ML17305A371

Forwards Drafts of Amends to Eight Lease Agreements That Licensee Proposes to Enter Into Per Authorizations Cited. Amends Do Not Affect Licensed Activities or Responsibilities

ML17305A371
Person / Time
Site:	Palo Verde
Issue date:	10/25/1989
From:	Michel R MUDGE, ROSE, GUTHRIE, ALEXANDER & FERDEN
To:	Knighton G Office of Nuclear Reactor Regulation
References
NUDOCS 8911080468
Download: ML17305A371 (81)

Text

ACCELERATED DI.

BUTION DEMONS TION +SYSI'EM REGULATORY INFORMATION DISTRIBUTION SYSTEM (RIDS)

ACCESSION NBR:8911080468 DOC.DATE: 89/10/25 NOTARIZED: NO DOCKET FACIL:STN-50-529 Palo Verde Nuclear Station, Unit 2, Arizona Publi 05000529 AUTH.NAME AUTHOR AFFILIATION MICHEL,R.B.

Mudge, Rose, Guthrie, Alexander a Ferden RECIP.NAME RECIPIENT AFFILIATION KNIGHTON,G.W.

Office of Nuclear Reactor Regulation, Director (Post 870411

SUBJECT:

Forwards drafts of amends to eight lease agreements that licensee proposes to enter into per authorizations cited.

I DISTRIBUTION CODE:

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+0 TITLE: Licensing Submittal: Application/General Info Amdt NOTES:Standardized plant.

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2ICI K STRCCT>> N.W.

WASHINGTON, D. 0 20O37 202 429 9355 SUITC 2020 333 SOUTH'ORAND AVENUE LOS ANOELCS>> CALIF. 9007I 2I3-el 3 III2 MUDGE ROSE GUTHRIE ALEXANDER K FERDON I60 MAIDEN LANE NEW YORK, N. Y. IOO36 2I2-SIO-7000 CABLE ADDRCS5: BALTVCHINS NCW YORK TCLCXIWU I27889 TELECOPIER: 2I2 2>>IB 2855 SUITC 900>> NORTHBRIDOC CENTRE 5I5 NORTH FLAGLCR DRIVE WEST PALM BEACH>> FL. 3340I 305 850 BIOO I2>> RUE DC LA PAIX 75002 PARIS, FRANCE III ~Z. 8I. 57. 7I October 25, 1989 Director of Nuclear Reactor Regulation Attention:

Mr. George W. Knighton, Project Director PWR Project Directorate 57 Division of Pressurized Water Reactor Licensing-B Nuclear Regulatory Commission Washington, D.C.

20555 Re:

In the Matter of El Paso Electric Company (Palo Verde Nuclear Generating Station, Unit 2)

Docket No.

STN 50-529, License No. NPF-51

Dear Mr. Knighton:

Amendment No.

3 issued August 15, 1986 and Amendment No.

6 issued December 11, 1986 to NRC License No.

NPF-51 authorized sale and leaseback transactions by El Paso Electric Company (the Company) to six and two equity investors, respectively, require that the NRC be notified of any change in the lease agreements under which El Paso Electric Company leases undivided inter-ests in Palo Verde Nuclear Generating Station Unit 2.

Enclosed are copies of drafts of amendments to the eight lease agreements which the Company proposes to enter into pursuant to the authorizations identified above.

The amendments do not affect licensed activities or responsibilities.

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Recent operating results of the Company neces-sitated a renegotiation of certain financial tests in the above-referenced lease agreements in a manner to permit Company compliance in the future.

In connection with the revision of such financial tests, the Company will agree that, in certain circumstances, it will provide letters of credit for the benefit of the equity investors owning undivided interests in Palo Verde Nuclear Generating Station Unit 2 leased to the Company securing their investments in such Unit through the end of 1999.

The investment of each of these investors in Unit 2 is currently secured by letters of credit expir-ing at the end of 1991.

The enclosed amendments to the lease agreements effect these changes.

The enclosed drafts represent substantially final drafts of the amendments to the lease agreements.

The amendment to the Facility Lease dated as of August 1, 1986 will be executed in indentical form for each of the six lease agreements in respect of th six undivided interests in Palo Verde Nuclear Generating Station Unit 2 executed in August 1986 with only such differences as relate to the identity of the specific equity investor for each such undivided interest.

The closing in connection with which three amendments to the lease agreements will be executed is currently scheduled for October 26, 1989.

Following the closing we will forward to you copies of the amendments to the lease agreements as executed.

Sincerely, Robert B. Michel Copies without enclosures to:

Elaine Chan, Esq.

Joseph F. Scinto, Esq.

Office of General Counsel Nuclear Regulatory Commission 7735 Old Georgetown Road

Bethesda, Maryland 21930 1021

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, Edwin J. Reis, Esq.

Assistant Chief Hearing Counsel Nuclear Regulatory Commission 7735 Old Georgetown Road

,Bethesda, Maryland 21930 Mr. James C. Peterson Mr. Michael Davis Nuclear Regulatory Commission 11555 Rockville Pike Rockville, Maryland 28052 Dane George, Esq.

Kemp, Smith, Duncan

& Hammond 2000 MBank Plaza El Paso, Texas 79901 Arthur C. Gehr, Esq.

Snell

& Wilmer 3100 Valley Bank Center

Phoenix, Arizona 85073 Mr. William F.

Conway Executive Vice President Nuclear Arizona Nuclear Power Project 11226 North 23rd Ave. Building B

Phoenix, Arizona 85029 Mr. W.J. Johnson Senior Vice President and Treasurer El Paso Electric Company 303 North Oregon Street El Paso, Texas 79901 1021. 200. 2712. 06: 5

When Recorded, Return to:

Greg R. Nielsen, Esq.

Snell 6 Wilmer 3100 Valley Bank Center

Phoenix, Arizona 85073 CERTAIN RIGHTS OF THE LESSOR UNDER THE FACILITY LEASE, AS AMENDED BY AMENDMENT NO.

1~AMENDMENT NO. 2, AND AMENDMENT NO.

3 THERETOr AND AS FURKHER AMENDED BY THIS AMENIRKNT NO-4 TfiEREXOi HAVE BEEN ASSIGNED TO, AND ARE SUBJECT TO A SECURITY INTEREST IN FAVOR OF, FXRST CXTY, TEXAS-HOUSTON, N.A.

(FORMERLY FIRST CITY NATIONAL BANK OF HOUSTON),

AS INDENTURE TRUSTEE UNDER A TRUST XNDENTURE, MOHTGAGEt SECURXTY AGREEMENT AND ASSIGNMENT OF RENTS DATED AS OF AUGUST 3.t

1986, AS AMENDED.

THIS AMENDMENT NO. 4 HAS BEEN EXECUTED XN SEVZBAL COUNTERPARTS.

SEE SECTION 3(e)

OF THIS AMENDMEKT NO.

4 FOR INFORMA-TXON CONCERNING THE RIGHTS OF HOLDERS OF VARIOUS COUNTERPARTS HEREOF.

THXS COUNTERPART XS NOT THE ORIGINAL COUNTERPART.

THE FACXLXTY LEASEi AS AMENDED BY AMENDMENT NO 1 r AMENDMENT NO.

2 AND AMENDMENT NO.

3 THERETO AND AS FURTHER. AMENDED AND CONFXRMED BY THXS AMENDMENT NO.

4

THERETO, GRANTS A SECURXTY INTEREST BY A UTILITY, but only if, contrary to the intention of the parties, it should be so construed.

Such Lease and Amendment Nos...

and thereto are filed as utility security docu-ments as a precautionary matter.

AMENDMENT NO.4 dated as of October 1, 1989 to FACILITY LEASE dated as of August 1, 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 August 1, 1986, with

Lessor, and EL PASO ELECTRIC COMPANY, Lessee Original Facility Lease recorded August 18,

1986, as Instrument No.

as corrected and confirmed by Instrument, recorded October 14, 1986 as Xnstrument No.

as amended by Amendment No.

1 thereto dated as of October 1,

1986, recorded December 19,

1986, as Xnstrument No.

by Amendment No.

2 thereto dated as of December 31,

1987, recorded

1988, as Instrument No.

by Amendment No.

3 thereto dated as of May 1,

1990, recorded

1988, as Instrument No.

, in the records of the County Recorder of Maricopa County, Arizona THE FACILITY LEASEI AS AMENDEDi CONTAXNS AFTER ACQUIRED PROPERTY PROVISIONS 1021

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AMENDMENT NO.4, dated as of October 1,

1989

("Amendment No. 4"), to Facility Lease dated as of August 1

1986) between THE FIRST NATIONAL BANK OF BOSTON, not in its indi-vidual capacity but solely as Owner Trustee under a Trust Agreement, dated as of August 1, 1986 with as Lessor

("Lessor" ), and EL PASO ELECTRIC COMPANY, as Lessee

("Lessee"

).

WHEREAS, the parties hereto have previously entered into the Facility Lease dated as of August 1,

1986, recorded on August 18,

1986, as Instrument No.

records of the County Recorder of Maricopa County, Arizona, a corrected version of which was recorded October 14,

1986, as Instrument No.

records of the County Recorder of Maricopa County, Arizona (as heretofore

amended, modified or supplemented, the "Facility Lease" ) providing for the lease by Lessor to Lessee of the Undivided Interest and the Real Property Interest; WHEREAS, the Lessee and the Lessor executed an Amendment No.

