ML18192A392
| ML18192A392 | |
| Person / Time | |
|---|---|
| Site: | Palo Verde  |
| Issue date: | 06/30/1975 |
| From: | Public Service Co of New Mexico |
| To: | Office of Nuclear Reactor Regulation |
| References | |
| Download: ML18192A392 (462) | |
Text
UESTION 7 Provide for each participant copies of the 1975 1st quarter, 2nd quar-ter, (and 3rd quarter when available) income and retained earnings statements and balance sheet. Provide the same statements for the most recent 12 months'eriod. Also provide copies of similar statements for the corresponding periods ended in the previous year.
. ~ IUBLIC $ 2%ICE COYPAiT OF MJ MXtCO A%7 SUBSIDIART INXXC CO:SCLIDA~a HZLCIAL STAIKMcBTS 19'9 (SubJect to Tear End Audit Adiustaeats)
COSSOLIDATKD BAIABCE SHEET as of Juae 30 4
COSSOLIDATED STATELXEVt OF EARÃt?lGS ACD RE AIlED EA<VLuCS SL}OÃtHS ESDED June Vl 12 1020> tillh I OKRATIBG RE'?ESUES 19?5 19 74 Electric $ 15,V46~ i33 $ 50003'>26 Utility Plant "
$ 18,681-,725 $ 729139! $ 358,910i585 $ 296 563 o0o Water 913 !190 2.074,".93 1,884,505 Accu>a>lated Provisioa for 619,1!'l275 Depreciation (63,769,228) (56.612.943)
'TO?AL OKRATBV RFilKCJES 61'! ~l6 SI 418 ?4,213.926 61,920. 132 195 141.357 239.950. 266 OKRATIBG EXWGRS 8 paver Purchased and Set Iaterchanded-105,411 (2vs,ssv) (3,'427,623) (1,006,110) 0>lsl IXOIXI07 >0 XINESIISIXS ~54 75S Other Operating and General Expenses 7,181>489 6,V94,00S 30.582,804 23>70098'65 CUPRERt ASSEIS c Yaintenaace 2,468,777 1,630,532 62759>839 4,225,677 Cash 3 29?0 >774 4,086,WB Depreciation and Aaortixation 2,155>8?2 1,976,115 8,322,9?2 ?,138,646 Receivables - Ret 9,427,656 7,144,43JS Taxes (Other than Taxes on Inccae) 1,391,420 1,145,795 4>833,956 4,023,542 . Haterials sad Supplies 10>359>491 9,215,280 Federal and State Taxes on Incoas (44,604) 570,336 3,779>308 2>489,536 Preoaid Expenses 1 >501 >151 941>411 Deferred Incooe Taxes ti' - Set 1,080,249 534,460 29819,396 2,245,079 Deferred Fuel Costs ~1CAI 8 I t ~ lt 1st ~2710 ~14 112 ~Efi4 4 I 927 201 X!X!4 040822 !XXVX TOTAL OKRATIBG OKRATIlt IRCO>C KISSES 14 701544
~46 !f71 it 520
~864 709 61
, ~54
~lo
~535 578~
576 44.v45,516 17 17 616 DKKRRED CHARGES ~44 72 4ag Allovence for Funds Used Durind Constructioo 538,488 163,193 1 >751,720 1 >735,064 0th I * ~ >V *tl, 1st lit 464 134,309 39S;t92 SIOCEROIDERSs EOUITf A%I LIABILITIES XIIXEE I>tOEE ECXEISt 00208 ~IO 02 4 162 121 ~21?9II 469 19 28.472 SZOCEHOLDERS2 Ci~ative Cccmon Stout EQUITI8 Preterre4 Stock $ 40,000,000 22 >133 i970
$ 30,000,000 21,750>230 IÃTET CHARTS c Interest on Ifixsg Tera Debt 2,474,987 1,686,525 7,?48,208 6,760,714 Prmiua and Expense Rctaine4 EaraiaEts 28,240,457 hl 00! Otl ~84IN 27,844,456 Auortixation ot Debt Discount>
Expense aud Pre!atua Other Interest Chardes 40, i03 245,416 340.V34 12,582 141,825 2,065,554 50,(964 1,3v1,586 totfil 01100110 IXI'011177 ~tl 4 . IS 115 x 212 2,v61.106 2,039 (962 9 >955 0597 8,183,144 L0% TKPA DEBT> Less Curreat Yaturities 143 412.C> 108 538 920 2>548,917 2, 122,279 11,843,8v2 11,125,32S RETAINED EARRVA BEGIREI% OF KRICO 40,w8.558 344'7599749 3?,038,485 '2,105,750 CURREf Pi LIABILITIES:
Short Tera Debt 20,550 >000 14,325,000 43,257,485 38,882.028 I 8,882,358 43,231,078 Acco3nsts Payable hi334>892 Current Yaturities of L/2 Debt 740 >48? 637,890 D~ESDS 8 Accrued Taxes E.V69,048 l>513>774 Preferred Stout ?S4,417 539>850 2,446,133 986,400 Accrued Interest 2,118>369 l>522>973 Cccaoa Stout 1.414,97? 1.303.692 5,378,134 5 0205>192 Other 44 2 20!! 7th 20197.394 1.843,542 7,824,267 6 >192,592 tttfii C02215C IXl!IX!X,SS ~527 8 8 ~24 '2 7 IIEtllflEI Eht2006 890 07 122110 541.058.041 637.03K!26 641.058.05l 637,038.486 Averere Sha:es of Cocxsoa Stoc? 23,218,048 19 283.416 Outstaad iud 4.422>955 4,346,856 h,108,181 4,338,510
Ãrt Earainds Per Share of Cccaon Stash $ .40 $ .36 $ 2.13 6331,691,49S 5268 058.701 Effective vith the three acnths ended June 30, 1975, thb Ccapaay adopted the deferred aethod of acccaatinS 7 Ih e fEel adIustaeat clause.
$ 2.34'ote:
As of June 30, 1975 tuel sorts ot $ 1,060 869 and reiate4 iaccoe taxes of $ 535,426 have baca deferre4.
tel tt 1 t OILI hl I ! 0 t Ih Set iaccxsc for the three aoaths and the tvelve aoaths ende4 June 30, 1975 has been iacressed by $ 525,453 ($ .12'per cfixaroa share/. Tl>> yortion of such iocrcass applicable to periods yrior to the three scathe eade4 June 30, 1975 is Isssaterialo
IUBLIC SEtflICB Cot&A!tY OF tZM tKUCO At(D SUBS1DIARY IN?KI! 4t COttSOLIDATED FINt!CIALSTATEttntiS (Subiect to Year En4 Audit Addustnents)
CO'.SOLIDATED, STAT..K:7 0: ?Alan'I~ A?D Rl.>ail. D FAR;ttr~
mZOLIDAi~o?AIArC"-
as S~31 of thrch 19~ 19~4 3 ~6 n?DED 1'arch 31 12 tLtTttS Lt~ tare'h'll OPVATItt REa'ERIES 1975 1975 Electric e 19>275>539 Utility Pant '8 338 810,910 ' 268,026,320 Vater 2 120 ot'6 Ac~lated Provision for Depreciation (61,836,256) . (55,202,752)
T08AL O~KTnar RE'2'ZANIES lo 6% 021 I 471 I ~TI. 52 052 So peb 6 hei Ui ILITT PIA4"I 276,974,654 2Ã,823,568 OFiiATIt~ KXPc tSESr Perer >urehaaed arA Interehanged- 08>t IRor>Y AUD ito>8STM6YS 4,993,070 4>078i929
- 4. t Other Operating and General Ex->>nses (924,065) (266,484) 6,128,834 (3,803,54) 16'577%M 30 > 199,(AD!2 (1,016,61Z) 21>515>951 CUÃtnT ASSE44r Ruin'tc *nce '1258440 ol3,612 5,917,275 3,521,665 Cash 7,370,576 3>993>625 Dcprcci".ion arA ~retention 2>1168850 1 > 958 >623 S,133,215 6>673,239 R>>ccivables - ttet 8,337,818 7>242 '75 Taxes (Other Thad Taxes on Income) 1,242 >501 1>105,896 4,586,331 3,619,026 Fat>>rials arA Supplies 10,627,454 Z,135,L19 Fade.al an4 State Taxes o1 Inca~ 1,6~,803 79. rBI L 530,LLS 2,~s,662 . Prcwid ~naca 1,027,877 535 >405 Defcrre Inecne Tax s - ttet Investncnt Tax Credit - hct ~2" ' 500,508
~
477,85'7>>
4 2,'?! I,'685 2>242,773 L. T>fAL CUR?niT ASS~4 27,363,>SS 18,o06,624 aNaL OPMF~ IBtF ~ES ~~If'a 4'~>98 A, 2,7%,971
, omATI:r, ntcotc ~>v5~ S 31L,698,259 8 258.593.292 Allovanee for Funds Used During Construction 511,828 178,3SO 1,376,425 2>275>619 STOCYBOLDEPS'NITv A!.'D LLaBIL~iES Other Incus>> ard Deductions, Net STOCt2!OIDK?S'. EQUITYt n:cE" pm~a itz R~ ctARCEs ~A>~27 c 4 414~4 ~2~4 ~>t447 8t57 Cumulative Pret'cr.rd Stock 8 40,000,000 S 13>OCO>COO Cora>on Stock 22,102>765 21,723,105 14~8- >ST G2AR>ESr Prentun and Expense 28,275,242 28 > 024 >723 Interc t on Long Tera Debt 1>9>>>>>>792 1,6$ ,1389 6,gQ',637 6,765>227 Retaine4 Earnings o 708 568 36,<25,95 Anortisatio1 of Debt Discount, Ex>ense and Prcnha Other Interest Charges ~4 'L0,760 12,581'ti>7 113,70'6
~n 50>923 TOTAL NOC!0>OLDERS'QUITY Lotrr TEtm D~T> Less Current I 1 0> 575 99,433,634 1
TOIAI ILTER2 T CPARGIS F~turitles . ~t,003,66tL 103824288 612 t~T EAICtitltGS 3>392>294 2,193,637 11,491,178 12>046>859 RrTAnm FARam BEonoatC PERIOD OP 7 ~LN!2 . >>5 80. 10 poo CUHKtT LIABILITIE>8 Short Tera De'bt 6,152,377 21,881,000 4 8417 1 117 0 4? 1!66 . Accounts Pat>able 4,662,645 3,CL6,OS>>
Current Vaturitics o L/T Debt Sx3>r 619,8o2 DIVI 'nPA 8 Accrued Taxes 3P>,669 2>691',693 Preferred Stock C>x=en 5imk 5 20'?
I 14S >850
'0'. 66 ~r5 1,05 Accrued Other Interest 2,0C1, 105 2,795,057 2.135 545 2,020.299 I 07 601 I 451 52! I 485. ~ 17 5 660 805 TOTAL CURREtIT LIABILITIES 20>1592379 32,58,725 KiAnl.aD FAICQiICS ntD OF FntiOD 8 40 245 56( ~SE 285 >26 8 lo 708 N! .".atS 806 Average Shares of C~n Stock Outstanding 4,416,789 4,342,631 4,389,206 4,328>623 S 314,698,259 8 258.595,292 Set Earnings Per Share of Ccc=~ Stock .64 2.65
in the United States to participate in PUBLIC SERVICE COMPANY OF, NEW MEXICO AND SUBSID a $ 1 million residential solar heating Interim Consolidated Financial Statements and cooling research and develop- (Subject to Year End Audit Adjustments) m nt effort. This four year project, I
Iving five new residences in the CONSOLID ATEMEN i cARNINGS uquerque area, is aimed at deter-mining which solar system will offer Three Months Ended Twelve Months Ended the best performance from both the June 30 June 30 1974 1975 1974 1975 consumer and utility viewpoints. Operating Revenues:
Future financing plans call for the Electric $ 18,681,725 $ 15,746,294 $ 72,139,133 $ 60,035,526 issuance of 675,000 shares of common Water 593,890 639,124 2,074,793 1884,606 stock in late September. Proceeds Total Operating Revenues 19,275.615 16.385,418 74,213,926 63,920.332 received from the sale of this stock will be used to reduce outstanding Operating Expenses:
short-term borrowings. Stockholders Power Purchased and Interchanged - Net 105,411 (275,557) (3,427,623) (1,006.110) will be advised by separate letter of Other Operating and General Expenses 7,181,489 6,794,005 30,582,804 23,700,845 Maintenance 2,468,777 1,630,532 6,759,839 4,225,677 the details of this offering on or about Depreciation and Amortization 2,165,872 1,976,115 8/22,972 7,138,646 A MESSAGE TO STOCKHOLDERS September 1, 1975. Taxes (Other than Taxes on Income) 1,391,420 1,145,796 4,833,956 4,023,642 Construction at the San Juan Gen- Federal and State Taxes on Income (44,604) 570/36 3,779/08 2,489,536 erating Station of the second unit, Deferred Income Taxes - Net 1,080,249 534,460 2,819396 2 246,079 rated at 326 megawatts, is approxi- Investment Tax Credit - Net 272,930 145,112 864,924 1 927,201 Earnings for the second quarter of 1975 were $ 0.40 compared to $ 0.36 mately 35 percent complete. The con-struction permit for the third unit, Total Operating Expenses 14,621,544 12.520.799 54,535.576 44,745,516 for the same quarter in 1974. For the rated at 466 megawatts, has received Operating Income 4.654.071 3,864,619 19,678,350 17,174,616 twelve month period ending June 30, Allowance for Funds Used During Construction 538,488 163,193 1,751,720 1,735,064 approval. from the New Mexico Envi-1975, earnings were $ 2.13 compared Other Income and Deductions, Net 117,464 134,309 369399 398,792 to $ 2.34 for a like period in 1974.
ronmental Improvement Agency and Income Before Interest Charges 5,310,023 4,162,121 21,799,469 19.308.472 The first adjustment under the cost from the Federal Energy Administration.
of service indexing concept which A hearing was held on July 24, 1975,. Interest Charges:
before the New Mexico Public Service Interest on Long Term Debt 2,474,987 1,686,526 was approved by the New Mexico 7,748,208 6,760,714 Public Service Commission on April Commission regarding a Certificate of Amortization of Debt Discount, 22 went into effect August 1, 1975.
Convenience and Necessity for Units Expense and Premium 40,703 12,582 141,825 50,844 3 nd 4. With the completion of the Other Interest Charges 245,416 340,734 2.065,564 1371,586 This new concept in regulation allo Total Interest Charges 2,761,10 " 2,039,842 9,955,597 unit in 1978, a total of 769 mega- 8,183,144 quarterly adjustments in the price Net Earnings 2,548,917 2,122,279 11,843,872 11,125,328 electricity based on actual earnings w s, or 70% of PNM's total generating on common equity. capacity, will be provided from coal- Preferred Stock Dividend Requirements 784,417 539,850 2,446.133 986400 During May, negotiations were con-burning generating stations. Net Earnings Applicable to Common Stock $ 1,764,500 $ 1,582,429 $ 9,397,739 310.138.928 cluded with Local 611 of the Interna- By Order of the Board of Directors: Average Shares Common Stock Outstanding 4.422,965 4,346,856 4,408,181 4038.570 tional Brotherhood of Electrical Net Earnings Per Share of Common Stock $ .40 $ .36 $ 2.13 3 234 Workers on a new 2 year labor contract.
Your Company has been selected by the Electric Power Research Insti-tute as one of two supporting utilities A.Q. P.~~
Chairman of the Board/President Note: Effective with the three months ended June 30, 1975, the Company adopted the deferred method of accounting for the portion of fuel costs which is recoverable in subsequent months under a fuel adjustment clause. As of June 30, 1975 fuel costs of $ 1,060,879 and related income taxes of $ 535,426 have been deferred. Net income for the three months and the twelve months ended June 30, 1975 has been increased by $ 525,453 ($ .12 per common share). The portion of such increase applicable to periods prior to the three months ended June 30, 1975 is immaterial.
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY .'a 000 Interim Earnings
~
4 D CrCC Interim Consolidated Financial Statements 4 g 0CC0
~
(Subject to Year End Audit Adjustments)
K 4
Report CO ATED BA SHEET To Assets as of June 30 1975 1974 oE CJ 0
Stockh.olders C C Utility Plant $ 358,910,585 $ 296,563,209 Accumulated Provision for Depreciation (63,769,228) (56,612,943) 4 C c ~ CD 0 ~
4 oaE 4 OO C
0 ffet Utility Plant 295,141357 239,950,266 C EO CI Sog-Other Property and Investments 5,459,758 4,598,948 o C0 gagE z
Current Assets: 0 4 E III V I Cash 3,970,774 4,086,628 <@VICE <
egg,g Receivab!es ~ ffet 9,427,656 7,144,464 ro Materials and Supplies 10,359,491 9,216,280 E
O x0 -s u C Prepaid Expenses Deferred Fuel Costs 1,501,161 1,060,879 941,411 0 z m tn
~ I 00 K o O Total Current Assets 26,319,961 21,388,783 IJI O. O~
III u cx I 0 z pP 4 Ct Deferred Charges 4,729,422 3,060,304 a 0 O o>>'0 +en bA++
0 Eo~
Cl 4
$ 331,650,498 $ 268,998,301 o~4 C cc Ct "xz 0 0 cO O co Ec Stockholders'quity aud Liabilities Oo'gC C 0 DZ Stockholders'quity: K400 Cumulative Preferred Stock 40,000,000 30,000,000 00,480
~c ut oo 0 Common Stock 22,133,970 21,750,230 6 pc " luCt 34 O4it%0 E o 0 cc Premium and Expense Retained Earnings 28,240,457 41,058,091 27,844,496 37,038,486 ) 4 0 a get tr C
PUBLIC SERVICE COMPANY Total Stockholders'quity 131,432,518 116,633,212 -ScÃ0 oY 4 RD 0 OF NEW MEXICO 0 0 0 4IC 0 Long Term Debt, Less Current Maturities 143,472,084 108,538,920 'x>> So Current Liabilities:
0 4>>Eo 04 0 C Do E u a/ac Short Term Debt 20,550,000 14,325,000 z D~ 4 0 Accounts Payable 6,020,600 4,334,892 o '2 cO O.
0c 0 Current Maturities of L/T D 740,487 637,890 s gl cO Q 0C Accrued Taxes 1,769,048 1,513,774 Accrued Interest 2,118,369 1,522,973 0 8 0 o>
Other 2,329,344 8 2,208,224 I nn 0C>>
CI x0 D D '4 QCO Total Current Liabilities 33,527,848 24,542,753 4 o m CI 0 fI c>> lc Deferred Credits 23.218,048 19,283,416 Cs z 0 4 gu F o c~'=
p 0>> C acct
$ 331,650,498 $ 268.998.301 Z CO
+0 -oooo O l 4 0
uDo a 0
4 DC Q(tgoOil(I 9 This report and the financial statements contained herein are submitted for the general information of the stock. 0 0D oceoa holders of the Company and are not intended for use in connection with any sale or purchase of, or any offer or D solicitation of offers to buy or sell, any securities of the Company. O. cO O z Lo EZZ
UESTION 8 Provide for each participant the most recent Officer's Certificate or Net Earnings Certificate prepared in connection with the issuance of mortgage bonds or debentures and showing interest coverage and debt ratio calculations using the most restrictive test set forth in the applicable indenture. Provide copies of the indenture. Provide cal-culations of net earnings and interest coverage for the most recent twelve months'eriod using the definitions of net earnings and annual
-interest requirements (on debt presently outstanding) using the most II restrictive test set forth in the mortgage bond indenture. Assuming a range of interest costs considered realistic by the utility, state the additional amount of first mortgage bonds which could be issued under the most restrictive test based on net earnings as defined by the indenture for the most recent twelve months'eriod.
If the corporate charter contains a preferred stock coverage require-ment, provide copies of that portion of the charter. Assuming a range of dividend yields considered realistic by the utility, state the 'ad-ditional amount of preferred stock that could be'ssued by applying the most restrictive test for preferred dividend coverage for the most recent twelve months'eriod.
ANSWER TO GUZSTION 8 A. Net Earnings as of August 31, 1975 (section 3.05, Indenture):
') Gross Operating Revenue (Electric and Water, Previous 12- Months) $ 78,117,300
- 2) Operating Expenses (Before State 6 Federal Income Taxes) (49, 934,000)
- 3) Net Non-Operating Income (Other + A.F.D.C. or 15% of 1) - 2),
. whichever is smaller 2 361 000 Net Earnings $ 30,544,300 Interest Requirement 1st Mortgage $ 8,971,100 Indenture Coverage 3.4 B. Additional amount of 1st M~ort a e that can be 'issued assuming a 9 1/8% interest rate:
Interest Requirement 8,971,100 + x Where x = Additional interest allowed 6,301,000
.09125 y = $ 6,301,000 y = 69,053,000 Where y = Additional amount of 1st mortgage 699053,000
Question 8 (continued)
C. Additional amount of Preferred Stock that could be issued using the most restrictive test, assuming a Preferred Dividend rate of 10.12% as of August 31, 1975:
Coverage II (Articles of Incorporation, Article Fourth, Paragraph E, Item (2) (a) (II).
Coverage II = Income Before Interest + Pro ected Tax Savin s Preferred Dividend + Annual Interest Requirement Minimum Coverage = 1.5 Income Before Interest = $ 22,707,500 Tax Shvings = Tax Rate (Proforma Interest-Previous 12 month Interest)
.505 -.($ 9,893,500 8,300,700)
$ 8045400 Interest and Preferred Dividend Requirement:
Preferred. Dividend Requirement $ 3, 171,400 1st Mortgage Interest Requirement 8,971, 100 Pollution Control Bond Interest 8861400 Other Long Term Debt 36 000 Total $ 13,064,900 1.5 = $ 22 707 500 + 804 400
$ 13,064,900 + x Where x = Additional Preferred Dividend allowed = $ 2,609,700
. 1012 y = $ 2,609,700
= $ 25,787,000 Where y = Additional Preferred Stock = $ 257787,000
PUBLIC SERIHCE CO!O'A.'lY OF tied hEXZCO Nct Earnings Cartifi.cate I, B. D. Lackey, an accountant appointed by the Board of Director" of Pi'JBT.ZC SER'/ZCr". COhPAttY Or I.r;,f KXZCO (Hereinafter called the "Co~any'-')
DO tK. "-BY CERTIFY:
(A) That the Nat Earnings of thc Company for tha period of twelve (12) consecutive months ending January 31, 1975, confuted pursuant to Section
'1.06 of its Indenture of h:ortgagc and Deed of Trust dated as of June 1, 1947, (hereinafter called the "Indenture" ) to Irving Trust Coapany, as Trustee, were as follows:
(1) Gross Op rating Revenues, Derived fran t'e Electric and Vater Business:
Electric $ 66,8O8,82O
>tater ~2 114<637 Total Operating Revenues @8,923,457 (2)'perating Expenses of the Electric and Vater Business:
Power Purchases for Resale $ (3,663,'877)
Production and Distribution Expenses 23,229.,576 Yaintanancc and Repairs 'p794p560 Provision for Depreciation ,8,O27,442 Excess of Standard of Expenditure Over Depreciation and l~nintenance par Book" General AcMnistiative Expense 5,985,982 Taxes, other than Income Taxes 4 >llv a9v Total Operating Expenses 4~4s Ma Bo Operating Income $ 25,O62,477 (3) Het tton-Operating Income Z.,7O4,8O7 (4) liat Operating Revenue Derived fran Sources Other than those Included,in (1) Above: NOltE ttet Earning of the Company $ 26~767~284
(B) That the annual interest requirements upon (1) All Bonds outstanding (as defined in the Indenture) at thc date of this Certificate, namely, $ 4,964,000 principal amount of 2-7/8",r Bonds; $ 3,950,0"0 principal amount of 3~> Bonds; $ 2,460,000 principal a~unt of 3-5/8",~ Bonds; $ 3,200,000 principal amount of 3-3/4~~
Bonds; $ 9,240,000 principal a.",a:nt of 4-3/G.",~ Bonds;
$ 10,460,MO princi"al ageist of 4-7/8;i Bonds;
$ 19,180,000 principal craunt of 5-7/8",> Bonds;
$ 14,850,000 principal a"iunt on 7-1/4+~ Bond":
$ 20,0CO,OOO principal a.:o at o. 7-1/2.",>,
$ 20,000,000 principal a".aunt of 8-1/8$ Bonds; is '$6~713p015.00, (2) Bonds now applied for in the application in connection with which this Ccrti ica e is nndc end those applied for in any other pending applicat.on; rar ly,
$ 25,000,000 princ'pal smunt of 9-1/8~ Bonds, is $ 2,281,250.00 (3) The princiapl ~a.uzt of all othe" indebtedness (except indebtedness secured by prepaid lions) outstanding on t'e date o thi" Certizicat and secured by a prior 1'cn (as s 'ch term ' defined. in
'the Indenture ) c..cept any indebtedness for thc pay-ment, re ircmcnt or redawption of which the Bonds now being'applied for arc to bc issued, is 19 760.81 Total Annual Interest requirements on (1), (2) and (3),above" $ 9,014,025.81 That thc Net Earnings of the Company as shown in Clause (A) above are more than two times thc annual interest requirements as shown above.
(C) Tnat I have read Sect'ons 1.06, 3.05 and 3.06 oz the Indenture end the relevant definitions co.".tained '.". said'ndenture of the terms therein used; the nature and scope of the examination or inrcsti.gation upon which tne state-ments contained in this Certificate are based, aze as follows: I have either person~~ y or through onc or more comp teat employees of the Company caused an examination to be made of the records and boo!cs of the Comoany for aH.'wttcrs appearing therein relevant to the statements contained in this Certificate; in my opinion I have aude sucn an examination or investigation as is ncccssary to enable me to express an informed opinion -as to thc matter" set forth in thi" Certificate and as to whether or not the conditions or covenants prescribed by Section 1.06, Section 3.05 and sucdivision (6) of Section 3.06, of thc Indenture have been complic'd wi h; and that in rvy opinion, said conditions or covenants have bccn complied with.
IN 31ZTtKSS LGEEOF, I have executed t'his instrurent this 31st day of January, "975.
SCiKDULE A PUBLIC SERVICE COiPA'.IY OF t~r..f iF'<ZCO Co.. utation of Gross Oocrctinc: Revenue"
, and Standard of'ffendi.turc For Twelve i'.onths E3>din.", January 1 1 75 Gross Revenue $ 68,923,457 Less:
Polar Purchases for Resale (3,663,877)
Rental PaM for Leased.
Properties 181,811 Interdepartmental and, Division Sales ~318 51 Total Deductions (3,163,715)
Gross Operating Revenue Ac/usted 7230873172 Add:
Rentals received or accrued for use by others of Company generating, trans-mission and/or distribution facilities 301 7 Gross Operating Revenue $ ~28~1. 1 10$ of Gross Operating Revenue 8~7. 2 8. 15 Standard of Expenditure $ ~238 9X%
.STATE OF HE1 hEXICO )
)ss COUi."TY OF BBClALILLO )
On this 14th day of Narch, l975, before me personally appeared B. D. LACKEY, who, upon being duly sworn, did depose and say that he is an Accountant appointed by the Board of Directors of Public Service Coma~ of Nev Ilexico; that he has read the foregoing Certificate subscribed by hia and knocks the contents thereof, and that the, sane is true.
f ota'ry Pu+>1 tQ Commission Expires:
7'
since we are now a "summer peaking" itional financing in the fall of this Company. possibly a combination of equity For 1975 year to date, electric usag debt issues, depending upon market is up 11.45o/o, while within that increased conditions.
percentage usage of energy, industrial PNM continued its commitment to R&D sales are up 3.04</>o. As the economy activities through participation in the Elec.
recovers, it is obvious that our require- tric Power Research Institute, EPRI. EPRI ments will be much greater as the indus- now has 265 projects under way repre.
trial sector begins to operate at close to senting a research commitment of 120 capacity. We are fortunate here at PNM million dollars from 500 companies. Indi ~
and in New Mexico to be ready to supply vidually, the Company is continuing its service. Because of the financial crunch interest in geothermal energy production, and construction cutbacks in other areas particularly in the Valle Grande area, and of the nation, we believe that some of our is currently involved in active studies with national economic recovery could well be Union Oil Company regarding this pros.
energy limited. Herein lies an opportunity pect. Solar R5D has received special for our State to attract job creating clean emphasis, especially in light of the attrac.
industries because we have energy avail ~
tive idea of solar. assisted heat pumps. An able now. It is becoming increasingly clear interesting experiment by PNM was con-that there is an electric energy economy ducted during this year utilizing waste coming. Hence, your Company has adopted automotive crank. case oil burned at Prager a new slogan this year, "Electricity... Station. The results were satisfactory important today, essential tomorrow." enough to justify continued effort to see During the spring of 1974 your Com- if this can become a supplementary source pany sold 170,000 shares of Preferred of boiler oil even though only 2.8o/o of Stock at a rate of 9.2o/o resulting in funds our total kilowatt hour requirements were available to the Company of some 16.8 supplied from oil fired generytion during million dollars. In September of 1974, 1974, whereas 51% of our energy was subject to the Company's guarantee, the from coal and 46.2o/o from natural gas.
City of Farmington issued 55 million dol. We believe the San Juan Mine reclamation lars worth of industrial revenue bonds to program to be one of the finest in the provide funds for the Company to con. United States and certainly leaves an struct pollution abatement equipment for attractive landscape upon completion of San Juan Units gl and g2. During 1974 approximately 7.6 million dollars of 55 million was expended for construction~
t~ reclamation. We estimate the cost of mation to be about $ 3,000 to $ 4,000 acre.
The balance of funds will be used as the 1974 was the first full year for opera-pollution control facilities are built; we tion of our Bernalillo Division. We are anticipate about 20 million dollars of these pleased to be a more direct participant in funds to be utilized during 1975. In the that community and look forward to being early part of this year you are undoubtedly a partner in Bernalilfo's future. We are aware your Company issued 25 million pleased to report to you that the Company dollars worth of 30 year First Mortgage received a 25 year electric fianchise and Bonds at a coupon rate of 9~/so/o and 10 a five year water franchise from the City million dollars worth of 10.12o/o Pre- of Santa Fe. During the next five years, ferred Stock. The Company anticipates we look forward to amicably determining
a long term solution to the Santa e expenses of 1.8 million dollars dur-water supply situation. g 1974.
After integrating the information, a Construction additions during 1974 of which I have just related in a very amounted to some forty.five million dol-summary form, and looking to the future, lars, a 16% increase in our plant. Twenty-our present best judgment informs us that five million dollars of this increase related the demand for electricity will continue to to generation and transmission, particu.
grow at the 9% plus rate. To meet this larly the San Juan second unit and the demand, the Company has scheduled a Ojo 345 KV Transmission Line which completion of the second San Juan Unit extends from the San Juan plant into the for December 1976. The long and tedious northern New Mexico area. In December process of building a nuclear plant has of 1974, a $ 3.5 million dollar water fil ~
been pursued in accordance with our prior tration plant for the City of Santa Fe was announcement. After considerable resource placed into commercial service.
and load requirement studies, however, During 1974 we were under the influ.
the commercial operation date of the three ence of the oil producing nations'artel units of that project have been resched. which resulted in a significant impact on vied to begin in May of 1982, '84, and '86. the consumption of energy by our cus.
In the interim between the completion tomers. We believe we have experienced of the second unit at the San Juan and the major portion of that impact and the commercial operation of the Arizona believe that our consumers have done a Nuclear Power Project, we intend to pro. good job of reducing their unnecessary ceed with the development of the third and uses of energy. Conservation's initial fourth units at San Juan. As has been impact has been an apparent one time stated many times, Public Service Com. major reduction. Despite that effort, how.
pany of New Mexico is indeed fortunate ever, the peak requirement for service to have adequate coal and water in the from your Company grew to 583,000 kilo.
San Juan area to sustain these four units watts during 1974, an increase of 9.5%,
well into the 21st century. whereas, our requirements for kilowatt As I mentioned earlier, peak demand hours of energy was up only 4.8%. Inci ~
growth and the kilowatt hour sales growth dentally, nationally, the requirement for have reaffirmed our forecast of facilities kilowatt hours did not grow in 1974 needed in the next ten years. Expenditures over 1973.
on these facilities are estimated to be If our peak is growing at a 9>/z% rate
$ 750 million in the next five year nd energy sales at a 4.8% rate, we are would like to pause just a moment aking less efficient use of our facilities.
point out the significance of this projec d Therefore, since we have unused produc.
growth to your Company. In the 28 years tion facilities available a good portion of since this Company's founding, we have the year, it is apparent that there are accumulated a gross investment of $ 327.8 opportunities to improve efficiency.
million. Now we project that in the next Improvement in efficiency can occur by five years we will spend about two and one.
half times as much money as we spent selective encouragement and education of in the first 28 years of our existence. These our consumers as to the proper use of figures are truly sobering in these troubled electricity. One of which may well be the economic times, but we have restudied solar-assisted heat pump, particularly
grim foundation indeed upon which to and recalculated our projections several build the financing structure necessary mes, and these are the requirements.
provide the funds to build the new fa We anticipate that we will be required ties required by our consumers. With raise approximately 500 million dollars improvement in earnings, the implication from external sources to meet this con.
of inability to finance and, therefore, in struction budget. And that leads me to a the lack of facilities to supply electricity, point I would like fo spend a little time would be an immediate prospect. discussing with you this morning. As you Fortunately, on November 7, 1974, will recall, Mr. Schreiber advised you last your Company, in accordance with a Court year at this meeting that Public Service agreed stipulation, was allowed to place Company filed a rate case with the New the rates, filed some twelve months prior, Mexico Public Service Commission in into effect. The new rates are now provid- December, 1973.
ing a portion of the needed increase in After an Order, which we considered revenues. An improvement in earnings is completely insufficient, was issued in slowly occurring. For the twelve months October, 1974, the Company filed an ending in March, 1975, earnings were appeal in the Santa Fe District Court. After
$ 2.12 per common share. the appeal was filed, the parties to the Expenses increased some 7.9 million case began exploring the possibility of dollars in 1974, due primarily to the settling the case on the basis of an inno.
rapidly accelerated costs of natural gas, vative regulatory procedure which had been high labor and maintenance costs, and briefly explored in the principal rate case.
significantly increased costs of money Rather than go through the details of the used to finance even more expensive negotiations and proposed settlement, suf.
facilities. Of particular note is the fact fice it to say that the Commission on that PNM's average cost of natural gas March 5 and March 6, 1975, held a public skyrocketed from 27) a million BTU dur. hearing on the cost of service index pro-ing 1973 to 50< during 1974, and we cedure agreed upon and supported by the have not seen the end yet. Our cost of intervenors, the Commission staff and the coal remained level during the two years Company management. On March 7, the at about 25' million BTU. We anticipate Commission announced its intent to adopt some increases in the cost of coal in the this procedure and signed a final Order future, but we do not expect acceleration on April 22, 1975. As mentioned, the in its cost at anywhere near the rate we procedure is completely innovative to New
~
have seen for natural gas. While our costs Mexico and to the Public Service Company of labor have increased, it is importan~ New Mexico. Neither your Company's report to you that as of 1974 we anagement, the intervenors who inci ~
some 50 employees under our budgeted dentally strongly opposed much of the requirements, which is a tribute to the effectiveness of the employees on the job. in 1973 Company's original request for rate relief nor the Commission would For instance, through the efforts of those seriously consider such an approach dur.
responsible for obtaining power sales and ing ordinary economic times. But, as I interchange contracts and the skill with reiterate, these are not ordinary times, which our system operators schedule especially in light of inflation and the energy from our system, your Company Company's tremendous capital expendi ~
achieved a net reduction of operating tures projected over the next five years. At
a time when many electric utilities are unable to finance new construction at price of capital, it occurred to those of involved that perhaps a new regulatory procedure which provides for rapid quar.
terly review would substantially enhance the financing of our construction program
~~ t(Mr. Geist)
Thank you Mr. Schreiber.
Good Morning Ladies and Gentlemen it's a privilege for me to add my wel come to you to this 1975 Annual Meeting of the Shareholders of Public Service Company of New Mexico. Last year, Mr.
~
and the financing of this construction pro. Schreiber concluded his speech by quoting gram at significantly lower costs of capital from Charles Dickens, "It is the best of than would otherwise be available. As you times, and it is the worst of times." Cer-know, the most serious effect on the utility tainly, the events of this past year have industry over the past few years has been proven Mr. Schreiber prophetic. Mr.
their inability, due to inflation, to earn the Schreiber had the privilege last year of return on equity which they had been reporting to you regarding 1973, a banner granted by the regulatory commissions. year; yet in anticipation of the worst of Hence, the cost of service index is an times, he reported that your Company, in attempt to assure that combined with good late 1973, had filed a request for an management practices, the Company will increase in rates with the New Mexico have an adequate opportunity to earn the Public Service Commission anticipating minimum required return on equity. This a precipitous decline in our earnings in will be accomplished, after independent 1974. The decline did in fact occur. 1974, accounting verification, by making quar- like 1973, however, turned out to be a terly adjustments to the electric rates banner year, but in terms of problems, based on the previous quarters'ctual not only for your Company but for the earnings. Not only do we think this will electric utility industry in general. In addi-give us a better opportunity to earn the tion to general problems, we were partic.
equity rate demanded by investors in order ularly saddened in 1974 at the loss of for those investors to provide us with your Company's first President and Direc.
necessary funds, we think those investors tor Emeritus, Mr. Arthur Prager. Not too will demand less return because of this long thereafter we were shocked at the rapid regulatory review process. It is death of our Director, Mr. Robert Tripp, further our opinion, and the opinion of the one of the most highly respected business leading utility financial experts in the leaders in the State of New Mexico.
nation, that this procedure will allow us However, as 1974 was a banner year to maintain our double A bond rati terms of problems, it was a banner year during a time when many utilities, es terms of the performance by our cially those in rapid growth areas, a ployees as they faced tough times with being down rated. It is our best estimate good results and brought forth some long.
that based on the capital we must raise in term solutions to major problems. I would the next five years, the indexing procedure like to now review with you some of the will result in the Company's cost of capital results of 1974 and early 1975 and dis.
being some $ 130 million less in the next cuss our view of the future.
thirty years than it would otherwise have Earnings for 1974 were $ 1.95 per been. This savings is a direct saving to share versus $ 2.81 for 1973, a precipitous the customer who, under conventional reg. drop indeed. These 1974 earnings rates, ulatory procedure, would have had to pay if they are not improved, will provide a
fact, every one of our consumers that they these additional costs. We are proud to be have a stake in the continued success articipant in this innovative experiment operation of Public Service Company. truly think it is a reflection on the by our being successful... and succe namism of the Company and its ful covers many things... will our con employees.
sumers have the electric energy they will I don't really know how to say the require for the coming electric economy. following, except I think I would be remiss We, your employees, are disappointed if I didn't report to you that I sincerely in the operating results of 1974. Earnings feel that few other companies would have per share for the calendar year were had the manpower, the initiative, and the
$ 1.95 per share; this compares to $ 2.81 reputation to embark on such an experi ~
for 1973. ment. We are proud that it is our State We were aware in late 1973 that, due and our Company who are providing the to increased costs of labor, material and financial electric light at the end of the capital, we would need increased reve. tunnel, the ultimate result of which is the nues and, as you know, filed for permis most economic way to assure adequate sion to increase revenues. Mr. Geist will energy to our consumers. Today, doing cover the rate proceedings in detail in his the best job for consumers is the key to report to you on 1974 operations. not only success but survival.
I must mention that in the past year This ability to serve to a great extent each Manager, Department Head and grows out of the leadership of Mr. Schrei ~
Supervisor was challenged to reduce costs ber, Reeves and Prager and we owe them and expenses. Your management actually our thanks.
set firm dollar amounts of reduction in So, in concluding, I think we can say costs and expenses that were to be we have weathered the worst of times, and achieved... quotas, if you please. Reports are looking forward to contributing to and were required twice, with the final report being in the forefront of the best of times.
due in January, 1975. In every case, Thank you for your attention.
reductions by Managers, Department Heads, and Supervisors in cost and expenses exceeded assigned quotas. (Mr. Schreiber)
Nineteen seventy. four was truly a year Thank you, Jerry.
of complete team effort. As Andrew Car- Are there any questions?
negie, the steel baron of the early 1900's As Jerry mentioned unlike some of once said, "Take away the steel the iron and coal deposits people, and we'l rebuild." The but leave ~
mills-sa~
ur sister utilities e form of coal your Company is eed fortunate to have sufficient fuel in under our control-applies to your Company. Our people to make the electricity that our consumers proved last year that they are among the will require for some time in the future.
best in the country. We are also fortunate that we have the Now, I'l turn the platform over to personnel to meet the challenges of today Jerry Geist who will discuss some signifi ~
and tomorrow. We have a dedicated group cant details in regard to where we'e been who are committed to the successful in the past year and where we'e going. operation of your Company.
Jerry. With the approval of the "indexing con.
cept" by the Public Service Commission
which Mr. Geist has explained we (Mr. Schreiber) hope that some of the uncertainties reg ing raising the necessary capital may h OD MORNING.
been overcome, and we stand ready o First, I want to welcome all of you to meet the challenges of the coming years the 28th Annual Meeting of Stockholders as we are convinced that with the oil and of Public Service Company of New Mexico.
natural gas problems that our country is Speaking for your management, we are facing, the future must be electric. extremely pleased so many of you are At the Directors'eeting at the con.
elusion of the Stockholders'eeting, your attending this meeting as only by having an informed group of stockholders as well management is going to recommend some re assignments, re.alignments, and re or-as employees and consumers, can we-at your Company accomplish the tasks ganization of some duties and responsi bilities which, we believe, will use the
~
before us... the legal obligation to pro.
vide adequate electric and water service strength of our people to the benefit of in our service areas.
your Company for the future. It's your Your Company has made a major change employees who have really done the job in it's Public Information Program. We have and will continue to do the job for the discarded what has been referred to as the coming electric economy. "low profile" where we just went about our Before adjourning this meeting, let me business, tried our best to do a good job, say that we are optimistic as to the future and kept our "light under a basket" and of the electric industry and your Company. hoped that the public and our consumers While it is true that there are and will appreciated the job that was and is being continue to be problems, we are confident that the future must turn more and more done. You have noticed I hope the change in our advertising. We are trying to electricity for the energy that our to explain our business... all phases...
country and our area will need to main.
tain and improve our productive capacity must make a profit the reasons for our decisions why we the planning that As Jerry said and standard of living.
we sincerely believe is necessary for a utility what we are doing to protect and improve the environ.
in our new slogan... "Electricity Important Today... But Absolutely ment etc.
We are aware that it will be a long and Essential Tommorrow." sometimes a frustrating campaign but we intend to pursue it to the best of our
'lity. Uninformed consumers or any nformed group will oppose change, so e Public Information Program is pro.
ceeding on the premise that with knowl ~
edge, people will accept change. And, believe me, in our industry and in your Company, there are going to be many major changes in the coming years.
Our aim is to inform the public... all segments... blue collar union nonunion white collar the professional groups the news media etc.; in
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY Interim Consolidated Financial Statements (Subject to Year End Audit Adjustments)
March 19, 1975, the sale of 100,000 ares of 10.12% Cumulative Preferred CONSOLIDATED DAIAHCE SHEET Stock and $ 25,000,000 of 9t+% First Mortgage Bonds due 2005 was completed.
Assets Net proceeds of approximately $ 34,650,000 March 31 were used to repay short. term borrowings.
1975 1974 On March 7, 1975, the New Mexico Public Service Commission announced its Utility Plant $ 338,810,910 $ 288,026320 decision to allow PNM to implement a rate AccumuIated Provision for Depreciatioii (61,836,256) (55,202,752) review procedure called "cost of service I(et Utility Plant 276,974,654 232,823,568 indexing." Indexing will provide for quarterly adjustments in the price of elec.
Other Property and Investments 4,993,070 4,079,929 tricity sold to PNM consumers based on actual earnings on common equity. For a Current Assets: more detailed analysis of indexing as it Cash 7,370,576 3,993,625 applies to PNM operations in the future, Receivables - Net 8337,848 7,242,375 Materials and Supplies see the text of the following address to 10,627,454 7,135,419 Prepaid Expenses 1,027,877 the stockholders by J. D. Geist, Executive 535,405 Vice President.
Total Current Assets 27,363,755 18,906,824 Construction is well underway on the Deferred Charges 5366,780 2,782,971 second coal-fired unit at the San Juan Generating station. This 345 megawatt
$ 314,698.259 $ 258,593,292 addition to San Juan is scheduled for corn.
mercial operation in December, 1976 which Stockholders'quity and Liabilities will bring to 70% the total coal-fired gen-Stockholders'quity: eration capacity available to PNM customers.
Cumulative Preferred Stock $ 40,000,000 $ 13,000,000 Revised water rates for service in Santa Common Stock 22,102,765 21,723,105 Fe and Las Vegas were approved by the Premium and Expense 28,225,242 28,024,723 New Mexico Public Service Commission on Retained Earnings 40,708,568 36,685,806 April 15, 1975. The new rates are expected t
Totai Stockholders'quity 131,036,575 99,433,634 to produce an additional $ 254,000 annually from water operations.
Long Term Debt, Less Current Maturities 142,003,660 108,249,612
' By Order of the Board of Directors:
Current Liabilities:
Short Term Debt Accounts Payable 6,152,377 4,662,645 21,881,000 3,046,096
~ A.g. P.4 Current Maturities of L/T Debt 863,506 619,892 Accrued Taxes 3,684,689 2,891,893 Chairman of the Board/President Accrued Interest 2,001,105 2,135,545 Other 2,795,057 2,020,299 Total Current Liabilities 20,159379 32,594,725 Deferred Credits 21,498,645 18315,321
$ 314,698,259 $ 258,593,292
PUBLIC SERVICE COMPANY QF NEW MEXICO AND SUBSIDIARY Interim Consolidated Financial Statements (Subject to Year End Audit Adjustments)
CONSOLIDATED STATEMENT OF EARNINGS Three Months Ended Twelve Months Ended March 31 March 31 1975 1974 1975 1974 Operating Revenues Electric $ 19,275,539 $ 15,101,417 $ 69,432,026 $ 57,627,838 Water 381,382 379,496 2,120,026 1,626,820 Total Operating Revenues 19,666,921 16,471,913 71,552,052 59,254,658 SPEECHES AT THE Operating Expenses:
Power Purchased and Interchanged - Net (924,065) (286,484) (3,808,594) (1,016,617)
ANNUAL STOCKHOLDERS'EETING Other Operating and General Expenses 8,326,806 6,428,834 30,199,642 21,515,951 by Maintenance 1,125,440 913,612 5,917,275 3,521,665 Depreciation and Amortization 2,116,850 1,958,623 8,133,215 6,673,239 G. A. SCHREIBER Taxes (Other Than Taxes on Income) 1,242,501 1,105,896 4,588,331 3,819,026 Federal and State Taxes on Income 1,699,808 796,991 4,530,445 2,996,862 CHAIRMAN OF THE BOARD/PRESIDENT Deferred Income Taxes ~ Net 500,508 477,854 2,247,885 2,242,773 Investment Tax Credit - Net 84,565 89,541 780,665 1,881,779 and Total 0 perating Expenses 14,172,413 11,484,867 52,588,864 41,634,678 J. D. GEIST Operating Income 5,484,508 3,987.046 18,963,188 17,619,980 EXECUTIVE VICE PRESIDENT Allowance for Funds Used During Construction 511,828 178,380 1376,425 2,275,619 Other Income and Deductions, Net 101,217 169.717 385,897 151,458 of Income Before Interest Charges 6,097,553 4,335,143 20,725,510 20,047,057 PUBLIC SERVICE COMPANY Interest Charges:
OF NEW MEXICO Interest on Long Term Debt 1,926,792 1,688,138 6,966,637 6,765,227 APRIL 22, 1975 Amortization of Debt Discount, Expense and Premium 40,720 12,581 113,704 50,923 Other Interest Charges 737,747 440,787 2,153,991 1,184,048 Total Interest Charges 2,705,259 2,141,506 9,234332 8,000,198 et Earnings 3,392,294 2,193,637 11,491,178 12,046,859 Preferred Stock Dividend Requirements 582,017 148,850 2,201,567 595,400 Net Earnings Applicable to Common Stock $ 2,810,277 $ 2,044,787 $ 9,289,611 $ 11,451,459 Average Shares Common Stock Outstanding 4,416,789 4,342.631 . 4,389,206 4,328,623 Net Earnings Per Share of Common Stock $ .64 $ .47 $ 2.12 $ 2.65
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<<Q. (D (D Ol CHANGE OF ADDRESS FORM MAILTO( Public Service Company of New Mexico Post Office Box 1047 Albuquerque, New Mexico 87103 PLEASE CHANGE MY ADDRESS ON YOUR RECORDS:
From Old Address To New Address Street or P. O. Box Street or P. O. Box City State Zip City State Zip Name of Shareholder Signature Date Please Print HAS YOUR ADDRESS CHANGED?
Please verify your address on the endosed dividend check. Il the address is incorrect, you msy use the above form to notify the Company of your ncw address. A coucct address will insure prompt delivery ot future dividend checks and other correspondence from the Company.
YOUR DIVIDEND CHECK AND REPORTS If you ceceive more than one dividend check or report ss a Public Service Company of New Mexico sharehoMer because of s slightly different name or dif.
fercnt address on your stock certificates. please advise the Company of the numbers of your cectificates so that only one dividend check snd rcport will be mailed to you in the future. This should be moce convenient for you and will ccsult in less expense to your Company. Our Transfer Agent is Albuquerque National Bank, Trust Department. Post Office Box 1344, Albuquerque, New Mexico BT103. II it is necessary to fonrard sny of your certificates for change.
Albuquerque National Bank will advise you of the the procedure.
t Interim Earnings Report To Stockh.older s And Statements Or Ttle Htteenttve Officers At The Annual Stockholders'eeting I'
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o~
This report and the financial statements contained herein
~ re submitted for the general Information of the stock.
holders of the Company and are not intended for use in Z
connection with any sale or purchase of, or any offer or solicitation of offers to buy or sell, any securities of the Company. ~O PUBLIC SERVICE COMPANY OF NEW MEXICO
PUBLIC SERVICE COMPANY OF NEW MEXICO TO IRVING TRUST COMPANY Trustee 9t'tl 9f EAi8f Dated as of June I, 1947 FIRST MORTGAGE BONDS This Indenture is, among other things, a chattel mortgage nowne Sr Co., Inc., 163 Front Street, New York 7e
I I
I
TABLE OF CONTENTS~
PAGE PARTIES 1 RECITALS: 1 Authorization of Bond issue and Indenture 1 General form of coupon Bond 2 General form of coupon . 5 General form'f fully registered Bond 6 Form of coupon bond, 2+% Series duc 1977 . 9 Form of interest coupon for borids of the 2+7% Series due 1977 . 14 Form of fully registered bond, 2'%eries'due 1977 .......... 14 Form of Trustee's certificate of authentication 19 Compliance with legal requirements . 19 GRANTING CLAUSES 19 PART FIRsT Plants 20 PART SEcoND Substations and Switching Stations 44 PART THIRD Transmission Lines 49 PART FQURTH Electric Distribution Systems 51 PART FIFTH Gas Distribution Systems 52 PART SIxTII Water Distribution Systems . 53 PART SEYENTH Water Rights 54 PART EIGIITH Miscellaneous Property 56 PROPERTY DESCRIBED GENERALLY, NOKV OiVNED OR HEREAFTER ACQUIRED 69 ExcEPTED PRQPERTY 70 HABENDUhI 72 SUBJECT To PERhIITTED ENCUhIBRANCES, LIENS ON AFTER-ACQUIRED PROPERTY AND CERTAIN VENDOR S LIENS 72 GRANT IN TRUST 72 DEFEASANCE ........ 73 GENERAL COVENANT 73 r
ARTICLE 1 DEFINITIONS SEGTIQN 1.01. Definition for purposes of Indenture 74
~ This table oi contents is not a part oi tbc annexed Indenture as executed,
n PACiE SEGTIoN 1.02. Following terms defined:
"Company" 74 "Corporation" 74 "Obhgor" 74 "Affiliate" 74 "Control" 74 "Person" . 74 "Trustee" 75 "Bond", "bondholder" and "holder"'............ 75 "Herein", "hereby", "hereunder", "hereof", "herein-before" and "hereinafter" 75 "This Indenture" . 75 "Lien of this Indenture" and "lien hereof" ....... 75 "Mortgaged property" or "trust estate" .......... 76 "Public utility system" 76 "Supplemental indenture" or ."indenture supple-mental hereto" 76 "Trust Indenture Act of 1939" . 76 SEcTioN 1.03. Following terms defined:
"Additional bon<ls" 76 "Authorized newspaper" 76 "Board", "Board of Directors" and "Directors" ... 77 "Certified resolution" 77
,"Application of the Company", "written order of the Company", "written request of the Company",
"written consent of the Company", "certificate of the Company" and "statement of the Company" 77 "Opinion of counsel" . 78 "Engineer" 79 "Independent engineer" . 79 "Accountant" and "independent public accountant" .. 79 Certificates, compliance with conditions and cove-nants ...................................,. 80 Certificate, compliance with conditions precedent. '. 81 "Responsible officer" and "responsible officers" .: .. 81 "Outstanding under this Indenture", "outstanding
'ereunder" and "outstanding" ................ 81 SEGTIoN 1.04. Following terms defined:
"Permitted encumbrances" 82 "Prepaid lien" 84 "Prior lien" 84 "Prior lien bonds" . 84 "Outstanding" with respect to prior lien bonds . 84 SEcTION 1.05. Following terms defined:
"Property additions" 85 "Net property additions" . 86 "Unapplied balance of net property additions" . 88 "Property retirements" 88 Cost 88
PAGE SECTION 1.06. Following terms defined:
"Net earnings certificat" 90 "Repairs" 92 SECTION 1.07. "Funded property" define 92 SECTION 1.08. "Funded prior lien bonds" defined. 92 ARTICLE 2 DESCRIPTION, FORM, EXECUTION, REGISTRATION AND EXCHANGE OF BONDS SECTION 2.01. Aggregate amount of Bonds not limited .............. 93 SECTION 2.02. Bonds issuable in series 93 General provisions as to all series designations, forms, variations, and special provisions 93 Each series, other than 2g~% Scrics due 1977, to be created by supplemental indenture 94 SECTION 2.03. Provisions with respect to First Mortgage Bonds, 2/7s%
Series due 1977:
Initial principal amount $ 6,800,000 .............. 94 Title of First Mortgage Bonds, 2g~' Scrics due 1977 (hereinafter referred to as "1977 Series" )
Date of coupon Bonds; maturity date and interest rate 95 Place and coin of payment of principal and interest 95 1977 Series to bc rcdcemable 95 1977 Series to bc entitled to Sinking Fund ..., .. 95 Denominations of coupon Bonds and of fully regis-tered Bonds . 95 Coupon Bonds and fully registered Bonds inter-changeable 95 2.04. Bonds of any series other than 1977 Series, issuable SECTION either as coupon Bonds or as fully registered Bonds thereof 'enominations 95 Date of fully registered Bonds 96 Date from which interest accrues thereon ............ 96 Interest thereon payablc only to rcgistcred holder ...... 96 SECTION 2.05. Exchange of coupon Bonds for coupon Bonds of other denominations Transkrs, consolidations, and subdivisions of fully regis-tered Bonds and exchange for coupon Bonds ....,... 96 Exchange of coupon Bonds for fully registered Bonds .. 96 Such exchanges to conform to rules of any= stock ex-change on which Bonds arc listed, and to usage ...... 97 In case of Ilefault, coupon Bonds exchanged shall have attached all matured coupons in default ............ 97
IV PAGE SECTION 2.06. Registration of coupon Bonds . 98 Coupons to bear same designation as Bonds .......... 98 SECTION 2.07. General provision for identification, designation, legends, etc., on Bonds 98 SEcrroN 2.08. Charges on exchanges of Bonds and transfer of fully registered Bonds ........... 98 Transfers not required, within 10 days prior to interest payment dates or in certain other instances .........
SECTION 2.09. Execution of Bond and coupons Matured coupons to be cancelled before authentication of Bonds 100 SFCTION 2.10. Temporary Bonds 100 SF.CTION 2.11 ~ Mutilated, lost, stolen or destroyed Bonds ........... '.
101 SEcrIoN 2.12. Authentication of Bonds by Trustee 102 ARTICLE 3 AUTHENTICATION AND DELIVERY OF BONDS SEcrIo N 3.01. $ 6,800,000 Bonds of 1977 Series, issuable immediately 102 SECTION 3.02. Additional Bonds issuable on basis of property additions 103 SECTION 3.03. Bonds not issuable under Sections 3.04, 3.05 or 3.06 on basis of funded property . 103 SECTION 3.04. Bonds issuable upon basis of property additions not to exceed 60% of net property additions .............
How amount of nct property additions evidenced ......
103 103 SECTION 3.05. Nct earnings requirements for issuance of Bonds on basis of property additions ........... 103 SECTION 3.06. Trustee to receive certain instruments ................ 103 (1) Certified resolution of Board .. 104 (2) Certificate of the Company showing no default 104 (3) Engineer's certificate relating to property addi-tions, etc.
(4) Indcpendcnt engineer's certificate in case prop-erty additions include an electric utility system of stated fair value and recent usc ......... 107 (5) Engineer's certificate as to fair value of any securities or other property included in cost of property additions 108 (6) Net earnings certificate 108 (7) Opinion of counsel 109
V PAGE (8) Deeds, conveyances, etc 110 (9) Engirieer's certificat dated within 10 days of application date, relative to property retire-ments not thcrctofore certified ............ 110 (10) Certificate of the Company and opinion of counsel as to compliance with conditions precedent SECTION 3.07. Additional Bonds issuable upon basis of rctircmcnt of equal amount of Bonds previously issued ...........
Surrender of retired Bonds or deposit of cash for their retirement, together with irrevocable authorizations...
Trustee to receive certain instruments:
(1) Certifie resolution of Board ................
(2) Certificate of the Company showing no default and relating to the Bonds retired .......... 111
- 3) Opinion of counsel . 112
- 4) Evidence of compliance with tax rcquircments and governmental approval ............... 113 (5) Certificate of the Company and opinion of counsel as to compliance with conditions prc-ccdent . 113 Interest rate of additional Bonds not to excccd that of retired Bonds except under specified conditions ...... 113 SEGTIoN 3.08. Additional Bonds issuable upon basis of deposit of equal amount of cash with Trustee 114
'Trustee to receive certain instruments:
(1) Certified resolution of Board ............... 114 (2) Certificat of the Company showing no default, 114 (3) Net earnings certificate . 114 (4) Opinion of counsel 114 (5) Evidence of compliance with tax requirements and governmental approval ............... 114 (6) Certificat of the Company and opinion of cofin-sel as to compliance with conditions precedent 115 SECrI ON 3.09; Deposited cash to be paid to Company in lieu of issuance of additional Bonds 115 SECTioN 3.10. When no application made within three years by Com-pany for payment of cash deposited under Section 3.09, such cash to be used for purchase or redemption of Bonds 115 SECTION 3.11. Issuance of Bonds against prior lien bonds deposited with Trustee, paid, redeemed, ctc., or for payment or re-demption'of which provision has bccn made Instruments to be delivered to Trustee:
......... 116 (a) Certifie resolution of Board ............... 117
PAGE (b) Either prior lien bonds '. 117 Or certIficate of the Company and opinion of counsel as to provisions for payment, redemp-tion, etc., of prior lien bonds .............. 117 (c) Certificate of the Company as to status of prior lien bonds Company not in default, etc..... 117 (d) Opinion of counsel that prior lien bonds de-posited with Trustee have been validly pledged.
and that issuance of Bonds applied for is duly authorized 118 e) Net earnings certificate, when re'quired ....... 118 f) Certificates or other documents specified in opinion of counsel 119 (g) Certificate of the Company and opinion of coun-sel as to compliance. with conditions precedent 119 Issuance of Bonds upon discharge of mortgage securing prior lien bonds theretofore deducted upon applications for issuance of Bonds . 119 Instruments to be delivered to Trustee:
Certificates of the Company, etc 120 Opinion of counsel . 120 ARTICLE 4 PARTICULAR COVENANTS OF COMPANY SEGTIoN 4.01. Warranties as to property mortgaged; maintenance of lien of Indenture 120 SEOTioN 4.02. Payment of principal and interest . 121 Extension and funding of coupons and claims for inter-est; subordination of such coupons and claims and those transferred separately 121 SECTION 4.03. Appointment of paying agent, and its duties .......... 121 SECTION 4.04. Financial office or agency and paying agencies ........ 122 SEcTION 4.05. Payment of taxes, etc 124 No prior liens or encumbrances to be permitted except as stated 124 Payment of mechanics'iens, etc 124 Performance of obligations under any lien that may here-after be a prior lien 125 SECTIQN 4.06. Mortgaged property to be kept insured .............. 125 Certificates as to insurance . 125 Proceeds of insurance to be paid to Company as reim-bursement for rebuilding or renewal of damage'd property 126 Proceeds not so paid over within specified time to in same manner as release moneys,......... be'pplied
.126
vrr PAGE SECTION 4.07. Maintenance of corporate existence and franchise, etc... 127 Mortgaged property to be kept in'repair .............
Proviso as to properties no longer profitable, etc.......
127 127 Company to classify certain property as retired........ 128 SECTION 4.08. Appointment of successor to Trustee when necessary; qualifications of such successor 128 SECTION 4.09. Books of account to be kept by Company ............ 128 "SECTION 4.10. Company to create Maintenance and Replacement Fund 128 "Standard of Expenditure" define Optional credits to Company:
................ 128 (1) Amounts expended for repairs and maintcnancc ]29 (2) Cost of certain property additions ........... 129
- 3) Certain rcdccmed, retired or canccllcd bonds .. 129
- 4) Net property additions 130 Annual certificate of the Company as to revenues, Stand-ard of Expenditure, credits taken, etc.............. 130 Payment to be made of any balance shown due by cer-tificate of the Company ., 131'3 Use of moneys in Maintenance and Rcplaccmcnt Fund:
For purchase or redemption of Bonds ........... l Withdrawal upon deposit of bonds ..............
Withdrawal on conditions, etc. provided in subdi-131 vision (1) of Section 8.11 . 132 How property additions computed in such case .. 132 Use of excess where total credits cxcced Standard of Expenditure 132 "Gross electric operatinq revenues" an'd "gross gas oper-ating revenues" and 'ross water operating revenues" defined . 132 SECTIoN 4.11. Restrictions on payment of dividends by Company...... 133 Method of determining earned surplus for purposes of this- Section 134 Successor corporation to Company to assume covenants of this Section as of date of succession ....'........ 134 SECTION 4.12. Instruments of further assurance '........ 135 SEcrIoN 4.13. Recordation, filing, etc.. 135 Company to furnish opinions of counsel .............. 136 SECTION 4.14. Bonds to bc issued only in accordance with Indenture... 136 No defaults under Indenture to be permitted .......... 136 SECTION 4.15. Trustee may make certain advances 136 SECTION 4.16. Additional property subject to a prior lien to be acquired only under certain conditions ..................... 136 Ratio of indebtedness to property 136 Earnings requirement 137
V111 PAGE Instruments to be filed with Trustee ......... 137 Exception as to equipment acquired subject to chattel mortgages, etc.......................... 139 SECTION 4.17. Bonds not to be disposed of after default ............ 139 SECTION 4.18. "Restricted property" defined..................
Covenant as to ratio between outstanding bonds and 139 Bonds issued in respect of restricted property, etc.; .. -'39 SECTION 4.19. Covenant to pay principal of and interest on prior lien'onds 140 SECTION 4.20. Indebtedness secured by prior. lien" not to be increased
, unless evidences thereof be deposited with Trustee .. 140 SECTION A. Uncancelled prior lien bonds'acquired by Company, '.21.
to be deposited with Trustee .' ............
B. Upon satisfaction of, prior lien, bonds secured by 141 other prior liens to be delivered to Trustee or trustee of prior lien................
C. Upon satisfaction of prior lien, property in hands 141 of trustee thereof to be delivered to Trustee here-under or trustee of prior lien .....-............ 142 D. Restriction upon Company's,,obtaining release of cash held by trustee of prior lien ............. 142 SECTION 4.22. Certificate of the Company as to compliance with certain covenants to be delivered annually to Trustee ........ 143 SECTIoN 4.23. Sinking Fund for Bonds of 1977 Series:
(a) Designation of Sinking Fund payment dates...... 143 (b) Sinking Fund provision for Bonds of 1977 Series... 143 Dates and amounts of Sinking Fund payments.... 144 Surrender of Bonds of 1977 Series in lieu of cash payments....................... 144 Series... '........
All cash paid in applicable to retirement of Bonds of 1977 144 (c) Current redemption price, forpurposes of Sinking Fund ...,.........................,.........
Trustee........
(d) Description of "statement" to be delivered'o (e) Application of Sinking Fund morieys to purchase or redemption of Bonds of 1977 Series ..........
