UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the period ended March 31, 1997
-----------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
----------------- ----------------
Commission file number 1-6986
----------
PUBLIC SERVICE COMPANY OF NEW MEXICO
---------------------------------------------
(Exact name of registrant as specified in its charter)
New Mexico 85-0019030
------------------- ------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Alvarado Square, Albuquerque, New Mexico 87158
----------------------------------------------
(Address of principal executive offices)
(Zip Code)
(505) 241-2700
---------------------
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed
since last report)
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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock--$5.00 par value 41,774,083 shares
----------------------------- ---------------------------
Class Outstanding at May 6, 1997
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
INDEX
Page No.
--------
PART I. FINANCIAL INFORMATION:
Report of Independent Public Accountants....................... 3
ITEM 1. FINANCIAL STATEMENTS
Consolidated Statements of Earnings--
Three Months Ended March 31, 1997 and 1996..................... 4
Consolidated Balance Sheets--
March 31, 1997 and December 31, 1996........................... 5
Consolidated Statements of Cash Flows--
Three Months Ended March 31, 1997 and 1996..................... 6
Notes to Consolidated Financial Statements..................... 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.................. 8
PART II. OTHER INFORMATION:
ITEM 1. LEGAL PROCEEDINGS.......................................... 14
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ....... 16
ITEM 5. OTHER INFORMATION.......................................... 17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K........................... 19
Signature ........................................................... 21
-2-
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
of Public Service Company of New Mexico:
We have reviewed the accompanying condensed consolidated balance sheet of Public
Service Company of New Mexico (a New Mexico corporation) and subsidiaries as of
March 31, 1997, and the related condensed consolidated statements of earnings
for the three-month periods ended March 31, 1997 and 1996, and the condensed
consolidated statements of cash flows for the three-month periods ended March
31, 1997 and 1996. These financial statements are the responsibility of the
company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Public Service Company of New
Mexico and subsidiaries as of December 31, 1996 (not presented herein), and, in
our report dated February 13, 1997, we expressed an unqualified opinion on that
statement. In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet as of December 31, 1996, is fairly stated,
in all material respects, in relation to the consolidated balance sheet from
which it has been derived.
ARTHUR ANDERSEN LLP
Albuquerque, New Mexico
May 5, 1997
-3-
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Three Months Ended
March 31
----------------------------
1997 1996
----------- -----------
(In thousands except
per share amounts)
Operating revenues:
Electric $ 161,261 $ 152,102
Gas 123,936 89,730
Energy Services 13,625 72
----------- -----------
Total operating revenues 298,822 241,904
----------- -----------
Operating expenses:
Fuel and purchased power 47,118 39,725
Gas purchased for resale 81,660 46,459
Gas purchased for resale - energy marketing 13,402 30
Other operation and maintenance 76,546 72,900
Depreciation and amortization 20,453 20,030
Taxes, other than income taxes 9,753 9,230
Income taxes 13,197 15,055
----------- -----------
Total operating expenses 262,129 203,429
----------- -----------
Operating income 36,693 38,475
----------- -----------
Other income and deductions, net of taxes 2,437 817
----------- -----------
Income before interest charges 39,130 39,292
----------- -----------
Interest charges:
Interest on long-term debt 12,123 12,085
Other interest charges 2,111 759
----------- -----------
Net interest charges 14,234 12,844
----------- -----------
Net earnings 24,896 26,448
Preferred stock dividend requirements 147 147
----------- -----------
Net earnings applicable to common stock $ 24,749 $ 26,301
=========== ===========
Average shares of common stock outstanding 41,774 41,774
=========== ===========
Net earnings per share of common stock $ 0.59 $ 0.63
=========== ===========
Dividends paid per share of common stock $ 0.12 $ -
=========== ===========
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1997 1996
------------ -----------
(Unaudited)
(In thousands)
ASSETS
Utility plant $ 2,509,996 $ 2,489,921
Accumulated provision for depreciation
and amortization (956,650) (937,228)
----------- -----------
Net utility plant 1,553,346 1,552,693
----------- -----------
Other property and investments 272,973 254,268
----------- -----------
Current assets:
Cash 8,082 11,125
Temporary investments, at cost 20,454 9,128
Receivables 184,168 197,025
Income taxes receivable 4,401 18,825
Fuel, materials and supplies 41,994 41,260
Gas in underground storage 2,374 2,679
Other current assets 8,190 6,632
----------- -----------
Total current assets 269,663 286,674
----------- -----------
Deferred charges 132,909 136,679
----------- -----------
$ 2,228,891 $ 2,230,314
=========== ===========
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock equity:
Common stock $ 208,870 $ 208,870
Additional paid-in capital 470,319 470,358
Excess pension liability, net of tax (1,840) (2,102)
Retained earnings since January 1, 1989 94,833 77,185
----------- -----------
Total common stock equity 772,182 754,311
Cumulative preferred stock without
mandatory redemption requirements 12,800 12,800
Long-term debt, less current maturities 714,326 713,919
----------- -----------
Total capitalization 1,499,308 1,481,030
----------- -----------
Current liabilities:
Short-term debt 123,000 100,400
Accounts payable 81,500 130,661
Dividends payable 7,248 5,159
Current maturities of long-term debt 14,970 14,970
Accrued interest and taxes 28,097 23,356
Other current liabilities 22,292 25,477
----------- -----------
Total current liabilities 277,107 300,023
----------- -----------
Deferred credits 452,476 449,261
----------- -----------
$ 2,228,891 $ 2,230,314
=========== ===========
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31
-------------------
1997 1996
-------- --------
(In thousands)
Cash Flows From Operating Activities:
Net earnings $ 24,896 $ 26,448
Adjustments to reconcile net earnings to net cash
flows from operating activities:
Depreciation and amortization 23,897 23,954
Accumulated deferred investment tax credit (1,119) (1,166)
Accumulated deferred income tax 1,662 (690)
Changes in certain assets and liabilities:
Receivables 30,872 11,032
Fuel, materials and supplies (430) 4,968
Deferred charges 5,116 1,009
Accounts payable (49,171) (22,583)
Accrued interest and taxes 4,741 9,323
Deferred credits 2,320 (3,453)
Other (4,650) (5,825)
Other, net 2,179 1,197
--------- ----------
Net cash flows from operating activities 40,313 44,214
--------- ----------
Cash Flows From Investing Activities:
Utility plant additions (25,454) (22,005)
Increase in nuclear decommissioning trust (23,000) -
Return of principal PVNGS LOBs 820 -
Increase in other property and investments (373) (1,805)
Increase in temporary investments, net (11,326) (18,092)
--------- ----------
Net cash flows from investing activities (59,333) (41,902)
--------- ----------
Cash Flows From Financing Activities:
Bond redemption premium and costs (1,474) (21)
Repayments of long-term debt - (105)
Trust borrowing for nuclear decommissioning 23,000 -
Repayments of short-term borrowings (400) -
Dividends paid (5,149) (153)
--------- ----------
Net cash flows from financing activities 15,977 (279)
--------- ----------
Increase (decrease) in cash (3,043) 2,033
Cash at beginning of period 11,125 4,228
--------- ----------
Cash at end of period 8,082 $ 6,261
========= ==========
Supplemental Cash Flow Disclosures:
Interest paid $ 13,971 $ 17,502
========= ==========
Income taxes paid, net $ - $ 4,000
========= ==========
The accompanying notes are an integral part of these financial statements.
-6-
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) General Accounting Policy
In the opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments necessary for a fair presentation of the
consolidated financial statements. The significant accounting policies followed
by Public Service Company of New Mexico (the "Company") are set forth in note
(1) of notes to the Company's consolidated financial statements in the Company's
Annual Report on Form 10-K for the year ended December 31, 1996 (the "1996 Form
10-K") filed with the Securities and Exchange Commission ("SEC").
(2) Nuclear Decommissioning Costs
The Company's share of the Palo Verde Nuclear Generating Station ("PVNGS")
decommissioning costs will be approximately $147.5 million in 1995 dollars. The
Company makes regular payments under agreements approved by the New Mexico
Public Utility Commission ("NMPUC") to external tax qualified and non-qualified
trusts over the estimated useful life of each unit. A portion of the
non-qualified trust funds are invested in life insurance policies. The remaining
trust funds are invested primarily in equities, a municipal bond fund and a
money market fund. Decommissioning costs are charged to expense over the license
term and decommissioning costs for Units 1 and 2 are currently recovered in
rates. As of March 31, 1997, the nuclear decommissioning trusts had net assets
of $25.6 million.
(3) Refinancing
On February 21, 1997, the Company completed the refinancing of $190 million of
pollution control revenue bonds issued by the City of Farmington, all maturing
in April 2022. The $60 million 1978 Series A Pollution Control Revenue Bonds and
the $40 million 1979 Series A Pollution Control Revenue Bonds were refinanced as
variable rate bonds (Pollution Control Revenue Refunding Bonds, $40 million 1997
Series A, $37 million 1997 Series B and $23 million 1997 Series C). The initial
variable rates were 3.35% for $40 million 1997 Series A and $37 million 1997
Series B, and 3.30% for $23 million 1997 Series C. The remaining $90 million
1979 Series A Pollution Control Revenue Bonds were refinanced with a fixed rate
of 6.375% (Pollution Control Revenue Refunding Bonds, 1997 Series D).
-7-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Company's 1996 Form 10-K PART II, ITEM 7. -- "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" discussed
management's assessment of the Company's financial condition, results of
operations and other issues facing the Company. The following discussion and
analysis by management focuses on those factors that had a material effect on
the Company's financial condition and results of operations during the first
quarter of 1997 and 1996. It should be read in conjunction with the Company's
consolidated financial statements. Trends and contingencies of a material nature
are discussed to the extent known and considered relevant.
LIQUIDITY AND CAPITAL RESOURCES
The capital requirements for 1997 including a retrofit environmental project at
the San Juan Generating Station, purchases of PVNGS Lease Obligation Bonds
("LOBs") and cash dividend requirements for both common and preferred stock are
expected to be $214.4 million. The Company spent approximately $30.5 million for
its utility construction expenditures and dividend requirements during the first
quarter of 1997 and anticipates spending approximately $184 million during the
remainder of 1997. The Company expects that such cash requirements can be met
primarily through internally generated cash. However, to cover the differences
in the amounts and timing of cash generation and cash requirements, the Company
intends to utilize short-term borrowings under its liquidity arrangements. At
March 31, 1997, the Company had $100 million of short-term borrowings against
its liquidity arrangements and had $111 million in unused liquidity capacity.
Included in this capacity were $100 million under a secured revolving credit
facility ("Facility") and $11 million under local lines of credit. The Facility
will expire in June 1998 and the Company expects to renew the Facility before
its expiration date.
On February 21, 1997, the Company completed the refinancing of $190 million of
pollution control revenue bonds issued by the City of Farmington, all maturing
in April 2022 (see Note 3 of Notes to Financial Statements).
As of March 31, 1997, the Company had approximately $20.5 million in temporary
investments. The Company continues to evaluate its investment and debt
retirement options to optimize its financing strategy and earnings potential.
Dividends
On March 12, 1997, the Company's board of directors ("Board") declared a
quarterly cash dividend of 17 cents per common share, payable May 23, 1997, to
the common stockholders of record as of May 12, 1996. This is an increase of 5
cents per share above the dividend paid in the prior quarter and represents the
first increase since the reinstatement of the common stock dividend a year ago.
The Company's Board reviews the Company's dividend policy on a continuing basis.
The declaration of common dividends is dependent upon a number of factors
including earnings and financial condition of the Company and market conditions.
-8-
<PAGE>
RESULTS OF OPERATIONS
Net earnings applicable to common stock decreased $1.6 million ($.04 per share)
for the quarter ended March 31, 1997, from the corresponding period last year.
The following discussion highlights significant items which affected the results
of operations for the quarter ended March 31, 1997 and 1996.
Electric gross margin (electric operating revenues less fuel and purchased power
expense) for the current quarter increased $1.8 million from a year ago due to
increased off-system sales. Higher gas prices on the West Coast and transmission
limitations from the Northwest to the California-Arizona market contributed to
the increase in off-system sales.
Gas gross margin (gas operating revenues less gas purchased for resale) for the
current quarter decreased $1.0 million from the previous year due to lower
off-system sales. Off-system sales margin decreased by $2.0 million from the
corresponding period a year ago because of lower price differentials between
market hubs.
Other operation and maintenance expenses increased $3.6 million for the quarter
over the same period last year. An adjustment of $3.4 million had reduced
retirees' health care costs in 1996. In 1997, compensation expense recorded for
the exercise of employee stock options (one-time item) increased administrative
and general labor expense by $3.8 million. That increase was offset by lower
electric production expense of $3.4 million as a result of reduced scheduled
maintenance outages in the current quarter.
Other income and deductions, net of taxes, for the quarter ended March 31, 1997
increased $1.6 million from the corresponding period a year ago due to increased
interest income resulting from the purchase of $200 million of LOBs in October
of 1996.
Net interest charges increased $1.4 million for the quarter ended March 31, 1997
from the corresponding period a year ago as a result of increased short-term
borrowings related to the purchase of the $200 million of LOBs.
OTHER ISSUES FACING THE COMPANY
Gas Rate Case
As previously reported, on February 13, 1997, the NMPUC issued a final order in
the gas rate case, ordering a rate decrease of approximately $6.9 million. In
the order, the NMPUC disallowed, among other things, the recovery of certain
regulatory assets. The Company had requested a $13.3 million increase in its
retail natural gas sales and transportation rates. The Company strongly
disagrees with the NMPUC's final order and has appealed it to the New Mexico
Supreme Court. (See PART II, ITEM 7. -- "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- OTHER ISSUES FACING THE COMPANY
- - -- GAS RATE CASE" in the 1996 Form 10-K.)
-9-
<PAGE>
The New Mexico Attorney General ("AG") filed a notice of appeal of the gas rate
case on March 17, 1997. On March 21, 1997, the Company filed a docketing
statement on the appeal of the $6.9 million gas rate reduction order. This is
the second step in the appeal process following the filing of the appeal in
February 1997. The docketing statement identifies all of the errors in the final
order that the Company may raise in its appeal, which include, among other
things, (i) disallowance of loss on reacquired debt and reservation fees, (ii)
transportation discount amounts, (iii) a reliability cost surcharge on sales and
transportation customers, (iv) cost of capital issues, (v) the NMPUC's refusal
to hear a proposed settlement of the case stipulated among the interested
parties and (vi) the cumulative error of the order. The AG also filed a
docketing statement on April 16, 1997, challenging the NMPUC's rate design and
refusal to implement the reliability cost surcharge on sales and transportation
customers. The appeal will continue with the filing of briefs-in-chief by the
Company and the AG on June 11, 1997, response briefs by participants in the case
on August 29, 1997, reply briefs by all participants on September 22, 1997, and
oral argument before the Supreme Court at an as-yet unspecified date. The
Company is unable to predict the date that the Supreme Court will subsequently
issue its decision. While the appeal is pending, the NMPUC's final order remains
in effect.
NMPUC Order on the Cost of Gas Case
As previously reported, the NMPUC issued a final order in this case on February
13, 1997. In the order, the NMPUC imposed, but suspended, a fine of $2.2 million
to the Company due to an allegedly incorrect cost factor (too low) that was
filed in November 1996. In addition, the NMPUC disallowed collection of $1.6
million of gas costs and ordered an independent audit to be conducted to review
the Company's gas cost factor calculations for the period of December 1995
through January 1997. In the order, the NMPUC accused the Company of
intentionally filing an inaccurate factor to avoid a hearing, thus impairing the
NMPUC's ability to investigate rising gas prices. The NMPUC also ordered the
docketing of two new investigations. The first, which required a Company filing
by March 15, 1997, will investigate whether the Company should exit the merchant
function. The merchant function refers to the Company's purchase and sale of
natural gas for its sales customers. The second will investigate the prudence of
the Company's portfolio strategies and purchase practices. In addition, the
NMPUC ordered the Company to file a new gas rate case by August 1, 1997, and
also ordered the Company to file an electric retail rate case by May 1, 1997.
The Company strongly disagrees with the NMPUC's final order. (See PART II, ITEM
7. -- "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS -- OTHER ISSUES FACING THE COMPANY -- NMPUC ORDER -- THE COMPANY'S
JANUARY 1997 PGAC FACTOR VARIANCE REQUEST; ORDER TO FILE NEW RETAIL ELECTRIC AND
GAS RATE CASES" in the 1996 Form 10-K.)
On March 5, 1997, the NMPUC, noting that the Company had by letter indicated
that it might request a rehearing, entered, on its own motion, an order
reopening the proceeding to, among other things, take additional testimony
regarding the allegedly incorrect gas cost factor. The reopening order
specifically left all of the findings and conclusions in the February 13 order
in place, but ruled that the February 13 order was now an interim order and
established a procedural schedule for the Company to present additional
testimony and for additional hearings. On March 14, 1997, the Company filed a
motion for rehearing of the reopening order asking the NMPUC to withdraw the
February 13 order and enter a new final order.
-10-
On April 2, 1997, the NMPUC issued an order, partially granting the Company's
rehearing motion and agreeing to withdraw and vacate portions of the February 13
order. In the April 2 order, the NMPUC (1) withdrew the finding that, because
the veracity of the Company's filings have been brought into question, rate
cases for both gas and electric operations were necessary, (2) withdrew the
requirement that the Company must pay for an independent audit of its gas cost
filings, (3) suspended the imposition of the $2.2 million civil penalty and the
order prohibiting the Company from recovering $1.6 million in gas costs incurred
in December 1996, and (4) reaffirmed the March 5 order reopening the proceeding
for additional testimony. That testimony from the Company is due on May 19,
1997, and further hearings are scheduled for June 23, 1997. The Board has
established an ad hoc committee of outside directors to investigate the
assertions of misconduct made by the NMPUC in its February 13 order. The
committee has retained independent counsel to assist in the investigation. The
investigation is expected to be completed by the time Company testimony is due.
In the April 2 order, the NMPUC further found that, because of the rapid changes
occurring in the electric industry, all major electricity suppliers, within the
jurisdiction of the NMPUC, which have not adopted a plan to provide retail open
access must make a general rate case filing with the NMPUC. The April 2 order
additionally requires the electric operations to make a general rate case filing
by June 2, 1997. The status of the electric rate case filing requirement is
discussed below.
Filings Relating to Electric Rate Case and Electric Industry Restructuring
On April 24, 1997, the Company filed related motions in two separate cases
before the NMPUC: Case No. 2681, the NMPUC's Notice of Inquiry into electric
industry restructuring and Case No. 2761, the Company's electric rate case
filing ordered by the NMPUC. The Company proposes that the NMPUC reconvene the
Case No. 2681 proceedings in an attempt to arrive at consensus legislation to
present to the 1998 session of the New Mexico Legislature. In its filing, the
Company offers to pay for an expert facilitator or mediator selected by the
NMPUC to drive the process towards consensus. However, the Company's proposal is
conditioned on the NMPUC granting the motion in Case No. 2761 to stay all
proceedings and vacate the existing requirements to file a rate case by June 2,
1997, together with unbundled tariffs. The Company contends that all interested
parties should focus their efforts on reaching consensus on industry
restructuring for the 1998 legislative session and points out that the NMPUC
will be replaced by the Public Regulation Commission ("PRC") on January 1, 1999.
The Company also contends that the NMPUC's order requiring the rate case is for
the unlawful purpose of forcing retail competition since the NMPUC lacks such
authority, and that the Company's due process rights are violated by the
requirement to file a rate case in the time frame specified and because the lack
of a retail competition market structure makes it impossible to properly design
unbundled tariffs. The Company stated that it was prepared to litigate the
matter if its proposal to settle differences is not adopted by May 5, 1997
unless the NMPUC grants an initial extension to file the rate case to June 30 to
allow more time to consider the proposal. On April 28, 1997, the NMPUC issued an
order scheduling a hearing in Case No. 2681. The order stated that the NMPUC
should not rule on the two motions until it has a complete understanding of the
Company's proposal in both motions and, more importantly, the opportunity to
assess the likelihood that the collaborative efforts proposed by the Company
will succeed.
-11-
<PAGE>
On May 6, 1997, the NMPUC issued an order, accepting the Company's proposal on
the collaborative efforts intended to introduce competition into the state's
retail electric power market. In the order, the NMPUC agreed to the Company's
proposal for a series of meetings including all interested parties to draft
legislation for consideration by the New Mexico Legislature in 1998. The NMPUC
suspended its earlier order requiring the Company to file an electric rate case
in June 1997 to facilitate the collaborative process. However, the NMPUC
indicated that it will order the Company to file an electric rate case by
September 1, 1997, if the parties in the negotiation fail to reach consensus on
an industry restructuring plan by August 1, 1997. If the collaborative process
terminates without consensus prior to August 1, the NMPUC will require the
Company to file an electric rate case no later than thirty days after issuance
of an order finding that the process has been terminated. The participants in
the collaborative process must file a plan outlining the process and
establishing the filing date for their restructuring proposals with the NMPUC.
In the order, the NMPUC also outlined three subjects which must be addressed in
the collaborative efforts, including (i) financial and economic issues, (ii)
consumer protection and environmental issues and (iii) timing of the transition
to a competitive market.
Filing Relating to Termination of Gas Merchant Function
As noted above, included in the February 13 order in the cost of gas case, the
NMPUC ordered the Company to make a separate filing addressing the terms and
conditions under which the Company would consider exiting the merchant function
and to identify any compelling issues that should be brought to the attention of
the NMPUC relating to exiting the merchant function. Since the cost of gas is
passed through to customers, the Company does not make a profit or loss on this
service.
On March 31, 1997, the Company filed its response in NMPUC Case No. 2760. In the
filing, the Company asserted that all customers should have the option to choose
their natural gas supplier, advocating that, ultimately, customer choice should
dictate whether the Company's gas operation retains its merchant function.
Currently, all customers may choose to become transportation customers on the
Company's distribution system, but nearly all residential and most small
commercial customers receive bundled sales service. The Company also outlined in
the filing that, in addition to continuing to provide customers with information
on their current options, it will conduct a customer survey to determine their
awareness of the choices and preferences of services provided by the Company and
other suppliers. As stated in the filing, the Company is currently planning to
file by May 16, 1997 a proposal with the NMPUC, outlining immediate measures to
facilitate the choice of transportation service by small commercial and
residential customers to be in place by next winter. By June 1, 1997, the
Company will also form a working group, consisting of customers, regulators, the
AG staff, the Company and gas marketers, to determine what is needed to increase
competition and more fully develop supplier choice for sales customers. In
addition, the Company apprised the NMPUC of its intent to file for approval of a
defined target purchased gas adjustment clause (similar to an incentive
mechanism) by September 1, 1997, to be in effect by the winter of 1998/1999.
-12-
<PAGE>
Investigation of Gas Supply Procurement Practices
As noted above, included in the February 13 order in the cost of gas case, the
NMPUC established a docket in NMPUC Case No. 2759 to review the gas procurement
practices and policies of the Company's gas operations. On April 14, 1997, the
Company filed testimony supporting the prudence of its practices and policies.
The Company asserted that its procurement practices and policies were conducted
in accordance with the rules and regulations of the NMPUC and industry
standards, and all gas costs billed to customers were prudently incurred.
Hearings on the review are currently scheduled to commence on May 27, 1997.
Chihuahua, Mexico Project
As previously reported, in January 1997, the Company had submitted a joint bid
to develop, design, construct, manage and operate natural gas distribution
systems in the cities of Chihuahua and Cuauhtemoc-Anahuac and Delicias in the
State of Chihuahua, Mexico. (See PART II, ITEM 7, -- "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- OVERVIEW --
Competitive Strategy" in the 1996 Form 10-K.) In January 1997, the Mexican
authority determined that the Company's joint bid did not pass the technical
review and awarded the project to another company. The Company continues to
explore and identify opportunities to provide energy and utility related
services and pursue new business opportunities in Mexico.
Update Regarding 1997 State Legislative Session Activities Affecting the
Electric Utility Industry in New Mexico
The 1997 New Mexico legislative session adjourned on March 22, 1997. Two retail
wheeling bills were introduced but both died on adjournment after being tabled
in the first committee.
Two joint memorials passed both chambers. One continues an interim committee
study of industry restructuring. The second directs a study on the tax impact on
any restructuring and alternative tax structures to preserve the state and local
revenue base. Gubernatorial action is not required.
A bill to create an interim committee to study transition to the new PRC which
will become effective January 1, 1999, passed but was vetoed by the Governor.
The Legislative Council can establish such a committee on its own or add those
duties to an existing interim committee. A bill that sets forth the five
districts for the new PRC commissioners was passed and signed into law by the
Governor. It is likely that legislation empowering the PRC will be discussed in
an interim committee and will be enacted during the 30-day 1998 session.
The Governor signed a bill authorizing the City of Las Cruces to condemn the
utility system owned by El Paso Electric Company that serves Las Cruces, New
Mexico; however, the new law is limited only to the City of Las Cruces.
-13-
<PAGE>
Disclosure Regarding Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 (the "Act") provides a
"safe harbor" for forward-looking statements to encourage companies to provide
prospective information about their companies without fear of litigation so long
as those statements are identified as forward-looking and are accompanied by
meaningful, cautionary statements identifying important factors that could cause
actual results to differ materially from those projected in the statement.
Accordingly, the Company hereby identifies the following important factors which
could cause the Company's actual financial results to differ materially from any
such results which might be projected, forecasted, estimated or budgeted by the
Company in forward-looking statements: (i) adverse actions of utility regulatory
commissions, (ii) utility industry restructuring, (iii) failure to recover
stranded assets, (iv) failure to obtain new customers or retain existing
customers, (v) inability to carry out marketing and sales plans, (vi) adverse
impacts resulting from environmental regulations, (vii) loss of favorable fuel
supply contracts, (viii) failure to obtain water rights and rights-of-way, (ix)
operational and environmental problems at generating stations and (x) failure to
maintain adequate transmission capacity.
Many of the foregoing factors discussed have been addressed in the Company's
previous filings with the SEC pursuant to the Securities Exchange Act of 1934.
The foregoing review of factors pursuant to the Act should not be construed as
exhaustive or as any admission regarding the adequacy of disclosures made by the
Company prior to the effective date of the Act.
New Mexico Industrial Energy Consumers ("NMIEC")
On April 22, 1997, NMIEC filed a petition for declaratory order with NMPUC. In
its petition, NMIEC states that the Company has interrupted service to NMIEC
members taking service under the Experimental Incremental Interruptible Power
Rate ("EIIPR") during off-peak periods and such interruptions violate the terms
of the EIIPR. The interruptions resulted from a scheduled maintenance for the
Company's 345 Kv line connected to the Four Corners Generating Station. NMIEC
alleges that its members have suffered economic harm from losses in production
due to such interruptions. The petition requests, among other things, (i)
clarification over the EIIPR to determine that EIIPR customers are entitled to
be treated the same as all other customers with similar consumption when system
emergency curtailments occur during the off-peak hours; (ii) determination that
the Company's practice of interrupting EIIPR customers during off-peak hours is
discriminatory; and (iii) the Company to discontinue such practice of
interrupting EIIPR customers. The Company is currently investigating the
complaint filed by NMIEC.
-14-
<PAGE>
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Federal Deposit Insurance Corporation ("FDIC") Litigation, formerly Resolution
Trust Corporation ("RTC") Litigation ("MDL-995")
As previously reported, in April 1993, the Company and certain current and
former employees of the Company or Meadows Resources, Inc., a wholly-owned
subsidiary of the Company ("Meadows") ("BCD parties"), were named as defendants
in an action filed in the United States District Court for the District of
Arizona by the RTC, as receiver for Western Savings and Loan Association
("Western"). Three of the individuals sued by the RTC have indemnity agreements
with the Company. The claims related to alleged actions of the Company's or
Meadows' employees in 1987 in connection with a loan procured by Bellamah
Community Development ("BCD"), whose general partners include Meadows, from
Western and the purchase by that partnership of property owned by Western. The
FDIC (the FDIC was substituted for the RTC as plaintiff in MDL-995 in early
1996) 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 FDIC is claiming in excess of $40 million in actual damages from
the BCD/Western transactions and is also claiming damages substantially
exceeding that amount on Arizona racketeering, civil conspiracy and aiding and
abetting theories. These allegations involve claims against the Company for
damages to Western caused by other defendants and from other transactions to
which BCD was not a party. The Company is sued only on the Arizona racketeering
claims. The FDIC claims that damages under the Arizona racketeering statute
would be trebled under applicable law. The prevailing parties on the Arizona
racketeering claims could seek fees and costs from the parties who do not
prevail.
In April 1996, representatives of the BCD parties and the FDIC met with a
mediator to continue settlement discussions. The mediation session resulted in
an agreement to settle the case for approximately $5.8 million, approximately
$3.1 million of which would be paid by the Company and the remainder to be paid
by insurance covering the BCD parties. (See PART I, ITEM 3. -- "LEGAL
PROCEEDINGS -- OTHER PROCEEDINGS" in the 1996 Form 10-K.)
Settlement documents are still being prepared. Delays have occurred due in part
to reassignment of attorneys for the FDIC but submission for court approval
appears imminent. After consideration of established reserves, the Company
believes that there will be no material adverse effect on the Company's
financial condition or results of operations. The Company continues to believe
that all of the claims made by the FDIC in this case are without merit but, for
business reasons, believes that the settlement is in the best interest of the
Company.
-15-
<PAGE>
PVNGS Property Taxes
As previously reported, in April 1996, the PVNGS participants and Arizona
Department of Revenue reached an agreement to settle the litigation which was
pursued by the PVNGS participants, claiming that portions of the new tax law
enacted in 1990 are unconstitutional. The Arizona Court of Appeals ruled in
favor of the participants in 1995. As a result, in July 1996, a $200 million
property tax reduction was enacted which codifies the terms of the settlement.
(See PART I, ITEM 3. -- "LEGAL PROCEEDINGS -- PVNGS PROPERTY TAXES" in the 1996
Form 10-K.) On February 11, 1997, the parties to this action signed the final
documents, resulting in a reduction to the Company's Arizona property taxes by
approximately $4.0 million annually beginning in 1996 and extending at least
three years, barring any subsequent changes in the applicable tax laws. Pursuant
to the settlement, the Company is required to relinquish its claims for relief
with respect to prior years, and the defendants will not challenge the Court of
Appeals' decision concerning prospective relief for tax years after 1995.
For a discussion of other legal proceedings, see PART 1, ITEM 2. -- "MANAGEMENT
DISCUSSION -- OTHER ISSUES -- Gas Rate Case and Filings Relating to Electric
Rate Case and Electric Industry Restructuring".
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Annual Meeting
At the meeting of shareholders held on April 29, 1997, the shareholders
reelected the following three nominees to serve as directors until the annual
meeting of shareholders in 2000, or until their successors are duly elected and
qualified, as follows:
Votes
Against Broker
Director Votes For or Withheld Abstentions Non-Votes
-------- --------- ----------- ----------- ---------
Robert G. Armstrong 36,963,927 449,567 * *
Reynaldo U. Oritz 36,941,448 472,046 * *
Paul F. Roth 36,928,722 484,772 * *
As reported in the Definitive 14A Proxy Statement filed March 24, 1997, the name
of each other director whose term of office as a director continued after the
meeting is as follows:
John T. Ackerman
Joyce A. Godwin
Manuel Lujan, Jr.
Laurence H. Lattman
Benjamin F. Montoya
Robert M. Price
-16-
<PAGE>
The approval of the selection by the Company's Board of Arthur Andersen LLP as
independent auditors for the fiscal year ending December 31, 1997, was voted on,
as follows:
Votes
Against Broker
Votes for or Withheld Abstentions Non-Votes
--------- ----------- ----------- ---------
37,223,423 61,105 128,966 *
*Not applicable or not readily available.
ITEM 5. OTHER INFORMATION
Independent System Operator ("ISO")
On March 14, 1997, the Company entered into a Memorandum of Understanding with
other transmission service providers to investigate the feasibility and benefits
of forming an ISO in the Southwest. Entities participating in the investigation
process include the Company, Arizona Electric Power Cooperative, Arizona Public
Power Company ("APS"), El Paso Electric Company, Nevada Power Company, Plains
Electric Generation & Transmission Cooperative, Salt River Project, Texas-New
Mexico Power Company, Tucson Electric Power Company and the Desert Southwest
Region of the Western Area Power Administration. Federal Energy Regulatory
Commission Order 888, issued in 1996, encourages utilities to investigate the
formation of such ISOs and provides criteria under which the formation,
operation and governance of ISOs would be reviewed.
The proposed ISO, named the Desert Southwest Transmission and Reliability
Operator ("Desert STAR"), would be empowered to serve as a transmission security
monitor, handle transmission service reservations, transmission service
scheduling and accounting, manage relief of congestion of the transmission grid,
procure ancillary services required for transmission system operation and
operate a grid-wide Open Access Same-time Information System. Desert STAR would
be governed by an independent board representing all industry customer sectors.
The feasibility study group has held five public forums to receive input from
interested entities regarding the formation of an ISO. The participants expect
that a six month investigation would result in a completed feasibility study for
Desert STAR. Implementation of the feasibility study would require various
regulatory approvals at both the state and Federal level. The Company is
currently unable to predict the timing of the formation or the ultimate outcome
of the proposed ISO.
-17-
<PAGE>
Four Corners Generating Station ("Four Corners")
Four Corners is located on land held under easements from the Federal government
and also under leases from the Navajo Nation. APS is the operating agent of the
plant and the Company owns a 13% ownership interest in Units 4 and 5. The lease
for Four Corners contains a waiver until 2001 of the requirement that APS pay
certain taxes to the Navajo Nation. APS and the Navajo Nation are currently
attempting to negotiate an agreement that would settle certain issues regarding
this waiver and other matters, including the computation of royalties due on the
sales of coal and possessory interest taxes paid by the Four Corners coal
supplier. The Company is currently unable to predict the outcome of this matter.
Person Station
The Company, in compliance with the New Mexico Environment Department's ("NMED")
Corrective Action Directive, determined that groundwater contamination exists in
the deep and shallow water aquifers at its retired fossil-fueled generating
station. The Company is required to delineate the extent of the contamination
and remediate the contaminants in the groundwater. The extent of the contaminant
plume in the deep water aquifer was assessed and results were reported to the
NMED. The Company estimated approximately $10.9 million to complete the
groundwater remediation program at Person Station. (See PART II, ITEM 7. --
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- OTHER ISSUES FACING THE COMPANY -- ENVIRONMENTAL ISSUES --
Electric Operations -- Person Station" in the 1996 Form 10-K.)
Based on currently available information, the Company's revised estimate for
completion of the groundwater remediation program is approximately $6.3 million,
a reduction of $4.6 million from the previously reported estimate. As required
by regulation, the Company maintains a post-closure trust fund with a trustee to
demonstrate financial assurance for post closure activities. The current balance
of the trust fund is approximately $6.8 million. The remediation program
continues on schedule.
Organizational Change
Effective March 11, 1997, the Company's Board elected Mr. Jeff Sterba as
Executive Vice President and Chief Operating Officer, reporting directly to the
President and Chief Executive Officer. Mr. Sterba will focus his attention on
the operational side of the Company, overseeing the electric, gas, energy and
bulk power services business units. This change will enable the Company's
President to focus on industry restructuring and building better relationships
with regulatory and legislative leaders and customers to be a successful
competitor in the new energy marketplace.
-18-
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits:
10.71** Reimbursement Agreement, dated as of February 1, 1997,
between Public Service Company of New Mexico and the Bank
named therein.
15.0 Letter Re: Unaudited Interim Financial Information
27 Financial Data Schedule
99.8 Participation Agreement dated as of August 12, 1986, among
the Owner Participant named therein, 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
(refiled).
99.8.1* Amendment No. 1 dated as of November 18, 1986, to
Participation Agreement dated as of August 12, 1986 (refiled).
99.10* Assignment, Assumption, and Further Agreement dated as of
August 12, 1986, between Public Service Company of New
Mexico and The First National Bank of Boston, as Owner
Trustee (refiled).
99.11* Participation Agreement dated as of December 15, 1986, among
the Owner Participant named therein, 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) (refiled).
99.12 Trust Indenture, Mortgage, Security Agreement and Assignment
of Rents dated as of December 15, 1986, between The First
National Bank of Boston, as Owner Trustee, and Chemical
Bank, as Indenture Trustee (Unit 1 Transaction) (refiled).
-19-
<PAGE>
a. Exhibits (continued)
99.13 Assignment, Assumption, and Further Agreement dated as of
December 15, 1986, between Public Service Company of New
Mexico and The First National Bank of Boston, as Owner
Trustee (Unit 1 Transaction) (refiled).
99.14 Participation Agreement dated as of December 15, 1986, among
the Owner Participant named therein, 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) (refiled).
99.16 Assignment, Assumption, and Further Agreement dated as of
December 15, 1986, between Public Service Company of New
Mexico and The First National Bank of Boston, as Owner
Trustee (Unit 2 Transaction) (refiled).
*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.
**Two additional documents, substantially identical in all material respects
to this exhibit, have been entered into, relating to two additional letters
of credit supporting pollution control revenue refunding bonds. 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.
b. Reports on Form 8-K:
None.
-20-
<PAGE>
Signature
Pursuant to the requirements 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: May 8, 1997 /s/ Donna M. Burnett
------------------------------------
Donna M. Burnett
Corporate Controller and
Chief Accounting Officer
(Officer duly authorized to
sign this report)
<PAGE>
[EXECUTION COPY]
================================================================================
REIMBURSEMENT AGREEMENT
dated as of February 1, 1997
between
PUBLIC SERVICE COMPANY
OF NEW MEXICO
and
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
relating to
Pollution Control Revenue
Refunding Bonds, 1997 Series A
(Public Service Company of New Mexico
San Juan Project)
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
SECTION 1. Definitions........................................ 3
SECTION 2. Accounting Terms................................... 12
SECTION 3. Issuance of the Letter of Credit................... 12
SECTION 4. Reimbursements..................................... 12
SECTION 5. Advances........................................... 12
SECTION 6. Repayments and Prepayments of Advances............. 13
SECTION 7. Interest........................................... 13
SECTION 8. Fees............................................... 14
SECTION 9. Advance Account.................................... 15
SECTION 10. Increased Costs.................................... 15
SECTION 11. Payments and Computations.......................... 16
SECTION 12. Reduction and Reinstatement of Letter of Credit
Amount............................................. 17
SECTION 13. Obligations Absolute............................... 17
SECTION 14. Conditions Precedent............................... 18
SECTION 15. Representations and Warranties..................... 22
SECTION 16. Covenants.......................................... 26
SECTION 17. Events of Default.................................. 32
SECTION 18. Extension of the Termination Date.................. 36
SECTION 19. Amendments and Waivers............................. 37
SECTION 20. Notices............................................ 37
SECTION 21. No Waiver; Remedies Cumulative..................... 38
-i-
<PAGE>
SECTION 22. Right of Set-Off................................... 38
SECTION 23. Indemnification.................................... 38
SECTION 24. Survival........................................... 39
SECTION 25. Transfer of the Letter of Credit................... 40
SECTION 26. Confirmation of Lien; Trust........................ 40
SECTION 27. Limited Liability of the Bank...................... 40
SECTION 28. Costs, Expenses and Taxes.......................... 41
SECTION 29. Severability....................................... 42
SECTION 30. Assignments and Participations..................... 42
SECTION 31. Governing Law...................................... 43
SECTION 32. Waiver of Jury Trial............................... 43
SECTION 33. Headings and Table of Contents..................... 43
SECTION 34. Counterparts....................................... 43
SECTION 35. Notification Relating to First Mortgage Bonds...... 44
-ii-
<PAGE>
SCHEDULE I Disclosure Schedule
EXHIBIT A Form of Irrevocable Letter of Credit No. 3003595
EXHIBIT B Form of Pledge Agreement
EXHIBIT C Form of Opinion of Keleher & McLeod, P.A., Special Counsel to the
Company
EXHIBIT D Form of Opinion of Winthrop, Stimson, Putnam & Roberts, Bond Counsel
EXHIBIT E Form of Opinion of White & Case, Special New York and California
Counsel to the Bank
-iii-
<PAGE>
REIMBURSEMENT AGREEMENT
THIS REIMBURSEMENT AGREEMENT, dated as of February 1, 1997, between
PUBLIC SERVICE COMPANY OF NEW MEXICO, a New Mexico corporation (the "Company"),
and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION (the "Bank"),
W I T N E S S E T H:
WHEREAS, the City of Farmington, New Mexico (the "Issuer"), pursuant to
the laws of the State of New Mexico, has determined to issue and sell its
Pollution Control Revenue Refunding Bonds, 1997 Series A (Public Service Company
of New Mexico San Juan Project) in an aggregate principal amount of $40,000,000
(the "Bonds"), and to make the proceeds thereof available to the Company for the
sole purpose of refunding a portion of the Issuer's outstanding Pollution
Control Revenue Refunding Bonds, 1979 Series A (Public Service Company of New
Mexico San Juan Project) in an equivalent aggregate amount (the "Refunded
Bonds");
WHEREAS, the Bonds shall be issued pursuant to Ordinance No. 97-1052,
adopted January 28, 1997 by the Issuer (as supplemented by Resolution No.
97-870, adopted January 28, 1997, and as amended by Ordinance No. 97-1053,
adopted February 11, 1997, and as hereafter modified, altered, amended,
supplemented or confirmed by any and all ordinances and resolutions supplemental
thereto or amendatory thereof adopted from time to time pursuant thereto, the
"Ordinance");
WHEREAS, First Security Bank of New Mexico, N.A. has been appointed as
trustee under the Ordinance (in such capacity, together with its duly appointed
successors, the "Trustee");
WHEREAS, the obligations of the Issuer under the Ordinance are to be
secured by an assignment by the Issuer of the Issuer's rights under the
Installment Sale Agreement to the Trustee for the benefit of the holders of the
Bonds;
WHEREAS, in order to provide an inducement to the Trustee to accept its
appointment under the Ordinance and an inducement to the purchase from time to
time of the Bonds by all who shall at any time become holders thereof, the
Company shall execute that certain Guaranty Agreement, dated as of February 1,
1997 (the "Guaranty"), in favor of the Trustee;
WHEREAS, in accordance with the terms of the Guaranty, and as a
condition precedent to the effectiveness of this Agreement, the Company desires
to enter into that certain Forty-ninth Supplemental Indenture, dated as of
February 1, 1997 (the "Supplemental First Mortgage Bond Indenture") to the
Indenture of Mortgage and Deed of Trust, dated as of June 1, 1947 (as amended or
modified from time to time, the "First Mortgage Bond Indenture"), between the
Company and The Bank of New York, formerly known as Irving Trust Company (the
"First Mortgage Bond Trustee") pursuant to which the Company proposes to issue
two additional series of bonds designated as First Mortgage Bonds in an
aggregate principal amount of not less than $40,000,000 (the "1997 First
Mortgage Bonds") to the Trustee for the benefit of (i) the holders of the Bonds
as collateral security for the Company's obligations under the Guaranty to pay
the Guaranteed Amounts and (ii) the Bank as collateral security for the
Company's obligations under this Agreement;
<PAGE>
WHEREAS, the obligations of the Company under this Agreement are also
to be secured, pursuant to the Pledge Agreement, by a pledge of the Pledged
Bonds to the Collateral Agent for the benefit of the Bank;
WHEREAS, pursuant to the Bond Purchase Agreement, dated February 20,
1997, as amended, modified or supplemented from time to time (the "Bond Purchase
Agreement"), between the Issuer, Lehman Brothers Inc., as underwriter, Citicorp
Securities, Inc., as underwriter, and Morgan Stanley & Co. Incorporated, as
underwriter (such underwriters being collectively herein referred to as the
"Underwriters"), the Underwriters have agreed to purchase the Bonds;
WHEREAS, in order to induce the Underwriters to enter into the Bond
Purchase Agreement and in order to provide for the payment when due of:
(i) the principal of that portion of the Bonds (and/or that
portion of the Purchase Price of such Bonds corresponding to principal)
which are in the Flexible Mode with a Rate Period not ending later than
the Scheduled Termination Date or in the Daily Mode or the Weekly Mode,
and
(ii) interest on that portion of the Bonds (and/or that portion
of the Purchase Price of such Bonds corresponding to interest) which
are in the Flexible Mode with a Rate Period not ending later than the
Scheduled Termination Date or in the Daily or Weekly Mode, at an
assumed interest rate of 12% per annum:
(A) for a period of 209 days (computed on the basis
of a year of 365 days) on such portion of the Bonds which are,
at the time, in the Flexible Mode, or
(B) for a period of 60 days (computed on the basis of
a year of 365 days) on such portion of the Bonds which are, at
the time, in the Daily or Weekly Mode,
the Company has requested that the Bank issue the Letter of Credit (as defined
below) to the Trustee in connection with the issuance of the Bonds.
NOW, THEREFORE, in consideration of the premises and in order to induce
the Bank to issue the Letter of Credit, the Company hereby agrees as follows:
-2-
<PAGE>
SECTION 1. Definitions. Unless otherwise defined or the context
otherwise requires, terms for which meanings are provided in this Agreement
shall have such meanings when used in this Agreement and in the Disclosure
Schedule, the Letter of Credit, and each notice and other communication
delivered from time to time in connection with this Agreement. The following
terms, as used herein, have the following meanings:
"Advance" is defined in Section 5.
"Agreement" means this Reimbursement Agreement, as amended, modified or
supplemented from time to time.
"Alternate Base Rate" means, on any date, a fluctuating rate of
interest per annum equal to the higher of
(a) the rate of interest most recently announced by the Bank
at its San Francisco, California office as its reference rate; and
(b) the Federal Funds Rate most recently determined by the
Bank plus 2 of 1% per annum.
The Alternate Base Rate is not necessarily intended to be the lowest rate of
interest determined by the Bank in connection with extensions of credit. Changes
in the rate of interest on any extensions of credit bearing interest at the
Alternate Base Rate will take effect simultaneously with each change in the
Alternate Base Rate. The Bank will give notice promptly to the Company of
changes in the Alternate Base Rate; provided that any failure to give such
notice shall not affect the occurrence of any change in the rate of interest on
any extensions of credit bearing interest at the Alternate Base Rate in
accordance with the immediately preceding sentence.
"Authorized Officer" means, with respect to the Company, those of its
officers whose signatures and incumbency shall have been certified to the Bank
pursuant to clause (a)(i)(H) of Section 14.
"Available Moneys" is defined in the Ordinance.
"Board of Directors" means either the board of directors of the Company
or a duly authorized committee of that board.
"Bank" is defined in the preamble.
"Bond Purchase Agreement" is defined in the eighth recital.
"Bond Ratings" is defined in the Credit Agreement.
"Bonds" is defined in the first recital.
-3-
<PAGE>
"Business Day" means a day of the year on which banks located in all of
the cities in which the principal offices of the Trustee, the Paying Agent, the
Remarketing Agent, and the Bank are located are not required or authorized to
remain closed and on which The New York Stock Exchange is not closed.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended.
"CERCLIS" means the Comprehensive Environmental Response Compensation
Liability Information System List.
"Code" means the United States Internal Revenue Code of 1986, as
amended from time to time.
"Collateral Agent" means First Security Bank of New Mexico, N.A., as
Collateral Agent under the Pledge Agreement, and its duly appointed successors.
"Contractual Obligation" means, as to any Person, any provision of any
"security" (as defined in the Securities Act of 1933, as amended) issued by such
Person or of any agreement, instrument or undertaking to which such Person is a
party or by which it or any of its property is bound.
"Controlled Group" means all members of a controlled group of
corporations and all members of a controlled group of trades or businesses
(whether or not incorporated) under common control which, together with the
Company, are treated as a single employer under Section 414(b) or 414(c) of the
Code or Section 4001 of ERISA.
"Corresponding Securities" is defined in the Ordinance.
"Credit Agreement" means the U.S. $100,000,000 Revolving Credit
Agreement, dated as of December 14, 1993, among the Company, as borrower, The
Chase Manhattan Bank and Citibank N.A., as co-agents thereunder, and the banks
named therein, as amended by Amendment No. 1, dated as of June 7, 1995, but
without regard to any subsequent amendment, modification or waiver thereof.
"Daily Mode" is defined in the Ordinance.
"Debt" means (i) indebtedness of the Company or its Subsidiaries (other
than under this Agreement) for borrowed money or the deferred purchase price of
property or services in respect of which the Company or any Subsidiary is
liable, contingently or otherwise, as obligor, guarantor or otherwise, or in
respect of which the Company or any Subsidiary otherwise assures a creditor
against loss, and (ii) obligations under leases which are or should be, in
accordance with GAAP, recorded as capital leases in respect of which obligations
the Company or any Subsidiary is liable, contingently or otherwise, as obligor,
guarantor or otherwise, or in respect of which the Company or any Subsidiary
otherwise assures a creditor against loss.
-4-
<PAGE>
"Default" means any event or condition which, with the lapse of time or
the giving of notice, or both, would constitute an Event of Default.
"Designated Subsidiary" is defined in the Credit Agreement.
"Disclosure Documents" is defined in clause (e) of Section 15.
"Disclosure Schedule" means the Disclosure Schedule attached hereto as
Schedule I, as it may be amended, supplemented or otherwise modified from time
to time by the Company with the written consent of the Bank.
"Drawing" means a drawing under the Letter of Credit to pay the
principal of, interest on, and/or Purchase Price corresponding to principal or
interest of, Bonds redeemed, purchased or deemed purchased or otherwise due in
accordance with their terms pursuant to the Ordinance, and, in the case of Bonds
purchased or deemed purchased, not remarketed by the Remarketing Agent on the
date such Bonds are to be purchased or deemed purchased.
"Environmental Law" is defined in the Credit Agreement.
"ERISA" is defined in the Credit Agreement.
"ERISA Affiliate" is defined in the Credit Agreement.
"ERISA Event" is defined in the Credit Agreement; provided; however,
that clause (c) of such definition shall be deemed to read as follows: "(c) the
substantial cessation of operations at a facility of such Person or any of its
ERISA Affiliates in the circumstances described in Title IV of ERISA;".
"Event of Default" is defined in Section 17.
"Federal Funds Rate" means, for any period, a fluctuating interest rate
per annum for each day during such period equal to
(a) the weighted average of the rates on overnight federal
funds transactions with members of the Federal Reserve System arranged
by federal fund 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
(b) if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on
transactions received by the Bank from three federal funds brokers of
recognized standing selected by it.
"Fee Letter" means that certain letter agreement dated February 19,
1997 executed by the Company.
-5-
<PAGE>
"Final Draft" is defined in the Letter of Credit.
"First Mortgage Bond" means any series of bonds issued pursuant to the
First Mortgage Bond Indenture.
"First Mortgage Bond Indenture" is defined in the sixth recital.
"First Mortgage Bond Trustee" is defined in the sixth recital.
"Fiscal Quarter" means any quarter of a Fiscal Year.
"Fiscal Year" means any period of twelve consecutive calendar months
ending on December 31.
"Flexible Mode" is defined in the Ordinance.
"Flexible Rate Period" means the Rate Period or Period (as defined in
the Ordinance) applicable to Bonds in the Flexible Mode.
"GAAP" means generally accepted accounting principles in effect from
time to time in the United States.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, and any Person exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Guaranty" is defined in the fifth recital.
"Guaranteed Amounts" is defined in the Guaranty.
"Hazardous Material" is defined in the Credit Agreement.
"including" means including without limiting the generality of any
description preceding such term, and, for purposes of this Agreement and each
other Related Document, the parties hereto agree that the rule of ejusdem
generis shall not be applicable to limit a general statement, which is followed
by or referable to an enumeration of specific matters, to matters similar to the
matters specifically mentioned.
"Indemnified Liabilities" is defined in Section 23.
"Indemnified Parties" is defined in Section 23.
-6-
<PAGE>
"Installment Sale Agreement" means the Amended and Restated Installment
Sale Agreement (Amending and Restating the Installment Sale Agreement dated as
of September 1, 1979), dated as of February 1, 1997, between the Issuer, as
vendor, and the Company, as vendee, as amended, modified or supplemented from
time to time.
"Insufficiency" is defined in the Credit Agreement.
"Issuance Date" is defined in Section 3.
"Issuer" is defined in the first recital.
"Letter of Credit" means the Letter of Credit substantially in the form
of Exhibit A, issued by the Bank pursuant to Section 3, as amended, modified or
supplemented from time to time.
"Letter of Credit Amount" means, with respect to the Letter of Credit,
$42,748,493.15, as reduced and reinstated from time to time as provided in the
Letter of Credit.
"Letter of Credit Fee" is defined in clause (a) of Section 8.
"Lien" means any security interest, mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or otherwise),
charge against or interest in property to secure payment of a debt or
performance of an obligation or other priority or preferential arrangement of
any kind or nature whatsoever.
"Material Adverse Effect" means, relative to any event, occurrence or
circumstance of any nature whatsoever (including any adverse determination in
any litigation, arbitration, investigation, proceeding or labor controversy), a
material adverse effect on
(a) the financial condition, operations, assets, business or
properties of the Company and its Designated Subsidiaries taken as a
whole; or
(b) the validity or enforceability of this Agreement or any
Related Document.
"Maximum Amount" means, at any time, $42,748,493.15, less all permanent
reductions of the Principal Component (as defined in the Letter of Credit) and
the Interest Component (as defined in the Letter of Credit) made effective prior
to or at such time.
"Mode" is defined in the Ordinance.
"Moody's" is defined in the Credit Agreement.
-7-
<PAGE>
"Multiannual Mode" is defined in the Ordinance.
"Multiemployer Plan" is defined in the Credit Agreement.
"Multiple Employer Plan" is defined in the Credit Agreement.
"1997 First Mortgage Bonds" is defined in the sixth recital.
"Official Statement" means the Official Statement relating to the
Bonds, dated February 20, 1997, (including any documents incorporated therein by
reference and any amendments, modifications or supplements thereto).
"Ordinance" is defined in the second recital.
"Organic Documents" means, as to any Person (including, without
limitation, the Company or its Designated Subsidiaries), its certificate of
incorporation, its by-laws and all shareholder agreements, voting trusts and
similar arrangements applicable to any of its authorized shares of capital
stock.
"Participant" means the Bank or any entity to which the Bank or any
Participant has granted a participation in the Letter of Credit and the rights
and benefits under this Agreement.
"PBGC" is defined in the Credit Agreement.
"Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization or
Government Authority.
"Plan" is defined in the Credit Agreement.
"Pledge Agreement" means the Pledge Agreement, dated as of February 1,
1997, among the Company, the Collateral Agent and the Bank, substantially in the
form of Exhibit B, as amended, modified or supplemented from time to time.
"Pledged Bonds" is defined in the Pledge Agreement.
"Preliminary Official Statement" means the Preliminary Official
Statement relating to the Bonds, dated February 12, 1997 (including any
documents incorporated therein by reference and any amendments, modifications or
supplements thereto).
"Prohibited Transaction" is defined in the Credit Agreement.
"Purchase Price" is defined in the Ordinance.
-8-
<PAGE>
"Quarterly Payment Date" means the last Business Day of each of March,
June, September and December.
"Rate Period" is defined in the Ordinance.
"Refunded Bonds" is defined in the first recital.
"Reimbursement Obligations" means, at any time, without duplication,
all unreimbursed Drawings under the Letter of Credit and all outstanding
Advances at such time.
"Related Documents" means the Installment Sale Agreement, the Guaranty,
the Ordinance, the First Mortgage Bond Indenture (as supplemented from time to
time including by the Supplemental First Mortgage Bond Indenture), the Bond
Purchase Agreement, the Pledge Agreement, the Remarketing Agent Agreement, the
Bonds, the 1997 First Mortgage Bonds and any other agreement or instrument
relating thereto or otherwise executed and delivered in connection with the
issuance of the Bonds.
"Release" means a "release", as such term is defined in CERCLA.
"Remarketing Agent" is defined in the Ordinance.
"Remarketing Agent Agreement" means the Remarketing Agent Agreement,
dated as of February 1, 1997, between the Company and the Remarketing Agent, as
amended, modified or supplemented from time to time.
"Requirement of Law" means, as to any Person, the Organic Documents of
such Person, and any law, treaty, rule or regulation, judgment, injunction,
order, decree or other determination of an arbitrator or a court or other
Governmental Authority, in each case applicable to or binding upon such Person
or any of its property or to which such Person or any of its property is
subject.
"S&P" is defined in the Credit Agreement.
"Scheduled Termination Date" means February 21, 2000.
"Single Employer Plan" is defined in the Credit Agreement.
"Subsidiary" means any corporation of which the Company, indirectly or
directly, owns more than 50% of the outstanding stock having by its terms
ordinary voting power to elect a majority of the board of directors of such
corporation, irrespective of whether at the time stock of any other class or
classes of such corporation shall have or might have voting power by reason of
the happening of any contingency.
"Supplemental First Mortgage Bond Indenture" is defined in the sixth
recital.
-9-
<PAGE>
"Taxes" is defined in clause (b) of Section 28.
"Termination Date" means the close of business of the Bank on the
earliest of
(a) the Scheduled Termination Date,
(b) the date on which the Bank shall have received written
notice from the Trustee that the principal amount of and interest on
the Bonds have been paid in full,
(c) the fifth Business Day following the date on which the
Bank shall have received written notice from the Trustee of the
occurrence of the effective date of the conversion of all of the Bonds
into any Multiannual Mode or into the Flexible Mode with a Flexible
Rate Period ending after the Scheduled Termination Date,
(d) the date the Bank honors a Final Draft drawn on the Letter
of Credit,
(e) the fifth Business Day following the date on which the
Bank shall have received written notice from the Trustee that an
alternate letter of credit or alternate security has been substituted
for the Letter of Credit in accordance with the Ordinance, or
(f) the date on which the Letter of Credit is surrendered to
the Bank for cancellation.
"Trustee" is defined in the third recital.
"Underwriters" is defined in the eighth recital.
"Weekly Mode" is defined in the Ordinance.
"Welfare Plan" is defined in the Credit Agreement.
"Withdrawal Liability" is defined in the Credit Agreement.
SECTION 2. Accounting Terms. Unless otherwise specified herein, all
accounting terms used herein shall be interpreted, all accounting determinations
hereunder shall be made, and all financial statements required to be delivered
hereunder shall be prepared in accordance with GAAP as in effect from time to
time, applied on a basis consistent with the most recent consolidated financial
statements of the Company and its consolidated Subsidiaries delivered to the
Bank.
-10-
<PAGE>
SECTION 3. Issuance of the Letter of Credit. On at least one (1)
Business Day's prior written notice from the Company to the Bank, on a date not
later than February 21, 1997, and subject to the terms and conditions of this
Agreement, the Bank agrees to issue on the Business Day specified in such notice
(the "Issuance Date") the Letter of Credit in a stated amount equal to the
initial Letter of Credit Amount, effective on the Issuance Date and expiring on
the Termination Date.
SECTION 4. Reimbursements. The Company shall pay to the Bank:
(a) unless otherwise provided by Sections 5 and 6(a),
immediately after (and on the same Business Day as) any amount is
disbursed under the Letter of Credit, an amount equal to the amount of
each Drawing under the Letter of Credit;
(b) upon notice from the Bank of the amount thereof, any and
all charges and expenses, including reasonable transaction fees in
connection with Drawings under the Letter of Credit, which the Bank may
pay or incur relative to the Letter of Credit, together with all
accrued and unpaid interest thereon at the rates set forth in Section
7; and
(c) upon notice from the Bank of the amount thereof, upon any
transfer of the Letter of Credit in accordance with its terms, a sum in
such amount as shall be necessary to cover the costs and expenses of
the Bank incurred in connection with such transfer together with all
accrued and unpaid interest thereon at the rates set forth in Section
7.
SECTION 5. Advances. Subject to the terms and provisions of this
Agreement (including, without limitation, the satisfaction of the conditions set
forth in Section 14(b)), the proceeds of each Drawing shall constitute an
advance made by the Bank to the Company on the date and in the amount of such
Drawing, each such advance being hereinafter referred to as an "Advance".
SECTION 6. Repayments and Prepayments of Advances.ents of Advances
(a) The Company shall repay the aggregate outstanding principal amount
of each Advance to the Bank immediately after (and on the same Business Day as)
any demand by the Bank for such repayment, or without any such demand, on the
Termination Date, together with all accrued and unpaid interest thereon at the
rates set forth in Section 7.
-11-
<PAGE>
(b) The Company shall, upon the remarketing, pursuant to Article II of
the Ordinance and the Remarketing Agent Agreement, of any Bonds purchased with
the proceeds of a Drawing, repay to the Bank, without any demand by the Bank, an
amount equal to the aggregate outstanding principal amount of the related
Advance (or if less than all of the Bonds purchased with the proceeds of the
such Drawing are remarketed, the portion of the Advance relating to such
remarketed Bonds), together with all accrued and unpaid interest thereon at the
rates set forth in Section 7.
(c) The Company shall pay to the Bank at any time when the sum of
(i) the aggregate amount of all Reimbursement Obligations, plus
(ii) the Letter of Credit Amount
exceeds the Maximum Amount at such time, the amount of such excess.
(d) The Company may prepay the aggregate outstanding principal amount
of any Advance, or a portion thereof, without premium or penalty on the
following terms and conditions:
(i) the Company shall give the Bank at least one Business
Day's prior written notice of its intent to prepay such Advance and the
amount of such prepayment; and
(ii) each such prepayment, unless equal to the aggregate
outstanding principal amount of all Advances, shall be in a minimum
amount of $500,000 or in any larger integral multiple of $100,000.
SECTION 7. Interest.
(a) So long as no Default or Event of Default shall have occurred, each
Advance shall bear interest from the date such Advance is made until the date it
becomes due at a fluctuating interest rate per annum equal to the Alternate Base
Rate plus 1.5% per annum; provided; however, that such fluctuating interest rate
shall in no event be higher than the maximum rate permitted by applicable law.
Such interest shall be payable in respect of each Advance (i) quarterly in
arrears on each Quarterly Payment Date and (ii) on the date of repayment or
prepayment (on the amount so repaid or prepaid).
(b) (i) Upon the occurrence and during the continuation of a Default or
Event of Default, Advances, and (ii) any and all amounts (whether principal,
interest, fees or any other amount) unpaid by the Company when due (whether at
stated maturity, upon acceleration, or otherwise) hereunder (in the case of
amounts in respect of interest, to the maximum extent permitted by law) for each
day from the date such amounts become due until payment in full, shall bear
interest at a fluctuating interest rate per annum equal to the Alternate Base
Rate plus 3% per annum; provided; however, that such fluctuating interest rate
shall in no event be higher than the maximum rate permitted by applicable law.
Such interest shall be payable on demand.
-12-
<PAGE>
SECTION 8. Fees
(a) The Company shall pay to the Bank a nonrefundable letter of credit
fee for the period from (and including) the Issuance Date to (but excluding) the
Termination Date on the Letter of Credit Amount at a rate per annum (the "Letter
of Credit Fee") determined as follows:
(i) If the Bond Rating assigned by Moody's and S&P is Baa2 and
BBB, respectively, or higher, the Letter of Credit Fee shall be 0.35%;
(ii) During such times as subclause (a)(i) of this Section 8
is not applicable and the Bond Rating assigned by Moody's or S&P is at
least Baa3 or BBB-, respectively, the Letter of Credit Fee shall be
0.45%;
(iii) During such times as neither subclause (a)(i) nor
(a)(ii) of this Section 8 is applicable and the Bond Rating assigned by
Moody's or S&P is at least Ba1 or BB+, respectively, or higher, the
Letter of Credit Fee shall be 0.75%;
(iv) During such times as none of subclauses (a)(i), (a)(ii)
or (a)(iii) of this Section 8 is applicable and the Bond Rating
assigned by Moody's or S&P is at least Ba2 or BB, respectively, the
Letter of Credit Fee shall be 1.00%;
provided that in the event of a split rating of two or more rating
levels, the average of the two rating levels will apply for purposes of
determining the applicable Letter of Credit Fee; provided, further,
that if none of clauses (i) through (iv) is applicable, the Letter of
Credit Fee shall be 1.75%.
The Letter of Credit Fee shall be payable in arrears on each Quarterly Payment
Date and on the Termination Date. Any change in the Letter of Credit Fee
resulting from a change in the Bond Ratings shall become effective on the day
when such change in the Bond Rating shall be announced by S&P or Moody's, as the
case may be.
(b) The Company shall pay to the Bank the fees and other amounts set
forth in the Fee Letter on the dates set forth therein.
-13-
<PAGE>
SECTION 9. Advance Account. The Bank shall maintain in accordance with
its usual practice an account or accounts evidencing each Advance and the
amounts of principal and interest with respect thereto payable and paid from
time to time hereunder. In any legal action or proceeding such accounts shall,
in the absence of manifest error, be conclusive evidence of the existence and
amounts of the obligations of the Company therein recorded. Notwithstanding the
foregoing, the failure of the Bank to maintain such account or accounts or any
error in maintaining such accounts shall not affect the obligations of any party
hereto with respect to any Advance.
SECTION 10. Increased Costs. Increased Costs
(a) If any change in any law or regulation or in the interpretation
thereof by any Governmental Authority charged with the administration thereof
shall either (i) impose, modify or be deemed by the Bank to make applicable any
reserve, special deposit or similar requirement against letters of credit issued
by, or assets held by, or deposits in or for the account of, the Bank or (ii)
impose on the Bank any other condition regarding this Agreement or the Letter of
Credit, and the result of any event referred to in clause (a)(i) or clause
(a)(ii) shall be to increase the cost to the Bank of issuing, extending or
maintaining the Letter of Credit (which increase in cost may be the result of
the Bank's reasonable allocation of the aggregate of such cost increases
resulting from such events), then, within five (5) Business Days of demand by
the Bank, the Company shall pay to the Bank all additional amounts which are
necessary to compensate the Bank for such increased cost incurred by the Bank.
All amounts payable pursuant to this clause (a) shall bear interest thereon if
not paid within five (5) Business Days of such notice until payment in full
thereof at the rate provided in clause (b) of Section 7. A certificate as to
such increased cost incurred by the Bank as a result of any event mentioned in
clause (a)(i) or clause (a)(ii) and setting forth the additional amount or
amounts to be paid to it hereunder and setting forth in reasonable detail the
basis therefor and the method of calculation thereof shall be prepared in good
faith and submitted by the Bank to the Company and shall be conclusive (absent
manifest error) as to the amount thereof. In determining such amount, the Bank
may use any reasonable averaging and attribution methods.
(b) If after the date hereof the Bank shall have determined that the
adoption of any applicable law, rule or regulation regarding capital adequacy,
or any change therein, or any change in the interpretation or administration
thereof by any Governmental Authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by the Bank
with any request or directive regarding capital adequacy (whether or not having
the force of law) of any such Governmental Authority, central bank or comparable
agency, has or would have the effect of reducing the rate of return on the
Bank's capital as a consequence of its obligations under the Letter of Credit to
a level below that which the Bank could have achieved but for such adoption,
change or compliance (taking into consideration the Bank's policies with respect
to capital adequacy) then, upon notice of such change by the Bank by submission
to the Company of the certificate hereinafter described, the Company shall
within five (5) Business Days of receipt of such notice, pay to the Bank such
additional amount or amounts as will compensate the Bank for such reduction. All
payments pursuant to this clause (b) shall bear interest thereon if not paid
within five (5) Business Days of such notice until payment in full at the rate
provided in clause (b) of Section 7. A certificate of the Bank claiming
compensation under this clause (b) and setting forth the additional amount or
amounts to be paid to it hereunder and setting forth in reasonable detail the
basis therefor and the manner of calculation thereof shall be prepared in good
faith and submitted by the Bank to the Company and shall be conclusive in the
absence of manifest error. In determining such amount, the Bank may use any
reasonable averaging and attribution methods.
-14-
<PAGE>
SECTION 11. Payments and Computations. All payments by the Company to
the Bank hereunder shall be made in lawful currency of the United States,
without setoff, deduction or counterclaim, not later than the close of business
of the Bank in San Francisco, California on the date due, in same day or
immediately available funds, to such account as the Bank shall specify from time
to time by notice to the Company. Funds received after that time shall be deemed
to have been received by the Bank on the next following Business Day. All fees
shall be computed on the basis of the actual number of days (including the first
day but excluding the last day) occurring during the period for which such fee
is payable over a year comprised of 360 days. All interest shall be computed on
the basis of the actual number of days (including the first day but excluding
the last day) occurring during the period for which such interest is payable
over a year comprised of 365 or 366 days, as the case may be. Whenever any
payment hereunder shall be due on a day which is not a Business Day, the date
for payment thereof shall be extended to the next succeeding Business Day, and
any interest payable thereon shall be payable for such extended time at the
specified rate.
SECTION 12. Reduction and Reinstatement of Letter of Credit Amount. The
Letter of Credit Amount shall be reduced or reinstated, as the case may be, as
specified in the Letter of Credit.
SECTION 13. Obligations Absolute. The obligations of the Company under
this Agreement and the Pledge Agreement shall be absolute, unconditional and
irrevocable, and shall be performed strictly in accordance with the terms hereof
and thereof, under all circumstances whatsoever, including the following:
(a) any lack of validity or enforceability of this Agreement, the
Letter of Credit, the Bonds or any other Related Document;
(b) any amendment or waiver of or any consent to departure from this
Agreement, the Letter of Credit, the Bonds or any other Related Document;
(c) the existence of any claim, set-off, defense or other rights which
the Company or any other Person may have at any time against the Trustee, any of
the Underwriters, any beneficiary or any transferee of the Letter of Credit (or
any Person for whom the Trustee, any such beneficiary or any such transferee may
be acting), any Participant or any other Person, whether in connection with this
Agreement, the Related Documents or any unrelated transaction; provided,
however, that nothing in this Section shall prevent the assertion of any such
claim, set-off, defense or other rights by separate suit or counterclaim;
-15-
<PAGE>
(d) the existence of any claim, set off, defense or other rights which
the Company or any other person may have at any time against the Bank in
connection with any unrelated transaction;
(e) any statement or any other document presented under the Letter of
Credit proving to be forged, fraudulent or invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect
whatsoever;
(f) payment by the Bank under the Letter of Credit against presentation
of a draft or certificate which does not comply with the terms of such Letter of
Credit; and
(g) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing.
SECTION 14. Conditions Precedent.
(a) Conditions Precedent to Issuance of Letter of Credit. The
obligation of the Bank to issue the Letter of Credit on the Issuance Date shall
be subject to the fulfillment of each of the following conditions precedent to
the satisfaction of the Bank:
(i) The Bank shall have received on or before the Issuance
Date the following, each dated such date, each in form and substance
satisfactory to the Bank:
(A) the opinion of Keleher & McLeod, P.A., special
counsel to the Company, substantially in the form of Exhibit C
attached hereto;
(B) the opinion of Winthrop, Stimson, Putnam &
Roberts, bond counsel, substantially in the form of Exhibit D
attached hereto;
(C) the opinion of White & Case, special New York and
California counsel to the Bank, substantially in the form of
Exhibit E attached hereto;
(D) copies of the resolutions of the Board of
Directors authorizing the execution, delivery and performance
by the Company of this Agreement and the Related Documents to
which the Company is a party, certified by the Secretary or an
Assistant Secretary of the Company (which certificate shall
state that such resolutions are all of the resolutions of the
Board of Directors relating to the execution, delivery and
performance by the Company of this Agreement and the Related
Documents to which the Company is a party and that such
resolutions are in full force and effect on the Issuance
Date);
-16-
<PAGE>
(E) certified copies of all approvals, authorizations,
or consents of, or notices to or registrations with, any
Governmental Authority required for the Company to enter into
this Agreement and the Related Documents to which it is a
party;
(F) a certificate of the Secretary or an Assistant
Secretary of the Company certifying the names and true
signatures of the officers of the Company authorized to sign
this Agreement and the other documents to be delivered by the
Company pursuant hereto, upon which certificate the Bank may
conclusively rely until it shall have received a further
certificate of the Secretary or an Assistant Secretary of the
Company cancelling or amending such prior certificate;
(G) a certificate of the Trustee as to the authority,
incumbency and specimen signatures of officers of the Trustee
authorized to execute and present certificates under the
Letter of Credit and to otherwise communicate with the Bank
regarding the Letter of Credit, upon which certificate the
Bank may conclusively rely until it shall have received a
further certificate of the Trustee cancelling or amending such
prior certificate;
(H) executed counterparts of this Agreement and the
Pledge Agreement and executed copies (or duplicates thereof)
of each other Related Document, each of which shall be in form
and substance satisfactory to the Bank (and in the case of
copies, each of which shall be certified by the Company as
being a true and correct copy of such other Related Document);
(I) a copy of the Official Statement certified by the
Company as being a true and correct copy thereof; and
(J) such other documents, instruments, approvals (and,
if requested by the Bank, certified duplicates of executed
copies thereof) or opinions as the Bank may reasonably
request.
(ii) On the Issuance Date,
(A) the representations and warranties contained in
Section 15 of this Agreement and each of the Related Documents
shall be true and correct on and as of the Issuance Date as
though made on such date, and the Bank shall have received a
certificate signed by an Authorized Officer of the Company,
dated the Issuance Date, to that effect;
-17-
<PAGE>
(B) no Default or Event of Default shall have occurred
and be continuing, or would result from the issuance of the
Letter of Credit or the execution and delivery of the Related
Documents, and the Bank shall have received a certificate
signed by an Authorized Officer of the Company, dated the
Issuance Date, to that effect;
(C) Since the date of the audited financial statements
described in clause (g) of Section 15, except as disclosed in
the Disclosure Documents, there shall have been no change in
the financial condition, operations, assets, business or
properties of the Company and its Designated Subsidiaries that
has resulted or could reasonably be expected to result in a
Material Adverse Effect;
(D) the Issuer shall have executed and issued the
Bonds, and the Trustee shall have authenticated and delivered
the Bonds to the Underwriters; and
(E) the Company shall have executed and issued the
1997 First Mortgage Bonds, and the First Mortgage Bond Trustee
shall have authenticated and issued the 1997 First Mortgage
Bonds to the Trustee to be held by it pursuant to the terms of
the Ordinance.
(iii) The following statements shall be true and correct on
the Issuance Date, and the Bank shall have received a certificate
signed by a duly authorized officer of the Issuer, dated the Issuance
Date, stating that:
(A) the Issuer shall have duly adopted resolutions
authorizing the execution, delivery and performance by the
Issuer of the Bonds and each of the Related Documents to which
the Issuer is a party and certified copies of such resolutions
shall have been delivered to the Bank;
(B) the Issuer shall have duly authorized and executed
the Ordinance, and the Ordinance shall be in full force and
effect (assuming the due execution and delivery thereof by the
other parties thereto); and
(C) the Issuer shall have duly authorized, signed and
delivered the Bonds to the Trustee for authentication and
delivery pursuant to the Ordinance.
(iv) The Trustee shall have duly authorized and executed the
Ordinance, and the Ordinance shall be in full force and effect as of
the Issuance Date, and the Bank shall have received a certificate
signed by a duly authorized officer of the Trustee, dated the Issuance
Date, as to such due authorization.
-18-
<PAGE>
(v) The First Mortgage Bond Trustee shall have duly authorized
and executed the Supplemental First Mortgage Bond Indenture, and the
First Mortgage Bond Indenture, as supplemented by all indentures
supplemental thereto (including the Supplemental First Mortgage Bond
Indenture), shall be in full force and effect as of the Issuance Date
(assuming the due authorization, execution and delivery by the Company
of the First Mortgage Bond Indenture and each indenture supplemental
thereto (including the Supplemental First Mortgage Bond Indenture)),
and the Bank shall have received a certificate signed by a duly
authorized officer of the First Mortgage Bond Trustee, dated the
Issuance Date, certifying, to the knowledge of such officer, to that
effect.
(vi) The Bank shall have received payment of all fees, costs
and expenses due and payable pursuant to Section 8 and Section 28,
including reasonable fees and disbursements of counsel to the Bank
(including allocated costs of in-house counsel and all disbursements of
in-house counsel), if then invoiced.
(b) Conditions Precedent to Advances. The obligation of the Bank to
make any Advance on any date shall be subject to the fulfillment of the
condition precedent to the satisfaction of the Bank on the date of such Advance
that both before and after giving effect to such Advance, the following
statements shall be true and correct
(i) the representations and warranties contained in Section 15
of this Agreement shall be true and correct with the same effect as if
then made (unless stated to relate solely to an earlier date in which
case such representations and warranties shall be true and correct as
of such earlier date), and
(ii) no Default or Event of Default shall have occurred and
be continuing.
The acceptance of the benefits of each Advance shall constitute a representation
and warranty by the Company to the Bank that all the conditions specified in
this clause (b) of Section 14 exist as of the date of making such Advance.
SECTION 15. Representations and Warranties. The Company represents and
warrants to the Bank:
(a) Organization; Qualification. The Company and each of its Designated
Subsidiaries is validly organized and existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation. The Company and each of
its Designated Subsidiaries is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction where the nature of its
business requires such qualification, and has full power and authority and holds
all requisite governmental licenses, permits and other approvals to own and hold
under lease its property and to conduct its business substantially as currently
conducted by it.
-19-
<PAGE>
(b) Corporate Authorization. The execution, delivery and performance by
the Company of this Agreement and each Related Document to which it is a party
are within the Company's corporate powers, have been duly authorized by all
necessary corporate action, do not contravene (i) the Company's Organic
Documents or (ii) any Requirement of Law or Contractual Obligation binding on or
affecting the Company or any of its Designated Subsidiaries, and do not result
in or require the creation of any Lien upon or with respect to any of their
respective properties, except as contemplated by the Pledge Agreement or the
First Mortgage Bond Indenture.
(c) Governmental Authorization, Investment Company Act. No
authorization or approval or other action by, and no notice to or filing with,
any Governmental Authority is required for the due execution, delivery and
performance by the Company of this Agreement or any Related Document to which
the Company is or is to be a party other than New Mexico Public Utility
Commission approvals relating to collateralization and refunding, each of which
has been duly made or obtained and is in full force and effect. Neither the
Company nor any of its Subsidiaries is an "investment company" within the
meaning of the Investment Company Act of 1940, as amended, or 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.
(d) Binding Effect. Each of this Agreement and the Related Documents to
which the Company is a party has been duly executed and delivered by the
Company. Each of this Agreement and the Related Documents to which the Company
is a party is a legally valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as such enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
laws or equitable principles relating to or limiting creditors' rights
generally.
(e) Litigation. Except as disclosed in the Company's annual report on
Form 10-K for the Fiscal Year ended December 31, 1996 (the "Disclosure
Documents"), there is no pending or, to the knowledge of the Company, threatened
litigation, arbitration, investigation, proceeding or labor controversy
affecting the Company or any of its Designated Subsidiaries, or any of their
respective properties, businesses, assets or revenues, which (i) is reasonably
likely to have a Material Adverse Effect, or (ii) in any manner questions the
validity of this Agreement, the Bonds or any other Related Document.
(f) Related Documents. The representations and warranties of the
Company set forth in the Related Documents to which the Company is a party are
true and correct on and as of the date hereof and are hereby made to the Bank on
and as of the date hereof as if set forth herein in full together with the
related definitions.
-20-
<PAGE>
(g) Financial Information. The audited consolidated balance sheets of
the Company and its Subsidiaries as at December 31, 1996, and the related
statements of earnings and cash flow of the Company and its Subsidiaries for the
fiscal year then ended, copies of which have been furnished to the Bank, have
been prepared in accordance with GAAP consistently applied, and present fairly
the consolidated financial condition of the corporations covered thereby as at
the dates thereof and the results of their operations for the period then ended.
(h) No Material Adverse Effect. Since the date of the audited financial
statements described in clause (g) of this Section, there has been no change in
the financial condition, operations, assets, business or properties of the
Company and its Designated Subsidiaries that would result in a Material Adverse
Effect, except as disclosed in the Disclosure Documents.
(i) Taxes. The Company and each of its Subsidiaries has filed all tax
returns and reports required by law to have been filed by it and has paid all
taxes and governmental charges thereby shown to be owing, except any such taxes
or charges which are being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP shall have
been set aside on its books.
(j) Regulations G, U and X. The Company is not engaged in the business
of extending credit for the purpose of purchasing or carrying margin stock, and
no proceeds of the Letter of Credit will be used for a purpose which violates,
or would be inconsistent with, F.R.S. Board Regulation G, U or X. Terms for
which meanings are provided in F.R.S. Board Regulation G, U or X or any
regulations substituted therefor, as in effect from time to time, are used in
this clause (j) with such meanings.
(k) Ownership of Properties. The Company and each of its Designated
Subsidiaries owns good and marketable title to all of its properties and assets,
real and personal, tangible and intangible, of any nature whatsoever (including
patents, trademarks, trade names, service marks and copyrights), free and clear
of all Liens, charges or claims (including infringement claims with respect to
patents, trademarks, copyrights and the like) except as permitted pursuant to
Section 5.02(a) of the Credit Agreement.
(l) ERISA Representations.
(i) Item 15(l) ("Plans, Multiemployer Plans and Welfare
Plans") of the Disclosure Schedule contains a complete and accurate
list of all Plans, Multiemployer Plans and Welfare Plans with respect
to any employees of the Company or any of its ERISA Affiliates as of
the date hereof.
(ii) No ERISA Event has occurred or is reasonably expected to
occur with respect to any Plan of the Company or any of its ERISA
Affiliates.
-21-
<PAGE>
(iii) Schedule B (Actuarial Information) to the 1996 annual
report (Form 5500 Series) for each Plan of the Company, 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.
(iv) Neither the Company nor any of its ERISA Affiliates has
incurred or is reasonably expected to incur any Withdrawal Liability to
any Multiemployer Plan.
(v) Neither the Company 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
Company is reasonably expected to be in reorganization or to be
terminated, within the meaning of Title IV of ERISA.
(vi) No Prohibited Transaction has occurred that has resulted
in or is reasonably likely to result in a material liability of the
Company.
(m) Environmental Representation. The operations and properties of the
Company and each of its 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 Company nor any of its Subsidiaries
has any material liability, contingent or otherwise, under any Environmental
Law, except as set forth in the Disclosure Documents.
(n) Accuracy of Information.
(i) Except for information contained in Annex B to the
Preliminary Official Statement and the Official Statement describing
the Bank, as to which no representation is made,
(A) as of its date, the Preliminary Official Statement
was,
(B) as of its date, the Official Statement was,
(C) as of the date of any amendment or supplement
thereto, the Official Statement as so amended or supplemented
was, is or will be,
accurate in all material respects for the purposes for which its use
is, was, or shall be, authorized; and
(D) as of its date, the Preliminary Official Statement
did not,
-22-
<PAGE>
(E) as of its date, the Official Statement did not,
(F) as of the date of any amendment or supplement
thereto, the Official Statement as so amended or supplemented
did not, does not, or will not,
contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements made therein, in light
of the circumstances under which they are or were made, not misleading.
(ii) All factual information furnished by or on behalf of the
Company in writing to the Bank for purposes of or in connection with
this Agreement or any transaction contemplated hereby (other than
information describing the Bank referred in clause (i)) and all other
such factual information hereafter furnished by or on behalf of the
Company to the Bank was, is or will be, as the case may be, true and
accurate in every material respect on the date as of which such
information is dated or certified, and was not, is not or shall not be,
as the case may be, incomplete by omitting to state any material fact
necessary to make such information not misleading on such date.
(o) First Mortgage Bond Indenture, etc. The First Mortgage Bond
Indenture grants to the First Mortgage Bond Trustee under the First Mortgage
Bond Indenture a security interest in the property pledged to the First Mortgage
Bond Trustee under the First Mortgage Bond Indenture. The 1997 First Mortgage
Bonds are secured by the First Mortgage Bond Indenture pari passu with all other
bonds issued and outstanding thereunder.
SECTION 16. Covenants. Unless the Bank otherwise consents in writing,
the Company agrees that during the term of this Agreement:
(a) Certain Covenants. Except as may be otherwise provided in this
Section 16, the Company will perform, comply with and be bound by, for the
benefit of the Bank, each of its agreements, covenants and obligations contained
in Article V of the Credit Agreement (other than Sections 5.01(a), 5.01(b),
5.01(c), 5.01(i) and 5.02(b) thereof), together with the related definitions not
otherwise defined herein and ancillary provisions, as in effect on the date of
execution hereof. The above-specified provisions of the Credit Agreement are
hereby incorporated herein by reference, and will be deemed to continue in
effect for the benefit of the Bank until the Letter of Credit has terminated and
all amounts due hereunder have been paid in full, without limiting the
foregoing, whether or not the Credit Agreement or any Commitment thereunder
remains in effect. For purposes of the foregoing, (i) references in the
provisions of the Credit Agreement incorporated herein by reference to the
"Borrower" shall refer to the Company, (ii) references in the provisions of the
Credit Agreement incorporated herein by reference to any of "Lender", "Lenders",
and "Majority Lenders" shall refer to the Bank, (iii) the terms "Agreement", any
"Note" or the "Notes", "hereto" and "hereof" when used in the provisions of the
Credit Agreement incorporated herein by reference shall refer to this Agreement,
(iv) the terms "Default" or "Event of Default" shall be deemed to have the
meanings given such terms herein; and (v) the terms "Advances" and "Commitment"
shall be deemed to mean "obligations of the Company under this Agreement".
-23-
<PAGE>
(b) Financial Information, Reports, Notices, etc. The Company will
furnish, or will cause to be furnished, to the Bank copies of the following
financial statements, reports, notices and information:
(i) as soon as available and in any event within sixty (60)
days after the end of each of the first three Fiscal Quarters of each
Fiscal Year of the Company, the consolidated financial statements of
the Company and its Subsidiaries for such Fiscal Quarter, including the
consolidated balance sheet of the Company and its Subsidiaries as of
the end of such Fiscal Quarter and the related consolidated statements
of earnings (loss) and cash flows of the Company and its Subsidiaries
for the period commencing at the end of the previous Fiscal Year and
ending with the end of such Fiscal 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 Authorized Officer of the Company as having been prepared in
accordance with GAAP, together with (A) a certificate of the chief
financial Authorized Officer of the Company stating that no Default or
Event of Default has occurred and is continuing or, if any such Default
or Event of Default has occurred and is continuing, a statement as to
the nature thereof and the action that the Company has taken and
proposes to take with respect thereto and (B) a schedule in form
satisfactory to the Bank of the computations used by the Company 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) of the Credit Agreement;
(ii) as soon as available and in any event within one hundred
twenty (120) days after the end of each Fiscal Year of the Company, a
copy of the annual audit report for such Fiscal Year for the Company
and its Subsidiaries, including therein the consolidated financial
statements of the Company and its Subsidiaries for such Fiscal Year,
including the consolidated balance sheet of the Company and its
Subsidiaries as of the end of such Fiscal Year and the related
consolidated statements of earnings (loss) and cash flows of the
Company and its Subsidiaries for such Fiscal Year, in each case
accompanied by an opinion acceptable to the Bank of Arthur Andersen &
Co. or other independent public accountants acceptable to the Bank,
together with (A) a certificate of such accounting firm in
substantially the form of Exhibit H to the Credit Agreement (with the
schedules referred to therein attached thereto) addressed to the Bank,
and (B) a certificate of the chief financial Authorized Officer of the
Company stating that no Default or Event of Default has occurred and is
continuing or, if any such Default or Event of Default has occurred and
is continuing, a statement as to the nature thereof and the action that
the Company has taken and proposes to take with respect thereto;
-24-
<PAGE>
(iii) as soon as possible and in any event within five (5)
days after the occurrence of each Default or Event of Default, a
statement of the chief financial Authorized Officer of the Company
setting forth details of such Default or Event of Default and the
action which the Company has taken and proposes to take with respect
thereto;
(iv) as soon as possible and in any event within five (5) days
after (x) the occurrence of any adverse development with respect to any
litigation, action, proceeding or labor controversy described in clause
(e) of Section 15 or (y) the commencement of any labor controversy,
litigation, action or proceeding of the type described in clause (e) of
Section 15, notice thereof and copies of all material documentation
relating thereto;
(v) promptly and in any event within fifteen (15) days after
the sending or filing thereof, copies of all reports which the Company
sends to any of its securityholders, and all reports and registration
statements which the Company or any of its Subsidiaries files with the
Securities and Exchange Commission or any national securities exchange;
(vi) promptly after the furnishing thereof, copies of any
statement or report furnished to any other holder of the securities of
the Company or of any of its Subsidiaries (A) pursuant to the terms of
the Ordinance or the First Mortgage Bond 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 Bank pursuant to any other clause of
this clause (b);
(vii) promptly upon receipt thereof, copies of all notices,
requests and other documents received by the Company or any of its
Subsidiaries under or pursuant to the Ordinance or the First Mortgage
Bond Indenture with respect to any pending or potential noncompliance
with the terms thereof, and, from time to time upon request by the
Bank, such information and reports regarding the Ordinance and the
First Mortgage Bond Indenture as the Bank may reasonably request;
(viii) promptly, and in any event within five (5) Business
Days after any change in the information regarding Material Operating
Leases of the type contained on Schedule VIII of the Credit Agreement
is furnished by the Company to Moody's or S&P, notice of such change;
(ix) promptly and in any event within ten (10) Business Days
after the Company or any of its ERISA Affiliates knows or has reason to
know that any ERISA Event has occurred, a statement of the chief
financial Authorized Officer of the Company describing such ERISA Event
and the action, if any, that the Company or such ERISA Affiliate has
taken and proposes to take with respect thereto;
-25-
<PAGE>
(x) promptly and in any event within five (5) Business Days
after receipt thereof by the Company 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;
(xi) promptly and in any event within thirty (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 Company;
(xii) promptly and in any event within five (5) Business Days
after receipt thereof by the Company or any of its ERISA Affiliates
from the sponsor of a Multiemployer Plan, copies of each notice
received by the Company or any of its ERISA Affiliates 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 Company or any of its ERISA
Affiliates in connection with any event described in clause (A) or (B);
(xiii) promptly and in any event within ten (10) Business Days
after the Company 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 Company has occurred, a statement
of the chief financial Authorized Officer of the Company describing
such Prohibited Transaction and the action, if any, that the Company or
such ERISA Affiliate has taken and proposes to take with respect
thereto;
(xiv) promptly after the amendment of, waiver to, or any other
modification of, any Related Document, a copy of such amendment, waiver
or modification;
(xv) promptly after the Company knows of the occurrence
thereof, notice of any change in the Bond Rating assigned by either
Moody's or S&P; and
(xvi) such other information respecting the condition or
operations, financial or otherwise, of the Company or any of its
Subsidiaries as the Bank may from time to time reasonably request.
(c) Modes of Bonds. Notwithstanding any provision of the Ordinance to
the contrary, the Company will not request or permit the Bonds to be partially
converted into another Mode.
-26-
<PAGE>
(d) Use of Proceeds. The Company agrees that, with respect to the Bonds
and the earnings thereon, no use thereof will be made which would (i) but for
the covenant contained in this Section, have been reasonably expected at the
time of the issuance of the Bonds, or (ii) if so reasonably expected, have
caused the bonds to be "arbitrage bonds" within the meaning of Section 148 (or
any successor provision thereto) of the Code, and the regulations proposed or in
effect thereunder on the date of such use and applicable to obligations issued
on the issuance date of the Bonds. The Company agrees to comply with the terms
of Section 148 (or any successor provision thereto) of the Code, and any
regulations promulgated thereunder.
(e) Repayment of Refunded Bonds. On or before the Issuance Date, the
Company shall have caused the Refunded Bonds to be defeased in full, and the
Bank shall have received (i) a reliance letter from Winthrop, Stimson, Putnam &
Roberts, bond counsel, addressed to the Bank, to the effect that the Bank may
rely on their defeasance opinion relating to the Refunded Bonds, and (ii) a
reliance letter or other evidence from Keleher & McLeod, special counsel to the
Company, to the effect that the Bank may rely on their opinion relating to the
Escrow Agreement (as defined in the Bond Purchase Agreement), which opinions
shall in each case be in form and substance satisfactory to the Bank.
(f) Amendments, Trustee, etc. The Company will not amend or otherwise
permit to occur any amendment, modification or waiver of any of the terms of the
Bonds or any other Related Document which could in any way increase the
obligations of the Bank under the Letter of Credit or adversely affect the
rights of the Bank without the prior written consent of the Bank. The Company
will not cause the removal of the Trustee from its capacity or approve the
appointment of a successor Trustee, without the prior written consent of the
Bank in its sole discretion.
(g) Compliance with Laws, Etc. The Company will comply, and will cause
each of its 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.
(h) Payment of Taxes, Etc. The Company will pay and discharge, and will
cause each of its 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 (as defined in the
Credit Agreement)) upon its property; provided, however, that neither the
Company nor any of its 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 adequate reserves in accordance with GAAP
are being maintained.
-27-
<PAGE>
(i) Maintenance of Insurance. The Company will maintain, and will cause
each of its Subsidiaries to maintain, insurance with responsible and reputable
insurance companies or associations, or will provide self-insurance, in such
amounts and covering such risks as is usually carried by companies engaged in
similar businesses and owning similar properties in the same general areas in
which the Company or such Subsidiary operates.
(j) Mergers, Etc. The Company will not 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 may merge or consolidate with or into
or acquire assets of, any other Designated Subsidiary, (ii) any Designated
Subsidiary may merge into the Company, and (iii) any Designated Subsidiary may
dispose of assets to the Company; provided; however, that in each case,
immediately after giving effect thereto, no Default or Event of Default would
exist, and in the case of any such merger to which the Company is a party, the
Company will be the surviving corporation.
(k) No Surrender of First Mortgage Bonds. Notwithstanding any provision
contained in Section 15.11 of the Ordinance to the contrary, the Company hereby
agrees not to request the Trustee to release to the Company or to the First
Mortgage Bond Trustee any amount of the First Mortgage Bonds (or Corresponding
Securities, as the case may be) and not to accept any amount of the First
Mortgage Bonds (or Corresponding Securities, as the case may be) so released,
without the prior written consent of the Bank.
SECTION 17. Events of Default. The following events shall be "Events of
Default" hereunder:
(a) the Company shall fail to pay any amount under Section 4(a),
Section 6, Section 7 or Section 8(a) when and as due; or shall fail to pay any
other amount due hereunder when and as due and such failure shall continue for
five (5) Business Days; or
(b) for any reason (other than the termination or release thereof by
the Collateral Agent at the direction of the Bank), the Pledge Agreement shall
cease to be in full force and effect or the Company shall repudiate its
obligations thereunder or the pledge and security interest under the Pledge
Agreement shall at any time cease to constitute in favor of the Collateral Agent
on behalf of the Bank a first priority perfected lien on the Pledged Collateral
(as therein defined); or
(c) (i) the First Mortgage Bond Indenture, including the Supplemental
First Mortgage Bond Indenture, or the 1997 First Mortgage Bonds shall cease to
be in full force and effect, or shall cease to provide the Liens, rights, powers
and privileges purported to be created thereby (other than as a result of an
exchange of the 1997 First Mortgage Bonds for Corresponding Securities in
accordance with Sections 12.02(l) and 12.09(b) of the Ordinance), (ii) any
Corresponding Securities or the Governing Instrument relating thereto shall
cease to be in full force and effect, or shall cease to provide the Liens,
rights, powers and privileges purported to be created thereby, or (iii) the
Company, or any Authorized Representative of the Company, shall deny or
disaffirm the Company's obligations under the First Mortgage Bond Indenture,
including the Supplemental First Mortgage Bond Indenture, or the 1997 First
Mortgage Bonds or under the Corresponding Securities or the applicable Governing
Instrument, as the case may be; or
-28-
(d) any provision of this Agreement or any Related Document shall at
any time for any reason cease to be valid and binding on the Company, or shall
be declared to be null and void, or the validity or enforceability thereof shall
be denied or contested by the Company, or a proceeding shall be commenced by any
governmental agency or authority having jurisdiction over the Company seeking to
establish the invalidity or unenforceability thereof, or the Company shall deny
that it has any further liability or obligation thereunder; or
(e) (i) the Company shall default in the observance or performance of
any term, covenant or agreement incorporated in clause (a) of Section
16 by reference to Section 5.01(h) or 5.02(i) of the Credit Agreement,
or contained in clause (b)(iii) or (k) of Section 16;
(ii) the Company or any Designated Subsidiary shall default in
the observance or performance of any term, covenant or agreement (other
than those referred to in clause (e)(i) of this Section 17)
incorporated in clause (a) of Section 16 by reference to Section 5.02
of the Credit Agreement;
(iii) the Company or any Designated Subsidiary shall default
in the observance or performance of any term, covenant or agreement
(other than those referred to in clauses (e)(i) and (e)(ii) of this
Section 17) contained in this Agreement, and such default shall remain
unremedied for ten (10) days following delivery of notice from the
Bank; or
(f) any representation, warranty, certificate or statement made by the
Company in this Agreement, any of the Related Documents or in any certificate,
financial statement or other document delivered pursuant to this Agreement or
any of the Related Documents shall prove to have been incorrect in any material
respect when made or deemed made; or
(g) a default under any Related Document shall occur; or
(h) the Company or any of its Designated Subsidiaries shall
(i) become insolvent or generally fail to pay, or admit in
writing its inability or unwillingness to pay, debts as they become
due;
-29-
<PAGE>
(ii) apply for, consent to, or acquiesce in, the appointment
of a trustee, receiver, sequestrator or other custodian for the Company
or any of its Designated Subsidiaries or any property of any thereof,
or make a general assignment for the benefit of creditors;
(iii) in the absence of such application, consent or
acquiescence, permit or suffer to exist the appointment of a trustee,
receiver, sequestrator or other custodian for the Company or any of its
Designated Subsidiaries or for a substantial part of the property of
any thereof, and such trustee, receiver, sequestrator or other
custodian shall not be discharged within thirty (30) days (in
connection therewith, the Company hereby expressly authorizes the Bank
to appear in any court conducting any relevant proceeding during such
30-day period to preserve, protect and defend its rights under the
Related Documents);
(iv) permit or suffer to exist the commencement of any
bankruptcy, reorganization, debt arrangement or other case or
proceeding under any bankruptcy or insolvency law, or any dissolution,
winding up or liquidation proceeding, in respect of the Company or any
of its Designated Subsidiaries, and, if any such case or proceeding is
not commenced by the Company or such Designated Subsidiary, such case
or proceeding shall be consented to or acquiesced in by the Company or
such Designated Subsidiary or shall result in the entry of an order for
relief or shall remain for thirty (30) days undismissed (in connection
therewith, the Company hereby expressly authorizes the Bank to appear
in any court conducting any such case or proceeding during such 60-day
period to preserve, protect and defend its rights under the Related
Documents); or
(v) take any action authorizing any of the foregoing; or
(i) (i) any ERISA Event shall have occurred with respect to a Plan of
the Company or any of its ERISA Affiliates 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
Company or any of its ERISA Affiliates with respect to which an ERISA
Event shall have occurred and then exist (or the liability of the
Company and its ERISA Affiliates related to such ERISA Events) exceeds
$5,000,000; provided; however, that an ERISA Event described in Section
302(f) of ERISA shall constitute an Event of Default without regard to
such Insufficiency;
(ii) the Company 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 Company 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;
-30-
<PAGE>
(iii) the Company 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
Company and its ERISA Affiliates to all Multiemployer Plans that are
then in reorganization or being terminated have been or will be
increased over the amount 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;
(iv) a Prohibited Transaction shall have occurred and the
Company has incurred or is reasonably likely to incur liability in
connection therewith in an amount exceeding $2,000,000;
(j) a default shall occur in the payment when due (subject to any
applicable grace period), whether by acceleration or otherwise, of any Debt of
the Company or any of its Designated Subsidiaries having a principal amount,
singly or in the aggregate, in excess of $5,000,000, or a default shall occur in
the performance or observance of any obligation or condition with respect to
such Debt if the effect of such default is to accelerate the maturity of any
such Debt or such default shall continue unremedied for any applicable period of
time sufficient to permit the holder or holders of such Debt or any trustee or
agent for such holders, to cause such Debt to become due and payable prior to
its expressed maturity; or
(k) any judgments or orders against the Company or any of its
Designated Subsidiaries for the payment of money
(A) in excess of $20,000,000, or
(B) which, when added to all other such judgments or
orders rendered on or after the date of the Credit Agreement,
exceeds $40,000,000 in the aggregate,
and either
(C) enforcement proceedings shall have been commenced by any
creditor upon such judgment or order;
(D) there shall be any period of thirty (30) consecutive days
during which a stay of enforcement of such judgment or order, by reason
of a pending appeal or otherwise, shall not be in effect.
-31-
<PAGE>
If any Event of Default occurs and is continuing,
(1) the Bank may, in its sole discretion, declare all Advances and all
interest accrued thereon and all other amounts due hereunder or under the Pledge
Agreement to be immediately due and payable, and upon such declaration, the same
shall become and be immediately due and payable, without presentment, protest or
other notice of any kind, all of which are hereby waived by the Company;
(provided that, if an Event of Default specified in clause (h) of this Section
17 shall occur with respect to the Company, all Advances and all interest
accrued thereon and all other amounts due hereunder or under the Pledge
Agreement as aforesaid shall automatically become immediately due and payable
without further act of the Bank);
(2) the Bank may, in its sole discretion, either
(i) notify the Trustee of such Event of Default and upon
satisfaction of the conditions set forth in the Ordinance, the
principal of all Bonds then outstanding and the interest accrued
thereon shall become immediately due and payable pursuant to Section
9.01(2) of the Ordinance; or
(ii) notify the Trustee pursuant to Section 3.01(c) of the
Ordinance of a mandatory redemption of the Bonds by delivery of a
notice substantially in the form of Exhibit 9 to the Letter of Credit;
and
(3) the Bank may, in its sole discretion, pursue all remedies available
to it at law, by contract, at equity or otherwise.
SECITON 18. Extension of the Termination Date. At least 120 days but no
more than 180 days before the third anniversary of the Issuance Date and each
subsequent anniversary of the Issuance Date, the Company may request in writing
that the Bank extend the Scheduled Termination Date for a period of one year.
Upon receipt of such request, the Bank may, in its sole discretion, agree to
extend the Scheduled Termination Date, and, if the Bank shall so agree, it
shall, within 30 days, notify the Company of any conditions precedent to the
effectiveness of such extension and upon satisfaction of such conditions (if
any) execute and deliver to the Trustee an amendment to the Letter of Credit
substantially in the form of Exhibit 10 to the Letter of Credit.
SECTION 19. Amendments and Waivers. No amendment or waiver of any
provision of this Agreement or consent to any departure by the Company therefrom
shall in any event be effective unless the same shall be in writing and signed
by the Bank. Any such amendment, waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
-32-
<PAGE>
SECTION 20. Notices. All notices, requests and other communications to
any party hereunder shall be in writing (including bank wire, telecopier or
similar writing) and shall be given to such party at its address or telecopier
number set forth below or such other address or telecopier number as such party
may hereafter specify for the purpose by notice to the other party. Each such
notice, request or other communication shall be effective (a) if given by
telecopier, when such telecopy is transmitted to the telecopier number specified
below and receipt of such telecopy is acknowledged by the party to which it was
transmitted, (b) if given by mail, ten days after such communication is
deposited in the mail with first-class postage prepaid, addressed as aforesaid
or (c) if given by any other means, when delivered at the address specified in
this Section.
To the Company:
Public Service Company of New Mexico
Alvarado Square
Albuquerque, New Mexico 87158
Attention: Treasurer
Telephone: (505) 241-2700
Telecopier: (505) 241-2369
To the Bank:
Bank of America NT & SA
555 South Flower Street
10th Floor
Los Angeles, California 90071
Attention: Bob Eaton
Telephone: (213) 228-5599
Telecopier: (213) 228-4062
With a copy to:
White & Case
633 West Fifth Street
Suite 1900
Los Angeles, California 9071
Attention: Neil W. Rust, Esq.
Telephone (213) 620-7700
Telecopier: (213) 687-0758
SECTION 21. No Waiver; Remedies Cumulative. No failure on the part of
the Bank 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. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law or otherwise.
-33-
<PAGE>
SECTION 22. Right of Set-Off. Upon the occurrence and during the
continuance of any Event of Default, the Bank is hereby authorized at any time
and from time to time, to the fullest extent permitted by law, to set off and
apply any and all deposits (general or special, time or demand, provisional or
final) at any time held and other indebtedness at any time owing by the Bank to
or for the credit or the account of the Company against any and all of the
obligations of the Company now or hereafter existing under this Agreement,
irrespective of whether or not the Bank shall have made any demand hereunder
although such obligations may be contingent or unmatured.
SECTION 23. Indemnification. In consideration of the execution and
delivery of this Agreement by the Bank, the Company hereby indemnifies,
exonerates and holds the Bank and each of its officers, directors, employees and
agents (collectively, the "Indemnified Parties") free and harmless from and
against any and all actions, causes of action, suits, losses, costs, liabilities
and damages, and expenses incurred in connection therewith (irrespective of
whether any such Indemnified Party is a party to the action for which
indemnification hereunder is sought), including reasonable attorneys' fees and
disbursements (collectively, the "Indemnified Liabilities"), incurred by the
Indemnified Parties or any of them as a result of, or arising out of, or
relating to
(a)any transaction financed or to be financed in whole or in
part, directly or indirectly, with the proceeds of any Drawing under
the Letter of Credit;
(b)the entering into and performance of this Agreement and any
other Related Document by any of the Indemnified Parties (including any
action brought by or on behalf of the Company as the result of any
determination by the Bank not to fund any Drawing under the Letter of
Credit);
(c)by reason of any untrue statement or alleged untrue
statement of any material fact contained or incorporated by reference
in the Preliminary Official Statement (other than in Appendix B
thereto) or in the Official Statement (other than in Appendix B
thereto), or in any amendment, modification or supplement thereto, or
the omission to state therein a material fact necessary to make such
statements, in the light of the circumstances under which they are or
were made, not misleading;
(d)any investigation, litigation or proceeding related to any
Environmental Law, any environmental cleanup, audit, compliance or
other matter relating to the protection of the environment or the
Release by the Company or any of its Subsidiaries of any Hazardous
Material; or
-34-
<PAGE>
(e)the presence on or under, or the escape, seepage, leakage,
spillage, discharge, emission, discharging or releases from, any real
property owned or operated by the Company or any Subsidiary thereof of
any Hazardous Material (including any losses, liabilities, damages,
injuries, costs, expenses or claims asserted or arising under any
Environmental Law), regardless of whether caused by, or within the
control of, the Company or such Subsidiary,
except for any such Indemnified Liabilities arising for the account of a
particular Indemnified Party by reason of the relevant Indemnified Party's gross
negligence or willful misconduct, and if and to the extent that the foregoing
undertaking may be unenforceable for any reason, the Company hereby agrees to
make the maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities which is permissible under applicable law.
SECTION 24. Survival. The obligations of the Company under this
Agreement shall continue until the later of the Termination Date or the date
upon which all amounts due or to become due to the Bank hereunder shall have
been paid in full; provided, however, that the obligations of the Company
pursuant to Section 23 and Section 28 shall survive the termination of this
Agreement.
SECTION 25. Transfer of the Letter of Credit. The Letter of Credit may
be transferred in accordance with the provisions set forth therein.
SECTION 26. Confirmation of Lien; Trust.
(a) The Company hereby grants to the Bank, to secure payment by the
Company of sums due hereunder, a lien on moneys or instruments (at such times as
they become payable to the Company under the Ordinance) which the Company has an
interest in or title to pursuant to the Ordinance, now or hereafter held by the
Trustee under the Ordinance and in the right of the Company to receive any such
moneys or instruments.
(b) The Bank agrees to hold the proceeds of any lien or security
interest referred to in clause (a) or to take or receive any collateral (other
than the Pledged Bonds) as security for the Company's obligations under this
Agreement, in each case in trust for the equal and pro rata benefit of itself,
on the one hand, and the holders of the Bonds, on the other hand. No holder of
any Bond nor the Trustee may exercise any rights under the trust established
pursuant to this clause (b) unless and until the Trustee has drawn under the
Letter of Credit pursuant to the Ordinance, and then only to the extent that a
strictly conforming draft has not been honored by the Bank. Any right
established hereunder for the benefit of any holder of any Bond shall: (i) be
released, without any consent, waiver, notice or other action by such party, in
the amount and to the extent of the satisfaction of the obligations due the
holders of any Bond or to the extent of any payment to the Trustee pursuant to a
Drawing under the Letter of Credit and (ii) terminate if (A) such termination
would not lead to the Bank being released, prevented or restrained from or
delayed in fulfilling its obligations under the Letter of Credit or (B) the
absence of the agreement contained in this clause (b) would not result in the
lowering or suspension by S&P or Moody's of its rating of the Bonds.
-35-
<PAGE>
SECTION 27. Limited Liability of the Bank. The Company assumes all
risks of the acts or omissions of the Trustee and any transferee of the Letter
of Credit with respect to its use of the Letter of Credit. Neither the Bank nor
any of its officers or directors shall be liable or responsible for (a) the use
which may be made of the Letter of Credit or for any acts or omissions of the
Trustee and any beneficiary or transferee in connection therewith; (b) the
validity, or genuineness of documents, or of any endorsement(s) thereon, even if
such documents should in fact prove to be in any or all respects invalid,
fraudulent or forged; or (c) any other circumstances whatsoever in making or
failing to make payment under the Letter of Credit, except only that the Company
shall have a claim against the Bank, and the Bank shall be liable to the
Company, to the extent, but only to the extent, of any direct, as opposed to
consequential, damages suffered by the Company which the Company proves were
caused by (i) the Bank's willful misconduct or gross negligence in determining
whether documents presented under the Letter of Credit comply with the terms
thereof or (ii) the Bank's willful failure to pay under the Letter of Credit
after the presentation to it by the Trustee (or a successor under the Ordinance
to whom the Letter of Credit has been transferred in accordance with its terms)
of a draft and certificate strictly complying with the terms and conditions of
the Letter of Credit. In furtherance and not in limitation of the foregoing, the
Bank may accept documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary.
SECITON 28. Costs, Expenses and Taxes.
(a) The Company agrees to pay on demand all out-of-pocket expenses of
the Bank, including reasonable fees and disbursements of counsel (including
allocated costs of in-house counsel and all disbursements of in-house counsel),
in connection with (i) the preparation of this Agreement and the Letter of
Credit and otherwise in connection with the issuance of the Bonds and the
preparation, authorization, execution and delivery of the Related Documents,
(ii) any amendments, modifications, extensions, supplements, consents or waivers
hereto or thereto, and (iii) the administration or enforcement of this
Agreement, the Bonds and the Related Documents and any other documents which may
be delivered in connection herewith or therewith.
(b) All payments by the Company of principal of, and interest on, the
Advances and all other amounts payable hereunder shall be made free and clear of
and without deduction for any present or future income, excise, stamp or
franchise taxes and other taxes, fees, duties, withholdings or other charges of
any nature whatsoever imposed by any United States taxing authority, but
excluding franchise taxes, agency profit taxes and taxes imposed on or measured
by the Bank's net income or receipts (for which excluded items the Company has
no liability) (such non-excluded items being called "Taxes"). In the event that
any withholding or deduction from any payment to be made by the Company
hereunder is required in respect of any Taxes pursuant to any applicable law,
rule or regulation, then the Company will
-36-
<PAGE>
(i) pay directly to the relevant authority the full amount
required to be so withheld or deducted;
(ii) promptly forward to the Bank an official receipt or other
documentation satisfactory to the Bank evidencing such payment to such
authority; and
(iii) pay to the Bank such additional amount or amounts as is
necessary to ensure that the net amount actually received by the Bank
will equal the full amount such Bank would have received had no such
withholding or deduction been required.
Moreover, if any Taxes are directly asserted against the Bank with respect to
any payment received by the Bank hereunder, the Bank may pay such Taxes and the
Company will promptly pay such additional amounts (including any penalties,
interest or expenses other than penalties, interest or expenses to the extent
they arise from acts or omissions of the Bank) as is necessary in order that the
net amount received by such person after the payment of such Taxes (including
any taxes on such additional amount) shall equal the amount such person would
have received had no such Taxes been asserted.
(c) If the Company fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to the Bank the required receipts or other
required documentary evidence, the Company shall indemnify the Bank for any
incremental Taxes, interest or penalties that may become payable by the Bank as
a result of any such failure.
SECTION 29. Severability. Any provision of this Agreement which is
prohibited, unenforceable or not authorized in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition,
unenforceability or non-authorization without invalidating the remaining
provisions hereof or affecting the validity, enforceability or legality of such
provision in any other jurisdiction.
SECTION 30. Assignments and Participations.d Participations
(a) This Agreement shall be binding upon the Company and its successors
and assigns and inure to the benefit of and be enforceable by the Bank and its
successors, transferees and assigns; provided, however, that the Company may not
assign all or any part of its rights or obligations under this Agreement without
the prior written consent of the Bank.
-37-
<PAGE>
(b) The Bank may with the prior written consent of the Company (which
consent may not be unreasonably withheld) assign to one or more financial
institutions all, or a proportional part of all (in a minimum amount of not less
than $5,000,000), of its rights and obligations under this Agreement, and such
assignee shall assume such rights and obligations. Upon any such assignment the
assignee shall become a party to this Agreement, shall be a "Bank" hereunder and
shall be entitled to all of the rights and benefits hereunder (including,
without limitation, the rights set forth in Sections 10, 22, 23 and 28).
(c) The Bank may at any time sell or grant participations to any
Participant in all or any part of, or any interest (undivided or divided) in,
the Bank's rights and benefits under this Agreement, in which event the
Participant shall not have any rights hereunder (the Participant's rights
against the Bank to be as set forth in the agreement executed by the Bank in
favor of the Participant), and all amounts payable by the Company hereunder
shall be determined as if the Bank had not sold or granted any participation.
SECTION 31. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
NEW YORK.
SECTION 32. Waiver of Jury Trial. THE COMPANY AND THE BANK HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER OR IN CONNECTION WITH, THIS AGREEMENT OR ANY RELATED DOCUMENT, OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR
ACTIONS OF THE COMPANY OR THE BANK. THE COMPANY ACKNOWLEDGES AND AGREES THAT IT
HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE BANK'S ENTERING INTO THIS AGREEMENT
AND EACH SUCH RELATED DOCUMENT TO WHICH IT IS A PARTY.
SECTION 33. Headings and Table of Contents. Section headings and the
Table of Contents in this Agreement are included herein for convenience of
reference only and shall not constitute a part of this Agreement for any other
purpose.
SECTION 34. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
-38-
<PAGE>
SECTION 35. Notification Relating to First Mortgage Bonds. (a) Upon the
permanent reduction of the Principal Component (as defined in Letter of Credit)
of the Letter of Credit by any amount, and subject to the payment in full of all
of the Company's obligations under Section 4(a), Section 6, Section 7, Section 8
and Section 10 with respect to the amount of such reduction, the Bank will
notify the Trustee
(i) on any date on which the Company issues a new series of
First Mortgage Bonds or the Bonds are remarketed, that (A) such
obligations have been paid in full with respect to an aggregate
principal amount of 1997 First Mortgage Bonds equal to the lesser of
(1) the amount of such reduction, and (2) the aggregate principal
amount of such new series of First Mortgage Bonds or the aggregate
principal amount of the Bonds so remarketed, and (B) any waiting period
to which the Bank is entitled relating thereto has been waived;
(ii) on the 120th day after the later of (A) such reduction of
the Principal Component (as so defined) of the Letter of Credit or (B)
such payment in full, that such obligations have been paid in full with
respect to an aggregate principal amount of 1997 First Mortgage Bonds
equal to the amount of such reduction, to the extent not already
referred to in the notice delivered pursuant to clause (a)(i).
(b) Upon the Termination Date (as defined in Letter of Credit), and
subject to the payment in full of all of the Company's obligations under Section
4(a), Section 6, Section 7, Section 8 and Section 10, the Bank will notify the
Trustee
(i) on any date on which the Company issues a new series of
First Mortgage Bonds or the Bonds are remarketed, that (A) such
obligations have been paid in full with respect to an aggregate
principal amount of 1997 First Mortgage Bonds equal to the aggregate
principal amount of the 1997 First Mortgage Bonds or the aggregate
principal amount of the Bonds so remarketed, the (B) any waiting period
to which the Bank is entitled relating thereto has been waived;
(ii) on the 120th day after the later of (A) the Termination
Date, or (B) such payment in full, that such obligations have been paid
in full with respect to an aggregate principal amount of 1997 First
Mortgage Bonds equal to the amount of the 1997 First Mortgage Bonds not
already referred to in the notices pursuant to clause (a)(i) or clause
(b)(i).
-39-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first above written.
PUBLIC SERVICE COMPANY OF NEW MEXICO
By ___________________________
Name:
Title:
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By ___________________________
Name:
Title:
-40-
<PAGE>
EXHIBIT A
(to the Reimbursement
Agreement)
IRREVOCABLE LETTER OF CREDIT
NO. 3003595
February 21, 1997
First Security Bank of New Mexico, N.A.,
as Trustee
40 First Plaza, N.W.
3rd Floor
Albuquerque, New Mexico 87102
Attention: Corporate Trust Services
Ladies and Gentlemen:
1. Bank of America National Trust and Savings Association (the "Bank")
hereby establishes, at the request and for the account of Public Service Company
of New Mexico (the "Company"), in the favor of First Security Bank of New
Mexico, N.A., as trustee (the "Trustee") for the benefit of the Bondholders
under Ordinance No. 97-1052 adopted January 28, 1997 (as supplemented by
Resolution No. 97-870, adopted January 28, 1997, and as amended by Ordinance No.
97-1053, adopted February 11, 1997, and as hereafter modified, altered, amended,
supplemented or confirmed by any and all ordinances and resolutions supplemental
thereto or amendatory thereof adopted from time to time pursuant thereto, the
"Ordinance") by the City of Farmington, New Mexico (the "Issuer"), pursuant to
which $40,000,000 principal amount of the Issuer's Pollution Control Revenue
Refunding Bonds, 1997 Series A (Public Service Company of New Mexico San Juan
Project) (the "Bonds") are being issued, its Irrevocable Letter of Credit No.
3003595 (the "Letter of Credit"), in the aggregate amount of $42,748,493.15 (as
more fully described below), effective immediately and expiring at the Bank's
close of business on the earliest of:
(a) February 21, 2000, as such date may be extended from time
to time by the Bank's issuance to the Trustee of an amendment hereto in
the form of Exhibit 8 hereto, (as so extended, the "Scheduled
Termination Date"),
(b) the date on which the Bank shall have received written
notice from the Trustee that the principal amount of and interest on
the Bonds have been paid in full,
-1-
<PAGE>
(c) the fifth Business Day (as defined herein) following the
date on which the Bank shall have received written notice from the
Trustee of the occurrence of the effective date of the conversion of
all of the Bonds into any Multiannual Mode or into the Flexible Mode
with a Flexible Rate Period ending after the Scheduled Termination
Date,
(d) the date on which the Bank honors a Final Draft (as
defined herein) drawn hereunder,
(e) the fifth Business Day following the date the date on
which the Bank shall have received written notice from the Trustee that
an alternate letter of credit or alternate security has been
substituted for this Letter of Credit in accordance with the Ordinance,
or
(f) the date on which this Letter of Credit is surrendered to
the Bank for cancellation,
(such earliest date, the "Termination Date"). Capitalized terms used herein and
not otherwise defined shall have the meanings given thereto in the Reimbursement
Agreement, dated as of February 1, 1997, between the Company and the Bank.
2. The Bank hereby irrevocably authorizes the Trustee to draw on the
Bank in accordance with the terms and conditions, and subject to reductions in
amount and reinstatement, as hereinafter set forth, by the Trustee's drafts, an
aggregate amount not exceeding $42,748,493.15 (Forty Two Million Seven Hundred
Forty Eight Thousand Four Hundred Ninety Three and 15/100 Dollars) (the "Letter
of Credit Amount"),
(a) of which an aggregate amount not exceeding $40,000,000
(Forty Million Dollars) may be drawn upon with respect to payment of
principal or that portion of the Purchase Price of such Bonds
corresponding to principal (the "Principal Component"), and
(b) of which an aggregate amount not exceeding $2,748,493.15
(Two Million Seven Hundred Forty Eight Thousand Four Hundred Ninety
Three and 15/100 Dollars) may be drawn upon with respect to payment of
interest (the "Interest Component").
3. Only the Trustee may make Drawings under this Letter of Credit. Upon
the payment to the Trustee or the Trustee's account of the amount specified in a
draft drawn hereunder, the Bank shall be fully discharged of the Bank's
obligation under this Letter of Credit with respect to such draft, and the Bank
shall not thereafter be obligated to make any further payments under this Letter
of Credit in respect of such draft to the Trustee or to any other person who may
have made to the Trustee or who makes to the Trustee a demand for purchase of,
or payment of principal of or interest on any Bond. Bonds which constitute
"Company Bonds" within the meaning of the Ordinance are not entitled to any
benefit of this Letter of Credit.
-2-
<PAGE>
4. Upon the honoring by the Bank of any draft drawn (each such drawing
being a "Drawing") on any day under this Letter of Credit in respect of payment
of the principal of, interest on, or Purchase Price for, any Bonds, the Letter
of Credit Amount and the amount available to be drawn hereunder by the Trustee
under any subsequent Drawing in respect of the Principal Component and/or
Interest Component, as the case may be, of such Letter of Credit Amount shall be
automatically reduced by an amount equal to the amount of principal and/or
interest, as the case may be, of such Drawing made on such day.
5. Subject to Sections 6 and 7 hereof, unless the Trustee shall have
received notice from the Bank in writing within ten calendar days from the date
of any Drawing with respect to the Interest Component to the effect that it has
not been reimbursed in respect of such Drawing, the Letter of Credit Amount and
the amount available to be drawn hereunder by the Trustee in any subsequent
Drawing in respect of such Interest Component shall be automatically reinstated
effective on the eleventh calendar day from the date of such Drawing.
6. If the Trustee shall make a Drawing hereunder in respect of the
Purchase Price of any Bonds in the form of Exhibit 3 hereto (other than pursuant
to a Final Draft), and the Bank shall have been reimbursed in full in respect of
that portion of the Purchase Price corresponding to principal or shall have
received written notice from the Trustee of its receipt of funds from the
Remarketing Agent for the account of the Bank sufficient to effect such
reimbursement, the Letter of Credit Amount and the amount available to be drawn
hereunder by the Trustee in any subsequent Drawing in respect of the Principal
Component of such Letter of Credit Amount shall be automatically reinstated in
an amount equal to the amount of such reimbursement. The Bank shall promptly
notify the Trustee upon such reimbursement.
7. The Letter of Credit Amount, and the amount available to be drawn
hereunder by the Trustee in respect of the Principal Component and/or Interest
Component, as the case may be, of such Letter of Credit Amount shall be
permanently reduced upon the Bank's receipt of the Trustee's written and
completed certificate in the form of Exhibit 6 hereto as set forth in such
certificate. Upon the honoring by the Bank of a Final Draft in the form of
Exhibit 5 hereto on any day under this Letter of Credit, neither the Letter of
Credit Amount nor the amount available to be drawn hereunder by the Trustee in
respect of the Principal Component or the Interest Component shall be reinstated
and the Letter of Credit shall expire in accordance with the terms of Section
1(d) hereof.
8. Funds under this Letter of Credit are available to the Trustee in
one or more Drawings against the Trustee's draft(s) payable, subject to Section
9 below, on the date of such draft(s) (other than a Final Draft) and drawn on
the Bank, stating on its face: "Drawn under Bank of America National Trust and
Savings Association, Irrevocable Letter of Credit No. 3003595" and,
-3-
<PAGE>
(a) if the Drawing is being made with respect to payment of
principal of the Bonds, accompanied by a certificate signed by the Trustee in
the form of Exhibit 1 hereto appropriately completed,
(b) if the Drawing is being made with respect to payment of
interest accrued on the Bonds, accompanied by a certificate signed by
the Trustee in the form of Exhibit 2 hereto appropriately completed,
(c) if the Drawing is a Drawing being made with respect to the
portion of the purchase price of Bonds corresponding to principal of
the Bonds, accompanied by a certificate signed by the Trustee in the
form of Exhibit 3 attached hereto appropriately completed, and
(d) if the Drawing is a Drawing being made with respect to the
portion of the purchase price of Bonds corresponding to interest
accrued on the Bonds, accompanied by a certificate signed by the
Trustee in the form of Exhibit 4 hereto appropriately completed.
If the Drawing is a final Drawing being made hereunder with respect to the
payment of principal or interest on any Bonds, funds under this Letter of Credit
are available to the Trustee in a single Drawing against the Trustee's draft
(the "Final Draft") payable, subject to Section 9 below, on the date of such
draft and drawn on the Bank, stating on its face: "Drawn under Bank of America
National Trust and Savings Association, Irrevocable Letter of Credit No.
3003595" and accompanied by a certificate signed by the Trustee in the form of
Exhibit 5 hereto appropriately completed.
9. All draft(s) and certificate(s) hereunder shall be dated the date of
presentation, which shall be made at the Bank's office located at 333 South
Beaudry Avenue, Los Angeles, California, 90017 Attention: Standby Letter of
Credit Department, or at any other office which may be designated by the Bank by
written notice delivered to the Trustee (the Bank's "Office"). At the Trustee's
option, demands for payment with respect to Drawings may be made by the Trustee
under this Letter of Credit in the following manner:
(a) If the Bank receives actual delivery of the Trustee's
original signed draft(s) and certificate(s) at the Bank's Office, all
in strict conformity with the terms and conditions of this Letter of
Credit, at or prior to 12:00 Noon (New York time) on a Business Day on
or prior to the Termination Date, the Bank will honor the same not
later than 3:00 p.m. (New York time) on the same Business Day in
accordance with the Trustee's payment instructions. If the Bank
receives the Trustee's draft(s) and certificate(s), all in strict
conformity with the terms and conditions of this Letter of Credit,
after 12:00 Noon (New York time) on a Business Day on or prior to the
Termination Date, the Bank shall honor the same not later than 12:00
Noon (New York time) on the next succeeding Business Day or such later
Business Day as the Trustee may specify in its demand.
-4-
<PAGE>
(b) If the Trustee, by means of a telecopy of the draft(s) and
certificate(s) in the appropriate form attached hereto and
appropriately completed (to be followed promptly by delivery of an
original signed copy), makes demand to the Bank's Office at or prior to
12:00 Noon (New York time) for payment hereunder, and provided such
draft(s) and certificate(s) strictly conform to the terms and
conditions hereof, the Bank shall honor the same not later than 3:00
p.m. (New York time) on the same Business Day as the Trustee may
specify in its demand. If the Bank receives such telecopy of the
draft(s) and certificate(s), all in strict conformity with the terms
and conditions of this Letter of Credit, after the respective times set
forth in this clause (b) on a Business Day on or prior to the
Termination Date, the Bank shall honor the same not later than 12:00
Noon (New York time) on the next succeeding Business Day or such later
Business Day as the Trustee may specify in its demand.
10. In addition to the requirements of Sections 9(a) and 9(b) hereof,
the Trustee agrees to use its best efforts to give telephone notice with respect
to each such demand for any Drawing no later than the time specified for the
delivery of the relevant notice, but any failure to give or any delay in giving
such telephone notice shall not affect the validity of any demand for a Drawing.
All telephone notices shall be made to the Bank's Standby Letter of Credit
Department at (213) 345-6632, and all telecopier communications shall be made to
the Bank at (213) 345-6694 (or any other telephone or telecopier number which
may be designated by the Bank by written notice delivered to the Trustee).
11. At the request of the Trustee, payment under this Letter of Credit
may be made in immediately available funds by federal funds wire transfer to or
by deposit into such account as the Trustee may specify to the Bank in writing
for credit to the Paying Agent, the Trustee, or the securities depository with
respect to the Bonds.
12. As used herein, "Business Day" means a day of the year on which
banks located in all of the cities in which the principal offices of the
Trustee, the Paying Agent, the Remarketing Agent, and the Bank are located are
not authorized or required to remain closed and on which The New York Stock
Exchange is not closed.
13. This Letter of Credit is transferable in its entirety (but not in
part) to any transferee who has succeeded the Trustee as trustee under the
Ordinance and may be successively so transferred. Transfer of the available
balance under this Letter of Credit to such transferee shall be effective by the
presentation to the Bank of this Letter of Credit accompanied by a certificate
substantially in form of Exhibit 7 hereto.
14. All payments made by the Bank hereunder shall be made from the
Bank's own funds.
-5-
<PAGE>
15. This Letter of Credit sets forth in full the Bank's undertaking,
and such undertaking shall not in any way be modified, amended, amplified or
limited by reference to any document, instrument or agreement referred to herein
(including, without limitation, the Bonds, the Ordinance and the Reimbursement
Agreement), except only the certificates and the drafts referred to herein; and
any such reference shall not be deemed to incorporate herein by reference any
document, instrument or agreement except for such certificates and such drafts.
16. If the Termination Date occurs on a date on which the Bank is
closed for reasons referred to in Article 17 of the Uniform Customs and Practice
for Documentary Credits (1993 Revision), International Chamber of Commerce,
Publication No. 500, then the Termination Date shall be extended to the Bank's
close of business on the second Business Day on which the Bank is open following
written notice to the Trustee from the Bank that the Bank has reopened.
17. This Letter of Credit shall be governed by, and construed in
accordance with, the Uniform Customs and Practice for Documentary Credits (1993
Revision), International Chamber of Commerce, Publication No. 500 and, to the
extent not inconsistent therewith, the laws of the State of New York, including,
without limitation, the Uniform Commercial Code as in effect in the State of New
York.
Very truly yours,
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By:___________________________
Name:
Title:
By:___________________________
Name:
Title:
-6-
<PAGE>
EXHIBIT 1
to the Letter
of Credit
CERTIFICATE FOR THE PAYMENT OF PRINCIPAL
OF
POLLUTION CONTROL REVENUE
REFUNDING BONDS, 1997 SERIES A
(PUBLIC SERVICE COMPANY OF NEW MEXICO SAN JUAN PROJECT)
The undersigned, a duly authorized officer of ________________, as
trustee (the "Trustee"), hereby certifies to Bank of America National Trust and
Savings Association (the "Bank"), with reference to Irrevocable Letter of Credit
No. 3003595 (the "Letter of Credit"; any capitalized term used herein and not
defined shall have its respective meaning as set forth in the Letter of Credit)
issued by the Bank in favor of the Trustee, that:
(1) The Trustee is the Trustee under the Ordinance for the
holders of the Bonds.
(2) The Bonds are entitled to the benefit of the Letter of
Credit, and do not constitute Company Bonds.
(3) The Trustee is making a Drawing under the Letter of
Credit with respect to the payment of principal of the Bonds in
accordance with Section 5.01(a) of the Ordinance.
(4) The amount of principal of the Bonds which is due and
payable (or which has been declared to be due and payable) is
$_________________, and the amount of the draft accompanying this
Certificate does not exceed such amount of principal.
(5) The amount of the draft accompanying this Certificate
does not exceed the amount available to be drawn under the Letter of
Credit in respect of payment of principal of the Bonds and was
computed in accordance with the terms and conditions of the Bonds,
the Ordinance and the Letter of Credit.
(6) Payment is to be made in immediately available funds by
[federal funds wire transfer to/deposit into] account number
________________ with _________________ for credit to [the Paying
Agent/the Trustee].
<PAGE>
(7) The draft accompanying this Certificate is not the Final
Draft.
IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate as of
---------------, ----.
---------------------------,
as Trustee
By:_________________________
Name:
Title:
-2-
<PAGE>
EXHIBIT 2
to the Letter
of Credit
CERTIFICATE FOR THE PAYMENT OF INTEREST ACCRUED
ON
POLLUTION CONTROL REVENUE
REFUNDING BONDS, 1997 SERIES A
(PUBLIC SERVICE COMPANY OF NEW MEXICO SAN JUAN PROJECT)
The undersigned, a duly authorized officer of ________________, as
trustee (the "Trustee"), hereby certifies to Bank of America National Trust and
Savings Association (the "Bank"), with reference to Irrevocable Letter of Credit
No. 3003595 (the "Letter of Credit"; any capitalized term used herein and not
defined shall have its respective meaning as set forth in the Letter of Credit)
issued by the Bank in favor of the Trustee, that:
(1) The Trustee is the Trustee under the Ordinance for the
holders of the Bonds.
(2) The Bonds are in the [Flexible Mode with a Rate Period
ending on or prior to the Scheduled Termination Date] [Weekly Mode]
[Daily Mode], are entitled to the benefit of the Letter of Credit, and
do not constitute Company Bonds.
(3) The Trustee is making a Drawing under the Letter of Credit
with respect to the payment of interest accrued on the Bonds in
accordance with Section 5.01(a) of the Ordinance.
(4) The aggregate amount of interest accrued on the Bonds
which is due and payable (or which has been declared to be due and
payable) is $____________, and the amount of the draft accompanying
this Certificate does not exceed such amount of interest.
(5) Pursuant to Section 2(b) of the Letter of Credit, the
aggregate amount drawn under the Letter of Credit in respect of payment
of interest accrued on the Bonds [cannot exceed $[____________] (an
amount equal to accrued and unpaid interest on such Bonds for the
immediately preceding 209 days at an assumed interest rate of 12% per
annum (computed on the basis of a year of 365 days))]/ [cannot exceed
$[__________] (an amount equal to accrued and unpaid interest on such
Bonds for the immediately preceding 60 days at an assumed interest rate
of 12% per annum (computed on the basis of a year of 365 days))]//, and
the amount of the draft accompanying this Certificate does not exceed
such amount of interest.
- - ----------
//This bracketed text to be used when the draw is with respect to Bonds that are
in the Flexible Mode.
<PAGE>
(6) The amount of the draft accompanying this Certificate does
not exceed the amount available to be drawn under the Letter of Credit
in respect of payment of interest accrued on the Bonds.
(7) The amount of the draft accompanying this Certificate was
computed in accordance with the terms and conditions of the Bonds, the
Ordinance and the Letter of Credit, and does not include any amount of
interest which is included in any other draft presented on or prior to
the date of this Certificate.
(8) Payment is to be made in immediately available funds by
[federal funds wire transfer to/deposit into] account number
________________ with _________________ for credit to [the Paying
Agent/the Trustee].
(9) The Draft accompanying this Certificate is not the Final
Draft.
IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate as of
---------------, ----.
---------------------------,
as Trustee
By:_________________________
Name:
Title:
- - ----------
// This bracketed text to be used when the draw is with respect to Bonds that
are in the Weekly or Daily Mode.
-2-
<PAGE>
EXHIBIT 3
to the Letter
of Credit
CERTIFICATE FOR THE PAYMENT OF THAT PORTION OF
THE PURCHASE PRICE OF BONDS
CORRESPONDING TO PRINCIPAL OF
POLLUTION CONTROL REVENUE
REFUNDING BONDS, 1997 SERIES A
(PUBLIC SERVICE COMPANY OF NEW MEXICO SAN JUAN PROJECT)
The undersigned, a duly authorized officer of _______________, as
trustee (the "Trustee"), hereby certifies to Bank of America National Trust and
Savings Association (the "Bank"), with reference to Irrevocable Letter of Credit
No. 3003595 (the "Letter of Credit"; any capitalized term used herein and not
defined shall have its respective meaning as set forth in the Letter of Credit)
issued by the Bank in favor of the Trustee, that:
(1) The Trustee is the Trustee under the Ordinance for the
holders of the Bonds.
(2) The Bonds are in the [Flexible Mode with a Rate Period
ending on or prior to the Scheduled Termination Date] [Weekly Mode]
[Daily Mode], are entitled to the benefit of the Letter of Credit, and
do not constitute Company Bonds.
(3) The Trustee is making a Drawing under the Letter of Credit
with respect to the Purchase Price of Bonds corresponding to principal
of Bonds required to be delivered to the Trustee pursuant to Section
5.01(b) of the Ordinance and not remarketed on the date such Bonds are
to be purchased.
(4) The amount of Purchase Price corresponding to such
principal of such unremarketed Bonds is $__________ and the amount of
the draft accompanying this Certificate does not exceed such amount of
principal.
(5) The amount of the draft accompanying this Certificate does
not exceed the amount available to be drawn under the Letter of Credit
in respect of the portion of the Purchase Price corresponding to
principal of such unremarketed Bonds and was computed in accordance
with the terms and conditions of the Bonds and the Ordinance.
<PAGE>
(6) Payment is to be made in immediately available funds by
[federal funds wire transfer to/deposit into] account number
________________ with _________________ for credit to [the Paying
Agent/the Trustee].
(7) The draft accompanying this Certificate is not the Final
Draft.
IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate as of
---------------, ----.
---------------------------,
as Trustee
By:_________________________
Name:
Title:
-2-
<PAGE>
EXHIBIT 4
to the Letter
of Credit
CERTIFICATE FOR THE PAYMENT OF THAT PORTION OF THE
PURCHASE PRICE OF BONDS CORRESPONDING TO ACCRUED
INTEREST ON
POLLUTION CONTROL REVENUE
REFUNDING BONDS, 1997 SERIES A
(PUBLIC SERVICE COMPANY OF NEW MEXICO SAN JUAN PROJECT)
The undersigned, a duly authorized officer of _______________, as
trustee (the "Trustee"), hereby certifies to Bank of America National Trust and
Savings Association (the "Bank"), with reference to Irrevocable Letter of Credit
No. 3003595 (the "Letter of Credit"; any capitalized term used herein and not
defined shall have its respective meaning as set forth in the Letter of Credit)
issued by the Bank in favor of the Trustee, that:
(1) The Trustee is the Trustee under the Ordinance for the
holders of the Bonds.
(2) The Bonds are in the [Flexible Mode with a Rate Period
ending on or prior to the Scheduled Termination Date] [Weekly Mode]
[Daily Mode], are entitled to the benefit of the Letter of Credit, and
do not constitute Company Bonds.
(3) The Trustee is making a Drawing under the Letter of Credit
with respect to the portion of the Purchase Price of Bonds
corresponding to interest accrued on the Bonds required to be delivered
to the Trustee pursuant to Section 5.01(b) of the Ordinance and not
remarketed on the date such Bonds are to be purchased.
(4) The portion of the Purchase Price of Bonds corresponding
to interest accrued on such unremarketed Bonds is $_________ and the
amount of the draft accompanying this Certificate does not exceed such
amount of accrued interest.
(5) Pursuant to Section 2(b) of the Letter of Credit, the
aggregate amount drawn under the Letter of Credit in respect of the
portion of the Purchase Price corresponding to interest accrued on such
unremarketed Bonds [cannot exceed $[____________] (an amount equal to
accrued and unpaid interest on such Bonds for the immediately preceding
209 days at an assumed interest rate of 12% per annum (computed on the
basis of a year of 365 days))]// [cannot exceed $[__________] (an
amount equal to accrued and unpaid interest on such Bonds for the
immediately preceding 60 days at an assumed interest rate of 12% per
annum (computed on the basis of a year of 365 days))]//, and the amount
of the draft accompanying this Certificate does not exceed such amount
of interest.
<PAGE>
(6) The amount of the draft accompanying this Certificate does
not exceed the amount available to be drawn under the Letter of Credit
in respect of the portion of the Purchase Price corresponding to
interest accrued on such unremarketed Bonds and was computed in
accordance with the terms and conditions of the Bonds and the
Ordinance.
(7) Payment is to be made in immediately available funds by
[federal funds wire transfer to/deposit into] account number
________________ with _________________ for credit to [the Paying
Agent/the Trustee].
(8) The draft accompanying this Certificate is not the Final
Draft.
IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate as of
---------------, ----.
---------------------------,
as Trustee
By:_________________________
Name:
Title:
- - ----------
// This bracketed text to be used when the draw is with respect to Bonds that
are in the Flexible Mode.
// This bracketed text to be used when the draw is with respect to Bonds that
are in the Weekly or Daily Mode.
<PAGE>
EXHIBIT 5
to the Letter
of Credit
CERTIFICATE FOR THE PAYMENT OF FINAL DRAFT
RELATING TO
POLLUTION CONTROL REVENUE
REFUNDING BONDS, 1997 SERIES A
(PUBLIC SERVICE COMPANY OF NEW MEXICO SAN JUAN PROJECT)
The undersigned, a duly authorized officer of _______________, as
trustee (the "Trustee"), hereby certifies to Bank of America National Trust and
Savings Association (the "Bank"), with reference to Irrevocable Letter of Credit
No. 3003595 (the "Letter of Credit"; any capitalized term used herein and not
defined shall have its respective meaning as set forth in the Letter of Credit)
issued by the Bank in favor of the Trustee, that:
(1) The Trustee is the Trustee under the Ordinance for the
holders of the Bonds.
(2) The Bonds are in the [Flexible Mode] [Weekly Mode] [Daily
Mode], are entitled to the benefit of the Letter of Credit, and do not
constitute Company Bonds.
(3) The Trustee is making a Drawing under the Letter of Credit
in the aggregate amount of $________ with respect to
(a) the payment of principal of the Bonds in
accordance with Section [5.01(a)] [5.01(b)] of the Ordinance;
and
(b) the payment of interest accrued on the Bonds in
accordance with Section [5.01(a)] [5.01(b)] of the Ordinance.
(4) The aggregate amount which is due and payable with respect
to the Bonds (or which has been declared to be due and payable) is
$________, corresponding to
(a) principal of the Bonds in the aggregate amount
of $________, and
(b) interest on the Bonds in the aggregate amount
of $________.
<PAGE>
(5) The amount of the draft accompanying this Certificate does
not exceed the amount available to be drawn under the Letter of Credit
in respect of payment of principal of, and interest on, the Bonds, and
was computed in accordance with the terms and conditions of the Bonds
and the Ordinance.
(6) Payment is to be made in immediately available funds by
[federal funds wire transfer to/deposit into] account number
________________ with _________________ for credit to [the Paying
Agent/the Trustee].
(7) The draft accompanying this Certificate has been presented
to the Bank following the [the occurrence of an Event of Default under
the Ordinance] [a mandatory redemption of the Bonds made pursuant to
notice from the Bank to the Trustee pursuant to clause (2)(ii) of
Section 17 of the Reimbursement Agreement, substantially in the form of
Exhibit 9 to the Letter of Credit].
(8) The draft accompanying this Certificate is the Final Draft.
IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate as of
---------------, ----.
---------------------------,
as Trustee
By:_________________________
Name:
Title:
-2-
<PAGE>
EXHIBIT 6
to the Letter
of Credit
CERTIFICATE FOR THE PERMANENT
REDUCTION OF LETTER OF CREDIT AMOUNT
OF LETTER OF CREDIT NO. 3003595
POLLUTION CONTROL REVENUE
REFUNDING BONDS, 1997 SERIES A
(PUBLIC SERVICE COMPANY OF NEW MEXICO SAN JUAN PROJECT)
The undersigned, a duly authorized officer of ______________, as
trustee (the "Trustee"), hereby certifies to Bank of America National Trust and
Savings Association (the "Bank"), with reference to Irrevocable Letter of Credit
No. 3003595 (the "Letter of Credit"; any capitalized term used herein and not
defined shall have its respective meaning as set forth in the Letter of Credit)
issued by the Bank in favor of the Trustee, that:
(1) The Trustee is the Trustee under the Ordinance for the
holders of the Bonds.
(2) The aggregate principal amount of the Outstanding Bonds
has been reduced by $_____________ to $________________.
(3) The Principal Component is hereby correspondingly reduced
by $_______________ to $____________.
(4) The Interest Component is hereby reduced, as applicable:
(a) by $______________ to $_________// to reflect the
maximum amount of interest due on each Interest Payment Date
with respect to Bonds in the Flexible Mode allocable to the
reduced amount of principal set forth in Section (3) hereof;
and
- - ----------
// Equal to the principal amount in paragraph (2) times 12% times 209/365.
<PAGE>
(b) by $______________ to $_________// to reflect the
maximum amount of interest due on each Interest Payment Date
with respect to Bonds in the Daily or Weekly Mode allocable to
the reduced amount of principal set forth in Section (3)
hereof.
IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate as of
---------------, ----.
---------------------------,
as Trustee
By:_________________________
Name:
Title:
- - ----------
// Equal to the principal amount in paragraph (2) times 12% times 60/365.
-2-
<PAGE>
EXHIBIT 7
to the Letter
of Credit
INSTRUCTION TO TRANSFER
LETTER OF CREDIT NO. 3003595
POLLUTION CONTROL REVENUE
REFUNDING BONDS, 1997 SERIES A
(PUBLIC SERVICE COMPANY OF NEW MEXICO SAN JUAN PROJECT)
The undersigned, a duly authorized officer of _______________, as
trustee (the "Trustee"), hereby irrevocably instructs Bank of America National
Trust and Savings Association (the "Bank"), with reference to Irrevocable Letter
of Credit No. 3003595 (the "Letter of Credit"; any capitalized term used herein
and not defined shall have its respective meaning as set forth in the Letter of
Credit) issued by the Bank in favor of the Trustee, to transfer all rights of
the Trustee to draw under the Letter of Credit to
- - -------------------------------------------------------
(Name of Transferee)
- - -------------------------------------------------------
(Address)
The transferee has succeeded the undersigned as Trustee under Ordinance
No. 97-1052, adopted January 28, 1997 by the City of Farmington, New Mexico
relating to the Pollution Control Revenue Refunding Bonds, 1997 Series A (Public
Service Company of New Mexico San Juan Project).
The Letter of Credit is attached hereto and is being surrendered to the
Bank herewith.
IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate as of
---------------, ----.
---------------------------,
as Trustee
By:_________________________
Name:
Title:
<PAGE>
EXHIBIT 8
to the Letter
of Credit
NOTICE OF AMENDMENT
OF LETTER OF CREDIT NO. 3003595
POLLUTION CONTROL REVENUE
REFUNDING BONDS, 1997 SERIES A
(PUBLIC SERVICE COMPANY OF NEW MEXICO SAN JUAN PROJECT)
The undersigned, a duly authorized officer of Bank of America National
Trust and Savings Association (the "Bank"), hereby certifies to
_________________, as trustee (the "Trustee"), with reference to Irrevocable
Letter of Credit No. 3003595 (the "Letter of Credit"; any capitalized term used
herein and not defined shall have its respective meaning as set forth in the
Letter of Credit) issued by the Bank in favor of the Trustee, that the Scheduled
Termination Date of the Letter of Credit has been extended to __________ __,
____.
This amendment is to be attached to the Letter of Credit and is made an
integral part thereof immediately upon the execution and delivery hereof.
IN WITNESS WHEREOF, the Bank has executed and delivered this Certificate as of
_______________, ____.
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By:_________________________
Name:
Title:
<PAGE>
EXHIBIT 9
to the Letter
of Credit
NOTICE OF MANDATORY REDEMPTION
RELATING TO
LETTER OF CREDIT NO. 3003595
POLLUTION CONTROL REVENUE
REFUNDING BONDS, 1997 SERIES A
(PUBLIC SERVICE COMPANY OF NEW MEXICO SAN JUAN PROJECT)
The undersigned, a duly authorized officer of Bank of America National
Trust and Savings Association (the "Bank"), hereby notifies _________________,
as trustee (the "Trustee"), with reference to Irrevocable Letter of Credit No.
3003595 (the "Letter of Credit"; any capitalized term used herein and not
defined shall have its respective meaning as set forth in the Letter of Credit)
issued by the Bank in favor of the Trustee, that an Event of Default (as defined
in the Reimbursement Agreement) has occurred. Accordingly, pursuant to clause
(2)(ii) of Section 17 of the Reimbursement Agreement, the Bank notifies the
Trustee pursuant to Section 3.01(c) of the Ordinance of a mandatory redemption
of the Bonds.
IN WITNESS WHEREOF, the Bank has executed and delivered this Certificate as of
_______________, ____.
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By:_________________________
Name:
Title:
<PAGE>
EXHIBIT B
(to the Reimbursement
Agreement)
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (as amended or modified from time to time, this
"Pledge Agreement"), dated as of February 1, 1997, made by PUBLIC SERVICE
COMPANY OF NEW MEXICO, a New Mexico corporation (the "Company"), as pledgor, in
favor of FIRST SECURITY BANK OF NEW MEXICO, N.A., as collateral agent (together
with any successor(s) thereto in such capacity, the "Collateral Agent") for BANK
OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION (the "Bank"), as pledgee,
W I T N E S S E T H:
WHEREAS, the City of Farmington, New Mexico (the "Issuer"), has agreed
with the Company to issue its Pollution Control Revenue Refunding Bonds, 1997
Series A (Public Service Company of New Mexico San Juan Project) (the "Bonds")
under that certain Ordinance No. 97-1052 adopted January 28, 1997 (as
supplemented by Resolution No. 97-870, adopted January 28, 1997, and as amended
by Ordinance No. 97-1053, adopted February 11, 1997, and as hereafter modified,
altered, amended, supplemented or confirmed by any and all ordinances
supplemental thereto or amendatory thereof adopted from time to time pursuant
thereto, the "Ordinance");
WHEREAS, First Security Bank of New Mexico, N.A., a national banking
association, has been appointed as trustee under the Ordinance (in such
capacity, together with its duly appointed successors, the "Trustee");
WHEREAS, the Company and the Bank have entered into that certain
Reimbursement Agreement dated as of February 1, 1997 (as amended or modified
from time to time, the "Reimbursement Agreement"), pursuant to which the Bank
has agreed to issue the Letter of Credit to the Trustee for the account of the
Company in order to support certain payments with respect to the Bonds; and
WHEREAS, it is a condition precedent under the Reimbursement Agreement
to the obligation of the Bank to issue the Letter of Credit that the Company
shall have executed and delivered this Pledge Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, and in order to induce the Bank to
issue the Letter of Credit, the Company agrees, for the benefit of the Bank, as
follows:
-1-
<PAGE>
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Pledge Agreement, including its preamble and
recitals, shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):
"Bank" is defined in the preamble.
"Bonds" is defined in the first recital.
"Collateral Agent" defined in the preamble.
"Company" is defined in the preamble.
"Collateral" is defined in Section 2.1.
"Issuer" defined in the first recital.
"Ordinance" is defined in the first recital.
"Pledge Agreement" is defined in the preamble.
"Pledged Bond" means each "Company Bond" as defined in the Ordinance.
"Pledged Property" means all Pledged Bonds, and all other pledged
bonds, all other securities, all assignments of any amounts due or to become
due, all other instruments which are now being delivered by the Company to the
Bank for the purpose of pledge under this Pledge Agreement or the Ordinance, and
all proceeds of any of the foregoing.
"Reimbursement Agreement" is defined in the third recital.
"Secured Obligations" is defined in Section 2.2.
"Trustee" is defined in the second recital.
"U.C.C." means the Uniform Commercial Code as in effect in State of New
York.
SECTION 1.2. Reimbursement Agreement Definitions. Unless otherwise
defined herein or the context otherwise requires, terms used in this Pledge
Agreement, including its preamble and recitals, have the meanings provided in
the Reimbursement Agreement.
-2-
<PAGE>
SECTION 1.3. U.C.C. Definitions. Unless otherwise defined herein or
the context otherwise requires, terms for which meanings are provided in the
U.C.C. are used in this Pledge Agreement, including its preamble and recitals,
with such meanings.
ARTICLE II
PLEDGE
SECTION 2.1. Grant of Security Interest. The Company hereby pledges,
hypothecates, assigns, charges, mortgages, delivers and transfers to the
Collateral Agent, for the benefit of the Bank, and hereby grants to the
Collateral Agent, for the benefit of the Bank, a continuing security interest
in, all of the following property (the "Collateral"):
(a) each Pledged Bond from time to time outstanding under the
Ordinance;
(b) all other Pledged Property, whether now or hereafter
delivered to the Bank in connection with this Pledge Agreement, subject
to clause (b) of Section 26 of the Reimbursement Agreement;
(c) all interest and other payments and rights with respect to
any Pledged Property; and
(d) all proceeds of any of the foregoing.
SECTION 2.2. Security for Obligations. This Pledge Agreement secures
the payment in full of all obligations of the Company to the Bank now or
hereafter existing under the Reimbursement Agreement and each Related Document
to which the Company is or may become a party, whether for principal, interest,
costs, fees, expenses or otherwise (all such obligations of the Company being
the "Secured Obligations"). The Company hereby consents to the Collateral Agent
acting as the agent of the Bank for the purpose of perfecting the security
interest of this Pledge Agreement and of holding the Collateral for the benefit
of the Bank pursuant to this Pledge Agreement.
SECTION 2.3. Continuing Security Interest. This Pledge Agreement
shall create a continuing security interest in the Collateral and shall
(a) remain in full force and effect until payment in full of
all Secured Obligations,
(b) be binding upon the Company and its successors,
transferees and assigns, and
-3-
<PAGE>
(c) inure, together with the rights and remedies of the
Collateral Agent hereunder, to the benefit of the Bank and its
successors, transferees and assigns.
SECTION 2.4. Payments on the Bonds. If, while this Pledge Agreement is
in effect, the Company shall become entitled to receive or shall receive any
interest or other payment in respect of the Pledged Bonds or any other Pledged
Property, the Company agrees to accept the same as the Bank's agent and to hold
the same in trust on behalf of the Bank and to deliver the same forthwith to the
Bank. The Company instructs and authorizes the Collateral Agent to hold and
receive on the Bank's behalf and to deliver forthwith to the Bank any payment
received by it in respect of the Pledged Bonds (including the proceeds of any
remarketing of the Pledged Bonds) or any other Pledged Property. All such
payments in respect of the Pledged Bonds or other Pledged Property which are
paid to the Bank shall be credited against the Secured Obligations as the Bank
may determine.
SECTION 2.5. Termination of Pledge Agreement. Upon the indefeasible
payment in full of all Secured Obligations, the security interest granted herein
shall terminate and all rights to the Collateral shall revert to the Company.
Upon any termination hereunder, the Collateral Agent will, at the Company's sole
expense, deliver to the Trustee, without representation, warranty or recourse of
any kind whatsoever, all instruments evidencing the Pledged Bonds, together with
all other Collateral held by the Collateral Agent hereunder, and execute and
deliver to the Company and any clearing corporation or financial intermediary
described in clause (b) of Section 2.6 such documents as the Company shall
reasonably request to evidence such termination.
SECTION 2.6. Delivery of Collateral to the Bank; Registration of Pledge.
(a) If an Event of Default has occurred and is continuing,
upon notice by the Bank to the Collateral Agent (which notice shall
direct the Collateral Agent to take the action referred to in this
clause (a)), the Collateral Agent shall deliver all certificates or
instruments (if any) representing or evidencing any Pledged Bonds or
other Collateral in its possession to the Bank, and the Bank may,
without notice, exercise all rights, privileges or options pertaining
to any such Pledged Bonds or other Collateral as if it were absolute
owner of such Pledged Bonds or other Collateral, upon such terms and
conditions as it may determine, all without liability except to account
for property actually received by it, but the Bank shall have no duty
to exercise any of those rights, privileges or options and shall not be
responsible for any failure to do so or delay in so doing.
-4-
<PAGE>
(b) Promptly upon any Bonds becoming Pledged Bonds, the
Company shall cause the Collateral Agent to receive (i) evidence that
entries have been made on the books of a clearing corporation (as
defined in Section 8-102 of the U.C.C.) to effect the "delivery" of the
Pledged Bonds to the Collateral Agent and the pledge of the Pledged
Bonds to the Collateral Agent, for the benefit of the Bank, as provided
in, and in accordance with, Section 8-320 of the U.C.C., or (ii)
evidence that a financial intermediary has identified the Pledged Bonds
as having been pledged to the Collateral Agent and has supplied the
Collateral Agent with confirmation thereof (including, if requested by
the Collateral Agent, the delivery to the Collateral Agent of a notice
from the Company to the financial intermediary substantially in the
form of Attachment I hereto, duly acknowledged by the financial
intermediary), all as provided in, and in accordance with, Section
8-313(1)(d)(i) of the U.C.C. (including the requirement of specificity
required therein), which evidence shall have been delivered to the
Collateral Agent, all in form and substance satisfactory to the
Collateral Agent and the Bank; provided, however, that in any event,
all other necessary and appropriate action and approvals shall have
been taken or received to grant to the Collateral Agent a first
priority fully perfected security interest in the Pledged Bonds.
SECTION 2.7. No Disposition. The Company agrees that it will not sell,
assign, transfer, exchange or otherwise dispose of, or grant any option with
respect to, the Collateral, nor will it create, incur or permit to exist any
liens, security interests, options or other charges or encumbrances with respect
to all or any part of the Collateral, except for the security interest of this
Pledge Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Warranties, etc. The Company represents and warrants unto
the Bank, as at the date of each pledge and delivery hereunder by the Company to
the Collateral Agent of any Collateral, as set forth in this Article.
SECTION 3.1.1. Ownership, No Liens, etc. The Company is or will be the
legal and beneficial owner of, and has good and marketable title to (and has
full right and authority to pledge and assign) such Collateral, free and clear
of all liens, security interests, options, or other charges or encumbrances,
except any lien or security interest granted pursuant hereto in favor of the
Collateral Agent.
-5-
<PAGE>
SECTION 3.1.2. Valid Security Interest. The execution and delivery of
this Pledge Agreement, together with the delivery of such Collateral to the
Collateral Agent (or, to the extent any Collateral is in book-entry form, upon
the making of appropriate entries in the relevant books and records of any
clearing corporation or financial intermediary, as the case may be, which
entries in the case of all relevant Collateral, will be made promptly upon any
such property becoming Collateral hereunder), are effective to create a valid,
perfected, first priority security interest in favor of the Collateral Agent for
the benefit of the Bank, in such Collateral and all proceeds thereof, securing
the Secured Obligations. No filing or other action will be necessary to perfect
or protect such security interest.
ARTICLE IV
THE COLLATERAL AGENT
SECTION 4.1. Collateral Agent Appointed Attorney-in-Fact. The Company
hereby irrevocably appoints the Collateral Agent the Company's attorney-in-fact,
with full power of substitution and full authority in the place and stead of the
Company and in the name of the Company or otherwise, from time to time in the
Bank'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 Pledge Agreement, including without limitation:
(a) after the occurrence and continuance of an Event of
Default, to ask, 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;
(b) to receive, endorse and collect any drafts or other
instruments, documents and chattel paper, in connection with clause
(a) above; and
(c) to file any claims or take any action or institute any
proceedings which the Collateral Agent may deem necessary or desirable
for the collection of any of the Collateral or otherwise to enforce the
rights of the Collateral Agent with respect to any of the Collateral.
The Company hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
SECTION 4.2. Collateral Agent May Perform. Either the Collateral Agent
or the Bank may from time to time, at its option, perform any act which the
Company agrees hereunder to perform and which the Company shall fail to perform
after being requested in writing so to perform (it being understood that no such
request need be given after the occurrence and during the continuance of an
Event of Default) and the Collateral Agent or the Bank may from time to time
take any other action which the Collateral Agent or the Bank reasonably deems
necessary for the maintenance, preservation or protection of any of the
Collateral or of its security interest therein, and the expenses of the
Collateral Agent and the Bank incurred in connection therewith shall be payable
by the Company pursuant to Section 5.5.
-6-
<PAGE>
SECTION 4.3. Collateral Agent Has No Duty. The powers and discretionary
rights conferred on the Collateral Agent hereunder are solely to protect its
interest (on behalf of the Bank) in the Collateral and shall not impose any duty
on it to exercise any such powers. Except for reasonable care of any Collateral
in its actual possession and the accounting for moneys actually received by it
hereunder, the Collateral Agent shall have no duty as to any Collateral or
responsibility for
(a) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relative
to any Pledged Property, whether or not the Collateral Agent has or is
deemed to have knowledge of such matters, or
(b) taking any necessary steps to preserve rights against
prior parties or any other rights pertaining to any Collateral.
SECTION 4.4. Reasonable Care. The Collateral Agent shall be deemed to
have exercised reasonable care in the custody and preservation of the Collateral
in its possession if the Collateral is accorded treatment substantially equal to
that which the Collateral Agent accords its own property consisting of
negotiable instruments.
ARTICLE V
REMEDIES
SECTION 5.1. Certain Remedies. If any Event of Default shall have
occurred and be continuing:
(a) The Bank may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on
default under the U.C.C. (whether or not the U.C.C. applies to the
affected Collateral) and also may, without notice except as specified
below, sell the Collateral or any part thereof in one or more parcels
at public or private sale, at any of the Bank's offices or elsewhere,
for cash, on credit or for future delivery, and upon such other terms
as the Bank may deem commercially reasonable. The Company agrees that,
to the extent notice of sale shall be required by law, at least ten
days' prior notice to the Company 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 Bank shall not be obligated to
make any sale of Collateral regardless of notice of sale having been
given. The Bank 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.
-7-
<PAGE>
(b) The Bank may
(i) transfer all or any part of the Collateral into
the name of the Bank or its nominee, with or without
disclosing that such Collateral is subject to the lien and
security interest hereunder,
(ii) notify the parties obligated on any of the
Collateral to make payment to the Bank of any amount due or to
become due thereunder,
(iii) enforce collection of any of the Collateral by
suit or otherwise, and surrender, release or exchange all or
any part thereof, or compromise or extend or renew for any
period (whether or not longer than the original period) any
obligations of any nature of any party with respect thereto,
(iv) endorse any checks, drafts, or other writings in
the Company's name to allow collection of Collateral,
(v) take control of any proceeds of the Collateral,
and
(vi) execute (in the name, place and stead of the
Company) endorsements, assignments, stock powers and other
instruments of conveyance or transfer with respect to all or
any of the Collateral.
SECTION 5.2. Compliance with Restrictions. The Company agrees that in
any sale of any of the Collateral whenever an Event of Default shall have
occurred and be continuing, the Bank is hereby authorized to comply with any
limitation or restriction in connection with such sale as it may be advised by
counsel is necessary in order to avoid any violation of applicable law including
compliance with such procedures as may restrict the number of prospective
bidders and purchasers, require that such prospective bidders and purchasers
have certain qualifications, and restrict such prospective bidders and
purchasers to persons who will represent and agree that they are purchasing for
their own account for investment and not with a view to the distribution or
resale of such Collateral, or in order to obtain any required approval of the
sale or of the purchaser by any governmental regulatory authority or official,
and the Company further agrees that such compliance shall not result in such
sale being considered or deemed not to have been made in a commercially
reasonable manner, nor shall the Bank be liable or accountable to the Company
for any discount allowed by the reason of the fact that such Collateral is sold
in compliance with any such limitation or restriction.
-8-
<PAGE>
SECTION 5.3. Application of Proceeds. All cash proceeds received by the
Bank in respect of any sale of, collection from, or other realization upon, all
or any part of the Collateral may, in the discretion of the Bank, be held by the
Bank as additional collateral security for, or then or at any time thereafter be
applied in whole or in part by the Bank against, all or any part of the Secured
Obligations in such order as the Bank shall elect. Any surplus of such cash or
cash proceeds held by the Bank and remaining after payment in full of all the
Secured Obligations shall be paid over to the Company or to whomsoever may be
lawfully entitled to receive such surplus.
SECTION 5.4. Sale of Collateral.
(a) The Company recognizes that the Bank may resort to one or more
private sales of the Collateral which may result in prices and other terms less
favorable to the seller than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner.
(b) The Company further agrees to do or cause to be done all such other
acts and things as may be necessary to make such sale or sales of all or any
part of the Pledged Bonds valid and binding and in compliance with any and all
applicable laws, rules, regulations, orders or decrees, all at the Company's
expense. The Company further agrees that a breach of any of the covenants
contained in this Section will cause irreparable injury to the Bank for which
the Bank would have no adequate remedy at law in respect of such breach and, as
a consequence, agrees that each and every covenant contained in this Section
shall be specifically enforceable against the Company, and the Company waives
and agrees not to assert any defenses against an action for specific performance
of such covenants except for a defense that no Event of Default has occurred
under the Reimbursement Agreement.
SECTION 5.5. Indemnity and Expenses. Neither the Collateral Agent nor
the Bank nor any of their respective officers, directors, employees, agents,
attorneys-in-fact or affiliates shall be liable for any action lawfully taken or
omitted to be taken by it or such person under or in connection with this Pledge
Agreement (except for its or such person's own gross negligence or willful
misconduct). The Company hereby indemnifies and holds harmless the Collateral
Agent and the Bank from and against any and all claims, losses and liabilities
arising out of or resulting from this Pledge Agreement (including enforcement of
this Pledge Agreement), except claims, losses or liabilities resulting from the
Collateral Agent's or the Bank's gross negligence or wilful misconduct. Upon
demand, the Company will pay to the Bank or to the Collateral Agent, as the case
may be, the amount of any and all reasonable expenses, including the reasonable
fees and disbursements of its counsel and of any experts and agents, which the
Bank or the Collateral Agent, as the case may be, may incur in connection with:
-9-
<PAGE>
(a) the administration of this Pledge Agreement, the
Reimbursement Agreement and each other Related Document;
(b) the custody, preservation, use, or operation of, or the
sale of, collection from, or other realization upon, any of the
Collateral;
(c) the exercise or enforcement of any of the rights of the
Bank or the Collateral Agent hereunder; or
(d) the failure by the Company to perform or observe any of
the provisions hereof.
The Collateral Agent may rely and shall be protected in acting or refraining
from acting upon any written notice, certificate, instruction or request
furnished to it hereunder and believed by it to be genuine and to have been
signed or presented by the proper party. The Collateral Agent may consult with
counsel of its own choice and shall have full and complete authorization and
protection for any action taken or suffered by it hereunder in good faith and in
accordance with the opinion of such counsel.