1 to the Facility Lease dated as of October 1,

1986, recorded on December 19, 1986 as Instrument No.

records of the County Recorder of Maricopa County, Arizona ("Amendment No. 1");

WHEREAS, the Lessee and the Lessor executed an Amendment No.

2 to the Facility Lease dated as of December 31,

1987, recorded on July 18, 1988 as Instrument No.

in the records of the County Recorder of Maricopa County, Arizona ("Amendment No. 2");

WHEREAS, the Lessee and the Lessor executed an Amendment No.

3 to the Facility Lease dated as of May 1,

1988, recorded on June 14, 1988 as Instrument No.

and re-recorded July 18,

1988, as Instrument No.

in the records of the County Recorder of Maricopa County, Arizona ("Amendment No. 3"); and WHEREAS, the Lessor and the Lessee desire to further amend the Facility Lease in certain respects and to ratify and confirm the Facility Lease, as amended by Amendment, No.

1, Amendment No. 2, Amendment No.

3 and this Amendment No. 4.

NOW, THEREFORE, in consideration of the premises and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

1021.200.2754.05:4

SECTION 1.

Definitions. For purposes hereof, capitalized terms used herein and not defined herein or in the recitals shall have the meanings ascribed thereto in Appendix A to the Facility Lease and in the Facility Lease.

Furthermore, the term defined in this Section 1 shall be added to the terms in Appendix A to the Facility Lease and the Transaction Documents.

"Rating Requirement" shall have the meaning set forth in Section 7(g) of the Facility Lease.

SECTION 2.

Amendments.

(a) Section 7.

Section 7 of the Facility Lease is hereby amended as follows:

(i) Subclause (b), entitled "Retirement of Debt," is deleted.

(ii) Subclause (d) is amended in its entirety to read as follows:

"(d) Incurrence of Debt.

Unless a

Complying Letter of Credit is in effect or the Owner Participant shall have drawn the full amount available under any such Letter of Credit or the Owner Participant shall otherwise con-

sent, the Lessee shall not, and shall not permit any of its subsidiaries (whether consolidated or unconsolidated) to, issue, assume or become liable in respect of (A) any Debt maturing more than one year after the date of such issuance, assumption or becoming liable (including current maturities of Debt with an original maturity of more than one year) if, immediately thereafter, (i) the total amount of all Debt of the Lessee and its subsidiaries (whether consolidated or unconsolidated) maturing more than one year after the date of such issuance, assumption or becoming liable (reduced by Cash Available for Investment) shall exceed 704 (or, at any time after January 1,

1992 when there is not in effect a Complying Letter of Credit, 65%) of New Consolidated Capitalization, in each case as shown on a pro forma consolidated balance sheet on and as of the date of such

issuance, assumption or becoming liable, or (ii) the New Coverage Ratio of the Lessee would be less than 1021.200.2754.05:4

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1.6 to 1 or (8) any Debt maturing one year or less after the date of such issuance, assumption or becoming liable (excluding current maturities of Debt with an'original maturity of more than one year) if, immediately thereafter, the total amount of all Debt of the Lessee and its subsid-iaries (whether consolidated or unconsolidated) maturing one year or less after the date of such

issuance, assumption or becoming liable shall exceed 12.54 of New Consolidated Capitalization, in each case'as shown on a pro forma consoli-dated balance

sheet, on and as of the date of such

issuance, assumption or becoming liable.

For purposes of the foregoing clause (A), there shall be excluded any Debt which has been legally defeased or for the payment. of which funds equal to the principal amount of such Debt have been segregated in escrow.

The following shall not constitute the Lessee

issuing, assum-ing, or becoming liable in respect of any Debt within the meaning of this subclause (d):

(A) any refunding of the debt issued on December 31, 1987 by the lessors in the sale and leaseback transactions relating to Unit 3 at PVNGS; (B) incurrence by Lessee of Debt consisting of reimbursement obligations arising under existing letters of credit, and renewals and replacements thereof; supporting Debt of the Lessee and under the letter of credit, and renewals and replace-ments thereof, supporting obligations of the Rio Grande Resources

Trust, and refinancings of such reimbursement obligations, so long as the prin-cipal or face amount thereof is not increased; (C) until the later of (x) the expiration date of the initial renewal Letter of Credit to be provided in 1991 under Section 10(b) (3) (xvii) of the Participation Agreement and (v)

December 31,

1994, (i) borrowings by Lessee of up to

$ 175,000,000 outstanding at any one time and from time to time under that certain Credit Agreement dated as of October 26, 1989 by and among Lessee, Chemical

Bank, as Agent, and the Banks parties thereto, as such Credit Agreement may be amended, modified, extended and renewed from time to time (herein, the "Credit Agreement" ), or under commercial paper issued by the Lessee as contemplated in the Credit Agreement, and (ii) borrowings by Lessee under the existing Rio Grande Resources Trust credit 1021.200.2754.05:4

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facility, of not in excess of 950, 000, 000 of Debt maturing one year or less after the date of

issuance, assumption or becoming liable; (D) until the later of (i) the expiration date of the initial renewal. Letter of Credit to be pro-vided in 1991 under Section 10(b)(3)(xvii) of the Participation Agreement and (ii)

December 31,

1994, incurrence of up to q135,000,000 of additional long term Debt by the Lessee; and (E)= refundings, extensions, renewals and replacements of Debt and preferred stock of the Lessee (including for such purposes, without limitation, sinking funds, serial maturities and the like), so long as the principal or face amount thereof is not increased."

(iii) Subclause (g} is amended in its entirety to read as follows:

" (g) Financial Ratios.

Unless (x) Owner Participant shall otherwise consent (which may be by way of acceptance of delivery of a Complying Letter of Credit as required by this paragraph) or (y) Lessee is obligated as provided in the immediately succeeding paragraph to maintain for bene-fit of the Owner Participant a Complying Letter of Credit through December 31,

1999, Lessee agrees that (i) the New Coverage Ratio of Lessee, determined as of December 31, 1990 or June 30, 1991, shall be not less than 1.6 to 1, (ii) the aggregate Debt maturing more than one year after

, the date of issuance, assumption or becoming liable (including current maturities of Debt with an original maturity in excess of one year) of Lessee shall not be in excess of 654 of New Consolidated Capitalization, all as derived from Lessee's financial books and records as of December 31, 1990 and June 30,

1991, and (iii) the aggre-gate Debt maturing one year or less after the date of such

issuance, assumption or becoming liable (excluding current maturities of Debt with an original maturity in excess of one year) of Lessee shall not be in excess of 12.5~ of such New Consolidated Capitalization, all as derived from Lessee's financial books and records as of December 31, 1990 and June 30, 1991 (clause (i} through (iii) above being herein called the "Tests" )., Lessee shall prepare for and provide to Owner Participant not later than April 1 and October 1,

1991 (and April 1 and October 1 of succeeding years under the circumstances set forth below) calculations showing whether Lessee has satisfied the Tests and the financial data upon which the calculations were based.

If Lessee has failed to meet the Tests, Owner Participant

may, 1021.200.2754.05:4

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by written notice to Lessee given not more than 30 days after receipt by Owner Participant of such calculations and financial data, require that Lessee

provide, at, its

expense, a renewal of replacement Letter of Credit for a term of one year following expiration of the Existing Letter of Credit and complying in all other respects with Section 10(b) (3)(xvii) of the Participation Agreement.

If Lessee fails to provide such a renewal or replacement Letter of Credit -by December 1,

1991 (or December 1 of any subsequent, year),

Owner Participant shall have the right to find a Person acceptable to it willing to issue such a

Letter of Credit for the account of Lessee on substantially the same terms as the Existing Letter of Credit, except that the annual fee payable under such replacement Letter of Credit shall not be more than 200 basis points greater than the annual fee payable by Lessee with respect to the Existing Letter of Credit.

The procedures set forth above (the New Coverage Ratio being determined, and deriving New Consolidated Capitalization from Lessee's financial books and records, as of each such December 30 and June

30) shall be repeated each year until no such renewal or replacement Letter of Credit, is required.

If Lessee obtains all authorizations, approvals or other actions by the FERC and NMPSC required in order for Lessee to maintain for the benefit of Owner Participant, a

Complying Letter of Credit through December 31,

1999, Lessee agrees to meet'he Tests and the Rating Requirement (as defined below) as of December 31, 1998 and June 30, 1999.

Lessee shall prepare for and provide to Owner Participant not later than April 1, 1999 and October 1,

1999 (and April 1 and October 1 of succeeding years under the circumstances set forth below) calculations showing whether Lessee has met the Tests as of December 31, 1998 and June 30,- 1999, respectively, and the financial data on which the calculations were based.