144.
145 145 rent redemption price ',............
Price on purchase or redemption not to exceed cur-Procedure to be followed in such purchase or 146 redemption 146 (f) Application of funds amounting to less than amount.
sufficient to redeem $ 10,000 of Bonds ..........
147 (g) Ca'ncellation of Bonds retired through operation of Sinking Fund . 147 SECTION 4.24. Covenant to extend corporate existence .............. 147
IX ARTICLE 5 REDEMPTION OF BONDS PAGE SECTION 5.01. Bonds of 1977 Series redeemable 148 Redemption prices for Bonds of 1977 Series,......... 148 SECTION 5.02. Redemption of Bonds of other series,............... 148 SECTION 5.03. Notice of redemption; how given 149 Contents of such notice . 149 Election to redeem Bonds may be rescinded .......... 149 Manner of selection of Bonds to be redeemed, in case of partial redemption 150 In case fully registered Bonds are so selected, notice to specify number thereof . 150 Bonds 'redeemed payable on'edemption date; interest thereon to cease to accrue 151 Method and place of payment of principal and interest ..* 151 Company to deposit redemption moneys in trust with Trustee 151
'EGTIoN 5.04. Moneys deposited with Trustee for redemption of Bonds reserved for the benefit of the Bondholders ........ 152 Bonds as to which redemption price so deposited will be excluded from, participation in security ............. 152 Sum so reserved constitutes trust fund .............. 152 SECTION 5.05. Redeemed Bonds to be cancelled . 153 SECTION 5.06. Bondholder agrees to accept payment upon terms of this Article and of Section 4.23 153 ARTICLE 6 BONDHOIDERS 'ISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE SECTION 6,01. Bondholders'ists to be filed with Trustee ...,.,...... 153 SEcTIDN 6.02..(a) Preservation by Trustee of Bondholders'ists .... 154 (b) Application,by Bondholders for Bondholders'ists, refusal, procedure 154 (c) Accountabtlity of Trustee 155 SEcTIDN 6.03. (1) Filing of Annual Report and other information with Trustee and Securities and Exchange Commission. 156
~
(2) Filing of additional information with respect to com-pliance with covenants in Indenture with Trustee an<i Securities and Exchange Commission ....., 156 (3) Transmittal to Bondholders of information required by rules and regulations of Securities and Ex-change Commission . 156
PAGE SECTION 6.04. (a) Transmittal by Trustee of report regarding eligibility and 'qualifications, advances, releases, issue of additional Bonds, etc.. 157 (b) Transmittal by Trustee to Bondholders of report (within 90 days) regarding release "of property, and amount of advances made by it,............ 158 (c) Transmittal of Trustee's reports by mail .......:= 159 (d) Report to Bondholders to be filed with stock ex-changes and Securities'and Exchange Commission. 159 (e) What'Bonds shall be deemed outstanding for pur-poses of this Section . 159 ARTICLE 7 C0Nc ERNING PRIOR LIEN BONDS DEPOSITED WITH TRUSTEE SECTION 7.01. Form in which such Bonds shall be received and held by the Trustee 160 SECTION 7.02. While Company not in default, no payment by way of interest, or otherwise, required as to prior lien bonds held by Trustee While Company not in default, moneys received by Trus-tee on account of prior lieri bo'nds shall be paid over to Company on stated condition's SEcnoN 7.03 While Company not in default, Trustee may cause prior lien bonds held by'it to be cancelled and prior lien of record instruments required in that con- dis-'harged nection 161 While Company not in default, Trustee may scil or sur-render prior lien bonds held by it to the holder of the prior liens for cancellation or otherwise instruments required in that connection .. 161 SEcnoN 7.04. While Company 'not in default, Trustee may exercise with consent of Company all "rights of bondholders with respect to prior lien bonds held ............... 162 Trustee to be reimbursed for expenses properly incurred:
in this connection . 162 ARTICLE 8 POSSESSION, USE AND RELEASE OF MORTGAGED PROPERTY SECTION 8.01. Company to possess, use and enjoy property until event of default . 163 SEcnoN 8.02. Release of property taken by eminent domain or exercise of right of municipal purchase, or sold in anticipation of such taking
XI PAGE Instruments required in that connection .......... 163 Release of property subject to prior lien .......... 165 SECTION 8.03. Company entitled to sell or exchange, and Trustee re-quired to rclcasc, any part of mortgaged property no longer needed 165 Permissible consideration thcrcfor described .......... 165 Release to bc cxccutcd upon receipt by Trustee of:
(A) Written request of Company ............, ..
(H) Certilicate of the ConIpany showing no event of default (C) Engineer's ccrtificatc relative to the considera-tion for and the fair value of property'o be released 166 (D) Independent engineer's certificate, under stated conditions 167 (E) All cash and obligations included in considera-tion (F) Mortgagcs, deeds, conveyances, etc., if con-sideration includes additional property .... 168 (G) Opinion of counsel 168 (H) CcrtifiIcate of thc Company and opinion of counsel as to compliance with conditions pre-cedent 169 SECTION 8.04. Company entitled, while not in default, to release of real estate no longer useful, to an aggregate value not ex-ceeding $ 25,000 in any twelve consecutive calendar months; consideration received to be deposited with Trustee, . 170 SECTION 8.05. Company cntitlc<l, without rclcasc or consent by Trustcc 170 (1) To dispose of certain properties no longer fit for use 171 (2) To scil abandonc<1 property ............,.... 171 (3) '1'o alter leases, etc.. 171 (4) To scil real estate used for right-of-way pur-poses if casement retained ................ 171 (5) To assent to modification of franchises, etc... 172
- 6) To change, relocate, etc., plants and property 172
- 7) To enter into agreements for joint use of equip-ment, etc 172 Company in certain cases to furnish Trustee an engineer's certificate, engineer to bc in<lcpendent in certain in-stances 173 SECTION 8.06. Trustee to cxccute, upon request, disclaiIner or <iuitclaim as to excepted property sold 173 SECTION 8.07. Trustee nray in its discretion execute release or consent although default exists . 174
xn I'h s'I'74 SECTION 8.08. l'urchase Iuoney obligations deposited with Truhtel'o he released upon deposit of unpaid principal amount thereof Trustee to collect principal and interest, but interest to be paid to Company 174 Additional property acquired in place of released property to become subject to lien of Indenture ..............
Covenant as to further assurance and recordation and 174 filing 174 SECTION 8.09. If required, consideration received may be deposited under prior lien . 175 Provisions with respect to moneys deposited with Trustee for payment of "prepaid liens" 175 SECTION 8.10. Purchaser of released property not bound to inquire into authority of Trustee or Company 176 SECTION 8.11. Definition of trust moneys 176 Trust moneys applicable to payment of Bonds upon de-fault in payment of principal of bonds While no default, trust moneys may be:
.............. 177 (1) Withdrawn by Company against property addi-tions or in lieu of issuance of additional
. Bonds 177 (2) Withdrawn by Company to reimburse it for taxes paid on profits derived from sale of re-leased property 178
- 3) Applied by Trustee to purchase of Bonds .... 178
- 4) Applied by Trustee to redemption of Bonds .. 178 Company to pay redemption premium and ac-crued interest 178 Provisions to be complied with by Company to procure application of trust moneys .... 178 Where property additions made basis of with-drawals of trust moneys, how cost of prop-erty additions computed 178 If trust moneys amounting to $ 25,000 or more remain with Trustee for three years shall be applied only to purchase or then'ame redemption of Bonds . 181 Bonds retired to bc cancelled 181 SECTION 8.12. Application of trust moneys to purchase of Bonds limitation as to purchase price . 182 Provisions governing method of making purchases .... 182 Company to pay accrued interest and any premium.... 183 Definition of "current redemption price" for purposes of this Section 183
xu1 PAGE SEGTIQN 8.13.' Exercise of certain powers under Article 8 when prop-erty in possession of receiver, trustee, etc.......... 183 Exercise of such powers during default .............. 183 ARTICLE 9 REMEoiEs SEGrION 9.01. Defaults define 184 Accclcration of principal 186 Rescission of such accclcration 186 SECTION 9.02. Trustee to give Bondholdcrs notice, within 90 days, of defaults known to it,. 187 May withhold such notice in certain case stated....... 187 SECTION 9.03. (1) Right of Trustee to enter. 188 Repairs to property, ctc . 188 Trustcc to rcceivc income, ctc 188 Application of moneys collected 188 (2) Power of sale by Trustee 188 (3) Right to sue in equity or at law ............... 189 SECTION 9.04. Judicial proceedings by Trustee ...................... 189 Entitled to appointmcnt of rccciver 189 SECTION 9.05. Trust estate, whether to be sold as an entirety or in parcels 190 Company waives right to have trust estate marshalled.. 190 SECTION 9 06. Notice of sale, how given............ 190 SECTION 9 07. Sale may be adjourned ................. 190 SECTION 9. 08. Trustcc to deliver deed to purchasers upon sale........
Sale shall divest title of Company....:
Rcccipt for purchase money to be discharge of purchaser 191 191 191 Purchaser not responsible for application of purchase money 191 SECTION 9.09. Application of proceeds of sale and other moneys held hy Trustcc 192 SIICTI ON 9.10. Sale to mature all unniaturc<l Bonils 193 Purcliascr may apply Bonds and coupons in payment of purchase price 193 SEGI'ION 9.11. Payment of amount duc on Bonds to Trustee on de-mand 193 Trustee entitled to recover judgment therefor ........ 194 Trustee appointed attorney-in-fact for Bondholders, to file claims, receive payments, etc ................. '94
xIY PAGF.
Trustee not entitled to vote claims of Bondholders .... 195 Pendency of proceedings for enforcemcnt of lien no bar '95 to recovery of judgment .
Application of moneys collected under this Section .... 196 SECTION 9.12. Trustee or the Bondholders may make certain payments in case of default by Company . 196 Company agrees to repay same, with interest ........ 197 Such payment does not relieve Company of default... 197 SECTION 9.13. Waiver by Company of benefit of laws for appraise-ment, redemption, etc. 197 Effect of repeal of any such law . 197 SECTION 9.14. Chattels mortgaged deemed real estate for purposes of Indenture 197 SECTION 9.15. Majority in amount of Bondholders may direct proceed-ings to enforce security 198 SECTION 9.16. Bondholdcrs may institute judicial proceedings after notice of default, request and offer of indemnity to Trustee . 198 Proviso as to rights of Bondholders individually to enforce payment of principal and interest at maturity 199 SECTION 9.17. Company entitled to waive periods of grace.......... 199 SECTION 9.18. All remedies cumulative 200 SECTION 9.19. Rights and powers not impaired by delay, ctc.........
Trustcc may enforce rights of action and prove claims without possession or production of Bonds .........
SECTION 9.20. 75% in amount of Bondholders may waive certain defaults .
SECTION 9.21. Rights, remedies and powers provided for in this Article may be exercised only when not in violation of law 201 ARTICLE 10 EVIDENGE oF RIGHTs oF B0NDEIGLDERs AND OWNERSHIP OF BONDS SECTIoN 10.01. Execution of instruments 201 Proof of execution 201 Proof of bcarcr Bond holdings 201 Proof of ownership of registered Bonds .............. 202 Request or consent binds all future holders of same Bond. 202 SECTION 10.02. Bearer of unregistered coupon Bond or of "coupon deemed owner thereof 202
XV PAGE Person in whose name fully registered Bonds are regis-tered deemed owner thereof ....................
Submission of Bond for inspection if rcquircd.........
202 203 ARTICLE 11 Ih1MUNITY OF- INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS SEGTIGN 11.01; Immunity of incorporators, stockholders, oflicers and
~ directors . 203 ARTICLE 12 EFFECT OF MERGERS'ONSOLIDATION, ETC.
SECTION 12.01. Company m'ay consolidate, merge, transfer or lease upon certain terms 204 Lien of Indenture, etc., to remain unimpaired ......... 204 Lease to be terminable upon happening of default hcre-hereunder 204 Successor corporation or lessee to assume payment of Bonds 205 Existing franchises of the Company to be preserved.... 205 SEGTION 12.02 Successor corporation to be substituted for Company sub-ject to certain restrictions 205 Successor corporation may issue additional Bonds only if supplemental indenture mortgages certain after-acquircd property 206 SECTION 12.03 Lien of the l)idcnturc and lien of supplcmcntal in)lcnturc attach only to certain properties thcreaftcr acquired .
SEGTIoN 12.04 Term "Company" includes successor corporation ..., ..
Net.earnings certificat executed by successor corporation relates only to earnings of mortgaged pro'per'ty ......
SEGTION 12.05 Company may waive powers under Ar'ticle 12 ........
ARTICLE 13 CONCERNING THE TRUSTEE SEGTIQN 13.01 Capital and surplus requirement 208 SECTION 13.02 Acceptance of trust and duties and immunities of Trustee . 209 As to when a default is 209 examine evidence submitted to it to determine if it cured'ust complies with requirements of Indenture ...........
xv1 PAGE SECTION 13.03 .Liability for negligence, wilful misconduct, error in judg-ment, etc SECTIoN 13.04 Trustee not responsible for recitals, and makes no repre-sentation and not responsible for disposition of Bonds or application of proceeds thereof or of any money paid to the Company . 21C SECTIoN 13.05 Trustee not personally liable in case of entry for debts contracted or liability incurred in operation .......... 211 SECTION 13.06 Trustee may rely on certificates, opinions, etc., and con-
. sult with counsel
'12 211 SECTION 13.07. Trustee not responsible for approval of experts other than independent experts 211 SECTION 13.08. Trustee or paying agent may buy, hold and deal in Bonds'nd coupons and engage in financial or othe'r trans-actions with Company . 212 SEGTIoN 13.09. Moneys received by Trustee or paying agent shall be held in trust but need not be segregated ............
SEGTIoN 13.10 Compensation, expenses, etc. of Trustee payable by Company; Trustee to have prior lien on mortgaged property SEGTIQN 13.11 Trustee may claim reimbursement for advances, expenses in bankruptcy, receivership and foreclosure proceed-ings, etc.; prrority of unpaid advances and expenses.. 213 SECTION 13.12, Certificate of Company as evidence of facts .......... 213 SECTION 13.13. Trustee has power to give notices .....,......,....... 214 SECTION 13.14. (a) Trustee acquiring conflicting interest must eliminate such interest or resign . 214 (b) Such Trustee must give notice of failure to remove conflicting interest or resignation to Bondholders . 214 (c) Certain Bondholders may petition court for removal of Trustee and appointment of' successor if Trustee fails to comply with (a) .............. 214 (d) Situations constituting conflicting mterests ........ 215
<wnroN 13.15 (a) Apportionment of preferential collections if a Trus-tee becomes a creditor within four months prior to default transactions excepted from apportion-ment; application of apportionment to.a resigned Trustee................'......... 220 (b) Creditor relationships excluded from apportionment
, of preferential collections . 224 SECTION 13.16. Resignation of Trustee............................ 225
5cyii PAGE SECTION 13.17. Removal of Trustee by a majority in amount of Bond-holders 226
'I SEGTIoN 13.18. Appointmcnt of successor Trustee 226 SEcrroN 13.19. Power to appoint separate Trustccs 228 No trustee liable for acts of any other trustee ........ 229 SEGrioN 13.20. Acceptance of trust by successor trustee; conveyance by predecessor trustee to successor trustee ............. 230
,SEGrroN 13.21. Effect of merger of Trustee 231 SEGTION 13.22. Rights and duties of Trustee governed by New York law ARTICLE 14 SUPPLEMENTAL INIIENTURES SEGTloN 14.01. Company may enter into supplemental indenturcs under certain circumstances for certain purposes:
a) To correct description of property ............ 232 b) To add to limitations, ctc., of issue of bonds..... 232 c) To provide for creation of additional series ...... 232 d) To provide sinking fund, etc 232 (e) To provide redemption provisions for additional series . 233 (f) In case Company is succccdcd by other corpora-tion 233 (g) To provide for issuance of convertible bonds .... 233 (h) To add to covenants of Company .............. 233 i) To clarify the Indenture, ctc.................. 233 j) To make provision in regard to matters or ques-tions arising under the Indenture ............ 233 (k) To'ive efFect to action taken by Bondholders pursuant to Article 15 . 233 (1) To modify provisions of the Indenture, subject to conditions stated . 233 SEGTIoN 14.02. Trustcc authorized to join in supplcmcntal indenture .. 234 SEGTloN 14.03. Trustcc to cxcrcisc discretion in dctcrmining propriety of supplementary indcnturc 234 SEcTloN 14.04. Supplemental Indentures to conform to Trust Indenture Act of 1939 . 235 ARTICLE 15 BUN IIIIoi.l)EI<s MElrrINGs ANI) CoNsENTs SEcrioN 15.01. Call and place of meeting 235 Dctcrmination of Bonds entitled to vote 235
xvhi PAGE SEGTIGN 15.02 Notice. of meeting 236 SECTION 15.03 Attendance at meeting; deposit or exhibition of Bonds; proxies SEGTION 15.04 Quorum; adjournment failing quorum; notice thereof ..
Officers of meeting; inspectors of votes, .'.............
SEGTIGN 15.05. Attendance by representatives of Trustee and Company SECTION 15.06. Certain types of modifications or alterations of Indenture,
~ etc., permitted by,75go vote 240 Proviso in case one serIes affected differently from others 241 Limitations on permitted modifications or alterations ... 241
'EGTIGN 15.07. Binding effec of Bondholders'ction on condition .... 242 SECTION 15.08. Record of meeting 243 SEGTION 15.09. Notation on Bonds; supplemental indenture .......... 243 SEGTION 15.10. Written c'onsent of Bondholdcrs . 244 ARTIC LE 16, DEFEASANCE SEGTIQN 16.01. Discharge of Indenture 244 SEGTIQN 16.02. Unclaimed moneys with Trustee to be paid to Company after six years, procedure 246 SEGTIGN 16.03. Repayment to'Company of moneys held by, paying agent upon discharge of Indenture . 246 ARTICLE 17 MISCELLANEOUS .
SEGTIGN 17.01. Indenture for exclusive benefit of parties and Bond-holders SEGTIQN 17.02. Instrument binding on successors and assigns of respec-tive parties 247 SEGTIGN 17.03. Notices to Trustee and Company 247 SECTION 17.04. Consent to undertaking for costs 247 SECTIGN 17;05. As to conflicts with any provisions required by the Trust Indenture Act of 1939 to be included in the Ind enture 248 SEGTIGN 17.06. Indenture may be executed in counterparts 248 TESTI MONIUM 248 SIGNATURES AND SEALS 249 ACKNOWLEDGMENTS 250
INDENTURE, dated as of June 1, 1947, between PUmac SEsvroE CoMp~zr oF NEw MExrco, a corporation organized and existing under the laws of the State of New Mexico (hereinafter sometimes called the "Company" ), party of the first part, and Iavxzo TaUsr CoMpwmr, a corporation organized and existing under the laws of the State of
¹w York (hereinafter'ometimes called the "Trustee" ), as Trustee, party of the second part.
WxrvnRAs the Company is authorized by law, and deems it neces-sary from thne to tim<<, to borrow money for its proper corporate purposes, and to that end, in the exercise of said authority, has duly authorized and directed the creation of an issue of its bonds of one or more series, to be designated generally as "First Mortgage Bonds" (hereinafter called the "bonds" ) of substantially the form and con-taining the terms hereinafter in this mortgage and deed of trust (here-inafter sometimes called "Indenture") provided or permitted; and in order to secure the payment of the principal of and interest on said bonds, to provide for the authentication and delivery thereof by the Trustee, and to establish and declare the terms and conditions upon which the bonds are to be issued and secured, the Company has duly authorized and directed the execution and delivery of this Indenture; and W~it;ns~s the bonds, the coupons to be annexed thereto, and the certificate of authentication of the Trustee to be executed thereon, are to be sub'stantially in the following forms, respectively, with such appropriate omissions, insertions and variations as are in this Inden-ture provided or permitted:
2 L
I
[GENERAL FORM OF COUPON EONDj PUBLIC SERA CE COMPANY OF< NEW MEXICO FIRST HOR GAGE BoNn, .... /o SERIES DUE... ~
Due No. 8 ~ . ~ -- -.
~
PURLIO SERvIcE CohfPANY oF NET MExIco, a corporation organized and existing under the, laws of the State of New Mexico (hereinafter sometimes called the Co~npany), for value received, hereby promises to pay to bearer, or, in case this bond be registered as to principal, to the registered owner hereof; on ........., ......... Dollars ($ ),
at the OAice or agency of the Company in and semi-annually on in each year, to pay interest thereon at of % per annum from..............
and at the rate until the Company's obli-gation with respect to such principal sum shall be discharged, but, until maturity, only upon presentation and surrender of the annexed coupons as they severally mature. Both the principal of and the in-terest on this bond shall be payable in any coin or currency of the United States of America which at the time of payment shall be legal tender for the payment of public and private debts.
This bond is one of an issue of bonds of the Company, l<nown as its I<'irst Mortgage Bonds, issued and to be'ssued in one or more series under and equally and ratably secured (except as any sinking, amortization, improvement or other fund, established in accordance with the provisions of the indenture hereinafter mentioned, may afford additional security for the bonds of any particular, series) by a certain mortgage and deed of trust (hereinafter called the Indenture), dated as of June 1, 1947, made by the Company to Irving Trust Company, as Trustee (hereinafter called the Trustee), to which Indenture (and to all indentures supplemental thereto) reference is hereby made for a description of the property mortgaged, the nature and extent of the security, the rights and limitations of rights of the Company, the Trustee, and the holders of said bonds and of the coupons appurtenant to coupon bonds, under the Indenture, the powers, duties and innnunities of the Trustee, and the terms and conditions upon which said bonds are and are to be issued and secured, to all of the provisions of which Indenture and of all such supplemental indentures in respect of such security, including the provisions of the,
Indenture permitting the issue of bonds of any series for property which, under the restrictions and limitations therein specified, may be subject to liens prior to the, lien of. the Indenture, the holder, by accept-ing this bond, assents. To the extent permitted by and as provided in the Indenture, the rights and obligations of the Company and of the holders of said bonds and coupons (including those pertaining to any sinking or other fund) may be changed and modified, with the consent of the Company, by the holders of at least 75% in aggregate principal ainount of the bonds then outstanding, such percentage heing determined as provided in the Indenture; provided, Jiomevcr, that in ease such changes and modifications aGect one or more but less than all series of bonds then outstanding, they shall be, required to be adopted only by the affirmative vote of the holders of at least 75/o in aggregate'principal amount of outstanding bonds of such one or more series so aftected, but nothing contained in this proviso shall be deemed to a8ect any of the rights granted to bondholders by Article 9 of
'the Indenture to give any direction to the Trustee or to waive any default on the part of the Company; and fnrtJier provided, that with-out the consent of the holder hereof no such change or modification shall be made'which will extend the time of payment of the principal of, or of the interest or premium, if any, on, this bond or reduce the principal amount hereof or the rate of interest or the premium, if any, hereon, or e6ect any other modification of the terms of payment of such principal or interest, or premium, if any, or will permit the crea-tion of any lien ranking prior to or on a parity with the lien of the ~
Indenture on any of the mortgaged property, or will deprive the holder hereof of the benefit of a lien upon the mortgage'd property for. the seciirity of his bond, or will reduce the percentage of bonds required for the adoption of changes. or modifications as aforesaid. This bond is one of a series of bonds designated as the First Mortgage Bonds,
%%uo Series due of the Company.
I N
[Here insert reference to redemption if bonds of a particular series are redeeinahle, and to sinking fund if such bonds are entitled thereto.]
Tlie principal of tliis bond niay be declared or may become due before tlie inaturity hereof, on the conditions, in the manner and at thc tunes set forth in the Indenture, upon the happening of a default as therein defined.
Tliis bond is transferable by delivery unless registered as to prin-cipal in the owner's name on the books of the Company kept for such purpose at
such registration being noted hereon. Xfter such registration no transfer hereof shall be valid unless made on the Company's books by the registered owner or by his attorney thereunto duly authorized and similarly noted hereon, but this bond may be discharged from registra-tion by being transferred to bearer, after which it shall again be trans-ferable by delivery, but it shall be subject to successive registrations and transfers to bearer as before. Such registration, however, shall not aGect the negotiability of the coupons hereto annexed, which shall abvays be payable to bearer and transferable by delivery. The Com-pany and the Trustee and any paying agent may deem and treat the bearer of this bond, if it be not registered as to principal, or, if this bond be registered as to principal as herein authorized, the person in whose name the same is registered, as the absolute owner hereof, and the bearer of any coupon hereunto appertaining as the absolute owner thereof, for the purpose of receiving payment and for all other purposes.
[Here insert provisions for exchangeability, if any.]
No recourse under or upon any covenant, obligation. or agreement of the Indenture, or of any indenture supplemental thereto, or of this bond or the coupons hereto annexed, for the payment of the principal of, pre'mium, if any, or interest on, this bond, or for any claim based thereon, or otherwise in any manner in respect thereof, shall be had against any incorporator, subscriber to capital stock, stockholder, oScer or director, as such, of the Company, whether former, present or future, either directly, or indirectly through the Company or any predecessor or successor corporation or the Trustee, by the enforce-ment of any subscription to capital stock, assessment or otherwise, or by any legal or equitable proceeding by virtue of any constitution, statute or otherwise (including, without limiting the generality of the Foregoing, any pro'ceeding to enforce any claimed liability of stockholders of the Company based upon any theory oF disregarding the corporate entity of the Company or upon any theory that the Company was'cting as the agent or instrumentality of the stock-holders); any and all such liability of incorporators, stockholders, subscribers, oAicers and directors, as such, being released by the holder hereof, by the acceptance of this bond, and being likewise waived and released by the terms of the Indenture.
Neither this bond nor any of the annexed cou'pons shall be valid or become obligatory for any purpose until the certificate of authentica-
tion endorsed hereon shall have been signed by, Irving Trust Company, or its successor, as Trustee under the Indenture.
IN WITNESS WHEREOF PUBLIC SEBVICE CohIPANY OF NEW MEXICO has caused this bond to be signed in its name by its President or a Vice-President, and its corporate seal, or a facsimile thereof, to be impressed or imprinted hereon and attested by its Secretary or an Assistant Secretary, and coupons bearing the facsimile signature of its Treasurer to be annexed hereto, all as of , 19 PUBLIC SERVICE COMPANY, OF NEW MEXICO'y President.
Attest:
Secretary.
[GENEBAL FORhI OF COUPON]
On the day of , 19 (unless the bond hereinafter mentioned shall have been called for previous redemption and, payment of the redemption price thereof duly pro-vided for), Public Service Company of New Mexico will pay to bearer, upon surrender hereof, at .............. in Dollars ($ ) in any coin or currency of the United States of America which at the time of payment shall be legal tender for the payment of public and private debts, being six months'nterest then due on its First Mortgage Bond, % Series due , No.
Treasurer.
(Reference to redemption shall be omitted from coupons annexed to bonds of any series that are not redeemable prior to the maturity of such coupons.)
[GENERAL POEM OP PULLY REGISTERED ROND]
PUBLIC SERVICE COMPANY OF NEW MEXICO FIRST MORTGAGE BOND~ ... ~
% SERIES DUE Due No. ~ 0 $.
PUDLIO SERvIcE CoMPANY oF NEw MExIco> a coI'poI'ation organIzed and existing under the laws of the State of Net Mexico (hereinafter sometimes called the Company), for value received, hereby promises to pay to . ., or registered assigns, on ...
j Dollars ($ ), at the OAice or agency of the Companyjin . , and semi-annually on and thereon to the registered owner hereof of at........,
in each year, to pay interest
% per annum from the semi-annual interest payment date next at the rate preceding the date of this bond (unless this bond be dated on an interest payment date, in which case from the date hereof; or unless this bond be dated prior to the first interest payment date in respect hereof, in which case from the beginning of the first'interest period for bonds of this series, and except that if this bond is delivered on a transfer or exchange of or in substitution for another bond or bonds it shall bear interest from the last preceding date to which interest shall have been paid on the bond or bonds in respect of which this bond is delivered),
until the Company's obligation with respect to such principal sum shall be discharged. Both the principal of and the interest on this bond shall be'payable in any coin or currency of the, United States of America which at the time of payment shall be legal tender for the payment of public and private debts.
This bond is one of an issue of bonds 'of the Company, known as
,its. First Mortgage Bonds, issued and to be issued in one or more series under and equally and ratably secured (except as any sinking, amortization, improvement or other fund, established in accordance
~ with the provisions of the indenture hereinafter mentioned, may af-ford additional security for the bonds of any particular series) by a certain mortgage and deed of trust (hereinafter called the Indenture),
dated as of June 1, 1947, made by the Company to Irving Trust Com-pany, as Trustee (hereinafter called the Trustee), to which Indenture (and to all indentures supplemental thereto) reference is hereby made for a description of the property mortgaged, the nature and extent of the security, the rights and limitations of rights of the Company, the Trustee, and the holders of said bonds and of the coupons appurtenant
to coupon bonds, under the Indenture, tlie powers, duties and immu-nities of the Trustee, and the terms and conditions upon whicli said bonds are and are to be issued and secured, to all of the provisions of wliich Indenture and of all suc)i supplemental indentures in re-spect of such security, including the provisions of the Inde>>ture per-
>>iitting the issue of bonds of any series for property wliicli, under the restrictions and limitations therein specified, may be subject'o liens prior to the lien of the Indenture, the holder, by accepting this bond,'assents. To the extent permitted by and as provided in the Indenture, the rights and obligations of the Company and of the holders of said bonds and coupons (including those pertaining to any sinking or other fund) may be changed and modified, with the consent of the Company, by the holders of at least 75% in aggregate principal amount of the bonds tlien outstanding, such percentage being determined as provided in the Indenture; provided, however, that in case such changes and modifications aGect one or more but less than all series-of bonds then outstanding, they shall be required to be adopted only by the aKrmative vote of the holders of at least 75% in aggregate principal amount of outstanding bonds of such one or more series so affected, but nothing contained in this proviso shall be deemed to affect any of the rights granted to bondholders by Article 9 of the Indenture to give any direction to the Trustee or to waive any default on the part of the company; and fnrtlier provided, that without the consent of the holder hereof no such change or modification shall be made which will extend the time of payment of the principal of, or of the interest or premium, if any, on, this bond or reduce the prin-cipal amount hereof or the rate of interest or the premium, if any, .
hereon, or effect any other modification of the terms of payment of such principal or interest, or premium, if any, or will permit the creation of any lien ranking prior to or on a parity with the lien of the Indenture on any of the mortgaged property, or will deprive the holder hereof of the benefit of a lien upon the mortgaged property I'or the se'curity of. liis bon(l, or will reduce the percentage of bonds required for the adoption of changes or modifications as aforesaid.
This bond is one of a series of bonds designated as the I<'irst Mortgage Bonds, % Series due of the Company.
[Here insert reference to redemption if bonds of a particular series are redeemable, and to sinking fund if such bonds are entitled thereto.]
The principal of this bond may be declared or may become due before the maturity hereof, on the conditions, in the manner and at
the times set forth in the Indenture, upon the happening of a default as therein defined.
This bond is transferable by the registered owner hereof in person or by his duly authorized attorney at the office or agency of the Com-pany in , upon surrender and cancellation of this bond and upon payment of charges, and thereupon a new fully registered bond of the same series and maturity, for a like principal amount, will be issued to the transferee in exchange therefor, as provided in the Indenture. The Company and the Trustee and any paying agent may deem and treat the person in whose name this bond is registered as the absolute owner hereof for the purpose of receiving payment and for all other purposes.
lHere insert provisions for exchangeability, if any.]
No recourse under or 'upon any covenant, obligation or agree-ment of the Indenture, or of any indenture supplemental thereto, or of this bond, for the payment of the principal of, premium, if any, or interest on, this bond, or for any claim based thereon, or otherwise in any manner in respect thereof, shall be had against any incorporator, subscriber to capital stock, stockholder, officer or director, as such, of the Company, whether former, present or future, either directly, or indirectly through the Company or any predecessor or successor corporation or the Trustee, by the enforce-ment of any subscription to capital stock, assessment or otherwise, or by any legal or equitable proceeding by virtue of any constitu-tion, statute or otherwise (including, without limiting the generality of the foregoing, any proceeding to enforce any claimed liability of stockholders of the Company based upon any theory of disre-garding the corporate entity of the Company or upon any theory that the Company was acting as the agent or instrumentality of the stockholders); any and all such liability of incorporators, stockholders, subscribers, officers and directors, as such, being released by the holder hereof, by the acceptance of this bond, and being likewise waived and by the terms of the Indenture. 'eleased This bond shall not be valid or become obligatory for any pur-pose until the certificate of authentication endorsed hereon shall have been signed by Irving Trust Company, or its successor, as Trustee under the Indenture.
IN WITNEss WHERECFq PUBLIO SERvicE CohIFANY 0F NEw MEZIco has caused this bond to be signed in its name by its President or a
Vice-President, and its corporate seal, or a facsimile thereof, to be impressed or imprinted hereon and attested by its Secretary or an Assistant Secretary.
Dated:
PUBLIG SEBVIOE CoÃPANY oP NEw MHxIcop By.
President.
Attest:
Secretary.
[1'oIIM oH coUP0N iioNDp 27/s% sHIGHs DUH 1977]
PUBLIC SERVICE COMPANY OF NEW MEXICO FIIisT MGIITGAGH BGND, 27/s% SHIIIHs DUE 1977 Due June 1, 1977 No. 01)000 PUI3LIG Si:RvIcl! CGMPANY oH NHw MHxico) 8, corporation organized and existing under the laws of the State of New Mexico ()iereinafter, sonietimes called the Company), for value received, hereby proIriises to pay to bearer, or, in case this bond be registered as to principal, to the registered owner hereof, on June 1, 1977 (unless this bond shall have been called for previous redemption and provision made for the pay-Inent of the redemption price thereof), One Thousand Dollars ($ 1,000),
at the oAice or <<gency of the Company in t)ie Borough of Manhattan, T)io City of New Yoilc, <<nd seiiii-annIially on the first day of December and t)ie first day of June in each year, to pay interest thereon at said ol)ico oi'igency, <<l, t)ie r<<te of 2>/q% pei <<nnuiri froin t)ie <late )iereof until the Company's obligation with respect to such principal sum shall be disc)iarged, but, until maturity, only upon presentation and sur-render of the annexed coupons as they severally mature. The principal of and premium, if any, and interest on this bond shall be payable in any coin or currency of the United States of America whic)i at the time of payment shall be legal tender for the payment of public and private debts.
This bond is one of an issue of bonds of t)ie Company, known as its First Mortgage Bonds, issued and to he issued in one or more series un<ler and equally and ratably secured (except as any sinking, amor-tization, improvement or other fund, establis)ied in accordance with
10 the provisions of the indenture hereinafter mentioned, may afford additiona1 security for the bonds of any particular series) by a certain mortgage and deed of trust (hereinafter called the'Indenture), dated as of June 1, 1947; made by the Company to Irving Trust Company, as Trustee (hereinafter called the Trustee), to which Indenture (and to all indentures supplemental thereto) reference is hereby made for a description of the property inortgaged, the nature and extent of the security, the rights and,limitations of rights of the Company, the Trustee, and the holders of said bonds and of the coupons appurtenant 'o coupon bonds, under the Indenture, the powers, duties and, im-
, munities of the Trustee, and the terms and conditions upon which said bonds are and are to be issued and secured, to all of the pro-visions of which Indenture and of all such supplemental indentures in respect. of such security, including the provisions of the Indenture
, permitting the issue of bonds of any series for property which, under the restrictions and limitations therein specified, may be subject to liens prior to the lien of the Indenture, the holder, by accepting this bond, assents. To the'extent permitted by and as provided in the Indenture, the rights and obligations of the Company and of the holders of said bonds and coupons (including those pertaining to any sinking or other fund) may be changed and modified, with the consent of tlie Company, by the holders of at least 75% in aggregate principal amount of the bonds then outstanding, such percentage being determined as provided in the Indenture; provided, however, that in case such changes and modifications affect one or more but less than all series of bonds then outstanding, they shall be required to be adopted only by the affirmative vote of the holders of at least 75% in ag-gregate principal amount of outstanding bonds of such one or more series so affected, but nothing contained in this proviso shall be deemed to affect any of the rights granted to bondholders by Article 9 of the Indenture to give any direction to the Trustee or to waive any default on the part of the Company; and further provided, that without the consent of the holder hereof no such change or modification shall be made which will extend the time of payme'nt of the principal of, or -of the interest or premium, if any, on, this bond or reduce the principal amount hereof or the rate of interest or the premium, if any, or effect any other modification of the terms of payment of such 'ereon, or interest, or premium, if any, or will permit the creation 'f
'rincipal any lien ranking prior to or on a parity with the lien of the Inden-"
ture on any of the mortgaged property, or will deprive the holder ..
hereof of the benefit of a lien upon the mortgaged property for, the
'ecurity of his bond, or will reduce the percentage of bonds required
for the adoption of changes or modifications as aforesaid. This bond is one of a series of bonds designated as the First ihlortgage Bonds, 27/so/o Series due 1977, of the Company.
'The bonds of this series are subject to redemption prior to ma-turity, upon not.less than thirty (80) days'rior notice, as a whole at any time, or from time to tinge in part, at the option of the Company, all as n>or'e fully provided in the Indenture, at t1te principal amount of the bonds so to be redeetned and accrued interest to the date fixed'for redemption, together, if redeemed otherwise than by the operation of the sinkinp fund provisions of the Indenture, with a premium equal to a percentage of the principal amount thereof determined as set forth in the tabulation below under the heading "Regular Redemption Pre-mium," and, if redeemed on or after June 1, 1948 by the operation of the sinking fund provisions of the Indenture in the manner and to the extent provided in the Indenture, with a premium equal to a per-centage of tlie principal amount thereof determined as set forth in the tabulation below under the heading "Sinking Fund Redemption Premium":
IfRedeemed During Twelve Regular Sinking Fund Months'eriod Ending May 31 Redemption Premium Ifo>>Redeemed Iune I Redemption Premium 1948 ... 4 65% 1948 ..... ...... 1.50%
1949 ... ... 450% 1949 ..... ...... 1.45%
1950 ... 4 8r)o/o 1950 ..... ...... 1.45/o 1951 ... ........ 4.20% 1951 1.40o/o 1952 4.05 1952 ..... ...... 1.35%%uo 1958 ... 8 8r)O/ 1958 ..... ...... 1.85%
. 1954 ... ........ 3.70% 1954 ..... ...... 1.80%
1955 ... ........ 8.55% 1955 ..... ...... 1.25%
1956 ... ........ 8.40% 1956 ..... ...... 1.20%
1957 ... ........ 8.25% 1957 ..... ...... 1.15%
1958 ... ........ 8.05% 1958 ..... 1.10%
1959 ... ........ 2.90% 1959 ..... 1.10/o 1960 ... ........ 2.75% 1960 ..... ...... 1.05%
1961.... 2 GQ/o 1961 ..... ...... 1.00%
.19G2 2.45o/o 1962 ..... .95%
1968 ... 2.25% 1968 ..... .90%
1964 ... ........ 2.10% 1964 ..... .85%%uo.
1965 ... ......... 1.95% 1965 ..... .80%
]966 ... 1.80% 1966 ..... .75%
1967 ... ........ 1.G5%%uo 1967 ..'... .70/o 1968 ... I 45)% 1968 ..... .60%
IfRedeemed Prem>urn During Ttoelve Regular Sinking Fund Montlxs'eriod Ending May 31 Redemption lfonRedeemed June'remium Redemption 1969 ............ 1.80% 1969 .............55%
1970 ........ ~... 1.15% 1970 .............50%
19?1 ............ 1.00% 1971 .............45%
1972 .............85% 1972 ...........,..85%
- 1978 1974
.............65%,
.............50%
1978 ...........: .80%
............' .25%
1974 19?5 .....,.......,'.85.% 1975 ......'.......15%
1976 ..............20% 1976 ............ 0.
1977 ............ 0.'f this bond shall be'alled for redemption, and payment of the redemption price shall be duly provided by the Company as specified in the Indenture, interest shall cease to accrue here'on from and after the date of redemption fixed in the notice thereof.
The principal of this bond may be declared or may become due before the maturity hereof, on the conditions, in the manner and at the
- times set forth in the Indenture, upon the happening. of a default as therein defined.
This bond is transfer'able by delivery unless registered as to principal in the owner's name on the books of the Company kept for such purpose by the Company at its oKce or agency in the Borough of, Manhattan, The City of New York, such registration being noted hereon
by the Company's registrar. After such registration no transfer liereof shall be valid unless made on the Company's books by the registered owner or by his attorney thereunto duly authorized and similarly noted hereon, but this bond may be discharged from registration by being ~,
transferred to bearer; after which it shall again be transferable by delivery, but it shall be subject to successive registrations and transfers to bearer as before. Such registration, however,, shall not affect the
=negotiability of the coupons hereto annexed,'xyhich- shall always be .
payable to bearer and transferable by delivery. The Company and the and any paying agent may deem and treat the bearer'of 'this 'rustee bond, if it be not registered as to principal, or, if this bond be registered 's to principal as herein authorized, the person in whose name the same is registered, as the absolute owner hereof, and the bearer of any coupon hereunto appertaining as the absolute owner thereof, for the .
purpose of receiving payment and for all other purposes.
The holder'F. this bond, at his option, may surrender the same, alone or with other bonds of the same series and maturity, with all appropriate coupons annexed thereto, at the above mentioned oAice or agency of the Company, for cancellation and exchange for one or more
fully registered bonds, of the same aggregate principal amount and of the same series and maturity, which fully registered bond or bonds may in turn be re-exchanged for a coupon bond or'bonds of the same aggregate principal amount and of the same series and maturity, all as, provided in the Indenture. Upon each such exchange and re-the Company may require the payment of charges as in the 'xchange Indenture prescribed.
No recourse under or upon any covenant, obligation or agree-ment of the Indenture, or of any indenture supplemental thereto, or of this bond or the coupons hereto annexed, for the payment of the principal of, premium, if any, or interest on, this bond, or for any claim based thereon, or otherwise in any manner in re-spect thereof, shall be had against any incorporator, subscriber to capital stock, stockholder, oAicer or director, as such, of the Company, whether former, present or future, either directly, or in-directly through the Company or any predecessor or successor cor-poration or the Trustee, by the enforcement of any subscription to capital stock, assessment or otherwise, or by any legal or equitable proceeding by virtue of any constitution, statute or otherwise (includ-ing, without limiting the generality of the foregoing, any proceeding to enforce any claimed liability of stockholders of the Company based upon any theory of disregarding the corporate entity of the Company or upon any theory that the Company was acting as the agent or instrumentality of the stockholders); any and all such liability of incorporators, stockholders, subscribers, officers and directors, as such, being released by the holder hereof, by the acceptance of this bond, and being likewise waived and released by the terms of the Indenture.
Neither this bond nor any of the annexed coupons shall be valid or become obligatory for any purpose until the certificat of authen-tication endorsed hereon shall have been signed by Irving Trust Co>npany, or its successor, as Trustee under the Indenture.
IN VP1TNRss WEIHREQP~ PUBLIG SERVICE CoNPhNY oP NHw MExIco has caused this bond to be signed in its name by its President or a Vice-.
President, and its corporate seal, or a facsimile thereof, to be impressed or imprinted hereon and attested by its Secretary or an Assistant Secretary, and coupons hearing the facsimile signature of its Treasurer to be annexed hereto, <<11 as of June 1, 1947.
'I'UBLic SHavrcH ConrphNY op NHw MExico By .
President.
Attest:
Secretary.
of;
[FGRM oF coUPoN FGR BQNDs oF THE 27/s% sERIEs DUE 1977 ]
On the 1st day 19 (unless the bond herein-after mentioned shall have been called for previous redemption and payment of the redemption price thereof duly provided for), Public Service Company of New Mexico will pay to bearer, upon surrender hereof, at the OKce or agency of the Company, in the Borough of Manhattan, The City of New York, Dollars and Cents ($ ) in any coin or currency of the United States of America which at the time of payment shall be legal tender for the payment of public and private debts, being six then due on its I<'irst Mortgage Bond, 27/s% Series due 1977, months'nterest No.
Treasurer.
[F0RN 0F FULLY RFGIsTFRED 90ND, 27/s% BERIEs DUE 1977 ]
PUBLIC SERVICE COMPANY OF NEW MEXICO FIRsT MGRTGAGE BGND, 27/s% SERIEs DUE 1977 DUE JUNE 1, 1977 No.
PUBLic SERvicE COMPaNY oF NEw MExico, a corporation organized and existing under the laws of the State of New Mexico (hereinafter sometimes called the Company), for value received hereby promises to pay to . ., or registered assigns, on June 1, 1977 (unless this bond shall have been called for previous redemption and provision made for the payment of the re-demption price thereof), Dollars.
($ ), at the OAice or agency of the Company in the Borough of Manhattan, The City of New York, and semi-annually on the first day of December and the first day of June in each year, 'to pay interest thereon to the registered owner hereof at said OAice or agency, at the rate of 27/s% per annum from the semi-annual interest payment date next preceding the date of this bond (unless this bond be dated on an interest payment date, in which case from the date hereof; or unless this bond be dated prior to the first interest payment date in
respect hereof, in wliich case from the-beginning of the first-interest period for bonds of this series, and except that if this bond is de-livered on a transfer or exchange of or in substitution for another bond or bonds it shall bear interest from the last preceding date to which interest shall have been paid on the bond or bonds in respect of which this bond is delivered), until the Company's obligation with respect to such principal sum shall be discharged. The principal of, premium, if any, and interest on this bond shall be payable in any coin or cur-rency of the United States of America which at the time of payment shall be legal tender for the payment of public and private debts.
This bond is one of an issue of bonds of the Company, known as its First Mortgage Bonds, issued and to be issued in one or more series
'>>der and equally and ratably secured (except as any sinking, amorti-zatio>>, improvement or other fund, established in accordance with the provisions of the indenture hereinafter mentioned, may afford addi-tional security for the bonds of any particular series) by a certain mortgage and deed of trust (hereinafter called the Indenture),, dated as of tune 1, 1947, made by the Company to Irving Trust Company, as Trustee (hereinafter called the Trustee), to which Indenture (and to all indentures supplemental thereto) reference is hereby made for a description of the property inortgaged, thc nature and extent of the security, the rights anti li>>)itations ol'ights of tho Coinpany, the Trustee, and the holders nf said bonds and of the coupons ap-purtenant to coupon bonds, under the Indenture, the powers, duties and immunities of the Trustee, and the terms and conditions upon which said bonds are and are to be issued and secured, to all of the provisions of which Indenture and of all such supplemental indentures in respect of such security, including the provisions of the Indenture permitting the issue of bonds of any series for property which, under the restrictions and limitations therein specified, may be subject to liens prior to the lien of the Indenture, the holder, by accepting
'this bond, assents. To the extent permitted by and as provided in the I>>denture, the rights and obligations of the Company and of the holders of said bonds and coupons (including those pertaining to any sinking or other fund) may be changed and modified, with the consent of the Company, by the holders of at least 75% in aggregate principal amount of the bonds then outstanding, such percentage being determined as provided in the Indenture; provided, I~omever, that in case such changes
>>>>d ~>>odifications affect one or more but less than all series of bonds t,l>>.>> outstanding, they shall be required to be adopted only by the
>illir>>ill,ive voto oi')ie holders of at least 75% in aggregate principal
16 amount of outstanding bonds of such one or more series so afFected, but nothing contained in this proviso shall be deemed to afKect any of the rights granted to bondholders by Article 9 of the Indenture to give any direction to the Trustee or to waive any default on the part of the Company; end filrtker provided, that without the consent of the holder hereof no such change or modification shall be made which will extend the time of payment of the principal of, or of the interest or premium, if any, on, this bond or reduce the principal amount hereof or the rate of interest or the premium, if any, hereon, or eKect any other modification of the terms of payment of such principal or interest, or premium, if any, or will permit the creation of any lien ranking prior to or on a parity. with the lien of the Indenture on any of the mortgaged property, or will deprive the holder hereof of the benefit of a lien upon. the mortgaged property for the security of his bond, or 'will reduce the percentage of bonds required for the adoption of changes or modifications as aforesaid. This bond is one of a series of bonds designated as the First Mortgage Bonds, 27/s% Series due 1977, of the Company.
The bonds of this series are subject to redemption prior to ma-turity, upon not less than thirty (30) days'rior notice, as a whole at any time, or from time to time in part, at the option of the Company, all as more fully provided in the Indenture, at the principal amount of the bonds so to be redeemed and accrued interest to the date fixed for redemption, together, if redeemed otherwise than by the operation of the sinking fund provisions of the Indenture, with a premium equal to a percentage of the principal amount thereof determined as set forth in the tabulation below under the heading "Regular Redemption Pre-mium," and, if redeemed on or after June 1, 1948 by the operation of the sinking fund provisions of the Indenture in. the manner and to the extent provided in the Indenture, with a premium equal to a percentage of the principal amount thereof determined as set forth in the tabulation below under the heading "Sinking I<'und Redemption Premium":
IfRedeemed Duri>>g Twelve Regulor Sinking Fund Mon lhs'eriod Redemplion IfRedeemed Redemplion Ending May 31 Prem<urn o>> I<<ne1 Premium 1948 ...... ...... 4.65% 1948 .. .......... 1.50%
1949 ...... ...... 4.50% 1949 .. .......... 1.45%
1950 ...... ...... 4.85% 1950 .. .... ~ ..... 1.45%
1951 ...... ...... 4.20% 1951 .......... 1.40%
1952 ...... ...... 4.05% 1952 .. .......... 1.85%
1953 ... .. ...... 3.85% '958 .. ...,....... 1,35%
1954 .. ..........
~
1954 ....,. ...... 3.70% 1.80%
IfRedeemed During Twelve Regular Sinking Fund Months'eriod IfRedeemed Ending May 31 Redetnptio>>
Prem<<am
............ 8.55/o on June'remsum Redemptio>>
1955 1955 ............* 1.25/o 1956 ............ 3.40% 1956 ............ 1.20/o 1957 ....... .. 8.25%
~ . ~ 1957 ............ 1.15%
1958 ......... .. 3.05%
~ 1958 ............ 1.10%
1959 ...... ..... 2.90%
~ 1959 ............ 1.10%
1960 ............ 2.75/o 1960 ............ 1.05%
1961 ............ 2.60/o 1961 ~... '........ 1.00%
1962 ............ 2.45 /o 1962 .............95%
1968 ............ 2.25o/o 1968 .............90/o 1964 ............ 2.10/o 1964 ........... ~ .85%
1965 ............ 1.95% 1965 ............ .80%
1966 ............ 1.80/o 1966 ............ .75/o 1967;:........;. 1.65% 1967 .............70%
1968 ....... ~.... 1.45% . 1968 .... ~........60%
1969 ............ 1.80% 1969 .............55%
1970 ............ 1.15% 1970 ............ .50%
1971 ............ 1.00% 1971 .............45%
1972 .............85o/o 1972 .............35%
1978 .............65 /o 1978 .............80%
1974 ............ '.50/o 1974 .............25%
1975 ............ .85o/o 1975 ............ .15/o 1976 .............20% 1976 ............ 0. /o 1977 ............ 0.
If this )iond shall be called for redemption in whole or in part, and paynient of the redoniption pri<<o s)tall he duly provided by the Com-pany as specified in the Indenture, interest shall cease to accrue hereon (or on tlie portion liereof to he redeemed) from and after the date of redemption fixed in the notice thereof.
The principal of this bond may be declared or may become due before the maturity hereof, on the conditions, .in the manner and at tlie times set forth in the Indenture, upon the happening of a default as therein defined.
Tliis bond is transferable by the registered owner hereof in person or by his duly authorised attorney at the o5ce or agency of the Company in tho Boron<<h of Manhattan, Tho City of New York, upon surron(lor und cancellation of this bond and upon payment of 'charges, anil thereupon a new fully registered bond of the same series and ma-turity, for a like principal amount, will be issued to the transferee in ozcliun<<e therefor, as provided in the Indenture. The Company and
18 the Trustee and any paying agent may deem and treat the person in whose name this bond is registered as the absolute owner hereof for the purpose of receiving payment and for all other purposes.,
This bond, alone or with other bonds of the same series and maturity, may in like manner be exchanged at such OSce or agency for one or more new fully registered bonds of the same series and maturity, in denominations approved by the Company, of the same aggregate principal amount, or the registered owner of this bond may at his option surrender the same for cancellation and exchange for a coupon bond or bonds of the same aggregate principal amount and of the same series and maturity with appropriate coupons annexed, which coupon bonds may in turn be re-exchanged for fully registered bonds of the same aggregate principal amount and of the same series and maturity, all as provided in the Indenture. Upon each such trans-fer, exchange and re-exchange the Company may require the payment of charges as in the Indenture prescribed.
No recourse under or upon any covenant, obligation or agreement of the Indenture, or of 'any indenture supplemental thereto, or of this bond, for the payment of the principal of, premium, if any, or interest on, this bond, or for any claim based thereon, or otherwise in any man-ner in respect thereof, shall be had against any incorporator, subscriber to capital stock, stockholder, OKcer or director, as such, of the Company, whether former, present or future, either directly, or indi-rectly through the Company or any predecessor or successor corpora-tion or the Trustee, by the enforcement of any subscription to capital stock, assessment or otherwise, or by any legal or equitable proceeding by virtue of any constitution, statute or otherwise (including, without limiting the generality of the foregoing, any proceeding to enforce any claimed liabilityof stockholders of the Company based upon any theory of disregarding the corporate entity of the Company or .upon'ny theory that the Company was acting as the agent or instrumentality of the stockholders); any and all such liability of incorporators, stock--
holders, subscribers, ofBcers and directors, as such, being released by the holder hereof, by the acceptance of this bond, and being likewise waived and released by the terms of the Indenture.
This bond shall not be valid or become obligatory for any purpose until the certificate of authentication endorsed hereon shall have been signed by Irving Trust Company, or its successor, as Trustee under the Indenture.
IN WITNEss WHEREQF) PUBLIc SERVIcE CCMPhNY oF NEw MExIco has caused this bond to be signed in its name by its President or a
19 Vice-President, and its corporate senl, or a facsimile thereof, to be impressed or imprinted hereon and attested by its Secretary or an Assistant Secretary.
Dated:
PUIILIG SERVICE CohIPANX OF NEw MEXICO)
By President.
Attest:
Secretary.
C Fonhf oF TRUSTEE s GERTIFIGATE oF AUTIIENTIGATIGN]
This bond is one of the bonds, of the series designaterl therein, described in the within-mentioned Indenture.
IRVING TRUsT CQMPANx~
As Trustee, c1 ssistant Secretary.
AND WHEREAs all the requirements of law nnd of the charter and by-laws of the Company, including all requisite action on the part of stockholders, directors and officers, and all things necessary to make said bonds, when duly executed by the Company and authenticated and rlelivererl hy the Trustee, and rluly issued, the valid, binding nnrl legal ohligntions of thc COInp<<ny, <<nrl to snake this Inrlenture a valirl and hinrling I>>ortg<<ge <<nrl rleerl of trust for the security of all honrls from time to tiI>>e issucrl hereunrlr.r, in <<r:corrlance with its terIns have hap-pcnerl, been rlone, an(1 been perforInerl; nnd the execution and delivery of this Indenture hns been in all respects duly authorized; Nowp THEREFoREp THls INDENTURE WITNEssETH That Public Ser-vice Company of New Mexico in consideration of the premises and of the mutunl covenants herein contained and of the purchase and accept-
20 ance by the holders thereof of the bonds at any time issued hereunder, and of One Dollar ($ 1) to it duly paid by the Trustee at or before the ensealing and delivery of these presents, the receipt whereof is hereby acknowledged, and in order to secure the payment of the principal of and interest and premium, if any, on all bonds from time to time outstanding hereunder, according to the terms of said bonds and of the coupons anne'xed thereto, and to secure the performance and observance of all the covenants and conditions therein and herein contained, and to declare the terms and conditions upon and subject to which said bonds are and are to be issued and secured, hath granted, bargained, sold, warranted, aliened, remised, released, con-veyed, assigned, transferred, mortgaged, pledged, set over and con-firmed, and by these presents doth grant, bargain, sell, warrant, alien, remise, release, convey, assign, transfer, mortgage, pledge, set over and confirm unto Irving Trust Company, as Trustee, and its successor or successors in the trust and its assigns forever, the following prop-erty, to wit:
PART FIRST (PmNxs)
The following electric generating plants, gas generating plants, gas holders, gas regulating stations, substations, steam plants, gravity pipe lines, reservoir sites, power sites, substations and other proper-ties of the Company, including all dams, power houses, warehouses, garages, cooling towers, spray ponds, buildings, forebays, reservoirs, races, raceways, pipes, head works, structures and works, and the lands of the Company on which the same are situated, and all the Company's lands, easements, rights, rights-of-way, water rights, rights to the use of water, including all of the Company's right, title and interest in and to any and all decrees therefor, fiowage rights, wooding rights, permits, franchises, consents, privileges, licenses, poles, towers, wires, switch racks, insulators, pipes, machinery, turbines, engines, boilers, condensers, motors, water pumps, chlorinators, line feeders, automobiles, tanks, trucks, oSce furniture and fixtures, regulators, meters, tools, appliances, equipment, appurtenances and supplies, form-ing a part of or appertaining to said plants, holders, reservoirs, sites,
21.
stations or other properties, or any of then), or used or enjoyed, or
<<npab)e of being used or enjoyed in conjunction or connection there-with, all situated in the State of New Mexico and the counties thereof, more particularly described ns follows:
BEBNALILLO COUNTY ALBUQUERQUE PowER PLANT:
Tract 1: Beginning at corner No. 1, a point on the center line of the-location of a wood conveyor and two (2) feet North of the North rail of the spur track leading from the Breece Lumber Company's log pond spur track to the Company's .
¹ power plant, whence the corner common to Sections 7, 8,=17
¹¹ and 18, Township 10 North, Range 3 East, iK P. M. (in place) bears S. 54'39'., 1352.60 feet distant; running thence 37'38'.,
52'22'.,
350 feet to the Southwest corner No. 2; thence 249.61 feet to the Northwest corner No. 3; thence S. 85'59'.,
523.76 feet to the Northeast corner No. 4; thence S. 0'55'<.
559.88 feet to the Southeast corner No. 5, a point 25 feet North-erly from, measured at right angle to, the center )ine of the above'described log pond spur; thence n)ong a line 25 feet Northerly fro>n, >neasured nt right'angle to, said )og pond spur center line, as follows: N. 78'19'., 50 feet to corner No. 6; N. 74'43'., 50 feet to corner No. 7; N. 72'01'., 50 feet to corner No. 8; N. 68'19'., 50 feet to corner No. 9;
¹ ¹ 63'54'., 50 feet to corner
¹ 65'56'.,
48.87 feet to corner No. 10; 58'49'., 50 feet to corner No. 12; N. 55'50'.,
No. 11; 52.66 feet to corner No. 13; ¹ 52'22'., 50 feet to the place of beginning, and containing 6.368 acres, more or less, to wit:
3.413 acres w'ithin the original power plant site, and 2.955 acres within the Easterly extension of said power plant site; hounded on the North, I<Past and West by lands of the Breece'umber Company, and on the South by the right of way of the above described log pond railway spur.
Tract 2: ALso a tract of land in School District No. 13, Bernalillo County, New Mexico, within the Tract of land com-monly known as the Mckinley. Land and Lumber Company t.rn<<t, which is shown by Survey made by Boss Engineering OAice~, to be desrrihed, as follows:
22 BEGIHNING at the Southwesterly corner of the original Power Plant site of the Company, whence the corner common to
¹ Sections 7, 8, 17 and 18, Township 10 North, Range 3 East M. P. M. bears South 54 deg. 11'ast 1702.33 feet distant, said beginning point being 27.41 feet Northerly from, measured at right angle to, the center-line of the raihvay spur track leading to the Breece Lumber Company's mill pond, running thence North 52 deg. 22'est 651.63 feet to the Soutlnvesterly Corner of the tract herein described, a point 26 feet Northerly from, measured at right angle to, said spur track center-line; thence North 4 deg. 01'East 62.0 feet to the Northwesterly cor-ner of the tract herein described; thence South 85 deg. 59'ast 1279.0 feet to the Northeasterly corner of the land of the Breece Lumber Company; thence South 8 deg. 33'est, along the East line of said land, 452.5 feet; thence South 52 deg. 27'ast along the East line'f said land 39.7 feet; thence South 7 deg.
40'est along the East line of said land 124.8 feet; thence South 32 deg. 34'ast along the East line of said land 16.15 feet; thence South 5 deg. 45'est along the East line of said land 163.7 feet to the Southeasterly corner of the land herein described, said corner being 25 feet Northerly from, measured at right angle to, the center-line of said spur track; thence North 81 deg. 54'est 20.34 feet to the Southeasterly corner of the present Power Plant Site of the Company; thence North 0 deg. 55'est along the East line of said site, 559.88 feet to the Northeasterly corner of said site; thence North 85 deg.
along the North'ine of said site and the North line of 59'est said original Power Plant site 523.76 feet to the Northwesterly corner of said original Power Plant site; thence South 38'est 249.61 feet to the place of beginning, containing37 7.398 deg.
acres, more or less.
Which said tract is BOUNDED's follows: on. the North by the land of St. Anthony's Orphanage; on the East by the land of the Unite'd States Indian School; on the south by land of the Company, and the right of way of the raihyay spur track leading to the Breece Lumber Company's mill pond; and 'on the West by the land of the Breece Lumber* Company.
B. Ar.nUgvrnqUF. B~s Pr,~ex:
Lots Six (6) to Thirteen (13), both inclusive in Block let-tered "B", and Lots One (1) and Two (2) in Block lettered
23 "C" of t)ie Union Depot F<rontage Addition to the City of Albuquerque, New Mexico, as the same are'shown and desig-nated on the Amended and Supplemental Plat of said Addition filed in the oSce of the Probate Clerk and Ex-OKcio Recorder of Bernalillo County, New Mexico, February 29, 1888, which are, according to m'ap dated May 18, 1927, prepared by Albuquerque Gas & Electric Company and approved by Robert L. Cooper, City Engineer of the City of Albuquerque, more par-ticularly described as follows:
Beginning at a point, which is the intersection of East property line of the A. T. & S. F. R. R. Spur R/W and the extension of the Nortli property line of East Silver Avenue; thence No. 8'45'<. along the East property line of said R. R.
R/AV, a distance of 410'o a point, on said property line, thence South 81'15'ast a distance of 90.4 feet to a point on the W.
property line of S. John St., thence S. 8'45'. along the said property line of said John St,, a distance of 110.0', to a point, which is the intersection of said property line of S. John St.,
and the South property line of East Gold Ave., thence S. 81'15'.
along said property line of E<. Gold Ave. a distance of 34.6
~
feet to a point which is the intersection of said property line of E. Gold and the West property line of the R/W of the Acequia Madre de los Barelas, thence S. 12'49'<. along said R/W of the Acequia Madre de los Barelas a distance of 124.4 feet to a point on the said R/W, thence S. 8'1l'. along said R/W a distance of 95.5 feet to a point on said R/W, thence S. 1'19'. along said R/W a distance of 90.4 feet to a point erty line of L<'ast Silver Ave., thence ¹ which is the intersection of the said R/W and the North prop-81'15'. along the extension of the North property line of E<ast Silver Ave. a dis-tance of 184.0 feet to place and point of beginning.
Also, beginning at a point which is the intersection of the East property line of the A. T. & S. F. R. R. Spur R/W and the extension of the South property line of- East Silver Ave.,
thence S. 81'15'. along the extension of said property line of. L<'ast Silver Ave. a distance of 203.0 feet to a point which is.
t)ic intersection of said property line and the West line of the Acequia Nadre de los Barelas R/W, thence S. 24'17'., along R/W, thence ¹ said R/W a distance of 103.84 feet to a point on said Acequia 81'21'. a distance of 175,0 feet to a point on the East line of the A. T. & S. F. R. R. R/W, thence ¹ 8'45'
E., along said R/W a distance of 100.0 feet to place and point of beginning.
Also that portion of East Silver Avenue running from the West bank of the Acequia Madre de Los Barelas to the east line of the Atchison, Topeka 0 Santa Fe Raihvay Company's Union Depot Frontage of the Town of Albuquerque, filed Feb-ruary 29th, 1888, more particularly described as follows:
Beginning at the Northwest Corner, the point where the North line of East Silver Avenue intersects the east line of the Atchison, Topeka and Santa Fe Railway Company's prop-erty, and running thence S. 8'45'. along the E<'ast line of said Railway property 60 feet to the Southwest corner; thence, angle left 90'00'30" along the South line of East Silver Avenue 203 feet to the Southeast corner of the West bank of th'e Acequia Madre de los'Barelas; thence angle left 107'34'long said Acequia, 62.94 feet to the northeast corner; thence angle left 72'26'long the North line of East Silver Avenue 184 feet to the place of beginning.
