WHEREAS, Purchaser and Seller previously executed that certain Letter of
Intent, dated August 31, 1993, relating to the purchase and sale of the assets
of SDCW, which provided that the parties would negotiate and execute this
Agreement; and
WHEREAS, Purchaser and Seller desire to enter into this Agreement to set
forth the terms and conditions pursuant to which the sale and purchase of
substantially all of the assets of SDCW shall occur;
NOW, THEREFORE, in consideration of the foregoing, and such other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
AGREEMENT
---------
Section 1. Definitions and Rules of Construction.
- --------- -------------------------------------
1.1 Defined Terms. In addition to terms defined elsewhere in this
-------------
Agreement, the following terms, when used in this Agreement, shall have the
meanings set forth below:
1.1.1 Accounts Receivable. Accounts receivable and other
-------------------
accounts due and owing payable to or for the account of Seller and arising
from the Business, including accounts which have not yet been billed, but
excluding Past Due Receivables.
1.1.2 Action. As defined in Section 13.4.
------
1
<PAGE>
1.1.3 Affiliate. With respect to any Person, any other Person
---------
known to such Person and controlling, controlled by or under common control
with such Person, with "control" for such purpose meaning the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities or voting interests, by contract or otherwise.
1.1.4 Assets. All of the assets relating to the Business as of
------
the Closing Date, real, personal and mixed, tangible and intangible, of every
kind, nature and description, wherever situated, and whether or not carried or
reflected on the books of Seller or on the Financial Statements, including,
but not limited to, the Accounts Receivable, Contract Rights, Deposits,
Donated Assets, Equipment, Governmental Permits, Intangibles, Materials and
Supplies, Prepaid Expenses, Real Property, Records, Service Agreements, Water
Rights and Water Transmission and Distribution Facilities. The Assets do not,
however, include the Excluded Assets.
1.1.5 Assumed Obligations. As defined in Section 4.1.
-------------------
1.1.6 Bonds. As defined in Section 8.1.
-----
1.1.7 Business. The water utility business conducted by SDCW
--------
within the Service Area on the date of this Agreement.
1.1.8 Business Day. Any day other than Saturday, Sunday or a
------------
day on which banking institutions in Santa Fe, New Mexico or New York, New
York are required or authorized to be closed.
1.1.9 Closing. The consummation of the Transactions, as
-------
described in Section 11.
1.1.10 Closing Date. The date for the Closing of the
------------
Transactions.
1.1.11 Code. The Internal Revenue Code of 1986, as amended, and
----
the rules and regulations thereunder.
1.1.12 Common Plant. The property more particularly described
------------
on Schedule 1.1.12, which is owned by Seller and used by SDCW in common with
---------------
one or more of Seller's other divisions and which is not included in the
Assets because of such common use.
1.1.13 Company Plan. Any Plan which Seller maintains or
------------
contributes to, and under which any employees or former employees (whether
employed by Seller or any other Person)
2
<PAGE>
who are or were engaged in the conduct of the Business are covered or have
benefit rights, including those plans described on Schedule 1.1.13.
---------------
1.1.14 Contract Rights. All contracts, agreements, leases,
---------------
easements, Service Agreements and right-of-way agreements (oral or written,
formal or informal) (other than Governmental Permits, Major Easements,
contracts and agreements regarding employment and employees, insurance
policies, and contracts and agreements constituting Excluded Assets)
pertaining to the ownership, operation and maintenance of the Assets or the
conduct of the Business, to which the Seller is a party or by which it is
bound, including without limitation those described on Schedule 1.1.14.
---------------
1.1.15 Deposits. All deposits from water customers or potential
--------
water customers held by Seller.
1.1.16 Donated Assets. As defined in Section 2.3.
--------------
1.1.17 Encumbrance. Any mortgage, lien, security interest,
-----------
conditional sale or other title retention agreement, pledge, option, charge,
assessment, encumbrance, adverse interest, restriction on right to use or
transfer, or any exception to or defect in title or other ownership interest
(including reservations, rights of way, possibilities of reverter,
encroachments, easements, rights of entry, restrictive covenants, leases and
licenses).
1.1.18 Environmental Law. Any of the following laws as in
-----------------
effect on the date of this Agreement and as amended through the Closing Date:
the Clean Air Act, 42 U.S.C. (S)(S) 7401 et. seq.; the Clean Water Act, 33
-- ---
U.S.C. (S)(S) 1251 et seq.; the Federal Insecticide, Fungicide and Rodenticide
-- ---
Act, 7 U.S.C. (S)(S) 136 et. seq.; the Noise Control Act, 42 U.S.C. (S)(S)
-- ---
4901 et. seq.; the Atomic Energy Act, 42 U.S.C. (S)(S) 2011 et. seq.; the
-- --- -- ---
Resource Conservation and Recovery Act, 42 U.S.C. (S)(S) 6901 et. seq., as
-- ---
amended by the Hazardous and Solid Waste Amendments of 1984; the Safe Drinking
Water Act, 42 U.S.C. (S)(S) 300f et. seq.; the Comprehensive Environmental
-- ---
Response, Compensation and Liability Act, 42 U.S.C. (S)(S) 9601 et. seq.; and
-- ---
the Toxic Substance Control Act, 15 U.S.C. (S)(S) 2601 et. seq. The term
-- ---
"Environmental Law" shall also include all state, county, municipal and other
local laws, statutes, regulations and ordinances that are equivalent or
similar to the federal laws recited above and as in effect on the date of this
Agreement and as amended through the Closing Date. The term "Environmental
Law" shall also include regulations issued under the Federal laws recited
above or equivalent or similar state laws and made effective after the Closing
Date, but only if public notice is given prior to the Closing Date of the
intention to adopt such
3
<PAGE>
regulations or to adopt regulations substantially similar to such regulations.
1.1.19 Equipment. All fixtures, machinery, automobiles,
---------
computers, tools, trucks, other transportation equipment, furnishings,
furniture, office equipment, appliances, supplies, and other tangible personal
property owned by Seller and used in any way in the operation of the Business
or in conjunction with any other Assets, and all future additions to or
substitutions to the same, or any part thereof, between the date hereof and
the Closing Date; and all right, title and interest of Seller under all
warranties and guarantees covering any of such property; which Equipment owned
by Seller includes the items described on Schedule 1.1.19A and leased by
----------------
Seller includes the items described on Schedule 1.1.19B.
----------------
1.1.20 ERISA. The Employee Retirement Income Security Act of
-----
1974, as amended, and the rules and regulations promulgated thereunder.
1.1.21 Excluded Assets. Past Due Receivables, the Two Mile Dam,
---------------
the Old Dempsey Tank Site, the 72 Acre Water Treatment Plant Parcel, the
Hagerman Rights, the Pino and La Cienega Ditch Claims, Common Plant, Non-
Transferrable Governmental Permits, and Excluded Trademarks.
1.1.22 Excluded Obligations. As defined in Section 4.2.
--------------------
1.1.23 Excluded Trademarks. The trademarks, tradenames and
-------------------
brand names used by Seller in the conduct of the Business which are
specifically identified on Schedule 1.1.23.
---------------
1.1.24 Financial Statements. As defined in Section 5.11.
--------------------
1.1.25 Final Purchase Price. As defined in Section 3.2.3.
--------------------
1.1.26 Final Report. As defined in Section 3.2.2.
------------
1.1.27 GAAP. Generally accepted accounting principles as in
----
effect from time to time in the United States of America (including official
interpretations by the Financial Accounting Standards Board).
1.1.28 Governmental Authority. (i) the United States of
----------------------
America, (ii) any state, commonwealth, territory or possession of the United
States of America and any political subdivision thereof (including counties,
municipalities and the like), or (iii) any agency, authority or
instrumentality of any of
4
<PAGE>
the foregoing, including any court, tribunal, department, bureau, commission,
board or agency.
1.1.29 Governmental Permits. All franchises, licenses, permits,
--------------------
authorizations, approvals, easements, right-of-ways, registrations,
qualifications, leases, variances and similar rights obtained from any
Governmental Authority other than Purchaser to which Seller is a party,
benefiting or obligating the Business, including without limitation those
described on Schedule 1.1.29, except Non-Transferable Governmental Permits and
---------------
Water Rights.
1.1.30 Hagerman Rights. The rights to water more particularly
---------------
described on Schedule 1.1.30.
---------------
1.1.31 Hazardous Substances. Any substance, waste, contaminant
--------------------
or material regulated by any Environmental Law.
1.1.32 Improvements. All structures, installations and
------------
facilities appurtenant to the Land and all Equipment affixed or attached to
the Real Property as of the Closing Date.
1.1.33 Indemnified Party. As defined in Section 13.4.
-----------------
1.1.34 Indemnifying Party. As defined in Section 13.4.
------------------
1.1.35 Inspection Period. As defined in Section 7.4.2.
-----------------
1.1.36 Intangibles. All intangible assets, including customer
-----------
lists, supplier lists, trade names, service marks, trademarks, patents,
copyrights, goodwill, claims, causes of action and judgments, if any, related
to the Business, any unpaid awards for any Taking or any damage to the Assets
by reason of a change of grade of any street or highway, any unpaid proceeds
for any damage to the Assets by reason of fire or other casualty, and any
development rights with respect to the Land, including any deposits delivered
to any governmental authority in connection with the past, present or future
development of the Land, but excluding Accounts Receivable, Excluded
Trademarks, and Excluded Obligations.
1.1.37 Knowledge of any Person or with respect to any matter
---------
means actual awareness or knowledge of (i) such Person, if a human being, (ii)
its directors, officers, senior managers, and any controlling Person, if a
corporation, (iii) its trustees, executors or personal representatives, if an
estate, or (iv) if a partnership, its general partners (if human beings) or,
if a general partner is a corporation, the directors, officers, senior
managers and any controlling Person of such corporation; after, in
5
<PAGE>
all cases, a diligent investigation by such Person, if a human being, or on
behalf of such Person by a trustee, executor, personal representative,
officer, senior manager or other controlling person, if the Person is an
estate, corporation, partnership or other entity, which investigation shall
include inquiries of current employees of such Person and a review of the
records of such Person.
1.1.38 Land. The fee interests in real property described on
----
Schedule 1.1.38A, and the rights to lease or use real property described on
- ----------------
Schedule 1.1.38B, and all easements, rights of way, privileges, appurtenances
- ----------------
and rights to the same, or belonging to or inuring to the same; all right,
title and interest of Seller in and to any land lying in the beds of any
street, road or avenue, open or proposed, in front of or adjoining said real
property to the center line thereof; and all right, title and interest of
Seller in and to all minerals, strips, gores, riparian rights and littoral
rights, if any, belonging to or inuring to the benefit of such real property.
1.1.39 Legal Requirement. Any statute, ordinance, code, law,
-----------------
rule, regulation, order or other requirement, standard or procedure enacted,
adopted or applied by any Governmental Authority, including judicial decisions
creating, interpreting or applying common law or interpreting any other Legal
Requirement.
1.1.40 Major Easements. The easements described on
---------------
Schedule 1.1.38B-1.
- ------------------
1.1.41 Material Adverse Effect. As defined in Section 5.2.
-----------------------
1.1.42 Materials and Supplies. The supplies, material, parts and
----------------------
similar consumable goods regularly and customarily used in the Business.
1.1.43 Non-Material Contract. Any Contract Right which has a
---------------------
remaining term (including exercised or unexercised option periods) of less
than one (1) year and which either (i) may be terminated by Seller or its
successor at any time without cause by providing no more than thirty (30) days
prior written notice, or (ii) has a remaining obligation of Seller or its
successor of $25,000 or less.
1.1.44 Non-Transferable Governmental Permits. The Governmental
-------------------------------------
Permits not transferable by their terms which are specifically identified on
Schedule 1.1.44.
- ---------------
1.1.45 Old Dempsey Tank Site. The real property more
---------------------
particularly described on Schedule 1.1.45.
---------------
6
<PAGE>
1.1.46 Operating Agreement. As defined in Section 9.8.
-------------------
1.1.47 Past Due Receivables. Accounts Receivable (other than
--------------------
petty cash) which are more than 90 days delinquent.
1.1.48 Permitted Encumbrances. The following Encumbrances:
----------------------
(i) liens for taxes, assessments and governmental charges not yet due and
payable; (ii) zoning laws and ordinances and similar Legal Requirements; (iii)
rights reserved to any Governmental Authority to regulate the affected
property; (iv) Permitted Exceptions; (v) until the Closing, the lien of the
PNM Indenture; (vi) the Encumbrances listed on Schedule 1.1.48; (vii) matters
---------------
disclosed by the surveys and other documents to be provided to Purchaser
pursuant to Section 7.2 to which Purchaser does not object or to which
Purchaser waives objection in accordance with Section 7.2; (viii) in regard to
the Water Rights, the matters stated in Section 5.16.13; and (ix) defects and
irregularities of title to Assets (other than Water Rights, Real
Property/Urban, Real Property/Watershed, and Major Easements) which,
individually or in the aggregate, do not materially impair the use of the
Assets in the Business.
1.1.49 Permitted Exceptions. As defined in Section 7.3.1.
--------------------
1.1.50 Person. Any human being, corporation, partnership, trust,
------
unincorporated organization, association, limited liability company,
Governmental Authority or other entity.
1.1.51 Pino and La Cienega Ditch Claims. The rights to water more
--------------------------------
particularly described on Schedule 1.1.51.
---------------
1.1.52 Plan. Any bonus, deferred compensation, profit sharing,
----
pension or retirement, stock bonus, stock option, stock purchase, stock
appreciation right, performance share, bonus, savings, severance, death
benefit, disability, medical, hospitalization, life or other insurance and
any other incentive or fringe benefit plan, program, arrangement or practice,
formal or informal, oral or written, and whether covering one Person or more
than one Person, providing employee or executive benefits, including, but not
limited to, any "employee welfare benefit plan" (as defined in Section 3(1) of
ERISA) and any "employee pension benefit plan" (as defined in Section 3(2) of
ERISA).
1.1.53 PNM Indenture. That certain Indenture of Mortgage and
-------------
Deed of Trust from Seller to Bank of New York, dated June 1, 1947, as
supplemented and amended.
1.1.54 Preliminary Purchase Price. As defined in Section 3.2.1.
--------------------------
7
<PAGE>
1.1.55 Preliminary Report. As defined in Section 3.2.1.
------------------
1.1.56 Prepaid Expenses. All prepaid expenses and leasehold and
----------------
other deposits of Seller related to SDCW.
1.1.57 PUC. The New Mexico Public Utility Commission.
---
1.1.58 Purchase Price. As defined in Section 3.1.
--------------
1.1.59 Purchaser. The City of Santa Fe, New Mexico, a body
---------
corporate and politic, organized under the Constitution and laws of the State
of New Mexico, in any capacity in which it may operate, whether governmental
or proprietary, and including all agencies, boards, commissions, and other
committees and bodies thereof and successors thereto through which it may act.
1.1.59 Purchaser's Required Consents. As defined in Section 6.2.
-----------------------------
1.1.60 Real Property. The Land, Improvements, and any easements,
-------------
rights-of-way, licenses or other real property interests (except Water Rights,
Governmental Permits and Non-Transferrable Governmental Permits) owned or used
in connection with the Business. "Real Property/Urban" means that portion of
the Land described on Schedule 1.1.38A-1, together with any and all Improvements
appurtenant, affixed or attached thereto. "Real Property/Watershed" means that
portion of the Land described on Schedule 1.1.38A-2, together with any and all
Improvements appurtenant, affixed or attached thereto.
1.1.61 Records. All records of Seller related to the Business,
-------
including, but not limited to, customer books, records, manuals, documents,
correspondence, personal records, computer programs, customer information
(including current and one year's historical data), supplier lists,
literature, brochures, advertising material, customer billing and usage data,
and sales and credit reports, soil, engineering, environmental inspection,
water and water facility reports and studies, market studies, reports and
similar information with respect to the management, ownership, maintenance,
use, occupancy and operation of the Assets or the Business, and any surveys,
plans, specifications, maps and as-built drawings related to the Assets.
1.1.62 Seller. Public Service Company of New Mexico, a
------
corporation organized under the laws of the State of New Mexico, and its
divisions, successors and assigns.
1.1.63 Seller's Required Consents. As defined in Section 5.2.
--------------------------
8
<PAGE>
1.1.64 Service Agreements. Any existing management, service,
------------------
equipment, supply, or maintenance agreements with respect to or affecting the
Assets, including without limitation those described on Schedule 1.1.64.
---------------
1.1.65 Service Area. The area in which SDCW operates the
------------
Business, specifically in and around the city of Santa Fe, New Mexico, as
authorized by the PUC and the City and County of Santa Fe, New Mexico.
1.1.66 Substantial Loss. As defined in Section 9.1.1.
----------------
1.1.67 Substantial Taking. As defined in Section 9.1.2.
------------------
1.1.68 Survival Period. As defined in Section 13.1.
---------------
1.1.69 System Employees. All employees of Seller primarily
----------------
engaged in the conduct of the Business.
1.1.70 Taking. The condemnation of any interest in property,
------
including any of the Assets, or a conveyance in lieu or threat thereof.
1.1.71 Title Company. Capitol City Title Services, Inc.
-------------
1.1.72 Two Mile Dam. The Real Property and reservoir
------------
particularly described on Schedule 1.1.72.
---------------
1.1.73 UCC Filings. As defined in Section 7.6.
-----------
1.1.74 Waiver Notice. As defined in Section 7.4.2.
-------------
1.1.75 Water Rights. All vested and inchoate water rights
------------
evidenced by all claims to, declarations of, applications for, licenses,
permits, decrees, administrative orders, subfile orders, and contracts for the
diversion, withdrawal, storage and use of water owned, leased, contracted or
used by Seller with respect to the Business, directly, or in any other manner,
including by dedication, augmentation and exchange, including without
limitation those set forth on Schedule 1.1.75, but excluding the Hagerman
---------------
Rights and the Pino and La Cienega Ditch Claims.
1.1.76 Water Transmission and Distribution Facilities. All of
----------------------------------------------
the water transmission, distribution and treatment systems related to the
Business, including all dams, reservoirs, wells, pump stations, water
treatment plants, pipes, meters, services, hydrants, water tanks, purification
systems and
9
<PAGE>
other related facilities, including without limitation those items described on
Schedule 1.1.76.
- ---------------
1.1.77 Transactions. The purchase and sale of the Assets
------------
pursuant to this Agreement.
1.1.78 72-Acre Water Treatment Plant Parcel. The real property
------------------------------------
more specifically described on Schedule 1.1.78.
---------------
1.2 General. Any term used with its initial letter capitalized will
-------
have the meaning specified, applicable to both singular and plural forms, for
all purposes of this Agreement. Pronouns of any gender will be deemed to
include references to masculine, feminine and neuter genders. The word
"include" and derivatives of that word are used in this Agreement in an
illustrative sense rather than a limiting sense.
1.3 Accounting Terms. All accounting terms used in this Agreement,
----------------
unless otherwise specifically provided in this Agreement, will have the
meanings ascribed to them under GAAP, applied on a basis consistent with that
applied in the preparation of Seller's Financial Statements related to the
Business for the year ended December 31, 1992.
1.4 Schedules. All references to a "Schedule" shall mean the
--------- --------
Schedules attached to this Agreement and made a part hereof.
- ---------
Section 2. Agreement to Sell and Purchase.
- --------- ------------------------------
2.1 Assets to be Purchased. Upon the terms and subject to the
----------------------
conditions of this Agreement, Seller shall sell, assign, convey, transfer and
deliver to Purchaser at the Closing, and Purchaser shall purchase and accept
from Seller, all of the Assets.
2.2 Excluded Assets. This Agreement shall not constitute an
---------------
agreement for the assignment, transfer or sublease, or an attempted
assignment, transfer or sublease, of the Excluded Assets.
2.3 Donated Assets. Purchaser acknowledges that the Assets include
--------------
plant, equipment and other capital assets contributed by SDCW's customers or
acquired or constructed with capital contributed by SDCW's customers (the
"Donated Assets"). The original cost of the Donated Assets as of November 30,
1993, was approximately $11,200,000. In determining the Purchase Price set
forth in Section 3.1, below, Seller and Purchaser acknowledge that no specific
allocation of the Purchase Price was made to the Donated Assets and that the
Donated Assets will, accordingly, be donated by Seller to Purchaser at the
Closing.
10
<PAGE>
2.4 "AS IS" SALE. PRIOR TO THE CLOSING DATE, PURCHASER SHALL MAKE OR
------------
CAUSE TO BE MADE ITS OWN INDEPENDENT INVESTIGATION AND EVALUATION WITH RESPECT
TO THE ASSETS. ACCORDINGLY, THE ASSETS WILL BE SOLD "AS IS" AND "WHERE IS."
EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT AND ANY TRANSFER DOCUMENTS,
SELLER MAKES NO REPRESENTATION OR WARRANTY WHATSOEVER, IN THIS AGREEMENT OR
OTHERWISE, EXPRESS, IMPLIED OR STATUTORY, INCLUDING, WITHOUT LIMITATION, ANY
REPRESENTATION OR WARRANTY AS TO THE VALUE, QUANTITY, CONDITION, SALABILITY,
OBSOLESCENCE, MERCHANTABILITY, FITNESS OR SUITABILITY FOR USE OR WORKING ORDER
OF ALL OR ANY PART OF THE ASSETS. SUBJECT TO SELLER'S REPRESENTATIONS AND
WARRANTIES AS SET FORTH IN THIS AGREEMENT AND ANY TRANSFER DOCUMENT, PURCHASER
IS WILLING, ON THE TERMS AND CONDITIONS OF THIS AGREEMENT, TO PURCHASE AND
ACCEPT THE ASSETS "AS IS" AND "WHERE IS."
Section 3. Consideration.
- --------- -------------
3.1 Purchase Price. As consideration for the sale of the Assets by
--------------
Seller to Purchaser, Purchaser shall pay to Seller an amount equal to
$48,250,000, adjusted as of the Closing Date as provided on Schedule 3.1 (the
------------
"Purchase Price").
3.2 Determination of the Purchase Price. Preliminary and final
------------------------------------
determinations of the Purchase Price shall be made as follows:
3.2.1 At least fifteen (15) Business Days prior to the Closing,
Seller shall deliver to Purchaser a report (the "Preliminary Report"),
prepared in good faith and on a reasonable basis, setting forth in reasonable
detail the preliminary determination of the Purchase Price (the "Preliminary
Purchase Price") estimated as of the Closing Date (or as of any other date
agreed by Seller and Purchaser), accompanied by appropriate documentation
supporting such determination, including an unaudited estimated balance sheet
of SDCW and Seller as of the Closing Date, a schedule setting forth the
additions and deductions to the Preliminary Purchase Price, including Accounts
Receivable information relating to the Business and a schedule setting forth
the liabilities to be assumed by Purchaser pursuant to the Agreement, all as
provided on Schedule 3.1.
--------
3.2.2 Within sixty (60) days after the Closing, Seller shall
deliver to Purchaser a report (the "Final Report"), prepared in good faith and
on a reasonable basis, setting forth in reasonable detail the final
determination of Purchase Price as provided on Schedule 3.1., accompanied by
--------
appropriate documentation supporting such determination, including an
unaudited balance sheet of SDCW and Seller as of the Closing (which balance
sheet will be prepared in accordance with GAAP) and any other document that
was required to be included with the Preliminary Report to the extent
11
<PAGE>
any change to the information included in such document shall have occurred.
Purchaser shall provide Seller with reasonable access to all books and records
which Purchaser has in its possession and which are reasonably necessary for
Seller to prepare the Final Report.
3.2.3 Within thirty (30) days after receipt of the Final Report,
Purchaser shall give Seller written notice of Purchaser's objections, if any,
to the Final Report. If Purchaser does not give any such notice within such 30-
day period, the determination of the Purchase Price set forth in the Final
Report shall be conclusive and binding on the parties. If Purchaser gives
notice of any objection, Seller and Purchaser shall negotiate in good faith to
resolve all issues in dispute for a period of fifteen (15) days following
receipt of such notice of objection. If the parties resolve all disputed
issues within such 15-day period, Seller shall promptly thereafter prepare and
deliver to Purchaser a statement reflecting the final determination of the
Purchase Price. If at the end of such 15-day period, all disputed issues are
not resolved, all issues remaining in dispute shall be submitted for
determination by KPMG Peat Marwick or such other nationally recognized
accounting firm selected jointly by Purchaser and Seller having experience in
accounting for companies engaged in water distribution, who shall be directed
to make such determination within thirty (30) days after submission to it and
whose determination shall be conclusive and binding on the parties. Seller, on
the one hand, and Purchaser, on the other, shall bear equally the fees and
expenses payable to such firm in connection with its determination. (The
Purchase Price determined in accordance with this Section may be referred to
as the "Final Purchase Price.")
3.3 Payment of Purchase Price.
-------------------------
3.3.1 At the Closing on the Closing Date, Purchaser shall pay to
Seller the Preliminary Purchase Price.
3.3.2 After the final determination of the Final Purchase Price
pursuant to Section 3.2.3, any payment on account of the Final Purchase Price
required to be made by (i) Seller to Purchaser, or (ii) Purchaser to Seller,
together with interest on the amount required to be paid at the rate specified
by Section 14.11 from the Closing Date to the date of payment, shall be paid
within three Business Days after the final determination of the Final Purchase
Price.
3.4 Good Funds. All amounts payable by Purchaser to Seller pursuant
----------
to Sections 3.2 and 3.3 hereof shall be paid by the wire transfer of
immediately available United States funds.
12
<PAGE>
Section 4. Assumed Liabilities and Excluded Obligations.
- --------- --------------------------------------------
4.1 Assumed Obligations. On and after the Closing Date, Purchaser,
-------------------
or its successor and permitted assigns, shall assume, perform, pay and satisfy
the following liabilities, obligations, contracts and commitments of Seller
relating to or arising from the Assets (collectively referred to herein as
"Assumed Obligations"):
i. Liabilities and reserves recorded in the Financial
Statements of Seller relating to the Assets;
ii. Liabilities and obligations arising under or related to
those Contract Rights (including, without limitation, the contracts related to
the developments known as Las Campanas, Summit and Tano which are identified
on Schedule 4.1) which are assigned at Closing, and which are recorded in the
------------
Financial Statements of Seller as of the Closing Date or arise after the
Closing Date;
iii. Liabilities and obligations, whether present or future,
related to the Water Rights and requirements placed thereon by the New Mexico
State Engineer relating to the offset obligations for the Buckman Well Field
or obligations imposed in water adjudication suits all as referenced in
Section 5.16.3; and
iv. Liabilities and obligations arising from or related to the
ownership of the Assets after the passage of title and risk of loss on the
Closing Date in accordance with Section 9.3 or the conduct of the Business
after the Closing, including without limitation, liabilities for personal
injury and property damage, provided that all of the material facts and
circumstances giving rise to such liabilities and obligations first arose
after the Closing Date and that Seller has made any disclosure required
hereunder related to the same and is not in breach of any representation,
warranty or covenant related to the same.
4.2 Excluded Obligations. Except as expressly set forth in
--------------------
Section 4.1, neither Purchaser nor any of its successors or assigns shall
assume or become obligated to pay any claim, debt, obligation or liability, of
any kind or nature (known or unknown, accrued, contingent or absolute) of
Seller, whether or not incurred or accrued in connection with the operation of
the Business or Assets, which Excluded Obligations include, but are not
limited to:
i. Liabilities for personal injury or property damage related
to the Assets or Business occurring prior to the Closing Date;
ii. Accumulated and deferred investment tax credits or
accumulated and deferred income tax liabilities of Seller;
13
<PAGE>
iii. Liabilities and obligations, including any pending or
contingent liabilities or obligations, to System Employees;
iv. Intercompany accounts payable to Seller and its
subsidiaries which shall be appropriately eliminated and settled on or prior
to the Closing Date;
v. Liabilities arising from all litigation and claims
resulting from any act or omission by Seller or employees of Seller with
respect to the Assets or operation of the Business that occurred prior to the
Closing Date;
vi. Benefits and liabilities under and pursuant to Company
Plans for present or former employees of Seller;
vii. Collective bargaining agreements between Seller and the
International Brotherhood of Electrical Workers or any union or bargaining
agent acting on behalf of System Employees;
viii. Other obligations and liabilities of Seller (y) which
arise from the Assets or the Business, but which Purchaser is not assuming
pursuant to Section 4.1, or (z) which are unrelated to the Assets or the
Business;
ix. any federal, state or local tax liability (or any interest
or penalties thereon) of Seller or any affiliated group of corporations within
the meaning of Section 1504 of the Code, of any nature, except pursuant to
Sections 9.2 and 11.4.1 (it being specifically recognized that Seller is
solely responsible for all income taxes of Seller related to the
Transactions);
x. obligations of Seller under or arising out of this Agreement;
xi. subject to the limitations set forth in Section 13.1, any
liabilities or obligations, the existence of which constitute a breach of the
representations or warranties of Seller contained in this Agreement; and
xii. any liabilities or obligations which, in accordance with
GAAP, would be required to be recorded as liabilities on the Financial
Statements but which are not so recorded.
Section 5. Representations and Warranties of Seller. Seller represents and
- --------- ----------------------------------------
warrants to Buyer, as of the date of this Agreement and as of the Closing Date,
as follows:
14
<PAGE>
5.1 Organization and Qualification. Seller is a New Mexico
------------------------------
corporation duly organized, validly existing and in good standing under the
laws of New Mexico and has all requisite corporate power and authority to own,
lease and use the Assets as they are currently owned, leased and used and to
conduct the Business as it is currently conducted. Seller is duly qualified or
registered to do business and is in good standing under the laws of each
jurisdiction in which the character of the properties owned, leased or used by
it or the nature of the activities conducted by it makes such qualification or
registration necessary, except any such jurisdiction where the failure to be
so qualified or registered and in good standing would not have a material
adverse effect on the Assets or Business or on the validity, binding effect or
enforceability of this Agreement.
5.2 No Breach or Violation. Subject to obtaining the consents,
----------------------
authorizations and approvals described on Schedule 5.2 ("Seller's Required
------------
Consents"), the execution, delivery and performance of this Agreement by
Seller and the consummation of the Transactions will not: (a) violate any
provision of Seller's Articles of Incorporation or Bylaws; (b) violate any
Legal Requirement applicable to Seller, the Business or any of the Assets; (c)
require any consent, approval or authorization of or any filing with or notice
to, any Person pursuant to any Governmental Permit, any Contract Rights, or
any Legal Requirement applicable to Seller, the Business or any of the Assets;
or (d) (i) violate, conflict with or constitute a breach of or default under,
(ii) permit or result in the termination, suspension or modification of,
(iii) result in the acceleration of (or give any Person the right to
accelerate) the performance of Seller under, or (iv) result in the creation or
imposition of any Encumbrance under, any Contract Rights, Governmental Permit
or any other instrument evidencing any of the Assets or any instrument or
other agreement to which Seller is a party or by which Seller or any of its
assets are bound except such violations, conflicts, breaches, defaults,
terminations, suspensions, modifications, and accelerations as would not, and
such consents, approvals, authorizations, filings or notices the failure of
which to be obtained, made or given would not, individually or in the
aggregate, have a material adverse effect on the Assets, Business or Seller or
on the right of Purchaser to own, lease and use the Assets as they are
currently owned, leased and used and to conduct the Business as it is
currently conducted (a "Material Adverse Effect").
5.3 Authority and Validity. Subject to Section 5.2, the execution
----------------------
and delivery by Seller of, and the performance by Seller of its obligations
under, this Agreement, and the consummation by Seller of the Transactions,
have been duly authorized by all requisite corporate action of Seller. This
Agreement has been duly executed and delivered by Seller and is the valid and
binding obligation of Seller, enforceable against Seller in accordance with
15
<PAGE>
its terms, except insofar as enforceability may be limited or affected by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
now or hereafter in effect affecting creditors' rights generally or by general
principles of equity.
5.4 Assets and Business Generally. Seller has exclusive, good and
-----------------------------
marketable title to (or, in the case of Assets that are leased, valid
leasehold interests in) the Assets (other than the Real Property and Water
Rights, as to which the representations and warranties in Sections 5.6 and
5.16, respectively, apply). The Assets are free and clear of all Encumbrances,
except (i) Permitted Encumbrances, and (ii) restrictions stated in the
Governmental Permits. The Assets are all of the assets owned by or leased to
Seller and necessary to conduct the Business substantially as it is currently
conducted and in compliance with all Legal Requirements.
5.5 Equipment. Except for Equipment leased under leases described on
---------
Schedule 1.1.19B, none of the Equipment is leased by Seller from any other
- ----------------
Person. Taken as a whole, the Equipment that is material to the conduct of the
Business as it is currently conducted is in good operating condition.
5.6 Real Property.
-------------
5.6.1 All of the Assets comprising the Real Property/Urban, the
Real Property/Watershed and the Major Easements are described on Schedule
--------
1.1.38A or Schedule 1.1.38B. Seller owns good, marketable and indefeasible fee
- ------- ----------------
simple title to the Real Property/Urban shown as being owned by Seller on
Schedule 1.1.38A and the valid and enforceable right to use and possess the
- ----------------
Real Property/Urban, Real Property/Watershed and the Major Easements, all as
currently used and possessed by Seller in the Business, subject only to
Permitted Encumbrances. Seller has valid leasehold interests in the Real
Property/Urban, Real Property/Watershed and Major Easements leased by Seller
pursuant to written leases described on Schedule 1.1.38B. With respect to any
----------------
Real Property that is not Real Property/Urban, Real Property/Watershed or
Major Easements that is material to the conduct of the Business as it is
currently conducted, Seller has the valid and enforceable right to use such
Real Property as it is currently used by Seller in the Business pursuant to
Governmental Permits described on Schedule 1.1.29 and easements, licenses,
---------------
right-of-way or other rights described on Schedule 1.1.14 or Schedule 1.1.29,
--------------- ---------------
subject only to Permitted Encumbrances. The documents delivered by Seller to
Purchaser as evidence of each lease, easement, license, right-of-way or other
right that is material to the conduct of the Business as it is currently
conducted constitute the entire agreement with the landlord, grantor or other
party in question. For purposes of the representations set forth in this
Section 5.6.1, all matters which will be shown on the title insurance
commitment to be
16
<PAGE>
furnished to Purchaser pursuant to Section 7.3.1 (unless and until deleted
therefrom) and all matters disclosed by the surveys and other documents to be
furnished to Purchaser pursuant to Section 7.2 (unless and until removed or
cured by Seller) are Permitted Encumbrances.
5.6.2 Seller has no leases, tenancies, licenses or other rights
of occupancy or use for any portion of the Real Property/Urban, Real
Property/Watershed, or Major Easements other than as set forth in Schedule
--------
1.1.38B. Except as otherwise noted on Schedule 1.1.38B, (i) each of the leases
- ------- ----------------
is valid and subsisting and in full force and effect, has not been amended,
modified or supplemented, and the tenant, licensee or occupant thereunder is
in actual possession, (ii) the copies of the leases delivered to Purchaser
constitute the entire agreements between the owner of the Real Property/Urban,
Real Property/Watershed and Major Easements and Seller with respect to the
Real Property/Urban, Real Property/Watershed and Major Easements referred to
therein, and (iii) no written notice of default or breach under any such
leases or other agreements relating to the Real Property/Urban, Real
Property/Watershed and Major Easements has been received or given by Seller or
its agents. Seller is not in arrears for the payment of rent for any month
preceding the month of the date of this Agreement, and Seller has not received
any notice to vacate.
5.6.3 Except as provided in Schedule 5.6.3, no Person has any
--------------
right or option granted by or through Seller to acquire the Real Property, or
any part thereof or interest therein.
5.6.4 No brokerage or leasing commission or other compensation
is or will be due or payable on or after the Closing to any person, firm,
corporation or other entity (including Seller or any affiliate of Seller) with
respect to or on account of any of the Real Property or any extensions or
renewals of any leases, licenses or rights of occupancy thereon.
5.6.5 Seller has performed all of Seller's obligations
(including the payment of all sums due to third parties) which obligations
have accrued as of the date hereof under the leases and under all other
agreements relating to the Real Property, except for amounts not yet due.
5.6.6 Seller has no Knowledge of any pending or threatened
condemnation or eminent domain proceedings which would directly affect any of
the Real Property.
5.6.7 Utility services to the Real Property/Urban, Real
Property/Watershed and Major Easements, including, but not limited to, water,
sewer, telephone, electric and gas, are being provided in sufficient
quantities to permit the
17
<PAGE>
use and occupation of the Real Property/Urban, Real Property/Watershed and
Major Easements for the intended use, but only as currently used and occupied
by Seller. Nothing in the preceding sentence shall imply the availability of
any utility service at any location unless that service is currently used by
Seller at such location.
5.6.8 To Seller's Knowledge the Improvements are free from
infestation by termites and any damage from previous termite infestation.
5.6.9 To Seller's knowledge, Seller is not in material
violation of any specific requirement or recommendation received from any
insurance company insuring the Improvements, the violation of which may pose a
hazard or materially and adversely affect the insurability of the
Improvements.
5.6.10 The Major Easements are all easements and rights-of-way
held by Seller for use in the Business (i) which burden real property which is
not a public way or which is not owned or controlled by a Governmental
Authority, (ii) which are evidenced by written instruments of conveyance to
Seller or its predecessors, and (iii) on which any transmission or
distribution lines, valves, or related equipment eight (8) inches in diameter
or larger, tank, reservoir, booster pump or well comprising a part of the
Water Transmission and Distribution Facilities is located.
5.7 Environmental Matters.
---------------------
5.7.1 Except as disclosed on Schedule 5.7.1A, Seller has not
---------------
generated, released, discharged or disposed of any Hazardous Substances at,
on, under, in or about, or in any other manner affecting, any of the Assets,
or discharged any Hazardous Substances from any of the Assets into any body of
water, directly or indirectly, in such quantities or concentrations or in such
manner as will give rise to a liability under any Environmental Law, and, to
the Knowledge of Seller, no other present or previous owner, tenant, occupant
or user of any of the Assets has committed or suffered any of the foregoing.
Except as disclosed on Schedule 5.7.1B, to the Knowledge of Seller, no release
---------------
of Hazardous Substances outside any of the Assets owned or leased by Seller
has entered or threatens to enter any such Assets, nor is there any pending or
threatened claim based on Environmental Laws which arises from any condition
of the land surrounding any such Assets. Except as disclosed on Schedule
--------
5.7.1C, no claim or investigation based on Environmental Laws which relates to
- ------
any of the Assets or any operations on such Assets, (i) has been asserted or
conducted in the past or is currently pending against or with respect to the
Seller, the Assets or the Business, or (ii) to the Knowledge of Seller is
threatened or contemplated.
18
<PAGE>
5.7.2 To the Knowledge of Seller, and except as disclosed on
Schedule 5.7.2, (i) no underground storage tank is currently or has ever been
- --------------
located on any Real Property owned or leased by Seller (ii) no Assets owned or
leased by Seller have been used at any time as a gasoline service station or
any other facility for storing, pumping, dispensing or producing gasoline or
any other petroleum products or wastes, (iii) no building or other structure
on any Real Property contains friable asbestos, and (iv) there are no
incinerators, septic tanks or cesspools on any Real Property and all waste
generated thereon is discharged into a public sanitary sewer system or
otherwise in accordance with applicable Legal Requirements. As to Real
Property other than Real Property/Urban and Real Property/Watershed, the
representations set forth in this Section 5.7.2 are based only on Seller's
actual knowledge without any investigation or inquiry by Seller.
5.7.3 Seller has disclosed to Purchaser (i) all studies,
reports, surveys or other materials in its possession relating to the presence
or alleged presence of Hazardous Substances at, on or affecting any of the
Assets, (ii) all notices or other materials in the possession of Seller that
were received from any Governmental Authority having the power to administer
or enforce any Environmental Laws relating to current or past ownership, use
or operation of any of the Assets or activities at any of the Assets, and
(iii) all materials in the possession of Seller relating to any claim,
allegation or action by any private party under any Environmental Law with
respect to any of the Assets.
5.7.4 Except as disclosed on Schedule 5.7.1B without any
---------------
modifications, alterations or additional expenditures, the Assets are and will
on the Closing Date be capable of delivering finished water which complies
with all applicable Legal Requirements, including without limitation the
requirements of the Federal Safe Drinking Water Act except those secondary
standards as to which compliance is not mandatory.
5.7.5 To the Knowledge of Seller and except as disclosed on
Schedule 5.7.5, the full exercise of the Water Rights has not resulted in any
- --------------
violation of any Legal Requirements or Governmental Permits concerning water
quality, and will require no Governmental Permit or other permit or approval
related to water quality other than those which Seller presently possesses and
which will be assigned to the City.
5.8 Compliance with Law; Governmental Permits.
-----------------------------------------
5.8.1 Except as disclosed on Schedule 5.8.1, the ownership,
--------------
leasing and use of the Assets as they are currently owned, leased and used and
the conduct of the Business as it is currently conducted do not violate any
Legal Requirement, which
19
<PAGE>
violation, individually or in the aggregate, would have a Material Adverse
Effect, and Seller has received no notice claiming such a violation.
5.8.2 Schedule 1.1.29 and 1.1.44 list all Governmental Permits
------------- ------
that are held by Seller with respect to the use or operation of the Assets or
the conduct of the Business, complete and correct copies of which have been
delivered to Purchaser. To Seller's Knowledge, no other consents,
certificates, approvals or other findings of any Governmental Authority are
necessary to conduct the Business as it is currently being conducted or to use
the Assets as they currently are, or are intended to be, used. The
Governmental Permits are currently in full force and effect and are valid
under applicable Legal Requirements according to their terms and are all the
certificates, franchises, licenses as are necessary, taken as a whole, for the
conduct of the Business. There is no legal action, governmental proceeding or
investigation, pending or, to Seller's Knowledge, threatened, to terminate,
suspend or modify any Governmental Permit and Seller is in compliance in all
material respects with the terms and conditions of the Governmental Permits.
Without limiting the generality of the foregoing sentence, and except as
disclosed in this Agreement, the operation of the Business has been, and is,
to Seller's Knowledge, in compliance with all statutes, rules, and
regulations, whether state, local or federal.
5.9 Patents, Trademarks and Copyrights: The ownership and operation
----------------------------------
by Seller of the Business, as presently owned and operated, and the use of the
Assets as they currently are, or are intended to be, used does not infringe
upon or conflict in any respect with trademark, tradename, brand name or
copyright of any other persons and, to the Knowledge of Seller, no other
person or entity is infringing any of Seller's trademarks, tradenames or brand
names.
5.10 Contract Rights.
---------------
5.10.1 Schedule 1.1.14 attached hereto lists all Contract Rights
---------------
(except Non-Material Contracts), complete and correct copies of which (or in
the case of oral contracts, agreements or arrangements, complete and correct
summaries of which) as currently in effect, have been provided to the
Purchaser. Except as described on Schedule 1.1.14 and except for Non-Material
---------------
Contracts and agreements which have been fully performed by all parties
thereto, Seller is not a party to or bound by any agreement, contract, lease,
easement, rights-of-way agreement or commitment of any kind, oral or written,
formal or informal. Without limiting the terms of the first sentence of this
Section 5.10.1, Schedule 1.1.14 lists:
---------------
20
<PAGE>
i. any agreement or arrangement (or group of related agreements
or arrangements) for the lease of any Assets by Seller from or to a third party
or involving the grant by or to Seller of a right to occupy or use any Assets or
any other property (whether Seller is the lessor, lessee, sublessor or
sublessee);
ii. any agreement or arrangement concerning a partnership
or joint venture between or among Seller relating to the Business or the Assets
and any other Person or Persons;
iii. any agreement or arrangement (or group of related
agreements or arrangements) under which Seller has created, incurred, assumed or
guaranteed indebtedness relating to the Business or the Assets or under which
any Encumbrance has been imposed (or may be imposed) on any Asset;
iv. any agreement or arrangement concerning confidentiality or
restricting in any way the right of Seller or its successors or assigns to
conduct the Business or any other business;
v. any agreement or arrangement under which the consequences
of a default or termination by any party might reasonably be expected to have
a Material Adverse Effect (including Non-Material Contracts);
vi. any agreement or arrangement not made in the ordinary
course of the Business;
vii. any currently effective power-of-attorney or similar
instrument granted by Seller relating to the Business or the Assets;
viii. any easement or rights-of-way agreement;
ix. any distribution arrangement;
x. any agreement for the future purchase or delivery of goods
or rendition of services;
xi. any agreement or arrangement relating to Intangibles;
xii. any consulting agreement;
xiii. any franchise agreement;
xiv. any line extension agreement or other agreement relating to
present or future provision of water services or capacity in the water system;
21
<PAGE>
xv. any bond, guaranty, warranty or repair agreements now
existing and outstanding concerning the Assets or any part thereof, including,
without limitation, any bond, guaranty, warranty or repair agreement (including
any fidelity bonds) relating to construction, use, maintenance occupancy, or
operation of the Improvements or the Equipment, subject to any limitation
contained in each such bond, guaranty, warranty or repair agreement;
xvi. any unrecorded agreements, including any deposits made
thereunder; and
xv. any other agreement or arrangement that is related to the
conduct of the Business as it is currently conducted or use of the Assets as
they are currently, or intended to be, used.
5.10.2 Except as described on Schedule 1.1.14, each Contract Right
---------------
(other than Non-Material Contracts related to defaults by customers in the
payment of their obligations to Seller) is in full force and effect. Seller is
not in breach or default in the performance, observance or fulfillment of any
obligation, covenant or condition contained in any Contract Rights which would
have a Material Adverse Effect. Seller has not taken any action or failed to
take any action which, with or without the giving of notice or lapse of time, or
both, would constitute a breach or default or permit termination, modification
or acceleration under any Contract Rights. To Seller's Knowledge and except
with respect to Non-Material Contracts, no other Person is in breach or default
in the performance, observance or fulfillment of any material obligation,
covenant or condition contained in any Contract Rights, or has taken any action
or failed to take any action which, with or without the giving of notice or
lapse of time or both, would constitute a breach or default or permit
termination, modification or acceleration under any Contract Rights.
5.11 Financial Statements. Seller has delivered to Purchaser correct
--------------------
and complete copies of SDCW's (a) unaudited balance sheets and related
statements of income, as of December 31, 1991 and December 31, 1992, and for the
years then ended, and (b) an unaudited balance sheet as of September 30, 1993,
and the related unaudited statement of income for the nine-month period then
ended (collectively, the "Financial Statements"). The Financial Statements were
prepared in accordance with GAAP applied on a consistent basis throughout the
periods covered thereby and fairly present Seller's financial position with
respect to the Business or Assets, results of operations and changes in
financial position as of the dates and for the periods indicated with respect to
the Business or Assets, subject only to normal year-end adjustments (none of
which will be material in amount) and the
22
<PAGE>
omission of footnotes. Except as disclosed by, or reserved against in, its most
recent balance sheet included in the Financial Statements, Seller did not have
as of the date of such balance sheet any liability or obligation, whether
accrued, absolute, fixed or contingent (including liabilities for taxes or
unusual forward or long-term commitments), which was or reasonably could be
expected to be material to the Business, or to results of operations or
financial condition of Seller with respect to the Business, nor does any aspect
of the Business form a basis for any claim by a third party which, if asserted,
could result in a liability not disclosed by or reserved against in such balance
sheet. For purposes of the preceding sentence, the terms "liabilities" and
"obligations" refer only to those liabilities and obligations which are specific
credits or deductions against the Purchase Price pursuant to Schedule 3.1 and
------------
which will become Assumed Obligations at Closing. Since the date of the most
recent balance sheet included in the Financial Statements (i) the Business has
been operated only in the ordinary course consistent with past practices, (ii)
Seller has not sold or disposed of any assets related to the Business with an
aggregate value, as recorded on Seller's books, of more than $25,000, other than
in the ordinary course of business, (iii) Seller has not declared or paid any
dividend on, or made any other distribution from the Assets in respect of any
shares of common stock, (iv) Seller has not sustained or incurred any loss,
damage or destruction (whether or not insured against) which has interfered with
or affected, or may interfere with or affect, the operation of the Business, the
condition of the Assets or the performance of Seller's obligations under this
Agreement, (v) there has been no material adverse change in or with respect to
the financial condition, operations, business, prospects, rights, properties,
assets or liabilities with respect to the Business or the Assets or the
performance of Seller's obligations under this Agreement, (vi) Seller has not
mortgaged or pledged or subjected to any Encumbrance, other than Permitted
Encumbrances, any of the Assets, (vii) Seller has not canceled any debts or
claims owed to it related to the Business or the Assets, (viii) except as
permitted or required by GAAP, Seller has not changed any accounting methods or
practices (including, without limitation, any change in depreciation or
amortization policies or rates), (ix) Seller has not made or authorized any
capital expenditure in excess of $5,900,000 related to the Assets or Business,
(x) Seller has not waived any right material to the operation of the Business or
Assets, or any other transaction, agreement or event outside the ordinary course
of Business, (xi) Seller has not agreed to do any of the items set forth in
clauses (ii) through (x), or (xii) no event has occurred which has had, or
reasonably could be expected to result in, a Material Adverse Effect to the
Assets, the Business or the performance of Seller's obligations under this
Agreement. All of the accounts, notes and other receivables related to the
Assets or Business which are reflected in the Financial Statements were acquired
by Seller
23
<PAGE>
in the ordinary course of business. To Seller's Knowledge, except to the extent
of the reserve provided for in the Financial Statements, all of the accounts,
notes and other receivables related to the Business which are reflected in the
Financial Statements should, if diligently pursued, be collected in full in the
ordinary course of business based upon past business practices of Seller.
5.12 Legal Proceedings. Except as set forth on Schedule 5.12, there
----------------- -------------
is no unsatisfied judgment or order outstanding, or any action, suit or
proceeding against Seller, the Assets, or the Business, or investigation of
Seller, the Assets or the Business by or before any Governmental Authority or
any arbitration pending, or to the Knowledge of Seller, threatened, involving or
affecting all or any part of the Business or the Assets or the ability of Seller
to perform its obligations under this Agreement.
5.13 Tax Returns: Other Reports. Except as described on Schedule
--------------------------- --------
5.13, (i) Seller has duly and timely filed in proper form all income, franchise,
- ----
sales, use, property, excise, payroll and other tax returns and all other
reports (whether or not relating to taxes) required to be filed with the
appropriate Governmental Authority; (ii) all taxes, fees and assessments of any
nature due and payable by Seller to any Governmental Authority have been paid,
and (iii) there are no outstanding agreements or waivers extending the statutory
period of limitations applicable to any federal, state, local or foreign tax to
which Seller or any Asset is or may be subject and except as disclosed on
Schedule 5.13, there are no tax audits or investigations pending by or before
- -------------
any Governmental Authority with respect to any such tax. Seller has delivered
to Purchaser a copy of the property tax bills with respect to the Assets,
including the Real Property, for the most recent three tax years. There are no
proceedings to which Seller is a party presently pending for the reduction or
increase of the assessed value of any of the Assets, including Real Property,
and to the Knowledge of Seller there is no such proceeding pending to which
Seller is not a party.
5.14 Employment Matters.
------------------
5.14.1 Seller has not failed to comply in all material respects
with all Legal Requirements relating to the employment of labor, including any
such Legal Requirements arising with respect to the consummation of the
Transactions by Seller, ERISA, continuation coverage requirements with respect
to group health plans and requirements relating to wages, hours, collective
bargaining, unemployment compensation, worker's compensation, equal employment
opportunity, age and disability discrimination, immigration control and the
payment and withholding of taxes, which failure to comply would result in a
Material Adverse Effect to the
24
<PAGE>
Business or any Assets in the hands of Purchaser or the ability of Seller to
perform its obligations under this Agreement.
5.14.2 There are no labor controversies pending or, to the
Knowledge of Seller, threatened by any employees of Seller which would result
in a Material Adverse Effect to the Business or any Assets in the hands of
Purchaser or the ability of Seller to perform its obligations under this
Agreement.
5.14.3 The consummation of the Transactions, including, but not
limited to, the transfer of the Assets, shall not violate any contract with
any labor organization or with or for the benefit of any employee of Seller,
and shall not violate any Legal Requirement related to employment obligations
of Seller, including, without limitation, the Worker Adjustment and Retraining
Notification Act.
5.14.4 Seller has not contributed to, and has not been required
to contribute to, any "multi-employer plan" (as defined in Section 4001(a)(3)
of ERISA). Seller does not, with respect to System Employees, have any
liability (including withdrawal liability) under any multi-employer plan.
Seller has not (i) incurred in connection with the termination of any Company
Plan (and does not have any knowledge of any event or circumstance that would
be reasonably likely to cause) any liability to the Pension Benefit Guaranty
Corporation ("PBGC"), (ii) terminated any Company Plan in a manner which might
result in the imposition of an Encumbrance on any of the Assets, (iii)
incurred any "accumulated funding deficiency" (as defined in Section 302 of
ERISA) with respect to any Company Plan, whether or not waived, or (iv) been
the subject of a "reportable event" (as defined in Section 4043 of ERISA) with
respect to any Company Plan, as to which a report or notice would be required
to be filed with the PBGC. To the Knowledge of Seller, each Company Plan has
been administered in material compliance with the terms of such Company Plan
and applicable Legal Requirements. To the Knowledge of Seller, here are no
facts relating to any Company Plan that (i) have resulted or could result in a
prohibited transaction under Section 4975 of the Code or Section 406 of ERISA
or have resulted or could result in the imposition of an excise tax pursuant
to Section 4975 of the Code or a civil penalty pursuant to Section 502 of the
Code, (ii) have resulted or could result in a material breach of fiduciary
duty or violation of Part 4 of Title I of ERISA, or (iii) have resulted or
could result in a material liability (whether or not asserted as of the date
hereof) of Seller or any Affiliate of Seller pursuant to Title IV of ERISA.
There is no litigation, arbitration, governmental or other proceeding,
investigation or claim pending, or to the Knowledge of Seller, threatened,
with respect to any Company Plan or with respect to any fiduciary,
administrator or sponsor (in its capacity as such) of any Company Plan (other
than routine claims for benefits). To the Knowledge of
25
<PAGE>
Seller, Seller has no liability under any Company Plan or "welfare plan" as
defined by Section 3(1) of ERISA to any "leased employee" as defined in Section
414(n) of the Code. To the Knowledge of Seller, except as described in Schedule
--------
1.1.13, full payment or accrual as of the Closing Date will have been made of
- ------
all amounts which Seller is required, under the terms of any fully insured
employee plans which are "welfare plans" as defined in Section 3(1) of ERISA, to
have paid as contributions or premiums with respect to such Employee Plans as of
the Closing Date. Except as listed on Schedule 5.14.4, there is no Person who
---------------
is part of the same controlled group as, or is under common control with, Seller
within the meaning of Section 414(b) or (e) of the Code.
5.15 Finders and Brokers. Seller has not employed any financial
-------------------
advisor, broker or finder or incurred any liability for any financial advisory,
brokerage, finder's or similar fee or commission in connection with the
Transactions for which Purchaser could be liable.
5.16 Water Transmission and Distribution Facilities and Water Rights.
---------------------------------------------------------------
5.16.1 All of the Water Transmission and Distribution Facilities
(except fire hydrant threads) were designed, installed and maintained in
accordance with generally accepted design, construction and installation
standards and practices applicable at the time; and, except as disclosed in the
reports described in Schedule 5.16.1, Seller has no Knowledge that any property,
---------------
plant, pipeline, system or any other property to be conveyed hereunder requires
replacement or repair, except as required in the course of routine maintenance
and repair activity. A list of all of the most recent inspections of Seller's
Water Transmission and Distribution Facilities are set forth on Schedule 5.16.1
---------------
and copies of such inspections have been delivered to Purchaser. Seller has
delivered full and complete copies of all reports or copies thereof in Seller's
possession, which are necessary for operation of the Business and Water
Transmission and Distribution Facilities, including, but not limited to, the
reports listed on Schedule 5.16.1.
---------------
5.16.2 The Water Rights described in Schedule 1.1.75, the
---------------
contractual rights to water under the San Juan-Chama Contract and the related
contracts described in Section 5.16.3(A)(6), and the Water Transmission and
Distribution Facilities represent all the water rights and water diversion,
storage and conveyance facilities held by Seller and used in connection with
the Business, except for the Hagerman Rights and Pino and La Cienega Ditch
Claims.
26
<PAGE>
5.16.3
(A) Subject to the supervision, administration and regulation
of the appropriation and beneficial use of water pursuant to the Water Rights
by the New Mexico State Engineer Office ("SEO") under the constitution and
laws of the State of New Mexico, to New Mexico law and to the further
conditions, limitations and qualifications stated below:
(1) Seller is the sole owner or lessee of record in the Office
of the SEO of the Water Rights set forth in Schedule 1.1.75;
---------------
(2) The "Buckman Rights" (so identified on Schedule 1.1.75),
---------------
governed by Permit No. RG-20516, et al., provide Seller with a valid legal right
-- --
to divert 10,000 acre feet of water per year, subject to the operation of New
Mexico law and conditions of approval set forth in Permit No. RG-20516, and in
particular to the condition of approval requiring offset as more specifically
described in Schedule 5.16.3-A;
-----------------
(3) The "Valley Rights," (so identified on Schedule 1.1.75),
---------------
provide Seller with offset rights pursuant to the condition of the Buckman
permit set out in Schedule 5.16.3-A in the amount of 261.78 acre feet per year
-----------------
(diversion), subject to the operation of New Mexico law and the terms and
conditions of the permits or assignments creating or assigning the Valley
Rights;
(4) The "Pojoaque/Tesuque Rights" (so identified on Schedule
--------
1.1.75), provide Seller with offset rights pursuant to the condition of the
- ------
Buckman permit set out in Schedule 5.16.3-A in the amount of 151.39 acre feet
-----------------
per year (diversion), subject to the operation of New Mexico law and the terms
and conditions of the leases, permits, declarations, decrees or assignments
creating, recognizing or assigning the Pojoaque/Tesuque Rights (which leases,
permits, declarations, leases or assignments are, to the extent of Seller's
Knowledge, listed on Schedule 5.16.3-C), to the SEO's acceptance of the full 3.0
-----------------
acre feet of Subfile 4.47, and to the adjudication of these rights in the case
of State of New Mexico ex rel. State Engineer v. Aamodt, (D.N.M. No. 6639-M
----------------------------------------------------
Civil) (herein "Aamodt");
------
(5) The "Santa Fe River and Santa Fe Basin Rights," (so
identified on Schedule 1.1.75), provide Seller with a valid legal right to
divert 4966.94 acre feet of groundwater and 5040.54 acre feet of surface water
per year, subject to the operation of New Mexico law and the terms and
conditions of the permits, decrees, licenses, or assignments creating or
assigning said rights, to the adjudication of the rights in the case of Anaya v.
--------
Public Service Co. of New Mexico (First Judicial District Cause No. 43347)
- --------------------------------
(herein "Anaya"), and to the outcome of permit applications
-----
27
<PAGE>
to be made to the SEO related to the transfer of rights of the Two Mile Dam and
Reservoir.
(6) Seller has contractual rights to San Juan-Chama water (which
do not appear on Schedule 1.1.75 because they are contractual rights to the use
---------------
of water), subject to the operation of New Mexico law, as follows:
(a) Seller, Buyer, the County of Santa Fe and the United States,
Department of Interior, Bureau of Reclamation have entered into a contract,
dated November 23, 1976 (amended August 3, 1979), for the combined purchase of
5605 acre feet per year of San Juan-Chama water (of which Seller has rights to
5,230 acre feet per year) through December 31, 2016 (the "San Juan-Chama
Contract"). Seller warrants and represents that the San Juan-Chama Contract has
been duly executed by it, and that the rights and obligations inure to, and are
binding on, Seller, and, to Seller's Knowledge, the United States Bureau of
Reclamation and Santa Fe County.
(b) Seller and Santa Fe County have entered into a contract,
dated December 14, 1993, for the management of San Juan-Chama water ("Management
Contract"). Seller warrants and represents that the Management Contract has
been duly executed by it, and that the rights and obligations inure to, and are
binding on, Seller, and to Seller's Knowledge, Santa Fe County.
(c) Seller and the City of Albuquerque have entered into a
letter agreement, dated December 14, 1993, for the storage of San Juan-Chama
water in Abiquiu Reservoir ("Abiquiu Storage Contract"). Seller warrants and
represents that the Abiquiu Storage Contract has been duly executed by it, and
that the rights and obligations inure to, and are binding on, Seller, and, to
Seller's Knowledge, the City of Albuquerque.
(d) Seller and the Middle Rio Grande Conservancy District have
entered into a contract, dated April 26, 1988, for the storage of San Juan-Chama
water in El Vado Reservoir ("El Vado Storage Contract"). Seller warrants and
represents that the El Vado Storage Contract has been duly executed by it, and
that the rights and obligations inure to, and are binding on, Seller, and, to
Seller's Knowledge, the Middle Rio Grande Conservancy District.
(e) Seller and the Middle Rio Grande Conservancy District
("MRGCD") have entered into an agreement, dated April 27, 1993, concerning
management of the storage of San Juan-Chama water in El Vado Reservoir ("El Vado
Management Agreement"). Seller warrants and represents that the El Vado
Management Agreement has been duly executed by it, and that the rights and
obligations inure to, and are binding on, Seller, and, to Seller's knowledge,
the MRGCD.
28
<PAGE>
(7) Each of the Water Rights as set forth in Schedule 1.1.75,
---------------
except for the dedications as set forth in Section 5.16.6, has been put to
beneficial use, and has been diverted in the amounts as set forth in Schedule
--------
5.16.3-B.
- --------
(8) To the Knowledge of Seller, (i) assuming that potential
claims regarding diversions under portions of SEO Declaration 01278, which
Seller has disclosed to Purchaser, are resolved favorably to Seller, there have
been no unauthorized changes in points of diversion for any of the Water Rights
described on Schedule 1.1.75; (ii) there has been no unauthorized storage of
---------------
water for any of the Water Rights described on Schedule 1.1.75; (iii) there
---------------
have been no unauthorized changes in places of use for any of the Water Rights
described on Schedule 1.1.75, which are exercised in accordance with applicable
---------------
declarations, permits, licenses, decrees and policies accepted by the State
Engineer; and (iv) there have been no unauthorized changes in purpose of use
for any of the Water Rights described on Schedule 1.1.75.
---------------
(B) To the Knowledge of Seller, water is available and can
reasonably be expected to continue to be available for appropriation and
beneficial use pursuant to the Water Rights described on Schedule 1.1.75 and
---------------
the San Juan-Chama Contract in sufficient quantities to satisfy the current
annualized customer and reserve margin requirements of the Business. For
purposes of Seller's representation in the preceding sentence, Seller and
Purchaser stipulate and agree that the current annualized customer and reserve
margin requirements of the Business are 13,969.46 acre feet per year (water
produced during 1993 plus 20 percent reserve margin), and Seller, with
Purchaser's consent, has assumed that: (i) hydrologic conditions will not
differ from those actually observed in the period since January 1, 1969 (the
"Historic Period"); (ii) physical plant, equipment and facilities will be
maintained which are adequate to appropriate the available quantity of water,
including facilities able to store and divert water pursuant to Declaration
01278 from an alternative source to Two Mile Reservoir, and facilities
adequate to remediate and/or blend contaminated water, where it is
encountered; (iii) no natural or man-caused events, including contamination of
the water supply, will occur which limit or preclude the appropriation or
storage of water pursuant to the Water Rights and the San Juan-Chama Contract
to the same extent and in the same manner as water could have been
appropriated and stored during the Historic Period; (iv) the rights to
appropriate and use water pursuant to the Water Rights, as described on
Schedule 1.1.75, and the San Juan-Chama Contract will not be restricted,
- ---------------
limited or abridged by the act of the NMSE, any court or any other
Governmental Authority; and (v) the pumping of the Buckman Well system will be
legally permitted and rights offsetting the effects of Buckman pumping,
sufficient to meet the requirements of the Buckman permit as administered by
the State Engineer, can and will be acquired.
29
<PAGE>
5.16.4 To the Knowledge of Seller, all conditions of approval
which are set forth in the permits, decrees, licenses, and dedications issued
by the State Engineer for the Water Rights identified on Schedule 1.1.75, and
---------------
which are necessary to maintain the Water Rights subject thereto in good
standing have been complied with.
5.16.5 To the Knowledge of Seller, the adjudication courts in
Aamodt and Anaya are courts of competent jurisdiction, and Seller has not
- ------ -----
contested the jurisdiction of either court.
5.16.6 The surface Water Rights listed under the heading "Rio
Tesuque and Rio Pojoaque Offset Rights" on Schedule 1.1.75 have, except as
---------------
expressly noted on Schedule 1.1.75, been dedicated in accordance with the
---------------
applicable procedures of the New Mexico State Engineer.
5.16.7 There are no actions, suits, claims, investigations or
proceedings pending before any Governmental Authority to which Seller is a
party, or, to Seller's Knowledge, threatened in writing by any Governmental
Authority or private party, against or affecting the Water Rights described on
Schedule 1.1.75 or the physical or legal yield of such Water Rights, or the
- ----------------
Water Transmission and Distribution Facilities, except as described on Schedule
--------
5.12.
- ----
5.16.8 To the Knowledge of Seller, neither the United States
Forest Service, nor any other federal or state agency, has taken any action or
issued any notice of any threatened or planned action which would require the
maintenance of minimum stream flow in the Santa Fe River and thereby prevent
the diversion and appropriation of water by the Water Transmission and
Distribution Facilities at times when the Water Rights described on Schedule
--------
1.1.75 would otherwise have priority.
- ------
5.16.9 To the Knowledge of Seller, neither the United States
Bureau of Reclamation nor any other federal or state agency, including, but
not limited to, the United States Fish and Wildlife Service, has taken any
action or given written notice of any proposed action that would reduce the
allocation of water to Seller as established by the San Juan-Chama Contract.
5.16.10 To the Knowledge of Seller, no portion of the Water Rights
described on Schedule 1.1.75 has been abandoned or forfeited, or is subject to a
----------------
claim of adverse possession, and Seller has, on a timely basis, and to the
extent legally required, filed all necessary extensions of time within which to
put water to beneficial use with the New Mexico State Engineer, and such
extensions of time have been approved by the New Mexico State Engineer, except
for (i) Seller's application for extension of time in SEO File No. RG-3767,
which was timely filed and which is
30
<PAGE>
currently awaiting action by the State Engineer, and (ii) such additional
applications as Seller may be required to make after the date of this Agreement.
5.16.11 Except as set forth on Schedule 5.16.11, Seller has not
----------------
received actual notice, in writing, of any claims or actions related to the
exercise of rights pursuant to any interstate compact or international treaty
that may diminish the amount of water available for diversion or use pursuant to
the Water Rights described on Schedule 1.1.75.
---------------
5.16.12 Except as set forth on Schedule 9.9, to the Knowledge of
------------
Seller, no action has been taken or has been threatened or proposed in writing
by the State Engineer or any other Governmental Authority which would result in
the restriction of storage of the Water Rights described on Schedule 1.1.75, to
---------------
the extent that such Water Rights are authorized for storage by the State
Engineer.
5.16.13 Except for Permitted Encumbrances, the terms and
conditions of the permits, decrees, leases, licenses, assignments,
declarations, or dedications creating, dedicating or assigning the Water
Rights described on Schedule 1.1.75, and encumbrances arising from or related
---------------
to the dedication of the Water Rights to the service of the public, including,
but not limited to, the conditions and restrictions set forth in the 1980
Quitclaim Deed from Purchaser to Seller, there exist no liens, encumbrances,
supply agreements, transfer agreements, other contracts or agreements,
assignments, easements or leases encumbering the use of the Water Rights
described on Schedule 1.1.75 in the Business.
---------------
5.16.14 Except as set forth in Schedule 5.2, and the terms and
------------
conditions of the permits, decrees, leases, licenses, assignments, declarations
or dedications creating, dedicating or assigning the Water Rights described in
Schedule 1.1.75, there are no limitations or restrictions which affect the
- ---------------
transferability to the Purchaser of any of the Water Rights described on
Schedule 1.1.75 or the Water Transmission and Distribution Facilities.
- ---------------
5.16.15 No consent to the diversion of the Water Rights
described on Schedule 1.1.75, has been granted to any third party by Seller
---------------
or, to Seller's Knowledge, any of Seller's predecessors, except for the lease
of water to Las Campanas Ltd. Partnership pursuant to a lease dated August 5,
1987.
5.16.16 Schedule 5.16.16 lists all significant reports, studies,
----------------
PUC orders, State Engineer orders, or Subfile orders in the possession of
Seller relating to the legal or physical availability of water subject to the
Water Rights, or the physical condition of the Water Transmission and
Distribution Facilities.
31
<PAGE>
5.17 Related Party Transactions. To the Knowledge of Seller, no
--------------------------
officer, director, controlling shareholder or Affiliate of Seller (i) owns,
directly or indirectly, or has any interest in, any right, property or asset
which is utilized or required by Seller in connection with owning or operating
the Business, or (ii) has any other business relationship (as supplier,
creditor, debtor, customer or otherwise) with Seller, other than their
relationship as an officer, director, shareholder or Affiliate.
5.18 Insurance. Schedule 5.18 sets forth and describes all
--------- -------------
policies of insurance which are owned or held by Seller with respect to the
Business, and all of such policies of insurance are in good standing, valid
and subsisting, and in full force and effect in accordance with their terms.
5.19 Materials and Supplies. All Material and Supplies, including
----------------------
those reflected on the Financial Statements, are valued at their original cost.
5.20 Disclosure. No representation or warranty by Seller in this
----------
Agreement, and no certificate or schedule furnished or to be furnished to
Purchaser pursuant hereto, or in connection with the Closing, contains or will
contain any untrue statement of material fact necessary to make the statements
or facts contained herein not misleading. To Seller's Knowledge, Seller has not
failed to disclose, or to make available to Purchaser, any material information
in Seller's possession regarding material defects in the condition of the Assets
taken as a whole.
5.21 Regarding Purchaser's Representations and Warranties. To
----------------------------------------------------
Seller's knowledge (based only on such investigations and inquiries as have
actually been made by or on behalf of Seller for purposes of this Agreement and
the Transactions), no fact, event, circumstance or action exists, has occurred
or is occurring which would cause any representation or warranty by Purchaser
under this Agreement to be untrue or incomplete in any material respect.
Section 6. Purchaser's Representations and Warranties.
- --------- ------------------------------------------
Purchaser represents and warrants to Seller, as of the date of this
Agreement and as of the Closing, as follows:
6.1 Corporate Status. Purchaser is a municipal corporation duly
----------------
organized, validly existing and in good standing under the laws of the State of
New Mexico, with the full power and authority to own its property and assets and
to conduct its business as now, or proposed to be, conducted.
32
<PAGE>
6.2 No Breach or Violation. Subject to obtaining the consents,
----------------------
authorizations and approvals described on Schedule 6.2 ("Purchaser's Required
------------
Consents"), the execution, delivery and performance of this Agreement by
Purchaser and the consummation of the Transactions will not: (a) violate the
Municipal Charter or Code of Purchaser; (b) violate any Legal Requirement; (c)
require any consent, approval or authorization of, or any filing with or notice
to, any Person; or (d) (i) violate, conflict with or constitute a breach of or
default under (without regard to requirements of notice, passage of time or
elections of any Person), (ii) permit or result in the termination, suspension
or modification of, (iii) result in the acceleration of (or give any Person the
right to accelerate) the performance of Purchaser under, or (iv) result in the
creation or imposition of any Encumbrance under, any instrument or other
agreement to which Purchaser is a party or by which Purchaser or any of its
assets is bound, except such violations, conflicts, breaches, defaults,
terminations, suspensions, modifications and accelerations as would not, and
such consents, approvals, authorizations, filings and notices the failure of
which to be obtained, made or given would not, individually or in the aggregate,
have a material adverse effect on the ability of Purchaser to perform its
obligations under this Agreement or on the validity, binding effect or
enforceability of this Agreement.
6.3 Purchaser Authorizations. Except for Purchaser's Required
------------------------
Consents, the performance of this Agreement and all transactions contemplated
herein and therein have been duly authorized and approved by the Santa Fe City
Council and all other requisite municipal agencies.
6.4 Enforceability. This Agreement constitutes a legal, valid and
--------------
binding obligation of the Purchaser, enforceable in accordance with its terms,
except insofar as enforceability may be affected by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws now or hereafter in
effect affecting creditors' rights generally or by general principles of equity.
6.5 Litigation. There is no litigation or administrative proceeding
----------
pending or, to the Knowledge of Purchaser, threatened against Purchaser which
will result in Purchaser's inability to perform its obligations pursuant to this
Agreement.
6.6 Finders and Brokers. Except as expressly set forth in this
-------------------
Agreement, Purchaser has not employed any financial advisor, broker or finder or
incurred any liability for any financial advisory, brokerage, finder's or
similar fee or commission in connection with the Transactions for which Seller
could be liable.
33
<PAGE>
6.7 Regarding Seller's Representations and Warranties. To
-------------------------------------------------
Purchaser's knowledge (based only on such investigations and inquiries as have
actually been made by or on behalf of Purchaser for purposes of this Agreement
and the Transactions), no fact, event, circumstance or action exists, has
occurred or is occurring which would cause any representation or warranty by
Seller under this Agreement to be untrue or incomplete in any material respect.
Section 7. Seller's Covenants.
- --------- ------------------
7.1 Continuity and Maintenance of Operations. Except as Purchaser
----------------------------------------
may otherwise agree, until the Closing:
7.1.1 Seller shall continue to operate the Business in the
ordinary course consistent with past practices (including completing line
extensions, placing pipe and taps in new developments) and will use commercially
reasonable efforts to keep available the services of employees employed in
connection with the Business. Without limiting the generality of the foregoing,
as to the Business, Seller will maintain the Assets in good condition and repair
and replace any part thereof that is worn out, lost, destroyed or stolen, will
maintain adequate inventories of spare Equipment consistent with past practice,
will maintain insurance as in effect on the date of this Agreement, will pay its
bills and obligations as the same become due, and will keep all its business
books, records and files in the ordinary course of business in accordance with
its past practices. Except as contemplated by this Agreement, Seller shall not
incur or contract for capital expenditures relating to the Water Transmission
Facilities in excess of $5,900,000 without the prior written approval of
Purchaser, which approval shall not be unreasonably withheld or delayed.
Capital Expenditures shall be accounted for in the Purchase Price pursuant to
Schedule 3.1.
- ------------
7.1.2 Seller shall not, without the prior written consent of
Purchaser, which Purchaser shall not unreasonably withhold or delay: (i) change
the rate charged for services; (ii) sell, transfer or assign any of the Assets
(other than in the ordinary course of business consistent with past practice and
with a value of less than $25,000 in the aggregate on Seller's books), or create
or permit the creation of any Encumbrance on any Asset other than Permitted
Encumbrances; (iii) permit the amendment or cancellation of any of the
Governmental Permits or the Contracts Rights (other than Non-Material Contracts
and those constituting Excluded Assets) which affects or is applicable to any
Asset or the Business, or would impair the ability of Seller to perform its
obligations under this Agreement; (iv) enter into any contract or commitment or
incur any indebtedness or other liability or obligation relating to any Asset or
the Business if such contract, commitment, liability or
34
<PAGE>
obligation is of the kind described in Section 5.10 hereof (other than in the
ordinary course of business consistent with past practice and imposing an
obligation on Seller of less than $25,000); (v) cancel any debts owing to
Seller; or (vi) take or omit to take any action that would cause Seller to be in
breach of any of its representations or warranties in this Agreement.
7.1.3 Seller shall deliver to Purchaser correct and complete
copies of monthly and quarterly financial statements and operating reports for
the Business and any reports with respect to the operations of the Business
for any period subsequent to the latest period covered by the Financial
Statements that are prepared by or for Seller at any time before the Closing.
All financial statements so delivered will be prepared in accordance with GAAP
and on a basis consistent with the Financial Statements.
7.1.4 Seller shall keep the insurance coverage at or above
the level required under the PNM Indenture in full force and effect through the
Closing Date. Seller shall maintain in full force and effect policies of
insurance or programs of self-insurance of the same type, character and coverage
as the policies currently carried with respect to the business, operations and
assets of Seller. Such insurance coverage is and will be in an amount customary
in the industry to cover, subject to applicable self insurance and deductibles,
liabilities for personal injury or property damage occurring prior to the
Closing Date. All insurance payments payable on account of loss, damage or
claims relating to the Assets or Business received by Seller after the Closing
Date shall inure to the benefit of and be paid to Purchaser.
7.1.5 Seller shall use commercially reasonable efforts to
preserve and protect the goodwill, business, rights, properties and assets of
the Business and its relationship with the customers of the Business as a whole.
7.1.6 Seller shall give Purchaser prompt notice of any and
all Contract Rights (except Non-Material Contracts) created, and material
adverse changes which occur, between the date hereof and the Closing Date with
respect to the financial condition, operations, business, prospects, rights,
properties, or assets or liabilities of the Business or Assets or Seller's
relationship with the customers of the Business as a whole.
7.1.7 Seller shall not merge or consolidate with any other
person or entity if the same shall adversely affect the Assets or Business or
alter or impair the performance of the obligations of Seller hereunder,
including, but not limited to, any obligation of indemnity hereunder if the
resulting person or entity does not have at least the same financial capability
as Seller.
35
<PAGE>
7.1.8 Seller shall not declare, set aside or pay any dividends
or make any other distributions in respect of any of its shares (except stock
dividends or distributions consistent with past practices) in properties or
assets of Seller other than cash;
7.1.9 Seller shall not violate any Legal Requirement or
Governmental Permit with respect to the operation of the Business which would
cause a Material Adverse Effect;
7.1.10 Seller shall proceed with reasonable diligence and use
reasonable efforts to obtain Seller's Required Consents.
7.1.11. Seller shall not cause or permit any charge or lien
against the Assets or Business arising out of its relationship with its
employees.
7.2 Survey.
------
7.2.1 Within 90 days after the execution of this Agreement,
Seller shall deliver to Purchaser, at Seller's sole cost and expense, a current
land title boundary and improvement survey of each parcel of Land constituting
the Real Property/Urban, with permanent corner pins in place, certified to date,
to be prepared from an on-the-ground inspection by a land surveyor licensed in
the State of New Mexico, showing thereon the correct legal metes and bounds
description of each parcel of Land constituting the Real Property/Urban, its
proper dimensions, and any and all Improvements, ditches, waterways, reservoirs,
officially designated flood plains, fence locations, easements, rights-of-way
and roadways on and/or adjacent to the Real Property/Urban, together with
appropriate recording identification information for such title matters of
record, and certifying that no improvements situate upon, under or adjacent to
the Real Property/Urban are the subject of encroachments, overlaps or overhangs
except as shown on the survey. Each survey shall contain a certificate from the
surveyor to Seller, Purchaser, the Title Company and any lender(s) designated by
Purchaser before delivery of the survey that the survey was made on the ground,
that there are no visible discrepancies, conflicts, encroachments, overlapping
of improvements, fences, easements, roads or rights-of way, except as are shown
on the survey, and that the survey is a true, correct and accurate
representation of the applicable parcel of the Real Property/Urban. Each survey
shall be in a form acceptable to the Title Company for the deletion of the
standard survey exceptions relating to boundaries, easements not shown in the
public records and parties in possession. Purchaser shall have until the
expiration of fifteen (15) days after receipt of the last of the surveys to be
provided Purchaser hereunder to examine each such survey delivered to it as
provided herein. If Purchaser has any
36
<PAGE>
objections to any matter(s) disclosed on any one or more of the surveys,
Purchaser shall notify Seller of such objections prior to expiration of such
fifteen (15) day period, and Seller shall have fifteen (15) days thereafter
within which to correct such matter(s) objected to. Seller shall have no
obligation to correct any matter(s) to which Purchaser objects. If Seller does
not so correct such matter(s) or agree to correct such matter(s) within such
fifteen (15) day period, Purchaser, at its sole option, may elect either (i) to
terminate this Agreement, in which event this Agreement shall be of no further
force or effect except as provided in Section 12.2, or (ii) to waive the
objections and to proceed to Closing in accordance with the remainder of this
Agreement. Purchaser's election shall be made within five (5) days after
Purchaser's receipt of written notice from Seller that any specified
objectionable matter(s) will not be corrected, and Purchaser's failure to
deliver notice of its election shall be deemed a waiver of such objectionable
matter(s). Matters disclosed by such surveys to which Purchaser does not object
or to which Purchaser waives objection shall be Permitted Encumbrances.
7.2.2 Seller shall not be required to furnish current
surveys for the parcels of Land constituting the Real Property/Watershed, as set
forth in Schedule 1.1.38A-2, and the Major Easements, as set forth on Schedule
------------------ --------
1.1.38B-1. Seller will provide to Purchaser within ten (10) days after the
- ---------
execution of this Agreement all surveys, plats and descriptions of the Real
Property/Watershed and the Major Easements which Seller has under its possession
or control. Seller shall cooperate with Purchaser, from the execution of this
Agreement through the expiration of Purchaser's period to review the surveys to
be provided pursuant to Section 7.2.1, in Purchaser's investigation and
confirmation of the boundaries of the parcels constituting the Real
Property/Watershed and the Major Easements. Purchaser shall have until the
expiration of fifteen (15) days after receipt of the last of the surveys to be
provided Purchaser pursuant to Section 7.2.1 to complete such investigation and
confirmation. If Purchaser has any objections to any matter(s) disclosed in
connection with such investigation and confirmation, Purchaser shall notify
Seller of such objections prior to expiration of such fifteen (15) day period,
and Seller shall have fifteen (15) days within which to correct such matter(s)
objected to. Seller shall have no obligation to correct any matter(s) to which
Purchaser objects. If Seller does not so correct such matter(s) or agree to
correct such matter(s) within such fifteen (15) day period, Purchaser, at its
sole option, may elect either (i) to terminate this Agreement, in which event
this Agreement shall be of no further force or effect except as provided in
Section 12.2, or (ii) to waive the objections and to proceed to Closing in
accordance with the remainder of this Agreement. Purchaser's election shall be
made within five (5) days after Purchaser's receipt of written notice from
Seller that any specified objectionable matter(s) will not be corrected, and
37
<PAGE>
Purchaser's failure to deliver notice of its election shall be deemed a waiver
of such objectionable matter(s). Matters disclosed by such surveys and other
documents to which Purchaser does not object or to which Purchaser waives
objection shall be Permitted Encumbrances.
7.3 Title Insurance.
---------------
7.3 Title Insurance.
---------------
7.3.1 A current title insurance commitment covering each parcel
of Land constituting the Real Property/Urban, the Real Property/Watershed and
the Major Easements issued by the Title Company, together with clear and
legible copies of all documents referred to therein, shall be delivered to
Purchaser, at Seller's sole cost and expense (except as hereinafter provided),
as soon as it can be prepared and issued by the Title Company with reasonable
diligence. In the event the Title Company charges additional fees for
extraordinary title searches in connection with the preparation and issuance
of such commitment, and such additional fees exceed $5,000.00, the parties
shall negotiate payment between them of such excess amount. If the parties are
unable to agree upon allocation of payment of such excess amount within
fifteen (15) days after receipt from the Title Company of notice of such
additional fees, either party may elect to terminate this Agreement within
five (5) days thereafter by giving written notice of such election to the
other party. The title insurance commitment shall be in the amount of
$14,225,000, and shall commit the Title Company to issue its standard ALTA
Owner's Policy, insuring good and marketable title in fee simple to the Real
Property/Urban, Real Property/Watershed and the Major Easements in Purchaser,
and shall include commitments for reinsurance as reasonably requested by
Purchaser from another title insurance company or companies reasonably
acceptable to Purchaser with direct access agreements regarding such
reinsurance. In the event that Purchaser desires title insurance coverage in
excess of $14,225,000, Seller shall cooperate with Purchaser in obtaining the
same, but such additional insurance coverage shall be at the sole cost and
expense of Purchaser. If the title insurance commitment delivered to Purchaser
shall contain any exceptions from coverage which Purchaser deems to be
unacceptable, Purchaser shall notify Seller of such matters prior to
expiration of thirty (30) days after Purchaser's receipt of the title
insurance commitment, and Seller shall have fifteen (15) days thereafter to
correct such matters objected to. Seller shall have no obligation to correct
any matter to which Purchaser objects. If Seller does not so correct such
matters or agree to correct such matters within such fifteen (15) day period,
Purchaser, at its option, may elect either (i) to terminate this Agreement, in
which event this Agreement shall be of no further force or effect except as
provided in Section 12.2, or (ii) to waive such objections and proceed to
38
<PAGE>
Closing in accordance with this Agreement. If Purchaser does not deliver
written notice of objection to title to Seller as provided herein before the end
of the aforementioned thirty (30) day period, Purchaser shall be deemed to have
accepted all matters shown on the title commitment as Permitted Exceptions. Any
exceptions on the title insurance commitment to which Purchaser does not object
or to which Purchaser objects but waives such objection pursuant to this Section
shall be deemed to be "Permitted Exceptions." Seller shall cause to be
delivered to Purchaser at Seller's sole cost and expense at the Closing an
updated title insurance commitment, subject only to the Permitted Exceptions,
and an ALTA closing protection letter in standard form issued by the Title
Company.
7.3.2 Seller shall obtain and shall deliver to Purchaser within
ten (10) days after the Closing Date, at its sole cost and expense, a standard
ALTA Owner's Policy of Title Insurance covering the Real Property/Urban, Real
Property/Watershed and the Major Easements in the amount of $14,225,000,
effective as of the date and time of the Closing, subject only to the
Permitted Exceptions; provided, that if Purchaser has elected to purchase
additional title insurance coverage in excess of $14,225,000 pursuant to
Section 7.3.1 hereof, Seller shall cooperate with Purchaser in obtaining the
same, but such additional coverage shall be at the sole cost and expense of
Purchaser. Standard pre-printed exceptions one (1) through (4) of such Policy,
regarding parties in possession, easements not shown by the public records,
surveys and mechanic's liens, with respect only to the Real Property/Urban,
shall be deleted at Seller's sole cost and expense. For purposes of such
Policy, the parties shall hereafter agree upon a reasonable allocation of the
coverage amount among the Real Property/Urban, Real Property/Watershed, and
Major Easements.Seller shall deliver to the Title Company any instruments,
documents, payments, indemnities, releases, and agreements as the Title
Company shall require in order to issue, amend or update the title insurance
commitment and policy as herein provided.
7.4 Inspection by Purchaser.
-----------------------
7.4.1 Subject to Purchaser's covenant of confidentiality
pursuant to Section 8.2 hereof, Purchaser and Purchaser's authorized agents
and representatives may, from time to time, during regular business hours, on
reasonable prior notice to Purchaser, and without unreasonably hindering or
impeding the conduct of the Business, enter all areas of the Real Property,
including without limitation the Water Transmission and Distribution
Facilities, and have access to all Assets and all Records for the purpose of
making inspections thereof and conducting such tests and observations and
compiling such information as Purchaser may deem appropriate. No such
inspection, however, shall constitute a waiver or relinquishment on the part
of Purchaser of its right to rely upon the covenants, representations,
39
<PAGE>
warranties or agreements made by Seller under this Agreement. Purchaser shall
pay when due all fees and expenses incurred in the performance of any such
inspections, tests or observations and shall indemnify, defend, and save Seller
harmless from any loss from mechanic's liens, claims for nonpayment of such
charges or damages or injury to persons or property arising out of the acts or
omissions of the parties performing such inspections, tests, or observations.
The indemnity in this Section 7.4.1 shall survive Closing or termination of this
Agreement.
7.4.2 At any time on or prior to sixty (60) days after the
full execution of this Agreement by all parties hereto (the "Inspection
Period"), if Purchaser determines that the Real Property or other Assets are
unsuitable, for any reason in Purchaser's sole discretion, Purchaser shall have
the right to terminate this Agreement by written notice to Seller of Purchaser's
election to terminate this Agreement. Alternatively, if Purchaser elects not to
terminate this Agreement, Purchaser shall deliver to Seller a written notice
that Purchaser has waived its right of termination under this Section 7.4.2 (a
"Waiver Notice"). If Purchaser fails to give Seller a Waiver Notice during the
Inspection Period, Purchaser shall conclusively be deemed to have elected to
terminate this Agreement. In the event of termination of this Agreement under
this Section 7.4.2, this Agreement shall be of no further force and effect
except as provided in Section 12.2. Notwithstanding the foregoing, the
Inspection Period shall be extended one day for each day of delay in providing
access to all Assets, Records or Real Property in accordance with Sections 7.4.1
and 7.8.
7.5 Environmental Investigation.
---------------------------
7.5.1 At any time prior to expiration of the Inspection Period,
Purchaser shall be entitled to obtain, and Seller will use its best efforts to
assist Purchaser in obtaining, at Purchaser's expense, Phase I and Phase II
environmental reports of the kind customarily obtained by buyers of commercial
real estate transactions in the Santa Fe, New Mexico area and, such other
reports as in the reasonable judgment of Purchaser may be necessary or
appropriate to determine the existence of Hazardous Substances on or about any
Assets, including the Real Property, owned or leased by Seller or of any other
condition or circumstance affecting any such Assets, including the Real
Property, that might give rise to a liability under any Environmental Law.
Purchaser will deliver to Seller a copy of any draft or final report obtained
by it of the nature described in the foregoing sentence.
7.5.2 If, based on the environmental reports and other
investigations, Purchaser determines that (i) there exists a potential risk of
liability to Purchaser under any Environmental Law with respect to any Assets,
including the Real
40
<PAGE>
Property owned or leased by Seller, or (ii) the use of any of the Assets,
including the Real Property, may be adversely affected because of the existence
of any Hazardous Substances, then Purchaser shall promptly give notice to that
effect to Seller. Within 10 days after receipt of any such notice, Seller, by
written notice to Purchaser, may elect to provide for a solution thereto, which
may include indemnification, the payment of costs, remediation, or other
alternative, any of which shall be acceptable to Purchaser in its sole
discretion. If, within such 10-day period, Seller and Purchaser do not agree on
a solution, then Purchaser shall have the right, within fifteen (15) days after
the expiration of such 10-day period, to deliver written notice to Seller that
it elects to terminate this Agreement, in which event this Agreement shall be
deemed null and void and of no effect whatsoever except as provided in Section
12.2.
7.6 Availability of Certain Governmental Permits. At any time prior
--------------------------------------------
to the expiration of the Inspection Period, Purchaser may terminate this
Agreement if Purchaser determines, in its sole discretion, that it will be
unable to obtain the transfer or issuance of Governmental Permits or Non-
Transferable Governmental Permits necessary to use the Assets as they currently
are being used or to operate the Business as it is currently being operated. In
the event that Purchaser delivers written notice of termination pursuant to this
Section 7.6 to Seller, this Agreement shall be of no further force and effect
except as provided in Section 12.2.
7.7 UCC Search. Within 30 days after the execution of this
----------
Agreement, Seller shall provide to Purchaser, at Seller's sole cost and expense,
a search of the records of the New Mexico Secretary of State, the filing
officers of any other state in which Assets are located, and the county clerks
of the counties in which any Real Property is located of any financing
statements or fixture filings (the "UCC Filings"). The search of the UCC
Filings shall show that the Assets are not subject to any Encumbrance except
Permitted Encumbrances or those that shall be released in full at Closing.
7.8 Books and Records. Subject to Purchaser's covenant of
-----------------
confidentiality pursuant to Section 8.2 of this Agreement, Seller shall permit
Purchaser's accountants and authorized representatives to examine Seller's books
and financial records pertaining to the Assets and the operation of the Business
prior to the Closing. Purchaser's accountants and representatives shall be
permitted access to such records during regular business hours. To the extent
that any of Seller's records relating to the Assets or Business have been
audited, Seller agrees to deliver those reports to Purchaser. Seller
acknowledges that Purchaser may include the Assets or revenue from the Business
as a part of a public offering of the Bonds, and Seller consents to the
disclosure of information
41
<PAGE>
regarding the Assets and Business, including financial information, in any such
public offering of the Bonds. Seller further agrees to allow Purchaser or its
agents to audit Seller's statements of operations or perform procedures as
considered necessary to comply with regulations of the Securities and Exchange
Commission or applicable state laws. Additionally, to the extent that a
subsequent interim period(s) statement of operations is required to be included
by Purchaser in an offering document, Seller agrees to allow Purchaser's
auditors access to the books and records of the Assets and Business necessary to
complete procedures as required by securities laws or regulations. Seller shall
provide Purchaser with such information as Seller may have with respect to
actual expenditures made on all repairs, maintenance, operation and upkeep of
the Assets, including, without limitation, all taxes and utility payments within
three years prior to the Closing, and dates of construction, installation and
major repairs to the Assets. Until the tenth anniversary of the Closing Date,
Purchaser shall, during reasonable business hours, have access to Seller's files
relating to SDCW, the Business or the Assets, and may photocopy, at Purchaser's
expenses, any such files. Seller shall not be obligated to retain or maintain
such books and records except in accordance with Seller's normal retention
policies in effect from time to time; provided that for a period of ten (10)
years after the Closing Date if Seller intends to destroy any books or records
related to the Assets or Business described in this Section 7.8, Seller shall
first give written notice to Purchaser at least sixty (60) days prior to the
intended date of destruction and Purchaser shall have the right to claim any
such books or records.
7.9 No Solicitation. Neither Seller nor any agent or representative
---------------
of Seller will, during the period commencing on the date of this Agreement and
ending with the earlier to occur of the Closing or the termination of this
Agreement, directly or indirectly (i) solicit or initiate the submission of
proposals or offers from any Person for, (ii) participate in any discussions
pertaining to, or (iii) furnish to any Person other than Purchaser or its
representatives, any information relating to, any direct or indirect acquisition
or purchase of all or any portion of Assets or the Business.
7.10 Notification of Certain Matters. Seller shall promptly notify
-------------------------------
Purchaser of any fact, event, circumstance or action, the existence or
occurrence of which would cause any representation or warranty of Seller under
this Agreement to be untrue or incomplete in any material respect.
7.11 Updated Schedules. Not less than five (5) days prior to the
-----------------
Closing, Seller will deliver to Purchaser revised copies of the Schedules to
this Agreement which shall have been updated to show any changes occurring
between the date of this Agreement and the date of delivery (or the latest date
for which
42
<PAGE>
the applicable information is then available) and which shall become a part of
this Agreement; provided, however, that if the effect of any such updates to
Schedules is to disclose any one or more additional properties, privileges,
rights, interests or claims as Assets or Assumed Obligations acquired by Seller
in breach of this Agreement, Purchaser, at or before the Closing, will have the
right (to be exercised by written notice to Seller) to cause any one or more of
such items to be designated as Excluded Assets or Excluded Obligations for all
purposes under this Agreement.
7.12 Required Consents; Satisfaction of Other Conditions. Seller
----------------------------------------------------
will use its reasonable efforts to obtain, as soon as practical and at Seller's
expense, all the Seller's Required Consents, in form and substance reasonably
satisfactory to Purchaser. Purchaser will provide such information with respect
to Purchaser, and its Affiliates, and the activities of any of them, as the
Persons from whom Seller's Required Consents are sought may reasonably request
and otherwise will cooperate in good faith with Seller to obtain all the
Seller's Required Consents, but Purchaser will not be required to agree to any
changes in or to the imposition of any condition to the transfer to Purchaser
of, any Contract Rights or Governmental Permit that would render such Contract
Right or Governmental Permit materially more burdensome as a condition to
obtaining any Seller's Required Consent. In such cases where such consents have
not been obtained by the Closing Date, this Agreement, to the extent permitted
by law, shall constitute an equitable assignment by Seller to Purchaser of all
of Seller's rights, benefits, title and interest in and to the assigned
contracts and commitments, and Purchaser shall be deemed to be Seller's agent
for the purpose of completing, fulfilling and discharging all of Seller's rights
and liabilities arising after the Closing Date under such assigned contracts and
commitments, and Seller shall take all necessary steps and actions to provide
Purchaser with the benefits of such contracts and commitments.
7.13 Estoppel Letters. No later than thirty (30) days prior to the
----------------
Closing Date, Purchaser may give written notice to Seller identifying the
contracts and agreements included in the Contract Rights as to which Purchaser
requests estoppel letters and the Persons from whom Seller is requested to
obtain the letters. The notice shall include the form or forms in which Seller
is to request the letters. Until the Closing, Seller shall, in good faith and
with reasonable diligence, attempt to obtain letters in the form requested by
Purchaser from the Persons and as to the contracts and agreements identified in
Purchaser's notice; provided, however, that Seller's failure to obtain any of
such letters after good faith effort shall not excuse Purchaser from the
performance of any of its obligations under this Agreement or be cause to delay
the Closing unless the same indicates a breach of any representation, warranty
or covenant by Seller under this Agreement.
43
<PAGE>
Section 8. Purchaser's Covenants.
- --------- ---------------------
8.1 Bonds. The parties hereto acknowledge that Purchaser shall have
-----
no obligation to consummate the Transactions contemplated by this Agreement
unless and until Purchaser shall have issued and sold $70,000,000 in tax-exempt
municipal utility revenue bonds, bearing interest at no more than 8.5% per
annum, with a customary long term maturity schedule, and prepayment and call
provisions, all in a form reasonably satisfactory to Purchaser and Purchaser's
counsel (the "Bonds"). The Bonds shall not be offered unless they are, in the
opinion of Purchaser's bond counsel, exempt from federal and New Mexico income
taxes. In the event that Purchaser is not able to issue and sell the Bonds
within ninety days after entry of the final order of the PUC authorizing
issuance of the Bonds, Purchaser may elect to terminate this Agreement by
providing written notice thereof to Seller within the next thirty (30) days, in
which event this Agreement shall be null and void and of no effect whatsoever
(except as provided in Section 12.2). Purchaser shall use commercially
reasonable efforts to obtain a firm commitment from a nationally recognized
investment banking company to purchase the Bonds, but shall be under no
obligation to pay any sums for bond insurance or accept discounts or provisions
other than those normal and customary in the placement of municipal bonds
secured by water utility revenues.
8.2 Confidentiality. Until the Closing, Purchaser shall hold in
---------------
strict confidence and not use or disclose to others, and will, for the benefit
of Seller, use its best efforts to require Purchaser's agents and
representatives to hold in strict confidence and not use or disclose to others,
any information heretofore or hereafter obtained from Seller or from any
officer, employee, agent or representative of Seller pertaining to the Assets or
the Business, except information which (i) was or is in the public domain, (ii)
is required or expressly permitted to be disclosed by Purchaser or its agents or
representatives in connection with any court action or proceeding before any
Governmental Authority, including without limitation, proceedings relating to
Purchaser's Required Consents, or (iii) is required to be disclosed with respect
to the Bonds. If the Closing does not occur, Purchaser shall return to Seller
all information regarding Seller, the Assets and the Business obtained by
Purchaser and its agents and representatives from Seller or Seller's officers,
employees, agents or representatives in connection with the negotiation of the
Letter of Intent and this Agreement and the consummation of the Transactions.
The provisions of this Section 8.2 shall survive termination of this Agreement
pursuant to Section 12.1.
8.3 Retention of Records; Purchaser's Access. After the Closing,
----------------------------------------
Purchaser shall afford Seller and its authorized representatives reasonable
access during normal business hours to
44
<PAGE>
the Records and will, at Seller's expense, furnish to Seller such reasonably
available other information, and will cooperate with Seller in such other
respects, as Seller may reasonable request, to the extent that such access and
cooperation (i) are required by Seller for financial reporting, tax or similar
purposes, or for purposes of conducting litigation or administrative proceedings
with third parties or Governmental Authorities, and (ii) would not violate the
terms of any agreement by which Purchaser is bound or any Legal Requirement.
For a period of ten (10) years after the Closing Date if Purchaser intends to
destroy any of the Records, Purchaser shall first give written notice to Seller
at least sixty (60) days prior to the intended date of destruction, and Seller
shall thereafter have the right to claim any of the Records intended by
Purchaser to be destroyed.
8.4 Required Consents; Satisfaction of Other Conditions. Purchaser
---------------------------------------------------
will use its reasonable efforts to obtain, as soon as practical and at
Purchaser's expense, all the Purchaser's Required Consents, in form and
substance reasonably satisfactory to Seller. Purchaser will not be required to
agree to any changes in or to the imposition of any condition to the transfer to
Purchaser of, any Contract Rights or Governmental Permit that would render such
Contract Right or Governmental Permit materially more burdensome as a condition
to obtaining any Purchaser's Required Consent.
8.5 Notification of Certain Matters. Prior to the Closing, Purchaser
-------------------------------
shall promptly notify Seller in the event Purchaser learns of any fact, event,
circumstance or action, the existence or occurrence of which would cause any
representation or warranty by Seller under this Agreement to be untrue or
incomplete in any material respect.
8.6 Rate Covenant.
-------------
8.6.1 For so long as any of the Bonds are outstanding, and
there are debts, liabilities or obligations owed by Purchaser to Seller under
this Agreement, Purchaser shall, for Seller's benefit, maintain the debt service
coverage ratio and comply with such other financial and operating covenants as
may be required of Purchaser under the indenture governing such Bonds.
8.6.2 At such time as none of the Bonds remains outstanding,
and for so long thereafter as there are debts, liabilities or obligations owed
by Purchaser to Seller under this Agreement, Purchaser shall employ the Assets
to carry on the Business, and shall establish, charge and collect rates, fees
and charges for the water service provided by Purchaser and otherwise exercise
skill and diligence in operating the Business, so as to provide revenue
sufficient to pay and perform all debts, liabilities and obligations of the
Business, including, but not limited to, the Assumed Obligations and all other
debts,
45
<PAGE>
liabilities and obligations owed by Purchaser to Seller under this Agreement.
Purchaser shall, as often as necessary, revise its rates, fees and charges in
such manner as may be necessary to enable Purchaser to comply with this Section
8.6.2. Should Purchaser default in the performance of its obligations under
this Section 8.6.2, Purchaser shall, within 15 days after written request by
Seller, engage an independent public utility rate consultant, reasonably
satisfactory to Seller, to make recommendations to Purchaser regarding
Purchaser's rates, fees and charges and other matters related to the conduct of
the Business and the provision of water service by Purchaser for the purpose of
enabling Purchaser to remedy such default and to continue in the performance of
its duties and obligations under this Section 8.6.2. A written report by the
consultant containing such recommendations shall be provided to Seller, and
Purchaser shall, to the extent permitted by applicable law, promptly implement
all such recommendations. If Purchaser fails to engage the consultant in
accordance with this Section 8.6.2, Seller may engage a consultant of Seller's
choosing to make such recommendations, in which case Purchaser shall reimburse
Seller for the reasonable fees and charges of the consultant so retained and
shall, to the extent permitted by applicable law, promptly implement the
recommendations of the consultant. Seller shall be entitled to specific
enforcement and performance of Purchaser's obligations under this Section 8.6.2,
but only to the extent that such enforcement and performance will not materially
and adversely affect the Business. If Purchaser fails to comply with the
recommendations of a consultant engaged in accordance with this Section 8.6.2,
Seller may, in addition to any rights and remedies otherwise available to
Seller, institute and prosecute an action or proceeding in any court or before
any governmental board or commission having jurisdiction to compel Purchaser to
comply with the recommendations of such consultant and the requirements of this
Section 8.6.2.
Section 9. Other Covenants.
- --------- ---------------
9.1 Casualty and Condemnation.
-------------------------
9.1.1 If, prior to the Closing, there occurs any loss or
damage to any Assets from fire, or other casualty that is so substantial as to
prevent normal operation of any material part of the Assets within 20 days after
the occurrence of the event resulting in such loss or damage (a "Substantial
Loss"), Seller will immediately notify Purchaser of that fact and provide
Purchaser with a copy of the applicable policy and insurance declarations and
Purchaser at any time within 10 days after receipt of such notice, may elect by
written notice to Seller either (i) to waive such defect and proceed toward
consummation of the acquisition of Assets in accordance with terms of this
Agreement, or (ii) to terminate this Agreement. If Purchaser elects so to
46
<PAGE>
terminate this Agreement, all the parties will be discharged of any and all
obligations under this Agreement, except as provided in Section 12.2. If
Purchaser and Seller consummate the Transactions notwithstanding such loss or
damage or if there occurs any loss or damage to Assets from fire, theft or other
casualty that is not a Substantial Loss, there will be no adjustment to the
Purchase Price on account of such loss or damage, but all insurance or self-
insurance proceeds (including deductibles) payable as a result of the occurrence
of the event resulting in such loss or damage will be delivered to Purchaser, or
the rights to such proceeds will be assigned to Purchaser if not yet paid over
to Seller.
9.1.2 If, prior to the Closing, there is a Taking of any
part of or interest in the Assets by a Governmental Authority other than
Purchaser, or if a Governmental Authority other than Purchaser having such power
informs Seller or Purchaser that it intends to proceed with such a Taking, and
if the effect of the Taking is, or could reasonably be expected to be, to
prevent normal operation of any material part of the Assets for a period of 20
days after the occurrence of such Taking (a "Substantial Taking"), then
Purchaser may terminate this Agreement. If Purchaser elects so to terminate this
Agreement, all the parties will be discharged of any and all obligations under
this Agreement. If Purchaser does not elect to terminate this Agreement or if a
Taking is not a Substantial Taking, then (i) Purchaser will have the sole right
to negotiate for, claim and contest and, if the Closing occurs, to receive all
damages with respect to the Taking, and (ii) Seller will not be deemed to be in
breach of any representation or warranty as to the Assets or interests that are
the subject of the Taking.
9.2 Transfer and Other Taxes. Seller, on the one hand, and
------------------------
Purchaser, on the other, each will be responsible for the payment of one-half of
any state or local sales, use, transfer, excise, documentary or license taxes or
fees or any other charges (including filing fees) imposed by any Governmental
Authority with respect to the Transactions, including any such taxes, fees or
other charges as may be payable with respect to any transfer of the Assets. If
either Seller or Purchaser shall have paid more than one-half of any such tax,
fee or other charge, the party making such payment will be entitled to
reimbursement within 15 days after delivery of a statement therefor.
9.3 Passage of Title and Risk of Loss. Legal title, equitable title
---------------------------------
and risk of loss with respect to the Assets shall not pass to Purchaser until
such assets are transferred to Purchaser on the Closing Date, which transfer
will be deemed effective for all purposes at 11:59 PM (Mountain Standard Time)
on the Closing Date specified herein.
47
<PAGE>
9.4 Application to PUC. As promptly as practical, Seller and
------------------
Purchaser shall make (either separately or jointly) such application or
applications to the PUC and shall use commercially reasonable efforts (which do
not include accepting the imposition of unreasonable terms or conditions) to
obtain such authorizations and approvals from the PUC as may be necessary to
authorize the transfer of the Assets in accordance with the terms of this
Agreement and issuance of the Bonds. If the PUC requests or requires
unreasonable terms or conditions, Purchaser and Seller shall negotiate in good
faith to resolve such situation in a mutually satisfactory manner. If Purchaser
or Seller cannot so resolve the situation, then either one may terminate this
Agreement pursuant to Section 12.1.4.
9.5 Appeals. In the event of an adverse or unfavorable determination
-------
by any Governmental Authority whose consent or approval is required for the
consummation of the Transactions, or if any of the Transactions are challenged
or opposed in an administrative or legal proceeding, the determination of
whether, and to what extent, to seek appeal or review, administrative or
otherwise, or to contest such challenge or opposition, shall be made by mutual
agreement of the parties hereto, and in the absence of such agreement, the party
making the application (or either party in the event of a joint application)
shall be permitted to maintain its position on appeal or review at its own
expense.
9.6 Reimbursement of Legal Fees. Schedule 9.6 is a copy of the
--------------------------- ------------
letter agreement, offered by Seller on December 9, 1993, and accepted by
Purchaser on December 10, 1993, concerning Seller's obligations to advance and
pay on Purchaser's behalf, and Purchaser's obligations to reimburse Seller for,
certain fees and expenses incurred by Purchaser during the preparation of
documents relating to the Transactions. The agreements, terms and conditions as
set forth in Schedule 9.6 are hereby incorporated in this Agreement by
------------
reference. The provisions of this Section 9.6, including the provisions of
Schedule 9.6, shall survive termination of this Agreement pursuant to Section
- ------------
12.1.
9.7 Grant of Easements.
------------------
9.7.1 At the Closing, Purchaser shall, for the benefit of the Old
Dempsey Tank Site, grant to Seller a non-exclusive, perpetual and irrevocable
easement, at least thirty (30) feet in width, for a road for ingress and egress
and for utilities access, all in the form shown on Schedule 9.7.1. The easement
--------------
shall extend from Cerro Gordo Road to the Old Dempsey Tank Site on the lands of
Purchaser and will be located generally parallel to the northerly boundary of
the real property designated herein as Two Mile Dam and thence generally along
the existing twelve-inch water line easement to the southeast corner of the Old
Dempsey Tank Site. The precise location of the easement will be mutually agreed
48
<PAGE>
upon by Seller and Purchaser as promptly as practical after execution of this
Agreement, and Seller will, at Seller's expense, obtain a survey thereof.
Purchaser shall have no obligation to maintain or repair the road or utility
easement on the Old Dempsey Tank Site, and Seller shall be solely responsible
for, and shall indemnify and hold harmless Purchaser, from all damages, costs
and expenses, including reasonable attorneys' fees, related to Seller's use of
such easement, including, but not limited to personal injury and property
damage, and further including damage to such road, ordinary wear and tear
excepted.
9.7.2 At the Closing, Seller shall dedicate to Purchaser a
perpetual and irrevocable easement and right of way for the "Cerro Gordo Road"
as such road is more specifically described on Schedule 9.7.2 (the "Cerro
--------------
Gordo Road"). Seller shall have no obligation to maintain or repair the Cerro
Gordo Road and Purchaser shall be solely responsible for, and shall indemnify
and hold harmless Seller, from all damages, costs and expenses, including
reasonable attorneys' fees, related to Purchaser's use of such road,
including, but not limited to, personal injury and property damage, and
further including damage to such road, ordinary wear and tear excepted.
9.7.3 At the Closing, Seller shall grant to Purchaser a
non-exclusive easement on the Old Dempsey Tank Site for access to and from,
and installation, repair and maintenance of, a UHF communication link, all in
the form shown on Schedule 9.7.3. The easement shall terminate upon
--------------
abandonment or removal of the UHF communication link by Purchaser.
9.8 Operating Agreement. At the Closing, Purchaser and Seller
-------------------
shall execute the Operating Agreement in the form attached hereto as Schedule
--------
9.8 (the "Operating Agreement"), which provides, among other things, that, for
- ---
a period not to exceed four (4) years after the Closing Date, Seller shall
continue to operate and manage the Business, for and on behalf of Purchaser as
an independent contractor, through Seller's continued employment of the System
Employees. In the event the Closing fails to occur for reasons other than the
breach by Seller of its obligations hereunder, Purchaser shall compensate
Seller in accordance with the Operating Agreement for services which Seller is
required to perform under Sections 3.09(d) of the Operating Agreement prior to
the "Commencement Date" as therein defined.
9.9 Two Mile Dam. Purchaser and Seller acknowledge that Seller
------------
shall, after receiving all necessary governmental permits and authorizations, at
Seller's sole cost, expense and liability, breach and remove the Two Mile Dam,
pursuant to the recommendations of Seller's consultant (as more specifically
described on Schedule 9.9), and all Governmental Requirements, including,
------------
without limitation, those of the New Mexico State Engineer. Purchaser and
49
<PAGE>
Seller further acknowledge that the removal of Two Mile Dam will also entail the
diversion and redirection of the Santa Fe River back to nearly its original bed,
the reconstruction of Cerro Gordo Road, and the installation of a culvert
beneath Cerro Gordo Road designed and constructed to allow passage of a volume
of flow from the Santa Fe River determined in accordance with applicable Legal
Requirements. Purchaser will pay, or reimburse Seller for, 50% percent of the
total cost of reconstructing Cerro Gordo Road and designing and installing the
aforementioned culvert.
9.10 Form of Closing Opinions. No later than thirty (30) days after
------------------------
full execution of this Agreement, Purchaser and Seller shall each deliver to the
other the form in which each requests the counsel for the other to deliver the
closing opinions of law required of such counsel pursuant to Sections 11.2.13
and 11.3.3, respectively. The forms of the opinions so requested shall be
subject to such qualifications, limitations, exceptions and assumptions of fact
as the respective counsel may deem reasonably necessary to deliver their
opinions, as will not vitiate or unreasonably compromise the meaning and force
of their opinions, and as are otherwise acceptable in the reasonable judgment of
the party receiving the opinion. Neither party shall demand an opinion that
such party knows or should know cannot reasonably be given, is not material to
the transactions, or would subject the other party to unreasonable expense.
After receiving the requested forms of the opinions, the parties shall promptly,
diligently and in good faith negotiate all matters pertaining to the form and
substance of the requested opinions.
Section 10. Conditions to Closing.
- ---------- ---------------------
10.1 Conditions to the Obligations of Purchaser and Seller. The
-----------------------------------------------------
obligations of Purchaser and Seller to close the Transactions are subject to the
satisfaction or waiver, to the extent permitted by applicable Legal
Requirements, at or prior to the Closing Date, of each of the following
conditions:
10.1.1 No action, suit or proceeding shall be pending or
threatened by or before any Governmental Authority and no Legal Requirement
shall have been enacted, promulgated or issued or deemed applicable to any of
the Transactions by any Governmental Authority, which would (i) prohibit
Purchaser's ownership or operation of all or a material portion of the
Business or any of the Assets which would have a Material Adverse Effect, (ii)
compel Purchaser to dispose of or hold separate all or a material portion of
the Business or Assets as a result of any of the Transactions, (iii) prevent
or make illegal the consummation of any of the Transactions, or (iv) impair
the ability of Seller to perform its obligations under this Agreement.
50
<PAGE>
10.1.2 Purchaser and Seller shall have received evidence, in
form and substance satisfactory to Purchaser and Seller, that all the Seller's
Required Consents and all the Purchaser's Required Consents, respectively, and
all estoppel letters required to be delivered pursuant to Section 11.2.4, have
been obtained or given and are in full force and effect, and that the same are
all of the consents, approvals or authorizations necessary for Purchaser to
use the Assets as they have been used in the past by Seller, to operate the
Business in its normal and customary manner, and to provide water service to
the customers of Seller as the same had been provided prior to the Closing.
10.1.3 Seller and Purchaser shall have obtained (either
separately or jointly) such Governmental Permits relating to this Agreement
and the transactions contemplated hereby as may be required by law, including
a favorable final, non-appealable (all appeal periods having expired) order
(or orders) in form and substance reasonably satisfactory to the parties and
their counsel from the PUC authorizing or approving the Transactions and
permitting Purchaser to use the Assets and operate the Business as they are
currently being used and operated, and a favorable final, non-appealable (all
appeal periods having expired) order (or orders) in form and substance
reasonably satisfactory to Purchaser and its counsel from the PUC authorizing
the issuance of the Bonds.
10.1.4 Neither Purchaser nor Seller shall have discovered any
material error, misstatement or omission in the representations and warranties
made by the other in this Agreement.
10.1.5 Purchaser and Seller shall each have performed and
complied with all agreements, covenants and conditions required by this
Agreement to be performed or complied with by it prior to the Closing Date.
10.1.6 Purchaser shall have issued and sold the Bonds in an amount
sufficient to pay the Purchase Price plus customary costs and expenses in
accordance with this Agreement.
10.1.7 Purchaser shall not have discovered any adverse change in
the condition of the Assets, taken as a whole, which is sufficient to
materially and adversely affect the value of the Business or the Assets, and
for which insurance proceeds or other compensation are not available under
Section 9.1.
10.2 Conditions to the Obligations of Purchaser. The obligation of
------------------------------------------
Purchaser to close the Transactions is subject to the satisfaction or waiver, to
the extent permitted by applicable Legal Requirements, at or prior to the
Closing Date, of each of the following conditions:
51
<PAGE>
10.2.1 All representations and warranties of Seller contained in
this Agreement shall be true and complete in all respects as of the Closing
Date with the same effect as if made on and as of the Closing Date.
10.2.2 Seller in all material respects shall have performed and
complied with each obligation, agreement, covenant and condition required by
this Agreement to be performed or complied with by Seller at or prior to
Closing.
10.2.3 Seller shall have delivered to Purchaser (i) either (Y)
releases, in form reasonably satisfactory to Purchaser, of all Encumbrances
affecting any of the Assets (other than Permitted Encumbrances), or (Z) binding
commitments signed by each Person holding any obligation secured by such an
Encumbrance in a form reasonably satisfactory to Purchaser to the effect that
such Person will release the Encumbrance upon payment of the amount stated
therein, and (ii) evidence of payment by Seller of New Mexico gross receipts tax
for the most recent reporting period for which payment is due prior to the
Closing Date, and (iii) UCC Filings as of one (1) day before Closing showing
that the Assets are free and clear of all Encumbrances except Permitted
Encumbrances to be released at Closing.
10.2.4 Purchaser shall have received and approved the surveys
described in Section 7.2 and the title insurance commitments and the ALTA
closing protection letter described in Section 7.3.
10.2.5 Purchaser shall be satisfied that (i) Seller has good and
marketable title to the Water Rights, (ii) the Water Rights are sufficient, in
Purchaser's reasonable judgment, to supply the Business' current and currently
projected needs, (iii) Seller has and will at the Closing transfer to Purchaser
valid easements to drill and maintain the well sites to access the Water Rights
and to distribute water from such well sites to its customers, and (iv) the
Water Rights described on Schedule 1.1.75 are valid and in full force and effect
---------------
on the Closing Date, all required extensions of time for appropriation to
beneficial use and completion of works have been timely filed and Purchaser
shall have received from Seller signed declarations in form appropriate for
filing with the New Mexico State Engineer's Office for all ground waters
appropriated by Seller (and its predecessor owners) outside a declared basin or
in a basin which was not declared at the time of appropriation except such as
are appropriated pursuant to permits issued by the New Mexico State Engineer.
10.3 Conditions to Obligations of Seller. The obligations of Seller
-----------------------------------
to close the Transactions are subject to the satisfaction or waiver by Seller,
to the extent permitted by
52
<PAGE>
applicable Legal Requirements, at or prior to the Closing Date, of each of the
following conditions:
10.3.1 All representations and warranties of Purchaser contained
in this Agreement shall be true and complete in all material respects on and
as of the Closing Date with the same effect as if made on and as of the
Closing Date.
10.3.2 Purchaser in all material respects shall have performed
and complied with each obligation, agreement, covenant and condition required
by this Agreement to be performed or complied with by Purchaser at or prior to
the Closing.
10.4 Waiver of Conditions. Any party may waive in writing any or all
--------------------
of the conditions to its obligations under this Agreement.
Section 11. Closing.
- ---------- -------
11.1 Closing Date. The Closing contemplated by this Agreement
------------
shall take place at the offices of Montgomery & Andrews, P.A., at 10:00 A.M.
(local time), or at such other place or time as the parties hereto may mutually
agree upon, on the tenth (10th) business day after the satisfaction of the
conditions set forth in Section 10, or such earlier or later date as the parties
hereto may mutually agree upon (herein sometimes referred to as the "Closing
Date").
11.2 Deliveries of Seller at Closing. At the Closing on the Closing
-------------------------------
Date, Seller shall deliver to Purchaser such deeds, assignments, bills and sale
and other instruments, or take such actions, as shall be necessary to assign and
transfer to and vest in Purchaser good and marketable title to the Assets, free
and clear of all Encumbrances, except Permitted Encumbrances, and to consummate
the Transactions in accordance with Seller's obligations under this Agreement,
including the following:
11.2.1 Deed. Special warranty deed to Purchaser, in the form
----
attached as Schedule 11.2.1A, duly executed and acknowledged, conveying the Real
----------------
Property/Urban. Special warranty deed to Purchaser, in the form attached as
Schedule 11.2.1B, duly executed and acknowledged, conveying the Real
- ----------------
Property/Watershed, and the Major Easements. Deed in the form attached as
Schedule 11.2.1C, duly executed and acknowledged, conveying other easements,
- ----------------
rights of way, licenses or other interests in real property owned or used in
connection with the Business.