If (x) Lessee has failed to. meet the Tests as of December 31, 1998 or June 30, 1999 or (y) on December 31, 1998 or June 30,

1999, the First Mortgage Bonds or other theri comparable long-term senior secured debt of El Paso, excluding any thereof which has the benefit of any credit support, is not rated at least BBB by Standard 6 Poor's Corporation or at least BAA2 by Moody's (the "Rating Requirement" ), Lessee shall pro-vide, at its expense, a renewal or replacement Letter of Credit for a term of one year following expiration of the then Existing Letter of Credit, and complying in all other respects with Section 10(b)(3)(xvii) of the Participation Agreement.

If Lessee fails to provide such a renewal or xeplacement Letter of Credit, by December 1,

1999 (or 1021. 200. 2754. 05: 4

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December 1 of any subsequent year, if required),

Owner Participant shall have the right to find a Person accept-able to it willing to issue such a Letter of Credit for the account of the Lessee on substantially the same terms as the then Existing Letter of Credit, except that the annual fee payable under such replacement Letter of Credit shall not be more than 200 basis points greater than the annual fee payable by the Lessee with respect to the then Existing Letter of Credit.

~

The procedure set forth above (the Rating Requirement and, the New Coverage Ratio being deter-

mined, and deriving New Consolidated Capitalization from Lessee's financial books and records',

as of each such December 31 and June

30) shall be repeated each year until no such renewal or replacement Letter of Credit is required.

I If (A) (x) the first, paragraph:of this subclause (g) is in effect and (y) Owner Participant does not elect to require the renewal or replacement Letter of Credit as set forth therein or(B) Lessee is unable to provide any renewal or replacement Letter of Credit, required under such first p'aragraph (if in effect) or the second paragraph of this subclause (g) (if in effect), then,'nless an Event of Default shall have occurred and be continuing or an Event of Loss shall have occurred or Deemed Loss Event shall have been declared, Lessee shall have the right to purchase, in the case of clause (A) above, within fifteen days after either (i) notice'rom Owner Participant, that it does not elect to require such a renewal or, replacement Letter of Credit or (ii) absent such notice, the expiration of the aforesaid 30-day period, or, in the case of clause (B) above, prior to the seventh,day before the -expiration of the Existing Letter of Credit, the Undivided interest and the Real Property Interest for an amount equal to the excess of (x) the greater of (i) Enhanced Casualty Value, determined as of, the date of purchase, if such date of pur-chase is a date set forth in Schedule 9 hereto, or on the date set forth ih 'such Schedule next following such date of purchase; in all other cases, and (ii) Fair Market Sales Value of the Undivided Interest and the Real Property

Interest,

.over (y) the unpaid principal amount of, and accrued interest since the last preceding Basic Rent Payment Date on, the Notes Outstanding on such purchase date.

If Lessee shall have made such payment and shall have assumed all obligations and liabilities of Owner Trustee under the Indenture and the Notes pursuant to Section 3.9(b) of the Indenture, the Lessor shall, so long as no Default or Event of Default shall have occurred and be continuing, Transfer the Undivided Interest and the Real 1021.200.2754.05:4

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Prope'rty. Interest to Lessee.

If Lessee shall have made such payment but shall" not have assumed all obligat'ions and liabilities of Owner, Trustee under the Indenture and the Notes, pursuant to Section 3.9(b) 'of the Indenture, Owner Participant shall effect the Special. Transfer, in which

case, without further act on the part of Lessor or Lessee, (i) the obligation of Lessee to pay further Basic Rent shall 'be reduced t'o. an amount payable on each Basic Rent Payment Date thereafter, equal to the aggregate amount, of principal, premium, if any, and accrued interest then pay-able on all Notes then Outstanding and (ii) this Facility Lease shall become a security agreement for all purposes of Applicable Law.

In the case of clause (A) above, Lessee shall not entitled'o purchase the Undivided Interest and the Real Property Interest unless Lessee shall have, within five.days 'after'i) receipt, by Lessee of the aforesaid notice from Owner Participant or (ii) absent such notice, expiration of the aforesaid 30-day period, as the case may be, notified Owner Participant of its election to exercise its right to'ur'chase the Undivided Interest and the Real Property Interest, as described above.

Notwithstanding the foregoing, Owner Trustee, with the consent of Owner Participant, shall be entitled to waive in writing any failure on the part of Lessee to provide a

renewal or replacement Letter of Credit, in which event Lessee's failure to provide a renewal or replacement Letter of Credit shall not constitute an Event of Default and Lessee shall not have the right 'purchase the Undivided Interest and the Real Property Interest pursuant to this Section 7(g)."

(b) Section 15.'Section 15 of the Facility Lease is hereby amended as follows:

(i)'lause 15 (x) is amended as follows:

"(x)

(1)

Lessee shall fail to pay when due (whether by scheduled maturity, required prepayment, acceleration, demand 'or otherwise) any Debt of the Lessee the original principal amount (or equivalent) of which is greater than

$ 5,000,000, and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt; or (2) any other default under any agreement or instrument relating to any such Debt, or any. other event, shall occur and such Debt shall become due as a result thereof; or" 1021.200.2754.05:4

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(ii} the phrase "or Section 10(b) (3) (xvii) of the Participation Agreement" is added after "Section 7(g)" the first time it appears in clause 15 (xi);

(iii) the "." at the end of clause 15(xi) is changed to ";. or" and thereafter is added the following:

"(xii) a Reimbursement Event of Default (as defined in the Letter of Credit Agreement relating to the Initial Letter of Credit, as in effect on October 26, 1989) relat-ing to Lessee's failure to maintain the required mainte-nance of equity ratio specified in Section 11(h} of such Letter of Credit Agreement or Lessee's failure to maintain the fixed charge. ratio specified in Section 11(i) of such Letter of Credit Agreement shall occur during the term of such Letter of Credit. Agreement,

unless, within 90 days after notice by Lessee to Owner Participant, such mainte-nance of equity ratio and/or fixed charge ratio provision shall have been amended by the Required Banks (as defined in such Letter of Credit Agreement) to cure such default or such default shall have been irrevocably waived by the Required Banks; Lessee shall give Owner Participant prompt notice of Lessee's failure to meet such ratio or ratios at the same time notice is given under such Letter of Credit Agreement to the Administrating Bank (as defined in such Letter of Credit Agreement)."

(c) Schedule

8. Schedule 8 to the Facility Lease is hereby deleted.

SECTION 3.

Miscellaneous.

(a) Effective Date of Amendments.

The amendments set forth in Section 2 hereof shall be and become effective upon the exe-cution and delivery of this Amendment No.

4 by the parties hereto.

(b) Counterpart Execution. This Amendment No.

4 may be executed in any number of counterparts and by each of the parties hereto on-separate counterparts; all such counterparts shall together constitute but one and the same instrument.

(c) Governing Law. This Amendment No.

4 has been negoti-ated 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, except to the extent that pursuant, to the law of the State of Arizona such law is mandatorily applicable thereto.

(d) Disclosure.

Pursuant to Arizona Revised Statutes Section 33-404, the beneficiary of the Trust Agreement is

[Name of 1021.200.2754.05:4

J Owner Participant],

a corporation.

The address of the beneficiary is 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.

(e)

Amendment 'No. 4.. The single executed original of this Amendment-- No.

4 marked "THIS COUNTERPART IS THE ORIGINAL COUNTERPART" and containing the receipt of the Indenture Trustee thereon shall be the Original of this Amendment No. 4.'o security interest in this Amendment No.

4 may be created or continued through the transfer or possession of any counterpart other than the original.

(f) Confirmation. The Facility Lease, as amended by Amendment Nos.

1, 2 and 3 and as further amended by this Amendment No. 4, shall remain in full force and effect and the same is hereby ratified arid confirmed.;-

IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment No.

4 to-be duly executed in New York, New York as of October 1,

1989.

THE FIRST NATIONAL BANK OF BOSTON, not in its individual

capacity, but solely as Owner Trustee under a Trust Agreement, dated as of August 1, 1986 with [Name of Owner Participant]

By:

EL PASO ELECTRIC COMPANY By:Vice President 1021.200.2754:05:4

l

STATE OF COUNTY OF

)

) ss.:

)

The foregoing instrument was acknowledged before me this day of 1989 by William J.

Johnson, a Senior Vice President of EL PASO ELECTRIC COMPANY, a Texas corporation, on behalf of the corporation.

NOTARY PUBLIC 1021. 200

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STATE OF NEW YORK COUNTY OF NEW YORK

)

) ss.:

)

The foregoing instrument was acknowledged before me this day of

1989, by g

a

~ of THE FIRST NATIONAL BANK OF BOSTON, a national banking association, on behalf of the banking association as trustee under that certain Trust Agreement dated as of August 1,

1986 with NOTARY PUBLIC 1021.200.2754.05:4

l'y I

When Recorded, Return to:

Greg R. Nielsen, Esq.

Snell 6 Wilmer 3100 Valley Bank Center

Phoenix, Arizona 85073 CERTAIN RIGHTS OF THE LESSOR UNDER THE FACILITY LEASE, AS AMENDED BY AMENDMJBIT NO. 1 AND AMJM3MENT NO.

2 THEIKTO AND AS FURTHJ&

AMENDED BY THIS AMENDMENT NO.

