ML17299B029

Memorandum Re Antitrust Reviews

ML17299B029
Person / Time
Site:	Palo Verde
Issue date:	02/21/1986
From:	Toy T MUDGE, ROSE, GUTHRIE, ALEXANDER & FERDEN
To:
Shared Package
ML17299B028	List: ML17299B027 ML17299B029
References
TAC-60907, TAC-63148, NUDOCS 8602240254
Download: ML17299B029 (37)

Text

UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION X

In the matter of ARIZONA PUBLIC SERVICE COMPANY, et'l.,

DOCKET NO. STN 50-529 (Palo Verde Nuclear Generating Station, Unit 2)

X MEMORANDUM IN RESPECT OF ANTITRUST REVIEWS Snell & Wilmer 3100 Valley Bank Center Phoenix, Arizona 85073 Arthur C. Gehr, Esq.

Keleher & McLeod, P.A, 414 Silver Avenue, S.W.

Albuquerque, New Mexico 87102 Charles L. Moore, Esq.

Mudge Rose Guthrie Alexander & Ferdon 180 Maiden Lane

. New York, New York 10038 Joe D. Clayton, Esq.

Timothy Michael Toy, Esq.

February 21, 1986 8602240254 86022ii PDR ADOCK 05000529('

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UNITED STATES OP AMERICA NUCLEAR REGULATORY COMMISSION In the matter of ARIZONA PUBLIC SERVICE DOCKET NO STN 50-529 COMPANY, et al.,

(Palo Verde Nuclear 0 Generating Station, Unit 2)

X MEMORANDUM IN RESPECT OP ANTITRUST REVIEWS

. I. INTRODUCTION On February 14, 1986, Arizona Public Service Company (APS) filed, on behalf of Public Service Company of New Mexico (PNM), an Application in Respect of Sale and Leaseback Transactions by Public .

Service Company of New Mexico (the Unit 2 Application).

The Unit 2 Application relates to certain sale and lease-back transactions proposed to be entered into by PNM with respect to all or a portion of PNM's 10.2% ownership interest in Palo Verde Nuclear Generating Station (PVNGS) Unit 2 and a portion of PNM's r'emaining undivided ownership interest in certain related PVNGS common facilities. Substantially similar transactions with respect to all or a portion of PNM's 10.2% ownership interest in Unit 1 and a portion of PNM's undivided ownership interest in certain related PVNGS common facilities were approved by the Commission by its Order

l I of December 12, 1985, in Arizona Public Service Company (Palo Verde Unit 1), Docket No. STN 50-528.'n the Unit 2 Application, PNM requests authority to enter into sale and leaseback transactions with equity investors (Equity Investors) who, among other types of Equity Investors, may be subsidiaries or affiliates of electric utilities (Utility Affiliates).

II. ISSUE PRESENTED In a recent meeting with PNM representatives, the Staff noted that the potential participation of a Utility Affiliate, directly or'ndirectly,'n the proposed sale and leaseback transac-tions presented the question of the need for submittal of the matter to the Attorney General for antitrust review and advice pursuant to Section 105c of the Atomic Energy Act of 1954, as amended (Act).'his Memorandum considers such question and concludes that submittal to the Attorney General is not required by Section 105c nor by the Commission's implementing regulations, 10 C.F.R. 55 50.33a and 50 .40. Moreover, recognizing that the Commission has discretionary authority to consult with the Attorney General, irrespective of the statutory mandate, the conclusion is reached that the exercise of such authority is not warranted under the circumstances presented.

1. See also Policy Paper SECY-85-367.

2. Participation of a Utility Affiliate in a sale and leaseback transaction may arise through its participation in an investment con-sortium or joint venture.

3. 42 U.S.C. 5 2135(c)(1981) .

These conclusions stem from consideration of (i) the rationale of the amendments to the Act enacted in 1970 (the 1970 Amendments), (ii) Section 105c, as amended, (iii) the exercise of the Commission's regulatory authority, and (iv) other federal agency action respecting leasing transactions and Section 7 of the Clayton Act.

1. The 1970 Amendments The provision for antitrust reviews by the Attorney General of applications for commercial licenses issued under Section 103'as an integral part of the Act, as originally enacted, which terminated the federal government's monopolization of the development of nuclear power. However, prior to the 1970 Amendments, the Atomic Energy Commission (AEC) was precluded by Section 102'rom issuing Section 103 commercial licenses until it had made the determination that the generation of electricity by nuclear facilities had "practical value."'he AEC was unable to make such a determination (and, as a result, to issue commercial licenses) prior to 1970 because of a lack of knowledge of the costs of nuclear plant con-struction and operation.'.