ARTICLE VI
MISCELLANEOUS PROVISIONS
SECTION 6.1. Related Document. This Pledge Agreement is a Related
Document executed pursuant to the Reimbursement Agreement and shall (unless
otherwise expressly indicated herein) be construed, administered and applied in
accordance with the terms and provisions thereof.
SECTION 6.2. Waivers, Amendments, etc. No waiver of any provision of
this Pledge Agreement or consent to any departure by the Company herefrom shall
in any event be effective unless the same shall be in writing and signed by the
Collateral Agent and the Bank, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
it is given. No amendment to any provision of this Pledge Agreement shall in any
event be effective unless the same shall be in writing and signed by the parties
hereto.
-10-
<PAGE>
SECTION 6.3. Notices. All notices, requests and other communications to
any party hereunder shall be in writing (including bank wire, telecopier or
similar writing) and shall be given to such party at its address or telecopier
number set forth below or such other address or telecopier number as such party
may hereafter specify for the purpose by notice to the other parties. Each such
notice, request or other communication shall be effective (a) if given by
telecopier, when such telecopy is transmitted to the telecopier number specified
below and receipt of such telecopy is acknowledged by the party to which it was
transmitted, (b) if given by mail, ten days after such communication is
deposited in the mail with first-class postage prepaid, addressed as aforesaid
or (c) if given by any other means, when delivered at the address specified in
this Section.
To the Company:
Public Service Company of New Mexico
Alvarado Square - MS 2702
Albuquerque, New Mexico 87158
Attention: Treasurer
Telephone: (505) 241-2700
Telecopier: (505) 241-2369
To the Bank:
Bank of America National Trust and Savings Association
555 South Flower Street
10th Floor
Los Angeles, California 90071
Attention: Bob Eaton
Telephone: (213) 228-5599
Telecopier: (213) 228-4062
With a copy to:
White & Case
633 West Fifth Street
Suite 1900
Los Angeles, CA 90071
Attention: Neil W. Rust, Esq.
Telephone: (213) 620-7748
Telecopier: (213) 687-0758
-11-
<PAGE>
To the Collateral Agent:
First Security Bank of New Mexico, N.A.
40 First Plaza, N.W.
3rd Floor
Albuquerque, New Mexico 87102
Attention: Corporate Trust Services
Telephone: 505-765-4124
Telecopier: 505-765-4190
SECTION 6.4. Section Captions. Section captions used in this Pledge
Agreement are for convenience of reference only, and shall not affect the
construction of this Pledge Agreement.
SECTION 6.5. Further Assurances. The Company agrees that at any time
and from time to time upon the written request of the Bank, the Company will
execute and deliver such further documents and do such further acts and things
as the Bank may reasonably request in order to effect the purposes of this
Pledge Agreement.
SECTION 6.6. Severability. Wherever possible each provision of this
Pledge Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Pledge Agreement shall
be prohibited by or invalid under such law, such provision shall be ineffective
to the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Pledge
Agreement.
SECTION 6.7. Counterparts. This Pledge Agreement may be signed in any
number of counterpart copies, but all such copies shall constitute one and the
same instrument.
SECTION 6.8. Successor Collateral Agent. In the event a successor
trustee shall have been appointed under the Ordinance, the Collateral Agent may
be removed and a successor collateral agent may be appointed by the Bank.
-12-
<PAGE>
SECTION 6.9. Governing Law, Entire Agreement, etc. THIS PLEDGE
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL
LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT THE VALIDITY OR
PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT
OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER
THAN THE STATE OF NEW YORK. THIS PLEDGE AGREEMENT, THE REIMBURSEMENT AGREEMENT
AND THE OTHER RELATED DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE
PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR
AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.
IN WITNESS WHEREOF, the parties hereto have caused this Pledge
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the day and year first above written.
PUBLIC SERVICE COMPANY OF NEW MEXICO
By _________________________________
Name:
Title:
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By _________________________________
Name:
Title:
FIRST SECURITY BANK OF NEW MEXICO, N.A.
By _________________________________
Name:
Title:
-13-
<PAGE>
ATTACHMENT I
(to Pledge Agreement)
PUBLIC SERVICE COMPANY OF NEW MEXICO
Alvarado Square - MS 2702
Albuquerque, New Mexico 87158
____________ __, 19__
[Name of financial intermediary]
- - --------------------------------
- - --------------------------------
Attention: __________________
Ladies and Gentlemen:
Public Service Company of New Mexico (the "Company") is or will be from
time to time the beneficial owner of the book entry form bonds issued by the
City of Farmington, New Mexico and known as the "Pollution Control Revenue
Refunding Bonds, 1997 Series A (Public Service Company of New Mexico San Juan
Project) (the "Pledged Bonds") which are currently held in one of your nominee
names pursuant to custodial account arrangements between the Company and you.
Effective as of the date hereof, the Company pledges, assigns and
hypothecates to Bank of America National Trust and Savings Association (the
"Bank") and grants to the Bank a first priority security interest in, the
Pledged Bonds and all proceeds thereof, all pursuant to the Pledge Agreement
dated as of February 1, 1997 (the "Pledge Agreement") made by the Company in
favor of the Bank.
The Company hereby requests and instructs you to mark your books and
records to reflect the pledge of the Pledged Bonds and all proceeds thereof to
the Bank and to assure that, unless and until the Bank gives you written notice
to the contrary, the Pledged Bonds and all proceeds thereof will be held by you
subject to the terms and conditions of the Pledge Agreement and that, if such
Pledged Bonds become evidenced by certificates, such certificates will
immediately be turned over to the Bank in pledge.
Very truly yours,
PUBLIC SERVICE COMPANY OF NEW MEXICO
By ____________________________
Name:
Title:
Books and Records So Marked:
[Insert name of
Financial Intermediary]
By__________________________
Name:
Title:
-14-
<PAGE>
ARTHUR
ANDERSEN
ARTHUR ANDERSEN LLP
May 5, 1997 Arthur Andersen LLP
Suite 400
6501 Americas Parkway NE
Albuquerque, NM 87110-5372
(505) 889-4700
Public Service Company of New Mexico:
We are aware that Public Service Company of New Mexico has incorporated by
reference in its Registration Statement Nos. 33-65418, 333-03303, and 333-03289
its Form 10-Q for the quarter ended March 31, 1997, which includes our report
dated May 5, 1997 , covering the unaudited interim financial information
contained therein. Pursuant to Regulation C of the Securities Act of 1933, that
report is not considered a part of the registration statement prepared or
certified by our firm or a report prepared or certified by our firm within the
meaning of Sections 7 and 11 of the Act.
Very truly yours,
Arthur Andersen LLP
<PAGE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from the
Company's Consolidated Statement of Earnings, Consolidated Balance Sheets and
Consolidated Statement of Cash Flows for the period ended March 31, 1997 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,553,346
<OTHER-PROPERTY-AND-INVEST> 272,973
<TOTAL-CURRENT-ASSETS> 269,663
<TOTAL-DEFERRED-CHARGES> 132,909
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 2,228,891
<COMMON> 208,870
<CAPITAL-SURPLUS-PAID-IN> 468,479
<RETAINED-EARNINGS> 94,833
<TOTAL-COMMON-STOCKHOLDERS-EQ> 772,182
0
12,800
<LONG-TERM-DEBT-NET> 714,326
<SHORT-TERM-NOTES> 123,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 14,970
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 591,613
<TOT-CAPITALIZATION-AND-LIAB> 2,228,891
<GROSS-OPERATING-REVENUE> 298,822
<INCOME-TAX-EXPENSE> 14,794
<OTHER-OPERATING-EXPENSES> 248,932
<TOTAL-OPERATING-EXPENSES> 262,129
<OPERATING-INCOME-LOSS> 36,693
<OTHER-INCOME-NET> 2,437
<INCOME-BEFORE-INTEREST-EXPEN> 39,130
<TOTAL-INTEREST-EXPENSE> 14,234
<NET-INCOME> 24,896
147
<EARNINGS-AVAILABLE-FOR-COMM> 24,749
<COMMON-STOCK-DIVIDENDS> 5,013
<TOTAL-INTEREST-ON-BONDS> 12,123
<CASH-FLOW-OPERATIONS> 40,313
<EPS-PRIMARY> 0.59
<EPS-DILUTED> 0.59
<PAGE>
</TABLE>
================================================================================
PARTICIPATION AGREEMENT
dated as of August 12, 1986
among
BURNHAM LEASING CORPORATION
as Owner Participant
FIRST PV FUNDING CORPORATION,
as Loan Participant
THE FIRST NATIONAL BANK OF BOSTON,
in its individual capacity and as Owner Trustee
under a Trust Agreement,
dated as of August 12, 1986,
with Burnham Leasing Corporation, as Owner Trustee
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, as Indenture Trustee
and
PUBLIC SERVICE COMPANY OF NEW MEXICO,
as Lessee
================================================================================
Sale and Leaseback of an Undivided Interest
in Palo Verde Nuclear Generating Station Unit 2
and an undivided interest in
certain Common Facilities
================================================================================
6091.BURNHAM.1106.27:1
<PAGE>
TABLE OF CONTENTS
Page
----
SECTI0N 1 Definitions ............................................. 2
SECTION 2 Participation by the
Loan Participant;
Releveraging; Refunding ................................. 2
SECTION 3 Participation by the
Owner Participant
Partial Refund of the
Investment .............................................. 5
SECTION 4 Purchase, Sale,
Financing and Lease of
the Undivided Interest;
Purchase, Sale and Lease
of the Real Property
Interest ................................................ 6
SECTION 5 Notice of Closing;
Closing ................................................. 7
SECTION 6 Representations;
Warranties, Agreements and Directions of the
Loan Participant ........................................ 7
SECTION 7 Representations,
Warranties and
Agreements of the Owner
Participant ............................................. 11
SECTION 8 Representations,
Warranties and
Agreements of the Owner
Trustee and FNB ......................................... 17
SECTION 9 Representations,
Warranties and
Agreements of Chemical .................................. 23
-i-
6091.BURNHAM.1106.27:l
<PAGE>
TABLE OF CONTENTS (Continued)
Page
----
SECTION 10 Representations, Warranties and
Agreements of the Lessee ................................ 25
SECTION 11 Conditions Precedent .................................... 51
SECTION 12 Consent to Assignment of
the Facility Lease;
Consent to Indenture;
Consent to Assignment of
Notes ................................................... 67
SECTION 13 Lessee's Indemnities .................................... 68
SECTION 14 Transaction Expenses .................................... 82
SECTION 15 Owner Participant's
Transfers .............................................. 84
SECTION 16 Brokerage and Finders'
Fees and Commissions .................................... 87
SECTION 17 Survival of
Representations and
Warranties; Binding
Effect .................................................. 87
SECTION 18 Notices ................................................. 88
SECTION 19 Miscellaneous ........................................... 89
-ii-
6091.BURNHAM.1106.27:1
<PAGE>
TABLE OF CONTENTS (Continued)
Page
----
SCHEDULES
Schedule I Notice of Closing
Schedule Pricing Assumptions
Schedule 3 Recordations and Filings
Schedule 4 Opinion of Mudge Rose Guthrie
Alexander & Ferdon, as counsel
for the Loan Participant
Schedule 5 Opinion of Milbank, Tweed,
Hadley & McCloy, as special
counsel for the Owner
Participant
Schedule 6 Opinion of Csaplar & Bok, as
counsel for the Owner Trustee
Schedule 7 Opinion of Shaw, Pittman,
Potts & Trowbridge, as special
NRC counsel for the Owner
Participant
Schedule 8 Opinion of Mudge Rose Guthrie
Alexander & Ferdon, as special
counsel for the Lessee
Schedule 9 Opinion of Keleher & McLeod, P.A.,
as general counsel for the Lessee
Schedule 10 Opinion of Snell & Wilmer, as special
Arizona counsel for the Lessee
Schedule 11 Opinion of Newman & Holtzinger, P.C.,
as special FERC counsel for the Lessee
Schedule 12 Opinion of Meyer, Hendricks, Victor,
Osborn & Maledon, as special Arizona
counsel for the Owner Participant
-iii-
6091.BURNHAM.1106.27:1
<PAGE>
TABLE OF CONTENTS (Continued)
Page
----
Schedule 13 Opinion of Rodey, Dickason,
Sloan, Akin & Robb, P.A., as
special New Mexico counsel
the Owner Participant
EXHIBITS
Exhibit A Form of Bill of Sale and
Assignment
Exhibit B Affidavit of Owner Trustee
-iv-
6091.BURNHAM.1106.27:1
<PAGE>
PARTICIPATION AGREEMENT
THIS PARTICIPATION AGREEMENT, dated as of August 12, 1986, among
BURNHAM LEASING CORPORATION, a New York corporation (the Owner Participant),
FIRST PV FUNDING CORPORATION, a Delaware corporation (the Loan Participant), THE
FIRST NATIONAL BANK OF BOSTON, a national banking association, in its individual
capacity (FNB) and as Owner Trustee (the Owner Trustee) under a Trust Agreement,
dated as of August 12, 1986, with Burnham Leasing Corporation, CHEMICAL BANK, a
New York banking corporation, in its individual capacity (Chemical) and as
Indenture Trustee (the 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, a New Mexico
corporation (the Lessee)
WITNESSETH
WHEREAS, the Owner Participant desires to cause the Trust to
acquire the Undivided Interest and the Real Property Interest and to lease the
Undivided Interest and the Real Property Interest to the Lessee under the
Facility Lease;
WHEREAS, the Lessee desires to sell the Undivided Interest and
the Real Property Interest to the Trust and lease the Undivided Interest and the
Real Property Interest back from the Trust under the Facility Lease 7
WHEREAS, the Owner Trustee and the Lessee will enter into the
Purchase Documents with respect to the sale and purchase of the Undivided
Interest and the Real Property Interest;
WHEREAS, pursuant to the terms and provisions of the Indenture,
the Owner Trustee will authorize the creation, issuance, sale and delivery of
the Initial Series Note and the granting of the security therefor, and the
Indenture Trustee will authenticate the Initial Series Note; and
6091.BURNHAM.1106.27:1
<PAGE>
WHEREAS, the Loan Participant is willing to purchase the Initial
Series Note on the terms and conditions 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 the purposes hereof, capitalized terms used herein shall
have the meanings assigned to such terms in Appendix A, as amended from time to
time in conjunction with the amendment of this Participation Agreement or, if
the Lessee, the Owner Participant, the Loan Participant and the Owner Trustee
shall have consented to such amendment, any other Transaction Document;
provided, however, that if such amendment to Appendix A made in connection with
the amendment of any other Transaction Document adversely affects the Indenture
Trustee under this Participation Agreement such amendment to Appendix A shall
not be effective as to the Indenture Trustee unless the Indenture Trustee also
consents thereto. References in this Participation Agreement to sections,
paragraphs and clauses are to sections, paragraphs and clauses in this
Participation Agreement unless otherwise indicated.
SECTION 2. Participation by the Loan Participant; Releveraging;
Refunding.
(a) Loan Participant's. Commitment Subject to the satisfaction
of the conditions in Sections 5(a) and 11(a), on the Closing Date the Loan
Participant agrees to lend to the Owner Trustee, on a non-recourse basis, an
amount (the Loan) equal to the Loan Percentage of the Purchase Price.
(b) Payment; Term of the Initial Series Note.
(I) Payment. Proceeds of the Loan shall be paid directly to the
Indenture Trustee, for the account of the Owner Trustee, in immediately
available funds, at the Indenture' Trustee's Office.
(2) Terms of the Initial Series Note. The Loan shall be
evidenced by the Initial Series Note.
-2-
6091.BURNHAM.1106.27:l
<PAGE>
The Initial Series Note shall be issued by the Owner Trustee under and
pursuant to the Indenture, shall be in the principal amount of the Loan
and shall bear interest at the rate or rates per annum and shall be
payable as set forth in the Indenture.
(c) Releveraging. Upon the occurrence of an adjustment of Basic
Rent and the schedules of Casualty Values, Special Casualty Values and
Termination Values pursuant to Section 3 (d) of the Facility Lease, subject to
the conditions set forth in Section 11(c) and the following sentence, on the
Releveraging Date the Loan Participant agrees to lend to the Owner Trustee, on a
non-recourse basis, an additional amount (the Releveraging Loan) equal to the
Releveraging Amount. There may be up to two Releveraging Loans under this
Section.2(c), the Releveraging Date or Dates of which shall be mutually
acceptable to the Lessee, the Owner Participant and the Loan Participant
provided, however, that (i) any modifications of the Transaction Documents to
effect a Releveraging Loan shall satisfy the provisions of Revenue Procedure
75-21, Revenue Procedure 75-28 and any other applicable statute, regulation,
revenue procedure, revenue ruling or technical information release relating to
the subject matter of such revenue procedures and (ii) such modifications (after
giving effect to any adjustments pursuant to Section 3(d) of the Facility Lease)
shall not, in the opinion of Shearman & Sterling, adversely affect the tax
benefits contemplated by the Owner Participant in entering into the transactions
contemplated by this Participation Agreement and the other Transaction
Documents. Proceeds of a Releveraging Loan shall be paid directly to the
Indenture Trustee, in immediately available funds, at the Indenture Trustee's
Office, and such proceeds shall be applied as a partial refund of the
Investment. Each Releveraging Loan shall be evidenced by a Releveraging Note,
which Note shall be issued by the Owner Trustee under and pursuant to the
Indenture, be in the principal amount of the Releveraging Loan, bear interest at
the rate or rates per annum and be payable, in each case as set forth in, or
determined under, the Indenture.
(d) Refunding of the Initial Series Note and any Releveraging
Notes Subject to. the satisfaction of the conditions set forth in Section 11(d),
on the Refunding Date the Loan Participant agrees to lend to the Owner Trustee,
on a non-recourse basis, an amount (the Refunding Loan) equal to the sum of (i)
-3-
609l.BURNHAM.1106.27:l
<PAGE>
the amount necessary to refund the Initial Series Note and any Releveraging
Notes theretofore issued and (ii) an amount equal to the Releveraging Amount.
Proceeds of the Refunding Loan shall be paid directly to the Indenture Trustee
(i) to the extent necessary to refund the Initial Series Note and any
Releveraging Notes theretofore issued in immediately available funds, at the
Indenture Trustee's Office and (ii) to the extent of the Releveraging Amount,
for the account of the Owner Trustee is a partial refund of the Investment, in
immediately available funds, at the Indenture Trustee's Office. The Refunding
Loan shall be represented by the Fixed Rate Note, which Note shall be issued by
the Owner Trustee under and pursuant to the Indenture and shall be in the
principal amount of the Refunding Loan and shall bear interest at the rates per
annum and shall be payable as set forth in the Indenture. On the Refunding Date
the Fixed Rate Note shall be exchanged by the Owner Trustee for the Initial
Series Note and any Releveraging Notes theretofore issued. Not less than 1
Business Day prior to the Refunding Date, the Loan Participant shall deliver to
the Owner Participant and the Lessee a certificate setting forth the information
necessary to complete the form of Fixed Rate Note (including any schedule
thereto) set forth in the Indenture. Upon such delivery, and upon approval by
the Lessee and the Owner Participant of the terms thereof, the Owner Participant
and the. Lessee shall cause the form of Fixed Rate Note to be. completed. The
parties hereto shall make a good faith effort to cooperate to effect such
amendments to the Transaction Documents as may be necessary or appropriate to
effect such refunding. The refunding contemplated by this Section 2(d) shall be
effected at the request of the Lessee given in writing at least 2 Business Days
prior to the Refunding Date; provided, however, that (i) no such request shall
be made or refunding occur while an Event of Default shall have occurred and be
continuing; (ii) unless waived in writing by the Owner Participant, Net Economic
Return shall not be adversely affected thereby (or appropriate adjustments shall
have been made or shall be made on the Refunding Date pursuant to Section 3(e)
of the Facility Lease to preserve Net Economic Return); (iii) unless waived in
writing by the Owner Participant, any modifications of the Transaction Documents
shall satisfy the provisions of Revenue Procedure 75-21, Revenue Procedure 75-28
and any other applicable statute, regulation, revenue procedure, revenue ruling
-4-
6091.BURNHAM.1106.27:l
<PAGE>
or technical information release relating to the subject matter of such revenue
procedures; and (iv) unless waived in writing by the Owner Participant, such
modifications (after giving effect to any adjustments pursuant to clause (ii)
above) shall not, in the opinion of the Owner Participant's special tax counsel,
adversely affect the tax benefits contemplated by the Owner Participant in
entering into. the transactions contemplated by this Participation Agreement and
the other Transaction Documents. In setting the terms or the Fixed Rate Notes,
the Lessee in its sole discretion may determine the number of tranches of debt
and the interest rates applicable thereto and, based on such determination, the
Owner Participant may in its sole discretion determine the principal amount, the
amortization schedule and the average life applicable to each tranche of the
Fixed Rate Notes, and the debt amortization schedules for the Fixed Rate Notes,
including the final maturities thereof, shall be satisfactory to the Owner
Participant; provided, however1 that in each case such determination shall be
made with a view to providing an optimal debt structure consistent with normal
commercial leasing practice (taking into account the limitations on rent
adjustments in respect of Changes in Tax Law).
SECTION 3. Participation by the Owner Participant; Partial
Refund of the Investment.
(a) Owner Participant's Commitment Subject to satisfaction of
the conditions in Sections 5(a) and 11(a), on the Closing Date the Owner
Participant agrees to (i) make an equity investment with respect to the
Undivided Interest in an amount (the Investment) equal to the Investment
Percentage of the Purchase Price, (ii) make an equity investment with respect to
the Real Property Interest in the amount set forth in Schedule 2 as the "Real
Estate Investment" (the Real Estate Investment), and (iii) provide to the Owner
Trustee an amount equal to the Estimated Transaction Expenses. Proceeds of the
Investment and the Real Estate Investment shall be paid directly to the
Indenture Trustee, in immediately available funds, at the Indenture Trustee's
Office. The Estimated Transaction Expenses shall be paid to the Owner Trustee,
in immediately available funds, at 100 Federal Street, Boston, Massachusetts
02110, Attention: Manager, Corporate Trust Department.
-5-
6091.BURNHAM.1106.27:1
<PAGE>
(b) Partial Refund. In the event that the Indenture Trustee
shall have received the proceeds of a Releveraging Loan or that portion of the
Refunding Loan equal to the Releveraging Amount used in calculating the amount
of the Refunding Loan, the Indenture Trustee shall, as soon as practicable (but
in any event within 2 Business Days or receipt thereof), return the same to the
Owner Participant as a partial refund of the Investment, and for purposes hereof
the "Investment" shall thereupon be, and the Owner Participant agrees that such
"Investment" may be, reduced accordingly. If the Indenture Trustee fails to
return to the Owner Participant such partial refund on the day the Indenture
Trustee receives the same, the Lessee shall pay interest thereon, until the same
is received by the Owner Participant, at a rate per annum equal to the Prime
Rate.
SECTION 4. Purchase, Sale, Financing and Lease of the Undivided
Interest; Purchase, Sale and Lease of the Real Property Interest.
(a) The Undivided Interest. Subject to (w) the satisfaction of
the conditions in Sections 5(a) and 11(a), (x) the satisfaction or waiver of the
conditions in Section 11(b), (y) receipt from the Owner Participant of the
Investment and an amount equal to the Estimated Transaction Expenses and (z)
receipt from the Loan Participant of the proceeds of the Loan, on the closing
Date the Owner Trustee shall (i) cause the Trust to purchase the Undivided
Interest from the Lessee for the amount specified in Schedule 2 as the "Purchase
Price" (the Purchase Price), and (ii) disburse the Estimated Transaction
Expenses as contemplated by Section 14. Subject to the satisfaction of the
conditions in Section 11(b), on the Closing Date the Lessee shall sell the
Undivided Interest to the Trust for the Purchase Price. Concurrently with such
purchase and sale, the Trust shall lease the Undivided Interest to the Lessee,
and the Lessee shall lease the Undivided Interest from the Trust, pursuant to
the Facility Lease.
(b) The Real Property Interest. Subject to (w) the satisfaction
of the conditions in Sections 5(a) and 11(a), (x) the satisfaction or waiver of
the conditions in Section 11(b), (y) receipt from the Owner Participant of the
Real Estate Investment and (z) receipt from the Loan Participant of the proceeds
of the Loan, on the closing Date the Owner Participant shall cause the Trust to
-6-
6091.BURNHAM.1106.27:1
<PAGE>
purchase the Real Property Interest from the Lessee for a purchase price equal
to the amount set forth in Schedule 2 as the "Real Estate Investment". Subject
to the satisfaction of the conditions in Section 11(b), on the Closing Date the
Lessee shall sell the Real Property Interest to the Trust for a purchase price
equal to the Real Estate Investment. Concurrently with such purchase and sale,
the Trust shall lease the Real Property Interest to the Lessee, and the Lessee
shall lease the Real Property Interest from the Trust, pursuant to the Facility
Lease.
SECTION 5. Notice of Closing; Closing.
(a) Notice of Closing. Not later than the Closing Date, the
Lessee shall deliver to the Owner Participant, the Owner Trustee, the Loan
Participant, the Collateral Trust Trustee and the Indenture Trustee a notice,
substantially in the form of Schedule 1 (the Notice of dosing), which shall (i)
state that the Closing Date shall occur on the date specified therein, (ii) list
the then known Transaction Expenses payable by the Owner Trustee pursuant to
Section 14(a)(the Estimated Transaction Expenses) and (iii) provide payment
instructions in respect of the disposition of the Purchase Price and the amount
of the Real Estate Investment.
(b) Closing. Upon satisfaction of the conditions in Section 5(a)
and Section 11(a) and upon receipt from the Owner Participant of the Investment,
the Real Estate Investment and the amount of the Estimated Transaction Expenses
and from the Loan Participant of the Loan, on the Closing Date the Owner Trustee
shall (i) instruct the Indenture Trustee to pay to the Lessee an amount equal to
the Purchase Price and the amount of the Real Estate Investment and (ii)
disburse the Estimated Transaction Expenses as contemplated by Section 14. Upon
satisfaction of the conditions in Section 11(b), on the Closing Date the Lessee
shall deliver to the Owner Trustee the Bill of Sale, the Deed and the Assignment
of Beneficial Interest.
SECTION 6. Representations, Warranties, Agreements and
Directions of the Loan Participant.
(a) Representations and Warranties. The Loan Participant
represents and warrants that:
-7-
6091.BURNHAM.1106.27:1
<PAGE>
(1) Due Organization. The Loan Participant is a corporation duly
organized and validly existing in good standing under the laws of the
State of Delaware and has the corporate power and authority to carry on
its business as presently conducted, own its properties, and enter into
and perform its obligations under this Participation Agreement and each
other Transaction Document and each Financing Document to which it is,
or is to become on or before the Closing Date, a party.
(2) Due Authorization. This Participation Agreement and each
other Transaction Document and each Financing Document to which it is,
or is to become on or before the Closing Date, a party, has been duly
authorized by all necessary corporate action on the part of the Loan
Participant and does not require the consent or approval of its
stock-holder or any trustee or holder of any of its indebtedness or
other obligations, except such as have been, or on or before the Closing
Date will have been, duly obtained, given or accomplished.
(3) Execution. This Participation Agreement, each other
Transaction Document and each Financing Document to which the Loan
Participant is, or is to become on or before the Closing Date, a party,
have been, or on or before the Closing Date will have been, duly
executed and delivered by the Loan Participant and constitutes, or upon
execution and delivery thereof will constitute, its legal, valid and
binding agreements, enforceable against it in accordance with their
respective terms.
(4) No Violation. Neither the execution, delivery or performance
by the Loan Participant of this Participation Agreement, any other
Transaction Document or any Financing Document to which it is, or is to
become on or before the Closing Date, a party, nor the consummation by
the Loan Participant of the transactions contemplated hereby or thereby,
nor compliance by the Loan Participant with the pro-visions hereof or
thereof, conflicts or will conflict with, or results or will result in
the breach of any provision of, or is inconsistent with, the Certificate
of Incorporation or By-Laws of the Loan Participant or contravenes any
Federal, Delaware, New Mexico, Arizona or New York law applicable to it,
-8-
609l.BURNHAM.1106.27:1
<PAGE>
or any indenture, mortgage or agreement to which the Loan Participant is
a party or by which it or its property is bound, or requires any
Governmental Action with respect to the Loan Participant under Federal,
Delaware, New Mexico, Arizona or New York law on or before the Closing
Date, except such as have been, or on or before the Closing Date will
have been, duly obtained, given or accomplished.
(5) No Other Business. Except as contemplated by this
Participation Agreement, the other Transaction Documents and the
Financing Documents and except as otherwise contemplated by the Section
6(c) Application, the Loan Participant has not engaged in any business
or activity of any type or kind whatever.
(6) ERISA The Loan Participant is not acquiring, and will not
acquire, any Note with the "plan assets" of any "employee benefit plan"
within the meaning of section 3(3) of ERISA or any "plan'1 within the
meaning of section 4975(e)(l) of the Code.
(7) Securities Act; Investment Representation. The Loan
Participant understands that (i) none of the Notes to be acquired by it
has been registered under the Securities Act and (ii) each such Note
will bear the legend set forth in the form of such Note. The Loan
Participant will acquire each Note to be acquired by it hereunder and
under the Indenture solely for purposes of pledging such Notes to the
Collateral Trust Trustee to secure Bonds issued from time to time under
the Collateral Trust Indenture.
(b) Agreements. The Loan Participant agrees that:
(1) Transfers of Notes. Any transfer or assignment of any Note
or of all or any part of the Loan Participant's interest hereunder or
under any other Transaction Document or any Financing Document shall be
effected in a transaction constituting an exempted transaction under the
Securities Act and on the express condition that the transferee,
assignee or participant shall agree to be bound by the terms and
provisions hereof and thereof. Neither the Loan Participant nor any
subsequent Holder of a Note may sell, exchange or transfer any Note to
-9-
6091.BURNHAM.1106.27:l
<PAGE>
any other Person (other than the Collateral Trust Trustee) unless such
transferee delivers to the other parties hereto a representation and
warranty (and an opinion of counsel satisfactory to each of the other
parties hereto) to the effect that neither the transfer of such Note to,
nor the ownership of such Note by, such transferee will cause such
transferee, or any other party hereto, to be engaged in a "prohibited
transaction", as defined in section 406 of ERISA or section 4975 of the
Code, which is not at such time subject to an exemption contained in
ERISA or in the rules, regulations, releases or bulletins adopted
thereunder.
(2) Quiet Enjoyment. The Loan Participant acknowledges Section
6(a) of the Facility Lease.
(3) No Other Business. During such time as any Note is
outstanding and held by the Loan Participant or the Collateral Trust
Trustee, the Loan Participant will not (i) engage in any business or
activity other than (1) in connection with the Transaction Documents or
the Financing Documents or as otherwise contemplated by the Section 6(c)
Application or (ii) amend, or engage in any activity or take any action
not permitted by, Article THIRD, FOURTH or SIXTH of its Certificate of
Incorporation, as in effect on the date of execution and delivery
hereof, without, in each case, the consent of the other parties hereto.
(c) Direction to the Indenture Trustee. The Loan Participant, as
purchaser of the Initial Series Note, (i) hereby authorizes and directs the
Indenture Trustee to execute, deliver and perform this Participation Agreement,
(ii) hereby authorizes and directs the Indenture Trustee to register such Note
in the name of the Loan Participant and, upon authentication and delivery
thereof pursuant to this Participation Agreement and the Indenture, to deliver
such Note (upon completion by the Loan Participant of the assignment attached to
the Initial Series Note) to the Collateral Trust Trustee pursuant to the
Collateral Trust Indenture, (iii) acknowledges and agrees that, in connection
with this Participation Agreement, the Indenture Trustee shall have the benefits
and protections of Article VIII of the Indenture and (iv) agrees that, in the
event of a conflict between the provisions of this Participation Agreement and
-10-
6091.BURNHAM.1106.27:l
<PAGE>
the Indenture, the Indenture Trustee shall, as between the Indenture Trustee and
the Loan Participant, be fully protected in relying on the express terms of the
Indenture.
SECTION 7. Representations, Warranties and Agreements of the
Owner Participant.
(a) Representations and Warranties. The Owner Participant
represents and warrants that:
(1) Organization. The Owner Participant is a corporation duly
organized and validly existing in good standing under the laws of the
state of its incorporation and has the corporate power and authority to
enter into and perform its obligations under this Participation
Agreement and each other Transaction Document to which it is, or is to
become on or before the Closing Date, a party.
(2) Due Authorization. This Participation Agreement and each
other Transaction Document to which the Owner Participant is, or is to
become on or before the Closing Date, a party have been duly authorized
by all necessary corporate action on the part of the Owner Participant
and do not require the consent or approval of its stockholders or any
trustee or holder of any of its indebtedness or other obligations,
except such as have been, or on or before the Closing Date will have
been, duly obtained, given or accomplished.
(3) Execution and Enforceability. This Participation Agreement
and each other Transaction Document to which the Owner Participant is,
or is to become on or before the Closing Date, a party have been, or on
or before the Closing Date will have been, duly executed and delivered
by the Owner Participant and constitute, or upon execution and delivery
thereof will constitute, its legal, valid and binding agreements,
enforceable against it in accordance with their respective terms (except
as may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights generally).
-11-
6091.BURNHAM.1106.27:l
<PAGE>
(4) No Violation. Neither the execution, delivery or performance
by the Owner Participant of this Participation Agreement or any other
Transaction Document to which it is, or is to become on or prior to the
closing Date, a party, nor the consummation by the Owner Participant of
the transactions contemplated hereby or thereby, nor compliance by the
Owner Participant with the provisions hereof or thereof, conflicts with,
or results in the breach of any provision of, or is inconsistent with,
its documents of incorporation or By-Laws or contravenes any Applicable
Law applicable to it or any of its Affiliates, or any indenture,
mortgage or agreement for borrowed money to which the Owner Participant
is a party or any other agreement or instrument to which the Owner
Participant is a party or by which it or its property is bound or
requires any Governmental Action with respect to the Owner Participant
under Federal law or the law of the States of New York or Delaware on or
before the Closing Date, except such as are contemplated by the
Transaction Documents or the Financing Documents or such as have been,
or on or before the Closing Date will have been, duly obtained, given or
accomplished; provided, however, that the Owner Participant makes no
representation or warranty as to any Applicable Law or Governmental
Action relating to the Securities Act, the Securities Exchange Act, the
Trust Indenture Act, the Federal Power Act, the Atomic Energy Act, the
Nuclear Waste Act, the Holding company Act, the New Mexico Public
Utility Act or other New Mexico law, the Arizona Public Utility Act or
other Arizona law, energy or nuclear matters, public utilities, the
environment, health and safety or Unit 2.
(5) No Owner Participant's Liens. Neither the execution and
delivery by the Owner Participant of this Participation Agreement or any
other Transaction Document to which the Owner Participant is, or is to
become on or before the closing Date, a party, nor the performance by
the Owner Participant of its obligations hereunder or thereunder, will
subject the Trust Estate or the Lease Indenture Estate, or any portion
of either thereof, to any Owner Participant's Lien.
(6) Acquisition for Investment. The Owner Participant is
acquiring the beneficial interest in the Trust and the Trust Estate for
its own account, for investment and not with a view to, or for sale in
connection with, any distribution thereof in violation of Section 5 of
-12-
6091.BURNHAM.1106.27:1
<PAGE>
the Securities Act, but subject, nevertheless, to any requirement of law
that the disposition of the Owner Participant's property shall at all
times be within its control.
(7) No Prior Security Interest. There exists no security
interest in or other Lien on the Lease Indenture Estate in the States of
New Mexico, Arizona, New York or Delaware arising as a result of claims
against the Owner Participant unrelated to the transactions contemplated
by the Transaction Documents or the Financing Documents which is prior
to the Indenture Trustee's security interest in the Lease Indenture
Estate.
(8) Securities Act. Neither the Owner Participant nor anyone
authorized to act on its behalf has directly or indirectly offered or
sold any security issued or to be issued to finance Unit 2, or any
security the offering of which for the purposes of the Securities Act
would be deemed to be part of the offerings contemplated by the
Transaction Documents and the Financing Documents, or solicited any
offer to acquire any such security from any Person, in violation of
Section 5 of the Securities Act.
(9) ERISA. The Owner Participant is not acquiring its interest
in the Trust with the "plan assets'9 of any "employee benefit plan"
within the meaning of section 3(3) of ERISA or any "plan" within the
meaning of section 4975(e) (1) of the Code.
(b) Agreements. The Owner Participant agrees that:
(1) No Owner Participant's Liens. The Owner Participant will not
create or permit to exist, and, at its own cost and expense, will
promptly take such action as may be necessary duly to discharge, all
Owner Participant's Liens.
(2) Quiet Enjoyment. The Owner Participant acknowledges the
provisions of Section 6(a) of the Facility Lease and Section 8(c) of
this Participation Agreement.
-13-
6091.BURNHAM.1106.27:l
<PAGE>
(3) No-Petition Agreement. Prior to the 181st day following the
payment in full of the Bonds and the discharge in accordance with its
terms of the Collateral Trust Indenture, the Owner Participant agrees
that it will not file a petition, or join in the filing of a petition,
seeking reorganization, arrangement, adjustment or composition of, or in
respect of, the Loan Participant under the Bankruptcy Code, or any other
applicable Federal or state law or the law of the District of Columbia.
(4) Transfer of Interest in the Estate. (a) Unless the Lessee
shall have assumed the Notes as contemplated by Section 3.9(b) of the
Indenture, upon receipt by the Owner Participant under Section 5.2 of
the Indenture of the payments to be made to the Lessor as provided in
Section 9(c), 9(d), 13(c) or 16(e) of the Facility Lease and, if
applicable, compliance in full by the Lessee with Section 9(f) of the
Facility Lease, the Owner Participant shall (so long as no Default or
Event of Default shall have occurred and be continuing), and (b) at any
time following the occurrence of an Event of Loss, Deemed Loss Event,
Special Purchase Event or event giving rise to the Cure Option or a
Default or an Event of Default, the Owner Participant may, assign,
convey and transfer to the Lessee all of the Owner Participant's right,
title and interest in, to and under the Trust Estate (except the right
to receive Excepted Payments), such transfer (~) to be free and clear of
Owner Participant's Liens but otherwise without recourse, representation
or warranty and (ii) if the Owner Participant so elects, to be effected
by the execution and delivery by the Owner Participant to the Lessee of
a Bill of Sale and Assignment substantially in the form of Exhibit A
(and such transfer shall be and become effective automatically and
without further action by the Owner Trustee, the Owner Participant, the
Lessee, the Lessor, the Indenture Trustee or any other Person). The
Lessee hereby agrees to accept the transfer contemplated by this Section
7(b)(4) and the parties hereto acknowledge and agree that at the time of
such transfer the Lessee shall be deemed to be a Transferee that has
satisfied all conditions set forth in Section 15(a) of this
Participation Agreement and Section 11.09 of the Trust Agreement.
If, in accordance with the preceding paragraph, the Owner
Participant shall assign, convey and transfer to the Lessee all of the
-14-
6091.BURNMAM.1106.27:l
<PAGE>
Owner Participant's right, title and interest in, to and under the Trust
Estate (except the right to receive Excepted Payments) following the
occurrence of an Event of Loss, Deemed Loss Event, Special Purchase
Event or event giving rise to the Cure Option or a Default or an Event
of Default in accordance with the preceding paragraph but the
transferring Owner Participant shall not have received under Section 5.2
of the Indenture the payments to be made to the Lessor as provided in
Section 9(c), 9(d), 13(c) or 16 of the Facility Lease, as the case may
be, the obligation of the Lessee to make such payments (together with
interest thereon in accordance with Section 3(b) (iii) of the Facility
Lease) (or to make other payments in a like amount with respect to Basic
Rent or Supplemental Rent paid by application of such payments (and in
which Owner Trustee has thereby acquired an interest) pursuant to
Section 5.1 or 5.3 of the Indenture) shall not be deemed to be cancelled
or discharged but shall continue until all such amounts are so received
by the Lessee, as successor Owner Participant, or by the transferring
Owner Participant pursuant to the following provisions of this Section
7(b)(4). The Lessee as successor Owner Participant hereby agrees to pay
to the transferring Owner Participant on the date of transfer an amount
equal to the amount of the payments to be made to the Lessor as provided
in Section 9(c), 9(d), 13(c) or 16 of the Facility Lease together with
interest thereon at the Penalty Rate (computed in accordance with the
Facility Lease) from the date of transfer, such payments (the Secured
Obligations) to be made only from amounts payable to the Owner
Participant from the Trust Estate and the Lessee shall make such payment
to the Lessor in accordance with the terms of the Transaction Documents.
The Secured Obligations shall be secured by (and the Lessee hereby
grants to the transferring Owner Participant a security interest in and
general lien upon) all of the right, title and interest of the Lessee as
successor Owner Participant in, to and under the Trust Estate. In
connection therewith, the Lessee as successor Owner Participant hereby
agrees as follows:
1. The transferring Owner Participant shall have all of
the rights and remedies of a secured party under the Uniform
Commercial Code as in effect in the State of New York (as such
law may at any time be amended).
-15-
6091.BURNHAM.1106.27:1
<PAGE>
2. Upon the occurrence of such transfer, the Lessee as
successor Owner Participant shall appoint, and hereby does
appoint, the transferring Owner Participant its
attorney-in-fact, irrevocably, with full power of substitution,
to the exclusion of the Lessee, as successor Owner Participant,
to ask for, require, demand, receive and give acquittance for
any and all moneys and claims for moneys due and to become due
to the Lessee as successor Owner Participant under or arising
out of the Trust Estate, to endorse any checks or other
instruments or orders in connection therewith, and to take any
action (including the filing of financing statements or other
documents and the delivery of written instructions to the Owner
Trustee and the Indenture Trustee specifying that all payments
to be made to the Lessee as successor Owner Participant under
the Trust Agreement and the Indenture shall be made directly to
the transferring Owner Participant so long as any portion of the
Secured Obligations remains outstanding) or institute any
proceedings which the transferring Owner Participant may deem
necessary or appropriate to protect and preserve the security
interest of the transferring Owner Participant in the Trust
Estate and the rights of the transferring owner Participant to
receive payments thereunder.
3. Upon the occurrence of such transfer, and until the
Secured Obligations have been paid in full, the Lessee (in its
capacity as such and as successor Owner Participant) shall not;
without the prior written consent of the transferring Owner
Participant (i) take any action or deliver any instruction
under, any Transaction Document the effect of which would be to
(A) relieve or otherwise affect the obligation of the Lessee to
make such payments, (B) terminate the Trust Agreement, (C)
terminate or rescind the Facility Lease, (D) sell, assign,
transfer or deliver the Trust Estate to any Person (except, in
the case of the Trust Estate, as contemplated by Section 9(j) of
the Facility Lease) or (ii) accept, or approve, any amendment to
any Transaction Document.
-16-
6091.BURNHAM.1106.27:l
<PAGE>
4. The Lessee (as such and as successor Owner
Participant) covenants and agrees to do all such acts and
execute all such instruments of further assurance as shall be
reasonably requested from time to time by the transferring Owner
Participant for the purpose of fully carrying out and
effectuating the provisions of this Section 7(b)(4) and the
intent thereof.
Upon the payment in full of the Secured Obligations, the security interest
hereinabove provided shall terminate and the transferring Owner Participant, at
the request of the Lessee as successor Owner Participant, shall execute and
deliver to the Lessee as successor Owner Participant such termination
statements, releases or other instruments presented to the transferring Owner
Participant as shall be reasonably required to effect such termination.
SECTION 8. Representations Warranties and Agreements of the
Owner Trustee and FNB.
(a) Representations and Warranties; FNB as Owner Trustee and
(except as otherwise provided in the last sentence of this Section 8(a)) in its
individual capacity, represents and warrants that:
(1) Due Organization. FNB is a national banking association
duly organized and validly existing in good standing under the laws of
the United States of America and has all requisite corporate power and
authority to enter into and perform its obligations under (x) the Trust
Agreement and, to the extent it is a party hereto in its individual
capacity, this Participation Agreement and (y) acting as Owner Trustee,
this Participation Agreement and each other Transaction Document to
which FNB is, or is to become on or before the Closing Date, a party as
Owner Trustee.
(2) Due Authorization; Enforceability; etc. This Participation
Agreement and each other Transaction Document to which FNB is, or is to
-17-
6091.BURNHAM.1106.27:l
<PAGE>
become on or before the Closing Date, a party have been duly authorized
by all necessary corporate action of FNB (in its individual capacity or
as Owner Trustee, as the case may be) and, upon execution and delivery
hereof and thereof, this Participation Agreement and each such other
Transaction Document will have been duly executed and delivered and will
be legal, valid and binding agreements of FNB (in its respective
capacities), enforceable against it (in its respective capacities) in
accordance with their respective terms (except as may be limited by
bankruptcy, insolvency or other similar laws affecting the enforcement
of creditors' rights generally); it being understood that FNB making any
representation or warranty as to the priorities of the Liens created or
to be created under any Transaction Document, title to the Trust Estate
or recordings or filings necessary in connection therewith.
(3) Notes. Upon execution of each Note to be issued by the Owner
Trustee hereunder and under the Indenture, authentication thereof by the
Indenture Trustee pursuant to the Indenture and delivery thereof against
payment therefor in accordance with this Participation Agreement, such
Note will be a legal, valid and binding obligation of the Owner Trustee,
enforceable against the Owner Trustee in accordance with its terms
(except as may be limited by bankruptcy, insolvency or other similar
laws affecting the enforcement of creditors' rights generally).
(4) No Violation. Neither the execution and delivery by (x) FNB
of the Trust Agreement and, to the extent FNB is a party hereto in its
individual capacity, this Participation Agreement and (y) the Owner
Trustee of this Participation Agreement and each other Transaction
Document (other than the Trust Agreement) to which the Owner Trustee is,
or is to become on or before the Closing Date, a party, nor the
performance by FNB, in its individual capacity or as Owner Trustee, as
the case may be, of its obligations under each, conflicts with, or
results in the breach of any provision of, its Articles of Association
or By-Laws and does not contravene any Applicable Law of the United
States of America or The Commonwealth of Massachusetts governing the
banking or trust powers of FNB, and does not contravene any provision
-18-
6091.BURNHAM.1106.27:l
<PAGE>
of, or constitute a default under, any indenture, mortgage, contract or
other instrument to which FNB is a party or by which it is bound or
require any Governmental Action with respect to the Owner Trustee under
any Federal or Massachusetts law, except such as are contemplated by the
Transaction Documents or the Financing Documents or such as have been,
or on or before the Closing Date will have been, duly obtained, given or
accomplished; provided1 however, that no representation or warranty is
made with respect to the right, power or authority of FNB or the Owner
Trustee to act under the ANPP Participation Agreement or the License in
respect of the Undivided Interest or Unit 2, and the Owner Trustee makes
no representation or warranty as to any Applicable Law or Governmental
Action relating to the Securities Act, the Securities Exchange Act, the
Trust Indenture Act, the Nuclear Waste Act, the Federal Power Act, the
Atomic Energy Act, the Holding Company Act, the New Mexico Public
Utility Act, the Arizona Public Utility Act, energy or nuclear matters,
public utilities, the environment, health and safety or Unit 2.
(5) Defaults. To the best knowledge of the Owner Trustee, no
Indenture Default or Indenture Event of Default has occurred and is
continuing, the Owner Trustee is not in Violation of any of the terms of
this Participation Agreement or any other Transaction Document to which
it is, or is to become on or before the Closing Date, a party.
(6) Litigation. There is no action, suit, investigation or
proceeding pending or, to the knowledge of FNB, threatened against FNB
(in any capacity) before any court, arbitrator or administrative or
governmental body and which relates to its banking or trust powers
which, individually or in the aggregate, if decided adversely to the
interests of FNB in such capacity, would have a material adverse effect
upon the ability of FNB (in any capacity) to perform its obligations
under this Participation Agreement or any other Transaction Document to
which it is, or is to become on or before the Closing Date, a party.
(7) Location of the Chief Place of Business and Chief Executive
Office, etc. The chief place of business and chief executive office of
-19-
6091.BURNHAM.1106.27:1
<PAGE>
the Owner Trustee and the office where its records concerning the
accounts or contract rights relating to the transactions contemplated
hereby are kept are located in Boston, Massachusetts.
(8) No Prior Security Interest. There exists no security
interest in the Lease Indenture Estate in the States of New Mexico, New
York or Arizona or in The Commonwealth of Massachusetts arising as a
result of any claim against FNB unrelated to the transactions
contemplated by the Transaction Documents or the Financing Documents
which is prior to the Indenture Trustee 'S security interest in the
Lease Indenture Estate.
(9) No Owner Trustee's Liens. Neither the execution by FNB (in
any capacity) of this Participation Agreement or any other Transaction
Document to which it (in any capacity) is, or is to become on or before
the Closing Date, a party, nor the performance in such capacity by it of
its obligations hereunder or thereunder, will subject the Trust Estate
or the Lease Indenture Estate, or any portion thereof, to any Owner
Trustee's Lien.
The representations and warranties in Section 8(a) (2) and Section 8(a)(3), as
to Transaction Documents and the Initial Series Note being legal, valid and
binding obligations enforceable in accordance with their respective terms, are
given only by FNB in its capacity as Owner Trustee and not in its individual
capacity, except that FNB does represent in its individual capacity that it is
authorized under the laws of The Commonwealth of Massachusetts to execute and
deliver the Transaction Documents to which it is a party.
(b) Agreements. FNB agrees, in its individual capacity, that:
(1) Discharge of Liens. FNB will not create or permit to exist,
and will, at its own cost and expense, promptly take such action as may
be necessary duly to discharge, all Owner Trustee's Liens.
(2) Certain Amendments. FNB agrees that, unless a Default or an
Event of Default has occurred and is continuing or an Event of Loss or
Deemed Loss Event has occurred, FNB will not amend any of the payment
-20-
6091.BURNHAM.1106.27:1
<PAGE>
terms of any Note, or take any action to refund any Note after the date
of issue thereof pursuant to the terms of this Participation Agreement
and the Indenture without the prior written consent of the Lessee. FNB
agrees that, except for amendments or supplements, if any, made pursuant
to Article X of the Trust Agreement or contemplated by Section 7(b)(4),
FNB will not amend or supplement, or consent to any amendment of or
supplement to, the Trust Agreement without the prior written consent of
the Lessee unless a Default or an Event of Default has occurred and is
continuing or the Lease Termination Date has occurred, if such amendment
would materially and adversely affect the rights of the Lessee under the
Facility Lease or this Participation Agreement.
(3) Change in Location of Chief Place of Business and Chief
Executive Office, etc. PNM shall notify the Lessee, the Loan Participant
and the Indenture Trustee promptly after any change in its chief
executive office, principal and chief place of business or place where
its records concerning the accounts or contract rights relating to the
transactions contemplated hereby are kept.
(4) No Petition Agreement. Prior to the 181st day following the
payment in full of the Bonds and the discharge in accordance with its
terms of the Collateral Trust Indenture, FNB (in all capacities) agrees
that it will not file a petition, or join in the filing of a petition,
seeking reorganization, arrangement, adjustment or composition of or in
respect of the Loan Participant under the Bankruptcy Code or any other
applicable Federal or state law or the law of the District of Columbia.
(5) Quiet Enjoyment. F.NB acknowledges Section 6(a) of the
Facility Lease.
(C) Agreements. The Owner Trustee agrees that:
(1) Rights in Relation to ANPP Participants. The rights and
remedies of the Owner Trustee and the Owner Participant in the Undivided
Interest and the related Generation Entitlement Share and in the Real
Property Interest are subject and subordinate to the rights and remedies
of the ANPP Participants (other than (i) the Lessee or (ii) any Person
who shall become an ANPP Participant in respect of the Lessor's
Interest) under the ANPP Project Agreements
-21-
6091.BURNHAM.1106.27:1
<PAGE>
(2) Lessee to be an ANPP Participant. Except as provided in
Sections 15.2.2, 15.6.4 and 15.10 (or any comparable successor
provisions) of the ANPP Participation Agreement, the Lessee shall be and
remain the sole "Participant" for all purposes of the ANPP Participation
Agreement and the sole representative (with power to bind the Lessor and
the Indenture Trustee) in all dealings with the other ANPP Participants
in relation to the property, rights, titles and interests of the Lessee
transferred to the Lessor pursuant to the Transaction Documents;
provided, however, that the foregoing shall not limit in any way any
liability or obligation that the Lessee may incur to the Owner Trustee
or the Owner Participant under any Transaction Document as a result
thereof.
(3) Cash Bids. On the Lease Termination Date and upon the
Lessee failing to purchase or otherwise reacquire all the right, title
and interest in PVNGS and contractual rights related thereto necessary
for the operation of the interest (the Lessor's Interest) acquired by
the Lessor pursuant to the Transaction Documents, the Lessor shall
entertain cash bids from each ANPP Participant for the Lessor's
Interest.
(4) Survival. The provisions of Sections 8(c)(l), (2) and (3)
and this paragraph (4) shall remain in full force and effect until such
time as the ANPP Administrative Committee or the ANPP Participants shall
otherwise consent.
(5) License Matters. The Owner Trustee acknowledges that before
taking possession of the Undivided Interest or any part thereof or of
any other interest in PVNGS, either of the following may be required:
(i) the issuance of an appropriate license from the NRC, whether by
amendment to the License or otherwise, or (ii) a partial transfer of the
License authorizing the Lessor to possess its interest in PVNGS, to the
extent 6f the Undivided Interest, upon application for partial transfer
of such License to such extent filed pursuant to Applicable Law. Neither
-22-
6091.BURNHAM.1106.27:l
<PAGE>
the Owner Trustee nor the Owner Participant shall have any
responsibility whatsoever to take, or initiate the taking of, any action
with respect to NRC licensing matters or any other matters relating to
the nuclear nature of Unit 2. Any failure by the Lessee, the Owner
Trustee or the Owner Participant to secure any Governmental Action by
the NRC or otherwise relating to the nuclear nature of Unit 2 shall not
reduce or limit any obligation of the Lessee under Section 5 of the
Facility Lease or any right or remedy of the Lessor under Section 16 of
the Facility Lease.
(6) Acknowledgment and Agreement. The Owner Trustee hereby
acknowledges and agrees to the provisions of Section 7(b)(4) of this
Participation Agreement. The Owner Trustee hereby agrees, upon the
request of the Owner Participant, to execute and cause to be filed with
the County Recorder, Maricopa County, Arizona, a duly completed
affidavit in substantially the form of Exhibit B.
(7) Reoptimization of the Fixed Rate Notes. After the Refunding
Note, the Owner Participant may in its sole discretion increase or
decrease the average life of each tranche of the Fixed Rate Notes by six
months with a view to providing an optimal debt structure consistent
with normal commercial leasing practice. If the Owner Participant, in a
timely manner, provides the Owner Trustee with information sufficient
for the Owner Trustee to direct the adjustments described in Section
3.12 of the Indenture, together with a certificate (in form reasonably
satisfactory to the Lessee) to the effect that such adjustments minimize
the aggregate increase in Basic Rent occurring as a result of the
operation of Section 3(d) of the Facility Lease, the Owner Trustee shall
deliver to the Indenture Trustee a certificate pursuant to such Section
3.12. Notwithstanding the foregoing, the Indenture Trustee and the Owner
Trustee may rely on such certificate and shall have no obligation to
verify the same.
SECTION 9. Representations, Warranties and Agreements of
Chemical.
(a) Representations and Warranties. Chemical represents and
warrants that:
-23-
6091.BURNHAM.1106.27:l
<PAGE>
(I) Due Organization. Chemical is a banking corporation duly
organized and validly existing in good standing under the laws of the
State of New York and has the corporate power and authority and legal
right to enter into and perform its obligations under the Indenture,
this Participation Agreement and each other Transaction Document to
which it is, or is to become on or before the Closing Date, a party.
(2) Due Authorization; Enforceability, etc. This Participation
Agreement and each other Transaction Document to which Chemical is, or
is to become on or before the closing Date, a party has been or will be
duly authorized by all necessary corporate action of Chemical (in its
respective capacities)
(3) Authentication of the Initial Series Note. The officer of
Chemical who shall authenticate the Initial Series Note to be issued
pursuant to the Indenture shall be, at the time of such authentication,
an Authorized Officer.
(4) No Violation. Neither the execution and delivery by Chemical
of this Participation Agreement or the Indenture, nor the authentication
by it of the Initial Series Note, nor the consummation by it of the
transactions contemplated hereby or thereby, nor the compliance by it
with the provisions hereof or thereof will contravene any Applicable Law
governing its banking or trust powers, or contravene or result in a
breach of, or c6nstitute a default under, its Articles of Incorporation
or By-laws, or require any Governmental Action under any Federal or New
York law, except such as have been, or on or before the Closing Date
will have peen, duly obtained, given or accomplished,' provided,
however, that no representation or warranty is made as to (i) any
Applicable Law or Governmental Action relating to the Securities Act,
the Securities Exchange Act, the Trust Indenture Act, the Nuclear Waste
Act, the Federal Power Act, the Atomic Energy Act, the Holding Company
Act, the New Mexico Public Utility Act, the Arizona Public Utility Act,
energy or nuclear matters, public utilities, the environment, health and
safety or Unit 2 or (ii) the Lease Indenture Estate to the extent it may
constitute real property under Applicable Law.
-24-
609l.BURNHAM.1106.27:l
<PAGE>
(b) Agreements. The Indenture Trustee agrees that:
(1) Agreement to Discharge Liens. The Indenture Trustee will not
create or permit to exist, and will promptly take such action as may be
necessary duly to discharge, all Indenture Trustee's Liens.
(2) No petition Agreement. Prior to the 181st day following the
payment in full of the Bonds and the discharge in accordance with its
terms of the Collateral Trust Indenture, the Indenture Trustee agrees
that it will not file a petition, or join in the filing of a petition,
seeking reorganization, arrangement, adjustment or composition of or in
respect of the Loan Participant under the Bankruptcy Code or any other
applicable Federal or state law or the law of the District of Columbia.
(3) Quiet Enjoyment. The Indenture Trustee agrees to be bound by
Section 6(a) of the Facility Lease.
(4) Acknowledgment. The Indenture Trustee hereby acknowledges
the provisions of Section 7(b)(4) of this Participation Agreement.
SECTION 10. Representations, Warranties and Agreements of the
Lessee.
(a) Representations and Warranties. The Lessee represents and
warrants that:
(1) Due Organization. PNM is a corporation duly organized and
validly existing in good standing under the laws of the State of New
Mexico and has the corporate power and authority to carry on its
business as presently conducted, to own or hold under lease its
properties and to enter into and perform its obligations under this
Participation Agreement and each other Transaction Document to which it
is, or is to become on or before the Closing Date, a party. PNM is duly
qualified and in good standing to do business as a foreign corporation
in the State of Arizona and has not failed to qualify to do business or
to be in good standing in any other jurisdiction where failure so to
-25-
609l.BURNHAM.1106.27:1
<PAGE>
qualify or be in good standing would materially and adversely affect the
financial condition of PNM or its ability to perform any obligations
under this Participation Agreement or any other Transaction Document to
which it is, or is to become on or before the Closing Date, a party.
(2) Due Authorization. The execution, delivery and performance
by PNM of this Participation Agreement and each other Transaction
Document to which it is, or is to become on or before the Closing Date,
a party, have been duly authorized by all necessary corporate action on
the part of PNM and do not, and will not, require the consent or
approval of the stockholders of PNM or any trustee or holder of any
indebtedness or other obligation of PNM, other than (i) the Mortgage
Release, (ii) the finding of the ANPP Administrative Committee described
in Section 15.6.2 of the ANPP Participation Agreement and (iii) such
other consents and approvals as have been, or on or before the Closing
Date will have been, duly obtained, given or accomplished, with true
copies thereof delivered to the Owner Participant.
(3) Execution. This Participation Agreement and each other
Transaction Document to which the Lessee is, or is to become a party,
have been or on or before the Closing Date will have been duly executed
and delivered by PNM, and this Participation Agreement constitutes, and
upon execution and delivery thereof, each such Transaction Document and
each such Financing Document will constitute, the legal, valid and
binding agreement of PNM, enforceable against it in accordance with
their respective terms.
(4) No Violation, etc. Neither the execution, delivery or
performance by the Lessee of this Participation Agreement or any other
Transaction Document to which it is, or is to become, a party, nor the
consummation by the Lessee of the transactions contemplated hereby or
thereby, nor compliance by the Lessee with the provisions hereof or
thereof, conflicts or will conflict with, or results or. will result in
a breach or contravention of any of the -.provisions of, the Restated
Articles of Incorporation or By-Laws of PNM, or any Applicable Law, or
any indenture, mortgage, lease or any other agreement or instrument to
-26-
6091.BURNHAM.1106.27:1
<PAGE>
which PNM or any Affiliate of PNM is a party or by which the property of
PNM or any Affiliate of PNM is bound, or results or will result in the
creation or imposition of any Lien (other than Permitted Liens) upon any
property of PNM or any Affiliate of PNM. There is no provision of the
Restated Articles of Incorporation or By-Laws of PNM, or any Applicable
Law, or any such indenture, mortgage lease or other agreement (other
than the ANPP Participation Agreement) or instrument which materially
adversely affects, or in the future is likely (so far as the Lessee can
now foresee) to materially adversely affect, the business, operations,
affairs, condition, properties or assets of the Lessee, or its ability
to perform its obligations under this Participation Agreement or any
other Transaction Document to which it is, or is to become, a party. The
Lessee represents and warrants that the transactions contemplated by the
Transaction Documents meet the conditions set forth in Section 15.6 of
the ANPP Participation Agreement.
(5) Governmental Actions. No Governmental Action is or will be
required in connection with the execution, delivery or performance by
the Lessee of, or the consummation by the Lessee of the transactions
contemplated by, this Participation Agreement or any other Transaction
Document or Financing. Document to which it is, or is to become on or
before the closing date, a party, except such Governmental Actions (i)
as have been, or on or before the closing Date will have been, duly
obtained, given or accomplished, with true copies thereof delivered to
the Owner Participant, the Owner Trustee and the Loan Participant (ii)
as may be required under existing Applicable Law to be obtained, given
or accomplished from time to time after the closing Date in connection
with the maintenance, use, possession or operation of Unit 2 or
otherwise with respect to Unit 2 and the Lessee's or the operating
Agent's involvement therewith and which are, for PVNGS; routine in
nature and which the Lessee has no reason to believe will not be timely
obtained and (iii) as may be required under Applicable Law not now in
effect. No Governmental Action (except Governmental Action as may be
required by any Governmental Authority of or in the states of the
principal place of business or of incorporation of the Owner
-27-
6091.BURNHAM.1106.27:l
<PAGE>
Participant) is or will I be required (a) in connection with the
participation by the Owner Trustee, the Indenture Trustee, the Owner
Participant or the Loan Participant in the consummation of the
transactions contemplated by this Participation Agreement, any other
Transaction Document or any Financing Document or (b) to be obtained by
any of such Persons during the Lease Term, except such Governmental
Actions (i) as have been, or on or before the Closing Date will have
been, duly obtained, given or accomplished, with true copies thereof
delivered to the Owner Participant and the Loan Participant, (ii) as may
be required by Applicable Law not now in effect, (iii) as may be
required of the Holder thereof in consequence of any transfer of
ownership of any Note or Bond, or any transfer (other than to the
Lessee) of the beneficial interest in the Trust by the Owner
Participant, or the Undivided Interest or the Real Property Interest by
the Owner Trustee under Applicable Law other than the law of the State
of Arizona, (iv) as may be required of the Holder thereof in consequence
of the issuance, sale or exchange and delivery of any Note (other than
the Initial Series Note) or any obligations issued under and pursuant to
the Collateral Trust Indenture (other than the Initial Series Bonds),
(V) as would be required by existing Applicable Law on the Lease
Termination Date in connection with taking possession of an interest in
Unit 2, (vi) as may be required by existing Applicable Law if, after the
Lease Termination Date, the Lessee should provide transmission services
for the Owner Trustee or cease to be agent for the Owner Trustee as
provided under the Assignment and Assumption, or (vii) as may be
required in consequence of any exercise of remedies or other rights by
any such Person in connection with taking possession of an interest in
Unit 2.
(6) Securities Act. Neither PNM nor anyone acting on its behalf
has directly or indirectly offered or sold any Bond, any interest in any
Note, any note issued with respect to any other undivided interest in
Unit 2, the Undivided Interest or any other undivided interest in Unit
2, the Facility Lease or any other lease of an undivided interest in
Unit 2, or any similar security or lease, or any interest in any
security or lease the offering of which, for purposes of the Securities
-28-
6091.BURNHAM.1106.27:1
<PAGE>
Act, would be deemed to be part of the same offering as the offering of
the aforementioned securities or leases, or solicited any offer to
acquire any of the aforementioned securities or leases in violation of
Section 5 of the Securities Act, and except as contemplated by this
Participation Agreement, neither the Lessee nor any one authorized to
act on its behalf will take any action which would subject the issuance
or sale of any Note or any interest in the Facility Lease or any other
debt instrument (other than the Refunding Bonds) issued or to be issued
to finance the Undivided Interest to the registration requirements of
such Section 5.
(7) Title to the Undivided Interest and Real Property Interest;
Security Interest. On the Closing Date, (i) good and marketable title to
the Undivided Interest and the related Generation Entitlement Share will
be duly, validly and effectively conveyed and transferred to the Owner
Trustee, free and clear of all Liens, except Permitted Liens (other than
those described in clause (ii) of the definition of such term and that
portion of clause (iv) of such definition relating to Liens for Taxes
being contested), (ii) good and marketable title to the Real Property
Interest will be duly, validly and effectively conveyed and transferred
to the Owner Trustee, as provided in the Deed and the Assignment of
Beneficial Interest, (iii) PNM will have good and marketable title to
its ownership interest in the Retained Assets, free and clear of all
Liens except Permitted Liens, the Lien of the Existing Mortgage and
matters disclosed in the title report referred to in Section 11 (a)
(34), (iv) the Lessee will have good and valid title to its ownership
interest in the PVNGS Site, (v) Unit 2 will be wholly located on the
PVNGS Site without any material encroachments by any portion thereof on
any other property, (vi) all filings and recordings necessary or
advisable to perfect the Owner Trustee's right, title and interest in
and to the Undivided Interest, the related Generation Entitlement Share
and the Real Property Interest, and to perfect for the benefit of the
Indenture Trustee and the holders of the Notes the first priority
security interest, mortgage and assignment of rents provided for in the
Indenture, will have been duly made and (vii) no other action, including
any action under any fraudulent conveyance statute, will be required to
-29-
609l.BURNHAM.1106.27:l
<PAGE>
protect the title and interests of the Owner Trustee in and to the
Undivided Interest, the related Generation Entitlement Share and the
Real Property Interest against the claims of all Persons other than the
ANPP Participants in accordance with the terms of the ANPP Project
Agreements, or to perfect such first priority security interest,
mortgage and assignment of rents in favor of the Indenture Trustee.
(8) Non-Interference. None of the Permitted Liens described in
clauses (ii), (iii), (iv), (v), (vii), (viii) and (xii) of the
definition of such Term will, on and after the Closing Date, materially
interfere with the use or possession of the Undivided Interest, the
related Generation Entitlement Share or the Real Property Interest or
the use of or the exercise by the Owner Trustee of its rights under the
Bill of Sale, the Deed, the Assignment of Beneficial Interest and the
Assignment and Assumption with respect to, the interests in PVNGS
granted or to be granted under the Bill of Sale, the Deed, the
Assignment of Beneficial Interest and the Assignment and Assumption.
(9) Personal Property. Unit 2, based on the agreements of PNM
and the other ANPP Participants in the ANPP Participation Agreement and
of the Lessee and the Owner Trustee herein and in the other Transaction
Documents, is personal property under the laws of the State of Arizona.
(10) Location of Chief Executive Office. The chief executive
office and place of business of the Lessee and the office where it keeps
its records concerning its accounts or contract rights is located at
Alvarado Square, Albuquerque, Bernalillo County, New Mexico 87158.
(11) Financial Statements. The consolidated balance sheets of
the Lessee and subsidiaries (A) as of December 31, 1985 and 1984,
respectively, and the related consolidated statements of earnings,
retained earnings and changes in financial position for each of the
years in the three-year period ended December 31, 1985, together with
the notes accompanying such financial statements, all certified by Peat,
Marwick, Mitchell & Co., and (B) as of June 30, 1986 and 1985,
respectively, and the related consolidated statements of earnings,
-30-
6091.BURNHAM.1106.27:1
<PAGE>
retained earnings and changes in financial position for the six-month
period ended June 30, 1986 and June 30, 1985, respectively, all certified
by the Controller or an Assistant Controller of the Lessee, as furnished
to the Owner Participant, fairly present the financial position of the
Lessee and its subsidiaries taken as a whole at each such date and the
results of their operations for each of the periods then ended, in
conformity with generally accepted accounting principles applied on a
consistent basis, subject in the case of the consolidated balance sheets
and the related consolidated statements described in clause (B) above to
the condensation of certain financial information and the omission of
certain footnote disclosures as permitted by the rules and regulations of
the SEC and to year-end audit adjustments. The Lessee knows of no such
adjustments which would, if made on the date hereof, be material.
(12) Disclosure None of the financial statements to which
reference is made in paragraph 11 above, nor the reports to which
reference is made in this paragraph 12, nor any certificate, written
statement or other document (other than any document published by any
Governmental Authority other than with respect to PVNGS or Unit 2, any
press report, any insurance report (furnished pursuant to Section 11
hereof) or any appraisal) and furnished to the Owner Participant by the
Lessee in connection with the transactions contemplated hereby (under
the circumstances at the time and for the purposes for which any
statement made therein was made) contains any untrue statement of a
material fact or omits to state a material fact necessary to make the
statements therein not misleading. There is no fact known to the Lessee
that materially and adversely affects or, so far as the Lessee can now
reasonably foresee, is likely to materially and adversely affect, the
business or financial condition of PNM or any material portion of its
properties or the ability of the Lessee to perform its obligations under
this Participation Agreement or any other Transaction Document or
Financing Document to which the Lessee is, or is to become on or before
the Closing Date, a party. PNM has heretofore delivered to the Owner
Participant PNM' 5 Annual Report on Form 10-K for the year ended
December 31, 1985, PNM's Quarterly Reports on Form l0-Q for the quarters
-31-
609l.BURNHAM.1l06.27:l
<PAGE>
ended March 31 and June 30, 1986 and the Current Reports on Form 8-K
filed on January 14, March 3, June 30, July 16 and July 31, 1986.
(13) Litigation. There is no action, suit, investigation or
proceeding pending or, to the knowledge of the Lessee, threatened
against PNM before any court, arbitrator or administrative or
governmental body which questions the validity or enforceability of this
Participation Agreement or any other Transaction Document to which the
Lessee is, or is to become, a party, or (except as described in the
reports to which reference is made in the last sentence of paragraph
(12) above) which, individually or in the aggregate, if decided
adversely to the interests of the Lessee, would have a material adverse
effect on the business or financial condition of PNM or materially and
adversely affect the ability of the Lessee to perform its obligations
under this Participation Agreement or any other Transaction Document to
which it is, or is to become, a party.
(14) Tax Returns. The Lessee has filed all Federal, state, local
and foreign, if any, tax returns which were required to be filed, and
has paid all Taxes shown to be due and payable on such returns and has
paid all other Taxes in respect of the Lessee's interest in Unit 2 and
in the PVNGS Site which are payable by PNM to the extent the same have
become due and payable and before they have become delinquent, except
for (i) any Taxes the amount, applicability or validity of which may be
in dispute and which are currently being contested in good faith by
appropriate proceedings and with respect to which PNM has set aside on
its books reserves (segregated to the extent required by generally
accepted accounting principles) deemed by it to be adequate and (ii) any
Taxes relating to PVNGS in respect of which the Operating Agent has not
given notice to PNM that the same are due and payable. The Federal
income tax returns of PNM have been audited by the IRS for taxable years
through 1980.
(15) ERISA. In reliance upon, and subject to the accuracy of the
representations made by the Loan Participant in Section 6(a)(6) and the
-32-
609l.BURNHAM.1106.27:1
<PAGE>
Owner Participant in Section 7(a)(9), the execution and delivery by the
Lessee of this Participation Agreement and the other Transaction
Documents and Financing Documents to which the Lessee is, or is to
become on or before the Closing Date, a party will not involve any
prohibited transaction within the meaning of ERISA or Section 4975 of
the Code.
(16) Regulation. So long as the Facility Lease is in effect,
assuming the proper filing of Form U-7D with the SEC on or within 30
days after the Closing Date, under Applicable Law now in effect, neither
the Loan Participant, the Owner Participant, FNB nor the Owner Trustee
will be or become, solely by reason of either its entering into this
Participation Agreement or any other Transaction Document to which any
of them is, or is to become, a party, or the transactions contemplated
hereby or thereby, subject to regulation (i) as an "electric utility",
an "electric utility company", a "public utility", a "public utility
company", a "holding company", or a "public utility holding company" by
any Federal, state (other than, as to the Owner Participant, the laws of
the states of its principal place of business and of its incorporation,
as to which no representation or warranty is given) or local public
utility commission or other regulatory body, authority or group
(including, without limitation, the SEC, the FERC, the NMPSC or the
Arizona Corporation Commission) or (ii) in any manner by the NRC. The
Lessee is not, and covenants that (except in connection with a
transaction permitted by Section 10(b) (3) (ii) hereof) it will not
become, a "holding company" or a "subsidiary company" of a "holding
company" or an "affiliate" of a "holding company" within the meaning of
the Holding Company Act. The Lessee is not subject to regulation by the
Arizona Corporation Commission as a public utility or a public service
corporation.
(17) Authorizations, etc. PNM has not failed to obtain any
Governmental Action or other authorization, license, approval, permit,
consent, right or interest, where a failure to obtain such would
materially and adversely affect the ability of PNM to carry on its
business as presently conducted.
-33-
6091.BURNHAM.1106.27:1
<PAGE>
(18) No Default, etc. PNM is not in default, and no condition
exists that, with the giving of notice or lapse of time or both, would
constitute a default by PNM, under the Existing Mortgage or any other
material mortgage, deed of trust, indenture, lease, contract or other
instrument or agreement to which PNM is a party or by which it or any of
its properties or assets may be bound.
(19) Certain Documents. True and correct copies of the ANPP
Participation Agreement, the Material Project Agreements (other than
those referred to in clauses (x) through (xiv) of the definition of such
term, true and correct copies of which will be delivered promptly
following the closing Date) and the Existing Mortgage have been
delivered to Milbank, Tweed, Hadley & McCloy. No ANPP Project Agreement
will, on and after the Closing Date, materially and adversely interfere
with (i) (except for the ANPP Participation Agreement, in the case of
the Generation Entitlement Share only) the title of the Owner Trustee to
the Undivided Interest, the related Generation Entitlement Share or the
Real. Property Interest or (ii) except for the ANPP Participation
Agreement, the use of, or the exercise by the Owner Trustee of its
rights under the Facility Lease, the Deed, the Assignment of Beneficial
Interest and the Assignment and Assumption with respect to, the
Undivided Interest, the related Generation Entitlement Share, and the
interests in the PVNGS Site (including the Real Property Interest)
granted or to be granted under the Deed, the Assignment of Beneficial
Interest and the Assignment and Assumption.. No payment default or other
default of a material nature by the Lessee has occurred and is
continuing under the Existing Mortgage or any ANPP Project Agreement.
The ANPP Participation Agreement and each other ANPP Project Agreement
is in full force and effect and no breach of any thereof, to the
Lessee's knowledge, by any other party thereto has occurred and is
continuing, except where the failure to be in force and effect or such
breach would not have a material and adverse effect on the Undivided
Interest, the related Generation Entitlement Share, the Real Property
interest, Unit 2 or the rights, interests and benefits of the Owner
Trustee or the Owner Participant under any Transaction Document. Upon
execution and delivery of the Mortgage Release and the recordation
thereof or of UCC releases in respect thereof, (i) the mortgagee and
-34-
609l.BURHAM.1106.27:1
<PAGE>
secured party thereunder will have released the lien of the Existing
Mortgage on the Undivided Interest, the related Generation Entitlement
Share and the Real Property Interest and (ii) the rights of the Owner
Trustee in the Undivided Interest and the Real Property Interest and the
related Generation Entitlement Share will not be, and will not become,
subject or subordinate to the rights of any Person, except the Indenture
Trustee under the Indenture and the ANPP Participants under, and to the
extent expressly set forth in, the ANPP Participation Agreement (as in
effect on the closing Date) and except as may otherwise expressly be
permitted by the Facility Lease. The lien of the Existing Mortgage does
not extend to rights of PNM under the Transaction Documents (other than
the Lessee's leasehold interest under the Facility Lease), or to the
Generation Entitlement Share related to the Undivided Interest. Neither
the Owner Trustee nor the Owner Participant shall, by virtue of the
transactions contemplated by the Transaction Documents, be a
"Transferee" under Section 15.10 of the ANPP Participation Agreement.
(20) Unit 2. The description of Unit 2 set forth in Exhibit B to
the Bill of Sale, as delivered on the closing Date, will be correct and
sufficiently complete to identify such property.
(21) Investment Company Act. PNM is not an "investment company",
or a company "controlled" by an "investment company", within the meaning
of the Investment company Act.
(b) Agreements.
(1) Delivery of Documents. The Lessee agrees that it will
deliver to the Owner Participant and the Loan Participant (and, in the
case of Sections 10(b) (1) (iii) and (v), the Owner Trustee):
(i) Financial Statements: (A) as soon as practicable, and
in any event within 120 days, after the end of each fiscal year
of PNM, a consolidated balance sheet of PNM and subsidiaries as
of the end of such fiscal year and related consolidated
statements of earnings, retained earnings and changes in
financial position for such year, all in reasonable detail and
-35-
6091.BURNHAM.1106.27:1
<PAGE>
certified in an opinion I by a nationally recognized firm of
independent public accountants, and the annual and interim
reports of PNM to its stockholders as soon as the same have been
mailed to such stockholders, (3) as soon as practicable, and in
any event within 60 days, after the end of each fiscal quarter
(other than the last fiscal quarter) of each fiscal year of PNM,
a consolidated balance sheet of PNM and subsidiaries as of the
end of said period and a related consolidated statement of
earnings, retained earnings and changes in financial position
for said period, all in reasonable detail, and certified by the
Chief Financial Officer, the Controller or an Assistant
Controller of PNM and (C) as soon as practicable after the same
have been filed, a copy of all documents filed by PNM with the
SEC pursuant to the reporting requirements of the Securities
Exchange Act;
(ii) Other Reports: promptly upon their becoming available,
any registration statement, offering statement, investment
memorandum or prospectus prepared by PNM in connection with the
public offering of securities (other than public offerings of
securities under employee stock option, consumer stock or
dividend reinvestment plans);
(iii) Notice of Default: promptly upon the Lessee becoming
aware of the existence there-of, written notice specifying any
condition which constitutes a Default or an Event of Default or
a default by any ANPP Participant under the ANPP Participation
Agreement and, in each case, the nature and status thereof;
(iv) Annual Certificate: within 120 days after the end of
each fiscal year of PNM, a certificate of the Lessee, signed by
the Chief Financial Officer, the Controller or an Assistant
Controller of PNM, to the effect that such officer has reviewed,
or caused to be reviewed by individuals under his supervision,
this Participation Agreement and each other Transaction Document
and each Financing Document to which the Lessee is a party and
has made, or caused to be made under his supervision, a review
-36-
6091.BURNHAM.1106.27:l
<PAGE>
of the transactions contemplated hereby and thereby and the
condition of PNM during such preceding fiscal year, and such
review has not disclosed the existence during such fiscal
period, nor does such officer have knowledge of the existence as
at the date of such certificate, of any condition or event that
constitutes a Default or Event of Default or, if any such
condition or event exists, specifying the nature and period of
existence thereof and any action the Lessee has taken, is
taking, or proposes to take with respect thereto;
(v) Opinion of Counsel: within 120 days after the end of
each fiscal year of the Lessee, an opinion or opinions,
satisfactory to the Owner Participant, the Owner Trustee, the
Collateral Trust Trustee and the Indenture Trustee, of Keleher &
McLeod, P.A., as general counsel for PNM, Snell & Wilmer, as
special Arizona counsel for the Lessee, and/or other counsel
acceptable to the Owner Participant (A) either to the effect
that (1) all filings and recordations (or refilings and
rerecordations) required to (i) convey to the Owner Trustee, and
establish, preserve, protect and perfect the title of the Owner
Trustee to, the Undivided Interest, the related Generation
Entitlement Share and the Real Property Interest and establish,
preserve and protect the Owner Trustee's rights under this
Agreement and the other Transaction Documents, and, (ii) so long
as any Note is Outstanding grant, perfect, and preserve the
security interest of the Indenture Trustee in the Lease
Indenture Estate, have been duly made, or (2) no such additional
filings, recordations, refilings or rerecordations are
necessary, to (i) convey to the Owner Trustee, and establish,
preserve, protect and perfect the title of the Owner Trustee to,
the Undivided Interest, the related Generation Entitlement Share
and the Real Property Interest and establish, preserve and
protect the Owner Trustee's rights under this Agreement and the
other Transaction Documents, and (ii) so long as any Note is
Outstanding, grant, perfect and preserve the security interest
-37-
6091.BURNHAM.1106.27:1
<PAGE>
of the Indenture Trustee in the Lease Indenture Estate and (B)
specifying the particulars of all action required during the
period from the date of such opinion through the last day of the
next succeeding calendar year, including, in the case of each
UCC continuation statement required to be filed during such
period, the office in which each such continuation statement is
to be filed and the filing date and filing number of the
original financing statement or fixture filing to be continued,
and the dates within which such continuation statement may be
filed under Applicable Law;
(vi) ANPP Information: upon receipt by the Lessee, copies
of all material notices, data, information and other written
communications received by the Lessee under or pursuant to any
ANPP Project Agreement or otherwise with respect to Unit 2,
PVNGS or the PVNGS Site, subject in each case to applicable
confidentiality undertakings with respect there-to, unless
prohibited by Applicable Law;
(vii) Other PVGS Information: the Lessee having by letter dated
on or prior to the Closing Date described its internal
procedures for monitoring PVNGS and reporting to the Owner
Participant with respect thereto, prior written notice of any
material change in such procedures; and copies of all notices of
violation or other material communications from the NRC and all
notices of Nuclear Incidents or other material occurrence given
to the NRC (including, without limitation, all "Licensee Event
Reports", Systematic Assessment of Licensee Performance (SALP)
reports and all other NRC audit reports) in each case with
respect to PVNGS or Unit 2;
(viii) Annual PVNGS Report: within 120 days after the end of
each fiscal year of the Lessee, a certificate of the Lessee
with respect to the status and operations of Unit 2 for such
fiscal year and current information respecting the status of
decommissioning funding arrangements for Unit 2,
-38-
6091.BURNHAM.1106.27:l
<PAGE>
(ix) Information Relating to Weighted Factor through the
Refunding Date, promptly after any change (other than a change
resulting from changes in the interest rate borne from time to
time by the Initial Series Note and the initial series notes
issued in connection with other sale and leaseback transactions
with respect to undivided interests in Unit 2 entered into by
PNM on the Closing Date) in the Weighted Factor, a notice
specifying the amount of such change, the amount of the Weighted
Factor after giving effect to such change and the event or
events which resulted in such change and, promptly following the
Owner Participant's request therefor, from time to time, such
other information regarding such factor and any events which
have resulted or may result in a change there-in; and
(x) Requested Information: with reasonable promptness,
unless prohibited by Applicable Law, such other data and
information as to the business and properties of PNM or as to
Unit 2, PVNGS or the PVNGS Site as from time to time may be
reasonably requested by the Owner Participant, subject, however,
to applicable confidentiality undertakings with respect thereto.
(2) Further Assurances. The Lessee will cause to be promptly and
duly taken, executed, acknowledged and delivered all such further acts,
documents and assurances as the Owner Participant may from time to time
reasonably request in order to carry out more effectively the intent and
purposes of this Participation Agreement, the other Transaction
Documents and the Financing Documents, and the transactions contemplated
hereby and thereby. The Lessee will cause the financing statements (and
continuation statements with respect thereto) and the documents
enumerated and described in Schedule 3, and all other documents
necessary or advisable in that connection, to be recorded or filed at
such places and times, and in such manner, and will take all such other
actions or cause such actions to be taken, as may be necessary or
reasonably requested by the Owner Participant, the Collateral Trust
Trustee, the Owner Trustee or the Indenture Trustee,
-39-
6091.BURNHAM.1106.27:l
<PAGE>
in order to establish, preserve, protect and perfect the title of the
Owner Trustee to the Undivided Interest, the related Generation
Entitlement Share and the Real Property Interest, and the Owner Trustee's
rights and interests under this Participation Agreement and the other
Transaction Documents and, so long as any Note is Outstanding, the first
and prior security interest of the Indenture Trustee in the Lease
Indenture Estate and the Indenture Trustee's rights under this
Participation Agreement and the other Transaction Documents, all referred
to and included under the granting clause of the Indenture.
(3) Covenants. The Lessee covenants and agrees as follows:
i) Maintenance of Corporate Existence, etc. The Lessee
shall at all times maintain its existence as a corporation under
the laws of the State of flew Mexico, except as permitted by
paragraph (ii) below (including any consent given by the Owner
Participant pursuant to such paragraph (ii)). The Lessee will do
or cause to be done all things necessary to preserve and keep in
full force and effect its rights (charter and statutory) and
franchises; provided, however, that the Lessee may discontinue
any right or franchise its board of directors shall determine
that such discontinuance is necessary or desirable in the
conduct of its business and does not materially and adversely
affect or diminish any right of the Owner Participant or the
Loan Participant.
(ii) Merger, Sale, etc.: Owner Participant. Without the
consent of the Owner Participant, the Lessee shall not (I)
consolidate with any Person, (2) merge with or into any Person,
or (3) subject to the provisions of Section 11(a) of the
Facility Lease and except in connection with normal dividend
policy of PNM, convey, transfer, lease, or dividend to any
Person more than 5% of its assets, including cash, in any single
transaction or series of related transactions, unless,
immediately after giving effect to such transaction:
-40-
6091.BURNHAM.1106.27:l
<PAGE>
(A) the person who is the Lessee immediately following such
consolidation, merger, conveyance, transfer or lease (the
Surviving Lessee) shall be a corporation or (with the prior
written consent of the Owner Participant, which consent shall
not be unreasonably withheld) other legal entity which (i) is
organized under the laws of the United States of America, a
state thereof or the District of Columbia, (ii) is a "public
utility" under applicable state and Federal laws, (iii) is an
ANPP Participant under the ANPP Participation Agreement with
respect to Unit 2 (including the Undivided Interest), (iv) if
other than the Lessee immediately prior to such transaction,
shall have assumed each covenant and condition of the Lessee
under the ANPP Participation Agreement and each other ANPP
Project Agreement and (V) holds a valid and subsisting license
from the NRC to possess Unit 2 (including the Undivided
Interest);
(B) the Surviving Lessee, if other than the Lessee
immediately prior to such transaction, shall execute and deliver
to the Owner Participant an agreement, in form and substance
reasonably satisfactory to the Owner Participant, containing the
assumption by the Surviving Lessee of each covenant and
condition of this Participation Agreement, each other
Transaction Document and each Financing Document to which the
Lessee immediately prior to such transaction was a party
immediately preceding such transaction;
(C) no Default (other than a failure to deliver documents and
other information specified in Section l0(b)(1)(vi), (vii) or
(viii) hereof) , Event of Default, Event of Loss or Deemed Loss
Event shall have occurred and be continuing;
-41-
6091.BURNHAM.1106.27:l
<PAGE>
(D) the Bonds (or, if the Bonds are not then rated, the
preferred stock of the Surviving Lessee) after giving effect to
such transaction, (1) shall be rated at least "investment grade"
by Standard & Poor's Corporation and Moody's Investors Service,
Inc. and (2) shall have an investment rating by Standard &
Poor's Corporation and Moody's Investors Service, Inc. not less
than one "smallest notch" below the rating assigned to the Bonds
(or, if the Bonds are not then rated, the preferred stock of the
Surviving Lessee) immediately prior to such transaction (or, if
neither of such rating organizations shall rate the Bonds (or,
if applicable, the preferred stock of the Surviving Lessee) at
the time, by any nationally recognized rating organization in
the United States of America);
(E) the Surviving Lessee shall have a Minimum Net Worth;
(F) the Surviving Lessee shall have delivered to the Owner
Participant and the Indenture Trustee an Officers' Certificate
and an opinion of counsel (if other than Mudge Rose Guthrie
Alexander & Ferdon or Keleher & McLeod, P.A., such counsel to be
reasonably satisfactory to the Owner Participant) to the
Surviving Lessee, each stating that (1) such transaction
complies with this subparagraph (ii) and (2) all conditions
precedent to the consummation of such transaction have been
satisfied and any Governmental Action required in connection
with such transaction has been obtained, given or accomplished;
(G) the Surviving Lessee shall have delivered to the Owner
Participant an opinion, reasonably satisfactory to the Owner
Participant, of independent counsel to the Surviving Lessee
stating that such transaction does not and will not cause a Tax
Loss (as defined in the Tax Indemnification Agreement)
(H) such transaction is otherwise permitted by and is in
accordance with the ANPP Participation Agreement; and
-42-
6091.BURNHAM.1106.27:l
<PAGE>
(I) the Coverage Ratio of the Surviving Lessee shall be at
least 1.6 to 1.
Upon the consummation of such transaction the Surviving Lessee,
if other than the Lessee, shall succeed to, and be substituted
for, and may exercise every right and power of, the Lessee
immediately prior to such transaction under this Participation
Agreement and each other Transaction Document and each Financing
Document to which the Lessee immediately prior to such
transaction was a party immediately prior to such transaction,
with the same effect as if the Surviving Lessee had been named
herein and therein.
(iii) Merger, Sale, etc.: Bondholders. The Lessee shall not
enter into any transaction constituting a consolidation1 merger,
conveyance, transfer, lease or dividend not permitted by Section
l0(b)(3)(ii), irrespective of any consent or waiver of the Owner
Participant, unless immediately after giving effect to such
transaction, the Bonds (or, if the Bonds are not then rated, the
preferred stock of the Surviving Lessee) shall be rated at least
"investment grade" by Standard & Poor's Corporation and Moody's
Investors Service, Inc.
(iv) Prior Notice to Rating Agencies. Prior to entering into
any transaction as to which the conditions set forth in
paragraphs (ii) and (iii) above shall be applicable, the Lessee
shall give notice thereof to the rating agencies specified in
such paragraphs, such notice to be sufficiently in advance of
such transaction to enable the rating agencies to respond
thereto prior to consummation thereof.
(V) Incurrence of Debt. Without the consent of the Owner
Participant, the Lessee shall not issue or assume any secured or
unsecured indebtedness maturing more than eighteen months after
the date of issuance thereof, if, immediately after such issue
or assumption, the total amount of all secured and unsecured
-43-
6091.BURNHAM.1106.27:l
<PAGE>
indebtedness of the Lessee maturing more than one year after the
date of such issue or assumption, exceeds 65% of the aggregate
of (x) such total amount and (y) the total capital and surplus
of the Lessee, in each case as shown on the Lessee's pro forma
consolidated balance sheet on and as of the date of such issue
or assumption.
(vi} Change in Chief Executive Office. The Lessee will notify
the Owner Trustee, the Owner Participant, the Loan Participant
and the Indenture Trustee promptly after any change in the
location of its chief executive office and place of business,
principal place of business or place where the Lessee maintains
its business records.
(vii) No Petition Agreement. Prior to the 181st day following
the payment in full of the Bonds and the discharge in accordance
with its terms of the Collateral Trust Indenture, PNM will not
file a petition, or join in the filing of a petition, seeking
reorganization, arrangement, adjustment or composition of or in
respect of the Loan Participant under the Bankruptcy Code or any
other applicable Federal or state law or the law of the District
of Columbia.
(viii) ANPP Project Agreements. Except where the failure to
do so would not have a material and adverse effect on the
Undivided Interest, the Real Property Interest, Unit 2 or the
rights, interests and benefits of the Owner Trustee or the Owner
Participant under any Transaction Document, the Lessee (without
limiting its obligations under the next sentence) at all times,
unless the Owner Participant shall otherwise consent, will (1)
perform its obligations under and comply with the terms of each
ANPP Project Agreement to be complied with by it, (2) exercise
its rights under the ANPP Participation Agreement to maintain
each ANPP Project Agreement in full force and effect, (3) keep
unimpaired all of the Lessee's rights, powers and remedies under
each ANPP Project Agreement and prevent any forfeiture or
-44-
609l.BURNHAM.1106.27:1
<PAGE>
impairment thereof, (4) enforce the ANPP Participation Agreement
in accordance with its terms and (5) not take, fail to take or
join in (i) any action with respect to, nor accept or approve
any amendment or any other change in, the ANPP Participation
Agreement or any other ANPP Project Agreement or (ii) any action
or change the effect of which would be to relieve the Lessee of
any obligation under the ANPP Participation Agreement on or
after the Closing Date. The Lessee will not, unless the Owner
Participant otherwise consents, accept or approve any amendment
to any ANPP Project Agreement the effect of which would be to
(A) reduce the Generation Entitlement Share related to the
Undivided Interest, (B) impose, directly or indirectly, on the
Owner Trustee or the Owner Participant any obligations, (C)
discriminate against (x) the Owner Trustee or the Owner
Participant in its capacity as lessor in a sale and leaseback
transaction or (y) any present or future ANPP Participant
because such ANPP Participant derived or will derive its status
as "Participant" under the ANPP Participation Agreement from a
lessor in a sale and leaseback transaction, or (D) deprive the
owner Trustee or the Owner Participant, as the case may be, of
the benefit of Sections 15.2.2, 15.10 and 32.1 of the ANPP
Participation Agreement (or any comparable successor
provisions). The Lessee shall (X) provide copies of any proposed
amendment to or modification of the ANPP Participation Agreement
to the Owner Participant not less than 45 days prior to the
execution thereof by the Lessee (except where the Lessee is
unaware thereof 45 days prior to such execution, in which case
the Lessee shall provide notice thereof as promptly as possible
after becoming so aware) and (Y) upon such execution furnish to
the Owner Participant a copy of any such amendment or
modification as executed. The Lessee will not, except as
permitted by paragraph (ii) above, sell, transfer, assign or
otherwise dispose of, except in the ordinary course of operation
of PVNGS, all or any of its rights or interests in and to PVNGS.
-45-
6091.BURNHAM.1106.27:1
<PAGE>
(ix) Notes and Bonds. The Lessee will not, and will not
permit any of its Affiliates to, acquire any of the Notes or,
except in connection with the selection of Bonds for redemption
pursuant to the Collateral Trust Indenture, the Bonds. The
Lessee agrees that (1) neither it nor any of its Affiliates
shall purchase any Bond more than 180 days in advance of the
date of the mandatory sinking fund redemption applicable
thereto, (2) the aggregate of Bonds of any one series so
purchased shall not exceed the amount of the, next succeeding
sinking fund payment applicable thereto and (3) any Bonds so
purchased shall be the subject of a request by the Lessee
pursuant to the provisions of the commitment agreement
applicable to such series of Bonds.
(x) Cooperation. The Lessee will cooperate with the Owner
Participant and the Owner Trustee in obtaining the valid and
effective issue, or, as the case may be, transfer or amendment
of all Governmental Actions (including, but without limitation,
the License) necessary or, in the opinion of the Owner
Participant, desirable for the ownership, operation and
possession of the Undivided Interest (including the related
Generation Entitlement Share), the Real Property Interest or any
portion of Unit 2 represented thereby by the Owner Trustee or
any transferee, lessee or assignee thereof for the period from
and after the Lease Termination Date to the Final Shutdown.
(xi) Decommissioning. (A) The Lessee will comply with its
obligations under Applicable Law concerning the Decommissioning
of Unit 2. If Applicable Law or Governmental Action shall not,
on or before December 31, 1990, impose upon the Lessee the
obligation to create and maintain an external reserve fund
(which may be a fund which qualifies under Section 468A of the
Code) dedicated to paying all Decommissioning Costs relating to
the Undivided Interest, then the Lessee will create and maintain
such a fund on terms reasonably satisfactory to the Owner
-46-
6091.BURNHAM.1106.27:l
<PAGE>
Participant; if Applicable Law or Governmental Action shall
thereafter impose upon the Lessee an obligation to create and
maintain such a fund, any fund in compliance with Applicable Law
or such Governmental Action shall be deemed satisfactory to the
Owner Participant for purposes of the preceding sentence. (B)
Except to the extent provided in clauses (C) and (D) below, as
between the Lessee, the Owner Trustee, the Owner Participant and
any transferee (including by way of lease) or assignee of any of
the Lessor's or the Owner Participant's right, title or interest
in Unit 2, the Lessee agrees to pay, or cause to be paid, and to
indemnify such parties against, all Decommissioning Costs,
notwithstanding (i) the occurrence of the Lease Termination
Date, any Event of Default, Default, Event of Loss, Deemed Loss
Event or any other event or occurrence, (ii) any provision of
any Transaction Document, or other document, instrument or
agreement, including the ANPP Participation Agreement, (iii) any
provision of the License or any other license or permit, or (iv)
any Applicable Law, charter or by-law provision, Governmental
Action or other impediment, including, without limitation, the
bankruptcy or insolvency of the Lessee, either now or hereafter
in effect; it being understood that the obligations of the
Lessee under this clause (B) are and shall be a~so1ute and
unconditional. (C) In the event that (i) the Facility Lease
shall have expired upon expiration (or early termination
pursuant to Section 14(e) of the Facility Lease) of the Lease
Term (other than in connection with an Event of Loss, Deemed
Loss Event or Event of Default) and (ii) thereafter the Lessor
shall (I) re-lease the Undivided Interest to any Person or (2)
retain the Undivided Interest and sell power and energy from its
Generation Entitlement Share, then after the Lessor has received
(x) in the case of clause (1) above, gross rents in an aggregate
amount (when discounted back to such Lease Termination Date at a
rate per annum equal to the Prime Rate) equal to 20% of Facility
Cost, or (y) in the case of clause (2) above, net electric
-47-
6091.BURNHAM.1106.27:1
<PAGE>
revenues in an aggregate amount (discounted as I aforesaid)
equal to 20% of Facility Cost, the Lessor shall thereafter
reimburse the Lessee for any expenditures incurred by the Lessee
under clauses (A) and (B) of this Section 10(b) (3) (xi) in an
amount equal to any further rent received or proceeds received
from the sale of power and energy to the extent that such rent
or proceeds are attributable to the decommissioning obligation
of the Lessee under this Section 10(b) (3) (xi) with respect to
the period from and after such Lease Termination Date (payable
on an annual basis with respect to each year or portion thereof
during the term of such lease referred to in clause (1) above or
such period referred to in clause (2) above during which the
Lessor retains the Undivided Interest); provided, however, that
when such amount has been paid the Lessor shall be relieved of
all obligations to make further reimbursement to the Lessee for
such purpose. (D) In the event that (i) the Facility Lease shall
have expired upon the expiration (or early termination pursuant
to Section 14(e) of the Facility Lease) of the Lease Term (other
than in connection with an Event of Loss1 Deemed Loss Event or
Event of Default, (ii) the Lessor shall sell (other than in
connection with the termination by the Lessee of the Facility
Lease for obsolescence pursuant to Section 14 of the Facility
Lease) the Undivided interest to any Person (including the
Lessee in connection with the exercise by the Lessee of the
purchase option provided by Section 13(b) of the Facility
Lease), and (iii) the net sales proceeds (discounted back to
such Lease Termination Date at a rate per annum equal to the
Prime Rate) received by the Lessor in connection therewith shall
exceed 20% of Facility Cost (reduced by the percentage of
Facility Cost, if any, actually realized by the Lessor pursuant
to clause (C) above), then the Lessor shall reimburse the Lessee
for any expenditures incurred by the Lessee under clauses (A)
and (B) of this Section 10(b)(3)(xi) in an amount equal to any
net proceeds of such sale, to the extent that such proceeds are
attributable to the decommissioning obligation of the Lessee
-48-
6091.BURNHAM.1106.27:l
<PAGE>
under this Section 10(b) (3) (xi) with respect to the period
from and after the date of such sale through the remaining
useful life of Unit 2 (whereupon the reimbursement obligations
of the Lessor under this Section 10(b) (3) (xi) shall
terminate); provided, however, that any such reimbursement shall
not reduce the amount of such net sales proceeds retained by the
Lessor to an amount (discounted as aforesaid) equal to less than
20% of Facility Cost (reduced by the percentage of Facility
Cost, if any, actually realized by the Lessor pursuant to clause
(C) above). The reimbursement obligations of the Lessor under
clauses (C) and (D) above are for the sole benefit of the
Lessee, and no other Person shall be a third party beneficiary
with respect thereto. In the event that the Lessee and the
Lessor shall not agree as to the amount of gross rents, net
electric revenues or net sales proceeds attributable to the
decommissioning obligation of the Lessee under this Section
l0(b)(3)(xi), such amount shall be determined by the Appraisal
Procedure. For purposes of determining Facility Cost under
clauses (C) and (0) of this Section l0(b)(3)(xi), Facility Cost
shall be adjusted to reflect inflation or deflation from the
Closing Date to the time of determination.
(xii) Other Leases with Respect to PVNGS. The Lessee agrees
that it will deliver to the Owner Participant, promptly
following execution and delivery thereof by the, Lessee, all
transaction documents pertaining to any sale and leaseback
transaction that the Lessee or any Affiliate of the Lessee may
enter into with respect to PVNGS. The Lessee agrees, upon the
written request of the Owner Participant delivered within 60
days of receipt of transaction documents with respect to each
such transaction, to enter (within a reasonable time as
specified in such request) into an amendment to the Facility
Lease as necessary to incorporate therein (in substitution for
the definitions of such terms theretofore appended thereto) and
at the option of the Owner Participant, any one or more of the
following three alternatives: (I) the definitions of "Deemed
-49-
6091.BURNHAM.1106.27: 1
<PAGE>
Loss Event" and "Event of Loss", (II) the definition of "Final
Shutdown", or (III) that portion of "Deemed Loss Event" as
relates to changes in the Price-Anderson Act, the Atomic Energy
Act or any other Applicable Law relating to the matters set
forth in clause (2) of the definition of "Deemed Loss Event"
contained in Appendix A hereto, in each case as appended to or
contained in the Facility Lease entered into in connection with
such transaction (the Subject Lease). For purposes of the
foregoing, the definitions of any of such terms shall include
such other terms as may be used in such transaction to connote
events similar to those contained in any of the definitions
referred to above. In connection with any such amendment, the
Owner Participant shall submit (subject to review by the
Lessee's financial advisors) new Schedules of Special Casualty
Values and/or casualty Values, in each case calculated on the
same assumption as the comparable schedules appended to the
Subject Lease. In connection with any such amendment, such
substituted definitions shall include and be subject to, mutatis
mutandis, the same qualifications and waivers and incorporate,
mutatis mutandis, the same definitions as shall be provided in
the Subject Lease or related transaction documents with respect
to any of the definitions referred to above which shall be
substituted.
(xiii) Acknowledgment and Agreement. The Lessee hereby
acknowledges and agrees to the provisions of Section 7(b) (4) of
this Participation Agreement.
(xiv) Real Estate Matters. The Lessee agrees that upon
request of the Owner Participant and at the expense of the
Lessee, the Lessee (if permitted by Applicable Law and the ANPP
Participation Agreement) will enter into amendments to the
Transaction Documents as necessary to reflect reasonable
alternative arrangements with respect to the Real Property
Interest involving the transfer of the Real Property to the
Lessee, the grant to the Lessor of easements, an option to
purchase a ground lease or other rights (or a combination
thereof) with respect to the Real Property
-50-
609l.BURNHAM.1106.27:l
<PAGE>
Interest and, (ii) if necessary or desirable to effect such
arrangements and if requested by the Owner Participant,
repurchase the Real Property Interest from the Lessor at the
higher of Fair Market Sales Value thereof and an amount equal
to the Real Estate Investment; provided, however, the Lessee
will not be obligated to accept any alternative arrangements
unless the Lessee shall have determined, based upon an opinion
of counsel, that such arrangements will not materially
adversely affect the status of the Owner Participant as owner
of the Undivided Interest for Federal income tax purposes.
(xv) Amendment of Subject and Subordinate Provisions. The
Lessee shall not unreasonably withhold its consent to any
proposed amendment to the ANPP Participation Agreement which
would have the effect of eliminating the provisions thereof
under which the rights of the Owner Trustee and the Owner
Participant hereunder shall be subject and subordinate to the
rights of the ANPP Participants, provided that the Lessee shall
have no obligations to initiate any such amendment.
SECTION 11. Conditions Precedent.
(a) Owner Participant and Loan Participant Conditions. The
obligation of (x) the Loan Participant to make the Loan on the Closing Date, and
(y) the Owner Participant to make the Investment and the Real Estate Investment
on the Closing Date, shall (except as provided below) be subject to the
fulfillment, on or prior to the Closing Date, of the following conditions
precedent (each instrument, document, certificate or opinion referred to below
to be in form and substance satisfactory to the Loan Participant and the Owner
Participant):
(1) Notice of Closing; Transaction Documents. Each shall have
received executed copies, or sets of executed counterparts, of (x) the
Notice of Closing, and (y) each Transaction Document (other than the Tax
Indemnification Agreement), the Mortgage Release, each Financing
Document being executed on the Closing Date and such other documents as
are contemplated by this Participation Agreement.
-51-
6091.BURNHAM.1106.27:1
<PAGE>
(2) Tax Indemnification Agreement. The Owner Participant shall
have received an executed copy of the Tax Indemnification Agreement.
(3) Authentication Request, etc. The Owner Trustee shall have
delivered to the Indenture Trustee (x) a request, dated the Closing
Date, authorizing the Indenture Trustee to authenticate and deliver the
Initial Series Note to the Loan Participant upon its payment to the
Indenture Trustee, for the account of the Owner Trustee/ of the proceeds
of the Loan, and (y) the Original of the Facility Lease.
(4) Due Authorization, Execution and Delivery. All of the
documents described in clauses (1) and (2) of this Section 11(a) shall
have been duly authorized, executed and delivered by the respective
parties thereto and shall be in full force and effect on the Closing
Date, and the Loan Participant and the Owner Participant shall have
received evidence as to such authorization, execution and delivery.
(5) Initial Series Note and Bond Transactions; Investment. In
the case of the Loan Participant, (A) the Loan Participant shall have
received the proceeds from the sale of the Initial Series Bonds as a
result of the consummation of the transactions contemplated by the Term
Loan Agreement, (B) the Owner Trustee shall have executed, and the
Indenture Trustee shall have authenticated and delivered to the Loan
Participant, the Initial Series Note evidencing the Loan made on the
Closing Date, (C) the Collateral Trust Trustee shall have accepted the
Term Note Supplemental Indenture and shall have released the amount of
the Loan from the lien of the Collateral Trust Indenture, and (D) the
Owner Participant shall have made the Investment and the Real Estate
Investment.
(6) Loan. In the case of the Owner Participant, the Loan
Participant shall have made the Loan.
(7) ANPP Administrative Committee. the ANPP Administrative
Committee shall have made the finding required by Section 15.6.2 of the
ANPP Participation Agreement and the Lessee shall have delivered
evidence thereof to the Loan Participant and the Owner Participant.
-52-
6091.BURNHAM.1l06.27:1
<PAGE>
(8) No Violation. The making by the Owner Participant of the
Investment and the Real Estate Investment and by the Loan Participant of
the Loan shall not violate any Applicable Law.
(9) No Default. No Default, Event of Default, Indenture Default
or Indenture Event of Default shall have occurred and be continuing.
(10) Recording and Filing. The financing statements and fixture
filings under the Uniform Commercial Code and certain Transaction
Documents, in each case as enumerated and described in Schedule 3, shall
have been duly filed or recorded in the respective places or offices set
forth in such Schedule and all recording and filing fees with respect
thereto shall have been paid.
(11) Representation. and Warranties of the Loan Participant. In
the case of the Owner Participant, the representations and warranties of
the Loan Participant set forth in Section 6(a) shall be true and correct
on and as of the Closing Date with the same effect as though made on and
as of the Closing Date, and the Owner Participant shall have received an
Officers' Certificate of the Loan Participant, dated the Closing Date,
to such effect.
(12) Opinion of the Loan Participant's Counsel. In the case of
the Owner Participant, it shall have received a favorable opinion of
Mudge Rose Guthrie Alexander & Ferdon, as counsel for the Loan
Participant, dated the Closing Date and addressed to the Owner
Participant, to the effect set forth in Schedule 4.
(13) Representation. and Warranties of the "Owner Participant."
In the case of the Loan Participant, the representations and warranties
of the Owner Participant set forth in Section 7 (a) shall be true and
correct on and as of the Closing Date with the same effect as though
made on and as of the Closing Date, and the Loan Participant shall have
received a certificate of an officer of the Owner Participant, dated the
Closing Date, to such effect.
-53-
6091.BURNHAM.1106.27:l
<PAGE>
(14) Opinion of the Owner Participant's Special Counsel and
Other Counsel. In the case of the Loan Participant, it shall have
received favorable opinions of counsel and special counsel for the Owner
Participant, dated the Closing Date and addressed to the Loan
Participant, to the effect set forth in Schedule 5.
(15) Representations and Warranties of the Owner Trustee. The
representations and warranties of FNB and the Owner Trustee set forth in
Section 8(a) shall be true and correct on and as of the Closing Date
with the same effect as though made on and as of the Closing Date, and
the Loan Participant and the Owner Participant shall have received a
certificate of an officer of FNB and a certificate of the Owner Trustee,
dated the Closing Date, to such effect..
(16) Opinion of the Owner Trustee's Counsel. The Loan
Participant and the Owner Participant shall have received a favorable
opinion of Csaplar & Bok, as counsel for the Owner Trustee, dated the
Closing Date and addressed to each such Person, to the effect set forth
in Schedule 6.
(17) Representations and Warranties of the Indenture Trustee.-
The representations and warranties of Chemical and the Indenture Trustee
set forth in Section 9(a) shall be true and correct on and as of the
Closing Date with the same effect as though made on and as of the
Closing Date, and the Loan Participant and the Owner Participant shall
have received a certificate of an officer of chemical and the Indenture
Trustee, dated the Closing Date, to such effect.
(18) Opinion of the Owner participant's Special NRC Counsel. The
Owner Participant shall have received a favorable opinion of Shaw,
Pittman, Potts & Trowbridge, as special NRC counsel for the Owner
Participant, dated the Closing Date and addressed to the Owner
Participant, to the effect set forth in Schedule 7.
-54-
6091.BURNHAM.1106.27:1
<PAGE>
(19) Representations and Warranties of the Lessee. (A) The
representations and warranties of the Lessee set forth in Section 10(a),
in each other Transaction Document, in the Term Loan Agreement and in
each certificate or other document to which the Lessee is a party
executed or delivered in connection with the transactions contemplated
hereby or thereby shall be true and correct on and as of the Closing
Date with the same effect as though made on and as of the Closing Date
and (B) no Deemed Loss Event or Event of Loss shall have occurred and.
no Default or Event of Default shall have occurred and be continuing and
the Loan Participant and the Owner Participant shall have received an
Officers' Certificate of the Lessee, dated the Closing Date, to such
effect. Such Officers' Certificate shall state that, except as may be
disclosed in the Lessee's reports on Form l0-Q and 8-K (which shall have
been delivered to the Owner Participant prior to the Closing Date),
there has been no material adverse change in the properties, business,
prospects or financial condition of the Lessee since December 31, 1985,
and no event has occurred since that date which would materially
adversely affect the ability of the Lessee to perform its obligations
under this Participation Agreement or any other Transaction Document to
which it is, or is to become, a party.
(20) Opinion of the Lessee's Special Counsel. The Loan
Participant and the Owner Participant shall have received a favorable
opinion of Mudge Rose Guthrie Alexander & Ferdon, as special counsel for
the Lessee, dated the Closing Date and addressed to each such Person, to
the effect set forth in Schedule 8.
(21) Opinion of Lessee's General Counsel. The Loan Participant
and the Owner Participant shall have received a favorable opinion of
Keleher & McLeod, P.A., dated the Closing Date and addressed to each
such Person, to the effect set forth in Schedule 9.
(22) Opinion of Lessee's Arizona Counsel. The Loan Participant
and the Owner Participant shall have received a favorable opinion of
Snell & Wilmer, dated the Closing Date and addressed to each such
Person, to the effect set forth in Schedule 10.
-55-
6091.BURNHAM.1106.27:l
<PAGE>
(23) Opinion of Special FERC Counsel. The Owner Participant
shall have received a favorable opinion of Newman & Holtzinger, P.C.,
dated the Closing Date and addressed to the Owner Participant, to the
effect set forth in Schedule 11.
(24) Opinion of Owner Participant's Special Arizona Counsel. The
Owner Participant shall have received a favorable opinion of Meyer,
Hendricks, Victor, Osborn & Maledon, dated the Closing Date and
addressed to the Owner Participant, to the effect set forth in Schedule
12.
(25) Opinion of Owner Participant's Special New Mexico Counsel.
The Owner Participant shall have received a favorable opinion of Rodey,
Dickason, Sloan, Akin & Robb, P. A. dated the Closing Date and addressed
to the Owner Participant, to the effect set forth in Schedule 13.
(26) Opinion of the Owner Participant's Special Counsel. The
Owner Participant shall have received a favorable opinion of Shearman &
Sterling, dated the Closing Date and addressed to the Owner Participant,
with respect to such Federal tax and other tax matters as the Owner
Participant may reasonably request.
(27) Opinion of the Loan Participant's Counsel. The Loan
Participant shall have received a favorable opinion of Mudge Rose
Guthrie Alexander & Ferdon, dated the Closing Date and addressed to it,
to the effect set forth in Schedule 4.
(28) Taxes. All Taxes, if any, payable in connection with the
execution, delivery, recording and filing of the Transaction Documents
and all the documents and instruments enumerated and described in
Schedule 3, or in connection with the issuance and sale of the Initial
Series Note and the Initial Series Bonds and the making by the Owner
Participant of the Investment and the Real Estate Investment, and all
Taxes payable in connection with the consummation of the transactions
contemplated hereby and by the other Transaction Documents, shall have
been duly paid in full by the Lessee.
-56-
6091.BURNHAM.1106.27:1
<PAGE>
(29) Form U-7D. A certificate on Form U-7D with respect to the
Facility Lease shall have been duly executed and delivered by the Owner
Trustee and the Owner Participant and shall be in due form for filing.
(30) Appraisal. The Owner Participant shall have received a
letter, dated the Closing Date and addressed to the Owner Participant,
from Ebasco Business Consulting Company, as the appraiser heretofore
selected by the Owner Participant, in form and substance satisfactory to
the Owner Participant, containing an appraisal of the Undivided
Interest, which appraisal shall reflect such appraiser's reasonable
conclusion that (w) the fair market value in the hands of the Owner
Trustee of the Undivided Interest on the Closing Date, taking into
account the effect and existence of the Real Property Interest, the
Assignment and Assumption and the ANPP Participation Agreement, is equal
to the Purchase Price as set forth in the Notice of Closing, (x) the
estimated remaining economic useful life of Unit 2 (including the
Undivided Interest) is at least 39.309 years, (y) at the expiration of
the Renewal Term the Undivided Interest will have an estimated residual
value taking into account the effect and the existence of this
Participation Agreement, the Real Property Interest, the Assignment and
Assumption and the ANPP Participation Agreement, in the hands of the
Owner Trustee or a Person (unrelated to the Lessee) who could lease or
purchase the Undivided Interest from the Owner Trustee for commercial
use, equal to at least 20% of the Purchase Price, determined without
including in such value any increase or decrease for inflation or
deflation during the period from the Closing Date through the expiration
of the Renewal Term, and (z) taking into account the effect and the
existence of the Real Property Interest, the Assignment and Assumption
and the ANPP Participation Agreement, the use of the Undivided Interest
at the Lease Termination Date by any User is feasible from an
engineering and economic point of view and is commercially reasonable.
(31) Offering and Sale of Interest. The Loan Participant, the
Owner Trustee and the Owner Participant shall have received a letter
from Kidder, Peabody & Co. Incorporated, Goldman, Sachs & Co., Citibank,
N.A. and Mellon Bank, N.A., with respect to the offering and sale of the
equity interests in the transactions contemplated by this Participation
Agreement.
-57-
6091.BURNHAM.1106.27:1
<PAGE>
(32) Extension Letter. The Extension Letter shall have been duly
executed by the respective parties thereto and delivered to the
Collateral Trust Trustee.
(33) Governmental Action. The Lessee shall have obtained all
Governmental Actions (including, without limitation, the New Mexico
Order, which order shall be final and non-appealable, and any amendments
to the License) required or, in the opinion of the Owner Participant,
advisable for the consummation of all the transactions contemplated by
this Participation Agreement and the other Transaction Documents and the
Financing Documents in accordance with their respective terms.
(34) Title Report; Title Insurance. The Owner Participant shall
have received (i) an updated title report, dated the Closing Date, with
respect to the PVNGS Site, which report does not disclose any exceptions
materially adverse to the possession or operation of Unit 2 or the
performance by the Lessee of its obligations under this Participation
Agreement and the other Transaction Documents to which the Lessee is a
party; and (ii) such title insurance policies with respect to the PVNGS
Site and improvements thereon (including the Owner Trustee's interests
therein) as it shall have reasonably requested, such policies to be in
form and substance satisfactory to the Owner Participant.
(35) No Change or Proposed Change in Tax laws. No change shall
have occurred or been proposed in the Code or any other tax statute, the
regulations thereunder or any interpretation thereof that would
adversely affect the tax consequences anticipated by the Owner
Participant with respect to the transactions contemplated by the
Transaction Documents, unless the effect of such change or proposed
change is provided for in Section 3(d) of the Facility Lease.
(36) Insurance. The Owner Participant shall have received a
written report from its independent insurance consultant in form and
substance satisfactory to the Owner Participant.
-58-
6091.BURNHAM.1106.27:l
<PAGE>
(37) Site Arrangement Plan. The Owner Participant shall have
received a site arrangement plan of the nuclear plant site prepared
subsequent to January 1, 1979.
(38) Special Certificate of the Lessee. The Owner Participant
shall have received a certificate of the Lessee, dated the Closing Date,
to the effect that, except as set forth on the Schedule thereto, (A)
Unit 2 has been in all material respects completed in a good and
workmanlike manner and in accordance with the plans and specifications
relating thereto (as the same may have been modified from time to time
to reflect Unit 2 as actually completed), Applicable Law (including, but
without limitation, the regulations of the NRC), the License and the
ANPP Participation Agreement, (B) all Governmental Action necessary for
the commercial operation of Unit 2 (including the Undivided Interest)
has been received, other than Governmental Action that is routine in
nature for PVNGS or that cannot be obtained under Applicable Law, or is
typically not applied for, prior to the time it is required, and that
the Lessee reasonably expects to be obtained in due course, (C) the
plans and specifications relating to Unit 2 are complete in all material
respects (modified or to be modified as aforesaid) and consistent with
prudent engineering practice, (D) the testing and startup procedures for
Unit 2 and the operation and maintenance programs for Unit 2 are
consistent with such plans and specifications, Applicable Law and
prudent engineering practice, (E) Unit 2 has been tested in accordance
with all customary testing and startup procedures which would have been
performed on or prior to the Closing Date, and such tests and procedures
indicate that Unit 2 will have the capacity and functional ability to
perform in commercial operation, on a continuing basis, the function for
which it is designed in accordance with such plans and specifications
and has a nominal capacity of 1,270 megawatts electric, (F) all material
Governmental Actions relating to the construction, operation or
maintenance of Unit 2 are listed in a schedule thereto, (G) there is no
present event or condition which would materially adversely affect the
capability of Unit 2 to operate in accordance with such plans and
specifications and (H) based upon the Lessee's present reasonable
-59-
6091.BURNHAM.1106.27:1
<PAGE>
expectations, and I subject to Applicable Law, the rights and interests
made available to the ANPP Participants (including the Lessee) pursuant
to the ANPP Participation Agreement, as such rights and interests are
made available to the Owner Trustee, any successor or assign of the
Owner Trustee or any "Transferee" of the Owner Trustee under Section
15.10 of the ANPP -Participation Agreement, under and pursuant to this
Participation Agreement, the Deed, the Assignment of Beneficial Interest
or the Assignment and Assumption, together with the rights to be made
available under and pursuant to the Assignment and Assumption, are
adequate to permit, during the period following the Lease Termination
Date or the taking of possession of the Undivided Interest and the Real
Property Interest in the exercise of remedies under Section 16 of the
Facility Lease, in accordance with the ANPP Project Agreements (i) the
construction, location, occupation, connection, maintenance,
replacement, renewal, repair or removal of Unit 2, (ii) the use,
operation and possession of Unit 2, (iii) the construction, use,
operation, possession, maintenance, replacement, renewal and repair of
all alterations, modifications, additions, accessions, improvements,
appurtenances, replacements and substitutions thereof and thereto, (iv)
adequate ingress to and egress from Unit 2for any reasonable purpose in
connection with the exercise of rights under the Assignment and
Assumption and the Owner Trustee's ownership and possession of the
Undivided Interest and (v) the obtaining of nuclear fuel, of water and
of transmission services to the ANPP Switchyard sufficient to enable
delivery of the Generation Entitlement Share related to the Undivided
Interest in a commercially efficient manner and on commercially
reasonable terms. Nothing in the foregoing clause (H) shall be deemed to
be or be construed as a warranty by the Lessee as to the performance by
the Operating Agent of its obligations under the ANPP Participation
Agreement. Such certificate shall also be attested to by J.D. Maddox,
Group Manager, Environmental and Resources Management, PNM Electric, who
shall state that (i) he is a qualified engineer, and that he has made
such investigation, inspection and review as he deems necessary to make
the statements in such certificate and (ii) to the best of his
knowledge, the statements of the Lessee in such certificate are true and
correct.
-60-
6091.BURNHAM.1106.27:l
<PAGE>
(39) Real Estate Appraisal. The Owner Participant shall have
received an appraisal of the Real Property Interest, which appraisal
shall reflect the appraiser's reasonable conclusion that the fair market
value in the hands of the Owner Trustee of the Real Property Interest on
the Closing Date is equal to the Real Estate Investment as set forth in
the Notice of closing. Such appraisal shall have covered such other
matters as the Owner Participant shall have requested.
(40) Nuclear Matters. There shall have been no change in the
circumstances involving the condition, nature, operation or value of
Unit 2, or in the regulation of the United States domestic nuclear
industry.
(41) Independent Engineer. The Owner Participant shall have
received a report from its nuclear engineer with respect to the status
and condition of Unit 2.
(42) Certain Unit 1 Leases. The Lessee shall have obtained the
consent required by Section 10(b) (3) (xii) of each of the three
Participation Agreements dated as of December 16, 1985, relating to
separate sale and leaseback transactions involving undivided interests
in Unit 1 in respect of which the Lessee is lessee.
(43) Other Matters. The Loan Participant and the Owner
Participant shall have received such other documents, certificates and
opinions as the Loan Participant or the Owner Participant, or their
respective counsel, shall reasonably request.
(b) Lessee Conditions. The obligation of the Lessee to sell and
lease back the Undivided Interest and the Real Property Interest on the Closing
Date pursuant to Section 4 shall be subject to the fulfillment on or prior to
the Closing Date of the following conditions precedent, in each case in form and
substance satisfactory to the Lessee:
(1) Paragraph (a) Documents. The Lessee, the Owner Trustee and
the Indenture Trustee shall have received executed copies of the
documents, certificates, opinions (other than the opinion referred to in
-61-
609l.BURNHAM.1106.27:1
<PAGE>
Section 11(a)(26)), appraisals, letters and forms described in paragraph
(a) of this Section 11. All such opinions shall be addressed to the
Lessee, the Indenture Trustee, the Loan Participant and the Owner
Trustee, except the opinions or documents to which reference is made in
clauses (18), and (26) of said paragraph (a), and the opinions referred
to in clauses (14), (16), (20), (21), (22) and (27) will be addressed to
the Collateral Trust Trustee as provided in Section 2.04(5) of the
Collateral Trust Indenture.
(2) Payment of Purchase Price. The Owner Trustee shall have paid
to the Lessee an amount, in immediately available funds, equal to the
Purchase Price and the purchase price of the Real Property Interest.
(3) Special Opinion of the Lessee's Special Counsel. The Lessee
shall have received a favorable opinion of Mudge Rose Guthrie Alexander
& Ferdon, dated the Closing Date and addressed to the Lessee, with
respect to such Federal tax and other matters as the Lessee may
reasonably request.
(4) Accountant's Letter. The Lessee shall have received a letter
satisfactory to it from Peat, Marwick, Mitchell & Co., to the effect
that, under generally accepted accounting principles and SFAS No. 13,
the Facility Lease is an "operating lease".
(5) Order. The NMPSC Order shall be in form and substance
satisfactory to the Lessee.
(6) Weighted Factor. The weighted Factor shall not exceed 11.7%
of the Purchase Price.
(c) Conditions to Re1everaging. The obligation of the Loan
Participant to make, and the Owner Trustee to borrow the proceeds of, a
Releveraging Loan on the Releveraging Date shall be subject to the fulfillment
on or prior to such Releveraging Date of the following conditions precedent
(each instrument, document, certificate or opinion to be in form and substance
satisfactory to the Loan Participant and the Owner Participant):
-62-
609l.BURHAM.1106.27:l
<PAGE>
(1) Authentication Request, etc. The Owner Trustee shall have
delivered to the Indenture Trustee a request, dated the Releveraging
Date, authorizing the Indenture Trustee to authenticate and deliver the
Releveraging Note to the Loan Participant upon its payment to the
Indenture Trustee, for the account of the Owner Trustee, of the proceeds
of the Releveraging Loan.
(2) Releveraging Note and Bond Transaction. (A) The Loan
Participant shall have received the proceeds from the sale of
Releveraging Bonds in an amount at least sufficient to make the
Releveraging Loan, (B) the Owner Trustee shall have executed, and the
Indenture Trustee shall have authenticated and delivered to the Loan
Participant, the Releveraging Note evidencing the Releveraging Loan made
on the Releveraging Date and (C) the collateral Trust Trustee shall have
accepted a supplement to the Collateral Trust Indenture subjecting the
Releveraging Note to the lien of the Collateral Trust Indenture and
shall have released the amount of the Releveraging Loan from the lien of
the Collateral Trust Indenture.
(3) No Violation. The return to, the Owner Participant of a
portion of the Investment and the making by the Loan Participant of the
Releveraging Loan shall not violate any Applicable Law.
(4) No Indenture Default. No Indenture Default or Indenture
Event of Default shall have occurred and be continuing.
(5) Representations and Warranties of the Owner Participant. In
the case of the Loan Participant, the representations and warranties of
the Owner Participant set forth in Section 7(a) shall be true and
correct on and as of the Releveraging Date with the same effect as
though made on and as of the Releveraging Date (with all references to
the Closing Date in such representations and warranties being changed to
references to the Releveraging Date), and the Loan Participant shall
have received a certificate of the Owner Participant, dated the
Releveraging Date, to such effect.
(6) Representations and Warranties of the Owner Trustee. In the
case of the Loan Participant, the representations and warranties of FNB
and the Owner Trustee set forth in Section 8(a) shall be true and
-63-
6091.BURNHAM.1106.27:1
<PAGE>
correct on and as of the Releveraging Date I with the same effect as
though made on and as of the Releveraging Date (with all references to
the Closing Date in such representations and warranties being changed to
references to the Releveraging Date), and the Loan Participant shall
have received a certificate from an officer of the and a certificate of
the Owner Trustee, dated the Releveraging Date, to such effect.
(7) Representations and Warranties of the Lessee. In the case of
the Loan Participant and the Owner Participant, (A) the representations
and warranties of the Lessee set forth in Section 10(a) shall be true
and correct on and as of the Releveraging Date with the same effect as
though made on and as of the Releveraging Date (with all references to
the Closing Date in such representations and warranties being changed to
references to the Releveraging Date) and (B) no Deemed Loss Event or
Event of Loss shall have occurred and no Default or Event of Default
shall have occurred and be continuing and the Loan Participant and the
Owner Participant shall have received an Officers' Certificate of the
Lessee, dated the Releveraging Date, to such effect.
(8) Opinions of Counsel.The Loan Participant shall have received
a favorable opinion of each of special counsel for the Owner
Participant, Csaplar & Bok, as counsel for the Owner Trustee, Mudge Rose
Guthrie Alexander & Ferdon, as special general counsel for the Lessee,
and Keleher & McLeod, P.A., as general counsel for the Lessee, each
dated the Releveraging Date and addressing such matters relating to the
transactions in connection with the Releveraging Loan as the Loan
Participant may reasonably request.
(9) Opinions of Counsel. The Owner Participant shall have
received a favorable opinion of each of Mudge Rose Guthrie Alexander &
Ferdon, as special Counsel for the Lessee, and Keleher & McLeod, P.A.,
as general counsel for the Lessee, each dated the Releveraging Date and
addressing such matters relating to the transactions in connection with
the Releveraging Loan as the Owner Participant may reasonably request.
-64-
6091.BURNHAM.1106.27:l
<PAGE>
(10) Weighted Factor. If such Releveraging Date occurs after the
Refunding Date, the weighted Factor shall not be increased as a result
of such Releveraging Loan and the Owner Participant shall have received
a certificate from the Lessee to such effect and setting forth the
calculation of such weighted Factor, in form and substance satisfactory
to the Owner Participant.
(d) Conditions to Refunding. In addition to the limitations set
forth in Section 2(d), the obligation of the Owner Participant and the Loan
Participant to participate in a refunding of the Initial Series Note (and the
Releveraging Notes, if any, theretofore issued) as provided in Section 2(d)
shall be subject to the fulfillment on or before the Refunding Date of the
following Conditions precedent (each instrument, document, certificate or
opinion to be in form and substance satisfactory to the Loan Participant and the
Owner Participant):
(1) Authentication Request, etc. The Owner Trustee shall have
delivered to the Indenture Trustee a request, dated the Refunding Date,
authorizing the Indenture Trustee to authenticate and deliver the Fixed
Rate Note to the Loan Participant against redelivery of the Initial
Series Note (and the Releveraging Notes, if any, theretofore issued) to
the Indenture Trustee for cancellation.
(2) Fixed Rate Note and Bond Transaction. (A) The Loan
Participant shall have received the proceeds from the sale of Refunding
Bonds in an amount at least sufficient to make the Refunding Loan, (B)
the Owner Trustee shall have executed, and the Indenture Trustee shall
have authenticated and delivered to the Loan Participant, the Fixed Rate
Note evidencing the Refunding Loan made on the Refunding Date and (C)
the Collateral Trust Trustee shall have accepted the Refunding
Supplemental Indenture subjecting the Fixed Rate Note to the lien of the
Collateral Trust Indenture and shall have released the Initial Series
Note (and the Releveraging Notes, if any, theretofore issued) from the
lien of the Collateral Trust Indenture.
(3) No Default. No Default or Event of Default or Indenture
Event of Default shall have occurred and be continuing.
-65-
6091.BURNHAM.1106.27:1
<PAGE>
(4) Representations and Warranties of the Owner Participant. The
representations and warranties of the Owner Participant set forth in
Section 7(a) shall be true and correct on and as of the Refunding Date
with the same effect as though made on and as of the Refunding Date
(with all references to the closing Date in such representations and
warranties being changed to references to the Refunding Date), and the
Loan Participant shall have received a certificate of the Owner
Participant, dated the Refunding Date, to such effect.
(5) Representations and Warranties of the Owner Trustee. The
representations and warranties of FNB and the Owner Trustee set forth in
Section 8(a) shall be true and correct on and as of the Refunding Date
with the same effect as though made on and as of the Refunding Date
(with all references to the Closing Date in such representations and
warranties being changed to references to the Refunding Date), and the
Loan Participant and the Owner Participant shall have received a
certificate from an officer of FNB and a certificate of the Owner
Trustee, dated the Refunding Date, to such effect.
(6) Representations and Warranties of the Lessee. (A) The
representations and warranties of the Lessee set forth in Section 10(a)
shall be true and correct on and as of the Refunding Date with the same
effect as though made on and as of the Refunding Date (with all
references to the Closing Date in such representations and warranties
being changed to references to the Refunding Date), (B) no Event of
Default, Deemed Loss Event or Event of Loss shall have occurred and be
continuing and the Loan Participant and the Owner Participant shall have
received an Officers' certificate of the Lessee, dated the Refunding
Date, to such effect and (C) on the date it became effective and on the
Refunding Date, the Registration Statement did not and will not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements contained therein not misleading, and
the Final Prospectus did not and will not contain any untrue statement
of a material fact or omit to state a material fact necessary to make
the statements contained therein not misleading under the circumstances
under which any such shall have been made.
-66-
6091.BURNHAM.1106.27:l
<PAGE>
(7) Opinions of Counsel The Loan Participant shall have received
a favorable opinion of each of special counsel for the Owner
Participant, Csaplar & Bok, as counsel for the Owner Trustee, Mudge Rose
Guthrie Alexander & Ferdon, as special counsel for the Lessee, and
Keleher & McLeod, P.A., as general counsel for the Lessee, each dated
the Refunding Date and addressing such matters relating to the
transactions in connection with the Refunding Loan as the Loan
Participant may reasonably request.
(8) Opinions of Counsel. The Owner Participant shall have
received a favorable opinion of each of Mudge Rose Guthrie Alexander &
Ferdon, as special counsel for the Lessee, and Keleher & McLeod, P.A.,
as general counsel for the Lessee, each dated the Refunding Date and
addressing such matters relating to the transactions in connection with
the Refunding Loan as the Owner Participant may reasonably request.
(9) Weighted Factor. The Weighted Factor would not, after giving
effect to an assumed 11% increase in the Basic Rent (excluding any Rent
Differential) which would have been payable on the Basic Rent Payment
Date immediately prior to the Refunding Date had no adjustments been
made pursuant to Section 3(d) or Section 3(e) of the Facility Lease
(other than adjustments to reflect actual Transaction Expenses),
adjusted to reflect the rate of interest on the Notes if such rate is
higher than 10.5% and any additional Transaction Expenses actually paid,
exceed 11.08%, and the Loan Participant and the Owner Participant shall
have received a certificate from the Lessee to such effect and setting
forth the calculation of such Weighted Factor, in form and substance
satisfactory to the Owner Participant.
SECTION 12. Consent to Assignment of the Facility Lease;
Consent to Indenture; Consent to Assignment of Notes.
(a) Consent to Assignment of Facility Lease. The Lessee hereby
acknowledges, and consents in all respects to, the partial assignment of the
Facility Lease by the Owner Trustee to the Indenture Trustee under and pursuant
to the Indenture and agrees:
-67-
6091.BURNHAM.ll06.27:l
<PAGE>
(i) to make each payment of Basic Rent and Supplemental
Rent due or to become due thereunder to the extent constituting
Assigned Payments (excluding, in any event, all Excepted
Payments) directly to the Indenture Trustee at the Indenture
Trustee's Office, so long as any of the Notes shall be
Outstanding and unpaid: and
(ii) not to seek to recover any payment (other than a
payment that both the owner Trustee and the Lessee agree was
made in mistake) made to the Indenture Trustee in accordance
with the Indenture once such payment is made.
(b) Consent to Indenture. The Lessee hereby consents in all
respects to the execution and delivery of the Indenture, and to all of the terms
thereof, and the Lessee acknowledges receipt of an executed counterpart of the
Indenture; it being understood that such consent shall not be construed to
require the Lessee's consent to any future supplement to, or amendment, waiver
or modification of the terms of, the Indenture or any Note, except to the extent
expressly provided for therein.
(c) Consent to Assignment by Loan Participant. Each of the
parties hereto acknowledges that the Loan Participant is assigning its right,
title and interest in and to the Notes to the collateral Trust Trustee as
security for the Bonds to the extent set forth in the Collateral Trust
Indenture, and each of the parties hereto consents to such assignment.
SECTION 13. Lessee's Indemnities.
(a) General Indemnity. The Lessee agrees, whether or not any of
the transactions contemplated hereby shall be consummated and whether or not the
Facility Lease, any other Transaction Document or any Financing Document shall
have expired or have been terminated, to assume liability for, and the Lessee
does hereby agree to indemnify, protect, defend, 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
because of act or omission by such Indemnitee or otherwise and whether or not
-68-
6091.BURNHAM.1106.27:1
<PAGE>
such Indemnitee shall also be indemnified as to any such Claim by any other
Person) in any way relating to or arising out of (i) Unit 2, the Undivided
Interest, the Real Property Interest, PVNGS or the PVNGS Site, or any part of
any thereof 1 any ANPP Project Agreement, the issuance or payment of the Bonds
or the Notes, this Participation Agreement or any other Transaction Document or
any Financing Document (including, without limitation, the performance or
enforcement of any of the obligations and terms hereunder or thereunder), (ii) a
disposition of all or any part of the Undivided Interest, the Real Property
Interest, Unit 2 or any other interest of the Owner Trustee in connection with
any termination of the Facility Lease, or (iii) the design, manufacture,
financing, erection, purchase, acceptance, rejection, ownership, acquisition,
delivery, non delivery, lease, sublease, preparation, installation, repair,
transfer of title, abandonment, Decommissioning, possession, use, operation,
maintenance, condition, sale, return, storage or disposition of the Undivided
Interest, Unit 2, the Real Property Interest, any Capital Improvement, the PVNGS
Site, any other facilities on the PVNGS Site or any other interest of the Owner
Trustee in any thereof or any accident, nuclear incident or extraordinary
nuclear occurrence in connection therewith (including, without limitation, (A)
claims or penalties arising from any violation of law (subject, however, to the
proviso to clause (E) below) or liability in tort (strict or otherwise) or from
the active or passive negligence of any Indemnitee, (B) loss of or damage to any
property or the environment or death or injury to any Person, (C) latent and
other defects, whether or not discoverable, (D) any claim for patent, trademark,
service-mark or copyright infringement and (E) any claim of any Indemnitee
incurred in the administration of this Participation Agreement, any other
Transaction Document or any Financing Document and not paid as Transaction
Expenses or included in Facility Cost and, if not included in Transaction
Expenses, the reasonable fees and disbursements of counsel and other
professionals incurred in connection therewith); provided, however, that the
Lessee shall not be required to indemnify any Indemnitee pursuant to this
Section 13(a), (1) for any Claim in respect of Unit 2, the Undivided Interest or
the Real Property Interest arising from acts or events not attributable to the
Lessee or Decommissioning (including any defects, errors, or omissions with
respect thereto) which occur after redelivery of the Undivided Interest to the
-69-
6091.BURNHAM.1106.27:1
<PAGE>
Owner Trustee in accordance with Section 5 of the Facility Lease, except to the
extent expressly provided in any Transaction Document, the ANPP Participation
Agreement or any other agreement or undertaking of the Lessee, (2) for any Claim
against such Indemnitee resulting solely from acts which would constitute the
willful misconduct or gross negligence of such Indemnitee (unless imputed to
such Indemnitee by reason of Unit 2, the Undivided Interest, the Real Property
Interest, PVNGS, the PVNGS Site or any other facilities at the PVNGS Site or any
occurrence in connection with any thereof or by reason of any act or omission of
the Lessee, whether as agent for such Indemnitee or otherwise), (3) for any
Transaction Expense to be paid by the Owner Trustee pursuant to Section 14(a) or
(4) for any Claim resulting solely from a transfer by the Owner Trustee or the
Owner Participant of all or part of its interest in the Facility Lease, Unit 2,
the Real Property Interest or the Undivided Interest other than in connection
with any early termination of the Facility Lease or any exercise of remedies
under Section 16 thereof or the transfer contemplated by Section 7(b)(4) or the
first transfer by the Owner Participant to an Affiliate of the Owner Participant
or (5) for any Claim based upon an untrue statement or alleged untrue statement
or omission or alleged omission in the Registration Statement or any document or
agreement in connection with the sale of the Bonds which is based upon
information furnished to the Lessee or its agents by such Indemnitee expressly
for use therein. To the extent that an Indemnitee in fact receives
indemnification payments from the Lessee under the indemnification provisions of
this Section 13(a), the Lessee shall be subrogated, to the extent of such
indemnity paid, to such Indemnitee's rights with respect to the transaction or
event requiring or giving rise to such indemnity, but only so long as such
subrogation shall not materially adversely affect the rights of such Indemnitee
or any other Indemnitee hereunder. Nothing herein or elsewhere contained shall
be construed as constituting a guaranty by the Lessee of the principal of,
premium, if any, or interest on the Notes or the Bonds or of the residual value
or useful life of the Undivided Interest.
(b) General Tax Indemnity.
-70-
6091.BURNMAM.1106.27:1
<PAGE>
(1) Indemnity. All payments by the Lessee in connection with the
transactions contemplated by the Transaction Documents shall be free of
expense to each Indemnitee for collection or other charges. All such
payments shall be free of withholdings of any nature whatsoever (and at
the time that the Lessee is required to make any payment upon which any
withholding is required, the Lessee shall pay an additional amount such
that the net amount actually received by the Person entitled to receive
such payment will, after such withholding, equal the full amount of the
payment then due). If, for any reason, the Lessee is required to make
any payment to a taxing authority with respect to, or as a result of,
any withholding tax imposed on any Indemnitee in respect of the
transactions contemplated by the Transaction Documents, which
withholding tax is not the responsibility of the Lessee under this
Section 13(b) as determined pursuant to this Section 13(b) but without
regard to the immediately preceding sentence of this Section 13(b)(l),
then such Indemnitee shall pay to the Lessee on an After-Tax Basis an
amount which equals the amount paid by the Lessee with respect to, or as
a result of, such withholding tax. Whether or not any of the
transactions contemplated hereby are consummated, except as provided in
Section 13(b)(2)1 the Lessee shall pay, and shall indemnify, defend and
hold each Indemnitee harmless, on an After-Tax Basis, from and against,
any and all Taxes howsoever imposed (whether imposed on or with respect
to the Indemnitee, the Lessee, Unit 2, the Undivided Interest, the Real
Property Interest, any Capital Improvement or the PVNGS Site or any part
thereof or interest therein or otherwise) by any Federal, state or local
government or subdivision thereof or taxing authority in the United
States or by any foreign country or subdivision thereof or by any
foreign or international taxing authority in connection with or relating
to (A) the design, construction, financing, purchase, acquisition,
acceptance, rejection, delivery, nondelivery, transport, ownership,
assembly, possession, repossession, operation, use, condition,
maintenance, repair, improvement, sale, return, abandonment,
preparation, installation, storage, replacement, redelivery,
manufacture, insuring, leasing, subleasing, modification, transfer of
title, rebuilding, rental, importation, exportation or other application
or disposition of, or the imposition of any Lien other than Owner
Participant's Liens and Owner Trustee's Liens (or incurrence of any
-71-
6091.BURNHAM.1106.27:l
<PAGE>
liability to refund or pay over any amount as a result of any Lien other
than Owner Participant's Liens and Owner Trustee's Liens) on, Unit 2,
the Undivided Interest, the Real Property Interest, any Capital
Improvement or the PVNGS Site, or any part thereof or interest therein,
(B) the payment of Rent or the receipts or earnings arising from or
received with respect to, and the indebtedness with respect to, Unit 2,
the Undivided Interest, the Real Property Interest or any Capital
Improvement, or any part thereof, interest therein or application or
disposition thereof, (C) any amount paid or payable pursuant to this
Participation Agreement, any other Transaction Document or any Financing
Document or the transactions contemplated hereby or thereby (D) Unit 2,
the Undivided Interest, the Real Property Interest, any Capital
Improvement or the PVNGS Site, or any part thereof, or interest therein,
or the applicability of the Facility Lease to the Undivided Interest or
any Capital Improvement, or any part thereof or interest therein, (E)
this Participation Agreement, any other Transaction Document or any
Financing Document or (F) otherwise with respect to or in connection
with the transactions contemplated by this Participation Agreement, any
other Transaction Document or any Financing Document.
(2) Exclusions from General Tax Indemnity. Section 13(b)(l)
(except for the first two sentences thereof) shall not apply to:
(i) Taxes based on, or measured by, net income imposed by
the United States federal government (including, without
limitation, any minimum Taxes, capital gains Taxes, withholding
Taxes, any Taxes on, or measured by, items of tax preference1
surcharges, additions to tax, penalties, fines or other charges
in respect thereof)
(ii) Taxes (other than sales, use or rental Taxes) imposed
by any state or local government or subdivision thereof or
taxing authority in the United States or by any foreign country
or subdivision thereof or by any foreign or international taxing
authority that are based on, or measured by, the net income,
items of tax preference, net worth or capital of an Indemnitee,
-72-
6091.BURNHAM.1106.27:1
<PAGE>
or any franchise or other taxes imposed in substitution for any
such Taxes, except, with respect to the Owner Trustee, the
Trust, the Trust Estate, the Owner Participant and any Affiliate
of any thereof, any such Taxes imposed by a jurisdiction as a
result of a relation or asserted relation of such jurisdiction
to the transactions contemplated by the Transaction Documents or
the Financing Documents or as a result of the activities of the
Lessee, any ANPP Participant or any Affiliate of any thereof in
such jurisdiction; provided, however, that the amount of any
such excepted Taxes shall be calculated (i) on a pro forma basis
assuming that such Indemnitee has no other taxable income or
loss in the taxing jurisdiction imposing the Tax (provided that
such calculation shall take into account any allocation or
apportionment method used by such jurisdiction except to the
extent that such method takes into account the income or
activities of business entities organized outside the United
States) and is able to use any net operating loss carryovers
based on such pro forma calculation to the fullest extent
allowed by law and (ii) by taking into account any actual
reduction in Taxes in any other jurisdiction in which such
Indemnitee is subject to tax (whether such reduction results
from the operation of allocation or apportionment formulas, from
credits or otherwise) which reduction results from the
transactions contemplated by the Transaction Documents or the
Financing Documents; provided further, however, that, with
respect to any Tax based on, or measured by, capital or net
worth, the Lessee's indemnity obligation shall not exceed the
incremental portion of such Tax attributable to the transactions
contemplated by the Transaction Documents;
(iii) Taxes that are imposed with respect to any period
after (a) the Lease Termination Date and (b) the date possession
of the Undivided Interest and the Real Property Interest has
been delivered to the Lessor as provided in Section 5(a) of the
Facility Lease, but excluding the Agency Period, if any, unless
such Taxes relate to events occurring or matters arising prior
to or simultaneously with such date;
-73-
6091.BURNHAM.1106.27:l
<PAGE>
(iv) Taxes on or with respect to an Indemnitee arising
from any voluntary transfer by such Indemnitee of any interest
in the Undivided Interest, the Real Property Interest, the Trust
Estate, the Indenture Estate, the Notes or any other right or
interest arising under the Transaction Documents or the
Financing Documents, unless an Event of Default has occurred and
is continuing, or Taxes arising from an involuntary transfer by
such Indemnitee of any such interest arising from a bankruptcy
or similar proceeding in which such Indemnitee is the debtor
unless such bankruptcy or other proceeding was caused by a
Default or Event of Default by the Lessee or an Affiliate.
thereof;
(v) Taxes based on or measured by any fees, commission or
compensation received by an Indemnitee for acting as trustee, or
for other services rendered, in connection with any of the
transactions contemplated by the Transaction Documents or the
Financing Documents;
(vi) Taxes on or with respect to an Indemnitee arising by
reason of such Indemnitee's failure to file proper and timely
reports or returns (unless the filing of such reports or returns
is the obligation of the Lessee under the Transaction Documents
or the Financing Documents) and any penalties or additions to
tax imposed by reason of such Indemnitee's failure to comply
with the laws imposing such Tax or its material failure to
comply with its obligations under Section 13(b)(6), unless such
failure results from any action of the Lessee or failure by the
Lessee to comply with any provision of the Transaction Documents
or the Financing Documents, including the failure to provide
necessary information;
-74-
6091.BURNHAM.1106.27:l
<PAGE>
(vii) Taxes on or with respect to an Indemnitee arising as
a result of a material failure of such Indemnitee to fulfill its
obligations with respect to the contest of any claim in
accordance with Section l3(b)(4) of this Participation
Agreement;
(viii) Taxes imposed on or with respect to a transferee
(or subsequent transferee) of an original Indemnitee (other than
a transferee or subsequent transferee either of which is an
Affiliate of the original Indemnitee) to the extent that the
amount of such Taxes exceeds the amount of taxes that would have
been imposed on or with respect to such original Indemnitee but
for the transfer to such transferee or, if imposed, would not
have been subject to indemnification under this Section 13(b);
provided, however, that the exception in this clause shall not
apply to any transferee where such transfer shall have occurred
during the continuance of an Event of Default:
(ix) any Taxes imposed on the Lessor or the Owner
Participant resulting from, or which would not have occurred but
for, Lessor's Liens or Owner Participant's Liens and any Taxes
imposed on the Indenture Trustee which would not have occurred
but for Indenture Trustee's Liens;
(x) any Tax that results solely from the activities of an
Indemnitee in any taxing jurisdiction which activities are
unrelated to the transactions contemplated by the Transaction
Documents or the Financing Documents:
(xi) any Tax on or with respect to an Indemnitee resulting
from any amendment or modification entered into by such
Indemnitee to any Transaction Document or Financing Document if
the Lessee is not a party to such amendment or modification or
has not consented to such amendment or modification, in each
case unless an Event of Default shall have occurred and be
continuing; and
-75-
6091.BURNHAM.1106.27:l
<PAGE>
(xii) any Tax on or with respect to an Indemnitee
resulting from the gross negligence or willful misconduct of
such Indemnitee (it being understood that no Indemnitee is
responsible for determining whether a Tax is payable if such Tax
is the responsibility of the Lessee under this Section 13(b)).
provided, however, that the foregoing subdauses (i) through (xii) shall not
apply to any Tax imposed on the Loan Participant or the indenture estate under
the Collateral Trust Indenture.
(3) Calculation of General Tax Indemnity Payments. If any
Indemnitee realizes a net permanent tax benefit by reason of the payment
of any indemnity under Section 13(b)(l), such Indemnitee shall pay the
Lessee, but not before the Lessee shall have made all payments
theretofore due to such Indemnitee pursuant to this Section 13(b), an
amount equal to the lesser of (x) the sum of such tax benefit plus any
other net tax benefit realized by such Indemnitee as the result of any
payment made by such Indemnitee pursuant to this sentence (determined in
a manner consistent with the definition of After Tax Basis set forth in
Appendix A and with the last sentence of Section 13(b)(6) hereof), and
(y) the amount of such payment by the Lessee to such Indemnitee and any
other payment by the Lessee to such Indemnitee theretofore made pursuant
to this Section 13(b) less the aggregate amount of all prior payments by
such Indemnitee to the Lessee pursuant to this clause (y) with respect
to amounts paid pursuant to Section 13(b)(l), it being intended that no
Indemnitee should realize a net tax benefit pursuant to this Section
13(b) unless the Lessee shall first have been made whole for any
payments by it to such Indemnitee pursuant to this Section 13(b);
provided, however, that in computing any permanent tax benefit, such
Indemnitee shall be deemed first to have utilized all deductions and
credits available to it otherwise than by reason of any payment by the
Lessee pursuant to this Section 13(b); provided further, however, that
notwithstanding the provisions of this clause (3), such Indemnitee shall
not be obligated to make any payment to the Lessee pursuant to this
clause (3) if at the time such payment shall be due an Event of Default
shall have occurred and be continuing.
-76-
609l.BURNHAM.ll06.27:l
<PAGE>
(4) General Tax Indemnity Contests. If a written claim shall be
made against any Indemnitee for any Tax for which the Lessee is
obligated pursuant to this Section 13(b), such Indemnitee shall notify
the Lessee promptly of such claim, but the failure so to notify the
Lessee shall not affect any obligation of the Lessee pursuant to this
Section 13(b) except as provided in Section 13(b)(2)(vii). If the Lessee
shall request in writing within 30 days after receipt of such notice,
such Indemnitee shall in good faith and at the Lessee's expense contest
the imposition (including the amount) of such Taxes; provided, however,
that such Indemnitee may in its sole discretion select the forum for
such contest and determine whether any such contest shall be by (A)
resisting payment of such Taxes, (B) paying such Taxes under protest or
(C) paying such Taxes and seeking a refund thereof; provided further,
however, that (W) such Indemnitee shall not be obligated to contest any
claim in which the amount in question is less than $125,000, (X) at such
Indemnitee's option, such contest shall be conducted by the Lessee in
the name of such Indemnitee (subject to the preceding proviso) and (Y)
in no event shall such Indemnitee be required or the Lessee permitted to
contest the imposition of any Taxes for which the Lessee is obligated
pursuant to this Section 13(b) unless (u) the Lessee shall have
acknowledged its liability to such Indemnitee for an indemnity payment
pursuant to this Section 13(b) as a result of such claim if and to the
extent such Indemnitee or the Lessee, as the case may be, shall not
prevail in the contest of such claim; (v) such Indemnitee shall have
received from the Lessee (i) satisfactory indemnity for any liability,
expense or loss arising out of or relating to such contest including,
but not limited to, (A) all reasonable legal, accountants' and
investigatory fees and disbursements, (B) the amount of. any interest,
additions to tax or penalty that may be payable as a result of
contesting such claim and (C) if such contest is to be initiated by the
payment of, and the claiming of a refund for such Tax, sufficient funds
to make such payment on an After Tax Basis and (ii) an opinion of
independent tax counsel selected by the Lessee and approved by such
Indemnitee (which approval shall not be unreasonably withheld) and
furnished at the Lessee's sole expense to the effect that a Reasonable
Basis exists for contesting such claim or, in the event of an appeal,
that there exists a substantial possibility that an appellate
-77-
6091.BURNHAM.ll06.27:1
<PAGE>
court or an administrative agency with appellate jurisdiction, as the
case may be, will reverse or substantially modify the adverse
determination; (w) the Lessee shall have agreed to pay such Indemnitee on
demand all reasonable costs and expenses that such Indemnitee may incur
in connection with contesting such claim (including, without limitation,
all costs, expenses, losses, reasonable legal and accounting fees,
disbursements, penalties, interest and additions to tax); (x) such
Indemnitee shall have reasonably determined that the action to be taken
will not result in any danger of sale, forfeiture or loss of, or the
creation of any Lien (except if the Lessee shall have adequately bonded
such Lien or otherwise made provision to protect the interests of such
Indemnitee in a manner satisfactory to such Indemnitee) on, Unit 2, any
part thereof, the Undivided Interest, the Real Property Interest, or any
interest in any of the foregoing; and (y) if such contest shall be
conducted in a manner requiring the payment of the claim, the Lessee
shall have paid the amount required. The Lessee agrees to give such
Indemnitee reasonable notice of any contest prior to the commencement
thereof. If any Indemnitee shall obtain a refund of all or any part of
any Taxes paid by the Lessee, or if any such refund would be payable to
the Indemnitee in the absence of an offsetting liability for Taxes
payable to the taxing authority in question, such Indemnitee shall pay
the Lessee, but not before the Lessee shall have made all payments
theretofore due to such Indemnitee pursuant to this Section 13 (b), an
amount equal to the lesser of (xx) the amount of such refund so received
or receivable, including interest received or receivable and attributable
thereto, plus any net permanent tax benefit realized by such Indemnitee
(determined in a manner consistent with the definition of After Tax Basis
set forth in Appendix A and with the last sentence of Section 13(b)(6)
hereof) as a result of any payment by such Indemnitee made pursuant to
this sentence (after taking into account the tax consequences of the
receipt of such refund and such interest) or (yy) such tax payment by the
Lessee to such Indemnitee plus any other payment by the Lessee to such
Indemnitee theretofore made pursuant to this Section 13(b), in either
case, net of any expenses not already paid or incurred by the Lessee;
-78-
6091.BURNHAM.1106.27:1
<PAGE>
provided, however, that in computing any tax benefit, such Indemnitee
shall be deemed first to have utilized all deductions and credits
available to it otherwise than by reason of any payment by the Lessee
pursuant to this Section 13(b); provided, further, however, that
notwithstanding the provisions of this clause (4), such Indemnitee shall
not be obligated to make any payment to the Lessee pursuant to this
clause (4) if at the time such payment shall be due a Default or
an-Event of Default shall have occurred and be continuing under the
Facility Lease. An Indemnitee shall not be required to make any payment
pursuant to this clause (4) before such time as the Lessee shall have
made all payments and indemnities then due under the Transaction
Documents to such Indemnitee. Notwithstanding anything contained in this
clause (4) to the contrary, no Indemnitee shall be required to contest
any claim if the subject matter thereof shall be of a continuing nature
and shall have previously been decided pursuant to the contest
provisions of this clause (4) unless there shall have been a change in
the law (including, without limitation, amendments to statutes or
regulations, administrative rulings and court decisions) after such
claim shall have been so previously decided, and such Indemnitee shall
have received an opinion of independent tax counsel selected by the
Lessee and approved by such Indemnitee (which approval shall not be
unreasonably withheld) and furnished at the Lessee's sole expense to the
effect that such change provides a Reasonable Basis for the position
which such Indemnitee and the Lessee, as the case may be, had asserted
in such previous contest or for an alternative position based upon such
change that the Lessee now desires to assert. Nothing contained in this
Section 13(b) shall require any Indemnitee to contest or permit the
Lessee to contest a claim which it would otherwise be required to
contest pursuant to this Section 13(b) if such Indemnitee shall waive
payment by the Lessee of any amount that might otherwise be payable by
the Lessee under this Section 13(b) by way of indemnity in respect of
such claim.
(5) General Tax indemnity Reports. If any report, return or
statement is required to be filed with respect to any obligations of the
Lessee under or arising out of this Section 13(b), the Lessee shall
timely file the same, except for any such report, return or statement
which such Indemnitee has notified the Lessee that it intends to file.
-79-
6091.BURNHAM.ll06.27:l
<PAGE>
The Lessee shall either file such report, return or statement so as to
show the ownership of the Undivided Interest or the Real Property
Interest, as the case may be, in the Owner Trustee and send a copy of
such report, return or statement to the Owner Trustee and such Indemnitee
or, where not so permitted, notify the Owner Trustee and such Indemnitee
of such requirement and prepare and deliver such report1 return or
statement to the Owner Trustee and such Indemnitee in a manner
satisfactory to the Owner Trustee and such Indemnitee within a reasonable
time prior to the time such report, return or statement is to be filed
or, where such return, statement or report shall be required to reflect
items in addition to any obligations of the Lessee under or arising out
of this Section 13(b), provide the Owner Trustee and such Indemnitee with
information sufficient to permit such return, statement or report
properly to be made with respect to any obligations of the Lessee under
or arising out of this Section 13(b) (and the Lessee shall hold each
Indemnitee harmless from and against any liabilities, obligations,
losses, damages, penalties, claims, actions, suits and reasonable costs
arising out of any insufficiency or inaccuracy in any such return,
statement, report or information). The Lessee shall not have any right to
examine the tax returns of any Indemnitee.
(6) General Tax Indemnity-Payment. All Taxes shall be paid when
due and payable (except with respect to Arizona real property taxes,
which shall be paid before they become delinquent) and, unless otherwise
requested by the appropriate Indemnitee, the Lessee shall pay any Taxes
for which it is liable pursuant to this Section 13(b) directly to the
appropriate taxing authority and shall pay such appropriate Indemnitee
promptly on demand in immediately available funds any amount due such
Indemnitee pursuant to this Section 13(b) with respect to such Taxes.
Any such demand shall specify in reasonable detail the payment and the
facts upon which the right to payment is based. Each Indemnitee shall
promptly forward to the Lessee any notice, bill or advice received by it
concerning any Taxes. Within 30. days after the date of each payment by
the Lessee of any Taxes, the Lessee shall furnish the appropriate
Indemnitee the original or a certified copy of a receipt for the
-80-
6091.BURNHAM.1106.27:1
<PAGE>
Lessee's payment of such Taxes or such other evidence of payment of such
Taxes as is acceptable to such Indemnitee. The Lessee shall also furnish
promptly upon request such data as any Indemnitee may require to enable
such Indemnitee to comply with the requirements of any taxing
jurisdiction. Whenever any payment is to be made by the Lessee under
this Section 13(b) and it shall be necessary, in calculating the After
Tax Basis amount of such payment, to compute the amount of any liability
for federal, state or local tax imposed on or measured by the net income
of any Indemnitee, such computation shall be based on the assumption
that such taxes shall be payable at the highest marginal statutory rate
in effect for the relevant period.
(7) Definition of Indemnitee. For purposes of this Section
13(b), the term Indemnitee shall mean and include the successors and
assigns of each respective Indemnitee, and for purposes of federal
income taxes, the affiliated group of corporations and each member
thereof (within the meaning of Section 1504 of the Code) of which such
Indemnitee is a member, if such group shall file a consolidated United
States federal income tax return, and, for purposes of income or
franchise taxes imposed by a particular state or 16ca1 taxing
jurisdiction, shall mean and include any consolidated or combine group
of which such Indemnitee is or shall be a member that is treated as such
by such state or local taxing jurisdiction.
(c) Supporting Material. Each Indemnitee shall provide to the
Lessee such supporting material (other than tax returns) as the Lessee shall
reasonably request in connection with the matters set forth in Section 13(b).
The Lessee shall reimburse to any Indemnitee any expenses incurred in providing
requested supporting material to the Lessee.
(d) Cooperation. The Owner Participant shall cooperate and shall
cause the Owner Trustee to cooperate with and consider in good faith any request
by, the Lessee, upon the written request and at the expense (including a
reasonable allowance for internal legal costs) of the Lessee, in order to avoid
or minimize any taxes for which the Lessee is responsible under Section 13(b)
hereof.
-81-
6091.BURNHAM.1106.27:l
<PAGE>
SECTION 14. Transaction Expenses.
(a) Transaction Expenses. Subject to the pro-visions of
paragraph (C) below, with funds provided by the Owner Participant, the Owner
Trustee hereby agrees that it will pay when due an appropriate portion of the
following costs and expenses (Transaction Expenses):
(i) the reasonable legal fees and disbursements of Mudge
Rose Guthrie Alexander & Ferdon (as counsel for the Loan
Participant), Milbank, Tweed, Hadley & Mccloy, Shearman &
Sterling, Cravath, Swaine & Moore, Reed Smith Shaw & McClay,
Csaplar & Bok, Shaw, Pittman, Potts & Trowbridge, Meyer,
Hendricks, Victor, Osborn & Maledon, Rodey, Dickason, Sloan,
Akin & Robb, P.A. and Wilikie, Farr & Gallagher (as counsel for
the Indenture Trustee) for their services rendered in connection
with the execution and delivery of this Participation Agreement
and the other Transaction Documents and all fees, expenses and
disbursements incurred by them in connection with such
-transactions; reasonable legal fees, expenses and disbursements
of Mudge Rose Guthrie Alexander & Ferdon and Snell & Wilmer in
connection with NRC and ANPP Participant approvals in connection
with such transactions; and (if agreed to in writing by the
Lessee) the internal charges of attorneys employed by the Owner
Participant or any Affiliate of the Owner Participant incurred
in connection with the transactions contemplated by the Transact
ion Documents;
(ii) the initial (but not the ongoing) fees and expenses
of the Owner Trustee and the Indenture Trustee;
(iii) all stenographic, printing, reproduction, and other
reasonable out-of-pocket expenses (other than investment banking
or brokerage fees) incurred in connection with the execution and
delivery of this Participation Agreement and the other
Transaction Documents and all other agreements, documents or
instruments prepared in connection therewith (including all
computer analysis and travel related costs);
-82-
6091.BURNHAM.1106.27:1
<PAGE>
(iv) the fees of Ebasco Business Consulting Company for
services rendered as contemplated by Section ll(a)(30), the fees
of the special nuclear consultants to the Owner Participant, the
fees of the appraiser for services rendered as contemplated by
Section ll(a)(39) and the fees of the insurance consultant for
services rendered as contemplated by Section 11 (a) (36);
(V) all costs of issue of the Initial Series Bonds and
the Refunding Bonds including, without limitation, the costs of
preparing the Financing Documents, filing fees relating to the
Registration Statement and the fees, expenses and disbursements
of Wilikie, Farr & Gallagher, as counsel for the Collateral
Trust Trustee and the banks party to the Term Loan Agreement,
Mudge Rose Guthrie Alexander & Ferdon, as counsel for the Loan
Participant, the Loan Participant's special Arizona and New
Mexico counsel, Willkie, Farr & Gallagher, as counsel for the
underwriters of the Refunding Bonds, the initial fees of the
Collateral Trust Trustee and its out-of-pocket expenses through
the Refunding Date, rating agency fees, the fees and commissions
of the underwriters of the Refunding Bonds and the fees,
expenses and disbursements of the Loan Participant;
(vi) the fees and out-of-pocket expenses of Kidder,
Peabody & Co., Incorporated, and Goldman, Sachs & Co. in
connection with the placement of the beneficial interest in the
Trust; and
(vii) the commitment fees payable to the banks party to
the Term Loan Agreement.