3

THJWETO, HAVE BEEN ASSIGNED TO, AND ARE SUBJECT TO A SECURITY INTEREST XN FAVOR OF FXRST CITY TEXAS HOUSTON N.A FORMERLY FIRST CITY NATIONAL BANK OF HOUSTON AS INDENTURE TRUSTEE UNDER A TRUST INDENTUREi MORTGAGEi SECURITY AGREEMENT AND ASSIGNMENT OF RENTS DATED AS OF DECEMBER 1i 1986 i AS AMENDED.

THIS AMENDMENT NO.

3 HAS BEEN EXECUTED XN SEVERAL COUNTERPARTS.

SEE SECTION 3(e)

OF THXS AMENDMENT NO.

3 FOR INFORMA-TION CONCERNING THE RIGHTS OF HOLDERS OF VARIOUS COUNTERPARTS HEREOF.

THIS COUNTERPART XS NOT THE ORIGINAL COUNTERPART.

THE FACXLITY LEASE, AS AMENDED BY AMENDMENT NO.

1 AND AMENDMENT NO.

2 THERETO AND AS FURTHER AN1M3ED AND CONFXRMED BY THIS AMENDMENT NO.

3 TK&ETQ, GRANTS A SECURITY INTEREST BY A UTXLITY, but only if, contrary to the intention of the parties, it should be so construed.

Such Lease and Amendment Nos.

1, 2,

and 3 thereto are filed as utility security documents as a precautionary matter.

AMENDMENT NO.3 dated as of October 1, 1989 to FACILITY LEASE dated as of December 1,

1986 between THE FIRST NATIONAL BANK OF

BOSTON, not in its Individual capacity but solely as Owner Trustee under a Trust Agreement, dated as of December 1,

1986, with COMMERCIAL FEDERAL INVESTMENT CORPORATION

Lessor, and EL PASO ELECTRIC COMPANY, Lessee Original Facility Lease recorded December 18,

1986, as Instrument, No. 86-699067, as amended by Amendment No.

1 thereto dated as of December 31,

1987, recorded July 18,

1988, as Instrument No. 88-350554, by Amendment No.

2 thereto dated as of May 1,

1988, recorded June 14,

1988, as Instrument No. 88-287754, and re-recorded July 18,

1988, as Instrument No. 88-350558 in the records of the County Recorder of Maricopa County, Arizona THE FACILITY LEASEg AS AMENDED'ONTAINS AFTER ACQUIRED PROPERTY PROVXSIONS 1021.200.2754.01:10

AMENDMENT NO.3, dated as of October 1,

1989

("Amendment No. 3"), to Facility Lease dated as of December 1,

1986, between THE FIRST NATXONAL BANK OF BOSTON, not in its indi-vidual capacity but solely as Owner Trustee under a Trust Agreement, dated as of December 1,

1986 with COMMERCIAL FEDERAL INVESTMENT CORPORATXON, as Lessor

("Lessor" ),

and EL PASO ELECTRIC COMPANY, as Lessee

("Lessee" ).

WHEREAS, the parties hereto have previously entered into the Facility Lease dated as of December 1,

1986, recorded on December 18,

1986, as Instrument No. 86-699067, records of the County Recorder of Maricopa County, Arizona (as heretofore

amended, modified or sup-plemented, the "Facility Lease" ) providing for the lease by Lessor to Lessee of the Undivided Interest and the Real Property Interest; WHEREAS, the Lessee and the Lessor executed an Amendment No.

1 to the Facility Lease dated as of December 31,

1987, recorded on July 18,

1988, as Xnstrument No. 88-350554, 1988 records of the County Recorder of Maricopa County, Arizona ("Amendment No. 1");

WHEREAS, the Lessee and the Lessor executed an Amendment No.

2 to the Facility Lease dated as of May 1,

1988, recorded on June 14, 1988 as Instrument No. 88-287754, and re-recorded July 18,

1988, as Instrument No. 88-350558, in the records of the County Recorder of Maricopa County, Arizona ("Amendment No. 2"); and

WHEREAS, the Facility Lease Facility Lease, as this Amendment No.

the Lessor and the Lessee desire to further amend in certain respects and to ratify and confirm the amended by Amendment No.

1, Amendment No.

2 and 3.

NOW, THEREFORE, in consideration of the premises and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

SECTION 1.

Definitions. For purposes

hereof, capitalized terms used herein and not defined herein or in the recitals shall have the meanings ascribed thereto in Appendix A to the Facility Lease and in the Facility Lease.

Furthermore, the terms defined in this Section 1 shall be added to, and, where appropriate, supersede the terms in Appendix A to the Facility Lease and the Transaction Documents.

"August Letter of Credit" shall have the meaning set forth in the fifth paragraph of Section 10(b)(3)(xvii) of the Participation Agreement.

1021. 200. 2754. 01: 10

"Complying Letter of Credit" shall have the meaning set forth in the fifth paragraph of Section 10(b)(3)(xvii) of the Participation Agreement.

"Eligible Bank" shall mean a commercial bank, trust company in the nature of a bank or United States branch or agency of a for-eign bank (as used herein, a "Letter of Credit Bank" ) not related to the Owner Participant or the Lessee at the time of issuance of any Letter of Credit which shall be (i) Marine Midland Bank, N.A. in the case of the Xnitial Letter of Credit or (ii) any Letter of Credit Bank whose long-term unsecured debt securities (or if it has no long-term unsecured debt securities rated, its long-term deposits) are rated by Moody's at the time of issuance of the Letter of Credit not less than A2, in the case of a United States bank, or Aa3, in the case of a United States branch or agency of a foreign bank, other than a Letter of Credit Bank to which the Owner Participant shall not consent (such consent not to be unreasonably withheld, it being understood that a basis for withholding such consent may be (A) legal or regulatory constraints on the issuance to or holding by the Owner Participant of a Letter of Credit from such Letter of Credit Bank, or (B) policy constraints in effect for the Owner Participant on the issuance to or holding by the Owner Participant of a Letter of Credit of such Letter of Credit Bank (it being understood that no such policy constraints may be applied by the Owner Participant to pre-clude the eligibility of such Letter of Credit Bank as an Eligible Bank unless such policy constraints are then applicable generally to extensions of credit by the Owner Participant or any Affiliate thereof to such Letter of Credit Bank and have been applied by the Owner Participant to the determination of such eligibility without regard to the nature of PVNGS or the transactions contemplated hereby or the identity or credit of the Lessee),

and such Letter of Credit Bank shall continue to be an Eligible Bank so long as its long-term unsecured debt securities (or if it has no long-term unsecured debt securities rated, its long-term deposits) are rated by Moody's at least A3, in the case of a United States bank, or Al, in the case of a United States branch or agency of a foreign bank.

Any Letter of Credit issued by a Letter of Credit Bank that is not incorporated in the United States shall provide that all payments shall be in United States dollars and shall be made in New York, New York, or such other city in the United States as the Owner Participant shall reasonably request.

For purposes

hereof, a Letter of Credit Bank which meets the credit rating criteria set forth above and which has been pro-posed as an Eligible Bank by the Lessee in writing to the Owner Participant no earlier than 120 days prior to the stated expiration date of an existing Letter of Credit (the "Existing Letter of Credit" )

and no later than 35 days prior to such date, shall be deemed to be an Eligible Bank unless, within 15 days of receipt by the Owner Participant of such proposal, the Owner Participant objects in writing to such Letter of Credit Bank.

Once a Letter of Credit 1021. 200. 2754. 01: 10

I F

Bank has qualified as an Eligible Bank with respect to a renewal or replacement Letter of Credit, it shall remain an Eligible Bank for such purpose from the date of its qualification through the stated expiration date of the Existing Letter of Credit (such period, the "Eligible Per'iod"); provided; however, that such Letter of Credit Bank shall cease to be an Eligible Bank 120 days after a reduction in the rating by Moody's of such Bank's long-term unsecured debt securi-ties (or if it has no long-term unsecured debt securities rated, its long-term deposits) during the Eligible Period to less than A3, in the case of a United States

bank, or Al, in the case of a United States branch or agency of a foreign bank.

"Existing Letter of Credit" shall have the meaning set forth in the definition of Eligible Bank herein.

"Initial Letter of Credit" shall have the meaning set forth in the first. paragraph of Section 10(b)(3)(xvii) of the Participation Agreement.

"Issuing Bank" shall mean, with respect to Initial Letter of Credit, Marine Midland Bank, N.A., and with respect any other Letter of Credit, the issuing bank thereof.

"Letter of Credit" shall mean an irrevocable, transferable letter of credit or letters of credit of an Eligible Bank (or some other form of credit support acceptable to the Owner Participant in its sole discretion).

"Letter of Credit Agreement" shall mean, with respect to the Initial Letter of Credit, the Letter of Credit and Reimbursement Agreement dated as of April 1, 1987 between El Paso and Marine Midland Bank, N.A., and, with respect to any subsequent Letter of Credit, the reimbursement agreement governing the rights and obliga-tions of the Lessee and the Issuing Bank.

"Noncomplying Letter of Credit" shall have the meaning set forth in the fifth paragraph of Section 10(b) (3) (xvii) of the Participation Agreement.

"Rating Requirement" shall have the meaning set forth in Section 7(f) of the Facility Lease.

SECTION 2.

Amendments.