11.2.2 Cerro Gordo Road Dedication. A dedication of the
---------------------------
easement and right of way for Cerro Gordo Road in the form of
53
<PAGE>
Schedule 9.7.2, duly executed and acknowledged by Seller and accepted by
- --------------
Purchaser.
11.2.3 Bill of Sale. A deed, bill of sale and assignment for the
------------
Assets, in the form attached as Schedule 11.2.3, duly executed and acknowledged
---------------
by Seller and Purchaser.
11.2.4 Assignment of Leases. An assignment or valid assignments
--------------------
of Seller's right, title and interest in and to all leases to Seller of Real
Property and Equipment in the form attached as Schedule 11.2.4, duly executed
---------------
and acknowledged by Seller and Purchaser assigning to Purchaser the interests of
Seller in such leases and the Real Property and Equipment subject thereto,
together with the original executed copy of each lease.
11.2.5 Assignment of Contract Rights, Service Agreements and
-----------------------------------------------------
Intangibles. An assignment in the form attached as Schedule 11.2.5, duly
- ----------- ---------------
executed and acknowledged by Seller and Purchaser, assigning to Purchaser all
of the right, title and interest of Seller in and to the Contract Rights,
Service Agreements and Intangibles.
11.2.6 Assumption Agreement. An assumption agreement duly
--------------------
executed and acknowledged as provided in Section 11.3.4.
11.2.7 Change of Ownership of Water Rights. Changes in
-----------------------------------
ownership, in the form of Schedule 11.2.7, for the Water Rights described on
---------------
Schedule 1.1.75 duly executed and acknowledged by Seller.
- ---------------
11.2.8 Operating Agreement. The Operating Agreement.
-------------------
11.2.9 Property Records. All Records.
----------------
11.2.10 Minutes. Certified copies of minutes or unanimous written
-------
consents of the Board of Directors and, if required, the stockholders of Seller,
approving the execution of this Agreement and the consummation of the
transactions contemplated hereunder.
11.2.11 Seller's Required Consents. Seller's Required Consents.
--------------------------
11.2.12 Release of PNM Indenture. A release of the PNM
------------------------
Indenture.
11.2.13 Opinion of Counsel. The opinion of Montgomery &
------------------
Andrews, P.A. or other counsel for Seller, dated the
54
<PAGE>
Closing Date in form and substance reasonably satisfactory to Purchaser and its
counsel.
11.2.14 Estoppel Letters. With respect to each parcel of Real
----------------
Property leased by Seller, an estoppel letter executed by each lessor in such
form and substance as Seller shall reasonably require, and any other estoppel
letters obtained by Seller pursuant to Section 7.13.
------------
11.2.15 Existing Encumbrances. Evidence reasonably satisfactory
---------------------
to Purchaser and its counsel that the indebtedness for borrowed money and other
liabilities designated in the Schedules as being paid at Closing have been paid
or provided for and that the Assets are being transferred to Purchaser free
and clear of any and all liens and Encumbrances, except Permitted Encumbrances.
11.2.16 FIRPTA Affidavit. An affidavit, signed under penalty of
----------------
perjury by Seller, to the effect that Seller is not a "foreign person" (as
defined in the Foreign Investment in Real Property Tax Act and applicable
regulations) and that Purchaser is not required to withhold any portion of the
consideration payable under this Agreement under the provisions of such Act.
11.2.17 Incumbency Certificates. A Certificate of the Secretary
-----------------------
or an Assistant Secretary of Seller dated the Closing Date with respect to the
incumbency of corporate officers and their signatures, corporate standing,
corporate charter and by-laws, and the corporate directors' and executive
committees' resolutions contemplated by this Agreement.
11.2.18 Articles of Incorporation/Certificates of Good Standing.
-------------------------------------------------------
Articles of Incorporation and all amendments thereto of Seller certified by the
State Corporation Commission of New Mexico within two (2) business days of the
Closing Date. Certificates of Good Standing of Seller issued by the State
Corporation Commission of New Mexico within three (3) business days of the
Closing Date.
11.2.19 Bring Down Certificate. A certificate from an officer of
----------------------
Seller that Seller's representations and warranties contained in this Agreement
are true and correct as of the Closing Date, with the same force and effect as
if such representations and warranties had been made on such date.
11.2.20 Conditions Precedent. A certificate from an officer of
--------------------
Seller dated the Closing Date stating that all conditions precedent to
Seller's closing of the Transaction have been fulfilled or waived.
55
<PAGE>
11.2.21 Other Documents. Such other documents to be delivered by
---------------
Seller hereunder, or as Purchaser or its counsel may reasonably request to carry
out the purposes of this Agreement.
11.3 Deliveries of Purchaser at Closing. At the Closing on the
----------------------------------
Closing Date, Purchaser shall deliver to Seller such instruments and take such
actions as are necessary to consummate the Transactions in accordance with
Purchaser's obligations under this Agreement, including the following:
11.3.1 Payment of Purchase Price, Section 9.6 Reimbursements. The
-----------------------------------------------------
payment of the Preliminary Purchase Price to be delivered by Purchaser pursuant
to Section 3.3.1 of this Agreement and the reimbursement owed by Purchaser to
Seller pursuant to Section 9.6 of this Agreement.
11.3.2 Consents. Copies of Purchaser's Required Consents.
--------
11.3.3 Opinions of Counsel. The opinion of Purchaser's city
-------------------
attorney or other counsel for Purchaser, dated the Closing Date, in form and
substance reasonably satisfactory to Seller.
11.3.4 Assumption Agreement. An assumption agreement in the form
--------------------
attached as Schedule 11.3.4, duly executed and acknowledged by Purchaser and
---------------
Seller, pursuant to which Purchaser shall assume the Assumed Obligations.
11.3.5 Easement. Easement to Seller, duly executed and
--------
acknowledged and in the form attached as Schedule 9.7.1, conveying the
--------------
easement with respect to the Old Dempsey Tank Site in accordance with Section
9.7.1.
11.3.6 Operating Agreement. The Operating Agreement.
-------------------
11.3.7 Mayor and City Council Certificates. Certificates of the
-----------------------------------
Mayor of the City of Santa Fe dated the Closing Date certifying that the
conditions precedent hereto to be performed by Seller have been fulfilled and
certifying that Purchaser's representations and warranties contained in this
Agreement are true and correct as of the Closing Date with the same force and
effect as if such representations and warranties had been made on such date.
11.3.8 Certificate of City Clerk. Certificates of the Clerk of
-------------------------
the City of Santa Fe dated the Closing Date with respect to the incumbency of
the Mayor and City Council and their signatures, and standing.
56
<PAGE>
11.3.9 Conditions Precedent. A certificate from the Mayor of
--------------------
the City of Santa Fe stating that all Conditions precedent to Purchaser's
closing of the Transactions have been fulfilled or waived.
11.3.10 Other Documents. Such other documents to be delivered by
---------------
Purchaser hereunder, or as Seller or its counsel may reasonably request to carry
out the purposes of this Agreement, including duly executed counterparts of
those documents set forth in Section 11.2 to which Purchaser is a party.
11.4 Prorations and Credits.
----------------------
11.4.1 The following items shall be prorated as of 11:59 p.m. of
the day immediately preceding the Closing Date. To the extent that the amounts
of the items to be prorated are ascertainable as of the Closing Date, they
shall be prorated at the Closing. To the extent that the amounts of the items
to be adjusted are not ascertainable as of the Closing Date, they shall be
estimated and finally adjusted as promptly after the Closing as the amounts
thereof are ascertained. Any errors or omissions in computing the prorations
at the Closing shall be promptly corrected. The obligations under this Section
11.4.1 shall survive the Closing hereunder for a period of six (6) months from
the Closing Date.
i. Notwithstanding anything to the contrary herein, (A)
real estate and personal property taxes shall be prorated on the basis of the
1993 valuations and mill levies, and shall be subject to readjustment as soon as
the actual 1994 valuation and mill levies are conclusively determined, and (B)
Seller shall be responsible to pay at or prior to closing any special
assessments which may be a lien on the Property.
Section 12. Termination.
- ---------- -----------
12.1 Events of Termination. This Agreement may be terminated and the
---------------------
Transactions may be abandoned at any time prior to the Closing:
12.1.1 By the written consent of Purchaser and Seller.
12.1.2 By Purchaser, if the Transactions to take place at the
Closing have not been consummated by December 31, 1994 for any reason other
than (i) a breach or default in any material respect by Purchaser in the
performance of any of its obligations under this Agreement, or (ii) the
failure of any representation or warranty of Purchaser to be true and complete
in any material respect.
57
<PAGE>
12.1.3 By Seller, if the Transactions to take place at the Closing
have not been consummated by December 31, 1994, for any reason other than (i) a
breach or default in any material respect by Seller in the performance of any of
its obligations under this Agreement, or (ii) the failure of any representation
or warranty of Seller to be true and complete in any material respect.
12.1.4 By Purchaser or Seller pursuant to Section 9.4.
12.1.5 By Purchaser pursuant to Sections 7.2, 7.3.1, 7.4.2,
7.5.2, 7.6, 8.1, 9.1.1 or 9.1.2.
12.2 Liabilities in Event of Termination. The termination of this
-----------------------------------
Agreement will in no way limit any obligation or liability of any party based on
or arising from a breach or default by such party with respect to any of its
representations, warranties, covenants or agreements contained in this
Agreement, or relieve any party from the performance of obligations which, by
the terms of this Agreement, survive such termination.
12.3 Procedure Upon Termination. In the event of the termination of
--------------------------
this Agreement by Purchaser or Seller pursuant to this Section 12, notice of
such termination will promptly be given by the terminating party to the others.
Section 13. Survival of Representations and Warranties; Indemnification.
- ---------- -----------------------------------------------------------
13.1 Survival of Representations and Warranties. The representations
------------------------------------------
and warranties of Seller in this Agreement and in the documents and instruments
to be delivered by Seller pursuant to this Agreement will survive until the
third anniversary of the Closing Date, except that (i) all such representations
and warranties with respect to any federal, state or local taxes or copyright
matters will survive until 60 days after the expiration of the applicable
statute of limitations (including any extensions) for such federal, state or
local taxes or copyright matter, respectively, (ii) the representations and
warranties set forth in Section 5.16, except the representations and warranties
set forth in Section 5.16.1, the representations and warranties as to ownership,
title, use, possession and Permitted Encumbrances of Assets set forth in
Sections 5.4 and 5.6 will survive until the tenth anniversary of the Closing
Date, and (iii) the representations and warranties set forth in Section 5.7 with
regard to environmental matters will survive until the fourteenth anniversary of
the Closing Date. The representations and warranties of Purchaser in this
Agreement and in the documents and instruments to be delivered by Purchaser
pursuant to this Agreement will survive until the second anniversary of the
Closing Date. The
58
<PAGE>
periods of survival of the representations and warranties prescribed by this
Section 13.1 are referred to as the "Survival Period." The liabilities of the
parties under their respective representations and warranties will expire as of
the expiration of the applicable Survival Period; provided, however, that such
expiration will not include, extend or apply to any representation or warranty,
the breach of which has been asserted in a written notice to the party alleged
to be responsible, which notice is given before such expiration, describing such
breach in reasonable detail. The covenants and agreements of the parties in
this Agreement and in the other documents and instruments to be delivered by any
of them pursuant to this Agreement will survive the Closing and will continue in
full force and effect without limitation by this Agreement. The fact that the
Donated Assets will be donated by Seller to Purchaser at Closing shall not
compromise or relieve Seller from any representations, warranties, covenants, or
other obligations otherwise applicable to the Donated Assets under this
Agreement.
13.2 Indemnification by Seller. Subject to the limitations set forth
-------------------------
in Sections 13.1 and 13.4, Seller, shall indemnify, defend and hold harmless
Purchaser and its officers, employees, agents, successors and assigns from and
against:
i. the Excluded Obligations;
ii. all losses, damages, liabilities, deficiencies or
obligations of or to Purchaser or any such other indemnified Person resulting
from or arising out of any breach of any representation, warranty, covenant,
agreement or obligation of Seller provided, however, that the aggregate amount
of Seller's liability (including obligations of indemnification) for breach of
the representations and warranties set forth in Section 5.16 of this Agreement,
except the representations and warranties set forth in Section 5.16.1, shall not
exceed five percent (5%) of the Final Purchase Price; and
iii. subject to the limitation stated in clause ii, above, all
claims, actions, suits, proceedings, demands, judgments, assessments, fines,
interest, penalties, costs and expenses (including settlement costs and
reasonable legal, accounting, experts' and other fees, costs and expenses)
incident or relating to or resulting from any of the foregoing.
13.3 Indemnification by Purchaser. Subject to the limitations set
----------------------------
forth in Sections 13.1 and 13.4, Purchaser shall indemnify, defend and hold
harmless Seller, the Affiliates of Seller and the shareholders, directors,
officers, employees, agents, successors and assigns of any of such Persons, from
and against:
59
<PAGE>
i. the Assumed Obligations;
ii. all losses, damages, liabilities, deficiencies or
obligations of or to Sellers or any such other indemnified Person resulting
from or arising out of any breach of any representation, warranty, covenant,
agreement or obligation of Purchaser in this Agreement; and
iii. all claims, actions, suits, proceedings, demands, judgments,
assessments, fines, interest, penalties, costs and expenses (including, without
limitation, settlement costs and reasonable legal, accounting, experts' and
other fees, costs and expenses) incident or relating to or resulting from any of
the foregoing.
13.4 Third Party Claims. Promptly after the receipt by any party of
------------------
notice of any claim, action, suit or proceeding by any Person who is not a party
to this Agreement (collectively, an "Action"), which Action is subject to
indemnification under this Agreement, such party (the "Indemnified Party") will
give reasonable written notice to the party from whom indemnification is claimed
(the "Indemnifying Party"). The Indemnified Party will be entitled, at the sole
expense and liability of the Indemnifying Party, to exercise full control of the
defense, compromise or settlement of any such Action unless the Indemnifying
Party, within a reasonable time after the giving of such notice by the
Indemnified Party, (i) admits in writing to the Indemnified Party the
Indemnifying Party's liability to the Indemnified Party for such Action under
the terms of this Section 13.4, (ii) notifies the Indemnified Party in writing
of the Indemnifying Party's intention to assume such defense, (iii) provides
evidence reasonably satisfactory to the Indemnified Party of the Indemnifying
Party's ability to pay the amount, if any, for which the Indemnified Party may
be liable as a result of such Action and (iv) retains legal counsel reasonably
satisfactory to the Indemnified Party to conduct the defense of such Action. The
other party will cooperate with the party assuming the defense, compromise or
settlement of any such Action in accordance with this Agreement in any manner
that such party reasonably may request. If the Indemnifying Party so assumes
the defense of any such Action, the Indemnified Party will have the right to
employ separate counsel and to participate in (but not control) the defense,
compromise or settlement of the Action, but the fees and expenses of such
counsel will be at the expense of the Indemnified Party unless (A) the
Indemnifying Party has agreed to pay such fees and expenses, (B) any relief
other than the payment of money damages is sought against the Indemnified Party,
or (C) the Indemnified Party is advised by its counsel that there may be one or
more defenses available to it which are different from or additional to those
available to the Indemnifying Party, and in any such case that portion of the
fees and expenses of such separate counsel that are reasonably related to
matters covered by the
60
<PAGE>
indemnity provided in this Section 13.4 will be paid by the Indemnifying Party.
No Indemnified Party will settle or compromise any Action for which it is
entitled to indemnification under this Agreement without the prior written
consent of the Indemnifying Party, unless the Indemnifying Party has failed,
after reasonable notice, to undertake control of such Action in the manner
provided in this Section 13.4. No Indemnifying Party will settle or compromise
any such Action (X) in which any relief other than the payment of money damages
is sought against any Indemnified Party or (Y) in the case of any Action
relating to the Indemnified Party's liability for any tax, if the effect of such
settlement would be an increase in the liability of the Indemnified Party for
the payment of any tax for any period beginning after the Closing Date, unless
the Indemnified Party consents in writing to such compromise or settlement.
Section 14. Miscellaneous.
- ---------- -------------
14.1 Parties Obligated and Benefitted. Subject to the limitations set
--------------------------------
forth below, this Agreement will be binding upon and enforceable against Seller
and Purchaser and their respective assigns and successors in interest and will
inure solely to the benefit of Seller and Purchaser and their respective assigns
and successors in interest, and no other Person will be entitled to any of the
benefits conferred by this Agreement. Without the prior written consent of
Seller (in the case of an assignment or delegation by Purchaser) or Purchaser
(in the case of an assignment or delegation by Seller) no party will assign any
of its rights under this Agreement or delegate any of its duties under this
Agreement.
14.2 Notices. Any notice, request, demand, waiver or other
-------
communication required or permitted to be given under this Agreement will be in
writing and will be deemed to have been duly given only if delivered in person
or by first class, prepaid, registered or certified mail, or sent by courier or,
if receipt is confirmed, by telecopier to each party at the address or telecopy
number set forth on Schedule 14.2. Any party may change the address to which
-------------
notices are required to be sent by giving notice of such change in the manner
provided in this Section 14.2. All notices will be deemed to have been received
on the date of delivery or on the third Business Day after mailing in accordance
with this Section, except that any notice of a change of address will be
effective only upon actual receipt.
14.3 Attorneys' Fees. In the event of any action or suit based upon
---------------
or arising out of any alleged breach by any party of any representation,
warranty, covenant or agreement contained in this Agreement, the prevailing
party will be entitled to recover
61
<PAGE>
reasonable attorneys' fees and other costs of such action or suit from the other
party.
14.4 Right to Specific Performance. Seller acknowledges that the
-----------------------------
unique nature of Assets to be purchased by Purchaser pursuant to this Agreement
renders money damages an inadequate remedy for the breach by Seller of its
obligations under this Agreement, and Seller agrees that in the event of such
breach, Purchaser will, upon proper action instituted by it, be entitled to a
decree of specific performance of this Agreement.
14.5 Waiver. Except as expressly provided herein, this Agreement or
------
any of its provisions may not be waived except in writing. The failure of any
party to enforce any right arising under this Agreement on one or more occasions
will not operate as a waiver of that or any other right on that or any other
occasion.
14.6 Captions. The section captions of this Agreement are for
--------
convenience only and do not constitute a part of this Agreement.
14.7 Choice of Law. THIS AGREEMENT AND THE RIGHTS OF THE PARTIES
-------------
UNDER IT WILL BE GOVERNED BY AND CONSTRUED IN ALL RESPECTS IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW MEXICO, WITHOUT REGARD TO THE CONFLICTS OF LAWS
RULES THEREOF.
14.8 Rights Cumulative. All rights and remedies of each of the
-----------------
parties under this Agreement will be cumulative, and the exercise of one or more
rights or remedies will not preclude the exercise of any other right or remedy
available under this Agreement or applicable law.
14.9 Further Actions. Seller and Purchaser will execute and deliver
---------------
to the other, from time to time at or after the Closing, for no additional
consideration and at no additional cost to the requesting party, such further
assignments, certificates, instruments, records, or other documents, assurances
or things as may be reasonably necessary to give full effect to this Agreement
and to allow each party fully to enjoy and exercise the rights accorded and
acquired by it under this Agreement.
14.10 Time. Time is of the essence under this Agreement. If the
----
last day permitted for the giving of any notice or the performance of any act
required or permitted under this Agreement falls on a day which is not a
Business Day, the time for the giving of such notice or the performance of such
act will be extended to the end of the next succeeding Business Day.
14.11 Late Payments. If any party fails to pay to another party
-------------
any amount when due under this Agreement, the amount due will bear interest from
the due date to the date of payment at
62
<PAGE>
the annual rate publicly announced from time to time by Bank of New York as its
prime rate (the "Prime Rate") plus 2%, adjusted as and when changes in the Prime
Rate are made.
14.12 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which will be deemed an original.
14.13 Entire Agreement. This Agreement (including the Schedules
----------------
and Exhibits referred to in this Agreement, which are incorporated in and
constitute a part of this Agreement) contains the entire agreement of the
parties and supersedes all prior oral or written agreements and understandings
with respect to the subject matter. This Agreement may not be amended or
modified except by a writing signed by or on behalf of all the parties affected
by such amendment or modification. Except as expressly set forth in this
Agreement, Seller makes no representation or warranty, express or implied, with
respect to Seller, the Business, or any of the Assets.
14.14 Severability. Any term or provision of this Agreement which
------------
is invalid or unenforceable will be ineffective to the extent of such invalidity
or unenforceability without rendering invalid or unenforceable the remaining
rights of the Person intended to be benefitted by such provision or any other
provisions of this Agreement.
14.15 Construction. This Agreement has been negotiated by
------------
Purchaser and Sellers and their respective legal counsel, and legal or equitable
principles that might require the construction of this Agreement or any
provision of this Agreement against the party drafting this Agreement will not
apply in any construction or interpretation of this Agreement.
14.16 Expenses. Except as otherwise expressly provided in this
--------
Agreement, each party will pay all its expenses, including attorneys' and
accountants' fees, in connection with the negotiation of this Agreement, the
performance of its obligations under this Agreement and the consummation of the
Transactions.
14.17 Savings Clause. The obligation of Purchaser to purchase the
--------------
Assets and pay the Purchase Price under this Agreement shall not constitute the
general obligations or indebtedness of Purchaser within the meaning of Article
IX, Subsection 12 of the Constitution of New Mexico and shall never constitute a
charge against the general credit or taxing power of Purchaser. The Purchase
Price shall be payable from the proceeds of the Bonds, which together with the
interest accruing thereon and any prior redemption premium due in connection
therewith, shall be a special obligation of Purchaser and shall be payable and
collectible from the net revenues of the utility system to be operated with the
63
<PAGE>
Assets, in accordance with applicable state statutes, which income will be so
pledged.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
PUBLIC SERVICE COMPANY OF
NEW MEXICO
By /s/
------------------------------
Title Senior Vice President
---------------------------
CITY OF SANTA FE, NEW MEXICO
ATTEST:
/s/ By /s/
- -------------------------- -----------------------------
City Clerk Mayor
APPROVED AS TO FORM:
/s/
- --------------------------
City Attorney
64
<PAGE>
EXHIBIT 3.2
BYLAWS
OF
PUBLIC SERVICE COMPANY OF NEW MEXICO
With All Amendments to and Including March 1, 1994
--------------------------------------------------
<PAGE>
BYLAWS
OF
PUBLIC SERVICE COMPANY OF NEW MEXICO
ARTICLE I.
Meetings of Stockholders
------------------------
Section 1. Meetings. The Annual Meeting of Stockholders shall be held on
--------
the fourth Wednesday of April in each year, if not a legal holiday
and if a legal holiday, then on the next succeeding business day, at a time
of the day to be determined by resolution of the Board of Directors, for
the election of directors and the transaction of such other business as may
properly come before the meeting. Special meetings may be called by a
majority of the Board of Directors, the Executive Committee, the Chairman
of the Board or the President.
Section 2. Place of Meetings. The annual or any special meeting of
-----------------
stockholders shall be held at the principal office of the Company in the
City of Albuquerque, Bernalillo County, State of New Mexico, or at such
other places within or without the State of New Mexico as shall be speci-
fied in the notice of such meeting.
Section 3. Notice. Written notice of any meeting stating the time and
------
place, and if a special meeting, the purpose or purposes of such meeting,
shall be mailed to each stockholder of record entitled to vote at such
meeting at the address of such stockholders as the same appears on the
stock transfer books of the Company, except as otherwise provided by law.
In the event of the transfer of a stockholder's stock after mailing of such
notice and prior to the holding of the meeting, it shall not be necessary
to mail notice of the meeting to any transferee. All notices of any special
stockholder meeting shall be mailed not less than forty (40) days before
the date of the meeting; however, notice of any such special meeting called
by a majority of the Board of Directors, the Executive Committee, the
Chairman of the Board or the President, and notice of any annual meeting,
shall be mailed not less than ten (10) days before such meeting of stock-
holders.
<PAGE>
Section 4. Quorum. At any meeting of the stockholders, except as other-
------
wise provided by law, it shall be necessary that the holders of a majority
of the issued and outstanding shares of the capital stock entitled to vote
at such meeting shall be represented in person or by proxy to constitute a
quorum for the transaction of business.
Section 5. Adjournment. Whenever at any meeting of the stockholders,
-----------
notice of which shall have been duly given, a quorum shall not be present,
or whenever for any reason it may be deemed desirable, a majority in
interest of the stockholders present in person or by proxy may adjourn the
meeting from time to time to any future day, without notice other than by
announcement at the meeting or adjournment thereof. At any such adjourned
meeting at which quorum shall be present, any business may be transacted
which might have been transacted at the meeting on the date originally
fixed.
Section 6. Organization. The Chairman, or in the absence of the Chairman,
------------
the President, or in the absence of both, a Vice President shall call
meetings of the stockholders to order and shall act as Chairman of such
meetings. The stockholders may appoint any stockholder or the proxy of any
stockholder to act as Chairman of any meeting of the stockholders in the
absence of the Chairman, President and Vice Presidents. The Secretary, or
in the absence of the Secretary, an Assistant Secretary, shall act
as Secretary at all meetings of the stockholders, but in the absence of the
Secretary and Assistant Secretaries at any meeting of the stockholders the
presiding officer may appoint any person to act as Secretary of such
meeting.
Section 7. Inspectors. At each meeting of the stockholders at which a
----------
vote by ballot is taken, the polls shall be opened and closed, the proxies
and ballots shall be received and be taken in charge, and the validity of
proxies and the acceptance or rejection of votes shall be decided by two
inspectors. No person who is a candidate for the office of director shall
act as Inspector of any election for directors. Such inspectors shall be
appointed by the Board of Directors before the meeting, or, if no such
appointment shall have been made, then by the presiding officer of the
meeting. If for any reason any of the inspectors previously appointed shall
fail to attend or refuse or be unable to serve, inspectors in place of any
so failing to attend or refusing or unable to serve shall be appointed in
like manner.
2
<PAGE>
Section 8. Voting. At each meeting of stockholders every stockholder,
------
whether resident or nonresident, shall be entitled to one vote for each
share of stock standing in the name of the stockholder on the books of the
Company on the date on which stockholders entitled to vote are determined.
Such stockholder may be represented and vote by a proxy or proxies appoint-
ed by an instrument in writing; in the event that such instrument in
writing shall designate two or more persons to act as proxies, a majority
of such persons present at the meeting, or if only one shall be present,
then that one shall have and may exercise all of the powers conferred by
such written instrument upon all of the persons so designated, unless the
instrument shall otherwise provide. No proxy shall be voted at any meeting
or adjournment thereof other than that for which the proxy is given.
In all elections for directors, voting shall be by written ballot.
The Board of Directors may fix a date in advance not exceeding fifty (50)
days preceding the date of any meeting of stockholders as a record date for
the determination of stockholders entitled to notice of and to vote at any
such meeting, and in such case only stockholders of record on the date so
fixed shall be entitled to notice of and to vote at such meeting.
ARTICLE II.
Directors
---------
Section 1. Number, Election and Terms. The business and property of the
--------------------------
corporation shall be managed and controlled by a Board of Directors who, if
and while so required by law, shall be stockholders in the Company, and
none of whom need be a resident of the State of New Mexico. The directors
shall be nine in number and shall be elected in classes in the manner
provided in Article Fifth of the Articles of Incorporation as amended.
Section 2. Chairman of the Board of Directors. The Chairman shall be
----------------------------------
elected annually by the Board of Directors at the annual meeting thereof
and shall hold that office until the next annual meeting or until a succes-
sor shall be elected and shall qualify. In the event of the incapacity of
the Chairman of the Board, the Board of Directors shall, by a majority vote
of the Board of Directors, designate an Acting Chairman who shall, during
the incapacity of the Chairman, assume and perform all functions and duties
which the Chairman is authorized or required by law to do. The Chairman of
the Board shall have the power to call special meetings of the stockholders
3
<PAGE>
and of the Directors for any purpose or purposes. The Chairman shall
preside at all meetings of the stockholders and of the Board of Directors
unless the Chairman shall be absent or incapacitated. The Chairman of the
Board, subject to the authority of the Board, shall generally do and
perform all acts incident to the office of the Chairman of the Board and
which are authorized or required by law.
Section 3. Vacancies. Any vacancies occurring on the Board of Directors
---------
by death, resignation, or otherwise shall be filled by a majority of
Directors then remaining in office.
Section 4. Meetings. The meetings of the Board of Directors shall be held
--------
at such place or places within or without the State of New Mexico as the
Board of Directors may from time to time designate.
The Annual Meeting of the Board of Directors for the election of officers
and of the Executive Committee, and such other business as may properly
come before the meeting, shall be held immediately following the annual
meeting of stockholders. The regular meetings of the Board of Directors
shall be held on the first Tuesday in the months of January, July, October
and November, if not a legal holiday, and if a legal holiday, then on the
next succeeding business day at a time and place to be fixed by the
Chairman of the Board of Directors.
Special meetings of the Board of Directors shall be held whenever called
by the direction of the Chairman of the Board of Directors, the President,
any two directors, or the Executive Committee.
Section 5. Notice. No notice shall be required of any annual or regular
------
meeting of the Board of Directors unless the place thereof shall be other
than that last designated by the Board. Notice of any annual or regular
meeting, when required, or of any special meeting of the Board of Directors
shall be given to each director by mailing or delivering the same at least
forty-eight hours, or by telephoning the same at least twenty-four hours
before the time fixed for the meeting. Such notice may be waived by any
director. Unless otherwise indicated in the notice thereof any and all
business may be transacted at a special meeting. At any meeting at which
every director shall be present, even without notice, any business may be
transacted.
4
<PAGE>
Section 6. Quorum. A majority of the Board of Directors shall constitute
------
a quorum for the transaction of business, and any action receiving the
affirmative vote of a majority of the directors present at any meeting
shall be effective.
Section 7. Adjournments. Any annual, regular or special meeting of the
------------
Board of Directors may be adjourned from time to time by the members
present whether or not a quorum shall be present, and no notice shall be
required of any adjourned meeting beyond the announcement of such adjourn-
ment at the meeting.
Section 8. Indemnification. Each person who shall have served as a
---------------
director or an officer of the Company, or, at the request of the Company,
as a director or an officer of any other corporation, partnership or joint
venture, whether profit or nonprofit, in which the Company (a) owns shares
of capital stock, (b) has an ownership interest, (c) is a member, or (d) is
a creditor, and regardless of whether or not such person is then in office,
and the heirs, executors, administrators and personal representatives of
any such person shall be indemnified by the Company to the full extent of
the authority of the Company to so indemnify as authorized by the law of
New Mexico.
Section 9. Committees. The Board of Directors, by resolution adopted by a
----------
majority of the full Board of Directors, may designate from among its
members one or more committees, in addition to the Executive Committee
provided for in Article III hereof, each of which, to the extent provided
in the resolution establishing such committee and designating the member or
members thereof, shall have and may exercise all the authority of the Board
of Directors, except as may be limited by law.
ARTICLE III.
Executive Committee
-------------------
Section 1. The Board of Directors may from time to time appoint by
resolution adopted by a majority of the full Board of Directors from among
its members an Executive Committee which may exercise the powers of the
Board of Directors in the management of the business, affairs and property
of the Company during intervals between the meetings of the Board of
Directors unless and until the Board of Directors shall otherwise direct.
Membership will be the Chairman of the Board and the Chairperson of each of
the standing committees of the Board.
5
<PAGE>
Section 2. A majority of the Executive Committee shall constitute a
quorum for the transaction of business and any action receiving the
affirmative vote of a majority of the members of the Executive Committee
present at any meeting shall be effective; provided, however, that the
affirmative vote of not less than three members of the Executive Committee
shall be required for any such action.
Section 3. Meetings of the Executive Committee shall be held whenever
called by the direction of the Chairman of the Board of Directors, the
president or any two members of the Executive Committee. Notice of any
meeting of the Executive Committee shall be given each member of the
Executive Committee in writing or by telephone at least 24 hours before the
time fixed for the meeting. Such notice may be waived by any member of the
Executive Committee.
ARTICLE IV.
Officers
--------
Section 1. Number, Election and Term. The officers of the Company shall
--------------------------
be a President, one or more Vice Presidents, a Secretary, a Treasurer, and
a Controller who shall be elected annually by the Board of Directors at the
annual meeting thereof and who shall hold their respective offices until
the next annual meeting or until their successor shall be elected and shall
qualify. The Board of Directors may designate one or more Vice Presidents
as "Executive" Vice Presidents and one or more Vice Presidents as "Senior"
Vice Presidents. The title of any Vice President may include words indica-
tive of the area of responsibility of such Vice President. The Board of
Directors shall designate one of the Vice Presidents as the chief financial
officer of the Company. The Board of Directors may from time to time
appoint such additional officers as the interest of the Company may require
and fix their terms and duties of office. A vacancy occurring in any office
may be filled by the Board of Directors. All officers shall hold office
subject to the Board of Directors and shall be subject to removal at any
time by the affirmative vote of a majority of the whole Board of Directors.
Election of any person as an officer of the Company shall not of itself
create contract rights.
Section 2. President. The President shall be the Chief Executive Officer
---------
of the Company and shall provide active executive management over all
operations of the Company; subject, however, to control of the Board of
Directors. The President shall have the power to appoint and discharge,
subject to the general approval or review by the Board of Directors,
6
<PAGE>
employees and agents of the Company and to fix their compensation to make
and sign contracts and agreements in the name of and on behalf of the
Company and direct the general management and control of the business and
affairs of the Company. The President may delegate from among the powers
enumerated in the preceding sentence to officers of the Company, such
responsibilities and authority as the President may determine. The Presi-
dent shall have the power to segregate the operations of the Company into
areas of responsibility. The President shall see that the books, reports,
statements and certificates required by the statute under which the Company
is organized or any other laws applicable thereto are properly kept, made,
and filed according to law; and the President shall generally do and
perform all acts which are authorized or required by law. The President
shall designate a Vice President who shall, during the absence or incapaci-
ty of the President, assume and perform all functions and duties which the
President might lawfully do if present in person and not under any incapac-
ity.
Section 3. Vice Presidents.
---------------
Section 3(a). Executive and Senior Vice Presidents. Each Vice President
------------------------------------
designated as "Executive" or "Senior Vice President" shall be responsible
for such areas and activities as assigned by the President, shall be
subject to the authority of the President and shall assist in the general
control and management of the business and affairs of the Company.
Section 3(b). Other Vice Presidents. The Vice Presidents shall be
---------------------
responsible for such areas and activities as are assigned by the President
and shall perform such duties as may be required.
Section 3(c). Assumption of Duties by a Vice President. A Vice President,
----------------------------------------
consistent with the title or duty of such Vice President, shall assume and
perform all functions and duties assigned to a superior executive during
the absence or incapacity of such superior.
Section 4. Secretary. The Secretary shall be sworn to the faithful
---------
discharge of the duties of the Secretary. The Secretary shall keep a
record in the proper books provided for that purpose of meetings and
proceedings of the Board of Directors, Executive Committee and other
Committees as may be designated by the Board and stockholders, and shall
record all votes of the directors and stockholders in a book to be kept for
that purpose. The Secretary shall notify the directors and stockholders of
the respective meetings as required by law or by the bylaws of the Company
7
<PAGE>
and shall perform such other duties as may be required by law or the bylaws
of the Company, or which may be assigned from time to time by the Board of
Directors or Executive Committee. The Secretary is authorized to appoint
one or more assistants from time to time as the Secretary deems advisable,
the assistant or assistants to serve at the pleasure of the Secretary, and
to perform the duties that are delegated by the Secretary. The assistant
or assistants so appointed shall not be officers of the Company.
Section 5. Treasurer. The Treasurer shall have the custody of all the
---------
funds and securities of the Company, and shall have the power on behalf of
the Company to sign checks, notes, drafts and other evidences of indebted-
ness, to borrow money for the current needs of the business of the Company
and to make short-term investments of surplus funds of the Company. The
Treasurer shall render to the President or directors, whenever required by
them, an account of all transactions performed as Treasurer and of the
financial conditions of the Company. The Treasurer shall perform such
other duties as may be assigned from time to time by the Board of Direc-
tors, by the Executive Committee or by the President. The Treasurer is
authorized to appoint one or more assistants from time to time as the
Treasurer deems advisable, the assistant or assistants to serve at the
pleasure of the Treasurer, and to perform the duties that are delegated by
the Treasurer. The assistant or assistants so appointed shall not be
officers of the Company.
Section 6. Controller. The Controller shall be the chief accounting
----------
officer of the Company and have full responsibility and control of the
accounting department, which department shall include all accounting
functions carried on throughout the Company and its subsidiaries. As such,
the Controller shall, subject to the approval of the Board of Directors,
the Executive Committee or the President, establish accounting policies.
The Controller shall standardize and coordinate accounting practices,
supervise all accounting records and the presentation of all financial
statements and tax returns. The Controller shall also direct the internal
auditing of the Corporation. The Controller shall have such other powers
and duties as, from time to time, may be conferred by the Board of Direc-
tors, by the Executive Committee or by the President. The Controller is
authorized to appoint one or more assistants from time to time as the
Controller deems advisable, the assistant or assistants to serve at the
pleasure of the Controller, and to perform the duties that are delegated by
the Controller. The assistant or assistants so appointed shall not be
officers of the Company.
8
<PAGE>
Section 7. Form of Appointment. In making any appointments of assis-
-------------------
tants the Secretary, Treasurer, and Controller shall use the following
form:
I, (Name), the duly elected (Title) of Public
----------------- ------------------
Service Company of New Mexico, do hereby appoint (Name)
---------------------
to serve as Assistant (Title) for the period of
------------------- --------
(date) to (date), unless this appointment is terminated
------ ---------------
earlier in writing, to assume or perform all functions and duties
which I might require and, in my absence or incapacity, which I might
lawfully do if present and not under any incapacity.
Any appointments of assistants by the Secretary, Treasurer or Controller
and any terminations of appointments shall be maintained in the records of
the Secretary's office.
ARTICLE V.
Contracts
---------
Section 1. Unless the Board of Directors shall otherwise specifically
direct, all contracts, instruments, documents or agreements of the Company
shall be executed in the name of the Company by the President, or any Vice
President, or any other employee, if approved by the President by either
administrative policy letter or specific written designation. It shall not
be necessary that the corporate seal be affixed to any contract.
Section 2. No contract or other transaction between the Company and any
other corporation owning or holding stock in this Company shall be affected
by the fact that the directors or officers of this Company are interested
in, or are directors or officers of, such other corporation. No contract or
transaction of this Company with any person or persons or firm or associa-
tion or corporation (other than one owning or holding stock in this
Company) shall be affected by the fact that any director or officer of this
Company is a party thereto or interested therein, or in any way connected
with such person or persons, firm or association, or corporation, provided
that at the meeting of the Board of Directors of this Company, making,
authorizing or confirming such contract or transaction, there shall be
present a quorum of directors not so interested, and that such contract or
transaction shall be approved or be ratified by the affirmative vote of at
least three directors not so interested.
The Board of Directors in its discretion may submit any contract, or act,
9
<PAGE>
for approval or ratification at any annual meeting of the stockholders, or
at any meeting of the stockholders called for the purpose of considering
any such act or contract; and any contract or act that shall be approved or
be ratified by the vote of the holders of a majority of the capital stock
of the Company which is represented in person or by proxy at such meeting
(provided that lawful quorum of stockholders be there represented in person
or by proxy) shall be as valid and as binding upon the Company and upon all
the stockholders as though it had been approved or ratified by every
stockholder of the Company.
ARTICLE VI.
Negotiable Instruments
----------------------
Except as otherwise provided by the Board of Directors, all checks,
drafts, bills of exchange, promissory notes and other negotiable instru-
ments shall be signed by the Chairman of the Board, the President, any Vice
President, Secretary or Treasurer.
ARTICLE VII.
Capital Stock
-------------
Section 1. Certificates of Stock. All certificates of stock shall be in
---------------------
such form as the Board of Directors may approve and shall be signed by the
President or a Vice President and by the Secretary and may be sealed with
the seal of the Company or a facsimile thereof. The signatures of the
President or Vice President and the Secretary of the Company upon a
certificate may be facsimiles. In case any officer of the Company whose
signature, whether facsimile or otherwise, shall have been placed upon any
certificate shall cease to be such officer before any certificate so signed
shall have been actually issued and delivered, such certificate may
nevertheless be issued and delivered by the Company as though the person
who had signed such certificate had not ceased to be an officer. All
certificates shall be numbered for identification. The name of the person
owning the shares represented thereby with the number of shares and the
date of issue shall be entered on the Company's books. All certificates
surrendered to the Company shall be cancelled, and no new certificates
shall be issued until a certificate or certificates aggregating the same
number of shares of the same class shall have been surrendered or
cancelled; but the Board of Directors or Executive Committee may make
proper provision, from time to time, for the issue of new certificates in
place of lost or destroyed certificates.
10
<PAGE>
Section 2. Transfer Agents and Registrars. The Company shall, if and
------------------------------
whenever the Board of Directors shall so determine maintain one or more
transfer offices or agencies, each in charge of a transfer agent designated
by the Board of Directors, where the shares of the capital stock of the
Company shall be directly transferable, and also one or more registry
offices, each in charge of a registrar designated by the Board of Direc-
tors, where such shares of stock shall be registered and no certificates
for shares of the capital stock of the Company, in respect of which one or
more transfer agents and registrars shall have been designated, shall be
valid unless countersigned by one of such transfer agents and registered by
one of such registrars. The Board of Directors may also make such addi-
tional rules and regulations as it may deem expedient concerning the issue,
transfer and registration of certificates for shares of the capital stock
of the Company.
Section 3. Transfer of Stock. Transfers of stock shall be made only upon
-----------------
the books of the Company by the holder in person or by the holder's
attorney upon surrender of certificates for a like number of shares.
Section 4. Closing of Transfer Books. The Board of Directors shall have
-------------------------
power to close the transfer books of the Company for a period not exceeding
fifty (50) days preceding the date of any meeting of stockholders 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; provided, however, that in lieu of closing the
transfer books as aforesaid, the Board of Directors may fix in advance a
date, not exceeding fifty (50) days preceding the date of any meeting of
stockholders 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 stockholders entitled to notice of and to vote at any such
meeting, 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 cases only
such stockholders as shall be stockholders of record on the date so fixed
shall be entitled to such notice of, and to vote at such meeting, or to
receive the 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 the Company after any such record
date fixed as aforesaid.
ARTICLE VIII.
11
<PAGE>
Dividends
---------
Dividends upon the stock of the Company may be declared from time to time
by the Board of Directors in its discretion and paid to stockholders from
the surplus or net profits arising from the business of the Company.
ARTICLE IX.
Books
-----
The books of the Company, except as otherwise provided by law, may be
kept outside of the State of New Mexico, at such place or places as may be
from to time designated by the Board of Directors.
The Directors shall, from time to time determine whether and to what
extent, and at what time and places, and under what conditions and regula-
tions the accounts and the books of the Company, or any of them, shall be
open to the inspection of stockholders; and no stockholder shall have any
right to inspect any book or account or document of the Company except as
conferred by the statutes of New Mexico, or authorized by the Directors.
ARTICLE X.
Corporate Seal
--------------
The common corporate seal is, and until otherwise ordered by the Board of
Directors shall be, an impression circular in form upon paper or wax
bearing the words "Public Service Company of New Mexico, Incorporated,
1917."
The seal shall be in the charge of the Secretary. If and when so directed
by the Board of Directors or by the Executive Committee a duplicate of the
seal may be kept and used by the Treasurer or by an Assistant Secretary or
Assistant Treasurer.
ARTICLE XI.
Amendments
----------
The power to alter, amend or repeal the Bylaws of the Company or adopt
new Bylaws for this Company shall be vested in the Board of Directors.
12
<PAGE>
EXHIBIT 10.50
PUBLIC SERVICE COMPANY OF NEW MEXICO
SECTION 415 PLAN
This Section 415 Plan ("Section 415 Plan") adopted as of the 1st day
of January, 1994, by Public Service Company of New Mexico, a New Mexico
corporation, (the "Company") is established to provide a supplemental retirement
plan for certain employees of the Company upon the terms and conditions set
forth herein.
ARTICLE I
Purpose
-------
1.01 Purpose. The Purpose of the Section 415 Plan is to provide
-------
for the payment of supplemental retirement benefits to Company employees whose
retirement benefits, under the Public Service Company of New Mexico Employees'
Retirement Plan (January 1, 1989) (the "Retirement Plan") have been reduced as
required by Section 415 of the Internal Revenue Code of 1986, as amended (the
"Code"), and applicable regulations and rulings promulgated thereunder. Code
Section 415 requires that qualified defined benefit retirement plans, such as
the Retirement Plan, limit the amount payable, in any one year, to a retired
Participant. The Code Section 415 limitations reduce the retirement benefits
otherwise due a Participant notwithstanding that such benefits were previously
accrued and vested pursuant to qualified retirement plans.
ARTICLE II
Participation
-------------
2.01 Participation. An employee of the Company who satisfies the
-------------
following requirements shall be entitled to participate in the Section 415 Plan,
and shall hereinafter be referred to as a "Participant." An employee of the
Company shall be entitled to participate hereunder if he or she:
(a) is a non-union employee;
(b) is a Participant in the Retirement Plan;
(c) commences receiving retirement benefits under the Retirement
Plan on or after January 1, 1994, with such benefits being
reduced by application of Code Section 415; and
(d) is neither a Participant in, nor entitled to receive benefits
under, the Public Service Company of New Mexico Restated and
Amended Accelerated Management Performance Plan (1988), the
Public Service Company of New Mexico Service Bonus Plan or any
other supplemental retirement plan or agreement or similar
arrangement with the Company or any affiliate thereof, wherein
such plan, agreement or arrangement has the effect of
overriding
<PAGE>
the limitations of Code Section 415 imposed on the Retirement
Plan.
ARTICLE III
Benefits
--------
3.01 Amount of Benefit. The benefit to which a Participant is
-----------------
entitled under this Section 415 Plan shall equal the reduction in a
Participant's overall retirement benefit under the Retirement Plan and any other
supplemental retirement plan or agreement or similar arrangement with the
Company or any affiliate thereof, as a result of the Code Section 415
limitation. The overall retirement benefit is the Participant's benefit under
the Retirement Plan or any other supplemental retirement plan or agreement or
similar arrangement with the Company or any affiliate thereof that is calculated
based upon the Participant's benefits under the Retirement Plan.
3.02 Form of Benefit. The benefit payable under Section 3.01 hereof
---------------
shall be payable pursuant to the annuity form (e.g., life annuity, or 100% joint
----
and survivor annuity) identical to the form of benefit being paid the
Participant under the Retirement Plan.
3.03 Commencement of Benefit. The benefits payable hereunder shall
-----------------------
commence on the same date the Participant commences receiving benefits under the
Retirement Plan.
3.04 Non-Duplication of Benefits. The sole purpose of providing a
---------------------------
Participant with benefits under the Section 415 Plan is to provide Company
employees who have been promised retirement benefits under the Retirement Plan
with the benefits that would have been payable had the Code Section 415
limitations not been imposed. It is not intended that any additional retirement
benefit be provided a Participant hereunder beyond the reduction caused by the
imposition of the Code Section 415 limitation and under no circumstances shall
retirement benefits be duplicated. Any Participant who is receiving benefits
under any other plan or agreement with the Company providing the benefits
intended to be provided herein shall have his or her benefits otherwise due
hereunder reduced to avoid such duplication of benefits.
ARTICLE IV
Designation of Beneficiary
--------------------------
4.01 Designation of Beneficiary. If the Participant elects a form of
--------------------------
benefit that results in survivor benefits payable to his or her beneficiary(ies)
following the death of the Participant, such beneficiary(ies) shall be the same
beneficiary(ies) as are receiving the Participant's survivor benefit under the
Retirement Plan.
ARTICLE V
2
<PAGE>
Source of Benefit Payments
--------------------------
5.01 Source of Benefit Payments. The Section 415 Plan is a
--------------------------
nonqualified, unfunded and unsecured deferred compensation arrangement. All
benefits payable hereunder shall be paid (a) from the general corporate funds of
the Company which are subject to the claims of creditors, or (b) out of any
trust the Company shall establish or authorize, provided that at all times prior
to actual payment to the Participant of his or her benefits, neither the
Participant nor his or her estate, or heirs shall (i) have any right, title or
interest whatsoever in or to, or any claim, preferred or otherwise, in or to any
particular assets of the Company or any trust that the Company may establish or
designate to aid in providing the payments described in this Plan; or (ii)
acquire any interest greater than that of any unsecured creditor in any assets
of the Company.
ARTICLE VI
Administrative and Miscellaneous Provisions
-------------------------------------------
6.01 Administrators. This Section 415 Plan shall be administered by
--------------
the Management Development and Compensation Committee of the Board of Directors
of the Company (the "Compensation Committee") or any individual or committee
appointed by the Compensation Committee to administer the Section 415 Plan (the
"Administrator"). The authority to administer the Section 415 Plan shall
include full authority, in the Administrator's sole discretion, to interpret the
Section 415 Plan document and any provision hereunder, and to determine any and
all issues pertaining thereto, including but not limited to, eligibility for
participation or benefits, the amount, form and timing of benefits, and
beneficiary designations.
6.02 Claims Procedure. The Administrator shall make all
----------------
determinations as to a Participant's right to a benefit pursuant to the Section
415 Plan. Within ninety (90) days after receipt of written notice of an
objection to benefits payable or claim for benefits, the Administrator shall
render a written decision on the objection to the benefits payable or the claim
for benefits. If the objection to benefits payable or the claim for benefits is
denied, either in whole or in part, the decision shall include:
(a) The specific reason or reasons for the denial;
(b) An indication of the specific provisions on which the denial
is based;
(c) A description of any additional material or information
necessary for the claimant to perfect the claim and any
explanation of why such material or information is necessary;
and
(d) An explanation of the Section 415 Plan appeal procedure,
3
<PAGE>
indicating that the appeal of the adverse determination must
be in writing addressed to the Administrator, and received
within sixty (60) days after the receipt by the claimant of
the Administrator's written denial of benefits. Failure to
perfect an appeal within the 60-day period shall make the
decision conclusive.
If the Participant appeals to the Administrator, he or she or his or
her duly authorized representative, must do so in writing and may submit, in
writing, whatever issues and comments he or she or his or her duly authorized
representative, feels are pertinent. The Participant or his or her duly
authorized representatives, may review pertinent documents. The Administrator
shall render a written decision on the question of the benefits payable or the
claim for benefit, setting forth the specific reasons for its decision including
a reference to the provisions of the Section 415 Plan within sixty (60) days
after receipt of the request for review, unless special circumstances (such as a
hearing) would make the rendering of a decision within the sixty (60) day limit
unfeasible, but in no event shall the Committee render a decision respecting a
denial for a claim for benefits later than one hundred twenty (120) days after
its receipt of a request for a review.
Any denial by the Administrator of Participant's claim for benefits
under the Section 415 Plan shall be stated in writing and such notice shall be
written in a manner that may be understood without legal or actuarial counsel.
6.03 Amendment. The Company reserves the right at any time and from
---------
time to time to amend this Section 415 Plan to any extent and in any manner that
it may deem advisable. Except as otherwise set forth below in this Section
6.03, no amendment or modification hereof by the Company, unless made to secure
or maintain the approval of the Section 415 Plan by the Internal Revenue Service
or other governmental agency, shall operate retroactively to reduce or divest
the then vested interest of any Participant or to reduce or divest any benefit
then payable hereunder. Notwithstanding the foregoing, if: (a) Code Section
415 is amended, repealed or modified, or (b) the Internal Revenue Service by
regulation, ruling or other administrative act interprets Code Section 415, so
as to eliminate or increase payments to a Participant under the Retirement Plan
that are, as of the effective date of this Section 415 Plan, reduced, then the
Company may amend this Section 415 Plan for the purpose of modifying or
extinguishing the Company's obligations hereunder, but only to the extent that
vested benefits hereunder are offset by an increase of benefits under the
Retirement Plan.
6.04 Controlling Law. This Section 415 Plan shall be interpreted
---------------
under the laws of the State of New Mexico.
6.05 Binding Effect. This Section 415 Plan shall be binding upon and
--------------
inure to the benefit of any successor of the Company and any such successor
shall be deemed substituted for the Company under the terms of this Section 415
Plan. As used in this
4
<PAGE>
Section 415 Plan, the term "successor" shall include any person, firm,
corporation, or other business entity which at any time, whether by merger,
purchase, or otherwise, acquires all or substantially all of the assets or
business of the Company.
6.06 No Right of Assignment. A Participant's benefits under this
----------------------
Section 415 Plan shall be subject to tax levies, court orders and orders under
state laws providing for the attachment, garnishment or levy of wages. Neither
a Participant nor any person taking on behalf of a Participant may voluntarily
anticipate, assign or alienate any benefit provided under the Section 415 Plan
and the Administrator shall not recognize any such anticipation, assignment or
alienation.
6.06 Incapacity of Payee. If the Administrator determines that any
-------------------
person to whom a benefit is payable is legally incapacitated, the Administrator
may direct that any payment becoming due to such person (unless claim shall have
been made therefor by a duly appointed legal representative) be applied for such
person's benefit, or paid to or applied for the benefit of such person's spouse,
children, a parent or other blood relative, or paid to a person with whom such
incompetent person resides, and any such payment or application so made shall be
a complete discharge of the Company's obligation.
IN WITNESS WHEREOF, the Company, by its authorized representatives,
has subscribed this Section 415 Plan as of December 31, 1993.
PUBLIC SERVICE COMPANY OF
NEW MEXICO
By
--------------------------------
BENJAMIN F. MONTOYA
President
5
<PAGE>
EXHIBIT 10.51
FIRST AMENDMENT TO THE
PUBLIC SERVICE COMPANY OF NEW MEXICO
EXECUTIVE RETENTION PLAN
The Public Service Company of New Mexico (the "Company") hereby adopts
the following First Amendment to the Public Service Company of New Mexico
Executive Retention Plan (the "Plan"), such First Amendment to be effective
January 1, 1994.
RECITALS
WHEREAS, the Company adopted the Plan effective May 1, 1990, reserving
the right in Article IX to amend the same; and
WHEREAS, the Company desires to amend the Plan, as follows:
NOW, THEREFORE, the Plan shall be, and the same hereby is, amended as
follows:
1. Article II Section R. in reference to "XLT members" is hereby
deleted in its entirety and replaced with the term [Reserved] and a new Section
K-1 is inserted between the letters K and L as follows:
K-1 "Management Committee members" shall mean those Participants
----------------------------
who are members of the Management Committee of the Company.
2. The term XLT member or XLT members as set forth in Article II
Section M.; in Article II Section N.; in Article V Section A.; and again in
Article V Section D shall be deleted and replaced with the phrase Management
Committee members.
IN WITNESS WHEREOF, the Public Service Company of New Mexico caused this
First Amendment to the Public Service Company of New Mexico Executive Retention
Plan to be executed by its authorized officers as of the date first above
written.
PUBLIC SERVICE COMPANY
OF NEW MEXICO
By
------------------------
BENJAMIN F. MONTOYA
President
ATTEST:
- ---------------------------
PATRICK T. ORTIZ
Secretary
<PAGE>
EXHIBIT 10.52
FIRST AMENDMENT TO THE
PUBLIC SERVICE COMPANY OF NEW MEXICO
PERFORMANCE STOCK PLAN
THIS FIRST AMENDMENT To The Public Service Company Of New Mexico
Performance Stock Plan (the "Plan") is made this __ day of ________, 1994, by
the Public Service Company of New Mexico (the "Company"). Terms used herein
shall have the same meaning as in the Plan, as amended by this First Amendment.
WHEREAS, the Company desires to amend the Plan to allow, in the case of
Nonofficer Participants only, for the Partial Award of Options based upon the
partial achievement of one or both of the Performance Goals;
WHEREAS, this amendment will only affect the Awards for Nonofficer
Participants, as the formula for the Performance Based Awards currently in
effect in the Plan will continue to apply to Officer Participants;
WHEREAS, Article X of the Plan grants the authority to the Board to amend
the Plan subject to certain restrictions;
WHEREAS, the Plan may be amended without shareholder approval, unless
shareholder approval is necessary to satisfy the conditions for exemption from
Section 16(b) of the Exchange Act pursuant to Rule 16b-3 promulgated thereunder;
and
WHEREAS, since the following amendment does not affect Officer
Participants, including "insiders" for the purposes of Section 16 of the
Exchange Act, it does not require shareholder approval under Rule 16b-3.
NOW, THEREFORE, consistent with its authority, the Board hereby causes the
Company to adopt the following Plan amendment:
1. New Sections 2.14A. and B are hereby added to be inserted between 2.14 and
2.15 as follows:
"2.14A. 'Nonofficer Participant' shall mean all Participants other
than Officer Participants.
2.14B. 'Officer Participant' generally will mean a Participant who is
an officer of the Company. However, the final classification of a
Participant as an Officer Participant under this Plan shall be made in the
sole discretion of the Committee."
2. Section 2.17 "Partial Award" is hereby amended in its entirety to read as
follows:
"2.17 'Partial Award' shall mean the Performance Based Awards as
described in Section 7.2 b."
<PAGE>
3. Section 7.2 is hereby amended as follows:
A. The fifth sentence of Section 7.2 shall be amended to read as follows:
"The goals for 1994 and all subsequent calendar years shall be established
by the Committee and communicated to the Participants before the
commencement of the calendar year to which such Awards pertain, or within
an administratively reasonable period of time thereafter as determined by
the Committee."
B. Section 7.2 shall be amended by deleting the following sentence set
forth therein:
"If only one of the two goals has been satisfied, Partial Awards shall be
made at year end."
4. Section 7.2b. is hereby amended in its entirety to read as follows:
"b. Partial Awards.
(i) Officer Participants. For an Officer Participant, if the
Committee determines that only one (1) of the two (2) Performance
Goals has been fully achieved, the Award of Options shall be
determined by multiplying the Target Award Percentage by fifty percent
(50%) and thereafter multiplying the result times the Salary Range
Control Point, and dividing this result by the Option Price, all
determined as of the Grant Date of the Award.
(ii) Nonofficer Participants. For a Nonofficer Participant, if
the Committee determines that only one (1) of the two (2) Performance
Goals has been fully achieved, the Award of Options for the fully
achieved Performance Goal shall be determined using the formula set
forth in Section 7.2(b)(i) above. If the Committee determines that
either one or both of the Performance Goals were only partially
achieved, the Award of Options for a partially achieved Performance
Goal shall be determined on the basis of such partial achievement.
The Award of Options for each Nonofficer Participant under this
Section 7.2b.(ii) shall be the sum of the Options determined for each
partially and fully achieved Performance Goal. The Committee shall
establish and communicate guidelines for determining the Partial Award
for partially achieved Performance Goals when it establishes and
communicates the Performance Goals pursuant to Section 7.2 above.
Such guidelines may be changed from year to year, in the sole
discretion of the Committee."
5. Except as amended by this First Amendment, the Plan is otherwise unchanged.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this First Amendment To The Public
Service Company Of New Mexico Performance Stock Plan to be executed as of the
date and year first above written, effective for all Performance Based Awards
having a Grant Date after December 31, 1993.
PUBLIC SERVICE COMPANY
OF NEW MEXICO
By
----------------------------------
Benjamin F. Montoya
President and Chief Executive Officer
<PAGE>
EXHIBIT 10.53
January 12, 1994
STIPULATION
(In connection with the application for a $30 million
reduction in retail electric rates)
1
<PAGE>
January 12, 1994
STIPULATION
Background and Introduction
- ---------------------------
This Stipulation is entered into jointly by Public Service Company of New Mexico
("PNM" or "the Company"), the Attorney General of the State of New Mexico
("AG"), the New Mexico Industrial Energy Consumers ("NMIEC"), the City of
Albuquerque ("COA"), the United States Executive Agencies ("USEA"), the New
Mexico Retail Association ("NMRA"), and the Staff ("Staff") of the New Mexico
Public Utility Commission ("NMPUC" or the "Commission"), collectively referred
to herein as the "signatories," and relates to the Company's electric utility
business and rates.
On January 11, 1993, PNM announced its intent to restructure operations in
order to achieve cost savings, reduce rates, and position itself as a
financially healthy New Mexico utility.
Since PNM's January 11, 1993 announcement, PNM's electric utility
representatives have engaged in extensive discussions with the other
signatories to ascertain various interests and needs so that resolution, as
between the signatories, of certain key issues might be achieved before
filing any related pleadings at the NMPUC. PNM and the other signatories
have focused on enabling PNM to participate in the increasingly competitive
market for electric service.
The signatories to this Stipulation recognize PNM's increasing need for
flexibility to meet changing customer needs. While specifically agreeing
to the terms and conditions as provided for in the Stipulation, the
signatories enter into the Stipulation in the spirit of facilitating PNM's
ability to compete in the future energy services marketplace and to prepare
for and respond to technological and marketplace changes.
1
<PAGE>
This Stipulation reflects the signatories' agreement on issues relative
to the following areas as they affect PNM:
1. Retail Electric Prices
2. Generation Assets
3. Financial Concerns
Accordingly, the signatories hereby stipulate and agree to the following:
I. Retail Electric Prices
----------------------
A. Cost of Service.
1. This Stipulation is supported by a cost-of-service analysis
prepared by PNM, which uses a 1992 base period cost of service
adjusted for known and measurable changes, attached as Appendix 1
hereto. The signatories request that the NMPUC waive any rules,
regulations or provisions of prior NMPUC Orders necessary to
facilitate implementation of this Stipulation.
2. Upon approval of this Stipulation, PNM will reduce retail
electric rates (not including street and private area lighting)
by approximately $30 million from 1993 levels. Proof of
revenues, which includes 11 months actual and 1 month estimated
revenues, and rate schedules are attached as Appendix 2 to this
Stipulation. The rate reduction shall be allocated among retail
customer classes pursuant to Section I.C of this Stipulation.
3. The City of Albuquerque and the Company agree to pursue the
potential sale by PNM and purchase by the City of the street
light fixtures involved
2
<PAGE>
in providing street light services. Irrespective of whether the
City and Company reach an agreement on such a transaction, it is
recognized and agreed that the Company has the ability to file a
separate rate case for Street and Private Area Lighting. This
agreement recognizes a waiver of Paragraph 5 of the Letter
Agreement entered into by the City of Albuquerque and the Company
in NMPUC Case 2409. A copy of this Letter Agreement is attached
as Appendix 3 to this Stipulation.
PNM and the City agree to work together to provide the City with
information that would allow the City to be aware of when PNM's
system is approaching a possible peaking condition. Such
information, if available to the City, will also be made
available to other customers on similar terms.
4. The signatories acknowledge that cost reduction efforts initiated
by the Company, the write-down of a portion of the Palo Verde
Nuclear Generating Station ("PVNGS") Units 1 and 2, and the
write-off of certain regulatory assets and other deferred costs
currently recovered in rates have contributed to the achievement
of this rate reduction. The write-off anticipated by the Company
as part of this Stipulation amounts to approximately $180
million, pre-tax. The effects of the write-offs are reflected in
the cost of service attached as Appendix 1.
5. The signatories acknowledge that certain cost of service matters
are of key importance to this Stipulation. Therefore, the
signatories have agreed to the following treatment of these
issues:
a. Decommissioning cost recovery for fossil-fueled generating
plants.
3
<PAGE>
- The Company shall be allowed to recover all fair, just,
and reasonable costs arising from the decommissioning
of its fossil-fueled generating plants, including
demolition, waste disposal, environmental and site
restoration.
- The Company shall not seek recovery of the first $24.4
million it spends on decommissioning Person, Prager,
and Santa Fe Stations. Nothing in this Stipulation
shall preclude the Company from seeking recovery of
decommissioning costs for Person, Prager, and Santa Fe
Stations in excess of that $24.4 million amount nor
prevent the signatories from asserting any position
with regard to the recovery of costs in excess of the
$24.4 million which would have been available to them
absent this Stipulation.
- The Commission should approve the decertification and
abandonment of Person, Prager, and Santa Fe Stations,
which relief has been requested by the Company in the
pending application docketed as NMPUC Case 2530. To
the extent that the Commuters' Committee abandonment
--------------------
tests and standards articulated in NMPUC Case 2296
apply, the decertification of Person, Prager, and Santa
Fe Stations satisfies those standards and tests.
- The land on which Person, Prager, and Santa Fe Stations
were located shall be placed in FERC Account 105,
"Plant Held for Future Use" and is not determined to be
abandoned as a result of this Stipulation. For these
specific parcels of land only and under the operation
of this
4
<PAGE>
Stipulation, prior to divesting itself of that land the
Company shall seek and obtain Commission approval and
shall demonstrate that the land being sold will not be
used and useful to the Company for electric utility
purposes within the reasonable foreseeable future.
- The signatories, who include all the parties to NMPUC
Case 2530, agree that this Stipulation, if approved and
adopted by the Commission, resolves all issues raised
in that proceeding by providing for the decertification
and abandonment of Person, Prager, and Santa Fe
Stations and the recovery of decommissioning costs for
those and other fossil-fueled generating plants under
the terms and conditions described in this Paragraph
I.A.5.a. and by incorporating the depreciation rates
proposed by the Company in NMPUC Case 2530 into the
cost of service study attached as Appendix 1 to this
Stipulation. The signatories therefore recommend that
a Final Order dismissing Case 2530 be issued
concurrently with the Commission's Final Order
approving this Stipulation and, to the extent required
by NMPUC Rule 340, those depreciation rates shall be
approved for use in 1994.
b. Regulatory treatment of existing incremental revenues from
economic development rates.
- The signatories acknowledge PNM's 1993 electric retail
revenues included in Appendix 2 to this Stipulation
include actual revenues being generated from incentive
and economic development rates.
5
<PAGE>
- Incentive and economic development rates priced above
incremental cost may benefit existing customers.
c. Regulatory treatment of book/tax temporary differences.
- The Company will fully normalize all prospective book-
tax temporary differences, and all temporary
differences previously flowed through will continue to
be reversed. This treatment is reflected in the cost
of service attached as Appendix 1 to this Stipulation.
d. Capital Structure.
(1) A capital structure based upon investment grade
guidelines issued by major credit rating agencies is an
appropriate target for the Company. The Company
intends to develop its financial plans to achieve this
capital structure.
(2) A capital structure which includes 44.19% Common, 5.47%
Preferred, and 50.34% Debt (excluding operating lease
debt) is used in the cost of service attached as
Appendix 1 in determination of the $30 million
reduction in rates. This approximates the capital
structure of the Company exclusive of the 1992 write-
downs and the approximate $180 million of write-downs
resulting from this Stipulation.
(3) The signatories are not bound by the foregoing capital
structure approach in future proceedings. In future
rate proceedings, the Company intends to describe then-
current
6
<PAGE>
market and regulatory circumstances in its presentation
of an appropriate capital structure.
B. Future Rate Path
1. The signatories have acted in good faith to develop fair, just,
and reasonable rates which are not currently anticipated to be
changed for four years and accordingly, do not intend to file or
cause the filing of a general rate case before January 1, 1998.
However, should a significant restructuring of included area
assets or unforeseen circumstances occasion a significant change
in PNM's costs requiring the need for a review of general rate
levels before January 1, 1998, the signatories will reconvene
before that change in rates is sought.
2. Gains and benefits allotted to shareholders pursuant to Sections
III. A. and B., will not be treated as utility earnings in any
rate case.
C. Rate Design
1. Rate schedules attached as Appendix 2 to this Stipulation are
intended to improve the cost/price relationship among and within
rate classes. The approximate $30 million rate reduction shall
be allocated non-proportionally among customer classes as
follows:
Residential: $6.0 million
Small Power: $1.3 million
General Power: $8.6 million
Large Power, Industrial Power, KAFB: $13.5 million
Water/Sewer: $0.6 million
Irrigation: $0.04 million
7
<PAGE>
The rates reflected in the attached rate schedules have been
specifically agreed to by the signatories.
2. The signatories understand that in the future, the Company may
need greater flexibility to competitively price services, attract
beneficial load, and offer new products and services.
3. PNM has the ability under the New Mexico Public Utility Act
(NMPUA) and applicable NMPUC rules to propose economic
development rates and/or rates designed to retain load and the
Stipulation is not, in any way intended to limit that ability.
4. Customers requesting that PNM, rather than an alternative
supplier, furnish additional reliability and/or service options
shall separately contract and pay for those options at cost plus
a reasonable profit margin, subject to the requirements of the
NMPUA and NMPUC rules.
5. Pursuant to the stipulation in NMPUC Case 2492 filed on December
14, 1993, the Fuel and Purchased Power Cost Adjustment Clause
(FPPCAC) will be eliminated after the implementation of rates
resulting from this Stipulation and base fuel costs as defined in
the stipulation in Case 2492 have been incorporated into the
cost of service attached as Appendix 1 to this Stipulation.
Elimination of PNM's FPPCAC is required in order to effectuate
the terms of this Stipulation.
8
<PAGE>
II. Generation Assets
-----------------
A. Case 2146, Part II Tests
1. PNM's interests in PVNGS Units 1 and 2 are used and useful and
are appropriately included in rates as balancing customer and
shareholder interest according to the tests set forth in Case
2146, Part II, 101 PUR 4th 126 (NMPUC 1989). As of the date this
Stipulation is filed, costs incurred for these units (not written
off as part of this Stipulation) are fully recoverable in
jurisdictional rates, as reflected in the cost of service
attached as Appendix 1 to this Stipulation.
B. Sales of Generation Assets
1. The signatories acknowledge that although PNM's included area
generating resources are used and useful, restructuring of the
Company's generation mix may result in benefits to both customers
and shareholders.
2. Future generating asset sales may need to include a mix of PVNGS
and coal-fired generation.
3. The signatories herein who intervene in any PNM proceeding
related to the sale of generating plant agree to support
expedited regulatory review of that proceeding. In that regard,
the Company agrees to notify and inform the signatories to this
Stipulation of the terms of any potential included area
generation asset sale once an agreement in principle is reached
with a potential buyer, reasonably in advance of seeking
regulatory approval. As a precondition to receiving advance
information on the terms of any potential sale, signatories will
sign reasonable confidentiality agreements if so requested by the
Company.
9
<PAGE>
5. If there is a book gain in the sale transaction, and costs or
obligations associated with the transaction are retained by the
Company, the gain allocated to shareholders under Paragraph
III.B. herein will first be used to offset such retained costs
or the estimated costs of any retained obligations. Any
retained costs or estimated costs of retained obligations
exceeding the book gain amount will be used in the overall
evaluation of the transaction to determine whether the sale
results in no customer harm. If the transaction is approved,
such costs will be included in retail customer rates.
6. The basis for any gain calculation on a sale of currently owned,
included area PVNGS will be the written-down net book value of
the asset at December 31, 1993, less depreciation through the
date of the sale, plus capital betterments and improvements
through the date of the sale.
C. Substitution of PVNGS Unit 3 for Units 1 and 2
1. The signatories acknowledge that the PVNGS Participation
Agreement currently restricts sales of a participant's interest
in the PVNGS project to an undivided portion of the entire three-
unit project, spread ratably across all three units and common
facilities.
2. At a time deemed appropriate by PNM, the Company shall be allowed
to remove from New Mexico jurisdictional rates up to one third of
its interest in each of Units 1 and 2 and replace those portions
so removed with an equal portion of Unit 3. That portion of Unit
3 so substituted shall have the same cost attributes and be given
the same regulatory treatment, including valuation, as the
removed portions of Units 1 and 2.
10
<PAGE>
III. Financial Concerns
------------------
A. Refinancing and restructuring of PVNGS leases
1. Reasonable efforts by PNM to refinance or restructure the PVNGS
Units 1 and 2 leases shall not be opposed by the signatories,
provided that the refinancing or restructuring provides
demonstrable net benefits.
2. The reduction in cost of service accruing from any future
refinancing or restructuring of the PVNGS Units 1 and 2 leases
shall be allocated 60% to shareholders and 40% to customers.
B. Net book gains made from the sale transaction of included and/or
excluded generation assets shall be allocated as follows:
1. Sale of nuclear generation -- 100% to shareholders.
2. Sale of included area coal generation matched with any nuclear
generation at a rate not more than 1 MW coal to 1 MW nuclear for
sales up to 130 MW minus the number of MW of excluded coal
generation remaining after the conclusion of NMPUC Case 2553--
100% to shareholders. Other sales of included area coal
generation matched with nuclear are not covered under this
Stipulation.
3. Sale of included area coal generation not matched with nuclear --
100% to customers.
4. Sale of excluded area coal generation remaining after the
conclusion of NMPUC Case 2553 if matched with nuclear at a rate
not more that 1 MW coal to 1 MW nuclear -- 100% to shareholders.
11
<PAGE>
5. Sale of the final 45 MW of excluded area coal generation if not
matched with nuclear shall be shared on a 50-50 basis between
customers and shareholders so that each party receives one half
of the net book gain and one half of the associated tax
benefits.
C. One hundred percent of the reduction in cost of service resulting from
the sale of included area generation assets (excluding shareholder
allocated book gains PVNGS refinancing benefits or lease restructuring
benefits) shall be allocated entirely to customers at the time a
subsequent rate change is implemented.
D. Transition Mechanism
1. If any included area PVNGS is sold, subleased, assigned, or
removed from full cost of service recovery for any reason:
a. The difference between the then current cost of PVNGS
included in jurisdictional rates and its sale price shall
continue to be recovered through rates in a manner which
conforms to appropriate accounting rules at the time.
b. The signatories have the right to oppose any sale, sublease,
assignment, or other action removing PVNGS from rates, if
such removal would cause an adverse impact on retail rates
or adversely affect the financial health of the Company.
IV. Summary
-------
This Stipulation is entered into by the signatories for the express purpose of
resolving the issues addressed herein. This Stipulation shall be filed with the
Commission for its consideration, adoption and approval with the expectation
that the matter will be docketed, public notice of the
12
<PAGE>
matter given and the matter will be set for hearing consistent with NMPUC rules.
If the Commission does not, for any reason, adopt and approve this Stipulation
in its entirety, unless otherwise agreed to by all the signatories, the
Stipulation shall be null and void and any signatory may freely assert any
position without regard to any position taken or concession made herein, and no
such position or concession made herein shall be used as evidence in this docket
or in any subsequent proceeding.
The signatories agree that the specific terms and provisions in this Stipulation
shall have no precedential effect except as specifically provided in the
Stipulation and cannot be modified except by mutual agreement of the signatories
and Commission order. Any matters not specifically addressed by this
Stipulation nor decided by the Commission in its Final Order shall not be
binding nor be relied upon by the signatories as a basis for any claim of
estoppel or res judicata in any future proceeding.
The signatories will not contest, appeal or otherwise oppose any Commission
order which in all material respects adopts and approves this Stipulation. The
signatories request that the NMPUC waive any rules, regulations or provisions of
prior NMPUC orders necessary to facilitate implementation of this Stipulation.
This Stipulation expresses the full intent, understanding and entire agreement
of the signatories concerning the subject matter hereof and no implication
should be drawn on any matter not addressed in the Stipulation. Appendices
attached to this Stipulation shall not be used to demonstrate that any
agreements have been reached among the signatories other than those set forth in
the written language of this Stipulation. If there are any inconsistencies
between the language of the Stipulation and the Appendices attached hereto, the
language of the Stipulation shall control. This Stipulation shall be binding
upon and inure to the benefit of the signatories' successors and assigns.
13
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO
By: /s/ Sarah D. Smith, Esq.
--------------------------------------------
Sarah D. Smith, Esq.
Alvarado Square MS-0806
Albuquerque, NM 87158
(505) 848-4903
FAX (505) 848-2338
STAFF OF THE NEW MEXICO PUBLIC UTILITY COMMISSION
By: /s/ Anastasia S. Stevens, Esq.
-----------------------------------------
Anastasia S. Stevens, Esq.
224 East Palace Avenue
Santa Fe, NM 87501-2013
(505) 827-6946
FAX (505) 827-6973
ATTORNEY GENERAL OF THE STATE OF NEW MEXICO
By: /s/ Charles F. Noble, Esq.
------------------------------------------
Charles F. Noble, Esq.
Gary Epler, Esq.
P.O. Drawer 1508
Santa Fe, NM 87501
(505) 827-6000
FAX (505) 827-5826
14
<PAGE>
NEW MEXICO INDUSTRIAL ENERGY CONSUMERS
By: /s/ Steven S. Michel, Esq.
------------------------------------------
Steven S. Michel, Esq.
368 Hillside Avenue
Santa Fe, NM 87501
(505) 989-8731
FAX (505) 989-8064
NEW MEXICO RETAIL ASSOCIATION
By: /s/ Lewis O. Campbell, Esq.
-------------------------------------------
Lewis O. Campbell, Esq.
Campbell, Pica, Olson & Seegmiller
PO Box 35459
Albuquerque, NM 87176
(505) 883-9110
UNITED STATES EXECUTIVE AGENCIES
By: telephonic approval given
Anastasia Stevens for
--------------------------------------------
Col. Bruce Barnard, Esq.
Capt. David D. Jividen, Esq.
Utility Litigation Team
General Litigation Division
139 Barnes Drive, Suite 1
Tyndall AFB, FL 32403-5319
(904) 283-6347
FAX (904) 283-6499
15
<PAGE>
CITY OF ALBUQUERQUE
By: /s/ Nann M. Houliston, Esq.
-------------------------------------------
Nann M. Houliston, Esq.
P.O. Box 1293
Albuquerque, NM 87103
(505) 768-5358
FAX (505) 768-5305
16
<PAGE>
EXHIBIT 10.54
EMPLOYMENT RETIREMENT AND RELEASE AGREEMENT
THIS EMPLOYMENT RETIREMENT AND RELEASE AGREEMENT ("the "Agreement") by
and between the Public Service Company of New Mexico, a New Mexico corporation,
(the "Company") and William M. Eglinton (the "Employee"), is effective as of the
date the Employee signs the Agreement as set forth below.
R E C I T A L S
WHEREAS, Employee has been continuously employed by the Company since
June 15, 1970;
WHEREAS, Employee is retiring from the Company effective December 31,
1993 and he is also resigning from all other positions he holds with Company, or
its Affiliates (including any affiliated entity over which the Company, directly
or indirectly, has a controlling interest (an "Affiliate"));
WHEREAS, the Employee originally desired to retire in February, 1993,
at which time he was serving as Executive Vice President/Chief Operating Officer
of the Company;
WHEREAS, the management duties and responsibilities of the
President/Chief Executive Officer and the Executive Vice President/Chief
Operating Officer were combined in 1993, and the Company requested that Employee
remain with the Company past his desired retirement date, through the end of
1993 if necessary, to assist in the transition;
WHEREAS, in partial consideration for agreeing to stay on during the
transition period, the Company agreed to provide Employee with severance
benefits equal to the enhanced severance benefits as described in the Public
Service Company of New Mexico Non-Union Severance Plan in effect in February,
1993 (the "Severance Plan") to be paid to Employee, pursuant to the following
terms and conditions; and
WHEREAS, the Employee is retiring and will be receiving retirement
benefits pursuant to various Company sponsered qualified and nonqualified
arrangements, unrelated to the severance benefits being provided herein.
NOW, THEREFORE, in consideration of the promises and benefits set forth
herein and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged by the parties hereto, it is hereby agreed as
follows:
1. EMPLOYEE'S RETIREMENT. Employee is retiring from the Company and,
---------------------
he hereby also agrees to resign from any and all other positions he currently
holds with Company and Affiliates thereof, including all officer, committee, and
director positions
<PAGE>
currently held with such entities, such retirement and resignations to be
effective as of December 31, 1993, (the "Retirement Date").
2. SEVERANCE BENEFITS. Company agrees to provide Employee, the
------------------
following severance benefits:
(a) SEVERANCE PAY. Severance Pay totaling $130,996, which
-------------
consists of (i) four (4) months of base salary (a total of $55,552 ) plus (ii)
one week of salary for each year of service (a total of $75,444).
(b) EMPLOYMENT CONTINUATION PAY. Those employees who are
---------------------------
entitled to receive benefits pursuant to the Severance Plan also receive
additional compensation for a total of ninety (90) days, which will also be
provided to Employee, (a total of $41,664) in addition to the Severance Pay
set forth above.
(c) PLACEMENT ASSISTANCE. The Employee shall also receive a
--------------------
payment for placement assistance equal to one month of base salary (totaling
$13,888) plus 10% of base salary (totaling $16,665) for a total placement
assistance payment of $30,553.
(d) HEALTH CARE COVERAGE. The Employee shall receive Health Care
--------------------
Benefits for the next six (6) calendar months immediately following the
Employee's Retirement Date, with the Company paying for all such Health Care
Benefits for the Employee and his or her enrolled eligible dependents on such
terms and conditions as was provided by the Company immediately prior to the
Retirement Date. The Employee will not be allowed to change his level of
benefits (including the elected family coverage) during such six (6) month
period. If Employee was receiving a monthly refund immediately prior to his
Retirement Date due to the elected level of Health Care Benefits, he will
continue to receive such refund during such six (6) month period. If the
Employee was required to contribute to the monthly cost of the Health Care
Benefits, (e.g., by payroll withholding) he will be required to continue making
----
any applicable monthly premium payments to retain the level of coverage being
provided immediately prior to such Retirement Date. "Health Care Benefits" as
used herein shall mean the medical and dental benefits provided to Employee
under the PNM Benefit Trust and Master Plan, maintained by the Company, although
the Company reserves the right from time to time, in its absolute and sole
discretion, to amend such plan, in any and all respects, including the right to
reduce or change the level of benefits provided thereunder, or to provide
alternative forms of benefits.
(e) LIFE INSURANCE. Company will provide term life insurance to
--------------
Employee in the amount of $10,000 for the six (6) calendar months immediately
following the Retirement Date.
3. PAYMENT OF BENEFITS. The payment for the benefits described in
-------------------
paragraphs 2 (a) through (c) above, shall be made to the Employee at the end of
the seven (7) day revocation period for this Agreement, without the same being
revoked by Employee.
2
<PAGE>
4. RELEASE PROVISIONS. Various state and federal statutes (laws)
------------------
prohibit employment discrimination based on age, sex, race, color, national
origin, religion, ancestry, physical or mental handicap and disability, mental
condition or veteran status. These statutes are enforced through state, federal
and local agencies, including the EEOC and the New Mexico Department of Labor,
Human Rights Division. Employee should carefully consider this Agreement and
the Release provisions of this Section 4, and thoroughly understand its effect
before signing it. Employee is strongly encouraged to consult with his own
attorney before signing this Agreement. Employee understands that the decision
to consult with an attorney is solely the decision of Employee. Employee
acknowledges that he has been given a period of at least twenty-one (21) days
(the "Review Period") to review and consider this Agreement before signing it.
Employee understands that he may use as much of this Review Period as he wishes
prior to signing. Employee may revoke this Agreement within seven (7) days
after signing it and this Agreement will become effective and enforceable only
after this revocation period has expired. Revocation will be made by returning
a copy of this Agreement to Karen Janway of the Company with a written signature
in the space provided at the end of the Agreement indicating that Employee has
elected to revoke this Agreement. For this revocation to be effective, written
notice must be received by the Company no later than the close of business on
the seventh (7th) day after Employee signs this Agreement. If Employee revokes
this Agreement, it shall not be effective nor enforceable and Employee will not
receive the Benefits provided under this Agreement.
(A) RELEASE OF THE COMPANY. BY SIGNING THIS AGREEMENT, EMPLOYEE
----------------------
AGREES TO RELEASE AND DISCHARGE THE COMPANY AND AFFILIATES, THEIR DIRECTORS,
OFFICERS, AGENTS, SUPERVISORS, EMPLOYEES, SUBSIDIARIES AND SUCCESSORS FROM ANY
AND ALL CLAIMS WHICH EMPLOYEE HAS OR MAY HAVE ARISING OUT OF OR RELATED TO
EMPLOYEE'S RELATIONSHIP, IN ANY CAPACITY, WITH THE COMPANY OR AFFILIATES OR THE
RETIREMENT FROM THE COMPANY OR AFFILIATES ("CLAIMS"). THIS AGREEMENT INCLUDES,
BUT IS NOT LIMITED TO ANY CLAIMS ARISING UNDER TITLE VII OF THE CIVIL RIGHTS
ACT, AS AMENDED, WHICH PROHIBITS DISCRIMINATION BASED ON RACE, COLOR, NATIONAL
ORIGIN, RELIGION, OR SEX; THE AGE DISCRIMINATION IN EMPLOYMENT ACT, WHICH
PROHIBITS DISCRIMINATION BASED ON AGE; THE EQUAL PAY ACT, WHICH PROHIBITS PAYING
MEN AND WOMEN UNEQUAL PAY FOR EQUAL WORK; THE REHABILITATION ACT OF 1973, WHICH
PROHIBITS DISCRIMINATION BASED ON HANDICAP; THE AMERICANS WITH DISABILITIES ACT,
WHICH PROHIBITS DISCRIMINATION BASED UPON DISABILITY; THE VIETNAM ERA VETERANS
READJUSTMENT ACT OF 1974, WHICH PROHIBITS DISCRIMINATION AGAINST VETERANS; THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974 ("ERISA"), WHICH GOVERNS RIGHTS
IN EMPLOYEE BENEFIT PLANS; THE NEW MEXICO HUMAN RIGHTS ACT, WHICH PROHIBITS
DISCRIMINATION BASED ON RACE, COLOR, NATIONAL ORIGIN, RELIGION, ANCESTRY, SEX,
OR MENTAL OR PHYSICAL HANDICAP; OR ANY OF THESE STATUTES, AS AMENDED, AS OF THE
DATE OF SIGNING OF THIS AGREEMENT, OR ANY OTHER FEDERAL, STATE, OR LOCAL
STATUTE, LAW, EXECUTIVE ORDER OR REGULATION. THIS AGREEMENT ALSO INCLUDES A
RELEASE BY EMPLOYEE FOR ANY CLAIMS ARISING FROM STATE OR FEDERAL COMMON LAW OR
STATUTE INCLUDING ANY CLAIMS RELATING TO THE COMPANY'S RIGHT TO TERMINATE ITS
EMPLOYEES, INCLUDING BUT NOT LIMITED TO ANY CLAIMS FOR WRONGFUL DISCHARGE,
RETALIATORY DISCHARGE, BREACH OF COVENANT OF GOOD FAITH AND FAIR DEALING OR
BREACH OF EMPLOYMENT CONTRACT. EMPLOYEE AGREES NOT TO FILE ANY LAWSUIT OR
3
<PAGE>
ASSERT ANY CLAIM, WITHOUT LIMITATION, BASED UPON THE FOREGOING STATE OR FEDERAL
COMMON LAWS OR STATUTES.
THIS AGREEMENT DOES NOT EXTEND TO A RELEASE OF THE COMPANY FOR ANY
BENEFITS PAYABLE PURSUANT TO THE AGREEMENT, NOR TO ANY BENEFITS THAT EMPLOYEE
MIGHT OTHERWISE BE ENTITLED PURSUANT TO ANY OF THE COMPANY'S PENSION PLAN (AS
THAT TERM IS DEFINED IN SECTION 3(2)(A) OF ERISA), THE PNM BENEFIT TRUST AND
MASTER PLAN, ANY HEALTH MAINTENANCE ORGANIZATION AND BENEFITS MY WAY, OR THE PNM
RESTATED AND AMENDED ACCELERATED MANAGEMENT PERFORMANCE PLAN (1988). PURSUANT
TO 29 U.S.C. (S) 626, THIS AGREEMENT DOES NOT EXTEND TO ANY CLAIMS OR RIGHTS
UNDER THE FEDERAL AGE DISCRIMINATION IN EMPLOYMENT ACT WHICH MAY ARISE OUT OF
THE ACTIONS OF THE COMPANY OR AN AFFILIATE AFTER THE DATE OF THIS AGREEMENT.
NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, NOTHING HEREIN SHALL BE
CONSTRUED AS TO ABROGATE OR SUPERSEDE ANY OBLIGATION OR AGREEMENT OF THE COMPANY
OR AFFILIATES THAT MAY EXIST OUTSIDE OF THIS AGREEMENT, PURSUANT TO APPLICABLE
BYLAW PROVISIONS OF THE COMPANY OR AFFILIATES, TO INDEMNIFY EMPLOYEE, OR TO
PROVIDE EMPLOYEE WITH DIRECTOR AND OFFICER LIABILITY INSURANCE. THIS AGREEMENT
SHALL NOT INCREASE OR ADVERSELY IMPACT ANY SUCH RIGHTS OR OBLIGATIONS TO WHICH
EMPLOYEE MAY BE ENTITLED UNDER SUCH INDEMNIFICATION OR DIRECTORS AND OFFICERS
LIABILITY INSURANCE REFERRED TO IN THE IMMEDIATELY PRECEDING SENTENCE.
(B) NO RELEASE OF EMPLOYEE. THE COMPANY AND AFFILIATES DO NOT RELEASE
----------------------
EMPLOYEE FROM ANY CLAIM WHICH THE COMPANY OR AN AFFILIATE HAS OR MAY HAVE
AGAINST EMPLOYEE ARISING OUT OF OR RELATING TO EMPLOYEE'S RELATIONSHIP, IN ANY
CAPACITY, WITH THE COMPANY OR AFFILIATES. THIS AGREEMENT ALSO DOES NOT RELEASE
EMPLOYEE FOR EXPRESSLY CONTRACTED DEBTS OR LOANS DUE THE COMPANY OR AFFILIATES,
EVIDENCED BY WRITTEN NOTES OR AGREEMENTS, OR FOR WILLFUL, WANTON OR
INTENTIONALLY WRONGFUL ACTS, NOR DOES THIS AGREEMENT EXTEND TO MATTERS OR EVENTS
OCCURRING AFTER THE DATE OF THIS AGREEMENT.
5. CONFIDENTIAL INFORMATION.
------------------------
(a) Employee Acquired Confidential Information. Except as required by
------------------------------------------
law, Employee agrees to keep confidential all "Confidential Information" (as
defined in this Agreement) obtained during the course of employment with the
Company and the positions he has held with Affiliates. Employee agrees that he
will not reveal any Confidential Information to any other person, corporation or
entity, without the prior written consent from an authorized Company
representative. The term "Confidential Information" as used in this Agreement
means information, written or otherwise, which Employee has received in the
course of his relationship, in any capacity with the Company or Affiliates and
includes, without limitation, all reports, forecasts, contracts, customer
information, confidential commercial information, trade secrets, business
secrets, personnel information or any information that is not available to the
general public. Any information, analysis or interpretation which is public
information as a result of (A) a public filing made by the Company or Affiliates
or (B) information supplied by the Company or Affiliates pursuant to formal
discovery procedures (unless such information, analysis or interpretation is
public as a result of a breach of this Agreement) shall not be considered
Confidential Information.
4
<PAGE>
(b) Protective Order. In the event that Employee, is requested or
----------------
required to disclose the Confidential Information pursuant to Section 5(a)
above, it is agreed that Employee shall provide the Company with prompt written
notice of such request(s) at least ten (10) days prior to making any such
disclosure and advise whether or not the Employee intends to seek an appropriate
protective order to preclude disclosure of such information. If Employee seeks
a protective order, the Company or any Affiliate may join in such action. If
Employee does not seek a protective order, then the Company or an Affiliate
shall have such right to seek a protective order. The parties agree to
cooperate in seeking a protective order if any party hereto so requests.
If Employee seeks such protective order, without the Company or the
Affiliate joining such action, or if the Company and/or the Affiliate commences
such action, without Employee seeking or joining in such action, then the party
seeking such protective order shall pay the attorney fees and expenses
associated therewith, including the reasonable attorney fees and costs of any
other party to this Agreement who requires such legal counsel to protect his or
its interest pursuant to such action. If Employee or the Company (and/or
Affiliate) both join in such action, then each shall be responsible for his or
its respective attorney fees and costs. If, in the absence of a protective
order or the receipt of a waiver hereunder, a party is legally bound, in the
written opinion of its counsel, to disclose the Confidential Information, it may
legally do so without a breach of this Agreement.
6. AGREEMENT TO ASSIST COMPANY. Employee agrees to assist the
---------------------------
Company when requested from time to time in the future, such as in providing
testimony or providing information to the Company or its counsel.
7. ACCORD AND SATISFACTION. Employee agrees that the payments and
-----------------------
benefits provided for pursuant to this Agreement and the provisions included
hereunder constitute full settlement and satisfaction of all claims released by
Employee as described in Section 4(a), and agrees that this Agreement and the
benefits provided pursuant to this Agreement are not to be construed as an
admission of liability by the Company, Affiliates, or their directors, officers,
supervisors, agents, employees or any other persons or entities being released.
Employee further agrees that acceptance of the payments and benefits provided
under this Agreement constitute a waiver of all rights Employee may have to
pursue any rights and privileges under any internal grievance procedure or
policy.
8. ENTIRE AGREEMENT. The benefits provided hereunder are in lieu of
----------------
any other benefits to which Employee may be eligible under (i) severance plans
(including employment option programs) or agreements maintained by Company or
Affiliates thereof (including any right to receive a notice of position
impaction under Company or Affiliates severance plans, which right is hereby
specifically waived), (ii) executive or employee retention plans or similar
type change in control plans or agreements maintained by Company or Affiliates
thereof, or (iii) any other benefit plan of the Company or its Affiliates
(including any Executive Medical Plan benefits), not otherwise mentioned in the
following sentence of this paragraph. The benefits provided hereunder are not,
however, in lieu of nor is the
5
<PAGE>
Agreement intended to increase or decrease or in any way impact the benefits
otherwise provided to Employee for (i) health care benefits to which Employee
may otherwise be entitled pursuant to the PNM Benefit Trust and Master Plan
and PNM Benefits My Way and (ii) vested pension benefits which may otherwise
be available to him pursuant to the PNM Employees' Retirement Plan, the PNM
Master Employee Savings Plan, the PNM Employee Stock Ownership Plan or the PNM
Restated and Amended Accelerated Management Performance Plan (1988), as the
such plans may be amended from time to time.
9. PAYROLL TAXES. Any amounts due pursuant to this Agreement shall
-------------
be reduced by applicable federal, social security (FICA) (Employee's portion
only) and state payroll withholding taxes.
10. ARBITRATION. Any dispute, controversy or claim arising out of or
-----------
relating to the execution of this Agreement, including but not limited to the
rights, duties and obligations under this Agreement, shall be determined by
binding arbitration pursuant to the Uniform Arbitration Act (S) 44-7-1, et seq.
NMSA (1978) with each party to bear its own costs and attorney's fees. The
presiding judge of the Second Judicial District Court, or his or her designee,
shall provide a list of three (3) attorneys for selection as arbitrator. Within
seven (7) days after the issuance of this list, each party may strike from the
list one (1) name. The first attorney remaining on the list shall then be
appointed as arbitrator. All expenses of the arbitrator shall be shared equally
by the parties.
11. CONTROLLING LAWS. This Agreement shall be interpreted under the
----------------
laws of the State of New Mexico.
12. HEADINGS. The headings and subheadings in this Agreement are
--------
inserted for convenience and reference only and are not to be used in construing
this Agreement or any provision thereof.
13. REVOCATION CONTINGENCY. It is hereby agreed that the benefits
----------------------
provided hereunder are contingent upon the Employee properly completing and
delivering this Agreement without revoking the same as otherwise provided in
Section 4 hereof.
14. SIGNATURE BY EMPLOYEE. Employee has twenty-one (21) days from the
---------------------
date this Agreement is delivered to him to sign and return it to the Company.
If he does not sign, as provided below, and return the same within the twenty-
one (21) day period, this Agreement shall no longer be of any force or effect.
Following the signing of the Agreement by the Employee, he shall have seven (7)
days to revoke the same by returning a revoked copy of the Agreement to the
Company. The date of the signature by the Employee shall be determined by the
date set forth in the notarial acknowledgment with respect to such signature.
EMPLOYEE HAS CAREFULLY READ AND FULLY UNDERSTANDS ALL OF THE PROVISIONS
OF THIS RETIREMENT AND RELEASE AGREEMENT WHICH SETS FORTH THE ENTIRE AGREEMENT
BETWEEN (I)
6
<PAGE>
THE COMPANY AND EMPLOYEE WITH REGARD TO EMPLOYEE'S EMPLOYMENT WITH THE
COMPANY, AND HIS RETIREMENT AND (II) AFFILIATES AND EMPLOYEE WITH REGARD TO
POSITIONS EMPLOYEE HELD WITH AFFILIATES, AND EMPLOYEE HEREBY ACKNOWLEDGES THAT
EMPLOYEE HAS NOT RELIED UPON ANY REPRESENTATION OR STATEMENTS, WRITTEN OR
ORAL, NOT SET FORTH IN THIS DOCUMENT, WITH RESPECT TO THIS AGREEMENT OR (I)
AND (II) ABOVE.
IN WITNESS WHEREOF, the parties hereto, have signed this Agreement to
be effective as of the date signed by the Employee.
PUBLIC SERVICE COMPANY OF NEW
MEXICO, INC.
By /s/ Benjamin F. Montoya
---------------------------------------
BENJAMIN F. MONTOYA,
President and Chief Executive Officer
EMPLOYEE
--------
/s/ William M. Eglinton
---------------------------------------
WILLIAM M. EGLINTON
STATE OF NEW MEXICO )
) ss:
COUNTY OF BERNALILLO )
The foregoing instrument was acknowledged before me this 20th day of
January, 1994, by Benjamin F. Montoya, its President and Chief Executive
Officer, on behalf of Public Service Company of New Mexico.
/s/ Samantha Street
-------------------------------
NOTARY PUBLIC
My commission expires:
11/3/97
7
<PAGE>
STATE OF NEW MEXICO )
) ss:
COUNTY OF BERNALILLO )
The foregoing instrument was acknowledged before me this 20th day of
January, 1992, by WILLIAM M. EGLINTON.
/s/ Maria G. Zehrung
-------------------------------
NOTARY PUBLIC
My commission expires:
January 30, 1996
8
<PAGE>
At an April 8, 1993 executive session of the Management Development and
Compensation Committee attended by Joyce Godwin, Bob Price, and Paul Roth, the
following was agreed to regarding severance pay for J. T. (John) Ackerman and
W. M. ("Bill") Eglinton the incumbents mentioned in point 3.
1. The Committee acknowledged these personnel exclusions
when the board adopted the company's impaction plan as
it applies to officers and senior management.
2. The Committee affirmed the Board's decision to combine
the management duties and responsibilities of President/
Chief Executive Officer with Executive Vice President/
Chief Operating Officer position.
3. The Committee affirmed the desire of the Board that
incumbents commit to remain with the Company for a
period of time that could be as long as the balance
of 1993 to provide for a smooth transition.
4. The Committee affirmed it's commitment to provide
compensation at separation/retirement equivalent to the
enhanced severance plan available to all impacted
employees, that was effective at the time of the commit-
ment by the Committee (4092)
The Committee thanked Ms. Zanotti, Ms. Barsky and Mr. Toevs for all their
work in regard to the different plans.
The meeting was adjourned at 3:45 p.m.
/s/ Elizabeth F. DeRockie
------------------------------
Secretary of the Meeting
Mgmt. Dev. & Comp. Comm.
April 5, 1993
<PAGE>
EXHIBIT 10.55
RECEIVABLES PURCHASE AGREEMENT
Dated as of August 2, 1993
Among
PUBLIC SERVICE COMPANY OF NEW MEXICO
as the Seller
-------------
and
CXC INCORPORATED
as the Purchaser
----------------
and
CITICORP NORTH AMERICA, INC.
as the Agent
------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
PRELIMINARY STATEMENTS.................................................... 1
ARTICLE I - DEFINITIONS................................................... 2
SECTION 1.01. Certain Defined Terms................................. 2
Adverse Claim................................................... 2
Affiliate....................................................... 2
Agent's Account................................................. 2
Alternate Base Rate............................................. 2
Assignee Rate................................................... 3
Business Day.................................................... 4
Capital......................................................... 4
CD Reserve Percentage........................................... 4
Collateral...................................................... 4
Collection Agent................................................ 5
Collection Agent Agreement...................................... 5
Collection Agent Fee............................................ 5
Collections..................................................... 5
Credit and Collection Policy.................................... 5
CXC............................................................. 5
Designated Account.............................................. 5
ERISA........................................................... 6
Eurocurrency Liabilities........................................ 6
Eurodollar Rate................................................. 6
Eurodollar Rate Reserve Percentage.............................. 6
Event of Termination............................................ 6
Fee Agreement................................................... 6
Financing Component............................................. 6
Fixed Period.................................................... 7
Fixed Rate...................................................... 8
Obligor......................................................... 9
Person.......................................................... 9
Purchase Date................................................... 10
Purchaser....................................................... 10
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
Purchaser Rate.................................................. 10
Rate Rider...................................................... 11
Receivable...................................................... 11
Recoverable Amounts............................................. 11
Regulatory Authority............................................ 11
Related Security................................................ 11
Seller Report................................................... 11
Settlement Period............................................... 12
Significant Subsidiary.......................................... 12
Surcharge Statement............................................. 12
Tariffs......................................................... 12
Termination Date................................................ 12
UCC............................................................. 13
Yield........................................................... 13
SECTION 1.02. Accounting and Other Terms............................ 13
ARTICLE II - AMOUNTS AND TERMS OF THE PURCHASES;
CONDITIONS OF PURCHASES........................................ 14
SECTION 2.01. Purchase Facility..................................... 14
SECTION 2.02. Purchases of Receivables.............................. 14
SECTION 2.03. Settlement Procedures................................. 15
SECTION 2.04. Recourse for Yield.................................... 17
SECTION 2.05. Fees.................................................. 17
SECTION 2.06. Payments and Computations, Etc........................ 17
SECTION 2.07. Increased Costs....................................... 18
SECTION 2.08. Conditions Precedent to Purchase...................... 19
ARTICLE III - REPRESENTATIONS AND WARRANTIES.............................. 22
SECTION 3.01. Representations and Warranties........................ 22
ARTICLE IV - COVENANTS.................................................... 25
SECTION 4.01. Covenants of the Seller............................... 25
ARTICLE V - PLEDGE OF COLLATERAL; RIGHTS;
REMEDIES; DUTIES.................................................. 29
SECTION 5.01. Grant of Security Interest............................ 29
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 5.02. Delivery of Records and Other Information............. 29
SECTION 5.03. Seller Remains Liable................................. 29
SECTION 5.04. Further Assurances.................................... 29
SECTION 5.05. Rights of the Seller Prior to Event of
Termination.......................................... 30
SECTION 5.06. Obligations Upon Event of Termination................. 30
SECTION 5.07. Agent Appointed Attorney-in-Fact...................... 31
SECTION 5.08. Agent May Perform..................................... 31
SECTION 5.09. The Agent's Duties.................................... 31
ARTICLE VI - INDEMNIFICATION.............................................. 32
SECTION 6.01. Indemnities by the Seller............................. 32
ARTICLE VII - EVENTS OF TERMINATION....................................... 34
SECTION 7.01. Events of Termination................................. 34
ARTICLE VIII - MISCELLANEOUS.............................................. 37
SECTION 8.01. Amendments, Etc....................................... 37
SECTION 8.02. Notices, Etc.......................................... 37
SECTION 8.03. Assignability......................................... 37
SECTION 8.04. Costs, Expenses and Taxes............................. 38
SECTION 8.05. No Proceedings........................................ 39
SECTION 8.06. Confidentiality....................................... 39
SECTION 8.07. Credit Enhancement.................................... 39
SECTION 8.08. Third Party Beneficiary............................... 40
SECTION 8.09. GOVERNING LAW......................................... 40
SECTION 8.10. Execution in Counterparts............................. 40
SECTION 8.11. Survival of Termination............................... 40
</TABLE>
EXHIBITS
Exhibit A Credit and Collection Policy
Exhibit B Form of Seller Report
Exhibit C Tariffs
Exhibit D Form of Opinion of Counsel to the Seller
Exhibit E Address of GCNM where records are kept
iii
<PAGE>
RECEIVABLES PURCHASE AGREEMENT
Dated as of August 2, 1993
PUBLIC SERVICE COMPANY OF NEW MEXICO, a New Mexico corporation (the
"Seller"), CXC INCORPORATED, a Delaware corpo-ration ("CXC"), and CITICORP NORTH
AMERICA, INC., a Delaware corporation ("CNAI"), as agent (the "Agent") for the
Purchaser, agree as follows:
PRELIMINARY STATEMENTS. The New Mexico Public Utility Commission (the
"Commission"), by its order in Case No. 2183 (the "Order"), has authorized Gas
Company of New Mexico ("GCNM"), a division of the Seller, to collect the
Recoverable Amounts from its customers. The "Recoverable Amounts" (as more
particularly defined in Section 1.01) comprise two parts:
(1) "Take or Pay Costs" are amounts paid in connection with the
settlement of claims by producers that GCNM or its Affiliate, Sunterra Gas
Gathering Company ("SGGC"), or, in some cases, interstate pipeline
companies, failed to comply with certain contractual obligations to
purchase, or, failing purchase, to pay for, specified quantities of gas;
Take or Pay Costs are recoverable through GCNM's Rate Rider No. 8 (the
"Rate Rider"), which has been approved by the Commission in Case No. 2340.
(2) "MDL-403 Costs" are costs paid by GCNM or SGGC to settle price
disputes under contracts that were the subject of federal multidistrict
anti-trust litigation bearing the docket number MDL-403; GCNM will be
entitled to recover all MDL-403 Costs determined by the Commission to have
been prudently incurred and to be otherwise just and reasonable; MDL-403
Costs are recoverable through the Rate Rider.
The Seller is prepared to sell to the Purchaser Receivables representing the
Recoverable Amounts and the Purchaser is prepared to purchase such Receivables
on the terms set forth herein. Accordingly, the parties agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this Agreement the
---------------------
following terms shall have the following meanings (such meanings to be equally
applicable to the singular and plural forms of the terms defined):
"Adverse Claim" means a lien, security interest or other charge or
-------------
encumbrance, or any other type of preferential arrangement.
"Affiliate" means, as to any Person, any other Person that, directly
---------
or indirectly, is in control of, is controlled by or is under common control
with such Person or is a director or officer of such Person.
"Agent's Account" means the special account (account number 4060-8256)
---------------
of the Agent maintained at the office of Citibank, N.A. at 399 Park Avenue, New
York, New York.
"Alternate Base Rate" means a fluctuating interest rate per annum as
-------------------
shall be in effect from time to time, which rate shall be at all times equal to
the higher of:
(a) the rate of interest announced publicly by Citibank, N.A. in
New York, New York, from time to time as Citibank, N.A.'s base rate;
or
(b) 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 such day is not a Business Day, on the next
succeeding Business Day) for the three-week period ending on the
previous Friday by Citibank, N.A. 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
Citibank, N.A. from three New
2
<PAGE>
York certificate of deposit dealers of recognized standing selected by
Citibank, N.A., 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.
"Assignee Rate" for any Fixed Period for the Receivables means an
-------------
interest rate per annum as determined by the Agent equal to
(x) 1% per annum above the Eurodollar Rate for such Fixed Period; or
(y) 1% per annum above the sum of:
(a) the rate per annum obtained by dividing (i) the consensus bid
rate determined by Citibank, N.A. (rounded upward to the nearest whole
multiple of 1/100 of 1% per annum, if such consensus bid rate is not such a
multiple) for the bid rates per annum, at 9:00 A.M. (New York City time)
(or as soon thereafter as practicable on the first day of such Fixed
Period), of New York certificate of deposit dealers of recognized standing
selected by Citibank, N.A. for the purchase at face value of certificates
of deposit of Citibank, N.A. in New York City in an amount substantially
equal to the Capital of the Receivables on such first day and with a
maturity equal to such Fixed Period, by (ii) a percentage equal to 100%
minus the CD Reserve Percentage for such Fixed Period, and
(b) the annual assessment rate per annum estimated by Citibank, N.A.
on the first day of such Fixed Period for determining the then current
annual assessment payable by Citibank, N.A. to the Federal Deposit
Insurance Corporation (or any successor) for insuring U.S. dollar deposits
of Citibank, N.A. in the United States;
provided, however, that in the case of
- -------- -------
(i) any Fixed Period on or prior to the first day of which a
Purchaser shall have notified the Agent that the introduction of or
any change in or in the interpretation of any law or regulation makes
it unlawful, or any central bank or other governmental authority
asserts that it is unlawful, for such Purchaser to fund such
Receivables at the Assignee Rate set forth above (and such
3
<PAGE>
Purchaser shall not have subsequently notified the Agent that such
circumstances no longer exist),
(ii) any Fixed Period of one to (and including) 13 days, or
(iii) any Fixed Period as to which the Agent does not receive
notice, no later than 12:00 noon (New York City time) on the third
Business Day preceding the first day of such Fixed Period, that the
Receivables will not be funded by issuance of commercial paper,
the "Assignee Rate" for such Fixed Period shall be an interest rate per annum
-------------
equal to 1% per annum above the Alternate Base Rate in effect on the first day
of such Fixed Period; provided further that the Agent and the Seller may agree
-------- -------
in writing from time to time upon a different "Assignee Rate."
-------------
"Business Day" means any day on which (i) banks are not authorized or
------------
required to close in New York City and (ii) if this definition of "Business Day"
is utilized in connection with the Eurodollar Rate, dealings are carried out in
the London interbank market.
"Capital" means the original amount paid on any Purchase Date to the
-------
Seller for the Receivables at the time of purchase by the Purchaser pursuant to
this Agreement, decreased from time to time by Collections distributed on
account of such Capital; provided that if such Capital shall have been reduced
--------
by any distribution and thereafter all or a portion of such distribution is
rescinded or must otherwise be returned for any reason, such Capital shall be
increased by the amount of such rescinded or returned distribution, as though it
had not been made.
"CD Reserve Percentage" for any Fixed Period means the reserve
---------------------
percentage applicable on the first day of such Fixed Period 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,
but not limited to, any emergency, supplemental or other marginal reserve
requirement) for Citibank, N.A. with respect to liabilities consisting of or
including (among other liabilities) U.S. dollar nonpersonal time deposits in the
United States with a maturity equal to such Fixed Period.
"Collateral" means (a) the indebtedness of any Obligor for natural gas
----------
sales and end-use transportation services provided to such Obligor by
4
<PAGE>
GCNM in accordance with the Tariffs, (b) all proceeds of any and all such
indebtedness and (c) the right to payment of any interest or finance charges and
other obligations of such Obligor with respect thereto.
"Collection Agent" means at any time the Person then authorized
----------------
pursuant to the Collection Agent Agreement to administer and collect the
Receivables.
"Collection Agent Agreement" means an agreement between the Seller and
--------------------------
the Agent (and, if the Seller does not act as Collection Agent, consented to by
the Collection Agent), in form and substance satisfactory to them, governing the
appointment and responsibilities of the Collection Agent as to administration
and collection of the Receivables, and requiring the Collection Agent to perform
its obligations set forth in this Agreement.
"Collection Agent Fee" means the collection agent fee referred to in
--------------------
the Collection Agent Agreement.
"Collections" means (a) with respect to the Receivables, any and all
-----------
cash collections, proceeds, product, offspring, rents and profits of the
Receivables received or deemed received, (b) all cash proceeds of Related
Security with respect to the Receivables, (c) with respect to the Collateral,
all proceeds of Collateral receivables (subject to the provisions of Section
5.05), (d) all Indemnified Amounts received pursuant to Section 6.01 and (e) any
Collection of Receivables deemed to have been received pursuant to Section 2.03.
"Credit and Collection Policy" means those receivables credit and
----------------------------
collection policies and practices of GCNM in effect on the date of this
Agreement and described in Exhibit A hereto, as modified in compliance with this
Agreement.
"CXC" means CXC Incorporated and any successor or assign of CXC
---
Incorporated that is a receivables investment company which in the ordinary
course of its business issues commercial paper or other securities to fund its
acquisition and maintenance of receivables.
5
<PAGE>
"Designated Account" means an account in the name of, and owned by,
------------------
CNAI, as Agent, designated by the Agent for the purpose of receiving Collections
of Receivables and proceeds of Collateral receivables.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time, and the regulations promulgated and rulings issued
thereunder.
"Eurocurrency Liabilities" has the meaning assigned to that term in
------------------------
Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time.
"Eurodollar Rate" for any Fixed Period means an interest rate per
---------------
annum equal to the rate per annum at which deposits in U.S. dollars are offered
by the principal office of Citibank, N.A. 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 Fixed Period in an amount substantially equal to the
Capital associated with such Fixed Period on such first day and for a period
equal to such Fixed Period.
"Eurodollar Rate Reserve Percentage" of any Purchaser for any Fixed
----------------------------------
Period in respect of which Yield is computed by reference to the Eurodollar Rate
means the reserve percentage applicable two Business Days before the first day
of such Fixed Period under regulations issued from time to time by the Board of
Governors of the Federal Reserve System (or any successor) (or if more than one
such percentage shall be applicable, the daily average of such percentages for
those days in such Fixed Period during which any such percentage shall be so
applicable) for determining the maximum reserve requirement (including, without
limitation, any emergency, supplemental or other marginal reserve requirement)
for such Purchaser with respect to liabilities or assets consisting of or
including Eurocurrency Liabilities (or with respect to any other category of
liabilities that includes deposits by reference to which the interest rate on
Eurocurrency Liabilities is determined) having a term equal to such Fixed
Period.
"Event of Termination" has the meaning specified in Article VII.
--------------------
"Fee Agreement" means the Agreement, of even date herewith, between
-------------
the Seller and the Agent relating to the fees payable by the Seller.
6
<PAGE>
"Financing Component" means, with respect to the monthly Collections
-------------------
of Receivables, the portion of such monthly Collections representing the
permitted interest rate under the Rate Rider, as specifically set forth in the
applicable Seller Report in accordance with the provisions of such Rate Rider.
"Fixed Period" means with respect to the Receivables:
------------
(a) initially the period commencing on the initial Purchase Date and
ending such number of days from such date as the Seller shall select and
the Agent shall approve; and
(b) thereafter each period commencing on the last day of the
immediately preceding Fixed Period and ending such number of days as the
Seller shall select and the Agent shall approve on notice by the Seller
received by the Agent (including notice by telephone, confirmed in writing)
not later than 11:00 A.M. (New York City time) on such last day, except
------
that if the Agent shall not have received such notice or approved such
period on or before 11:00 A.M. (New York City time) on such last day, such
period shall be one day;
provided that
- --------
(i) any Fixed Period in respect of which Yield is computed by
reference to the Assignee Rate shall be a period from one to and including
14 days, or a period of 21, 30, 60, 90 or 180 days (or if the Eurodollar
Rate is used in determining the Assignee Rate, a period of one, two or
three months) as the Seller may select as provided above;
(ii) any Fixed Period (other than of one day) which would otherwise
end on a day which is not a Business Day shall be extended to the next
succeeding Business Day; provided, however, if Yield in respect of such
-------- -------
Fixed Period is computed by reference to the Eurodollar Rate component of
the Assignee Rate, and such Fixed Period would otherwise end on a day which
is not a Business Day, and there is no subsequent Business Day in the same
calendar month as such day, such Fixed Period shall end on the next
preceding Business Day);
7
<PAGE>
(iii) in the case of any Fixed Period of one day, (A) if such Fixed
Period is the initial Fixed Period, such Fixed Period shall be the initial
Purchase Date; (B) any subsequently occurring Fixed Period which is one day
shall, if the immediately preceding Fixed Period is more than one day, be
the last day of such immediately preceding Fixed Period, and, if the
immediately preceding Fixed Period is one day, be the day next following
such immediately preceding Fixed Period; and (C) if such Fixed Period
occurs on a day immediately preceding a day which is not a Business Day,
such Fixed Period shall be extended to the next succeeding Business Day;
and
(iv) in the case of any Fixed Period which commences before the
Termination Date and would otherwise end on a date occurring after the
Termination Date, such Fixed Period shall end on the Termination Date.
"Fixed Rate" means for any Fixed Period the rate per annum determined
----------
by the Agent for funding by the Purchaser of the purchase of Receivables as
agreed between the Agent and the Seller; provided, however, if the rate as
-------- -------
agreed between the Agent and the Seller with regard to any Fixed Period is a
discount rate, the "Fixed Rate" for such Fixed Period shall be the rate
----------
resulting from converting such discount rate to an interest-bearing equivalent
rate per annum. The Seller understands that upon the agreement between the
Seller and the Agent on a Fixed Rate for a Fixed Period, the Agent on behalf of
the Purchaser intends to enter into funding arrangements with third parties
(including, but not limited to, interest rate swaps and collars) on terms and
conditions which could result in loss to the Purchaser if the Capital with
respect to such Fixed Period does not remain outstanding at the Fixed Rate in
the amounts and for the periods agreed between the Seller and the Agent at the
time of the purchase of the Receivables. Therefore, if (i) the Capital shall be
reduced prior to the end of such Fixed Period or (ii) the Termination Date
occurs before the end of such Fixed Period, the Seller shall indemnify and hold
harmless the Purchaser or the Agent for all losses, liabilities, costs and
expenses related thereto (including, but not limited to, attorneys' fees and
expenses and the cost of interest rate swaps and collars in connection with the
Purchaser's funding of the Receivables at a Fixed Rate) and shall pay two
Business Days after the Fee Determination Date (as defined below), to the
Purchaser, as liquidated damages a fee equal to the product of
8
<PAGE>
[CLA x (F-R)] x [1 - (1+R/f)/-n/]
------------- -----------------
f R/f
where:
CLA = Capital Liquidation Amount, as hereinafter defined.
F = Fixed Rate for the Receivables for such Fixed Period.
R = Redeployment Rate, as hereinafter defined.
f = Fixed Rate payment frequency per annum.
n = Number of interest payment periods remaining from
Fee Determination Date to end of Fixed Period.
The parties hereto acknowledge that the cost of any early termination
of any funding arrangement with third parties prior to the originally scheduled
termination date thereof, including, without limitation, interest rate swaps and
collars, could result in a payment by the Agent on behalf of the Purchaser to
the third party providing such funding arrangement. Any such breakage cost will
be determined by such third party providing such funding arrangement with the
concurrence of the Purchaser or Agent, and such amount will be included in the
losses, liabilities, costs and expenses payable by the Seller to the Purchaser
or the Agent in connection with the occurrence of the events described in the
immediately preceding sentence or otherwise. "Redeployment Rate" shall mean the
-----------------
rate of interest at which the Agent is able to reinvest the Capital Liquidation
Amount for a period comparable to the period from the Fee Determination Date to
the last day of such Fixed Period in compliance with the Purchaser's investment
policy. "Fee Determination Date" means the date on which the Capital is not so
----------------------
maintained or the date on which the Capital was paid. "Capital Liquidation
-------------------
Amount" means the total amount of Capital not so maintained or the total amount
- ------
of Capital paid. For purposes of this definition of Fixed Rate, the Fixed
----------
Period shall be computed without regard to clause (iv) of the definition of
Fixed Period. The Agent's determination of the Redeployment Rate and breakage
- ------------
and other costs shall be conclusive, absent manifest error.
9
<PAGE>
"Obligor" means a sales service customer or end-use transportation
-------
service customer in GCNM's service area from whom GCNM is entitled to collect a
portion of the Recoverable Amounts.
"Person" means an individual, partnership, corporation (including a
------
business trust), joint stock company, trust, unincorporated association, joint
venture or other entity, or a government or any political subdivision or agency
thereof.
"Purchase Date" means each date on which Receivables are purchased by
-------------
the Purchaser.
"Purchaser" means individually and collectively CXC and all other
---------
owners by assignment or otherwise of Receivables and, to the extent of the
undivided interests so purchased by participants, shall include such
participants.