42 U.S.C. 5 2133 (1981) .

5. 42 U.S.C. 5 2132 (1981) ~

6. 31 Fed. Reg. 221 (1966) .

0 Nonetheless, the late 1960's saw a steady increase in the number of applications for Section 104b (research and development) licenses'or large scale nuclear power projects intended for "commercial" electric generation. Concurrently< numerous small util-ities, municipally owned and rural cooperatives for the most part, I

found access to several nuclear projects foreclosed by some of the large utilities sponsoring them. The small utilities contended, with support f rom the Department of Justice, that the foreclosure of access to the new "commercial" nuclear facilities denied them the potential of securing the benefits of economies of scale and low fuel costs and was anti-competitive insofar as it reduced the ability of the small utilities to compete for load growth opportunities.

During the same time period, the issue of applicability of antitrust principles to regulated electric utilities rose to public importance in a number of judicial and regulatory contexts.'he 1970 Amendments were among the end results in the resolution of these issues. The requirement of a "practical value" determination in Sections 102 and 104b was eliminated; the use of Section 104b licenses for commercial nuclear facilities was restricted to those facilities for which Section 104b construction permits had been issued; the opportunity for obtaining antitrust reviews and hearings

7. 42 U.S.C. 5 2134(b) (1981) ~

8. See, e.g., Otter Tail Power Co. v. Federal Power Commission, 410 U.S. 366 (1973) (utility is not insulated from antitrust regulation by reason of the Federal Power Act).

l) was extended retroactively to certain licenses previously issued and to then pending applications for construction permits and operating licenses; and the nature and standards of antitrust reviews by the Attorney General were clarified. In essence, the 1970 Amendments codified for the nuclear industry the rights of "access" in the broad sense i.e., access to "commercial" generating facilities, access to 4

transmission networks and arrangements, access to reserve sharing and power pooling, and access to planning of generating and transmission facilities.'xamination of the foregoing rationale behind the passage of the 1970 Amendments makes it readily apparent that the antitrust review under Section 105c is utterly. irrelevant to the sale and leaseback transactions proposed by PNM whether or not a Utility Affiliate participates in any such transaction. Simply stated, such transactions do not and cannot result in a foreclosure or restraint of "access" or any other anti-competitive behavior contemplated by Congress in passing the 1970 Amendments.

The facts are that PNM will retain its full generation entitlement share in the output of all of the PVNGS units. No trans-mission, power pooling or reserve sharing arrangement is affected.

PNM also will maintain its status as "licensee;" and the Equity Investors, be they Utilities Affiliates or otherwise, will not and cannot become licensees until the leases are terminated for any

9. See Regulatory Guide 9.1 promulgated by the Commission.

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reason and the Commission has taken action permitting such Equity Investors to become licensees.

In light of these circumstances, embarkation upon antitrust reviews of any sort would be totally unjustified and beyond the scope of the antitrust review permitted under Section 105c, as amended.

2. Section 105c, as Amended The 'only portions of Section 105c, as amended, that are relevant to this matter are paragraphs (1) and (2) thereof which provide:

(c) (1) The Commission shall promptly transmit to the Attorney General a copy of any license application provided for in paragraph (2) of this subsection . . . and the Attorney General shall, within a reasonable time, but in no event to exceed 180 days after receiving a copy of such application or written request, render such advice to the Commission as he determines to be appropriate in regard to the finding to be made by the Commission pursuant to para-graph (5) of this subsection. Such advice shall include an explanatory statement as to the reasons or basis therefor.

(2) Paragraph (1) of this subsection shall apply to an application for a license to construct or operate a utili-zation or production facility under section 103 of this Chapter: Provided, however, That paragraph (1) shall not apply to an application for a license to operate a utiliza-tion or production facility for which a construction permit was issued under section 103 of this Chapter: unless the Commission determines such review is advisable on the ground that significant changes in the licensee's activi-ties or proposed activities have occurred subsequent to the previous review by the Attorney General and the Commission under this subsection in connection with the construction permit for the facility.

42 U.S.C. 5 2135(c)(1981).

Paragraphs (1) and (2) retained the mandatory submittal of Section 103 license applications to the Attorney General found in Section 105c in its original form. Nevertheless, the proviso of the new paragraph (2) of Section 105c explicitly exempts from such requirement those applications for Section 103 operating licenses for which a construction permit was issued under Section 103 (for which the mandatory Attorney General review would have been completed).