Subject to easement and right of way agreement dated January 4, 1937, between Albuquerque Gas and Electric Com-pany and the City of Albuquerque, recorded in Book 144, page 629 of the records of Bernalillo County, New Mexico.
SANDOVAL COUNTY C. BFiRNhLILLO POWFR PLhNT:
Three tracts of land in the Town of Bernalillo, Sandoval County, New Mexico, within Section 6, Township 12 North, Range 4 E<ast, N. M. P. M., and being a-portion of Private Claim 206 within the Sandia Pueblo Grant, which are more particularly described by survey made by Ross L<'ngineering OSce, on April 16, 1938, as follows:
Tract "A". Beginning at the Northwest Corner No. 1, whence the Northwest Corner No. 2 of- Private Claim 18
¹ 44'.
Parcel 1, in Section 6, Township 12 North, Range 4 E<'ast, 64 M. P. M., and within the Sandia Pueblo Grant, bears 1106.92 feet distant, running thence S. 61'06'.
¹ 128.66 feet to the Northeast Corner No. 2; thence S. 28'54'.
32 feet to the Southeast Corner No. 3; thence N. 61'06'
25 W. 128.66 feet to the Southwest Corner No. 4; thence ¹ 32 feet to the place of beginning, and containing 0.094 of 28'54'.
one acre, more or less; Tract "B". Beginning at the Southwest Corner No. ],
whence the Northwest and beginning Corner No. 1 of Tract "A" above described, bears S. 36'43'., 70.66 feet distant; running thence N. 29'01'. 52.18 feet to the Northwest corner No. 2; thence S. 60'59'. 76 feet to the Northeast corner No. 3; thence S. 29'01'. 52.18 feet to the South-east corner No. 4; thence N. 60'59'. 76 feet to the place of beginning, and containing 0.091 of one acre, more or less; Tract "C". Beginning at Corner No. 1, whence the
¹>rtlnvest and beginning Corner No. 1 of Tract "A" above thence 3'27'.
¹ 61,'l4'.
described, bears S. 19'56'<3. 22.80 feet distant; running 1.4.68 feet to corner No. 2; thence N.
17.08 feet to corner No. 3; lienee N. 29'20'., 15.13 feet to the Northeast corner No. 4; thence N. 61'30'. 23.20 feet to corner No. 5; thence S. 29'51'. 19.81 feet to corner No. 6; thence N. 60'44'. 22.92 feet to corner No. 7; thence S. 41'30'. 4.20 feet to corner No. 8; thence 16.64 feet to the, Northwest corner No. 9; thence S.
¹ 62'54'.
28'46'.
149.40 feet to the Southwest corner No. 10; thence S.
61'l4'<. 14 feet to corner No. 11; thence S. 28'46'. 5.67 feet to corner No 12; thence S. 61'14'. 73.15 feet to the Southeast corner No. 13; thence N. 28'46'. 46.08 feet to corner No. 14; thence 28'46'.
¹ 51'06'<. 19.34 feet to corner No.
1.5; thence N.
S. 61'14'. 5.04 feet to corner No. 17; thence ¹ 13.30 feet to corner No. 16; thence 7.95 feet to corner No. 18; thence N. 61'14'. 4.15 feet to 28'46'.
corner No. 19; thence ¹ 28'46'. 15.84 feet to corner No. 20; tl>ence N. 61'14'. 8.32 feet .to corner,No. 21; thence N.
HH"4(<'<l. 49.95 feet to the place of beginning and containing (I.:f32 of one <<<<rc, >>iore or less.
hi.so a tract of land in the Town of Bernalillo, Sandoval County, New Mexico, within Section 6, Township 12 North, E<'ast, ¹ Range 4 East, and Section 31, Township 13 North, Range 4 M. P. iK, and being yortions of Private Claim 20, Parcel 1, Private Claim 26, Parcel 1 and Private Claim 206 within the Sandia Pueblo Grant, which is more particularly
26 described by Survey made by Ross-Beyer Engineering Once on April 28th, 1944, as follows:
BEGINNING at the Northeast Corner No. ',
United States General Land OlEce oScial metal monument whence the marking the Northwest Corner No. 2 (in place) of Private Claim No. 18, Parcel 1, in the above described Section 6 and within "said Sandia Pueblo Grant, bears S. 18 deg. 10'. 604.02 feet distant; running thence ¹ 48 deg. 26'. 75.23 feet to Corner No. 2, a point on the Easterly boundary line of lands of Albuquerque Gas S Electric Company; thence along said boundary line as follows: S. 41 deg. 00'., 31.24 feet to Corner No. 3; N. 63 deg. 26'., 30 feet to Corner No. 4; N. 84 deg.
28'., 30 feet to Corner No. 5; S. 78 deg. 56'., 829.35 feet to Corner No. 6; S. 73 deg. 55'., 40 feet to Corner No. 7; S.
60 deg. 54'., 35 feet to the Northwest corner No. 8; S. 29 deg. 09'., 61,20 feet to Corner No. 9; S. 15 deg. 44'., 558.87 feet to Corner No. 10; S. 57 deg. 47'., 32.45 feet to the South-west Corner No. 11; thence leaving said Easterly boundary of lands of the Com-pany and running S. 59 deg. 04'ast, 397.52 feet to Corner No.
12; thence S. 28 deg. 46'., 22.88 feet to Corner No. 13; being the identical Northwest Corner of said Company's Bern'alillo Power plant. tract as follows: S. 62 deg. 54'., 16,64 feet to corner No. 14; deg. 30'., 4.20 feet to Corner No. 15; S. 60 deg, 44'., 22.92
¹ thence along the No'rtherly boundary of said power plant tract 41 feet to the Southeast Corner No. 16; feet to corner No. 17;
¹ 29 deg. 51'., 19.81 thence leaving said power plant tract boundary and running; N. 61 deg. 30'., 13.75 feet to Corner No. 18; thence N. 41 deg.
34'., 1295.98 feet to the place of beginning; Containing Thirteen and Eighty-two-hundredths (13.82) Acres, more or less.
VALENCIA COUNTY D. BELEN POWER PLANT:
A tract of land in the Town of Belen, Valencia County, New Mexico, being described by metes and bounds as follows, to-wit:
. 2?
Bogi>>>>iiig <<t tin. Northeast corner of the land herein de-scribed, which is a point established by, projecting the South line of, Baca Avenue as said Baca Avenue now exists and is shown on the Map of the Belen Townsite made by Pitt Boss in 1903, and filed in the ofFice of the County Clerk of Valencia County, New Mexico July 26, 1909, Eastward to intersection with the West line of First Street which West line of First Street is a line sixty feet Westerly from and parallel with the West line of the property of the'A. T. 5 S. F. Railway Company; and running from said Northeast corner Southerly along said West- line of First Street 280 feet to the Southeast corner; thence Westerly, angle right 90 deg. 0'40 feet to the South-west corner; thence Northerly, angle right 90 deg. 0'80 feet to the Northwest corner; thence Easterly angle right 90 deg.
0'long the projected South line of Baca Avenue, 140 feet to the place of beginning.
Saiil land is bounded: on the E<ast hy First Street; on the South by F<<nners Road; on the West by land formerly of John Becker, and on the North by a line parallel with the extension of Baca Avenue.
LUNA COUNTY E. DHI,IING STEAN ELECTRIC PLANT:
All that part of Block Sixteen (16) of the Wallis Survey Addition of Townsite of Deming, Luna County, New Mexico, according to the plat of said addition on file in the oSce of the County Clerk of said Luna County, New Mexico, particularly described as follows, to-wit: Beginning at the ~/4 Section corner
¹ between Secs. 2? and 34, in Township 23 South, Bange 9 West, N. P. M.,-thence West 35 feet, thence North Eight degrees, Eighteen minutes West (¹ 8'8'.) 1,511.9 feet, thence North eighty-one degrees, forty-two minutes East (N. 81'2'.) 80 feet for' new point of beginning; thence North eight degrees oi< hteen niinutes West (¹ 8'8'.) 133.8 feet, thence North eighty-one degrees, forty-two minutes E<'ast (N. 8~1'2'.) 300 feet, tlience South eiglit degrees eighteen minutes East (S.
133.8 feet, thence South eighty-one degrees, forty-two 81'2'.)
8'8'<3.)
minutes West (S. 300 feet to the last mentioned place of beginning, being a part of Lots 1 to 12 inclusive, in said Block 16 of the Wallis Survey Addition to Townsite of
28 Deming, Luna County, New Mexico; excepting therefrom the following two described tracts:
Tract 1 Beginning at the SE corner of Block 16 of the Wallis pin set by the Village Engineer at a point feet and th'ence S. 8'8'., ¹ Survey Addition to Deming, New Mexico; this being an iron 81'2'<. 5.35 1.95 feet from the SE corner of concrete loading platform, thence N.
81'2'., 8'8'.,
8'8'<. 91 feet, thence
¹ S.
81'2'.',
78 feet, thence S.
78 feet, to the place of beginning.
91 feet, thence Tract 2 Beginning at the SE corner of Block 16 of the Wallis Sur-set by the Village Engineer at a point 8'8'., ¹ 81'2'.
vey Addition to Deming, New Mexico; this being an iron,pin 5.35 feet and thence S.
crete loading platform, thence 81'2'. ¹ 8'8'.,
1.95 feet from the SE corner of con-107.2 feet, thence 48.6 feet for a new place of beginning, this being S.
the SE< corner of the Ammonia Plant, thence N.
24 feet, thence S. 81'2'., 39.7 feet, thence S.
8'8'.
8'8'., 24 feet, thence N. 81'2'., 39.7 feet to the said new place of beginning.
Lots Thirteen (13) to Twenty-four (24), both inclusive, in Block Forty-one (41) of the Wallis Survey Addition to the Townsite of Deming, Luna County, New Mexico, according to the plat of said addition on file in the once of the County Clerk of said Luna County, New Mexico.
Also a tract of land described as follows: All that part of First Street lying between Gold Avenue and Copper Street, in the Villageof Deming, Luna County, New Mexico, more par-ticularly described as follows:
Beginning at the Southeast corner o'f Block Forty-one (41) of the Wallis Survey Addition to the Townsite of Dem-ing, Luna County, New Mexico, thence south 8'4'ast, 70 feet along the west side of Gold Avenue to the Northeast corner of Block Sixteen (16), thence South 81'6'est, 300 feet along the south line of F<irst Street to the Northwest corner of Block Sixteen (16), thence North 8'4'est, 70 feet
29 along the east side of Copper Street, to the southwest corner of Block Forty-one (41), thence North 81'6'ast, 300 feet along the north line of First Street to the place of beginning, according to the oAicial map of said Wallis Survey Addition on file in the 0$ ce of the County Clerk of said Luna County, New Mexico, containing 0.482 of an acre, more or less.
SAN MIGUEL COUNTY F. THE LAS.VEGAS STEAhf ELECTRIC POWER PLANT:
Lots One (1) to Seventeen (17), both inclusive, in Block numbered F<ight (8); and Lots Eight (8) to F<ourteen (14),
both inclusive, in Block numbered Thirteen (13) of the Lopez, Sulzbacher and Bosenwald Addition of the E<1 Dorado Town Company to Las Vegas, New Mexico.
'lso a certain tract of land described as follows:
Beginning, at the southeast corner of this tract or parcel of land said corner being marked by a stake set in the ground on the west side of 11th Street being also the northeast corner of Lot 17, Block 8 of the Lopez, Sulzbacher and Hosenwald Addition of the EI Dorado Town Company to Las Vegas, New Mexico, as established at this time July 1940; thence westerly along north line of said Lot 17 of said Block 150 feet to the center line of Alley which runs through said Block 8; thence northerly and making an angle of 99 degrees 03 minutes with the last mentioned line following along extension of center line of said alley along east side of property of the New Mexico Power Company 137 feet to the northwest corner and to the
. south line of the New Mexico Normal University Athletic Field; thence easterly and making an angle of 96 degrees 42 minutes with the last inentioned line 62 feet along said New Mexico Norinal University Athletic Field to angle in line; thence con-tinuing along said Athletic Field and making an angle of 161 degrees 00 minutes with the last mentioned line 89 feet to stake set at the northeast corner; this corner being on the west line of the continuation of the above mentioned 11th Street; thence southerly and making an angle of 103 degrees 17 minutes with tlie last inentioned line 148 feet along west line of said 11th Street to the place of beginning, containing 00.51 of an acre, inore or less.
80 A tract of land beginning at a point on the East side of
'&velfth Street N. 28'50'. 282 feet distant from its inter-section with the North side of San Francisco Avenue, and running thence S. 74'30'. 64 feet to a post at the corner of the fence where Peter Tranbley's land adjoins the right of way of the Hot Springs Branch of The A. T. S S. F. Ry.;
thence along said right of way fence N. 5'30'E. 100 feet to the middle of the ditch; thence along the middle of the ditch in a general course N. 58'80'. 168 feet; thence S. 28'50'., 136.5 feet to a point in said Peter Trambley's fence at the middle of the alley which runs through Block No. Eight (8) of the Lopez, Sulzbacher and Rosenwald Addition of the El Dorado Town Company to Las Vegas; thence along said fence S. 74'30'.
151.5 feet to the place of beginning; Also a tract of land formerly a portion of 12th Street in the City of Las Vegas, New Mexico, and being all that portion of said 12th Street that lies north of the north line of San Francisco Avenue in said City of Las Vegas, as shown on the oKcial plat of said City and being all that portion of said 12th Street lying between Lots Six (6) to Fourteen (14), both inclusive, of Block Thirteen (18), and Lots One (.1) to Nine (9), both inclusive, of Block No. Eight (8) of said Lopez, Sulzbacher and Rosenwald Addition, which was recently abandoned, vacated and closed by said City of Las Vegas and conveyed by it to Las Vegas Light and Power Company by deed dated December 14, 1939, recorded in Book 128, Records of Deeds, page 494, of the records of San Miguel County, New Mexico.
6o PFiTERSON RESERVOIR:
Pm', A. A tract of land beginning at a point 2.25 feet southeast of a pine tree situated at the southeast corner of land of the Hot Springs Company and in a northerly line of land of Z. H. Stearns and F. H. Pierce, and then running north 16'19'ast 355 feet to the center line of the main track of the Hot Springs Branch of the A. T. 0 S. F. Ry., thence south 85'55'ast 196 feet along said center line to a point of curve; thence north 85'24'ast 337.'5 feet along chord of a curve (whose arc measures 839 feet) along center line of aforesaid track to a point of curve; thence north 74'43'ast 160.8 feet; thence north
31 84'87'<. 276.8 feet along the chord of the curve (whose arc measures 227.7 feet) to a point on the curve about 37 feet west-erly from highway crossing; thence south 15'2'est 52.2 feet to a point on right of way of aforesaid railroad; thence south 4'5S'est 5GS feet to a stake; thence south 21'5'est 1393 feet to a pile of stones on top of ridge; thence north 3'32'est 893 feet along easterly boundary of land of aforesaid J. H.
Stearns and P<. H. Pierce to a stone marked 8-P; thence north 18'40'est 1044 feet to a stone marked S-P; thence north 73'31'est 246.5 feet to a point or place of beginning, contain-ing 22.8 acres, more or less, exclusive of the right of way of aforesaid railroad, said right of way being excepted.
Pincer, B. Beginning at a pine tree which marks the south-east corner of the property now or formerly belonging to the Hot Springs Company and running south 73'31'~<ast 246.5 feet to a stone marked 8-1', thence running south 18'40'ast, 677 feet to a cedar post; thence running south 10'09'est; 1210 feet to a post; thenc'e running south 10'20'est, 2620 feet to a post; thence running north 26'42'est 1760 feet to a post:
thence running north 29 P East 659 feet to a post; thence run-ning north 1,'57'est 766 feet to a post; thence running north 65'81.'est, 287 feet tn a post; thence running north 1597 feet to a post, which post is the point of beginning 24'31'<'ast, of Parcel C; thence running north 84'21.'ast, 837.0 feet ~o the point of beginning, containing 84.38 acres, more or less.
Phncsr. C. A strip of land fifty feet wide, lying 25 feet on either side of the following described line: Beginning at a post on the westerly side of the property described in Parcel B, 337 feet distant, and bearing south 84'21'est, from a pine tree which marks the southeast corner of the property now or form-erly belonging to the Hot Springs Company; thence north 826 feet; thence south 71'35'est, 532 feet; thence north 59'-46'est, 1.G'21'ast, 355 feet to a point on the southerly line of the alrove property now or formerly belonging .to the Hot Springs Corrrpany which point is about 1066 feet distant and hearing nortlr 73'3l.'est, from the above mentioned pine tree; con-taining 1.04 acres, more or less..
Pmcr~r. D. A strip of land fifty feet wide, lying 25 feet on each side of the following described center line: Beginning at
32 a point on the southerly line of the property described in parcel C, which point is about 1066 feet distant and bearing north 73'1'est, from the above mentioned pine tree; Thence north 18'0'ast 54.2 feet; thence north 25'0'est 267.3 feet; thence south 81'2'est 140.5 feet; thence north 76'2'est 153 feet; thence north 34'0'est 202 feet; thence north 212,5 feet; thence north 65'5'est 352 feet; thence north 17'2'est 88'6'est 249 feet; thence south 78'1'est 144.8 feet; thence south 44'4'est 201 feet; thence south 56'1'est 186 feet; thence south 62'8'est 237.9 feet; thence south 69'0'est 223.1 feet; thence south 65'0'est 220 feet; thence south 202.5 feet; thence south 78'7'est 135 feet; thence south 80'est 75'est 209 feet; thence north 44'6'est 100 feet from which station the corner common to Townships 16 and 17 north Ranges 15 and 16 east bears south 70'ast 175 feet north 63'tV west 132 feet; thence along the face of a distant,'hence high perpendicular blufF south 71'4'est 10?6 feet; thence south 47'3'est 110.3 feet; thence south 40'9'est 162.7 feet; thence south 59'6'est 284.7 feet; thence south 75 feet; thence south 85'0'est 190 feet; thence north 52'3'est 82'5'est 274 feet to the line of the property of the Company and which point bears, south 26'6'est 510 feet from monu-ment No. 1 of the survey of the lands of the Company. Said Monument No. 1 is south 82'8'0" west 2068 feet from the northeast corner of Township 16 north Range 15 east; containing 6.65 acres, more or less.
PAROEI. E. A strip of land 50 feet in width, the same being 25 feet each side of the following described center line: Be-ginning at a point on the west line of Tract No. 1 formerly owned by the Hot Springs Company, later by the Young Men' Christian Association of Las Vegas 410 feet north of the south-west corner of same; thence south 31'0?'ast, 153 feet, thence South 47'55'ast, 202 feet; thence south 89'57'ast 153 feet; thence north 67'57'ast 140 feet; thence south 38'55'ast 267.3 feet; thence south 5'15'est 45.7 feet, containing 1.10 acres, more or less.
H. REsERvoIR AND DAM SITE IN BALLINAs CANQN:
That certain tract of land situated above the Las Vegas Hot Spring on the Gallinas River described as follows: Begin-
ning at t1>e northeast corner of this tract which is a point in the center of the Gallinas Biver where the course of the Canon Negro intersects said river and which point is south 82 58'50" west 206S feet fro'm the northeast corner of Township 16 North, Bange 15 East, N. M. P. iC.; thence south 26'26'est 450 feet through the Canon Negro; thence south 62'34'30" west 1177 feet to a point; thence along the highest point of the divide of the watershed to the southwest corner by the following courses:
south 28'01'est 549.6 feet; south 7'14'40" west 560.6 feet;
'south 41'07'est 610 feet; south 41'52'80" west 851.5 feet; south 61'08'est 270 feet; south 74'52'est 160 feet; south 52'44'est 982 feet; south 57'20'est 860 feet; south G82 feet; south 29'12'est 821 feet to the point farthest 84'47'est south and to a stone marked A. P. C. set near a blazed tree; north 40'09'est 875 feet; north 44'53'est 748.2 feet; north 58'29'est 1378 feet, passing a stone monument at 306 feet; north 85'44'est G45.7 feet; north 18'80'est 287.5 feet to the southwest corner of this tract and which corner is marked by a stone set by a blazed tree; thence north 89'58'ast 2379 feet to the center of the Gallinas Biver at a point about 1000 feet above Dam No. 9 of the Company; thence south 84'29'ast 2505 feet; thence north 29'54'ast 200 feet; thence south 60'06'ast 72.5 feet to the south side of the right of way of the A. T.
8; S. F. By. Co., the last three described points heing marked hy inonuments >narked A. P. C.; thence along the south side of said ri< ht of way north 30'09'ast 273.9 .feet and thence
'north 58'58'30" <<ast 426.9 feef'; thence leaving the right of way soutli hei"82'ast 200 feet to the center of the Gallinas River; thence ah>>i<< tlu. center of thc said river to a point north 27"02",10" cast 199.I feet to the intersection of the center lines ol'hc 0<<llinas River and the Canon ¹ino,just below Darn No.
1<'ive; thence south 86'0,")'08" east 1074 feet along the center of the Gallinas Biver; thence continuing along center of said river north 84'4G'50" east 933.6 feet to the northeast corner and place of beginning containing 848.7 acres, more or less.
I. DAMs NUMBFRED 2 AND 3:
Lot numbered Sixteen (16) in Block numbered One (1) of Mills and Chapman's Second Addition to Las Vegas EIot Springs.
84 Lots numbered One (1) to Ten (10), inclusive, and Lots numbered Eighteen (18) to Forty-two (42) inclusive, in Block numbered Four (4);
Lots numbered One (1), Two (2), Three (3), and Lots num-bered Twenty-two (22) to Forty-one (41); inclusive, in Block numbered Six (6);
Lot numbered nineteen (19) in Block numbered Ten (10);
Lots numbered seventeen (17) to Thirty-two (82) inclusive, in block numbered Eleven (11);
Lots numbered One (1) to Thirteen '(13); inclusive, in block numbered Twelve (12);
Lots numbered One (1) to Six (6) inclusive, in Block num-bered Fifteen (15);
Lots numbered One (1) to Eight (8) inclusive, in Block numbered Sixteen (16);
Lots numbered One (1) to Four (4) inclusive, in Block num-bered ¹ineteen (19);
Lots numbered One (1) to Fifteen (15) inclusive, in Block numbered Twenty-one (21);
Lots numbered Seven (7) to Thirteen (13) inclusive, in Block numbered Twenty-two (22);
All of Block numbered Twenty-three (28) and Thirty-three (33)
All in Mills and Kihlberg's First Addition to the Hot Springs; Also the following described tract. of land: Commencing on the Rio Gallinas, in the center of the same, on the west line of Lot No. 21 in Block No. 11, and running up said river to a point in the middle of said stream to a point opposite the east.
line of Lot No. 1 in Block No. 5, in Mills S ICihlberg's Addition to the Hot Springs; thence south from the center of said river a distance of 100 feet; thence easterly on a line running parallel with the center of said Gallinas River, to a point 100 feet south-erly from the point of beginning; thence northerly 100 feet to
35 the place of beginning; all in Mills and Kihlberg's First Addi-tion to the Hot Springs; J. RESERVOIR AND SETTLING BASIN:
Commencing at a point on the west side of the Boulevard, northwest of the Insane Asylum, on the brow of the hill, marked by a sandstone 23 x 7 x 4 inches in the ground with mound of stone, marked A. P. Co., from which an air valve on the water main bears I<i. 33 links distant; thence north 34'5'est 9.97 chains (219.34 yds.) thence north 29'45'est 5.15 chains (113.30 yds.) to a stone set marked A. P. Co., thence south 61'00'est 26.40 chains (580.80 yds.) to a stone set marked A. P. Co., thence south 32'00'ast 15.15 chains (330,30 yds.) to a stone set, thence north 61'00'<., 26.80 chains (589.60 yds.) to the place of be-ginning, containing 40 acres, more or less.
SANTA 1< L<'OUNTY IC. SA'NTA FE STEAM ELEcTEIc PowEE PLANT AND OPI<'IGE BUILDING:
A tract of land in the City of Santa Fe described as fol-lows: From the Southeast property line intersection of Don Gaspar and Water Streets, south 72'01'ast 153.57 feet; thence south 64'36'ast 94.45 feet to the point of beginning, which is the NortlIwest corner of this tract. From this point of beginning south 64'36'ast 60.0 feet to the Northeast corner of this tract; thence south 25'49'est 88.92 feet to the South-east corner of this tract; thence north 72'24'est 52.75 feet to the Southwest corner of this tract; thence north 16'06'ast 48.40 feet; thence north 26'21'ast 48.30 feet to the Northwest corner of this tract and the point and place of beginning.
Also a tract of land in the City of Santa Fe, described as follows: From the Southeast property line intersection of Don Gaspar and Water Street, which is the Northwest corner and the point of beginning of this tract, south 72'01'ast 153.57 feet; thence south 64'36'ast 94.45 feet to the Northeast cor-ner of this tract; thence south 26'21'est 48.30 feet; thence south 16'06'est 48.40 feet to the Southeast corner of this tract; thence north 72'06'est 84.50 feet; thence north 14.58 feet; thence north 75'37'est 151.45 feet to the 19'01'ast
Southwest corner of this tract; thence north 14 23'ast 103.65 feet to the Northwest corner of this tract and the point and place of beginning.
Also a tract of land in the City of Santa Fe described as follows: From the Northwest corner of which, the Southeast property line intersection of Don Gaspar and Water Streets bears north 14'23'ast 103.65 feet; and from which North-west corner the center of a manhole on a sanitary sewer on Don Gaspar Avenue bears north 57'20'est 86.0 feet; from which Northwest corner, which is the point of beginning of this tract, south 75'37'ast 151.25 feet; thence south 14.5S feet; thence south 72'06'ast.,84.50 feet; thence 19'01'est south 72'83'ast 52.7 feet to the Northeast corner of this tract; thence south 12'30'est 26.9 feet to the Southeast corner of this tract; thence north 75'44'est 287.82 feet to-the South-west corner of -this tract; thence north 14'16'ast 50.0 feet to the Northwest corner of the tract and the point and place of beginning.
L. THE HYDRQ PowER PLANT AND SERYIcE BASIN PRCPERTY:
A, portion of Tracts Nos. 49, 50 and 51, in Precinct No, 3, as shown by Zimmerman's Map of 1904, also more particularly described as follows: Beginning at corner Number One, which is a fence post about eight inches in diameter on the north side of Canon Road and near the North bank of the Arroyo de Los Moros, thence south 74'55'est 865.88 feet along the ¹orth side of Canon Road; thence south 86~20'est 186.75 feet along said fence on the north side of Canon Road to and crossing the right-hand turn in said road and to the center of an Arroyo Moros in which is located the Southwest corner of this tract; thence along the center line of said Arroyo Moros on the West boundary of this tract north 17'40'est,225.50 feet; thence north 25'4l'est 125 feet; thence north 38'8l'est 102.80 feet, again crossing said Canon Road to its North side; thence north 48'88'est 168.25 feet; thence north 58'00'est 147.50 feet to the Northwest corner of this tract which corner is located on the South bank of the Santa Fe river; thence meandering the South bank of said river and along the northerly line of this tract north 70'51'ast 180 feet, which point is located on the east side of the road crossing the said river; thence north
37 75'ast 147.50 feet to a point at the intake of the Acequia Mndre; thence north GG'47'ast 89.59 feet; thence north 91.72 feet; thence north 83'06'ast 216.91 feet; thence G8'2?'ast south 77'39'ast 78.86 feet; thence south 75'00'ast 91 feet; thence south 78'19'ast 99 feet to the Northeast corner which is located in the center of the said Arroyo de Los Moros at its juncture with the Santa I<'e River; thence along the Easterly side of this tract and the center of the last mentioned Arroyo de Los Moros south 5'31'est 181 feet; thence south 89 f<<ot; thon<<e south 9'27'ast 210 foot; thence south 33'7'nst 82"00'ast 80 l'oot; thon<<<< south 37'22'ast 152.50 feet to the Southeast corner of this tract, which is located in the center of the last mentioned Arroyo at the Northerly side of the sharp curve in the said Canon Road; thence north 62'16'est 69.67 feet; thence north 88'51'est 65.88 feet, both bearings being along the northerly side of said Canon Bond and to the point of beginning; said tract containing 11.51 acres.
ibt. GnhNITY, POINT RRSHavolR:
T)>o Santiago Ramirez Grant in Sections 22, 23 and 24 in Township 17 North, 14ango 10 L<'ast, and Sections 18 and 19 in Township 1.7 North, Range 11 East, of the New Mexico Meridian in the County of Santa I<'e, New Mexico, containing 2?2.168 acres; the said grant being more particularly described as follows: Beginning at a point on the Northeast corner of the Grant which is located on a rock known ns Monument Rock, whi<<h rock is )ocatod at Latitude 35'41.'orth, Longitude 105'49'est; frown tho s;<i<) point of beginning, south ]8.00 chains to Hu. bout)ioast <<orner of said Orant; thence south 33'15'est I6.00 chains to station 1 on the South boundary of said Grant; thence south 48'00'est 18.00 chains to station 2 on the South boundary of said Grant; thence south G8'40'est 13.00 chains to station 8 on the south boundary of said Grant; thence south 82'45'est 27.00 chains to station 4 on the south boundary of said Grant; thence north 86'0'est 6.00 chains to the One Mile Station on the south boundary of said Grant; thence north 8G'00'est 80.00 chains to Station 5 on -the South boundary of said Grant; thence south 79'00'est 19.50 chains to Station 6 on tho South boundary of said Grant; thence south 57'15'est 18.00 chains to Station 7 on the South boundary of said
38 Grant; thence south 80'45'est 9.20 chains to Station 8 on the South boundary of said Grant; thence North 55'00'est 8.30 chains to Station 9 and the 2 mile corner of the South boundary of said Grant; thence south 79'45'est 11.60 chains to Station 10 on the South boundary of said tract; thence south 86'00'est 14.40 chains to Station 11 on the South boundary of said Grant; thence north 83'00'est 41.00 chains to the Southwest corner of said Grant; thence north 13.00 chains to the Northwest corner'f said Grant; from the Northeast and beginning corner, south 33'15'est 16.00 chains to Station 1 on the North boundary of said Grant; thence south 48'00'est 18.00 chains to Station 2 on the North boundary of said Grant; thence south 68'40'est 13.00 chains to Station 3 on the North boundary of said Grant; thence south 82'45'est 27.00 chains to Station 4 on the North boundary of said Grant; thence north 86'00'est 6.00 chains to the One Mile Corner on the North boundary of said Grant; thence north 86'00'est 30.00 chains to Station 5 on the North boundary of said Grant; thence south 79'00'est 19.50 chains to Station 6 on the North boundary of said Grant; thence south 57'15'est 13.00 chains to Station 7 on the North boundary of said Grant; thence south 80'45'esf 9.20 chains to Station 8 on the North boundary of said Grant; thence north 55'00'est 8.30 chains to Station 9 and the 2 Mile Corner on the North boundary of said Grant; thence south 79'45'est 11.60 chains to Station 10 on the North boundary of said Grant; thence south 86'00'est 14.40 chains to Station 11 on the North boundary of said Grant; thence north 83'00'est 41.00 chains to the Northwest corner of said Grant.
Boardman Tract. The Southeast Quarter of the North-west Quarter (SE~/4 NW~/4), Southwest Quarter of the North-east Quarter (SW~/4 NE~/4), Northeast Quarter of the South-west Quarter (NE~/4 SW~/4), and the Northwest Quarter of the Southeast Quarter (NW>/4 SE~/4) of Section 24, Township-17 North, Range 10 East, N. M. P. M., containing 160 acres.
N. Two-Mn,r; REsEnvoin,:
Tract 1: That parcel of land east of the eastern boundary of the Santa Fe Grant and South of the Northern boundary of the Talaya Hill Grant; described as follows: Beginning at Corner No. 1 on the East Boundary of the Santa Fe Grant
identical with corner 7 of the tract within the Santa Fe Grant owned by t)re Company, which is an iron peg in concrete, whence the 2-mile corner on t)re East boundary of said Santa Fe Orant bear>> sout)r 00'49'est 2003 feet distant; thence sout)r 89'23'rrs1, along the Nort)r side of the ron<1 Santa
'Fe Canyon 69.2 feet to corner 2, an iron peg in up concrete, wlrence the Northeast corner of an adobe house hears south 17'15'ast 101..6 feet distant; thence south 27'80'ast, ascending steep slopes, 1151 feet to corner 8, which is a granite boulder, 14x9x5 inc)res above tire ground, marked "X3", nnd is on top of high spur projecting Northeast; thence north 48'25'ast, descending slope of spur, 545 feet to corner 4, which is n granite
)roulder 10x8xG feet above ground marked "X4"; T)ronne nort)r along the First Arroyo Quate 580.5 feet to corner. 5r w)ric)r is a granite )rorrl<ler HxGx4 feet n)rove ground rnnrke<l "X5r";
tlrence nort)r 25"23'est along the First Arroyo Qrrrrte 494.4 feet to corner 6, an iron peg in concrete; thence nort)r ]0'44'est 211. feet to corner 7, an iron peg in concrete; t)rence nort)r 84'17'ast n)on<< t)re North sir)e of the rond up Santa Fe Canyon 12?
feet to corner 8, an iron peg in concrete; thence sout)r 84'54' rs(. nlorrg tire'Nor t,)r sir)e of snirl roar) (N.5 1'eel to corner 9, nn ir<rrr )reg irr concr'r:t>>; 1)rerrce nor t)r 58"40'rst n)on< t)re Nort)r shin rrf s;rirl r orrr) 63.6 fr.et to corner 10, rrn iron peg in corr<;rote;
()r<rrrce rrrrr ()r 8'27'esl. rrlon<" t)re west. sir)e of'. s rid ro;rr),14).6 feet to corner 11., nn iron peg in concrete; thence north 45'20'ast along tire North side of snid road 208.9 feet to corner 12, an iron peg in concrete; thence north 19'55'ast'long tire West side of said road 240.8 feet to corner 18, an iron peg in concrete; thence north 48'00'ast along the north side of said road 88.2 feet to corner 14, an iron peg in concrete; thence sout)r 85'58'ast nlong t)re Nort)i side of said road 817.6 feet to corner 15, an iron peg in concrete; thence nort)r 37'27'ast 80.5 feet to corner 1.6, identicn) wit)r corner 8 of a survey of the )ands of Banda)1 Dnvey, w)rich is an iron peg in concrete; thence north 41.'30'east along t)re line of the Nort)r side of )ands of snid
.Rrrndall Dnvey 497.G'feet to corner 17, identical with corner 4 of
. t)re survey of the snid Banda)1 Davey lands, whic)r is n granite
)er)ge 82x24x14 inches mnrked "X2"; thence south 84'00'ast along t)re Nort)r sirle of lands of said Banda)1 Davey 47.5 feet (o r;orner 18 on t)re )<inst )roundary of t)re Talaya JIi)l Grant
40 identical with corner 1 of the survey of the said Randall Davey lands, which is a granite ledge 30x30xl5 inches, marked "X1",
whence the witness northeast corner of said Talaya Hill Grant bears south 5'89'ast 22.4 feet distant; thence north 5'44'est with the East boundary of said Talaya Hill Grant 76.6 feet to corner 19 in the true position for the North East corner of the Talaya Hill Grant in the bed of the Santa Fe River; thence south 54'15'est along the North boundary of said Talaya Hill Grant over the river bed of the Santa Fe River 309.5 feet to corner 20; thence south 57'87'est with the North Boundary of said Talaya Hill Grant along the Santa Fe River bed 1184 feet to angle point 21; thence south 77'35'est along the North boundary of said Talaya Hill Grant over the Storage Reservoir 521.4 feet to corner 22; thence south 54'45'est along the North Boundary of said Talaya Hill Grant over the Storage Reservoir 241.6 feet to corner 28 on the East Boundary of the Santa Fe Grant, whence the 8 mile corner of said Santa Fe Grant bears north 00'49'ast 2569.6 feet distant; thence south 0'49'est along the East boundary of said Santa Fe Grant 649.7 feet to corner 1, the place of beginning, containing 88.46 acres.
Tract 2: That parcel of land within the Santa Fe Grant and adjoining the East Boundary, described as follows: Begin-ning at corner 1, which is an iron peg in concrete, whence the North end of the pipe line at the head of the Cerro Gordo Ditch bears south 85'80'ast 20.5 feet distant; thence south 46'24'ast 270.8 feet to corner 2, an iron peg in concrete; thence south 42'19'est 174.8 feet to corner 8, an iron,peg in concrete"; thence south 40'45'ast along a fence 154.2 feet to corner 4, an iron peg in concrete; thence north 83'45'ast along a fence 189,8 feet to corner 5, an iron peg in concrete; thence south 35'28'ast along a fence 191.9 feet to corner 6, an iron peg in concrete; thence north 88'07'ast along the North side of the road up the Santa Fe Canyon 367.2 feet to corner 7, identical with corner 1 of the Tract within the Talaya Hill Grant owned by the Company, which is an iron peg in concrete on the East boundary of the Santa Fe Grant, whence the 2 mile corner of said Santa Fe Grant bears south 0'49'est 2008 feet distant; thence north 0'49'ast along the East boundary of said Santa Fe Grant 1289.2 feet to corner 8, an iron peg in concrete, whence the 8 mile corner of the East boundary of said Santa Fe
Grant bears north 0'49'ast 1980.1 feet distant; thence sout)i 43'26'est 1129.1 feet to corner 1, the place of beginning; con-taining 13.20 acres.
Tract 3: The Northeast Quarter of the Northwest Quarter
¹(NEI/4 NWI/4) of Section 21, Township 17 North, Bange 10 East, N. I'. M., containing 40 acres.
Bange 10 E<'ast, ¹ Tract 4I )'iot Number 3, Section 2i, Township 17 North, M. P. M., containing 41.19 acres.
Tract 5: A portion of Lot Number 2, Section 21, Township 17, North, Bange 10 East, N. M. P. M., containing 37.55 acres.
O. STORAGE TANIK PROPERTY ON DEMPsEY PIPE LINE A. tract of land within the City of Santa Fe described as follows: From the Three mile corner on the East boundary of the Santa Fe Grant, south 00'49'est 1855.00 feet to an iron rod set in concrete; thence north 56'02'est 805.0 feet to the Southeast corner of said tract and the point and place of =
beginning; thence west 948.0 feet to the Southwest corner of said tract; thence north 548.0 feet to the Northwest corner of said tract; thence north 89'59'ast 492.5 feet; thence south 83'21'ast 170.00 feet to the Northeast corner of said Tract; thence south 28'35'<ast 600.0 feet to the Southeast corner of said tract and the point and place of beginning, containing 9.995 acres, more or less.
P. '.I.'AI,AYA IIII,I.BEsERvoIR:
Beginning at a point on the Northeast corner of this tract from which t)ie Bout)>>west corner of the Power House on the Old Power Plant Site bears north 28'28'<. 1027.0 feet; thence south 14'00'ast 750.00 feet to the Southeast corner of said tract; thence south 76'00'est 319.0'feet; thence north ll'45'ast 110.0 feet; thence north 79'20'est 527.0 feet to the Southwest
~ corner of said tract; thence north 14'00'est 431.0 feet to the Northwest corner of said tract; thence north 76'00'ast 750 feet to the Northeast corner and the point and place of begin-ning; containing 10.670 acres.
Q. EIIGII LEVEL DITCH BIGHT-Ol"-WAY:
A rig)it-of-way 29 feet wide, being 10 feet on the northerly si>>le an>>l 19 feet on the sout)>>er)y side of the following described
line: Beginning at' point whence corner No. 5 of Tract 1 of The Two-Mile Reservoir Site (above described) hears south 64'15'ast 32.0 feet; thence west 15.0 feet. From said point of beginning thence south 64'15'ast 32.0 feet to Station No. 3; thence north 60'00'ast 17.5 feet to Station 4; thence north 0'15'ast 212.5 feet to station 5; thence north 82'15'ast 132.0 feet to station 6; thence north 43'50'ast 72.6 feet to station 7; thence north 7'.00'est 52.8 feet to station 8; thence north 68'22'ast 108.0 feet to station 9; thence south 54'45'ast 79.2 feet to station 10; thence south 71'30'ast 67.3 feet to station 11; thence north 83'30'ast 25.0 feet to station 12.
iL. right-of-way 20 feet wide, being 10 feet on either side of the following described center line: Beginning at a point which is Station No. 12 above described; thence north 38.0 feet to Station 13; thence north 48'00'est 47.5 feet to Station 14; thence north 12'08'est 105.6 feet to Station 15; thence north 49'00'ast 79.2 feet to Station 16; thence north 78'00'ast 141.2 feet to Station 17; thence north 76'00'ast 66.0 feet to Station 18; thence north 52'00'ast 169.0 feet to Station 19; thence north 46'39'ast 95.0 feet to Station 20; thence north 70'00'ast 83.2 feet to Station 21; thence north 71'45'ast 47.5 feet to Station 22; thence north 17'00'ast 22.5 feet to Station 23; thence north 19'50'est 60.7 feet to Station 24; thence north 5'15'ast 79.9 feet to Station 25; thence north 38'49'ast 266.6 feet to Station 26; thence north 19'40'ast 59.4 feet to Station 27; thence north 36'35'est 52.8 feet to Station 28; thence north 18'30'ast 39.6 feet to Station 29; thence north 64'30'ast 155.8 feet to Station 30; thence north 12'35'ast 144.0 feet to Station 31; whence the witness Northeast Corner of the Talaya Hill Grant bears north 49'50'est 460 feet dis-tant; thence north 53'36'ast 232.3 feet to Station 32; thence south 74'45'ast 120.1 feet to Station 33; thence south 145.2 feet to Station 34; thence south 13'08'est 180.8 19'15'ast feet to Station 35; thence south 12'45'ast 77.9 feet to Station 36; thence south 46'25'ast 99.0 feet to Station 37; thence north 58'00'ast 56.1 feet to Station 38; thence north 04'00'est 99.0 feet to Station 39; thence north 18'30'ast 92.4 feet to Station 40; thence north 41'00'ast 72.6 feet to Station 41; thence south 68'30'ast 184.8 feet to Station 42; thence south 59'00'ast 204.6 feet to Station 43; thence south 84'30'.east 138.6 feet to
Station 44; thence north 77;00'ast 290.4 feet to Station 45; thence north 73'30'ast 409.2 feet to Station 46; thence south 66'00'ast 39.6 feet to Station. 47; thence north 40'00'ast 59.4 feet to Station 48; thence north 81'00'ast 130.0 feet, to a point on the west boundary of the. Simon Vigil Tract, which tract is hereinafter described.
R. NxcHoLs Ih:sravoia:
Tract 1: Beginning at the Northeast corner of Tract No. 48, ship 17 North, Range 10 East, ¹ Small Holding Claim No. 040064, located in Section 2L of Town-M. P. M., and marked hy government iron pipe; thence South 250.0 feet to government
. iron pipe; thence S. 80'08'. 190.1 feet to 5/8 inch steel rod; thence S. 7'40'. 557.7 feet to 5/8 inch steel rod; thence S.
97.3 feet to 5/8 inch steel rod; thence S. 82'33'. 308.8 feet 77'18'.
to 5/8 inch steel rod; thence N. 894.6 feet to 5/8 inch steel rod; thence E. 515.0 feet to the point of beginning; containing 8.21 acres, more or less.
Bounded on the North by land of Santa Fe National Forest, on the East by land of Santa Fe National Forest and Small Holding Claim No. 918 owned by the Company, on the South by land of Bandall Davey and road, and on the West by land of Randall Davey.
Tract 2: Small Holding Claim No. 918, known as the Simon ship 17 North, Bange 10 East, ¹ Vigil Tract in and being a part of Sections 21 and 22 in Town-
) f. P. M., and more particularly described as follows: Beginning at the southeast corner of the said tract of land and running thence south 79'45'est 63.22 chains to a corner; thence north 8'07'est 25.28 chains to a corner; thence north 79'45'ast 63.22 chains to a corner; thence south 8'07'ast 25.28 chains to the point or place of beginning, containing 159.73 acres.
PART SECOND (SUBSTATIONS AND SWITCHING STATIONS)
The following electric substations and'ubstation sites of the Company, including all buildings, structures, towers, poles, lines, and all equipment, appliances and devices for transforming, converting and distributing electric energy, and all the right, title and interest of the Company in and to the land on which the same are situated, and all of the Company's lands, easements, rights-of-way, rights, franchises, privileges, machinery, equipment, appliances, devices, appurtenances and supplies forming a part of said substations or any of them, or used or enjoyed, or capable of being used or enjoyed, in conjunction or connection with any thereof, all situated in the State of New Mexico, and the counties thereof, more particularly described as follows:
BERNALILLO COUNTY A, SUBsTATICN 'FQR FEEDER No. 12 (44 KV/2.8 I<V):
Lots numbered Twenty-three (28) and Twenty-four (24) in Block numbered Thirty-seven (37) of the Valley View Addi-tion to the City of Albuquerque, New Mexico, as the same are shown and designated on the map of said Addition filed'in the OSce of the Probate Clerk and Ex-ofBcio Recorder of Bernalillo County, New Mexico, on the 2nd day of September, 1911.
SUBsTATICN FCR FEEDER No. 18 (22 IIV/2.8 KV):
All that portion of Lot numbered Seven (7) of Shadyside Addition, a subdivision in School District No. 9, Bernalillo County, New Mexico, as the same is shown and designated on the Map of said Addition filed in the of6ce of the County Clerk of Bernalillo County, New Mexico, on the 16th day of June, 1982, described as follows: Beginning at the Northwest corner and running thence South along the West line of said lot 259.09 feet to the Southwest corner of said lot; thence running East along the south line of said lot 50 feet to a point on the south line of said lot; thence running North parallel with the West line of said lot 50 feet to a point; thence running West parallel with south line of said Lot 84 feet to a point; thence running north parallel with the West line of said lot 209.09 feet to a
45 point on the North line of said lot; thence running West along the North'line of said lot 16 feet to the point and place of beginning.
C. SUBsTATroN FoR FEEDER No. 14 (44 KV/2.8 KV):
A tract of land in Section 6, Township 9 North, Range 3 E<ast N. M. P. M., which is described by survey made by Ross Engineering Office as follows: Beginning at the Southeast cor-ner No. 1, a point 30 feet Northerly from, measured at right angle to the line between Secs. 6 and 7, T. 9 ¹, R. 8 E.,
N. M. P. M., whence the Southeast corner of said'Sec. 6 (in, place) bears S. 84'48'., 880.88 feet distant; running from said heginning corner West 50 feet to the Southwest Corner No. 2; thence North 50 feet to the Northwest corner No. 3; thence E<ast 50 feet to the Northeast corner No. 4; thence South 50 feet to the place of beginning, and containing 2500 square feet; said tract being shown'nd designated as a portion of the South-easterly fraction of Tract No. 25, on Map 45 of the survey of the Middle Rio Grande Conservancy District.
D, SUBsTATIQN FoR FEEDER No. 15 (22 KV/2.8 KV):
Lot numbered Twenty-one-B (21-B) of, the Dora A. Wil-liams First Addition, an Addition to the City of Albuquerque, New Mexico, as the same is shown and designated on the Map of said Addition filed in the oflice of the County Clerk of Bernalillo County, New Mexico, on the 12th day of February, 1941.
E. SUBsTATIoN Poa FEEDER No. 16 (44 KV/2.3 KV):
Lot numbered Twenty-one (21) of Dry's Subdivision to the City of Albuquerque, New Mexico, as the same is shown and designated on the Replat of Block 16, IZnob Heights Addition, filed in the ofiice of tlie County Clerk of Bernalillo County, New Mexico, Sanuary 2, 1941..
F. SUBsTATIoN F08 FEEDER No. 17 (44 KV/2.8 KV):
Located near Alameda on land of C. H. Crist under ease-ment to the Company recorded in Volume 90 page 447 of records of Bernalillo County.
G. SUBsTATIoN FoR FEEDER No. 18 (44KV/2.8KV):
Located on Sandia Army A'irbase near Albuquerque on land of U. S. Government under easement granted by contract dated October 1, 1942.
H. SUBsTATIoN FoR FEEDER No. 19 (22 KV/2.8 KV):
Located on Border Station premises hereinafter described.
I. KOB SUBsTATIoN (44 KV/2.8 KV):
Located about one mile north of Alameda near U. S. High-way No. 85 on land of Albuquerque Broadcasting Company.
J. IsLETA SUBsTATIQN (44 KV/2.8 KV):
Located in Isleta on Pueblo Indian land under easement granted by contract dated June 29, 1986.
K. ALBUQUERQUE PowER PLANT SUBsTATIoN (22 KV/2.8 KV):
Located on Albuquerque Power Plant premises hereinbefore described.
h L. AI.BUQUERQUE PowER PLANT SUBsTATIoN (44 KV/2.3 and 6.6 KV):
Located on Albuquerque Power Plant premises hereinbefore described.
M. DowNTowN SUBsTATIoN (44 KV/2.8 KV):
Located on Albuquerque Gas Plant premises hereinbefore described.
h N. SUBsTATIQN FoR FEEDER Nos. 5, 6 and 8 (44 KV/4,15 KV):
A tract of land within the City of Albuquerque, Bernalillo County, New Mexico, and within the Albuquerque Grant, which is bounded:
'n the North by the South line of a Public Alley; On the East by property of Silfredo Lopez and Margarita Nuanes de Lopez; On the South by property of Juanita Lopez, and On the West by the East line of South Eighth Street.
47 and which is described by Survey made by Ross-Beyer Engineer-ing 0$ ce in December 1942 as follows:
BHG1HHIÃG for a tie, at the intersection of the center lines of South Seventh Street and West Iron Avenue, and running thence along the center line of said South Seventh Street (as projected from West Lead Avenue) S. 8 deg. 45'., 406.44 feet to a point; thence S. 88 deg. 24'., along the Southerly line, and the projection thereof, of a public alley running in an Easterly and Westerly direction from said South Seventh Street to to South E<'ightli Street, a distance of 167.11 feet to tlie North-east and beginning corner No. 1 of the tract herein set forth; tlience continuing S. 88 deg. 24'., 155 feet along said alley line to its intersection with the Easterly line to South Eighth Street and the Northwest corner No. 2; thence S. 1 deg. 58'., along said line of Sout)i Eighth Street 44.43 feet to the Southwest corner No, 3; thence leaving said Street and running 155 feet to the Southeast corner No. 4;
¹ 88 deg. 08'.,
thence N. 1'eg. 58'., 43.71 feet to the place of begin-ning; Said tract is now shown and designated as Tract 93A-1 on Amended Map No. 40 of the Survey of the Middle Rio Grande Conservancy District.
- 0. SUBsTATI0N Fon PHHDEB No. 20 (44 IIVj2.'4 KV):
All of Lot numbered Pourteen (14), except tlie South 65 I'eet thereof, in Hlo'ck numbered Three (3) of Mani'ato Place, an Addition to the City of Albuquerque, New Mexico, as the sa>>ie is shoivn and designated on the Map=of said Addition filed in tlie OSce of tlie County Clerk of Bernalillo County,'New Mexico, on the 26th day of January, 1926.
VALENCIACOUNTY P. Los LUNAs SUBsTATIoN (44 IZV/2.3 I%V):
~ Located in the Village of Los Lunas on land of Pred Huning, under easement to the Company recorded in Volume 55, page 598 records of Valencia County.
48 Q. ZUNI MILLSUBsTATIoN (44 KV/.44 KV):
Located about one mile south of the Village of Los Lunas near U. S. Highway No. 85 on property of ZunI MillingCompany.
R. STATE PRIsoN FARM SUBsTATIQN (44 KV/2.8 KV):
Located about four miles south of Los Lunas on land of New Mexico State Penitentiary under easement-recorded Volume A88 page 592 of the records of Valencia County.
S. BELEN PowER PLANT SUBsTATIQN (44 KV/2.8 KV):
Located on the Helen Power Plant premises hereinabove described.
T. RAILwAYs ICE CoMPANY SUBsTATIoN (44 KV/.44 KV):
Located about two miles south of Belen on property of The Railways Ice Company under easement granted by contract dated A.ugust 25, 1944.
SANDOVAL COUNTY U. BERNALILLoPowER PLANT SUBsTATIQN (44 KV/2.8 KV):
Located on Bernalillo Power Plant premises hereinbefore
. described.
V. DoMINGo SUBsTATIoN (44 KV/2.3 KV):
Located on the pole line right-of-way approximately >/s mile west of Domingo.
W. ALGonoNEs SUBsTATIoN (44 KV/2.3 KV):
Located about I/s mile northeast of Algodones on land of ANGUs MAceiLLivRAYand LUGY L. MAGBILLIVRAY)ills wife, under easement recorded in Volume 5, Misc, Records page 17, records of Sandoval County.
SANTA. FE COUNTY X. SANTA FE SUBsTATIoN (44 KVJ'2.8 KV):
Located on the Santa Fe Steam Electric Power Plant and OAice Building premises hereinabove described.
49 Y. BRUNs SUBsTATIoN (44 I%V/2.3 IZV):
Located near the northwest corner of Bruns General Hos-pital premises near U. S. highway +85 about 2I/2 miles south-west of Santa Fe on land of U. S. Government.
LUNA COUNTY Z. DEMING PoivER PLANT SUBsTATIQN (13.8 IZV/2.3 I%V):
Located on the Deming Steam Electric. Plant premises here-inabove described.
AA. DEMING PowER PLANT SWITOHING STATIGN (13.8 I%V):
Located on the Deming Steam C<lectric Plant premises here-inabove described.
PART THIRD (TRANSMISSION LINES)
The following electric transmission lines of the Company, in-cluding the towers, poles, pole lines, wires, switch racks, insulators, supports, guys, telephone lines and other appliances and .equipment, and all other property of the Company, real, personal or mixed, forming a part thereof or appertaining thereto, together with all of the Company's rights-of-way, easements, permits, privileges, municipal, county or other franchises, consents, licenses and rights, for or relating to the construction, maintenance or operation thereof, through, over, under or upon any public streets or highways or other lands, public or private,'ll situated in the State of New Mexico and the counties thereof, more particularly described as follows:
- l. Single circuit Three-Phase 44 I%V transmission line extending approximotely 2I/2 miles from Albuquer'que Power Plant substation in Bcrnalillo County hereinbefore described in Part Second hereof in an easterly direction to the Downtown substation in Bernalillo County, hereinbefore described in Part Second hereof with the following branches:
(a) Single circuit Three-Phase 44 I%V transmission line extending approximately 4 miles from a midway point'in above transmission line (1) in an easterly direction to Substation +12
50 in Bernalillo County hereinbefore described in Part Second hereof.
(b) Single circuit Three-Phase 44 KV transmission line extending approximately Bgs miles from Substation +12 in Bernalillo County, hereinbefore described in Part Second hereof, in an easterly direction to Substation +18 in Bernalillo County, hereinbefore described in Part Second hereof.
(c) Single circuit Three-Phase 44 KV transmission line ex-tending approximately 2 miles from a midway point in trans-mission line (a) above, in a southerly direction to Substation
+16 in Bernalillo County hereinbefore described in Part Second hereof.
- 2. Single circuit Three-Phase 44 KV transmission line extending approximately 36 miles from Albuquerque Power Plant Substation in Bernalillo County hereinbefore described in Part Second hereof in a southerly direction to the Belen Power Plant substation in Valencia County hereinbefore described in Part Second hereof with the follow-ing branches:
(a) Single circuit Three-Phase 44 KV transmission line ex-tending approximately 1>/s miles from Belen Power House Sub-station in Valencia County hereinbefore described in Part Second hereof in a southerly direction to Raibvays Ice Company Substation in Valencia County hereinbefore described in Part Second hereof.
(b) Single circuit Three-Phase 44 KV transmission line extending approximately 2 miles from a point in line g2 ap-proximately 7 miles from the Albuquerque Power Plant Sub-.
station, hereinbefore described in Part Second hereof, in an easterly direction to Substation gl4 in Bernalillo County hereinbefore described in Part Second hereof.
- 3. Single circuit Three-Phase 44 KV transmission line extending approximately 16'iles from Albuquerque Power Plant Substation in Bernalillo County hereinbefore described in Part Second hereof in a northerly direction to the Bernalillo Power Plant Substation in Sando-val County hereinbefore described in Part Second hereof.
- 4. Single circuit Three-Phase 22 KV transmission line extending approximately 7 miles from Albuquerque Power Plant Substation in Bernalillo County hereinbefore described in Part Second hereof in a
southerly direction to Substation gl3 in Bernalillo County herein-before described in Part Second hereof.
- 5. Single circuit -Three-Phase 44 I%V transmission line extending approximately 46 miles, from Bernalillo Power Plant Substation in Sandoval County hereinbefore described in Part Second hereof in a northeasterly direction to the Santa Fe Power Plant Substation in Santa Fe County, hereinbefore described in Part Second hereof, with the following branch:
(a) Single circuit Three-Phase 44 KV transmission line extending approximately 4/10 mile from a point on above transmission line which is approximately 2>/q miles southwest of Santa Fe Power Plant Substation, hereinbefore described in Part Second hereof, in a southeasterly direction to .Bruns Sub-station, hereinbefore described in Part Second hereof.
Also all extensions, branches, taps, developments and improve-ments of or to any and all of the above described transmission lines, telephone lines or any of them, as well as all rights-of-way, ease-ments, permits, privileges, rights and municipal, county or other franchises, licenses and consents, for or relating to the construc-tion, maintenance or operation of said lines or any of them, or any part thereof, under or upon any public streets or highways or any public or private lands, whether now owned or hereafter acquired.
PART FOURTH (F~r.ronne DlsTRIDUTION SYsTKMS)
',1.'hc l'ollowing electric (listrihution system)s of the Company, includ-ing towers, poles, wires, insulators, appliances, devices, appurtenances
. and equip>ncnt, and all the Coinpany's other property, real, personal or mixe<1, forming a part of, or used, occupied or enjoyed in connection with or in any way appertaining to said distribution systems, or any of them, together with all of the Company's rights-of-way, easements, permits, privileges, municipal or other franchises, licenses, consents and rights for or relating to the construction, maintenance or opera-
. tion thereof through, over, under or upon any public streets or high-ways, or public or private lands situated in the State of New Mexico, more particularly described as follows:
certain electric distribution systems as located, constructed I'hose and equipped, together with all franchises, permits and consents under which said systems are or may be operated:
In the City of Albuquerque and unincorporated districts known as Alameda,", Candelaria, Los Griegos, Isleta and in other suburban and rural districts of Bernalillo County; In unincorporated district known as Bernalillo and in other suburban and rural'istricts of Sandoval County; In the municip'alities of Belen and Los Lunas and in other suburban and rural districts of Valencia County; In the municipality of Deming and in other suburban and rural districts of Luna County; In the municipality of Santa Fe and in other suburban and rural districts of Santa I<'e County; and In the municipalities of Town of Las Vegas and City of Las Vegas and in other suburban and rural districts of San Miguel County.
And also all branches, extensions, improvements and developments of or appertaining to or connected with, said electric distribution sys-tems, or any of them, and all other electric distribution. Systems of the Company and parts thereof wherever situated, and whether now owned or hereafter acquired, as well as all rights-of-way,'asements, privi-leges, permits, municipal or other franchises, consents and rights for or relating to the construction, maintenance or operation thereof, or any part thereof, through, over, under or upon public or private lands, whether now owned or hereafter acquired, PART FIFTH (Gas DIsTRIBUTIoN SYsTRMS)
The following gas distribution systems of the Company, including all pipes, pipe lines, motors, gas boosters, regulators, meters and ap-purtenances, appliances, devices and equipment, and all the Company's other property, real, personal or mixed, forming a part of, or used, occupied or enjoyed in connection with or in any way appertaining to said distribution systems, or any of them, together with all of the Company's rights-of-way, easements, permits, privileges, municipal or other franchises, licenses, consents and rights for or relating to the
construction, maintenance or operation thereof through, over, under or upon any public streets or highways, or public or private lands situ-ated in the State of New Mexico, more particularly described as follows:
That certain gas distribution system as located, constructed and equipped together with all franchises, permits and consents under which said system is or may be operated in the City of
,Albuquerque, County of Bernalillo; Those certain gas distribution systems as located, con-structed and equipped together with all franchises, permits and consents'nder which said systems are or may be operated in the suburban territory adjacent to the City of Albuquerque, in the County of Bernalillo.
And also all branches, extensions, improvements and developments of. or appertaining to or connected with said gas distribution systems, and all other gas distribution systems of the Company and parts there-of wherever situated, whether connected or not connected with any of the foregoing distribution systems, whether for the distribution of manufactured or natural gas, and whether now owned or hereafter acquired, as well as all rights-of-way, easements, privileges, permits, Inunicipal or other franchises, consents and rights for or relating to the construction, maintenance or operation thereof, or any part thereof, through, over, under or upon public or private lands, whether now owned or hereafter acquired.
PART SIXTH (WATRR DISTRIBUTION SYSTEMS)
Tho following water distribution systems of the Company, includ-ing all pipes, pipe lines, meters and appurtenances, apyliances, de-vices and equipment, and all the Company's other property, real, personal or mixed, forming a part of, or used, occupied or enjoyed in con>>ection with or in any way appertaining to said distribution syston)s, or any oF them, together with all of the Company's rights-of-way, oasoI>>onts, permits, privileges, municipal or other franchises, lice>>sos, co>>sents and rights for or relating to the construction, main-to>>a>>co oi opoIation thereof through, over, under or upon any public streets oi )highways, or public or private lands, situated in the Counties
i of San Miguel and Santa Fe, State of New Mexico, more particularly described as follows:
That certaip water distribution system as located, con-structed and eq'uipped, together with all franchises, permits and consents under which said system is or may be operated in or adjacent ito the City of Santa Fe, in the County of Santa Fe.
That certain water distribution system as located, con-structed and equipped, together with all franchises, permits and consents under which said system is or may be operated in or adjacent to the City of Las Vegas, the Town of Las Vegas, in the County of San Miguel.
And also all branches, extensions, improvements and develop-ments of or appertaining to or connected with said water distribution systems, and all other water distribution systems of the Company and parts thereof wherever situated, whether connected or not connected with the foregoing distribution systems, and whether now owned or hereafter acquired, as well as all rights-of-way, easements, privileges, permits, municipal or other franchises, consents and rights for or relating to the construction, maintenance or operation thereof, or any part thereof, through, over, under or upon public or private lands, whether now owned or hereafter acquired.
,PART SEVENTH (WATER RIoHTS)
All of the right, title, interest, equity, claim and demand of the Company in and to all water appropriations, any and all decrees therefor, rights to. the use of water, ditches, ditch rights, claims and filings with respect thereto, all reservoirs and rights of storage there-in and rights of flooding or overflow of land, flowage rights, permits, franchises, consents, privileges and licenses forming a part of or appertaining thereto, or used or enjoyed, or capable of being used or enjoyed in conjunction or connection with the ownership, operation, use and/or maintenance of the property of the Company, situated in the State of New Mexico, and the Counties thereof, more particularly described. as follows:
55 SAN MIGUEL COUNTY
- 1. THE GALLINAS RIVER:
The right to impound in said River above the Las Vegas Hot Springs in the various dams of the Company, with a priority date as of January 1, 1881, 2600 acre feet per annum, of the waters of the Gallinas River, a tributary of the Pecos River, for the purpose of a satisfactory water supply and of supplying the residents of and water consumers of or within the City of Las Vegas and the Town of Las Vegas, New Mexico and territory tributary to the Company's pipe lines with water for doinestic, industrial, irrigation and other purposes and uses, as the same are generally made of water for such purposes and uses; and for the purpose of creating, manufacturing and harvesting ice for domestic and industrial purposes, awarded and finally adjudicated in the United States District Court for the District of New Mexico in that certain cause therein entitled "The United States of America, Plaintiff, vs. Hope Com-munity Ditch, et al, Defendants" and numbered 712 in equity
'on'the docket of said court, by final decree. therein entered on May 8, 1933, said final decree being recorded in Book K of the records of San Miguel County, New Mexico. The said water.
rights are subject to any right, if any there be, which the City of Las Vegas, Town of Las Vegas, or the individual water con-suming residents thereof, they or any of them, may have acquired by use of water from the water system of the Company and its predecessors in title, The Agua Pura Company and New Mexico Power Company.
SANTA. FE COUNTY
- 2. TEER SANTA FR RIVER:
The right to impound in said River in Santa Fe Canyon in tlie various dams of the Company 3500 acre feet per annum, of the waters of the Santa Fe River, a tributary of the Rio Grande, and to divert said waters for the purpose of a satis-factory water supply and of supplying the residents of and water consumers of or within the City of Santa Fe and surrounding territory with. water for domestic, industrial, irri-gation and other purposes and. uses, as the same are generally made of water for such purposes and uses, the said water
56 rights being covered by permit issued to the predecessor of the Company by the New Mexico State Engineer under date of t'uly 14, 1926. Said water rights are subject to any valid and existing prior rights, if any, in and to said waters.