"Purchaser Rate" for any Fixed Period means:
--------------
(a) to the extent CXC funds Receivables for such Fixed Period by
issuing commercial paper, the rate (or if more than one rate, the weighted
average of the rates) at which commercial paper notes of CXC having a term
equal to such Fixed Period and to be issued to fund the purchase of the
Receivables may be sold by any placement agent or commercial paper dealer
selected by the Agent on behalf of CXC, as agreed between each such agent
or dealer and the Agent and notified by the Agent to the Collection Agent;
provided if the rate (or rates) as agreed between any such agent or dealer
--------
and the Agent with regard to any Fixed Period is a discount rate (or
rates), the "Purchaser Rate" for such Fixed Period shall be the rate (or if
--------------
more than one rate, the weighted average of the rates) resulting from
converting such discount rate (or rates) to an interest-bearing equivalent
rate per annum; or
(b) the rate equivalent to the Fixed Rate as agreed between the Agent
and the Seller; or
(c) if no Fixed Rate is agreed to between the Agent and the Seller
and the Purchaser does not fund its purchase of the Receivables for such
Fixed Period by issuing commercial paper, a rate equal to the Assignee
10
<PAGE>
Rate for such Fixed Period or such other rate as the Agent and the Seller
shall agree to in writing;
provided, however, that, if the Agent so requests and the Seller consents
- -------- -------
thereto, the "Purchaser Rate" for any Fixed Period of one day shall be the
--------------
Assignee Rate for such Fixed Period.
"Rate Rider" means Rate Rider No. 8, as the same may be modified by
----------
the Commission, filed by GCNM with the Commission with respect to re-covery of
"Producer Take-or-Pay Costs," "Pipeline Take-or-Pay Costs," "MDL-403 Costs,"
certain amounts of interest, and other amounts referred to in such Rate Rider.
"Receivable" means all of the Seller's right under the Order to
----------
recover Recoverable Amounts pursuant to the Rate Rider and includes, without
limitation, the indebtedness of any Obligor from time to time constituting the
Seller's recovery from such Obligor through direct billing of such Recoverable
Amounts and the right to payment of any interest or finance charges and other
obligations of such Obligor with respect thereto.
"Recoverable Amounts" means amounts eligible for recovery from the
-------------------
Obligors pursuant to the Order. For purposes of this definition and this
Agreement, amounts are "eligible for recovery pursuant to the Order"
notwithstanding (x) the need for Commission prudency determinations with respect
to MDL-403 Costs and (y) challenges to Surcharge Statements.
"Regulatory Authority" means each of the New Mexico Public Utility
--------------------
Commission, Federal Energy Regulatory Commission and any successor commission to
either.
"Related Security" means with respect to the Receivables:
----------------
(i) all other security interests or liens and property subject
thereto from time to time purporting to secure payment of the Receivables,
together with all financing statements signed by an Obligor describing any
collateral securing any such Receivable;
11
<PAGE>
(ii) all guaranties, insurance and other agreements or arrangements
of whatever character from time to time supporting or securing payment of
the Receivables; and
(iii) all proceeds of all the foregoing.
"Seller Report" means a report, in substantially the form of Exhibit B
-------------
hereto or as otherwise requested by the Agent, furnished by the Collection Agent
to the Agent pursuant to the Collection Agent Agreement.
"Settlement Period" for the Receivables means each period as shall be
-----------------
selected from time to time by the Agent or, in the absence of any such
selection, each one month period from the last day of the immediately preceding
Settlement Period.
"Significant Subsidiary" means a subsidiary, including its
----------------------
subsidiaries, which meets any of the following conditions:
(a) The Seller's and its other subsidiaries' investments in and
advances to the subsidiary exceed 10 percent of the total assets of the
Seller and its subsidiaries consolidated as of the end of the most recently
completed fiscal year; or
(b) The Seller's and its other subsidiaries' proportionate share of
the total assets (after intercompany eliminations) of the subsidiary
exceeds 10 percent of the total assets of the Seller and its subsidiaries
consolidated as of the end of the most recently completed fiscal year; or
(c) The Seller's and its other subsidiaries' equity in the income
from continuing operations before income taxes, extraordinary items and
cumulative effect of a change in accounting principles of the subsidiary
exceeds the greater of (i) 10 percent of such income of the Seller and its
subsidiaries consolidated for the most recently completed fiscal year or
(ii) $2 million.
"Surcharge Statement" means any statement filed by GCNM pursuant to
-------------------
Section 5.A of "Original Rule No. 27 - Rate Rider No. 8 Details (X)," filed by
GCNM with the Commission in connection with the Rate Rider.
12
<PAGE>
"Tariffs" means the tariffs described in Exhibit C, as hereafter
-------
amended or modified by the governing Regulatory Authority, pursuant to which
GCNM provides natural gas sales and end-use transportation services to the
Obligors and the Obligors are obligated to pay for such sales and services.
"Termination Date" means the date on which the Purchaser shall have
----------------
received payment in full of the Capital of the Receivables, all Yield accrued
thereon and any other amounts owed by the Seller hereunder.
"UCC" means the Uniform Commercial Code as from time to time in effect
---
in the specified jurisdiction.
"Yield" for any Fixed Period means,
-----
PR x C x ED
---
360
where:
PR = the Purchaser Rate for the Receivables for such Fixed
Period
C = the Capital of the Receivables during such Fixed Period
ED = the actual number of days elapsed during (a) such Fixed
Period or (b) in the case of a Fixed Period at a Fixed
Rate the fraction shall be adjusted to correspond to
the calculation of interest on any note the proceeds of
which will fund or maintain the Capital of the
Receivables;
provided that no provision of this Agreement shall require the payment or permit
- --------
the collection of Yield in excess of the maximum permitted by applicable law;
and provided further that Yield for the Receivables shall not be considered paid
-------- -------
by any distribution to the extent that at any time all or a portion of such
distribution is rescinded or must otherwise be returned for any reason.
13
<PAGE>
SECTION 1.02. Accounting and Other Terms. All accounting terms not
--------------------------
specifically defined herein shall be construed in accordance with generally
accepted accounting principles. All terms used in Article 9 of the UCC in the
State of New York, and not specifically defined herein, are used herein as
defined in such Article 9.
ARTICLE II
AMOUNTS AND TERMS OF THE PURCHASES;
CONDITIONS OF PURCHASES
SECTION 2.01. Purchase Facility. (a) On the terms and conditions
-----------------
hereinafter set forth, CXC may, on a Purchase Date, in its sole discretion,
purchase all of the Seller's Receivables which may from time to time in the
future arise from the Recoverable Amounts in return for the payments specified
in Section 2.02 below.
(b) The purchase of the Receivables shall be without recourse to the
Seller or any assets of the Seller except as specifically set forth in Section
2.04 and in Articles V and VI of this Agreement.
(c) The sale of the Receivables hereunder shall include the sale to
CXC of the Seller's rights in all Related Security and Collections therefrom.
(d) In connection with the transactions contemplated hereby, the
Seller hereby assigns and grants a security interest in the Receivables and
Collections therefrom to secure payment in full of all outstanding Capital,
Yield and any other amounts payable by the Seller to the Purchaser or the Agent
hereunder.
SECTION 2.02. Purchases of Receivables. (a) On each Purchase Date,
------------------------
CXC shall, upon satisfaction of the applicable conditions set forth in Section
2.08, make available to the Seller in same day funds, to account 191537670 at
First National Bank in Albuquerque, an amount set forth in the applicable Seller
Report as the initial Capital relating to such purchase, and shall thereupon, by
virtue of and subject to the terms of this Agreement, become and be the owner of
the Receivables shown by such Seller Report to be eligible for
14
<PAGE>
purchase and the Seller's rights in the Related Security and Collections
therefrom.
(b) From time to time thereafter upon certification by the Seller
that all approvals necessary for billing and collection have been obtained, CXC,
in its sole discretion, may determine to purchase additional Receivables
representing such Recoverable Amounts and, in such case, will make available to
the Seller, in the manner provided in subparagraph (a) above, funds for such
purchase, as set forth in the applicable Seller Report, which funds shall be
added to the aggregate Capital outstanding.
(c) The aggregate Capital outstanding shall at no time exceed the
lesser of $80,000,000 or 95% of the Recoverable Amounts as to which collections
by the Seller have begun, less any discounts given by the Seller as shown on the
Seller Report.
SECTION 2.03. Settlement Procedures. (a) Collection of the
---------------------
Receivables shall be administered by a Collection Agent, in accordance with the
terms of this Agreement and the Collection Agent Agreement. The Seller shall
provide to the Collection Agent (if other than the Seller) on a timely basis all
information needed for such administration.
(b) The Collection Agent shall, on each day on which Collections are
received by it, set aside and hold in trust for the Purchaser an amount equal to
such Collections and shall, on the last day of each Settlement Period, deposit
all such amounts held for the Purchaser into the Designated Account, provided,
--------
however, that the aggregate amount deposited pursuant to this subsection (b)
- -------
shall not exceed the sum of the Capital of and accrued Yield and Collection
Agent Fee on the Receivables plus the aggregate of any other amounts then owed
by the Seller to the Purchaser or the Agent hereunder. The Collection Agent may
invest any moneys from time to time held in trust for the Purchaser in short-
term United States Government securities or other short-term highly liquid
investments approved by the Agent (collectively, "Short-term Investments"). All
earnings on such investments shall be considered Collections, to be deposited in
the Agent's Account, together with all amounts from the Designated Account, on
the last day of each Settlement Period.
(c) Upon receipt of funds deposited into the Agent's Account, the
Agent shall distribute (i) out of the portion of Collections that represents the
15
<PAGE>
Financing Component, first, if the Collection Agent is not the Seller, to the
-----
Collection Agent an amount equal to accrued but unpaid Collection Agent Fee and
second, to the Purchaser an amount equal to accrued but unpaid Yield; and (ii)
- ------
the remainder, if any, of such funds (including the remainder of the portion
representing the Financing Component) as follows: first, to the Purchaser in
-----
reduction to zero of all Capital, second, to the Collection Agent in payment in
------
full of all accrued but unpaid Collection Agent Fee, and third, to the Purchaser
-----
or the Agent in payment of any amounts owed by the Seller hereunder.
(d) To the extent that any Collections deposited in the Agent's
Account are not immediately distributed in the manner set forth above, such
Collections shall be invested by the Agent for the benefit of the Seller in
Short-term Investments, until such Collections are distributed by the Agent from
the Agent's Account. All earnings on such investments shall be applied to the
purposes and in the priorities set forth in Section 2.03(c).
(e) To the extent that Collections are distributed from the Agent's
Account and applied to reduction of Capital prior to the end of a Fixed Period,
such Collections shall be deemed invested by the Agent for the remainder of such
Fixed Period in Short-term Investments. All such earnings, deemed or otherwise,
on such investments shall be applied to the purposes and in the priorities set
forth in Section 2.03(c) and an amount equal to any earnings, deemed or
otherwise, remaining thereafter shall be paid to the Seller for its own account.
(f) After the Capital and Yield and Collection Agent Fee with respect
to the Receivables, and any other amounts payable by the Seller to the Purchaser
or the Agent hereunder, have been paid in full, all additional Collections with
respect to the Receivables shall be paid to the Seller for its own account.
(g) For the purposes of this Section 2.03:
(i) if on any day any of the representations or warranties in Section
3.01(h) is no longer true with respect to any of the Receivables, the
Seller shall be deemed to have received on such day a Collection of such
Receivables in full;
16
<PAGE>
(ii) if and to the extent the Purchaser shall be required for any
reason to pay over to an Obligor any amount received on its behalf
hereunder, such amount shall be deemed not to have been so received but
rather to have been retained by the Seller and, accordingly, the Purchaser
shall have a claim against the Seller for such amount, payable when and to
the extent that any distribution from or on behalf of such Obligor is made
in respect thereof.
SECTION 2.04. Recourse for Yield. To the extent that either no
------------------
amounts are distributed or the amount distributed pursuant to Section 2.03(c)(i)
is insufficient to pay all then accrued but unpaid Yield and Collection Agent
Fee, the Seller shall be obligated to pay to the Agent, on the last day of each
Settlement Period for the Receivables, (a) for the account of the Purchaser an
amount equal to the balance of such accrued and unpaid Yield, by deposit of such
amount to the Agent's Account and (b) for the account of the Collection Agent,
an amount equal to the unpaid Collection Agent Fee. The obligation set forth
above with respect to the Yield shall be secured by the pledge of Collateral
specified in Article V. Upon receipt of such funds in the Agent's Account, the
Agent shall distribute such funds to the Purchaser and Collection Agent, as
appropriate.
SECTION 2.05. Fees. (a) The Seller shall pay to the Agent for the
----
account of CXC, on the average daily Capital with respect to the Receivables
from the date hereof until the Termination Date, a fee (the "Purchaser
Investment Fee") at the per annum rate of 1/100 of 1%. The Purchaser Investment
Fee is payable in arrears annually on the last Business Day of November of each
year until the Termination Date.
(b) The Seller also shall pay to the Agent certain fees in the
amounts and on the dates set forth in the Fee Agreement.
SECTION 2.06. Payments and Computations, Etc. (a) All amounts to be
------------------------------
paid or deposited by the Seller or the Collection Agent hereunder or under the
Collection Agent Agreement shall be paid or deposited no later than 12:00 Noon
(New York City time) on the day when due in same day funds to the Agent's
Account.
(b) The Seller shall, to the extent permitted by law, pay interest on
any amount not paid or deposited by the Seller (whether as Collection Agent or
17
<PAGE>
otherwise) when due hereunder, at an interest rate per annum equal to 1% per
annum above the Alternate Base Rate, payable on demand.
(c) All computations of interest under subsection (b) above and all
computations of Yield, fees and other amounts hereunder shall be made on the
basis of a year of 360 days for the actual number of days elapsed. Whenever any
payment or deposit to be made hereunder shall be due on a day other than a
Business Day, such payment or deposit shall be made on the next succeeding
Business Day and such extension of time shall be included in the computation of
such payment or deposit.
SECTION 2.07. Increased Costs. (a) If CNAI, the Purchaser or any of
---------------
their respective Affiliates (each an "Affected Person") 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) affects or would affect the amount of capital required or expected to be
maintained by such Affected Person and such Affected Person determines that the
amount of such capital is increased by or based upon the existence of any
commitment to make purchases of or otherwise to maintain the investment in
Receivables or interests therein related to this Agreement or to the funding
thereof and other commitments of the same type, then, upon demand by such
Affected Person (with a copy to the Agent), the Seller shall immediately pay to
the Agent, for the account of such Affected Person (as a third-party
beneficiary), from time to time as specified by such Affected Person, additional
amounts sufficient to compensate such Affected Person in the light of such
circumstances, to the extent that such Affected Person reasonably determines
such increase in capital to be allocable to the existence of any of such
commitments. A certificate as to such amounts submitted to the Seller and the
Agent by such Affected Person shall be conclusive and binding for all purposes,
absent manifest error.
(b) If, due to either (i) the introduction of or any change (other
than any change by way of imposition or increase of reserve requirements
referred to in Section 2.07(c)) in or in the interpretation of any law or
regulation or (ii) compliance with any guideline or request from any central
bank or other governmental authority (whether or not having the force of law),
there shall be any increase in the cost to a Purchaser of agreeing to purchase
or purchasing, or maintaining the ownership of Receivables in respect of which
Yield is computed by reference to the Eurodollar Rate, then, upon demand by such
Purchaser (with
18
<PAGE>
a copy to the Agent), the Seller shall immediately pay to the Agent, for the
account of such Purchaser (as a third-party beneficiary), from time to time as
specified by such Purchaser, additional amounts sufficient to compensate such
Purchaser for such increased costs. A certificate as to such amounts submitted
to the Seller and the Agent by such Purchaser shall be conclusive and binding
for all purposes, absent manifest error.
(c) Additional Yield on Receivables Bearing a Eurodollar Rate. The
---------------------------------------------------------
Seller shall pay to any Purchaser, so long as such Purchaser shall be required
under regulations of the Board of Governors of the Federal Reserve System to
maintain reserves with respect to liabilities or assets consisting of or
including Eurocurrency Liabilities, additional Yield on the unpaid Capital of
the Receivables of such Purchaser during each Fixed Period in respect of which
Yield is computed by reference to the Eurodollar Rate, for such Fixed Period, at
a rate per annum equal at all times during such Fixed Period to the remainder
obtained by subtracting (i) the Eurodollar Rate for such Fixed Period from (ii)
the rate obtained by dividing such Eurodollar Rate referred to in clause (i)
above by that percentage equal to 100% minus the Eurodollar Rate Reserve
Percentage of such Purchaser for such Fixed Period, payable on each date on
which Yield is payable on such Receivables. Such additional Yield shall be
determined by such Purchaser and notified to the Seller through the Agent within
30 days after any Yield payment is made with respect to which such additional
Yield is requested. A certificate as to such additional Yield submitted to the
Seller and the Agent by such Purchaser shall be conclusive and binding for all
purposes, absent manifest error.
SECTION 2.08. Conditions Precedent to Purchase. The purchase of
--------------------------------
Receivables under this Agreement is subject to the conditions precedent that:
(a) The Agent shall have received on or before the initial Purchase
Date the following, each (unless otherwise indicated) dated such date, in form
and substance satisfactory to the Agent:
(i) Certified copies of the resolutions of the Board of Directors of
the Seller approving this Agreement and certified copies of all documents
evidencing other necessary corporate action and governmental approvals, if
any, with respect to this Agreement, together with a certificate of the
Secretary or Assistant Secretary of the Seller certifying the names and
true
19
<PAGE>
signatures of the officers of the Seller authorized to sign this Agreement
and the other documents to be delivered by it hereunder.
(ii) A certificate, dated within two months prior to the date of the
initial purchase of Receivables hereunder, from the Secretary of State of
the State of New Mexico, certifying as to the corporate existence and good
standing of the Seller.
(iii) Acknowledgment copies or time stamped receipt copies of this
Agreement, duly filed as a public utility filing with the Secretary of
State of the State of New Mexico, and of proper financing statements, duly
filed on or before the date of execution of this Agreement under the UCC of
all jurisdictions that the Agent may deem necessary or desirable in order
to perfect the interests contemplated by this Agreement in the Receivables,
Related Security, Collections and Collateral.
(iv) Acknowledgment copies or time stamped receipt copies of proper
financing statements, if any, necessary to release all security interests
and other rights of any Person in the Receivables, Related Security,
Collections or Collateral previously granted by the Seller.
(v) Completed requests for information or reports of chattel
searches, dated on or before the initial Purchase Date, listing the
financing statements referred to in subsection (iii) above and all other
effective financing statements filed in the jurisdictions referred to in
subsection (iii) above that name the Seller as debtor, together with
copies of such other financing statements (none of which shall cover any
Receivables, Related Security, Collections or Collateral).
(vi) Evidence satisfactory to the Agent that the Designated Account
has been opened.
(vii) A favorable opinion of Keleher & McLeod, P.A., counsel for the
Seller, substantially in the form of Exhibit D hereto and as to such other
matters as the Agent may reasonably request.
(viii) Evidence satisfactory to the Agent that the Receivables,
Related Security, Collections and Collateral have been released from the
lien of the Indenture of Mortgage and Deed of Trust dated June 1, 1947,
20
<PAGE>
between the Seller and The Bank of New York (formerly Irving Trust
Company), as heretofore supplemented by all Supplemental Indentures
thereto, or that no such release is required.
(ix) Copies of the Order, the Rate Rider, the Tariffs and the orders,
if any, of the Commission in cases Nos. 2445, 2503 and 2353, certified as
true and correct by an authorized officer of the Seller, together with a
copy of the order of the Commission authorizing the Seller to consummate
the transactions contemplated by this Agreement.
(x) The Collection Agent Agreement.
(xi) A favorable opinion of Kaye, Scholer, Fierman, Hays & Handler,
counsel for the Agent, as the Agent may reasonably request.
(b) On or prior to each Purchase Date (including the initial Purchase
Date), the Collection Agent shall have delivered to the Agent, in form and
substance satisfactory to the Agent, a completed Seller Report dated within ten
days prior to such Purchase Date together with such additional information as
may reasonably be requested by the Agent. In addition, the following statements
shall be true:
(i) The representations and warranties contained in Article III are
correct on and as of the date of such purchase as though made on and as of
such date.
(ii) No event has occurred and is continuing, or would result from
such purchase that constitutes an Event of Termination or that would
constitute an Event of Termination but for the requirement that notice be
given or time elapse or both.
(iii) On such date, all of the Seller's long-term public senior debt
securities are rated at least B- by Standard & Poor's Corporation and B3 by
Moody's Investors Service, Inc.
(c) The Agent shall have received such other approvals, opinions or
documents as it may reasonably request.
21
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. Representations and Warranties. The Seller hereby
------------------------------
represents and warrants as follows, each of which representations and warranties
shall be a continuing representation during the term of this Agreement:
(a) The Seller is a corporation duly incorporated, validly existing
and in good standing under the laws of New Mexico and is duly qualified to do
business, and is in good standing, in every jurisdiction where the nature of its
business requires it to be so qualified.
(b) The execution, delivery and performance by the Seller of this
Agreement, the Collection Agent Agreement and the other documents to be
delivered by it hereunder, including the Seller's use of the proceeds of
purchases, are within the Seller's corporate powers, have been duly authorized
by all necessary corporate action, do not contravene (i) the Seller's charter or
by-laws, (ii) any law, rule or regulation applicable to the Seller, (iii) any
contractual restriction binding on or affecting the Seller or its property or
(iv) any order, writ, judgment, award, injunction or decree binding on or
affecting the Seller or its property, and do not result in or require the
creation of any lien, security interest or other charge or encumbrance upon or
with respect to any of its properties except as required by this Agreement.
This Agreement and the Collection Agent Agreement have been duly executed and
delivered by the Seller.
(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 Seller of this Agreement, the
Collection Agent Agreement or any other document to be delivered thereunder
except such as shall have been obtained or made on or before the applicable
Purchase Date and except the notices, filings and approvals contemplated by the
Order, including but not necessarily limited to the prudency determinations by
the Commission with respect to MDL-403 Costs and orders of the Commission
disposing of cases involving challenges to Surcharge Statements.
22
<PAGE>
(d) This Agreement constitutes the legal, valid and binding
obligation of the Seller enforceable against the Seller in accordance with its
terms, subject to bankruptcy, insolvency or other similar laws affecting
creditors' rights generally and to general principles of equity (whether
considered in a proceeding in equity or at law).
(e) The consolidated balance sheet of the Seller and its sub-
sidiaries as at December 31, 1992, and as at the end of the most recently
completed fiscal quarter as set forth in the most recent financial statements
filed with the Securities and Exchange Commission and the related consolidated
statements of income and retained earnings of the Seller and its subsidiaries
for the periods then ended, copies of which have been furnished to the Agent,
fairly present the financial condition of the Seller and its subsidiaries as at
such date and the results of the operations of the Seller and its subsidiaries
for the period ended on such date all in accordance with generally accepted
accounting principles consistently applied.
(f) There is no pending or threatened action or proceeding affecting
the Seller or any of its subsidiaries before any court, governmental agency or
arbitrator which may materially adversely affect the ability of the Seller to
perform its obligations under this Agreement, or which purports to affect the
legality, validity or enforceability of this Agreement.
(g) The proceeds of the purchases of the Receivables will not be used
to acquire any equity security of a class which is registered pursuant to
Section 12 of the Securities Exchange Act of 1934.
(h) On each Purchase Date, the Seller shall be the legal and
beneficial owner of the applicable Receivables, Related Security and Collateral,
free and clear of any Adverse Claim or any legal, contractual or other
restriction on assignability, transfer or sale, and on such Purchase Date, the
Seller shall transfer to the Purchaser (and the Purchaser shall acquire) (i)
good and legal title to the Receivables, the Related Security and Collections
with respect thereto, free and clear of Adverse Claims, and (ii) a valid and
perfected first priority security interest in the Collateral and the
Receivables and Collections therefrom. No effective financing statement or
other instrument similar in effect covering the Receivables, the Related
Security or Collections with respect thereto, or the Collateral, is on file in
any recording office, except those filed in favor of the Agent relating to
this Agreement.
23
<PAGE>
(i) Each Seller Report (if prepared by the Seller or one of its
Affiliates, or to the extent that information contained therein is supplied by
the Seller or an Affiliate), item of information, exhibit, financial statement,
document, book, record or report furnished or to be furnished at any time by or
on behalf of the Seller to the Agent in connection with this Agreement is or
will be accurate in all material respects as of its date or (except as otherwise
disclosed to the Agent at such time) as of the date so furnished, and no such
document contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact necessary in order to make the
statements contained therein, in the light of the circumstances under which they
were made, not misleading.
(j) The principal place of business and chief executive office of
GCNM and the office where GCNM keeps its records concerning the Receivables and
the Collateral are located at the address set forth in Exhibit E hereto (or,
upon 30 days' prior written notice to the Agent in accordance with Section 8.02,
at such other locations in jurisdictions where all actions reasonably requested
by the Agent to protect and perfect the interest in the Receivables and the
Collateral have been taken and completed).
(k) The purchase of the Receivables constitutes (i) a "current
transaction" within the meaning of Section 3(a)(3) of the Securities Act of
1933, as amended, and (ii) a purchase or other acquisition of notes, drafts,
acceptances, open accounts receivable or other obligations representing part or
all of the sales price of merchandise, insurance or services within the meaning
of Section 3(c)(5) of the Investment Company Act of 1940, as amended.
(l) There has been no material adverse change in the collectibility
of the Receivables or the Collateral or the ability of the Seller to perform its
obligations under this Agreement or the Collection Agent Agreement.
(m) Under New Mexico law, the Seller's right under the Order to
recover Recoverable Amounts pursuant to the Rate Rider is an existing general
intangible in which a security interest may be granted by the Seller and the
Collections of Receivables will be proceeds thereof.
24
<PAGE>
ARTICLE IV
COVENANTS
SECTION 4.01. Covenants of the Seller. Until the Termination Date:
-----------------------
(a) Compliance with Laws, Etc. The Seller will comply in all
-------------------------
material respects with all applicable laws, rules, regulations and orders and
preserve and maintain its corporate existence, rights, franchises,
qualifications and privileges, except to the extent that the failure so to
comply with such laws, rules and regulations or the failure so to preserve and
maintain such existence, rights, franchises, qualifications and privileges would
not materially adversely affect the collectibility of the Receivables or the
Collateral, if applicable, or the ability of the Seller to perform its
obligations under this Agreement or the Collection Agent Agreement.
(b) Offices, Records and Books of Account. The Seller will keep the
-------------------------------------
principal place of business and chief executive office of GCNM and the office
where GCNM keeps its records concerning the Receivables at the address set forth
in Exhibit E hereto or, upon 30 days' prior written notice to the Agent in
accordance with Section 8.02, at any other locations in a jurisdiction where all
action required by Section 3.01(j) shall have been taken. The Seller also will
maintain and implement administrative and operating procedures (including,
without limitation, an ability to recreate records evidencing the Receivables
and Collateral in the event of the destruction of the originals thereof), and
keep and maintain all documents, books, records and other information reasonably
necessary or advisable for the collection of the Receivables and Collateral
(including, without limitation, records adequate to permit the daily
identification of the Receivables and Collateral and all Collections of and
adjustments to the Receivables and the Collateral).
(c) Performance and Compliance. The Seller will, at its expense,
--------------------------
timely and fully perform and comply with all material provisions, covenants and
other promises required to be observed by it under the Rate Rider, the
Receivables and the contracts related to the Collateral receivables, and timely
and fully comply in all material respects with the Credit and Collection Policy
in regard to the Receivables and the Collateral, including (i) promptly billing
all
25
<PAGE>
Collateral receivables and (ii), as promptly as the applicable orders and
regulations permit, billing all amounts permitted to be recovered pursuant to
the Rate Rider.
(d) Sales, Liens, Etc. The Seller will not sell, assign (by
-----------------
operation of law or otherwise) or otherwise dispose of, or create or suffer to
exist any Adverse Claim upon or with respect to, the Receivables, Related
Security, Collections or Collateral, or upon or with respect to any account to
which any Collections of the Receivables or of the Collateral are sent, or
assign any right to receive income in respect thereof.
(e) Extension or Amendment of Receivables. Except as provided in the
-------------------------------------
Collection Agent Agreement, the Seller will not extend, amend or otherwise
modify the terms of the Receivables or Collateral receivables or amend, modify
or waive any term or condition of any contract related to the Collateral
receivables.
(f) Change in Business or Credit and Collection Policy. The Seller
--------------------------------------------------
will not make any change in the character of its business or in the Credit and
Collection Policy that would, in either case, materially adversely affect the
collectibility of the Receivables or the Collateral or the ability of the Seller
to perform its obligations under this Agreement or the Collection Agent
Agreement.
(g) Audits. The Seller will, from time to time during regular
------
business hours as requested by the Agent, permit the Agent, or its agents or
representatives, (i) to examine and make copies of and abstracts from all books,
records and documents (including, without limitation, computer tapes and disks)
in the possession or under the control of the Seller relating to the
Receivables, the Related Security and the Collateral, and (ii) to visit the
offices and properties of the Seller for the purpose of examining such materials
described in clause (i) above, and to discuss matters relating to the
Receivables, the Related Security and the Collateral or the Seller's performance
hereunder with any of the officers or employees of the Seller having knowledge
of such matters.
(h) Deposits to the Designated Account. At the request of the Agent,
----------------------------------
the Seller will deposit, or cause to be deposited, all Collections of
Receivables directly into the Designated Account and, if necessary to pay Yield
and Indemnified Amounts arising under Section 6.01, Collections from Related
26
<PAGE>
Security and proceeds of Collateral. The Seller will not deposit or otherwise
credit, or cause or permit to be so deposited or credited, to any Designated
Account cash or cash proceeds other than Collections of Receivables or, if
necessary, proceeds of Related Security and Collateral.
(i) Reporting Requirements. The Seller will provide to the Agent the
----------------------
following:
(i) as soon as available and in any event within 60 days after the
end of the first three quarters of each fiscal year of the Seller, a
consolidated balance sheet of the Seller and its subsidiaries as of the end
of such quarter and a consolidated statement of income and retained
earnings of the Seller and its subsidiaries for the period commencing at
the end of the previous fiscal year and ending with the end of such
quarter, certified by the chief accounting officer of the Seller;
(ii) as soon as available and in any event within 120 days after the
end of each fiscal year of the Seller, a copy of the annual report for such
year for the Seller and its subsidiaries, containing consolidated financial
statements for such year audited by Arthur Andersen & Co. or other
independent public accountants acceptable to the Agent;
(iii) as soon as possible and in any event within five days after the
occurrence of each Event of Termination or event which, with the giving of
notice or lapse of time, or both, would constitute an Event of Termination,
a statement of the chief financial officer of the Seller setting forth
details of such Event of Termination or event and the action that the
Seller has taken and proposes to take with respect thereto;
(iv) promptly after the sending or filing thereof, copies of all
reports that the Seller sends to any of its securityholders, and copies of
all reports and registration statements that the Seller or any subsidiary
files with the Securities and Exchange Commission or any national
securities exchange other than reports and registration statements in
connection with public offerings of securities under employee stock option,
consumer stock or dividend reinvestment plans;
27
<PAGE>
(v) promptly after the sending or filing thereof, copies of all
reports with respect to Recoverable Amounts required by the Rate Rider
which the Seller or GCNM files with any Regulatory Authority ;
(vi) promptly after the filing or receiving thereof, copies of all
reports and notices that the Seller or any Affiliate files under ERISA with
the Internal Revenue Service or the Pension Benefit Guaranty Corporation or
the U.S. Department of Labor or that the Seller or any Affiliate receives
from any of the foregoing or from any multiemployer plan (within the
meaning of Section 4001(a)(3) of ERISA) to which the Seller or any
Affiliate is or was, within the preceding five years, a contributing
employer, in each case in respect of the assessment of withdrawal liability
or an event or condition which could, in the aggregate, result in the
imposition of liability on the Seller and/or any such Affiliate in excess
of $1,000,000;
(vii) at least ten Business Days prior to any change in the Seller's
name, a notice setting forth the new name and the effective date thereof;
(viii) such other information respecting the Receivables or the
Collateral or the condition or operations, financial or otherwise, of the
Seller or any of its subsidiaries as the Agent may from time to time
reasonably request; and
(ix) as soon as available, copies of all communications from the
Commission with respect to the Recoverable Amounts, the Collections related
thereto or the Collateral.
(j) Seller Reports. The Seller will furnish to the Agent, prior to
--------------
the twentieth day of each month, the Seller Report as of the last day of the
immediately preceding month (if prepared by the Seller, or to the extent that
information contained therein is supplied by the Seller).
(k) Change in Corporate Structure. The Seller shall not make any
-----------------------------
change in the corporate structure of the Seller as a result of which GCNM would
no longer be a division of the Seller, whether through a sale of assets or
otherwise, unless the Agent consents in writing to any such change.
28
<PAGE>
ARTICLE V
PLEDGE OF COLLATERAL; RIGHTS; REMEDIES; DUTIES
SECTION 5.01. Grant of Security Interest. As collateral security for
--------------------------
(a) the payment of the accrued and unpaid Yield on the last day of each
Settlement Period, (b) fees, expenses and other amounts payable by the Seller
hereunder (other than Capital) and (c) the Indemnified Amounts, as defined in
Section 6.01, the Seller hereby pledges to the Purchaser and grants the
Purchaser a security interest in all of the Seller's right, title and interest
in and to the Collateral.
SECTION 5.02. Delivery of Records and Other Information. The Seller
-----------------------------------------
shall deliver to the Agent, upon request, all such information, instruments or
documents evidencing the Collateral as the Agent deems necessary or advisable.
SECTION 5.03. Seller Remains Liable. Anything herein to the contrary
---------------------
notwithstanding, (a) the Seller shall remain liable under the contracts included
in the Collateral to the extent set forth therein to perform all of its duties
and obligations thereunder to the same extent as if this Agreement had not been
executed, (b) the exercise by the Agent of any of the rights hereunder shall not
release the Seller from any of its duties or obligations under the contracts
included in the Collateral, and (c) the Agent shall not have any obligation or
liability under the contracts included in the Collateral by reason of this
Agreement, nor shall the Agent be obligated to perform any of the obligations or
duties of the Seller thereunder or to take any action to collect or enforce any
claim for payment assigned hereunder.
SECTION 5.04. Further Assurances. The Seller agrees that from time
------------------
to time, at the expense of the Seller, the Seller will promptly execute and
deliver all further instruments and documents, and take all further action that
may be necessary or desirable, or that the Agent may reasonably request, in
order to perfect and protect any security interest granted or purported to be
granted by this Agreement or to enable the Agent to exercise and enforce its
rights and remedies hereunder with respect to the Receivables or any Collateral.
Without limiting the generality of the foregoing, the Seller will upon the
request of the Agent:
29
<PAGE>
(i) mark conspicuously each invoice evidencing each Collateral
receivable, each related contract and each of its records pertaining to
such receivables with a legend, in form and substance satisfactory to the
Agent, indicating that such invoice, contract or receivable is subject to
the security interest granted hereby;
(ii) if any Collateral receivable shall be evidenced by a promissory
note or other instrument, deliver and pledge to the Agent hereunder such
note or instrument duly indorsed and accompanied by duly executed
instruments of transfer or assignment, all in form and substance
satisfactory to the Agent; and
(iii) execute and file such financing or continuation statements, or
amendments thereto or assignments thereof, and such other instruments or
notices, as may be necessary or desirable, or as the Agent may request, in
order to perfect and preserve the security interests granted or purported
to be granted by this Agreement.
SECTION 5.05. Rights of the Seller Prior to Event of Termination.
--------------------------------------------------
Subject to Section 4.01(h) and so long as there shall exist no condition, event
or act which constitutes, or with notice or lapse of time or both would
constitute, an Event of Termination hereunder, the Seller shall be entitled to
receive and retain for its own account any and all collections with respect to
the receivables constituting the Collateral and to exercise, as it shall deem
fit, but in a manner not inconsistent with the terms hereof, all rights and
powers with respect to such Collateral.
SECTION 5.06. Obligations Upon Event of Termination. Upon an Event
-------------------------------------
of Termination or a condition, event or act which with notice or lapse of time
or both would constitute an Event of Termination, the Agent shall have the right
at any time, upon written notice to the Seller of its intention to do so, to
notify the account debtors or obligors under any Collateral receivables of the
assignment of such receivables to the Agent and to direct such account debtors
or obligors to make payment of all amounts due or to become due to the Seller
thereunder directly to the Agent and, upon such notification and at the expense
of the Seller, to enforce collection of any such receivables, and to adjust,
settle or compromise the amount or payment thereof, in the same manner and to
the same extent as the Seller might have done. After receipt by the Seller of
the notice from the Agent referred to in the preceding sentence, (a) the Seller
shall
30
<PAGE>
deposit in the Designated Account, from all collections with respect to such
Collateral, an amount equal to the accrued and unpaid Yield and the Indemnified
Amounts as defined in Section 6.01 and shall on the last day of each Settlement
Period deposit all collections from the Collateral up to such accrued Yield,
such Indemnified Amounts and costs and expenses incident thereto in the Agent's
Account; and (b) the Seller shall not adjust, settle or compromise the amount or
payment of any Collateral receivable, or release wholly or partly any account
debtor or obligor thereof, or allow any credit or discount thereon.
SECTION 5.07. Agent Appointed Attorney-in-Fact. The Seller hereby
--------------------------------
irrevocably appoints the Agent the Seller's attorney-in-fact, with full
authority in the place and stead of the Seller and in the name of the Seller,
the Agent or otherwise, from time to time in the Agent's discretion, to take any
action and to execute any instrument which the Agent may deem necessary or
advisable to accomplish the purposes of this Agreement including, without
limitation:
(i) to ask for, demand, collect, sue for, recover, compromise,
receive and give acquittance and receipts for moneys due and to become due
under or in respect of any of the Collateral,
(ii) to receive, indorse and collect any drafts or other instruments,
documents and chattel paper, in connection with clause (i) above, and
(iii) to file any claims or take any action or institute any
proceedings which the Agent may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
the Agent with respect to any of the Collateral.
SECTION 5.08. Agent May Perform. If the Seller fails to perform any
-----------------
agreement contained herein, the Agent may itself perform, or cause performance
of, such agreement, and the expenses of the Agent incurred in connection
therewith shall be payable by the Seller.
SECTION 5.09. The Agent's Duties. The powers conferred on the Agent
------------------
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for the safe
custody of any Collateral in its possession and the accounting for moneys
actually received by it hereunder, the Agent shall have no duty as to any
31
<PAGE>
Collateral or as to the taking of any necessary steps to preserve rights against
prior parties or any other rights pertaining to any Collateral.
ARTICLE VI
INDEMNIFICATION
SECTION 6.01. Indemnities by the Seller. Without limiting any other
-------------------------
rights that the Agent or the Purchaser or any Affiliate thereof (each, an
"Indemnified Party") may have hereunder or under applicable law, the Seller
hereby agrees to indemnify each Indemnified Party from and against any and all
claims, losses and liabilities (including reasonable attorneys' fees) (all of
the foregoing being collectively referred to as "Indemnified Amounts") arising
out of or resulting from this Agreement or the use of proceeds of purchases or
the ownership of Receivables, excluding, however, (a) Indemnified Amounts to the
extent resulting from gross negligence or willful misconduct on the part of such
Indemnified Party, (b) recourse (except as otherwise specifically provided in
this Agreement) for uncollectible Receivables or (c) any income taxes incurred
by such Indemnified Party arising out of or as a result of this Agreement or the
ownership of Receivables. Without limiting or being limited by the foregoing,
the Seller shall pay on demand to each Indemnified Party any and all amounts
necessary to indemnify such Indemnified Party from and against any and all
Indemnified Amounts relating to or resulting from any of the following:
(i) failure of the Seller to receive all approvals from the
Commission necessary for billing and collection of the Recoverable Amounts;
any revocation, modification or challenge to or invalidity of the Order or
the Rate Rider, or any other inability of the Seller to collect the
Receivables (other than by reason of the financial inability of an Obligor
to pay) in accordance with the provisions of the Rate Rider or any
inability of the Purchaser to receive Collections as a result of the
bankruptcy of the Seller;
(ii) reliance on any representation or warranty or statement made or
deemed made by the Seller (or any of its officers) under or in connection
with this Agreement which was incorrect in any material respect when made;
32
<PAGE>
(iii) the failure by the Seller to comply with any applicable law,
rule or regulation with respect to the Receivables and Collateral; or the
failure of the Receivables and Collateral to conform to any such applicable
law, rule or regulation;
(iv) the failure to vest in the Purchaser good and legal title to the
Receivables and the Related Security and Collections in respect thereof,
and a first priority security interest in the Receivables and Collections
therefrom and Collateral, all of which are free and clear of any Adverse
Claim;
(v) the failure to have filed, or any delay in filing, financing
statements or other similar instruments or documents under the UCC of any
applicable jurisdiction or other applicable laws with respect to the
Receivables, the Related Security and Collections in respect thereof, or
the Collateral, whether at the time of the purchase or pledge or at any
subsequent time;
(vi) any dispute, claim, offset or defense (other than discharge in
bankruptcy of the Obligor) of the Obligor to the payment of any Receivable
(including, without limitation, a defense based on such Receivable not
being a legal, valid and binding obligation of such Obligor enforceable
against it in accordance with its terms), or any other claim resulting from
the sale of the merchandise or services related to the Receivables or the
furnishing or failure to furnish such merchandise or services (Without in
any manner limiting the Seller's indemnity obligations under this Section
6.01(vi), the Seller shall be entitled, at its election, to assume the
defense of, or otherwise to contest, any such dispute, claim, offset or
defense, provided that (A) the Seller first acknowledges its liability to
indemnify the Indemnified Party with respect thereto, and (B) the Seller
posts a bond or other security with the Indemnified Party in the amount of
the relief requested from the Indemnified Party, plus all related costs and
expenses theretofore incurred by the Indemnified Party, or the Indemnified
Party is otherwise satisfied, in its reasonable judgment, that sufficient
assets of the Seller will be available to satisfy any adverse judgment
rendered against the Indemnified Party and to pay all related costs and
expenses theretofore incurred by the Indemnified Party. The Indemnified
Party will cooperate with the Seller, at the Seller's sole cost, in any
such defense or contest undertaken by the Seller. In the event the
33
<PAGE>
Seller assumes such defense, or undertakes such contest, the Indemnified
Party shall be permitted, at its sole cost, to participate therein.);
(vii) any failure of the Seller, as Collection Agent or otherwise, to
perform its duties or obligations in accordance with the provisions hereof
or of the Collection Agent Agreement or to perform its duties or
obligations under the New Mexico Public Utility Act;
(viii) the commingling of Collections at any time with other funds;
(ix) the failure of the Financing Component of the Collections to
generate an amount sufficient to pay the Yield in full under this Agreement
on the last day of each Settlement Period;
(x) any breakage and other expenses, if any, of the Purchaser,
including without limitation, attorneys' fees and disbursements or the
cost, including accrued interest, of interest rate swaps and collars in
connec-tion with the Purchaser's purchase of the Receivables and the costs
and expenses set forth in the definition of Fixed Rate herein, provided,
---------- --------
the Capital with respect to the Receivables for a Fixed Period at a Fixed
Rate is not maintained by the Seller for the entire Fixed Period (The
Agent's determination of the Redeployment Rate, breakage and other costs
shall be conclusive, absent manifest error.);
(xi) the failure of the Seller to bill all Recoverable Amounts as
promptly as the applicable regulations permit, but in no event later than
August 2, 1998, or to bill all Collateral receivables promptly; or
(xii) any investigation, litigation or proceeding related to this
Agreement or the use of proceeds of purchases or the ownership of the
Receivables, Related Security, Collections or Collateral.
34
<PAGE>
ARTICLE VII
EVENTS OF TERMINATION
SECTION 7.01. Events of Termination. If any of the following events
---------------------
("Events of Termination") shall occur and be continuing:
(a) The Collection Agent (if the Seller or any of its Affiliates) (i)
shall fail in any material respect to perform or observe any term, covenant or
agreement applicable to it in its capacity as Collection Agent under this
Agreement or under the Collection Agent Agreement (other than as referred to in
clause (ii) of this paragraph (a)) and such failure shall remain unremedied for
three Business Days or (ii) shall fail to make when due any payment or deposit
to be made by it under this Agreement or the Collection Agent Agreement; or
(b) The Seller shall fail (i) to transfer to the Agent when requested
any rights, pursuant to this Agreement or the Collection Agent Agreement, which
the Seller then has as Collection Agent, or (ii) to make any payment required
under Section 2.03; or
(c) Any representation or warranty made or deemed made by the Seller
(or any of its officers) under or in connection with this Agreement or any
information or report delivered by the Seller pursuant to this Agreement shall
prove to have been incorrect or untrue in any material respect when made or
deemed made or delivered; or
(d) The Seller shall fail to perform or observe any other term,
covenant or agreement contained in this Agreement on its part to be performed or
observed and any such failure shall remain unremedied for ten days after written
notice thereof shall have been given to the Seller by the Agent; provided,
--------
however, that notice shall not be required with respect to a failure relating to
- -------
Article V; or
(e) There shall have occurred any event which may materially
adversely affect the collectibility of the Receivables or the Collateral or the
ability of the Seller to collect the Receivables or the Collateral or otherwise
perform its obligations under this Agreement or the Collection Agent Agreement;
or
35
<PAGE>
(f) The purchase of Receivables pursuant to this Agreement shall for
any reason (other than pursuant to the terms hereof) fail to result in good and
legal title in the Receivables, the Related Security and Collections with
respect thereto in the name of the Purchaser, free and clear of Adverse Claims
or for any reason shall cease to create a valid and perfected first priority
security interest in the Collateral, the Receivables or the Collections
therefrom; or
(g) The Seller or any of its Significant Subsidiaries shall generally
not pay its debts as such debts become due, or shall admit in writing its
inability to pay its debts generally, or shall make a general assignment for the
benefit of creditors; or any proceeding shall be instituted by or against the
Seller or any of its Significant Subsidiaries seeking to adjudicate it a
bankrupt or insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief or composition of it or its debts
under any law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment of a
receiver, trustee, custodian or other similar official for it or for any
substantial part of its property and, in the case of any such proceeding
instituted against it (but not instituted by it), either such proceeding shall
remain undismissed or unstayed for a period of 30 days, or any of the actions
sought in such proceeding (including, without limitation, the entry of an order
for relief against, or the appointment of a receiver, trustee, custodian or
other similar official for, it or for any substantial part of its property)
shall occur; or the Seller or any of its Significant Subsidiaries shall take any
corporate action to authorize any of the actions set forth above in this
paragraph (g);
then, and in any such event, the Agent may, by notice to the Seller, and without
limiting any right under the Collection Agent Agreement to replace the
Collection Agent, designate another Person to succeed the Seller as the
Collection Agent; provided that, automatically upon the occurrence of any event
--------
(without any requirement for the passage of time or the giving of notice)
described in Section 7.01(g), the Seller (if it is then serving as the
Collection Agent) shall cease to be the Collection Agent, and the Agent or its
designee shall become the Collection Agent. Upon any such designation or upon
any such automatic termination, the Purchaser and the Agent shall have, in
addition to the rights and remedies which they may have under this Agreement or
otherwise (including rights and remedies with respect to the Collateral), all
other rights and remedies provided after default under the UCC and under other
applicable law, which rights and remedies shall be cumulative.
36
<PAGE>
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. No amendment or waiver of any
---------------
provision of this Agreement or consent to any departure by the Seller therefrom
shall be effective unless in a writing signed by the Agent, as agent for the
Purchaser (and with respect to any amendment, by the Seller), and then such
amendment, waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given. No failure on the part of the
Purchaser or the Agent to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right hereunder preclude any other or further exercise thereof
or the exercise of any other right.
SECTION 8.02. Notices, Etc. All notices and other communications
------------
hereunder shall, unless otherwise stated herein, be in writing (including
facsimile communication) and faxed or delivered, to each party hereto, at its
address set forth under its name on the signature pages hereof or at such other
address as shall be designated by such party in a written notice to the other
parties hereto. Notices and communications by facsimile shall be effective when
sent (and shall be followed by hard copy sent by regular mail), and notices and
communications sent by other means shall be effective when received.
SECTION 8.03. Assignability. (a) This Agreement and the Purchaser's
-------------
rights herein (including ownership of the Receivables) shall be assignable by
the Purchaser and its successors and assigns, in which case, the Purchaser Rate
for any Fixed Period thereafter shall be the Assignee Rate for such Fixed Period
or such other rate agreed between the Seller and the Agent. Each assignor of a
Receivable or any interest therein shall notify the Agent and the Seller of any
such assignment.
(b) This Agreement and the rights and obligations of the Agent herein
shall be assignable by the Agent and its successors and assigns.
(c) The Seller may not assign its rights hereunder or any interest
herein without the prior written consent of the Agent.
37
<PAGE>
SECTION 8.04. Costs, Expenses and Taxes. (a) In addition to the
-------------------------
rights of indemnification granted under Section 6.01 hereof, the Seller agrees
to pay on demand all costs and expenses in connection with the preparation,
execution, delivery and administration (including periodic auditing of
Receivables or Collateral) of this Agreement or similar agreement relating to
the sale or transfer of interests in Receivables and the other documents and
agree-ments to be delivered hereunder, including, without limitation, the
reasonable fees and out-of-pocket expenses of counsel for the Agent and CXC and
their respective Affiliates with respect thereto and with respect to advising
the Agent and CXC and their respective Affiliates as to their rights and
remedies under this Agreement, and all costs and expenses, if any (including
reasonable counsel fees and expenses), of the Agent, the Purchaser and their
respective Affiliates in connection with the enforcement of this Agreement and
the other documents and agreements to be delivered hereunder.
(b) In addition, the Seller shall pay (i) any and all commissions of
placement agents and commercial paper dealers in respect of commercial paper
notes issued to fund the purchase of the Receivables, (ii) any and all costs and
expenses of any issuing and paying agent or other Person responsible for the
administration of CXC's commercial paper program in connection with the
preparation, completion, issuance, delivery or payment of commercial paper notes
issued to fund the purchase or maintenance of any Receivable, and (iii) any
and all stamp and other taxes and fees payable in connection with the
execution, delivery, filing and recording of this Agreement or the other
documents or agreements to be delivered hereunder, and agrees to save each
Indemnified Party harmless from and against any liabilities with respect to or
resulting from any delay in paying or omission to pay such taxes and fees.
(c) The Seller also shall pay on demand all other costs, expenses and
taxes (excluding income taxes) incurred by CXC or any stockholder of CXC ("Other
Costs"), including the cost of auditing CXC's books by certified public
accountants, the cost of rating CXC's commercial paper by independent financial
rating agencies, the taxes (excluding income taxes) resulting from CXC's
operations, and the reasonable fees and out-of-pocket expenses of counsel for
any stockholder of CXC with respect to advising as to rights and remedies under
this Agreement, the enforcement of this Agreement or advising as to matters
relating to CXC's operations; provided that the Seller and any other Persons who
--------
from time to time sell receivables or interests therein to CXC ("Other Sellers")
38
<PAGE>
each shall be liable for such Other Costs ratably in accordance with the usage
under their respective facilities; and provided further that if such Other Costs
-------- -------
are attributable to the Seller and not attributable to any Other Seller, the
Seller shall be solely liable for such Other Costs.
SECTION 8.05. No Proceedings. Each of the Seller, the Agent, the
--------------
Purchaser, each assignee of a Receivable or any interest therein and each entity
which enters into a commitment to purchase Receivables or interests therein
hereby agrees that it will not institute against CXC any proceeding of the type
referred to in Section 7.01(g) so long as any commercial paper issued by CXC
shall be outstanding or there shall not have elapsed one year plus one day since
the last day on which any such commercial paper shall have been outstanding.
SECTION 8.06. Confidentiality. (a) Unless otherwise required by
---------------
applicable law or regulation, the Seller agrees to maintain the confidentiality
of this Agreement (and all drafts thereof) in communications with third parties
and otherwise; provided that this Agreement may be disclosed to (i) third
--------
parties to the extent such disclosure is made pursuant to a written agreement of
confiden-tiality in form and substance reasonably satisfactory to the Agent, and
(ii) the Seller's legal counsel and auditors if they agree (which they may do
orally) to hold it confidential.
(b) The Agent and the Purchaser agree to maintain the confidentiality
of any information each receives from the Seller, its agents, affiliates or
representatives in connection with this Agreement or any audit or otherwise (the
"Confidential Information"); provided, however, that each may, in connection
with an assignment or participation, disclose to the assignee or participant any
information relating to the Seller, including the Receivables, furnished to such
assignor by or on behalf of the Seller or by the Agent; provided that, prior to
any such disclosure, the assignee or participant agrees to preserve the
confidentiality of any Confidential Information in a form reasonably
satisfactory to the Seller; and provided further that there shall be no
obligation of confidentiality in respect of any Confidential Information which
may be generally available to the public.
SECTION 8.07. Credit Enhancement. The Seller shall furnish to the
------------------
provider of any credit enhancement relating to this Agreement each of the
reports required by Section 4.01(i), a copy of the Seller Report and copies of
all
39
<PAGE>
notices delivered pursuant to Section 8.02 of this Agreement at the same time as
it provides such information, reports or notices to the Agent.
SECTION 8.08. Third Party Beneficiary. The provider of credit
-----------------------
enhancement relating to this Agreement shall be entitled, as a third party
beneficiary, to exercise all the rights of a Purchaser or the Agent under this
Agreement.
SECTION 8.09. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
--------------
AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK (WITHOUT
GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF), EXCEPT TO THE EXTENT
THAT THE PERFECTION OF THE INTERESTS OF THE PURCHASER IN THE RECEIVABLES,
RELATED SECURITY, COLLECTIONS AND THE COLLATERAL AND THE REMEDIES HEREUNDER, IN
RESPECT THEREOF, ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE
OF NEW YORK.
SECTION 8.10. Execution in Counterparts. This Agreement may be
-------------------------
executed in any number of counterparts, each of which when so executed shall be
deemed to be an original and all of which when taken together shall constitute
one and the same agreement.
SECTION 8.11. Survival of Termination. The provisions of Sections
-----------------------
2.07, 5.01, 6.01, 8.04, 8.05 and 8.06 shall survive any termination of this
Agreement.
40
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
SELLER: PUBLIC SERVICE COMPANY OF NEW MEXICO
By /s/ Terry R. Horn
---------------------------------
Title: Assistant Treasurer
Alvarado Square
Albuquerque, NM 87158
Attn: Treasurer
Facsimile No.: 505-848-2369
PURCHASER: CXC INCORPORATED
By: Citicorp North America, Inc.,
as Attorney-in-Fact
By
------------------------------
Vice President
450 Mamaroneck Avenue
Harrison, NY 10528
Attention: Corporate Asset Funding
Facsimile No. 914-899-7890
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
SELLER: PUBLIC SERVICE COMPANY OF NEW MEXICO
By
---------------------------------
Title:
Alvarado Square
Albuquerque, NM 87158
Attn: Treasurer
Facsimile No.: 505-848-2369
PURCHASER: CXC INCORPORATED
By: Citicorp North America, Inc.,
as Attorney-in-Fact
By /s/ Paul T. Pureka
------------------------------
Vice President
450 Mamaroneck Avenue
Harrison, NY 10528
Attention: Corporate Asset Funding
Facsimile No. 914-899-7890
<PAGE>
AGENT: CITICORP NORTH AMERICA, INC.,
as Agent
By /s/ Paul T. Pureka
------------------------------
Vice President
450 Mamaroneck Avenue
Harrison, NY 10528
Attention: Corporate Asset Funding
Facsimile No. 914-899-7890
<PAGE>
ACKNOWLEDGEMENT
---------------
STATE OF NEW MEXICO )
) SS.
COUNTY OF BERNALILLO )
This instrument was acknowledged before me on July 21, 1993 by Terry
R. Horn (name of officer), Assistant Treasurer (title of officer) of PUBLIC
SERVICE COMPANY OF NEW MEXICO, a New Mexico corporation.
/s/ Joan Navarrete
------------------------
Notary Public
[Seal of Joan Navarrete,
My Commission Expires: Notary Public]
7/19/95
<PAGE>
ACKNOWLEDGEMENT
---------------
STATE OF NEW YORK )
) SS.
COUNTY OF NEW YORK )
This instrument was acknowledged before me on July 30, 1993 by Paul
T. Pureka (name of officer), Vice President (title of officer) of CITICORP
NORTH AMERICA, INC., a Delaware corporation.
/s/ Renee E. Ring
------------------------
Notary Public
Renee E. Ring
My Commission Expires: Notary Public, State of New York
No. 31-4985371
August 12, 1993 Qualified in New York County
Commission Expires 8/12/93
<PAGE>
EXHIBIT 10.56
U.S. $40,000,000
RECEIVABLES PURCHASE AGREEMENT
Dated as of December 21, 1993
Among
PUBLIC SERVICE COMPANY OF NEW MEXICO
as the Seller
-------------
and
CORPORATE RECEIVABLES CORPORATION
as the Investor
---------------
and
CITICORP NORTH AMERICA, INC.
as the Agent
------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
------- ----
<S> <C> <C>
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms......................... 1
SECTION 1.02. Accounting and Other Terms.................... 17
ARTICLE II
AMOUNTS AND TERMS OF THE PURCHASES;
CONDITIONS OF PURCHASES
SECTION 2.01. Purchase Facility............................. 17
SECTION 2.02. Making Purchases.............................. 18
SECTION 2.03. Receivable Interest Computation............... 18
SECTION 2.04. Settlement Procedures......................... 19
SECTION 2.05. Fees.......................................... 21
SECTION 2.06. Payments and Computations, Etc................ 22
SECTION 2.07. Dividing or Combining Receivable Interests.... 22
SECTION 2.08. Increased Costs............................... 22
SECTION 2.09. Additional Yield on Receivable Interests
Bearing a Eurodollar Rate.................... 23
SECTION 2.10. Repurchase of Receivable Interests............ 24
SECTION 2.11. Conditions Precedent to Initial Purchase...... 25
SECTION 2.12. Conditions Precedent to All Purchases and
Reinvestments................................ 26
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. Representations and Warranties................ 27
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Section Page
------- ----
<S> <C> <C>
ARTICLE IV
COVENANTS
SECTION 4.01. Covenants of the Seller....................... 29
ARTICLE V
INDEMNIFICATION
SECTION 5.01. Indemnities by the Seller..................... 33
ARTICLE VI
EVENTS OF TERMINATION
SECTION 6.01. Events of Termination......................... 36
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. Amendments, Etc............................... 38
SECTION 7.02. Notices, Etc.................................. 38
SECTION 7.03. Assignability................................. 38
SECTION 7.04. Costs, Expenses and Taxes..................... 39
SECTION 7.05. No Proceedings................................ 40
SECTION 7.06. Confidentiality............................... 40
SECTION 7.07. Execution of Documents by Agent............... 41
SECTION 7.08. Governing Law................................. 41
SECTION 7.09. Execution in Counterparts..................... 41
SECTION 7.10. Survival of Termination....................... 42
</TABLE>
ii
<PAGE>
ANNEXES
Annex A Form of Seller Report
Annex B Form of Opinion of Counsel to Seller
SCHEDULES
Schedule I Credit and Collection Policy
Schedule II Tariffs
iii
<PAGE>
[Master Agreement]
RECEIVABLES
PURCHASE AGREEMENT
Dated as of December 21, 1993
PUBLIC SERVICE COMPANY OF NEW MEXICO, a New Mexico corporation (the
"Seller"), CORPORATE RECEIVABLES CORPORATION, a California corporation ("CRC"),
and CITICORP NORTH AMERICA, INC., a Delaware corporation ("CNAI"), as agent (the
"Agent") for the Investor, agree as follows:
PRELIMINARY STATEMENTS. The Seller has Receivables in which it is
prepared to sell undivided fractional ownership interests (referred to herein as
"Receivable Interests"). CRC is prepared to purchase such Receivable Interests
on the terms set forth herein. Accordingly, the parties agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this Agreement the
---------------------
following terms shall have the following meanings (such meanings to be equally
applicable to the singular and plural forms of the terms defined):
"Adverse Claim" means a lien, security interest or other charge or
-------------
encumbrance, or any other type of preferential arrangement.
"Affiliate" means, as to any Person, any other Person that, directly
---------
or indirectly, is in control of, is controlled by or is under common control
with such Person or is a director or officer of such Person.
"Affiliated Obligor" means any Obligor that is an Affiliate of
------------------
another Obligor.
<PAGE>
"Agent's Account" means the special account (account number 4063-4833)
---------------
of the Agent maintained at the office of Citibank, N.A. at 399 Park Avenue, New
York, New York.
"Alternate Base Rate" means a fluctuating interest rate per annum as
-------------------
shall be in effect from time to time, which rate shall be at all times equal to
the higher of:
(a) the rate of interest announced publicly by Citibank, N.A. in
New York, New York, from time to time as Citibank, N.A.'s base rate;
and
(b) 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 such day is not a Business Day, on the next
succeeding Business Day) for the three-week period ending on the
previous Friday by Citibank, N.A. 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
Citibank, N.A. from three New York certificate of deposit dealers of
recognized standing selected by Citibank, N.A., 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.
"Assignee Rate" for any Fixed Period for any Receivable Interest means
-------------
an interest rate per annum equal to
(a) 1.5% per annum above the Eurodollar Rate for such Fixed
Period, plus
----
(b) during any period when the Seller's long-term public senior
debt securities are not rated at least BB by Standard & Poor's
Corporation or Ba2 by Moody's Investors Services, Inc. (or, if any
such securities are not publicly rated at such time, the Agent has
determined, in its sole discretion, that such securities would not
2
<PAGE>
receive such ratings if they were publicly rated), a rate of 0.5% per
annum;
provided, however, that in the case of
- -------- -------
(i) any Fixed Period on or prior to the first day of which an
Investor shall have notified the Agent that the introduction of or any
change in or in the interpretation of any law or regulation makes it
unlawful, or any central bank or other governmental authority asserts
that it is unlawful, for such Investor to fund such Receivable
Interest at the Assignee Rate set forth above (and such Investor shall
not have subsequently notified the Agent that such circumstances no
longer exist),
(ii) any Fixed Period of one to (and including) 29 days,
(iii) any Fixed Period as to which the Agent does not receive
notice, by no later than 12:00 noon (New York City time) on the third
Business Day preceding the first day of such Fixed Period, that the
related Receivable Interest will not be funded by issuance of
commercial paper, or
(iv) any Fixed Period for a Receivable Interest the Capital of
which allocated to the Investor is less than $500,000,
the "Assignee Rate" for each such Fixed Period shall be an interest rate per
-------------
annum equal to the Alternate Base Rate in effect on the first day of such Fixed
Period; provided further that the Agent and the Seller may agree in writing from
-------- -------
time to time upon a different "Assignee Rate."
-------------
"Average Maturity" means at any time that period of days equal to the
----------------
average maturity of the Pool Receivables calculated by the Collection Agent in
the then most recent Seller Report; provided if the Agent shall disagree with
--------
any such calculation, the Agent may recalculate such Average Maturity.
"Business Day" means any day on which (i) banks are not authorized or
------------
required to close in New York City and (ii) if this definition of "Business Day"
is utilized in connection with the Eurodollar Rate, dealings are carried out in
the London interbank market.
3
<PAGE>
"Capital" of any Receivable Interest means the original amount paid to
-------
the Seller for such Receivable Interest at the time of its purchase pursuant to
this Agreement, or such amount divided or combined in accordance with Sec-tion
2.07, in each case reduced from time to time by Collections distributed on
account of such Capital pursuant to Section 2.04(d); provided that if such
--------
Capital shall have been reduced by any distribution and thereafter all or a
portion of such distribution is rescinded or must otherwise be returned for any
reason, such Capital shall be increased by the amount of such rescinded or
returned distribution, as though it had not been made.
"Collection Agent" means at any time the Person then authorized
----------------
pursuant to the Collection Agent Agreement to administer and collect Pool
Receivables.
"Collection Agent Agreement" means an agreement between the Seller and
--------------------------
the Agent (and, if the Seller does not act as Collection Agent, consented to by
the Collection Agent), in form and substance satisfactory to them, governing the
appointment and responsibilities of the Collection Agent as to administration
and collection of the Pool Receivables, and requiring the Collection Agent to
perform its obligations set forth in this Agreement.
"Collection Agent Fee" shall mean the collection agent fee referred to
--------------------
in the Collection Agent Agreement.
"Collection Agent Fee Reserve" for any Receivable Interest at any time
----------------------------
means the sum of (i) the unpaid Collection Agent Fee relating to such Receivable
Interest accrued to such time, plus (ii) an amount equal to (a) the Capital of
such Receivable Interest on such date multiplied by (b) the product of (x) the
percentage per annum at which the Collection Agent Fee is accruing on such date
and (y) a fraction having the sum of the Average Maturity (as in effect at such
date) as its numerator and 360 as its denominator.
"Collections" means, with respect to any Receivable, all cash
-----------
collections and other cash proceeds of such Receivable, including, without
limitation, all cash proceeds of Related Security with respect to such
Receivable, and any Collection of such Receivable deemed to have been received
pursuant to Section 2.04.
"Concentration Limit" for any Obligor means at any time 3%, or such
-------------------
other percentage ("Special Concentration Limit") for such Obligor
4
<PAGE>
designated by the Agent in a writing delivered to the Seller; provided that (a)
--------
in the case of an Obligor with any Affiliated Obligor, the Concentration Limit
shall be calculated as if such Obligor and such Affiliated Obligor are one
Obligor; (b) the Agent may cancel any Special Concentration Limit upon three
Business Days' notice to the Seller and (c) the Concentration Limits for the
four largest Obligors shall not in the aggregate at any time exceed 9%.
"Contract" means either (i) an agreement between the Seller and a
--------
Designated Obligor pursuant to or under which such Obligor shall be obligated to
pay for electric services from time to time or (ii) the Tariffs.
"CRC" means Corporate Receivables Corporation and any successor or
---
assign of CRC that is a receivables investment company which in the ordinary
course of its business issues commercial paper or other securities to fund its
acquisition and maintenance of receivables.
"Credit and Collection Policy" means those receivables credit and
----------------------------
collection policies and practices of the Seller in effect on the date of this
Agreement and described in Schedule I hereto, as modified in compliance with
this Agreement.
"Debt" means (i) indebtedness for borrowed money, (ii) obligations
----
evidenced by bonds, debentures, notes or other similar instruments, (iii)
obligations to pay the deferred purchase price of property or services, (iv)
obligations as lessee under leases which shall have been or should be, in
accordance with generally accepted accounting principles, recorded as capital
leases, (v) obligations under direct or indirect guaranties in respect of, and
obligations (contingent or otherwise) to purchase or otherwise acquire, or
otherwise to assure a creditor against loss in respect of, indebtedness or
obligations of others of the kinds referred to in clauses (i) through (iv)
above, and (vi) liabilities in respect of unfunded vested benefits under plans
covered by Title IV of ERISA.
"Default Ratio" means the ratio (expressed as a percentage) computed
-------------
as of the last day of each calendar month by dividing (i) the aggregate
Outstanding Balance of all Pool Receivables that were Defaulted Receivables on
such day or that would have been Defaulted Receivables on such day had they not
been written off the books of the Seller during such month by (ii) the aggregate
Outstanding Balance of all billed Pool Receivables of retail Obligors on such
day.
5
<PAGE>
"Defaulted Receivable" means a Receivable:
--------------------
(i) as to which any payment, or part thereof, remains unpaid for
60 days from the original due date for such payment;
(ii) as to which the Obligor thereof or any other Person
obligated thereon or owning any Related Security in respect thereof
has taken any action, or suffered any event to occur, of the type
described in Section 6.01(g); or
(iii) which, consistent with the Credit and Collection Policy,
would be written off the Seller's books as uncollectible.
"Delinquency Ratio" means the ratio (expressed as a percentage)
-----------------
computed as of the last day of each calendar month by dividing (i) the aggregate
Outstanding Balance of all Pool Receivables that were Delinquent Receivables on
such day by (ii) the aggregate Outstanding Balance of all billed Pool
Receivables of retail Obligors on such day.
"Delinquent Receivable" means a Receivable that is not a Defaulted
---------------------
Receivable and:
(i) as to which any payment, or part thereof, remains unpaid for
30 days from the original due date for such payment; or
(ii) which, consistent with the Credit and Collection Policy,
would be classified as delinquent by the Seller.
"Designated Account" means an account in the name of and owned by the
------------------
Agent, designated by the Agent in a writing delivered to the Seller, for the
purpose of receiving Collections of Pool Receivables.
"Designated Obligor" means, at any time, each Obligor; provided,
------------------ --------
however, that any Obligor shall cease to be a Designated Obligor upon three
- -------
Business Days' notice by the Agent to the Seller.
"Eligible Receivable" means, at any time, a Receivable:
-------------------
6
<PAGE>
(i) the Obligor of which is a United States resident, is not an
Affiliate of any of the parties hereto and is not a federal
governmental subdivision or agency (provided, however, that
Receivables of federal governmental subdivisions or agencies in an
amount up to 3% of the Outstanding Balance of the Receivables Pool may
be included as Eligible Receivables);
(ii) the Obligor of which, at the time of the initial creation of
an interest therein under this Agreement, is a Designated Obligor and
is not the Obligor of any Defaulted Receivables which in the aggregate
constitute 5% or more of the aggregate Outstanding Balance of all
Receivables of such Obligor;
(iii) which at the time of the initial creation of an interest
therein under this Agreement is not a Defaulted Receivable;
(iv) which, according to the Contract related thereto, is
required to be paid in full within 45 days of the original billing
date therefor;
(v) which is an obligation representing all or part of the sales
price of merchandise, insurance or services within the meaning of
Section 3(c)(5) of the Investment Company Act of 1940, as amended, and
the nature of which is such that its purchase with the proceeds of
notes would constitute a "current transaction" within the meaning of
Section 3(a)(3) of the Securities Act of 1933, as amended;
(vi) which is an "account" within the meaning of Section 9-106 of
the UCC of the applicable jurisdictions governing the perfection of
the interest created by a Receivable Interest;
(vii) which is denominated and payable only in United States
dollars in the United States;
(viii) which arises under a Contract which, together with such
Receivable, is in full force and effect and constitutes the legal,
valid and binding obligation of the Obligor of such Receivable and is
not subject to any dispute, offset, counterclaim or defense
7
<PAGE>
whatsoever (except the potential discharge in bankruptcy of such
Obligor);
(ix) which, together with the Contract related thereto, does not
contravene in any material respect any laws, rules or regulations
applicable thereto (including, without limitation, laws, rules and
regulations relating to usury, consumer protection, truth in lending,
fair credit billing, fair credit reporting, equal credit opportunity,
fair debt collection practices and privacy) and with respect to which
no party to the Contract related thereto is in violation of any such
law, rule or regulation in any material respect;
(x) which (A) satisfies all applicable requirements of the Credit
and Collection Policy and (B) complies with such other criteria and
requirements (other than those relating to the collectibility of such
Receivable) as the Agent may from time to time specify to the Seller
upon 30 days' notice; and
(xi) as to which, at or prior to the time of the initial creation
of an interest therein under this Agreement, the Agent has not
notified the Seller that such Receivable (or class of Receivables) is
not acceptable for purchase by CRC hereunder.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time, and the regulations promulgated and rulings issued
thereunder.
"Eurocurrency Liabilities" has the meaning assigned to that term in
------------------------
Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time.
"Eurodollar Rate" means, for any Fixed Period, an interest rate per
---------------
annum equal to the rate per annum at which deposits in U.S. dollars are offered
by the principal office of Citibank, N.A. 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 Fixed Period in an amount substantially equal to the
Capital associated with such Fixed Period on such first day and for a period
equal to such Fixed Period.
8
<PAGE>
"Eurodollar Rate Reserve Percentage" of any Investor for any Fixed
----------------------------------
Period in respect of which Yield is computed by reference to the Eurodollar Rate
means the reserve percentage applicable two Business Days before the first day
of such Fixed Period under regulations issued from time to time by the Board of
Governors of the Federal Reserve System (or any successor) (or if more than one
such percentage shall be applicable, the daily average of such percentages for
those days in such Fixed Period during which any such percentage shall be so
applicable) for determining the maximum reserve requirement (including, without
limitation, any emergency, supplemental or other marginal reserve requirement)
for such Investor with respect to liabilities or assets consisting of or
including Eurocurrency Liabilities (or with respect to any other category of
liabilities that includes deposits by reference to which the interest rate on
Eurocurrency Liabilities is determined) having a term equal to such Fixed
Period.
"Event of Termination" has the meaning specified in Article VI.
--------------------
"Facility Termination Date" means the earliest of (a) December 20,
-------------------------
1998 or (b) the date determined pursuant to Article VI or (c) the date the
Purchase Limit reduces to zero pursuant to Section 2.01(b), but not earlier than
December 20, 1994.
"Fee Agreement" means the agreement, of even date herewith, between
-------------
the Seller and the Agent relating to the fees payable by the Seller.
"Fixed Period" means with respect to any Receivable Interest:
------------
(a) initially the period commencing on the date of purchase of
such Receivable Interest and ending such number of days as the Seller
shall select and the Agent shall approve pursuant to Section 2.02, up
to 270 days from such date; and
(b) thereafter each period commencing on the last day of the
immediately preceding Fixed Period for such Receivable Interest and
ending such number of days (not to exceed 270 days) as the Seller
shall select and the Agent shall approve on notice by the Seller
received by the Agent (including notice by telephone, confirmed in
writing) not later than 11:00 A.M. (New York City time) on such last
day, except that if the Agent shall not have received such notice or
------
approved such period on or before 11:00
9
<PAGE>
A.M. (New York City time) on such last day, such period shall be one
day;
provided that
- --------
(i) any Fixed Period in respect of which Yield is computed by
reference to the Assignee Rate shall be a period from one to and
including 29 days, or a period of one, two or three months, as the
Seller may select as provided above;
(ii) any Fixed Period (other than of one day) which would
otherwise end on a day which is not a Business Day shall be extended
to the next succeeding Business Day (provided, however, if Yield in
-------- -------
respect of such Fixed Period is computed by reference to the
Eurodollar Rate, and such Fixed Period would otherwise end on a day
which is not a Business Day, and there is no subsequent Business Day
in the same calendar month as such day, such Fixed Period shall end on
the next preceding Business Day);
(iii) in the case of any Fixed Period of one day, (A) if such
Fixed Period is the initial Fixed Period for a Receivable Interest,
such Fixed Period shall be the day of purchase of such Receivable
Interest; (B) any subsequently occurring Fixed Period which is one day
shall, if the immediately preceding Fixed Period is more than one day,
be the last day of such immediately preceding Fixed Period, and, if
the immediately preceding Fixed Period is one day, be the day next
following such immediately preceding Fixed Period; and (C) if such
Fixed Period occurs on a day immediately preceding a day which is not
a Business Day, such Fixed Period shall be extended to the next
succeeding Business Day; and
(iv) in the case of any Fixed Period for any Receivable Interest
which commences before the Termination Date for such Receivable
Interest and would otherwise end on a date occurring after such
Termination Date, such Fixed Period shall end on such Termination Date
and the duration of each Fixed Period which commences on or after the
Termination Date for such Receivable Interest shall be of such
duration as shall be selected by the Agent.
10
<PAGE>
"Investor" means CRC and all other owners by assignment or otherwise
--------
of a Receivable Interest and, to the extent of the undivided interests so
purchased by participants, shall include any participants.
"Investor Rate" for any Fixed Period for any Receivable Interest
-------------
means, to the extent CRC funds such Receivable Interest for such Fixed Period by
issuing commercial paper, the rate (or if more than one rate, the weighted
average of the rates) at which commercial paper notes of CRC having a term equal
to such Fixed Period and to be issued to fund such Receivable Interest may be
sold by any placement agent or commercial paper dealer selected by the Agent on
behalf of CRC, as agreed between each such agent or dealer and the Agent and
notice of which has been given by the Agent to the Collection Agent; provided if
--------
the rate (or rates) as agreed between any such agent or dealer and the Agent for
any Fixed Period for any Receivable Interest is a discount rate (or rates), then
such rate shall be the rate (or if more than one rate, the weighted average of
the rates) resulting from converting such discount rate (or rates) to an
interest-bearing equivalent rate per annum.
"Liquidation Day" means, for any Receivable Interest, (i) each day
---------------
during a Settlement Period for such Receivable Interest on which the conditions
set forth in Section 2.12. are not satisfied, and (ii) each day which occurs on
or after the Termination Date for such Receivable Interest.
"Liquidation Fee" means, for any Fixed Period during which a
---------------
Liquidation Day occurs, the amount, if any, by which (i) the additional Yield
(calculated without taking into account any Liquidation Fee or any shortened
duration of such Fixed Period pursuant to clause (iv) of the definition thereof)
which would have accrued during such Fixed Period on the reductions of Capital
of the Receivable Interest relating to such Fixed Period had such reductions
remained as Capital, exceeds (ii) the income, if any, received by the Investor's
investing the proceeds of such reductions of Capital.
"Loss Percentage" means, for any Receivable Interest on any date, the
---------------
greater of (i) three times the highest sum of the Default Ratio plus the
Delinquency Ratio as of the last day of each of the twelve months ended
immediately preceding such date and (ii) 9%.
"Loss-to-Liquidation Ratio" means the ratio (expressed as a
-------------------------
percentage) computed as of the last day of each calendar month by dividing (i)
the aggregate Outstanding Balance of all Pool Receivables written off by the
11
<PAGE>
Seller, or which should have been written off by the Seller in accordance with
its Credit and Collection Policy, during such calendar month by (ii) the
aggregate amount of Collections of Pool Receivables of retail Obligors actually
received during such calendar month.
"Loss Reserve" means, for any Receivable Interest on any date, an
------------
amount equal to
LP x (C + YR)
where:
LP = the Loss Percentage for such Receivable Interest
on such date.
C = the Capital of such Receivable Interest at the
close of business of the Collection Agent on such
date.
YR = the Yield Reserve for such Receivable Interest on
such date.
"Net Receivables Pool Balance" means at any time the Outstanding
----------------------------
Balance of Eligible Receivables then in the Receivables Pool reduced by the sum
of (i) the Outstanding Balance of such Eligible Receivables that have become
Defaulted Receivables and (ii) the aggregate amount by which the Outstanding
Balance of Eligible Receivables (other than Defaulted Receivables) of each
Obligor then in the Receivables Pool exceeds the product of (A) the
Concentration Limit for such Obligor multiplied by (B) the Outstanding Balance
of the Eligible Receivables then in the Receivables Pool.
"Obligor" means a Person obligated to make payments pursuant to a
-------
Contract.
"Outstanding Balance" of any Receivable at any time means the then
-------------------
outstanding principal balance thereof.
"Parallel Purchase Commitment" means the Receivables Purchase
----------------------------
Agreement, dated as of the date hereof, among the Seller, Citibank, N.A. and
12
<PAGE>
certain other banks, and CNAI, as Agent, as the same may, from time to time,
be amended, modified or supplemented.
"Person" means an individual, partnership, corporation (including a
------
business trust), joint stock company, trust, unincorporated association, joint
venture or other entity, or a government or any political subdivision or agency
thereof.
"Pool Receivable" means a Receivable in the Receivables Pool.
---------------
"Purchase Limit" means $40,000,000, as such amount may be reduced
--------------
pursuant to Section 2.01. References to the unused portion of the Purchase
Limit shall mean, at any time, the Purchase Limit, as then reduced pursuant to
Section 2.01(b) or pursuant to the next sentence, minus the sum of the then
outstanding Capital of Receivable Interests under this Agreement and the then
outstanding "Capital" of "Receivable Interests" under the Parallel Purchase
Commitment. Furthermore, on each day on which the Seller reduces the unused
portion of (or terminates) the "Total Commitment" under the Parallel Purchase
Commitment, the Purchase Limit automatically shall reduce by the same amount (or
so terminate).
"Receivable" means the indebtedness (whether or not billed) of any
----------
Obligor under a Contract, and includes the right to payment of any interest or
finance charges and other obligations of such Obligor with respect thereto.
"Receivable Interest" means, at any time, an undivided percentage
-------------------
ownership interest in (i) all then outstanding Pool Receivables arising prior to
the time of the most recent computation or recomputation of such undivided
percentage interest pursuant to Section 2.03, (ii) all Related Security with
respect to such Pool Receivables, and (iii) all Collections with respect to, and
other proceeds of, such Pool Receivables. Such undivided percentage interest
shall be computed as
13
<PAGE>
C + YR + LR + CAFR
------------------
NRPB
where:
C = the Capital of such Receivable Interest at the
time of computation.
YR = the Yield Reserve of such Receivable Interest at
the time of computation.
LR = the Loss Reserve of such Receivable Interest at the
time of computation.
CAFR = the Collection Agent Fee Reserve of such Receivable
Interest at the time of computation.
NRPB = the Net Receivables Pool Balance at the time of
computation.
Each Receivable Interest shall be determined from time to time pursuant to the
provisions of Section 2.03.
"Receivables Pool" means at any time the aggregation of each then
----------------
outstanding Receivable in respect of which the Obligor is a Designated Obligor
at such time or was a Designated Obligor on the date of the initial creation of
an interest in such Receivable under this Agreement or the Parallel Purchase
Commitment.
"Related Security" means with respect to any Receivable:
----------------
(i) all other security interests or liens and property subject
thereto from time to time purporting to secure payment of such Receivable,
whether pursuant to the Contract related to such Receivable or otherwise,
together with all financing statements signed by an Obligor describing any
collateral securing such Receivable; and
(ii) all guaranties, insurance and other agreements or
arrangements of whatever character from time to time supporting or
14
<PAGE>
securing payment of such Receivable whether pursuant to the Contract
related to such Receivable or otherwise.
"Seller Report" means a report, in substantially the form of Annex A
-------------
hereto, furnished by the Collection Agent to the Agent pursuant to the
Collection Agent Agreement.
"Settlement Period" for any Receivable Interest means each period
-----------------
commencing on the first day and ending on the last day of each Fixed Period for
such Receivable Interest and, on and after the Termination Date for such
Receivable Interest, such period (including, without limitation, a period of one
day) as shall be selected from time to time by the Agent or, in the absence of
any such selection, each period of 30 days from the last day of the immediately
preceding Settlement Period.
"Significant Subsidiary" means a subsidiary, including its
----------------------
subsidiaries, which meets any of the following conditions:
(a) The Seller's and its other subsidiaries' investments in and
advances to the subsidiary exceed 10 percent of the total assets of the
Seller and its subsidiaries consolidated as of the end of the most recently
completed fiscal year; or
(b) The Seller's and its other subsidiaries' proportionate share of
the total assets (after intercompany eliminations) of the subsidiary
exceeds 10 percent of the total assets of the Seller and its subsidiaries
consolidated as of the end of the most recently completed fiscal year; or
(c) The Seller's and its other subsidiaries' equity in the income
from continuing operations before income taxes, extraordinary items and
cumulative effect of a change in accounting principles of the subsidiary
exceeds the greater of (i) 10 percent of such income of the Seller and its
subsidiaries consolidated for the most recently completed fiscal year or
(ii) $2 million.
"Tariff" means the tariffs described in Schedule II, as hereafter
------
amended or modified, pursuant to which the Seller provides electric service to
the Obligors and the Obligors are obligated to pay for such service.
15
<PAGE>
"Termination Date" for any Receivable Interest means the earlier of
----------------
(i) the Business Day which the Seller or the Agent so designates by notice to
the other at least one Business Day in advance for such Receivable Interest and
(ii) the Facility Termination Date.
"UCC" means the Uniform Commercial Code as from time to time in effect
---
in the specified jurisdiction.
"Yield" means:
-----
(i) for each Receivable Interest for any Fixed Period to the
extent CRC will be funding such Receivable Interest on the first day of
such Fixed Period through the issuance of commercial paper,
IR x C x ED + LF
---
360
(ii) for each Receivable Interest for any Fixed Period to the
extent the Investor will not be funding such Receivable Interest on the
first day of such Fixed Period through the issuance of commercial paper,
AR x C x ED + LF
---
360
where:
AR = the Assignee Rate for such Receivable Interest for
such Fixed Period
C = the Capital of such Receivable Interest during such
Fixed Period
ED = the actual number of days elapsed during such
Fixed Period
IR = the Investor Rate for such Receivable Interest for
such Fixed Period
LF = the Liquidation Fee, if any, for such Receivable
Interest for such Fixed Period;
16
<PAGE>
provided that no provision of this Agreement shall require the payment or permit
- --------
the collection of Yield in excess of the maximum permitted by applicable law;
and provided further that Yield for any Receivable Interest shall not be
-------- -------
considered paid by any distribution to the extent that at any time all or a
portion of such distribution is rescinded or must otherwise be returned for any
reason.
"Yield Reserve" for any Receivable Interest at any time means the sum
-------------
of (i) the Liquidation Yield at such time for such Receivable Interest, and (ii)
the then accrued and unpaid Yield for such Receivable Interest. For purposes of
this definition, "Liquidation Yield" means, for any Receivable Interest on any
-----------------
date, an amount equal to the product of (i) the Capital of such Receivable
Interest on such date and (ii) the product of (a) the Alternate Base Rate for
such Receivable Interest for a 30-day Fixed Period deemed to commence on such
date and (b) a fraction having the Average Maturity (as in effect at such date)
as its numerator and 360 as its denominator.
SECTION 1.02. Accounting and Other Terms. All accounting terms not
--------------------------
specifically defined herein shall be construed in accordance with generally
accepted accounting principles. All terms used in Article 9 of the UCC in the
State of New York, and not specifically defined herein, are used herein as
defined in such Article 9.
ARTICLE II
AMOUNTS AND TERMS OF THE PURCHASES;
CONDITIONS OF PURCHASES
SECTION 2.01. Purchase Facility. (a) On the terms and conditions
-----------------
hereinafter set forth, CRC may, in its sole discretion, purchase Receivable
Interests from the Seller from time to time during the period from the date
hereof to the Facility Termination Date. Under no circumstances shall CRC make
any such purchase if after giving effect to such purchase the aggregate
outstanding Capital of Receivable Interests, together with the aggregate
outstanding "Capital" of "Receivable Interests" under the Parallel Purchase
Commitment, would exceed the Purchase Limit.
(b) At any time after December 20, 1994, the Seller may, upon at
least five Business Days' notice to the Agent, terminate the Facility in whole
or, from time to time, reduce in part the unused portion of the Purchase Limit;
17
<PAGE>
provided that each partial reduction shall be in the amount of at least
- --------
$1,000,000 or an integral multiple thereof.
(c) Until the Agent gives the Seller the notice provided in Section
2.12(b)(iv), the Agent, on behalf of the Investor which owns Receivable
Interests, shall have the Collections attributable to such Receivable Interests
automatically reinvested pursuant to Section 2.04 in additional undivided
percentage interests in the Pool Receivables by making an appropriate
readjustment of such Receivable Interests.
SECTION 2.02. Making Purchases. (a) Each purchase shall be made on
----------------
at least three Business Days' notice from the Seller to the Agent. Each such
notice of a purchase shall specify (i) the amount requested to be paid to the
Seller (such amount, which shall not be less than $5,000,000, being referred to
herein as the initial "Capital" of the Receivable Interest then being
purchased), (ii) the date of such purchase (which shall be a Business Day), and
(iii) the duration of the initial Fixed Period for such Receivable Interest.
The Agent shall promptly thereafter notify the Seller whether CRC has determined
to make a purchase and, if so, whether all of the terms specified by the Seller
are acceptable to CRC.
(b) On the date of each such purchase of a Receivable Interest, CRC
shall, upon satisfaction of the applicable conditions set forth in this Article
II, make available to the Seller in same day funds, at First National Bank in
Albuquerque, PNM General Fund, Account No. 191537670, ABA 107000275 (or such
other account as the Seller may notify the Agent from time to time), an amount
equal to the initial Capital of such Receivable Interest.
(c) Effective on the date of each purchase pursuant to this Section
2.02 and each reinvestment pursuant to Section 2.04, the Seller hereby sells and
assigns to the Agent, for the benefit of the Investor, an undivided percentage
ownership interest, to the extent of the Receivable Interest then being
purchased, in each Pool Receivable then existing and in the Related Security and
Collections with respect thereto.
SECTION 2.03. Receivable Interest Computation. (a) Each Receivable
-------------------------------
Interest shall be initially computed on its date of purchase. Thereafter until
the Termination Date for such Receivable Interest, such Receivable Interest
shall be automatically recomputed (or deemed to be recomputed) on each day other
than a Liquidation Day. Any Receivable
18
<PAGE>
Interest, as computed (or deemed recomputed) as of the day immediately preceding
the Termination Date for such Receivable Interest, shall thereafter remain
constant. Such Receivable Interest shall become zero when Capital thereof and
Yield thereon shall have been paid in full, all other amounts owed by the Seller
hereunder to the Investor or the Agent are paid and the Collection Agent shall
have received the accrued Collection Agent Fee thereon.
(b) If any Receivable Interest would otherwise be reduced on any day
on account of newly arising Pool Receivables, the Investor may prevent such
reduction by notifying the Collection Agent on such day that the Receivables
Pool and the Net Receivables Pool Balance for such Receivable Interest will
include, with respect to Receivables arising as Pool Receivables on such day,
only such number or portion of such Receivables as shall cause such Receivable
Interest to remain constant. The remainder of such Receivables or portion
thereof shall be treated as Receivables arising on the next succeeding Business
Day (subject to reapplication of this subsection (b)).
SECTION 2.04. Settlement Procedures. (a) Collection of the Pool
---------------------
Receivables shall be administered by a Collection Agent, in accordance with the
terms of this Agreement and the Collection Agent Agreement. The Seller shall
provide to the Collection Agent (if other than the Seller) on a timely basis all
information needed for such administration, including notice of the occurrence
of any Liquidation Day and current computations of each Receivable Interest.
(b) The Collection Agent shall, on each day on which Collections of
Pool Receivables are received by it with respect to any Receivable Interest:
(i) set aside and hold in trust (and, at the request of the
Agent, segregate) for the Investor, out of the percentage of such
Collections represented by such Receivable Interest, an amount equal
to the Yield and Collection Agent Fee accrued through such day for
such Receivable Interest and not previously set aside;
(ii) if such day is not a Liquidation Day, reinvest with the
Seller, on behalf of the Investor, the remainder of such percentage of
Collections, to the extent representing a return of Capital, by
recomputation of such Receivable Interest pursuant to Section 2.03;
(iii) if such day is a Liquidation Day, set aside and hold in
trust (and, at the request of the Agent, segregate) for the Investor
19
<PAGE>
the entire remainder of such percentage of Collections; provided that
--------
if amounts are set aside and held in trust on any Liquidation Day, and
thereafter during such Settlement Period the conditions set forth in
Section 2.12 are satisfied or are waived by the Agent, such previously
set aside amounts shall, to the extent representing a return of
Capital, be reinvested in accordance with the preceding paragraph (ii)
on the day of such subsequent satisfaction or waiver of conditions;
and
(iv) during such times as amounts are required to be reinvested
in accordance with the foregoing paragraph (ii) or the proviso to
paragraph (iii), release to the Seller for its own account any
Collections in excess of such amounts and the amounts that are
required to be set aside pursuant to paragraph (i) above.
(c) The Collection Agent shall deposit into the Agent's Account, on
the last day of each Settlement Period for a Receivable Interest, Collections
held for the Investor that relate to such Receivable Interest pursuant to
Section 2.04(b).
(d) Upon receipt of funds deposited into the Agent's Account, the
Agent shall distribute them as follows:
(i) if such distribution occurs on a day that is not a
Liquidation Day, first to the Investor in payment in full of all
accrued Yield and then to the Collection Agent in payment in full of
all accrued Collection Agent Fee.
(ii) if such distribution occurs on a Liquidation Day, first to
the Investor in payment in full of all accrued Yield, second to the
Investor in reduction to zero of all Capital, third to the Investor or
the Agent in payment of any other amounts owed by the Seller
hereunder, and fourth to the Collection Agent in payment in full of
all accrued Collection Agent Fee.
After the Capital and Yield and Collection Agent Fee with respect to a
Receivable Interest, and any other amounts payable by the Seller to the Investor
or the Agent hereunder, have been paid in full, all additional Collections with
respect to such Receivable Interest shall be paid to the Seller for its own
account.
20
<PAGE>
(e) For the purposes of this Section 2.04:
(i) if on any day the Outstanding Balance of any Pool Receivable
is reduced or adjusted as a result of any defective, rejected,
returned, repossessed or foreclosed merchandise or services, or any
cash discount or other adjustment made by the Seller, or any setoff,
the Seller shall be deemed to have received on such day a Collection
of such Pool Receivable in the amount of such reduction or adjustment;
(ii) if on any day any of the representations or warranties in
Section 3.01(h) is no longer true with respect to any Pool Receivable,
the Seller shall be deemed to have received on such day a Collection
of such Pool Receivable in full;
(iii) except as provided in paragraph (i) or (ii) of this
Section 2.04(e), or as otherwise required by applicable law or the
relevant Contract, all Collections received from an Obligor of any
Receivables shall be applied to the Receivables of such Obligor in the
order of the age of such Receivables, starting with the oldest such
Receivable, unless such Obligor designates its payment for application
to specific Receivables; and
(iv) if and to the extent the Agent or the Investor shall be
required for any reason to pay over to an Obligor any amount received
on its behalf hereunder, such amount shall be deemed not to have been
so received but rather to have been retained by the Seller and,
accordingly, the Agent or the Investor, as the case may be, shall have
a claim against the Seller for such amount, payable when and to the
extent that any distribution from or on behalf of such Obligor is made
in respect thereof.
SECTION 2.05. Fees. (a) The Seller shall pay to the Agent for the
----
account of CRC, on the amount of the annual average outstanding Capital of all
Receivable Interests from the date hereof until the later of the Facility
Termination Date or the date on which all Capital of all Receivable Interests is
reduced to zero, a fee (the "Investor Investment Fee") at the per annum rate of
1/100 of 1%. The Investor Investment Fee is payable in arrears annually on the
last Business Day of June of each year and on the later of the Facility
21
<PAGE>
Termination Date or the date on which all Capital of all Receivable Interests is
reduced to zero.
(b) The Seller also shall pay to the Agent certain fees in the
amounts and on the dates set forth in the Fee Agreement.
SECTION 2.06. Payments and Computations, Etc. (a) All amounts to be
------------------------------
paid or deposited by the Seller or the Collection Agent hereunder or under the
Collection Agent Agreement shall be paid or deposited no later than 11:00 A.M.
(New York City time) on the day when due in same day funds to the Agent's
Account.
(b) The Seller shall, to the extent permitted by law, pay interest on
any amount not paid or deposited by the Seller (whether as Collection Agent or
otherwise) when due hereunder, at an interest rate per annum equal to 2% per
annum above the Alternate Base Rate, payable on demand.
(c) All computations of interest under subsection (b) above and all
computations of Yield, fees, and other amounts hereunder shall be made on the
basis of a year of 360 days for the actual number of days elapsed. Whenever any
payment or deposit to be made hereunder shall be due on a day other than a
Business Day, such payment or deposit shall be made on the next succeeding
Business Day and such extension of time shall be included in the computation of
such payment or deposit.
SECTION 2.07. Dividing or Combining Receivable Interests. Either the
------------------------------------------
Seller or the Agent may, upon notice to the other party received at least three
Business Days prior to the last day of any Fixed Period in the case of the
Seller giving the notice or up to the last day of such Fixed Period in the case
of the Agent giving the notice, either (i) divide any Receivable Interest into
two or more Receivable Interests having aggregate Capital equal to the Capital
of such divided Receivable Interest, or (ii) combine any two or more Receivable
Interests originating on such last day or having Fixed Periods ending on such
last day into a single Receivable Interest having Capital equal to the aggregate
of the Capital of such Receivable Interests.
SECTION 2.08. Increased Costs. (a) If CNAI, any Investor, any entity
---------------
which enters into a commitment to purchase Receivable Interests or interests
therein, or any of their respective Affiliates (each an "Affected Person")
determines that compliance with any law or regulation or any guideline or
22
<PAGE>
request from any central bank or other governmental authority (whether or not
having the force of law) affects or would affect the amount of capital required
or expected to be maintained by such Affected Person and such Affected Person
determines that the amount of such capital is increased by or based upon the
existence of any commitment to make purchases of or otherwise to maintain the
investment in Pool Receivables or interests therein related to this Agreement or
to the funding thereof and other commitments of the same type, then, upon demand
by such Affected Person (with a copy to the Agent), the Seller shall immediately
pay to the Agent, for the account of such Affected Person (as a third-party
beneficiary), from time to time as specified by such Affected Person, additional
amounts sufficient to compensate such Affected Person in the light of such
circumstances, to the extent that such Affected Person reasonably determines
such increase in capital to be allocable to the existence of any of such
commitments. A certificate as to such amounts submitted to the Seller and the
Agent by such Affected Person shall be conclusive and binding for all purposes,
absent manifest error.
(b) If, due to either (i) the introduction of or any change (other
than any change by way of imposition or increase of reserve requirements
referred to in Section 2.09) in or in the interpretation of any law or
regulation or (ii) compliance with any guideline or request from any central
bank or other governmental authority (whether or not having the force of law),
there shall be any increase in the cost to an Investor of agreeing to purchase
or purchasing, or maintaining the ownership of Receivable Interests in respect
of which Yield is computed by reference to the Eurodollar Rate, then, upon
demand by such Investor (with a copy to the Agent), the Seller shall immediately
pay to the Agent, for the account of such Investor (as a third-party
beneficiary), from time to time as specified by such Investor, additional
amounts sufficient to compensate such Investor for such increased costs, to the
extent that such Investor reasonably determines such increase in costs to be
allocable to such agreement to purchase such Receivable Interests. A
certificate as to such amounts submitted to the Seller and the Agent by such
Investor shall be conclusive and binding for all purposes, absent manifest
error.
23
<PAGE>
SECTION 2.09. Additional Yield on Receivable Interests Bearing a
--------------------------------------------------
Eurodollar Rate. The Seller shall pay to any Investor, so long as such Investor
- ---------------
shall be required under regulations of the Board of Governors of the Federal
Reserve System to maintain reserves with respect to liabilities or assets
consisting of or including Eurocurrency Liabilities, additional Yield on the
unpaid Capital of each Receivable Interest of such Investor during each Fixed
Period in respect of which Yield is computed by reference to the Eurodollar
Rate, for such Fixed Period, at a rate per annum equal at all times during such
Fixed Period to the remainder obtained by subtracting (i) the Eurodollar Rate
for such Fixed Period from (ii) the rate obtained by dividing such Eurodollar
Rate referred to in clause (i) above by that percentage equal to 100% minus the
Eurodollar Rate Reserve Percentage of such Investor for such Fixed Period,
payable on each date on which Yield is payable on such Receivable Interest.
Such additional Yield shall be determined by such Investor and notice thereof
given to the Seller through the Agent within 30 days after any Yield payment is
made with respect to which such additional Yield is requested. A certificate as
to such additional Yield submitted to the Seller and the Agent by such Investor
shall be conclusive and binding for all purposes, absent manifest error.
SECTION 2.10. Repurchase of Receivable Interests. (a) The Seller
----------------------------------
may upon at least three days' prior written notice to the Agent and each
Investor (which notice shall specify a date or dates (the "Repurchase Date") and
the Receivable Interests to be purchased), repurchase from the Investor any or
all Receivable Interests.
(b) The Seller shall, on the Repurchase Date for each Receivable
Interest, pay to the Agent (in accordance with Section 2.06), as the repurchase
price (the "Repurchase Price") thereof, an amount equal to the sum of (i) the
Capital of such Receivable Interest as of such date, plus (ii) the Yield for
such Receivable Interest accrued through such Repurchase Date to the extent not
paid, plus (iii) the accrued Collection Agent Fee as of such Repurchase Date,
plus (iv) all accrued and unpaid fees owing under the Fee Agreement as of such
Repurchase Date, plus (v) all other amounts due to the Agent and each Investor
hereunder. Upon the Agent's receipt of the Repurchase Price for a Receivable
Interest, it shall apply such funds in accordance with clause (ii) of Section
2.04 and in payment of any amounts owing to the Agent.
(c) The Seller shall execute and deliver such further agreements,
documents and instruments, and take such further action, as the Agent may
reasonably request to effect the intent and purpose of this Section 2.10.
Without
24
<PAGE>
limiting any other provision of this Agreement, the Seller shall indemnify the
Agent and each Investor for all losses, liabilities, costs and expenses
(including without limitation reasonable fees and disbursements of counsel)
which the Agent and each Investor may sustain as a result of any repurchase
contemplated by this Section 2.10.
(d) Upon the Agent's receipt in full of the Repurchase Price for each
Receivable Interest repurchased pursuant to paragraph (b) above, the Agent's
distribution to each Investor of the portion of the Repurchase Price payable to
such Investor and the reduction to zero of the Capital of each such Receivable
Interest, each Investor shall reassign to the Seller such repurchased Receivable
Interests, without recourse, representation or warranty of any kind, other than
a representation that no lien has been created by the Investor with respect to
such Receivable Interest.
SECTION 2.11. Conditions Precedent to Initial Purchase. The initial
----------------------------------------
purchase of a Receivable Interest under this Agreement is subject to the
conditions precedent that the Agent shall have received on or before the date of
such purchase the following, each (unless otherwise indicated) dated such date,
in form and substance satisfactory to the Agent:
(a) Certified copies of the resolutions of the Board of Directors of
the Seller approving this Agreement and certified copies of all documents
evidencing other necessary corporate action and governmental approvals, if any,
with respect to this Agreement.
(b) A certificate of the Secretary or Assistant Secretary of the
Seller certifying the names and true signatures of the officers of the Seller
authorized to sign this Agreement and the other documents to be delivered by it
hereunder.
(c) Acknowledgment copies, or time stamped receipt copies, of this
Agreement, duly filed as a public utility filing with the Secretary of State of
the State of New Mexico, and proper financing statements, duly filed on or
before the date of such initial purchase under the UCC of all jurisdictions that
the Agent may deem necessary or desirable in order to perfect the ownership
interests contemplated by this Agreement.
(d) Acknowledgment copies, or time stamped receipt copies, of proper
financing statements, if any, necessary to release all security interests and
25
<PAGE>
other rights of any Person in the Receivables, Contracts or Related Security
previously granted by the Seller.
(e) Completed requests for information or reports of chattel
searches, dated on or before the date of such initial purchase, listing the
financing statements referred to in subsection (c) above and all other effective
financing statements filed in the jurisdictions referred to in subsection (c)
above that name the Seller as debtor, together with copies of such other
financing statements (none of which shall cover any Receivables, Contracts or
Related Security).
(f) A favorable opinion of Keleher & McLeod, P.A., counsel for the
Seller, substantially in the form of Annex B hereto and as to such other matters
as the Agent may reasonably request.
(g) The Collection Agent Agreement.
(h) The Fee Agreement.
(i) A favorable opinion of Kaye, Scholer, Fierman, Hays & Handler,
counsel for the Agent, as to such matters as the Agent may reasonably request.
SECTION 2.12. Conditions Precedent to All Purchases and Rein-
----------------------------------------------
vestments. Each purchase (including the initial purchase) and each reinvestment
- ---------
shall be subject to the further conditions precedent that:
(a) in the case of each purchase, the Collection Agent shall have
delivered to the Agent on or prior to such purchase, in form and substance
satisfactory to the Agent, a completed Seller Report, dated as of the last day
of the preceding calendar month, together with such additional information as
may reasonably be requested by the Agent,
(b) on the date of such purchase or reinvestment the following
statements shall be true (and acceptance of the proceeds of such purchase or
reinvestment shall be deemed a representation and warranty by the Seller that
such statements are then true):
26
<PAGE>
(i) The representations and warranties contained in Article III
are correct on and as of the date of such purchase or reinvestment as
though made on and as of such date,
(ii) No event has occurred and is continuing, or would result
from such purchase or reinvestment, that constitutes an Event of
Termination or that would constitute an Event of Termination but for the
requirement that notice be given or time elapse or both, and
(iii) All of the Seller's long-term public senior debt
securities are rated at least B by Standard & Poor's Corporation and B2 by
Moody's Investors Service, Inc., and
(iv) The Agent shall not have given the Seller at least one
Business Day's notice that the Investor has terminated the reinvestment of
Collections in Receivable Interests, and
(c) the Agent shall have received such other approvals, opinions or
documents as it may reasonably request.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. Representations and Warranties. The Seller hereby
------------------------------
represents and warrants as follows, each of which representations and warranties
shall be a continuing representation during the term of this Agreement:
(a) The Seller is a corporation duly incorporated, validly existing
and in good standing under the laws of New Mexico, and is duly qualified to do
business, and is in good standing, in every jurisdiction where the nature of its
business requires it to be so qualified.
(b) The execution, delivery and performance by the Seller of this
Agreement and the other documents to be delivered by it thereunder, including
the Seller's use of the proceeds of purchases and reinvestments, (i) are within
the Seller's corporate powers, (ii) have been duly authorized by all necessary
corporate action, (iii) do not contravene (1) the Seller's charter or by-laws,
(2) any law, rule or regulation applicable to the Seller, (3) any contractual
restriction
27
<PAGE>
binding on or affecting the Seller or its property or (4) any order, writ,
judgment, award, injunction or decree binding on or affecting the Seller or its
property, and (iv) do not result in or require the creation of any lien,
security interest or other charge or encumbrance upon or with respect to any of
its properties, except as required by this Agreement. This Agreement has been
duly executed and delivered by the Seller.
(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 Seller of this Agreement or
any other document to be delivered thereunder, except such as have been obtained
or made.
(d) This Agreement constitutes the legal, valid and binding
obligation of the Seller enforceable against the Seller in accordance with its
terms, subject to bankruptcy, insolvency or other similar laws affecting
creditors' rights generally and to general principles of equity (whether
considered in a proceeding in equity or at law).
(e) The consolidated balance sheet of the Seller and its sub-
sidiaries as at December 31, 1992, and as at the end of the most recently
completed fiscal quarter as set forth in the most recent financial statements
filed with the Securities and Exchange Commission and the related consolidated
statements of income and retained earnings of the Seller and its subsidiaries
for the periods then ended, copies of which have been furnished to the Agent,
fairly present the financial condition of the Seller and its subsidiaries as at
such date and the results of the operations of the Seller and its subsidiaries
for the period ended on such date, all in accordance with generally accepted
accounting principles consistently applied.
(f) There is no pending or threatened action or proceeding affecting
the Seller or any of its subsidiaries before any court, governmental agency or
arbitrator which may materially adversely affect the ability of the Seller to
perform its obligations under this Agreement, or which purports to affect the
legality, validity or enforceability of this Agreement.
(g) No proceeds of any purchase of Receivable Interests or
reinvestment of Collections will be used to acquire any equity security of a
class which is registered pursuant to Section 12 of the Securities Exchange Act
of 1934.
28
<PAGE>
(h) The Seller is the legal and beneficial owner of the Pool
Receivables and Related Security free and clear of any Adverse Claim; upon each
purchase or reinvestment, the Investor shall acquire a valid and perfected first
priority undivided percentage interest to the extent of the pertinent Receivable
Interest in each Pool Receivable then existing or thereafter arising and in the
Related Security and Collections with respect thereto. No effective financing
statement or other instrument similar in effect covering any Contract or any
Pool Receivable or the Related Security or Collections with respect thereto is
on file in any recording office, except those filed in favor of the Agent
relating to this Agreement. Notwithstanding any other provision of this
Subsection 3.01(h) the Seller makes no representation or warranty concerning
the relative priority of the security interests created by this Agreement and
the Parallel Purchase Agreement.
(i) Each Seller Report (if prepared by the Seller or one of its
Affiliates, or to the extent that information contained therein is supplied by
the Seller or an Affiliate), item of information, exhibit, financial statement,
document, book, record or report furnished or to be furnished at any time by or
on behalf of the Seller to the Agent or the Investor in connection with this
Agreement is or will be accurate in all material respects as of its date or
(except as otherwise disclosed to the Agent or the Investor, as the case may be,
at such time) as of the date so furnished, and no such document contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary in order to make the statements contained therein, in
the light of the circumstances under which they were made, not misleading.
(j) The principal place of business and chief executive office of the
Seller and the office where the Seller keeps its records concerning the Pool
Receivables are located at the address or addresses referred to in Section
4.01(b).
(k) Each purchase of a Receivable Interest and each reinvestment of
Collections in Pool Receivables will constitute (i) a "current transaction"
within the meaning of Section 3(a)(3) of the Securities Act of 1933, as amended,
and (ii) a purchase or other acquisition of notes, drafts, acceptances, open
accounts receivable or other obligations representing part or all of the sales
price of merchandise, insurance or services within the meaning of Section
3(c)(5) of the Investment Company Act of 1940, as amended.
29
<PAGE>
(l) There has been no material adverse change in the collectibility
of the Receivables or the ability of the Seller to perform its obligations under
this Agreement or the Collection Agent Agreement.
ARTICLE IV
COVENANTS
SECTION 4.01. Covenants of the Seller. Until the latest of the
-----------------------
Facility Termination Date, the date on which no Capital of or Yield on any
Receivable Interest shall be outstanding or the date all other amounts owed by
the Seller hereunder to the Investor or the Agent are paid in full:
(a) Compliance with Laws, Etc. The Seller will comply in all
-------------------------
material respects with all applicable laws, rules, regulations and orders and
preserve and maintain its corporate existence, rights, franchises,
qualifications and privileges, except to the extent that the failure so to
comply with such laws, rules and regulations or the failure so to preserve and
maintain such existence, rights, franchises, qualifications, and privileges
would not materially adversely affect the collectibility of the Receivables Pool
or the ability of the Seller to perform its obligations under this Agreement or
the Collection Agent Agreement.
(b) Offices, Records and Books of Account. The Seller will keep its
-------------------------------------
principal place of business and chief executive office and the office where it
keeps its records concerning the Pool Receivables at the address of the Seller
set forth under its name on the signature page to this Agreement or, upon 30
days' prior written notice to the Agent, at any other locations in jurisdictions
where all actions reasonably requested by the Agent to protect and perfect the
interest in the Pool Receivables have been taken and completed. The Seller also
will maintain and implement administrative and operating procedures (including,
without limitation, an ability to recreate records evidencing Pool Receivables
and related Contracts in the event of the destruction of the originals thereof),
and keep and maintain all documents, books, records and other information
reasonably necessary or advisable for the collection of all Pool Receivables
(including, without limitation, records adequate to permit the daily
identification of each Pool Receivable and all Collections of and adjustments to
each existing Pool Receivable).
30
<PAGE>
(c) Performance and Compliance with Contracts and Credit and
--------------------------------------------------------
Collection Policy. The Seller will, at its expense, timely and fully perform
- -----------------
and comply with all material provisions, covenants and other promises required
to be observed by it under the Contracts related to the Pool Receivables, and
timely and fully comply in all material respects with the Credit and Collection
Policy in regard to each Pool Receivable and the related Contract.
(d) Sales, Liens, Etc. The Seller will not sell, assign (by
-----------------
operation of law or otherwise) or otherwise dispose of, or create or suffer to
exist any Adverse Claim upon or with respect to, the Seller's undivided interest
in any Pool Receivable, Related Security, related Contract or Collections, or
upon or with respect to any account to which any Collections of any Pool
Receivable are sent, or assign any right to receive income in respect thereof.
(e) Extension or Amendment of Receivables. Except as provided in the
-------------------------------------
Collection Agent Agreement or as required by law, the Seller will not extend,
amend or otherwise modify the terms of any Pool Receivable, or amend, modify or
waive any term or condition of any Contract related thereto.
(f) Change in Business or Credit and Collection Policy. The Seller
--------------------------------------------------
will not make any change in the character of its business or in the Credit and
Collection Policy that would, in either case, materially adversely affect the
collectibility of the Receivables Pool or the ability of the Seller to perform
its obligations under this Agreement or the Collection Agent Agreement.
(g) Audits. The Seller will, from time to time during regular
------
business hours as requested by the Agent, permit the Agent, or its agents or
representatives, (i) to examine and make copies of and abstracts from all books,
records and documents (including, without limitation, computer tapes and disks)
in the possession or under the control of the Seller relating to Pool
Receivables and the Related Security, including, without limitation, the related
Contracts, and (ii) to visit the offices and properties of the Seller for the
purpose of examining such materials described in clause (i) above, and to
discuss matters relating to Pool Receivables and the Related Security or the
Seller's performance hereunder or under the Contracts with any of the officers
or employees of the Seller having knowledge of such matters. In addition,
within 120 days after the end of each fiscal year of the Seller, the Seller
will, at its expense, cause its independent public accountants to perform, and
deliver to the Agent a written report describing, certain agreed upon procedures
conducted by such accountants with
31
<PAGE>
respect to the Pool Receivables and the Credit and Collection Policy on a scope
and in a form reasonably requested by the Agent.
(h) Collections. At all times following the designation by the Agent
-----------
of any Designated Account, the Seller will deposit, or cause to be deposited,
all Collections to such Designated Account.
(i) Deposits to Designated Accounts. The Seller will not deposit or
-------------------------------
otherwise credit, or cause or permit to be so deposited or credited, to any
Designated Account cash or cash proceeds other than Collections of Pool
Receivables.
(j) Marking of Records. At its expense, the Seller will mark its
------------------
master data processing records evidencing Pool Receivables and related Contracts
with a legend evidencing that Receivable Interests related to such Pool
Receivables and related Contracts have been sold in accordance with the
Agreement.
(k) Reporting Requirements. The Seller will provide to the Agent (in
----------------------
multiple copies, if requested by the Agent) the following:
(i) as soon as available and in any event within 60 days after
the end of the first three quarters of each fiscal year of the Seller, a
consolidated balance sheet of the Seller and its subsidiaries as of the end
of such quarter and a consolidated statement of income and retained
earnings of the Seller and its subsidiaries for the period commencing at
the end of the previous fiscal year and ending with the end of such
quarter, certified by the chief financial officer of the Seller;
(ii) as soon as available and in any event within 120 days after
the end of each fiscal year of the Seller, a copy of the annual report for
such year for the Seller and its subsidiaries, containing consolidated
financial statements for such year audited by Arthur Andersen & Co. or
other independent public accountants acceptable to the Agent;
(iii) as soon as possible and in any event within five days
after the occurrence of each Event of Termination or event which, with the
giving of notice or lapse of time, or both, would constitute an Event of
Termination, a statement of the chief financial officer of the Seller
setting
32
<PAGE>
forth details of such Event of Termination or event and the action that the
Seller has taken and proposes to take with respect thereto;
(iv) promptly after the sending or filing thereof, copies of all
reports that the Seller sends to any of its securityholders, and copies of
all reports and registration statements that the Seller or any subsidiary
files with the Securities and Exchange Commission or any national
securities exchange other than reports and registration statements in
connection with public offerings of securities under employee stock option,
consumer stock or dividend reinvestment plans;
(v) promptly after the filing or receiving thereof, copies of
all reports and notices that the Seller or any Affiliate files under ERISA
with the Internal Revenue Service or the Pension Benefit Guaranty
Corporation or the U.S. Department of Labor or that the Seller or any
Affiliate receives from any of the foregoing or from any multiemployer plan
(within the meaning of Section 4001(a)(3) of ERISA) to which the Seller or
any Affiliate is or was, within the preceding five years, a contributing
employer, in each case in respect of the assessment of withdrawal liability
or an event or condition which could, in the aggregate, result in the
imposition of liability on the Seller and/or any such Affiliate in excess
of $1,000,000;
(vi) at least ten Business Days prior to any change in the
Seller's name, a notice setting forth the new name and the effective date
thereof; and
(vii) such other information respecting the Receivables or the
condition or operations, financial or otherwise, of the Seller or any of
its subsidiaries as the Agent may from time to time reasonably request.
ARTICLE V
INDEMNIFICATION
SECTION 5.01. Indemnities by the Seller. Without limiting any other
-------------------------
rights that the Agent or the Investor or any of their respective Affiliates
(each, an "Indemnified Party") may have hereunder or under applicable law, the
Seller hereby agrees to indemnify each Indemnified Party from and against any
and all claims, losses and liabilities (including reasonable attorneys' fees)
(all of
33
<PAGE>
the foregoing being collectively referred to as "Indemnified Amounts") arising
out of or resulting from this Agreement or the use of proceeds of purchases or
reinvestments or the ownership of Receivable Interests or in respect of any
Receivable or any Contract, excluding, however, (a) Indemnified Amounts to the
extent resulting from gross negligence or willful misconduct on the part of such
Indemnified Party, (b) recourse (except as otherwise specifically provided in
this Agreement) for uncollectible Receivables or (c) any income taxes incurred
by such Indemnified Party arising out of or as a result of this Agreement or the
ownership of Receivable Interests or in respect of any Receivable or any
Contract. Without limiting or being limited by the foregoing, the Seller shall
pay on demand to each Indemnified Party any and all amounts necessary to
indemnify such Indemnified Party from and against any and all Indemnified
Amounts relating to or resulting from any of the following:
(i) the creation of an undivided percentage interest in any
Receivable which purports to be part of the Net Receivables Pool
Balance but which is not at the date of the creation of such interest
an Eligible Receivable or which thereafter ceases to be an Eligible
Receivable;
(ii) reliance on any representation or warranty or statement made
or deemed made by the Seller (or any of its officers) under or in
connection with this Agreement which was incorrect in any material
respect when made;
(iii) the failure by the Seller to comply with any law, rule or
regulation applicable to the Seller with respect to any Pool
Receivable or the related Contract; or the failure of any Pool
Receivable or the related Contract to conform to any such applicable
law, rule or regulation;
(iv) the failure to vest in the Investor a perfected undivided
percentage ownership interest, to the extent of each Receivable
Interest, in the Receivables in, or purporting to be in, the
Receivables Pool and the Related Security and Collections in respect
thereof, free and clear of any Adverse Claim;
(v) the failure to have filed, or any delay in filing, financing
statements or other similar instruments or documents under the UCC of
any applicable jurisdiction or other applicable laws with respect
34
<PAGE>
to any Receivables in, or purporting to be in, the Receivables Pool
and the Related Security and Collections in respect thereof, whether
at the time of any purchase or reinvestment or at any subsequent time;
(vi) any dispute, claim, offset or defense (other than discharge
in bankruptcy of the Obligor) of the Obligor to the payment of any
Receivable in, or purporting to be in, the Receivables Pool
(including, without limitation, a defense based on such Receivable or
the related Contract not being a legal, valid and binding obligation
of such Obligor enforceable against it in accordance with its terms),
or any other claim resulting from the sale of the merchandise or
services related to such Receivable or the furnishing or failure to
furnish such merchandise or services or relating to collection
activities with respect to such Receivable (if such collection
activities were performed by the Seller or any of its Affiliates
acting as Collection Agent). Without in any manner limiting the
Seller's indemnity obligations under this Section 5.01(vi), the Seller
shall be entitled, at its election, to assume the defense of, or
otherwise to contest, any such dispute, claim, offset or defense. The
Indemnified Party will cooperate with the Seller, at the Seller's sole
cost, in any such defense or contest undertaken by the Seller. In the
event the Seller assumes such defense, or undertakes such contest, the
Indemnified Party shall be permitted, at its sole cost, to participate
therein;
(vii) any failure of the Seller, as Collection Agent or
otherwise, to perform its duties or obligations in accordance with the
provisions hereof or of the Collection Agent Agreement or to perform
its duties or obligations under the Contracts;
(viii) any products liability or other claim arising out of or
in connection with services which are the subject of any Contract;
(ix) the commingling of Collections of Pool Receivables at any
time with other funds; or
(x) any investigation, litigation or proceeding related to this
Agreement or the use of proceeds of purchases or reinvestments or
35
<PAGE>
the ownership of Receivable Interests or in respect of any Receivable,
Related Security or Contract.