The construction permit for PVNGS Unit 2 (as well as those for PVNGS Units 1 and 3) was issued under Section 103.. Therefore, under Section 105c(2), as amended by the 1970 Amendments, it was not necessary to submit the'pplication for the Unit 2 operating license to the Attorney General for review.'4 Hypothesizing that an argument might be made that the phrases "any license application" in paragraph (1) and "an applica-tion for license" in paragraph (2) are broad enough,to encompass all applications for any amendments of a license, one only need turn to the legislative hi:story of the 1970 Amendments to put the matter to rest. In its report (the Joint Committee Report) accompanying the 1970'mendments, the Joint Committee explained:

The committee recognizes that applications may be amended from time to time, that there may be applications to extend or review a license, and also that the form of an

10. The Regulatory Staff did, however, conduct an antitrust review to permit a determination that there were no significant changes since the Attorney General's review at the construction permit stage that would warrant consultation with the Attorney General.

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application for a construction permit may be such that, from the applicant s standpoint, it ultimately ripens into the application for an operating license. The phrases "any license application", "an application for a license", and "any application" as used in the clarified and revised subsection 105c. refer to the initial application for a construction permit, the initial application for operating license, or the initial application for a modification which would constitute a new or substantially different facility, as the case may be, as determinedu oses Commission. The hrases d not inc ude fo by the o

tri 'nd d s 'nsec 'one

c. o e a licatio wh'ch ma i e 'n roce It should go without saying that, given this clear state-ment of Congressional intent< the Unit 2 Application respecting PNM's proposed sale and leaseback transactions cannot trigger Section 105c. It is not an initial application for either a con-struction permit or an operating license. Nor is it an application to modify PVNGS Unit 2 in any manner. Rather, it is merely another application filed during the licensing process seeking a license amendment that will reflect the conversion of PNM's interest in PVNGS Unit 2 to a leasehold.

In this connection, the question of the applicability of the interlocutory order entered by the Atomic Safety and Licensing Board (ASLB) in the Detroit Edison Company case to the matter at hand ll. The Joint Committee on Atomic Energy's Report: Amending the Atomic Energy Act of 1954, as Amended, to Eliminate the Requirement for Finding of Practical Value, to Provide for Prelicensing Antitrust Review of Production and Utilization Facilities, and to Effectuate Certain Other Purposes Pertaining to Nuclear Facilities, H. Rep. 91-1470, 91st Cong. 2d Sess., reprinted in, 1970 U.S. Code Cong. 6 Ad. News 4981, 5010 (emphasis added) .. Hereinafter, all citations to the Joint Committee Report will be to the reprint.

should be address'ed. " In such order, the ASLB ruled that an application to amend a construction. permit to add two new owners was an application which triggered the Section 105c antitrust review process. This ruling (which recited the foregoing excerpt from the Joint Committee Report) was premised upon the ASLB's conclusion that:

To construe the statute otherwise would permit a utility with no antitrust problems to undergo an antitrust review and obtain an unconditioned construction permit, and then sell an ownership interest to another monopolizing utility . . . . Such an unequal treatmentreview of applicants, insulating from prelicensing antitrust those who came in later by way of amendments to construction permits would subvert the Congressional intent and purpose of Section 105c.

Nuclear Reg. Rep. (CCH) 0 30,284.01 (April 7, 1978) .

It is submitted that this ASLB ruling and its rationale (assuming they were adopted by the Commission) have no application here for the simple reason that the relief requested in the pending application will not result in the addition of any new owners as licensees. To the contrary, the new owners of legal title will have no right of possession or control of PVNGS Unit 2 and no right to the electricity generated by PVNGS Unit 2. Indeed, as the Commission's December 12, 1985 Order explicitly states, the Owner Trustee and its successors in interest (which would encompass any Equity Investor,

12. In the Matter of Detroit Edison Company (Enrico Fermi Atomic Power Plant, Unit No. 2), f1978 Transfer Binder] Nuclear Reg. Rep.

(CCH) 0 30,282 (April 7, 1978) (Docket No. 50-341A) .

I whether or not a Utility Affiliate) may not acquire possession nor exercise control of the facility without compliance with the provi-sions of 10 C.F.R. 5 50.81.