Subject to the provisions of paragraph (c) below, funds for the payment of
Transaction Expenses will be provided by the Owner Participant to the Owner
Trustee and the Owner Trustee will promptly disburse such funds.
-83-
6091.BURNHAM.1106.27:1
<PAGE>
(b) Post-Closing Expenses. The Lessee will pay, Supplemental
Rent, (i) the ongoing fees, expenses, disbursements and costs (including legal
and other professional fees and expenses) of or incurred by the Owner Trustee,
the Indenture Trustee and the Collateral Trust Trustee, including in connection
with the issue, sale and purchase of Notes and Bonds after the Closing Date, and
(ii) all fees, expenses, disbursements and costs (including legal and other
professional fees and expenses) incurred by the Loan Participant, the Owner
Participant, the Owner Trustee, the Indenture Trustee and the Collateral Trust
Trustee in connection with (a) any Default, Event of Default, Indenture Default
or Indenture Event of Default, (b) the entering into or giving or withholding of
any amendment, modification, supplement, waiver or consent with respect to any
Transaction Document or Financing Document, (c) any Event of Loss or Deemed Loss
Event, (d) any transfer of all or any part of the right, title and interest of
the Indenture Trustee in, to and under the Transaction Documents, (e) any
transfer of all or any part of the right, title and interest of the Owner
Trustee in the Undivided Interest, the Real Property Interest or in, to and
under the Transaction Documents, (f) any transfer contemplated by Section
7(b)(4) and (g) any releveraging or refunding referred to in Section 2(c) or
2(d) (except to the extent constituting Transaction Expenses)
(c) Lessee's Obligation. Notwithstanding Section 14(a) hereof,
(i) in the event the transactions contemplated by this Participation Agreement
shall not be consummated, the Lessee shall pay or cause to be paid, and shall
indemnify and hold harmless the Loan Participant, the Indenture Trustee, the
Owner Trustee and the Owner Participant in respect of all Transaction Expenses
unless such failure to consummate shall result solely from the Owner
Participant's default in making its Investment hereunder and (ii) the Lessee
shall pay or cause ~o be paid that portion of the Transaction Expenses which
exceeds 2% of the Purchase Price.
SECTION 15. Owner Participant's Transfers.
(a) Transfers. After the Closing Date, except as contemplated
by Section 7(b)(4) or by the Facility Lease, the Owner Participant shall not
assign, convey or otherwise transfer all or any part of (including, without
limitation, an undivided interest in) its right, title or interest in and to
this Participation Agreement, any of the other Transaction Documents or the
Trust Estate (except its right to receive Excepted Payments) to any Person (a
Transferee) except on the following conditions:
-84-
6091.BURNHAM.1106.27:1
<PAGE>
(i) the Transferee shall enter into an agreement or
agreements whereby such Transferee confirms that (1) it shall be
bound by the terms of this Participation Agreement and each
other Transaction Document, to the extent of the interest
transferred, as if it had been originally named as the Owner
Participant hereunder and thereunder and (2) if such Transferee
is a public utility company, it shall have waived its right to
claim Special Casualty Value upon the occurrence of a Deemed
Loss Event (of the type specified in clause (1) of the
definition thereof) under the Facility Lease;
(ii) the Transferee shall be either (A) a financial
institution, a corporation or a partnership with a net worth or
capital and surplus of at least $25,OOO,OOO (or, in the case of
a partnership, at least one of whose general partners has such a
net worth or capital and surplus), or a direct or indirect
wholly-owned subsidiary of such a financial institution or
corporation, (B) a direct or indirect wholly-owned subsidiary of
(1) the Owner Participant or (2) any direct or indirect parent
of the Owner Participant, (C) the Lessee or any Affiliate of the
Lessee, (D) such other Person as shall have been approved by the
Lessee or (E) any Person; provided, however, that if the
Transferee is a subsidiary referred to in clause (A) above or a
Person referred to in clause (E) above, the transferring Owner
Participant (and any parent thereof secondarily liable pursuant
to this Section 15(a) (ii)) shall continue to be liable for (or
the parent of such Transferee, which shall otherwise be a
permitted Transferee, shall enter into an agreement whereby such
parent confirms that it shall be secondarily liable for) the
obligations of such Transferee under Section 7(b) (i)
notwithstanding such transfer; and
(iii) such transfer shall not violate the Securities Act
or any provision of, or create a relationship which would be in
violation of, any Applicable Law or agreement to which the
transferring Owner Participant or the Transferee is a party or
by which its property is bound.
-85-
6091.BURNHAM.1106.27:l
<PAGE>
Upon any transfer permitted pursuant to the foregoing provisions, the
transferring Owner Participant shall, except as expressly provided in clause
(ii) above, be released from its obligations under this Participation Agreement
and the other Transaction Documents (including, without limitation, the Trust
Agreement) to the extent of the interest transferred. An agreement to transfer
shall not in and of itself constitute a transfer for purposes of this Section
15.
(b) Procedure. If the Owner Participant transfers all or any
part of its interest hereunder pursuant to this Section 15, it shall give
written notice thereof to the Lessee, the Owner Trustee, the Indenture Trustee
and the Loan Participant, specifying the name and address for notices to the
Transferee, such other information and evidence as shall be necessary to
establish compliance with this Section 15 and the extent of the interest
transferred to such Transferee. If, as a result of any such transfer, the
original Owner Participant is not to continue to receive all payments to be made
by the Indenture Trustee to the "Owner Participant" under the Indenture, the
original Owner Participant shall from time to time, by notice to the Indenture
Trustee, with copies to the Lessee, the Owner Trustee and the Collateral Trust
Trustee, designate the manner in which any such payments to the "Owner
Participant" are to be allocated, and the Indenture Trustee shall be entitled to
rely on such notice for all purposes. This Section 15 (other than the notice
provisions contained in the first sentence of this Section 15(c)) is for the
benefit of the Lessee, the Owner Trustee and the Owner Participant and may not
be enforced by any other party hereto. The Owner Participant agrees that it will
use reasonable efforts to provide (or cause to be provided) such information as
the Lessee may reasonably request to comply with requests for information
received from the NRC with respect to the Transferee (provided that the Owner
Participant shall not be required to provide (or cause to be provided) any
information of a confidential or proprietary nature).
-86-
6091.BURNHAM.1106.27:1
<PAGE>
SECTION 16. Brokerage and Finders' Fees and Commissions.
Except to the extent of amounts payable by the Owner
Participant pursuant to Section 14, the Lessee will indemnify and hold harmless
the Loan Participant, the Indenture Trustee, the Owner Trustee and the Owner
Participant in respect of any commissions, fees, judgments or other expenses of
any nature and kind which any of them may become liable to pay by reason of any
claims by or on behalf of brokers, finders, agents, advisors or investment
bankers in connection with the transactions contemplated by this Participation
Agreement, any other Transaction Document or any Financing Document, or any
litigation or similar proceeding arising from any such claim, other than claims
arising out of written undertakings of the party claiming indemnification under
this Section 16 or any Affiliate or shareholder (or Affiliate of such
shareholder) of such Person with any such broker, finder, agent, advisor or
investment banker.
SECTION 17. Survival of Representations and Warranties;
Binding Effect.
(a) Survival. All indemnities, Representations and warranties
contained in this Participation Agreement, in any other Transaction Document, in
any Financing Document and in any agreement, document or certificate delivered
pursuant hereto or thereto or in connection herewith or therewith, shall
survive, and shall continue in effect following, the execution and delivery of
this Participation Agreement, the making of the investments and the loans
referred to herein, any disposition of any interest in the Undivided Interest,
Unit 2 or any other property referred to in this Participation Agreement and the
expiration or other termination of any of the Transaction Documents or Financing
Documents and shall be and continue in effect notwithstanding (i) any
investigation made by the Owner Participant or the Loan Participant or (ii) the
fact that any of the Indenture Trustee, the Owner Trustee, the Loan Participant
or the Owner Participant may waive compliance with any of the other terms,
provisions or conditions of any of the Transaction Documents or Financing
Documents. The obligations of the Lessee under Sections 10(b) (2), 10(b) (3)
(vii) , 10(b) (3) (x) l0(b)(3)(xi), 13, 14, 16 and 19(f) shall survive the
expiration or other termination of this Participation Agreement or any other
-87-
6091.BURNHAM.1106.27:1
<PAGE>
Transaction Document or Financing Document. The modification by law of any
statute of limitations, or the waiver or extension of any statute of limitations
by the Owner Trustee, the Indenture Trustee, the Lessee, the Owner Participant,
the Loan Participant or any Indemnitee shall not affect such survival.
(b) Binding Effect. All agreements, representations and
warranties in this Participation Agreement, the other Transaction Documents and
the Financing Documents and in any agreement, document or certificate delivered
concurrently with the execution of this Participation Agreement or from time to
time thereafter, shall bind the party making the same and its successors and
permitted assigns and shall inure to the benefit of each party for whom made and
its successors and permitted assigns, and, to the extent provided in the next
sentence, each Indemnitee and its successors and assigns. The obligations of the
Lessee under Section 13 hereof and Section 20 of the Facility Lease are
expressly made for the benefit of, and shall be enforce-able by, any Indemnitee,
separately or together, without declaring the Facility Lease to be in default
and notwithstanding any assignment by the Lessor of the Facility Lease or any of
its rights thereunder or any disposition of all or any part of any interest in
the Undivided Interest, the Real Property Interest, Unit 2 or any other property
referred to in this Participation Agreement, or in any Transaction Document or
any Financing Document. All payments required to be made pursuant to Section 13
shall be made directly to, or as otherwise requested by, the Indemnitee entitled
thereto upon written demand by such Indemnitee. The Lessee shall not assign any
of its rights or obligations hereunder without the prior written consent of the
Owner Participant and the Owner Trustee. Except as otherwise indicated, all
references herein to any party to this Participation Agreement and the other
Transaction Documents shall include the permitted successors and assigns of such
party.
SECTION 18. Notices.
All communications, notices and consents provided for herein
shall be in writing, and sent by telex, telecopy or other wire transmission
containing a request for assurance of receipt in a manner typical with respect
to communications of that type, or mailed by registered or certified mail,
-88-
6091.BURNHAM.1106.27:1
<PAGE>
personally delivered or delivered by express delivery service, and shall be
addressed (i) if to the Owner Participant, at 60 Broad Street, New York, New
York 10004, Attention: Assistant Treasurer; (ii) if to the Loan Participant, at
Corporation Trust Center, 1209 Orange Street, Wilmington Delaware 19801,
Attention: President; (iii) if to FNB, or the Owner Trustee, at 100 Federal
Street, Boston, Massachusetts 02110, Attention: Corporate Trust Division (TWX
No. 940581); (iv) if to the Indenture Trustee, at 55 Water Street, New York, New
York 10041: Attention of Corporate Trustee Administration; and (v) if to the
Lessee, at Alvarado Square, Albuquerque, New Mexico 87158, Attention: Secretary;
or at such other address as any party hereto may from time to time designate by
notice duly given in accordance with the provisions of this Section to the other
parties hereto. All such communications, notices and consents given in the
manner provided above shall be effective on the date of receipt of such
communication or notice.
SECTION 19. Miscellaneous.
(a) Execution. This Participation Agreement may be executed in
any number of counterparts and by the different parties hereto on 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. Although this Participation Agreement is dated as of the date
first above written for convenience, the actual dates of execution hereof by the
parties hereto are respectively the dates set forth under the signatures hereto,
and this Participation Agreement shall be effective on the latest of such dates.
(b) Intention of the Owner Trustee and the Owner Participant.
Each of the Owner Trustee and the Owner Participant intends to exercise its
rights and carry out its obligations hereunder and under the other Transaction
Documents solely with a view to furthering its own best interests and does not
have, and does not expect to have, any form of joint profit motive with any
other Person. The Owner Trustee and the Owner Participant shall not be required
to share any Rent to which they are entitled under the Facility Lease, or the
residual value of the Undivided Interest or the Real Property Interest, with any
other Person. The Owner Trustee and the Owner Participant are not under the
-89-
6091.BURNHAM.1106.27:1
<PAGE>
control of nor shall they be deemed to be under the control of any other Person
having any interest in Unit 2, and shall not be the agent of or have a right or
power to bind any such Person (other than the Owner Participant as regards the
Owner Trustee) without its express written consent. The Owner Trustee (on behalf
of the Owner Participant) and the owner Participant (on its own behalf) have and
at all times shall retain the right separately to take or dispose of the
Undivided Interest and the Real Property Interest, subject only to the rights of
the Lessee and the Loan Participant under the Transaction Documents. The Owner
Trustee and the Owner Participant accordingly do not intend to create any form
of partnership or joint venture with any other Person by virtue of the
transactions contemplated hereby or by any of the Transaction Documents. In the
event that it is determined, contrary to the intent of the Owner Trustee and the
Owner Participant, that, for purposes of the Code or any other income tax law, a
form of partnership or joint venture exists between the Owner Trustee or the
Owner Participant and any other Person, the Owner Trustee and the Owner
Participant hereby elect to the extent permitted by law (i) not to have the
partnership provisions of the Code or such other income tax law apply to any of
the transactions contemplated hereby or by any of the Transaction Documents and
(ii) to be treated solely as owning the Undivided Interest and the Real Property
Interest.
(c) Governing Law. This Participation Agreement has been
negotiated and delivered in the State of New York and shall be governed
by, and be construed in accordance with, the laws of the State of New
York.
(d) Amendments, Supplements, etc. Neither this Participation
Agreement nor any of the terms hereof may be amended, supplemented,
waived or modified orally, but only by an instrument in writing signed
by the party against which enforcement of such change is sought.
(e) Headings. The headings of the sections and paragraphs of
this paragraphs of this Participation Agreement have been inserted for
convenience of reference only and shall in no way restrict or otherwise
modify any of the terms or provisions hereof.
(f) Bankruptcy of Owner Participant. If (a) the Owner
Participant or the Owner Trustee becomes a debtor subject to the
reorganization provisions of the Bankruptcy Code, or any successor
provision,
-90-
6091.BURNHAM.1106.27:1
<PAGE>
(b) pursuant to such reorganization provisions the Owner Participant or the
Owner Trustee is required, by reason of the Owner Participant being held to have
recourse liability directly or indirectly to the Holder of any Note or the
Indenture Trustee, to make payment on account of any amount payable as principal
or interest on such Note and (c) such Holder or the Indenture Trustee actually
receives any Excess Amount which reflects any payment by the Owner Participant
on account of clause (b) of this Section1 then such Holder or the Indenture
Trustee, as the case may be, shall promptly refund to the Owner Participant such
Excess Amount. For purposes of this Section, "Excess Amount means the amount by
which such payment exceeds the amount which would have been received on or prior
to the date of such payment by such Holder or the Indenture Trustee if the Owner
Participant or the Owner Trustee had not become subject to the recourse
liability referred to in clause (b) of this Section, Nothing contained in this
Section shall prevent such Holder or the Indenture Trustee from enforcing any
personal recourse obligation (and retaining the proceeds thereof) of the Owner
Participant expressly provided for under this Participation Agreement.
(g) Entire Agreement. This Participation Agreement (including
the Schedules hereto and the waiver letter dated as of the Closing Date), the
other Transaction Documents and the Financing Documents supersede all prior
agreements, written or oral, between or among any of the parties hereto relating
to the transactions contemplated hereby and thereby and each of the parties
hereto represents and warrants to the others that this Participation Agreement
and the other Transaction Documents and the Financing Documents constitute the
entire agreement among the parties relating to the transactions contemplated
hereby and thereby.
(h) Publicity. Each party hereto agrees that it will not issue
or release for external publication any article or advertising or publicity
matter relating to the transaction contemplated hereby or any similar
transaction mentioning or implying the identity of the Owner Participant without
the prior written consent of the Owner Participant; provided, however, that the
Owner Participant agrees that such written consent shall not be withheld if such
disclosure is required by Applicable Law.
-91-
6091.BURNHAM.1106.27:l
<PAGE>
(i) Section 48(d) Election. Neither the Owner participant nor
the Owner Trustee makes any representation or warranty to the Lessee or any
other Person as to the availability or amount of any investment tax credits with
respect to the Undivided Interest. The Owner Participant hereby agrees with the
Lessee that:
(1) Within a reasonable time after the execution of this
participation Agreement (but in no event later than the date required by
the Regulations under Section 48(d) of the Code), the Owner participant
will execute and file with the Lessee and will cause the common parent
(the "Common Parent") of the affiliated group of corporations of which
the owner Participant is a member (the "Group") and the Owner Trustee to
execute and file with the Lessee a statement in the form of Exhibit C
hereto (the section 48(d) Election);
(2) The Owner Participant will attach and will cause the common
parent and the Owner Trustee to attach to their respective Federal
income tax returns and to the consolidated Federal income tax return of
the Group for their respective taxable years in which the Facility Lease
commences a summary statement in the form of Exhibit D hereto (the
Summary Statement; and
(3) The Owner Participant will keep and will cause the Common
Parent and the Owner Trustee to keep the Section 48(d) Election as part
of their respective records.
To the best of the Owner Participant's knowledge, the
information set forth in clauses (i)(a), (i) (b) , (ii) (a) and (ii) (b) of the
Section 48(d) election is true and correct, and the information set forth in
clauses (i)(a) and (i)(k) of the Summary Statement is true and correct. The
owner Participant has no present intention to take any action that would render
clause (vii) of the Section 48(d) Election incorrect at any time during the
continuance of the Facility Lease, The Owner Participant has no present
intention to become, at any time during the continuance of the Facility Lease
when a loss or recapture described herein would result, a Person who may not
make a valid election under Section 48(d) of the Code or a Person whose status
as a lessor of the Undivided Interest would result in the loss or recapture of
-92-
6091.BURNHAM.11060.27:1
<PAGE>
any investment-tax credits claimed by the Lessee with respect to the Undivided
Interest under Sections 46(d) or 48(d) of the Code. The Owner Participant has no
present intention to make a disposition of its interest in the Trust State at
any time during the continuance of the Facility Lease when a loss or recapture
would result, to a Person described in the preceding sentence.
-93-
6091.BURNHAM.1106.27:1
<PAGE>
IN WITNESS WHEREOF, the parties hereto have each caused this
Participation Agreement to be duly executed by their respective officers
thereunto duly authorized as of the dates set forth below.
BURNHAM LEASING CORPORATION
By ____________________________
Assistant Treasurer
Date: August 18, 1986
FIRST PV FUNDING CORPORATION
By_________________________
Vice President
Date: August 18, 1986
PUBLIC SERVICE COMPANY OF
NEW MEXICO
By_____________________
Date: August 18, 1986
THE FIRST NATIONAL BANK OF BOSTON, in its
individual capacity and as
Owner Trustee
By:_____________________________
AUTHORIZATION OFFICER
Date: August 18, 1986
-94-
6091.BURNHAM.1106.27:1
<PAGE>
CHEMICAL BANK, in its
individual capacity and as
Indenture Trustee
By
----------------------------
Vice President
Date: August 18, 1986
-95-
6091.BURNHAM.1106.27:1
<PAGE>
Schedule 1
PUBLIC SERVICE COMPANY OF NEW MEXICO
PALO VERDE NUCLEAR GENERATING
STATION UNIT 2
NOTICE OF CLOSING
BURNHAM LEASING CORPORATION
Pursuant to Section 5(a) of the Participation Agreement, dated
as of August 12, 1986 (the Participation Agreement), among Burnham Leasing
Corporation, as Owner Participant (the Owner Participant), First PV Funding
Corporation, as Loan Participant, The First National Bank of Boston, as Owner
Trustee, Chemical Bank, as Indenture Trustee, and Public Service Company of New
Mexico (PNM), PNM hereby gives notice of a Closing to occur at 10:00 a.m. on
August 18, 1986 (the Closing Date). The Closing will be held at the offices or
in the hallway of Messrs. Mudge Rose Guthrie Alexander & Ferdon, 180 Maiden
Lane, New York, New York 10038.
(i) Based upon information supplied to PNM, Estimated
Transaction Expenses are an aggregate of $10,077,400. A list of such
expenses is attached hereto.
(ii) Payment of the Purchase Price and the Real Estate
Investment shall be made pursuant to (i) that certain Owner Participant
Escrow Letter, dated August 18, 1956, between the Owner Participant and
Chemical Bank, and (ii) that certain Collateral Trust Escrow Agreement,
dated August 18, 1986, between Chemical Bank and Chemical Bank, as
Collateral Trust Trustee.
Capitalized terms used herein and not otherwise specifically
defined herein shall have the meanings set forth in Appendix A to the
Participation Agreement.
6091.BURNHAM.1106.27b:2
<PAGE>
IN WITNESS WHEREOF, Public Service Company of New Mexico has
executed this Notice of Closing this 18th day of August, 1986.
PUBLIC SERVICE COMPANY OF NEW MEXICO
By___________________________
Vice President, Revenue
Management
-2-
6091.BURNHAM.1106.27b:2
<PAGE>
Schedule 2
PRICING ASSUMPTIONS
Basic Rent, Casualty Values, Special Casualty Values and
Termination Values, as set forth in the Facility Lease as originally executed,
have been computed on the basis of the fol1owing pricing assumptions:
1. Investment Percentage: 26.03987685%
2. Loan Percentage: 73.96012315%
3. Interest Rate on Initial
Series Note: 10.5% per annum.
4. Federal ACRS Deductions: 10-year public utility
property deductions on the basis
of 95% of Purchase
Price allocated to
Unit 2 and 100% of
Purchase Price allocated to Common
Facilities.
5. Investment Tax Credit
Retained by the Lessor: 10% of Purchase
Price Allocated to
Unit 2.
6. Owner Participant's Tax
Year-End: December 31.
7. Purchase Price: $100,000,000
a. Purchase Price
Allocated to Unit 2: $87,000,000
b. Purchase Price
Allocated to Common
Facilities: $13,000,000
8. Closing Date: August 18, 1986.
6091.BURNHAM.1106.27a:3
<PAGE>
9. Transaction Expenses: 0.8% of Purchase
Price paid by the
Owner Participant in
addition to its
Investment
(amortized on a
straight-line basis
during the basic
lease term and
interim period).
10. Real Estate Investment: $47,000.00
11. Basic rent payment dates: January 15 and July 15
of each year (rent
payable in arrears).
12. First basic rent payment
date: July 15, 1987.
13. Last basic rent payment
date: January 15, 2016.
14. Interim rent payment
date: January 15, 1987.
15. Marginal Composite Tax
Rate: 46%
16. First Estimated Tax
Payment Date: September 15, 1986.
17. Tax Accounting Method: Accrual.
18. Amortization of Initial
Series Note: See schedule
attached thereto.
19. Tax Estimation Method: 90% current estimate;
10% make-up
payment in March of
the following year.
-2-
6091.BURNHAM.1106.27a:3
<PAGE>
Schedule 3
Recordations and Filings
Part I. Recordations in Respect of the Sale of, and the Owner Trustee' 5
Title to, the Undivided Interest and the Real Property Interest.
County Recorder, Maricopa County, Arizona:
(i) Deed;
(ii) Bill of Sale;
(iii) Assignment and Assumption;
(iv) Facility Lease;
(v) Indenture;
(vi) Indenture of Partial
Release/Facility; and
(vii) Indenture of Partial Release/Real Property.
Part II. UCC-1 Financing Statements.
A. County Recorder, Maricopa County, Arizona:
(i) A financing statement on form UCC-l naming PNM, as
lessee, the Owner Trustee, as lessor, and the Indenture Trustee,
as assignee of the Owner Trustee, in respect of the Facility
Lease;
(ii) A financing statement on form UCC-l naming the Owner
Trustee1 as debtor, and the Indenture Trustee, as secured party,
in respect of the Lease Indenture Estate; and
(iii) A financing statement amendment on form UCC-2 naming
the Loan Participant, as debtor, and the Collateral Trust
Trustee, as secured party, in respect of the Pledged Property
(as defined in the Collateral Trust Indenture) with respect to
the Term Note Supplemental Indenture.
6091.BURNMAM.1106.27:1
<PAGE>
B. Secretary of State, Arizona:
(i) A financing statement on form UCC-l naming PNM, as
lessee, the Owner Trustee, as lessor, and the Indenture Trustee,
as assignee of the Owner Trustee, in respect of the Facility
Lease;
(ii) A financing statement on form UCC-l naming PNM, as
lessee, the Owner Trustee, as lessor and the Indenture Trustee,
as assignee of the Owner Trustee, in respect of the Facility
Lease [Filed as a public utility filing];
(iii) A financing statement on form UCC-l naming the Owner
Trustee, as debtor, and the Indenture Trustee, as secured party,
in respect of the Lease Indenture Estate; and
(iv) A financing statement amendment on form UCC-2 naming
the Loan Participant, as debtor, and the Collateral Trust
Trustee, as secured party, in respect of the Pledged Property
(as defined in the Collateral Trust Indenture) with respect to
the Term Note Supplemental Indenture.
C. Office of County Clerk, Bernalillo County, New Mexico:
(i) A financing statement on form UCC-l naming PNM, as
lessee, the Owner Trustee, as lessor, and the Indenture Trustee,
as assignee of the Owner Trustee, in respect of the Facility
Lease;
(ii) A financing statement on form UCC-l naming the Owner
Trustee, as debtor and the Indenture Trustee, as secured party,
with respect to the Lease Indenture Estate; and
(iii) A UCC financing statement amendment naming the Loan
Participant, as debtor, and the Collateral Trust Trustee, as
secured party, with respect to the Pledged Property (as defined
in the Collateral Trust Indenture) in respect of the Term Note
Supplemental Indenture.
-2-
6091.BURNHAM.1106.27:l
<PAGE>
D. Secretary of State, New Mexico:
(i) A financing statement on form UCC-l naming PNM, as
lessee, the Owner Trustee, as lessor, and the Indenture Trustee,
as assignee of the Owner Trustee, in respect of the Facility
Lease;
(ii) A financing statement on form UCC-l naming the Owner
Trustee, as debtor, and the Indenture Trustee, as secured party,
in respect of the Lease Indenture Estate; and
(iii) A UCC financing statement amendment naming the Loan
Participant, as debtor, and the Collateral Trust Trustee, as
secured party, with respect to the Pledged Property (as defined
in the Collateral Trust Indenture) in respect of the Term Note
Supplemental Indenture.
E. Secretary of State, Massachusetts:
(i) A financing statement on form UCC-l naming the
Owner Trustee, as debtor, and the Indenture Trustee, as
secured party, in respect of the Lease Indenture Estate.
Part III. Other Filings:
Filing of the Indenture with the Secretary of State of the State
of New Mexico pursuant to the New Mexico Public Utility Act.
-3-
6091.BURNHAM.1106.27:1
<PAGE>
SCHEDULE 4
[Letterhead of Mudge Rose Guthrie Alexander & Ferdon]
August 18, 1986
To Each Person Listed on The Attached Schedule
SALE AND LEASEBACK OF AN UNDIVIDED INTEREST IN
PALO VERDE NUCLEAR GENERATING STATION UNIT 2
AND CERTAIN COMMON FACILITIES
Dear Sirs:
We have acted as counsel for First PV Funding Corporation, a
Delaware corporation (Funding Corp.), in connection with the transactions
contemplated by the Participation Agreement, dated as of August 12, 1986 (the
Participation Agreement), among Burnham Leasing Corporation, a New York
corporation, as Owner Participant, The First National Bank of Boston, a national
banking association, individually and as Owner Trustee, Funding Corp., Chemical
Bank, a New York banking corporation, individually and as Indenture Trustee and
Public Service Company of New Mexico, a New Mexico corporation. All capitalized
terms used herein and not otherwise defined herein shall have the meanings set
forth in Appendix A to the Participation Agreement. This opinion is being
delivered pursuant to Sections 11(a) (12) and 11(a) (27) of the Participation
Agreement.
6091.BURNHAM.1106.08:l
<PAGE>
As such counsel we have examined originals or copies, certified
or otherwise identified to our satisfaction, of such corporate records,
agreements and other instruments., certificates, orders, opinions,
correspondence with public officials, certificates of officers and
representatives of Funding Corp. and other documents, as we have deemed
necessary or advisable for the purposes of rendering the opinions set forth
herein.
Based on the foregoing, we are of the opinion that:
(1) Funding Corp. is a corporation duly organized and validly
existing in good standing under the laws of the State of Delaware and
has the corporate power and authority to carry on its business as
presently conducted, own its properties, and enter into and perform its
obligations under the Participation Agreement and each other Transaction
Document and each Financing Document to which it is a party.
(2) The execution, delivery and performance by Funding Corp.
of the Participation Agreement and each other Transaction Document and
each Financing Document to which it is a party, have been duly
authorized by all necessary corporate action on the part of Funding
Corp. and do not require the consent or approval of the stockholder of
Funding Corp. The Participation Agreement and each other Transaction
Document and each Financing Document to which Funding Corp. is a party
have been duly executed and delivered by Funding Corp. and, assuming due
authorization, execution and delivery by each other party thereto,
constitute legal, valid and binding agreements of Funding Corp.
enforceable against it in accordance with their respective terms.
(3) Neither the execution, delivery or performance by Funding
Corp. of the Participation Agreement or any other Transaction Document
or any Financing Document to which it is a party, nor the consummation
by Funding Corp. of the transactions contemplated thereby, nor
compliance by Funding Corp. with the provisions thereof conflicts with,
-2-
6091.BURNHAM.1106.08:1
<PAGE>
or results in the breach of any provision of, the Certificate of
Incorporation or By-Laws of Funding Corp. or any Federal, Delaware or
New York law or any indenture, mortgage or agreement to which Funding
Corp. is a party or by which it or its property is bound or requires any
Governmental Action with respect to Funding Corp. under Federal,
Delaware or New York law, except such as have been, duly obtained, given
or accomplished.
The opinions set forth above are subject to the qualifications
that enforceability of the Participation Agreement and each other Transaction
Document and each Financing Document to which Funding Corp. is a party in
accordance with their respective terms may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting enforcement of
creditors' rights generally, as well as the general principles of equity and the
availability of equitable remedies.
This opinion is limited to the Federal laws of the United
States, the laws of the State of New York and the corporate law of the State of
Delaware.
Very truly yours,
-3-
6091.BURNHAM.1106.08:1
<PAGE>
SCHEDULE
First PV Funding Corporation,
as Loan Participant
Corporate Trust Center
1209 Orange Street
Wilmington, Delaware 19801
Burnham Leasing Corporation,
as Owner Participant
60 Broad Street
New York, New York 10004
Attention: Assistant Treasurer
Public Service Company of New Mexico,
as Lessee
Alvarado Square
Albuquerque, New Mexico 87158
The First National Bank of Boston,
as Owner Trustee
100 Federal Street
Boston, Massachusetts 02110
Chemical Bank,
as Indenture Trustee and Collateral "Trust Trustee
55 Water Street
New York, New York 10041
609l.BURNHAM.1l06.08:l
<PAGE>
Schedule 5
[Letterhead of Milbank, Tweed, Hadley & McCloy]
To Each Person Listed on
The Attached Schedule
August 18, 1986
SALE AND LEASEBACK OF AN UNDIVIDED INTEREST IN
PALO VERDE NUCLEAR GENERATING STATION UNIT 2
AND CERTAIN COMMON FACILITIES
Dear Sirs:
We have acted as special New York counsel for Burnham Leasing
Corporation, a New York corporation (the Owner Participant), in connection with
the transactions contemplated by the Participation Agreement1 dated as of August
12, 1986, (the Participation Agreement), among the Owner Participant, The First
National Bank of Boston, a national banking association, individually and a
Owner Trustee, First PV Funding Corporation, a Delaware corporation, Chemical
Bank, a New York banking corporation, as Indenture Trustee and Public Service
Company 6f New Mexico, a New Mexico corporation. All capitalized terms used
herein and not otherwise defined herein shall have the meanings set forth in
Appendix A to the Participation Agreement. This opinion is being delivered
pursuant to Section 11(a) (14) of the Participation Agreement.
As such counsel we have examined originals or copies,
certified or otherwise identified to our satisfaction, of such corporate
records, agreements and other instruments, certificates; orders, opinions,
correspondence with public officials, certificates of officers and
representatives of the Owner Participant, and other documents, as we have deemed
necessary or advisable for the purposes of rendering the opinions set forth
herein.
Based upon the foregoing, we are of opinion that:
6091.BURNHAM.1106.08:1
<PAGE>
(1) The Owner Participant is a corporation validly existing and
in good standing under the laws of its state of incorporation and has
the corporate power and authority to enter into and perform its
obligations under the Participation Agreement and each other Transaction
Document to which it is a party.
(2) The making and performance by the Owner Participant of
the Participation Agreement and each other Transaction Document to
which the Owner Participant is a party have been duly authorized by all
necessary corporate action on the part of the Owner Participant and do
not require the consent or approval of its stockholders (except for any
such consents or approvals as have been obtained).
(3) The Participation Agreement and each other Transaction
Document to which the Owner Participant is a party have been duly
executed and delivered by the Owner Participant and constitute legal,
valid and binding agreements of the Owner Participant, enforceable
against it in accordance with their respective terms, subject, as to
enforceability, to applicable bankruptcy, insolvency, reorganization,
moratorium and other similar laws affecting the enforceability of
creditors' rights generally and to general principles of equity
(regardless of whether an enforcement action is considered in a
proceeding in equity or at law). In addition, we wish to point out that
provisions in the Participation Agreement and in the other Transaction
Documents to which the Owner Participant is a party which permit the
Owner Participant to make determinations or take actions may be subject
to a requirement that such determinations be made and such actions be
taken on a reasonable basis and in good faith.
(4) Neither the execution, delivery or performance by the
Owner Participant of the Participation Agreement or any other
Transaction Document to which it is a party, nor the consummation by
the Owner Participant of the transactions contemplated thereby, nor
compliance by the Owner Participant with the provisions thereof,
conflicts with, or results in the breach of any provision of the
corporate charter or the by-laws of the Owner Participant or
contravenes any agreement or instrument to which the Owner Participant
-2-
6091.BURNHAM.1106.08:1
<PAGE>
is a party of which we are aware, or requires any Governmental Action
with respect to the Owner Participant under Federal or New York law,
except such as are contemplated by the Transaction Documents (including
the filing of Form U-7D with the SEC within 30 days of the date hereof)
or the Financing Documents or such as have been duly obtained, given or
accomplished.
We are members of the Bar of the State of New York and we
express no opinion with regard to any law other than the laws of the State of
New York and the Federal laws of the United States of America. We do not hold
ourselves out as experts on the laws of the State of Arizona or the State of New
Mexico, and to the extent such laws may be relevant to any opinion herein
expressed, we have, with your permission, relied upon the opinions dated this
date of Meyer, Hendricks, Victor, Osborn & Maledon; Snell & Wilmer; Rodey,
Dickason, Sloan, Akin & Robb, P.A.; and Keleher & McLeod, P.A., without
independently considering the matters covered thereby. Further, we express no
opinion as to matters governed by the Atomic Energy Act or the Nuclear Waste
Act.
Very truly yours,
-3-
6091.BURNHAM.1106.08:l
<PAGE>
SCHEDULE
First PV Funding Corporation,
as Loan Participant
Corporate Trust Center
1209 Orange Street
Wilmington, Delaware 19801
Public Service Company of New Mexico,
as Lessee
Alvarado Square
Albuquerque, New Mexico 87158
The First National Bank of Boston,
as Owner Trustee
100 Federal Street
Boston, Massachusetts 02110
Chemical Bank,
as Indenture Trustee and Collateral Trust Trustee
55 Water Street
New York, New York 10041
Burnham Leasing Corporation,
as Owner Participant
60 Broad Street
New York, New York 10004
Attention: Assistant Treasurer
6091.BURNHAM.1106.08:1
<PAGE>
SCHEDULE 6
(Letterhead of Csaplar & Bok]
August 18, 1986
To Each Person Listed on The Attached Schedule
SALE AND LEASEBACK OF AN UNDIVIDED INTEREST IN
PALO VERDE NUCLEAR GENERATING STATION UNIT 2
AND CERTAIN COMMON FACILITIES
Gentlemen:
We have acted as special counsel to The First National Bank of
Boston, a national banking association (FNB) in connection with the transactions
contemplated by the Participation Agreement, dated as of August 12, 1986 (the
Participation Agreement), among Burnham Leasing Corporation, a New York
corporation (the Owner Participant), First PV Funding Corporation, a Delaware
corporation, FNB, in its individual capacity and as Owner Trustee under a Trust
Agreement dated as of August 12, 1986, with the Owner Participant (in such
fiduciary capacity, the Owner Trustee), Chemical Bank, a New York banking
corporation, as Indenture Trustee and Public Service Company of New Mexico, a
New Mexico corporation. All capitalized terms used herein and not otherwise
defined herein shall have the meanings set forth in Appendix A to the
Participation Agreement. This opinion is being delivered pursuant to Section
11(a) (16) of the Participation Agreement.
As such counsel we have examined originals or copies, certified
or otherwise identified to our satisfaction, of such corporate records,
agreements and other instruments, certificates, orders, opinions, correspondence
with public officials, certificates of officers and representatives of FNB, and
other documents, as we have deemed necessary or advisable for the purposes of
rendering the opinions set forth herein. With respect to our opinion set forth
in paragraph 6 hereof, we have assumed that, for federal income tax purposes,
6091.BURNHAM.1106.08:l
<PAGE>
the trust created by the Trust Agreement will be treated as a grantor trust
subject to section 671 of the Internal Revenue Code of 1954, as amended. We have
also assumed that each of the Transaction Documents is legal, valid, binding and
enforceable under the laws of the State of New York, subject only to such
limitations as are set forth below.
Based on the foregoing, we are of the opinion that:
(1) FNB is a national banking association duly organized and
validly existing in good standing under the laws of the United States of
America and has all requisite corporate power and authority to enter
into and perform its obligations under (x) the Trust Agreement and, to
extent it is a party to the Participation Agreement in its individual
capacity, the Participation Agreement and (y) acting as Owner Trustee,
the Participation Agreement and each other Transaction Document to which
FNB is a party as Owner Trustee.
(2) The Participation Agreement and each other Transaction
Document to which FNB is a party have been duly authorized by all
necessary corporate action of FNB (in its individual capacity or as
Owner Trustee, as the case may be) and, upon execution and delivery
thereof, the Participation Agreement and each such other Transaction
Document will be duly executed and delivered and will be legal, valid
and binding agreements of FNB (in its respective capacities),
enforceable against it (in its respective capacities) in accordance with
their respective terms except as enforcement thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the rights of creditors generally and general principles
of equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law) and except that the enforceability of
certain of the remedial provisions in the Indenture may be limited by
applicable state laws, which laws, however, do not in our opinion make
the remedies provided in such documents inadequate for the practical
realization of the benefits provided thereby.
-2-
6091.BURNHAM.1106.08:1
<PAGE>
(3) Neither the execution and delivery by (X) of the Trust
Agreement and, to the extent FNB is a party thereto in its individual
capacity, the Participation Agreement and (y) the Owner Trustee of the
Participation Agreement and each other Transaction Document (other than
the Trust Agreement) to which the Owner Trustee is a party, nor the
performance by FNB, in its individual capacity or as Owner Trustee, as
the case may be, of its obligations under each, conflicts with, or
results in the breach of any provision of, its Charter or By-Laws and
does not contravene any Applicable Law of the United States of America
or The Commonwealth of Massachusetts governing the banking or trust
powers of FNB, and does not contravene any provision of, or constitute a
default under, any indenture, mortgage, contract or other instrument,
known to us, to which FNB is a party or by which it is bound or require
any Governmental Action with respect to the Owner Trustee under any
Federal or Massachusetts law except such as are contemplated by the
Transaction Documents or the Financing Documents or such as have been
duly obtained, given or accomplished.
(4) To the best of our knowledge, after due inquiry, no
Indenture Default or Indenture Event of Default has occurred and is
continuing and the Owner Trustee is not in violation of any of the terms
of the Participation Agreement or of any other Transaction Document to
which it is a party.
(5) To the best of our knowledge, but without independent
investigation, there is no action, suit, investigation or proceeding
pending, or to our knowledge, threatened against FNB (in either such
capacity) before any court, arbitrator or administrative or governmental
body and which relates to its banking or trust powers which,
individually or in the aggregate, if decided adversely to the interests
of FNB (in either such capacity), would have an adverse effect upon the
ability of FNB (in either such capacity) to perform its obligations
under the Participation Agreement or any other Transaction Document to
which it is a party (in any capacity).
(6) Neither the execution by FNB (in any capacity) of the
Participation Agreement, the Initial Series Note or any other
Transaction Document to which it (in any capacity) is a party, nor the
performance in any capacity by it of its obligations thereunder, will
subject the Trust Estate or the Lease Indenture Estate, or any portion
thereof, to any Owner Trustee's Lien.
-3-
6091.BURNMAM.1106.08:1
<PAGE>
(7) Other than any tax imposed on FNB in its individual capacity
or the Owner Trustee in respect of any compensation to which FNB or the
Owner Trustee, as the case may be, is entitled or receives for its
services in connection with the performance of its duties under the
Trust Agreement or the Indenture, no taxes, fees or other charges will
be imposed by The Commonwealth of Massachusetts or any political
subdivision thereof on or with respect to the execution, delivery or
performance of any of the Transaction Documents or with respect to the
issuance of the Initial Series Note, except such taxes, fees or other
charges which would have been imposed had FNB or the Owner Trustee, as
the case may be, not performed in The Commonwealth of Massachusetts its
duties under the Trust Agreement and the other Transaction Documents.
The opinions expressed herein are limited to 1aws of The
Commonwealth of Massachusetts and the Federal laws of the United States of
America relating to the banking and trust powers of FNB.
Very truly yours,
-4-
6091.BURNHAM.1106.08:1
<PAGE>
SCHEDULE
Burnham Leasing Corporation,
as Owner Participant
60 Broad Street
New York, New York 10004
Attention: Assistant Treasurer
First PV Funding Corporation,
as Loan Participant
Corporate Trust Center
1209 Orange. Street
Wilmington, Delaware 19801
Public Service Company of New Mexico,
as Lessee
Alvarado Square
Albuquerque, New Mexico 87158
Chemical Bank,
as Indenture Trustee and Collateral Trust Trustee
55 Water Street
New York, New York 10041
The First National Bank of Boston
100 Federal Street
Boston, Massachusetts 02110
6091.BURNHAM.1106.08:1
<PAGE>
SCHEDULE 7
[Letterhead of Shaw, Pittman, Potts & Trowbridge]
August 18, 1986
To Each Person Listed on The Attached Schedule
SALE AND LEASEBACK OF AN UNDIVIDED INTEREST IN
PALO VERDE NUCLEAR GENERATING STATION UNIT 2
AND CERTAIN COMMON FACILITIES
Gentlemen:
We have acted as special NRC counsel for Burnham Leasing
Corporation, a New York corporation (the Owner Participant), in connection with
the transactions contemplated by the Participation Agreement, dated as of August
12, 1986, (the Participation Agreement), among the Owner Participant, The First
National Bank of Boston, a national banking association, individually and as
Owner Trustee (the Owner Trustee), First PV Funding Corporation, a Delaware
corporation, Chemical Bank, a New York banking corporation, as Indenture Trustee
and Public Service Company of New Mexico, a New Mexico corporation. All
capitalized terms used herein and not otherwise defined herein shall have the
meanings set forth in Appendix A to the Participation Agreement. This opinion is
being delivered pursuant to Section 11(a)(18) of the Participation Agreement.
The Owner Participant and Owner Trustee have requested our
opinion with respect to three related issues: (1) whether the NRC Order issued
December 12, l986, by the Nuclear Regulatory Commission ("NRC"), which
authorizes PNM to proceed with the proposed transaction without requiring the
Owner Participant or Owner Trustee to become NRC licensees during the term of
the Facility Lease of the Undivided Interest, is a final order; (2) whether the
Owner Participant or Owner Trustee would have any licensing or reporting
obligations during the Lease Term under any nuclear-related statute or
6091.BURNHAM.1106.08:1
<PAGE>
regulation; and (3) whether the Price-Anderson Act, 42 U.S.C. 5 2210, would
protect the Owner Participant and Owner Trustee against liability with respect
to any "nuclear incident" (as defined by the Act) and whether the Act would
impose any financial obligations on the Owner Participant and Owner Trustee
during the lease term.
In reaching the opinions on these issues set forth below, we
have reviewed and relied upon the NRC Order and the SECY-85-367 NRC staff
document to which the NRC Order refers. We also have reviewed PNM's Application
to the NRC for approval of the transaction and various materials submitted in
support of that Application, including the Arizona Nuclear Power Plant ("ANPP")
Project Participation Agreement and Amendment No. 10 thereto. Finally, we have
reviewed successive drafts (dated _____, _____ and _____ of the relevant
transaction documents, in particular the Participation Agreement among the Owner
Participant, Owner Trustee PNM and others, Appendix A thereto (Definition of
Terms)' and the Facility Lease between the Owner Trustee and PNM. We have
assumed for purposes of our opinions that the final versions of these documents
will not differ materially from the _________ draft versions.
The Finality of the NRC Order
The NRC Order constitutes final agency action, pursuant to 42
U.S.C. 2239(a), on PNM's application for a license amendment. The Hobbs Act, 28
U.S.C. ss. 2344, permits any party aggrieved" by the NRC Order to petition for
review in the appropriate court of appeals within sixty (60) days of its entry.
Since no person intervened in the NRC proceeding to oppose PNM' 5 application,
however, an appeal from the Order by any person other than PNM would be
dismissed on standing grounds. E.g., American Civil Liberties Union v F.C.C.,
774 F.2d 24, 25 (1st Cir. 1985) ("The courts have consistently interpreted the
term "party aggrieved" to require that a petitioner have participated in the
agency proceedings"); Gage v. AEC, 479 F.2d 1214, 1218 (D.C. Cir. 1973).
Section 2.206 of the NRC Rules of Practice (l0 C.F.R. ss. 2.206)
provides that "[a]ny person may file a request for [the appropriate NRC office]
to institute a proceeding pursuant to ss. 2.202 to modify, suspend or revoke a
-2-
6091.BURNHAM.1106.08:1
<PAGE>
license, or for such other action as may be appropriate." This provision would
permit any person to request the NRC during the term of the Facility Lease to
reconsider its Order and amend the License so as to add the Owner Participant
and Owner Trustee as licensees. The likelihood that such a request would be
filed, or that if filed it would be granted, appears to be extremely remote. In
any event, this would not affect the "finality" of the NRC Order.
Similarly, Section 2.204 of the Rules of Practice (10 C.F.R.
2.204) authorizes the NRC to take action of its own accord to modify a license
"by issuing an amendment on notice to the licensee that the licensee may demand
a hearing with respect to all or any part of the amendment." It seems equally
unlikely that the NRC would take such action during the Lease Term to add the
Owner Participant or Owner Trustee as a licensee of the Palo Verde facility.
License and Reporting Obligations of the Owner Participant and
Owner Trustee
The NRC Order includes the condition requested by PNM that "the
lessor and anyone else who may acquire an interest under the transaction which
is the subject of this application are prohibited from exercising directly or
indirectly any control over the licensees of the Palo Verde nuclear facility,"
and therefore concludes that the proposed sale-leaseback transaction "shall have
no effect on the Palo Verde nuclear facility throughout the term of the
license." The SECY-85-367 staff recommendation adopted by the Order further
states:
[W]here as here, the sale of the facility is simply a step in a
transaction involving only the refinancing of capital, and where the
investor owner only serves in a passive role with no authority or
control over the nuclear facility, the Staff can perceive of no
regulatory purpose which would be served by an interpretation of Section
101 of the Atomic Energy Act the source of the NRC's licensing
authority], which requires the licensing of such financial investors.
-3-
6091.BURNHAM.1106.08:1
<PAGE>
The effect of this analysis and the NRC Order is that the Owner
Participant and Owner Trustee are not required to become licensees during the
Lease Term and therefore will incur no obligations as licensees during that
period. By the same token, we believe that the Arizona Public Service Company,
as Project Manager and Operating Agent under the ANPP Participation Agreement,
and PNM, as lessee of the undivided interest from the Owner Trustee, will remain
during the Lease Term the relevant licensees under Facility Operating License
No. NPF-51 subject to all license obligations with respect to the management and
operation of the PVNGS. Such license obligations include the costs and
responsibilities of decommissioning the facility.
In addition, it is our opinion that the Owner Participant and
Owner Trustee will have no reporting obligations during the Lease Term under any
nuclear-related law or regulation. With one exception, such reporting
obligations are limited to licensees or holders of construction permits for
nuclear facilities. The exception is Section 206 of the Energy Reorganization
Act of 1974, 42 U.S.C. 5846, which provides that each director and "responsible
officer" of any firm "constructing, owning, operating, or supplying the
components of any facility or activity which is licensed or otherwise regulated"
by the NRC, "who obtains information reasonably indicating that such facility or
activity or basic components supplied to such facility" fails to comply with
nuclear laws or regulations relating to substantial safety hazards or contains a
defect that could create a substantial safety hazard, shall immediately notify
the NRC of the failure to comply or the defect." Although the literal language
of Section 206 would encompass even unlicensed owners of nuclear facilities, the
NRC regulations implementing this provision (10 C.F.R. Part 21) make clear that
its reporting requirements. extend only to licensees and to firms (including
directors and responsible officers thereof) that construct or supply components
to licensed facilities. 10 C.F.R. 21.2. Just as the NRC Order in this case
reflects the agency's understanding that despite the literal language of Section
101 of the Atomic Energy Act the sale of an ownership interest in a nuclear
facility does not require licensing of the passive investor owner, Part 21 of
the NRC Regulations reflects the agency's understanding that the reporting
requirements established by Section 206 were not intended to reach passive
-4-
6091.BURNHAM.1106.08:1
<PAGE>
investors or-lenders and make sense only if applied to those persons actually
involved in the management operation or construction of a nuclear facility or in
the supply of components for such facilities. Accordingly, it is our opinion
that neither Section 206 nor its implementing regulations would impose any
reporting requirements on the Owner Participant or Owner Trustee during the
Lease Term.
The Price-Anderson Act
Section 170 of the Price-Anderson Act, in its present form,
requires "licensees" of nuclear facilities to maintain financial protection in
specified amounts against liability for "nuclear incidents" (as that term is
defined in the Price-Anderson Act, 42 U.S.C. 2014(q)), which protection includes
both mandatory insurance coverage and retroactive premium assessments of
$5,000,000 per facility for each nuclear incident. 42 U.S.C. 2210(a) & (b). The
Price-Anderson Act also protects all "persons indemnified" against liability for
nuclear incidents beyond the sum of the amount covered by the required financial
protection and the limits of indemnification provided by the NRC. 42 U.S.C.
2210(e).. The Act defines the term "persons indemnified" to include both persons
who are required to maintain financial protection, i.e., licensees, and "any
other person who may be liable for public liability." 42 U.S.C. 2014(t). The
term public liability," in turn, is defined to mean "any legal liability arising
out of or resulting from a nuclear incident" (emphasis added), except for
workers' compensation claims of persons employed at the site where the incident
occurs, claims arising out of an act of war, and claims relating to loss of or
damage to property located at the site of and used in connection with the
activity where the incident occurs. 42 U.S.C. 2014(w).
In light of the NRC Order holding that PNM remains the licensee
of the Palo Verde facility during the lease term, in our opinion the Owner
Participant and Owner Trustee will have no obligation under the Price Anderson
Act or its implementing regulations to maintain financial protection during the
lease term. In addition, the terms of the Act described above extend full
financial protection to the Owner Participant and Owner Trustee against
liability for nuclear incidents.
-5-
6091.BURNHAM.1106.08:1
<PAGE>
In summary, it is our opinion that: (1) the NRC Order issued
December 12, 1985, is final subject only to reconsideration at the instance of
the NRC or some other person under Sections 2.204 and 2.206 of the NRC'S Rules
of Practice; (2) under the terms of the NRC Order and under a proper reading of
Section 101 of the Atomic Energy Act and its implementing regulations in their
present form, the Owner Participant and Owner Trustee will not have any license
or reporting obligations during the lease term under any nuclear-related law or
regulation; and (3) the Price-Anderson Act in its present form protects the
Owner Participant and Owner Trustee against financial exposure from any
liability for nuclear incidents and does not require the Owner Participant or
Owner Trustee to maintain financial protection during the lease term against
liability for such nuclear incidents.
Sincerely,
-6-
6091.BURNHAM.1106.08:1
<PAGE>
SCHEDULE
Burnham Leasing Corporation,
as Owner Participant
60 Broad Street
New York, New York 10004
Attention: Assistant Treasurer
The First National Bank of Boston,
as Owner Trustee
100 Federal Street
Boston, Massachusetts 02110
Chemical Bank,
as Indenture Trustee
55 Water Street
New York, New York 10041
6091.BURNHAM.1106.08:1
<PAGE>
SCHEDULE 8
[Letterhead of Mudge Rose Guthrie Alexander & Ferdon]
August 18, 1986
To Each Person Listed on The Attached Schedule:
SALE AND LEASEBACK OF AN UNDIVIDED INTEREST IN
PALO VERDE NUCLEAR GENERATING STATION UNIT 2
AND CERTAIN COMMON FACILITIES
Dear Sirs:
We have acted as special counsel for Public Service Company of
New Mexico, a New Mexico corporation (PNM), in connection with the transactions
contemplated by the Participation Agreement, dated as of August 12, 1986 (the
Participation Agreement), among Burnham Leasing Corporation, a New York
corporation, as Owner Participant, First PV Funding Corporation, a Delaware
corporation, The First National Bank of Boston, a nationa1 banking association,
individually and as Owner Trustee, Chemical Bank, a New York banking
corporation, individually and as Indenture Trustee, and PNM. All capitalized
terms used herein and not otherwise defined herein shall have the meanings set
forth in Appendix A to the Participation Agreement. This opinion is being
delivered pursuant to Section 11(a) (20) of the Participation Agreement.
As such counsel we have examined originals or copies,
certified or otherwise identified to our satisfaction, of such corporate
records, agreements and other instruments, certificates, opinions,
correspondence with public officials, certificates of officers, management
personnel and representatives of PNM, and such other documents, as we have
deemed necessary or advisable for the purposes of rendering the opinions set
forth herein.
6091.BURNHAM.1106.08:l
<PAGE>
Based on the foregoing and subject to the qualifications set
forth below, we are of the opinion that:
(1) The Participation Agreement and each other Transaction
Document to which PNM is a party have been duly executed and delivered
by PNM, and, assuming the due authorization, execution and delivery
thereof by the other parties thereto, the Participation Agreement and
each other Transaction Document to which PNM is a party constitute the
legal, valid and binding agreements of PNM, enforceable against PNM in
accordance with their respective terms.
(2) Neither the execution, delivery or performance by PNM of the
Participation Agreement or any other Transaction Document or any
Financing Document to which PNM is a party, nor the consummation by PNM
of the transactions contemplated thereby, nor compliance by PNM with the
provisions thereof, conflicts with, or results in a breach or
contravention of any of the provisions of, the Restated Articles of
Incorporation or By-Laws of PNM, or any Federal or New York Applicable
Law.
(3) No Federal or New York Governmental Action under any
Applicable Law now in effect is required in connection with the
execution, delivery or performance by PNM of, or the consummation by PNM
of the transactions contemplated by, the Participation Agreement or any
other Transaction Document in effect on the date hereof to which PNM is
a party, except such Federal and New York Governmental Actions (i) as
have been duly obtained, given or accomplished, (ii) as are routine in
nature and that cannot be obtained, or are not normally applied for,
prior to the time they are required, (iii) as may be required under the
Holding Company Act, (iv) as may be required to be obtained, given or
accomplished from time to time in connection with the maintenance, use,
possession, operation or improvement of Unit 2 or otherwise with respect
to Unit 2 and PNM's or the operating Agent's involvement therewith, (V)
as may be required in consequence of any transfer of ownership of any
Note or Bond by the Holder thereof, the beneficial interest in the Trust
by the Owner Participant, or the Undivided Interest or the Real Property
-2-
6091.BURNHAM.1106.08:l
<PAGE>
Interest by ,the Owner Trustee, (vi) as may be required in consequence
of the issuance, sale or exchange and delivery of or any obligations
issued under and pursuant to any Collateral Trust Indenture (other than
the Initial Series Note), (vii) as may be required by existing
Applicable Law if, after termination or expiration of the Facility
Lease, PNM should provide transmission services for the Owner Trustee or
(viii) as may be required under Federal or New York law not now in
effect. No Federal or New York Governmental Action is or will be
required (a) in connection with the participation by the Owner Trustee,
the Indenture Trustee, the Owner Participant or the Loan Participant in
the consummation of the transactions contemplated by the Participation
Agreement, any other Transaction Document in effect on the date hereof
or any Financing Document in effect on the date hereof or (b) to be
obtained by any of such Persons during the term of the Facility Lease
with respect to Unit 2 except such Federal or New York Governmental
Actions (i) as have been duly obtained, given or accomplished, (ii) as
may be required by Applicable Law not now in effect, (iii) as may be
required in consequence of any transfer of ownership of any Note or Bond
by the Holder thereof, the beneficial interest in the Trust by the Owner
Participant, or the Undivided Interest or the Real Property Interest by
the Owner Trustee, (iv) as may be required in consequence of the
issuance, sale or exchange and delivery of or any obligations issued
under and pursuant to any Collateral Trust Indenture (other than the
Initial Series Note), (v) as would be required by existing Applicable
Law upon termination or expiration of the Facility Lease in connection
with taking possession of an interest in Unit 2, (vi) as may be required
by existing Applicable Law if, after termination or expiration of the
Facility Lease, PNM should provide transmission services for the Owner
Trustee or cease to be agent for the Owner Trustee as provided under the
Assignment and Assumption, or (vii) as may be required in consequence of
any exercise of remedies or other rights by any such Person in
connection with taking possession of an interest in Unit 2.
(4) So long as the Facility Lease is in effect, assuming the
proper filing of Form U-7D with the SEC on or within 30 days after the
-3-
6091.BURNHAM.1106.08:1
<PAGE>
date hereof, under Federal law now in effect, neither the Loan
Participant, the Owner Participant, FNB nor the Owner Trustee will be or
become, solely by reason of either its entering into the Participation
Agreement or any other Transaction Document to which any of them is a
party, or the transactions contemplated thereby, subject to regulation
(including, without limitation, as an electric utility company, an
electric utility, a public-utility company or corporation, a public
utility, a holding company, a public utility holding company, an
electric corporation, or a utility company or corporation) by any
Federal or New York public utility commission or other regulatory body,
authority or group (including, without limitation, the SEC and the
FERC). PNM is not a "holding company" or a "subsidiary company" of a
"holding company" or an "affiliate" of a "holding company" within the
meaning of the Holding Company Act.
(5) PNM is not an "investment company", or a company
"controlled" by an "investment company", within the meaning of the
Investment Company Act.
The opinions set forth above are subject to the qualifications
that (i) enforceability of the Participation Agreement and the other Transaction
Documents to which PNM is a party in accordance with their respective terms may
be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting enforcement of creditors' or lessors' rights generally,
as well as the general principles of equity and the availability of equitable
remedies, and (ii) certain laws and judicial decisions may affect the
enforceability against PNM of certain rights and remedies provided in the
Transaction Documents. With respect to the latter qualification, however, we are
of the opinion that none of such laws now in effect and none of such judicial
decisions make the rights and remedies provided in the Transaction Documents,
taken as a whole, inadequate for the realization of the benefits of the
Transaction Documents.
-4-
6091.BURNHAM.1106.08:1
<PAGE>
Our opinion is limited to the laws of the State of New York and
the Federal laws of the United States of America, however we express no opinion
as to any matters relating to the Atomic Energy Act or the Nuclear Waste Act.
Very truly yours,
-5-
6091.BURNHAM.1106.08:1
<PAGE>
SCHEDULE
Burnham Leasing Corporation,
as Owner Participant
60 Broad Street
New York, New York 10004
Attention: Assistant Treasurer
Public Service Company of New Mexico,
as Lessee
Alvarado Square
Albuquerque, New Mexico 87158
First PV Funding Corporation,
as Loan Participant
Corporate Trust Center
1209 Orange Street
Wilmington, Delaware 19801
The First National Bank of Boston,
as Owner Trustee
100 Federal Street
Boston, Massachusetts 02110
Chemical Bank,
as Indenture Trustee and Collateral Trust Trustee
55 Water Street
New York, New York 10041
Keleher & McLeod, P.A.
414 Silver Avenue; S.W.
Albuquerque, New Mexico 87102
-5-
609l.BURNHAM.1106.08:l
<PAGE>
SCHEDULE 9
[Letterhead of Keleher & McLeod, P.A.]
August 18, 1986
To Each Person Listed on The Attached Schedule
SALE AND LEASEBACK OF AN UNDIVIDED INTEREST IN
PALO VERDE NUCLEAR GENERATING STATION UNIT 2
AND CERTAIN COMMON FACILITIES
Dear Sirs:
We have acted as general counsel for Public Service Company of
New Mexico, a New Mexico corporation (PNM), in connection with the transactions
contemplated by the Participation Agreement, dated as of August 12, 1986 (the
Participation Agreement), among Burnham Leasing Corporation, a New York
corporation, as Owner Participant, The First National Bank of Boston, a national
banking association, individually and as Owner Trustee, First PV Funding
Corporation, a Delaware corporation, Chemical Bank, a New York banking
corporation, as Indenture Trustee, and PNM. All capitalized terms used herein
and not otherwise defined herein shall have the meanings set forth in Appendix A
to the Participation Agreement. This opinion is being delivered pursuant to
Section 11(a) (21) of the Participation Agreement.
As such counsel we have examined originals or copies, certified
or otherwise identified to our satisfaction, of such corporate records,
agreements and other instruments, certificates, orders, opinions, correspondence
with public officials, certificates of officers and representatives of PNM, and
other documents, as we have deemed necessary or advisable for the purposes of
rendering the opinions set forth herein.
6091.BURNHAM.1106.08:1
<PAGE>
Based on the foregoing, we are of the opinion that:
(1) PNM is a corporation duly organized and validly existing in
good standing under the laws of the State of New Mexico and has the
corporate power and authority to carry on its business as presently
conducted, to own or hold under lease its properties and to enter into
and perform its obligations under the Participation Agreement, each
other Transaction Document to which PNM is a party, and each Financing
Document to which PNM is a party. PNM is duly qualified and in good
standing to do business as a foreign corporation in the State of Arizona
and has not failed to qualify to do business or to be in good standing
in any other jurisdiction where failure so to qualify or be in good
standing would materially and adversely affect the financial condition
of PNM or its ability to perform any of its obligations under the
Participation Agreement, any other Transaction Document to which PNM is
a party, or any Financing Document to which PNM is a party.
(2) The execution, delivery and performance by PNM of the
Participation Agreement, each other Transaction Document to which PNM is
a party, and each Financing Document to which PNM is a party have been
duly authorized by all necessary corporate action on the part of PNM and
do not require the consent or approval of the stockholders of PNM or any
trustee or holder of any indebtedness or other obligation of PNM, other
than (i) the Mortgage Release, (ii) the finding of the ANPP
Administrative Committee described in Section 15.6.2 of the ANPP
Participation Agreement, and (iii) such other consents and approvals as
have been duly obtained, given or accomplished.
(3) The Participation Agreement, each other Transaction Document
to which PNM is a party, and each Financing Document to which PNM is a
party have been duly executed and delivered by PNM, and, assuming the
due authorization, execution and delivery thereof by the other parties
thereto, the Participation Agreement, each such other Transaction
Document and each such Financing Document constitutes the legal, valid
and binding agreement of PNM, enforceable against PNM in accordance with
their respective terms.
-2-
6091.BURNHAM.1106.08:1
<PAGE>
(4) Neither the execution, delivery or performance by PNM of the
Participation Agreement, any other Transaction Document to which PNM is
a party, or any Financing Document to which PNM is a party, nor the
consummation by PNM of the transactions contemplated thereby, nor
compliance by PNM with the provisions thereof, conflicts with, or
results in a breach or contravention of any of the provisions of, the
Restated Articles of Incorporation or By-Laws of PNM or any Affiliate of
PNM, or any Applicable Law, or any indenture, mortgage, lease or any
other agreement or instrument, known to us, to which PNM or any
Affiliate of PNM is a party or by which the property of PNM or any
Affiliate of PNM is bound, or results in the creation or imposition of
any Lien (other than Permitted Liens) upon any property of PNM or any
Affiliate of PNM.
(5) No New Mexico Governmental Action under Applicable Law now
in effect is required in connection with the execution, delivery or
performance by PNM of, or the consummation by PNM of the transactions
contemplated by, the Participation Agreement, any other Transaction
Document to which PNM is a party, or any Financing Document to which PNM
is a party, except such New Mexico Governmental Actions (i) as have been
duly obtained, given or accomplished, and (ii) as may be required under
existing New Mexico Applicable Law to be obtained, given or accomplished
from time to time after the date hereof in connection with the
maintenance, use, possession or operation of Unit 2 or otherwise with
respect to Unit 2 and PNM's involvement therewith and which are, for
PVNGS, routine in nature and which we have no reason to believe will not
be timely obtained. No New Mexico Governmental Action is required (a) in
connection with the participation by the Owner Trustee, the Indenture
Trustee, the Owner Participant or the Loan Participant in the
consummation of the transactions contemplated by the Participation
Agreement, any other Transaction Document in effect on the date hereof
or any Financing Document in effect on the date hereof or (b) to be
obtained by any of such Persons during the term of the Facility Lease
with respect to Unit 2 except such New Mexico Governmental Actions (i)
as have been duly obtained, given or accomplished, (ii) as may be
required by Applicable Law not now in effect, (iii) as may be required
-3-
6091.BURNHAM.1106.08:1
<PAGE>
in consequence of any transfer of ownership of the Undivided Interest or
the Real Property Interest by the Owner Trustee, (iv) as would be
required by existing Applicable Law upon termination or expiration of
the Facility Lease in connection with taking possession of an interest
in Unit 2, (v) as may be required by existing Applicable Law if, after
termination or expiration of the Facility Lease, PNM should provide
transmission services for the Owner Trustee or cease to be agent for the
Owner Trustee as provided under the Assignment and Assumption, or (vi)
as may. be required in consequence of any exercise of remedies or other
rights by any such Person in connection with taking possession of an
interest in Unit 2.
(6) Except as disclosed in the financial statements to which
reference is made in Section l0(a)(ll) of the Participation Agreement
and in the reports to which reference is made in Section 10 (a) (12) of
the Participation Agreement, there is no action, suit, investigation or
proceeding pending or, to our knowledge, threatened against PNM before
any Federal or New Mexico court, arbitrator or administrative or
governmental body which questions the validity or enforceability of the
Participation Agreement or any other Transaction Document or any
Financing Document in effect on the date hereof or which, individually
or in the aggregate, if decided adversely to the interests of PNM, would
have a material adverse effect on the business or financial condition of
PNM or materially and adversely affect the ability of PNM to perform its
obligations under the Participation Agreement or any other Transaction
Document or any Financing Document in effect on the date hereof to which
PNM is a party.
(7) The lien of the Existing Mortgage does not extend to
contract rights of PNM under the Transaction Documents (other than the
Facility Lease) or to the Generation Entitlement Share related to the
Undivided Interest.
The opinions set forth above are subject to the qualifications
that (i) enforceability of the Participation Agreement, the other Transaction
Documents to which PNM is a party, and the Financing Documents to which PNM is a
party in accordance with their respective terms may be limited by bankruptcy,
-4-
6091.BURNHAM.1106.08:l
<PAGE>
insolvency, reorganization, moratorium of other similar laws affecting
enforcement of creditors' or lessors' rights generally, as well as the general
principles of equity and the availability of equitable remedies, and (ii)
certain laws and judicial decisions may affect the enforceability of certain
rights and remedies provided in the Transaction Documents. With respect to the
latter qualification, however, we are of the opinion that none of such laws now
in effect and none of such judicial decisions make the rights and remedies
provided in the Transaction Documents, taken as a whole, inadequate for
enforcing payment of the Initial Series Note and the security interest provided
by the Indenture or the realization of the benefits of the Transaction
Documents.
In rendering the opinions set forth above, we have relied as to
all matters relating to (A) the law of the State of New York, solely upon the
opinion of Mudge Rose Guthrie Alexander & Ferdon, Special Counsel for PNM,
delivered pursuant to Section 11(a) (20) of the Participation Agreement, as to
which law we have, with your consent, made no independent investigation, (B) the
laws of the State of Arizona, the Atomic Energy Act and the Nuclear Waste Act,
solely upon the opinion of Snell & Wilmer, PNM's Special Arizona Counsel,
delivered pursuant to Section 11(a) (22) of the Participation Agreement, as to
which we have, with your consent, made no independent investigation, and (C) the
Federal Power Act, upon the opinion of Newman & Holtzinger, P.C., PNM's Special
FERC Counsel, delivered pursuant to Section 11(a) (23) of the Participation
Agreement, as to which we have, with your consent, made no independent
investigation. Each such opinion is satisfactory to us in form and scope, and we
believe you and we are justified in relying thereon.
For purposes of this opinion we have assumed that the Owner
Participant and the Lessor will exercise their rights, and that PNM will perform
its obligations, under Section 13(c) of the Facility Lease if it becomes
necessary to do so to remain in compliance with the New Mexico Order. We have
further assumed that no Lease Transaction (as that term is used in the New
Mexico Order) entered into by PNM subsequent to the date hereof will result in a
violation of the New Mexico Order.
-5-
6091.BURNHAM.1106.08:1
<PAGE>
In rendering the opinions set forth in paragraphs (4) and (5)
above, we have not passed upon and do not purport to pass upon the application
of so-called "blue sky" or securities laws of any jurisdiction.
Very truly yours,
KELEHER & MCLEOD, P.A.
By__________________
Brian J. O'Rourke
-5-
6091.BURNHAM.1106.08:1
<PAGE>
SCHEDULE
Burnham Leasing Corporation,
as Owner Participant
60 Broad Street
New York, New York 10004
Attention: Assistant Treasurer
First PV Funding Corporation,
as Loan Participant
Corporate Trust Center
1209 Orange Street and Collateral Trust Trustee
Wilmington, Delaware 19801
The First National Bank of Boston,
as Owner Trustee
100 Federal Street
Boston, Massachusetts 02110
Chemical Bank,
as Indenture Trustee and Collateral Trust Trustee
55 Water Street
New York, New York 10041
Public Service Company of New Mexico,
as Lessee
Alvarado Square
Albuquerque, New Mexico 87158
Mudge Rose Guthrie Alexander & Ferdon
180 Maiden Lane
New York, New York 10038
Milbank, Tweed, Hadley & McCloy
One Chase Manhattan Plaza
New York, New York 10005
6091.BURNHAM.1106.08:1
<PAGE>
SCHEDULE 10
[Letterhead of Snell & Wilmer]
August 18, 1986
To Each Person Listed on The Attached Schedule
SALE AND LEASEBACK OF AN UNDIVIDED INTEREST IN
PALO VERDE NUCLEAR GENERATING STATION UNIT 2
AND CERTAIN COMMON FACILITIES
Dear Sirs:
We have acted as Special Arizona counsel for Public Service
Company of New Mexico, a New Mexico corporation (PNM), in connection with the
transactions contemplated by the Participation Agreement, dated as of August 12,
1986 (the Participation Agreement), among Burnham Leasing Corporation, a New
York corporation, as Owner Participant, The First National Bank of Boston, a
national banking association (FNB), individually and as Owner Trustee, First PV
Funding Corporation, a Delaware corporation, Chemical Bank, a New York banking
corporation, as Indenture Trustee, and PNM. All capitalized terms used herein
and not otherwise defined herein shall have the meaning set forth in Appendix A
to the Participation Agreement. This opinion is' being delivered pursuant to
Section 11(a) (22) of the Participation Agreement.
As such counsel we have examined originals or copies, certified
or otherwise identified to our satisfaction, of such corporate records,
agreements and other instruments, certificates, orders, opinions, correspondence
with public officials, certificates of officers and representatives of PNM, and
other documents, as we have deemed necessary or advisable for the purposes of
rendering the opinions set forth herein.
6091.BURNHAM.1106.08:1.
<PAGE>
In rendering our opinions, we have also reviewed the Special
Order of Exemption, issued December 26, 1985, by the Arizona Department of Real
Estate with respect to PVNGS, together with two (2) Snell & Wilmer petition
letters to the Arizona Department of Real Estate, dated December 19, 1985 and
December 23, 1985 (the Special Order of Exemption and the petition letters being
collectively referred to herein as the "Exemption Documents").
In rendering our opinions, we have relied as to certain factual
matters on the documents we have examined, on certificates of public officials,
and on the Certificate attached as Exhibit A, and we have assumed:
(1) Lessee is a corporation duly organized and validly existing
in good standing under the laws of the State of New Mexico and has the
corporate power and authority to carry on its business as presently
conducted, to own or hold under lease its properties and to enter into
and perform its obligations under each Transaction Document to which it
is a party.
(2) The execution, delivery and performance by Lessee of each
Transaction Document to which it is a party have been duly authorized by
all necessary corporate action on the part of Lessee and do not, and
will not, require the consent or approval of the stockholders of Lessee.
(3) Each Transaction Document to which Lessee is a party has
been duly executed and delivered by Lessee, and each such Transaction
Document (excluding the Facility Lease) to which Lessee is a party is
the legal, valid and binding obligation of Lessee, enforceable against
Lessee in accordance with its terms.
(4) Each party to each Transaction Document, other than Lessee,
is duly organized and validly existing in good standing under the laws
of the jurisdiction of its organization, is duly registered, licensed or
authorized to transact business in each other jurisdiction in which such
registration, licensing or authorization is required, and has the power
and the authority to enter into and to perform its obligations under
each Transaction 'Document to which it is a party.
-2-
6091.BURNHAM.1106.08:1
<PAGE>
(5) The execution, delivery and performance by each party to
each Transaction Document, other than Lessee, have been duly authorized
by all necessary action by such party and do not require the consent or
approval of any of the stockholders of such party. Each Transaction
Document has been duly executed and delivered by each party thereto,
other than Lessee, and constitutes the legal, valid and binding
obligation of such party, enforceable against such party in accordance
with its terms.
(6) The trusts of which the Owner Trustee, the Indenture Trustee
and the Collateral Trust Trustee are the Owner Trustee, the Indenture
Trustee and the Collateral Trust Trustee, respectively, were duly formed
and are validly existing under the laws of the jurisdiction governing
such trusts. Each of the Owner Trustee, the Indenture Trustee and the
Collateral Trust Trustee has the power and authority under the trust
agreement for its respective trust to enter into and perform its
obligations under each Transaction Document to which it is a party.
(7) The execution, delivery and performance by the Owner
Trustee, the Indenture Trustee, and the Collateral Trust Trustee of each
Transaction Document to which it is a party are authorized by the trust
agreement of its respective trust and do not require the consent or
approval of any other Person. Each Transaction Document to which the
Owner Trustee, the Indenture Trustee or the Collateral Trust Trustee is
a party has been duly executed and delivered by the Owner Trustee, the
Indenture Trustee or the Collateral Trust Trustee, respectively, and
constitutes the legal, valid and binding obligation of the Owner
Trustee, the Indenture Trustee or the Collateral Trust Trustee,
respectively, enforceable against the Owner Trustee, the Indenture
Trustee or the Collateral Trust Trustee, respectively, in accordance
with its terms.
(8) Lessee's past, present and proposed activities in the State
of Arizona (including, without limitation, Lessee's ownership and
operation of electrical facilities in the State of Arizona) consist of,
and are limited to, Lessee's ownership of an undivided interest in PVNGS
(including the plant site) the ANPP Switchyard and associated
-3-
6091.BURNHAM.1106.08:1
<PAGE>
transmission facilities therefor, and its ownership interest in, and
operation of a certain portion of, certain transmission lines, facilities
and control equipment located on real property owned by Lessee and/or
other corporations and on easements owned by Lessee and/or other
corporations in Greenlee County, Arizona. Lessee is not making, nor
presently proposing to make, any sales of electricity in the State of
Arizona (other than sales to or exchanges with other electric generating
or distributing entities).
(9) The Owner Participant, FNB, (in its individual capacity and
as the Owner Trustee), and the Indenture Trustee, and each of them, will
not, by reason either of entering into the Participation Agreement, the
Facility Lease, the Assignment and Assumption, the Indenture, or any
other Transaction Document, consummation of the transactions
contemplated thereby or otherwise, engage in any activity in Arizona
involving the ownership and operation of electrical facilities, other
than those presently conducted by the Lessee, as set forth in Paragraph
8 above;
(10) Immediately prior to the execution and delivery of the
Transaction Documents, Lessee owned the property to be transferred by
Lessee to Owner Trustee under the Transaction Documents. Immediately
after the execution and delivery of the Transaction Documents, Owner
Trustee will own the property to be transferred by the Lessee to the
Owner Trustee under the Transaction Documents. The assumptions in this
Paragraph 10 do not apply to the opinion in the first sentence of
Section 9 of this legal opinion.
(11) Amendment Number 10 to the ANPP Participation Agreement has
been duly authorized, executed and delivered by, constitutes the legal,
valid and binding agreement of, and is enforceable against, each of the
parties thereto. The transactions contemplated by the Transaction
Documents are authorized and permitted to be performed pursuant to, and
do not conflict with, the terms and conditions of any ANPP Project
Agreement, including, without limitation, Amendment Number 10 to the
ANPP Participation Agreement.
-4-
6091.BURNHAN.1106.08:1
<PAGE>
(12) The sale and conveyance of the Undivided Interest, the Real
Property Interest and any other property or interest in property
transferred by Lessee under the Transaction Documents will not render
Lessee insolvent nor is it being made in contemplation of Lessee's
insolvency; the property remaining in the hands of Lessee after such
sale, conveyance and transfer is not an unreasonably small capital;
Lessee does not intend to or believe that it will incur debts beyond its
ability to pay as they mature; and Lessee has no actual intent to
hinder, delay or defraud either present or future creditors.
(13) On the date of execution of the Transaction Documents and
on the date hereof, there was adequate consideration for the execution
and delivery by Lessee of the Transaction Documents to which it is a
party and for Lessee entering into the transaction described in the
Transaction Documents.
(14) The chief executive office and the place of business of the
Lessee and the office where it keeps its records concerning its accounts
or contract rights is located at Alvarado Square, Albuquerque,.
Bernalillo County, New Mexico 87158.
(15) The Transaction Documents accurately and completely set
forth all agreements, arrangements and understandings of the parties
thereto with respect to the transaction described in and contemplated by
the Transaction Documents and the Transaction Documents accurately and
completely reflect the intentions of the parties with respect to such
transaction.
(16) The Facility Lease is a "lease" for Federal income tax
purposes and an "operating lease" and not a "capital lease" for
financial reporting purposes under Financial Accounting Standards Board
Statement 13 and will be so treated and reported for such purposes by
Lessee and Owner Trustee.
(17) The form of the Transaction Documents executed and
delivered by the parties thereto conforms to the drafts of the
Transaction Documents described above.
-5-
6091.BURNHAM.1106.08:1
<PAGE>
Based on the foregoing and subject to the qualifications set
forth herein, we are of the opinion that:
(1) Lessee is authorized to transact business and is in good
standing as a foreign corporation under the General Corporation Law of
the State of Arizona, Chapter 1, Title 10, Arizona Revised Statutes
("A.R.S.").
(2) Lessee has the power and authority, and is not required to
obtain any franchises, licenses or permits not already obtained, to
engage in the State of Arizona in the business and activities now
conducted by it therein, except that certain minor defects and
exceptions may exist which, individually and in the aggregate, are not,
in our judgment, material.
(3) Lessee is not a public utility or public service corporation
under Arizona Applicable Law.
(4) Under Arizona Applicable Law the Owner Participant, FNB (in
its individual capacity and as Owner Trustee) and each of them, will not
be, by reason of entering into any Transaction Document or by reason of
the activities contemplated by the Transaction Documents prior to the
expiration or termination of the Facility Lease, subject to regulation
as a public service corporation, public utility, or public utility
holding company by any Arizona public utility commission or other
Arizona regulatory body, authority or group (including, without
limitation, the Arizona Corporation Commission), provided, however, we
express no opinion regarding the effect of (i) Applicable Law not now in
effect, (ii) any transfer of ownership of the Undivided Interest by the
Owner Trustee, (iii) termination or expiration of the Facility Lease and
the taking of possession by the Owner Trustee or any other Person of an
interest in Unit 2, (iv) Lessee's providing of transmission services to
the Owner Trustee or any other Person owning the Undivided Interest or
the Real Property Interest, or (v) any exercise of remedies or other
rights by any Person in connection with taking possession of an interest
in Unit 2.
-6-
6091.BURNHAM.1106.08:1
<PAGE>
(5) All Governmental Action by the State of Arizona or any
political subdivision thereof which is or will be required on or before
the date hereof in connection with the execution and delivery by Lessee
of each Transaction Document to which Lessee is a party and in
connection with the performance by Lessee of those of its obligations
pursuant to any Transaction Document to which Lessee is a party which
are to be performed on or before the date hereof, have been duly
obtained, given or accomplished, except that our opinion in this Section
5 does not relate to (i) any governmental Action required in connection
with construction, improvement, maintenance, use, possession, operation,
decommissioning or retirement from service of any portion of Unit 2 or
PVNGS or otherwise with respect to Unit 2 or PVNGS or Lessee's or the
Operating Agent's involvement therewith, Lessee's duties and obligations
as a Participant under any of the ANPP Project Agreements, or Lessee's
duties and obligations as Agent under the Assignment and Assumption;
(ii) securities and taxation laws of any Arizona Governmental Authority;
and (iii) the recording or filing of any Transaction Document; and (iv)
the transfer of the "Assigned Project Agreements" (as that term is
defined in the Deed) pursuant to the Deed.
(6) The execution, delivery and performance of the Transaction
Documents by the parties thereto do not violate the Atomic Energy Act,
as now in effect, the NRC regulations now in effect, any order of the
NRC now in effect, or the Nuclear Waste Act, as now in effect, provided
that such parties comply with the terms and conditions of the License
and the NRC Order. No Governmental Action by or with respect to the NRC
is or will be required in connection with the execution, delivery or
performance by Lessee of the Participation Agreement, the Facility
Lease, the Assignment and Assumption or any other Transaction Document
to which it is a party, except (i) such Governmental Actions as may be
required pursuant to the terms of the License; (ii) such Governmental
Actions as may be required pursuant to the terms of the NRC Order; (iii)
such other Governmental Actions by or with respect to the NRC as have
been duly obtained, given or accomplished on or before the date hereof;
(iv) such Governmental Actions of or with respect to the NRC as may be
-7-
6091.BURNHAM.1106.08:1
<PAGE>
required under existing law or regulation to be obtained, given or
accomplished from time to time after the Closing Date in connection with
the construction, improvement, maintenance, operation, decommissioning
or retirement from service of any portion of Unit 2 or PVNGS or
otherwise with respect to Unit 2 or PVNGS and Lessee's or the Operating
Agent's involvement therewith; and (v) such other Governmental Actions
as may be required under law or regulation not now in effect.
(7) The transfer of property and interest in property by Lessee
to the Owner Trustee pursuant to the Participation Agreement, the Bill
of Sale, the Deed, the Trust Assignment, and the Assignment and
Assumption is not a fraudulent conveyance under the law of the State of
Arizona, provided, however, that this opinion, in so far as it relates
to A.R.S. Section 44-1061 and any common law vendor-in-possession
fraudulent conveyance doctrine, is subject to the following comments.
Section 44-1061 provides:
"A. A sale made by a vendor of goods and chattels in
his possession or under his control, or an assignment
of goods and chattels, unless the sale or assignment is
accompanied by an immediate delivery and followed by an
actual and continued change of possession of the things
sold or assigned, is prima facie evidence of fraud
against creditors of the vendor, or creditors of the
person making the assignment, or subsequent purchasers
in good faith.
"B. The term 'creditors' includes all persons who are
creditors of the vendor or assignor at any time while
such goods and chattels are in his possession or under
his control."
The Arizona court decisions interpreting Section 44-1061 arose
in the context of tangible property in the actual possession of the
seller. These decisions suggest that open, visible and unequivocal
indications that there has been a change
-8-
6091.BURNHAM.1106.08:l
<PAGE>
of ownership would be sufficient to overcome the prima fade evidence of
fraud established by Section 44-1061. See, e.g., Nolte V. Winstayley, 16
Ariz. 327, 145 Pac. 246 (1914). Unfortunately, this precedent is not very
helpful in the context of the present transaction. In addition, the court
decisions under Section 44-1061 are equivocal as to the effect of
recording or filing transfer documents. Nolte V. Winstanley, supra; and
Liebes V. Steffy, 4 Ariz. 11, 32 Pac. 261 (1893). Notwithstanding this
equivocation, as to a subsequent encumbrancer of any personal property
which is subject to Article 9 of the Uniform Commercial Code as in effect
in Arizona, which is described in the three (3) UCC-1 Financing
Statements, dated December 31, 1985 between Lessee, as lessee, and Owner
Trustee, as lessor filed with the Secretary of State of Arizona and the
County Recorder, Maricopa County, State of Arizona (Lease Financing
Statements) and in which a security interest may be perfected by filing
of a financing statement within Arizona, we believe that the filing of
the Lease Financing Statements should be sufficient to overcome the prima
facie evidence of fraud to the extent the description of such property in
the Lease Financing Statements is accurate, complete, and legally
adequate. In addition, as to future creditors with actual knowledge of
the transfers in the Deed, the Bill of Sale, the Trust Assignment and the
Assignment and Assumption prior to extending or committing to extend.
credit, we believe that such knowledge should overcome the prima facie
evidence of fraud in Section 44-1061.
(8) Neither the execution and delivery by Lessee, nor the
performance by Lessee, of any Transaction Document to which it is a
party, conflicts with, or results in a breach of any statute, ordinance,
governmental rule or regulation of the State of Arizona or Maricopa
County, except that our opinion does not relate to any conflict or
breach as a result of (i) construction, improvement, maintenance, use,
possession, operation, decommissioning or retirement from service of any
portion of Unit 2 or PVNGS or otherwise with respect to Unit 2 or PVNGS
or the Lessee's or the operating Agent's involvement therewith, Lessee's
duties and obligations as a Participant under any of the ANPP Project
Agreements, or Lessee's duties and obligations as Agent under the
-9-
6091.BURNHAM.1106.08:1
<PAGE>
Assignment and Assumption; (ii) Applicable Law not now in effect; (iii)
securities and taxation laws of any Arizona Governmental Authority;
((iv) any Refunding described in Section 2(c) of the Participation
Agreement, any assumption by Lessee pursuant to Section 3.9 of the
Indenture or any other similar or related provision in the Indenture or
any of the other Transaction Documents, a transfer of the interest in
the Trust Estate pursuant to Section 7(b) (4) of the Participation
Agreement and any security interest granted pursuant to said Section
7(b)(4), the conversion of the Facility Lease to a security agreement
pursuant to Section 9(c), Section 9(d), or Section. 16(e) of the
Facility Lease or any other similar or related provisions in the
Facility Lease or any of the other Transaction Documents, the subjection
of the Undivided Interest or the Real Property Interest to the lien of
the Indenture pursuant to Section 9(j) of the Facility Lease, any
Supplemental Financing pursuant to Section 8(f) of the Facility Lease,
or the transfer of the Assigned Project Agreements pursuant to the
Deed;] (v) any action taken by Lessee pursuant to Section 10(b) (2) of
the Participation Agreement or any similar provision in the
Participation Agreement or any other Transaction Document; (vi) any
involvement by Lessee in connection with any transfer of ownership of
the Undivided Interest or the Real Property Interest by the Owner
Trustee or the taking of possession of the Undivided Interest or the
Real Property interest by Owner Trustee or any other Person upon
expiration or termination of the Facility Lease; (vii) Lessee providing
transmission services for the Owner Trustee or any other Person owning
the Undivided Interest or the Real Property Interest or ceasing to serve
as Agent pursuant to the Assignment or Assumption, (viii) any action by
Lessee pursuant to Article VI of the Assignment and Assumption, or (ix)
Lessor or any other Person, other than Lessee, receiving the Generation
Entitlement Share of Lessee pursuant to Section 19 of the Facility Lease
or any other provision of any Transaction Document.
(9) Assuming that any choice of law provision in favor of the
law of a state other than the State of Arizona is disregarded therein,
the Deed, the Bill of Sale and the Assignment and Assumption are in
sufficient form to convey from Lessee to Owner Trustee the interests in
-10-
6091.BURNHAM.1106.08:1
<PAGE>
property described therein and for recording under the law of the State
of Arizona, except that our opinion in this sentence and in the
remainder of this Section 9 does not relate to the transfer of the
Assigned Project Agreements pursuant to the Deed. The Trust Assignment
is in sufficient form to convey from Lessee to Owner Trustee the
interests in property therein described. The Deed, the Bill of Sale, the
Assignment and Assumption and the Facility Lease when duly executed,
acknowledged and delivered, each must be recorded in the Office of the
Recorder of Maricopa County, Arizona, together with an [Affidavit of
Legal Value] pursuant to A.R.S. Section 42-1612 with respect to any such
document transferring title to real estate (other than leases or
easements). Precautionary financing statements pursuant to A.R.S.
Section 47-9408 must be filed in the office of the Arizona Secretary of
State and the Office of the Recorder of Maricopa County, Arizona. Upon
the completion of such recordings and filings, no other filings or
recordings in Arizona are required to establish, preserve, perfect, and
protect the Owner Trustee's rights and interests (including, without
limitation1 any security interest which may be deemed to be created by
the Facility Lease) in and to the Undivided Interest and the Real
Property Interest (other than the interests transferred under the
Assignment of Beneficial Interest), and no additional recordation is
required to continue the effectiveness of such recordings, provided that
our opinion in this Section 9 is limited to property constituting the
Undivided Interest and the Real Property Interest that is either real
property under the law of the State of Arizona or property subject to
Article 9 of the Uniform Commercial Code (as in effect in Arizona) in
which a security interest may be perfected by the filing of a financing
statement within the State of Arizona. In addition, no additional
financing statements, other than those filed with the Secretary of State
of Arizona and in the Office of the County Recorder of Maricopa County,
Arizona, are required to be filed in order to continue the effectiveness
thereof except that continuation statements are required to be filed
with respect to such financing statements within each of the six-month
periods preceding the expiration of each six-year period after the
respective dates of filing. We express no opinion regarding the form
-11-
6091.BURNHAM.1106.08:1
<PAGE>
for conveyance, the transfer or the perfection of rights in any Capital
Improvements or regarding filings or recordings that may be required
under the laws of any other state, under federal law or by reason of the
application of the conflict of laws rules set forth in A.R.S. Section
47-9103. To the extent any recorded or filed Transaction Document refers
to or incorporates by reference any other Transaction Document (for
definitional purposes or otherwise) not recorded or filed in the same
location or, if recorded [or] filed, not identifying the date and
instrument or file number of such document incorporated by reference, our
opinion in this Section 9 excludes the effect, if any, of such reference
or incorporation by reference. In giving our opinion in this Section 9 we
have assumed that the description of the Undivided Interest and the Real
Property Interest in the Lease Financing Statements is accurate, complete
and legally adequate.
(10) You have requested that we advise you whether an Arizona
court would give effect to the choice of law provision in favor of the
law of the State of New York in each Transaction Document, other than
the Deed, the Bill of Sale, the Trust Assignment, the Assignment and
Assumption, and the Facility Lease. There is no Arizona case stating
that an Arizona court will follow the choice of law provision of the
parties to a contract. However, the Supreme Court of Arizona has
consistently ruled that where it is not bound by a previous decision or
by legislative enactment it will follow the rules in the Restatements of
the Law including the Restatements of Conflict of Laws. Smith v. Normat,
51 Ariz. 134, 75 P.2d 38 1938); Western Coal & Min. Co. V. Hilvert, 66
Ariz. 171, 160 P.2d 331 (1945); and Taylor V. Security National Bank, 20
Ariz. App. 504, 514 P.2d 257 (1973). Section 187 of the Restatement
(Second) Conflict of laws provides that the parties to a contract may
stipulate to their choice of law t9 govern the contract and that the
laws of the state chosen will be applied unless (i) the particular issue
is one which the parties could not have resolved by an explicit
provision in their agreement directed to that issue, and (ii) either:
-12-
6091.BURNHAM.1106.08:1
<PAGE>
"(a) the chosen state has no substantial relationship
to the parties or the transaction and there is no other
reasonable basis for the parties' choice; or
"(b) application of the law of the chosen state would
be contrary to a fundamental policy of a state which
has a materially greater interest than the chosen state
in the determination of the particular issue and which,
under the rule of Section 188, would be the state of
the applicable law in the absence of an effective
choice of law by the parties."
We believe that the State of New York has a "substantial
relationship" to the parties or the transaction with respect to the
documents covered by the opinion in this Section 9 and that with respect
to such documents there is a reasonable basis for the choice of law of
the State of New York because at least one of the parties to such
documents is located in the State of New York and such documents have
been substantially negotiated within and from the State of New York and
have been executed and delivered within the State of New York. Thus, the
effectiveness of the choice of law provisions in these documents will
depend upon whether, as to the particular issue in question, (i) there
would be a difference in the applicable substantive law of the State of
New York, on the one hand, and the law of the State of Arizona or
another state1 on the other hand, (ii) the resolution of such issue
under the law of the State of New York would be contrary to a
fundamental policy of the State of Arizona or such other state, (iii)
the State of Arizona or such other state would have a materially greater
interest than the State of New York in the determination of the
particular issue and (iv) under Section 188 of the Restatement (Second)
Conflict of Laws, the law of the State of Arizona or such other state
would be the applicable law.
(11) Assuming an Arizona court were not to give effect to the
choice of law provision in the Facility Lease in favor of the law of the
State of New York and were to apply the law of the State of Arizona
-13-
6091.BURNHAM.1106.08:1
<PAGE>
(other than choice of law rules), the Facility Lease is the legal,
valid, and binding obligation of Lessee and is duly enforceable against
Lessee in accordance with its terms:
(a) Except as limited by applicable bankruptcy,
insolvency, moratorium, reorganization, and similar laws of
general application;
(b) Except as limited by equitable principles of
general application; and
(c) Except as limited by other applicable laws or
general principles of law that may render unenforceable certain
provisions of the Facility Lease, provided, however, that (i) if
Owner Trustee does not violate its obligations under the
Facility Lease (including, without limitation, the covenant of
quiet enjoyment), such limitations will not interfere with the
enforcement by Owner Trustee of the obligations of Lessee to pay
Basic Rent as provided in Section 3(a) of the Facility Lease as
the payments of Basic Rent become due on each Basic Rent Payment
Date prior to termination of the Facility Lease and without
acceleration or advancement thereof and (ii) Owner Trustee may
obtain the return of the Undivided Interest and the Real
Property interest upon termination or expiration of the Facility
Lease, except in the case of each of (i) and (ii) for the
economic consequences of any procedural delays that may result
from such limitations.
Anything in this opinion to the contrary notwithstanding, we
express no opinion concerning (i) the ownership of, or legal or equitable title
to, any property, (ii) whether the property described and referred to in the
Transaction Documents is personal property or real property or whether any
severance or other provision in the Transaction Documents purporting to make
certain property personal property is effective, or (iii) the priority of the
interest of any person in any property or interest in property.
-14-
6091.BURNHAM.1106.08:1
<PAGE>
The above opinions are limited to the laws of the State of
Arizona as in effect on the date of this opinion and we express no opinion as to
the applicability or effect of federal law, except as set forth in Section 6 of
this opinion and as federal law is in effect on the date of this opinion, or the
law of any state other than Arizona. This opinion is rendered to you solely in
connection with the transactions described in and contemplated by the
Transactions Documents. This opinion is not to be referred to, or quoted in, any
document, report, or financial statement or filed with, or delivered to, any
governmental entity or other person or entity, without our prior written
consent.
Very truly yours,
-15-
6091.BURNHAM.1106.08:1
<PAGE>
SCHEDULE
Burnham Leasing Corporation,
as Owner Participant
60 Broad Street
New York, New York 10004
Attention: Assistant Treasurer
First PV Funding Corporation,
as Loan Participant
Corporate Trust Center
1209 Orange Street
Wilmington, Delaware 19801
Public Service Company of New Mexico,
as Lessee
Alvarado Square
Albuquerque, New Mexico 87158
The First National Bank of Boston,
as Owner Trustee
100 Federal Street
Boston, Massachusetts 02110
Chemical Bank,
as Indenture Trustee and Collateral Trust Trustee
55 Water Street
New York, New York 10041
Mudge Rose Guthrie Alexander & Ferdon
180 Maiden Lane
New York, New York 10038
Keleher & McLeod, P.A.
414 Silver Avenue, SW.
Albuquerque, New Mexico 87102
The Chase Manhattan Bank (National Association)
1 Chase Manhattan Plaza
New York, New York 10081
Chemical Bank
277 Park-Avenue
New York, New York 10172
6091.BURNHAM.1106.08:l
<PAGE>
Bank of America National Trust &
Savings Association
555 South Flower Street
Utilities No. 5164
Los Angeles, California 90071
Mellon Bank, N.A.
555 South Flower Street
Suite 4070
Los Angeles, California 90071
-2-
6091.BURNHAM.1106.08:l
<PAGE>
EXHIBIT A
PUBLIC SERVICE COMPANY OF NEW MEXICO, a New Mexico corporation
(the "Lessee"), hereby certifies the following to Snell & Wilmer in connection
with their giving a legal opinion ("Legal Opinion") with respect to the sale and
lease-back transaction that is the subject matter of the Participation Agreement
("Participation Agreement"), dated as of August 12, 1986, among Burnham Leasing
Corporation, a New York corporation, as Owner Participant, FIRST PV FUNDING
CORPORATION, The First National Bank of Boston (in its individual capacity and
as Owner Trustee), Chemical Bank (in its individual capacity and as Indenture
Trustee), and Lessee (all capitalized terms used herein and not otherwise
defined herein will have the meanings ascribed to them in the Legal Opinion):
(1) The relationship of Lessee and Owner Trustee in respect of
each of the following Transaction Documents intended, agreed to, and
understood by Lessee, Owner Trustee, and each other party to any of the
Transaction Documents is as follows:
(a) The relationship of Lessee and Owner Trustee in respect of
the Deed, the Deed and Bill of Sale, the Deed and Assignment
of Beneficial Interest, and the Assignment and Assumption is
one of seller and purchaser, respectively; and
(b) The relationship of Owner Trustee and Lessee in respect of
the Facility Lease is one of lessor and lessee,
respectively.
(2) Each and all of the operative provisions of the Transactions
Documents, in general, and the following basic aspects of the
transaction described in and contemplated by the Transaction Documents,
in particular, are intended, agreed to, and understood by each and all
of Lessee, Owner Trustee, Owner Participant, and each other party to any
of the Transaction Documents:
6091.BURNHAM.1106.08:1
<PAGE>
(a) The Deed, the Deed and Bill of Sale, the Deed and Assignment
of Beneficial Interest and the Assignment and Assumption are
absolute, unconditional and indefeasible transfers of the
property and interests in property described therein;
(b) The Undivided Interest is leased back by Owner Trustee to
Lessee for an extendable term as provided in the Facility
Lease, subject to the early termination and other provisions
of the Facility Lease;
(c) Lessee's obligation to pay rent under the Facility Lease is
absolute and unconditional as set forth in Section 4 of the
Facility Lease; and
(d) The property and interests in property transferred by Lessee
to Owner Trustee by the Deed, the Deed and Bill of Sale, the
Deed and Assignment of Beneficial Interest and the
Assignment and Assumption are to be owned by Owner Trustee
upon expiration or earlier termination of the Facility Lease
without further consideration passing from Owner Trustee to
Lessee.
(3) The Transaction Documents are an accurate and complete
statement of the agreements, arrangements and understandings of the
parties thereto with respect to the transaction described in and
contemplated by the Transaction Documents.
(4) From the first contact of Lessee, Owner Participant and each
other party to any Transaction Document and continuing through all
discussions and negotiations among the parties to the Transaction
-2-
6091.BURNHAM.1106.08:1
<PAGE>
Documents, the transaction described in and contemplated by the
Transaction Documents has been intended and understood by Lessee, Owner
Participant, and each other such party to be a sale and lease-back
transaction.
IN WITNESS WHEREOF, Lessee has caused this Certificate to be
executed on its behalf by its duly authorized officer as of August 18, 1986.
PUBLIC SERVICE COMPANY OF NEW MEXICO,
a New Mexico corporation
By: ______________________
J.E. Sterba
Vice President,
Revenue Management
-3-
6091.BURNHAM.1106.08:1
<PAGE>
SCHEDULE 11
[Letterhead of Newman & Holtzinger, P.C.]
August 18, 1986
To Each Person Listed on The Attached Schedule
SALE AND LEASEBACK OF AN UNDIVIDED INTEREST
IN PALO VERDE NUCLEAR GENERATING STATION UNIT 2
AND CERTAIN COMMON FACILITIES
Dear Sirs:
We have acted as Special FERC counsel for Public Service Company
of New Mexico, a New Mexico corporation (PNM) in connection with the
transactions contemplated by the Participation Agreement, dated as of August 12,
1986 (the Participation Agreement), among Burnham Leasing Corporation, a New
York corporation (the Owner Participant), The First National Bank of Boston, a
national banking association, individually and as Owner Trustee, First PV
Funding Corporation, a Delaware corporation, Chemical Bank, a New York banking
corporation, as Indenture Trustee and PNM. All capitalized terms used herein and
not otherwise defined shall have the meanings set forth in Appendix A to the
Participation Agreement. This opinion is being delivered pursuant to Section
11(a)(23) of the Participation Agreement.
As such counsel we have examined originals or copies, certified
or otherwise identified to our satisfaction, of all corporate records,
agreements and other instruments, certificates, opinions and correspondence with
public officials, certificates of officers and representatives of PNM, and other
documents as we have deemed necessary or advisable for the purposes of rendering
the opinions set forth herein.
6091.BURNHAM.1106.08:1
<PAGE>
As to matters of fact relevant to our opinion, we have relied
upon the representations of the parties as set forth in the Participation
Agreement, including the supporting documentation related thereto and PNM's
October 18, 1985 petition to the FERC for an order (1) disclaiming jurisdiction
over its proposed sale and leaseback of a portion of its interest in Unit 1 of
the Palo Verde Nuclear Generating Station, (2) disclaiming jurisdiction over the
Equity Investors and Lessors of such interest, and (3) determining that the
Owner Participants and Lessors would not become public utilities as defined in
Section 201(e) of the Federal Power Act, 16 U.S.C. 824(e) (1982) solely by
reason of their participation in the proposed sale and leaseback arrangements.
We have also relied upon the requested FERC Order Disclaiming Jurisdiction
issued on December 5, 1985.
Based on the foregoing, we are of the opinion that:
(a) So long as the Lease shall be in effect, neither
the Owner Participant nor the Owner Trustee will be or become a
"public utility" within the meaning of Section 201(e) of the
Federal Power Act, 16 U.S.C. 824(e) (1982), solely by reason of
its participation in the transactions contemplated by the
Participation Agreement; and
(b) PNM does not require authorization pursuant to
Section 203(a) of the Federal Power Act, 16 U.S.C. ss.824b(a)
(1982), to sell the interest contemplated by the Participation
Agreement to the Trust in accordance with the terms and
conditions set forth in the Participation Agreement.
There are no court cases on point with respect to our opinion
expressed in paragraph (a). However, the FERC and its predecessor have
consistently found that it would be inconsistent with the intent of the Federal
Power Act for it to find that investors or trustees participating in financing
transactions similar to those contemplated by the Participation Agreement would
be public utilities under Section 201(e) of the Federal Power Act, 16 U.S.C.
-2-
6091.BURNHAM.1106.08:1
<PAGE>
824(e) (1982) solely by reason of such participation, a finding in which we
concur. The FERC previously made such a finding with respect to PNM's sale of a
part of its ownership interest in Palo Verde Nuclear Generating Station Unit 1
in its December 5, 1985 order. The most recent FERC order containing such a
finding related to El Paso Electric Company's proposed sale of all or a portion
of its ownership interest in Palo Verde Nuclear Generating Station Unit 2.
We express no opinion as to the status of' the Owner Participant
or the Owner Trustee upon termination of the Lease, the occurrence of an Event
of Default, or the occurrence of any circumstance or event whereby the Owner
Trustee or the Owner Participant may be in possession of, or control the
operation of, the Undivided Interest or any interest therein. We also express no
opinion as to any other aspects of the transactions contemplated by the
Participation Agreement that are governed by any statute other than the Federal
Power Act.
Very truly yours,
-3-
6091.BURNHAM.1106.08:1
<PAGE>
SCHEDULE
Burnham Leasing Corporation,
as Owner Participant
60 Broad Street
New York, New York 10004
Attention: Assistant Treasurer
Public Service Company of New Mexico,
as Lessee
Alvarado Square
Albuquerque, New Mexico 87158
The First National Bank of Boston, as Owner Trustee
100 Federal Street
Boston, Massachusetts 02110
Chemical Bank,
as Indenture Trustee and Collateral Trust Trustee
55 Water Street
New York, New York 10041
First PV Funding Corporation,
as Loan Participant
Corporate Trust Center
1209 Orange Street
Wilmington, Delaware 19801
Mudge Rose Guthrie Alexander & Ferdon
180 Maiden Lane
New York, New York 10038
Keleher & McLeod, P.A.
414 Silver Avenue, S.W.
Albuquerque, New Mexico 87102
The Chase Manhattan Bank (National Association)
The Chase Manhattan Bank
(National Association)
Chemical Bank
277 Park Avenue
New York, New York 10172
6091.BURNHAM.1106.08:1
<PAGE>
Bank of America National Trust &
Savings Association
555 South Flower Street
Utilities No. 5164
Los Angeles, California 90671
Mellon Bank, N.A.
555 South Flower Street
Suite 4070
Los Angeles, California 90071
-2-
6091.BURNHAM.1106.08:1
<PAGE>
SCHEDULE 12
(Letterhead of Meyer, Hendricks, Victor, Osborn &
Maledon]
August 18, 1986
To Each Person Listed on The Attached Schedule
SALE AND LEASEBACK 0F AN UNDIVIDED INTEREST IN
PALO VERDE NUCLEAR GENERATING STATION UNIT 2
AND CERTAIN COMMON FACILITIES
Dear Sirs:
We have acted as special Arizona counsel for Burnham Leasing
Corporation, a New York corporation (the Owner Participant, in connection with
the transactions contemplated by the Participation Agreement, dated as of August
12, 1986 (the Participation Agreement), among Public Service Company of New
Mexico, a New Mexico corporation (PNM), The First National Bank of Boston, a
national banking association (FNB), individually and as Owner Trustee (the Owner
Trustee), First PV Funding Corporation, a Delaware corporation, Chemical Bank, a
New York banking corporation, as Indenture Trustee, and PNM. All capitalized
terms used herein and not otherwise defined herein shall have the meanings set
forth in Appendix A to the Participation Agreement. This opinion is being
delivered pursuant to Section 11(a) (24) of the Participation Agreement.
As such counsel we have examined originals or copies, certified
or otherwise identified to our satisfaction, of such corporate records,
agreements and other instruments, certificates, orders, opinions, correspondence
with public officials, certificates of officers and representatives of PNM, and
other documents, as we have deemed necessary or advisable for the purposes of
rendering the opinions set forth herein.
6091.BURNHAM.1106.08:1
<PAGE>
Certain facts particularly relevant to our opinion may be
summarized as follows. The proposed transaction contemplates the sale of part of
PNM's undivided 10.2% interest in Unit 2 and certain common facilities (the
Facilities) to the Owner Trustee for the Owner Participant. The Owner Trustee,
will lease the purchased interest in the Facilities back to PNM on a long-term
net lease basis. The purchase of PNM's interest in the Facilities by the Owner
Trustee will be financed in part by a loan made by the Loan Participant and
evidenced by a non-recourse obligation (the Initial Series Note) of the Owner
Trustee.
The Initial Series Note will be issued by FNB under a lease
indenture, for which Chemical Bank will serve as Indenture Trustee. Upon the
closing of the lease indenture, the Initial Series Note will be pledged and
assigned to the Collateral Trust Trustee. The Initial Series Note will not be
secured by the property subject to the Lease, but instead will be secured by an
assignment of the rights of the Owner Trustee, as lessor, to receive rentals and
certain other payments under the Lease with PNM.
First PV Funding Corporation, as the Loan Participant, will
obtain funds for the purchase of the Initial Series Note by borrowing from
commercial banks under a Term Loan Agreement and, in connection therewith, by
the sale of debt securities.
Based on the sale and leaseback transaction as described in this
letter, and as qualified below, we are of the opinion that:
(i) the transaction will not be a fraudulent
conveyance under Arizona law;
(ii) the Trust will not be subject to regulation as a
public service corporation by the Arizona Corporation
Commission, at least unless and until the Trust actually assumes
possession of the Facilities;
(iii) the Conveyance Documents, as identified below,
are sufficient under Arizona law to convey such title as PNM has
in the Facilities; and
-2-
6091.BURNHAM.1106.08: 1
<PAGE>
(iv) Arizona law does not prohibit FNB or Chemical
Bank from serving, respectively, as Owner Trustee or Indenture
Trustee and does not require either bank, based solely on its
involvement in the Palo Verde sale and leaseback, to qualify to
do business in Arizona.
These conclusions are based on our understanding of the sale and
leaseback transaction as stated in this letter and our analysis of authorities
deemed by us to be analogous or otherwise relevant and briefly described in part
below.
1. Fraudulent Conveyance.
We understand that: (i) before the closing of the transaction, an
independent appraisal will confirm that the aggregate purchase price to be paid
for the Facilities is a reasonable estimate of their fair market value, and (ii)
the proposed sale and leaseback as described in the Transaction Documents will
be approved pursuant to a Final Order of the New Mexico Public Utility
Commission (the "Final Order") and (ii;) such transactions will not render PNM
insolvent or otherwise impair its financial condition.
Our review of Arizona statutes and case law has revealed no
authorities that directly address a sale and leaseback and suggest that the
proposed transaction would be prohibited or fraudulent. Moreover, we believe
that the transfer of PNM's interest in PVNGS as contemplated would be for "fair
consideration" within the meaning of Arizona's Fraudulent Conveyance Act and
therefore would not be fraudulent under Ariz. Rev. Stat. Section 44-1004
(conveyance without fair consideration rendering transferor insolvent) ; id.
Section 44-1005 (conveyance without fair consideration leaving transferor in
business with unreasonably small capital); or id. Section 44-1006 (conveyance
without fair consideration by transferor about to incur debts).
Arizona case law indicates that even if a conveyance is for fair
consideration, it may be found fraudulent under Ariz. Rev. Stat. Section 44-1007
if made with actual intent -- as distinguished from an intent presumed at law --
to hinder, delay or defraud creditors. Wallin v. Scottsdale Plumbing Co., Inc.,
27
-3-
609l.BURNHAM.1106.08:1
<PAGE>
Ariz. App. 591, 557 .P.2d 190 (i976). We note that the proposed sale and
leaseback will have been reviewed and approved in at least two public regulatory
hearings. Based on our review of Arizona law and the facts as described, we see
no basis for a successful claim that the transaction involves an actual intent
to defraud PNM's creditors.
Arizona also has a venerable statute that predates statehood and
adoption of the Fraudulent Conveyance Act and provides that:
A sale made by a vendor of goods and chattels in his possession
or under his control, or an assignment of goods and chattels, unless the sale or
assignment is accompanied by an immediate delivery and followed by an actual and
continued change of possession of things sold or assigned, is prima facie
evidence of fraud against creditors of the vendor, or creditors of the person
making the assignment, or subsequent purchasers in good faith. Ariz. Rev. Stat.
Section 44-1061.A.
Our research has not revealed any reported Arizona court
decision in the last fifty years that relies upon this statute. The few old
cases applying the statute make clear that failure of immediate delivery is not
conclusive that a sale was fraudulent. Instead, the statute is held to create a
presumption of fraud that may be overcome by proof that a transfer was made in
good faith and for fair consideration. Nolte v. Winstanley, 16 Ariz. 327, 145 P.
246 (1914); Liebes V. Steffy, 4 Ariz. 11, 32 P. 261 (1893). If the statute
applies to the proposed-sale and leaseback, it would seem relatively easy to
rebut the presumption of fraud under the circumstances.
Moreover, we believe that there are plausible arguments that
Ariz. Rev. Stat. ss. 44-1061.A does not apply to the sale of PNM's interest in
the Facilities. Although Arizona cases provide little guidance on the issue,
such an interest arguably is not "goods and chattels" within the meaning of the
statute. We note in this regard that, even if the interest being transferred is
characterized as involving in part "personal property," Arizona by statute
defines personal property to include interests other than goods and chattels.
Ariz. Rev. Stat. ss. 1-215.25. Thus, even if PNM's interest in PVNGS is not real
property, such interest would not necessarily constitute "goods and chattels."
-4-
6091.BURNHAM.1106.08:l
<PAGE>
The few reported Arizona cases applying Ariz. Rev. Stat.
ss.44-1061.A also do not foreclose an argument that "delivery" will in fact be
made under the circumstances of the transaction. We note in this regard that
ownership of PVNGS is governed by the ANPP Participation Agreement, which
provides that Arizona Public Service Company is authorized to act as agent for
the owners of PVNGS, and has responsibility and control over construction,
operation, and maintenance of PVNGS.
Gant v. Broadway, 2 Ariz. 315, 15 P. 862 (1887), which
considered a predecessor statute to Ariz. Rev, Stat. ss. 44-1061.A, states that
the acts which constitute delivery will depend upon the character of the
property sold and the circumstances of each particular case. More specifically,
Gant approved a jury instruction indicating that where property remains in
possession of a third party, "delivery" can in some circumstances take place
when the vendor, purchaser, and third party agree that the goods shall be
subsequently held for the purchaser. Whether Gant would guide an Arizona court
in applying Ariz. Rev. Stat. ss.44-1061.A is unclear, because the statute
considered in that case differs textually from the current statute, i.e. ~ the
earlier statute provided for a conclusive presumption of fraud and did not refer
to assignment, and later cases apparently have not discussed Gant.
Based on Gant, one could argued that any required "delivery"
will occur with respect to the transfer of PNM's undivided interest in the
Facilities because of the unusual nature of the property transferred, the fact
that the transaction will have been subjected to prior review and approval in
public regulatory hearings, and the seemingly indisputable point that the
transaction simply does not involve the sort of surreptitious transfer that the
statute intends to reach. Whether Arizona courts would be receptive to such an
argument is difficult to predict, given the paucity of cases applying Ariz. Rev.
Stat. Section 44-1061.A.
-5-
6091.BURNHAM.1106.08:1
<PAGE>
2. Arizona Utility Regulation.
Based on our review of the Participation Agreement, other
Transaction Documents, and the ANPP Participation Agreement, as amended, we do
not believe that the Trust will become subject to Arizona utility
Section 40-284.A of the Ariz. Rev. Stat. prohibits a foreign
corporation from transacting "public service business" in Arizona unless
authorized to do so. Moreover, Ariz. Rev. Stat. ss. 40-284.B prohibits a
"license, permit or franchise to own, control, operate or manage any
public service business [from being) granted or transferred, directly or
indirectly, to any foreign corporation not lawfully transacting within
this state a public service business of like character."
Violation of the provisions regulating a foreign corporation with regard to
transacting a public service business can result in criminal and civil
liability.
Arizona law indicates that the provisions of Ariz. Rev. Stat. ~
40-284 will not apply to the Trust as a result of the proposed sale and
leaseback because PNM is not a public service corporation, nor is it currently
transacting "public service business" within Arizona (for which conclusions we
rely on the opinion of Snell & Wilmer of even date) and the Trust will not,
during the term of the Facility Lease, transact such business in this state.
The Arizona Constitution defines public service corporations to
include corporations "furnishing electricity for light, fuel or power" without
expressly indicating whether the electricity must be provided to the public in
Arizona. The constitutional provision empowering the Arizona Corporation
Commission to regulate rates and charges of public service corporations extends
that power only to services rendered to the public in Arizona. Arizona statutes
and case law conform to this limitation.
-6-
6091.BURNHAM.1106.08:1
<PAGE>
Because PNM is not now operating as a public service corporation
in Arizona in connection with its interest in PVNGS under the ANPP Participation
Agreement and in any event will retain control, at least until default or other
termination of the Facility Lease, of its Arizona business, we believe that the
proposed sale and leaseback will not violate Ariz. Rev. Stat. Section 40-284.
Moreover, because the Trust will not furnish electricity for sale to the public
in Arizona during the term of the Facility Lease, we believe that the Owner
Trustee and the Owner Participant will not be subject to regulation as public
service corporations by the Arizona Corporation Commission. If the Owner Trustee
did take possession, depending upon the manner and then current structure of the
ANPP Participation Agreement, it is possible that the Trust could then become a
public service corporation subject to regulation by the Corporation Commission.
3. Sufficiency of the Documents to Convey Title.
Subject to the assumptions, exceptions and qualifications
expressed below, we are of the opinion that the Deed, the Deed and Bill of Sale,
and the Deed and Assignment of Beneficial Interest (all of the above instruments
being collectively referred to herein as the "Conveyance Documents") of even
date herewith executed in connection with the transaction, each of which names
PNM as grantor and FNB in its capacity as Owner Trustee as grantee, are
sufficient under Arizona law to convey to FNB as Owner Trustee all of the right,
title and interest of PNM in and to the real and personal property constituting
the Facilities and as identified in the Conveyance Documents.
Our opinion is subject to the following assumptions, exceptions
and qualifications. We assume that each of the Conveyance Documents has been:
duly authorized and executed by appropriate action of each of the parties
thereto; duly delivered by PNM; and filed or recorded in the appropriate public
records. We express no opinion as to the condition of title or concerning the
nature or existence of the interest of PNM in the real and personal property
constituting the Facilities and as identified in the Conveyance Documents. We
note that the Conveyance Documents do not convey any portion of PNM's interest
in certain common facilities of PVNGS, certain ANPP Project Agreements, and the
-7-
6091.BURNHAM.1106.08:1
<PAGE>
Unit 2 Retained Assets, and certain warranties related to the Facilities.
Finally, we are assuming that an appropriate amendment of the trust disclosure
affidavit relating to Title USA Trust No. 530 will be recorded under Ariz. Rev.
Stat. ss. 33-401 with respect to the transfer under the Deed and Assignment of
Beneficial Interest.
4. Activities of the Owner Trustee and the Indenture Trustee.
Our research has revealed no Arizona statute or case law that
would prohibit FNB or Chemical Bank from serving, respectively, as Owner Trustee
or Indenture Trustee in the proposed transaction merely because of its status as
an out-of-state bank. Moreover, we do not believe that either bank will be
required, solely as result of its participation in the sale and leaseback
transaction, to qualify to do business in Arizona.
Our conclusion in this regard is qualified as follows. First, we
understand that the Trust for which FNB will serve as trustee and the indenture
trust for which Chemical Bank will serve as trustee will be formed exclusively
for the purpose of the lease financing of the Palo Verde transaction. Second,
the Owner Participant has informed us and we assume, that the Owner Participant
has no interest in property located in Arizona except its beneficial interest as
Owner Participant in the assets held by the Trust and that the Owner Participant
engages in no business or other activities within this state, except the
activities contemplated by the Participation Agreement. Third, FNB and Chemical
Bank have participated previously in four sale and leaseback transactions
substantially similar to that contemplated by the Participation Agreement and
may participate in a limited number of substantially similar transactions in the
future with respect to interests in PVNGS. Fourth, we do not offer any opinion
whether activities of Chemical Bank or FNB within this state not described in
this letter would require either bank to qualify to do business in this state
when considered along with participation in the Palo Verde sale and leaseback.
Finally, we do not offer any opinion whether qualification would be necessary if
the Owner Participant or either bank, in its capacity as trustee, assumed actual
possession of any portion of PVNGS upon default by PNM or upon other termination
of the Facility proposed sale and leaseback and the property is located in
Arizona.
-8-
6091.BURNHAM.1106.08:l
<PAGE>
Apart from the case law described above, Ariz. Rev. Stat. ss.
l0-106.B provides that, "(without excluding other activities which may not
constitute transacting business in this state, foreign corporations shall not be
considered to be transacting business by reason of carrying on in this state any
one or more of the following activities." The specified activities include
"(creating as a borrower or lender, or acquiring, indebtedness, mortgages or
other security interests in real or personal property, "id. ss. 44-106.B.7, and
"[s]ecuring or collecting debts or enforcing any rights in property securing the
same," Id. ss. 44-106.B.8.
Our research has revealed no reported Arizona cases that apply
the statutory provisions described in the preceding paragraph in circumstances
that are directly on point with respect to the proposed sale and leaseback. At
the same time, we note that Arizona case law does pot suggest the statutory
provisions will be applied other than in accord with their plain language. That
language, we believe, indicates that certain actions by FNB and Chemical Bank
will not constitute transacting business within Arizona.
The statutory provisions indicate that FNB will not be transacting
business in the state by virtue of its issuance of the Initial Series Note
secured by assignment of the lease payments because this action, even if deemed
to be carried on in Arizona, involves the creation as a borrower of indebtedness
or other security interests in real or personal property. We note in this regard
that Arizona case law indicates that the right to future payments under a real
property lease is an incorporeal hereditament that constitutes and interest in
land. Valley National Bank v. Avco Development Co., 14 Ariz. App. 56, 480 P.2d
671 (1971).
The statutory provisions also suggest that Chemical Bank, as
Collateral Trust Trustee, will not be transacting business within Arizona by
virtue of its acceptance of the Initial Series Note or its receipt of the
assigned rental payments because these actions constitute securing or collecting
debts or enforcing any rights in property securing the same.
-11-
6091.BURNHAM.1106.08:l
<PAGE>
Assets, and certain warranties related to the Facilities. Finally, we are
assuming that an appropriate amendment of the trust disclosure affidavit
relating to Title USA Trust No. 530 will be recorded under Ariz. Rev. Stat. ~
33-401 with respect to the transfer under the Deed and Assignment of Beneficial
Interest.
4. Activities of the Owner Trustee and the Indenture Trustee.
Our research has revealed no Arizona statute or case law that
would prohibit FNB or Chemical Bank from serving, respectively, as Owner Trustee
or Indenture Trustee in the proposed transaction merely because of its status as
an out-of-state bank. Moreover, we do not believe that either bank will be
required, solely as result of its participation in the sale and leaseback
transaction, to qualify to do business in Arizona.
Our conclusion in this regard is qualified as follows. First, we
understand that the Trust for which FNB will serve as trustee and the indenture
trust for which Chemical Bank will serve as trustee will be formed exclusively
for the purpose of the lease financing of the Palo Verde transaction. Second,
the Owner Participant has informed us and we assume, that the Owner Participant
has no interest in property located in Arizona except its beneficial interest as
Owner Participant in the assets held by the Trust and that the Owner Participant
engages in no business or other activities within this state, except the
activities contemplated by the Participation Agreement. Third, FNB and Chemical
Bank have participated previously in four sale and leaseback transactions
substantially similar to that contemplated by the Participation Agreement and
may participate in a limited number of substantially similar transactions in the
future with respect to interests in PVNGS. Fourth, we do not offer any opinion
whether activities of Chemical Bank or FNB within this state not described in
this letter would require either bank to qualify to do business in this state
when considered along with participation in the Palo Verde sale and leaseback.
Finally, we do not offer any opinion whether qualification would be necessary if
the Owner Participant or either bank, in its capacity as trustee, assumed actual
possession of any portion of PVNGS upon default by PNM or upon other termination
of the Facility.
-8-
6091.BURNHAM.1106.08:1
<PAGE>
The opinion stated in this letter is limited to matters of
Arizona law and federal laws of general applicability as they exist on this
date.
We have not been asked to, and we expressly do not, render any
opinion pertaining to any matter not specifically set forth herein.
This opinion is being delivered to you solely for your use in
connection with the proposed sale and leaseback contemplated by the Transaction
Documents. This opinion may not be used or relied upon by you for any other
purpose and may not be relied upon for any purpose by any person or entity other
than you; provided, however, that your respective counsel may rely upon this
opinion, but only to the extent that any opinion given by them in connection
with the transactions contemplated by the Transaction Documents may concern
matters of Arizona law. Except for the use permitted herein, this opinion is not
to be quoted or reproduced in whole or in part or otherwise issued, circulated
or referred to in any manner, nor is it to be filed with any governmental agency
or delivered to any other person without our prior written consent.
Very truly yours,
-12-
6091.BURNHAM.1106.08:l
<PAGE>
SCHEDULE
Burnham Leasing Corporation,
as Owner Participant
60 Broad Street
New York, New York 10004
Attention: Assistant Treasurer
The First National Bank of Boston, as Owner Trustee
100 Federal Street
Boston, Massachusetts 02110
Chemical Bank,
as Indenture Trustee
55 Water Street
New York, New York 10041
Public Service Company of New Mexico, as Lessee
Alvarado Square
Albuquerque, New Mexico 87158
First PV Funding Corporation, as Loan Participant
Corporate Trust Center
1209 Orange Street
Wilmington, Delaware 19801
-13-
6091.BURNHAM.1106.08:1
<PAGE>
SCHEDULE 13
[Letterhead of Rodey, Dickason, Sloan, Akin & Robb, P.A]
August 18, 1986
To Each Person Listed on
The Attached Schedule
SALE AND LEASEBACK OF AN UNDIVIDED INTEEEST IN
PALO VERDE NUCLEAR GENERATING STATION UNIT 2
AND CERTAIN COMMON FACILITIES
Dear Sirs:
We have acted as special New Mexico counsel for Burnham Leasing
Corporation, a New York corporation (the Owner Participant), in connection with
the transactions contemplated by the Participation Agreement, dated as of August
12, 1986, (the Participation Agreement), among the Owner Participant, The First
National Bank of Boston, a national banking association, individually and as
Owner Trustee, First PV Funding Corporation, a Delaware corporation, Chemical
Bank, a New York banking corporation, as Indenture Trustee and Public Service
Company of New Mexico, a New Mexico corporation (PNM). All capitalized terms
used herein and not otherwise defined herein shall have the meanings set forth
in Appendix A to the Participation Agreement. This opinion is being delivered
pursuant to Section 11(a)(25) of the Participation Agreement.
As such counsel we have examined originals or copies, certified
or otherwise identified to our satisfaction, of such corporate records,
agreements and other instruments, certificates, orders, opinions, correspondence
with public officials, certificates of officers and representatives of PNM, and
other documents, as we have deemed necessary or advisable for the purposes of
rendering the opinions set forth herein.
Based on the foregoing, we are of the opinion that :under New
Mexico Applicable Law now in effect:
6091.BURNHAM.1106.08:l
<PAGE>
(1) Each Transaction Document to which PNM is a party, assuming
the due authorization, execution and delivery thereof by each party
thereto, constitutes the legal, valid and binding obligation of PNM,
enforceable against PNM in accordance with its terms
(2) Neither the execution, delivery or performance by PNM of any
Transaction Document to which it is a party, nor the consummation by PNM
of the transactions contemplated thereby, nor the compliance by PNM with
the provision thereof, conflicts with or results in a breach of any
Applicable Law of any state, county, municipal, regional or other
governmental authority, agency, board, body, instrumentality or court of
New Mexico ("New Mexico Governmental Authority").
(3) No Governmental Action of or with any New Mexico
Governmental Authority is required in connection with the execution,
delivery or performance by PNM of, or the consummation by PNM of the
transaction contemplated by, any Transaction Document to which PNM is a
party, except the New Mexico Order, which has been duly issued by the
NMPSC, and such other New Mexico Governmental Actions (i) as have been
duly obtained, given or accomplished, and (ii) as may be required to be
obtained, given or accomplished from time to time after the date hereof
in connection with the maintenance, use, possession or operation of Unit
2 or otherwise with respect to Unit 2 and PNM's involvement therewith
and which are, for PVNGS, routine in nature and which we have no reason
to believe will not be timely obtained.
(4) Assuming that all filings required to be made in other
jurisdictions have been duly made, upon (a) the filing of UCC-l
financing statements in appropriate form relating to the Indenture and
the Collateral Trust Indenture with the Secretary of State of New Mexico
and the County Clerk of Bernalillo County, New Mexico and the filing of
the Indenture and the Collateral Trust Indenture with the Secretary of
State of New Mexico pursuant to the New Mexico Public Utility Act, (b)
the delivery of the Original of the Facility Lease to, and so long as
the same is retained by, the Indenture Trustee, and (c) the delivery of
the Pledge Lessor Notes (as defined in the Collateral Trust Indenture)
-2-
6091.BURNHAM.1106.08:1
<PAGE>
to, and so long as the same are retained by, the Collateral Trust
Trustee, the Indenture Trustee will have a perfected UCC security
interest in the Lease Indenture Estate pursuant to, and to the extent
provided in, the Indenture, and the Collateral Trust Trustee will have a
perfected UCC security interest in the Pledged Property (as defined in
the Collateral Trust Indenture), pursuant to, and to the extent provided
in, the Collateral Trust Indenture, and no filing or recording of any
document (except those enumerated above and the filing of continuation
statements in appropriate form with respect to the UCC-l financing
statements referred to above at the time and in the matter provided
under the laws of New Mexico) will be necessary or appropriate under the
laws of New Mexico to establish, preserve, protect and perfect the
security interests referred to above.
(5) So long as the Facility Lease is in effect, and in reliance
upon the New Mexico Order, neither the Owner Trustee, the Owner
Participant, nor the Indenture Trustee, will, by reason either of its
entering into any Transaction Document or its performance of any
transaction contemplated thereby, be subject to regulation as an
"electric utility," a "public utility," or a "public utility holding
company" by the NMPSC or any other New Mexico Governmental Authority.
(6) Neither the Owner Trustee nor the Indenture Trustee is
required to qualify to do business in New Mexico in order to serve in
such capacity.
(7) No New Mexico Tax will be imposed upon payments of Rent by
PNM to the Owner Trustee under the Facility Lease or in connection with
the transfer of the Undivided Interest or the Real Property Interest by
PNM to the Owner Trustee.
The opinions expressed herein are subject in each> case (a) as
to enforceability, to bankruptcy, insolvency, reorganization, moratorium and
other similar laws heretofore or hereafter enacted affecting creditors' or
lessors' rights generally, general principles of equity, and the availability of
specific performance and other equitable remedies, (b) to the qualification that
-3-
6091.BURNHAM.1106.08:l
<PAGE>
any provision in the Transaction Documents which purports to permit any Person
to make determinations, take actions or require payments under indemnity and
similar provisions may be subject to requirements that such determinations be
made, such actions be taken and such payments required on a reasonable basis and
in good faith, (c) to possible limitations upon the exercise of certain
indemnity, remedial or procedural provisions contained in the Transaction
Documents, which limitations do not in our opinion make such indemnity, remedial
or procedural provisions, taken as a whole, inadequate for the practical
realization of the benefits provided by the Transaction Documents, (d) as to the
perfection of UCC security interests in proceeds, to the qualification that such
perfection is limited to the degree set forth in Section 9-306 of the UCC, and
(e) as to the perfection of UCC security interests in money, to the
qualification that such perfection is limited to money in the possession of the
secured party.
For purposes of this opinion we have assumed that the Owner
Participant and the Lessor will exercise their rights, and that PNM will perform
its obligations, under Section 13(c) of the Facility Lease if it becomes
necessary to do so to remain in compliance with the New Mexico Order. We have
further assumed that no Lease Transaction (as that term is used in the New
Mexico Order) entered into by PNM subsequent to the date hereof will result in a
violation of the New Mexico Order.
We do not purport to be experts in the laws of any jurisdictions
other than New Mexico and the United States. The opinions expressed herein
relate only to the existing laws of New Mexico, and we express no opinion with
respect to the laws of the United States or any jurisdiction other than New
Mexico. Our opinions do not cover any matter relating to the "blue sky" or
securities laws of New Mexico or any other jurisdiction.
Yours very truly,
RODEY, DICKASON, SLOAN, AKIN & ROBS, P.A.
-4-
6091.BURNHAM.1106.08:1
<PAGE>
Exhibit A
to
Participation Agreement
BILL OF SALE AND ASSIGNMENT
================================================================================
BILL OF SALE AND ASSIGNMENT
dated as of __________, 19
from
[BURNHAM LEASING CORPORATION]
to
PUBLIC SERVICE COMPANY OF NEW MEXICO
================================================================================
6091.BURNHAM.1106.27:1
<PAGE>
BILL OF SALE AND ASSIGNMENT, dated as of ________ 19__, from
[BURNHAM LEASING CORPORATION3, a [New York corporation (the Owner Participant),
to PUBLIC SERVICE COMPANY OF NEW MEXICO, a New Mexico corporation (PNM)
W I T N E S S E T H:
WHEREAS, pursuant to Section 7(b)(4) of the Participation
Agreement dated as of August 12, 1986 among the Owner Participant, First PV
Funding Corporation, as Loan Participant, The First National Bank of Boston, in
its individual capacity and as Owner Trustee, Chemical Bank, in its individual
capacity and as Indenture Trustee and PNM, as, Lessee, (the Participation
Agreement), the Owner Participant desires to sell and PNM desires to buy the
Assigned Property (as hereinafter defined);
NOW, THEREFORE, in consideration of the premises and of other
good and valuable consideration, receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. For purposes hereof, capitalized terms used herein
shall have the meanings assigned to such terms in the Participation Agreement.
References in this Agreement to articles, sections and clauses are to articles,
sections and clauses in this Agreement unless otherwise indicated.
ARTICLE II
ASSIGNMENT OF TRUST ESTATE
SECTION 2.01. Assignment. The Owner Participant does hereby
grant, bargain, convey, sell, assign, transfer and set over to PNM, without
recourse, representation or warranty, express and implied, of any nature
whatsoever (except as set forth in the next succeeding sentence), all of the
Owner Participant's right, title and interest in, to and under the Trust Estate
except the Owner Participant's right to receive Excepted Payments (the Assigned
Property) [subject to the Owner
6091.BURNHAM.1106.27:1
<PAGE>
Participant's security interest in, and general lien upon all of the right,
title, and interest of PNM, as successor Owner Participant in, to and under the
Assigned Property*]. The Owner Participant hereby represents and warrants to PNM
that the Owner Participant has good and valid title to the Assigned Property
free and clear of all Owner Participant's Liens.
[Insert the following provision if the Owner Participant has not
received under Section 5.2 of the Indenture the payments provided for in Section
9(c), 9(d),1(c) or 16 of the Facility Lease, as the case may be:
SECTION 2.02. No Release of PNM Notwithstanding the transfer of
the Assigned Property to PNM pursuant to Section 2.01 hereof, the obligation of
PNM to make the payments as provided in Section [insert applicable section:
9(c), 9(d), 13(c) or 16] of the Facility Lease (together with interest thereon
in accordance with Section 3(b) (iii) of the Facility Lease) (or to make other
payments in a like amount with respect to Basic Rent or Supplemental Rent paid
by application of such payments (and in which the Owner Trustee has thereby
acquired an interest pursuant to Section 5.1 or 5.3 of the Indenture) shall not
be deemed to be cancelled or discharged but shall continue until all such
amounts are so received by PNM, as successor Owner Participant, or by the
transferring Owner Participant pursuant to the provisions of Section 7(b)(4) of
the Participation Agreement.
(Insert following if the Owner Participant has received under
Section 5.2 of the Indenture the payments provided for in Section
9(c),9(d),13(c) or 16 of the Facility Lease, as the case may be:
SECTION 2.03. Acknowledgment. The Owner Participant hereby
acknowledges receipt of $_________ representing payment in full of all amounts
due to the Owner Participant under Section [9(c), 9(d), 13(c) or 16] of the
Facility Lease.]
- - ----------
*To be inserted if on the date of the transfer the Owner Participant
has not received under Section 5.2 of the Indenture the payments provided for in
Section 9(c), 9(d), 13(c) or 16(e) of the Facility Lease, as the case may be.
-2-
6091.BURNHAM.1106.27:l
<PAGE>
ARTICLE III
EFFECTIVENESS OF TRANSFER
SECTION 3.01. Effectiveness of Transfer. The transfer of the
Assigned Property shall become effective without further action upon the
execution and delivery by the Owner Participant to the Lessee of this Bill of
Sale and Assignment and the furnishing of a counterpart of this Bill of Sale and
Assignment to the Owner Trustee.
ARTICLE IV
MISCELLANEOUS
SECTION 4.01. Successors and Assigns. This Bill of Sale and
Assignment shall be binding upon the Owner Participant and its successors and
shall inure to the benefit of PNM and its successors and assigns.
SECTION 4.02. Governing Law. This Bill of Sale and Assignment
shall be governed by and construed and enforced in accordance with the law of
the State of New York.
SECTION.4.03. Headings. The division of this Bill of Sale and
Assignment into sections, and the insertion of headings are for convenience of
reference only and shall not affect the construction or interpretation of this
Bill of Sale and Assignment.
-3-
6091.BURNHAM.1106.27:1
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Bill of Sale
and Assignment to be duly executed as of the day and year written above.
[BURNHAM LEASEING CORPORATION]
By____________________________
Title:
-4-
6091.BURNHAM.1106.27:1
<PAGE>
Exhibit B
to
Participation Agreement
AFFIDAVIT OF TRUSTEE
THE FIRST NATIONAL BANK OF BOSTON,
as Owner Trustee under that
certain Trust Agreement dated as of
August 12, 1986, with
Burnham Leasing Corporation
The undersigned, being a duly authorized representative of The
First National Bank of Boston, a national banking association, as Trustee under
the above-captioned Trust Agreement (the Trust Agreement), does hereby affirm
and acknowledge that The First National Bank of Boston, as Trustee, holds legal
title to certain real (and other) property on behalf of a certain beneficiary,
such property and beneficiary being more particularly described in that certain
Deed recorded August 18, 1986, as instrument No. 86- records of Maricopa County,
Arizona; being further described in that certain Deed and Bill of Sale recorded
August 18, 1986, as instrument No. 86-, records of Maricopa County, Arizona;
being further described in that certain Assignment, Assumption and Further
Agreement recorded August 18, 1986, as instrument No. 86- , records of Maricopa
county, Arizona; and being further described in that certain Deed and Assignment
of Beneficial Interest dated as of August 18, 1986, and that certain related
Third Amended Affidavit of Trustee executed by Title USA Company of Arizona as
Trustee of its Trust No. 530 and recorded August 18, 1986, as instrument No. 86-
, records of Maricopa County, Arizona; the property descriptions and beneficiary
disclosures contained in or incorporated into each of said instruments being
incorporated herein by this reference as if fully set forth herein.
A certain change in ownership of the beneficial interest in the
Trust Agreement has occurred since the recordation of the above-described
6091.BURNHAM.1106.27:1
<PAGE>
instruments. As now reflected in the records of The First National Bank of
Boston, the sole beneficiary of the Trust Agreement is:
Public Service Company of New Mexico
Alvarado Square
Albuquerque, New Mexico 87158
A copy of the Trust Agreement is available for inspection at the
offices of The First National Bank of Boston, 100 Federal Street, Boston,
Massachusetts 02110.
DATED THIS____________ day of _________ _____
THE FIRST NATIONAL BANK OF BOSTON, not in its individual
capacity, but solely as Owner Trustee under the Trust
Agreement dated as of August 12, 1986, with Burnham
Leasing Corporation
By:______________________________
STATE OF __________ )
)SS.
COUNTY OF __________)
The foregoing instrument was acknowledged before me this _____
day of __________, __________, by __________, of FIRST NATIONAL BANK OF BOSTON,
a national banking association, under that certain Trust Agreement dated as of
August 12, 1986 with Burnham Leasing Corporation.
Notary Public
-2-
6091.BURNHAM.l106.27:1
<PAGE>
Appendix A
DEFINITION OF TERMS
The terms defined herein relate to the Participation Agreement
(as defined below) and certain Transaction Documents executed, or to be
executed, in connection with the Participation Agreement. Such terms include the
plural as well as the singular. Any agreement defined or referred to below shall
include each amendment, modification and supplement thereto and waiver thereof
as may become effective from time to time, except where otherwise indicated. Any
term defined below by reference to any agreement shall have such meaning whether
or not such document is in effect. The terms "hereof", "herein", "hereunder" and
comparable terms refer to the entire agreement with respect to which such terms
are used and not to any particular article, section or other subdivision
thereof.
If, and to the extent that, either, the Participation Agreement
or any other Transaction Document which incorporates this Appendix shall be
amended from time to time pursuant to the respective terms thereof, this
Appendix shall be, or be deemed to have been, amended concurrently with the
execution and delivery of each such amendment in. order to conform the
definitions herein to the new or amended definitions set forth in or required by
each such amendment.
Additional Bonds shall mean Bonds in addition to the Initial
Series Bonds.
Additional Equity Investment shall. have the meaning specified
in Section 8(f) of the Facility Lease.
Additional Notes shall have the meaning set forth in the
recitations in the Indenture, which Additional Notes shall be issued, if at all,
pursuant to Section 3.5 of the Indenture.
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. For purposes of this definition, the
6091.BURNHAM.1106.55:l
<PAGE>
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.
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)
computed at the highest marginal statutory tax rate resulting from the receipt
(actual or constructive) of such two payments imposed under any Applicable Law
or by any Governmental Authority, be equal to such payment received or deemed to
have been received.
Agent and Agency Period shall have the respective meanings set
forth in Section 7.01 of the Assignment and Assumption.
ANPP Administrative Committee shall mean the committee
established pursuant to Section 6.1.1 of the ANPP Participation Agreement (or
any comparable successor provision).
ANPP Operating Committee shall mean the committee established
pursuant to Section 6.1.2 of the ANPP Participation Agreement (or any comparable
successor provision).
ANPP Participants shall have the meaning assigned to the word
Participant under the ANPP Participation Agreement.
ANPP Participation Agreement shall mean the Arizona Nuclear
Power Project Participation Agreement, dated as of August 23, l973, among APS,
Salt River, Southern California, PNM, El Paso, LADWP and SCPPA, as heretofore
and hereafter amended pursuant to the terms thereof.
-2-
6091.BURNHAM.1106.55:1
<PAGE>
ANPP Project Agreements shall mean the ANPP Participation
Agreement and the other Project Agreements (as such term is defined in the ANPP
Participation Agreement).
ANPP Switchyard shall mean the ANPP High Voltage Switchyard
located at the PVNGS Site, the owner-ship, construction, operation and
maintenance of which are governed by the ANPP High Voltage Switchyard
Participation Agreement executed as of August 20, 1981 (APS Contract No.
2252-419,00), the parties to which are APS, PNM, Salt River, El Paso1 LADWP and
Southern California.
ANPP Transferee shall have the meaning set forth in Section 4.01
of the Assignment and Assumption.
Applicable law shall mean all applicable laws, statutes,
treaties, rules, codes, ordinances, regulations, permits, certificates, orders,
licenses and permits of any Governmental Authority, interpretations of any of
the foregoing by a Governmental Authority having jurisdiction, and judgments,
decrees, injunctions, writs, orders or like action of any court, arbitrator or
other judicial or quasi judicial tribunal (including those pertaining to health,
safety, the environment or otherwise)
Appraisal Procedure shall mean a procedure whereby two
independent appraisers, one chosen by the Lessee and one by the Lessor, shall
mutually agree upon the value, period or amount (including economic Useful Life)
then the subject of an appraisal. If either the Lessor or the Lessee, as the
case may be, shall determine that a value, period or amount to be determined
(other than fair market value under Section 5(b) of the Facility Lease) under
the Facility Lease or any other Transaction Document cannot be established
promptly by mutual agreement, such party shall appoint its appraiser and deliver
a written notice thereof to the other party. Such other party shall appoint its
appraiser within 15 days after receipt from the other party of the foregoing
written notice. If within 20 days after appointment of the two appraisers, as
described above, the two appraisers are unable to agree upon the value, period
or 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
-3-
6091.BURNHAM.1106.55:1
<PAGE>
first two appraisers fail to agree upon the appointment of a third appraiser
within such period, 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 nuclear electric generating
plant 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
ten days after the selection of such third appraiser. If three appraisers shall
be so appointed and the determination of one appraiser is disparate from the
middle determination by more than twice the amount, period or value by which the
third 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. The
fees and expenses of appraisers incurred in connection with any Appraisal
Procedure relating to any transaction contemplated by any provision of any
Transaction Document shall be divided equally between the Lessor and the Lessee
(except pursuant to Section 16 of the Facility Lease, which shall be paid solely
by the Lessee).
APS shall mean Arizona Public Service Company, an Arizona
corporation.
Arizona Public Utility Act sha11 mean Chapter 2, Title 40,
Arizona Revised Statutes.
Assigned Payments shall have the meaning specified in Section
2.1(1) of the Indenture.
Assignment and Assumption shall mean the Assignment, Assumption
and Further Agreement, dated as of August 12, 1986, between PNM and the Owner
Trustee.
Assignment of Beneficial Interest shall mean the Deed and
Assignment of Beneficial Interest under Title USA Company of Arizona Trust No.
530, dated as of August 18, 1986, from PNM to the Owner Trustee.
-4-
6091.BURNHAM.1106.55:1
<PAGE>
Assumption Agreement shall mean the Assumption Agreement of PNM
substantially in the form of Exhibit B to the Indenture.
Assumptions shall mean the Pricing Assumptions and the Tax
Assumptions.
Atomic Energy Act shall mean the Atomic Energy Act of 1954, as
amended, and regulations from time to time issued published or promulgated
pursuant thereto.
Authorized Officer shall mean, with respect to the Indenture
Trustee, any officer of the Indenture Trustee who shall be duly authorized by
appropriate corporate action to authenticate a Note and shall mean, with respect
to the Owner Trustee, any officer of the Owner Trustee who shall be duly
authorized by appropriate corporate action to execute any Transaction Document.
Bankruptcy Code shall mean the Bankruptcy Reform Act of 1973, as
amended, and any law with respect to bankruptcy, insolvency or reorganization
successor thereto.
Basic Lease Tern shall mean the initial term of the Facility
Lease, which shall begin on the Closing Date and end on January 15, 2016, unless
earlier terminated.
Basic Rent shall have the meaning set forth in Section 3(a) o~
the Facility Lease.
Basic Rent Payment Dates shall mean and include January 15,
1987, and each January 15 and July 15 of each year thereafter through and
including January 15, 2016, and, if the Lessee shall elect the Renewal Term,
each January 15 and July 15 of each year during the Renewal Term, commencing
July 15, 2016 and ending on the last day of the Renewal Term.
Bill of Sale shall mean the Deed and Bill of Sale, dated as of
August 18, 1986, between PNM and the Owner Trustee.
-5-
609l.BURNHAM.1106.55:1
<PAGE>
Bonds shall mean all bonds, notes and other evidences of
indebtedness from time to time issued and outstanding under the Collateral Trust
Indenture, including, but without limitation, the Initial Series Bonds, the
Releveraging Bonds, the Refunding Bonds and any other Additional Bonds.
Business Day shall mean any day other than a Saturday or Sunday
or other day on which banks in Albuquerque, New Mexico, New York, New York or
Boston, Massachusetts are authorized or obligated to be closed.
Capital Improvement shall mean (a) the addition, betterment or
enlargement of any property constituting part of Unit 2 or the Common Facilities
or the replacement of any such property with other property, irrespective of
whether (i) such replacement property constitutes an enlargement or betterment
of the property which it replaces, (ii) the cost of such addition, betterment,
enlargement or replacement is or may be capitalized, or charged to maintenance
or repairs, in accordance with the Uniform System of Accounts or (iii) such
addition, betterment or enlargement is or is not included or reflected in the
plans and specifications for Unit 2 or the Common Facilities, as built, and (b)
any alteration, modification, addition or improvement to Unit 2, other than
original, substitute or replacement parts incorporated into Unit 2 or the Common
Facilities.
Casualty Value, as of any Basic Rent Payment Date, shall mean
the percentage of Facility Cost set forth opposite such date in Schedule I to
the Facility Lease. Casualty Value as of any Basic Rent Payment Date during the
Renewal Term shall mean the unamortized portion as of such Basic Rent Payment
Date of the Fair Market Sales Value of. the Undivided Interest, determined by
the straight-line amortization of such Fair Market Sales Value at the
commencement of the Renewal Term over the period from such commencement date
through the remaining term of the License determined pursuant to the Appraisal
Procedure undertaken in accordance with the last sentence of Section 13(a) of
the Facility Lease. Anything contained in the Participation Agreement or the
Facility Lease to the contrary notwithstanding, Casualty Value shall be, when
added to all other amounts which the Lessee is required to pay under Section
9(c) of the Facility Lease (taking into account any assumption of Notes by the
-6-
6091.BURNHAM.1106.55:l
<PAGE>
Lessee), under any circumstances and in any event, in an amount at least
sufficient to pay in full, as of any Basic Rent Payment Date, the aggregate
unpaid principal amount of all Notes Outstanding at the close of business on
such date, together with accrued and unpaid interest on such Notes.
Change in Tax Law shall mean any change in the Code or successor
legislation enacted by either the Ninety-ninth or the One Hundredth Congress
(other than a change in respect of an alternative minimum tax or an add-on
minimum tax having the same effect as an alternative minimum tax), or if prior
to January 15, 1997 (i) there is enacted any technical correction thereto, or
(ii) there are adopted, promulgated, issued or published any proposed, temporary
or final Regulations resulting therefrom (regardless of the effective date of
such technical corrections or Regulations, but only if such technical
corrections or Regulations would affect Net Economic Return), provided, however,
that a Change in Tax Law shall occur in the event the provision set forth in
Section 1509(b) of H.R. 3838 as passed by the U.S. House of Representatives on
December 17, 1985 and Section 1809(b) of H.R 3838 as passed by the U.S. Senate
on June 24, 1986 shall fail to be enacted into law in the form therein set forth
or, if such provision is so enacted into law, it shall not apply to the Common
Facilities
Chemical Bank shall mean Chemical Bank, a New York banking
corporation.
Chief Financial Officer shall mean the person designated by the
Board of Directors of PNM as the chief financial officer of PNM.
Claims shall mean liabilities, obligations, losses, damages,
penalties, claims (including, without limitation, claims involving liability in
tort, strict or otherwise), actions, suits, judgments, costs, interest, expenses
and disbursements, whether or not any of the foregoing shall be founded or
unfounded (including, without limitation, legal fees and expenses and costs of
investigation) of any kind and nature whatsoever without any limitation as to
amount.
-7-
6091.BURNHAM.1106.55:1
<PAGE>
Closing shall mean the proceedings which are contemplated by
Section 4 of the Participation Agreement.
Closing Date sha1l mean August 8, 1986.
Code shall mean the Internal Revenue Code of 1954, as amended,
or any comparable successor law.
Collateral Trust Indenture shall mean the Collateral Trust
Indenture, dated as of December 16, 1985, among PNM, Funding Corp. and the
Collateral Trust Trustee.
Collateral Trust Indenture Supplement shall mean a supplement to
the Collateral Trust Indenture.
Collateral Trust Trustee shall mean Chemical Bank, not in its
individual capacity, but solely as Collateral Trust Trustee under the Collateral
Trust Indenture, and the successors or assigns of such Trustee.
Common Facilities shall mean all PVNGS common facilities, as set
forth in Item B of Exhibit B to the Bill of Sale, other than common facilities
excluded therefrom in said item B.
Common Facilities Interest shall mean the Owner Trustee's
portion of the Lessee's original 10.2% undivided interest in all Common
Facilities at PVNGS, the percentage of which is set forth in Schedule 2 to the
Participation Agreement.
Coverage Ratio shall mean the fraction (i) denominator of which
shall be the sum (calculated as of a date no earlier than 135 days prior to the
date of calculation) of (x) the interest that will be payable during the
twelve-month period following the date of the transaction with respect to which
a calculation is required to be made on the debt (both long-term and short-term)
of the Surviving Lessee, and (y) the interest portion of payments due during the
twelve-month period following the date of such transaction on lease obligations
of the Surviving Lessee with a term in excess of one year, and (ii) the
numerator of which shall be the sum of (x) the pro forma net earnings (before
taxes and excluding allowance for funds used during construction) of the
Surviving Lessee for a twelve-month period ending no earlier than 135 days prior
to the date of such transaction, and (y) such denominator.
-8-
6091.BURNHAM.1106.55:1
<PAGE>
Cure Option shall have the meaning set forth in Section 16(e) of
the Facility Lease.
Debt shall mean (A) indebtedness for borrowed money, (B)
obligations as lessee under leases and (C) obligations under direct or indirect
guarantees 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 clause (A)
or (B) above, if the principal amount (or equivalent) thereof is greater than
$20,000,000 for any one item of Debt or $30,000,000 in the aggregate for all
items of Debt of the Lessee);
Decommissioning shall mean the decommissioning and retirement
from service of Unit 2, and the related possession, maintenance and disposal of
radioactive material used in or produced incident to the possession and
operation of Unit 2, including, without limitation, (i) placement and
maintenance of Unit 2 in a state of protective storage, (ii) in-place entombment
and maintenance of Unit 2, (iii) dismantlement of Unit 2, (iv) any other form of
decommissioning and retirement from service required by or acceptable to the NRC
and (v) all activities undertaken incident to the implementation thereof and to
the obtaining of NRC authority therefor, including, without limitation,
maintenance, storage, custody, removal, decontamination, and disposition of
materials, equipment and fixtures, razing of Unit 2, removal and disposition of
debris from the PVNGS Site, and restoration of the PVNGS Site related to Unit 2
for unrestricted use.
Decommissioning Costs shall mean all costs, liabilities and
expenses relating or allocable to, or incurred in connection with, the
Decommissioning of Unit 2, including, without limitation, (i) any and all costs
of activities undertaken to terminate NRC licensing authority and requirements
to own, operate and possess Unit 2 and to possess radioactive material used in
or produced incident to the possession and operation of Unit 2; and (ii) any and
all costs of activities undertaken, prior to termination of all NRC licensing
-9-
6091.BURNMAM.1106.55:1
<PAGE>
authority and requirements with respect to Unit 2 and the radioactive material
used in or produced incident to the possession and operation of Unit 2, to
possess, maintain, and dispose of radioactive material used in or produced
incident to the possession and operation of Unit 2.
Deed shall mean the Deed, dated as of August 12, 1986, from PNM
to the Owner Trustee.
Deemed Loss Event shall mean any of the following events (unless
waived by the Owner Participant, which waiver shall be in writing and may be
either indefinite or for a specified period):
(1) Regulation. 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 the Real
Property Interest or any part thereof by the Owner Trustee (or any
beneficial interest therein by the Owner Participant) or the lease of
the Undivided Interest or the Real Property Interest to the Lessee or
any of the other transactions contemplated by the Transaction Documents
(the term Ownner 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 clause (1), whether by
reason of such ownership or lease transactions, or otherwise) shall be
deemed by any Governmental Authority having jurisdiction to be, or shall
become subject to regulation (other than Non-Burdensome Regulation) as,
an "electric utility" or a "public utility" under any Applicable Law or
a holding company under the Holding company Act, or as a consequence of
any Governmental Action, and the effect thereof on the Owner Trustee or
the Owner Participant would be, in the sole judgment of either such
Person, acting on advice of counsel, adverse, and the Owner Trustee and
the Owner Participant have not waived application of this definition,
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 clause
(1), 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
-10-
6091.BURNHAM.1106.55:1
<PAGE>
on, the Undivided Interest, the Real Property Interest or any part
thereof or any interest there-in, (ii) such contest does not adversely
affect the Undivided Interest, the Real Property Interest or any part
thereof or any other property, assets or rights of the Owner Trustee or
the Owner Participant or the Lien of the Indenture thereon, (iii) the
Lessee shall have furnished the Owner Trustee, 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 and the effects
thereof, (iv) such determination and the effects thereof shall be
effectively stayed or with-drawn during such contest (and shall not be
subject to retroactive application at the conclusion of such contest) in
a manner satisfactory to the Owner Trustee and the Owner Participant,
and the Owner Participant shall have determined that the Owner Trustee's
continued ownership of the Undivided Interest and the Real Property
Interest during the pendency of such contest or such contest will not
adversely affect its or its Affiliates' business, and (V) the Lessee
shall have indemnified the Owner Trustee 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 the Lessee's contest;
(2) Price-Anderson Act Change. If there shall be, at any time
during the Lease Term, any change in the Price-Anderson Act, the Atomic
Energy Act or the regulations of the NRC, or any other Applicable Law,
in each case as in effect on the Closing Date, as a result of which, in
the opinion of independent counsel for the Owner Participant, (i) the
aggregate liability for a single Nuclear Incident of "persons
indemnified" (as each such term is defined in the Price-Anderson Act) is
increased, unless the change is such that neither the Owner Trustee nor
the Owner Participant may be exposed, either during or subsequent to the
Lease Term, to any increased real or potential liability in respect of a
Nuclear Incident, (ii) the aggregate liability for a single Nuclear
Incident of "persons indemnified" (as such term is defined in the
Price-Anderson Act) exceeds the amount of financial protection
established by the NRC as a condition to the License, unless the change
-11-
6091.BURNHAM.1106.55:l
<PAGE>
is such that neither the Owner Trustee nor the Owner Participant may be
exposed, either during or subsequent to the Lease Term, to any increased
real or potential liability in respect of a Nuclear Incident, (iii) the
amount of financial protection required, including but not limited to
the limitation on the amount of deferred premiums for such financial
protection, is increased, unless the change is such that neither the
Owner Trustee nor the Owner Participant may be exposed, either during or
subsequent to the Lease Term, to any increased real or potential
liability in respect of a Nuclear Incident, or (iv) either the Owner
Trustee or the Owner Participant may be exposed to any other increase in
its real or potential liability in respect of a Nuclear Incident, either
during or subsequent to the Lease Term, it being understood for purposes
of this definition that the requirement or existence of insurance,
retrospective premiums, indemnities (whether by the Lessee or any other
person) or other forms of financial protection (similar or dissimilar to
the foregoing) shall not be deemed to reduce or eliminate any exposure
of the Owner Trustee or the Owner Participant to real or potential
liability in respect of a Nuclear Incident except to the extent (x) such
financial protection is provided by the United States Government under
Congressional action which does not require any further appropriation or
other act of Congress or any other Governmental Authority, (y) the terms
of such financial protection are otherwise satisfactory to the Owner
Trustee and the Owner Participant, and (z) the Owner Trustee or Owner
Participant may not otherwise be exposed, either during or subsequent to
the Lease Term, to any increased real or potential liability in respect
of a Nuclear Incident; provided, however, that such change shall not
constitute a "Deemed Loss Event" if such change shall include a
provision drafted in a manner reasonably satisfactory to the Owner
Participant which exempts the Owner Trustee and the Owner Participant
from all real and potential liability in respect of a Nuclear Incident
so long as neither the Owner Trustee or the Owner Participant is in
actual possession and control of Unit 2 or the Undivided Interest,
unless (in the opinion of independent counsel to the Owner Participant)
a court could reasonably hold that the statute incorporating such
provision is unconstitutional;
-12-
6091.BURNHAM.1106.55:l
<PAGE>
(3) Liability far Termination Obligation. If there shall be any
change in Applicable Law as a result of which the Owner Trustee shall
become liable in its individual capacity, or the Owner Participant shall
become liable in any capacity, in respect of any portion of the
Termination Obligation (as defined in the ANPP Participation Agreement)
or Decommissioning Costs or, during the Lease Term, any other liability
or obligation imposed as of the date hereof on licensees of the NRC;
(4) Illegality. If there shall be any change in Applicable Law
or any Governmental Action the effect of which is to make the
transactions contemplated by the Transaction Documents unauthorized,
illegal or otherwise contrary to Applicable Law;
(5) Limitation on Exercise of Rights. My change in, or new
interpretation by Governmental Authority having jurisdiction of, the
License and the License Amendment (each as in effect on the Closing
Date) constituting an assertion to the effect that the exercise by the
Owner Trustee or the Owner Participant of any right (irrespective of the
event giving rise to such right) under any Transaction Document would
constitute impermissible control over Unit 2 or the licensees of Unit 2,
other than an assertion that affects such rights in a manner consistent
with the second sentence of Section 184 of the Atomic Energy Act and the
NRC's regulations thereunder (including, without limitation, 10 CFR
Section 50.81, as now and hereafter in effect);
(6) Early Licensee Status. If as a result of any expiration,
revocation, suspension, amendment or interpretation by any Governmental
Authority of the License, the License Amendment or any other
Governmental Action or change in Applicable Law, either the Owner
Trustee or the Owner Participant shall be required to become a licensee
of the NRC prior to the Lease Termination Date;
(7) Suspension or Termination of Insurance. If any policy of
liability insurance with respect to Unit 2 shall be 5uupended or
terminated, or the coverage thereunder reduced, for any reason
whatsoever or shall be amended or supplemented, in either case in a
-13-
6091.BURNHAM.1106.55:l
<PAGE>
manner which may expose the Owner Trustee or the Owner Participant,
either during or subsequent to the Lease Term, to any increased real or
potential liability in respect of a Nuclear Incident and such policy of
insurance shall not be immediately replaced by insurance or other
financial protection satisfactory to the Owner Participant effective
immediately upon such suspension, termination, reduction, amendment or
supplementation which, in the reasonable opinion of the Owner
Participant, is at least as protective of it (in all respects deemed by
it to be material) as the policy of insurance so terminated, suspended,
reduced, amended or supplemented, unless the aggregate liability for a
Nuclear Incident of "persons indemnified" (as such term is defined in
the Atomic Energy Act of 1954, as amended) is reduced by an amount equal
to the amount of liability insurance so terminated, suspended, reduced,
amended or supplemented and, in the reasonable opinion of the Owner
Participant, it may not otherwise be exposed, either during or
subsequent to the Lease Term, to any increased real or potential
liability in respect of a Nuclear Incident as a consequence of such
suspension, termination, reduction, amendment or supplementation.
Default shall mean an event or condition which, with the giving
of notice or lapse of time, or both, would constitute 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 in
Interest of Holders of Notes, directing the Indenture Trustee to take or refrain
from taking the action specified in such instrument.
Early Termination Date shall have the meaning specified in
Section 14(d) of the Facility Lease.
Early Termination Notice shall have the meaning specified in
Section 14(d) of the Facility Lease.
Economic Useful Life shall mean that period (commencing on the
date as of which the determination of Economic Useful Life is to be made as
provided in Section 8(g) of the Facility Lease and ending on the date upon which
either of the states of affairs described in clauses (i) and (ii) below cease to
-14-
609l.BURNHAM.1106.55:1
<PAGE>
apply, or can reasonably be expected to cease to apply, to Unit 2) during which
(i) Unit 2 will be useful to, and usable by, any owner or lessee thereof as a
facility for the generation of electric power and (ii) Unit 2 is an economic and
commercially practical facility for the generation of electric power capable of
producing (after taking into account costs of capital) a reasonable economic
return to the owner thereof. For the purposes of determinations under clauses
(i) and (ii) above, the following factors, among others, shall be taken into
account (as such factors obtain on the date of determination and as such factors
are reasonably expected to obtain in the future): (a) provisions of the ANPP
Project Agreements (including, without limitation, the ANPP Participation
Agreement and the Material Project Agreements (or substitutes for such Material
Project Agreements in effect on the date of determination)); (b) the actual
condition and performance of Unit 2; (C) the actual condition and performance of
such other facilities constituting PVNGS (including, without limitation, the
Common Facilities) as are integral to the operation of Unit 2; (d) the actual
condition of, and access of the ANPP Participants to, the ANPP Switchyard and
such other transmission facilities as are available and necessary to permit the
transmission of the maximum amount of power generated by PVNGS; (e) the cost of
obtaining, handling, storing and disposing of nuclear fuel for Unit 2; (f) the
projected cost (including, without limitation, costs attributable to obligations
to fund any reserve fund maintained (or funded) by licensed owners and/or
lessees of Unit 2 to the extent dedicated to (or attributable to and freely
available with respect to) Unit 2 (the Unit 2 Fund)) or the Decommissioning or
retirement from service of Unit 2 including, without limitation, Decommissioning
Costs (taking into account the balance (plus projected investment earnings
thereon) of the Unit 2 Fund); (g) the cost of Capital Improvements to Unit 2
then planned to be made, or reasonably expected to be made; (h) the cost of
acquiring or leasing the Unit 2 Retained Assets; (i) the current status of all
Governmental Action with respect to Unit 2 (including, without limitation, the
License) required to permit licensed owners and/or lessees to possess and (in
the case of the Operating Agent) to operate Unit 2 and such other facilities
constituting PVNGS. (including, without limitation, the Common Facilities) as
are integral to the operation of unit 2; and (j) the relative cost of producing
an amount of electric power and energy equivalent to the generating capacity of
Unit 2 from other facilities then available in the region serviced, or
reasonably expected to be serviced, by PVNGS.
-15-
609l.BURNHAM.1106.55:l
<PAGE>
El Paso shall mean El Paso Electric Company,a Texas corporation.
ERISA shall mean the Employee Retirement Income Security Act of
1974, as amended.
Estimated Transaction Expenses shall have the meaning set forth
in Section 5(a) of the Participation Agreement.
Event of Default shall have the meaning set forth in Section 15
of the Facility Lease.