ARTICLE VI
EVENTS OF TERMINATION
SECTION 6.01. Events of Termination. If any of the following events
---------------------
("Events of Termination") shall occur and be continuing:
(a) The Collection Agent (if the Seller or any of its Affiliates) (i)
shall fail in any material respect to perform or observe any term, covenant or
agreement under this Agreement or under the Collection Agent Agreement (other
than as referred to in clause (ii) of this paragraph (a)) and such failure shall
remain unremedied for three Business Days or (ii) shall fail to make when due
any payment or deposit to be made by it under this Agreement or the Collection
Agent Agreement; or
(b) The Seller shall fail (i) to transfer to the Agent when requested
any rights, pursuant to this Agreement or the Collection Agent Agreement, which
the Seller then has as Collection Agent, or (ii) to make any payment required
under Section 2.04; or
(c) Any representation or warranty made or deemed made by the Seller
(or any of its officers) under or in connection with this Agreement or any
information or report delivered by the Seller pursuant to this Agreement shall
prove to have been incorrect or untrue in any material respect when made or
deemed made or delivered; or
(d) The Seller shall fail to perform or observe any other term,
covenant or agreement contained in this Agreement on its part to be performed or
observed and any such failure shall remain unremedied for ten days after written
notice thereof shall have been given to the Seller by the Agent; or
(e) The Seller or any of its Significant Subsidiaries shall fail to
pay any principal of or premium or interest on any of its Debt which is
outstanding in a principal amount of at least $5,000,000 in the aggregate when
the same becomes due and payable (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise), and such failure shall continue
after the applicable grace period, if any, specified in the agreement or
instrument relating
36
<PAGE>
to such Debt; or any other event shall occur or condition shall exist under any
agreement or instrument relating to any such Debt and shall continue after the
applicable grace period, if any, specified in such agreement or instrument, if
the effect of such event or condition is to accelerate, or to permit the
acceleration of, the maturity of such Debt; or any such Debt shall be declared
to be due and payable, or required to be prepaid (other than by a regularly
scheduled required prepayment), redeemed, purchased or defeased, or an offer to
repay, redeem, purchase or defease such Debt shall be required to be made, in
each case prior to the stated maturity thereof; or
(f) Any purchase or any reinvestment pursuant to this Agreement shall
for any reason (other than pursuant to the terms hereof) cease to create, or any
Receivable Interest shall for any reason cease to be, a valid and perfected
first priority undivided percentage interest to the extent of the pertinent
Receivable Interest in each applicable Pool Receivable and the Related Security
and Collections with respect thereto; or
(g) The Seller or any of its Significant Subsidiaries shall generally
not pay its debts as such debts become due, or shall admit in writing its
inability to pay its debts generally, or shall make a general assignment for the
benefit of creditors; or any proceeding shall be instituted by or against the
Seller or any of its Significant Subsidiaries seeking to adjudicate it a
bankrupt or insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, or composition of it or its debts
under any law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment of a
receiver, trustee, custodian or other similar official for it or for any
substantial part of its property and, in the case of any such proceeding
instituted against it (but not instituted by it), either such proceeding shall
remain undismissed or unstayed for a period of 30 days, or any of the actions
sought in such proceeding (including, without limitation, the entry of an order
for relief against, or the appointment of a receiver, trustee, custodian or
other similar official for, it or for any substantial part of its property)
shall occur; or the Seller or any of its Significant Subsidiaries shall take any
corporate action to authorize any of the actions set forth above in this
paragraph (g); or
(h) As of the last day of any calendar month, either the Default
Ratio shall exceed 2% or the Delinquency Ratio shall exceed 5% or the Loss-to-
Liquidation Ratio shall exceed 1.5%; or
37
<PAGE>
(i) The sum of the Receivable Interests plus the "Receivable
Interests" under the Parallel Purchase Commitment shall for a period of five
consecutive Business Days be greater than 100%; or
(j) There shall have occurred any event which may materially
adversely affect the collectibility of the Receivables Pool or the ability of
the Seller to collect Pool Receivables or otherwise perform its obligations
under this Agreement or the Collection Agent Agreement;
the Agent may, by notice to the Seller, take either or both of the following
actions: (x) declare the Facility Termination Date to have occurred (in which
case the Facility Termination Date shall be deemed to have occurred), and (y)
without limiting any right under the Collection Agent Agreement to replace the
Collection Agent, designate another Person to succeed the Seller as the
Collection Agent; provided that, automatically upon the occurrence of any event
--------
(without any requirement for the passage of time or the giving of notice)
described in paragraph (g) above, the Facility Termination Date shall occur, the
Seller (if it is then serving as the Collection Agent) shall cease to be the
Collection Agent, and the Agent or its designee shall become the Collection
Agent. Upon any such declaration or designation or upon any such automatic
termination, the Investor and the Agent shall have, in addition to the rights
and remedies which they may have under this Agreement, all other rights and
remedies provided after default under the UCC and under other applicable law,
which rights and remedies shall be cumulative.
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. Amendments, Etc. No amendment or waiver of any
---------------
provision of this Agreement or consent to any departure by the Seller therefrom
shall be effective unless in a writing signed by the Agent, as agent for the
Investor (and, in the case of any amendment also signed by the Seller), and then
such amendment, waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given. No failure on the part
of the Investor or the Agent to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right hereunder preclude any other or further exercise thereof
or the exercise of any other right.
38
<PAGE>
SECTION 7.02. Notices, Etc. All notices and other communications
------------
hereunder shall, unless otherwise stated herein, be in writing (which shall
include facsimile communication) and faxed or delivered to each party hereto, at
its address set forth under its name on the signature pages hereof or at such
other address as shall be designated by such party in a written notice to the
other parties hereto. Notices and communications by facsimile shall be
effective when sent (and shall be followed by hard copy sent by regular mail),
and notices and communications sent by other means shall be effective when
received.
SECTION 7.03. Assignability. (a) This Agreement and the Investor's
-------------
rights and obligations herein (including ownership of each Receivable Interest)
shall be assignable by the Investor and its successors and assigns. Each
assignor of a Receivable Interest or any interest therein shall notify the Agent
and the Seller of any such assignment.
(b) This Agreement and the rights and obligations of the Agent herein
shall be assignable by the Agent and its successors and assigns.
(c) The Seller may not assign its rights or obligations hereunder or
any interest herein without the prior written consent of the Agent.
SECTION 7.04. Costs, Expenses and Taxes. (a) In addition to the
-------------------------
rights of indemnification granted under Section 5.01, the Seller agrees to pay
on demand all costs and expenses in connection with the preparation, execution,
delivery and administration (including periodic auditing of Receivables) of this
Agreement, any asset purchase agreement or similar agreement relating to the
sale or transfer of interests in Receivable Interests and the other documents
and agreements to be delivered hereunder, including, without limitation, the
reason-able fees and out-of-pocket expenses of counsel for the Agent, CNAI, CRC
and their respective Affiliates with respect thereto and with respect to
advising the Agent, CNAI, CRC and their respective Affiliates as to their rights
and remedies under this Agreement, and all costs and expenses, if any (including
reasonable counsel fees and expenses), of the Agent, CNAI, the Investor and
their respective Affiliates, in connection with the enforcement of this
Agreement and the other documents and agreements to be delivered hereunder.
(b) In addition, the Seller shall pay (i) any and all commissions of
placement agents and commercial paper dealers in respect of commercial paper
notes issued to fund the purchase or maintenance of any Receivable Interest,
(ii)
39
<PAGE>
any and all costs and expenses of any issuing and paying agent or other Person
responsible for the administration of CRC's commercial paper program in
connection with the preparation, completion, issuance, delivery or payment of
commercial paper notes issued to fund the purchase or maintenance of any
Receivable Interest, and (iii) any and all stamp and other taxes and fees
payable in connection with the execution, delivery, filing and recording of this
Agree-ment or the other documents or agreements to be delivered hereunder, and
agrees to save each Indemnified Party harmless from and against any liabilities
with respect to or resulting from any delay in paying or omission to pay such
taxes and fees.
(c) The Seller also shall pay on demand all other costs, expenses and
taxes (excluding income taxes) incurred by CRC or any stockholder of CRC ("Other
Costs"), including the cost of auditing CRC's books by certified public
accountants, the cost of rating CRC's commercial paper by independent financial
rating agencies, the taxes (excluding income taxes) resulting from CRC's opera-
tions, and the reasonable fees and out-of-pocket expenses of counsel for any
stockholder of CRC with respect to advising as to rights and remedies under this
Agreement, the enforcement of this Agreement or advising as to matters relating
to CRC's operations; provided that the Seller and any other Persons who from
--------
time to time sell receivables or interests therein to CRC ("Other Sellers") each
shall be liable for such Other Costs ratably in accordance with the usage under
their respective facilities; and provided further that if such Other Costs are
-------- -------
attributable to the Seller and not attributable to any Other Seller, the Seller
shall be solely liable for such Other Costs.
SECTION 7.05. No Proceedings. Each of the Seller, the Agent, each
--------------
Investor, each assignee of a Receivable Interest or any interest therein and
each entity which enters into a commitment to purchase Receivable Interests or
interests therein hereby agrees that it will not institute against CRC any
proceeding of the type referred to in Section 6.01(g) so long as any commercial
paper issued by CRC shall be outstanding or there shall not have elapsed one
year plus one day since the last day on which any such commercial paper shall
have been outstanding.
SECTION 7.06. Confidentiality. (a) Unless otherwise required by
---------------
applicable law or regulation, the Seller agrees to maintain the confidentiality
of this Agreement (and all drafts thereof) in communications with third parties
and otherwise; provided that this Agreement may be disclosed to (i) third
--------
parties to the extent such disclosure is made pursuant to a written agreement of
confiden-
40
<PAGE>
tiality in form and substance reasonably satisfactory to the Agent, and (ii) the
Seller's legal counsel and auditors if they agree (which they may do orally) to
hold it confidential.
(b) The Agent and the Investor agree to maintain the confidentiality
of any information each receives from the Seller, its agents, affiliates or
representatives in connection with this Agreement or any audit or otherwise (the
"Confidential Information"); provided, however, that each may, in connection
with an assignment or participation, disclose to the assignee or participant any
information relating to the Seller, including the Receivables, furnished to such
assignor by or on behalf of the Seller or by the Agent; provided that, prior to
any such disclosure, the assignee or participant agrees to preserve the
confidentiality of any Confidential Information in a form reasonably
satisfactory to the Seller; and provided further that there shall be no
obligation of confidentiality in respect of any Confidential Information which
may be generally available to the public.
SECTION 7.07 Execution of Documents by Agent. Promptly following
-------------------------------
request therefor by the Seller, the Agent will execute and deliver to the Seller
such amendments and supplements to, and such releases with respect to, UCC
financing statements, and such other instruments and documents, as the Seller
may from time to time request for the purpose of (a) stating the extent of CRC's
undivided interest in the Receivables Pool as of a stated date, (b) identifying
Receivables that are not included in, or have been excluded from, the
Receivables Pool, or (c) releasing any Receivable referred to in the immediately
preceding clause (b) hereof from any security interest or other lien created by
or in connection with the transactions contemplated by this Agreement.
SECTION 7.08. Governing Law. This agreement shall be governed by,
-------------
and construed in accordance with, the law of the State of New York (without
giving effect to the conflict of laws principles thereof), except to the extent
that the perfection of the interests of the investors in the receivables or
remedies hereunder, in respect thereof, are governed by the laws of a
jurisdiction other than the State of New York.
41
<PAGE>
SECTION 7.09. Execution in Counterparts. This Agreement may be
-------------------------
executed in any number of counterparts, each of which when so executed shall be
deemed to be an original and all of which when taken together shall constitute
one and the same agreement.
SECTION 7.10. Survival of Termination. The provisions of Sections
-----------------------
2.08, 2.09, 5.01, 7.04, 7.05 and 7.06 shall survive any termination of this
Agreement.
42
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
SELLER: PUBLIC SERVICE COMPANY OF
NEW MEXICO
By /s/ M. J. Marzec
------------------------------
Title: Treasurer
Alvarado Square
Albuquerque, NM 87158
Attn: Treasurer
Facsimile No: 505-848-2369
INVESTOR: CORPORATE RECEIVABLES CORPORATION
By: Citicorp North America,
Inc., as Attorney-in-Fact
By
--------------------------
Vice President
450 Mamaroneck Avenue
Harrison, NY 10528
Attention: Corporate Asset Funding
Facsimile No. 914-899-7890
AGENT: CITICORP NORTH AMERICA, INC.,
as Agent
By
----------------------------
Vice President
450 Mamaroneck Avenue
Harrison, NY 10528
Attention: Corporate Asset Funding
Facsimile No. 914-899-7890
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
SELLER: PUBLIC SERVICE COMPANY OF
NEW MEXICO
By
------------------------------
Title: Treasurer
Alvarado Square
Albuquerque, NM 87158
Attn: Treasurer
Facsimile No: 505-848-2369
INVESTOR: CORPORATE RECEIVABLES CORPORATION
By: Citicorp North America,
Inc., as Attorney-in-Fact
By /s/ Paul T. Pureka
--------------------------
Vice President
450 Mamaroneck Avenue
Harrison, NY 10528
Attention: Corporate Asset Funding
Facsimile No. 914-899-7890
AGENT: CITICORP NORTH AMERICA, INC.,
as Agent
By /s/ Paul T. Pureka
----------------------------
Vice President
450 Mamaroneck Avenue
Harrison, NY 10528
Attention: Corporate Asset Funding
Facsimile No. 914-899-7890
<PAGE>
ACKNOWLEDGEMENT
---------------
STATE OF NEW MEXICO )
) SS.
COUNTY OF BERNALILLO )
This instrument was acknowledged before me on December 16, 1993 by
M.J. Marzec (name of officer), Treasurer (title of officer) of PUBLIC SERVICE
COMPANY OF NEW MEXICO, a New Mexico corporation.
/s/ Terri L. Winsley
--------------------------
Notary Public
My Commission Expires:
2/14/94
<PAGE>
ACKNOWLEDGMENT
---------------
STATE OF NEW YORK )
) SS.
COUNTY OF NEW YORK )
This instrument was acknowledged before me on December 16, 1993 by
Paul T. Pureka (name of officer), Vice President (title of officer) of CITICORP
NORTH AMERICA, INC., a Delaware corporation.
/s/ Renee E. Ring
--------------------------
Notary Public
My Commission Expires:
Renee E. Ring
Notary Public, State of New York
No. 02-R14985071
Qualified in New York County
Commission Expires 8/12/95
<PAGE>
AGREEMENT OF THE COMPANY
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, the Company hereby
agrees to provide to the Securities and Exchange Commission, upon request, a
copy of any instrument referred to in subsection (A) thereof.
PUBLIC SERVICE COMPANY OF NEW MEXICO
By D. E. Peckham
-------------
Secretary
Albuquerque, New Mexico
March 27, 1984
<PAGE>
EXHIBIT 10.57
U.S. $100,000,000
REVOLVING CREDIT AGREEMENT
Dated as of December 14, 1993
Among
PUBLIC SERVICE COMPANY OF NEW MEXICO
as Borrower
-----------
and
THE BANKS NAMED HEREIN
as Banks
--------
and
CHEMICAL BANK
and
CITIBANK, N.A.
as Co-Agents
------------
<PAGE>
T A B L E O F C O N T E N T S
- - - - - - - - - - - - - - -
<TABLE>
<CAPTION>
Section Page
------- ----
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
<C> <S> <C>
1.01 Certain Defined Terms.................... 1
1.02 Computation of Time Periods.............. 16
1.03 Accounting Terms......................... 16
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
2.01 The Advances............................. 16
2.02 Making the Advances...................... 17
2.03 Fees..................................... 19
2.04 Reduction of the Commitments............. 20
2.05 Repayment................................ 20
2.06 Interest................................. 20
2.07 Additional Interest on Eurodollar Rate
Advances............................... 22
2.08 Interest Rate Determination and
Protection............................. 22
2.09 Rollover and Conversion of Advances...... 24
2.10 Prepayments.............................. 25
2.11 Increased Costs.......................... 26
2.12 Illegality............................... 27
2.13 Payments and Computations................ 27
2.14 Taxes.................................... 29
2.15 Sharing of Payments, Etc. ............... 31
2.16 Use of Proceeds.......................... 32
ARTICLE III
CONDITIONS TO EFFECTIVENESS AND LENDING
3.01 Conditions Precedent to Effectiveness.... 32
3.02 Conditions Precedent to Initial
Borrowing.............................. 34
3.03 Conditions Precedent to Each
Borrowing and to Rollover
of Advances............................. 34
3.04 Determination Under Section 3.01,
3.02, or 3.03........................... 35
</TABLE>
<PAGE>
ii
<TABLE>
<CAPTION>
Section Page
------- ----
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
<C> <S> <C>
4.01 Representations and Warranties of the
Borrower............................... 35
ARTICLE V
COVENANTS OF THE BORROWER
5.01 Affirmative Covenants................... 41
5.02 Negative Covenants...................... 48
ARTICLE VI
EVENTS OF DEFAULT
6.01 Events of Default....................... 53
ARTICLE VII
THE AGENTS
7.01 Authorization and Action................ 56
7.02 Agents' Reliance, Etc. ................. 57
7.03 Chemical and Citibank and
their Affiliates...................... 57
7.04 Lender Credit Decision.................. 58
7.05 Indemnification......................... 58
7.06 Successor Agents........................ 59
7.07 Exchange of Pledged Debt................ 59
ARTICLE VIII
MISCELLANEOUS
8.01 Amendments, Etc. ....................... 61
8.02 Notices, Etc. .......................... 62
8.03 No Waiver; Remedies..................... 62
8.04 Costs, Expenses and Taxes............... 62
8.05 Right of Set-off........................ 63
8.06 Binding Effect.......................... 64
8.07 Assignments and Participations.......... 64
8.08 Governing Law........................... 67
8.09 Execution in Counterparts............... 67
</TABLE>
<PAGE>
iii
Schedule I - List of Applicable Lending Offices
Schedule II - Subsidiaries
Schedule III - Electric Franchises
Schedule IV - ERISA Plans
Schedule V - Material Environmental Law Liability
Schedule VI - Material Leases
Schedule VII - Indebtedness
Schedule VIII - Material Lease Obligations
Schedule IX - Alternative Independent Accountants
Exhibit A - Promissory Note
Exhibit B - Notice of Borrowing/Rollover
Exhibit C - Assignment and Acceptance
Exhibit D - Form of Pledge Agreement
Exhibit E-1 - Form of Supplemental Indenture for First
Mortgage Bonds, Series A
Exhibit E-2 - Form of Supplemental Indenture for First
Mortgage Bonds, Series B
Exhibit F - Form of Opinion of Counsel for the Borrower
Exhibit G - Form of Opinion of Counsel for the Agents
Exhibit H - Form of Independent Accountants' Certificate
<PAGE>
REVOLVING CREDIT AGREEMENT
Dated as of December 14, 1993
PUBLIC SERVICE COMPANY OF NEW MEXICO, a New Mexico
corporation (the "Borrower"), the banks (the "Banks") listed on
-------- -----
the signature pages hereof, and CHEMICAL BANK ("Chemical") and
--------
CITIBANK, N.A. ("Citibank"), as Co-Agents (defined below) for
--------
the Lenders hereunder, agree as follows:
PRELIMINARY STATEMENT:
The Borrower has requested, and the Banks have agreed,
to enter into this Agreement in order to provide financing for a
period of eighteen months on the terms and conditions set forth
in this Agreement.
NOW, THEREFORE, for and in consideration of the
premises and of the mutual covenants and agreements contained
herein, the Borrower, the Banks and the Co-Agents do hereby
agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this
---------------------
Agreement, the following terms shall have the following
meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):
"Adjusted CD Rate" means, for any Interest Period for
----------------
each Adjusted CD Rate Advance comprising part of the same
Borrowing, an interest rate per annum (determined, subject
to the provisions of Section 2.08, by the Administrative
Agent on the basis of applicable rates furnished to and
received by the Administrative Agent from the Reference
Banks on the first day of such Interest Period) equal to
the sum of:
(a) the rate per annum obtained by dividing (i)
the rate of interest determined by the Administrative
Agent to be the average (rounded upward to the nearest
whole multiple of 1/100 of 1% per annum, if such
average is not such a multiple) of the consensus bid
rate determined by each of the Reference Banks for the
bid rates per annum, at
<PAGE>
2
10:00 A.M. (New York City time) (or as soon thereafter
as practicable) on the first day of such Interest
Period, of New York certificate of deposit dealers of
recognized standing selected by such Reference Bank
for the purchase at face value of certificates of
deposit of such Reference Bank in an amount
substantially equal to such Reference Bank's Adjusted
CD Rate Advance comprising part of such Borrowing and
with a maturity equal to such Interest Period, by (ii)
a percentage equal to 100% minus the Adjusted CD Rate
Reserve Percentage (as defined below) for such
Interest Period, plus
(b) the Assessment Rate (as defined below) for
such Interest Period.
The "Adjusted CD Rate Reserve Percentage" for any Interest
-----------------------------------
Period for each Adjusted CD Rate Advance comprising part of
the same Borrowing means the reserve percentage applicable
on the first day of such Interest Period 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, but not limited
to, any emergency, supplemental or other marginal reserve
requirement) for a member bank of the Federal Reserve
System in New York City with deposits exceeding one billion
dollars with respect to liabilities consisting of or
including (among other liabilities) U.S. dollar nonpersonal
time deposits in the United States with a maturity equal to
such Interest Period. The "Assessment Rate" for any
---------- ----
Interest Period for each Adjusted CD Rate Advance
comprising part of the same Borrowing means the annual
assessment rate estimated by the Administrative Agent on
the first day of such Interest Period for determining the
then current annual assessment payable by Chemical to the
Federal Deposit Insurance Corporation (or any successor)
for insuring U.S. dollar deposits of Chemical in the United
States.
"Adjusted CD Rate Advance" means an Advance which
------------------------
bears interest as provided in Section 2.06(a)(ii).
"Administrative Agent" means Chemical, as Co-Agent, or
--------------------
its successor as provided for pursuant to Section 7.06 of
this Agreement.
"Advance" means an advance by a Lender to the Borrower
-------
pursuant to Article II, and refers to an Adjusted CD Rate
Advance, a Base Rate Advance or a
<PAGE>
3
Eurodollar Rate Advance (each of which shall be a "Type" of
----
Advance).
"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.
"Agent" or "Agents" has the meaning specified in
----- ------
Section 7.01 of this Agreement.
"Applicable Lending Office" means, with respect to
-------------------------
each Lender, such Lender's Domestic Lending Office in the
case of a Base Rate Advance, such Lender's CD Lending
office in the case of an Adjusted CD Rate Advance, and such
Lender's Eurodollar Lending Office in the case of a
Eurodollar Rate Advance.
"Applicable Margin" means the percentage to be added
-----------------
from time to time to the Base Rate, the Adjusted CD Rate or
the Eurodollar Rate, as the case may be, in accordance with
the terms of Section 2.06 of this Agreement.
"Assignment and Acceptance" means an assignment and
-------------------------
acceptance entered into by a Lender and an Eligible
Assignee, and accepted by the Administrative Agent, in
substantially the form of Exhibit C hereto.
"Base Rate" means, for any period, 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 announced publicly by
Chemical in New York, New York, from time to time, as
Chemical's base rate; or
(b) 1/2 of one percent per annum 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 Chemical 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
<PAGE>
4
quotations for such rates received by Chemical from
three New York certificate of deposit dealers of
recognized standing selected by Chemical, 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; or
(c) for any day 1/2 of one percent per annum
above 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 Chemical from three
Federal funds brokers of recognized standing selected
by it.
"Base Rate Advance" means an Advance which bears
-----------------
interest as provided in Section 2.06(a)(i).
"Bond Rating" means, with respect to either Moody's or
-----------
S&P, as of any date, the rating of First Mortgage Bonds in
effect on such date, provided, however, that if, for either
-------- -------
Moody's or S&P, no rating is in effect, the rating from
Moody's or S&P, as the case may be, on such date shall be
deemed to be Ba2 or BB, as applicable; and, provided
--------
further, that if, as of any date, either Moody's or S&P
-------
shall have ceased to exist or to be in the business of
rating securities, (i) the Bond Rating with respect to
whichever of Moody's or S&P shall have ceased to exist or
to rate securities shall mean the rating of First Mortgage
Bonds by the applicable Substitute Rating Agency in effect
on such date and (ii) each rating specified in any Loan
Document for either Moody's or S&P, as applicable, shall be
deemed to be the rating of such Substitute Rating Agency
reasonably equivalent to such rating of Moody's or S&P.
"Borrowing" means a borrowing consisting of Advances
---------
of the same Type made on the same day by the Lenders.
"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 Rate Advances, on which dealings are carried on
in the London interbank market.
<PAGE>
5
"Cash Equivalents" means, to the extent owned by the
----------------
Borrower free and clear of all Liens, any Investment (i)
having a maturity of not greater than 180 days from the
date of acquisition thereof in (A) readily marketable
direct obligations of the Government of the United States
or any agency or instrumentality thereof or obligations
unconditionally guaranteed by the full faith and credit of
the Government of the United States, (B) insured
certificates of deposit of or time deposits with any
commercial bank that is a Lender or a member of the Federal
Reserve System, issues (or the parent of which issues)
commercial paper rated as described in clause (C), is
organized under the laws of the United States or any State
thereof and has combined capital and surplus of at least $1
billion or (C) commercial paper in an aggregate amount of
no more than $5,000,000 per issuer outstanding at any time,
issued by any corporation organized under the laws of any
State of the United States, rated at least "Prime-1" (or
the then equivalent grade) by Moody's or "A-1" (or the then
equivalent grade) by S&P or (ii) made and held in
compliance with the most current investment policy of the
Borrower disclosed to the Lenders in writing from time to
time.
"CD Lending Office" means, with respect to any Lender,
-----------------
the office of such Lender specified as its "CD Lending
Office" opposite its name on Schedule I hereto or in the
Assignment and Acceptance pursuant to which it became a
Lender (or, if no such office is specified, its Domestic
Lending Office), or such other office of such Lender as
such Lender may from time to time specify to the Borrower
and the Administrative Agent.
"Co-Agents" means Chemical and Citibank, or any
---------
successor as is provided for pursuant to Section 7.06 of
this Agreement.
"Collateral Agent" means Citibank, as Collateral Agent
----------------
under the Pledge Agreement, or its successor as provided
for pursuant to Section 7.06 of this Agreement.
"Commitment" has the meaning specified in Section
----------
2.01.
"Consolidated" refers to the consolidation of
------------
financial statements in accordance with GAAP.
"Convert", "Conversion" and "Converted" each refers to
------- ---------- ---------
a Rollover of Advances pursuant to Section 2.09 that
<PAGE>
6
also involves the conversion of Advances of one Type into
Advances of another Type.
"Default" means any Event of Default or any event that
-------
would constitute an Event of Default but for the
requirement that notice be given or time elapse or both.
"Designated Subsidiary" means each of Sunterra Gas
---------------------
Processing and Sunterra Gas Gathering and each other Person
that has become or becomes a Subsidiary of the Borrower on
or after December 14, 1993; provided, however that if
-------- -------
either Sunterra Gas Processing or Sunterra Gas Gathering
shall cease to be a Subsidiary of the Borrower following a
sale permitted under Section 5.02(c)(iii) hereof, then such
Person shall cease to be a Designated Subsidiary.
"Domestic Lending Office" means, with respect to any
-----------------------
Lender, the office of such Lender specified as its
"Domestic Lending Office" opposite its name on Schedule I
hereto or in the Assignment and Acceptance pursuant to
which it became a Lender, or such other office of such
Lender as such Lender may from time to time specify to the
Borrower and the Administrative Agent.
"Eastern Interconnection Project Leases" means the
--------------------------------------
Eastern Interconnection Project Leases listed in Schedule
VI, "Material Leases".
"Effective Date" means December 14, 1993.
--------------
"Eligible Assignee" means (i) any commercial bank or
-----------------
savings and loan association having a net worth in excess
of $250,000,000; (ii) any commercial finance company, or
wholly-owned finance subsidiary of any corporation, having a
net worth in excess of $250,000,000; (iii) any insurance
company having a net worth in excess of $250,000,000 or
(iv) any Bank or any Affiliate of any Bank.
"Environmental Law" means any Federal, state or local
-----------------
law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award relating to the environment,
health or safety or to the release or threatened release of
any materials into the environment, including, without
limitation, the Clean Air Act, as amended, the Clean Water
Act of 1977, as amended, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as
amended, the Hazardous Materials Transportation Act, as
amended, the Toxic Substance Control Act, as amended, and
the Resource Conservation and Recovery Act of 1976, as
amended.
<PAGE>
7
"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" of any Person means any other Person
---------------
that for purposes of Title IV of ERISA is a member of such
Person's controlled group, or under common control with
such Person, within the meaning of Section 414 of the
Internal Revenue Code.
"ERISA Event" with respect to any Person means (a) the
-----------
occurrence of a reportable event, within the meaning of
Section 4043 of ERISA, with respect to any Plan of such
Person or any of its ERISA Affiliates unless the 30-day
notice requirement with respect to such event has been
waived by the PBGC; (b) the provision by the administrator
of any Plan of such Person or any of its ERISA Affiliates
of a notice of intent to terminate such Plan, pursuant to
Section 4041(a)(2) of ERISA (including any such notice with
respect to a plan amendment referred to in Section 4041(e)
of ERISA); (c) the cessation of operations at a facility of
such Person or any of its ERISA Affiliates in the
circumstances described in Section 4062(e) of ERISA; (d)
the withdrawal by such Person or any of its ERISA
Affiliates from a Multiple Employer Plan during a plan year
for which it was a substantial employer, as defined in
Section 4001(a)(2) of ERISA; (e) the failure by such Person
or any of its ERISA Affiliates to make a payment to a Plan
required under Section 302(f)(1) of ERISA; (f) the adoption
of an amendment to a Plan of such Person or any of its
ERISA Affiliates requiring the provision of security to
such Plan, pursuant to Section 307 of ERISA; or (g) the
institution by the PBGC of proceedings to terminate a Plan
of such Person or any of its ERISA Affiliates, pursuant to
Section 4042 of ERISA, or the occurrence of any event or
condition described in Section 4042 of ERISA that could
constitute grounds for the termination of, or the
appointment of a trustee to administer, such Plan.
"Eurocurrency Liabilities" has the meaning assigned to
------------------------
that term in Regulation D of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"Eurodollar Lending Office" means, with respect to any
-------------------------
Lender, the office of such Lender specified as its
"Eurodollar Lending Office" opposite its name on Schedule I
hereto or in the Assignment and Acceptance pursuant to
which it became a Lender (or, if no such
<PAGE>
8
office is specified, its Domestic Lending Office), or such
other office of such Lender as such Lender may from time to
time specify to the Borrower and the Administrative Agent.
"Eurodollar Rate" means, for any Interest Period for
---------------
each Eurodollar Rate Advance comprising part of the same
Borrowing, an interest rate per annum equal to the average
(rounded upward to the nearest whole multiple of 1/16 of 1%
per annum, if such average is not such a multiple) of the
rate per annum at which deposits in U.S. dollars are
offered by the principal office of each of the Reference
Banks 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 in an
amount substantially equal to such Reference Bank's
Eurodollar Rate Advance comprising part of such Borrowing
and for a period equal to such Interest Period. The
Eurodollar Rate for any Interest Period for each Eurodollar
Rate Advance comprising part of the same Borrowing shall be
determined by the Administrative Agent on the basis of
applicable rates furnished to and received by the
Administrative Agent from the Reference Banks two Business
Days before the first day of such Interest Period, subject,
-------
however, to the provisions of Section 2.08.
-------
"Eurodollar Rate Advance" means an Advance which bears
-----------------------
interest as provided in Section 2.06(a)(iii).
"Eurodollar Rate Reserve Percentage" of any Lender for
----------------------------------
any Interest Period for any Eurodollar Rate Advance means
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 Lender with respect to liabilities or
assets consisting of or including Eurocurrency Liabilities
having a term equal to such Interest Period.
"Events of Default" has the meaning specified in
-----------------
Section 6.01.
<PAGE>
9
"Existing Agreement" has the meaning specified in
------------------
Section 3.02.
"Federal Funds Rate" means, for any period, a
------------------
fluctuating interest rate per annum 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 Administrative Agent from three Federal
funds brokers of recognized standing selected by it.
"First Mortgage Bonds" means those first mortgage
--------------------
bonds issued pursuant to the FMB Indenture.
"FMB Indenture" means the Indenture of Mortgage and
-------------
Deed of Trust, dated as of June 1, 1947, between the
Borrower and The Bank of New York (formerly Irving Trust
Company), as trustee thereunder, as supplemented and
amended.
"GAAP" has the meaning specified in Section 1.03.
----
"Hazardous Materials" means all materials subject to
-------------------
any Environmental Law, including, without limitation,
materials listed in 49 C.F.R. (S) 172.101, materials defined
as hazardous pursuant to Section 101(14) of the
Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, flammable, explosive or
radioactive materials, hazardous or toxic wastes or
substances, petroleum or petroleum distillates, PCB's or
asbestos-containing materials.
"Indebtedness" means (i) indebtedness for borrowed
------------
money, (ii) obligations evidenced by bonds, debentures,
notes or other similar instruments, (iii) obligations to
pay the deferred purchase price of property or services
(other than trade payables incurred in the ordinary course
of business), (iv) obligations as lessee under leases which
shall have been or should be, in accordance with GAAP,
recorded as capital leases, (v) obligations, contingent or
otherwise, under acceptance, letter of credit or similar
facilities, (vi) all obligations, contingent or otherwise,
under the Material Leases and (vii) obligations under
direct or indirect guaranties in
<PAGE>
10
respect of, and obligations (contingent or otherwise) to
purchase or otherwise acquire, or otherwise to assure a
creditor against loss in respect of, indebtedness or
obligations of others of the kinds referred to in clauses
(i) through (vi) above.
"Independent Accountants" means Arthur Andersen & Co.,
-----------------------
any of the independent public accountants listed on
Schedule IX or other independent public accountants of
recognized standing acceptable to the Majority Lenders.
"Insufficiency" means, with respect to any Plan, the
-------------
amount, if any, of its unfunded benefit liabilities, as
defined in Section 4001(a)(18) of ERISA.
"Interest Period" means, for each Advance comprising
---------------
part of the same Borrowing, the period commencing on the
date of the making of such Advance pursuant to Section 2.02
or the date of the Rollover (whether or not such Rollover
includes a Conversion) of any Advance into such Advance
pursuant to Section 2.09, and ending on the last day of the
period selected by the Borrower pursuant to the provisions
below and, thereafter, each subsequent period commencing on
the last day of the immediately preceding Interest Period
and ending on the last day of the period selected by the
Borrower pursuant to the provisions below. The duration of
each such Interest Period shall be 30, 60 or 90 days in the
case of an Adjusted CD Rate Advance, 1, 2 or 3 months in
the case of a Eurodollar Rate Advance and up to 90 days in
the case of a Base Rate Advance, in each case as the
Borrower may specify in the applicable Notice of Borrowing
or Notice of Rollover received by the Administrative Agent
by the time specified in Section 2.02 or Section 2.09, as
the case may be; provided, however, that:
-------- -------
(i) the Borrower may not select any Interest
Period that ends after the Termination Date;
(ii) Interest Periods commencing on the same
date for Advances comprising part of the same
Borrowing shall be of the same duration; and
(iii) whenever the last day of any Interest
Period would otherwise occur on a day other than a
Business Day, the last day of such Interest Period
shall be extended to occur on the next succeeding
Business Day, provided, in the case of any Interest
--------
Period for a Eurodollar Rate Advance, that if such
extension would cause the last day of such Interest
<PAGE>
11
Period to occur in the next following calendar month,
the last day of such Interest Period shall occur on
the next preceding Business Day.
"Internal Revenue Code" means the Internal Revenue
---------------------
Code of 1986, as amended from time to time, and the
regulations promulgated and rulings issued thereunder.
"Investment" in any Person means any loan or advance
----------
to such Person, any purchase or other acquisition of any
capital stock, warrants, rights, options, obligations or
other securities of such Person, any capital contribution
to such Person or any other investment in such Person,
including without limitation, any arrangement pursuant to
which the investor incurs Indebtedness of the kind referred
to in clause (vii) of the definition of "Indebtedness" in
respect of such Person other than in connection with the
refinancing of existing Indebtedness.
"Lenders" means the Banks listed on the signature
-------
pages hereof and each Eligible Assignee that shall become a
party hereto pursuant to Section 8.07.
"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 Documents" means this Agreement, the Notes, the
--------------
Pledge Agreement, the Supplemental Indentures and the
Pledged Debt.
"Majority Lenders" means at any time Lenders holding
----------------
at least 66 and 2/3% of the then aggregate unpaid principal
amount of the Advances owing to Lenders, or, if no such
principal amount is then outstanding, Lenders having at
least 66 and 2/3% of the Commitments (provided that, for
--------
purposes hereof, neither the Borrower, nor any of its
Affiliates, if a Lender, shall be included in (i) the
Lenders holding such amount of the Advances or having such
amount of the Commitments or (ii) determining the aggregate
unpaid principal amount of the Advances or the total
Commitments).
"Material Lease" means any lease to the Borrower of
--------------
its leasehold interests in (i) Unit 1 or Unit 2, and
related common facilities, of the Palo Verde Nuclear
Generating Station or (ii) the electric transmission
<PAGE>
12
line, and related facilities, known as the Eastern
Interconnection Project, including, without limitation, any
lease set forth on Schedule VI hereto.
"Moody's" means Moody's Investors Service, Inc.
-------
"Multiemployer Plan" of any Person means a
------------------
multiemployer plan, as defined in Section 4001(a)(3) of
ERISA, to which such Person or any of its ERISA Affiliates
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.
"Multiple Employer Plan" of any Person means a single
----------------------
employer plan, as defined in Section 4001(a)(15) of ERISA,
that (a) is maintained for employees of such Person or any
of its ERISA Affiliates and at least one Person other than
such Person and its ERISA Affiliates or (b) was so
maintained and in respect of which such Person or any of
its ERISA Affiliates could have liability under Section
4064 or 4069 of ERISA in the event such plan has been or
were to be terminated.
"Net Worth" means an amount equal to the sum of
---------
preferred stockholders' equity and common stockholders'
equity, as such amounts would appear on a balance sheet of
the Borrower prepared in accordance with GAAP.
"NMSA" means the New Mexico Statutes Annotated 1978,
----
as amended or supplemented.
"Note" means a promissory note of the Borrower payable
----
to the order of any Lender, in substantially the form of
Exhibit A hereto, evidencing the aggregate indebtedness of
the Borrower to such Lender resulting from the Advances
made by such Lender.
"Notice of Borrowing" has the meaning specified in
-------------------
Section 2.02.
"Notice of Rollover" has the meaning specified in
------------------
Section 2.09.
"Palo Verde Leases" means the "Palo Verde Unit 1" and
-----------------
"Palo Verde Unit 2" leases listed in Schedule VI, "Material
Leases".
"PBGC" means the Pension Benefit Guaranty Corporation.
----
<PAGE>
13
"Permitted Liens" means such of the following as to
---------------
which, except as provided below, no enforcement,
collection, execution, levy or foreclosure proceeding shall
have been commenced: (a) Liens for taxes, assessments and
governmental charges or levies to the extent payment of
such taxes, assessments, governmental charges or levies is
being contested in good faith and by proper proceedings and
as to which proper reserves are being maintained; (b) Liens
imposed by law, such as materialmen's, mechanics',
carriers', workmen's and repairmen's Liens and other
similar Liens arising in the ordinary course of business
securing obligations that are not overdue for a period of
more than 30 days; (c) pledges or deposits to secure
obligations under workers' compensation laws or similar
legislation or to secure public or statutory obligations;
and (d) easements, rights of way and other encumbrances on
title to real property that do not render title to the
property encumbered thereby unmarketable or materially
adversely affect the use of such property for its present
purposes; provided, however, that in any event each of
-------- -------
those Liens defined as "permitted encumbrances" in
Section 1.04 of the FMB Indenture on the date hereof shall
be deemed to be included within the definition of Permitted
Liens.
"Person" means an individual, partnership, corporation
------
(including a business trust), joint stock company, trust,
unincorporated association, joint venture or other entity,
or a government or any political subdivision or agency
thereof.
"Plan" means a Single Employer Plan or a Multiple
----
Employer Plan.
"Pledge Agreement" has the meaning specified in
----------------
Section 3.01.
"Pledged Debt" has the meaning specified in the Pledge
------------
Agreement.
"Prohibited Transaction" means a transaction that is
----------------------
prohibited under Section 4975 of the Internal Revenue Code
or Section 406 of ERISA and not exempt under Section 4975
of the Internal Revenue Code or Section 408 of ERISA.
"PUC" means the New Mexico Public Utility Commission
---
(formerly the New Mexico Public Service Commission).
<PAGE>
14
"PUC 2183 Amounts" means those amounts, which the
----------------
Borrower's Gas Company of New Mexico division has paid or
will pay, but expects to recover from its customers, that
are either (1) amounts referenced in PUC Case No. 2183 and
related to settlements of gas purchase contract disputes or
(2) amounts referenced in PUC Case No. 2183 and PUC Case
No. 2320 and related to purchased gas costs.
"Recordation Fee" has the meaning specified in Section
---------------
8.07(a) of this Agreement.
"Reference Banks" means Chemical and Citibank.
---------------
"Roll Over", "Rollover" and "Rolled Over" each refers
--------- -------- -----------
to the rollover of Advances comprising part of the same
Borrowing occurring, except in the case of Base Rate
Advances, on the last day of the Interest Period for such
Advances (or such earlier date as may be required pursuant
to Section 2.12) into another Interest Period pursuant to
Section 2.09, irrespective of whether such rollover also
constitutes a Conversion of Advances of one Type into
Advances of another Type; provided, however, that, as
-------- -------
applied to any Advances comprising part of the same
Borrowing, such terms shall at no time refer to any
transaction that results in an increase in the aggregate
outstanding amount of such Advances owing to the Lenders.
"Rollover Date" has the meaning specified in Section
-------------
2.09 of this Agreement.
"S&P" means Standard & Poor's Corporation.
---
"San Juan Unit 4 Capacity" means an undivided interest
------------------------
in Unit 4 of the San Juan Generating Station.
"Sangre de Cristo Water" means the water utility
----------------------
division of the Borrower, known as the "Sangre de Cristo
Water Company".
"Single Employer Plan" of any Person means a single
--------------------
employer plan, as defined in Section 4001(a)(15) of ERISA,
that (a) is maintained for employees of such Person or any
of its ERISA Affiliates and no Person other than such
Person and its ERISA Affiliates or (b) was so maintained
and in respect of which such Person or any of its ERISA
Affiliates could have liability under Section 4069 of ERISA
in the event such Plan has been or were to be terminated.
<PAGE>
15
"Subsidiary" of any Person means any corporation of
----------
which more than 50% of the issued and outstanding capital
stock having ordinary voting power to elect a majority of
the Board of Directors of such corporation (irrespective of
whether at the time capital stock of any other class or
classes of such corporation shall or might have voting
power upon the occurrence of any contingency) is at the
time directly or indirectly owned or controlled by such
Person, by such Person and one or more of its other
Subsidiaries or by one or more of such Person's other
Subsidiaries.
"Substitute Rating Agency" means a nationally
------------------------
recognized statistical rating organization designated by
the Administrative Agent on any date that either Moody's or
S&P shall have ceased to exist or to be in the business of
rating securities, which applies ratings criteria to the
First Mortgage Bonds reasonably equivalent to those used on
the date hereof by whichever of Moody's or S&P shall have
so ceased to exist or rate securities.
"Sunterra Gas Gathering" means Sunterra Gas Gathering
----------------------
Company, a New Mexico corporation.
"Sunterra Gas Processing" means Sunterra Gas
-----------------------
Processing Company, a New Mexico corporation.
"Supplemental Indentures" has the meaning specified in
-----------------------
Section 3.01.
"Termination Date" means June 13, 1995; provided that
---------------- --------
on each anniversary of the Effective Date on which any
Commitments shall remain outstanding hereunder (each such
date being an "Annual Extension Date"), the Termination
Date shall become a date one year following the
then-applicable Termination Date, if by such Annual
Extension Date (i) the Co-Agents and each Lender shall, on a
date no more than 45 and no less than 15 days before the
applicable Annual Extension Date, have received notice from
---------------------
the Borrower requesting such extension, (ii) each Co-Agent
and each Lender shall have consented in writing to such
extension in its sole discretion, (iii) the Borrower shall
have delivered to each Lender a favorable opinion of
Keleher & McLeod, P.A., counsel to the Borrower, in form
and substance satisfactory to each Lender stating that,
among other things, no approval of, or filing with, the PUC
was required in connection with such extension, (iv) the
Borrower shall have delivered to each Lender new Notes and
new instruments evidencing the
<PAGE>
16
Pledged Debt, in each case to reflect the new maturity date
of such instruments, in exchange for the existing Notes and
instruments evidencing the Pledged Debt, and (v) the
Borrower shall have delivered such other documents as each
Lender shall request.
"Total Capitalization" means the sum of Total Debt
--------------------
plus Net Worth.
"Total Debt" means an amount equal to (i) the sum of
----------
(A) the current portion of long-term debt, (B) long-term
debt and (C) notes payable, as such amount would appear on a
balance sheet prepared in accordance with GAAP plus (ii)
----
the net present value (using (A) the discount rate (1) set
forth in Schedule VIII, so long as Schedule VIII specifies
the same relevant discount rate as is used in calculating
such net present value provided to Moody's and S&P or
(2) the discount rate used in calculating such net present
value provided to Moody's and S&P or (B) any such other
rate as shall be proposed by the Borrower and agreed upon
by the Majority Lenders) of all amounts payable under the
Material Leases.
"UAMPS" means the Utah Associated Municipal Power
-----
Systems.
"Welfare Plan" means a welfare plan, as defined in
------------
Section 3(1) of ERISA.
"Withdrawal Liability" has the meaning specified in
--------------------
Part I of Subtitle E of Part IV of ERISA.
SECTION 1.02. Computation of Time Periods. In this
---------------------------
Agreement in the computation of periods 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 generally accepted accounting principles
consistent with those applied in the preparation of the annual
financial statements referred to in Section 4.01(f) ("GAAP").
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Advances. Each Lender severally
------------
<PAGE>
17
agrees, on the terms and conditions hereinafter set forth, to
make Advances to the Borrower from time to time on any Business
Day during the period from the date hereof until the
Termination Date in an aggregate amount not to exceed at any
time outstanding the amount set forth opposite such Lender's
name on the signature pages hereof or, if such Lender has
entered into any Assignment and Acceptance, set forth for such
Lender in the Register maintained by the Administrative Agent
pursuant to Section 8.07(c), as such amount may be reduced
pursuant to Section 2.04 (such Bank's "Commitment"). Each
----------
Borrowing shall consist of Advances of the same Type made on
the same day by the Lenders ratably according to their
respective Commitments and shall be in an aggregate amount (or
an integral multiple of $1,000,000 in excess thereof) of not
less than (a) $10,000,000, if such Borrowing consists of
Eurodollar Rate Advances or Adjusted CD Rate Advances, or
(b) $3,000,000, if such Borrowing consists of Base Rate
Advances. Within the limits of each Lender's Commitment, the
Borrower may borrow, prepay pursuant to Section 2.10 and
reborrow under this Section 2.01.
SECTION 2.02. Making the Advances. (a) Each
-------------------
Borrowing shall be made on notice, given by the Borrower to the
Administrative Agent not later than, in the case of a proposed
Borrowing to consist of (i) Eurodollar Rate Advances, 12:00
noon (New York City time) on the third Business Day prior to
such proposed Borrowing, (ii) Adjusted CD Rate Advances, 12:00
noon (New York City time) on the second Business Day prior to
such proposed Borrowing, and (iii) Base Rate Advances, 11:00
A.M. (New York City time) on the date of such proposed
Borrowing. The Administrative Agent shall give prompt notice
thereof to each Lender by telecopier, telex or cable. Each
such notice of a Borrowing (a "Notice of Borrowing") shall be
-------------------
by telecopier, telex or cable, confirmed immediately by a
signed original delivered by regular mail, overnight courier or
messenger, in substantially the form of Exhibit B hereto,
specifying therein (i) the requested (A) date of such
Borrowing, (B) Type of Advances comprising such Borrowing,
(C) aggregate amount of such Borrowing, and (D) initial
Interest Period for each such Advance and (ii) whether the
requested Borrowing is being made together with a requested
Rollover of Advances pursuant to Section 2.09 to occur
simultaneously on the date of the requested Borrowing. If such
Notice of Borrowing includes a request for a simultaneous
Rollover of Advances pursuant to Section 2.09, (i) such Notice
of Borrowing shall include the information required for a
Notice of Rollover pursuant to Section 2.09 and shall otherwise
comply with the requirements of such Section 2.09 and (ii) the
amount of the proposed Borrowing shall in no event be less than
an amount
<PAGE>
18
equal to the difference, if any, between the amount of the
Advances to be Rolled Over on the date of the proposed
Borrowing and the amount of such Advances following Rollover
thereof. Each Lender shall, before 12:00 noon (New York City
time) on the date of a Borrowing consisting of Eurodollar Rate
Advances or Adjusted CD Rate Advances, or before 2:00 P.M. (New
York City time) on the date of a Borrowing consisting of Base
Rate Advances, make available for the account of its Applicable
Lending Office to the Administrative Agent at its address
referred to in Section 8.02, in same day funds, such Lender's
ratable portion of such Borrowing. After the Administrative
Agent's receipt of funds and upon fulfillment of the applicable
conditions set forth in Article III, the Administrative Agent
will make funds available to the Borrower at the Administrative
Agent's aforesaid address; provided, however, that if a
-------- -------
Borrowing is made simultaneously with a Rollover of Advances
pursuant to Section 2.09, the Administrative Agent shall first
apply such funds to any prepayment required on such date by
Section 2.10(b)(ii).
(b) Each Notice of Borrowing shall be irrevocable and
binding on the Borrower. In the case of any Borrowing which
the related Notice of Borrowing specifies is to be comprised of
Adjusted CD Rate Advances or Eurodollar Rate Advances, the
Borrower shall indemnify each Lender against any loss, cost or
expense incurred by such Lender as a result of any failure to
fulfill on or before the date specified in such Notice of
Borrowing for such Borrowing the applicable conditions set
forth in Article III, including, without limitation, any loss
(including loss of anticipated profits), cost or expense
incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by such Lender to fund the
Advance to be made by such Lender as part of such Borrowing
when such Advance, as a result of such failure, is not made on
such date.
(c) Unless the Administrative Agent shall have
received notice from a Lender that such Lender will not make
available to the Administrative Agent such Lender's ratable
portion of a Borrowing, if such Borrowing consists of (i) Base
Rate Advances, before 2:00 P.M. (New York City time) on the
date of such Borrowing or (ii) Adjusted CD Rate Advances or
Eurodollar Rate Advances, prior to the date of such Borrowing,
the Administrative Agent may assume that such Lender has made
such portion available to the Administrative Agent on the date
of such Borrowing in accordance with subsection (a) of this
Section 2.02 and the Administrative Agent may, in reliance upon
such assumption, make available to the Borrower on such date a
corresponding amount. If and
<PAGE>
19
to the extent that such Lender shall not have so made such
ratable portion available to the Administrative Agent, such
Lender and the Borrower severally agree to repay to the
Administrative Agent forthwith on demand such corresponding
amount together with interest thereon, for each day from the
date such amount is made available to the Borrower until the
date such amount is repaid to the Administrative Agent, at (i)
in the case of the Borrower, the interest rate applicable at
the time to Advances comprising such Borrowing and (ii) in the
case of such Lender, the Federal Funds Rate. If such Lender
shall repay to the Administrative Agent such corresponding
amount, such amount so repaid shall constitute such Lender's
Advance as part of such Borrowing for purposes of this
Agreement.
(d) The failure of any Lender to make the Advance to
be made by it as part of any Borrowing shall not relieve any
other Lender of its obligation, if any, hereunder to make its
Advance on the date of such Borrowing, but no Lender shall be
responsible for the failure of any other Lender to make the
Advance to be made by such other Lender on the date of any
Borrowing.
SECTION 2.03. Fees. (a) Commitment Fee. The
---- --------------
Borrower agrees to pay to the Administrative Agent for the
account of each Lender a commitment fee on the average daily
unused portion of such Lender's Commitment from the Effective
Date until the Termination Date, payable quarterly in arrears
on the last day of each March, June, September and December
during the term of such Lender's Commitment, commencing on the
first such date to occur after the Effective Date, and on the
Termination Date, at the rate of (i) 1/4 of 1% during such
times as the Bond Ratings by both Moody's and S&P are at least
Baa2 and BBB, respectively, (ii) 3/8 of 1% during such times as
clause (a)(i) of this Section 2.03 is not applicable and the
Bond Ratings by both Moody's and S&P are at least Ba1 and BB+,
respectively, (iii) 1/2 of 1% during such times as clauses
(a)(i) and (a)(ii) of this Section 2.03 are not applicable and
the Bond Ratings by both Moody's and S&P are at least Ba2 and
BB, respectively, and (iv) 5/8 of 1% at all other times.
(b) Participation Fee. The Borrower agrees to pay to
-----------------
the Administrative Agent for the account of each Lender a
participation fee equal to 1/4 of 1% of such Lender's
Commitment, payable on the date hereof.
(c) Co-Agents' Fees. The Borrower agrees to pay to
---------------
each Co-Agent for its own account the fees (i) set forth in the
Fee Letter, dated the date hereof, among the Co-Agents
<PAGE>
20
and the Borrower at the times specified therein for payment of
such fees, and (ii) such other fees as may from time to time be
agreed among the Borrower and the Co-Agents.
SECTION 2.04. Reduction of the Commitments.
----------------------------
(a) Optional. The Borrower shall have the right, upon at
--------
least three Business Days' notice to the Administrative Agent,
to terminate in whole or reduce ratably in part the unused
portions of the respective Commitments of the Lenders, provided
--------
that each partial reduction shall be in the aggregate amount of
$5,000,000 or an integral multiple thereof. In the event of
any such reduction, the Collateral Agent shall release a
portion of the Pledged Debt with an aggregate face amount equal
to the aggregate reduction of the Commitments, as provided in
Section 16 of the Pledge Agreement.
(b) Mandatory. The respective Commitments of the
---------
Lenders shall, concurrently with any release by the Collateral
Agent of Pledged Debt pursuant to Section 16 of the Pledge
Agreement, be reduced by an amount equal to the aggregate face
amount of any such Pledged Debt so released.
SECTION 2.05. Repayment. The Borrower shall repay
---------
the unpaid principal amount of each Advance owing to each
Lender on the Termination Date.
SECTION 2.06. Interest. (a) The Borrower shall pay
--------
interest on the unpaid principal amount of each Advance owing
to each Lender from the date of such Advance until such
principal amount shall be paid in full, at the following rates
per annum:
(i) Base Rate Advances. During such periods as such
------------------
Advance is a Base Rate Advance, a rate per annum equal at
all times during the Interest Period for such Advance to
the Base Rate in effect from time to time during such
Interest Period plus the following Applicable Margin in
effect from time to time:
(A) if the Bond Ratings by both Moody's and S&P
are Baa2 and BBB, respectively, or higher, 0%,
(B) if clause (A) above is not applicable, and
if the Bond Ratings by both Moody's and S&P are Ba1
and BB+, respectively, or higher, 1/8 of 1%,
(C) if neither clause (A) nor clause (B) above
is applicable, and if the Bond ratings by both
<PAGE>
21
Moody's and S&P are Ba2 and BB, respectively, or
higher, 5/8 of 1%, and
(D) in all other cases, 1%,
in each case payable on the last day of such Interest
Period.
(ii) Adjusted CD Rate Advances. During such periods
-------------------------
as such Advance is an Adjusted CD Rate Advance, a rate per
annum equal at all times during each Interest Period for
such Advance to the sum of the Adjusted CD Rate for such
Interest Period for such Advance plus the following
Applicable Margin in effect from time to time:
(A) if the Bond Ratings by both Moody's and S&P
are Baa2 and BBB, respectively, or higher, 7/8 of 1%,
(B) if clause (A) above is not applicable and if
the Bond Ratings by both Moody's and S&P are Ba1 and
BB+, respectively, or higher, 1 and 1/8%,
(C) if neither clause (A) nor clause (B) above
is applicable, and if the Bond Ratings by both Moody's
and S&P are Ba2 and BB, respectively, or higher, 1 and
5/8%, and
(D) in all other cases, 2 and 1/8%,
in each case payable on the last day of such Interest
Period;
(iii) Eurodollar Rate Advances. During such periods as
------------------------
such Advance is a Eurodollar Rate Advance, a rate per annum
equal at all times during each Interest Period for such
Advance to the sum of the Eurodollar Rate for such Interest
Period for such Advance plus the following Applicable
Margin in effect from time to time:
(A) if the Bond Ratings by both Moody's and S&P
are Baa2 and BBB, respectively, or higher, 3/4 of 1%,
(B) if clause (A) hereof is not applicable and
if the Bond Ratings by both Moody's and S&P are Ba1
and BB+, respectively, or higher, 1%,
<PAGE>
22
(C) if neither clause (A) nor clause (B) hereof
is applicable, and if the Bond Ratings by both Moody's
and S&P are Ba2 and BB, respectively, or higher, 1 and
1/2%, and
(D) in all other cases, 2%,
in each case payable on the last day of such Interest
Period.
(b) Upon the occurrence and during the continuance of
any Event of Default, the Borrower shall pay interest on the
unpaid principal amount of each Advance owing to each Lender
and on the unpaid amount of all interest, fees and other
amounts payable hereunder that is not paid when due, payable in
arrears on the dates referred to in clauses (a)(i) through
(iii) above and on demand, at the rate per annum equal at all
times to 1% above the rate per annum otherwise required to be
paid on such Advance pursuant to clauses (a)(i) through (iii)
above or, in the case of such other amounts, 1% above the rate
per annum required to be paid on Base Rate Advances pursuant to
clause (a)(i) above.
SECTION 2.07. Additional Interest on Eurodollar Rate
--------------------------------------
Advances. The Borrower shall pay to the Administrative Agent
--------
for the account of each Lender additional interest on the
unpaid principal amount of each Advance of such Lender during
such periods as such Advance is a Eurodollar Rate Advance, from
the date of such Advance until such principal amount is paid in
full, at an interest rate per annum equal at all times to the
remainder obtained by subtracting (i) the Eurodollar Rate for
such Interest Period for such Eurodollar Rate Advance from (ii)
the rate obtained by dividing such Eurodollar Rate by a
percentage equal to 100% minus the Eurodollar Rate Reserve
Percentage of such Lender for such Interest Period, payable on
each date on which interest is payable on such Eurodollar Rate
Advance. Such additional interest shall be determined by such
Lender and notified to the Borrower through the Administrative
Agent.
SECTION 2.08. Interest Rate Determination and
-------------------------------
Protection. (a) Each Reference Bank agrees to furnish to the
----------
Administrative Agent timely information for the purpose of
determining each Adjusted CD Rate or Eurodollar Rate, as
applicable. If either of the Reference Banks shall not furnish
such timely information to the Administrative Agent for the
purpose of determining any such interest rate, the
Administrative Agent shall determine such interest rate on the
basis of timely information furnished by the other Reference
Bank.
<PAGE>
23
(b) The Administrative Agent shall give prompt notice
to the Borrower and the Lenders of the applicable interest rate
determined by the Administrative Agent for purposes of Section
2.06(a) and (b).
(c) If neither Reference Bank furnishes timely
information to the Administrative Agent for determining the
Adjusted CD Rate for any Adjusted CD Rate Advances, or the
Eurodollar Rate for any Eurodollar Rate Advances,
(i) the Administrative Agent shall forthwith notify
the Borrower and the Lenders that the interest rate cannot
be determined for such Adjusted CD Rate Advances or
Eurodollar Rate Advances, as the case may be,
(ii) the obligation of the Lenders to make, or to Roll
Over Advances into, Adjusted CD Rate Advances or Eurodollar
Rate Advances, as the case may be, shall be suspended until
the Administrative Agent shall notify the Borrower and the
Lenders that the circumstances causing such suspension no
longer exist, and
(iii) any request for a Borrowing consisting of, or for
a Rollover of Advances into, Adjusted CD Rate Advances or
Eurodollar Rate Advances, as the case may be, shall be
deemed a request for a Borrowing consisting of, or a
Rollover of Advances into, Base Rate Advances having the
same Interest Period as such requested Borrowing or
Rollover.
(d) If, with respect to any Eurodollar Rate Advances,
the Majority Lenders notify the Administrative Agent that the
Eurodollar Rate for any Interest Period for such Advances will
not adequately reflect the cost to such Majority Lenders of
making, funding or maintaining their respective Eurodollar Rate
Advances for such Interest Period,
(i) the Administrative Agent shall forthwith so
notify the Borrower and the Lenders,
(ii) the obligation of the Lenders to make, or to Roll
Over Advances into, Eurodollar Rate Advances shall be
suspended until the Administrative Agent shall notify the
Borrower and the Lenders that the circumstances causing
such suspension no longer exist, and
(iii) any request for a Borrowing consisting of, or a
Rollover of Advances into, Eurodollar Rate Advances shall
be deemed a request for a Borrowing consisting of, or a
<PAGE>
24
Rollover of Advances into, Base Rate Advances having the
same Interest Period as such requested Borrowing or
Rollover.
SECTION 2.09. Rollover and Conversion of Advances.
-----------------------------------
(a) Each Rollover may be made on notice given by the Borrower
to the Administrative Agent not later than, if such Rollover is
into (i) Eurodollar Rate Advances, 12:00 noon (New York City
time) on the third Business Day prior to, (ii) Adjusted CD Rate
Advances, 12:00 noon (New York City time) on the second
Business Day prior to, and (iii) Base Rate Advances, 11:00 A.M.
(New York City time) on the date of, the proposed Rollover (the
"Rollover Date"), which Rollover Date shall be the last day of
-------------
the Interest Period of the Advances to be Rolled Over or such
earlier date as shall be required pursuant to Section 2.12,
unless the Advances to be so Rolled Over are Base Rate
Advances. The Administrative Agent shall give to each Lender
prompt notice thereof by telecopier, telex or cable. Each such
notice of a Rollover (a "Notice of Rollover") shall be by
------------------
telecopier, telex or cable, confirmed immediately by a signed
original delivered by regular mail, overnight courier or
messenger, in substantially the form of Exhibit B hereto,
(i) specifying therein (A) the Advances to be Rolled Over,
(B) the Rollover Date, (C) the Interest Period for such
Advances upon being Rolled Over, (D) the Type for such Advances
upon being Rolled Over and (E) the amount of such Advances upon
being Rolled Over (which amount shall equal, if such Advances
are to be (x) Base Rate Advances, $3,000,000 or an integral
multiple of $1,000,000 in excess thereof or (y) Adjusted CD
Rate Advances or Eurodollar Rate Advances, $10,000,000 or an
integral multiple of $1,000,000 in excess thereof), and
(ii) specifying whether the requested Rollover is being made
together with a requested Borrowing to occur simultaneously
with the requested Rollover on the applicable Rollover Date
pursuant to Section 2.02. If such Notice of Rollover includes a
request for a simultaneous Borrowing pursuant to Section 2.02,
(i) such Notice of Rollover shall include the information
required for a Notice of Borrowing pursuant to Section 2.02 and
(ii) the amount of the proposed Borrowing to occur
simultaneously with such Rollover shall in no event be less
than an amount equal to the difference, if any, between the
amount of the Advances to be Rolled Over and the amount of such
Advances following Rollover thereof. Upon fulfillment, on the
Rollover Date, of the applicable conditions set forth in
Article III of this Agreement (which conditions shall be deemed
fulfilled unless the Administrative Agent shall have received
written notice from any Lender pursuant to Section 3.04 or from
the Borrower, if such Rollover is into (i) Adjusted CD Rate
Advances or
<PAGE>
25
Eurodollar Rate Advances, by 12:00 noon (New York City time) on
the Rollover Date, or (ii) if such Rollover is into Base Rate
Advances, by 2:00 P.M. (New York City time) on the Rollover
Date), a Rollover of such Advances shall occur as set forth in
the Notice of Rollover for such Advances. The Administrative
Agent shall forthwith notify the Borrower and the Lenders if
such applicable conditions have not been fulfilled and the
Rollover shall therefore not occur.
(b) Each Notice of Rollover shall be irrevocable and
binding on the Borrower. In the case of any proposed Rollover
into Adjusted CD Rate Advances or Eurodollar Rate Advances, the
Borrower shall indemnify each Lender against any loss, cost or
expense incurred by such Lender as a result of any failure to
fulfill, on or before the Rollover Date for such Rollover, the
applicable conditions set forth in Article III, including,
without limitation, any loss (including loss of anticipated
profits), cost or expense incurred by reason of the liquidation
of or reemployment of deposits or other funds acquired by such
Lender in connection with the Rollover of the Advance made by
such Lender when such Advance, as a result of such failure, is
not Rolled Over on the Rollover Date.
SECTION 2.10. Prepayments. (a) Optional. The
----------- --------
Borrower may, (i) in the case of Eurodollar Rate Advances and
Adjusted CD Rate Advances, upon at least three Business Days'
notice to the Administrative Agent and (ii) in the case of Base
Rate Advances, upon notice given to the Administrative Agent no
later than 11:30 A.M. (New York City time) on the proposed
date, in either case stating the proposed date and aggregate
principal amount of the prepayment, and if such notice is given
the Borrower shall, prepay the outstanding principal amounts of
the Advances comprising part of the same Borrowing in whole or
ratably in part, together with accrued interest to the date of
such prepayment on the principal amount prepaid; provided,
--------
however, that (x) each partial prepayment shall be in an
-------
aggregate principal amount of $5,000,000 or an integral
multiple thereof and (y) in the event of such prepayment of an
Adjusted CD Rate Advance or Eurodollar Rate Advance, the
Borrower shall be obligated to reimburse the Lenders in respect
thereof pursuant to Section 8.04(b).
(b) Mandatory. (i) If, after giving effect to a
---------
reduction of Commitments pursuant to Section 2.04 of this
Agreement, the aggregate principal amount of the Advances
outstanding shall exceed the aggregate amount of the
Commitments of the Lenders, the Borrower shall immediately
prepay the outstanding principal amount of the Advances in an
<PAGE>
26
amount equal to the amount of such excess, together with
accrued interest to the date of such prepayment on the
principal amount prepaid and all amounts then owing under
Section 8.04(b) of this Agreement in respect of such
prepayment.
(ii) If, on the last day of the Interest Period for
any Advance, any portion of such Advance shall not be Rolled
Over pursuant to Section 2.09 of this Agreement, the Borrower
shall immediately prepay the portion of such Advance not so
Rolled Over.
(iii) The Borrower shall prepay Advances, together with
interest accrued thereon and any amounts then owing under
Section 8.04(b) of this Agreement in respect of any such
prepayment, as required by Section 2.12 of this Agreement.
SECTION 2.11. Increased Costs. (a) If, due to
---------------
either (i) the introduction of or any change (other than any
change by way of imposition or increase of reserve
requirements, in the case of Adjusted CD Rate Advances,
included in the Adjusted CD Rate Reserve Percentage or, in the
case of Eurodollar Rate Advances, included in the Eurodollar
Rate Reserve Percentage) in or in the interpretation of any law
or regulation or (ii) the compliance with any guideline or
request from any central bank or other governmental authority
(whether or not having the force of law), there shall be any
increase in the cost to any Lender of agreeing to make or
making, funding or maintaining Adjusted CD Rate Advances or
Eurodollar Rate Advances, then the Borrower shall from time to
time, upon demand by such Lender (with a copy of such demand to
the Administrative Agent), pay to the Administrative Agent for
the account of such Lender additional amounts sufficient to
compensate such Lender for such increased cost. Each Lender
agrees to use its best efforts to furnish notice to the
Borrower promptly upon its becoming aware of and determining
such increased cost. A certificate as to the amount of such
increased cost, submitted to the Borrower and the
Administrative Agent by such Lender, shall be conclusive and
binding for all purposes, absent manifest error.
(b) If any 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) affects or would affect the amount of capital
required or expected 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
<PAGE>
27
existence of such Lender's commitment to lend hereunder and
other commitments of this type, then, upon demand by such
Lender (with a copy of such demand to the Administrative
Agent), the Borrower shall immediately pay to the
Administrative Agent for the account of 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 to lend hereunder.
A certificate as to such amounts submitted to the Borrower and
the Administrative Agent by such Lender shall be conclusive and
binding for all purposes, absent manifest error.
SECTION 2.12. Illegality. Notwithstanding any other
----------
provision of this Agreement, if any Lender shall notify the
Administrative Agent that the introduction of or any change in
or in the interpretation of any law or regulation makes it
unlawful, or any central bank or other governmental authority
asserts that it is unlawful, for any Lender or its Eurodollar
Lending Office to perform its obligations hereunder to make
Eurodollar Rate Advances or to fund or maintain Eurodollar Rate
Advances hereunder, (i) the obligation of the Lenders to make,
or to Roll Over Advances into, Eurodollar Rate Advances shall
be suspended until the Administrative Agent shall notify the
Borrower and the Lenders that the circumstances causing such
suspension no longer exist, (ii) the Borrower shall, within
five Business Days of notice from the Administrative Agent,
either prepay in full all Eurodollar Rate Advances of all
Lenders then outstanding, together with interest accrued
thereon and amounts then owing under Section 8.04(b) of this
Agreement in respect of such prepayment or Convert all
Eurodollar Rate Advances of all Lenders then outstanding into
Advances of another Type in accordance with Section 2.09 and
(iii) any request for a Borrowing consisting of, or a Rollover
of Advances into, Eurodollar Rate Advances shall be deemed a
request for a Borrowing consisting of, or a Rollover of
Advances into, Base Rate Advances having the same Interest
Period as such requested Borrowing or Rollover.
SECTION 2.13. Payments and Computations. (a) The
-------------------------
Borrower shall make each payment hereunder and under the Notes
not later than 2:00 P.M. (New York City time) on the day when
due in U.S. dollars to the Administrative Agent at its address
referred to in Section 8.02 in same day funds. The
Administrative Agent will promptly thereafter cause to be
distributed like funds relating to the payment of principal or
interest or commitment fees ratably (other than amounts
<PAGE>
28
payable pursuant to Section 2.02(b), 2.07, 2.11, 2.14 or
8.04(b)) to the Lenders for the account of their respective
Applicable Lending Offices, and like funds relating to the
payment of any other amount payable to any Lender to such
Lender for the account of its Applicable Lending Office, in
each case to be applied in accordance with the terms of this
Agreement. Upon its acceptance of an Assignment and Acceptance
and recording of the information contained therein in the
Register pursuant to Section 8.07(d), from and after the
effective date specified in such Assignment and Acceptance, the
Administrative Agent shall make all payments hereunder and
under the Notes in respect of the interest assigned thereby to
the Lender assignee thereunder, and the parties to such
Assignment and Acceptance shall make all appropriate
adjustments in such payments for periods prior to such
effective date directly between themselves.
(b) All computations of interest based on the Base
Rate shall be made by the Administrative 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 Adjusted CD Rate, the
Eurodollar Rate or the Federal Funds Rate and of commitment
fees shall be made by the Administrative Agent, and all
computations of interest pursuant to Section 2.07 shall be made
by a Lender, 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 or commitment fees are payable. Each determination by
the Administrative Agent (or, in the case of Section 2.07, by a
Lender) of an interest rate hereunder shall be conclusive and
binding for all purposes, absent manifest error.
(c) Whenever any payment hereunder or under the Notes
shall be stated to be due on a day other than a Business Day,
such payment shall be made on the next succeeding Business Day,
and such extension of time shall in such case be included in
the computation of payment of interest or commitment fee, as
the case may be; provided, however, if such extension would
-------- -------
cause payment of interest on or principal of Eurodollar Rate
Advances to be made in the next following calendar month, such
payment shall be made on the next preceding Business Day.
(d) Unless the Administrative Agent shall have
received notice from the Borrower prior to 11:00 A.M. (New York
City time) on the date on which any payment is due to the
Lenders hereunder that the Borrower will not make such payment
in full, the Administrative Agent may assume that the Borrower
has made such payment in full to the Administrative
<PAGE>
29
Agent on such date and the Administrative Agent may, in
reliance upon such assumption, cause to be distributed to each
Lender on such due date an amount equal to the amount then due
such Lender. If and to the extent the Borrower shall not have
so made such payment in full to the Administrative Agent, each
Lender shall repay to the Administrative Agent forthwith on
demand such amount distributed to such Lender together with
interest thereon, for each day from the date such amount is
distributed to such Lender until the date such Lender repays
such amount to the Administrative Agent, at the Federal Funds
Rate.
SECTION 2.14. Taxes. (a) Any and all payments by
-----
the Borrower hereunder or under the Notes shall be made, in
accordance with Section 2.13, free and clear of and without
deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding, in the case of
---------
each Lender and the Administrative Agent, taxes imposed on its
income, and franchise taxes imposed on it, by the jurisdiction
under the laws of which such Lender or the Administrative Agent
(as the case may be) is organized or any political subdivision
thereof and, in the case of each Lender, taxes imposed on its
income, and franchise taxes imposed on it, by the jurisdiction
of such Lender's Applicable Lending Office or any political
subdivision thereof (all such non-excluded taxes, levies,
imposts, deductions, charges, withholdings and liabilities
being hereinafter referred to as "Taxes"). If the Borrower
-----
shall be required by law to deduct any Taxes from or in respect
of any sum payable hereunder or under any Note to any Lender or
the Administrative Agent, (i) the sum payable shall be
increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums
payable under this Section 2.14) such Lender or the
Administrative Agent (as the case may be) receives an amount
equal to the sum it would have received had no such deductions
been made, (ii) the Borrower shall make such deductions and
(iii) the Borrower shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance
with applicable law.
(b) In addition, the Borrower agrees to pay any
present or future stamp or documentary taxes or any other
excise or property taxes, charges or similar levies which arise
from any payment made hereunder or under the Notes or from the
execution, delivery, filing, recording, or registration of, or
otherwise with respect to, the Loan Documents and the other
documents to be delivered under the Loan Documents (hereinafter
referred to as "Other Taxes").
-----------
<PAGE>
30
(c) The Borrower will indemnify each Lender and the
Administrative Agent for the full amount of Taxes or Other
Taxes (including, without limitation, any Taxes or Other Taxes
imposed by any jurisdiction on amounts payable under this
Section 2.14) paid by such Lender or the Administrative Agent
(as the case may be) and any liability (including penalties,
interest and expenses) arising therefrom or with respect
thereto, whether or not such Taxes or Other Taxes were
correctly or legally asserted. This indemnification shall be
made within 30 days from the date such Lender or the
Administrative Agent (as the case may be) makes written demand
therefor. The Administrative Agent and the Lenders each agree
to pay to the Borrower promptly upon receipt thereof an amount
equal to the amount of any refund received by the
Administrative Agent or such Lender, as the case may be, with
respect to Taxes or Other Taxes paid by the Borrower.
(d) Within 30 days after the date of any payment of
Taxes, the Borrower will furnish to the Administrative Agent,
at its address referred to in Section 8.02, the original or a
certified copy of a receipt evidencing payment thereof. If no
Taxes are payable in respect of any payment hereunder or under
the Notes, the Borrower will, upon request by any Lender
through the Administrative Agent, furnish to the Administrative
Agent, at such address, a certificate from each appropriate
taxing authority, or an opinion of counsel acceptable to the
Administrative Agent, in either case stating that such payment
is exempt from or not subject to Taxes.
(e) Each Lender organized under the laws of a
jurisdiction outside the United States, on or prior to the date
of its execution and delivery of this Agreement in the case of
each Bank and on the date of the Assignment and Acceptance
pursuant to which it becomes a Lender in the case of each other
Lender, and from time to time thereafter if requested in
writing by the Borrower (but only so long as such Lender
remains lawfully able to do so), shall provide the Borrower
with Internal Revenue Service form 1001 or 4224, as
appropriate, or any successor form prescribed by the Internal
Revenue Service, certifying that such Lender is entitled to
benefits under an income tax treaty to which the United States
is a party which reduces the rate of withholding tax on
payments of interest or certifying that the income receivable
pursuant to this Agreement is effectively connected with the
conduct of a trade or business in the United States. If the
form provided by a Lender at the time such Lender first becomes
a party to this Agreement indicates a United States interest
withholding tax rate in
<PAGE>
31
excess of zero, withholding tax at such rate shall be
considered excluded from "Taxes" as defined in Section 2.14(a).
(f) For any period with respect to which a Lender has
failed to provide the Borrower with the appropriate form
described in Section 2.14(e) (other than if such failure is due
----- ----
to a change in law occurring subsequent to the date on which a
form originally was required to be provided, or if such form
otherwise is not required under the first sentence of
subsection (e) above), such Lender shall not be entitled to
indemnification under Section 2.14(c) with respect to Taxes
imposed by the United States; provided, however, that should a
-------- -------
Lender become subject to Taxes because of its failure to
deliver a form required hereunder, the Borrower shall take such
steps as the Lender shall reasonably request to assist the
Lender to recover such Taxes.
(g) Notwithstanding any contrary provisions of this
Agreement, in the event that a Lender that originally provided
such form as may be required under Section 2.14(e) thereafter
ceases to qualify for complete exemption from United States
withholding tax, such Lender shall have the right to assign all
of its rights and obligations under this Agreement to any
Eligible Assignee in accordance with Section 8.07(a), provided
that the rate of United States withholding tax applicable to
such Eligible Assignee shall not exceed the rate then
applicable to the assignor.
(h) Without prejudice to the survival of any other
agreement of the Borrower hereunder, the agreements and
obligations of the Borrower contained in this Section 2.14
shall survive the payment in full of principal and interest
hereunder and under the Notes.
SECTION 2.15. Sharing of Payments, Etc. If any
------------------------
Lender shall obtain any payment (whether voluntary,
involuntary, through the exercise of any right of set-off, or
otherwise) on account of the Advances owing to it (other than
pursuant to Section 2.02(b), 2.07, 2.11, 2.14 or 8.04(b)) in
excess of its ratable share of payments on account of the
Advances obtained by all the Lenders, such Lender shall
forthwith purchase from the other Lenders such participations
in the Advances made by them as shall be necessary to cause
such purchasing Lender to share the excess payment ratably with
each of them, provided, however, that if all or any portion of
-------- -------
such excess payment is thereafter recovered from such
purchasing Lender, such purchase from each Lender shall be
rescinded and such Lender shall repay to the purchasing Lender
the purchase price to the extent of such recovery
<PAGE>
32
together with an amount equal to such Lender's ratable share
(according to the proportion of (i) the amount of such Lender's
required repayment to (ii) the total amount so recovered from
the purchasing Lender) of any interest or other amount paid or
payable by the purchasing Lender in respect of the total amount
so recovered. The Borrower agrees that any Lender so
purchasing a participation from another Lender pursuant to this
Section 2.15 may, to the fullest extent permitted by law,
exercise all its rights of payment (including the right of
set-off) with respect to such participation as fully as if such
Lender were the direct creditor of the Borrower in the amount
of such participation.
SECTION 2.16. Use of Proceeds. The proceeds of the
---------------
Advances shall be available (and the Borrower agrees that it
shall use such proceeds) solely to (a) provide interim funding
for refunding, redemption or defeasance of long-term
obligations (consisting of long-term Indebtedness, preferred
shares of the Borrower, lease obligation bonds under the Palo
Verde Leases or secured facility bonds under the Borrower's
Eastern Interconnection Project Leases) during the next
succeeding 30-day period, and (b) to finance ongoing
expenditures incurred in the ordinary course of the Borrower's
utility business required to be made during the next succeeding
30-day period (including, without limitation, operating
expenditures, capital expenditures, construction expenditures,
lease rental payments, interest and taxes).
ARTICLE III
CONDITIONS TO EFFECTIVENESS AND LENDING
SECTION 3.01. Conditions Precedent to Effectiveness.
-------------------------------------
This Agreement and the obligations of the Lenders hereunder
shall become effective on the Effective Date, subject to
satisfaction of the following conditions precedent:
(a) The Co-Agents shall have received on or before
the Effective Date the following, each dated such day, in
form and substance satisfactory to the Lenders and (except
for the Notes and the Pledged Debt) in sufficient copies
for each Lender:
(i) The Notes to the order of the Lenders,
respectively.
<PAGE>
33
(ii) A pledge agreement, duly executed by the
Borrower and the Collateral Agent, in substantially
the form of Exhibit D (the "Pledge Agreement"),
----------------
together with:
(A) instruments evidencing the Pledged Debt
referred to in the Pledge Agreement, and
(B) evidence that all other actions
necessary or, in the opinion of the Lenders,
desirable to perfect and protect the security
interests created by the Pledge Agreement have
been taken.
(iii) The supplemental indentures, duly executed
by the Borrower, in substantially the forms of
Exhibits E-1 and E-2 (the "Supplemental Indentures").
-----------------------
(iv) Certified copies of the resolutions of the
Board of Directors of the Borrower approving each Loan
Document, and of all documents evidencing other
necessary corporate action and governmental approvals,
if any, with respect to each such Loan Document.
(v) A certificate of the Secretary or an
Assistant Secretary of the Borrower certifying the
names and true signatures of the officers of the
Borrower authorized to sign each Loan Document and the
other documents to be delivered hereunder.
(vi) A favorable opinion of Keleher & McLeod,
P.A., counsel for the Borrower, substantially in the
form of Exhibit F hereto.
(vii) A favorable opinion of Shearman & Sterling,
counsel for the Agents, substantially in the form of
Exhibit G hereto.
(b) The Borrower shall have paid all fees and
expenses of the Agents and the Lenders, including the
accrued fees and expenses of counsel to the Agents payable
on or before the Effective Date.
(c) On the Effective Date, the Bond Ratings by
Moody's and S&P shall be at least Ba2 and BB+,
respectively.
<PAGE>
34
SECTION 3.02. Conditions Precedent to Initial
-------------------------------
Borrowing. The obligation of each Lender to make an Advance on
---------
the occasion of the initial Borrowing is subject to the
condition precedent that the Lenders shall be satisfied that
all commitments under the Amended and Restated Credit Agreement
dated as of March 8, 1991, as amended by the Amendment dated
April 11, 1991 (the "Existing Agreement") among the Borrower,
------------------
the lenders party thereto and Chemical and Citibank, as
co-agents, have been terminated, and all amounts owed with
respect thereto have been, or will simultaneously with the
initial Borrowing hereunder, be paid in full, and the Co-Agents
shall have received copies of all notices, certificates or
other evidence of termination of the commitments under the
Existing Agreement, in form and substance satisfactory to the
Lenders. Each Lender hereunder that is a party to the Existing
Agreement hereby waives, upon execution of this Agreement, the
three Business Days' notice required by Section 2.04(a) of the
Existing Agreement relating to the termination of the
commitments under the Existing Agreement.
SECTION 3.03. Conditions Precedent to Each Borrowing
--------------------------------------
and to Rollover of Advances. The obligation of each Lender to
---------------------------
make an Advance on the occasion of each Borrowing (including
the initial Borrowing) or to Roll Over any Advances comprising
part of the same Borrowing on any Rollover Date shall be
subject to the further conditions precedent that on the date of
such Borrowing (a) the following statements shall be true (and
each of the giving of the applicable Notice of Borrowing and
the acceptance by the Borrower of the proceeds of such
Borrowing or the giving of the applicable Notice of Rollover
and the failure to otherwise notify the Administrative Agent in
writing on the Rollover Date by the time specified in
Section 2.09(a) shall constitute a representation and warranty
by the Borrower that on the date of such Borrowing, or on the
Rollover Date for such Rollover, such statements are true,
except that, in the case of the initial Borrowing hereunder,
the Administrative Agent shall have received for the account of
each Lender a certificate signed by a duly authorized officer
of the Borrower, dated the date of such Borrowing, stating
that):
(i) The representations and warranties contained in
Section 4.01 of this Agreement and in Section 4 of the
Pledge Agreement are correct on and as of the date of such
Borrowing or Rollover, before and after giving effect to
such Borrowing or Rollover and to the application of the
proceeds therefrom, as though made on and as of such date,
and
<PAGE>
35
(ii) No event has occurred and is continuing, or would
result from such Borrowing or from the application of the
proceeds therefrom, which constitutes a Default;
and (b) the Administrative Agent shall have received such other
approvals, opinions or documents as any Lender through the
Administrative Agent may reasonably request.
SECTION 3.04. Determinations Under Section 3.01,
----------------------------------
3.02, or 3.03. For purposes of determining compliance with the
-------------
conditions specified in Section 3.01, 3.02, or 3.03, each
Lender shall be deemed to have consented to, approved or
accepted or to be satisfied with each document or other matter
required thereunder to be consented to or approved by or
acceptable or satisfactory to the Lenders unless an officer of
the Administrative Agent responsible for the transactions
contemplated by the Loan Documents shall have received notice
from such Lender (a) in the case of the Effective Date, by
11:00 A.M. (New York City time) on such date specifying its
objection thereto which notice shall not have been withdrawn by
another written notice received by the Administrative Agent
before 2:00 P.M. (New York City time) on such date, and (b) in
the case of a Borrowing consisting of, or a Rollover of
Advances into, (i) Adjusted CD Rate or Eurodollar Rate
Advances, prior to the date of the Borrowing or the Rollover
Date, as the case may be, and (ii) Base Rate Advances, by 2:00
P.M. (New York City time) on the date of such Borrowing or the
Rollover Date, as the case may be, specifying its objection
thereto and (in the case of a Borrowing) declaring its
intention not to fund its ratable portion of such Borrowing,
which notice shall not (in the case of a written notice
received prior to the date of the Borrowing or the Rollover
Date) have been withdrawn by another written notice received by
the Administrative Agent before 11:00 A.M. (New York City time)
on the date of such Borrowing or such Rollover Date, as the
case may be.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the
-------------------------------------
Borrower. The Borrower represents and warrants as follows:
--------
(a) The Borrower (i) is a corporation duly organized,
validly existing and in good standing under the laws of the
State of New Mexico, (ii) is duly qualified and in good
standing as a foreign corporation
<PAGE>
36
in each other jurisdiction in which it owns or leases
property or in which the conduct of its business requires
it to so qualify or be licensed, and (iii) has all
requisite corporate power and authority to own or lease and
operate its properties and to carry on its business as now
conducted and as proposed to be conducted. All of the
outstanding capital stock of the Borrower has been validly
issued and is fully paid and non-assessable.
(b) Set forth on Schedule II hereto (and on any
supplement thereto delivered in writing to the Agents after
the date hereof that is necessary to reflect changes in
ownership of Designated Subsidiaries permitted pursuant to
Section 5.02(c)(iii) hereof) is a complete and accurate
list of all direct Subsidiaries of the Borrower showing (as
to each such direct Subsidiary) the jurisdiction of its
incorporation, the number of shares of each class of
capital stock authorized, and the number outstanding, on
the date hereof and the percentage of the outstanding
shares of each such class owned (directly or indirectly) by
the Borrower, and the number of shares covered by all
outstanding options, warrants, rights of conversion or
purchase and similar rights at the date hereof. All of the
outstanding capital stock of all Designated Subsidiaries of
the Borrower has been validly issued, is fully paid and
non-assessable and is owned by the Borrower free and clear
of all Liens. Each Designated Subsidiary of the Borrower
(i) is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its
incorporation, (ii) is duly qualified and in good standing
as a foreign corporation in each other jurisdiction in
which it owns or leases property or in which the conduct of
its business requires it to so qualify or be licensed and
(iii) has all requisite corporate power and authority to
own or lease and operate its properties and to carry on its
business as now conducted and as proposed to be conducted.
(c) The execution, delivery and performance by the
Borrower of this Agreement, the Notes and each other Loan
Document, and the consummation of the transactions
contemplated hereby, are within the Borrower's corporate
powers, have been duly authorized by all necessary
corporate action, and do not (i) contravene the Borrower's
charter or by-laws, (ii) violate any law (including,
without limitation, the Securities Exchange Act of 1934 and
the Racketeer Influenced and Corrupt Organizations Chapter
of the Organized Crime Control Act of 1970), rule,
regulation (including, without
<PAGE>
37
limitation, Regulation X of the Board of Governors of the
Federal Reserve System), order, writ, judgment, injunction,
decree, determination or award, (iii) conflict with or
result in the breach of, or constitute a default under, any
contract, loan agreement, indenture (including, without
limitation, the FMB Indenture), mortgage, deed of trust,
lease or other instrument binding on or affecting the
Borrower, any of its Designated Subsidiaries or any of
their properties or (iv) result in or require the creation
or imposition of any Lien upon or with respect to any of
the properties of the Borrower or any of its Designated
Subsidiaries, except as permitted by Section 5.02(a)(i).
Neither the Borrower nor any of its Subsidiaries is in
violation of any such law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award or in
breach of any such contract, loan agreement, indenture,
mortgage, deed of trust, lease or other instrument, the
violation or breach of which could have a material adverse
effect on the condition (financial or otherwise), results
of operations, assets, business or prospects of the
Borrower and its Subsidiaries on a Consolidated basis.
(d) No authorization or approval or other action by,
and no notice to or filing with, any governmental authority
or regulatory body or any other third party (except any
authorization or approval obtained prior to the date
hereof) is required for the due execution, delivery and
performance by the Borrower of this Agreement, the Notes,
or any other Loan Document, or for the consummation of the
transactions contemplated hereby, except for the short-term
financing plans permitting the Borrowings under this
Agreement, the most recent copy of which is in effect, has
been approved in writing by the Executive Director of the
PUC and has been delivered to the Co-Agents.
(e) This Agreement has been, and each of the Notes
and each other Loan Document when delivered hereunder will
have been, duly executed and delivered by the Borrower.
This Agreement is, and each of the Notes and each other
Loan Document when delivered hereunder will be, the legal,
valid and binding obligation of the Borrower, enforceable
against the Borrower in accordance with its terms.
(f) The Consolidated financial statements of the
Borrower and its Subsidiaries, including the Consolidated
balance sheet of the Borrower and its Subsidiaries as at
December 31, 1992 and the related Consolidated statements
<PAGE>
38
of earnings (loss) and cash flows of the Borrower and its
Subsidiaries for the fiscal year then ended, accompanied by
an opinion of Independent Accountants, copies of which have
been furnished to each Lender, fairly present the
Consolidated financial condition of the Borrower and its
Subsidiaries as at such date and the Consolidated results
of the operations of the Borrower and its Subsidiaries for
the period ended on such date, all in accordance with
generally accepted accounting principles applied on a
consistent basis. The Consolidated balance sheet of the
Borrower and its Subsidiaries as at September 30, 1993, and
the related Consolidated statements of earnings (loss) and
cash flows for the nine months ending on such date, copies
of which have been furnished to each Lender, are, subject
to audit adjustment, fairly stated on a consistent basis.
Since December 31, 1992, there has been no material adverse
change in the condition (financial or otherwise), results
of operations, assets, business or prospects of the
Borrower and its Designated Subsidiaries, except as
disclosed in the Borrower's 1992 Form 10-K, Forms 10-Q for
the three months ending on March 31, 1993, June 30, 1993
and September 30, 1993, respectively, and Forms 8-K
delivered to the Co-Agents prior to October 1, 1993.
(g) The Consolidated balance sheet and related
statement of income and cash flow of the Borrower and its
Subsidiaries most recently delivered pursuant to Section
5.01(i)(iii) of this Agreement and the accompanying opinion
of Independent Accountants delivered together therewith,
fairly present the Consolidated financial condition of the
Borrower and its Subsidiaries as at the date of such
balance sheet and the Consolidated results of the
operations of the Borrower and its Subsidiaries for the
period ended on such date, all in accordance with GAAP.
(h) No information, exhibit or report furnished by
the Borrower to either Co-Agent or to any Lender in
connection with the syndication efforts of the Co-Agents,
the negotiation of the Original Credit Agreement or the
Loan Documents contained any untrue statement of a material
fact or omitted to state a material fact necessary to make
the statements made therein not misleading.
(i) There is no action, suit, investigation,
litigation or proceeding affecting the Borrower or any of
its Designated Subsidiaries pending or threatened before
any court, governmental agency or arbitrator that is
<PAGE>
39
likely to have a material adverse effect on the condition
(financial or otherwise), results of operations, assets,
business or prospects of the Borrower and its Designated
Subsidiaries on a Consolidated basis, except as disclosed
in the Borrower's 1992 Form 10-K, Forms 10-Q for the three
months ending on March 31, 1993, June 30, 1993 and
September 30, 1993, respectively, and Forms 8-K delivered
to the Co-Agents prior to October 1, 1993 (the "Disclosed
---------
Litigation"), and there has been no adverse change in the
----------
status, or financial effect on the Borrower and its
Designated Subsidiaries on a Consolidated basis, of the
Disclosed Litigation.
(j) There is no action, suit, investigation,
litigation or proceeding affecting the Borrower or any of
its Subsidiaries pending or threatened before any court,
governmental agency or arbitrator that purports to affect
the legality, validity or enforceability of this Agreement,
any Note, any other Loan Document or the FMB Indenture, or
the consummation of the transactions contemplated hereby.
(k) No proceeds of any Advance will be used to
acquire any equity security of a class that is registered
pursuant to Section 12 of the Securities Exchange Act of
1934.
(l) The Borrower is not engaged in the business of
extending credit for the purpose of purchasing or carrying
margin stock (within the meaning of Regulation U issued by
the Board of Governors of the Federal Reserve System), and
no proceeds of any Advance will be used to purchase or
carry any margin stock or to extend credit to others for
the purpose of purchasing or carrying any margin stock.
(m) Schedule III contains a list of (i) all electric
franchises of the Borrower in effect as of the date of the
initial Borrowing, (ii) expiration dates for each such
franchise, and (iii) the percentage of revenues of all
electric utility operations of the Borrower derived from
each operating unit with respect to such franchises for the
October 1993 billing period. Schedule III also contains
similar information with respect to the electric franchise
for the City of Albuquerque, which has expired.
(n) On and after delivery hereunder, the Pledge
Agreement and the pledge of the Pledged Debt to the
Collateral Agent pursuant thereto will create a valid and
<PAGE>
40
perfected first priority security interest in the Pledged
Debt securing the payment of the Secured Obligations (as
defined in the Pledge Agreement).
(o) Set forth on Schedule IV hereto is a complete and
accurate list of all Plans, Multiemployer Plans and Welfare
Plans with respect to any employees of the Borrower or any
of its Designated Subsidiaries as of the date hereof.
(p) No ERISA Event has occurred or is reasonably
expected to occur with respect to any Plan of the Borrower.
(q) Schedule B (Actuarial Information) to the 1992
annual report (Form 5500 Series) for each Plan of the
Borrower, copies of which have been filed with the Internal
Revenue Service, 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 material adverse
change in such funding status.
(r) Neither the Borrower nor any of its ERISA
Affiliates has incurred or is reasonably expected to incur
any Withdrawal Liability to any Multiemployer Plan.
(s) Neither the Borrower nor any of its ERISA
Affiliates has been notified by the sponsor of a
Multiemployer Plan that such Multiemployer Plan is in
reorganization or has been terminated, within the meaning
of Title IV of ERISA, and no Multiemployer Plan of the
Borrower is reasonably expected to be in reorganization or
to be terminated, within the meaning of Title IV of ERISA.
(t) No Prohibited Transaction has occurred that has
resulted in or is reasonably likely to result in a material
liability of the Borrower.
(u) The operations and properties of the Borrower and
each of its Designated Subsidiaries comply in all material
respects with all Environmental Laws and neither utilize
nor contain nor are affected by any Hazardous Materials
that are not treated in compliance with all Environmental
Laws, and on the date hereof, neither the Borrower nor any
of its Designated Subsidiaries has any material liability,
contingent or otherwise, under any Environmental Law,
except as set forth on Schedule V.
<PAGE>
41
(v) The Borrower and each of its Designated
Subsidiaries has filed, has caused to be filed or has been
included in all tax returns (federal, state, local and
foreign) required to be filed and has paid all taxes shown
thereon to be due, together with applicable interest and
penalties.
(w) Set forth on Schedule VI hereto is a complete and
accurate list of the Material Leases on the date hereof,
showing the expiration date and annual rental cost thereof.
The Borrower is entitled to exercise all of the rights of
lessee purported to be granted to the Borrower under each
such Material Lease.
(x) Set forth on Schedule VII hereto is a complete
and accurate list of all Indebtedness (other than Material
Leases and intercompany Indebtedness that would be
eliminated in preparing the Consolidated financial
statements of the Borrower and its Subsidiaries) of the
Borrower and any of its Designated Subsidiaries, showing as
of October 31, 1993 the principal amount outstanding,
obligor, obligee and maturity date thereof, and from
October 31, 1993 through the date hereof there has been no
increase or material decrease in the principal amount
outstanding of such Indebtedness.
(z) Schedule VIII hereto, as most recently provided
to the Administrative Agent, sets forth the same (i)
amounts with respect to the interest portion of payments
under the Material Leases and (ii) discount rate used to
calculate the net present value of all amounts payable
under the Material Leases as have been most recently
provided (or that the Borrower intends to provide shortly)
to Moody's and S&P or as have otherwise been agreed to by
the Majority Lenders.
(aa) No more than 5% of the reported value of the
assets of the Borrower and its Consolidated Subsidiaries
taken as a whole is owned by any Person other than the
Borrower or any Designated Subsidiary.
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants. So long as any
---------------------
Advance shall remain unpaid or any Lender shall have any
<PAGE>
42
Commitment hereunder, the Borrower will, unless the Majority
Lenders shall otherwise consent in writing:
(a) Compliance with Laws, Etc. Comply, and cause
--------------------------
each of its Designated Subsidiaries to comply, in all
material respects with (i) all material laws, rules,
regulations and orders (including, without limitation,
ERISA and all applicable Environmental Laws) and (ii) all
other laws, rules, regulations and orders, promptly upon
discovery of any non-compliance.
(b) Payment of Taxes, Etc. Pay and discharge, and
---------------------
cause each of its Designated Subsidiaries to pay and
discharge, before the same shall become delinquent, (i) all
taxes, assessments and governmental charges or levies
imposed upon it or upon its property and (ii) all lawful
claims that, if unpaid, might by law become a Lien (other
than a Permitted Lien) upon its property; provided,
--------
however, that neither the Borrower nor any of its
-------
Designated Subsidiaries shall be required to pay or
discharge any such tax, assessment, charge or claim that is
being contested in good faith and by proper proceedings and
as to which appropriate reserves are being maintained.
(c) Maintenance of Insurance. Maintain, and cause
------------------------
each of its Designated Subsidiaries to maintain, insurance
with responsible and reputable insurance companies or
associations in such amounts and covering such risks as is
usually carried by companies engaged in similar businesses
and owning similar properties in the same general areas in
which the Borrower or such Designated Subsidiary operates;
provided that the Borrower and its Designated Subsidiaries
--------
may maintain reasonable amounts of self insurance
consistent with their financial condition and other
relevant criteria.
(d) Preservation of Corporate Existence and
---------------------------------------
Approvals. Preserve and maintain, and cause each of its
---------
Designated Subsidiaries to preserve and maintain (i) its
corporate existence, rights (charter and statutory),
franchises and privileges in the jurisdiction of its
incorporation, and qualify and remain qualified, and cause
each of its Designated Subsidiaries to qualify and remain
qualified, as a foreign corporation in each jurisdiction in
which such qualification is necessary or desirable in view
of its business and operations or the ownership of its
properties; provided, however, that nothing herein
-------- -------
contained shall prevent any merger or consolidation
permitted without the written consent of
<PAGE>
43
the Majority Lenders by Section 5.02(b) of this Agreement;
and (ii) all approvals, authorizations, licenses,
franchises and other permissions of all governmental,
judicial, regulatory, and other agencies necessary to
enable each of the Borrower and its Designated Subsidiaries
to operate and maintain its property, business and
operations in the same condition as in effect or carried
on, as the case may be, on the date hereof or as such
property, business and operations may hereafter be
maintained or carried on in accordance with the Loan
Documents, if the failure to so maintain and preserve any
such approval, authorization, license, franchise or other
permission would be reasonably likely to result in a
material adverse change in the condition (financial or
otherwise), results of operations, assets, business or
prospects of the Borrower and its Designated Subsidiaries
on a Consolidated basis.
(e) Maintenance of Properties, Etc. Maintain and
------------------------------
preserve, and cause each of its Designated 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.
(f) Performance of the FMB Indenture. Perform and
--------------------------------
observe all of the terms and provisions of the FMB
Indenture, maintain the FMB Indenture in full force and
effect, enforce the FMB Indenture in accordance with its
terms, take all such action to such end as may be from time
to time requested by the Administrative Agent and, upon
request of the Administrative Agent, make to each other
party to the FMB Indenture such demands and requests for
information and reports or for action as the Borrower is
entitled to make under the FMB Indenture.
(g) Transactions with Affiliates. Conduct, and cause
----------------------------
each of its Designated Subsidiaries to conduct, all
transactions otherwise permitted under the Loan Documents
with any of their Affiliates on terms that are fair and
reasonable and no less favorable to the Borrower or such
Designated Subsidiary than it would obtain in a comparable
arm's-length transaction with a Person not an Affiliate.
(h) Total Debt to Total Capitalization. Maintain a
----------------------------------
ratio of Consolidated Total Debt to Consolidated Total
Capitalization of the Borrower and its Subsidiaries,
measured at the end of each fiscal quarter, of not more
than 0.72 to 1; provided that, for purposes of this
--------
<PAGE>
44
Section 5.01(h), the calculation of Consolidated Total
Capitalization shall include an amount not exceeding the
difference between (i) the lesser of (x) the before tax
amount of any non-cash write-offs occurring during 1993 and
1994 resulting from the Borrower's restructuring efforts as
described in the Borrower's Form 8-K dated as of
January 26, 1993 and the Borrower's Form 10-K for the
fiscal year ended December 31, 1992 and (y) $200,000,000
and (ii) the tax benefit to the Borrower of such
write-offs.
(i) Reporting Requirements. Furnish to the Lenders:
----------------------
(i) as soon as possible and in any event within
five days after the occurrence of each Default
continuing on the date of such statement, a statement
of the chief financial officer of the Borrower setting
forth details of such Default and the action that the
Borrower has taken and proposes to take with respect
thereto;
(ii) as soon as available and in any event within
60 days after the end of each of the first three
quarters of each fiscal year of the Borrower, the
Consolidated financial statements of the Borrower and
its Subsidiaries for such fiscal quarter, including
the Consolidated balance sheet of the Borrower and its
Subsidiaries as of the end of such quarter and the
related Consolidated statements of earnings (loss) and
cash flows of the Borrower and its Subsidiaries for
the period commencing at the end of the previous
fiscal year and ending with the end of such quarter,
setting forth in each case in comparative form the
corresponding figures for the corresponding period of
the preceding fiscal year, all in reasonable detail
and duly certified (subject to year-end audit
adjustments) by the chief accounting officer of the
Borrower as having been prepared in accordance with
GAAP, together with (A) a certificate of the chief
financial officer of the Borrower stating that no
Default has occurred and is continuing or, if any such
Default has occurred and is continuing, a statement as
to the nature thereof and the action that the Borrower
has taken and proposes to take with respect thereto
and (B) a schedule in form satisfactory to the
Administrative Agent of the computations used by the
Borrower in determining compliance with the covenants
contained in Sections 5.01(h), 5.02(a), 5.02(c),
5.02(d) and 5.02(i);
<PAGE>
45
(iii) as soon as available and in any event within
120 days after the end of each fiscal year of the
Borrower, a copy of the annual audit report for such
year for the Borrower and its Subsidiaries, including
therein the Consolidated financial statements of the
Borrower and its Subsidiaries for such fiscal year,
including the Consolidated balance sheet of the
Borrower and its Subsidiaries as of the end of such
fiscal year and the related Consolidated statements of
earnings (loss) and cash flows of the Borrower and its
Subsidiaries for such fiscal year, in each case
accompanied by an opinion acceptable to the Majority
Lenders of Independent Accountants, together with (A) a
certificate of such accounting firm in substantially
the form of Exhibit H (with the schedules referred to
therein attached thereto) and (B) a certificate of the
chief financial officer of the Borrower stating that
no Default has occurred and is continuing or, if any
such Default has occurred and is continuing, a
statement as to the nature thereof and the action that
the Borrower has taken and proposes to take with
respect thereto;
(iv) promptly and in any event within 10 Business
Days after the Borrower or any of its ERISA Affiliates
knows or has reason to know that any ERISA Event has
occurred, a statement of the chief financial officer
of the Borrower describing such ERISA Event and the
action, if any, that the Borrower or such ERISA
Affiliate has taken and proposes to take with respect
thereto;
(v) promptly and in any event within five
Business Days after receipt thereof by the Borrower or
any of its ERISA Affiliates, copies of each notice
from the PBGC stating its intention to terminate any
Plan or to have a trustee appointed to administer any
Plan;
(vi) promptly and in any event within 30 days
after the filing thereof with the Internal Revenue
Service, copies of each Schedule B (Actuarial
Information) to the annual report (Form 5500 Series)
with respect to each Plan of the Borrower;
(vii) promptly and in any event within five
Business Days after receipt thereof by the Borrower or
any of its ERISA Affiliates from the sponsor of a
Multiemployer Plan, copies of each notice received by
the Borrower or any of its ERISA Affiliates
<PAGE>
46
concerning (A) the imposition of Withdrawal Liability
by any Multiemployer Plan, (B) the reorganization or
termination, within the meaning of Title IV of ERISA,
of any Multiemployer Plan or (C) the amount of
liability incurred, or that may be incurred, by the
Borrower or any of its ERISA Affiliates in connection
with any event described in clause (A) or (B);
(viii) promptly and in any event within 10 Business
Days after the Borrower or any of its ERISA Affiliates
knows or has reason to know that any Prohibited
Transaction that is reasonably likely to result in a
material liability of the Borrower has occurred, a
statement of the chief financial officer of the
Borrower describing such Prohibited Transaction and
the action, if any, that the Borrower or such ERISA
Affiliate has taken and proposes to take with respect
thereto;
(ix) promptly after the commencement thereof,
notice of all actions, suits and proceedings before
any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or
foreign, affecting the Borrower or any of its
Subsidiaries of the type described in Section
4.01(i) or (j);
(x) promptly after the sending or filing thereof,
copies of all proxy statements, financial statements
and reports that the Borrower sends to its
stockholders, and copies of all regular, periodic and
special reports, and all registration statements, that
the Borrower files with the Securities and Exchange
Commission or any governmental authority that may be
substituted therefor, or with any national securities
exchange;
(xi) promptly after the furnishing thereof, copies
of any statement or report furnished to any other
holder of the securities of the Borrower or of any of
its Designated Subsidiaries (A) pursuant to the terms
of the FMB Indenture, or (B) with respect to any
pending or potential non-compliance with the terms of
any other indenture, loan or credit or similar
agreement, and not otherwise required to be furnished
to the Lenders pursuant to any other clause of this
Section 5.01(i);
<PAGE>
47
(xii) promptly upon receipt thereof, copies of all
notices, requests and other documents received by the
Borrower or any of its Designated Subsidiaries under
or pursuant to the FMB Indenture with respect to any
pending or potential non-compliance with the terms
thereof, and, from time to time upon request by the
Administrative Agent, such information and reports
regarding the FMB Indenture as the Administrative
Agent may reasonably request;
(xiii) promptly, and in any event within five
Business Days after any change in the information
regarding Material Leases of the type contained on
Schedule VIII furnished by the Borrower to Moody's or
S&P, notice of such change; and
(xiv) such other information respecting the
business, condition (financial or otherwise),
operations, performance, properties or prospects of
the Borrower or any of its Designated Subsidiaries as
any Lender may from time to time reasonably request.
(j) Reference Bond Ratings. Use its best efforts to
----------------------
ensure that the First Mortgage Bonds are at all times rated
by Moody's and S&P, and promptly notify the Administrative
Agent should either such rating cease to be in effect or
become unavailable for any reason.
(k) Visitation Rights. At any reasonable time and
-----------------
from time to time, permit, and cause each of its Designated
Subsidiaries to permit, either Co-Agent or any of the
Lenders or any agents or representatives thereof (i) to
examine and make copies of and abstracts from the records
and books of account of, and visit the properties of, the
Borrower or any such Designated Subsidiary and (ii) to
discuss the affairs, finances and accounts of the Borrower
and any of its Designated Subsidiaries with any of their
officers or directors and with their independent certified
public accountants.
(l) Keeping of Books. Keep, and cause each of its
----------------
Designated Subsidiaries to keep, proper books of record and
account, in which full and correct entries shall be made of
all financial transactions and the assets and business of
the Borrower and each such Designated Subsidiary in
accordance with GAAP.
<PAGE>
48
SECTION 5.02. Negative Covenants. So long as any
------------------
Advance shall remain unpaid or any Lender shall have any
Commitment hereunder, the Borrower will not, without the
written consent of the Majority Lenders:
(a) Liens, Etc. Create, incur, assume or suffer to
----------
exist, or permit any of its Designated Subsidiaries to
create, incur, assume or suffer to exist, any Lien on or
with respect to any of its properties of any character
(including, without limitation, accounts) whether now owned
or hereafter acquired, or sign or file, or permit any of
its Designated Subsidiaries to sign or file, under the
Uniform Commercial Code of any jurisdiction, a financing
statement that names the Borrower or any of its Designated
Subsidiaries as debtor, or sign, or permit any of its
Designated Subsidiaries to sign, any security agreement
authorizing any secured party thereunder to file such
financing statement, or assign, or permit any of its
Designated Subsidiaries to assign, any accounts or other
right to receive income, excluding, however, from the
--------- -------
operation of the foregoing restrictions the following:
(i) Liens created by the Loan Documents;
(ii) Permitted Liens;
(iii) purchase money Liens upon or in property
acquired or held by the Borrower or any of its
Designated Subsidiaries in the ordinary course of
business to secure the purchase price of such property
or to secure Indebtedness incurred solely for the
purpose of financing the acquisition of any such
property to be subject to such Liens, or Liens
existing on any such property at the time of
acquisition, or extensions, renewals or replacements
of any of the foregoing for the same or a lesser
amount; provided, however, that no such Lien shall
-------- -------
extend to or cover any property other than the
property being acquired, and no such extension,
renewal or replacement shall extend to or cover any
property not theretofore subject to the Lien being
extended, renewed or replaced; and provided further
-------- -------
that the aggregate principal amount of the
Indebtedness at any one time outstanding secured by
Liens permitted by this clause (iii) shall not exceed
$25,000,000 at any one time outstanding;
(iv) Liens on assets of the Borrower pursuant to
the FMB Indenture, provided that the aggregate
--------
principal amount of the Debt at any time outstanding
<PAGE>
49
secured by such Liens shall not exceed $1,000,000,000;
(v) Liens on utility regulatory assets related
to PUC 2183 Amounts;
(vi) Liens on accounts receivable and signing and
filing of related financing statements under the
Uniform Commercial Code of the applicable
jurisdictions;
(vii) Liens on demand, energy or wheeling
revenues, or on capacity reservation or option fees,
payable to the Borrower with respect to any wholesale
electric service or transmission agreements and Liens
on capacity reservation or option fees payable to the
Borrower with respect to asset sales permitted herein;
(viii) Liens securing obligations owed by any
Designated Subsidiary to the Borrower;
(ix) Liens with respect to leases between the
Borrower and any Designated Subsidiary;
(x) other Liens not covered in clauses (i)
through (ix) above securing Indebtedness in an
aggregate amount not to exceed $10,000,000; and
(xi) signing and filing financing statements
under the Uniform Commercial Code of the applicable
jurisdictions and the creation of Liens in connection
with the refinancing of existing Indebtedness.
(b) Mergers, Etc. Merge with or into or consolidate
------------
with or into any Person, or acquire all or substantially
all of the assets of any Person, or permit any of its
Designated Subsidiaries to do so, except that (i) any
Designated Subsidiary of the Borrower may merge or
consolidate with or into or acquire assets of, any other
Designated Subsidiary of the Borrower and (ii) any of the
Borrower's Designated Subsidiaries may merge into or
dispose of assets to the Borrower; provided, however, that
-------- -------
in each case, immediately after giving effect thereto, no
Default would exist, and in the case of any such merger to
which the Borrower is a party, the Borrower is the
surviving corporation.
<PAGE>
50
(c) Sales, Etc. of Assets. Sell, lease, transfer or
---------------------
otherwise dispose of, or permit any of its Designated
Subsidiaries to sell, lease, transfer or otherwise dispose
of, any of its assets (including, without limitation, all
or substantially all of its assets, whether in one
transaction or a series of related transactions) except
(i) in connection with a transaction authorized by
subsection (b) of this Section; (ii) sales of accounts
receivable; (iii) sales of the assets or capital stock of
(A) Sunterra Gas Gathering, (B) Sunterra Gas Processing and
(C) Sangre de Cristo Water and sales of San Juan Unit 4
Capacity to UAMPS; (iv) sales of assets (excluding those
permitted in clauses (i), (ii) and (iii) hereof) for fair
value, if such value does not, for each transaction or
series of related transactions in any calendar year, exceed
5% of the book value of the assets of the Borrower and its
Designated Subsidiaries; provided, however, that, except as
-------- -------
permitted in clause (iii) above, the Borrower shall not
permit any Designated Subsidiary to sell all or
substantially all of its assets under any circumstances;
(v) sales of utility regulatory assets and corresponding
accounts receivable related to PUC 2183 Amounts; and
(vi) sale, lease, transfer or other disposition, at less
than fair value, of any other assets, provided that the
--------
aggregate book value of such assets shall not exceed
$1,350,000 in any calendar year.
(d) Investments in Other Persons. Make or hold, or
----------------------------
permit any of its Designated Subsidiaries to make or hold,
any Investment in any Person other than:
(i) Investments by the Borrower, Sunterra Gas
Processing and Sunterra Gas Gathering held on the date
hereof or made pursuant to one or more binding
contracts in effect on the date hereof in any of their
respective Subsidiaries;
(ii) Investments held by any Designated
Subsidiary on the date it becomes a Designated
Subsidiary;
(iii) So long as each of Sunterra Gas Processing
and Sunterra Gas Gathering remains a Designated
Subsidiary, Investments by the Borrower in such
Designated Subsidiary and Investments by such
Designated Subsidiary in the Borrower;
(iv) Loans and advances in the ordinary course of
the business of the Borrower and its Designated
Subsidiaries as presently conducted, provided that
--------
<PAGE>
51
no loan or advance shall in any event be made pursuant
to this clause (iv) either (A) to any Subsidiary of
the Borrower other than Sunterra Gas Processing or
Sunterra Gas Gathering or (B) to Sunterra Gas
Processing or Sunterra Gas Gathering after such Person
shall cease to be a Designated Subsidiary;
(v) Investments by the Borrower and its
Designated Subsidiaries in Cash Equivalents;
(vi) Investments by the Borrower that give the
Borrower control over another Person engaged in the
transmission or distribution of electricity, water or
natural gas; provided, that the aggregate book value
--------
of the assets acquired in all such Investments from
the date hereof to the date of any such Investment
shall not exceed 5% of the aggregate book value of the
assets of the Borrower and its Subsidiaries as of the
date of such Investment; and
(vii) Guarantees or similar agreements by the
Borrower for the benefit of a municipality or other
governmental agency or the bondholders or trustee
therefor made in respect of tax exempt financing and
associated with financing of the Borrower's utility
properties.
(e) Capital Expenditures. Make, or permit any of its
--------------------
Designated Subsidiaries to make, any expenditures for fixed
or capital assets, except for (i) expenditures for assets
used in, intended for use in or related to the gas, water
or electric utility business and (ii) other expenditures
for fixed or capital assets not exceeding $2,000,000 in any
fiscal year.
(f) Change in Nature of Business. Except in
----------------------------
connection with transactions permitted under Section
5.02(b) and (c) above, make, or permit any of its
Designated Subsidiaries to make, any material change in the
nature of its business as carried on at the date hereof.
(g) Accounting Changes. Make or permit, or permit
------------------
any of its Subsidiaries to make or permit, any change in
accounting policies or reporting practices, except as
required by GAAP, or as permitted by GAAP, if the amounts
involved are not material.
<PAGE>
52
(h) Maintenance of Ownership of Designated
--------------------------------------
Subsidiaries. Except as provided in Section 5.02(c)(iii)
------------
hereof, sell or otherwise dispose of any shares of capital
stock of any Designated Subsidiary or any warrants, rights
or options to acquire such capital stock or permit any
Designated Subsidiary to issue, sell or otherwise dispose
of any shares of its capital stock or the capital stock of
any other Designated Subsidiary or any warrants, rights or
options to acquire such capital stock, except to the
Borrower or another Designated Subsidiary.
(i) Limitation on Dividends. Declare or make any
-----------------------
dividend payment or other distribution of assets,
properties, cash, rights, obligations or securities on
account of any shares of common stock of the Borrower, or
purchase, redeem or otherwise acquire for value (or permit
any of its Subsidiaries to do so) any shares of common
stock of the Borrower or any warrants, rights or options to
acquire any such shares, now or hereafter outstanding,
except that the Borrower may (i) declare and make any
dividend payment or other distribution payable in common
stock of the Borrower, (ii) purchase, redeem or otherwise
acquire shares of its common stock or warrants, rights or
options to acquire any such shares with the proceeds
received from the substantially concurrent issue of new
shares of its common stock and (iii) declare or pay cash
dividends to its common stockholders and purchase, redeem
or otherwise acquire shares of its common stock or
warrants, rights or options to acquire any such shares for
cash during any 12-month period in an amount not to exceed
100% of net income (excluding extraordinary gains and
extraordinary losses, such extraordinary gains and
extraordinary losses to include, but not be limited to,
gains and losses from the sale, lease, transfer or other
disposition of assets of the Borrower and its Subsidiaries
for such period) computed on a consolidated basis, less the
amount of cash dividends declared and paid to the holders
of any class of capital stock (other than common stock) of
the Borrower, provided that, immediately after giving
effect to such proposed action, no Event of Default or
event which, with the giving of notice or lapse of time, or
both, would constitute an Event of Default would exist.