(a) Section 7. Section 7 of the Facility Lease is hereby amended as follows:

(i) Subclause (b), entitled "Retirement of Debt," is deleted.

1021.200.2754.01:10

1

(ii) Subclause (d) is amended in its entirety to read as follows:

" (d.) Incurrence of Debt.

Unless (1)

(x) prior to January 3,

1992, a Letter of Credit satisfying the provi-sions of the first two paragraphs of Section 10(b) (3) (xvii) is in effeet or (y) after January 2,

1992, a Complying Letter of Credit is in effect or (2) the Owner Participant shall have drawn the full amount available under any Letter of Credit or (3) the Owner Participant shall otherwise con-

sent, the Lessee shall not, and shall not permit any of its subsidiaries (whether consolidated or unconsolidated) to,

issue, assume or become liable in respect of (A) any Debt maturing more than one year after the date of such issu-

ance, assumption or becoming liable (including current maturities of Debt with an original maturity of more than one year) if, immediately thereafter, (i) the total amount of all Debt of the Lessee and its subsidiaries (whether consolidated or unconsolidated) maturing more than one year after the date of such issuance, assumption or becoming liable (reduced by Cash Available for Investment) shall exceed 70< (or, at any time after January 2,

1992 when there is not in effect a Complying Letter of Credit, 65~o) of New Consolidated Capitalization, in each case as shown on a pro forma consolidated balance sheet on and as of the date of such issuance, assumption or becoming liable, or (ii) the New Coverage Ratio of the Lessee would be less than 1.6 to 1 or (B) any Debt maturing one year or less after the date of such issuance, assumption or becoming liable (excluding current maturities of Debt with an origi-nal maturity of more than one year) if, immediately there-after, the total amount of all Debt of the Lessee and its subsidiaries (whether consolidated or unconsolidated) maturing one year or less after the date of such issuance, assumption or becoming liable shall exceed 12.54 of New Consolidated Capitalization, in each case as shown on a pro forma consolidated balance sheet on and as of the date of such issuance, assumption or becoming liable.

For purposes of the foregoing clause (A), there shall be excluded any Debt which has been legally defeased or for the payment of which funds equal to the principal amount of such Debt have been segregated in escrow.

The following shall not consti-tute the Lessee

issuing, assuming, or becoming liable in respect of any Debt within the meaning of this subclause (d):

(A) any refunding of the debt issued on December 31, 1987 by the lessors in the sale and leaseback transactions relating to Unit 3 at PVNGS; (B) incurrence by Lessee of Debt consisting of reimbursement obligations arising under existing letters of credit, and renewals and replacements 1021-200-2754

~ 01-10

I

thereof, supporting Debt of the Lessee and under the letter of credit, and renewals and replacements

thereof, support-ing obligations of the Rio Grande Resources

Trust, and refinancings of such reimbursement obligations, so long as the principal or face amount thereof is not increased; (C) until the later of (x) the expiration date of the initial renewal Letter of Credit to be provided for the period after January 2,

1992 under Section 10 (b) (3) (xvii) of the Participation Agreement and (y)

December 31,

1994, (i) bor-rowings by Lessee of up to

$ 175,000,000 outstanding at any one time and from time to time under that certain Credit Agreement dated as of October 26, 1989 by and among Lessee, Chemical

Bank, as Agent, and the Banks parties thereto, as such Credit Agreement may be amended, modified, extended and renewed from time to time (herein, the "Credit Agreement" ), or under commercial paper issued by the Lessee as contemplated in the Credit Agreement, and (ii) borrow-ings by Lessee under the existing Rio Grande Resources Trust credit facility of not in excess of $50,000,000 of Debt maturing one year or less after the date of issuance, assumption or becoming liable; (D) until the later of (i) the expiration date of the renewal Letter of Credit to be provided for the period after January 2,

1992 under Section 10(b) (3) (xvii) of the Participation Agreement and (ii)

December 31,

1994, incurrence of up to 9135,000,000 of additional long-term Debt by the Lessee; and (E) refund-

ings, extensions, renewals and replacements of Debt and preferred stock of the Lessee (including for such purposes, without limitation, sinking funds, serial maturities and the like)), so long as the principal or face amount thereof is not increased."

(iii) Subclause (f) is amended in its entirety to read as follows:

"(f) Financial Ratios.

Unless (x) the Owner Participant shall otherwise consent (which may be by way of acceptance of delivery of a Complying Letter of Credit as required by this paragraph) or (y) Lessee is obligated as provided in the immediately succeeding paragraph to main-tain for the benefit of Owner Participant a Complying Letter of Credit through December 31,

1999, Lessee agrees that (i) the New Coverage Ratio of Lessee, determined as of December 31, 1990 and June 30, 1991, shall be not less than 1.6 to 1, (ii) the aggregate Debt maturing more than one year after the date of issuance, assumption or becoming liable (including current maturities of Debt with an original maturity in excess of one year) of Lessee shall not be in excess of 65> of New Consolidated Capitalization, 1021.200.2754.01:10

all as derived from Lessee's financial books and records as of December 31, 1990 and June 30,

1991, and (iii) the aggregate Debt maturing one year or less after the date of such

issuance, assumption or becoming liable (excluding current maturities of Debt with an original maturity in excess of one year) of Lessee shall not be in excess of 12.54 of such New Consolidated Capitalization, all as derived from Lessee's financial books and records as of December 31, 1990 and June 30, 1991 (clause (i) through (iii) above being herein called the "Tests" ).

Lessee shall prepare for and provide to Owner Participant not later than April 1, 1991 and October 1,

1991 (and April 1 and October 1 of succeeding years under the circumstances set forth below) calculations showing whether Lessee has satis-fied the Tests as of December 31, 1990 and June 30,

1991, respectively, and the financial data upon which the calcu-lations were based.

If Lessee has failed to meet the Tests as of December 31, 1990 or June 30,

1991, Owner Participant

may, by written notice to Lessee given not more than 30 days after receipt by Owner Participant of such calcula-tions and financial data, require that Lessee provide, at its expense, a renewal or replacement Letter of Credit for a term of one year following expiration of the Existing Letter of Credit, and complying in all other respects with the fifth paragraph of Section (10) (b) (3) (xvii) of the Participation Agreement.

If Lessee fails to provide such a

renewal or replacement Letter of Credit by December 1,

1991 (or December 1 of any subsequent year),

Owner Participant shall have the right to find a Person acceptable to it willing to issue such a Letter Credit, for the account of Lessee on substantially the same terms as the Existing Letter of Credit, except that. the annual fee payable under such replacement Letter of Credit shall not be more than 200 basis points greater than the annual fee payable by Lessee with respect to the Existing Letter of Credit.

The procedures set forth above (the New Coverage Ratio being determined, and deriving New Consolidated Capitalization from Lessee's financial books and records, as of each such December 31 and June

30) shall be repeated each year until no such renewal or replacement Letter of Credit is required.

If Lessee obtains all authorizations, approvals or other actions by the FERC and NMPSC required in order for Lessee to maintain for the benefit of Owner Participant a

Complying Letter of Credit through December 31,

1999, Lessee agrees to meet the Tests and the Rating Requirement (as defined below) as of December 31, 1998 and June 30, 1999.

Lessee shall prepare for and provide to Owner 1021. 200. 2754. 01: 10

1,

Participant not later than April 1, 1999 and October 1,

1999 (and April 1 and October 1 of succeeding years under the circumstances set forth below) calculations showing whether Lessee has met the Tests as of December 31, 1998 and June 30, 1999, respectively, and the financial data on which the calculations were based.

If (x} Lessee has failed to meet the Tests as of December 31, 1998 or June 30, 1999 or (y) on December 31, 1998 or June 30,

1999, the First Mortgage Bonds or other then comparable long-term senior secured debt of El Paso, excluding any thereof which has the benefit of any credit support, is not rated at least BBB by Standard

& Poor's Corporation or at least BAA2 by Moody's (the "Rating Requirement" ), Lessee shall pro-vide, at its expense, a renewal or replacement Letter of Credit for a term of one year following expiration of the then Existing Letter of Credit and complying in all other respects with the fifth paragraph of Section 10(b) (3) (xvii) of the Participation Agreement.

If Lessee fails to provide such a renewal or replacement, Letter of Credit by December 1,

1999 (or December 1 of any subsequent year, if required),

Owner Participant shall have the right to find a Person acceptable to it willing to issue such a Letter of Credit for the account of the Lessee on substantially the same terms as the then Existing Letter of Credit, except that the annual fee payable under such replacement Letter of Credit shall not be more than 200 basis points greater than the annual fee payable by the Lessee with respect to the then Existing Letter of Credit.

The procedures set forth above (the Rating Requirement and the New Coverage Ratio being determined, and deriving New Consolidated Capitalization from Lessee's financial books and records, as of each such December 31 and June

30) shall be repeated each year until no such renewal or replacement Letter of Credit is required.