3., Exercise of the Commission's Regulatory Authority The Commission's principal regulations implementing Section 105c are found in 10 C.F.R. SS 50.42 and 50.33a and Appendix L to Part 50. " 10 C.F.R. 5 50.42 is in essence an iter-ation of paragraphs (1) and (2) of Section 105c and, therefore, all comments previously made respecting Section 105c are applicable to 10 CD F.R. 5 50.42

'0 C.F.R. 5 50.33a and Appendix L merely state the informa-tional requirements when submittal of a license application to the Attorney General is required pursuant to 10 C.F.R. 5 50.42. Such informational requirements are not at issue, though it should be stated that compliance therewith would require an effort that is not insignificant.

The Regulatory Staff has promulgated three Regulatory Guides relating to its antitrust reviews: Regulatory Guides 9.1, 9.2 and 9.3. Neither of the latter two guides has any bearing upon the issue of whether the participation of a Utility Affiliate in a sale 13 . Corollary regulations relating to such matters are found in 10 C.F.R. 55 50 .33(i) and 50.43. Additionally, 10 C.F.R. 5 50.80 states that applications to transfer a license may involve the submittal of information required by 10 C.F.R. 5 50.33a. As noted in SECY-85-367, 10 C.F.R. 5 50.80 is not invoked by the Unit 2 Application.

I and leaseback transaction should be submitted to the Attorney General. Regulatory Guide 9.2 is applicable solely to applications for construction permits. Regulatory Guide 9.3 identifies the infor-mational requirements of the Staff's antitrust reviews of applica-tions for operating licenses. The purpose of such reviews is to enable the Staff to make a determination whether or not changes in an applicant's practices and circumstances warrant consultation with the Attorney General as provided by Section 105c (2) and 10 C.F.R.

g 50.42 Regulatory Guide 9.1, on the other hand, is of interest to the subject of this Memorandum. It sets forth the rationale for the Regulatory Staff's antitrust reviews which obviously is the same as the rationale behind the 1970 Amendments previously discussed in this Memorandum. In more complete detail than provided in the prior dis-cussion, Regulatory Guide 9.1 identifies the kinds of information which the Staff considers relevant to the fundamental issue of "access" available to small utilities: transmission interconnections and arrangements; generating sources and capacity; wheeling arrange-ments; contracts with other utilities; rate schedules and contracts; 14 . In addition to the Section 105c antitrust reviews conducted prior to the issuance of the PVNGS construction permits, the Regulatory Staff performed,its Regulatory Guide 9.3 review upon the filing of the application for PVNGS operatinginitiated licenses in 1980. By letter dated December 18, 1985, the Staff an updating review in connection with the application for an operating license for PVNGS Unit 3.

generating reserves; power pooling and reserve sharing; and relationships with other utilities.

.None of these areas of interest to the issue of "access" has any relationship to the conversion of PNM's PVNGS interests to leaseholds, irrespective of the business in which any Equity Investor is engaged. Therefore, it may be argued that Regulatory Guide 9.1 constitutes an acknowledgement by the Commission that antitrust reviews of proposed sale and leaseback transactions are not required.

In summation, there is nothing in the Commission's regula-tions which requires the submittal of the Unit 2 Application to the Attorney General. Nor is there anything in the regulations which compels an antitrust review by the Regulatory Staff or the exercise of any discretionary authority or responsibility to consult with the Attorney General.

Suffice it to say, to the extent that the Commission has any continuing authority or responsibility to monitor licensee com-pliance with the antitrust laws, " the regulations adopted to

15. The extent of the Commission s responsibility and authority with respect to antitrust matters arising subsequent to the issuance of a facility operating license does not appear to be settled. See Fort Pierce Util. Auth. v. U.S., 606 F.2d 986, 989, 1001 (D.C. Cir. 1979) . The court's 'decision clearly holds that the Commission has no authority under Section 105 to conduct any anti-trust reviews relating to a facility for which an operating license has been issued. However, the court deliberately avoided the issue whether or not authority to conduct such reviews could be found under Section 186.

implement the changes in Section 105c of the Act also lead to the conclusion that Attorney General review of the Unit 2 Application is not mandatory. The requirements of 10 C.F.R. 5 50.33a for the sub-mittal of antitrust information for the Attorney General's review (which requirements were developed after consultation with and con-currence of the Attorney General) are expressly limited to applica-tions for construction permits.