<PAGE>
53
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 Borrower shall fail to pay (i) any principal
of any Advance when the same becomes due and payable
(including, without limitation, in connection with any
mandatory prepayment) or (ii) interest on any Advance or
any other amount under any Loan Document for five days
after such interest or other amount has become due and
payable; or
(b) Any representation or warranty made by the
Borrower (or any of its officers) under or in connection
with any Loan Document shall prove to have been incorrect
in any material respect when made; or
(c) The Borrower shall fail to perform or observe
(i) any term, covenant or agreement contained in Section
5.01(h), 5.01(i)(i) or 5.02, or (ii) any other term,
covenant or agreement contained in any Loan Document on its
part to be performed or observed if such failure shall
remain unremedied for 10 days after written notice thereof
shall have been given to the Borrower by the Administrative
Agent or any Lender; or
(d) The Borrower or any of its Designated
Subsidiaries shall fail to pay any principal of or premium
or interest or other amounts on any (i) First Mortgage Bond
or (ii) any other Indebtedness outstanding in a principal
amount of at least $5,000,000 in the aggregate (but
excluding Indebtedness outstanding hereunder) of the
Borrower or such Designated Subsidiary (as the case may
be), when the same becomes due and payable (whether by
scheduled maturity, required prepayment, acceleration,
demand or otherwise), and such failure shall continue after
the applicable grace period, if any, specified in such
First Mortgage Bond, the FMB Indenture, or any agreement or
instrument relating to such First Mortgage Bond or any such
other Indebtedness; or any other event shall occur or
condition shall exist under such First Mortgage Bond, the
FMB Indenture, or any agreement or instrument relating to
such other Indebtedness and shall continue after the
applicable
<PAGE>
54
grace period, if any, specified therein, if the effect of
such event or condition is to accelerate, or to permit the
acceleration of, the maturity of such First Mortgage Bond
or such other Indebtedness; or such First Mortgage Bond or
any such other Indebtedness shall be declared to be due and
payable, or required to be prepaid (other than by a
regularly scheduled required prepayment), redeemed,
purchased or defeased, or an offer to prepay, redeem,
purchase or defease such First Mortgage Bond or such other
Indebtedness shall be required to be made, in each case
prior to the stated maturity thereof; or
(e) The Borrower or any of its Designated
Subsidiaries shall generally not pay its debts as such
debts become due, or shall admit in writing its inability
to pay its debts generally, or shall make a general
assignment for the benefit of creditors; or any proceeding
shall be instituted by or against the Borrower or any of
its Designated Subsidiaries seeking to adjudicate it a
bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection,
relief, or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or
relief of debtors, or seeking the entry of an order for
relief or the appointment of a receiver, trustee, custodian
or other similar official for it or for any substantial
part of its property and, in the case of any such
proceeding instituted against it (but not instituted by
it), either such proceeding shall remain undismissed or
unstayed for a period of 30 days, or any of the actions
sought in such proceeding (including, without limitation,
the entry of an order for relief against, or the
appointment of a receiver, trustee, custodian or other
similar official for, it or for any substantial part of its
property) shall occur; or the Borrower or any of its
Designated Subsidiaries shall take any corporate action to
authorize any of the actions set forth above in this
subsection (e); or
(f) Any judgment or order for the payment of money
shall be rendered against the Borrower or any of its
Designated Subsidiaries (i) in excess of $20,000,000 or
(ii) which, when added to all other such judgments or
orders rendered on or after the date hereof, exceeds
$40,000,000 in the aggregate, and either (A) enforcement
proceedings shall have been commenced by any creditor upon
such judgment or order or (B) there shall be any period of
30 consecutive days during which such judgment or order
shall not have been satisfied and a stay of
<PAGE>
55
enforcement of such judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect; or
(g) Any provision of the Pledge Agreement after
delivery thereof pursuant to Section 3.01 shall for any
reason cease to be valid and binding on the Borrower, or
the Borrower shall so state in writing; or
(h) The Pledge Agreement after delivery thereof
pursuant to Section 3.01 shall for any reason (other than
pursuant to the terms thereof) cease to create a valid and
perfected first priority security interest in any of the
collateral purported to be covered thereby, or the Borrower
shall so state in writing; or
(i) Any ERISA Event shall have occurred with respect
to a Plan of the Borrower and the sum (determined as of the
date of occurrence of such ERISA Event) of the
Insufficiency of such Plan and the Insufficiency of any and
all other Plans of the Borrower with respect to which an
ERISA Event shall have occurred and then exist (or the
liability of the Borrower and its ERISA Affiliates related
to such ERISA Event) exceeds $5,000,000; or
(j) The Borrower or any of its ERISA Affiliates shall
have been notified by the sponsor of a Multiemployer Plan
that it has incurred Withdrawal Liability to such
Multiemployer Plan in an amount that, when aggregated with
all other amounts required to be paid to Multiemployer
Plans by the Borrower and its ERISA Affiliates as
Withdrawal Liability (determined as of the date of such
notification), exceeds $2,000,000 or requires payments
exceeding $1,000,000 per annum; or
(k) The Borrower or any of its ERISA Affiliates shall
have been notified by the sponsor of a Multiemployer Plan
that such Multiemployer Plan is in reorganization or is
being terminated, within the meaning of Title IV of ERISA,
and as a result of such reorganization or termination the
aggregate annual contributions of the Borrower and its
ERISA Affiliates to all Multiemployer Plans that are then
in reorganization or being terminated have been or will be
increased over the amounts contributed to such
Multiemployer Plans for the plan years of such
Multiemployer Plans immediately preceding the plan year in
which such reorganization or termination occurs by an
amount exceeding $2,000,000; or
(l) A Prohibited Transaction shall have occurred and
the Borrower has incurred or is reasonably likely to
<PAGE>
56
incur liability in connection therewith in an amount
exceeding $2,000,000;
then, and in any such event, the Administrative Agent (i) shall
at the request, or may with the consent, of the Majority
Lenders, by notice to the Borrower, declare the obligation of
each Lender to make Advances to be terminated, whereupon the
same shall forthwith terminate, and (ii) shall at the request,
or may with the consent, of the Majority Lenders, by notice to
the Borrower, 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 Borrower;
provided, however, in the event of an actual or deemed entry of
an order for relief with respect to the Borrower under the
Federal Bankruptcy Code, (A) the obligation of each Lender to
make Advances shall automatically be terminated and (B) the
Notes, all such interest and all such amounts 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 Borrower.
ARTICLE VII
THE AGENTS
SECTION 7.01. Authorization and Action. Each Lender
------------------------
hereby appoints and authorizes, with respect to this Agreement,
the Co-Agents and with respect to the Pledge Agreement, the
Collateral Agent (the Co-Agents and the Collateral Agent being
herein referred to in such capacities collectively as the
"Agents", any one of them being an "Agent") to take such action
------ -----
as agent on its behalf and to exercise such powers under the
Loan Documents as are delegated to them by the terms hereof,
together with such powers as are reasonably incidental thereto.
As to any matters not expressly provided for by the Loan
Documents (including, without limitation, enforcement or
collection of, or other actions taken with respect to, the
Notes or the Pledge Agreement), the Agents shall not be
required to exercise any discretion or take any action, but
shall be required to act or to refrain from acting (and shall
be fully protected in so acting or refraining from acting) upon
the instructions of the Majority Lenders and such instructions
shall be binding upon all Lenders and all holders of Notes;
<PAGE>
57
provided, however, that the Agents shall not be required to
-------- -------
take any action which exposes any Agent to personal liability
or which is contrary to this Agreement or applicable law. Each
Agent agrees to give to each Lender prompt notice of each
notice given to it by the Borrower pursuant to the terms of
this Agreement.
SECTION 7.02. Agents' Reliance, Etc. No Agent, nor
---------------------
any of its directors, officers, agents or employees, shall be
liable for any action taken or omitted to be taken by it or
them under or in connection with any Loan Document, except for
its or their own gross negligence or willful misconduct.
Without limitation of the generality of the foregoing, each
Agent: (i) may treat the payee of any Note as the holder
thereof until the Administrative Agent receives and accepts an
Assignment and Acceptance entered into by the Lender that is
the payee of such Note, as Assignor, and an Eligible Assignee,
as assignee, as provided in Section 8.07; (ii) may consult with
legal counsel (including counsel for the Borrower), independent
public accountants and other experts selected by it and shall
not be liable for any action taken or omitted to be taken in
good faith by it in accordance with the advice of such counsel,
accountants or experts; (iii) makes no warranty or
representation to any Lender and shall not be responsible to
any Lender for any statements, warranties or representations
(whether written or oral) made in or in connection with any
Loan Document; (iv) shall not have any duty to ascertain or to
inquire as to the performance or observance of any of the
terms, covenants or conditions of any Loan Document on the part
of the Borrower or to inspect the property (including the books
and records) of the Borrower; (v) shall not be responsible to
any Lender for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of any Loan
Document or any other instrument or document furnished pursuant
hereto; and (vi) shall incur no liability under or in respect
of any Loan Document by acting upon any notice, consent,
certificate or other instrument or writing (which may be by
telecopier, telegram, cable or telex) believed by it to be
genuine and signed or sent by the proper party or parties.
SECTION 7.03. Chemical and Citibank and Their
-------------------------------
Affiliates. With respect to its Commitment, the Advances made
----------
by it and the Note issued to it, each of Chemical and Citibank
shall have the same rights and powers under the Loan Documents
as any other Lender and may exercise the same as though it were
not an Agent; and the term "Lender" or "Lenders" shall, unless
otherwise expressly indicated, include each of Chemical and
Citibank in its individual capacity. Each of Chemical and
Citibank and its affiliates
<PAGE>
58
may accept deposits from, lend money to, act as trustee under
indentures of, and generally engage in any kind of business
with, the Borrower, any of its Subsidiaries and any Person who
may do business with or own securities of the Borrower or any
such Subsidiary, all as if it were not an Agent under any Loan
Document and without any duty to account therefor to the
Lenders.
SECTION 7.04. Lender Credit Decision. Each Lender
----------------------
acknowledges that it has, independently and without reliance
upon any Agent or any other Lender and based on the financial
statements referred to in Section 4.01 and such other documents
and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement.
Each Lender also acknowledges that it will, independently and
without reliance upon any Agent or any other Lender and based
on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement.
SECTION 7.05. Indemnification. The Lenders agree to
---------------
indemnify each Agent (to the extent not promptly reimbursed by
the Borrower), ratably according to the respective principal
amounts of the Notes then held by each of them (or if no Notes
are at the time outstanding or if any Notes are held by Persons
which are not Lenders, ratably according to the respective
amounts of their Commitments), from and against any and all
liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind
or nature whatsoever which may be imposed on, incurred by, or
asserted against such Agent in any way relating to or arising
out of any Loan Document or any action taken or omitted by such
Agent under any Loan Document, provided that no Lender shall be
--------
liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from any such Agent's gross
negligence or willful misconduct. Without limitation of the
foregoing, each Lender agrees to reimburse each Agent promptly
upon demand for its ratable share of any out-of-pocket expenses
(including counsel fees) incurred by such Agent in connection
with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal
advice in respect of rights or responsibilities under, any Loan
Document, to the extent that such Agent is not promptly
reimbursed for such expenses by the Borrower.
<PAGE>
59
SECTION 7.06. Successor Agents. Any Agent may resign
----------------
at any time by giving written notice thereof to the Lenders and
the Borrower and may be removed at any time with or without
cause by the Majority Lenders. Upon any such resignation or
removal, the Majority Lenders shall, subject to the approval of
the Borrower if no Default has occurred and is continuing on
such date (which approval will not be unreasonably withheld),
have the right to appoint a successor Agent. If within 30 days
after the retiring Agent's giving of notice of resignation or
the Majority Lenders' removal of the retiring Agent, no
successor Agent shall have (A) been so appointed by the
Majority Lenders, (B) if required, been approved by the
Borrower, and (C) accepted such appointment, then the retiring
Agent may, on behalf of the Lenders, appoint a successor Agent,
which shall be a commercial bank organized under the laws of
the United States of America or of any State thereof and having
a combined capital and surplus of at least $50,000,000. 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 under the Loan
Documents. After any retiring Agent's resignation or removal
hereunder as Agent, the provisions of this Article VII shall
inure to its benefit as to any actions taken or omitted to be
taken by it while it was Agent under this Agreement.
SECTION 7.07. Exchange of Pledged Debt. Upon at
------------------------
least 30 days' prior written notice from and at the request of
the borrower to the Co-Agents, the Collateral Agent, as holder
of First Mortgage Bonds constituting the Pledged Debt, shall
exchange the Pledged Debt for other bonds or evidences of
indebtedness of the Borrower ("Company Securities") (x) in an
aggregate principal amount equal to the aggregate principal
amount of the Pledged Debt, in such principal amounts and
maturing on such dates that upon the stated maturity dates of
the Pledged Debt a corresponding principal amount of such
Company Securities shall mature, (y) bearing interest at the
same interest rate borne from time to time by the Pledged Debt
(Company Securities meeting the requirements of the foregoing
clauses (x) and (y) being herein called the "Corresponding
Securities"); provided however, that prior to or upon such
-------- -------
exchange, each of the following conditions shall have been
satisfied:
(a) the Corresponding Securities shall be outstanding
under a mortgage, deed of trust or other indenture or other
similar instrument or agreement (a "Governing Instrument")
which (i) has been qualified
<PAGE>
60
under the Trust Indenture Act of 1939, as amended or (ii)
shall, in the opinion of counsel to the Borrower, meet the
requirements for qualification under said Act upon the
filing of an appropriate application for such
qualification;
(b) the trusts created by the Governing Instrument
shall be stated therein to be for the equal and
proportionate benefit and security of the holders from time
to time of all Company Securities outstanding thereunder
(including the Corresponding Securities) without any
priority of any such Company Security over any other such
Company Security so outstanding;
(c) the Borrower shall provide the Co-Agents with an
opinion of counsel dated the date of exchange, to the
effect that (i) the forms and terms of the Corresponding
Securities have been duly authorized by the Borrower and
have been established in conformity with the Governing
Instrument, (ii) the Corresponding Securities, when
authenticated and delivered by the trustee under the
Governing Instrument in the manner and subject to any
conditions specified in such opinion, will have been duly
issued under the Governing Instrument and will constitute
valid and legally binding obligations of the Borrower
entitled to the benefits of the Governing Instrument, and
enforceable in accordance with their respective terms
(except as limited by bankruptcy, insolvency, moratorium
and other laws affecting the enforcement of mortgagees' and
other creditors' rights and by general equitable
principles) and (iii) all conditions precedent relating to
such exchange provided in this Section 7.07 have been
complied with;
(d) no Event of Default shall have occurred and be
continuing hereunder, no "default" (as defined in the FMB
Indenture) shall have occurred and be continuing and no
"event of default" or other comparable event under the
Governing Instrument shall have occurred and be continuing
(in each case as certified by the Borrower to the
Co-Agents);
(e) Moody's and S&P shall have indicated in writing
that the Company Securities outstanding or to be
outstanding under the Governing Instrument are or will be
assigned the same or a better rating as the rating in
effect for the First Mortgage Bonds of the Borrower
outstanding under the FMB Indenture on the date of
exchange; and
<PAGE>
61
(f) each Lender and each Co-Agent shall have
consented in writing to such exchange and each Lender, the
Borrower and the Co-Agents shall have duly executed and
delivered documentation satisfactory to such Lenders and
the Co-Agents effecting such exchange. Each Lender and
each Co-Agent shall consent to such exchange if it
otherwise meets the requirements of this Section 7.07 and
if, in its sole judgment, the effect thereof would not
adversely affect the interests of such Lender under the
Loan Documents, taking into consideration all factors then
relevant, including, without limitation, the Indebtedness
of the Borrower, the value of the collateral and the
likelihood of timely payment hereunder.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. No amendment or
---------------
waiver of any provision of this Agreement or the Notes, nor
consent to any departure by the Borrower therefrom, shall in
any event be effective unless the same shall be in writing and
signed by the Majority Lenders, and then such waiver or consent
shall be effective only in the specific instance and for the
specific purpose for which given; provided, however, that no
-------- -------
amendment, waiver or consent shall, unless in writing and
signed by all the Lenders, do any of the following: (a) waive
any of the conditions specified in Article III, (b) increase
the Commitments of the Lenders or subject the Lenders to any
additional obligations, (c) reduce the principal of, or
interest on, the Notes or any fees or other amounts payable
hereunder, (d) postpone any date fixed for any payment of
principal of, or interest on, the Notes or any fees or other
amounts payable hereunder, (e) change the percentage of the
Commitments or of the aggregate unpaid principal amount of the
Notes, or the number of Lenders, which shall be required for
the Lenders or any of them to take any action hereunder, (f)
amend this Section 8.01, (g) authorize the Collateral Agent to
release any of the Pledged Debt otherwise than as specified in
Section 16 of the Pledge Agreement; and provided further that
-------- -------
no amendment, waiver or consent shall, unless in writing and
signed by the Co-Agents in addition to the Lenders required
above to take such action, affect the rights or duties of any
Co-Agent to pay to the Administrative Agent on demand a fee of
$2500 for each amendment or waiver of, or consent to any
departure from (or series of amendments, waiver and/or consents
forming part of a single writing) the provisions of any Loan
Documentation
<PAGE>
62
executed by the Majority Lenders or (if required hereunder) by
all Lenders.
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 Borrower, at its address at
Alvarado Square, Mail Stop 2704, Albuquerque, New Mexico 87158,
Attention: Corporate Treasury Management; if to any Bank, at
its Domestic Lending Office specified opposite its name on
Schedule I hereto; if to any other Lender, at its Domestic
Lending Office specified in the Assignment and Acceptance
pursuant to which it became a Lender; if to Chemical, as
Co-Agent, at its address at 270 Park Avenue, New York, New
York, 10017, Attention: Utilities Group; and if to Citibank,
as Co-Agent or as Collateral Agent, at its address at 399 Park
Avenue, New York, NY 10043, Attention: Utilities Department;
or, as to each party, at such other address as shall be
designated by such party in a written notice to the other
parties. Unless otherwise specifically 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 and communications
to the Administrative Agent pursuant to Article II or VII shall
not be effective until received by the Administrative Agent.
SECTION 8.03. No Waiver; Remedies. No failure on the
-------------------
part of any Lender or any Agent to exercise, and no delay in
exercising, any right under any Loan Document shall operate as a
waiver thereof; nor shall any single or partial exercise of any
such right preclude any other or further exercise thereof or
the exercise of any other right. The remedies herein provided
are cumulative and not exclusive of any remedies provided by
law.
SECTION 8.04. Costs, Expenses and Taxes. (a) The
-------------------------
Borrower agrees to pay on demand (i) all costs and
out-of-pocket expenses of the Agents in connection with the
syndication, preparation, execution, delivery, administration,
modification and amendment of the Loan Documents and the other
documents to be delivered under the Loan Documents, including,
without limitation, (A) all due diligence, transportation,
computer, duplication, appraisal, audit, insurance, consultant,
search, filing and recording fees and expenses and (B) the
reasonable fees and out-of-pocket expenses of counsel for the
Agents with respect
<PAGE>
63
thereto and with respect to advising the Agents as to their
rights and responsibilities, or the perfection, protection or
preservation of rights or interests under the Loan Documents,
and with respect to negotiations with the Borrower regarding
any Default or event or circumstance that may give rise to any
Default, and (ii) all costs and expenses of the Agents and the
Lenders, if any (including, without limitation, reasonable
counsel fees and expenses, which may include, without
limitation, the reasonable allocated costs and expenses of
in-house counsel; provided, however, that the fees of in-house
-------- -------
counsel shall not be reimbursable to the extent they are
duplicative or redundant of those of outside counsel), in
connection with the enforcement (whether through negotiations,
legal proceedings or otherwise) of the Loan Documents and the
other documents to be delivered under the Loan Documents,
including, without limitation, reasonable counsel fees and
expenses in connection with the enforcement of rights under
this Section 8.04(a).
(b) If any payment of principal of, or Rollover of,
any Adjusted CD Rate Advance or Eurodollar Rate Advance is made
other than on the last day of an Interest Period relating to
such Advance, as a result of a payment or Rollover pursuant to
Section 2.12 or acceleration of the maturity of the Notes
pursuant to Section 6.01 or for any other reason, the Borrower
shall, upon demand by such Lender (with a copy of such demand
to the Administrative Agent), pay to the Administrative Agent
for the account of such Lender any amounts required to
compensate such Lender for any additional losses, costs or
expenses which it may reasonably incur as a result of such
payment or Rollover, including, without limitation, any loss
(including loss of anticipated profits), costs or expense
incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by such lender to fund or
maintain such Advance.
SECTION 8.05. Right of Set-off. Upon (i) the
----------------
occurrence and during the continuance of any Event of Default
and (ii) the making of the request or the granting of the
consent by the Majority Lenders specified by Section 6.01 to
authorize the Administrative Agent to declare the Notes due and
payable pursuant to the provisions of Section 6.01, each Lender
is hereby authorized at any time and from time to time, to the
fullest extent permitted by law, to set off and apply any and
all deposits (general or special, time or demand, provisional
or final) at any time held and other indebtedness at any time
owing by such Lender to or for the credit or the account of the
Borrower against any and all of the obligations of the Borrower
now or hereafter existing under any Loan Document, whether or
not such Lender shall
<PAGE>
64
have made any demand under this Agreement or such Note and
although such obligations may be unmatured. Each Lender agrees
promptly to notify the Borrower after any such set-off and
application made by such Lender, provided that the failure to
--------
give such notice shall not affect the validity of such set-off
and application. The rights of each Lender under this Section
are in addition to other rights and remedies (including,
without limitation, other rights of set-off) which such Lender
may have.
SECTION 8.06. Binding Effect. This Agreement shall
--------------
become effective when it shall have been executed by the
Borrower and the Co-Agents and when the Administrative Agent
shall have been notified by each Lender that such Lender has
executed it and thereafter shall be binding upon and inure to
the benefit of the Borrower, each Co-Agent and each Lender and
their respective successors and assigns, except that the
Borrower shall not have the right to assign its rights
hereunder or any interest herein without the prior written
consent of the Lenders.
SECTION 8.07. Assignments and Participations. (a)
------------------------------
Each Lender, with the consent of the Borrower (which consent
shall not be unreasonably withheld), may assign to one or more
banks or other entities all or a portion of its rights and
obligations under this Agreement (including, without
limitation, all or a portion of its Commitment, the Advances
owing to it and the Note or Notes held by it): provided,
--------
however, that (i) each such assignment shall be of a constant,
-------
and not a varying, percentage of all rights and obligations
under this Agreement, (ii) except in the case of (A) an
assignment to a Person that immediately prior to such
assignment was a Lender or (B) an assignment of all of the
remaining rights and obligations of such assigning Lender under
this Agreement, the amount of the Commitment of the assigning
Lender being assigned pursuant to each such assignment
(determined as of the date of the Assignment and Acceptance
with respect to such assignment) shall in no event be less than
$5,000,000, and shall be an integral multiple thereof, (iii)
the assigning Lender shall, immediately following such
assignment (unless such assignment is of all the rights and
obligations of such assigning Lender under this Agreement, or
is made concurrently with another such assignment or other such
assignments that in the aggregate constitute all of the rights
and obligations of such assigning Lender under this Agreement),
retain a Commitment of at least $5,000,000 under this
Agreement, (iv) each such assignment shall be to an Eligible
Assignee, and (v) the parties to each such assignment shall
execute and deliver to the Administrative Agent, for its
acceptance and recording in
<PAGE>
65
the Register, an Assignment and Acceptance, together with any
Note or Notes subject to such assignment and a processing and
recordation fee (the "Recordation Fee") of $2,500. Upon such
---------------
execution, delivery, acceptance and recording, from and after
the effective date specified in each Assignment and Acceptance,
(x) the assignee thereunder shall be a party hereto and, to the
extent that rights and obligations hereunder have been assigned
to it pursuant to such Assignment and Acceptance, have the
rights and obligations of a Lender hereunder and (y) the Lender
assignor thereunder shall, to the extent that rights and
obligations hereunder have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights and be
released from its obligations under this Agreement (and, in the
case of an Assignment and Acceptance covering all of the
remaining portion of an assigning Lender's rights and
obligations under this Agreement, such Lender shall cease to be
a party hereto).
(b) By executing and delivering an Assignment and
Acceptance, the Lender assignor thereunder and the assignee
thereunder confirm to and agree with each other and the other
parties hereto as follows: (i) other than as provided in such
Assignment and Acceptance, such assigning Lender makes no
representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made
in or in connection with this Agreement or the execution,
legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any other instrument or document
furnished pursuant hereto; (ii) such assigning Lender makes no
representation or warranty and assumes no responsibility with
respect to the financial condition of the Borrower or the
performance or observance by the Borrower of any of its
obligations under this Agreement or any other instrument or
document furnished pursuant hereto; (iii) such assignee
confirms that it has received a copy of this Agreement,
together with copies of the financial statements referred to in
Section 4.01 and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision
to enter into such Assignment and Acceptance; (iv) such
assignee will, independently and without reliance upon any
Agent, such assigning Lender or any other Lender and based on
such documents and information as it shall deem appropriate at
the time, continue to make its own credit decisions in taking
or not taking action under this Agreement; (v) such assignee
confirms that it is an Eligible Assignee; (vi) such assignee
appoints and authorizes the Agents to take such action as agent
on its behalf and to exercise such powers under this Agreement
as are delegated to each Agent by the terms hereof, together
with such powers as are reasonably incidental
<PAGE>
66
thereto; and (vii) such assignee agrees that it will perform in
accordance with their terms all of the obligations which by the
terms of this Agreement are required to be performed by it as a
Lender.
(c) The Administrative Agent shall maintain at its
address referred to in Section 8.02 a copy of each Assignment
and Acceptance delivered to and accepted by it and a register
for the recordation of the names and addresses of the Lenders
and the Commitment of, and principal amount of the Advances
owing to, each Lender from time to time (the "Register"). The
--------
entries in the Register shall be conclusive and binding for all
purposes, absent manifest error, and the Borrower, the Agents
and the Lenders may treat each Person whose name is recorded in
the Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by
the Borrower or any Lender at any reasonable time and from time
to time upon reasonable prior notice.
(d) Within five Business Days after its receipt of an
Assignment and Acceptance executed by an assigning Lender and
an assignee representing that it is an Eligible Assignee,
together with any Note or Notes subject to such assignment, the
Administrative Agent shall, if such Assignment and Acceptance
has been completed and is in substantially the form of Exhibit C
hereto, (i) accept such Assignment and Acceptance, (ii) record
the information contained therein in the Register and (iii)
give prompt notice thereof to the Borrower. Within five
Business Days of its receipt of such notice, the Borrower, at
its own expense, shall execute and deliver to the Agent in
exchange for the surrendered Note or Notes a new Note to the
order of such Eligible Assignee in an amount equal to the
Commitment assumed by it pursuant to such Assignment and
Acceptance and, if the assigning Lender has retained a
Commitment hereunder, a new Note to the order of the assigning
Lender in an amount equal to the Commitment retained by it
hereunder. Such new Note or Notes shall be in an aggregate
principal amount equal to the aggregate principal amount of
such surrendered Note or Notes, shall be dated the effective
date of such Assignment and Acceptance and shall otherwise be
in substantially the form of Exhibit A hereto.
(e) Each Lender may sell participations to one or
more banks or other entities in or to all or a portion of its
rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitment, the Advances
owing to it and the Note or Notes held by it); provided,
--------
however, that (i) such Lender's obligations under
-------
<PAGE>
67
this Agreement (including, without limitation, its Commitment
to the Borrower hereunder) shall remain unchanged, (ii) such
Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations, (iii) such
Lender shall remain the holder of any such Note for all
purposes of this Agreement, and (iv) the Borrower, the Agents
and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender's
rights and obligations under this Agreement; and provided
--------
further that no Lender shall give any participant any right to
-------
determine or influence such Lender's vote pursuant to Section
8.01 of this Agreement, except with respect to such matters as
are specified in clauses (c), (d) and (f) of such Section 8.01.
(f) Each Lender acknowledges that it has obligations
regarding preservation of the confidentiality of non-public
information regarding the Borrower. Each Lender may, in
connection with any assignment or participation or proposed
assignment or participation pursuant to this Section 8.07,
disclose to the assignee or participant or proposed assignee or
participant, any information relating to the Borrower furnished
to such Lender by or on behalf of the Borrower; provided that,
--------
prior to any such disclosure, the assignee or participant or
proposed assignee or participant shall agree to preserve the
confidentiality of any confidential information relating to the
Borrower received by it from such Lender.
SECTION 8.08. Governing Law. This Agreement and the
-------------
Notes shall be governed by, and construed in accordance with,
the laws of the State of New York.
SECTION 8.09. Execution in Counterparts. This
-------------------------
Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and
all of which taken together shall constitute one and the same
agreement.
<PAGE>
68
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.
PUBLIC SERVICE COMPANY
OF NEW MEXICO
By [SIGNATURE APPEARS HERE]
---------------------------------
Title: Treasurer
CHEMICAL BANK,
as Co-Agent
By /s/ Marisa J. Harney
---------------------------------
Title: Vice President
CITIBANK, N.A.,
as Co-Agent
By /s/ Anita J. Brickell
---------------------------------
Title: Vice President
THE BANKS
---------
Commitment
----------
$14,000,000 CHEMICAL BANK
By /s/ Marisa J. Harney
---------------------------------
Title: Vice President
$14,000,000 CITIBANK, N.A.
By /s/ Anita J. Brickell
---------------------------------
Title: Vice President
<PAGE>
69
$12,000,000 BANK OF AMERICA NATIONAL
TRUST AND SAVINGS
ASSOCIATION
By /s/ Mark Milner
---------------------------------
Title: Vice President
$10,000,000 THE BANK OF CALIFORNIA, N.A.
By /s/ Rebecca Holden
---------------------------------
Title: Vice President
$10,000,000 CANADIAN IMPERIAL BANK OF
COMMERCE
By /s/ Frederick P. Engler
---------------------------------
Frederick P. Engler
Title: Vice President
$10,000,000 THE CHASE MANHATTAN BANK,
NATIONAL ASSOCIATION
By /s/ Richard W. Cortright, Jr.
---------------------------------
Title: Vice President
$10,000,000 MELLON BANK N.A.
By /s/ A. J. Sabatelle
---------------------------------
Title: Vice President
$10,000,000 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ Sheila O'Connell
---------------------------------
Title: Managing Director
<PAGE>
70
$10,000,000 THE LONG-TERM CREDIT BANK OF
JAPAN LIMITED, Los Angeles
Agency
By /s/ Hiroshi Norizuki
---------------------------------
Title: Deputy General Manager
Hiroshi Norizuki
-------------------
$100,000,000 Total of the Commitments
<PAGE>
SCHEDULE I
to the Revolving Credit Agreement, dated as of December 14, 1993,
among Public Service Company of New Mexico, as Borrower,
certain lenders, and Chemical Bank and Citibank, N.A. as Co-Agents
PUBLIC SERVICE COMPANY OF NEW MEXICO
<TABLE>
<CAPTION>
Name of Bank Domestic Lending Office CD Lending Office Eurodollar Lending Office
<S> <C> <C> <C>
CHEMICAL BANK 270 Park Avenue 270 Park Avenue 270 Park Avenue
8th Floor 8th Floor 8th Floor
New York, NY 10017 New York, NY 10017 New York, NY 10017
CITIBANK, N.A. North American Finance Group North American Finance Group North American Finance Group
399 Park Avenue 399 Park Avenue 399 Park Avenue
New York, NY 10043 New York, NY 10043 New York, NY 10043
BANK OF AMERICA 1850 Gateway Boulevard 1850 Gateway Boulevard 1850 Gateway Boulevard
NATIONAL TRUST AND 4th Floor, Section 3 4th Floor, Section 3 4th Floor, Section 3
SAVINGS ASSOCIATION Concord, PA 94520 Concord, PA 94520 Concord, PA 94520
THE BANK OF 355 South Grand Avenue 355 South Grand Avenue 355 South Grand Avenue
CALIFORNIA, N.A. 42nd Floor 42nd Floor 42nd Floor
Los Angeles, CA 90071 Los Angeles, CA 90071 Los Angeles, CA 90071
CIBC, INC. CIBC - Atlanta CIBC - Atlanta CIBC - Atlanta
Two Paces West Two Paces West Two Paces West
2727 Paces Ferry Road 2727 Paces Ferry Road 2727 Paces Ferry Road
Suite 1200 Suite 1200 Suite 1200
Atlanta, GA 30339 Atlanta, GA 30339 Atlanta, GA 30339
THE CHASE MANHATTAN BANK, One Chase Manhattan Plaza One Chase Manhattan Plaza One Chase Manhattan Plaza
NATIONAL ASSOCIATION New York, NY 10081 New York, NY 10081 New York, NY 10081
</TABLE>
<PAGE>
2
<TABLE>
<CAPTION>
Name of Bank Domestic Lending Office CD Lending Office Eurodollar Lending Office
<S> <C> <C> <C>
MELLON BANK N.A. One Mellon Bank Center Three Mellon Bank Center Three Mellon Bank Center
Room 4425 Mellon Square, Room 2305 Mellon Square, Room 2305
Pittsburgh, PA 15258 Pittsburgh, PA 15258 Pittsburgh, PA 15258
MORGAN GUARANTY TRUST 60 Wall Street 60 Wall Street Nassau Bahamas Office
COMPANY OF NEW YORK New York, NY 10260-0060 New York, NY 10260-0060 c/o J.P. Morgan Servics Inc.
Euro-Loan Servicing Unit-
Loan Operations
500 Stanton Christiana Rd,
3rd Floor
Newark, DE 19713
THE LONG-TERM CREDIT BANK OF 444 South Flower Street 444 South Flower Street 444 South Flower Street
JAPAN LIMITED, Suite 3700 Suite 3700 Suite 3700
Los Angeles Agency Los Angeles, CA 90071 Los Angeles, CA 90071 Los Angeles, CA 90071
</TABLE>
<PAGE>
SCHEDULE II
DIRECT SUBSIDIARIES
-------------------
<TABLE>
<CAPTION>
DESIGNATED SUBSIDIARIES
- -----------------------
<S> <C>
SUNTERRA GAS GATHERING COMPANY
Authorized shares 2,000 Common stock par value $1.00/share
Outstanding shares 10 Common stock par value $1.00/share
SUNTERRA GAS PROCESSING COMPANY
Authorized shares 1,000 Common stock par value $1.00/share
Outstanding shares 10 Common stock par value $1.00/share
OTHER DIRECT SUBSIDIARIES
- -------------------------
PARAGON RESOURCES INC.
Authorized shares 250,000 Common stock par value $1.00/share
Outstanding shares 3,000 Common stock par value $1.00/share
SUNBELT MINING COMPANY, INC.
Authorized shares 250,000 Common stock par value $1.00/share
125 Cumulative Preferred par value
$100,000
Outstanding shares 250 Common stock par value $1.00/share
0 Cummulative Preferred par value
$100,000
MEADOWS RESOURCES, INC.
Authorized shares 250,000 Common stock par value $1.00/share
Outstanding 250 Common stock par value $1.00/share
</TABLE>
NOTE: With respect to each of the above subsidiaries:
- -----
(1) Percent of outstanding owned by PNM - 100%
(2) Incorporated in the State of New Mexico
(3) There are no options, warrants, rights of conversion or purchase or
similar rights outstanding with respect to the shares of capital stock.
(4) There are no liens on outstanding capital stock.
<PAGE>
SCHEDULE III
Electric Franchises
-------------------
<TABLE>
<CAPTION>
Oper Unit Franchise
Operating Revenue Revenue Renewal
Units % % Electric Franchise Date
- ------------- ------------ ------------ ----------------------------- -----------
<S> <C> <C> <C> <C>
Metro 73.36% 58.27% City of Albuquerque Expired
13.38% Bernalillo County 11-30-97
0.16% Los Ranchos de Albuquerque 02-08-10
1.47% McKinley County 06-13-03
0.08% Village of Tijeras 07-01-01
Sante Fe 11.01% 8.28% City of Santa Fe 11-21-99
2.73% Sante Fe County 12-08-05
Bernalillo 7.12% 0.74% City of Bernalillo 05-22-08
2.87% City of Rio Rancho 03-21-06
0.03% Town of Cochiti Lake 08-03-98
0.51% Village of Corrales 06-30-97
0.02% Pueblo de Cochiti 06-30-02
0.10% Pueblo de Santo Domingo 11-03-28
2.84% Sandoval County 03-25-99
Valencia 4.05% 0.78% Town of Belen 01-10-14
0.26% Village of Bosque Farms 05-06-00
0.72% Village of Los Lunas 10-08-11
2.28% Valencia County 04-26-14
Deming 1.86% 1.22% City of Deming 10-11-12
0.64% Luna County 02-13-99
Las Vegas 1.60% 1.60% City of Las Vegas 07-31-96
0.00% San Miguel County 07-01-99
Clayton 0.27% 0.27% City of Clayton 02-22-12
All Oper. Units 0.73% 0.73% Non-Franchise Areas None
</TABLE>
Approximate percentage of jurisdictional revenues based on October 1993 billing.
<PAGE>
SCHEDULE IV
to the Revolving Credit Agreement
dated as of December 14, 1993,
among Public Service Company of New Mexico,
as Borrower, certain Lenders,
and Chemical Bank and Citibank, N.A.
as Co-Agents
ERISA PLANS
-----------
Employee Retirement Plan
Employee Stock Ownership Plan
Master Employee Savings Plan
Master Employee Savings Plan for Collective Bargaining Employees
Group Term Life Insurance Plan (contract)
Long Term Disability Plan (contract)
Special Accidental Death and Dismemberment Plan (contract)
Health and Dental Plan
Service Term Life Insurance Plan (contract)
Management Life Insurance Plan (contract)
PNM Non-Union Severance Plan
Educational Reimbursement Plan (no plan document required)
Employee Retention Plan
Optional Medical Plans (contract)
Benefits My Way
Dependent Life Insurance (contract)
Voluntary Term Life (contract)
Voluntary AD&D (contract)
Sunterra Processing Severance
Sunterra Gathering Severance
<PAGE>
Sunterra Processing Employee Option Program
Sunterra Gathering Employee Option Program
Meadows Severance
PNM Employee Assistance Program
PNM Employee Option Program
PNM Non-Union Voluntary Separation Program
Sunterra Gas Gathering Non-Union Voluntary Separation Program
Sunterra Gas Processing Non-Union Voluntary Separation Program
Introductory Employees Non-Union Severance Pay Plan
PNM Gas Asset Retention Plan
Sunterra Gas Gathering Gas Asset Retention Plan
Sunterra Gas Processing Gas Asset Retention Plan
OBRA '93 Retirement Plan
PNM Section 415 Plan (final approval is pending)
EXECUTIVE PLANS
Accelerated Management Performance Plan
Executive Medical
Executive Retention
Service Bonus Plan
Directors' Restricted Stock Retainer Plan
Asset Sales Incentive Plan
Performance Stock Plan
2
<PAGE>
SCHEDULE V
to the Revolving Credit Agreement
dated as of December 14, 1993,
among Public Service Company of New Mexico,
as Borrower, certain Lenders,
and Chemical Bank and Citibank, N.A.
as Co-Agents
ENVIRONMENTAL LAW LIABILITY
---------------------------
None.
<PAGE>
SCHEDULE VI
MATERIAL LEASES
<TABLE>
<CAPTION>
Description Expiration Annual Rent
<S> <C> <C>
Palo Verde Unit 1
Facility Lease dated as of December 16, 1985, 1/15/2015 $ 5,580,122.34
between PNM and The First National Bank of
Boston ("FNB") as Owner Trustee under a Trust
Agreement dated as of December 16, 1985, with
MFS Leasing Corp. ("MFS"), as owner
Participant, as amended.
Facility Lease dated as of December 16, 1985, 1/15/2015 $ 9,407,079.98
between PNM and FNB, as owner Trustee under
a Trust Agreement dated as of December 16,
1985, with PNM (successor-in-interest to DBP
Corp., successor-in-interest to Burnham Leasing
Corporation ("Burnham")) as Owner Participant,
as amended.
Facility Lease dated as of December 16, 1985, 1/15/2015 $15,693,862.76
between PNM and FNB, as Owner Trustee under
a Trust Agreement dated as of December 16,
1985, with Chrysler Financial Corporation, as
Owner Participant, as amended.
Facility Lease dated as of December 15, 1986, 1/15/2015 $ 4,757,769.00
between PNM and FNB, as Owner Trustee under
a Trust Agreement dated as of December 15,
1986, with Palo Verde 1--PNM December 75
Corporation (successor-in-interest to Chase
Manhattan Realty Leasing Corporation
("Chase")), as Owner Participant, (Unit 1), as
amended.
Facility Lease dated as of July 31, 1986 between 1/15/2015 $ 6,974,313.00
PNM and FNB, as Owner Trustee under a Trust
Agreement dated as of July 31, 1986, with Palo
Verde 1--PNM August 50 Corporation (successor-
in-interest to Chase), as Owner Participant, as
amended.
Total -- Unit 1 $42,413,147.04
</TABLE>
<PAGE>
Schedule VI
to Credit Agreement
Page 2
<TABLE>
<CAPTION>
Palo Verde Unit
<S> <C> <C>
Facility Lease dated as of August 12, 1986, 1/15/2016 $ 5,742,060.00
between PNM and FNB, as Owner Trustee under
a Trust Agreement dated as of August 12, 1968,
with MFS, as Owner Participant, as amended.
Facility Lease dated as of August 12, 1986, 1/15/2016 $ 8,839,122.60
between PNM and FNB, as Owner Trustee under
a Trust Agreement dated as of August 12, 1986
with PNM (successor-in-interest to DBP Corp.,
successor-in-interest to Burnham), as Owner
Participant, as amended.
Facility Lease dated as of August 12, 1986, 1/15/2016 $ 9,958,476.04
between PNM and FNB, as Owner Trustee under
a Trust Agreement dated as of August 12, 1986
with CGI Capital, Inc., as Owner Participant, as
amended.
Facility Lease dated as of August 12, 1986, 1/15/2016 $ 9,569,653.00
between PNM and FNB, as Owner Trustee under
a Trust Agreement dated as of August 12, 1986
with Palo Verde Leasing Corporation (successor-
in-interest to First Chicago Lease Holdings, Inc.),
as Owner Participant, as amended.
Facility Lease dated as of August 12, 1986, 1/15/2016 $ 4,743,012.00
between PNM and FNB, as Owner Trustee under
a Trust Agreement dated as of August 12, 1986
with MFS (successor-in-interest to Beneficial
Leasing Group, Inc.), as Owner Participant, as
amended.
Facility Lease dated as of December 15, 1986 1/15/2016 $ 3,272,560.40
between PNM and FNB, as Owner Trustee under
a Trust Agreement dated as of December 15,
1986 with PV 2-PNM December 35 Corporation
(successor-in-interest to Chase), as Owner
Participant, as amended.
Total - Unit 2 $42,124,884.04
</TABLE>
<PAGE>
Schedule VI
to Credit Agreement
Page 3
<TABLE>
<CAPTION>
Eastern Interconnection Project (EIP)
<S> <C> <C>
Amended and Restated Lease dated as of 4/1/2015 $ 4,009,766.52*
September 1, 1993, between PNM, as Lessee, $ 4,487,119.68
and FNB, as Owner Trustee under a Trust
Agreement dated as of January 2, 1985, with
DCC Project Finance Two, Inc., as Lessor.
Amended and Restated Lease dated as of 4/1/2015 $ 2,675,739.30*
September 1, 1993, between PNM, as Lessee, $ 2,844,913.50
and FNB, as Owner Trustee under a Trust
Agreement dated as of January 2, 1985, with
General Foods Credit Corporation, Lessor.
$ 6,685,505.82*
Total - EIP $ 7,332,033.18
* 1994 only
</TABLE>
<PAGE>
SCHEDULE VII
INDEBTEDNESS
All First Mortgage Bonds and Pollution Control Bonds are publicly held unless
noted otherwise.
<TABLE>
<CAPTION>
OUTSTANDING
NAME OF ISSUE SERIES MATURITY as of 10/31/93
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FIRST MORTGAGE BONDS 5 1/8% 9-15-2001 $15,400,000
FIRST MORTGAGE BONDS 5 7/8% 5-1-1997 15,551,000
FIRST MORTGAGE BONDS 7 1/4% 4-1-1999 11,980,000
FIRST MORTGAGE BONDS 7 1/2% 6-15-2002 16,377,000
FIRST MORTGAGE BONDS 9 1/8% 3-15-2005 21,366,000
FIRST MORTGAGE BONDS 8 1/8% 6-15-2007 26,330,000
FIRST MORTGAGE BONDS 9.0% 5-1-2008 57,386,000
* FIRST MORTGAGE BONDS 10 1/8% 10-1-2004 45,000,000
POLLUTION CONTROL BONDS 6.0% SEC'D FMB 3-1-2008 125,000,000
POLLUTION CONTROL BONDS 6 1/2% SEC'D FMB 9-1-2004 35,000,000
POLLUTION CONTROL BONDS 6 1/2% SEC'D FMB 9-1-2009 95,000,000
POLLUTION CONTROL BONDS 5.9% SEC'D FMB 4-1-2007 77,045,000
POLLUTION CONTROL BONDS 7 3/4% SEC'D FMB 11-1-2009 23,000,000
# POLLUTION CONTROL BONDS VAR. RATE SEC'D FMB 11-1-2022 37,300,000
POLLUTION CONTROL BONDS 6 3/8% SEC'D FMB 12-15-2022 46,000,000
POLLUTION CONTROL BONDS 6 3/8% SEC'D FMB 08-15-2023 36,000,000
POLLUTION CONTROL BONDS 6.40% SEC'D FMB 08-15-2023 100,000,000
<CAPTION>
OTHER LONG-TERM DEBT
<S> <C> <C>
CAPITAL LEASE -- Security Trust Land 12-1993 114,000
@ PV Lease Oblig. Bonds 137,164,000
Asset Securitization -- Take-Or-Pay Receivables Variable 58,362,497
------------
TOTAL INDEBTEDNESS $980,375,497
------------
</TABLE>
* Private Placement (refer to Schedule VII, page 2 for listing of bondholders.)
# Supported by Letter of Credit with Canadian Imperial Bank of Commerce.
@ Recorded on PNM's books as a result of the purchase of Drexel's beneficial
interests in Palo Verde Units 1 and 2.
First Mortgage Bonds Outstanding as Collateral Under the Revolving Credit
Agreement:
<TABLE>
<S> <C>
13 1/8% $41,859,900
15 % 58,140,100
---------------
Total $100,000,000
===============
</TABLE>
<PAGE>
SCHEDULE VII
to the Credit Agreement
Page 2
Owners of Private Issue First Mortgage Bonds 10 1/8% due 10/1/04
- ----------------------------------------------------------------
American United Life
Great West Life & Annuity Insurance Company
Kentucky Central Life Insurance Company
Metropolitan Life Insurance Company
Security Mutual Life Insurance Company of New York
State Farm Life Insurance Company
The Columbus Mutual Life Insurance Company
Indianapolis Life Insurance Company
Liberty Life Insurance Company
R J Thomas & Company
Shearson Lehman Brothers, Inc.
UMBTRU & Co.
Daly & Co.
Cust & Co.
Liberty Life Insurance Company
Salkeld & Co.
The State Compensation Insurance Fund of California
United Benefit Life Insurance Company
United Fidelity Life Insurance Company
Variable Annuity Life Insurance Company
Woodmen Accident and Life Company
<PAGE>
SCHEDULE VIII
CALCULATION OF CAPITALIZED LEASE OBLIGATIONS
<TABLE>
<CAPTION>
E.I.P. (Discount rate==>12.85% P.V.N.G.S. (Discount rate==>10.00% EIP & PVNGS
---------------------------------------------- ------------------------------------------------ CAPITALIZED EOY
YEAR PAYMENT INTEREST PRINCIPAL EOY BALANCE PAYMENT INTEREST PRINCIPAL EOY BALANCE LEASE PAYMENTS YEAR
- ---- ----- ------ ------- ------- ------ ----- ------- ------- --------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1993 $52,236,276 $579,920,816 $632,157,094 1993
1994 $6,665,505 $6,712,362 ($26,857) $52,253,135 $66,130,886 $57,992,082 $8,138,804 $571,782,012 $624,045,146 1994
1995 $7,332,032 $6,715,813 $616,219 $51,646,916 $66,130,886 $57,178,201 $8,952,685 $582,829,327 $614,476,242 1995
1996 $7,332,032 $6,636,829 $695,403 $50,951,512 $66,130,886 $56,282,933 $9,847,953 $552,981,373 $603,932,666 1996
1997 $7,332,032 $6,547,269 $784,763 $50,166,749 $66,130,886 $55,298,137 $10,632,749 $542,148,625 $592,315,374 1997
1998 $7,332,032 $6,446,427 $885,605 $49,281,145 $66,130,886 $54,214,862 $11,918,024 $530,232,601 $579,513,746 1998
1999 $7,332,032 $6,332,627 $999,405 $48,281,740 $66,130,886 $53,023,260 $13,107,626 $517,124,975 $565,406,715 1999
2000 $7,332,032 $6,204,204 $1,127,628 $47,153,911 $66,130,886 $51,712,498 $14,418,388 $502,706,587 $549,860,496 2000
2001 $7,332,032 $6,059,276 $1,272,754 $45,881,157 $66,130,886 $50,270,859 $15,850,227 $488,846,360 $532,727,517 2001
2002 $7,332,032 $5,895,729 $1,436,303 $44,444,554 $66,130,886 $48,684,636 $17,446,250 $469,400,110 $513,844,963 2002
2003 $7,332,032 $5,711,164 $1,520,868 $42,823,986 $66,130,886 $46,940,011 $19,190,875 $450,209,235 $493,033,220 2003
2004 $7,332,032 $5,502,882 $1,829,150 $40,994,536 $66,130,886 $45,020,923 $21,109,963 $429,099,272 $470,094,108 2004
2005 $7,332,032 $5,267,636 $2,064,196 $35,930,840 $66,130,886 $42,909,927 $23,220,959 $405,878,313 $444,808,953 2005
2006 $7,332,032 $5,002,587 $2,329,445 $36,601,195 $66,130,886 $40,587,631 $25,543,055 $380,335,259 $418,936,454 2006
2007 $7,332,032 $4,703,254 $2,626,778 $33,972,417 $66,130,886 $38,033,526 $26,097,360 $352,237,595 $388,210,315 2007
2008 $7,332,032 $4,365,458 $2,966,576 $31,005,840 $66,130,886 $35,223,790 $30,907,096 $321,330,602 $352,336,643 2008
2009 $7,332,032 $3,984,250 $3,347,762 $27,655,059 $66,130,886 $32,133,080 $33,997,806 $287,332,996 $314,991,055 2009
2010 $7,332,032 $3,554,061 $3,777,971 $23,880,088 $66,130,886 $28,733,300 $37,397,588 $249,935,410 $273,815,498 2010
2011 $7,332,032 $3,068,591 $4,263,441 $19,618,647 $66,130,886 $24,993,541 $41,137,345 $208,798,065 $228,414,712 2011
2012 $7,332,032 $2,520,739 $4,811,293 $14,805,354 $66,130,886 $20,879,607 $45,251,079 $163,540,985 $178,352,339 2012
2013 $7,332,032 $1,902,488 $5,429,544 $9,375,810 $66,130,886 $16,354,699 $49,776,187 $113,770,798 $123,146,508 2013
2014 $7,332,032 $1,204,792 $6,127,240 $3,248,589 $66,130,886 $11,377,080 $54,753,808 $59,016,992 $62,265,561 2014
2015 $3,666,016 $417,441 $3,248,575 ($5) $49,786,798 $5,901,699 $43,687,099 $15,129,893 $15,129,888 2015
2016 $16,642,882 $1,512,989 $15,129,893 $0 2016
---------------------------------------------------------------------------------------------------------------
$156,992,161 $104,755,876 $52,236,283 $0 $1,438,537,404 $873,746,461 $584,790,923 $0
===============================================================================================================
TRH11/24/93 (Revised for EIP Refunding)
</TABLE>
<PAGE>
SCHEDULE IX
ALTERNATIVE INDEPENDANT
ACCOUNTANTS
-----------
Price Waterhouse & Co.
Ernst & Young
Coopers & Lybrand
Deloitte & Touche
KPMG Peat Marwick
<PAGE>
EXHIBIT A
---------
PROMISSORY NOTE
U.S. $_______________ Dated:_________, 1993
FOR VALUE RECEIVED, the undersigned, PUBLIC SERVICE COMPANY OF NEW
MEXICO, a New Mexico corporation (the "Borrower"), HEREBY PROMISES TO PAY to
--------
the order of __________________ (the "Lender") for the account of its
------
Applicable Lending Office (as defined in the Credit Agreement referred to
below) the principal sum of U.S.$[amount of the Lender's Commitment in
figures] or, if less, the aggregate principal amount of the Advances (as
defined below) made by the Lender to the Borrower pursuant to the Credit
Agreement outstanding on the [applicable Termination Date (as defined in the
Credit Agreement)] in the manner set forth in the Credit Agreement.
The Borrower promises to pay interest on the unpaid principal amount of
each Advance from the date of such Advance until such principal amount is paid
in full, at such interest rates, and payable at such times, as are specified
in the Credit Agreement.
Both principal and interest are payable in lawful money of the United
States of America to Chemical Bank, as Administrative Agent, at 270 Park
Avenue, New York, New York, 10017, Attention: Utilities Group, in same day
funds. Each Advance made by the Lender to the Borrower pursuant to the Credit
Agreement, and all payments made on account of the principal amount thereof,
shall be recorded by the Lender and, prior to any transfer hereof, endorsed on
the grid attached hereto which is part of this Promissory Note.
This Promissory Note is one of the Notes referred to in, and is entitled
to the benefits of, the Revolving Credit Agreement dated as of December 14, 1993
(the "Credit Agreement") among the Borrower, the Lender and certain other
----------------
lenders parties thereto, and Chemical Bank and Citibank, N.A., as Co-Agents for
the Lender and such other lenders, and the Pledge Agreement referred to therein
and entered into pursuant thereto. The Credit Agreement, among other things,
(i) provides for the making of advances (the "Advances" by the Lender to the
--------
Borrower from time to time in an aggregate amount not to exceed at any time
outstanding the U.S. dollar amount first above mentioned, the indebtedness of
the Borrower resulting from each such Advance being evidenced by this
Promissory Note, and (ii) contains provisions for acceleration of the maturity
hereof upon the
<PAGE>
2
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.
PUBLIC SERVICE COMPANY
OF NEW MEXICO
By
----------------------------
Title:
<PAGE>
ADVANCES AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Amount of
Amount of Principal Paid Unpaid Principal Notation
Date Advance or Prepaid Balance Made By
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
NOTICE OF BORROWING/ROLLOVER
Chemical Bank, as
Administrative Agent
for the Lenders parties
to the Credit Agreement
referred to below
270 Park Avenue
New York, New York 10017 _________________, 19__
Attention: Utilities Group
Ladies and Gentlemen:
The undersigned, PUBLIC SERVICE COMPANY OF NEW MEXICO, refers to the
Revolving Credit Agreement, dated as of December 14, 1993 (the "Credit
------
Agreement", the terms defined therein being used herein as therein defined),
- ---------
among the undersigned, certain Lenders parties thereto and Chemical Bank and
Citibank, N.A., as Co-Agents for said Lenders, and thereby gives you notice,
irrevocably, pursuant to (check one)
[ ] Section 2.02
(check this item if no currently
outstanding Advances are being Rolled Over
but a Borrowing of new funds is requested)
[ ] Section 2.02 and Section 2.09
(check this item if currently outstanding
Advances are being Rolled Over and a
Borrowing of new funds is requested to
occur on the same date)
[ ] Section 2.09
(check this item if currently outstanding
Advances are being Rolled Over but no
Borrowing of new funds is requested)
of the Credit Agreement that the undersigned hereby requests (check one)
[ ] a Borrowing
[ ] a Borrowing and a Rollover
[ ] a Rollover
as follows:
<PAGE>
A. Borrowing
-------------
(fill in the information in this paragraph A only if a Borrowing but no
Rollover is requested; otherwise, delete this paragraph A)
(i) The Business Day of the proposed Borrowing is __________, 19__.
(Insert a date that is (1) no less than 3 Business Days following the date of
this certificate, if the proposed Borrowing is to consist of Eurodollar Rate
Advances, (2) no less than 2 Business Days following the date of this
certificate, if the proposed Borrowing is to consist of Adjusted CD Rate
Advances, or (3) the date of this certificate or a subsequent Business Day, if
the proposed Borrowing is to consist of Base Rate Advances.)
(ii) The Type of Advances comprising the proposed Borrowing is (check
one):
[ ] Adjusted CD Rate Advances
[ ] Base Rate Advances
[ ] Eurodollar Rate Advances
(iii) The aggregate amount of the proposed Borrowing is $________. (If
Base Rate Advances are requested, insert a minimum of $3,000,000 or a multiple
of $1,000,000 in excess thereof; if Adjusted CD Rate Advances or Eurodollar
Rate Advances are requested, insert a minimum of $10,000,000 or a multiple of
$1,000,000 in excess thereof.)
(iv) The initial Interest Period for each Advance made as part of the
proposed Borrowing is
__ days (fill in a number up to 90 days if Base Rate Advances were
chosen, or 30, 60 or 90 days, if Adjusted CD Rate Advances were
chosen; otherwise, delete this subparagraph)
__ months (fill in 1, 2 or 3 months, if Eurodollar Rate Advances
were chosen; otherwise, delete this subparagraph)
<PAGE>
3
B. Borrowing and Rollover
--------------------------
(fill in the information in this paragraph B only if both a Borrowing and
a Rollover are requested to occur on the same date; otherwise, delete this
paragraph B)
(i) The Business Day of the proposed Borrowing and Rollover is
______________, 19__ (the "R&B Date"). (Insert a date that is (1) no less
--------
than 3 Business Days following the date of this certificate, if the proposed
Borrowing is to consist of, or the Rollover will be into Eurodollar Rate
Advances, (2) no less than 2 Business Days following the date of this
certificate, if the proposed Borrowing is to consist of, or the Rollover will
be into, Adjusted CD Rate ADvances but neither the Borrowing nor the Rollover
will consist of or be into Eurodollar Rate Advances, or (3) the date of this
certificate or a subsequent Business Day, if the proposed Borrowing is to
consist of, or the Rollover will be into, Base Rate Advances, but neither the
Borrowing nor the Rollover will consist of or be into Eurodollar Rate Advances
or Adjusted CD Rate Advances.)
(ii) The Type of Advances comprising the proposed Borrowing is (check
one):
[ ] Adjusted CD Rate Advances
[ ] Base Rate Advances
[ ] Eurodollar Rate Advances
(iii) The aggregate amount of the proposed Borrowing is $___________.
(If Base Rate Advances are requested, insert a minimum of $3,000,000 or a
multiple of $1,000,000 in excess thereof; if Adjusted CD Rate Advances or
Eurodollar Rate Advances are requested, insert a minimum of $10,000,000 or a
multiple of $1,000,000 in excess thereof. The amount inserted should not, in
any event, be less than an amount equal to the difference between the amount
of (1) the Relevant Advances specified in clause (v) below and (2) the Rolled
Over Advances specified in clause (vii) below.)
(iv) The initial Interest Period for each Advance made as part of the
proposed Borrowing is
__ days (fill in a number up to 90 days if Base Rate Advances were
chosen or 30, 60 or 90 days, if Adjusted CD Rate Advances were
chosen; otherwise, delete this subparagraph)
__ months (fill in 1, 2 or 3 months, if Eurodollar Rate Advances
were chosen; otherwise, delete this subparagraph)
<PAGE>
4
(v) The Advances the be Rolled Over (the "Relevant Advances") comprise
-------- --------
the Borrowing originally made on ______________, 19__, which currently
consists of (check one):
[ ] Adjusted CD Rate Advances
[ ] Base Rate Advances
[ ] Eurodollar Rate Advances.
(vi) The R&B Date specified in clause (i) above is (check one)
[ ] the last day of the current Interest Period for the Relevant
Advances.
[ ] not the last day of the current Interest Period for the
Relevant Advances, because (check one)
[ ] this proposed Rollover is
pursuant to Section 2.12 of
the Credit Agreement.
[ ] the Relevant Advances are
Base Rate Advances.
(vii) The amount of the Relevant Advances to remain outstanding upon being
Rolled Over is $______________ (such remaining Advances being the "Rolled Over
-----------
Advances"). (Insert an amount that is not less than $3,000,000 or a multiple
- --------
of $1,000,000 in excess thereof, if such Rolled Over Advances are to be Base
Rate Advances, and that is not less than $10,000,000 or a multiple of
$1,000,000 in excess thereof, if such Rolled Over Advances are to be Adjusted
CD Rate Advances or Eurodollar Rate Advances.)
(viii) The Rolled Over Advances are to be (check one):
[ ] Adjusted CD Rate Advances.
[ ] Base Rate Advances.
[ ] Eurodollar Rate Advances.
<PAGE>
5
(ix) The duration of the Interest Period for the Rolled Over Advances is
__ days (fill in a number up to 90 days if Base Rate Advances were
chosen or 30, 60 or 90 days, if Adjusted CD Rate Advances were
chosen; otherwise, delete this subparagraph).
__ months (fill in 1, 2 or 3 months, if Eurodollar Rate Advances
were chosen; otherwise, delete this subparagraph).
Such Interest Period is to begin on the R&B Date.
C. Rollover
------------
(fill in the information in this paragraph C only if a Rollover but no
Borrowing is requested; otherwise, delete this paragraph C)
(i) The Business Day of the proposed rollover is ____________, 19__ (the
"Rollover Date"). (Insert a date that is (1) no less than 3 Business Days
-------------
following the date of this certificate, if the proposed Rollover will be into
Eurodollar Rate Advances, (2) no less than 2 Business Days following the date
of this certificate, if the proposed Rollover will be into Adjusted CD Rate
Advances, or (3) the date of this certificate or a subsequent Business Day, if
the proposed Rollover will be into Base Rate Advances.)
(ii) The Advances to be Rolled Over (the "Relevant Advances") comprise
-----------------
the Borrowing originally made on ____________, 19__, which consists of (check
one):
[ ] Adjusted CD Rate Advances.
[ ] Base Rate Advances.
[ ] Eurodollar Rate Advances.
<PAGE>
6
(iii) The Rollover Date specified in clause (i) above is (check one)
[ ] the last day of the current Interest Period for the Relevant
Advances.
[ ] not the last day of the current Interest Period for the Relevant
Advances, because (check one)
[ ] this proposed Rollover is
pursuant to Section 2.12 of the
Credit Agreement.
[ ] the Relevant Advances are
Base Rate Advances.
(iv) The amount of the Relevant Advances to remain outstanding upon being
Rolled Over is $__________________ (such remaining Advances being the "Rolled
------
Over Advances"). (Insert an amount that is not less than $3,000,000 or a
- -------------
multiple of $1,000,000 in excess thereof, if such Rolled Over Advances are to
be Base Rate Advances, and that is not less than $10,000,000 or a multiple of
$1,000,000 in excess thereof, if such Rolled Over Advances are to be Adjusted
CD Rate Advances or Eurodollar Rate Advances.)
(v) The Rolled Over Advances are to be (check one)
[ ] Adjusted CD Rate Advances.
[ ] Base Rate Advances.
[ ] Eurodollar Rate Advances.
(vi) The duration of the Interest Period for the Rolled Over Advances is
___ days (fill in a number up to 90 days if Base Rate Advances were
chosen or 30, 60 or 90 days, if Adjusted CD Rate Advances were
chosen; otherwise, delete this subparagraph)
___ months (fill in 1, 2 or 3 months, if Eurodollar Rate Advances were
chosen; otherwise, delete this subparagraph)
Such Interest Period is to begin on the R&B Date.
<PAGE>
7
(vii) On the Rollover Date, the undersigned will prepay a portion of the
Relevant Advances in an amount equal to the excess, if any, of the Relevant
Advances over the Rolled Over Advances, together with accrued interest thereon.
***
The undersigned hereby certifies that the following statements are true
on the date hereof, and will (unless, in the case of any Rollover of Advances,
the undersigned shall have otherwise notified the Administrative Agent in
writing on the Rollover Date by the time specified in Section 2.09(a) of the
Credit Agreement) be true on (check the applicable provision)
[ ] the date of the proposed Borrowing:
[ ] the R&B Date:
[ ] the Rollover Date:
(A) the representations and warranties contained in Section 4.01 of the
Credit Agreement and Section 4 of the Pledge Agreement are correct, before
and after giving effect to the proposed Borrowing and to the application
of the proceeds therefrom, as though made on and as of such date; and
(B) no event has occurred and is continuing, or would result from such
proposed Borrowing or from the application of the proceeds therefrom, which
constitutes a Default.
Very truly yours,
PUBLIC SERVICE COMPANY
OF NEW MEXICO
By
-------------------------
Title:
<PAGE>
ASSIGNMENT AND ACCEPTANCE
Dated ____________, 19__
Reference is made to the Revolving Credit Agreement dated as of December
14, 1993 (the "Credit Agreement") among PUBLIC SERVICE COMPANY OF NEW MEXICO,
----------------
a New Mexico corporation (the "Borrower"), the Lenders (as defined in the
--------
Credit Agreement) and CHEMICAL BANK AND CITIBANK, N.A., as Co-Agents for the
Lenders (the "Co-Agents"). Terms defined in the Credit Agreement are used
---------
herein with the same meaning.
__________________ (the "Assignor") and ___________________ (the
--------
"Assignee") agree as follows:
--------
1. The Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes from the Assignor, that interest in and
to all of the Assignor's rights and obligations under the Credit Agreement as
of the date hereof which represents the percentage interest specified on
Schedule 1 of all outstanding rights and obligations under the Credit
Agreement, including, without limitation, such interest in the Assignor's
Commitment, the Advances owing to the Assignor, and the Note(s) held by the
Assignor. After giving effect to such sale and assignment, the Assignee's
Commitment and the amount of the Advances owing to the Assignee will be set
forth in Section 2 of Schedule 1.
2. The Assignor (i) represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; (ii) makes no representation
or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Credit
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Credit Agreement or any other instrument or
document furnished pursuant hereto; (iii) makes no representation or warranty
and assumes no responsibility with respect to the financial condition of the
Borrower or the performance or observance by the Borrower of any of its
obligations under the Credit Agreement or any other instrument or document
furnished pursuant thereto; and (iv) attaches the Note[s] referred to in
paragraph 1 above and requests that the Administrative Agent exchange such
<PAGE>
Note[s] for a new Note payable to the order of the Assignee in an amount
equal to the Commitment assumed by the Assignee pursuant hereto or new Notes
payable to the order of the Assignee in an amount equal to the Commitment
assumed by the Assignee pursuant hereto and the Assignor in an amount equal to
the Commitment retained by the Assignor under the Credit Agreement,
respectively, as specified on Schedule I hereto.
3. The Assignee (i) confirms that it has received a copy of the Credit
Agreement, together with copies of the financial statements referred to in
Section 4.01 thereof and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
this Assignment and Acceptance; (ii) agrees that it will, independently and
without reliance upon any Agent, the Assignor or any other Lender and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action
under the Credit Agreement; (iii) confirms that it is an Eligible Assignee;
(iv) appoints and authorizes _____________ and ___________________ to take
such action as agents on its behalf and to exercise such powers under the
Loan Documents as are delegated to _______________ and _______________,
respectively, by the terms thereof, together with such powers as are
reasonably incidental thereto; (v) agrees that it will perform in accordance
with their terms all of the obligations which by the terms of the Credit
Agreement are required to be performed by it as a Lender; [and] (vi) specifies
as its CD Lending Office, Domestic Lending Office (and address for notices)
and Eurodollar Lending Office the offices set forth beneath its name on the
signature pages hereof [and (vii) attaches the forms prescribed by the
Internal Revenue Service of the United States certifying as to the Assignee's
status for purposes of determining exemption from United States withholding
taxes with respect to all payments to be made to the Assignee under the
Credit Agreement and the Notes or such other documents as are necessary to
indicate that all such payments are subject to such rates at a rate
reduced by an applicable tax treaty].*
4. Following the execution of this Assignment and Acceptance by the
Assignor and the Assignee, it will be delivered to the Administrative
Agent for acceptance and
______________________
* If the Assignee is organized under the laws of a jurisdiction outside
the United States.
<PAGE>
3
recording by the Administrative Agent. The effective date of this Assignment
and Acceptance shall be the date of acceptance thereof by the Administrative
Agent, or such later date as is specified on Schedule 1 hereto (the "Effective
---------
Date").
- ----
5. Upon such acceptance and recording by the Administrative Agent, as of
the Effective Date, (i) the Assignee shall be a party to the Credit Agreement
and, to the extent provided in this Assignment and Acceptance, have the rights
and obligations of a Lender thereunder and (ii) the Assignor shall, to the
extent provided in this Assignment and Acceptance, relinquish its rights and
be released from its obligations under the Credit Agreement.
6. Upon such acceptance and recording by the Administrative Agent, from
and after the Effective Date, the Administrative Agent shall make all payments
under the Credit Agreement and the Notes in respect of the interest assigned
hereby (including, without limitation, all payments of principal, interest and
commitment fees with respect thereto) to the Assignee. The Assignor and
Assignee shall make all appropriate adjustments in payments under the Credit
Agreement and the Notes for periods prior to the Effective Date directly
between themselves.
7. This Assignment and Acceptance shall be governed by, and construed in
accordance with, the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed by their respective officers thereunto duly
authorized, as of the date first above written, such execution being made on
Schedule 1 hereto.
<PAGE>
Schedule 1
to
Assignment and Acceptance
Dated ______, 19__
Section 1.
- ---------
Percentage Interest:
________%
Section 2.
- ---------
Assignee's Commitment:
$________
Aggregate Outstanding Principal
Amount of Advances owing to the Assignee:
$________
A Note payable to the order of the Assignee
Dated: ___________, 19__
Principal amount:
_________
A Note payable to the order of the Assignor
Dated: ___________, 19__
Principal amount:
_________
Section 3.
- ---------
Effective Date*;
________, 19__
[NAME OF ASSIGNOR]
By:
----------------------------
Title:
___________________________
* This date should be no earlier than the date of acceptance by the
Administrative Agent.
<PAGE>
2
[NAME OF ASSIGNEE]
By:
-------------------------
Title:
CD Lending Office:
[Address]
Domestic Lending Office (and
address for notices):
[Address]
Eurodollar Lending Office:
[Address]
Accepted this _______ day
of ________________, 19__
CHEMICAL BANK,
as Administrative Agent
By:
-----------------------
Title:
<PAGE>
PLEDGE AGREEMENT dated as of December 14, 1993, made by PUBLIC SERVICE
COMPANY OF NEW MEXICO, a New Mexico corporation (the "Borrower" or the
--------
"Pledgor"), to CITIBANK, N.A. ("Citibank") as collateral agent (the "Collateral
------- -------- ----------
Agent") for the lenders (the "Lenders") parties to the Credit Agreement (as
- ----- -------
hereinafter defined).
PRELIMINARY STATEMENTS:
(1) The Lenders, and Citibank and Chemical Bank as Co-Agents for the
Lenders have entered into a Revolving Credit Agreement dated as of December 14,
1993 (said Agreement, as it may hereafter be amended or otherwise modified from
time to time, being the "Credit Agreement", the terms defined therin and not
----------------
otherwise defined herein being used herein as therein defined) with the
Borrower.
(2) The Pledgor is the owner of the indebtedness (the "Pledged Debt")
------------
described in Schedule I hereto and issued by the Pledgor pursuant to the
Supplemental Indentures.
(3) It is a condition precedent to the making of Advances by the
Lenders under the Credit Agreement that the Pledgor shall have made the pledge
contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and in order to induce
the Lenders to make Advances under the Credit Agreement, the Pledgor hereby
agrees with the Collateral Agent for its benefit and the ratable benefit of the
Lenders as follows:
SECTION 1. Pledge. The Pledgor hereby pledges to the Collateral Agent
------
for its benefit and the ratable benefit of the Lenders, and grants to the
Collateral Agent for its benefit and the ratable benefit of the Lenders a
security interest in, the following (the "Pledged Collateral"):
------------------
(i) the Pledged Debt and the instruments evidencing the Pledged Debt,
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 the Pledged Debt; and
<PAGE>
2
(ii) all proceeds of any and all of the foregoing
Pledged Collateral (including, without limitation, proceeds
that constitute property of the types described above).
SECTION 2. Security for Obligations. This Agreement
------------------------
secures the payment of all obligations of the Borrower now
or hereafter existing under the Loan Documents, whether for
principal, interest, fees, expenses or otherwise (all such
obligations of the Borrower being the "Secured Obligations")
-------------------
Without limiting the generality of the foregoing, this Agreement
secures the payment of all amounts which constitute part of the
Secured Obligations and would be owed by the Borrower to any
Agent or any Lender under the Loan Documents but for the fact
that they are unenforceable or not allowable due to the existence
of a bankruptcy, reorganization or similar proceeding involving
the Borrower.
SECTION 3. Delivery of Pledged Collateral. All certificates
------------------------------
or instruments representing or evidencing the Pledged Collateral shall
be delivered to and held by or on behalf of the Collateral Agent
pursuant hereto and (except for the Pledged Debt) shall be in
suitable form for transfer by delivery, or shall be accompanied
by duly executed instruments of transfer or assignment in blank, all
in form and substance satisfactory to the Collateral Agent. For the
better perfection of the Collateral Agent's rights in and to the
Pledged Collateral, the Pledgor shall forthwith, upon the pledge
of any Pledged Collateral hereunder, cause such Pledged Collateral
to be registered in the name of such nominee or nominees of the
Collateral Agent as the Collateral Agent shall direct. In addition,
the Collateral Agent shall have the right at any time to exchange
certificates or instruments representing or evidencing Pledged
Collateral (other than the Pledged Debt) for certificates or
instruments of smaller or larger denominations, as provided in the
FMB Indenture.
SECTION 4. Representations and Warranties. The Pledgor
------------------------------
represents and warrants as follow:
(a) The Pledged Collateral is free and clear of any
lien, security interest, option or other charge or encumbrance
except for the security interest created by this Agreement.
<PAGE>
3
(b) The pledge of the Pledged Debt pursuant to this Agreement creates a
valid and perfected first priority security interest in the Pledged
Collateral, securing the payment of the Secured Obligations.
(c) Except to the extent already obtained on or prior to the date
hereof, no consent of any other Person and no authorization, approval, or
other action by, and no notice to or filing with, any governmental authority
or regulatory body is required (i) for the pledge by the Pledgor of the
Pledged Collateral pursuant to this Agreement or for the execution, delivery
or performance of the Agreement by the Pledgor, (ii) for the perfection or
maintenance of the security interest created hereby (including the first
priority nature of such security interest) or (iii) for the exercise by the
Collateral Agent of the voting or other rights provided for in this
Agreement or the remedies in respect of the Pledged Collateral pursuant to
this Agreement.
(d) The Pledged Debt has been issued in the principal amount indicated
on Schedule I, and is outstanding pursuant to the Supplemental Indentures.
(e) There are mo conditions precedent to the effectiveness of this
Agreement that have not been satisfied or waived.
(f) The Pledgor has, independently and without reliance upon any Agent
or any Lender and based on such documents and information as it has deemed
appropriate, made its own analysis and decision to enter into this
Agreement.
SECTION 5. Further Assurances. The Pledgor agrees that at any time and
-----------------
from time to time, at the expense of the Pledgor, the Pledgor will promptly
execute and deliver all further instruments and documents, and take all further
action, that may be necessary or desirable, or that the Collateral Agent may
reasonably request, in order to perfect and protect any security interest
granted or purported to be granted hereby or to enable the Collateral Agent to
exercise and enforce its rights and remedies hereunder with respect to any
Pledged Collateral.
<PAGE>
4
SECTION 6. Voting Rights; Etc. (a) Any rights of the Pledgor to
------------------
exercise or refrain from exercising any voting and other consensual rights
pertaining to the Pledged Collateral or any part thereof and to receive any
interest paid in respect of the Pledged Collateral shall, on the date hereof,
cease, and all such rights shall on the date hereof, become vested in the
Collateral Agent who shall have the sole right to exercise or refrain from
exercising such voting and other consensual rights and to receive and hold as
Pledged Collateral such interest payments.
(b) All interest payments which are received by the Pledgor contrary
to the provisions of subsection (a) of this Section 6 shall be received in
trust for the benefit of the Collateral Agent, shall be segregated from other
funds of the Pledgor and shall be forthwith paid over to the Collateral Agent
as Pledged Collateral in the same form as so received (with any necessary
indorsement).
SECTION 7. Transfers and Other Liens. The Pledgor agrees that it will
-------------------------
not (i) sell, assign (by operation of law or otherwise) or otherwise dispose
of, or grant any option with respect to, any of the Pledged Collateral, or
(ii) create or permit to exist any lien, security interest, option or other
charge or encumbrance upon or with respect to any of the Pledged Collateral,
except for the security interest under this Agreement.
SECTION 8. Collateral Agent Appointed Attorney-in-Fact. The Pledgor
-------------------------------------------
hereby appoints the Collateral Agent the Pledgor's attorney-in-fact, with full
authority in the place and stead of the Pledgor and in the name of the Pledgor
or otherwise, from time to time in the Collateral Agent's discretion to take
any action and to execute any instrument which the Collateral Agent may deem
necessary or advisable to accomplish the purposes of this Agreement,
including, without limitation, to receive, indorse and collect all instruments
made payable to the Pledgor representing any interest payment or other
distribution in respect of the Pledged Collateral or any part thereof and to
give full discharge for the same.
<PAGE>
5
SECTION 9. Collateral Agent May Perform. If the
----------------------------
Pledgor fails to perform any agreement contained herein, the
Collateral Agent may itself perform, or cause performance of,
such agreement, and the expenses of the Collateral Agent
incurred in connection therewith shall be payable by the
Pledgor under Section 12.
SECTION 10. The Collateral Agent's Duties. The
-----------------------------
powers conferred on the Collateral Agent hereunder are solely
to protect its interest in the Pledged Collateral and shall not
impose any duty upon it to exercise any such powers. Except
for the safe custody of any Pledged Collateral in its possession
and the accounting for moneys actually received by it hereunder,
the Collateral Agent shall have no duty as to any Pledged
Collateral, as to ascertaining or taking action with respect to
calls, exchanges, maturities or other matters relative to any
Pledged Collateral, whether or not the Collateral Agent or any
Lender has or is deemed to have knowledge of such matters, or
as to the taking of any necessary steps to preserve rights
against any parties or any other rights pertaining to any Pledged
Collateral. The Collateral Agent shall be deemed to have
exercised reasonable care in the custody and preservation of any
Pledged Collateral in its possession if such Pledged Collateral is
accorded treatment substantially equal to that which Citibank
accords its own property.
SECTION 11. Remedies upon Default. If any Event of Default
---------------------
shall have occurred and be continuing:
(a) The Collateral Agent may exercise in respect of
the Pledged Collateral, in addition to other rights and remedies
provided for herein or otherwise available to it under the FMB
Indenture or any Supplemental Indenture or otherwise, all the
rights and remedies (other than sale of the Pledged Debt) of a
secured party on default under the Uniform Commercial Code in
effect in the State of New York at that time (the "Code")
----
(whether or not the Code applies to the affected Pledged
Collateral), and may also, without notice except as specified
below, sell any of the Pledged Collateral other than the Pledged
Debt in one or more parcels at public or private sale, at any
exchange, broker's board or at any of the Collateral Agent's
offices or elsewhere, for cash, on credit or for future delivery,
and upon such other terms as the
<PAGE>
6
Collateral Agent may deem commercially reasonable. The
Pledgor agrees that, to the extent notice of sale shall
be required by law, at least ten days' notice to the
Pledgor of the time and place of any public sale or the
time after which any private sale is to be made shall
constitute reasonable notification. The Collateral Agent
shall not be obligated to make any sale of such Pledged
Collateral regardless of notice of sale having been
given. The Collateral Agent may adjourn any public or
private sale from time to time by announcement at the
time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it
was so adjourned.
(b) Any cash held by the Collateral Agent as
Pledged Collateral and all cash proceeds received by the
Collateral Agent in respect of any sale of, collection
from, or other realization upon all or any part of the
Pledged Collateral may, in the discretion of the
Collateral Agent, be held by the Collateral Agent as
collateral for, and/or then or at any time thereafter be
applied (after payment of any amounts payable to the
Collateral Agent pursuant to Section 12) in whole or in
part by the Collateral Agent for the ratable benefit of
the Lenders against, all or any part of the Secured
Obligations in such order as the Collateral Agent shall
elect. Any surplus of such cash or cash proceeds held by
the Collateral Agent and remaining after payment in full
of all the Secured Obligations shall be paid over to the
Pledgor or to whomsoever may be lawfully entitled to
receive such surplus.
SECTION 12. Expenses. The Pledgor will upon demand
--------
pay to the Collateral Agent the amount of any and all
reasonable expenses, including the reasonable fees and
expenses of its counsel and of any experts and agents, which
the Collateral Agent may incur in connection with (i) the
administration of this Agreement, (ii) the custody or
preservation of, or the sale of, collection from, or other
realization upon, any of the Pledged Collateral, (iii) the
exercise or enforcement of any of the rights of the
Collateral Agent or the Lenders hereunder or (iv) the failure
by the Pledgor to perform or observe any of the provisions
hereof.
<PAGE>
7
SECTION 13. Amendments, Etc. No amendment or waiver of any provision
---------------
of this Agreement, and no consent to any departure by the Pledgor herefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Collateral Agent, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
SECTION 14. Addresses for Notices. 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 it, if to the Pledgor, at its
address at Alvarado Square, Mail Stop 2704, Albuquerque, New Mexico 87158,
Attention: Treasurer, and if to the Collateral Agent, at its address specified
in the Credit Agreement, or, as to either party, at such other address as shall
be designated by such party in a written notice to the other party. All such
notices and other 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.
SECTION 15. Continuing Security Interest: Assignments under Credit
------------------------------------------------------
Agreement. This Agreement shall create a continuing security interest in the
- ---------
Pledged Collateral and shall (i) remain in full force and effect until the later
of (x) the payment in full of the Secured Obligations and all other amounts
payable under this Agreement and (y) the expiration or termination of the
Commitments, (ii) be binding upon the Pledgor, its successors and assigns, and
(iii) inure, together with the rights and remedies of the Collateral Agent
hereunder, to the benefit of, and be enforceable by, the Collateral Agent, the
Lenders and their respective successors, transferees and assigns. Without
limiting the generality of the foregoing clause (iii), any Lender may assign or
otherwise transfer all or any portion of its rights and obligations under the
Credit Agreement (including, without limitation, all or any portion of its
Commitment, the Advances owing to it and any Note held by it) as provided in the
Credit Agreement, and any assignee thereof shall thereupon become vested with
all the benefits in respect thereof granted to such Lender herein or otherwise,
subject, however, to the provisions of Article VII (concerning the Agents) of
the Credit Agreement. Upon the
<PAGE>
8
later of the payment in full of the Secured Obligations and all other amounts
payable under this Agreement and the expiration or termination of the
Commitments, the Collateral Agent will, at the Pledgor's expense, return to
the Pledgor such of the Pledged Collateral as shall not have been sold or
otherwise applied pursuant to the terms hereof and execute and deliver to the
Pledgor such documents as the Pledgor shall reasonably request to evidence
such termination.
SECTION 16. Release of Pledged Debt. So long as no Default shall have
-----------------------
occurred and be continuing or would result from such release, the Collateral
Agent will, within five Business Days of notice and upon receipt of a
certificate of the Pledgor by a duly authorized officer of the Pledgor,
together with such other documents, instruments, or opinions as the Collateral
Agent shall reasonably request, requesting release of all or part of the
Pledged Debt, and specifying the certificates to be so released, release the
Pledged Debt specified in such certificates to the Pledgor; provided, however,
-------- -------
that the Borrower may not request the release of, and the Collateral Agent
shall not release, any Pledged Debt hereunder, if any other Pledged Debt held by
the Collateral Agent (and not being released simultaneously with such Pledged
Debt) provides for the accrual of interest at a lower rate than the interest
rate with respect to the Pledged Debt to be so released.
SECTION 17. Governing Law; Terms. This Agreement shall be governed by,
--------------------
and construed in accordance with, the laws of the State of New York. Unless
otherwise defined herein or in the Credit Agreement, terms defined in Article
9 of the Code are used herein as therein defined.
IN WITNESS WHEREOF, the Pledgor has caused this Agreement to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
PUBLIC SERVICE COMPANY OF
NEW MEXICO
By
------------------------
Title:
<PAGE>
9
AGREED:
CITIBANK, N.A., as Collateral Agent
By
---------------------------------
Title:
Date:
<PAGE>
SCHEDULE I
Attached to and forming a part of that certain Pledge
Agreement dated as of December 14, 1993, by PUBLIC SERVICE
COMPANY OF NEW MEXICO, as Pledgor, to CITIBANK, N.A.,
as Collateral Agent
<TABLE>
<CAPTION>
Original
Debt Certificate Final Principal
Debt Issuer Description of Debt No(s). Maturity Amount
- ----------- ------------------- ---------------- -------- ---------
<S> <C> <C> <C> <C>
Public Service First Mortgage Bonds, 1 June 13, 1995 $41,859,900
Company of New 1993 Series A
Mexico
First Mortgage Bonds, 1 June 13, 1995 $58,140,100
1993 Series B
</TABLE>
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO
TO
THE BANK OF NEW YORK,
(formerly Irving Trust Company),
Trustee
------------------------
FORTY-FIRST SUPPLEMENTAL INDENTURE
Dated as of December 14, 1993
------------------------
(Supplemental to Indenture of Mortgage and Deed of Trust
dated as of June 1, 1947)
Creating a New Issue of First Mortgage Bonds,
1993 Series A
------------------------
The Mortgage of which this instrument forms a part covers
real property, personal property and chattels.
The above-described Indenture of Mortgage and Deed of
Trust contains after-acquired property provisions.
<PAGE>
FORTY-FIRST SUPPLEMENTAL INDENTURE dated as of
December 14, 1993, between PUBLIC SERVICE COMPANY OF NEW
MEXICO, a corporation organized and existing under the laws of
the State of New Mexico, Alvarado Square, Albuquerque, New
Mexico 87158 (hereinafter called the "Company"), party of the
-------
first part, and THE BANK OF NEW YORK (formerly Irving Trust
Company), a corporation organized and existing under the laws
of the State of New York, One Wall Street, New York, New York
10015 (hereinafter sometimes called the "Trustee"), as Trustee,
-------
party of the second part.
WHEREAS, the Company did heretofore execute and
deliver an Indenture of Mortgage and Deed of Trust dated as of
June 1, 1947 (hereinafter referred to as the "Original
--------
Indenture"), to the Trustee to secure an issue of First
---------
Mortgage Bonds of the Company, issuable in series, and created
thereunder an initial series of bonds, designated as First
Mortgage Bonds, 2 7/8% Series due 1977, none of which bonds is
presently outstanding; and
WHEREAS, under Article 3 of the Original Indenture the
Company is authorized to issue additional bonds upon the terms
and conditions expressed in the Original Indenture; and
WHEREAS, the Company did heretofore execute and
deliver a certain First Supplemental Indenture dated as of
January 1, 1948, to the Trustee and created thereunder a series
of bonds designated as First Mortgage Bonds, 3 3/8% Series due
1978, none of which bonds is presently outstanding; and
WHEREAS, the Company did heretofore execute and
deliver a certain Second Supplemental Indenture dated as of
December 1, 1948, to the Trustee and created thereunder a
series of bonds designated as First Mortgage Bonds, 3 3/8%
Series due 1977, none of which bonds is presently outstanding;
and
WHEREAS, the Company did heretofore execute and
deliver a certain Third Supplemental Indenture dated as of
December 1, 1950, to the Trustee and created thereunder a
series of bonds designated as First Mortgage Bonds, 3% Series
due 1980, none of which bonds is presently outstanding; and
<PAGE>
2
WHEREAS, the Company did heretofore execute and
deliver a certain Fourth Supplemental Indenture dated as of
March 1, 1952, to the Trustee and created thereunder a series
of bonds designated as First Mortgage Bonds, 3 3/4% Series due
1982, none of which bonds is presently outstanding; and
WHEREAS, the Company did heretofore execute and
deliver a certain Fifth Supplemental Indenture dated as of
April 1, 1954, to the Trustee and created thereunder a series
of bonds designated as First Mortgage Bonds, 3 5/8% Series due
1984, none of which bonds is presently outstanding; and
WHEREAS, the Company did heretofore execute and
deliver a certain Sixth Supplemental Indenture dated as of
July 1, 1955, to the Trustee for the purpose of further
assuring, conveying and confirming unto the Trustee additional
property and also, by different description, certain property
which is described in the Granting Clauses of the Original
Indenture, no bonds having been created or issued thereunder;
and
WHEREAS, the Company did heretofore execute and
deliver a certain Seventh Supplemental Indenture dated as of
June 1, 1958, to the Trustee and created thereunder a series of
bonds designated as First Mortgage Bonds, 4 3/8% Series due
1988, none of which bonds is presently outstanding; and
WHEREAS, the Company did heretofore execute and
deliver a certain Eighth Supplemental Indenture dated as of
February 1, 1961, to the Trustee and created thereunder a
series of bonds designated as First Mortgage Bonds, 4 7/8%
Series due 1991, none of which bonds is presently outstanding;
and
WHEREAS, the Company did heretofore execute and
deliver a certain Ninth Supplemental Indenture dated as of
January 1, 1967, to the Trustee for the purpose of modifying
certain provisions of the Original Indenture, no bonds having
been created or issued thereunder; and
WHEREAS, the Company did heretofore execute and
deliver a certain Tenth Supplemental Indenture dated as of
May 1, 1967 (hereinafter referred to as the "Tenth Supplemental
------------------
Indenture"), to the Trustee and created thereunder a series of
---------
bonds designated as First Mortgage Bonds, 5 7/8% Series due
1997; and
<PAGE>
3
WHEREAS, the Company did heretofore execute and
deliver a certain Eleventh Supplemental Indenture dated as of
April 1, 1969 (hereinafter referred to as the "Eleventh
--------
Supplemental Indenture"), to the Trustee and created thereunder
----------------------
a series of bonds designated as First Mortgage Bonds, 7 1/4%
Series due 1999; and
WHEREAS, the Company did heretofore execute and
deliver a certain Twelfth Supplemental Indenture dated as of
September 15, 1971 (hereinafter referred to as the "Twelfth
-------
Supplemental Indenture"), to the Trustee for the purpose of
----------------------
amending the Original Indenture in one respect and for the
purpose of creating thereunder a series of bonds designated as
First Mortgage Bonds, 8 1/8% Series due 2001; and
WHEREAS, the Company did heretofore execute and
deliver a certain Thirteenth Supplemental Indenture dated as of
June 15, 1972 (hereinafter referred to as the "Thirteenth
----------
Supplemental Indenture"), to the Trustee and created thereunder
----------------------
a series of bonds designated as First Mortgage Bonds, 7 1/2%
Series due 2002; and
WHEREAS, the Company did heretofore execute and
deliver a certain Fourteenth Supplemental Indenture dated as of
December 1, 1974 (hereinafter referred to as the "Fourteenth
----------
Supplemental Indenture"), to the Trustee for the purpose of
----------------------
amending the Original Indenture in certain respects and for the
purpose of further assuring, conveying and confirming unto the
Trustee additional property, no bonds having been created or
issued thereunder; and
WHEREAS, the Company did heretofore execute and
deliver a certain Fifteenth Supplemental Indenture dated as of
March 15, 1975 (hereinafter referred to as the "Fifteenth
---------
Supplemental Indenture"), to the Trustee and created thereunder
----------------------
a series of bonds designated as First Mortgage Bonds, 9 1/8%
Series due 2005; and
WHEREAS, the Company did heretofore execute and
deliver a certain Sixteenth Supplemental Indenture dated as of
April 1, 1976, to the Trustee and created thereunder a series
of bonds designated as First Mortgage Bonds, 1976 Pollution
Control Series, none of which bonds is presently outstanding;
and
WHEREAS, the Company did heretofore execute and
deliver a certain Seventeenth Supplemental Indenture dated as
of June 1, 1977 (hereinafter referred to as the "Seventeenth
-----------
Supplemental Indenture"), to the Trustee and created
----------------------
<PAGE>
4
thereunder a series of bonds designated as First Mortgage
Bonds, 8 1/8% Series due 2007; and
WHEREAS, the Company did heretofore execute and
deliver a certain Eighteenth Supplemental Indenture dated as of
March 1, 1978 (hereinafter referred to as the "Eighteenth
----------
Supplemental Indenture"), to the Trustee and created thereunder
----------------------
a series of bonds designated as First Mortgage Bonds, 1978
Pollution Control Series A; and
WHEREAS, the Company did heretofore execute and
deliver a certain Nineteenth Supplemental Indenture dated as of
April 15, 1978, to the Trustee for the purpose of further
assuring, conveying and confirming unto the Trustee additional
property, no bonds having been created or issued thereunder;
and
WHEREAS, the Company did heretofore execute and
deliver a certain Twentieth Supplemental Indenture dated as of
May 1, 1978 (hereinafter referred to as the "Twentieth
---------
Supplemental Indenture"), to the Trustee and created thereunder
----------------------
a series of bonds designated as First Mortgage Bonds, 9% Series
due 2008; and
WHEREAS, the Company did heretofore execute and
deliver a certain Twenty-first Supplemental Indenture dated as
of September 1, 1979 (hereinafter referred to as the
"Twenty-first Supplemental Indenture"), to the Trustee and
-----------------------------------
created thereunder a series of bonds designated as First
Mortgage Bonds, 1979 Pollution Control Series A; and
WHEREAS, the Company did heretofore execute and
deliver a certain Twenty-second Supplemental Indenture dated as
of October 1, 1979 (hereinafter referred to as the
"Twenty-second Supplemental Indenture"), to the Trustee for the
------------------------------------
purpose of amending the Original Indenture in one respect and
for the purpose of creating thereunder a series of bonds
designated as First Mortgage Bonds, 10 1/8% Series due 2004;
and
WHEREAS, the Company did heretofore execute and
deliver a certain Twenty-third Supplemental Indenture dated as
of May 15, 1980, to the Trustee and created thereunder a series
of bonds designated as First Mortgage Bonds, 1980 Pollution
Control Series A, none of which bonds is presently outstanding;
and
WHEREAS the Company did heretofore execute and deliver
a certain Twenty-fourth Supplemental Indenture dated as of
September 15, 1980, to the Trustee and created
<PAGE>
5
thereunder a series of bonds designated as First Mortgage
Bonds, 12.95% Series due 1985, none of which bonds is presently
outstanding; and
WHEREAS, the Company did heretofore execute and
deliver a certain Twenty-fifth Supplemental Indenture dated as
of October 1, 1981, to the Trustee and created thereunder a
series of bonds designated as First Mortgage Bonds, 17 1/2%
Series due 2011, none of which bonds is presently outstanding;
and
WHEREAS, the Company did heretofore execute and
deliver a certain Twenty-sixth Supplemental Indenture dated as
of November 1, 1982, to the Trustee and created thereunder a
series of bonds designated as First Mortgage Bonds, 13 1/8%
Series due 2012, none of which bonds is presently outstanding;
and
WHEREAS, the Company did heretofore execute and
deliver a certain Twenty-seventh Supplemental Indenture dated
as of September 1, 1983, to the Trustee and created thereunder a
series of bonds designated as First Mortgage Bonds, 12 7/8%
Series due 2013, none of which bonds is presently outstanding;
and
WHEREAS, the Company did heretofore execute and
deliver a certain Twenty-eighth Supplemental Indenture dated as
of November 15, 1983, to the Trustee for the purpose of further
assuring, conveying and confirming unto the Trustee additional
property, no bonds having been created or issued thereunder;
and
WHEREAS, the Company did heretofore execute and
deliver a certain Twenty-ninth Supplemental Indenture dated as
of December 1, 1983, to the Trustee and created thereunder a
series of bonds designated as First Mortgage Bonds, 1983
Pollution Control Series A, none of which bonds is presently
outstanding; and
WHEREAS, the Company did heretofore execute and
deliver a certain Thirtieth Supplemental Indenture dated as of
August 15, 1984, to the Trustee and created thereunder a series
of bonds designated as First Mortgage Bonds, 13 1/8% Series due
1994, none of which bonds is presently outstanding; and
WHEREAS, the Company did heretofore execute and
deliver a certain Thirty-first Supplemental Indenture dated as
of September 15, 1984 (hereinafter referred to as the
"Thirty-first Supplemental Indenture"), to the Trustee and
-----------------------------------
<PAGE>
6
created thereunder a series of bonds designated as First
Mortgage Bonds, 1984 Pollution Control Series; and
WHEREAS, the Company did heretofore execute and
deliver a certain Thirty-second Supplemental Indenture dated as
of December 1, 1984 (hereinafter referred to as the
"Thirty-second Supplemental Indenture"), to the Trustee and
------------------------------------
created thereunder a series of bonds designated as First
Mortgage Bonds, 1984 Pollution Control Series A; and
WHEREAS, the Company did heretofore execute and
deliver a certain Thirty-third Supplemental Indenture dated as
of December 15, 1987, to the Trustee for the purpose of further
assuring, conveying and confirming unto the Trustee additional
property, no bonds having been created or issued thereunder;
and
WHEREAS, the Company did heretofore execute and
deliver a certain Thirty-fourth Supplemental Indenture dated as
of March 8, 1991, to the Trustee and created thereunder a
series of bonds designated as First Mortgage Bonds, 1991 Series
A, which bonds will be cancelled prior to issuing any bonds
hereunder; and
WHEREAS, the Company did heretofore execute and
deliver a certain Thirty-fifth Supplemental Indenture dated as
of March 8, 1991, to the Trustee and created thereunder a
series of bonds designated as First Mortgage Bonds, 1991 Series
B, none of which bonds is presently outstanding; and
WHEREAS, the Company did heretofore execute and
deliver a certain Thirty-sixth Supplemental Indenture dated as
of March 8, 1991, to the Trustee and created thereunder a
series of bonds designated as First Mortgage Bonds, 1991 Series
C, which bonds will be cancelled prior to issuing any bonds
hereunder; and
WHEREAS, the Company did heretofore execute and
deliver a certain Thirty-seventh Supplemental Indenture dated
as of November 1, 1992 (hereinafter referred to as the
"Thirty-seventh Supplemental Indenture"), to the Trustee and
-------------------------------------
created thereunder a series of bonds designated as First
Mortgage Bonds, 1992 Pollution Control Series A; and
WHEREAS, the Company did heretofore execute and
deliver a certain Thirty-eighth Supplemental Indenture dated as
of January 1, 1993 (hereinafter referred to as the
"Thirty-eighth Supplemental Indenture"), to the Trustee and
------------------------------------
created thereunder a series of bonds designated as First
<PAGE>
7
Mortgage Bonds, 1993 Pollution Control Series A, and First
Mortgage Bonds, 1993 Pollution Control Series B; and
WHEREAS, the Company did heretofore execute and
deliver a certain Thirty-ninth Supplemental Indenture dated as
of August 15, 1993 (hereinafter referred to as the
"Thirty-ninth Supplemental Indenture"), to the Trustee and
-----------------------------------
created thereunder a series of bonds designated as First
Mortgage Bonds, 1993 Pollution Control Series C; and
WHEREAS, the Company did heretofore execute and
deliver a certain Fortieth Supplemental Indenture dated as of
August 15, 1993 (hereinafter referred to as the "Fortieth
--------
Supplemental Indenture"), to the Trustee and created thereunder
----------------------
a series of bonds designated as First Mortgage Bonds, 1993
Pollution Control Series D; and
WHEREAS, the Company is entering into that certain
Revolving Credit Agreement, dated as of December 14, 1993 (as
the same may be amended from time to time, the "Credit
------
Agreement"), among the Company, certain lenders (the "Lenders")
--------- -------
and Chemical Bank and Citibank, N.A. as co-agents for the
Lenders; and
WHEREAS, the Credit Agreement requires, as a condition
precedent to the effectiveness of the Credit Agreement and the
initial borrowing thereunder, that the Company issue one or
more new series of First Mortgage Bonds to Citibank, N.A., as
collateral agent (the "Collateral Agent") for the Lenders under
----------------
a pledge agreement, of even date herewith (the "Pledge
------
Agreement"), in an aggregate principal amount of $100,000,000
---------
to secure the payment when due of the Secured Obligations (as
defined in the Pledge Agreement); and
WHEREAS, the agreements of the parties to the Credit
Agreement constitute consideration for the issuance of such
First Mortgage Bonds to the Collateral Agent; and
WHEREAS, the Company, as required by the Credit
Agreement, proposes to create a new issue of First Mortgage
Bonds, to be designated as First Mortgage Bonds, 1993 Series A
(the "Series A Bonds") to be due on June 13, 1995, in an
--------------
aggregate principal amount of $41,859,900 and to bear interest
at a rate of 13 and 1/8% per annum, and proposes to issue the
same initially upon the execution of this Forty-first
Supplemental Indenture; and
WHEREAS, simultaneously herewith, the Company, as
required by the Credit Agreement, proposes to create another
<PAGE>
8
new issue of First Mortgage Bonds, to be designated as First
Mortgage Bonds, 1993 Series B (the First Mortgage Bonds, 1993
Series A and B being collectively the "1993 Bonds"), to be due
----------
on June 13, 1995, such that the aggregate principal amount of
the 1993 Bonds shall be an amount equal to $100,000,000, and
proposes to issue such First Mortgage Bonds, 1993 Series B,
initially upon the execution of the Forty-second Supplemental
Indenture dated as of the date hereof (hereinafter referred to
as the "Forty-second Supplemental Indenture") to be executed
-----------------------------------
simultaneously herewith; and
WHEREAS, it is the intent of the Company and the
Lenders that there be no duplication in the obligations paid by
the Company under the Credit Agreement and the 1993 Bonds, but
that payments, if any, of principal of or interest on the 1993
Bonds be applied to payment of the Secured Obligations and that
the benefits and security of the first mortgage lien on Company
assets under the Original Indenture, as supplemented and
amended, be extended to the Secured Obligations by means of the
pledge of the 1993 Bonds to the Lenders; and
WHEREAS, the Company, by appropriate corporate action,
has duly resolved and determined to execute this Forty-first
Supplemental Indenture for the purpose of providing for the
creation of the Series A Bonds and of specifying the form,
provisions and particulars thereof as in said Original
Indenture provided or permitted and of giving to the Series A
Bonds the protection and security of the Original Indenture;
and
WHEREAS, the text of the Series A Bonds and the text
of the Trustee's certificate of authentication to be endorsed
thereon are to be substantially in the form (the "Series A Bond
-------------
Form") following (certain of the provisions of the Series A
----
Bonds may be set forth on the reverse thereof):
[FORM OF BOND, 1993 SERIES A]
PUBLIC SERVICE COMPANY OF NEW MEXICO
First Mortgage Bond, 1993 Series A
THIS BOND IS NOT TRANSFERABLE EXCEPT
AS PERMITTED IN ARTICLE I OF
THE FORTY-FIRST SUPPLEMENTAL INDENTURE
No. $
---------------------- -----------------------
1. PUBLIC SERVICE COMPANY OF NEW MEXICO, a
corporation organized and existing under the laws of the
<PAGE>
9
State of New Mexico (hereinafter sometimes called the
"Company"), for value received, hereby promises to pay to
-------
Citibank, N.A. as collateral agent for the Lenders parties to
the Credit Agreement referred to in the Forty-first
Supplemental Indenture referred to below, on June 13, 1995,
unless this bond shall have been called for previous redemption
and provision made for the payment of the redemption price
thereof, $__________, at the office or agency of the Company in
the Borough of Manhattan, The City of New York, plus accrued
interest thereon at the rate of 13 and 1/8% per annum, payable
quarterly on the first day of April, July, October, and January
of each year commencing the first such date to occur on or
after the Effective Date (as defined in the Credit Agreement
referred to in the Forty-first Supplemental Indenture referred
to below) and on the date of payment in full of principal on
this bond. The principal of and interest on this bond shall be
payable in any coin or currency of the United States of America
which at the time of payment shall be legal tender for the
payment of public and private debts.
2. This bond is one of an issue of bonds of the
Company (hereinafter sometimes called the "Bonds"), known as
-----
its First Mortgage Bonds, issued and to be issued in one or
more series under and equally and ratably secured (except as
any sinking, amortization, improvement or other fund,
established in accordance with the provisions of the indenture
hereinafter mentioned, may afford additional security for the
Bonds of any particular series) by a certain mortgage and deed
of trust, dated as of June 1, 1947, made by the Company to The
Bank of New York (formerly Irving Trust Company), as Trustee
(hereinafter called the "Trustee"), and that certain
-------
Forty-first Supplemental Indenture dated as of December 14,
1993 (the "Forty-first Supplemental Indenture"), made by the
----------------------------------
Company to the Trustee (said mortgage and deed of trust and all
indentures supplemental thereto (including the Forty-first
Supplemental Indenture) being hereinafter sometimes
collectively called the "Indenture"), to which Indenture
---------
reference is hereby made for a description of the property
mortgaged, the nature and extent of the security, the rights
and limitations of rights of the Company, the Trustee and the
holders of the Bonds under the Indenture, the powers, duties
and immunities of the Trustee, and the terms and conditions
upon which the Bonds are and are to be issued and secured, to
all of the provisions of which Indenture and of all such
supplemental indentures in respect of such security, including
the provisions of the Indenture permitting the issue of Bonds
of any series for property which, under the restrictions and
limitations therein specified, may be subject to liens prior to
the lien of the
<PAGE>
10
Indenture, the holder, by accepting this bond, assents. To the
extent permitted by and as provided in the Indenture, the
rights and obligations of the Company and of the holders of the
Bonds (including those pertaining to any sinking or other fund)
may be changed and modified, with the consent of the Company,
by the holders of at least 75% in aggregate principal amount of
the Bonds then outstanding, such percentage being determined as
provided in the Indenture; provided, however, that in case such
-------- -------
changes and modifications affect one or more but less than all
series of Bonds then outstanding, they shall be required to be
adopted only by the affirmative vote of the holders of at least
75% in aggregate principal amount of outstanding Bonds of such
one or more series so affected, but nothing contained in this
proviso shall be deemed to affect any of the rights granted to
bondholders by Article 9 of the Indenture to give any direction
to the Trustee or to waive any default on the part of the
Company; and further provided that without the consent of the
----------------
holder hereof no such change or modification shall be made
which will extend the time of payment of the principal of, or
of the interest or premium, if any, on, this bond or reduce the
principal amount hereof or the rate of interest or the premium,
if any, hereon, or effect any other modification of the terms
of payment of such principal or interest or premium, if any, or
will permit the creation of any lien ranking prior to or on a
parity with the lien of the Indenture on any of the mortgaged
property, or will deprive the holder hereof of the benefit of a
lien upon the mortgaged property for the security of this bond,
or will reduce the percentage of Bonds required for the
adoption of changes or modifications as aforesaid. This bond
is one of a series of Bonds designated as the First Mortgage
Bonds, 1993 Series A of the Company.
3. The bonds of this series (the "Series A Bonds")
--------------
have been issued by the Company to secure the payment when due
(whether at maturity, by acceleration, or otherwise) of the
Obligations (as defined in the Forty-first Supplemental
Indenture) under the Company's Credit Facility (as defined in
the Forty-first Supplemental Indenture). The agreements of the
parties to the Credit Agreement (as defined in the Forty-first
Supplemental Indenture) shall constitute the consideration for
issuance of the Series A Bonds.
4. Notwithstanding any other provision herein and in
the Indenture to the contrary, the Company shall have no
obligation to pay any amount (whether principal or interest,
including Accrued Interest (defined below)) with respect to the
Series A Bonds in excess of the Applicable Share (defined
below) of all Obligations due and not paid under the Credit
<PAGE>
11
Facility at the time such payment with respect to the Series A
Bonds would otherwise be made. Without limitation of the
foregoing, (A) except as provided in paragraph 5 below, the
obligation of the Company to make each payment with respect to
the principal of or interest on the Series A Bonds shall be
fully satisfied and discharged, and such payment shall not be
due, if on the date that such payment shall be due no
Obligations shall have become due and remain unpaid; (B) the
obligation of the Company to make any payment of principal due
on the Series A Bonds (at maturity, by reason of acceleration,
or otherwise) shall, fully or pro rata in proportion to the
principal amount of the Series A Bonds then held by the Pledge
Agent (as defined in the Forty-first Supplemental Indenture),
as the case may be, be satisfied and discharged to the extent
that, at the time any such principal payment is due, such
payment exceeds the Applicable Share of principal then due and
not paid under the Credit Facility; (C) the aggregate amount of
Accrued Interest on the Series A Bonds becoming currently due
and payable on any interest payment date shall not exceed the
Applicable Share of all Obligations (other than principal) then
due and not paid under the Credit Facility; and (D) upon
termination of the Credit Facility and payment by the Company
of all Obligations with respect thereto, any obligation of the
Company to make any payment with respect to the interest
(including all Accrued Interest) accrued to such time on the
Series A Bonds shall be fully satisfied and discharged.
"Applicable Share" means a fraction equal to the aggregate
----------------
principal amount of the Series A Bonds then held by the Pledge
Agent divided by the aggregate principal amount of all 1993
Bonds (as defined in the Forty-first Supplemental Indenture)
then held by the Pledge Agent.
5. If the Credit Facility is in effect on an interest
payment date for the Series A Bonds, the obligation to pay
Accrued Interest on such interest payment date shall not be
discharged or satisfied (irrespective of whether any payment of
amounts due on such date is made by or on behalf of the Company
for the benefit of the lenders under the Credit Facility, it
being acknowledged that any such payment shall be deemed a
payment of the Obligations and not of amounts due on the Series
A Bonds), but shall be deferred until the next interest
payment date for Series A Bonds (such deferred interest being
"Carry-over Interest"), provided, that if the Trustee receives
------------------- --------
notice from the Pledge Agent as set forth in paragraph 6
hereof, Accrued Interest, to the extent available, in an amount
equal to the Applicable Share of the amount of the Obligations
(excluding principal) specified in such notice as being due and
unpaid under the Credit Facility shall not be deferred, but
shall become due
<PAGE>
12
and payable on such interest payment date. "Accrued Interest"
----------------
means, as of any interest payment date for Series A Bonds,
interest accrued to such date on such Series A Bonds (as set
forth in paragraph 1 hereof), including Carry-over Interest
from prior periods; provided, however, that in no event shall
-------- -------
Accrued Interest include any interest paid prior to such
interest payment date with respect to the Series A Bonds.
6. The Trustee may conclusively presume that no
payments with respect to the principal of, or interest on, the
Series A Bonds are due unless and until the Trustee shall have
received a written certificate from the Pledge Agent, signed by
an authorized officer of the Pledge Agent, certifying (i) that
payment of principal (whether upon acceleration of maturity or
otherwise) or interest then due under the Credit Facility has
not been made, (ii) the amount of principal, if any, then due
and not paid under the Credit Facility, and (iii) the aggregate
amount of the Obligations (excluding principal) then due and
not paid under the Credit Facility.
7. The Series A Bonds are subject to redemption prior
to maturity if (1) the Company shall have failed to pay any
Obligations when due and payable (whether by scheduled
maturity, required prepayment, acceleration, demand or
otherwise), and such failure shall have continued beyond any
applicable grace period or (2) any other event shall occur or
condition shall exist under the Credit Facility or any related
agreement and shall continue after any applicable grace period,
if the effect of such event or condition is to accelerate or
permit the acceleration of the maturity of the entire principal
amount under the Credit Facility (any such event specified in
(1) or (2) being an "Event of Default"). If an Event of
----------------
Default has occurred, then Series A Bonds equal in principal
amount to the Applicable Share of the principal amount then due
under the Credit Facility shall be subject to redemption at the
election of the Pledge Agent. To cause such redemption, the
Pledge Agent shall deliver to the Trustee within 365 days of
the occurrence of any Event of Default (and mail a copy thereof
to the Company) a written demand (the "Redemption Demand")
-----------------
(including, without limitation, a demand sent by telecopier,
telegraph, telex or cable communication) for the redemption of
Series A Bonds equal in principal amount to the Applicable
Share of the principal amount then due under the Credit
Facility. The Redemption Demand shall be signed by an
authorized officer of the Pledge Agent, and shall set forth
(1) the Applicable Share of the principal amount then due under
the Credit Facility, (2) the date of redemption (the
"Redemption Date")
---------------
<PAGE>
13
of the Series A Bonds, which date shall not be less than 7 days
after delivery of the Redemption Demand to the Trustee,
(3) that the Trustee is thereby instructed to call the Series A
Bonds for redemption and (4) that the parties to such
Redemption Demand waive any required notice of redemption from
the Trustee. The Trustee may conclusively presume the
statements contained in the Redemption Demand to be correct.
On the Redemption Date, the Company shall pay an aggregate
amount (the "Redemption Amount") for the Series A Bonds so
-----------------
called for redemption equal to the aggregate of the following:
(i) the Applicable Share of the aggregate principal amount then
due under the Credit Facility and (ii) the lesser of (A) the
aggregate amount of interest (including Accrued Interest) on
the Series A Bonds accrued and unpaid through the Redemption
Date and (B) the Applicable Share of all Obligations (other
than principal) then due and unpaid under the Credit Facility.
Notwithstanding any other provision in this paragraph or in the
Indenture, in the event of an actual or deemed entry of an
order for relief for the Company under the Federal Bankruptcy
Code, a Redemption Demand for the redemption of all the Series A
Bonds shall be deemed to have been delivered by the Pledge
Agent to the Trustee, and a call for redemption of the Series A
Bonds made to the Company by the Trustee, without any delivery
of notice or other demand, all of which are hereby expressly
waived by the Company and the Trustee, and on such date an
amount equal to the Applicable Share of the Obligations under
the Credit Facility shall automatically become due and payable
as the Redemption Amount for the Series A Bonds, such date
being the Redemption Date for such Series A Bonds. Upon
payment of the Redemption Amount on the Redemption Date, the
obligation to pay principal of and Accrued Interest on the
Series A Bonds shall, as of the Redemption Date, be deemed
satisfied and discharged in an amount equal to (i) with respect
to principal on the Series A Bonds, the Applicable Share of the
aggregate principal amount due under the Credit Facility and
(ii) with respect to Accrued Interest on the Series A Bonds,
the lesser of (A) the aggregate amount of interest (including
Accrued Interest) on the Series A Bonds accrued and unpaid
through the Redemption Date and (B) the Applicable Share of all
Obligations (other than principal) then due and unpaid under
the Credit Facility.
8. Upon payment of the Redemption Amount on any
Redemption Date, each Series A Bond shall be considered
redeemed in full if the Applicable Share of the aggregate
principal amount then due under the Credit Facility equals the
aggregate principal amount of the Series A Bonds held by the
Pledge Agent, and otherwise shall be considered redeemed
pro rata in the proportion the Applicable Share of the
<PAGE>
14
aggregate principal amount then due bears to the aggregate
principal amount of the Series A Bonds held by the Pledge
Agent. If this bond or any portion thereof is duly called for
redemption and payment duly provided for or otherwise duly
satisfied and discharged, this bond or such portion thereof
shall cease to be entitled to the lien of the Indenture from
and after the date payment is so provided for or otherwise duly
satisfied and discharged.
9. The principal of this bond may be declared or may
become due before the maturity hereof, on the conditions, in
the manner, and at the times set forth in the Indenture, upon
the happening of a default as therein defined.
10. Subject to the restrictions on transfer set forth
in Article I of the Forty-first Supplemental Indenture, this
bond is transferable by the registered owner hereof in person
or by his duly authorized attorney at the office or agency of
the Company in the Borough of Manhattan, City and State of New
York, upon surrender and cancellation of this bond and upon
payment of charges, and thereupon a new fully registered bond
of the same series and maturity, for a like principal amount,
will be issued to the transferee in exchange therefor, as
provided in the Indenture. The Company and the Trustee and any
paying agent may deem and treat the person in whose name this
bond is registered as the absolute owner hereof for the purpose
of receiving payment and for all other purposes.
11. No recourse under or upon any covenant, obligation
or agreement of the Indenture, or of any indenture supplemental
thereto, or of this bond, for the payment of the principal of,
or interest on, this bond, or for any claim based thereon, or
otherwise in any manner in respect thereof, shall be had
against any incorporator, subscriber to capital stock,
stockholder, officer or director, as such, of the Company,
whether former, present or future, either directly, or
indirectly through the Company or any predecessor or successor
corporation or the Trustee, by the enforcement of any
subscription to capital stock, assessment or otherwise, or by
any legal or equitable proceeding by virtue of any
constitution, statute or otherwise (including, without limiting
the generality of the foregoing, any proceeding to enforce any
claimed liability of stockholders of the Company based upon any
theory of disregarding the corporate entity of the Company or
upon any theory that the Company was acting as the agent or
instrumentality of the stockholders); any and all such
liability of incorporators, stockholders, subscribers, officers
and directors, as such, being released by the holder hereof, by
the acceptance of this bond, and
<PAGE>
15
being likewise waived and released by the terms of the
Indenture.
12. This bond shall not be valid or become obligatory
for any purpose until the certificate of authentication
endorsed hereon shall have been signed by The Bank of New York,
or its successor, as Trustee under the Indenture.
IN WITNESS WHEREOF, PUBLIC SERVICE COMPANY OF NEW
MEXICO has caused this bond to be signed by the manual or
facsimile signature of its President or a Vice President, and
its corporate seal, or facsimile thereof, to be impressed or
imprinted hereon and attested by the manual or facsimile
signature of its Secretary or an Assistant Secretary.
Dated: ________________, 1993
PUBLIC SERVICE COMPANY OF
NEW MEXICO
By
--------------------------
(Title)
Attest:
--------------------
Secretary
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This bond is one of the bonds, of the series
designated therein, described in the within-mentioned
Indenture.
THE BANK OF NEW YORK,
As Trustee,
By
----------------------
Authorized Signatory
AND WHEREAS, all conditions and requirements necessary
to make this Forty-first Supplemental Indenture a valid, legal
and binding instrument in accordance with its terms and to make
said bonds, when duly executed by the
<PAGE>
16
Company and authenticated and delivered by the Trustee, and
duly issued, the valid, binding and legal obligations of the
Company, have been done and performed, and the execution and
delivery of this Forty-first Supplemental Indenture have been
in all respects duly authorized;
NOW, THEREFORE, THIS FORTY-FIRST SUPPLEMENTAL
INDENTURE WITNESSETH: That Public Service Company of New
Mexico, in consideration of the premises and of One Dollar
($1.00) to it duly paid by the Trustee at or before the
ensealing and delivery of these presents, the receipt whereof
is hereby acknowledged, for itself and its successors, does
hereby covenant and agree to and with the Trustee and its
successors in the trust under the Original Indenture, for the
benefit of those who shall hold the bonds, or any of them, to
be issued hereunder and thereunder, as hereinafter provided, as
follows:
ARTICLE I.
CREATION AND DESCRIPTION OF FIRST MORTGAGE BONDS
1993 SERIES A
SECTION 1. A new series of bonds to be issued under
and secured by the Original Indenture and this Forty-first
Supplemental Indenture is hereby created, to be designated as
First Mortgage Bonds, 1993 Series A. The Series A Bonds shall
be limited to an aggregate principal amount of $41,859,900
excluding any of the Series A Bonds which may be authenticated
in exchange for or in lieu of or in substitution for or on
transfer of any other Series A Bonds pursuant to any provisions
of the Original Indenture or of this Forty-first Supplemental
Indenture. Said bonds of said series shall be substantially in
the form of the Series A Bond Form set forth above. Said bonds
shall be issued only as fully registered bonds in denominations
of $100.00 and multiples thereof from time to time authorized
by the Company, such authorization to be evidenced by the
execution thereof.
The Series A Bonds shall be issued in such aggregate
principal amount to the Collateral Agent under the Pledge
Agreement in order to secure the payment when due of the
Secured Obligations. The agreements of the parties to the
Credit Agreement constitute consideration for the issuance of
the Series A Bonds to the Collateral Agent. The Series A Bonds
shall mature on June 13, 1995. Payments of principal of, or
interest on, the Series A Bonds and redemption and
<PAGE>
17
exchange of such Series A Bonds shall be subject to the
provisions of Article II hereof.
The "Credit Facility" shall mean initially the Credit
---------------
Agreement while it is in effect or while any Secured
Obligations shall remain unpaid, and after the termination
thereof and payment of the Secured Obligations, any other
revolving credit agreement entered into from time to time and
designated therein by the Company as being the (or a portion of
the) "Credit Facility" hereunder, so long as any such agreement
is in effect or any amounts are outstanding thereunder.
The "Obligations" shall mean initially the Secured
-----------
Obligations, and after all Secured Obligations have been paid
in full and the Credit Agreement has been terminated, any
principal, interest or other amounts due under any Credit
Facility.
The "Pledge Agent" shall mean initially the Collateral
------------
Agent under the Pledge Agreement (or any successor Collateral
Agent as provided in the Credit Agreement), and after the
Credit Agreement has been terminated and the Secured
Obligations have been paid in full, any transferee of the
Collateral Agent that holds the Series A Bonds as security for
the payment of the Obligations under a Credit Facility.
The Series A Bonds shall be issued to and registered
in the name of the Collateral Agent and shall not be
transferable by any Pledge Agent, except (i) in the case of the
Collateral Agent, (A) to a successor Collateral Agent as
provided in the Credit Agreement or (B) as provided in the
Pledge Agreement, to the Company, and (ii) in the case of any
other Pledge Agent, (A) to a successor Pledge Agent or (B) to
the Company. The Company hereby instructs the Trustee to so
limit transfers requested by the holder (other than the
Company) of any Series A Bond.