Event of Loss shall mean any of the following events: (a) a
Final Shutdown, (b) a Requisition of Title, or (c) a Requisition of Use for an
indefinite period which can be reasonably expected to exceed, or a stated period
which ends on the last day of or after, the Lease Term (including the Renewal
Term only if the Renewal Term shall have been elected prior to such Requisition
of Use by the exercise of the renewal option provided in Section 12 of the
Facility Lease).
Excepted Payments shall mean (i) all payments of Supplemental
Rent, other than payments by the Lessee (x) of Casualty Value, Termination Value
or Special Casualty Value or in connection with the exercise of the Cure Option
or the occurrence of the Special Purchase Event or (y) of indemnity payments to
which either the Loan Participant or any Indemnitee other than the Owner Trustee
or the Owner Participant or any of their respective Affiliates (or the
respective successors, assigns, agents, officers, directors or employees
thereof) is entitled; (ii) any amounts payable under any Transaction Document t9
reimburse the Lessor or the Owner Participant or any of their respective
Affiliates (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, (iii) any amount payable to the Owner Participant by
any Transferee as the purchase price of the Owner Participant's interest in the
Trust Estate, (iv) so long as no Indenture Default or Indenture Event of Default
-16-
6091.BURNHAM.1106.55:l
<PAGE>
shall have occurred and be continuing, all payments of Basic Rent in excess of
amounts then due and owing in respect of the principal of and premium, if any,
and interest on all Notes Outstanding; (v) any insurance proceeds with respect
to an Event of Loss in excess of amounts then due and owing in respect of the
principal of and premium, if any, and interest on all Notes Outstanding, (vi)
any insurance proceeds (or payments with respect t6 risks self-insured) under
liability policies and (vii) any payments in respect of interest to the extent
attributable to payments referred to in clauses (i) through (vi) above.
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 mean liabilities, obligations, losses, damages,
taxes (other than taxes on income), claims, actions, suits, costs, expenses and
disbursements (including legal fees and expenses) of any kind -and nature
whatsoever.
Extension Letter shall mean the Extension Letter, dated August
18, 1986 and addressed to the Collateral Trust Trustee by the parties to the
Participation Agreement.
Extraordinary Nuclear Occurrence shall have its meaning as
defined in Section 11 of the Atomic Energy Act and the related NRC regulations,
as amended to the date hereof, and as the meaning of such term shall be expanded
from time to time by future amendments thereof. The definition of "extraordinary
nuclear occurrence" contained in Section 11 of the Atomic Energy Act on the date
hereof is: "any event causing a discharge or dispersal of source, special
nuclear, or by-product material from its intended place of confinement in
amounts offsite, or causing radiation levels offsite, which the Commission
determines to be substantial, and which the Commission determines has resulted
or will probably result in substantial damages to persons off-site or property
offsite. Any determination by the Commission that such an event has, or has not,
occurred shall be final and conclusive, and no other official or any court shall
have power or jurisdiction to review any such. determination. The Commission
shall establish criteria in writing setting forth the basis upon which such
-17-
6091.BURNHAM.1106.55:l
<PAGE>
determination shall be made. As used in this subsection, 'offsite' means away
from 'the location' or 'the contract location' as defined in the applicable
Commission indemnity agreement, entered into pursuant to section 2210 of this
title.
Facility Cost shall mean the Purchase Price plus the sum of (x) all
Supplemental Financing Amounts, and (y) all Additional Equity Investment
amounts.
Facility Lease shall mean the Facility Lease, dated as of August
12, 1986, between PNM, as Lessee, and the Owner Trustee, as Lessor.
Fair Market Rental Value or Fair Market Sales Value of any
property or service shall mean (other than for purposes of Section 5(b) of the
Facility Lease) the value of such property or service for lease or sale
determined on the basis of an arm's-length transaction for cash between an
informed and willing lessee or purchaser (under no compulsion to lease or
purchase) and an informed and willing lessor or seller (under no compulsion to
lease or sell), and shall take into account the Lessor's rights and obligations
under the Assignment and Assumption and the Assignment of Beneficial Interest
and rights under the Deed and the Bill of Sale, but shall be without regard to
any rights of the Lessee (including any renewal options) under the Facility
Lease. Except pursuant to Section 6.01 of the Assignment and Assumption, Fair
Market Rental Value and Fair Market Sales Value of the Undivided Interest and
the Real Property Interest shall be determined on the assumption that (i) Unit 2
has been maintained in accordance with, and the Lessee has complied with, the
requirements of the Facility Lease, the other Transaction Documents and the ANPP
Participation Agreement, and (ii) the Lessee or PNM, as possessor of the
Undivided Interest and the Real Property Interest, is otherwise in compliance
with the requirements of all Transaction Documents. Fair Market Rental Value
shall be determined on the assumption that rent will be payable in equal
semi-annual installments in arrears.
Federal Power Act shall mean the Federal Power Act, as amended.
-18-
6091.BURNHAM.1106.55:1
<PAGE>
Federal Securities shall have the meaning set forth in Section
2.3(c) of the Indenture.
FERC shall mean the Federal Energy Regulatory Commission of the
United States of America or any successor agency.
Final Prospectus shall mean the Prospectus included in the
Registration Statement on the date the same becomes effective, including
documents incorporated into said Prospectus by reference, including any
applicable prospectus supplements.
Final Shutdown shall mean the earlier to occur of:
(1) the or expiration revocation of the license or that portion
of the License that permits the operation of Unit 2 or the expiration,
suspension or revocation of the License or that portion of the License that
permits the possession by the Lessee of the Undivided Interest and the Real
Property Interest; or
(2) the suspension (pursuant to 10 C.F.R. Section 2.202, as
amended, and any successor provision) of the License or that portion of the
License that permits the operation of Unit 2, which suspension remains in effect
for three consecutive calendar months; or
(3) the permanent or temporary cessation of operation of Unit 2
as a result of a Nuclear Incident at Unit 2 (or if Unit 2 is not in operation
immediately prior to the occurrence of such Nuclear Incident, the failure to
resume operation thereof as a result of such Nuclear Incident) if (A) the Period
of such cessation or failure equals or exceeds twenty-four consecutive calendar
months, or (B) such Nuclear Incident causes the radiation level in the
containment building of Unit 2, as measured by the average of two high range
radiation monitors in such containment building of Unit 2 (or if only one such
monitor is operating at such time1 such monitor) over one hour to equal or
exceed 500 rads per hour; provided, however, this subsection (B) shall not apply
in respect of a Nuclear Incident arising solely from a fuel handling accident;
or
-19-
6091.BURNHAM.1106.55:l
<PAGE>
(4) the permanent or temporary cessation of operation of Unit 2
as a result of a Nuclear Incident at Unit 1 or 3 (the Affected Unit) (or if Unit
2 is not in operation immediately prior to the occurrence of such Nuclear
Incident, the failure to resume operation thereof as a result of such Nuclear
Incident) if (A) the Period of such cessation or failure equals or exceeds
thirty-six consecutive calendar months; or (B) such Nuclear Incident causes the
radiation level in the containment building of the Affected Unit, as measured by
the average of two high range radiation monitors in such containment building
(or if only one such monitor is operating at such time, such monitor) over one
hour to equal or exceed 500 rads per hour; provided, however, this subsection
(B) shall not apply in respect of a Nuclear Incident arising solely from a fuel
handling accident;
(5) the occurrence of a Nuclear Incident at Unit 1, 2 or 3
causing (A) substantial injury or death to any person on or off the PVNGS Site
or (B). a discharge or dispersal of Source, Special Nuclear or Byproduct
Material from its intended place of confinement in amounts off the PVNGS Site or
causing radiation levels off the PVNGS Site such that, in the case of (B) above
(x) the NRC declares the occurrence of an Extraordinary Nuclear Occurrence or
declares any other event connoting an equivalent level of accident or (y) the
surface contamination dose rate measured off the PVNGS Site by a radiation
monitor at 1 meter above the surface level equals or is greater at any time than
10 millirads/hour (0.10 milligray/hour) or in the case of noble gas plume
passage, the radiation dose rate equals or is greater than 10 rads (0.10 gray)
integrated over 24 hours, (or if the NRC shall at any time lower the radiation
levels required for the occurrence of an Extraordinary Nuclear Occurrence, such
lower levels as shall be consistent with such change by the NRC); or
(6) damage to or destruction of any portion of Unit 2 and,
un1ess the Lessee theretofore shall have exercised its purchase option under
Section 13(b) of the Facility Lease, the failure of the Lessee, or of. the
Lessee and one or more other ANPP Participants, (A) to agree within eighteen
calendar months of such damage or destruction (or prior to such earlier date as
of which one or more other ANPP Participants shall agree to restore or
reconstruct any damaged portion of Unit 2 in accordance with Section 16.2 of the
ANPP Participation Agreement) to restore or reconstruct Unit 2 to completion
prior to the day sixty calendar months after the date of such agreement and (B)
-20-
6091.BURNHAM.1106.55:1
<PAGE>
thereafter to complete the restoration and reconstruction of Unit 2 within a
period of sixty calendar months after the date of such agreement, provided that
no Final Shutdown shall be deemed to have occurred pursuant to this clause (6)
if and so long as Unit 2 is in operation at a rated core power level of at least
1900 megawatts thermal; or
(7) the non-operation of Unit 2 or the operation of Unit 2 at a
net rated power level below 630 megawatts electric or any combination thereof
for any reason (including, without limitation, the occurrence of any Nuclear
Incident at any generating facility located anywhere in the world) for a Period
of thirty-six consecutive calendar months (or a period through the penultimate
day of the Lease Term if the Lessee shall have given notice of its intent to
exercise the purchase option permitted by Section 13(b) of the Facility Lease)
other than as a result of damage to or destruction of Unit 2.
For purposes of this definition, a Final Shutdown resulting from the occurrence
of an event described in clause (5) above shall be deemed to have occurred
immediately and automatically upon the decline of the water coolant within Unit
2 to a level three feet above the nuclear fuel.
Financing Documents shall mean the Collateral Trust Indenture,
the Term Note Supplemental Indenture, the Underwriting Agreement, the Term Loan
Agreement, the Supplemental Indenture of Pledge and the Refunding Supplemental
Indenture.
Fixed Rate Note shall mean the non-recourse promissory note or.
notes to be issued by the Owner Trustee and authenticated by the Indenture
Trustee on the Refunding Date to refund the Initial Series Note.
Fixed Rate Renewal Term shall have the meanings set forth in
Section 12 of the Facility Lease.
FNB shall mean The First National Bank of Boston, in its
individual capacity, and its successors and assigns.
-21-
6091.BURNHAM.1106.55:1
<PAGE>
Form U-7D shall mean the certificate to be 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 Molding Company
Act.
Funding Corp. shall mean First PV Funding Corporation, a
Delaware corporation.
Generating Unit shall mean Unit 1, 2, or 3.
Generation Entitlement Share shall have the meaning assigned
thereto in the ANPP Participation Agreement and (i) when used in reference to
Unit 2, shall mean the Generation Entitlement Share of PNM as the ANPP
Participant with respect to its interest in Unit 2, (ii) when used in reference
to the Undivided Interest, shall mean that portion of the Generation Entitlement
Share attributable to the Undivided Interest and (iii) when used in Section 19
of the Facility Lease, shall refer to the Generation Entitlement Share of the
Lessee in all Generating Units as PVNGS.
Governmental Action shall mean all authorizations, consents,
approvals, waivers, exceptions, variances, orders, licenses, exemptions,
publications, filings, notices to and declarations of or with any Governmental
Authority (other than routine reporting requirements the failure to comply with
which will not affect the validity or enforceability of any of the Transaction
Documents or have a material adverse effect on the transactions contemplated by
any Transaction Document or any Financing Document) or any other action in
respect of any Governmental Authority and shall include, without limitation, all
siting, environmental and operating permits and licenses which are required for
the use and operation of Unit 2, including the Undivided Interest and the Real
Property Interest.
Governmental Authority shall mean any Federal, state, county,
municipal, foreign, international, regional or other governmental authority,
agency, board, body, instrumentality or court, and the staff thereof pursuant to
their official responsibilities.
-22-
6091.BURNHAM.1106.55:l
<PAGE>
Holders shall mean the holders of the Notes or the Bonds, as the
case may be.
Holding Company Act shall mean the Public Utility Holding
Company Act of 1935, as amended.
Indemnitee shall mean the Owner Participant, the Owner Trustee,
FNB, the Loan Participant, the stock-holder of Funding Corp. and its officers
and directors, Chemical Bank, the Indenture Trustee, each Holder of a Not. from
time to time Outstanding, the Collateral Trust Trustee, the Trust, the Trust
Estate, the Lease Indenture Estate, the indenture estate under the Collateral
Trust Indenture, any Affiliate of any of the foregoing and the respective
successors, assigns, agents, officers, directors or employees of the foregoing,
excluding, however, any ANPP Participant other than the Owner Trustee or the
Owner Participant.
Indenture shall mean the Trust Indenture, Mortgage, Security
Agreement and Assignment of Rents, dated as of August 12, 1986, between the
Owner Trustee and the Indenture Trustee.
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 Chemical Bank, a New York banking
corporation, not in its individual capacity, but solely as Indenture Trustee
under the Indenture and each successor trustee and co-trustee thereunder.
Indenture Trustee's Liens shall mean Liens against the Lease
Indenture Estate which result from acts of, or any failure to act by, or as a
result of claims against, the Indenture Trustee, in its individual capacity,
unrelated to the transactions contemplated by the Transaction Documents.
Indenture Trustee's Office shall mean the office of the
Indenture Trustee located at 55 Water Street, New York, New York 10041, 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.
-23-
6091.BURNHAM.1106.55:l
<PAGE>
Initial Series Bonds shall mean the promissory notes of Funding
Corp. evidencing the loans made to Funding Corp. under the Term Loan Agreement,
issued, authenticated and delivered under the Term Loan Agreement and the
Collateral Trust Indenture, as supplemented by the Term Note Supplemental
Indenture.
Initial Series Note shall mean the nonrecourse promissory note,
substantially in the form of Exhibit A to the Indenture, to be issued by the
Owner Trustee and authenticated by the Indenture Trustee on the Closing Date to
finance a portion of the Purchase Price
Investment shall have the meaning set forth in Section 3 of the
Participation Agreement.
Investment Company Act shall mean the Investment Company Act
of 1940, as amended.
Investment Percentage shall mean the percentage identified as
such in Schedule 2 to the Participation Agreement.
IRS shall mean the Internal Revenue Service of the United States
Department of the Treasury or any successor agency.
LADWP shall mean the Department of Water and Power of The City
of Los Angeles, a department organized and existing under the charter of the
City of Los Angeles, a municipal corporation of the State of California.
Lease Indenture Estate shall have the meaning set forth in
Section 2.1 of the Indenture.
Lease Term shall mean the aggregate of the Basic Lease Term and
the Renewal Term, if any.
Lease Termination Date shall mean the last day of the Lease
Term (whether occurring by reason of a termination or expiration of the Lease
Term).
-24-
609l.BURHAM.l106.55:l
<PAGE>
Lessee shall mean Public Service Company of New Mexico, a New
Mexico corporation, and its successors and assigns, as lessee under the Facility
Lease and as party to the other Transactions Documents and Financing Documents
to which it is. a signatory.
Lessee Request shall mean a request of the Lessee delivered
pursuant to Section 6.03 of the Collateral Trust Indenture.
Lessor shall mean the Owner Trustee, as lessor under the
Facility Lease (and for purposes of the definition of "Deemed Loss Event" and
where the context 0therwise so requires, the Owner Trustee in its individual
capacity), and its successors and assigns.
Lessor's Interest shall have the meaning set forth in Section
8(c)(3) of the Participation Agreement.
Lessor's Liens or Owner Trustee's Liens shall mean Liens
against the Trust Estate or the Lease Indenture Estate (other than Permitted
Liens described in the definition of such term, except "Lessor's Liens" and
"Owner Participant's Liens" referred to in clause (vi) of such definition) for
which the Lessee is not responsible and which result from acts of, or any
failure to act by, or as a result of claims against, FNB or the Lessor,
unrelated to the ownership of the Undivided Interest or the Real Property
Interest, the administration of the Trust Estate or the transactions
contemplated by the Transaction Documents or the Financing Documents.
Lessor's Portion shall mean the Owner Trustee's portion of the
original lO.2% undivided interest of the Lessee in Unit 2, the percentage of
which is set forth in Schedule 2 to the Participation Agreement.
License shall mean NRC Facility Operating License No. NPF-51,-
issued April 24, 1986 (superseding NRC Facility Operating License No. NPF-46,
issued on December 9, 1985), as the same may be amended, modified, extended,
renewed or superseded from time to time.
-25-
6091.BURHAM.1106.55:1
<PAGE>
License Amendment shall mean amendment number No. 2 to the
License, issued August 12, 1986, approving the sale and leaseback transaction
contemplated by the Transaction Documents.
License Expiration Date shall mean December 9, 2025, or any
later or earlier date on which the License shall expire or be terminated.
Lien shall mean any mortgage, pledge, security interest,
encumbrance, lien, easement, servitude 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(a) of the
Participation Agreement.
Loan Participant shall mean Funding Corp.
Loan Percentage shall mean the percentage identified as such in
Schedule 2 to the Participation Agreement.
Majority in Interest of Holders of Notes shall mean Holders of a
majority in principal amount of all Notes Outstanding under the Indenture at the
time of any such determination.
Material Project Agreement shall mean (i) Nuclear Fuel Contract
between Arizona Nuclear Power Project and Combustion Engineering, Inc. (CE),
dated as of August 20, 1973, (ii) Nuclear Steam Supply Contract between APS and
CE, dated as of August 20, 1973, as amended (iii) Turbine Generator Contract
between APS and General. Electric Company, dated as of March 21, 1974, as
amended (iv) Uranium Enrichment Services Contract between the United States of
America (USA) and APS, dated November 15, 1984, as amended and the Associated
Supplemental Agreement of Settlement between USA and APS, dated November 15,
1984, (v) Contract between APS and Westinghouse Electric Corporation for fuel
fabrication services for reload batches of nuclear fuel, dated August 7, 1974,
as amended, (vi) Agreement for the Sale and Purchase of Waste Water Effluent
between the City of Tolleson, APS and Salt River, dated June 12, 1981, as
-26-
6091.BURNHAM.1106.55:l
<PAGE>
amended (vii) Agreement for Construction of Arizona Nuclear Power Project
between Bechtel Power Corporation (Bechtel) and APS, dated January 15, 1973,
(viii) Agreement for Engineering and Procurement Services between APS and
Bechtel, dated January 15, 1973, (ix) Option and Purchase of Effluent dated
April 23, 1973, among the Cities of Phoenix, Glendale, Mesa, Tempe and
Scottsdale1 the Town of Youngtown, APS and Salt River, APS, and Salt River,
dated April 23 1973, (x) Agreement for Conversion Services between Allied
Chemical Corporation and APS, dated November 17, 1975, as amended, (xi) Uranium
Concentrate Sales Agreement between Energy Fuels Exploration Company and APS,
dated as of December 1, 1983, (xii) Uranium Concentrate Sales Agreement between
Energy Fuels Exploration and APS, dated as of October 23, 1981, as amended,
(xiii) Agreement for Sale of Uranium Concentrates between Pathfinder Mines
Corporation and APS, dated December 1, 1983, (xiv) Contract for Disposal of
Spent Nuclear Fuel and/or High Level Radioactive Waste between USA and APS,
dated July 21, 1984, and the ANPP Participation Agreement.
Minimum Net Worth means a Net Worth equal to the greater of (x)
$700,000,000 and (y) (1) $950,000,000 less (2) with respect to each Generating
Unit as to which PNM shall have entered into one or more transactions
constituting sale and leaseback transactions under the ANPP Participation
Agreement (including, but without limitation, the transaction contemplated by
the Participation Agreement), (A) $50,000,000 (in the case of Unit 1) and
$100,000,000 (in the case of each other Generating Unit) times (B). the
aggregate percentage of the Lessee's undivided interest in such PVNGS unit
subject to such transactions.
Mortgage Release shall mean the Indentures of Partial Release,
each dated August 18, 1986, under and with respect to the Existing Mortgage.
Net Economic Return shall mean the after-tax economic yield and
periodic after-tax cash flows (after all Federal, state and local taxes) and the
periodic return on investment and the timing of recognition of income originally
expected by the Owner Participant with respect to the Undivided Interest,
utilizing the same assumptions as used by the Owner Participant in making the
original computation upon which its evaluation of investment in the Undivided
Interest and the initial computation of Basic Rent, Casualty Value, Special
Casualty Value and Termination Value were based.
-27-
6091.BURNHAM.ll06.55:l
<PAGE>
Net Worth means the excess of assets over liabilities determined
by the Lessee's auditors on the basis of generally accepted accounting
principles.
New Mexico Public Utility Act shall mean the New Mexico Public
Utility Act, as amended.
NMPSC shall mean the New Mexico Public Service Commission
established pursuant to Section 62-5-1 of New Mexico Statutes Annotated, 1978.
NMPSC Order shall mean the order issued by the NMPSC on July 8,
1986, in Case No. 2019 (Phase I), approving, among other things; the terms of
the Facility Lease and the execution and delivery of the Facility Lease by PNM.
Non-Burdensome Regulation sha11 mean (i) regulation to which the
Owner Participant or the Owner Trustee is otherwise subject by reason of its
lease financing or other activities unrelated to the transactions contemplated
by the Transaction Documents, (ii) ministerial regulatory requirements which do
not impose limitations or regulatory requirements on the business or activities
of the Owner Participant and which are deemed, in the reasonable discretion of
the Owner Participant, not to be burdensome, (iii) regulation resulting from any
possession of the Undivided Interest on or after the Lease Termination Date or
(iv) regulation of the Owner Trustee which would be terminated by the
appointment of a successor Owner Trustee or a co-Owner Trustee pursuant to the
terms of the Trust Agreement.
Nonseverable, when used with respect to any Capital Improvement,
shall mean any Capital Improvement which is not a Severable Capital Improvement.
Noteholder shall mean any Holder from time to time of a Note
Outstanding under the Indenture.
Notes shall mean the Initial Series Note and the Fixed Rate
Note, the Releveraging Note and any other Additional Notes.
-28-
6091.BURNHAM.1106.55:l
<PAGE>
Notice of Closing shall have the meaning set forth in Section
5(a) of the Participation Agreement.
NRC shall mean the Nuclear Regulatory Commission of the United
States of America or any successor agency.
Nuclear Incident shall have its meaning as defined in Section 11
of the Atomic Energy Act, as amended to the date hereof and as the meaning of
such term may be expanded from time to time by future amendments thereof. The
definition of "nuclear incident" contained in the Atomic Energy Act on the date
hereof is: "any occurrence, including an extraordinary nuclear occurrence,
within the United States causing, within or outside the United States, bodily
injury, sickness, disease, or death, or loss of or damage to property, or loss
of use of property, arising out of or resulting from the radioactive, toxic,
explosive, or other hazardous properties of source, special nuclear, or
byproduct material: Provided, however, that as the term is used in section
22l0(1) of title, it shall include any such occurrence outside the United
States: And provided further, That as the term is used in section 2210(d) of
this title, it shall include any such occurrence outside the United States if
such occurrence involves source, special nuclear, or byproduct material owned
by, and used by or under contract with, the United States: And provided further,
That as the term is used in section 2210(c) of this title, it shall include any
such occurrence outside both the United States and any other nation if such
occurrence arises out of or results from the radioactive, toxic, explosive, or
other hazardous properties of source, special nuclear, or byproduct material
licensed pursuant to subchapters V, VI, VII, and IX of this chapter, which is
used in connection with the operation of a licensed stationary production or
utilization facility or which moves outside the territorial limits of the United
States in transit from one person licensed by the Commission to another person
licensed by the Commission."
Nuclear Waste Act shall mean the Nuclear Waste Policy Act of
1982, as amended, or any comparable successor law.
-29-
6091.BURNHAM.1106.55:l
Officers' Certificate sha11 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 operating Agent shall have the meaning assigned thereto in the
ANPP Participation Agreement.
Original of the Facility Lease shall mean the fully executed
counterpart of the Facility Lease, marked "This Counterpart is the Original
Counterpart", pursuant to Section 22(e) of the Facility Lease and containing the
receipt of the Indenture Trustee.
Outstanding, when used with respect to the Notes, shall mean, as
of the date of determination, 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 the
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.
Overdue Interest Rate shall mean the weighted average rate per
annum of interest payable with respect to overdue payments of. principal on the
Notes Outstanding, computed as set forth in such Notes.
-30-
6091.BURNHAM.1106.55:l
<PAGE>
Owner Participant shall mean Burnham Leasing Corporation, and
the successors and assigns of such Person in accordance with the Trust Agreement
and the Participation Agreement.
Owner Participant's Liens shall mean Liens against the Trust
Estate or the Lease Indenture Estate (other than Permitted Liens described in
the definition of such term, except "Lessor's Liens" and "Owner Participant's
Liens" referred to in clause (vi) of such definition) for which the Lessee is
not responsible and 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 or the Financing Documents.
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 (unless the context otherwise
requires), and each successor as trustee, separate trustee and co-trustee
thereunder.
Participation Agrees shall mean the Participation Agreement,
dated as of August 12, 1986, among the Owner Trustee, the Indenture Trust,
Funding Corp., the Owner Participant and PNM.
Penalty Rate shall mean 2% per annum in excess of the Prime
Rate.
Period of a stated duration in respect of any event shall mean
an indefinite period which can reasonably be expected to exceed the lesser of
such duration and the period remaining to the date which is three years prior to
the end of the remaining Basic Lease Term (or if such event occurs after the
date three years prior to the end of the remaining Basic Lease Term, the lesser
of six months and the period remaining to the day next preceding the end of the
Basic Lease Term) or a stated period in excess of the lesser thereof or an
actual period which continues in excess of the lesser thereof.
Permitted Liens shall mean (i) the respective rights and
interests of the Lessee, the Owner Participant, the Lessor, the Loan Participant
and the Indenture Trustee, as provided in the Transaction Documents; (ii) the
-31-
6091.BURNHAM.1106.55:l
<PAGE>
rights of any sublessee or assignee under a sublease or an assignment permitted
by the terms of the Facility Lease; (iii) the Lien of the Existing Mortgage on
the leasehold state under the Facility Lease; (iii) Liens for taxes either not
yet due or which are being contested in good faith and by appropriate
proceedings diligently conducted, so long as such proceedings shall not (x)
involve any danger of the sale, forfeiture or lass of the Undivided Interest or
the Real Property Interest or any part thereof or interest therein of the Lessor
or the Owner Participant, (y) interfere with the use, possession or disposition
of the Undivided Interest or the Real Property Interest, or any part thereof or
interest therein, or (z) impair payment of Rent; (V) inchoate materialmen's,
mechanics', workmen's, repairmen's, employees', carriers', warehousements, or
other like Liens arising in the ordinary course of business for PVNGS, and not
delinquent; (vi) Lessor's Liens, Owner Participant's Liens and Indenture
Trustee's Liens; (vii) choate Liens that have been bonded for the full amount in
dispute or as to which other satisfactory security arrangements shall have been
made and which are being contested diligently by the appropriate party in good
faith and by appropriate proceedings so long as such proceedings shall not
violate clause (x), (y) or (z) of clause (iv) above; (viii) choate Liens of any
of the types described in clause (v) above that have been bonded for the full
amount in dispute or as to which other satisfactory security arrangements shall
have been made and which arise out of judgments or awards and with respect to
which (A) an appeal or proceeding for review is being prosecuted in good faith
and for the payment of which adequate reserves shall have been provided as
required by generally accepted accounting practice and (B) there shall have been
secured a stay of execution pending such appeal or proceeding for review, so
long as such proceedings shall not violate clause (x), (y) or (z) of clause (iv)
above; (ix) the rights and interests of the Lessee under the Assignment and
Assumption; (x) the rights of the NRC under the License; (xi) the rights of the
ANPP Participants (other than (i) the Lessee and (ii) any Person who shall
become an ANPP Participant in respect of the Undivided Interest and the Real
Property Interest) under the ANPP Participation Agreement or any other ANPP
Project. Agreement; (xii) Liens on the undivided ownership interests in Unit 2
of the ANPP Participants and other Persons (other than the Lessee) and (xiii)
any Liens arising by virtue of the ANPP Participation Agreement.
-32-
6091.BURNHAM.1106.55:l
<PAGE>
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.
PNM shall mean Public Service Company of New Mexico, a New
Mexico corporation.
Price-Anderson Act shall mean the Price-Anderson Act, Pub. L.
No. 85-256, 71 Stat. 576 (1957), as amended to the Closing Date.
Pricing Assumptions shall mean the pricing assumptions set forth
in Schedule 2 to the Participation Agreement.
Prime Rate shall mean the rate of interest publicly announced
from time to time by Chemical Bank at its principal office in New York City as
its prime or base lending rate. Any change in the Prime Rate shall be effective
on the date such change in the Prime Rate is announced.
Project Insurance shall have the meaning assigned thereto in the
ANPP Participation Agreement.
Project Manager shall have the meaning assigned thereto in the
ANPP Participation Agreement.
Purchase Documents shall mean the Bill of Sale, the Deed and the
Assignment of Beneficial Interest and such other documents as the Owner
Participant, the Owner Trustee, the Indenture Trustee, the Loan Participant or
their respective counsel shall deem desirable to convey good and marketable
title to the Undivided Interest and the Real Property Interest to the Trust.
Purchase Price shall have the meaning set forth in Section 4(a)
of the Participation Agreement.
PVNGS shall mean the Arizona Nuclear Power Project, as that term
is defined in the ANPP Participation Agreement.
-33-
6091.BURNHAM.1106.55:l
<PAGE>
PVNGS Site shall mean the beneficial interest in the Arizona
land trust and the real property described in Exhibit A to the Bill of Sale.
Real Estate Investment shall have the meaning set forth in
Section 3(a) of the Participation Agreement.
Real Property Interest shall mean the right, title and interest
of the Owner Trustee acquired pursuant to the Deed and the Assignment of
Beneficial Interest.
Reasonable Basis for a position shall exist if tax counsel may
properly advise reporting such position on a tax return in accordance with
Formal Opinion 85-352 issued by the Standing Committee on Ethics and
Professional Responsibility of the American Bar Association.
Refunding Bonds shall mean Funding Corp.'s Lease Obligation
Bonds Series 1986B, issued, authenticated and delivered under the Collateral
Trust Indenture, as supplemented by. the Refunding Supplemental Indenture, as
described in the Underwriting Agreement.
Refunding Date shall mean the date of issuance of the
Refunding Bonds.
Refunding Loan shall have the meaning set forth in Section
2(d) of the Participation Agreement.
Refunding Supplemental Indenture shall mean the Refunding Bond
Supplemental Indenture, among PNM, Funding Corp. and the Collateral Trust
Trustee, supplementing the Collateral Trust Indenture and providing, among other
things, for the issuance of the Refunding Bonds.
Registration Statement shall mean the registration statement on
Form S-3, as amended, and any other similar registration statement, including
all exhibits and all documents incorporated therein by reference, filed with the
SEC under the Securities Act in connection with the offer, issue and sale of the
Refunding Bonds.
-34-
6091.BURNHAM.1106.55:1
<PAGE>
Regulations shall mean the income tax regulations issued,
published or promulgated under the Code.
Releveraging Amount shall (i) mean the initial principal amount
of each series of Releveraging Bonds, but only in an amount equal to the amount
of the related Note or Notes issued in connection with such Bonds, or (ii) the
initial principal amount of the Refunding Bonds to the extent such amount is in
excess of the Initial Series Bonds being refunded, but only in an amount equal
to the amount that. the related Fixed Rate Note or Notes exceed the aggregate
amount of the Initial Series Note and any Releveraging Motes theretofore issued.
Releveraging Bonds shall mean a series of securities issued,
authenticated and delivered under the Collateral Trust Indenture in accordance
with Section 2.03 thereof, part of the proceeds of which is used to refund to
the Owner Participant a portion of its Investment as provided in Section 3(b) of
the Participation Agreement.
Releveraging Date shall mean the date of issuance of the
Releveraging Bonds.
Releveraging Loan shall have the meaning specified in Section
2(c) of the Participation Agreement.
Releveraging Note shall mean the non-recourse promissory note,
substantially in the form of the Initial Series Note or, if the Refunding Date
shall have occurred, the Fixed Rate Note, to be issued by the Owner Trustee and
authenticated by the Indenture Trustee on the Releveraging Date to refund to the
Owner Trustee a portion of the Investment.
Renewal Term shall mean the Fixed Rate Renewal Term as provided
in Section 12 of the Facility Lease.
Rent shall mean Basic Rent and Supplemental Rent.
-35-
6091.BURNHAM.ll06.55:l
<PAGE>
Rent Differential shall have the meaning set forth in Section
3(h) of the Facility Lease.
Requisition of Title shall mean any circumstance or event in
consequence of which Unit 2 or the Undivided Interest shall be condemned or
seized or title thereto shall be requisitioned or taken by any Governmental
Authority under power of eminent domain or otherwise and all administrative or
judicial appeals opposing such condemnation, seizure or taking shall have been
exhausted or the period for such appeal shall have expired.
Requisition of Use shall mean any circumstance or event in
consequence of which the use of Unit 2 or the Undivided Interest shall be
requisitioned or taken by any Governmental Authority under power of eminent
domain or otherwise, other than a Requisition of Title.
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, or 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.
Retained Assets shall mean (i) the Lessee's interest in PVNGS
(other than the Undivided Interest, the related Generation Entitlement Share,
and the Real Property Interest), (ii) Severable Capital Improvements title to
the undivided interest in which is retained by the Lessee in accordance with
Section 8(e) of the Facility Lease, and (iii) any additional interest in and to
PYNGS (other than the Undivided Interest, the related Generation Entitlement
Share and the Real Property Interest) to which the Lessee becomes entitled in
consequence of Sections 16.2 or 23.5 of the ANPP Participation Agreement (except
as otherwise provided in Section 5(a) or 19 of the Facility Lease).
Sale Proceeds shall mean, with respect to any sale of the
Undivided Interest and the Real Property Interest by the Lessor to any Person
other than the Lessee, the gross proceeds of such sale payable in cash, less all
costs and expenses whatsoever incurred by the Lessor and the Owner Participant
in connection therewith.
-36-
6091.BURNHAM.1106.55:l
<PAGE>
Salt River shall mean Salt River Project Agricultural
Improvement and Power District, an Arizona agricultural improvement district.
SCPPA shall mean Southern California Public Power Authority, a
California joint powers agency (doing business in Arizona as Southern California
Public Power Authority Association).
SEC shall mean the Securities and Exchange Commission of the
United States of America, or any successor agency.
Section 6(c) Application shall mean Funding Corp.'s Application
for an Order under Section 6(c) of the Investment Company Act of 1940 exempting
First PV Funding Corporation from all provisions of such Act, as filed with the
SEC on September 20, 1985, as amended.
Secured Obligations shall have the meaning set forth in Section
7(b)(4) of the Participation Agreement.
Securities Act shall mean the Securities Act of 1933, as
amended.
Securities Exchange Act shall mean the Securities Exchange Act
of 1934, as amended.
Severable, when used with respect to any Capital Improvement,
shall mean any Capital Improvement which can readily be removed from Unit 2 or
the Common Facilities without materially damaging Unit 2 or the Common
Facilities or materially diminishing or impairing the value, utility or
condition of Unit 2 or the Common Facilities.
Source, Special Nuclear or Byproduct Material shall have their
respective defined meanings as defined in Section 11 of the Atomic Energy Act of
1954, as amended to the date hereof and as the meanings of such terms may be
expanded by future amendments thereof.
-37-
6091.BURNHAM.1106.55:1
<PAGE>
Southern California shall mean Southern California Edison
Company, a California corporation.
Special Casualty Value as of any date, shall mean (i) during the
Basic Lease Term, the percentage of Facility Cost set forth opposite such date
in Schedule 2 to the Facility Lease, and (ii) during the Renewal Term, if any,
the unamortized portion of the Fair Market Sales Value of the Undivided Interest
determined by amortizing ratably the Fair Market Sales Value of the Undivided
Interest as of the day following the last day of the Basic Lease Term in
semi-annual steps over the period from such date to the License Expiration Date.
Anything contained in the Facility Lease to the contrary notwithstanding,
Special Casualty Value shall be, when added to all other amounts which the
Lessee is required to pay under Section 9(d) of the Facility Lease (taking into
account any assumption of Notes by the Lessee), under any circumstances and in
any event, in an amount at least sufficient to pay in full, as of any date of
payment, the aggregate unpaid principal amount of all Notes Outstanding at the
close of business on such date, together with accrued and unpaid interest on
such Notes.
Supplemental Financing shall mean a financing of the
Supplemental Financing Amount of Capital Improvements made pursuant to Section
8(f) of the Facility Lease.
Special Purchase Event shall have the meaning specified in
Section 13(c) of the Facility. Lease.
Substituted lessee shall have the meaning specified in Section
6.8(c) of the Indenture.
Supplemental Financing Amount shall mean a Unit 2 Interest in
the cost of a Capital Improvement to Unit 2, and a Common Facilities Interest in
the cost of a Capital Improvement to the Common Facilities, or that portion of
such interest in such cost which shall not exceed (i) the amount of the
increase, if any, in the Owner Participant's basis in the Undivided Interest for
purposes of section 1012 or 1016 of the Code as a result of such Capital
Improvement less (ii) the amount of the related Additional Equity Investment of
the Lessor, if any.
-38-
6091.BURNHAM.1106.55:l
<PAGE>
Supplemental Indenture of P1edge shall have the meaning
specified in the Term Note Supplemental Indenture.
Supplemental Rent shall have the meaning set forth in Section
3(b) of the Facility Lease.
Surviving lessee shall have the meaning specified in Section
10(b) (3) (ii) of the Participation Agreement.
Tax shall mean any and all fees (including, without limitation,
documentation, recording, license and registration fees), taxes (including,
without limitation, net income, franchise, value added, ad valorem, gross
income, gross receipts, sales, use, property (personal or real, tangible or
intangible) 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 Assumptions shall mean the assumptions set forth in Section
1(a) of the Tax Indemnification Agreement, with respect to the Federal income
tax consequences of the transactions contemplated by the Transaction Documents.
Tax Indemnification Agreement shall mean the Tax Indemnification
Agreement, dated as of August 12, 1986, between PNM and the Owner Participant.
Term Loan Agreement shall mean the Term Loan Agreement dated as
of August 12, 1986 among Funding Corp., PNM and the banks named on the signature
pages thereto.
Term Note Supplemental Indenture shall mean the Series 1986B
Term Note Supplemental Indenture dated as of August 12, 1986 among PN1I, Funding
Corp. and the Collateral Trust Trustee, supplementing the Collateral Trust
Indenture and providing, among other things, for the issuance of the Initial
Series Bonds.
-39-
6091.BURNHAM.1106.55:l
<PAGE>
Termination Date shall have the meaning set forth in Section
14(a) of the Facility Lease.
Termination Event shall mean any early termination of the
Facility Lease in accordance with Section 14 thereof.
Termination Notice shall have the meaning set forth in Section
14(a) of the Facility Lease.
Termination Obligation shall have the meaning set forth in
Section 15.10.2 of the ANPP Participation Agreement (or any comparable successor
provision).
Termination Value, as of any Basic Rent Payment Date during the
Basic Lease Term, shall mean the percentage of Facility Cost set forth opposite
such date in Schedule 3 to the Facility Lease. Anything contained in the
Facility Lease to the contrary notwithstanding, Termination Value shall be, when
added to all other amounts which the Lessee is required to pay under Section 14
of the Facility Lease, under any circumstances and in any event, in an amount at
least sufficient to pay in full as of any Basic Rent Payment Date the aggregate
unpaid principal amount of all Notes Outstanding at the close of business on
such date, together with accrued and unpaid interest on such Notes.
Transaction Documents shall mean the Participation Agreement,
the Facility Lease, the Trust Agreement, the Indenture, the Extension Letter,
the Tax Indemnification Agreement, the Mortgage Release, the Assignment and
Assumption, each Purchase Document and the Notes.
Transaction Expenses shall have the meaning set forth in Section
14(a) of the Participation Agreement.
Transfer shall mean the transfer, by bill of sale or otherwise,
by the Lessor of all the Lessor's right, title and interest in and to the
Undivided Interest and the Real Property Interest and under the Assignment and
Assumption on an "as is, where is" basis, free and clear of all Lessor's Liens
and Owner Participants Liens, but otherwise without recourse, representation or
warranty (including an express disclaimer of representations and warranties in a
-40-
6091.BURNHAM.1106.55:1
<PAGE>
manner comparable to that set forth in the second sentence of Section 6(b) of
the Facility Lease)1 together with the due assumption by the transferee of, and
the due release of the Lessor from, all of the Lessor's obligations under the
Assignment and Assumption and the Assignment of Beneficial Interest by an
instrument or instruments satisfactory in form and substance to the Lessor and
the Owner Participant.
Transferee shall have the meaning assigned thereto in Section l5
of the Participation Agreement.
Trust shall mean the trust created by the Trust Agreement.
Trust Agreement shall mean the Trust Agreement, dated as of
August 12, 1986, between Burnham Leasing corporation and FNB.
Trust Estate shall have the meaning set forth in Section 2.03 of
the Trust Agreement.
Trust Indenture Act shall mean the Trust Indenture Act of 1939,
as amended.
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 Facility 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(a) or 13(b) of the
Participation Agreement.
-41-
6091.BURNHAM.1106.55:1
<PAGE>
UCC or Uniform Commercial Code shall mean the Uniform Commercial
Code as in effect in any applicable jurisdiction.
Underwriting Agreement shall mean the agreement with the
underwriters named therein relating to the purchase, sale and delivery of the
Refunding Bonds.
Undivided Interest shall mean the Unit 2 Interest in Unit 2 and
the Unit 2 Common Facilities Interest in the Common Facilities. Where the
context so requires, the Undivided Interest includes the related Generation
Entitlement Share.
Undivided Interest Indenture Supplement shall mean the
supplement to the Indenture, substantially in the form of Exhibit C thereto,
pursuant to which the Owner Trustee causes the Undivided Interest and the Real
Property Interest to be subjected to the Lien of the Indenture.
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 in effect on the
date of execution of the Participation Agreement, as amended or modified from
time to time after such date.
Unit 1 and Unit 3 shall mean the Generating Units bearing such
designations at PVNGS.
Unit 2 shall mean the 1,270 megawatt unit, commonly known as
Unit 2, at PVNGS, all as more fully describe4 in. Item A of Exhibit B to the
Bill of Sale, together with all Capital Improvements thereto, but excluding all
Common Facilities.
Unit 2 Common Facilities Interest shall mean the Owner Trustee's
0.7555556% undivided interest in all Common Facilities.
Unit 2 Interest shall mean a percentage equal to the Owner
Trustee's 2.2666667% undivided interest in all of Unit 2.
-42-
6091.BURNHAM.1106.55:l
<PAGE>
Unit 2 Retained Assets shall mean (i) all resident fuel
assemblies, equipment and personal property constituting part of the Generating
Unit (as defined in the ANPP Participation Agreement) designated as Palo Verde
Nuclear Generating Station Unit 2 (other than common facilities) but excluded
from Unit 2 as set forth in Item A of. Exhibit B to the Bill of Sale and (ii)
all equipment and personal and real property constituting PVNGS common
facilities under the ANPP Participation Agreement but excluded from the Common
Facilities as set forth in Item B of Exhibit B to the Bill of Sale.
User shall mean a Person unrelated to PNM (within the meaning of
Section 318 of the Code) possessing the Undivided Interest after the Lease
Termination Date.
Weighted Factor means the weighted average of the annual
percentage rates (averaged over the Basic Lease Term and (x) if the Pricing
Assumptions contemplate the Lessor claiming investment tax credits, the basic
term of all other leases so contemplating (the ITC Leases) entered into by PNM
pursuant to the authority granted by the NMPSC Order or (y} if the Pricing
Assumptions do not contemplate the Lessor claiming investment tax credits, the
basic term of all other leases not so contemplating (the Non-ITC Leases) entered
into by PNM pursuant to the authority granted by the NMPSC Order) (i) as such
percentage rates may be adjusted from time to time pursuant to the terms of the
Facility Lease and the ITC Leases or the Non-ITC Leases, as the case may be, but
excluding any such adjustments in connection with supplemental financing of
capital improvements, and (ii) adjusted to reflect the amortization over the
Basic Lease Term and the basic term of the ITC Leases or the Non-ITC Leases, as
the case may be, of any gain or loss to the Lessee from any hedging or interest
protection program implemented by the Lessee with respect to the Notes and with
respect to the comparable notes to be issued with respect to the ITC Leases or
the Non-ITC Leases, as the case may be, which, when multiplied by the aggregate
of the Purchase Price and the. comparable purchase prices payable by the lessors
under the ITC Leases or the Non-ITC Leases, as the case may be, determines,
respectively, the amount of Basic Rent payable under the Facility Lease and the
comparable basic rent payable under the ITC Leases or the Non-ITC Leases, as the
case may be.
-43-
6091.BURNHAM.ll06.55:l
<PAGE>
================================================================================
AMENDMENT NO.1
Dated as of November 18, 1986
to
PARTICIPATION AGREEMENT
Dated as of August 12, 1986
among
LEASING CORPORATION,
as Owner Participant
FIRST PV FUNDING CORPORATION,
as Loan Participant
THE FIRST NATIONAL BANK OF BOSTON,
in its individual capacity and as Owner Trustee
under a Trust Agreement,
dated as of August 12, 1986,
with the Owner Participant, as Owner Trustee
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, 1916
with the Owner Trustee, as Indenture Trustee
and
PUBLIC SERVICE COMPANY OF NEW MEXICO,
as Lessee
================================================================================
Sale and Leaseback of an Undivided Interest in
Palo Verde Nuclear Generating Station
Unit 2 and Certain Related Common Facilities
================================================================================
6O9l.BURNHAM.DEBT.181B:1
<PAGE>
AMENDMENT NO. 1, dated as of November 18, 1986, to the
Participation Agreement, dated as of August 12, 1986, among BURNHAM LEASING
CORPORATION, a New York corporation (the Owner Participant), FIRST PV FUNDING
CORPORATION, a Delaware corporation (the Loan Participant), THE FIRST NATIONAL
BANK OF BOSTON, a national banking association, in its individual capacity (FNB)
and as Owner Trustee (the Owner Trustee) under a Trust Agreement, dated as of
August 12, 1986, with the Owner Participant, CHEMICAL BANK, a New York banking
corporation, in its individual capacity (Chemical Bank) and as Indenture Trustee
(the 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, a New Mexico corporation (the Lessee).
WITNESSETH:
WHEREAS, the Owner Participant, the Loan Participant, the
Owner Trustee, the indenture Trustee and the Lessee have previously entered into
a Participation Agreement dated as of August 12, 1986 (the Participation
Agreement); WHEREAS, the Initial Series Note was issued by the Owner Trustee in
connection with the acquisition of the Undivided Interest;
WHEREAS, Section 2(d) of the Participation Agreement provides for a refunding of
the Initial Series Note upon the satisfaction of the conditions set forth in
Sections 2(d) and 11(d) of the Participation Agreement;
WHEREAS, the parties hereto wish to refund the Initial Series
Note;
WHEREAS, such refunding of the Initial Series Note
necessitates this Amendment No. 1 to the Participation Agreement (Amendment No.
1);
WHEREAS, Section l0.1(viii) of the Indenture provides, among
other things, that the Owner Trustee and Indenture Trustee may, without the
consent of the Holders of Notes Outstanding, execute a supplement to the
Indenture in order to evidence the issuance of and to provide the terms of
Additional Notes;
WHEREAS, the Owner Trustee and the Indenture Trustee intend to
execute Supplemental Indenture No; 1, dated as of November 18, 1986
(Supplemental Indenture No. 1), to the Indenture, providing among other things,
for the. issuance under the Indenture of the Fixed Rate Notes (as defined in
Supplemental Indenture No. 1):
6091.BURNHAM.DEBT. 181B:1
<PAGE>
WHEREAS, Section 10.2(ii) of the Indenture provides, among
other things, that, upon receipt of a written instruction from the Lessee and
the Owner Trustee, the Indenture Trustee shall consent to certain amendments to
the Facility Lease; and
WHEREAS, the Owner Trustee and the Lessee intend to execute
Amendment No. 1, dated as of November 18, 1986 (Lease Amendment No. 1), to the
Facility Lease, among other things, to amend section 3(a) thereof and the
schedules thereto;
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: Amendment.
(a) Definitions. Except as otherwise defined herein and in the
recitals, capitalized terms used herein shall have the respective meanings set
forth in Appendix A to the Participation Agreement.
(b) Amendments to Tax Indemnification Agreement. The fact that
amendments to the Tax Indemnification Agreement are contained in this Amendment
No. 1 to the Participation Agreement does not mean that the consent or agreement
of any party to this Amendment No. 1 to the Participation Agreement other than
the Lessee and the Owner Participant is required to amend the Tax
Indemnification Agreement at this time or at any time in the future. The Lessee
and the Owner Participant hereby amend:
(1) Section l(a)(13) of the Tax Indemnification Agreement to
read in its entirety as follows:
"(13) The Owner Participant's marginal federal rate of
income tax is 46% in 1986, 39.95068% in 1987 and 34% in 1988
and thereafter, without giving effect to any credits against
tax.";
-2-
6091.BURNHAM.DEBT.181B:1
<PAGE>
(2) Section l(a)(5)(i) of the Tax Indemnification Agreement to
read in its entirety as follow:
"(i) in the case of the ITC Property, the portion of
the Purchase Price allocated to Unit 2 as set forth in the
Current Pricing Assumptions (as defined in Section 3(e) of the
Facility Lease), reduced by. the full amount of the Investment
Tax Credit taken by the Owner Participant with respect
thereto; and;
(3) Section 1(b) of the Tax Indemnification Agreement by
adding at the end thereof a new subsection (24) which reads as follows:
"(24) The ITC Property is transition property within
the meaning of Section 49(e) of the Internal Revenue Code of
1986, as amended.".
SECTION 2. Implementation.
(a) Forms. The forms of Supplemental Indenture No. 1 and Lease
Amendment No. 1 are attached hereto as Exhibits A and B, respectively. All
blanks in Supplemental Indenture No. 1 and Lease Amendment No. 1 shall be
appropriately filled in or completed, all in a manner consistent therewith and
with the Transaction Documents and the Financing Documents.
(b) Request by the Owner Participant. In accordance with
Section 2.01 of the Trust Agreement, the Owner Participant hereby requests that
the Owner Trustee (i) execute and deliver this Amendment No. 1, Supplemental
Indenture No. 1 and Lease Amendment No. 1 (collectively, the Refunding
Amendments); (ii) execute the Fixed Rate Notes and request the Indenture Trustee
to authenticate and deliver the Fixed Rate Notes pursuant to Section 3.5(2) of
the Indenture; and (iii) execute and deliver all other agreements, instruments
and certificates contemplated by the Transaction Documents, the Financing
Documents and the Refunding Amendments.
(c) Instruction and Consent. The Lessee and the Owner Trustee
hereby instruct the Indenture Trustee (i) to consent to Lease Amendment No. 1,
and the Indenture Trustee so consents, and (ii) to execute Supplemental
Indenture No. 1, all in accordance with Section 10.2 of the Indenture.
-3-
6091.BURNHAM.DEBT. 181B: 1
<PAGE>
(d) Recordations and Filing. The Lessee agrees that it shall
cause to be made the recordations and filings set forth in Schedule 1 hereto and
represents that such filing. and recordations are all the recordations and
filings that are necessary in order to preserve, protect and perfect the Owner
Trustee's rights and interests under the Facility Lease, as amended by Lease
Amendment No. 1, and the first and prior security interest of the Indenture
Trustee in the Lease Indenture Estate under the Indenture, as amended by
Supplemental Indenture No. 1.
(e) Refunding of Bonds. The Loan Participant agrees that,
unless it obtains the written consent of the Owner Participant, (1) it will
refund its Lease Obligation Bonds, Series 1986B (the Bonds), issued pursuant to
the Series 1986B Bond Supplemental Indenture, dated as of November 18, 1986 (the
series 1986B Bond Supplemental Indenture), only in connection with the refunding
of an equal principal amount of the Pledged Lessor Notes identified in schedule
2 to the Series 1986B Bond Supplemental Indenture (the Pledged Lessor Notes),
or, to the extent that the Lessor Notes described in Schedule 3 to such Series
1986B Bond Supplemental Indenture (the Lessor Notes) are subjected to the lien
of the Collateral Trust Indenture, in connection with the refunding of an equal
principal amount of such Lessor Notes and (2) subsequent to any Lessor Notes
being subjected to the lien of the Collateral Trust Indenture, or, if the Lessor
Notes are not so subjected, a mandatory redemption of Bonds pursuant to Section
1.04(a) of the Series 19863 Bond Supplemental Indenture, the principal amount of
Pledged Lessor Notes bearing interest at the rates per annum of 8.05%, 8.95% and
10.15% respectively, and Lessor Notes, if any, bearing interest at the rates per
annum of 8.05%, 8.95% and 10.15%, respectively, shall not be less than the
principal amount of Bonds bearing interest at the rates per annum of 8.05%,
8.95% and 10.15% respectively.
(f) Investment. Contemporaneously with the execution of this
Amendment No. 1, the Owner Participant is delivering to the Owner Trustee a
check in immediately available funds in the amount of $1,123.15 (the Additional
Investment) to be used in connection with the redemption of the Initial series
Note. The Owner Trustee's Investment shall, for all purposes of the
Participation Agreement, be increased by an amount equal to the additional
Investment.
-4-
6091.BURNHAM.DEBT.l8lB:l
<PAGE>
(g) Payment of Transaction Expenses. The Owner Participant
shall pay to the Owner Trustee on the Refunding Date the sum of $500,000 to be
disbursed by the Owner Trustee on account of Transaction Expenses as
contemplated by section 14 of the Participation Agreement.
SECTION 3. Miscellaneous.
(a) Execution. This Amendment No. 1 may be executed in any
number of counterparts and by the different parties hereto on 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. Although this Amendment No. 1 is dated as of the date first
above written for convenience, the actual dates of execution hereof by the
parties hereto are respectively the dates set forth under the signatures hereto,
and this Amendment No. 1 shall be effective on the latest of such dates.
(b) Governing Law. This Amendment No. 1 has been negotiated
and delivered in the State of New York and shall be governed by, and be
construed in accordance with, the laws of the State of New York.
(c) Responsibility For Recitals. The recitals contained herein
shall be taken as the statements of the Lessee, and the other parties hereto
assume no responsibility for the correctness of the same.
-5-
6091.BURNHAM.DEBT.l81B:1
<PAGE>
IN WITNESS WHEREOF, the parties hereto have each caused this
Amendment No. 1 to the Participation Agreement to be duly executed by their
respective officers thereunto duly authorized as of the dates set forth below.
BURNHAM LEASING CORPORATION
By:
-----------------------
Assistant Treasurer
Date: November 25, 1986
By:
-----------------------
President
Date: November 25, 1986
PUBLIC SERVICE COMPANY
OF NEW MEXICO
By:
----------------------
Vice President and
Corporate Controller
Date: November 25, 1986
-6-
6091.BURNHAM.DEBT.l81B:1
<PAGE>
THE FIRST NATIONAL BANK OF
BOSTON, in its individual
capacity and as Owner Trustee
By:
-----------------------
Authorized Officer
Assistant Vice President
Date: November 25, 1986
CHEMICAL BANK, in its individual
capacity and as Indenture Trustee
By:
----------------------
Vice President
Date: November 25, 1986
-7-
6091.BURNHAM.DEBT. l81B:l
<PAGE>
Schedule 1
to
Amendment No. 1
to
Participation Agreement
RECORDATIONS AND FILINGS
Part I. Recordations.
County Recorder, Maricopa County, Arizona:
(i) Amendment No. 1 to the Facility Lease; and
(ii) Supplemental Indenture No. 1 to the Indenture.
Part II. Filing:
(a) Separate financing statement amendments naming PNM as
"Lessee" and the Owner Participant's Owner Trustee as "Lessor", and the
Indenture Trustee, as Assignee of the Owner Trustee, with respect to the
Facility Lease, as amended by Lease Amendment No. 1, to be filed in the records
of:
(1) the Secretary of State of the State of Arizona
(regular and public utility filings);
(2) the Clerk of Maricopa County, Arizona;
(3) the Secretary of State of the State of New Mexico;
and
(4) the Clerk of Bernalillo County, New Mexico.
(b) Separate financing statement amendments naming the Owner
Trustee as "Debtor" and the Indenture Trustee as "Secured Party", with respect
to the Indenture, as amended by Supplemental Indenture No. 1, to be filed in the
records of:
(1) the Secretary of State of the State of Arizona;
6091.BURNHAM.DEBT.l8lB:1
<PAGE>
(2) the Clerk of Maricopa County, Arizona;
(3) the Secretary of State of the State of New Mexico;
and
(4) the Clerk of Bernalillo County, New Mexico.
(c) A financing statement amendment naming the Owner Trustee
as "Debtor" and the Indenture Trustee as "Secured Party", with respect to the
Indenture, as amended by Supplemental Indenture No. 1, to be filed with the
Secretary of State of the Commonwealth of Massachusetts.
(d) Separate financing statement amendments naming Funding
Corp as "Debtor" and the Collateral Trust Trustee as "Secured Party", and
listing, as collateral covered thereby, the "Pledged Property" under the
Collateral Trust Indenture, as amended and supplemented, to be filed with:
(1) the Secretary of State of the State of Arizona;
(2) the County Clerk of Maricopa County, Arizona;
(3) the Secretary of State of the State of New Mexico I
and
(4) the County Clerk of Bernalillo County, New Mexico.
(e) Supplemental Indenture No. 1 to the Indenture, to be filed
with the Secretary of State of the State of New Mexico, under the Public Utility
Act.
-2-
6091.BURNHAM. DEBT. l8lB: 1
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO
Alvarado Square
Albuquerque, New Mexico 87158
November 25, 1986
Burnham Leasing Corporation
60 Broad Street
New York, New York 10004
Attention: Assistant Treasurer
Current Pricing Assumptions
Participation Agreement
dated as of August 12, 1986,
as amended
Dear Sirs:
Attached hereto as Schedule 1 is a list of the current Pricing
Assumptions used in connection with the adjustment to Basic Rent, Casualty
Values, Special Casualty Values and Termination Values agreed to in connection
with the transactions consummated on November 25, 1986, with respect to the
above-captioned Participation Agreement and the Facility Lease, as amended, and
the Indenture, as amended, referred to therein.
We understand that the Current Pricing Assumptions reflected
on Schedule 1 hereto may not be amended without your prior written consent.
Sincerely,
PUBLIC SERVICE COMPANY OF NEW Mexico
By:
--------------------------
Vice President and
Corporate Controller
6091. BURNHAM DEBT. l8lH: 1
<PAGE>
SCHEDULE 1
CURRENT PRICING ASSUMPTIONS
Basic Rent, Casualty Values, Special Casualty Values and
Termination Values, as set forth in the Facility Lease, as amended by Amendment
No. 1 thereto, have been computed on the basis of the following pricing
assumptions:
1. Investment Percentage: 26.041%
2. Loan Percentage: 73.959%
3. Interest Rate on:
(a) Fixed Rate Note due January 15, 1992 8.05%
(b) Fixed Rate Note due January 15, 1997 8.95%
(a) Fixed Rate Note due July 15, 2012 10.15%
(d) Assumed Interest Rate for interim period 8.3493068%
4. Federal ACRS Deductions: 10-year public
utility property
deductions on the
basis of 90% of
Purchase Price
allocated to Unit 2
and 100% of Purchase
Price allocated to
Common Facilities
5. Investment Tax Credit Retained by the Lessor: 10% of Purchase Price
allocated to Unit 2
-2-
6091.BURNHAM.DEBT.181H:l
<PAGE>
6. Owner Participant's Tax
Year-End: December 31
7. Purchase Price: $l00,000,00O
(a) Purchase Price
Allocated to Unit 2: $87,935,000
(b) Purchase Price
Allocated to Common
Facilities: $12,065,000
8. Closing Date: August 18, 1986
9. Transaction Expenses: .8% of Purchase
Price paid by the
Owner Participant on
the closing Date and
.5% of the Purchase
Price paid on
November 25, 1986 in
addition to its
Investment (amortized
on a straight-line
basis from the date
paid through the end
of the basic lease
term)
10. Real Estate Investment: $32,836
11. Basic rent payment dates: January 15 and
July 15 of each year
(rent payable in
arrears)
12. First basic rent payment
date: July 15, 1987
13. Last basic rent payment
date: January 15, 2016
14. Interim rent payment date: January 15, 1987
15. Marginal Federal Tax Rate: 46% for 1986,
39.95068% for 1987
and 34% thereafter
-3-
6091.BURNHAM.DEBT.181H:1
<PAGE>
16. First Estimated Tax Payment
Date: September 15,1986
17. Tax Accounting Method: Accrual
18. Amortization of Fixed Rate
Notes: As set forth in the
schedule attached
thereto
19. Tax Estimation Method: 90% current estimate;
10% make-up payment
in March of the
following year
-4-
6091.BURNHAM.DEBT. 181H:1
<PAGE>
Accepted and Agreed:
BURNHAM LEASING CORPORATION
By:
-----------------------
Title:
<PAGE>
WHEN RECORDED RETURN TO:
GREG R. NIELSEN
SNELL & WILMER
3100 VALLEY BANK CENTER
PHOENIX, ARIZONA 85073
RECORDED IN OFFICIAL RECORDS OF
MARICOPA COUNTY, ARIZONA
Aug 18, '86 - 455
Keith Poletis, County Recorder
Fee-PGS 56 I.G.
================================================================================
ASSIGNMENT, ASSUMPTION
AND
FURTHER AGREEMENT
dated as of August 12, 1986
between
PUBLIC SERVICE COMPANY OF NEW MEXICO
and
THE FIRST NATIONAL BANK OF BOSTON,
not in its individual capacity, but
solely as Owner Trustee under a Trust
Agreement with Burnham
Leasing Corporation
================================================================================
Sale and Leaseback of an Undivided Interest
in Palo Verde Nuclear Generating Station Unit 2
and an Undivided Interest in
Certain Common Facilities
================================================================================
BURNHAM LEASING CORPORATION
<PAGE>
THIS ASSIGNMENT, ASSUMPTION AND FURTHER AGREEMENT, dated as of
August 12, 1986, between PUBLIC SERVICE COMPANY OF NEW MEXICO, a New Mexico
corporation (PNM), and THE FIRST NATIONAL BANK OF BOSTON, not in its individual
capacity, but solely as Owner Trustee (the Owner Trustee), under a Trust
Agreement, dated as of August 12, 1986, with BURNHAM LEASING CORPORATION, a New
York corporation, as Owner Participant (the Owner Participant).
WITNESSETH:
WHEREAS, PNM and the other ANPP Participants are parties to the
ANPP Participation Agreement (such terms and all other terms used in these
recitals without definition having the respective definitions to which reference
is made in Article I below);
WHEREAS, PNM has sold, and the Owner Trustee has purchased, the
Undivided Interest and the Real Property Interest for and in consideration of
the payment to PNM by the Owner Trustee of the Purchase Price, the purchase
price of the Real Property Interest and the assignments and assumptions herein
set forth; and
WHEREAS, PNM has leased from the Owner Trustee the Undivided
Interest and the Real Property Interest pursuant to the Facility Lease;
NOW, THEREFORE, in consideration of the premises and of other
good and valuable consideration, receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
For purposes hereof, capitalized terms used herein shall have
the meanings assigned to such terms in Appendix A hereto. References in this
Agreement to articles, sections and clauses are to articles, sections and
clauses in this Agreement unless otherwise indicated.
6091.BURNHAM.1106.07:1
<PAGE>
ARTICLE II
NONPARTITIONMENT
SECTION 2.01. Nonpartitionment. The Owner Trustee hereby waives
any rights it may have to partition Unit 2, the Common Facilities or the PVNGS
Site, whether by partitionment in kind or by sale and division of proceeds, and
further agrees that it will not resort to any action at law or in equity to
partition Unit 2 or the Common Facilities, and it waives the benefits of all
laws that may now or hereafter authorize such partition for a term (i) which
shall be coterminous with the term of ANPP Participation Agreement or (ii) which
shall be for such lesser period as may be required under Applicable Law.
ARTICLE III
ASSIGNMENTS; EXERCISE OF RIGHTS
SECTION 3.01. Assignment of Warranties. PNM hereby ASSIGNS to
the Owner Trustee an undivided interest, equal to a Unit 2 Interest, in the case
of property not constituting Common Facilities, or a Common Facilities Interest,
in the case of Common Facilities, in, to and under any and all warranties of and
other claims against dealers, manufacturers, vendors, contractors and
subcontractors relating to Unit 2 and the Common Facilities.
SECTION 3.02. Assignment of the ANPP Participation Agreement.
(a) In furtherance of the purchase and sale referred to above, PNM hereby
ASSIGNS to the Owner Trustee an undivided interest, in, to and under all of
PNM's rights under the ANPP Participation Agreement, equal to 2.2666667% to the
extent that such rights relate to Unit 2 (including, but without limitation, a
percentage entitlement equal to 2.2666667% of the Net Energy Generation and
Available Generating Capability (as each such term is defined in the ANPP
Participation Agreement) of Unit 2) and equal to 0.7555556% to the extent such
rights relate to the Common Facilities.
(b) In furtherance of the lease of the Undivided Interest and
the Real Property Interest the Owner Trustee hereby ASSIGNS to PNM the rights
-2-
609l.BURNHAM.1106.07:1
<PAGE>
assigned under paragraph (a) until the Lease Termination Date, subject to the
terms of the Facility Lease.
SECTION 3.03. Exercise of Rights as Participant under the ANPP
Participation Agreement. (a) Except as provided in Sections 15.2.2, 15.6.4 and
Section 15.10 of the ANPP Participation Agreement (or any comparable successor
provision) PNM shall be and remain the sole "Participant" for all purposes of
the ANPP Participation Agreement and the sole representative (with power to
bind) in all dealings with the other ANPP Participants in relation to the
Undivided Interest, the Real Property Interest and the rights assigned to the
Owner Trustee pursuant to this Agreement; provided, however, that the foregoing
shall not limit in any way any liability or obligation that PNM may incur to the
Owner Trustee or the Owner Participant under any Transaction Document as a
result of the exercise by PNM of rights as a "Participant", under the ANPP
Participation Agreement (including, but without limitation, any liability that
PNM may incur under Section 16 of the Facility Lease as a result of an Event of
Default).
(b) Unless the ANPP Participation Agreement shall otherwise
permit, any right conferred on the Owner Trustee by Section 15.2.2 of the ANPP
Participation Agreement shall be exercised as required by Section 15.6.3.3 of
said Agreement.
(c) The provisions of this Section 3.03 shall remain in full
force and effect until such time as the ANPP Administrative Committee or the
ANPP Participants shall otherwise consent.
ARTICLE IV
ASSUMPTION; RELEASE
SECTION 4.01. Assumption by Owner Trustee. Except as
contemplated by Section 5(a) of the Facility Lease, the Owner Trustee agrees
that, effective on and as of the Lease Termination Date, unless (i) a Default or
Event of Default shall have occurred and be continuing or an Event of Loss or
Deemed Loss Event shall have occurred or (ii) such Lease Termination Date
occurred by reason of a termination of the Facility Lease pursuant to Section 16
-3-
6091.BURNHAM.1106.07:1
<PAGE>
thereof, the Owner Trustee or, if a Person shall become a transferee of the
Undivided Interest and the Real Property Interest pursuant to Section 15.10 of
the ANPP Participation Agreement (an ANPP Transferee), such ANPP Transferee?
shall assume and agree to pay, perform and discharge a portion equal to a Unit 2
Interest, in the case of property not constituting Common Facilities, or a Unit
2 Common Facilities Interest, in the case of Common Facilities, of all
liabilities and obligations of PNM under, or with respect to, the ANPP Project
Agreements, attributable to Unit 2 and the Common Facilities, other than any and
all costs relating to, allocable to, or incurred in connection with,
Decommissioning.
SECTION 4.02. Release. Upon the assumption and agreement by an ANPP
Transferee pursuant to Section 4.01 (whether at the Lease Termination Date or
thereafter), the Owner Trustee shall therewith and thereupon be released and
discharged from its obligations under Section 4.01 arising on or after such
assumption and agreement.
ARTICLE V
NO RELEASE OF PNM; REIMBURSEMENT
SECTION 5.01. No Release of PNM. Notwithstanding the provisions
of Article IV or any other provision hereof or of any other Transaction
Document, and except to the extent provided in Section 15.10 of the ANPP
Participation Agreement (or any comparable successor provision), PNM shall not
be released from any liability or obligation under the ANPP Project Agreements,
or otherwise, with respect to PVNGS, and PNM shall remain liable for the payment
and performance of all such liabilities and obligations.
SECTION 5.02. Reimbursement. Unless a Default or an Event of
Default shall have occurred and be continuing or an Event of Loss or Deemed Loss
Event shall have occurred, from and after the Lease Termination Date (except a
Lease Termination occurring by reason of a termination of the Facility Lease
pursuant to Section 16 thereof), upon the payment or performance by PNM of any
liability or obligation in respect of which the Owner Trustee shall also have
become obligated in consequence of Article IV or the ANPP Participation
Agreement, and for so long as the Owner Trustee shall be so liable, PNM shall be
entitled to prompt reimbursement by the Owner Trustee from the Trust Estate for
all amounts expended in connection with such payment or performance.
-4-
6091.BURNHAM.1106.07:1
<PAGE>
ARTICLE VI
FURTHER AGREEMENTS OF PNM
SECTION 6.01. Agreement to Sell or Lease Unit 2 Retained Assets.
Upon a transfer to an ANPP Transferee, PNM agrees in respect of the Undivided
Interest and the Real Property Interest, (i) if such ANPP Transferee is a
purchaser of the Undivided Interest and the Real Property Interest, to sell to
such ANPP Transferee, at a price equal to the then Fair Market Sales Value
thereof (determined on the basis of the then actual condition of the Unit 2
Retained Assets), an undivided interest, equal to 2.2666667%, to the extent
related to Unit 2 and O.755S556%, to the extent related to the PVNGS common
facilities, in and to the Unit 2 Retained Assets, or (ii) if such ANPP
Transferee is a lessee of the Undivided Interest and the Real Property Interest,
to lease or otherwise make available to such ANPP Transferee, at a rent equal to
the then Fair Market Rental Value (determined on the basis of the then actual
condition of the Unit 2 Retained Assets) thereof, an undivided interest, equal
to 2.2666667%, to the extent related to Unit 2 and 0.7555556%, to the extent
related to the PVNGS common facilities, in and to the Unit 2 Retained Assets. If
such ANPP Transferee and PNM cannot agree on the Fair Market Sales Value or the
Fair Market Rental Value of the Unit 2 Retained Assets, the ANPP Transferee may
initiate the Appraisal Procedure. Any such sale or lease by PNM shall be
accomplished by an appropriate bill of sale or lease.
SECTION 6.02. Agreement to Assign or Make Available ANPP Project
Agreements. Upon a transfer to an ANPP Transferee, PNM agrees in respect of the
Undivided Interest and the Real Property Interest, (i) if such ANPP Transferee
is a purchaser of the Undivided Interest and the Real Property Interest, to
assign to such ANPP Transferee an undivided interest, equal to 2.2666667%, to
the extent related to Unit 2 and 0.7555556%, to the extent related to the PVNGS
common facilities or the ANPP Project Agreements (other than the ANPP
-5-
609l.BURNHAM.1106.07:l
<PAGE>
Participation Agreement), and (ii) if such ANPP Transferee is a lessee of the
Undivided Interest and the Real Property Interest, to assign for the term of
such lease to such ANPP Transferee an undivided interest, equal to 2.2666667%,
to the extent related to Unit 2 and 0.7555556% to the extent related to the
PVNGS common facilities of the ANPP Project Agreements (other than the ANPP
Participation Agreement). Any assignment pursuant to this Section 6.02 shall be
accomplished by an appropriate instrument of assignment.
SECTION 6.03. Agreements to Seek Amendments to the ANPP
Participation Agreement and the License. PNM agrees to use its best efforts to
obtain any required amendments to the ANPP Participation Agreement and the
License and all other Governmental Actions necessary to permit PNM to act as
Agent of the Owner Trustee in the manner contemplated by Section 7.01 hereof, if
(a) (i) PNM shall not have elected to purchase the Undivided Interest and the
Real Property Interest as provided in Section 13(b) of the Facility Lease and
(ii) there shall not be an ANPP Transferee in respect of the Undivided Interest
and the Real Property Interest or (b) PNM shall be obligated to surrender
p05session of the Undivided Interest and the Real Property Interest pursuant to
Section 5(a) of the Facility Lease, PNM acknowledges and agrees that neither the
Owner Trustee nor the Owner Participant shall have any obligation whatsoever to
assist PNM in obtaining any such amendments and Governmental Actions.
SECTION 6.04. Owner Trustee's Agreement. If PNM becomes
obligated to sell, lease, otherwise make available or assign in accordance with
Sections 6.01 and 6.02 hereof, the Owner Trustee shall (at the direction of the
Owner Participant) require or cause the ANPP Transferee to purchase, lease,
accept or assume, as the case may be, the property or rights being sold, leased,
made available or assigned by PNM.
-6-
6091.BURNHAM.1106.07:1
<PAGE>
ARTICLE VII
INTERIM AGENCY ARRANGEMENTS
SECTION 7.01. Designation of Agent. From and after the Lease
Termination Date and until a transfer to an ANPP Transferee in respect of the
Undivided Interest and the Real Property Interest (such period being referred to
as the Agency Period), PNM shall be, and the Owner Trustee hereby designates PNM
as, the initial agent (PNM or any other Person appointed in its place by the
Owner Trustee being herein called the Agent) of the Owner Trustee in the
exercise of all rights assigned to the Owner Trustee hereunder.
SECTION 7.02. Operation of Unit 2. During the Agency Period1 the
Agent shall administer the operation of the Undivided Interest and the Real
Property Interest in accordance with this Agreement and all instructions of the
Owner Trustee in accordance with Applicable Law. If, however, the Owner Trustee
and any User shall, prior to, or at any time during, the Agency Period, enter
into any joint ownership and operating agreement with other Persons having a
legal right to, or right to use, any other undivided interest in Unit 2, the
Agent agrees to join in, and be bound by, the terms of such agreement if the
Agent's performance thereunder shall not violate, or result in a violation of,
any Applicable Law or the License. The Owner Trustee agrees to give the Agent
reasonable prior written notice of the commencement of the negotiation of any
such agreement.
SECTION 7.03. ANPP Participation Agreement. PNM agrees that,
at all times during the Agency Period, it will perform all obligations and
discharge all liabilities for which it is responsible as a "Participant" under
the ANPP Participation Agreement in respect of the Undivided Interest and the
Real Property Interest. In the performance of the foregoing agreement, PNM shall
not exercise its rights as an ANPP Participant to cause Capital Improvements to
be made to Unit 2 and the Common Facilities unless the Owner Trustee shall have
agreed to provide funds for the payment of the Owner Trustee's Share of the cost
of such Capital Improvements to PNM prior to the date on which such amounts
shall be due with respect thereto under the ANPP Participation Agreement.
-7-
6091.BURNHAM.1106.07:1
<PAGE>
SECTION 7.04. Support. Except with respect to the Unit 2
Retained Assets for which provision is made in Section 7.06, PNM covenants and
agrees that, at all times during the Agency Period, it will provide, or make
available, to the Owner Trustee all PNM'S rights in and to the Unit 2 Retained
Assets and the ANPP Project Agreements to the extent relating to the Undivided
Interest and the Real Property Interest.
SECTION 7.05. Compensation. As compensation for its obligations
under Sections 7.02, 7.03 and 7.04, if no Event of Default based upon PNM's
failure to perform its obligations under Section 5(a) of the Facility Lease
shall have occurred and be continuing, PNM shall be entitled to receive, and the
Owner Trustee hereby agrees to pay, an amount equal to the Owner Trustee's share
of the aggregate of (i) amounts paid by PNM as provided in Section 7.03 to the
extent reasonably allocable to the Undivided Interest and the Real Property
Interest and (ii) reasonable compensation for the Unit 2 Retained Assets and
(iii) out-of-pocket expenses incurred by PNM or the Agent, as the case may be,
in connection with the performance of its agreements in this Article VII.
Compensation under this Section 7.05 shall be paid promptly in cash upon receipt
of an invoice from PNM.
SECTION 7.06. Transmission; Transmission Agreement. {a) PNM
covenants and agrees that, (i) at all times during the Agency Period, the Owner
Trustee shall have the right to wheel, under normal transmission operating
conditions, the Owner Trustee's share of power and energy in respect of the
Undivided Interest over transmission equipment in which PNM now owns or may
hereafter acquire an ownership interest, between Unit 2 and the ANPP Switchyard
and (ii) PNM will wheel such Owner Trustee's share to the extent of transmission
capacity available to PNM not subject to existing commitments and not required
by customers of PNM at the time such wheeling arrangement is entered into.
(b) Based upon the respective rights, duties obligations of the
Owner Trustee and PNM set forth in Section 7.06(a), if PNM shall fail or decline
to give the notice of renewal of the Facility Lease or purchase of the Undivided
Interest, in each case as provided in Section 13(a) of the Facility Lease, PNM
and the Owner Trustee shall forthwith commence the negotiation in good faith of
-8-
6091.BURNHAM.1106.07:l
<PAGE>
a definitive transmission agreement, not inconsistent with the terms and
provisions of Section 7.06 (a), but containing sufficient detail for the proper
wheeling of power and energy, under normal transmission operating conditions,
over the equipment of PNM referred to in such Section 7.06 (a) under then
existing circumstances, for the exercise or stipulation, as the case may be, of
the respective rights, duties and obligations of the Owner Trustee shall
complete such negotiations and execute such definitive transmission agreement
prior to the Lease Termination Date and such definitive transmission agreement
shall provide for compensation to PNM for the transmission services so provided
at the Fair Market Sales Value thereof.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Successors and Assigns. This Agreement shall be
binding upon the successors and assigns of each of PNM and the Owner Trustee.
SECTION 8.02. Governing Law. The interpretation of this
Agreement and the rights and obligations of the parties hereto-shall be governed
by and construed and enforced in accordance with the law of the State of New
York.
SECTION 8.03. Counterpart Execution. This Agreement 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.
SECTION 8.04. Amendments. The terms of this Agreement shall not
be waived, altered, modified, amended, supplemented or terminated in any manner
whatsoever, except by written instrument signed by PNM and the Owner Trustee.
SECTION 8.05. Survival. All agreements and covenants contained
in this Agreement or any agreement, document or certificate delivered pursuant
hereto or in connection herewith shall survive the execution and delivery of
this Agreement.
-9-
6091.BURNHAM.1106.07:1
<PAGE>
SECTION 8.06. Severability of Provisions. Any provision of this
Agreement which may be determined by competent authority to be prohibited or
unenforceable in any jurisdiction shall1 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 provisions in any
other jurisdiction. To the extent permitted by Applicable Law, PNM hereby waives
any provision of law which renders any provision hereof prohibited or
unenforceable in any respect.
SECTION 8.07. Headings. The division of this Agreement 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 Agreement.
SECTION 8.08. Disclosure of Beneficiary. Pursuant to Arizona
Revised Statutes i33-401, the beneficiary of the Trust Agreement is Burnham
Leasing Corporation, a New York corporation, whose address is 60 Broad Street,
New York, New York 10004, Attention: Assistant Treasurer. A copy of the Trust
Agreement is available for inspection at the offices of the Owner Trustee at 100
Federal Street, Boston, Massachusetts 02110 Attention of Corporate Trust
Division.
-10-
6091.BURNHAM.1106.07:1
<PAGE>
IN WITNESS WHEREOF, the parties hereto have each caused this
Agreement to be duly executed in New York, New York by their respective officers
thereunto duly authorized.
PUBLIC SERVICE COMPANY OF NEW MEXICO
By
---------------------------------
Vice President, Revenue
Management
THE FIRST NATIONAL BANK OF
BOSTON, not in its individual capacity, but
solely as Owner Trustee under a Trust
Agreement, dated as of August 12, l986, with
Burnham Leasing Corporation
By:
---------------------------------
AUTHORIZED OFFICER
-11-
6091.BURNHAM.1106.07:1
<PAGE>
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
The foregoing instrument was acknowledged before me this 17th
day of August, 1986, by J.E. Sterba, the Vice President, Revenue Management of
PUBLIC SERVICE COMPANY OF NEW MEXICO, a New Mexico corporation, on behalf of the
corporation.
----------------
Notary Public
David A. Spivak
Notary Public, State of New York
No. 31-4693468
Qualified in New York County
Commission Expires March 30, 1987
STATE OF NEW YORK )
)SS.
COUNTY OF NEW YORK )
The foregoing instrument was acknowledged before me this 17th
day of August, 1986, by K. D. Woods, Vice President of the THE FIRST NATIONAL
BANK OF BOSTON, a national banking association, on behalf of the banking
association under that certain Trust Agreement dated as of August 12, 1986.
----------------------
Notary Public
David A. Spivak
Notary Public, State of New York
No. 31-4693468
Qualified in New York County
Commission Expires March 30, 1987
-12-
6091.BURNHAM.1106.07:1
<PAGE>
Appendix A
DEFINITION OF TERMS
The terms defined herein relate to the Participation Agreement
(as defined below) and certain Transaction Documents executed1 or to be
executed, in connection with the Participation Agreement. Such terms include the
plural as well as the singular. Any agreement defined or referred to below shall
include each amendment, modification and supplement thereto and waiver thereof
as may become effective from time to time, except where otherwise indicated. Any
term defined below by reference to any agreement shall have such meaning whether
or not such document is in effect. The terms "hereof", "here in", "hereunder"
and comparable terms refer to the entire agreement with respect to which such
terms are used and not to any particular article, section or other subdivision
thereof.
If, and to the extent that, either the Participation Agreement
or any other Transaction Document which incorporates this Appendix shall be
amended from time to time pursuant to the respective terms thereof, this
Appendix shall be, or be deemed to have been, amended concurrently with the
execution and delivery of each such amendment in order to conform the
definitions herein to the new or amended definitions set forth in or required by
each such amendment.
Additional Bonds shall mean Bonds in addition to the Initial
Series Bonds.
Additional Equity Investment shall have the meaning specified in
Section 8(f) of the Facility Lease.
Additional Notes shall have the meaning set forth in the
recitations in the Indenture, which Additional Notes shall be issued, if at all,
pursuant to Section 3.5 of the Indenture.
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. For purposes of this definition, the
6091.BURNHAM.1106.55:l
<PAGE>
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
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)
computed at the highest marginal statutory tax rate resulting from the receipt
(actual or constructive) of such two payments imposed under any Applicable Law
or by any Governmental Authority, be equal to such payment received or deemed to
have been received.
Agent and Agency period shall have the respective meanings set
forth in Section 7.01 of the Assignment and Assumption.
ANPP Administrative Committee shall mean the committee
established pursuant to Section 6.1.1 of the ANPP Participation Agreement (or
any comparable successor provision).
ANPP Operating Committee shall mean the committee established
pursuant to Section 6.1.2 of the ANPP Participation Agreement (or any comparable
successor provision).
ANPP Participants shall have the meaning assigned to the word
Participant under the ANPP Participation Agreement.
ANPP Participation Agreement shall mean the Arizona Nuclear
Power Project Participation Agreement, dated as of August 23, 1973, among APS,
Salt River, Southern California, PNM, El Paso, LADWP and SCPPA, as heretofore
and hereafter amended pursuant to the terms thereof.
-2-
6091.BURNHAM.1106.55:1
<PAGE>
ANPP Project Agreements shall mean the ANPP Participation
Agreement and the other Project Agreements (as such term is defined in the ANPP
Participation Agreement).
ANPP Switchyard shall mean the ANPP High Voltage Switchyard
located at the PVNGS Site, the ownership, construction, operation and
maintenance of which are governed by the ANPP High Voltage Switchyard
Participation Agreement executed as of August 20, 1981 (APS Contract No.
2252-419,00), the parties to which are APS, PNM, Salt River, El Paso, LADWP and
Southern California.
ANPP Transferee shall have the meaning set forth in Section 4.01
of the Assignment and Assumption.
Applicable Law shall mean all applicable taws, statutes,
treaties, rules, codes, ordinances, regulations, permits, certificates, orders,
licenses and permits of any Governmental Authority, interpretations of any of
the foregoing by a Governmental Authority having jurisdiction, and judgments,
decrees, injunctions, writs, orders or like action of any court, arbitrator or
other judicial or quasi judicial tribunal (including those pertaining to health,
safety, the environment or otherwise).
Appraisal Procedure shall mean a procedure whereby two
independent appraisers, one chosen by the Lessee and one by the Lessor, shall
mutually agree upon the value, period. or amount (including Economic Useful
Life) then the subject of an appraisal. If either the Lessor or the Lessee, as
the case may be, shall determine that a value, period or amount to be determined
(other than fair market value under Section 5(b) of the Facility Lease) under
the Facility Lease or any other Transaction document cannot be established
promptly by mutual agreement, such party shall appoint its appraiser and deliver
a written notice thereof to the other party. Such other party shall appoint its
appraiser within 15 days after receipt from the other party of the foregoing
written notice. If within 20 days after appointment of the two appraisers, as
described above, the two appraisers are unable to agree upon the value, period
or 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
-3-
6091.BURNHAM.1106.55:1
<PAGE>
first two appraisers fail to agree upon the appointment of a third appraiser
within such period, 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 nuclear electric generating
plant 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
ten days after the selection of such third appraiser. If three appraisers shall
be so appointed and the determination of one appraiser is disparate from the
middle determination by more than twice the amount, period or value by which the
third 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. The
fees and expenses of appraisers incurred in connection with any Appraisal
Procedure relating to any transaction contemplated by any provision of any
Transaction Document shall be divided equally between the Lessor and the Lessee
(except pursuant to Section 16 of the Facility Lease, which shall be paid solely
by the Lessee).
APS shall mean Arizona Public Service Company, an Arizona
corporation.
Arizona Public Utility Act Sha11 mean Chapter 2, Title 40,
Arizona Revised Statutes.
Assigned Payments shall have the meaning specified in Section
2.1(1) of the Indenture.
Assignment and Assumption shall mean the Assignment, Assumption
and Further Agreement, dated as of August 12, 1986, between PNM and the Owner
Trustee.
Assignment of Beneficial Interest shall mean the Deed and
Assignment of Beneficial Interest under Title USA Company of Arizona Trust No.
530, dated as of August 18, 1986, from PNM to the Owner Trustee.
-4-
6091.BURNHAM.1106.55:1
<PAGE>
Assumption Agreement shall mean the Assumption Agreement of PNM
substantially in the form of Exhibit B to the Indenture.
Assumptions shall mean the Pricing Assumptions and the Tax
Assumptions.
Atomic Energy Act shall mean the Atomic Energy Act of 1954, as
amended, and regulations from time to time issued, published or promulgated
pursuant thereto.
Authorized Officer shall mean, with respect to the Indenture
Trustee, any officer of the Indenture Trustee who shall be duly authorized by
appropriate corporate action to authenticate a Note and shall mean, with respect
to the Owner Trustee, any officer of the Owner Trustee who shall be duly
authorized by appropriate corporate action to execute any Transaction Document
Bankruptcy Code shall mean the Bankruptcy Reform Act of 1978 as
amended, and any law with respect to bankruptcy, insolvency or reorganization
successor thereto.
Basic Lease Term shall mean the initial term of the Facility
Lease, which shall begin on the closing Date and end on January 15, 2016, unless
earlier terminated.
Basic Rent shall have the meaning set forth in Section 3 (a) of
the Facility Lease.
Basic Rent Payment Dates shall mean and include January 15,
1987, and each January 15 and July 15 of each year thereafter through and
including January 15, 2016, and, if the Lessee shall elect the Renewal Term,
each January 15 and July 15 of each year during the Renewal Term, commencing
July 15, 2016 and ending on the last day of the Renewal Term.
Bill of Sale shall mean the Deed and Bill of Sale, dated as of
August 18, 1986, between PNM and the Owner Trustee.
-5-
6091.BURNHAM.1106.55:1
<PAGE>
Bonds shall mean all bonds, notes and other evidences of
indebtedness from time to time issued and outstanding under the Collateral Trust
Indenture, including, but without limitation, the Initial Series Bonds, the
Releveraging Bonds, the Refunding Bonds and any other Additional Bonds.
Business Day shall mean any day other than a Saturday or Sunday
or other day on which banks in Albuquerque, New Mexico, New York, New York or
Boston, Massachusetts are authorized or obligated to be closed.
Capital Improvement shall mean (a) the addition, betterment or
enlargement of any property constituting part of Unit 2 or the Common Facilities
or the replacement of any such property with other property, irrespective of
whether (i) such replacement property constitutes an enlargement or betterment
of the property which it replaces, (ii) the cost of such addition, betterment,
enlargement or replacement is or may be capitalized, or charged to maintenance
or repairs, in accordance with the Uniform System of Accounts or (iii) such
addition, betterment or enlargement is or is not included or reflected in the
plans and specifications for Unit 2 or the Common Facilities, as built, and (b)
any alteration, modification, addition or improvement to Unit 2, other than
original, substitute or replacement parts incorporated into Unit 2 or the Common
Facilities.
Casualty Value, as of any Basic Rent Payment Date, shall mean
the percentage of Facility Cost set forth opposite such date in Schedule 1 to
the Facility Lease. Casualty Value as of any Basic Rent Payment Date during the
Renewal Term shall mean the unamortized portion as of such Basic Rent Payment
Date of the Fair Market Sales Value of the Undivided Interest, determined by the
straight-line amortization of such Fair Market Sales Value at the commencement
of the Renewal Term over the period from such commencement date through the
remaining term of the License determined pursuant to the Appraisal Procedure
undertaken in accordance with the last sentence of Section 13(a) of the Facility
Lease. Anything contained in the Participation Agreement or the Facility Lease
to the contrary notwithstanding, Casualty Value shall be, when added to all
other amounts which the Lessee is required to pay under Section 9(c) of the
Facility Lease (taking into account any assumption of Notes by the Lessee) under
-6-
609l.BURNHAM.1106.55:1
<PAGE>
any circumstances and in any event, in an amount at least sufficient to pay in
full, as of any Basic Rent Payment Date, the aggregate unpaid principal amount
of all Notes Outstanding at the close of business on such date, together with
accrued and unpaid interest on such Notes.
Change in Tax Law shall mean any change in the Code or successor
legislation enacted by either the Ninety-ninth or the One Hundredth Congress
(other than a change in respect of an alternative minimum tax or an add-on
minimum tax having the same effect as an alternative minimum tax), or if prior
to January 15, 1997 (i) there is enacted any technical correction thereto, or
(ii) there are adopted, promulgated, issued or published any proposed, temporary
or final Regulations resulting therefrom (regardless of the effective date of
such technical corrections or Regulations, but only if such technical
corrections or Regulations would affect Net Economic Return), provided, however,
that a Change in Tax Law shall occur in the event the provision set forth in
Section 1509(b) of H.R. 3838 as passed by the U.S. House of Representatives on
December 17, 1985 and Section 1809(b) of H.R. 3838 as passed by the U.S. Senate
on June 24, 1986 shall fail to be enacted into law in the form therein set forth
or, if such provision is so enacted into law1 it shall not apply to the Common
Facilities.
Chemical Bank shall mean Chemical Bank, a New York banking
corporation.
Chief Financial Officer shall mean the person designated by the
Board of Directors of PNM as the chief financial officer of PNM.
Claims shall mean liabilities, obligations, losses, damages,
penalties, claims (including, without limitation, claims involving liability in
tort, strict or otherwise), actions, suits, judgments, costs, interest, expenses
and disbursements, whether or not any of the foregoing shall be founded or
unfounded (including, without limitation, legal fees and expenses and costs of
investigation) of any kind and nature whatsoever without any limitation as to
amount.
-7-
6091.BURNHAM.1106.55:1
<PAGE>
Closing shall mean the proceedings which are contemplated by
Section 4 of the Participation Agreement.
Closing Date shall mean August 18, 1986.
Code shall mean the Internal Revenue Code of 1954, as amended,
or any comparable successor law.
Collateral Trust Indenture shall mean the Collateral Trust
Indenture, dated as of December 16, 1985, among PNM, Funding Corp. and the
Collateral Trust Trustee.
Collateral Trust Indenture Supplement shall mean a supplement to
the Collateral Trust Indenture.
Collateral Trust Trustee shall mean Chemical Bank, not in its
individual capacity, but solely as Collateral Trust Trustee under the Collateral
Trust Indenture, and the successors or assigns of such Trustee.
Common Facilities shall mean all PVNGS common facilities, as set
forth in Item B of Exhibit B to the Bill of Sale, other than common facilities
excluded therefrom in said item B.
Common Facilities Interest shall mean the Owner Trustee's
portion of the Lessee's original 10.2% undivided interest in all Common
Facilities at PVNGS, the percentage of which is set forth in Schedule 2 to the
Participation Agreement.
Coverage Ratio shall mean the fraction (i) the denominator of
which shall be the sum (calculated as of a date no earlier than 135 days prior
to the date of calculation) of (x) the interest that will be payable during the
twelve-month period following the date of the transaction with respect to which
a calculation is required to be made on the debt (both long-term and short-term)
of the Surviving Lessee, and (y) the interest portion of payments due during the
twelve-month period following the date of such transaction on lease obligations
of the Surviving Lessee with a term in excess of one year, and (ii) the
numerator of which shall be the sum of (x) the pro forma net earnings (before
taxes and excluding allowance for funds used during construction) of the
Surviving Lessee for a twelve-month period ending no earlier than 135 days prior
to the date of such transaction, and (y) such denominator.
-8-
6091.BURNHAM.1106.55:1
<PAGE>
Cure Option shall have the meaning set forth in Section 16(e) of
the Facility Lease.
Debt shall mean (A) indebtedness for borrowed money, (B)
obligations as lessee under leases and (C) obligations under direct or indirect
guarantees 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 clause (A)
or (B) above, if the principal amount (or equivalent) thereof is greater than
$20,000,000 for any one item of Debt or $30,000,000 in the aggregate for all
items of Debt of the Lessee).
Decommissioning shall mean the decommissioning and retirement
from service of Unit 2, and the related possession, maintenance and disposal of
radioactive material used in or produced incident to the possession and
operation of Unit 2, including, without limitation, (i) placement and
maintenance of Unit 2 in a state of protective storage, (ii) in-place entombment
and maintenance of Unit 2, (iii) dismantlement of -Unit 2, (iv) any other form
of decommissioning and retirement from service required by or acceptable to the
NRC and (V) all activities undertaken incident to the implementation thereof and
to the obtaining of NRC authority therefor, including, without limitation,
maintenance, storage, custody, removal, decontamination, and disposition of
materials, equipment and fixtures, razing of Unit 2, removal and disposition of
debris from the PVNGS Site, and restoration of the PVNGS Site related to Unit 2
for unrestricted use.
Decommissioning Costs shall mean all costs, liabilities and
expenses relating or allocable to, or incurred in connection with, the
Decommissioning of Unit 2, including, without limitation, (i) any and all costs
of activities undertaken to terminate NRC licensing authority and requirements
to own, operate and possess Unit 2 and to possess radioactive material used in
or produced incident to the possession and operation of Unit 2; and (ii) any and
all costs of activities undertaken, prior to termination of all NRC licensing
authority and requirements with respect to Unit 2 and the radioactive material
used in or produced incident to the possession and operation of Unit 2, to
possess, maintain, and dispose of radioactive material used in or produced
incident to the possession and operation of Unit 2.
-9-
6091.BURNHAM.1106.55:1
<PAGE>
Deed shall mean the Deed, dated as of August 12, 1986, from PNM
to the Owner Trustee
Deemed Loss Event shall mean any of the following events (unless
waived by the Owner Participant, which waiver shall be in writing and may be
either indefinite or for a specified period):
(1) Regulation. 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 the
Real Property Interest or any part thereof by the Owner Trustee (or any
beneficial interest therein by the Owner Participant) or the lease of
the Undivided Interest or the Real Property 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 clause (1), whether by
reason of such ownership or lease transactions, or otherwise) shall be
deemed by any Governmental Authority having jurisdiction to be, or shall
become subject to regulation (other than Non-Burdensome Regulation) as,
an "electric utility" or a "public utility" under any Applicable Law or
a holding company under the Holding Company Act, or as a consequence of
any Governmental Action, and the effect thereof on the Owner Trustee or
the Owner Participant would be, in the sole judgment of either such
Person, acting on advice of counsel, adverse, and the Owner Trustee and
the Owner Participant have not waived application of this definition,
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 clause
(1), 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,
-10-
6091.BURNHAM.1106.55:1
<PAGE>
sale, forfeiture or loss of, or the creation of any Lien on, the
Undivided Interest, the Real Property Interest or any part thereof or
any interest therein, (ii) such contest does not adversely affect the
Undivided Interest, the Real Property Interest or any part thereof or
any other property, assets or rights of the Owner Trustee or the Owner
Participant or the Lien of the Indenture thereon, (iii) the Lessee shall
have furnished the Owner Trustee, 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 and the effects thereof, (iv) such
determination and the effects thereof 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 Owner Trustee and the Owner Participant, and the Owner
Participant shall have determined that the Owner Trustee's continued
ownership of the Undivided Interest and the Real Property Interest
during the pendency of such contest or such contest will not adversely
affect its or its Affiliates' business, and (V) the Lessee shall have
indemnified the Owner Trustee 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 the Lessee's contest;
(2) Price-Anderson Act Change. If there shall be, at any time
during the Lease Term, any change in the Price-Anderson Act, the Atomic
Energy Act or the regulations of the NRC, or any other Applicable Law,
in each case as in effect on the Closing Date, as a result of which, in
the opinion of independent counsel for the Owner Participant, (i) the
aggregate liability for a single Nuclear Incident of "persons
indemnified" (as each such term is defined in the Price-Anderson Act) is
increased, unless the change is such that neither the Owner Trustee nor
the Owner Participant may be exposed, either during or subsequent to the
Lease Term, to any increased real or potential liability in respect of a
Nuclear Incident, (ii) the aggregate liability for a single Nuclear
Incident of "persons indemnified" (as such term is defined in the
Price-Anderson Act) exceeds the amount of financial protection
established by the NRC as a condition to the License, unless the change
is such that neither the Owner Trustee nor
-11-
6O91.BURNHAM.1106.55:1
<PAGE>
the Owner Participant may be exposed, either during or subsequent to the
Lease Term, to any increased real or potential liability in respect of a
Nuclear Incident, (iii) the amount of financial protection required,
including but not limited to the limitation on the amount of deferred
premiums for such financial protection, is increased, unless the change
is such that neither the Owner Trustee nor the Owner Participant may be
exposed, either during or subsequent to the Lease Term, to any increased
real or potential liability in respect of a Nuclear Incident, or (iv)
either the Owner Trustee or the Owner Participant may be exposed to any
other increase in its real or potential liability in respect of a
Nuclear Incident, either during or subsequent to the Lease Term, it
being understood for purposes of this definition that the requirement or
existence of insurance, retrospective premiums, indemnities (whether by
the Lessee or any other person) or other forms of financial protection
(similar or dissimilar to the foregoing) shall not be deemed to reduce
or eliminate any exposure of the Owner Trustee or the Owner Participant
to real or potential liability in respect of a Nuclear Incident except
to the extent (x) such financial protection is provided by the United
States Government under Congressional action which does not require any
further appropriation or other act of Congress or any other Governmental
Authority, (y) the terms of such financial protection are otherwise
satisfactory to the Owner Trustee and the Owner Participant, and (z) the
Owner Trustee or Owner Participant may not otherwise be exposed, either
during or subsequent to the Lease Term, to any increased real or
potential liability in respect of a Nuclear Incident; provided, however,
that such change shall not constitute a "Deemed Loss Event" if such
change shall include a provision drafted in a manner reasonably
satisfactory to the Owner Participant which exempts the Owner Trustee
and the Owner Participant from all real and potential liability in
respect of a Nuclear Incident so long as neither the Owner Trustee or
the Owner Participant is in actual possession and control of Unit 2 or
the Undivided Interest, unless (in the opinion of independent counsel to
the Owner Participant) a court could reasonably hold that the statute
incorporating such provision is unconstitutional;
-12-
609l.BURNHAM.1106.55:l
<PAGE>
(3) Liability for Termination Obligation. If there shall be any
change in Applicable Law as a result of which the Owner Trustee shall
become liable in its individual capacity, or the Owner Participant shall
become liable in any capacity, in respect of any portion of the
Termination Obligation (as defined in the ANPP Participation Agreement)
or Decommissioning Costs or, during the Lease Term, any other liability
or obligation imposed as of the date hereof on licensees of the NRC;
(4) Illegality. If there shall be any change in Applicable Law
or any Governmental Action the effect of which is to make the
transactions contemplated by the Transaction Documents unauthorized,
illegal or otherwise contrary to Applicable Law;
(5) Limitation on Exercise of Rights. Any change in, or new
interpretation by Governmental Authority having jurisdiction of, the
License and the License Amendment (each as in effect on the Closing
Date) constituting an assertion to the effect that the exercise by the
Owner Trustee or the Owner Participant of any right (irrespective of the
event giving rise to such right) under any Transact ion Document would
constitute impermissible control over Unit 2 or the licensees of Unit 2,
other than an assertion that affects such rights in a manner consistent
with the second sentence of Section 184 of the Atomic Energy Act and the
NRC's regulations thereunder (including, without limitation, 10 CFR
Section 50.81, as now and hereafter in effect);
(6) Early Licensee Status. If as a result of any expiration,
revocation, suspension, amendment or interpretation by any Governmental
Authority of the License, the License Amendment or any other
Governmental Action or change in Applicable Law, either the Owner
Trustee or the Owner Participant shall be required to become a licensee
of the NRC prior to the Lease Termination Date;
(7) Suspension or Termination of Insurance. If any policy of
liability insurance with respect to Unit 2 shall be suspended or
terminated, or the coverage thereunder reduced, for any reason
whatsoever or shall be amended or supplemented, in either case in a
-13-
609l.BURNHAM.1106.55:1
<PAGE>
manner which may expose the Owner Trustee or the Owner Participant,
either during or subsequent to the Lease Term, to any increased real or
potential liability in respect of a Nuclear Incident and such policy of
insurance shall not be immediately replaced by insurance or other
financial protection satisfactory to the Owner Participant effective
immediately upon such suspension, termination, reduction, amendment or
supplementation which, in the reasonable opinion of the Owner
Participant, is at least as protective of it (in all respects deemed by
it to be material) as the policy of insurance so terminated, suspended,
reduced, amended or supplemented, unless the aggregate liability for a
Nuclear Incident of "persons indemnified" (as such term is defined in
the Atomic Energy Act of 1954, as amended) is reduced by an amount equal
to the amount of liability insurance so terminated, suspended, reduced,
amended or supplemented and, in the reasonable opinion of the Owner
Participant, it may not otherwise be exposed, either during or
subsequent to the Lease Term, to any increased real or potential
liability in respect of a Nuclear Incident as a consequence of such
suspension, termination, reduction, amendment or supplementation.
Default shall mean an event or condition which, with the giving
of notice or lapse of time, or both, would constitute 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 in
Interest of Holders of Notes, directing the Indenture Trustee to take or refrain
from taking the action specified in such instrument.
Early Termination Date shall have the meaning specified in
Section 14(d) of the Facility Lease.
Early Termination Notice shall have the meaning specified in
Section 14(d) of the Facility Lease.
Economic Useful Life shall mean that period (commencing on the
date as of which the determination of Economic Useful Life is to be made as
provided in Section 8(g) of the Facility Lease and ending on the date upon which
either of the states of affairs described in clauses (i) and (ii) below cease to
-14-
6091.BURNHAM.1106.55:1
<PAGE>
apply, or can reasonably be expected to cease to apply, to Unit 2) during which
(i) Unit 2 will be useful to, and usable by, any owner or lessee thereof as a
facility for the generation of electric power and (ii) Unit 2 is an economic and
commercially practical facility for the generation of electric power capable of
producing (after taking into account costs of capital) a reasonable economic
return to the owner thereof. For the purposes of determinations under clauses
(i) and (ii) above, the following factors, among others, shall be taken into
account (as such factors obtain on the date of determination and as such factors
are reasonably expected to obtain in the future): (a) provisions of the ANPP
Project Agreements (including, without limitation, the ANPP Participation
Agreement and the Material Project Agreements (or substitutes for such Material
Project Agreements in effect on the date of determination)); (b) the actual
condition and performance of Unit 2; (C) the actual condition and performance of
such other facilities constituting PVNGS (including, without limitation, the
Common Facilities) as are integral to the operation of Unit 2; (d) the actual
condition of, and access of the ANPP Participants to, the ANPP switchyard and
such other transmission facilities as are available and necessary to permit the
transmission of the maximum amount of power generated by PVNGS; (e) the cost of
obtaining, handling, storing and disposing of nuclear fuel for Unit 2; (f) the
projected cost (including, without limitation, costs attributable to obligations
to fund any reserve fund maintained (or funded) by licensed owners and/or
lessees of Unit 2 to the extent dedicated to (or attributable to and freely
available with respect to) Unit 2 (the Unit 2 Fund)) or the Decommissioning or
retirement from service of Unit 2 including, without limitation, Decommissioning
Costs (taking into account the balance (plus projected investment earnings
thereon) of the Unit 2 Fund); (q) the cost of Capital Improvements to Unit 2
then planned to be made, or reasonably expected to be made; (h) the cost of
acquiring or leasing the Unit 2 Retained Assets; (i) the current status of all
Governmental Action with respect to Unit 2 (including, without limitation, the
License) required to permit licensed owners and/or lessees to possess and (in
the case of the Operating Agent) to operate Unit 2 and such other facilities
constituting PVNGS (including, without limitation, the Common Facilities) as are
integral to the operation of Unit 2; and (j) the relative cost of producing an
-15-
6091.BURNHAM.1106.55:1
<PAGE>
amount of electric power and energy equivalent to the generating capacity of
Unit 2 from other facilities then available in the region serviced, or
reasonably expected to be serviced, by PVNGS.
El Paso shall mean El Paso Electric Company, a Texas corporation.
ERISA shall mean the Employee Retirement Income Security Act of
1974, as amended.
Estimated Transaction Expenses shall have the meaning set forth
in Section 5(a) of the Participation Agreement.
Event of Default shall have the meaning set forth in Section 15
of the Facility Lease.
Event of Loss shall mean any of the following events: (a) a
Final Shutdown, (b) a Requisition of Title, or (c) a Requisition of Use for an
indefinite period which can be reasonably expected to exceed, or a stated period
which ends on the last day of or after, the Lease Term (including the Renewal
Term only if the Renewal Term shall have been elected prior to such Requisition
of Use by the exercise of the renewal option provided in Section 12 of the
Facility Lease).
Excepted Payments shall mean (i) all payments of Supplemental
Rent, other than payments by the Lessee (x) of Casualty Value, Termination Value
or Special Casualty Value or in connection with the exercise of the Cure Option
or the occurrence of the Special Purchase Event or (y) of indemnity payments to
which either the Loan Participant or any Indemnitee other than the Owner Trustee
or the Owner Participant or any of their respective Affiliates (or the
respective successors, assigns, agents, officers, directors or employees
thereof) is entitled; (ii) any amounts payable under any Transaction Document to
reimburse the Lessor or the Owner Participant or any of their respective
Affiliates (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, (iii) any amount payable to the Owner Participant by
any Transferee as the purchase price of the Owner Participant's interest in the
Trust Estate, (iv) so long as no Indenture Default or Indenture Event of Default
-16-
6091.BURNHAM.1106.55:l
<PAGE>
shall have occurred and be continuing, all payments of Basic Rent in excess of
amounts then due and owing in respect of the principal of and premium, if any,
and interest on all Notes Outstanding; (v) any insurance proceeds with respect
to an Event of Loss in excess of amounts then due and owing in respect of the
principal of and premium, if any, and interest on all Notes Outstanding, (vi)
any insurance proceeds (or payments with respect to risks selfinsured) under
liability policies and (vii) any payments in respect of interest to the extent
attributable to payments referred to in clauses (i) through (vi) above.
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 mean liabilities, obligations, losses, damages,
taxes (other than taxes on income), claims, actions, suits, costs, expenses and
disbursements (including legal fees and expenses) of any kind and nature
whatsoever.
Extension letter shall mean the Extension Letter, dated August
18, 1986 and addressed to the Collateral Trust Trustee by the parties to the
Participation Agreement.
Extraordinary Nuclear Occurrence shall have its meaning as
defined in Section 11 of the Atomic Energy Act and the related NRC regulations,
as amended to the date hereof1 and as the meaning of such term shall be expanded
from time to time by future amendments thereof. The definition of "extraordinary
nuclear occurrence" contained in Section 11 of the Atomic Energy Act on the date
hereof is: If any event causing a discharge or dispersal of source, special
nuclear, or by-product material from its intended place of confinement in
amounts offsite, or causing radiation levels offsite, which the Commission
determines to be substantial, and which the Commission determines has resulted
or will probably result in substantial damages to persons offsite or property
offsite. Any determination by the Commission that such an event has, or has not,
occurred shall be final and conclusive, and no other official or any court shall
have power or jurisdiction to review any such determination. The Commission
shall establish criteria in writing setting forth the basis upon which such
-17-
6091.BURNHAM.1106.55:1
<PAGE>
determination shall be made. As used in this subsection, "offsite" means away
from "the location" or "the contract location" as defined in the applicable
Commission indemnity agreement, entered into pursuant to section 2210 of this
title."
Facility Cost shall mean the Purchase Price plus the sum of (x)
all Supplemental Financing Amounts, and (y) all Additional Equity Investment
amounts.
Facility Lease shall mean the Facility Lease, dated as of August
12, 1986, between PNM, as Lessee, and the Owner Trustee, as Lessor.
Fair Market Rental Value or Fair Market Sales Value of any
property or service shall mean (other than for purposes of Section 5(b) of the
Facility Lease) the value of such property or service for lease or sale
determined on the basis of an arm's-length transaction for cash between an
informed and willing lessee or purchaser (under no compulsion to lease or
purchase) and an informed and willing lessor or seller (under no compulsion to
lease or sell), and shall take into account the Lessor's rights and obligations
under the Assignment and Assumption and the Assignment of Beneficial Interest
and rights under the Deed and the Bill of Sale, but shall be without regard to
any rights of the Lessee (including any renewal options) under the Facility
Lease. Except pursuant to Section 6.01 of the Assignment and Assumption, Fair
Market Rental Value and Fair Market Sales Value of the Undivided Interest and
the Real Property Interest shall be determined on the assumption that (i) Unit 2
has been maintained in accordance with, and the Lessee has complied with, the
requirements of the Facility Lease1 the other Transaction Documents and the ANPP
Participation Agreement, and (ii) the Lessee or PNM, as possessor of the
Undivided Interest and the Real Property Interest, is otherwise in compliance
with the requirements of all Transaction Documents. Fair Market Rental Value
shall be determined on the assumption that rent will be payable in equal
semi-annual installments in arrears.
Federal Power Act shall mean the Federal Power Act, as amended.
-18-
6091.BURNHAM.1106.55:1
<PAGE>
Federal Securities shall have the meaning set forth in Section
2.3(c) of the Indenture.
FERC shall mean the Federal Energy Regulatory Commission of the
United States of America or any successor agency.
Final Prospectus shall mean the Prospectus included in the
Registration Statement on the date the same becomes effective, including
documents incorporated into said Prospectus by reference, including any
applicable prospectus supplements.
Final Shutdown shall mean the earlier to occur of:
(1) the expiration or revocation of the License or that portion
of the License that permits the operation of Unit 2 or the expiration,
suspension or revocation of the License or that portion of the License that
permits the possession by the Lessee of the Undivided Interest and the Real
Property Interest; or
(2) the suspension (pursuant to 10 C.F.R. 2.202, as amended, and
any successor provision) of the License or that portion of the License that
permits the operation of Unit 2, which suspension remains in effect for three
consecutive calendar months; or
(3) the permanent or temporary cessation of operation of Unit 2
as a result of a Nuclear Incident at Unit 2 (or if Unit 2 is not in operation
immediately prior to the occurrence of such Nuclear Incident, the failure to
resume operation thereof as a result of such Nuclear Incident) if (A) the Period
of such cessation or failure equals or exceeds twenty-four consecutive calendar
months, or (B) such Nuclear Incident causes the radiation level in the
containment building of Unit 2, as measured by the average of two high range
radiation monitors in such containment building of Unit 2 (or if only one such
monitor is operating at such time, such monitor) over one hour to equal or
exceed 500 rads per hour, provided, however, this subsection (B) shall not apply
in respect of a Nuclear Incident arising solely from a fuel handling accident;
or
(4) the permanent or temporary cessation of operation of Unit 2
as a result of a Nuclear Incident at Unit 1 or 3 (the Affected Unit) (or if Unit
-19-
6091.BURNHAM.1106.55:1
<PAGE>
2 is not in operation immediately prior to the occurrence of such Nuclear
Incident, the failure to resume operation thereof as a result of such Nuclear
Incident) if (A) the Period of such cessation or failure equals or exceeds
thirty-six consecutive calendar months: or (B) such Nuclear Incident causes the
radiation level in the containment building of the Affected Unit, as measured by
the average of two high range radiation monitors in such containment building
(or if only one such monitor is operating at such time, such monitor) over one
hour to equal or exceed 500 rads per hour: provided, however, this subsection
(B) shall not apply in respect of a Nuclear Incident arising solely from a fuel
handling accident:
(5) the occurrence of a Nuclear Incident at Unit 1, 2 or 3
causing (A) substantial injury or death to any person on or off the PVNGS Site
or (B) a discharge or dispersal of Source, Special Nuclear or Byproduct Material
from its intended place of confinement in amounts off the PVNGS Site or causing
radiation levels off the PVNGS Site such that, in the case of (B) above (x) the
NRC declares the occurrence of an Extraordinary Nuclear Occurrence or declares
any other event connoting an equivalent level of accident or (y) the surface
contamination dose rate measured off the PVNGS Site by a radiation monitor at 1
meter above the surface level equals or is greater at any time than 10
millirads/hour (0.10 milligray/hour) or in the case of noble gas plume passage,
the radiation dose rate equals or is greater than 10 rads (0.10 gray) integrated
over 24 hours, (or if the NRC shall at any time lower the radiation levels
required for the occurrence of an Extraordinary Nuclear Occurrence, such lower
levels as shall be consistent with such change by the NRC); or
(6) damage to or destruction of any portion of Unit 2 and,
unless the Lessee theretofore shall have exercised its purchase option under
Section 13(b) of the Facility Lease, the failure of the Lessee, or of the Lessee
and one or more other ANPP Participants, (A) to agree within eighteen calendar
months of such damage or destruction (or prior to such earlier date as of which
one or more other ANPP Participants shall agree to restore or reconstruct any
damaged portion of Unit 2 in accordance with Section 16.2 of the ANPP
Participation Agreement) to restore or reconstruct Unit 2 to completion prior to
the day sixty calendar months after the date of such agreement and (B)
-20-
609l.BURNHAM.1106.55:1
<PAGE>
thereafter to complete the restoration and reconstruction of Unit 2 within a
period of sixty calendar months after the date of such agreement, provided that
no Final Shutdown shall be deemed to have occurred pursuant to this clause (6)
if and so long as Unit 2 is in operation at a rated core power level of at least
1900 megawatts thermal; or
(7) the non-operation of Unit 2 or the operation of Unit 2 at a
net rated power level below 630 megawatts electric or any combination thereof
for any reason (including, without limitation, the occurrence of any Nuclear
Incident at any generating facility located anywhere in the world) for a Period
of thirty-six consecutive calendar months (or a period through the penultimate
day of the Lease Term if the Lessee shall have given notice of its intent to
exercise the purchase option permitted by Section 13(b) of the Facility Lease)
other than as a result of damage to or destruction of Unit 2.
For purposes of this definition, a Final Shutdown resulting from the occurrence
of an event described in clause (5) above shall be deemed to have occurred
immediately and automatically upon the decline of the water coolant within Unit
2 to a level three feet above the nuclear fuel.
Financing Documents shall mean the Collateral Trust Indenture,
the Term Note Supplemental Indenture, the Underwriting Agreement, the Term Loan
Agreement, the Supplemental Indenture of Pledge and the Refunding Supplemental
Indenture.
Fixed Rate Note shall mean the non-recourse promissory note or
notes to be issued by the Owner Trustee and authenticated by the Indenture
Trustee on the Refunding Date to refund the Initial Series Note.
Fixed Rate Renewal Term shall have the meanings set forth in
Section 12 of the Facility Lease.
FNB shall mean The First National Bank of Boston, in its
individual capacity, and its successors and assigns.
-21-
6091.BURNHAM.1106.55:1
<PAGE>
Form U-7D-shall mean the certificate to be 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 First PV Funding Corporation, a
Delaware corporation.
Generating Unit shall mean Unit 1, 2, or 3.
Generation Entitlement Share shall have the meaning assigned
thereto in the ANPP Participation Agreement and (i) when used in reference to
Unit 2, shall mean the Generation Entitlement Share of PNM as the ANPP
Participant with respect to its interest in Unit 2, (ii) when used in reference
to the Undivided Interest, shall mean that portion of the Generation Entitlement
Share attributable to the Undivided Interest and (iii) when used in Section 19
of the Facility Lease, shall refer to the Generation Entitlement Share of the
Lessee in all Generating Units as PVNGS.
Governmental Action shall mean all authorizations, consents,
approvals, waivers, exceptions, variances, orders, licenses, exemptions,
publications, filings, notices to and declarations of or with any Governmental
Authority (other than routine reporting requirements the failure to comply with
which will not affect the validity or enforceability of any of the Transaction
Documents or have a material adverse effect on the transactions contemplated by
any Transaction Document or any Financing Document) or any other action in
respect of any Governmental Authority and shall include, without limitation, all
siting, environmental and operating permits and licenses which are required for
the use and operation of Unit 2, including the Undivided Interest and the Real
Property Interest.
Governmental Authority shall mean any Federal, state, county,
municipal, foreign, international, regional or other governmental authority,
agency, board, body, instrumentality or court, and the staff thereof pursuant to
their official responsibilities.
-22-
609l.BURNHAM.1106.55:l
<PAGE>
Holders shall mean the holders of the Notes or the Bonds, as the
case may be.
Holding Company Act shall mean the Public Utility Holding
Company Act of 1935, as amended.
Indemnitee shall mean the Owner Participant, the Owner Trustee,
FNB, the Loan Participant, the stockholder of Funding Corp. and its officers and
directors, Chemical Bank, the Indenture Trustee, each Holder of a Note from time
to time Outstanding, the Collateral Trust Trustee, the Trust, the Trust Estate,
the Lease Indenture Estate, the indenture estate under the Collateral Trust
Indenture, any Affiliate of any of the foregoing and the respective successors,
assigns, agents, officers, directors or employees of the foregoing, excluding,
however, any ANPP Participant other than the Owner Trustee or the Owner
Participant.
Indenture shall mean the Trust Indenture, Mortgage, Security
Agreement and Assignment of Rents, dated as of August 12, 1986, between the
Owner Trustee and the Indenture Trustee.
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 Chemical Bank, a New York banking
corporation, not in its individual capacity, but solely as Indenture Trustee
under the Indenture and each successor trustee and co-trustee thereunder.
Indenture Trustee's Liens shall mean Liens against the Lease
Indenture Estate which result from acts of, or any failure to act by, or as a
result of claims against, the Indenture Trustee, in its individual capacity,
unrelated to the transactions contemplated by the Transaction Documents.
Indenture Trustee's Office shall mean the office of the
Indenture Trustee located at 55 Water Street, New York, New York 10041, 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.
-23-
6091.BURNHAM.1106.55:1
<PAGE>
Initial Series Bonds shall mean the promissory notes of Funding
Corp. evidencing the loans made to Funding Corp. under the Term Loan Agreement,
issued, authenticated and delivered under the Term Loan Agreement and the
Collateral Trust Indenture, as supplemented by the Term Note Supplemental
Indenture.
Initial Series Note shall mean the nonrecourse promissory note1
substantially in the form of Exhibit A to the Indenture, to be issued by the
Owner Trustee and authenticated by the Indenture Trustee on the Closing Date to
finance a portion of the Purchase Price.
Investment shall have the meaning set forth in Section 3 of the
Participation Agreement.
Investment Company Act shall mean the Investment Company Act of
1940, as amended.
Investment Percentage shall mean the percentage identified as
such in Schedule 2 to the Participation Agreement.
IRS shall mean the Internal Revenue Service of the United States
Department of the Treasury or any successor agency.
LADWP shall mean the Department of Water and Power of The City
of Los Angeles, a department organized and existing under the charter of the
City of Los Angeles, a municipal corporation of the State of California.
Lease Indenture Estate shall have the meaning forth in Section
2.1 of the Indenture.
Lease Term shall mean the aggregate of the Basic Lease Term and
the Renewal Term, if any.
Lease Termination Date shall mean the last day of the Lease Term
(whether occurring by reason of a termination or expiration of the Lease Term).
-24-
609l.BURNHAM.1106.55:l
<PAGE>
Lessee shall mean Public Service Company of New Mexico, a New
Mexico corporation, and its successors and assigns, as lessee under the Facility
Lease and as party to the other Transactions Documents and Financing Documents
to which it is a signatory.
Lessee Request shall mean a request of the Lessee delivered
pursuant to Section 6.03 of the Collateral Trust Indenture.
Lessor shall mean the Owner Trustee, as lessor under the
Facility Lease (and for purposes of the definition of "Deemed Loss Event" and
where the context otherwise so requires, the Owner Trustee in its individual
capacity), and its successors and assigns.
Lessor's Interest shall have the meaning set forth in Section
8(c) (3) of the Participation Agreement.
Lessor's Liens or Owner Trustee's Liens shall mean Liens against
the Trust Estate or the Lease Indenture Estate (other than Permitted Liens
described in the definition of such term, except "Lessor's Liens" and "Owner
Participant's Liens" referred to in clause (vi) of such definition) for which
the Lessee is not responsible and which result from acts of, or any failure to
act by, or as a result of claims against, FNB or the Lessor, unrelated to the
ownership of the Undivided Interest or the Real Property Interest, the
administration of the Trust Estate or the transactions contemplated by the
Transaction Documents or the Financing Documents.
Lessor's Portion shall mean the Owner Trustee's portion of the
original 10.2% undivided interest of the Lessee in Unit 2, the percentage of
which is set forth in Schedule 2 to the Participation Agreement.
License shall mean NRC Facility Operating License No. NPF-51,
issued April 24, 1986 (superseding NRC Facility Operating License No. NPF-46,
issued on December 9, 1985), as the same may be amended, modified, extended,
renewed or superseded from time to time.
-25-
6091.BURNHAM.1106.55:1
<PAGE>
License Amendment shall mean amendment number No. 2 to the
License, issued August 12, 1986, approving the sale and leaseback transaction
contemplated by the Transaction Documents.
License Expiration Date shall mean December 9, 2025, or any
later or earlier date on which the License shall expire or be terminated.
Lien shall mean any mortgage, pledge, security interest,
encumbrance, lien, easement, servitude 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(a) of the
Participation Agreement.
Loan Participant shall mean Funding Corp.
Loan Percentage shall mean the percentage identified as such in
Schedule 2 to the Participation Agreement.
Majority in Interest of Holders of Notes shall mean Holders of a
majority in principal amount of all Notes Outstanding under the Indenture at the
time of any such determination.
Material Project Agreements sha11 mean (i) Nuclear Fuel Contract
between Arizona Nuclear Power Project and Combustion Engineering, Inc. (CE),
dated as of August 20, 1973, (ii) Nuclear Steam Supply Contract between APS and
CE, dated as of August 20, 1973, as amended (iii) Turbine Generator Contract
between APS and General Electric Company, dated as of March 21, 1974, as amended
(iv) Uranium Enrichment Services Contract between the United States of America
(USA) and APS, dated November 15, 1984, as amended and the Associated
Supplemental Agreement of Settlement between USA and APS, dated November 15,
1984, (v) Contract between APS and Westinghouse Electric Corporation for fuel
fabrication services for reload batches of nuclear fuel, dated August 7, 1974,
as amended, (vi) Agreement for the Sale and Purchase of Waste Water Effluent
between the City of Tolleson, APS and Salt River, dated June 12, 1981, as
-26-
6091.BURNHAM.1106.55:1
<PAGE>
amended (vii) Agreement for Construction of Arizona Nuclear Power Project
between Bechtel Power Corporation (Bechtel) and APS, dated January 15, 1973,
(viii) Agreement for Engineering and Procurement Services between APS and
Bechtel, dated January 15, 1973, (ix) option and Purchase of Effluent dated
April 23, 1973, among the Cities of Phoenix, Glendale, Mesa, Tempe and
Scottsdale, the Town of Youngtown, APS and Salt River, APS, and Salt River,
dated April 23, 1973, (x) Agreement for Conversion Services between Allied
Chemical Corporation and APS, dated November 17, 1975, as amended, (xi) Uranium
Concentrate Sales Agreement between Energy Fuels Exploration Company and APS,
dated as of December 1, 1983, (xii) Uranium Concentrate Sales Agreement between
Energy Fuels Exploration and APS, dated as of October 23, 1981, as amended,
(xiii) Agreement for Sale of Uranium Concentrates between Pathfinder Mines
Corporation and APS, dated December 1, 1983, (xiv) Contract for Disposal of
Spent Nuclear Fuel and/or High Level Radioactive Waste between USA and APS,
dated July 21, 1984, and the ANPP Participation Agreement.
Minimum Net Worth means a Net Worth equal to the greater of (x)
$700,000,000 and (y) (1) $950,000,000 less (2) with respect to each Generating
Unit as to which PNM shall have entered into one or more transactions
constituting sale and leaseback transactions under the ANPP Participation
Agreement (including, but without limitation, the transaction contemplated by
the Participation Agreement), (A) $50,000,000 (in the case of Unit 1) and
$100,000,000 (in the case of each other Generating Unit) time5 (B) the aggregate
percentage of the Lessee's undivided interest in such PVNGS unit subject to such
transactions.
Mortgage Release shall mean the Indentures of Partial Release,
each dated August 18, 1986, under and with respect to the Existing Mortgage.
Net Economic Return shall mean the after-tax economic yield and
periodic after-tax cash flows (after all Federal, state and local taxes) and the
periodic return on investment and the timing of recognition of income originally
expected by the Owner Participant with respect to the Undivided Interest,
utilizing the same assumptions as used by the Owner Participant in making the
original computation upon which its evaluation of investment in the Undivided
Interest and the initial computation of Basic Rent, Casualty Value, Special
Casualty Value and Termination Value were based.
-27-
6091.BURNHAM.1106.55:1
<PAGE>
Net Worth means the excess of assets over liabilities determined
by the Lessee's auditors on the basis of generally accepted accounting
principles.
New Mexico Public Utility Act shall mean the New Mexico Public
Utility Act, as amended.
NMPSC shall mean the New Mexico Public Service Commission
established pursuant to Section 62-5-1 of New Mexico Statutes Annotated, 1978.
NMPSC Order shall mean the order issued by the NMPSC on July 8,
1986, in Case No. 2019 (Phase I), approving, among other things, the terms of
the Facility Lease and the execution and delivery of the Facility Lease by PNM.
Non-Burdensome Regulation sha11 mean (i) regulation to which the
Owner Participant or the Owner Trustee is otherwise subject by reason of its
lease financing or other activities unrelated to the transactions contemplated
by the Transaction Documents, (ii) ministerial regulatory requirements which do
not impose limitations or regulatory requirements on the business or activities
of the Owner Participant and which are deemed, in the reasonable discretion of
the Owner Participant, not to be burdensome, (iii) regulation resulting from any
possession of the Undivided interest on or after the Lease Termination Date or
(iv) regulation of the Owner Trustee which would be terminated by the
appointment of a successor Owner Trustee or a co-Owner Trustee pursuant to the
terms of the Trust Agreement.
Nonseverable, when used with respect to any Capital Improvement,
shall mean any Capital Improvement which is not a Severable Capital Improvement.
Noteholder shall mean any Holder from time to time of a Note
Outstanding under the Indenture.
Notes shall mean the Initial Series Note and the Fixed Rate
Note, the Releveraging Note and any other Additional Notes.
-28-
6091.BURNHAM.1106.55:l
<PAGE>
Notice of Closing shall have the meaning set forth in Section
5(a) of the Participation Agreement.
NRC shall mean the Nuclear Regulatory Commission of the United
States of America or any successor agency.
Nuclear Incident shall have its meaning as defined in Section 11
of the Atomic Energy Act, as amended to the date hereof and as the meaning of
such term may be expanded from time to time by future amendments thereof. The
definition of "nuclear incident" contained in the Atomic Energy Act on the date
hereof is "any occurrence, including an extraordinary nuclear occurrence, within
the United States causing, within or outside the United States, bodily injury,
sickness, disease, or death, or loss of or damage to property, or loss of use of
property, arising out of or resulting from the radioactive, toxic, explosive, or
other hazardous properties of source, special nuclear, or byproduct material:
Provided, however, that as the term is used in section 2210(1) of this title, it
shall include any such occurrence outside the United States: And provided
further, That as the term is used in section 2210(d) of this title, it shall
include any such occurrence outside the United States if such occurrence
involves source, special nuclear, or byproduct material owned by, and used by or
under contract with, the United States: And provided further, That as the term
is used in section 2210(c) of this title, it shall include any such occurrence
outside both the United States and any other nation if such occurrence arises
out of or results from the radioactive, toxic, explosive, or other hazardous
properties of source, special nuclear, or byproduct material licensed pursuant
to subchapters V, VI, VII, and IX of this chapter, which is used in connection
with the operation of a licensed stationary production or utilization facility
or which moves outside the territorial limits of the United States in transit
from one person licensed by the Commission to another person licensed by the
Commission."
Nuclear Waste Act shall mean the Nuclear Waste Policy Act of
1982, as amended, or any comparable successor law.
-29-
6091.BURNHAM.1106.55:l
<PAGE>
Officers' Certificate sha11 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.
Operating Agent shall have the meaning assigned thereto in the
ANPP Participation Agreement.
Original of the Facility lease shall mean the fully executed
counterpart of the Facility Lease, marked "This Counterpart is the Original
Counterpart", pursuant to Section 22(e) of the Facility Lease and containing the
receipt of the Indenture Trustee.
Outstanding, when used with respect to the Notes, shall mean, as
of the date of determination, 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 the
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.
Overdue interest Rate shall mean the weighted average rate per
annum of interest payable with respect to overdue payments of principal on the
Notes outstanding, computed as set forth in such Notes.
-30-
6091.BURNHAM.1106.55:1
<PAGE>
Owner Participant shall mean Burnham Leasing Corporation, and
the successors and assigns of such Person in accordance with the Trust Agreement
and the Participation Agreement.
Owner Participant's Liens shall mean Liens against the Trust
Estate or the Lease Indenture Estate (other than Permitted Liens described in
the definition of such term, except "Lessor's Liens" and "Owner Participant's
Liens" referred to in clause (vi) of such definition) for which the Lessee is
not responsible and 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 or the Financing Documents.
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 (unless the context otherwise requires),
and each successor as trustee, separate trustee and co-trustee thereunder.
Participation Agreement shall mean the Participation Agreement,
dated as of August 12, 1986, among the Owner Trustee, the Indenture Trustee,
Funding Corp., the Owner Participant and PNM.
Penalty Rate shall mean 2% per annum in excess of the Prime
Rate.
Period of a stated duration in respect of any event shall mean
an indefinite period which can reasonably be expected to exceed the lesser of
such duration and the period remaining to the date which is three years prior to
the end of the remaining Basic Lease Term (or if such event occurs after the
date three years prior to the end of the remaining Basic Lease Term, the lesser
of six months and the period remaining to the day next preceding the end of the
Basic Lease Term) or a stated period in excess of the lesser thereof or an
actual period which continues in excess of the lesser thereof.
Permitted Liens shall mean (i) the respective rights and
int9rests of the Lessee, the Owner Participant, the Lessor, the Loan Participant
and the Indenture Trustee, as provided in the Transaction Documents; (ii) the
-31-
6091.BURNHAM.1106.55:1
<PAGE>
rights of any sublessee or assignee under a sublease or an assignment permitted
by the terms of the Facility Lease; (iii) the Lien of the Existing Mortgage on
the leasehold estate under the Facility Lease; (iv) Liens for taxes either not
yet due or which are being contested in good faith and by appropriate
proceedings diligently conducted, so long as such proceedings shall not (x)
involve any danger of the sale, forfeiture or loss of the Undivided Interest or
the Real Property Interest or any part thereof or interest therein of the Lessor
or the Owner Participant, (y) interfere with the use, possession or disposition
of the Undivided Interest or the Real Property Interest, or any part thereof or
interest therein, or (z) impair payment of Rent; (v) inchoate materialmen's,
mechanics', work-men's, repairmen's, employees', carriers', warehouse-men's, or
other like Liens arising in the ordinary course of business for PVNGS, and not
delinquent; (vi) Lessor's Liens, Owner Participant's Liens and Indenture
Trustee's Liens; (vii) choate Liens that have been. bonded for the full amount
in dispute or as to which other satisfactory security arrangements shall have
been made and which are being contested diligently by the appropriate party in
good faith and by appropriate proceedings so long as such proceedings shall not
violate clause (x), (y) or (z) of clause (iv) above; (viii) choate Liens of any
of the types described in clause (v) above that have been bonded for the full
amount in dispute or as to which other satisfactory security arrangements shall
have been made and which arise out of judgments or awards and with respect to
which (A) an appeal or proceeding for review is being prosecuted in good faith
and for the payment of which adequate reserves shall have been provided as
required by generally accepted accounting practice and (B) there shall have been
secured a stay of execution pending such appeal or proceeding for review, so
long as such proceedings shall not violate clause (x), (y) or (z) of clause (iv)
above; (ix) the rights and interests of the Lessee under the Assignment and
Assumption; (x) the rights of the NRC under the License; (xi) the rights of the
ANPP Participants (other than (i) the Lessee and (ii) any Person who shall
become an ANPP Participant in respect of the Undivided Interest and the Real
Property Interest) under the ANPP Participation Agreement or any other ANPP
Project Agreement; (xii) Liens on the undivided ownership interests in Unit 2 of
the ANPP Participants and other Persons (other than the Lessee) and (xiii) any
Liens arising by virtue of the ANPP Participation Agreement.
-32-
6091.BURNRAM.1106.55:1
<PAGE>
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.
PNN shall mean Public Service company of New Mexico, a New
Mexico corporation.
Price-Anderson Act shall mean the Price-Anderson Act, Pub. L.
No. 85-256, 71 Stat. 576 (1957), as amended to the Closing Date.
Pricing Assumptions shall mean the pricing assumptions set forth
in Schedule 2 to the Participation Agreement.
Prime Rate shall mean the rate of interest publicly announced
from time to time by Chemical Bank at its principal office in New York City as
its prime or base lending rate. Any change in the Prime Rate shall be effective
on the date such change in the Prime Rate is announced.
Project Insurance shall have the meaning assigned thereto in the
ANPP Participation Agreement.
Project Manager shall have the meaning assigned thereto in the
ANPP Participation Agreement.
Purchase Documents shall mean the Bill of sale, the Deed and the
Assignment of Beneficial Interest and such other documents as the Owner
Participant, the Owner Trustee, the Indenture Trustee, the Loan Participant or
their respective counsel shall deem desirable to convey good and marketable
title to the Undivided Interest and the Real Property Interest to the Trust.
Purchase Price shall have the meaning set forth in Section 4(a)
of the Participation Agreement.
PVNGS shall mean the Arizona Nuclear Power Project, as that term
is defined in the ANPP Participation Agreement
-33-
6091.BURNHAM.1106.55:1
<PAGE>
PVNGS Site shall mean the beneficial interest in the Arizona
land trust and the real property described in Exhibit A to the Bill of Sale.
Real Estate Investment shall have the meaning set forth in
Section 3(a) of the Participation Agreement.
Real Property Interest shall mean the right, title and interest
of the Owner Trustee acquired pursuant to the Deed and the Assignment of
Beneficial Interest.
Reasonable Basis for a position shall exist if tax counsel may
properly advise reporting such position on a tax return in accordance with
Formal Opinion 85-352 issued by the Standing Committee on Ethics and
Professional Responsibility of the American Bar Association.
Refunding Bonds shall mean Funding Corp.'s Lease Obligation
Bonds Series 1986B, issued, authenticated and delivered under the Collateral
Trust Indenture, as supplemented by the Refunding Supplemental Indenture, as
described in the Underwriting Agreement.
Refunding Date shall mean the date of issuance of the Refunding
Bonds.
Refunding Loan shall have the meaning set forth in Section 2(d)
of the Participation Agreement.
Refunding Supplemental Indenture shall mean the Refunding Bond
Supplemental Indenture, among PNM, Funding Corp. and the Collateral Trust
Trustee, supplementing the Collateral Trust Indenture and providing, among other
things, for the issuance of the Refunding Bonds.
Registration Statement shall mean the registration statement on
Form S-3, as amended, and any other similar registration statement, including
all exhibits and all documents incorporated therein by reference, filed with the
SEC under the Securities Act in connection with the offer, issue and sale of the
Refunding Bonds.
-34-
6091.BURNHAM.1106.55:1
<PAGE>
Regulations shall mean the income tax regulations issued,
published or promulgated under the Code.
Releveraging Amount shall (i) mean the initial principal amount
of each series of Releveraging Bonds, but only in an amount equal to the amount
of the related Note or Notes issued in connection with such Bonds, or (ii) the
initial principal amount of the Refunding Bonds to the extent such amount is in
excess of the Initial Series Bonds being refunded, but only in an amount equal
to the amount that the related Fixed Rate Note or Notes exceed the aggregate
amount of the Initial Series Note and any Releveraging Notes theretofore issued.
Releveraging Bonds shall. mean a series of securities issued,
authenticated and delivered under the Collateral Trust Indenture in accordance
with Section 2.03 thereof, part of the proceeds of which is used to refund to
the Owner Participant a portion of its Investment as provided in Section 3(b) of
the Participation Agreement.
Releveraging Date shall mean the date of issuance of the
Releveraging Bonds.
Releveraging Loan shall have the meaning specified in Section
2(c) of the Participation Agreement.
Releveraging Note shall mean the non-recourse promissory note,
substantially in the form of the Initial Series Note or, if the Refunding Date
shall have occurred, the Fixed Rate Note, to be issued by the Owner Trustee and
authenticated by the Indenture Trustee on the Releveraging Date to refund to the
Owner Trustee a portion of the Investment.
Renewal Term shall mean the Fixed Rate Renewal Term as provided
in Section 12 of the Facility Lease.
Rent shall mean Basic Rent and Supplemental Rent.
-35-
6091.BURNHAM.1106.55:l
<PAGE>
Rent Differential shall have the meaning set forth in Section
3(h) of the Facility Lease.
Requisition of Title shall mean any circumstances or event in
consequence of which Unit 2 or the Undivided Interest shall be condemned or
seized or title thereto shall be requisitioned or taken by any Governmental
Authority under power of eminent domain or otherwise and all administrative or
judicial appeals opposing such condemnation, seizure or taking shall have been
exhausted or the period for such appeal shall have expired.
Requisition of Use shall mean any circumstance or event in
consequence of which the use of Unit 2 or the Undivided Interest shall be
requisitioned or taken by any Governmental Authority under power of eminent
domain or otherwise, other than a Requisition of Title.
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 President1 or 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.
Retained Assets shall mean (i) the Lessee's interest in PVNGS
(other than the Undivided Interest, the related Generation Entitlement Share,
and the Real Property Interest), (ii) Severable Capital Improvements title to
the undivided interest in which is retained by the Lessee in accordance with
Section 8(e) of the Facility Lease, and (iii) any additional interest in and to
PVNGS (other than the Undivided Interest, the related Generation Entitlement
Share and the Real Property Interest) to which the Lessee becomes entitled in
consequence of Sections 16.2 or 23.5 of the ANPP Participation Agreement (except
as otherwise provided in Section 5(a) or 19 of the Facility Lease).
Sale Proceeds shall mean, with respect to any sale of the
Undivided Interest and the Real Property Interest by the Lessor to any Person
other than the Lessee, the gross proceeds of such sale payable in cash, less all
costs and expenses whatsoever incurred by the Lessor and the Owner Participant
in connection therewith.
-36-
6091.BURNHAM.1106.55:l
<PAGE>
Salt River shall mean Salt River Project Agricultural
Improvement and Power District, an Arizona agricultural improvement district.
SCPPA shall mean Southern California Public Power Authority, a
California joint powers agency (doing business in Arizona as Southern California
Public Power Authority Association).
SEC shall mean the Securities and Exchange Commission of the
United States of America, or any successor agency. Section. 6(c) Application
shall mean Funding Corp.'s Application for an Order under Section 6(c) of the
Investment Company Act of 1940 exempting First PV Funding Corporation from all
provisions of such Act, as filed with the SEC on September 20, 1985, as amended.
Secured obligations shall have the meaning set forth in Section
7(b)(4) of the Participation Agreement.
Securities Act shall mean the Securities Act of 1933, as
amended.
Securities Exchange Act shall mean the Securities Exchange Act
of 1934, as amended.
Severable, when used with respect to any Capital Improvement,
shall mean any Capital Improvement which can readily be removed from Unit 2 or
the Common Facilities without materially damaging Unit 2 or the Common
Facilities or materially diminishing or impairing the value, utility or
condition of Unit 2 or the Common Facilities.
Source, Special Nuclear or Byproduct Material shall have their
respective defined meanings as defined in Section 11 of the Atomic Energy Act of
1954,- as amended to the date hereof and as the meanings of such terms may be
expanded by future amendments thereof.
-37-
6091.BURNHAM.1106.55:1
<PAGE>
Southern California shall mean Southern California Edison
Company, a California corporation.
Special Casualty Value as of any date, shall mean (i) during the
Basic Lease Term, the percentage of Facility Cost set forth opposite such date
in Schedule 2 to the Facility Lease, and (ii) during the Renewal Term, if any,
the unamortized portion of the Fair Market Sales Value of the Undivided Interest
determined by amortizing ratably the Fair Market Sales Value of the Undivided
Interest as of the day following the last day of the Basic Lease Term in
semi-annual steps over the period from such date to the License Expiration Date.
Anything contained in the Facility Lease to the contrary notwithstanding,
Special Casualty Value shall be, when added to all other amounts which the
Lessee is required to pay under Section 9(d) of the Facility Lease (taking into
account any assumption of Notes by the Lessee), under any circumstances and in
any event, in an amount at least sufficient to pay in full, as of any date of
payment, the aggregate unpaid principal amount of all Notes Outstanding at the
close of business on such date, together with accrued and unpaid interest on
such Notes.
Supplemental Financing shall mean a financing of the
Supplemental Financing Amount of Capital Improvements made pursuant to Section
8(f) of the Facility Lease.
Special Purchase Event shall have the meaning specified in
Section 13(c) of the Facility Lease.
Substituted lessee shall have the meaning specified in Section
6.8(c) of the Indenture.
Supplemental Financing Amount shall mean a Unit 2 Interest in
the cost of a Capital Improvement to Unit 2, and a Common Facilities Interest in
the cost of a Capital Improvement to the Common Facilities, or that portion of
such interest in such cost which shall not exceed (i) the amount of the
increase, if any, in the Owner Participant's basis in the Undivided Interest for
purposes of section 1012 or 1016 of the Code as a result of such Capital
Improvement less (ii) the amount of the related Additional Equity Investment of
the Lessor, if any.
-38-
6091.BURNHAM.1106.55:1
<PAGE>
Supplemental Indenture of Pledge shall have the meaning
specified in the Term Note Supplemental Indenture.
Supplemental Rent shall have the meaning set forth in Section
3(b) of the Facility Lease.
Surviving lessee shall have the meaning specified in Section
10(b) (3) (ii) of the Participation Agreement.
Tax shall mean any and all fees (including, without limitation,
documentation1 recording, license and registration fees), taxes (including,
without limitation, net income, franchise, value added, ad valorem, gross
income, gross receipts, sales, use, property (personal or real, tangible or
intangible) 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 Assumptions shall mean the assumptions set forth in Section
1(a) of the Tax Indemnification Agreement, with respect to the Federal income
tax consequences of the transactions contemplated by the Transaction Documents.
Tax Indemnification Agreement shall mean the Tax Indemnification
Agreement, dated as of August 12, 1986, between PNM and the Owner Participant.
Term Loan Agreement shall mean the Term Loan Agreement dated as
of August 12, 1986 among Funding Corp., PNM and the banks named on the signature
pages thereto.
Term Note Supplemental Indenture shall mean the Series 1986B
Term Note Supplemental Indenture dated as of August 12, 1986 among PNM, Funding
Corp. and the Collateral Trust Trustee, supplementing the Collateral Trust
Indenture and providing, among other things, for the issuance of the Initial
Series Bonds.
-39-
6091.BURNHAM.1106.55:1
<PAGE>
Termination Date shall have the meaning set forth in Section
14(a) of the Facility Lease.
Termination Event shall mean any early termination of the
Facility Lease in accordance with Section 14 thereof.
Termination Notice shall have the meaning set forth in Section
14(a) of the Facility Lease.
Termination Obligation shall have the meaning set forth in
Section 15.10.2 of the A~PP Participation Agreement (or any comparable successor
provision).
Termination Value, as of any Basic Rent Payment Date during the
Basic Lease Term, shall mean the percentage of Facility Cost set forth opposite
such date in Schedule 3 to the Facility Lease. Anything contained in the
Facility Lease to the contrary notwithstanding, Termination Value shall be, when
added to all other amounts which the Lessee is required to pay under Section 14
of the Facility Lease, under any circumstances and in any event; in an amount at
least sufficient to pay in full as of any Basic Rent Payment Date the aggregate
unpaid principal amount of all Notes Outstanding at the close of business on
such date, together with accrued and unpaid interest on such Notes.
Transaction Documents shall mean the Participation Agreement,
the Facility Lease, the Trust Agreement, the Indenture, the Extension Letter,
the Tax Indemnification Agreement, the Mortgage Release, the Assignment and
Assumption, each Purchase Document and the Notes.
Transaction Expenses shall have the meaning set forth in Section
14(a) of the Participation Agreement.
Transfer shall mean the transfer, by bill of sale or otherwise,
by the Lessor of all the Lessor's right, title and interest in and to the
Undivided Interest and the Real Property Interest and under the Assignment and
Assumption on an "as is, where is" basis, free and clear of all Lessor's Liens
and Owner Participant's Liens, but otherwise without recourse, representation or
warranty (including an express disclaimer of representations and warranties in a
-40-
6091.BURNHAM.1106.55:1
<PAGE>
manner comparable to that set forth in the second sentence of Section 6(b) of
the Facility Lease), together with the due assumption by the transferee of, and
the due release of the Lessor from, all of the Lessor's obligations under the
Assignment and Assumption and the Assignment of Beneficial Interest by an
instrument or instruments satisfactory in form and substance to the Lessor and
the Owner Participant.
Transferee shall have the meaning assigned thereto in Section 15
of the Participation Agreement.
Trust shall mean the trust created by the Trust Agreement.
Trust Agreement shall mean the Trust Agreement, dated as of
August 12, 1986, between Burnham Leasing Corporation and FNB.
Trust Estate shall have the meaning set forth in Section 2.03 of
the Trust Agreement.
Trust Indenture Act shall mean the Trust Indenture Act of 1939,
as amended.
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 Facility 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(a) or 13 (b) of the
Participation Agreement.
-41-
6091.BURNHAM.1106.55:1
<PAGE>
UCC or Uniform Commercial Code shall mean the Uniform Commercial
Code as in effect in any applicable jurisdiction.
Underwriting Agreement shall mean the agreement with the
underwriters named therein relating to the purchase, sale and delivery of the
Refunding Bonds.
Undivided Interest shall mean the Unit 2 Interest in Unit 2 and
the Unit 2 Common Facilities Interest in the Common Facilities. Where the
context so requires, the Undivided Interest includes the related Generation
Entitlement Share.
Undivided Interest Indenture Supplement shall mean the
supplement to the Indenture, substantially in the form of Exhibit C thereto,
pursuant to which the Owner Trustee causes the Undivided Interest and the Real
Property Interest to be subjected to the Lien of the Indenture.
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 3), 18 CFR 101, as in effect on the
date of execution of the Participation Agreement, as amended or modified from
time to time after such date.
Unit 1 and Unit 3 shall mean the Generating Units bearing such
designations at PVNGS.
Unit 2 shall mean the 1,270 megawatt unit, commonly known as
Unit 2, at PVNGS, all as more fully described in Item A of Exhibit B to the Bill
of Sale, together with all Capital Improvements thereto, but excluding all
Common Facilities.
Unit 2 Common Facilities Interest shall mean the Owner Trustee's
0.7555556% undivided interest in all Common Facilities.
Unit 2 Interest shall mean a percentage equal to the Owner
Trustee's 2.2666667% undivided interest in all of Unit 2.
-42-
6091.BURNHAM.1106.55:1
<PAGE>
Unit 2 Retained Assets shall mean (i) all resident fuel
assemblies, equipment and personal property constituting part of the Generating
Unit (as defined in the ANPP Participation Agreement) designated as Palo Verde
Nuclear Generating Station Unit 2 (other than common facilities) but excluded
from Unit 2 as set forth in Item A of Exhibit B to the Bill of Sale and (ii) all
equipment and personal and real property constituting PVNGS common facilities
under the ANPP Participation Agreement but excluded from the Common Facilities
as Set forth in Item B of Exhibit B to the Bill of Sale.
User shall mean a Person unrelated to PNM (within the meaning of
Section 318 of the Code) possessing the Undivided Interest after the Lease
Termination Date.
Weighted Factor means. the weighted average of the annual
percentage rates (averaged over the Basic Lease Term and (x) if the Pricing
Assumptions contemplate the Lessor claiming investment tax credits, the basic
term of all other leases so contemplating (the ITC Leases) entered into by PNM
pursuant to the authority granted by the NMPSC Order or (y) if the Pricing
Assumptions do not contemplate the Lessor claiming investment tax credits, the
basic term of all other leases not so contemplating (the Non ITC Leases) entered
into by PNM pursuant to the authority granted by the NMPSC Order) (i) as such
percentage rates may be adjusted from time to time pursuant to the terms of the
Facility Lease and the ITC Leases or the Non-ITC Leases, as the case may be, but
excluding any such adjustments in connection with supplemental financing of
capital improvements, and (ii) adjusted to reflect the amortization over the
Basic Lease Term and the basic term of the ITC Leases or the Non-ITC Leases, as
the case may be, of any gain or loss to the Lessee from any hedging or interest
protection program implemented by the Lessee with respect to the Notes and with
respect to the comparable notes to be issued with respect to the ITC Leases or
the Non-ITC Leases, as the case may be, which, when multiplied by the aggregate
of the Purchase Price and the comparable purchase prices payable by the lessors
under the ITC Leases or the Non-ITC Leases, as the case may be, determines,
respectively, the amount of Basic Rent payable under the Facility Lease and the
comparable basic rent payable under the ITC Leases or the Non-ITC Leases, as the
case may be.
-43-
6091.BURNHAM.1106.55:1
<PAGE>
================================================================================
PARTICIPATION AGREEMENT
dated as of December 15, 1986
among
CHASE MANHATTAN REALTY LEASING CORPORATION
as Owner participant
FIRST PV FUNDING CORPORATION,
as Loan Participant
THE FIRST NATIONAL BANK OF BOSTON,
in its individual capacity and as Owner Trustee
under a Trust Agreement,
dated as of December 15, 1986,
with the Owner participant, as owner Trustee
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, as Indenture Trustee
and
PUBLIC SERVICE COMPANY OF NEW MEXICO,
as Lessee
================================================================================
Sale and Leaseback of a 1.700000% undivided Interest
in Palo Verde Nuclear Generating Station Unit 1
and a .566667% Undivided Interest in Certain Common
Facilities
================================================================================
6091.100.2898.27:1
<PAGE>
TABLE OF CONTENTS
Page
----
SECTI0N 1 Definitions ............................................. 2
SECTION 2 Participation by the
Loan Participant......................................... 2
SECTION 3 Participation by the
Owner Participant........................................ 3
SECTION 4 Purchase, Sale,
Financing and Lease of
the Undivided Interest;
Purchase, Sale and Lease
of the Real Property
Interest ................................................ 3
SECTION 5 Notice of Closing;
Closing ................................................. 4
SECTION 6 Representations;
Warranties, Agreements and Directions of the
Loan Participant ........................................ 5
SECTION 7 Representations,
Warranties and
Agreements of the Owner
Participant ............................................. 8
SECTION 8 Representations,
Warranties and
Agreements of the Owner
Trustee and FNB ......................................... 15
SECTION 9 Representations,
Warranties and
Agreements of Chemical .................................. 22
-i-
6091.100.2898.27:1
<PAGE>
TABLE OF CONTENTS (Continued)
Page
----
SECTION 10 Representations, Warranties and
Agreements of the Lessee ................................ 24
SECTION 11 Conditions Precedent .................................... 50
SECTION 12 Consent to Assignment of
the Facility Lease;
Consent to Indenture;
Consent to Assignment of
Notes ................................................... 62
SECTION 13 Lessee's Indemnities
and Agreements........................................... 63
SECTION 14 Transaction Expenses .................................... 78
SECTION 15 Owner Participant's
Transfers .............................................. 81
SECTION 16 Brokerage and Finders'
Fees and Commissions .................................... 83
SECTION 17 Survival of
Representations and
Warranties; Binding
Effect .................................................. 84
SECTION 18 Notices ................................................. 85
SECTION 19 Miscellaneous ........................................... 86
-ii-
6091.100.2898.27:1
<PAGE>
TABLE OF CONTENTS (Continued)
- SCHEDULES
Schedule 1 - Notice of Closing
Schedule 2 - Pricing Assumptions
Schedule 3 - Bill of Sale and Assignment (Section 7(b) (4))
Schedule 4 - Recordations and Filings
Schedule 5 - Affidavit of Owner Trustee (Section 7(c) (6))
- APPENDIX
Appendix A - Definitions
--iii--
6091.100.2898.27:1
<PAGE>
PARTICIPATION AGREEMENT
PARTICIPATION AGREEMENT, dated as of December 15, 1986 among
CHASE MANHATTAN REALTY LEASING CORPORATION, a New York corporation (the Owner
Participant)1 FIRST PV FUNDING CORPORATION, a Delaware corporation (the Loan
Participant), THE FIRST NATIONAL BANK OF BOSTON, a national banking association,
in its individual capacity (FNB) and as Owner Trustee (the Owner Trustee) under
a Trust Agreement, dated as of December 15, 1986, with the Owner Participant,
CHEMICAL BANK, a New York banking corporation, in its individual capacity
(Chemical Bank) and as Indenture Trustee (the 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, a New Mexico Corporation (the Lessee)
WITNESSETH
WHEREAS, the Owner Participant desires to cause the Trust to
acquire the undivided Interest and the Real Property Interest and to lease the
Undivided Interest and the Real Property Interest to the Lessee under the
Facility Lease;
WHEREAS, the Lessee desires to sell the undivided Interest and
the Real Property Interest to the Trust and lease the Undivided Interest and the
Real Property Interest back from the Trust under the Facility Lease;
WHEREAS, the Owner Trustee and the Lessee will enter into the
Purchase Documents with respect to the sale and purchase of the Undivided
Interest and the Real Property Interest;
WHEREAS, pursuant to the terms and provisions of the
Indenture, the Owner Trustee will authorize the creation, issuance, sale and
delivery of the Fixed Rate Notes and the granting of the security therefor, and
the Indenture Trustee will authenticate the Fixed Rate Notes; and
WHEREAS, the Loan Participant is willing to purchase the.
Fixed Rate Notes on the terms and conditions set forth herein;
6091.100.2898.27:1
<PAGE>
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 the purposes hereof, capitalized terms used herein shall
have the meanings assigned to such terms in Appendix A. References in this
Participation Agreement to sections, paragraphs and clauses are to sections,
paragraphs and clauses in this Participation Agreement unless otherwise
indicated.
SECTION 2. Participation by the Loan Participant.
(a) Loan Participant's Commitment. subject to the satisfaction
of the conditions in Sections 5(a) and 11(a), on the Closing Date the Loan
Participant agrees to lend to the Owner Trustee, on a non-recourse basis, an
amount (the Loan) equal to 80% of the Purchase Price.
(b) Payment: Terms of the Fixed Rate Notes.
(1) Payment. Proceeds of the Loan shall be paid directly to
the Indenture Trustee, for the account of the Owner Trustee, in
immediately available funds, at the Indenture Trustee's Office.
(2) Terms of the Fixed Rate Notes. The Loan shall be evidenced
by the Fixed Rate Notes. The Fixed Rate Notes shall be issued by the
Owner Trustee under and pursuant to the Indenture, shall be, in the
aggregate, in the principal amount of the Loan and shall bear interest
at the rate or rates per annum and shall be payable as set forth in the
Indenture.
-2-
6091.100.2898.27:1
<PAGE>
SECTION 3. Participation by the Owner Participant.
Subject to the satisfaction of the conditions in sections 5(a)
and 11(a), on the Closing Date the Owner Participant agrees to (i) make an
equity investment with respect to the Undivided Interest in an amount (the
Investment) equal to 20% of the Purchase Price, (ii) make an equity investment
with respect to the Real Property Interest in the amount set forth in the Notice
of Closing (the Real Estate Investment), and (iii) provide to the Owner Trustee
an amount equal to the Estimated Transaction Expenses. Proceeds of the
Investment and the Real Estate Investment shall be paid directly to the
Indenture Trustee, in immediately available funds, at Indenture Trustee's
Office. The Estimated Transaction Expenses shall be paid to the owner Trustee,
in immediately available funds, at 100 Federal street, Boston, Massachusetts
02110 Attention: Manager, Corporate Trust Department
SECTION 4. Purchase, Sale, Financing and Lease of the
Undivided Interest, Purchase, Sale and Lease of the Real Property Interest
(a} The Undivided Interest. Subject to (x) the satisfaction of
the conditions in Sections 5(a) and 11(a), (y) receipt from the Owner
Participant of the Investment and an amount equal to Estimated Transaction
Expenses and (z) receipt from the Loan Participant of the proceeds of the Loan,
on the Closing Date the Owner Trustee shall (i) cause the Trust to purchase the
undivided Interest from the Lessee for $75,000,000 (the Purchase Price) and (ii)
disburse an amount equal to the Estimated Transaction Expenses as contemplated
by Section 14. Subject to the satisfaction of the conditions in section 11(b),
on the Closing Date the Lessee shall sell the Undivided Interest to the Trust
for the Purchase Price. Concurrently with such purchase and sale, the Trust
shall lease the Undivided Interest to the Lessee, and the Lessee shall lease the
undivided Interest from the Trust, pursuant to the Facility Lease
-3-
6091.100.2898.27:1
<PAGE>
(b) The Real Property Interest. Subject to (x) the
satisfaction of the conditions in Sections 5(a) and 11(a) and (y) receipt from
the Owner Participant of the Real Estate Investment, on the Closing Date the
Owner Participant shall cause the Trust to purchase the Real Property Interest
from the Lessee for a purchase price equal to the Real Estate Investment.
Subject to the satisfaction of the conditions in Section 11(b), on the closing
Date the Lessee shall sell the Real Property Interest to the Trust for such
purchase price. concurrently with such purchase and sale, the Trust shall lease
the Real Property Interest to the Lessee, and the Lessee shall lease the Real
Property Interest from the Trust, pursuant to the Facility Lease.
SECTION 5. Notice of Closing; Closing.
(a) Notice of Closing. Not later than two Business Days prior
to the closing Date, the Lessee shall deliver to the owner Participant, the
Owner Trustee, the Loan Participant, the collateral Trust Trustee and the
Indenture Trustee a notice, substantially in the form of Schedule 1 (the Notice
of Closing), which shall (i) state that the closing Date shall occur on the date
specified therein, (ii) set forth a list of the then known Transaction Expenses
payable by the Owner Trustee pursuant to section 14 (a) (the Estimated
Transaction Expenses) and (iii) provide payment instructions in respect of the
disposition of the Purchase Price and the amount of the Real Estate Investment.
(b) Closing. Upon satisfaction of the conditions in Section
5(a) and Section 11(a) and upon receipt from the Owner Participant of the amount
of the Investment, the Real Estate Investment and the Estimated Transaction
Expenses and from the Loan Participant of the Loan, on the closing Date the
Owner Trustee shall (i) instruct the Indenture Trustee to pay to the Lessee an
amount equal to the Purchase Price and the amount of the Real Estate Investment
in immediately available funds and (ii) disburse the Estimated Transaction
Expenses as contemplated by Section 14. Upon satisfaction of the conditions in
Section 11(b), on the Closing Date, the Lessee shall deliver to the Owner
Trustee the Bill of Sale, the Deed and the Assignment of Beneficial Interest.
-4-
6091.lOO.2898.27:l
<PAGE>
SECTION 6. Representations, Warranties and Agreements of the
Loan Participant; Direction to the Indenture Trustee.
(a) The Loan Participant represents and warrants that:
(1) Due organization. The Loan Participant is a corporation
duly organized and validly existing in good standing under the laws of
the State of Delaware and has the corporate power and authority to carry
on its business as presently conducted, own its properties, and enter
into and perform its obligations under this Participation Agreement and
each other Transaction Document and each Financing Document to which it
is, or is to become on or before the Closing Date, a party.
(2) Due Authorization; Enforceability. The execution, delivery
and performance by the Loan Participant of this Participation Agreement
and each other Transaction Document and each Financing Document to which
it is, or is to become, a party on or before the Closing Date, have been
duly authorized by all necessary corporate action on the part of the
Loan Participant and do not require the consent or approval of the
stockholder of the Loan Participant. This Participation Agreement and
each other Transaction Document and each Financing Document to which the
Loan Participant is, or is to become, a party, have been, or on or
before the Closing Date will have been, duly executed and delivered by
the Loan Participant and constitute, or upon execution and delivery
thereof will constitute, legal, valid and binding agreements of the Loan
Participant enforceable against it in accordance with their respective
terms.
-5-
6091.100.2898.27:1
<PAGE>
(3) No Violation. Neither the executi6n, delivery or
performance by the Loan Participant of this Participation Agreement, any
other Transaction Document or any Financing Document to which it is, or
is to become on or before the closing Date, a party, nor the
consummation by the Loan Participant of the transactions contemplated
hereby or thereby, nor compliance by the Loan Participant with the
provisions hereof or thereof conflicts or will conflict with, or results
or will result in the breach of any provision of, the certificate of
Incorporation or By-Laws of the Loan Participant or any Applicable Law
or any indenture, mortgage or agreement to which the Loan Participant is
a party or by which it or its property is bound or requires any
Governmental Action, except such as have been, or on or before the
closing Date will have been, duly obtained, given or accomplished.
(4) No other Business. Except as contemplated by this
participation Agreement, the other Transaction Documents and the
Financing Documents and except as otherwise contemplated by the Section
6(c) Application, the Loan Participant has not engaged, and will not
engage, in any business or activity of any type or kind whatever.
(5) ERISA. The Loan Participant is not acquiring any Note with
the "plan assets" of any "employee benefit plan" within the meaning of
section 3(3) of ERISA or any "plan" within the meaning of section
4975(e)(l) of the code.
(6) Securities Act. The Loan participant understands that (i)
none of the Notes to be acquired by it has been registered under the
Securities Act and (ii) each will bear the legend set forth in the form
of such Notes. The Loan Participant will acquire each Note to be
acquired by it hereunder and under the Indenture solely for purposes of
pledging such Notes to the collateral Trust Trustee to secure Bonds
issued from time to time under the collateral Trust Indenture.
-6-
6091.100.2898.27:1
<PAGE>
(b) Agreements of the Loan Participant. The Loan Participant
agrees that:
(1) Transfers of the Notes. Any transfer or assignment of any
Note or of all or any part of the Loan Participant's interest hereunder
or under any other Transaction Document or any Financing Document shall
be effected in a transaction constituting an exempted transaction under
the Securities Act and on the express condition that the transferee,
assignee or participant shall agree to be bound by the terms and
provisions hereof and thereof. Neither the Loan Participant nor any
subsequent Holder of a Note may sell, exchange or transfer any Note to
any other Person (other than the Collateral Trust Trustee) unless such
transferee delivers to the other parties hereto a representation and
warranty (and an opinion of counsel satisfactory to each of the other
parties hereto) to the effect that neither the transfer of such Note to,
nor the ownership of such Note by, such transferee will cause such
transferee, or any other party hereto, to be engaged in a "prohibited
transaction", as defined in section 406 of ERISA or section 4975 of the
Code, which is not at such time subject to an exemption contained in
ERISA or in the rules, regulations, releases or bulletins adopted
thereunder.
(2) Quiet Enjoyment. The Loan Participant acknowledges Section
6(a) of the Facility Lease.
(3) No Other Business. During such time as any Note is
outstanding and held by the Loan Participant or the collateral Trust
Trustee, the Loan Participant will not (i) engage in any business or
activity other than (1) in connection with the Transaction Documents or
the Financing Documents or (2) as otherwise contemplated by the Section
6(c) Application or (ii) amend or engage in any activity or take any
action not permitted by Article THIRD, FOURTH or SIXTH of its
Certificate of Incorporation, as in effect on the date of execution and
delivery hereof, without, in each case, the consent of the other parties
hereto.