If (A)

(x} the first paragraph of this subclause (f) is in effect and (y} Owner Participant does not elect to require the renewal or replacement Letter of Credit as set forth therein or (B) Lessee is unable to provide any xenewal or replacement Letter of Credit required under such first paragraph (if in effect) or the second paragraph of this subclause (f) (if in effect)

, then, unless an Event of Default shall have occurred and be continuing or an Event of Loss shall have occurred or Deemed Loss Event shall have been declared, Lessee shall have the right to

purchase, in the case of clause (A) above, within fifteen days after either (i) notice from Owner 'Participant that it does not elect to require such a renewal or replacement Letter of Credit, or (ii) absent such notice, the expiration 1021.200.2754.01:10

I

of the aforesaid 30-day period, or, in the case of clause (B) above, prior to the seventh day before the expiration of the Existing Letter of Credit, the Undivided Interest and the Real Property Interest for an amount equal to the excess of (x) the greater of (i) Enhanced Casualty Value, determined as of the date of purchase, if such date of pur-chase is a date set forth in Schedule 8 hereto, or on the date set forth in such Schedule next following such date of

purchase, in all other cases, and (ii) Fair Market Sales Value of the Undivided Interest and the Real Property

Interest, over (y) the unpaid principal amount of, and accrued interest since the last preceding Basic Rent Payment Date on, the Notes Outstanding on such purchase date.

If Lessee shall have made such payment and shall have assumed all obligations and liabilities of Owner Trustee under the Indenture and the Notes pursuant to Section 3.9(b) of the Indenture, the Lessor shall, so long as no Default or Event of Default shall have occurred and be continuing, Transfer the Undivided Interest and the Real Property Interest to Lessee.

If Lessee shall have made such payment but shall not have assumed all obligations and liabilities of Owner Trustee under the Indenture and the Notes pursuant to Section 3.9(b) of the Indenture, Owner Participant shall effect the Special Transfer, in which

case, without further act on the part of Lessor or Lessee, (i) the obligation of Lessee to pay further Basic Rent shall be reduced to an amount payable on each Basic Rent Payment Date thereafter, equal to the aggregate amount. of principal, premium, if any, and accrued interest then pay-able on all Notes then Outstanding and (ii) this Facility Lease shall become a security agreement for all purposes of Applicable Law.

In the case of clause (A) above, Lessee shall not be entitled to purchase the Undivided Interest and the Real Property Interest unless Lessee shall have, within five days after (i) receipt by Lessee of the afore-said notice from Owner Participant or (ii) absent such notice, expiration of the aforesaid 30-day period, as the case may be, notified Owner Participant of its election to exercise its right to purchase the Undivided Interest and the Real Property Interest, as described above.

Notwithstanding the foregoing, Owner Trustee, with the consent of Owner Participant, shall be entitled to waive in writing any failure on the part of Lessee to provide a

renewal or replacement Letter of Credit, in which event Lessee's failure to provide a renewal or replacement Letter of Credit shall not constitute an Event of Default and Lessee shall not have the right to purchase the Undivided 1021.200.2754.01:10

0

'0

Interest and the Real Property Interest pursuant to this Section 7(f)."

(b) Section

15. Section 15 of the Facility Lease is hereby amended as follows:

(i) clause 15 (x) is amended as follows:

"(x)(1) Lessee shall fail to pay when due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) any Debt of the Lessee the original principal amount (or equivalent) of which is greater than

$ 5,000,000, and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt; or (2) any other default under any agreement or instrument relating to any such Debt, or any other event, shall occur and such Debt shall become due as a result thereof; or" (ii) the phrase "or Section 10(b) (3) (xvii) of the Participation Agreement" is added after "Section 7(f)" the first, time it appears in clause 15(xi);

(iii) the "."

at the end of clause 15 (xi) is changed to "; or" and thereafter is added the following:

"(xii) a Reimbursement Event of Default (as defined in the letter of credit agreement relating to the August Letter of Credit, as in effect on October 26, 1989) relat-ing to Lessee's failure to maintain the required mainte-nance of equity ratio specified in Section 11 (h) of such letter of credit agreement or Lessee's failure to maintain the fixed charge ratio specified in Section 11 (i) of such letter of credit agreement shall occur during the term of such letter of credit agreement,

unless, within 90 days after notice by Lessee to Owner Participant, such mainte-nance of equity ratio and/or fixed charge ratio provision shall have been amended by the Required Banks (as defined in such letter of credit agreement) to cure such default or such default shall have been waived irrevocably by the Required Banks.

Lessee shall give Owner Participant prompt notice of Lessee's failure to meet such ratio or ratios at the same time notice is given under such letter of credit agreement to Administrating Bank (as defined in such letter of credit agreement)."

(c) Schedule

7. Schedule 7 to the Facility Lease is hereby deleted. 1021.200.2754.01:10

SECTION 3.

Miscellaneous.

(a) Effective Date of Amendments.

The amendments set forth in Section 2 hereof shall be and become effective upon the exe-cution and delivery of this Amendment No.

3 by the parties hereto.

(b) Counterpart Execution. This Amendment No.

3 may be executed in any number of counterparts and by each of the parties hereto on separate counterparts; all such counterparts shall together constitute but one and the same instrument.

(c) Governing Law. This Amendment No.

3 has been negoti-ated 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, except to the extent that pursuant to the law of the State of Arizona such law is mandatorily applicable thereto.

(d) Disclosure.

Pursuant to Arizona Revised Statutes Section 33-404, the beneficiary of the Trust Agreement is Commercial Federal Investment Corporation, a Nebraska corporation.

The address of the beneficiary is Commercial Federal

Tower, 2129 South 72nd

Street, Omaha, Nebraska 68124, Attention: Jeff Bainbridge.

A copy of Trust Agreement is available for inspection at the offices of the the Owner Trustee at 100 Federal Street,

Boston, Massachusetts

02110, Attention of Corporate Trust, Division.

(e)

Amendment No. 3.

The single executed original of this Amendment.

No.

3 marked "THIS COUNTERPART IS THE ORIGINAL COUNTERPART" and containing the receipt of the Indenture Trustee thereon shall be the Original of this Amendment No.

3.

No security interest in this Amendment No.

3 may be created or continued through the transfer or possession of any counterpart other than the original.

(f) Confirmation. The Facility Lease, as amended by Amendment Nos.

1 and 2 and as further amended by this Amendment No. 3, shall remain in full force and effect and the same is hereby ratified and confirmed.

1021. 200. 2754. 01: 10

I

't

IN WITNESS WHEREOF, each of the parties hereto as caused this Amendment No.

3 to be duly executed in New York, New York as of October 1,

1989.

THIS FIRST NATIONAL BANK OF BOSTON, not in its individual

capacity, but solely as Owner Trustee under a Trust Agreement, dated as of August 1,

1986 with COMMERCIAL FEDERAL INVESTMENT CORPORATION By:

EL PASO ELECTRIC COMPANY By:Vice President 1021.200.2754 F 01:10

STATE OF COUNTY OF

)

)

SS

~

The foregoing instrument was acknowledged before me this day of 1989 by William J. Johnson, a Vice President of EL PASO ELECTRIC COMPANY, a Texas corporation, on behalf of the corporation.

NOTARY PUBLIC 1021.200.2754.01:10

C

STATE OF NEW YORK COUNTY OF NEW YORK

)

)

SS

~

)

The foregoing instrument was acknowledged before me this day. of

1989, by g

a of THE FIRST NATIONAL BANK OF BOSTON, a national banking association, on behalf of the banking association as trustee under that certain Trust Agreement dated as of December 1,

1986 with Commercial Federal Investment Corporation.

NOTARY PUBLIC 1021. 200. 2754. 01: 10

When Recorded, Return to:

Greg R. Nielsen, Esq.

Snell

& Wilmer 3100 Valley Bank Center

Phoenix, Arizona 85073 CERTAXN RXGHTS OF THE LESSOR UNDER THE FACILITY LEASE, AS AMENDED BY AMENDMENT NO-1 AND AMENDMENT NO-2 TH%~ AND AS FURTHER AMENDED BY THIS AMENDMENT NO.

3 Tf9&EKO, HAVE BEEN ASSXGNED TO, AND ARE SUBJECT TO A SECURITY XNTEREST XN FAVOR OF, FIRST CITY, TEXAS-HOUSTON i N A

( FORMERLY FXRST CXTY NATXONAL BANK OF HOUSTON) i AS INDENTURE TRUSTEE UNDER A TRUST INDENTURE, MORTGAGE, SECURITY AGREEMENT AND ASSIGNMENT OF RENTS DATED AS OF DECEMBER 1 i 1986 i AS AMENDED.=

THXS AMENDMENT NO.

3 HAS BEEN EXECUTED XN SEVERAL COUNTERPARTS.

SEE SECTION 3{e)

OF THIS AMENDMENT NO.

3 FOR INFORMA-TION CONCERNING THE RIGHTS OF HOLDERS OF VARIOUS COUNTERS'ARTS HEREOF.

THXS COUNTERPART IS NOT THE ORXGINAL COUNTERPART.

THE FACXLITY LEASE, AS AMENDED BY AMENDMENT NO.

1 and AMENDMENT NO-2 THERETO AND AS HHVZHER AMENDED AND CONFIRMED BY THXS AMENDMENT NO 3

TEiERETO g GRANTS A SECURITY INTZREST BY A UTILXTYp but, only if, contrary to the intention of the parties, it should be so construed.