PART EIGHTH (Misca~NEovs PnoeEaxv)
The following residences, garages, warehouses, buildings, struc-tures, works and sites and the Company's lands on which the same are situated, and all easements, rights, rights of way, permits, franchises, consents, privileges, licenses, machinery, equipment, furniture and fixtures, appurtenances and supplies forming a part of said residences, garages, warehouses, buildings, structures, works and sites, or any of them, or used or enjoyed or capable of being used or enjoyed in con-nection or conjunction therewith, situated in the State of New Mexico, and the Counties thereof, more particularly described as follows:
LUNA COUNTY A. All of Lots One (1), Two (2), Three (3) and Four (4) in Block Forty-one (41) of the Wallis Survey Addition to the Townsite of Deming, Luna County, New Mexico, according to the plat of said Addition on file in the office of the County Clerk of said Luna County, New Mexico.
B. INGRAhf TBANSFOI4NCER SrrR:
One-half acre of land located in the East half of the North-east quarter, (Ei/2NEi/4) of Section Thirty-two (82), Township Twenty-four (24) South, of Range ¹ine (9) West, N. M. P. M.,
in Luna County, State of New Mexico, being located along the east and west road approximately midway between the North-east and Northwest corners of the Ei/2NE>/4 of said Section 32, more particularly described as follows: Beginning at point thirty feet (80') south and five hundred fifty-eight feet (558')
west of the Northeast corner of said Section 32, Township 24 South, Range 9 West, thence. southerly and parallel to the East boundary of Section 32, a distance of one hundred forty-seven and fifty-eight hundredths feet (147.58'); thence westerly parallel to the north boundary of Section 82, a distance of one
hundred forty-seven and fifty-eight hundredths feet (147.58');
thence northerly parallel to East boundary of Section 82 a distance of one hundred forty-seven and. fifty-eight hundredths feet (147.58'); thence easterly parallel to north boundary a distance of one hundred forty-seven and fifty-eight hundredths feet to the place of beginning, containing one-half acre, more or less..
C. Dri<riza Ori. ici;:
The premises occupied by the Company at 100 South Gold Avenue, Deming, New Mexico, under lease dated July 6, 1989.
BERNALILLO COUNTY D. THi". Honnva Sx<<,viol:
A tract of land in Hcliool District No. 28, Bernalillo County, New Mexico, within tlie Atrisco Grant, which is bounded as follows: On the North by land belonging to the New Mexico Gas Company; on the East by land formerly belonging to Pedro Aranda; and on the South and West sides by public roads; and is described by Survey as follows, to-wit: Beginning at the 24, Township 10 North, Range 2 East, ¹ Northeast Corner No. 1, whence the Northwest corner of Sec.
M. P. M., bears 89'89'. 2180.4 feet distant, and running thence S. 2?'22'.,
¹ 169.0 feet to the Southeast corner No. 2; thence ¹ 70'28'.,
281.1.6 feet to the Northwest corner No. 8; thence N. 62'88'.,
157.7 feet to the point and place of beginning and containing 0.31 acre, and said tract is also shown and designated as Tract No. 344-B-2 on Amended Map 'No. 88 of the Survey of the Middle Bio Grande Conservancy District, on file in the office of said District.
E. 1'w>>isa>>ss Gas Mi.vi.a Svwvrow:
A]1 tliat portion of Lot numbered Sixteen (16) in Block numhered (6) of Tiir; Par,isa>>Fs, an Addition to the City of Albuquerque, New Mexico, as shown and designated on the plat of said Addition, filed in the office of the County Clerk of Bernalillo County, New Mexico, on the 21st day of December, 1945, and more particularly described as follows, to-wit:
58 Beginning at the Southeast corner No. 1 of the tract herein described, a point on the Westerly right-of-way of Atrisco Road, being the identical Southeast corner of said Lot numbered Six-teen (16) and running thence: S. 56 degrees 26'., 57.27 feet along the Southeasterly line of said Lot numbered Sixteen (16) to the Southwest corner No. 2 of the tract herein described;
~ thence leaving said Lot line and running: N. 13 degrees 47'.
21.25 feet to the Northwest corner No. 3 of the tract herein described, thence N. 56 degrees 26'., 50.08 feet to the North-east corner No, 4 of the tract herein described, a point'on the Westerly right-of-way line of said Atrisco Road; thence'. 33 degrees 34'., 20 feet along said line of Atrisco Road to the place of beginning.
Containing Ten Hundred Seventy-three and five-tenths square feet, more or less.
F. 14TH STREET REGULATOR STATION:
Lot lettered "A"of the Dolores Otero de Burg's Amended and Supplemental Plat of Lots 11, 12, 13 and 14 in Block 44 of the Perea Addition to the City of Albuquerque, New Mexico, as the same is shown and designated on the said Amended and Supplemental Plat filed in the OAice of the Probate Clerk and Ex-ofBcio Recorder of Bernalillo County, New Mexico, October 31, 1912l Also, all that portion of the following described tract of land in the City of Albuquerque, New Mexico, which lies North of the north line of Lot "A" of Dolores Otero de Burg's
~
Amended and Supplemental Plat of Lots ll, 12, 13 and 14 in Block 44 of the Perea Addition to the City of Albuquerque, New Mexico, as the same are shown and designated on the said Amended and Supplemenal Map filed in the oflice of the Probate Clerk Er, Ex OScio Recorder of Bernalillo County, New Mexico, on October 31, 1912, to-wit: Beginning at a point on the west line of North 14th Street, which point is 100 feet in a northerly direction, measured along the said west line, from the Northwest corner of Granite Avenue and North 14th Street, and running thence in a westerly direction parallel with the said North line of Granite Avenue a distance of 42 feet; thence Northerly and parallel with the said west line of North 14th Street a distance of 131.65 feet to a point on the present south line of Mountain
59 Road; thence in a southeasterly direction along the said present south line of Mountain Bond a distance of 42.76 feet to the intersection of the south line of the present Mountain Road with the west line of said Fourteenth Street; thence in a south-erly direction along the west line of said North 14th Street a distance of 123.63 feet to the place of beginning.
- e. ALBUQUERQUE OFFICE; The premises occupied by the Company at 422-424 West Central Avenue in Albuquerque, New Mexico, under lease dated May 31, 1934.
VALENCIACOUNTY H. BELEN OFFICE:
The premises occupied by the Company at 714 Dalies Avenue, Helen, New Mexico, under lease dated April 1, 1940.
SANDOVAL COUNTY 3ERNALILLO TRACTS:
Three tracts of )and in the Town of Rema)i))o, County ok Sandova), State of New hfexico, which are described as follows:
Tract A. Beginning at the Northeast corner, a point
¹ from which the Northeast corner of Sec. 6, T. 12 ¹, B. 4 E.,
M. P. M., bears S. 27'48'. 770. 2 feet, and running thence S. 41'00'. 838.5 feet; thence
¹ ¹ 68'26'. 30 feet; thence 84'28'. 80 feet; thence S. 78'56'. 829.85 feet; thence S. 78'55'. 40 feet; thence S. 60'-54'. 85 feet; thence S. 29'09'. 61.2 feet; thence S. 15'44'. 558.87 feet; thence S. 57'47'. 192.45 feet; thence N 61'26'. 227.9 feet; thence N. 80'52'<3. 186.84 feet; thence feet; thence N. 68'57'. 25 feet; thence
¹¹ 41'15'<. 869.88 26'48'<. 851.18 feet; thence 208.88 feet; N. 21.'43'.,
thence S.
314.46 67'89'30" feet; E.
thence 870.12 N. 17'00' feet; thence 22'89'30" E., 226.04 feet; thence S. 67'42'. 696.41 feet, to
¹ the place of beginning, containing 15.14 acres; T<<act D. ]beginning at the Northeast corner, a point fi own which the Northeast corner of.Sec. 6,*T. 12 ¹, R. 4 E.,
60
¹¹ 67'59'. 57'42'.
M; P. M., bears S. 1726.2 feet, and running thence 27.53 .feet; thence 9. 19'l4'. 521.8 feet; thence ¹ 28'30'.
thence S.
26'43'.
feet; thence N.
239 feet; thence S.
244.93 feet; thence N.
17'00'.
68'57'.
21'8'.
208.88 feet, to the place of beginning, 36.6 feet; 314.46 containing .424 acres; Tract E. Beginning at the Northeast Corner, a point
¹ from which the Northeast corner of Sec. 6, T. 12 M. P. M., bears S. 88'l8'. 1729.1 fe'et, and running
¹, R. 4 E.,
thence N. 68'57'. 1764.8 feet; thence S. 61'08'. 139.5 feet; thence S. 68 57'. 1847.3 feet; thence ¹ 26'48'. 106.2 to the place of beginning, containing 4.42 acres; 'eet, Subject to 'easements, rights-of-way and licenses of the Middle Rio Grande Conservancy District, and also subject to easements and rights-of-way reserved in deed dated March. 6, 1926, between White Pine Lumber Company and Albuquerque'as and Electric Company, recorded Book 2 Misc. Records, page 88, and in deed between White Pine Lumber Company, L. B.
Putney Mercantile Company and Lyman Porter, Trustee, and Albuquerque Gas and Electric Company, dated March 6, 1926, recorded Book 4 Deed Record, page 22, of the records of San-,"
doval County, New Mexico.
SAN MIGUEL COUNTY J.. LAs VEGAS OFFICE BUILDING:
Lots numbered Twenty-three (23) and Twenty-four. (24),in Block numbered Eleven (11) of the Las Vegas Town'.Com-pany's Addition to Las Vegas, New Mexico, according to the plat of said Addition on file in the ofBce of the County Clerk of San Miguel County, New Mexico.
K. TwELFTH AND COLUMBIA STREET STORAGE YARD:
Lots numbered One (1) to Sixteen (16) both 'inclusive, in Block numbered Ten (10) of the Lopez, Sulzbacher'nd Rosenwald Addition of the El Dorado Town Company to Las Vegas, now City-of Las Vegas, New Mexico, as shown by the plat of said Addition on file in the Ofhce of the Probate Clerk
'nd Ex-OKcio Recorder in and for the County of San Miguel, New Mexico.
.61 WATERsHED LANDs FRohx No. 2 DAh1 To TRQUT SPRINGs PRQPERTY:
Lot numbered Thirteen (18) in Placita Martinez, being 290 feet from east to west, and 160 feet from north to south on the east side, and 110 feet'orth to south on the west side, bounded on the North by the Scenic Road; on the east by Lot'o.
12; on the south by the Public Road, and on the west by School property.
Lot numbered Fifteen (15) in Placita Martinez, being 320
'eet from east to west, and 240 feet from north to south on the east side, and 180 feet north to south on the west side, bounded on the north by the Scenic Road; on the east by the Old Convict Camp; on the south by the Public Road, and on the west by the west line of Placita Martinez.
Beginnirig at the northwest corner of the 848.7 acre tract of the Company, which corner is north 84'24'est (true bear-ing variation 18'E.) 115.5 feet from monument No. 2 (Marked A. P. C. No. 2), which is a cut stone monument set in concrete; thence south 84'24'ast, 200 feet to a stone marked A. P.;
thence north 960 feet to the northeast corner and,to a stone marked A. P.; thence north 82'58'est 1364 feet to a stone-marked A. P.; thence south 7'est 300 feet to a stone marked A. P.; thence north 88'est 1080 feet to a stone marked A. P.;
. thence north 46'est 8974 feet to the northwest corner of this tract and to the east line of the property known as Trout Springs, which corner is marked hy a stone marked A. P.; thence along said property of Trout Springs south 44'est 1820 feet to'a stone marked A. P. and the southwest corner; thence south 4416 feet to a stone marked A. P.; thence south 83'ast 46'ast 2825 feet to a stone marked A. P.; thence north 39'58'ast 786 feet to place of beginning, containing 212.5 acres, more or less; said 848.7 acre tract herein I'eferred to being the Reservoir and Dam Site in Gallinas Canon Property hereinbefore described.
WATERSHED LANDS IN GALLINAS CANON:
Beginning at the most northeast corner of this tract, said corner being defined by a post set in the ground on foot of creston, the said post being also the most southeasterly corner of a tract of land as deeded by the Las Vegas Land Grant to one Manuelita Apodaca and now of one Timoteo Fresquez, the northwest corner of bridge No. 5-A, of the Atchison, Topeka and Santa Fe Railway branch to Hot Springs bears north
62 24'40'ast 858 feet; thence south 48'36'est 142 feet to corner stone and to the northwest corner of a tract of land claimed by one Pablo Padilla; thence south 84'47'est 898 feet along land of the Las Vegas Grant to stone marked X, the said stone being on top of the creston; thence south 2416 feet along the easterly side of the said creston to the southeast corner, and to stone, said stone being marked A. P Co. on the north-westerly side and O' on the southwesterly side, this corner being also the northeast corner of land of the Society of Jesus of Santa Ana; thence. west, along 'the north line of said Society land 1715 feet over top of creston to top of second creston to the southwest corner, and to the northwest corner of the above mentioned Society land and to the east line of land of the Canon Lime Company, which corner is defined by a stone set in a mount of stone marked Z S over N W on south side, A.. P on the north side and C L on the west side; thence along the east line of the said Canon Lime Company land north 8'15'est 1722 feet to stone marked S P on the west side; thence north 9'45'ast 520 feet to mound of stone and to the northwest corner, and to the most southwesterly corner of land of the above mentioned Fresquez; thence leaving land of the said Canon Lime Company and also creston, and along south line of the said Fresquez north 73'45'ast 2130 feet to the north-east corner and to the place of beginning, said tract of land being located in Sections 5 and 6 in Township 16 North of Range 16 East, N. M. P. M., and containing 101.67 acres, more or less.
The following described two tracts of land located in the Canyon of the Gallinas River just below the village of Lower Las Gallinas and between said village and the place known as Trout Springs, and better described as follows:
Tract No. 1. Beginning at the Northeast corner of this tract, the said corner being on the West line of the highway leading from Las Vegas to Porvenir (said corner bears south 28'47'ast 1110 feet from a stone set under a fence line and being marked D 28 over 60, which stone is north 29'40'est
.12.50 feet from the Northeast corner of a tract of land deeded by the Las Vegas Grant Board to one Henry Le Guillou (or Henry Le Guillon); being Deed No. 419, which Northeast cor-ner of the said Guillon land bears south 51'05'ast 338 feet from the spire, of the church in the above mentioned village
of Lower Las Gallinas); thence along the west line of the above mentioned highway as follows, following a fence line south 29'30'ast 110 feet; south 18'20'ast 369 feet; south 31'10'ast 184 feet to the SE corner and to the NE corner of a tract of land of one Faustin Padilla to fence corner; thence along the North line of the said Faustin Padilla land, following fence line to the river, south 58'28'est 1233 feet across river to top of creston and to the SW corner; thence north 20 05'est 659 feet along top of creston along land of the Las Vcgas Grant to the NW corner; thence nortli 58'45'ast 1189 feet along south line of land as deeded by the Las Vegas Grant to the said Guillou, and formerly of one Clemente Padilla, to the NE corner. and to the place of beginning, said tract being located in Township 17 North, Range 15 East, and containing 18.44 acres, more or less.
Tract No. 2. Beginning at the NE corner of this tract, which is on the West side of and abuts the Scenic Highway from Hot Springs to the Pecos Forest Reserve and El Por-venir through the Gallinas Canon and which corner bears south 51'5'ast 338 feet from the spire of the church at the Placita del Santo Nino or Lower Las Gallinas; thence south 32'25'ast 386 feet along the aforesaid road; thence south 15'ast 230 feet along said road; thence south 27'10'ast 273 feet along said road; thence south 35'30'ast 221 feet along said road to the SE corner of tract; thence south 503 feet; thence north 40'25'est 162 feet; north 58'45'est 377 feet; north 26'35'est 573 feet to the NW corner; 14'50'est thence north 57'38'ast 433 feet to the NE corner and place of. beginning, containing 11.7 acres, more or less.
N. LOS VIGILFS PROPERTY:
Two certain tracts of land lying near and easterly from.
the Village of Los Vigiles north of Las Vegas, New Mexico, and better described as follows:
Tract No. 1. Beginning at the Northwest corner of this tract, said corner being defined by an iron rod and wood stake set in the ground on the south side of road leading from Los Vigiles to Las Vegas, and from said Northwest corner the Northwest corner of Section 4, Township 16 North, Range 16 East, N. M. P. M, bears north 63'00'est 1246.16 feet distant; thence south 85'33'ast 435 feet along south side of above
64 mentioned road to fence corner post, and to the Northeast cor-ner; thence south 46'18'est 1513 feet along fence along land formerly of one Concepcion Saiz, to a stake on the North bank of the Storrie Main Canal and to the Southeast corner; thence along the North bank of said canal north 80'00'est 400 feet to stake and to the Southwest corner; thence north 46'18'ast 1454 feet along land of one Basilio Lopez, recently de-ceased, to the place of beginning, containing approximately 11.60 acres, more or less.
Tract No. 2. Beginning at the Northwest corner of this tract, said corner or point of beginning being defined by a stake set in'the ground on the southerly side of road below the Storrie Main Canal, and from the said stake the South-west corner. of Tract No. 1 herein bears north 46'18'ast 120 feet distant; thence south 76'30'ast 428 feet along above mentioned road to post at the Northeast corner of this tract and to fence corner; thence south 54'00'est 222 feet along fence along land of one S. H. Bond to the Southeast corner of this tract; thence north 73'00'est 375 feet to the South-west corner of this tract; thence north 46'18'<'ast 172 feet to the place of beginning, containing 1.83 acres, more or less.
O. LIME CANYON DAM SITE:
A certain tract of land located near Placita Llano, in the Las Vegas Grant, more particularly described as follows: Be-ginning at a fence corner post at the NW corner of this tract, said corner post bears south 23'00'est 204 feet distant from an 8-inch fence corner post set in the ground on the east line of the Peterson Canon Tract of the Company, where the Hot Springs Boulevard changes its course from north to east at a, point several hundred feet north of the Placita Llano; thence south 79'30'ast 514 feet; south 08'00'ast 1390 feet; south 73'45'est 1190 feet; thence ¹ 58'20'est 435 feet to the. wire fence of the Company's land; thence along said fence north 38'30'ast 400 feet; north 32'45'ast 112 feet; thence north 23'00'ast 1286 feet to the place of beginning, containing 35.70 acres, more or less.
Also a certain tract of land located near Placita Llano, more particularly described as follows:
Beginning at the SE corner of this tract, from which corner'he NW corner of Railroad Bridge No. 5-A of the Hot Springs
65 Branch of the A. T. R S. P. Bai)way Company just north of the Placita del Llano bears N. 24'40'. 358 feet; thence S.
940 feet; thence N. 8'00'., 1890 feet along land of the 78'45',,
Agua Pura Company to corner; N. 79'30'., 514 feet along said Agua Pura Company land to fence; thence N. 28'00'.,
204 feet along fence and said Agua Pura Company land to the NW corner of this tract; thence along southerly side of road leading to Hot Springs, S. 74'45'., 180 feet; S. 85'80'., 470 feet; S. 57'05'., 747 feet; thence continuing along westerly side of said road, 8. 80'00'<i., 400 feet; S. 18'20'., 255 feet; S. 5'30'W., 820 feet to the place of beginning, containing 80
'cres, more or less, Also a certain tract of land described as fo)lows: Beginning at the most southeast corner of this tract which corner is defined
'f by a fence corner where the fence line on the southerly side the herein described tract intersects the westerly. right of way fence line of the A, T. A S. F. Ry. branch from Las Vegas to Hot Springs. The said corner also bears no'rth 84 degrees 06 minutes west 826 feet from the northwest corner of Bridge No. 5-A of the above mentioned Rai)way; Thence north 57
'egrees 45 minutes west 769 feet following fence on the north-erly side of highway leading from Las Vegas to Montezuma, New Mexico, to the most northwest corner of this tract and to an arroyo; Thence following the said arroyo downstream, 355 feet more or less to the intersection of the westerly right of way fence line of the above mentioned Eai)way and to the northeast corner of this tract; Thence south 81 degrees 30
>ninutes cast 580 feet along the westerly r'ight of way fence line of the above mentioned rni)way to the most southeast corner an<) to the place of beginning, containing 8.81. acres, more or less.
P VALENCIASTREET PROPERTY at a one-inch iron pipe set in the ground at the
'eginning southwest corner of Romero Street and National Avenue, which corner is also the northeast corner of Block 158 of the Town of Las Vegas, San Miguel County, New Mexico, as shown on the official map of the Town of Las Vegas as prepared by V<. Meredith Jones, 1896, Thence in a southeasterly direction along the west line of Bomero Street 150 feet to an iron pipe set in the ground at the southeast corner of this tract; Thence
in a southwesterly direction at right angles to the last described line, and parallel to the south line of National Avenue a dis-tance of 626.2 feet to an iron pipe set in the ground at the southwest corner of this tract; Thence in a northwesterly direc-tion at-right angles to the last described line 750 feet to an iron pipe set in the ground at the northwest corner of this tract; Thence in a northeasterly direction at right angles to the last described line 445.2 feet to an iron pipe set in the ground at the northeast corner; Thence in a southeasterly direction at right angles to the last described line 600 feet to an iron pipe set in the ground on the south line of National Avenue; Thence in a northeasterly direction along the south line of National Avenue 181 feet to the place of beginning, containing 8.28 acres, more or less.
SANTA P<E COUNTY Q. SANTA FE CANON WATERSHI"D KNOWN AS DISSETTE PROPERTY:
The Northwest Quarter of the Southeast Quarter (NWI/4 SEI/4), South half of the Southwest Quarter of the Northeast Quarter (SP2SWi/4NEi/4), South half of the Southeast Quarter of the Southwest Quarter (Si/2SEi/4SW>/4), East half of the Northeast Quarter of the Southwest Quarter (EP2NEI/4SWi/4),
and the North Half of the Southeast Quarter of the Southwest Quarter (N+2SEi/4SWi/4) of Section 18, Township 17 North, Range 11 East of the New Mexico Meridian, containing 116.93 acres.
R. SANTA FE CANON WATERSHED~ KNOWN As GONZALES TRACT:
Homestead Entry No. 10056, Patented to Luis Gonzales, located in Sections 24 and 25, Township 17 North; Range 10 East of the New Mexico Principal Meridian, and more particularly de-scribed as follows:
Beginning at the Northeast corner of said tract, from which corner the Southeast corner of Section 24 hears south 10.75 chains distant; thence west 40.0 chains to the North-1'20'est west corner; thence south 1'20'est 37.56 chains to the South-west corner; thence east 40.0 chains to the Southeast corner; thence north 1'20'ast 37.56 chains to the point of beginning, containing 150.24 acres, more or less.
I 67 S. HIOKOX STREET PROPERTY USED AS STORAGE YARD:
That certain lot or tract of land situate on the south side of Hickox Street, in Ward Number Two, Precinct Number Four, of the City and County of Santa Fe, New Mexico, described as bounded on the North by Hickox Street, on the South and West by property now or formerly of the New Mexico Central Rail-road Company, ahd more particularly described as follows:
Cominencing at the Northwest corner of. this tract, which is a point on the South side of Hickox Street, 11.7 feet distant from the New Mexico Central sidetrack; from thence east 160 feet along the South s>de of Hickox Street to the Northeast corner of this tract Inarked by an iron spike on a fence corner; from thence South 264.5 feet along an old fence to the Southeast corner of this tract marked by an old iron pipe; thence North 89'43'est 261.33 feet along a double fence line to the South-west corner of this tract marked by an'iron spike; thence north 140 feet to a point marked by an iron spike 24.8 feet distant from the New Mexico Central Sidetrack; thence north 51'ast 160 feet to the point or place of beginning.
T. 8ARD WELL PROPERTY:
Commencing at the southeast corner of this tract, which is a point on the northerly side of Alto Street, in Ward Two, of the City of Santa Fe, marked by an iron stake, from which point the center of the manhole of the main outfall sanitary sewer in the intersection of La Madera Road with Alto Street bears N. 78'20'. 13.0 feet distant; thence from said south-east corner and place of beginning running S. 56'12'. 30.0 feet, along the northerly side of said Alto Street, to an iron stake set for the southwest corner of this tract; thence ¹ 39'05'. 58.9 feet, to an iron stake set for the northwest corner of this tract; thence ¹ 51'02'<'. 30.0 feet, to an iron stake set for the northeast corner o'f this tract; thence S. 38'58'.
61.6 feet, to the southeast corner, the point and place of begin-ning; this tract being bounded on the northerly, easterly and westerly sides by lands now or formerly of I<l. Bethel Gard and husband, and on the southerly side by said Alto Street; and being a portion of Blocl'1-B of the 1933 Ofticial Map of the Cit'y of Santa 'Fe, New Mexico; all as represented upon that certain plat entitled "Portion of Block 61-3, 1933 Oflicial Map, Santa Fe, New Mexico," the surveys for which were made in
the field July 27, 1946, by Walter 8. Turley, registered pro-,
fessional engineer and land surveyor.
U. SANTA FE CANON WATERsrIED< KNOWN AS KOURY TRACT:
The Southeast quarter of the southeast quarter (SE<I/4SE<i/4) of Section twenty-two (22), the southwest quarter of the south-west quarter (SWI/4SWI/4) of Section twenty-three (23), the northwest quarter of the northwest quarter (NWI/4NWI/4) of section twenty-six (26) and the northeast quarter of the nortli-east quarter (ME<I/4NEi/4) of section twenty-seven (27), in Township seventeen (17) North, Range ten (10) East of the New Mexico Meridian, New Mexico, containing one hundred sixty acres, according to the original survey of the said town-ship; and being the same land patented by the United States to Luciana Lujan.formerly Luciana Tafoya widow of Dolores Tafoya, and being Tract No. 49 H. E. 7860, according to the plat of resurvey of the said township approved April 5, 1929.
V. TonnroN ADDITION WELL SITE:
P Beginning at an iron stake set for the southwest corner of the intersection of Camino Alire with West Alameda in Ward Number Three of the City of Santa Fe, New Mexico, from which a 1 and I/2 inch iron pipe driven in the ground for the northwest bears ¹ corner of the intersection of Bob Street with the West Alameda 5 deg. 40'., 84.4 feet distant; and the southwest corner of Henry Carillo's Store bears N. 27 deg. 45'., 67.9 feet distant; thence from the said beginning point, which is also the northeast corner of this tract of land, and running S.
40 deg. 08'., 55.9 feet, along the west boundary of Camino Alire, to an iron stake set for the southeast corner of this tract;-
which is a point on the south boundary of the lands formerly of H. B. Cartwright; thence leaving the said west boundary of the Camino Alire, and running S. 67 deg. 17'., 112.0 feet, along the south boundary of the lands formerly of H. B. Cartwright, to an iron stake set for the southwest corner of this tract; and running ¹ thence leaving the said south, boundary of the Cartwright Tract, .
16 deg, 47'., 51.2 feet to an iron stake'et this tract; thence ¹ on the south side of West Alameda for the northwest corner of 65'deg. 89'., 90.0 feet, along the south side of West Alameda to the northeast corner; .the point and place of beginning; containing O.ll acres of land. All as represented
69 upon that certain plat entitled, "Land Surveyed for Samuel A.
Moore within Tibbett's Subdivision of the Torreon Addition to the City of Santa Fe, New Mexico"; the surveys for which were completed in the field January 80, 1947, by Walter 8. Turley, registered. professional engineer and land surveyor.
~ y ~a All other property, whether real, personal or mixed (except any property hereinbefor'e or hereinafter expressly excepted), and whether now owned or hereafter acquired by the Company and w'heresocver situated, including (without in any wise limiting or impairing by tlie enumeration of the saine.thc scope an<1 intent of the foregoing or of any general description contained in this I'ndenture) all lands, power sites, flowage rights, water riglits, rights to the use of ivater, including all the right, title and interest of the Company in and to any and all decrees therefor, fiumes, ditches, reservoirs, reservoir sites, water wells, purifi-cation systems, canals, raceways, dams, dam sites, dam rights of way and roads; all plants for the generation of electricity by steam, water and/or other power; all power houses, gas plants, telephone systems, water works, water systems, substations, gathering lines, transmission lines, distributing systems, bridges, culverts, tracks; all oSces, build-ings and structures, and the equipment thereof; all machinery, engines, boilers, pumps, dynainos, machinesi regulators, meters, transformers, generators and motors; conduits, cables and lines; all pipes whether for water, gas or other purposes; all mains and pipes, service pipes, hydrants, fittings, valves and connections, poles, wires, tools, imple-ments, apparatus, furniture, and chattels; all lines for the transmis-sion and/or distribution of e1cctric current, gas or water for any.
purpose, including tow<<rs, pol<<s, wires, cables, pipes, conduits, street lighting systeiris and all apparatus for use in connection therewith; all real estate, lands, leases, leaseholds; all= easements, servitudes, licenses, permits, rights, powers, franchises (except the franchise to be a corporation), privileges, rights of way and other rights in or relating to real estate or the occupancy of the same and (except as hereinbefore or hereinafter expressly excepted) all the right, title and interest of the Company in and to all other property of any kind or nature appertaining to and/or used and/or occupied and/or enjoyed in connection with any property hereinbefore described;
70 ToGETHER WITH all and singular the tenements, hereditaments and appurtenances belonging or in any wise appertaining to the aforesaid mortgaged property or any part thereof, with the reversion and re-versions, remainder and remainders and (subject to the provisions of Section 8.01) the tolls, rents, revenues, issues, earnings, income, product and profits thereof, and all the estate, right, title and interest and claim whatsoever, at.law as well as in equity, which the Company now has or may hereafter acquire in and to the aforesaid mortgaged property and franchises and every part and parcel thereof; IT Is HEREBY AGREED by the Company that all the property, rights and franchises acquired by the Company after the date hereof (except any hereinafter expressly excepted) shall (subject to the provisions of Section 8.01 and to the extent permitted by law) be as fully em-braced within the lien hereof as if such property, rights and fran-chises were now owned by the Company and/or specifically described herein and conveyed hereby; EXCEPTED PROPERTY I'rovMed, however, the following property, whether now owned or hereafter acquired (herein sometimes referred to as "Excepted Property" ), are not and are not intended to be now or hereafter granted, bargained, sold, warranted, aliened, remised, released, con-veyed, assigned, transferred, mortgaged, pledged, set over or con-firmed hereunder and are hereby expressly excepted and reserved from the lien and operation of this Indenture, viz.:
(1) The ice plant of the Company, including all its structures and works and the lands of the Company on which the same are situated, together with all machinery, appliances, equipment and appurtenances forming a part of or appertaining to such ice plant, now owned or hereafter acquired, situated in Luna County, New Mexico, on land more particularly described as follows:
Beginning at the SE< corner of Block 16 of the Wallis Survey Addition to Deming, New Mexico; this being an iron pin set by the Village Engineer at a point N. 81'42'., 5.35 feet and
71 thence S. 8'18'., 1.95 feet from the SE corner of concrete loading platform, thence N. 8'18'., 91 feet, thence S.
78 feet; thence S. 8'18'., 91 feet, thence feet to the place of beginning.
¹ 81'42'., 78 81'42'.,
(2) the ammonia plant of the Company, including all its structures and works and the lands of the Company on which the same are situated, together with all machinery, appliances, equipment and appurtenances forming a part of or appertaining to such ammonia Implant, now owned or hereafter acquired, situ-ated in Luna County, New Mexico,.on land more particularly described as follows:
Beginning at the SE corner of Block 16 of the Wallis Survey Addition to Deming, New Mexico; this being an iron pin set by the Village Engineer at a point N. 81'42'., 5.35 feet and thence S. 8'18'., 1.95 feet from the SE corner of concrete loading platform, thence N. 8'18'., 107.2 feet, thence S.
81'42'., 48.6 feet for a new place of beginning, this being the SE corner of the Airiinonia Plant, thence 24 feet, thence S. 81'42'.,
¹ 8'18'.,-
39.7 feet; thence S. 8'.18'., 24 feet; tlience N. Hl'42'<l., 39.7 feet,to tlie said new place of beginning.
(3) all bills, notes and accounts receivable, cash on hand or in bank, judgments, contracts, choses in action, operating agree-ments, existing leases in which the Company is lessor and leases hereafter made of portions of the mortgaged property in which the Company is lessor; (4) all shares of stock and certificates or evidences of inter-est therein, and all bonds, notes and other evidences of indebted-ness or certificates of interest therein and other securities now owned or hereafter acquired or possessed by the Company (ex-cept securities or obligations specifically subjected to the lien liereof or required to be pledged by the terms of this Indenture);
(5) all goods, wares, merchandise, appliances, equipment, apparatus, iriaterials or supplies held or acquired by the Com-p>>>>y for tlic piirpose of sale or resale or leasing to its ous-t>>>>iers in t)ic orili>>ary <<nurse and conduct of its business and
<ill <;o>>dilio>>:iI s;iles co>>tra<<ts cliattcl i>>ortgages or. other con-l,r>><;ls resiilti>>g fr>>i>> t)ie ilisposition thereof; all fuel, oil, ma-teri;ils, cqiiilii>>e>>t, stores and supplies and other personal prop-erty wliicli are consuinable in their use in the operation of any
(2 of the properties of the Company and construction equipment acquired for temporary use; and (6) all aircraft, rolling stock, buses, motor coaches, auto-mobiles and other motor vehicles and materials and supplies held for the purpose of repairing or replacing any of the same (in whole or in part); and all timber, minerals, mineral'rights and royalties; Svzzzcr, Howzvzz, to the right of the Company by supplemental indenture to specifically subject to the lien and operation of this Inden-ture all or any part of the Excepted Property whether now owned or hereafter acquired;
.. To H~vz ~en xo HoLn all such properties, real, personal and mixed, granted, bargained, sold, warranted, aliened, remised, released, con-veyed, assigned, transferred, mortgaged, pledged, set over or con-firmed by the Company as aforesaid, or intended so to be, unto the Trustee and its successors and assigns, forever; SUMzcx, Howzvzz, to the reservations, exceptions, limitations and restrictions contained in the several deeds, leases, servitudes, contracts, I
decrees, judgments, or other instruments through which the Company acquired or claims title to or enjoys the use of the aforesaid prop-erties; and also subject to such servitudes, easements, rights and privileges in, over, on or through said properties as have been granted by the Company to other persons prior to the date of execution of this Indenture; and also 8tcbject to permitted encumbrances as defined in Section 1.04, and, as to any property hereafter acquired by the Com-pany, to any liens thereon existing, and to any liens for unpaid portions of the purchase money placed thereon at the time of such acquisition, and also subject to the provisions of Article 12; Im TzUsr Nzvzzxazr.zss, upon the terms and trusts herein set forth, for the equal and proportionate benefit, security, and protection of those who from time to time shall hold the bonds and coupons authen-ticated and delivered hereunder and duly issued by the Company, without preference, priority or distinction as to lien (except as any sinking, amortization, improvement or other fund established in ac-
73 cordance with the provisions of this Indenture or any indenture sup-plemental hereto may afford additional security for the bonds of any particular series) of any of said bonds over any others thereof by reason of series, priority in the time of the issue or negotiation thereof, or otherwise howsoever, except as provided in Section 4.02, it being intended that the lien and security hereby created, of all of the bonds and coupons, shall take effect from the date of. the execu-tion and delivery hereof, whether all of the bonds shall actually be sold and disposed of and issued at such date or at some later date, and that the lien and security of this Indenture shall take effect from the date of the execution and de)ivery hereof, as if all of said bonds were actually so)d or de)ivered to, and in the hands of, inno'cent holders for value, upon such date, an<1 shall, in no manner, he altered, im-paired, or prejudiced hy the creation of subsequent deeds or mort-gages by the Coinpany, its successors or assigns, or by judgments or liens of any form, in favor of creditors of the Company, whether all of said bonds shall have been issued or not; PRoviDED, HowEvER, and these presents are upon the condition that if the Company, its successors or assigns, shall pay or cause to be paid <<nto the holders of said bonds the principal and interest, and premium, if any, to become due in respect thereof at the times and in the manner stipulated therein and herein and shall'keep, perform and observe all and singular the covenants and promises in said bonds and in t)iis Indenture expressed to he kept, performed and observed by or on the part of the Company, tlien this Indenture and the estate and rights )iereby granted s)iall cease, determine and be void, other-wise. to he anil remain in full force and effect.
.IT Is ] IERERY CovENANTRD DEGLARED AND AGREED by and between t)ie parties )iercto t)iat all bonds and the coupons appertaining thereto
- ire to he issued, aut)ienticatcd, delivered and held, and that all pro'perty subject or to become subject hereto is to be held, subject to the further covenants, conditions, uses and trusts'ereinafter set forth, for the benefit of those who shall hold said bonds and the coupons appertaining thereto, or any of them, as follows
ARTICLE 1 DFi imrroms SEcTIoN 1.01. The terms hereinbelow in this Article 1 defined shall, for all purposes of this Indenture and of any indenture supple-mental hereto and of any certificate, opinion or other document filed with the Trustee, have the respective meanings herein specified, unless the context otherwise requires. Any term defined in Section 803 of the Trust Indenture Act of 1939 and not otherwise defined in this Indenture shall, unless the context otherwise requires, have the meaning assigned to such term in such Section 803 as in force on the date of the execution of this Indenture.
SEoriom 1,02. (a) The term "Company" shall mean and include
, not only Public Service Company of New Mexico, the party of the first part hereto, but also any successor corporation which shall become such in the manner hereinafter in Article 12 prescribed.
The term "corporation" shall also include voluntary associations, joint stock companies, and business trusts of the form commonly known at the date hereof as Massachusetts trusts.
(b) The term "obligor", when used with respect to bonds issued or issuable under this Indenture, shall mean every person who is liable thereon, (c) The term "aKliate" shall mean any person directly or in-directly controlling or controlled by or under direct or indirect com-mon control with any such obligor. The terms "affiliated" and "afBlia-tion" shall have meanings correlative to the foregoing.
The term "control" shall mean the power to direct the man-
'd) agement and policies of a person, directly or through one or more intermediaries, whether through the ownership of voting securities, by contract or otherwise, (e) The term "person" shall mean an individual, a corporation, a partnership, an association, a joint stock company, a trust, any unin-corporated organization or a government or a political subdivision thereof.
75 (f) The term "Trustee'hall mean Irving Trust Company and shall include its successor or successors in trust hereunder appointed as provided in Article 18.
(g) The words "bond", "bondholder" and "holder" shall include the plural as well as the singular number, and the words "bondholder" and "holder" shall include both the bearer of a coupon bond not regis-tered as to principal and the registered owner of a fully registered bond or of a coupon bond registered as to principal; and registered holder" shall include not only the person in whose name any bond shall be registered, but also the executors, administrators or other legal representatives of such person. The term "bonds" or "bond" shall mean the bonds or one of the bonds issued and to be issued under this Indenture.
(h) The terms "herein", "hereby", "hereunder", "hereof",
"hereinbefore" and "hereinafter" and other equivalent words shall be held and construed to refer to this Indenture and not solely to the particular Article, Section, or subdivision hereof in which any such
'word is used.
(i) The term "this Indenture" or its equivalent shall be deemed to include and mean, in addition to this instrument dated as of June 1, 1947, each and every instrument which the Company shall enter into with the Trustee pursuant to any requirement or permission herein contained, and which shall be stated to be supplemental to this In-denture.
(j) The terms "lien of this Indenture" and "lien hereof" shall mean the lien created by these presents (including the after-acquired property clauses hereof) and the lien created by any subsequent con-veyance or delivery to or pledge with the Trustee hereunder (whether made by the Company or any other corporation or any individual or co-partnership) or otherwise created, effectively constituting any prop-erty a part of the security held by the Trustee upon the terms and trusts and subject to the covenants, conditions and uses specified in this Indenture.
76 (k) The terms "mortgaged property" or "trust estate" shall mean as of any particular time the property which at said time is subject or intended to be subject to the lien of this Indenture.
(1) The term "public utility system" shall mean a plant or system, including any property used in connection therewith, not con-structed or erected by or for the Company, but which prior to the purchase or acquisition thereof by the Company has been used or operated by a person or persons other than the Company in a business similar to the business of the Company and is to be used by the Company in the business of producing, generating, manufacturing, transporting, transmitting, distributing or supplying electricity or gas (either natural or manufactured) for light, heat, cold, power or other purposes or water for any purposes.
(m) The term "supplemental indenture" or "indenture supple-mental hereto" shall mean any indenture which may at any time be entered into between the Company and the Trustee in accordance with or pursuant to the provisions of this Indenture.
(n) The term "Trust Indenture Act of 1939" shall mean the Trust Indenture Act of 1939 as in force on the date of the execution of this Indenture.
SECTION 1.03. (a) The term "additional bonds" shall mean bonds of any series authorized hereunder evidencing additional indebt-edness, other than those which shall be duly authenticated and deliv-ered pursuant to the provisions of Section 3.01 (and other than bonds issued pursuant to the terms of Section 2.11).
(b) The term "authorized newspaper", when used in connection with the name of a particular city, shall mean a newspaper customarily published on each business day, whether or not such newspaper is pub-lished on Saturdays, Sundays and legal holidays, printed in the English language and of general circulation in the city in connection with which the term is used.
Whenever successive publications in an authorized newspaper are required by any provision of this Indenture, such successive publica-
77 tions niay be made in t)ie sairie or in diferent aut)iorixed newspapers.
In case by reason of t)ie teniporary or perinanent suspension of publication of any newspaper, or by reason of any ot)ier cause, it shall be impossible for the Company or t)ie Trustee,-as t)ie case inay be, to make publication of any notice required hereby in a newspaper or newspapers as herein provided, then such publication in lieu thereof as the Trustee, or the Company with t)ie approval of the Trustee, shall make, shall constitute a suAicient publication of such notice. Such pub-lication shall, so far as may be, approximate the terins and conditions of the publication in lieu of w)iich it is given.
(c) The terms "Board", "Board of Directors" and "Directors" shall each mean either the Board of Directors of the Coinpany or the Executive Conunittee of the Board of Directors of the Conipany. Ref-erence, wit)iout inore, to iiction hy the Directors s)ia)l >>iean action either by t)ie Directors ol')ie C<iinpany as a Board or by t)ie l<ixecutive Connnittee o)')ie Boar<) o)'l)irectors.
(<)) '.I.')ie tcriii "<<erti)i<<<) i es<ilution" s)ia)l iriean a copy of, a, resolu-tion or resolutions certified by t)ie Secretary or an Assistant Secretary of. the Company, under its corporate seal, to have been duly adopted by t)ie Board of Directors at a meeting thereof duly convened and held and at which a quorum was present and acted thereon, and to be in full force and e6'ect on the date of such certification.
(e) The terms "application of the Company", written order of the Company", "written request of. t)ie Company", "written consent of the Company", "certificate of the Company" and statement of
'the Company" shall mean,-respectively, an application, order, request; consent, certificate or statement signed by the President or a Vice President and by the Treasurer or an Assistant'Treasurer or the Secretary or an Assistant Secretary of the Company. Any suc)i ap-p)ication or writteri request inay he coinbined in a single instruinent wit)i any suc)i certificate anil, in so far as any suc)i certificate (or a)ip)i<<ation or written rcq<<est, in case no separate certificate is herein provided for) relates to conditions precedent provided for in this Indenture (including any covenants compliance with which constitutes a condition precedent) wliich relate to the authentication and delivery
78 of bonds hereunder, to the release or release and substitution of prop-erty subject to the lien of this Indenture, to the satisfaction and dis-charge of this Indenture, or to any other action to be taken by the Trustee at the request or on the application of the Company, as may be, shall include, in addition to the statements, if any, re-the'ase quired by any other applicable provision of this Indenture, the state-ments required by paragraph (i) of this Section 1.08 to be included in a certificate or opinion furnished to the Trustee.
Any certificate or statement of the Company may be based, in so far as it relates to legal matters, upon an opinion of, or repr'esenta-tions by, counsel, unless the officer or officers signing such certificate or statement knows that the opinion or representations with respect to the matters upon which said certificate or statement may be based as aforesaid are erroneous, or, in the exercise of reasonable care, should have known'hat the same were erroneous.
The same officer or officers of the Company, or the same engineer or counsel or other person, as the case may be, need not certify to all the matters required to be certified under the provisions of any Article, Section, subdivision or other portion hereof, but diferent officers, engineers, counsel or other persons may certify to different facts, respectively.
Where any person or persons are required to make, give or execute two or more applications, orders, requests, consents, certificates, state-ments or other instruments under this Indenture, any such applica-tions, orders, requests, consents, certificates, statements or other in-struments may, but need not, be consolidated and form one instrument.
(f) The term "opinion of counsel" shall mean a written opinion given by counsel selected by the Company, who may be counsel for the Company; and which shall, in so far as it relates to conditions pre-cedent provided for in this Indenture (including any covenants com-pliance with which constitutes a condition precedent) which relate to authentication and delivery of bonds hereunder, to the release or release and substitution of property subject to the lien of this Inden-ture, to the satisfaction and discharge of this Indenture, or to any other action to be taken by the Trustee at the request or on the application of the Company, as the case may be, include in addition
79 to the statements, if any, required by any other applicable provision of this Indenture, the statements required by paragraph (i) of this Section 1.03 to be included in a certificate or opinion furnished to the Trustee.
hny opinion of counsel inay he based, in so far as it relates to Factual inatters witli respect to w)iicli inforniation is in the possession of the Company, upon a certiAcate or opinion of, or representations by, an ofFicer or oAicers of the Company, unless such counsel knows that the certificate or opinion or representations with respect to the matters upon which his opinion inay be based as aforesaid are errone-ous, or, in the exercise of reasonable care, should have known that the same were erroneous.
(g) Tlie term "engineer" shall mean any engineer, appraiser or other expert, wlio may be an individual, co-partnership or corpora-tion, selected and paid by the Company and who may (except as otherwise )ierein provided) be an oAicer or employee of the Company; and the term "independent engineer" shall mean an engineer selected and paid by the Company approved by the Trustee in the exercise of reasonable care and wlio (1,) is in fact independent; (2) does not have any sulistantial interest, direct or indirect, in tlie Company or in any other iililigor upon tlie lionils or in any afIiliate of the Company or of any sucli otlier ol)ligoi j and (8) is not connected witli the Company or any such other obligor or with any aAiliate of the Company or of any such other obligor as an oAicer, employee, promoter, underwriter, trustee, partner, director or person performing similar functions.
(h) The tenn "accountant" shall mean any accountant or account-ing Arm, who need not be certified or licensed or public, selected
- nd paid by the Company and who may (except as otherwise herein lirovided) be an oAicer or employee of the Company; and the term "independent public accountant" shall mean any certified or licensed public accountant or any firm of such accountants selected and paid by tlie Company approved by the Trustee in. the exercise of rea-sonal>l<<care iind who, or each oF. whoin, (1) is in fact independent; (2) <loes not liave any sulistantial interest, direct or indirect, in the.
Coinpany oi in any o'ther oliligor upon tlie lionils or iii any aAiliate of
80 the Company or of any such other obligor; and (3) is not connected with the Company or any such other obligor or with any affiliate of the Company or of any such other obligor as an officer, employee, promoter, underwriter, trustee, partner, director or person performing similar functions, but who may be regularly retained to make annual and other similar audits of the books of the Company, any other obligor upon the bonds or any affiliate of either thereof.
(i) Each certificate (or application or written request of the Com-pany where no separate certificate of the Company is provided for) or opinion furnished to the Trustee with respect to compliance with any condition or covenant provided for in this Indenture, shall include (1) a statement that the person making such certificate or giving such opinion has read such covenant or condition and the definitions, if any, herein contained relative thereto; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of such person, such condition or covenant has been complied with. Any certificate of the Company or opinion of counsel which is hereinafter expressly required to contain a statement as to compliance with'onditions precedent shall also state that all conditions precedent, if any, provided for in this Indenture relating to the action to be taken by the Trustee upon the request or direction in connection with which such certificate or opinion is furnished have been complied with.
The acceptance by the Trustee of a certificate or opinion of an engineer or accountant shall be sufficient evidence that the signer or signers have been approved by, or are satisfactory to, the Trustee, as the case may be.
Each certificate by an independent engineer or independent public accountant shall state that the signer has read the definition herein contained of an independent engineer or independent public accountant, as the case may be, and that the signer is an independent engineer
81 or independent public accountant, as the case may be, within the mean-ing of 'such definition.
Except as herein elsewhere specifically required, no certificate
'j) or opinion as to compliance with -conditions precedent need be made by any person other than an officer or employee of the Company (i) as to dates or periods not covered by annual reports required to be filed by the Company, in the case of conditions precedent which depend upon a state of facts as of a date or dates or for a period or periods diferent from that required to be covered by such annual reports, or (ii) as to the amount and value of property additions, or (iii) as to the adequacy of depreciation, maintenance or repairs.
(k) The'terms "responsible officer" and "responsible ofFicers" of the Trustee as used in Sections 9.02, 9.15, 13.03 and 15.07 shall mean and include the Chairman and Vice-Chairman of the Board of Directors and of the Executive Committee, the President, every Vice President, every Assistant or Second Vice President, the Treasurer, every Assistant Treasurer, the Cashier and every Assistant Cashier, the Secretary and every Assistant Secretary, every Trust Officer, every Assistant Trust Officer and any other officer of such Trustee with supervisory powers who customarily performs functions similar to those performed by any of the foregoing individuals or to whom any corporate trust matter is referred because of his knowledge of, and familiarity with, a particular subject.
(l) The terms "outstanding under this Indenture", "outstanding hereunder", and "outstanding", when used with reference to bonds, shall mean as of any particular time all bonds then and theretofore authenticated and delivered under this Indenture except (a) bonds paid, retired, redeemed or cancelled or surrendered to the Trustee for cancellation, at or prior to the particular time, (b) bonds for the payment, retirement or redemption of which cash in the necessary amount shall have theretofore been deposited with the Trustee in ac-cordance with the provisions hereof (whether prior to, upon or after the maturity or the redemption date of such bonds) prov'ided that if such bonds are to be redeemed prior to the maturity thereof notice of sucli redemption shall have been given as in Article 5 hereof provided,
82 or irrevocable authorization shall have been given by the Company to the Trustee to give such notice, (c) bonds in lieu of and in substitution for which other bonds shall have been authenticated and delivered pur-suant to the terms of Section 2.11 and (d) bonds deposited with or held by the Trustee under any of the provisions of this Indenture, including any so held under any sinking or other similar fund; provided that in determining the percentage of the principal amount of bonds outstand-ing or of bonds of a particular series outstanding entitling the holders thereof to take any action pursuant to any provision of this Indenture, or in determining whether the holders of the required percentage of the aggregate principal amount of bonds outstanding or of bonds of a particular series outstanding have concurred in any direction to the Trustee or in any consent pursuant to any provision of this Indenture, bonds owned legally or equitably by the Company or by any other obligor upon the bonds or by any af61iate of the Company or of any such other obligor, or by any person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company, shall be disregarded, except that for the purpose of de-termining whether the Trustee shall be protected in relying on any such direction or consent, only bonds which the Trustee knows are so owned shall be so disregarded. Bonds so owned which have been pledged in good faith may be regarded as outstanding for any such purpose if the pledgee shall establish to the satisfaction of the Trustee the pledgee's right to vote such bonds and that 'the pledgee is not an affiliate of the Company or of any such other obligor. In ease of a dispute as to such right, any decision by the Trustee taken upon the advice of counsel shall be full protection to the Trustee.
SEGTIoN 1.04. The term "permitted encumbrances" shall mean as of any particular time any of the following:
(a) Liens for taxes, assessments or governmental charges for the then current year; and liens for taxes, assessments or governmental charges, workmen's compensation awards and similar obligations not then due and delinquent; (b) Liens for taxes, assessments or governmental charges already due (or liens incidental to construction for indebtedness already due) but the validity of which is being contested at the
time by the Company in good faith pursuant to the provisions of Section 4.05; (c) Any liens securing indebtedness, neither payable by, nor assumed nor guaranteed by, the Company nor on account of which it customarily pays interest, existing, either at the date hereof, or, as to property hereafter acquired, at the time of acquisition by the Company, upon real estate or rights in or relating to real estate acquired by the Company for substation, switching station, regulating station, measuring station, trans-mission line, transportation line, distribution line, transportation or distribution main, or right of way purposes; (d) E<asements, licenses, restrictions, exceptions, reserva-tions or other outstanding interests in or against any property and/or rights of way of the Company created or existing by way of, or for the purpose of, public highways, private roads, railroads, railroad sidetracks, pipe lines, gas transportation lines, transmission lines, transportation lines, distribution lines, telegraph or telephone lines, mains, ditches, and other like pur-poses; water power rights of the State or others; building and use restrictions; and defects, irregularities and deficiences of title to, or leases of minor parts of, the mortgaged property which do not, in the opinion of counsel, materially impair the use of the mortgaged property as an entirety, in the operation of the business of the Company; (e) Any obligations or duties affecting the property of the Company to any municipality or public authority with respect to any franchise, grant, license or permit; (f) Defects in titles to overflow and Hood lands and rights, and in titles to rights oC way for transmission lines, transporta-tion lines, distribution lines, mains, ditches, telephone lines, tele-graph lines or for other purposes of the Company', over public or private property, none of which, in thc opinion of counsel for thc Coinpany materially impairs thc use of the property affecte thereby in the operation of the business of the Company; (g) Bights reserved to or vested in any n>unicipality or public authority by the terms of any right, power, franchise, grant, license or permit, or by any provisions of law, to ter-minate such right, power, franchise, grant, license or permit or to purchase or recapture or to designate a purchaser of any
of the property of the Company or otherwise to control or regulate any property of the Company; (h) Leases existing at the date of execution and delivery hereof and renewals of said leases; (i) Undetermined liens and charges incidental to current construction; (j) Bights granted or created or burdens assumed hy the Company under, or of the kind permitted by, the provisions of paragraph (7) of Section 8.05.
The term "prepaid lien" shall mean any prior lien securing in-debtedness for the purchase, payment, satisfaction or redemption of which moneys in the necessary amount shall have been irrevocably ~
deposited in trust with the Trustee or with the trustee or other holder of the prior lien securing such indebtedness (whether prior to, upon or after the maturity or the redemption date of such indebtedness),
provided that, if any such indebtedness is to be redeemed prior to the maturity thereof, notice of such redemption shall have been pub-lished or otherwise given as required by the mortgage or other instru-ment securing the same, or irrevocable authorization to give such notice shall have been given to the Trustee, or to the trustee or other holder of such prior lien.
The term "prior lien" shall mean and include a mortgage or other lien (except permitted encumbrances) prior to the lien of this Indenture, upon property (other than property of a character embraced within the definition of Fxcepted Property) hereafter acquired by the Com-pany, existing on said property and/or placed thereon at the time of such acquisition to secure'unpaid portions of the purchase price.
The term '! prior lien bonds" shall mean bonds or other obligations secured by a prior lien. "Outstanding" with respect to prior lien bonds shall mean as of any particular time all prior lien bonds thereto-fore authenticated and delivered by the trustee or other holder of the prior lien securing the same, or, if there be no such trustee or other holder, all prior lien bonds theretofore issued under and secured by any such lien, except (a) prior lien bonds theretofo're paid, retired, redeemed, discharged or cancelled, (1) prior lien bonds held in pledge
85 hereunder, (c) prior lien bonds held uncancelled by the trustee or other holder of a prior lien (on the same property as that securing the prior lien bonds so held) under conditions such that no transfer of ownership or possession of such prior lien bonds by the trustee or other holder of such prior lien is permissible thereunder except upon a default thereunder or except to the Trustee hereunder to be held subject to the provisions of Article 7, or to the trustee or other holder of a prior lien for cancellation or to be held uncancelled under the terms of a prior lien under like conditions, (d) prior lien bonds for the purchase, payment or redemption of which moneys in the necessary amount shall have been deposited with or be held, with irrevocable direction so to apply, by the Trustee hereunder or by the trustee or other holder of a prior lien; provided that, in the ease of redemption, the notice required therefor shall have been published or otherwise given as required by the mortgage or other instruinent securing the same, or irrevocable authorization to give such notice shall have been given to the Trustee or to the trustee or other holder of such prior lien, and (e) prior lien bonds upon transfer of which or in exchange or substitution for and jor in lieu of which other prior lien bonds have been authenticated and delivered or made and delivered under any of the provisions of the prior lien securing such prior lien bonds.
SEGTIoN 1.05. The term "property additions" shall mean any new or additional property (including separate and distinct units, plants, systems and properties), located. within the State of New Mexico or adjacent States, and improvements, extensions, additions or betterments to or about the plants or properties of the Company-in every case properly chargeable to electric, gas or water plant ac-counts, purchased, constructed or otherwise. acquired by the Company subsequent to February 28, 1947, and in every case used or useful or to be used in the business of producing, generating, manufacturing, impounding, storing, transporting, transmitting, distributing or supply-ing electricity, gas (either natural or manufactured) or water for any and all purposes; provided, J<ourever, that (a) Property additions, as so defined, without limitation of the general import of such term, shall include
86 (1) Improvements, extensions, additions or betterments to or about the properties of the Company in the process of con-struction or erection, in so far as actually constructed or erected subsequent to I<'ebruary 28, 1947; (2) Property purchased, constructed or otherwise acquired by the Company, to renew, replace or in substitution for old, worn out, retired, discontinued or abandoned property, the retirement of which has been credited to electric, gas or water plant account; (3) Property acquired by the Company subject to prior "liens; (4) Property acquired by the Company by merger or con-solidation.
(b) Property additions, as so defined, shall not include:
(1) Any shares of stock, bonds, evidences of indebtedness, other securities, contracts, leases, bills, notes, accounts receiv-'ble, or choses in action; (2) Going concern value or good will acquired by the Company; (3) Any plant or system in which the Company shall acquire only a leasehold interest, or any improvements, extensions or additions upon or to any plant or system in which the Coni-pany shall own only a leasehold interest; (4) Any property acquired, made or constructed by in keeping or maintaining the mortgaged property in the'ompany good repair, working order and condition, whose cost is no't.,'
properly chargeable to electric, gas or water plant accounts; Any property of t'e character specified in
'5) subdivisions-'5) and (6) of the description of Excepted Property unless such property has been subjected to the lien hereof.'he term "net property additions" shall at any particular time mean the aggregate of all property additions up to that time at the cost or fair value thereof to the Company (whichever is less) after,.
(A) deducting (1) the aggregate amount of all property re-tirements, as hereinafter defined, prior to the date of the par-'
87 ticular computation, and (2) a sum equal to one hundred sixty-siz and two-thirds per centum (1662/s) of the principal amount of any outstanding prior lien bonds secured by a lien on such property additions, which prior lien bonds have not theretofore been deducted in computing the amount of other net property additions which have been funded; and (lk) adding to tlie balance so arrived at an airiount equal to the aggregate of the cash plus the principal aiiiount of any purchase money obligations deposited with the Trustee here-under, or the trustee or other holder of a prior lien, and rep-resenting the proceeds of insurance on or the release or sale of or the taking by eminent domain of any property classified as retired prior to the date of the particular computation; provided, )however, that the aggregate of the amounts added under Clause (3) above shall in no event exceed the amounts deducted under Clause '(A) (1) above.
Anything herein contained to the contrary notwithstanding, any net property additions which shall have been certified to the Trustee at any time as a basis for the authentication and delivery of bonds or for the withdrawal of cash under any of the provisions of this Inden-ture, or the basis of a credit taken under subdivision (4) of Section 4.10, or )iave been the subject of a waiver of the right to the authen-tication <<nd delivery of bonds under and to the extent provided in Section 4.16, and liaving a cost or fair value, whichever shall be appli-cable under the respective provisions of this Indenture, in excess of (1) the amount thereof required by the provisions of this Indenture as a basis for the authentication and delivery of the bonds applied for or for the withdrawal of the cash applied for under any of the provisions of this Indenture, or as tlie basis of a credit taken under subdivision (4) of Section 4.10; or (2) one hundred'ixty-six and two-thirds per centum (166%'%%uo) of the principal amount of bonds the authentication and delivery of which have been waived pursuant to said Sec-tion 4.16; shall to the extent of such excess (but in no event in an amount of more tlian $ 200,000) be available upon any subsequent application as
88 a basis for the authentication and delivery of bonds, or the withdrawal of cash under any of the provisions of this Indenture where net prop-erty additions are made the basis thereof, or the basis of a credit taken under subdivision (4) of Section 4.10, or for an application for a waiver under Section 4.16. The amount of any such excess is herein-after sometimes referred to as the "unapplied balance of net property additions."
Whenever any unapplied balance of net property additions is included in any engineer's certificate or certificate of the Company executed and delivered to the Trustee in connection with the authenti-cation and delivery of bonds hereunder, or the withdrawal of cash under any provision of this Indenture where net property additions are made the basis thereof, or the taking of a credit under subdivision (4) of Section 4.10,'or a waiver under Section 4.16, and if there are also included in such certificate other property additions not embraced within the unapplied balance of net property additions, the amount of such unapplied balance of net property additions shall be deemed to be the amount first utilized for the purpose for which such certifi-cate shall be executed and delivered, before the amount of the other property additions included in such certificate shall be deemed to be utilized for such purpose.
The term "property- retirements" shall mean (a) the cost of all mortgaged property of the character of property additions as herein defined, owned by the Company on February 28, 1947, and (b) the cost of all funded property additions (except property additions the fair value of which at the time the same became funded property was less than the cost, in which latter ease such fair value shall be used in lieu of cost) which, in either case, shall prior to the date of the particular computation and subsequent to February 28, 1947, have been either retired or abandoned.
The term "cost" as used herein shall mean:
(a) As to any property owned by the Company on Febru-ary 28, 1947, the book value thereof as of that date (or the esti>>iated hook value as of tliat date in the case of property the book value of which is not specifically sliown by the books of the
89 Company), without deducting therefrom applicable reserves for depreciation and/or retirements as of that date; provided, however, that in the event any regulatory body having juris-diction shall require or approve a change in the book value of any such property as shall not have, at or prior to the time of such change, permanently ceased to be used or useful in the business of the Company, the value as so changed shall be treated as the book value as of the date of this Indenture, not less, however, than the cash cost of such property to the person or corporation (or their afBliates) first devoting such property to public use; (b) As to any property acquired after February 28, 1947, the cost to the Company; which shall be deemed to be the sum of (1) any cash forming a part of such cost, (2) an amount equivalent to the fair value (being the fair market value, if any, as of tbe date of delivery) ol'ny securities or the fair value of any other property delivered, in payment or exchange therefor or for the acquisition thereof, (3) whichever shall be the lesser of either (a) an amount equivalent to the principal amount of any indebtedness (whether or -not assumed by the Company) secured by prior lien upon such property additions outstanding at the time of, or reserved by the vendor or created by the Company at the time of, the acquisition of such property or (b) the aggregate of the amounts, if any, expended by the Company'(exclusive of premium and accrued interest) to pro-cure the satisfaction or discharge of any such indebtedness or to cause the lion securing the same to become a prepaid lien, and (4) the principal amount of any unsecured indebtedness assumed by the Company as part of the consideration for the acquisition thereof, or, if the amount be less, the amount actually expended by the Company to secure the discharge thereof.
In determining cost in cases in which, property acquired consists partly of property additions and partly of other prop-erty or-in cases in which cost is not allocated between various items of property, cost may be allocated to the various parts
<<>>d items of property in any manner which the signer of the engineer's certificate in which the cost of such parts or items of property is required to he stated deeins reasonable and in accordance with good accounting practice. For the purpose of making such allocation, the signer of the engineer s certificate
90 may rely on and accept, if he deems it proper so to do, any action taken by the Board of Directors of the Company with respect to such allocation and any valuation and other reports available to them with respect to the property concerned, includ-ing the independent engineer's certificate (if any) filed with the Trustee with respect to the fair value of the property so acquired.
SEcTIQN 1.06. The term "net earnings certificate" shall mean a certificate signed and verified by an accountant or an independent pub-lic accountant as provided in subdivision (6) of Section 3.06, stating (subject to the provisions of Section 12.04):
(A) The net earnings of the Company for any period of twelve (12) consecutive calendar months within the fifteen (15) calendar months immediately preceding the first day of the month in which the application in connection with which a net earnings certificate is required under this Indenture is made, showing how the same have been calculated, and to that end
'pecifying (1) The aggregate. of the gross operating revenues de-rived from the electric, gas and water business of the Com-panyi (2) The aggregate of the operating expenses of such business, including therein (a) taxes, other than income, profits and other taxes measured by or dependent on net inconie in respect of which the amount payable by way of interest is a deductible item, (h) assessments, rentals, license charges and insurance, (c) expenses for current repairs and maintenance, and (d) provision for reserves for renewals, replacements, depreciation, depletion or retirement of mortgaged property (which provision, together with the amount of (c) above shall aggregate not less than the Standard of G<xpenditure, as defined in Section 4.1.0, for such period); but excluding there-from any expenses or provisions for interest on any indebted-,
ness or for any. sinking or similar. fund 'for the retirement of any indebtedness or provisions for the amortization of debt discount and expense or of any 'discount or expense on retire-ment of preferred stock; (3) The net non-operating income of the Company; and
(4) The net operating revenue derived from all sources other than the electric, gas and water business of the Com-pany.