Each of the Series A Bonds shall be dated as of the
date of its authentication.
SECTION 2. The Series A Bonds described in Section 1
of this Article may be executed by the Company and delivered to
the Trustee and, upon compliance with all applicable provisions
and requirements of the Original Indenture, as amended, in
respect thereof, shall be authenticated by the Trustee and
delivered (without awaiting the filing or recording of this
Forty-first Supplemental
<PAGE>
18
Indenture) in accordance with the written order or orders of
the Company.
ARTICLE II.
PAYMENT OF INTEREST AND PRINCIPAL;
REDEMPTION AND EXCHANGE; SURRENDER AND CANCELLATION
SECTION 1. The principal of and interest on each
Series A Bond shall be payable at the office or agency of the
Company in the Borough of Manhattan, The City of New York, and
both principal and interest shall be payable in any coin or
currency of the United States of America which at the time of
payment shall be legal tender for the payment of public and
private debts. The Series A Bonds shall be deemed fully paid,
and the obligations of the Company thereunder shall be
terminated, to the extent and in the manner provided in the
Series A Bond Form set forth above.
SECTION 2. The Series A Bonds shall bear interest as
provided in the Series A Bond Form set forth above.
SECTION 3. The Series A Bonds are subject to
redemption prior to maturity as provided in the Series A Bond
Form set forth above.
SECTION 4. Upon surrender by any holder to the
Trustee hereunder of any of the Series A Bonds for
cancellation, such bonds shall be cancelled by the Trustee and
delivered to the Company and shall be deemed fully paid and the
obligations of the Company thereunder terminated.
ARTICLE III.
MAINTENANCE AND REPLACEMENT FUND COVENANT.
The Company hereby covenants that so long as any of
the Series A Bonds shall remain outstanding, the covenants and
agreements of the Company set forth in Section 4.10 of the
Original Indenture as amended by the Fourteenth Supplemental
Indenture shall be and remain in full force and effect, and be
duly observed and complied with by the Company, irrespective of
the fact that no First Mortgage Bonds, 2 7/8% Series due 1977,
remain outstanding.
<PAGE>
19
ARTICLE IV.
DOCUMENT DELIVERY COVENANT.
The Company hereby covenants that so long as any of
the Series A Bonds shall remain outstanding, the Company shall
deliver to the Trustee as soon as available copies (certified
by an officer of the Company to be true) of the Credit Facility
and the Pledge Agreement and copies of any supplements,
amendments or replacements thereto. The Trustee shall have no
duty to examine or take any other action with respect to any
such documents so received by it, other than to retain in its
files any of same which it so receives.
ARTICLE V.
THE TRUSTEE.
The Trustee accepts the trusts created by this
Forty-first Supplemental Indenture upon the terms and
conditions in the Original Indenture and in this Forty-first
Supplemental Indenture set forth. Each and every term and
condition contained in Article 13 of the Original Indenture
shall apply to this Forty-first Supplemental Indenture with the
same force and effect as if the same were herein set forth in
full, with such omissions, variations and modifications thereof
as may be appropriate to make the same conform to this
Forty-first Supplemental Indenture.
The recitals contained herein shall be taken as the
statements of the Company, and the Trustee assumes no
responsibility for the correctness of the same.
To the extent permitted by Section 13.02 and 13.03 of
the Original Indenture, and without limitation of Section 13.06
of the Original Indenture, the Trustee may rely and shall be
fully protected in acting upon any resolution, certificate,
opinion, notice, request, consent, order, appraisal, report,
bond, or other paper or document (including, without
limitation, the Credit Facility, the Pledge Agreement and any
notice, certificate, or other document provided for in the
Credit Facility, the Pledge Agreement or this Forty-first
Supplemental Indenture) believed by the Trustee to be genuine
and to have been signed or presented by the proper party or
parties.
<PAGE>
20
ARTICLE VI.
MISCELLANEOUS PROVISIONS.
SECTION 1. If the date for making any payment or the
last date for performance of any act or the exercising of any
right, as provided in this Forty-first Supplemental Indenture,
shall be a legal holiday or a day on which banking institutions
in The City of New York are authorized or required by law to
remain closed, such payment may be made or act performed or
right exercised on the next succeeding day not a legal holiday
or a day on which such banking institutions are authorized or
required by law to remain closed with the same force and effect
as if done on the nominal date provided in this Forty-first
Supplemental Indenture, and if done on such succeeding day no
interest shall accrue for the period after such nominal date.
SECTION 2. The Original Indenture is in all respects
ratified and confirmed, and the Original Indenture, this
Forty-first Supplemental Indenture and all other indentures
supplemental to the Original Indenture shall be read, taken and
construed as one and the same instrument. Neither the
execution of this Forty-first Supplemental Indenture nor
anything herein contained shall be construed to impair the lien
of the Original Indenture, as supplemented, on any of the
property subject thereto, and such lien shall remain in full
force and effect as security for all bonds now outstanding or
hereafter issued under the Original Indenture, the Tenth
Supplemental Indenture, the Eleventh Supplemental Indenture,
the Twelfth Supplemental Indenture, the Thirteenth Supplemental
Indenture, the Fifteenth Supplemental Indenture, the
Seventeenth Supplemental Indenture, the Eighteenth Supplemental
Indenture, the Twentieth Supplemental Indenture, the
Twenty-first Supplemental Indenture, the Twenty-second
Supplemental Indenture, the Thirty-first Supplemental
Indenture, the Thirty-second Supplemental Indenture, the
Thirty-seventh Supplemental Indenture, the Thirty-eighth
Supplemental Indenture, the Thirty-ninth Supplemental
Indenture, the Fortieth Supplemental Indenture, the
Forty-second Supplemental Indenture or hereunder. All
covenants and provisions of the Original Indenture shall
continue in full force and effect, and this Forty-first
Supplemental Indenture shall form part of the Original
Indenture. All terms defined in Article 1 of the Original
Indenture, as amended, shall, for all purposes of this
Forty-first Supplemental Indenture, have the meanings in said
Article 1 specified, as amended, unless the context otherwise
requires.
<PAGE>
21
SECTION 3. This Forty-first Supplemental Indenture
may be simultaneously executed in any number of counterparts,
and all such counterparts executed and delivered, each as an
original, shall constitute but one and the same instrument.
IN WITNESS WHEREOF, Public Service Company of New
Mexico, party of the first part, has caused its corporate name
to be hereunto affixed and this instrument to be signed by its
President or a Vice President or its Treasurer, and its
corporate seal to be hereunto affixed and attested by its
Secretary or an Assistant Secretary for and in its behalf; and
The Bank of New York (formerly Irving Trust Company), party of
the second part, in evidence of its acceptance of the trust
hereby created, has caused its corporate name to be hereunto
affixed, and this instrument to be signed by its President or a
Vice President or an Assistant Vice President and its corporate
seal to be hereunto affixed and attested by one of its
Assistant Secretaries or Assistant Treasurers for and in its
behalf, all as of the day and year first above written.
PUBLIC SERVICE COMPANY OF
NEW MEXICO
By
--------------------------
Title:
Attest:
------------------------
Title:
(Corporate Seal)
THE BANK OF NEW YORK,
As Trustee
By
--------------------------
Assistant Vice President
Attest:
------------------------
Assistant Treasurer
(Corporate Seal)
<PAGE>
22
STATE OF NEW MEXICO )
) ss.:
COUNTY OF BERNALILLO)
On this _____ day of December, 1993, before me
appeared _____________________________, to me personally known,
who, being by me duly sworn, did say that he is the ___________
of Public Service Company of New Mexico, a New Mexico
corporation, and that the seal affixed to said instrument is
the corporate seal of said corporation, and that said
instrument was signed and sealed on behalf of said corporation
by authority of its Board of Directors, and said ______________
acknowledged said instrument to be the free act and deed of
said corporation.
-------------------------
Notary Public
(Notarial Seal)
STATE OF NEW MEXICO )
) ss.:
COUNTY OF BERNALILLO)
This instrument was acknowledged before me on
December __, 1993 by ________________ as ______________ of
Public Service Company of New Mexico, a New Mexico corporation.
-------------------------
Notary Public
My Commission Expires:
---------------------
<PAGE>
23
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this __ day of December, 1993, before me personally
came __________________, to me known, who, being by me duly
sworn, did depose and say that he resides at _________________
______________________________; that he is an Assistant Vice
President of The Bank of New York, one of the corporations
described in and which executed the foregoing instrument; that
he knows the seal of said corporation; that the seal affixed to
said instrument is such corporate seal; that it was so affixed
by authority of the Board of Directors of said corporation; and
that he signed his name thereto by like authority.
--------------------------
Notary Public
(Notarial Seal)
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
This instrument was acknowledged before me on
December __, 1993 by _______________ as an Assistant Vice
President of The Bank of New York.
--------------------------
Notary Public
My Commission Expires:
----------------------
<PAGE>
EXHIBIT E-2
-----------
PUBLIC SERVICE COMPANY OF NEW MEXICO
TO
THE BANK OF NEW YORK,
(formerly Irving Trust Company),
Trustee
--------------------------------
FORTY-SECOND SUPPLEMENTAL INDENTURE
Dated as of December 14, 1993
--------------------------------
(Supplemental to Indenture of Mortgage and Deed of Trust
dated as of June 1, 1947)
Creating a New Issue of First Mortgage Bonds,
1993 Series A
--------------------------------
The Mortgage of which this instrument forms a part covers
real property, personal property and chattels.
The above-described Indenture of Mortgage and Deed of
Trust contains after-acquired property provisions.
<PAGE>
FORTY-SECOND SUPPLEMENTAL INDENTURE dated as of
December 14, 1993, between PUBLIC SERVICE COMPANY OF NEW
MEXICO, a corporation organized and existing under the laws of
the State of New Mexico, Alvarado Square, Albuquerque, New
Mexico 87158 (hereinafter called the "Company"), party of the
-------
first part, and THE BANK OF NEW YORK (formerly Irving Trust
Company), a corporation organized and existing under the laws
of the State of New York, One Wall Street, New York, New York
10015 (hereinafter sometimes called the "Trustee"), as Trustee,
-------
party of the second part.
WHEREAS, the Company did heretofore execute and
deliver an Indenture of Mortgage and Deed of Trust dated as of
June 1, 1947 (hereinafter referred to as the "Original
--------
Indenture"), to the Trustee to secure an issue of First
---------
Mortgage Bonds of the Company, issuable in series, and created
thereunder an initial series of bonds, designated as First
Mortgage Bonds, 2 7/8% Series due 1977, none of which bonds is
presently outstanding; and
WHEREAS, under Article 3 of the Original Indenture the
Company is authorized to issue additional bonds upon the terms
and conditions expressed in the Original Indenture; and
WHEREAS, the Company did heretofore execute and
deliver a certain First Supplemental Indenture dated as of
January 1, 1948, to the Trustee and created thereunder a series
of bonds designated as First Mortgage Bonds, 3 3/8% Series due
1978, none of which bonds is presently outstanding; and
WHEREAS, the Company did heretofore execute and
deliver a certain Second Supplemental Indenture dated as of
December 1, 1948, to the Trustee and created thereunder a
series of bonds designated as First Mortgage Bonds, 3 3/8%
Series due 1977, none of which bonds is presently outstanding;
and
WHEREAS, the Company did heretofore execute and
deliver a certain Third Supplemental Indenture dated as of
December 1, 1950, to the Trustee and created thereunder a
series of bonds designated as First Mortgage Bonds, 3% Series
due 1980, none of which bonds is presently outstanding; and
<PAGE>
2
WHEREAS, the Company did heretofore execute and
deliver a certain Fourth Supplemental Indenture dated as of
March 1, 1952, to the Trustee and created thereunder a series
of bonds designated as First Mortgage Bonds, 3 3/4% Series due
1982, none of which bonds is presently outstanding; and
WHEREAS, the Company did heretofore execute and
deliver a certain Fifth Supplemental Indenture dated as of
April 1, 1954, to the Trustee and created thereunder a series
of bonds designated as First Mortgage Bonds, 3 5/8% Series due
1984, none of which bonds is presently outstanding; and
WHEREAS, the Company did heretofore execute and
deliver a certain Sixth Supplemental Indenture dated as of
July 1, 1955, to the Trustee for the purpose of further
assuring, conveying and confirming unto the Trustee additional
property and also, by different description, certain property
which is described in the Granting Clauses of the Original
Indenture, no bonds having been created or issued thereunder;
and
WHEREAS, the Company did heretofore execute and
deliver a certain Seventh Supplemental Indenture dated as of
June 1, 1958, to the Trustee and created thereunder a series of
bonds designated as First Mortgage Bonds, 4 3/8% Series due
1988, none of which bonds is presently outstanding; and
WHEREAS, the Company did heretofore execute and
deliver a certain Eighth Supplemental Indenture dated as of
February 1, 1961, to the Trustee and created thereunder a
series of bonds designated as First Mortgage Bonds, 4 7/8%
Series due 1991, none of which bonds is presently outstanding;
and
WHEREAS, the Company did heretofore execute and
deliver a certain Ninth Supplemental Indenture dated as of
January 1, 1967, to the Trustee for the purpose of modifying
certain provisions of the Original Indenture, no bonds having
been created or issued thereunder; and
WHEREAS, the Company did heretofore execute and
deliver a certain Tenth Supplemental Indenture dated as of
May 1, 1967 (hereinafter referred to as the "Tenth Supplemental
------------------
Indenture"), to the Trustee and created thereunder a series of
---------
bonds designated as First Mortgage Bonds, 5 7/8% Series due
1997; and
WHEREAS, the Company did heretofore execute and
deliver a certain Eleventh Supplemental Indenture dated as of
April 1, 1969 (hereinafter referred to as the "Eleventh
--------
<PAGE>
3
Supplemental Indenture"), to the Trustee and created thereunder
----------------------
a series of bonds designated as First Mortgage Bonds, 7 1/4%
Series due 1999; and
WHEREAS, the Company did heretofore execute and
deliver a certain Twelfth Supplemental Indenture dated as of
September 15, 1971 (hereinafter referred to as the "Twelfth
-------
Supplemental Indenture"), to the Trustee for the purpose of
----------------------
amending the Original Indenture in one respect and for the
purpose of creating thereunder a series of bonds designated as
First Mortgage Bonds, 8 1/8% Series due 2001; and
WHEREAS, the Company did heretofore execute and
deliver a certain Thirteenth Supplemental Indenture dated as of
June 15, 1972 (hereinafter referred to as the "Thirteenth
----------
Supplemental Indenture"), to the Trustee and created thereunder
----------------------
a series of bonds designated as First Mortgage Bonds, 7 1/2%
Series due 2002; and
WHEREAS, the Company did heretofore execute and
deliver a certain Fourteenth Supplemental Indenture dated as of
December 1, 1974 (hereinafter referred to as the "Fourteenth
----------
Supplemental Indenture"), to the Trustee for the purpose of
----------------------
amending the Original Indenture in certain respects and for the
purpose of further assuring, conveying and confirming unto the
Trustee additional property, no bonds having been created or
issued thereunder; and
WHEREAS, the Company did heretofore execute and
deliver a certain Fifteenth Supplemental Indenture dated as of
March 15, 1975 (hereinafter referred to as the "Fifteenth
---------
Supplemental Indenture"), to the Trustee and created thereunder
----------------------
a series of bonds designated as First Mortgage Bonds, 9 1/8%
Series due 2005; and
WHEREAS, the Company did heretofore execute and
deliver a certain Sixteenth Supplemental Indenture dated as of
April 1, 1976, to the Trustee and created thereunder a series
of bonds designated as First Mortgage Bonds, 1976 Pollution
Control Series, none of which bonds is presently outstanding;
and
WHEREAS, the Company did heretofore execute and
deliver a certain Seventeenth Supplemental Indenture dated as
of June 1, 1977 (hereinafter referred to as the "Seventeenth
-----------
Supplemental Indenture"), to the Trustee and created thereunder
----------------------
a series of bonds designated as First Mortgage Bonds, 8 1/8%
Series due 2007; and
<PAGE>
4
WHEREAS, the Company did heretofore execute and
deliver a certain Eighteenth Supplemental Indenture dated as of
March 1, 1978 (hereinafter referred to as the "Eighteenth
----------
Supplemental Indenture"), to the Trustee and created thereunder
----------------------
a series of bonds designated as First Mortgage Bonds, 1978
Pollution Control Series A; and
WHEREAS, the Company did heretofore execute and
deliver a certain Nineteenth Supplemental Indenture dated as of
April 15, 1978, to the Trustee for the purpose of further
assuring, conveying and confirming unto the Trustee additional
property, no bonds having been created or issued thereunder;
and
WHEREAS, the Company did heretofore execute and
deliver a certain Twentieth Supplemental Indenture dated as of
May 1, 1978 (hereinafter referred to as the "Twentieth
---------
Supplemental Indenture"), to the Trustee and created thereunder
----------------------
a series of bonds designated as First Mortgage Bonds, 9% Series
due 2008; and
WHEREAS, the Company did heretofore execute and
deliver a certain Twenty-first Supplemental Indenture dated as
of September 1, 1979 (hereinafter referred to as the
"Twenty-first Supplemental Indenture"), to the Trustee and
-----------------------------------
created thereunder a series of bonds designated as First
Mortgage Bonds, 1979 Pollution Control Series A; and
WHEREAS, the Company did heretofore execute and
deliver a certain Twenty-second Supplemental Indenture dated as
of October 1, 1979 (hereinafter referred to as the
"Twenty-second Supplemental Indenture"), to the Trustee for the
------------------------------------
purpose of amending the Original Indenture in one respect and
for the purpose of creating thereunder a series of bonds
designated as First Mortgage Bonds, 10 1/8% Series due 2004;
and
WHEREAS, the Company did heretofore execute and
deliver a certain Twenty-third Supplemental Indenture dated as
of May 15, 1980, to the Trustee and created thereunder a series
of bonds designated as First Mortgage Bonds, 1980 Pollution
Control Series A, none of which bonds is presently outstanding;
and
WHEREAS the Company did heretofore execute and deliver
a certain Twenty-fourth Supplemental Indenture dated as of
September 15, 1980, to the Trustee and created thereunder a
series of bonds designated as First Mortgage Bonds, 12.95%
Series due 1985, none of which bonds is presently outstanding;
and
<PAGE>
5
WHEREAS, the Company did heretofore execute and
deliver a certain Twenty-fifth Supplemental Indenture dated as
of October 1, 1981, to the Trustee and created thereunder a
series of bonds designated as First Mortgage Bonds, 17 1/2%
Series due 2011, none of which bonds is presently outstanding;
and
WHEREAS, the Company did heretofore execute and
deliver a certain Twenty-sixth Supplemental Indenture dated as
of November 1, 1982, to the Trustee and created thereunder a
series of bonds designated as First Mortgage Bonds, 13 1/8%
Series due 2012, none of which bonds is presently outstanding;
and
WHEREAS, the Company did heretofore execute and
deliver a certain Twenty-seventh Supplemental Indenture dated
as of September 1, 1983, to the Trustee and created thereunder a
series of bonds designated as First Mortgage Bonds, 12 7/8%
Series due 2013, none of which bonds is presently outstanding;
and
WHEREAS, the Company did heretofore execute and
deliver a certain Twenty-eighth Supplemental Indenture dated as
of November 15, 1983, to the Trustee for the purpose of further
assuring, conveying and confirming unto the Trustee additional
property, no bonds having been created or issued thereunder;
and
WHEREAS, the Company did heretofore execute and
deliver a certain Twenty-ninth Supplemental Indenture dated as
of December 1, 1983, to the Trustee and created thereunder a
series of bonds designated as First Mortgage Bonds, 1983
Pollution Control Series A, none of which bonds is presently
outstanding; and
WHEREAS, the Company did heretofore execute and
deliver a certain Thirtieth Supplemental Indenture dated as of
August 15, 1984, to the Trustee and created thereunder a series
of bonds designated as First Mortgage Bonds, 13 1/8% Series due
1994, none of which bonds is presently outstanding; and
WHEREAS, the Company did heretofore execute and
deliver a certain Thirty-first Supplemental Indenture dated as
of September 15, 1984 (hereinafter referred to as the
"Thirty-first Supplemental Indenture"), to the Trustee and
-----------------------------------
created thereunder a series of bonds designated as First
Mortgage Bonds, 1984 Pollution Control Series; and
<PAGE>
6
WHEREAS, the Company did heretofore execute and
deliver a certain Thirty-second Supplemental Indenture dated as
of December 1, 1984 (hereinafter referred to as the
"Thirty-second Supplemental Indenture"), to the Trustee and
------------------------------------
created thereunder a series of bonds designated as First
Mortgage Bonds, 1984 Pollution Control Series A; and
WHEREAS, the Company did heretofore execute and
deliver a certain Thirty-third Supplemental Indenture dated as
of December 15, 1987, to the Trustee for the purpose of further
assuring, conveying and confirming unto the Trustee additional
property, no bonds having been created or issued thereunder;
and
WHEREAS, the Company did heretofore execute and
deliver a certain Thirty-fourth Supplemental Indenture dated as
of March 8, 1991, to the Trustee and created thereunder a
series of bonds designated as First Mortgage Bonds, 1991 Series
A, which bonds will be cancelled prior to issuing any bonds
hereunder; and
WHEREAS, the Company did heretofore execute and
deliver a certain Thirty-fifth Supplemental Indenture dated as
of March 8, 1991 , to the Trustee and created thereunder a
series of bonds designated as First Mortgage Bonds, 1991 Series
B, none of which bonds is presently outstanding; and
WHEREAS, the Company did heretofore execute and
deliver a certain Thirty-sixth Supplemental Indenture dated as
of March 8, 1991, to the Trustee and created thereunder a
series of bonds designated as First Mortgage Bonds, 1991 Series
C, which bonds will be cancelled prior to issuing any bonds
hereunder; and
WHEREAS, the Company did heretofore execute and
deliver a certain Thirty-seventh Supplemental Indenture dated
as of November 1, 1992 (hereinafter referred to as the
"Thirty-seventh Supplemental Indenture"), to the Trustee and
-------------------------------------
created thereunder a series of bonds designated as First
Mortgage Bonds, 1992 Pollution Control Series A; and
WHEREAS, the Company did heretofore execute and
deliver a certain Thirty-eighth Supplemental Indenture dated as
of January 1, 1993 (hereinafter referred to as the
"Thirty-eighth Supplemental Indenture"), to the Trustee and
------------------------------------
created thereunder a series of bonds designated as First
Mortgage Bonds, 1993 Pollution Control Series A, and First
Mortgage Bonds, 1993 Pollution Control Series B; and
<PAGE>
7
WHEREAS, the Company did heretofore execute and
deliver a certain Thirty-ninth Supplemental Indenture dated as
of August 15, 1993 (hereinafter referred to as the
"Thirty-ninth Supplemental Indenture"), to the Trustee and
-----------------------------------
created thereunder a series of bonds designated as First
Mortgage Bonds, 1993 Pollution Control Series C; and
WHEREAS, the Company did heretofore execute and
deliver a certain Fortieth Supplemental Indenture dated as of
August 15, 1993 (hereinafter referred to as the "Fortieth
--------
Supplemental Indenture"), to the Trustee and created thereunder
----------------------
a series of bonds designated as First Mortgage Bonds, 1993
Pollution Control Series D; and
WHEREAS, the Company is entering into that certain
Revolving Credit Agreement, dated as of December 14, 1993 (as
the same may be amended from time to time, the "Credit
------
Agreement"), among the Company, certain lenders (the "Lenders")
--------- -------
and Chemical Bank and Citibank, N.A. as co-agents for the
Lenders; and
WHEREAS, the Credit Agreement requires, as a condition
precedent to the effectiveness of the Credit Agreement and the
initial borrowing thereunder, that the Company issue one or
more new series of First Mortgage Bonds to Citibank, N.A., as
collateral agent (the "Collateral Agent") for the Lenders under
----------------
a pledge agreement, of even date herewith (the "Pledge
------
Agreement"), in an aggregate principal amount of $100,000,000
---------
to secure the payment when due of the Secured Obligations (as
defined in the Pledge Agreement); and
WHEREAS, the agreements of the parties to the Credit
Agreement constitute consideration for the issuance of such
First Mortgage Bonds to the Collateral Agent; and
WHEREAS, the Company, as required by the Credit
Agreement, proposes to create a new issue of First Mortgage
Bonds, to be designated as First Mortgage Bonds, 1993 Series B
(the "Series B Bonds") to be due on June 13, 1995, in an
--------------
aggregate principal amount of $58,140,100 and to bear interest
at a rate of 15% per annum, and proposes to issue the same
initially upon the execution of this Forty-second Supplemental
Indenture; and
WHEREAS, simultaneously herewith, the Company, as
required by the Credit Agreement, proposes to create another
new issue of First Mortgage Bonds, to be designated as First
Mortgage Bonds, 1993 Series A (the First Mortgage Bonds, 1993
Series A and B being collectively the "1993 Bonds"), to be
----------
<PAGE>
8
due on June 13, 1995, such that the aggregate principal amount
of the 1993 Bonds shall be an amount equal to $100,000,000, and
proposes to issue such First Mortgage Bonds, 1993 Series A,
initially upon the execution of the Forty-first Supplemental
Indenture dated as of the date hereof (hereinafter referred to
as the "Forty-first Supplemental Indenture") to be executed
----------------------------------
simultaneously herewith; and
WHEREAS, it is the intent of the Company and the
Lenders that there be no duplication in the obligations paid by
the Company under the Credit Agreement and the 1993 Bonds, but
that payments, if any, of principal of or interest on the 1993
Bonds be applied to payment of the Secured Obligations and that
the benefits and security of the first mortgage lien on Company
assets under the Original Indenture, as supplemented and
amended, be extended to the Secured Obligations by means of the
pledge of the 1993 Bonds to the Lenders; and
WHEREAS, the Company, by appropriate corporate action,
has duly resolved and determined to execute this Forty-second
Supplemental Indenture for the purpose of providing for the
creation of the Series B Bonds and of specifying the form,
provisions and particulars thereof as in said Original
Indenture provided or permitted and of giving to the Series B
Bonds the protection and security of the Original Indenture;
and
WHEREAS, the text of the Series B Bonds and the text
of the Trustee's certificate of authentication to be endorsed
thereon are to be substantially in the form (the "Series B Bond
-------------
Form") following (certain of the provisions of the Series B
----
Bonds may be set forth on the reverse thereof):
[FORM OF BOND, 1993 SERIES B]
PUBLIC SERVICE COMPANY OF NEW MEXICO
First Mortgage Bond, 1993 Series B
THIS BOND IS NOT TRANSFERABLE EXCEPT
AS PERMITTED IN ARTICLE I OF
THE FORTY-SECOND SUPPLEMENTAL INDENTURE
No. $
--------------------- ------------------
1. PUBLIC SERVICE COMPANY OF NEW MEXICO, a
corporation organized and existing under the laws of the State
of New Mexico (hereinafter sometimes called the "Company"), for
-------
value received, hereby promises to pay to
<PAGE>
9
Citibank, N.A. as collateral agent for the Lenders parties to
the Credit Agreement referred to in the Forty-second
Supplemental Indenture referred to below, on June 13, 1995,
unless this bond shall have been called for previous redemption
and provision made for the payment of the redemption price
thereof, $_________ , at the office or agency of the Company in
the Borough of Manhattan, The City of New York, plus accrued
interest thereon at the rate of 15% per annum, payable
quarterly on the first day of April, July, October, and January
of each year commencing the first such date to occur on or
after the Effective Date (as defined in the Credit Agreement
referred to in the Forty-second Supplemental Indenture referred
to below) and on the date of payment in full of principal on
this bond. The principal of and interest on this bond shall be
payable in any coin or currency of the United States of America
which at the time of payment shall be legal tender for the
payment of public and private debts.
2. This bond is one of an issue of bonds of the
Company (hereinafter sometimes called the "Bonds"), known as
-----
its First Mortgage Bonds, issued and to be issued in one or
more series under and equally and ratably secured (except as
any sinking, amortization, improvement or other fund,
established in accordance with the provisions of the indenture
hereinafter mentioned, may afford additional security for the
Bonds of any particular series) by a certain mortgage and deed
of trust, dated as of June 1, 1947, made by the Company to The
Bank of New York (formerly Irving Trust Company), as Trustee
(hereinafter called the "Trustee"), and that certain
-------
Forty-second Supplemental Indenture dated as of December 14,
1993 (the "Forty-second Supplemental Indenture"), made by the
-----------------------------------
Company to the Trustee (said mortgage and deed of trust and all
indentures supplemental thereto (including the Forty-second
Supplemental Indenture) being hereinafter sometimes
collectively called the "Indenture"), to which Indenture
---------
reference is hereby made for a description of the property
mortgaged, the nature and extent of the security, the rights
and limitations of rights of the Company, the Trustee and the
holders of the Bonds under the Indenture, the powers, duties
and immunities of the Trustee, and the terms and conditions
upon which the Bonds are and are to be issued and secured, to
all of the provisions of which Indenture and of all such
supplemental indentures in respect of such security, including
the provisions of the Indenture permitting the issue of Bonds
of any series for property which, under the restrictions and
limitations therein specified, may be subject to liens prior to
the lien of the Indenture, the holder, by accepting this bond,
assents. To the extent permitted by and as provided in
<PAGE>
10
the Indenture, the rights and obligations of the Company and of
the holders of the Bonds (including those pertaining to any
sinking or other fund) may be changed and modified, with the
consent of the Company, by the holders of at least 75% in
aggregate principal amount of the Bonds then outstanding, such
percentage being determined as provided in the Indenture;
provided, however, that in case such changes and modifications
-------- -------
affect one or more but less than all series of Bonds then
outstanding, they shall be required to be adopted only by the
affirmative vote of the holders of at least 75% in aggregate
principal amount of outstanding Bonds of such one or more
series so affected, but nothing contained in this proviso shall
be deemed to affect any of the rights granted to bondholders by
Article 9 of the Indenture to give any direction to the Trustee
or to waive any default on the part of the Company; and further
-------
provided that without the consent of the holder hereof no such
--------
change or modification shall be made which will extend the time
of payment of the principal of, or of the interest or premium,
if any, on, this bond or reduce the principal amount hereof or
the rate of interest or the premium, if any, hereon, or effect
any other modification of the terms of payment of such
principal or interest or premium, if any, or will permit the
creation of any lien ranking prior to or on a parity with the
lien of the Indenture on any of the mortgaged property, or will
deprive the holder hereof of the benefit of a lien upon the
mortgaged property for the security of this bond, or will
reduce the percentage of Bonds required for the adoption of
changes or modifications as aforesaid. This bond is one of a
series of Bonds designated as the First Mortgage Bonds, 1993
Series B of the Company.
3. The bonds of this series (the "Series B Bonds")
--------------
have been issued by the Company to secure the payment when due
(whether at maturity, by acceleration, or otherwise) of the
Obligations (as defined in the Forty-second Supplemental
Indenture) under the Company's Credit Facility (as defined in
the Forty-second Supplemental Indenture). The agreements of
the parties to the Credit Agreement (as defined in the
Forty-second Supplemental Indenture) shall constitute the
consideration for issuance of the Series B Bonds.
4. Notwithstanding any other provision herein and in
the Indenture to the contrary, the Company shall have no
obligation to pay any amount (whether principal or interest,
including Accrued Interest (defined below)) with respect to the
Series B Bonds in excess of the Applicable Share (defined
below) of all Obligations due and not paid under the Credit
Facility at the time such payment with respect to the Series B
Bonds would otherwise be made. Without limitation of the
<PAGE>
11
foregoing, (A) except as provided in paragraph 5 below, the
obligation of the Company to make each payment with respect to
the principal of or interest on the Series B Bonds shall be
fully satisfied and discharged, and such payment shall not be
due, if on the date that such payment shall be due no
Obligations shall have become due and remain unpaid; (B) the
obligation of the Company to make any payment of principal due
on the Series B Bonds (at maturity, by reason of acceleration,
or otherwise) shall, fully or pro rata in proportion to the
principal amount of the Series B Bonds then held by the Pledge
Agent (as defined in the Forty-second Supplemental Indenture),
as the case may be, be satisfied and discharged to the extent
that, at the time any such principal payment is due, such
payment exceeds the Applicable Share of principal then due and
not paid under the Credit Facility; (C) the aggregate amount of
Accrued Interest on the Series B Bonds becoming currently due
and payable on any interest payment date shall not exceed the
Applicable Share of all Obligations (other than principal) then
due and not paid under the Credit Facility; and (D) upon
termination of the Credit Facility and payment by the Company
of all Obligations with respect thereto, any obligation of the
Company to make any payment with respect to the interest
(including all Accrued Interest) accrued to such time on the
Series B Bonds shall be fully satisfied and discharged.
"Applicable Share" means a fraction equal to the aggregate
----------------
principal amount of the Series B Bonds then held by the Pledge
Agent divided by the aggregate principal amount of all 1993
Bonds (as defined in the Forty-second Supplemental Indenture)
then held by the Pledge Agent.
5. If the Credit Facility is in effect on an interest
payment date for the Series B Bonds, the obligation to pay
Accrued Interest on such interest payment date shall not be
discharged or satisfied (irrespective of whether any payment of
amounts due on such date is made by or on behalf of the Company
for the benefit of the lenders under the Credit Facility, it
being acknowledged that any such payment shall be deemed a
payment of the Obligations and not of amounts due on the Series
B Bonds), but shall be deferred until the next interest
payment date for Series B Bonds (such deferred interest being
"Carry-over Interest"), provided, that if the Trustee receives
------------------- --------
notice from the Pledge Agent as set forth in paragraph 6
hereof, Accrued Interest, to the extent available, in an amount
equal to the Applicable Share of the amount of the Obligations
(excluding principal) specified in such notice as being due and
unpaid under the Credit Facility shall not be deferred, but
shall become due and payable on such interest payment date.
"Accrued Interest" means, as of any interest payment date for
----------------
Series B
<PAGE>
12
Bonds, interest accrued to such date on such Series B Bonds (as
set forth in paragraph 1 hereof), including Carry-over Interest
from prior periods; provided, however, that in no event shall
-------- -------
Accrued Interest include any interest paid prior to such
interest payment date with respect to the Series B Bonds.
6. The Trustee may conclusively presume that no
payments with respect to the principal of, or interest on, the
Series B Bonds are due unless and until the Trustee shall have
received a written certificate from the Pledge Agent, signed by
an authorized officer of the Pledge Agent, certifying (i) that
payment of principal (whether upon acceleration of maturity or
otherwise) or interest then due under the Credit Facility has
not been made, (ii) the amount of principal, if any, then due
and not paid under the Credit Facility, and (iii) the aggregate
amount of the Obligations (excluding principal) then due and
not paid under the Credit Facility.
7. The Series B Bonds are subject to redemption prior
to maturity if (1) the Company shall have failed to pay any
Obligations when due and payable (whether by scheduled
maturity, required prepayment, acceleration, demand or
otherwise), and such failure shall have continued beyond any
applicable grace period or (2) any other event shall occur or
condition shall exist under the Credit Facility or any related
agreement and shall continue after any applicable grace period,
if the effect of such event or condition is to accelerate or
permit the acceleration of the maturity of the entire principal
amount under the Credit Facility (any such event specified in
(1) or (2) being an "Event of Default"). If an Event of
----------------
Default has occurred, then Series B Bonds equal in principal
amount to the Applicable Share of the principal amount then due
under the Credit Facility shall be subject to redemption at the
election of the Pledge Agent. To cause such redemption, the
Pledge Agent shall deliver to the Trustee within 365 days of
the occurrence of any Event of Default (and mail a copy thereof
to the Company) a written demand (the "Redemption Demand")
-----------------
(including, without limitation, a demand sent by telecopier,
telegraph, telex or cable communication) for the redemption of
Series B Bonds equal in principal amount to the Applicable
Share of the principal amount then due under the Credit
Facility. The Redemption Demand shall be signed by an
authorized officer of the Pledge Agent, and shall set forth
(1) the Applicable Share of the principal amount then due under
the Credit Facility, (2) the date of redemption (the
"Redemption Date") of the Series B Bonds, which date shall not
---------------
be less than 7 days after delivery of the Redemption Demand to
the Trustee,
<PAGE>
13
(3) that the Trustee is thereby instructed to call the Series B
Bonds for redemption and (4) that the parties to such
Redemption Demand waive any required notice of redemption from
the Trustee. The Trustee may conclusively presume the
statements contained in the Redemption Demand to be correct.
On the Redemption Date, the Company shall pay an aggregate
amount (the "Redemption Amount") for the Series B Bonds so
-----------------
called for redemption equal to the aggregate of the following:
(i) the Applicable Share of the aggregate principal amount then
due under the Credit Facility and (ii) the lesser of (A) the
aggregate amount of interest (including Accrued Interest) on
the Series B Bonds accrued and unpaid through the Redemption
Date and (B) the Applicable Share of all Obligations (other
than principal) then due and unpaid under the Credit Facility.
Notwithstanding any other provision in this paragraph or in the
Indenture, in the event of an actual or deemed entry of an
order for relief for the Company under the Federal Bankruptcy
Code, a Redemption Demand for the redemption of all the Series B
Bonds shall be deemed to have been delivered by the Pledge
Agent to the Trustee, and a call for redemption of the Series B
Bonds made to the Company by the Trustee, without any delivery
of notice or other demand, all of which are hereby expressly
waived by the Company and the Trustee, and on such date an
amount equal to the Applicable Share of the Obligations under
the Credit Facility shall automatically become due and payable
as the Redemption Amount for the Series B Bonds, such date
being the Redemption Date for such Series B Bonds. Upon
payment of the Redemption Amount on the Redemption Date, the
obligation to pay principal of and Accrued Interest on the
Series B Bonds shall, as of the Redemption Date, be deemed
satisfied and discharged in an amount equal to (i) with respect
to principal on the Series B Bonds, the Applicable Share of the
aggregate principal amount due under the Credit Facility and
(ii) with respect to Accrued Interest on the Series B Bonds,
the lesser of (A) the aggregate amount of interest (including
Accrued Interest) on the Series B Bonds accrued and unpaid
through the Redemption Date and (B) the Applicable Share of all
Obligations (other than principal) then due and unpaid under
the Credit Facility.
8. Upon payment of the Redemption Amount on any
Redemption Date, each Series B Bond shall be considered
redeemed in full if the Applicable Share of the aggregate
principal amount then due under the Credit Facility equals the
aggregate principal amount of the Series B Bonds held by the
Pledge Agent, and otherwise shall be considered redeemed
pro rata in the proportion the Applicable Share of the
aggregate principal amount then due bears to the aggregate
principal amount of the Series B Bonds held by the Pledge
<PAGE>
14
Agent. If this bond or any portion thereof is duly called for
redemption and payment duly provided for or otherwise duly
satisfied and discharged, this bond or such portion thereof
shall cease to be entitled to the lien of the Indenture from
and after the date payment is so provided for or otherwise duly
satisfied and discharged.
9. The principal of this bond may be declared or may
become due before the maturity hereof, on the conditions, in
the manner, and at the times set forth in the Indenture, upon
the happening of a default as therein defined.
10. Subject to the restrictions on transfer set forth
in Article I of the Forty-second Supplemental Indenture, this
bond is transferable by the registered owner hereof in person
or by his duly authorized attorney at the office or agency of
the Company in the Borough of Manhattan, City and State of New
York, upon surrender and cancellation of this bond and upon
payment of charges, and thereupon a new fully registered bond
of the same series and maturity, for a like principal amount,
will be issued to the transferee in exchange therefor, as
provided in the Indenture. The Company and the Trustee and any
paying agent may deem and treat the person in whose name this
bond is registered as the absolute owner hereof for the purpose
of receiving payment and for all other purposes.
11. No recourse under or upon any covenant, obligation
or agreement of the Indenture, or of any indenture supplemental
thereto, or of this bond, for the payment of the principal of,
or interest on, this bond, or for any claim based thereon, or
otherwise in any manner in respect thereof, shall be had
against any incorporator, subscriber to capital stock,
stockholder, officer or director, as such, of the Company,
whether former, present or future, either directly, or
indirectly through the Company or any predecessor or successor
corporation or the Trustee, by the enforcement of any
subscription to capital stock, assessment or otherwise, or by
any legal or equitable proceeding by virtue of any
constitution, statute or otherwise (including, without limiting
the generality of the foregoing, any proceeding to enforce any
claimed liability of stockholders of the Company based upon any
theory of disregarding the corporate entity of the Company or
upon any theory that the Company was acting as the agent or
instrumentality of the stockholders); any and all such
liability of incorporators, stockholders, subscribers, officers
and directors, as such, being released by the holder hereof, by
the acceptance of this bond, and being likewise waived and
released by the terms of the Indenture.
<PAGE>
15
12. This bond shall not be valid or become obligatory
for any purpose until the certificate of authentication
endorsed hereon shall have been signed by The Bank of New York,
or its successor, as Trustee under the Indenture.
IN WITNESS WHEREOF, PUBLIC SERVICE COMPANY OF NEW
MEXICO has caused this bond to be signed by the manual or
facsimile signature of its President or a Vice President, and
its corporate seal, or facsimile thereof, to be impressed or
imprinted hereon and attested by the manual or facsimile
signature of its Secretary or an Assistant Secretary.
Dated: , 1993
---------------
PUBLIC SERVICE COMPANY OF
NEW MEXICO
By
-------------------------
(Title)
Attest:
--------------------------
Secretary
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This bond is one of the bonds, of the series
designated therein, described in the within-mentioned
Indenture.
THE BANK OF NEW YORK,
As Trustee,
By
--------------------------
Authorized Signatory
AND WHEREAS, all conditions and requirements necessary
to make this Forty-second Supplemental Indenture a valid, legal
and binding instrument in accordance with its terms and to make
said bonds, when duly executed by the Company and authenticated
and delivered by the Trustee, and duly issued, the valid,
binding and legal obligations of the Company, have been done
and performed, and the execution and
<PAGE>
16
delivery of this Forty-second Supplemental Indenture have been
in all respects duly authorized;
NOW, THEREFORE, THIS FORTY-SECOND SUPPLEMENTAL
INDENTURE WITNESSETH: That Public Service Company of New
Mexico, in consideration of the premises and of One Dollar
($1.00) to it duly paid by the Trustee at or before the
ensealing and delivery of these presents, the receipt whereof
is hereby acknowledged, for itself and its successors, does
hereby covenant and agree to and with the Trustee and its
successors in the trust under the Original Indenture, for the
benefit of those who shall hold the bonds, or any of them, to
be issued hereunder and thereunder, as hereinafter provided, as
follows:
ARTICLE I.
CREATION AND DESCRIPTION OF FIRST MORTGAGE BONDS
1993 SERIES B
SECTION 1. A new series of bonds to be issued under
and secured by the Original Indenture and this Forty-second
Supplemental Indenture is hereby created, to be designated as
First Mortgage Bonds, 1993 Series B. The Series B Bonds shall
be limited to an aggregate principal amount of $58,140,100
excluding any of the Series B Bonds which may be authenticated
in exchange for or in lieu of or in substitution for or on
transfer of any other Series B Bonds pursuant to any provisions
of the Original Indenture or of this Forty-second Supplemental
Indenture. Said bonds of said series shall be substantially in
the form of the Series B Bond Form set forth above. Said bonds
shall be issued only as fully registered bonds in denominations
of $100.00 and multiples thereof from time to time authorized
by the Company, such authorization to be evidenced by the
execution thereof.
The Series B Bonds shall be issued in such aggregate
principal amount to the Collateral Agent under the Pledge
Agreement in order to secure the payment when due of the
Secured Obligations. The agreements of the parties to the
Credit Agreement constitute consideration for the issuance of
the Series B Bonds to the Collateral Agent. The Series B Bonds
shall mature on June 13, 1995. Payments of principal of, or
interest on, the Series B Bonds and redemption and exchange of
such Series B Bonds shall be subject to the provisions of
Article II hereof.
<PAGE>
17
The "Credit Facility" shall mean initially the Credit
---------------
Agreement while it is in effect or while any Secured
Obligations shall remain unpaid, and after the termination
thereof and payment of the Secured Obligations, any other
revolving credit agreement entered into from time to time and
designated therein by the Company as being the (or a portion of
the) "Credit Facility" hereunder, so long as any such agreement
is in effect or any amounts are outstanding thereunder.
The "Obligations" shall mean initially the Secured
-----------
Obligations, and after all Secured Obligations have been paid
in full and the Credit Agreement has been terminated, any
principal, interest or other amounts due under any Credit
Facility.
The "Pledge Agent" shall mean initially the Collateral
------------
Agent under the Pledge Agreement (or any successor Collateral
Agent as provided in the Credit Agreement), and after the
Credit Agreement has been terminated and the Secured
Obligations have been paid in full, any transferee of the
Collateral Agent that holds the Series B Bonds as security for
the payment of the Obligations under a Credit Facility.
The Series B Bonds shall be issued to and registered
in the name of the Collateral Agent and shall not be
transferable by any Pledge Agent, except (i) in the case of the
Collateral Agent, (A) to a successor Collateral Agent as
provided in the Credit Agreement or (B) as provided in the
Pledge Agreement, to the Company, and (ii) in the case of any
other Pledge Agent, (A) to a successor Pledge Agent or (B) to
the Company. The Company hereby instructs the Trustee to so
limit transfers requested by the holder (other than the
Company) of any Series B Bond.
Each of the Series B Bonds shall be dated as of the
date of its authentication.
SECTION 2. The Series B Bonds described in Section 1
of this Article may be executed by the Company and delivered to
the Trustee and, upon compliance with all applicable provisions
and requirements of the Original Indenture, as amended, in
respect thereof, shall be authenticated by the Trustee and
delivered (without awaiting the filing or recording of this
Forty-second Supplemental Indenture) in accordance with the
written order or orders of the Company.
<PAGE>
18
ARTICLE II.
PAYMENT OF INTEREST AND PRINCIPAL;
REDEMPTION AND EXCHANGE; SURRENDER AND CANCELLATION
SECTION 1. The principal of and interest on each
Series B Bond shall be payable at the office or agency of the
Company in the Borough of Manhattan, The City of New York, and
both principal and interest shall be payable in any coin or
currency of the United States of America which at the time of
payment shall be legal tender for the payment of public and
private debts. The Series B Bonds shall be deemed fully paid,
and the obligations of the Company thereunder shall be
terminated, to the extent and in the manner provided in the
Series B Bond Form set forth above.
SECTION 2. The Series B Bonds shall bear interest as
provided in the Series B Bond Form set forth above.
SECTION 3. The Series B Bonds are subject to
redemption prior to maturity as provided in the Series B Bond
Form set forth above.
SECTION 4. Upon surrender by any holder to the
Trustee hereunder of any of the Series B Bonds for
cancellation, such bonds shall be cancelled by the Trustee and
delivered to the Company and shall be deemed fully paid and the
obligations of the Company thereunder terminated.
ARTICLE III.
MAINTENANCE AND REPLACEMENT FUND COVENANT.
The Company hereby covenants that so long as any of
the Series B Bonds shall remain outstanding, the covenants and
agreements of the Company set forth in Section 4.10 of the
Original Indenture as amended by the Fourteenth Supplemental
Indenture shall be and remain in full force and effect, and be
duly observed and complied with by the Company, irrespective of
the fact that no First Mortgage Bonds, 2 7/8% Series due 1977,
remain outstanding.
<PAGE>
19
ARTICLE IV.
DOCUMENT DELIVERY COVENANT.
The Company hereby covenants that so long as any of
the Series B Bonds shall remain outstanding, the Company shall
deliver to the Trustee as soon as available copies (certified
by an officer of the Company to be true) of the Credit Facility
and the Pledge Agreement and copies of any supplements,
amendments or replacements thereto. The Trustee shall have no
duty to examine or take any other action with respect to any
such documents so received by it, other than to retain in its
files any of same which it so receives.
ARTICLE V.
THE TRUSTEE.
The Trustee accepts the trusts created by this
Forty-second Supplemental Indenture upon the terms and
conditions in the Original Indenture and in this Forty-second
Supplemental Indenture set forth. Each and every term and
condition contained in Article 13 of the Original Indenture
shall apply to this Forty-second Supplemental Indenture with
the same force and effect as if the same were herein set forth
in full, with such omissions, variations and modifications
thereof as may be appropriate to make the same conform to this
Forty-second Supplemental Indenture.
The recitals contained herein shall be taken as the
statements of the Company, and the Trustee assumes no
responsibility for the correctness of the same.
To the extent permitted by Section 13.02 and 13.03 of
the Original Indenture, and without limitation of Section 13.06
of the Original Indenture, the Trustee may rely and shall be
fully protected in acting upon any resolution, certificate,
opinion, notice, request, consent, order, appraisal, report,
bond, or other paper or document (including, without
limitation, the Credit Facility, the Pledge Agreement and any
notice, certificate, or other document provided for in the
Credit Facility, the Pledge Agreement or this Forty-second
Supplemental Indenture) believed by the Trustee to be genuine
and to have been signed or presented by the proper party or
parties.
<PAGE>
20
ARTICLE VI.
MISCELLANEOUS PROVISIONS.
SECTION 1. If the date for making any payment or the
last date for performance of any act or the exercising of any
right, as provided in this Forty-second Supplemental Indenture,
shall be a legal holiday or a day on which banking institutions
in The City of New York are authorized or required by law to
remain closed, such payment may be made or act performed or
right exercised on the next succeeding day not a legal holiday
or a day on which such banking institutions are authorized or
required by law to remain closed with the same force and effect
as if done on the nominal date provided in this Forty-second
Supplemental Indenture, and if done on such succeeding day no
interest shall accrue for the period after such nominal date.
SECTION 2. The Original Indenture is in all respects
ratified and confirmed, and the Original Indenture, this
Forty-second Supplemental Indenture and all other indentures
supplemental to the Original Indenture shall be read, taken and
construed as one and the same instrument. Neither the
execution of this Forty-second Supplemental Indenture nor
anything herein contained shall be construed to impair the lien
of the Original Indenture, as supplemented, on any of the
property subject thereto, and such lien shall remain in full
force and effect as security for all bonds now outstanding or
hereafter issued under the Original Indenture, the Tenth
Supplemental Indenture, the Eleventh Supplemental Indenture,
the Twelfth Supplemental Indenture, the Thirteenth Supplemental
Indenture, the Fifteenth Supplemental Indenture, the
Seventeenth Supplemental Indenture, the Eighteenth Supplemental
Indenture, the Twentieth Supplemental Indenture, the
Twenty-first Supplemental Indenture, the Twenty-second
Supplemental Indenture, the Thirty-first Supplemental
Indenture, the Thirty-second Supplemental Indenture, the
Thirty-seventh Supplemental Indenture, the Thirty-eighth
Supplemental Indenture, the Thirty-ninth Supplemental
Indenture, the Fortieth Supplemental Indenture, the Forty-first
Supplemental Indenture or hereunder. All covenants and
provisions of the Original Indenture shall continue in full
force and effect, and this Forty-second Supplemental Indenture
shall form part of the Original Indenture. All terms defined
in Article 1 of the Original Indenture, as amended, shall, for
all purposes of this Forty-second Supplemental Indenture, have
the meanings in said Article 1 specified, as amended, unless
the context otherwise requires.
<PAGE>
21
SECTION 3. This Forty-second Supplemental Indenture
may be simultaneously executed in any number of counterparts,
and all such counterparts executed and delivered, each as an
original, shall constitute but one and the same instrument.
IN WITNESS WHEREOF, Public Service Company of New
Mexico, party of the first part, has caused its corporate name
to be hereunto affixed and this instrument to be signed by its
President or a Vice President or its Treasurer, and its
corporate seal to be hereunto affixed and attested by its
Secretary or an Assistant Secretary for and in its behalf; and
The Bank of New York (formerly Irving Trust Company), party of
the second part, in evidence of its acceptance of the trust
hereby created, has caused its corporate name to be hereunto
affixed, and this instrument to be signed by its President or a
Vice President or an Assistant Vice President and its corporate
seal to be hereunto affixed and attested by one of its
Assistant Secretaries or Assistant Treasurers for and in its
behalf, all as of the day and year first above written.
PUBLIC SERVICE COMPANY OF
NEW MEXICO
By
------------------------
Title:
Attest:
------------------------
Title:
(Corporate Seal)
THE BANK OF NEW YORK,
As Trustee
By
---------------------------
Assistant Vice President
Attest:
-------------------------
Assistant Treasurer
(Corporate Seal)
<PAGE>
22
STATE OF NEW MEXICO )
) ss.:
COUNTY OF BERNALILLO)
On this _____ day of December, 1993, before me
appeared ____________________________ , to me personally known,
who, being by me duly sworn, did say that he is the __________
of Public Service Company of New Mexico, a New Mexico
corporation, and that the seal affixed to said instrument is
the corporate seal of said corporation, and that said
instrument was signed and sealed on behalf of said corporation
by authority of its Board of Directors, and said _____________
_____ acknowledged said instrument to be the free act and deed
of said corporation.
--------------------------
Notary Public
(Notarial Seal)
STATE OF NEW MEXICO )
) ss.:
COUNTY OF BERNALILLO)
This instrument was acknowledged before me on December
__, 1993 by ________________ as ______________ of Public
Service Company of New Mexico, a New Mexico corporation.
----------------------------
Notary Public
My Commission Expires:
---------------------
<PAGE>
23
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this ____ day of December, 1993, before me
personally came __________________, to me known, who, being by
me duly sworn, did depose and say that he resides at
______________________________; that he is an Assistant Vice
President of The Bank of New York, one of the corporations
described in and which executed the foregoing instrument; that
he knows the seal of said corporation; that the seal affixed to
said instrument is such corporate seal; that it was so affixed
by authority of the Board of Directors of said corporation; and
that he signed his name thereto by like authority.
--------------------------
Notary Public
(Notarial Seal)
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
This instrument was acknowledged before me on
December __, 1993 by _______________ as an Assistant Vice
President of The Bank of New York.
---------------------------
Notary Public
My Commission Expires:
----------------------
<PAGE>
EXHIBIT 10.58
AMENDMENT NO. 8 TO THE
ARIZONA NUCLEAR POWER PROJECT
PARTICIPATION AGREEMENT
APS Contract No: 4172-419.00
Execution Copy
June 17, 1983
<PAGE>
AMENDMENT NO. 8 TO THE
----------------------
ARIZONA NUCLEAR POWER PROJECT
-----------------------------
PARTICIPATION AGREEMENT
-----------------------
1. PARTIES: The Parties to this Amendment No. 8 to the Arizona Nuclear Power
-------
Project Participation Agreement ("Amendment No. 8") (hereinafter referred
to as the "Participants") are: ARIZONA PUBLIC SERVICE COMPANY, a
corporation organized and existing under and by virtue of the laws of the
State of Arizona, hereinafter referred to as "Arizona," SALT RIVER PROJECT
AGRICULTURAL IMPROVEMENT AND POWER DISTRICT, an agricultural improvement
district organized and existing under and by virtue of the laws of the
State of Arizona, hereinafter referred to as "Salt River Project," SOUTHERN
CALIFORNIA EDISON COMPANY, a corporation organized and existing under and
by virtue of the laws of the State of California, hereinafter referred to
as "Edison," PUBLIC SERVICE COMPANY OF MEW MEXICO, a corporation organized
and existing under and by virtue of the laws of the State of New Mexico,
hereinafter referred to as "El Paso," EL PASO ELECTRIC COMPANY, a
corporation organized and existing under and by virtue of the laws of the
State of Texas, hereinafter referred to as "El Paso," and SOUTHERN
CALIFORNIA PUBLIC POWER AUTHORITY, a joint powers agency organized and
existing under and by virtue of the laws of the State of California, doing
business in the State of Arizona as SOUTHERN CALIFORNIA PUBLIC POWER
AUTHORITY ASSOCIATION, hereinafter referred to as "SCPPA."
<PAGE>
2. RECITALS:
2.1 Arizona, Salt River Project, Edison, PNM and El Paso are
parties ("Participants") to a certain agreement entitled
Arizona Nuclear Power Project Participation Agreement, dated
as of January 1, 1974; Amendment No. 2, dated as of August
28, 1975; Amendment No. 3, dated as of July 22, 1976; Amend-
ment No. 4, dated as of December 15, 1977; Amendment No. 5,
dated as of December 5, 1979; Amendment No. 6, dated as of
October 16, 1981; and Amendment No. 7, dated as of April 1,
1982 (hereinafter as so amended "Participation Agreement").
2.2 Pursuant to the Salt River Project - Authority Palo Verde
Nuclear Generating Station Assignment Agreement, dated
August 14, 1981, by and between Salt River Project and
SCPPA, on September 10, 1982, Salt River Project, pursuant
to Section 15.3 of the Participation Agreement, assigned and
transferred to SCPPA, among other things, an undivided
6.91% interest in the Palo Verde Nuclear Generating Station
and in the Project Agreements related thereto, and a 5.91%
Generation Entitlement Share under the Participation Agree-
ment, and SCPPA, pursuant to Section 15.5 of the Participa-
tion Agreement, has accepted said assignment and transfer
and has become and assumed the status and obligations of a
Participant in the Palo Verde Nuclear Generating Station to
the extent of SCPPA's interest therein.
<PAGE>
2.3 Mutual assistance agreements among utilities and others providing for
the temporary borrowing, loan or exchange of personnel, equipment or
material to a requesting party to such agreement are advantageous to
all parties thereto because (i) personnel, equipment or material
required to respond to an emergency or to avoid or minimize any
delay, outage or reduction of generating availability or capacity
may not be readily available from any other source and (ii)
responses to any such requests can be expedited if the terms and
conditions pursuant to which any borrowing, loan or ex- change of
personnel, equipment or material have been agreed upon prior to such
requests.
2.4 As construction of ANPP reaches completion, significant
amounts of valuable construction equipment and materials jointly owned
by the Participants will no longer be required and means should be
established for its orderly and expeditious disposition on terms
favorable to the Participants. Similarly, it is anticipated that, from
time to time during the operation of ANPP, some jointly owned
equipment or materials acquired for the operation or maintenance of
ANPP or for Capital Improvements shall cease to be used or useful and
should be disposed of expeditiously on terms favorable to the
Participants.
2.5 The Parties desire to amend the Participation Agreement to empower
the Project Manager and/or the Operating Agent to borrow, lend or
exchange personnel, equipment or material
<PAGE>
from or to any third party who shall have entered into a mutual
assistance agreement substantially in a form as shall have been
previously approved by the Administrative Committee and, upon
Administrative Committee approval of criteria and guidelines, and
consistent with such criteria and guidelines, dispose of equipment and
material jointly owned by the Participants as and when the Project
Manager or Operating Agent shall determine that such equipment and
material is no longer used or useful in the performance of
Construction Work or Operating Work or in making Capital Improvements.
3. AGREEMENT:
In consideration of the terms and conditions contained in this
Amendment No. 8 to the Participation Agreement, the Parties agree as
follows:
4. EFFECTIVE DATE:
This Amendment No. 8 shall become effective when executed by all the
Participants.
5. AMENDMENT NO. 8 TO THE PARTICIPATION AGREEMENT:
5.1 Amendment to Section 3.28.
Section 3.28 shall be deleted in its entirety and a new
Section 3.28 shall be added to read as follows:
"3.28 Generation Entitlement Share: The percentage
entitlement of each Participant to the New Energy
Generation and to the Available Generating
Capability. Each Participant's percentage
entitlement is as follows:
<PAGE>
3.28.1 Arizona = 29.1 percent
3.28.2 Salt River Project = 23.19 percent
3.28.3 Edison = l5.8 percent
3.28.4 PNM = 10.2 percent
3.28.5 E1 Paso = 15.8 percent
3.28.6 SCPPA = 5.91 percent"
5.2 New Section 6.2.11.
A new Section 6.2.11 shall be added to read as follows:
"6.2.11 Review, modify if necessary and approve a form of contract
recommended by the Engineering and Operating Committee pursuant
to Section 6.3.5, which may be executed by the Project Manager,
pursuant to Section 7.3.34, or the Operating Agent, pursuant to
Section 8.3.27, as applicable, for and on behalf of all
Participants concerning mutual assistance among the parties
thereto in the nature of the temporary borrowing, loan or
exchange of personnel, equipment or material."
5.3 New Section 6.2.12.
A new Section 6.2.12 shall be added to read as follows:
"6.2.12 Review, modify if necessary and approve criteria and guidelines
which are to be utilized by the Project Manager or Operating
Agent, as the case may be, concerning (i) the sale, transfer or
conveyance of equipment or materials acquired for use in the
performance of Construction Work,
<PAGE>
Operating Work or the construction, operation or maintenance of
Capital Improvements which are no longer required for such
purposes and (ii) the disposal of retired Units of Property
pursuant to Section 18.8. Such criteria and guidelines are to be
developed by the Project Manager and shall be reviewed and
modified as necessary by the Engineering and Operating Committee
prior to being forwarded to the Administrative Committee. Such
criteria and guidelines shall also include any specific
requirements which may be deemed necessary with respect to the
sale, transfer or conveyance, by a non-competitive bid process,
of such equipment or materials or retired Units of Property to
any Participant of subsidiary thereof, the Project Manager or the
Operating Agent."
5.4 New Section 6.3.5.
A new section 6.3.5 shall be added to read as follows:
"6.3.5 Develop and recommend to the Administrative Com-mittee a form of
contract which may be executed by the Project Manager, pursuant
to Section 7.3.34, or the Operating Agent, pursuant to Section
8.3.27, as applicable, for and on behalf of all Participants
concerning mutual assistance among the parties thereto in the
nature of the temporary borrowing, loan or exchange of personnel,
equipment or material.
<PAGE>
5.5 New Section 6.3.6.
A new Section 6.3.6 shall be added to read as follows:
"6.3.6 Review, modify as necessary and forward to the Administrative
Committee for their approval, criteria and guidelines to be
developed by the Project Manager which are to be utilized by the
Project Manager or the Operating Agent, as the case may be,
concerning (i) the sale, transfer or conveyance of equipment or
materials acquired for use in the performance of Construction
Work, Operating Work or the construction, operation or
maintenance of Capital Improvements which are no longer required
for such purposes and (ii) the disposal of retired Units of
Property pursuant to Section 18.8."
5.6 New Section 7.3.34.
A new Section 7.3.34 shall be added to read as follows:
"7.3.34 Enter into mutual assistance agreements with utilities and others
providing for the temporary borrowing, loan or exchange of
personnel, equipment or material upon request of any party to
such agreement; provided that each such agreement shall be in a
form as approved by the Administrative Committee pursuant to
Section 6.2.11 and shall include such warranty, indemnity,
insurance and other provisions as such committee may have deemed
appropriate."
<PAGE>
5.7 New Section 7.3.35.
A new section 7.3.35 shall be added to read as follows:
"7.3.35 Develop and recommend to the Engineering and Operating Committee
for their review, modification if necessary and forwarding to the
Administrative Committee for the final review, modification if
necessary and approval, criteria and guidelines to be utilized by
the Project Manager or Operating Agent, as the case may be,
concerning (i) the sale, transfer or conveyance of equipment or
materials acquired for use in the performance of Construction
Work, Operating Work or the construction, operation or
maintenance of Capital Improvements which are no longer required
for such purposes and (ii) the disposal of retired Units of
Property pursuant to Section 18.8."
5.8 New Section 7.3.36
A new Section 7.3.36 shall be added to read as follows:
"7.3.36 Consistent with the criteria and guidelines approved by the
Administrative Committee pursuant to Section 6.2.12(i), sell,
transfer and convey for and on behalf of all Participants to any
entity, including without limitation any Participant or the
Operating Agent, any and all equipment or material acquired for
use in the performance of Construction Work, provided that at the
time of such sale, transfer or conveyance (i) the Project Manager
shall have determined that such equipment or material is no
longer used or useful for
<PAGE>
ANPP, (ii) the Project Manager shall sell, transfer or convey any
such equipment or material only on an "as is" basis without any
representation or warranty as to quality, condition or fitness
for any purpose and (iii) proceeds, if any, received therefrom
shall be credited or distributed to the Participants in
proportion to their Generation Entitlement Shares."
5.9 New Section 8.3.27.
A new Section 8.3.27 shall be added to read as follows:
"8.3.27 Enter into mutual assistance agreements with utilities and others
providing for the temporary borrowing, loan or exchange of personnel,
equipment or material upon request of any party to such agreement;
provided that each such agreement shall be in a form as approved by the
Administrative Committee pursuant to Section 6.2.11 and shall include
such warranty, indemnity, insurance and other provisions as such
committee shall deem appropriate."
<PAGE>
5.10 New Section 8.3.28.
A new Section 8.3.28 shall be added to read as follows:
"8.3.28 Consistent with the criteria and guidelines approved by the
Administrative Committee pursuant to Section 6.2.12(i), sell, transfer
and convey for and on behalf of all Participants to any entity,
including without limitation any Participant, any and all equipment or
material acquired for use in the performance of Operating Work, or
acquired for use in the construction, operation or maintenance of any
Capital improvement; provided that at the time of such sale, transfer
or conveyance (i) the Operating Agent shall have determined that such
equipment or material is no longer used or useful for ANPP, (ii) the
Operating Agent shall sell, transfer or convey any such equipment or
material only on an `as is' basis without any representation or
warranty as to quality, condition or fitness for any purpose and (iii)
proceeds, if any, received therefrom shall be credited or distributed
to the Participants in proportion to their Generation Entitlement
Shares."
5.11 Amendment to Section 18.8.
Section 18.8 shall be deleted in its entirety and a new
Section 18.8 shall be added to read as follows:
"18.8 Units of Property retired from service, whether
<PAGE>
considered original construction or Capital Improvements, shall
be disposed of by the Oper-ating Agent on the best available
terms as soon as practicable consistent with the criteria and
guidelines approved by the Administrative Committee pursuant to
Section 6.2.12(ii); provided that at the time of such disposal
(i) the Operating Agent shall have determined that such Units of
Property are no longer used or useful for ANPP, (ii) the
Operating Agent shall dispose of such Units of Property only on
an `as is' basis without any representation or warranty as to
quality, condition or fitness for any purpose and (iii) proceeds,
if any, received therefrom shall be credited or distributed to
the Participants in proportion to their Generation Entitlement
Shares."
5.12 New Section 38.1.6.
A new Section 38.1.6 shall be added to read as follows:
"38.1.6 Southern California Public Power Authority
c/o Executive Director
Room 300 613 East Broadway
Glendale, California 91205"
5.13 Except as otherwise provided, the amended Participation Agreement, as
amended by this Amendment No. 8, shall remain in full force and effect.
<PAGE>
6. EXECUTION BY COUNTERPARTS:
This Amendment No. 8 may be executed in any number of counterparts, and
upon execution by all Participants, each executed counterpart shall have
the same force and effect as an original instrument and as if all
Participants had signed the same instrument. Any signature page of this
Amendment No. 8 may be detached from any counterpart of this Amendment No.
8 without impairing the legal effect of any signatures thereon, and may be
attached to another counterpart of this Amendment No. 8 identical in form
hereto but having attached to it one or more signature pages.
7. SIGNATURE CLAUSE:
The signatures hereto represent that they have been appropriately
authorized to enter into this Amendment No. 8 on behalf of the party for
whom they sign. This Amendment No. 8 is hereby executed as of the
___________ day of ___________, 1983.
ARIZONA PUBLIC SERVICE COMPANY
By
----------------------------
Its
---------------------------
SALT RIVER PROJECT AGRICULTURAL
IMPROVEMENT AND POWER DISTRICT
ATTEST AND COUNTERSIGN:
By
- --------------------------------- ----------------------------
Its Its
----------------------------- ---------------------------
<PAGE>
SOUTHERN CALIFORNIA EDISON COMPANY
By
--------------------------------
Its
-------------------------------
PUBLIC SERVICE COMPANY OF NEW MEXICO
By
---------------------------------
Its
--------------------------------
EL PASO ELECTRIC COMPANY
By
---------------------------------
Its
--------------------------------
SOUTHERN CALIFORNIA PUBLIC POWER
AUTHORITY, doing business in the State of
Arizona as SOUTHERN CALIFORNIA
PUBLIC POWER AUTHORITY ASSOCIATION
ATTEST
By
- --------------------------------- ---------------------------------
Its Its
----------------------------- --------------------------------
<PAGE>
Exhibit 10.59
CERTAIN RIGHTS OF THE LESSOR UNDER THIS LEASE AND IN THE UNDIVIDED INTEREST
COVERED HEREBY HAVE BEEN ASSIGNED TO, AND ARE SUBJECT TO A SECURITY INTEREST IN
FAVOR OF, CHEMICAL BANK, AS INDENTURE TRUSTEE. THIS LEASE HAS BEEN EXECUTED IN
SEVERAL COUNTERPARTS. SEE SECTION 20(e) FOR INFORMATION CONCERNING THE RIGHTS
OF HOLDERS OF VARIOUS COUNTERPARTS HEREOF.
THIS COUNTERPART IS THE ORIGINAL COUNTERPART
================================================================================
AMENDED AND RESTATED LEASE
dated as of
September 1, 1993
between
THE FIRST NATIONAL BANK OF BOSTON,
not in its individual capacity, but solely as Owner Trustee under a Trust
Agreement dated as of January 2, 1985 with DCC Project Finance Two, Inc.
Lessor
and
PUBLIC SERVICE COMPANY OF NEW MEXICO
Lessee
================================================================================
EASTERN INTERCONNECTION PROJECT LEASE
<PAGE>
THIS AMENDED AND RESTATED LEASE dated as of September 1, 1993, between
THE FIRST NATIONAL BANK OF BOSTON, not in its individual capacity but solely as
Owner Trustee under a Trust Agreement dated as of January 2, 1985 with DCC
Project Finance Two, Inc., as lessor (the Lessor), and PUBLIC SERVICE COMPANY OF
NEW MEXICO, a New Mexico corporation, as lessee (the Lessee).
W I T N E S S E T H :
WHEREAS, the parties hereto have heretofore executed and delivered the
Lease dated February 5, 1985 with respect to the Undivided Interest (such Lease,
as amended and/or supplemented by (i) Supplement Number One thereto dated as of
September 30, 1985 and (ii) Lease Amendment No. 2 thereto dated as of March 7,
1987, being hereinafter called the "Original Lease"), which Lease was recorded
(a) at Volume Misc. 174, page 808 in the Office of the County Clerk of Sandoval
County, New Mexico, (b) at Volume 512, page 608 in the Office of the County
Clerk of Santa Fe County, New Mexico, (c) at Volume Misc. 230, page 2850 in the
Office of the County Clerk of San Miguel County, New Mexico, (d) at Volume Misc.
52, page 701, in the Office of the County Clerk of Guadalupe County, New Mexico,
(e) at Volume 57 Misc., page 843, in the Office of the County Clerk of De Baca
County, New Mexico, (f) at Volume Misc. 76, page 353, in the Office of the
County Clerk of Quay, County, New Mexico, (g) at Volume Misc. 45, page 459, in
the Office of the County Clerk of Roosevelt County, New Mexico, and (h) at
Volume 94 Misc., page 521, in the Office of the County Clerk of Curry County,
New Mexico; and
WHEREAS, in connection with the prepayment of the Initial Series Note
as contemplated by the Amended and Restated Participation Agreement of even date
hereof among the Lessor, the Lessee and the other parties named therein, the
parties hereto have agreed to amend and restate the Original Lease in the terms
set forth herein;
NOW, THEREFORE, in consideration of the premises and of other good and
valuable consideration, receipt of which is hereby acknowledged, the parties
hereto agree as follows:
SECTION 1. DEFINITIONS.
For purposes hereof, capitalized terms used herein shall have the
meanings set forth in Appendix A hereto. References in this Agreement to
sections, paragraphs and clauses are to sections, paragraphs and clauses in this
Lease unless otherwise indicated.
SECTION 2. LEASE OF UNDIVIDED INTEREST; TERM.
Upon and subject to the terms and conditions of this Lease, the Lessor
hereby agrees to lease to the Lessee, and the Lessee hereby agrees to lease from
the Lessor, the Undivided Interest. The term of this Lease (the LEASE TERM)
began on February 5, 1985
1
<PAGE>
and shall end on April 1, 2015, or such earlier or later date on which, or to
which, this Lease shall have been terminated, extended or renewed pursuant to
the terms hereof.
SECTION 3. RENT; ADJUSTMENTS TO RENT.
(a) Basic Rent. The Lessee shall pay to the Lessor as basic rent
(Basic Rent) for the Undivided Interest, the following amounts:
(1) (i) on October 1, 1993, an amount equal to the product obtained
by multiplying Lessor's Cost by 0.0000000%; (ii) on April 1, 1994, an
amount equal to the product obtained by multiplying Lessor's Cost by
3.9629251%; (iii) on October 1, 1994, an amount equal to the product
obtained by multiplying Lessor's Cost by 5.1917930%; and (iv) on each Basic
Rent Payment Date during the Basic Term from and including April 1, 1995 to
and including April 1, 2015 (unless the Basic Term is terminated prior to
such date in accordance with the terms hereof), an amount, determined
initially on the basis of the Pricing Assumptions, but subject to
adjustments pursuant to Section 3(d), equal to the product obtained by
multiplying Lessor's Cost by 5.1222827%;
(2) on each Basic Rent Payment Date subsequent to the date of
execution of a Lease Supplement in respect of any Additional Equity
Investment or Supplemental Financing and during the Basic Term, an amount
set forth in, and determined under, such Lease Supplement, subject to
adjustments pursuant to Section 3(d);
(3) on the date of any refunding of the Refunding Notes or any
Additional Notes which shall occur on any date other than a Basic Rent
Payment Date, an amount equal to any principal of, and premium, if any, and
interest on, the Notes so refunded and payable on the date of such
refunding in accordance with the terms of such Notes;
(4) on each Basic Rent Payment Date during any Fixed Rent Renewal
Term permitted pursuant to Section 13(a)(2), an amount equal to 50% of the
installment of Basic Rent paid or payable on the last Basic Rent Payment
Date; and
(5) on each Basic Rent Payment Date during any Fair Market Renewal
Term permitted pursuant to Section 13(a)(1), an amount equal to the Fair
Market Rental Value of the Undivided Interest established for such Fair
Market Renewal Term pursuant to Section 13(b).
(b) Supplemental Rent. The Lessee shall pay the following amounts as
supplemental rent (Supplemental Rent):
(1) on demand, any amount (other than Basic Rent, Casualty Value,
Special Casualty Value and Early Purchase Value) which the Lessee assumes
the obligation to pay, or agrees to pay, under this Lease (including each
Lease Supplement) or any other Transaction Document;
2
<PAGE>
(2) on the date herein provided, any amount, or the sum of any amounts,
payable hereunder (including each Lease Supplement) as Casualty Value,
Special Casualty Value or Early Purchase Value; and
(3) on demand and in any event on the next succeeding Basic Rent
Payment Date, to the extent permitted by applicable law, interest (computed
on the basis of a 360-day year of twelve 30-day months) at a rate per annum
equal to (i) the Overdue Interest Rate, on that portion of any payment of
Basic Rent or Supplemental Rent distributable pursuant to clause "first" of
Section 5.1 or clause "second" of Section 5.3 of the Indenture (determined
prior to the computation of interest on overdue payments referred to in
such clauses), and (ii) 2% over the Prime Rate, on the balance of any such
payment of Basic Rent or Supplemental Rent (including, in the case of both
clause (i) and clause (ii) above, but without limitation, to the extent
permitted by law, interest payable pursuant to this clause (3)) not paid
when due (whether or not declaration of this Lease to be in default for
such nonpayment is subject to any period of grace) for any period for which
the same shall be overdue.
In the event of any failure on the part of the Lessee to pay any Supplemental
Rent when the same shall become due and payable, the Lessor shall have all
rights, powers and remedies provided for in this Lease or in equity or otherwise
in the case of nonpayment of Basic Rent.
(c) Form of Payment. All payments of Rent shall be made by wire
transfer of immediately available funds on the date each such payment shall be
payable hereunder and shall be paid to either (i) in the case of payments other
than Excepted Payments, the Lessor at its address set forth in Section 17 or to
such other Person at such other address in New York, New York as the Lessor may
direct by notice in writing to the Lessee, or (ii) in the case of Excepted
Payments, the Person entitled to receive such payments under the terms hereof
(including each Lease Supplement) or of any other Transaction Document at such
address in New York, New York as such Person may direct by notice in writing to
the Lessee. The Lessee shall cause each such wire transfer to be initiated by
such time as to permit oral confirmation thereof (specifying the wire number) to
be given no later than 11:00 a.m., New York City time on the date the
corresponding payment of Rent is payable hereunder, and shall cause such
confirmation to be duly given in each such case. If the date on which any
payment of Rent is due shall not be a Business Day, such payment shall be
payable on the next succeeding Business Day, together with interest thereon at
the Overdue Interest Rate or 2% over the Prime Rate, as the case may be, for the
period from, and including, the due date to, but excluding, such next succeeding
Business Day.
(d) Adjustments. Basic Rent payable under Section 3(a)(1) and
Section 3(a)(2) and the Schedules of Casualty Value, Special Casualty Value and
Early Purchase Value attached hereto from time to time (after giving effect to
any prior adjustments pursuant to this Section 3(d)) shall be subject to
adjustment, upward or downward, to reflect and to preserve Net Economic Return
in consequence of, any Additional Equity Investment, any Supplemental
3
<PAGE>
Financing, or any refunding of the Refunding Notes, any Additional Notes or
all Notes, which adjustment shall be made on or before the Basic Rent Payment
Date next following such refunding, shall take into account the terms of such
refunding, Additional Equity Investment or Supplemental Financing (including,
without limitation, any payment of principal, premium, if any, and interest on
any Notes refunded and paid on or to a date other than a Basic Rent Payment
Date), and shall be effective as of the date of such Additional Equity
Investment, Supplemental Financing or refunding.
(e) Adequacy and Confirmation of Adjustments. Notwithstanding any
adjustment pursuant to this Section 3, each installment of Basic Rent, as
adjusted, shall be, under any circumstances and in any event, at least
sufficient to pay on each Basic Rent Payment Date thereafter all principal of,
and premium, if any, and interest on, all Notes then due and payable. The
amount of any such adjustment shall first be determined by the Owner
Participant, in its sole discretion, but shall be subject to verification by
Salomon Brothers Inc if the Lessee shall so request. Subject only to such
verification, such adjustment shall be conclusive and binding on the Lessee if
the Owner Participant confirms to the Lessee in writing that such adjustment was
computed on a basis consistent with the original computation of Basic Rent and
Casualty Value, Special Casualty Value and Early Purchase Value. Each
adjustment pursuant to this Section 3 shall be evidenced by the execution and
delivery of a Lease Supplement, but shall be effective as provided herein
without regard to when such Lease Supplement is so executed and delivered.
SECTION 4. NET LEASE.
This Lease shall be a net lease and the Lessee hereby acknowledges and
agrees that the Lessee's obligation to pay all Rent hereunder, and the rights of
the Lessor in and to such Rent, shall be absolute and unconditional and shall
not be affected by any circumstances of any character, including, without
limitation, (i) any set-off, abatement, counterclaim, suspension, recoupment,
reduction, defense or other right which the Lessee may have against the Lessor,
the Owner Participant, Funding Corp, the Indenture Trustee, the Collateral Trust
Trustee, the Contractor or any vendor or manufacturer of any equipment or assets
incorporated in the Transmission System or any other Person for any reason
whatsoever, (ii) any defect in or failure of the title, merchantability,
condition, design, compliance with specifications, operation or fitness for use
of all or any part of the Transmission System, (iii) any loss, theft or
destruction of all or any part of the Transmission System, or any interference,
interruption or cessation in the use or possession thereof or of the Undivided
Interest by the Lessee by any Person for any reason whatsoever or of whatever
duration, (iv) any restriction, prevention or curtailment of or interference
with any use of all or any part of the Transmission System or of the Undivided
Interest, (v) any insolvency, bankruptcy, reorganization or similar proceeding
by or against the Lessee, the Lessor, the Owner Participant, Funding Corp or any
other Person, (vi) the invalidity, illegality or unenforceability of this Lease
or of any other Transaction Document or any other infirmity herein or therein or
any lack of right, power or authority of the Lessor or the Lessee, the Owner
Participant, Funding Corp, the Indenture Trustee or any other party to enter
into this Lease or any other Transaction Document, (vii) the breach or failure
of any
4
<PAGE>
warranty or representation made in this Lease or in any other Transaction
Document by the Lessor, the Owner Participant, Funding Corp, the Indenture
Trustee or any other Person, (viii) any amendment or other change of, or any
assignment of rights under, this Lease, or any other Transaction Document, or
any waiver or any other action or inaction under or in respect of this Lease
or any other Transaction Document, or any exercise or nonexercise of any right
or remedy under this Lease or any other Transaction Document, including,
without limitation, the exercise of any foreclosure or other remedy under the
Indenture, the Refunding Collateral Trust Indenture, or this Lease, or the
sale of the Transmission System, the Undivided Interest, or any part thereof
or any interest therein, or (ix) any other circumstance or happening
whatsoever whether or not similar to any of the foregoing. The Lessee hereby
waives, to the extent permitted by applicable law, any and all rights which it
may now have or which at any time hereafter may be conferred upon it, by
statute or otherwise, to terminate, cancel, quit or surrender this Lease
except in accordance with the express terms hereof. If for any reason
whatsoever this Lease shall be terminated in whole or in part by operation of
law or otherwise, except as specifically provided herein, the Lessee
nonetheless agrees to pay to the Lessor an amount equal to each installment of
Basic Rent and all Supplemental Rent at the time such payment would have
become due and payable in accordance with the terms hereof had this Lease not
been terminated in whole or in part. Each payment of Rent made by the Lessee
shall be final, and the Lessee shall not seek to have any right to recover all
or any part of such payment from the Lessor or any other Person for any reason
whatsoever.
SECTION 5. RETURN OF TRANSMISSION SYSTEM.
(a) Return of Transmission System. Upon the expiration or
termination of t he Lease Term or the last applicable Renewal Term, as the case
may be, the Lessee will surrender possession of the Undivided Interest to the
Lessor, subject to the terms and provisions of the Support Agreements. At the
time of such return the Undivided Interest shall be free and clear of all Liens
(other than Lessor's Liens, Owner Participant's Liens and the Lien of the
Support Agreements), and the Transmission System shall be in the condition and
repair required by Section 8 hereof.
(b) Disposition Services. The Lessee agrees that if it does not
exercise its option to renew or purchase as provided in Sections 13 and 14,
respectively, then during the last twenty-four months of the Basic Term or the
applicable Renewal Term, as the case may be, the Lessee will fully cooperate
with the Lessor in connection with the Lessor's efforts to dispose of, and in
addition the Lessee will make a reasonable effort to dispose of, the Undivided
Interest and the Lessor's interest under the Support Agreements. The Lessor
agrees to reimburse the Lessee for its reasonable out-of-pocket costs and
expenses of such cooperation or such reasonable effort incurred, at the Lessor's
request, whether or not the Lessor disposes of the Undivided Interest.
SECTION 6. WARRANTY OF THE LESSOR.
5
<PAGE>
(a) Quiet Enjoyment. The Lessor warrants that during the Basic Term
and any applicable Renewal Term, if the Lessee is in compliance with each and
every term and provision of this Lease and each other Transaction Document to
which it is a party, the Lessee's use of the Transmission System, including
the Undivided Interest, shall not be interrupted by the Lessor or any Person
claiming through or under the Lessor, and their respective assigns.
(b) Disclaimer of Other Warranties. The warranty set forth in
Section 6(a) is in lieu of all other warranties of the Lessor, whether written,
oral or implied, with respect to this Lease, the Transmission System or the
Undivided Interest. As between the Lessor and the Lessee, execution by the
Lessee of this Lease (including each Lease Supplement) shall be conclusive proof
of the compliance of the Transmission System, any Alteration and any Replacement
Component and the Undivided Interest with all requirements of this Lease and any
such Lease Supplement, and THE LESSOR LEASES AND THE LESSEE TAKES THE UNDIVIDED
INTEREST AS IS AND WHERE IS, and the Lessor shall not be deemed to have made,
and THE LESSOR HEREBY DISCLAIMS, ANY OTHER REPRESENTATION OR WARRANTY, EITHER
EXPRESS OR IMPLIED, AS TO ANY MATTER WHATSOEVER, INCLUDING, WITHOUT LIMITATION,
THE DESIGN OR CONDITION OF THE TRANSMISSION SYSTEM OR THE UNDIVIDED INTEREST, OR
ANY PART THEREOF, THE MERCHANTABILITY THEREOF OR THE FITNESS THEREOF FOR ANY
PARTICULAR PURPOSE, TITLE TO THE TRANSMISSION SYSTEM OR THE UNDIVIDED INTEREST,
OR ANY PART THEREOF, THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREOF OR
CONFORMITY THEREOF TO THE PLANS AND SPECIFICATIONS, OR THE ABSENCE OF ANY LATENT
OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, NOR SHALL THE LESSOR BE LIABLE
FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING LIABILITY IN TORT, STRICT OR
OTHERWISE), it being agreed that all such risks, as between the Lessor and the
Lessee, are to be borne by the Lessee, but the Lessor authorizes the Lessee, at
the Lessee's expense, to assert for the Lessor's account, during the Lease Term,
so long as no Default or Event of Default shall have occurred and be continuing
hereunder, all of the Lessor's rights under any applicable warranty and any
other claims that the Lessee or the Lessor may have against the Contractor,
whether under the Construction Contract or otherwise, or any vendor,
manufacturer or sub-contractor with respect to the Transmission System or the
Undivided Interest hereunder or under the Purchase Documents, and the Lessor
agrees to cooperate, at the Lessee's expense, with the Lessee in asserting such
rights. Any amount received by the Lessee as payment under any such warranty or
other claim shall be applied first, to restore the Transmission System to the
condition required by Section 8 hereof, second, to reimburse the Lessee for its
reasonable out-of-pocket fees and expenses, if any, incurred in enforcing any
such warranty or other claim, and third, the balance, if any, of such amount
shall, to the extent, but only to the extent, of the Lessor's Share, be paid
over to and retained by the Lessor.
SECTION 7. LIENS.
The Lessee will not directly or indirectly create, incur, assume or
suffer to exist any Liens on or with respect to the Undivided Interest, the
Lessor's title thereto or any interest
6
<PAGE>
of the Lessor therein (and the Lessee will promptly, at its own expense, take
such action as may be necessary duly to discharge any such Lien), except
Permitted Liens.
SECTION 8. OPERATION AND MAINTENANCE; MARKING; INSPECTION.
(a) Operation and Maintenance. The Lessee covenants that it will (i)
operate, service and maintain the Transmission System so that the condition of
the Transmission System and the operating efficiency thereof will be maintained
and preserved, ordinary wear and tear excepted, in accordance with (x) Prudent
Utility Practice, (y) such operating standards as shall be required to enforce
warranty claims against the Contractor and all vendors, manufacturers and
subcontractors; provided, however, that the Lessee may operate the Blackwater
HVDC Station at levels above the limits provided by the Contractor under the
Construction Contract in respect of the Contractor's warranties so long as such
operation will not, in the Lessee's reasonable judgment, cause damage to the
Blackwater HVDC Station or reduce the useful life of the Transmission System and
(z) the terms and conditions of all insurance policies in effect at any time
with respect to the Transmission System, the Undivided Interest or any part
thereof, (ii) comply with all Governmental Rules, whether pertaining to health,
safety, the environment or otherwise, affecting the Transmission System and the
use, operation and maintenance thereof, and (iii) keep and maintain proper books
and records relating to all services rendered and all funds expended for
operation and maintenance of the Transmission System and the acquisition,
construction and installation of all Replacement Components and Alterations
incorporated in the Transmission System, all in accordance with the Uniform
System of Accounts and customary practices in the electric utility industry in
the Southwestern region of the United States of America. The Lessor shall not
be obliged in any way to maintain, alter, repair, rebuild or replace the
Undivided Interest or the Transmission System or any portion thereof, and the
Lessee expressly waives the right to perform any such action at the expense of
the Lessor pursuant to any law at any time in effect.
(b) Inspection. The Lessor, the Owner Participant, the Indenture
Trustee and the Collateral Trust Trustee shall have the right, but not the duty,
to inspect the Transmission System at their expense. Upon the request of the
Lessor, the Owner Participant, the Indenture Trustee or the Collateral Trust
Trustee, the Lessee shall, at any reasonable time, make the Transmission System,
and the Lessee's operating, maintenance and repair records pertaining to the
Transmission System, available to the Lessor, the Owner Participant, the
Indenture Trustee or the Collateral Trust Trustee for inspection at such times
during business hours as the Lessor, the Owner Participant, the Indenture
Trustee or the Collateral Trust Trustee may reasonably request.
(c) Replacement of Components. If and to the extent required by
paragraph (a) above and in compliance with the Lessee's covenant and agreement
thereunder, unless prohibited by applicable Governmental Rule, the Lessee, at
its sole expense, will promptly replace each necessary and useful Component, the
replacement of which shall be required in accordance with Prudent Utility
Practice (each replacement of a Component being herein referred to as a
Replacement Component), which may from time to time be incorporated in the
7
<PAGE>
Transmission System and which may from time to time fail to function in
accordance with its intended use, or become worn out, destroyed, damaged beyond
repair, lost, condemned, confiscated, stolen or seized for any reason
whatsoever. In addition, in the ordinary course of maintenance, service, repair
or testing, the Lessee may remove any Component; provided, however, that the
Lessee shall cause such Component to be replaced by a Replacement Component as
promptly as practicable and, subject to this paragraph (c), the Lessee shall be
entitled to retain the entire amount of the net proceeds of (including the
Undivided Interest in the net proceeds of) any sale or disposition of such
removed Component. Each Replacement Component shall be free and clear of all
Liens except Permitted Liens and shall be in as good operating condition as, and
shall have a value and utility at least equal to, the Component replaced,
assuming such replaced Component was in at least the condition and repair
required to be maintained under paragraph (a) above. The Undivided Interest in
each Component at any time removed from the Transmission System shall remain the
property of the Lessor, no matter where located, until such time as such
Component shall be replaced by a Replacement Component which has been
incorporated in the Transmission System (including the Undivided Interest) and
which meets the requirements for Replacement Components specified above.
Immediately upon any Replacement Component becoming incorporated in the
Transmission System, without further act, (i) title to an Undivided Interest in
the removed Component shall thereupon vest in the Lessee or such other Person as
shall be designated by the Lessee, free and clear of all rights of the Lessor,
the Indenture Trustee or the Collateral Trust Trustee, (ii) title to an
undivided interest in such Replacement Component, the percentage of which shall
be equal to the Lessor's Share, shall thereupon vest in the Lessor and (iii)
such undivided interest in such Replacement Component shall become subject to
this Lease and be deemed part of the Undivided Interest and the Transmission
System for all purposes hereof to the same extent that the Lessor had an
Undivided Interest in the Component originally incorporated in the Transmission
System.
(d) Required Alterations. The Lessee shall make all Severable and
Nonseverable Alterations to the Transmission System as may be required from time
to time to maintain the Transmission System in accordance with Prudent Utility
Practice or to meet applicable Governmental Rules (all such Alterations being
herein referred to as Required Alterations). All Required Alterations shall be
completed in a good and workmanlike manner, with reasonable dispatch.
(e) Optional Alterations. The Lessee may from time to time make
such Severable and Nonseverable Alterations to the Transmission System which are
not Required Alterations (all such Alterations being herein referred to as
Optional Alterations) as the Lessee, in its sole discretion, may deem desirable
in the proper conduct of its business; provided, however, that no Optional
Alteration shall diminish the value, utility or condition of the Transmission
System below the value, utility and condition thereof immediately prior to such
Optional Alteration, assuming the Transmission System was then in at least the
condition and repair required to be maintained by the terms of this Lease. If
at any time the Lessee shall propose to incorporate in the Transmission System
any Nonseverable Optional Alteration with a cost in excess of $2,000,000, the
Lessee will give to the Lessor 30 days' prior written notice thereof, including
the Lessee's proposal for the financing of the cost of the Lessor's Undivided
8
<PAGE>
Interest therein. Such alteration shall be subject to the Lessor's consent;
provided, however, that if the Lessor shall not have objected to the
incorporation of such proposed Nonseverable Optional Alteration in the
Transmission System within such 30-day period, the Lessor will be deemed to have
consented thereto. In such connection, the Lessor acknowledges that its
interest in the Transmission System is only with respect to its Undivided
Interest and, therefore, that the Lessee shall be required to take into account
the rights and interests of all other Persons having an undivided interest in
the Transmission System, including any undivided interest in such proposed
Nonseverable Optional Alteration. All Optional Alterations shall be completed
in a good and workmanlike manner, with reasonable dispatch.
(f) Reports of Alterations. On or before April 1 of each year
throughout the Lease Term, commencing April 1, 1993, the Lessee shall furnish
the Lessor with a report describing separately and in reasonable detail (i) each
Alteration having a cost in excess of $500,000 which was incorporated in the
Transmission System during the preceding calendar year and (ii) each Alteration
having an estimated cost in excess of $500,000 which the Lessee then proposes to
incorporate in the Transmission System during the calendar year which includes
the date of such report. Each such report shall indicate, separately with
respect to each Alteration, (x) in the case of Alterations referred to in clause
(i) above, the actual cost thereof, the arrangement for the financing thereof
and the Person or Persons who hold title thereto or to an undivided interest
therein in accordance with the provisions of paragraph (g) of Section 8, and (y)
in the case of Alterations referred to in clause (ii) above, the estimated cost
thereof, any proposed arrangement (including, without limitation,a proposed
Supplemental Financing and any request for Additional Equity Investment) for the
financing of an undivided interest therein, the percentage of which shall be
equal to the Lessor's Share and the Person who, upon completion could or, upon
completion of any plan for the financing of such an undivided interest would,
hold title thereto in accordance with the provisions of paragraph (g) of this
Section 8.
(g) Title to Alterations. Title to an undivided interest, the
percentage of which shall be equal to the Lessor's Share, in each Alteration
shall vest, as follows:
(1) in the case of each Alteration other than a Severable Optional
Alteration, whether or not the Lessor shall have financed or provided
financing (in whole or in part) for such undivided interest by an
Additional Equity Investment or a Supplemental Financing, or both,
effective on the date such Alteration shall have been incorporated in the
Transmission System, the Lessor shall, without further act, acquire title
to such undivided interest in such Alteration;
(2) in the case of each Severable Optional Alteration, if the Lessor
shall have financed (by an Additional Equity Investment or a Supplemental
Financing or both) its Share in any such Alteration, effective on the date
of payment, or the date on which the Lessor shall unconditionally be
obligated to make payment of an amount equal to the product obtained by
multiplying the cost (or the then estimated cost) thereof by the Lessor's
Share, the Lessor shall, without further act, acquire title to such
undivided interest in such Alteration; and
9
<PAGE>
(3) in the case of each Severable Optional Alteration the Lessor's
Share of the cost of which the Lessor does not finance, the Lessee shall
retain title to such undivided interest, and the Lessor shall have no
interest therein, and neither such Alteration nor any such undivided
interest shall thereafter be, or be deemed to be, incorporated in the
Undivided Interest.
Immediately upon title to such undivided interest in any Alteration vesting in
the Lessor pursuant to subparagraph (1) or (2) of this paragraph (g), such
undivided interest in such Alteration shall, without further act, become subject
to this Lease and be deemed part of the Undivided Interest and the Transmission
System for all purposes hereof.
(h) Funding of Alterations and Replacement Components. The Lessee
may request that the Lessor provide financing of an undivided interest in (i)
any Alteration or (ii) the Incremental Cash Cost of any Replacement Component
incorporated in the Transmission System at any time during the preceding twelve
months, in each case in an amount equal to the product obtained by multiplying
the actual cost thereof or the Incremental Cash Cost thereof by the Lessor's
Share; provided that in each case the actual cost and the Incremental Cash Cost
of all Alterations and Replacement Components included in such request shall
exceed the Lessor's Share of $3,000,000. Such request may be made (i) in the
notice given under paragraph (e) above in respect of each such Nonseverable
Optional Alteration, (ii) in the report given under paragraph (f) above in
respect of each such Alteration other than a Nonseverable Optional Alteration,
or (iii) on February 1 of each year during the Lease Term, commencing February
1, 1993, in respect of the Incremental Cash Cost of each such Replacement
Component. With respect to (i), (ii) and (iii) of the preceding sentence, the
Lessor may, with funds provided by the Owner Participant in its sole discretion,
make an additional direct investment in any such Alteration or the Incremental
Cash Cost of any such Replacement Component (any such direct investment being
herein referred to as an Additional Equity Investment). If no Default or Event
of Default shall have occurred and be continuing and if the Lessee so elects,
the Lessee shall have the right to cause the Lessor, without the Lessor's
consent, to issue one or more Additional Notes to finance (x) the difference
between (A) an amount equal to the product obtained by multiplying the actual
cost of any such Alteration or the Incremental Cash Cost of any such Replacement
Component by the Lessor's Share, and (B) any Additional Equity Investment, or
(y) if the Owner Participant shall elect not to make any Additional Equity
Investment, the product obtained under sub-clause (A) of clause (x) above, by
arranging for one or more other Persons (other than a party affiliated with the
Lessee within the meaning of section 318 of the Code) to provide to the Lessor,
through the Indenture, the funds required to finance the amount determined under
clause (x) or clause (y) above (such financing being herein called a
Supplemental Financing); provided, however, that, unless the Lessor shall have
given its prior written consent, the Lessor shall not be obligated to accept any
Supplemental Financing pursuant to clause (y) above to the extent that the total
amount financed by the Lessor pursuant to such Supplemental Financing, when
added to the amount of previous Supplemental Financings under clause (y) above,
effected without the prior written consent of the Lessor, exceeds the Lessor's
Share of $10,000,000; and provided, further, that such Supplemental Financing
shall comply
10
<PAGE>
with the requirements of Section 3.5 of the Indenture, as if such requirement
were fully set forth herein and shall not, in the opinion of independent tax
counsel for the Owner Participant, adversely affect the status of this Lease
as a "true lease" for Federal income tax purposes or, in the opinion of the
Owner Participant, otherwise adversely affect the capacity or the anticipated
value or useful life of the Undivided Interest after the termination or
expiration of this Lease. The failure or inability of the Lessee to effect a
Supplemental Financing in respect of any such Alteration or the Incremental
Cash Cost of any such Replacement Component shall not in any manner affect (i)
the Lessee's obligation to make any Required Alteration or to incorporate such
Replacement Component in the Transmission System in accordance with the terms
of this Lease, in which case the Lessee shall carry out such obligation at its
own expense and title to such Alteration shall in such case vest as provided
in paragraph (g) of this Section 8, or (ii) the Lessee's obligations under the
Tax Indemnity Agreement. Any Supplemental Financing shall be conditioned upon
the Lessee's having a credit rating at the time of such Supplemental Financing
at least equal to the Lessee's credit rating at February 5, 1985. Each such
Supplemental Financing and each such Additional Equity Investment shall be
subject to the condition that the Owner Participant and the Lessee negotiate
in good faith the specific terms thereof, including, without limitation, (A)
the amount of such Additional Equity Investment, if any, (B) the terms of the
Additional Notes (including, but not limited to, interest rate, amortization
and maturity (which must be earlier than, or co-terminus with, the Basic
Term)), (C) the nature and extent of any Federal tax benefits attributable
thereto and to the Lessor's acquisition thereof and investment therein and
appropriate indemnification with respect to such tax benefits if, and to the
extent that the value thereof is reflected in adjustments referred to below,
(D) the net economic return then required by the Owner Participant in its sole
discretion, and (E) the adjustments to Basic Rent, Casualty Value, Special
Casualty Value and Early Purchase Value pursuant to Section 3(d). As soon as
possible thereafter, such terms shall be reflected in, and the Lessor and
Lessee shall execute, a Lease Supplement and the parties thereto shall execute
a Supplemental Indenture and amendments to any other Transaction Documents,
including, without limitation, the Tax Indemnity Agreement, affected thereby.
Except as amended or modified by such Lease Supplement, this Lease shall
continue in full force and effect.
(i) Marking. The Lessee agrees, at its own cost, expense and
liability, to maintain in a prominent place in the control room of the
Blackwater HVDC Station a durable, readily visible inscription of such type and
content as from time to time may be required by law or otherwise deemed
necessary by the Lessor or the Indenture Trustee in order to protect the title
of the Lessor to the Undivided Interest, the rights of the Lessor under this
Lease and the Lien of the Indenture Trustee under the Indenture. The Lessee
will replace promptly such marking if the same shall have been removed, defaced,
obliterated or destroyed.
SECTION 9. EVENT OF LOSS; DEEMED LOSS EVENT.
(a) Event of Loss. In the event that the Transmission System shall
suffer either (i) an Event of Loss or (ii) an event which, in the reasonable
opinion of the Lessee, might constitute an Event of Loss, such fact and the date
of the occurrence thereof shall promptly be
11
<PAGE>
reported by the Lessee to the Lessor. In the case of any event described in
clause (ii) of the preceding sentence, the Lessee shall determine, within six
months of the occurrence of such event, whether such event constitutes an
Event of Loss and shall furnish the Lessor with a copy of the opinion of an
independent engineer (to the extent required pursuant to the definition of
Event of Loss) upon which such determination is based.
(b) Payment of Casualty Value. In the case of an Event of Loss, on
the Basic Rent Payment Date next following the date of any report given pursuant
to paragraph (a) above (but in no event later than the six month period referred
to in paragraph (a)), the Lessee shall pay to the Lessor Casualty Value
determined as of such Basic Rent Payment Date, plus any Basic Rent or
Supplemental Rent then owing. Upon receipt of such amount, the Lessor shall
terminate the Easement and the Operating Agreement and transfer the Undivided
Interest to the Lessee on an as is, where is basis, free and clear of all
Lessor's Liens and Owner Participant's Liens, but without any other recourse,
representation or warranty, express or implied, by the Lessor or the Owner
Participant.
(c) Deemed Loss Event. In the case of a Deemed Loss Event, on the
last day of the month during which such event occurs or, if such last day shall
be less than 30 days following the date on which such event shall occur, on the
last day of the month following the month during which such event occurs, the
Lessee shall pay to the Lessor the Special Casualty Value applicable on such
date, plus any Supplemental Rent then owing. Upon payment of Special Casualty
Value the Lessor shall terminate the Easement and the Operating Agreement and
transfer the Undivided Interest to the Lessee on an as is, where is basis, free
and clear of all Lessor's Liens and Owner Participant's Liens, but without any
other recourse, representation or warranty, express or implied, by the Lessor or
the Owner Participant.
(d) Termination of Obligation. Upon satisfaction by the Lessee of
all requirements of either paragraph (b) or paragraph (c) above, as the case may
be, the Lessee's obligation to pay further Basic Rent shall cease, but the
Lessee's obligation to pay all Supplemental Rent becoming due before, on and
after such satisfaction shall remain unchanged and shall survive such
termination.
SECTION 10. INSURANCE.
The Lessee will, at its own expense, cause to be carried and
maintained insurance, with financially sound and reputable insurers satisfactory
to the Lessor, against damage to or destruction of any substations and the
Blackwater HVDC Station (but specifically excluding all towers and lines
included in the Transmission System), and liability insurance with respect to
third party bodily injury and property damage, in each case in amounts (after
deductibles) and against risks (i) consistent with Prudent Utility Practice,
(ii) at least comparable in amounts and against risks customarily insured
against by the Lessee or others in the electric utility business in the
Southwestern region of the United States and (iii) sufficient to prevent the
Lessor and the Indenture Trustee from becoming at any time a coinsurer with
respect to any loss relating to events or occurrences covered under any policy;
provided, however, that in the case of insurance
12
<PAGE>
in respect of damage to or destruction of the Transmission System, the Lessee
shall not be required to insure towers and lines, but the insurance so
provided shall cover the loss of or damage to any substations included in the
Transmission System and the Blackwater HVDC Station and such insurance shall
be in an amount equal to that portion of Casualty Value which bears the same
relation to Casualty Value as the aggregate construction cost of such
substations and Station bears to Transmission System Cost. Any policies with
respect to such insurance shall (i) name the Lessee, the Lessor, the Owner
Participant and the Indenture Trustee as insureds and loss payees, as their
interests may appear, (ii) provide for at least 60 days prior written notice
by the insurance carrier to the Lessor, the Owner Participant and the
Indenture Trustee in the event of cancellation, expiration or material
modification thereof, (iii) waive any right to claim any premiums or
commissions against the Lessor, the Owner Participant or the Indenture
Trustee, (iv) provide that the insurers shall waive any rights of subrogation
against the Lessor, the Owner Participant or the Indenture Trustee, (v)
provide that if such insurance is cancelled for any reason whatsoever, or any
substantial change is made in the coverage which affects the interest of the
Lessor, the Owner Participant or the Indenture Trustee, or if such insurance
is allowed to lapse for nonpayment of premium, such cancellation, change or
lapse shall not be effective against the Lessor, the Owner Participant or the
Indenture Trustee for 60 days after receipt by the Lessor, the Owner
Participant and the Indenture Trustee, respectively, of written notice from
any applicable insurers of such cancellation, change or lapse, and (vi)
provide that each of the Lessor, the Owner Participant and the Indenture
Trustee shall be permitted to make payments to effect the continuation of such
insurance coverage upon notice of cancellation due to nonpayment of premiums.
Each such policy shall be primary without right of contribution from any other
insurance which is carried by the Lessor, the Owner Participant or the
Indenture Trustee with respect to its interest in the Transmission System. The
Lessee shall, on or before April 1 of each year, commencing April 1, 1994,
furnish to the Lessor, the Owner Participant and the Indenture Trustee (i) a
certificate signed by an independent insurance broker satisfactory to the
Lessor, the Owner Participant and the Indenture Trustee showing the insurance
then maintained by the Lessee pursuant to this Section 10 and stating that in
the opinion of such independent broker such insurance complies with the
provisions hereof, and (ii) copies of policies carried and maintained by the
Lessee pursuant to this Section 10. The Lessee shall not reduce the amounts of
its liability insurance as in effect on February 5, 1985. In the event that
the Lessee shall fail to maintain insurance as herein provided the Lessor, the
Owner Participant or the Indenture Trustee may at its option maintain
insurance which is required to be maintained by the Lessee hereunder, and, in
such event, the Lessee shall reimburse such party upon demand for the cost
thereof, together with interest thereon at the Overdue Interest Rate, as
Supplemental Rent. So long as no Default or Event of Default shall have
occurred and be continuing, all insurance proceeds paid in respect of damage
to or destruction of the Undivided Interest and received by the Lessor
(directly or from the Indenture Trustee) in respect of the Undivided Interest
with respect to an occurrence not constituting an Event of Loss shall be paid
to the Lessee. Nothing in this Section 10 shall prohibit the Lessee or the
Owner Participant from placing at its expense insurance on or with respect to
the Transmission System or the Undivided Interest, or the operation of either
thereof, naming the Lessee or the Owner Participant, as the case may be, as
insured and loss payee, in an amount exceeding the amount of insurance
required to be maintained by the Lessee hereunder
13
<PAGE>
from time to time, unless, in the case of insurance maintained by the Lessee,
such insurance would conflict with or otherwise limit the insurance to be
provided or maintained by the Lessee in accordance with this Section 10.
SECTION 11. INDEMNIFICATION.
The Lessee agrees, whether or not any of the transactions contemplated
hereby shall be consummated and whether or not this Lease shall have expired or
terminated, to assume liability for, and does hereby agree to indemnify,
protect, save and keep harmless each Indemnitee, on an After-Tax Basis, from and
against any and all Claims which may be imposed on, incurred by or asserted
against any Indemnitee, whether or not such Indemnitee shall also be indemnified
as to any such Claim by any other Person, (i) in any way relating to or arising
out of this Lease, any other Transaction Document or any Financing Document, or
the performance or enforcement of any of the terms hereof or thereof, (ii) in
any way relating to a disposition of all or any part of the Undivided Interest
in connection with a termination upon an Event of Default, an Event of Loss or a
Deemed Loss Event or (iii) in any way relating to or arising out of the design,
manufacture, erection, purchase, acceptance, rejection, financing, ownership,
delivery, lease, sublease, possession, use, operation, maintenance, condition,
sale, return, storage or disposition of the Transmission System or any accident
in connection therewith (including, without limitation, latent and other
defects, whether or not discoverable, and any Claim for patent, trademark,
service-mark or copyright infringement and expenses of any such Indemnitee
incurred in the administration of this Lease, any other Transaction Document or
any Financing Document, and not paid as a Transaction Expense or included in
Lessor's Cost, and reasonable fees and disbursements of outside counsel incurred
in connection therewith); provided, however, that the Lessee shall not be
required to indemnify any Indemnitee for (A) any Claim in respect of the
Transmission System or the Undivided Interest arising from acts or events which
occur after possession of the Undivided Interest has been redelivered to the
Lessor in accordance with Section 5 hereof (other than after an Event of
Default), except as provided in the Participation Agreement, (B) any Claim
resulting from acts which would constitute the willful misconduct or gross
negligence of such Indemnitee, (C) any Transaction Expenses to be paid by the
Lessor or the Owner Participant pursuant to Section 14 of the Amended and
Restated Participation Agreement, (D) any Claim resulting directly from a
transfer by such Indemnitee of all or part of its interest in this Lease, the
Undivided Interest or the Transmission System other than in connection with an
Event of Default, an Event of Loss, a Deemed Loss Event or the exercise by the
Lessor of its rights under Section 16 of this Lease, (E) any Claim, including
attorney fees, arising out of either (1) the preparation or approval of maps,
drawings, opinions, reports, surveys, change orders, designs or specifications
by such Indemnitee, or any agent or employee of such Indemnitee, or (2) the
giving of or the failure to give directions or instructions by such Indemnitee,
or any agent or employee of such Indemnitee, where such giving of or failure to
give directions or instructions is the primary cause of bodily injury to persons
or damage to property, or (F) any Claim in respect of the payment of principal,
premium, if any, or interest on the Notes or the Bonds. The Lessor shall have
no duty to give any such directions or instructions referred to in Clause (E)
above, except as expressly provided herein. To the extent that an Indemnitee in
fact receives indemnification payments from the Lessee under this
14
<PAGE>
Section 11, and so long as no Default or Event of Default shall have occurred
and be continuing, the Lessee shall be subrogated, to the extent of any
indemnity paid, to such Indemnitee's rights with respect to the transaction or
event requiring or giving rise to such indemnity.
SECTION 12. ASSIGNMENT OR SUBLEASE.
Without the prior written consent (which consent shall not be
unreasonably withheld) of the Lessor, the Lessee shall not assign, transfer,
encumber (except for Permitted Liens) or sublease its leasehold interest under
this Lease. The Lessee shall not, without the prior written consent of the
Lessor and the Owner Participant, part with the possession or control of, or
suffer or allow to pass out of its possession or control, the Transmission
System, except to the extent permitted by the provisions of this Section 12 or
the provisions of the Support Agreements. No wheeling agreement,
interconnection agreement, power sales contract, grant by the Lessee of any
right to tap the Transmission System or utility agreement or grant, however
denominated, shall be deemed to be an assignment, transfer, encumbrance or
sublease for purposes of this Section, so long as any such agreement or grant
shall not transfer possession or control of the Transmission System, or purport
to create or grant rights to use the Transmission System, beyond the end of the
Lease Term.
SECTION 13. LEASE RENEWALS.
(a) Lease Renewal. At the end of the Basic Term or the then
applicable Renewal Term, as the case may be, provided that no Default or Event
of Default shall have occurred and be continuing hereunder and the Notes shall
have been paid in full, the Lessee shall have the right to exercise one of the
following two options to renew the term of this Lease for the Renewal Term or
Renewal Terms described below:
(1) At the end of the Basic Term, the Fixed Rent Renewal Term, if
any, elected by the Lessee under clause (2) below, or any expiring Fair
Market Renewal Term theretofore elected by the Lessee under this clause
(1), upon notice given as provided in Section 13(b), the Lessee may renew
the term of this Lease during the remaining term of the Support Agreements
for one or more periods of not less than three years, nor more than five
years (each such period so determined being herein referred to as a Fair
Market Renewal Term), each at a Fair Market Rental Value, payable on each
Basic Rent Payment Date occurring during such Fair Market Renewal Term;
provided, however, that if the Lessee shall elect more than one Fair Market
Renewal Term, all such Fair Market Renewal Terms shall be successive; and
provided, further, that notwithstanding the foregoing, the last Fair Market
Renewal Term may be for a period of less than three years if the period
from the expiration of the preceding Fair Market Renewal Term to the
expiration date of the Support Agreements shall be less than three years;
and
15
<PAGE>
(2) Upon notice given as provided in Section 13(b), at the end of the
Basic Term only, the Lessee may renew the term of this Lease for one period
of not less than one year nor more than the Maximum Option Period (such
period so determined being herein referred to as the Fixed Rent Renewal
Term), in which case the Basic Rent payable under the Fixed Rent Renewal
Term shall be the rental provided in Section 3(a)(4) hereof.
(b) Notice; Appraisal. Not less than two years prior to the
expiration date of the Basic Term, or the then applicable Fixed Rent Renewal
Term or any then applicable Fair Market Renewal Term, the Lessee may indicate
its desire to exercise the lease renewal option described in either Section
13(a)(1) or, only in respect of the expiration of the Basic Term, Section
13(a)(2). Any such election shall be irrevocable, but shall be binding against
the Lessor only if on the effective date thereof no Default or Event of Default
shall have occurred and be continuing. The Maximum Option Period or the Fair
Market Rental Value of the Undivided Interest, as the case may be, shall be
established in accordance with the Appraisal Procedure. Upon a determination of
the Maximum Option Period the Lessor and the Lessee shall amend the Support
Agreements to extend the date of the expiration thereof to the then estimated
useful life of the Transmission System.
SECTION 14. PURCHASE OPTIONS.
(a) Unless a Default or Event of Default shall have occurred and be
continuing, the Lessee shall have the right to exercise one of the following
options to purchase the Undivided Interest:
(1) On the date of expiration of the Basic Term, the Fixed Rent
Renewal Term or any then applicable Fair Market Renewal Term, the Lessee
shall have the right upon not less than two years' prior written notice, to
purchase the Undivided Interest on the date of expiration of such Term at a
purchase price equal to the Fair Market Value thereof; or
(2) On the Basic Rent Payment Date designated in a written notice
given at least two years prior to such Basic Rent Payment Date (which date
may only be a Basic Rent Payment Date during the Basic Term occurring on or
after the thirtieth Basic Rent Payment Date), at a purchase price equal to
the greater of the Early Purchase Value applicable on the date of purchase
and the Fair Market Value of the Undivided Interest on such date, plus an
amount equal to the sum of any Basic Rent then owing and any premium due on
prepayment of the Notes.
(b) Any such election shall be irrevocable, but shall be binding
against the Lessor only if on the effective date thereof no Event of Default
shall have occurred and be continuing. If the Lessee shall have elected to
purchase the Undivided Interest, payment by the Lessee of the purchase price
thereof plus all Rent then due and owing shall be made in immediately available
funds against delivery of (i) a bill of sale transferring and assigning to the
Lessee all
16
<PAGE>
right, title and interest of the Lessor in and to the Undivided Interest free
and clear of all Lessor's Liens and all Owner Participant's Liens, but without
other recourse, representation or warranty, and (ii) the agreement of the Lessor
and the Indenture Trustee (in recordable form) terminating their respective
interests in the Undivided Interest and under the Transaction Documents to which
the Lessor or the Indenture Trustee, as the case may be, is a party, except that
indemnity obligations of the Lessee with respect to periods prior to the date of
termination shall survive. In connection with any sale by the Lessor to the
Lessee under this Section 14, the Lessor may specifically disclaim
representations and warranties (other than as contemplated by clause (i) of the
preceding sentence) in a manner comparable to that set forth in the second
sentence of Section 6(b).
SECTION 15. EVENTS OF DEFAULT.
The term Event of Default, wherever used herein, shall mean any of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary, or come about or be effected by operation of
law, or be pursuant to or in compliance with any Governmental Rule or
Governmental Action):
(1) the Lessee shall fail to make, or cause to be made, payment of
Casualty Value, Special Casualty Value or Early Purchase Value when due,
any payment of Basic Rent within 10 days after the same shall become due,
or any payment of Supplemental Rent (other than Casualty Value, Special
Casualty Value or Early Purchase Value) within 30 days after the same shall
become due; or
(2) the Lessee shall fail to maintain insurance as required by
Section 10 hereof; or
(3) the Lessee shall fail to perform or observe any covenant,
condition or agreement to be performed or observed by it under Section 12
hereof or Section 10(b)(iii) of the Participation Agreement (except as
expressly permitted by the terms of this Lease or the Participation
Agreement, as the case may be); or
(4) the Lessee shall fail to perform or observe any other covenant,
condition or agreement to be performed or observed by it under this Lease
or any other Transaction Document to which the Lessee is a party, and such
failure shall continue for a period of 30 days after there shall have been
given to the Lessee by the Lessor or the Indenture Trustee a notice
specifying such failure; or
(5) any representation or warranty made by the Lessee in this Lease,
any other Transaction Document to which the Lessee is a party, any
Financing Document, or any agreement, document or certificate delivered by
the Lessee in connection herewith or therewith shall prove to have been
incorrect in any material respect when any such representation or warranty
was made or given; or
17
<PAGE>
(6) the Lessee shall commence a voluntary case or other proceeding
seeking liquidation, reorganization or other relief with respect to itself
or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial
part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official or agency in an
involuntary case or other proceeding commenced against it, or shall make a
general assignment for the benefit of creditors, or shall fail generally to
pay its debts as they become due, or shall take any corporate action to
authorize any of the foregoing; or an involuntary case or other proceeding
shall be commenced against the Lessee seeking liquidation, reorganization
or other relief with respect to it or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official or agent of it or any substantial part of its property, and such
involuntary case or other proceeding shall remain undismissed and unstayed
for a period of 60 days; or
(7) final judgment for the payment of money in excess of $1,000,000
shall be rendered against the Lessee and the Lessee shall not have
discharged the same or provided for its discharge in accordance with its
terms or bonded the same or procured a stay of execution thereof within 30
days from the entry thereof; or
(8) an event of default under any other lease to the Lessee of any
undivided interest in the Transmission System shall occur, and any
applicable grace period shall have expired.
SECTION 16. REMEDIES.