Such Lease and Amendment Nos.

1, 2,

and 3 thereto are filed as utility security documents as a precautionary matter.

AMENDMENT NO.

3 dated as of October 1, 1989 to FACILITY LEASE dated as of December 1,

1986 between THE FXRST NATIONAL BANK OF

BOSTON, not. in its individual capacity but solely as Owner Trustee under a Trust Agreement, dated as of December 1,

1986, with CHRYSLER FINANCIAL CORPORATION Lessor and EL PASO ELECTRIC COKPANY, Lessee Original Facility Lease recorded December 18,

1986, as Instrument No. 86-699074, as amended by Amendment No.

1 thereto dated as of December 31,

1987, recorded July 18,

1988, as Instrument No. 88-350549, by Amendment No.

2 thereto dated as of May 1,

1988, recorded June 14

1988, as Instrument No. 88-287750, and re-recorded July 18,

1988, as Xnstrument No. 88-350550, in the records of the County Recorder of Maricopa County, Arizona THE FACXLXTY LEASE, AS AMENDED, CONTAINS AFTER ACQUIRED PROPERTY PROVISIONS 1021.200.2754.07:8

AMENDMENT NO. 3, dated as of October 1,

1989 ("Amendment No. 3"), to Facility Lease dated as of December 1,

1986, between THE FIRST NATIONAL BANK OF BOSTON, not in its indi-vidual capacity but solely as Owner Trustee under a Trust Agreement, dated as of December 1,

1986 with CHRYSLER FINANCIAL CORPORATION, as Lessor

("Lessor" ),

and EL PASO ELECTRIC COMPANY, as Lessee

("Lessee" ).

WHEREAS, the parties hereto have previously entered into the Facility Lease dated as of December 1,

1986, recorded on December 18,

1986, as Instrument No. 86-699074, records of the County Recorder of Maricopa County, Arizona (as heretofore

amended, modified or supplemented, the "Facility Lease" ) providing for the lease by Lessor to Lessee of the Undivided Interest and the Real Property Interest; WHEREAS, the Lessee and the Lessor executed an Amendment No.

1 to the Facility Lease dated as of December 31,

1987, recorded on July 18,

1988, as Instrument No. 88-350549, records of the County Recorder of Maricopa County; Arizona ("Amendment No. 1");

No.

2 to June 14,

1988, as Maricopa WHEREAS, the Lessee and the Lessor executed an Amendment the Facility Lease dated as of May 1,

1988, recorded on 1988 as Instrument No. 88-287750, and re-recorded July 18, Instrument No.

88-350550, records of the County Recorder of County, Arizona ("Amendment No. 2"); and

WHEREAS, the Facility Lease Facility Lease, as this Amendment No.

the Lessor and the Lessee desire to further amend in certain respects and to ratify and confirm the amended by Amendment No.

1, Amendment No.

2 and 3.

NOW, THEREFORE, in consideration of the premises and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

SECTION 1.

Definitions.

For purposes hereof, capitalized terms used herein and not defined herein or in the recitals shall have the meanings ascribed thereto in Appendix A to the Facility Lease and in the Facility Lease.

Furthermore, the terms defined in this Section 1 shall be added to, and where a

ro riate su ersede the terms in Appendix A to the Facility Lease and the Transaction Documents.

1021.200.2754.07:8

"Initial Let,ter of Credit" shall mean the Letter of Credit issued on May 19, 1988 by the Fuji Bank, Limited, acting through its New York Branch, to the Owner Participant.

"Letter of Credit Agreement" shall

mean, with respect to the Initial Letter of Credit, the Reimbursement Agreement dated as of May 1,

1988, among El Paso, Chemical

Bank, The Fuji Bank, Limited, and the participating banks named therein, and, with respect to any subsequent Letter of Credit, the reimbursement or similar agreement governing the rights and obligations of the Lessee and the Issuing Bank.

"Rating Requirement" shall have the meaning set forth in Section 7(f) of the Facility Lease.

SECTION 2.

Amendments..

(a) Section

7. Section 7 of the Facility Lease is hereby amended as follows:

(i) Subclause (b), entitled "Retirement of Debt," is deleted.

(ii) Subclause (d) is amended in its entirety to read as follows:

"(d) Incurrence of Debt. Unless (1)(i) a Letter of Credit that com lies with all the terms of Section 10 b 3

xvii of the Partici ation A reement is in effect and ii the Lessee meets the Tests and the Ratin Re uirement as re uired in Section 7 f or 2

the Owner Participant shall have drawn the full amount available under the Letter of Credit or ~3 the Owner Participant shall otherwise consent, the Lessee shall not, and shall not permit, any of its subsidiaries (whether consolidated or unconsolidated) to, issue, assume or become liable in respect of (A) any Debt maturing more than one year after the date of such

issuance, assumption or liability (including current maturities of Debt with an original maturity of more than one year) if, immediately thereafter, (i) the total amount of all Debt of the Lessee and its sub-sidiaries (whether consolidated or unconsolidated) maturing more than one year after the date of such issuance, assump-tion or becoming liable (reduced by Cash Available for Investment) shall exceed 70> (or, at any time after January 1,

1992 when there is not in effect a Letter of Credit complying in all respects with the terms of Section 10(b)(3)(xvii) of the Participation Agreement or Lessee shall not meet, the Tests and the Rating Requirement, 1021 '00.2754.07:8

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as required in Section 7 (f), 65<) of New Consolidated Capitalization, in each case as shown on a pro forma con-solidated balance sheet on and as of the date of such issu-

ance, assumption or becoming liable, or (ii) the New Coverage Ratio of the Lessee would be less than 1.6 to 1 or (B) any Debt maturing one year or less after the date of such

issuance, assumption or becoming liable (excluding current maturities of Debt with an original maturity of more than one year) if, immediately thereafter, the total amount of all Debt of the Lessee and its subsidiaries (whether consolidated or unconsolidated}

maturing one year or less after the date of such

issuance, assumption or becoming liable shall exceed 12.5< of New Consolidated Capitalization, in each case as shown on a pro forma con-solidated balance sheet on and as of the date of such issu-

ance, assumption or becoming liable.

For purposes of the foregoing clause (A), there shall be excluded any Debt which has been legally defeased or for the payment of which funds equal to the principal amount of such Debt have been segregated in escrow.

The following shall not constitute the Lessee

issuing, assuming, or becoming liable in respect of any Debt within the meaning of this Section 7(d):

(i) any refunding of the debt issued on December 31, 1987 by the lessors in the sale and leaseback transactions relating to Unit, 3 at PVNGS; (ii) incurrence by Lessee of Debt con-sisting of reimbursement obligations arising under existing letters of credit, and renewals and replacements

thereof, supporting Debt of the Lessee and under the letter of

credit, and renewals and replacements

thereof, supporting obligations of the Rio Grande Resources

Trust, and refi-nancings of such reimbursement obligations, so long as the principal or face amount thereof is not increased; (iii) until the later of (x) the expiration date of the initial renewal Letter of Credit to be provided in 1991 under Section 10(b) (3) (xvii) of the Participation Agreement and (y) December 31,

1994, (a) borrowings by Lessee of up to

$ 175,000,000 outstanding at any one time and from time to time under that certain Credit Agreement dated as of October 26, 1'989 by and among Lessee, Chemical

Bank, as

Agent, and the Banks parties thereto, as such Credit Agreement may be amended, modified, extended and renewed from time to t,ime (herein, the "Credit Agreement" ), or under commercial paper issued by the Lessee as contemplated the existing Rio Grande Resources Trust Credit facility of not in excess of 950,000,000 of Debt maturing one year or less after the date of issuance, assumption or becoming liable; (iv) until the later of (x) the expiration date of the initial renewal Letter of Credit to be provided in 1991 1021.200.2754.07:8

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under Section 10(b) (3) (xvii) of the Participation Agreement and (y) December 31,

1994, incurrence of up to 9135, 000, 000 of additional long-term Debt by the Lessee; and (v) refundings, extensions, renewals and replacements of Debt and preferred stock of the Lessee (including for such

purposes, without limitation, sinking funds, serial maturi-ties and the like), so long as the principal or face amount thereof is not increased."

(iii) Subclause (f) is amended in its entirety to read as follows:

"(f) Financial Ratios.

Unless (x) the Owner Participant shall otherwise consent (which may be in the form of deferral of compliance in the manner set forth below) or (y) the Lessee obtains the authorizations, approvals or actions by the FERC and NMPSC required under Section 7(g) of the Facility Lease dated as of August 1, 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 August 1, 1986, with Chrysler Financial Corporation,

Lessor, and El Paso Electric

Company, Lessee, as amended (the "August Facility Lease" ),

Lessee agrees that (i} the New Coverage Ratio of Lessee, determined as of December 31, 1990 and June 30, 1991, shall be not less than 1.6 to 1, (ii) the aggregate Debt maturing more than one year after the date of issuance, assumption or liability (including current maturities of Debt with an original maturity in excess of one year) of Lessee shall not be in excess of 65% of New Consolidated Capitalization, all as derived from Lessee's financial books and records as of December 31, 1990 and June 30,

1991, and (iii) the aggregate Debt maturing one year or less after the date of such issuance, assumption or liability (excluding current maturities of Debt with an original maturity in excess of one year) of Lessee shall not be in excess of 12.54 of such New Consolidated Capitalization, all as derived from Lessee's financial books and records as of December 31, 1990 and June 30, 1991 (clause (i} through (iii) above being herein called the "Tests" ).