-7-
6091.100.2898.27:1
<PAGE>
(c) Direction to the Indenture Trustee. The Loan participant,
as purchaser of the Fixed Rate Notes, (i) hereby authorizes and directs the
Indenture Trustee to execute, deliver and perform this participation Agreement,
(ii) hereby authorizes and directs the Indenture Trustee to register such Notes
in the name of the Loan Participant and, upon authentication and delivery
thereof pursuant to this Participation Agreement and the Indenture, to deliver
such Notes (upon completion by the Loan participant of the assignment attached
to each of the Fixed Rate Notes) to the Collateral Trust Trustee pursuant to the
Collateral Trust Indenture, (iii) acknowledges and agrees that, in connection
with this participation Agreement, the Indenture Trustee shall have the benefits
and protections of Article VIII of the Indenture and (iv) agrees that, in the
event of a conflict between the provisions of this Participation Agreement and
the Indenture, the Indenture Trustee shall, as between the Indenture Trustee and
the Loan Participant, be fully protected in relying on the express terms of the
Indenture.
SECTION 7. Representations, warranties and Agreements of the
owner Participant.
(a) Representations and warranties. The Owner Participant
represents and warrants that:
(1) Due Organization. The Owner Participant is a corporation
duly organized and validly existing in good standing under the laws of
the state of its incorporation and has the corporate power and authority
to enter into and perform its obligations under this Participation
Agreement and each other Transaction Document to which it is, or is to
become, a party.
(2) Due Authorization. This Participation Agreement and each
other Transaction Document to which the Owner Participant is, or is to
-8-
6091.100.2898.27:1
<PAGE>
become on or before the closing Date, a party have been duly authorized
by all necessary corporate action on the part of the Owner Participant
and do not require the consent or approval of its stockholders or any
trustee or holder of any of its indebtedness or other obligations,
except such as have been, or on or before the Closing Date will have
been, duly obtained, given or accomplished.
(3) Execution. This Participation Agreement and each other
Transaction Document to which the Owner Participant is, or is to become
on or before the Closing Date, a party have been, or on or before the
Closing Date will have been, duly executed and delivered by the Owner
Participant and constitute, or upon execution and delivery thereof will
constitute, its legal, valid and binding agreements, enforceable against
it in accordance with their respective terms (except as may be limited
by-bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights generally).
(4) No Violation. Neither the execution, delivery or
performance by the Owner Participant of this Participation Agreement or
any other Transaction Document to which it is, or is to become on or
prior to the Closing Date, a party, nor the consummation by the Owner
Participant of the transactions contemplated hereby or thereby, nor
compliance by the Owner Participant with the provisions hereof or
thereof, conflicts with, or results in the breach of any provision of,
or is inconsistent with, its documents of incorporation or By-Laws or
contravenes any Applicable Law applicable to it or any of its
Affi4iates, or any indenture, mortgage or agreement for borrowed money
to which the Owner Participant is a party or any other agreement or
instrument to which the Owner Participant is a party or by which it or
its property is bound or requires any Governmental Action with respect
to the Owner Participant under Federal or New York law on or before the
Closing Date, except such as are contemplated by the Transaction
-9-
6091.100.2898.27:1
<PAGE>
Documents or the Financing documents or such as have been, or on or
before the Closing Date will have been, duly obtained, given or
accomplished; provided, however, that the Owner Participant makes no
representation or warranty as to any Applicable Law or Governmental
Action relating to the securities Act, the securities Exchange Act, the
Trust Indenture Act, the Federal Power' Act, the Atomic Energy Act, the
Nuclear waste Act, ERISA (except to the extent set forth in paragraph
(9) below), the Holding Company Act, the New Mexico Public utility Act,
the Arizona Public utility Act, energy or nuclear matters, public
utilities, the environment, health and safety or Unit 1.
(5) No Owner Participant's Liens. Neither the execution and
delivery by the Owner Participant of this Participation Agreement or any
other Transaction Document to which the Owner Participant is, or is to
become on or before the Closing Date, a party, nor the performance by
the Owner Participant of its obligations hereunder or thereunder, will
subject the Trust Estate or the Lease Indenture Estate, or any portion
of either thereof, to any Owner Participant's Lien.
(6) Acquisition. The Owner Participant is acquiring the
beneficial interest in the Trust Estate for its own account in the
ordinary course of its business and the Owner Participant has no
intention of making any sale or other distribution of the beneficial
interest in the Trust Estate in violation of any legislation, rule or
regulation relating to limitations upon the sale or other distribution
of interests such as such beneficial interest.
(7) No Prior security Interest. There exists no security
interest in or other Lien on the Lease Indenture Estate in the state of
the chief place of business of the Owner Participant, the State of New
Mexico or the State of Arizona arising as a result of claims against the
Owner Participant unrelated to the transactions contemplated by the
Transaction Documents or the Financing Documents which is prior to the
Indenture Trustee's security interest in the Lease Indenture Estate.
-10-
6091.l00.2898.27:l
<PAGE>
(8) No Sales or Solicitations. Except as contemplated by the
Financing Documents and as described in a letter to the Lessee dated
November 17, 1986, neither the Owner Participant not anyone acting on
its behalf has directly or indirectly offered or sold, or solicited any
offer to acquire, any beneficial interest in the Trust Estate or any
Note or any Bond.
(9) ERISA. The Owner Participant is not acquiring its
interests in the Trust with the "plan assets" at any "employee benefit
plan" within one meaning of section 3(3) of ERISA or any "plan" within
the meaning of Section 4975(e)(l) of the Code.
(b) Agreements of the Owner Participant. The Owner Participant
agrees that:
(1) No Owner Participant's Liens. The Owner Participant will
not create or permit to exist, and, at its own cost and expense, will
promptly take such action as may be necessary duly to discharge, all
Owner Participant's Liens.
(2) Quiet Enjoyment. The Owner Participant acknowledges the
provisions of Section 6(a) of the Facility Lease and Section 8(c) of
this Participation Agreement.
(3) No-Petition Agreement. Prior to the 181st day following
the payment in full of the Bonds and the discharge in accordance with
its terms of the collateral Trust Indenture, the Owner Participant
agrees that it will not file a petition, or join in the filing of a
petition, seeking reorganization, arrangement, adjustment or composition
of, or in respect of, the Loan Participant under the Bankruptcy Code, or
any other applicable Federal or state law or the law of the District of
Columbia.
-11-
6091.100.2898.27:1
<PAGE>
(4) Transfer Of Interest in the Trust Estate. Unless the
Lessee shall have assumed the Notes as contemplated by Section 3.9(b) of
the Indenture, upon receipt by the Owner Participant under Section 5.2
of the Indenture of the payments to be made to the Lessor as provided in
Section 9(c), 9(d) or 16 of the Facility Lease and, if applicable,
compliance in full by the Lessee with Section 9(f) of the Facility
Lease, the Owner Participant shall (so long as no Default or Event of
Default shall have occurred and be continuing), and at any time
following the occurrence of an Event of Loss, Deemed Loss Event or a
Default or Event of Default at event giving rise to the exercise of the
Cure Option the Owner Participant may, assign, convey and transfer to
the Lessee all of the Owner Participant's right, title and interest in,
to and under the Trust Estate (except the right to receive Excepted
Payments), such transfer (i) to be free and clear of Owner Participant's
Liens but otherwise without recourse, representation or warranty and
(ii) if the Owner Participant so elects, to be effected by the execution
and delivery by the Owner Participant to the Lessee of a Bill of Sale
and Assignment substantially in the form off Exhibit A hereto (and upon
the execution and delivery thereof and the furnishing of executed
counterparts thereof to the Owner Trustee such transfer shall be and
become effective automatically and without further action by the Owner
Trustee, the Owner Participant, the Lessee, the Lessor, the Indenture
Trustee or any other Person). The Lessee hereby agrees to accept the
transfer contemplated by this Section 7(b) (4) and the parties hereto
acknowledge and agree that at the time of such transfer the Lessee shall
be deemed to be a Transferee that has-satisfied all conditions set forth
in Section 15(a) of this Participation Agreement and Section 11.09 of
the Trust Agreement.
-12-
6091.100.2898.27:1
<PAGE>
If, in accordance with the preceding paragraph, the Owner
Participant shall assign, convey and transfer to the Lessee all of the
owner participant's right, title and interest in, to and under the Trust
Estate (except the right to receive Excepted Payments) following the
occurrence of an Event of Loss, Deemed Loss Event or a Default or Event
of Default or event giving rise to the Cure Option, but the transferring
Owner Participant shall not have received under Section 5.2 of the
Indenture the payments to be made to the Lessor as provided in Section
9(c), 9(d) or 16 of the Facility Lease, as the case may be, the
obligation of the Lessee to make such payments (together with interest
thereon in accordance with Section 3(b)(iii) of the Facility Lease) (or
to make other payments in a like amount with respect to Basic Rent or
supplemental Rent paid by application of such payments (and in which the
Owner Trustee has thereby acquired an interest) pursuant to Section 5.1
or 5.3 of the Indenture) shall not be deemed to be canceled or
discharged but shall continue until all such amounts are so received by
the Lessee, as successor Owner participant, or by the transferring Owner
Participant pursuant to the following provisions of this Section
7(b)(4). The Lessee as successor Owner Participant hereby agrees to pay
to the transferring owner Participant on the date of transfer an amount
equal to the amount of the payments to be made to the Lessor as provided
in Section 9(c), 9(d) or 16 together with interest thereon at the
Penalty Rate (computed in accordance with the Facility Lease) from the
date of transfer, such payments (the Secured Obligations) to be made
only from amounts payable to the Owner Participant from the Trust
Estate. The secured Obligations shall be secured by (and the Lessee
hereby grants to the transferring Owner Participant a security interest
in and general lien upon) all of the right, title and interest of the
Lessee as successor Owner Participant in, to and under the Trust Estate.
In connection therewith, the Lessee as successor Owner Participant
hereby agrees as follows:
-13-
6091.100.2898.27:1
<PAGE>
(i) The transferring Owner Participant shall have all of
the rights and remedies of a secured party under the Uniform
commercial code as in effect in the State of New York (as such
law may at any time be amended)
(ii) Upon the occurrence of such transfer, the Lessee as
successor Owner Participant shall appoint, and hereby does
appoint, the transferring Owner participant its
attorney-in-fact, irrevocably, with full power of
substitution, to the exclusion of the Lessee as successor
Owner Participant, to ask for, require, demand, receive and
give acquittance for any and all moneys and claims for moneys
due and to become due to the Lessee as successor Owner
Participant under or arising out of the Trust Estate, to
endorse any checks or other instruments or orders in
connection therewith, and to take any action (including the
filing of financing statements or other documents and the
delivery of written instructions to the Owner Trustee and the
Indenture Trustee specifying that all payments to be made to
the Lessee as successor Owner Participant under the Trust
Agreement and the Indenture shall be made directly to the
transferring Owner Participant so long as any portion of the
Secured Obligations remains outstanding) or institute any
proceedings which the transferring Owner Participant may deem
necessary or appropriate to protect and preserve the security
interest of the transferring Owner Participant in the Trust
Estate and the rights of the transferring owner Participant to
receive payments thereunder.
(iii) Upon the occurrence of such transfer, and until the
Secured Obligations have been paid in full, the Lessee (in its
capacity as such and as successor Owner Participant) shall
not, without the prior written consent of the transferring
-14-
6091.100.2898.27:1
<PAGE>
Owner Participant (1) take any action or deliver any
instruction under any Transaction Document the effect of which
would be to (A) relieve or otherwise affect the obligation of
the Lessee to make such payments, (B) terminate the Trust
Agreement, (C) terminate or rescind the Facility Lease, (D)
sell, assign, transfer or deliver the Trust Estate to any
Person (except, in the case of the Trust Estate, as
contemplated by section 9(j) of the Facility Lease) or (2)
accept, or approve, any amendment to any Transaction Document.
(iv) The Lessee (as such and as successor Owner
Participant) covenants and agrees to do all such acts and
execute all such instruments of further assurance as shall be
reasonably requested from time to time by the transferring
Owner Participant for the purpose of fully carrying out and
effectuating the provisions of this Section 7(b)(4) and the
intent thereof.
Upon the payment in full of the Secured Obligations, the security interest
hereinabove provided shall terminate and the transferring Owner Participant, at
the request of the Lessee as successor Owner Participant, shall execute and
deliver to the Lessee as successor Owner Participant such termination
statements, releases or other instruments presented to the transferring Owner
Participant as shall be reasonably required to effect such termination.
SECTION 8. Representations, Warranties and Agreements of the
Owner Trustee and FNB'S.
(a) Representations and Warranties. FNB as Owner Trustee and
(except as otherwise provided in the last sentence of this section 8(a))
in its individual capacity, represents and warrants that:
(1) Due Organization. FNB is a national banking association
duly organized and validly existing in good standing under the laws of
the United States of America and has all requisite corporate power and
-15-
6091.100.2898.27:1
<PAGE>
authority to enter into and perform its obligations under (x) the Trust
Agreement and, to the extent it is a party hereto in its individual
capacity, this Participation Agreement and (y) acting as Owner Trustee,
this participation Agreement and each other Transaction Document to
which FNB is, or is to become on or before the Closing Date, a party as
Owner Trustee.
(2) Due Authorization; Enforceability; etc. This Participation
Agreement and each other Transaction Document to which FNB is, or is to
become on or before the Closing Date, a party have been duly authorized
by all necessary corporate action of FNB (in its individual capacity or
as Owner Trustee, as the case may be) and, upon execution and delivery
hereof and thereof, this participation Agreement and each such other
Transaction Document will be duly executed and delivered and will be
legal, valid and binding agreements of FNB (in its respective
capacities), enforceable against it (in its respective capacities) in
accordance with their respective terms (except as may be limited by
bankruptcy, insolvency or other similar laws affecting the enforcement
of creditors' rights generally); it being understood that FNB is not
making any representation or warranty as to the priorities of the liens
created or to be created under any Transaction Document, title to the
Trust Estate or recordings or filings necessary in connection therewith.
(3) Notes. Upon execution of the Fixed Rate Notes,
authentication thereof by the Indenture Trustee pursuant to the
Indenture and delivery thereof against payment therefor in accordance
with this participation Agreement, each such Note will be a legal, valid
and binding obligation of the owner Trustee, enforceable against the
owner Trustee in accordance with its terms (except as may be limited by
bankruptcy, insolvency or other similar laws affecting the enforcement
of creditors' rights generally)
-16-
6091.100.2898.27:1
<PAGE>
(4) No violation. Neither the execution and delivery by (x)
FNB of the Trust Agreement and, to the extent FNB is a party hereto in
its individual capacity, this Participation Agreement and (y) the Owner
Trustee of this Participation Agreement and each other Transaction
Document (other than the Trust Agreement) to which the Owner Trustee is,
or is to become on or before the Closing Date, a party, nor the
performance by FNB, in its individual capacity or as Owner Trustee, as
the case may be, of its obligations under each, conflicts with, or
results in the breach of any provision of, its Articles of Association
or By-Laws and does not contravene any Applicable Law of the United
states of America or The Commonwealth of Massachusetts governing the
banking or trust powers of FNB, and does not contravene any provision
of, or constitute a default under, any indenture, mortgage, contract or
other instrument to which FNB is a party or by which it is bound or
require any Governmental Action with respect to the owner Trustee under
any Federal or Massachusetts law, except such as are contemplated by the
Transaction Documents or the Financing Documents or such as have been,
or on or before the closing Date will have been, duly obtained, given or
accomplished; provided, however, that no representation or warranty is
made with respect to the right, power or authority of FNB or the Owner
Trustee to act under the ANPP Participation Agreement or the License in
respect of the Undivided Interest or Unit 1, and the Owner Trustee makes
no representation or warranty as to any Applicable Law or Governmental
Action relating to the Securities Act, the Securities Exchange Act, the
Trust Indenture Act, the Federal Power Act, the Atomic Energy Act, the
Holding Company Act, the New Mexico Public Utility Act, the Arizona
public Utility Act, the Nuclear Waste Act, ERISA, energy or nuclear
matters, public utilities, the environment, health and safety or Unit 1.
(5) Defaults. To the best knowledge of the Owner Trustee, no
Indenture Default or Indenture Event of Default has occurred and is
continuing. The Owner Trustee is not in violation of any of the
-17-
6091.100.2898.27:1
<PAGE>
terms of this Participation Agreement or any other Transaction Document
to which it is, or is to become on or before the Closing Date, a party.
(6) Litigation. There is no action, suit, investigation or
proceeding pending or, to the knowledge of FNB, threatened against FNB
(in any capacity).before any court, arbitrator or administrative or
governmental body and which relates to its banking or trust powers
which, individually or in the aggregate, if decided adversely to the
interests of FNB in such capacity, would have a material adverse effect
upon the ability of FNB (in any capacity) to perform its obligations
under this Participation Agreement or any other Transaction Document to
which it is, or is to become on or before the Closing Date, a party (in
any capacity).
(7) Location of the Chief place of Business and Chief
Executive Office, etc. The chief place of business and chief executive
office of the owner Trustee and the office where its records concerning
the accounts or contract rights relating to the transactions
contemplated hereby are located in Boston, Massachusetts.
(8) No Prior security Interest. There exists no security
interest in the Lease Indenture Estate in the States of Mew Mexico, New
York or Arizona or in The Commonwealth of Massachusetts arising as a
result of any claim against FNB unrelated to the transactions
contemplated by the Transaction Documents or the Financing Documents
which is prior to the Indenture Trustee's security interest in the Lease
Indenture Estate.
(9) No Owner Trustee's Liens. Neither the execution by FNB (in
any capacity) of this Participation Agreement or any other Transaction
Document to which it (in any capacity) is, or is to become on or before
the Closing Date, a party, nor the performance in such capacity by it of
its obligations hereunder or thereunder, will subject the Trust Estate
or the Lease Indenture Estate, or any portion thereof, to any Owner
Trustee's Lien.
-18-
6091.100.2898.27:1
<PAGE>
The representations and warranties in Section 8(a)(2), section 8(a) (3) and
section 8(a)(5) as to Transaction Documents and the Fixed Rate Notes being
legal, valid and binding obligations enforceable in accordance with their
respective terms, are given by FNB only in its capacity as Owner Trustee and not
in its individual capacity, except that FNB does represent in its individual
capacity that it is authorized under the laws of The commonwealth of
Massachusetts to execute and deliver the Transaction Documents to which it is,
or is to become on or before the closing Date, a party.
(b) Agreements. FNB agrees, in its individual capacity, that:
(1) Discharge of Liens. FNB will not create or permit to
exist, and will, at its own cost and expense, promptly take such action
as may be necessary duly to discharge, all Owner Trustee's Liens.
(2) Certain Amendments. FNB agrees that unless a Default or an
Event of Default has occurred and is continuing or an Event of Loss or
Deemed Loss Event has occurred, FNB will not amend any of the payment
terms of any Note, or take any action to refund any Note after the date
of issue thereof pursuant to the terms of this Participation Agreement
and the Indenture without the prior written consent of the Lessee. FNB
agrees that except for amendments or supplements, if any, made pursuant
to Article x of the Trust Agreement or contemplated by section 7(b) (4),
FNB will not amend or supplement, or consent to any amendment of or
supplement to, the Trust Agreement if such amendment would materially
and adversely affect the rights of the Lessee under the Facility Lease
and this Participation Agreement, without the prior written consent of
the Lessee unless a Default or an Event of Default has occurred and is
continuing or the Lease Termination Date has occurred.
(3) Change in Location of Chief Place of Business and chief
Executive Office, etc. FNB shall notify the Lessee, the Loan Participant
and the Indenture Trustee promptly after any change in
-19-
6091.100.2898.27:1
<PAGE>
location of its chief executive office, principal and chief place of
business or place where its records concerning the accounts or contract
rights relating to the transactions contemplated hereby are kept
(4) No Petition Agreement. Prior to the 181st day following
the payment in full of the Bonds and the discharge in accordance with
its terms of the Collateral Trust Indenture, FNB (in all capacities)
agrees that it will not file a petition, or join in the filing of a
petition, seeking reorganization, arrangement, adjustment or composition
of or in respect of the Loan participant under the Bankruptcy code or
any other applicable Federal or state law or the law or the District or
Columbia.
(5) Quiet Enjoyment. FNB acknowledges section 6(a) of the
Facility Lease.
(c) Agreements of the owner Trustee. The owner Trustee agrees
that:
(1) Subject and subordinate. The rights and remedies of the
Owner Trustee and the Owner Participant in the Undivided Interest, the
Real Property Interest and the related Generation Entitlement Share are
subject and subordinate to the rights and remedies of the ANPP
Participants (other than (i) the Lessee or (ii) any Person who shall
become an ANPP Participant in respect of the Lessor's Interest (as
defined in Section 8(c) (3)) under the ANPP Project Agreements.
(2) Lessee to be Participant. Except as provided in Sections
15.2.2, 15.6.4 and 15.10 (or any comparable successor provisions) of the
ANPP Participation Agreement, the Lessee shall be and remain the sole
"Participant" for all purposes of the ANPP Participation Agreement and
the sole representative (with power to bind the Lessor and the Indenture
Trustee) in all dealings with the other ANPP Participants in relation to
the property, rights, titles and interests of the Lessee transferred to
-20-
6091.100.2S98.27:1
<PAGE>
the Lessor pursuant to the Transaction Documents; provided, however,
that the foregoing shall not limit in any way the effect of section 15
or 16 of the Facility Lease or any liability or obligation that the
Lessee may incur to the Owner Trustee or the Owner Participant under any
Transaction Document as a result thereof (including, without limitation,
any liability that PNM may incur under section 16 of the Facility Lease
as the result of an Event of Default)
(3) Cash Bids. Upon the expiration of the Facility Lease and
upon the Lessee failing to purchase or otherwise reacquire all the
right, title and interest in PVNGS and contractual rights related
thereto necessary for the operation of the interest (the Lessor's
Interest) acquired by the Lessor pursuant to the Transaction Documents,
the Lessor shall entertain cash bids from each ANPP Participant for the
Lessor's Interest.
(4) Survival. The provisions of this paragraph (4) and
Sections 8(c)(l), (2) and (3) shall remain in full force and effect
until such time as the ANPP Administrative Committee or the ANPP
Participants shall otherwise consent.
(5) License Matters. The Owner Trustee acknowledges that
before taking possession of the undivided interest or any part thereof
or of any other interest in PVNGS, either of the following may be
required: (i) the issuance of an appropriate license from the NRC,
whether by amendment to the License or otherwise, or (ii) a partial
transfer of the License authorizing the Lessor to possess its interest
in PVNGS, to the extent of the Undivided Interest, upon application for
partial transfer of such License to such extent filed pursuant to
Applicable Law. Neither the Owner Trustee nor the Owner Participant
shall have any responsibility whatsoever to take or initiate any action
with respect to any NRC licensing matter.
(6) Acknowledgment and Agreement. The Owner Trustee hereby
acknowledges and agrees to the provisions of Section 7(b)(4) of this
-21-
6091.100.2898.27:1
<PAGE>
Participation Agreement. The Owner Trustee hereby agrees, upon the
request of the Owner participant, to execute and cause to be filed with
the County Recorder, Maricopa County, Arizona a duly completed affidavit
in substantially the form of Schedule 5 hereto.
SECTION 9. Representations, warranties and' Agreements of
Chemical Bank.
(a) Representations and warranties. Chemical bank represents
and warrants that:
(1) Due Organization. Chemical Bank is a banking corporation
duly organized and validly existing in good standing under the laws of
the State of New York and has the corporate power and authority and
legal right to enter into and perform its obligations under the
Indenture, this participation Agreement and each other Transaction
Document to which it is, or is to become on or before the Closing Date,
a party.
(2) Due Authorization. This Participation Agreement and each
other Transaction Document to which Chemical Bank is, or is to become on
or before the Closing Date, a party have been or will be duly authorized
by all necessary corporate action of Chemical Bank and each has been or
will have been duly executed and delivered by Chemical Bank.
(3) Authentication of the Fixed Rate Notes. The officer of
Chemical Bank who shall authenticate the Fixed Rate Notes to be issued
pursuant to the Indenture shall be, at the time of such authentication,
an Authorized Officer.
(4) No violation. Neither the execution and delivery by
Chemical Bank of this Participation Agreement or the Indenture, nor the
authentication by it of the Fixed Rate Notes, nor the consummation by it
of the transactions contemplated hereby or thereby, nor the compliance
by it with the provisions hereof or thereof will contravene any
Applicable Law governing its banking or trust powers, or contravenes or
-22-
6091.100.2898.27:1
<PAGE>
results in a breach of, or constitutes a default under, its Articles of
Incorporation or By-laws, or requires any Governmental Action under any
Federal or New York law, except such as have been, or on or before the
Closing date will have been, duly obtained, given or accomplished;
provided, however, that no representation or warranty is made as to (i)
any Applicable Law or Governmental Action relating to the Securities
Act, the Securities Exchange Act, the Trust Indenture Act, the Federal
Power Act, the Atomic Energy Act, the Holding Company Act, the New
Mexico Public Utility Act, the Arizona public Utility Act, the Nuclear
Waste Act, ERISA, energy or nuclear matters, public utilities, the
environment, health and safety or Unit 1 or (ii) the Lease Indenture
Estate to the extent it may constitute real property under Applicable
Law
(b) Agreements. The Indenture Trustee agrees that:
(1) Agreement to Discharge Liens. The Indenture Trustee will
not create or permit to exist, and will promptly take such action as may
be necessary duly to discharge, all Indenture Trustee's Liens
(2) No petition Agreement. Prior to the 181st day following
the payment in full of the Bonds and the discharge in accordance with
its terms of the Collateral Trust Indenture, the Indenture Trustee
agrees that it will not file a petition, or join in the filing of a
petition, seeking reorganization, arrangement, adjustment or composition
of or in respect of the Loan Participant under the Bankruptcy Code or
any other applicable Federal or state law or the law of the District of
Columbia
(3) Quiet Enjoyment. The Indenture Trustee agrees to be bound
by Section 6(a) of the Facility Lease.
(4) Acknowledgment. The Indenture Trustee hereby acknowledges
the provisions of Section 7(b) (4) of this Participation Agreement.
-23-
6091.100.2898.27:1
<PAGE>
SECTION 10. Representations, warranties and Agreements of the
Lessee.
(a) Representations and warranties. The Lessee represents and
warrants that:
(1) Due Organization. The Lessee is a corporation duly
organized and validly existing in good standing under the laws of the
State of New Mexico and has the corporate power and authority to carry
on its business as presently conducted, to own or hold under lease its
properties and to enter into and perform its obligations under this
Participation Agreement and each other Transaction Document and
Financing Document to which it is, or is to become, a party. The Lessee
is duly qualified and in good standing to do business as a foreign
corporation in the State of Arizona and has not failed to qualify to do
business or to be in good standing in any other jurisdiction where
failure so to qualify or be in good standing would materially and
adversely affect the financial condition of the Lessee or its ability to
perform any obligations under this Participation Agreement, any other
Transaction Document or any Financing Document to which it is, or is to
become on or before the Closing Date, a party.
(2) Due Authorization. The execution, delivery and performance
by the Lessee of this Participation Agreement and each other Transaction
Document and each Financing Document to which it is, or is to become on
or before the Closing Date, a party, have been duly authorized by all
necessary corporate action on the part of the Lessee and do not, and
will not, require the consent or approval of the stockholders of the
Lessee or any trustee or holder of any indebtedness or other obligation
of the Lessee, other than (i) the Mortgage Release, (ii) the finding of
the ANPP Administrative Committee described in Section 15.6.2 of the
ANPP Participation Agreement and (iii) such other consents and approvals
as have been, or on or before the Closing Date will have been, duly
obtained, given or accomplished, with true copies thereof delivered to
the Owner Participant prior to the Closing Date.
-24-
6091.100.2898.27:1
<PAGE>
(3) Execution. This Participation Agreement and each other
Transaction Document and each Financing Document to which the Lessee is,
or is to become on or before the Closing Date, a party will have been
duly executed and delivered by the Lessee, and this Participation
Agreement constitutes, and upon execution and delivery thereof,. each
such Transaction Document and each such Financing Document will
constitute, the legal, valid and binding agreement of the Lessee,
enforceable against the Lessee in accordance with their respective
terms.
(4) No violation, etc. Neither the execution, delivery or
performance by the Lessee of this Participation Agreement or any other
Transaction Document or any Financing Document to which it is, or is to
become on or before the Closing Date, a party, nor the consummation by
the Lessee of the transactions contemplated hereby or thereby, nor
compliance by the Lessee with the provisions hereof or thereof,
conflicts or will conflict with, or results or will result in a breach
or contravention of any of the provisions of, the Restated Articles of
Incorporation or By-Laws of the Lessee or any Affiliate of the Lessee,
or any Applicable Law, or any indenture, mortgage, lease or any other
agreement or instrument to which the Lessee or any Affiliate of the
Lessee is a party or by which the property of the Lessee or any
Affiliate of the Lessee is bound, or results or will result in the
creation or imposition of any Lien (other than Permitted Liens) upon any
property of the Lessee or any Affiliate of the Lessee. There is no
provision of the Restated Articles of Incorporation or By-Laws of the
Lessee or any Affiliate of the Lessee, or any Applicable Law, or any
such indenture, mortgage, lease or other agreement or instrument which
materially adversely affects or in the future is likely (so far as the
Lessee can now foresee) to materially adversely affect the business,
operations, affairs, condition, properties or assets of the Lessee, or
-25-
6091.100.2898.27:1
<PAGE>
its ability to perform its obligations under this participation
Agreement or any other Transaction Document or any Financing Document to
which it is, or is to become on or before the closing Date, a party.
(5) Governmental Actions. No Governmental Action is or will be
required in connection with the execution, delivery or performance by
the Lessee of, or the consummation by the Lessee of the transactions
contemplated by, this Participation Agreement, any other Transaction
Document or any Financing Document, except such Governmental Actions (i)
as have been, or on or before the Closing Date will have been, duly
obtained, given or accomplished, with true copies thereof delivered to
the Owner Participant and the Loan Participant, (ii) as may be required
under existing Applicable Law to be obtained, given or accomplished from
time to time after the Closing Date in connection with the maintenance,
use, possession or operation of Unit 1 or otherwise with respect to Unit
1 and the Lessee's or the Operating Agent's involvement therewith and
which are, for PVNGS, routine in nature and which the Lessee has no
reason to believe will not be timely obtained and (iii) as may be
required under Applicable Law not now in effect. No Governmental Action
(except Governmental Action as may be required by any Governmental
Authority of or in New York or Delaware) is or will be required (a) in
connection with the participation by the Owner Trustee, the Indenture
Trustee, the Owner Participant or the Loan Participant in the
consummation of the transactions contemplated by this Participation
Agreement, any other Transaction Document or any Financing Document or
(b) to be obtained by any of such Persons during the term of the
Facility Lease with respect to Unit 1 except such Governmental Actions
(i) as have been, or on or before the closing Date will have been, duly
obtained, given or accomplished, with true copies thereof delivered to
the Owner Participant, the Owner Trustee and the Loan Participant prior
to the closing Date, (ii) as may be required by Applicable Law not now
in effect, (iii) as may be required in consequence of any transfer of
-26-
6091.100.2898.27:1
<PAGE>
ownership of the undivided Interest or the Real Property Interest by the
Owner Trustee, (iv) as would be required by existing Applicable Law upon
termination or expiration of the Facility Lease in connection with
taking possession of an interest in Unit 1, (v) as may be required by
existing Applicable Law if, after termination or expiration of the
Facility Lease, the Lessee should provide transmission services for the
Owner Trustee or cease to be agent for the Owner Trustee as provided
under the Assignment and Assumption, or (vi) as may be required in
consequence of any exercise of remedies or other rights by any such
Person in connection with taking possession of an interest in Unit 1.
(6) Securities Act. Neither the Lessee nor anyone acting on
its behalf has directly or indirectly offered or sold any Bond, any
interest in any Note, any note issued with respect to any other
undivided interest in Unit 1, the undivided Interest or any other
undivided interest in Unit 1, the Facility Lease or any other lease of
an undivided interest in Unit 1, or any similar security or lease, or
any interest in any security or lease the offering of which, for
purposes of the Securities Act, would be deemed to be part of the same
offering as the offering of the aforementioned securities or leases, in
either case, or solicited any offer to acquire any of the aforementioned
securities or leases in violation of Section 5 of the Securities Act,
and except as contemplated by this Participation Agreement, neither the
Lessee nor any one authorized to act on its behalf will take any action
which would subject the issuance or sale of any Note or any interest in
the Facility Lease or any other debt instrument issued or to be issued
to finance the Undivided Interest to the registration requirements of
such Section 5.
(7) Title to the Undivided Interest and Real-Property
Interest; Security Interest. on the closing Date, (A) good and
marketable title to the undivided Interest and the related Generation
Entitlement Share will be duly, validly and effectively conveyed and
transferred to the Owner Trustee, free and clear of all Liens, except
-27-
6091.100.2898.27:1
<PAGE>
Permitted Liens (other than those described in clause (ii) of the
definition of such term and that portion of clause (iv) of such
definition relating to Liens for taxes being contested), (B) good and
marketable title to the Real Property Interest will be duly, validly and
effectively conveyed and transferred to the Owner Trustee, as provided
in the Deed and the Assignment of Beneficial Interest (C) the Lessee
will have good and marketable title to its ownership interest in the
Retained Assets, free and clear of all Liens except Permitted Liens, the
Lien of the Existing Mortgage and matters disclosed in the title report
referred to in Section ll (a)(33), (D) the Lessee will have good and
valid title to its ownership interest in the PVNGS Site. (E) Unit 1 will
be wholly located on the PVNGS Site without any material encroachments
by any portion thereof on any other property, (F) all filings and
recordings necessary or advisable to perfect the Owner Trustee's right,
title and interest in and to the Undivided Interest, the related
Generation Entitlement Share and the Real Property Interest, and to
perfect for the benefit of the Indenture Trustee and the holders of the
Notes the first priority security interest, mortgage and assignment of
rents provided for in the Indenture, will have been duly made and (G) no
other action, including any action under any fraudulent conveyance
statute, will be required to protect the title and interests of the
Owner Trustee in and to the Undivided Interest, the related Generation
Entitlement Share and the Real Property Interest against the claims of
all Persons other than the ANPP Participants under the ANPP Project
Agreements (in accordance with the terms thereof), or to perfect such
first priority security interest, mortgage and assignment of rents in
favor of the Indenture Trustee.
(8) Non-Interference. None of the permitted Liens will, on and
after the Closing Date, materially interfere with the use or possession
of the Undivided Interest, the related Generation Entitlement share or
the Real Property Interest or the use of or the exercise by the Owner
-28-
6091.100.2898.27:1
<PAGE>
Trustee of its rights under the Bill of Sale, the Deed, the Assignment
of Beneficial Interest and the Assignment and Assumption with respect
to, the interests in PVNCS granted or to be granted under the Bill of
Sale, the Deed, the Assignment of Beneficial Interest and the Assignment
and Assumption.
(9) Personal Property. Unit 1, based on the agreements of the
Lessee and the other ANPP Participants in the ANPP Participation
Agreement and of the Lessee and the Owner Trustee herein and in the
other Transaction Documents, is to the full extent permitted by
Applicable Law personal property under the laws of the State of Arizona.
(10) Location of Chief Executive Office. The chief executive
office and place of business of the Lessee and the office where it keeps
its records concerning its accounts or contract rights is at Alvarado
Square, Albuquerque, Bernalillo County, New Mexico 87158.
(11) Financial Statements. The consolidated balance sheets of
the Lessee and subsidiaries (A) as of December 31, 1985 and 1984,
respectively, and the related consolidated statements of earnings,
retained earnings and changes in financial position for each of the
years in the three-year period ended December 31, 1985, together with
the notes accompanying such financial statements, all certified by Peat
Marwick Mitchell & Co., and (B) as of September 30, 1986 and 1985,
respectively, and the related consolidated statements of earnings,
retained earnings and changes in financial position for the nine-month
periods ended September 30, 1986 and September 30, 1985, respectively,
all certified by the Controller or an Assistant Controller of the
Lessee, as furnished to the Owner Participant, fairly present the
financial position of the Lessee and its subsidiaries taken as a whole
at each such date and the results of their operations for each of the
periods then ended, in conformity with generally accepted accounting
principles applied on a consistent basis and in conformity with
applicable Accounting Practice.
-29-
6091.100.2898.27:1
<PAGE>
(12) Disclosure. None of the financial statements to which
reference is made in paragraph 11 above nor the reports to which
reference is made in this paragraph 12 nor any (other than publicly
available documents of any Governmental Authority, (other than documents
prepared by or on behalf of the Lessee), and any press reports,
insurance reports, if delivered on or before the Closing Date, and
appraisals) certificate, written statement or other document furnished
to the Owner Participant or the Appraiser by the Lessee in connection
with the transactions contemplated hereby (under the circumstances at
the time and for the purposes for which any statement made therein was
made) contains any untrue statement of a material fact or omits to state
a material fact necessary to make the statements therein not misleading.
There is no fact known to the Lessee that materially and adversely
affects or, so far as the Lessee can now reasonably foresee, is likely
to materially and adversely affect, the business or financial condition
of the Lessee or any material portion of its properties or its ability
to perform its obligations under this Participation Agreement or any
other Transaction Document or any Financing Document to which the Lessee
is, or is to become, a party. The Lessee has heretofore delivered to the
owner Participant the Lessee's Annual Report on Form 10-K for the year
ended December 31, 1985, the Lessee's Quarterly Report on Form l0-Q for
the quarters ended March 31, June 30 and September 30, 1986 and the
Current Reports on Form 8-K filed on February 12, 1985 (as amended by
Form S filed April 12, 1985) , January 14, March 3, June 30, July 16,
July 31, September 2, September 9, and December 15, 1986.
(13) Litigation. Except as disclosed in the reports to which
reference is made in paragraph 12 above, there is no action, suit,
investigation or proceeding pending or, to the knowledge of the Lessee,
threatened against the Lessee before any court, arbitrator or
administrative or governmental body which questions the validity or
-30-
6091.100.2898.27:1
<PAGE>
enforceability of this Participation Agreement or any other Transaction
Document or any Financing Document to which the Lessee is, or is to
become, a party, or which, individually or in the aggregate, if decided
adversely to the interests of the Lessee, would have a material adverse
effect on the business or financial condition of the Lessee or
materially and adversely affect the ability of the Lessee to perform its
obligations under this Participation Agreement or any other Transaction
Document or any Financing Document to which it is or is to become a
party.
(14) Tax Returns. The Lessee has filed all Federal, state,
local and foreign, if any, tax returns which were required to be filed,
and has paid all Taxes shown to be due and payable on such returns and
has paid all other Taxes in respect of the Lessee's interest in Unit 1
and in the PVNGS Site which are payable by the Lessee to the extent the
same have become due and payable and before they have become delinquent,
except (i) any Taxes the amount, applicability or validity of which may
be in dispute and which are currently being contested in good faith by
appropriate proceedings and with respect to which the Lessee has set
aside on its books reserves (segregated to the extent required by
generally accepted accounting principles) deemed by it to be adequate
and (ii) any Taxes relating to PVNGS in respect of which the Operating
Agent has not given notice to the Lessee that the same are due and
payable. The Federal income tax returns of the Lessee have been audited
by the IRS for taxable years through 1980.
(15) ERISA. In reliance upon, and subject to the accuracy of,
the representations made by the Loan Participant in section 6(a) (5) and
the Owner Participant in Section 7(a) (9), the execution and delivery of
this Participation Agreement, the other Transaction Documents and the
Financing Documents by the Lessee will not involve any prohibited
transaction within the meaning of ERISA or Section 4975 of the Code.
-31-
6091.100.2898.27:1
<PAGE>
(16) Regulation. So long as the Facility Lease is in effect,
assuming the proper filing of Form U-7D with the SEC on or within 30
days after the Closing Date, under Applicable Law now in effect, neither
the Loan Participant, the Owner Participant, FNB nor the owner Trustee
will be or become, solely by reason of either its entering into this
Participation Agreement or any other Transaction Document to which any
of them is, or is to become, a party, or the transactions contemplated
hereby or thereby, subject to regulation (i) as an "electric utility",
an "electric utility company", a "public utility", a "public utility
company", a "holding company", or a "public utility holding company" by
any Federal, state (other than, as to the Owner Participant, New York,
as to which no representation or warranty is given) or local public
utility commission or other regulatory body, authority or group
(including, without limitation, the SEC, the FERO, the NMPSC or the
Arizona Corporation Commission) or (ii) in any manner by the NRC. The
Lessee is not, and covenants that (except in connection with a
transaction permitted by Section 10(b) (3) (ii) hereof) it will not
become, a "holding company" or a "subsidiary company" of a "holding
company" or an "affiliate" of a "holding company" within the meaning of
the Holding Company Act. The Lessee is not subject to regulation by the
Arizona Corporation Commission as a public utility or a public service
corporation.
(17) Authorizations6 etc. The Lessee has not failed to obtain
any Governmental Action or other authorization, license, approval,
permit, consent, right or interest, where a failure to obtain such would
materially and adversely affect the ability of the Lessee to carry on
its business as presently conducted or as described in the Registration
Statement
(18) No Default, etc. The Lessee is not in default, and no
condition exists that, with the giving of notice or lapse of time or
both, would constitute a default by the Lessee, under any material
-32-
6091.100.2898.27:1
<PAGE>
mortgage, deed of trust, indenture, lease, contract or other instrument
or agreement to which the Lessee is a party or by which it or any of its
properties or assets may be bound.
(19) Certain Documents. True and correct copies of the ANPP
Participation Agreement, the other Material Project Agreements and the
Existing Mortgage have been delivered to the Owner Participant's Special
Counsel for and on behalf of the Owner Participant prior to the date of
execution hereof. No ANPP Project Agreement will, on and after the
Closing Date, materially and adversely interfere with (i) (except for
the ANPP Participation Agreement in the case of the Generation
Entitlement Share only). the title of the Owner Trustee to the Undivided
Interest, the related Generation Entitlement Share or the Real Property
Interest or (ii) except for the ANPP Participation Agreement, the use
of, or the exercise by the Owner Trustee of its rights under the
Facility Lease, the Deed, the Assignment of Beneficial Interest and the
Assignment and Assumption with respect to, the undivided Interest, the
related Generation Entitlement Share, and the interests in the PVNGS
Site (including the Real Property Interest) granted or to be granted
under the Deed, the Assignment of Beneficial Interest and the Assignment
and Assumption. No payment default or other default of a material nature
by the Lessee has occurred and is continuing under the Existing Mortgage
or any ANPP Project Agreement. The ANPP Participation Agreement and each
other ANPP Project Agreement are in full force and effect and no breach
of any thereof, to the Lessee's knowledge, by any other party thereto
has occurred and is continuing, except where the failure to be in force
and effect or such breach would not have a material and adverse effect
on the undivided Interest, the related Generation Entitlement Share, the
Real Property Interest, Unit 1 or the rights, interests and benefits of
the Owner Trustee or the Owner Participant under any Transaction
Document. Upon execution and delivery of the Mortgage Release and the
recordation thereof or of UCC releases in respect thereof, (i) the
-33-
6091.100.2898.27:1
<PAGE>
mortgagee and secured party thereunder will have released the lien of
the Existing Mortgage on the undivided Interest, the related Generation
Entitlement Share and the Real Property Interest and (ii) the rights of
the Owner Trustee in the Undivided Interest and the Real Property
Interest and the related Generation Entitlement Share will not be, and
will not become, subject or subordinate to the rights of any Person,
except the Indenture Trustee under the Indenture and the ANPP
Participants to the extent expressly set forth in the ANPP Participation
Agreement (as in effect on the Closing Date) and except as may otherwise
expressly be permitted by the Facility Lease. The lien of the Existing
Mortgage does not extend to rights of PNM under Transportation Documents
(other than the Lessee's leasehold interest under the Facility Lease) or
to the Generation Entitlement Share related to the Undivided Interest.
Neither Section 15.6.3.5 of the ANPP Participation Agreement nor Section
8(C) (3) of this Participation Agreement (i) requires the Owner Trustee
to accept any cash bid referred to therein or (ii) otherwise materially
impedes the Owner Trustee's right, upon a failure by the Lessee to
purchase or otherwise reacquire the Undivided Interest and the Real
Property Interest, to conclude a sale or lease to a Person constituting
a "Transferee" under Section 15.10 of the ANPP Participation Agreement
(20) Unit 1. The description of Unit 1 set forth in Exhibit B
to the Bill of Sale is correct and sufficiently complete to identify
such property
(21) Investment Company Act. The Lessee is not, and will not
become, an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act
(b) Agreements of Lessee
(1) Delivery of Documents. The Lessee agrees that it will
deliver to the Owner Participant and the Loan Participant (and, in the
case of Sections 10(b) (1) (iii) and (v) hereof, the Owner Trustee):
-34-
6091.100.2898.27:1
<PAGE>
(i) Financial statements: (A) as soon as practicable, and
in any event within 120 days, after the end of each fiscal year
of the Lessee, a consolidated balance sheet of the Lessee and
subsidiaries as of the end of such fiscal year and related
consolidated statements of earnings, retained earnings and
changes in financial position for such year, all in reasonable
detail and certified in an opinion by a nationally recognized
firm of independent public accountants, and the annual and
interim reports of the Lessee to its stockholders as soon as the
same have been mailed to such stockholders, (B) as soon as
practicable, and in any event within 60 days, after the end of
each fiscal quarter (other than the last fiscal quarter) of each
fiscal year of the Lessee, a consolidated balance sheet of the
Lessee and subsidiaries as of the end of said period and a
related consolidated statement of earnings, retained earnings
and changes in financial position for said period, all in
reasonable detail, and certified by the Controller or an
Assistant Controller or the Chief Financial Officer of the
Lessee and (C) as soon as practicable after the same have been
filed, a copy of all documents filed by the Lessee with the SEC
pursuant to the reporting requirements of the Securities
Exchange Act;
(ii) Other Reports: promptly upon their becoming
available, any registration statement, offering statement,
investment memorandum or prospectus prepared by the Lessee in
connection with the public offering of securities (other than
public offerings of securities under employee stock option,
consumer stock or dividend reinvestment plans)
-35-
6091.100.2898.27:1
<PAGE>
(iii) Notice of Default: promptly upon the Lessee becoming
aware of the existence thereof, written notice specifying any
condition which constitutes a Default or an Event of Default
or a default by any ANPP Participant under the ANPP
Participation Agreement and the nature and status thereof;
(iv) Annual Certificate: within 120 days after the end of
each fiscal year of the Lessee, a certificate of the Lessee,
signed by the controller or an Assistant Controller or the
chief Financial Officer of the Lessee, to the effect that such
officer has reviewed, or caused to be reviewed by individuals
under his supervision, this Participation Agreement and each
other Transaction Document and each Financing Document to
which the Lessee is a party and has made, or caused to be made
under his supervision, a review of the transactions
contemplated hereby and thereby and the condition of the
Lessee during such preceding fiscal year, and such review has
not disclosed the existence during such fiscal period, nor
does such officer have knowledge of the existence as at the
date of such certificate, of any condition or event that
constitutes a Default or Event of Default or, if any such
condition or event exists, specifying the nature and period of
existence thereof and any action the Lessee has taken, is
taking, or proposes to take with respect thereto;
(v) Opinion of Counsel: within 120 days after the end of
each fiscal year of the Lessee, an opinion or opinions,
satisfactory to the Owner Participant, the Owner Trustee, the
Collateral Trust Trustee and the Indenture Trustee, of Keleher
& McLeod, P.A., as general counsel for the Lessee, Snell &
Wilmer, as special Arizona counsel for the Lessee, and/or
other counsel acceptable to the Owner Participant (A) either
to the effect that (1) all filings and recordations (or
refilings and rerecordations) required to (i) convey to the
Owner Trustee, and establish, preserve, protect and perfect
-36-
6091.100.2898.27:1
<PAGE>
the title of the Owner Trustee to, the Undivided Interest, the
related Generation Entitlement Share and the Real Property
Interest and establish, preserve and protect the Owner
Trustee's rights under this Agreement and the other
Transaction Documents, and, (ii) so long as any Note is
Outstanding, grant, perfect and preserve the security interest
of the Indenture Trustee in the Lease Indenture Estate have
been duly made, or (2) no such additional filings,
recordations, refilings or rerecordations are necessary, to
(i) convey to the Owner Trustee, and establish, preserve,
protect and perfect the title of the Owner Trustee to, the
Undivided Interest, the related Generation Entitlement Share
and the Real Property Interest and establish, preserve and
protect the Owner Trustee's rights under this Agreement and
the other Transaction Documents, and (ii) so long as any Note
is Outstanding, grant, perfect and preserve the security
interest of the Indenture Trustee in the Lease Indenture
Estate and (S) specifying the particulars of all action
required during the period from the date of such opinion
through the last day of the next succeeding calendar year,
including, in the case of each UCO continuation statement
required to be filed during such period., the office in which
each such continuation statement is to be filed and the filing
date and filing number of the original financing statement or
fixture filing to be continued, and the dates within which
such continuation statement may be filed under Applicable Law;
such opinion shall also address such additional matters
relating to actions taken by the Lessee pursuant to Section
10(b) (2) as the Loan Participant or the Owner Participant may
reasonably request;
(vi) ANPP Information: upon receipt by the Lessee, copies
or advice of all Systematic Assessment of Licensee Performance
Reports (or comparable successor report) and of all material
-37-
6091.100.2898.27:1
<PAGE>
notices, data, information and other written communications
received by the Lessee under or pursuant to any ANPP Project
Agreement or otherwise with respect to Unit 1, PVNGS or the
PVNGS Site, subject in each case to applicable confidentiality
undertakings with respect thereto, unless prohibited by
Applicable Law;
(vii) other PYNGS Information: the Lessee having furnished a
letter to the Owner Participant dated August 12, 1986,
describing its internal procedures for monitoring PVNGS and
reporting to the Owner Participant with respect thereto, prior
written notice of any material change in such procedures; and,
upon receipt by the Lessee, copies or advice of all notices of
violation or other material communications from the NRC and all
notices of nuclear incidents or other material occurrence at
PVNGS given to the NRC;
(viii) Annual PVNGS Report: within 120 days after the end of
each fiscal year of the Lessee, a certificate of the Lessee with
respect to the status and operations of Unit 1 for such fiscal
year and current information respecting the status of
decommissioning funding arrangements for Unit 1; and
(ix) Requested Information: with reasonable promptness,
such other data and information as to the business and
properties of the Lessee or as to Unit 1, PVNGS or the PVNGS
Site as from time to time may be reasonably requested by the
Owner Participant, subject in each case to applicable
confidentiality undertakings with respect thereto, unless
prohibited by Applicable Law.
(2) Further Assurances. The Lessee will cause to be promptly
and duly taken, executed, acknowledged and delivered all such further
acts, documents and assurances as the Owner Participant may from time to
time reasonably request in order to carry out more effectively the
-38-
6091.100.2898.27:1
<PAGE>
intent and purposes of this Participation Agreement, the other
Transaction Documents and the Financing Documents, and the transactions
contemplated hereby and thereby. The Lessee will cause the financing
statements (and continuation statements with respect thereto) and the
documents enumerated and described in Schedule 4, and all other
documents necessary or advisable in that connection, to be recorded or
filed at such places and times, and in such manner, and will take all
such other actions or cause such actions to be taken, as may be
necessary or reasonably requested by the Owner participant, the
collateral Trust Trustee, the Owner Trustee or the Indenture Trustee, in
order to establish, preserve, protect and perfect the title of the Owner
Trustee to the undivided Interest, the related Generation Entitlement
Share and the Real Property Interest, and the Owner Trustee's rights and
interests under this Participation Agreement and the other Transaction
Documents and, so long as any Note is outstanding, the first and prior
security interest of the Indenture Trustee in the Lease Indenture Estate
and the Indenture Trustee's rights under this Participation Agreement
and the other Transaction Documents, all referred to and included under
the granting clause of the Indenture.
(3) Covenants. The Lessee covenants and agrees as follows:
(i) Maintenance of Corporate Existence, etc. The Lessee
shall at all times maintain its existence as a corporation under
the laws of the state of New Mexico, except as permitted by
paragraph (ii) below. The Lessee will do or cause to be done all
things necessary to preserve and keep in full force and effect
its rights (charter and statutory) and franchises; provided,
however, that the Lessee may discontinue any right or franchise
if its board of directors shall determine that such
discontinuance is necessary or desirable in the conduct of its
business and does not materially and adversely affect or
diminish any right of
-39-
6091.100.2898.27:l
<PAGE>
(B) the Surviving Lessee, if other than the Lessee
immediately prior to such transaction, shall execute and
deliver to the Owner Participant an agreement, in form and
substance reasonably satisfactory to the Owner Participant,
containing the assumption by the Surviving Lessee of each
covenant and condition of this Participation Agreement, each
other Transaction Document and each Financing Document to
which the Lessee immediately prior to such transaction was a
party immediately preceding such transaction;
( C) No Default (other than a failure to deliver documents
and other information specified in Section 10(b) (1) (vi)
(vii) or (viii) hereof) , Event of Default, Event of Loss or
Deemed Loss Event shall have occurred and be continuing;
(D) the Bonds (or, if the Bonds are not then rated, the
preferred stock of the Surviving Lessee) after giving effect
to such transaction, (1) shall be rated at least "investment
grade" by Standard & Poor's Corporation and Moody's Investors
Service, Inc. and (2) shall have an investment rating by
Standard & Poor's corporation and Moody's Investors Service,
Inc. not less than one "smallest notch" below the rating
assigned to the Bonds (or, if the Bonds are not then rated,
the preferred stock of the Surviving Lessee) immediately prior
to such transaction (or, if neither of such rating
organizations shall rate the Bonds (or, if applicable, the
preferred stock of the surviving Lessee) at the time, by any
nationally recognized rating organization in the united States
of America);
-41-
6091.100.2898.27:1
<PAGE>
(E) the Surviving Lessee shall have a Minimum Net worth;
(F) the Surviving Lessee shall have delivered to the Owner
Participant and the Indenture Trustee an Officers' certificate
and an opinion, reasonably satisfactory to the Owner
Participant, of counsel to the Surviving Lessee, each stating
that (1) such transaction complies with this subparagraph (ii)
and (2) all conditions precedent to the consummation of such
transaction have been satisfied and any Governmental Action
required in connection with such transaction has been
obtained, given or accomplished;
(G) the Surviving Lessee shall have delivered to the Owner
Participant an opinion, reasonably satisfactory to the Owner
Participant, of independent counsel (if other than Mudge Rose
Guthrie Alexander & Ferdon, such counsel to be reasonably
satisfactory to the Owner Participant) to the Surviving Lessee
stating that such transaction does not and will not cause a
Loss (as defined in the Tax Indemnification Agreement)
(H) such transaction is otherwise permitted by and in
accordance with the ANPP Participation Agreement; and
(I) the Coverage Ratio of the Surviving Lessee shall be at
least 1.6 to 1.
Upon the consummation of such transaction the Surviving Lessee,
if other than the Lessee immediately prior to such transaction,
shall succeed to, and be substituted for, and may exercise
every right and power of, the Lessee immediately prior to such
transaction under this Participation Agreement and each other
Transaction Document and each Financing Document to which the
Lessee immediately prior to such transaction was a party
immediately preceding the date of such transaction, with
the same effect as if the Surviving Lessee had been named
herein and therein.
-42-
6091.100.2898.27:1
<PAGE>
(iii) Merger, sale, etc.: Bondholders. The Lessee shall not
enter into any transaction constituting a consolidation, merger,
conveyance, transfer, lease or dividend not permitted by Section
l0(b)(3) (ii), irrespective of any consent or waiver of the
Owner Participant, unless immediately after giving effect to
such transaction, the Bonds (or, if the Bonds are not then
rated, the preferred stock of the surviving Lessee) , after
giving effect to such transaction, shall be rated at least
"investment grade" by Standard & Poor's Corporation and Moody's
Investors Service, Inc.
(iv) Prior Notice to Rating Agencies. Prior to entering
into any transaction as to which the conditions set forth in
paragraphs (ii) and (iii) above shall be applicable, the
Lessee shall give notice thereof to the rating agencies
specified in such paragraphs, such notice to be sufficiently
in advance of such transaction to enable the rating agencies
to respond thereto prior to consummation thereof.
(v) Incurrence of Debt. Without the consent of the
Owner Participant, the Lessee shall not issue or assume any
secured or unsecured indebtedness maturing more than eighteen
months after the date of issuance thereof, if, immediately after
such issue or assumption, the total amount of all secured and
unsecured indebtedness of the Lessee maturing more than one year
after the date of such issue or assumption shall exceed 65% of
the aggregate of (x) such total amount and (y) the total of the
capital and surplus of the Lessee.
-43-
6091.100.2898.27:1
<PAGE>
(vi) Change in Chief Executive office. The Lessee will
notify the Owner Trustee, the Owner Participant, the Loan
Participant and the Indenture Trustee promptly after any
change of location of its chief executive office and place of
business, principal place of business or place where the
Lessee maintains its business records
(vii) No Petition Agreement. Prior to the 181st; day
following the payment in full of the Bonds and the discharge
in accordance with its terms of the Collateral Trust
Indenture, the Lessee will not file a petition, or join in the
filing of a petition, seeking reorganization, arrangement,
adjustment or composition of or in respect of the Loan
Participant under the Bankruptcy Code or any other applicable
Federal or state law or the law or the District of Columbia.
(viii) ANPP Project Agreements. Except where the failure
to do so would not have a material and adverse effect on the
Undivided Interest, the Real Property Interest, Unit 1 or the
rights, interests and benefits of the Owner Trustee or the
owner Participant under any Transaction Document, the Lessee
(without limiting its obligations under the next sentence) at
all times, unless the Owner Participant shall otherwise
consent, (1) will perform its obligations under and comply
with the terms of each ANPP Project Agreement to be complied
with by it, (2) will exercise its rights under the ANPP
Participation Agreement to maintain each ANPP Project
Agreement in full force and effect, (3) will keep unimpaired
all of the Lessee's rights, powers and remedies under each
ANPP Project Agreement and prevent any forfeiture or
impairment thereof, (4) will enforce the ANPP Participation
Agreement in accordance with its terms and (5) will not take
or fail to take or join in (i) any action with respect to, nor
accept or approve any amendment to or any other change in, the
ANPP Participation Agreement or any other ANPP Project
Agreement, or (ii) any action or change the effect of which
-44-
6091.100.2896.27:1
<PAGE>
would be to relieve the Lessee of any obligation under the ANPP
Participation Agreement on or after the Closing Date. The
Lessee will not, unless the Owner Participant otherwise
consents, accept or approve any amendment to any ANPP Project
Agreement the effect of which would be to (A) reduce the
Generation Entitlement Share related to the undivided Interest,
(B) impose, directly or indirectly, at any time on the Owner
Trustee or the Owner Participant any obligations (unless such
Person is then an ANPP Participant) , (C) discriminate against
(x) the Owner Trustee or the owner Participant in it's capacity
as lessor in a sale and lease-back transaction or (y) any
present or future ANPP Participant because such ANPP
Participant derived or will derive its status as, "Participant"
under the ANPP Participation Agreement from a lessor in a sale
and lease-back transaction, (E) deprive the Owner Trustee or
the Owner Participant, as the case may be, of the benefit of
Sections 15.2.2, 15.10 and 32.1 of the ANPP Participation
Agreement (or any comparable successor provisions), or (F)
amend or otherwise change Section 15.10 of the ANPP
Participation Agreement. The Lessee shall (A) provide copies of
any proposed amendment to or modification of the ANPP
Participation Agreement to the Owner Participant not less than
45 days prior to the execution thereof by the Lessee (except
where the Lessee is unaware thereof 45 days prior to such
execution, in which case the Lessee shall provide notice
thereof as promptly as possible after becoming so aware) and
(B) upon such execution furnish to the Owner Participant a copy
of any such amendment or modification as executed. The Lessee
will not, except as permitted by paragraph (ii) above or by the
Assignment and Assumption, sell, transfer, assign or otherwise
dispose of all or any of its rights or interests in and to
PVNGS.
-45-
6091.100.2898.27:1
<PAGE>
(ix) Notes and Bonds. The Lessee will not, and will not
permit any of its Affiliates to, acquire any of the Notes or,
except in connection with the selection of Bonds for
redemption pursuant to the Collateral Trust Indenture, the
Bonds
(x) Cooperation. The Lessee will cooperate with the
Owner Participant and the Owner Trustee in obtaining the valid
and effective issue, or, as the case may be, transfer or
amendment of all Governmental Actions (including, but without
limitation, the License) necessary or, in the opinion of the
Owner Participant. desirable for the ownership, operation and
possession of the Undivided Interest, the Real Property Interest
or any portion of Unit 1 represented thereby by the Owner
Trustee or any transferee, lessee or assignee thereof for the
period from and after the Lease Termination Date. The Lessee
agrees to accept and cooperate in receiving any transfer of the
Owner Participant's right, title and interest in the Trust
Estate made pursuant to Section 7(b)(4).
(xi) Decommissioning. (A) The Lessee will comply with its
obligations under Applicable Law concerning the
decommissioning and retirement from service of Unit 1 (which
term shall include, for all purposes of this paragraph (xi),
(i) the cost of removal, decontamination and disposition of
equipment and fixtures, the cost of safe storage for later
removal, decontamination and disposal and the cost of
entombment of equipment and fixtures, and (ii) the cost of (x)
razing Unit 1, (y) removal and disposition of debris from the
PVNGS Site and (z) restoration of relevant portions of the
PVNGS Site) . If Applicable Law or Governmental Action shall
not, on or before December 31, 1990, impose upon the Lessee
the obligation to create, fund and maintain an external
reserve fund dedicated to paying all the costs of
-46-
6091.100.2898.27:1
<PAGE>
decommissioning and removing from service the undivided
Interest, then the Lessee will create and maintain the
Decommissioning Fund; if Applicable Law or Governmental Action
shall thereafter impose upon the Lessee an obligation to create
and maintain such a fund, any fund in compliance with
Applicable Law or such Governmental Action shall be deemed
satisfactory to the Owner Participant for purposes of the
preceding sentence; provided, however, the Lessee shall in any
and all events maintain and fund such an external reserve in
accordance with prudent utility practice and thereafter review
such fund, at least every five years after its creation, and
modify the same as to amount or rate of accumulation to bring
the same, it necessary, into conformity with prudent utility
practice. (B) Except to the extent provided in clauses (C) and
(D) below, as between the Lessee, the Owner Trustee, the Owner
Participant and any transferee (including by way of lease) or
assignee of any of the Lessor's or the Owner Participant's
right, title or interest in Unit 1, the Lessee agrees to pay,
be solely responsible for, and to indemnify such parties
against, all costs and expenses relating or allocable to, or
incurred in connection with, the decommissioning and retirement
front service of Unit 1, notwithstanding (i) the occurrence of
the Lease Termination Date, any Event of Default, Default,
Event of Loss, Deemed Loss Event or any other event or
occurrence, (ii) any provision of any Transaction Document or
other document, instrument or agreement, including the ANPP
Participation Agreement, (iii) any provision of the License or
any other license or permit, or (iv) any Applicable Law,
charter or by-law provision, Governmental Action or other
impediment, including, without limitation, the bankruptcy or
insolvency of the Lessee, either now or hereafter in effect; it
being understood that the obligations of the Lessee under this
clause (B) are and shall be absolute and unconditional. (C) In
-47-
6091.100.2898.27:1
<PAGE>
the event that (i) the Facility Lease shall have expired upon
expiration (or early termination pursuant to Section 14(e) of
the Facility Lease) of the Lease Term (other than in connection
with an Event of Loss, Deemed Loss Event or Event of Default)
and (ii) thereafter the Lessor shall (1) re-lease the undivided
Interest to any Person or (2) retain the undivided Interest and
sell power and energy from its Generation Entitlement share
through PNM, as agent, then after the Lessor has received (x)
in the case of clause (1) above, gross rents in an aggregate
amount (when discounted back to such Lease Termination Date at
a rate per annum equal to the Prime Rate) equal to 20% of
Facility Cost, or (y) in the case or clause (2) above, net
electric revenues in an aggregate amount (discounted as
aforesaid) equal to 20% of Facility Cost, the Lessor shall
thereafter reimburse the Lessee in respect of the
decommissioning obligation of the Lessee hereunder in an amount
equal to any further rent received or proceeds received from
the sale of power and energy to the extent that such rent or
proceeds are attributable to the decommissioning obligation of
the Lessee under this Section l0(b)(3)(xi) with respect to the
period from and after such Lease Termination Date (payable on
an annual basis with respect to each year or portion thereof
during the term of such lease referred to in clause (1) above
or such agency period referred to in clause (2) above) ;
provided, however, that when such amount has been paid the
Lessor shall be relieved of all obligations to make further
reimbursement to the Lessee for such purpose. (0) In the event
that (i) the Facility Lease shall have expired upon the
expiration (or early termination pursuant to Section 14(e) of
the Facility Lease) of the Lease Term (other than in connection
with an Event of Loss, Deemed Loss Event or Event of Default,
(ii) the Lessor shall sell (other than in connection with the
termination by the Lessee of the Facility Lease for
-48-
6091.100.2898.27:1
<PAGE>
obsolescence pursuant to Section 14 of the Facility Lease) the
undivided Interest to any Person (including the Lessee in
connection with the exercise by the Lessee of the purchase
option provided by Section 13(b) of the Facility Lease), and
(iii) the net sales proceeds (discounted back to such Lease
Termination Date at a rate per annum equal. to the Prime Rate)
received by the Lessor in connection therewith shall exceed 20%
of Facility Cost (reduced by the percentage of Facility Cost,
if any, actually realized by the Lessor pursuant to clause (C)
above), then the Lessor shall reimburse the Lessee in respect
of the decommissioning obligation of the Lessee hereunder in an
amount equal to any net proceeds of such sale to the extent
that such proceeds are attributable to the decommissioning
obligation of the Lessee under this Section 10(b) (3) (xi) with
respect to the period from and after the date of such sale
through the remaining useful life of Unit 1 (whereupon the
reimbursement obligations of the Lessor under this Section
10(b) (3) (xi) shall terminate); provided, however, that any
such reimbursement shall not reduce the amount of such net
sales proceeds retained by the Lessor to an amount (discounted
as aforesaid) equal to less than 20% of Facility Cost (reduced
by the percentage of Facility Cost, if any, actually realized
by the Lessor pursuant to clause (C) above) . The reimbursement
obligations of the Lessor under clauses (C) and (D) above are
for the sole benefit of the Lessee, and no other Person shall
be a third party beneficiary with respect thereto. In the event
that the Lessee and the Lessor shall not agree as to the amount
of gross rents, net electric revenues or net sales proceeds
attributable to the decommissioning obligation of the Lessee
under this Section 10(b) (3) (xi), such amount shall be
determined by the Appraisal Procedure. For purposes of
determining Facility Cost under clauses (C) and (D) of this
-49-
6091.100.2898.27:1
section 10(b) (3) (xi), Facility Cost shall be adjusted to
reflect any inflation or deflation from the Closing Date to the
time to the determination
(xii) Acknowledgment and Agreement.
The Lessee hereby acknowledges and agrees to the provisions of
Section 7(b) (4) of this Participation Agreement
SECTION 11. Conditions Precedent
(a) Owner Participant and Loan Participant Conditions. The
obligation of (x) the Loan Participant to make the Loan on the Closing Date, and
(v) the Owner Participant to make the Investment and the Real Estate Investment
on the Closing Date, shall be subject to the fulfillment on or prior to the
Closing Date of the following conditions precedent (each instrument, document,
certificate or opinion referred to below to be in form and substance
satisfactory to the Loan Participant and the Owner Participant):
(1) Notice of Closing; Transaction Documents. Each shall have
received executed copies, or sets of executed counterparts, of (x) the
Notice of Closing, and (y) each Transaction Document (other than the Tax
Indemnification Agreement), the Mortgage Release, each Financing
Document being executed on the Closing Date and such other documents as
are contemplated by this Participation Agreement.
(2) Tax Indemnification Agreement. The Owner Participant shall
have received an executed copy of the Tax Indemnification Agreement
(3) Authentication Request, etc. The Owner Trustee shall have
delivered to the Indenture Trustee (x) a request, dated the Closing
Date, authorizing the Indenture Trustee to authenticate and deliver the
Fixed Rate Notes to the Loan Participant upon its payment to the
Indenture Trustee, for the account of the Owner Trustee, of the proceeds
of the Loan, and (y) the Original of the Facility Lease
-50-
6091.100.2898.27:1
<PAGE>
(4) Due Authorization, Execution and Delivery. All of the
documents described in clauses (1) and (2) of this section 11(a) shall
have been duly authorized, executed and delivered by the respective
parties thereto and shall be in full force and effect on the closing
Date, and the Loan Participant and the Owner Participant shall have
received evidence as to such authorization, execution and delivery.
(5) Fixed Rate Notes and Bond Transactions; Investment. In the
case of the Loan Participant, (A) the Loan Participant shall have
received the proceeds from the sale of the Series B Bonds as a result of
the consummation of the transactions contemplated by the underwriting
Agreement, (B) the Owner Trustee shall have executed, and the Indenture
Trustee shall have authenticated and delivered to the Loan Participant,
the Fixed Rate Notes evidencing the Loan made on the Closing Date, (C)
the collateral Trust Trustee shall have accepted the Series B
supplemental Indenture and the related supplemental Indenture of Pledge
(as defined in the series B supplemental Indenture) and shall have
released the amount of the Loan from the lien of the Collateral Trust
Indenture, and (D) the owner Participant shall have made the Investment
and the Real Estate Investment on the Closing Date.
(6) Loan. In the case of the owner Participant, the Loan
Participant shall have made the Loan.
(7) ANPP Administrative committee. The ANPP Administrative
Committee shall have made the finding required by Section 15.6.2 of the
ANPP Participation Agreement, and the Lessee shall have delivered
evidence of such finding having been made.
(8) No violation. The making by the owner Participant of the
Investment and the Real Estate Investment and by the Loan Participant of
the Loan shall not violate any Applicable Law.
-51-
6091.100.2898.27:1
<PAGE>
(9) No Default. No Default or Event of Default or, in the case
of the Loan Participant, Indenture Default or Indenture Event of
Default, shall have occurred and be continuing.
(10) Recording and Filing. The financing statements under the
uniform commercial code and certain Transaction Documents, in each case
as enumerated and described in Schedule 4, shall have been duly filed or
recorded in the respective places or offices set forth in such schedule
and all recording and filing fees with respect thereto shall have been
paid.
(11) Representations and warranties of the Loan participant.
In the case of the owner Participant, the representations and warranties
of the Loan Participant set forth in Section 6(a) shall be true and
correct on and as of the Closing Date with the same effect as though
made on and as of the closing Date, and the owner Participant shall have
received an officers' certificate of the Loan Participant, dated the
closing Date, to such effect.
(12) Opinion of the Loan participant's Counsel. In the case of
the Owner Participant, it shall have received a favorable opinion of the
Loan Participant's counsel, dated the Closing Date and addressed to the
Owner Participant, addressing such matters relating to the transactions
contemplated hereby and by the other Transaction Documents as the Owner
Participant may reasonably request.
(13) Representations and warranties of the Owner participant.
In the case of the Loan Participant, the representations and warranties
of the Owner Participant set forth in section 7(a) shall be true and
correct on and as of the Closing Date with the same effect as though
made on and as of the Closing Date, and the Loan Participant shall have
received a certificate of an officer of the Owner Participant, dated the
closing Date, to such effect.
-52-
6091.100.2898.27:1
<PAGE>
(14) Opinion of the Owner Participant's special counsel. In
the case of the Loan Participant, it shall have received a favorable
opinion of the Owner Participant's Special counsel, dated the Closing
Date and addressed to the Loan Participant, addressing such matters
relating to the transactions contemplated hereby and by the other
Transaction Documents, as the Loan participant may reasonably request.
(15) Representations and warranties of the Owner Trustee. The
representations and warranties of FNB and the Owner Trustee set forth in
Section 8(a) shall be true and correct on and as of the closing Date
with the same effect as though made on and as of the Closing Date, and
the Loan Participant and the Owner Participant shall have received a
certificate from an officer of FNB and a certificate of the Owner
Trustee, dated the Closing Date, to such effect.
(16) Opinion of the Owner Trustee's counsel. The Loan
Participant and the Owner Participant shall have received a favorable
opinion of the Owner Trustee's Counsel, dated the Closing Date and
addressed to each such Person, addressing such matters relating to the
transactions contemplated hereby and by the other Transaction Documents
as the Loan Participant or the Owner Participant may reasonably request.
(17) Representations and warranties of the Indenture Trustee.
The representations and warranties of the Indenture Trustee set forth in
Section 9 (a) shall be true and correct on and as of the Closing Date
with the same effect as though made on and as of the Closing Date, and
the Loan Participant and the Owner Participant shall have received a
certificate of the Indenture Trustee, dated the Closing Date, to such
effect.
-53-
609l.100.2898.27:l
<PAGE>
(18) Opinion of the Owner Participant's special NRC Counsel.
The Owner Participant shall have received a favorable opinion of the
Owner Participant's Special NRC Counsel, dated the Closing Date and
addressed to the Owner Participant, addressing such matters relating to
the transactions contemplated hereby and by the other Transaction
Documents as the Owner Participant may reasonably request.
(19) Representations and warranties of the Lessee. (A) The
representations and warranties, of the Lessee set forth in section
10(a), in each other Transaction Document, in the Underwriting Agreement
and in each certificate or other document to which the Lessee is a party
executed or delivered in connection with the transactions contemplated
hereby or thereby shall be true and correct on and as of the closing
Date with the same effect as though made on and as of the Closing Date
and (B) no Default, Event of Default, Deemed Loss Event or Event of Loss
shall have occurred and be continuing and the Loan participant and the
Owner participant shall have received an Officers' Certificate of the
Lessee, dated the Closing Date, to such effect. Such Officers'
Certificate shall state that there has been no material adverse change
in the properties, business, prospects or financial condition of the
Lessee since September 30, 1986, and no event has occurred since that
date which would materially adversely affect the ability of the Lessee
to perform its obligations under this Participation Agreement or any
other Transaction Document to which it is or is to become a party.
(20) Opinion of the Lessee's Special counsel. The Loan
participant and the Owner Participant shall have received a favorable
opinion of the Lessee's special Counsel, dated the Closing Date and
addressed to each such Person, addressing such matters relating to the
transactions contemplated hereby and by the other Transaction Documents
as the Loan Participant or the Owner Participant shall reasonably
request.
-54-
6091.00.2898.27:l
<PAGE>
(21) Opinion of Lessee's General Counsel. The Loan Participant
and the Owner Participant shall have received a favorable opinion of the
Lessee S General Counsel, dated the Closing Date and addressed to each
such Person, addressing such matters relating to the transactions
contemplated hereby and by the other Transaction Documents as the Loan
Participant or the Owner participant shall reasonably request.
(22)Opinion of Lessee's Arizona counsel. The Loan participant
and the Owner Participant shall have received a favorable opinion of the
Lessee's Special Arizona Counsel, dated the Closing Date and addressed
to each such Person, addressing such matters relating to the
transactions contemplated hereby and by the other Transaction Documents
as the Loan Participant or the Owner Participant shall reasonably
request.
(23) Opinion of Owner participant's special Arizona Counsel.
The Owner Participant shall have received a favorable opinion of the
Owner Participant's Special Arizona Counsel, dated the Closing Date and
addressed to the Owner Participant, addressing such matters relating to
the transactions contemplated hereby and by the other Transaction
Documents as the Owner Participant shall reasonably request.
(24) Opinion of owner Participant's special New Mexico
counsel. The Owner Participant shall have received a favorable opinion
of the owner Participant's Special New Mexico Counsel, dated the Closing
Date and addressed to the Owner Participant, addressing such matters
relating to the transactions contemplated hereby and by the other
Transaction Documents as the Owner Participant may reasonably request.
(25) Opinion of the Owner participant's special Counsel. The
Owner Participant shall have received a favorable opinion of the Owner
Participant's Special Counsel, dated the Closing Date and addressed to
the Owner participant, with respect to such Federal tax and other tax
matters as the Owner Participant may reasonably request.
-55-
6091.100.2898.27:1
<PAGE>
(26) Opinion of the Loan Participant's Counsel. The Loan
Participant shall have received a favorable opinion of the Loan
Participant's counsel, dated the closing Date and addressed to it, with
respect to such matters as the Loan Participant shall reasonably
request.
(27).Taxes. All Taxes, if any, payable in connection with the
execution, delivery, recording and filing of the Transaction Documents
and all the documents and instruments enumerated and described in
Schedule 4, or in connection with the issuance and sale of the Fixed
Rate Notes and the Series B Bonds and the making by the Owner
Participant of the Investment and the Real Estate Investment, and all
Taxes payable in connection with the consummation or the transactions
contemplated hereby and by the other Transaction Documents, shall have
been duly paid in full by the Lessee.
(28) Form U-7D. A certificate on Form U-70 with respect to the
Facility Lease shall have been duly executed and delivered by the Owner
Trustee and the Owner Participant and shall be in due form for filing.
(29) Appraisal. The Owner Participant shall have received a
letter, dated the Closing Date and addressed to the Owner Participant,
from the Appraiser containing an appraisal of the Undivided Interest,
which appraisal shall reflect the Appraiser's reasonable conclusion that
(w) the fair market value in the hands of the Owner Trustee of the
Undivided Interest on the closing Date, taking into account the effect
and existence of the Real Property Interest, the Assignment and
Assumption and the ANPP Participation Agreement, is equal to the
Purchase Price as set forth in the Notice of closing, (x) the estimated
remaining economic useful life of Unit 1 (including the undivided
Interest) is at least 38 years, (y) at the expiration of the first two
years of the Renewal Term the Undivided Interest will have an estimated
residual value taking into account the effect and the existence of this
-56-
6091.100.2898.27:1
<PAGE>
Participation Agreement, the. Real Property Interest, the Assignment and
Assumption and the ANPP Participation Agreement, in the hands of the
Owner Trustee or a Person (unrelated to the Lessee) who could lease or
purchase the Undivided Interest from the Owner Trustee for commercial
use, equal to at least 20% of the Purchase Price, determined without
including in such value any increase or decrease for inflation or
deflation during the period from the Closing Date through the expiration
of the first two years of the Renewal Term, and (z) taking into account
the effect and the existence of the Real Property Interest, the
Assignment and Assumption and the ANPP Participation Agreement, the use
of the Undivided Interest at the Lease Termination Date by any User is
feasible from an engineering and economic point of view and is
commercially reasonable.
(30) offering and sale of Interest. The Loan Participant, the
Owner Trustee and the Owner Participant shall have received a letter
from each of Kidder Peabody and Goldman Sachs & Co. with respect to the
offering and sale of the interests in the transactions contemplated by
this Participation Agreement and each other participation agreement
relating to an undivided interest in Unit 1.
(31) Extension Letter. The Extension Letter shall have been
duly executed by the respective parties thereto and delivered to the
Collateral Trust Trustee.
(32) Governmental Action. The Lessee shall have obtained all
Governmental Actions (including, without limitation, the New Mexico
Order and the FERC Order, which orders shall be final and
non-appealable, and the NRC Order, which order shall be final) required
or, in the opinion of the Owner Participant, advisable for the
consummation of all the transactions contemplated by this Participation
Agreement and the other Transaction Documents and the Financing
Documents in accordance with their terms.
-57-
6091.100.2898.27:1
<PAGE>
(33) Title Report; Title Insurance. The Owner Participant
shall have received (i) an updated title report, dated the Closing Date,
with respect to the nuclear plant site, which report does not disclose
any exceptions materially adverse to the possession or operation of Unit
1 or the performance by the Lessee of its obligations under this
Participation Agreement and the other Transaction Documents to which the
Lessee is, or is to become, a party; and (ii) such title insurance
policies with respect to the nuclear plant site and improvements thereon
(including the Owner Trustee's interests therein) as it shall have
reasonably requested, such policies to be in form and substance
satisfactory to the Owner Participant.
(34) No Change or Proposed Change in Tax Laws. No change shall
have occurred or been proposed in the Code or any other tax statute, the
regulations thereunder or any interpretation thereof that would
adversely affect the tax consequences anticipated by the Owner
Participant with respect to the transactions contemplated by the
Transaction Documents, unless the Lessee shall have agreed in writing to
protect the Owner Participant, in the Tax Indemnification Agreement or
otherwise, in a manner reasonably satisfactory to it, against the effect
of such change or proposed change.
(35) Insurance. The Owner Participant shall have received a
written report from its independent insurance consultant in form and
substance satisfactory to the Owner Participant.
(36) site Arrangement plan. The Owner Participant's Special
Counsel shall have received a site arrangement plan of the nuclear plant
site prepared subsequent to January 1, 1979.
(37)special Certificate of the Lessee. The Owner Participant
shall have received a certificate of the Lessee, dated the Closing Date,
to the effect that, except as set forth on the Schedule thereto, (A)
Unit 1 has been in all material respects completed in a good and
workmanlike manner and in accordance with the plans and specifications
-58-
6091.l00.2898.27:1
<PAGE>
relating thereto (as the same may have been modified from time to time
to reflect Unit 1 as actually completed) p Applicable Law (including,
but without limitation, the regulations of the NRC), the License and the
ANPP Participation Agreement, (B) all Governmental Action necessary for
the commercial operation of Unit 1 (including the Undivided Interest) ha
vie been received, other than Governmental Action that is routine in
nature for PVNGS or that cannot be obtained under Applicable Law, or is
typically not applied for, prior to the time it is required, and that
the Lessee reasonably expects to be obtained in due course, (C) the
plans and specifications relating to Unit 1 are complete in all material
respects (modified or to be modified as aforesaid) and consistent with
prudent engineering , (D) the testing and startup procedures for Unit 1
were and the operation and maintenance programs for Unit 1 are
consistent with such plans and specifications, Applicable Law and
prudent engineering practice, (E) Unit 1 has been tested in accordance
with all customary testing and startup procedures which would have been
performed on or prior to the Closing Date, and such tests and procedures
indicate that Unit 1 will have the capacity and functional ability to
perform in commercial operation, on a continuing basis, the function for
which it is designed in accordance with such plans and specifications
and has a nominal capacity of 1,270 megawatts electric, (F) all material
Governmental Actions relating to the construction, operation or
maintenance of Unit 1 are listed in a schedule to such certificate, (G)
there is no present event or condition which would materially adversely
affect the capability of Unit 1 to operate in accordance with such plans
and specifications and (H) based upon the Lessee's present reasonable
expectations, and subject to Applicable Law, the rights and interests
made available to the ANPP Participants (including the Lessee) pursuant
to the ANPP Participation Agreement, as such rights and interests are
made available to the Owner Trustee, any successor or assign of the
Owner Trustee or any "Transferee" of the Owner Trustee under Section
15.10 of the ANPP Participation Agreement, under and pursuant to this
-59-
6091.100.2898.27:1
<PAGE>
Agreement, the Deed, the Assignment of Beneficial Interest or the
Assignment and Assumption, together with the rights to be made available
under and pursuant to the Assignment and Assumption, are adequate to
permit, during the period following the Lease Termination Date or the
taking of possession of the Undivided Interest and tile Real Property
Interest in the exercise of remedies under Section 16 of the Facility
Lease, in accordance with the ANPP Project Agreements (i) the
construction, location, occupation, connection, maintenance,
replacement, renewal, repair or removal of Unit 1, (ii) the use,
operation and possession of Unit 1, (iii) the construction, use,
operation, possession, maintenance, replacement, renewal and repair of
all alterations, modifications, additions, accessions, improvements,
appurtenances, replacements and substitutions thereof and thereto, (iv)
adequate ingress to and egress from Unit 1 for any reasonable purpose in
connection with the exercise of rights under the Assignment and
Assumption and the Owner Trustee's or any transferee's ownership and
possession of the Undivided Interest and (v) the obtaining of nuclear
fuel, of water and of transmission services to the ANPP Switchyard
sufficient to enable delivery of the Generation Entitlement Share
related to the Undivided Interest in a commercially efficient manner and
on commercially reasonable terms. Nothing in the foregoing clause (H)
shall be deemed to be or be construed as a warranty by the Lessee as to
the performance by the Operating Agent of its obligations under the ANPP
Participation Agreement. Such certificate shall also be attested to by
J.L. Wilkins, Senior Vice President, Power Supply, PNM Electric, who
shall state that (i) he has made such investigation, inspection and
review as he deems necessary to make the statements in the certificate
and (ii) to the best of his knowledge, the statements of the Lessee in
such certificate are true and correct.
-60-
6091.100.2898.27:1
<PAGE>
(38) Real Estate Appraisal. The Owner Participant shall have
received an appraisal of the Real Property Interest, which appraisal
shall reflect the appraiser's reasonable conclusion that the fair market
value in the hands of the Owner Trustee of the Real Property Interest on
the Closing Date is equal to the Real Estate Investment. Such appraisal
shall cover such other matters as the Owner Participant shall have
requested.
(39) other Unit 1 Leases The Lessee shall have obtained the
consent required by Section 10 (b) (3) (xii) of each of the three,
participation Agreements dated as of December 16, 1985, relating to
separate sale and leaseback transactions involving undivided interests
in Unit 1 in respect of which the Lessee is lessee.
(40) Opinion of Lessee's FERC Counsel. The Loan Participant
and the Owner Participant shall have received a favorable opinion of
Lessee's FERC Counsel, dated the Closing Date and addressed to each such
Person, addressing such FERO matters as the Loan Participant or the
Owner Participant may reasonably request.
(41) Other Matters. The Loan Participant and the Owner
Participant shall have received such other documents, certificates and
opinions as the Loan Participant or the Owner Participant, or their
respective counsel, shall reasonably request.
(b) Lessee Conditions. The obligation of the Lessee to sell
and lease back the Undivided Interest and the Real Property Interest on the
Closing Date pursuant to Section 4 shall be subject to the fulfillment on or
prior to the Closing Date of the following conditions precedent, in each case in
form and substance satisfactory to the Lessee:
(1) Paragraph (a) Documents. The Lessee, the Owner Trustee and
the Indenture Trustee shall have received executed copies of the
documents, certificates, opinions (other than' the opinion referred to
in Section 11(a)(25)), appraisals, letters and forms described in
paragraph (a) of this Section 11. All such opinions shall be addressed
to the Lessee, the Owner Trustee and the Indenture Trustee except the
opinions or documents to which reference is made in clauses (18), (23),
(24) and (25) of said paragraph (a).
-61-
6091.100.2898.27:1
<PAGE>
(2) Payment of Purchase price. The Owner Trustee shall have
paid to the Lessee an amount, in immediately available funds, equal to
the Purchase Price and the Real Estate Investment.
(3) special Opinion of the Lessee's special Counsel. The
Lessee shall have received a favorable opinion of the Lessee's Special
Counsel, dated the Closing Date and addressed to the Lessee, with
respect to such Federal tax and other matters as the Lessee may
reasonably request.
(4) Accountant's Letter. The Lessee shall have received a
letter satisfactory to it from Peat, Marwick, Mitchell & Co., to the
effect that, under generally accepted accounting principles and FASB No.
13, the Facility Lease is an "operating lease".
(5) Changes in Pricing Assumptions. If any change or changes
in the Pricing Assumptions shall have occurred on or before the Closing
Date, the effect of such change or changes will not require the payment
of Basic Rent (as to be adjusted pursuant to Section 3(e) (iii) of the
Facility Lease) on an annual basis to exceed 11.7% of Facility Cost.
SECTION 12. Consent to Assignment of the Facility Lease;
Consent to Indenture; Consent to Assignment of Notes.
(a) Consent to Assignment of Facility Lease. The Lessee hereby
acknowledges, and consents in all respects to, the partial assignment of
the Facility Lease by the Owner Trustee to the Indenture Trustee under
and pursuant to the Indenture and agrees:
(i) To make each payment of Basic Rent and supplemental
Rent due or to become due thereunder to the extent
constituting Assigned Payments excluding, in any event, all
Excepted Payments) directly to the Indenture Trustee at the
Indenture Trustee's Office, so long as any of the Notes shall
be Outstanding and unpaid; and
-62-
6091.100.2898.27:1
<PAGE>
(ii) not to seek to recover any payment (other than a
payment that both the Owner Trustee and the Lessee agree was
made in mistake) made to the Indenture Trustee in accordance
with the Indenture once such payment is made
(b) Consent to Indenture. The Lessee hereby consents in all
respects to the execution and delivery of the Indenture, and to all of the terms
thereof, and the Lessee acknowledges receipt of an executed counter-part of the
Indenture; it being understood that such consent shall not be construed to
require the Lessee 5 consent to any future supplement to, or amendment, waiver
or modification of the terms of, the Indenture or any Note, except to the extent
expressly provided for.
(C) Consent to Assignment by Loan Participant. Each of the
parties hereto acknowledges that the Loan Participant is assigning its
right, title and interest in and to the Notes to the Collateral Trust
Trustee as security for the Bonds to the extent set forth in the
Collateral Trust Indenture, and each of the parties hereto consents to
such assignment
SECTION 13. Lessee's Indemnities and Agreements.
(a) General Indemnity. The Lessee agrees, whether or not any
of the transactions contemplated hereby shall be consummated and whether
or not the Facility Lease, any other Transaction Document or any
Financing Document shall have expired or have been terminated, to assume
liability for, and the Lessee does hereby agree to indemnify, protect,
defend, 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 because of act or
omission by such Indemnitee or otherwise and whether or not such
Indemnitee shall also be indemnified as to any such Claim by any other
-63-
6091.100.2898.27:1
<PAGE>
Person) in any way relating to or arising out of (i) Unit 1, the Undivided
Interest, the Real Property Interest, PVNGS or the PVNGS Site, or any part of
any thereof (or any beneficial interest therein) , any ANPP Project Agreement,
the issuance or payment of the Bonds or the Notes, this Participation Agreement
or any other Transaction Document or any Financing Document (including, without
limitation, the performance or enforcement of any of the obligations and terms
hereunder or thereunder), (ii) a disposition of all or any part of the Undivided
Interest, the Real Property Interest, Unit 1 or any other interest of the Owner
Trustee or Owner Participant in connection with any termination of the Facility
Lease, or (iii) the design, manufacture, financing, erection, purchase,
acceptance rejection, ownership, acquisition, delivery, nondelivery, lease,
sublease, preparation, installation, repair, transfer of title, abandonment,
possession, use, operation, maintenance, condition, sale, return, storage,
disposition, or decommissioning (including, but without limitation, with respect
to the Termination Obligation) of the Undivided Interest, Unit l, the Real
Property Interest, any Capital Improvement, the PVNGS Site, any other facilities
on the PVNGS Site or any other interest of the Owner Trustee or Owner
Participant in any thereof or any accident, nuclear incident or extraordinary
nuclear occurrence in connection therewith (including, without limitation, (A)
claims or penalties arising from any violation of law or liability in tort
(strict or otherwise) or from the active or passive negligence of any
Indemnitee, (B) loss of or damage to any property or the environment or death or
injury to any Person, (C) latent and other defects, whether or not discoverable,
(D) any claim for patent, trademark, service-mark or copyright infringement and
(E) any claim of any Indemnitee incurred in the administration of this
Participation Agreement, any other Transaction Document or any Financing
Document and not paid as Transaction Expenses or included in Facility Cost and,
if not included in Transaction Expenses, the reasonable fees and disbursements
of counsel and other professionals incurred in connection therewith); provided,
however, that the Lessee shall not be required to indemnify any Indemnitee
pursuant to this Section 13(a), (1) for any Claim in respect of Unit 1, the
Undivided Interest or the Real Property Interest arising from acts or events
-64-
6091.100.2898.27:1
<PAGE>
not attributable to the Lessee which occur after redelivery of the Undivided
Interest to the owner Trustee in accordance with section 5 of the Facility
Lease, except to the extent expressly provided in any Transaction Document, the
ANPP participation Agreement or any other agreement or undertaking of the
Lessee, (2) for any Claim against such Indemnitee resulting solely from acts
which would constitute the willful misconduct or gross negligence of such
Indemnitee (unless imputed to such Indemnitee by reason of Unit 1, the Undivided
Interest, the Real Property Interest, PVNGS, the PVNGS Site or any other
facilities at the PVNGS Site or any occurrence in connection with any thereof),
(3) for any Transaction Expense to be paid by the Owner Trustee pursuant to
Section 14 (a) or (4) for any Claim resulting solely from a transfer by the
Owner Trustee or the Owner participant of all or part of its interest in the
Facility Lease, Unit 1, the Real Property Interest or the Undivided Interest
other than in connection with any early termination of the Facility Lease or any
exercise of remedies under Section 16 thereof or the transfer contemplated by
Section 7(b) (4) or the first transfer by the Owner Participant to an Affiliate
of the owner participant. To the extent that an Indemnitee in fact receives
indemnification payments from the Lessee under the indemnification provisions of
this Section 13(a), the Lessee shall be subrogated, to the extent of such
indemnity paid, to such Indemnitee's rights with respect to the transaction or
event requiring or giving rise to such indemnity, but only so long as such
subrogation shall not materially adversely affect the rights of such Indemnitee
or any other Indemnitee hereunder. Nothing herein contained shall be construed
as constituting a guaranty by the Lessee of the principal of or premium, if any,
or interest on the Notes or the Bonds or of the residual value or useful life of
the Undivided Interest.
(b) General Tax Indemnity.
(1) Indemnity. All payments by the Lessee in connection with
the transactions contemplated by the Transaction Documents shall be free
of withholdings of any nature whatsoever (and at the time that the
-65-
6091.100.2898.27:1
<PAGE>
Lessee is required to make any payment upon which any withholding is
required, the Lessee shall pay an additional amount such that the net
amount actually received by the Person entitled to receive such payment
will, after such withholding, equal the full amount of the payment then
due) and shall be free of expense to each Indemnitee for collection or
other charges. If, for any reason, the Lessee is required to make any
payment to a taxing authority with respect to, or as a result of, any
withholding tax imposed on any Indemnitee in respect of the transactions
contemplated by the Transaction Documents by reason of the Indemnitee
not being a United States person, then such Indemnitee shall pay to the
Lessee on an After Tax Basis an amount which equals the amount paid by
the Lessee with respect to or as a result of such withholding tax.
Whether or not any of the transactions contemplated hereby is
consummated, except as provided in Section 13(b)(2), the Lessee shall
pay, and shall indemnify, defend and hold each Indemnitee harmless, on
an After Tax Basis, from and against, any and all Taxes howsoever
imposed (whether imposed on or with respect to the Indemnitee, the
Lessee, Unit 1, the undivided Interest, the Real Property Interest, any
capital Improvement or the PVNGS Site or any part thereof or interest
therein or otherwise) by any Federal, state or local government or
subdivision thereof or taxing authority in the United States or by any
foreign country or subdivision thereof or by any foreign or
international taxing authority in connection with or relating to (A) the
design, construction, financing, purchase, acquisition, acceptance,
rejection, delivery, nondelivery, transport, ownership, assembly,
possession, repossession, operation, use, condition, maintenance,
repair, improvement, sale, return, abandonment, decommissioning,
preparation, installation, storage, replacement, redelivery,
manufacture, insuring, leasing, subleasing, modification, transfer of
title, rebuilding, rental, importation, exportation or other application
or disposition of, or the imposition of any Lien (or incurrence of any
liability to refund or pay over any amount as a result of any Lien other
than Owner Participant's Liens and Owner Trustee's Liens) other than
-66-
6091.100.2898.27:1
<PAGE>
Owner Participant's Liens and Owner Trustee's Liens on, Unit 1, the
Undivided Interest, the Real Property Interest, any capital Improvement
or the PVNGS Site, or any part thereof or interest therein, (3) the
payment of Rent or the receipts or earnings arising from or received
with respect to, and the indebtedness with respect to, Unit 1, the
Undivided Interest, the Real Property Interest or any capital
Improvement, or any part thereof, interest therein or application or
disposition thereof, (C) any amount paid or payable pursuant to, or
contemplated by, this Participation Agreement, any other Transaction
Document or any Financing Document or the transactions contemplated
hereby or thereby (D) Unit 1, the Undivided Interest, the Real Property
Interest, any Capital Improvement or the PVNGS Site, or any part
thereof, or interest therein, or the applicability of the Facility Lease
to the Undivided Interest or any Capital Improvement, or any part
thereof or interest therein, (E) this Participation Agreement, any other
Transaction Document or any Financing Document or (F) otherwise with
respect to or in connection with the transactions contemplated by this
Participation Agreement, any other Transaction Document or any Financing
Document.
(2) Exclusions from General Tax Indemnity. Section 13(b) (1)
(except for the first sentence thereof) shall not apply to:
(i) Taxes based on, or measured by, net income imposed by
the United States federal government (including, without
limitation, any minimum Taxes, capital gains Taxes, any Taxes
on, or measured by, items of tax preference, surcharges,
additions to tax, penalties, fines or other charges in respect
thereof)
(ii) Taxes (other than sales, use or rental Taxes) imposed
by any state 0; local government or subdivision thereof or
other taxing authority in the United States or by any foreign
country or subdivision thereof or by any foreign or
international taxing authority that are based on, or measured
-67-
6091.100.2898.27:l
<PAGE>
by, the net income, items of tax preference, net worth or
capital of an Indemnitee, or other taxes imposed in lieu of
any such Taxes., except, with respect to the Owner Trustee,
the Trust, the Trust Estate, the Owner Participant and any
Affiliate of any thereof, any such Taxes imposed by a
jurisdiction as a result of a relation or asserted relation of
such jurisdiction to the transactions contemplated by the
Transaction Documents or the Financing Documents or as a
result of the activities of the Lessee, any ANPP Participant
or any Affiliate of any thereof in such jurisdiction;
provided, however, that the amount of any such excepted Taxes
shall be calculated (i) on a pro forma basis assuming that
such Indemnitee has no other taxable income or loss in the
taxing jurisdiction imposing the Tax (provided that such
calculation shall take into account any allocation or
apportionment method used by such jurisdiction except to the
extent that such method takes into account the income or
activities of business entities organized outside the United
States) and is able to use any net operating loss carryovers
(generated solely by reason of and solely attributable to the
transactions contemplated by the Transaction Documents or the
Financing Documents, and for this purpose a similar pro forma
calculation shall be made) to the fullest extent, reasonably
determined, in good faith, by the Indemnitee, and (ii) by
taking into account any actual reduction in Taxes in such
jurisdiction or in any other jurisdiction in which such
Indemnitee is subject to tax (whether such reduction results
from the operation of allocation or apportionment formulas,
from credits or otherwise, except that no account shall be
taken of any actual reductions of tax benefits described in
the Tax Indemnification Agreement or any tax liability
generated by transactions other than those contemplated by the
Transaction Documents or the Financing Documents) which
reduction results from the transactions contemplated by
-68-
6091.100.2898.27:1
<PAGE>
the Transaction Documents or the Financing Documents; provided
further, however, that, with respect to any Tax based on, or
measured by, capital or net worth, the Lessee's indemnity
obligation shall not exceed the incremental portion of such
Tax attributable to the transactions contemplated by the
Transaction Documents;
(iii) Taxes attributable to the undivided Interest or the Real
Property Interest to the extent that such Taxes are imposed
with respect to any period after (a) the Lease Termination
Date and (b) the date possession Property Interest has been
delivered to the Lessor as provided in Section 5(a) of the
Facility Lease, unless such Taxes relate to events occurring
or matters arising prior to or simultaneously with either of
the aforementioned dates;
(iv) Taxes on or with respect to an Indemnitee arising
from any voluntary transfer by such Indemnitee of any interest
in the Undivided Interest, the Real Property Interest, the
Trust Estate, the Indenture Estate, the Notes or any other
right or interest arising under the Transaction Documents or
the Financing Documents, unless an Event of Default has
occurred and is continuing, or Taxes arising from an
involuntary transfer by such Indemnitee of any such interest
arising from a bankruptcy or similar proceeding in which such
Indemnitee is the debtor unless such bankruptcy or other
proceeding was caused, in whole or in part, by the Lessee or
any Affiliate thereof;
(V) Taxes based on or measured by any fee, commission or
compensation received by an Indemnitee for acting as trustee,
or for other services rendered, in connection with any of the
transactions contemplated by the Transaction Documents or the
Financing Documents;
-69-
6091.100.2898.27:1
<PAGE>
(vi) Taxes on or with respect to an Indemnitee arising by
reason of such Indemnitee's failure to file proper and timely
reports or returns (unless the filing of such reports or
returns is the obligation of the Lessee under the Transaction
Documents or the Financing Documents) and any penalties or
additions to tax imposed by reason of such Indemnitee's
failure to comply with the laws imposing such Tax or its
material failure to comply with its obligations under Section
13 C(b) (6) unless such failure results from any action of the
Lessee or failure by the Lessee to comply with any provision
of the Transaction Documents or the Financing Documents,
including the failure to provide necessary information;
(vii) Taxes on or with respect to an Indemnitee arising as
a result of a material failure of such Indemnitee to fulfill
its obligations with respect to the contest of any claim in
accordance with Section l3(b)(4) of this Participation
Agreement;
(viii) Taxes imposed on or with respect to a transferee
(or subsequent transferee) of an original Indemnitee (other
than a transferee or subsequent transferee that is an
Affiliate of its transferor) to the extent that the amount of
such Taxes exceeds the amount of taxes that would have been
imposed on or with respect to such original Indemnitee but for
the transfer to such transferee or, if imposed, would not have
been subject to indemnification under this Section 13(b),
provided, however, that the exception in this clause shall not
apply to any transferee where such transfer shall have
occurred during the continuance of an Event of Default;
-70-
6091.100.2898.27:1
<PAGE>
(ix) any Taxes imposed on the Lessor or the Owner
Participant resulting from, or which would not have occurred
but for, Lessor's Liens or Owner Participant's Liens and any
Taxes imposed on the Indenture Trustee which would not have
occurred but for Indenture Trustee's Liens;
(x) any Tax that results solely from the activities of an
Indemnitee in any taxing jurisdiction which activities are
unrelated to the transactions contemplated by the Transaction
Documents or the Financing Documents, Indemnitee resulting
from any amendment or modification entered into by such
Indemnitee to any Transaction Document or Financing Document
if the Lessee is not a party to such amendment or modification
or has not consented to such amendment or modification, in
each case unless an Event of Default shall have occurred and
be continuing; and
(xii) any Tax on or with respect to an Indemnitee
resulting from the gross negligence or willful misconduct of
such Indemnitee (it being understood that no Indemnitee is
responsible for determining whether a Tax is payable if the
Lessee is required to indemnify the Indemnitee for such Tax
under this Section 13(b));
provided, however, that the foregoing sub-clauses (i) through (xii)
shall not apply to any Tax imposed on the Loan Participant or the
indenture estate under the Collateral Trust Indenture
(3) Calculation of General Tax Indemnity Payments. If any
Indemnitee realizes a net permanent tax benefit by reason of the payment
of any indemnity under Section 13(b), such Indemnitee shall pay the
Lessee, but not before the Lessee shall have made all payments
theretofore due to such Indemnitee
-71-
6091.100.2898.27:1
<PAGE>
pursuant to this section 13(b), an amount equal to the lesser of (x) the
sum of such tax benefit plus any other net tax benefit realized by such
Indemnitee as the result of any payment made by such Indemnitee pursuant
to this sentence (determined in a manner consistent with the definition
of After Tax Basis set forth in Appendix A and with the last sentence of
Section 13 (b) (6) hereof) or (y) the amount of such payment by the
Lessee to such Indemnitee and any other payment by the Lessee to such
Indemnitee thereto-fore made pursuant to this Section 13(b) less the
aggregate amount of all prior payments by such Indemnitee to the Lessee
pursuant to this clause (y) with respect to amounts paid pursuant to
Section 13 (b) (1), it being intended that no Indemnitee should realize
a net tax benefit pursuant to this section 13(b) unless the Lessee shall
first have been made whole for any payments by it to such Indemnitee
pursuant to this Section 13(b); provided, however, that in computing any
permanent tax benefit, such Indemnitee shall be deemed first to have
utilized all deductions and credits available to it otherwise than by
reason of any payment by the Lessee pursuant to this Section 13(b);
provided further, however, that notwithstanding the provisions of this
clause (3), such Indemnitee shall not be obligated to make any payment
to the Lessee pursuant to this clause (3) if at the time such payment
shall be due an Event of Default shall have occurred and be continuing.
(4) General Tax Indemnity-Contests. If a written claim shall
be made against any Indemnitee for any Tax for which the Lessee is
obligated pursuant to this section 13 (b), such Indemnitee shall notify
the Lessee promptly of such claim but the failure so to notify the
Lessee shall not affect any obligation. of the Lessee pursuant to this
section 13(b). If the Lessee shall- reasonably request in writing within
30 days after receipt of such notice, such Indemnitee shall in good
faith and at the Lessee's expense contest the imposition of such Taxes;
provided, however, that such Indemnitee may in its sole discretion
select the forum for such contest and determine whether any such contest
-72-
6091.100.2898.27:1
<PAGE>
shall be by (A) resisting payment of such Taxes, (B) paying such Taxes
under protest or (C) paying such Taxes and seeking a refund thereof;
provided further, however, that (W) such Indemnitee shall not be
obligated to contest any claim in which the amount in question is less
than $250,000, (X) at such Indemnitee's option, such contest shall be
conducted by the Lessee in the name of such Indemnitee (subject to the
preceding proviso) and (V) in no event shall such Indemnitee be required
or the Lessee permitted to contest the imposition of any Taxes for which
the Lessee is obligated pursuant to this Section 13(b) unless (u) the
Lessee shall have acknowledged its liability to such Indemnitee for an
indemnity payment pursuant and to the extent such Indemnitee or the
Lessee, as the case may be, shall not prevail in the contest of such
claim; (v) such Indemnitee shall have received from the Lessee (i)
satisfactory indemnity for any liability, expense or loss arising out of
or relating to such contest including, but not limited to, (A) all
reasonable legal, accountants' and investigatory fees and disbursements,
(B) the amount of any interest, additions to tax or penalties that may
be payable as a result of contesting such claim and (C) if such contest
is to be initiated by the payment of, and the claiming of a refund for
such Tax, sufficient funds to make such payment on an After Tax Basis
and (ii) an opinion of independent tax counsel selected by the Lessee
and approved by such Indemnitee (which approval shall not be
unreasonably withheld) and furnished at the Lessee's sole expense to the
effect that a Reasonable Basis exists for contesting such claim or, in
the event of an appeal, that there exists a substantial possibility that
an appellate court or an administrative agency with appellate
jurisdiction, as the case may be, will reverse or substantially modify
the adverse determination that the Lessee desires to contest; (w) the
Lessee shall have agreed to pay such Indemnitee on demand, and on an
After Tax Basis, all reasonable costs and expenses that such Indemnitee
may incur in connection with contesting such claim (including, without
limitation, all costs, expenses, losses, reasonable legal and accounting
-73-
6091.100.2898.27:1
<PAGE>
fees, disbursements, penalties, interest and additions to tax), (x) such
Indemnitee shall have reasonably determined that the action to be taken
will not result in any danger of sale, forfeiture or loss of, or the
creation of any Lien (except if the Lessee shall have adequately bonded
such Lien or otherwise made provision to protect the interests of such
Indemnitee in a manner satisfactory to such Indemnitee) on, Unit 1, any
part thereof, the Undivided Interest, the Real Property Interest, or any
interest in any of the foregoing; and (y) if such contest shall be
conducted in a manner requiring the payment of the claim, the Lessee
shall have paid the amount required. The Lessee agrees to give such
Indemnitee reasonable notice of any contest Indemnitee shall obtain a
refund of all or any part of any Taxes paid by the Lessee, or if any
such refund would be payable to the Indemnitee in the absence of an
offsetting liability for Taxes payable to the taxing authority in
question, such Indemnitee shall pay the Lessee, but not before the
Lessee shall have made all payments theretofore due to such Indemnitee
pursuant to this Section 13(b), an amount equal to the lesser of (xx)
the amount of such refund so received or receivable, including interest
received or receivable and attributable thereto, plus any net permanent
tax benefit realized by such Indemnitee (determined in a manner
consistent with the definition of After Tax Basis set forth in Appendix
A and with the last sentence of Section 13 (b) (6) hereof) as a result
of any payment by such Indemnitee made pursuant to this sentence (but
only to the extent that such net permanent tax benefit was not taken
into account pursuant to Section 13(b)(3)), and after taking into
account the tax consequences of the receipt of such refund and such
interest) or (yy) such tax payment by the Lessee to such Indemnitee plus
any other payment by the Lessee to such Indemnitee theretofore made
pursuant to this Section 13(b), in either case, net of any expenses not
already paid or incurred by the Lessee; provided, however, that in
computing any net permanent tax benefit, such Indemnitee shall be deemed
-74-
6091.100.2892.27:1
<PAGE>
first to have utilized all deductions and credits available to it
otherwise than by reason of any payment by the Lessee pursuant to this
Section 13(b); provided, further, however, that notwithstanding the
provisions of this clause C4), such Indemnitee shall not be obligated to
make any payment to the Lessee pursuant to this clause (4) if at the
time such payment shall be due a Default or an Event of Default shall
have occurred and be continuing under the Facility Lease. An Indemnitee
shall not be required to make any payment pursuant to this clause (4)
before such time as the Lessee shall have made all payments and
indemnities then due under the Transaction Documents to such Indemnitee.
Notwithstanding anything contained in this clause (4) to the contrary,
no Indemnitee shall be required to contest any claim if the subject
matter thereof shall be of a continuing nature and shall have previously
been decided pursuant to the contest provisions of this clause (4)
unless there shall have been a change in the law (in6luding, without
limitation, amendments to statutes or regulations, administrative
rulings and court decisions) after such claim shall have been so
previously decided, and such Indemnitee shall have received an opinion
of independent tax counsel selected by the Lessee and approved by such
Indemnitee (which approval shall not be unreasonably withheld) and
furnished at the Lessee's sole expense to the effect that such change
provides a Reasonable Basis for the position which such Indemnitee and
the Lessee, as the case may be, had asserted in such previous contest or
for an alternative position based upon such change that the Lessee now
desires to assert. Nothing contained in this Section 13(b) shall require
any Indemnitee to contest or permit the Lessee to contest a claim which
it would otherwise be required to contest pursuant to this Section 13(b)
if such Indemnitee shall waive payment by the Lessee of any amount that
might otherwise be payable by the Lessee under this Section 13(b) by way
of indemnity in respect of such claim. If the Lessee does not request
that a Tax be contested pursuant to this paragraph (5), the Lessee shall
-75-
6091.100.2898.27:1
<PAGE>
pay the Indemnitee therefor unless such Tax was not included in the
indemnification under Section 13(b) (1) or was excluded by Section 13
(b) (2).
(5) General Tax Indemnity Reports. If any report, return or
statement is required to be filed with respect to any obligations of the
Lessee under or arising out of this Section 13(b), the Lessee shall
timely notify the Indemnitee and timely file the same, except for any
such report, return or statement which such Indemnitee has notified the
Lessee that it intends to file. The Lessee shall either file such
report, return or statement so as to show the ownership of the undivided
Interest or the Real Property Interest, as the case maybe, in , the
owner Trustee and send a copy of such report, return or statement to the
Owner Trustee and such Indemnitee or, where not so permitted, notify the
Owner Trustee and such Indemnitee of such requirement and prepare and
deliver such report, return or statement to the Owner Trustee and such
Indemnitee in a manner satisfactory to the Owner Trustee and such
Indemnitee within a reasonable time prior to the time such report,
return or statement is to be filed or, where such return, statement or
report shall be required to reflect items in addition to any obligations
of the Lessee under or arising out of this Section 13(b), provide the
Owner Trustee and such Indemnitee with information sufficient to permit
such return, statement or report properly to be made with respect to any
obligations of the Lessee under or arising out of this Section 13(b)
(and the Lessee shall hold each Indemnitee harmless from and against any
liabilities, obligations, losses, damages, penalties, claims, actions,
suits and reasonable costs arising out of any insufficiency or
inaccuracy in any such return, statement, report or information). The
Lessee shall not have any right to examine the tax returns of any
Indemnitee
-76-
6091.100.2898.27:1
<PAGE>
(6) General Tax Indemnity-Payment. All Taxes shall be paid
when due and payable and, unless otherwise requested by the appropriate
Indemnitee, the Lessee shall pay any Taxes for which it is liable
pursuant to this Section 13(b) directly to the appropriate taxing
authority and shall pay such appropriate Indermitee promptly on demand
in immediately available funds any amount due such Indemnitee pursuant
to this Section 13(b) with respect to such Taxes. Any such demand shall
specify in reasonable detail the payment and the facts upon which the
right to payment is based. Each Indemnitee shall promptly forward to the
Lessee any notice, bill or advice received by it concerning any Taxes.
within 30 days after the date of each payment by the Lessee of any
Taxes, the Lessee shall furnish the appropriate Indemnitee the original
or a certified copy of a receipt for the Lessee's payment of such Taxes
or such other evidence of payment of such Taxes as is acceptable to such
Indemnitee. The Lessee shall also furnish promptly upon request such
data as any Indemnitee may require to enable such Indemnitee to comply
with the requirements of any taxing jurisdiction. Whenever any payment
is to be made by the Lessee under this Section 13(b) and it shall be
necessary, in calculating the After Tax Basis amount of such payment, to
compute the amount of any liability for federal, state or local tax
imposed on or measured by the net income of any Indemnitee, such
computation shall be based on the assumption that such taxes shall be
payable at the highest marginal statutory rate in effect for the
relevant period.
(7) Definition of Indemnitee. For purposes of this Section
13(b), the tern Indemnitee shall mean and include the successors and
assigns of each respective Indemnitee, and for purposes of federal
income taxes, the affiliated group of corporations and each member
thereof (within the meaning of Section 1504 of the Code) of which such
Indemnitee is a member, if such group shall file a consolidated united
States federal income tax return, and, for purposes of income or
franchise taxes imposed by a particular state or local taxing
-77-
6091.100.2898.27:1
<PAGE>
jurisdiction, shall mean and include any consolidated or combined group
of which such Indemnitee is or shall be a member that is treated as such
by such state or local taxing jurisdiction.
(c) Supporting Material. Upon receipt of any payment provided
for by this Section 13, the Indemnitee receiving the same shall provide to the
Lessee such supporting material (other than tax returns) as the Lessee shall
reasonably request. The Lessee shall reimburse to any Indemnitee, on an After
Tax Basis, any expenses incurred in providing requested supporting material to
the Lessee.
(d) Coordination with Tax Indemnification Agreement. Any
amounts that the Lessee is liable to pay pursuant to this Section 13(b) shall be
payable by the Lessee hereunder even if such Taxes are not the liability of the
Lessee pursuant to the Tax Indemnification Agreement
SECTION 14. Transaction Expenses.
(a) Transaction Expenses. Subject to the provisions of
paragraph (C) below, with funds provided by the Owner Participant, the Owner
Trustee hereby agrees that it will pay when due an appropriate portion (taking
into account the other undivided interests in Unit 1 sold on December 31, 1985
and on August 1, 1986) of the following costs and expenses (Transaction
Expenses)
(i) the reasonable legal fees and disbursements of the
Loan Participant's Counsel, the Owner Participant's Special
Arizona Counsel, the Owner Participant's Special New Mexico
Counsel, the Owner Participant's Special Counsel, the Owner
Participant's Special NRC Counsel, the Owner Trustee's counsel
and the Indenture Trustee's counsel for their services
rendered in connection with the execution and delivery of this
Participation Agreement and the other Transaction Documents
-78-
6091.100.2898.27:1
<PAGE>
and all fees, expenses and disbursements incurred by them in
connection with such transactions; and reasonable legal tees,
expenses and disbursements in connection with NRC and ANPP
Participant approvals in connection with such transactions;
(ii) the initial (but not the ongoing) fees and expenses
of the Owner Trustee and the Indenture Trustee;
(iii) all stenographic, printing, reproduction, and other
reasonable out-of-pocket expenses (other than investment banking
or brokerage fees) incurred in connection with the execution and
delivery or this Participation Agreement and the other
Transaction Documents and all other agreements, documents or
instruments prepared in connection therewith (including all
computer analysis and travel related costs)
(iv) the fees of the Appraiser for services rendered as
contemplated by Section 11(a) (29), the fees of the appraiser
for services rendered as contemplated by Section 11(a) (36) and
the fees of the insurance consultant for services rendered as
contemplated by Section 11 (a) (35);
(v) all costs of issue of the Series B Bonds including,
without limitation, the costs of preparing the Financing
Documents, filing fees relating to the Registration Statement
and the fees, expenses and disbursements of Collateral Trust
Trustee's Counsel, Loan Participant's special Arizona counsel
and special New Mexico counsel, Underwriter's Counsel, the
initial fees of the Collateral Trust Trustee and its
out-of-pocket expenses, rating agency fees, the fees and
commissions of the underwriters of the Series B Bonds and the
tees, expenses and disbursements of the Loan participant; and
-79-
6091.100.2898.27:1
<PAGE>
(vi) the fees and out-of-pocket expenses of Kidder Peabody
in connection with the placement of the beneficial interest in
the Trust.
subject to the provisions of paragraph (c) below, funds for the payment of
Transaction Expenses will be provided by the Owner participant to the Owner
Trustee and the Owner Trustee will promptly disburse such funds.
(b) Post-closing Expenses. The Lessee will pay, as
supplemental Rent, (i) the ongoing fees, expenses, disbursements and costs
(including legal and other professional fees and expenses) of or incurred by the
Owner-Trustee, the Indenture Trustee and the collateral Trust Trustee, including
in connection with the issue, sale and purchase of Notes and Bonds after the
closing Date, and (ii) all fees, expenses, disbursements and costs (including
legal and other professional fees and expenses) incurred by the Loan
participant, the Owner participant, the Owner Trustee, the Indenture Trustee and
the collateral Trust Trustee in connection with (a) any Default, Event of
Default, Indenture Default or Indenture Event of Default, (b) the entering into
or giving or withholding of any amendment, modification, supplement, waiver or
consent with respect to any Transaction Document or Financing Document, (c) any
Event of Loss or Deemed Loss Event, (d) any transfer of all or any part of the
right, title and interest of the Indenture Trustee in, to and under the
Transaction Documents, (e) any transfer of all or any part of the right, title
and interest of the Owner Trustee in the undivided Interest, the Real Property
Interest or in, to and under the Transaction Documents, and (t) any transfer
contemplated by Section 7(b) (4)
(c) Lessee's obligation. Notwithstanding Section 14(a) hereof,
(i) in the event the transactions contemplated by this Participation Agreement
shall not be consummated, the Lessee shall pay or cause to be paid, and shall
-80-
6091.l00.2898.27:l
<PAGE>
indemnify and hold harmless the Loan participant, the Indenture Trustee, the
collateral Trust Trustee, the Owner Trustee and the Owner Participant in respect
of all Transaction Expenses unless such failure to consummate shall result
solely from the Owner Participant's default in making its Investment hereunder
and (ii) the Lessee shall pay or cause to be paid that portion of Transaction
Expenses which exceeds a percentage of the Purchase Price equal to 2.5%.
SECTION 15. Owner Participant's Transfers.
(a) Transfers. After the closing Date, except as contemplated
by Section 7(b) (4), the Owner Participant shall not assign, convey or otherwise
transfer all or any part of (including without limitation an undivided interest
in) its right, title or interest in and to this Participation Agreement, any of
the other Transaction Documents or the Trust Estate (except its right to receive
Excepted Payments) to any Person (a Transferee) except on the following
conditions:
(i) the Transferee shall enter into an agreement or
agreements whereby such Transferee confirms that (1) it shall
be bound by the terms of this Participation Agreement and each
other Transaction Document, to the extent of the interest
transferred, as if it had been originally named as the Owner
Participant hereunder and thereunder and (2) if such
Transferee is a public utility company, it shall have waived
its right to claim Special Casualty Value upon the occurrence
of a Deemed Loss Event (of the type specified in clause (1) of
the definition thereof) under the Facility Lease;
(ii) the Transferee shall be either (A) a financial
institution, a corporation or a partnership with a net worth or
capital and surplus of at least $25,000,000 (or, in the case of
a partnership, at least one of whose general partners has such a
net worth or capital and surplus), or a direct or indirect
-81-
6091.100.2898.27:1
<PAGE>
wholly owned subsidiary of such a financial institution or
corporation, (B) a direct or indirect wholly owned subsidiary
of (1) the owner Participant or (2) any parent of the Owner
participant, (C) the Lessee or such other Person as shall have
been approved by the Lessee or (D) any Person; provided,
however, that if the Transferee is a subsidiary referred to in
clause (A) above or a Person referred to in clause (D) above,
the transferring Owner participant (and any parent thereof
secondarily liable pursuant to this Section 15(a) (ii)) shall
continue to be liable for (or the parent of such Transferee,
which shall otherwise be a permitted Transferee, shall enter
into an agreement whereby such parent confirms that it shall be
secondarily liable for) the obligations of such Transferee
under section 7(b) (1) notwithstanding such transfer; and
(iii) such transfer shall not violate the securities Act or
any provision of, or create a relationship which would be in
violation of, any Applicable Law or agreement to which the
transferring owner participant or the Transferee is a party or
by which its property is bound
Upon any such transfer, the transferring Owner participant shall, except as
expressly provided in clause (ii) above, be released from its obligations under
this participation Agreement and the other Transaction Documents to the extent
of the interest transferred An agreement to transfer shall not in and of itself
constitute a transfer for purposes of this Section 15.
(b) procedure. If the Owner participant transfers all or any
part of its interest hereunder pursuant to this Section 15, it shall give
written notice thereof to the Lessee, the Owner Trustee, the Indenture Trustee
-82-
6091.100.2898.27.1
<PAGE>
and the Loan Participant, specifying the name and address for notices to the
Transferee, such other information and evidence as shall be necessary to
establish compliance with this Section 15 and the extent of the interest
transferred to such Transferee. If, as a result of any such transfer, the
original Owner Participant is not to continue to receive all payments to be made
by the Indenture Trustee to the "Owner participant" under the Indenture, the
original' Owner participant shall from time to time, by notice to the Indenture
Trustee, with copies to the Lessee, the Owner Trustee and the Collateral trust
Trustee, designate the manner in which any such payments to the "Owner
participant" are to be allocated, and the Indenture Trustee shall be entitled to
rely on such notice for all purposes. This Section 15 (other than the notice
provisions contained in the first sentence of this Section 15(c)) is for the
benefit of the Lessee, the Owner Trustee and the Owner participant and may not
be enforced by any other party hereto.
SECTION 16. Brokerage and Finders' Fees and Commissions.
Except to the extent of amounts payable by the owner
Participant pursuant to Section 14, the Lessee will indemnify and hold harmless
the Loan participant, the Indenture Trustee, the Owner Trustee and the Owner
Participant in respect of any commissions, fees, judgments or other expenses of
any nature and kind which any of them may become liable to pay by reason of any
claims by or on behalf of brokers, finders, agents, advisors or investment
bankers in connection with the transactions contemplated by this Participation
Agreement, any other Transaction Document or any Financing Document, or any
litigation or similar proceeding arising from any such claim, other than those
claims arising out of written undertakings of the party claiming indemnification
under this Section 16 or any Affiliate or shareholder (or Affiliate of such
shareholder) of such Person with any such broker, finder, agent, advisor or
investment banker.
-83 -
6091.l00.2898.27:l
<PAGE>
SECTION 17. Survival of Representations and warranties;
Binding Effect
(a) Survival. All indemnities, representations and warranties
contained in this participation Agreement, in any other Transaction Document, in
any Financing Document and in any agreement, document or certificate delivered
pursuant hereto or thereto or in connection herewith or therewith, shall
survive, and shall continue in effect following, the execution and delivery of
this participation Agreement, the making of the investments and the loans
referred to herein, any disposition of any interest in the Undivided Interest,
Unit 1 or any other property referred to in this Participation Agreement and the
expiration of any of the Transaction Documents or Financing Documents and shall
be and continue in effect notwithstanding (i) any investigation made by the
Owner Participant or the Loan participant or (ii) the fact that any of the
Indenture Trustee, the Owner Trustee, the Loan Participant or the owner
Participant may waive compliance with any of the other terms, provisions or
conditions of any of the Transaction Documents or Financing Documents. The
obligations of the Lessee under Sections 10(b) (1) (ix), 10(b) (2), 10(b) (3)
(vii), 10(b) (3) (x) , 10(b) (3) (xi), 13, 14, 16 and 19(f) shall survive the
expiration or other termination of this Participation Agreement or any other
Transaction Document or Financing Document. The extension of any applicable
statute of limitations by the owner Trustee, the Indenture Trustee, the Lessee,
the Owner Participant, the Loan participant or any Indemnitee shall not affect
such survival.
(b) Binding Effect. All agreements, representations and
warranties in this Participation Agreement, the other Transaction Documents and
the Financing Documents and in any agreement, document or certificate delivered
concurrently with the execution of this Participation Agreement or from time to
time thereafter, shall bind the party making the same and its successors and
permitted assigns and shall inure to the benefit of each party for whom made and
-84-
6091.100.2898.27:1
<PAGE>
its successors and permitted assigns, and, to the extent provided in the next
sentence, each Indemnitee and its successors and assigns. The obligations of the
Lessee under Section 13 hereof and Section 20 of the Facility Lease are
expressly made for the benefit of, and shall be enforceable by, any Indemnitee,
separately or together, without declaring the Facility Lease to be in default
and notwithstanding any assignment by the Lessor of the Facility Lease or any of
its rights thereunder or any disposition of all or any part of any interest in
the Undivided Interest, the Real Property Interest, Unit 1 or any other property
referred to in this Participation Agreement, or in this Participation Agreement
or any other Transaction Document or any Financing Document. All payments
required to be made pursuant to Section 13 hereof shall be made directly to, or
as otherwise requested by, the Indemnitee entitled thereto upon written demand
by such Indemnitee. The Lessee shall not assign any of its rights or obligations
hereunder without the prior written consent of the Owner Participant and the
Owner Trustee. Except as otherwise indicated, all references herein to any party
to this participation Agreement and the other Transaction Documents shall
include the permitted successors and assigns of such party.
SECTION 18. Notices.
All communications, notices and consents provided for herein
shall be in writing, including telex, telecopy or other wire transmission
containing a request for assurance of receipt in a manner typical with respect
to communications of that type, or mailed by registered or certified mail,
personally delivered (with signed receipt of an officer of the Owner participant
in the case of delivery to the Owner Participant) or delivered by express
delivery service, and shall be addressed (i) if to the Owner Participant, at One
chase Manhattan plaza (20th floor), New York, New York 10081, Attention of
Leasing Administrator; (ii) if to First PV Funding Corporation at Corporation
Trust Center, 1209 Orange Street, Wilmington, Delaware 19801, Attention of
-85-
6091.100.2898.27:1
<PAGE>
President; (iii) if to The First National Bank of Boston, at 100 Federal Street,
Boston, Massachusetts 02110, Attention of corporation Trust Division; (iv) if to
Chemical Bank, at 55 Water Street, New York, New York 10041, Attention of
Corporate Trustee Administration; and (V) if to Public Service Company of New
Mexico, at Alvarado Square, Albuquerque, New Mexico 87158, Attention: Secretary;
or at such other address as any party hereto may from time to time designate by
notice duly given in accordance with the provisions of this Section to the other
parties hereto. All such communications, notices and consents given in the
manner provided above shall be effective on the date of receipt of such
communication or notice.
SECTION 19. Miscellaneous
(a) Execution. This Participation Agreement may be executed in
any number of counterparts and by the different parties hereto on 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. Although this Participation Agreement is dated as of the date
first above written for convenience, the actual dates of execution hereof by the
parties hereto are respectively the dates set forth under the signatures hereto,
and this Participation Agreement shall be effective on the latest such date.
(b) Intention of the Owner Trustee and the Owner participant.
Each of the Owner Trustee and the Owner Participant intends to exercise its
rights and carry out its obligations hereunder and under the other Transaction
Documents solely with a view to furthering its own best interests and does not
have, and does not expect to have, any form of joint profit motive with any
other Person. The owner Trustee and the Owner Participant shall not be required
to share any Rent to which they are entitled under the Facility Lease, or the
residual value of the Undivided Interest or the Real Property Interest, with any
other Person. The Owner Trustee and the Owner Participant are not under the
-86-
609l.l00.2898.27:1
<PAGE>
control of nor shall they be deemed to be under the control of any other Person
having any interest in Unit 1, and shall not be the agent of or have a right or
power to bind any such Person (other than the Owner Participant as regards the
Owner Trustee) without its express written consent. The owner Trustee and the
Owner Participant accordingly do not intend to create any form of partnership or
joint venture with any other Person by virtue of the transactions contemplated
hereby or by any of the Transaction Documents. In the event that it is
determined, contrary to the intent of the Owner Trustee and the Owner
Participant, that, for purposes of the code or any other income tax law, a form
of partnership or joint venture exists between the owner Trustee or the owner
Participant and any other Person, the Owner Trustee and the Participant hereby
elect to the extent permitted by law (i) not to have the partnership provisions
of the code or such other income tax law apply to any of the transactions
contemplated hereby or by any of the Transaction Documents and (ii) to be
treated solely as owning the Undivided Interest.
(c) Governing Law. This Participation Agreement has been
negotiated and delivered in the State of New York and shall be governed by, and
be construed in accordance with, the laws of the State of New York.
(d) Amendments, Supplements, etc. Neither this Participation
Agreement nor any of the terms hereof may be amended, supplemented, waived or
modified orally, but only by an instrument in writing signed by the party
against which enforcement of such change is sought.
(e) Headings. The headings of the sections and paragraphs of
this Participation Agreement have been inserted for convenience of reference
only and shall in no way restrict or otherwise modify any of the terms or
provisions hereof.
(f) Bankruptcy of Owner participant. If (a) the Owner
Participant or the Owner Trustee becomes a debtor subject to the reorganization
provisions of the Bankruptcy code, or any successor provision, (b) pursuant to
-87-
609l.l00.2898.27:l
<PAGE>
such reorganization provisions the Owner Participant or the Owner Trustee is
required, by reason of the Owner Participant being held to have recourse
liability directly or indirectly to the Holder of any Note or the Indenture
Trustee, to make payment on account of any amount payable as principal or
interest, and premium (if any), on such Note and (c) such Holder or the
Indenture Trustee actually receives any Excess Amount (as hereinafter defined)
which reflects any payment by the Owner Participant on account of clause (b) of
this Section, then such Holder or the Indenture Trustee, as the case may be,
shall promptly refund to the Owner Participant such Excess Amount. For purposes
of this Section, "EXCESS Amount" means the amount by which such payment exceeds
the amount which would have been received on or prior to the date of such
payment by such Holder or the Indenture Trustee if the Owner Participant or the
Owner Trustee had not become subject to the recourse liability referred to in
clause (b) of this Section. Nothing contained in this Section shall prevent such
Holder or the Indenture Trustee from enforcing any personal recourse obligation
(and retaining the proceeds thereof) of the Owner Participant expressly provided
for under this Participation Agreement.
(g) Entire Agreement This Participation Agreement (including
the Schedules hereto), the other Transaction Documents and the Financing
Documents supersede all prior agreements, written or oral, between or among any
of the parties hereto relating to the transactions contemplated hereby and
thereby and each of the parties hereto represents and warrants to the others
that this Participation Agreement and the other Transaction Documents and the
Financing Documents constitute the entire agreement among the parties relating
to the transactions contemplated hereby and thereby.
(h) Publicity. Each party hereto agrees that it will not issue
or release for external publication any article or advertising or publicity
matter relating to the transaction contemplated hereby or any similar
transaction and mentioning or implying the identity of the Owner Participant
-88-
6091.100.2898.27:1
<PAGE>
without the prior written consent of the Owner Participant; provided, however,
that the Owner participant agrees that such written consent shall not be
withheld if such disclosure is required by Applicable Law.
-89-
6091.100.2898.27:1
<PAGE>
IN WITNESS WHEREOF, the parties hereto have each caused this
Participation Agreement to be duly executed by their respective officers
thereunto duly authorized as of the dates set forth below.
CHASE MANHATTAN REALTY
LEASING CORPORATION
By
-------------------------
Vice President
Date: December 12, 1986
FIRST PV FUNDING CORPORATION
By
-------------------------
Vice President
Date: December __ , 1986
PUBLIC SERVICE COMPANY OF NEW MEXICO
By
-------------------------
Vice President and Treasurer
Date: December , 1986
-90-
6091.100.2898.27:1
<PAGE>
THE FIRST NATIONAL BANK OF BOSTON,
in its individual capacity and as
Owner Trustee
By:
-------------------------
Assistant Vice President
Date: December 1986
CHEMICAL BANK, in its individual
capacity and as Indenture Trustee
By
-------------------------
Vice President
Date: December 1986
-91-
6091.100.2898.27:1
<PAGE>
Schedule 1
PUBLIC SERVICE COMPANY OF NEW MEXICO
PALO VERDE NUCLEAR GENERATING
STATION UNIT 1
NOTICE OF CLOSING
CHASE MANHATTAN REALTY LEASING CORPORATION
Pursuant to Section 5(a) of the Participation Agreement, dated
as of December 15, 1986 (the Participation Agreement) among Chase Manhattan
Realty Leasing Corporation, as Owner Participant (the Owner Participant), First
PV Funding Corporation, as Loan Participant, The First National Bank of Boston,
as Owner Trustee, Chemical Bank, as Indenture Trustee, and Public Service
Company of New Mexico (PNM), PNM hereby gives notice of a Closing to occur at
10:00 a.m. on December 17, 1986 (the Closing Date). The Closing will be held at
the offices of Messrs. Mudge Rose Guthrie Alexander & Ferdon, 180 Maiden Lane,
New York, New York 10038.
(i) Based upon information supplied to PNM, the current
estimate of Transaction Expenses is an aggregate of $ . A list
of such transaction expenses is attached hereto.
(ii) Payment of the Purchase Price and the purchase price
for the Real Property Interest shall be made pursuant to an
Omnibus Transfer Instruction and Receipt to be executed by all
parties to the Participation Agreement on the Closing Date.
(iii) The Real Estate Investment is $__________.
6091.100.2898.27:1
<PAGE>
Capitalized terms used herein and not otherwise specifically
defined herein shall have the meanings set forth in Appendix A to the
participation Agreement.
IN WITNESS WHEREOF, Public Service Company of New Mexico has
executed this Notice of Closing this 10th day of December, 1986.
PUBLIC SERVICE COMPANY OF NEW MEXICO
By
--------------------------------
Senior Vice President and
Chief Financial Officer
-2-
6091.100.2898.27:1
<PAGE>
Schedule 2
PRICING ASSUMPTIONS
Basic Rent and the schedules of casualty values, Special
casualty values and Termination values, as set forth in the Facility Lease as
originally executed*, have been computed on the basis of the following pricing
assumptions:
1. Investment Percentage: 20%
2. Loan Percentage: 80%
3. Interest Rate on:
(a)Fixed Rate Note
due January 15, 1992
($3,300,000) 8.05%
(b)Fixed Rate Note
due January 15, 1997
($8,060,000) 8.95%
(c)Fixed Rate Note due
January 15, 2015
($48,640,000) 10.15%
4. Federal ACRS Deductions: 10-year public utility property
deductions on the
basis of 100% of Facility Cost.
5. State and city Deductions: 16 Year 150% declining balance
switching to straight line at
the optimal point, using the
half year convention, on the
basis of 100% of Lessor's Cost.
6091.100.2898.27:1
<PAGE>
6. Owner Participant's Tax
Year-End: December 31, 1986.
7. Closing Date December 17, 1986.
8. Transaction Expenses: 1.5% of Facility
Cost paid by the
owner Participant in
addition to its
Investment
(amortized on a
straight-line basis
during the Basic
Lease Term)
9. Real Estate Investment: $41,903.
l0. Basic Rent Payment Date: January 15 and July 15 of each
year (rent payable in
arrears).
11. First Basic Rent Payment
Date: July 15, 1987.
12. Last Basic Rent Payment
Date: January 15, 2Q15.
13. Interim Rent Payment Date: January 15, 1987.
14. Marginal Federal Tax Rate: 46% in 1986;
9.950685% in 1987;
and 34% in 1988.
15. Marginal Combined New York 8.6% deductible for Federal
State and City Tax Rate: taxes.
16. First Estimated Tax Payment
Date: March 15, 1987
17. Tax Accounting Method: Accrual.
18. Amortization of the Fixed
Rate Notes: See schedules attached thereto.
-2-
6091.100.2898.27:1
<PAGE>
Schedule 3
BILL OF SALE AND ASSIGNMENT
================================================================================
BILL OF SALE AND ASSIGNMENT
dated as of 19
---------------------------- --
from
[CHASE MANHATTAN REALTY LEASING CORPORATION)
to
PUBLIC SERVICE COMPANY OF NEW MEXICO
================================================================================
6091.100.2898.27:1
<PAGE>
BILL OF SALE AND ASSIGNMENT, dated as of __________, 19 , from
[CHASE MANHATTAN REALTY LEASING CORPORATION], a New York corporation (the Owner
Participant), to PUBLIC SERVICE COMPANY OF NEW MEXICO, a New Mexico corporation
(PNM).
W I T N E S S E T H:
WHEREAS, pursuant to Section 7(b)(4) of the participation
Agreement dated as of December 15, 1986 (relating to Unit 1) among the Owner
Participant, First PV Funding corporation, as Loan participant, The First
National Bank of Boston, as owner Trustee, Chemical Bank, as Indenture Trustee
and PNM, as Lessee, (the Participation Agreement), the owner participant desires
to sell and PNM desires to buy the Assigned Property (as hereinafter defined);
NOW, THEREFORE, in consideration of the premises and of other
good and valuable consideration, receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. For purposes hereof, capitalized terms used herein
shall have the meanings assigned to such terms in the participation Agreement.
References in this Agreement to articles, sections and clauses are to articles,
sections and clauses in this Agreement unless otherwise indicated.
6091.100.2898.27:1
<PAGE>
ARTICLE II
ASSIGNMENT OF TRUST ESTATE
SECTION 2.01. Assignment. The Owner participant does hereby
grant, bargain, convey, sell, assign, transfer and set over to PNM, without
recourse, representation or warranty, express and implied, of any nature
whatsoever (except as set forth in the next succeeding sentence), all of the
Owner Participants right, title and interest in, to and under the Trust Estate
except the Owner participant's right to receive Excepted Payments (the Assigned
Property) [subject to the Owner participant's security interest in, and general
lien upon all of the right, title, and interest of PNM, as successor Owner
Participant in, to and under the Assigned Property*]. The Owner Participant
hereby represents and warrants to PNM that the Owner Participant has good and
valid title to Assigned Property free and clear of all Owner participant's
Liens.
[Insert the following provision if the Owner participant has
not received under Section 5.2 of the Indenture the payments provided for in
section 9(c), 9(d) or 16(e) of the Facility Lease, as the case may be:
SECTION 2.02. No Release of PNM. Notwithstanding the transfer
of the Assigned Property to PNM pursuant to Section 2.01 hereof, the obligation
of PNM to make the payments as provided in Section (insert applicable section:
9(c), 9(d) or 16] of the Facility Lease (together with interest thereon in
accordance with Section 3(b)(iii) of the Facility Lease) (or to make other
payments in a like amount with respect to Basic Rent or supplemental Rent paid
by application of such payments (and in which the owner Trustee has thereby
- - ----------
* To be inserted if on the date of the transfer the Owner Participant has not
received under Section 5.2 of the Indenture the payments provided for in Section
9(c), 9(d) or 16 of the Facility Lease, as the case may be.
-2-
6091.100.2898.27:1
<PAGE>
acquired an interest pursuant to Section 5.1 or 5.3 of the Indenture) shall not
be deemed to be cancelled or discharged but shall continue until all such
amounts are so received by PNM, as successor Owner Participant, or by the
transferring Owner Participant pursuant to the provisions of Section 7(b) (4) of
the participation Agreement. ]
[Insert following if the owner participant has received under
Section 5.2 of the Indenture the payments provided for in Section 9(c), 9(d) or
16 of the Facility Lease, as the case may be:
SECTION 2.02. Acknowledgment. The Owner participant hereby
acknowledges receipt of $__________ representing payment in full of all amounts
due to the Owner Participant under Section (9) ( C), 9 (d) or 16] of the
Facility Lease.
ARTICLE III
EFFECTIVENESS OF TRANSFER
SECTION 3.01. Effectiveness of Transfer. The transfer of the
Assigned Property shall become effective without further action upon the
execution and delivery by the Owner participant to the Lessee of this Bill of
Sale and Assignment and the furnishing of a counterpart of this Bill of Sale and
Assignment to the Owner Trustee.
ARTICLE IV
MISCELLANEOUS
SECTION 4.01. Successors and Assigns. This Bill of Sale and
Assignment shall be binding upon the owner Participant and its successors and
shall inure to the benefit of PNM and its successors and assigns.
SECTION 4.02. Governing law. This Bill of Sale and Assignment
shall be governed by and construed and enforced in accordance with the law of
the State of New York.
-3-
6091.100.2898.27:1
<PAGE>
SECTION 4.03. Headings. The division of this Bill of sale and
Assignment into sections, and the insertion of headings are for convenience of
reference only and shall not affect the construction or interpretation of this
Bill of Sale and Assignment.
IN WITNESS WHEREOF, the undersigned has caused this Bill of
Sale and Assignment to be duly executed as of the day and year written above.
[CHASE MANHATTAN REALTY
LEASING CORPORATION]
By
---------------------
Title:
-4-
6091.100.2898.27:1
Schedule 4
Recordations and Filings
Part I. Recordations in Respect of the Sale of, and the Owner Trustee's
Title to, the undivided Interest and the Real Property Interest.
A. County Recorder, Maricopa County, Arizona:
(i) Deed;
(ii) Bill of sale;
(iii) Assignment and Assumption;
(iv) Facility Lease;
(v) Indenture;
(vi) Indenture of Partial Facility; and
(vii) Indenture of Partial Release/Real Property
Part II. UCC-l Financing Statements.
A. County Recorder, Maricopa County, Arizona:
(i) A financing statement on form UCC-l naming PNM, as lessee,
the Owner Trustee, as lessor, and the Indenture Trustee, as
assignee of the Owner Trustee, in respect of the Facility Lease;
(ii) A financing statement on form UCC-l naming the Owner
Trustee, as debtor, and the Indenture Trustee, as secured party, in
respect of the Lease Indenture Estate; and
(iii) A financing statement amendment on form UCC-2 reflecting
the supplementation of the Collateral Trust Indenture by the
supplemental Indenture of Pledge (as contemplated by the Series B
supplemental Indenture)
B. Secretary of State, Arizona:
6091.100.2898.27:1
<PAGE>
(i) A financing statement on form UCC-l naming PNM, as lessee,
the Owner Trustee, as lessor, and the Indenture Trustee, as
assignee of the Owner Trustee, in respect of the Facility Lease;
(ii) A financing statement on form UCC-l naming; PNM, as
lessee, the Owner Trustee, as lessor and the Indenture Trustee, as
assignee of the Owner Trustee, in respect of the Facility Lease
(Filed as a public utility filing);
(iii) A financing statement on form UCC-l naming the Owner
Trustee, as debtor, and the Indenture Trustee, as secure a party,
in respect of the Lease Indenture Estate; and
(iv) A financing statement amendment on form UCC-2 reflecting
the supplementation of the collateral Trust Indenture by the
Supplemental Indenture of Pledge (as contemplated by the Series B
Supplemental Indenture)
C. Office of County Clerk, Bernalillo County, New Mexico:
(i) A financing statement on form UCC-l naming PNM, as lessee,
the Owner Trustee, as lessor, and the Indenture Trustee, as
assignee of the Owner Trustee, in respect of the Facility Lease;
(ii) A financing statement on form UCC-l naming the Owner
Trustee, as debtor, and the Indenture Trustee, as secured party, in
respect of the Lease Indenture Estate; and
(iii) A UCC financing statement amendment reflecting the
supplementation of the collateral Trust Indenture by the
Supplemental Indenture of Pledge (as contemplated by the Series B
Supplemental Indenture).
-2-
6091.100.2898.27:1
<PAGE>
D. Secretary of State, New Mexico:
(i) A financing statement on form UCC-1 naming PNM, as lessee,
the Owner Trustee, as lessor, and the Indenture Trustee, as
assignee of the owner Trustee, in respect of the Facility Lease;
(ii) A financing statement on form UCC-l naming the owner
Trustee, as debtor, and the Indenture Trustee, as secured party, in
respect of the Lease Indenture Estate; and
(iii) A UCC financing statement amendment reflecting the
supplementation of the Collateral Trust Indenture by the
supplemental Indenture of Fledge (as contemplated by the Series B
Supplemental Indenture)
E. Secretary of State, Massachusetts:
(i) A financing statement on form UCC-l naming the Owner
Trustee, as debtor, and the Indenture Trustee, as secured party, in
respect of the Lease Indenture Estate.
Part III. Other Filings:
Filing of the Indenture with the Secretary of State of the State
of New Mexico pursuant to the New Mexico public utility Act.
-3-
6091.100.2898.27:1
<PAGE>
Schedule 5
AFFIDAVIT OF TRUSTEE
THE FIRST NATIONAL BANK OF BOSTON,
as Owner Trustee under that certain
Trust Agreement dated as of
December 15, 1986 with Chase
Manhattan Realty Leasing Corporation
The undersigned, being a duly authorized representative of The
First National Bank of Boston, a national banking association, as Trustee under
the above-captioned Trust Agreement (the Trust Agreement), does hereby affirm
and acknowledge that The First National Bank of Boston, as Trustee, holds legal
title to certain real (and other) property on behalf of a certain beneficiary,
such property and beneficiary being more particularly described in that certain
Deed recorded December ____, 1986, as instrument No. 86-records of Maricopa
County, Arizona; being further described in that certain Deed and Bill of sale
recorded December _____, 1986, as instrument No. 86____________, records of
Maricopa County, Arizona; being further described in that certain Assignment,
Assumption and Further Agreement recorded December ______, 1986, as instrument
No. 86-______, records of Maricopa County, Arizona; and being further described
in that certain Deed and Assignment of Beneficial Interest dated December 1986,
and that certain related __________ Amended Affidavit of Trustee executed by
Title USA Company of Arizona as Trustee of its Trust No. 530 and recorded
December _______, 1986, as instrument No. 86- _______, records of Maricopa
County, Arizona; the property descriptions and beneficiary disclosures contained
in or incorporated into each of said instruments being incorporated herein by
this reference as if fully set forth herein.
A certain change in ownership of the beneficial interest in
the Trust Agreement has occurred since the recordation of the above-described
instruments. As now reflected in the records of The First National Bank of
Boston, the sole beneficiary of the Trust Agreement is:
6091.100.2898.27:1
<PAGE>
Public Service Company of New Mexico
Alvarado Square
P. O. Box 2267
Albuquerque, New Mexico 87103
A copy of the Trust Agreement is available for inspection at
the offices of The First National Bank of Boston, 100 Federal Street, Boston,
Massachusetts 02110.
DATED THIS _____ day of ________________, __________.
THE FIRST NATIONAL BANK OF BOSTON, not in its individual
capacity, but solely as Owner Trustee under the Trust Agreement dated as of
December 15, 1986, with Chase Manhattan Realty Leasing Corporation
By:
--------------------------
Its Authorized Officer
STATE OF
----------------) SS.
COUNTY OF
----------------)
The foregoing instrument was acknowledged before me this _____
day of __________ , _________, by ___________ an Authorized Officer of THE FIRST
NATIONAL BANK OF BOSTON, a national banking association, under that certain
Trust Agreement dated as of December 15, 1986 with Chase Manhattan Realty
Leasing Corporation.
---------------------
Notary Public
-2-
6091.100.2898.27:1
<PAGE>
Appendix A
DEFINITION OF TERMS
The terms defined herein relate to the Participation Agreement
(as defined below) and certain Transaction Documents executed, or to be
executed, in connection with the Participation Agreement. Such terms include the
plural as well as the singular. Any agreement defined or referred to below shall
include each amendment, modification and supplement thereto and waiver thereof
as may become effective from time to time, except where otherwise indicated. Any
term defined below by reference to any agreement shall have such meaning whether
or not such document is in effect. The terms "hereof", "herein", "hereunder" and
comparable terms refer to the entire agreement with respect to which such terms
are used and not to any particular article, section or other subdivision
thereof.
If, and to the extent that, either the Participation Agreement
or any other Transaction Document which incorporates this Appendix shall be
amended from time to time pursuant to the respective terms thereof, this
Appendix shall be, or be deemed to have been, amended concurrently with the
execution and delivery of each such amendment in order to conform the
definitions herein to the new or amended definitions set forth in or required by
each such amendment.
Acceptable Change shall mean any change in or new interpretation
by Governmental Authority having jurisdiction of the Price-Anderson Act or the
Atomic Energy Act (or the regulations of the NRC relating thereto) if, after
giving effect to such change or new interpretation:
(A) (a) the "aggregate liability" for a single "nuclear incident" of
"persons indemnified" shall not exceed $6.563 billion (assuming 101
operating nuclear facilities participating in the deferred premium or
similar plan referred to in clause (c) below and subject to adjustment
in an amount not exceeding (X) $63 million for each increase or decrease
6O9l.l00.2898.55:l
<PAGE>
in said number of operating nuclear facilities and (Y) the aggregate of
all changes in such "aggregate liability" to reflect the effects of
inflation contemplated pursuant to clause (c) below)
(b) the "aggregate liability" for a single "nuclear incident" of
"persons indemnified" shall not exceed the sum of, without duplication,
(X) the amount of insurance coverage available from commercial insurance
underwriters on terms substantially equivalent (in the reasonable
opinion of the Owner Participant) to the terms in effect on the Closing
Date under Applicable Law and required to be maintained by each licensee
with respect to any single nuclear facility, and (Y) the maximum
aggregate amount payable with respect to a single "nuclear incident" by
all licensees of nuclear facilities participating in any deferred
premium or similar plan required under Applicable Law, by more than $40
million
(C) the amount payable by all licensees of a single nuclear facility
with respect to such facility under any deferred premium or similar plan
required under Applicable Law shall not exceed $63 million per "nuclear
incident" (subject to an annual adjustment upward for each calendar year
after the enactment of a change in the Price-Anderson Act (if such
change increases the standard deferred premium) by an amount equal to,
if specified by such change or otherwise by Applicable law, (X) the
annual percentage change during the immediately prior calendar year in
the implicit price deflator for the Gross National Product published by
the united States Department of Commerce or (Y) the annual percentage
change in the consumer price index since the immediately prior calendar
-2-
6091.100.2898.55:1
<PAGE>
year; provided, however, that (i) in the event that Applicable Law shall
not specify an inflation adjustment, then the inflation adjustment
permitted by this parenthetical shall be that specified in the preceding
sub-clause (X) and (ii) in the event that Applicable Law shall specify a
standard deferred premium below $63 million, the inflation adjustment
factor shall not be available to increase the standard deferred premium
permissible under this clause (c) beyond $63 million until such lower
deferred premium (as so inflated) equals or exceeds $63 million);
(d) the amount payable by all licensees of a single nuclear facility
with respect to such facility in any one year with respect to any one
"nuclear incident" under any deferred premium or similar plan required
under Applicable Law shall not exceed $12 million;
(e) insurance or other financial protection shall be in effect under
which the providers of such insurance or other financial protection
shall agree to pay any amount payable by any licensee under any deferred
premium or similar plan upon a default in such payment by such licensee
up to a maximum aggregate amount for all such defaults in payment of not
less than $30 million;
(f) a provision shall be included (X) which authorizes (whether or not
subject to appropriation acts) the NRC or other Governmental Authority
to borrow from the United States Treasury (1) to make payments on behalf
of any licensees under any deferred premium or similar plan and (2) to
make payments to claimants in the event that funds available to pay
valid claims in any year are insufficient as a result of any limitation
on the amount or deferred premiums that may be required of a licensee
under Applicable Law (in both cases the reimbursement obligation of such
-3-
6091.100.2898.55:1
<PAGE>
licensees in any calendar year shall not exceed $12 million, plus
interest) , or (V) which makes the exclusive source of payments for
public liability claims the funds provided by financial protection
required by Applicable Law and, where appropriate, funds provided as a
result of NRC or other Governmental Authority borrowings or (Z) which
establishes another mechanism under which the maximum potential
liability of all Persons during any calendar year as a result of a
"nuclear incident" shall not exceed the amount of insurance or other
financial protection required to be available during such calendar year
to pay all amounts which may become payable by any such Person, when and
as they become payable, in respect of such liability;
(g) there shall be no claim, liability or expense excluded (1) from the
limitation of liability established by the price-Anderson Act (as in
effect on the Closing Date) (through modification of the definitions of
"aggregate liability", "persons indemnified", "nuclear incident" or
otherwise) or (2) under commercially available insurance or other
financial protection required under Applicable Law (as in effect on the
Closing Date) (other than an exclusion of the costs of investigating and
settling claims and defending suits for damages) , except, for purposes
of sub-clauses (1) and (2) of this clause (g), to the extent excluded
pursuant to Applicable Law as in effect on the Closing Date;
(h) subject only to clause (b) above, policies of insurance, including
policies in respect of any deferred premium or similar plan, shall
provide, or shall have been amended or modified to provide, in both
timing and amount, and make available, or shall have been amended or
modified to make available, financial protection required under
Applicable Law.; and
-4 -
6091.100.2896.55:1
<PAGE>
(i) neither the Owner Trustee nor the Owner Participant shall be (in the
opinion of independent counsel to the Owner participant) exposed to any
other increase in its real or potential liability with respect to a
"nuclear incident", either during or subsequent to the Lease Term; or
(B) at all times from the date of such change to, but not including, the
Lease Termination Date,
(a) a provision shall be included, with language reasonably satisfactory
to the Owner Participant, which exempts the Owner Trustee and the Owner
Participant from all real or potential liability in respect of a
"nuclear incident" so long as neither the Owner Trustee nor the Owner
Participant is in actual possession and control of Unit 1 or the
undivided Interest, unless (in the opinion of independent counsel to the
Owner Participant) (x) a court could reasonably hold that the statute
incorporating such provision is unconstitutional or (y) there shall have
occurred a subsequent change in, or new interpretation by Governmental
Authority having jurisdiction of, the exemption from liability provided
by such provision as to interests of the Owner Trustee and the Owner
Participant in Unit 1 which change or new interpretation renders
ineffective such exemption;
(b) the "aggregate liability" for a single "nuclear incident" of
"persons indemnified" shall not exceed $13 billion (assuming 101
operating nuclear facilities participating in the deferred premium or
similar plan referred to in clause (c) of paragraph (A) above and
subject to adjustment in an amount not exceeding CX) $126 million for
each increase or decrease in said number of operating nuclear facilities
-5-
6091.100.2898.55:1
<PAGE>
and (V) the aggregate of all changes in such "aggregate liability" to
reflect the effects of inflation contemplated pursuant to clause (a) of
paragraph (A) above (but without giving effect to clause (it) of the
proviso set forth in such clause) ); and
(C) the amount payable by all licensees of a single nuclear facility in
respect of such facility and with respect to any one "nuclear incident"
under any deferred premium or similar plan required by Applicable Law
shall not exceed $3(3 million (subject to adjustment as provided in
sub-clause (V) of the preceding clause (b))
For purposes of this definition, "nuclear facility" shall mean and refer to a
facility designed for producing substantial amounts of electricity and having a
rated capacity of 100,000 electrical kilowatts or more.
Additional Bonds shall mean Bonds in addition to the Series B
Bonds.
Additional Equity Investment shall have the meaning specified in
Section 8(f) of the Facility Lease.
Additional Notes shall have the meaning set forth in the
recitations in the Indenture, which Additional Notes shall be issued, if at all,
pursuant to Section 3.5 of the Indenture
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. For purposes of this definition, the
term "control" (including the correlative meanings of the terms "controlled byes
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.
-6-
6091.100.2898.55.l
<PAGE>
After Tax Basis shall mean, with respect to any payment received
or accrued or deemed to have been received or accrued 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 and computed at the highest marginal statutory tax rate) resulting from
the receipt (actual or constructive) of such two payments imposed under any
Applicable Law or by any Governmental Authority, be equal to such payment
received or accrued or deemed to have been received or accrued.
Agent and Agency Period shall have the meanings specified in
Section 7.01 of the Assignment and Assumption
ANPP Administrative committee shall mean the committee
established pursuant to Section 6.1.1 of the ANPP Participation Agreement (or
any comparable successor provision)
ANPP operating Committee shall mean the committee established
pursuant to Section 6.1.2 of the ANPP Participation Agreement (or any comparable
successor provision)
ANPP Participants shall have the meaning assigned to the word
"Participant" under the ANPP Participation Agreement.
ANPP Participation Agreement shall mean the Arizona Nuclear
Power Project Participation Agreement, dated as of August 23, 1973, among APS,
Salt River, Southern California, PNM, (pound)1 Paso, LADWP and SCPPA, as
heretofore and hereafter amended pursuant to the terms thereof
-7-
6091.100.2898.55:1
<PAGE>
ANPP Project Agreements shall mean the ANPP Participation
Agreement and the other Project Agreements (as such term is defined in the ANPP.
Participation Agreement)
ANPP Switchyard shall mean the ANPP High Voltage Switchyard
located at the PVNGS Site, the ownership, construction, operation and
maintenance of which are governed by the ANPP High Voltage Switchyard
Participation Agreement executed as of August 20, 1981 (APS Contract No.
2252-419,00), the parties to which are APS, PNM, Salt River, El Paso, Southern
California and LADWP
ANPP Transferee shall have the meaning specified in Section 4.01
of the Assignment and Assumption.
Applicable Law shall mean all applicable laws, statutes,
treaties, rules, c9des, ordinances, regulations, permits, certificates, orders,
interpretations, licenses and permits of any Governmental Authority and
judgments, decrees, injunctions, writs, orders or like action of any court,
arbitrator or other judicial or quasi judicial tribunal (including those
pertaining to health, safety, the environment or otherwise)
Appraisal Procedure shall mean a procedure whereby two
independent appraisers, one chosen by the Lessee and one by the Lessor, shall
mutually agree upon the value, period or amount then the subject of an
appraisal. If either the Lessor or the Lessee, as the case may be, shall
determine that a value, period or amount to be determined under the Facility
Lease or any other Transaction Document cannot promptly be established by mutual
agreement, such party shall appoint its appraiser and deliver a written notice
thereof to the other party. Such other party shall appoint its appraiser within
15 days after receipt from the other party of the foregoing written notice. If
within 20 days after appointment of the two appraisers, as described above, the
two appraisers are unable to agree upon the value, period or amount in question,
-8-
6091.100.2898.55:1
<PAGE>
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 within such period, 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 nuclear electric generating plant .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 ten days after the
selection of such third appraiser. If three appraisers shall be so appointed and
the determination of one appraiser is disparate from the middle determination by
more than twice the amount, period or value by which the third 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. The fees and expenses of appraisers
incurred in connection with any Appraisal Procedure relating to any transaction
contemplated by any provision of any Transaction Document shall be divided
equally between the Lessor and the Lessee (except pursuant to Section 16 of the
Facility Lease, which shall be paid solely by the Lessee)
An shall mean Arizona public Service Company, an Arizona
corporation.
Appraiser shall mean Ebasco Business Consulting Company.
Arizona Public Utility Act Sha11 mean Chapter 2, Title 40,
Arizona Revised Statutes.
Assigned Payments shall have the meaning specified in Section
2.1(1) of the Indenture.
-9-
6091.100.2898.55:1
<PAGE>
Assignment and Assumption Sha11 mean the Assignment,
Assumption and Further Agreement, dated as of December 15, 1986, between PNM and
the Owner Trustee
Assignment of Beneficial Interest shall mean the Deed and
Assignment of Beneficial Interest under Title USA. Company of Arizona Trust Mo.
530, dated as of December 15, 1986, from PNM to the Owner Trustee.
Assumption Agreement Sha11 mean the Assumption Agreement of
PUM substantially in the form of Exhibit B to the Indenture
Assumptions shall mean the Pricing Assumptions and the Tax
Assumptions
Atomic Energy Act shall mean the Atomic Energy Act of 1954, as
amended, and regulations from time to time issued, published or promulgated
pursuant thereto
Authorized Officer shall mean, with respect to the Indenture
Trustee, any officer of the Indenture Trustee who shall be duly authorized by
appropriate corporate action to authenticate a Note and shall mean, with respect
to the Owner Trustee, any officer of the Owner Trustee who shall be duly
authorized by appropriate corporate action to execute any Transaction Document
Bankruptcy Code shall mean the Bankruptcy Reform Act of 1978, as
amended, and any law with respect to bankruptcy, insolvency or reorganization
successor thereto
Basic Lease Term shall mean the initial term of the Facility
Lease, which shall begin on the Closing Date and end on January 15, 2015, unless
earlier terminated as provided in the Facility Lease.
-10-
6091.l00.2898.55:1
<PAGE>
Basic Rent shall have the meaning set forth in section 3(a) of
the Facility Lease.
Basic Rent Payment Dates shall mean and include July 15, 1987,
and January 15 and July 15 of each year thereafter, commencing January 15, 1988,
and ending January 15, 2015, and, if the Lessee shall elect the Renewal Term,
each January 15- and July 15 of each year during the Renewal Term, commencing
July 15, 2015 and ending on the last day of the Renewal Term.
Bill of Sale shall mean the Deed and Bill of gale, dated as of
December 15, 1986, between PNM and the Owner Trustee.
Bonds shall mean all bonds, notes and other evidences of
indebtedness from time to time issued and outstanding under the Collateral Trust
Indenture, including, but without limitation, the Series B Bonds and any
Additional Bonds.
Business Day shall mean any day other than a Saturday or Sunday
or other day on which banks in Albuquerque, New Mexico, New York, New York or
Boston, Massachusetts are authorized or obligated to be closed.
Capital Improvement shall mean (a) the addition, betterment or
enlargement of any property constituting part of Unit 1 or the Common Facilities
or the replacement of any such property with other property, irrespective-of
whether (i) such replacement property constitutes an enlargement or betterment
of the property which it replaces, (ii) the cost of which addition, betterment,
enlargement or replacement is or may be capitalized or charged to maintenance or
repairs, in accordance with the Uniform System of Accounts or, (iii) in the case
of any addition, betterment or enlargement, is not included or reflected in the
plans and specifications for Unit 1 or the Common Facilities, as built, and (b)
any alteration, modification, addition or improvement to Unit 1 or the Common
Facilities, other than original, substitute or replacement parts incorporated
into Unit 1 or the Common Facilities; provided, however, that any Capital
Improvement with respect to a Common Facility shall mean only an undivided
.566667% interest in and to such Capital Improvement.
-11-
6091.100.2898.55:1
<PAGE>
Casualty Value, as of any Basic Rent Payment Date during the
Basic Lease Term, shall mean the percentage of Facility Cost set forth opposite
such Basic Rent Payment Date in Schedule 1 to the Facility Lease. Anything
contained in the Participation Agreement or the Facility Lease to the contrary
notwithstanding, Casualty Value shall be, when added to all other amounts which
the Lessee is required to pay under Section 9(c) of the Facility Lease (taking
into account any assumption of the Notes by the Lessee), under any circumstances
and in any event, in an amount at least sufficient to pay in full, as of any
Basic Rent Payment Date, the aggregate unpaid principal amount of all Notes
Outstanding at the close of business on such date, together with accrued and
unpaid interest on such Notes. Casualty Value as of any Basic Rent Payment Date
during the Renewal Term shall mean the unamortized portion as of such Basic Rent
Payment Date of the Fair Market Sales Value of the Undivided Interest,
determined by the straight-line amortization of such Fair Market Sales Value at
the commencement of such Renewal Term over the period from such commencement
date through the remaining term of the License determined pursuant to the
Appraisal Procedure undertaken in accordance with the last sentence of Section
13(a) of the Facility Lease.
Change in Tax Law shall mean any change in the State Tax Law
(as such term is defined in Section 1(a) of the Tax Indemnification Agreement),
Code or successor legislation enacted by the appropriate legislative bodies of
New York State or New York City no later than the date of adjournment of the One
Hundredth Congress, or enacted by either the Ninety-ninth or the One Hundredth
Congress (without regard to the date of presidential signature) , or if prior to
January 15, 1997 (i) there is enacted any technical correction to such enactment
or (ii) there are promulgated, issued or published any proposed, temporary, or
final Regulations resulting from such enactment (regardless of the effective
date of such technical corrections or Regulations, but only if such technical
corrections or Regulations would affect Net Economic Return)
-12-
6091.100.2898.55:1
<PAGE>
Chemical Bank shall mean Chemical Bank, a New York banking
corporation
Chief Financial Officer shall mean the Person designated by
the Board of Directors of PNM as the chief financial officer of PNM
Claims shall mean liabilities, obligations, losses, damages,
penalties, claims (including, without limitation, claims involving liability in
tort, strict or otherwise) , actions, suits, judgments, costs, interest,
expenses and disbursements, whether or not any of the foregoing shall be founded
or unfounded (including without limitation, legal fees and expenses and costs of
investigation) of any kind and nature whatsoever without any limitation as to
amount
Closing shall mean the proceedings which occur on the Closing
Date, as contemplated by the Participation Agreement
Closing Date shall mean December 17, 1986.