The net earnings of the Company shall be the sum obtained by deducting the amount stated in Clause (2) above from the amount stated in Clause (1) and adding to the balance so obtained the sum of the amounts stated in Clauses (3) and (4); provided, however, that profits or losses resulting from the sale, abandomnent or other disposition of capital assets or se-curities, or any aniortixation or elimination of intangibles, shall not be talien into account in the calculation of net earnings; anil-provided f<crther, tliat of the net earnings of the Coinpany not more than fifteen per centum (15%) in the aggregate may consist of (a) net non-operating income, <<nil (b) net operating reveiiue ileriveil froi>> all sources other than the electric, ga>> and water business of tlie Coiiipany; and in the event that such income and revenue referreil to in (a,) and (b) shall in the aggregate exceed fifteen per centum (16%) of such net earnings, then the amount of any such excess shall be separately stated and shall, for the purposes of any net earnings certificate under this Indenture, be excluded from t)ie computation of net earnings; and (3) The annual interest requirements upon (1) all bonds outstanding hereunder at the date of such certificate, except any bonds for the payment, retirement or redemption of which the bonds then applied for are to be issued, (2) bonds then applied for in the application in connection with which such certificate is made and those applied for in any other pending application, and (3) the principal amount of all other indebtedness (except indebtedness secured by prepaid liens) outstanding on the date of such certificate and secured by a prior lien, except any in-debtedness for the payment, retirement or redemption of wliich the bonds then applied for are to be issued.
If a>>y of the property of the Company owned by it at the time of the maki>>g of any net earnings certificate shall consist of a plant or system (including any property used in connection therewith) which shall have been acquired during or after any period for which net earnings are to be computed, the actual net earnings or net losses of such property (computed in the manner specified in this Section 1.06 for the computation of the net earnings of the Company, but eliminating all intercompany items, if any) during such period or such part of such period as shall have preceded the acquisition thereof, to the extent that
92 the same are ascertainable and have not otherwise been included (and unless such property shall have been acquired in exchange or substitution for property the earnings of which have been included) shall be treated as net earnings or net losses of the Company for all purposes of this Indenture. The net earnings or net losses (to the extent ascertainable) of any property of the Company consisting of a plant or system and property used in connection therewith and which shall have been disposed of by the Company during or after any period for which net earnings are to be computed, shall not be treated as net earnings or net losses of the Company for the purposes of this Indenture.
The term "repairs" as used in this Section 1.06 shall include all re-newals which, in the ordinary practice of companies carrying on a business similar to that of, the Company, are charged to current main-tenance, repairs, or other operating expense account.
SECTIQN 1.07. The term "funded property" shall mean:
(1) All property owned by the Company on February 28, 1947, and subjected or intended to be subjected to the lien of this Indenture; and (2) All property additions which shall have theretofore been certified to the Trustee as a basis for the authentication and delivery of bonds or the withdrawal of cash or the release of funded property'nder any of the provisions of this Indenture, or for the taking of a credit under subdivision (4) of Section 4,10 or used as the basis of a waiver under Section 4.16, except to
'he extent, if any, of the unapplied balance of net property addi-tions and of any excess of property additions, certified as a basis for the withdrawal of cash or release of funded property where net property additions are not required to be used, above the amount required by the provisions of this Indenture for such withdrawal or release.
SEGTIoN 1.08. The term "funded prior lien bonds" shall mean any prior lien bonds made the basis for the authentication and delivery of bonds or for the withdrawal of cash held by the Trustee or for the release of funded property from the lien thereof under any provision of this Indenture, or for which credit has been taken under subdivision (3) of Section 4,10.
!)3 ARTICLE 2 DEscRIPTICN FCRM> L<XEcUTICN> BEQIsTRATICN hND ExcHANGE CF BQNDs SEOTIoN 2.01. The aggregate principal amount of the bonds which may be executed by the Company and authenticated and delivered by the Trustee and be secured by this Indenture is not limited, but shall include such aggregate principal amount as may from time to time.
be authenticated and delivered under the terms hereof.
SEOTIoN 2.02. At the option of the Co)npany, the bonds issued hereunder may be issued in one or more series. All bonds of any one series shall contain in all. respects the sa)ne provisions, except for necessary or proper variations l)etween te)nporary bonds) coupon bonds an<1 l'ally registere<1 l)on<is or lion<is of diFerent denominations an(1, in thc <:))se ol')on<Is of any seri<.s ol'erial ))) Iturity, as to date of ma-tuiity, rate of, interest an<1 the price, terms an<1 conditions of redemp-tion thereof. The for)n of each series shall be distinguished by such designation or descriptive title as the Board of Directors of the Company may select for such series (which shall contain the words "First Mortgage Bonds" ), and each bond issued hereunder shall bear upon the face thereof the designation or descriptive title so selected for the series to which it belongs. All bonds issued under this Inden-ture sl)all be expressed to be payable as to principal and interest in any coin or currency of the United States of America which at the time of pay)nent shall be legal tender for the payment of public and priva,te debts.
The texts of the coupon bonds and of the fully registered bonds to be issued under this Indenture, and of the coupons appertaining to the coulion bonds, and of the certif)cate of authentication of the Trustee
))l)<>>):)II l)on<is, sl>>)ll he r<)sl)<'.ctively substantially of the tenor and 1>>)) l)<)) [. I)<.)<.inl)el'<))<. )<<.:it<<, 1, with such omissi<ms, variations and in-serl.i<>>)s;)s n)ay he n<)cessary or appropriate to mal<e th<>>n confor)n to provisions anti)orixed in respect of the bonds of any series by the Board of Directors of the Company and permitted by this Indenture; provided, ho<oever, that (subject to the provisions of Section 2.08 with respect to bonds of the series to be initially issued hereunder and which
is hereinafter sometimes referred to as the "1977 Series" ) at the option of the Company, from time to time expressed by resolution of its Board of Directors:
(1) provision may be made in the bonds of any series per-mitting exchange thereof for another bond or other bonds of a different series, upon such terms and subject to such adjust-ments as may be set forth in said resolution; (2) provision may be made in any series of bonds for the payment of the principal thereof or interest thereon, or both, without deduction for any taxes whatsoever, or without deduc-tion for certain specified taxes differing from those contained in the bonds of any other series, and for the reimbursement to the holders of bonds of specified taxes assessed upon them by reason of their ownership of such bonds or the receipt of income therefrom; (8) the date or dates of issue, date or dates of maturity, place or places of payment, rate or rates of interest and interest payment dates of the bonds of each series issued hereunder from time to time, and the terms and conditions, if any, of the purchase and/or redemption and/or convertibility thereof and/or of provisions in regard to the establishment and ap-plication of any sinking, amortization, improvement or other analogous fund for the benefit of the holders of the bonds of such series or of one or more other series and/or such other terms and provisions as shall be not inconsistent with the general forms hereinabove set forth, shall be"as fixed and deter-mined in said resolution and provided in the bonds when issued.
Before any bonds of any series, other than. the 1977 Series, shall be authenticated and delivered hereunder, the Company shall execute and deliver to the Trustee a supplemental indenture, in recordable form, containing the particulars of the new series of bonds as above set forth and containing appropriate provisions giving to such bonds the protection and security of this Indenture.
SHcnoz 2.08. The bonds to be initially issued hereunder in the aggregate principal amount of $ 6,800,000, referred to in Section 8.01, shall be of a series designated First Mortgage Bonds, 2~/s% Series due
95 1977 (such series being herein referred to as the "19?7 Series" ). All coupon bonds of the 19?7 Series shall be dated June 1, 1947, and all bonds of the 1977 Series shall mature June 1, 1977, and shall bear interest from June 1, 1947 nt the rate of 27/s% per annum, payable semi-annually on December 1 nnd June 1 in each year; the principal of and interest on e'ach such bond, shall be payable at the Ofhce or agency of the Company in the Borough of Manhattan, The City of New York; and principal, premium, if any, and interest shall be pay-able in any coin or currency of the United States of America which at the time of paynIent shall be legal tender for the payment of public and private debts.
The bonds of the 1977 Series shall be redeemable prior to maturity, upon not less than thirty (30) days'rior notice, as a whole at any time, or from time to time in part, at the option of the Company, upon the terms nnd conditions hereinafter specifIed in Article 5 of this Indenture.
Bonds of the 1977 Series are entitled to the'benefi of a Sinking Fund as provided in Section 4.23 and are also redeemable to th'e extent and in the manner provided by said Section 4.23.
Said bonds sliall he issue(l as coupon bonds, registerable as to principal, in the denoInination of $ 1,000; nnd as fully registered bonds in denominations of $ 1,000 nnd multiples thereof. from time to time authorized hy tlie Coinpnny.
Coupon bonds nn(l fully registered bonds of tlie 1977 Series shall bc r(igist(.rahle nn(l int(irclinng(.alile nt tlie OAice or agency (if tli(. Com-pany in th(i Borougli of Manhattan, Tlie City of New York, in the ninnncr nnd upon tlie ternis sct forth in Section 2.05, upon payment of charges as required or permitted by the provisions of Section 2.0S.
SEGTIQN 2.04. Bonds of any series other than the 1977 Series issued pursuant to the provisions hereof may at the election of the Board of Directors of the Company, expressed from time to time by resolution, be executed, authenticated and delivered either ns coupon bonds and/or as fully registered bonds, and in such denominations (not l'ess than $ 100) as the Hoard of Directors of the Company shall determine.
96 L<'very fully registered bond shall be dated as of the date of its authentication and shall bear interest from the interest payment date for bonds of such series next preceding such date (except that if any such bond shall be authenticated on any interest payment date for bonds of such series it shall bear interest from its date, and except that if any such bond shall be authenticated prior to the first interest pay-ment date for bonds of such series it shall bear interest from the begin-ning of the first interest period for bonds of such series, and except that any fully registered bond delivered on a transfer or exchange of or in substitution for another bond or bonds shall bear interest from the last preceding date to which interest shall have been paid on the bond or bonds in respect of which such fully registered bond is de-livered). The Company will pay the interest on any fully registered bond only to or upon the order of the owner registered on the Com-pany's books at the date interest is paid on such bonds.
SEGTIoN 2.05. Whenever any coupon bond or bonds of any series and of the same maturity, by the terms thereof exchangeable for cou-pon bonds of the same series and maturity of other denominations, together with all unmatu'red coupons thereto appertaining, shall be surrendered to the Company for exchange for a like aggregate princi-pal amount of coupon bonds of such other authorized denominations of the same series and maturity, the Company shall execute, and the Trustee shall authenticate, and the Company shall deliver in exchange therefor a like aggregate principal amount of coupon bonds of the same series and maturity as the surrendered bond or bonds, of such other authorized denominations, bearing all unmatured coupons.
Whenever the registered owner of any fully registered bond or bonds of any series shall surrender the same to the Company for transfer, or, if by their terms exchangeable for any other fully regis-tered bond or bonds, for consolidation or subdivision, together, in case of a transfer, with a written instrument of transfer in form approved by the Company or by the Trustee duly executed by such. registered owner or by his attorney duly authorized in writing, the Company shall execute, and the Trustee shall authenticate, and the Company shall
deliver in exchange therefor a new fully registered bond, or new fully registered bonds, of the same series and maturity as the surrendered bond or bonds, of authorized denominations, for the same aggregate principal amount.
Whenever any fully registered bond or bonds, by the terms thereof exchangeable for a coupon bond or coupon bonds of the same series and maturity, together with a written instrument of transfer in form ap-proved by the Company or by the Trustee duly executed by the regis-tered owner or by his attorney duly authorized in writing, shall be surrendered to the Company for exchange for one or more coupon bonds of the same series and maturity, the Company shall execute, and the Trustee shall authenticate, and the Company shall deliver in exchange therefor a like aggregate principal amount of coupon bonds of the sa>ne series and maturity as the surrendered bond or bonds, bearing a)l uninatured coupons.
Whenever any coupon bond or bonds of any series and of the same maturity, by the terms thereof exchangeable for a fully registered bond or fully registered bonds, shall, together with all unmatured cou-pons thereto appertaining, be surrendered for exchange for a fully registered bond or fully registered bonds, of authorized denominations, the Company shall execute, and the Trustee shall authenticate, and the Company shall deliver in exchange therefor a fully registered bond, or fully registered bonds, of the same series and maturity as the sur-rendered bond or bonds, of such authorized denominations, for the same aggregate principal amount.
Every such exchange of bonds of one denomination for bonds of a different denomination or denominations or of coupon bonds for fu))y registered bonds or of fully registered bonds for coupon bonds, as ))rovided in this Rection 2.05, sha)) be effected as herein provided, or as>>>>iy he necessary to comply with the rules of any stock exchange on which such bonds are listed or to conform to usage with respect thereto.
In case at the time of any such exchange interest on the bonds is in default, all coupon bonds surrendered for exchange and all coupon bonds delivered in exchange shall have attached thereto all matured coupons in default.
98 SEcTIoN 2.06. The holder of any coupon bond issued hereunder may have the ownership thereof registered as to principal at the oKce or agency of the Company in the Borough of Manhattan, The City of New York (or in such other place as may be provided in respect of a particular series), and such registration noted on the bond. After such registration no transfer of said bond shall be valid unless made at said oKce or agency by the registered owner in person or by his duly authorized attorney, and similarly noted on the bond; but the same may be discharged from registration b'y being in like manner transferred to bearer, and thereupon transferability by delivery shall be restored; but such bond may again from time to time be registered, or transferred to bearer as before. Such registration, however, shall not affect the negotiability of the coupons, but every such coupon shall continue to be transferable by delivery merely, and shall remain payable to bearer.
All coupons annexed to any bond issued hereunder shall bear the same designation as the bond to which they are annexed, and all bonds delivered as authorized in this Article 2 in exchange for outstanding bonds shall evidence the same debt as the bond or bonds so surrendered.
SEcTIoN 2.07. Any bond issued hereunder whether in fully regis-tered or in coupon form and whether in temporary or definitive form shall bear such numbers, letters or other marks of identification or designation not inconsistent herewith, and may be endorsed with such legends or recitals in respect of the bond or bonds for which it is ex-changeable, as may be determined by the Company and approved by the Trustee, and as may be required to comply with the rules and regula-tions of any stock exchange or to conform to usage in respect thereof; and similar provision may be made in connection with the issue of coupon bonds of denominations of less than $ 1,000 or of fully registered bonds for the reservation of appropriate serial numbers or other designating marks of the coupon bonds exchangeable in place thereof as required by such stock exchange rules and regulations or usage.
SEGTIQN 2.08. Upon every exchange of coupon bonds for fully registered bonds or for other coupon bonds, or of fully registered bonds
for coupon bonds or for other 'fully registered bonds, and upon any transfer of fully registered bonds, the Company may make a charge sufFicient to reimburse it for or pay any stamp or other tax or govern-mental charge required to be paid, and in addition may charge a sum not exceeding $ 2 for each bond of the denomination of $ 1,000 or more and $ 1 for each bond of the denomination of less than $ 1,000, issued upon such exchange or transfer, which sums shall be paid by the party requesting such exchange or transfer as a condition precedent to the exercise of such exchange or transfer privileges, No charge except for taxes or governmental charges shall be made for the registration or transfer of coupon bonds.
The Company shall not be required to make any exchange or trans-fer of bonds of any series as provided in this Article 2 for a period of ten (10) days next'receding any interest payment date for bonds of said series, or next preceding any designation of bonds of said series to be redeemed. The Company shall not be required to make transfers or exc)ranges of bonds designated in whole or in part for redemption.
SrcnoN 2.09. All the bonds issued hereunder shall, from time to time, be signed on behalf o'f the Company by its President or a Vice-President and its corporate seal shall be thereunto aAixed and attested by its Secretary or an Assistant Secretary. The corporate seal of the Company may be afiixed to any bond by printing, engraving, litho-graphing, stamping or otherwise making, placing or aQixing upon such bond by any process whatever, an impression, facsimile or other repro-duction of said corporate seal.
The coupons to be attached to coupon bonds shall bear the facsimile signature of the present or any future Treasurer of the Company, and the Company may adopt and use for that purpose the facsimile signature of any person who shall have been such Treasurer,'notwith-standing the fact that he may not have been such Treasurer at the date of any such bond or that he may have ceased to be such Treasurer at the time when any such bond shall be actually authenticated and delivered.
In case any of the oNcers who shall have signed and sealed. any
bonds or attested the seal thereon shall cease to be such officer of the Company before the bonds so signed and sealed shall have been actually authenticated by the Trustee or delivered by the Company, such bonds nevertheless may be executed, authenticated and delivered with the same force and effect as though the person or persons who signed and sealed such bonds had not ceased to'e such officer or officers of the Company; and also any bond may be signed and sealed on behalf of the Company by such person as at the actual date of the execution of such bond shall be the proper officer of the Company although at the date of such bond such person shall not have been such officer of the Company.
Before authenticating any coupon bonds the Trustee shall cut off and cancel all matured coupons thereon (except as otherwise pro-vided in Sections 2.05 and'2.11) and shall thereafter deliver the same to or upon the order of the Company.
SzonoN 2.10. Until definitive bonds are ready for delivery, the Company may execute, and the Trustee shall authenticate and deliver in lieu of any thereof, temporary bonds of any denomination substantially in the form of the fully registered or coupon bonds hereinbefore described, with one or more or without coupons, and with appro-priate omissions, insertions and variations as may be required.
Temporary bonds may be. issued without the provisions entitling the holders to register the bonds or a recital of specific redemption prices, and may contain such reference to any provision of this Indenture as may be appropriate. Such temporary bonds shall be exchangeable for definitiv'e bonds when ready for delivery. Un-til exchanged for definitive bonds, such temporary bonds shall be en-titled to the lien'and benefit of this Indenture. Upon such exchange, whicli tlie Company shall make without any charge therefor, such tem-porary bonds shall be cancelled and may be destroyed by the Trustee, and a certificate of such destruction shall be delivered to the Company.
Temporary bonds without coupons of any series shall bear interest from the beginning of the current interest period for bonds of that series in which such temporary bonds without coupons, shall be authen-ticated. When and as interest is paid upon temporary bonds without
101 coupons, the fact of such payment shall be noted thereon. Until such definitive bonds are ready for delivery the holder of one or more temporary bonds may surrender the same to the Trustee for cancella-tion, and shall be entitled to receive temporary bonds of like aggregate principal amount in such denominations indicated, by him as may have been authorized by the Board of Directors.
SznroN 2.11. In case any bond outstanding under this Indenture and the coupons thereto appertaining (if any) shall become mutilated or be lost, stolen or destroyed, then, on the terms herein set forth, and not otherwise, the Company may execute, and thereupon the Trustee shall authenticate, and the Company shall deliver, a new bond of like tenor and date, and having annexed corresponding coupons (if any),
in exchange and substitution for, and upon cancellation of, the muti-lated bond and coupons, or in lieu of and substitution for the same if lost, stolen or destroyed; or if any such mutilated, lost, stolen or de-stroyed bond or coupon shall have matured, or be about to'mature, instead of issuing a substituted bond or coupon the Company may pay the same, without surrender thereof in the case of any such lost, stolen or destroyed bond or coupon. The applicant for such payment or for a substituted bond and coupons (if'any) shall furnish to the Company and the Trustee evidence satisfactory to each of them in their discre-tion of the loss, theft or destruction of such bond and coupons alleged to have been lost, stolen or destroyed, and of the ownership and authen-ticity of such mutilated, lost, stolen or destroyed bond and coupons (if any), and also indemnity in a sum deemed satisfactory by the Company and the Trustee, having as surety thereon a surety company satisfactory to the Company and the Trustee in their discretion; and shall pay all expenses and charges of such substitution, payment or exchange. Any indemnity bond shall name as obligees the Company, the Trustee and, if requested by the Company, any paying agent.
The Trustee may authenticate any such substituted bonds and deliver the same with appurtenant coupons (if any), or the Trustee or any pay-ing agent of the Company may make such payment, upon the written request or authorization of any o5cer of the Company, and shall incur
102 no liability to anyone by reason of anything done or omitted to be done by it in good faith and without negligence under the provisions of this Section 2.11. Allbonds issued under this Indenture are held and owned upon the express condition that the provisions of this Section 2.11 are exhaustive and shall exclude all other rights and remedies, any law or statute now existing or hereafter enacted to the contrary not-withstanding.
Any such bonds and coupons issued pursuant to this Section 2.11 in substitution for bonds or coupons alleged to be lost, stolen or de-stroyed shall constitute original additional contractual obligations on the part of the, Company, whether or not the bonds and coupons so alleged to be lost, stolen or destroyed be at any time enforcible by anyone, and shall (subject to the provisions of Section 4.02) be equally secured hereby and entitled to equal and proportionate benefits with all other bonds and coupons issued hereunder in any moneys or prop-erty at any time held by the Trustee for the benefit of the bondholders.
SEOTIoN 2.12. Only such bonds as shall bear thereon a certificate of authentication substantially in the form hereinabove recited, executed by the Trustee, shall be secured by this Indenture or be entitled to any lien, right or benefit hereunder. No bond and no coupon there-unto appertaining shall be valid or become obligatory for any pur-pose until such certificate shall be duly executed on such bond, and such authentication by the Trustee upon any bond shall be conclusive evidence and the only competent evidence that the bond so authenti-cated has been duly authenticated. and delivered hereunder and that such bond is entitled to the benefits hereof.
ARTICLE 3 AUTHENTICATIONAND DELIVERY OF BONDS Section 3.01. Bonds of the 1977 Series, described in Section 2.03, in the aggregate principal amount of $ 6,800,000, shall forthwith be exe-cuted by the Company and delivered to the Trustee and shall be au-thenticated by the Trustee and delivered (without awaiting the filing or
108 recording hereof) in accordance with the written order or orders of the Company.
SECTION 3.02. Bonds, in addition to those provided for in Section 3.01, of the 1977 Series or of any one or more other series, may from time to time be executed by the Company and delivered to the Trustee and shall be authenticated by the Trustee and delivered from time to time in accordance with the written order or orders of the Company upon the basis of property additions, but only in accordance with and subject to the conditions, provisions and limitations set forth in the next succeeding four Sections of this Article 3, numbered Section 3.03 to Section 3.06, both inclusive.
Sponom 3.03. No bonds shall be authenticated and delivered at any time under the provisions of Sections 3.04, 3.05 or 3.06 upon the basis of funded property.
SEGTIoN 3.04. Bonds of any one or more series (including the 1977 Series) shall be authenticated and delivered from time to time under the provisions of this Article 8 upon the basis of property addi-tions included in a computation of net property additions, to an aggre-gate principal amount not exceeding sixty per centum (60%) of the amount of net property additions as evidenced for the purposes'f this Article 8, by the appropriate certificates provided for in Section 8.06.
SFcnow 3.05. No bonds shall be authenticated and delivered upon the basis of property additions unless, as shown by 'a net" earnings certificate, the net earnings of the Company for the period therein re-ferred to shall have been in the aggregate at least equivalent to two (2) times the annual interest requirements as shown by such net earnings certificate.
SEcTIoN 3.06..No application by the Company to the Trustee for the authentication and delivery of bonds hereunder upon the basis of property additions shall be granted by the Trustee until the Trustee shall have received:
104 (1) A certified resolution requesting the Trustee to authen-ticate and. deliver bonds, (a) specifying the aggregate principal amount of bonds applied for, the series and denominations thereof, and any other matters with respect thereto required by this Indenture, and (b) specifying the ofBcer or oScers of the Company to whom, or upon whose written order, such bonds shall be delivered.
(2) A, certificate of the Company stating that the Company is not to the knowledge of the signers in default under any of the provisions of this Indenture.
(3) An engineer's certificate made and dated not more than sixty (60) days prior to the time of such application, (A) showing'the amount, if any, of the unapplied bal-ance of net property additions (not in excess of $ 200,000) included in the most recent engineer's certificate, if any, there-tofore filed with the Trustee pursuant to this subdivision (3),
Sections 4.10, 4.16, or 8.11; (3) specifying other property additions purchased, con-structed or otherwise acquired by the Company since Febru-ary 28, 1947 and not theretofore included in an engineer's cer-tificate certifying net property additions; and stating whether, and if so to what extent, such property additions consist of funded property; and as to such property additions:
(a). describing such property additions in reasonable detail by classified fixed capital accounts then in use by the Company; stating the cost thereof; stating whether such property additions include any additional tract or parcel of real estate;.and stating that all such property additions are property additions as defined in Section 1.05; (b) stating, except as to property additions acquired, or constructed wholly through the delivery of securi- 'ade ties, or the transfer of other property, that the amount of cash forming all or part of the cost thereof was equal to or more than an amount to be stated therein; (c) briefiy describing with respect to any such. prop-erty additions acquired, made or constructed in whole or in part through the delivery of securities or the transfer of other property, the securities or 'other property so de-
105 livered or transferred and stating the date of such delivery or transfer; (d) stating the principal amount qf any unsecured in-debtedness assumed. by the Company as part of the con-sideration for the acquisition of any of such property addi-tions, or, if the amount be less, the amount actually ex-pended by the Company to secure the discharge thereof; (e) specifying the nature and extent of all prior liens, and the principal amount of all prior lien bonds secured thereby, existing upon any of such property additions at tlie time of the acquisition thereof, and stating (1) which, if any, of such prior liens have, at or prior to the date of the certificate, become prepaid liens, or (2) whether any or all of the indebtedness secured thereby has been satisfied or discharged, and stating the aggregate of the amounts, if any, expended (excluding any sums expended in respect of premium or accrued interest) by. the Company to procure the satisfaction or discharge of any such indebtedness, or to cause the liens securing the same to become prepaid liens and (3) if and to the extent that bonds applied for are to be issued against property additions subject to prior liens which have not become prepaid liens or which have not been satisfied or discharged, then stating the principal amount of all prior lien bonds then secured thereby and that the engineer's certificate called .for by Section 4.16 has been filed with the Trustee with respect thereto, and showing that the acquisition of such property subject to a prior lien was permitted by the provisions of said Section 4.16 and of Section 4.18; (f) stating that there is no outstanding indebtedness of the Company or of others known, after due inquiry, to the Company, for the purchase price or construction of, or for labor, wages or materials in connection with the con-struction of, sucli property additions, which could become the basis of a lien upon said property additions, prior to the lien of this Indenture, which in the opinion of the signer of said certificate might materially impair the security hereof; (g) stating, except as to such property additions in respect of the fair value to the Company of which a state-ment is to be made in an independent engineer's certificate
106 as provided for in subdivision (4) of this Section 3.06, the then fair value to the Company of such property additions; and (h) stating whether such property additions include a public utility system (or systems) which has within six months prior to the date of acquisition thereof by the Company been used or operated by a person or persons other than the Company in a business similar to that in which it has been or is to be used or operated by the Com-pany and showing the cost of such public utility system (or systems) and whether the then fair value thereof to the Coinpany is not less than $ 2,>,000 and not less than one per centum (1%) of the aggregate principal ainount of the bonds at the time outstanding hereunder; and if any of such property additions includes a public utility system, the cost thereof may include all or part of the cost of any riglits and intangible property simultaneously acquired with sucli public utility system for which no separate or distinct considera-tion shall have been paid or apportioned, and in such case the term property additions, as defined herein, may include such rights and intangible property (except going concern value or good will); and in determining the fair value of such public utility system it shall be proper to include as an element of value thereof an amount deemed proper by the signer of said certificate for such rights and intangible property as aforesaid; (C) stating the aggregate amount of all property retire-ments made up to the close of the period covered by the engi-neer's certificate then being made and since the close of the period covered by the most recent certificate, if any, referred to in the preceding Clause (A) (or, if no such prior certificate has been filed, then since February 28, 1947);
(D) stating the aggregate amount of the cash plus the principal amount of any purchase money obligations deposited with the Trustee hereunder, or the trustee or other holder of a prior lien, up to the close of the period covered by the engi-neer's certificate then being made and since the close of the period covered by the most recent certificate, if any, referred to in the preceding Clause (A) (or if no such certificate has been filed, then since February 28, 1947), and representing the proceeds of insurance on or the release or sale of or the
107 taking by eminent domain of any property referred to in the preceding Clause (C) above; (E) showing the amount of the net property additions available as a basis for the authentication and delivery of pursuant to Section 3.04, by adding to the amount of 'onds the unapplied balance of net property additions shown by Clause (A.) above the amount of the net property additions, determined in the manner specified in the definition of net property additions contained in Section 1.05 and on the basis of the respective amounts shown by Clauses (3), (C) and (9) above, by deducting from the amount of unfunded property additions shown by Clause (3) the amount of retirements shown by Clause (C) and 166% jo of the principal amount of lien bonds (if any) shown hy subdivision (e)(3) of 'rior Clause (8) and not theretofore deducted, and adding to the balance the aggregate amount of cash and purchase money obligations, as shown by Clause (D), provided, hoivever, that the aggregate amount so added may not exceed tlie aggregate of the amount so deducted; and (F) showing the unapplied balance of net property addi-tions remaining after the authentication and delivery of the bonds requested in the application then being made, deter-mined by deducting from the amount of net property addi-tions available as shown by Clause (E) above, the amount of net property additions required as the basis for the appli-cation then being made.
In the discretion of the Company there may be omitted from such engineer's certificate any or all property additions which would result in an unapplied balance of net property additions, and such property additions so omitted may be included in a subsequent engineer's certificate.
(4) In case any property additions certified pursuant to Clause (3) of subdivision (3) above are shown by such engi-neer's certificate to include a public utility system and such certificate shows that the then fair value to the Company of such public utility system is not less than $ 25,000 and not less than one per centum (1%) of the aggregate principal amount of the bonds at the time outstanding hereunder, and that such public utility system has within six months prior to the date of acquisition thereof hy the Company been used or operated by a person or persons other than the Company in a business
108 similar to that in which it has been or is to be used or operated by the Company, an independent engineer's certificate dated not more than sixty (60) days prior to the time of such appli-cation, stating, as to such public utility system, the then fair value thereof to the Company in the opinion of the signer, to-gether with the signer's report thereon which shall contain a brief statement of the conditions governing the signer's deter-mination of such fair value and a brief statement of the con-dition, serviceability and location of such public utility system, and such certificate shall cover the fair value to the Company of any public utility system (if there be any) so used or operated, which has been subjected to the lien hereof as a basis for the authentication and delivery of bonds, the withdrawal of cash, or the release of property subject to the lien hereof, since the com-mencement of the then current calendar year, and as to which a certificate of an independent engineer has not previously been furnished; and, in determining any such fair value, it shall be proper in the case of any such public utility system to include 's an element of the value thereof an amount deemed proper by said engineer for any rights and intangible property (except going concern value or good will) simultaneously acquired with such public utility system for which no separate or distinct consideration shall have been paid or apportioned.
(5) In case any property additions are shown by the engi-neer's certificate provided for in subdivision (3) to have been acquired, made or constructed in whole or in part through the delivery of securities or other property, an engineer's certificate stating in, the opinion of the signer the fair value of such securi-ties (being the fair market value, if any) and other property at the time of delivery thereof in payment for or for the acquisi-tion of such property additions.
(6) '4 net earnings certificate by an accountant, certifying the amount of the net earnings of the Company to be as required by Section 3.05, and showing the calculation of such net earn-ings in the manner set forth in Section 1.06. Said certificate shall, subject to the provisions of subdivision (j) of Section 1.03, be made by an independent public accountant, if the aggre-gate principal amount of bonds tlien applied for plus the aggre-gate principal amount of bonds authenticated and delivered since the commencement of the then current calendar year (other than those with respect to which a certificate of an accountant is not required or with respect to which a certificate of an inde-
109 pendent public accountant has previously been furnished) is ten per centum (10%) or more of the aggregate principal amount of bonds at the time outstanding.
(7) An opinion of counsel stating (a) that the instruments which have been or are there-with delivered to the Trustee conform to the requirements of this Indenture and constitute sufBcient authority under this Indenture for the Trustee to authenticate and deliver the bonds applied for; and that, on the basis thereof, the bonds applied for may be lawfully authenticated and delivered under this Article 3; (b) that this Indenture has been duly recorded or filed and, together with certain instruments of conveyance, assign-ment or transfer specified in, such opinion, will be sufiicient to subject to the lien of this Indenture the property additions then being certified pursuant to Clause (8) of subdivision (3) above and still owned and not retired by the Company, sub-ject to no lien thereon prior to the lien of this Indenture, except the prior liens and prepaid liens (if any) described in the accompanying engineer's certificate, and permitted encum-brances, or that no such instruments are necessary for suc)i purpose; and that, upon the recordation or filing in the manner stated in. such opinion of the instruments so speci-fied, if any, or without such recordation or filing, if none is so specified, and upon such further recording or filing of this Indenture or any supplemental indenture in the manner stated in such opinion, or without any such further recorda-tion or 'filing if such opinion shall so state, no further record-ing or re-recording or filing or refiling of this Indenture or any other instrument is required to maintain the lien of this Indenture with respect to such property additions as against any creditors or subsequent purchasers; (c) that the Company has acquired good and valid legal title to such property additions, and that the same and every part thereof are free and clear of all liens, charges and encumbrances prior to the lien of this Indenture, except the prior liens and prepaid liens (if any) described in the accom-panying engineer's certificate, and permitted encumbrances; (d) that this Indenture is, or upon the delivery of the instruments of conveyance, assignment or transfer, if any,
specified in said opinion will be, a lien on all the property additions certified pursuant to Clause (B) of subdivision (3) above which are still owned and have not been retired by the Company, subject to no lien thereon prior to the lien of this Indenture, except the prior liens and prepaid liens (if any) described in the accompanying engineer,'s certificate, and per-mitted encumbrances; (e) that the Company has corporate authority and all necessary permission from governmental authorities to ac-quire, own, use and operate such property additions; (f) that the issue of the bonds, the authentication and delivery of which are being applied for, has been duly author-ized by the Company and by any and all governmental authori-ties the consent of which is requisite to the legal issue of such bonds, specifying any duly certifiied documents by which such consent is or may be evidenced or that no consent of any governmental authorities is requisite, and specifying the cer-tifiicate or other evidence which will be sufiicient to show com-pliance with the requirements, if any, of any mortgage record-ing tax law or other tax law applicable to the issuance of the bonds applied for, or stating that there are no such legal requirements; and (g) that the general nature and extent of prior liens and prepaid liens and the principal amount of the then outstand-ing prior lien bonds secured thereby, if any, mentioned in the accompanying engineer's certificate, are correctly stated.
(8) The instruments of conveyance, assignment and transfer, if any, and the duly certified documents, if any, specified in the opinion of counsel provided for in subdivision (7) above; pro-vided that if any property additions certified pursuant to Clause (B) of subdivision (3) above include-any additional tract or parcel of real estate, there shall in any event be delivered to the Trustee, if it shall so request, a supplemental indenture or other instrument of conveyance subjecting said tract or parcel to the direct lien of this Indenture.
(9) An engineer's certificate, made and dated not more than ten (10) days prior to the date of such application, stating that the signer has no knowledge of and does not believe that there
have been, since the close of the period covered by the engineer's certificate specified in subdivision (8) above, property retire-ments in an amount exceeding property additions since the close of said period by more than the amount of the unapplied balance of net property additions calculated to be remaining upon the granting of the application.
(10) A certificate of the Company and an opinion of counsel as to compliance with conditions precedent.
Svcx'roN 3.07. The Trustee shall from time to tiine upon the written request of tlie Coinpany authenticate and deliver bonds here-under of an aggregate principal amount equal to the aggregate principal amount of any bonds (except as otherwise provided in this Section 8.07) theretofore authenticated and delivered under this Indenture that shall have been paid, retired, redeemed or cancelled or surrendered to the Trustee for cancellation, or for the payment, retirement or redemption of which moneys in the necessary amount shall have been deposited with, or shall then be held by, the Trustee (with irrevocable direction and authorization satisfactory to the Trustee so to apply the same, and, as regards bonds to be redeemed, either with proof satisfactory to the Trustee that notice of redemption has been duly given or with irre-vocable authorization to the Trustee to give such notice of redemption),
but only after the Trustee shall have received:
(1) a certified resolution such as is described in subdivision (1) of Section 3.06; (2) a certificate of the Company stating (a) that the Com-pany is not to the best of the knowledge and belief of the signers in default under any of the provisions of this Indenture; and (b) that bonds theretofore authenticated and delivered under this Indenture of a specified aggregate principal amount (not less than the aggregate principal amount of bonds for which such request for authentication and delivery is made under this Section 8.07) have been paid, retired, redeemed or cancelled, or concurrently with the authentication and delivery of the bonds requested will be surrendered to the Trustee for cancellation (otherwise than upon exchanges or transfers of bonds) and/or that moneys in the. necessary amount for the payment, retire-
112 ment or redemption thereof are then held by or will be deposited with the Trustee prior to or concurrently with the authentica-tion and delivery of the bonds so requested (with irrevocable direction and authorization satisfactory to the Trustee so to apply the same, and, as regards bonds to be redeemed, either with proof satisfactory to the Trustee that notice of redemp-tion has been duly given or with irrevocable authorization to the Trustee to give such notice of redemption), and further stating that no part of such aggregate principal amount of bonds has been theretofore made the basis under any of the provi-sions of this Indenture for the authentication and delivery of bonds or the withdrawal of cash or the'taking of a credit under subdivision (8) of Section 4.10 and that none of such bonds has been retired by the use of the proceeds of any insurance on any funded property or the proceeds of the release or other disposi-tion of any part of the funded property, or through the operation of any sinking, improvement or other fund applicable to such're-tirement, except, as regards any such fund, to the extent, if any, that the provisions establishing such fund may expressly permit the issuance of bonds under this Section 8.07 in respect of bonds retired through the operation of such fund; and further stating the interest rate or rates and the maturity date or dates borne by all such bonds so cancelled or so to be surrendered for can-.
cellation or which are to be so paid, retired or redeemed or money for the retirement or redemption of which is to be so deposited; (8) an opinion of counsel to the eGect (a) that the instru-. ~
ments which have been or are therewith delivered to the Trustee conform to the requirements of this Indenture and constitute su5cient authority under this Indenture for the Trustee and deliver the bonds applied for, and that, on to'uthenticate the basis of the payment, retirement, redemption, cancellation or surrender for cancellation of bonds or the deposit of moneys in accordance with the certificate of the Company delivered to tl>e Trustee pursuant to subdivision (2) of this Section 8.07,.'he bonds applied for may be lawfully authenticated and,de-.
livered under this Article 8; and (b) that the issue of the the authentication and delivery of which are requested 'onds, in such resolution, has been duly authorized by the Company and by any and all governmental authorities the consent of which
118 is requisite to the legal issue of such bonds, specifying any duly certified documents by which such consent is or may be evi-denced, or that no consent of any governmental authorities is requisite, and specifying the certificate or other evidence which will be sufBcient to show compliance with the requirements, if any, of any mortgage recording tax law or other tax law applic-able to the issuance of the bonds applied for, or stating that there are no such legal requirements; (4) the duly certified documents, if any, specified in the opinion of counsel provided for in subdivision (8) of this Sec-tion 3.07; and (5) a certificate of the Company and an opinion of counsel as to compliance with condition precedent; provided, however, that no additional bond shall be authenticated and delivered pursuant to this Section 3.07 more than two years prior to the stated maturity of the bond (hereinafter called the retired bond) in respect of the payment, retirement, redemption, cancellation or sur-render for cancellation of which the authentication and delivery of such additional bond is applied for, unless such additional bond bears no greater rate of interest than such retired bond, or, if such addi-tional bond bears a greater rate of interest than such retired bond, unless the Trustee shall have received a net earnings certificat and unless such net earnings certificate shall show the net earnings of the Company to be as required by Section 3.05; and provided fnrtker, that no additional bond shall be authenticated and delivered pursuant to this Section 8.0? in re'spect of the payment, retirement, redemption, cancel-lation or surrender for cancellation of any bond the interest charges on which have been excluded from any net earnings certificate filed with the Trustee since the payment, retirement, redemption, cancella-tion or surrender for cancellation of such bond, unless the Trustee shall have received, in connection with the authentication and delivery of such additional bond, a net earnings certificate and unless such net earnings certificate shall show the net earnings of the Company to be as required by Section 8.05.
hny and all coupon bonds delivered to the Trustee pursuant to
114 P
this Section 3.0? shall have annexed thereto all unmatured coupons appertaining thereto.
SEcTIoN 8.08. The Trustee shall from time to time upon the writ-ten request of the Company authenticate and deliver bonds upon the deposit with the Trustee by the Company of cash equal to the aggregate principal amount of the bonds so requested to be authenticated and delivered, but only after the Trustee shall have received:
(1) a certified resolution such as is described in subdivision (1) of Section 8.06; (2) a certificate of the Company stating that the Company is not to the best of the knowledge and belief of the signers in default under any of the provisions of this Indenture; (3) a net earnings certificate showing the net earnings of the Company to be as required by Section 3.05; (4) an opinion of counsel to the effect (a) that the instru-ments which have been or are therewith delivered to the Trustee conform to the requirements of this Indenture and constitute sufFicient authority under this Indenture for the Trustee to authenticate and deliver the bonds applied for, and that upon the deposit of an amount of cash equal to the aggregate prin-cipal amount of the bonds applied for such bonds may be law-fully authenticated and delivered under this Article 8; and (b) that the issue of the bonds, the authentication and delivery of which are requested in such resolution, has been, duly authorized by the Company and by any and all governmental authorities the consent of which is requisite to the legal issue of such bonds, specifying any duly certified documents by which such consent is or may be evidenced, or that no consent of any governmental authorities is requisite, and specifying the certificate or other evidence which will be sufiicient to show compliance with the requirements, if any, of any mortgage recording tax law or other tax law applicable to the issue of the bonds applied for, or stating that there are no such legal requirements; (5) the duly certified documents, if any, specified in the opinion of counsel provided for in subdivision (4) of this Sec-tion 8.09; and
115 (6) a certificate of the Company and an opinion of counsel as to compliance with conditions precedent.
SEcxroN 8.09. All cash deposited with the Trustee under the pro-visions of Section 3.08 (in this Section 3.09 referred to as deposited cash) shall be held by the Trustee as a part of the mortgaged property, but whenever (subject to the provisions of Section 4.18) the Company shall become entitled to the authentication and delivery of bonds under any of the provisions of this Indenture (other than those contained in Section 3.08), the Trustee, upon the application of the Company evi-denced by a certified resolution, and upon compliarice by the Company with all the provisions of this Indenture (except as hereinafter in this Section 8.09 provided, and with such omissions'and variations as may be appropriate by reason of the fact that the withdrawal of de-posited cash rather than the authentication and delivery of bonds is being applied for) with which it would have to comply to obtain such authentication and delivery, shall pay over to the Company or upon its order, in lieu of each bond or fraction thereof to the authentication and delivery of which the Company shall then be so entitled, a sum in cash equal to the principal amount of each such bond or fraction thereof.; provided, however, that for the purpose of withdrawing cash pursuant to the provisions of this Section 3.09, it shall in no case be necessary for the Company to deliver to the Trustee the resolution and certificate such as are described in subdivisions (1) and (6) of Section 3.06, or sued parts of the opinions described in subdivision (7) of Section 8,06 and in subdivision (3) of Section 3.0? and in subdivi-sion (d) of Section 8.11 as relate to the authorization of the issuance of bonds by governmental authorities and by the Company and as relate to tax laws applicable to the issue of bonds, or to comply with any earnings requirements. Any withdrawal of cash under this Section 8.09 shall be in lieu of the right of the Company to the authentication and delivery of the bonds on the basis of which such cash is withdrawn, Si".cnoN 3;10. Any sums deposited with the Trustee under the provisions of Section 3.08 in respect of which no application under
116 the provisions of Section 3.09 shall h'ave been made within three (3) years from the date of the deposit thereof and in respect of which notice in writing of intention to make such application upon the basis of property additions being constructed by or on behalf of the Company and then in progress and uncompleted shall not have been given to the Trustee by the Company within such three-year, period, or in respect of which the Company shall at any time notify the Trustee that no application is to be made under Section 3,09, shall be used for or applied, .to the purchase or (at the election of the Company) to the redemption of bonds in the manner and subject to the conditions provided in subdivisions (3) and/or (4) of Section 8.11. Bonds so purchased or redeemed shall not thereafter be made the basis for the issue of bonds, or the withdrawal of cash or the taking of a credit under any of the provisions of this Indenture.
SEcnoN 3.11. At any time after the amount of any outstanding prior lien bonds shall have been deducted in connection with any appli-cation for authentication and delivery of bonds on the basis of prop-erty additions or for the release of property, or for the withdrawal of cash, or deducted in the computation of net property additions taken as a credit under subdivision 4 of Section 4.10, or have been the cause of a waiver of the authentication and delivery of bonds pursuant to the provisions of subdivision (A) of Section 4.16, the Company may (sub-ject to the provisions of Section 4.18), execute and deliver to the Trus-tee, and the Trustee shall thereupon authenticate and deliver to or upon the written order of the Company, bonds for an aggregate principal amount equal to the aggregate principal amount of such prior lien bonds, deducted or causing a waiver as aforesaid, which, after such deduction or causing a waiver, shall have been deposited with the Trus-tee or paid or redeemed or ascertained by a final judicial determination to be invalid, or for the payment, retirement or redemption of which moneys in the necessary amount shall be deposited with the trustee or other holder of the prior lien securing the same concurrently with the action requested (with irrevocable direction and authorization, satis-factory to the Trustee, to the trustee or other holder of the prior lien
117 so to apply the same, and, as regards prior lien bonds to be redeemed, either with proof that notice of redemption has been published or other-wise given as required by the mortgage or other instrument securing the same, 'or that irrevocable authorization to give such notice shall have been given to the trustee or other holder of such prior lien), but only upon receipt by the Trustee of:
(a) a certified resolution such as is described in subdivi-sion (1) of Section 3.06; (b) either .
(1) prior lien bonds, not theretofore funded, then or tlieretofore delivered (either uncancelled and pledged under this Indenture pursuant to the provisions of Section 4.21, to he held and dealt with hy the Trustee in tlie manner and sub-
.ject to the provisions of Article 7, or cancelled at maturity or under the redeinption or other provisions of the mortgage or other lien securing the same), or (2) a certificate of the Company, accompanied by 'a con-curring opinion of counsel, to the effect that specified prior lien bonds have been paid or ascertained by final judicial deterinination to be in whole or in part invalid, or constitute redeemed prior lien bonds, and specifying the amount of pay-ment, or the extent of invalidity, or the amount of bonds re-deemed, as the cise may be or stating that moneys in the necessary amount for the payment, retirement or redemption of specified prior lien bonds have been or w'ill be, concurrently with the action requested, deposited with the tru'stee or other holder of the prior lien securing the same (with irrevocable direction and authorization, satisfactory to the Trustee, to the trustee or otlier holder of the prior lien so to apply the saine, and, as regards bonds to be redeemed, with proof that notice of redeinption lias been published or otherwise given as re-quired hy the niortgage or other instrument securing the same, or tliat irrcvocalile autliorization to give such notice shall have been given to thc trustee or other holder of such prior lien);
(c) a certificate of the Company stating in substance:
(1) that the prior lien bonds, made the basis for the application, have theretofore been deducted in connection with
118 applications (specifying the dates thereof) for authentication and delivery of bonds on the basis of property additions, or for the withdrawal of cash, or for the release of property, or have been deducted in the computation of net property addi-tions taken as a credit under subdivision 4 of Section 4.10 or have been the cause of a waiver under subdivision (A) of Section 4.16; (2) that no part of the prior lien bonds, made the basis for the application, has theretofore been funded; (3) that the Company is not and, upon the granting of the application then being made,'ill not be in default in the performance of any of the terms or covenants of Sections 4.18 or 4.21; and (4) that the Company is not, to the knowledge of the signers, in default in the performance of any of the other terms or covenants of this Indenture; (d) an opinion of counsel to the effect that such uncan-celled prior lien bonds, if any, which have been deposited with the Trustee pursuant to this Section 3,11 have been legally and validly pledged under this Indenture, that the instruments which have been or are therewith delivered to the Trustee conform to the requirements of this Indenture and constitute suflicient
. authority under this Indenture for the Trustee to authenticate and deliver the bonds applied for, that the issue of the bonds, the authentication and delivery of which are requested in such resolution, has been duly authorized by the Company and by any and all governmental authorities the consent of which is requisite to the legal issue of such bonds, specifying any duly certifie documents by'hich such consent is or may be evidenced, or that no consent of any governmental authorities is requisite, and specifying the certificat or other evidence which will be suflicient to show compliance with the requirements, if any, of any niortgage recording tax law or other tax law applicable to the issue of the bonds applied for, or stating that there are no such legal requirements; (e) a net earnings certificate showing the net earnings of the Company to be as required by Section 3.05, but only if (1) the Trustee is requested to authenticate and deliver additional bonds bearing interest at a higher rate per annum
8 119 than the prior lien bonds on the basis of which such additional bonds are to be authenticated and delivered, or (2) additional bonds shall'have been authenticated and delivered and a net earnings certificate shall have been filed with the Trustee as.a basis therefor, pursuant to any provision of this Article 3, between the date of the deposit, payment, or ascertainment of invalidity, redemption or the making of provision for the payment, retirement or redemption of the prior lien bonds on the basis whereof additional bonds are then'applied for under this "Section 3.11 and the date such additional bonds are'so ap'pliers foi';
Ij provided that no such net earnings certificate need be filed when the Trustee is. requested to authenticate and deliver additional bonds. pursuant to the provisions of this Section 3.11 on the basis of prior lien bonds which by their terms mature within two years from'the date of such request; (f) the duly certified documents, if any, specified in the opinion of counsel provided for in subdivision (d) of this Section 3.11; and (g) a certificate of the Company and an opinion of counsel as,to compliance with conditions precedent.
Redeemed prior lien bonds shall be deemed to have been paid and cancelled within the meaning of this Section 3.11.
Whenever the mortgage or other instrument securing any prior lien bonds'hall have been discharged of record, a'dditional bonds for an aggregate principal amount equal to the total principal amount of prior lien bonds secured by such prior lien theretofore deducted in connection with applications for the authentication and delivery of bonds,"or for the withdrawal of cash, or for the release of property, or taken as a credit under any of the provisions of this Indenture, less the sum of (1) the total principal amount of such prior lien bonds theretofore funded, and'(2) the total principal amount of such prior lien bonds which the Company has agreed will not be funded, as pro-vided in Section 4.21, shall thereafter be authenticated by the Trustee and. delivered to or upon the'ritten order of the Company, but only upon receipt by the Trustee of:
120 (aa) certifIed resolution, certifIcates of the Company, opinions of counsel, and documents, all in form as prescribed in subdivisions (a), (c), (d), (e), (f) and (g) of this Section 3 11 (bb) a certificate of the Company stating:
(1) the total principal amount of prior lien bonds se-cured by such prior lien theretofore deducted in connection with applications (specifying the dates thereof) for the au-thentication and delivery of bonds, or for the withdrawal of cash,- or for the release of property, or taken as a credit under any of the provisions of this Indenture; and (2) the, total principal amounts of prior lien bonds se-cured by such prior lien (i) theretofore funded and (ii) which the Company has agreed will not be funded; and (cc) an opinion of counsel to the effect that such prior lien has been discharged of record.
ARTICLE 4 PARTIGULAR CovENANTs oF THE CohIPANY.
The Company hereby cov'enants as follows:
SEGTIoN 4.01. That (a) it hereby does and will forever warrant and defend the title to the mortgaged property described in the Grant-ing Clauses hereof against the claims and demands of all persons what-soever; that (b) it is lawfully seized and possessed of all the real property described in the Granting Clauses hereof; that (c) it will maintain and preserve the lien of this Indenture on the mortgaged property so long as any of the bonds issued hereunder are outstanding; that (d) it has good right and lawful authority to mortgage the mort-gaged property, as provided in and by this Indenture; and that (e) the mortgaged property is free and clear of all liens, charges or encum-brances thereon or affecting the title thereto prior to the lien of this Indenture; excepting (as to each of the foregoing covenants (a), (b),
(c), (d) and (e) ) permitted encumbrances and the property.'specifically excepted from the lien hereof; and provided that nothing in this In-
121 denture contained shall prevent the Company from hereafter acquiring any. property subject to a prior lien, but only to the extent permitted by Section 4.16.
SEcTIoN 4,02. That it will duly. and punctually pay the principal if of and interest on, and premium, any, upon all the bonds at any time outstanding hereunder, according to the terms thereof. The interest on all coupon bonds shall, until maturity of such bonds, be payable only upon presentation and surrender, of. the several coupons for such in-terest as they respectively mature, and, when paid, such coupons shall forthwith be cancelled. The interest on fully registered bonds with-out coupons shall be paid to or upon the order of the registered owners thereof. The principal of each bond shall be payable only upon presentation and surrender of the b'ond except that upon partial pay-ment of a registered bond the amount thereof may be noted upon the bond and the bond returned to'the registered owner. The Com-pany will not directly or indirectly extend or assent to the extension of the time for the payment of any coupon or claim for interest upon any of the bonds secured hereby and will not directly or indirectly become a party to any such extension or approve any arrangement therefor by purchasing or funding, said coupons or claims or in any other manner. Neither any such'coupon or claim so extended, nor any coupon or claim for interest b'elonging to any bond outstanding hereunder which in any way at or after maturity'hall have been trans-ferred or pledged, separate or apart from the bond to which it relates, shall be entitled in case of a default hereunder, to any bene6t of or from this Indenture, except. after the prior. payment in full of the principal of the bonds outstanding hereunder,.and of all coupons and claims for interest not so transferred, pledged, hept alive or extended.
SECTION 4.03. That, if.it shall appoint a paying agent other than the Trustee, it willcause such paying agent to execute and'deliver to the Trustee an instrument in which it shall agree with the Trustee, sub-ject to the provisions of the last paragraph of this Section 4.03, (1) that such paying agent shall hold in trust for the bene6t of the bondholders or the Trustee all sums held by such paying agent for the payment of
122 the principal of or interest (and premium, if any) on the bonds out-standing under this Indenture, whether received from the Company or any other obligor upon the bonds; and (2) that such paying agent shall give the Trustee notice of any default by the Company or any other obligor upon the bonds in the making of any deposit with it for the payment of the principal of or interest (and premium, if any) on the bonds, and of any default in the making of any such payment.
That, if and to the extent that it acts as its own paying agent, it will, on or before each due date of each instalment of principal of or interest'on the bonds, set apart and segregate and hold in trust for the benefit of the holders of such bonds or of the Trustee a sum sufBcient to pay such principal (and premium, if any) or interest so becoining due on the bonds and. which is to be paid by it as its own paying agent and will notify the Trustee of such action or of any failure to take such action.
Anything in this Section 4.03 to the contrary notwithstanding, the Company may at any time, for the purpose of obtaining a release or satisfaction of this Indenture or for any other reason, pay or cause to be paid to the Trustee all sums held in trust as required by this Section 4.03, such sums to be held by the Trustee upon the trusts herein contained.
Anything in this Indenture to the contrary notwithstanding, the agreement to hold sums in trust as provided in this Section 4.03 is subject to the provisions'of Sections 16.02 and 16.03.
Sacer'.04. That it will keep a financial ofBce or agency in the Borough of Manhattan, The City of New York, where notices, presenta-tions and demands to or upon the Company in respect of the bonds or their coupons or this Indenture,may be given or made, and will keep at said ofilce or agency books for the registration and transfer of bonds issued hereunder, which books, at all reasonable times, shall be open for inspection by the Trustee, and will also keep an oSce or agency in the Borough of Manhattan, The City of New York, for the payment of the principal of and interest on the bonds issued hereunder, for the payment of interest on coupon bonds of the 1977 Series upon presentation of the respective coupons therefor, and that it will keep a financial ofBc~ or
agency where notices, presentations and demands to or upon the Com-pany in respect of the bonds or their coupons or this Indenture may be given or made at such other place or places, if any, as shall be specdied in any series of bonds outstanding hereunder as a place or places at which the principal of or the interest on such bonds is payable, and will likewise keep books for the registration and transfer of bonds issued hereunder at such other place or places, if any, as shall be speci6ed in any series of bonds outstanding hereunder as a place or places at which said bonds are registerable, which books, at all reasonable times, shall be open for inspection by the Trustee. The Company willfrom time to
'ime give the Trustee written notice of the location of each such ofBce or agency, and in case the Company shall fail to maintain any such once or agency'r to give the Trustee written notice of the location thereof, any such notice, presentation or demand. in respect of the bonds or coupons or this Indenture may be given or made, unless other provision is expressly made herein, to or upon the Trustee at its principal once in the Borough of Manhattan, The City of New York, and the Company hereby authorizes such presentation and demand to be made to and such notice to be served on the Trustee in'such event, and the principal of and interest on the bonds shall in such event be payable at said once of the Trustee.
Subject to the provisions of Section 16.02, any moneys which at any time shall be deposited by the Company or on its behalf with the .
Trustee or any other depositary for the purpose of paying any of the bonds which shall have become due and payable, whether at maturity thereof or upon call for redemption or otherwise, or for the purpose of paying any coupons or claims for interest appertaining to any of the bonds, shall be and are hereby assigned, transferred and set over to the Trustee or such depositary, to be held in a special account and in trust for the respective holders of the bonds or coupons or claims for interest for the purpose of paying which said moneys shall have been deposited.
Interest, if any, accruing on such moneys during the period the same shall remain on deposit shall belong to the Company and. shall, unless a default as de6ned in Section 9.01 shall have occurred and be con-tinuing, be paid to it from time to time upon written request of its Treasurer or one of its assistant Treasurers.
SEcnoN 4.05. That it will pay or cause to be paid all taxes and assessments lawfully levied or assessed upon the mortgaged property, or upon any part thereof or upon any income therefrom, or upon the interest of the Trustee in the mortgaged property, or upon the Com-pany, before the same shall become delinquent, and will duly observe and conform to all valid requirements of any governmental authority relative to any of the mortgaged property, and all covenants, terms and conditions upon or under which any of the mortgaged property is held; that it will not sufFer any lien to be hereafter created upon any part of the mortgaged, property now owned or hereafter acquired, or the income therefrom, prior t'o the lien of this Indenture, except permitted encum-brances and prepaid liens, and except (subject to the provisions of Section 4.16) prior liens; and within three (3) months after the accruing of any lawful claims or demands for labor, materials, supplies or other objects which if unpaid might by law be 'given precedence over or parity with the lien of this Indenture as a lien or charge upon any of the mort-gaged property or the income thereof, it will pay or cause to be discharged or make adequate provision to satisfy or discharge the same and will not sufFer any other matter or thing whereby the lien hereby create'd might be impaired; provided, hotuever, that nothing in this Section 4.05 contained shall require the Company to observe or conform to any requirement of governmental authority or to pay, or cause to be paid or discharged, or make provision for, any such tax, assessment, claim, demand, prior lien or charge, so long as the validity thereof shall be contested in good faith and by appropriate legal proceedings, unless thereby any of the mortgaged property will be lost or forfeited; and provided further, that nothing in this Indenture contained, shall pre-vent the Company from hereafter acquiring any property subject to, or from placing thereon at the time of acquisition, any mortgage, lien or other encumbrance thereon permitted by Section 4.16 and holding the same subject to such mortgage, lien or other encumbrance, or, sub-ject to the provisions of Section 4.16, from renewing or replacing any such mortgage, lien or encumbrance or from subjecting to any such prior lien any property acquired as betterments, extensions, improve-ments, repairs, renewals, replacements, substitutions or alterations to, upon, for and of property subject to such prior lien, but only to the
125 extent that the after-acquired property or other provisions of such prior lien attach thereto.
The Company will duly and punctually perform all the conditions and obligations on it imposed by the terms of any lien that may here-after be a prior lien on any of the mortgaged property to such extent as shall be necessary to keep the security a8orded by this Indenture substantially unimpaired, and will not permit any default under any prior lien to occur and continue for the period of grace, if any, specified therein, if thereby the security afforded by this Indenture be materially impaired or endangered.
SEGTI0N 4,06. That it will keep or cause to be kept all the insur-able mortgaged property insured against fire and other risks to the extent usually insured against by'ompanies owning and operating similar property, by, reputable insurance companies or, at the Com-pany's election, with respect to all or any part of the mortgaged prop-erty, by means of an adequate insurance fund set aside and maintained by it out of its own earnings or, in conjunction with other companies through an insurance fund, trust or other agreement (the adequacy of such insurance fund, trust or other agreement to be evidenced by a certificate, to be filed with the Trustee, of an actuary or other qualified person selected by the Company and satisfacto'ry'o the Trustee), the loss, if any, except to the person or property of others, and except as to merchandise, materials and supplies, and, except any loss less than $ 25,000, to be made payable to the Trustee hereunder as in-terest may appear and to be paid to the Trustee, to be held and applied as hereinafter provided (unless required by the terms of any prior lien to be paid to the trustee or other holder thereof). Xs soon as practicable after the execution of this Indenture, but not later than
.December 31, 1947, and thereafter once in each year, and at any other time upon the written request of the Trustee, the Company will furnish to the Trustee a certificate of the Company stating in substance that the Company has complied with all the terms and conditions of this Section 4.06 and with the terms and conditions of any and all insurance policies, containing a detailed statement of the insurance then in efFect upon the property of the Company on a date therein'specifled (which date shall be within thirty (30) days of the filing of such certificate)
126 and, except in respect of property insured by means of an insurance fund, trust or other agreement as permitted by this Section 4.06, show-ing the numbers of the policies of insurance in effect and the names of the issuing companies, the amounts and expiration dates of such policies, and the property covered by such policies; and, in case any of the property shall at the time be insured by means of an insurance fund, trust or other agreement, as permitted by this Section 4.06, the Company shall, at the time of furnishing each such< certificate of the Company, also furnish to the Trustee a certificate, as described above, with respect to the'adequacy of such insurance fund, .trust or other agreement.
All moneys received by the Trustee as proceeds of any insurance shall be held by the Trustee and shall be paid by it to -the Company, at any time within two (2),years after the receipt thereof, to reim-burse the'ompany for an equal amount spent in replacing or re-or in renewal of the property destroyed or damaged, upon 'uilding receipt by the Trustee of a certified resolution requesting such re-imbursement and a certificate of the Company setting out in reasonable detail the amount so expended, the nature of such replacing, renewal or rebuilding, and the fair value to the Company of such replacing, re-newal or rebuilding, and an opinion of counsel to the effect that such new or rebuilt property is subject to the lien of this Indenture free from all other liens, charges or encumbrances prior to the lien of this Indenture, except prior liens to which the lost or damaged property shall have been subject, and permitted encumbrances.'ny such moneys may also be withdrawn, used, or applied in the manner, to the extent, and for the purposes and subject to the condi-tions provided in Section 8.11, provided that any such moneys not applied to the work 'of, replacing, rebuilding or renewal as aforesaid within two (2) years, after their receipt by the Trustee, or in respect of which notice in writing'of intention to apply the same to the work of replacing, rebuilding or renewal then in progress and uncompleted shall not have been given to the Trustee by the Company within such two (2) years, or which the Company shall at any time notify the Trustee are not to be so applied, shall thereafter be withdrawn, used or applied only in the manner, to the extent and for the purposes and
127 subject to the conditions provided in Section 8.11, and such moneys shall be deemed to have been deposited as trust moneys within the meaning of said Section 8.11. at the expiration of such two-year period, or at such earlier time as the Company may notify'he Trustee that such moneys are not to be applied to the work of replacing, rebuilding or renewal, as the case may be.
SEonoz 4.07. That, subject to the provisions of Article 12 hereof "and of this Section 4.07, it will at all times maintain its corporate existence and right to carry on business and that its business will be continuously carried on and conducted in an efBcient manner; that it will in good faith use its best efforts to preserve, maintain and renew all the rights, privileges and franchises pertaining to the electric, gas and water business to it granted and upon it conferred and it will at all times maintain, preserve and keep, or cause to be maintained, pre-served and kept, the mortgaged property with the appurtenances thereto and every part and parcel thereof, in thorough repair, working order and condition, and from time to time make all needful and proper repairs and renewals, so that the properties mortgaged or intended to be mortgaged hereunder shall at all times be maintained as an operat-ing system or systems in good repair, working order and condition, and so that at.all times the value of the security for the bonds issued hereunder and the e5ciency of the mortgaged plants and properties shall be fully preserved and maintained.
Nothing in this Indenture contained shall be held to prevent the Company from discontinuing the operation of or abandoning any of its plants, works or properties, or any business (other than its electric, gas and water business), if, in the judgment of the Board of Directors of the Company, it is no longer advisable to operate the same, or if the Company intends to sell or dispose of the same and within a reason-able time shall endeavor to e6'ectuate such sale or disposition; nor shall anything in this Section 4.07 contained be considered to prevent the Company from taking such action with respect to'its plants, works and properties as is proper under the circumstances, including the cessation or omission to exercise rights, permits, licenses,.privileges
128 or franchises which, in the judgment of the Board of Directors of the Company, can no longer be profitably exercised or availed of.