Lessee shall prepare for and provide to Owner Participant not later than April 1, 1991 and October 1,

1991 (and April 1 and October 1 of suc-ceeding years under the circumstances set forth below) cal-culations showing whether Lessee has satisfied the Tests as of December 31, 1990 and June 30, 1991, respectively, and the financial data upon which the calculations were based.

Xf Lessee has failed to meet the Tests as of December 31, 1990 or June 30,

1991, Owner Participant

may, by written notice to Lessee, elect to defer requiring Lessee to comply 1021.200.2754.07:8

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with the Tests for one year. If Owner Participant makes such election, Lessee's failure to meet the Tests shall not constitute an Event of Default hereunder.

The procedures set forth above (the New Coverage Ratio being determined, and deriving New Consolidated Capitalization from Lessee's financial books and records, as of each such December 31 and June

30) shall be repeated each year until Owner Participant ceases to be entitled to make such election of deferral.

If Lessee obtains the authorizations, approvals or other actions required under Section 7(g) of the August Facility Lease, Lessee agrees to meet the Tests and the Rating Requirement (as defined below) as of December 31, 1998 and June 30, 1999.

Lessee shall prepare for and pro-vide to Owner Participant not later than April 1, 1999 and October 1,

1999 (and April 1 and October 1 of succeeding years under the circumstances set forth below) calculations showing whether Lessee has met the Tests as of December 31, 1998 and June 30, 1999, respectively, and the financial data on which the calculations were based.

If (x) Lessee has failed to meet the Tests as of December 31, 1998 or June 30, 1999 or (y) on December 31, 1998 or June 30,

1999, the First Mortgage Bonds or other then comparable long-term senior secured debt of El Paso, excluding any thereof which has the'benefit of any credit support, is not rated at lest BBB by Standard 6 Poor's Corporation or at least BAA2 by Moody's (the "Rating Requirement" ), such failure shall not constitute an Event of Default and the procedures set forth above (the Rating Requirement and the New Coverage Ratio being determined, and deriving New Consolidated Capitalization from Lessee's financial books and records, as of each such December 31 and June

30) shall be repeated each year until the Lessee meets the Tests and the Rating Requirement as required above.

If (x) the first paragraph of this subclause (f) is in effect and (y) Owner Participant does not elect, within 30 days after Lessee shall have furnished Owner Participant the aforesaid calculations and financial data referred to in the first paragraph of this subclause (f), to defer requiring Lessee to.comply with the Tests for an additional year as set forth therein,

then, unless an Event of Default shall have occurred and be continuing or an Event of Loss shall have occurred or Deemed Loss Event shall have been

declared, Lessee shall have the right to purchase within fifteen days after either (i) notice from the Owner Participant that it does not elect to permit such deferral or (ii) absent such notice, the expiration of the aforesaid 1021.200.2754.07:8

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30-day period, the Undivided Interest and the Real Property Xnterest for an amount equal to the excess of (x) the greater of (i) Enhanced Casualty Value, determined as of the date of purchase, if such date of purchase is a date set forth in Schedule 5 hereto, or on the date set forth in such Schedule next following such date of purchase, in all other cases, and (.ii) Fair Market Sales Value of the Undivided Interest and the Real Property Interest, over (y) the unpaid principal amount of, and accrued interest since the last preceding Basic Rent Payment Date on, the Notes Outstanding on such purchase date.

If Lessee shall have made such payment and shall have assumed all obligations and liabilities of Owner Trustee under the Indenture and the Notes pursuant to Section 3.9(b) of the Indenture, the Lessor shall, so long as no Default or Event of Default shall have occurred and be continuing, Transfer the Undivided Interest and the Real Property Interest to Lessee.

Xf.Lessee shall have made such payment but shall not have assumed all obligations and liabilities of Owner Trustee under the Xndenture and the Notes pursuant, to Section 3.9(b) of the Indenture, Owner Participant shall effect the Special Transfer, in which case, without further act on the part of'essor or Lessee, (i) the obligation of Lessee to pay further Basic Rent, shall be reduced to an amount payable on each Basic Rent Payment Date thereafter, equal to the aggregate amount of principal, premium, if

any, and accrued interest then payable on all Notes then Outstanding an'd (ii) this Facility Lease shall become a

security agreement for all purposes of Applicable Law.

Lessee shall not be entitled to purchase the Undivided Interest and the Real Property Interest unless Lessee shall have, within five days after (i) receipt by the Lessee of the aforesaid'otice from the Owner Participant or (ii) absent such notice, 'expiration of the aforesaid 30-day

period, as the case may be, notified Owner Participant of its election to exercise its right to purchase the Undivided Xnterest and the Real Property Interest, as described above.'b)

Section

15. Section 15 of the Facility Lease is hereby amended as follows:

(i) clause 15 (x) is amended as follows:

"(x)

(1) the L'essee shall fail to pay when due (whether by scheduled maturity, required prepayment, accel-

eration, demand or otherwise) any Debt of the Lessee the original principal amount (or equivalent) of which is greater than

$5,000,000, and such failure shall continue 1021.200.2754.07:8

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after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt; or (2) any other default under any agreement or instrument relating to any such Debt, or any other event, shall occur and such Debt shall become due as a result thereof; or" (ii) the "."

at the end of clause 15 (xi) is changed to "; or" and thereafter is added the following:

"(xii) a Reimbursement Event of Default (as defined in the Letter of Credit Agreement relating to the Initial Letter of Credit, as in effect on October 26, 1989) relat-ing to Lessee's failure to maintain the required mainte-nance of equity ratio specified in Section ll (h) of such Letter of Credit Agreement or Lessee's failure to maintain the fixed charge ratio specified in Section 11 (i) of such Letter of Credit Agreement shall occur during the term of such Letter of Credit Agreement,

unless, within 90 days after notice by Lessee to Owner Participant, such mainte-nance of equity ratio and/or fixed charge ratio provision shall have been amended by the Required Banks (as defined in such Letter of Credit Agreement) to cure such default or such default shall have been irrevocably waived by the Required Banks.

Lessee shall give Owner Participant prompt notice of Lessee's failure to meet such ratio or ratios at the same time notice is given under such Letter of Credit Agreement to the Administrating Bank (as defined in such Letter of Cxedit Agreement)."

(c) Schedule

7. Schedule 7 to the Facility Lease is hereby deleted.

SECTION 3.

Miscellaneous.

(a) Effective Date of Amendments.

The amendments set forth in Section 2 hereof shall be and become effective upon the exe-cution and delivery of this Amendment No.

3 by the parties hereto.

(b) Counterpart Execution. This Amendment No.

3 may be executed in any number of counterparts and by each of the parties hereto on separate counterparts; all such counterparts shall together constitute but one and the same instrument.

(c) Governing Law. This Amendment No.

3 has been negoti-ated 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, except to the extent that pursuant to the law of the State of Arizona such law is mandatorily applicable thereto.

1021.200.2754.07:8

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(d) Disclosure.

Pursuant to Arizona Revised Statutes Section 33-404, the beneficiary of the Trust Agreement is Chrysler inancial Corporation, a Michigan corporation.

The address of the beneficiary is Greenwich Office Park I, Greenwich, Connecticut

06536, Attention of Leasing and Investment Services.

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.

(e)

Amendment, No.

3.

The single executed original of this Amendment No.

3 marked "THIS COUNTERPART XS THE ORIGINAL COUNTERPART" and containing the receipt of the Indenture Trustee thereon shall be the Original of this Amendment No. 3.

No security interest in this Amendment No.

3 may be created or continued through the transfer or possession of any counterpart other than the Original.

(f) Confirmation. The Facility Lease, as amended by Amendment Nos.

1 and 2 and as further amended by this Amendment No. 3, shall remain in full force and effect and the same is hereby ratified and confirmed.

IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment No.

3 to be duly executed in New York, New York as of October 1,

1989.

THE FIRST NATIONAL BANK OF BOSTON, not in its individual

capacity, but. solely as Owner Trustee under a Trust Agreement, dated as of December 1,

1986 with CHRYSLER FXNANCIAL CORPORATION By:

EL PASO ELECTRIC COMPANY By:Vice President 1021 '00.2754.07:8

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STATE OF NEW YORK COUNTY OF NEW YORK The foregoing instrument was acknowledged before me this day of October, 1989 by William J. Johnson, a Vice President of EL PASO ELECTRIC

COMPANY, a Texas corporation, on behalf of the corporation.

Notary Public 1021.200.2754.07:8

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~ g STATE OF NEW YORK COUNTY OF NEW YORK SS.:

The foregoing instrument was acknowledged before me this day of October,

1989, by g

a of THE FIRST NATIONAL BANK OF BOSTON, a national banking association, on behalf of the banking association as trustee under that certain Trust Agreement dated as of December 1,

1986 with Chrysler Financial Corporation.

NOTARY PUBLIC 1021.200.2754.07:8

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