Code shall mean the Internal Revenue Code of 1986, as amended,
or any comparable successor law.
Collateral Trust Indenture shall mean the Collateral Trust
Indenture, dated as of December 16, 1985, among PNM, Funding Corp. and the
Collateral Trust Trustee
Collateral Trust Indenture Supplement shall mean a supplement
to the Collateral Trust Indenture.
Collateral Trust Trustee shall mean Chemical Bank, not in its
individual capacity, but solely as Collateral Trust Trustee under the Collateral
Trust Indenture, and the successors or assigns of such Trustee.
-13-
6091.100.2898.55:1
<PAGE>
Common Facilities shall mean all PVNGS common facilities as
set forth in Item B of Exhibit B to the Bill of Sale other than excluded common
facilities as set forth in said Item B to such Exhibit B or common facilities
constituting Unit 1 Retained Assets.
Coverage Ratio shall mean the fraction (i) the denominator of
which shall be the sun (calculated as of a date no earlier than 135 days prior
to the date of calculation) of (x) the interest that will be payable during the
twelve-month period following the date of the transaction with respect to which
a calculation is required to be made on the debt (both long-term and short-term)
of the Surviving Lessee, and (y) the interest portion of payments due during the
twelve-month period following the date of such transaction on lease obligations
of the surviving Lessee with a term in excess of one year, and (ii) the
numerator of which shall be the sum of (x) the pro forma net earnings (before
taxes and excluding the allowance for funds used during construction) of the
Surviving Lessee for a twelve-month period ending no earlier than 135 days prior
to the date of such transaction, and (y) such denominator
Cure Option shall have the meaning set forth in Section 16(e)
of the Facility Lease
Decommissioning Fund shall mean, with respect to Unit 1
Decommissioning Costs, an external reserve fund which fund shall be segregated
from the Lessee's assets, but may be within the Lessee's administrative control,
into which deposits are made at least annually in an amount equal to the
quotient of (i) Unit 1 Decommissioning Costs (less the balance of the
Decommissioning Fund and reasonably projected earnings thereon through the date
of expiry of the License) divided by (ii) the number of years remaining until
date of expiry of the License, provided that the amount in the Decommissioning
Fund, on the date of expiry of the License, shall be at least equal to Unit 1
Decommissioning Costs.
-14-
6091.100.2898.55:1
<PAGE>
Deed shall mean the Deed, dated as of December 15, 1986, from
PNN to the Owner Trustee.
Deemed Loss Event shall mean any of the following events
(unless waived by the Owner participant which waiver shall be in writing and may
be either indefinite or for a specific period): (1) 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 the
Real Property Interest or any part thereof by the Lessor (or any beneficial
interest therein by the Owner Participant) or the lease of the Undivided
Interest or the Real Property Interest to the Lessee or any of the other
transactions contemplated by the Transaction Documents (the 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 (other than non-Burdensome Regulation)
as, an "electric utility", an "electric utility company", a "public utility", a
"public utility company", a "holding company" or a "public utility holding
company" under any Applicable Law or by reason of any Governmental Action, and
the effect thereof on the Lessor or the Owner Participant would be, in the sole
judgment of either such Person, acting on advice of counsel, adverse, and the
Owner Trustee and the Owner Participant have not waived application of this
definition; 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 clause (1) ,
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, the Real Property
Interest or any part thereof or any interest therein, (ii) such contest does not
adversely affect the Undivided Interest, the Real Property Interest or any part
-15-
6091.l00.2898.55:l
<PAGE>
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 Owner Trustee, 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 and the effects thereof 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
Owner Trustee and the Owner Participant, and the Owner Participant shall have
determined that the Lessor's continued ownership of the Undivided Interest The
Real Property Interest during the pendency of such contest or such contest will
not adversely affect its or its Affiliate's business, and (v) the Lessee shall
have indemnified the Owner Trustee 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 the Lessee's contest; (2) any change in, or new
interpretation by Governmental Authority having jurisdiction of, Applicable Law,
including without limitation, the Price-Anderson Act, the Atomic Energy Act or
the regulations of the NRC, in each case as in effect on the Closing Date, as a
result of which (in the opinion of independent counsel to the owner Participant)
(i) the aggregate liability for a single "nuclear incident" of "persons
indemnified" (as each such term is defined in the Price-Anderson Act as in
effect on the Closing Date) is increased, unless the change is such that neither
the Owner Trustee nor the Owner Participant may be exposed, either during or
subsequent to the Lease Term, to any increased real or potential liability in
respect of a "nuclear incident", (ii) the "aggregate liability" for a single
"nuclear incident" of "persons indemnified" (as each term is defined in the
Price-Anderson Act as in effect on the Closing Date) exceeds the amount of
financial protection established by the NRC as a condition to the License,
unless the change is such that neither the Owner Trustee nor the Owner
Participant may be exposed, either during or subsequent to the Lease Term, to
-16-
6091.100.2898.55:1
<PAGE>
any increased real or potential liability in respect of a "nuclear incident",
(iii) the amount of financial protection required, including but not limited to
the limitation on the amount of deferred premiums for such financial protection,
is increased, unless the change is such that neither the Owner Trustee nor the
Owner participant may be exposed, either during or subsequent to the Lease Term,
to any increased real or potential liability in respect of a "nuclear incident",
or (iv) either the Owner Trustee or the Owner participant may be exposed to any
other increase in its real or potential liability in respect of a "nuclear
incident", either during or subsequent to the Lease Term; provided, however,
that no such change or new interpretation shall constitute a Deemed Loss Event
if such change or new interpretation constitutes an Acceptable Change; (3) any
change in, or new interpretation by Government Authority having jurisdiction of,
Applicable Law as a result of which the owner Trustee (but not the Trust
Estate), or the owner participant shall become liable in any capacity, in
respect of any portion of the Termination obligation or, during the Lease Term,
any other liability or obligation imposed as of the date hereof on licensees of
the NRC; (4) any change in, or new interpretation by Governmental Authority
having jurisdiction of, Applicable Law or any Governmental Action the effect of
which is to make the transactions contemplated by the Transaction Documents
unauthorized, illegal or otherwise contrary to Applicable Law; (5) any change
in, or new interpretation by Governmental Authority having jurisdiction of, the
License and the NRC Order (each as in effect on the Closing Date) constituting
an assertion to the effect that the exercise by the owner Trustee or the Owner
Participant of any right (irrespective of the event giving rise to such right)
under any Transaction Document would constitute impermissible control over Unit
1 or the licensees of Unit 1, other than an assertion that affects such rights
in a manner consistent with both Section 184 of the Atomic Energy Act and the
NRC's regulations thereunder (including, without limitation, 10 CFR S50.8l, as
now and hereafter in effect) (6) any expiration, revocation, suspension,
amendment or interpretation by any Governmental Authority of the NRC order, the
License or the licensing of the Lessee by the NRC or any other Governmental
-17-
6O9l.l00.2898.55:l
<PAGE>
Action or change in, or new interpretation by Governmental Authority having
jurisdiction of, Applicable Law as a result of which either the Owner Trustee or
the owner Participant shall be required to become a licensee of the prior to the
Lease Termination Date; (7) any policy of public liability insurance with
respect to PVNGS or Unit 1 shall be suspended or terminated for any reason
whatsoever or shall be amended or supplemented in a manner which expose the
Owner Trustee or the Owner Participant, either during or subsequent to the Lease
Term; to any increased real or potential liability in respect of a "nuclear
incident" (as defined in the Price-Anderson Act) and such policy of insurance
shall not be immediately replaced by insurance effective immediately upon such
suspension, termination, amendment or supplementation which, in the reasonable
opinion Participant, is at least as protective of it (in all respects reasonably
deemed by it to be material) as the policy of insurance so terminated,
suspended, amended or supplemented, unless the "aggregate liability" for a
"nuclear incident" of "persons indemnified" (as each term is defined in the
Atomic Energy Act of 1954, as amended) is reduced by an amount equal to the
amount of liability insurance so terminated, suspended, amended or supplemented
and, in the reasonable opinion of the Owner Participant, it may not otherwise be
exposed, either during or subsequent to the Lease Term, to any increased real or
potential liability in respect of a "nuclear incident" as a consequence of such
suspension, termination, amendment or supplementation; (S) with respect to
PVNGS, the NRC shall have issued within a five year period three or more
Modification Orders provided that such Modification Orders are issued (x) in
connection with violations constituting "Severity Level I" or "Severity Level
II" violations within the activity area of "Reactor Operations", as such terms
are used in Supplement I to Appendix C to 10 CFR, Part 2 as in effect on the
date hereof (or, if such supplement is amended or superseded to change such
categories of violations or areas, violations or areas falling within comparable
categories) or (y) in connection with willful or flagrant violations in any
"activity area", repeated poor performance in a particular "activity area" or
-18-
6091.100.2898.55:1
<PAGE>
serious breakdowns in management control; and (9) the cessation of operation of
Unit 1 or as a result of either (x) the occurrence of an Extraordinary Nuclear
Occurrence or an Incipient Extraordinary Nuclear occurrence at PVNGS Unit 2 or
PVNGS Unit 3 or (y) a Nuclear Incident at PVNGS Unit 2 or PVNGS Unit 3 and the
continuation, in the case of this clause (y) , of such cessation for the Minimum
Period
Default shall mean an event or condition which, with the
giving of notice or lapse of tine, or both, would constitute 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 in
interest of Holders of Notes, directing the Indenture Trustee to take or refrain
from taking the action specified in such instrument.
Early Termination Date shall have the meaning specified in
Section 14(6) of the Facility Lease.
Early Termination notice shall have the meaning specified in
section 14(d) of the Facility Lease.
El Paso shall mean El Paso Electric Company, a Texas corporation
ERISA shall mean the Employee Retirement Income security Act of
1974, as amended.
Estimated Transaction Expenses shall have the meaning set
forth in Section 5(a) of the Participation Agreement.
Event of Default shall have the meaning set forth in Section
15 of the Facility Lease.
Event of Loss shall mean any of the following events: (a) a
Final Shutdown, (b) a Requisition of Title, (c) a Requisition of Use which can
reasonably be expected to exceed, or for a stated period which ends on or after,
-19-
6091.100.2898.55:1
<PAGE>
the penultimate day of the Lease Term, (6) any degradation of the rated capacity
of Unit 1 to below, or the inability of Unit 1 to produce electricity at a level
above, 530 megawatts electric for the minimum Period (for any reason other than
as a result of damage to or destruction of Unit 1, Governmental Action or an
event referred to in clause (iii) (x) or (iii) (y) of the definition of "Final
Shutdown")
Excepted Payments shall mean (i) all payments of supplemental
Rent, other than payments by the Lessee (x) of Casualty Value, Termination value
or special casualty value or in connection with the exercise of the Cure Option
or (y) of indemnity payments to which either the Loan Participant or any
Indemnitee other than the Owner Trustee or the Owner Participant or any of their
respective Affiliates, (or the respective successors, assigns, agents, officers,
directors or employees of the Owner Trustee or the Owner Participant is
entitled, (ii) any amounts payable under any Transaction Document to reimburse
the Lessor or the Owner Participant, or any of their respective Affiliates,
(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, (iii) any amount payable to the Owner Participant by any Transferee as
the purchase price of the Owner Participant's interest in Trust Estate, (iv) so
long as no Indenture Default or Indenture Event of Default shall have occurred
and be continuing, all payments of Basic Rent in excess of amounts then due and
owing in respect of the principal of and premium, if any, and interest on all
Notes Outstanding, (v) any insurance proceeds with respect to an Event of Loss
in excess of amounts then due and owing in respect of the principal of and
premium, if any, and interest on all Notes Outstanding, (vi) any insurance
proceeds (or payments with respect to risks self-insured) under liability
policies and (vii) any payments in respect of interest to the extent
attributable to payments referred to in clauses (i) through (vi) above
-20-
6091.100.2898.55:1
<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 mean liabilities, obligations, losses, damages,
taxes (other than taxes on income) claims, actions, suits, costs, interest,
expenses and disbursements (including legal fees and expenses) of any kind and
nature whatsoever.
Extension Letter shall mean the Extension Letter, to be dated
the Closing Date and addressed to the Collateral Trust Trustee by the parties to
the Participation Agreement.
Extraordinary Nuclear Occurrence shall have its meaning as
defined in Section 11 of the Atomic Energy Act of 1954, as amended to the
Closing Date.
Facility Cost shall mean the Purchase Price plus the sum of
(x) all supplemental Financing Amounts, and (y) all Additional Equity Investment
amounts.
Facility Lease shall mean the Facility Lease, dated as of
December 15, 1986, between PNM, as Lessee, and the Owner Trustee, as Lessor.
Fair Market Rental Value or Fair Market Sales Value of any
property or service shall mean the value of such property or service for lease
or sale determined on the basis of an arm's-length transaction for cash between
an informed and willing lessee or purchaser (under no compulsion to lease or
purchase) and an informed and willing lessor or seller (under no compulsion to
lease or sell) , and shall take into account tile Lessor's rights and
obligations under the Assignment and Assumption and the Assignment of Beneficial
Interest and rights under the Deed and the Bill of Sale, but shall be without
regard to any rights of the Lessee (including any renewal options) under the
Lease. Except pursuant to Section 16 of the Facility Lease (other than Section
16(a) (V) (D) thereof) and Section 6.01 of the Assignment and Assumption, Fair
-21-
6091.100.2898.55:1
<PAGE>
Market Rental Value and Fair Market Sales value of the Undivided Interest and
the Real Property Interest shall be determined on the assumption that (i) Unit 1
has been maintained in accordance with, and the Lessee has complied with, the
requirements of the Facility Lease, the other Transaction Documents and the ANPP
Participation Agreement, (ii) the Lessee shall not bear the obligation imposed
by section 10(b) (3) (xi) of the Participation Agreement in respect of
Transferees (as defined in the ANPP Participation Agreement) of the Lessor, and
(iii) the Lessee or PNM, as possessor of the undivided Interest and the Real
Property Interest, is otherwise in compliance with the requirements of all
Transaction Documents. Fair Market Rental value shall be determined on the
assumption that rent will be payable in equal semi-annual installments in
arrears.
Federal Power Act shall mean the Federal Power Act, as amended
Federal Securities shall have the meaning set forth in Section
2.3(c) of the Indenture
FERC shall mean the Federal Energy Regulatory Commission of the
United States of America or any successor agency.
FERC order shall mean the Order Disclaiming Jurisdiction
issued by FERC on December 5, 1985 (Docket No. EL86-5-000)
Final Prospectus shall mean the Prospectus included in the
Registration Statement relating to the Series B Bonds, including documents
incorporated into said Prospectus by reference and any applicable Prospectus
Supplement
Final Shutdown shall mean the earlier to occur of (i) the
expiration or revocation of the License, or any portion thereof such that the
operation of Unit 1 or the possession by the Lessee of the Undivided Interest
and the Real Property Interest are no longer permitted, (ii) the taking of any
Governmental Action or the adoption or making of any interpretations, directives
-22-
6091.100.2898.55:1
<PAGE>
or requests by any Governmental Authority (including, without limitation, the
staff thereof) or the concurrence by any Governmental Authority in the voluntary
action of the operator thereof, in each such case whether formal or informal, by
reason of which Unit 1 shall cease to operate, or shall be unable under
Applicable Law to resume operation, at a capacity level of a least 630 megawatts
electric for the Minimum period, (iii) the cessation of operation of Unit I as a
result of either (x) the occurrence of an Nuclear Occurrence or an Incipient
Extraordinary nuclear Occurrence relating to Unit 1 or (y) a Nuclear Incident
relating to Unit 1 and, in the case of this clause (y) the continuation of such
cessation for the Minimum Period, (iv) damage to Unit 1 and the failure of the
Lessee, or of the Lessee and one or more other ANPP Participants, to agree
within three years of the occurrence of such damage to restore and reconstruct
Unit I, (v) damage to Unit 1, without restoration or reconstruction having been
completed by the expiration of the Minimum Period, such that Unit 1 has a rated
capacity of at least 630 megawatts electric, or (vi) destruction of Unit 1. For
purposes of this definition, Final Shutdown pursuant to the foregoing clause
(iv) will be deemed to have occurred upon the earlier of (x) the written
declaration of the Lessee of its intent not to agree and (y) the expiration of
the 3-year period referred to in said clause (iv) without written agreement.
Final Shutdown pursuant to the foregoing clause (ii), (iii) (y) or (v) will be
deemed to have occurred on the last day of the Minimum Period.
Financing Documents shall mean the collateral Trust Indenture,
the Underwriting Agreement, the Series B Supplemental Indenture and the
supplemental Indenture of Pledge.
Fixed Rate Motes shall mean the non-recourse promissory notes,
substantially in the forms of Exhibits A-1, A-2 and A-3 to the Indenture, to be
issued by the Owner Trustee and authenticated by the Indenture Trustee on the
Closing Date to finance a portion of the Purchase Price.
-23-
6091.100.2898.55:1
<PAGE>
FNB shall mean the Owner Trustee in its individual capacity,
and successors and assigns.
Form U-70 shall mean the certificate to be 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 First PV Funding Corporation, a
Delaware corporation.
Generating Unit shall mean Unit 1 or any of the other Generating
Units (as such term is defined in the ANPP Participation Agreement) constituting
PVNGS.
Generation Entitlement Share shall have the meaning assigned
thereto in the ANPP Participation Agreement and (i) when used in reference to
Unit 1, shall mean the Generation Entitlement Share of PNM as the ANPP
Participant with respect to its interest in Unit 1, (ii) when used in reference
to the Undivided Interest, shall mean that portion of the Generation Entitlement
Share attributable to the Undivided Interest and (iii) when used in Section 19
of the Facility Lease, shall refer to the Generation Entitlement Share of the
Lessee in all Generating Units at PVNGS.
Governmental Action shall mean all authorizations, consents,
approvals, waivers, exceptions, variances, orders, licenses, exemptions,
publications, filings, notices to and declarations of or with any Governmental
Authority (other than routine reporting requirements the failure to comply with
which will not affect the validity or enforceability of any of the Transaction
Documents or have a material adverse effect on the transactions contemplated by
any Transaction Document or any Financing Document) or any other action in
respect of any Governmental Authority and shall include, without limitation, all
siting, environmental and operating permits and licenses which are required for
the use and operation of Unit 1, including the Undivided Interest and the Real
Property Interest
-24-
6091.100.2898.55:1
<PAGE>
Governmental Authority Sha11 mean a n y Federal, state,
county, municipal, foreign, international, regional or other governmental
authority, agency, board, body, instrumentality or court.
Holders shall mean the holders of the Notes.
Holding company Act shall mean the public Utility Holding
Company Act of 1935, as amended.
Incipient Extraordinary Nuclear Occurrence shall mean an event
causing a discharge or dispersal of nuclear source, special nuclear or nuclear
by-product material from its intended place of confinement in amounts off site
or on site or causing a radiation level off site or on site which an independent
nuclear consultant agreed to by the Lessee and the Owner Participant (or,
failing prompt agreement, appointed by the American Arbitration Society)
determines to be substantial and which such consultant determines has resulted
in substantial injury to persons on or off the PVNGS Site or substantial damage
to property off the PVNGS Site.
Indemnitee shall mean the Owner Participant, the Owner Trustee,
FNB, the Owner Participant, the stock- holder of Funding Corp. and its officers
and directors, Chemical Bank, the Indenture Trustee, each Holder of a Note from
time to time Outstanding, the collateral Trust Trustee, the Trust, the Trust
Estate, the Lease Indenture Estate, the indenture estate under the Collateral
Trust Indenture, any Affiliate of any of the foregoing and the respective
successors, assigns, agents, officers, directors or employees of the foregoing,
excluding, however, any ANPP Participant other than the owner Trustee or the
Owner Participant.
Indenture shall mean the Trust Indenture, Mortgage, Security
Agreement and Assignment of Rents, dated as of December 15, 1986, between the
Owner Trustee and the Indenture Trustee.
-25-
6O9l.100.289855:1
<PAGE>
Indenture Default shall mean an event or condition 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 Chemical Bank, a New York banking
corporation, not in its individual capacity, but solely as Indenture Trustee
under the Indenture and each successor trustee and co-trustee thereunder
Indenture Trustee's counsel Sha11 mean Willkie Farr &
Gallagher, One Citicorp Center, 153 East 53rd Street, New York, New York 10022.
Indenture Trustee's Liens shall mean Liens against the Lease
Indenture Estate which result from acts of, or any failure to act by, or as a
result of claims against, the Indenture Trustee, in its individual capacity,
unrelated to the transactions contemplated by the Transaction Documents.
Indenture Trustee's office shall mean the office of the
Indenture Trustee located at 55 Water Street, New York, New York 10041, 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
Investment shall have the meaning set forth in Section 3 of
the Participation Agreement
Investment Company Act shall mean the Investment Company Act of
1S40, as amended.
IRS shall mean the Internal Revenue Service of the united States
Department of the Treasury or any successor agency.
-26-
6091.100.2898.55:1
<PAGE>
Kidder Peabody shall mean Bidder, Peabody & Co. Incorporated.
LADWP shall mean the Department of Water and Power of The City
of Los Angeles, a department organized and existing under the charter of the
City of Los Angeles, a municipal corporation of the State of California.
Lease Indenture Estate shall have the meaning set forth in
Section 2.1 of the Indenture
Lease Term shall mean the aggregate of the Basic Lease Term
and the Renewal Term, if any. Lease Termination Date shall mean the last day of
the Lease Term (whether occurring by reason of a termination or expiration of
the Lease Term)
Lessee shall mean public Service Company of New Mexico, a New
Mexico corporation, and its successors and assigns, as lessee under the Facility
Lease and as party to the other Transaction Documents and Financing Documents to
which it is a signatory
Lessee's FUC Counsel shall mean Newman & Holtzinger, P.C.,
1615 L street, Washington, D. C. 20036
Lessee's General Counsel shall mean Keleher & MeLeod, P.A., P.
O. Drawer AA, Albuquerque, New Mexico 87103
Lessee's Special Arizona Counsel shall mean Snell & Wilmer,
3100 Valley Bank Center, Phoenix, Arizona 85073
Lessee's Special Counsel shall mean Mudge Rose Guthrie
Alexander & Ferdon, 180 Maiden Lane, New York, New York 10038.
-27-
6091.l00.2898.55:l
<PAGE>
Lessor shall mean the Owner Trustee, as lessor under the
Facility Lease, and its successors and assigns.
Lessor's Interest shall have the meaning set forth in Section
8(c) (3) of the Participation Agreement.
Lessor's Liens or Owner Trustee's Liens shall mean Liens
against the Trust Estate or the Lease Indenture Estate (other than Permitted
Liens) for which the Lessee is not responsible and which result from acts of, or
any failure to act by, or as a result of claims against, FNB or the Lessor,
unrelated to the ownership of the Undivided Interest or the Real Property
Interest, the administration or the Trust Estate or the transactions
contemplated by the Transaction Documents or the Financing Documents
License shall mean NRC Facility operating License No. NPF-41,
as the same may be amended, modified, extended, renewed or superseded from time
to time.
License Expiration Date shall mean the date of expiration of
the License.
Lien shall mean any mortgage, pledge, security interest,
encumbrance, lien, easement; servitude 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(a) of the
Participation Agreement.
Loan Participant shall mean Funding Corp.
-28-
6091.100.2898.55:1
<PAGE>
Loan Participant's Counsel shall mean Nudge Rose Guthrie
Alexander & Ferdon, 180 Maiden Lane, New York, New York 10038
Majority in Interest of Holders of Notes shall mean Holders of
a majority in principal amount of all Notes Outstanding under the Indenture at
the time of any such determination.
Material Project Agreements 5ha11 mean (i) Nuclear Fuel
Contract between APS and Combustion Engineering, Inc. (CE), dated as of August
20, 1973, (ii) Nuclear Steam Supply Contract between APS and CE, dated as of
August 20, 1973, (iii) Turbine Generator Contract between APS and General
Electric Company, dated as of March 21, 1974, (iv) Uranium Enrichment Services
Contract between the United States of America (USA) and APS, dated November 15,
1984, and the Associated Supplemental Agreement of Settlement between USA and
APS, dated November 15, 1984, (v) Reload Nuclear Fuel Contract between APS and
Combustion Engineering, Inc., dated November 5, 1986, (vi) Agreement for the
Sale and Purchase of Waste Water Effluent between the City of Tolleson, APS and
Salt River, dated June 12, 1981, (vii) Agreement for Construction of Arizona
Nuclear Power Project between Bechtel Power Corporation (Bechtel) and APS, dated
January 15, 1973, (viii) Agreement for Engineering and Procurement Services
between APS and Bechtel, dated January 15, 1973, (ix) Option and Purchase of
Effluent dated April 23, 1973, among the Cities of Phoenix, Glendale, Mesa,
Tempe and Scottsdale, the Town of Youngtown, APS and Salt River, (x) Agreement
for Conversion Services between Allied Chemical Corporation and APS, dated
November 17, 1975, as amended, (xi) Uranium Concentrate Sales Agreement between
Energy Fuels Exploration Company and APS, dated as of December 1, 1982, (xii)
Uranium Concentrate Sales Agreement between Energy Fuels Exploration and APS,
dated as of October~23, 1931, as amended, (xiii) Agreement for Sale of Uranium
Concentrates between Pathfinder Mines Corporation and APS, dated December 1,
1983, (xiv) Contract for Disposal of Spent Nuclear Fuel and/or High Level
-29-
6091.100.2898.55:1
<PAGE>
Radioactive Waste between USA and APS, dated July 21, 1984, and (xv) the ANPP
Participation Agreement
Maximum Option Period shall mean the period, in no event
ending after January 15, 2023, determined as provided in Section 13(a) of the
Facility Lease as of the date of expiration of the Basic Lease Term1 (i) at the
end: of which the residual value of the Undivided Interest (without regard to
inflation or deflation from the Closing Date and without regard to the
obligation of the Lessee to pay decommissioning costs pursuant to Section 10(b)
(3) (xi) of the Participation Agreement, but taking into consideration the
existence and effect of the Assignment and Assumption, the ANPP Participation
Agreement and the License) shall be equal to at least 20% of Facility Cost, (ii)
which, wen added to the Basic Lease Term, does not exceed 80% of the economic
useful life of the Undivided Interest from the Closing Date and (iii) at the end
of which, taking into consideration the existence and effect of the Assignment
and Assumption, the ANPP Participation Agreement and the License, the use of the
Undivided Interest by any User (in a transaction pursuant to which the Owner
Participant could realize the amount referred to in clause (i) above) is
feasible from an engineering and economic point of view and is commercially
reasonable. Unless the period, as computed in accordance with the preceding
sentence, shall end on a January 15 or July 15, the final date of the Maximum
Option Period shall be the final January 15 or July 15 in the period, as so
computed. In no event shall the Maximum Option Period end after the License
Expiration Date
Minimum Net Worth means a Net Worth equal to the greater of
(x) $700,000,000 and (y) (1) $950,000,000 less (2) with respect to each
Generating Unit as to which PNM shall have entered into one or more transactions
constituting sale and leaseback transactions under the ANPP Participation
Agreement (including, but without limitation, the transaction contemplated by
the Participation Agreement), (A) $50,000,000 (in the case of Unit 1) and
$100,000,000 (in the case of each other Generating Unit) times (B) the aggregate
-30-
6091.100.2898.55:1
<PAGE>
percentage of the Lessee's undivided interest in such PVNGS unit subject to such
transactions.
Minimum Period shall mean the shorter of (a) the shorter of
(1) an indefinite period unless such period can reasonably be expected to be
shorter than the applicable Benchmark period and (2) an actual period in excess
of the applicable Benchmark Period and (b) a period beginning on the date of
determination through and including the penultimate day of the Lease Term. The
Benchmark Period shall be a period equal to any 60 consecutive calendar months
except that a period of 36 consecutive calendar months shall be applicable with
respect to events specified in clause (iii) (y) of the definition of "Final
Shutdown" or clause (9) (y) of the definition or "Deemed Loss Event". The period
specified in the foregoing clause (a) (1) shall be determined by an independent
nuclear consultant agreed to by the Lessee and the Owner Participant, or,
failing prompt agreement upon such consultant, appointed by the American
Arbitration Society (or comparable or successor organization)
Modification order shall mean: (i) an order modifying the
License or the NRC license for either PVNGS Unit 2 or PVNGS Unit 3 effective
immediately upon issuance thereof; (ii) an order modifying the License or the
NRC license for either PVNGS Unit 2 or PVNGS Unit 3 effective upon the
expiration of the time period for a demand for a hearing if such hearing is not
demanded within such period or if the penultimate day of the Lease Term occurs
prior to such demand; or (iii) an order modifying the License or the NRC license
for either PVNGS Unit 2 or FVNGS Unit 3 effective following a hearing (and not
subject to further appeal) or subject to a hearing (or to further appeal) on the
penultimate day of the Lease Term.
Mortgage Release shall mean the Indentures of partial Release,
to be dated the Closing Date, under and with respect to the Existing Mortgage.
-31-
6091.100.2898.55:1
<PAGE>
Net Economic Return shall mean the after-tax yield and
after-tax cash flows (after all Federal, state and local taxes) and the return
on investment originally expected by the Owner Participant with respect to the
undivided Interest, utilizing the Pricing Assumptions and the initial
computation of Basic Rent, Casualty values, Special Casualty values and
Termination values derived from such Pricing Assumptions.
Net worth means the excess of assets over liabilities
determined by the Lessee's auditors on the basis of generally accepted
accounting principles.
New Mexico Order shall mean the order issued by the NMPSC on
November 27, 1985, as amended by Order Adopting Errata Notice issued on November
30,1 983, in Case No. 1995, approving, among other things, the terms of the
Facility Lease and the execution and delivery of the Facility Lease by PNM.
New Mexico Public utility Act shall mean the New Mexico Public
utility Act, as amended.
NMPSC shall mean the New Mexico Public Service Commission
established pursuant to section 62-5-1 of New Mexico Statutes Annotated, 1973.
Non-Burdensome Regulation sha11 mean (i) regulation to which
the owner Participant or the Owner Trustee is otherwise subject by reason of its
lease financing or other activities unrelated to the transactions contemplated
by the Transaction Documents, (ii) ministerial regulatory requirements which do
not impose limitations or regulatory requirements on the business or activities
of the Owner Participant and which are deemed, in the reasonable discretion of
the Owner participant, not to be burdensome, (iii) regulation resulting from any
possession of the undivided Interest on or after the Lease Termination Date or
(iv) regulation of the Owner Trustee which would be terminated by the
appointment of a successor Owner Trustee or a Co-Owner Trustee pursuant to the
terms of the Trust Agreement.
-32-
6091.l00.2898..55:l
<PAGE>
Nonseverable, when used with respect to any Capital
Improvement, shall mean any Capital Improvement which is not a Severable Capital
Improvement.
Noteholder shall mean any Holder from time to time of a Note
Outstanding under the Indenture.
Notes shall mean the Fixed Rate Notes and any Additional Notes.
Notice of Closing shall have the meaning set forth in Section
5(a) of the Participation Agreement.
NRC shall mean the Nuclear Regulatory Commission of the United
States of America or any successor agency.
NRC order shall mean the Order of the NRC in the matter of
Arizona Public Service Company, et al. (Palo Verde Nuclear Generating Station,
Unit 1); Application In Respect Of A sale And Leaseback Financing Transaction By
Public Service Company of New Mexico (Docket No. STN 50-52S) , December 12,
1985.
Nuclear Incident shall mean any occurrence causing bodily
injury, sickness , disease, or death, or loss of or damage to, property, or the
loss of use of property, arising out of or resulting from the radioactive,
toxic, explosive or other hazardous properties of nuclear source, special
nuclear or nuclear by-product material.
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.
Operating Agent shall have the meaning assigned thereto in the
ANPP Participation Agreement.
-33-
6091.100.2898.55:1
<PAGE>
Original of the Facility Lease shall mean the fully executed
counterpart of the Facility Lease, marked "This Counterpart the original
"Counterpart", pursuant to Section 22(e) of the Facility Lease and containing
the receipt of the Indenture Trustee.
Outstanding, when used with respect to Notes, shall mean, as
of the date of determination, 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 the
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.
Overdue Interest Rate shall mean the weighted average rate per
annum of interest payable with respect to overdue payments of principal on the
Notes Outstanding, computed as set forth in such Notes.
Owner Participant shall mean Chase Manhattan Realty Leasing
Corporation, a New York corporation, and the successors and assigns of such
Person in accordance with the Trust Agreement and the Participation Agreement.
-34-
6091.100.2898.55:1
<PAGE>
Owner Participant's Liens shall mean Liens against the Trust
Estate or the Lease Indenture Estate (other than Permitted Liens) for which the
Lessee is not responsible and 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 or the Financing
Documents.
Owner Participant's special Arizona Counsel shall mean Meyer,
Hendricks, Victor, Osborne & Maledon, 2700 North Third Street, Suite 4000,
Phoenix, Arizona 85004.
Owner Participant's Special NRC Counsel shall mean Shaw,
Pittman, Potts & Trowbridge, 1800 M Street, NW, Washington, C. C. 20036.
Owner Participant's Special New Mexico Counsel shall mean
Rodey, Dickason, Sloan, Akin & Robb, P.A., 20 First Plaza, Suite 700,
Albuquerque, New Mexico 87103.
Owner Participant's special Counsel shall mean Milbank, Tweed,
Hadley & McCloy, One Chase Manhattan Plaza, New York, New York, 10005.
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 trustee, separate
trustee and co-trustee thereunder.
Owner Trustee's Counsel shah mean Csaplar & Bok, 1 Winthrop
Square, Boston, Massachusetts 02110.
Participation Agreement 5ha11 mean the Participation
Agreement, dated as of December 15, 1986, among the Owner Trustee, the Indenture
Trustee, Funding Corp., the Owner Participant and PNM.
-5-
6091.100.2898.55:1
<PAGE>
Penalty Rate shall mean the greater of 2% per annum in excess
of the Prime Rate and 2% per annum in excess of the weighted average rate of
interest on the Bonds.
Permitted Liens shall mean (i) the respective rights and
interests of the Lessee, the Owner Participant, the Lessor, the Loan Participant
and the Indenture Trustee, as provided in the Transaction Documents; (ii) the
rights of any sublessee or assignee under a sublease or an assignment permitted
by the terms of the Facility Lease; (iii) the Lien of the Existing Mortgage on
the leasehold estate under the Facility Lease; (iv) Liens for taxes either not
yet due or which are being contested in good faith and by appropriate
proceedings diligently conducted, so long as such proceedings shall not (x)
involve any danger of the sale, forfeiture or loss of the Undivided Interest or
the Real Property Interest or any part thereof or interest therein of the Lessor
or the Owner Participant, (y) interfere with the use, possession or disposition
of the Undivided Interest or the Real Property Interest, or any part thereof or
interest therein, or (z) impair payment of Rent; (v) inchoate materialmen's,
mechanics', workmens, repairmen's, employees', carriers', warehousemen's, or
other like Liens arising in the ordinary course of business for PVNGS, and not
delinquent; (vi) Lessor's Liens, Owner Participant's Liens and Indenture
Trustee's Liens; ('iii) choate Liens that have been bonded for the full amount
in dispute or as to which other satisfactory security arrangements shall have
been made and which are being contested diligently by the appropriate party in
good faith and by appropriate proceedings so long as such proceedings shall not
violate clause (x) , (y) or (z) of clause (iv) above; (viii) choate Liens of any
of the types described in clause (v) above that have been bonded for the full
amount in dispute or as to which other satisfactory security arrangements shall
have been made and which arise out of judgments or awards and with respect to
which (A) an appeal or proceeding for review is being prosecuted in good faith
and for the payment of which adequate reserves shall have been provided as
-36-
6091.100.2898.55:1
<PAGE>
required by generally accepted accounting principles and (B) there shall have
been secured a stay of execution pending such appeal or proceeding for review,
so long as such proceedings shall not violate clause (x), (y) or (z) of clause
(iv) above; (ix) the rights and interests of the Lessee under the Assignment and
Assumption; (x) the rights of the NRC under the License; (xi) the rights of the
ANPP Participants (other than (i) the Lessee and (ii) any Person who' shall
become an ANPP Participant in respect of the Undivided Interest and the Real
Property Interest) under the ANPP Participation Agreement or any other ANPP
Project Agreement; and (xii) Liens on the undivided ownership interests in Unit
1 of the ANPP Participants and other Persons (other than the Lessee)
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
PNM shall mean Public Service Company of Mew Mexico, a New
Mexico corporation
Price-Anderson Act shall mean the Price-Anderson Act, Pub. L.
No. 85-256, 71 Stat. 576 (1957), as amended to the Closing Date.
Pricing Assumptions shall mean the pricing assumptions set
forth in schedule 2 to the Participation Agreement
Prime Rate shall mean the rate of interest per annum equal to
the prime commercial rate of The Chase Manhattan Bank (National Association) as
announced from time to time at its principal office in New York, New York, in
effect from time to time
Project Insurance shall have the meaning assigned thereto in
the ANPP Participation Agreement.
-37-
6091.100.2898.55:1
<PAGE>
Project Manager shall have the meaning assigned thereto in the
ANPP Participation Agreement.
Purchase Documents shall mean the Bill of Sale, the Deed and
the Assignment of Beneficial Interest and such other documents as the Owner
participant, the owner Trustee, the Indenture Trustee, the Loan Participant or
their respective counsel shall deem desirable to convey good and marketable
title to the undivided Interest and the Real Property Interest to the Trust
Purchase Price shall have the meaning set forth in section
4(a) of the Participation Agreement.
PVNGS shall mean the Arizona Nuclear Power Project, as that
term is defined in the ANPP participation Agreement
PVNGS site shall mean the interest in the Arizona land trust
and the real property described in Exhibit A to the Bill of Sale.
Real Estate Investment shall have the meaning set forth in
Section 3 of the Participation Agreement.
Real Property Interest shall mean the right, title and
interest of the Owner Trustee acquired pursuant to the Deed and the Assignment
of Beneficial Interest
Reasonable Basis for a position shall exist if tax counsel may
properly advise reporting such position on a tax return in accordance with
Formal Opinion 85-352 issued by the standing Committee on Ethics and
Professional Responsibility of the American Bar Association
Registration Statement shall mean the registration statements
on Form S-3 (File Nos. 33-2031 and 33-8650) , as amended, and any other similar
registration statement, including all exhibits and all documents incorporated in
any such registration statement by reference, filed with the SEC under the
Securities Act in connection with the offer, issue and sale of the Series B
Bonds.
-38-
6091.100.2898.55:1
<PAGE>
Regulations shall mean the income tax regulations issued,
published or promulgated under the Code.
Renewal Term shall have the meaning set forth in Section 12 of
the Facility Lease.
Rent shall mean Basic Rent and supplemental Rent.
Requisition of Title shall mean any circumstance or event in
consequence of which Unit 1 or the Undivided Interest shall be condemned or
seized or title thereto shall be requisitioned or taken by any Governmental
Authority under power of eminent domain or otherwise and all administrative or
judicial appeals opposing such condemnation, seizure or taking shall have been
exhausted or the period for such appeal shall have expired.
Requisition of Use shall mean any circumstance or event in
consequence to which the use of Unit 1 or the Undivided Interest shall be
requisitioned or taken by any Governmental Authority under power of eminent
domain or otherwise, other than a Requisition of Title.
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, or 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.
Retained Assets shall mean (i) the Lessee's ownership interest
in PVNGS other than the Undivided Interest, the related Generation Entitlement
Share and the Real Property Interest, (ii) Severable Capital Improvements title
to the undivided interest in which is retained by the Lessee in accordance with
-39-
6O9l.l00.2898.55:l
<PAGE>
Section 8(e) of the Facility Lease, and (iii) any additional interest in and to
PVNGS (other than the Undivided Interest, the related Generation Entitlement
Share and the Real Property Interest) to which the Lessee becomes entitled in
consequence of Sections 16.2 or 23.5 of the ANPP Participation Agreement (except
as otherwise provided in Section 5(a) or 19 of the Facility Lease).
Sale Proceeds shall mean, with respect to any sale of the
Undivided Interest and the Real Property Interest by the Lessor to any Person
other than the Lessee, the gross proceeds of such sale payable in cash, less all
costs and expenses whatsoever incurred by the Lessor and the Owner Participant
in connection therewith
Salt River shall mean Salt River Project Agricultural
Improvement and Power District, an Arizona agricultural improvement district
SCPPA shall mean Southern California Public Power Authority, a
California joint powers agency (doing business in Arizona as Southern California
Public Power Authority Association)
SEC shall mean the Securities and Exchange Commission of the
United States of America or any successor agency
Section 6(c) Application shall mean Funding Corp.'s
Application for an order under Section 6(0). of the Investment Company Act of
1940 Exempting First PV Funding Corporation from All Provisions of such Act, as
filed with the SEC on September 20, 1985, as amended by an Amendment No. 1
thereto dated November 8, 1985 and Amendment No..2 thereto dated November 25,
1985.
Securities Act shall mean the Securities Act of 1933, as
amended
-40-
6091.100.2898.55.1
<PAGE>
Securities Exchange Act shall mean the Securities Exchange Act
of 1934, as amended
Series B Bonds shall mean the Lease Obligation Bonds, Series
19863 of Funding Corp., issued, authenticated and delivered pursuant to the
Underwriting Agreement and the Collateral Trust Indenture, as supplemented and
amended by the Series B Supplemental Indenture
Series B Supplemental Indenture shall mean the Collateral
Trust Indenture Supplement dated as of November 18, 1986, providing, among other
things, for the issuance, authentication and delivery of Funding Corp.'s Lease
Obligation Bonds, Series 1986B.
Severable, when used with respect to any Capital Improvement,.
shall mean any Capital Improvement which can be removed from Unit 1 or the
Common Facilities without materially damaging Unit 1 or the Common Facilities or
materially diminishing or impairing the value, utility or condition which Unit 1
or the Common Facilities would have had if the applicable capital Improvement
had not been made.
Share shall mean a percentage equal to the percentage of
Undivided Interest in Unit 1 or the Common Facilities, as the context so
requires
Southern California shall mean Southern California Edison
Company, a California corporation.
Special Casualty value shall mean (i) during the Basic Lease
Term, the percentage of Facility Cost set forth opposite such date in Schedule 2
to the Facility Lease and (ii) during the Renewal Term, the amount determined by
amortizing ratably the Fair Market Sales 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 License determined pursuant to Section 13(a) of the
Facility Lease. Anything contained in the Facility Lease to the contrary
notwithstanding, Special Casualty Value shall be, when added to all other
-41-
6091.100.2898.55:1
<PAGE>
amounts which the Lessee is required to pay under Section 9(d) of the Facility
Lease (taking into account any assumption of the Notes by the Lessee) under any
circumstances and in any event, in an amount at least sufficient to pay in full,
as of any date of payment, the aggregate unpaid principal amount of all Notes
Outstanding at the close of business on such date, together with accrued and
unpaid interest on such Notes
Substituted Lessee shall have the meaning specified in Section
6.8(c) of the Indenture.
Supplemental Indenture of Pledge shall mean the Supplemented
Indenture of Pledge, dated as of December 15, 1986, between the Loan
Participant, the Lessee and the Collateral Trust Trustee, substantially in the
form attached as Exhibit A to the Series B supplemental Indenture
Supplemental Financing shall mean a financing of the
supplemental Financing Amount of Capital Improvements made pursuant to Section
8(f) of the Facility Lease
Supplemental Financing Amount shall mean that portion of
1.700000% of the cost of a Capital Improvement to Unit 1 and .566667% of the
cost of a Capital Improvement to the Common Facilities that shall not exceed (i)
the amount of the increase, if any, in the Owner Participants basis in the
Undivided Interest for purposes of Section 1012 of the Code as a result of such
Capital Improvement less (ii) the amount of the related Additional Equity
Investment of the Lessor, if any
Supplemental Rent shall have the meaning set forth in Section
3(b) of the Facility Lease
Surviving Lessee shall have the meaning specified in Section
10(b) (3) (ii) of the Participation Agreement
-42-
6091.100.2898.55:1
<PAGE>
Tax shall mean any and all fees (including, without limitation,
documentation, recording, filing, license and registration fees), taxes
(including, without limitation, net income, franchise, value added, advalorem,
gross income, gross receipts, sales, use, property, personal and real, tangible
and intangible, excise, and stamp taxes) , levies, imposts, duties, charges,
assessments, or withholdings of any nature whatsoever, general or specific,
ordinary or extraordinary, together with any and all penalties, fines, additions
to tax and interest thereon
Tax Assumptions shall mean the assumptions set forth in
Section 1(a) of the Tax Indemnification Agreement, with respect to the Federal
income tax consequences at the transactions included or reflected in the Pricing
Assumptions
Tax Indemnification Agreement shall mean the Tax
Indemnification Agreement, dated as of December 15, 1986, between PNM and the
Owner Participant.
Termination Date shall have the meaning set forth in Section
14(a) of the Facility Lease.
Termination Event shall mean any early termination of the
Facility Lease in accordance with Section 14 thereof.
Termination Notice shall have the meaning set forth in Section
14(a{ of the Facility Lease.
Termination Obligation shall have the meaning set forth in
Section 15.10.2 of the ANPP Participation Agreement (or any comparable successor
provision)
Termination Value, as of any Basic Rent Payment Date during
the Basic Lease Term, shall mean the percentage of Facility Cost set forth
opposite such Basic Rent Payment Date in Schedule 3 to the Facility Lease.
Anything contained in the Facility Lease to the contrary notwithstanding,
Termination value shall be, when added to all other amounts which the Lessee is
-43-
6091.100.2898.55:1
<PAGE>
required to pay under Section 14 of the Facility Lease, under any circumstances
and in any event, in an amount at least sufficient to pay in full as of any
Basic Rent Payment Date the aggregate unpaid principal amount of all Notes
Outstanding at the close of business on such date, together with accrued and
unpaid interest on such Notes
Transaction Documents shall mean the Participation Agreement,
the Facility Lease; the Trust Agreement, the Indenture, the Extension Letter,
the Tax Indemnification Agreement, the Mortgage Release, the Assignment and
Assumption, each Purchase Document and the Notes
Transaction Expenses shall have the meaning set forth in
Section 14 (a) of the Participation Agreement
Transfer shall mean the transfer, by bill of sale or
otherwise, by the Lessor of all the Lessor's right, title and interest in and to
the undivided Interest and the Real Property Interest and under the Assignment
and Assumption on an "as is, where is" basis, free and clear of all Lessor's
Liens and Owner Participant's Liens but otherwise without recourse,
representation or warranty (including an express disclaimer of representations
and warranties in a manner comparable to that set forth in the second sentence
of Section 6(b) of the Facility Lease), together with the due assumption by the
transferee of, and the due release of the Lessor from, all the Lessor's
obligations under the Assignment and Assumption and the Assignment of Beneficial
Interest by an instrument or instruments satisfactory in form and substance to
the Lessor and the Owner Participant.
Transferee shall have the meaning assigned thereto in Section 15
of the Participation Agreement.
Trust shall mean the trust created by the Trust Agreement
-44-
6091.100.2898.55.1
<PAGE>
Trust Agreement shall mean the Trust Agreement, dated as of
December 15, 1986, between the Owner Participant and FNB.
Trust Estate shall have the meaning set forth in Section 2.03
of the Trust Agreement
Trust Indenture Act shall mean the Trust Indenture Act of
1939, as amended
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 Facility 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(a) or 13(b) of the
Participation Agreement
UCC or Uniform commercial Code shall mean the Uniform
Commercial Code as in effect in any applicable jurisdiction
Underwriting Agreement shall mean the agreement among Funding
Corp., PNM, Kidder Peabody, Goldman, Sachs & Co. and Drexel Burnhain Lambert
Incorporated (all acting either as underwriters or representatives of the
underwriters named therein) relating to the purchase, sale and delivery of the
Series B Bonds and any applicable pricing agreements
-45-
6091.100.2898.55:1
<PAGE>
Underwriters' Counsel shall mean Willkie Farr & Gallagher, One
Citicorp Center; 153 East 53rd Street, New York, New York 10022
Undivided Interest shall mean a 1.700000% undivided interest
in Unit 1 and a .566667% undivided interest in Common Facilities; the owner of
the Undivided Interest shall be a tenant-in-common with the owners (including
PNM, if it should be such an owner) of all other undivided interests in Unit 1
and the Common Facilities. unless the context otherwise requires, undivided
Interest includes an appropriate portion of Generation Entitlement Share
Undivided Interest Indenture Supplement shall mean the
supplement to the Indenture substantially in the form of Exhibit C thereto
pursuant to which the Owner Trustee causes the undivided Interest and the Real
Property Interest to be subjected to the Lien of the Indenture
Undivided Interest Percentage sha11 mean 1.700000%; provided,
however, that with respect to the portion of the Undivided Interest constituting
Common Facilities, the Undivided Interest Percentage shall be a percentage equal
to .566667%
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 in effect on the
date of execution of the Participation Agreement, as amended or modified from
time to time after such date
Unit 1 shall mean the 1,270 megawatt unit commonly known as
Unit 1 at the Palo Verde Nuclear Generating Station, all as more fully described
in Item A of Exhibit B to the Bill of Sale, together with all Capital
Improvements thereto, but excluding all common facilities
-46-
6091.100.2898.55:1
<PAGE>
Unit 1 Decommissioning Costs sha1l mean approximately
$23,OOO,OOC (1986 dollars) (or such other amount as shall be determined by the
Lessee, in good faith, in accordance with prudent utility practice) adjusted
annually on the last day of each calendar year, for inflation using an inflation
rate twice that indicated by the change in the Consumer Price Index published by
the U.S. Department of Labor, Bureau of Labor Statistics for such calendar year,
such adjustment to take effect on the first day of the succeeding calendar year.
Unit 1 Retained Assets shall mean (i) all resident fuel
assemblies, equipment and personal property constituting part of the Generating
Unit (as defined in the ANPP Participation Agreement) designated as Palo Verde
Nuclear Generating Station Unit 1 (other than common facilities) owned by the
Lessee but excluded from Unit 1 as set forth in Item A of Exhibit B to the Bill
of Sale and (ii) a one-third interest in all equipment and personal and real
property constituting PVNGS common facilities under the ANPP Participation
Agreement owned by the Lessee but excluded from the Common Facilities as set
forth in Item B of Exhibit B to the Bill of Sale.
User shall mean a Person unrelated to PNM (within the meaning
of Section 318 of the Code) possessing the Undivided Interest after the Lease
Termination Date.
-47-
6091.100.2898.55:l
<PAGE>
When recorded, return to: Greg A. Nielsen
Snell & Wilmer
3100 valley Bank Center
Phoenix, Arizona 85073
TRUST INDENTURE, MORTGAGE, SECURITY AGREEMENT AND
ASSIGNMENT OF RENTS
Dated as of December 15, 1986
between
THE FIRST NATIONAL BANK OF BOSTON, not
in its individual capacity, but solely
as Owner Trustee under a Trust
Agreement dated as of December 15,
1986, with Chase Manhattan
Realty Leasing Corporation
and
CHEMICAL BANK,
as Indenture Trustee
Sale and Leaseback at a 1.700000% Undivided
Interest in Palo Verde Nuclear Generating
Station Unit 1 and a .566667% Undivided
Interest in Certain Common
Facilities
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
CONSTRUCTION, GOVERNING LAW, INTERPRETATION
AND DEFINTIONS
SECTION 1.1 Governing Law ........................................... 2
SECTION 1.2 Headings and Table of Contents .......................... 2
SECTION 1.3 Definitions; Construction of
References; Schedules ................................... 2
SECTION 1.4 Disclosure of Beneficiaries ............................. 3
ARTICLE II
SECURITY
SECTION 2.1 Grant of Security Interest;
Mortgage ................................................ 4
SECTION 2.2 Payments Under the Facility Lease ....................... 6
SECTION 2.3 Release of Lien on Lease rndenture
Estate .................................................. 7
SECTION 2.4 Power of Attorney ....................................... 9
ARTICLE III
ISSUE, EXECUTION, AUTHENTICATION, FOR AND
REGISTRATION OF NOTES
SECTION 3.1 Limitation on Notes ..................................... 10
-i-
6091. CHASEUl. LEASE. 07:2
<PAGE>
TABLE OF CONTEXTS (Continued)
Page
----
SECTION 3.2 Execution of Notes ....................................... 10
SECTION 3.3 Effect of Certificate of
Authentication ........................................... 10
SECTION 3.4 Creation of the Fixed Rate Notes;
Aggregate Principal Amount, Dating
and Terms: Prerequisites to
Authentication and Delivery of the
Fixed Rate Notes; Application of
Proceeds ................................................. 11
SECTION 3.5 Additiona1 Notes ......................................... 12
SECTION 3.6 Security for and Parity of Notes ......................... 15
SECTION 3.7 Source of Payments Limited ............................... 15
SECTION 3.8 Place and Medium of Payment .............................. 16
SECTION 3.9 Prepayment of Notes; Assumption by
Lessee; Notice of Assumption or
Prepayment ............................................... 17
SECTION 3.10 Mutilated, Destroyed, Lost or
Stolen Notes ............................................ 19
SECTION 3.11 Allocation of Principal and
Interest ................................................ 19
SECTION.3.12 Certain Adjustments to the
Amortization Schedule of the Fixed
Rate Note due January 15, 2015 .......................... 20
ARTICLE IV
REGISTRATION, TRANSFER, EXCHANGE
CANCELLATION AND OWNERSHIP OF NOTES
SECTION 4.1 Register of Notes ....................................... 21
-ii-
6091.CHASEUl LEASE.07:2
<PAGE>
TABLE OF CONTENTS (Continued)
Page
----
SECTION 4.2 Registration of Transfer or
Exchange of Notes ....................................... 21
SECTION 4.3 Cancellation of Notes ................................... 22
SECTION 4.4 Limitation on Timing of
Registration of Notes ................................... 22
SECTION 4.5 Restrictions on Transfer Resulting
from Federal Securities Laws,
Legend .................................................. 22
SECTION 4.6 Charges upon Transfer or Exchange
of Notes ................................................ 22
SECTION 4.7 Inspection of Register of Notes ......................... 22
SECTION 4.8 Ownership of Notes ...................................... 23
ARTICLE V
RECEIPT, DISTRIBUTION AND APPLICATION OF
INCOME AND PROCEEDS FROM THE LEASE INDENTURE
ESTATE
SECTION 5.1 Basic Rent, Interest on Overdue
Installments of Basic Rent and
Prepayments of Interest ................................ 24
SECTION 5.2 Amounts Received as Result of
Event of Loss, Deemed Loss Event,
Exercise of Option to Terminate
or Exercise of Cure Option ............................. 25
SECTION 5.3 Amounts Received After, or Held
at Time of, Indenture Event of
Default under Section 6.2 .............................. 26
-iii-
6091. CHASEUl. LEASE.07:2
<PAGE>
TABLE OF CONTENTS (Continued)
Page
----
SECTION 6.9 Further Assurances ..................................... 37
SECTION 6.10 Right of Indenture Trustee To
Perform Covenants, etc ................................. 37
SECTION 6.11 Certain Other Rights of the Owner
Trustee ................................................ 37
ARTICLE VII
CERTAIN DUTIES OF THE OWNER TRUSTEE AND THE
INDENTURE TRUSTEE
SECTION 7.1 Duties in Respect of Events of
Defauit, Deemed Loss Events and
Events of Loss: Acceleration of
Maturity ............................................... 38
SECTION 7.2 Duties in Respect of Matters Specified in Directive .... 39
SECTION 7.3 Indemnification ........................................ 40
SECTION 7.4 Limitations on Duties; Discharge
of Certain Liens Resulting from
Claims Against Indenture Trustee ....................... 40
SECTION 7.5 Restrictions on Dealing with Lease
Indenture Estate ....................................... 41
SECTION 7.6 Filing of Financing Statements and
Continuation Statements ................................ 41
-v-
6091. CHASEUl. LEASE. 07:2
<PAGE>
TABLE OF CONTENTS (Continued)
Page
----
SECTION 5.4 Amounts Received for Which
Provision Is Made in a Transaction
Document ............................................... 28
SECTION 5.5 Amounts Received for Which No
Provision Is Made ...................................... 28
SECTION 5.6 Payments to Owner Trustee .............................. 28
SECTION 5.7 Excepted Payments ...................................... 29
ARTICLE VI
REPRESENTATIONS, WARRANTIES AND COVENANTS OF
OWNER TRUSTEE; EVENTS OF DEFAULT; REMEDIES
OF THE INDENTURE TRUSTEE
SECTION 6.1 Representations, Warranties and
Covenants of Owner Trustee .............................. 29
SECTION 6.2 Indenture Events of Default ............................. 30
SECTION 6.3 Enforcement of Remedies ................................. 31
SECTION 6.4 Specific Remedies; Enforcement of
Claims without Possession of Notes ...................... 32
SECTION 6.5 Rights and Remedies Cumulative .......................... 33
SECTION 6.6 Restoration of Rights and
Remedies ................................................ 34
SECTION 6.7 Waiver of Past Defaults ................................. 34
SECTION 6.8 Right of Owner Trustee to Pay
Rent; Nate Purchase; Substitute Lessee .................. 34
-iv-
6091.CHASEUl.LEASE.07:2
<PAGE>
TABLE OF CONTENTS (Continued)
Page
----
ARTICLE VIII
CONCERNING THE OWNER TRUSTEE AND THE
INDENTURE TRUSTEE
SECTION 8.1 Acceptance of Trusts; Standard of
Care ..................................................... 42
SECTION 8.2 No Duties of Maintenance, Etc ............................ 43
SECTION 8.3 Representations and Warranties of
Indenture Trustee and the Owner
Trustee .................................................. 43
SECTION 8.4 Moneys Held in Trust;
Non-Segregation of Moneys ................................ 43
SECTION 8.5 Reliance on Writings, Use of
Agents, Etc .............................................. 44
SECTION 8.6 Indenture Trustee to Act Solely as
Trustee .................................................. 45
SECTION 8.7 Limitation on Rights Against
Registered Holders, the Owner
Trustee or Lease rndenture Estate ........................ 45
SECTION 8.8 Investment of Certain Payments Held
by the Indenture Trustee ................................. 46
SECTION 8.9 No Responsibility for Recitals,
etc. ..................................................... 46
SECTION 8.10 Indenture Trustee May Engage in
Certain Transactions ..................................... 47
SECTION 8.11 Construction of Ambiguous
Provisions ............................................... 47
-vi-
6091. CHASEUl.LEASE.07:2
<PAGE>
TABLE OF CONTENTS (Continued)
Page
----
ARTICLE IX
SUCCESSOR TRUSTEES
SECTION 9.1 Resignation and Removal of
Indenture Trustee; Appointment of
Successor ............................................... 47
ARTICLE X
SUPPLEMENTS AND AMENDMENTS TO THIS INDENTURE
AND OTHER DOCUMENTS
SECTION 10.1 Supplements, Amendments and
Modifications to This Indenture
Without Consent of Holders of
Notes .................................................... 49
SECTION 10.2 Supplements and Amendments to this
Indenture and the Facility Lease With
Consent of Holders of Notes .............................. 49
SECTION 10.3 Certain Limitations on supplements
and Amendments ........................................... 51
SECTION 10.4 Directive Need Not Specify
Particular Form of Supplement or
Amendment ................................................ 51
SECTION 10.5 Trustee to Furnish Copies of
Supplement or Amendment .................................. 52
-vii-
6091. CHASEUI. LEASE. 07:2
<PAGE>
TABLE OF CONTENTS (Continued)
Page
----
ARTICLE Xl
MISCELLANEOUS
SECTION 11.1 Moneys for Payments in Respect of
Notes to be Held in Trust ................................ 52
SECTION 11.2 Disposition of Moneys Held for
Payments of Notes ........................................ 52
SECTION 11.3 Transfers Not to Affect Indenture
or Trusts ................................................ 53
SECTION 11.4 Binding Effect of Saie of Lease
Indenture Estate ......................................... 53
SECTION 11.5 Limitation as to Enforcement of
Rights, Remedies and Claims .............................. 53
SECTION 11.6 Notices .................................................. 54
SECTION 11.7 Separability of Provisions ............................... 54
SECTION 11.8 Benefit of Parties, Successors and
Assigns .................................................. 54
SECTION 11.9 Survival of Representations and
Warranties ............................................... 55
SECTION 11.10 Bankruptcy of the Owner Trustee .......................... 55
SECTION 11.11 Bankruptcy of the Owner
Participant .............................................. 55
SECTION 11.12 Counterpart Execution .................................... 56
SECTION 11.13 Dating of Indenture ...................................... 56
Exhibit A-1 - Form of Fixed Rate Note (Due January 15, 1992)
Exhibit A-2 - Form of Fixed Rate Note (Due January 15, 1997)
-viii-
6091. CHASEUl. LEASE. 07:2
<PAGE>
TABLE OF CONTENTS (Continued)
Exhibit A-3 - Form of Fixed Rate Note (Due January 15, 2015)
Exhibit B - Form of Assumption Agreement
Exhibit C - Form of Undivided Interest Indenture Supplement
Schedule 1 - Undivided Interest Description
Schedule 2 - Real Property Interest Description
Appendix A - Definitions
-ix-
6091. CHASEUL. LEASE. 07:2
<PAGE>
TRUST INDENTURE, MORTGAGE, SECURITY AGREEMENT AND ASSIGNMENT or RENTS
dated as of December 15, 1986, between THE FIRST NATIONAL BANK OF BOSTON a
national banking association (FNB) , not in its individual capacity, but solely
as trustee (the Owner Trustee) under a Trust Agreement dated as of December 15,
1986 between FNB, whose address is 100 Federal Street, Boston, Massachusetts
02110, with Chase Manhattan Realty Leasing Corporation, and CHEMICAL BANK, a New
York banking corporation (the Indenture Trustee), whose address is 55 Water
Street, New York, New York 10041.
W I T N S S S S Ir H:
WHEREAS, the Owner Trustee has entered into a Participation
Agreement, dated as of December 15, 1986 among the Owner Participant, First PV
Funding Corporation, a Delaware corporation, Public Service Company of New
Mexico, a New Mexico corporation, and the Indenture Trustee;
WHEREAS, the Owner Trustee, acting on behalf of the Owner Participant,
pursuant to the Trust Agreement and the Participation Agreement, intends to
purchase the Undivided rntarest and the Real Property Interest from Public
Service Company of New Mexico and lease the Undivided Interest and the Real
Property Interest to Public Service Company of New Mexico pursuant to the
Facility Lease;
WHEREAS, in order to finance a portion of the Purchase Price of the
Undivided Interest, the Owner Trustee desires to issue its promissory notes
hereunder with such promissory notes to be substantially in the form of Exhibits
A-1, A-2 and A-3 hereto;
WHEREAS, in order to finance all or a portion of the Supplemental
Financing Amount of Capital :mprovements and to refund Notes of any series
previously issued, the Owner Trustee may desire to issue additional promissory
notes hereunder (the Additional Notes) secured on a pan passu basis with other
Notes outstanding from time to time;
WHEREAS, in order to secure the obligations referred to herein, the
Owner Trustee desires to grant to the :ndenture Trustee the security interest
herein provided and the parties hereto desire that this Indenture be regarded as
a "security agreement" and as a
6091. CHASEUl. LEASE .07.2
<PAGE>
financing statement" for such security agreement under the uniform Commerical
Code;
NOW, THEREFORE, in consideration of the premises, of the acceptance
by the Indenture Trustee of the trusts hereby created and of other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
CONSTRUCTION, GOVERNING LAW,
INTERPRETATION AND DEFINITIONS
SECTION 1.1. Governing Law.
This Indenture (i) is being oexecuted and delivered in the
State of New York, (ii) shall be deemed to be a contract made in such State and
(iii) for all purposes shall be construed in accordance with and governed by the
laws of the State of New York, except to the extent that the laws of the State
of Arizona are mandatorily applicable hereto.
SECTION 1.2. Headings and Table of Contents.
The division of this Indenture into articles and 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 Indenture.
SECTION 1.3. Definitions; Construction of References;
Schedules.
In this Indenture, unless the context otherwise requires:
(a) the term this Indenture means this instrument, together
with all exhibits, appendices and schedules hereto, as originally executed and
as it may from time to time be supplemented or amended by one or more indentures
supplemental hereto pursuant to the provisions hereof;
(b) all references in this instrument to designated Articles,
Sections and other subdivisions are to designated Articles, Sections and other
subdivisions of this instrument unless otherwise indicated;
6091. CHASEUlLEASE .07:2
-2-
<PAGE>
(c) all accounting terms not otherwise defined herein shall
have the meanings assigned to them in accordance with generally accepted
accounting principles; and
(d) capitalized terms used herein which are not otherwise
defined herein shall have the meanings set forth in Appendix A hereto, and the
rules of construction set forth in Appendix A hereto shall be applicable hereto
(e) Attached as Schedule 1 hereto is a description of the
Undivided Interest and attached as Schedule 2 hereto is a description of the
Real Property Interest
SECTION 1.4. Disclosure of Beneficiaries.
Pursuant to Arizona Revised Statutes Section 35-401, (i) the
beneficiary of the Trust Agreement is Chase Manhattan Realty Leasing
Corporation, a New York corporation, whose address is One Chase Manhattan Plaza
(20th Floor), New York, New York 10081, Attention of Leasing Administrator and
(ii) the beneficiary of this rndenture is the Holder of the Notes, First PV
Funding Corporation, whose address is Corporation Trust Center, 1209 Orange
Street, Wilmington, Delaware 19801 and, by pledge and assignment, Chemical Bank,
as trustee under the Collateral Trust rndenture, whose address is 55 Water
Street, New York, New York 10041: Attention of Corporate Trustee Administration.
Copies of the Trust Agreement and this Indenture are available for inspection at
the Indenture Trustee's office.
6091. CHASEUl. LEASE.07: 2
-3-
<PAGE>
ARTICLE II
SECURITY
Mortgage.
SECTION 2.1. Grant at Security Interest;
As security for the due and punctual payment of the principal
of and premium, if any, and interest on the Notes according to their respective
terms and effect and the performance and observance by the Owner Trustee of all
the covenants and agreements made by it or on its behalf in the Notes, the
Participation Agreement and this Indenture, the Owner Trustee does by its
execution and delivery hereof hereby grant a security interest in and grant,
bargain, convey, warrant, assign, transfer, mortgage, pledge and set over unto
the Indenture Trustee, and to its successors and assigns in trust, the following
(the Lease Indenture Estate):
(1) all right, title and interest of the Owner Trustee in, to
and under the Facility Lease recorded concurrently herewith in
the records of Maricopa County, Arizona, to the extent6 and
only to the extent, constituting Rent (including, but without
limitation, Basic Rant, payments of casualty Value,
Termination value and Special casualty value, and payments
under and pursuant to Section 16 of the Facility Lease,
excluding all Excepted Payments) (the Assigned Payments),
together with all rights, powers and remedies on the part of
the Owner Trustee arising under the Facility Lease to demand,
collect or receive the Assigned Payments;
(2) all moneys and securities deposited or required to be
deposited with the :ndenture Trustee pursuant to any term of
this Indenture and held or required to be held by the
Indenture Trustee hereunder;
-4-
6091 CHASEUL. LEASE. 07:2
<PAGE>
(3) all profits, revenues and other income of all property
from time to time subjected to the lien of this Indenture, and
all right, title and interest of every nature whatsoever off
the Owner Trustee in and to the same and every part thereof;
(4) all right, title and interest of the Owner Trustee in and
to any right to restitution from the Lessee in respect of any
determination of invalidity of the Facility Lease; and
(5) all proceeds of the foregoing;
but excluding, however, from the Lease Indenture Estate any and all Excepted
Payments; and subject, however, to (i) the terms and provisions of this
Indenture and (ii) the rights of the Lessee under the Facility Lease.
To the extent that any portion of the Lease Indenture Estate
constitutes fixtures or real property, this Indenture constitutes a realty
mortgage and an assignment of rents with respect to all such items of real
property and in addition to all other rights or remedies set forth in this
Indenture, or otherwise available under Applicable Law, the Indenture Trustee
shall have all of the rights, remedies and benefits of a mortgagee of real
property under Applicable Law,. including, without limitation, the rights and
remedies pursuant to Arizona Revised Statutes 1 33-702.3, and the Owner Trustee
shall be deemed a mortgagor with respect to such items.
TO HAVE AND TO HOLD all the aforesaid properties, rights and
interests unto the Indenture Trustee, its successors and assigns forever, but in
trust, nevertheless, for the use and purposes and with the power and authority
and subject to the terms and conditions mentioned and set forth in this
Indenture.
UPON CONDITION that, unless and until an Indenture Event of
Default shall have occurred and be continuing, the Owner Trustee shall be
permitted, to the exclusion of the Indenture Trustee, to possess and use the
Lease Indenture Estate and exercise all rights with respect thereto and, without
limitation of the foregoing, the Owner Trustee may exercise all of its rights
under the Facility Lease to the same extent as if its right, title and interest
therein had not been assigned to the Indenture Trustee to the extent set forth
above, except that the Indenture Trustee shall receive all payments of Assigned
Payments and all moneys and securities required to be held by or deposited with
the Indenture Trustee hereunder.
-5-
<PAGE>
It is expressly agreed that, anything herein contained to the
contrary notwithstanding, the Owner Trustee shall remain obligated to the Lessee
under the Facility Lease to perform all of the Owner Trustee's obligations
thereunder in accordance with and pursuant to the terms and provisions thereof,
and the Indenture Trustee shall not be required or obligated in any manner,
except as expressly provided herein, to perform or fulfill any obligations of
the Owner Trustee under the Facility Lease or to make any payment, or to make
any inquiry as to the nature or sufficiency of any payment received by it, or to
present or file any claim, or to take any action to collect or enforce the
payment of any amounts which may have been assigned to it or to which it may be
entitled at any time or times.
The Owner Trustee hereby warrants and represents that it has
not assigned or pledged any of its right, title or interest in and to the Lease
Indenture Estate to anyone other than the Indenture Trustee.
SECTION 2.2. Payments Under the Facility Lease.
The Facility Lease provides that Ci) all payments constituting
Assigned Payments shall be made to the Indenture Trustee at the Indenture
Trustee's Of fice, (ii) all other payments other than Excepted Payments shall be
made to the Lessor at such address as the Lessor may direct by notice in writing
to the Lessee, and (iii) all Excepted Payments shall be made to the Person
entitled to receive such payments. The Owner Trustee agrees that, so long as any
Notes shall be Outstanding hereunder, all payments described in clause (i) above
shall be directed to be made to the Indenture Trustee or in accordance with the
Indenture Trustee's instruction and that if it should receive any such payments
or any proceeds for or with respect to the Lease Indenture Estate or otherwise
constituting part of the Lease Indenture Estate, it will promptly forward such
payments to the Indenture Trustee or in accordance with the :ndenture Trustee's
instructions. The. Indenture Trustee agrees to apply payments from time to time
received by it (from the Lessee, the Owner Trustee or otherwise) with respect to
the Lease Indenture Estate in the manner provided in Section 3.11 and Article V
hereof.
6091. CHASEUl. LEASE 07:2
-6-
<PAGE>
SECTION 2.3. Release of Lien on Lease Indenture Estate.
(a) Upon receiving evidence satisfactory to the Indenture
Trustee that (i) it has received, or provision has been made in accordance with
paragraph (C) hereof for, full payment of all principal of and premium, if any,
and interest on the Notes and any other sums payable to the Indenture Trustee
and the Holders of the Notes under this Indenture or the Facility Lease, and
(ii) all Trustee's Eppenses shall have been paid in full or provision
satisfactory to the Indenture Trustee shall have been made for such payment,
(A) the security interest and all other estate and rights
granted by this Indenture shall cease and become null and void and all
of the property, rights and interests included in the Lease Indenture
Estate shall revert to and revest in the Owner Trustee without any
other act or formality whatsoever, and
(S) the Indenture Trustee shall, at the request of the Owner
Trustee, execute and deliver to the Owner Trustee such termination
statements, releases or other instruments presented to the Indenture
Trustee by or at the direction of the Owner Trustee as shall be
requisite to evidence the satisfaction and discharge of this Indenturt
and the lien hereby created with respect to the Lease Indenture Estate,
to release or reconvey to the Owner Trustee or as directed by the Owner
Trustee all the Lease Indenture Estate, freed and discharged from the
provisions herein contained with respect thereto, and to release the
Owner Trustee from its covenants herein contained.
(b) Upon receipt by the Indenture Trustee of the Assumption
Agreement and other documents and opinions described in Section 3.g(b) hereof,
Ci) the security interest and all other estate and rights granted by this
Indenture by or on behalf of the Owner Trustee shall cease and become null and
void and all of the property, rights and interests included in the Lease
Indenture Estate shall revert to and revest in the Owner Trustee without any
other act or formality whatsoever and (ii) the Indenture Trustee shall, at the
request of the Owner Trustee, execute and deliver to the Owner Trustee such
termination statements, releases or other instruments presented to the Indenture
Trustee by or at the direction of the Owner Trustee as shall be requisite
6091. CHASEUl. LEASE. 07:2
-7-
<PAGE>
to evidence the satisfaction and discharge of this Indenture as to the Owner
Trustee and the lien hereby created with respect to the Lease Indenture Estate,
to release or reconvey to the Owner Trustee or as directed by the Owner Trustee
all the Lease Indenture Estate, freed and discharged from the provisions herein
contained with respect thereto, and to release the Owner Trustee from its
covenants herein contained.
(c) Any Note shall, prior to the maturity or redemption date
thereof, be deemed to have been paid within the meaning and with the effect
expressed in this Section 2.3 if (i) there shall have been deposited with the
Indenture Trustee either moneys in an amount which shall be sufficient, or
direct obligations of or obligations the principal of and interest on which are
unconditionally guaranteed by the United States of America or certificates of an
ownership interest in the principal of or interest on obligations of or
guaranteed as to principal and interest by the united States of America (Federal
securities), in each case which shall not contam provisions permitting the
redemption thereof at the option of the issuer, the principal of and the
interest on which when due, and without any reinvestment thereof, will provide
moneys in an amount which shall be sufficient, together with the moneys, if any,
deposited with or held by the rndenture Trustee at the same tine (such
sufficiency to be established by the delivery to the Indenture Trustee of a
certificate of an independent public accountant), to pay when due the principal
of and premium, if any, and interest due and to become due on said Note on and
prior to the redemption date or maturity date thereof, as the case may be, and
(ii) in the event said Note does not mature or is not to be redeemed within the
next 45 days, the maenture Trustee shall have been given irrevocable
instructions to give, as soon as practicable, a notice to the registered Holder
of such Note that the deposit required by subdause (i) above has been made with
the Indenture Trustee and that said Note is deemed to have been paid in
accordance with this Section 2.3 and stating such maturity or redemption date
upon which moneys are to be available for the payment of the principal of and
premium, if any, and interest on said Note. Neither the Federal Securities nor
moneys deposited with the Indenture Trustee pursuant to this Section 2.3 or
principal or interest payments on 1any such Federal Securities shall be
withdrawn or used for any purpose other than, and shall be held in trust for,
the payment of the principal of and premium, if any, and interest on
6091 CHASEUX. LEAgE. 07:2
-8-
<PAGE>
said Note; provided, however, that any cash received from such principal or
interest payments on such Federal Securities deposited with the Indenture
Trustee, shall be reinvested pursuant to Section 8.8 hereof in Federal
Securities. At such time as any Note shall be deemed paid as aforesaid, it shall
no longer be secured by or entitled to the benefits of the Lease Indenture
Estate or this rndenture, except that such Note shall be entitlied to the
benefits of the portions of the Lease Indenture Estate described in Granting
Clauses (2) , (3) and (5) , to the extent such portions relate to such moneys or
Federal Securities deposited with the Indenture Trustee.
(d) So long as any Note as to which this Indenture has been
discharged remains unpaid, this Indenture shall continue in effect with respect
to such Note solely with respect to rights of registration of transfer, exchange
or replacement of such Note, rights to receive payment of the principal thereof
and premium, if any, and interest thereon in accordance with the terms of this
Indenture from such deposited funds or the proceeds of or interest on such
Federal Securities and the correlative rights and responsibilities of the
Indenture Trustee; provided, however, that, following such discharge, no claim
for payment of principal of or premium, if any, or interest on such Note shall
be made against the Owner Trustee or the Lease Indenture Estate other than as
provided in this Section; provided, further, that the Owner Trustee, following
such discharge, shall be released from any further duties or obligations under
this Indenture and, except as expressly provided therein, any other Transaction
Document.
SECTION 2.4. Power of Attorney.
Subject to the other terms of this Indenture, the Owner
Trustee hereby appoints the Indenture Trustee the Owner Trustee's
attorney-in-fact, irrevocably, with full power of substitution, to collect, ask,
require, demand, receive and give acquittance for any and all moneys and claims
for moneys due and to become due to the Owner Trustee under or arising out of
the Lease Indenture Estate, to endorse any checks or other instruments or orders
in connection therewith, and to take any action (including the filing of
financing statements or other documents) or institute any proceedings which the
Indenture Trustee may deem to be necessary or appropriate to protect and
6C9 1. CHASEUl LEASE.O7: 2
-9-
<PAGE>
preserve the interest of the Indenture Trustee in the Lease Indenture Estate.
Prior to any exercise by it (acting as attorney-in-fact for the Owner Trustee)
of the powers, authority or rights granted by this Section 2.4, the Indenture
Trustee will give three Business Cay's prior written notice to the Owner Trustee
and the Owner Participant.
ARTICLE III
ISSUE, EXECUTION, AUTHENTICATION,
FORM AND REGISTRATION OF NOTES
SECTION 3.1. Limitation on Notes.
No notes may be issued under the provisions of, or become
secured by, this Indenture except in accordance with the provisions of this
Article III. No Note shall be issued in an original principal amount of less
than $5,000.
SECTION 3.2. Execution of Notes.
All Notes shall be manually executed on behalf of the Owner
Trustee by one of its Responsible Officers. In case any Responsible Officer of
the Owner Trustee who shall have executed any of the Motes shall cease to be
such a Responsible Officer before such Notes so executed shall have been
authenticated by the Indenture Trustee and delivered or disposed of by the Owner
Trustee, such Notes nevertheless may be authenticated and delivered or disposed
of as though the person who executed such Notes had not ceased to be such a
Responsible Of ficer of the Owner Trustee; and any Note may be executed on
behalf of the Owner Trustee by such person as, at the actual time of execution
of such Note, shall be a Responsible Officer of the owner Trustee, although at
the date of such Mote any such person was not such a Responsible officer.
SECTION 3.3. Effect of Certificate of Authentication.
Only such Notes as shall bear thereon a certificate of
authentication substantially in the following form manually executed by the
Indenture Trustee shall be entitled to the benefits of this Indenture or be
valid or obligatory for any purpose. Such certificate of authentication of the
Indenture Trustee upon an'; Note executed by the Owner Trustee shall be
concl~sive evidence that the Note so authenticated was duly issued,
authenticated and delivered under this Indenture:
-10-
6091. CHASEUl LsAsE.07:2
<PAGE>
This Note is one of the series of Notes referred to therein
and in the within-mentioned Indenture
CHEMCIAL BANK,
as Indenture Trustee
By
----------------------
Authorized Officer
SECTION 3.4. Creation of tile Fixed Rate Notes; Aggreqate
Principal Amount, Dating and Terms; Prerequisites to Authentication and Delivery
of the Fixed Rate Notes; Application of Proceeds.
(a) There is hereby created and established a separate series
of Notes of the Owner Trustee designated "Nonrecourse Promissory Notes, Fixed
Rate Series" herein referred to as the Fixed Rata Notes. The Fixed Rate Notes
shall be payable in the principal amounts and bear interest as follows:
Fixed Rate Note Interest Principal
Due Rate Amount
--------------- -------- ---------
January 15, 1992 8.05% $3,300,000
January 15, 1997 8.95% $8,060,000
January 15, 2015 10.15% $46,640,000
-----------
$60,000,000
===========
Each Fixed Rate Note shall bear interest on the principal amount thereof from
time to tirne Outstanding from the data thereof until paid at the rate of
interest set forth therein. The principai amount of each Fixed Rate Note shall
be payable as set forth in Schedule 1 attached thereto, as such Schedule 1 may
be adjusted, in the case of the Fixed Rate Note due January 15, 2015, in
accordance with the terms of such Fixed Rate Note and this Indenture.
Installments of interest on and principal of (and premium, if any, on) each
6091. CHASEUl. LlAsE.O7:2
-11-
<PAGE>
Fixed Rate Note shall be due and payable on the dates and at the rates of
interest specified in such Fixed Rate Note. The Fixed Rate Note due January 15,
1992 shall be substantially in the form of Exhibit A-1 to this Indenture. The
Fixed Rate Note due January 15, 1997 shall be substanttally in the form of
Exhibit A-2 to this Indenture. The Fixed Rate Note due January 15, 2015 shall be
substantially in the form of Exhibit A-3 to this Indenture.
(b) Subject to the provisions of Section 3.10 hereof, the
aggregate principal amount of the Fixed Rate Notes issued by the Owner Trustee
and authenticated and delivered by the Indenture Trustee hereunder shall not
exceed $60,000,000.
(c) The Fixed Rate Notes, subject to paragraph (d) of this
Section 3.4, shall be executed and issued by the Owner Trustee and authenticated
and delivered by the Indenture Trustee on the date and to the Person specified
by the Owner Trustee in its request and authorization for issuance, shall be
dated the date specified by the Owner Trustee in its request and authorization
for issuance, and shall be in the form of a registered Note payable to the
Person designated in the Owner Trustee's request and authorization for issuance
or its registered assigns.
(d) The Indenture Trustee shall authenticate the Fixed Rate
Notes and deliver the Fixed Rate Notes to the Person designated by the Owner
Trustee in the request and authorization for issuance in respect of the Fixed
Rate Notes in accordance with the provisions of this Section 3.4.
(e) Upon receipt of the proceeds of the Fixed Rate Notes, the
Indenture Trustee shall immediately transfer the same to, or pursuant to the
direction of, the owner Trustee, all as set forth in the request and
authorization. for issuance submitted by the Owner Trustee to the Indenture
Trustee.
SECTION 3.5. Additional Notes.
(1) Subject to Section 3.6 hereof, Additional Notes of the
Owner Trustee may be issued under and secured by this Indenture, at any time or
from time to time, in addition to the Fixed Rate Notes and subject to the
conditions hereinafter provided in this Section, for cash in the amount of the
original principal amount of such Additional Notes, for the purpose of Ci)
6091. CHASEUl. L(pound)ASE.07:2
-12-
<PAGE>
refunding any previously issued series of Notes, in whole or in part and/or (ii)
providing funds for the payment of all or any portion of the supplemental
Financing Amount relating to capital Improvements made or installed from time to
time pursuant to the Facility Lease; provided, however, that in the case of
Notes issued for the purposes set forth in clause (ii) of this Section 3.5, no
Note shall be issued by the Owner Trustee pursuant to this Section 3.5 unless
such Notes may be pledged in accordance with Section 2.15(b) of the collateral
Trust Indenture and serve as the basis for Additional Bonds.
(2) Before any Additional Notes shall be issued under the
provisions of this Section 3.5, the Owner Trustee shall have received from the
Owner participant, and delivered to the Indenture Trustee not less than 2
Business Days nor mote than 30 Business Days prior to the proposed date of
issuance of such Additional Notes as set forth in the below mentioned request
and authorization, a request and authorization to issue Additional Notes, which
request and authorization shall include the amount of such Additional Notes, the
date of issuance of such Additional Notes and details with respect thereto which
are not inconsistent with this Section. Additional Notes shall have a
designation so as to distinguish such Additional Notes from the Fixed Rate Notes
but otherwise shall be substantially similar in terms to the Fixed Rate Notes,
shall specify maturity dates, rank pan passu with all Notes then Outstanding, be
dated their respective dates of authentication, bear interest at such rates
(which may be fixed or floating) as shall be indicated in the aforementioned
request and authorization, and shall be stated to be payable by their terms not
later than the last day of the Sasic Lease Term.
(3) Except as to any differences in the maturity dates and
amortization schedules of the Additional Notes or the rate or rates of interest
thereon and the date or dates such interest is payable or the provisions for
redemption with respect thereto, if any, such Additional Notes shall be on a
parity with, and shall be entitled to the same benefits and security of this
Indenture as, other Notes issued pursuant to the terms hereof
(4) The terms, conditions and designations of such Additional
Notes (which shall be consistent with this Indenture) shall be set forth in an
-13-
<PAGE>
indenture supplemental to this Indenture executed by the Owner Trustee and the
Indenture Trustee. Such Additional Notes shall be executed as provided in
Section 3.2 and deposited with the Indenture Trustee for authentication, but
before such Additional Notes shall be authenticated and delivered by the
Indenture Trustee there shall be filed with the Indenture Trustee, in addition
to the other documents and certificates required by this Section 3.5, the
following, all of which shall be dated as of the date of the supplemental
indenture:
(a) a copy of such supplemental indenture (which shall include
the form of such series of Notes in respect thereof)
(b) a certificate of a Responsible officer of the Owner
Trustee ci) stating that to the best of his knowledge, no Default or Event of
Default or Indenture Event of Default has occurred and is continuing and (ii)
stating, in reliance upcn a certificate of ~ nesponsible Officer of the Lessee
as to such matters, that payments pursuant to the Facility Lease of Basic Rent,
casualty value, Special casualty Value and Termination value and of amounts in
respect of the exercise of the cure Option are sufficient to pay all the
outstanding Notes, after taking into account the issuance of such Additional
Notes and any related redemption;
(c) such additional documents, certificates and opinions as
shall be reasopably requested by, and acceptable to, the Owner Trustee and the
Indenture Trustee;
(d) a request and authorization to the Indenture Trustee by or
on behalf of the owner Trustee to authenticate and deliver such Additional Notes
to or upon the order of the Person or Persons noted in such request at the
address set forth therein, and in such principal amounts as are stated therein,
upon payment to the Indenture Trustee, but for the account of the Owner Trustee,
of the sum or sums specified in such request and authorization; and
(e) an opinion of counsel to the effect that the conditions
precedent required under this Indenture for the issuance of such Additional
Notes have been complied with.
When the documents referred to in the foregoing clauses (a)
through (e) above shall have been filed with the Indenture Trustee and when the
-14-
6091. CHASEUl LEASE. 07:2
<PAGE>
Additional Notes described in the above-mentioned order and authorization shall
have been executed and authenticated as required by this Indenture, the
Indenture Trustee shall deliver such Additional Notes in the manner described in
clause (d) above, but only upon payment to the Indenture Trustee of the sum or
sums specified in such request and authorization.
SECTION 3.6. Security for and Parity of Notes.
All Notes issued and Outstanding hereunder shall rank on a
parity with each other and shall as to each other be secured equally and ratably
by this Indenture, without preference, priority or distinction of any thereof
over any other by reason of difference in time of issuande or otherwise. The
maximum principal amount of Notes Outstanding and secured by this Indenture
shall be $120,000,000.
SECTION 3.7. Source of Payments Limited.
All payments to be made by the Owner Trustee under this
Indenture or on the Notes shall be made only from the Lease Indenture Estate and
the Trust Estate. Each Holder of a Note, by its acceptance of such Note, and the
Indenture Trustee agree that they will look solely to the Trust Estate and the
income and proceeds from the Lease Indenture Estate to the ertent available for
distribution to such Holder or the Indenture Trustee as herein provided and that
neither the Owner Participant nor, except as expressly provided in this
Indenture, the Owner Trustee nor the Indenture Trustee, shall be personally
liable to such Holder of a Note or the Indenture~Trustee, as the case may be,
for any amounts payable hereunder or under such Note; provided, however, that in
the event that the Lessee shall assume all the obligations and liabilities of
the Owner Trustee hereunder and under the Notes pursuant to Section 3.9(b), then
all payments to be made under this Indenture and the Notes shall be made only
from payments made by the Lessee under the Notes in accordance with the
Assumption Agreement referred to in Section 3.9(b) and each Holder of a Note and
the Indenture Trustee agree that in such event they will look solely to the
Lessee for such payment. Nothing herein contained shall be interpreted as
affecting the duties and obligations of the Indenture Trustee set forth in
Section 7.4 hereof.
6091. CHASEUl. LEASE.07:2
-15-
<PAGE>
In furtherance of the foregoing, to the fullest extent
permitted by law, each Holder of a Note (and each assignee of such Person) , by
its acceptance thereof, and the Indenture Trustee agree, as a condition to the
Notes being secured under this Indenture, that neither such Holder nor the
Indenture Trustee will exercise any statutory right to negate the agreements set
forth in this section 3.7.
SECTION 3.8. Place and Medium of Payment.
The principal of and premium, if any, and interest on each
Note shall be payable at the Indenture Trustee's office in immediately available
funds in such coin or currency of the united states of America as at the time of
payment shall be legal tender for the payment of public and private debts.
Notwithstanding the foregoing or any provision in any Note to the contrary, if
so requested by the Holder of any Note, by written notice to the Indenture
Trustee, all amounts (other than the final payment) payable with respect to such
obligation shall be paid by crediting the amount to be distributed to such
Holder to an account maintained by such Holder with the Indenture Trustee or by
the Indenture Trustee's transferring such amount by wire, with such wire
transfer to be initiated by such time as to permit, to the extent practicable,
oral confirmation thereof (specifying the wire number) to be given no later than
12:00 noon flew York City time on the date scheduled for payment, but only to
the extent of funds available for such wire transfer, to such other bank in the
united states having wire transfer facilities, including a Federal Reserve Bank,
as shall have been specified in such notice, for credit to the account of such
Holder maintained at such bank, any such credit or transfer pursuant to this
Section 3.8 to be in immediately available funds, without any presentment or
surrender of such Note. Final payment of any such Note shall be made only
against surrender of such Note at the Indenture Trustee's Office.
SECTION 3.9. Prepayment of Notes; Assumption by lessee; Notice
of Assumption or Prepayment.
(a) Notes shall be subject to prepayment (other' than through
application of the installment payments on such Notes) from time to time only as
provided in this Indenture and as otherwise specifically provided, owith respect
to Notes of a particular series, in such Notes.
-16-
6091. CHASEUl LEASE 07:2
<PAGE>
(b) In the event of the occurrence of a Deemed Loss Event or
Event of Loss or exercise of the Cure aption, and upon receipt by the Indenture
Trustee of the documents listed below, all the obligations and liabilities of
the Owner Trustee hereunder and under the Notes shall be assumed by the Lessee
and the Owner Trustee shall be released and discharged without further act or
formality whatsoever from all obligations and liabilities hereunder and under
the Notes
(1) a duly executed Assumption Agreement substantially in the
form of Exhibit B to this Indenture
(2) an, opinion of counsel to the Lessee, addressed to the
Indenture Trustee and the Holders of the outstanding Notes, to
the effect that the conditions precedent required by this
Indenture for such assumption have been complied with, that the
Assumption Agreement has been duly authorized, executed and
delivered on behalf of the Lessee, that no Governmental Action
is necessary or required In connection therewith (or if any
such Governmental Action is necessary or required, that the
same has been duly obtained and is in full force and effect) ,
and that the Assumption Agreement is a legal, valid and binding
agreement and obligation of the Lessee, enforceable in
accordance with its terms (except as limited by bankruptcy,
insolvency or similar laws of general application affecting the
enforcement of creditors' rights generally and equitable
principles)
(3) copies of all Governmental Actions referred to in such
opinion
(4) an indenture supplemental to this Indenture which shall,
among other things, confirm the release of the Owner Trustee
and the Lease Indenture Estate thereby effected and contain
provisions appropriately amending references to the Facility
Lease in this Indenture
(5) a certificate of a Responsible Officer of the Lessee
stating that, to the best of his knowledge, (i) the conditions
precedent required by this Indenture for such assumption have
been complied with, (ii) no Indenture Event of Default has
occurred and is
-17-
<PAGE>
continuing, (iii) such assumption is permitted by the
provisions of the Lessee's Articles of Incorporation and
By-Laws and (iv) the Lessee is not insolvent within the
meaning of any applicable preferential transfer, fraudulent
conveyance or bankruptcy law; and
(6) a certificate of a Responsible Officer of the Owner
Trustee stating 'that, to the best of his knowledge, no
Indenture Event of Default has occurred and is continuing.
(c) Notice of any assumption or prepayment of Notes shall be
given to the registered Holders of the Notes which have been assumed or are to
be prepaid (and any assignee of a registered Holder which has given the
Indenture Trustee written notice of such assignment) as promptly as practicable
after the Indenture Trustee is notified thereof, and, in the case of prepayment,
in no event later than 30 days before the date fixed for prepaynent (provided
the Indenture Trustee receives such notification at least three Business Days
before such 30th day) in the event of the exercise by the Owner Trustee of its
option to terminate the Facility Lease pursuant to Section 14 thereof.
(d) If the assumption described in paragraph (b) above has not
occurred, then, as required by section 9(j) of the Facility Lease, not less than
2 Business Days prior to the date on which the Lessee is required to make the
payments specified in Section 9(c) or 9(d) of the Facility Lease, the~Owner
Trustee will cause the undivided Interest and the Real Property Interest to be
subjected to the lien of this Indenture by executing and delivering to the
Indenture Trustee an undivided Interest Indenture Supplement substantially in
the form of Exhibit C to this Indenture. subject to Section 10.3 hereof, the
Indenture Trustee shall execute and accept delivery from the Owner Trustee of
the undivided Interest Indenture supplement.
SECTION 3.10. Mutilated, Destroyed, Lost or Stolen Notes.
If any Note shall become mutilated or shall be destroyed, lost
or stolen, the Owner Trustee shall, upcn the written request of the Holder of
such Note, execute, and the Indenture Trustee shall authenticate and deliver in
replacement thereof, a new Note, payable in the same original principal amount
and dated the same date and of the same series as the Note so mutilated,
-18-
6091 CHASEUl. LEASE. 07:2
<PAGE>
destroyed, lost or stolen. The Indenture Trustee shall make a notation on each
new Note of the amount of all payments of principal theretofore made on the Note
so mutilated, destroyed, lost or stolen and the date to which interest on such
old Note has been paid. If the Note being replaced has been mutilated, such Note
shall be delivered to the Indenture Trustee who shall then deliver a certificate
of destruction of the type required by Section 4.3 hereof. If the Note being
replaced has been destroyed, lostor stolen, the Holder of such Note shall
furnish to the Lessee, the Owner Trustee and the Indenture Trustee a bond or
surety agreement of such Holder as shall be satisfactory to them to save the
Lessee, the Owner Trustee, the Indenture Trustee, the Trust Estate and the Lease
Indenture Estate harmless from any loss, however remote, including claims for
principal of, and premium, if any, and interest on the purportedly destroyed,
lost or stolen Note, together with evidence satisfactory to the Lessee, the
Owner Trustee and the Indenture Trustee of the destruction, loss or theft of
such Note and of the ownership thereof; provided, however, that if the Holder of
such Note is the collateral Trust Trustee, the unsecured written undertaking of
the Collateral Trust Trustee, in its individual capacity, shall be sufficient
indemnity for purposes of this Section.
SECTION 3.11. Allocation of Principal and Interest.
In the case of each Note, each payment of principal thereof
and interest thereon shall be applied, first, to the payment of accrued but
unpaid interest on such Note (as well as any interest on overdue principal or,
to the extent permitted by law, interest) to the date of such payment, second,
to the payment of the principal amount of, and premium, if any, on such Note
then due (including any overdue installment of principal) thereunder and third,
the balance, if any, remaining thereafter, to the balance of the payment of the
principal amount of, and premium, if any, on such Note
SECTION 3.12. Certain Adjustments to the Amortization
Schedule of the Fixed Rate Note due January 15, 2015.
(a) The schedule of principal amortization attached to the
Fixed Rate Note due January 15, 2015 may be adjusted at the discretion of the
Owner Trustee at one time prior to July 15, 1997; provided, however, that no
such adjustment shall be made by the Owner Trustee which will increase or reduce
-19-
6091. CHASEUl LEASE 07:2
<PAGE>
the average life of such Fixed Rate Note (calculated in accordance with
generally accepted financial practice from the date of initial issuance) by more
than two years; provided, however, such adjustment may be made only in
connection with an adjustment to Basic Rent pursuant to section 3(d) of the
Facility Lease. If the Owner Trustee shall elect to make the foregoing
adjustment, the Owner Trustee shall deliver to the Indenture Trustee and to the
Lessee at least 60 dAys prior to the first payment date (specified on the
schedule to such Fixed Rate Note) proposed to be affected by such adjustment, a
certificate of the Owner Trustee (x) stating that the Owner Trustee has elected
to make such adjustment, (y) setting forth the revised schedule of principal
amortization for such Fixed Rate Note and (z) attaching calculations showing
that the average life of such Fixed Rate Note will not be reduced or increased
except as permitted by this section 3.12(a). The Indenture Trustee may rely on
such Owner Trustee certificate and shall have no duty with respect to the
calculations referred to in the foregoing clause (z).
(b) If the Lessee, in a timely manner, provides the Owner
Trustee and the Owner Participant with information sufficient for the Owner
Trustee to direct the adjustments described in paragraph (a) of this section
3.12, together with a certificate (in form and substance reasonably satisfactory
to the Owner Participant) to the effect that such adjustments minimize the
aggregate increase or decrease in Basic Rent occurring as a result of the
operation of section 3(d) of the Facility Lease, the Owner Trustee shall deliver
to the Indenture~Trustee a certificate pursuant to such paragraph (a)
Notwithstanding the foregoing, the Owner Participant, the Indenture Trustee and
the Owner Trustee may rely on such certificate and shall have no obligation to
verify the same.
-20-
6091. CHASEUl. LEASE. 07:2
<PAGE>
ARTICLE IV
REGISTRATION, TRANSFER, EXCHANGE,
CANCELLATION AND OWNERSHIP OF
NOTES
SECTION 4.1. Register of Notes.
The Indenture Trustee on behalf of the Owner Trustee shall
maintain at the Indenture Trustee's Office a register for the purpose of
registration, and registration of transfer and exchange, of the Notes by series
and in which shall be entered the names and addresses of the owners of such
Notes and the principal amounts of the Notes owned by them, respectively. For
these purposes, the Indenture Trustee is hereby appointed transfer agent and
registrar for the Notes.
SECTION 4.2. Registration of Transfer or Exchange of Notes.
A Holder of a Note intending to register the transfer of any
Outstanding Note held by such Holder (including any transfer in the form of a
pledge or assignment) or to exchange any Outstanding Note held by such Holder
for a new Note or Notes of the same series may surrender such Outstanding Note
at the Indenture Trustee's Office, together with the written request of such
Holder, or of its attorney duly authorized in writing, in each case with
signatures guaranteed, for the registration of such Note in the name of any
pledgee or assignee (in the case of a transfer in the form of a pledge or
assignment) or for the issuance of a new Note or Notes of the same series,
specifying the authorized denomination or denominations of any new Note or Notes
to be issued and the name and address of the Person or Persons in whose name or
names the Note or Notes are to be registered (either as pledgee or assignee or
as owner) . Promptly upon receipt by the Indenture Trustee of the foregoing and
satisfaction of the requirements of sections 4.5 and 4.6 hereof, the Indenture
Trustee shall register such Note or Notes in the name or names of the Person or
Persons as shall be specified in the written request and, in the case in which a
new Note or Notes are to be issued, the Owner Trustee shall execute and the
In4enture Trustee shall authenticate and deliver such new Note or Notes of the
same series, in the same aggregate principal amount and date4 the same date as
-21-
<PAGE>
the Outstanding Note surrendered, in such authorized denomination or
denominations as shall be specified in the written request. The Indenture
Trustee shall make a notation on each new Note of the amount of all payments of
principal theretofore made on the old Note or Notes in exchange or transfer for
which any new Note has been issued~and the date to which interest on such old
Note or Notes has been paid.
SECTION 4.3. Cancellation of Notes.
All Notes surrendered to the Indenture Trustee for payment in
full, prepayment in full or registration of transfer or exchange shall be
cancelled by it; and no Notes shall be issued in lieu thereof except as
expressly permitted by any of the provisions of this Indenture. The Indenture
Trustee shall destroy cancelled Notes held by it in a manner satisfactory to the
owner Trustee and deliver a certificate of destruction to the Owner Trustee. If
the Owner Trustee shall acquire any of the Notes, such acquisition shall not
operate as a redemption of or the satisfaction of the indebtedness represented
by such Notes unless and until the same shall be delivered to the Indenture
Trustee for cancellation.
SECTION 4.4. Limitation on Timing of Registration of Notes.
The Indenture Trustee shall not be required to register
transfers or exchanges of Notes on any date fixed for the payment or prepayment
of principal of or interest on the Notes or during the fifteen days preceding
any such date.
SECTION 4.5. Restrictions on Transfer Resulting from Federal
Securities Laws; lagend.
If not prohibited by the securities Act, each Note shall be
delivered to the initial Holder thereof without registration of such Note under
the securities Act and without qualification of this Indenture under the Trust
Indenture Act. Prior to any transfer of any Note, in whole or in part, to any
Person other than the collateral Trust Trustee, the Holder thereof shall furnish
to the Lessee, the Indenture Trustee and the Owner Trustee an opinion of
counsel, which opinion and which counsel shall be reasonably satisfactory to the
Xndenture Trustee, the owner Trustee and the Lessee, to the effect that such
transfer will not violate the registration provisions of the securities Act or
-22-
6091. CHASEUl. LEAsE.a7:2
<PAGE>
require qualification of this Indenture under the Trust Indenture Act, and all
Notes issued hereunder shall be endorsed with a legend which shall read
substantially as follows:
This Note has not been registered under the Securities Act of
1933 and may not be transferred, sold or offered for sale in
violation of such Act.
SECTION 4.6. Charges upon Transfer or Exchange of Notes.
As a further condition to registration of transfer or exchange
of any Note, the Indenture Trustee and the Owner Trustee may charge the Holder
thereof for any stamp taxes or governmental charges required to be paid with
respect to such registration of transfer or exchange.
SECTION 4.7. Inspection of Register of Notes.
The register of the Holders of the Notes referred to in
section 4.1 shall at all reasonable times be open for inspection by any Holder
of a Note. Upon request by any Holder of a Note, or the Owner Trustee or the
Lessee, the Indenture Trustee shall furnish such person, at the expense of such
Person, with a list of the names and addresses of all Molders of Notes entered
on the register kept by the Indenture Trustee indicating the series, principal
amount and number of each Note held by each such Holder.
SECTION 4.8. Ownership of Notes.
(a) Prior to due presentment for registration of transfer of
any Note, the owner Trustee and the Indenture Trustee may deem and treat the
Holder of record of such Note as the absolute owner of such Mote for the purpose
of receiving payment of all amounts payable with respect to such Note and for
all other purposes, and neither the Owner Trustee nor the Indenture Trustee
shall be affected by any notice to the contrary.
(b) The Owner Trustee and the Indenture Trustee may, in their
discretion, treat the Holder of record of any Note as the owner thereof without
actual production of such Note for any purpose hereunder, except as provided in
the last sentence of Section 3.8 hereof.
6091.CHASEUl.LEASE.o7:2
-23-
<PAGE>
(c) Neither the Owner Trustee nor the Indenture Trustee shall
be bound to take notice of or carry out the execution of any trust in respect of
any Note, and may register the transfer of the same on the direction of the
Holder of record thereof, whether named as trustee or otherwise, as though such
Holder were the beneficial owner thereof.
(d) The receipt by the Holder of record of any Note of any
payment at principal, premium or interest shall be a good discharge to the Owner
Trustee and the Indenture Trustee for the same and neither the Owner Trustee nor
the Indenture Trustee shall be bound to inquire into the title of any such
Holder.
ARTICLE V
RECEIPT, DISTRIBUTION AND
APPLICATION OF INCOME AND PROCEEDS
FROM THE LEASE INDENTURE ESTATE
SECTION 5.1. Basic Rent, Interest on Overdue Installments
of Basic Rent and Prepayments of Interest.
Except as otherwise provided in Section 5.3 or 5.7 hereof,
each payment of Basic Rent, as well as any payment of supplemental Rent
representing interest on overdue installments of Basic Rent, received by the
Indenture Trustee at any time, shall be distributed by the Indenture Trustee in
the following order of priority: first, so much of such payment as shall be
required to pay in full the aggregate amount of the payment or payments of
principal and/or interest (as well as any interest on overdue principal or, to
the extent permitted by law, interest) then due and unpaid on all Notes shall be
distributed to the Holders of the Notes ratably, without priority of one over
the other, in the proportion that the aggregate amount of such payment or
payments then due and unpaid on all Notes held by each such Holder on such date
bears to the aggregate amount of such payment or payments then due and unpaid on
all Notes Outstanding on such date, without priority of interest over principal
or principal over interest; and second, the balance, if any, of such payment
6091. CHASEUl. L(pound)ASE.07:2
-24-
<PAGE>
remaining thereafter shall be distributed, concurrently with any distribution
pursuant to clause first hereof, to the Owner Trustee or as the Owner Trustee
may direct. If there shall not otherwise have been distributed on any date (or
within any applicable period of grace) , pursuant to this Section 5.1, the full
amount then distributable pursuant to clause first of this Section 5.1, the
Indenture Trustee shall distribute other payments referred to'in Sections 5.4
and 5.5 then held by it or thereafter received by it, except as otherwise
provided in section 5.3, to the Holders of all Notes to the extent necessary to
enable it to make all the distributions then due pursuant to such clause first;
provided that to the extent any distribution is made from amounts held pursuant
to Section 5.4 hereof and the Lessee subsequently makes the payment of Basic
Rent or Supplemental Rent in respect of which such distribution was made, such
payment of Basic Rent or Supplemental Rent shall, unless an Indenture Default or
an Indenture Event of Default shall have occurred and be continuing, be applied
to the purpose for which such amount held pursuant to Section 5.4 had been held,
subject, in all cases, to the terms of Section 5.4. The portion of each such
payment made to the Indenture Trustee which is to be distributed by the
Indenture Trustee in payment of Notes shall be applied in accordance with
Section 3.11. Any payment received by the Indenture Trustee pursuant to Section
6.8 shall be distributed to the Holders of the Notes, ratably, without priority
of one over the other, in the proportion that the amount of such payment or
payments then due and unpaid on all Notes held by each such Holder bears to the
aggregata amount of the payments then due and unpaid on all Notes Outstanding.
Amounts distributed by the Indenture Trustee pursuant to this Section 5.1 shall
be distributed as promptly as practicable after such amounts are actually
received by the Indenture Trustee; provided, however, that in the event the
Indenture Trustee shall be directed to make payments to the Holder of any Note
by wire transfer in accordance with Section 3.8 hereof, any amounts received by
the Indenture Trustee after 11:00 A.M., New York City time, may be distributed
on the following Business Day.
SECTION 5.2. Amounts Received as Result of Event of L,oss,
Deemed Loss Event, Exercise of Option to Terminate or Exercise of Cure Option.
6091. CHASEUl. LEASE.C7:2
-25-
<PAGE>
If an Event of Loss or Deemed Loss Event shall occur or the Lessee shall
exercise the Cure Option, and if either the Assumption Agreement or the
Undivided Interest Indenture supplement shall have been executed and delivered,
any amounts of casualty Value, special casualty Value or Fair Market Sales Value
received or held by the Indenture Trustee in respect of such Event of Loss or
Deemed Loss Event or exercise of the Cure option shall, except as otherwise
provided in Section 5.3, be distributed forthwith to the Owner participant. If
the Lessee or the owner Trustee, as the case may be, shall exercise itS option
to terminate the Facility Lease pursuant to section 14 thereof, then there shall
be prepaid, on the date payments of proceeds with respect thereto are received
by the Indenture Trustee (or as soon thereafter as practicable) under Section 14
of the Facility Lease, the unpaid principal amount of all Notes, together with
the premium, if any, and all accrued but unpaid interest thereon to the date of
such prepayment. Notice of such prepayment shall be given as provided in section
3.9 (c) and may provide that it is subject to receipt of funds for such
prepayment. Except as otherwise provided in Section 5.3 or 5.7, any payments
received and amounts realized by the Indenture Trustee upon exercise of the
Lessee's or the Owner Trustee's option to terminate the Facility Lease under
Section 14 thereof shall in each case be distributed on the date of prepay~ant
as provtded La clauses first, second and fifth of Section 5.3.
SECTION 5.3. Amounts Received After, or Held at Time of,
Indenture Event of Default under Section 6.2.
Except as otherwise provided in section 5.7, all payments
received and amounts realized by the Indenture Trustee in respect of the Lease
Indenture Estate (including any amounts realized by the Indenture Trustee from
the exercise of any remedies pursuant to the Facility Lease or Article VI of
this Indenture) after an Indenture Event of Default referred to in section 6.2
shall have occurred and be continuing and the Notes have been accelerated
pursuant to section 7.1, as well as all payments thereafter received or amounts
then held by the Indenture Trustee as part of the Lease Indenture Estate, shall
be distributed by the Indenture Trustee in the following order of priority:
first, so much of such payments or amounts as shall be
required to reimburse the Indenture Trustee for any Trustee's Expenses
(to the extent not previously reimbursed) and to pay the reasonable
remuneration of the Indenture Trustee, shall be applied by the Indenture
Trustee to such reimbursement and payment;
-26-
6C91 . CHASEUl. LEASE.o7:2
<PAGE>
second, so much of such payments or amounts remaining as shall
be required to pay in full the aggregate unpaid principal amount of all
Notes, together with premium, if any, plus accrued but unpaid interest
(as well as interest on overdue principal and, to the extent permitted
by law, on overdue interest) thereon to the date of distribution, shall
be distributed to the Holders of such Notes and in case the aggregate
amount so to be distributed shall be insufficient to pay all such Notes
in full as aforesaid, then ratably, without priority of one over the
other, in the proportion that the aggregate unpaid principal amount of
all such Notes held by each such Holder, together with premium, if any,
plus accrued but unpaid interest thereon to the date of distribution
bears to the aggregate unpaid principal amount of all Notes, together
with premium, if any, plus accrued but unpaid interest thereon to the
date of distribution;
third, so much of such payments or amounts remaining as shall
be required to pay the present or former Holders of the Notes the
amounts payable to them as Indemnitees (to the extent not previously
reimbursed) shall be distributed to such Holders; and in case the
aggregate amount so to be paid to all such Holders in accordance with
this clause third shall be insufficient to pay all such amounts as
aforesaid, then ratably, without priority of one over the other, in the
proportion that the amount of such indemnitflor other payments to which
such Person is entitled bears to the aggregate amount of such indemnity
or other payments to which all such Persons are entitled;
fourth, the balance, if any, of such payments or amounts
remaining shall be applied to the payment of any other indebtedness at
the time due and owing to the Indenture Trustee or the Holders of the
Notes which this Indenture by its terms secures; and
fifth, the balance, if any, of such payments or amounts
remaining thereafter shall be distributed to or upon the direction of
the Owner Trustee.
-27-
6091. CHASEUl. LEASE.07:2
<PAGE>
SECTION 5.4. Amounts Received for Which Provision Is Made in
a Transaction Document.
Except as otherwise provided in Section 5.1, 5.3 or 5.7
hereof, any payments received by the Indenture Trustee in respect of the Lease
Indenture Estate for which provision as to the application thereof is made in a
Transaction Document shall be applied to the purpose for which such payment was
made in accordance with the terms of such Transaction Document, as determined,
in the first instance, from instructions or other information accompanying such
payment, or, otherwise, in accordance with instructions from the payor of such
payments.
SECTION 5.5. Amounts Received for which No pr~vjsion Is Made.
Except as otherwise provided in Section 5.1, 5.2, 5.3 or 5.7,
any payments received and any amounts realized by the Indenture Trustee in
respect of the Lease Indenture Estate
(a) for which no provision as to the application thereof is made in a
Transaction Document or elsewhere in this Article V shall be held by the
Indenture Trustee as part of the Lease Indenture Estate, and
(b) to the extent received or realized at any time after payment in full
of the principal of and premium, if any, and interest on all the Notes,
as well as any other amounts remaining as part of the Lease Indenture
Estate after payment in full of the principal of and prerniurn, if any,
and interest on all the Notes, shall be distributed by the Indenture
Trustee in the order of priority set forth in Section 5.3 (omitting
clause second thereof)
SECTION 5.6. Payments to Owner Trustee.
Unless otherwise directed by the Owner Trustee, all payments
to be made to the Owner Trustee hereunder shall be made to the Owner Participant
by wire transfer of immediately available funds as soon as practicable but in
any event no later than the close of business on the date of receipt (assuming
the Indenture Trustee has received such funds prior to 11:00 a.m. New York City
time on the same day), to such account at such bank or trust company as the
Owner Participant shall from time to time designate in writing to the Indenture
Trustee.
-28-
6091. CHAgEUl. LEASE.07:2
<PAGE>
SECTION 5.7. Excepted Payments.
Anything in this Article V or elsewhere in this Indenture to
the contrary notwithstanding, any Excepted Payment received at any time by the
Indenture Trustee shall be distributed as promptly as practicable to the Person
entitled to receive such Payment (such entitlement to be conclusively determined
by reference to payment instructions from such Person)
ARTICLE VI
REPRESENTATIONS, WARRANTIES Am)
COVENANTS OF OWNER TRUSTEE; ~TS
OF DEFAULT; REMEDIES OF THE
INDENTURE TRuSrrs(pound)
SECTION 6.1. Representations, Warranties and Covenants of
Owner Trustee.
The owner Trustee hereby covenants and agrees that (i) it will
duly and punctually pay the principal of, and premium, if any, and interest on,
the Notes in accordapce with the terms thereof and this Indenture, (ii~ it will
not pledge, create a security interest in or mortgage, so long as this Indenture
shall remain in effect, any of. its estate, right, title or interest in and to
the Lease Indenture Estate or otherwise constituting part of the Trust Estate,
to anyone other than the Indenture Trustee, (iii) so long as this Indenture
shall remain in effect, it will not purchase or agree to purchase any property
or asset other than the Undivided Interest and the Real Property Interest and
other than as contemplated by the Transaction Documents, (iv) it will not,
except with the prior written concurrence of the Indenture Trustee or as
expressly provided in or permitted by this Indenture or with respect to the
Trust Agreement or any property not constituting part of the Lease Indenture
Estate, take any action which would result in an impairment of any Note or the
obligation of the Lessee to pay any amount under the Facility Lease which is
part of the Lease Indenture Estate (not in any event including in respect of
6091 CHASEUl. L(pound)ASE.07:2
-29-
<PAGE>
Excepted Payments) or any of the other rights or security created or effected
thereby, or (V) issue, or incur any obligation in respect of, indebtedness for
borrowed money except for its obligations in respect of Notes.
A signed copy of any amendment or supplement to the Trust
Agreement shall be delivered by the Owner Trustee to the Indenture Trustee and
the Lessee. This Indenture and the Lease Indenture Estate shall not be affected
by any action taken under or in respect of the Trust Agreement except as
otherwise provided in or permitted by this Indenture The Trust Agreement may not
in any event be terminated by the Owner participant or the Owner Trustee or
revoked by the Owner Participant so long as any of the Notes or any unpaid
obligations under this Indenture remain Outstanding. The Owner Trustee may
resign as Owner Trustee, appoint a successor Owner Trustee and take all
necessary and proper action to constitute one or more Persons as co-trustee(s)
jointly with the Owner Trustee or as separate trustee(s), all in accordance with
the terms and conditions of Article IX of the Trust Agreement.
SECTION 6.2. Indenture Events-of Default.
The term Indenture Event of Default, wherever used herein,
shall mean any of the following events (whatever the reason for such Indenture
Event of Default and whether it shall be voluntary or involuntary or come about
or be effected by operation of law or pursuant to or in compliance with any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body)
(a) any of the Events of Default specified in the following
clauses of Section 15 of the Facility Lease.' (1) clause (i) cy) , except a
failure of the Lessee to pay any amount which shall constitute an Excepted
Payment; (2) clause (i) (x), except a failure of the Lessee to pay any amount
which shall constitute an Excepted Payment or except where the Owner Trustee
shall not have rescinded or terminated the Facility Lease pursuant to Section
l6(a)(i) of the Facility Lease; or (3) clause (vii) ; or
(b) the rescission or termination of, or the taking of action
by the Owner Trustee or the Owner Participant the effect of which would be to
rescind or terminate, the Facility Lease, whether pursuant to Section 16(a) (i)
of the Facility Lease or otherwise; or
-30-
6091. CHASEUl.LEASE. 07:2
<PAGE>
(c) any failure by the Lessee to perform and observe Section
10(b) (3) (iii) of the Participation Agreement; or
(d) the Owner Trustee shall tail to make any payment in
respect of the principal of, or premium, if any, or interest on, the Notes
within ten (10) Business Days after the same shall have become due (other than
by virtue of any failure by the Lessee to make any payment of Rent therefor) ;
or
(e) the Owner Trustee shall fail to perform or observe any
covenant or agreement to be performed or observed by it under Section 6.1 of
this Indenture, or the Owner Participant shall fail to perform or observe any
covenant or agreement to be performed or observed by it under Section 7(b) (1)
of the Participation Agreement and, in any such case, such failure shall
continue for a period of 30 days after notice thereof shall have been given to
the Owner Trustee, the Owner Participant and the Lessee by the Indenture
Trustee, specifying such failure and requiring it to be remedied.
SECTION 6.3. Enforcement of Remedies.
(a) In the event that an Indenture Event of Default shall have
occurred and be continuing, then and in every such case the Indenture Trustee,
subject to paragraph (b) of this Section 6.3 and Section 6.11, may, and when
required pursuant to the provisions of Article VII hereof shall, exercise any or
all of the rights and powers and pursue, subject to the rights of the Lessee
under the Facility Lease, Cx) in the event such Indenture Event of Default is
referred to in paragraph (d) or (e) of Section 6.2, any or all of the remedies
then available pursuant to this Article VI and Article VII, or Cy) in the event
such Indenture Event of Default is referred to in paragraph (a), (b) or (C) of
Section 6.2, any or all of such remedies concurrently with the exercise and
pursuit by the Owner Trustee of any or all of the remedies then available to the
Owner Trustee under the~Facility Lease.
(b) Any provisions of the Facility Lease or this Indenture to
the contrary notwithstanding, if the Lessee shall fail to pay any Excepted
Payment to any Person entitled thereto as and when due, such Person shall have
the right at all times, to the exclusion of the Indenture Trustee, to demand,
collect, sue for, enforce performance of obligations relating to, or otherwise
obtain all amounts due in respect of such Excepted Payment.
6091. CHASEUl. LEASE.07:2
-31-
<PAGE>
SECTION 6.4. specific Remedies; Enforcement of Claims without
possession of Notes.
Subject to sections 6.2, 6.2 and 6.11 hereof and the terms of
the documents constituting a part of the Lease Indenture Estate, upon the
occurrence and during the continuance of an Indenture Event of Default:
(a) The rndenture Trustee may, in order to enforce the rights
of the Indenture Trustee and of the Holders of the Notes, direct payment to it
of all moneys and enforce any agreement or undertaking constituting a part of
the Lease Indenture Estate by any action, suit, remedy or proceeding authorized
or permitted by this Indenture or by law or by equity, and whether for the
specific pertormance of any agreement contained herein, or for an injunction
against the violation of any of the terms hereof, or in aid of the exercise of
any power granted hereby or by Applicable Law, and in addition may sell, assign,
transfer and deliver, from time to time to the extent permitted by Applicable
Law, all or any part of the Lease Indenture Estate or any interest therein, at
any private sale or public auction with or without demand, advertisement or
notice (except as herein required or as may be required by Applicable Law) of
the date, time and place of sale and an? adjournment thereof, for cash or credit
or other property, for immediate or future delivery and for such price or prices
and on such terms as the Indenture Trustee, in its uncontrolled discretion, may
determine, or as may be required by Applicable Law, so long as the Owner
participant and the Owner Trustee are afforded a commercially reasonable
opportunity to bid for all or such part of the Lease Indenture Estate in
connection therewith. It is agreed that 90 days' notice to the Owner
participant, the owner Trustee and the Lessee of the date, time and place of any
proposed sale by the Indenture Trustee of all or any part of the Lease Indenture
Estate or interest therein is reasonable. The Indenture Trustee may file such
proofs of claim and other papers or documents as may be necessary or advisable
in order to have the claims of -the Indenture Trustee and of the Holders of the
Notes asserted or upheld in any bankruptcy, receivership or other judicial
proceedings.
-22-
609l.CHASEU1.L(pound)ASE.07:2
<PAGE>
(b) Without limiting the foregoing, the Indenture Trustee, its
assigns and its legal representatives, subject to the rights of the Lessee under
the Facility Lease, shall have as to such of the Lease Indenture Estate as is
subject to the uniform Commercial Code or similar law in each relevant
jurisdiction all the remedies of a secured party under the Uniform Corrimercial
Code or similar law in such jurisdiction and such further remedies as from time
to time may hereafter be provided in such jurisdiction for a secured party.
(c) All rights of action and rights to assert claims under
this Indenture or under any of the Notes may be enforced by the Indenture
Trustee without the possession of the Notes at any trial or other proceedings
instituted by the Indenture Trustee, and any such trial or other proceedings
shall be brought in its own name as trustee of an express trust, and any
recovery or judgment shall be for the ratable benefit of the Holders of the
Notes as herein provided In any proceedings brought by the Indenture Trustee
(and also an(pound)proceedings involving the interpretation of any provision of
this Indenture to which the Indenture Trustee shall be a party) the Indenture
Trustee shall be held to represent all the Holders of the Notes, and it shall
not be necessary to make any such Holders parties to such proceedings.
(d) The Indenture Trustee may exercise any other right or
remedy that may be available to it undet Applicable Law or proceed by
appropriate court action to enforce the terms hereof or to recover damages for
the breach hereof.
SECTION 6.5. Rights and R~ies Cumulative
Subject to Sections 6.2, 6.3 and 6.11 hereof, (a) each and
every right, power and remedy herein specifically given to the Indenture Trustee
under this Indenture shall be cumulative and shall be in addition to every other
right, power and remedy herein specifically given or now or hereafter existing
at law, in equity or by statute, and each and every right, power and remedy
whether specifically herein given or other-wise existing may be exercised from
time to time and as often and in such order as may be deemed expedient by the
Indenture Trustee and the exercise or the beginning of the exercise of any
right, power or remedy shall not be construed to be a waiver of the right to
6091. CHAS(pound)ul. L(pound)ASE.07:2
-33-
<PAGE>
exercise at the same time or thereafter any other right, power or remedy, and
(b) no delay or omission by the Indenture Trustee in the exercise of any right,
power or remedy or in the pursuance of any remedy shall impair any such right,
power or remedy or be construed to be a waiver of any default on the part of the
Owner participant, the Owner Trustee or the Lessee or to be an acquiescence
therein
SECTION 6.6. Restoration of Rights and Remedies.
In case the Indenture Trustee shall have proceeded to enforce
any right, power or remedy under this Indenture by foreclosure, entry or
otherwise, and such proceedings shall have been discontinued or abandoned for
any reason or shall have been determined adversely to the Indenture Trustee,
then and in every such case the Owner Trustee, the Owner participant, the
Indenture Trustee and the Lessee shall be restored to their former positions and
rights hereunder with respect to the Lease Indenture Estate, and all rights,
powers and remedies of the Indenture Trustee shall continue as if no such
proceedings had been taken.
SECTION 6.7. Waiver of Past Defaults.
Any past Indenture Default or Indenture Event of Default and
its consequences may be waived by the Indenture Trustee, except an Indenture
Default or an Indenture Event of Default (i) in the payment of the principal of
or interest on any Note, subject to the provisions of Section 1.1 hereof, or
(ii) in respect of a covenant or provision hereof which, under Section 10.2
hereof, can~ot be modified or amended without the consent of each Holder of a
Note then outstanding. Upon any such waiver, such Indenture Default or Indenture
Event of Default shall cease to exist, and any other Indenture Event of Default
arising therefrom shall be deemed to have been cured, for every purpose of this
Indenture; but no such waiver shall extend to any subsequent dr other Indenture
Default or Indenture Event of Default or impair any right consequent thereon.
SECTION 6.8. Right of Owner Trustee to Pay Rent; Note
Purchase; substitute Lessee.
Anything in this Article VI or Article VII to the contrary
notwithstanding:
-34-
6091. CHASEUl. LEASE.o7:2
<PAGE>
(a) an Indenture Event of Default shall be deemed cured if
such Indenture Event of Default results from non-payment of Basic Rent or
Supplemental Rent under the Facility Lease, and the Owner Trustee or the Owner
Patticipant shall have paid all principal of and interest on the Notes due
(other than by acceleration) on the date such Basic Rent was payable (plus
interest on such amount as required hereby) within 20 days after the receipt by
the Owner Trustee of notice of such non-payment, such receipt to be evidenced
by, among other things any notice thereof given to the Owner Trustee in
accordance with the notice provisions of the Participation Agreement. The Owner
Trustee or the Owner Participant, upon exercising cure rights under this
paragraph (a), shall not obtain any Lien on any part of the Lease Indenture
Estate on account of such payment for the costs and expenses incurred in
connection there-with nor, except as expressly provided in the succeeding
sentence, shall any claims of the Owner Trustee or the Owner Participant against
the Lessee or any other Person for the repayment thereof impair the prior right
and security interest of the Indenture Trustee in and to the Lease Indenture
Estate. Upon any payment by the Owner Trustee or the Owner Participant pursuant
to this Section 6.8, the Owner Trustee or the Owner Participant, as the case may
be, shall (to the extent of such payment made by it) be subroqated to the rights
of the Indenture Trustee and the Holders or the Notes to receive the payment of
Rent with respect to which the Owner Trustee or the Owner Participant made such
payment and interest on account of such Rent payment being overdue in the manner
set forth in the next sentence. If the Indenture Trustee shall thereafter
receive such payment of Rent or such interest, the Indenture Trustee shall,
notwithstanding the requirements of Section 5.1, on the date such payment is
received by the Indenture Trustee, remit such payment of Rent (to the extent of
the payment made by the Owner Trustee or the Owner Participant pursuant to this
Section 6.8) and such interest to the Owner Trustee or the Owner Participant, as
the case may be, in reimbursement for the funds so advanced by it.
(b) Each Holder of a Note agrees, by accep tance thereof, that
if the Notes have been accelerated pursuant to Section 7.1, and the Owner
Trustee, within 30 days after receiving notice from the Indenture Trustee
pursuant to Section 7.1 hereof, shall give writ-ten notice to the Indenture
Trustee of the Owner Trustee's intention to purchase all of the Notes in
6091. cHASEUl LEASE.o7:2
-35-
<PAGE>
accordance with this paragraph, accompanied by assurances of the Owner Trustee
to purchase the Notes, then, upon receipt within 10 Business Days after such
notice from the Owner Trustee of an amount equal to the aggregate unpaid
principal amount of and any premium with respect to any unpaid Notes then held
by such Holder, together with accrued but unpaid interest thereon to the date of
such receipt (as well as any interest on overdue principal and, to the extent
permit-ted by law, interest) , such Holder will forthwith sell, assign, transfer
and convey to the Owner Trustee (without recourse or warranty of any kind other
than of title to the Notes so conveyed) all of the right, title and interest of
such Holder in and to the Lease Indenture Estate, this Indenture and all Notes
held by such Holder; provided, that no such Holder shall be required so to
convey unless (1) the Owner Trustee shall have simultaneously tendered payment
for all other Notes issued by the Owner Trustee at the time Outstanding pursuant
to this paragraph and (2) such conveyance is not in violation of any Applicable
Law
(c) Each Holder of a Note further agrees by its acceptance
thereof that the Owner Trustee shall have the right, pursuant to Section 16 of
the Facility Lease, to terminate the Facility Lease and, in connection
therewith, to arrange for the substitution of another Person as lessee under a
new lease substantially similar to the FacilitY Lease (hereinafter the
Substituted Lessee) and, subject to: (i) any Indenture Event of flefault under
paragraphs (d) and (e) of Section 6.2 having been cured by the owner Trustee,
(ii) the Substituted Lessee's assuming all of the obligations of the Lessee
under the Facility Lease and (iii) the Substituted Lessee's having an assigned
credit rating by standard & Poor's corporation and Moody's Investors Service,
Inc (or, if either of such organizations shall not rate securities issued by
such Substituted Lessee, by any other nationally recognized rating organization
in the United States of America) with respect to at least one series of its debt
obligations or preferred stock equal to or better than the ratings assigned,
immediately prior to such substitution, by such organizations to comparable
securities of the Lessee immediately prior to such substitution but in no event
less than 11investrnent grade", then the Facility Lease between the Owner
Trustee and such Substituted Lessee shall, for all purposes of this Indenture,
be deemed to be the Facility Lease subject to the lien of this Indenture.
-36-
6091. CHASEUl LEASE.07:2
<PAGE>
SECTION 6.9. Further Assurances.
Subject to Section 7.6 hereof, the Owner Trustee covenants and
agrees from time to time to do all such acts and execute all such instruments of
further assurance as shall be reasonably requested by the Indenture Trustee for
the purpose of fully carrying out and effectuating this Indenture and the intent
hereof.
SECTION 6.10. Right of Indenture Trustee To Perform covenants,
etc.
If the Owner Trustee shall tail to make any payment or perform
any act required to be made or performed by it hereunder or under the Facility
Lease or if the Owner Trustee shall fail to release any Lien affecting the Lease
Indenture Estate which it is required to release by the terms of this Indenture,
the Indenture Trustee, without notice to or demand upon the Owner Trustee and
without waiving or releasing any obligation or default, may (but shall be under
no obligation to) at any time thereafter make such payment or perform such act
for the account and at the expense of the Lease Indenture Estate. All sums so
paid by the Indenture Trustee and all costs and expenses (including without
limitation reasonable fees and expenses of legal counsel and other
professionals) so incurred, together with interest thereon from the date of
payment or occurrence, shall constitute additional indebtedness secured by this
Indenture and shall be paid from the Lease Indenture Estate to the Indenture
Trustee on demand. The Indenture Trustee shall not be liable for any damages
resulting from any such payment or action unless such damages shall be a
consequence of willful misconduct or gross negligence on the part of the
Indenture Trustee.
SECTION 6.11. Certain Other Rights of the Owner Trustee.
Notwithstanding any provision to the contrary in this
Indenture, the Owner Trustee shall at all times retain, to the exclusion of the
Indenture Trustee, all rights of the Owner Trustee to exercise any election or
option or to make any decision or determination or to give or receive any
notice, consent, waiver or approval or to take any other action under or in
respect of the Facility Lease, as wel1l as all rights, powers and remedies on
the part of the Owner Trustee, whether arising under the Facility Lease or by
statute or at law or in equity or otherwise, arising out of any Default or Event
-37-
6091 SCHASEUl. LEASE.07:2
<PAGE>
of Default subject, however, to Section 10.2. Without the prior written consent
of the Indenture Trustee, the exercise of any of the aforesaid rights so
retained by the Owner Trustee shall not be exercised in such a manner as to (i)
reduce the amounts payable by the Lessee under the Facility Lease below the
amounts necessary to provide the Owner Trustee with sufficient monies to make
timely payments in full of amounts due with respect to the principal of and
premium, if any, and interest on all Notes or (ii) rescind or terminate the
Facility Lease pursuant to Section 16 thereof. Nor shall the Owner Trustee
exercise any other right or remedy under the Facility Lease the effect of which
would be to effect such rescission or termination.
ARTICLE VII
CERTAIN DUTIES OF THE OWNER
TRUSTEE AND THE INDENTURE TRUSTEE
SECTION 7.1. Duties in Respect of Events of Default, Deemed
Loss Events and Events of Loss; Acceleration of Maturity.
In the event the Owner Trustee shall have actual knowledge of
an Indenture Event of Default, an Event of Default, a Deemed Loss Event or an
Event of Loss, the Owner Trustee shall give prompt written notice thereof to the
Owner Participant, the Lessee and the Indenture Trustee. In the event the
Indenture Trustee shall have actual knowledge of an Event of Default, an
Indenture Event~of Default, a Deemed Loss Event or an Event of Loss, the
Indenture Trustee shall give prompt written notice thereof to the Owner
Participant, the Owner Trustee, the Lessee and each Holder of a Note. subject to
the terms of Sections 6.2, 6.3, 6.4, 6.8, 6.11 and 7.3 hereof, (a) the Indenture
Trustee shall take such action (including the waiver of past Defaults in
acdordance with Section 6.7 hereof), or refrain from taking such action, with
respect to any such Indenture Event of Default, Event of Default, Deemed Lass
Event or Ev~nt of Loss as the Indenture Trustee shall be instructed by a
Directive, (b) if the Indenture Trustee shall not have received instructions as
above provided within 20 days after mailing by the Indenture Trustee of notice
of such Indenture Event of Default, Event of Default, Deemed Loss Event or Event
-38-
6091. CHASEUl. LEAsE.07:2
<PAGE>
of Loss to the Persons referred to above, the Indenture Trustee may, subject to
instructions thereafter received pursuant to the preceding sentence, take such
action, or refrain from taking such action, but shall be under no duty to take
or refrain from taking any action, with respect to such Indenture Event of
Default, Event of Default, Deemed Loss Event or Event of Loss as it shall
determine advisable in the best interests of the Holders of the Notes of all
series and (c) in the event that an Indenture Event of Default shall have
occurred and be continuing, the Indenture Trustee in its discretion may, or upon
receipt of a Directive shall, by written notice to the Owner Trustee, declare
the unpaid principal amount of all Notes with accrued interest thereon to be
immediately due and payable, upon which declaration such principal amount and
such accrued interest shall immediately become due and payable without further
act or notice of any kind. For all purposes of this Indenture, in the absence of
actual knowledge, neither the Owner Trustee nor the Indenture Trustee shall be
deemed to have knowledge of an Indenture Event of Default or Event of Default
except that the Indenture Trustee shall be deemed to have knowledge of the
failure of the Lessee to pay any installment of Basic Rent within 10 Business
Days after the same shall become due. For purposes of this Section 7.1, neither
the Owner Trustee nor the Indenture Trustee shall be deemed to have actual
knowledge of any Indenture Event of Default, Event of Default, Deemed Loss Event
or Event of Loss unless it shall have received notice thereof pursuant to
Section 11.6 hereof or such Indenture Event of Default or Event of Default shall
actually be known by an officer in the corporate trust department of the Owner
Trustee or by an officer in the Corporate Trustee Administration~Department of
the Indenture Trustee, as the case may be.
SECTION 7.2. Duties in Respect of Matters Specified in
Directive.
Subject to the terms of sections 6.2, 6.3, 6.4, 6.8, 6.11, 7.1
and 7.3 hereof, upon receipt of a Directive, the Indenture Trustee shall take
such of the following actions as may be specified in such Directive: (i) give
such notice or direction or exercise such right, remedy or power permitted
hereunder or permitted with respect to the racility Lease or in respect of any
part or all of the Lease Indenture Estate as shall be specified in such
Directive; and (ii) take such action to preserve or protect the tease Indenture
-39-
6091 - CHASEUl. L(pound)AsE.07:2
<PAGE>
Estate as shall be specified in such Directive, it being agreed that without
such a Directive, the Indenture Trustee shall not waive, consent to or approve
any such matter as satisfactory to it.
SECTION 7.3. Indemnification.
The Indenture Trustee shall not be required to take or refrain
from taking any action under section 7.1 or 7.2 or Article VI hereof which shall
require the Indenture Trustee to expend or risk its own funds or otherwise incur
any financial liability unless the Indenture Trustee shall have been indemnified
by the Holders of the Notes against liability, cost or expense (including
counsel fees) which may be incurred in connection therewith, or unless, in the
reasonable judgment of the Indenture Trustee, the indemnities of the Lessee
shall be adequate for such purpose; provided, however, that if the Molder of
such Mctes is the collateral Trust Trustee, the unsecured written undertaking of
the collateral Trust Trustee, in its individual capacity, shall be sufficient
indemnity for purposes of this Section. The Indenture Trustee shall not be
required to take any action under Section 7.1 or 7.2 or Article VI hereof nor
shall any other provision of this Indenture be deemed to impose a duty on the
Indenture Trustee to take any action, if the Indenture Trustee shall reasonably
determine, or shall have been advised by counsel, that such action is likely to
result in personal liability or is contrary to the terms hereof or of the
Facility Lease or is otherwise contrary to law.
SECTION 7.4. Lixitations on Duties; Discharge of certain Liens
Resulting from Claims Against Indenture Trustee.
The Indenture Trustee shall have no duty or obligation to take
or refrain from taking any action under, or in connection with, this Indenture
or the Facility Lease, except as expressly provided by the terms of this
Indenture. The Indenture 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 duly to discharge all Liens on any part of the Lease
Indenture Estate which result from acts by or claims against it arising out of
events or conditions not related to its rights in the Lease Indenture Estate or
the administration of the Lease Indenture Estate or the transactions
contemplated hereby.
-40-
6091 CHASEUl LEASE. 07:2
<PAGE>
SECTION 7.5. Restrictions on Dealing with Lease Indenture
Estate.
Except as provided in the Transaction Documents, the Owner
Trustee shall not use, operate, store, lease, control, manage, sell, dispose of
or otherwise deal with any part of the Lease Indenture Estate.
SECTION 7.6. Filing of Financing statements and Continuation
Statements.
Pursuant to section 10(b) (2) of the participation Agreement,
the Lessee has covenanted to maintain the priority of the lien of this Indenture
on the Lease indenture Estate. The indenture Trustee shall, at the request and
expense of the Lessee as provided in the Participation Agreement, execute and
deliver to the Lessee and the Lessee will file, if not already filed, such
financing statements or other documents and such continuation statements or
other documents with respect to financing statements or other documents
previously filed relating to the lien created under this Indenture in the Lease
Indenture Estate as may be necessary to protect, perfect and preserve the lien
created under this Indenture. At any time and from time to time, upon the
request of the Lessee or the Indenture Trustee, at the expense of the Lessee as
provided in the Participation Agreement (and upon receipt of the form of
document so to be executed), the Owner Trustee shall promptly and duly execute
and deliver any and all such further instruments and documents as the Lessee or
the Indenture Trustee may reasonably request in order for the Indenture Trustee
to obtain the full benefits of the security interest, assignment and mortgage
created or intended to be created hereby and of the rights and powers herein
granted. Upon the reasonable instructions (which instructions shall be
accompanied by the form of document to be filed) at any time and from time to
time of the Lessee or the Indenture Trustee, the Owner Trustee shall execute and
file any financing statement (and any continuation statement with respect to any
such financing statement), any certificate of title or any other document, in
each case relating to the security interest, assignment and mortgage created by
this Indenture, as may be specified in such instructions. In addition, the
Indenture Trustee and the Owner Trustee will execute such continuation
statements with respect to financing statements and other documents relating to
-41-
6091.CHASEUl.LEASE.07:2
<PAGE>
the lien created under this Indenture in the Lease Indenture Estate as may be
reasonably specified from time to time in written instructions of any Holder of
a Note (which instructions may, by their terms, be operative only at a future
date and which shall be accompanied by the form of such continuation statement
or other document so to be filed).
ARTICLE VIII
CONCERNING THE OWNER TRUSTEE AND
THE INDENTURE TRUSTEE
SECTION 8.1. Acceptance of Trusts; Standard of Care.
The Indenture Trustee accepts the trusts hereby created and
applicable to it and agrees to perform the same but only upon the terms of this
Indenture and the Participation Agreement and agrees to receive and disburse all
moneys constituting part of the Lease Indenture Estate in accordance with the
provisions hereof, provided that no implied duties or obligations shall be read
into this Indenture or the Participation Agreement against the Indenture
Trustee. The Indenture Trustee shall enter into and perform its obligations
under the Participation Agreement, and, at the request of the owner Trustee, any
other agreement relating to any transfer of the undivided Interest or the Real
Property Interest or the assignment of rights under the Assignment and
Assumption or, at the request of the Owner Trustee, the purchase by any Person
of Notes or Additional Notes issued hereunder, all as contemplated hereby. The
Indenture Trustee shall not be liable under any circumstances, except for its
own willful misconduct or gross negligence. If any Indenture Event of Default
shall have occurred and be continuing, the Indenture Trustee shall exercise such
of the rights and remedies vested in it by this Indenture, subject to the
provisions hereof, and shall use the same degree of care in their exercise as a
prudent man would exercise or use in the circumstances in the conduct of his own
affairs; provided that if in the opinion of the Indenture Trustee such action
may tend to involve expense or liability, it shall not be obligated to take such
action unless it is furnished with indemnity satisfactory to it.
-42-
6091.CHASEUl.LEASE.07:2
<PAGE>
SECTION 8.2. No Duties of Maintenance, Etc.
Except pursuant to Section 7.2 hereof and except as provided
in, and without limiting the generality of, Sections 7.1 and 7.4 hereof, the
Indenture Trustee shall have no duty (i) to see to any recording or filing of
any Transaction Document, or to see to the maintenance of any such recording or
filing, or (ii) to see to the payment or discharge of any tax, assessment or
other governmental charge or any lien or encumbrance of any kind owing with
respect to, or assessed or levied against, any part of the Lease Indenture
Estate (except such as are required to be paid or discharged by it pursuant to
this Indenture or any of the other Transaction Documents) or to make or file any
reports or returns related thereto.
SECTION 8.3. Representations and Warranties of Indenture
Trustee and the Owner Trustee.
NEITHER THE OWNER TRUSTEE NOR THE INDENTURE TRUSTEE MAKES ANY
REPRESENTATION OR WARRANTY AS TO THE VALUE, CONDITION, MERCHANTABIUTY OR FITNESS
FOR USE OF UNIT 1, THE UNDIVIDED INTEREST OR ANY PART OF THE LEASE INDENTURE
ESTATE OR AS TO ITS INTEREST THEREIN, OR ANY OTHER REPRESENTATION OR WARRANTY
WITH RESPECT TO UNIT 1, THE UNDIVIDED INTEREST OR ANY PART OF THE LEASE
INDENTURE ESTATE WHATSOEVER. The Owner Trustee and the Indenture Trustee each
represents and warrants, in its individual capacity, as to itself that this
Indenture has been executed and delivered by one or more of its officers who are
duly authorized to execute and deliver this Indenture on its behalf.
SECTION 8.4. Moneys Meld in Trust; Non-Segregation of Moneys.
All moneys and securities deposited with and held by the
Indenture Trustee under this Indenture for the purpose of paying, or securing
the payment of, the principal of or premium or interest on the Notes shall be
held in trust. Except as provided in Sections 2.3(c), 8.8 and 11.1 hereof,
moneys received by the Indenture Trustee under this Indenture 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; provided,
however, that any payments received or applied hereunder by the Indenture
Trustee shall be accounted for by the Indenture Trustee so that any portion
6091.CHASEUl.LEASE.07:2
-43-
<PAGE>
thereof paid or applied pursuant hereto shall be identifiable as to the source
thereof. Except as otherwise expressly provided herein, the Indenture Trustee
shall not be liable for any interest on any money held pursuant to this
Indenture.
SECTION 8.5. Reliance on writings, Use of Agents, Etc.
The Indenture Trustee shall incur no liability to anyone in
acting upon any signature, instrument, notice, resolution, request, consent,
telegram, 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. In the case of the Lessee, the Indenture Trustee may accept a copy
of a resolution of the Board of Directors or any duly constituted and authorized
committee of the Board of Directors of the Lessee, certified by the Secretary or
an Assistant Secretary of the Lessee as duly adopted and in full force and
effect, as conclusive evidence that such resolution has been duly adopted by
such Board or Committee and that the same is in full force and effect. As to the
aggregate unpaid principal amount of the Notes outstanding as of any date, the
owner Trustee may for all purposes hereof rely on a certificate signed by any
Authorized Officer of the Indenture Trustee. As to any fact or matter the manner
of ascertainment of which is not specifically described herein, the Indenture
Trustee may for all purposes hereof rely on a certificate, signed by the
Chairman of the Board, the president, any Vice president and the Treasurer or
the Secretary or any Assistant Treasurer or Assistant Secretary of the Lessee ,
or a Holder of a Note or any Responsible officer of the Owner Trustee, as the
case may be, as to such fact or matter, and such certificate shall constitute
full protection to the Indenture Trustee for any action taken or omitted to be
taken by it in good faith in reliance thereon. The Indenture Trustee shall
furnish to the owner Trustee upon request such information and copies of such
documents as the Indenture Trustee may have and as are necessary for the Owner
Trustee to perform its duties under Article III hereof. In the administration of
the trusts hereunder, the Indenture Trustee may execute any of the trusts or
powers hereof and perform its powers and duties hereunder directly or through
agents or attorneys selected by it in good faith and with reasonable care, and,
with respect to matters relating to the Notes, the Lease Indenture Estate and
-44-
609l.CHASEUl.LEASE.07:2
<PAGE>
its rights and duties under this Indenture and the other Transaction Documents,
may, at the expense of the Lessee, or, if the Lessee shall have failed to pay or
provide for the payment thereof, at the expense of the Lease Indenture Estate,
consult with counsel, accountants and other skilled persons to be selected and
employed by it in good faith and with reasonable care, and the Indenture Trustee
shall not be liable for anything done, suffered or omitted in good faith by it
in accordance with the advice or opinion of any such counsel, accountants or
other skilled persons so selected. Unless otherwise specified herein or in any
other Transaction Document, any opinion of counsel referred to in this Indenture
or in such other Transaction Document may be relied on by the Indenture Trustee
to the extent it is rendered by an attorney or firm of attorneys satisfactory to
the Indenture Trustee (which may be counsel to the Owner Participant, the Owner
Trustee, the Lessee or any party to any Transaction Document)
SECTION 8.6. Indenture Trustee to Act Solely as Trustee.
The Indenture Trustee acts hereunder solely as trustee as
herein provided and not in any individual capacity, except as otherwise
expressly provided herein; and except as provided in Sections 9(a) and 9(b) of
the Participation Agreement or section 7.4 or 8.1 hereof, all Persons having any
claim against the Indenture Trustee arising from matters relating to the Notes
by reason of the transactions contemplated hereby shall, subject to the lien and
priorities of payment as herein provided and to Sections 3.6 and 5.7, look only
to the Lease Indenture Estate for payment or satisfaction thereof.
SECTION 8.7. Limitation on Rights Against Registered Holders,
the Owner Trustee or Lease Indenture Estate.
The Indenture Trustee shall be entitled to be paid or
reimbursed for Trustee's Expenses as provided herein and in the other
Transaction Documents. Nonetheless, the Indenture Trustee agrees that it shall
have no right against the Holders of the Notes, the Owner Trustee (except to the
extent included in Transaction Expenses payable by the Owner Participant) or,
except as provided in Article V and Section 6.4 or this Article VIII, the Lease
Indenture Estate for any fee as compensation for its services hereunder.
-45-
6091.CHASEUl.LEASE.07:2
<PAGE>
SECTION 8.8. Investment of certain Payments Held by the
Indenture Trustee.
Any amounts held by the Indenture Trustee hereunder other than
pursuant to Section 2.3(c) or 11.1 hereof shall be invested by the Indenture
Trustee from time to time as directed in writing by the Owner participant and at
the expense and risk of the Owner participant in (i) obligations of, or
guaranteed as to interest and principal by, the United states Government
maturing not more than 90 days after such investment, (ii) open market
commercial paper of any corporation incorporated under the laws of the United
States of America or any State thereof rated "prime-1" or its equivalent by
Moody's Investors Service, Inc. or "A-1" or its equivalent by Standard & Poor's
corporation or (iii) certificates of deposit maturing within 90 days after such
investment issued by commercial banks organized under the laws of the United
States of America or of any political subdivision thereof having a combined
capital and surplus in excess of $500,000,000; provided, however, that the
aggregate amount at any one time so invested (a) in open market commercial paper
of any corporation shall not exceed $2,000,000 and (b) in certificates of
deposit issued by any one bank shall not exceed $10,000,000. Any income or gain
realized as a result of any such investment shall be applied to make up any
losses resulting from any such investment to the extent such losses shall not
have been paid by the Owner Trustee or the Owner Participant pursuant to this
Section 8.8. Any further income or gain so realized shall be promptly
distributed (in no event later than the next Business Day) to the owner Trustee
or the Owner Participant, except after the occurrence and during the continuance
of an Indenture Event of Default. The Indenture Trustee shall have no liability
for any loss resulting from any investment made in accordance with this Section.
Any such investment may be sold (without regard to maturity date) by the
Indenture Trustee whenever necessary to make any distribution required by
Article V hereof.
SECTION 8.9. No Responsibility far Recitals, etc.
The Indenture Trustee makes no representation or warranty as
to the correctness of any statement, recital or representation made by any
Person other than the Indenture Trustee in this Indenture, any other Transaction
Document or the Notes.
-46-
6091. CHASEUl.LEASE.07:2
<PAGE>
SECTION 8.10. Indenture Trustee May Engage in Certain
Transactions.
The Indenture Trustee may engage in or be interested in any
financial or other transaction with the Lessee, the Owner Participant, the Owner
Trustee and any other party to a Transaction Document, provided that if the
Indenture Trustee determines that any such relation is in conflict with its
duties under this Indenture, it shall eliminate the conflict or resign as
Indenture Trustee.
SECTION 8.11 Construction of Ambiguous Provisions.
The Indenture Trustee, subject to Section 8.1 hereof, may
construe any ambiguous or inconsistent provisions of this Indenture, and any
such construction by the Indenture Trustee shall be binding upon the
Noteholders. In construing any such provision, the Indenture Trustee will be
entitled to rely upon opinions of counsel and will not be responsible for any
loss or damage resulting from reliance in good faith thereon, except for its own
gross negligence or willful misconduct.
ARTICLE IX
SUCCESSOR TRUSTEES
SECTION 9.1. Resignation and Removal of Indenture Trustee;
Appointment of Successor.
(a) The Indenture Trustee may resign at any time without cause
by giving at least 30 days' prior written notice to the Owner Participant, the
Owner Trustee, the Lessee and to each Holder of a Note, such resignation to be
effective upon the acceptance of such trusteeship by a successor. In addition,
the Indenture Trustee may be removed without cause by a Directive delivered to
the Owner Participant, the Owner Trustee, the Lessee and the Indenture trustee,
and the Indenture Trustee shall promptly give notice thereof in writing to each
Holder of a Note. In the case of the resignation or removal of the Indenture
Trustee, a successor trustee may be appointed by such a Directive. If a
6091.CHASEUl.LEASE.07:2
-47-
<PAGE>
successor trustee shall not have been appointed within 30 days after such notice
of resignation or removal, the Indenture Trustee, the Owner Trustee or any
Holder of a Note may apply to any court of competent jurisdiction to appoint a
successor to act until such time, if any, as a successor shall have been
appointed as above provided. The successor so appointed by such court shall
immediately and without further act be superseded by any successor appointed as
above provided within one year from the date of the appointment by such court.
(b) Any successor trustee, however appointed, shall execute
and deliver to its predecessor and to the Owner Trustee an instrument accepting
such appointment, and thereupon such successor, without further act, shall
become vested with all the estates, properties, rights, powers and duties of its
predecessor hereunder in the trusts under this Indenture applicable to it with
like effect as if originally named the Indenture Trustee; but, nevertheless,
upon the written request of such successor trustee or receipt of a Directive,
its predecessor shall execute and deliver an instrument transferring to such
successor trustee, upon the trusts herein expressly applicable to it, all the
estates, properties, rights and powers of such predecessor under this Indenture,
and such predecessor shall duly assign, transfer, deliver and pay over to such
successor trustee all moneys or other property then held by such predecessor
under this Indenture.
(c) Any successor trustee, however appointed, shall be a bank
or trust company organized under the laws of the united states or any
jurisdiction thereof having a combined capital and surplus of at least
$100,000,000, if there be such an institution willing, able and legally
qualified to perform the duties of the Indenture Trustee hereunder upon
reasonable or customary terms.
(d) Any corporation into which the Indenture 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 Indenture
Trustee shall be a party, or any corporation to which substantially all the
corporate trust business of the Indenture Trustee may be transferred, shall,
subject to the terms of paragraph (c) of this section 9.1, be the Indenture
Trustee under this Indenture without further act.
-48-
6091.CHASEUl.LEASE.07:2
<PAGE>
ARTICLE X
SUPPLEMENTS AND AMENDMENTS TO THIS
INDENTURE AND OTHER DOCUMENTS
SECTION 10.1. Supplements, Amendments and Modifications to
This Indenture Without Consent of Holders of Notes.
The Indenture Trustee may, with the written consent of the
Owner Trustee, from time to time and at any time execute a supplement to this
Indenture without the consent of the Holders of Notes Outstanding in order to
(i) cure any defect, omission or ambiguity in this Indenture or for any other
purpose if such action does not adversely affect the interests of such Holders,
(ii) grant or confer upon the Indenture Trustee for the benefit of such Holders
any additional rights, remedies, powers, authority or security which may be
lawfully granted or conferred and which are not contrary to or inconsistent with
this Indenture, (iii) add to the covenants or agreements to be observed by the
Owner Trustee and which are not contrary to this Indenture or surrender any
right or power of the Owner Trustee, (iv) confirm or amplify, as further
assurance, any pledge under, and the subjection to any lien or pledge created or
to be created by, this Indenture, of the properties covered hereby, or subject
to the lien or pledge of this Indenture additional revenues, properties or other
collateral, including pursuant to an undivided Interest Indenture supplement,
(v) qualify this Indenture under the provisions of the Trust Indenture Act, (vi)
evidence the appointment of any successor Indenture Trustee pursuant to the
terms hereof, (vii) evidence the assumption and release affected by the
Assumption Agreement, or (viii) execute supplemental indentures to evidence the
issuance of and to provide the terms of, Additional Notes to be issued hereunder
in accordance with the terms hereof
SECTION 10.2. Supplements and Amendments to this Indenture and
the Facility Lease With Consent of Holders of Notes.
Except as provided in Section 10.1 hereof, at any time and
from time to time, (i) upon receipt of a Directive, the Indenture Trustee shall
execute a supplement to this Indenture (to which the Owner Trustee has agreed in
6091.CHASEUl.LEASE.07:2
-49-
<PAGE>
writing) for the purpose of adding provisions to, or changing or eliminating
provisions of, this Indenture, but only as specified in such Directive and, (ii)
upon receipt of a written instruction from the Lessee and the Owner Trustee, the
Indenture Trustee shall consent to any amendment of or supplement to the
Facility Lease or execute and deliver such written waiver or modification of the
terms of the Facility Lease to which the Owner Trustee may agree; provided,
however, that, without the consent at the Holders of all the Notes then
outstanding no such supplement or amendment to this Indenture or the Facility
Lease, or waiver or modification of the terms of either thereof, shall (x)
modify any of the provisions of this section or of section 7.1 or 7.2 hereof or
section 4 of the Facility Lease or of the definition of Directive contained in
Appendix A hereto or the definition of Indenture Event of Default herein, reduce
the amount of the Basic Rent, Casualty Value, special Casualty Value.,
Termination Value or any payment under or pursuant to section 16 of the Facility
Lease as set forth in the Facility Lease below such amount as is required to pay
the full principal of, and premium, if any, and interest on, the Notes when due,
or extend the time of payment thereof, (y) except as permitted by clause (x)
above, modify, amend or supplement the Facility Lease or consent to the
termination or any assignment thereof, in any case reducing the Lessee's
obligations in respect of the payment of the Basic Rent, Casualty Value, special
casualty Value, Termination Value or any payment under or pursuant to section 16
of the Facility Lease below the amount referred to in clause (x) above, or (z)
deprive the Holders of any Notes of the lien of this Indenture on the Lease
Indenture Estate (except as contemplated by section 3.9(b)}or materially
adversely affect the rights and remedies for the benefit of such Holders
provided in Article VI of this Indenture; and, provided, further, that, without
the consent of the Holders of all the Notes then outstanding and affected
thereby no such supplement or amendment to this Indenture or the Facility Lease,
or waiver or modification of the terms of either thereof, shall reduce the
amount or extend the time of payment of any amount payable under any Note,
reduce or modify the provisions for the computation of the rate of interest
owing or payable thereon, adversely alter or modify the provisions of Article V
with respect to the order of priorities in which distributions thereunder with
respect to the Motes shall be made, or reduce, modify or amend any indemnities
in favor of the Holders of the Notes. Anything to the contrary contained herein
-50-
6091.CHASEUl.LEASE.07:2
<PAGE>
notwithstanding, without the necessity of the consent of the Holders of Notes or
the Indenture Trustee, (a) any indemnities in favor of the Owner Trustee or the
Owner Participant may be modified, amended or changed and (b) the Owner Trustee
may enter into any agreement with respect to the Lease Indenture Estate which by
its terms does not become effective prior to the satisfaction and discharge of
this Indenture, provided, however, that any agreement entered into by the Owner
Trustee pursuant to this clause (b) shall not materially adversely affect the
Indenture Trustee or the Holder of any Note. Notwithstanding the foregoing, the
Indenture Trustee shall, upon receipt or a written instruction from the Lessee
and the Owner Trustee, consent to an amendment of the definitions of "Deemed
Loss Event, "Event of Loss" and "Final Shutdown" contained in or appended to the
Facility Lease or this Indenture. The Owner Trustee shall deliver to the
Indenture Trustee a copy of each amendment to the Facility Lease whether or not
the Indenture Trustee is required to consent or otherwise act with respect
thereto.
SECTION 10.3. Certain Limitations on supplements and
Amendments.
If in the opinion of the Owner Trustee or the Indenture
Trustee, each of which shall be entitled to rely on counsel for purposes of this
Section 10.3, any document required to be executed by either of them pursuant to
the terms of Section 10.1 or 10.2 does not comply with the provisions of this
Indenture or adversely affects any right, immunity or indemnity in favor of, or
increases any duty of, the Owner Trustee or the Indenture Trustee under this
Indenture, the Facility Lease or the Participation Agreement, the Owner Trustee
or the Indenture Trustee, as the case may be, may in its discretion decline to
execute such document.
SECTION 10.4. Directive Need Not Specify Particular Form of
Supplement or Amendment.
It shall not be necessary for any Directive furnished pursuant
to Section 10.2 hereof to specify the particular form of the proposed documents
to be executed pursuant to such Section, but it shall be sufficient if such
request shall indicate the substance thereof.
6091.CHASEUl.LEASE.07:2
-51-
<PAGE>
SECTION 10.5. Trustee to Furnish Copies of Supplement or
Amendment.
Promptly after the execution by the Owner Trustee or the
Indenture Trustee of any document entered into pursuant to Section 10.2, the
Indenture Trustee shall mail, by first-class mail, postage prepaid, a con-formed
copy thereof to each Holder of an outstanding Note at the address of such Person
set forth in the register kept pursuant to section 4.1 but the failure of the
Indenture Trustee to mail such conformed copies shall not impair or affect the
validity of such document.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. Moneys for Payments in Respect of Notes to be
Held in Trust.
In case the Holder of any Note shall fail to present the same
for payment on any date on which the principal thereof or interest thereon
becomes payable, the Indenture Trustee may set aside in trust the moneys then
due thereon uninvested and shall pay such moneys to the Holder of such Note or
such Person upon due presentation or surrender thereof in accordance with the
provisions of this Indenture, subject always, however, to the provisions of
Sections 3.8 and 11.2.
SECTION 11.2. Disposition of Moneys Held for Payments of
Notes.
Any moneys set aside under section 11.1 and not paid to
Holders of Notes as provided in Section 11.1 shall be held by the Indenture
Trustee in trust until the latest of (i) the date three years after the date of
such setting aside, (ii) the date all other Holders of the Notes shall have
received full payment of all principal of and interest and other sums payable to
them on such Notes or the Indenture Trustee shall hold (and shall have, notified
such persons that it holds) in trust for that purpose an amount sufficient to
make full payment thereof when due and (iii) the date the Owner Trustee shall
have fully performed and observed all its covenants and obligations contained in
-52-
6091.CHASEU1.LEASE.07:2
<PAGE>
this Indenture with respect to the Notes; and thereafter shall be paid to the
Owner Trustee by the Indenture Trustee on demand; and thereupon the Indenture
Trustee shall be released from all further liability with respect to such
moneys; and thereafter the Holders of the Notes in respect of which such moneys
were so paid to the Owner Trustee shall have no rights in respect thereof except
to obtain payment of such moneys from the Owner Trustee. Upon the setting aside
of such moneys, interest shall cease to accrue on the Notes.
SECTION 11.3. Transfers Not to Affect Indenture or Trusts.
No Holder of a Note shall have legal title to any part of the
Lease Indenture Estate. No transfer, by operation of law or otherwise, of any
Note or other right, title and interest of any Holder of a Note in and to the
Lease Indenture Estate or hereunder shall operate to terminate this Indenture or
the trusts hereunder with respect to such Note or entitle any successor or
transferee of such Holder to an accounting or to the transfer to it of legal
title to any part of the Lease Indenture Estate.
SECTION 11.4. Binding Effect of Sale of Lease Indenture
Estate.
Any sale or other conveyance of the Lease Indenture Estate or
any part thereof by the Indenture Trustee made pursuant to the terms of this
Indenture or the Facility Lease shall bind the Holders of the Notes and shall be
effective to transfer or convey all right, title and interest of the Indenture
Trustee, the Owner Trustee and such Holders in and to the same. 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 Indenture Trustee.
SECTION 11.5. Limitation as to Enforcement of Rights, Remedies
and Claims.
Nothing in this Indenture, whether express or implied, shall
be construed to give to any Person, other than the Owner Trustee, the Owner
Participant, the Lessee (to the extent the Lessee's consent or other action by
the Lessee is expressly provided for) , the Indenture Trustee and the Holders of
the Notes, any legal or equitable right, remedy or claim under or in respect of
this Indenture or any Note.
6091.CHASEUl.LEASE.07:2
-53-
<PAGE>
SECTION 11.6. Notices.
Unless otherwise expressly specified or permitted by the terms
hereof, all communications and notices given hereunder to the Lessee, the Owner
Trustee, the Owner Participant or the Indenture Trustee shall be given in the
manner provided in Section 18 of the participation Agreement. Notices by the
Indenture Trustee to any Holder of a Note shall be in writing and 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 to such Holder at the address set forth in the register kept pursuant
to Section 4.1. whenever any notice in writing is required to be given by the
Indenture Trustee to any Holder of a Note such notice shall be effective (x) if
sent by telex, telecopy or other wire transmission, on the date of transmission
thereof, or (y) if sent by mail, three Business Days after being mailed.
SECTION 11.7. Separability of Provisions
In case any one or more of the provisions of this Indenture or
any application thereof shall be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
hereof and any other application hereof shall not in any way be affected or
impaired.
SECTION 11.8 Benefit of Parties, Successors and Assigns.
All representations, warranties, covenants and agreements
contained herein shall be binding upon, and inure to the benefit of, the Owner
Trustee, the Indenture Trustee and their respective successors and assigns and
each Holder of a Note, all as herein provided. Any request, notice, direction,
consent, waiver or other instrument or action by any Holder of a Note shall bind
the successors and assigns of such Holder and any Holder of a Note issued in
transfer or exchange of such Note.
-54-
6091.CHASEUl.LEASE.07:2
<PAGE>
SECTION 11.9. Survival of Representations and Warranties.
All representations and warranties made with respect to the
Notes shall survive the execution and delivery of this Indenture and the issue,
sale and delivery of any Notes and shall continue in effect so long as any Note
issued hereunder is Outstanding and unpaid
SECTION 11.10. Bankruptcy of the Owner Trustee.
If (a) the Owner Trustee becomes a debtor subject to the
reorganization provisions of the Bankruptcy Code, or any successor provision,
(b) pursuant to such reorganization provisions the Owner Trustee is required, by
reason of the Owner T6ustee being held to have recourse liability directly or
indirectly to the Holder of any Note or the Indenture Trustee, to make payment
on account of any amount payable as principal or interest on such Note and (c)
such Holder or the Indenture Trustee actually receives any Excess Amount (as
hereinafter defined) which reflects any payment by the Owner Trustee on account
of clause (b) of this Section, then such Holder or the Indenture Trustee, as the
case may be, shall promptly refund to the Owner Trustee such Excess Amount.
"Excess Amount" means the amount by which such payment exceeds the amount which
would have been received on or prior to the date of such payment by such Ho1der
or the Indenture Trustee if the Owner Trustee had not become subject to the
recourse liability referred to in clause (b) of this Section. Nothing contained
in this Section shall prevent such Holder or the Indenture Trustee from
enforcing any recourse obligation (and retaining the proceeds thereof) of the
Owner Trustee expressly provided for under this Indenture or in the Notes
SECTION 11.11. Bankruptcy of the Owner Participant.
The Indenture Trustee and the Holders of the Notes shall be
bound by the provisions of Section 19(f) of the Participation Agreement.
6091.CHASEUl.LEASE.07:2
-55-
<PAGE>
SECTION 11.12 Counterpart Execution.
This Indenture and any amendment or supplement to this
Indenture may be executed in any number of counterparts and by the different
parties hereto and thereto on 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.
SECTION 11.13. Dating of Indenture.
Although this Indenture is dated for convenience and for the
purpose of reference as of the date mentioned, the actual date or dates of
execution by the Owner Trustee and the Indenture Trustee are as indicated by
their respective acknowledgments hereto annexed.