(a) Remedies. Upon the occurrence of any Event of Default and so
long as the same shall be continuing, the Lessor may, at its option, declare
this Lease to be in default by written notice to such effect given to the
Lessee, and at any time thereafter the Lessor may exercise one or more of the
following remedies, as the Lessor in its sole discretion shall elect:
(1) the Lessor may, by notice to the Lessee, rescind or terminate
this Lease and exercise its rights under the Support Agreements;
(2) the Lessor may sell the Undivided Interest, together with its
interest under the Support Agreements and any other Transaction Document to
which the Lessor is a party, or any part thereof, at public or private
sale, as the Lessor may determine, free and clear of any rights of the
Lessee in the Undivided Interest and without any duty to account to the
Lessee with respect to such action or inaction or any proceeds with respect
thereto (except to the extent required by paragraph (4) below if the Lessor
shall elect to exercise its rights thereunder), in which event the Lessee's
obligation to pay Basic Rent hereunder for periods commencing after the
date of such sale shall be terminated (except
18
<PAGE>
to the extent that Basic Rent is to be included in computations under
paragraph (3) or (4) below if the Lessor shall elect to exercise its rights
thereunder);
(3) the Lessor may, whether or not the Lessor shall have exercised or
shall thereafter at any time exercise its rights under paragraph (2) above,
demand, by written notice to the Lessee specifying a payment date not
earlier than 10 days after the date of such notice, that the Lessee pay to
the Lessor, and the Lessee shall pay to the Lessor, on the payment date
specified in such notice, as liquidated damages for loss of a bargain and
not as a penalty (in lieu of the Basic Rent due after the payment date
specified in such notice), any unpaid Rent due through the payment date
specified in such notice plus whichever of the following amounts the
Lessor, in its sole discretion, shall specify in such notice (together with
interest on such amount at the interest rate specified in Section 3(b)(3)
hereof from the payment date specified in such notice to the date of actual
payment):
(i) an amount equal to the excess, if any, of Casualty Value, computed
as of the payment date specified in such notice, over the Fair Market
Rental Value of the Undivided Interest (determined on the basis of
the actual condition of the Transmission System) until the end of
the Basic Term or the then applicable Renewal Term, after
discounting such Fair Market Rental Value semiannually to present
value as of the payment date specified in such notice at a rate per
annum equal to the Overdue Interest Rate;
(ii) an amount equal to the excess, if any, of such Casualty Value over
the Fair Market Value of the Undivided Interest (determined on the
basis of the actual condition of the Transmission System) as of the
payment date specified in such notice;
(iii) an amount equal to the greater of (A) such Casualty Value, (B)
such discounted Fair Market Rental Value or (C) such Fair Market
Value (assuming, in the case of (B) and (C) above, that the
Transmission System was then maintained in accordance with this
Lease) and, in such event, upon full payment by the Lessee of all
sums due hereunder, the Lessor shall, at its option, either (x)
exercise its best efforts promptly to sell the Undivided Interest
together with its interest under the Support Agreements and any
other Transaction Document to which the Lessor is a party, and pay
over to the Lessee the sale proceeds up to the amount claimed under
(A), (B) or (C) above and actually paid by the Lessee to the
Lessor, or (y) deliver to the Lessee (AA) a bill of sale
transferring and assigning to the Lessee all right, title and
interest of the Lessor in and to the Undivided Interest free and
clear of all Lessor's Liens and Owner Participant's Liens, but
without
19
<PAGE>
recourse or warranty, and (BB) the agreement of the Lessor
terminating its interest under the Support Agreements and any other
Transaction Document to which the Lessor is a party, whereupon this
Lease shall terminate, except that indemnity obligations of the
Lessee incurred prior to the date of termination shall survive; or
(iv) an amount equal to the excess of (A) the present value as of the
payment date specified in such notice of all installments of Basic
Rent until the end of the Basic Term, discounted semiannually at a
rate of 10% per annum, over (B) the present value as of such payment
date of the Fair Market Rental Value of the Undivided Interest
(determined on the basis of the actual condition of the Transmission
System) until the end of the Basic Term, discounted semiannually at a
rate of 10% per annum; or
(4) if the Lessor shall have sold the Undivided Interest together
with its interest under the Support Agreements and any other Transaction
Document to which the Lessor is a party pursuant to paragraph (2) above,
the Lessor, in lieu of exercising its rights under paragraph (3) above with
respect to the Undivided Interest and its interest under the Support
Agreements and any other Transaction Document to which the Lessor is a
party, may, if it shall so elect, demand that the Lessee pay to the Lessor,
and the Lessee shall pay to the Lessor, on the date of such sale, as
liquidated damages for loss of a bargain and not as a penalty (in lieu of
Basic Rent due for periods commencing after the next Basic Rent payment
date following the date of such sale), any unpaid Basic Rent and
Supplemental Rent due through such payment date, plus the amount of any
deficiency between the sale proceeds and Casualty Value, computed as of
such payment date, together with interest at the Overdue Interest Rate on
the amount of such Rent and such deficiency from the date of such sale
until the date of actual payment.
(b) No Release. No rescission or termination of this Lease, in
whole or in part, or repossession of the Undivided Interest or exercise of any
remedy under paragraph (a) of this Section 16 shall, except as specifically
provided therein, relieve the Lessee of any of its liabilities and obligations
hereunder. In addition, the Lessee shall be liable, except as otherwise
provided above, for any and all unpaid Rent due hereunder before, after or
during the exercise of any of the foregoing remedies, including all reasonable
legal fees and other costs and expenses incurred by the Lessor or the Indenture
Trustee by reason of the occurrence of any Event of Default or the exercise of
the Lessor's remedies with respect thereto. At any sale of the Undivided
Interest and the Lessor's interest under the Support Agreements and any
Transaction Documents to which the Lessor is a party or any part thereof
pursuant to Section 16(a) hereof, the Lessor, the Owner Participant or the
Indenture Trustee may bid for and purchase such property.
20
<PAGE>
(c) Remedies Cumulative. No remedy under paragraph (a) of this
Section 16 is intended to be exclusive, but each shall be cumulative and in
addition to any other remedy provided under such paragraph (a) or otherwise
available to the Lessor at law or in equity. No express or implied waiver by
the Lessor of any Default or Event of Default hereunder shall in any way be, or
be construed to be, a waiver of any future or subsequent Default or Event of
Default. The failure or delay of the Lessor in exercising any rights granted it
hereunder upon any occurrence of any of the contingencies set forth herein shall
not constitute a waiver of any such right upon the continuation or recurrence of
any such contingencies or similar contingencies and any single or partial
exercise of any particular right by the Lessor shall not exhaust the same or
constitute a waiver of any other right provided herein. To the extent permitted
by applicable law, the Lessee hereby waives any rights now or hereafter
conferred by statute or otherwise which may require the Lessor to sell, lease or
otherwise use the Undivided Interest or the Transmission System in mitigation of
the Lessee's damages as set forth in paragraph (a) of this Section 16 or which
may otherwise limit or modify any of the Lessor's rights and remedies provided
in such paragraph.
(d) Exercise of Other Rights or Remedies. In addition to all other
rights and remedies provided in this Section 16, the Lessor may exercise any
other right or remedy that may be available to it under applicable law or
proceed by appropriate court action to enforce the terms hereof or to recover
damages for the breach hereof.
SECTION 17. NOTICES.
All communications and notices provided for in this Lease shall be
given in person or by means of telex, telecopy, or other wire transmission (with
request for assurance of receipt in a manner typical with respect to
communications of that type), or mailed by registered or certified mail,
addressed as follows:
(i) if to the Lessor:
The First National Bank of Boston,
as Owner Trustee
Blue Hill Office Park
Mail Stop 45-02-15
150 Royall Street
Canton, Massachusetts 02021
Attention: Corporate Trust
Division;
(ii) if to the Lessee:
Public Service Company of New Mexico
Alvarado Square
Albuquerque, New Mexico 87158
Attention: Secretary;
21
<PAGE>
(iii) in each case with copies to:
(A) the Indenture Trustee:
Chemical Bank
450 West 33rd Street
New York, New York 10001
Attention: Corporate Trustee
Administration Department;
(B) the Collateral Trust Trustee:
Chemical Bank
450 West 33rd Street
New York, New York 10001
Attention: Corporate Trustee
Administration Department;
(C) the Owner Participant:
DCC Project Finance Two, Inc.
c/o Dana Commercial Credit Corporation
1900 Indian Wood Circle
Maumee, Ohio 43537
Attention: Operations Manager - Public Service
Company of New Mexico
or at such other address as such parties or such Persons shall from time to time
designate by notice in writing to such other parties or such other Persons. All
such communications and notices given in such manner shall be effective on the
date of receipt of such communication or notice.
SECTION 18. SUCCESSORS AND ASSIGNS.
This Lease, including all agreements, covenants, representations and
warranties, shall be binding upon and inure to the benefit of the Lessor and its
successors and permitted assigns, and the Lessee and its successors and, to the
extent permitted hereby, assigns.
SECTION 19. RIGHT TO PERFORM FOR LESSEE.
If the Lessee shall fail to make any payment of Rent to be made by it
hereunder or shall fail to perform or comply with any of its other agreements
contained herein, the Lessor, the Owner Participant or the Indenture Trustee
may, but shall not be obligated to, make such payment or perform or comply with
such agreement, and the amount of such payment and the amount of all costs and
expenses (including, without limitation, reasonable attorneys' and other
professionals' fees and expenses) of the Lessor, the Owner Participant or the
Indenture Trustee incurred in connection with such payment or the performance of
or compliance with such
22
<PAGE>
agreement, as the case may be, together with interest thereon at the Overdue
Interest Rate, shall be deemed Supplemental Rent, payable by the Lessee upon
demand.
SECTION 20. AMENDMENTS AND MISCELLANEOUS.
(a) Amendments in Writing. The terms of this Lease shall not be
waived, altered, modified, amended, supplemented or terminated in any manner
whatsoever except by written instrument signed by the Lessor and the Lessee.
(b) Survival. All agreements, indemnities, representations and
warranties contained in the Transaction Documents or any agreement, document or
certificate delivered pursuant hereto or thereto or in connection herewith or
therewith shall survive the execution and delivery of this Lease and the
expiration or other termination of this Lease.
(c) Severability of Provisions. Any provision of this Lease which
may be determined by competent authority to be prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and no such prohibition or unenforceability in any
jurisdiction shall invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable law, the Lessee
hereby waives any provision of law which renders any provision hereof prohibited
or unenforceable in any respect.
(d) True Lease. This Lease shall constitute an agreement of lease
and nothing herein shall be construed as conveying to the Lessee any right,
title or interest in or to the Transmission System, except as lessee only.
(e) Original Lease. The single executed original of this Amended
and Restated Lease marked "Original" shall be the "Original" of this Lease. To
the extent that this Lease constitutes chattel paper, as such term is defined in
the Uniform Commercial Code as in effect in any applicable jurisdiction, no
security interest in this Lease may be created through the transfer or
possession of any counterpart other than the "Original".
(f) Governing Law. This Lease shall be governed by and construed in
accordance with the law of the State of New York.
(g) Headings. The division of this Lease into sections, the
provision of a table of contents and the insertion of headings are for
convenience of reference only and shall not affect the construction or
interpretation of this Lease.
(h) Counterpart Execution. This Lease may be executed in any number
of counterparts and by each of the parties hereto on separate counterparts, all
such counterparts together constituting but one and the same instrument, with
the counterparts delivered to the Indenture Trustee pursuant to the Indenture
being deemed the "Original" and all other counterparts being deemed duplicates.
23
<PAGE>
(i) Entire Agreement. This Lease, including the Schedules, Exhibit
and Appendix hereto, supersedes all prior agreements, written or oral between or
among the parties hereto (including the Original Lease) and each of the parties
hereto represents and warrants to the other that this Lease and the other
Transaction Documents (and any documents to be delivered hereby or thereby)
constitute the entire agreement among the parties hereto and thereto relating to
the transactions contemplated hereby.
24
<PAGE>
IN WITNESS WHEREOF, the parties hereto have each caused this Lease
to be duly executed in New York, New York, on the date first above written, by
their respective officers thereunto duly authorized.
THE FIRST NATIONAL BANK OF BOSTON, not
in its individual capacity, but
solely as Owner Trustee under a Trust
Agreement dated as of January 2, 1985
with DCC Project Finance Two, Inc.
By
------------------------------
Donna Germano
Account Manager
PUBLIC SERVICES COMPANY OF NEW
MEXICO, as Lessee
By
------------------------------
Terry Horn
Assistant Treasurer
25
<PAGE>
ACKNOWLEDGMENTS
STATE OF NEW MEXICO )
) ss.:
COUNTY OF BERNALILLO )
This instrument was acknowledged before me on September__, 1993,
by Terry R. Horn, Assistant Treasurer of Public Service Company of New Mexico,
a New Mexico Corporation.
-----------------------
Notary Public
My Commission Expires:
26
<PAGE>
COMMONWEALTH OF MASSACHUSETTS )
) ss.
COUNTY OF NORFOLK )
The undersigned a notary public for the County of Norfolk,
Commonwealth of Massachusetts, does certify that on the ___ day of September,
1993, before me came Donna Germano, to me known, who, being by me duly sworn,
did depose and say that she is an Account Manager of The First National Bank
of Boston, a national banking association, the corporation described in and
which executed the foregoing instrument, that she signed her name to said
instrument on behalf of said association under authority of the by-laws of
said association.
--------------------------
Notary Public
Term Expires:
27
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Title Page
- ------- ----- ----
<C> <S> <C>
SECTION 1. Definitions. ............................................ 1
SECTION 2. Lease of Undivided Interest; Term. ...................... 1
SECTION 3. Rent; Adjustments to Rent. .............................. 2
(a) Basic Rent ........................................ 2
(b) Supplemental Rent ................................. 2
(c) Form of Payment ................................... 3
(d) Adjustments ....................................... 3
(e) Adequacy and Confirmation of Adjustments .......... 4
SECTION 4. Net Lease. .............................................. 4
SECTION 5. Return of Transmission System. .......................... 5
(a) Return of Transmission System ..................... 5
(b) Disposition Services .............................. 5
SECTION 6. Warranty of the Lessor. ................................. 5
(a) Quiet Enjoyment ................................... 5
(b) Disclaimer of Other Warranties .................... 6
SECTION 7. Liens. .................................................. 6
Section 8. Operation and Maintenance; Marking; Inspection. ......... 7
(a) Operation and Maintenance ......................... 7
(b) Inspection ........................................ 7
(c) Replacement of Components ......................... 7
(d) Required Alterations .............................. 8
(e) Optional Alterations .............................. 8
(f) Reports of Alterations ............................ 9
(g) Title to Alterations .............................. 9
(h) Funding of Alterations and Replacement Components . 10
(i) Marking ........................................... 11
SECTION 9. Event of Loss; Deemed Loss Event. ....................... 11
(a) Event of Loss ..................................... 11
(b) Payment of Casualty Value ......................... 12
(c) Deemed Loss Event ................................. 12
(d) Termination of Obligation ......................... 12
</TABLE>
i
<PAGE>
TABLE OF CONTENTS (Continued)
<TABLE>
<CAPTION>
Section Title Page
- ------- ----- ----
<C> <S> <C>
SECTION 10. Insurance. ............................................. 12
SECTION 11. Indemnification. ....................................... 14
SECTION 12. Assignment or Sublease. ................................ 15
SECTION 13. Lease Renewals. ........................................ 15
(a) Lease Renewals .................................... 15
(b) Notice: Appraisal ................................. 16
SECTION 14. Purchase Options. ...................................... 16
SECTION 15. Events of Default. ..................................... 17
SECTION 16. Remedies. .............................................. 18
(a) Remedies .......................................... 18
(b) No Release ........................................ 20
(c) Remedies Cumulative ............................... 21
(d) Exercise of Other Rights or Remedies .............. 21
SECTION 17. Notices. ............................................... 21
SECTION 18. Sucessors and Assigns. ................................. 22
SECTION 19. Right to Perform for Lessee. ........................... 22
SECTION 20. Amendments and Miscellaneous. .......................... 23
(a) Amendments in Writing ............................. 23
(b) Survival .......................................... 23
(c) Severability of Provisions ........................ 23
(d) True Lease ........................................ 23
(e) Original Lease .................................... 23
(f) Governing Law ..................................... 23
(g) Headings .......................................... 23
(h) Counterpart Execution ............................. 23
(i) Entire Agreement .................................. 24
</TABLE>
ii
<PAGE>
TABLE OF CONTENTS (Continued)
<TABLE>
<CAPTION>
Section Title Page
- ------- ----- ----
<C> <S> <C>
SCHEDULE 1 Schedule of Casualty Values
SCHEDULE 2 Schedule of Special Casualty Values
SCHEDULE 3 Schedule of Early Purchase Values
APPENDIX
Appendix A Definition of Terms
</TABLE>
iii
<PAGE>
===============================================================================
APPENDIX A
DEFINITION OF TERMS
===============================================================================
EASTERN INTERCONNECTION PROJECT LEASE
BOND REFUNDING
===============================================================================
<PAGE>
DEFINITION OF TERMS
The terms defined herein relate to all Transaction Documents and such terms
shall include the plural as well as the singular.
Accounting Method shall have the meaning set forth in the Tax Indemnity
Agreement.
Accounting Practice shall mean generally accepted utility accounting
practice in accordance with the Uniform System of Accounts.
ACRS Deductions shall have the meaning set forth in the Tax Indemnity
Agreement.
Additional Easements shall have the meaning set forth in Section 2(d) of
the Easement.
Additional Equity Investment shall have the meaning set forth in Section
8(h) of the Lease.
Additional Notes shall mean any non-recourse promissory notes (other than
the Refunding Notes) issued by the Owner Trustee and authenticated by the
Indenture Trustee under the terms of the Indenture.
Adjusted Lessor's Cost shall have the meaning set forth in the Tax
Indemnity Agreement.
Affiliate, with respect to any Person, shall mean any other Person directly
or indirectly controlling or controlled by, or under direct or indirect common
control with, such Person. The term "control" (including the correlative
meanings of the terms "controlled by" and "under common control with"), as used
with respect to any Person, shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management policies of such
Person, whether through the ownership of voting securities or by contract or
otherwise.
Affiliate Transaction shall have the meaning set forth in Section 10(b)(v)
of the Participation Agreement.
After-Tax Basis shall mean, with respect to any payment received or deemed
to have been received by any Person, the amount of such payment supplemented by
a further payment to that Person so that the sum of the two payments shall,
after deduction of all taxes and other charges (taking into account any credits
or deductions arising therefrom and the timing thereof) resulting from the
receipt (actual or constructive) of such two payments imposed under any
Governmental Rule or by any Governmental Authority, the United States of
America, or any territory or possession of the United States of America, or any
governmental authority of any foreign country or any subdivision or any taxing
authority thereof, or any international taxing authority, be equal to such
payment received or deemed to have been received.
Alterations shall mean alterations, modifications, additions and
improvements to the Transmission System (including the Undivided Interest) the
cost of which is required to be added to capital accounts pursuant to the
Uniform System of Accounts; and such term shall include, as appropriate, all
Severable Required Alterations, Nonseverable Required Alterations, Severable
Optional Alterations
<PAGE>
and Nonseverable Optional Alterations, but shall not include any original or
substitute Component or any Replacement Component.
Amended and Restated Lease means the Amended and Restated Lease dated as of
September 1, 1993 between the Owner Trustee and PNM.
Amended and Restated Participation Agreement means the Amended and Restated
Participation Agreement dated as of September 1, 1993 between the Owner
Participant, Funding Corp, the Owner Trustee, the Indenture Trustee and PNM.
Amended and Restated TIA means the Amended and Restated Tax Indemnity
Agreement dated as of September 1, 1993 between the Owner Participant and the
Lessee.
Amendment shall mean the Amendment dated the Closing Date to the Original
Participation Agreement.
Amortization Deductions shall have the meaning set forth in the Tax
Indemnity Agreement.
Applicable Agreement shall have the meaning set forth in Section 2 of the
Operating Agreement.
Applicable Laws shall mean all applicable laws, including, without
limitation, Federal and state securities laws, ordinances, judgments, decrees,
injunctions, writs and orders of any Governmental Authority and rules,
regulations, orders, interpretations, licenses and permits of any Governmental
Authority.
Appraisal Procedure shall mean a procedure whereby, the Lessor and the
Lessee having failed to agree, two independent appraisers, one chosen by the
Lessee and one by the Lessor, shall mutually agree upon the determinations then
the subject of appraisal. The Lessor or the Lessee, as the case may be, shall
deliver a written notice to the other appointing its appraiser within 15 days
after receipt from the other of a written notice appointing its appraiser. If
one party shall fail to appoint its appraiser within 15 days after receipt from
the other party of a written notice appointing its appraiser, the determination
of the single appraiser shall be final. If within 30 days after appointment of
the two appraisers they are unable to agree upon the amount in question, a third
independent appraiser shall be chosen within ten days thereafter by the mutual
consent of such first two appraisers or, if such first two appraisers fail to
agree upon the appointment of a third appraiser, such appointment shall be made
by the American Arbitration Association, or any organization successor thereto,
from a panel of arbitrators having experience in the business of operating a
utility transmission system and a familiarity with equipment used or operated in
such business. The decision of the third appraiser so appointed and chosen
shall be given within 30 days after the selection of such third appraiser. If
three appraisers shall be appointed and the determination of one appraiser is
disparate from the middle determination by more than twice the amount by which
the other determination is disparate from the middle determination, then the
determination of such appraiser shall be excluded, the remaining two
determinations shall be averaged and such average shall be binding and
conclusive on the Lessor and the Lessee; otherwise the average of all three
determinations shall be binding and conclusive on the Lessor and the Lessee.
2
<PAGE>
Assignment of Construction Contract shall mean the Assignment of
Construction Contract dated the Closing Date from PNM to the Owner Trustee.
Assignment of Right of Use shall mean the Assignment of Right of Use dated
the Closing Date from PNM to the Owner Trustee.
B-A Property shall mean that portion of the Transmission System which is a
part of the facility known as the "B-A Station".
BLM shall mean the United States Department of the Interior, Bureau of Land
Management.
Basic Rent shall mean the rent payable pursuant to Section 3(a) of the
Lease, provided, however, that Basic Rent as of any date shall be, under any
circumstances and in any event, an amount at least sufficient to pay in full the
aggregate of the regular installments of principal and interest due and payable
and unpaid on the applicable Basic Rent Payment Date on all Notes then
Outstanding under the Indenture, together with all accrued and unpaid interest
thereon.
Basic Rent Payment Dates shall mean and include each April 1 and October 1
of each year, commencing October 1, 1985, throughout (and including the last day
of) the Basic Term and each elected Renewal Term.
Basic Rent Prepayment shall mean the amount of Basic Rent prepaid by the
Lessee on the Refunding Date.
Basic Term shall mean the period commencing on the Closing Date and ending
on April 1, 2015, or such shorter period as may result from earlier termination
of the Lease as provided in the Lease.
Bill of Sale shall mean the Bill of Sale dated the Closing Date from PNM to
the Owner Trustee.
Blackwater HVDC Station shall mean the high voltage direct current
converter station located in the Clovis-Portales area of Eastern New Mexico and
constructed for PNM by the Contractor pursuant to the Construction Contract.
Bonds shall mean the Refunding Bonds.
Business Day shall mean any day other than a Saturday or Sunday or other
day on which banks in New York, New York are authorized to remain closed.
Casualty Value, as of any Basic Rent Payment Date, shall mean (i) during
the Basic Term, an amount equal to the product obtained by multiplying Lessor's
Cost by the percentage in the Schedule of Casualty Values attached to the Lease
(which Casualty Values as originally attached to the Lease are based upon the
Pricing Assumptions and are subject to adjustment pursuant to Section 3(d) of
the Lease) and set forth opposite such Basic Rent Payment Date and (ii) during
any Renewal Term, the amount determined by amortizing ratably the Fair Market
Value of the Undivided Interest as of the day
3
<PAGE>
following the last day of the Basic Term or the last preceding Renewal Term, as
the case may be, in semi- annual steps over the remaining term of the Easement,
as such term may be extended in consequence of a determination of the Maximum
Option Period, which amortized amounts shall be set forth in a revised Schedule
of Casualty Values and attached to the Lease pursuant to a Lease Supplement
prior to the last day of the Basic Term or the last preceding Renewal Term, as
the case may be; provided, however, that, after giving effect to the payment of
Basic Rent on such Basic Rent Payment Date and the application thereof to the
payment of the regular installment of principal of, and all accrued and unpaid
interest on, the Notes then due, Casualty Value as of any date shall be, under
any circumstances and in any event, an amount at least sufficient to pay in full
the aggregate unpaid principal amount of all Notes then Outstanding under the
Indenture.
Certificate of Acceptance shall mean a certificate, substantially in the
form of Exhibit A to the Original Lease, duly completed and executed and
delivered on the Closing Date or, in the case of any Alteration acquired by the
Lessor pursuant to the terms of the Lease, a date required by the applicable
Lease Supplement.
Change in Tax Laws shall have the meaning set forth in the Tax Indemnity
Agreement.
Claims shall mean liabilities, costs, obligations, losses, damages,
penalties, claims (including, without limitation, claims involving liability in
tort, strict or otherwise), actions, suits, judgments, costs, expenses and
disbursements (including without limitation legal fees and expenses) of any kind
and nature whatsoever without any limitation as to amount.
Closing shall mean the proceedings which occurred on the Closing Date, as
contemplated by the Original Participation Agreement.
Closing Date shall mean the date the sale and leaseback of the Undivided
Interest was completed and payment of Lessor's Cost was made. The Closing Date
is February 5, 1985.
Collateral Trust Trustee shall mean the trustee from time to time under the
Refunding Collateral Trust Indenture.
Components shall mean appliances, parts, instruments, appurtenances,
accessories, furnishings, equipment and other property of whatever nature that
may from time to time be incorporated in the Transmission System or any part
thereof.
Construction Contract shall have the meaning set forth in the Assignment of
Construction Contract.
Consulting Engineer shall mean Marshall and Stevens or such other firm of
construction engineers as shall be selected by the Owner Participant and
approved by the Lessee.
Contractor shall mean Brown Bovari Corporation, a New York corporation.
Deemed Loss Event shall mean the following event: if at any time after the
Closing Date and before the Lease Termination Date, the Owner Trustee or the
Owner Participant, by reason of the ownership of the Undivided Interest or any
part thereof by the Lessor or the lease of the Undivided
4
<PAGE>
Interest to the Lessee or any of the other transactions contemplated by the
Transaction Documents (the term Owner Participant, as used in this definition,
not including any Transferee who at the time of transfer to such Transferee is a
non-exempt entity of the type referred to in this definition, whether by reason
of such ownership, lease, transactions or otherwise) shall be deemed by any
Governmental Authority having jurisdiction to be, or shall become subject to
regulation as, an "electric utility" or a "public utility" or a "public utility
holding company" under any Governmental Rule or by reason of any Governmental
Action, and the effect thereof on the Lessor or the Owner Participant would be,
in the sole reasonable judgment of either such Person, adverse, and the Lessor
and the Owner Participant have not waived application of this definition (which
waiver shall be in writing and may be either indefinite or for a specific
period); except that if the Lessee, at its sole cost and expense, is contesting
diligently and in good faith any action by any Governmental Authority which
would otherwise constitute a Deemed Loss Event under this definition, such
Deemed Loss Event shall be deemed not to have occurred so long as (i) such
contest does not involve any danger of the foreclosure, sale, forfeiture or loss
of, or the creation of any Lien on, the Undivided Interest or any part thereof
or any interest therein, (ii) such contest does not adversely affect the
Undivided Interest or any part thereof or any other property, assets or rights
of the Lessor or the Owner Participant or the lien of the Indenture thereon,
(iii) the Lessee shall have furnished the Lessor, the Owner Participant, and the
Indenture Trustee with an opinion of independent counsel satisfactory to each
such Person to the effect that there exists a reasonable basis for contesting
such determination, (iv) such determination shall be effectively stayed or
withdrawn during such contest (and shall not be subject to retroactive
application at the conclusion of such contest) in a manner satisfactory to the
Lessor and the Owner Participant, and the Owner Participant shall have
determined that the Lessor's continued ownership of the Undivided Interest
during the pendency of such contest or such contest will not adversely affect
its business, and (v) the Lessee shall have indemnified the Lessor and the Owner
Participant in a manner satisfactory to each such Person for any liability or
loss which either such Person may incur as a result of Lessee's contest.
Default shall mean an event which, after giving of notice or lapse of time,
or both, would become an Event of Default.
Directive shall mean an instrument in writing executed in accordance with
the terms and provisions of the Indenture by the holders, or their duly
authorized agents or attorneys-in-fact, representing a majority of the aggregate
unpaid principal amount of all Notes Outstanding under the Indenture, directing
the Indenture Trustee to take or refrain from taking the action specified in
such instrument.
Early Purchase Value as of any Basic Rent Payment Date occurring on or
after the thirtieth Basic Rent Payment Date, shall mean an amount equal to the
product obtained by multiplying Lessor's Cost by the percentage in the Schedule
of Early Purchase Values attached to the Lease (which Early Purchase Values as
originally attached to the Lease are based upon the Pricing Assumptions and are
subject to adjustment pursuant to Section 3(d) of the Lease) and set forth
opposite such Basic Rent Payment Date; provided, however, that, after giving
effect to (A) the payment of Basic Rent on such Basic Rent Payment Date and the
application thereof to the payment of the regular installment of principal of,
and accrued interest on, the Notes then due, and (B) the payment of premium, if
any then due on the Notes, Early Purchase Value as of any date shall be, under
any circumstances and in any event, an amount at least sufficient to pay in full
the aggregate unpaid principal amount of all Notes then Outstanding under the
Indenture.
5
<PAGE>
Easement shall mean the Easement dated the Closing Date between PNM and the
Owner Trustee, as supplemented on March 27, 1987.
ERISA shall mean the Employee Retirement Income Security Act of 1974, as
amended, or any comparable successor law.
Event of Default shall have the meaning set forth in Section 15 of the
Lease.
Event of Loss shall mean any of the following events: (a) the loss of the
Transmission System (including the Undivided Interest) due to theft,
disappearance, destruction or, in the good faith and reasonable opinion of the
Lessee (confirmed by an independent engineer reasonably satisfactory to the
Owner Participant), damage beyond repair; (b) the receipt of insurance proceeds
based upon an actual or constructive total loss with respect to the Transmission
System; or (c) the confiscation or seizure of title to the Transmission System
(including the Undivided Interest) or the property subject to the Easement (in
its entirety or such a substantial portion that the then remaining portion
cannot practically be utilized for the purposes intended) or the condemnation of
the Undivided Interest or the property subject to the Easement by any Person
other than the Lessee or a Person related to the Lessee, or the requisition of
use of the Transmission System (including the Undivided Interest) or the
property subject to the Easement (in its entirety or a substantial portion as
aforesaid) for a stated period which shall, or for an indefinite period which is
reasonably expected to, exceed the remaining portion of the Basic Term or any
then effective Renewal Term.
Excepted Payments shall mean any and all payments not due to or in respect
of the Trust Estate or the Lease Indenture Estate or otherwise included in the
Lease Indenture Estate, including (i) any indemnity or other payment (whether or
not Supplemental Rent and whether or not a Default or Event of Default exists)
payable under any Transaction Document directly to any Person, other than the
Indenture Trustee or the Lessor (except Chemical Bank or FNB), or payable by the
Lessee to the Lessor, FNB or the Owner Participant to reimburse any such Person
for its costs and expenses in exercising its rights under the Transaction
Documents, (ii) (A) insurance proceeds, if any, payable to the Lessor, FNB,
Chemical Bank or the Owner Participant under insurance separately maintained by
the Lessor, FNB, Chemical Bank or the Owner Participant with respect to the
Undivided Interest as permitted by the Lease or (B) proceeds of personal injury
or property damage liability insurance maintained under any Transaction Document
for the benefit of the Lessor, FNB, Chemical Bank or the Owner Participant,
(iii) any amounts payable under any Transaction Document to reimburse the Lessor
or the Owner Participant (including the reasonable expenses of the Lessor or the
Owner Participant incurred in connection with any such payment) for performing
or complying with any of the obligations of the Lessee under and as permitted by
any Transaction Document (including, but without limitation, amounts payable
pursuant to Section 14 of the Participation Agreement), (iv) any amount payable
to the Owner Participant by any Transferee as the purchase price of the Owner
Participant's interest in the Trust Estate, (v) any payments, insurance proceeds
or other amounts with respect to the Undivided Interest or any portion thereof
which have been released from the lien of the Indenture and (vi) any payments in
respect of interest to the extent attributable to payments referred to in
clauses (i) through (v) above.
Excepted Rights shall mean (a) all rights with respect to Excepted Payments
of the Person entitled thereto and (b) all rights and privileges expressly
reserved to the Owner Trustee or the Owner Participant exclusively or jointly
with the Indenture Trustee pursuant to the Indenture (including, but without
limitation, Section 6.11 thereof) for the periods specified in the Indenture.
6
<PAGE>
Existing Mortgage shall mean the Indenture of Mortgage and Deed of Trust
dated as of June 1, 1947, between PNM and Irving Trust Company, as heretofore
supplemented by all supplemental indentures thereto.
Expenses shall have the meaning set forth in Section 7.01 of the Trust
Agreement.
Expiration Date shall have the meaning set forth in the Operating
Agreement.
Fair Market Renewal Term shall mean a Renewal Term elected pursuant to
Section 13(a)(1) of the Lease.
Fair Market Rental Value or Fair Market Value of any property or service as
of any date shall mean the cash rent or cash price obtainable in an arm's-length
lease, or sale or supply, respectively, between an informed and willing lessee
or buyer (under no compulsion to lease or purchase) and an informed and willing
lessor or seller or supplier (under no compulsion to lease or sell or supply) of
the property or service in question, and shall, in the case of the Transmission
System, be determined (except pursuant to Section 16(a) (3)(i), (ii) and (iv) of
the Lease) on the basis that (i) the Transmission System has been maintained in
accordance with, and the Lessee has complied with, the requirements of the Lease
and the other Transaction Documents, (ii) the lessee or the buyer shall have
rights in, or an assignment of, the Transaction Documents (including, without
limitation, the Support Agreements) to which the Lessor is a party and (iii) the
Lessee has complied with the requirements of the Lease and each Transaction
Document to which the Lessee is a party. If the Lessor and the Lessee are
unable to agree upon a determination of Fair Market Rental Value or Fair Market
Value, as the case may be, such Fair Market Rental Value or Fair Market Value
shall be determined in accordance with the Appraisal Procedure.
Federal Power Act shall mean the Federal Power Act, as amended.
Federal Securities shall have the meaning set forth in Section 2.4(b) of
the Indenture.
Fee Land shall mean the parcels of land described in Part I of Exhibit A to
the Easement.
FERC shall mean the Federal Energy Regulatory Commission of the United
States of America.
FERC Order shall mean the Order Granting Petition for Declaratory Order,
Authorizing Sale of Facilities, Noting Intervention, and Terminating Dockets
issued by the FERC on December 31, 1984 (Docket Nos. EC85-4-000 and EL85-9-000).
Final Prospectus means the prospectus with respect to the Refunding Bonds
and the offering thereof constituting part of the Registration Statement at the
time the Registration Statement is declared effective by the SEC, together with
any supplement or modification to, or completion of, such prospectus filed by
PNM with the SEC pursuant to Rule 424 under the Securities Act.
Financing Documents shall mean the Underwriting Agreement, the Registration
Statement, the Refunding Collateral Trust Indenture, the Refunding Supplemental
Indenture and the Refunding Bonds.
7
<PAGE>
First Basic Rent Payment Date shall mean October 1, 1985.
Fixed Rent Renewal Term shall mean a Renewal Term elected pursuant to
Section 13(a)(2) of the Lease.
FNB shall mean The First National Bank of Boston, a national banking
association, in its individual capacity.
Form U-7D shall mean the certificate filed pursuant to Rule 7(d) of the
Holding Company Act for the purpose of exempting the Owner Participant and the
Owner Trustee from registration under the Holding Company Act.
Funding Corp shall mean EIP Refunding Corporation, a Delaware corporation.
Funding Corp's Counsel shall mean Mudge Rose Guthrie Alexander & Ferdon,
180 Maiden Lane, New York, New York 10038.
Governmental Actions shall mean all authorizations, consents, approvals,
waivers, exceptions, variances, filings 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
Transaction Documents or have a material adverse effect on the transactions
contemplated by the Participation Agreement), and shall include, without
limitation, those siting, environmental and operating permits and licenses which
are required for the use and operation of the Transmission System, including the
Undivided Interest.
Governmental Authority shall mean any Federal, state, county, municipal,
regional or other governmental or taxing authority, agency, board or court.
Governmental Rules shall mean statutes, laws, rules, codes, ordinances,
regulations, permits, certificates and orders of any Governmental Authority,
including without limitation those pertaining to health, safety, the
environment or otherwise.
Granting Clause Documents shall have the meaning set forth in Section 2.1
of the Indenture.
Group shall mean the affiliated group of corporations of which the Owner
Participant is a member.
Holders shall mean the holders of the Notes.
Holding Company Act shall mean the Public Utility Holding Company Act of
1935, as amended.
"incorporated in" shall mean incorporated or installed in, attached to, or
otherwise made a part of the Transmission System.
8
<PAGE>
Incremental Cash Cost of a Replacement Component shall mean the difference
between the actual cost of the Replacement Component and the sum of any
insurance proceeds received in respect of, and (if not assigned to the insurance
carrier) the salvage value of, the Component replaced.
Indemnitee shall mean the Owner Participant, FNB, the Owner Trustee, the
Indenture Trustee, Funding Corp, the Collateral Trust Trustee, the Escrow Fund
created under the Escrow Deposit Agreement, the Trust Estate, the Lease
Indenture Estate and each other holder of a Note from time to time Outstanding
under the Indenture, and the successors, assigns, agents and employees of each
such Person and any Affiliate of each such Person. The failure to include in
the definition of "Indemnitee" a Person which is an "Indemnitee" under the 1985
Transaction Documents shall not operate to alter or abridge the rights and
obligations of such Person as an "Indemnitee" under the 1985 Transaction
Documents.
Indenture shall mean the Amended and Restated Trust Indenture and Security
Agreement dated as of September 1, 1993 between the Owner Trustee and Chemical
Bank.
Indenture Default shall mean an event which, after giving of notice or
lapse of time, or both, would become an Indenture Event of Default.
Indenture Event of Default shall mean any of the events specified in
Section 6.2 of the Indenture.
Indenture Trustee shall mean the trustee from time to time under the
Indenture.
Indenture Trustee Office shall mean the office of the Indenture Trustee
located at 450 West 33rd Street, New York, New York 10001, or such other office
as may be designated by the Indenture Trustee to the Owner Trustee and each
holder of a Note Outstanding under the Indenture.
Indenture Trustee's Counsel shall mean Cravath, Swaine & Moore, Worldwide
Plaza, 825 Eighth Avenue, New York, New York 10019.
Initial Series Note means the Owner Trustee's Nonrecourse Promissory Note,
Due 1990-2015, Initial Series, issued on the Closing Date pursuant to the 1985
Lease Indenture.
Instrument of Assignment of Other Construction Contracts shall mean the
Instrument of Assignment of Other Construction Contracts dated the Closing Date
between PNM and the Owner Trustee.
Interest Deductions shall have the meaning set forth in the Tax Indemnity
Agreement.
Investment Company Act shall mean the Investment Company Act of 1940, as
amended.
Investment Credit shall have the meaning set forth in Section 1(b) of the
Tax Indemnity Agreement.
9
<PAGE>
Lease means the Original Lease as amended and restated by the Amended and
Restated Lease.
Lease Indenture Estate shall have the meaning set forth in Section 2.1 of
the Indenture.
Lease Supplement shall mean a supplement to the Lease for purposes of (i)
adjusting Basic Rent, Casualty Value, Special Casualty Value and Early Purchase
Value pursuant to Section 3(d) of the Lease, (ii) adding the Lessor's Share in
any Alteration, if title thereto shall vest in the Owner Trustee pursuant to the
terms of the Lease, (iii) effecting Supplemental Financings and Additional
Equity Investments, or (iv) otherwise changing or modifying the terms of the
Lease, all in accordance with and subject to the terms of the Lease.
Lease Term shall have the meaning set forth in Section 2 of the Lease.
Lease Termination Date shall mean the last day of the Lease Term (whether
occurring by reason of the termination or the expiration of the Lease).
Lessee shall mean Public Service Company of New Mexico, a New Mexico
corporation.
Lessee Request shall have the meaning set forth in Section 1.01 of the
Refunding Collateral Trust Indenture.
Lessee's General Counsel shall mean Keleher & McLeod, P.A., 414 Silver
Avenue S.W., Albuquerque, New Mexico 87103.
Lessee's Special Counsel shall mean Mudge Rose Guthrie Alexander & Ferdon,
180 Maiden Lane, New York, New York 10038.
Lessor shall mean the Owner Trustee.
Lessor's Cost shall mean the Purchase Price of the Undivided Interest.
Lessor's Liens shall mean Liens (other than Permitted Liens described in
clauses (a) and (c) through (e) of the definition of such term) which result
from acts of, or any failure to act by, or as a result of claims against, FNB or
the Lessor unrelated either to the ownership of the Undivided Interest, the
administration of the Trust Estate or the transactions contemplated by the
Transaction Documents.
Lessor's Share shall mean the Share of the Lessor.
Lien shall mean any mortgage, pledge, security interest, encumbrance, lien
or charge of any kind, including without limitation any conditional sale or
other title retention agreement, any lease in the nature thereof or the filing
of, or agreement to give, any financing statement under the Uniform Commercial
Code of any jurisdiction.
Loan shall have the meaning set forth in Section 2 of the Participation
Agreement.
10
<PAGE>
Majority in Interest of Holders of Notes shall mean a majority of Holders
of all Notes Outstanding at the time of any such determination.
Marshall and Stevens shall have the meaning set forth in the Tax Indemnity
Agreement.
Maximum Option Period shall mean the period, determined as of the date of
expiration of the Basic Term, (i) at the end of which the residual value of the
Undivided Interest, without regard to inflation or deflation from the Basic
Lease Commencement Date, but taking into consideration the existence and effect
of the Support Agreements (including any extension of the terms thereof in
consequence of any determination of the Maximum Option Period), shall be at
least equal to 20% of Lessor's Cost, and (ii) which, when added to the Basic
Term, does not exceed 80% of the sum of the then appraised remaining useful life
of the Transmission System and 30 years.
Mortgage Release shall mean the Indenture of Partial Release dated the
Closing Date.
Net Economic Return shall mean the Owner Participant's (i) after tax yield
and (ii) present value of after tax cash flow, each as of December 31, 1991 and
each computed on a basis consistent with the computation of Basic Rent as
adjusted on and as of the Refunding Date pursuant to the terms of the Lease.
Net Worth shall mean the excess of assets over liabilities determined by
PNM's independent accountants on the basis of generally accepted accounting
principles.
New Mexico Counties shall mean Sandoval, Santa Fe, San Miguel, Guadalupe,
De Baca, Quay, Roosevelt and Curry Counties, New Mexico.
New Mexico Commission means the New Mexico Public Utility Commission,
formerly known as the New Mexico Public Service Commission, established pursuant
to Section 62-5-1, New Mexico Statutes Annotated (1978).
New Mexico Order means the 1985 Order and the 1993 Order.
New Mexico Public Utility Act shall mean the New Mexico Public Utility Act,
as amended.
1985 Bonds means the "Security Facility Bonds, due 1990-2015" issued by
1985 Funding Corp under the 1985 Collateral Trust Indenture in the original
principal amount of $54,382,000.
1985 Collateral Trust Indenture means the Collateral Trust Indenture dated
as of February 5, 1985 among PNM, 1985 Funding Corp. and the 1985 Collateral
Trust Trustee, as amended and supplemented by (i) Indenture Supplement No. 1
dated as of the Closing Date and (ii) the 1992 Supplemental Indenture dated as
of November 4, 1992.
1985 Collateral Trust Trustee means Morgan Guaranty Trust Company of New
York, a New York Banking Corporation, as trustee under the 1985 Collateral Trust
Indenture.
11
<PAGE>
1985 Extension Letter means the Extension Letter dated the Closing Date to
the 1985 Collateral Trust Trustee from the owner participant named therein, the
Owner Trustee, 1985 Funding Corp, PNM and the 1985 Indenture Trustee.
1985 Funding Corp. means E.I.P. Funding Corporation, a Delaware
Corporation.
1985 Indenture Trustee means Morgan Guaranty Trust Company of New York, a
New York banking corporation, as trustee under the 1985 Lease Indenture.
1985 Lease Indenture means the Trust Indenture and Security Agreement dated
as of January 2, 1985 between the Owner Trustee and the 1985 Indenture Trustee.
1985 Order means the order issued by the New Mexico Public Service
Commission on December 31, 1984 in Case No. 1930.
1985 Transaction Documents means the Transaction Documents (including the
1985 Extension Letter) as in effect immediately preceding the Signing Date.
1993 Order means the order issued by the New Mexico Public Utility
Commission on March 1, 1993 in Case No. 2482.
Nonseverable, when used in respect to any Alteration, shall mean any
Alteration which is not a Severable Alteration.
Noteholder shall mean any holder from time to time of a Note Outstanding
under the Indenture.
Notes shall mean the Refunding Notes and any Additional Notes issued by the
Owner Trustee and authenticated by the Indenture Trustee under the Indenture.
Officers' Certificate shall mean a certificate signed by the President or
any Vice President and by the Treasurer, any Assistant Treasurer, the Secretary
or any Assistant Secretary of the Person with respect to which such term is
used.
Omnibus Acknowledgment has the meaning specified in Section 4(a) of the
Amended and Restated Participation Agreement.
Omnibus Receipt shall mean the Omnibus Notice, Receipt, Payment Instruction
and Acknowledgment with Respect to (I) the Issuance of the Secured Facility
Bonds Due 1995 and 2012 and (II) the Redemption of the Secured Facility Bonds
Due April 1, 1995 and April 1, 2015.
Operating Agreement shall mean the Operating Agreement dated the Closing
Date between PNM and the Owner Trustee.
Operating Period shall have the meaning set forth in the Operating
Agreement.
Operator shall have the meaning set forth in Section 2 of the Operating
Agreement.
12
<PAGE>
Optional Alterations shall have the meaning set forth in Section 8(e) of
the Lease.
Original Lease means the Lease dated the Closing Date from the Owner
Trustee, as lessor, to PNM, as lessee, as amended and/or supplemented by (i)
Supplement Number One to Lease dated as of September 30, 1985 between the Owner
Trustee and PNM and (ii) Lease Amendment No.2 dated as of March 9, 1987 between
the Owner Trustee and PNM.
Original of the Lease shall mean the fully executed counterpart of the
Amended and Restated Lease marked "Original" pursuant to Section 20(e) of the
Lease.
Original Participation Agreement means the Participation Agreement dated as
of January 2, 1985, as amended by the Amendment dated the Closing Date among the
owner participant named therein, 1985 Funding Corp, the Owner Trustee, the 1985
Indenture Trustee and PNM.
Original TIA means the Tax Indemnity Agreement dated the Closing Date
between the Owner Participant and the Lessee.
Other Construction Contracts shall have the meaning set forth in the
Instrument of Assignment of Other Construction Contracts.
Outstanding, when used with respect to Notes, shall mean, as of the date of
determina-tion, all such Notes theretofore issued, authenticated and delivered
under the Indenture, except (a) Notes theretofore cancelled by the Indenture
Trustee or delivered to the Indenture Trustee for cancellation, (b) Notes or
portions thereof for the payment of which the Indenture Trustee holds (and has
notified the holders thereof that it holds) in trust for that purpose an amount
sufficient to make full payment thereof when due, (c) Notes or portions thereof
which have been pledged as collateral for any obligations of the obligor thereof
to the extent that an amount sufficient to make full payment of such obligations
when due has been deposited with the pledgee of such Notes for the purpose of
holding such amount in trust for the payment of such obligations in accordance
with the indenture or agreement under which such obligations are secured and (d)
Notes in exchange for, or in lieu of, which other Notes have been issued,
authenticated and delivered pursuant to such Indenture; provided, however, that
any Note owned by the Lessee or the Owner Trustee or any Affiliate of either
thereof shall be disregarded and deemed not to be Outstanding for the purpose of
any Directive unless, in the case of the Owner Trustee, it shall own all Notes
issued by it.
Overdue Interest Rate shall mean the rate per annum equal to 1% above the
interest rate applicable to that portion of the Refunding Note that is due April
1, 2012.
Owner Participant shall mean DCC Project Finance Two, Inc., a Delaware
corporation.
Owner Participant's Counsel shall mean Hunton & Williams, 200 Park Avenue,
New York, New York 10020.
Owner Participant's Liens shall mean Liens (other than Permitted Liens
described in clauses (a) and (c) through (e) of the definition of such term)
which result from acts of, or any failure to act by, or as a result of claims
against, the Owner Participant unrelated to the transactions contemplated by the
Transaction Documents.
13
<PAGE>
Owner Trustee shall mean The First National Bank of Boston, a national
banking association, not in its individual capacity, but solely as Owner Trustee
under the Trust Agreement, and each successor as Owner Trustee under the Trust
Agreement.
Owner Trustee's Counsel shall mean Shipman & Goodwin, 799 Main Street,
Hartford, Connecticut 06103.
Participant shall mean Funding Corp or the Owner Participant.
Participation Agreement means, (i) as to the Persons which are party to
both, the Original Participation Agreement as amended and restated by the
Amended and Restated Participation Agreement and, (ii) as to any Person which is
party to one but not the other of such instruments, the instrument to which such
Person is party.
Permitted Investments shall mean (i) obligations of the United States of
America, or fully guaranteed as to interest and principal by the United States
of America, maturing in not more than one year, (ii) certificates of deposit
having a final maturity of not more than 30 days after the date of issuance
thereof of any commercial bank incorporated under the laws of the United States
of America or any state thereof or the District of Columbia which bank is a
member of the Federal Reserve System and has a combined capital and surplus of
not less than $100,000,000 and (iii) commercial paper, rated P-1 by Moody's
Investors Services, Inc., or A-1 by Standard and Poor's Corporation, having a
remaining term until maturity of not more than 90 days, other than any such
obligation, certificate of deposit or commercial paper issued by FNB, Chemical
Bank or any institution which shall become a successor Owner Trustee, Indenture
Trustee or Collateral Trust Trustee; provided, however, that no such investment
made while there shall have occurred and be continuing an Indenture Default or
an Indenture Event of Default shall be a Permitted Investment if it has a
maturity in excess of 30 days.
Permitted Liens shall mean (a) the respective rights and interests of the
Lessee, the Owner Participant, the Lessor, the Indenture Trustee and Funding
Corp, as provided in the Transaction Documents, (b) Lessor's Liens and Owner
Participant's Liens, (c) Liens for Taxes either not yet due or being contested
in good faith and by appropriate proceedings, so long as such proceedings shall
not involve any danger of the sale, forfeiture or loss of any part of the
Undivided Interest, the Trust Estate, the Lease Indenture Estate, title thereto
or any interest therein and shall not interfere with the use or disposition of
any part of the Undivided Interest, the Trust Estate, the Lease Indenture
Estate, title thereto or any interest therein, or the payment of Rent, and the
Lessee shall have provided adequate reserves for the payment of such Taxes, (d)
materialmen's, mechanics', workers', repairmen's, employees' or other like Liens
arising in the ordinary course of business of the Lessee for amounts either not
yet due or being contested in good faith and by appropriate proceedings so long
as such proceedings shall not involve any danger of the sale, forfeiture or loss
of any part of the Undivided Interest, the Trust Estate, the Lease Indenture
Estate, title thereto or any interest therein and shall not interfere with the
use or disposition of any part of the Undivided Interest, the Trust Estate, the
Lease Indenture Estate, title thereto or interest therein, or the payment of
Rent, and the Lessee shall have provided adequate reserves for the payment of
such amounts, (e) Liens arising out of judgments or awards against the Lessee
with respect to which at the time an appeal or proceeding for review is being
prosecuted in good faith and either which have been bonded or for the payment of
which adequate reserves shall have been provided so long as such judgment, award
or appeal shall not involve any danger of the sale, forfeiture or loss of any
part of the Undivided Interest, the Trust Estate, the Lease Indenture Estate,
title thereto or any interest therein and
14
<PAGE>
shall not interfere with the use or disposition of any part of the Undivided
Interest, the Lease Indenture Estate, title thereto or any interest therein,
or the payment of Rent, and (f) Liens consented to by the Lessor in accordance
with the provisions of Section 12 of the Lease.
Person shall mean any individual, partnership, corporation, trust,
unincorporated association or joint venture, a government or any department or
agency thereof, or any other entity.
Plans and Specifications shall mean the technical specifications of the
Transmission System (x) attached as Exhibit A to the Construction Contract and
entitled "Public Service Company of New Mexico Technical Specifications for the
Clovis Area Blackwater HVDC Station Specification HVDC-83-1 dated February 7,
1983" and all amendments thereto or modifications thereof as permitted by the
Construction Contract, the Participation Agreement, and the Lease and the
Assignment of Construction Contract, and (y) attached to, or constituting part
of, the Other Construction Contracts.
PNM shall mean Public Service Company of New Mexico, a New Mexico
corporation.
Premium Deduction shall have the meaning set forth in the Tax Indemnity
Agreement.
Pricing Assumptions shall mean the pricing assumptions set forth in
Schedule II to the Amended and Restated Participation Agreement; provided,
however, that from and after any adjustment pursuant to Section 3(d) of the
Lease such term shall mean such pricing assumptions, as so adjusted.
Prudent Utility Practice shall mean, at a particular time, those practices,
methods and acts as are in accordance with standards of prudence applicable to
the electric utility industry in the Southwestern region of the United States of
America which would have been expected to accomplish the desired result at the
lowest reasonable cost consistent with reliability, safety and expedition.
Prudent Utility Practice is not intended to be limited to the optimum practice,
method or act, to the exclusion of all others, but rather is a spectrum of
possible practices, methods and acts which could have been expected to
accomplish the desired result at the lowest reasonable cost consistent with
reliability, safety and expedition, but Prudent Utility Practice is intended to
mean at least the same standard as the Lessee would, in the prudent management
of its own properties, use from time to time. Prudent Utility Practice shall
not include any practice, method or act that discriminates against the
Transmission System or the Undivided Interest in relation to those practices,
methods or acts employed by the Lessee with respect to transmission facilities
other than the Transmission System or those practices, methods or acts which
would have been employed by the Lessee if it had been the owner of the
Transmission System and such other transmission facilities in their entirety.
Purchase Documents shall mean the Bill of Sale.
Purchase Price means $43,800,000.
Qualified Investment shall have the meaning set forth in Section 1(b) of
the Tax Indemnity Agreement.
Refunding Account shall have the meaning set forth in paragraph 3 of the
Omnibus Receipt.
15
<PAGE>
Refunding Amortization Deductions shall have the meaning set forth in the
Tax Indemnity Agreement.
Refunding Bonds means the "Secured Facility Bonds, Due 1995 and 2012"
issued by Funding Corp under the Refunding Collateral Trust Indenture as
supplemented by the Refunding Supplemental Indenture.
Refunding Collateral Trust Indenture means the Collateral Trust Indenture
dated as of September 1, 1993 among Funding Corp, PNM and Chemical Bank.
Refunding Date means the date on which the Refunding Bonds are issued and
sold.
Refunding Extension Letter means the Extension Letter to be dated the
Refunding Date to the Collateral Trust Trustee from the Owner Participant, the
Owner Trustee, Funding Corp, and the Indenture Trustee.
Refunding Note Supplemental Indenture means Supplemental Indenture No. 1
dated as of the Refunding Date between the Owner Trustee and the Indenture
Trustee pursuant to which the Refunding Notes are to be issued.
Refunding Notes means the Owner Trustee's "Nonrecourse Promissory Notes,
Refunding Series" issued by the Owner Trustee under the Indenture as
supplemented by the Refunding Note Supplemental Indenture.
Refunding Supplemental Indenture means the Refunding Bond Supplemental
Indenture dated as of the Refunding Date among Funding Corp, PNM and the
Collateral Trust Trustee pursuant to which the Refunding Bonds are to be issued.
Registration Statement means the registration statement on Form S-3 under
the Securities Act filed by PNM, as the "issuer" and "registrant" of the
Refunding Bonds (in each case, for purposes of the Securities Act and the
Securities Act Rules), with the SEC (Registration Number 33-56148), together
with any amendments thereto, the prospectus constituting a part thereof and the
documents incorporated by reference therein.
Regulations shall mean the income tax regulations promulgated under the
Code.
Renewal Term shall mean each period during which the Undivided Interest may
be leased as permitted by Section 13 of the Lease, or such shorter period as may
result from earlier termination as provided in the Lease.
Rent shall mean Basic Rent and Supplemental Rent, collectively.
Replacement Component shall have the meaning set forth in Section 8(c) of
the Lease.
Required Alterations shall have the meaning set forth in Section 8(d) of
the Lease.
16
<PAGE>
Responsible Officer shall mean, with respect to the subject matter of any
covenant, agreement or obligation of any party contained in any Transaction
Document, the President, any Vice President, Assistant Vice President,
Treasurer, Assistant Treasurer or other officer who in the normal performance of
his operational responsibility would have knowledge of such matter and the
requirements with respect thereto.
SEC shall mean the Securities and Exchange Commission of the United States
of America.
Secured Facility Bonds shall mean Bonds issued by Funding Corp under the
Refunding Collateral Trust Indenture.
Securities Act shall mean the Securities Act of 1933, as amended.
Securities Act Rule shall mean any Rule promulgated by the SEC under the
Securities Act.
Securities Exchange Act shall mean the Securities Exchange Act of 1934, as
amended.
Securities Exchange Act Rule shall mean any Rule promulgated by the SEC
under the Securities Exchange Act.
Severable, when used with respect to any Alteration, shall mean any
Alteration which can be readily removed from the Transmission System without
materially damaging the Transmission System or materially diminishing or
impairing the value, utility or condition which the Transmission System would
have had if the applicable Alteration had not been made.
SFAS No. 13 shall mean Statement of Financial Accounting Standards No. 13,
as amended.
Share shall mean a percentage equal to the percentage of the Undivided
Interest.
Signing Date means September 8, 1993.
Special Casualty Value, as of the last day of any month on which Special
Casualty Value shall be payable under the Lease, shall mean (i) during the Basic
Term, the amount determined by multiplying Lessor's Cost by the percentage in
the Schedule of Special Casualty Values attached to the Lease (which Special
Casualty Values as originally attached to the Lease are based upon the Pricing
Assumptions and are subject to adjustment pursuant to Section 3(d) of the Lease)
and set forth opposite such day of such month and (ii) during any Renewal Term,
the amount determined by amortizing ratably the Fair Market Value of the
Undivided Interest as of the day following the last day of the Basic Term in
monthly steps over the remaining term of the Easement, as such term may be
extended in consequence of a determination of the Maximum Option Period, which
amortized amounts shall be set forth in a revised Schedule of Special Casualty
Values and attached to the Lease prior to the last day of the Basic Term or the
last preceding Renewal Term, as the case may be; provided, however, that Special
Casualty Value as of any date shall be, under any circumstances and in any
event, an amount at least sufficient to pay in full the aggregate unpaid
principal amount of all Notes then Outstanding under the Indenture, together
with all accrued and unpaid interest thereon.
17
<PAGE>
Substituted Lessee shall have the meaning set forth in Section 6.8(c) of
the Indenture.
Supplemental Financing shall have the meaning set forth in Section 8(h) of
the Lease.
Supplemental Rent shall have the meaning set forth in Section 3(b) of the
Lease.
Support Agreements shall mean the Operating Agreement, the Easement and the
Assignment of Right of Use, collectively.
Tax shall mean any and all fees (including, without limitation,
documentation, recording, license and registration fees), taxes (including,
without limitation, income, gross receipts, sales, use, property (personal and
real, tangible and intangible), intangibles, excise and stamp taxes), levies,
imposts, duties, charges, assessments or withholdings of any nature whatsoever,
general or special, ordinary or extraordinary, together with any and all
penalties, fines, additions to tax and interest thereon.
Tax Counsel shall have the meaning set forth in the Tax Indemnity
Agreement.
Tax Indemnity Agreement shall mean the Original Tax Indemnity Agreement, as
amended and restated by the Amended and Restated TIA.
Tax Loss shall have the meaning set forth in the Tax Indemnity Agreement.
Third Party Transaction shall have the meaning set forth in Section
10(b)(iv) of the Participation Agreement.
Transaction Documents shall mean the Participation Agreement, the Lease,
the Easement, the Operating Agreement, the Tax Indemnity Agreement, the Trust
Agreement, the Indenture, the Notes, the Assignment of Construction Contract,
the Instrument of Assignment of Other Construction Contracts, the Refunding
Extension Letter, the Bill of Sale, the Omnibus Notice and the Omnibus Receipt,
together with all amendments and supplements thereto.
Transaction Expenses shall be the sum of all amounts paid or payable
pursuant to Section 14 of the Participation Agreement and shall mean and
include:
(i) the reasonable fees of Funding Corp's Counsel, Owner
Trustee's Counsel, Indenture Trustee's Counsel and Owner Participant's
Counsel for their services rendered in connection with the
transactions occurring on the Signing Date and the Refunding Date and
all expenses and disbursements incurred by them in connection with
such transactions;
(ii) the reasonable initial fees of the Owner Trustee and
the Indenture Trustee, and out-of-pocket expenses of each through the
Refunding Date;
(iii) an amount equal to the product of (A) the aggregate
of all costs of issue of the Bonds including, without limitation, the
costs of preparing the Financing Documents, filing fees relating to
the Registra-
18
<PAGE>
tion Statement and the reasonable fees, expenses and disbursements of
the Collateral Trust Trustee's counsel and the Underwriter's counsel,
the reasonable initial fees of the Collateral Trust Trustee and its
out-of-poc-ket expenses through the Refunding Date, rating agency
fees, and the fees and commissions of the Underwriter, multiplied by
(B) the Lessor's Share.
(iv) all stenographic, printing and reproduction costs and
expenses incurred in connection with the execution and delivery of the
Amended and Restated Participation Agreement and the other Transac-
tion Documents and all other agreements, documents or instruments
prepared in connection therewith; and
(v) the out-of-pocket expenses for travel, computer and
related costs of the Owner Participant, but such amount shall not
exceed an amount equal to the product obtained by multiplying $25,000
by the Lessor's Share.
Transfer shall mean the transfer, by bill of sale or otherwise, by the
Lessor to the Lessee of all the Lessor's right, title and interest in and to the
Undivided Interest on an "as is, where is" basis, free and clear of all Lessor's
Liens but otherwise without recourse, representation or warranty, express or
implied, including an express disclaimer of representations and warranties in a
manner comparable to that set forth in Section 6(b) of the Lease, together with
the due assumption by the Lessee of, and the due release of the Lessor from, all
the Lessor's obligations and liabilities under the Transaction Documents by
instrument or instruments satisfactory in form and substance to the Lessor, and
Transferred shall be construed accordingly.
Transferee shall have the meaning set forth in Section 16 of the
Participation Agreement.
Transmission System shall mean the 216 mile, 345 kV Bulk power
transmission line between existing PNM facilities near Bernalillo, New Mexico,
and the Blackwater HVDC Station and an interconnection with the transmission
system of Southwestern Public Service Company in the area of Clovis/Portales,
New Mexico, as more particularly described in the Bill of Sale.
Transmission System Cost shall mean the fair market value of the
Transmission System, as set forth in, or determined in accordance with, the
letter of Marshall and Stevens.
Trust shall mean the trust created by the Trust Agreement.
Trust Agreement shall mean the Trust Agreement dated as of January 2,
1985 between the Owner Participant and FNB.
Trust Estate shall have the meaning set forth in Section 2.02 of the
Trust Agreement.
Trust Indenture Act shall mean the Trust Indenture Act of 1939, as
amended.
19
<PAGE>
Trustee's Expenses shall mean any and all liabilities, obligations,
costs, compensation, fees, expenses and disbursements (including, without
limitation, legal fees and expenses) of any kind and nature whatsoever (other
than such amounts as are included in Transaction Expenses) which may be imposed
on, incurred by or asserted against the Indenture Trustee or any of its agents,
servants or personal representatives, in any way relating to or arising out of
the Indenture, the Lease Indenture Estate, the Participation Agreement or the
Lease, or any document contemplated thereby, or the performance or enforcement
of any of the terms thereof, or in any way relating to or arising out of the
administration of such Lease Indenture Estate or the action or inaction of the
Indenture Trustee under the Indenture; provided, however, that such amounts
shall not include any Taxes or any amount expressly excluded from the Lessee's
indemnity obligations pursuant to Section 13(b)(ii) of the Participation
Agreement.
UCC or Uniform Commercial Code shall mean the Uniform Commercial Code
as in effect in the Commonwealth of Massachusetts and the State of New Mexico,
respectively.
Uncontrollable Forces shall have the meaning set forth in the
Operating Agreement.
Underlying Easements shall mean the easements of right-of-way set
forth and described in Parts II and III of Exhibit A to the Easement.
Underwriter means Salomon Brothers Inc.
Underwriting Agreement means the Underwriting Agreement dated as of
September 2, 1993 among Funding Corp, PNM and the Underwriter.
Undivided Interest shall mean a 60% undivided interest of the Owner
Trustee in the Transmission System.
Uniform System of Accounts shall mean the Uniform System of Accounts
prescribed for Public Utilities and Licensees Subject to the Provisions of the
Federal Power Act (Class A and Class B), 18 CFR 101, as revised from time to
time.
User shall have the meaning set forth in Section 2 of the Operating
Agreement.
20
<PAGE>
EXHIBIT 10.61
PARTICIPATION AGREEMENT
dated as of
June 30, 1983
among
SECURITY TRUST COMPANY, as Trustee
PUBLIC SERVICE COMPANY OF NEW MEXICO
TUCSON ELECTRIC POWER COMPANY
and
THE FINANCIAL INSTITUTIONS LISTED
IN SCHEDULE I HERETO
SAN JUAN COAL TRUST
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<C> <S> <C>
Preliminary Statement............................................ 1
SECTION 1 DEFINITIONS......................................... 2
SECTION 2 PURCHASE AND SALE OF CERTIFICATES
OF INTEREST....................................... 7
SECTION 3 THE CLOSING......................................... 7
3.1 Date, Time and Location........................ 7
3.2 Purchase and Sale.............................. 7
3.3 Transfer and Delivery of
New Certificates of Interest................ 7
3.4 Confirmation of Representations
and Warranties.............................. 8
SECTION 4 CONDITIONS PRECEDENT TO CLOSING..................... 8
4.1 Conditions Precedent to
Obligations to the Sellers.................. 8
4.2 Conditions Precedent to
Obligations of Each Investor................ 10
SECTION 5 REPRESENTATIONS AND WARRANTIES...................... 15
5.1 Representations and Warranties of
PNM......................................... 15
5.2 Representations and Warranties of
TEP......................................... 21
5.3 Representations and Warranties of
the Utilities............................... 26
5.4 Representations and Warranties of
Security Trust.............................. 29
5.5 Representations and Warranties of
Each Investor............................... 30
SECTION 6 COVENANTS RELATING TO QUALIFIED
COAL MINER.................................. 32
SECTION 7 GENERAL INDEMNITY................................... 33
7.1 Utilities' Obligations to
Indemnify................................... 33
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C> <C>
7.2 Exceptions to Indemnification
Obligation.................................. 34
SECTION 8 CERTAIN COVENANTS OF THE SELLERS AND PNM 36
8.1 Further Assurances.............................. 36
8.2 Recordation..................................... 37
SECTION 9 NOTICES.............................................. 37
SECTION 10 MISCELLANEOUS........................................ 38
10.1 Closing Expenses............................... 38
10.2 Captions, References........................... 38
10.3 Binding Effect, Successors
and Assigns.................................. 38
10.4 Entirety of Agreement, Waivers
and Amendments in Writing.................... 38
10.5 Governing Law.................................. 39
10.6 Survival of Agreements......................... 39
10.7 No Exclusion of Remedies....................... 39
10.8 Counterparts................................... 39
10.9 Reproduction of Documents...................... 39
SCHEDULE I - Schedule of Investors
EXHIBIT A - Schedule of Fruitland Coal Leases
EXHIBIT B - Schedule of Surface Rights and Surface
Instruments
EXHIBIT C - Trust Agreement
</TABLE>
-ii-
<PAGE>
PARTICIPATION AGREEMENT
PARTICIPATION AGREEMENT, dated as of June 30, 1983, among (i) Public
Service Company of New Mexico, a New Mexico corporation, (ii) Security Trust
Company, as Trustee, a New Mexico corporation, (iii) Tucson Electric Power
Company, an Arizona corporation, and (iv) the financial institutions listed
in Schedule I hereto, All capitalized terms used herein without definition
are defined in Section l.
PRELIMINARY STATEMENT
The San Juan Station, located in San Juan County, New Mexico,
presently consists of four coal fired electrical generating units.
PNM and TEP each formerly owned 50% of the outstanding common stock
of Western. Western's assets included its interests in the Fruitland Coal
under the Fruitland Coal Leases. The Fruitland Coal is presently being used to
supply the fuel requirements of the San Juan Station as described below.
Western subleased the Fruitland Coal to Utah pursuant to the Utah
Sublease and Utah has further sub-leased the Fruitland Coal to San Juan Coal
Company pursuant to the San Juan Sublease. San Juan Coal Company has under-
taken to supply coal to the Utilities pursuant to the Coal Sales Agreement.
Pursuant to the Sublease, Western had a Retained Economic Interest in respect
of the Fruitland Coal mined and sold to the Utilities.
On November 30, 1981, Western entered into the original Trust
Agreement with the Trustee and Western transferred the Fruitland Coal
Interests to the Trustee and directed the Trustee to execute and deliver
Certifi-cates or Interest to PNM and TEP. On December 31, 1981, the Trustee
and the Utilities entered into the Amended and Restated Trust Agreement.
The Utilities have previously disposed of a 37.512% interest in the
trust created under the Trust Agreement.
<PAGE>
On May 17, 1982, PNM entered into the Resource Trust Agreement with
Security Trust and PNM transferred to Security Trust, for the benefit of
Meadows, its Certificate of Interest.
The Investors desire to make an investment in a natural energy
resource where the economic return from such an investment will be paid
quarterly and indexed quarterly to a broad-based, government-published
inflation indicator over the term of their investment, by purchasing from the
Sellers the remaining portion of the beneficial interest in the trust create
under the Trust Agreement currently held by the Sellers.
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto agree as follows:
SECTION 1. DEFINITIONS
Unless the context otherwise requires, for all purposes of this
Agreement, the following terms shall have the respective meanings set forth
below (such definitions to be equally applicable to both the singular and
plural forms of the terms defined):
"Affiliate" of any Person means any other Person controlling,
controlled by or under direct or indirect common control with such Person. For
the purposes of this definition, "control," when used with respect to any
specified Person, means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Amended and Restated Trust Agreement" shall mean the Amended and
Restated Trust Agreement, dated as of December 31, 1981, among the Utilities
and the Trustee, a conformed copy of which is included as Exhibit C hereof.
"BLM" shall mean the Bureau of Land Management of the United States
Department of the Interior or any governmental authority or agency succeeding
to its functions.
"Business Day" shall mean any day other than a Saturday, Sunday or
holiday scheduled by law or required
2
<PAGE>
by Executive Order to commercial banking institutions in the State of New
York.
"Certificate of Interest" shall mean a certificate issued by the
Trustee pursuant to the Trust Agreement, substantially in the form of Exhibit
C to the Trust Agreement.
"Closing" shall have the meaning set forth in Section 3.1.
"Closing Date" shall mean the day on which the Closing takes place.
"Coal Sales Agreement" shall mean the Coal Sales Agreement, dated
August 18, 1980, among San Juan Coal Company, PNM and TEP, as amended by
Amendment Number One to Coal Sales Agreement, dated September 30, 1981, as the
same may hereafter from time to time be further amended. modified or
supplemented in accordance with the terms thereof.
"Commissions" shall mean the Securities and Exchange Commission or
any governmental authority or agency succeeding to its functions.
"Conveyances" shall mean the instruments of assignment and other
documents or instruments transferring the Fruitland Coal Interests to the
Trustee.
"Equipment Agreement" shall mean the Agreement for Purchase and Sale
of Equipment, dated August 18, 1980, between Western and San Juan Coal
Company, as the same may from time to time be amended, modified or
supplemented in accordance with the terms thereof.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Federal Leases" shall mean the Fruitland Coal Leases of which the
United States is the lessor.
"Fruitland Coal" shall mean the coal located within the lands covered
by the Fruitland Coal Leases at a depth no greater than 400 feet below the
surface.
"Fruitland Coal Interests" shall mean the rights and interests in, to
and under the Fruitland Coal Leases, the Surface Instruments and the Utah
Sublease formerly owned by Western which were transferred to the Trustee.
3
<PAGE>
"Fruitland Coal Leases" shall mean the 20 leases from the United
States, the State of New Mexico and certain private lessors described in
Exhibit A hereto.
"Fruitland Coal Closing Date" shall mean November 30, 1981, the date
of the transfer of the Fruitland Coal Interests from Western to the Trustee.
"Guaranty" shall mean the Guaranty of Utah, dated August 18, 1980,
relating to the Coal Sales Agreement.
"Investors" shall mean each of the financial institutions listed in
Schedule I hereto and its successors and assigns including, without
limitation, each future holder of one of the Certificates of Interest being
purchased by an Investor at the Closing.
"Lien" shall mean any interest in property securing an obligation
owed to, or claimed by, a Person other than the owner of the property, whether
such interest is based on common law, statute or contract, and including but
not limited to any security interest or lien arising from a mortgage,
encumbrance, pledge, conditional sale or trust receiptor a lease, consignment
or bailment for security purposes. The term "Lien" shall also include
reservations, exceptions, encroachments, easements, rights-of-way, covenants,
conditions, restrictions, leases and other title exceptions and encumbrances
affecting property.
"Meadows" shall mean Meadows Resources, Inc. a New Mexico corporation
and a subsidiary of PNM.
"Officers' Certificate" shall mean, as to any corporation, a
certificate signed by (a) the Chairman of the Board, the President, any Vice
President or any Assistant Vice President and (b) the Treasurer, any
Assistant Treasurer, the Secretary, any Assistant Secretary or any Trust
Officer.
"Operative Agreements" shall mean the Surface Instruments, the
Fruitland Coal Leases, the Utah Sub-lease, the San Juan Sublease, the Coal
Sales Agreement, the Guaranty, the Right of First Refusal, the Equipment
Agreement, the Conveyances, the Trust Agreement, the Certificates of
Interest, this Participation Agreement and the Transfer Agreements.
"Participation Agreement," "this Agreement," "herein," "hereunder,"
"hereof," "hereby," or other like
4
<PAGE>
words mean or refer to this Participation Agreement, as this Participation
Agreement may hereafter from time to time be supplemented, amended or modified
pursuant to the terms hereof.
"Person" shall mean and include any individual, partnership, joint
venture, association, joint stock company, corporation, trust, or
unincorporated organization or any government or any agency or political
subdivision thereof.
"PNM" shall mean Public Service Company of New Mexico, a New Mexico
corporation and, to the extent permitted hereunder and under the other
Operative Agreements, its successors and assigns.
"Resource Trust Agreement" shall mean the trust agreement, dated May
17, 1982, between PNM and Security Trust, as the same may from time to time
have been amended, modified or supplemented to the date hereof in accordance
with the terms thereof.
"Retained Economic Interest" shall have the meaning specified in the
Utah Sublease.
"Right of First Refusal" shall mean the Right of First Refusal, dated
August 18, 1980, between Western and Utah, as the same may from time to time
be amended, modified or supplemented in accordance with the terms thereof.
"San Juan Coal Company" shall mean San Juan Coal Company, a Delaware
corporation and wholly-owned subsidiary of Utah and, to the extent permitted
hereunder and under the other Operative Agreements, its successors and
assigns.
"San Juan Sublease" shall mean the Sublease, dated August 18, 1980,
between Utah and San Juan Coal Company, as the same may from time to time be
amended, modified or supplemented in accordance with the terms thereof.
"Security Trust" shall mean Security Trust Company, a New Mexico
corporation, acting solely as trustee under the Resource Trust Agreement and
not in its individual capacity, and, to the extent permitted hereunder and
under the Resource Trust Agreement, its successors and assigns.
5
<PAGE>
"State Leases" shall mean the Fruitland Coal Leases of which the
State of New Mexico is the lessor.
"Sellers" shall mean TEP and Security Trust.
"Surface Instruments" shall mean the instruments described in Exhibit
B hereto.
"Surface Rights" shall mean the rights granted to or reserved by
Western under the Surface Instruments with respect to parts of the lands
covered by the Fruitland Coal Leases and lands adjacent thereto, which rights
were assigned to the Trustee.
"TEP" shall mean Tucson Electric Power Company, an Arizona
corporation and, to the extent permitted hereunder and under the other
Operative Agreements, its successors and assigns.
"Transfer Agreement" shall mean one of the respective transfer
agreements, substantially in the form of Exhibit D to the Trust Agreement,
pursuant to which the respective Sellers shall transfer to the respective
Investors the trust interests contemplated hereby.
"Trust Agreement" shall mean the Trust Agreement, dated November 30,
1981, between Western and the Trustee, as amended and restated in its entirety
by the Amended and Restated Trust Agreement, as the same may from time to time
be further amended, modified or supplemented in accordance with the terms
thereof.
"Trustee" shall mean Bank of American National Trust and Savings
Association, a national banking association, as trustee under the Trust
Agreement, and its successors as trustee thereunder.
"Trust Estate" shall have the meaning specified in the Trust
Agreement.
"Utah" shall mean Utah International Inc., a Delaware corporation
and, to the extent permitted hereunder and under the other Operative
Agreements, its successors and assigns.
"Utah Sublease" shall mean the Sublease, dated August 18, 1980,
between Western and Utah, as amended by Amendment Number One to Sublease,
dated September 30, 1981, as the same may hereafter from time to time be
further
6
<PAGE>
amended, modified or supplemented in accordance with the terms thereof.
"Utilities" shall mean PNM and TEP.
"Western" shall mean Western Coal Co., a New Mexico corporation in
liquidation.
SECTION 2. PURCHASE AND SALE OF CERTIFICATES OF INTEREST
Subject to the terms and conditions of this Agreement, each of the
Sellers and severally, but not jointly, agrees to sell, and each of the
Investors severally, but not jointly, agrees to purchase, for the amount
specified opposite each Investor's name in Schedule I hereto, the percentage
of the beneficial interest in the trust created under the Trust Agreement
owned by such Seller which is specified opposite such Investor's name in
Schedule I hereto (as evidenced by Certificates of Interest representing the
percentage of beneficial interest in the trust created under the Trust
Agreement set forth in such Schedule I).
SECTION 3. THE CLOSING
3.1 Date, Time and Location. The Closing at which the Sellers
shall sell and the Investors shall purchase the portion of the beneficial
interest required by Section 2 (the "Closing") shall take place at 10:00
o'clock A.M. New York time at the offices of Debevoise & Plimpton, 875 Third
Avenue, New York, New York 10022, on June 30, 1983, or at such other time and
place as may be mutually agreed upon by the Sellers and the Investors, but, in
any event, no later than July 15, 1983.
3.2 Purchase and Sale. At the Closing, each Investor shall purchase
the interest to be purchased by it from each Seller by wiring or otherwise
delivering immediately available funds, in the amount set forth in Schedule I
hereto, to such Seller in the manner requested by such Seller no less than
five days prior to the Closing.
3.3 Transfer and Delivery of New Certificates of Interest. Upon
payment by an Investor of the purchase price specified in Schedule I hereto,
each Seller will duly assign, transfer and convey to such Investor,
Certificates of Interest evidencing the portion of the beneficial interest
purchased by such Investor, which Certificates of Interest will be duly
endorsed by such Seller (or in such other
7
<PAGE>
form as is required by the Trustee) so as to permit re-registration in the
name of the Investor, and, upon presentation of such Certificates of Interest
to the Trustee, the Trustee will execute, deliver and issue one or more new
Certificates of Interest to such Investor, in its name or the name of its
nominee (as previously specified to the Trustee), in the same percentage of
beneficial interest as the percentage of beneficial interest represented by
the Certificates of Interest presented to the Trustee for re-registration.
3.4 Confirmation of Representations and Warranties. Each Investor
agrees that the purchase by it at the Closing of a portion of the beneficial
interest in the trust created by the Trust Agreement shall constitute, without
further act, a confirmation that the representations and warranties of such
Investor contained in Section 5.5 are true and correct in all material
respects on and as of the Closing Date as though made on and as of the Closing
Date (except when expressly made on and as of another date, in which case such
representations and warranties shall be true and accurate as of such date).
SECTION 4. CONDITIONS PRECEDENT TO CLOSING
4.1 Conditions Precedent to Obligations of the Sellers. The
obligation of a Seller to sell the portion of the beneficial interest in the
trust created by the Trust Agreement to be sold by it pursuant to Section 2 is
subject to, and shall be conditioned upon, the fulfillment at or prior to the
Closing of each of the following conditions:
(a) Representations and Warranties True. The representations and
warranties of the Trustee contained in the Trust Agreement and of the
Investors contained in Section 5.5 are true and correct as of the Closing
Date (except where expressly made on and as of another date, in which
case such representations and warranties shall be true and correct as of
such date), and respective counsel for each of the Sellers shall have
received an Officer's Certificate of the Trustee, dated the Closing Date,
to such effect as to its representations and warranties.
(b) Approvals. All consents, approvals, authorizations, permits and
orders with respect to the trans-
8
<PAGE>
actions contemplated by the Operative Agreements required from any
Person or any court, governmental agency, authority or instrumentality
Federal, state or local, having or asserting jurisdiction over PNM, TEP,
Utah, Security Trust, the Trustee, any of the Investors, any part of the
Fruitland Coal Interests or such transactions, shall have been obtained
and be valid and in full force and effect.
(c) No Litigation. No action, suit, investigation or other
proceeding shall be pending before any court or governmental agency
which, in the opinion of counsel for either of the Sellers, attempts to
restrain or prohibit the consummation of the transactions contemplated
by the Operative Agreements and the Resource Trust Agreement.
(d) Execution and Delivery of Operative Agreements and the Resource
Trust Agreement. Each of the Operative Agreements and the Resource Trust
Agreement shall have been duly executed and delivered by the parties
thereto (except the Sellers), and shall be in full force and effect and
no party thereto shall then be in default or alleged to be in default or
have failed in a material respect to perform on the basis of force
majeure or other claim of excusable delay or nonperformance thereunder.
(e) Opinions of Counsel. The Sellers shall have received the opinion
of Mitchell, Silberberg & Knupp, counsel for the Trustee, in form and
substance satisfactory to them.
(f) Proceedings and Documents. All corporate and other proceedings
taken or to be taken in connection with the consummation of the
transactions contemplated hereby and all documents incident thereto
shall be satisfactory in substance and form to the Sellers, and the
Sellers shall have received all such counterpart originals or certified
or other copies of such documents as the Sellers may reasonably request,
all in form and substance satisfactory to each Seller.
(g) Investment Banker Certificates. Each Seller and PNM shall have
received a certificate from each of Blyth Eastman Paine Webber
Incorporated and Kidder, Peabody & Co. Incorporated addressed to it,
9
<PAGE>
dated the Closing Date, certifying that (i) it has not, nor has anyone
authorized to act on its behalf, directly or indirectly, offered for sale
or sold or solicited any offer to acquire the Certificates of Interest or
any interests in the trust created by the Trust Agreement or any form of
participation in the transactions contemplated by this Agreement or any
similar security, or any security the offering of which for the purposes
of the Securities Act of 1933, as amended, would be deemed to be a part
of the same offering as the offering of the aforementioned interests, to
or from, or otherwise approached or negotiated with respect thereto
with, anyone other than the Investors and not more than 86 other
institutional investors none of whom was offered less than a $1,000,000
participation in such transactions, and (ii) immediately prior to making
the offer to each offeree, it had reasonable grounds to believe and did
believe that each such offeree had such knowledge and experience in
financial and business matters that it was capable of evaluating the
merits and risks of the investments described in this Agreement, and,
after making reasonable inquiry, it had reasonable grounds to believe and
does believe that each of the Investors has such knowledge and experience
in financial and business matters and that each of them is capable of
evaluating the merits and risks of its respective investment.
4.2 Conditions Precedent to Obligations of Each Investor. The
obligation of each Investor to make its respective purchase as contemplated in
Sections 2 and 3.2 hereof is subject to the fulfillment at or before the
Closing of each of the following conditions:
(a) Proceedings and Documents. All corporate and other proceedings on
the part of all parties to the Resource Trust Agreement or to any of the
Operative Agreements (other than the Investors) in connection with the
transactions contemplated hereby and by the other Operative Agreements
and by the Resource Trust Agreement and all documents and instruments
incidental to such transactions shall be satisfactory in form and
substance to each Investor. Each Investor shall have received all such
counterpart originals or certified or other copies of such documents and
instruments as such Investor may reasonably request, all in form and
substance satisfactory to such Investor.
10
<PAGE>
(b) Certificates of Interest. Each of the Sellers shall have complied
with the provisions of Section 3.3, and there shall have been duly
executed and delivered to such Investor by the Trustee a Certificate of
Interest, substantially in the form set forth as Exhibit C to the Trust
Agreement, dated the Closing Date, in the name of such Investor or its
nominee and representing the percentage beneficial interest in the trust
created under the Trust Agreement and otherwise as provided in this
Agreement and the Trust Agreement.
(c) No Change in Applicable Law; Legal Investment. There shall have
been no change in the provisions of any applicable law or regulations
thereunder or interpretations thereof by appropriate courts or
regulatory authorities since the date of this Agreement, which would, in
the opinion of such Investor, make it illegal for such Investor to make
its purchase as contemplated by this Agreement or which would otherwise
subject such Investor to any penalty or liability, and the Sellers shall
have furnished to such Investor such evidence as it may reasonably
request to enable it to determine whether such acquisition is so
permitted.
(d) Consents and Approvals. (i) All approvals and consents of any
trustees or holders of any indebtedness or obligations of Western or the
Utilities and the consents of the parties to the Fruitland Coal Leases
and the Surface Instruments which in the opinion of such Investor are
required in connection with any of the transactions contemplated by this
Agreement shall have been duly obtained, and copies thereof, in form and
substance satisfactory to such Investor and certified by the Utilities,
shall have been delivered to the Trustee and such Investor.
(ii) The execution and delivery of the Resource Trust Agreement,
this Agreement and the other Operative Agreements and any document
required or referred to hereunder or thereunder by Western, the Trustee,
the Utilities, Security Trust, San Juan Coal Company or Utah, the
consummation by such parties of any of the transactions contemplated
hereby and thereby and the compliance by such parties with any of the
terms and provisions hereof and thereof shall not contravene any Federal,
state or local law, govern-
11
<PAGE>
mental rule or regulation and, except for such consents and approvals as
may abe required, from time to time, in the ordinary course of business
with respect to future mining operations on the Fruitland Coal Leases, no
consent or approval of, giving of notice to, registration, recording or
filing of any document with, or taking of any other action in respect of,
any such governmental authority or agency shall be required in connection
therewith.
(e) Authorization, Execution and Delivery of Operative Agreements.
The Resource Trust Agreement and each of the Operative Agreements shall
have been duly authorized, executed and delivered by the respective
party or parties thereto and shall be in full force and effect in
accordance with its terms on the Closing Date without amendment or
modification (other than as consented to by such Investor) and without
any event or condition having occurred or existing which constitutes, or
which with the giving of notice, lapse of time, or both, or the happening
of any further condition, event or act would constitute, a default
thereunder or breach thereof or would give any party thereto the right to
terminate any thereof, and copies thereof, which if so requested by the
Investors shall be certified by the Utilities, shall have been delivered
to the Trustee and each Investor.
(f) Title. Each Investor and the Trustee shall have received (i) an
opinion of Pruitt & Gushee as to the title to the coal deposits within
the Federal Leases and the State Leases, in form and substance
satisfactory to it, and (ii) copies of the opinions of Pruitt & Gushee as
to title, delivered in connection with the sale by the Utilities of
trust interests on December 31, 1981, together with a letter of Pruitt &
Gushee stating that such Investor may rely on such opinions as if they
were addressed to such Investor.
(g) Representations and Warranties; Compliance; No Defaults;
Investment Banker's Certificate.
(i) The representations and warranties of each of the Utilities,
Security Trust, San Juan Coal Company, Utah and the Trustee contained
herein or in any other Operative Agreement or made in writing by or
on behalf of it in connection with the transaction contemplated
hereby
12
<PAGE>
or thereby shall be true and correct on and as of the Closing Date
with the same effect as if made on and as of such date (unless stated
to be true and correct on and as of another date, in which case such
representations or warranties shall be true and correct on and as of
such other date); and such Investor shall have received an Officers'
Certificate of each of the Utilities, Security Trust and the Trustee
to the effect stated in this paragraph to the extent applicable to
such Person.
(ii) Each of Western, the Utilities, Security Trust, Utah, San
Juan Coal Company and the Trustee shall have duly performed and
complied with all agreements and conditions contained herein, in the
Resource Trust Agreement and in each of the Operative Agreements
required to be performed or complied with by it on or prior to the
Closing Date, and no event or condition would result from the
consummation of any of the transactions contemplated hereby, which
constitutes, or which with the giving of notice, lapse of time, or
both, or the happening of any further condition, event or act would
constitute, a default under any of the Operative Agreements or the
Resource Trust Agreement, and such Investor shall have received an
Officers' Certificate of each of the Utilities, Security Trust and
the Trustee to such effect, as to such entity.
(iii) Each Investor shall have received copies of the certificate
referred to in Section 4.1(g) addressed to it.
(h) Authorizations. Such Investor shall have received, in each case
in form and substance satisfactory to it, a copy of the resolutions of
the board of directors of each of Western, the Utilities and the Trustee,
certified by its secretary or an assistant secretary (by an officer of
each of the Utilities in the case of Western) as being in full force and
effect (i) on the Fruitland Coal Closing Date in the case of Western,
(ii) on the Closing Date and the Fruitland Coal Closing Date in the case
of the Trustee, and (iii) on the Closing Date in the case of the
Utilities, duly authorizing the execution, delivery, and performance by
it of the Resource Trust Agreement and each
13
<PAGE>
of the Operative Agreements to which it is a party and of each other
document required to be executed and delivered by it in accordance with
the provisions hereof or thereof, together with an incumbency
certificate as to the officer or officers authorized to execute and deliver
such Operative Agreements and Resource Trust Agreement and other
documents on its behalf and as to the signatures of such officer or
officers.
(i) No Adverse Change. Nothing shall have occurred subsequent to
March 31, 1983, that, either in any case or in the aggregate, materially
adversely affects or may reasonably be expected to materially adversely
affect the operations, business, properties, or condition (financial or
otherwise) of any of the Utilities, San Juan Coal Company or Utah or the
ability of any thereof to perform its obligation under any of the
Operative Agreements or the Resource Trust Agreement, and each Investor
shall have received an Officers' Certificate of each of the Utilities to
such effect (solely with respect to the entity as to which such
certificate is given).
(j) Conveyances; Recordings and Taxes. The Conveyances shall be
satisfactory in form and substance to each of the Investors. The
Resources Trust Agreement and each of the Operative Agreements shall have
been duly recorded in all such places as are required to establish,
perfect, preserve and protect the rights of the parties thereto. All
taxes, fees and other governmental charges in connection with the
recording and filing of the Resource Trust Agreement or any of the
Operative Agreements shall have been duly paid in full by the Utilities,
and the Trustee shall have received certified copies (or other evidence
of due recordation and filing in compliance with the foregoing
requirements satisfactory to such Investor) of such documents as
recorded, indicating such recording and such payment of taxes, fees and
governmental charges.
(k) Insurance. Each such Investor shall have received a copy of the
report by Alexander & Alexander, Inc. with respect to the "business
interruption insurance" maintained pursuant to the Utah Sublease,
delivered in connection with the sale by the Utilities of trust interests
on December 31, 1981, together
14
<PAGE>
with a letter from Utah or other satisfactory evidence that the insurance
required by Section 6.3 of the Utah Sublease remains in full force and
effect.
(l) Opinions of Counsel. Such Investor shall have received a
favorable opinion of the following counsel, dated the Closing Date and
addressed to it, in form and substance satisfactory to it:
(i) Keleher & McLeod, P.A., counsel for PNM and Western and
special counsel for Security Trust;
(ii) Roland F. Hoch, Esq., counsel for TEP;
(iii) Ann Victoria Scott, Esq., counsel for Utah and San Juan Coal
Company;
(iv) Mitchell, Silberberg & Knupp, counsel for the Trustee; and
(v) Debevoise & Plimpton, special counsel for the Investors.
(m) Utah Certificate and Side-Letter. Each Investor shall have
received a copy of the Officer's Certificate and Side-Letter delivered by
Utah in connection with the sale by the Utilities of trust interests on
December 31, 1981.
(n) Certificates as to No Liens. Each Investor shall have received
from the Trustee an Officers' Certificate, dated the Closing Date, to the
effect that there are no Liens on the Fruitland Coal Interests, or any
other properties constituting part of the Trust Estate, which result from
claims against the Trustee, arising out of any event or condition
unrelated to the administration of the Trust Estate.
SECTION 5. REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties of PNM. PNM represents and
warrants to the Investors that:
(a) Organization and Qualification. PNM is a corporation duly
organized, validly existing and in good standing under the laws of the
State of New
15
<PAGE>
Mexico and has all requisite power and authority to own its property and
carry on its business as now being conducted, to enter into and perform
the Resource Trust Agreement and each of the Operative Agreements to
which it is a party and to carry out the terms of each thereof. PNM is
duly qualified as a foreign corporation and in good standing in each
jurisdiction in which either the nature of the business conducted or the
character of the properties owned by it makes such qualification
necessary and in which the failure to so qualify would have a material
adverse effect on the business, condition, properties, or operations of
PNM.
(b) Financial Statements. PNM has furnished to each Investor its
Annual Report on Form 10-K for its fiscal year ended December 31, 1982,
its Quarterly Report on Form 10-Q in respect of the first quarter of its
fiscal year ending on December 31, 1983 and its Report on Form 8-K filed
June 22, 1983, all as filed with the Commission. The financial statements
contained in such Reports (including any related schedules and/or notes)
are true and correct in all material respects (subject, as to interim
statements, to changes resulting from audits and year-end adjustments),
have been prepared in accordance with generally accepted accounting
principles consistently followed, fairly present the financial position
and results of operations of PNM and its subsidiaries for such periods
and as at the dates indicated and reflect all known liabilities,
contingent or other, that should in accordance with generally accepted
accounting principles be reflected therein. There has been no material
adverse change in the business, condition, properties, or operations
(financial or otherwise) of PNM and its subsidiaries taken as a whole
since March 31, 1983.
(c) Actions Pending Against PNM. Except as set forth in its Annual
Report on Form 10-K, its Quarterly Report on Form 10-Q and its Report on
Form 8-K filed June 22, 1983 referred to in paragraph (b) hereof, there
is no action, suit, proceeding or claim and no investigation by any
governmental agency pending or, to the knowledge of PNM, in prospect of
threatened against PNM or any of its subsidiaries, or the assets or
business of PNM or any of its subsidiaries, before any court, arbitrator
or governmental agency or instrumentality, domestic or foreign, which
(i), either singly or in the aggregate, may reasonably be expected to
result in a material adverse change in the business,
16
<PAGE>
condition, properties, or operations (financial or otherwise) of PNM and
it subsidiaries taken as a whole, or (ii) seeks to restrain, invalidate
or prohibit or otherwise questions the validity of the Resource Trust
Agreement or any of the Operative Agreements or any action taken or to
be taken pursuant hereto or thereto. Except as so set forth, there is no
outstanding judgment, order, writ, injunction or decree of any court,
arbitrator or governmental agency or instrumentality, domestic or
foreign, which has resulted or may reasonably be expected to result in a
material adverse change in the business, condition, properties, or
operations (financial or otherwise) of PNM and its subsidiaries taken as
a whole or which restrains, enjoins or prohibits the consummation of any
of the transactions contemplated by the Resource Trust Agreement or any
of the Operative Agreements.
(d) Defaults. There exists no default under any provision of any
instrument evidencing indebtedness of PNM in excess of $1,000,000 or
under any agreement relating thereto.
(e) Authorization, Execution and Delivery of Operative Agreements.
The execution, delivery and performance by PNM of the Resource Trust
Agreement, this Agreement and the other Operative Agreements to which it
is a party have been duly authorized by all necessary corporate action on
the part of PNM. The Resource Trust Agreement, this Agreement and the
other Operative Agreements to which it is a party have been duly executed
and delivered by one of its officers who is authorized to execute and
deliver such documents on its behalf, and the Resource Trust Agreement,
this Agreement and the other Operative Agreements to which it is a party
constitute the legal, valid and binding obligations of PNM, enforceable
against it in accordance with their respective terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors'
rights generally and except as limited by applicable laws which may
affect some of the remedies provided therein, which laws, however, do
not make the remedies provided for therein inadequate for the practical
realization of the benefits provided thereby.
17
<PAGE>
(f) Conflicting Agreements and Other Matters. PNM is not in violation
of any term of (i) its charter or by-laws or of any mortgage, indenture,
indebtedness, agreement, lease, charter, assignment, instrument, license,
permit, judgment, writ, injunction, decree or order, applicable to it, or
any determination or award of any arbitrator applicable to it, and the
execution, delivery and performance of the Resource Trust Agreement and
the Operative Agreements to which it is a party and the documents and
transactions contemplated hereby or thereby will not result in any such
violation and will not conflict with, or cause a breach of, or default
under, any such term or result in the creation of any Lien upon any of
its properties or assets pursuant to any such term, or (ii) any law,
statute, ordinance, rule or regulation applicable to it, and the
execution, delivery and performance of the Resource Trust Agreement and
the Operative Agreements to which it is a party and the documents and
transactions contemplated hereby or thereby will not result in any such
violation and will not conflict with, or cause a breach of, or default
under, any such term or result in the creation of any Lien upon any of
its properties or assets pursuant to any such term, other than with
respect to clauses (i) or (ii) above violations that will not, in any
case or in the aggregate, impair the ability of PNM duly to perform its
obligations under the Resource Trust Agreement and the Operative
Agreements or have a material adverse effect upon the business,
condition, properties, or operations (financial or otherwise) of PNM or
any of its properties or assets.
(g) Tax Returns and Payments. PNM has filed all tax returns required
by law to be filed and has paid all taxes, assessments and other
governmental charges levied upon it or any of its properties, assets,
income or franchises which are due and payable, other than those
presently payable without penalty or interest. All other tax liabilities
of PNM are adequately provided for on its books and PNM knows of no
unpaid assessment for additional Federal, foreign, state or local taxes
for any period or of any basis for any such assessment which might be
material in amount for PNM.
(h) Title to Properties of PNM. On the date hereof, PNM has good and
marketable title to all of
18
<PAGE>
its properties and assets, including the properties and assets reflected
in the financial statements as of March 31, 1983 referred to in paragraph
(b) hereof (except properties and assets disposed of since such date in
the ordinary course of business) free from all Liens other than Liens
that will not, in any case or in the aggregate, impair the ability of PNM
duly to perform its obligations under the Resource Trust Agreement and
the Operative Agreements or have a material adverse effect upon the
business, condition, properties, or operations (financial or otherwise)
of PNM or any of its properties or assets.
(i) Offering of Participation. Neither PNM nor Security Trust, nor
anyone authorized to act on behalf of either thereof has offered the
Certificates of Interest or any interest in the trust created by the
Trust Agreement or any form of participation in the transaction
contemplated hereby or any similar security, or any interest therein, or
any security the offering of which for the purposes of the Securities
Act of 1933, as amended, would be deemed to be a part of the same
offering as the offering of any of the foregoing interests, for sale to,
or solicited any offer to acquire any of the same from, or otherwise
approached or negotiated with respect thereto with, anyone other than
Blyth Eastman Paine Webber Incorporated and Kidder, Peabody & Co.
Incorporated. Neither PNM nor Security Trust has taken, nor will either
of them take, any action which would subject the issuance or sale of such
interests to the provisions of Section 5 of the Securities Act of 1993,
as amended, or to the provisions of any securities or Blue Sky law of any
applicable jurisdiction.
(j) ERISA. PNM has delivered to the Investors a true and complete
letter, dated the Closing Date, identifying each employee benefit plan
with respect to which PNM is a party in interest or with respect to which
its securities are employer securities. As used in this paragraph, the
terms "employee benefit plan" and "party in interest" have the meanings
set forth in Section 3 of ERISA and the term "employer securities" has
the meaning set forth in Section 407(d)(1) of ERISA.
(k) Governmental Consents. No consent, approval, permit, order or
authorization of, or registration,
19
<PAGE>
declaration, or filing with or notice to, or action to be taken in
respect of, any court or administrative, governmental or public body or
authority whether Federal, state or local, foreign or domestic, is
required to permit PNM to enter into or carry out its obligations under the
Resource Trust Agreement or any of the Operative Agreements.
(l) Full Disclosure. Neither the financial statements referred to in
paragraph (b) hereof, nor any Operative Agreement to the extent of the
statements by PNM therein, nor any other document furnished by or on
behalf of PNM to the Trustee or any Investor in connection with the
transactions contemplated hereby, contains any untrue statement of a
material fact or omits to state a material fact necessary to make the
statements contained therein not misleading; and there is no fact with
respect to PNM's business or operations which PNM has not disclosed to
such parties in writing which materially adversely affects the business,
condition, properties, or operations (financial or otherwise) of PNM and
it subsidiaries taken as a whole or the ability of PNM to perform its
obligations under the Resources Trust Agreement or any of the Operative
Agreements.
(m) Title to Beneficial Interests and Certificates of Interest. PNM
has transferred to Security Trust for the benefit of Meadows under the
Resource Trust Agreement good and marketable title to the portion of the
beneficial interest in the trust created by the Trust Agreement (as
evidenced by the Certificates of Interest) that Security Trust proposes
to transfer to the Investors free and clear of all Liens. At the Closing,
upon payment of the purchase price thereof, the Investors will receive
good and marketable title to such interests free and clear of all Liens.
(n) Actions Pending. There is no action, suit, proceeding or claim
and no investigation by an governmental agency pending against PNM or,
to its knowledge, against any other Person, or, to its knowledge, in
prospect or threatened against PNM or any other Person, before any court,
arbitrator or governmental agency or instrumentality, domestic or
foreign, which (i) may reasonably be expected to materially adversely
affect the Trustee's interest in or title to the Fruitland Coal Leases,
the Surface Rights, the Surface
20
<PAGE>
Instruments or the Utah Sublease, or (ii) seeks to restrain, invalidate
or prohibit or otherwise questions the validity of the Resource Trust
Agreement or any of the Operative Agreements or any action taken or to be
taken pursuant hereto or thereto. There is no outstanding judgment,
order, writ, injunction or decree of any court, arbitrator or
governmental agency or instrumentality, domestic or foreign, which may
reasonably be expected to have a material adverse effect on the Fruitland
Coal Interests or which restrains, enjoins or prohibits the consummation
of any of the transactions contemplated by the Resource Trust Agreement
or any of the Operative Agreements.
(o) Representations and Warranties. The representations and
warranties of Security Trust contained in Section 5.4 hereof are true and
correct.
5.2 Representations and Warranties of TEP. TEP represents and
warrants to the Investors that:
(a) Organization and Qualification. TEP is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Arizona and has all requisite power and authority to own its
property and carry on its business as now being conducted, to enter into
and perform each of the Operative Agreements to which it is a party and
to carry out the terms of each thereof. TEP is duly qualified as a
foreign corporation and in good standing in each jurisdiction in which
either the nature of the business conducted or the character of the
properties owned by it makes such qualification necessary and in which
the failure to so qualify would have a material adverse effect on the
business, condition, properties, or operations of TEP.
(b) Financial Statements. TEP has furnished to each Investor its
Annual Report on Form 10-K for its fiscal year ended December 31, 1981
and its Quarterly Report on Form 10-Q in respect of the first quarter of
its fiscal year ending on December 31, 1983, as filed with the
Commission. The financial statements contained in such Reports (including
any related schedules and/or notes) are true and correct in all material
respects (subject, as to interim statements, to changes resulting from
audits and year-end adjustments), have been prepared in accor-
21
<PAGE>
dance with generally accepted accounting principles consistently
followed, fairly present the financial position of TEP and its
consolidated subsidiaries for such periods as at the dates indicated and
reflect all known liabilities, contingent or other, that should in
accordance with generally accepted accounting principles be reflected
therein. There has been no material adverse change in the business,
condition, properties or operations (financial or otherwise) of TEP and
its subsidiaries taken as a whole since March 31, 1983.
(c) Actions Pending against TEP. Except as set forth in its Annual
Report on Form 10-K or the Quarterly Report on Form 10-Q referred to in
paragraph (b) hereof, there is no action, suit, proceeding or claim and
no investigation by any governmental agency pending or, to the knowledge
of TEP, in prospect or threatened against TEP or any of its subsidiaries,
or the assets or business of TEP or any of its subsidiaries, before any
court, arbitrator or governmental agency or instrumentality, domestic or
foreign which (i) either singly or in the aggregate, may reasonably be
expected to result in a material adverse change in the business,
condition, properties, or operations (financial or otherwise) of TEP and
its subsidiaries taken as a whole, or (ii) seeks to restrain, invalidate
or prohibit or otherwise questions the validity of any of the Operative
Agreements or any action taken or to be taken pursuant hereto or thereto.
Except as so set forth, there is not outstanding judgment, order, writ,
injunction or decree of any court, arbitrator or governmental agency or
instrumentality, domestic or foreign, which has resulted or may
reasonably be expected to result in a material adverse change in the
business, condition, properties, or operations (financial or otherwise)
of TEP and it subsidiaries taken as a whole or which restrains, enjoins
or prohibits the consummation of any of the transactions contemplated by
any of the Operative Agreements.
(d) Defaults. There exists no default under any provision of any
instrument evidencing indebtedness of TEP in excess of $1,000,000 or
under any agreement relating thereto.
(e) Authorization, Execution and Delivery of Operative Agreements.
The execution, delivery and
22
<PAGE>
performance by TEP of this Agreement and the other Operative Agreements
to which it is a party have been duly authorized by all necessary
corporate action on the part of TEP. This Agreement and the other Opera-
tive Agreements to which it is a party have been duly executed and
delivered by one of its officers who is authorized to execute and deliver
such documents on its behalf, and this Agreement and the other Operative
Agreements to which it is a party constitute the legal, valid and binding
obligations of TEP, enforceable against it in accordance with their
respective terms, except as such enforceability may be limited by bank-
ruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and except as
limited by applicable laws which may affect some of the remedies provided
therein, which laws, however, do not make the remedies provided therein
inadequate for the practical realization of the benefits provided
thereby.
(f) Conflicting Agreements and Other Matters. TEP is not in violation
of any term of (i) its charter or by-laws or of any mortgage, indenture,
indebtedness, agreement, lease, charter, assignment, instrument, license,
permit, judgment, writ, injunction, decree or order, applicable to it, or
any determination or award of any arbitrator applicable to it, and the
execution, delivery and performance of the Operative Agreements to which
it is a party and the documents and transactions contemplated hereby or
thereby will not result in any such violation and will not conflict with,
or cause a breach of, or default under, any such term or result in the
creation of any Lien upon any of its properties or assets pursuant to any
such term, or (ii) any law, statute, ordinance, rule or regulation
applicable to it, and the execution, delivery and performance of the
Operative Agreements to which it is a party and the documents and
transactions contemplated hereby or thereby will not result in any such
violation and will not conflict with, or cause a breach of, or default
under, any such term or result in the creation of any Lien upon any of
its properties or assets pursuant to any such term other than with
respect to clauses (i) or (ii) above violations that will not, in any
case or in the aggregate, impair the ability of TEP duly to perform its
obligations under
23
<PAGE>
the Operative Agreements or have a material adverse effect upon the
business, condition, properties, or operations (financial or otherwise)
of TEP or any of its properties or assets.
(g) Tax Returns and Payments. TEP has filed all tax returns required
by law to be filed and has paid all taxes, assessments and other
governmental charges levied upon it or any of its properties, assets,
income or franchises which are due and payable, other than those
presently payable without penalty or interest. All other tax liabilities
of TEP are adequately provided for on its books and TEP knows of no
unpaid assessment for additional Federal, foreign, state or local taxes
for any period or of any basis for any such assessment which might be
material in amount for TEP.
(h) Title to Properties of TEP. On the date hereof, TEP has good and
marketable title to all of its properties and assets, including the
properties and assets reflected in the financial statements as of March
31, 1983 referred to in paragraph (b) hereof (except properties and
assets disposed of since such date in the ordinary course of business)
free from all Liens other than Liens that will not, in any case or in the
aggregate, impair the ability of TEP duly to perform its obligations
under the Operative Agreements or have a material adverse effect upon
the business, condition, properties, or operations (financial or
otherwise) of TEP or any of its properties or assets.
(i) Offering of Participations. Neither TEP nor anyone authorized to
act on its behalf has offered the Certificates of Interest, or any
interest in the trust created by the Trust Agreement or any form of
participation in the transactions contemplated hereby or any similar
security, or any interest therein, or any security the offering of which
for the purposes of the Securities Act of 1933, as amended, would be
deemed to be a part of the same offering as the offering of any of the
foregoing interests, for sale to, or solicited any offer to acquire any
of the same from, or otherwise approached or negotiated with respect
thereto with, anyone other than Blyth Eastman Paine Webber Incorporated
and Kidder, Peabody & Co. Incorporated. TEP has not taken and
24
<PAGE>
will not take any action which would subject the issuance or sale of
such interests to the provisions of Section 5 of the Securities Act of
1933, as amended, or to the provisions of any securities or Blue Sky law
of any applicable jurisdiction.
(j) ERISA. TEP has delivered to the Investors a true and complete
letter, dated the Closing Date, identifying each employee benefit plan
with respect to which TEP is a party in interest or with respect to which
its securities are employer securities. As used in this paragraph, the
terms "employee benefit plan", "party in interest" and "employer
securities" shall have the meanings referred to in Section 5.1(j).
(k) Governmental Consents. No consent, approval, permit, order or
authorization of, or registration, declaration, or filing with or notice
to, or action to be taken in respect of, any court or administrative,
governmental or public body or authority whether Federal, state or local,
foreign or domestic, is required to permit TEP to enter into or carry
out its obligations under any of the Operative Agreements.
(l) Full Disclosure. Neither the financial statements referred to in
paragraph (b) hereof, nor any Operative Agreement to the extent of the
statements by PNM therein, nor any other document furnished by or on
behalf of TEP to the Trustee or any Investor in connection with the
transactions contemplated hereby, contains any untrue statement of a
material fact or omits to state a material fact necessary to make the
statements contained therein not misleading; and there is no fact with
respect to TEP's business or operations which TEP has not disclosed to
such parties in writing which materially adversely affects the business,
condition, properties, or operations (financial or otherwise) of TEP and
it subsidiaries taken as a whole or the ability of TEP to perform its
obligations under any of the Operative Agreements.
(m) Title to Beneficial Interests and Certificates of Interest. TEP
has good and marketable title to the portion of the beneficial interest
in the trust created by the Trust Agreement (as evidenced by the
25
<PAGE>
Certificates of Interest) that it proposes to transfer to the Investors
free and clear of all Liens. At the Closing, upon payment of the purchase
price thereof, the Investors will receive good and marketable title to
such interests free and clear of all Liens.
(n) Actions Pending. There is no action, suit, proceeding or claim
and no investigation by an governmental agency pending against TEP or,
to its knowledge against any other Person, or, to its knowledge, in
prospect or threatened against TEP or any other Person, before any court,
arbitrator or governmental agency or instrumentality, domestic or
foreign, which (i) may reasonably be expected to materially adversely
affect the Trustee's interest in or title to the Fruitland Coal Leases,
the Surface Rights, the Surface Instruments or the Utah Sublease, or (ii)
seeks to restrain, invalidate or prohibit or otherwise questions the
validity of any of the Operative Agreements or any action taken or to be
taken pursuant hereto or thereto. There is no outstanding judgment,
order, writ, injunction or decree of any court, arbitrator or
governmental agency or instrumentality, domestic or foreign, which may
reasonably be expected to have a material adverse effect on the Fruitland
Coal Interests or which restrains, enjoins or prohibits the consummation
of any of the transactions contemplated by any of the Operative
Agreements.
5.3 Representations and Warranties of the Utilities. Each of the
Utilities severally represents and warrants to the Investors that:
(a) Organization. On the Fruitland Coal Closing Date, Western was a
corporation duly organized, validly existing and in good standing under
the laws of the State of New Mexico and had all requisite power and
authority to transfer and Fruitland Coal Interests to the Trustee and to
enter into and perform each of the Operative Agreements to which it was a
party and to carry out the terms of each thereof.
(b) Authorization, Execution and Delivery of Operative Agreements.
The execution, delivery and performance by Western of the Operative
Agreements to which it was a party were duly authorzed by all necessary
corporate action on the part of Western. The Operative Agreements to
which it was a party were
26
<PAGE>
executed and delivered by one of its officers who was authorized to
execute and deliver such documents on its behalf, and the Operative
Agreements to which it was a party constituted the legal, valid and
binding obligations of Western.
(c) Conflicting Agreements and Other Matters. The execution and
delivery by Western of the Operative Agreements to which it was a party
did not result in any violation of or conflict with, or cause a breach
of, or default under, any of its charter or by-laws or of any mortgage,
indenture, indebtedness, agreement, lease, charter, assignment,
instrument, license, permit, judgment, writ, injunction, decree or
order, applicable to it, or any determination or award of any arbitrator
applicable to it or any law, statute, ordinance, rule or regulation
applicable to it.
(d) Title to Fruitland Coal Leases and Surface Instruments.
(i) Except as specified in writing prior to the date hereof the
Trustee has good and marketable title to the leasehold estates
created by the Federal Leases and the State Leases, and, upon
severance of the coal in the manner permitted by the Federal and the
State leases and upon compliance with all the terms and conditions of
the Federal and the State Leases, San Juan Coal Company will have
good and marketable title to all of the Fruitland Coal contained in
the lands described in the Federal and the State Leases; and
(ii) Except as specified in writing prior to the date hereof the
Trustee has good and marketable title to the Fruitland Coal Leases
other than the Federal Leases and the State Leases (the "Private
Leases"), to the Utah Sublease, to the Surface Rights and, upon
severance of the coal in the manner permitted by the Private Leases
and upon compliance with all the terms and conditions of the Private
Leases, San Juan Coal Company will have good and marketable title to
all of the Fruitland Coal contained in the lands described in the
Private leases, free and clear, with respect to both Section
5.3(d)(1) and Section 5.3(d)(2), of all Liens, except (i)
27
<PAGE>
the interests of the parties under the Operative Agreements, (ii)
royalty and other payments due lessors under the Fruitland Coal
Leases and grantors under the Surface Instruments, (iii) Liens which
do not, individually or in the aggregate, materially interfere with
the right to mine and remove the Fruitland Coal and perform all other
obligations under the Operative Agreements as contemplated by the
Sublease and the Coal Sales Agreement and (iv) Liens, if any, arising
from acts of the holders of Certificates of Interest other than the
Sellers and PNM.
(e) Standing of Fruitland Coal Leases and Surface Instruments.
Except as otherwise disclosed to the Investors in writing prior to the
date hereto, each of the Fruitland Coal Leases and Surface Instruments
is valid, effective and in full force and effect in accordance with its
terms, all acts having been done thereunder which are required to be done
by the lessee or grantee thereunder, and no outstanding notice of
forfeiture or termination has been given with respect to any such lease
or instrument. There has been delivered to the Trustee a true and correct
list of all Persons currently entitled to payments under the terms of
each Fruitland Coal Lease and Surface Instrument and the respective
payment interest of each.
(f) Quality of Coal. Based upon the information available to it,
including the following:
(i) as of May 31, 1983 the 26,311,356 tons of Fruitland coal
delivered since 1973 have contained sufficient British Thermal Units
to meet the heating value requirements of "mineable coal" as defined
in Section 1.3 of the Coal Sales Agreement;
(ii) core samples of Fruitland Coal which have been taken have
contained sufficient British Thermal Units to meet the heating value
requirements of "mineable coal" as defined in Section 1.3 of the
Coal Sales Agreement; and
(iii) the Fruitland Coal constitutes coal within a single
geological formation;
28
<PAGE>
the Utilities have no reason to believe that the remaining Fruitland
Coal, assuming the utilization of reasonable and prudent mining
techniques in extracting such coal, does not contain sufficient
British Thermal Units to meet the heating value requirements of "mine-
able coal" as defined in Section 1.3 of the Coal Sales Agreement.
(g) Governmental Consents. No consent, approval, permit, order or
authorization of, or registration, declaration, or filing with or
notice to, or action to be taken in respect of, any court or
administrative, governmental or public body or authority whether
Federal, state or local, foreign or domestic, with respect to Western
was required (or if required, was not obtained) to permit Western to
enter into or carry out its obligations under the Operative
Agreements, including, without limitation, the transfer of the
Fruitland Coal Interests to the Trustee.
5.4 Representations and Warranties of Security Trust. Security
Trust represents and warrants to the Investors that:
(a) Organization and Qualification. Security Trust is a
corporation duly organized, validly existing and in good standing
under the laws of the State of New Mexico and has all requisite power
and authority to own its property and carry on its business as now
being conducted, to enter into and perform this Agreement and the
Transfer Agreements to which it is a party and to carry out the terms
of each thereof.
(b) Authorization, Execution and Delivery; Conflicting
Agreements; Governmental Consents. The execution, delivery and
performance by Security Trust of this Agreement and the Transfer
Agreements to which it is a party have each been duly authorized by
all necessary corporate action on the part of Security Trust. This
Agreement and the Transfer Agreements to which it is a party have
each been duly executed and delivered by one of its officers who is
authorized to execute and deliver such documents on its behalf, and
this Agreement and the Transfer Agreements to which it is a party
constitute the legal, valid and binding obligations of Security
Trust, enforceable against it in accordance with their respective
terms, except as such enforceability may be limited by bankruptcy,
29
<PAGE>
insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and except
as may be limited by applicable laws which may affect some of the
remedies provided therein, which laws, however, do not make the
remedies provided for therein inadequate for the practical
realization of the benefits provided thereby. The execution, delivery
and performance of this Agreement and the Transfer Agreements to
which it is a party and the documents and transactions contemplated
hereby or thereby will not result in any violation of the terms of
its charter or by-laws or of any agreement, instrument, license,
permit, judgment, writ, decree, order, law, statute, ordinance, rule
or regulation applicable to it and will not conflict with, or cause a
breach of, or default under, any of the terms of its charter or by-
laws or of any agreement, instrument, license, permit, judgment,
writ, decree, order, law, statute, ordinance, rule or regulation
applicable to it or result in the creation of any Lien upon any of
its properties or assets pursuant to any such term. No consent,
approval, permit, order or authorization of, or registration,
declaration, or filing with or notice to, or action to be taken in
respect of, any court or administrative, governmental or public body
or authority whether Federal, state of local, foreign or domestic, is
required to permit Security Trust to enter into or carry out its
obligations under this Agreement or the Transfer Agreements to which
it is a party.
(c) Title to Beneficial Interests and Certificates of Interest.
Security Trust has good and marketable title to the portion of the
beneficial interest in the trust created by the Trust Agreement (as
evidenced by the Certificates of Interest held for the benefit of
Meadows by Security Trust under the Resource Trust Agreement) that it
proposes to transfer to the investors free and clear of all Liens
arising from its own acts or omissions. At the Closing, upon payment
of the purchase price thereof, the Investors will receive good and
marketable title to such interests free and clear of all Liens
arising from its own acts or omissions.
5.5 Representations and Warranties of Each Investor. Each
investor represents and warrants that:
30
<PAGE>
(a) Valid Agreement. This Agreement has been duly authorized,
executed and delivered by such Investor and is a valid and binding
obligation of such Investor enforceable against such Investor in
accordance with its terms, subject (i) to applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally, (ii) to
general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law),
and (iii) in the case of any proceeding begun in the Commonwealth of
Massachusetts involving the liquidation of John Hancock Mutual Life
Insurance Company, to the priorities of distribution provided for in
Section 180F of Chapter 175 of the General Laws of the Commonwealth
of Massachusetts.
(b) Investment Representation. It is making the investment
hereunder for its own account, or for the account of one or more
trust funds or pension funds for which it is acting as trustee,
and/or as agent for one or more institutional investors, and that in
any such case it is making the investment hereunder for investment
and not with a view to the distribution thereof, subject,
nevertheless, to the disposition of such Investor's property and the
property of those for whom the Investor is acting, as the case may
be, being at all times within its or their control. If such Investor
is making the investment hereunder for one or more trust funds or
pension funds and/or as agent for one or more institutional inves-
tors, such Investor represents (i) that it is acting as sole trustee
for all such funds, or as sole agent for all such agency accounts, as
the case may be, in connection with making the investment hereunder,
(ii) that, except to the extent it has advised the other parties
hereto in writing to the contrary, it has sole investment discretion
with respect to all such funds and agency accounts (and, to the
extent it does not have sole investment discretion, that it has been
authorized to make the representations contained in this Section by
every Person having investment discretion in connection with each
such fund and agency account with respect to which the Investor does
not have sole investment discretion), and (iii) that the
determination and decision on its behalf to make the investment for
all such funds and agency accounts was made by the same individual or
group of individuals who customarily pass on such investments.