The Company further covenants that it will promptly classify as retired, for the purpose of any computation of net property additions hereunder, all mortgaged, property of the character of property addi-tions, except land owned in fee, that (a) has permanently ceased to be used or useful in the business of producing, generating, manufacturing, transporting, transmitting, distributing or supplying electricity, gas or water, or (b) has been abandoned.
SECTION 4.08. That, whenever necessary to avoid or. fill a vacancy in the oSce of the Trustee, the Company will appoint a Trustee in the manner provided in Section 13.18, so that tliere shall at all times he a Trustee hereunder. which shall at all times be a bank or trust. company having its principal ofKice and place of business in the Borough of, Manhattan, The City of New York, if there be such a bank or trust company willing and able to accept the trust upon reasonable or cus-tomary terms, and which shall at all times be a corporation organized and doing business under the laws of the United States or of any State or Territory or of the District of Columbia, with a combined capital and surplus of at least $ 5,000,000, and authorized under such laws to exercise corporate trust powers and subject to supervision or examina-tion by Federal, State, Territorial or District of Columbia authority.
SEcnoii 4.09. That the Company will at all times keep or cause to be kept proper books of record and account in which full, true and correct entries will'be made of all dealings or transactions of or in relation to the plants, properties, business and afFairs of the Company.
Sl".oTION 4.10. Tliat, so long as any of the bonds of the 1977 Series shall rcniain outstanding, tlie Coinpany will, for each calendar year, beginning January 1, 1948 (hereinafter sometimes called the "account-ing period"), pay to the Trustee on or before the first day of May next succeeding the close of each accounting period, as a Maintenance and Replacement Fund, an amount in cash (hereinafter sometimes called the "Standard of Expenditure" ) not less than the sum of fifteen per
centum (15%) of the gross electric operating revenues and gross gas operating revenues and eight per centum (8%) of the gross water operating revenues (all as hereinafter defined) derived from the mort-gaged property during the accounting period; provided, however, that the amount of such payment shall be reduced by the following credits, to the extent that the Company desires to take the same, stated in the certificate of the Company hereinafter in this Section 4.10 provided for:
(1) all amounts expended'during"the accounting period for repairs and maintenance of the mortgaged property; (2) the cost of property additions (whether or not funded) acquired, made or constructed during the accounting period (less one hundred sixty-six and two-thirds per centum (166fs%) of the principal amount of any outstanding prior lien bonds which are secured by a lien on such property additions and not there-tofore deducted under this subdivision (2)) to renew or re-place, or in renewal, replacement or substitution for, or in lieu of any of the mortgaged property retired or abandoned since February 28, 1947 and up to the close of the accounting period, and not renewed or replaced prior to "the beginning of the accounting period, and for this purpose any property additions made, acquired or constructed during the accounting period shall be deemed to be in renewal, replacement or substitution for or in lieu of such property so retired or abandoned and not so renewed or replaced, to an amount equivalent to the property retirements resulting from the retirement or abandonment of such property (and for this purpose the certificate of the Com-pany hereinafter required shall set forth the amount of such property retirements and the. cost of such property additions-deemed to be in, renewal, replacement, or substitution or in lieu of such. property retirements; and that such property additions have not been made the basis for the withdrawal, pursuant to the provisions of subdivision (1) (a) of Section 8.11, of any moneys constituting any part of the Maintenance and Replace-ment Fond). Property additions shall not become funded by reason of their utilization as a credit under this subdivision (2);
(3) the principal amount of all bonds hereby'. secured, and/or one hundred sixty-six and two-thirds per centum
180 (166/s%) of the principal amount of all prior lien bonds, retired or redeemed and cancelled and for which no bonds have been or will be issued, or other credit taken or cash withdrawn under any of the provisions of this Indenture; (4) any net property additions which, under the provisions of Article 3 hereof, might otherwise be made the basis of the issue of bonds hereunder and which the Company elects to make the basis of a credit under this Section 4.10. In case credit under this Section 4.10 is taken in whole or in part upon the basis of net property additions, the Company shall comply with all provisio'ns of this Indenture which would be applicable if =
such net property additions were made the basis of an applica-tion for the authentication of bonds (except that credit on the basis of net property additions shall be to the extent of one hundred per 'centum (100%) thereof instead of sixty per centum (60%) as provided in Section 3.04 and except that the date of the engineer's or independent engineer's certificate required by subdivision (3) or (4) of Section 8.06 may be dated any date after the close of the accounting period). In any such case the Company shall file with the Trustee appropriate documents evidencing compliance with all such applicable provisions, pro-vided, Iiomeyer, that in no such case shall the Company be re-quired to deliver to the Trustee any resolution or documents such as are described in subdivisions (1), (2), (6) and (9) of Section 8.06 or any opinions with respect to the authorization of the issue of bonds by governmental authorities and by the Com-pany and with respect to tax laws applicable to the issue of.
bonds, or to comply with any earnings requirements.
On or before the first day of M'ay next succeeding any accounting period, the Company shall file with the Trustee a certificate of tlie Company, stating (a) t)ie amount of (i) the gross electric operating revenues, (ii) the gross gas operating revenues and (iii) the gross water operating icvonucs of the mortgaged property during such ac-counting period; (b) the Standard of Expenditure (showing in rea-sonable detail the computation thereof) during such accounting period; (c) to the extent that the Company desires to take the same, the credits provided for under subdivisions (1), (2), (3) and (4) of this Section 4.10; (d) the excess credit, if any, hereinafter in this Section 4.10 referred to, shown by the last preceding certificate of the Company filed hereunder; and (e) the balance, if any, of the
131 amount set forth under (b) remaining after deducting the credits set forth under (c) and (d).
The Coiupany shall at the time of delivery of such certificate of the Company pay to the Trustee as additional security for the bonds issued and to be issued hereunder the amount of the balance, if any, shown under (e) of such certificate. The delivery by the Company to the Trustee of outstanding bonds, either secured hereby or secured by a prior lien, in each case with their appurtenant unmatured coupons if such bonds be coupon bonds, shall be deemed equivalent under this Section 4.10 to the payinent of cash to an amount equal to the aggregate principal amount of bonds so delivered in the, case of bonds outstand-ing hereunder and to an amount equal to one hundred sixty-six and two-thirds per centum (166~/s%) of the aggregate principal amount of outstanding prior lien bonds so delivered.
Any moneys constituting any part of the Maintenance and Re-placement Fund, at the option and upon the request of the Company, expressed by a certified resolution, shall be applied by the Trustee to the purchase or redemption of any bonds issued hereunder of such series as may be designated by the Company, such purchas~ to be in the manner and as provided in Section 8.12 and such redemption to be in the manner and as provided in subdivision (4) of Section 8.11.
Any moneys constituting any part of the Maintenance and Replace-ment Fund may be withdrawn by the Company upon the delivery to the Trustee of bonds outstanding hereunder or outstanding prior lien bonds, with their appurtenant unmatured coupons if such bonds be coupon bonds, in an amount equal to the aggregate principal amount of bonds outstanding hereunder so delivered, and one hundred sixty-six and two-thirds per centum (16%/s%) of the aggregate principal amount of outstanding prior lien bonds so delivered. All bonds issued.
hereunder, purchased or otherwise acquired by or delivered to the Trustee for the ) laintenance and Replacement Fund, shall be cancelled lay the Trustee, and shall thereafter be cremated if in coupon forni, or delivered to the Company if in fully registered form upon the written order of any oAicer of the Company. Any bonds so cancelled shall not thereafter be inade the basis for the issue of bonds or the withdrawal of cash or the taking of a credit under any of the provisions of this Indenture.
132 Any moneys constituting any part of the Maintenance and Re-placement Fund may also be withdrawn from time to'ime by the Com-pany on the conditions, in the manner, and to the extent provided by subdivision (1) of Section 8.11 for the withdrawal of trust moneys; provided, however, that if so withdrawn pursuant to the provisions of subdivision (1) (a) of Section 8.11, the property additions used as the basis for the withdrawal may not thereafter be used as the basis of a credit under subdivision (2) of this Section 4,10 and that property additions made the basis of a credit under subdivision (2) of this Section 4.10 may not thereafter be made the basis for the withdrawal of such moneys pursuant to the provisions of subdivision (1)(a) of Section 8.11.
Any moneys constituting any part of the Maintenance and Re-placement Fund may be withdrawn from time to time on the written request of the Company, in an amount equal to the excess credit, if any, referred to below, and the excess credit shall be reduced by the amount of the moneys so withdrawn.
If the total amount of credits specified in any certificate of the Company filed for such. accounting period shall exceed the Standard of Expenditure during such accounting period, the excess, if any, shall, to the extent that it is not reduced by the withdrawal of moneys as aforesaid, be available as a credit in any subsequent certificate of the Company under this Section 4.10, or, at the option of the Company, if any net property additions have previously been used as a credit to, or if any net property additions have previously been used for the with-drawal of cash from, the Maintenance and Replacement Fund, such net property additions, to the amount of such excess only, may there-after be used, anything in this Indenture to the contrary notwith-standing, for any purpose for which the same might have been used hereunder if they had riot been so previously used, whereupon the amount of such excess available for any such use shall be decreased accordingly.
The terms "gross electric operating revenues", "gross gas operating revenues" an'd "gross water operating revenues" for the purposes of this Section 4.10 and of Section 4.11 are hereby defined as the respective amounts received or accrued from the sale of (1)
electric service, (2) gas service and (3) water service after deducting an amount equal to the cost of electric current and/or gas and/or water or other products purchased for exchange or resale and rentals paid or incurred for electric and/or gas and/or water, generating, transmitting and/or distributing properties leased and adding thereto the amounts received or accrued as rentals or fixed charges for the use by others (or the use by the Company for the account of others) of generating, trans-mission and distribution facilities owned by the Company (with all inter-departmental items eliminated); provided, however, that there shall be excluded from such operating revenues any revenue derived from the sale of goods, wares and merchandise, equipment, materials or supplies'cquired by the Company for the purpose of sale or resale or leasing to its customers in the ordinary course and conduct of its busi-ness; and furtlier pro>>ided, that any such operating revenues which are in controversy as a result of any litigation, or which have been im-pounded in such litigation, shall be included in the gross operating revenues for the purpose of this computation only after, and in the year in which, any such operating revenues in controversy or impounded are recovered or, at the option of the Company, after, and in the year in which, it shall have been finally determined that such operating reve-nues belong to the Company, SEGTIQN 4.11. That, so long as any of the bonds of the 1977 Series shall be outstanding, the Company will not, on or after March 1, 1947, declare or pay any dividends on its common stock (other than divi-dends payable in shares of its common stock), or make any other distribution on any shares of its common stock, or purchase any shares of its conunon stock (other than with the proceeds of. additional com-mon stock financing), if, as a result thereof, the cumulative aggregate aiiiount of such dividends, distributions and purchases exceeds the sum of $ 131,225.75 (being the amount of the dividend on its common stock declared on February 25, 1947 and paid on March 3, 1947) plus the amount of the earned surplus of the Company (computed before de-ducting any amount in respect of such dividends, distributions and purchases) accumulated subsequent to February 28, 1947, determined in accordance with accepted accounting practice, and the Company warrants that it has not, since February 28, 1947, declared or paid
134 any dividend nor made any distribution or purchase which would produce any such result; provided, however, that, for the purposes of this*Section 4.11, in determining at any time or from time to time the amount of earned surplus arising subsequent to February 28, 1947:
(a) no deduction or addition need be made for any or all of the following direct charges or credits to earned surplus:
(1) surplus adjustments applicable to a period or p'eriods prior to March 1, 1947; (2) charges to earned surplus for the write-oft at any time of any of the unamortized discount, premium and ex-pense existing at February 28, 1947, on funded debt, or of any unamortized premiums, discount and expense, including double interest, paid in connection with the redemption of such funded debt; (3) charges to earned surplus covering loss on sale or abandonment of property or investments owned on February 28, 1947, whether or not subject to the lien of this Indenture; (4) charges to earned surplus with respect to transfers from surplus to capital; and (b) there shall be'included in operating expenses an aggre-gate amount for maintenance and repairs to and as provision for reserves for renewals and replacements or depreciation of the Company's electric, gas and water properties equivalent to the Standard of Expenditure (as said term is defined in Sec.
tion 4.10) for each of the years and any fraction of an uncom.
pleted year, from March 1, 1947 to the date of determination ol
'the amount of such earned s'urplus, Anything herein to the cdntrary notwithstanding, in the event that pursuant to the provisions of Article 12 a successor corporation shall have succeeded to the rights and liabilities of the Company hereunder, the date of such succession shall, for the purpose of the performance of this covenant thereafter, be substituted in lieu and in place of the dates February 28, 1947 and March 1, 1947 wherever said dates or either of them are used in this Section 4.11, and such successor cor-poration shall be deemed to have assumed said covenant modified as to dates as aforesaid.
The provisions of this Section 4.11 shall not apply to the acquisi-tion of shares of common stock of the Company eBected through the
135 exchange of other shares of common stock of the Company or other-wise acquired without expenditure of assets of the Company.
SEGTION 4.12. That it will execute and deliver such further instru-ments and do or cause to be done such further acts as may be neces-sary or proper to carry out more effectually the purposes of this Indenture, and to make subject to the lien hereof any property here-after acquired and intended to be subject to the lien hereof, and to transfer to any new trustee the estate, powers, instruments or funds held in trust hereunder.
SEcTI0N 4.18. That it will cause this Indenture, and each supple-mental indenture or instrument purporting to create a lien upon mort-gaged property to secure the bonds, to be promptly recorded and filed and re-recorded and re-filed in such manner and, in such places as may be required by law in order fully to make effective and maintain the lien intended to be created thereby and to preserve and protect the security of the bondholders and all rights of the Trustee, and that it will furnish to the Trustee:
(a) Promptly after the execution and delivei;y, of this Indenture, and promptly after the execution and delivery hereafter of each such indenture supplemental hereto, an opinion of counsel either stating that in the opinion of such counsel this Indenture, or such supplemental indenture, as the case may be, has been properly recorded and filed so as to make effective the lien intended to be created thereby, and reciting the details of such action, or stating that in the opinion of sucli counsel no such action is necessary to make such lien effective.. It shall be a compliance with this subsection (a) if (1) the opinion of counsel herein required to be delivered to the Trustee shall state that this Indenture or such supplemental indenture, as the case may be, has been received for record or filing in each jurisdiction in which it is required'to be recorded or filed and tliat, in the opinion of counsel (if such is the case), such receipt for record or filing makes effective the lien intended to be created by this Indenture or such supplemental indenture, as the case may be, and (2) such opinion is delivered to the Trustee within such time, following the date of the execution an'd delivery of 'this Indenture or such supplemental indenture, as the case may be, as
186 shall be practicable having due'regard to the number and distance of the jurisdictions in which this Indenture or such supplemental inden-ture, as the case may be, is required to be recorded or filed; and (b) On or before June 1, 1948, and on or before each June 1 thereafter, an opinion of counsel, either stating that in the'opinion of such counsel such action has been taken with respect to the recording, filing, re-recording, and re-filing of this Indenture and any indentures supplemental hereto as is necessary to maintain the lien of this Inden-ture, and reciting the details of such action, or stating that in the opinion of such counsel no such action is necessary to maintain such lien.
SEcxroN 4.14. That it will not issue, or permit to be issued, any bonds hereunder in any manner other than in accordance with the pro-visions of this Indenture and the agreements in that behalf herein contained, and will not auGer or permit any default to occur under this Indenture or. any indenture supplemental hereto, but will faith-fully observe and perform all the conditions, covenants and require-ments of this Indenture and of any indenture supplemental hereto and of the bonds issued hereunder.
SE0TION 4,15. That if the Company shall fail to perform any of the covenants contained in Sections 4.05, 4.06, 4.07, or 4.18, the Trustee may make advances in order to perform the same in its behalf; and all sums so advanced shall be at once repayable by the Company with interest thereon at the rate of 4% per annum.
4.16. That it will not acquire, by purchase or otherwise,
'EGTI0N any property (other than property of the character excepted from the lien of this Indenture) subject to a prior lien or prior liens (A) if at the time of the acquisition by the Company of any such property, the principal amount of outstanding prior lien bonds secured by such prior lien or prior liens shall exceed sixty per centum (60%) of the sum of (1) an amount equal to the then fair value of the property subject to such prior lien or prior liens plus (2) an amount equal to one hundred sixty-six and two-thirds per centum (166%%) of the aggregate principal
137 amount of all bonds to the authentication and delivery of which the Company would, at the time of such acquisition, be entitled under the provisions of this Indenture upon the basis of prop-erty additions by virtue of compliance with all applicable pro-visions of tliis Indenture (except as ot) wrwise in this Section 4.16 set forth) relating to such authentication and delivery, provided, however, that if any such indebtedness so secured by prior lien shall exceed sixty per centum (60%) of the then fair value of the property subject to such prior lien or prior liens, then the acqui-sition thereof shall,,to the extent of an aggregate principal amount of bonds equal to such excess of prior lien, operate as a waiver by the Company of the right to-the authentication and delivery of such aggregate principal amount. of bonds, and to such extent no such bonds may thereafter be authenticated and delivered hereunder; and (3) unless the net earnings of the Company, determined in the manner provided in Section 1.06, but including therein the net earnings or net losses of the property so to be acquired, shall, for any period of twelve (12) consecutive calendar months within the fifteen (15) calendar months immediately pre-ceding the 1st day of the month in which such property is to be acquired, have been in the aggregate equal to at least two (2) times the sum of the annual interest requirements of thc Com-Tiany as specified in sub<division (8) of Section 1..06 plus the annual interest requirements on all indebtedness secured by such prior lien or prior liens, after deducting, however, from such latter requirements, the annual interest requirements on all such if any, held by the Company immediately prior to 'ndebtedness, such acquisition.
In case the Company shall propose to acquire any property subject to a prior lien, as permitted by this Section 4.16, it will prior to, or simultaneously with, the acquisition of any such property file with the Trustee:
(1) An engineer's certificate made and dated not more than sixty (60) days prior to the date as of which such property is to be acquired, (a) stating that the Company proposes to acquire certain property subject to a prior lien or prior liens,
138 (b) describing in reasonable detail by classified fixed capital accounts then in use by the Company the property so to be acquired, (c) specifying the nature and extent of all prior liens, and the principal amount of all prior lien bonds secured thereby, existing upon any of the property so to be acquired, alld (d) stating that the fair value to,the Company of such property, as of the proposed date of acquisition thereof, will be equal to or more than an amount stated in such certificate; and in determining such fair value, it shall be proper in the case of any public utility system included in such property to include as an element of the value thereof an amount deemed proper by the signer for any rights and intangible property (except going concern value or good will) simultaneously acquired with such public utility system for which no separate or distinct consideration shall have been paid or apportioned.
(2) A net earnings certificate, with such appropriate modi-fications or additions thereto as may be necessary to show com-pliance with the provisions of subdivision (3) of this Section 4.16.
(3) An opinion of counsel to the effect that the nature and extent of the prior lien or prior liens on the property so to be acquired are correctly stated in said engineer's certificate, and that upon the acquisition thereof by the Company all such property of the character intended to be subjected to the lien hereof will be subject to the lien of this Indenture, free from all liens and encumbrances except the prior lien or prior liens specified in said engineer's certificate and except prepaid liens and 'permitted encumbrances.
(4) A certificate of the Company and an opinion of counsel as to compliance with conditions precedent.
In case, in connection with any such acquisition of property sub-ject to a prior lien, the indebtedness secured by prior lien shall exceed sixty per centum (60%) of the then fair value of the property subject thereto and the Company's right to make such acquisition shall, accord-ingly, be based in part on the waiver as aforesaid of the right to the authentication and delivery of bonds hereunder, the Company shall evidence such waiver by a certified resolution, and shall comply with
139 all applicable provisions of this Indenture relating to such authentica-tion and delivery (except as hereinafter in this Section 4.16 provided, and with such omissions and variations as may be appropriate in the light of the fact that a waiver of the right to the authentication and de-livery of bonds is required), provided, hoivever, that in no such ease shall tlie Company be required to deliver to the Trustee the resolution and certificat such as are described in subdivisions (1) and (6) of Sec-tion 8.06 (but in lieu of the certificate described in said subdivision (6) of said Section 8.06 the Company shall deliver the certificate described in subdivision (2) of this Section 4.16) or such parts of the opinion described in subdivision (7) of Section 3.06 as relate to the authoriza-tion of thc issue of bonds by governmental authorities and by the Company and as relate to tax laws applicable to the issue of bonds, or to comply with any earnings requirements except as set forth in sub-division (2) of this Section 4.16.
Anything herein contained to the contrary notwithstanding, the right of the Company to acquire electric, gas or water equipment from the manufacturers thereof or from others subject to any chattel mort-gage, conditional sales agreement or equipment trust agreement shall not be in any respect limited or restricted by the provisions of this Section 4.16, nnd such provisions shall have no application to nny such acquisition.
Si:.cTioN 4.17. That, if a default as defined in Section 9.01 shall occur nnd be continuing, it will not sell, pledge or-otherwise dispose of any bonds issued hereunder. then held by it or on its behalf.
SEGTIQN 4,18. The term "restricted property", as used in this Section 4.18, shall at any time mean (1) property additions theretofore or then being funded nnd not theretofore released from the lien hereof, which were at the time of funding thereof and continue to be subject to a prior lien, and (2) prior lien bonds theretofore or then being funded, provided thnt the prior lien securing such bonds shall not have been cancelled.
The Company covenants and agrees that it will not apply for or obtain the authentication and delivery of any additional bonds; or the withdrawal of any cash, or the release of any property underr any an
140 provision of this Indenture, if as a result of such authentication and delivery of bonds, or withdrawal of cash, or release of property, as shall be stated in an engineer's certificate or certificate of the Company.
accompanying the application, the aggregate of:
(A) The principal amount of all additional bonds thereto-for authenticated and delivered and then outstanding (provided that all such additional bonds which have theretofore been re-funded by the issuance of bonds under Section 3.07 shall, solely for the purposes of this subdivision (A), be considered to be outstanding), including any bonds theri to be authenticated and delivered, upon the basis of property additions or prior lien bonds, which then constitute restricted property; (B) The principal amount of all prior lien bonds outstand-ing. and (C) The total amount of all cash which has been deposited with the Trustee under any provision of this Indenture (other than cash representing the proceeds of insurance on property additions subject to prior lien) and subsequently withdrawn (including any such cash then to be withdrawn) upon the basis of property additions or prior lien bonds, which then constitute restricted property; would exceed ten per centum (10%) of the sum of the aggregate prin-cipal amount of all bonds then outstanding, including the bonds then to be authenticated and delivered, and the aggregate principal amount of all prior lien bonds then outstanding.
SEoTION 4.19. The Company covenants and agrees that it will pay or cause to be paid when due and payable the principal of, or will acquire and pledge hereunder, all outstanding prior lien bonds not at the time deposited hereunder; that until paid or discharged at maturity or otherwise, it will pay or cause to be paid the interest thereon at the time and at the place or places therein, or in the coupons annexed thereto, set forth; and that it will prevent any default or other thing from happening whereby the right might arise to enforce by fore-closure or otherwise the prior lien securing the same.
SECTION 4.20. The Company covenants that if at any time here-after it shall acquire property subject to a prior lien it will not permit
141 the principal amount of any indebtedness secured by any such prior lien to be increased at any time thereafter, unless the evidences of such increased. indebtedness are forthwith deposited with the Trustee to be held subject to the provisions of Article 7 (except in accordance with any applicable provisions with respect to substituting new instruments evidencing any such indebtedness in place of other such instruments which may have become lost, stolen or destroyed).
SEGTIQN 4.21, A. The Company covenants and agrees that it will forthwith pledge and deposit with the Trustee, uncancelled, all prior lien bonds which may hereafter be acquired uncancelled by the Com-pany, whether or not such prior lien bonds have theretofore become due and payable, unless the Company shall, by the terms of a prior lien, be required to cancel such prior lien bonds or deliver or pledge them to or with the trustee or other holder of any prior lien, All such prior lien bonds deposited with the Trustee shall be received and held by the Trustee, as further security for the bonds issued hereunder, in the manner provided in Article 7; provided, Rourever, that any such prior lien bonds so deposited and pledged with the Trustee may, if not theretofore funded, be made the basis, then or from time to time thereafter, for the authentication and delivery of bonds, the withdrawal of cash, the release of property, or a credit to the extent, in the manner and subject to the conditions in this Indenture provided.
- 3. The Company covenants and agrees that, upon the satisfac-tion of any prior lien, all prior lien bonds secured by other prior liens, which are then held by the trustee or other holder of such satisfied prior lien, shall be delivered to the Trustee to be held subject to the provisions of Article 7, or, if so required by the terms of any other prior lien or liens, to the trustee or other holder of the. mortgage or other lien or liens, securing such prior lien bonds or securing other prior lien bo'nds, to be cancelled or to be held in pledge or for the pur-pose of any sinking fund or analogous fund for the retirement of bonds for which provision may have been made in the instrument evidencing such mortgage or other lien; and that the Company will not obtain or apply for the authentication and delivery of any bonds under the
142 provisions of Section 8.11, or the withdrawal of cash, the release of property, or a credit under any provision of this Indenture, upon the basis of any prior lien bonds deposited with the Trustee pursuant to the provisions of this subdivision B.
C. The Company further covenants and agrees that all prior lien bonds, proceeds of property, considerations for property taken by the exercise of the power of eminent domain or purchased by a iriunic-ipality in the exercise of any right, considerations for property re-leased, proceeds. of insurance, and moneys, in lieu of receiving which, in each case, the Trustee shall have received a certificate that the same have been. deposited with the trustee or other holder of a prior lien in pursuance of any provision of this Indenture, and which. in each case are held'by the trustee or other holder of a prior lien at the tim'e of the satisfaction of such prior lien, shd.ll thereupon be paid or delivered to the Trustee (to be held subject'to the provisions of this Indenture as though originally received by the Trustee) or to the trustee or other holder of a prior lien if required by the terms of such prior lien; and that the Company will not obtain any withdrawal of any such prior lien bonds or any such casli or any such proceeds or considerations
. from any such trustee or holder on tlie basis of any prior lien bonds deposited with the Trustee pursuant to any provisions of this Inden-ture and theretofore funded, except for the liurpose of depositing sucli prior lien bonds, casli, or proceeds or considerations so withdrawn with tlie Trustee hereunder; and that tlie Company will not apply for or obtain the authentication and delivery of any bonds under the pro-visions of Section 8.11 or the withdrawal of cash or the release of property or take a credit under any provisions of this Indenture on the basis of any prior lien bonds used to withdraw any such cash, prior lien bonds, or proceeds or considerations from any such trustee or holder which are not deposited with" the Trustee hereunder.
D, The Company further covenants and agrees that it will not apply for or obtain the release of any cash received or held by a trus-tee or other holder under any prior lien except upon compliance with terms and conditions similar to the terms and conditions of Section
143 8.11, unless such cash shall thereupon be deposited with the Trustee to be held and applied by it as though such cash had originally been deposited with the Trustee.
SEGTIoN 4.22. That, on or before June 1, 1948, and on or before June 1 in each calendar year thereafter, or on or before such other day in each calendar year as the Company and the Trustee may from time to time agree upon, it will deliver to the Trustee a certificate of the Company complying with the provisions of subdivision (i) of Section 1.03 in respect of compliance or non-compliance by the Com-pany with the covenants contained in Sections 4.02, 4.03, 4.05, 4.06, 4.07, 4.11, 4.16, 4,19, 4.20 and 4.21.
SI".GTION 4.23. (a) For the purpose of this Section 4.23, the first day of June, 1948, and the first day of June in each year thereafter to and including June 1, 1976 are each called a "sinking fund payment date."
(b) The Company covenants and agrees that it will on June 1, 1948 create, and so long as any of the bonds of the 19?7 Series are outstanding, maintain a sinking fund, and that it will pay to the Trustee on (or before, as hereinafter provided) each sinking fund payment date, so long as any bonds of the 1977 Series are outstanding, for the account of such sinking fund, cash suAicient in amount to retire, at prices not exceeding the current redemption price applicable on such sinking fund payment date in subdivision (c) of this Section 4.23 specified, $ 68,000 aggregate principal amount of bonds of the 1977 Series. The Company further covenants and ag'rees that in case any additional bonds of the 1977 Series are authenticated and delivered liereunder in addition to the initial issue in the aggregate principal amount of $ 6,800,000 provided for in Section 3.01, it will thereafter on or before eac)i sinking fund payment date, so long as any bonds of the 19?7 Series are outstanding, pay to the Trustee, for the account of such sinking fund, in addition to the cash to be then paid as above provided, such an amount of cash as will be suAicient to retire, at prices not exceeding the current redemption price applicable on such sinking fund payment date in subdivision (c) of this Section 4.23 pro-vided, one per cent of the aggregate principal amount of such addi-
144 tional bonds theretofore authenticated and delivered here'under. The Company may satisfy all or any part of its obligations as aforesaid by the surrender to the Trustee, on any sinking fund payment date, of bonds of the 1977 Series then outstanding ac'companied by all un-matured coupons appertaining thereto; and the Company may utilize for such purpose bonds of the 1977 Series which it may have purchased or otherwise acquired at any time after the authentication and delivery thereof, each bond so surrendered to be received by the Trustee in lieu of cash in an amount equal to the current redemption price of such bond.
All cash paid by the Company'o the Trustee pursuant to the pro-visions of this Section 4.23 shall be applied to the retirement of bonds of the 1977 Series, as provided in subdivision (e) of this Section.4.28.
(c) The current redemption price applicable to lionds to be pur-chased or redeeined under tlie provisions of tliis Section 4.23 shall be the principal amount thereof plus a premium equal'o a percentage of the principal amount thereof determined as set forth in the follow-ing table:
IfonRedeemed Pre>>num IfRedeemed o>> June 1 Premium>>
June'948.......
1.50% .90%
1949....... 1.45% 1964....... .85%%uo 1950....... 1.45% 1965....... .80%
1951....... 1.40% 1966....... 75o/o 1952....... 1.85% 1967....... .70%
1953....... 1.85% 1968......;. .60%
1954....... 1.80% 1969....... .55%
1955....... 1.25% 1970....... .50%
1956....... 1.20% 1971....... 45%%uo
.1957....... 1 15o/o 1972....... .35%
1.10% 1973....... .30%
195i9....... 1.10% 1974.......
1960....... 1.05% 1975;...... .] 5%
1961....... 1.00% 1976....... 0.
1962....... .95%
and together in each case with accrued interest to the date fixed for redemption.
145 (d) Not less than seventy (70) days prior to each sinking fund payinent date, the Company will deliver a statement of thc Company to the Trustee stating the aggregate principal amount and serial numbers of bonds of the 1977 Series the Company intends to surrender on tlie next succeeding sinking fund payment date in satisfaction of its sinking fund obligation pursuant to this Section 4.28 and deducting from the principal amount of borids required to be purchased "or redeemed, the aggregate principal amount of bonds which the Com-pany states will be surrendered on the next succeeding sinking fund payment date, Such statement is in this Section 4,23 referred to as "the statement", and the balance resulting from such deduction in said statement is hereinafter in this Section 4.28 referred to as the amount, or the principal amount, "set forth in the statement".
'e) It shall be the duty of the Trustee to apply the casli paid to it under this Section 4.28 for the account of the sinking fund to the purcliase or redemption of bonds of the 1977 Series, at prices not exceeding the current redemption price applicable on such sinking fund payment date, in an aggregate principal amount equal to the amount set forth in the statement.
Prior to each sinking fund payment date, the Company may give notice to all holders of bonds of the 1977 Series, by publica-tion two (2) times in one week in an authorised new'spaper in the Borough of Manhattan, The City of New York.(the first publica-tion to be not more than sixty-five (65) days and not less than sixty (60) days before such sinking fund payment date), of the intention of the Trustee to apply such cash to be paid it to the pur-chase of a principal amount of bonds of the 1977 Series specified in such notice, and inviting written proposals to be made to the Trustee for the sale of bonds of the 1977 Series in the principal amount set forth in the statement at prices not to exceed such current redemption price. Proof of such publication shall be filed by the Company with the Trustee. Such notice shall state the aggregate principal amount of bonds of the 1977 Series to be purchased at prices not exceeding such current redemption price, and that proposals shall be deemed to be made for all or any part of the bonds overed, whether so expressed
146 or not, and shall state the last date upon which such written proposals shall be received by the Trustee (which such last date shall be not less than fifty (50) days prior to such sinking fund payment date),
and shall state when bonds accepted for purchase by the Trustee shall be delivered to the Trustee against payment therefor.
From the bonds offered in response to such notice, the Trustee shall, as agent for the Company, accept such bonds as are offered at the price or prices deemed by it most favorable to the Company, not exceeding such current redemption price, up to an aggregate principal amount not exceeding the amount set forth in the statement.'he Trustee shall notify the Company of the principal amount of all bonds so accepted for purchase and the respective prices to be fixed therefor including accrued interest, and the Company will promptly pay all such amounts to the Trustee.
If forty (40) days before such sinking fund payment date, there shall not have been purchased by and delivered to the Trustee in response to such notice, at prices not exceeding such current redemp-tion price, bonds of the 1977 Series equal in aggregate principal amount to the aniount set forth in the stateinent, then in such event bonds of the 1977 Series equal in aggregate principal amount to the sum by which the amount set forth in the statement exceeds the aggregate principal amount of bonds so purchased. shall be selected by the Trustee in the manner described in Section 5.08, and it shall forthwith give the Company notice to that effect specifying the numbers of the bonds so to be redeemed, provided, however, that the Trustee shall not select for redemption or redeem less than $ 10,000 principal amount of bonds unless the Company shall in writing so request.
The Company, upon receipt of such notice from the Trustee, shall forthwith give notice, in the manner provided in Section 5.08, of intention to redeem such bonds of the 1977 Series. Such notice shall state the date of redemption (which shall be the next succeeding sinking fund payment date), the place of redemption (which shall be the principal o5ce of the Trustee in the Borough of Manhattan, The City of New York), the current redemption price then applicable and the serial numbers of the bonds to bc redeemed (or in the case of'
partial redemption of a fully registered bond, the serial number and portion thereof to be redeemed) and that on the date fixed for redemp-tion interest on such bonds (or portions thereof) shall cease. Such notice shall also state that such bonds are being redeemed through operation of the sinking fund. Proof in form satisfactory to the Trustee of the giving of such notice, as hereinabove provided, shall be furnished to the. Trustee by the Company on or before such sinking fund payment date, together with a certificate of the Company.
(f) Any cash balance at any time in the sinking fund amounting to less than a sum su5cient to redeem $ 10,000 principal amount of bonds shall be added to any succeeding sinking fund cash payment or payments, and be applied to such purchase or redemption along with such succeeding payment or payments.
(g) All bonds purchased, redeemed or surrendered under the provisions of this Section 4.28 and the appurtenant coupons shall be cancelled by the Trustee, and shall thereafter be cremated if in coupon form, or delivered to the Company if in fully registered form, upon the written order of any o5cer of the Company.
Bonds so purchased, redeemed or surrendered shall not thereafter, so long as any bonds of the 1977 Series are outstanding, be made the basis for the issue of bonds,'r the withdrawal of cash, or the taking of a credit under any of the provisions of this Indenture.
SEcnoN 4.24. The Company further covenants and agrees that if prior to February 1, 1967 appropriate action shall not have been taken to extend its corporate existence to a date subsequent to June 1, 1977, it will call for redemption on or before Nay 1, 1967, in the manner (including the payment of premium) provided for in Article 5 hereof, all of the bonds then outstanding.
148 ARTICLE 5 L REDEMPTION OF BONDS L
SEcTICN 5.01. The bonds of the 1977 Series shall be redeemable prior to maturity, upon not less than thirty (80) nor more than sixty (60) days'rior notice, as a whole at any time, or from time to L time in part, at the option of the Company (exercised by resolu-tion of the Board, a certified copy of which shall be delivered to the Trustee), at the principal amount of the bonds so to be redeemed together with a premium equal to a percentage of the principal amount thereof deterlnined as set forth in the tabulation below (hereinafter called the redemption price):
IfRedeemed During Ttoelve Months'eriod If Redeemed During Ttvelve Months'eriod Ending May 31. Premium Ending Ma@ 31 Premium L 19G8........ i*
1948...,..... 4.65 jo 2.25 jo 1949........ 4.50 jo 1964........ 2.10 jo 1950........ 4.35% 1965........ 1.95 jo 1951........ 4.20 jo 1966........ 1.80%
1952........ 4.05% 1967........ 1.65%
1953......... 8.85% 1968........ 1.45%
1954........ 8.70% 1969........ 1.30%
1955........ 8.55% 1970........ 1.15%
1956........ 8.40% 1971........ 1.00% L 1957........ 8.25% 1972........ .85%
1958........ 8.05% 1973........ ~
65%'50%
1959........ 2.90% 19?4.........
1960........ 2.75% 1975 .35)%
1961,........ 2.60% 1976........ .20%%un 1962........ 2.45)% 1977.......; 0 and together in each ease with accrued interest to the date fixed for redemption.
SEcTICN 5.02. Such of the bonds of any other series issued here-under as are, by their terms, redeemable before maturity, may, at the option of the Company (exercised by resolution of the Board, a certifie L
149 copy 'of which shall be delivered to the Trustee), be redeemed at such times, in such amounts and at'such prices as may be specified therein and in accordance with the provisions hereinafter set forth. in this Article 5.
SEcTIoN 5.08. If the Company shall elect to e8ect such redemption, it shall give notice thereof in accordance with this Section 5.08. If all bonds to be redeemed; in whole or in part, shall be fully registered bonds or coupon bonds registered as to principal, notice of redemp-tion shall be suf6ciently given if mailed, postage prepaid, by registered mail, at least thirty (80) and not more than sixty (60) days prior to the date on which such redemption is to be made, to all registered owners of bonds to be redeemed, at their addresses as the same shall appear on the bond registry of the Company; otherwise notice of redemption shall be given by publication thereof once in each of any four (4) successive weeks, in at least one authorized newspaper in the Borough of Manhattan, The City of New York (in each instance upon any day of the week, the first publication to be made not less than thirty (30) and not more than sixty (60) days prior to such redemption date). If notice by publication shall be required, notice shall also be mailed by the Company, postage prepaid, within the time aforesaid to each registered owner of bonds to be redeemed, but in such case neither failure so'o mail such notice to, any such registered owner or owners nor any imperfection or defect in such notice shall a8ect the validity o'f the proceedings for redemp-tion, Each notice of redemption shall state such election on the part of the Company and shall specify, in case less than all of the bonds of a series are to be redeemed, the 'erial numbers of the bonds to be redeemed, and shall also state that the interest on the bonds in such notice designated for redemption shall cease to accrue on such redemption date and that on said date there will become due and pay-able upon each of said bonds the redemption price therein specified, at the principal oSce of the Trustee.
Any election of the Company to redeem bonds may be rescinded
150 by the Company at any time prior to the first publication or the mailing of the. notice of redemption.
In case the Company shall have elected to redeem less than all the outstanding bonds of any series, it shall, in each such instance, at least ten (10) days before the date upon which the first publication or the mailing of notice of redemption is required to be made, notify the Trustee, in writing of such election and of the aggregate principal amount of bonds of such series to be redeemed.
The selection of, bonds to be redeemed shall, in case less than all of the outstanding bonds of any series are to be redeemed, be made by the Trustee either (a) in accordance with the provisions of any agree-ment, satisfactory to the Trustee, duly executed by the registered owners of all of t)ie honds of such series if at the tinic of selection all of the outstanding bonds of sucli series sliall be either fully regis-'ered bonds or coupon bonds registered as to principal and shall all be registered in the names of one or more parties to said agreement and an executed counterpart of said agreement shall have been filed with the Trustee at or prior to the time of selection, or (b) if the provisions of the preceding Clause (a) shall not be applicable, by drawing the bonds to be redeemed by lot, from the bonds of such series theretofore authenticated and delivered hereunder and not previously cancelled by the Trustee or called for redemption, in any manner deemed by the Trustee to be fair and proper'The Trustee shall promptly notify the Company in writing of the serial numbers of the bonds so selected for redemption.
In case any fully registered bond shall be redeemed in part only, the notice of redemption shall specify the principal amount thereof to be redeemed and shall state that, upon the presentation of such fully registered bond for partial redemption, a new bond or bonds of the same series of an aggregate principal amount equal to the unredeemed portion of such fully registered bond will be issued in lieu thereof; and in such case the Company shall execute and the Trustee shall authenticate and deliver to or upon the written order of the registered owner of any such fully registered bond, at the expense of the Com-pany, a bond or bonds of the same series, and in either coupon or fully
151 registered form (but only in authorized denominations) for the prin-cipal amount of the unredeemed portion of such fully registered bond, or, at the option of the registered owner of such fully registered bond, the Trustee shall, upon presentation thereof for the purpose, make a notation thereon of the payment of the portion thereof so called for partial redemption.
Notice having been given as aforesaid, the bonds (or the speci-fied portions of fully registered bonds) so to be redeemed shall on the date designated in such notice become due and payable at the redemp.-
tion price so specified (including interest accrued to the date fixed for redemption); and from and after the date so designated for re-demption (unless the Company shall make default in the deposit with the Trustee of moneys suNcient to redeem such bonds) interest on the bonds so designated for redemption (or in the case of partial redemp-tion of a fully registered bond, on the portion thereof to be redeemed) shall cease to accrue, and the coupons for interest maturing subse-quent to such date shall be void, and.upon surrender at the principal oNce of the Trustee, in accordance with said notice, of any bond specified therein, together with all coupons thereto appertaining ma-turing after the date fixed for redemption, such bond (or the portion thereof to be redeemed) shall be paid by the Company at the redemp-tion price aforesaid, including accrued interest to the date fixed for redemption. In the case of a coupon bond, the interest due on the date of redemption (if it be an interest date) and the interest which shall have matured prior to the redemption date shall continue to be payable (but without interest thereon, unless the Company shall make default in the payment thereof upon demand) to the respective bearers of tlie coupons therefor, upon the presentation and surrender thereof.
If, due to the fault of the Company, the said bonds are not so paid upon surrender thereof, said bonds shall continue to bear interest at the rate therein specified until paid.
The Company shall deposit in trust with the Trustee, prior to the date designated for redemption, an amount of money sufFicient to pay the redemption price of all the bonds which the Company has elected to redeem on such date, including accrued interest, and premium, if any.
152 SEcTIQN 5.04. If and so soon as the Company shall have duly elected to redeem any bonds pursuant to the provisions of Section 5.03, or be required to effect such redemption pursuant to the provi-sions of Section 4.23 or of any sinking, amortization, improvement or other analogous fund which may hereafter be created as in Section 2.02 provided, and shall have delivered to the Trustee (1) proof satisfactory to the Trustee that notice of redemp-
'ion thereof has been duly published and/or mailed pursuant to the provisions of Section 4.28 or Section 5.08 or pursuant to the provisions of any sinking, amortization,,improvement or other analogous fund which may hereafter be created as in Section 2.02 provided, or (2) a written instrument executed by the Company under its corporate seal and expressed to be irrevocable, authorizing the Trustee to give such notice on behalf of the Company; and shall have deposited with the Trustee an amount of money sufB-cient to pay the redemption price of such bonds, and shall have made proper provision for the payment of all interest on any such bonds payable on or before the date designated for redemption thereof which.
is not included in the redemption price thereof, together with a cer-tificate of the Company containing the statements required by para-graph (i) of Section 1.08; then and in every such case (a) the money held by the Trustee for tlie redemption of such bond shall, without further act, be deemed forthwith to be reserved for the benefit of the holders of such bonds, and (b) upon and after the date fixed for redemption (notice of such redemption having been given as hereinbefore provided and such deposit having been made as aforesaid), or upon and after such deposit with the Trustee together with irrevocable instruc-tions to the Trustee to give notice, at the earliest practicable date, of such redemption, all such bonds (or in case of partial redemption of a fully registered bond, the portion thereof to be redeemed) shall be excluded from par-ticipation in the lien and security afforded by this Indenture, and as
158 between the Company and the holder thereof all such bonds or por-tions thereof shall, upon and after the date upon which such notice is first published, be deemed to have been paid. Money held in trust by the Trustee for the redemption of any bonds shall not be deemed
'to be a part of the trust estate.
SEcrroN 5.05. All bonds redeemed pursuant to Section 5.08 and appurtenant coupons shall be cancelled by the Trustee, and shall there-after be cremated if in coupon form, or delivered to the Company if in fully registered form, upon the written order of any OScer of the Company. All interest coupons maturing subsequent to the date so designated for redemption appurtenant to bonds so redeemed shall be null and void.
SEGTIoN 5.06. The holder of each and every bond of the 1977 Series issued hereunder hereby agrees to accept payment thereof prior to maturity on the terms and conditions in this Article 5 and in Section 4.28 provided.
ARTICLE 6 BONDHOLDERS LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE SFGTIoN 6.01, The Company covenants and agrees that it will furnish or cause to be furnished to the Trustee on or before J'anuary 15 and July 15 in each year, beginning with January 15, 1948, and at such other times as tlie Trustee may request in writing within thirty (80) days after the receipt by the Company of such request, a list in such form as the Trustee may reasonably require containing all the information in the possession or control of the Coinpany or of any of its paying agents (other than the Trustee), as to the 'names and addresses of the holders of bonds obtained sin'ce the date as of which the next previous list, if any, was furnished. Any such list may be dated as of a date not more than thirty (30) days prior to the time such information is furnished or caus'ed to be furnished, and need not include information received after such date,
154 SRcnoN 6.02. (a) The Trustee shall preserve, in as current a form as is reasonably practicable, all information as to the names and addresses of the holders of bonds outstanding under this Indenture (1) contained in the most recent list furnished to it as provided in Section 6.01, (2) received by it in the capacity. of paying agent hereunder, if and when acting in such capacity, and (3) filed with it within two preceding years pursuant to the provisions of paragraph (2) of sub-section (c) of Section 6.04. The Trustee may (1) destroy any list furnished to it as provided in Section 6.01 upon receipt of a new list so furnished; (2) destroy any information received by it as paying agent for any series of bonds upon delivering to itself as Trustee, not earlier than forty-five (45) days after an interest payment date of the bonds of such series, a, list containing the names and addresses of the holders of bonds of such series obtained from such information since the delivery of the next previous list, if any, with respect to such series; (3) destroy any list delivered to itself as Trustee which was compiled from information received by it as such paying agent upon the receipt of a new list so delivered with respect to the same series; and (4) destroy any information received by it pursuant to the provisions of paragraph (2) of subsection (c) of Section 6.04, but not until two years after such information has been filed with it.
(b) In ease three or more holders of bonds outstanding under this Indenture (hereinafter referred to as "applicants" ) apply in writing to the Trustee, and furnish to the Trustee reasonable proof that each such applicant has owned one or more bonds outstanding under this Indenture for a period of at least six (6) months preceding the date of such application, and such application states that the applicants desire to communicate with other holders of bonds with respect to their rights under this Indenture or under the bonds, and is accompanied by a copy of the form of proxy or other communication which such applicants propose to transmit, then the Trustee shall,'within five (5) business days after the receipt of such application, at its election, either (1) a8ord to such applicants access to the information pre-served at the time by the Trustee in accordance with the provi-sions of subsection (a) of this Section 6.02; or
155 (2) inform such applicants as to the approximate nuinber of holders of bonds whose names and addresses appear in the information preserved at the time by the Trustee, in accordance with the provisions of subsection (a) of this Section 6.02, and as to the approximate cost of mailing to such bondholders the form of proxy or other communication, if any, specified in such appli-cation.
If the Trustee shall elect not to afFord to such applicants access to such information, the Trustee shall, upon the written request of such applicants, mail to each bondholder whose name and in the information preserved at the time by the Trustee in address'ppears accordance with the provisions of subsection (a) of this Section 6.02, a copy of the form of proxy or other communication which is specified in such request, with reasonable promptness after a tender to the Trustee of the iriaterial to be inailed and of payment, or provision for the payment, of the reasonable expenses of mailing, unless within five (5) days after such tender the Trustee shall mail to such applicants and file with the Securities and Exchange Commission, together with a copy of the material to be mailed, a written statement to the effect that, in the opinion of the Trustee, such mailing would be contrary to the best interests of the bondholders, or would be in violation of applicable law. Such written statement shall specify the basis of such opinion. If said Commission, after opportunity for 'a hearing upon the objections specified in the written statement so filed, shall enter an order refusing to sustain any of such objections, or if, after the entry of an order sustaining one or more of such objections, said Commission shall find, after notice and opportunity for a hearing, that all the objections so sustained have been met, and shall enter an ~
order so declaring, the Trustee shall mail copies of such material to all such bondholders with reasonable promptness after the entry of sucli order and the renewal of such tender; otherwise the Trustee sliall be relieved of any obligation or duty to such applicants respect-ing their application.
(c) The Trustee shall not be held accountable by reason of the mail-ing of any material pursuant to any request made under subsection (b)
156 of this Section 6.02 or the disclosure of any information as to the names and addresses of the holders of bonds in accordance with the provisions of subsection (b) of this Section 6.02 regardless of the source from which such information was derived.
SRGTION 6.03. The Company covenants and agrees (1) to file with the Trustee, within fifteen (15) days after the Company is required to file the same with the Securities and Exchange Commission, copies of the annual reports and of the information, documents, and other reports (or copies 'of such portions of any of the foregoing as such Commisssion may from time to time. by rules and regulations prescribe) which the Com-pany may be required to file with such Commission pursuant to Section 13 or Section 15(d) of the Securities E<xchange Act of 1934; or, if the Company is not required to file information, documents, or reports pursuant to either of such sections 'of the Securities Exchange Act of 1934, then to file with the Trus-tee and the Securities and Exchange Commission, in accordance with such rules and regulations as may be prescribed from time to time by said Commission, such of the supplementary and periodic information, documents and reports whicli may he required pursuant to Section 13 of tlie Securities L<'xchange Act of .1934 in respect of a security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations; (2) to file with the Trustee and the Securities and E<xchange Commission, in accordance with the rules and regulations pre-scribed from tim'e to time by said Commission, such additional information, documents and reports with respect to compliance by the Company with the conditions and covenants provided for in this Indenture as may be required from time to time by such rules and regulations; and (3) to transmit to the holders of bonds, within thirty (30) days after the filing thereof with the Trustee (or. at such other time as shall be fixed by the Securities and Exchange Commis-sion) and in the manner and to the extent provided in subsection (c) of Section 6.04, with respect to reports pursuant to sub-section (a) of Section 6.04, such summaries of any information, documents and reports required to be filed by the Company
157 pursuant to subsections (1) and (2) of this Section 6.03 as may be required by the rules and regulations prescribed from time to time by the Securities and Exchange Commission.
SEGTIoN 6.04. (a) The Trustee shall transmit, within sixty (60) days after May 15 in each year beginning with the year 1948, to the bondholders as hereinafter in this Section 6.04 provided, a brief report dated as of such May 15, with respect to (1) its eligibility and its qualifications under Sections 4.08, 18.01 and 13.14, or in lieu thereof, if to the best of its knowledge it has continued to be eligible and qualified under such Sections, a written statement to such effect; (2) 'the character.and amount of any advances (and if the Trustee elects so to state, th'e circumstances surrounding the making thereof) made by the Trustee as such, which remain un-paid on the date of such report, and for the reimbursement of which the Trustee claims or may claim a lien or charge prior to that of the bonds on the trust estate, or on property or funds held or collected by it as Trustee, provided that the Trustee shall not be required (but may elect) to state such advances if such advances so remaining unpaid aggregate not more than one-half of one per centum (>/s jo) of the aggregate principal amount of the bonds outstanding on the date of such report; (8) the amount, interest rate, and maturity date of all:
other indebtedness owing by the Company or any other obligor upon the bonds to the Trustee in its individual capacity on the date of such report, with a brief description of any property held as collateral security therefor, except an indebtedness based, upon a creditor relations)iip arising in any manner described in paragraphs (2), (3), (4) or (6) of. subsection (h) of Section 18,15; (4) the property and funds physically in the possession of the Trustee as such, or of a depositary for the Trustee, on the date of such report; (5) any release; or release and substitution, of property.
subject to the lien of this Indenture (and the consideration therefor, if any) which it has not previously reported; provided, hmiiever, that to the extent that the aggregate value as shown
158 by the release papers of any or all of such released properties does not exceed an amount equal to one per centum (1%) of the aggregate principal amount of bonds then outstanding, the re-port need only indicate the number of such releases, the total value of property released as shown by the release papers, the aggregate amount of cash and obligations secured by purchase money mortgages received and the aggregate value of property received in substitution therefor as shown by the release papers; (6) any additional issue of bonds since the original issue of bonds of the 1977 Series which it has not previously reported; and (7) any action taken by the Trustee in the performance of its duties under this Indenture which the Trustee has not previ-ously reported and which in the opinion of the Trustee materially affects the bonds or the trust estate, except action in respect of a default, notice of which has been or is t'o be withheld by the Trustee in accordance with the provisions of Section 9.02.
(b) The Trustee shall transmit to the bondholders as hereinafter provided, within ninety (90) days after the making of any release, release and substitution, or advance as hereinafter specified, a brief report with respect to (1) the release, or release and substitution, of property subject to the lien of this Indenture (and the consideration therefor, if'any) unless the fair value of such property, as shown by'he certificates or opinions required by Sections 8.02, 8.03, or 8.04, is less than ten per centum (10%) of the aggregate principal amount of bonds outstanding under this Indenture at the time of such release, or such release and substitution;, and (2) the character and amount of any advances (and if the elects so to state, the circumstances surrounding the 'rustee making thereof) made by the Trustee as such since the date of the last report transmitted pursuant to the provisions of sub-section (a) of this Section 6.04 (or if no such report has yet been so transmitted, then since the date of this Indenture), for the reimbursement of which the Trustee claims or may claim a lien or charge, prior to that of the bonds on the trust estate, or on property or funds held or collected by it as Trustee,
159 and which it has not previously reported pursuant to this para-graph, provided that the Trustee shall not be required (but may elect) to state such advances, if such advances so remaining unpaid at any time aggregate not more than ten per centum (10%) of the aggregate principal amount of bonds outstariding at such time.
(c) Reports pursuant to this Section 6.04 shall be transmitted by mail (1) to all registered holders of bonds outstanding under this Indenture, as the names and addresses of such holders appear upon the registration books of the Company; (2) to such holders of bonds outstanding under this Inden-ture as have, within two years preceding such transmission, filed their names and addresses with the Trustee for that pur-pose; and (3) except in the case of reports pursuant to subsection (b) of this Section 6,04, to each bondholder whose name and address are preserved at the time by the Trustee, as provided in sub-section (a) of Section 6.02.
(d) A copy of eacli such report sliall, at tlie time of such trans-missio'n to bondholders, be filed by the Trustee with each stock ex-change upon which the bonds of any series are listed and also with the Securities and Exchange Commission. The Company will notify the Trustee of the name and address of each stock exchange upon which the bonds of any series are listed.
(e) I<'or the purpose of this Section 6.04, all bonds which have been authenticated and delivered shall be deemed to be outstanding, except bonds whicli have been returned to the Trustee and cancelled and bonds whic)i, pursuant to the provisions of Section 5.04 liereof, have been excluded from participation in the lien and security afforded by this Indenture except the right to receive funds deposited as provided in said Section 5.04.
160 ARTICLE 7 CONGERNINQ PRIOR LIEN BONDS DEPOSITED WITH TRUSTEE SEGTIGN 7.01. Each prior lien bond in coupon form deposited with the Trustee shall when so deposited have attached thereto all un-matured coupons, or shall be accompanied by evidence satisfactory to the Trustee (which may be a certificate of the trustee or other holder of the prior'lien securing the same) that the discharge of the lien
. securing such prior lien bond may be obtained without the production of any coupon or coupons that may be missing> and each pridr lien bond so deposited shall be uncancelled. Each prior lien bond deposited hereunder shall be in bearer form or accompanied by appropriate instruments of transfer; and the Trustee inay cause any or nll regis-tered prior lien bonds to be registered in its name ns Trustee here-under, or otherwise, or in the name or names of its nominee or nominees.
SEGTIGN 7.02. Allprior lien bonds received by the Trustee for the puryose of this Article 7 shall be held by the Trustee as part of the trust estate and without impairment of the obligation represented thereby or the lien thereof, for the protection and further security of the bonds issued hereunder. Unless a default as defined in Section 9.01 shall have occurred and shall be continuing, no payment by way of interest or otherwise on any of the prior lien bonds held by the Trustee shall be made or demanded, and the coupons thereto apper- .
taining shall, as they mature, be cancelled by the Trustee and delivered so cancelled to the Company, unless the Company shall direct, with respect to any of such prior lien bonds, that such payments be made nnd demanded, in which event the Company shall, subject to the pro- .
visions hereinafter in this Section 7.02 contained, be entitled to receive.
nll such payments. 'In any event, unless such a default shall have .,
occurred and shall be continuing as aforesaid, all moneys received by the Trustee (a) on account of the principal of or interest or premium.
on said prior lien bonds, or (b) by reason of the sale or delivery of any of said bonds to any'sinking fund or other similar device for the retirement of bonds provided for in any prior lien securing the same .
161
'as to both (a) and (b) above to the extent that a certificate of the Company delivered to the Trustee shall state that such moneys do not represent the proceeds of .insurance on, or of the release of, or of the taking by eminent domain or purchase of, or of the other disposition or change of, property of the nature of property additions, includirig any property and substitutes arising from any of the foregoing), shall be paid over by the Trustee to or upon the written order of the Com-pany; provided that if and to the extent that such certificate of the Company fails to state that such moneys do not represent any such proceeds, or substitutes therefor, the same shall be retained by the Trustee and held as part of the trust estate, and may be withdrawn, or applied, in the manner, for the purposes, and subject to the 'sed conditions provided in Section 8.11.
SEGTIoN 7.03. Unless a default as defined in Section 9.01 shall have occurred and shall be continuing, the Trustee,. upon the written request of the Company, shall cause any prior lien bonds held by it to be cancelled, and the obligation thereby evidenced to be satisfied and discharged, provided, howsoever, that it shall have received notice from the trustee or other holder of the lien securing the same that such, trustee or other holder, on receipt of the prior lien bonds so held by the Trustee, will cause the lien securing the same to be satisfied and dis-charged of record, and provided further, that the Trustee shall not be required to cause any bonds so held by it to be cancelled or to be sur-rendered for cancellation pursuant to the provisions of this Section 7.03, unless and until the Trustee shall have received an opinion of counsel to the eGect that there is no outstanding lien (other than per-mitted encumbrances) covering any part of the property upon which sucli lien exists junior to or on a parity with such lien and senior to the lien of this Indenture; and upon similar request, the Trustee shall sell or surrender any prior lien bonds held by it subject to this Article .
7 to the trustee or other holder of the prior lien securing the same for cancellation, or to be held uncancelled for the purposes of any sinking fund or other similar device for the retirement of bonds for which provision may have been made in the prior lien securing the prior lien bonds so sold or surrendered, provided, homever, that no
162 such prior lien bonds shall be sold or surrendered except for cancella-tion as aforesaid, until the Trustee shall have received (i) an opinion of counsel to the efFect (a) that the pro-.
visions of the prior lien securing the prior lien bonds so to be sold or surrendered are such that no transfer of ownership or
, possession of such prior li'en bonds by the trustee or other holder of such prior lien is permissible thereunder except upon default thereunder or except to the Trustee hereunder, to be held sub-ject to the provisions of this Article 7, or to the trustee or other holder of a prior lien upon the same property, for cancellation or to be held uncancelled under the terms of such prior lien under like conditions, or (b) that all of the property subject to the prior lien with respect to which such prior lien bonds have been deposited with the Trustee has been released from the lien of this Indenture, which shall be stated in any event if such be the fact; and (ii) a certificate of the Company stating that all conditions precedent, specified'in this Indenture, to the right of the Com-pany to have said prior lien bonds so sold or surrendered have been complied with; and provided further, that if all of the property subject to the prior lien securing prior lien bonds deposited with'he Trustee shall be re-leased from the lien of this. Indenture, such prior'ien bonds sliall be cancelled or surrendered to the trustee or other holder of such prior lien .for cancellation or delivered to the Company upon the written request of tlie Coinpany.
SpcmroN 7.04. Unless a default as defined in Section 9.0l. shall have occurred and shall be continuing, the Trustee may exercise, but only with the written consent of the Company, and upon the occurrence and continuance of any such default, the Trustee may exercise in its absolute discretion without the written consent of the Company, any and all rights of a bondholder with respect to the prior lien bonds tlien held by the Trustee or may take any other action which, shall in its judgment be desirable or necessary to avail of the security created for such prior lieri bonds by the prior liens securing the same. The Trus-tee shall be reimbursed by the Company for all expenses by it properly
163 incurred by reason of any such action taken,'without negligence or bad faith, with interest upon all such expenditures at the rate of four per cent. (4%) per annum; and the amount of such expenses and interest shall, until repaid, constitute a lien upon the mortgaged property prior to the lien of the bonds and coupons issued hereunder.
ARTICLE 8 POSSESSIONS USE AND RELEASE OP MORTGAGED PROPERTY SEOTIoN 8.01. Unless a default as defined in Section 9.01 shall have occurred and shall be continuing, the Company shall be suffered and permitted to possess, use and enjoy the mortgaged property (except any cash or other personal property pledged or deposited with or required to be pledged or deposited with the Trustee hereunder),
and to receive and use the rents, issues, income, product and profits thereof, with power, in the ordinary course of business, freely and without let or hindrance on the part of the Trustee, or the bond-holders, to use and consume supplies, stores, materials, tools and appliances, and to exercise any and all rights under choses in action and contracts..
SEcTIoN 8.02. Xn the event of (a) any taking of any part of the mortgaged property by the exercise of the power of eminent domain, or the sale or conveyance by the Company in lieu of such taking and in reasonable anticipation thereof where proceedings therefor might law-fully be taken to vest such property in the grantee for the same pur-poses, or (b) the exercise by any municipality or other governmental subdivision or agency of any right which it may have or may hereafter acquire to purchase any part of the mortgaged property; upon the application of the Company the Trustee shall execute and deliver a deed of release of the mortgaged property so taken, sold, purchased or otherwise disposed of upon receipt of (1) a certificate of the Company and an opinion of counsel to the effect that such property has been
164 (A.) taken by the valid exercise of the power of eminent domain, or (B) sold in anticipation of such taking, and that such property could have been taken lawfully by the grantee in the exercise of the power of eminent domain, or (C) purchased by a municipality or other governmental subdivision or agency in the valid exercise of a right which it had to purchase the same, and such certificate of the Company shall also state the amount of such award, sales price, or purchase price, as the case may be; (2) if sold in'anticipation of such taking by exercise of the power of eminent domain, a certified resolution stating that in the opinion of the Directors such sale was in lieu of and in reasonable anticipation of such taking and was for the best interest of the Company, having in view such forcible taking; (3) a sum equal to the amount of the award, the fair value of the property or sales price, whichever is greater, if sold in anticipation of such taking, or the purchase price paid by the municipality or other governmental subdivision or agency, which may consist of cash or other property, or both; (4) a certificate of the'Company and an opinion of counsel as to compliance with conditions precedent; and (5) a certificate signed by an engineer (or an independent engineer, in case the fair value of the property in question and of all other property or securities released since the commence-ment of the then current calendar year, as set forth in the cer-tificate required pursuant to this provision, and any similar certificates pursuant to this provision and any other Sections of this Article 8, is:ten per centum (10%) or more of the aggregate principal amount'of bonds at the time outstanding, unless the fair value of the property in question, as set forth in the certifi-cate, is less than $ 25,000 or less than'on'e per centum (1%) of the aggregate principal amount of bonds at the time outstand-ing) stating the fair value, in his opinion, of the property, as of the date of the application. If a sale in lieu and in reasonable anticipation of any of the aforesaid events is involved, the Trustee shall be furnished an engineer's or inde-
165 pendent engineer's certificate as aforesaid, which certificate shall also state that in the opinion of the, signer such sale and release will not impair the security hereunder in contravention of the provisions hereof.
In any such proceedings the Trustee may be represented by coun-sel. Subject to the provisions of Section 8.09, the proceeds of all prop-erty so sold, taken or disposed of shall be paid over to the Trustee hereunder to be held and applied as a part of the mortgaged property, in the same manner provided in Section 8.11.
Anything herein to the contrary notwithstanding, in case the prop-erty so to be released is subject to a prior lien, the Trustee shall at any time, upon the request of the Company, such request to be evi-denced by a certified resolution containing recitals showing that the case is one to which the provisions of this Section 8,02 apply, release such property upon receipt of a certificate of the trustee or other holder of such prior lien to the e8ect that said property has been released from such prior lien and that the proceeds thereof have been received by the trustee or other holder of such prior lien pursuant to the require-ments thereof, together with an instrument, in form satisfactory to the Trustee, assigning such proceeds to the Trustee subject to such prior lien.