-56-
6091.CHASEUl.LEASE.07:2
<PAGE>
IN WITNESS WHEREOF, the Owner Trustee and the Indenture Trustee have
each caused this Indenture to be duly executed by their respective officers
thereunto duly authorized, all as of the date first set forth above.
THE FIRST NATIONAL BANK OF BOSTON, not in
its individual capacity, but solely as
Owner Trustee under the Trust Agreement
dated as of December 15, 1986 with Chase
Manhattan Realty Leasing Corporation
By
-----------------------------------
Assistant Vice President
CHEMICAL BANK
By
-----------------------------------
Vice President
6091.CHASEUl.LEASE.07:2
-57-
<PAGE>
STATE OF NEW YORK )
) ss.)
COUNTY OF NEW YORK )
On the 16th day of December, 1966, before me personally came
Martin P. Henry, to me known, who, being by me duly sworn, did acknowledge,
depose and say that he resides at Boston, Massachusetts; that he is an Assistant
Vice President of THE FIRST NATIONAL BANK OF BOSTON, a national banking
association, described in and which executed the foregoing instrument; and that
he signed his name thereto on behalf of said association by authority of the
Board of Directors of such association.
----------------------
Notary Public
[NOTARIAL SEAL] Term Expires:
Delia T. Santiago
Notary Public, State of New York
No. 41-3451160
Qualified in Queens County
Commission Expires: March 30, 1987
6091.CHASEUl.LEASE.07:2
-58-
<PAGE>
STATE OF NEW YORK )
) ss.:)
COUNTY OF NEW YORK)
On the 16th day of December, 1986, before me personally came
T.J. FOLEY, to me known, who, being by me duly sworn, did acknowledge, depose
and say that he resides at Bethpage, New York; that he is a Vice President of
CHEMICAL BANK, a New York banking corporation, described in and which executed
the foregoing instrument; and that he signed his name thereto on behalf of said
corporation by authority of the Board of Directors of such corporation.
-----------------------
Notary Public
[NOTARIAL SEAL) Term Expires:
Delia T. Santiago
Notary Public, State of New York
No. 41-3451160
Qualified in Queens County
Commission Expires: March 30, 1987
6091.CHASEUl.LEASE.07:2
-59-
<PAGE>
EXHIBIT A-1
TO INDENTURE
FORM OF FIXED RATE NOTE
(DUE JANUARY 15, 1992)
THIS NOTE HAS NOT BEEN REGISTER UNDER THE
SECURITIES ACT OF 1933 AND MAY NOT B! TRANSFERRED,
SOLD OR OFFERED FOR SALE IN VIOLATION OF SUCH ACT
NONRECOURSE PROMISSORY NOTE, FIXED RATE SERIES
(DUE JANUARY 15, 1992)
Issued at: New York, New York
Issue Date: December ___-, 1986
THE FIRST NATIONAL BANK OF BOSTON, not in its individual
capacity, but solely as Owner Trustee (Owner Trustee) under a Trust Agreement
dated as of December 15, 1986 with Chase Manhattan Realty Leasing Corporation
(the Owner Participant), hereby promises to pay to FIRST PV FUNDING CORPORATION,
or registered assigns, the principal sum of $3,300,000 (Three Million Three
Hundred Thousand Dollars) on January 15, 1992 together with interest (computed
on the basis of a 360-day year of twelve 20-day months) on the a4gregate amount
of such principal sum remaining unpaid from time to time from the date of this
Fixed Rate Note until due and payable, in arrears, at the rate of 8.05% per
annum. Payments of principal installments of this Fixed Rate Note shall be made
in the "principal amount payable" and on the "payment dates" specified in
Schedule 1 hereto. Payments of accrued interest on this Fixed Rate Note shall be
made on January 15 and July 15 in each year, commencing January 15, 1927, to and
including the last "payment date" specified in Schedule 1 hereto.
Capitalized terms used in this Fixed Rate Note which are not
otherwise defined herein shall have the meanings ascribed thereto in the
Indenture (as hereinafter defined).
6091.CHASEUl.LEASE.07:2
A-1
<PAGE>
Interest on any overdue principal and premium, if any, and (to
the extent permitted by applicable law) any overdue interest, shall be paid, on
demand, from the due date thereof at the rate per annum equal to 9.05% (computed
oh the basis of a 360-day year of twelve 30-day months) for the period during
which any such principal, premium or interest shall be overdue.
In the event any date on which a payment is due under this
Fixed Rate Note is not a Business Day, then payment thereof may be made on the
next succeeding Business Day with the same force and effect as if made on the
date on which such payment was due.
All payments of principal, premium, if any, and interest to be
made by the Owner Trustee hereunder and under the Trust Indenture, Mortgage,
Security Agreement and Assignment of Rents dated as of December 15, 1986, as at
any time heretofore or hereafter amended or supplemented in accordance with the
provisions thereof (the Indenture), between the Owner Trustee and Chemical Bank,
as Trustee (the Indenture Trustee), shall be made only from the Lease Indenture
Estate and the Trust Estate and the Indenture Trustee shall have no obligation
for the payment thereof except to the extent that the Indenture Trustee shall
have sufficient income or proceeds from the Lease Indenture Estate to make such
payments in accordance with the terms of Article V of the Indenture. The Holder
hereof, by its acceptance of this Fixed Rate Note, agrees that such Holder will
look solely to the Trust Estate and the income and proceeds from the Lease
Indenture Estate to the extent available for distribution to the Holder hereof
as above provided, and that neither the Owner Participant nor, except as
expressly provided in the Indenture, the Owner Trustee nor the Indenture Trustee
is or shall be personally liable to the Holder hereof for any amounts payable
under this Fixed Rate Note or for any performance to be rendered under the
Indenture or any other Transaction Document or for any liability thereunder;
provided, however, that in the event the Lessee shall assume all the obligations
of the Owner Trustee hereunder and under the Indenture pursuant to Section
3.9(b) of the Indenture, then all the payments to be made under this Fixed Rate
Note shall be made only from payments made by the Lessee under this Fixed Rate
Note in accordance with the Assumption Agreement referred to in said Section
3~9(b) and the Holder of this Fixed Rate Note agrees that in such event it will
look solely to the Lessee for such payment.
6091.CHASEUl.LEASE.07:2
A-2
<PAGE>
Principal, premium, if any, and interest shall be payable, in
the manner provided in the Indenture, on presentment of this Fixed Rate Note at
the Indenture Trustees S Orifice, or as otherwise provided in the Indenture.
The Holder hereof, by its acceptance of this Fixed Rate Note,
agrees that each payment received by it hereunder shall be applied in the manner
set forth in Section 3.11 of the Indenture. The Holder of this Fixed Rate Note
agrees, by its acceptance hereof, that it will duly note by appropriate means
all payments of principal or interest made hereon and that it will not in any
event transfer or otherwise dispose of this Fixed Rate Note unless and until all
such notations have been duly made.
This Fixed Rate Note is one of the Fixed Rate Notes referred
to in the Indenture. The Indenture permits the issuance of additional series of
Notes, as provided in Section 3.5 of the Indenture, and the several series may
be for varying aggregate principal amounts and may have different maturity
dates, interest rates, redemption provisions and other terms. The properties of
the Owner Trustee included in the Lease Indenture Estate are pledged to the
Indenture Trustee to the extent provided in the Indenture as security for the
payment of the principal of and premium, if any, and interest on this Fixed Rate
Note and all other Notes issued and outstanding from time to time under the
Indenture. Reference is hereby made to the Indenture for a statement of the
rights of the Holders of, and the nature and extent of the security for, this
Fixed Rate Note and of the rights of, and the nature and extent of the security
for, the Holders of the other Notes and of certain rights of the Owner Trustee,
as well as for a statement of the terms and conditions of the trust created by
the Indenture, to all of which terms and conditions the Holder hereof agrees by
its acceptance of this Fixed Rate Note.
This Fixed Rate Note is not subject to prepayment in whole or
in part.
In case an Indenture Event of Default shall occur and be
continuing, the unpaid balance of the principal of this Fixed Rate Note and any
other Notes, together with all accrued but unpaid interest thereon, may, subject
to certain rights of the Owner Trustee or the Owner Participant contained or
referred to in the Indenture, be declared or may become due and payable in the
manner and with the effect provided in the Indenture.
6091 CHASEUl.LEASE.07:2
A-3
<PAGE>
The lien upon the Lease Indenture Estate is subject to being
legally discharged prior to the maturity of this Fixed Rate Note upon the
deposit with the Indenture Trustee of cash or certain securities sufficient to
pay this Fixed Rate Note when due or an assumption of the obligation of the
Owner Trustee under this Fixed. Rate Note and the Indenture, in each case in
accordance with the terms of the Indenture.
There shall be maintained at the Indenture Trustee's Office a
register for the purpose of registering transfers and exchanges of Notes in the
manner provided in the Indenture. The transfer of this Fixed Rate Note is
registrable, as provided in the Indenture, upon surrender of this Fixed Rate
Note for registration of transfer duly accompanied by a written instrument of
transfer duly executed by or on behalf of the registered Holder hereof, together
with the amount of any applicable transfer taxes. prior to due presentment for
registration of transfer of this Fixed Rate Mote, the Owner Trustee and the
Indenture Trustee may treat the person in whose name this Fixed Rate Note is
registered as the owner hereof for the purpose of receiving payments of
principal of and premium, if any, and interest on this Fixed Rate Note and for
all other purposes whatsoever, whether or not this Fixed Rate Note be overdue,
and neither the Owner Trustee nor the Indenture Trustee shall be affected by
notice to the contrary.
This Fixed Rate Note shall be governed by, and construed in
accordance with, the laws of the State of New York.
6091.CHASEUl.LEASE.07:2
A-4
<PAGE>
IN WITNESS WHEREOF, the Owner Trustee has caused this Fixed
Rate Mote to be duly executed as of the date hereof
THE FIRST NATIONAL BANK OF
BOSTON, not in its individual
capacity, but solely as
Owner Trustee under a Trust
Agreement dated as of
December 15, 1986 with
Chase Manhattan Realty
Leasing Corporation
By ____________________
Assistant Vice President
This Note is one of the series of Notes referred to therein
and in the within-mentioned Indenture.
CHEMICAL BANK,
as Indenture Trustee
By _____________________
Authorized Officer
6091.CHASEUl.LEASE.07:2
A-5
<PAGE>
SCHEDULE 1
TO THE FIXED RATE NOTE
(DUE JANUARY 15, 1992)
Schedule of Principal Amortization
$3,300,000 Principal Amount
Payment Principal Principal
Date Amount Payable Amount Paid
---- -------------- -----------
July 15, 1989 $ 379,000
January 15, 1990 539,000
July 15, 1990 561,000
January 15, 1991 583,000
July 15, 1991 607,000
January 15, 1992 631,000
----------
Principal Amount $3,300,000
==========
Page 1 of 1
6091.CHASEU1.LEASE.07:2
<PAGE>
ASSIGNMENT
Date: December _____, 1986
For value received, FIRST PV FUNDING CORPORATION (First PV)
hereby sells, assigns and transfers to CHEMICAL BANK, as Collateral Trust
Trustee pursuant to the Collateral Trust Indenture dated as of December 16,
1985, as heretofore amended and supplemented, among First PV, Public Service
Company of New Mexico and said Collateral Trust Trustee, without recourse, the
Fixed Rate Note to which this Assignment is annexed and all rights thereunder
FIRST PV FUNDING CORPORATION
By ______________________
Vice President
<PAGE>
EXHIBIT A-2
TO INDENTURE
FORM OF FIXED RATE NOTE
(DUE JANUARY 15, 1997)
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED,
SOLD OR OFFERED FOR SALE IN VIOLATION OF SUCH ACT
NONRECOURSE PROJUSSORY NOTE, FIXED RATE SERIES
(DUE JANUARY 15, 1997)
Issued at: New York, New York
Issue Data: December __ 1986
THE FIRST NATIONAL BANK OF BOSTON, not in its individual
capacity, but solely as Owner Trustee (Owner Trustee) under a Trust Agreement
dated as of December 15, 1986 with Chase Manhattan Realty Leasing Corporation
(the Owner Participant), hereby promises to pay to FIRST PV FUNDING CORPORATION,
or registered assigns, the principal sum of $8,060,000 (Eight Million Sixty
Thousand Dollars) on January 15, 1997 together with interest (computed on the
basis of a 360-day year of twelve 30-day months) on the aggregate amount of such
principal sum remaining unpaid from time to time from the date of this Fixed
Rate Note until due and payable, in arrears, at the rate of 8.95% per annum.
Payments of principal installments of this Fixed Rate Note shall be made in the
"principal amount payable" and on the "payment dates" specified in Schedule 1
hereto. Payments of accrued interest on this Fixed Rate Note shall be made on
January. 15 and July 15 in each year, commencing January 15, 1987, to and
including the last "payment date" specified in Schedule 1 hereto.
Capitalized terms used in this Fixed Rate Mote which are not
otherwise defined herein shall have the meanings ascribed thereto in the
Indenture (as hereinafter defined)
Interest on any overdue principal and premium, if any, and (to
the extent permitted by applicable law) any overdue interest, shall be paid, on
demand, from the due date thereof at the rate per annum equal to 9.95% (computed
on the basis of a 360-day year of twelve 30-day months) for the period during
which any such principal, premium or interest shall be overdue.
<PAGE>
In the event any date on which a payment is due under this
Fixed Rate Note is not a Business day, then payment ant thereof may be made on
the next succeeding Business Day with the same force and effect as if made on
the date on which such payment was due.
All payments of principal, premium, if any, and interest to be
made by the Owner Trustee hereunder and under the Trust Indenture, Mortgage,
Security Agreement and Assignment of Rents dated as of December 15, 1986, as at
any time heretofore or hereafter amended or supplemented in accordance with the
provisions thereof (the Indenture) , between the Owner Trustee and chemical
Bank, as Trustee (the Indenture Trustee), shall be made only from the Lease
Indenture Estate and the Trust Estate and the Indenture Trustee shall have no
obligation for the payment thereof except to the extent that the Indenture
Trustee shall have sufficient income or proceeds from the Lease Indenture Estate
to make such payments in accordance with the terms of Article V of the
Indenture. The Holder hereof, by its acceptance of this Fixed Rate Note, agrees
that such Holder will look solely to the Trust Estate and the income and
proceeds from the Lease Indenture Estate to the extent available for
distribution to the Holder hereof as above provided, and that neither the Owner
Participant nor, except as expressly provided in the Indenture, the Owner
Trustee nor the Indenture Trustee is or shall be personally liable to the Holder
hereof for any amounts payable under this Fixed Rate Note or for any performance
to be rendered under the Indenture or any other Transaction Document or for any
liability thereunder; provided however, that in the event the Lessee shall
assume all the obligations of the Owner Trustee hereunder and under the
Indenture pursuant to Section 3.9(b) of the Indenture, then all the payments to
be made under this Fixed Rate Note shall be made only from payments made by the
Lessee under this Fixed Rate Note in accordance with the Assumption Agreement
referred to in said Section 3.9(b) and the Holder of this Fixed Rate Note agrees
that in such event it will look solely to the Lessee for such payment.
Principal, premium, if any, and interest shall be payable, in
the manner provided in the Indenture, on presentment of this Fixed Rate Note at
the Indenture Trustee's Office, or as otherwise provided in the Indenture.
6091.CHASEUl.LEASE.07:2
-2-
<PAGE>
The Holder hereof, by its acceptance of this Fixed Rate Note,
agrees that each payment received by it hereunder shall be applied in the manner
set forth in Section 3.11 of the Indenture. The Holder of this Fixed Rate Note
agrees, by its acceptance hereof, that it will duly note by appropriate means
all payments of principal or interest made hereon and that it will not in any
event transfer or otherwise dispose of this Fixed Rate Note unless and until all
such notations have been duly made.
This Fixed Rate Note is one of the Fixed Rate Notes referred
to in the Indenture. The Indenture permits the issuance of additional Series of
Notes, as provided in Section 3.5 of the Indenture, and the several series may
be for varying aggregate principal amounts and may have different maturity
dates, interest rates, redemption provisions and other terms. The properties of
the Owner Trustee included in the Lease Indenture Estate are pledged to the
Indenture Trustee to the extent provided in the Indenture as security for the
payment of the principal of and premium, if any, and interest on this Fixed Rate
Note and all other Notes issued and outstanding from time to time under the
Indenture. Reference is hereby made to the Indenture for a statement of the
rights of the Holders of, and the nature and extent of the security for, this
Fixed Rate Note and of the rights of, and the nature and extent of the security
for, the Holders of the other Notes and of certain rights of the Owner Trustee,
as well as for a statement of the terms and conditions of the trust created by
the Indenture, to all of which terms and conditions the Holder hereof agrees by
its acceptance of this Fixed Rate Note.
This Fixed Rate Note may be prepaid in whole or in part at any
time on or after January 15, 1992 by the Owner Trustee upon the giving of not
less than 30 days' notice (as provided in the Indenture) and at the following
prepayment prices (expressed as a percentage of the unpaid principal amount
hereof) , together with interest accrued to the date fixed for prepayment:
Twelve Month Redemption
Period Beginning Price
---------------- ----------
January 15, 1992 102.557%
January 15, 1993 101.279
6091.CHASEUl.LEASE.07:2
-3-
<PAGE>
and thereafter at the principal amount thereof, together with interest accrued
to the date fixed for prepayment. This Fixed Rate Note is not otherwise subject
to prepayment in whole or in part.
In case an Indenture Event of Default shall occur and be
continuing, the unpaid balance of the principal of this Fixed Rate Note and any
other Notes, together with all accrued but unpaid interest thereon, may, subject
to certain rights of the owner Trustee or the Owner Participant contained or
referred to in the Indenture, be declared or may become due and payable in the
manner and with the effect provided in the Indenture.
The lien upon the Lease Indenture Estate is subject to being
legally discharged prior to the maturity of this Fixed Rate Note upon the
deposit with the Indenture Trustee of cash or certain securities sufficient to
pay this Fixed Rate Note when due or an assumption of the obligation of the
Owner Trustee under this Fixed Rate Note and the Indenture, in each case in
accordance with the terms of the Indenture.
There shall be maintained at the Indenture Trustee's Office a
register for the purpose of registering transfers and exchanges of Notes in the
manner provided in the Indenture. The transfer of this Fixed Rate Note is
registrable, as provided in the Indenture, upon surrender of this Fixed Rate
Note for registration of transfer duly accompanied by a written instrument of
transfer duly executed by or on behalf of the registered Holder hereof, together
with the amount of any applicable transfer taxes. Prior to due presentment for
registration of transfer of this Fixed Rate Note, the owner Trustee and the
Indenture Trustee may treat the person in whose name this Fixed Rate Note is
registered as the owner hereof for the purpose of receiving payments of
principal of and premium, if any, and interest on this Fixed Rate Note and for
all other purposes whatsoever, whether or not this Fixed Rate Note be overdue,
and neither the Owner Trustee nor the Indenture Trustee shall be Affected by
notice to the contrary.
This Fixed Rate Note shall be governed by, and construed in
accordance with, the laws of the State of New York.
-4-
6091.CHASEUl.LEASE.07:2
<PAGE>
IN WITNESS WHEREOF, the Owner Trustee has caused this Fixed
Rate Note to be duly executed as of the date hereof
THE FIRST NATIONAL OF BOSTON, not in its
individual capacity, but solely as Owner
Trustee under a Trust Agreement dated as
of December 15, 1986 with Chase Manhattan
Realty Leasing Corporation
By____________________________
Assistant Vice President
This Note is one of the series of Notes referred to therein
and in the within-mentioned Indenture.
CHEMICAL BANK,
as Indenture Trustee
By________________________
Authorized Officer
6091.CHASEUl.LEASE.07:2
-5-
<PAGE>
SCHEDULE 1
TO THE FIXED RATE NOTES
(DUE JANUARY 15, 1997)
Schedule of Principal Amortization
$8,060,000 Principal Amount
Payment Principal Principal
Date Amount Payable Amount Paid
------- -------------- -----------
July 15, 1992 $657,000
January 15, 1993 686,000
July 15, 1993 717,000
January 15, 1994 749,000
July 15, 1994 782,000
January 15, 1995 817,000
July 15, 1995 854,000
January 15, 1996 892,000
July 15, 1996 932,000
January 15, 1997 974,000
----------
$8,060,000
==========
Page 1 of 1
6091.CHASEUl.LEASE.07:2
<PAGE>
ASSIGNMENTS
Date: December _______, 1986
For value received, FIRST PV FUNDING CORPORATION (First PV)
hereby sells, assigns and transfers to CHEMICAL BANK, as Collateral Trust
Trustee pursuant to the Collateral Trust Indenture dated as of December 16,
1985, as heretofore amended and supplemented, among First PV, Public Service
Company of Mew Mexico and said Collateral Trust Trustee, without recourse, the
Fixed Rate Note to which this Assignment is annexed and all rights thereunder.
FIRST PV FUNDING CORPORATION
By
-----------------------
Vice President
<PAGE>
EXHIBIT A-3
TO INDENTURE
FORM OF FIXED RATE NOTE
(DUE JANUARY 15, 2015)
THIS NOTE HAS NOT SEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED,
SOLD OR OFFERED FOR SALE IN VIOLATION OF SUCH ACT
NONRECOURSE PROMISSORY NOTE, FIXED RATE SERIES
(DUE JANUARY 15, 2015)
Issued at: New York, New York
Issue Data: December ______ , 1986
THE FIRST NATIONAL BANK OF BOSTON, not in its individual
capacity, but solely as Owner Trustee (Owner Trustee) under a Trust Agreement
dated as of December 15, 1986 with Chase Manhattan Realty Leasing Corporation
(the Owner Participant), hereby promises to pay to FIRST PV FUNDING CORPORATION,
or registered assigns, the principal sum of $48,640,000 (Forty Eight Million Six
Hundred Forty Thousand Dollars) on January 15, 2015 together with interest
(computed on the basis of a 360-day year of twe1ve 30-day months) on the
aggregate amount of such principal sum remaining unpaid from time to time from
the date of this Fixed Rate Note until due and payable, in arrears, at the rata
of 10.15% per annum. Payments of principal installments of this Fixed Rate Note
shall be made in the "principal amount payable" and on the "payment dates"
specified in Schedule 1 hereto, as such Schedule may be adjusted in accordance
with the Indenture and the terms contained herein. Payments of accrued interest
on this Fixed Rate Note shall be made on January 15 and July 15 in each year,
commencing January 15, 1987, to and including the last payment date" specified
in Schedule 1 hereto.
Capitalized terms used in this Fixed Rate Note which are not
otherwise defined herein shall have the meanings ascribed thereto in the
Indenture (as hereinafter defined).
Interest on any overdue principal and premium, if any, and (to
the extent permitted by applicable law) any overdue interest, shall be paid, on
demand, from the due date thereof at the rate per annum equal to 11.15%
(computed on the basis of a 360-day year of twelve 30- day months) for the
period during which any such principal, premium or interest shall be overdue.
<PAGE>
In the event any date on which a payment is due under this
Fixed Rate Note is not a Business Day, then payment thereof may be made on the
next succeeding Business Day with the same force and effect as if made on the
date on which such payment was due.
All payments of principal, premium, if any, and interest to be
made by the Owner Trustee hereunder and under the Trust Indenture, Mortgage,
Security Agreement and Assignment of Rents dated as of December 15, 1986, as at
any time heretofore or hereafter amended or supplemented in accordance with the
provisions thereof (the Indenture), between the Owner Trustee and Chemical Bank,
as Trustee (the Indenture Trustee), shall be made only from the Lease Indenture
Estate and the Trust Estate and the Indenture Trustee shall have no obligation
for the payment thereof except to the extent that the Indenture Trustee shall
have sufficient income or proceeds from the Lease Indenture Estate to make such
payments in accordance with the terms of Article V of the Indenture. The Holder
hereof, by its acceptance of this Fixed Rate Note, agrees that such Molder will
look solely to the Trust Estate and the income and proceeds from the Lease
Indenture Estate to the extent available for distribution to the Holder hereof
as above provided, and that neither the Owner Participant nor, except as
expressly provided in the Indenture, the Owner Trustee nor the Indenture Trustee
is or shall be personally liable to the Holder hereof for any amounts payable
tinder this Fixed Rate Note or for any performance to be rendered under the
Indenture or any other Transaction Document or for any liability thereunder;
provided, however, that in the event the Lessee shall assume all the obligations
of the Owner Trustee hereunder and under the Indenture pursuant to Section
3.9(b) of the Indenture, then all the payments to be made under this Fixed Rate
Note shall be made only from payments made by the Lessee under this Fixed Rate
Note in accordance with the Assumption Agreement referred to in said Section
3.g(b) and the Holder of this Fixed Rate Note agrees that in such event it will
look solely to the Lessee for such payment.
Principal, premium1 if any, and interest shall be payable, in
the manner provided in the Indenture, on presentment of this Fixed Rate Note at
the Indenture Trustee's Office, or as otherwise provided in the Indenture.
6091.CHASEUl.LEASE.07:2.
-2-
<PAGE>
In the manner and to the extent provided in the Indenture,
Schedule 1 hereto may be adjusted once at the discretion of the Owner Trustee
prior to July 15, 1997, in connection with an adjustment to Basic Rent under
Section 3Cd) of the Facility Lease.
The Holder hereof, by its acceptance of this Fixed Rate Note,
agrees that each payment received by it hereunder shall be applied in the manner
set forth in Section 3.11 of the Indenture. The Holder of this Fixed Rate Note
agrees, by its acceptance hereof, that it will duly note by appropriate means
all payments of principal or interest made hereon and that it will not in any
event transfer or otherwise dispose of this Fixed Rate Note unless and until all
such notations have been duly made.
This Fixed Rate Note is one of the Fixed Rate Notes referred
to in the Indenture. The Indenture permits the issuance of additional Series of
Notes, as provided in Section 3.5 of the Indenture, and the several series may
be for varying aggregate principal amounts and may have different maturity
dates, interest rates, redemption provisions and other terms. The properties of
the Owner Trustee included in the Lease Indenture Estate are pledged to the
Indenture Trustee to the extent provided in the Indenture as security for the
payment of the principal of and premium, if any, and interest on this Fixed Rate
Note and all other Notes issued and outstanding from time to time under the
Indenture. Reference is hereby made to the Indenture for a statement of the
rights of the Holders of, and the nature and extent of the security for, this
Fixed Rate Note and of the rights of, and the nature and extent of the security
for, the Holders of the other Notes and of certain rights of the. Owner Trustee,
as well as for a statement of the terms and conditions of the trust created by
the Indenture, to all of which terms and conditions the Holder hereof agrees by
its acceptance of this Fixed Rate Note.
This Fixed Rate Note is subject to prepayment in whole as
contemplated by Section 5.2 of the Indenture and in the circumstances therein
described. In addition, this Fixed Rate Note may be prepaid in whole or in part
at any time on or after January 15, 1992 by the Owner Trustee upon the giving of
6091.CHASEUl.LEASE.07:2
-3-
<PAGE>
not less than 30 days' notice (as provided in the Indenture) and at the
following prepayment prices (expressed as a percentage of the unpaid principal
amount hereof) , together with interest accrued to the data fixed for
prepayment:
Twelve Month Redemption
Period Beginning Price
---------------- ----------
January 15, 1992 108.120%
January 15, 1993 107.714
January 15, 1994 107.308
January 15, 1995 106.902
January 15, 1996 106.496
January 15, 1997 106.090
January 15, 1998 105.684
January 15, 1999 105.278
January 15, 2000 104.872
January 15, 2001 104.466
January 15, 2002 104.060
January 15, 2003 103.654
January 15, 2004 103.248
January 15, 2005 102.842
January 15, 2006 102.436
January 15, 2007 102.030
January 15, 2008 101.624
January 15, 2009 101.218
January 15, 2010 100.812
January 15, 2011 100.406
and thereafter at the principal amount thereof, together with interest accrued
to the date fixed for prepayment. This Fixed Rate Note is not otherwise subject
to prepayment in whole or in part.
In case an Indenture Event of Default shall occur and be
continuing, the unpaid balance of the principal of this Fixed Rate Note and any
other Notes, together with all accrued but unpaid interest thereon, may, subject
to certain rights of the Owner Trustee or the Owner Participant contained or
referred to in the Indenture, be declared or may become due and payable in the
manner and with the effect provided in the Indenture
The lien upon the Lease Indenture Estate is subject to being
legally discharged prior to the maturity of this Fixed Rate Note upon the
deposit with the Indenture Trustee of cash or certain securities sufficient to
pay this Fixed Rate Note when due or an assumption of the obligation of the
Owner Trustee under this Fixed Rate Note and the Indenture, in each case in
accordance with the terms of the Indenture.
-4-
6091.CHASEUl.LEASE.07.2
<PAGE>
There shall be maintained at the Indenture Trustee Cs Office a
register for the purpose of registering transfers and exchanges of Notes in the
manner provided in the Indenture. The transfer of this Fixed Rate Note is
registrable, as provided in the Indenture, upon surrender of this Fixed Rate
Note for registration of transfer duly accompanied by a written instrument of
transfer duly executed by or on behalf of the registered Holder hereof, together
with the amount of any applicable transfer taxes. Prior to due presentment for
registration of transfer of this Fixed Rate Note, the Owner Trustee and the
Indenture Trustee may treat the person in whose name this Fixed Rate Note is
registered as the owner hereof for the purpose of receiving payments of
principal of and premium, if any, and interest on this Fixed Rate Note and for
all other purposes whatsoever, whether or not this Fixed Rate Note be overdue,
and neither the Owner Trustee nor the Indenture Trustee shall be affected by
notice to the contrary.
This Fixed Rate Note shall be governed by, and construed in
accordance with, the laws of the State of New York.
6091.CHASEU1.LEASE.07:2
-5-
<PAGE>
IN WITNESS WHEREOF, the Owner Trustee has caused this Fixed
Rate Note to be duly executed as of the date hereof
THE FIRST NATIONAL BANK OF BOSTON, not in
its individual capacity, but solely as
Owner Trustee under a Trust Agreement
dated as at December 15, 1966 with Chase
Manhattan Realty Leasing corporation
By_______________________
Assistant Vice President
This Note is one of the Series of Notes referred to therein
and in the within-mentioned Indenture.
CHEMICAL BANK,
as Indenture Trustee
By_______________________
Authorized Officer
-6-
6091.CHASEU1.LEASE.07:2
<PAGE>
SCHEDULE 1
TO THE FIXED RATE NOTES
(DUE JANUARY 15, 2015)
Schedule of Principal Amortization
$48,640,000 Principal Amount
Payment Principal Principal
Date Amount Payable Amount Paid
- - ------- -------------- -----------
July15, 1997 $1,017,000
January15, 1998 1,069,000
July 15, 1998 1,123,000
January 15, 1999 1,180,000
July 15, 1999 1,240,000
January 15, 2000 1,303,000
July 15, 2000 1,217,000
January 15, 2001 939,000
July 15, 2001 1,053,000
January 15, 2002 967,000
July 15, 2002 1,065,000
January 15, 2003 960,000
July 15, 2003 1,077,000
January 15, 2004 1,143,000
July 15, 2004 1,039,000
January 15, 2005 1,214,000
July 15, 2005 1,103,000
January 15, 2006 1,288,000
July 15, 2006 1,171,000
January 15, 2007 1,368,000
July 15, 2007 1,368,000
January 15, 2008 1,243,000
July 15, 2008 1,452,000
January15, 2009 1,319,000
July 15 2009 1,541,000
January 15, 2010 1,400,000
Page 1 of 2
6091.CHASEUl.LEASE.07:2
<PAGE>
SCHEDULE 1
TO THE FIXED RATE NOTES
(DUE JANUARY 15, 2015)
Schedule of Principal Amortization
(Continued)
Payment Principal Principal
Date Amount Payable Amount Paid
- - ------- -------------- -----------
July 15, 2010 $1,636,000
January 15, 2011 1,486,000
July 15, 2011 1,737,000
January 15, 2012 1,577,000
July 15, 2012 1,844,000
January 15, 2013 1,674,000
July 15, 2013 1,957,000
January 15, 2014 1,777,000
July 15, 2014 2,077,000
January 15, 2015 2,405,000
-----------
$48,640,000
===========
Page 2 of 2
6091.CHASEU1.LEASE.07:2
<PAGE>
ASSIGNMENT
Date: December _______, 1986
For value received, FIRST PV FUNDING CORPORATION (First PV)
hereby sells, assigns and transfers to CHEMICAL BANK, as Collateral Trust
Trustee pursuant to the Collateral Trust Indenture dated as of December 16,
1925, as heretofore amended and supplemented, among First PV, Public Service
Company of New Mexico and said Collateral Trust Trustee, without recourse, the
Fixed Rata Notes to which this Assignment is annexed and all rights thereunder
FIRST PV FUNDING CORPORATION
By _______________________
Vice President
<PAGE>
When recorded, return to: Greg R. Nielsen
Snell & Wilmer
3100 Valley Bank Center
Phoenix, Arizona
================================================================================
ASSIGNMENT, ASSUMPTION
AND
FURTHER AGREEMENT
Dated as of December 15, 1986
between
PUBLIC SERVICE COMPANY OF NEW MEXICO,
and
THE FIRST NATIONAL BANK OF BOSTON not in its
individual capacity, but solely as Owner
Trustee under a Trust
Agreement, dated as of December 15,
1986, with Chase Manhattan Realty
Leasing Corporation
================================================================================
Sale and Leaseback of a l.700000% Undivided Interest
in Palo Verde Nuclear Generating Station Unit 1
and a .566667% Undivided Interest in Certain Common
Facilities
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS; SCHEDULES
Section 1.01. General .............................................. 1
Section 1.02. Undivided Interest and
Real Property Interest ............................... 1
ARTICLE II
Section 2.01. Nonpartitionment ..................................... 2
ARTICLE III
ASSIGNMENTS; EXERCISE OF RIGHTS
Section 3.01. Assignment of Warranties ............................. 2
Section 3.02. Assignment of the ANPP
Participation Agreement .............................. 2
Section 3.03. Exercise of Rights as
Participant under the
ANPP Participation
Agreement ............................................ 2
ARTICLE IV
ASSUMPTION; RELEASE
Section 4.01. Assumption by owner Trustee .......................... 3
Section 4.02. Release .............................................. 4
ARTICLE V
NO RELEASE OF PNM; REIMBURSEMENT
Section 5.01. No Release of PNM .................................... 4
Section 5.02. Reimbursement ........................................ 4
6091.CHASEUl.LEASE.56:1
<PAGE>
TABLE OF CONTENTS (Continued)
Page
ARTICLE VI
FURTHER AGREEMENTS OF PNM AND THE
OWNER TRUSTEE
Section 6.01. Agreement to Sell or
Lease Unit 1 Retained
Assets ............................................. 5
Section 6.02. Agreement to Assign or
Make Available ANPP
Project Agreements ................................. 5
Section 6.03. Agreements to Seek
Amendments to the ANPP
Participation Agreement
and the License .................................... 6
Section 6.04. Owner Trustee's Agreement .......................... 6
ARTICLE VII
INTERIM AGENCY ARRANGEMENTS
Section 7.01. Designation of Agent ............................... 6
Section 7.02. Operation of Unit 1 ................................ 7
Section 7.03. ANPP Participation ................................. 7
Agreement .......................................... 7
Section 7.04. Support ............................................ 7
Section 7.05. Compensation ....................................... 8
Section 7.06. Transmission;
Transmission Agreement ............................. 8
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Successors and Assigns ............................. 9
Section 8.02. Governing Law . .................................... 9
Section 8.03. Counterpart Execution .............................. 9
Section 8.04. Amendments ......................................... 9
Section 8.05. Survival ........................................... 9
Section 8.06. Severability of
Provisions ......................................... 9
6091.CHASEU1.LEASE.56:1
-ii-
<PAGE>
TABLE OF CONTENTS (Continued)
Page
----
Section 8.07. Headings .......................................... 10
Section 8.08. Disclosure of
Beneficiary ....................................... 10
Section 6.09. Capacity of Lessee ................................ 10
ARTICLE A
ARTICLE B
Section I. PVNGS Plant Site ................................... 1
Section II Hassayampa Pumping
Station and Effluent
Pipeline ........................................... 3
Section III Miscellaneous Real
Property Interests ................................. 3
Exhibit B - Form of Assumption Agreement
Exhibit C - Form of Undivided Interest Indenture Supplement
Schedule 1 - Undivided Interest Description
Schedule 2 - Real Estate Interest Description
Appendix A - Definitions
6091.CHASEU1.LEASE.56:1
-iii-
<PAGE>
ASSIGNMENT, ASSUMPTION AND FURTHER AGREEMENT, dated as of December
15, 1986, between PUBLIC SERVICE COMPANY OF NEW MEXICO, a New Mexico corporation
(PNM), and THE FIRST NATIONAL BANK OF BOSTON, not in its individual capacity,
but solely as Owner Trustee (the Owner Trustee) , under a Trust Agreement, dated
as of December 15, 1986, with Chase Manhattan Realty Leasing Corporation.
WITNESSETH:
WHERRAS, PUM and the other ANPP Participants are parties to the ANPP
Participation Agreement (such terms and all other terms used in these recitals
without definition having the respective definitions to which reference is made
in Article I below) and
WHEREAS, PNM has sold, and the Owner Trustee has purchased, the
Undivided Interest and the Real Property Interest for and in consideration of
the payment to PNM by the Owner Trustee of the Purchase Price, the purchase
price at the Real Property Interest and the assignments and assumptions herein
set forth;
NOW, THEREFORE, in consideration of the premises and of other good
and valuable consideration, receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS; SCHEDULES
SECTION 1.01. General. For purposes hereof, capitalized terms used
herein which are not otherwise defined herein shall have the meanings assigned
to such terms in Appendix A hereto. References in this Agreement to articles,
sections and clauses are to articles, sections and clauses in this Agreement
unless otherwise indicated.
SECTION 1.02. Undivided Interest and Real Property Interest.
Attached as Schedule 1 hereto is a description of the Undivided Interest and
attached as Schedule 2 hereto is a description of the Real Property Interest.
6091.CHASEUl.LEASE.56:1
<PAGE>
ARTICLE II
NONPARTITIONMENT
SECTION 2.01. Nonpartitionment. The Owner Trustee hereby waives any
rights it may have to partition Unit 1 or the Common Facilities, whether by
partitionment in kind or by sale and division of proceeds, and further agrees
that it will not resort to any action at law or in equity to partition Unit 1 or
the Common Facilities, and it waives the benefits of all laws that may now or
hereafter authorize such partition for a term (i) which shall be coterminous
with the term of the ANPP Participation Agreement or (ii) which shall be for
such lesser period as may be required under Applicable Law.
ARTICLE III
ASSIGNMENTS; EXERCISE OF RIGHTS
SECTION 3.01. Assignment of Warranties. PNM hereby ASSIGNS to
the Owner Trustee an undivided Interest, equal to the applicable Share, in, to
and under any and all warranties of and other claims against dealers,
manufacturers, vendors, contractors and subcontractors relating to Unit 1 and
the Common Facilities.
SECTION 3.02. Assignment of the ANPP Participation Agreement.
(a) PNM hereby ASSIGNS to the Owner Trustee an undivided interest, in, to and
under all of PNM's rights under the ANPP Participation Agreement, equal to
1.700000% to the extent that such rights relate to Unit 1 (including, but
without limitation, a percentage entitlement equal to 1.700000%, of the Net
Energy Generation and Available Generating Capability (as each such term is
defined in the AMP? Participation Agreement) of Unit 1) and equal to .566667% to
the extent such rights relate to the Common Facilities.
(b) The Owner Trustee hereby ASSIGNS to PNM the rights
assigned under paragraph (a) until the Lease Termination Date.
SECTION 3.03. Exercise of Rights as Participant under the ANPP
Participation Agreement. (a) Except as provided in Sections 15.2.2, 15.6.4 and
Section 15.10 of the ANPP Participation Agreement (or any comparable successor
provision) PNM shall be and remain the sole "Participant" for all purposes of
the ANPP Participation Agreement and the sole representative (with power to
bind) in all dealings with the other ANPP Participants in relation to the
-2-
<PAGE>
Undivided Interest, the Real Property Interest and the rights assigned to the
Owner Trustee pursuant to this Agreement; provided, however, that the foregoing
shall not limit in any way the effect of Sections 15 or 16 of the Facility Lease
or any liability or obligation that PNM may incur to the Owner Trustee or the
Owner Participant under any Transaction Document as a result thereof (including,
but without limitation, any liability that FNM may incur under Section 16 of the
Facility Lease as the result of an Event of Default)
(b) Unless the ANPP Participation Agreement shall otherwise permit,
any right conferred on the Owner Trustee by Section 15.2.2 of the ANPP
Participation Agreement shall be exercised as required by Section 15.6.3.3 of
said Agreement.
(c) The provisions of this Section 3.03 shall remain in full force
and effect until such time as the ANPP Administrative Committee or the ANPP
Participants shall otherwise consent.
ARTICLE IV
ASSUMPTION; RELEASE
SECTION 4.01. Assumption by Owner Trustee. Except as
contemplated by Section 5(a) of the Facility Lease, the Owner Trustee agrees
that, effective on and as of the Lease Termination Date (unless a transferee of
the Undivided Interest and the Real Property Interest (an ANPP Transferee) shall
have qualified under Section 15.10 of the ANPP Participation Agreement or any
comparable successor provision), unless (i) a Default or Event of Default shall
have occurred and be continuing or an Event of Loss or Deemed Loss Event shall
have occurred or (ii) such Lease Termination Date shall have occurred by reason
of a termination of the Facility Lease pursuant to Section 16 thereof, the Owner
Trustee shall assume and agree to pay, perform and discharge the Owner Trustee's
Share of all liabilities and obligations of PNM under, or with respect to, the
ANPP Project Agreements, attributable to Unit 1 and the Common Facilities, other
than any and all costs relating to, allocable to, or incurred in connection
with, the decommissioning and retirement of Unit 1 from commercial service,
including, but without limitation, (x) the cost of removal, decontamination and
-3-
6091.CHASEU1.LEASE.56:1
<PAGE>
disposition of equipment and fixtures, the cost of safe storage for later
removal, decontamination and disposal and the cost of entombment of equipment
and fixtures, and (y) the cost of (i) the razing of Unit t, (ii) the removal and
disposition of debris from the PVNGS Site, and (iii) the restoration of relevant
portions of the PVNGS Site.
SECTION 4.02. Release. Upon the assumption and agreement by an
ANPP Transferee pursuant to Section 4.01 (whether at the Lease Termination Date
or thereafter) , the Owner Trustee shall therewith and thereupon be released and
discharged from its obligations under Section 4.01 arising on or after such
assumption and agreement.
ARTICLE V
NO RELEASE OF PNM; REIMBURSMENT
SECTION 5.01. No Release of PNM. Notwithstanding the
provisions of Article IV or any other provision hereof or of any other
Transaction Document, and except to the extent provided in Section 15.10 of the
ANPP Participation Agreement (or any comparable successor provision) , PNM shall
not be released from any liability or obligation under the ANPP Project
Agreements, or otherwise, with respect to PVNGS, and ml shall remain liable for
the payment and performance of all such liabilities and obligations, including,
but without limitation, any and all liabilities and obligations not assumed by
the Owner Trustee or an ANPP Transferee pursuant to Section 4.01.
SECTION 5.02. Reimbursement. Unless a Default or an Event of
Default shall have occurred and be continuing or an Event of Loss or Deemed Loss
Event shall have occurred, from and after the Lease Termination Date (except a
Lease Termination occurring by reason of a termination of the Facility Lease
pursuant to Section 16 thereof), upon the payment or performance by PNM of any
liability or obligation in respect of which the Owner Trustee shall also have
become obligated in consequence of Article IV or the ANPP Participation
Agreement, and for so long as the Owner Trustee shall be so liable, PNM shall be
entitled to prompt reimbursement by the Owner Trustee from the Trust Estate for
all amounts expended in connection with such payment or performance.
-4-
6091.CHASEUl.LEASE.56:1
<PAGE>
ARTICLE VI
FURTHER AGREEMENTS OF PNM AND THE
OWNER TRUSTEE
SECTION 6.01. Agreement to Sell or Lease Unit 1 Retained
Assets. Upon a transfer to an ANPP Transferee, PNM agrees in respect of the
Undivided. Interest and the Real Property Interest, (1) if such ANPP Transferee
is a purchaser of the Undivided Interest and the Real Property Interest, to sell
to such ANPP Transferee, at a price equal to the then Fair Market Sales Value
(determined on the basis of the then actual condition of the Unit 1 Retained
Assets) thereof, an undivided interest, equal to 1.700000%, to the extent
related to Unit 1 and .566667%, to the extent related to the PVNGS Common
facilities, in and to the Unit 1 Retained Assets, or (ii) if such ANPP
Transferee is a lessee of the Undivided Interest and the Real Property Interests
to lease or otherwise make available to such ANPP Transferee, at a rent equal to
the then Fair Market Rental Value thereof, an undivided interest, equal to
1.700000%, to the extent related to Unit 1 and .566667% to the extent related to
the PVNGS common facilities, in and to the Unit 1 Retained Assets. Any such sa1e
or lease by PNM shall be accomplished by an appropriate bill of sale or lease.
The Bill of Sale referenced in the definition of Unit 1 Retained Assets set
forth in Appendix A hereto was recorded December __ , 1986, as Instrument No.
__________, records of Maricopa County, Arizona, and thereby incorporated
herein by reference.
SECTION 6.02. Agreement to Assign or Make Available ANPP
Project Agreements. Upon a transfer to an ANPP Transferee, PNM agrees in respect
of the Undivided Interest and the Real Property Interest, (i) if such ANPP
Transferee is a purchaser of the Undivided Interest and the Real Property
Interest, to assign to such ANPP Transferee an undivided interest, equal to
1.700000%, to the extent related to Unit 1, and .566667%, to the extent related
to the PVNGS common facilities, of the Project Agreements (other than the ANPP
Participation Agreement) and (ii) if such ANPP Transferee is a lessee of the
Undivided Interest and the Real Property Interest, to assign for the term of
such lease to such ANPP Transferee an undivided interest, equal to 1.700000%, to
the extent related to Unit 1, and .566667%, to the extent related to the PVNGS
-5-
6091.CHASEUl.LEASE.56:1
<PAGE>
common facilities, of the Project Agreements (other than the ANPP Participation
Agreement). Any assignment pursuant to this Section 6.02 shall be accomplished
by an appropriate instrument of assignment.
SECTION 6.03. Agreements to Seek Amendments to the ANPP
Participation Agreement and the License. PNM agrees to use its best efforts to
obtain any required amendments to the ANPP Participation Agreement and the
License to permit PNM to act as Agent of the Owner Trustee in the manner
contemplated by Section 7.01 hereof, if (a) (i) PNM shall not have elected to
purchase the Undivided Interest and the Real Property Interest as provided in
Section 13(b) of the Facility Lease and (ii) there shall not be an ANPP
Transferee in respect of the Undivided Interest and the Real Property Interest
or (b) PNM shall be obligated to surrender possession of the Undivided Interest
and the Real Property Interest pursuant to Section 5(a) of the Facility Lease.
PNM acknowledges and agrees that neither the Owner Trustee nor the Owner
Participant shall have any obligation whatsoever to assist PMM in obtaining any
such amendments.
SECTION 6.04. Owner Trustee's Agreement. If PNM becomes
obligated to sell, lease, otherwise make available or assign in accordance with
Sections 6.01 and 6.02 hereof, the Owner Trustee shall (at the direction of the
Owner Participant) require or cause the ANPP Transferee to purchase, lease,
accept or assume, as the case may be, the property or rights being sold, leased,
made available or assigned by PNM.
ARTICLE VII
INTERIM AGENCY ARRANGMENTS
SECTION 7.01. Designation of Agent. From and after surrender
of possession to the Owner Trustee (or its assigns) of the Undivided Interest
and the Real Property Interest pursuant to Section 5(a) of the Facility Lease
(or during such period on or after the Lease Termination Date that the Owner
Trustee shall have waived any Default or Event of Default with respect to the
inability of PNM to effectively surrender possession as required by such Section
5(a)) and until a transfer to an ANPP Transferee in respect of the Undivided
-6-
6091.CHASEUl.LEASE.56:1
<PAGE>
Interest and the Real Property Interest (such period being referred to as the
Agency Period), PNM shall be, and the Owner Trustee hereby designates PNM as,
the initial agent (the Agent) of the Owner Trustee in the exercise of all rights
assigned to the Owner Trustee hereunder.
SECTION 7.02. Operation of Unit 1. During the Agency Period,
the Agent shall administer the operation of the Undivided Interest and the Real
Property Interest in accordance with this Agreement and all instructions of the
Owner Trustee in accordance with Applicable Law. If, however, the Owner Trustee
and any User shall, prior to, or at any time during, the Agency Period, enter
into any joint ownership and operating agreement with other Persons having a
legal right to, or right to use, any other undivided interest in Unit 1, the
Agent agrees to join in, and be bound by, the terms of such agreement if the
Agent's performance thereunder shall not violate, or result in a violation of,
any Applicable Law or the License. The Owner Trustee agrees to give the Agent
reasonable prior written notice of the commencement of the negotiation of any
such agreement.
SECTION 7.03. ANPP Participation Agreement. PNM agrees that,
at all times during the Agency Period, it will perform all obligations and
discharge all liabilities for which it is responsible as a "Participant" under
the ANPP Participation Agreement in respect of the Undivided Interest and the
Real Property Interest. In the performance of the foregoing agreement, PNM shall
not exercise its rights as an ANPP Participant to cause Capital Improvements to
be made to Unit 1 and the Common Facilities unless the Owner Trustee shall have
agreed to provide funds for the payment of the Owner Trustee's Share of the cost
of such Capital Improvements to PNM prior to the date on which such amounts
shall be due with respect thereto under the ANPP Participation Agreement.
SECTION 7.04. Support. Except with respect to the Unit 1
Retained Assets for which provision is made in Section 7.06, PNM covenants and
agrees that, at all times during the Agency Period, it will provide, or make
available, to the Owner Trustee all ml's rights in and to other assets owned by
PNM and the ANPP Project Agreements to the extent relating to the Undivided
Interest and the Real Property Interest.
-7-
6091.CHASEUl.LEASE.56:1
<PAGE>
SECTION 7.05. Compensation. As compensation for its obligations
under Sections 7.02, 7.03 and 7.04, if no Event of Default based upon PNM's
failure to perform obligations under Section 5(a) of the Facility Lease has
occurred and is continuing, PNM shall be entitled to receive, and the Owner
Trustee hereby agrees to pay, an amount equal to the Owner Trustee's Share of
the aggregate of (i) amounts paid by; PNM as provided in Section 7.03 to the
extent reasonably allocable to the Undivided Interest and the Real Property
Interest and (ii) reasonable compensation for the Unit 1 Retained Assets and
(iii) out-of-packet expenses incurred by PNM or the Agent, as the case may be,
in connection with the performance of its agreements in this Article VII.
Compensation under this Section 7.05 shall be paid promptly in cash upon receipt
of an invoice from PNM.
SECTION 7.06. Transmission; Transmission Agreement. (a) PNM
covenants and agrees that, at all times during the Agency Period, the Owner
Trustee shall have the right to wheel, under normal transmission operating
conditions, the Owner Trustee's Share of the then rated capacity of Unit 1,
under normal transmission operating conditions, over transmission equipment in
which PNM now owns or may hereafter acquire an ownership interest, between Unit
1 and the ANPP Switchyard.
(b) Based upon the respective rights, duties and obligations of the
Owner Trustee and ml set forth in Section 7.06(a), if PNM shall fail or decline
to give the notice of renewal of the Facility Lease or purchase of the undivided
Interest, in each case as provided in Section 13(a) of the Facility Lease, PNM
and the Owner Trustee shall forthwith commence the negotiation in good faith of
a definitive transmission agreement, not inconsistent with the terms and
provisions of Section 7.06(a), but containing sufficient detail for the proper
wheeling of power and energy, under normal transmission operating conditions,
over the equipment of P&M referred to in such Section 7.06(a) under then
existing circumstances, for the exercise or stipulation, as the case may be, of
the respective rights, duties and obligations of the Owner Trustee and PNM set
forth in Section 7.06(a). PNM and the Owner Trustee shall complete such
negotiations and execute such definitive transmission agreement prior to the
Lease Termination Date and such definitive transmission agreement shall provide
for compensation to PNM for the transmission services so provided at the Fair
Market Sales Value thereof.
-6-
6091.CHASEU1.LEASE.56:l
<PAGE>
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Successors and Assigns. This Agreement shall be
binding upon the successors and assigns of each of PNM and the Owner Trustee.
SECTION 8.02. Governing law. The interpretation of this Agreement
and the rights and obligations of the parties hereto shall be governed by and
construed and enforced in accordance with the law of the State of New York.
SECTION 8.03. Counterpart Execution. This Agreement 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.
SECTION 8.04. Amendments. The terms of this Agreement shall not be
waived, altered, modified, amended, supplemented or terminated in any manner
whatsoever, except by written instrument signed by ml and the Owner Trustee.
SECTION 8.05. Survival. All agreements and covenants contained in
this Agreement or any agreement, document or certificate delivered pursuant
hereto or in connection herewith shall survive the execution and delivery of
this Agreement.
SECTION 8.06. Severability of Provisions. Any provision of this
Agreement 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 provisions in any
other jurisdiction. To the extent permitted by Applicable Law, PNM hereby waives
any provision of law which renders any provision hereof prohibited or
unenforceable in any respect.
-9-
6091.CHASEUl.LEASE.56:l
<PAGE>
SECTION 8.07. Headings. The division of this Agreement 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 Agreement.
SECTION 8.08. Disclosure or Beneficiary. Pursuant to Arizona Revised
Statutes 133-401, the beneficiary of the Trust Agreement is Chase Manhattan
Realty Leasing Corporation, a New York corporation, whose address is One Chase
Manhattan Plaza (20th Floor), New York, New York 10081, Attention of Leasing
Administrator. A copy of the Trust Agreement is available for inspection at the
offices of the Owner Trustee at 100 Federal Street, Boston, Massachusetts 02110,
Attention of Corporate Trust Division.
SECTION 8.09. Capacity of Lessee. Notwithstanding anything to the
contrary in this Agreement, both parties hereto agree that all rights and
obligations of the Lessee with respect to PVNGS under this Agreement are rights
and obligations of the Lessee solely in its capacity as an ANPP Participant and
not in its capacity as Operating Agent.
-10-
6091.CHASEU1.LEASE.56:l
<PAGE>
IN WITNESS WHEREOF, the parties hereto have each caused this
Agreement to be duly executed in New York, New York by their respective officers
thereunto duly authorized.
PUBLIC SERVICE COMPANY OF NEW
MEXICO
By
-------------------------
Senior Vice President and
Chief Financial Officer
THE FIRST NATIONAL BANK OF
BOSTON, not in its individual
capacity, but solely as
Owner Trustee under a Trust
Agreement, dated as of
December 15, 1986, with
Chase Manhattan Realty
Leasing Corporation
By:
-------------------------
Assistant Vice President
<PAGE>
State of New York )
)ss.
County of New York )
The foregoing instrument was acknowledged before me this 15th
day of December, 1986, by A.J. Robison, Senior Vice President and Chief
Financial Officer of Public Service Company of New Mexico, a New Mexico
corporation, on beha1f of the corporation.
-------------------------
Notary Public
Delia T. Santiago
Notary Public, State of New York
No. 41-3451160
Qualified In Queens County
Commission Expires March 30, 1987
State of New York )
) ss.
County of New York )
The foregoing instrument was acknowledged before me this 15th
day of December, 1986, by Martin P. Henry, Assistant Vice President of The First
National Bank of Boston, a national banking association, on behalf of the
banking association as Owner Trustee under that certain Trust Agreement dated as
of December 15, 1986.
-------------------------
Notary Public
DAVID L SPIVAK
Notary Public, State of New York
No. 31-4693468
Qualified in New York County
Commission Expires March 30, 1987
<PAGE>
SCHEDULE 1
UNDIVIDED INTEREST DESCRIPTION
The Undivided Interest is a (i) 1.700000% undivided interest
in and to the property described under A below and (ii) a .566667% individed
interest in and to the property described in B below.
A. Unit 1 of the Palo Verde Nuclear Generating Station (PVNGS),
located in Maricopa County, Arizona, approximately 55 miles west of the City of
Phoenix, Arizona, and approximately 16 miles west of the City of Buckeye,
Arizona, consisting of:
I. Unit 1 Combustion Engineering "System 80" pressurized water
reactor nuclear steam supply system (the NSSS). The NSSS is
comprised of a reactor vessel containing 241 fuel assemblies
with approximately 100 tons of enriched uranium (fuel
assemblies, however, are not part of Unit 1 and are not
included in the Undivided Interest being sold), two steam
generators, four reactor coolant pumps and various
additional systems and subsystems. The licensed thermal
rating of the NSSS is 3800 MW.
II. Unit 1 GE TC6F-43, 1800 RPM tandem-compound, six flow,
reheat turbine-generator including turbine, generator, moisture
separator-reheater, exciter, controls, and auxiliary subsystems.
The turbine-generator is conductor cooled and rated at 1,554 MVA at
24,000 V, 3 phase, 60 Hz, 1.5 in Hg ABS back pressure, and
approximately 1,363 MW maximum gross electric output.
-13-
6091.CHASEUl.LEASE.56:l
<PAGE>
III. Unit 1 146 ft. inside diameter, steel-lined, prestressed concrete
cylindrical containment building with a hemispherical dome designed
for 60 psig. The containment building houses the reactor system.
IV. Unit 1 auxiliary systems and equipment including engineered
safeguards Systems, reactor auxiliary systems and turbine-generator
auxiliary systems associated with items I, II, and III above,
extending to and including the Unit 1 start-up transformer.
V. Unit 1 cooling tower system consisting or three (3) mechanical
draft cooling towers, including a closed cycle circulating water
system, make-up water systems and essential spray ponds.
VI. Unit 1 radioactive waste treatment system, including liquid,
gaseous, and solid waste subsystems, controls, instrumentation,
storage, handling and shipment facilities.
VII. Unit 1 emergency diesel-generator system, including a
diesel-generator building which contains two diesel generators,
fuel oil Systems, storage tanks, control and instrumentation
systems and other equipment.
VIII.Unit 1 internal communication systems, including associated
interconnections and computer data links.
BUT EXCLUDING:
I. Nuclear fuel for Unit 1, including spare fuel assemblies.
II. Spare Parts (Unit 1).
III. Transmission facilities (including any and all facilities and
equipment providing interconnection between the Unit I turbine
generator and the ANPP High Voltage Switchyard, including step-up
transformers and standby equipment and systems).
-14-
6091.CHASEUl.LEASE.56:1
<PAGE>
IV. Oil and diesel fuel inventories (Unit 1)
B. All PVNGS common facilities, INCLUDING BUT NOT LIMITED TO::
I Surveillance Systems, including associated radioactive monitoring
systems and equipment.
II. Water treatment facilities and transport systems for supply of
waste water
III. Warehouse and related storage facilities and equipment.
BUT EXCLUDING:
I. Nuclear fuel, including spare fuel assemblies.
II. All transmission and ANPP High Voltage Switchyard facilities.
III. Administration Building.
IV. Administration Annex Building.
V. Technical Support Center.
VI. Visitor Center.
VII. External communication systems and equipment, including associated
interconnections and computer data links.
VIII. Parking lot improvements, road improvements, fencing and dikes.
IX. Spare parts (common facilities).
X. Simulator.
-15-
6091.CHASEUl.LEASE.56:l
<PAGE>
XI. Oil and diesel fuel inventories.
XII. Real property, beneficial interest in Title USA Company of Arizona
Trust No. 530, and Project Agreement interests described in
Schedule 2.
-16-
6091.CHASEU1.LEASE.56:l
<PAGE>
SCHEDULE 2
REAL PROPERTY INTEREST DESCRIPTION
The Real Property Interest is a (i) 0.5% undivided interest in
the land described in, I below, a (ii) .566667% undivided interest in the rights
and interests described in I below, and (iii) a .566667% undivided interest in
the right and interests described in III below.
I. PVNGS PLANT SITE
PARCEL NO. 1: Lot Four (4); the Southwest quarter of the Northwest quarter; and
the West half of the Southwest quarter, all in Section Two (2), Township One
(1)South, Range Six (6) West of the Gila and Salt River Base and Meridian,
Maricopa County, Arizona.
PARCEL NO. 2: All of Section Three (3), Township One (1) South, Range Six (6)
West of the Gila and Salt River Base and Meridian, Maricopa County, Arizona.
PARCEL NO. 3: The East half of Section Four (4) Township One (1) South, Range
Six (6) West of the Gila and Salt River Base and Meridian, Maricopa County,
Arizona.
PARCEL NO. 4: The West half of Section Twenty-six (26), Township One (1) oNorth,
Range Six (6) West of the Gila and Salt River Base and Meridian, Maricopa
County, Arizona.
PARCEL NO. 5: Section Twenty-seven (27), Township One (1) North, Range Six (6)
West of the Gila and Salt River Base and Meridian, Maricopa County, Arizona;
EXCEPT the Northwest quarter of Section 27.
PARCEL NO. 6: The Southeast quarter of Section Twenty-eight (28), Township One
(1) North, Range Six (6) West of the Gila and Salt River Base and Meridian,
Maricopa County, Arizona; EXCEPT 50% of all oil, gas and other mineral deposits
and geothermal resources recovered from or developed on the property, as
reserved in instrument recorded May 10, 1974 in Docket 10647, page 136.
PARCEL NO. 7: The East half of Section Thirty-three (33), Township One (1)
North, Range Six (6) West of the Gila and Salt River Base and Meridian, Maricopa
County, Arizona.
6O91.CHASEU1.LEASE.56:l
<PAGE>
PARCEL NO. 8: All of Section Thirty-four (34), Township One (1) North, Range Six
(6) West of the Gila and Salt River Base and Meridian, Maricopa County, Arizona.
PARCEL No. 9: The West half of Section Thirty-five (35), Township One (1) North,
Range Six (6) West of the Gila and Salt River Base and Meridian, Maricopa
County, Arizona.
PARCEL NO. 10: The Southeast quarter of Section Nine (9), Township One (1)
South, Range Six (6) West of the Gila and Salt River Base and Meridian, Maricopa
County, Arizona; except the Northwest quarter thereof.
PARCEL NO. 11: All of Section Ten (10), Township One (1) South, Range Six (6)
West of the Gila and Salt River Base and Meridian, Maricopa County, Arizona;
EXCEPT the East half of the Southeast quarter thereof; and EXCEPT the North half
of the South half of the Northwest quarter of the Northwest quarter thereof.
PARCEL NO. 12: That part of the East half of the Southwest quarter of Section
Twenty-three (23), Township One (1) North, Range Six (6) West of the Gila and
Salt River Base and Meridian, Maricopa County, Arizona, more particularly
described as follows:
BEGINNING at the Southeast corner of the said East half of the
Southwest quarter of Section 23; thence West, an assumed bearing along
the South line of the said East half of the Southwest quarter of Section
23, for a distance of 762.04 feet; thence North 0 degrees 03 minutes 39
seconds West; parallel to the East line of the said East half of the
Southwest quarter of Section 23, for a distance of 1946.46 feet to a
point on the South right-of-way line of the 200 foot wide
HASSAYAMPA-SALOME HIGHWAY, as recorded in Book 12 of Road Maps, page 82,
Maricopa County Recorder, Maricopa County, Arizona; thence continuing
North 0 degrees 03 minutes 39 seconds West for a distance of 234.15 feet
to a point on the North right-of-way line of said highway; thence South
58 degrees 43 minutes 35 seconds East, along said North right-of-way
line for a distance of 892.17 feet to a point on the said East line of
-2-
6091.CHASEUl.LEASE.56:1
<PAGE>
the East half of the Southwest quarter of Section 23; thence South 0
degrees 03 minutes 39 seconds East, along said East line for a distance
of 234.15 feet to a point on the said South right-of-way line; thence
continuing South 0 degrees 03 minutes 39 seconds East for a distance of
1483.31 feet to the true point of beginning;
EXCEPT the East 305 feet of the South 305 feet thereof; and
EXCEPT one-half of the minerals and mineral rights and mineral
estates of every kind and nature, as set forth in Deed recorded in
Docket 11652, page 52, Maricopa County Records.
PARCEL NO. 13: The North half of the South half of the Northwest quarter of the
Northwest quarter of Section Ten (10) Township One (1) South. Range Six (6) West
of the Gila and Salt River Base and Meridian, Maricopa County, Arizona.
II. HASSAYAMPA PUMPING STATION AND EFFLUENT PIPELINE
All real property, leases, licenses, easements, rights-of-way
and other property held by Title USA Company of Arizona Trust No. 530
established by that certain Trust Agreement dated October 15, 1975, as amended,
but excluding therefrom all improvements.
III. MISCELLANEOUS REAL PROPERTY INTERESTS
Those ANPP Project Agreements (as defined in the ANPP
Participation Agreement), in addition to the Trust Agreement for Title USA
Company of Arizona Trust 530, consisting of leases, licenses, easements, and
permits, which provide land and land rights for (a) the pipeline to supply waste
water effluent to PVNGS from the 91st Avenue sewage treatment plant serving the
Phoenix Metropolitan area and (b) railroad access to the Nuclear Plant Site (as
defined in the ANPP Participation Agreement).
-3-
6091.CHASEUl.LEASE.56:1
<PAGE>
================================================================================
PARTICIPATION AGREEMENT
dated as of December 15, 1986
among
CHASE MANHATTAN REALTY LEASING CORPORATION
as Owner Participant
FIRST PV FUNDING CORPORATION,
as Loan Participant
THE FIRST NATIONAL BANK OF BOSTON,
in its individual capacity and as Owner Trustee
under a Trust Agreement,
dated as of December 15, 1986,
with the Owner Participant, as Owner Trustee
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, 19B6,
with the Owner Trustee, as Indenture Trustee
and
PUBLIC SERVICE COMPANY OF NEW MEXICO,
as Lessee
================================================================================
Sale and Leaseback of a .7933333% Undivided Interest
in Palo Verde Nuclear Generating Station Unit 2
and a .2644444% Undivided Interest in Certain Common
Facilities
================================================================================
6091.100.2898.27A:9
<PAGE>
TABLE OF CONTENTS
Page
----
SECTION 1 Definitions .......................................... 2
SECTION 2 Participation by the
Loan Participant ..................................... 2
SECTION 3 Participation by the
Owner Participant .................................... 3
SECTION 4 Purchase, Sale
Financing and Lease of
the Undivided Interest;
Purchase, Sale and Lease
of the Real Property
Interest ............................................. 3
SECTION 5 Notice of Closing;
Closing .............................................. 4
SECTION 6 Representations
Warranties and
Agreements of the Loan
Participant; Direction
to the Indenture Trustee ............................. 5
SECTION 7 Representations
Warranties and
Agreements of the Owner
Participant .......................................... 8
SECTION 8 Representations
Warranties and
Agreements of the Owner
Trustee and FNB ...................................... 15
SECTION 9 Representations
Warranties and
Agreements of Chemical
Bank ................................................. 22
--i--
6091.lOO.2898.27A:9
<PAGE>
TABLE OF CONTENTS (Continued)
Page
----
SECTION 10 Representations,
Warranties and
Agreements of the Lessee ............................. 24
SECTION 11 Conditions Precedent ................................. 50
SECTION 12 Consent to Assignment of
the Facility Lease;
Consent to Indenture;
Consent to Assignment of
Notes ................................................ 62
SECTION 13 Lessee's Indemnities and
Agreements ........................................... 63
SECTION 14 Transaction Expenses ................................. 78
SECTION 15 Owner Participant's
Transfers ............................................ 81
SECTION 16 Brokerage and Finders'
Fees and Commissions ................................. 83
SECTION 17 Survival of
Representations and
Warranties; Binding
Effect ............................................... 84
SECTION 18 Notices .............................................. 85
SECTION 19 Miscellaneous ........................................ 86
SCHEDULES
Schedule 1 - Notice of Closing
--ii--
6091.1OO.2898.27A:9
<PAGE>
TABLE OF CONTENTS (Continued)
Page
----
Schedule 2 - Pricing Assumptions
Schedule 3 - Bill of Sale and Assignment (Section 7(b) (4))
Schedule 4 - Recordations and Filings
Schedule 5 Affidavit of Owner Trustee (Section 7(c)(6))
- APPENDIX
Appendix A - Definitions
-- iii --
6091.100.2898.27A:9
<PAGE>
PARTICIPATION AGREEMENT
PARTICIPATION AGREEMENT, dated as of December 15, 1986 among CHASE
MANHATTAN REALTY LEASING CORPORATION, a New York corporation (the Owner
Participant), FIRST PV FUNDING CORPQRATION, a Delaware corporation (the Loan
Participant), THE FIRST NATIONAL BANK OF BOSTON, a national banking association,
in its individual capacity (FNB) and as Owner Trustee (the Owner Trustee) under
a Trust Agreement, dated as of December 15, 1986, with the Owner Participant,
CHEMICAL BANK, a New York banking corporation, in its individual capacity
(Chemical Bank) and as Indenture Trustee (the 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, a New Mexico Corporation (the Lessee).
WITNESSETH:
WHEREAS, the Owner Participant desires to cause the Trust to
acquire the Undivided Interest and the Real Property Interest and to lease the
Undivided Interest and the Real Property Interest to the Lessee under the
Facility Lease;
WHEREAS, the Lessee desires to sell the Undivided Interest and
the Real Property Interest to the Trust and lease the Undivided Interest and the
Real Property Interest back from the Trust under the Facility Lease;
WHEREAS, the Owner Trustee and the Lessee will enter into the
Purchase Documents with respect to the sale and purchase of the Undivided
Interest and the Real Property Interest;
WHEREAS, pursuant to the terms and provisions of the Indenture,
the Owner Trustee will authorize the creation, issuance, sale and delivery of
the Fixed Rate Notes and the granting of the security therefor, and the
Indenture Trustee will authenticate the Fixed Rate Notes; and
WHEREAS, the Loan Participant is willing to purchase the Fixed
Rate Notes on the terms and conditions set forth herein;
6091.l00.2898.27A:9
<PAGE>
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 the purposes hereof, capitalized terms used herein shall have
the meanings assigned to such terms in Appendix A. References in this
Participation Agreement to sections, paragraphs and clauses are to sections,
paragraphs and clauses in this Participation Agreement unless otherwise
indicated.
SECTION 2. Participation by the Loan Participant.
(a) Loan Participant's Commitment. Subject to the satisfaction of
the conditions in Sections 5(a) and 11(a), on the Closing Date the Loan
Participant agrees to lend to the Owner Trustee, on a non-recourse basis, an
amount (the Loan) equal to 79.646017% of the Purchase Price.
(b) Payment; Term of the Fixed Rate Notes.
(1) Payment. Proceeds of the Loan shall be paid directly to the
Indenture Trustee, for the account of the Owner Trustee, in immediately
available funds, at the Indenture Trustee's Office.
(2) Terms of the Fixed Rate Notes. The Loan shall be evidenced by
the Fixed Rate Notes. The Fixed Rate Notes shall be issued by the Owner
Trustee under and pursuant to the Indenture, shall be in the principal
amount of the Loan and shall bear interest at the rate or rates per
annum and shall be payable as set forth in the Indenture.
-2-
6091.100.2898.27A:9
<PAGE>
SECTION 3. Participation by the Owner Participant.
Subject to the satisfaction of the conditions in Sections 5(a) and
11(a), on the Closing Date the Owner Participant agrees to (i) make an equity
investment with respect to the Undivided Interest in an amount (the Investment)
equal to 20.353983% of the Purchase Price, (ii) make an equity investment with
respect to the Real Property Interest in the amount set forth in the Notice of
Closing (the Real Estate Investment), and (iii) provide to the Owner Trustee an.
amount equal to the Estimated Transaction Expenses. Proceeds of the Investment
and the Real Estate Investment shall be paid directly to the Indenture Trustee,
in immediately avail-able funds, at the Indenture Trustee's Office. The
Estimated Transaction Expenses shall be paid to the Owner Trustee, in
immediately available funds, at 100 Federal Street, Boston, Massachusetts 02110
Attention: Manager, Corporate Trust Department.
SECTION 4. Purchase, Sale, Financing and Lease of the Undivided
Interest; purchase, Sale and Lease of the Real Property Interest.
(a) The Undivided Interest. Subject to (x) the satisfaction of the
conditions in Sections 5(a) and 11(a), (y) receipt from the Owner Participant of
the Investment and an amount equal to Estimated Transaction Expenses and (z)
receipt from the Loan Participant of the proceeds of the Loan, on the Closing
Date the Owner Trustee shall (i) cause the Trust to purchase the Undivided
Interest from the Lessee for $25,155,556 (the Purchase Price) and (ii) disburse
an amount equal to the Estimated Transaction Expenses as contemplated by Section
14. subject to the satisfaction of the conditions in Section 11(b), on the
Closing Date the Lessee shall sell the undivided Interest to the Trust for the
Purchase Price. Concurrently with such purchase and sale, the Trust shall lease
the Undivided Interest to the Lessee, and the Lessee shall lease the Undivided
Interest from the Trust, pursuant to the Facility Lease.
-3-
6091.100.2898.27A:9
<PAGE>
(b) The Real Property Interest. Subject to (x) the satisfaction of
the conditions in Sections 5(a) and 11(a) and (y) receipt from the Owner
Participant of the Real Estate Investment, on the Closing Date the Owner
Participant shall cause the Trust to purchase the Real Property Interest from
the Lessee for a purchase price equal to the Real Estate Investment. Subject to
the satisfaction of the conditions in Section 11(b), on the Closing Date the
Lessee shall sell the Real Property Interest to the Trust for such purchase
price. Concurrently with such purchase and sale, the Trust shall lease the Real
Property Interest to the Lessee, and the Lessee shall lease the Real Property
Interest from the Trust, pursuant to the Facility Lease.
SECTION 5. Notice of Closing; Closing.
(a) Notice of Closing. Not later than two Business Days prior to the
Closing Date, the Lessee shall deliver to the Owner Participant, the Owner
Trustee, the Loan Participant, the Collateral Trust Trustee and the Indenture
Trustee a notice, substantially in the form of Schedule 1 (the Notice of
Closing), which shall (i) state that the Closing Date shall occur on the date
specified therein, (ii) set forth a list of the then known Transaction Expenses
payable by the Owner Trustee pursuant to Section 14(a) (the Estimated
Transaction Expenses) and (iii) provide payment instructions in respect of the
disposition of the Purchase Price and the amount of the Real Estate Investment.
(b) Closing. Upon satisfaction of the conditions in Section 5(a) and
Section 11(a) and upon receipt from the Owner Participant of the amount of the
Investment, the Real Estate Investment and the Estimated Transaction Expenses
and from the Loan Participant of the Loan, on the Closing Date the Owner Trustee
shall (i) instruct the Indenture Trustee to pay to the Lessee an amount equal to
the Purchase Price and the amount of the Real Estate Investment in immediately
available funds and (ii) disburse the Estimated Transaction Expenses as
-4-
6091.100.2898.27A:9
<PAGE>
contemplated by Section 14. Upon satisfaction of the conditions in Section
11(b), on the Closing Date, the Lessee shall deliver to the Owner Trustee the
Bill of Sale, the Deed and the Assignment of Beneficial Interest.
SECTION 6. Representations, Warranties and Agreements of the Lean
Participant; Direction to the Indenture Trustee.
(a) The Loan Participant represents and warrants that:
(1) Due Organization. The Loan Participant is a corporation duly
organized and validly existing in good standing under the laws of the
State of Delaware and has the corporate power and authority to carry on
its business as presently conducted, own its properties, and enter into
and perform its obligations under this Participation Agreement and each
other Transaction Document and each Financing Document to which it is,
or is to become on or before the Closing Date, a party.
(2) Due Authorization; Enforceability. The execution, delivery and
performance by the Loan Participant of this Participation Agreement and
each other Transaction Document and each Financing Document to which it
is, or is to become, a party on or before the Closing Date, have been
duly authorized by all necessary corporate action on the part of the
Loan Participant and do not require the consent or approval of the
stockholder of the Loan Participant. This Participation Agreement and
each other Transaction Document and each Financing Document to which the
Loan Participant is, or is to become, a party, have been, or on or
before the Closing Date will have been, duly executed and delivered by
the Loan Participant and constitute, or upon execution and delivery
thereof will constitute, legal, valid and binding agreements of the Loan
Participant enforceable against it in accordance with their respective
terms.
-5-
6091.100.2898.27A:9
<PAGE>
(3) No violation. Neither the execution, delivery or performance by
the Loan Participant of this Participation Agreement, any other
Transaction Document or any Financing Document to which it is, or is to
become on or before the Closing Date, a party, nor the consummation by
the Loan Participant of the transactions contemplated hereby or thereby,
nor compliance by the Loan Participant with the provisions hereof or
thereof conflicts or will conflict with, or results or will result in
the breach of any provision of, the Certificate of Incorporation or
By-Laws of the Loan Participant or any Applicable Law or any indenture,
mortgage or agreement to which the Loan Participant is a party or by
which it or its property is bound or requires any Governmental Action,
except such as have been, or on or before the Closing Date will have
been, duly obtained, given or accomplished.
(4) No Other Business. Except as contemplated by this Participation
Agreement, the other Transaction Documents and the Financing Documents
and except as otherwise contemplated by the Section 6(c) Application,
the Loan Participant has not engaged, and will not engage, in any
business or activity of any type or kind whatever.
(5) ERISA The Loan Participant is not acquiring any Note with the
"plan assets" of any "employee benefit plan" within the meaning of
Section 3(3) of ERISA or any "plan" within the meaning of section
4975(e) (1) of the Code.
(6) Securities Act. The Loan Participant understands that (i) none
of the Notes to be acquired by it has been registered under the
Securities Act and (ii) each will bear the legend set forth in the form
of such Notes. The Loan Participant will acquire each Note to be
acquired by it hereunder and under the Indenture solely for purposes of
pledging such Notes to the Collateral Trust Trustee to secure Bonds
issued from time to time under the Collateral Trust Indenture.
-6-
6091.100.2898.27A:9
<PAGE>
(b) Agreements of the Loan Participant. The Loan Participant agrees
that:
(1) Transfers of the Notes. Any transfer or assignment of any Note
or of all or any part of the Loan Participant's interest hereunder or
under any other Transaction Document or any Financing Document shall be
effected in a transaction constituting an exempted transaction under the
Securities Act and on the express condition that the transferee,
assignee or participant shall agree to be bound by the terms and
provisions hereof and thereof. Neither the Loan Participant nor any
subsequent Holder of a Note may sell, exchange or transfer any Note to
any other Person (other than the Collateral Trust Trustee) unless such
transferee delivers to the other parties hereto a representation and
warranty (and an opinion of counsel satisfactory to each of the other
parties hereto) to the effect that neither the transfer of such Note to,
nor the ownership of such Note by, such transferee will cause such
transferee, or any other party hereto, to be engaged in a "prohibited
transaction", as defined in section 406 of ERISA or section 4975 of the
Code, which is not at such time subject to an exemption contained in
ERISA or in the rules, regulations, releases or bulletins adopted
thereunder.
(2) Quiet Enjoyment. The Loan Participant acknowledges Section 6(a)
of the Facility Lease.
(3) No Other Business. During such time as any Note is outstanding
and held by the Loan Participant or the Collateral Trust Trustee, the
Loan Participant will not (i) engage in any business or activity other
than (1) in connection with the Transaction Documents or the Financing
Documents or (2) as otherwise contemplated by the Section 6(c)
Application or (ii) amend or engage in any activity or take any action
not permitted by Article THIRD, FOURTH or SIXTH of its Certificate of
Incorporation, as in effect on the date of execution and delivery
hereof, without, in each case, the consent of the other parties hereto.
-7-
6091.100.2898.27A:9
<PAGE>
(c) Direction to the Indenture Trustee. The Loan Participant, as
purchaser of the Fixed Rate Notes, (i) hereby authorizes and directs the
Indenture Trustee to execute, deliver and perform this Participation Agreement,
(ii) hereby authorizes and directs the Indenture Trustee to register such Notes
in the name of the Loan Participant and, upon authentication and delivery
thereof pursuant to this Participation Agreement and the Indenture, to deliver
such Notes (upon completion by the Loan Participant of the assignment attached
to each of the Fixed Rate Notes) to the Collateral Trust Trustee pursuant to the
Collateral Trust Indenture, (iii) acknowledges and agrees that, in connection
with this Participation Agreement, the Indenture Trustee shall have the benefits
and protections of Article VIII of the Indenture and (iv) agrees that, in the
event of a conflict between the provisions of this Participation Agreement and
the Indenture, the Indenture Trustee shall, as between the Indenture Trustee and
the Loan Participant, be fully protected in relying on the express terms of the
Indenture.
SECTION 7. Representations, Warranties and Agreements of the Owner
Participant.
(a) Representations and Warranties. The Owner Participant represents
and warrants that:
(1) Due Organization. The Owner Participant is a corporation duly
organized and validly existing in good standing under the laws of the
state of its incorporation and has the corporate power and authority to
enter into and perform its obligations under this Participation
Agreement and each other Transaction Document to which it is, or is to
become, a party.
-8-
6091.100.2898.27A:9
<PAGE>
(2) Due Authorization. This Participation Agreement and each other
Transaction Document to which the Owner Participant is, or is to become
on or before the Closing Date, a party have been duly authorized by all
necessary corporate action on the part of the Owner Participant and do
not require the consent or approval of its stockholders or any trustee
or holder of any of its indebtedness or other obligations, except such
as have been, or on or before the Closing Date will have been, duly
obtained, given or accomplished.
(3) Execution. This Participation Agreement and each other
Transaction Document to which the Owner Participant is, or is to become
on or before the Closing Date, a party have been, or on or before the
Closing Date will have been, duly executed and delivered by the Owner
Participant and constitute, or upon execution and delivery thereof will
constitute, its legal, valid and binding agreements, enforceable against
it in accordance with their respective terms (except as may be limited
by bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights generally).
(4) No violation. Neither the execution, delivery or performance by
the Owner Participant of this Participation Agreement or any other
Transaction Document to which it is, or is to become on or prior to the
Closing Date, a party, nor the consummation by the Owner Participant of
the transactions contemplated hereby or thereby, nor compliance by the
Owner Participant with the provisions hereof or thereof, conflicts with,
or results in the breach of any provision of, or is inconsistent with,
its documents of incorporation or By-Laws or contravenes any Applicable
Law applicable to it or any of its Affiliates, or any indenture,
mortgage or agreement for borrowed money to which the Owner Participant
is a party or any other agreement or instrument to which the Owner
Participant is a party or by which it or its property is bound or
requires any Governmental Action with respect to the Owner Participant
under Federal or New York law on or before the Closing Date, except such
-9-
6091.100.2898.27A:9
<PAGE>
as are contemplated by the Transaction Documents or the Financing
Documents or such as have been, or on or before the Closing Date will
have been, duly obtained, given or accomplished; provided, however, that
the Owner Participant makes no representation or warranty as to any
Applicable Law or Governmental Action relating to the Securities Act,
the Securities Exchange Act, the Trust Indenture Act, the Federal Power
Act, the Atomic Energy Act, the Nuclear Waste Act, ERISA (except to the
extent set forth in paragraph (9) below), the Holding Company Act, the
flew Mexico Public Utility Act, the Arizona Public Utility Act, energy
or nuclear matters, public utilities, the environment, health and safety
or Unit 2.
(5) No Owner Participant's Liens. Neither the execution and delivery
by the Owner Participant of this Participation Agreement or any other
Transaction Document to which the Owner Participant is, or is to become
on or before the Closing Date, a party, nor the performance by the Owner
Participant of its obligations hereunder or thereunder, will subject the
Trust Estate or the Lease Indenture Estate, or any portion of either
thereof, to any Owner Participant's Lien.
(6) Acquisition. The Owner Participant is acquiring the beneficial
interest in the Trust Estate for its own account in the ordinary course
of its business and the Owner Participant has no intention of making any
sale or other distribution of the beneficial interest in the Trust
Estate in violation of any legislation, rule or regulation relating to
limitations upon the sale or other distribution of interests such as
such beneficial interest.
(7) No Prior Security Interest. There exists no security interest in
or other Lien on the Lease Indenture Estate in the state of the chief
place of business of the Owner Participant, the State of New Mexico or
the State of Arizona arising as a result of claims against the Owner
Participant unrelated to the transactions contemplated by the
Transaction Documents or the Financing Documents which is prior to the
Indenture Trustee's security interest in the Lease Indenture Estate.
-10-
6091.100.2898.27A:9
<PAGE>
(8) No Sales or Solicitations. Except as contemplated by the
Financing Documents and as described in a letter to the Lessee dated
November 17, 1986, neither the Owner Participant nor anyone acting on
its behalf has directly or indirectly offered or sold, or solicited any
offer to acquire, any beneficial interest in the Trust Estate or any
Note or any Bond.
(9) ERISA. The Owner Participant is not acquiring its interests in
the Trust with the "plan assets" of any "employee benefit plan" within
the meaning of section 3(3) of ERISA or any "plan" within the meaning of
section 4975(e)(l) of the Code.
(b) Agreements of the Owner Participant. The Owner Participant
agrees that:
(1) No Owner Participant's Liens. The Owner Participant will not
create or permit to exist, and, at its own cost and expense, will
promptly take such action as may be necessary duly to discharge, all
Owner Participant's Liens.
(2) Quiet Enjoyment. The Owner Participant acknowledges the
provisions of Section 6(a) of the Facility Lease and Section 8(c) of
this Participation Agreement.
(3) No-Petition Agreement. Prior to the 181st day following the
payment in full of the Bonds and the discharge in accordance with its
terms of the Collateral Trust Indenture, the Owner Participant agrees
that it will not file a petition, or join in the filing of a petition,
seeking reorganization, arrangement, adjustment or composition of, or in
respect of, the Loan Participant under the Bankruptcy Code, or any other
applicable Federal or state law or the law of the District of Columbia.
-11-
6091.100.2898.27A:9
<PAGE>
(4) Transfer of Interest in the Trust Estate. Unless the Lessee
shall have assumed the Notes as contemplated by Section 3.9(b) of the
Indenture, upon receipt by the Owner Participant under Section 5.2 of
the Indenture of the payments to be made to the Lessor as provided in
Section 9(c), 9(d) or 16 of the Facility Least and, if applicable,
compliance in full by the Lessee with Section 9(f) of the Facility
Lease, the Owner Participant shall (so long as no Default or Event of
Default shall have occurred and be continuing), and at any time
following the occurrence of an Event of Loss, Deemed Loss Event or a
Default or Event of Default or event giving rise to the exercise of the
Cure Option the Owner Participant may, assign, convey and transfer to
the Lessee all of the Owner Participant's right, title and interest in,
to and under the Trust Estate (except the right to receive Excepted
Payments), such transfer (i) to be free and clear of Owner Participant's
Liens but otherwise without recourse, representation or warranty and
(ii) if the Owner Participant so elects, to be effected by the execution
and delivery by the Owner Participant to the Lessee of a Bill of Sale
and Assignment substantially in the form of Exhibit A hereto (and upon
the execution and delivery thereof and the furnishing of executed
counterparts thereof to the Owner Trustee such transfer shall be and
become effective automatically and without further action by the Owner
Trustee, the Owner Participant, the Lessee, the Lessor, the Indenture
Trustee or any other Person). The Lessee hereby agrees to accept the
transfer contemplated by this Section 7(b) (4) and the parties hereto
acknowledge and agree that at the time of such transfer the Lessee shall
be deemed to be a Transferee that has satisfied all conditions set forth
in Section 15(a) of this Participation Agreement and Section 11.09 of
the Trust Agreement.
-12-
6091.100.2898.27A:9
<PAGE>
If, in accordance with the preceding paragraph, the Owner
Participant shall assign, convey and transfer to the Lessee all of the
Owner Participant's right, title and interest in, to and under the Trust
Estate (except the right to receive Excepted Payments) following the
occurrence of an Event of Loss, Deemed Loss Event or a Default or Event of
Default or event giving rise to the Cure Option, but the transferring
Owner Participant shall not have received under Section 5.2 of the
Indenture the payments to be made to the Lessor as provided in Section
9(c), 9(d) or 16 at the Facility Lease, as the case may be, the obligation
of the Lessee to make such payments (together with interest thereon in
accordance with Section 3(b)(iii) of the Facility Lease) (or to make other
payments in a like amount with respect to Basic Rent or Supplemental Rent
paid by application of such payments (and in which the Owner Trustee has
thereby acquired an interest) pursuant to Section 5.1 or 5.3 of the
Indenture) shall not be deemed to be canceled or discharged but shall
continue until all such amounts are so received by the Lessee, as
successor Owner Participant, or by the transferring Owner Participant
pursuant to the following provisions of this Section 7(b)(4). The Lessee
as successor Owner Participant hereby agrees to pay to the transferring
Owner Participant on the date of transfer an amount equal to the amount of
the payments to be made to the Lessor as provided in Section 9(c), 9(d) or
16 together with interest thereon at the Penalty Rate (computed in
accordance with the Facility Lease) from the data of transfer, such
payments (the Secured obligations) to be made only from amounts payable to
the Owner Participant from the Trust Estate. The Secured Obligations shall
be secured by (and the Lessee hereby grants to the transferring Owner
Participant security interest in and general lien upon) all of the right,
title and interest of the Lessee as successor Owner Participant in, to and
under the Trust Estate. In connection therewith, the Lessee as successor
Owner Participant hereby agrees as follows:
-13-
6091.100.2898.27A:9
<PAGE>
(i) The transferring Owner Participant shall have all of the rights
and remedies of a secured party under the Uniform Commercial Code as in
effect in the State of New York (as such law may at any time be
amended).
(ii) Upon the occurrence of such transfer, the Lessee as successor
Owner Participant shall appoint, and hereby does appoint, the
transferring Owner Participant its attorney-in-fact, irrevocably, with
full power of substitution, to the exclusion of the Lessee as successor
Owner Participant, to ask for, require, demand, receive and give
acquittance for any and all moneys and claims for moneys due and to
become due to the Lessee as successor Owner Participant under or arising
out of the Trust Estate, to endorse any checks or other instruments or
orders in connection therewith, and to take any action (including the
filing of financing statements or other documents and the delivery of
written instructions to the Owner Trustee and the Indenture Trustee
specifying that all payments to be made to the Lessee as successor Owner
Participant under the Trust Agreement and the Indenture shall be made
directly to the transferring Owner Participant so long as any portion of
the Secured Obligations remains outstanding) or institute any
proceedings which the transferring Owner Participant may deem necessary
or appropriate to protect and preserve the security interest of the
transferring Owner Participant in the Trust Estate and the rights of the
transferring Owner Participant to receive payments thereunder.
(iii) Upon the occurrence of such transfer, and until the Secured
Obligations have been paid in full, the Lessee (in its capacity as such
and as successor Owner Participant) shall not, without the prior written
-14-
6091.l00.2898.27A:9
<PAGE>
consent of the transferring Owner Participant (I) take any action or
deliver any instruction under any Transaction Document the effect of
which would be to CA) relieve or otherwise affect the obligation of the
Lessee to make such payments, (B) terminate the Trust Agreement, (C)
terminate or rescind the Facility Lease, (D) sell, assign, transfer or
deliver the Trust Estate to any Person (except, in the case of the Trust
Estate, as contemplated by Section g(j) of the Facility Lease) or (2)
accept, or approve, any amendment to any Transaction Document.
(iv) The Lessee (as such and as successor Owner Participant)
covenants and agrees to do all such acts and execute all such
instruments of further assurance as shall be reasonably requested from
time to time by the transferring Owner Participant for the purpose of
fully carrying out and effectuating the provisions of this Section
7(b)(4) and the intent thereof.
Upon the payment in full of the Secured Obligations, the security interest
hereinabove provided shall terminate and the transferring Owner Participant, at
the request of the Lessee as successor Owner Participant, shall execute and
deliver to the Lessee as successor Owner Participant such termination
statements, releases or other instruments presented to the transferring Owner
Participant as shall be reasonably required to effect such termination.
SECTION 8. Representations, Warranties and Agreements of the Owner
Trustee and FNB.
(a) Representations and Warranties. FNB as Owner Trustee and (except
as otherwise provided in the last sentence of this Section 8(a)) in its
individual capacity, represents and warrants that:
(1) Due Organization. FNB is a national banking association duly
organized and validly existing in good standing under the laws of the
United States of America and has all requisite corporate power and
-15-
6091.lOO.2898.27A:9
<PAGE>
authority to enter into and perform its obligations under (x) the Trust
Agreement and, to the extent it is a party hereto in its individual
capacity, this Participation Agreement and (y) acting as Owner Trustee,
this Participation Agreement and each other Transaction Document to
which FNB is, or is to become on or before the Closing Date, a party as
Owner Trustee
(2) Due Authorization: Enforceability; etc. This Participation
Agreement and each other Transaction Document to which FNB is, or is to
become on or before the Closing Date, a party have been duly authorized
by all necessary corporate action of FNB (in its individual capacity or
as Owner Trustee, as the case may be) and, upon execution and delivery
hereof and thereof, this Participation Agreement and each such other
Transaction Document will be duly executed and delivered and will be
legal, valid and binding agreements of FNB (in its respective
capacities), enforceable against it (in its respective capacities) in
accordance with their respective terms (except as may be limited by
bankruptcy, insolvency or other similar laws affecting the enforcement
of creditors' rights generally); it being understood that PUB is not
making any representation or warranty as to the priorities of the Liens
created or to be created under any Transaction Document, title to the
Trust Estate or recordings or filings necessary in connection therewith.
(3) Notes. Upon execution of the Fixed Rate Notes,
authentication thereof by the Indenture Trustee pursuant to the
Indenture and delivery thereof against payment therefor in accordance
with this Participation Agreement, each such Note will be a legal, valid
and binding obligation of the Owner Trustee, enforceable against the
Owner Trustee in accordance with its terms (except as may be limited by
bankruptcy, insolvency or other similar laws affecting the enforcement
of creditors' rights generally)
-16-
6091.100.2898.27A:9
<PAGE>
(4) No Violation. Neither the execution and delivery by (x)
FNB of the Trust Agreement and, to the extent FNB is a party hereto in
its individual capacity, this Participation Agreement and (y) the Owner
Trustee of this Participation Agreement and each other Transaction
Document (other than the Trust Agreement) to which the Owner Trustee is,
or is to become on or before the Closing Date, a party, nor the
performance by FNB, in its individual capacity or as Owner Trustee, as
the case may be, of its obligations under each, conflicts with, or
results in the breach of any provision of, its Articles of Association
or By-Laws and does not contravene any Applicable Law of the United
States of America or The Commonwealth of Massachusetts governing the
banking or trust powers of FNB, and does not contravene any provision
of, or constitute a default under, any indenture, mortgage, contract or
other instrument to which FNB is a party or by which it is bound or
require any Governmental Action with respect to the Owner Trustee under
any Federal or Massachusetts law, except such as are contemplated by the
Transaction Documents or the Financing Documents or such as have been,
or on or before the Closing Date will have been, duly obtained, given or
accomplished; provided, however, that no representation or warranty is
made with respect to the right, power or authority of FNB or the Owner
Trustee to act under the ANPP Participation Agreement or the License in
respect of the Undivided Interest or Unit 2, and the Owner Trustee makes
no representation or warranty as to any Applicable Law or Governmental
Action relating to the Securities Act, the Securities Exchange Act, the
Trust Indenture Act, the Federal Power Act, the Atomic Energy Act, the
Holding Company Act, the New Mexico Public Utility Act, the Arizona
Public Utility Act, the Nuclear Waste Act, ERISA, energy or nuclear
matters, public utilities, the environment, health and safety or Unit 2.
(5) Defaults. To the best knowledge of the Owner Trustee, no
Indenture Default or Indenture Event of Default has occurred and is
continuing. The Owner Trustee is not in violation of any of the
-17-
6091.l00.2898.27A:9
<PAGE>
terms of this Participation Agreement or any other Transaction Document
to which it is, or is to become on or before the Closing Date, a party.
(6) Litigation. There is no action, suit, investigation or
proceeding pending or, to the knowledge of FNB, threatened against FNB
(in any capacity) before any court, arbitrator or administrative or
governmental body and which relates to its banking or trust powers
which, individually or in the aggregate, if decided adversely to the
interests of FNB in such capacity, would have a material adverse effect
upon the ability of FNB (in any capacity) to perform its obligations
under this Participation Agreement or any other Transaction Document to
which it is, or is to become on or before the Closing Date, a party (in
any capacity).
(7) Location of the Chief Place of Business and chief Executive
Office, etc. The chief place of business and chief executive office of
the Owner Trustee, and the office where its records concerning the
accounts or contract rights relating to the transactions contemplated
hereby are located in Boston, Massachusetts.
(8) No Prior Security Interest. There exists no security interest in
the Lease Indenture Estate in the States of New Mexico, New York or
Arizona or in The Commonwealth of Massachusetts arising as a result of
any claim against FNB unrelated to the transactions contemplated by the
Transaction Documents or the Financing Documents which is prior to the
Indenture Trustee's security interest in the Lease Indenture Estate.
(9) No Owner Trustee's Liens. Neither the execution by FNB (in any
capacity) of this Participation Agreement or any other Transaction
Document to which it (in any capacity) is, or is to become on or before
the Closing Date, a party, nor the performance in such capacity by it of
its obligations hereunder or thereunder, will subject the Trust Estate
or the Lease Indenture Estate, or any portion thereof, to any Owner
Trustee's Lien.
-18-
6091.100.2898.27A:9
<PAGE>
The representations and warranties in Section 8(a) (2) Section 8(a) (3) and
Section 8(a) (5) as to Transaction Documents and the Fixed Rate Notes being
legal, valid and binding obligations enforceable in accordance with their
respective terms, are given by FNB only in its capacity as Owner Trustee and not
in its individual capacity, except that FNB does represent in its individual
capacity that it is authorized under the laws of The Commonwealth of
Massachusetts to execute and deliver the Transaction Documents to which it is,
or is to become on or before the Closing Date, a party.
(b) Agreements. FNB agrees, in its individual capacity, that:
(1) Discharge of Liens. FNB will not create or permit to exist, and
will, at its own cost and expense, promptly take such action as may be
necessary duly to discharge, all Owner Trustee's Liens.
(2) Certain Amendments. FNB agrees that unless a Default or an Event
of Default has occurred and is continuing or an Event of Loss or Deemed
Loss Event has occurred, FNB will not amend any of the payment terms of
any Note, or take any action to refund any Note after the date of issue
thereof pursuant to the terms of this Participation Agreement and the
Indenture without the prior written consent of the Lessee. FNB agrees
that except for amendments or supplements, if any, made pursuant to
Article X of the Trust Agreement or contemplated by Section 7(b)(4), FNB
will not amend or supplement, or consent to any amendment of or
supplement to, the Trust Agreement if such amendment would materially
and adversely affect the rights of the Lessee under the Facility Lease
and this Participation Agreement, without the prior written consent of
the Lessee unless a Default or an Event of Default has occurred and is
continuing or the Lease Termination Date has occurred.
(3) Change in Location of Chief Place of Business and Chief
Executive Office, etc. F'NB shall notify the Lessee, the Loan
Participant and the Indenture Trustee promptly after any change in
-19-
6091.l00.2898.27A:9
<PAGE>
location of its chief executive office, principal and chief place of
business or place where its records concerning the accounts or contract
rights relating to the transactions contemplated hereby are kept
(4) No Petition Agreement. Prior to the 181st day following the
payment in full of the Bonds and the discharge in accordance with its
terms of the Collateral Trust Indenture, FNB (in all capacities) agrees
that it will not file a petition, or join in the filing of a petition,
seeking reorganization, arrangement, adjustment or composition of or in
respect of the Loan Participant under the Bankruptcy Code or any other
applicable Federal or state law or the law of the District of Columbia.
(5) Quiet Enjoyment. FNB acknowledges Section 6(a) of the Facility
Lease
(c) Agreements of the Owner Trustee. The Owner Trustee agrees that:
(1) Subject and Subordinate. The rights and remedies of the Owner
Trustee and the Owner Participant in the Undivided Interest, the Real
Property Interest and the related Generation Entitlement Share are
subject and subordinate to the rights and remedies of the AHPP
Participants (other than (i) the Lessee or (ii) any Person who shall
become an ANPF Participant in respect of the Lessor's Interest (as
defined in Section S(c)(3)) under the ANPP Project Agreements
(2) Lessee to be Participant. Except as provided in Sections 15.2.2,
15.6.4 and 15.10 (or any comparable successor provisions) of the ANPP
Participation Agreement, the Lessee shall be and remain the sole
"Participant" for all purposes of the ANPP Participation Agreement and
the sole representative (with power to bind the Lessor and the Indenture
Trustee) in all dealings with the other ANPP Participants in relation to
the property, rights, titles and interests of the Lessee transferred to
-20-
6091.100.2898.27A:9
<PAGE>
the Lessor pursuant to the Transaction Documents: provided, however,
that the foregoing shall not limit in any way the effect of Section 15
or 16 of the Facility Lease or any liability or obligation that the
Lessee may incur to the Owner Trustee or the Owner Participant under any
Transaction Document as a result thereof (including, without limitation,
any liability that PNM may incur under Section 16 of the Facility Lease
as the result of an Event of Default).
(3) Cash Bids. Upon the expiration of the Facility Lease and
upon the Lessee failing to purchase or otherwise reacquire all the
right, title and interest in PVNGS and contractual rights related
thereto necessary for the operation of the interest (the Lessor's
Interest) acquired by the Lessor pursuant to the Transaction Documents,
the Lessor shall entertain cash bids from each ANPP Participant for the
Lessor's Interest.
(4) Survival. The provisions of this paragraph (4) and
Sections 8(c) (1), (2) and (3) shall remain in full force and effect
until such time as the ANPP Administrative committee or the ANPP
Participants shall otherwise consent.
(5) License Hatters. The Owner Trustee acknowledges that
before taking possession of the Undivided Interest or any part thereof
or of any other interest in PVNGS, either of the following may be
required: (i) the issuance of an appropriate license from the NRC,
whether by amendment to the License or otherwise, or (ii) a partial
transfer of the License authorizing the Lessor to possess its interest
in PVNGS, to the extent of the Undivided Interest, upon application for
partial transfer of such License to such extent filed pursuant to
Applicable Law. Neither the Owner Trustee nor the Owner Participant
shall have any responsibility whatsoever to take or initiate any action
with respect to any NRC licensing matter.
(6) Acknowledgment and Agreement. The Owner Trustee hereby
acknowledges and agrees to the provisions of Section 7(b)(4) of this
Participation Agreement. The Owner Trustee hereby agrees, upon the
request of the Owner Participant, to execute and cause to be filed with
the County Recorder, Maricopa County, Arizona a duly completed affidavit
in substantially the form of Schedule 5 hereto.
-21-
6091.100.2898.27A:9
<PAGE>
SECTION 9. Representations, Warranties and Agreements of Chemical
Bank.
(a) Representations and Warranties. Chemical Bank represents and
warrants that:
(1) Due Organization. Chemical Bank is a banking corporation duly
organized and validly existing in good standing under the laws of the
State of New York and has the corporate power and authority and legal
right to enter into and perform its obligations under the Indenture,
this Participation Agreement and each other Transaction Document to
which it is, or is to become on or before the Closing Date, a party.
(2) Due Authorization. This Participation Agreement and each other
Transaction Document to which Chemical Bank is, or is to become on or
before the Closing Date, a party have been or will be duly authorized by
all necessary corporate action of Chemical Bank and each has been or
will have been duly executed and delivered by Chemical Bank.
(3) Authentication of the Fixed Rate Notes. The officer of Chemical
Bank who shall authenticate the Fixed Rate Notes to be issued pursuant
to the Indenture shall be, at the time of such authentication, an
Authorized Officer.
(4) No violation. Neither the execution and delivery by Chemical
Bank of this Participation Agreement or the Indenture, nor the
authentication by it of the Fixed Rate Notes, nor the consummation by it
of the transactions contemplated hereby or thereby, nor the compliance
by it with the provisions hereof or thereof will contravene any
Applicable Law governing its banking or trust powers, or contravenes or
results in a breach of, or
-22-
6091.100.2898.27A:9
<PAGE>
constitutes a default under, its Articles of Incorporation or By-laws,
or requires any Governmental Action under any Federal or New York law,
except such as have been, or on or before the Closing Date will have
been, duly obtained, given or accomplished; provided, however, that no
representation or warranty is made as to (i) any Applicable Law or
Governmental Action relating to the Securities Act, the securities
Exchange Act, the Trust Indenture Act, the Federal Power Act, the Atomic
Energy Act, the Holding Company Act, the New Mexico Public Utility Act,
the Arizona Public Utility Act, the Nuclear Waste Act, ERISA, energy or
nuclear matters, public utilities, the environment, health and safety or
Unit 2 or (ii) the Lease Indenture Estate to the extent it may
constitute real property under Applicable Law
(b) Agreements. The Indenture Trustee agrees that:
(1) Agreement to Discharge Liens. The Indenture Trustee will not
create or permit to exist, and will promptly take such action as may be
necessary duly to discharge, all Indenture Trustee's Liens.
(2) No Petition Agreement. Prior to the 181st day following the
payment in full of the Bonds and the discharge in accordance with its
terms of the Collateral Trust Indenture, the Indenture Trustee agrees
that it will not file a petition, or join in the tiling of a petition,
seeking reorganization, arrangement, adjustment or composition of or in
respect of the Loan Participant under the Bankruptcy Code or any other
applicable Federal or state law or the law of the District of Columbia.
(3) Quiet Enjoyment. The Indenture Trustee agrees to be bound by
Section 6(a) of the Facility Lease.
(4) Acknowledgment. The Indenture Trustee hereby acknowledges the
provisions of Section 7(b) (4) of this Participation Agreement.
-23-
6091.100.2898.27A:9
<PAGE>
SECTION 10. Representations, Warranties and Agreements of the
Lessee.
(a) Representations and Warranties. The Lessee represents and
warrants that:
(1) Due Organization. The Lessee is a corporation duly organized and
validly existing in good standing under the laws of the State of New
Mexico and has the corporate power and authority to carry on its
business as presently conducted, to own or hold under lease its
properties and to enter into and perform its obligations under this
Participation Agreement and each other Transaction Document and
Financing Document to which it is, or is to become, a party. The Lessee
is duly qualified and in good standing to do business as a foreign
corporation in the State of Arizona and has not failed to qualify to do
business or to be in good standing in any other jurisdiction where
failure so to qualify or be in good standing would materially and
adversely affect the financial condition of the Lessee or its ability to
perform any obligations under this Participation Agreement, any other
Transaction Document or any Financing Document to which it is, or is to
become on or before the Closing Date, a party.
(2) Due Authorization. The execution, delivery and performance by
the Lessee of this Participation Agreement and each other Transaction
Document and each Financing Document to which it is, or is to become on
or before the Closing Date, a party, have been duly authorized by all
necessary corporate action on the part of the Lessee and do not, and
will not, require the consent or approval of the stockholders of the
Lessee or any trustee or holder of any indebtedness or other obligation
of the Lessee, other than (i) the Mortgage Release, (ii) the finding of
the ANPP Administrative Committee described in Section 15.6.2 of the
ANPP Participation Agreement and (iii) such other consents and approvals
as have been, or on or before the Closing Date will have been, duly
obtained, given or accomplished, with true copies thereof delivered to
the Owner Participant prior to the Closing Date.
-24-
6091.100.2898.27A:9
<PAGE>
(3) Execution. This Participation Agreement and each other
Transaction Document and each Financing Document to which the Lessee is,
or is to become on or before the Closing Date, a party, will have been
duly executed and delivered by the Lessee, and this Participation
Agreement constitutes, and upon execution and delivery thereof, each
such Transaction Document and each such Financing Document will
constitute, the legal, valid and binding agreement of the Lessee,
enforceable against the Lessee in accordance with their respective
terms.
(4) No Violation, etc. Neither the execution, delivery or
performance by the Lessee of this Participation Agreement or any other
Transaction Document or any Financing Document to which it is, or is to
become on or before the Closing Date, a party, nor the consummation by
the Lessee of the transactions contemplated hereby or thereby, nor
compliance by the Lessee with the provisions hereof or thereof,
conflicts or will conflict with, or results or will result in a breach
or contravention of any of the provisions of, the Restated Articles of
Incorporation or By-Laws of the Lessee or any Affiliate of the Lessee,
or any Applicable Law, or any indenture, mortgage, lease or any other
agreement or instrument to which the Lessee or any Affiliate of the
Lessee is a party or by which the property of the Lessee or any
Affiliate of the Lessee is bound, or results or will result in the
creation or imposition of any Lien (other than Permitted Liens) upon any
property of the Lessee or any Affiliate of the Lessee. There is no
provision of the Restated Articles of Incorporation or By-Laws of the
Lessee or any Affiliate of the Lessee, or any Applicable Law, or any
such indenture, mortgage, lease or other agreement or instrument which
materially adversely affects or in the future is likely (so tar as the
Lessee can now foresee) to materially adversely affect the business,
operations, affairs, condition, properties or assets of the Lessee, or
its ability to perform its obligations under this
-25-
6091.l00.2898.27A:9
<PAGE>
Participation Agreement or any other Transaction Document or any
Financing Document to which it is, or is to become on or before the
Closing Date, a party.
(5) Governmental Actions. No Governmental Action is or will be
required in connection with the execution, delivery or performance by
the Lessee of, or the consummation by the Lessee of the transactions
contemplated by, this Participation Agreement, any other Transaction
Document or any Financing Document, except such Governmental Actions (i)
as have been, or on or before the Closing Date will have been, duly
obtained, given or accomplished, with true copies thereof delivered to
the Owner Participant and the Loan Participant, (ii) as may be required
under existing Applicable Law to be obtained, given or accomplished from
time to time after the Closing Date in connection with the maintenance,
use, possession or operation of Unit 2 or otherwise with respect to Unit
2 and the Lessee's or the Operating Agent's involvement therewith and
which are, for PVNGS, routine in nature and which the Lessee has no
reason to believe will not be timely obtained and (iii) as may be
required under Applicable Law not now in effect. No Governmental Action
(except Governmental Action as may be required by any Governmental
Authority of or in New York or Delaware) is or will be required (a) in
connection with the participation by the Owner Trustee, the Indenture
Trustee, the Owner Participant or the Loan Participant in the
consummation of the transactions contemplated by this Participation
Agreement, any other Transaction Document or any Financing Document or
(b) to be obtained by any of such Persons during the term of the
Facility Lease with respect to unit 2 except such Governmental Actions
(i) as have been, or on or before the Closing Date will have been, duly
obtained, given or accomplished, with true copies thereof delivered to
the Owner Participant, the Owner Trustee and the Loan Participant prior
to the Closing Date, (ii) as may be required by Applicable Law not now
in effect, (iii) as may be required in consequence of any transfer of
-26-
6091.100.2898.27A:9
<PAGE>
ownership of the Undivided Interest or the Real Property Interest by the
Owner Trustee, (iv) as would be required by existing Applicable Law upon
termination or expiration of the Facility Lease in connection with
taking possession of an interest in Unit 2, (v) as may be required by
existing Applicable Law if, after termination or expiration of the
Facility Lease, the Lessee should provide transmission services for the
Owner Trustee or cease to be agent for the Owner Trustee as provided
under the Assignment and Assumption, or (vi) as may be required in
consequence of any exercise of remedies or other rights by any such
Person in connection with taking possession of an interest in Unit 2.
(6) Securities Act. Neither the Lessee nor anyone acting on its
behalf has directly or indirectly offered or sold any Bond, any interest
in any Note, any note issued with respect to any other undivided
interest in Unit 2, the Undivided Interest or any other undivided
interest in Unit 2, the Facility Lease or any other lease of an
undivided interest in Unit 2, or any similar security or lease, or any
interest in any security or lease the offering of which, for purposes of
the Securities Act, would be deemed to be part of the same offering as
the offering of the aforementioned securities or leases, in either case,
or solicited any offer to acquire any of the aforementioned securities
or leases in violation of Section 5 of the Securities Act, and except as
contemplated by this Participation Agreement, neither the Lessee nor any
one authorized to act on its behalf will take any action which would
subject the issuance or sale of any Note or any interest in the Facility
Lease or any other debt instrument issued or to be issued to finance the
Undivided Interest to the registration requirements of such Section 5.
(7) Title to the Undivided Interest and Real Property Interest;
Security Interest. On the Closing Date, (A) good and marketable title to
the Undivided Interest and the related Generation Entitlement Share will
be duly, validly and effectively conveyed and transferred to the Owner
Trustee, free and clear of ail Liens, except Permitted Liens (other than
-27-
6091.100.2898.27A:9
<PAGE>
those described in clause (ii) of the definition of such term and that
portion of clause (iv) of such definition relating to Liens for taxes
being contested), (B) good and marketable title to the Real Property
Interest will be duly, validly and effectively conveyed and transferred
to the Owner Trustee, as provided in the Deed and the Assignment of
Beneficial Interest, (C) the Lessee will have good and marketable title
to its ownership interest in the Retained Assets, free and clear of all
Liens except Permitted Liens, the Lien of the Existing Mortgage and
matters disclosed in the title report referred to in Section 11(a)(33),
(D) the Lessee will have good and valid title to its ownership interest
in the PVNGS Site, (E) Unit 2 will be wholly located on the PVNGS Site
without any material encroachments by any portion thereof on any other
property, (F) all filings and recordings necessary or advisable to
perfect the Owner Trustee's right, title and interest in and to the
Undivided Interest, the related Generation Entitlement Share and the
Real Property Interest, and to perfect for the benefit of the Indenture
Trustee and the holders of the Notes the first priority security
interest, mortgage and assignment of rents provided for in the
Indenture, will have been duly made and (G) no other action, including
any action under any fraudulent conveyance statute, will be required to
protect the title and interests of the Owner Trustee in and to the
Undivided Interest, the related Generation Entitlement Share and the
Real Property Interest against the claims of all Persons other than the
ANPP Participants under the ANPP Project Agreements (in accordance with
the terms thereof), or to perfect such first priority security interest,
mortgage and assignment of rents in favor of the Indenture Trustee.
(8) Non-Interference. None of the Permitted Liens will, on and after
the Closing Date, materially interfere with the use or possession of the
Undivided Interest, the related Generation Entitlement Share or the Real
Property Interest or the use of or the exercise by the Owner Trustee of
its rights under the Bill of Sale, the Deed, the
-28-
6091.100.2898.27A:9
<PAGE>
Assignment of Beneficial Interest and the Assignment and Assumption with
respect to, the interests in PVNGS granted or to be granted under the
Bill of Sale, the Deed, the Assignment of Beneficial Interest and the
Assignment and Assumption.
(9) Personal Property. Unit 2, based on the agreements of the
Lessee and the other ANPP Participants in the ANPP Participation
Agreement and of the Lessee and the Owner Trustee herein and in the
other Transaction Documents, is td the full extent permitted by
Applicable Law personal property under the laws of the State of Arizona.
(10) Location of Chief Executive Office. The chief executive
office and place of business of the Lessee and the office where it keeps
its records concerning its accounts or contract rights is at Alvarado
Square, Albuquerque, Bernalillo County, New Mexico 87158.
(11) Financial Statements. The consolidated balance sheets of
the Lessee and subsidiaries (A) as of December 31, 1985 and 1984,
respectively, and the related consolidated statements of earnings,
retained earnings and changes in financial position for each of the
years in the three-year period ended December 31, 1985, together with
the notes accompanying such financial statements, all certified by Peat
Marwick Mitchell & Co., and (B) as of September 30, 1986 and 1985,
respectively, and the related consolidated statements of earnings,
retained earnings and changes in financial position for the nine-month
periods ended September 30, 1986 and September 30, 1985 respectively,
all certified by the Controller or an Assistant Controller of the
Lessee, as furnished to the Owner Participant, fairly present the
financial position of the Lessee and its subsidiaries taken as a whole
at each such date and the results of their operations for each of the
periods then ended, in conformity with generally accepted accounting
principles applied on a consistent basis and in conformity with
applicable Accounting Practice.
-29-
6091.100.2898.27A:9
<PAGE>
(12) Disclosure. None of the financial statements to which
reference is made in paragraph 11 above nor the reports to which
reference is made in this paragraph 12 nor any (other than publicly
available documents of any Governmental Authority, (other than documents
prepared by or on behalf of the Lessee), and any press reports,
insurance reports, if delivered on or before the Closing Date, and
appraisals) certificate, written statement or other document furnished
to the Owner Participant or the Appraiser by the Lessee in connection
with the transactions content-plated hereby (under the circumstances at
the time and for the purposes for which any statement made therein was
made) contains any untrue statement of a material fact or omits to state
a material fact necessary to make the statements therein not misleading.
There is no fact known to the Lessee that materially and adversely
affects or, so far as the Lessee can now reasonably foresee, is likely
to materially and adversely affect, the business or financial condition
of the Lessee or any material portion of its properties or its ability
to perform its obligations under this Participation Agreement or any
other Transaction Document or any Financing Document to which the Lessee
is, or is to become, a party. The Lessee has heretofore delivered to the
Owner Participant the Lessee's Annual Report on Form 10-K for the year
ended December 31, 1985, the Lessee's Quarterly Report on Form 1O-Q for
the quarters ended March 31, June 30 and September 30, 1986 and the
Current Reports on Form 8-K filed on February 12, 1985 (as amended by
Form 8 filed April 12, 1985), January 14, March 3, June 30, July 16,
July 31, September 2, September 9, and December 15, 1926.
(13) Litigation. Except as disclosed in the reports to which
reference is made in paragraph 12 above, there is no action, suit,
investigation or proceeding pending or, to the knowledge of the Lessee,
threatened against the Lessee before any court, arbitrator or
administrative or governmental body which questions the validity or
-30-
6091.l00.2898.27A:9
<PAGE>
enforceability of this Participation Agreement or any other Transaction
Document or any Financing Document to which the Lessee is, or is to
become, a party, or which, individually or in the aggregate, if decided
adversely to the interests of the Lessee, would have a material adverse
effect on the business or financial condition of the Lessee or
materially and adversely affect the ability of the Lessee to perform its
obligations under this Participation Agreement or any other Transaction
Document or any Financing Document to which it is or is to become a
party.
(14) Tax Returns. The Lessee has filed all Federal, state, local
and foreign, if any, tax returns which were required to be filed, and
has paid all Taxes shown to be due and payable on such returns and has
paid all other Taxes in respect of the Lessee's interest in Unit 2 and
in the PVNGS Site which are payable by the Lessee to the extent the same
have become due and payable and before they have become delinquent,
except (i) any Taxes the amount, applicability or validity of which may
be in dispute and which are currently being contested in good faith by
appropriate proceedings and with respect to which the Lessee has set
aside on its books reserves (segregated to the extent required by
generally accepted accounting principles) deemed by it to be adequate
and (ii) any Taxes relating to PVNGS in respect of which the Operating
Agent has not given notice to the Lessee that the same are due and
payable. The Federal income tax returns of the Lessee have been audited
by the IRS for taxable years through 1980.
(15) ERISA. In reliance upon, and subject to the accuracy of,
the representations made by the Loan Participant in Section 6(a) (5) and
the Owner Participant in Section 7(a)(9), the execution and delivery of
this Participation Agreement, the other Transaction Documents and the
Financing Documents by the Lessee will not involve any prohibited
transaction within the meaning of ERISA or section 4975 of the Code.
-31-
6091.l00.2898.27A:9
<PAGE>
(16) Regulation. So long as the Facility Lease is in effect,
assuming the proper filing of Form 7D with the SEC on or within 30 days
after the Closing Date, under Applicable Law now in effect, neither the
Loan Participant, the Owner Participant, ma nor the Owner Trustee will
be or become, solely by reason of either its entering into this
Participation Agreement or any other Transaction Document to which any
of them is, or is to become, a party, or the transactions contemplated
hereby or thereby, subject to regulation (i) as an "electric utility",
an "electric utility company", a "public utility", a "public utility
company", a "holding company", or a "public utility holding company" by
any Federal, state (other than, as to the Owner Participant, New York,
as to which no representation or warranty is given) or local public
utility corn-mission or other regulatory body, authority or group
(including, without limitation, the SEC, the FERO, the NMPSC or the
Arizona Corporation Commission) or (ii) in any manner by the NRC. The
Lessee is not, and covenants that (except in connection with a
transaction permitted by Section 10(b) (3) (ii) hereof) it will not
become, a It "holding company" or a "subsidiary company" of a "holding
company" or an "affiliate" of a "holding company" within the meaning of
the Holding Company Act. The Lessee is not subject to regulation by the
Arizona Corporation Commission as a public utility or a public service
corporation.
(17) Authorizations, etc. The Lessee has not failed to obtain
any Governmental Action or other authorization, license, approval,
permit, consent, right or interest, where a failure to obtain such would
materially and adversely affect the ability of the Lessee to carry on
its business as presently conducted or as described in the Registration
Statement.
(18) No Default, etc. The Lessee is not in default, and no
condition exists that, with the giving of notice or lapse of time or
both, would constitute a default by the Lessee, under any material
mortgage, deed of trust, indenture, lease,
-32-
6091.100.2898.27A:9
<PAGE>
contract or other instrument or agreement to which the Lessee is a party
or by which it or any of its properties or assets may be bound.
(19) certain Documents. True and correct copies of the ANPP
Participation Agreement, the other Material Project Agreements and the
Existing Mortgage have been delivered to the Owner Participant's Special
Counsel for and on behalf of the Owner Participant prior to the date of
execution hereof. No ANPP Project Agreement will, on and after the
Closing Date, materially and adversely interfere with (i) (except for
the ANPP Participation Agreement in the case of the Generation
Entitlement Share only) the title of the Owner Trustee to the Undivided
Interest, the related Generation Entitlement Share or the Real Property
Interest or (ii) except for the ANPP Participation Agreement, the use
of, or the exercise by the Owner Trustee of its rights under the
Facility Lease, the Deed, the Assignment of Beneficial Interest and the
Assignment and Assumption with respect to, the Undivided Interest, the
related Generation Entitlement Share, and the interests in the PVNGS
Site (including the Real Property Interest) granted or to be granted
under the Deed, the Assignment of Beneficial Interest and the Assignment
and Assumption. No payment default or other default of a material nature
by the Lessee has occurred and is continuing under the Existing Mortgage
or any ANPP Project Agreement. The ANPP Participation Agreement and each
other ANPP Project Agreement are in full force and effect and no breach
of any thereof, to the Lessee's knowledge, by any other party thereto
has occurred and is continuing, except where the failure to be in force
and effect or such breach would not have a material and adverse effect
on the Undivided Interest, the related Generation Entitlement Share, the
Real Property Interest, Unit 2 or the rights, interests and benefits of
the Owner Trustee or the Owner Participant under any Transaction
Document. Upon execution and delivery of the Mortgage Release and the
recordation thereof or of UCC releases in respect thereof, (i) the
mortgagee and secured party thereunder will have
-33-
6091.l00.2898.27A:9
<PAGE>
released the lien of the Existing Mortgage on the Undivided Interest,
the related Generation Entitlement Share and the Real Property Interest
and (ii) the rights of the Owner Trustee in the Undivided Interest and
the Real Property Interest and the related Generation Entitlement Share
will not be, and will not become, subject or subordinate to the rights
of any Person, except the Indenture Trustee under the Indenture and the
ANPP Participants to the extent expressly set forth in the ANPP
Participation Agreement (as in effect on the Closing Date) and except as
may otherwise expressly be permitted by the Facility Lease. The lien of
the Existing Mortgage does not extend to rights of PNM under Transaction
Documents (other than the Lessee's leasehold interest under the Facility
Lease) or to the Generation Entitlement Share related to the Undivided
Interest. Neither Section 15.6.3.5 of the ANPP Participation Agreement
nor Section 8(c) (3) of this Participation Agreement (i) requires the
Owner Trustee to accept any cash bid referred to therein or (ii)
otherwise materially impedes the Owner Trustee's right, upon a failure
by the Lessee to purchase or otherwise reacquire the Undivided Interest
and the Real Property Interest, to conclude a sale or lease to a Person
constituting a "Transferee" under Section 15.10 of the ANPP
Participation Agreement.
(20) Unit 2. The description of Unit 2 set forth in Exhibit B to the
Bill of Sale is correct and sufficiently complete to identify such
property.
(21) Investment Company Act. The Lessee is not, and will not become,
an "investment company", or a company "controlled" by an "investment
company", within the meaning of the Investment Company Act
(b) Agreements of Lessee.
(1) Delivery of Documents. The Lessee agrees that it will deliver to
the Owner Participant and the Loan Participant (and, in the case of
Sections 10(b) (1) (iii) and (v) hereof, the Owner Trustee):
-34-
6091.l00.2898.27A:9
<PAGE>
(i) Financial Statements: (A) as soon as practicable, and
in any event within 120 days, after the end of each fiscal year
of the Lessee, a consolidated balance sheet of the Lessee and
subsidiaries as of the end of such fiscal year and related
consolidated statements of earnings, retained earnings and
changes in financial position for such year, all in reasonable
detail and certified in an opinion by a nationally recognized
firm of independent public accountants, and the annual and
interim reports of the Lessee to its stockholders as soon as the
same have been mailed to such stockholders, (B) as soon as
practicable, and in any event within 60 days, after the end of
each fiscal quarter (other than the last fiscal quarter) of each
fiscal year of the Lessee, a consolidated balance sheet of the
Lessee and subsidiaries as of the end of said period and a
related consolidated statement of earnings, retained earnings
and changes in financial position for said period, all in
reasonable detail, and certified by the Controller or an
Assistant Controller or the Chief Financial officer of the
Lessee and (C) as soon as practicable after the same have been
filed, a copy of all documents filed by the Lessee with the SEC
pursuant to the reporting requirements of the Securities
Exchange Act;
(ii) Other Reports: promptly upon their becoming available,
any registration statement, offering statement, investment
memorandum or prospectus prepared by the Lessee in connection
with the public offering of securities (other than public
offerings of securities under employee stock option, consumer
stock or dividend reinvestment plans);
-35-
609l.100.2898.27A:9
<PAGE>
(iii) Notice of Default: promptly upon the Lessee becoming
aware of the existence thereof, written notice specifying any
condition which constitutes a Default or an Event of Default or
a default by any ANPP Participant under the ANPP Participation
Agreement and the nature and status thereof;
(iv) Annual Certificate: within l20 days after the end of
each fiscal year of the Lessee, a certificate of the lessee,
signed by the controller or an Assistant Controller or the Chief
Financial Officer of the Lessee, to the effect that such officer
has reviewed, or caused to be reviewed by individuals under his
supervision, this Participation Agreement and each other
Transaction Document and each Financing Document to which the
Lessee is a party and has made, or caused to be made under his
supervision, a review of the transactions contemplated hereby
and thereby and the condition of the Lessee during such
preceding fiscal year, and such review has not disclosed the
existence during such fiscal period, nor does such officer have
knowledge of the existence as at the date of such certificate;
of any condition or event that constitutes a Default or Event of
Default or, if any such condition or event exists, specifying
the nature and period of existence thereof and any action the
Lessee has taken, is taking, or proposes to take with respect
thereto;
(v) Opinion of Counsel: within 120 days after the end of
each fiscal year of the Lessee, an opinion or opinions,
satisfactory to the Owner Participant, the Owner Trustee, the
Collateral Trust Trustee and the Indenture Trustee, of Keleher &
McLeod, P.A., as general counsel for the Lessee, Snell & Wilmer,
as special Arizona counsel for the Lessee, and/or other counsel
acceptable to the Owner Participant (A) either to the effect
that (1) all filings and recordations (or refilings and
rerecordations) required to (i) convey to the Owner Trustee, and
establish, preserve, protect and perfect the title of the Owner
-6-
6091.100.2898.27A:9
<PAGE>
Trustee to, the Undivided Interest, the related Generation
Entitlement Share and the Real Property Interest and establish,
preserve and protect the Owner Trustee's rights under this
Agreement and the other Transaction Documents, and, (ii) so
long as any Note is Outstanding, grant, perfect and preserve
the security interest of the Indenture Trustee in the Lease
Indenture Estate have been duly made, or (2) no such additional
filings, recordations, refilings or rerecordations are
necessary, to (i) convey to the Owner Trustee, and establish,
preserve, protect and perfect the title of the Owner Trustee
to, the Undivided Interest, the related Generation Entitlement
Share and the Real Property Interest and establish, preserve
and protect the Owner Trustee's rights under this Agreement and
the other Transaction Documents, and (ii) so long as any Note
is Outstanding, grant, perfect and preserve the security
interest of the Indenture Trustee in the Lease Indenture Estate
and (B) specifying the particulars of all action required
during the period from the date of such opinion through the
last day of the next succeeding calendar year, including, in
the case of each UCC continuation statement required to be
filed during such period, the office in which each such
continuation statement is to be filed and the filing date and
filing number of the original financing statement or fixture
filing to be continued, and the dates within which such
continuation statement may be tiled under Applicable Law; such
opinion shall also address such additional matters relating to
actions taken by the Lessee pursuant to Section 10(b) (2) as
the Loan Participant or the Owner Participant may reasonably
request;
(vi) ANPP Information: upon receipt by the Lessee, copies or
advice of all Systematic Assessment of Licensee Performance
Reports (or comparable successor report) and of all material
-37-
6091.100.2898.27A:9
<PAGE>
notices, data, information and other written communications
received by the Lessee under or pursuant to any ANPP Project
Agreement or otherwise with respect to Unit 2, PVNGS or the
PVNGS Site, subject in each case to applicable confidentiality
undertakings with respect thereto, unless prohibited by
Applicable Law;
(vii) Other PVNGS Information: the Lessee having furnished a
letter to the Owner Participant dated August 12, 1986,
describing its internal procedures for monitoring PVNGS and
reporting to the Owner Participant with respect thereto, prior
written notice of any material change in such procedures; and,
upon receipt by the Lessee, copies or advice of all notices of
violation or other material communications from the NRC and all
notices of nuclear incidents or other material occurrence at
PVNGS given to the NRC;
(viii) Annual PYNGS Report: within 120 days after the end of
each fiscal year of the Lessee, a certificate of the Lessee
with respect to the status and operations of Unit 2 for such
fiscal year and current information respecting the status of
decommissioning funding arrangements for Unit 2; and
(ix) Requested Information: with reasonable promptness, such
other data and information as to the business and properties of
the Lessee or as to Unit 2, PVNGS or the PVNGS Site as from time
to time may be reasonably requested by the Owner Participant,
subject in each case to applicable confidentiality undertakings
with respect thereto, unless prohibited by Applicable Law.
(2) Further Assurances. The Lessee will cause to be promptly
and duly taken, executed, acknowledged and delivered all such further
acts, documents and assurances as the Owner Participant may from time to
time reasonably request in order to carry out more effectively the
-38-
6091.100.2898.27A:9
<PAGE>
intent and purposes of this Participation Agreement, the other
Transaction Documents and the Financing Documents, and the transactions
contemplated hereby and thereby. The Lessee will cause the financing
statements (and continuation statements with respect thereto) and the
documents enumerated and described in Schedule 4, and all other
documents necessary or advisable in that connection, to be recorded or
filed at such places and times, and in such manner, and will take all
such other actions or cause such actions to be taken, as may be
necessary or reasonably requested by the Owner Participant, the
Collateral Trust Trustee, the Owner Trustee or the Indenture Trustee, in
order to establish, preserve, protect and perfect the title of the Owner
Trustee to the Undivided Interest, the related Generation Entitlement
Share and the Real Property Interest, and the Owner Trustee's rights and
interests under this Participation Agreement and the other Transaction
Documents and, so long as any Note is Outstanding, the first and prior
security interest of the Indenture Trustee in the Lease Indenture Estate
and the Indenture Trustee's rights under this Participation Agreement
and the other Transaction Documents, all referred to and included under
the granting clause of the Indenture.
(3) Covenants. The Lessee covenants and agrees as follows:
(i) Maintenance of Corporate Existence, etc. The Lessee shall at all
times maintain its existence as a corporation under the laws of the
State of New Mexico, except as permitted by paragraph (ii) below. The
Lessee will do or cause to be done all things necessary to preserve and
keep in full force and effect its rights (charter and statutory) and
franchises; provided, however, that the Lessee may discontinue any right
or franchise if its board of directors shall determine that such
discontinuance is necessary or desirable in the conduct of its business
and does not materially and adversely affect or diminish any right of
the Owner Participant or the Loan Participant.
-39-
6091.100.2898.27A:9
<PAGE>
(ii) Merger Sale, etc.: Owner Participant. Without the consent of
the Owner Participant, the Lessee shall not (1) consolidate with any
Person, (2) merge with or into any Person, or (3) except in connection
with normal dividend policy of the Lessee, convey, transfer, lease, or
dividend (other than transfers and dividends described in the Lessee's
proxy statement dated April 11, 1986 and transfers and conveyances
constituting sale and leaseback transactions under the ANPP
Participation Agreement) to any Person more than 5% of its assets,
including cash, in any single transaction or series of related
transactions; unless, immediately after giving effect to such
transaction:
(A) the Person who is the Lessee immediately following such
consolidation, merger, conveyance, transfer or lease (the Surviving
Lessee) shall be a corporation or (with the prior consent of the
Owner Participant, which consent shall not be unreasonably withheld)
other legal entity which (i) is organized under the laws of the
United States of America, a state thereof or the District of
Columbia, (ii) is a "public utility" under applicable state and
Federal laws, (iii) is an ANPP Participant under the ANPP
Participation Agreement with respect to Unit 2 (including the
Undivided Interest), (iv) if other than the Lessee immediately prior
to such transaction, shall have assumed each covenant and condition
of the Lessee under the ANPP Participation Agreement and each other
ANPP Project Agreement and (V) holds a valid and subsisting license
from the NRC to possess Unit 2 (including the Undivided Interest);
-40-
6091.l00.2898.27A:9
<PAGE>
(B) the Surviving Lessee, if other than the Lessee immediately
prior to such transaction, shall execute and deliver to the Owner
Participant an agreement, in form and substance reasonably
satisfactory to the Owner Participant, containing the assumption by
the Surviving Lessee of each covenant and condition of this
Participation Agreement, each other Transaction Document and each
Financing Document to which the Lessee immediately prior to such
transaction was a party immediately preceding such transaction;
(C) no Default (other than a failure to deliver documents and
other information specified in Section 10(b)(l)(vi), (vii) or (viii)
hereof) , Event of Default, Event of Loss or Deemed Loss Event shall
have occurred and be continuing;
(D) the Bonds (or, if the Bonds are not then rated, the
preferred stock of the Surviving Lessee) after giving effect to such
transaction, (1) shall be rated at least "investment grade" by
Standard & Poor's Corporation and Moody's Investors Service, Inc.
and (2) shall have an investment rating by Standard & Poor's
Corporation and Moody's Investors Service, Inc. not less than one
"smallest notch" below the rating assigned to the Bonds (or, if the
Bonds are not then rated, the preferred stock of the Surviving
Lessee) immediately prior to such transaction (or, if neither of
such rating organizations shall rate the Bonds (or, if applicable,
the preferred stock of the Surviving Lessee) at the time, by any
nationally recognized rating organization in the United States of
America);
-41-
6091.100.2898.27A:9
<PAGE>
(E) the Surviving Lessee shall have a Minimum Net Worth;
(F) the Surviving Lessee shall have delivered to the Owner
Participant and the Indenture Trustee an Officers' Certificate and
an opinion, reasonably satisfactory to the Owner Participant, of
counsel to the Surviving Lessee, each stating that (1) such
transaction complies with this subparagraph (ii) and (2) all
conditions precedent to the consummation of such transaction have
been satisfied and any Governmental Action required in connection
with such transaction has been obtained, given or accomplished;
(G) the Surviving Lessee shall have delivered to the Owner
Participant an opinion, reasonably satisfactory to the Owner
Participant, of independent counsel (if other than Nudge Rose
Guthrie Alexander & Ferdon, such counsel to be reasonably
satisfactory to the Owner Participant) to the Surviving Lessee
stating that such transaction does not and will not cause a Loss (as
defined in the Tax Indemnification Agreement);
(H) such transaction is otherwise permitted by and in accordance
with the ANPP Participation Agreement; and
(I) the Coverage Ratio of the Surviving Lessee shall be at least
1.6 to 1.
Upon the consummation of such transaction the Surviving Lessee, if other
than the Lessee immediately prior to such transaction, shall succeed to,
and be substituted for, and may exercise every right and power of, the
Lessee immediately prior to such transaction under this Participation
Agreement and each other Transaction Document and each Financing
Document to which the Lessee immediately prior to such transaction was a
party immediately preceding the date of such transaction, with the same
effect as if the Surviving Lessee had been named herein and therein.
-42-
601.100.2898.27A:9
<PAGE>
(iii) Merger, Sale, etc.: Bondholders. The Lessee shall not enter
into any transaction constituting a consolidation, merger, conveyance,
transfer, lease or dividend not permitted by Section l0(b)(3)(ii),
irrespective of any consent or waiver of the Owner Participant, unless
immediately after giving effect to such transaction, the Bonds (or, if
the Bonds are not then rated, the preferred stock of the Surviving
Lessee), after giving effect to such transaction, shall be rated at
least "investment grade" by Standard & Poor's Corporation and Moody's
Investors Service, Inc.
(iv) Prior Notice to Rating Agencies. Prior to entering into any
transaction as to which the conditions set forth in paragraphs (ii) and
(iii) above shall be applicable, the Lessee shall give notice thereof to
the rating agencies specified in such paragraphs, such notice to be
sufficiently in advance of such transaction to enable the rating
agencies to respond thereto prior to consummation thereof.
(v) Incurrence of Debt. Without the consent of the Owner
Participant, the Lessee shall not issue or assume any secured or
unsecured indebtedness maturing more than eighteen months after the date
of issuance thereof, if, immediately after such issue or assumption, the
total amount of all secured and unsecured indebtedness of the Lessee
maturing more than one year after the date of such issue or assumption
shall exceed 65% of the aggregate of (x) such total amount and (y) the
total of the capital and surplus of the Lessee.
(vi) change in Chief Executive Office. The Lessee will notify the
Owner Trustee, the Owner Participant, the Loan Participant and
-43-
6091.100.2898. 27A: 9
<PAGE>
the Indenture Trustee promptly after any change of location of its chief
executive office and place of business, principal place of business or
place where the Lessee maintains its business records.
(vii) No Petition Agreement. Prior to the 121st day following the
payment in full of the Bonds and the discharge in accordance with its
terms of the Collateral Trust Indenture, the Lessee will not file a
petition, or join in the filing of a petition, seeking reorganization,
arrangement, adjustment or composition of or in respect of the Loan
Participant under the Bankruptcy Code or any other applicable Federal or
state law or the law of the District of Columbia.
(viii) ANPP Project Agreements. Except where the failure to do so
would not have a material and adverse effect on the Undivided Interest,
the Real Property Interest, Unit 2 or the rights, interests and benefits
of the Owner Trustee or the Owner Participant under any Transaction
Document, the Lessee (without limiting its obligations under the next
sentence) at all times, unless the Owner Participant shall otherwise
consent, (1) will perform its obligations under and comply with the
terms of each ANPP Project Agreement to be complied with by it, (2) will
exercise its rights under the ANPP Participation Agreement to maintain
each ANPP Project Agreement in full force and effect, (3) will keep
unimpaired all of the Lessee's rights, powers and remedies under each
AMPP Project Agreement and prevent any forfeiture or impairment thereof,
(4) will enforce the ANPP Participation Agreement in accordance with its
terms and (5) will not take or fail to take or join in (i) any action
with respect to, nor accept or approve any 4mendment to or any other
change in, the ANPP Participation Agreement or any other ANPP Project
Agreement, or (ii) any action or change the effect of which would be
-44-
6091. 100.2898.27A:9
<PAGE>
to relieve the Lessee of any obligation under the ANPP Participation
Agreement on or after the Closing Date. The Lessee will not, unless the
Owner Participant otherwise consents, accept or approve any amendment to
any ANPP Project Agreement the effect of which would be to (A) reduce
the Generation Entitlement Share related to the Undivided Interest, (B)
impose, directly or indirectly, at any time on the Owner Trustee or the
Owner Participant any obligations (unless such Person is then an ANPP
Participant), (C) discriminate against (x) the Owner Trustee or the
Owner Participant in its capacity as lessor in a sale and lease-back
transaction or (y) any present or future ANPP Participant because such
ANPP Participant derived or will derive its status as "Participant"
under the ANPP Participation Agreement from a lessor in a sale and
lease-back transaction, (E) deprive the Owner Trustee or the Owner
Participant, as the case may be, of the benefit of Sections 15.2.2,
15.10 and 32.1 of the ANPP Participation Agreement (or any comparable
successor provisions), or (F) amend or otherwise change Section 15.10 of
the ANPP Participation Agreement. The Lessee shall (A) provide copies of
any proposed amendment to or modification of the ANPP Participation
Agreement to the Owner Participant not less than 45 days prior to the
execution thereof by the Lessee (except where the Lessee is unaware
thereof 45 days prior to such execution, in which case the Lessee shall
provide notice thereof as promptly as possible after becoming so aware)
and (B) upon such execution furnish to the Owner Participant a copy of
any such amendment or modification as executed. The Lessee will not,
except as permitted by paragraph (ii) above or by the Assignment and
Assumption, sell, transfer, assign or otherwise dispose of all or any of
its rights or interests in and to PVNGS.
-45-
6091.1OO.2898.27A:9
<PAGE>
(ix) Notes and Bonds. The Lessee will not, and will not permit any
of its Affiliates to, acquire any of the Notes or, except in connection
with the selection of Bonds for redemption pursuant to the Collateral
Trust Indenture, the Bonds.
(x} Cooperation. The Lessee will cooperate with the Owner
Participant and the Owner Trustee in obtaining the valid and effective
issue, or, as the case may be, transfer or amendment of all Governmental
Actions (including, but without limitation, the License) necessary or,
in the opinion of the Owner Participant, desirable for the ownership,
operation and possession of the Undivided Interest, the Real Property
Interest or any portion of Unit 2 represented thereby by the Owner
Trustee or any transferee, lessee or assignee thereof for the period
from and after the Lease Termination Date. The Lessee agrees to accept
and cooperate in receiving any transfer of the Owner Participant's
right, title and interest in the Trust Estate made pursuant to Section
7(b)(4).
(xi) Decommissioning. (A) The Lessee will comply with its
obligations under Applicable Law concerning the decommissioning and
retirement from service of Unit 2 (which term shall include, for all
purposes of this paragraph (xi), (i) the cost of removal,
decontamination and disposition of equipment and fixtures, the cost of
safe storage for later removal, decontamination and disposal and the
cost of entombment of equipment and fixtures, and (ii) the cost of (x)
razing Unit 2, (y) removal and disposition of debris from the PVNGS Site
and (z) restoration of relevant portions of the PVNGS Site). If
Applicable Law or Governmental Action shall not, on or before December
31, 1990, impose upon the Lessee the obligation to create, fund and
maintain an external reserve fund dedicated to paying all the costs of
-46-
6091.100.2898.27A:9
<PAGE>
decommissioning and removing from service the Undivided Interest, then
the Lessee will create and maintain the Decommissioning Fund; if
Applicable Law or Governmental Action shall thereafter impose upon the
Lessee an obligation to create and maintain such a fund, any fund in
compliance with Applicable Law or such Governmental Action shall be
deemed satisfactory to the Owner Participant for purposes of the
preceding sentence; provided, however, the Lessee shall in any and all
events maintain and fund such an external reserve in accordance with
prudent utility practice and thereafter review such fund, at least every
five years after its creation, and modify the same as to amount or rate
of accumulation to bring the same, it necessary, into conformity with
prudent utility practice. (B) Except to the extent provided in clauses
(C) and (D) below, as between the Lessee, the Owner Trustee, the Owner
Participant and any transferee (including by way of lease) or assignee
of any of the Lessor's or the Owner Participant's right, title or
interest in Unit 2, the Lessee agrees to pay, be solely responsible for,
and to indemnify such parties against, all costs and expenses relating
or allocable to, or incurred in connection with, the decommissioning and
retirement from service of Unit 2, notwithstanding (i) the occurrence of
the Lease Termination Date, any Event of Default, Default, Event of
Loss, Deemed Loss Event or any other event or occurrence, (ii) any
provision of any Transaction Document, or other document, instrument or
agreement, including the ANPP Participation Agreement, (iii) any
provision of the License or any other license or permit, or (iv) any
Applicable Law, charter or by-law provision, Governmental Action or
other impediment, including, without limitation, the bankruptcy or
insolvency of the Lessee, either now or hereafter in effect; it being
understood that the obligations of the Lessee under this clause (B) are
-47-
6091.100.2898.27A:9
<PAGE>
and shall be absolute and unconditional. (C) In the event that (i) the
Facility Lease shall have expired upon expiration (or early termination
pursuant to Section 14(e) of the Facility Lease) of the Lease Term
(other than in connection with an Event of Loss, Deemed Loss Event or
Event of Default) and (ii) thereafter the Lessor shall (1) re-lease the
Undivided Interest to any Person or (2) retain the Undivided Interest
and sell power and energy from its Generation Entitlement Share through
PNM, as agent, then after the Lessor has received (x) in the case of
clause (1) above, gross rents in an aggregate amount (when discounted
back to such Lease Termination Date at a rate per annum equal to the
Prime Rate) equal to 20% of Facility Cost, or (y) in the case or clause
(2) above, net electric revenues in an aggregate amount (discounted as
aforesaid) equal to 20% of Facility Cost, the Lessor shall thereafter
reimburse the Lessee in respect of the decommissioning obligation of the
Lessee hereunder in an amount equal to any further rent received or
proceeds received from the sale of power and energy to the extent that
such rent or proceeds are attributable to the decommissioning obligation
of the Lessee under this Section 10(b) (3) (xi) with respect to the
period from and after such Lease Termination Date (payable on an annual
basis with respect to each year or portion thereof during the term of
such lease referred to in clause (1) above or such agency period
referred to in clause (2) above); provided, however, that when such
amount has been paid the Lessor shall be relieved of all obligations to
make further reimbursement to the Lessee for such purpose. (0) In the
event that (i) the Facility Lease shall have expired upon the expiration
(or early termination pursuant to Section 14(e) of the Facility Lease)
of the Lease Term (other than in connection with an Event of Loss,
Deemed Loss Event or Event of Default, (ii) the Lessor shall sell (other
than in connection with the termination by the Lessee of the Facility
Lease for
-42-
6091.100.2898.27A:9
<PAGE>
obsolescence pursuant to Section 14 of the Facility Lease) the Undivided
Interest to any Person (including the Lessee in connection with the
exercise by the Lessee of the purchase option provided by Section 13(b)
of the Facility Lease), and (iii) the net sales proceeds (discounted
back to such Lease Termination Date at a rate per annum equal to the
Prime Rate) received by the Lessor in connection therewith shall exceed
20% of Facility Cost (reduced by the percentage of Facility Cost, if
any, actually realized by the Lessor pursuant to clause (C) above), then
the Lessor shall reimburse the Lessee in respect of the decommissioning
obligation of the Lessee hereunder in an amount equal to any net
proceeds of such sale to the extent that such proceeds are attributable
to the decommissioning obligation of the Lessee under this Section 10(b)
(3) (xi) with respect to the period from and after the date of such sale
through the remaining useful life of Unit 2 (whereupon the reimbursement
obligations of the Lessor under this Section 10(b) (3) (xi) shall
terminate); provided, however, that any such reimbursement shall not
reduce the amount of such net sales proceeds retained by the Lessor to
an amount (discounted as aforesaid) equal to less than 20% of Facility
Cost (reduced by the percentage of Facility Cost, if any, actually
realized by the Lessor pursuant to clause (C) above). The reimbursement
obligations of the Lessor under clauses (C) and (D) above are for the
sole benefit of the Lessee, and no other Person shall be a third party
beneficiary with respect thereto. In the event that the Lessee and the
Lessor shall not agree as to the amount of gross rents, net electric
revenues or net sales proceeds attributable to the decommissioning
obligation of the Lessee under this Section 10(b) (3) (xi), such amount
shall be determined by the Appraisal Procedure. For purposes of
determining Facility Cost under clauses (C) and (D) of this Section
10(b) (3) (xi), Facility Cost
-49-
6091.100.2898.27A:9
<PAGE>
shall be adjusted to reflect any inflation or deflation from the Closing
Date to the time of the determination.
(xii) Acknowledgment and Agreement.
The Lessee hereby acknowledges and agrees to the provisions of
Section 7(b) (4) of this Participation Agreement.
SECTION 11. Conditions Precedent.
(a) Owner Participant and Loan Participant Conditions. The
obligation of (x) the Loan Participant Conditions. The obligation of (x) the
Loan Participant to make the on the Closing Date, and (y) the Owner Participant
to make the Investment and the Real Estate Investment on the Closing Date, shall
be subject to the fulfillment on or prior to the Closing Date of the following
conditions precedent (each instrument, document, certificate or opinion referred
to below to be in form and substance satisfactory to the Loan Participant and
the Owner Participant):
(1) Notice of Closing; Transaction Documents. Each shall have
received executed copies, or sets of executed counterparts, of (x) the
Notice of Closing, and (y) each Transaction Document (other than the Tax
Indemnification Agreement), the Mortgage Release, each Financing
Document being executed on the Closing Date and such other documents as
are contemplated by this Participation Agreement.
(2) Tax Indemnification Agreement. The Owner Participant shall have
received an executed copy of the Tax Indemnification Agreement.
(3) Authentication Request, etc. The Owner Trustee shall have
delivered to the Indenture Trustee (x) a request, dated the Closing
Date, authorizing the Indenture Trustee to authenticate and deliver the
Fixed Rate Notes to the Loan Participant upon its payment to the
Indenture Trustee, for the account of the Owner Trustee, of the proceeds
of the Loan, and (y) the Original of the Facility Lease.
-50-
6091.100.2898.27A:9
(4) Due Authorization, Execution and Delivery. All of the documents
described in clauses (1) and (2) of this Section 11(a) shall have been duly
authorized, executed and delivered by the respective parties thereto and shall
be in full force and effect on the Closing Date, and the Loan Participant and
the Owner Participant shall have received evidence as to such authorization,
execution and delivery.
(5) Fixed Rate Notes and Bond Transactions; Investment. In the case of
the Loan Participant, (A) the Loan Participant shall have received the proceeds
from the sale of the Series B Bonds as a result of the consummation of the
transactions contemplated by the Underwriting Agreement, (B) the Owner Trustee
shall have executed, and the Indenture Trustee shall have authenticated and
delivered to the Loan Participant, the Fixed Rate Notes evidencing the Loan made
on the Closing Date, (C) the Collateral Trust Trustee shall have accepted the
Series S Supplemental Indenture and the related Supplemental Indenture of Pledge
(as defined in the Series S Supplemental Indenture) and shall have released the
amount of the Lean from the lien of the Collateral Trust Indenture, and (D) the
Owner Participant shall have made the Investment and the Real Estate Investment
on the Closing Date.
(6) Loan. In the case of the Owner Participant, the Loan Participant
shall have made the Loan.
(7) ANPP Administrative Committee. The ANPP Administrative Committee
shall have made the finding required by Section 15.6.2 of the ANPP Participation
Agreement, and the Lessee shall have delivered evidence of such finding having
been made.
(8) No violation. The making by the Owner Participant of the Investment
and the Real Estate Investment and by the Loan Participant of the Loan shall not
violate any Applicable Law.
-51-
6091.100.2898.27A:9
<PAGE>
(9) No Default. No Default or Event of Default or, in the case of the
Loan Participant, Indenture Default or Indenture Event of Default, shall have
occurred and be continuing.
(10) Recording and Filing. The financing statements under the Uniform
Commercial Code and certain Transaction Documents, in each case as enumerated
and described in Schedule 4, shall have been duly filed or recorded in the
respective places or offices set forth in such Schedule and all recording and
filing fees with respect thereto shall have been paid.
(11) Representations and Warranties of the Loan Participant. In the case
of the Owner Participant, the representations and warranties of the Loan
Participant set forth in Section 6(a) shall be true and correct on and as of the
Closing bate with the same effect as though made on and as of the Closing Date,
and the Owner Participant shall have received an Officers' Certificate of the
Loan Participant, dated the Closing Date, to such effect.
(12) Opinion of the Loan Participant's Counsel. In the case of the Owner
Participant, it shall have received a favorable opinion of the Loan
Participant's Counsel, dated the Closing Date and addressed to the Owner
Participant, addressing such matters relating to the transactions contemplated
hereby and by the other Transaction Documents as the Owner Participant may
reasonably request.
(13) Representations and Warranties of the Owner Participant. In the
case of the Loan Participant, the representations and warranties of the Owner
Participant set forth in Section 7(a) shall be true and correct on and as of the
Closing Date with the same effect as though made on and as of the Closing Date,
and the Loan Participant shall have received a certificate of an officer of the
Owner Participant, dated the Closing Date, to such effect.
-52-
6091.100.2898.27A:9
<PAGE>
(14) Opinion of the Owner Participant's Special Counsel. In the case of
the Loan Participant, it shall have received a favorable opinion of the Owner
Participant's Special Counsel, dated the Closing Date and addressed to the Loan
Participant, addressing such matters relating to the transactions contemplated
hereby and by the other Transaction Documents, as the Loan Participant may
reasonably request.
(15) Representations and Warranties of the Owner Trustee. The
representations and warranties of FNB and the Owner Trustee set forth in Section
8(a) shall be true and correct on and as of the Closing Date with the same
effect as though made on and as of the Closing Date, and the Loan Participant
and the Owner Participant shall have received a certificate from an officer of
Ins and a certificate of the Owner Trustee, dated the Closing Date, to such
effect.
(16) Opinion of the Owner Trustee's Counsel. The Loan Participant and
the Owner Participant shall have received a favorable opinion of the Owner
Trustee's Counsel, dated the Closing Date and addressed to each such Person,
addressing such matters relating to the transactions contemplated hereby and by
the other Transaction Documents as the Loan Participant or the Owner Participant
may reasonably request.
(17) Representations and Warranties of the Indenture Trustee. The
representations and warranties of the Indenture Trustee set forth in Section
9(a) shall be true and correct on and as of the Closing Date with the same
effect as though made on and as of the Closing Date, and the Loan Participant
and the Owner Participant shall have received a certificate of the Indenture
Trustee, dated the Closing Date, to such effect.
(18) Opinion of the Owner Participant's Special NRC Counsel. The Owner
Participant shall have received a favorable opinion of the Owner Participant's
Special WRC Counsel, dated the Closing Date and addressed to the Owner
Participant, addressing such matters relating to the transactions contemplated
hereby and by the other Transaction Documents as the Owner Participant may
reasonably request.
-53-
6091.l00.2898.27A:9
<PAGE>
(19) Representations and Warranties of the Lessee. (A) The
representations and warranties of the Lessee set forth in Section 10(a), in each
other Transaction Document, in the Underwriting Agreement and in each
certificate or other document to which the Lessee is a party executed or
delivered in connection with the transactions contemplated hereby or thereby
shall be true and correct on and as of the Closing Date with the same effect as
though made on and as of the Closing Date and (3) no Default, Event of Default,
Deemed Loss Event or Event of Loss shall have occurred and be continuing and the
Loan Participant and the Owner Participant shall have received an Officers'
Certificate of the Lessee, dated the Closing Date, to such effect. Such
Officers' Certificate shall state that there has been no material adverse change
in the properties, business, prospects or financial condition of the Lessee
since September 30, 1926, and no event has occurred since that date which would
materially adversely affect the ability of the Lessee to perform its obligations
under this Participation Agreement or any other Transaction Document to which it
is or is to become a party.
(20) Opinion of the Lessee's Special Counsel. The Loan Participant and
the Owner Participant shall have received a favorable opinion of the Lessee's
Special Counsel, dated the Closing Date and addressed to each such Person,
addressing such matters relating to the transactions contemplated hereby and by
the other Transaction Documents as the Loan Participant or the Owner Participant
shall reasonably request.
(21) Opinion of Lessee's General Counsel. The Loan Participant and the
Owner Participant shall have received a favorable opinion of the Lessee's
General Counsel, dated the Closing Date and addressed to each such Person,
addressing such matters relating to the transactions contemplated hereby and by
the other Transaction Documents as the Loan Participant or the Owner Participant
shall reasonably request.
-54-
6091.100.2898.27A:9
<PAGE>
(22) Opinion of Lessee's Arizona Counsel. The Loan Participant and the
Owner Participant shall have received a favorable opinion of the Lessee's
Special Arizona Counsel, dated the Closing Date and addressed to each such
Person, addressing such matters relating to the transactions contemplated hereby
and by the other Transaction Documents as the Loan Participant or the Owner
Participant shall reasonably request.
(23) Opinion of Owner Participant's Special Arizona Counsel. The Owner
Participant shall have received a favorable opinion of the Owner Participant's
Special Arizona Counsel, dated the Closing Data and addressed to the Owner
Participant, addressing such matters relating to the transactions contemplated
hereby and by the other Transaction Documents as the Owner Participant shall
reasonably request.
(24) Opinion of Owner Participant's Special New Mexico Counsel. The
Owner Participant shall have received a favorable opinion of the Owner
Participant's Special New Mexico Counsel, dated the Closing Date and addressed
to the Owner Participant, addressing such matters relating to the transactions
contemplated hereby and by the other Transaction Documents as the Owner
Participant may reasonably request.
(25) Opinion of the Owner Participant's Special Counsel. The Owner
Participant shall have received a favorable opinion of the Owner Participant's
Special Counsel, dated the Closing Date and addressed to the Owner Participant,
with respect to such Federal tax and other tax matters as the Owner Participant
may reasonably request.
-55-
6091.100.2898.27A:9
<PAGE>
(26) Opinion of the Loan Participant's Counsel. The Loan Participant
shall have received a favorable opinion of the Lean Participant's Counsel, dated
the Closing Date and addressed to it, with respect to such matters as the Loan
Participant shall reasonably request.
(27) Taxes. All Taxes, if any, payable in connection with the execution,
delivery, recording and filing of the Transaction Documents and all the
documents and instruments enumerated and described in Schedule 4, or in
connection with the issuance and sale of the Fixed Rate Notes and the Series B
Bonds and the making by the Owner Participant of the Investment and the Real
Estate Investment, and all Taxes payable in connection with the consummation of
the transactions contemplated hereby and by the other Transaction Documents,
shall have been duly paid in full by the Lessee.
(28) Form U-70. A certificate on Form U-7D with respect to the Facility
Lease shall have been duly executed and delivered by the Owner Trustee and the
Owner Participant and shall be in due form for filing.
(29) Appraisal. The Owner Participant shall have received a letter,
dated the Closing Date and addressed to the Owner Participant, from the
Appraiser containing an appraisal of the Undivided Interest, which appraisal
shall reflect the Appraiser's reasonable conclusion that (w) the fair market
value in the hands of the Owner Trustee of the Undivided Interest on the Closing
Date, taking into account the effect and existence of the Real Property
Interest, the Assignment and Assumption and the ANPP Participation Agreement, is
equal to the Purchase Price as set forth in the Notice of closing, (x) the
estimated remaining economic useful life of Unit 2 (including the Undivided
Interest) is at least 38 years and 11 months (y) at the expiration of the first
two years of the Renewal Term the Undivided Interest will have an estimated
residual value taking into account the effect and the existence of this
-56-
6091.100.2898.27A:9
<PAGE>
Participation Agreement, the Real Property Interest, the Assignment and
Assumption and the ANPP Participation Agreement, in the hands of the Owner
Trustee or a Person (unrelated to the Lessee) who could lease or purchase the
Undivided Interest from the Owner Trustee for commercial use, equal to at least
20% of the Purchase Price, determined without including in such value any
increase or decrease for inflation or deflation during the period from the
Closing Date through the expiration of the first two years of the Renewal Term,
and (z) taking into account the effect and the existence of the Real Property
Interest, the Assignment and Assumption and the ANPP Participation Agreement,
the use of the Undivided Interest at the Lease Termination Date by any User is
feasible from an from an engineering and economic point of view and is
commercially reasonable.
(30) Offering and Sale of Interest. The Loan Participant, the Owner
Trustee and the Owner Participant shall have received a letter from each of
Kidder Peabody and Goldman, Sachs & Co. with respect to the offering and sale of
the interests in the transactions contemplated by this Participation Agreement
and each other participation agreement relating to an undivided interest in Unit
2.
(31) Extension latter. The Extension Letter shall have been duly executed
by the respective parties thereto and delivered to the Collateral Trust Trustee.
(32) Governmental Action. The Lessee shall have obtained all Governmental
Actions (including, without limitation, the New Mexico Order, which order shall
be final and non-appealable), required or, in the opinion of the Owner
Participant, advisable for the consummation of all the transactions contemplated
by this Participation Agreement and the other Transaction Documents and the
Financing Documents in accordance with their terms.
(33) Title Report; Title Insurance. The Owner Participant shall have
received (i) an updated title report, dated the Closing Date, with respect to
-57-
6091.100.2898.27A:9
<PAGE>
the nuclear plant site, which report does not disclose any exceptions materially
adverse to the possession or operation of Unit 2 or the performance by the
Lessee of its obligations under this Participation Agreement and the other
Transaction Documents to which the Lessee is, or is to become, a party; and (ii)
such title insurance policies with respect to the nuclear plant site and
improvements thereon (including the Owner Trustee's interests therein) as it
shall have reasonably requested, such policies to be in form and substance
satisfactory to the Owner Participant.
(34) No change or Proposed Change in Tax Laws. No change shall have
occurred or been proposed in the Code or any other tax statute, the regulations
thereunder or any interpretation thereof that would adversely affect the tax
consequences anticipated by the Owner Participant with respect to the
transactions contemplated by the Transaction Documents, unless the Lessee shall
have agreed in writing to protect the Owner Participant, in the Tax
Indemnification Agreement or otherwise, in a manner reasonably satisfactory to
it, against the effect of such change or proposed change.
(35) Insurance. The Owner Participant shall have received a written report
from its independent insurance consultant in form and substance satisfactory to
the Owner Participant.
(36) Site Arrangement Plan. The Owner Participant's Special Counsel shall
have received a site arrangement plan of the nuclear plant site prepared
subsequent to January 1, 1979.
(37) Special Certificate of the Lessee. The Owner Participant shall have
received a certificate of the Lessee, dated the Closing Date, to the effect
that, except as set forth on the Schedule thereto, (A) Unit 2 has been in all
material respects completed in a good and workmanlike manner and in accordance
with the plans and specifications relating thereto (as the same may have been
-58-
609l.l00.2898.27A:9
<PAGE>
modified from time to time to reflect Unit 2 as actually completed), Applicable
Law (including, but without limitation, the regulations of the NRC), the License
and the ANPP Participation Agreement, (B) all Governmental Action necessary for
the commercial operation of Unit 2 (including the Undivided Interest) have been
received, other than Governmental Action that is routine in nature for PVNGS or
that cannot be obtained under Applicable Law, or is typically not applied for,
prior to the time it is required, and that the Lessee reasonably expects to be
obtained in due course, (C) the plans and specifications relating to Unit 2 are
complete in all material respects (modified or to be modified as aforesaid) and
consistent with prudent engineering practice, (D) the testing and startup
procedures for Unit 2 were and the operation and maintenance programs for Unit 2
are consistent with such plans and specifications, Applicable Law and prudent
engineering practice, (E) Unit 2 has been tested in accordance with all
customary testing and startup procedures which would have been performed on or
prior to the Closing Date, and such tests and procedures indicate that Unit 2
will have the capacity and functional ability to perform in commercial
operation, on a continuing basis, the function for which it is designed in
accordance with such plans and specifications and has a nominal capacity of
1,270 megawatts electric, (F) all material Governmental Actions relating to the
construction, operation or maintenance of Unit 2 are listed in a schedule to
such certificate, (G) there is no present event or condition which would
materially adversely affect the capability of Unit 2 to operate in accordance
with such plans and specifications and (H) based upon the Lessee's present
reasonable expectations, and subject to Applicable Law, the rights and interests
made available to the ANPP Participants (including the Lessee) pursuant to the
ANPP Participation Agreement, as such rights and interests are made available to
the Owner Trustee, any successor or assign of the Owner Trustee or any
"Transferee" of the Owner Trustee under Section 15.10 of the ANPP Participation
Agreement, under and pursuant to this Agreement, the Deed, the Assignment of
-59-
6091.100.2898.27A:9
<PAGE>
Beneficial Interest or the Assignment and Assumption, together with the rights
to be made available under and pursuant to the Assignment and Assumption, are
adequate to permit, during the period following the Lease Termination Date or
the taking of possession of the Undivided Interest and the Real Property
Interest in the exercise of remedies under Section 16 of the Facility Lease, in
accordance with the ANPP Project Agreements (i) the construction, location,
occupation, connection, maintenance, replacement, renewal, repair or removal of
Unit 2, (ii) the use, operation and possession of Unit 2, (iii) the
construction, use, operation, possession, maintenance, replacement, renewal and
repair of all alterations, modifications, additions, accessions, improvements,
appurtenances, replacements and substitutions thereof and thereto, (iv) adequate
ingress to and egress from Unit 2 for any reasonable purpose in connection with
the exercise of rights under the Assignment and Assumption and the Owner
Trustee's or any transferee's ownership and possession of the Undivided Interest
and (v) the obtaining of nuclear fuel, of water and of transmission services to
the ANPP Switchyard sufficient to enable delivery of the Generation Entitlement
Share related to the Undivided Interest in a commercially efficient manner and
on commercially reasonable terms. Nothing in the foregoing clause (H) shall be
deemed to be or be construed as a warranty by the Lessee as to the performance
by the Operating Agent of its obligations under the ANPP Participation
Agreement. Such certificate shall also be attested to by J.L. Wilkins, Senior
Vice President, Power Supply, PMN Electric, who shall state that (i) he has made
such investigation, inspection and review as he deems necessary to make the
statements in the certificate and (ii) to the best of his knowledge, the
statements of the Lessee in such certificate are true and correct.