31
<PAGE>
(c) Source of Funds. Either (i) no part of the funds being used by
such Investor to acquire its interest in the Trust Estate constitutes
plan assets of any employee benefit plan identified in the letters of
PNM and TEP referred to in Sections 5.1(j) and 5.2(j), or, if such
Investor is an insurance company, assets of any separate account
maintained by it in which any such employee benefit plan participates
to the extent of 5% or more (treating all employee benefit plans
maintained by the same employer or employee organization as a single
plan), or (ii) such Investor is an employee benefit plan described in
Section 4(b)(1) or Section 4(b)(2) of ERISA and Section 4975(g)(2)
or Section 4975(g)(3) of the Internal Revenue Code of 1954, as
amended to the date hereof, or (iii) the funds to be used by such
Investor to acquire its interest in the Trust Estate constitute
assets of a guaranteed contract separate account maintained by it.
As used in this paragraph (c), the term "separate account" shall have
the meaning set forth in Section 3(17) of ERISA, the terms "party in
interest" and "employee benefit plan" shall have the respective
meanings described in Section 5.1(j) and the term "guaranteed
contract separate account" shall have the meaning set forth in the
Department of Labor Prohibited Transaction Exemption 81-82, 46 Fed.
Reg. 46443 (1981).
SECTION 6. COVENANTS RELATING TO QUALIFIED COAL MINER
In the event that (a) in a proceeding under the Federal Bankruptcy
Code a trustee in bankruptcy or other similar official of Utah elects to
reject the Utah Sublease, or (b) the Utah Sublease has been terminated
other than by reason of Section 8.2 of the Utah Sublease and only if the
Utilities are not obligated under the Coal Sales Agreement, then in such
event:
(1) The Trustee will enter into a sublease of the Fruitland
Coal with a "Qualified Coal Miner" (as hereinafter defined)
selected by the Trustee (as described in the Trust Agreement) and
approved by the Utilities (which approval shall not be
unreasonably withheld) on substantially the same terms and
conditions of, but in all events on terms and conditions no less
favorable to the Trustee than, the Utah Sublease as it is in full
force and effect on the date hereof; and
32
<PAGE>
(2) The Utilities agree to enter into an agreement with the
Qualified Coal Miner for the sale and delivery of coal from the
Fruitland Coal Leases to the San Juan Generating Station on
substantially the same terms and conditions of, but in all events
on terms and conditions no less favorable to the Utilities than,
the Coal Sales Agreement as it is in full force and effect on the
date hereof; provided, however, that the term of such new coal
sales agreement need not extend beyond December 31, 2004.
As used in this Section 6, a "Qualified Coal Miner" shall mean a
reputable and capable miner, ready, willing and able to perform the
sublease and the new coal sales agreement referred to above
satisfactorily and in a commercially reasonable manner.
SECTION 7. GENERAL INDEMNITY
7.1 Utilities' Obligation to Indemnify. Subject to section 7.2
each Utility hereby severally agrees with respect to 50% of any
obligations under this Section 7.1 (whether or not any of the
transactions contemplated hereby are consummated) to indemnify (on an
after-tax basis) each Indemnitee (which term, for the purposes of this
Section 7, shall mean the Trustee (both individually and in its capacity
as Trustee), each Investor, the Trust Estate and their respective
successors, assigns, servants and agents) against, and shall protect,
save, keep harmless and make whole each thereof from,
(a) all taxes, levies, imposts, duties, assessments, utility
charges and fees, including all license, documentation, recording
and registration fees and all other charges and withholdings of any
nature whatsoever, general or specific, ordinary or extraordinary,
together with any penalties, fines, additions to tax or interest
thereon (collectively, "Taxes"), howsoever imposed, whether levied or
imposed upon an Indemnitee, or otherwise, by any Federal, state or
local government or governmental subdivision or taxing authority in
the United States or by any foreign country or foreign taxing
authority or by a territory or possession of the United States or any
subdivision or taxing authority of any of the foregoing, and
33
<PAGE>
(b) any and all liabilities, obligations, losses, damages,
penalties, claims, actions, suits, costs, expenses and
disbursements, including reasonable legal and investigatory fees and
expenses (whether or not litigation be commenced), of whatever kind
and nature,
in either case which are imposed on, incurred by or asserted against any
Indemnitee, in any way relating to or arising out of,
(i) any of the Operative Agreements, or the violation of any of
the terms or conditions of any thereof, or the entering into or
giving or negotiation with respect to any future amendments,
supplements, waivers or consents with respect to any of the Operative
Agreements (including, without limitation, reasonable legal and
investigatory fees and expenses);
(ii) the ownership, delivery, non-delivery, lease, possession,
use, sublease, operation, condition, sale, return or other
disposition of any of the Fruitland Coal Interests, the Fruitland
Coal, or the Surface Interests including, without limitation, claims
or penalties arising from any (A) violation of the laws, statutes,
rules, codes, ordinances or orders of any country or political
subdivision thereof, or any agency, or authority of any thereof, (B)
loss of or any damage to any property or death or injury to any
Person, (C) latent or other defects, whether or not discoverable, and
(D) patent, trademark, copyright or trade secret infringement; or
(iii) the offer, sale or delivery of any interest in and to the
Trust Estate or under the Trust Agreement, in the manner contemplated
hereby, but not including any offers, sales or deliveries by any
Investor (the indemnities contained in this clause (iii) to extend
also to any Person who "controls" any Indemnitee within the meaning
of Section 15 of the Securities Act of 1933, as amended).
The Indemnities contained in this Section 7.1 shall survive the
termination of this Agreement or any of the other Operative Agreements.
7.2 Exceptions to Indemnification Obligation. The foregoing
indemnity with regard to any particular Indemnitee shall not extend to
any,
34
<PAGE>
(a) liability, obligation, loss, damage, penalty, claim, action,
suit, cost, expense or disbursement resulting from the willful misconduct
or gross negligence of such Indemnitee or its successors or assigns, or
from the inaccuracy of any of the representations or warranties made by
such Indemnitee in any Operative Agreement;
(b) obligations of Utah to make payments of Retained Economic
Interest under the Utah Sublease, whether or not such obligations are
honored, breached, terminated or discharged;
(c) liability, obligation, loss, damage, penalty, claim, action,
suit, cost, expense, or disbursements for which any Person other than
the Utilities is expressly obligated under the Utah Sublease or this
Participation Agreement to indemnify the Indemnitee, whether or not such
agreement to indemnify is honored, breached, terminated or discharged;
(d) liability, obligation, loss, damage, penalty, claim, action,
suit, cost, expense or disbursement arising out of or in connection with
the quantity or quality of coal or Uncontrollable Forces as such term is
used in the Utah Sublease and the Coal Sales Agreement which relates to
the Investors' loss or impairment of the income or value of any Certi-
ficate of Interest;
(e) liability, obligation, loss, damage, penalty, claim, action,
suit, cost, expense or disbursement which is attributable to acts or
events which occur after December 31, 2004, provided, however, that the
exception set forth in this Section 7.2(e) shall not apply with respect
to the Investors named in Schedule I hereto (but excluding transferees or
assignees of such Investors) so long as the Coal Sales Agreement shall be
in full force and effect, but provided further that, in such event, from
and after January 1, 2005, the indemnities set forth in Section 7.1 shall
not extend to any expenses or disbursements arising out of or arising in
connection with the administration of the Trust Agreement (including,
without limitation, Trustee's fees), the trust created under the Trust
Agreement and the Operative Agreements or the entering into or giving or
negotiating with respect to any amendments, supplements, waivers or
consents with respect thereto;
35
<PAGE>
(f) Taxes based on or measured by any fees received by the Trustee in
connection with any transaction contemplated by the Operative Agreements;
(g) Taxes upon or with respect to the income, receipts (other than
sales or use taxes), capital, franchises or conduct of business of any
Investor;
(h) personal property or intangible taxes imposed by any state
resulting from the situs of the Certificates of Interest in such state;
(i) all costs and expenses incurred in connection with, and all
Taxes (other than Taxes for which specific exception is otherwise made in
this Section 7.2) imposed by reason of, the sale or transfer of a
Certificate or Certificates of Interest by an Investor;
(j) gift, inheritance and estate taxes; and
(k) obligations to be borne pursuant to the express provisions of the
Trust Agreement by the Trustee, other than those arising out of the
failure of the Utilities to perform their respective obligations
hereunder;
provided, however, that none of the limitations specified above is intended to
or shall be deemed to limit any representation or warranty contained herein
or otherwise made by or on behalf of the Utilities. If any Indemnitee shall
have any knowledge of any claim of liability indemnified against by the terms
of this Section 7, it shall give prompt written notice thereof to the
Utilities, provided that the failure of any Indemnitee to give such notice
shall not in any way discharge any of the indemnities provided in Section
7.1.
SECTION 8. CERTAIN COVENANTS OF THE SELLERS AND PNM
The Sellers and PNM covenant and agree with each Investor as follows:
8.1 Further Assurances. The Sellers and PNM will cooperate to cause
to be done, executed, acknowledged and delivered all and every such further
acts, conveyances and assurances as the Trustee or any Investor shall
reasonably require for accomplishing the purposes of this Agreement,
36
<PAGE>
and the other Operative Agreements and the Resource Trust Agreement and to
furnish to the Trustee such information as may reasonably be required to
enable the Trustee timely to file any reports required to be filed by it with
any governmental authority because of the Trustee's ownership of the Fruitland
Coal Interests, the Coal Leases and the Surface Rights.
8.2 Recordation. The Sellers will take, or cause to be taken, such
action with respect to the recording, filing, rerecording and refiling of
the Operative Agreements as is necessary to establish and perfect the
Trustee's title to and interest in the Fruitland Coal Interests, the Coal
Leases and the Surface Rights as against any parties.
SECTION 9. NOTICES
Unless otherwise specifically provided herein, all notices, consents,
directions, approvals, instructions, requests and other communications
required or permitted by the terms hereof shall be given by mail, telex,
telegram or cable, shall become effective when received, and shall be (i) if
to an Investor, addressed to such Investor in the manner provided in Schedule
I hereto, or to such other address as to which such Investor shall have given
written notice to the Utilities, the Trustee and each other Investor; (ii) if
to PNM, addressed to it at Alvarado Square, Albuquerque, New Mexico 87158,
Attention: Secretary, or to such other address as PNM shall have designated by
written notice to TEP, the Trustee and the Investors; (iii) if the TEP,
addressed to it at Post Office Box 711, Tucson, Arizona 85702, Attention:
Secretary, or to such other address as TEP shall have designated by written
notice to PNM, the Trustee and the Investors; (iv) if to the Trustee,
addressed to it at 555 South Flower Street, Los Angeles, California 90071,
Attention: Corporate Agency Division, or to such other address as Trustee
shall have designated by written notice to the Utilities and the Investors;
(v) if to any subsequent holder of a beneficial interest under the Trust
Agreement, to such address as appears in the register maintained by the
Trustee pursuant to Section 3.03 of the Trust Agreement; and (vi) if to
Security Trust, addressed to it at 200 Lomas Blvd. N.W., Albuquerque, N.M.
87103, Attention: President.
37
<PAGE>
SECTION 10. MISCELLANEOUS
10.1 Closing Expenses. Whether or not any of the transactions
contemplated hereby are consummated, the Utilities each agree to pay, or
cause to be paid, 50% of
(a) the fees and expenses of the Trustee in connection with the
transactions contemplated hereby;
(b) the reasonable fees, expenses and disbursements of Debevoise &
Plimpton, special counsel for the Investors, and Mitchell, Silberberg &
Knupp, counsel for the Trustee;
(c) all expenses in connection with the mechanical preparation and
reproduction of any document referred to herein; and
(d) all expenses, including, without limitation, closing costs, all
fees and other charges payable in connection with the recording or re-
recording or filing or refiling of any documents or instruments described
in this Agreement or required pursuant to the provisions of the Trust
Agreement and reimbursement to the Investors and any and all fees,
expenses and disbursements of the character referred to in paragraphs
(a), (b) and (c) above which shall have been paid by the Investors.
Nothing contained in this Section 10.1 (relating to expenses incurred
in connection with the Closing) is intended to, or shall be deemed to limited
or affect the scope of the indemnities contained in Section 7.1.
10.2 Captions; References. The captions in this Agreement and in the
table of contents are for convenience of reference only and shall not define
or limit any of the terms or provisions hereof. Reference herein to sections
and subsections without reference to the document in which they are contained
are references to this Agreement.
10.3 Binding Effect, Successors and Assigns. The terms and provisions
of this Agreement and the respective rights and obligations of the parties
hereunder shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns.
10.4 Entirety of Agreement, Waivers and Amendments in Writing. This
Agreement constitutes the entire
38
<PAGE>
agreement among the parties hereto with respect to the matters dealt with
herein and there are no oral or written understandings, representations or
commitments of any kind, expressed or implied, not expressly set forth herein.
Neither this Agreement nor any of the terms hereof may be terminated, amended,
supplemented, waived or modified orally, but only by an instrument in writing
signed by the party against which the enforcement of the termination,
amendment, supplement, waiver or modification is sought.
10.5 Governing Law. This Agreement shall in all respects be governed
by, and construed in accordance with, the laws of the State of New York,
including all matters of construction, validity and performance. This
Agreement is being made and delivered in New York.
10.6 Survival of Agreements. All agreements, representations and
warranties contained herein or made in writing by or on behalf of any party
hereto in connection with the transactions contemplated hereby shall survive
the execution and delivery of this Agreement and each other document and
instrument delivered in connection with the consummation of the transactions
contemplated hereby, any investigation at any time made by any party hereto or
on its behalf and any disposition of such interests. All statements contained
in any certificate or other instrument delivered by or on behalf of any part
hereto pursuant hereto or in connection with the transactions contemplated
hereby shall be deemed representations and warranties by such party
hereunder.
10.7 No Exclusion of Remedies. Nothing contained in this Agreement
shall in any way limit the liability of any party hereto which defaults in the
performance of its obligations hereunder or exclude any right or remedy which
any other party hereto may have under applicable law as a result of any such
default.
10.8 Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute but
one and the same instrument.
10.9 Reproduction of Documents. This Agreement and all documents
relating hereto, including, without limitation, (a) consents, waivers and
modifications which may hereafter be executed, (b) documents received by the
Inves-
39
<PAGE>
tors on the Closing Date and (c) financial statements, certificates and other
information previously or hereafter furnished to the Investors, may be
reproduced by an Investor by any photographic, photostatic, microfilm,
microcard, miniature photographic or other similar process and such Investor
may destroy any original document so reproduced. Each party hereto stipulates
that, to the extent permitted by law, any such reproduction shall be
admissible in evidence as the original itself in any judicial or administra-
tive proceeding (whether or not the original is in existence and whether or
not such reproduction was made by such Investor in the regular course or
business), and any enlargement, facsimile or further reproduction of such
reproduction shall likewise be admissible in evidence.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
PUBLIC SERVICE COMPANY OF
NEW MEXICO
Attest:
By /s/ A. J. Robison
-------------------------------------
/s/ P. J. Archibeck Title: Sector Vice President-
- -------------------------- Finance
Treasurer and
Assistant Secretary
TUCSON ELECTRIC POWER COMPANY
By /s/ Roland F. Hoch
-------------------------------------
Title: Vice President and
General Counsel
SECURITY TRUST COMPANY
By /s/ Linda L. Browning
--------------------------------------
Title: Secretary/Trust
Officer
40
<PAGE>
THE EQUITABLE LIFE ASSURANCE
SOCIETY OF THE UNITED STATES
By /s/ David F. Hoyt
--------------------------------------
Title: Assistant Vice President
JOHN HANCOCK MUTUAL LIFE INSURANCE
COMPANY
By /s/ John P. Shea
--------------------------------------
Title: Assistant Investment Officer
NEW ENGLAND MUTUAL LIFE
INSURANCE COMPANY
By /s/ Hanson C. Robbins
---------------------------------------
Title: Senior Investment Officer
UNITED OF OMAHA LIFE INSURANCE
COMPANY
By /s/ Rodney P. Walker
---------------------------------------
Title: Second Vice President -
Investments
STATE STREET BANK & TRUST COMPANY, AS
TRUSTEE FOR THE RETIREMENT PLANS OF THE
ATLANTIC RICHFIELD COMPANY AND CERTAIN
OF ITS SUBSIDIARIES
By /s/ Edward J. Lavin, Jr.
----------------------------------------
Title: Vice President
41
<PAGE>
Schedule I
to
Participation Agreement
Information Regarding Investors
<TABLE>
<CAPTION>
Percentage Interest Purchase Price Aggregate Aggregate
Name and Address to be Purchased to be Paid to Beneficial Purchase
of Investor From Each Seller Each Seller Interest Price
- ---------------- ------------------- -------------- ---------- ---------
<S> <C> <C> <C> <C>
THE EQUITABLE LIFE ASSURANCE
SOCIETY OF THE UNITED STATES 17.57475% Security Trust 35.1495% $ 43,484,784.35
$21,742,374.18
(1) All payments by wire
transfer of immediately TEP
available funds to: $21,742,374.17
The Chase Manhattan
Bank, N.A.
110 West 52nd Street
New York, New York 10019
A/C The Equitable Life
Assurance Society of
the United States
Account No. 037-1-000233
With sufficient information
to identify the source and
application of such funds and
with instructions to telephone
advice of credit to:
Banking Division
Bank Services Department
The Equitable Life Assur-
ance Society of the
United States
</TABLE>
1
<PAGE>
Schedule I
to
Participation Agreement
(Continued)
Information Regarding Investors
<TABLE>
<CAPTION>
Percentage Interest Purchase Price Aggregate Aggregate
Name and Address to be Purchased to be Paid to Beneficial Purchase
of Investor From Each Seller Each Seller Interest Price
- ---------------- ------------------- -------------- ---------- ---------
<S> <C> <C> <C> <C>
(2) All notices of payments:
The Equitable Life
Assurance Society
of the United States
1285 Avenue of the Americas
New York, New York 10019
Attention: Securities Services
Division, Investment
Services Department
(3) All other communications:
The Equitable Life Assur-
ance Society of the
United States
1285 Avenue of the Americas
New York, New York 10019
Attention: Corporate Finance
Department
JOHN HANCOCK MUTUAL
LIFE INSURANCE COMPANY 3.9055% Security Trust 7.8110% $ 9,663,277.41
$4,831,638.71
TEP
$4,831,638.70
</TABLE>
2
<PAGE>
Schedule I
to
Participation Agreement
(Continued)
Information Regarding Investors
<TABLE>
<CAPTION>
Percentage Interest Purchase Price Aggregate Aggregate
Name and Address to be Purchased to be Paid to Beneficial Purchase
of Investor From Each Seller Each Seller Interest Price
- ---------------- ------------------- -------------- ---------- ---------
<S> <C> <C> <C> <C>
(1) All payments by wire
transfer of immediately
available funds not later
than 12:00 noon Boston
time to:
The First National Bank of Boston
Attention: National Division--East
Boston, Massachusetts 02110
Account of: John Hancock Mutual Life
Insurance Company
(GBSA Account)
Account No.: 535-8416
with sufficient information to identify
the source and application of such funds.
(2) All notices of payments
and written confirmations
of such wire transfers:
John Hancock Mutual Life
Insurance Company
Attention: Treasury Department,
Securities Control
John Hancock Place
P.O. Box 111
Boston, Massachusetts 02117
</TABLE>
3
<PAGE>
Schedule I
to
Participation Agreement
(Continued)
Information Regarding Investors
<TABLE>
<CAPTION>
Percentage Interest Purchase Price Aggregate Aggregate
Name and Address to be Purchased to be Paid to Beneficial Purchase
of Investor From Each Seller Each Seller Interest Price
- ---------------- ------------------- -------------- ----------- ---------
<S> <C> <C> <C> <C>
(3) All other communications:
John Hancock Mutual Life
Insurance Company
Attention: Bond and Corporate
Finance Department
John Hancock Place
P.O. Box 111
Boston, Massachusetts 02117
NEW ENGLAND MUTUAL
LIFE INSURANCE COMPANY 3.9055% Security Trust 7.8110% $ 9,663,277.41
$4,831,638.70
(1) All payments by wire
transfer of immediately TEP
available funds to: $4,831,638.71
Morgan Guaranty Trust
Company of New York
23 Wall Street
New York, New York 10015
Attention: Money Transfer Department
A/C Newing One & Co.
Account No. 045-93-956
with sufficient information to
identify the source and application
of such funds.
</TABLE>
4
<PAGE>
Schedule I
to
Participation Agreement
(Continued)
Information Regarding Investors
<TABLE>
<CAPTION>
Percentage Interest Purchase Price Aggregate Aggregate
Name and Address to be Purchased to be Paid to Beneficial Purchase
of Investor From Each Seller Each Seller Interest Price
- ---------------- ------------------- -------------- ---------- ---------
<S> <C> <C> <C> <C>
(2) All notices of payments
and written confirmations
of such wire transfers:
New England Mutual
Life Insurance Company
501 Boylston Street
Boston, Massachusetts 02117
Attention: Investment Accounting
Department
(3) All other communications:
New England Mutual
Life Insurance Company
501 Boylston Street
Boston, Massachusetts 02117
Attention: Securities Department
UNITED OF OMAHA LIFE
INSURANCE COMPANY 3.9055% Security Trust 7.8110% $ 9,663,277.41
$4,831,638.70
(1) All payments by wire
transfer of immediately TEP
available funds to: $4,831,638.71
</TABLE>
5
<PAGE>
Schedule I
to
Participation Agreement
(Continued)
Information Regarding Investors
<TABLE>
<CAPTION>
Percentage Interest Purchase Price Aggregate Aggregate
Name and Address to be Purchased to be Paid to Beneficial Purchase
of Investor From Each Seller Each Seller Interest Price
- ---------------- ------------------- -------------- ---------- ---------
<S> <C> <C> <C> <C>
Omaha National Bank
1700 Farnam Street
Omaha, Nebraska 68102
For the account of:
United of Omaha Life
Insurance Company,
account number
490-7-390
With sufficient information
to identify the source and
application of such funds and
with instructions to telephone
advice of credit to:
Securities Accounting
Supervisor
(402) 342-760 ext. 3060
All notices of payments:
United of Omaha Life
Insurance Company
Mutual of Omaha Plaza
Omaha, Nebraska 68175
Attention: Investment
Services
</TABLE>
6
<PAGE>
Schedule I
to
Participation Agreement
(Continued)
Information Regarding Investors
<TABLE>
<CAPTION>
Percentage Interest Purchase Price Aggregate Aggregate
Name and Address to be Purchased to be Paid to Beneficial Purchase
of Investor From Each Seller Each Seller Interest Price
- ---------------- ------------------- -------------- ---------- ---------
<S> <C> <C> <C> <C>
(2) All other communications:
United of Omaha Life
Insurance Company
Mutual of Omaha Plaza
Omaha, Nebraska 68175
Attention: Investment
Services
STATE STREET BANK & TRUST
COMPANY, AS TRUSTEE FOR
THE RETIREMENT PLANS OF THE
ATLANTIC RICHFIELD COMPANY
AND CERTAIN OF ITS SUBSIDI-
ARIES 1.95275% $ 2,415,819.35 3.9055% $ 4,831,638.70
(1) All payments by
wire transfer of
immediately available
funds to:
State Street Bank and
Trust Company
Federal Reserve Wire
Route No. 0110.000.28
Attention: Ed Lavin, Jr., Custodian
</TABLE>
7
<PAGE>
Schedule I
to
Participation Agreement
(Continued)
Information Regarding Investors
<TABLE>
<CAPTION>
Percentage Interest Purchase Price Aggregate Aggregate
Name and Address to be Purchased to be Paid to Beneficial Purchase
of Investor From Each Seller Each Seller Interest Price
- ---------------- ------------------- -------------- ---------- ---------
<S> <C> <C> <C> <C>
Services for Account
ARCO-Private Placement
9303
P.O. Box 1713
Boston, Massachusetts 02105
with sufficient information to
identify the source and application
of such funds.
(2) All notices of payments, written
confirmations of such wire transfers
and all other communications:
Atlantic Richfield Company
P.O. Box 2679-T.A.
BOA 3350
Los Angeles, California 90051
Attention: Portfolio Manager-
Private Placements
</TABLE>
8
<PAGE>
EXHIBIT A
to
Participation Agreement
SCHEDULE OF FRUITLAND COAL LEASES
I. Lease from the United States of America, as lessor.
dated November 1, 1961, Lease Number NM045196,
covering the following described land in T30N,
R15W, NMPM, New Mexico:
Sec. 2: N1/2 NW1/4, NW1/4 NE1/4
Sec. 3: NE1/4 NE1/4
Sec. 9: W1/2 NW1/4
Sec. 10: W1/2
Sec. 21: A11
Sec. 28: A11
Sec. 33: A11 2,467.24 Acres
II. Lease from the United States of America, as lessor,
dated November 1, 1961, Lease Number NM045197,
covering the following described land in T30N,
R15", NMPM, New Mexico:
Sec. 15: A11
Sec. 22: A1l
Sec. 27: A11
Sec. 34: A11 2,565.60 Acres
III. Lease from the United States of America, as lessor,
dated December 1, 1961, Lease Number NM045217,
covering the following described land in T30N,
R15W, NMPM, New Mexico:
Sec. 3: S1/2 NE1/4, NW1/4 NE14,
NW1/4, S1/2
Sec. 4: SE1/4 NE1/4, SW1/4 SW 1/4,
E1/2 SW1/4, SE1/4
Sec. 9: E1/2 NW1/4, E1/2 SW1/4
Sec. 10: E1/2 1,800.00 Acres
9
<PAGE>
IV. Lease from the United States of America, as lessor,
dated June 11, 1940, Lease Number SF071448, cover-
ing the following described land in T29N, R15W,
NMPM, New Mexico:
Sec. 4: SW1/4 NW1/4 40.00 Acres
V. Lease from the State of New Mexico as lessor,
dated November 1, 1975, Lease Number M-14014,
covering the following described land in T30N,
R15W, NMPM, New Mexico:
Sec. 16: E1/2 NW1/4, NW1/4 NE1/4 120.00 Acres
VI. Lease from the State of New Mexico, as lessor,
dated August 26, 1979, State Lease Number M-15354,
covering the following described Land in T30N,
R15W, NMPM, New Mexico:
Sec. 32: Lots 1, 2, 3, NW1/4 NW1/4,
SW1/4 NE1/4, N1/2 SE1/4.
NE1/4 SW1/4 309.04 Acres
VII. Lease from the State of New Mexico, as lessor,
dated October 24, 1975, State Lease Number 15417,
covering the following described land in T30N,
R15", NMPM, New Mexico:
Sec. 16: S1/2, W1/2 NW1/4,
E1/2 NE1/4, SW1/4 NE1/4 520.00 Acres
VIII. Coal Lease dated November 1, 1972, from Bonnie V.
Kennedy Crook, Arlington Boyd Kennedy, Bonnie
Gaye Kennedy Richman, Michael Harold Kennedy, all
dealing in their sole and separate property, to
Howard E. Henderson, recorded in the records of
the Clerk of San Juan County, New Mexico, in
Book 741, Page 227, and covering the following
lands in said County:
N1/2 NW1/4, SE1/4 NW1/4, SW1/4 NE1/4, N1/2
NE1/4, Section 4, T.29N., R.15W., N.M.P.M.
containing 240 acres, more or less.
10
<PAGE>
IX. Coal Lease dated November 1, 1972, from Bonnie V.
Kennedy Crook, Guardian of Cynthia Kaye Kennedy,
John Varnell Kennedy and Lyle Edward Kennedy,
Minors, to Howard E. Henderson, recorded in the
records of the Clerk of San Juan County, New
Mexico, in Book 741, Page 225, and covering the
following lands in said County:
N1/2 NW1/4, SE1/4 NW1/4, SW1/4 NE1/4, N1/2
NE1/4, Section 4, T.29N., R.15W., N.M.P.M.
containing 240 acres, more or less.
X. Coal Lease dated May 21, 1973, from William A.
Halland Suzanne Hall, his wife, to James R.
Pickett, recorded in the records of the Clerk of
San Juan County, New Mexico, in Book 741, Page
213, and covering the following lands in said
County:
N1/2 NE1/4, Section 4, T.29N, R.15W., N.M.P.M.
XI. Coal Lease dated May 28, 1973 from Theodore P.
Amsden and Winifred Amsden, his wife, to James
R. Pickett, recorded in the records of the Clerk
of San Juan County, New Mexico, in Book 741,
Page 211, and covering the following lands in
said County:
N1/2 NE1/4, Section T.29N., R.15W, N.M.P.M.
XII. Coal Lease dated June 1, 1973, between Bertram W.
Collyer, Trustee, to James R. Pickett, recorded
in the records of the Clerk of San Juan County,
New Mexico, in Book 741, Page 207, and covering
the following lands in said County;
N1/2 NE1/4, Section 4, T.29N., R.15W., N.M.P.M.
XIII. Coal Lease dated June 1, 1973, from the First
National Bank of Iowa City, Iowa, as Trustee for
Marian Winks, John R. Winks, Sally Ann Maurer,
James Whitmire, Jr., Marian Whitmire, Jane
Schweiker, Tom Schweiker, William L. Whitmire,
Lynda Whitmire, J. E. Whitmire, M. D., James E.
11
<PAGE>
Whitmire, Jr., under Trust Agreement dated
August 6, 1966, recorded in Book 652, Page 572,
San Juan County, New Mexico, to James R. Pickett,
recorded in the records of the Clerk of San Juan
County, New Mexico, in Book 741, Page 209, and
covering the following lands in said County:
N1/2 NE1/4, Section 4, T.29N., R.15W., N.M.P.M.
XIV. Coal Lease dated June 1, 1973, from Louise T.
Weatherford and Winifred T. Maurer dealing in
their sole and separate property, to James R.
Pickett, recorded in the records of the Clerk of
San Juan County, New Mexico, in Book 741, Page
215, and covering the following lands in said
County:
N1/2 NE1/4, Section 4, T.29N., R.15W., N.M.P.M.
XV. Coal Lease dated August 1, 1973, from Larry Amsden
to James R. Pickett, recorded in the records of
the Clerk of San Juan County, New Mexico, in
book 741, Page 203, and covering the following
lands in said County:
N1/2 NE1/4, Section 4, T.29N., R.15W., N.M.P.M.
XVI. Coal Lease dated August 1, 1974, from Lawrence
Warren Stallings to James R. Pickett, recorded
in the records of the Clerk of San Juan County,
New Mexico, in Book 741, Page 205, and covering
the following lands in said County:
NE1/4, Section 5, T.29N., R.15W., N.M.P.M.
XVII. Coal Lease dated August 1, 1974, from Patricia Lucy
Stallings Ryan to James R. Pickett, recorded in
the records of the Clerk of San Juan County, New
Mexico, in Book 741, Page 217, and covering the
following lands in said County:
NE1/4, Section 5, T.29N., R.15W., N.M.P.M.
12
<PAGE>
XIII. Coal Lease dated August 1, 1974, from Frances
Stallings Maloney to James R. Pickett, recorded
in the records of the Clerk of San Juan County,
New Mexico, in Book 741, Page 223, and covering
the following lands in said County:
NE1/4, Section 5, T.29N., R.15W., N.M.P.M.
XIX. Coal Lease dated August 1, 1974, from William H.
Charters to James R. Pickett, recorded in the
records of the Clerk of San Juan County, New
Mexico, in Book 741, Page 221, and covering the
following lands in said County:
NE1/4, Section 5, T.29N, R.15W., N.M.P.M.
XX. Coal Lease dated August 1, 1974, from Mary Irene
Bannowsky, to James R. Pickett, recorded in the
records of the Clerk of San Juan County, New
Mexico, in Book 741, Page 219, and covering the
following lands in said County:
NE1/4, Section 5, T.29N., R.15W., N.M.P.M.
13
<PAGE>
EXHIBIT B
to
Participation Agreement
SURFACE RIGHTS AND
SURFACE INSTRUMENTS
I. Rights under Agreement dated November 6, 1979,
between Wagon Rod Ranch, Inc., and Western Coal
Co., recorded with the records of the Clerk of
San Juan County, New Mexico, in Book 872, Page
595, as modified by Letter Agreement dated
October 22, 1979, between Western Coal Co. and
Wagon Rod Ranch, Inc., a Memorandum of which is
recorded with the records of the Clerk of San
Juan County, New Mexico, in Book 872, Page 593,
covering the following lands in said County:
NE 1/4 NE 1/4 of Section 3,
T30 N, R 15 W, N.M.P.M.
II. Rights under Agreement dated as of June 1, 1973,
between the Most Reverend Jerome J. Hastrich,
and his Successors, Diocese of Gallup, New Mexico,
and Western Coal Co., recorded with the records
of the Clerk of San Juan County, New Mexico, in
Book 724, Page 133, covering the following lands
in said County:
SE 1/4 of Section 28,
T 30 N, R 15 W, N.M.P.M.
III. Rights under Agreement dated April 20, 1976,
between Ella Thurland and Western Coal Co.,
recorded with the records of the Clerk of San
Juan County, New Mexico, in Book , Page ,
and covering the following lands in said County:
NE 1/4 NW 1/4 and N 1/2 NE 1/4 of
Section 33, T 30 N, R 15 W, N.M.P.M.
IV. Rights under Agreement entered into as of
January 1, 1980, and dated February 22, 1980,
between Michael L. Keleher, Trustee, and Western
Coal Co., a Memorandum of which is recorded with
14
<PAGE>
the records of the Clerk of San Juan County, New
Mexico, in Book 874, Page 276, covering the fol-
lowing lands in said County:
SE 1/4 SW 1/4 and SW 1/4 SE 1/4 of
Section 22, and NE 1/4 NW 1/4
and NW 1/4 NE 1/4 of Section 27,
T 30 N, R 15 W, N.M.P.M.
V. Rights under Easements reserved in four Quitclaim
Deeds, all dated June 25, 1980, from Western Coal
Co. to Paragon Resources, Inc., and Valencia
Energy Company, recorded with the Records of the
Clerk of San Juan County in Book 885, Pages 329,
330, 331 and 332, and covering the lands in said
County described in said Quitclaim Deeds.
15
<PAGE>
EXHIBIT C
to
Participation Agreement
[Conformed Copy]
AMENDED AND RESTATED
TRUST AGREEMENT
Dated as of December 31, 1981
Among
Public Service Company of New Mexico and
Tucson Electric Power Company,
as Holders of
Certificates of
Interest
And
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Trustee
San Juan Coal Trust
16
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
<S> <C>
Parties............................................ 1
Recitals........................................... 1
1. Definitions and Terms......................... 1
1.01 Terms Defined........................... 2
1.02 Terms Defined in the Participation
Agreement............................. 5
1.03 Terms Defined in the Utah Sublease...... 5
2. Purpose and Declaration of Trust.............. 5
2.01 Purpose of Trust........................ 5
2.02 Limitations on Trustee.................. 5
2.03 No Implied Authority.................... 6
2.04 General Application..................... 6
2.05 Declaration of Trust.................... 6
3. Certificates of Interest...................... 7
3.01 Terms................................... 7
3.02 Method of Payment....................... 7
3.03 Denominations, Registration,
Transfer and Exchange................. 8
3.04 Mutilated, Lost or Stolen Certificates.. 8
3.05 Payment of Taxes, Etc., on New
Certificates.......................... 9
3.06 Nature of Ownership Interest............ 9
3.07 Ownership of Certificates
by Trustee............................ 9
4. Distribution of Funds from the Trust Estate... 10
5. Duties of Trustee............................. 10
5.01 Retained Economic Interest.............. 10
5.02 Duties after Default or Event of
Default............................... 10
5.03 Action Upon Instructions................ 11
5.04 Indemnification and Legal Action........ 11
5.05 No Implied Duties....................... 12
</TABLE>
-i-
17
<PAGE>
<TABLE>
<CAPTION>
Section Page
<S> <C>
6. The Trustee.................................... 12
6.01 Acceptance of Trust and Certain Duties... 12
6.02 Limitation of Duties..................... 13
6.03 Representations, Warranties and
Covenants of the Trustee............... 13
6.04 Segregation of Funds..................... 14
6.05 Reliance on Documents; Agents............ 14
6.06 Interpretation of Agreements............. 15
6.07 Acting Solely as Trustee................. 15
6.08 Fees and Expenses of Trustee............. 15
6.09 Books, Records and Tax Returns........... 16
7. Indemnification................................ 16
8. Transfer of Holder's Interest.................. 18
8.01 Transfer of Certificates................. 18
8.02 Merger, Consolidation, Etc............... 18
8.03 Discharge of a Holder.................... 19
9. Successor Trustees; Additional and
Separate Trustees............................ 19
9.01 Resignation of Trustee;
Appointment of Successor............... 19
9.02 Appointment of Additional and
Separate Trustees...................... 21
10. Supplements and Amendments..................... 23
10.01 Supplements and Amendments.............. 23
10.02 Form of Request......................... 24
10.03 Rights of Trustee....................... 24
10.04 Mailing of Documents.................... 24
11. Miscellaneous.................................. 25
11.01 Termination of Trust.................... 25
11.02 Intention of Parties to Establish
a Trust; Legal Title to Trust Estate.. 26
11.03 Validity of Sale........................ 26
11.04 No Liability on Certificates............ 27
11.05 Limitations on Rights of Others......... 27
11.06 Notices................................. 27
11.07 Severability............................ 27
11.08 Benefits of Agreement................... 28
11.09 No Waiver............................... 28
11.10 Headings; Name of Trust................. 28
11.11 Instruments of Further Assurance........ 28
11.12 Counterparts............................ 28
11.13 Governing Law........................... 28
</TABLE>
EXHIBIT A - Schedule of Fruitland Coal Leases
-ii-
18
<PAGE>
EXHIBIT B - Schedule of Surface Rights
and Surface Instruments
EXHIBIT C - Form of Certificate of Interest
EXHIBIT D - Form of Transfer Agreement
EXHIBIT E - Form of Certificate of Trustee
-iii-
19
<PAGE>
This AMENDED AND RESTATED TRUST AGREEMENT, dated as of December 31,
1981, among Public Service Company of New Mexico, Tucson Electric Power Company
and Bank of America National Trust and Savings Association, a corporation
organized and existing as a national bank association under the laws of the
United States of America, as Trustee. Capitalized terms used herein without
definition shall have the meanings specified in Section 1.
W I T N E S S E T H :
WHEREAS, Western and the Trustee have heretofore entered into a Trust
Agreement, dated November 30, 1981 (the "Original Trust Agreement") pursuant to
which Western granted, assigned, transferred and conveyed to the Trustee all of
Western's right, title and interest in, to and under the Fruitland Coal Leases,
the Surface Rights, the Retained Economic Interest and the Utah Sublease, and
the Trustee, at the direction of Western, issued to each of PNM and TEP a
Certificate evidencing a 50% beneficial interest in the trust created thereby;
and
WHEREAS, the parties hereto wish to amend and supplement the Original
Trust Agreement and to restate the Original Trust Agreement, as so amended and
supplemented, in its entirety;
NOW, THEREFORE, in consideration of the premises, the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
that the Original Trust Agreement is hereby amended and supplemented, and, as so
amended and supplemented, restated in its entirety to read as follows:
SECTION 1. DEFINITIONS AND TERMS
Unless the context otherwise requires, the following terms shall have
the respective meanings set forth below for all purposes of this Agreement (the
definitions
20
<PAGE>
4. Except for the approvals of the Bureau of Land Management of the
United States Department of the Interior (the "BLM") and the Commissioner of
Public Lands of the State of New Mexico (the "CPL") of the assignment to the
Trustee of the Fruitland Coal Leases, as such term is defined in the Agreements,
of which the United States and the State of New Mexico are the lessors, and the
approval of the BLM to the acquisition by the parties to the Restated Agreement,
other than the Trustee, of Certificates of Interest executed and delivered under
the Agreements, neither the execution and delivery by the Trustee of the
Agreements nor the performance by it of any of the transactions contemplated
thereby, nor the compliance by it with any of the terms or conditions thereof
will, or did on November 30, 1981, contravene, conflict with, cause a breach of
or default under any federal, state or local statute, ordinance, rule or
regulation, or any writ, injunction, decree, judgment or order applicable to or
binding on it, or contravene, or result in a breach of, or constitute a default
under, its articles of association or by-laws (provided that no representation
or warranty is made with respect to state securities laws).
5. Neither the Trustee nor anyone acting on its behalf has, directly or
indirectly, offered or sold the Certificates of Interest, executed and delivered
under the Agreements, or any interest in the Trust created by the Agreements or
any form of participation in the transactions contemplated thereby or any
similar security, or any interest therein, or any security the offering of which
for the purposes of the Securities Act of 1933, as amended, would be deemed to
be a part of the same offering as the offering of any of the foregoing
interests, for sale to, or solicited any offer to acquire any of the same from,
or otherwise approached or negotiated with respect thereto with, anyone, and
neither the Trustee nor anyone acting on its behalf has taken or will take any
action which would subject the issuance or sale of such interests to the
provisions of Section 5 of the Securities Act of 1933, as amended.
6. Except for the approvals of the BLM and CPL of the assignment to
the Trustee of the Fruitland Coal Leases, as such term is defined in the
Agreements, of which the United States and the State of New Mexico are the
lessors, and the approval of the BLM to the acquisition by the parties to the
Restated Agreement, other than the Trustee, of the Certificates of Interest.
neither the execution and
21
<PAGE>
"Lien" shall mean any interest in property securing an obligation owed
to, or claimed by, a Person other than the owner of the property, whether such
interest is based on common law, statute or contract, and including but not
limited to any security interest or lien arising from a mortgage, encumbrance,
pledge, conditional sale or trust receipt or a lease, consignment or bailment
for security purposes. The term "Lien" shall also include reservations,
exceptions, encroachments, easements, rights-of-way, covenants, conditions,
restrictions, leases and other title exceptions and encumbrances affecting
property.
"Majority in Interest of Holders", as of a particular date of
-------------------------------
determination, shall mean the Holders of more than 66-2/3 percent of the
undivided beneficial interest in the Trust Estate held by all Holders, as of
that date (excluding, however, all beneficial interest held, directly or
indirectly, by Utah, PNM, TEP or any Affiliate of any thereof unless all
beneficial interest in the Trust Estate is held by PNM and/or TEP).
"Participation Agreement" shall mean the Participation Agreement, dated
-----------------------
as of December 31, 1981, among PNM, TEP and the financial institutions listed in
Schedule I thereto as that Participation Agreement may from time to time be
supplemented, amended or modified in accordance with its terms.
"Person" shall mean and include any individual, partnership, joint
------
venture, association, joint stock company, corporation, trust, or unincorporated
organization or any government or any agency or political subdivision thereof
"PNM" shall mean Public Service Company of New Mexico, a New Mexico
Corporation, and its successors and assigns.
"Responsible Officer", when used with respect to the Trustee, shall
-------------------
mean any vice president, any trust officer, any second or assistant vice
president, or any other officer or assistant officer of the Trustee customarily
performing functions similar to those performed by the persons who at the time
shall be such officers, respectively, or to whom
22
<PAGE>
any corporate trust matter is referred because of his knowledge of and
familiarity with the particular subject.
"Surface Instruments" shall mean the instruments described in Exhibit B
-------------------
hereto.
"Surface Rights" shall mean the rights granted to or reserved by
--------------
Western under the Surface Instruments with respect to parts of the lands covered
by the Fruitland Coal Leases and lands adjacent thereto, which rights were
assigned to the Trustee.
"TEP" shall mean Tucson Electric Power Company, an Arizona corporation,
and its successors and assigns.
"Trust" shall mean the trust formed by this Trust Agreement.
-----
"Trust Agreement" shall mean the Original Trust Agreement, as amended
---------------
and supplemented by this Amended and Restated Trust Agreement as the same may
hereafter from time to time be further supplemented, amended or modified in
accordance with its terms.
"Trustee" shall mean Bank of America National Trust and Savings
-------
Association, a corporation organized and existing as a national banking
association under the laws of the United States of America, and, to the extent
permitted by this Agreement, its successors and assigns.
"Trust Estate" shall mean all present and future estate, right, title
------------
and interest of the Trustee in, to and under the Fruitland Coal Interests, the
Fruitland Coal, the Surface Rights, and any of the Operative Agreements,
including, without limitation, all amounts of Retained Economic Interest payable
under the Utah Sublease, all insurance proceeds, indemnities or other payments
of any kind except for any indemnities payable to the Trustee in its individual
capacity) payable at any time to the Trustee for or with respect to the
Fruitland Coal Interests, the Fruitland Coal, the Surface Rights or any
Operative Agreement, all payments of proceeds received by the Trustee after the
termination of the Utah Sublease as a result of the sale, sublease or other
disposition of the Fruitland Coal Interests, the Fruitland Coal and the Surface
Rights, or any part thereof, and all income and proceeds received from time to
time by the Trustee in respect of the Trust Estate and not theretofore
distributed.
23
<PAGE>
"Trust Office" shall mean a principal corporate trust office of the
------------
entity serving as Trustee, which in the case of Bank of America National Trust
and Savings Association, until notice by it of a change of address, shall be at
the Los Angeles office of its Corporate Agency Division, 5th Floor, 555 South
Flower Street, Los Angeles, California 90071.
"Utah" shall mean Utah International Inc., a Delaware corporation and,
to the extent permitted under the Operative Agreements, its successors and
assigns.
"Utah Sublease" shall mean the Sublease, dated August 18, 1980, between
-------------
Western and Utah, as amended by Amendment Number One to Sublease, dated
September 30, 1981, as the same may hereafter from time to time be further
amended, modified or supplemented in accordance with the terms thereof.
"Western"-shall mean Western Coal Co., a New Mexico corporation in
-------
liquidation.
Section 1.02. Terms Defined in the Participation Agreement. For all
-----------------------------------------------------------
purposes of this Agreement the following terms shall have the meanings defined
in the Participation Agreement: "Officers' Certificate", "Operative Agreements"
and "San Juan Coal Company.
Section 1.03. Terms Defined in the Utah Sublease. For all
- --------------------- ----------------------------------
purposes of this Agreement the following terms shall have the meanings defined
in the Utah Sublease: "Retained Economic Interest".
SECTION 2. PURPOSE AND DECLARATION OF TRUST
Section 2.01. Purpose of Trust. The sole purpose of this
- --------------------- ----------------
Trust and of the appointment of the Trustee hereunder is to protect and conserve
the Trust Estate, including but not limited to, the Fruitland Coal Leases, the
Surface Rights, the Retained Economic Interest and other rights retained and
obtained by Western under the Utah Sublease, and to provide for the collection
and distribution from time to time of the income therefrom and the proceeds of
disposition thereof.
Section 2.02. Limitations on Trustee. The Trustee shall not
- ---------------------- ----------------------
at any time, on behalf of the Holders or
24
<PAGE>
with respect to the Trust or the Trust Estate, enter into or engage in any
business, including, without limitation, the exploration, development or
operation of any coal or mineral deposit or mine wherever located. This
limitation shall apply irrespective of whether the conduct of any such business
activities is deemed by the Trustee to be necessary or proper for the
conservation and protection of the Trust Estate. The Trustee shall not invest
any of the funds held in the Trust Estate except that the Trustee may, to the
extent practicable pending distribution pursuant to Section 4, deposit money
held under this Agreement in an interest-bearing account or accounts (which may
be accounts with the Trustee). With respect to the Trust or the Trust Estate,
the Trustee shall be restricted to the holding and collection of the trust
moneys and the payment and distribution thereof for the purposes set forth in
this Agreement and to the conservation and protection of the Trust Estate and
the administration thereof in accordance with the provisions of this Agreement.
The Trustee shall not acquire any new properties of any kind for the Trust or
mine coal on or otherwise operate or manage the properties relating to the Trust
Estate. The Trustee shall not assign, sell, mortgage, transfer, pledge, grant a
security interest in, encumber or otherwise dispose of or create a charge upon
the Trust Estate except as may be required to conserve and protect same and
except for the transfer as provided in Section 9 of this Agreement. Nothing
herein is intended to or shall restrict the Trustee with respect to actions that
do not relate to the Trust or the Trust Estate.
Section 2.03. No Implied Authority. The Trustee shall have
- ------------------------------ --------------------
no authority except as set forth in this Agreement.
Section 2.04. General Application. Every provision in this
- ------------------------------ -------------------
Agreement, including but not limited to the provisions of Section 5, shall be
construed in a way that is consistent with the purpose and with the limitations
on the Trustee set forth in this Section 2, and no power granted by, or duty
imposed by Section 5 or any other provision of this Agreement shall be exercised
in a manner which goes beyond the purpose and the limitations of this Section 2.
Section 2.05. Declaration of Trust. The Trustee hereby
- ------------------------------ --------------------
accepts the Trust created hereby and declares that it will hold the Trust Estate
in trust upon and subject to the terms and conditions set forth in this
Agreement for the benefit of the Holders.
25
<PAGE>
SECTION 3. CERTIFICATES OF INTEREST
Section 3.01. Terms. The interest of each Holder in the
- ------------------------------ -----
beneficial ownership of the Trust Estate shall be evidenced by one or more
Certificates substantially in the form set forth in Exhibit C. Each Certificate
shall be dated the date of its execution and delivery and shall contain a
statement by the Trustee that the Holder has an undivided beneficial interest in
the Trust Estate and is entitled to receive, ratably with the holders of the
other Certificates, as provided herein, a share of any distributions thereof,
including payments of Retained Economic Interest received or to be received by
the Trustee under the Utah Sublease, as well as such share of certain other
payments which may be received by the Trustee pursuant to the terms hereof, all
as more particularly set forth herein.
Section 3.02. Method of Payment. The amounts payable to the
- ------------------------------ -----------------
Holders pursuant to this Agreement will be payable at the Trust Office and will
be paid by the Trustee by crediting the amount to be distributed to any Holder
to the account maintained by such Holder with the Trustee or, if such an account
is not maintained or if such Holder shall so instruct the Trustee in writing (a)
by making such payment to such Holder in immediately available funds at the
Trust Office, (b) by transferring such amount in immediately available funds to
a banking institution with bank wire transfer facilities in any city in which a
Federal Reserve Bank is located, for the account of such Holder, or (c) by
mailing a check for such amount in New York Clearing House funds to such Holder
at its address specified herein, or at such other address as such Holder shall
designate by notice to the Trustee, in all cases without any presentment or
surrender of any Certificate. So long as any signatory to the Participation
Agreement or a nomi-nee thereof shall be the registered Holder of a Certificate,
all payments to it shall be made in the manner provided in Schedule I to the
Participation Agreement unless it shall have specified some other manner of
payment by notice to the Trustee in accordance with the first sentence of this
Section 3.02. The Trustee may deem and treat the Person in whose name any
Certificate shall have been registered by the Trustee as the absolute owner of
such Certificate for the purpose of receiving payment of all amounts payable by
the Trustee with respect to such Certificate and for all other purposes, and the
Trustee shall not be affected by any notice to the contrary except as provided
in Section
26
<PAGE>
3.03 upon the registration of transfer. All distributions so made to any such
Holder shall, to the extent of the amount so paid, be effective to satisfy and
discharge the liability for moneys payable with respect to such Certificate.
Section 3.03. Denominations, Registration, Transfer and
- ------------------------------ ------------- ------------ ------------
Exchange. All Certificates to be executed and delivered hereunder shall be
- --------
registered Certificates, shall be numbered consecutively starting with R-1 and
shall be transferable only as herein provided. The Trustee shall maintain at
the Trust Office a register in which, subject to such reasonable regulations as
it may prescribe, the Trustee shall provide for the registration of Certificates
and, to the extent permitted by this Agreement, the registration of transfer of
Certificates. A Holder desiring to transfer any or all of the Certificates held
by such Holder to a new Holder or to exchange any or all Certificates held by
such Holder for Certificates representing different percentages of beneficial
interests hereunder shall surrender the Certificate to the Trustee at the
address set forth in Section 11.06 together with a written request for the
execution and delivery of a new Certificate or Certificates, specifying the
percentage or percentages desired, and, in the case of a surrender for
registration of transfer, the name and address of the prospective holder or
holders. Every Certificate surrendered for the registration of a transfer shall
be duly endorsed, or be accompanied by a written instrument of transfer duly
executed by the Holder of the Certificate or by his attorney duly authorized in
writing, and shall be accompanied by the documents specified in Section 8.01(a)
hereof. Promptly upon receipt of these documents by the Trustee, it shall
execute and deliver a new Certificate or Certificates, in the same aggregate
percentage amount of beneficial interest hereunder, dated the date of execution
and delivery of such Certificate or Certificates, and in such denomination or
denominations and registered in such name or names as shall be specified in the
written request. Nothing contained in this Section 3.03 shall be deemed to
permit the Holder of a Certificate to transfer it except in accordance with the
terms of Section 8 of this Agreement.
Section 3.04. Mutilated, Lost or Stolen Certificates. If any
- ------------------------------ --------------------------------------
Certificate shall become mutilated, destroyed, lost or stolen, the Trustee
shall, upon the written request of the registered Holder thereof, execute and
deliver in replacement a new Certificate, in the same percentage amount of
beneficial interest hereunder and dated the same date as the Certificate so
mutilated, destroyed, lost or stolen. If the Certificate being replaced has
become mutilated, it shall be surrendered to the Trustee and cancelled. If the
Certificate being replaced has been destroyed, lost or stolen, its registered
Holder shall furnish to the Trustee (a) such security or indemnity as the
Trustee may require to save the Trustee harmless and (b) evidence
27
<PAGE>
satisfactory to the Trustee of the destruction, loss or theft of the
Certificate, provided, that, if the Holder of such Certificate is one of the
--------
signatories to this Agreement, an Affiliate or any nominee thereof, the written
undertaking of such Holder delivered to the Trustee shall be sufficient security
and indemnity.
Section 3.05. Payment of Taxes, Etc., on New Certificates.
- ------------------------------ ------------------------------ ------------
Upon the execution and delivery of a new Certificate or Certificates pursuant to
Section 3.03 or 3.04, the Trustee may require from the party requesting the new
Certificate or Certificates payment of a sum to reimburse the Trustee for, or to
provide funds for, the payment of any tax or other governmental charge in
connection therewith or any charges and expenses connected with such tax or
other governmental charge paid or payable by the Trustee.
Section 3.06. Nature of Ownership Interest. Each Holder of a
- ------------------------------ ----------------------------
Certificate has, ratably with the Holders of all other Certificates, an
undivided beneficial interest in the Trust Estate and shall be entitled to
receive distributions from the Trust Estate (including payments of Retained
Economic Interest) in accordance with the percentage interest shown on such
Certificate. No Person shall be entitled to receive any distribution pursuant
to the provisions hereof unless such Person is a registered Holder at the time
of such distribution. No Holder shall have any legal title to the Trust Estate;
legal title shall be held by the Trustee.
Section 3.07. Ownership of Certificates by Trustee. The
- ------------------------------ ---------------------------- -------
Trustee, either individually or in a representative or fiduciary capacity (other
than as a Trustee hereunder), may acquire, own and dispose of Certificates to
the same extent as if it were not Trustee hereunder.
SECTION 4. DISTRIBUTION OF FUNDS FROM THE TRUST ESTATE
All amounts from time to time received by the Trustee with respect to
the Trust Estate (including, without
28
<PAGE>
limitation, all amounts received as the result of any partial disposition
pursuant to the terms of this Agreement) shall be distributed by the Trustee
promptly upon receipt in the following order of priority:
First: so much of such amounts as shall be re-- quired to pay
- ----------------------
or reimburse the Trustee for amounts due to it pursuant to the provisions
of this Agreement shall be retained by it;
Second: if any payments have been made by the Holders pursuant
- -----------------------
to Sections 5.02, 5.04 and 7, so much of such amounts as shall be
required to reimburse such payments, ratably in accordance with the
amount of each such payment; and
Third: the remainder of such amounts shall be distributed by
- ----------------------
the Trustee ratably to each Holder as provided in Section 3.06.
SECTION 5. DUTIES OF TRUSTEE
Section 5.01. Retained Economic Interest. The Trustee shall
- ------------------------------ --------------------------
receive payments of Retained Economic Interest as sublessor under the Utah
Sublease and disburse the payments as provided in Section 4.
Section 5.02. Duties after Default or Event of Default. In
- ------------------------------ -------------------------------- -------
the event the Trustee shall have knowledge of a Default or an Event of Default,
the Trustee shall give prompt notice by telephone of the Default or Event of
Default to PNM, TEP and each Holder, followed by prompt written notice by
certified mail, postage prepaid. For all purposes of this Agreement, in the
absence of actual knowledge of a Responsible Officer in the Trust Office of the
Trustee, the Trustee shall not be deemed to have knowledge of any Default or
Event of Default, unless and until so notified in writing by PNM, TEP or a
Holder. If an Event of Default shall have occurred and be continuing, the
Trustee shall have no duty to take any action unless and until so directed by a
Majority in Interest of Holders, except that, subject to Section 5.04 and the
last sentence of this Section 5.02, the Trustee shall make all payments due and
take all other necessary action under the Fruitland Coal Leases and the Surface
Instruments which are required in order that there be no right of forfeiture or
termination under any such lease or instrument. Nothing in this Section 5.02 or
elsewhere in this Agreement shall be deemed to require the Trustee to advance
its own funds for any purpose and the Trustee shall not be required to make any
such payment unless and until the Holders advance the funds estimated by the
Trustee to be reasonably necessary for the purpose.
29
<PAGE>
Section 5.03. Action Upon Instructions. Upon the written
- ------------------------------- ------------------------
instructions at any time and from time to time of a Majority in Interest of
Holders, the Trustee shall take any of the following actions on behalf of the
Trust: (a) give such notice or direction, or exercise such right, remedy or
power hereunder or under any of the other Operative Agreements in respect of all
or any part of the Trust Estate, or take such other actions as shall be
specified in the instructions; (b) take such action with respect to, or to
preserve or protect, the Trust Estate as shall be specified in the instructions;
(c) approve or disapprove as satisfactory to it all matters required by the
terms of any Operative Agreement to be satisfactory to the Trustee as shall be
specified in the instructions; (d) make all necessary or appropriate
applications to all governmental agencies and authorities in connection with the
transfer to it or the transfer by it of all or any part of the Trust Estate,
including but not limited to applications to the United States Department of
Interior, Bureau of Land Management and the State of New Mexico for approval of
such transfers; (e) select a Substitute Qualified Coal Miner (as such term is
used in the Participation Agreement) named in and as shall be specified in the
instructions; and (f) after the expiration or earlier termination of the Utah
Sublease, grant a new sublease of, or convey or otherwise dispose of, all or any
part of the rights and interests granted by the Fruitland Coal Leases and the
Surface Instruments for such amount, on such terms and to such person or persons
as shall be designated in the instructions.
Section 5.04. Indemnification and Legal Action. The Trustee
- ------------------------------ --------------------------------
shall be under no duty to take any action or refrain from taking any action
under this Agreement unless it shall have been indemnified by the Holders in a
manner and form satisfactory to the Trustee, against any liability, cost or
expense (including fees and expenses of counsel, whether or not litigation be
commenced) which may be incurred in connection with such action or inaction
other than any liability, cost, or expense which results from the willful
misconduct or negligence of the Trustee or from any action or inaction for which
the Trustee would be answerable or accountable in its individual capacity
hereunder; and if a Majority in Interest of Holders shall have directed the
Trustee to take any action or refrain from taking any action, all of the Holders
severally agree to furnish such indemnity as shall be required, ratably as
provided in Section 7. The Trustee shall not be required to take any action or
refrain from taking any action under this Agreement if the Trustee shall have
been advised by counsel (who shall not be an employee of the Trustee) that such
action would expose it to personal liability or is contrary to the terms of this
or any of the other Operative Agreements or is otherwise contrary to law.
30
<PAGE>
Section 5.05. No Implied Duties. The Trustee shall not have
- ------------------------------ -----------------
any duty to take any action or refrain from taking any action with respect to
any part of the Trust Estate, or to otherwise take or refrain from taking any
action under, or in connection with, any of the Operative Agreements except as
expressly required by the terms of this Agreement or any other Operative
Agreement to which it is a party; or as expressly provided in written
instructions from the Holders received pursuant to the terms of Section 5.02 or
5.03 hereof; and no duties or obligations shall be implied in this Agreement
which are adverse to the Trustee. The Trustee nevertheless agrees that it will,
in its individual capacity and at its own cost and expense, promptly take such
action as may be necessary to duly discharge any Lien on any part of the Trust
Estate which result from acts by or claims against the Trustee in its individual
capacity not arising out of its administration of the Trust Estate. The Trustee
shall not manage, control, use, operate, store, lease, sell or otherwise
transfer title to, or dispose of, or otherwise deal with the Fruitland Coal
Interests or any other part of the Trust Estate except (a) as required by the
terms of the Operative Agreements; b) in accordance with the powers expressly
granted to, or the authority expressly conferred upon, the Trustee pursuant to
this Agreement; or (c) in accordance with written instructions from the Holders
pursuant to Section 5.02 or 5.03 hereof.
SECTION 6. THE TRUSTEE
Section 6.01. Acceptance of Trust and Certain Duties. The
- ------------------------------ ------------------------------- ------
Trustee accepts the trusts hereby created and agrees to perform them, but only
upon the terms of this Agreement. The Trustee also agrees to receive and
disburse or cause to be received and disbursed all moneys constituting part of
the Trust Estate in accordance with the terms of this Trust Agreement to the
extent, if any, that such terms require the Trustee to receive and disburse
moneys constituting part of the Trust Estate. The Trustee shall not be
answerable or accountable in its individual capacity under any circumstances
except (a) for its willful misconduct or negligence, (b) in the case of the
inaccuracy of any representation or warranty expressly made by the Trustee in
its individual capacity contained in Section 6.03 hereof, (c) for its acts not
related to the administration of the Trust Estate or the performance of its
duties under the Operative Agreements, or (d) matters for which it has assumed
obligations pursuant to Section 5.05 hereof.
Section 6.02. Limitation of Duties. Except in accordance
- ------------------------------ --------------------
with Sections 5.01 and 5.02 and subject to the provisions of Section 5.03, but
without limiting the generality of Section 5.05, the Trustee shall have no duty
(a) to see to the payment or discharge of any tax, assessment or other
31
<PAGE>
governmental charge or any Lien of any kind owing with respect to, assessed or
levied against, any part of the Trust Estate (except for any such tax,
assessment or other governmental charge or any such Lien arising from its own
negligence or willful misconduct or arising from claims against the Trustee
unrelated to its administration of the Trust Estate or the performance of its
duties under the other Operative Agreements to which it is a party) or (b) to
inspect the property subject to the Fruitland coal Leases or the Surface
Instruments at any time or ascertain or inquire as to the performance or obser-
vance of any of the covenants of Utah under the Utah Sublease. Notwithstanding
the foregoing, the Trustee will furnish to the Holders, promptly upon receiving
them, duplicates or copies of all reports, notices, requests, demands,
certificates and other instruments furnished to the Trustee in connection with
the Operative Agreements, the Fruitland Coal Leases, the Surface Instruments and
the Utah Sublease to the extent that they shall not previously have been
furnished to the Holders.
Section 6.03. Representations, Warranties and Covenants of
- ------------------------------ -------------------------------
the Trustee. (a) THE TRUSTEE HAS NOT MADE ANY INSPECTION OF THE PROPERTY
SUBJECT TO THE FRUITLAND COAL LEASES OR THE SURFACE INSTRUMENTS OR THE DOCUMENTS
RELATING THERETO, AND THE TRUSTEE (WHETHER ACTING AS TRUSTEE UNDER THIS
AGREEMENT OR AS SUBLESSOR UNDER THE UTAH SUBLEASE OR IN ITS INDIVIDUAL CAPACITY)
HAS MADE, MAKES AND SHALL BE DEEMED TO HAVE MADE, NO REPRESENTATION OR WARRANTY
WHATSOEVER, EXPRESS OR IMPLIED, AS TO THE TITLE TO OR THE QUANTITY, QUALITY,
MINEABILITY OR VALUE OF THE FRUITLAND COAL, OR ANY OTHER REPRESENTATION OR
WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE FRUITLAND COAL
LEASES, THE FRUITLAND COAL, THE SURFACE INSTRUMENTS, THE SURFACE RIGHTS, THE
UTAH SUBLEASE OR OTHERWISE, and (b) the Trustee makes no representation or
warranty as to the validity, legality or enforceability of this Agreement, the
other Operative Agreements or any other agreement, certificate or document
referred to herein or therein or involved in the transactions contemplated by
this Agreement and the other Operative Agreements, or as to the correctness of
any statement contained in any Operative Agreement or any such other agreement,
certificate or document, or otherwise relating to the transactions contemplated
by this Agreement and the other Operative Agreements, except as set forth in the
Certificate of Trustee attached hereto as Exhibit E.
Section 6.04. Segregation of Funds. Except as otherwise
- ------------------------------ --------------------
provided in this Agreement, all moneys and property received by the Trustee
hereunder and with respect to the Trust Estate need not be segregated in any
manner, except to the extent required by law, and may be deposited under such
general conditions as may be prescribed by law and by the Trustee for similar
accounts held by the Trustee, and the Trustee shall not be liable for any
interest thereon except as may be agreed to by
32
<PAGE>
it; provided, that any payments received or applied or property held hereunder
--------
by the Trustee shall be accounted for and held by the Trustee so that any
portion thereof shall be identifiable as to the source thereof.
Section 6.05. Reliance on Documents- Agents. The Trustee
- ------------------------------ -----------------------------
shall not incur any liability to anyone in acting in reliance upon any
signature, instrument, notice, resolution, instruction, request, consent, order,
certificate, report, opinion, bond or other document or paper believed by it to
be genuine and believed by it to be signed by the proper party or parties. As to
any fact or matter the manner of ascertainment of which is not specifically
described in this Agreement, the Trustee may for all purposes rely on a
certificate of not less than a Majority in Interest of Holders and the Trustee
shall be fully protected for any action taken or omitted to be taken by it in
good faith in reliance on such a certificate. In the exercise or administration
of the trusts and powers under this Agreement, or in the performance of any of
its duties and obligations under this or any other Operative Agreement, the
Trustee may act directly or through any agents or attorneys and may, at the
expense of the Trust Estate, consult with counsel, accountants and (with the
prior approval of a Majority in Interest of Holders) other skilled persons
(other than such persons regularly employed by it) to be selected and employed
by it, and the Trustee shall not be liable for anything done, suffered or
omitted in good faith in accordance with the advice or opinion of any such
counsel, accountants or other skilled persons selected by it with due care.
Section 6.06. Interpretation of Agreements. In the event
- ------------------------------ ----------------------------
that the Trustee is unsure as to the application of any provision of this
Agreement or any other Operative Agreement or any other agreement relating to
the transactions contemplated by this Agreement and the other Operative
Agreements, or believes that any such provision is ambiguous as to its
application, or is, or appears to be, in conflict with any other applicable
provision of the Operative Agreements, or in the event this Agreement or any
other Operative Agreement permits any determination by the Trustee or is silent
or incomplete as to the course of action which the Trustee is required to take
with respect to a particular set of facts, the Trustee may request instructions
of the Holders and, to the extent that the Trustee acts in good faith in
accordance with any instructions received from not less than a Majority in
Interest of Holders, shall not.be liable to any Person.
Section 6.07. Acting Solely as Trustee. In accepting the
- ------------------------------ ------------------------
trusts hereby created-, the Trustee acts (except as otherwise expressly provided
herein) solely as trustee for the benefit of the Holders and not in its
individual capacity,
33
<PAGE>
and all persons having any claim against the Trustee by reason of the
transactions contemplated hereby shall look only to the Trust Estate for payment
or satisfaction thereof except as otherwise provided in this Agreement.
Section 6.08. Fees and Expenses of Trustee. The Trustee shall
- ------------------------------ ----------------------------
be entitled to receive reasonable compensation for all services which it renders
in accordance with this Agreement (which compensation shall not be limited by
any provision of law with respect to compensation of a trustee of an express
trust), together with reimbursement for all expenses incurred or made by it in
accordance with any provision of this Agreement or any other Operative Agreement
(including the reasonable compensation and the shall be consummated, to assume
liability for, and to indemnify, protect, defend, save and keep harmless (from
and after the date the Holder becomes a registered Holder), the Trustee and its
successors, assigns, agents and servants from and against any and all
liabilities, obligations, losses, damages, penalties, taxes, claims, actions,
suits, costs or expenses (including, without limitation, reasonable legal and
investigatory fees and expenses) of whatsoever kind and nature (collectively,
"Expenses") which may be imposed on, incurred by or asserted at any time
against, the Trustee (but only to the extent that the Trustee has not previously
been reimbursed for such Expenses by some other Person) in any way relating to
or arising out of this Agreement, the Utah Sublease or any other instrument,
notice, resolution, authorization, request, consent, order, certificate, report,
opinion, bond or other paper referred to herein or given in connection with the
transactions contemplated hereby or in any way relating to or arising out of the
administration of the Trust Estate or any action or inaction of the Trustee,
except that the Holders shall not be required to indemnify the Trustee in the
case of (and the Trustee in its individual capacity shall be responsible and
liable for) all liabilities, obligations, losses, damages, penalties, taxes,
claims, actions, suits, costs or expenses caused by (a) willful misconduct or
negligence on the part of the Trustee whether it was then acting as Trustee or
in its individual capacity, (b) any representation or warranty of the Trustee
made expressly in its individual capacity and referred to in Section 6.03 hereof
proving at any time to be untrue or inaccurate, (c) any taxes, fees or other
charges on, based on, with respect to or measured by any amounts paid to the
Trustee as fees or compensation pursuant to Section 6.08 hereof or otherwise for
services rendered in connection with the transactions contemplated by the
Operative Agreements, (d) acts or omissions of the Trustee, whether done or
omitted by it as Trustee or in its individual capacity, not related to the
administration of the Trust Estate or the performance of its duties under the
Operative Agreements, or (e) matters for which the Trustee is answerable or
accountable in its
34
<PAGE>
individual capacity hereunder. The indemnities contained in this Section 7
shall survive the termination of this Agreement and any other Operative
Agreement. In addition, the Trustee shall be entitled to indemnification from
the Trust Estate for any liability, obligation, loss, damage, penalty, tax,
claim, action, suit, cost, expense or disbursement indemnified against pursuant
to this Section 7 to the expenses of its counsel, accountants or other skilled
persons and of all other persons not regularly in its employ). PNM and TEP each
hereby agree to pay 50% of the fees and expenses (including, but not limited to,
all fees for any bonds required of the Trustee in connection with the Trust or
the Trust Estate), both initial and ongoing, of the Trustee for services
rendered through December 31, 2004. Except as provided in Section 7, the Trustee
agrees that it shall have no right against the Holders for any fee as
compensation for its services under this Agreement until December 31, 2004.
Section 6.09. Books, Records and Tax Returns. Except as
- ------------------------------ ----- -----------------------
otherwise provided in this Agreement, the Trustee shall be responsible for the
keeping of all customary books and records relating to the receipt and
disbursement of all moneys under this Agreement and such other transactions
relating to the Trust Estate as the Trustee may deem appropriate in accordance
with good accounting principles. Such books and records shall be open to
inspection during regular business hours of the Trustee by any Holder, or its
duly authorized agent or attorney, upon a reasonable period of prior written
notice to the Trustee. The Trustee shall cause to be prepared and filed all tax
returns required for the Trust (at no cost to the Trustee). The Trustee shall
give each Holder a copy of all such tax returns at least 30 days before the same
are required to be filed and the Holders shall be entitled to comment to the
Trustee relating to the preparation thereof until 15 days before such tax
returns are required to be filed. Each Holder, upon request, will furnish to the
Trustee all such information as may be reasonably required from such Holder in
connection with the preparation of such tax returns and shall, if required and
upon request of the Trustee, execute such returns. The Trustee will give to the
Holders such periodic advice concerning receipts and disbursements of the Trust
created by this Agreement as required by law and, upon request, such other
information as would be helpful to the Holders in preparing their tax returns.
The Trustee shall not be liable in its individual capacity for any tax due and
payable in connection with this Agreement, any other Operative Agreement or the
transactions contemplated by this Agreement and the other Operative Agreements
other than taxes in the nature of income taxes or franchise taxes imposed on or
in connection with the Trustee's compensation for services hereunder.
35
<PAGE>
SECTION 7. INDEMNIFICATION
The Holders, from time to time hereby agree, whether or not any of
the transactions contemplated hereby extent not reimbursed by the Holders or
any other Person, but without releasing any Holder from its agreement of
indemnification herein. The obligations of the Holders under this Section 7
shall be several and not joint, and shall be ratable in proportion to the
beneficial interest hereunder owned by each Holder (as evidenced by the
Certificates of Interest held by each Holder). The indemnities in this Section
7 extend to the Trustee only in its individual capacity and shall not be
construed as indemnities of the Trust Estate (except to the extent, if any,
that the Trustee has been reimbursed by the Trust Estate for amounts covered
by the indemnities contained in this Section 7). The Trustee shall give prompt
notice to the Holders of any claim for any Expense, and shall take such
actions as the Holders may reasonably request at the cost and expense of the
Holders, to permit the Trustee to contest any such claim, whether in the name
of the Trustee or in the name of the Holders.
SECTION 8. TRANSFER OF HOLDER'S INTEREST
Section 8.01. Transfer of Certificates. Any Holder may at
- ------------------------------ ------------------------
any time transfer, sell, assign or dispose of, to any other Person any or all of
its interest hereunder as evidenced by the Certificates which it holds,
provided, that (a) the transferee shall have entered into and delivered to the
Trustee an agreement substantially in the form attached hereto as Exhibit D, (b)
such conveyance does not violate any provision of any Federal law and no
registration pursuant to the Securities Act of 1933, as amended, is required in
connection with the proposed transfer, (c) the transferring Holder agrees to
bear the risk of any adverse tax consequences resulting from such conveyance,
and (d) the transferee shall not be a natural person acquiring such interest for
his own account.
Section 8.02. Merger, Consolidation, Etc. Any corporation
- ------------------------------ --------------------------
into which a Holder may be merged or converted or with which it may be
consolidated or any corporation resulting from any merger, conversion or
consolidation to which a Holder may be a party or any corporation to which
substantially all the business of a Holder may be transferred shall be deemed
without further act to be the Holder of all Certificates held by such Holder.
Section 8.03. Discharge of a Holder. Upon any transfer
- ------------------------------ ---------------------
complying with Section 8.O1, the transferring Holder shall be released from that
portion of its obligations under this Agreement and the other Operative
Agreements, if any so provide, arising or maturing after the date of such
transfer
36
<PAGE>
which the transferee has undertaken.
SECTION 9. SUCCESSOR TRUSTEES; ADDITIONAL
AND SEPARATE TRUSTEES
Section 9.01. Resignation of Trustee; Appointment of
- ------------------------------ --
Successor.
- ---------
(a) The Trustee or any successor Trustee may resign at any time
without cause by giving at least 60 days' prior written notice to each Holder,
such resignation to be effective on the acceptance of appointment by a successor
Trustee under Section 9.01(b). In addition, the Trustee may be removed at any
time without cause by a Majority in Interest of Holders by an instrument in
writing delivered to the Trustee and to each other Holder, such removal to be
effective on the acceptance of appointment by a successor Trustee under Section
9.01(b). If the Trustee shall become incapable of acting, or shall be adjudged
bankrupt or insolvent, or a receiver of the Trustee or of its property shall be
appointed, or any public officer shall take charge or control of the Trustee or
of its property or affairs for the purpose of rehabilitation, conservation or
liquidation, the Trustee shall be deemed to have resigned, and the Trustee shall
give each Holder prompt written notice of such incapacity, bankruptcy,
insolvency, appointment or assumption of control. In case of the resignation or
removal of the Trustee, the Holders may appoint a successor Trustee by a written
instrument signed by a Majority in Interest of Holders and delivered to the
retiring Trustee. If a successor Trustee shall not have been appointed within
60 days after the giving of the written notice of such resignation or the
delivery of the written instrument with respect to such removal, any Holder or
the resigning Trustee may apply to any court of competent jurisdiction to
appoint a successor Trustee to act until such time, if any, as a successor shall
have been appointed as above provided. Any successor Trustee so appointed by
such court shall immediately and without further act be superseded by any
successor Trustee appointed as above provided.
(b) Any successor Trustee, whether appointed by a court or by the
Holders, shall execute and deliver to the predecessor Trustee an instrument
accepting such appointment, and thereupon such successor Trustee, without
further act, deed or conveyance, shall become vested with all the estates,
properties, rights, powers, duties and trusts of the predecessor Trustee in the
trusts hereunder with like effect as if originally named as Trustee herein; but
nevertheless upon the written request of such successor Trustee, such
predecessor Trustee shall execute and deliver an instrument transferring to such
successor Trustee, upon the trusts herein expressed, all the estates,
properties, rights, powers and trusts of such predecessor Trustee, and such
predecessor Trustee shall duly
37
<PAGE>
assign, transfer, deliver and pay over to such successor Trustee any property or
moneys then held by such predecessor Trustee upon the trusts herein expressed.
(c) Any successor Trustee, however appointed, shall be a bank or trust
company organized under the laws of the United States or any state thereof (the
appointment of which does not violate any law or regulation or create a
relationship that would be in violation thereof) having a combined capital and
surplus of at least $100,000,000 and shall, to the extent required by applicable
law, be qualified to conduct trust business in the State of New Mexico, if there
be such an institution willing, able and legally qualified to perform the duties
of Trustee hereunder upon reasonable and customary terms; if there be no such
bank or trust company, the Trustee shall be an institution or individual
reasonably acceptable to a Majority in Interest of Holders.
(d) Any corporation into which the Trustee may be merged or converted
or with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Trustee is a party, or any bank
or trust company in any manner succeeding to all or substantially all the
corporate trust business of the Trustee, if eligible as provided in Paragraph
(c) of this Section, shall automatically succeed to the rights and obligations
of the Trustee hereunder without further action on the part of any of the
parties hereto, provided that such surviving or succeeding corporation (if other
--------
than the Trustee) shall forthwith deliver to each Holder written notice of such
succession to the rights and obligations of the Trustee hereunder.
Section 9.02. Appointment of Additional and Separate Trustees.
- ---------------------- -----------------------------
(a) Whenever the Trustee shall deem it necessary or prudent in order
either to conform to any law of any jurisdiction in which all or any part of the
Trust Estate shall be situated or to make any claim or bring any suit with
respect to the Trust Estate or any of the Fruitland Coal Interests, or the
Trustee shall be advised by counsel (who shall not be an employee of the
Trustee) satisfactory to it that it is so necessary or prudent in the interest
of the Holders or in the event that the Trustee shall have been requested to do
so by the Holders, the Trustee and each Holder shall execute and deliver an
agreement supplemental hereto and all other instruments and agreements necessary
or proper to constitute another bank or trust company, or one or more Persons
approved by the Trustee, either to act as additional trustee or trustees of all
or any part of the Trust Estate, jointly with the Trustee, or to act as separate
trustee or trustees of all or any part of the Trust Estate, in any such case
with such powers (not inconsistent with
38
<PAGE>
the other provisions of this Agreement) as may be provided in such agreement
supplemental hereto, and to vest in such bank, trust company, or Person as such
additional trustee or separate trustee, as the case may be, any property, title,
right, or power of the Trustee deemed necessary or advisable by the Trustee,
subject to the remaining provisions of this Section 9.02. In the event the
Holders shall not have joined in the execution of such an agreement supplemental
hereto within ten days after the receipt of a written request from the Trustee
so to do, the Trustee may act under the foregoing provisions of this Section
9.02 in either of such contingencies. The Trustee may execute, deliver, and
perform any deed, conveyance, assignment, or other instrument in writing as may
be required by any additional trustee or separate trustee for more fully and
certainly vesting in and confirming to it or him any property, title, right, or
power which by the terms of such agreement supplemental hereto, are expressed to
be conveyed or conferred to or upon such additional trustee or separate trustee,
and the Holders shall, upon the Trustee's request, join therein and execute,
acknowledge, and deliver the same; and the Holders hereby make, constitute, and
appoint the Trustee their agent and attorney-in-fact for them and in their name,
place and stead to execute, acknowledge and deliver any such deed, conveyance,
assignment, or other instrument in the event that the Holders shall not
themselves execute and deliver the same within ten days after receipt by them of
such request so to do.
(b) Every additional trustee and separate trustee hereunder shall, to
the extent permitted by law, be appointed and act and the Trustee shall act,
subject to the following provisions and conditions:
(i) all powers, duties, obligations and rights conferred upon the
Trustee in respect of the receipt, custody, investment and payment of
moneys, shall be exercised solely by the Trustee;
(ii) all other powers, duties, obligations, and rights conferred or
imposed upon the Trustee shall be conferred or imposed upon and exercised
or performed by the Trustee and such additional trustee or trustees and
separate trustee or trustees jointly, except to the extent that under any
law of any jurisdiction in which any particular act or acts are to be
performed, the Trustee shall be incompetent or unqualified to perform
such act or acts, in which event such powers, duties, obligations and
rights (including the holding of title to the Trust Estate in any such
jurisdiction) shall be exercised and performed by such additional trustee
or trustees or separate trustee or trustees;
39
<PAGE>
(iii) no power hereby given to, or with respect to which it is hereby
provided may be exercised by, any such additional trustee or separate
trustee shall be exercised hereunder by such additional trustee or
separate trustee except jointly with, or with the consent of, the
Trustee; and
(iv) no trustee hereunder shall be personally liable by reason of any
act or omission of any other trustee hereunder.
If at any time the Trustee shall deem it no longer necessary or prudent in order
to conform to any such law or take any such action or shall be advised by such
counsel that it is no longer so necessary or prudent in the interest of the
Holders for any additional or separate trustee to continue to act as such or in
the event that the Trustee shall have been requested in writing by the Holders
to remove any additional or separate trustee, the Trustee and the Holders shall
execute and deliver an agreement supplemental hereto and all other instruments
and agreements necessary or proper to remove such additional trustee or separate
trustee. In the event that the Holders shall not have joined in the execution
of such agreement supplemental hereto, instruments and agreements within 15 days
after receipt of notice from the Trustee, the Trustee may act on behalf of the
Holders to the same extent provided above.
(c) Any additional trustee or separate trustee may at any time by an
instrument in writing constitute the Trustee, its agent or attorney-in-fact,
with full power and authority, to the extent which may be authorized by law, to
do all acts and things and exercise all discretions which it is authorized or
permitted to do or exercise, for and in its behalf and in its name. In case any
such additional trustee or separate trustee shall die, become incapable of
acting, resign or be removed, all the assets, property, rights, powers, trusts,
duties and obligations of such additional trustee or separate trustee, as the
case may be, so far as permitted by law, shall vest in and be exercised by the
Trustee, without the appointment of a new successor to such additional trustee
or separate trustee unless and until a successor is appointed in the manner
hereinbefore provided.
(d) Any request, approval, or consent in writing by the Trustee to any
additional trustee or separate trustee shall be sufficient warranty to such
additional trustee or separate trustee, as the case may be, to take such action
as may be so requested, approved, or consented t.o.
SECTION 10. SUPPLEMENTS AND AMENDMENTS
Section 10.01. Supplements and Amendments Subject to
- ------------------------------- --------------------------
40
<PAGE>
the provisions of Section 10.02, at any time and from time to time, but only
upon the written request of a Majority in Interest of Holders and as specified
in such request, (a) the Trustee, together with the Holders making the request,
shall execute a written amendment of or a supplement to this Agreement for the
purpose of adding provisions to, or changing or eliminating provisions of this
Agreement, and (b) the Trustee shall enter into such written amendment of or
supplement to any other Operative Agreement, or may enter into any new agreement
relating to the Fruitland Coal and the Surface Rights or their purchase,
financing, subleasing or disposition as each other party to such agreement may
agree to, or execute and deliver such written waiver of the terms of any of such
agreements; provided, however, that, without the consent of each Holder, no such
--------
supplement, amendment, new agreement or waiver shall (i) modify any of the
provisions of this Section or of Section 2.02, 3.03, 4, 5.02, 5.03, 5.04, 8 or
11, (ii) reduce the amount or extend the time of payment of any amount owing or
to be paid under any Certificate, (iii) reduce, modify, or amend any indemnities
in favor of such Holder, (iv) reduce the amount or extend the time of payment of
Retained Economic Interest as set forth in the Utah Sublease, or any amount
payable as indemnity pursuant to Section 7 of the Participation Agreement, (v)
require any Holder to invest or advance funds or to become personally liable on
any agreement or obligation, (vi) modify, amend, or supplement the Utah Sublease
or consent to any assignment of the Utah Sublease, in either case releasing Utah
from its obligations in respect of the payment or changing the character of such
obligations as set forth in the Utah Sublease, or (vii) in any other way
adversely affect the rights, privileges or interests of the Holders.
41
<PAGE>
Section 10.02. Form of Request. It shall not be necessary
- ------------------------------- ---------------
for any written request furnished pursuant to Section 10.01 to specify the
particular form of the proposed documents. It shall be sufficient if the
request shall indicate the substance of the document proposed.
Section 10.03. Rights of Trustee. Prior to executing any
- ------------------------------- -----------------
document required to be executed by it pursuant to the terms of this Agreement,
the Trustee shall be entitled to receive an opinion of counsel to the effect
that the execution of the document is authorized by and conforms to all of the
requirements of this Agreement. If in the opinion of the Trustee and its
counsel any such document adversely affects any of the Trustee's rights,
immunities or indemnities under this Agreement or any other agreement
contemplated hereby, the Trustee may in its discretion decline to execute the
document.
Section 10.04. Mailing of Documents. Promptly after the execution by
the Trustee of any document entered into pursuant to Section 10.01, the Trustee
shall mail, by first class mail, postage prepaid, a conformed copy to each
Holder, but the failure of the Trustee to mail copies shall not impair or affect
the validity of the document.
SECTION 11. MISCELLANEOUS
Section 11.01. Termination of Trust. (a) This Agreement and
- ----------------------------- --------------------
the Trust created by it shall continue until the earliest of: (i) the final
distribution by the Trustee of all moneys or other property and proceeds
constituting the Trust Estate, after receipt by the Trustee of instructions in
writing from a Majority in Interest of Holders requesting that this Agreement be
terminated and directing the final disposition by the Trustee of the Trust
Estate, in accordance with the priorities set forth in Section 4 hereof, (ii)
the sale, transfer or other final disposition by the Trustee of all property,
including all right, title and interest of the Trustee in and to the Fruitland
Coal Interests and any other property at the time part of the Trust Estate, as
directed by a Majority in Interest of the Investors, and the final distribution
thereafter by the Trustee of all moneys or other property and proceeds con-
stituting the Trust Estate in accordance with the priorities set forth in
Section 4, (iii) 21 years less one day after the date of the death of the last
survivor of any of the descendants, living on the date of this Agreement, of
John D., Laurence S., Nelson A. or David Rockefeller, children of John D.
Rockefeller, Jr. but excluding Michael Rockefeller, son of Nelson A.
Rockefeller, and any descendants of Michael Rockefeller, or (iv) receipt of the
written instruction of the Holders of Certificates representing 100% of the
beneficial interest created under this Agreement. In the event the duration of
this Trust is necessarily limited by applicable law of any state to
42
<PAGE>
a term which is shorter than the term hereinabove set forth and a court of
competent jurisdiction has finally determined that such shorter term must be
used and the law of such state must be applied in determining the duration of
this Trust, then, and in such event, this Trust shall continue for the maximum
period permitted under the laws of such state for the duration of the Trust, in
lieu of the period set forth herein.
(b) If the Trustee sells or otherwise disposes of any part (but less
than all) of the Trust Estate, as contemplated or permitted by this Agreement,
the Trust shall be deemed terminated with respect to the property sold or
disposed of.
(c) Upon termination of the Trust pursuant to paragraph (a) of this
Section 11.01, all money included in the Trust Estate shall be distributed as
specified in Section 4, and each Holder shall be vested with a proportional
undivided interest in common in the other assets constituting part of the Trust
Estate, including, without limitation, the Fruitland Coal Leases, the Utah
Sublease and the Surface Rights. The Trustee shall take all action as may be
necessary or appropriate, including, without limitation, the executing,
acknowledging, delivering and recording of such instruments and documents as may
be necessary or appropriate and the making of such applications to governmental
authorities as may be necessary or appropriate, to transfer and perfect such
title in the Holders.
(d) After the termination of the Trust, and for the purpose of
liquidating and winding up the affairs of the Trust, the Trustee shall continue
to act as such until its duties have been fully performed. Upon the
distribution of all of the Trust Estate to the holders, the payment and
discharge of all debts, liabilities and obligations of the Trust, and the
performance of all of the Trustee's duties hereunder, the Trustee shall have no
further duties or obligations hereunder except to account as Provided by law.
Section 11.02. Intention of Parties to Establish a Trust;
- ------------------------------- --------------------------------- --------
Legal Title to Trust Estate. This Agreement is not intended to create and shall
- ---------------------------
not be interpreted as creating an association, partnership or joint venture of
any kind. It is intended as a trust to be governed and construed in all
respects as a trust. No person except the Trustee shall have legal title to any
part of the Trust Estate. No transfer, by operation of law or otherwise, of any
Certificate or of any right, title or interest of any Holder in and to the Trust
Estate shall operate to terminate this Agreement or the trust created hereby or
effect any dissolution or entitle any successor or transferee of any Holder to
an accounting or to any other right with respect to the Trust Estate.
43
<PAGE>
Section 11.03. Validity of Sale. Any sale or other transfer
- ------------------------------- ----------------
or conveyance of the Fruitland Coal Interests, the Fruitland Coal, the Surface
Rights or any other part of the Trust Estate, or any part thereof by the Trustee
made in accordance with the terms of this Agreement shall be binding upon the
Trustee, the Holders and all other Persons and shall be effective to transfer or
convey all right, title and interest of the Trustee and the beneficial interest
of the Holders to such Fruitland Coal Interests, such Fruitland Coal, such
Surface Rights or such other part of the Trust Estate, or such part thereof. No
purchaser or other grantee shall be required to inquire as to the authorization,
necessity, expediency or regularity of such sale or conveyance or as to the
application of any sale or other proceeds with respect thereto by the Trustee.
Section 11.04. No Liability on Certificates. Neither the
- ------------------------------- ----------------------------
Trustee in its individual capacity nor any Holder shall in any way be liable or
responsible or have any obligation to the holders of the Certificates for their
validity, effectiveness or enforceability, except as otherwise expressly
provided in this Agreement.
Section 11.05. Limitations on Rights of Others. Nothing in
- ------------------------------- -------------------------------
this Agreement, whether express or implied, shall be construed to give to any
person other than the Trustee and the Holders any legal or equitable right,
remedy or claim under or in respect of this Agreement, any covenants,
conditions, or provisions contained herein, or in any Certificate. All such
covenants, conditions, and provisions are, and shall be held to be, for the sole
and exclusive benefit of the Trustee and the Holders.
Section 11.06. Notices. Unless otherwise expressly specified
- ------------------------------- -------
or permitted by the terms of this Agreement, all notices under its terms shall
be in writing and shall be mailed by first class mail, postage prepaid, and
addressed: (i) if to the Trustee, at 555 South Flower Street, Los Angeles,
California 90071, Attention: Corporate Agency Division; (ii) if to any original
---------
Holder, at its address set forth below its name on the signature page hereof;
and (iii) if to a future Holder, at its address in the register maintained by
the Trustee pursuant to Section 3.03 hereof; or to such other address with
respect to the Trustee as the Trustee shall notify the Holders in writing, or to
such other address with respect to any Holder as such Holder shall notify the
Trustee in writing.
Section 11.07. Severability. Any provision of this Agreement
- ------------------------------- ------------
which is prohibited or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of the prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such
44
<PAGE>
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable the provision in any other jurisdiction.
Section 11.08. Benefits of Agreement. All covenants and agreements
- ---------------------- ---------------------
contained herein shall be binding upon, and shall inure to the benefit of, the
Trustee and, to the extent permitted by Section 9, its respective successors and
assigns, and the Holders and, to the extent permitted by Section 8, their
respective successors and assigns, and to no other persons. Any request,
notice, direction, consent, waiver or other instrument or action by a Holder
shall bind its successors and assigns.
Section 11.09. No Waiver. Nothing contained in this
- ------------------------------- ---------
Agreement shall be construed as or deemed to be (i) a waiver by either PNM or
TEP of any rights either may have under Sections 4(b)(i) or (ii) of the Closing
Agreement, dated August 18, 1980, among PNM, TEP, Utah and San Juan Coal
Company, or (ii) the appointment of the Trustee or any Holder as the agent of
either PNM or TEP for the purpose of making or effecting any such waiver.
Section 11.10. Headings; Name of Trust. The cover, table of
- ------------------------------- -----------------------
contents and headings of the various Sections herein are for convenience of
reference only and shall not modify, define, expand, or limit any of the terms
or provisions hereof. The trusts created hereby may for ease of reference be
referred to as the "San Juan Coal Trust". References herein to Sections or
subsections without reference to the document in which they are contained are
references to this Agreement.
Section 11.11. Instruments of Further Assurance. PNM and TEP
- ------------------------------- --------------------------------
shall, upon reasonable request of the Trustee, execute, acknowledge and deliver
such further instruments and do such further acts as may be necessary or proper
to carry out the purposes of this Agreement, to transfer any property intended
to be covered hereby and to vest in the Trustee, its successors and assigns, the
state, powers, and instruments transferred in trust hereunder.
Section 11.12. Counterparts. This Agreement may be executed
- ------------------------------- ------------
by the parties hereto in several separate counterparts, each of which shall be
an original but, all of which taken together shall constitute but one and the
same Agreement.
Section 11.13. Governing Law. This Agreement shall in all
- ------------------------------- -------------
respects be governed by, and construed and enforced in accordance with, the law
of the State of New York, including all matters of construction, validity and
Performance.
45
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By James G. Ryan
-------------------------------
Title: Assistant Vice
President
46
<PAGE>
PUBLIC SERVICE COMPANY OF
NEW MEXICO
Attest:
D. E. Peckham By A.J. Robison
- --------------------------- -------------------------------
Secretary Title: Sector Vice President
Alvarado Square
Albuquerque, New Mexico 87158
Attention: Secretary
---------
TUCSON ELECTRIC POWER COMPANY
By J. Robert Johnston
---------------
Title: Vice President
Post Office 711
Tucson, Arizona 85702
Attention: Secretary
---------
47
<PAGE>
EXHIBIT A
SCHEDULE OF FRUITLAND COAL LEASES
I. Lease from the United States of America, as lessor,
dated November 1, 1961, Lease Number NM045196,
covering the following described land in T30N,
R15W, NMPM, New Mexico:
Sec. 2: N1/2 NW1/4, NW1/4 NE1/4
Sec. 3: NE1/4 NE1/4
Sec. 9: W1/2 NW1/4
Sec. 10: W1/2.
Sec. 21: A11
Sec. 28: A11
Sec. 33: A11 2,467.24 Acres
II. Lease from the United States of America, as lessor,
dated November 1, 1961, Lease Number NM045197,
covering the following described land in T30N,
R15", NMPM, New Mexico:
Sec. 15: A11
Sec. 22: A11
Sec. 27: A11
Sec. 34: A11 2,565.60 Acres
III. Lease from the United States of America, as lessor,
dated December 1, 1961, Lease Number NM045217,
covering the following described land in T30N,
R15W, NMPM, New Mexico:
Sec. 3: S1/2 NE1/4, NW1/4 NE14,
NW14, S1/2
Sec. 4: SE1/4 NE1/4, SW1/4 SW1/4,
E1/2 SW1/4. SE1/4
Sec 9: E1/2 NW1/4, E1/2, SW1/4
Sec 10: E1/2 1,800.00 Acres
48
<PAGE>
IV. Lease from the United States of America, as lessor,
dated June 11, 1940, Lease Number SF071448, cover-
ing the following described land in T29N, R15W,
NMPM New Mexico:
Sec. 4: SW1/4 NW1/4 40.00 Acres
V. Lease from the State of New Mexico, as lessor, dated November 1, 1975,
Lease Number M-14014, covering the following described land in T30N,
R15W, NMPM, New Mexico:
Sec. 16: NW1/4 NW1/4 NE1/4 120.00 Acres
VI. Lease from the State of New Mexico, as lessor, dated August 26, 1979,
State Lease Number M-15354, covering the following described land in
T30N, R15W, NMPM, New Mexico:
Sec. 32: Lots 1, 2, 3, NW1/4 NW1/4,
SW1/4 NE1/4, N1/2 SE1/4,
NE1/4 SW1/4 309.04 Acres
VII. Lease from the State of New Mexico, as lessor,
dated October 24, 1975, State Lease Number 15417,
covering the following described land in T30N,
R15", NMPM, New Mexico:
Sec. 16: S1/2, W1/2 NW1/4,
E1/2 NE1/4. SW1/4 NE1/4 520.00 Acres
VIII. Coal Lease dated November 1, 1972, from Bonnie V. Kennedy Crook,
Arlington Boyd Kennedy, Bonnie Gaye Kennedy Richman, Michael Harold
Kennedy, all dealing in their sole and separate property, to Howard E.
Henderson, recorded in the records of the Clerk of San Juan County,
New Mexico, in Book 741, Page 227, and covering the following lands in
said County:
N1/2 NW1/4, SE1/4 NW1/4, SW1/4 NE1/4, N1/2 NE1/4, Section 4,
T.29N. R.15W., N.M.P.M. containing 240 acres more or less.
49
<PAGE>
EXHIBIT B
SURFACE RIGHTS AND
SURFACE INSTRUMENTS
- -------------------------------------------------
I. Rights under Agreement dated November 6, 1979,
between Wagon Rod Ranch, Inc., and Western Coal
Co., recorded with the records of the Clerk of
San Juan County, New Mexico, in Book 872, Page
595, as modified by Letter Agreement dated
October 22, 1979, between Western Coal Co. and
Wagon Rod Ranch, Inc., a Memorandum of which is
recorded with the records of the Clerk of San
Juan County, New Mexico, in Book 872, Page 593,
covering the following lands in said County:
NE 1/4 NE 1/4 of Section 3, T30 N, R 15 W, N.M.P.M.
II. Rights under Agreement dated as of June 1, 1973,
between the Most Reverend Jerome J. Hastrich,
and his Successors, Diocese of Gallup, New Mexico,
and Western Coal Co., recorded with the records
of the Clerk of San Juan County, New Mexico, in
Book 724, Page 133, covering the following lands
in said County:
SE 1/4 of Section 28, T 30 N, R 15 W, N.M.P.M.
III. Rights under Agreement dated April 20,
between Ella Thurland and Western Coal
recorded with the records of the Clerk
Juan County, New Mexico, in Book
and covering the following lands in said County:
NE 1/4 NW 1/2 and N 1/2 NE 1/4 of Section 33, T 30 N, R
15 W, N.M.P.M.
IV. Rights under Agreement entered into as of
January 1, 1980, and dated February 22, 1980,
between Michael L. Keleher, Trustee, and Western
Coal Co.. a Memorandum of which is recorded with the records of
the Clerk of San Juan County, New Mexico, in Book 874, Page 276, covering
the following lands in said County:
SE 1/4 SW 1/4 and SW 1/4 SE 1/4 of Section 22,
and NE 1/4 NW 1/4 and NW 1/4 NW 1/4 of Section 27, T 30 N, R 15 W,
N.M.P.M.
IV. Rights under Easements reserved in four Quitclaim Deeds, all dated
June 25, 1980, from Western Coal Co.
50
<PAGE>
to Paragon Resources, Inc., and Valencia Energy Company, recorded with
the Records of the Clerk of San Juan County in Book 885, Pages 329,
330, 331 and 332, and covering the lands in said County described in
said Quitclaim Deeds.
IX. Coal Lease dated November 1, 1972, from Bonnie V.
Kennedy Crook, Guardian of Cynthia Kaye Kennedy,
John Varnell Kennedy and Lyle Edward Kennedy,
Minors, to Howard E. Henderson, recorded in the
records of the Clerk of San Juan County, New
Mexico, in Book 741, Page 225, and covering the
following lands in said County:
N1/2 NW1/4, SE1/4 NW1/4, SW1/4 NE1/4, N1/2
NE1/4, Section 4, T.29N., R.15W., N.M.P.M. containing 240
acres, more or less.
X. Coal Lease dated May 21, 1973, from William A.
Hall and Suzanne Hall, his wife, to James R.
Pickett, recorded in the records of the Clerk of
San Juan County, New Mexico, in Book 741, Page
213, and covering the following lands in said
County:
N1/2 NE1/4, Section 4, T.29N., R.15W., N.M.P.M.
XI. Coal Lease dated May 28, 1973 from Theodore P.
Amsden and Winifred Amsden, his wife, to James
R. Pickett, recorded in the records of the Clerk
of San Juan County, New Mexico, in Book 741,
Page 211, and covering the following lands in
said County:
N1/2 NE1/4, Section 4, T.29N., R.15W., N.M.P.M.
XII. Coal Lease dated June 1, 1973, between Bertram W.
Collyer, Trustee, to James R. Pickett, recorded
in the records of the Clerk of San Juan County,
New Mexico, in Book 741, Page 207, and covering
the following lands in said County:
N1/2 NE1/4, Section 4, T.29N., R.15W., N.M.P.M.
XIII. Coal Lease dated June 1, 1973, from the First National Bank of Iowa
City, Iowa, as Trustee for Marian Winks, John R. Winks, Sally Ann
Maurer, James Whitmire, Jr., Marian Whitmire, Jane Schweiker, Tom
Schweiker, William L. Whitmire, Lynda Whitmire, J.E. Whitmire, M.D.,
James E. Whitmire, Jr., under Trust Agreement dated August 6, 1966,
recorded in Book 652, Page 572,
51
<PAGE>
San Juan County, New Mexico, to James R. Pickett, recorded in the
records of the Clerk of San Juan County, New Mexico, in Book 741, Page
209, and covering the following lands in said County:
N1/2 NE1/4, Section 4, T.29N., R.15W., N.M.P.M.
XIV. Coal Lease dated June 1, 1973, from Louise T. Weatherford and Winifred
T. Maurer dealing in their sole and separate property, to James R.
Pickett, recorded in the records of the Clerk of San Juan County, New
Mexico, in Book 741, Page 215, and covering the following lands in
said County:
N1/2 NE1/4, Section 4, T.29N., R.15W., N.M.P.M.
XV. Coal Lease dated August 1, 1973, from Larry Amsden to James R.
Pickett, recorded in the records of the Clerk of San Juan County, New
Mexico, in Book 741, Page 203, ana covering the following lands in
said County:
N1/2 NE1/4, Section 4, T.29N., R.15W., N.M.P.M.
XVI. Coal Lease dated August 1, 1974, from Lawrence Warren Stallings to
James R. Pickett, recorded in the records of the Clerk of San Juan
County, New Mexico, in Book 741, Page 205, and covering the following
lands in said County:
NE1/4, Section 5, T.29N., R.15W., N.M.P.M.
XVII. Coal Lease dated August 1, 1974, from Patricia Lucy Stallings Ryan to
James R. Pickett, recorded in the records o4 the Clerk of San Juan
County, New Mexico, in Book 741, Page 217, and covering the following
lands in said County:
NE1/4, Section 5, T.29N., R.15W., N.M.P.M.
52
<PAGE>
XVIII. Coal Lease dated August 1, 1974, from Frances Stallings Maloney to
James R. Pickett, recorded in the records of the Clerk of San Juan
County, New Mexico, in Book 741, Page 223, and covering the following
lands in said County:
NE1/4, Section 5, T.29N., R.15W., N.M.P.M.
XIX. Coal Lease dated August 1, 1974, from William H. Charters to James R.
Pickett, recorded in the records of the Clerk of San Juan County,
New Mexico, in Book 741, Page 221, and covering the following lands in
said County:
NE1/4, Section 5, T.29N., R.15W., N.M.P.M.
XX. Coal Lease dated August 1, 1974, from Mary Irene Bannowsky, to James
R. Pickett, recorded in the records of the Clerk of San Juan County,
New Mexico, in Book 741, Page 219, and covering the following lands in
said County:
NE1/4, Section 5, T.29N., R.15W., N.M.P.M.
53
<PAGE>
EXHIBIT C
Transfer of this Certificate is subject to certain restrictions and limitations
set forth in the Trust Agreement referred to below.
[NAME OF TRUSTEE]
TRUSTEE UNDER AMENDED AND RESTATED
TRUST AGREEMENT DATED AS OF DECEMBER 31, 1981
(SAN JUAN COAL TRUST)
CERTIFICATE OF INTEREST
R-
______ % ______________ , 1 9_
[NAME OF TRUSTEE], as Trustee (herein called the "Trustee") under the
Amended and Restated Trust Agreement (as the same may be amended, modified or
supplemented, from time to time, in accordance with the terms thereof, the
"Trust Agreement") dated as of December 31, 1981, between the Holders (such term
and other capitalized terms used herein without definition having the meanings
specified in the Trust Agreement) named therein and the Trustee, hereby
certifies as follows: (i) this Certificate is one of the Certificates of
Interest referred to in the Trust Agreement, which Certificates have been or are
to be executed and delivered by the Trustee pursuant to the Trust Agreement; and
(ii) [Name of Holder], the Holder of this Certificate has an undivided
beneficial interest in the Trust Estate and is entitled to receive, ratably with
the Holders of the other Certificates, as provided in the Trust Agreement, a
share of any distributions thereof, including payments of Retained Economic
Interest received or to be received by the Trustee under the Utah Sublease, as
well as such share of certain other payments which may be received by the
Trustee pursuant to the terms of the Trust Agreement, all as more particularly
set forth in the Trust Agreement.
54
<PAGE>
All amounts payable hereunder and under the Trust Agreement shall be paid
only from the income and the proceeds from the Trust Estate and only to the
extent that the Trustee shall have sufficient income or proceeds from the Trust
Estate to make such payments in accordance with the terms of the Trust
Agreement; and each Holder hereof, by its acceptance of this Certificate, agrees
that it will look solely to the income and proceeds from the Trust Estate to the
extent available for distribution to such Holder as above provided and that
neither the other Holders nor the Trustee shall be personally liable to the
Holder hereof for any amounts payable under this Certificate or the Trust
Agreement. No Person shall be entitled to receive any distribution pursuant to
the provisions of the Trust Agreement unless such Person is a registered Holder
at the time of such distribution.
Subject to the provisions of the Trust Agreement, the amounts payable
to the holder hereof pursuant to the Trust Agreement shall be payable at the
Trust Office of the Trustee at 555 South Flower Street, Los Angeles, California
90071, Attention: Corporate Agency Division or at the office of any successor
---------
Trustee, in lawful money of the United States of America.
There shall be maintained a register for the purpose of registering
transfers and exchanges of Certificates at the Trust Office of the Trustee, or
at the Trust Office of any successor Trustee, in the manner provided in Section
3.03 of the Trust Agreement.
Reference is hereby made to the Trust Agreement for a statement of the
rights of the Holder of this Certificate and of the rights of the Holders of the
other Certificates, as well as for a statement of the terms and conditions of
the trust created by the Trust Agreement (as the same may be amended from time
to time in accordance with the terms thereof), to all of which terms and
conditions each Holder hereof agrees by its acceptance of this Certificate.
This Certificate may be transferred, sold, assigned or
- ------------- ----------- --- -- ----------- ---- -------- --
otherwise disposed of by the Holder hereof only in accordance with the
- --------- -------- -- -- --- ------ ------ ---- -- ---------- ---- ---
provisions of Section 8 of the Trust Agreement. Each Holder hereof, by its
- ---------- -- ------- - -- --- ----- ---------
acceptance of this Certificate, agrees not to transfer this Certificate except
in accordance with the terms of Section 8 of the
55
<PAGE>
EXHIBIT D
FORM OF TRANSFER AGREEMENT
TRANSFER AGREEMENT, dated as of , 19
among (the "Transferor"),
(the "Transferee") and
(the "Trustee") under the
Amended and Restated Trust Agreement, dated as of December
31, 1981 (the "Trust Agreement"), among Public Service Com-
pany of New Mexico ("PNM"), Tucson Electric Power Company
("TEP") and the Trustee (all capitalized terms not otherwise
defined herein having the meanings assigned to them in the
Trust Agreement),
W I T N E S S E T H:
WHEREAS, the Transferor proposes to transfer to the Transferee the
Certificate issued to the Transferor and dated , 19 , representing a
_% beneficial interest in the Trust Estate (the "Certificate"); and
WHEREAS, pursuant to Section 8.01 of the Trust Agreement, it is a
condition to the right of the Transferor to transfer the Certificate to the
Transferee that the Transferee shall have entered into an agreement
substantially in the form of this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements and covenants
contained herein, and the other undertakings required or contemplated thereby,
the parties hereto agree as follows:
1. The Transferee shall hereafter be deemed a party to the Trust
Agreement; shall be deemed to be the Holder of the Certificate (which represents
the beneficial interest being transferred) for all purposes of the Trust
Agreement (except as to registration) and the Operative Agreements, shall be
deemed to have acquired the portion of the beneficial interest in the trust
created under the Trust Agreement which is being transferred in connection
herewith, and shall be bound by all the terms of and shall undertake and perform
all of the obligations of the Transferor contained in the Trust Agreement,
including, without limitation, the obligations of the Transferor under Section 7
of the Trust Agreement; and each reference to the Holder (with respect to the
Certificate being transferred in connection herewith) in the Trust Agreement and
the Operative Agreements shall be deemed to be a reference to the Transferee
for all purposes thereof.
56
<PAGE>
2. The Transferee hereby represents and warrants:
(a) Valid Agreement. This Agreement has been duly authorized, executed and
---------------
delivered by the Transferee and is a valid and binding obligation of the
Transferee.
(b) Investment Representation. The Transferee is purchasing the beneficial
-------------------------
interests represented by the Certificate to be transferred for its own account,
or for the account of one or more trust funds or pension funds for which it is
acting as trustee, and/or as agent for one or more institutional investors, and
that in any such case it is making the investment hereunder for investment and
not with a view to the distribution thereof, subject, nevertheless, to the
disposition of the Transferee's property and the property of those for whom the
Transferee is acting, as the case may be, being at all times within its or their
control. If the Transferee is making the investment hereunder for one or more
trust funds or pension funds and/or as agent for one or more institutional
investors, the Transferee represents (i) that it is acting as sole trustee for
all such funds, or as sole agent for all such agency accounts, as the case may
be, in connection with making the investment hereunder, (ii) that, except to the
extent it has advised the other parties hereto in writing to the contrary, it
has sole investment discretion with respect to all such funds and agency
accounts (and, to the extent it does not have sole investment discretion, that
it has been authorized to make the representations contained in this Agreement
by every Person having investment discretion in connection with each such fund
and agency account with respect to which the Transferee does not have sole
investment discretion), and (iii) that the determination and decision on its
behalf to make the investment for all such funds and agency accounts was made by
the same individual or group of individuals who customarily pass on such
investments.
(c) Source of Funds. Either (i) no part of the funds being used by the
Transferee to acquire its interest in the Trust Estate constitutes plan assets
of any employee benefit plan with respect to which either PNM or TEP is a party
in interest (determined on the basis of the lists of such plans provided by PNM
and TEP) or, if such Transferee is an insurance company, assets of any separate
account maintained by it in which any such employee benefit plan participates to
the extent of 5% or more (treating all employee benefit plans maintained by the
same employer or employee organization as single plan), or (ii) such Investor is
an employee benefit plan described in Section 4(b)(1) of Section 4(b)(2) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") and
Section 4975(b)(2) or Section 4975(g)(3) of the Internal Revenue Code of 1954,
as amended to the date hereof or (iii) that, if all or any part of the funds to
bs used by it to purchase such beneficial
57
<PAGE>
interest constitute assets allocated to a separate account, the acquisition of
such interest will not constitute a prohibited transaction under Section 406(a)
of ERISA. If, upon the request of any proposed Transferee, either PNM or TEP
refuses to supply the lists referred to in the immediately preceding sentence,
the Transferee shall be deemed not to have made the representation and warranty
contained in this Section 2(c). Upon request, any proposed Transferee will
specify to the Trustee any employee benefit plan supplying funds to be used in
the acquisition of an interest in the Trust Estate. As used in this Section,
the terms "separate account," "employee benefit plan," and "party in interest"
shall have the respective meanings set forth in Section 3 of ERISA.
3. The Transferee here ratifies, confirms and agrees to be bound by all actions
taken or omitted by the Trustee pursuant to instructions given by the Transferor
with respect to the Trust or the Trust Agreement.
4. The Transferor hereby agrees to bear the risk of any adverse tax
consequences resulting from the transfer of the portion of the beneficial
interest in the trust created under the Trust Agreement with respect to which
this Agreement is being delivered.
5. This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall constitute but one and the same instrument.
This Agreement shall be governed by and construed in accordance with the laws of
the State of New York. All the terms and provisions of this Agreement shall be
binding upon and inure to the benefit of and be enforceable by the respective
successors and assigns of the parties hereto. This agreement may not be
changed, discharged or terminated orally, but only by an instrument in writing
signed by the party or parties against when enforcement of any changed,
discharged or terminated orally, but only by an instrument in writing signed by
the party or parties against whom enforcement of any change, discharge or
termination is sought.
58
<PAGE>
In WITNESS WHEREOF, the parties hereto have caused
this agreement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
[Transferor]
By____________________________
Title:
[Transferor]
By____________________________
Title:
[Trustee]
By____________________________
Title:
59
<PAGE>
EXHIBIT E
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
CERTIFICATE OF TRUSTEE
I, Vicki L. Herrick, do hereby certify that:
1. I am a duly qualified and acting Trust Officer of Bank of America
National Trust and Savings Association, a corporation organized and existing as
a national banking association under the laws of the United States of America
(the "Trustee"), and as such am familiar with the records, proceedings and
operations thereof.
2. The Trustee is, and was on November 30, 1981, a corporation
organized and existing in good standing as a national banking association under
the laws of the United States of America and has, and had, all requisite power
and authority to enter into and perform its obligations under the Trust
Agreement dated as of November 30, 1981 (the "Original Agreement") between
Western Coal Co. and the Trustee and the Amended and Restated Trust Agreement,
dated as of December 31, 1981 (the "Restated Agreement"), among Public Service
Company of New Mexico, Tucson Electric Power Company and the Trustee (the
Original Agreement and Restated Agreement are collectively herein referred to as
the "Agreements").
3. The execution, delivery and performance by the Trustee of the
Agreements have been duly authorized by all necessary corporate action on the
part of the Trustee and the Agreements have been duly executed and delivered on
behalf of the Trustee by its officers duly authorized to execute and deliver
such documents and constitute legal, valid and binding obligations of the
Trustee, enforceable against it to the extent reasonably necessary to protect
the interests of the persons holding Certificates of Interest executed and
delivered under the Agreements, except as the enforceability thereof may be
limited by bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditor's rights generally.
60
<PAGE>
4. Except for the approvals of the Bureau of Land Management of the
United States Department of the Interior (the "BLM") and the Commissioner of
Public Lands of the State of New Mexico (the "CPL") of the assignment to the
Trustee of the Fruitland Coal Leases, as such term is defined in the Agreements,
of which the United States and the State of New Mexico are the lessors, and the
approval of the BLM to the acquisition by the parties to the Restated Agreement,
other than the Trustee, of Certificates of Interest executed and delivered under
the Agreements, neither the execution and delivery by the Trustee of the
Agreements nor the performance by it of any of the transactions contemplated
thereby, nor the compliance by it with any of their terms or conditions hereof
will, or did on November 30, 1981, contravene, conflict with, cause a breach of
or default under any federal, state or local statute, ordinance, rule or
regulation, or any write, injunction, decree, judgment or order applicable to or
binding on it, or contravene, or result in a breach of, or constitute a default
under, its articles of association or by-laws (provided that no representation
or warranty is made with respect to sate securities law).
5. Neither the Trustee nor anyone acting on its behalf has, directly
or indirectly, offered to sold the Certificates of Interest, executed and
delivered under the Agreements, or any interest in the Trust created by the
Agreements or any form of participation in the transactions contemplated thereby
or any similar security, or any interest therein, or any security of the
offering of which for the purposes of the Securities Act of 1933, as amended,
would be deemed to be a part of the same offering as the offering of any of the
foregoing interests, for sale to, or solicited any offer to acquire any of the
same from, or otherwise approached or negotiated with respect thereto with,
anyone, and neither the Trustee nor anyone acting on its behalf has taken or
will take any action which would subject the issuance or sale of such interests
to the provisions of Section 5 of the Securities Act of 1933, as amended.
6. Except for the approvals of the BLM and CPL of the assignment to
the Trustee of the Fruitland Coal Leases, as such term is defined in the
Agreements, of which the United States and the State of New Mexico are the
lessors, and the approval of the BLM to the acquisition by the parties to the
Restated Agreement, other than the Trustee, of the Certificates of Interest,
neither the execution and
61
<PAGE>
delivery by the Trustee of the Agreements nor the performance by it of any of
the transactions contemplated thereby, requires, or did require on November 30,
1981, the consent, permit, order, authorization or approval of, the
registration, declaration or filing with, the giving of notice to, or the taking
of any other action in respect of any court or administrative, public or
governmental body or authority whether Federal, state or local (provided that no
representation or warranty is made with respect to state securities laws).
7. To the knowledge of the officers of the Corporate Agency Division
of the Trustee, there is no action, suit, proceeding or claim, and no
investigation by any governmental agency pending or, in prospect or threatened,
against or affecting the Trustee before any Court, arbitrator or governmental
agency or instrumentality which might materially and adversely affect the Trust
Estate created by the Agreements or seeks to restrain, invalidate or prohibit or
otherwise questions the validity of any of the Agreements or any action taken or
to be taken pursuant thereto or the right, power and authority of the Trustee to
enter into or perform the Agreements.
8. The Trustee has whatever title to the Fruitland Coal Interests, as
such term is defined in the Agreements, as was transferred to it by Western Coal
Co., and such Fruitland Coal Interests are free of liens resulting from any acts
of or claims against the Trustee in its individual capacity not arising out of
its administration of the Trust Estate.
Vicki L. Herrick, Trust Officer
62
<PAGE>
EXHIBIT 10.62
AGREEMENT OF THE COMPANY
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, the Company hereby
agrees to provide to the Securities and Exchange Commission, upon request, a
copy of any instrument referred to in subsection (A) thereof.
PUBLIC SERVICE COMPANY OF NEW MEXICO
By D.E. Peckham
------------
Secretary
Albuquerque, New Mexico
March 27, 1984
<PAGE>
EXHIBIT 23.1
Consent of Independent Public Accountants
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation of our
report included in this Form 10-K, into the Company's previously filed
Registration Statement File No. 33-65418.
Arthur Andersen & Co.
Albuquerque, New Mexico
March 7, 1994
<PAGE>
EXHIBIT 23.2
Consent of KPMG Peat Marwick
The Board of Directors
Public Service Company of New Mexico:
We consent to incorporation by reference in the registration statement (No.
33-65418) on Form S-8 of Public Service Company of New Mexico of our report
dated March 11, 1993, relating to the consolidated balance sheet and statement
of capitalization of Public Service Company of New Mexico and subsidiaries as
of December 31, 1992, and the related consolidated statements of earnings
(loss), retained earnings (deficit), and cash flows and related schedules for
each of the years in the two-year period ended December 31, 1992, which
report appears in the December 31, 1993 annual report on Form 10-K of Public
Service Company of New Mexico. Our report dated March 11, 1993, included an
explanatory paragraph that described the uncertainties related to the
valuation of, and the continued regulatory recovery of costs related to, the
Company's interest in the Palo Verde Nuclear Generating Station as discussed
in note 2 to those statements. Additionally, our report refers to the fact
that the Company changed its method of accounting for unbilled revenue in
1992.
March 7, 1994 KPMG Peat Marwick
Albuquerque, NM