SzonoN 8,03. The Company shall have the right at any time and from time to time, unless a default as defined in Section 9.01 shall have happened and. shall be continuing, to sell or exchange any part of the mortgaged property (except any cash or prior lien bonds held by the Trustee) which shall no longer be advantageous in the judicious man-agement and maintenance of the mortgaged property or in the conduct of the business of the Company. The consideration received for such property so sold or exchanged may be (i) cash, and/or (ii) obligations secured by purchase money mortgage on such property, provided that (a) such obligations shall not exceed in aggregate principal amount sixty per centum (60%) of the then fair value of the property to be released (as established. either by the engineer's certificate referred to in sub-paragraph (C) below or the independent engineer's certificate
166 referred to in sub-paragraph (D) below, whichever shall be the higher),
and (b) the aggregate principal amount of such obligations held as a part of the mortgage'd property shall not exceed ten per centum (10%) of the aggregate principal amount of bonds-at the time out-standing under this Indenture, and/or (iii) any additional property of such character as would be included in the definition of property additions contained in Section 1.05. The Trustee shall, from time to time, release such property so sold or exchanged from the operation and lien of this Indenture, but only upon receipt of:
(A) A written requestof the Company, evidenced by a certified resolution of the Board, requesting such release and describing the property so to be released.
(B) A certificate of the Company stating that no default as defined in Section 9.01 has happened and is continuing.
(C) An engineer's certificate, made and dated not mo'e than (60) days prior to the time of such application, setting forth in substance as follows:
(1) that the Company has sold or exchanged or has con-tracted to, sell or exchange the property so to be released for a consideration described, in reasonable detail, in said certifi-cate, and that such sale or exchange is desirable in the con-duct of the business of the Company, and that the property to be released is no longer advantageous in the judicious management and maintenance of the mortgaged property or in the conduct of the business of the Company; (2) the then fair value, in the opinion of the signer, of the property to be released; (3) in. case the consideration for the property to be released consists, in whole or in yart,'of additional property, describing such additional property in reasonable detail by
'classified fixed capital accounts then in use by the Company; stating that all such additional property is of such character as would be included in the definition of property additions
.,contained in Section 1.05, and setting forth the then fair value to the Company, in the opinion of the signer, of all such addi-tio'nal propert>; and if such additional property is subject
167 to a prior lien, showing that the application satisfies the re-quirements of Sections 4.16 and 4.18; (4) that the consideration described in said certificate has a then fair value to the Company at least equal to the then fair value of the property to be released, in each case after deducting the principal amount of any indebtedness secured by prior liens on such property (if an independent engineer's certificate as provided for in the following sub-paragraph (D) is required either with respect to the property to be released or additional property included in the consideration therefor, then fair value of the property to be released and/or of 'he any such additional property shall be deemed to be as stated in such engineer's certificate or in such independent engineer's certificate, whichever shall be the higher); and (5) that such release is,'n the opinion of the signer, desirable in the conduct of the business of the Company and will not impair the security under this Indenture in contra-vention of the provisions hereof.
(D) In ca'se, as shown by said engineer's certificate, the fair value of the property to be released and of all other property or securities released since the commencement of the then cur-rent calendar year, as set forth in the. certificate required pur-suant to sub-paragraph (C), and any similar certificates pur-suant to sub-paragraph (C) and any other sections of this Article 8, is ten per centum (10%) or more of the aggregate principal amount of bonds at the time outstanding, unless the fair value of the property to be released, as set forth in the certificate, is less than $ 25,000 or less than one per centum (1%)
of the aggregate principal amount of bonds at the time outstand-ing, an independent engineer's certificate, made and dated not more than sixty (60) days prior to the date of such application, stating that the signer has examined the written request fur-nished to the Trustee; stating as to such property the then fair value thereof in the opinion of the signer, together with the signer's report thereon which shall contain a brief statement of the conditions governing the signer's deterinination of such fair value and stating that in the opinion of the signer such release will not iinpair the security under this Indenture in con-travention of the provisions hereof; and in case, as shown by said engineer's certificate, the consideration for the property to
168 be released includes additional property of a fair value to the Company of not less than $ 25,000 and not less than one per cen-tum (1/o) of the aggregate principal amount of the bonds at the time outstanding, and if such property has, within six months prior to the date of acquisition thereof by the Company, been used or operated by a person or persons other than the Com-pany in a business similar to that in which it has been or is to be used or operated by the Company, a similar independent engineer's certificate with respect to the then fair value to the Company of such additional property shall also he furnis)ied to the Trustee.
(E) Any and a11 money and obligations stated in said engi-neer's certificate to be consideration for the property so to be released; provided, howevei; that if the property to be released shall be subject to any prior lien, the cash or obligations other-wise deliverable to the Trustee in accordance with the provisions of this Section 8.03 in respect of the release of such property shall, to the extent required by reason of the existence of sucli prior lien, as shall be stated in the opinion of counsel referred to in sub-paragraph (6) below, be paid or delivered to the trustee or other holder of such prior lien, and, in such event, there shall
~
be delivered to the Trustee hereunder, in lieu of such cash or obligations, a 'certificate or receipt of such trustee or othe'r holder that such cash or obligations have been paid or delivered to it or them.
(F) The mortgages, deeds, conveyances, assignments, trans-fers and instruments of further assurance, if any, specified in clause (4) of the opinion of counsel referred to in the following sub-paragraph (O.).
(6) An opinion of counsel:
(1) stating that the instruments which have been or are therewith delivered to the Trustee conform to the require-ments of this Indenture and constitute. suScient authority under this Indenture for the Trustee to execute and deliver tlie release requested, and that, upon the basis of the con-sideration described in the engineer's certificate delivered to the Trustee pursuant to sub-paragraph (C) of this Section 8.03, the property so sold or exchanged may be released from
169 the operation of the lien of this Indenture pursuant to the provisions of this Section 8.03; (2) stating that any obligations included in the considera-'ion for such release are valid obligations and are duly se-cured by a valid purchase money mortgage constituting a direct lien upon the property so to be released, subject to no lien prior. thereto except such liens, if any, as shall have existed thereon just prior to such release as liens prior to the lien of this Indenture; and, in case any such prior lien shall have so existed on such property, stating the extent, if any, to which the trustee or other holder of such'prior lien is entitled to the money and obligations stated in said engineer's cer-,
tificate to be consideration for such property; (3) stating, in case the Trustee is requested to release any franchise, that such release will not impair the right of the Company to operate any of its remaining properties; (4) in case the consideration for the property to be re-leased consists, in whole or in part, of additional property, specifying the mortgages, deeds, conveyances, assignments, transfers and instruments of further assurance which will be suKcient to subject to the direct lien of this Indenture the additional property described in the above-mentioned engi-neer's certificate, or stating that said additional property is then subject to the direct lien of this Indenture and that no such mortgage, deed, conveyance, assignment, transfer or instrument of further assurance is necessary for such pur-pose l and (5) in ease the consideration for the property to be re-leased consists, in whole or in part, of additional property, stating that the Company has acquired a good and valid legal title to such additional property, and that the same and every part thereof is free and clear of all liens, charges or encum-brances prior to the lien of this Indenture,'>>except specifie prior liens, prepaid liens and permitted encumbrances; and stating also that the Company has lawful power to acquire, own and use said additional property'in its business.
(H) A certificate of the Company and an opinion of courisel as to compliance with conditions precedent.
170 SEGTIoN 8,04. Unless a default as defined in Section 9.01 shall have occurred and shall be continuing, the Trustee shall, whenever from time to time requested by the Company, and without requiring compliance with any of the foregoing provisions of Section 8.03, release from the lien hereof any real estate, provided the Company has, sold or agreed to sell such real estate for a cash consideration, and proiiided the aggregate value of such real estate so released without such com-pliance, as shown by the engineer's certificate in this Section 8.04 referred to, in any period of twelve (12) consecutive calendar months shall not exceed the sum of $ 25,000; such release to be made upon receipt. by the Trustee of (1) a written request of the Company for the release of any property, describing the same in reasonable detail, and stat-ing that the same is not.needed for the use of the Company in its business; (2) an engineer's certificate, made and dated not more than sixty (60) days prior to the filing of such written request, stating (a) the then fair value, in the opinion of the signer, of the property to be released, and (b) that such release is, in the opinion of the signer, desirable in the conduct of the business of the Company and will not impair the security under this Indenture in contravention of the provisions hereof; and (3) a certificate of the Company and an opinion of counsel as to compliance with conditions precedent.
The Company covenants that it will forthwith deposit with the Trustee the consideration received by it from the sale of any property so re-leased, to be held and applied as a part of the mortgaged property, in the manner provided in Section 8.11, or with the trustee or other holder of a prior lien, if required by the terms thereof, as evidenced by an opinion of counsel.
SRGTloN 8.05. Unless a default as defined in Section 9.01 shall have happened and shall be continuing, the Company shall have the right at any time, and from time to time, without any release or con-sent by the Trustee:
(1) to sell or dispose of, according to its discretion, free from the lien of this Indenture, such portion of the machinery, tools, implements or equipment which shall at any time be ac-quired or held for the use of the Company, as shall have become unfit or unnecessary for use, but any and. all new or other machinery, tools, implements, or equipment, which may be ac-quired for the use of the Company in substitution for any so sold or disposed of shall by virtue and force hereof become and be immediately upon the acquisition thereof subject to the lien and operation of these presents without any new conveyance or trans-fer or other act or proceeding whatsoever; and the net proceeds of all sales of machinery, tools, implements or equipment ac-quired or held for use by the Company, which may not be invested in real estate or in new or other machinery, tools, implements, equipment, improvements or other property for use in connection with the mortgaged property, shall be paid over to'the Trustee to be held and applied as part of the mort-
.gaged property in the manner and subject to the conditions provided in Section 8.11; (2) to sell or dispose of, according to its discretion, free from the lien of this Indenture, any part of the mortgaged property, the use and operation of which has been abandoned and discontinued by the Company pursuant to the provisions hereof, and the net proceeds of such sale or disposition of the property abandoned as aforesaid shall be paid to the Trustee hereunder as and when realized by the Company, to be held and applied as part of the mortgaged property in the manner and subject to the conditions provided in Section 8.11; (3) to abandon, terminate, cancel, release or make changes or alterations in or substitutions of any leases, rights of way, agreements or contracts subject to the lien of this Indenture, provided that any changed, altered or substituted leases, rights of way, agreements or contracts shall forthwith become subject to the lien of this Indenture to the same extent and in the same manner as those previously existing; (4) to sell or convey any real estate used by the Company solely for transmission, transportation or distribution line right-of-way, if it shall retain or obtain an easement over the same property for the maintenance of the transmission, trans-
172 portation or distribution lines located thereon, and provided that any proceeds of the sale of any parcel of such real estate over the cost of obtaining such easement with respect thereto shall be paid over to the Trustee, to be held and applied as part of the mortgaged property in the manner and subject to the conditions provided in Section 8.11; (5) to surrender or assent to or procure a modification of any franchise, license, authority or permit under which it operates any of its mortgaged properties, which it may now or hereafter hold or under which it may now or hereafter operate, if in the opinion of its Board of Directors, such surrender or modification is in its best interests and will not impair its right to operate any of its remaining mortgaged properties, and the value and efiiciency generally of the mortgaged property as an entirety and the value of the security for the bonds will not thereby be materially impaired, and the Trustee shall consent thereto, if requested, upon receipt of a certified resolution evi-dencing the opinion of said Board of Directors as aforesaid; (6) to alter, repair, replace, change the location or posi-tion of and add to its plants, works, buildings, structures, systems, machinery, transmission, transportation and distribu-tion systems, equipment, apparatus, other fixtures and appurte-nances, in such manner as it shall deem expedient, except that the location of none of the mortgaged property may be changed so as to impair the lien of this Indenture thereon unless such property is sold or otherwise disposed of or abandoned as per-mitted by this Section 8.05 or released. as provided by Sections 8.02, 8.03 or 8.04; and
, (7) to enter into agreements for the joint use of poles and equipment, and similar agreements; and to assume the burdens created under any law or governmental r'egulation or permit requiring it to maintain certain facilities or perform certain acts as a condition of its occupancy of or interference with'any public lands or any river or stream or navigable waters or bridge or highway.
Upon receipt by the Trustee of a written request of the Com-pany, and a certificate of the Company and an opinion of counsel as
173 to compliance with conditions precedent, and, in the case of the sur-render or modification of a franchise, a resolution of the Board of Directors of the Company authorizing such request, and in case of the sale or disposition of abandoned property, a resolution of the Board of Directors authorizing. such request, stating that in its opinion the further use and operation of the property by the Company is undesirable and authorizing the abandonment thereof, the Trustee shall execute any release and/or consent which may be therein re-quested to confirm any action taken pursuant to this Section 8.05.
In the case of any sale as provided in subdivisions (2) or (4) of this Section 8.05 the Company will furnish to the Trustee an engineer's certificate, made and dated within sixty (60) days after such sale, setting forth the fair value in the opinion of the signer, of the prop-erty sold and that such sale was, in the opinion of the signer, desirable in the conduct of the business of the Company and did not impair the security under this Indenture in contravention of the provisions here-of; and in case such fair value of the property sold and of all other property sold under said subdivisions (2) and (4) since the commence-ment of the then current calendar year is more than $ 25,000 or more than 1% of the aggregate principal amount of bonds at the time out-standing, such certificate shall be an independent engineer's certificate.
SEGTIQN 8.06. In case the Company proposes to sell or has sold any property of the character excepted from the lien hereof and tHe purchaser thereof requests the Company to furnish a written dis-claimer or quit claim by the Trustee of any interest in such property under this Indenture, the Trustee shall execute such an instrument without substitution of other property or cash upon receipt by the Trustee of (1) a certificate of the Company reciting the sale or pro-posed sale, describing in reasonable detail the property sold or to be sold, stating that such property is not subject to the lien hereof, and stating that the purchaser has requested a written disclaimer or quit claim by the Trustee, and stating compliance with conditions precedent; and
174 (2) an opinion of counsel stating that such property is not subject to the lien hereof or required to be subjected thereto by any of the provisions hereof, and stating compliance with con-ditions precedent.
SEGTIoN 8.07. The Trustee, subject to the provisions of Sections 13.02 and 13.03, may in its absolute discretion (but shall not be bound to) execute any release or consent under the provisions of Sections 8.02 to 8.06, inclusive, notwithstanding that interest on any bonds then outstanding shall be due and unpaid or that a default exists.
SzcnoN 8,08. Any obligation received or to be received by the Trustee pursuant to the provisions of Sections 8,02 or 8.03 may be released upon payment by the Company to the Trustee of the principal amount of such obligation or any unpaid portion thereof. The principal of and interest on any such obligation shall be received by the Trustee as and when the same shall become payable. The Trustee shall liave and may exercise all of the rights and powers of an owner of any such obligation and, without limiting the generality of the foregoing, may take any action desirable or necessary for the collection thereof or the enforcement of the security therefor. Any discretionary action which the Trustee may be entitled to take in connection with any such,obliga-tion shall be taken, unless a default as defined in Section 9.01 shall have
'f happened and shall be continuing, in accordance with the written request the Co'mpany, and during the continuance of a default as defined in Section 9.01 shall be taken in its own discretion. Unless a default as defined in Section 9.01 shall have happened and shall be continuing, the interest received by the Trustee on any such obligation shall be promptly paid over to the Company.
Any new property acquired by exchange or purchase to take the place of any property released under any provision of this Article 8 shall forthwith and without further action become subject to the lien of this Indenture as a part of the mortgaged property; but the Com-pany covenants that, if so requested by the Trustee, it will convey, assign or transfer the same, or cause the same to be conveyed, as-signed or transferred, to the Trustee by appropriate instruments and upon the trusts and for the purposes of this Indenture, and will cause
175 such instruments to be recorded or filed in such manner as appro-priately to secure and continue the lien of this Indenture on such' property.
SEcTIoN 8,09. In case, in the opinion of counsel, the provisions of any prior lien, whether or not a prepaid lien, existing on any of the mortgaged property shall require the deposit with the trustee or other holder. of such prior lien of the cash or obligations constituting any part of the consideration received in payment for any part of such property released from this Indenture or taken by the exercise of the power of eminent domain or the proceeds of any insurance on such property, the Company may deposit the same with the trustee or other holder of such prior lien to the extent that the same may be required to be so deposited, and shall furnish the Trustee.mth a certificate or receipt of such trustee or other holder to the effect that it has re-=
ceived the same with irrevocable authority to pay over the same to the Trustee upon the release th'ereof from such prior lien.
Except as in this Section 8.09 otherwise expressly provided, moneys at any time deposited with the Trustee for the payment, satisfaction or redemption of any indebtedness secured by prior lien on any of the mortgaged property for the purpose of causing such prior lien to become a prepaid lien as defined in Section 1.04 shall not be deemed to be trust moneys within the meaning of Section 8.11 but shall be applied by the Trustee from time to time to the payment of the principal and interest on or to the redemption of such indebtedness, or shall be repaid "
to the Company proportionately as such indebtedness shall be paid or reduced out of other funds (except the proceeds of the release or the taking by eminent domain of or the proceeds of 'insurance upon, any of the property securing such prepaid lien) or shall be ascertained by judicial determination or otherwise to be in, whole or in part invalid, upon the filing with the Trustee of a certificate of the Company, to the effect that the indebtedness secured by such prepaid lien has been paid or reduced out of other funds (except as aforesaid) or has been ascer-tained by judicial determination or otherwise to be in whole or in part invalid and specifying the amount of payment or reduction or the extent of the invalidity, as the case may be, accompanied by a con-
176 curring opinion of counsel; provided, however, that the Trustee shall not be required to pay any such moneys to the Company so long as any default shall exist hereunder; and provided further, that in case moneys shall have been deposited with the Trustee for the payment or satisfaction, other than by redemption prior to maturity, of any indebt-edness secured by a prepaid lien, and in case any of the property sub-ject to such prepaid lien shall have been released from the lien of this Indenture or shall be taken by eminent domain in accordance with the provisions of this Article 8 or in ease there shall become available any proceeds of insurance on any such property, prior to the actual pay-ment or satisfaction of such indebtedness, then and in that event, to the extent that such proceeds of insurance or of such releases or of such taking shall have been applied to the payment of the principal and interest on or to the redemption of such indebtedness, the moneys so deposited with and remaining in the hands of the Trustee upon the satisfaction and discharge of such indebtedness shall be deemed to be trust moneys within the meaning of Section 8.11.
SE0TI0N 8.10. No purchaser in good faith of property purporting to have been released herefrom shall be bound to ascertain the authority of the Trustee to execute the release, or to inquire as to the existence of any conditions required by the provisions hereof for the exercise of such authority, or be bound to see to the application of. the purchase moneys; nor shall any purchaser or grantee of any property or rights permitted by this Article 8 to be sold, granted, exchanged or otherwise disposed of, nor any party to any contract permitted to be changed, be.
under any obligation to ascertain or inquire into the authority of the Company to make any such sale, grant, exchange or other disposition, or such change.
SEcTIoN 8.11. Allmoneys received by the Trustee in consideration of any release by the Trustee under this Article 8, including payment on account of the principal of any obligations secured by purchase money mortgage, and all moneys herein provided to be held and applied as in this Section 8.11 provided, and all moneys, if any, received by the Trustee the disposition of which is not elsewhere herein specifically otherwise provided for, (herein sometimes referred to as "trust
177 moneys") shall be held by the Trustee as a part of the mortgaged property, and, upon default in the payment of the principal of any of the bonds when and as the same shall become due and payable, whether by the terms thereof or by declaration or otherwise, as herein provided,
. said moneys shall be forthwith applicable to the purposes specified in, and in accordance with the provisions of; Section 9.09; but, unless a default as defined in Section 9.01 shall have happened and shall be continuing, all or any part. of said trust moneys, at the request and election of the. Company, shall, subject to the provisions'of this Section 8,11, be applied by the Trustee from time to time as follows:
(1) trust moneys may be withdrawn from time to time by the Company (a) in an amount equal to the cost or fair value to the Company (whichever is less) of property additions (not
'theretofore funded) acquired, made or constructed, subse-quent to the receipt by the'Trustee of the trust moneys then being withdrawn less'662/s% of the principal amount of any outstanding prior lien bonds secured by a lien on sucli prop-erty additions not theretofore deducted in computing the ainount of net property additions which have been funded and not theretofore deducted from the cost of property additions pursuant to this subdivision (1), and/or (b) in an amount equal to one hundred sixty-six and two-thirds per centum (1662/s%)
of the principal amount of each'bond or fraction of a bond to the authentication and delivery of which the Company shall then be entitled under the provisions of Sections 3.02, 3,03, 3,04, 8.05 and 8.06, and/or (c) in an amount equal to the principal amount of bonds to the authentication and delivery of which the Company shall be entitled under the provisions of Sections 8.07 and 3.11, but only to the extent that the right of the Company to such authentication and delivery of bonds under Sections 3.07 and 8.11 is based upon the payment, retirement or redemption of bonds or prior lien bonds which have theretofore been outstanding as a result of a bona fide sale; and provided, holever, that if the application for such withdrawal of cash is based upon tlie fact that the Company is entitled to the authentication and delivery of bonds, sucli application shall operate as a waiver by tbe Com-pany of sucli right to tlie authentication and delivery of each such bond or fraction thereof ori the basis of which right such cash is withdrawn, and to such'extent no such bond or fraction
178 thereof may thereafter be authenticated and delivered here-under; or (2) trust moneys may be withdrawn from time to time by the Company upon the written request of the Company delivered to the Trustee, and the receipt by the Trustee of a certificate of the Company stating that the Company has paid a specified amount of, Federal and/or State taxes based on profits derived from the sale or other disposition of property released from the lien of this Indenture, and that no part of such requested amount has been theretofore reimbursed to the Company out of trust moneys; the amount of trust moneys so to be withdrawn to be in an amount up to, but not exceeding, the aggregate amount of such taxes so stated as paid in such certificate; (3) trust moneys may, upon the written reques't of the Company delivered to the Trustee, be applied by the Trustee to the purchase, in accordance with the provisions of Section 8.12, of,bonds issued hereunder; or (4) trust moneys may, upon the written request of the Company delivered to the Trustee, be applied by the Trustee to the redemption of any bonds issued hereunder which by their terms are redeemable before maturity, of such series as may be designated by the Company, such redemption to be in the manner and as provided in Article 5 hereof, but in the ease of any such redemption, the Company shall at the time of the delivery of such resolution to the Trustee (or at any later date satisfactory to the Trustee) pay to the Trustee, to be held and applied as trust moneys in accordance with the provisions of said Article 5, an amount in cash equal to the redemption premium, if any, and accrued interest required to be paid upon redemption of the bonds so to be redeemed, to the.end that the trust moneys shall not be diminished by the payment therefrom of redemption premium, if any, or interest, Trust moneys shall from time to time be paid to the Company or used or applied hy the Trustee as aforesaid upon receipt by the Trustee of (a) the written request of the Company, (b) a certificate of the Company and (c) an opinion of counsel as to compliance with con-ditions precedent.
In ease the withdrawal of trust moneys is, in whole or in part, based upon the cost of property additions (as permitted under sub-
179 division (1)(a) of this Section 8.11) the Company shall file with the Trustee (a) an engineer's certificate specifying property additions purchased,"constructed or otherwise acquired'by the Company subsequent to the receipt by the Trustee of the trust moneys then being withdrawn; stating whether, and if so, to what extent, such property additions consist of funded property; in case the moneys sought to be withdrawn are part of the Maintenance and Replacement Fund, stating that such property additions have not been made the basis of a credit under subdivision (2) of Section 4.10; and containing the statements required by para-graphs (a) through (h) of subdivision (8)(B) of Section 8.06 (with such omissions and variations as may be appropriate by reason of the fact that the withdrawal of trust moneys under this Section 8.11 rather than the authentication and delivery of bonds is being applied for); and in addition to the statements required by paragraph (e) of said subdivision (8)(B), stating the principal amount of such prior liens which have not thereto-fore been deducted -in computing the amount of net property additions which have been funded and have not theretofore been deducted from the. cost of property additions pursuant to sub-division (1) of this Section SJ.l; (b) the independent engineer's certificate, if any, required by subdivision (4) of Section 8.06 (with such +missions and variations as may be appropriate by reason of the fact that the withdrawal of trust moneys under this Section 8.11 rather than the 'authentication and delivery of bonds is being applied for);
(c) the engineer's certificate, if.any, required by subdivision (5) of Section 8.06; and (d) the opinion'of, counsel, instruments of conveyance, assignment and transfer, if any, and the duly certified docu-ments, if any, required by subdivisions (7) and (8) of Section 8.06 except that it shall not be necessary for such opinion of counsel to contain such parts of the opinion described in said subdivision (7) as relate to the authorization of the issuance of bonds by governmental authorities and by the Company and as relate to tax laws applicable to the issue of bonds.
In case the withdrawal of trust moneys is, in whole or in part, based upon the riglit to the authentication and delivery of bonds (as
180 permitted under subdivisions (1) (b) and (c) of this Section 8.11) the Company, except, as otherwise in this Section 8.11 provided, shall comply with all applicable provisions of this Indenture relating to such authentication and delivery (with such omissions and variations as may be appropriate by reason nf the fact that the withdrawal of trust moneys under this Section 8.11 rather than the authentication and delivery of bonds is being applied for); provided, however, that in no such case shall the Company be required to deliver to the Trustee any such resolution or certificate as is described in subdivisions (1) and (6) of Section 3.06, or. the resolution described in subdivision (1) of Section 3.07 or in Section 3.11 or the net earnings certificate provided for in Section 3.07 or Section 3.11, or such parts of the opinions described in subdivision (7) of Section 3.06 and in subdivision (3) of Section 3.0? or in subdivision (d) of Section 3.11 as relate solely to the authorization of the issue of bonds of;the Company by govern-mental authorities or by the Company and as relate to tax laws appli-cable to the issue of bonds, or to comply with any earnings require-ments. In case the withdrawal of trust moneys is, in whole or in part, based upon the payment, retirement or redemption of bonds or prior lien bonds the Company shall furnish to the Trustee a certificate of the Company that such bonds and/or prior lien bonds have thereto-fore been outstanding as a result of a bona fide sale, H the amount of the property additions specified in the engineer's certifiicate filed pursuant to subdivision (a) of this Section 8.11 as the basis for the application for the withdrawal of trust moneys shall exceed the amount required for the withdrawal of the trust moneys then being withdrawn, the excess, if any, may thereafter be used, anything in this Indenture to the contrary notwithstanding, to the extent and for the purpose for which the same might have been used if not included in such certificate filed in connection with the withdrawal of trust moneys from the Trustee. In any case where the property additions being certified include property which, within six (6) months prior to the date of acquisition thereof by the Company, have been used or operated by a person or persons other than the Company in a business similar to that in which it has been or is to
181 be used or operated by the Company, and the fair value to the Com-pany of such property is not less than $ 25,000 and not less than one per centum (1%) of the aggregate principal amount of the bonds at the time outstanding, the Trustee shall also be furnished with an independent engineer's certificate as to the fair value to the Company of such property.
All trust moneys'amounting to $ 25,000 or over remaining in the hands of the Trustee for a period of three years after the deposit thereof as trust moneys and in respect of which no request pursuant to this Section 8.11 shall have been filed by the Company within said three-year period, shall be applied forthwith by the Trustee to the purchase of bonds in the manner provided in subdivision (3) of this Section 8.11 or at the election of the Company to the redemption of bonds in the manner provided in subdivision (4) of this Section 8.11, choosing for such redemption, bonds of the series designated by the Company; and the Company in any such ease, upon written notice from the Trustee, shall pay to the Trustee additional cash equal to all accrued interest and premium'payable upon any such purchase or redemption, as pro-vided in subdivision '(4) of this Section 8.11 with respect to the redemp-tion of bonds and as provided in Section 8.12 with respect to the pur-chase of bonds. In the case of redemption, the Company shall, upon written notice from the Trustee, give or cause to be given the notice required in respect of the redemption of such bonds, and if the Com-pany shall fail to give such notice or cause such notice to be given, the Trustee shall have full power and authority to give such notice or cause such notice to be given in the name and on behalf of the Com-pany. The Company shall pay to the Trustee all expenses incurred by the Trustee in connection with any purchase or redemption of bonds pursuant to this Section 8.11.
Any bonds (together with any coupons appurtenant thereto) de-livered to the Trustee pursuant to the provisions of this Section 8.11 and any bonds purchased or redeemed through the application of trust moneys pursuant to the provisions of this Section 8.11, shall forthwith be cancelled by the Trustee, and shall thereafter be cremated if in coupon form, or delivered to the Company if in fully registered form, upon the written order of any oKcer of the Company.
182 SHcrroz 8.12. Upon the request of the Company, expressed by certified resolution, the Trustee shall, to the extent that such bonds are available for such purchase, apply aH or any part of the trust moneys then available for the purpose, or any cash deposited with it by the Company for the purpose, to the purchase of bonds then outstanding hereunder of such series (one or more) as the Company may desig-nate, at a price not exceeding the current redemption price of, and the accrued interest on, such bonds as shall be by their terms redeemable at the option of the Company before maturity, and at a price not exceeding the principal amount of, plus accrued interest on, bonds not so redeemable. Such purchases may be made upon tender or upon the open market or at private sale or upon any exchange, or in any one or more of said ways, according as the Trustee, in its uncontrolled discretion, shall determine. Before making any such purchase upon tender, the Trustee may, and upon request of the Company shall, by notice published once in each of two (2) successive calendar weeks (in each case on any day of the week) in an authorized newspaper in the Borough of Manhattan, The City of New York, advertise for written proposals (to be received by it on or before a specified date) to sell to it on or before a subsequent specified date bonds of. the series desig-nated by the Company then outstanding hereunder; and the Trustee, to the extent, as nearly as is possible, of such funds then in its hands and requested by the Company to be so applied, shall purchase the bonds so overed at the price or prices deemed by it most favorable to the Company, and reasonable notice shall be mailed by the Trustee to the holder or holders of the bonds whose proposals may be accepted.
The Trustee may also in its discretion, and upon request of the Com-pany so to do, invite ofFers of bonds for sale to it in any other usual manner. The Trustee may reject any or all proposals in whole or in part if it can at the time of opening said proposals purchase the requi-site amount of such bonds at a more favorable price or prices than it could by accepting said proposals. All advertisements for written proposals shall state that proposals shall be deemed to be made for all or any part of the bonds offered, whether so expressed or not.
Upon the purchase of any bond as hereinabove provided, the Trus-
tee shall notify the Company in writing thereof specifying the principal amount of the bonds purchased or to be purchased and the amount of the accrued interest, if any, thereon paid or to be paid by the Trustee, on such purchase, and also specifying the amount of the premium, if any, in excess of the principal amount of any bond paid or to be paid by the Trustee on such purchase, and the Company covenants that it will, from time to time, upon the receipt by it of any such notice, im-mediately.pay to the Trustee, to be held and applied as trust moneys, an amount in cash equal" to such accrued interest and such premium on the bonds so purchas'ed or to be purchased, as specified in such notice, to the end that. the trust moneys shall not be diminished by the payment therefrom of 'redemption premium, if any, or interest, The term "current redemption price" as used in this Section 8.12 with respect to the bonds of any particular series shall'be deemed to be the current redemption price at which bonds of such. series are redeemable solely at the option of the Company except as otherwise provided with respect to bonds of such series.
SEGTIoN 8.13. In case the mortgaged property shall be in the pos-session of a receiver or trustee, lawfully appointed, or in case the Com-pany shall be in possession of any mortgaged property under the juris-diction of some court of competent jurisdiction in proceedings for the reorganization of the Company pursuant to any provision of any bank-ruptcy or other act, the powers hereinbefore in this Article 8 con-ferred upon the Company with respect to the sale or other disposi-tion of the mortgaged property or the withdrawal of cash may be exercised, with the approval of the Trustee, by said receiver or trustee, or, when duly authorized by order of said, court, by the Company notwithstanding that the Company may be in default, and any request, certificate or appointment made or signed by such receiver or trustee for such purposes shall be as efFective as if made by the Company or its Board of Directors or any of its OEcers or appointees in the manner herein provided; and if the Trustee shall be in possession of the mortgaged property under any provision of this Indenture; then such powers may be exercised by the Trustee, in its discretion, not-withstanding the Company may be in default. Notwithstanding a
default as defined in Section 9.01 may have happened and may be con-tinuing hereunder, the Trustee may release from the lien hereof any part of the mortgaged property or permit the withdrawal of cash, upon compliance with the conditions specified in this Article 8 in respect thereof,'if the Trustee in its uncontrolled discretion (subject to the provisions of Sections 18.02 and 18.03), or the holders of at least a majority in aggregate principal amount of the bonds at the time outstanding, shall deem such release or withdrawal of cash for the best interests of the bondholders.
ARTICLE 9 RPiht FrDJES Szcnoz 9.01. The following events are hereby defined for all purposes of this Indenture (except where the term is otherwise defined for specific purposes) as "defaults":
(a) Failure to pay interest on any of the bonds for a period of sixty (60) days after such interest shall have become due and payable; or (b) Failure to pay the principal of, or premium, if any, on, any of the bonds when and as the same shall become due and payable as therein expressed whether at maturity, upon call for redemption, by declaration as herein provided or otherwise; or (c) Failure to pay any interest upon or principal (whether at maturity as therein expressed or by declaration, or other-wise) of any outstanding prior lien bonds continued beyond the
.expiration of the period of grace, if any, specified in the prior lien securing the same; or
'(d) Failure to pay any instalment =of any sinkirig fund required by the terins of this Indenture or of any indenture supplemental hereto to be paid by the Company to the Trustee to be applied by the Trustee to the purchase or redemption of any of the bonds hereby secured for a period of sixty (60) days after the same shall have become due and payable; or (e) Failure to perform or observe any other of the cove-nants or agreements of the Company in this Indenture or in any indenture supplemental hereto or in any of the bonds con-'
185 tained, and the continuance of such failure for a period of ninety (90) days after written notice specifying the same and requiring the same to be remedied shall have been given to the Company by the Trustee, or to the Company and the Trustee by the holders of not less than ten per centum (10%) in aggregate principal amount of the bonds. then outstanding; or (f) The admission in writing of its inability to pay its debts generally as they come due, or the making of a general assignment for the benefit of creditors, or the filing of a volun-tary petition in bankruptcy or under the corporate reorganiza-tion provisions of the National 3ankruptcy Act (as now or here-after amended) or an answer admitting the material allega-tions of a petition filed against the Company under such provi-sions, or the filing by the Company of a voluntary petition, answer or consent, seeking relief under the provisions of any other now existing or future bankruptcy or other law providing for the reorganization, dissolution, liquidation or winding up of corporations on the ground of insolvency; or (g) The expiration of a period of sixty (60) days following the consenting by the Company to the appointment, upon the application of a creditor or creditors, of a receiver of itself or of the whole or any substantial part of the trust estate; or of a period of sixty (60) days following the entry of an order, judg-ment or decree, upon the application of a creditor or creditors, by any court of competent jurisdiction adjudicating the 'Com-pany a bankrupt or insolvent, or appointing, without the con-sent of the Company, a receiver of the Company or of the whole or any substantial part of the trust estate for the purpose of the dissolution of the Company, or for the reorganization, liquida-tion, or winding up of the Company, on the ground of insol-vency; unless during such period such adjudication, appoint-ment, order, judgment or decree shall have been vacated, set aside or stayed; or (h) The expiration of a period of sixty (60) days following the approval, by any court of competent jurisdiction, of a peti-tion against the Company in proceedings under the corporate reorganization provisions of the National Bankruptcy Act (as now or hereafter amended) or the assumption, by any court of competent jurisdiction, of custody or control of the Company or of the whole or any part of the trust estate under the provisions
186 of any other now existing or future bankruptcy or other law providing for the reorganization, dissolution, liquidation or winding up of corporations on the ground of insolvency, unless during such period such approval shall be withdrawn or stayed on appeal, or such proceeding dismissed, or such custody or con-trol relinquished or terminated.
If and so long as any such default shall continue to exist, either the Trustee or the holders of not less than twenty-five per centum (25%) in aggregate principal amount of the bonds at the time out-standing may, by notice in writing given to the Company (and to the Trustee if the notice be given by the bondholders), declare the principal of all bonds then outstanding, together wit)i all accrued and unpaid interest t)iereon, if not already due, to he due and payable inunediately, and upon any suc)i declaration the same shall become and be due and payable immediately, anything in this Indenture or in any of the bonds contained to the contrary notwithstanding.
This provision is subject, however, to the condition that if, at any time after the principal of all the bonds shall have been so declared due and payable, and before any sale of all or any part of the mort-gaged property shall have been made, all arrears of interest upon all the bonds, with interest (if and to the extent permitted by law) on overdue instalments of interest at the same rates respectively borne by the bonds the interest on which shall be in default, together with the reasonable charges and expenses of the Trustee, its agents and attorneys, and all other sums which may have become due and pay-able by the Company under this Indenture, other than the prin-cipal of. suc)i bonds as sha)l not have become due and payable by their terms or, upon eall for redemption, shall either be paid by the Conipany to t)iose entitled thereto (or to the Trustee for their
'account) or be collected out of the income from or earnings of the trust estate, and all other defaults under the bonds or under this
)'ndenture known to the Trustee shall be made good or be secured to the satisfaction of the Trustee, or provision deemed by the Trustee to be adequate shall be made therefor, or shall have been waived as in Section 9.20 provided, then and in every such case (1) the holders of
187 not less than a majority in aggregate principal amount of the bonds then outstanding, by written notice to the Company and,to the Trustee, before any sale of all or any part of the mortgaged property pursuant to the provisions of this Article 9 shall have been made, may annul any such declaration and its consequences under this Indenture; or, (2) if in declaring the. principal due the Trustee shall have acted without a direction from the holders of not less than a majority in aggregate principal amount of the bonds outstanding at the time of such request, or if the principal was declared due and payable by the holders of not.
less than twenty-five per centum (25%) in aggregate principal amount of the bonds at the time outstanding, and if there shall not have been theretofore delivered to the Trustee and to the Company written direc-tion to the contrary by the holders of not less than a majority in aggre-gate principal amount of the bonds then outstanding, then any such declaration and its consequences shall ipso facto be deemed to be an-nulled; but no suc)i annulment, waiver or rescission, shall extend to or afFect any subsequent default or impair any right consequent thereon.
In event of such annulment or waiver the mortgaged property if in the hands of the Trustee or of a receiver appointed hereunder shall be returned to the Company.
SzcnoN 9.02. The Trustee shall, within ninety (90) days after the occurrence thereof, give to the bondholders, in the manner and to the extent provided in subsection (c) of .Section 6.04, notice of all defaults known to it, unless such defaults shall have been cured befor'e the giving of such notice -(the term "defaults" for the purposes of this Section being hereby defined to be the events specified in sub-sections (a), (b), (c), (d), (e), (f), (g) and (h) of Section 9.01 not including any periods of grace provided for in said subsections); pro-vided that, except in the case of default in the payment of the prin-cipal, or premium, if any, of or interest on any of the bonds, or in the payinent of any purchase or sinking fund instalment in respect of bonds of any series, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive commit-tee, or a trust committee of directors andfor responsible oKcers, of
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the Trustee in good faith determines that the withholding of such notice is in the interests of the bondholders.
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188 SEGTIoN 9.03., In case one or more of the defaults enumerated in Section 9.01 shall exist, then and in each and every such case the Trustee, personally or by its attorneys or agents, is hereby authorized and empowered, whether or not the principal of the bonds shall have matured or been declared due, to exercise any one or more of the following remedies, and to do oz cause to be done any or all of the following acts and things, namely:
(1) The Trustee, by its agents or attorneys, shall be entitled to enter and take possession of all the mortgaged property (with the books, papers and accounts of the Company), and to hold, operate and manage the same, and from time to time to make all needful repairs, and such alterations, additions and improvements as to it shall seem wise; and to receive the rents, income, issues and profits thereof and out of the same to pay all proper costs and expenses of so taking, holding and managing the same, including reasonable compensation to the Trustee, its agents and counsel, 'and any charges of the Trustee hereunder, and any taxes and assessments and other charges prior to the lien of this Indenture which the Trustee may deem it wise to pay, and all expenses'f such repairs, alterations, addi-tions and improvements, and. to apply the remainder of the moneys so received by it, first, if none of the bonds is due, to the payment of the instalments of interest which are due and unpaid, in order of their maturity, with interest after maturity (if and to the extent per-mitted by law) at the respective rates borne by the bonds. (except as otherwise provided in Section 4.02 with respect to extended, pledged and transferred coupons); and next, if the principal of any of said bonds is due, to the payment of said principal and accrued interest thereon pro rata without any preference or priority whatever (ex-,
cept as aforesaid). Whenever all that is due upon such bonds and instalments of interest shall have been paid and all other defaults under this Indenture made good, the Trustee shall surrender possession to the Company, its successors or assigns; the, same right of entry, however, to exist upon any subsequent default.
(2) The Trustee, by its agents or attorneys, shall be entitled, with or without entry, to sell, subject to prior liens, if any, then
189 existing thereon or free froin such of said liens as it, in its discretion, may elect to discharge, to the highest and best bidder, all or'any part or parts of the mortgaged property, and of the right, title, interest, claim and demand of the Company therein and thereto, and the right of redemption thereof, at public auction, at such times and places and upon such conditions as to upset or reserve bids or prices and as to terms of payment and other terms of sale as the Trustee may fix and briefiy specify in the notice of sale to be given as in Section 9.06 pro-vided, or as may be required by law, including power and authority to the Trustee to rescind or vary any contract of sale that may be entered into and to resell under the powers herein conferred.
(3) The Trustee may proceed to protect and enforce its rights and the rights of the bondholders under this Indenture by a suit or suits in equity or at law, whether for the specific performance of any covenant or agreement contained in this Indenture, or in aid of the execution of any power granted in this Indenture, or for the fore-closure of this Indenture, or for the enforcement of any other appro-priate remedy as the Trustee, being advised by counsel, shall, subject to the provisions of Sections 13,02 and 13.03, deem most eftectual to preserve and enforce any of the rights aforesaid.
'SE0TION 9.04. Upon filing a bill in equity or upon other commence-ment of judicial proceedings by the Trustee to enforce any right under this Indenture, the Trustee shall be entitled to exercise any and all other rights and powers herein conferred and provided to be exercised by the Trustee upon the occurrence of a default as defined in Section 9.01; and, as a matter of right, without notice or demand and without regard to the adequacy of the security for the bonds, the Trustee shall be entitled to the appointment of a receiver of the trust estate, and of the tolls, earnings, revenue, rents, issues, profits and other income thereof, with all such powers as the court or courts making such ap-pointment shall confer; but, notwithstanding the appointment of any receiver, the Trustee shall be entitled to retain possession and control of, and to collect and receive the income from, any money, obligations, evidences of indebtedness, and other securities and property deposited
190 or pledged with it hereunder or agreed or provided to be delivered to or, deposited or pledged with, it hereunder.
SEcnoz 9.05. In the event of any sale under this Article 9, whether made under the power of sale herein granted or by virtue of judicial proceedings, the whole of the trust estate shall be sold in one parcel and as an entirety, unless'such sale as an entirety, in the judg-ment of the Trustee, shall not be practicable or desirable in the interest of the bondholders, or unless the holders of not less than a majority in aggregate principal amount of the bonds then outstanding shall in writing request the Trustee to cause. the trust estate to 'be sold in parcels, in which case the sale shall be made in such parcels as shall be specified in such request, but, if not so specified, as the Trustee in its discretion shall deem most expedient in the interest of the bondholders.
The Company, for itself, its successors and assigns, and for all persons and corporations hereafter claiming through or under it or them or who may at any time hereafter become holders of liens junior to the lien of this Indenture, hereby expressly waives and releases all right to have the trust estate or any part thereof marshalled upon any fore- .
closure, sale or other enforcement hereof; and the Trustee, or any court in which the foreclosure of this Indenture or the administration of the trusts hereby created is sought, shall have the right as afore-said to sell the entire trust estate as a whole in a single parcel, unless otherwise required by law.
SECTION 9.06. Notice of any sale pursuant to any provision of this Indenture sliall state the time when and the place where the same is to bc made, sliall contain a brief description of the property to be sold, and shall briefly state the terms of sale, and shall be suKciently given if published once in each of four (4) successive calendar weeks prior to such sale in an authorized newspaper in the Borough of Manhattan, The City of New York (in each instance upon any day of the week, the first publication to be made not less than thirty (80) days nor more than forty (40) days prior to such sale), and in such other manner as may be required by law.
Szcnoz 9.07. The Trustee may from time to time adjourn any sale to be made by it under the provisions of this Indenture, 'by an-
191 nouncement at the time and place appointed for such sale or for any adjournment thereof; and without further notice or publication (unless otherwise required by law), it may make such sale at the time and place to which the same shall have been so adjourned.
SzoTioN 9,08, Upon the completion of any sale or sales under or by virtue of this Indenture, the Trustee shall execute and deliver to the accepted purchaser or purchasers a good and. sufBcient deed or deeds of conveyance, sale and:transfer of all the property sold; and the Trustee, or its successors for the time. being, are hereby irrevocably appointed
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the true and lawful attorneys of the Company,,in its name and stead>
to make all necessary deeds and conveyances of the property thus sold; and for that purpose. it. may execute all necessary deeds and instiumcnts of assignment and transfer, and may substitute one or more persons with like power, the Company hereby ratifyin'g and con-firming all that its said attorneys, or such. substitute or substitutes, shall lawfully do by virtue hereof. Nevertheless, if so requested by the Trustee, the Company shall ratify and.confirm any such sale or transfer by executing and delivering to the Trustee or to such pur-chaser or purchasers all such in'struments as may be necessary or in the judgment of the Trustee proper for. the purpose and as may be designated in any such request.
Any such sale or sales made under or by virtue of this Indenture, whether under the power of sale herein granted or by virtue of judicial proceedings, shall, to the extent permitted by law, operate to divest all right, title, interest, claim and demand whatsoever, either at law or in equity, of the Company of, in and to the property so sold, and shall be a pe'rpetual bar, both at law and in equity, against the Com-pany, its successors and assigns, and against any and all persons clainiing or who may claim the property sold, or any part thereof, from, through or under the Company, or their successors or assigns.
The receipt of the Trustee or of the court ofhcer conducting any such sale, for the purchase money paid at or under any such, sale, shall be a full and sufBcient discharge to any purchaser of any, prop-erty sold as aforesaid; and no such purchaser, or his representatives,
192 grantees or assigns, after paying such purchase money and receiving such receipt, shall be bound to see to the application of such purchase money upon or for any trust or purpose of this Indenture, or in any manner whatsoever be answerable for any loss, misapplication or non-application of any such purchase money or any part thereof, or be bound to inquire as to the authorization, necessity, expediency or regularity of any such sale.
SzoTroN 9.09. The purchase money, proceeds and avails of any such sale, whether made under the power of sale herein granted or pursuant to judicial proceedings, together with any other sums which may then be held by the Trustee as part of the trust estate or the pro-ceeds thereof, shall be applied as follows:
first. To the payment of the costs and expenses of such sale, including the reasonable compensation of the Trustee, its agents, attorneys and counsel, and of all necessary or proper expenses, liabilities and advances made or incurred without negligence or bad faith under this Indenture or in executing any trust or power hereunder, and to the payment of all taxes, assess-ments or liens superior to the lien of this Indenture, except any taxes, assessments or other superior liens subject to which such sale shall have been made; Second. To the payment of the whole amount then owing and un'paid upon the bonds then outstanding, for principal, and premiums, if any, and interest, with interest (if and to the extent permitted by law) on the overdue installments of interest at the same rates, respectively, as were borne by the respective bonds; and, in case such proceeds shall be insufBcient to 'pay in full the whole amount so due and unpaid upon the bonds, then to the payment of such principal and interest, without prefer-ence or priority of principal over interest, or of interest over principal, or of any installment of interest over any other in-stalhnent of interest, or of the bonds of any series over the bonds of any other series, ratably according to the aggregate so due for such principal and the accrued and unpaid interest, at the date fixed by the Trustee for the distribution of such moneys, subject, l~owever, to the provisions of Section 4.02 in respect of extended, pledged and transferred coupons, and any balance
193 then remaining to the payment ratably of any such premiums; but only upon presentation of the several bonds and coupons, and stamping such payment thereon if partly paid, and upon surrender and cancellation thereof, if fully paid; and Third. To the payment of the surplus, if any, to the Com-pany, its successors or assigns, or to whosoever may be lawfully entitled to receive the same, or as a court of competent juris-diction may direct.
SEcxroN 9.10. In case of any sale of the trust estate, or any part thereof, under this Article 9, whether made under the power of sale herein granted, or by virtue of judicial proceedings, the principal of and accrued interest on all the bonds then outstanding, if not already due, shall immediately become due and payable, anything in the. bonds or in this Indenture to the contrary notwithstanding.
Upon any sale made either under the power of sale hereby given or under judgment or decree in any judicial proceedings for fore-closure or otherw'ise for the enforcement of this Indenture, any bond- .
holder or bondholders may bid for and purchase the mortgaged prop-erty or any part thereof, and upon compliance with the terms of sale may hold, retain and. possess and dispose of such property in their or its own absolute right without further accountability, and any pur-chaser at any such sale may, in paying the purchase money, turn in any of the bonds and coupons outstanding hereunder in lieu of cash to the amount which shall, upon distribution of the net,proceeds of such sale, be payable thereon, subject however to the provisions of Section 4.02 in respect of extended, pledged and transferred coupons. Said bonds and coupons in case the amount so payable thereon shall be less than the amount due thereon, shall be returned to the holders thereof after being properly stamped to show partial payment.
SEoTIoN 9.11. The Company covenants that (1) in case it shall fail to pay interest on any of the bonds for a period of sixty (60) days after such interest shall have become due and payable; or (2) in case it shall fail to pay the principal of, or premium, if any, on, any of the bonds when and as th'e same shall become
194 due and payable as therein expressed whether at maturity, upon call for redemption, by declaration as herein provided or otherwise, then, and upon demand of the Trustee, the Company will pay to the Trustee at its oSce, for the benefit of the holders of the bonds and coupons then secured hereby, the whole amount due and payable on all such bonds and coupons, for principal, premium (if any) and interest, including the redemption price of any bonds called for redemption, with interest upon the overdue principal and premium and (if and to the extent permitted by law) overdue installments of interest at the same rates, respectively, as were borne by the respective bonds; and in case the Company shall fail to pay the same forthwith upon such demand, the Trustee, in its own name, and as trustee of an express trust, shall be entitled to recover judgment against the Company or any other obligor upon the bonds for the dhole amount so due and unpaid.
The Trustee shall be entitled and empowered either in its own name and as trustee of an express trust, or as attorney-in-fact for the bearers or registered owners of the bonds and coupons, or in any one or more such capacities, to make and file such proofs of debt, amendments to proofs of debt, claims, petitions or other documents as may.be necessary or advisable in order to have the claims of the Trustee and the bearers or registered owners of the bonds and coupons allowed in any equity receivership, insolvency, bankruptcy, liquida-tion, readjustment, reorganization or other proceeding involving any distribution of the assets of the Company or any other obligor upon the bonds to its creditors, or in any judicial proceedings relative to thc Company or such other obligor, its creditors, or its property.
The Trustee is hereby irrevocably appointed (and the successive respective bearers or registered owners of the bonds and coupons issued hereunder, by taking and holding the same, shall be conclusively deemed to have so appointed the Trustee) the true and lawful attorney-in-fact of the respective bearers and registered owners of the bonds and coupons issued hereunder, with authority to make and file in any judicial proceeding, either in the respective names of the bearers and registered owners of the bonds and/or coupons, or on behalf of all the
195 bearers and registered owners of the bonds and/or coupons as a class (subject to deduction from any such claim of the amounts of any claims filed by any of the bearers and registered owners of the bonds and/or coupons themselves), any proof of debt, amendment to proof of debt, claim, petition or other document; to receive payment of any sums becoming distributable on account thereof; and to execute any other papers and documents and to do and perform any and all such acts and things as may be necessary or'dvisable in the opinion of the Trustee in order to have the respective claims of the bearers and regis-tered owners of the bonds and/or coupons against the Company or any other obligor upon the bonds allowed in any equity receivership, insolvency, bankruptcy, liquidation, or other proceedings to which the Company or any such other obligor shall be a party or which relates to the Company. or any such other obligor, or to the creditors or prop-erty of the Company or any such other obligor. The Trustee shall have full power of substitution and delegation in respect of any such
- powers, Nothing herein shall be deemed, however, to give power to the Trustee to vote the claims of the holders of the bonds or coupons in any such proceedings, or to accept or consent to any plan of reorgani-zation, readjustment, arrangement, or composition or other like plan, or by other action of any character in any such proceeding to waive or change any right of any holder of the bonds or coupons.
The Trustee shall be entitled to recover judgment or make or file proof of debt as aforesaid either before or after or during the pendency of any proceedings for the enforcement of the lien of this Indenture, and the right of the Trustee to recover such judgment or make such proof of debt shall not be affected by any entry or sale hereunder or by the exercise of any other right, power or remedy for the enforce-ment of the provisions of this Indenture or the foreclosure of the lien hereof. In case of a sale of the mortgaged property an'd of the appli-cation of the proceeds of sale to the payment of the bonds, the Trustee, in its own nan>e and as trustee of an express trust, shall be entitled to enforce payment of, and to receive, all amounts then remaining due and unpaid upon any and all of the bonds and coupons then outstand-
196 ing, for the benefit of the holders thereof, and shall be entitled to judgment or make or file proof of debt for any portion of the re-'over same remaining unpaid, with interest as aforesaid. No recovery of any such judgment by the Trustee or any attachment or levy of= execu-tion under any such judgment upon the trust estate or any part thereof, or upon any other property, nor any such proof of debt, shall in'ny manner or to any extent aGect the lien of this Indenture upon the mort-gaged property or any part thereof or any lien, rights, .powers or remedies of the Trustee hereunder or of the holders of the bonds; but such lien, rights, powers and remedies shall continue unimpaired as before.
All moneys collected by the Trustee under this Section 9.11 shall be applied as follows:
E<'irst. To the payment of the costs and expenses of the proceedings resulting in the collection of such moneys, the rea-sonable compensation of the Trustee, its agents, attorneys and counsel and of necessary or proper expenses, liabilities and ad-vances made or incurred by the Trustee, without negligence or bad faith, under this Indenture or in executing any trust or power hereunder; and Second. To the payment of the amounts then due and unpaid upon the bonds in respect whereof such moneys shall have been collected, for principal, premium (if any) and interest, ratably and without any preference or priority of any kind (except as provided in Section 4.02 in respect of extended, pledged or transferred coupons) according to the amounts due and payable upon such bonds and for interest, respectively, to the date fixed by the Trustee for the distribution of such moneys, upon presentation of the several bonds and coupons, any, and stamping such payment thereon, if partly paid, and
'f upon surrender and cancellation thereof, if fully paid.
SEGTIoN 9.12. Upon failure of the Company so to do the holders of not less than twenty-five per centum (25%) in aggregate principal amount of tEie bonds tlien outstanding may make any payment (other than of the principal, premium (if any), interest and/or any sinking or purchase fund instalment in respect of the bonds of any series) which the Company by any p'rovision of this Indenture agrees to make,
19?
or cause to be made, and the Company covenants and agrees that it will forthwith repay to the bondholders all moneys which the bondholders shall so pay, and will pay interest thereon from the date of such pay-inent by the bondholders until the repayment thereof, at the current rate for time loans; and until so paid such advances shall be secured by a lien under and by virtue of this Indenture upon the trust estate, in preference to the bonds and coupons issued hereunder. No such payment by the bondholders shall be deemed to relieve the'Company from the consequence of any default hereunder.
SEcnoN 9.13. The Company and any one claiming through or under it will not at any time insist upon or plead or in any manner whatever claim or take the benefit or advantage of any appraisement, valuation, stay, extension or redemption law now or hereafter in force, in order to prevent or hinder the enforcement or foreclosure of this Indenture or the absolute sale of the trust estate or the possession thereof by any purchaser at any sale made pursuant to any provision hereof, or pursuant to the decree of any court of competent jurisdic-tion; bu't the Company, for itself and all who may claim through or under it, so far as it or they now or hereafter lawfully may, hereby waives the benefit of all such laws.
If any law in this Section 9.18 referred to and now in force, of which the Company or its successor or successors might take advan-tage despite the provisions hereof, shall hereafter be repealed or cease to be in force, such law shall not thereafter be deemed to constitute any part of the contract herein contained or to preclude the operation or application of the provisions of this Section 9.18.
SEcTIoN 9.14. The personal property and chattels, mortgaged; pledged, and transferred pursuant to the provisions hereof, or in-tended so to be, both those now held and those hereafter acquired, shall be deemed real estate for all the purposes of this Indenture and shall be held and taken to be fixtures and appurtenances of the Com-pany's real estate and, in case of a foreclosure sale of the property hereunder whether by legal process, judicial sale or under the powers hereof or otherwise, the same may be sold therewith and in the same
198 manner and not separate therefrom, except as herein otherwise pro-vided.
SEczroz 9.15. Anything in this Indenture to the contrary notwith-standing, the holders of not less than a majority in aggregate principal amount of the bonds at the time outstanding shall, if they so elect and manifest such election by an instrument or. concurrent instru-ments in writing executed and delivered, to the, Trustee, have the right (1) to require the Trustee to proceed to enforce the lien of this Indenture, either by suit or suits at law or in equity for the enforcement of the payment of tlie bonds the'n outstanding hereunder and for'the foreclosure of this Indenture and for the sale of the trust estate under the judgment or decree of a court of competent jurisdiction, or at the election of the Trustee, by exercise of its powers with respect to entry or sale, and (2) to direct and control the time, method and place of conducting any and all proceedings hereby authorized for any sale of the trust estate, or any adjournment thereof, or for the foreclosure of this Indenture, or for the appointment of a receiver, or any other action or proceeding hereunder instituted by the Trustee, provided, hoivever, that such direction shall not be otherwise than in accordance with the provisions of law and this Indenture, and the Trustee shall not be responsible to any one for any action taken or omitted by it in good faith and without negligence pursuant to any such direction; and pro-vided further, that subject to the provisions of Sections 18.02 and 18.03, the Trustee shall have the right to decline to follow any such direction if the Trustee shall be advised by counsel that the action or proceeding so directed may not lawfully be taken or if the Trustee in good faith shall by responsible oKcers determine that the action or proceeding so directed would be unjustifiably yrejudicial to the non-assenting bond-holders, or that it will not be suSciently indemnified for any expendi-tures or liabilities to be incurred by it in any action or proceeding so directed.
SEGTIoN 9.16. No holder of any bond or couyon issued hereunder shall have the right to institute any suit, action or proceeding in equity or at law for the foreclosure of this Indenture, or for the execution of
199 any trust or power hereof, or for the appointment of a receiver, or for the enforcement of any other remedy under or upon this Indenture, unless (1) such holder shall have previously given to the Trustee written notice of some existing default, as hereinbefore pro-vided; (2) the holders of not less than a majority in aggregate principal amount of the bonds at the time outstanding shall, after the right to exercise such powers, or right of action, as the case may be, shall have accrued, have requested the Trustee in writing to act; (3) such holder or holders shall have offered to the Trustee security and indemnity satisfactory to it against the costs, ex-penses and liabilities to be incurred therein or thereby,,without negligence or bad faith; and (4) the Trustee shall have refused or neglected to comply with such request for a period of sixty (60) days, Such notification, request and offer of indemnity are hereby de-clared, at the option of the Trustee,'ut subject to the provisions of Sections 18.02 and 13.08, to be conditions precedent to the execution by it of the powers and trusts of this Indenture and to the exercise by it of any action or cause of action or remedy hereunder.
Notwithstanding any other provision of this Indenture, the right of any holder of any bond, which is absolute and unconditional, to re-ceive payment of the principal of and interest on such bond, on or after the due date thereof as therein expressed, or to institute suit for the enforcement, of any such payment on or after such due date, or the obligation of the Company, which is also absolute and unconditional, to pay the principal of and interest on each of the bonds to the respec-tive holders thereof at the time and place in said bonds and the ap-purtenant coupons expressed, shall not be impaired or affected without the consent of such holder, SsonoN 9.17. The Company, by vote of its Board of Directors, may waive any period of grace provided for in this Article 9.
200 Szcrroz 9.18. Except as herein expressly provided to the con-trary, no remedy herein conferred upon or reserved to the Trustee or to the holders of the bonds is intended to be exclusive of any other remedy, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or here-after existing at law or in equity or by statute; and the employment of any remedy hereunder or otherwise shall not prevent the concurrent employment of any other appropriate remedy or remedies.
SEoTIoN 9.19. No delay or omission of the Trustee or of any holder of bonds to exercise any right or power upon the happening of any default (as defined in Section 9.01) shall impair any right or power or sh'all be construed to be a waiver of any such default or an acquiescence therein, nor shall the action of the Trustee, or of the bondholders, in case of any default and the subsequent waiver of such default, afFect or impair the rights of the Trustee, or of such holders, in respect of any subsequent default on the part of the Company or impair any right resulting therefrom; and every right, power and remedy given by this Article 9 to the Trustee, or to the bondholders, respectively, may, subject to the provisions of Section 9.16, be exer-cised from time to time and as often as may be deemed expedient by the Trustee, or by the bondholders.
All rights of action under this Indenture (including the making and filing of proofs of debt, and taking any action necessary or advis-able in order to have the claims of bearers and registered owners of bonds allowed in any p'roceedings) may be enforced by the Trustee without the possession of any of the bonds or coupons or the produc-tion thereof on the trial or other proceedings, and any such suit or proceedings instituted by the Trustee shall be brought in its name.
SEGTIoN 9.20. Anything in this Indenture to the contrary not-withstanding, the holders of seventy-five per centum (75%) or more in aggregate principal amount of the bonds then outstanding (including, if more than one series of bonds be at the time outstand-ing, not less than sixty per centum (60%) in aggregate principal amount of the bonds of each such series) may, by written instrument or
201 instruments, signed by such bondholders and delivered to the Trustee and to the Company; waive any past default hereunder and its conse-quences, except a default in the payment of the principal of, premium, if any, or interest on any of the bonds as and when the same shall become due by the terms of such bonds and upon such waiver such default shall be deemed not to exist for any purpose of this Indenture.
SEonoN 9.21. Allof the rights, remedies and powers provided for in this Article 9 may be exercised'only to the extent that the exercise thereof does not violate any applicable provisions of law in the prem-ises, and all of the provisions of this Article 9 are intended to be subject to all applicable, mandatory provisions of:law that may be controlling in'the premises and to be limited.to the extent necessary in order that they shall not render this Indenture invalid or unen-forceable in whole or in part or prevent the recording or filing thereof under the provisions of any applicable law".
ARTICLE 10 OF BIGHTS OF BONDHOLDERS AND OWNERSHIP OF BONDS I'VIDENCE SEcnoN 10.01. Any request, notice, declaration or other instru-ment, which this Indenture may require or permit to be signed and executed by the bondholders, may be in any number of concurrent in-struments of similar tenor, and may be signed or executed by such bondholders in person or by attorney appointed in writing. Proof'f the execution of any such request or other instrument, or of a writ-ing appointing any such attorney, or of the holding by any person 'of the bonds or coupons appertaining thereto, may be accepted by the Company or by the Trustee, as sufBcient for any purpose of this Indenture if made in the following manner:
(a) The fact and date of the execution by any person of such request or other instrument or writing may be proved by the certificate of any notary public, or other OScer authorized to take acknowledgments of deeds to be recorded in the juris-diction wherein he purports to act, that the person signing such request or other instrument acknowledged to him the execution thereof, or by an aAidavit of a witness of such execution;
202 (b) The amount of bonds transferable by delivery held by any person executing such request or other instrument as a bondholder, and the series and serial numbers thereof and the date of his holding the same, may be proven by a certificate exe-cuted by any trust company, bink, banker or other depositary wherever situated, if such certificate shall be deemed by the Trustee to be satisfactory, showing that at the date therein mentioned such person had on deposit with such depositary, the bonds described in such certificate, and such holding may be deemed by the Trustee and the Company to continue until written notice to the contrary is served upon the Trustee. The Company and the Trustee may nevertheless in their separate discretion require further proof in cases where they deem fur-ther proof desirable. The ownership of registered bonds (whether fully registered, or registered as to principal only) shall be proved. by the registry books.
Any request, notice, consent or vote of the holder of any bond shall bind all future holders, of the same bond or any bond or bonds issued in lieu thereof, in respect of anything done or suffered by the Com-pany or by the Trustee in pursuance thereof or in reliance thereon.
SEGTIoN 10.02. The Company and the Trustee and any paying agent may deem and treat the bearer of any coupon bond outstanding hereunder, which shall not at the time be registered in the name of the owner thereof as hereinbefore authorized, and the bearer of any coupon for interest on any such bond, whether such bond shall be
'registered or not, as the absolute owner of such bond or coupon, as the ease may be, for the purpose of receiving*payment thereof or on ac-
'count thereof and for all other purposes, and neither the Company nor the Tr'ustee shall be aff'ected by any notice to the contrary.