(38) Real Estate Appraisal. The Owner Participant shall have received an
appraisal of the Real Property Interest, which appraisal shall reflect the
appraiser's reasonable conclusion that the fair market value in the hands of the
Owner Trustee of the Real Property Interest on the Closing Date is equal to the
Real Estate Investment. Such appraisal shall cover such other matters as the
Owner Participant shall have requested.
-60-
6091.100.2898.27A:9
<PAGE>
(39) Consent of Certain Unit 1 lessors. The Lessee shall have obtained the
consent required by Section 10 (b) (3) (xii) of each of the three Participation
Agreements dated as of December 16, 1985, relating to separate sale and
leaseback transactions involving undivided interests in Unit 1 in respect of
which the Lessee is lessee.
(40) Opinion of Lessee's FERC Counsel. The Loan Participant and the Owner
Participant shall have received a favorable opinion of Lessee's FERC Counsel,
dated the Closing Date and addressed to each such Person, addressing such FERC
matters as the Loan Participant or the Owner Participant may reasonably request.
(41) Other Matters. The Loan Participant and the Owner Participant shall
have received such other documents, certificates and opinions as the Loan
Participant or the Owner Participant, or their respective counsel, shall
reasonably request.
(b) Lessee Conditions. The obligation of the Lessee to sell and lease back
the Undivided Interest and the Real Property Interest on the Closing Date
pursuant to Section 4 shall be subject to the fulfillment on or prior to the
Closing Date of the following conditions precedent, in each case in form and
substance satisfactory to the Lessee:
(1) Paragraph (a) Documents. The Lessee, the Owner Trustee and the
Indenture Trustee shall have received executed copies of the documents,
certificates, opinions (other than the opinion referred to in Section
11(a)(25)), appraisals, letters and forms described in paragraph (a) of
this section 11. All such opinions shall be addressed to the Lessee, the
Owner Trustee and the Indenture Trustee except the opinions or documents
to which reference is made in clauses (18), (23), (24) and (25) of said
paragraph (a).
-61-
6091.100.2898.27A:9
<PAGE>
(2) Payment of Purchase Price. The Owner Trustee shall have paid to
the Lessee an amount, in immediately available funds, equal to the
Purchase Price and the Real Estate Investment.
(3) Special opinion of the Lessee's Special Counsel. The Lessee
shall have received a favorable opinion of the Lessee's Special Counsel,
dated the Closing Date and addressed to the Lessee, with respect to such
Federal tax and other matters as the Lessee may reasonably request.
(4) Accountant's Letter. The Lessee shall have received a letter
satisfactory to it from Peat, Marwick, Mitchell & Co., to the effect that,
under generally accepted accounting principles and FASB No. 13, the
Facility Lease is an "operating lease".
(5) Changes in Pricing Assumptions. If any change or changes in the
Pricing Assumptions shall have occurred on or before the Closing Date, the
effect of such change or changes will not require the payment of Basic
Rent (as to be adjusted pursuant to Section 3(e) (iii) of the Facility
Lease) on an annual basis to exceed 11.7% of Facility Cost.
SECTION 12. Consent to Assignment of the Facility Lease; Consent to
Indenture: Consent to Assignment of Notes.
(a) Consent to Assignment of Facility Lease. The Lessee hereby
acknowledges, and consents in all respects to, the partial assignment of the
Facility Lease by the Owner Trustee to the Indenture Trustee under and pursuant
to the Indenture and agrees:
(i) to make each payment of Basic Rent and Supplemental Rent due or
to become due thereunder to the extent constituting Assigned Payments
(excluding, in any event, all Excepted Payments) directly to the Indenture
Trustee at the Indenture Trustee's Office, so long as any of the Notes
shall be Outstanding and unpaid; and
-62-
6091.l00.2898.27A:9
<PAGE>
(ii) not to seek to recover any payment (other than a payment that
both the Owner Trustee and the Lessee agree was made in mistake) made to
the Indenture Trustee in accordance with the Indenture once such payment
is made.
(b) Consent to Indenture. The Lessee hereby consents in all respects to
the execution and delivery of the Indenture, and to all of the terms thereof,
and the Lessee acknowledges receipt of an executed counterpart of the Indenture;
it being understood that such consent shall not be construed to require the
Lessee's consent to any future supplement to, or amendment, waiver or
modification of the terms of, the Indenture or any Note, except to the extent
expressly provided for.
(c) Consent to Assignment by Loan Participant. Each of the parties hereto
acknowledges that the Loan Participant is assigning its right, title and
interest in and to the Notes to the Collateral Trust Trustee as security for the
Bonds to the extent set forth in the collateral Trust Indenture, and each of the
parties hereto consents to such assignment.
SECTION 13. Lessee's Indemnities and Agreements
(a) General Indemnity. The Lessee agrees, whether or not any of the
transactions contemplated hereby shall be consummated and whether or not the
Facility Lease, any other Transaction Document or any Financing Document shall
have expired or have been terminated, to assume liability for, and the Lessee
does hereby agree to indemnify, protect, defend, save and keep harmless each
Indemnitee, on an After-Tax Basis, tram and against, any and all claims which
may be imposed on, incurred by or asserted against any Indemnitee (whether
because of act or omission by such Indemnitee or otherwise and whether or not
such Indemnitee shall also be indemnified as to any such Claim by any other
Person) in any way relating to or arising out of (i) Unit 2, the Undivided
Interest, the Real Property Interest, PVNGS or the PVNGS Site, or any part of
-63-
6091.100.2898.27A:9
<PAGE>
any thereof (or any beneficial interest therein) , any ANPP Project Agreement,
the issuance or payment of the Bonds or the Notes, this Participation Agreement
or any other Transaction Document or any Financing Document (including, without
limitation, the performance or enforcement of any of the obligations and terms
hereunder or thereunder), (ii) a disposition of all or any part of the Undivided
Interest, the Real Property Interest, Unit 2 or any other interest of the Owner
Trustee or Owner Participant in connection with any termination of the Facility
Lease, or (iii) the design, manufacture, financing, erection, purchase,
acceptance, rejection, ownership, acquisition, delivery, nondelivery, lease,
sublease, preparation, installation, repair, transfer of title, abandonment,
possession, use, operation, maintenance, condition, sale, return, storage,
disposition, or decommissioning (including, but without limitation, with respect
to the Termination Obligation) of the Undivided Interest, Unit 2, the Real
Property Interest, any Capital Improvement, the PVNGS Site, any other facilities
on the PVNGS Site or any other interest of the Owner Trustee or Owner
Participant in any thereof or any accident, nuclear incident or extraordinary
nuclear occurrence in connection therewith (including, without limitation, (A)
claims or penalties arising from any violation of law or liability in tort
(strict or otherwise) or from the active or passive negligence of any
Indemnitee, (3) loss of or damage to any property or the environment or death or
injury to any Person, (C) latent and other defects, whether or not discoverable,
(D) any claim for patent, trademark, service-mark or copyright infringement and
(E) any claim of any Indemnitee incurred in the administration of this
Participation Agreement, any other Transaction Document or any Financing
Document and not paid as Transaction Expenses or included in Facility Cost and,
if not included in Transaction Expenses, the reasonable fees and disbursements
of counsel and other professionals incurred in connection therewith); provided,
however, that the Lessee shall not be required to indemnify any Indemnitee
pursuant to this Section 13(a), (1) for any Claim in respect of Unit 2, the
Undivided Interest or the Real Property Interest arising from acts or events not
attributable to the Lessee which occur after redelivery of the Undivided
Interest to the Owner Trustee in accordance with Section 5 of the Facility
-64-
6091.100.2898.27A:9
<PAGE>
Lease, except to the extent expressly provided in any Transaction Document, the
ANPP Participation Agreement or any other agreement or undertaking of the
Lessee, (2) for any Claim against such Indemnitee resulting solely from acts
which would constitute the willful misconduct or gross negligence of such
Indemnitee (unless imputed to such Indemnitee by reason of Unit 2, the Undivided
Interest, the Real Property Interest, PVNGS, the PVNGS Site or any other
facilities at the PVNGS Site or any occurrence in connection with any thereof),
(3) for any Transaction Expense to be paid by the Owner Trustee pursuant to
Section 14(a) or (4) for any Claim resulting solely from a transfer by the Owner
Trustee or the Owner Participant of all or part of its interest in the Facility
Lease, Unit 2, the Real Property Interest or the Undivided Interest other than
in connection with any early termination of the Facility Lease or any exercise
of remedies under Section 16 thereof or the transfer contemplated by Section
7(b) (4) or the first transfer by the Owner Participant to an Affiliate of the
Owner Participant. To the extent that an Indemnitee in fact receives
indemnification payments from the Lessee under the indemnification provisions of
this Section 13(a), the Lessee shall be subrogated, to the extent of such
indemnity paid, to such Indemnitee's rights with respect to the transaction or
event requiring or giving rise to such indemnity, but only so long as such
subrogation shall not materially adversely affect the rights of such Indemnitee
or any other Indemnitee hereunder. Nothing herein contained shall be construed
as constituting a guaranty by the Lessee of the principal of or premium, if any,
or interest on the Notes or the Bonds or of the residual value or useful life of
the Undivided Interest.
(b) General Tax Indemnity.
(1) Indemnity. All payments by the Lessee in connection with the
transactions contemplated by the Transaction Documents shall be free of
withholdings of any nature whatsoever (and at the time that the Lessee is
required to make any payment upon which any withholding is required, the
Lessee shall pay an additional amount such that the net amount actually
-65-
6091.100.2898.27A:9
<PAGE>
received by the Person entitled to receive such payment will, after such
withholding, equal the full amount of the payment then due) and shall be
free of expense to each Indemnitee for collection or other charges. If,
for any reason, the Lessee is required to make any payment to a taxing
authority with respect to, or as a result of, any withholding tax imposed
on any Indemnitee in respect of the transactions contemplated by the
Transaction Documents by reason of the Indemnitee not being a United
States person, then such Indemnitee shall pay to the Lessee on an
After-Tax Basis an amount which equals the amount paid by the Lessee with
respect to or as a result of such withholding tax. Whether or not any of
the transactions contemplated hereby is consummated, except as provided in
Section 13(b) (2), the Lessee shall pay, and shall indemnify, defend and
hold each Indemnitee harmless, on an After-Tax Basis, from and against,
any and all Taxes howsoever imposed (whether imposed on or with respect to
the Indemnitee, the Lessee, Unit 2, the Undivided Interest, the Real
Property Interest, any Capital Improvement or the PVNGS Site or any part
thereof or interest therein or otherwise) by any Federal, state or local
government or subdivision thereof or taxing authority in the United States
or by any foreign country or subdivision thereof or by any foreign or
international taxing authority in connection with or relating to (A) the
design, construction, financing, purchase, acquisition, acceptance,
rejection, delivery, nondelivery, transport, ownership, assembly,
possession, repossession, operation, use, condition, maintenance, repair,
improvement, sale, return, abandonment, decommissioning, preparation,
installation, storage, replacement, redelivery, manufacture, insuring,
leasing, subleasing, modification, transfer of title, rebuilding, rental,
importation, exportation or other application or disposition of, or the
imposition of any Lien (or incurrence of any liability to refund or pay
aver any amount as a result of any Lien other than Owner Participant's
Liens and Owner Trustee's Liens) other than Owner Participant's Liens and
Owner Trusteees Liens on, Unit 2, the Undivided Interest, the Real
Property Interest, any Capital Improvement or the PVNGS Site, or any part
-66-
6091.l00.2S98.27A:9
<PAGE>
thereof or interest therein, (B) the payment of Rent or the receipts or
earnings arising from or received with respect to, and the indebtedness
with respect to, Unit 2, the Undivided Interest, the Real Property
Interest or any Capital Improvement, or any part thereof, interest therein
or application or disposition thereof, (C) any amount paid or payable
pursuant to, or contemplated by, this Participation Agreement, any other
Transaction Document or any Financing Document or the transactions
contemplated hereby or thereby (D) Unit 2, the Undivided Interest, the
Real Property Interest, any Capital Improvement or the PVNGS Site, or any
part thereof, or interest therein, or the applicability of the Facility
Lease to the Undivided Interest or any Capital Improvement, or any part
thereof or interest therein, (E) this Participation Agreement, any other
Transaction Document or any Financing Document or (F) otherwise with
respect to or in connection with the transactions contemplated by this
Participation Agreement, any other Transaction Document or any Financing
Document.
(2) Exclusions from General Tax Indemnity. Section 13(b) (1) (except
for the first sentence thereof) shall not apply to:
(i) Taxes based on, or measured by, net income imposed by the United
States federal government (including, without limitation, any minimum
Taxes, capital gains Taxes, any Taxes on, or measured by, items of tax
preference, surcharges, additions to tax, penalties, fines or other
charges in respect thereof);
(ii) Taxes (other than sales, use or rental Taxes) imposed by any
state or local government or subdivision thereof or other taxing
authority in the United States or by any foreign country or subdivision
thereof or by any foreign or international taxing authority that are
based on, or measured by, the net income, items of tax preference, net
worth or capital of an Indemnitee, or other taxes imposed in lieu of any
-67-
6091.l00.2898.27A:9
<PAGE>
such Taxes, except, with respect to the Owner Trustee, the Trust, the
Trust Estate, the Owner Participant and any Affiliate of any thereof,
any such Taxes imposed by a jurisdiction as a result of a relation or
asserted relation of such jurisdiction to the transactions contemplated
by the Transaction Documents or the Financing Documents or as a result
of the activities of the Lessee, any ANPP Participant or any Affiliate
of any thereof in such jurisdiction; provided, however, that the amount
of any such excepted Taxes shall be calculated (i) on a pro forma basis
assuming that such Indemnitee has no other taxable income or loss in the
taxing jurisdiction imposing the Tax (provided that such calculation
shall take into account any allocation or apportionment method used by
such jurisdiction except to the extent that such method takes into
account the income or activities of business entities organized outside
the United States) and is able to use any net operating loss carryovers
(generated solely by reason of and solely attributable to the
transactions contemplated by the Transaction Documents or the Financing
Documents, and for this purpose a similar pro forma calculation shall be
made) to the fullest extent, reasonably determined, in good faith, by
the Indemnitee, and (ii) by taking into account any actual reduction in
Taxes in such jurisdiction or in any other jurisdiction in which such
Indemnitee is subject to tax (whether such reduction results from the
operation of allocation or apportionment formulas, from credits or
otherwise, except that no account shall be taken of any actual
reductions of tax benefits described in the Tax Indemnification
Agreement or any tax liability generated by transactions other than
those contemplated by the Transaction Documents or the Financing
Documents) which reduction results from the transactions contemplated by
the Transaction Documents or the Financing Documents; provided further,
-68-
6091.100.2898.27A:9
<PAGE>
however, that, with respect to any Tax based on, or measured by, capital
or net worth, the Lessee's indemnity obligation shall not exceed the
incremental portion of such Tax attributable to the transactions
contemplated by the Transaction Documents;
(iii) Taxes attributable to the Undivided Interest or the Real
Property Interest to the extent that such Taxes are imposed with respect
to any period after (a) the Lease Termination Date and (b) the date
possession of the Undivided Interest and the Real Property Interest has
been delivered to the Lessor as provided in Section 5(a) of the Facility
Lease, unless such Taxes relate to events occurring or matters arising
prior to or simultaneously with either of the aforementioned dates;
(iv) Taxes on or with respect to an Indemnitee arising from any
voluntary transfer by such Indemnitee of any interest in the Undivided
Interest, the Real Property Interest, the Trust Estate, the Indenture
Estate, the Notes or any other right or interest arising under the
Transaction Documents or the Financing Documents, unless an Event of
Default has occurred and is continuing, or Taxes arising from an
involuntary transfer by such Indemnitee of any such interest arising
from a bankruptcy or similar proceeding in which such Indemnitee is the
debtor unless such bankruptcy or other proceeding was caused, in whole
or in part, by the Lessee or any Affiliate thereof;
(v) Taxes based on or measured by any fee, commission or
compensation received by an Indemnitee for acting as trustee, or for
other services rendered, in connection with any of the transactions
contemplated by the Transaction Documents or the Financing Documents;
-69-
6091.100.2898.27A:9
<PAGE>
(vi) Taxes on or with respect to an Indemnitee arising by reason of
such Indemnitee's failure to file proper and timely reports or returns
(unless the filing of such reports or returns is the obligation of the
Lessee under the Transaction Documents or the Financing Documents) and
any penalties or additions to tax imposed by reason of such Indemnitee's
failure to comply with the laws imposing such Tax or its material
failure to comply with its obligations under Section 13 (b) (6), unless
such failure results from any action of the Lessee or failure by the
Lessee to comply with any provision of the Transaction Documents or the
Financing Documents, including the failure to provide necessary
information;
(vii) Taxes on or with respect to an Indemnitee arising as a result
of a material failure of such Indemnitee to fulfill its obligations with
respect to the contest of any claim in accordance with Section 13(b) (4)
of this Participation Agreement;
(viii) Taxes imposed on or with respect to a transferee (or
subsequent transferee) of an original Indemnitee (other than a
transferee or subsequent transferee that is an Affiliate of its
transferor) to the extent that the amount of such Taxes exceeds the
amount of taxes that would have been imposed on or with respect to such
original Indemnitee but for the transfer to such transferee or, if
imposed, would not have been subject to indemnification under this
Section 13(b); provided, however, that the exception in this clause
shall not apply to any transferee where such transfer shall have
occurred during the continuance of an Event of Default;
(ix) any Taxes imposed on the Lessor or the Owner Participant
resulting from, or which would not have occurred but for, Lessor's Liens
or Owner Participant's Liens and any Taxes imposed on the Indenture
Trustee which would not have occurred but for Indenture Trustee's Liens;
-70-
6091.100.2898.27A:9
<PAGE>
(x) any Tax that results solely from the activities of an Indemnitee
in any taxing jurisdiction which activities are unrelated to the
transactions contemplated by the Transaction Documents or the Financing
Documents;
(xi) any Tax on or with respect to an Indemnitee resulting from any
amendment or modification entered into by such Indemnitee to any
Transaction Document or Financing Document if the Lessee is not a party
to such amendment or modification or has not consented to such amendment
or modification, in each case unless an Event of Default shall have
occurred and be continuing; and
(xii) any Tax on or with respect to an Indemnitee resulting from the
gross negligence or willful misconduct of such Indemnitee (it being
understood that no Indemnitee is responsible for determining whether a
Tax is payable if the Lessee is required to indemnify the Indemnitee for
such Tax under this Section 13(b));
provided, however, that the foregoing subclauses (i) through (xii) shall
not apply to any Tax imposed on the Loan Participant or the indenture
estate under the Collateral Trust Indenture.
(3) Calculation of General Tax Indemnity Payments. If any
Indemnitee realizes a net permanent tax benefit by reason of the payment
of any indemnity under Section 13(b), such Indemnitee shall pay the
Lessee, but not before the Lessee shall have made all payments
theretofore due to such Indemnitee pursuant to this Section 13(b), an
amount equal to the lesser of (x) the sum of such tax benefit plus any
other net tax benefit realized by such Indemnitee as the result of any
-71-
6091.100.2898.27A:9
<PAGE>
payment made by such Indemnitee pursuant to this sentence (determined in
a manner consistent with the definition of After-Tax Basis set forth in
Appendix A and with the last sentence of Section 13 (b) (6) hereof) or
(y) the amount of such payment by the Lessee to such Indemnitee and any
other payment by the Lessee to such Indemnitee theretofore made pursuant
to this Section 13(b) less the aggregate amount of all prior payments by
such Indemnitee to the Lessee pursuant to this clause (y) with respect
to amounts paid pursuant to Section 13(b) (1), it being intended that no
Indemnitee should realize a net tax benefit pursuant to this Section
13(b) unless the Lessee shall first have been made whole for any
payments by it to such Indemnitee pursuant to this Section 13 (b) ;
provided, however, that in computing any permanent tax benefit, such
Indemnitee shall be deemed first to have utilized all deductions and
credits available to it otherwise than by reason of any payment by the
Lessee pursuant to this Section 13(b); provided further, however, that
notwithstanding the provisions of this clause (3), such Indemnitee shall
not be obligated to make any payment to the Lessee pursuant to this
clause (3) if at the time such payment shall be due an Event of Default
shall have occurred and be continuing.
(4) General Tax Indemnity-Contests. If a written claim shall
be made against any Indemnitee for any Tax for which the Lessee is
obligated pursuant to this Section 13(b), such Indemnitee shall notify
the Lessee promptly of such claim but the failure so to notify the
Lessee shall not affect any obligation of the Lessee pursuant to this
Section 13(b). If the Lessee shall reasonably request in writing within
30 days after receipt of such notice, such Indemnitee shall in good
faith and at the Lessee's expense contest the imposition of such Taxes;
provided, however, that such Indemnitee may in its sole discretion
select the forum for such contest and determine whether any such contest
shall be by (A) resisting payment of such Taxes, (H) paying such Taxes
under protest or (C) paying such Taxes and seeking a refund thereof;
provided further, however, that (W) such Indemnitee shall not be
-72-
6091.100.2898.27A:9
<PAGE>
obligated to contest any claim in which the amount in question is less
than $250,000, (X) at such Indemnitee's option, such contest shall be
conducted by the Lessee in the name of such Indemnitee (subject to the
preceding proviso) and (Y) in no event shall such Indemnitee be required
or the Lessee permitted to contest the imposition of any Taxes for which
the Lessee is obligated pursuant to this Section 13(b) unless (u) the
Lessee shall have acknowledged its liability to such Indemnitee for an
indemnity payment pursuant to this Section 13(b) as a result of such
claim if and to the extent such Indemnitee or the Lessee, as the case
may be, shall not prevail in the contest of such claim; (v) such
Indemnitee shall have received from the Lessee (i) satisfactory
indemnity for any liability, expense or loss arising out of or relating
to such contest including, but not limited to, (A) all reasonable legal,
accountants' and investigatory fees and disbursements, (B) the amount of
any interest, additions to tax or penalties that may be payable as a
result of contesting such claim and (C) if such contest is to be
initiated by the payment of, and the claiming of a refund for such Tax,
sufficient funds to make such payment on an After-Tax Basis and (ii) an
opinion of independent tax counsel selected by the Lessee and approved
by such Indemnitee (which approval shall not be unreasonably withheld)
and furnished at the Lessee's sole expense to the effect that a
Reasonable Basis exists for contesting such claim or, in the event of an
appeal, that there exists a substantial possibility that an appellate
court or an administrative agency with appellate jurisdiction, as the
case may be, will reverse or substantially modify the adverse
determination that the Lessee desires to contest; (w) the Lessee shall
have agreed to pay such Indemnitee on demand, and on an After-Tax Basis,
all reasonable costs and expenses that such Indemnitee may incur in
connection with contesting such claim (including, without limitation,
all costs, expenses, losses, reasonable legal and accounting fees,
disbursements, penalties, interest and additions to tax) ; (x) such
Indemnitee shall have reasonably determined that the action to be taken
will not result in any danger of sale, forfeiture or loss of,
-73-
6091.l00.2898.27A:9
<PAGE>
or the creation of any Lien (except if the Lessee shall have adequately
bonded such Lien or otherwise made provision to protect the interests of
such Indemnitee in a manner satisfactory to such Indemnitee) on, Unit 2,
any part thereof, the Undivided Interest, the Real Property Interest, or
any interest in any of the foregoing; and (y) if such contest shall be
conducted in a manner requiring the payment of the claim, the Lessee
shall have paid the amount required. The Lessee agrees to give such
Indemnitee reasonable notice of any contest prior to the commencement
thereof. If any Indemnitee shall obtain a refund of all or any part of
any Taxes paid by the Lessee, or if any such refund would be payable to
the Indemnitee in the absence of an offsetting liability for Taxes
payable to the taxing authority in question, such Indemnitee shall pay
the Lessee, but not before the Lessee shall have made all payments
theretofore due to such Indemnitee pursuant to this Section 13(b), an
amount equal to the lesser of (xx) the amount of such refund so received
or receivable, including interest received or receivable and
attributable thereto, plus any net permanent tax benefit realized by
such a Indemnitee (determined in a manner consistent with the definition
of After-Tax Basis set forth in Appendix A and with the last sentence of
Section 13(b)(6) hereof) as a result of any payment by such Indemnitee
made pursuant to this sentence (but only to the extent that such net
permanent tax benefit was not taken into account pursuant to Section
l3(b)(3)), and after taking into account the tax consequences of the
receipt of such refund and such interest) or (yy) such tax payment by
the Lessee to such Indemnitee plus any other payment by the Lessee to
such Indemnitee theretofore made pursuant to this Section 13(b), in
either case, net of any expenses not already paid or incurred by the
Lessee; provided, however, that in computing any net permanent tax
benefit, such Indemnitee shall be deemed first to have utilized all
deductions and credits available to it otherwise than by reason of any
payment by the Lessee pursuant to this Section 13(b); provided, further,
-74-
6091.100.2898.27A:9
<PAGE>
however, that notwithstanding the provisions of this clause (4) such
Indemnitee shall not be obligated to make any payment to the Lessee
pursuant to this clause (4) if at the time such payment shall be due a
Default or an Event of Default shall have occurred and be continuing
under the Facility Lease. An Indemnitee shall not be required to make
any payment pursuant to this clause (4) before such time as the Lessee
shall have made all payments and indemnities then due under the
Transaction Documents to such Indemnitee. Notwithstanding anything
contained in this clause (4) to the contrary, no Indemnity shall be
required to contest any claim if the subject matter thereof shall be of
a continuing nature and shall have previously been decided pursuant to
the contest provisions of this clause (4) unless there shall have been a
change in the law (including, without limitation, amendments to statutes
or regulations, administrative rulings and court decisions) after such
claim shall have been so previously decided, and such Indemnitee shall
have received an opinion of independent tax counsel selected by the
Lessee and approved by such Indemnitee (which approval shall not be
unreasonably withheld) and furnished at the Lessee's sole expense to the
effect that such change provides a Reasonable Basis for the position
which such Indemnitee and the Lessee, as the case may be, had asserted
in such previous contest or for an alternative position based upon such
change that the Lessee now desires to assert. Nothing contained in this
Section 13(b) shall require any Indemnitee to contest or permit the
Lessee to contest a claim which it would otherwise be required to
contest pursuant to this Section 13(b) if such Indemnitee shall waive
payment by the Lessee of any amount that might otherwise be payable by
the Lessee under this Section 13(b) by way of indemnity in respect of
such claim. If the Lessee does not request that a Tax be contested
pursuant to this paragraph (5), the Lessee shall pay the Indemnitee
therefor unless such Tax was not included in the indemnification under
Section 13(b) (1) or was excluded by Section 13 (b) (2).
-75-
6091.100.2898.27A:9
<PAGE>
(5) General Tax Indemnity-Reports. If any report, return or
statement is required to be filed with respect to any obligations of the
Lessee under or arising out of this Section 13(b), the Lessee shall
timely notify the Indemnitee and timely file the same, except for any
such report, return or statement which such Indemnitee has notified the
Lessee that it intends to file. The Lessee shall either file such
report, return or statement so as to show the ownership of the Undivided
Interest or the Real Property Interest, as the case may be, in the Owner
Trustee and send a copy of such report, return or statement to the Owner
Trustee and such Indemnitee or, where not so permitted, notify the Owner
Trustee and such Indemnitee of such requirement and prepare and deliver
such report, return or statement to the Owner Trustee and such
Indemnitee in a manner satisfactory to the Owner Trustee and such
Indemnitee within a reasonable time prior to the time such report,
return or statement is to be filed or, where such return, statement or
report shall be required to reflect items in addition to any obligations
of the Lessee under or arising out of this Section 13(b), provide the
Owner Trustee and such Indemnitee with information sufficient to permit
such return, statement or report properly to be made with respect to any
obligations of the Lessee under or arising out of this Section 13(b)
(and the Lessee shall hold each Indemnitee harmless from and against any
liabilities, obligations, losses, damages, penalties, claims, actions,
suits and reasonable costs arising out of any insufficiency or
inaccuracy in any such return, statement, report or information). The
Lessee shall not have any right to examine the tax returns of any
Indemnitee.
(6) General Tax Indemnity-Payment. All Taxes shall be paid when due
and payable and, unless otherwise requested by the appropriate
Indemnitee, the Lessee shall pay any Taxes for which it is liable
pursuant to this Section 13(b) directly to the appropriate taxing
-76-
6091.100.2898.27A:9
<PAGE>
authority and shall pay such appropriate Indemnitee promptly on demand
in immediately available funds any amount due such Indemnitee pursuant
to this Section 13(b) with respect to such Taxes. Any such demand shall
specify in reasonable detail the payment and the facts upon which the
right to payment is based. Each Indemnitee shall promptly forward to the
Lessee any notice, bill or advice received by it concerning any Taxes.
Within 30 days after the date of each payment by the Lessee of any
Taxes, the Lessee shall furnish the appropriate Indemnitee the original
or a certified copy of a receipt for the Lessee's payment of such Taxes
or such other evidence of payment of such Taxes as is acceptable to such
Indemnitee. The Lessee shall also furnish promptly upon request such
data as any Indemnitee may require to enable such Indemnitee to comply
with the requirements of any taxing jurisdiction. Whenever any payment
is to be made by the Lessee under this Section 13(b) and it shall be
necessary, in calculating the After-Tax Basis amount of such payment, to
compute the amount of any liability for federal, state or local tax
imposed on or measured by the net income of any Indemnitee, such
computation shall be based on the assumption that such taxes shall be
payable at the highest marginal statutory rate in effect for the
relevant period.
(7) Definition of Indemnitee. For purposes of this Section
13(b), the term Indemnitee shall mean and include the successors and
assigns of each respective Indemnitee, and for purposes of federal
income taxes, the affiliated group of corporations and each member
thereof (within the meaning of Section 1504 of the Code) of which such
Indemnitee is a member, if such group shall file a consolidated United
States federal income tax return, and, for purposes of income or
franchise taxes imposed by a particular state or local taxing
jurisdiction, shall mean and include any consolidated or combined group
of which such Indemnitee is or shall be a member that is treated as such
by such state or local taxing jurisdiction.
-77-
6091.100.2898.27A:9
<PAGE>
(c) Supporting Material. Upon receipt of any payment provided for by
this Section 13, the Indemnitee receiving the same shall provide to the Lessee
such supporting material (other than tax returns) as the Lessee shall reasonably
request. The Lessee shall reimburse to any Indemnitee, on an After-Tax Basis,
any expenses incurred in providing requested supporting material to the Lessee.
(d) Coordination with Tax Indemnification Agreement. Any amounts
that the Lessee is liable to pay pursuant to this Section 13(b) shall be payable
by the Lessee hereunder even if such Taxes are not the liability of the Lessee
pursuant to the Tax Indemnification Agreement.
SECTION 14. Transaction Expenses.
(a) Transaction Expenses. Subject to the provisions of paragraph (c)
below, with funds provided by the Owner Participant, the Owner Trustee hereby
agrees that it will pay when due an appropriate portion (taking into account the
other undivided interests in Unit 2 sold on August 16, 1986) of the following
costs and expenses (Transaction Expenses):
(i) the reasonable legal fees and disbursements of the Loan
Participant's Counsel, the Owner Participant's Special Arizona Counsel,
the Owner Participant's Special New Mexico Counsel., the Owner
Participant's Special Counsel, the Owner Participant's Special NRC
Counsel, the Owner Trustee's Counsel and the Indenture Trustee's Counsel
for their services rendered in connection with the execution and
delivery of this Participation Agreement and the other Transaction
Documents and all fees, expenses and disbursements incurred by them in
connection with such transactions; and reasonable legal fees, expenses
and disbursements in connection with NRC and ANPP Participant approvals
in connection with such transactions;
-78-
6091.100.2898.27A:9
<PAGE>
(ii) the initial (but not the ongoing) fees and expenses of the
Owner Trustee and the Indenture Trustee;
(iii) all stenographic, printing, reproduction, and other reasonable
out-of-pocket expenses (other than investment banking or brokerage fees)
incurred in connection with the execution and delivery of this
Participation Agreement and the other Transaction Documents and all
other agreements, documents or instruments prepared in connection
therewith (including all computer analysis and travel related costs);
(iv) rendered the fee rendered and the services Section 11 (a) (29),
the fees of the appraiser for services as contemplated by Section 11
(a)(38) fees of the insurance consultant for services rendered as
contemplated by 11(a) (35);
(v) all costs of issue of the Series B Bonds including, without
limitation, the costs of preparing the Financing Documents, filing fees
relating to the Registration Statement and the fees, expenses and
disbursements of Collateral Trust Trustee's Counsel, Loan Participant's
special Arizona counsel and special New Mexico counsel, Underwriter's
Counsel, the initial fees of the Collateral Trust Trustee and its
out-of-pocket expenses, rating agency fees, the fees and commissions of
the underwriters of the Series B Bonds and the fees, expenses and
disbursements of the Loan Participant; and
-79-
6091.100.2898.27A:9
<PAGE>
(vi) the fees and out-of-pocket expenses of Kidder Peabody and
Goldman, Sachs & Co. in connection with the placement of the beneficial
interest in the Trust.
Subject to the provisions of paragraph (c) below, funds for the payment
of Transaction Expenses will be provided by the Owner Participant to the
Owner Trustee and the Owner Trustee will promptly disburse such funds.
(b) Post-Closing Expenses. The Lessee will pay, as Supplemental
Rent, (i) the ongoing fees, expenses, disbursements and costs (including legal
and other professional fees and expenses) of or incurred by the Owner Trustee,
the Indenture Trustee and the Collateral Trust Trustee, including in connection
with the issue, sale and purchase of Notes and Bonds after the Closing Date, and
(ii) all fees, expenses, disbursements and costs (including legal and other
professional fees and expenses) incurred by the Loan Participant, the Owner
Participant, the Owner Trustee, the Indenture Trustee and the Collateral Trust
Trustee in connection with (a) any Default, Event of Default, Indenture Default
or Indenture Event of Default, (b) the entering into or giving or withholding of
any amendment, modification, supplement, waiver or consent with respect to any
Transaction Document or Financing Document, (c) any Event of Lass or Deemed Loss
Event, (d) any transfer of all or any part of the right, title and interest of
the Indenture Trustee in, to and under the Transaction Documents, (e) any
transfer of all or any part of the right, title and interest of the Owner
Trustee in the Undivided Interest, the Real Property Interest or in, to and
under the Transaction Documents and (f) any transfer contemplated by Section
7(b)(4).
(c) Lessee's Obligation. Notwithstanding Section 14(a) hereof, (i)
in the event the transactions contemplated by this Participation Agreement shall
not be consummated, the Lessee shall pay or cause to be paid, and shall
indemnify and hold harmless the Loan Participant, the Indenture Trustee, the
Collateral Trust Trustee, the Owner Trustee and the Owner Participant in respect
of all Transaction Expenses unless such failure to consummate shall result
solely from the Owner Participant's default in making its Investment hereunder
and (ii) the Lessee shall pay or cause to be paid that portion of Transaction
Expenses which exceeds a percentage of the Purchase Price equal to 2.5%.
-80-
6091.100.2898.27A:9
<PAGE>
SECTION 15. Owner Participant's Transfers.
(a) Transfers. After the Closing Date, except as contemplated by
Section 7(b) (4), the Owner Participant shall not assign, convey or otherwise
transfer all or any part of (including without limitation an undivided interest
in) its right, title or interest in and to this Participation Agreement, any of
the other Transaction Documents or the Trust Estate (except its right to receive
Excepted Payments) to any Person (a Transferee) except on the following
conditions:
(i) the Transferee shall enter into an agreement or agreements
whereby such Transferee confirms that (1) it shall be bound by the terms
of this Participation Agreement and each other Transaction Document, to
the extent of the interest transferred, as if it had been originally
named as the Owner Participant hereunder and thereunder and (2) if such
Transferee is a public utility company, it shall have waived its right
to claim Special Casualty Value upon the occurrence of a Deemed Loss
Event (of the type specified in clause (1) of the definition thereof)
under the Facility Lease:
(ii) the Transferee shall be either (A) a financial institution, a
corporation or a partnership with a net worth or capital and surplus of
at least $25,000,000 (or, in the case of a partnership, at least one of
whose general partners has such a net worth or capital and surplus), or
a direct or indirect wholly owned subsidiary of such a financial
institution or corporation, (B) a direct or indirect wholly owned
subsidiary of (1) the Owner Participant or (2) any parent of the
-81-
6091.100.2898.27A:9
<PAGE>
Owner Participant, (C) the Lessee or such other Person as shall have
been approved by the Lessee or (D) any Person; provided, however, that
if the Transferee is a subsidiary referred to in clause (A) above or a
Person referred to in clause (D) above, the transferring Owner
Participant (and any parent thereof secondarily liable pursuant to this
Section 15(a) (ii)) shall continue to be liable for (or the parent of
such Transferee, which shall otherwise be a permitted Transferee, shall
enter into an agreement whereby such parent confirms that it shall be
secondarily liable for) the obligations of such Transferee under Section
7(b) (1) notwithstanding such
(iii) such transfer shall not violate the Securities Act or any
provision of, or create a relationship which would be in violation of,
any Applicable Law or agreement to which the transferring Owner
Participant or the Transferee is a party or by which its property is
bound.
Upon any such transfer, the transferring Owner Participant shall, except
as expressly provided in clause (ii) above, be released from its
obligations under this Participation Agreement and the other Transaction
Documents to the extent of the interest transferred. An agreement to
transfer shall not in and of itself constitute a transfer for purposes
of this Section 15.
(b) Procedure. If the Owner Participant transfers all or any part of
its interest hereunder pursuant to this Section 15, it shall give written notice
thereof to the Lessee, the Owner Trustee, the Indenture Trustee and the Loan
Participant, specifying the name and address for notices to the Transferee, such
other information and evidence as shall be necessary to establish compliance
with this Section 15 and the extent of the interest transferred to such
-82-
6091.100.2898.27A:9
<PAGE>
Transferee. If, as a result of any such transfer, the original Owner Participant
is not to continue to receive all payments to be made by the Indenture Trustee
to the "Owner Participant" under the Indenture, the original Owner Participant
shall from time to time, by notice to the Indenture Trustee, with copies to the
Lessee, the Owner Trustee and the Collateral Trust Trustee, designate the manner
in which any such payments to the "Owner Participant" are to be allocated, and
the Indenture Trustee shall be entitled to rely on such notice for all purposes.
This Section 15 (other than the notice provisions contained in the first
sentence of this Section 15(c)) is for the benefit of the Lessee, the Owner
Trustee and the Owner Participant and may not be enforced by any other party
hereto.
SECTION 16. Brokerage and Finders' Fees and Commissions
Except to the extent of amounts payable by the Owner Participant
pursuant to Section 14, the Lessee will indemnify and hold harmless the Loan
Participant, the Indenture Trustee, the Owner Trustee and the Owner Participant
in respect of any commissions, fees, judgments or other expenses of any nature
and kind which any of them may become liable to pay by reason of any claims by
or on behalf of brokers, finders, agents, advisors or investment bankers in
connection with the transactions contemplated by this Participation Agreement,
any other Transaction Document or any Financing Document, or any litigation or
similar proceeding arising from any such claim, other than those claims arising
out of written undertakings of the party claiming indemnification under this
Section 16 or any Affiliate or shareholder (or Affiliate of such shareholder) of
such Person with any such broker, finder, agent, advisor or investment banker.
-83-
6091.100.2398.27A:9
<PAGE>
SECTION 17. Survival of Representations and Warranties; Binding Effect
(a) Survival. All indemnities, representations and warranties
contained in this Participation Agreement, in any other Transaction Document, in
any Financing Document and in any agreement, document or certificate delivered
pursuant hereto or thereto or in connection herewith or therewith, shall
survive, and shall continue in effect following, the execution and delivery of
this Participation Agreement, the making of the investments and the loans
referred to herein, any disposition of any interest in the Undivided Interest,
Unit 2 or any other property referred to in this Participation Agreement and the
expiration or other termination or any or the Transaction Documents or Financing
Documents and shall be and continue in effect notwithstanding (i) any
investigation made by the Owner Participant or the Loan Participant or (ii) the
fact that any of the Indenture Trustee, the Owner Trustee, the Loan Participant
or the Owner Participant may waive compliance with any of the other terms,
provisions or conditions of any of the Transaction Documents or Financing
Documents. The obligations of the Lessee under Sections 10(b) (1) (ix), 10(b)
(2), 10(b) (3) (vii), 10(b) (3) (x) , 10(b) (3) (xi), 13, 14, 16 and 19(f) shall
survive the expiration or other termination of this Participation Agreement or
any other Transaction Document or Financing Document. The extension of any
applicable statute of limitations by the Owner Trustee, the Indenture Trustee,
the Lessee, the Owner Participant, the Loan Participant or any Indemnitee shall
not affect such survival.
(b) Binding Effect. All agreements, representations and warranties
in this Participation Agreement, the other Transaction Documents and the
Financing Documents and in any agreement, document or certificate delivered
concurrently with the execution of this Participation Agreement or from time to
time thereafter, shall bind the party making the same and its successors and
permitted assigns and shall inure to the benefit of each party for whom made and
-84-
6091.100.2898.27A:9
<PAGE>
its successors and permitted assigns, and, to the extent provided in the next
sentence, each Indemnitee and its successors and assigns. The obligations of the
Lessee under Section 13 hereof and Section 20 of the Facility Lease are
expressly made for the benefit of, and shall be enforceable by, any Indemnitee,
separately or together, without declaring the Facility Lease to be in default
and notwithstanding any assignment by the Lessor of the Facility Lease or any of
its rights thereunder or any disposition of all or any part of any interest in
the Undivided Interest, the Real Property Interest, Unit 2 or any other property
referred to in this Participation Agreement, or in this Participation Agreement
or any other Transaction Document or any Financing Document. All payments
required to be made pursuant to Section 13 requested by, the Indemnitee entitled
thereto upon written demand by such Indemnitee. The Lessee shall not assign any
of its rights or obligations hereunder without the prior written consent of the
Owner Participant and the Owner Trustee. Except as otherwise indicated, all
references herein to any party to this Participation Agreement and the other
Transaction Documents shall include the permitted successors and assigns of such
party.
SECTION 18. Notices.
All communications, notices and consents provided for herein shall
be in writing, including telex, telecopy or other wire transmission containing a
request for assurance of receipt in a manner typical with respect to
communications of that type, or mailed by registered or certified mail,
personally delivered (with signed receipt of an officer of the Owner Participant
in the case of delivery to the Owner Participant) or delivered by express
delivery service, and shall be addressed (i) if to the Owner Participant, at One
Chase Manhattan Plaza (20th floor), New York, New York 10081, Attention of
Leasing Administrator; (ii) if to First PV Funding Corporation at Corporation
Trust Center, 1209 Orange Street, Wilmington, Delaware 19801, Attention of
-85-
6091. l00.2898.27A:9
<PAGE>
President; (iii) if to The First National Bank of Boston, at 100 Federal Street,
Boston, Massachusetts 02110, Attention of Corporation Trust Division; (iv) if to
Chemical Bank, at 55 Water Street, New York, New York 10041, Attention of
Corporate Trustee Administration; and (v) if to Public Service Company of New
Mexico, at Alvarado Square, Albuquerque, New Mexico 87158, Attention: Secretary;
or at such other address as any party hereto may from time to time designate by
notice duly given in accordance with the provisions of this Section to the other
parties hereto. All such communications, notices and consents given in the
manner provided above shall be effective on the date of receipt of such
communication or notice.
SECTION 19. Miscellaneous.
(a) Execution. This Participation Agreement may be executed in any
number of counterparts and by the different parties hereto on 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. Although this Participation Agreement is dated as of the date
first above written for convenience, the actual dates of execution hereof by the
parties hereto are respectively the dates set forth under the signatures hereto,
and this Participation Agreement shall be effective on the latest such date.
(b) Intention of the Owner Trustee and the Owner Participant. Each
of the Owner Trustee and the Owner Participant intends to exercise its rights
and carry out its obligations hereunder and under the other Transaction
Documents solely with a view to furthering its own best interests and does not
have, and does not expect to have, any form of joint profit motive with any
other Person. The Owner Trustee and the Owner Participant shall not be required
to share any Rent to which they are entitled under the Facility Lease, or the
residual value of the Undivided Interest or the Real Property Interest, with any
other Person. The Owner Trustee and the Owner Participant are not under the
-86-
6091.100.2898.27A:9
<PAGE>
control of nor shall they be deemed to be under the control of any other Person
having any interest in Unit 2, and shall not be the agent of or have a right or
power to bind any such Person (other than the Owner Participant as regards the
Owner Trustee) without its express written consent. The Owner Trustee and the
Owner Participant accordingly do not intend to create any form of partnership or
joint venture with any other Person by virtue of the transactions contemplated
hereby or by any of the Transaction Documents. In the event that it is
determined, contrary to the intent of the Owner Trustee and the Owner
Participant, that, for purposes of the Code or any other income tax law, a form
of partnership or joint venture exists between the Owner Trustee or the Owner
Participant and any other Person, the Owner Trustee and the Owner Participant
hereby elect to the extent permitted by law (i) not to have the partnership
provisions of the Code or such other income tax law apply to any of the
transactions contemplated hereby or by any of the Transaction Documents and (ii)
to be treated solely as owning the Undivided Interest.
(c) Governing Law. This Participation Agreement has been negotiated
and delivered in the State of New York and shall be governed by, and be
construed in accordance with, the laws of the State of New York.
(d) Amendment, Supplements, etc. Neither this Participation
Agreement nor any of the terms hereof may be amended, supplemented, waived or
modified orally, but only by an instrument in writing signed by the party
against which enforcement of such change is sought.
(e) Headings. The headings of the sections and paragraphs of this
Participation Agreement have been inserted for convenience of reference only and
shall in no way restrict or otherwise modify any of the terms or provisions
hereof.
(f) Bankruptcy of Owner Participant. If (a) the Owner Participant or
the Owner Trustee becomes a debtor subject to the reorganization provisions of
the Bankruptcy Code, or any successor provision, (b) pursuant to such
-87-
6091.100.2898.27A:9
<PAGE>
reorganization provisions the Owner Participant or the Owner Trustee is
required, by reason of the Owner Participant being held to have recourse
liability directly or indirectly to the Holder of any Note or the Indenture
Trustee, to make payment on account of any amount payable as principal or
interest, and premium (if any), on such Note and (c) such Holder or the
Indenture Trustee actually receives any Excess Amount (as hereinafter defined)
which reflects any payment by the Owner Participant on account of clause (b) of
this Section, then such Holder or the Indenture Trustee, as the case may be,
shall promptly refund to the Owner Participant such Excess Amount. For purposes
of this Section, "Excess Amount" means the amount by which such payment exceeds
the amount which would have been received on or prior to the date of such
payment by such Holder or the Indenture Trustee if the Owner Participant or the
Owner Trustee had not become subject to the recourse liability referred to in
clause (b) of this Section. Nothing contained in this Section shall prevent such
Holder or the Indenture Trustee from enforcing any personal recourse obligation
(and retaining the proceeds thereof) of the Owner Participant expressly provided
for under this Participation Agreement.
(g) Entire Agreement. This Participation Agreement (including the
Schedules hereto), the other Transaction Documents and the Financing Documents
supersede all prior agreements, written or oral, between or among any of the
parties hereto relating to the transactions contemplated hereby and thereby and
each of the parties hereto represents and warrants to the others that this
Participation Agreement and the other Transaction Documents and the Financing
Documents constitute the entire agreement among the parties relating to the
transactions contemplated hereby and thereby.
(h) Publicity. Each party hereto agrees that it will not issue or
release for external publication any article or advertising or publicity matter
relating to the transaction contemplated hereby or any similar transaction and
mentioning or implying the identity of the Owner Participant without the prior
-88-
6091..lOO.2898.27A:9
<PAGE>
written consent of the Owner Participant; provided, however, that the Owner
Participant agrees that such written consent shall not be withheld if such
disclosure is required by Applicable Law.
-89-
6091.100.2898.27A:9
IN WITNESS WHEREOF, the parties hereto have each caused this
Participation Agreement to be duly executed by their respective officers
thereunto duly authorized as of the dates set forth below.
CHASE MANHATTAN REALTY
LEASING CORPORATION
By
-------------------
Vice President
Date: December 17, 1986
FIRST PV FUNDING CORPORATION
By
-------------------
Vice President
Date: December ____, 1986
PUBLIC SERVICE COMPANY OF NEW
MEXICO
By
-------------------
Vice President and
Treasurer
Date: December_____, 1986
6091.100.2898.27A:9
<PAGE>
THE FIRST NATIONAL BANK OF
BOSTON, in its individual capacity
and as Owner Trustee
By:
------------------------
Assistant Vice President
Date: December 16, 1986
CHEMICAL BANK, in its individual capacity
and as Indenture Trustee
By____________________________
Vice President
Date: December 16, 1986
6091.100.2898.27A:9
<PAGE>
Schedule 1
PUBLIC SERVICE COMPANY OF NEW MEXICO
PALO VERDE NUCLEAR GENERATING
STATION UNIT 2
NOTICE OF CLOSING
CHASE MANHATTAN REALTY LEASING CORPORATION
Pursuant to Section 5(a) of the Participation Agreement, dated
as of December 15, 1986 (the Participation Agreement) among Chase Manhattan
Realty Leasing Corporation, as Owner Participant (the Owner Participant), First
PV Funding Corporation, as Loan Participant, The First National Bank of Boston,
as Owner Trustee, Chemical Bank, as Indenture Trustee, and Public Service
Company of New Mexico (PIOC), PNM hereby gives notice of a Closing to occur at
10:00 a.m. on December 17, 1986 (the Closing bate). The Closing will be held at
the offices of Messrs. Mudge Rose Guthrie Alexander & Ferdon, 180 Maiden Lane,
New York, New York 10038.
(i) Based upon information supplied to PNM, the current estimate of
Transaction Expenses is an aggregate of $ A list of such transaction
expenses is attached hereto.
(ii) Payment of the Purchase Price and the purchase price for the
Real Property Interest shall be made pursuant to an Omnibus Transfer
Instruction and Receipt to be executed by all parties to the
Participation Agreement on the Closing Date.
(iii) The Real Estate Investment is $ ___________.
6091.100.2898.27A:9
<PAGE>
Capitalized terms used herein and not otherwise specifically
defined herein shall have the meanings set forth in Appendix A to the
Participation Agreement.
IN WITNESS WHEREOF, Public service Company of New Mexico has
executed this Notice of closing this 10th day of December, 1986.
PUBLIC SERVICE COMPANY OF NEW MEXICO
By
--------------------------------
Senior Vice President and
Chief Financial Officer
-2-
6091.100.2898.27A:9
<PAGE>
Schedule 2
PRICING ASSUMPTONS
Basic Rent and the Schedules of Casualty Values, special
Casualty Values and Termination Values, as set forth in the Facility Lease as
originally executed, have been computed on the basis of the following pricing
assumptions:
1. Investment Percentage: 20.353983%
2. Loan Percentage: 79.646017%
3. Interest Rate on:
(a) Fixed Rate Note due
January 15, 1992
($1,270,000) 8.05%
(b) Fixed Rate Note due
January 15, 1997
($3,501,000) 8.95%
(c) Fixed Rate Note due
January 15, 2016
($23,229,000) 10.15%
4. Federal ACRS Deductions: 10-year public utility property
deductions on the basis
of 100% of Facility Cost.
5. State and City Deductions: 16 Year 150% declining balance
switching to straight line at
the optimal point, using the
half year convention, on the
basis of 100% of Lessor's
Cost.
6091.100.2898.27A:9
<PAGE>
6. Owner Participant's Tax
Year-End: December 31, 1986.
7. Closing Date: December 17, 1986.
8. Transaction Expenses: 2.0% of Facility
Cost paid by the
Owner Participant
addition to its
Investment
(amortized on a
straight-line basis
during the Basic
Lease Term).
9. Real Estate Investment: $19, 554.
l0. Basic Rent Payment Date: January 15 and
July 15 of each year
(rent payable in
arrears) a
ll. First Basic Rent Payment
Date: July 15, 1987.
l2. Last Basic Rent Payment
Date: January 15, 2016.
13. Interim Rent Payment Date: January 15, 1987
14. Marginal Federal Tax Rate: 46% in 1926;
39.950625% in 1927;
and 34% in 1928.
15. Marginal Combined New York
State and City Tax Rate: 8.6% deductible for
Federal taxes.
16. First Estimated Tax Payment
Date: March 15, 1927.
17. Tax Accounting Method: Accrual.
18. Amortization of the Fixed
Rate Notes: See schedule attached thereto.
-2-
<PAGE>
Schedule 3
BILL OF SALE AND ASSIGNMENT
================================================================================
BILL OF SALE AND ASSIGNMENT
dated as of 19
----------------------- --
from
[CHASE MANHATTAN REALTY LEASING CORPORATION)
to
PUBLIC SERVICE COMPANY OF NEW MEXICO
================================================================================
6091.100.2898.27:1
<PAGE>
BILL OF SALE AND ASSIGNMENT, dated as of __________, 19 , from
[CHASE MANHATTAN REALTY LEASING CORPORATION], a New York corporation (the Owner
Participant), to PUBLIC SERVICE COMPANY OF NEW MEXICO, a New Mexico corporation
(PNM).
W I T N E S S E T H:
WHEREAS, pursuant to Section 7(b)(4) of the participation
Agreement dated as of December 15, 1986 (relating to Unit 1) among the Owner
Participant, First PV Funding corporation, as Loan participant, The First
National Bank of Boston, as owner Trustee, Chemical Bank, as Indenture Trustee
and PNM, as Lessee, (the Participation Agreement), the owner participant desires
to sell and PNM desires to buy the Assigned Property (as hereinafter defined);
NOW, THEREFORE, in consideration of the premises and of other
good and valuable consideration, receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. For purposes hereof, capitalized terms used herein
shall have the meanings assigned to such terms in the participation Agreement.
References in this Agreement to articles, sections and clauses are to articles,
sections and clauses in this Agreement unless otherwise indicated.
6091.100.2898.27:1
<PAGE>
ARTICLE II
ASSIGNMENT OF TRUST ESTATE
SECTION 2.01. Assignment. The Owner participant does hereby
grant, bargain, convey, sell, assign, transfer and set over to PNM, without
recourse, representation or warranty, express and implied, of any nature
whatsoever (except as set forth in the next succeeding sentence), all of the
Owner Participants right, title and interest in, to and under the Trust Estate
except the Owner participant's right to receive Excepted Payments (the Assigned
Property) [subject to the Owner participant's security interest in, and general
lien upon all of the right, title, and interest of PNM, as successor Owner
Participant in, to and under the Assigned Property*]. The Owner Participant
hereby represents and warrants to PNM that the Owner Participant has good and
valid title to Assigned Property free and clear of all Owner participant's
Liens.
[Insert the following provision if the Owner participant has
not received under Section 5.2 of the Indenture the payments provided for in
section 9(c), 9(d) or 16(e) of the Facility Lease, as the case may be:
SECTION 2.02. No Release of PNM. Notwithstanding the transfer
of the Assigned Property to PNM pursuant to Section 2.01 hereof, the obligation
of PNM to make the payments as provided in Section (insert applicable section:
9(c), 9(d) or 16] of the Facility Lease (together with interest thereon in
accordance with Section 3(b)(iii) of the Facility Lease) (or to make other
payments in a like amount with respect to Basic Rent or supplemental Rent paid
by application of such payments (and in which the owner Trustee has thereby
* To be inserted if on the date of the transfer the Owner Participant has not
received under Section 5.2 of the Indenture the payments provided for in Section
9(c), 9(d) or 16 of the Facility Lease, as the case may be.
-2-
6091.100.2898.27:1
<PAGE>
acquired an interest pursuant to Section 5.1 or 5.3 of the Indenture) shall not
be deemed to be cancelled or discharged but shall continue until all such
amounts are so received by PNM, as successor Owner Participant, or by the
transferring Owner Participant pursuant to the provisions of Section 7(b) (4) of
the participation Agreement. ]
[Insert following if the owner participant has received under
Section 5.2 of the Indenture the payments provided for in Section 9(c), 9(d) or
16 of the Facility Lease, as the case may be:
SECTION 2.02. Acknowledgment. The Owner participant hereby
acknowledges receipt of $__________ representing payment in full of all amounts
due to the Owner Participant under Section (9) ( C), 9 (d) or 16] of the
Facility Lease.
ARTICLE III
EFFECTIVENESS OF TRANSFER
SECTION 3.01. Effectiveness of Transfer. The transfer of the
Assigned Property shall become effective without further action upon the
execution and delivery by the Owner participant to the Lessee of this Bill of
Sale and Assignment and the furnishing of a counterpart of this Bill of Sale and
Assignment to the Owner Trustee.
ARTICLE IV
MISCELLANEOUS
SECTION 4.01. Successors and Assigns. This Bill of Sale and
Assignment shall be binding upon the owner Participant and its successors and
shall inure to the benefit of PNM and its successors and assigns.
SECTION 4.02. Governing law. This Bill of Sale and Assignment
shall be governed by and construed and enforced in accordance with the law of
the State of New York.
-3-
6091.100.2898.27:1
<PAGE>
SECTION 4.03. Headings. The division of this Bill of sale and
Assignment into sections, and the insertion of headings are for convenience of
reference only and shall not affect the construction or interpretation of this
Bill of Sale and Assignment.
IN WITNESS WHEREOF, the undersigned has caused this Bill of
Sale and Assignment to be duly executed as of the day and year written above.
[CHASE MANHATTAN REALTY
LEASING CORPORATION]
By
-----------------------
Title:
-4-
6091.100.2898.27:1
Schedule 4
Recordations and Filings
Part I. Recordations in Respect of the Sale of, and the Owner
Trustee's Title to, the undivided Interest and the Real
Property Interest.
A. County Recorder, Maricopa County, Arizona:
(i) Deed;
(ii) Bill of sale;
(iii) Assignment and Assumption;
(iv) Facility Lease;
(v) Indenture;
(vi) Indenture of Partial Facility; and
(vii) Indenture of Partial Release/Real Property
Part II. UCC-l Financing Statements.
A. County Recorder, Maricopa County, Arizona:
(i) A financing statement on form UCC-l naming PNM, as lessee, the
Owner Trustee, as lessor, and the Indenture Trustee, as assignee of
the Owner Trustee, in respect of the Facility Lease;
(ii) A financing statement on form UCC-l naming the Owner Trustee,
as debtor, and the Indenture Trustee, as secured party, in respect of
the Lease Indenture Estate; and
(iii) A financing statement amendment on form UCC-2 reflecting the
supplementation of the Collateral Trust Indenture by the supplemental
Indenture of Pledge (as contemplated by the Series B supplemental
Indenture)
B. Secretary of State, Arizona:
6091.100.2898.27:1
<PAGE>
(i) A financing statement on form UCC-l naming PNM, as lessee, the
Owner Trustee, as lessor, and the Indenture Trustee, as assignee of
the Owner Trustee, in respect of the Facility Lease;
(ii) A financing statement on form UCC-l naming; PNM, as lessee,
the Owner Trustee, as lessor and the Indenture Trustee, as assignee of
the Owner Trustee, in respect of the Facility Lease (Filed as a public
utility filing);
(iii) A financing statement on form UCC-l naming the Owner Trustee,
as debtor, and the Indenture Trustee, as secure a party, in respect of
the Lease Indenture Estate; and
(iv) A financing statement amendment on form UCC-2 reflecting the
supplementation of the collateral Trust Indenture by the Supplemental
Indenture of Pledge (as contemplated by the Series B Supplemental
Indenture)
C. Office of County Clerk, Bernalillo County, New Mexico:
(i) A financing statement on form UCC-l naming PNM, as lessee, the
Owner Trustee, as lessor, and the Indenture Trustee, as assignee of
the Owner Trustee, in respect of the Facility Lease;
(ii) A financing statement on form UCC-l naming the Owner Trustee,
as debtor, and the Indenture Trustee, as secured party, in respect of
the Lease Indenture Estate; and
(iii) A UCC financing statement amendment reflecting the
supplementation of the collateral Trust Indenture by the Supplemental
Indenture of Pledge (as contemplated by the Series B Supplemental
Indenture).
-2-
6091.100.2898.27:1
<PAGE>
D. Secretary of State, New Mexico:
(i) A financing statement on form UCC-1 naming PNM, as lessee, the
Owner Trustee, as lessor, and the Indenture Trustee, as assignee of
the owner Trustee, in respect of the Facility Lease;
(ii) A financing statement on form UCC-l naming the owner Trustee,
as debtor, and the Indenture Trustee, as secured party, in respect of
the Lease Indenture Estate; and
(iii) A UCC financing statement amendment reflecting the
supplementation of the Collateral Trust Indenture by the supplemental
Indenture of Fledge (as contemplated by the Series B Supplemental
Indenture)
E. Secretary of State, Massachusetts:
(i) A financing statement on form UCC-l naming the Owner Trustee,
as debtor, and the Indenture Trustee, as secured party, in respect of
the Lease Indenture Estate.
Part III. Other Filings:
Filing of the Indenture with the Secretary of State of the State
of New Mexico pursuant to the New Mexico public utility Act.
-3-
6091.100.2898.27:1
<PAGE>
Schedule 5
AFFIDAVIT OF TRUSTEE
THE FIRST NATIONAL BANK OF BOSTON,
as Owner Trustee under that certain
Trust Agreement dated as of
December 15, 1986 with Chase
Manhattan Realty Leasing
Corporation
The undersigned, being a duly authorized representative of The
First National Bank of Boston, a national banking association, as Trustee under
the above-captioned Trust Agreement (the Trust Agreement), does hereby affirm
and acknowledge that The First National Bank of Boston, as Trustee, holds legal
title to certain real (and other) property on behalf of a certain beneficiary,
such property and beneficiary being more particularly described in that certain
Deed recorded December ____, 1986, as instrument No. 86-records of Maricopa
County, Arizona; being further described in that certain Deed and Bill of sale
recorded December _____, 1986, as instrument No. 86____________, records of
Maricopa County, Arizona; being further described in that certain Assignment,
Assumption and Further Agreement recorded December ______, 1986, as instrument
No. 86-______, records of Maricopa County, Arizona; and being further described
in that certain Deed and Assignment of Beneficial Interest dated December 1986,
and that certain related __________ Amended Affidavit of Trustee executed by
Title USA Company of Arizona as Trustee of its Trust No. 530 and recorded
December _______, 1986, as instrument No. 86- _______, records of Maricopa
County, Arizona; the property descriptions and beneficiary disclosures contained
in or incorporated into each of said instruments being incorporated herein by
this reference as if fully set forth herein.
A certain change in ownership of the beneficial interest in
the Trust Agreement has occurred since the recordation of the above-described
instruments. As now reflected in the records of The First National Bank of
Boston, the sole beneficiary of the Trust Agreement is:
Public Service Company of New Mexico
Alvarado Square
P. O. Box 2267
Albuquerque, New Mexico 87103
6091.100.2898.27:1
<PAGE>
A copy of the Trust Agreement is available for inspection at
the offices of The First National Bank of Boston, 100 Federal Street, Boston,
Massachusetts 02110.
DATED THIS _____ day of ________________, __________.
THE FIRST NATIONAL BANK OF BOSTON, not in its individual
capacity, but solely as Owner Trustee under the Trust
Agreement dated as of December 15, 1986, with Chase
Manhattan Realty Leasing Corporation
By:
------------------------------
Its Authorized Officer
STATE OF
----------------)
) SS.
COUNTY OF
----------------)
The foregoing instrument was acknowledged before me this _____
day of __________ , _________, by ___________ an Authorized Officer of THE FIRST
NATIONAL BANK OF BOSTON, a national banking association, under that certain
Trust Agreement dated as of December 15, 1986 with Chase Manhattan Realty
Leasing Corporation.
-----------------------------
Notary Public
-2-
6091.100.2898.27:1
<PAGE>
Appendix A
DEFINITION OF TERMS
The terms defined herein relate to the Participation Agreement
(as defined below) and certain Transaction Documents executed, or to be
executed, in connection with the Participation Agreement. Such terms include the
plural as well as the singular. Any agreement defined or referred to below shall
include each amendment, modification and supplement thereto and waiver thereof
as may become effective from time to time, except where otherwise indicated. Any
term defined below by reference to any agreement shall have such meaning whether
or not such document is in effect. The terms "hereof", "herein", "hereunder" and
comparable terms refer to the entire agreement with respect to which such terms
are used and not to any particular article, section or other subdivision
thereof.
If, and to the extent that, either the Participation Agreement
or any other Transaction Document which incorporates this Appendix shall be
amended from time to time pursuant to the respective terms thereof, this
Appendix shall be, or be deemed to have been, amended concurrently with the
execution and delivery of each such amendment in order to conform the
definitions herein to the new or amended definitions set forth in or required by
each such amendment.
Acceptable Change shall mean any change in or new interpretation
by Governmental Authority having jurisdiction of the Price-Anderson Act or the
Atomic Energy Act (or the regulations of the NRC relating thereto) if, after
giving effect to such change or new interpretation:
(A) (a) the "aggregate liability" for a single "nuclear incident" of
"persons indemnified" shall not exceed $6.563 billion (assuming 101
operating nuclear facilities participating in the deferred premium or
similar plan referred to in clause (c) below and subject to adjustment
in an amount not exceeding (X) $63 million for each increase or decrease
6O9l.l00.2898.55:l
<PAGE>
in said number of operating nuclear facilities and (Y) the aggregate of
all changes in such "aggregate liability" to reflect the effects of
inflation contemplated pursuant to clause (c) below)
(b) the "aggregate liability" for a single "nuclear incident" of
"persons indemnified" shall not exceed the sum of, without duplication,
(X) the amount of insurance coverage available from commercial insurance
underwriters on terms substantially equivalent (in the reasonable
opinion of the Owner Participant) to the terms in effect on the Closing
Date under Applicable Law and required to be maintained by each licensee
with respect to any single nuclear facility, and (Y) the maximum
aggregate amount payable with respect to a single "nuclear incident" by
all licensees of nuclear facilities participating in any deferred
premium or similar plan required under Applicable Law, by more than $40
million
(c) the amount payable by all licensees of a single nuclear facility
with respect to such facility under any deferred premium or similar plan
required under Applicable Law shall not exceed $63 million per "nuclear
incident" (subject to an annual adjustment upward for each calendar year
after the enactment of a change in the Price-Anderson Act (if such
change increases the standard deferred premium) by an amount equal to,
if specified by such change or otherwise by Applicable law, (X) the
annual percentage change during the immediately prior calendar year in
the implicit price deflator for the Gross National Product published by
the united States Department of Commerce or (Y) the annual percentage
change in the consumer price index since the immediately prior calendar
year; provided, however, that (i) in the event that
-2-
6091.100.2898.55:1
<PAGE>
Applicable Law shall not specify an inflation adjustment, then the
inflation adjustment permitted by this parenthetical shall be that
specified in the preceding sub-clause (X) and (ii) in the event that
Applicable Law shall specify a standard deferred premium below $63
million, the inflation adjustment factor shall not be available to
increase the standard deferred premium permissible under this clause (c)
beyond $63 million until such lower deferred premium (as so inflated)
equals or exceeds $63 million);
(d) the amount payable by all licensees of a single nuclear facility
with respect to such facility in any one year with respect to any one
"nuclear incident" under any deferred premium or similar plan required
under Applicable Law shall not exceed $12 million;
(e) insurance or other financial protection shall be in effect under
which the providers of such insurance or other financial protection
shall agree to pay any amount payable by any licensee under any deferred
premium or similar plan upon a default in such payment by such licensee
up to a maximum aggregate amount for all such defaults in payment of not
less than $30 million;
(f) a provision shall be included (X) which authorizes (whether or not
subject to appropriation acts) the NRC or other Governmental Authority
to borrow from the United States Treasury (1) to make payments on behalf
of any licensees under any deferred premium or similar plan and (2) to
make payments to claimants in the event that funds available to pay
valid claims in any year are insufficient as a result of any limitation
on the amount or deferred premiums that may be required of a licensee
under Applicable Law (in both cases the reimbursement obligation of such
-3-
6091.100.2898.55:1
<PAGE>
licensees in any calendar year shall not exceed $12 million, plus
interest) , or (V) which makes the exclusive source of payments for
public liability claims the funds provided by financial protection
required by Applicable Law and, where appropriate, funds provided as a
result of NRC or other Governmental Authority borrowings or (Z) which
establishes another mechanism under which the maximum potential
liability of all Persons during any calendar year as a result of a
"nuclear incident" shall not exceed the amount of insurance or other
financial protection required to be available during such calendar year
to pay all amounts which may become payable by any such Person, when and
as they become payable, in respect of such liability;
(g) there shall be no claim, liability or expense excluded (1) from the
limitation of liability established by the price-Anderson Act (as in
effect on the Closing Date) (through modification of the definitions of
"aggregate liability", "persons indemnified", "nuclear incident" or
otherwise) or (2) under commercially available insurance or other
financial protection required under Applicable Law (as in effect on the
Closing Date) (other than an exclusion of the costs of investigating and
settling claims and defending suits for damages) , except, for purposes
of sub-clauses (1) and (2) of this clause (g), to the extent excluded
pursuant to Applicable Law as in effect on the Closing Date;
(h) subject only to clause (b) above, policies of insurance, including
policies in respect of any deferred premium or similar plan, shall
provide, or shall have been amended or modified to provide, in both
timing and amount, and make available, or shall have been amended or
modified to make available, financial protection required under
Applicable Law.; and
-4-
6091.100.2896.55:1
<PAGE>
(i) neither the Owner Trustee nor the Owner Participant shall be (in the
opinion of independent counsel to the Owner participant) exposed to any
other increase in its real or potential liability with respect to a
"nuclear incident", either during or subsequent to the Lease Term; or
(B) at all times from the date of such change to, but not including, the Lease
Termination Date,
(a) a provision shall be included, with language reasonably satisfactory
to the Owner Participant, which exempts the Owner Trustee and the Owner
Participant from all real or potential liability in respect of a
"nuclear incident" so long as neither the Owner Trustee nor the Owner
Participant is in actual possession and control of Unit 1 or the
undivided Interest, unless (in the opinion of independent counsel to the
Owner Participant) (x) a court could reasonably hold that the statute
incorporating such provision is unconstitutional or (y) there shall have
occurred a subsequent change in, or new interpretation by Governmental
Authority having jurisdiction of, the exemption from liability provided
by such provision as to interests of the Owner Trustee and the Owner
Participant in Unit 1 which change or new interpretation renders
ineffective such exemption;
(b) the "aggregate liability" for a single "nuclear incident" of
"persons indemnified" shall not exceed $13 billion (assuming 101
operating nuclear facilities participating in the deferred premium or
similar plan referred to in clause (c) of paragraph (A) above and
subject to adjustment in an amount not exceeding CX) $126 million for
each increase or decrease in said number of operating nuclear facilities
-5-
6091.100.2898.55:1
<PAGE>
and (V) the aggregate of all changes in such "aggregate liability" to
reflect the effects of inflation contemplated pursuant to clause (a) of
paragraph (A) above (but without giving effect to clause (it) of the
proviso set forth in such clause) ); and
(c) the amount payable by all licensees of a single nuclear facility in
respect of such facility and with respect to any one "nuclear incident"
under any deferred premium or similar plan required by Applicable Law
shall not exceed $3(3 million (subject to adjustment as provided in
sub-clause (V) of the preceding clause (b))
For purposes of this definition, "nuclear facility" shall mean and refer to a
facility designed for producing substantial amounts of electricity and having a
rated capacity of 100,000 electrical kilowatts or more.
Additional Bonds shall mean Bonds in addition to the Series B Bonds.
Additional Equity Investment shall have the meaning specified in
Section 8(f) of the Facility Lease.
Additional Notes shall have the meaning set forth in the recitations
in the Indenture, which Additional Notes shall be issued, if at all, pursuant to
Section 3.5 of the Indenture.
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. For purposes of this definition, the term
"control" (including the correlative meanings of the terms "controlled byes 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.
-6-
6091.100.2898.55.l
<PAGE>
After Tax Basis shall mean, with respect to any payment received or
accrued or deemed to have been received or accrued 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
and computed at the highest marginal statutory tax rate) resulting from the
receipt (actual or constructive) of such two payments imposed under any
Applicable Law or by any Governmental Authority, be equal to such payment
received or accrued or deemed to have been received or accrued.
Agent and Agency Period shall have the meanings specified in Section
7.01 of the Assignment and Assumption.
ANPP Administrative committee shall mean the committee established
pursuant to Section 6.1.1 of the ANPP Participation Agreement (or any comparable
successor provision).
ANPP operating Committee shall mean the committee established
pursuant to Section 6.1.2 of the ANPP Participation Agreement (or any comparable
successor provision).
ANPP Participants shall have the meaning assigned to the word
"Participant" under the ANPP Participation Agreement.
ANPP Participation Agreement shall mean the Arizona Nuclear Power
Project Participation Agreement, dated as of August 23, 1973, among APS, Salt
River, Southern California, PNM, (pound)1 Paso, LADWP and SCPPA, as heretofore
and hereafter amended pursuant to the terms thereof.
-7-
6091.100.2898.55:1
<PAGE>
ANPP Project Agreements shall mean the ANPP Participation Agreement
and the other Project Agreements (as such term is defined in the ANPP.
Participation Agreement)
ANPP Switchyard shall mean the ANPP High Voltage Switchyard located
at the PVNGS Site, the ownership, construction, operation and maintenance of
which are governed by the ANPP High Voltage Switchyard Participation Agreement
executed as of August 20, 1981 (APS Contract No. 2252-419,00), the parties to
which are APS, PNM, Salt River, El Paso, Southern California and LADWP.
ANPP Transferee shall have the meaning specified in Section 4.01 of
the Assignment and Assumption.
Applicable Law shall mean all applicable laws, statutes, treaties,
rules, codes, ordinances, regulations, permits, certificates, orders,
interpretations, licenses and permits of any Governmental Authority and
judgments, decrees, injunctions, writs, orders or like action of any court,
arbitrator or other judicial or quasi judicial tribunal (including those
pertaining to health, safety, the environment or otherwise).
Appraisal Procedure shall mean a procedure whereby two independent
appraisers, one chosen by the Lessee and one by the Lessor, shall mutually agree
upon the value, period or amount then the subject of an appraisal. If either the
Lessor or the Lessee, as the case may be, shall determine that a value, period
or amount to be determined under the Facility Lease or any other Transaction
Document cannot promptly be established by mutual agreement, such party shall
appoint its appraiser and deliver a written notice thereof to the other party.
Such other party shall appoint its appraiser within 15 days after receipt from
the other party of the foregoing written notice. If within 20 days after
appointment of the two appraisers, as described above, the two appraisers are
unable to agree upon the value, period or amount in question, a third
-8-
6091.100.2898.55:1
<PAGE>
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 within such period, 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 nuclear electric generating plant .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 ten days after the
selection of such third appraiser. If three appraisers shall be so appointed and
the determination of one appraiser is disparate from the middle determination by
more than twice the amount, period or value by which the third 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. The fees and expenses of appraisers
incurred in connection with any Appraisal Procedure relating to any transaction
contemplated by any provision of any Transaction Document shall be divided
equally between the Lessor and the Lessee (except pursuant to Section 16 of the
Facility Lease, which shall be paid solely by the Lessee)
An shall mean Arizona public Service Company, an Arizona
corporation.
Appraiser shall mean Ebasco Business Consulting Company.
Arizona Public Utility Act Sha11 mean Chapter 2, Title 40, Arizona
Revised Statutes.
Assigned Payments shall have the meaning specified in Section 2.1(1)
of the Indenture.
-9-
6091.100.2898.55:1
<PAGE>
Assignment and Assumption Sha11 mean the Assignment, Assumption and
Further Agreement, dated as of December 15, 1986, between PNM and the Owner
Trustee.
Assignment of Beneficial Interest shall mean the Deed and Assignment
of Beneficial Interest under Title USA. Company of Arizona Trust Mo. 530, dated
as of December 15, 1986, from PNM to the Owner Trustee.
Assumption Agreement Sha11 mean the Assumption Agreement of PUM
substantially in the form of Exhibit B to the Indenture.
Assumptions shall mean the Pricing Assumptions and the Tax
Assumptions.
Atomic Energy Act shall mean the Atomic Energy Act of 1954, as
amended, and regulations from time to time issued, published or promulgated
pursuant thereto.
Authorized Officer shall mean, with respect to the Indenture
Trustee, any officer of the Indenture Trustee who shall be duly authorized by
appropriate corporate action to authenticate a Note and shall mean, with respect
to the Owner Trustee, any officer of the Owner Trustee who shall be duly
authorized by appropriate corporate action to execute any Transaction Document.
Bankruptcy Code shall mean the Bankruptcy Reform Act of 1978, as
amended, and any law with respect to bankruptcy, insolvency or reorganization
successor thereto.
Basic Lease Term shall mean the initial term of the Facility Lease,
which shall begin on the Closing Date and end on January 15, 2015, unless
earlier terminated as provided in the Facility Lease.
-10-
6091.l00.2898.55:1
<PAGE>
Basic Rent shall have the meaning set forth in section 3(a) of the
Facility Lease.
Basic Rent Payment Dates shall mean and include July 15, 1987, and
January 15 and July 15 of each year thereafter, commencing January 15, 1988, and
ending January 15, 2015, and, if the Lessee shall elect the Renewal Term, each
January 15- and July 15 of each year during the Renewal Term, commencing July
15, 2015 and ending on the last day of the Renewal Term.
Bill of Sale shall mean the Deed and Bill of Sale, dated as of
December 15, 1986, between PNM and the Owner Trustee.
Bonds shall mean all bonds, notes and other evidences of
indebtedness from time to time issued and outstanding under the Collateral Trust
Indenture, including, but without limitation, the Series B Bonds and any
Additional Bonds.
Business Day shall mean any day other than a Saturday or Sunday or
other day on which banks in Albuquerque, New Mexico, New York, New York or
Boston, Massachusetts are authorized or obligated to be closed.
Capital Improvement shall mean (a) the addition, betterment or
enlargement of any property constituting part of Unit 1 or the Common Facilities
or the replacement of any such property with other property, irrespective-of
whether (i) such replacement property constitutes an enlargement or betterment
of the property which it replaces, (ii) the cost of which addition, betterment,
enlargement or replacement is or may be capitalized or charged to maintenance or
repairs, in accordance with the Uniform System of Accounts or, (iii) in the case
of any addition, betterment or enlargement, is not included or reflected in the
plans and specifications for Unit 1 or the Common Facilities, as built, and (b)
any alteration, modification, addition or improvement to Unit 1 or the Common
Facilities, other than original, substitute or replacement parts incorporated
into Unit 1 or the Common Facilities; provided, however, that any Capital
Improvement with respect to a Common Facility shall mean only an undivided
.566667% interest in and to such Capital Improvement.
-11-
6091.100.2898.55:1
<PAGE>
Casualty Value, as of any Basic Rent Payment Date during the Basic
Lease Term, shall mean the percentage of Facility Cost set forth opposite such
Basic Rent Payment Date in Schedule 1 to the Facility Lease. Anything contained
in the Participation Agreement or the Facility Lease to the contrary
notwithstanding, Casualty Value shall be, when added to all other amounts which
the Lessee is required to pay under Section 9(c) of the Facility Lease (taking
into account any assumption of the Notes by the Lessee), under any circumstances
and in any event, in an amount at least sufficient to pay in full, as of any
Basic Rent Payment Date, the aggregate unpaid principal amount of all Notes
Outstanding at the close of business on such date, together with accrued and
unpaid interest on such Notes. Casualty Value as of any Basic Rent Payment Date
during the Renewal Term shall mean the unamortized portion as of such Basic Rent
Payment Date of the Fair Market Sales Value of the Undivided Interest,
determined by the straight-line amortization of such Fair Market Sales Value at
the commencement of such Renewal Term over the period from such commencement
date through the remaining term of the License determined pursuant to the
Appraisal Procedure undertaken in accordance with the last sentence of Section
13(a) of the Facility Lease.
Change in Tax Law shall mean any change in the State Tax Law (as
such term is defined in Section 1(a) of the Tax Indemnification Agreement), Code
or successor legislation enacted by the appropriate legislative bodies of New
York State or New York City no later than the date of adjournment of the One
Hundredth Congress, or enacted by either the Ninety-ninth or the One Hundredth
Congress (without regard to the date of presidential signature) , or if prior to
January 15, 1997 (i) there is enacted any technical correction to such enactment
or (ii) there are promulgated, issued or published any proposed, temporary, or
final Regulations resulting from such enactment (regardless of the effective
date of such technical corrections or Regulations, but only if such technical
corrections or Regulations would affect Net Economic Return)
-12-
6091.100.2898.55:1
<PAGE>
Chemical Bank shall mean Chemical Bank, a New York banking
corporation.
Chief Financial Officer shall mean the Person designated by the
Board of Directors of PNM as the chief financial officer of PNM.
Claims shall mean liabilities, obligations, losses, damages,
penalties, claims (including, without limitation, claims involving liability in
tort, strict or otherwise) , actions, suits, judgments, costs, interest,
expenses and disbursements, whether or not any of the foregoing shall be founded
or unfounded (including without limitation, legal fees and expenses and costs of
investigation) of any kind and nature whatsoever without any limitation as to
amount.
Closing shall mean the proceedings which occur on the Closing Date,
as contemplated by the Participation Agreement.
Closing Date shall mean December 17, 1986.
Code shall mean the Internal Revenue Code of 1986, as amended, or
any comparable successor law.
Collateral Trust Indenture shall mean the Collateral Trust
Indenture, dated as of December 16, 1985, among PNM, Funding Corp. and the
Collateral Trust Trustee.
Collateral Trust Indenture Supplement shall mean a supplement to the
Collateral Trust Indenture.
Collateral Trust Trustee shall mean Chemical Bank, not in its
individual capacity, but solely as Collateral Trust Trustee under the Collateral
Trust Indenture, and the successors or assigns of such Trustee.
-13-
6091.100.2898.55:1
<PAGE>
Common Facilities shall mean all PVNGS common facilities as set
forth in Item B of Exhibit B to the Bill of Sale other than excluded common
facilities as set forth in said Item B to such Exhibit B or common facilities
constituting Unit 1 Retained Assets.
Coverage Ratio shall mean the fraction (i) the denominator of which
shall be the sun (calculated as of a date no earlier than 135 days prior to the
date of calculation) of (x) the interest that will be payable during the
twelve-month period following the date of the transaction with respect to which
a calculation is required to be made on the debt (both long-term and short-term)
of the Surviving Lessee, and (y) the interest portion of payments due during the
twelve-month period following the date of such transaction on lease obligations
of the surviving Lessee with a term in excess of one year, and (ii) the
numerator of which shall be the sum of (x) the pro forma net earnings (before
taxes and excluding the allowance for funds used during construction) of the
Surviving Lessee for a twelve-month period ending no earlier than 135 days prior
to the date of such transaction, and (y) such denominator.
Cure Option shall have the meaning set forth in Section 16(e) of the
Facility Lease
Decommissioning Fund shall mean, with respect to Unit 1
Decommissioning Costs, an external reserve fund which fund shall be segregated
from the Lessee's assets, but may be within the Lessee's administrative control,
into which deposits are made at least annually in an amount equal to the
quotient of (i) Unit 1 Decommissioning Costs (less the balance of the
Decommissioning Fund and reasonably projected earnings thereon through the date
of expiry of the License) divided by (ii) the number of years remaining until
date of expiry of the License, provided that the amount in the Decommissioning
Fund, on the date of expiry of the License, shall be at least equal to Unit 1
Decommissioning Costs.
-14-
6091.100.2898.55:1
<PAGE>
Deed shall mean the Deed, dated as of December 15, 1986, from PNN to
the Owner Trustee.
Deemed Loss Event shall mean any of the following events (unless
waived by the Owner participant which waiver shall be in writing and may be
either indefinite or for a specific period): (1) 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 the
Real Property Interest or any part thereof by the Lessor (or any beneficial
interest therein by the Owner Participant) or the lease of the Undivided
Interest or the Real Property Interest to the Lessee or any of the other
transactions contemplated by the Transaction Documents (the 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 (other than non-Burdensome Regulation)
as, an "electric utility", an "electric utility company", a "public utility", a
"public utility company", a "holding company" or a "public utility holding
company" under any Applicable Law or by reason of any Governmental Action, and
the effect thereof on the Lessor or the Owner Participant would be, in the sole
judgment of either such Person, acting on advice of counsel, adverse, and the
Owner Trustee and the Owner Participant have not waived application of this
definition; 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 clause (1) ,
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, the Real Property
Interest or any part thereof or any interest therein, (ii) such contest does not
adversely affect the Undivided Interest, the Real Property Interest or any part
-15-
6091.l00.2898.55:l
<PAGE>
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 Owner Trustee, 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 and the effects thereof 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
Owner Trustee and the Owner Participant, and the Owner Participant shall have
determined that the Lessor's continued ownership of the Undivided Interest The
Real Property Interest during the pendency of such contest or such contest will
not adversely affect its or its Affiliate's business, and (v) the Lessee shall
have indemnified the Owner Trustee 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 the Lessee's contest; (2) any change in, or new
interpretation by Governmental Authority having jurisdiction of, Applicable Law,
including without limitation, the Price-Anderson Act, the Atomic Energy Act or
the regulations of the NRC, in each case as in effect on the Closing Date, as a
result of which (in the opinion of independent counsel to the owner Participant)
(i) the aggregate liability for a single "nuclear incident" of "persons
indemnified" (as each such term is defined in the Price-Anderson Act as in
effect on the Closing Date) is increased, unless the change is such that neither
the Owner Trustee nor the Owner Participant may be exposed, either during or
subsequent to the Lease Term, to any increased real or potential liability in
respect of a "nuclear incident", (ii) the "aggregate liability" for a single
"nuclear incident" of "persons indemnified" (as each term is defined in the
Price-Anderson Act as in effect on the Closing Date) exceeds the amount of
financial protection established by the NRC as a condition to the License,
unless the change is such that neither the Owner Trustee nor the Owner
Participant may be exposed, either during or subsequent to the Lease Term, to
-16-
6091.100.2898.55:1
<PAGE>
any increased real or potential liability in respect of a "nuclear incident",
(iii) the amount of financial protection required, including but not limited to
the limitation on the amount of deferred premiums for such financial protection,
is increased, unless the change is such that neither the Owner Trustee nor the
Owner participant may be exposed, either during or subsequent to the Lease Term,
to any increased real or potential liability in respect of a "nuclear incident",
or (iv) either the Owner Trustee or the Owner participant may be exposed to any
other increase in its real or potential liability in respect of a "nuclear
incident", either during or subsequent to the Lease Term; provided, however,
that no such change or new interpretation shall constitute a Deemed Loss Event
if such change or new interpretation constitutes an Acceptable Change; (3) any
change in, or new interpretation by Government Authority having jurisdiction of,
Applicable Law as a result of which the owner Trustee (but not the Trust
Estate), or the owner participant shall become liable in any capacity, in
respect of any portion of the Termination obligation or, during the Lease Term,
any other liability or obligation imposed as of the date hereof on licensees of
the NRC; (4) any change in, or new interpretation by Governmental Authority
having jurisdiction of, Applicable Law or any Governmental Action the effect of
which is to make the transactions contemplated by the Transaction Documents
unauthorized, illegal or otherwise contrary to Applicable Law; (5) any change
in, or new interpretation by Governmental Authority having jurisdiction of, the
License and the NRC Order (each as in effect on the Closing Date) constituting
an assertion to the effect that the exercise by the owner Trustee or the Owner
Participant of any right (irrespective of the event giving rise to such right)
under any Transaction Document would constitute impermissible control over Unit
1 or the licensees of Unit 1, other than an assertion that affects such rights
in a manner consistent with both Section 184 of the Atomic Energy Act and the
NRC's regulations thereunder (including, without limitation, 10 CFR S50.8l, as
now and hereafter in effect) (6) any expiration, revocation, suspension,
amendment or interpretation by any Governmental Authority of the NRC order, the
License or the licensing of the Lessee by the NRC or any other Governmental
-17-
6O9l.l00.2898.55:l
<PAGE>
Action or change in, or new interpretation by Governmental Authority having
jurisdiction of, Applicable Law as a result of which either the Owner Trustee or
the owner Participant shall be required to become a licensee of the prior to the
Lease Termination Date; (7) any policy of public liability insurance with
respect to PVNGS or Unit 1 shall be suspended or terminated for any reason
whatsoever or shall be amended or supplemented in a manner which expose the
Owner Trustee or the Owner Participant, either during or subsequent to the Lease
Term; to any increased real or potential liability in respect of a "nuclear
incident" (as defined in the Price-Anderson Act) and such policy of insurance
shall not be immediately replaced by insurance effective immediately upon such
suspension, termination, amendment or supplementation which, in the reasonable
opinion Participant, is at least as protective of it (in all respects reasonably
deemed by it to be material) as the policy of insurance so terminated,
suspended, amended or supplemented, unless the "aggregate liability" for a
"nuclear incident" of "persons indemnified" (as each term is defined in the
Atomic Energy Act of 1954, as amended) is reduced by an amount equal to the
amount of liability insurance so terminated, suspended, amended or supplemented
and, in the reasonable opinion of the Owner Participant, it may not otherwise be
exposed, either during or subsequent to the Lease Term, to any increased real or
potential liability in respect of a "nuclear incident" as a consequence of such
suspension, termination, amendment or supplementation; (S) with respect to
PVNGS, the NRC shall have issued within a five year period three or more
Modification Orders provided that such Modification Orders are issued (x) in
connection with violations constituting "Severity Level I" or "Severity Level
II" violations within the activity area of "Reactor Operations", as such terms
are used in Supplement I to Appendix C to 10 CFR, Part 2 as in effect on the
date hereof (or, if such supplement is amended or superseded to change such
categories of violations or areas, violations or areas falling within comparable
categories) or (y) in connection with willful or flagrant violations in any
"activity area", repeated poor performance in a particular "activity area" or
-18-
6091.100.2898.55:1
<PAGE>
serious breakdowns in management control; and (9) the cessation of operation of
Unit 1 or as a result of either (x) the occurrence of an Extraordinary Nuclear
Occurrence or an Incipient Extraordinary Nuclear occurrence at PVNGS Unit 2 or
PVNGS Unit 3 or (y) a Nuclear Incident at PVNGS Unit 2 or PVNGS Unit 3 and the
continuation, in the case of this clause (y) , of such cessation for the Minimum
Period.
Default shall mean an event or condition which, with the giving of
notice or lapse of tine, or both, would constitute 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 in interest of
Holders of Notes, directing the Indenture Trustee to take or refrain from taking
the action specified in such instrument.
Early Termination Date shall have the meaning specified in Section
14(6) of the Facility Lease.
Early Termination notice shall have the meaning specified in section
14(d) of the Facility Lease.
El Paso shall mean El Paso Electric Company, a Texas corporation
ERISA shall mean the Employee Retirement Income security Act of
1974, as amended.
Estimated Transaction Expenses shall have the meaning set forth in
Section 5(a) of the Participation Agreement.
Event of Default shall have the meaning set forth in Section 15 of
the Facility Lease.
Event of Loss shall mean any of the following events: (a) a Final
Shutdown, (b) a Requisition of Title, (c) a Requisition of Use which can
reasonably be expected to exceed, or for a stated period which ends on or after,
-19-
6091.100.2898.55:1
<PAGE>
the penultimate day of the Lease Term, (6) any degradation of the rated capacity
of Unit 1 to below, or the inability of Unit 1 to produce electricity at a level
above, 530 megawatts electric for the minimum Period (for any reason other than
as a result of damage to or destruction of Unit 1, Governmental Action or an
event referred to in clause (iii) (x) or (iii) (y) of the definition of "Final
Shutdown")
Excepted Payments shall mean (i) all payments of supplemental Rent,
other than payments by the Lessee (x) of Casualty Value, Termination value or
special casualty value or in connection with the exercise of the Cure Option or
(y) of indemnity payments to which either the Loan Participant or any Indemnitee
other than the Owner Trustee or the Owner Participant or any of their respective
Affiliates, (or the respective successors, assigns, agents, officers, directors
or employees of the Owner Trustee or the Owner Participant is entitled, (ii) any
amounts payable under any Transaction Document to reimburse the Lessor or the
Owner Participant, or any of their respective Affiliates, (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,
(iii) any amount payable to the Owner Participant by any Transferee as the
purchase price of the Owner Participant's interest in Trust Estate, (iv) so long
as no Indenture Default or Indenture Event of Default shall have occurred and be
continuing, all payments of Basic Rent in excess of amounts then due and owing
in respect of the principal of and premium, if any, and interest on all Notes
Outstanding, (v) any insurance proceeds with respect to an Event of Loss in
excess of amounts then due and owing in respect of the principal of and premium,
if any, and interest on all Notes Outstanding, (vi) any insurance proceeds (or
payments with respect to risks self-insured) under liability policies and (vii)
any payments in respect of interest to the extent attributable to payments
referred to in clauses (i) through (vi) above
-20-
6091.100.2898.55:1
<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 mean liabilities, obligations, losses, damages, taxes
(other than taxes on income) claims, actions, suits, costs, interest, expenses
and disbursements (including legal fees and expenses) of any kind and nature
whatsoever.
Extension Letter shall mean the Extension Letter, to be dated the
Closing Date and addressed to the Collateral Trust Trustee by the parties to the
Participation Agreement.
Extraordinary Nuclear Occurrence shall have its meaning as defined
in Section 11 of the Atomic Energy Act of 1954, as amended to the Closing Date.
Facility Cost shall mean the Purchase Price plus the sum of (x) all
supplemental Financing Amounts, and (y) all Additional Equity Investment
amounts.
Facility Lease shall mean the Facility Lease, dated as of December
15, 1986, between PNM, as Lessee, and the Owner Trustee, as Lessor.
Fair Market Rental Value or Fair Market Sales Value of any property
or service shall mean the value of such property or service for lease or sale
determined on the basis of an arm's-length transaction for cash between an
informed and willing lessee or purchaser (under no compulsion to lease or
purchase) and an informed and willing lessor or seller (under no compulsion to
lease or sell) , and shall take into account tile Lessor's rights and
obligations under the Assignment and Assumption and the Assignment of Beneficial
Interest and rights under the Deed and the Bill of Sale, but shall be without
regard to any rights of the Lessee (including any renewal options) under the
Lease. Except pursuant to Section 16 of the Facility Lease (other than Section
16(a) (V) (D) thereof) and Section 6.01 of the Assignment and Assumption, Fair
-21-
6091.100.2898.55:1
<PAGE>
Market Rental Value and Fair Market Sales value of the Undivided Interest and
the Real Property Interest shall be determined on the assumption that (i) Unit 1
has been maintained in accordance with, and the Lessee has complied with, the
requirements of the Facility Lease, the other Transaction Documents and the ANPP
Participation Agreement, (ii) the Lessee shall not bear the obligation imposed
by section 10(b) (3) (xi) of the Participation Agreement in respect of
Transferees (as defined in the ANPP Participation Agreement) of the Lessor, and
(iii) the Lessee or PNM, as possessor of the undivided Interest and the Real
Property Interest, is otherwise in compliance with the requirements of all
Transaction Documents. Fair Market Rental value shall be determined on the
assumption that rent will be payable in equal semi-annual installments in
arrears.
Federal Power Act shall mean the Federal Power Act, as amended.
Federal Securities shall have the meaning set forth in Section
2.3(c) of the Indenture
FERC shall mean the Federal Energy Regulatory Commission of the
United States of America or any successor agency.
FERC order shall mean the Order Disclaiming Jurisdiction issued by
FERC on December 5, 1985 (Docket No. EL86-5-000).
Final Prospectus shall mean the Prospectus included in the
Registration Statement relating to the Series B Bonds, including documents
incorporated into said Prospectus by reference and any applicable Prospectus
Supplement.
Final Shutdown shall mean the earlier to occur of (i) the expiration
or revocation of the License, or any portion thereof such that the operation of
Unit 1 or the possession by the Lessee of the Undivided Interest and the Real
Property Interest are no longer permitted, (ii) the taking of any Governmental
Action or the adoption or making of any interpretations, directives or requests
-22-
6091.100.2898.55:1
<PAGE>
by any Governmental Authority (including, without limitation, the staff thereof)
or the concurrence by any Governmental Authority in the voluntary action of the
operator thereof, in each such case whether formal or informal, by reason of
which Unit 1 shall cease to operate, or shall be unable under Applicable Law to
resume operation, at a capacity level of a least 630 megawatts electric for the
Minimum period, (iii) the cessation of operation of Unit I as a result of either
(x) the occurrence of an Nuclear Occurrence or an Incipient Extraordinary
nuclear Occurrence relating to Unit 1 or (y) a Nuclear Incident relating to Unit
1 and, in the case of this clause (y) the continuation of such cessation for the
Minimum Period, (iv) damage to Unit 1 and the failure of the Lessee, or of the
Lessee and one or more other ANPP Participants, to agree within three years of
the occurrence of such damage to restore and reconstruct Unit I, (v) damage to
Unit 1, without restoration or reconstruction having been completed by the
expiration of the Minimum Period, such that Unit 1 has a rated capacity of at
least 630 megawatts electric, or (vi) destruction of Unit 1. For purposes of
this definition, Final Shutdown pursuant to the foregoing clause (iv) will be
deemed to have occurred upon the earlier of (x) the written declaration of the
Lessee of its intent not to agree and (y) the expiration of the 3-year period
referred to in said clause (iv) without written agreement. Final Shutdown
pursuant to the foregoing clause (ii), (iii) (y) or (v) will be deemed to have
occurred on the last day of the Minimum Period.
Financing Documents shall mean the collateral Trust Indenture, the
Underwriting Agreement, the Series B Supplemental Indenture and the supplemental
Indenture of Pledge.
Fixed Rate Motes shall mean the non-recourse promissory notes,
substantially in the forms of Exhibits A-1, A-2 and A-3 to the Indenture, to be
issued by the Owner Trustee and authenticated by the Indenture Trustee on the
Closing Date to finance a portion of the Purchase Price.
-23-
6091.100.2898.55:1
<PAGE>
FNB shall mean the Owner Trustee in its individual capacity, and
successors and assigns.
Form U-70 shall mean the certificate to be 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 First PV Funding Corporation, a Delaware
corporation.
Generating Unit shall mean Unit 1 or any of the other Generating
Units (as such term is defined in the ANPP Participation Agreement) constituting
PVNGS.
Generation Entitlement Share shall have the meaning assigned thereto
in the ANPP Participation Agreement and (i) when used in reference to Unit 1,
shall mean the Generation Entitlement Share of PNM as the ANPP Participant with
respect to its interest in Unit 1, (ii) when used in reference to the Undivided
Interest, shall mean that portion of the Generation Entitlement Share
attributable to the Undivided Interest and (iii) when used in Section 19 of the
Facility Lease, shall refer to the Generation Entitlement Share of the Lessee in
all Generating Units at PVNGS.
Governmental Action shall mean all authorizations, consents,
approvals, waivers, exceptions, variances, orders, licenses, exemptions,
publications, filings, notices to and declarations of or with any Governmental
Authority (other than routine reporting requirements the failure to comply with
which will not affect the validity or enforceability of any of the Transaction
Documents or have a material adverse effect on the transactions contemplated by
any Transaction Document or any Financing Document) or any other action in
respect of any Governmental Authority and shall include, without limitation, all
siting, environmental and operating permits and licenses which are required for
the use and operation of Unit 1, including the Undivided Interest and the Real
Property Interest.
-24-
6091.100.2898.55:1
<PAGE>
Governmental Authority Sha11 mean a n y Federal, state, county,
municipal, foreign, international, regional or other governmental authority,
agency, board, body, instrumentality or court.
Holders shall mean the holders of the Notes.
Holding company Act shall mean the public Utility Holding Company
Act of 1935, as amended.
Incipient Extraordinary Nuclear Occurrence shall mean an event
causing a discharge or dispersal of nuclear source, special nuclear or nuclear
by-product material from its intended place of confinement in amounts off site
or on site or causing a radiation level off site or on site which an independent
nuclear consultant agreed to by the Lessee and the Owner Participant (or,
failing prompt agreement, appointed by the American Arbitration Society)
determines to be substantial and which such consultant determines has resulted
in substantial injury to persons on or off the PVNGS Site or substantial damage
to property off the PVNGS Site.
Indemnitee shall mean the Owner Participant, the Owner Trustee, FNB,
the Owner Participant, the stockholder of Funding Corp. and its officers and
directors, Chemical Bank, the Indenture Trustee, each Holder of a Note from time
to time Outstanding, the collateral Trust Trustee, the Trust, the Trust Estate,
the Lease Indenture Estate, the indenture estate under the Collateral Trust
Indenture, any Affiliate of any of the foregoing and the respective successors,
assigns, agents, officers, directors or employees of the foregoing, excluding,
however, any ANPP Participant other than the owner Trustee or the Owner
Participant.
Indenture shall mean the Trust Indenture, Mortgage, Security
Agreement and Assignment of Rents, dated as of December 15, 1986, between the
Owner Trustee and the Indenture Trustee.
-25-
6O9l.100.289855:1
<PAGE>
Indenture Default shall mean an event or condition 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 Chemical Bank, a New York banking
corporation, not in its individual capacity, but solely as Indenture Trustee
under the Indenture and each successor trustee and co-trustee thereunder.
Indenture Trustee's counsel Sha11 mean Willkie Farr & Gallagher, One
Citicorp Center, 153 East 53rd Street, New York, New York 10022.
Indenture Trustee's Liens shall mean Liens against the Lease
Indenture Estate which result from acts of, or any failure to act by, or as a
result of claims against, the Indenture Trustee, in its individual capacity,
unrelated to the transactions contemplated by the Transaction Documents.
Indenture Trustee's office shall mean the office of the Indenture
Trustee located at 55 Water Street, New York, New York 10041, 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.
Investment shall have the meaning set forth in Section 3 of the
Participation Agreement.
Investment Company Act shall mean the Investment Company Act of
1S40, as amended.
IRS shall mean the Internal Revenue Service of the united States
Department of the Treasury or any successor agency.
-26-
6091.100.2898.55:1
<PAGE>
Kidder Peabody shall mean Bidder, Peabody & Co. Incorporated.
LADWP shall mean the Department of Water and Power of The City of
Los Angeles, a department organized and existing under the charter of the City
of Los Angeles, a municipal corporation of the State of California.
Lease Indenture Estate shall have the meaning set forth in Section
2.1 of the Indenture.
Lease Term shall mean the aggregate of the Basic Lease Term and the
Renewal Term, if any. Lease Termination Date shall mean the last day of the
Lease Term (whether occurring by reason of a termination or expiration of the
Lease Term).
Lessee shall mean public Service Company of New Mexico, a New
Mexico corporation, and its successors and assigns, as lessee under the Facility
Lease and as party to the other Transaction Documents and Financing Documents to
which it is a signatory
Lessee's FUC Counsel shall mean Newman & Holtzinger, P.C., 1615 L
street, Washington, D. C. 20036.
Lessee's General Counsel shall mean Keleher & MeLeod, P.A., P. O.
Drawer AA, Albuquerque, New Mexico 87103.
Lessee's Special Arizona Counsel shall mean Snell & Wilmer, 3100
Valley Bank Center, Phoenix, Arizona 85073.
Lessee's Special Counsel shall mean Mudge Rose Guthrie Alexander &
Ferdon, 180 Maiden Lane, New York, New York 10038.
-27-
6091.l00.2898.55:l
<PAGE>
Lessor shall mean the Owner Trustee, as lessor under the Facility
Lease, and its successors and assigns.
Lessor's Interest shall have the meaning set forth in Section 8(c)
(3) of the Participation Agreement.
Lessor's Liens or Owner Trustee's Liens shall mean Liens against the
Trust Estate or the Lease Indenture Estate (other than Permitted Liens) for
which the Lessee is not responsible and which result from acts of, or any
failure to act by, or as a result of claims against, FNB or the Lessor,
unrelated to the ownership of the Undivided Interest or the Real Property
Interest, the administration or the Trust Estate or the transactions
contemplated by the Transaction Documents or the Financing Documents.
License shall mean NRC Facility operating License No. NPF-41, as the
same may be amended, modified, extended, renewed or superseded from time to
time.
License Expiration Date shall mean the date of expiration of the
License.
Lien shall mean any mortgage, pledge, security interest,
encumbrance, lien, easement; servitude 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(a) of the
Participation Agreement.
Loan Participant shall mean Funding Corp.
-28-
6091.100.2898.55:1
<PAGE>
Loan Participant's Counsel shall mean Nudge Rose Guthrie Alexander &
Ferdon, 180 Maiden Lane, New York, New York 10038.
Majority in Interest of Holders of Notes shall mean Holders of a
majority in principal amount of all Notes Outstanding under the Indenture at the
time of any such determination.
Material Project Agreements 5ha11 mean (i) Nuclear Fuel Contract
between APS and Combustion Engineering, Inc. (CE), dated as of August 20, 1973,
(ii) Nuclear Steam Supply Contract between APS and CE, dated as of August 20,
1973, (iii) Turbine Generator Contract between APS and General Electric Company,
dated as of March 21, 1974, (iv) Uranium Enrichment Services Contract between
the United States of America (USA) and APS, dated November 15, 1984, and the
Associated Supplemental Agreement of Settlement between USA and APS, dated
November 15, 1984, (v) Reload Nuclear Fuel Contract between APS and Combustion
Engineering, Inc., dated November 5, 1986, (vi) Agreement for the Sale and
Purchase of Waste Water Effluent between the City of Tolleson, APS and Salt
River, dated June 12, 1981, (vii) Agreement for Construction of Arizona Nuclear
Power Project between Bechtel Power Corporation (Bechtel) and APS, dated January
15, 1973, (viii) Agreement for Engineering and Procurement Services between APS
and Bechtel, dated January 15, 1973, (ix) Option and Purchase of Effluent dated
April 23, 1973, among the Cities of Phoenix, Glendale, Mesa, Tempe and
Scottsdale, the Town of Youngtown, APS and Salt River, (x) Agreement for
Conversion Services between Allied Chemical Corporation and APS, dated November
17, 1975, as amended, (xi) Uranium Concentrate Sales Agreement between Energy
Fuels Exploration Company and APS, dated as of December 1, 1982, (xii) Uranium
Concentrate Sales Agreement between Energy Fuels Exploration and APS, dated as
of October 23, 1931, as amended, (xiii) Agreement for Sale of Uranium
Concentrates between Pathfinder Mines Corporation and APS, dated December 1,
1983, (xiv) Contract for Disposal of Spent Nuclear Fuel and/or High Level
Radioactive Waste between USA and APS, dated July 21, 1984, and (xv) the ANPP
Participation Agreement.
-29-
6091.100.2898.55:1
<PAGE>
Maximum Option Period shall mean the period, in no event ending
after January 15, 2023, determined as provided in Section 13(a) of the Facility
Lease as of the date of expiration of the Basic Lease Term1 (i) at the end: of
which the residual value of the Undivided Interest (without regard to inflation
or deflation from the Closing Date and without regard to the obligation of the
Lessee to pay decommissioning costs pursuant to Section 10(b) (3) (xi) of the
Participation Agreement, but taking into consideration the existence and effect
of the Assignment and Assumption, the ANPP Participation Agreement and the
License) shall be equal to at least 20% of Facility Cost, (ii) which, wen added
to the Basic Lease Term, does not exceed 80% of the economic useful life of the
Undivided Interest from the Closing Date and (iii) at the end of which, taking
into consideration the existence and effect of the Assignment and Assumption,
the ANPP Participation Agreement and the License, the use of the Undivided
Interest by any User (in a transaction pursuant to which the Owner Participant
could realize the amount referred to in clause (i) above) is feasible from an
engineering and economic point of view and is commercially reasonable. Unless
the period, as computed in accordance with the preceding sentence, shall end on
a January 15 or July 15, the final date of the Maximum Option Period shall be
the final January 15 or July 15 in the period, as so computed. In no event shall
the Maximum Option Period end after the License Expiration Date.
Minimum Net Worth means a Net Worth equal to the greater of (x)
$700,000,000 and (y) (1) $950,000,000 less (2) with respect to each Generating
Unit as to which PNM shall have entered into one or more transactions
constituting sale and leaseback transactions under the ANPP Participation
Agreement (including, but without limitation, the transaction contemplated by
the Participation Agreement), (A) $50,000,000 (in the case of Unit 1) and
$100,000,000 (in the case of each other Generating Unit) times (B) the aggregate
-30-
6091.100.2898.55:1
<PAGE>
percentage of the Lessee's undivided interest in such PVNGS unit subject to such
transactions.
Minimum Period shall mean the shorter of (a) the shorter of (1) an
indefinite period unless such period can reasonably be expected to be shorter
than the applicable Benchmark period and (2) an actual period in excess of the
applicable Benchmark Period and (b) a period beginning on the date of
determination through and including the penultimate day of the Lease Term. The
Benchmark Period shall be a period equal to any 60 consecutive calendar months
except that a period of 36 consecutive calendar months shall be applicable with
respect to events specified in clause (iii) (y) of the definition of "Final
Shutdown" or clause (9) (y) of the definition or "Deemed Loss Event". The period
specified in the foregoing clause (a) (1) shall be determined by an independent
nuclear consultant agreed to by the Lessee and the Owner Participant, or,
failing prompt agreement upon such consultant, appointed by the American
Arbitration Society (or comparable or successor organization).
Modification order shall mean: (i) an order modifying the License or
the NRC 2icense for either PVNGS Unit 2 or PVNGS Unit 3 effective immediately
upon issuance thereof; (ii) an order modifying the License or the NRC license
for either PVNGS Unit 2 or PVNGS Unit 3 effective upon the expiration of the
time period for a demand for a hearing if such hearing is not demanded within
such period or if the penultimate day of the Lease Term occurs prior to such
demand; or (iii) an order modifying the License or the NRC license for either
PVNGS Unit 2 or FVNGS Unit 3 effective following a hearing (and not subject to
further appeal) or subject to a hearing (or to further appeal) on the
penultimate day of the Lease Term.
Mortgage Release shall mean the Indentures of partial Release, to be
dated the Closing Date, under and with respect to the Existing Mortgage.
-31-
6091.100.2898.55:1
<PAGE>
Net Economic Return shall mean the after-tax yield and after-tax
cash flows (after all Federal, state and local taxes) and the return on
investment originally expected by the Owner Participant with respect to the
undivided Interest, utilizing the Pricing Assumptions and the initial
computation of Basic Rent, Casualty values, Special Casualty values and
Termination values derived from such Pricing Assumptions.
Net worth means the excess of assets over liabilities determined by
the Lessee's auditors on the basis of generally accepted accounting principles.
New Mexico Order shall mean the order issued by the NMPSC on
November 27, 1985, as amended by Order Adopting Errata Notice issued on November
30,1 983, in Case No. 1995, approving, among other things, the terms of the
Facility Lease and the execution and delivery of the Facility Lease by PNM.
New Mexico Public utility Act shall mean the New Mexico Public
utility Act, as amended.
NMPSC shall mean the New Mexico Public Service Commission
established pursuant to section 62-5-1 of New Mexico Statutes Annotated, 1973.
Non-Burdensome Regulation sha11 mean (i) regulation to which the
owner Participant or the Owner Trustee is otherwise subject by reason of its
lease financing or other activities unrelated to the transactions contemplated
by the Transaction Documents, (ii) ministerial regulatory requirements which do
not impose limitations or regulatory requirements on the business or activities
of the Owner Participant and which are deemed, in the reasonable discretion of
the Owner participant, not to be burdensome, (iii) regulation resulting from any
possession of the undivided Interest on or after the Lease Termination Date or
(iv) regulation of the Owner Trustee which would be terminated by the
appointment of a successor Owner Trustee or a Co-Owner Trustee pursuant to the
terms of the Trust Agreement.
-32-
6091.l00.2898..55:l
<PAGE>
Nonseverable, when used with respect to any Capital
Improvement, shall mean any Capital Improvement which is not a Severable Capital
Improvement.
Noteholder shall mean any Holder from time to time of a Note
Outstanding under the Indenture.
Notes shall mean the Fixed Rate Notes and any Additional Notes.
Notice of Closing shall have the meaning set forth in Section
5(a) of the Participation Agreement.
NRC shall mean the Nuclear Regulatory Commission of the United
States of America or any successor agency.
NRC order shall mean the Order of the NRC in the matter of
Arizona Public Service Company, et al. (Palo Verde Nuclear Generating Station,
Unit 1); Application In Respect Of A sale And Leaseback Financing Transaction By
Public Service Company of New Mexico (Docket No. STN 50-52S) , December 12,
1985.
Nuclear Incident shall mean any occurrence causing bodily
injury, sickness , disease, or death, or loss of or damage to, property, or the
loss of use of property, arising out of or resulting from the radioactive,
toxic, explosive or other hazardous properties of nuclear source, special
nuclear or nuclear by-product material.
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.
Operating Agent shall have the meaning assigned thereto in the
ANPP Participation Agreement.
-33-
6091.100.2898.55:1
<PAGE>
Original of the Facility Lease shall mean the fully executed
counterpart of the Facility Lease, marked "This Counterpart the original
"Counterpart", pursuant to Section 22(e) of the Facility Lease and containing
the receipt of the Indenture Trustee.
Outstanding, when used with respect to Notes, shall mean, as
of the date of determination, 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 the
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.
Overdue Interest Rate shall mean the weighted average rate per
annum of interest payable with respect to overdue payments of principal on the
Notes Outstanding, computed as set forth in such Notes.
Owner Participant shall mean Chase Manhattan Realty Leasing
Corporation, a New York corporation, and the successors and assigns of such
Person in accordance with the Trust Agreement and the Participation Agreement.
-34-
6091.100.2898.55:1
<PAGE>
Owner Participant's Liens shall mean Liens against the Trust Estate
or the Lease Indenture Estate (other than Permitted Liens) for which the Lessee
is not responsible and 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 or the Financing
Documents.
Owner Participant's special Arizona Counsel shall mean Meyer,
Hendricks, Victor, Osborne & Maledon, 2700 North Third Street, Suite 4000,
Phoenix, Arizona 85004.
Owner Participant's Special NRC Counsel shall mean Shaw, Pittman,
Potts & Trowbridge, 1800 M Street, NW, Washington, C. C. 20036.
Owner Participant's Special New Mexico Counsel shall mean Rodey,
Dickason, Sloan, Akin & Robb, P.A., 20 First Plaza, Suite 700, Albuquerque, New
Mexico 87103.
Owner Participant's special Counsel shall mean Milbank, Tweed,
Hadley & McCloy, One Chase Manhattan Plaza, New York, New York, 10005.
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 trustee, separate
trustee and co-trustee thereunder.
Owner Trustee's Counsel shall mean Csaplar & Bok, 1 Winthrop Square,
Boston, Massachusetts 02110.
Participation Agreement sha11 mean the Participation Agreement,
dated as of December 15, 1986, among the Owner Trustee, the Indenture Trustee,
Funding Corp., the Owner Participant and PNM.
-35-
6091.100.2898.55:1
<PAGE>
Penalty Rate shall mean the greater of 2% per annum in excess
of the Prime Rate and 2% per annum in excess of the weighted average rate of
interest on the Bonds.
Permitted Liens shall mean (i) the respective rights and
interests of the Lessee, the Owner Participant, the Lessor, the Loan Participant
and the Indenture Trustee, as provided in the Transaction Documents; (ii) the
rights of any sublessee or assignee under a sublease or an assignment permitted
by the terms of the Facility Lease; (iii) the Lien of the Existing Mortgage on
the leasehold estate under the Facility Lease; (iv) Liens for taxes either not
yet due or which are being contested in good faith and by appropriate
proceedings diligently conducted, so long as such proceedings shall not (x)
involve any danger of the sale, forfeiture or loss of the Undivided Interest or
the Real Property Interest or any part thereof or interest therein of the Lessor
or the Owner Participant, (y) interfere with the use, possession or disposition
of the Undivided Interest or the Real Property Interest, or any part thereof or
interest therein, or (z) impair payment of Rent; (v) inchoate materialmen's,
mechanics', workmens, repairmen's, employees', carriers', warehousemen's, or
other like Liens arising in the ordinary course of business for PVNGS, and not
delinquent; (vi) Lessor's Liens, Owner Participant's Liens and Indenture
Trustee's Liens; ('iii) choate Liens that have been bonded for the full amount
in dispute or as to which other satisfactory security arrangements shall have
been made and which are being contested diligently by the appropriate party in
good faith and by appropriate proceedings so long as such proceedings shall not
violate clause (x) , (y) or (z) of clause (iv) above; (viii) choate Liens of any
of the types described in clause (v) above that have been bonded for the full
amount in dispute or as to which other satisfactory security arrangements shall
have been made and which arise out of judgments or awards and with respect to
which (A) an appeal or proceeding for review is being prosecuted in good faith
and for the payment of which adequate reserves shall have been provided as
-36-
6091.100.2898.55:1
<PAGE>
required by generally accepted accounting principles and (B) there shall have
been secured a stay of execution pending such appeal or proceeding for review,
so long as such proceedings shall not violate clause (x), (y) or (z) of clause
(iv) above; (ix) the rights and interests of the Lessee under the Assignment and
Assumption; (x) the rights of the NRC under the License; (xi) the rights of the
ANPP Participants (other than (i) the Lessee and (ii) any Person who' shall
become an ANPP Participant in respect of the Undivided Interest and the Real
Property Interest) under the ANPP Participation Agreement or any other ANPP
Project Agreement; and (xii) Liens on the undivided ownership interests in Unit
1 of the ANPP Participants and other Persons (other than the Lessee).
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.
PNM shall mean Public Service Company of Mew Mexico, a New Mexico
corporation.
Price-Anderson Act shall mean the Price-Anderson Act, Pub. L. No.
85-256, 71 Stat. 576 (1957), as amended to the Closing Date.
Pricing Assumptions shall mean the pricing assumptions set forth in
schedule 2 to the Participation Agreement.
Prime Rate shall mean the rate of interest per annum equal to the
prime commercial rate of The Chase Manhattan Bank (National Association) as
announced from time to time at its principal office in New York, New York, in
effect from time to time.
Project Insurance shall have the meaning assigned thereto in the
ANPP Participation Agreement.
-37-
6091.100.2898.55:1
<PAGE>
Project Manager shall have the meaning assigned thereto in the
ANPP Participation Agreement.
Purchase Documents shall mean the Bill of Sale, the Deed and
the Assignment of Beneficial Interest and such other documents as the Owner
participant, the owner Trustee, the Indenture Trustee, the Loan Participant or
their respective counsel shall deem desirable to convey good and marketable
title to the undivided Interest and the Real Property Interest to the Trust
Purchase Price shall have the meaning set forth in section
4(a) of the Participation Agreement.
PVNGS shall mean the Arizona Nuclear Power Project, as that
term is defined in the ANPP participation Agreement
PVNGS site shall mean the interest in the Arizona land trust
and the real property described in Exhibit A to the Bill of Sale.
Real Estate Investment shall have the meaning set forth
in Section 3 of the Participation Agreement.
Real Property Interest shall mean the right, title and
interest of the Owner Trustee acquired pursuant to the Deed and the Assignment
of Beneficial Interest
Reasonable Basis for a position shall exist if tax counsel may
properly advise reporting such position on a tax return in accordance with
Formal Opinion 85-352 issued by the standing Committee on Ethics and
Professional Responsibility of the American Bar Association
Registration Statement shall mean the registration statements
on Form S-3 (File Nos. 33-2031 and 33-8650) , as amended, and any other similar
registration statement, including all exhibits and all documents incorporated in
any such registration statement by reference, filed with the SEC under the
Securities Act in connection with the offer, issue and sale of the Series B
Bonds.
-38-
6091.100.2898.55:1
<PAGE>
Regulations shall mean the income tax regulations issued, published
or promulgated under the Code.
Renewal Term shall have the meaning set forth in Section 12 of the
Facility Lease.
Rent shall mean Basic Rent and supplemental Rent.
Requisition of Title shall mean any circumstance or event in
consequence of which Unit 1 or the Undivided Interest shall be condemned or
seized or title thereto shall be requisitioned or taken by any Governmental
Authority under power of eminent domain or otherwise and all administrative or
judicial appeals opposing such condemnation, seizure or taking shall have been
exhausted or the period for such appeal shall have expired.
Requisition of Use shall mean any circumstance or event in
consequence to which the use of Unit 1 or the Undivided Interest shall be
requisitioned or taken by any Governmental Authority under power of eminent
domain or otherwise, other than a Requisition of Title.
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, or 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.
Retained Assets shall mean (i) the Lessee's ownership interest in
PVNGS other than the Undivided Interest, the related Generation Entitlement
Share and the Real Property Interest, (ii) Severable Capital Improvements title
to the undivided interest in which is retained by the Lessee in accordance with
-39-
6O9l.l00.2898.55:l
<PAGE>
Section 8(e) of the Facility Lease, and (iii) any additional interest in and to
PVNGS (other than the Undivided Interest, the related Generation Entitlement
Share and the Real Property Interest) to which the Lessee becomes entitled in
consequence of Sections 16.2 or 23.5 of the ANPP Participation Agreement (except
as otherwise provided in Section 5(a) or 19 of the Facility Lease).
Sale Proceeds shall mean, with respect to any sale of the Undivided
Interest and the Real Property Interest by the Lessor to any Person other than
the Lessee, the gross proceeds of such sale payable in cash, less all costs and
expenses whatsoever incurred by the Lessor and the Owner Participant in
connection therewith.
Salt River shall mean Salt River Project Agricultural Improvement
and Power District, an Arizona agricultural improvement district.
SCPPA shall mean Southern California Public Power Authority, a
California joint powers agency (doing business in Arizona as Southern California
Public Power Authority Association).
SEC shall mean the Securities and Exchange Commission of the United
States of America or any successor agency.
Section 6(c) Application shall mean Funding Corp.'s Application for
an order under Section 6(0). of the Investment Company Act of 1940 Exempting
First PV Funding Corporation from All Provisions of such Act, as filed with the
SEC on September 20, 1985, as amended by an Amendment No. 1 thereto dated
November 8, 1985 and Amendment No. 2 thereto dated November 25, 1985.
Securities Act shall mean the Securities Act of 1933, as amended.
-40-
6091.100.2898.55.1
<PAGE>
Securities Exchange Act shall mean the Securities Exchange Act of
1934, as amended
Series B Bonds shall mean the Lease Obligation Bonds, Series 19863
of Funding Corp., issued, authenticated and delivered pursuant to the
Underwriting Agreement and the Collateral Trust Indenture, as supplemented and
amended by the Series B Supplemental Indenture.
Series B Supplemental Indenture shall mean the Collateral Trust
Indenture Supplement dated as of November 18, 1986, providing, among other
things, for the issuance, authentication and delivery of Funding Corp.'s Lease
Obligation Bonds, Series 1986B.
Severable, when used with respect to any Capital Improvement,. shall
mean any Capital Improvement which can be removed from Unit 1 or the Common
Facilities without materially damaging Unit 1 or the Common Facilities or
materially diminishing or impairing the value, utility or condition which Unit 1
or the Common Facilities would have had if the applicable capital Improvement
had not been made.
Share shall mean a percentage equal to the percentage of Undivided
Interest in Unit 1 or the Common Facilities, as the context so requires.
Southern California shall mean Southern California Edison Company, a
California corporation.
Special Casualty value shall mean (i) during the Basic Lease Term,
the percentage of Facility Cost set forth opposite such date in Schedule 2 to
the Facility Lease and (ii) during the Renewal Term, the amount determined by
amortizing ratably the Fair Market Sales 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 License determined pursuant to Section 13(a) of the
Facility Lease. Anything contained in the Facility Lease to the contrary
notwithstanding, Special Casualty Value shall be, when added to all other
-41-
6091.100.2898.55:1
<PAGE>
amounts which the Lessee is required to pay under Section 9(d) of the Facility
Lease (taking into account any assumption of the Notes by the Lessee) under any
circumstances and in any event, in an amount at least sufficient to pay in full,
as of any date of payment, the aggregate unpaid principal amount of all Notes
Outstanding at the close of business on such date, together with accrued and
unpaid interest on such Notes.
Substituted Lessee shall have the meaning specified in Section
6.8(c) of the Indenture.
Supplemental Indenture of Pledge shall mean the Supplemented
Indenture of Pledge, dated as of December 15, 1986, between the Loan
Participant, the Lessee and the Collateral Trust Trustee, substantially in the
form attached as Exhibit A to the Series B supplemental Indenture.
Supplemental Financing shall mean a financing of the supplemental
Financing Amount of Capital Improvements made pursuant to Section 8(f) of the
Facility Lease.
Supplemental Financing Amount shall mean that portion of 1.700000%
of the cost of a Capital Improvement to Unit 1 and .566667% of the cost of a
Capital Improvement to the Common Facilities that shall not exceed (i) the
amount of the increase, if any, in the Owner Participants basis in the Undivided
Interest for purposes of Section 1012 of the Code as a result of such Capital
Improvement less (ii) the amount of the related Additional Equity Investment of
the Lessor, if any.
Supplemental Rent shall have the meaning set forth in Section 3(b)
of the Facility Lease.
Surviving Lessee shall have the meaning specified in Section 10(b)
(3) (ii) of the Participation Agreement.
-42-
6091.100.2898.55:1
<PAGE>
Tax shall mean any and all fees (including, without limitation,
documentation, recording, filing, license and registration fees), taxes
(including, without limitation, net income, franchise, value added, advalorem,
gross income, gross receipts, sales, use, property, personal and real, tangible
and intangible, excise, and stamp taxes) , levies, imposts, duties, charges,
assessments, or withholdings of any nature whatsoever, general or specific,
ordinary or extraordinary, together with any and all penalties, fines, additions
to tax and interest thereon
Tax Assumptions shall mean the assumptions set forth in
Section 1(a) of the Tax Indemnification Agreement, with respect to the Federal
income tax consequences at the transactions included or reflected in the Pricing
Assumptions
Tax Indemnification Agreement shall mean the Tax
Indemnification Agreement, dated as of December 15, 1986, between PNM and the
Owner Participant.
Termination Date shall have the meaning set forth in Section
14(a) of the Facility Lease.
Termination Event shall mean any early termination of the
Facility Lease in accordance with Section 14 thereof.
Termination Notice shall have the meaning set forth in Section
14(a{ of the Facility Lease.
Termination Obligation shall have the meaning set forth in
Section 15.10.2 of the ANPP Participation Agreement (or any comparable successor
provision)
Termination Value, as of any Basic Rent Payment Date during
the Basic Lease Term, shall mean the percentage of Facility Cost set forth
opposite such Basic Rent Payment Date in Schedule 3 to the Facility Lease.
Anything contained in the Facility Lease to the contrary notwithstanding,
Termination value shall be, when added to all other amounts which the Lessee is
-43-
6091.100.2898.55:1
<PAGE>
required to pay under Section 14 of the Facility Lease, under any circumstances
and in any event, in an amount at least sufficient to pay in full as of any
Basic Rent Payment Date the aggregate unpaid principal amount of all Notes
Outstanding at the close of business on such date, together with accrued and
unpaid interest on such Notes.
Transaction Documents shall mean the Participation Agreement, the
Facility Lease; the Trust Agreement, the Indenture, the Extension Letter, the
Tax Indemnification Agreement, the Mortgage Release, the Assignment and
Assumption, each Purchase Document and the Notes.
Transaction Expenses shall have the meaning set forth in Section 14
(a) of the Participation Agreement.
Transfer shall mean the transfer, by bill of sale or otherwise, by
the Lessor of all the Lessor's right, title and interest in and to the undivided
Interest and the Real Property Interest and under the Assignment and Assumption
on an "as is, where is" basis, free and clear of all Lessor's Liens and Owner
Participant's Liens but otherwise without recourse, representation or warranty
(including an express disclaimer of representations and warranties in a manner
comparable to that set forth in the second sentence of Section 6(b) of the
Facility Lease), together with the due assumption by the transferee of, and the
due release of the Lessor from, all the Lessor's obligations under the
Assignment and Assumption and the Assignment of Beneficial Interest by an
instrument or instruments satisfactory in form and substance to the Lessor and
the Owner Participant.
Transferee shall have the meaning assigned thereto in Section 15 of
the Participation Agreement.
Trust shall mean the trust created by the Trust Agreement.
-44-
6091.100.2898.55.1
<PAGE>
Trust Agreement shall mean the Trust Agreement, dated as of December
15, 1986, between the Owner Participant and FNB.
Trust Estate shall have the meaning set forth in Section 2.03 of the
Trust Agreement.
Trust Indenture Act shall mean the Trust Indenture Act of 1939, as
amended.
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
Facility 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(a) or 13(b) of the
Participation Agreement.
UCC or Uniform commercial Code shall mean the Uniform Commercial
Code as in effect in any applicable jurisdiction.
Underwriting Agreement shall mean the agreement among Funding Corp.,
PNM, Kidder Peabody, Goldman, Sachs & Co. and Drexel Burnhain Lambert
Incorporated (all acting either as underwriters or representatives of the
underwriters named therein) relating to the purchase, sale and delivery of the
Series B Bonds and any applicable pricing agreements.
-45-
6091.100.2898.55:1
<PAGE>
Underwriters' Counsel shall mean Willkie Farr & Gallagher, One
Citicorp Center; 153 East 53rd Street, New York, New York 10022.
Undivided Interest shall mean a 1.700000% undivided interest in Unit
1 and a .566667% undivided interest in Common Facilities; the owner of the
Undivided Interest shall be a tenant-in-common with the owners (including PNM,
if it should be such an owner) of all other undivided interests in Unit 1 and
the Common Facilities. unless the context otherwise requires, undivided Interest
includes an appropriate portion of Generation Entitlement Share.
Undivided Interest Indenture Supplement shall mean the supplement to
the Indenture substantially in the form of Exhibit C thereto pursuant to which
the Owner Trustee causes the undivided Interest and the Real Property Interest
to be subjected to the Lien of the Indenture.
Undivided Interest Percentage sha11 mean 1.700000%; provided,
however, that with respect to the portion of the Undivided Interest constituting
Common Facilities, the Undivided Interest Percentage shall be a percentage equal
to .566667%
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 in effect on the date of
execution of the Participation Agreement, as amended or modified from time to
time after such date
Unit 1 shall mean the 1,270 megawatt unit commonly known as Unit 1
at the Palo Verde Nuclear Generating Station, all as more fully described in
Item A of Exhibit B to the Bill of Sale, together with all Capital Improvements
thereto, but excluding all common facilities.
-46-
6091.100.2898.55:1
<PAGE>
Unit 1 Decommissioning Costs sha1l mean approximately $23,OOO,OOC
(1986 dollars) (or such other amount as shall be determined by the Lessee, in
good faith, in accordance with prudent utility practice) adjusted annually on
the last day of each calendar year, for inflation using an inflation rate twice
that indicated by the change in the Consumer Price Index published by the U.S.
Department of Labor, Bureau of Labor Statistics for such calendar year, such
adjustment to take effect on the first day of the succeeding calendar year.
Unit 1 Retained Assets shall mean (i) all resident fuel assemblies,
equipment and personal property constituting part of the Generating Unit (as
defined in the ANPP Participation Agreement) designated as Palo Verde Nuclear
Generating Station Unit 1 (other than common facilities) owned by the Lessee but
excluded from Unit 1 as set forth in Item A of Exhibit B to the Bill of Sale and
(ii) a one-third interest in all equipment and personal and real property
constituting PVNGS common facilities under the ANPP Participation Agreement
owned by the Lessee but excluded from the Common Facilities as set forth in Item
B of Exhibit B to the Bill of Sale.
User shall mean a Person unrelated to PNM (within the meaning of
Section 318 of the Code) possessing the Undivided Interest after the Lease
Termination Date.
-47-
6091.100.2898.55:l
<PAGE>
When recorded, return to: Greg R. Nielsen
Snell & Wilmer
3100 Valley Bank Center
Phoenix, Arizona
================================================================================
ASSIGNMENT, ASSUMPTION
AND
FURTHER AGREEMENT
Dated as of December 15, 1986
between
PUBLIC SERVICE COMPANY OF NEW MEXICO,
and
THE FIRST NATIONAL BANK OF BOSTON,
not in its individual capacity, but
solely as Owner Trustee under a Trust
Agreement, dated as of December 15,
1986, with Chase Manhattan Realty
Leasing Corporation
================================================================================
Sale and Leaseback of a .7933333% undivided Interest
in Palo Verde Nuclear Generating Station Unit 2
and a .2644444% Undivided Interest in Certain Common
Facilities
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS; SCHEDULES
Section 1.01. General ............................................... 1
Section 1.02. Undivided Interest and
Real Property Interest ................................ 1
ARTICLE II
NONPARTITIONMENT
Section 2.01. Nonpartitionment ...................................... 2
ARTICLE III
ASSIGNMENTS; EXERCISE OF RIGHTS
Section 3.01. Assignment of warranties ............................. 2
Section 3.02 Assignment of the ANPP
Participation Agreement .............................. 2
Section 3.03 Exercise of Rights as
Participant under the
ANPP Participation
Agreement ............................................ 2
ARTICLE IV
ASSUMPTION; RELEASE
Section 4.01. Assumption by Owner
Trustee .............................................. 3
section 4.02. Release .............................................. 4
ARTICLE V
NO RELEASE OF PNM; REIMBURSEMENT
Section 5.01. No Release of PNM .................................... 4
Section 5.02. Reimbursement ........................................ 4
-i-
6091.CHASEU2.LEASE.56:3
<PAGE>
TABLE OF CONTENTS (Continued)
Page
----
ARTICLE VI
FURTHER AGREEMENTS OF PNM AND THE
OWNER TRUSTEE
Section 6.01. Agreement to Sell or
Lease Unit 2 Retained
Assets ............................................... 5
Section 6.02. Agreement to Assign or
Make Available ANPP
Project Agreements ................................... 5
Section 6.03. Agreements to Seek
Amendments to the ANPP
Participation Agreement
and the License ...................................... 6
Section 6.04. Owner Trustee's
Agreement ............................................ 6
ARTICLE VII
INTERIM AGENCY ARRANGEMENTS
Section 7.01. Designation of Agent ................................. 6
Section 7.02. Operation of Unit 2 .................................. 7
Section 7.03. ANPP Participation
Agreement ............................................ 7
Section 7.04. Support .............................................. 7
Section 7.05. Compensation ......................................... 8
Section 7.06. Transmission;
Transmission Agreement ............................... 8
ARTICLE VIII MISCELLANEOUS
Section 8.01. Successors and Assigns ................................ 9
Section 8.02. Governing Law ......................................... 9
Section 8.03. Counterpart Execution ................................. 9
Section 8.04. Amendments ............................................ 9
Section 8.05. Survival .............................................. 9
Section 8.06. Severability of
Provisions ............................................ 9
-ii-
6091.CHASEU2 LEASE.56:3
<PAGE>
TABLE OF CONTENTS (Continued)
Page
----
Section 8.07. Headings ............................................... 10
Section 8.08. Disclosure of
Beneficiary ............................................ 10
Section 8.09. Capacity of Lessee ..................................... 10
ARTICLE A
ARTICLE B
Section I. PVNGS Plant Site ....................................... 1
Section II. Hassayampa Pumping
Station and Effluent
Pipeline ............................................... 3
Section III. Miscellaneous Real
Property Interests ..................................... 3
Exhibit B - Form of Assumption Agreement
Exhibit C - Form of Undivided Interest Indenture Supplement
Schedule 1 Undivided Interest Description
Schedule 2 - Real Estate Interest Description
Appendix A - Definitions
-iii-
6091.CHASEU2.LEASE.56:3
<PAGE>
ASSIGNMENT, ASSUMPTION AND FURTHER AGREEMENT, dated as of
December 15, 1986, between PUBLIC SERVICE COMPANY OF NEW MEXICO, a New Mexico
corporation (PNM), and THE FIRST NATIONAL BANK OF BOSTON, not in its individual
capacity, but solely as Owner Trustee (the Owner Trustee) , under a Trust
Agreement, dated as of December 15, 1966, with Chase Manhattan Realty Leasing
Corporation.
WITNESSETH.
WHEREAS, PNM and the other ANPP Participants are parties to
the ANPP Participation Agreement (such terms and all other terms used in these
recitals without definition having the respective definitions to which reference
is made in Article I below) ; and
WHEREAS, PNM has sold, and the Owner Trustee has purchased,
the Undivided interest and the Real Property Interest for and in consideration
of the payment to PNM by the Owner Trustee of the Purchase Price, the purchase
price of the Real Property Interest and the assignments and assumptions herein
set forth;
NOW, THEREFORE, in consideration of the premises and of other
good and valuable consideration, receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS; SCHEDULES
SECTION 1.01. General. For purposes hereof, capitalized terms
used herein which are not otherwise defined herein shall have the meanings
assigned to such terms in Appendix A hereto. References in this Agreement to
articles, sections and clauses are to articles, sections and clauses in this
Agreement unless otherwise indicated.
SECTION 1.02. Undivided Interest and Real Property Interest.
Attached as Schedule 1 hereto is a description of the undivided Interest and
attached as Schedule 2 hereto is a description of the Real Property Interest.
6091.CHASEU2.LEASE.56:3
<PAGE>
ARTICLE II
NONPARTITIONMENT
SECTION 2.01. Nonpartitionment. The Owner Trustee hereby
waives any rights it may have to partition Unit 2 or the Common Facilities,
whether by partitionment in kind or by sale and division of proceeds, and
further agrees that it will not resort to any action at law or in equity to
partition Unit 2 or the Common Facilities, and it waives the benefits of all
laws that may now or hereafter authorize such partition for a term (i) which
shall be coterminous with the term of the ANPP Participation Agreement or (ii)
which shall be for such lesser period as may be required under Applicable Law.
ARTICLE III
ASSIGNMENTS; EXERCISE OF RIGHTS
SECTION 3.01. Assignment of Warranties. PNM hereby ASSIGNS to
the Owner Trustee an undivided interest, equal to the applicable Share, in, to
and under any and all warranties of and other claims against dealers,
manufacturers, vendors, contractors and subcontractors relating to Unit 2 and
the Common Facilities.
SECTION 3.02. Assignment of the ANPP Participation Agreement.
(a) PNM hereby ASSIGNS to the Owner Trustee an undivided interest, in, to and
under all of PNM's rights under the ANPP Participation Agreement, equal to
.7933333% to the extent that such rights relate to Unit 2 (including, but
without limitation, a percentage entitlement equal to .7933333%, of the Wet
Energy Generation and Available Generating Capability (as each such term is
defined in the ANPP Participation Agreement) of Unit 2) and equal to .2644444%
to the extent such rights relate to the Common Facilities.
(b) The Owner Trustee hereby ASSIGNS to PNM the rights
assigned under paragraph (a) until the tease Termination Date.
SECTION 3.03. Exercise of Rights as Participant under the ANPP
Participation Agreement. (a) Except as provided in Sections 15.2.2, 15.6.4 and
Section 15.10 of the ANPP Participation Agreement (or any comparable successor
provision) PNM shall be and remain the sole "Participant" for all purposes of
the ANPP Participation Agreement and the sole representative (with power to
bind) in all dealings with the other ANPP Participants in relation to the
Undivided Interest, the
-2-
<PAGE>
Undivided Interest, the Real Property Interest and the rights assigned to the
Owner Trustee pursuant to this Agreement; provided, however, that the foregoing
shall not limit in any way the effect of Sections 15 or 16 of the Facility Lease
or any liability or obligation that PNM may incur to the Owner Trustee or the
Owner Participant under any Transaction Document as a result thereof (including,
but without limitation, any liability that PNM may incur under Section 16 of the
Facility Lease as the result of an Event of Default)
(b) Unless the ANPP Participation Agreement shall otherwise
permit, any right conferred on the Owner Trustee by Section 15.2.2 of the ANPP
Participation Agreement shall be exercised as required by Section 15.6.3.3 of
said Agreement.
(c) The provisions of this Section 3.03 shall remain in full
force and effect until such time as the ANPP Administrative Committee or the
ANPP Participants shall otherwise consent.
ARTICLE IV
ASSUMPTION; RELEASE
SECTION 4.01. Assumption by Owner Trustee. Except as
contemplated by Section 5(a) of the Facility Lease, the Owner Trustee agrees
that, effective on and as of the Lease Termination Date (unless a transferee of
the Undivided Interest and the Real Property Interest (an ANPP Transferee) shall
have qualified under Section 15.10 of the ANPP Participation Agreement or any
comparable successor provision), unless (i) a Default or Event of Default shall
have occurred and be continuing or an Event of Loss or Deemed Loss Event shall
have occurred or such Lease Termination Date shall have occurred by reason of a
termination of the Facility Lease pursuant to Section 16 thereof, the Owner
Trustee shall assume and agree to pay, perform and discharge the owner Trustee's
Share of all liabilities and obligations of PNM under, or with respect to, the
ANPP Project Agreements, attributable to Unit 2 and the Common Facilities, other
than any and all costs relating to, allocable to, or incurred in connection
with, the decommissioning and retirement of Unit 2 from commercial service,
including, but without limitation, (x) the cost of removal, decontamination and
-3-
6091.CHASEU2.LEASE.56:3
<PAGE>
disposition of equipment and fixtures, the cost of safe storage for later
removal, decontamination and disposal and the cost of entombment of equipment
and fixtures, and (y) the cost of (i) the razing of Unit 2, (ii) the removal and
disposition of debris from the PVNGS Site, and (iii) the restoration of relevant
portions of the PVNGS Site.
SECTION 4.02. Release. Upon the assumption and agreement by an
ANPP Transferee pursuant to Section 4.01 (whether at the Lease Termination Date
or thereafter) , the Owner Trustee shall therewith and thereupon be released and
discharged from its obligations under Section 4.01 arising on or after such
assumption and agreement.
ARTICLE V
NO RELEASE OF PNM; REIMBURSEMENT
SECTION 5.01. No Release of PMM. Notwithstanding the
provisions of Article IV or any other provision hereof or of any other
Transaction Document, and except to the extent provided in Section 15.10 of the
ANPP Participation Agreement (or any comparable successor provision) , PNM shall
not be released from any liability or obligation under the ANPP Project
Agreements, or otherwise, with respect to PVNGS, and PNM shall remain liable for
the payment and performance of all such liabilities and obligations, including,
but without limitation, any and all liabilities and obligations not assumed by
the Owner Trustee or an ANPP Transferee pursuant to Section 4.01.
SECTION 5.02. Reimbursement. Unless a Default or an Event of
Default shall have occurred and be continuing or an Event of Loss or Deemed Loss
Event shall have occurred, from and after the Lease Termination Date (except a
Lease Termination occurring by reason of a termination of the Facility Lease
pursuant to Section 16 thereof), upon the payment or performance by PNM of any
liability or obligation in respect of which the Owner Trustee shall also have
become obligated in consequence of Article IV or the ANPP Participation
Agreement, and for so long as the Owner Trustee shall be so liable, PNM shall be
entitled to prompt reimbursement by the Owner Trustee from the Trust Estate for
all amounts expended in connection with such payment or performance.
-4-
6091.CHASEU2.LEASE.56:3
<PAGE>
ARTICLE VI
FURTHER AGREEMENTS OF PNM AND THE
OWNER TRUSTEE
SECTION 6.01. Agreement to Sell or Lease Unit 2 Retained
Assets. Upon a transfer to an ANPP Transferee, PNM agrees in respect of the
Undivided Interest and the Real Property Interest, (i) such ANPP Transferee is a
purchaser of the Undivided Interest and the Real Property Interest, to sell to
such ANPP Transferee, at a price equal to the then Fair Market sales value
(determined on the basis of the then actual condition of the Unit 2 Retained
Assets) thereof, an undivided interest, equal to .7933333%, to the extent
related to Unit 2 and .2644444%, to the extent related to the PVNGS common
facilities, in and to the Unit 2 Retained Assets, or such ANPP Transferee is a
lessee of the Undivided Interest and the Real Property Interest, to lease or
otherwise make available to such ANPP Transferee, at a rent equal to the then
Fair Market Rental Value thereof, an undivided interest, equal to .7933333%, to
the extent related to Unit 2 and .2644444% to the extent related to the PVNGS
common facilities, in and to the Unit 2 Retained Assets. Any such sale or lease
by PNM shall be accomplished by an appropriate bill of sale or lease. The Bill
of Sale referenced in the definition of Unit 2 Retained Assets set forth in
Appendix A hereto was recorded December __ , 1986, as Instrument No. __________
records of Maricopa County, Arizona, and is hereby incorporated herein by
reference.
SECTION 6.02. Agreement to Assign or Make Available ANPP
Project Agreements. Upon a transfer to an ANPP Transferee, PNM agrees in respect
of the Undivided Interest and the Real Property Interest, (i) if such ANPP
Transferee is a purchaser of the Undivided Interest and the Real Property
Interest, to assign to such ANPP Transferee an undivided interest, equal to
.7933333%, to the extent related to Unit 2, and .2644444%, to the extent related
to the PVNGS common facilities, of the Project Agreements (other than the ANPP
Participation Agreement) and (ii) if such ANPP Transferee is a lessee of the
Undivided Interest and the Real Property Interest, to assign for the term of
such lease to such ANPP Transferee an undivided interest, equal to .79.33333%,
to the extent related to Unit 2, and .2644444%, to the extent related to the
-5-
6O9l.CHASEU2.LEASE.56:3
<PAGE>
PVNGS common facilities, of the Project Agreements (other than the ANPP
Participation Agreement) . Any assignment pursuant to this Section 6.02 shall be
accomplished by an appropriate instrument of assignment.
SECTION 6.03. Agreements to Seek Amendments to the ANPP
Participation Agreement and the License. PNM agrees to use its best efforts to
obtain any required amendments to the ANPP Participation Agreement and the
License to permit PNM to act as Agent of the Owner Trustee in the manner
contemplated by Section 7.01 hereof, if (a) (i) PNM shall not have elected to
purchase the Undivided Interest and the Real Property Interest as provided in
Section 13(b) of the Facility Lease and (ii) there shall not be an ANPP
Transferee in respect of the Undivided Interest and the Real Property Interest
or (b) PNM shall be obligated to surrender possession of the Undivided Interest
and the Real Property Interest pursuant to Section 5(a) of the Facility Lease.
PNM acknowledges and agrees that neither the Owner Trustee nor the Owner
Participant shall have any obligation whatsoever to assist PNM in obtaining any
such amendments.
SECTION 6.04. Owner Trustee's Agreement. If PNM becomes
obligated to sell, lease, otherwise make available or assign in accordance with
Sections 6.01 and 6.02 hereof, the Owner Trustee shall (at the direction of the
Owner Participant) require or cause the ANPP Transferee to purchase, lease,
accept or assume, as the case may be, the property or rights being sold, leased,
made available or assigned by PNM.
ARTICLE VII
INTERIM AGENCY ARRANGEMENTS
SECTION 7.01. Designation of Agent. From and after surrender
of possession to the Owner Trustee (or its assigns) of the Undivided Interest
and the Real Property Interest pursuant to Section 5(a) of the Facility Lease
(or during such period on or after the Lease Termination Date that the Owner
Trustee shall have waived any Default or Event of Default with respect to the
inability of PNM to effectively surrender possession as required by such Section
5(a)) and until a transfer to an ANPP Transferee in respect of the Undivided
-6-
6091.CHASEU2.LEASE.56:3
<PAGE>
Interest and the Real Property Interest (such period being referred to as the
Agency Period), PNM shall be, and the Owner Trustee hereby designates PNM as,
the initial agent (the Agent) of the Owner Trustee in the exercise of all rights
assigned to the Owner Trustee hereunder.
SECTION 7.02. Operation of Unit 2. During the Agency Period,
the Agent shall administer the operation of the Undivided Interest and the Real
Property Interest in accordance with this Agreement and all instructions of the
Owner Trustee in accordance with Applicable Law. If, however, the Owner Trustee
and any User shall, prior to, or at any time during, the Agency Period, enter
into any joint ownership and operating agreement with other Persons having a
legal right to, or right to use, any other undivided interest in Unit 2, the
Agent agrees to join in, and be bound by, the terms of such agreement if the
Agent's performance thereunder shall not violate, or result in a violation of,
any Applicable Law or the License. The Owner Trustee agrees to give the Agent
reasonable prior written notice of the commencement of the negotiation of any
such agreement.
SECTION 7.03. ANPP Participation Agreement. PNM agrees that,
at all times during the Agency Period, it will perform all obligations and
discharge all liabilities for which it is responsible as a "Participant" under
the ANPP Participation Agreement in respect of the Undivided Interest and the
Real Property Interest. In the performance of the foregoing agreement, PNM shall
not exercise its rights as an ANPP Participant to cause Capital improvements to
be made to Unit 2 and the Common Facilities unless the Owner Trustee shall have
agreed to provide funds for the payment of the Owner Trustee's Share of the cost
of such Capital Improvements to PNM prior to the date on which such amounts
shall be due with respect thereto under the ANPP Participation Agreement.
SECTION 7.04. Support. Except with respect to the Unit 2
Retained Assets for which provision is made in Section 7.06, PNM covenants and
agrees that, at all times during the Agency Period, it will provide, or make
available, to the Owner Trustee all PNM's rights in and to other assets owned by
PNM and the ANPP Project Agreements to the extent relating to the Undivided
Interest and the Real Property Interest.
-7-
6091.CHASEU2.LEASE.56:3
<PAGE>
SECTION 7.05. Compensation. As compensation for its
obligations under Sections 7.02, 7.03 and 7.04, if no Event of Default based
upon PNM's failure to perform obligations under Section 5(a) of the Facility
Lease has occurred and is continuing, PNM shall be entitled to receive, and the
Owner Trustee hereby agrees to pay, an amount equal to the Owner Trustee's Share
of the aggregate of (i) amounts paid by PNM as provided in Section 7.03 to the
extent reasonably allocable to the undivided Interest and the Real Property
Interest and (ii) reasonable compensation for the Unit 2 Retained Assets and
(iii) out-of-pocket expenses incurred by PNM or the Agent, as the case may be,
in connection with the performance of its agreements in this Article VII.
Compensation under this Section 7.05 shall be paid promptly in cash upon receipt
of an invoice from PNM.
SECTION 7.06. Transmission; Transmission Agreement. (a) PNM
covenants and agrees that, at all times during the Agency Period, the Owner
Trustee shall have the right to wheel, under normal transmission operating
conditions, the Owner Trustee's Share of the then rated capacity of Unit 2,
under normal transmission operating conditions, over transmission equipment in
which PNM now owns or may hereafter acquire an ownership interest, between Unit
2 and the ANPP Switchyard.
(b) Based upon the respective rights, duties and obligations
of the Owner Trustee and PNM set forth in Section 7.06(a), if PNM shall fail or
decline to give the notice of renewal of the Facility tease or purchase of the
Undivided Interest, in each case as provided in Section 13(a) of the Facility
Lease, PNM and the Owner Trustee shall forthwith commence the negotiation in
good faith of a definitive transmission agreement, not inconsistent with the
terms and provisions of Section 7.06(a), but containing sufficient detail for
the proper wheeling of power and energy, under normal transmission operating
conditions, over the equipment of PNM referred to in such Section 7.06(a) under
then existing circumstances, for the exercise or stipulation, as the case may
be, of the respective rights, duties and obligations of the Owner Trustee and
PNM set forth in Section 7.06(a). PNM and the Owner Trustee shall complete such
negotiations and execute such definitive transmission agreement prior to the
Lease Termination Date and such definitive transmission agreement shall provide
for compensation to PNM for the transmission services so provided at the Fair
Market Sales Value thereof.
-8-
6091.CHASEU2.LEASE.56:3
<PAGE>
ARTICLE VIII MISCELLANEOUS
SECTION 8.01. Successors and Assigns. This Agreement shall be
binding upon the successors and assigns of each of PNM and the Owner Trustee.
SECTION 8.02. Governing Law. The interpretation of this
Agreement and the rights and obligations of the parties hereto shall be governed
by and construed and enforced in accordance with the law of the State of New
York.
SECTION 8.03. Counterpart Execution. This Agreement 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.
SECTION 8.04. Amendments. The terms of this Agreement shall not
be waived, altered, modified, amended, supplemented or terminated in any manner
whatsoever, except by written instrument signed by PNM and the Owner Trustee.
SECTION 8.05. Survival. All agreements and covenants contained
in this Agreement or any agreement, document or certificate delivered pursuant
hereto or in connection herewith shall survive the execution and delivery of
this Agreement.
SECTION 8.06. Severability of Provisions. Any provision of this
Agreement 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 provisions in any
other jurisdiction. To the extent permitted by Applicable Law, PNM hereby waives
any provision of law which renders any provision hereof prohibited or
unenforceable in any respect.
-9-
6091.CHASEU2.LEASE.56:3
<PAGE>
SECTION 8.07. Headings. The division of this Agreement 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 Agreement.
SECTION 8.08. Disclosure of Beneficiary. Pursuant to Arizona
Revised Statutes 133-401, the beneficiary of the Trust Agreement is Chase.
Manhattan Realty Leasing Corporation, a New York corporation, whose address is
One Chase Manhattan Plaza (20th Floor), New York, New York 10081, Attention of
Leasing Administrator. A copy of the Trust Agreement is available for inspection
at the offices of the Owner Trustee at 100 Federal Street, Boston, Massachusetts
02110, Attention of Corporate Trust Division.
SECTION 8.09. Capacity of Lessee. Notwithstanding anything to
the contrary in this Agreement, both parties hereto agree that all rights and
obligations of the Lessee with respect to PVNGS under this Agreement are rights
and obligations of the Lessee solely in its capacity as an ANPP Participant and
not in its capacity as Operating Agent.
-10-
6091.CHASEU2.LEASE.56:3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have each caused this
Agreement to be duly executed in New York, New York by their respective officers
thereunto duly authorized.
PUBLIC SERVICE COMPANY OF NEW MEXICO
By ____________________________
Vice President and Chief
Financial Officer
THE FIRST NATIONAL BANK OF BOSTON,
not in its individual
capacity, but solely as owner
Trustee under a Trust
Agreement, dated as of
December 15, 1986, with Chase
Manhattan Realty Leasing
corporation
By:_______________________
Assistant Vice
President
<PAGE>
State of New York )
)SS:
County of New York )
The foregoing instrument was acknowledged before me this 15th
day of December, 1986, by A.J. Robison, Senior Vice President and Chief
Financial officer of Public Service Company of New Mexico, a New Mexico
corporation, on behalf of the corporation.
----------------------------
Notary Public
State of New York )
) ss.
County of New York )
Delia T. Santiago
Notary Public, State of New York
No. 41-3451160
Qualified in Queens County
Commission Expires March 30, 1987
The foregoing instrument was acknowledged before me this 4th
day of December, 1966, by Martin P. Henry, Assistant Vice President of The First
National Bank of Boston, a national banking association, on behalf of the
banking association as Owner Trustee under that certain Trust Agreement dated as
of December 15, 1986.
----------------------------
Notary Public
DAVID A. SPIVAK
Notary Public, State of New York
NO. 31-4693468
Qualified in New York County
Commission Expires: March 30, 1987
<PAGE>
SCHEDULE 1
UNDIVIDED INTEREST DESCRIPTION
The Undivided Interest is a (i) .7933333% undivided interest
in and to the property described under A below and a .2644444% individed
interest in and to the property described in H below.
A. Unit 2 of the Palo Verde Nuclear Generating Station (PVNGS),
located in Maricopa County, Arizona, approximately 55 miles west of the city of
Phoenix, Arizona, and approximately 16 miles west of the City of Buckeye,
Arizona, consisting of:
I. Unit 2 Combustion Engineering "System 80" pressurized water reactor
nuclear steam supply system (the NSSS) . The NSSS is comprised of a
reactor vessel containing 241 fuel assemblies with approximately 100
tons of enriched uranium (fuel assemblies, however, are not part of
Unit 2 and are not included in the Undivided Interest being sold),
two steam generators, four reactor coolant pumps and various
additional Systems and subsystems. The licensed thermal rating of
the NSSS is 3800 Mw.
II. Unit 2 GE TCEF-43, 1800 RPM tandem-compound, six flow, reheat
turbine-generator including turbine, generator, moisture
separator-reheater, exciter, controls, and auxiliary subsystems. The
turbine-generator is conductor cooled and rated at 1,554 MVA at
24,000 V, 3 phase, 60 Hz, 1.5 in Hg ABS back pressure, and
approximately 1,363 MW maximum gross electric output.
-13-
6091.CHASEU2.LEASE.56:3
<PAGE>
III. Unit 2 146 ft. inside diameter, steel-lined, prestressed concrete
cylindrical containment building with a hemispherical dome designed
for 60 psig. The containment building houses the reactor system
IV. Unit 2 auxiliary systems and equipment including engineered
safeguards Systems, reactor auxiliary systems and turbine-generator
auxiliary systems associated with items I, II, and XII above,
extending to and including the Unit 2 start-up transformer
V. Unit 2 cooling tower system consisting of three (3) mechanical draft
cooling towers, including a closed cycle circulating water system,
make-up water systems and essential spray ponds.
VI. Unit 2 radioactive waste treatment system, including liquid,
gaseous, and solid waste subsystems, controls, instrumentation,
storage, handling and shipment facilities.
VXI. Unit 2 emergency diesel-generator system, including a
diesel-generator building which contains two diesel generators, fuel
oil systems, storage tanks, control and instrumentation systems and
other equipment.
VIII. Unit 2 internal communication systems, including associated
interconnections and computer data links
BUT EXCLUDING:
I. Nuclear fuel for Unit 2, including spare fuel assemblies
II. Spare Parts (Unit 2).
III. Transmission facilities (including any and all facilities and
equipment providing interconnection between the Unit 2 turbine
generator and the ANPP High Voltage switchyard, including step-up
transformers and standby equipment and systems).
-14-
6091.CHASEU2.LEASE.56:3
<PAGE>
IV. Oil and diesel fuel inventories (Unit 2).
B. All PVNGS common facilities, INCLUDING BUT NOT LIMITED To:
I. Surveillance systems, including associated radioactive monitoring
systems and equipment.
II. Water treatment facilities and transport systems for supply of waste
water effluent.
III. Warehouse and related storage facilities and equipment.
BUT EXCLUDING:
I. Nuclear fuel, including spare fuel assemblies.
II. All transmission and ANPP High Voltage Switchyard facilities.
III Administration Building.
IV. Administration Annex Building.
V. Technical Support Center.
VI. Visitor Center.
VII. External communication systems and equipment, including associated
interconnections and computer data links.
VIII. Parking lot improvements, road improvements, fencing and dikes.
IX. Spare parts (common facilities)
X. Simulator.
-15-
6091.CHASEU2.LEASE.56:3
<PAGE>
XI. Oil and diesel fuel inventories.
XII. Real property, beneficial interest in Title USA Company of Arizona
Trust No. 530, and Project Agreement interests described in Schedule
2.
-16-
6091.CHASEU2.LEASE.56:3
<PAGE>
SCHEDULE 2
REAL PROPERTY INTEREST DESCRIPTION
The Real Property Interest is a (i) .2333334% undivided
interest in the land described in I below, a (ii) .2644444% undivided interest
in the rights and interests described in II below, and a .2644444% undivided
interest in the right and interests described in III below.
I. PVNGS PLANT SITE
PARCEL NO. 1: Lot Four (4); the Southwest quarter of the Northwest quarter; and
the West half of the Southwest quarter, all in Section Two (2), Township One (1)
South, Range Six (6) West of the Gila and Salt River Base and Meridian, Maricopa
County, Arizona
PARCEL NO. 2: All of Section Three (3), Township One (1) South, Range Six (6)
West of the Gila and Salt River Base and Meridian, Maricopa County, Arizona
PARCEL NO. 3: The East half of Section Four (4), Township One (1) South, Range
Six (6) West of the Gila and Salt River Base and Meridian, Maricopa County,
Arizona.
PARCEL NO. 4: The West half of Section Twenty-six (26), Township One (1) North,
Range Six (6) West of the Gila and Salt River Base and Meridian, Maricopa
County, Arizona.
PARCEL NO. 5: Section Twenty-seven (27), Township One (1) North, Range Six (6)
West of the Gila and Salt River Base and Meridian, Maricopa County, Arizona;
EXCEPT the Northwest quarter of Section 27
PARCEL NO. 6: The Southeast quarter of Section Twenty-eight (28), Township One
(1) North, Range Six (6) West of the Gila and Salt River Base and Meridian,
Maricopa County, Arizona; EXCEPT 50% of all oil, gas and other mineral deposits
and geothermal resources recovered from or developed on the property, as
reserved in instrument recorded May 10, 1974 in Docket 10647, page 136.
PARCEL NO. 7: The East half of Section Thirty-three (33), Township One (1)
North, Range Six (6) West of the Gila and Salt River Base and Meridian, Maricopa
County, Arizona.
6091.CHASEU2.LEASE.56:3
<PAGE>
PARCEL NO 8: All of Section Thirty-four (34), Township one (1) North, Range Six
(6) West of the Gila and Salt River Ease and Meridian, Maricopa County, Arizona.
PARCEL NO. 9: The West half of Section Thirty-five (35), Township One (1) North,
Range Six (6) West of the Gila and Salt River Base and Meridian, Maricopa
County, Arizona.
PARCEL NO. 10: The Southeast quarter of Section Nine Township One (1) South,
Range Six (6) West of the Gila and Salt River Base and Meridian, Maricopa
County, Arizona; EXCEPT the Northwest quarter thereof.
PARCEL NO. 11: All of Section Ten (10), Township One (1) South, Range Six (6)
West of the Gila and Salt River Base and Meridian, Maricopa County, Arizona;
EXCEPT the East half of the Southeast quarter thereof; and EXCEPT the North half
of the South half of the Northwest quarter of the Northwest quarter thereof.
PARCEL NO. 12: That part of the East half of the Southwest quarter of Section
Twenty-three (23), Township One (1) North, Range Six (6) West of the Gila and
Salt River Base and Meridian, Maricopa County, Arizona, more particularly
described as follows:
BEGINNING at the Southeast corner of the said East half of the
Southwest quarter of Section 23; thence West, an assumed bearing along
the South line of the said East half of the Southwest quarter of Section
23, for a distance of 762.04 feet; thence North C degrees 03 minutes 39
seconds West; parallel to the East line of the said East half of the
Southwest quarter of Section 23, for a distance of 1946.46 feet to a
point on the South right-of-way line of the 200 foot wide
HASSAYAMPA-SAWME HIGHWAY, as recorded in Book 12 of Road Maps, page 82,
Maricopa County Recorder, Maricopa County, Arizona; thence continuing
North 0 degrees 03 minutes 39 seconds West for a distance of 234.15 feet
to a point on the North right-of-way line of said highway; thence South
58 degrees 43 minutes 35 seconds East, along said North right-of-way
line for a distance of 892.17 feet to a point on the said East line of
-2-
6091.CHASEU2.LEASE.56:3
<PAGE>
the East half of the Southwest quarter of Section 23; thence South 0
degrees On minutes 39 seconds East, along said East line for a distance
of 234.15 feet to a point on the said South right-of-way line; thence
continuing South 0 degrees on minutes 39 seconds East for a distance of
1463.31 feet to the true point of beginning;
EXCEPT the East 305 feet of the South 305 feet thereof; and
EXCEPT one-half of the minerals and mineral rights and mineral
estates of every kind and nature, as set forth in Deed recorded in
Docket 11652, page 52, Maricopa County Records.
PARCEL NO. 13: The North half of the South half of the Northwest quarter of the
Northwest quarter off Section Ten (10), Township One (1) South, Range Six (6)
West of the Gila and Salt River Base and Meridian, Maricopa County, Arizona.
II. HASSAYAMPA PUMPING STATION AND EFFLUENT PIPELINE
All real property, leases, licenses, easements, rights-of-way
and other property held by Title USA Company of Arizona Trust No. 530
established by that certain Trust Agreement dated October 15, 1975, as amended,
'but excluding therefrom all improvements.
III. MISCELLANEOUS REAL PROPERTY INTERESTS
Those ANPP Project Agreements (as defined in the ANPP
Participation Agreement), in addition to the Trust Agreement for Title USA
Company of Arizona Trust 530, consisting of leases, licenses, easements, and
permits, which provide land and land rights for (a) the pipeline to supply waste
water effluent to PVNGS from the 91st Avenue sewage treatment plant serving the
Phoenix Metropolitan area and (b) railroad access to the Nuclear Plant Site (as
defined in the ANPP Participation Agreement).
-3-
6091.CHASEU2.LEASE.56:3