In the absence of a change in the determination reflected in the Commission's December 12, 1985 Order, neither the Owner Trustee nor any successor in interest (e.g. an Equity Investor) will be a licensee or become a licensee without compliance with the condi-tions of such order, i.e., compliance with the regulations applicable to creditors under 10 C.F.R. 5 50.81. To conduct at this time any antitrust review of the Owner Trustee or of any successor in interest would clearly be premature and unavailing in the performance of the Commission's responsibilities if and when the Owner Trustee or any successor in interest becomes a licensee.

If the relief requested is granted, the Commission will have reserved jurisdiction to approve and regulate any successor licensee to PNM. The time to conduct any reviews of any such succes-sor, be they related to financial or antitrust matters, is when and if the successor licensee is particularly identified -presumably (if at all) some 30 years hence. Accordingly, the Commission should forego any discretionary review of non-licensees at this time, because such review would be premature and fruitless.

4. Other Federal Agency Action; The Clayton Act The regulations of the Federal Trade Commission (FTC) respecting leasing transactions are of particular significance in this matter since enforcement of the antitrust laws is one of the primary responsibilities of the FTC. " FTC regulation, 16 C.F.R. 5 802.63(a), specifically exempts leasing transactions from the notif ication requirements imposed by the Hart-Scott-Rodino Antitrust Improvements Act of 1976 in the following manner:

An acquisition . . . in connection with the establishment of a lease financing . . . shall be exempt from the requirements of the act if made by a creditor in a bona fide credit transaction entered into in the ordinary course of the creditor's business.

The rationale for the exemption established by the FTC was set forth in the following explanatory comment published in connection with the final rulemaking:

In a common type of lease financing, several equity invest-ors contribute part of the cost of the leased equipment to a trustee (the owner trustee) . The owner trustee, usually a commercial bank< then borrows the remaining funds from other investors (usually other institutional investors) and purchases the equipment, which is then leased to the actual user. Often, a second trust is established that takes a security interest in the leased property to protect the

16. Section 105a, 42 U.S.C. 5 2135(a) (1981), explicitly includes the Federal Trade Commission Act within the definition of the "antitrust laws." The Joint Committee Report notes that this statu-tory definition was adopted deliberately and with awareness that it was at odds with the normal meaning given to the term "antitrust laws" and that " ftlhese include the statutory provisions pertaining to the Federal Trade Commission, which normally are not identified as antitrust law". 1970 U.S. Code Cong. a Ad. News 4995.

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rights of the equity investors. The comment argued that none of these various "acquisitions" should be subject to the act. Any uncertainty on this point was removed in the final rule, which now specifically exempts transactions in connection with a bona fide lease financing.

43 Fed. Reg. 33,450, 33,502 (1978) .

Implicit in the FTC rulemaking was the determination that acquisition of title to property in connection with a bona fide lease financing can never implicate the requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, including the most impor-tant requirement of preemptive antitrust reviews of potentially anti-competitive transactions.

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Moreover, the Clayton Act of 1914," which was aimed at specific business practices whereunder competition was eliminated and growth fostered, recognizes that acquisitions of an ownership inter-est for investment purposes only does not present an anti-competitive threat. The principal purpose of Section 7 of the Clayton Act, 15 U.S.C. 5 18 (1985 Supp.), is to prohibit the acquisition of stock, share capital or assets of a corporation subject to the jurisdiction of the FTC:"

where in any line of commerce or in any activity affecting commerce in any section of the country, the effect of such acquisition, of such stocks or assets, or of the use of such stock by the voting or granting of proxies 17 . Act of Oct. 15, 1914, 38 Stat. 730, Ch. 323 ggl-26, as amendedg 15 U.S.C. 5512-27 (1973 a 1985 Supp.).

18. See also U.S. v. E.I. Dupont Nemours a Co., 77 S.Ct. 872, 353 U. S. 586 (1957) .

or otherwise, may be substantially to lessen competition, or tend to create a monopoly.

However, an exemption is provided for the purchase of stock for investment purposes:

This section shall not apply to persons purchasing such stock solely for investment and not using the same by voting or otherwise to bring about, or in attempting to bring about, the substantial lessening of competition.,

42 U.S.C. 518 (1985 Supp.) . Although the exemption refers specifi-cally to the purchase of stock, the underlying rationale for such an exemption is Congress'ecognition that the purchase of an ownership interest for investment only, as is the case with the proposed sale and leaseback transactions, does not give rise to antitrust concerns.

In light of the exemption of bona fide lease transactions from the requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 by the FTC and the exemption provided for purchases of stock for investment purposes found in Section 7 of the-Clayton Act, there is no basis, consistent with the proper and uniform application of the antitrust laws, on which the Commission could justify a dis-cretionary antitrust review of the proposed PNM sale and leaseback transactions.

III. CONCLUSION APPROVAL IS IN THE PUBLIC INTEREST The sale and leaseback transaction is a widely used financ-ing mechanism, which has been used for a variety of equipment financ-ings, including financing of nuclear fuel and undivided interests in coal-fired power plants. For example, in the month of December, 1985, the following electric utility sale and leaseback transactions were reported to have been consummated: "

(i) Tucson Electric Power Company (Springerville coal plant) for $ 850 million; (ii) Deseret Generation and Transmission Cooperative (44%

interest in Bonanza coal plant) for $ 664 million; (iii)2 Basin Unit Electric Power Cooperative coal plant) for 623=-million; (Antelope Valley (iv) Oglethorpe Power Cooperative (60% interest in Scherer Unit 2 coal plant) for $ 395 million; (v) Public Service Company of New Mexico (7.37% interest in Palo Verde Unit 1 nuclear plant) for $ 325 million; (vi) Montana Power Company (40% interest in Colstrip Unit 4 coal plant) for $ 292 million; and (vii) Portland General Electric (15% interest in Boardman coal plant) for $ 233 million.

The importance of the availability to the nuclear power industry of sale and leaseback transactions cannot be over-emphasized. PNM is advised by its financial advisors, Kidder, Peabody a Co. Incorporated and Goldman, Sachs & Co., that affiliates and subsidiaries of electric utilities (singly, or in joint venture

19. Business Week, February 3, 1986, pp. 74-75.

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with other equity investors and/or financial intermediaries) are an increasingly important component of the equity investment market for such transactions.~ The Unit 2 Application underscores the antici-pated importance of Utility Affiliates to the successful sale and leaseback by PNM of its entire interest in PVNGS Unit 2. The bene-fits to PNM and its New Mexico ratepayers are maximized when PNM's entire interest is sold and leased back.

The transactions are themselves blind to the businesses in which any Equity Investor or any of its affiliates is engaged. The objective is to secure investment capital without regard to the source of capital. Whether it is derived from commercial banking, investment banking, automobile or other financing, tobacco business or utility operations is totally irrelevant.

Since the rights acquired by an Equity Investor cannot result in control or possession of PVNGS Unit 2 or affect the distri-bution of the power and energy produced, such rights cannot enhance its ability or any propensity to engage in any anti-competitive util-ity practices. The possession of a lessor's interest in a generating facility cannot be used to achieve unfair advantage.

In light of this, the public interest is best served by not creating the additional costs and delays involved in a review by the Attorney General which might limit the universe of the potential

20. For example, HEI Investment, one of the equity investors in the Oglethorpe Power transaction, is an affiliate of Hawaiian Electric Company.

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equity investment market available to finance an interest in PVNGS and other utilization facilities. There is, quite simply, no coun-teracting public interest that can be served by conditioning the right of a Utility Affiliate to participate upon completion of an antitrust review.

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In light of the foregoing, PNM respectfully submits that the relief requested in the Unit 2 Application is justified and appropriate and that the same should be granted in a timely manner.

Respectfully submitted, PUBLIC SERVICE COMPANY OP NEW MEXICO by its attorneys SNELL 6 WILMER 3100 Valley Bank Center Phoenix, Arizona 85073 Arthur C. Gehr< Esq.

KELEHER & MCLEOD' A 414 Silver Avenue,. S.W.

Albuquerque, New Mexico 87102 Charles L. Moore, Esq.

MUDGE ROSE GUTHRIE ALEXANDER 6 PEHDON 180 Maiden Lane New York, New York 10038 Joe D. Clayton, Esq.

Timoth Mich el Toy, Esq.

b Timothy Mi ael Toyi Esq.

Dated: February 21, 1986 k1 I

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STATE OP NEW YOHK )

) ss.:

COUNTY OP NEW YORK )

I, Timothy Michael Toy, represent that I am an associate of the firm of Mudge Rose Guthrie Alexander a Ferdon, that I have read the foregoing memorandum and know its contents, and that to the best of my knowledge and belief, the statements made therein are true.

Timoth

(.4 Michael Toy Sworn to before me this 21st day of February, 1986.

Notary Public My Commission Expires:

ANNA MARIE NAPOLI Notary Public. State of New York No. 244759288 Qualitied in Kings County Cerllllcate flied In New York Counttp/

Commission expires March 30, 19Zg7

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