The Company and the Trustee and any paying agent may deem and treat the person in whose name any fully registered bond outstand-ing hereunder shall be registered upon the books of the Company as hereinbefore provided, as the absolute owner of such bond for the pur-pose of receiving payment of or on account of the principal of and interest on such bond and for,all other purposes, and they may deem and treat the person in whose name any coupon bond shall be so regis-tered as to principal as the absolute owner thereof for the purpose of
203 receiving payment of or on account of the principal thereof and for all other purposes, except to receive payment of interest represented by outstanding coupons; and all such payments so made to any such registered owner or upon his order, shall be valid and efFectual to satisfy and discharge the liability upon such bond to the extent of the sum or sums so paid, and neither the Company nor the Trustee shall be affected by any notice to the contrary.
Neither the Company nor the Trustee shall be bound to recognize any person as the holder of a bond outstanding hereunder unless and until his bond is submitted for inspection, if required, and title thereto satisfactorily established, if disputed; except as may otherwise be pro-vided by regulations made under Section 15.03.
ARTICLE 11 IMMUNITY OF INCORPORATORS~ STOCKHOLDERS'FFICERS AND DIRECTORS SEOTICN 11.01. No recourse under or upon any covenant, obliga-tion or agreement of this Indenture, or of any indenture supplemental hereto, or in any bond or coupon hereby secured, for. the payment of the principal of, premium, if any, or interest on, any of the bonds hereby secured, or for any claim based thereon, or otherwise in any manner in respect thereof, shall be had against any incorporator, subscriber to capital stock, stockholder, ofFicer or director, as such, of the Company, whether former, present or future, either directly, or indirectly through the Company or any predecessor or shccessor corporation or the Trus-tee, by the enforcement of any subscription to capital stock, assessment or otherwise, or by any legal or equitable proceeding by virtue of any constitution, statute or otherwise (including, without limiting the gen-erality of the foregoing, any proceeding to enforce any claimed liability of stockholders of the Company based upon any theory of disregarding the corporate entity of the Company or upon any theory that the Com-pany was acting as the agent or instrumentality of the stockholders);
it being expressly agreed and understood that this Indenture, and the obligations hereby secured, are solely corporate obligations, and that no personal liability whatever shall attach to, or be incurred by, the
204 incorporators, subscribers to capital stock, stockholders, OScers or directors, as such, of the Company, or of any successor corporation, or any of them, on account of the indebtedness hereby authorized, or under or by reason of any of the obligations, covenants or. agreements of this Indenture or in any indenture supplemental hereto, or in any of the bonds or coupons hereby secured, or implied therefrom, and that any and all such personal liability of every name and nature, and any and all such rights and claims against every such incorporator, subscriber to capital stock, stockholder, oflicer or director, as such, whether arising at common law or in equity, or created by constitu-fion, statute, contract of subscription, or otherwise, are expressly released and waived as a condition of, and as part of the consideration for, the execution of this Indenture and the issue of the bonds and interest obligations secured hereby.
ARTICLE 12 EFFECT. OF MERGERS CONSOLIDATION) ETC.
SEOTICN 12.01. Nothing in this Indenture or in any bond outstand-ing hereunder shall prevent any consolidation or merger of the Com-pany or of any successor company with or into which it has been lawfully consolidated or merged, with'or into any corporation having corporate authority to carry on the electric, gas or water utility busi-ness, or any conveyance, transfer or lease, subject to this Indenture, of the mortgaged property as an entirety or substantially as an en-tirety to any corporation lawfully entitled to acquire or lease and.
operate the saIne; or to prevent successive similar consolidations, nIcrgers, conveyances, transfers and leases to which the Company or.
its successor or successors shall be a party or parties; provided, 1Iow-ever, and the Company covenants and agrees, that every such consoli-dation, merger, conveyance, transfer or lease shall be upon such terms as fully to preserve and in no respect to impair the lien, eSciency, or=
security of this Indenture, or any of the rights or powers of the Trus- .
tee or the bondholders hereunder; and provided furtlier that any such lease shall be made expressly subject to immediate termination by the Company or by the Trustee at any time during the continuance of a '
205'efault hereunder, and also by the purchaser of the property so leased at any sale thereof hereunder, whether such sale be made under the power of sale hereby conferred or under judicial proceedings; and provided furtlier that, upon any such consolidation, merger, conveyance or transfer, or upon any such lease the term of which extends beyond the date of maturity of any of the bonds then outstanding hereunder, the due and punctual payment of the principal of and interest on. all of said bonds according to their tenor, and the due and punctual per-forinance and observance of all the covenants and conditions of this Indenture to be kept or pcrforined by the Company, shall be assumed by the corporation formed by such consolidation or. into which such merger shall have been made, or acquiring the mortgaged property as aforesaid, or by the lessee under any such lease the term of which extends beyond the date of maturity of the bonds secured hereby; and provided further, that no such consolidation, merger, conveyance, transfer or lease shall be made except upon such terms as shall fully preserve and protect the then existing franchises of the Company, sub-ject, however, to the provisions of subdivision (5) of Section 8.05.
SECTION 12.02. In ease the Company, pursuant to Section 12.01, shall be consolidated with or merged into any other corporation, or shall convey or transfer, subject to the lien of this Indenture, the mort- .
gaged property as aforesaid, the successor corporation formed by such consolidation, or into which the Company shall have been merged, or which shall have received a conveyance or transfer as aforesaid upon executing and causing to be recorded a supplemental indenture with the Trustee, satisfactory to the Trustee, whereby such successor.cor-poration shall assume and agree to pay, duly and punctually, the princi-pal and interest of the bonds issued hereunder in accordance with the provisions of said bonds and coupons and this Indenture, and shall agree to perform and fulfill"all the covenants and conditions of,this Indenture binding upon the Company shall succeed to and be sub-stituted for the Company, with the same effect as if it had been named herein as the mortgagor company, and without prejudice to the gen-erality of the foregoing, such successor corporation thereupon may cause to be executed, authenticated and delivered, either in its own name or in the present name of the Company or its name as lawfully
changed, such bonds as could or might have been executed, issued and delivered by the Company under any provision of this Indenture, and upon the order of such successor corporation in lieu of the Company, and subject to all the terms, conditions and restrictions in this Inden-ture prescribed, concerning the authentication and delivery of bonds, the Trustee shall authenticate and deliver any of such bonds which shall have been previously signed and delivered by the officers of the Company to the Trustee for authentication, and any of such bonds which such successor corporation shall thereafter, in accordance with the provisions of this Indenture, cause to be executed and delivered to the Trustee for such purpose and such successor corporation shall have and may exercise in respect of the issue of -bonds on the basis of property additions, cash, bonds, or prior lien bonds and subject to all the terms, conditions and restrictions in this Indenture prescribed applicable thereto, whether as to withdrawal of cash or otherwise, the same powers and rights which the Company might or could exercise had it acquired such property additions, cash, bonds, or prior lien bonds, by purchase on or after the date of such consolidation, merger, conveyance or transfer and had such consolidation, merger, convey-ance or transfer not occurred. All the bonds so issued shall in all respects have the same legal right and security as the bonds thereto-fore issued in accordance with the terms of this Indenture as if all of, said bonds had been authenticated and delivered at the date of the execution hereof. Provided, l~otoever, that as a condition precedent to the execution by such successor corporation and the right of such successor corporation to procure the authentication and delivery by the Trustee of any such additional bonds in respect of the construction or acquisitio'n by the successor corporation of improvements, exten-sions and additions to the mortgaged property or plants or properties additional thereto, the supplemental indenture with the Trustee to be executed and caused to be recorded by the successor corporation as in this Section ]2.02 provided shall contain a conveyance or transfer and mortgage in terms suScient to include and subject to the lien of this Indenture the properties and franchises described in subdivisions (1),
(2) and (3) of Section 12.03, and provided further, that the lien created thereby shall have similar force, effect and standing as the
207 lien of this Indenture would have if the Company should not be con-i solidated with or merged, into such corporation or should not convey or transfer, subject to this Indenture, the mortgaged property as aforesaid, to such successor corporation and should itself acquire or construct all said property and request the authentication and delivery of bonds under the provisions of this Indenture in respect thereof; but the inclusion in said:supplemental indenture of such conveyance or transfer and mortgage'hall not (except as may be required in any opinion of counsel calledfor by the applicable provisions hereof) be a condition precedent to the exercise hereunder by such successor cor-poration of the other power's and rights conferred upon the Company,.
including the right to procure the withdrawal of cash or the-release of property upon the basis of property additions.
Subject to the provisions of Sections 18.02 and 18.03, the Trustee may receive an opinion of counsel as conclusive evidence that any such supplemental indenture, or any such merger, consolidation, conveyance, transfer or lease, complies with the conditions and provisions of this Article 12.
Y SEcnoN 12.08. In case the Company, pursuant to Section 12.01, shall be consolidated with or merged into any other corporation, or shall convey or transfer, subject to this Indenture, the mortgaged property as aforesaid, neither this Indenture nor the supplemental indenture with the Trustee to be executed and caused to be recorded as provided in Section 12.02, shall become and be a lien upon an'y of the properties and franchises of the successor corporation except the mortgaged property acquired by it from the Company and except:
(1) All betterments, extensions, improvements, additions, repairs, renewals, r'eplacements, substitutions and alterations to, upon, for and of the mortgaged property and all property (including rights, franchises,'icenses, easements, leases and contracts) held or acquired for use or used upon or in connection with or appertaining to the mortgaged property or any part thereof; (2) All property made the basis of the authentication of bonds, the withdrawal of cash or the release of property from
208 the lien of this Indenture, and all property acquired or con-structed with the proceeds of any insurance on any part of the mortgaged property or with the proceeds of any part of the mortgaged property released from the lien of this Indenture or taken by the exercise of the power of eminent domain; and (8) All property acquired in pursuance of the covenants herein contained to maintain and preserve and keep the mort-gaged property in good repair, working order and condition, or in pursuance of some other covenant or agreement herein con-tained to be kept or performed by the Company.
SEGTroN 12.04. The word "Company" whenever used in this In-denture shall include Such successor corporation so complying with the provisions hereof, and in such case the certificates or resolutions of the Board of Directors or OScers of the Company required by the provisions of this Indenture may be made by like OKcials of such successor corporation.
Any net earnings certificate, as provided in Section 8.05, executed on behalf of such successor corporation shall, however, relate and be limited to the earnings of the mortgaged property, and the provisions of Section 4.10 shall relate and be limited to the mortgaged property and the earnings tliereof.
SEGTION 12.05.. At any time prior to the exercise of any power by this Article 12 reserved to the Company or a purchasing or suc-cessor corporation, the Company may surrender any such power by delivering to the Trustee an instrument in writing executed by its President or a Vice-President under its corporate seal attested by its Secretary or an Assistant Secretary, accompanied by the afiidavit of its Secretary or an Assistant Secretary that the execution of such instrument was duly authorized by the vote of two-thirds of its Board of Directors, and thereupon the power so surrendered shall cease.
AETICLQ< 13 CQNOERNING THE TRUSTEE SEGTION 18.01. The Trustee shall at all times be a bank or trust company eligible under Section 4.08 and having a combined capital and
209 surplus of at least $ 5,000,000. If the Trustee publishes reports of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority referred to in Section 4.08, then for the purposes of this Section the combined capital and surplus of the Trustee shall be deemed to be its combined capital'and surplus as set forth in its most recent report of condition so published.
SEGTIoN 18.02. The Trustee hereby accepts the trust hereby cre-ated. The Trustee undei'takes and, if a separate or co-trustee is appointed pursuant to Section 13.19 hereof, such separate or co-trustee undertakes, prior to default as defined in Section 9.01 and after the curing of all defaults which may have occurred, to perform such duties and only such duties as are specifically set forth in this Indenture, and in case of default (which has not been cured) to exercise such of the riglits and powers vested in it by this Indenture, and to use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs.
For the purposes of this Section 18.02 and of 13.03, a default shall be deemed cured when the act or omission or other event giving rise to such default shall have been cured, remedied or terminated. If a default is waived as provided in Section 9.20, such default shall be deemed to have been cured.
The Trustee, upon receipt of evidence furnished to it by or on behalf of the Company pursuant to any provision of this Indenture, shall examine the same to determine whether or not such evidence conforms to the requirements of this Indenture.
Sparrow 13.03. No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent 'failure to act, or its own wilful misconduct, except that (a) prior to the occurrence of a default hereunder and after the curing of all defaults which may have occurred, the Trustee shall not be liable except for the performance of such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Inden-
210 ture against the Trustee, but the duties and obligations of the Trustee, prior to default and after the curing of all defaults which may have occurred, shall be determined solely by the express provisions of this Indenture; (b) prior to the occurrence of a default hereunder and after the curing of all defaults which may have occurred, and in the absence of bad faith on the part of the Trustee, the Trustee may conclusively rely as to the truth of the statements
'nd the correctness of the opinions expressed therein, upon cer-tificates or opinions conforming to the requirements of this Indenture; (c) the Trustee shall not be personally liable for any error of judgment made in good faith by a responsible officer or officers of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; and (d) the Trustee shall not be personally liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the holders of not less than a majority in aggregate principal amount of the bonds at the time outstanding (such percentage being determined as provided
- in Section 1.08) relating to the time, method and place of con-ducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred upon the Trustee
'nder this In'denture.
~
The provisions of this Section'18.03, if a separate or co-trustee is appointees pursuant to Section 18.19 hereof, shall also apply to any separate or co-tr'ustee.
SHcnoN 13.04. The recitals contained herein and in the bonds shall be taken as the statements of the Company, and the Trustee assumes no responsibility for the correctness of the same. The Trustee makes no representations as to the value of the mortgaged property or any part thereof, or as to the title of the Company thereto, or as to the validity or adequacy of the security afforded thereby and hy this Indenture, or as to the validity of this Indenture or of the bonds or coupons issued hereunder. The Trustee shall be under no responsi-bility or duty with respect to the disposition by the Company of any
211 bonds authenticated and delivered hereunder or the application of the proceeds thereof or the applications of any moneys paid to the Com-pany under any of the provisions hereof.
SEcrxox 13.05. The Trustee shall not be personally liable in case of entry by it upon the mortgaged property for debts contracted or liability or damages incurred in the management or operation of said property.
Sscrioz 18.06. To the extent permitted by Sections 13.02 and 13.08:
(1) The Trustee may rely and shall be protected in acting upon any resolution, certificate, opinion, notice, request, consent, order, appraisal, report, bond, or other paper or document be-lieved by it to be genuine and to have been signed or presented by the proper party or parties; (2) The Trustee may consult with counsel, who may be of counsel to the Company, and the opinion of such counsel shall be full and complete authorization and protection in respect of
any action t'aken or suffered by it hereunder in good faith and in accordance with the opinion of such counsel; and (3) The Trustee shall not be liable for any action taken by it in-good faith and believed by it to be authorized or within the discretion or power conferred upon it by this Indenture.
Sparrow 13.07. The Trustee shall not be under any responsibility for the selection, appointment or approval of any erigineer, accountant or other expert for any of the purposes expressed'in this Indenture, except that nothing in this Section 13.07 contained shall relieve the Trustee of its obligation to exercise reasonable care with respect to the selection, appointment, or approval of independent experts who may furnish opinions or" certificates to the'Trustee pursuant to any provision of this Indenture.
Nothing contained in this Section 18.07 shall be deemed to modify the obligation of the Trustee to exercise during the continuance of a default the rights and powers vested in it by this Indenture with the degree of care and skill specified in Section 13.02.
212 SzcnoN 13.08. Subject to the provisions of Sections 13.14 and 18.15, the Trustee or any paying agent may buy, sell or deal in the bonds and coupons, and other securities of the Company, or any obligor upon the bonds, and may engage or be interested in any finan-cial or other transaction with the Company, or any obligor on the bonds, as freely as if it were not the Trustee or a paying agent hereunder.
SzcnoN 13.09. Subject to the provisions of Section 16.02, all moneys received by the Trustee, whether as Trustee or paying agent, shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated from other funds except to the extent required hy law. The Trustee
>nay allow and credit to the Company interest on any moneys received by it hereunder at such rate, if any, as may be agreed upon with the Company from time to time and as may be permitted by law.
SEmroN 18.10. The Company covenants and agrees to pay to the Trustee from time to time, and the Trustee shall be entitled to, reason-able compensation for all services rendered by'it in the execution of 'the trusts hereby created and in the exercise and performance of any of the powers and duties. hereunder of the Trustee, which compensation shall not be limited by any provision of law in regard to the compensa-tion of a trustee of an express trust, and the Company will reimburse the Trustee for all appropriate advances made by the Trustee with interest thereon at the rate of 4% per annum, and will pay to the Trustee from time to time its expenses and disbursements, includ-ing the reasonable compensation and the expenses and disbursements of its counsel and of all persons not regularly in its employ, incurred without negligence or bad faith. The Company also covenants to indemnify the Trustee for, and to hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on the part of the Trustee, arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending against any claim of liability in the premises. For the performance of the obligations of the Company under this Section
218 13.10, the Trustee shall'have (in addition to any other rights under this Indenture) a lien prior to the bonds on the trust estate, including all property or funds held or collected by the Trustee.
SI~CTIoN 13.1 I.. If, and to the extent that, the Trustee and its counsel and other persons not regularly in its employ do not receive compensation for services rendered, reimbursement of its advances, expenses and disbursements,or indemnity, as herein provided, as the result of allowances made in any reorganization, bankruptcy, receiver-ship, liquidation or other proceeding or by -any plan of reorganization or readjustment of obligations of the Company, the Trustee shall be entitled, in priority to the holders. of the bonds, to receive any distribu-tions of any securities, dividends or other disbursements which would otherwise be made to the holders'of bonds in any, such proceeding or proceedings and the Trustee is, hereby. constituted and appointed, irrevocably, the. attorney in fact for the. holders of the bonds and each of t}Iem to collect and receive, in their name, place and stead, such distributions, dividends or other disbursements, to deduct there-from the amounts due to the Trustee, its counsel and other persons not regularly in its employ on account of services rendered, advances, expenses, and disbursements made or incurred, or indemnity, and to pay and distribute the balance, pro rata, to the holders of the bonds.
The Trustee shall have'a lien upon any securities or other considera-tions to which the holders of bonds may become entitled pursuant to any such plan of reorganization or readjustment of obligations, or in any such proceeding or proceedings; and the court or judge in any such proceeding or proceedings may determine the term's and condi-tions under which any such lien shall exist and be enforced.
SEGTIoN 13.12. Whenever in the administration of the trusts of this Indenture, prior to a default hereunder, and after curing any such default, the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suGering any action here-under, such matter (unless other evidence in respect'hereof be'herein specifically prescribed) may, to the extent permitted by Sections'13.02 and 13.03, he deemed to he conclusively proved and established by a certifIcate of tho Company delivered to the Trustee, and such certi-ficate shall be full warrant to the Trustee for any action taken or
suffered by it under the provisions of this Indenture upon the faith thereof.
SEcTIoN 18,18. Whenever it is provided in this Indenture that the Trustee shall take any action upon the happening of a specified event or upon the fulfillment of any condition or upon the request of the Company or of bondholders, the Trustee shall have full power to give any and all notices and to do any and all acts and things incidental to such action.
SEGTI0N 18.14. (a) If the Trustee has or acquires any conflicting interest, as defined by subsection (d) of this Section 18.14, the Trustee shall within ninety (90) days after ascertaining that it has such con-flicting interest, either eliminate such conflicting interest or resign by giving written notice to the Company, but such resignation shall not become effective until the appointment of a successor trustee and such successor's acceptance of such appointment. The Company covenants to take prompt steps to have a successor appointed in the manner hereinafter provided in Section 13.18. Upon giving such notice of resignation, the resigning Trustee shall publish notice thereof in an authorized newspaper in the Borough of Manhattan, The City of New York, once in each of three (8) successive calendar weeks, in each case on any business day of the week. If the resigning Trustee fails to publish such notice within ten (10) days after giving written notice of its resignation to the Company, the Company shall publish such notice.
(b) In the event that the Trustee shall fail to comply with the provisions of the preceding subsection (a) of this Section 13.14, it shall within ten (10) days after the expiration of such ninety (90) day period transmit notice of such failure to the bondholders, in the manner and to the extent provided in subsection (c) of Section 6.04 witli respect to reports pursuant to subsection (a) of Section 6.04.
(c) Subject to the provisions of Section 17.04, any bondholder who has been a bona fide holder of a bond or bonds for at least six (6) months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor, if the Trustee fails, after
215'ritten request therefor by such holder, to comply with the provisions of subsection (a) of this Section 13.14.
(d) For the purposes of this Section 13.14, the Trustee shall be deemed to have a confiicting interest if (1) the Trustee is trustee under another indenture under which any other securities, or certificates of interest or par-ticipation in any other securities, of the Company, are outstand-ing, unless such other indenture is a collateral trust indenture under which the only collateral consists of bonds issued under this Indenture; provided that there shall be excluded from the operation of this paragraph any indenture or indentures under which other securities, or certificates of interest or participa-tion in other securities, of the Company are outstanding, if the Company shall have sustained the burden of proving, on appli-cation to the Securities and Exchange Commission and after opportunity for hearing thereon, that the trusteeship under this Indenture and such other indenture is not so likely to involve a material confiict of interest as to make it necessary in the pub-lic interest or for the protection of investors to disqualify the Trustee from acting as such under one of such indentures; and fnrtl~er provided that there shall also be excluded from the operation of this paragraph the following indentures:
(a) Indenture of Albuquerque Gas and Electric Com-pany to Irving Trust Company, Trustee dated as of April 1, 1941 securing an issue of First Mortgage Bonds 3>/~% Series due 1966.
(b) Indenture of Deming Ice and Electric Company to Irving Trust Company, Trustee dated as of April 1, 1941 securing an issue of I<'irst )Lortgage Bonds 3>/s% Series due 1966.
(c) Indenture of The Las Vegas Light and Power Com-pany to Irving Trust Company, Trustee dated as of April 3,
]941 securing, an issue of First Mortgage Bonds 3~/s% Series due 1966.
(d) Indenture of New Mexico Power Company to Irving Trust Company, Trustee dated as of April 1, 1941 securing an issue of I<'irst Mortgage Bonds 3~/s% Series due 1966.
216 (2) the Trustee or any of its directors or executive ofii-cers is an obligor upon the bonds or an underwriter for the Company; (3) the Trustee directly or indirectly controls or is directly or indirectly controlled by or is under direct or indirect common control with the Company or an underwriter for the Company; (4) the Trustee or any of its directors or executive officers is a director, officer, partner, employee, appointee, or repre-
.sentative of the Company, or of an underwriter (other than the Trustee itself) for the Company, who is currently engaged in the business of underwriting, except" that (A) one individual may be a>>director and/or an executive officer of the Trustee and a direct'or<and/or an executive officer of the Company, but may not be at the same time an executive officer of both the Trustee and the Company; (3) if and so long as the number of directors of the Trustee in office is more than "nine, one additional individual may be a director and/or an executive officer of the Trustee and a director of the Company; and (C) the Trustee may be designated by the Company, or by any underwriter for the Company, to act in the capacity of transfer agent, registrar, custodian, paying agent; fiscal agent, escrow agent or depositary or in any other similar capacity, or subject to the provisions of paragraph (1) of this subsection (d), to aet as trustee, whether under an indenture or otherwise; (5) ten per centum (10%) or more of the voting securities of the Trustee is beneficially owned either by the Company or by any director, partner or executive officer thereof, or twenty per centum (20%) or more of such voting securities is bene-ficially owned, collectively, by any two or more of such persons; or ten per centum (10%) or more of the voting securities of the Trustee is beneficially owned either by an underwriter for the Company or by any director, partner or executive officer thereof, or is beneficially owned, collectively, by any two or more such persons; (6) the Trustee is the beneficial owner of, or holds as col-lateral security for an obligation which is in default as in this subsection (d) defined, (A) five per centum (5%) or more of the voting securities, or ten per centum (10%) or more of any other class of security, of the Coinpany, not including the bonds issued under this Indenture and securities issued under any other
2L7 indenture under which the Trustee is also trustee, or (8) ten per centum (10%) or more of any class of security of an under-writer for the Company; (7) the Trustee is the beneficial owner of, or holds as col-lateral security for an obligation which"is in'default as 'in this subsection (d) defined, five per centum (5%) or more of the voting securities of any person who, to the knowledge of the Trustee, owns ten per centum (10%) or more of the voting securities of, or. controls directly or indirectly or is under direct or indirect common control with, the Company; (8) the Trustee is the beneficial owner of, or holds as col-lateral security for an obligation which, is in default as in this subsection (d) defined,'ten per ce'ntum (10%) or more of any class of security of any person who, to the knowledge'f the Trustee, owns 'fifty (50) per centum or more of the'oting securities of the Company; or'9) the Trustee owns, on May 15 in any calendar year in the capacity of executor,'administrator, testamentary or inter vivos trustee, guardian, committee or conservator, or 'in any other similar capacity, an aggregate of twenty-five per centum (25%) or more of the voting securities, or of any class of security, of any person, the beneficial ownership of a specified percentage of which would have constituted a confiicting interest under paragraphs (6), (7) or (8) of this subsection (d). As to any such securities of which the Trustee acquired ownership through becoming executor, administrator or testamentary trus-tee of an estate which included them, the provisions of the pre-ceding sentence shall not apply for a period of two (2) years from the date of such acquisition, to the extent that such securi-ties included in such estate do not exceed twenty-five per centum (25%) of such voting securities or twenty-five per centum (25%)
of any such class of security. Promptly after May 15, in each calendar year, the Trustee shall make a check of its holdings of such securities in any of the. above-mentione'd capacities as of sucli May 15. Tf the Company fails to make payment in full of principal or interest upon the bonds when and as tlic same becomes due and payable, and such failure continues for thirty (30) days thereafter, the Trustee shall make a prompt check of its holdings of such securities in any of the above-mentioned capacities as of the date of the expiration of such'thirty-day
218 period, and after such date, notwithstanding the foregoing pro-visions of this paragraph, all such securities so held by the Trustee, with sole or joint control of such securities vested in it, shall, but only so long as such failure shall continue, be considered as though beneficially owned by the Trustee for the purposes of paragraphs (6), (7) and (8) of this subsection (d).
The specifications of percentages in paragraphs (5) to (9), inclu-sive, of this subsection (d) shall not be construed as indicating that the ownership of such percentages of the securities of a person is or is not necessary or sufiicient to constitute direct or indirect control for the purpose of paragraph (3) or (7) of this subsection (d).
For the purposes. of paragraphs (6), (7), (8) and (9) of this sub-section (d), (A) the terms "security" and "securities" shall include only such securities as are generally known as corporate securities, but shall not include any note or other evidence of indebtedness issued to evidence an obligation to repay moneys lent to a person hy one or more banks, trust companies, or banking firms, or any certificate of interest or participation in any such note or evidence of indebtedness; (3) an obligation shall be deemed to be in default when a default in payment of principal shall have continued for thirty (30) days or more and shall not have been cured; and (C) the Trustee shall not be deemed to be the owner or holder of (i) any security which it holds as col-lateral security (as trustee or otherwise) for an obligation which is not in default as above defined, or (ii) any security which it holds as collateral security under this Indenture, irrespective of any default hereunder, or (iii) any security which it holds as agent for collection, or as custodian, escrow agent, or depositary, or in any similar repre-sentative capacity.
The percentages of voting securities and other securities specified in this subsection (d) shall be calculated in accordance with the follow-ing provisions:
(a) A specified percentage of the v'oting securities of the Trustee, the Company or any other person referred to in this Section 13.14 (each of whom is referred to as a "person" in this paragraph and in the following paragraph) means such amount of the outstanding voting securities of such person as entitles the holder or holders thereof to cast such specified percentage
219 of the aggregate votes which the holders of all the outstanding voting securities of such person are entitled to cast in the direction or management, of the affairs of such person.
(b) -A specified percentage of a class of securities of a person means .such percentage of the aggregate amount of securities of the class outstanding.
(c) The term "amount", when used in regard to securi-ties, means the principal amount if relating to evidences of indebtedness, the number of shares if relating to capital shares, and the number of units, if relating to any other kind of security.
(d) The term "outstanding" means issued and not held by or for the account of the issuer. 'The following securities shall not be deemed outstanding within the meaning of this definition:
(1) Securities of, an issuer held in a sinking fund relating to securities of the issuer of the same class;
'2) Securities of an issuer held in a sinking fund relating to another class of securities of the issuer, if the obligation evidenced by such other class of securities is not in default as to principal or interest or otherwise; (3) Securities pledged by the issuer thereof as security for an obligation of the issuer not in default as to prin'cipal or interest or otherwise; (4) Securities held in escrow if placed in escrow by the issuer .thereof; provided, Aotvever, that any voting securities of an issuer shall be deemed, outstanding if any person other than the issuer is entitled to exercise the voting rights thereof.
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(e) A security shall be deemed to be of the same class as another security if both securities confer upon the holder or holders thereof substantially the same rights and 'privileges, provided, however, that, in the case of secured evidences of indebtedness, all of which are issued under a.single indenture, differences in the interest rates or maturity dates. of various series thereof shall not be deemed suKcient to constitute such series different classes, and provided furtlier, that, in the ease of unsecured evidences of indebtedness, differences in the inter-est rates or maturity dates thereof shall not be deemed su%cient
220 to constitute tliem securities of different classes, whether or not they are issued under a single indenture.
For the purposes of this Section 13,14, the term "voting security" means any security presently entitling the owner or holder thereof to vote in the direction or management of the affairs of a person, or any security issued under or pursuant to any trust, agreement,- or arrange-
.ment whereby a trustee or trustees or agent or agents for the owner or holder of such security are presently entitled to vote in the direction or management of the affairs of a person; the term "director" means any director of a corporation, or any individual performing similar functions with respect to any organization whether incorporated or unincorporated; the term "executive oificer" means the president, every vice president, every trust officer, the cashier, the secretary, and
.the treasurer of a corporation, and any individual customarily per-forming similar functions with respect to any organization whether incorporated or unincorporated, but shall not include the chairman of the board of directors; the term "underwriter" when used with reference to the Company means every person who, within three years prior to the time as of which the determination is made, has purchased from the Company with a view to, or has sold for the Company in con-nection with, the distribution of any security of the Company out-standing at such time, or has participated or has had a direct or indirect participation in any such undertaking, or has participated or has had a participation in the direct or indirect underwriting of any such undertaking, but such term shall not include a person whose in-terest was limited to a commission from an underwriter or dealer not in excess of the usual 'and custom'ary distributors'r sellers'om-mission; and the term "the Company" shall include any obligor upon the Bonds.
SEcrroN 13.15. (a) Subject to the provisions of subsection (b) of
'this Section 13.15, if the Trustee shall be or shall become a creditor, directly or indirectly, secured or unsecured, of the Company within four (4) months prior to a default (as defined in the last paragraph of this subsection), or subsequent to such a default, then, unless and until such default shall be cured, the Trustee shall set apart and hold in a special account for the benefit of the Trustee individually, the
221 bondholders, and the holders of other indenture securities (as defined in the last paragraph of this subsection)
(1) an amount equal to any and all reductions in the amount due and owing upon any claim as such creditor in respect of principal or interest, effected after the beginning of such four months'eriod and valid as against the Company and its other creditors, except any such reduction resulting from the receipt or disposition of any property described in paragraph (2) of this subsection (a), or from the exercise of any right of set-off which the Trustee could have exercised if a petition in bank-ruptcy had been filed by or against the Company upon the date of such default; and (2) all property received by the Trustee in respect of any claim as such creditor, either as security therefor, or in satisfac-tion or composition thereof, or otherwise, after the beginning of such four (4) months'eriod, or an amount equal to the proceeds of any such property, if disposed of, subject, however, to the rights, if any, of the Company and its other creditors in such property or such proceeds.
Nothing herein contained, however, shall affect the right of the Trustee (A) to retain for its own account (i) payments made on account of any such claim by any person (other than the Company) who is liable thereon, and (ii) the proceeds. of the bona fide sale of any such claim by the Trustee to a third person, and (iii) distributions made in cash, securities, or other prop-erty in respect of claims filed against the Company in bank-ruptcy or receivership or in proceedings for to the Bankruptcy Act or applicable State law; reorganization'ursuant (B) to realize, for its own account, upon any property h'eld by it as security for any such claim, if such property was so held prior to the beginning of such four (4) months'eriod; (C) to realize, for its own account, but only to the extent of the claim hereinafter mentioned, upon any property held by it as security for'any such claim, if such claim was created after the beginning of such four (4) months'eriod and such property was received as security therefor simultaneously with the creation thereof, and if the Trustee shall sustain the burden of proving that at the time such property'as so received the Trustee had no reasonable cause to believe that a default as
222 defined in the last paragraph of this subsection (a) would occur within four (4) months; or (D) to receive payment on any claim referred to in para-graph (B) or (C) of this subsection (a) against the release of any property held as security for such claim as provided in paragraph (B) or (C), as the case may be, of this subsection (a), to the extent of the fair value of such property.
For the purposes of paragraphs (B), (C) and (D) of this subsection (a), property substituted after the beginning of such four (4) for property held as security at the time of such substitution months'eriod shall, to the extent of the fair value of the property released, have the same status as the property released, and, to the extent that any claim referred to in any of such paragraphs is created in renewal of or in substitution for or for the purpose of repaying or refunding any pre-existing claim of the Trustee as such creditor, such claim shall have the same status as such pre-existing claim.
H the Trustee shall be required to account, the funds and property held in such special account and the proceeds thereof shall be appor-tioned between the Trustee, the bondholders, and the holders of other indenture securities in such manner that the Trustee, the bondholders, and the holders of other indentur'e securities realize, as a result of payments from such special account and payments of dividends on claims filed against the Company in bankruptcy-or receivership or in proceedings for reorganization pursuant to the Bankruptcy Act or applicable State law, the same percentage of their respective claims, figured, before crediting to the claim of the Trustee anything on account of the receipt by it from the Company of the funds and prop-erty in such special account and before crediting to the respective claims 'f the Trustee, the bondholders, and the holders of other indenture securities dividends on claims filed against the Company in bankruptcy 'r reccivorship or in proceedings for reorganization pursuant to the
'ankruptcy Act or applicable State law, but after crediting thereon receipts on account of the indebtedness represented by their respec-tive claims from all sources other than from such dividends and from the funds and property so held in such special account. As used in this paragraph, with respect to any claim, the term "dividends" shall h
223 include any distribution with respect to such claim, in bankruptcy 'or receivership or in proceedings for reorganization pursuant to the
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Bankruptcy Act or applicable State law, whether such distribution is made in cash, securities, or other property, but-shall not include any such distribution with respect to the secured portion, if any, of such claim. The court in which such bankruptcy, receivership, or proceeding for reorganization is pending shall have jurisdiction (i) to apportion between the Trustee, the bondholders, and the holders of other indenture securities, in accordance with the provisions of this paragraph, tlie funds and property held in such special account and the proceeds thereof, or (ii) in lieu of such apportionment, in whole or in part, to give to the "provisions of this paragraph due considera-tion in determining the. fairness of the distributions to be made to the Trustee, the bondholders, and the holders of, other indenture securi-ties, with respect to their respective claims, in which event it shall not be necessary to liquidate or to appraise the value of any securities or other property held in such special account or as security for any such claim, or to make a specific allocation of such distributions as between the secured and unsecured portions of such claims, or other-wise to apply the provisions of this paragraph as a mathematical formula.
If the Trustee shall have resigned or been removed, after the beginning of such four (4) months'eriod, it shall be subject to the provisions of this subsection as though such resignation or removal had not occurred. If the Trustee has resigned or been removed prior to the beginning of such four (4) months'eriod, it shall be subject to the provisions of this subsection if and only if the following con-ditions exist (i) the receipt of property or reduction of claim which would have given rise to the obligation to account, if the Trustee had continued as trustee, occurred after the beginning of such four (4) months'eriod; and (ii) such receipt of property or reduction of claim occurred within four (4) months after such resignation or removal, As used in this Section 13.15, the tenn "default" means any failure ,
to make payment in full of the principal of or interest upon the bonds
224 or upon the other indenture securities when and as such principal or interest becomes due and payable; and the term "other indenture securities" means securities upon which the Company is an obligor (as defined in the Trust Indenture Act of 1939) outstanding under any other indenture (i) under which the Trustee is also trustee, (ii) which contains provisions substantially similar to the provisions of this subsection (a), and (iii) under which a default exists at the tiine of the apportionment of the funds and property held in said special account.
(b) There shall be excluded from the operation of subsection (a) of this Section 13.15 a creditor relationship arising from (1) the ownership or acquisition of securities issued under any indenture, or any security or securities having 'a maturity of one year or more at the time of acquisition. by the Trustee; (2) advances authorized by a r'eceivership or bankruptcy court of competent jurisdiction or by this Indenture for the purpose of preserving the property subject to the lien of this or of discharging tax liens or other prior liens or 'ndenture encumbrances on the trust estate, if notice of such advance and of the circumstances surrounding the making thereof is given to the bondholders as provided in subsections (a), (b) and (c) of Section 6.04 hereof with respect to advances by the Trustee as such; (3) disbursements made in the ordinary course of business in the capacity of trustee under an indenture, transfer agent, registrar, custodian, paying agent, fiscal agent or depositary, or other similar capacity; (4) an indebtedness created as a result of services rendered or premises rented; or an indebtedness created as a result of, goods or securities sold in a cash transaction as'efined in the last paragraph of this subsection (b);
(5) the ownership of stock or of other securities of a cor-.
poration organized under the provisions of Section 25 (a) of the Federal Reserve Act,,as amended, which is directly or in-a creditor of an obligor upon the bonds; or 'irectly (6). the acquisition, ownership, acceptance or negotiation, of any drafts, bills of exchange, acceptances, or obligations
225 which fall within the classification of self-liquidating paper as defined in the last paragraph of this subsection (b).
As used in this Section 18.15, the term "security" shall have the meaning assigned to such terms in the Securities Act of 1938, as amended and in force on the date of the execution of this Indenture; the term "cash transaction" shall mean any transaction in which full payment for goods or securities sold is made within seven (7) days after delivery of the go'ods or securities in currency or in checks or other orders drawn upon banks or bankers and payable upon demand; and the term "self-liquidating paper" shall mean any draft, bill of exchange, acceptance or obligation which is made, drawn, negotiated or incurred by the Company for the purpose of financing the purchase, processing, manufacture, shipment, storage or sale of goods, wares or merchandise and which is secured by documents evidencing title to, possession of, or a lien upon, the goods, wares or merchandise or the receivables or proceeds arising from the sale of the goods, wares or merchandise previously constituting the security, provided the security is received by the Trustee siniultaneously with tlie creation of the creditor relationship with the Company arising from the making, draw-ing, negotiating or incurring of the draft, bill of exchange, acceptance or obligation; the term "Trustee" shall include the Trustee and any separate trustee or co-trustee appointed pursuant to Section 13.19 hereof; and the term "the Company" shall include any obligor upon the bonds.
SEGTIoN 18.16. The Trustee may at any time resign and be dis-charged of the trusts hereby created by giving written notice to the Company specifying the day upon which such resignation shall take effect and thereafter publishing notice thereof, in'an authorized news-paper in the Borough of Manhattan, The City of New: York, once in each of three (8) successive calendar weeks, in each case on any busi-ness day of the week, and such resignation shall take effect upon the day specific<1 in such notice unless previously a successor trustee shall have hccn appointed by the bondholders or the Coinpany in the manner hereinafter provided in Section 13.18, and in such event such resigna-tion shall take effect immediately on the appointment of such successor
226 trustee. This Section 18.16 shall not be applicable to resignations pur-suant to Section 18.14, SEcTIoN 18.17. The Trustee may be removed at any time by an instrument or concurrent instruments in writing filed with the Trustee and the Company and signed and acknowledged by the holders of a majority in aggregate principal amount of the bonds then outstanding (such percentage being determined as provided in Section 1.03) or by their attorneys in fact duly authorized.
In case at any time the Trustee shall cease to be eligible in ac-cordance with the provisions of Sections 4.0S and 18.01, then the.Trus-tee shall resign immediately in the manner and with the eftect specified in Section 18.16; and in the event that the Trustee does not resign immediately in such case, tlien it may be removed fortliwitli by an instrument or concurrent instruments in writing filed with the Trustee and either (a) signed by the President or a Vice-President of the Com-pany with its corporate seal attested by a Secretary or an Assistant Secretary of the Company or (b) signed and acknowledged by the holders of a majority in aggregate principal amount of the bonds then outstanding (such percentage being determined as provided in Section 1.08) or by their attorneys in fact duly authorized.
SEGTIQN 13.18. In case at any time the Trustee shall resign or sh'all be removed (unless the Trustee shall be removed as provided in subsection (c) of Section 13.14 in which event the vacancy shall be filled as provided in said subsection) or shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or if a receiver Trustee or of its property shall be appointed, or if any public of'he oKcer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquida-'ion, a vacancy shall be deemed to exist in the oSce of Trustee, and a successor or successors may be appointed by the holders of a majority in aggregate principal amount of the bonds then outstanding hereunder (determined as provided in Section 1.03), by an instrument or con-current instruments in writing signed and acknowledged by such bond-holders or by their attorneys in fact duly authorized, and delivered to such new Trustee, notification thereof being given to the Company and the retiring Trustee; provided, nevertheless, that until a new Trus-
227 tee shall be appointed by the bondholders as aforesaid, the Company, by instrument executed by order of its Board of Directors and duly acknowledged by its President or a Vice-President, may appoint a Trustee to fill such vacancy until a new Trustee shall be appointed by the bondholders as herein authorized. The Company shall publish notice of any such appointment made by it in the manner provided in Section 13.16. Any new Trustee appointed by the Company shall, immediately and without further act, be superseded by a Trustee appointed by the bondholders, as above provided, if such appointment by the bondholders be made prior to the expiration of one year after the first publication of notice of the appointment of the new Trustee by the Company.
If in a proper case no appointment of a successor Trustee shall be made pursuant to the foregoing provisions of this Section 13.18 within six (6) months after a vacancy shall have occurred in the office of Trustee, the holder of any bond outstanding hereunder or any retiring Trustee may apply to any court of competent jurisdiction to appoint a successor Trustee. Said court may thereupon after such notice, if any, as such court may deem proper and prescribe, appoint a successor Trustee.
If the Trustee resigns because of a confiicting interest as pro-vided in subsection (a) of Section 18.14 and a successor has not been .
appointed by the Company or the bondholders or, if appointed, has not accepted the appointment within thirty (80) days after the date of such resignation, the resigning Trustee may apply to any court of compe-tent jurisdiction for the appointment of a successor Trustee.
Any Trustee appointed under the provisions of this Section 18,18' in succession to a Trustee shall be a bank or trust company eligible under Sections 4.08 and 18.01 and not disqualified under Section 18.14;"
Any Trustee which has resigned or been removed shall neverthe-less retain the lien upon the trust estate, including all property or funds held or collected by the Trustee as such (exccpt funds held iri trust for the benefiit of particular bonds or couporis), to secure the ainounts due to such Trustee as compensation, reimbursement, expenses and indemnity, afforded to it by Section 13.10 and shall retain the rights afforded to it by Section 13.11.
228
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SEGTIoN 13.19. At any time or times, for the purpose of conform-ing to any legal requirements, restrictions or conditions in any State or jurisdiction in which any part of the mortgaged property then sub-ject or to become subject to the lien of this Indenture may be located, the Company and the Trustee shall have power to appoint, and, upon the request of the Trustee the Company shall for such purpose join with the Trustee in the execution, delivery and performance. of, all instruments and agreements necessary or proper to appoint another corporation or one or more persons approved by the Trustee, either to act as separate. trustee or trustees, or co-trustee or co-trustees jointly with the Trustee, of all or any of the property subject to the lien hereof. In the event that the Company shall not have joined in such appointment within fifteen (15) days after the receipt by it of a request so to do, the Trustee alone shall have power to make such appointment.
Every separate trustee, every co-trustee and every successor trus-tee, other than any trustee which may be appointed as successor to the Trustee, shall, to the extent permitted by law, but to such extent only, be appointed subject to the following provisions and conditions, namely:
(1) The rights, powers, duties and obligations conferred or imposed upon trustees hereunder or any of them shall be con-ferred or imposed upon and exercised or performed by the Trus-tee and suc)i separate trustee or separate trustees or co-trustee or co-trustees jointly, as shall be provided in the instruments and agreements appointing such separate trustee or separate trustees or co-trustee or co-trustees,'xcept to the extent that under any law of any jurisdiction in which any particular act or acts are to be performe'd the Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations shall be exercised and performed by such separate trustee or separate trustees or co-trustee or co-trustees; (2) The bonds secured hereby shall be authenticated and delivered, and all powers, duties, obligations and rights con-ferred upon the Trustee in respect of the custody of all bonds and other securities and of all cash pledged or deposited here-
229 under, shall be exercised solely by the Trustee or its successors in the trust hereunder; (8) The Company and the Trustee, at any time by an in-.
strument in writing executed by them jointly, may accept the resignation of or remove any separate trustee or co-trustee ap-pointed under, this Section 13.19 or otherwise, and, upon'he request of the Trustee, the Company shall, for such purpose, join with the Trustee in the execution, delivery and performance of all instruments and agreements necessary or proper to make effective such resignation or removal. In the event that the Company shall not have joined in such action within fifteen (15) days after the receipt by it of a request so to do, the Trustee alone shall have power to accept such resignation or to remove any such separate trustee or co-trustee. A. successor to a sepa-rate trustee or co-trustee so resigned or removed may be ap-pointed in the manner provided in this Section 18.19; and (4) The rights,'powers, duties and obligations conferred or imposed upon the Trustee by Sections 6.04, 9.02 and 13.14 shall be similarly conferred and imposed upon each and every other trustee hereunder; provided however that notwithstanding any obligation upon any trustee to transmit reports to the bond-holders and to file such reports w'ith each stock exchange upon which the Bonds are listed and also with the Securities and Ex-
.change Commission, any trustee may furnish to the Trustee all information concerning such trustee which such trustee is re-quired to report, and the Trustee shall transmit and file such information on behalf \ of such trustee.
No trustee hereunder shall be personally liable by reason of any act or omission of any other trustee, separate trustee or co-trustee, hereunder.
Any notice, request or other writing, by or on behalf of the holders of the bonds delivered to the Trustee, or its successor in the trust hereunder, shall be deemed to have been delivered to all of the then trustees or co-trustees as effectually as if delivered to each of them.
Every instrument appointing any trustee or trustees other than a successor to the Trustee shall refer to this Indenture and the condi-tion in this Article 13 expressed,'nd upon the acceptance in writing by
230 such trustee or trustees'or co-trustee or co-trustees, he, they or it shall be vested with the estates or property specified in such instrument, either jointly with .the Trustee,,or separately, as may be provided therein, subject to all the trusts,'onditions and,provisions of this Indenture; and'every such instrument shall be filed with the Trustee hereunder. Any separate trustee or'rustees, or any co-trustee or co-trustees, may at any time by an instr'umerit in writing constitute the Trustee his, their, oz its agent or attorney in fact, with full power and authority, to. the extent which may be permitted by law, to do any and all acts and things and exercise any and all discretion authorized or perinitted by him, them or it, for and in behalf of him, them or it, and in his, their or its name. In case any separate trustee or trustees or co-trustee or co-trustee's, or a successor to any of them, shall die, become incapable of acting, resign or be removed, all the. estates, prop-erty, rights, powers, trusts, duties and obligations of said separate trustee or co-trustee, so far, as'permitted by law, shall vest in and be exercised by the Trustee hereunder, without the appointment of a new trustee as successor to such separate trustee or co-trustee.
SEcxroN 13.20. Any successor trustee appointed hereunder shall execute, acknowledge and deliver to its predecessor trustee, and also to the Company, an instrument accepting such appointment hereunder, and thereupon such successor trustee, without any further act, deed or conveyance, shall become fully vested with all the estates, properties, rights, powers, trusts, duties and obligations of its predecessor in trust hereunder, with like effect as if originally named as trustee herein; but the trustee ceasing to act shall nevertheless, on the written request of the Company, or of the successor trustee, or of the holders of ten per centum (10%) in aggregate principal amount of .the bonds then outstanding hereunder, execute, acknowledge and deliver such instruments of conveyance and further assurance and do such other things as may reasonably be required for more fully and certainly vesting and confirming in such successor trustee all the right, title and interest of the trustee to which it succeeds, in and to the mort-gaged property and such rights, powers, trusts, duties and obli-
281 gations, and the trustee ceasing to act shall also, upon like request, pay over, assign and deliver to the successor trustee any money or other property which may then be in its possession subject to the lien of this Indenture, including any pledged securities which may then be in his or its possession. Should any deed, conveyance or instrument in writing froni the Company be required by the new trustee for more fully and certainly vesting in'and confirming to such new trustee such estates, properties, rights, powers, trusts, duties and obligations, any and all such deeds, conveyances and instruments in writing shall, on request, be executed, acknow'ledged and delivered by the Company.
SHcnoz 13.21. Any. corporation into which the Trustee may be merged or w'ith which it may be" cons'ofidated or any corporation result-ing from any merger or consolidation to which the Trustee shall be" a party or any corporation, to which s'ubstantially 'all the business and assets of the Trustee may be t'ransferred, shall be the successor trustee under this Indenture, without the execution or filing of any paper or the performance of any further act on the part of any other parties hereto, anything herein to the contrary notwithstanding, provided such corpo-ration shall be eligible under the pr'ovisions of Sections 4.08 and 18.01, and that, if such corporation shall not be qualified under the provisions of Section 13.14, such corporation shall, within ninety (90) days after becoming such successor trustee, either become qualifiied under the provisions of said Section 18.14 or resign in the manner and with the effect provided in said Section 18.14. In case any of the bonds con-templated to be issued hereunder shall have been authenticated but not delivered, any such successor to the Trustee may, subject to the same terms and conditions as though such. successor had itself authenticated such bonds, adopt the certificate of authentication of the original Trus-tee or of any successor to it as trustee hereunder, and deliver the said bonils so authenticated; and in ca'se any of said bonds shall not have been authenticated, any successor to the Trustee may authenticate such Eionds either in the nanie of any predecessor hereunder or in the name of the successor trustee, and in all such cases such certificate shall have tlie full force which it is anywhere in said bonds or in this Inden-
282
,ture provided that the certificate of the Trustee shall have; provided, however, that the right to authenticate bonds in the name of the Trustee shall apply only to'its successor or successors by merger or consolida-tion or transfer as aforesaid.
SEOTION 18.22. The duties, liabilities, rights, privileges and im-munities of the Trustee in relation to the holders of the bonds shall be governed exclusively by the laws of the State of New York.
ARTICLE 14 SUPPLEMENTAL INDENTURES SEOTIoN 14.01. The Company, when authorized by a resolution of its Board of Directors, and the Trustee from time to time and at any time, may enter into an indenture or indentures supplemental hereto and which thereafter shall form a part hereof, for one or more of the following purposes:
(a) To correct the description of any property hereby mort-gaged or pledged or intended so to be, or to convey, transfer and assign to the Trustee and to subject to the lien of this Indenture, with the same force and eGect as though specifically described in the Granting Clauses hereof, additional property then owned by the Company, acquired by it through purchase, consolidation, merger, donation or otherwise; (b) To add to the limitations specified herein on the amount, issue and purposes of issue of the bonds, or of any series thereof, other limitations thereafter to be observed, that the Company may deem to be advisable; (c) To provide for the creation of any series of bonds (other than the 1977 Series), designating the series to be created and specifying the form and provisions of bonds of such series as hereinbefore provided or permitted; (d) To provide for the creation of a sinking, amortization, improvement or other analogous fund for the benefit of all or any of the bonds of any one or more series, of such character and of such amount and upon such terms and conditions as shall be contained in such supplemental indenture;
233 (e) To vary the provisions contained in Article 5 of this Indenture, or to fix new provisions, in respect of the redemption of bonds of any series other than the 1977 Series; (f) To evidence the succession of another corporation to the Company, or successive successions, and assumption by a suc-cessor corporation of the covenants and obligations of the Com-pany under this Indenture; (g) To provide'for the issue under this Indenture, when duly authorized, of particular series of bonds convertible, at the option of the holders t'hereof, into other obligations or into capital stock of any class of the Company, within such period or periods and upon such terms and conditions as in such sup-plemental indenture shall be provided and as shall be appro-priately expressed in the bonds of such particular series; (h) To add to the covenants of the Company such further covenants as its Board of Directors shall consider to be for the protection of the mortgaged property and of, the holders of bonds issued or issuable under this Indenture, and to make the occurrence and continuance of a default in any of such addi-tional covenants a default permitting the enforcement of all or any of the several remedies provided in this Indenture as herein set forth; provided, howsoever, that in respect of any such additional covenant, such supplemental indenture may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such default, or may limit the remedies available to the Trustee upon such default; (i) To cure any ambiguity, or correct or supplement any inconsistent or defective provision contained herein or in any indenture supplemental hereto; (j) To make such provision in regard to matters or ques-tions arising under this Indenture as may be necessary or desir-able and not inconsistent with this Indenture; (k) To give eA'cct to action taken by bondholders pursuant to the provisions of Article 15 hereof; (l) To modify any of the provisions of this Indenture, pro-vided (i) that no such modification (unless made pursuant to
Article 15) shall be or become operative or efFective, or in any manner impair any of the rights of the bondholders or of the Trustee, while any bonds of the 1977 Series or of any other series established prior to the execution of such supple-mental indenture shall remain outstanding, (ii) that such sup-plernental indenture shall be specifically referred to in the text of all bonds of any series established after the execution of such supplemental indenture, (iii) that the Trustee may in its un-controlled discretion decline to enter into any such supplemental indenture which in its opinion may not a8ord adequate protec-tion to the Trustee when the same shall become operative, and (iv) that no such modifications shall be made if the same would be in conflict with the provisions of the Trust Indenture Act of 1939.
SEoTIoN 14.02. The Trustee is hereby authorized to join with the Company in the execution of any such supplemental indenture, to make any further appropriate agreements and stipulations which may be therein contained, and to accept the conveyance, transfer and assign-ments of any property thereunder. Any supplemental indenture exe-cuted in accordance with any of the provisions of this Article 14 shall thereafter Corm a part of this Indenture; and all the terms and condi-tions contained in any such supplemental indenture as to any provision authorized to be contained therein shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes, and, if deemed necessary. or desirable by the Trustee, any of such terms or conditions may be set forth in reasonable and customary manner in.
the bonds of the series to which such supplemental indenture shall apply. In case of the execution and delivery of any supplemental indenture, express reference may be made thereto in the. text of the bonds of any series authenticated and delivered. thereafter, if deemed necessary or desirable by the Trustee.
SEGTIoN 14.03. In each and every case provided for in this Article 14, the Trustee shall be entitled to exercise its discretion in determining or not any proposed supplemental indenture, or any term or 'hether provision therein contained, is proper or desirable, having in view the purposes of such instrument, the needs of the Company, and the rights
235 and interests of the bondholders, and the Trustee shall be under no responsibility or liability to the Company or to any bondholder or to anyone whomsoever, for any act or thing which it may do or decline to do in good faith and without negligence, subject to the provisions of this Article 14, in the exercise of such discretion. The Trustee shall be entitled to receive, and (subject to the provisions of Sections 18.02 and 13.08) shall be fully protected in relying upon, an opinion of counsel, as conclusive evidence that any such supplemental indenture complies with the provisions of this Indenture, and that it is proper for the Trustee, under the provisions of this Article 14, to join in the execution of such supplemental indenture.
SEGTIoN 14.04. Any supplemental indenture entered into pursuant to the provisions of this Article 14 shall conform to the Trust Indenture Act of 1989 as in force on the date of the execution of this Indenture or as in force upon the date of such supplemental indenture.
, ARTICLE 15 BONDHOLDERS MEETINGS AND CONSENTS SEGTIoN 15.01. The Trustee may at any time call a meeting of the bondholders to take any action specified in Section 15.06, In the event of the Trustee's failing for ten (10) days to call such a meeting after being thereunto requested either by the Company or by the holders of at least ten per centum (10%) in aggregate principal amount of the bonds outstanding, by written request. setting forth in reasonable detail the action proposed to be taken at the. meeting, either the Company or the holders of at least ten per centum (10%) in aggregate principal amount of the bonds outstanding may call such meeting. Every such, meeting shall be held in the Borough of Manhattan, The City of New York. For the purposes of this Article 15, the amount of bonds out-standing 'shall be determined in the manner provided in Section 1.03, and no bond excluded or disregarded under the provisions of said Section 1..08 in computing or determining a required percentage of the aggregate principal amount of bonds, shall be entitled to vote or consent under the provisions of this Article 15.
286 SEcnoN 15.02. Notice of every meeting of bondholders called pur-suant to Section 15.01, setting forth the purpose of such meeting in reasonable detail and the place and time of such meeting, and in general terms the business to'e transacted, shall be mailed by the Trustee (or by the Company or by the holders of at least ten per centum (10%)
in aggregate principal amount, whichever shall call the meeting pursu-ant to Section 15.01), not less than thirty (80) days before such meeting (a) to each registered'owner of outstanding registered bonds (whether fully registered, or registered as to principal only) affected by the busi-ness to be submitted to the meeting addressed to him at his address ap-pearing on the registration books of the Company, (b) to each holder of any bond payable to bearer so affected who shall within two years have filed with the Trustee an address for notices to be'addressed to him, (c) to each other holder of any other bond afFected by the business to bq sub-mitted to the meeting whose name and address appear on the latest information furnished to the Trustee as provided in Section 6.01, and (d) to the Company (and also to the Trustee, if it shall not have given the notice); and shall be published at least four (4) times, at intervals of not less than five (5) days, in an authorized newspaper in the Bor-ough of Manhattan, The City of New York, the first publication to be not less than sixty (60) and not more than ninety (90) days prior to the date fixed for the meeting; provided that such first publication may be less than sixty (60) but not less than thirty (30) days prior to the date fixed for the meeting if the Trustee in its absolute discretion deems such shorter notice advisable, and that it shall not be necessary for all four publications to be made in the same authorized newspaper; pro-vided, hoivever, that the mailing of such notice to any bondholders shall in no case be a condition precedent, to the validity of any action taken at any such meeting, and neither failure so to mail such notice to any such holder or holders nor any defect in such notice shall affect the validity of the proceedings taken at such meeting. The cost of publishing and/or mailing any such notice or notices shall be paid by the Company. Any meeting of hondholders shall be valid without notice, if thc holders of all bonds then outstanding hereunder are present in person or by proxy and if the Company and the Trustee are present by duly authorized representatives, or if notice is waived
237 in writing before or after the meeting by the Company, the holders of all bonds outstanding hereunder or by such as are not present in person or by proxy, and by the Trustee.
SEcnoN 15.03. The Trustee may (for the purpose of enabling the bondholders to be present and vote at any meeting without producing their bonds, and of enabling them to be present and vote at any such meeting by proxy) make, and may. from time to time vary, such regu-lations as it shall think fit for the deposit of unregistered bonds with or the exhibition thereof to any bank, banker or trust company or corpo-ration, firm or person, approved by the Trustee, and for the issue, to the person so depositing or exhibiting the same, of certificates by such bank, trust company or corporation, firm or person entitling the holders thereof to be present and vote at any such meeting and to appoint proxies to represent them and vote for them at any such meeting and at any adjournment thereof in the same way as if the persons so present and voting either personally or by proxy were the actual bearers of the bonds in respect of which such certificates shall have been issued, and any regulations so made shall be binding and effective and the votes given in accordance therewith shall be valid and shall be counted.
Any such certificate which does not require such bond or bonds to be deposited and remain on deposit until after the. meeting or until surrender of such certificate shall eitlier (a) recite that the bond or bonds in respect of which such certificate was issued have been endorsed by any such bank, banker, trust company or corporation, firm or person, with a notation as to the issuance of such certificate (and all such bonds shall be so endorsed), or (b) shall entitle, the holder thereof or his proxy to vote at any meeting only if the bond or bonds in respect of which it was issued are not produced at the time of the meeting by any person and are not at the time of the meeting registered in the name of any person or exchanged for a registered bond or bonds without coupons. In the event tliat two or more such certifiicates shall be issued with respect to any bond or bonds, the certificate hearing tlie latest date sliall be recognired and he deemed to supersede any certificate or certificates previously issued in respect of such bond or
238 bonds. If any such meeting shall have been called by bondholders or by the Company as aforesaid, upon failure of the Trustee to call the same after having been so requested to do under the provisions of Section 15.01, regulations to like effect for such deposit of bonds with, and issue of certificates by, any bank, banker or trust company organized under the laws of the United States of America, or of any State thereof, having a capital of not less than $ 500,000, shall be simi-larly binding and effective for all purposes hereof, if adopted or ap-proved by the bondholders calling such m'ecting or by, the Board of Directors of the Company, if such meeting shall have been called by the Company, provided that in either such case copies of such regula-tions shall be filed ivith the Trustee. Owners of fully registered bonds and coupon bonds registered as to principal may, by proxy duly consti-tuted in writing, appoint any person to vote at any meeting for them.
Each such writing shall state the aggregate principal amount of bonds in respect of which the person authorized thereby is entitled to vote. Save as in this Section 15.03 otherwise expressly provided, the only persons who shall be recognized at any meeting as holders of any bonds, or as entitled to vote or be present at the meeting in respect thereof, shall be the persons who produce unregistered bonds at the meeting and the registered bondholders (whether fully registered or registered as to principal only).
SEoTioN 15.04. The quorum at any such meeting shall be persons holding or representing by proxy at least seventy-five per centum (75%) in aggregate principal amount of the bonds outstanding; but less than a quorum may adjourn the meeting from time to,time and the meeting may be held as a'djourned, whether such adjournment shall have been had by a quorum or by less than a quorum; provided, hoivever, that if such meeting is adjourned'y less than a quorum for more than fourteen (14) days, notice thereof shall forthwith be mailed by the Trustee, if such meeting shall have been called by the Trustee, to each registered owner of bonds (whether fully registered or registered as to principal only) then outstanding, addressed to him at his address appearing on the registry books of the Company and to the Company,
289 and shall be published at least once in each fourteen-day period of such adjournment in an authorized newspaper in the Borough of Manhattan, The City of New York, but the failure to mail any such notice to any such bondholder as aforesaid shall in no case affect the validity of any action taken at any meeting held pursuant to such adjournment. If such meeting shall have been called by the bondholders or by the Com-pany, after the failure of the Trustee to eall the same after being requested so to do as aforesaid, notice of such adjournment shall be given by the permanent Chairman and permanent Secretary of the meeting in the newspapers and for the number of times above specified in this Section and shall be sufhcient if so given.
Persons named by the Trustee, if represented at the meeting, shall act as temporary Chairman and temporary Secretary of the meeting; but if the Trustee shall notbe present or shall fail to nominate such persons or if such persons'nominated shall not be present, the bond-holders and proxies present shall by a majority vote,,irrespective of the amount of their holdings, elect other persons from those present to fill such vacancies. The meeting shall be organized,-irrespective of whether a quorum is present, by the election of a permanent Chairman and a permanent Secretary of such meeting from those present by the bondholders and proxies present by a majority vote, according to principal amount, The Trustee, if represented at the meeting, shal) appoint two Inspectors of Votes, who shall count all votes cast at such meeting except votes on the election of a Chairman and Secretary, both 'temporary and permanent, as aforesaid, and who shall make and file with the permanent Secretary of the meeting their verified written report in triplicate of all such votes so cast at said meeting. If the Trustee shall not be represented at the meeting, or shall fail to appoint such Inspectors of Votes or if either Inspector of Votes fails to attend the meeting, the vacancy shall be filled by appointment by the perma-nent Chairman of the meeting. The Chairman of the meeting shall have no right to vote other than by virtue of bonds held by him or by instruments in writing as aforesaid duly designating him as the person to vote on behalf of other bondholders.
240 SEcxroN 15.05. Any representative of the Trustee, and its counsel, and any representative of the Company, and its counsel, may attend and speak at'any such meeting, but shall not be entitled to voto thereat other than by virtue of bonds held by them (subject to the provisions of Section 1.03) or by instruments in writing as aforesaid duly designat-ing them as the persons to vote on behalf of other bondholders; SEGTIoN 15.06. A meeting of the bondholders shall have the power, by resolution aSrmatively voted for by the holders of at least seventy-five per centum (75%) in aggregate principal amount of the bonds then outstanding, to (a) sanction any change or alteration of any provision in this Indenture and any modification or compromise of the rights of the bondholders against the Company or against its prop-erty (including those pertaining to any sinking or other fund),
whether such rights shall arise under the provisions of this Indenture, or otherwise, provided that no such change or altera--
tion which, in the opinion of the Trustee, aGects the rights, duties or immunities of the Trustee under this Indenture,'may be made without the consent of the Trustee; (b) require the Trustee on having entered into or taken possession of the mortgaged property, or any part thereof, to restore the same to the Company upon such conditions as the bondholders may direct; (c) require the Trustee to exercise or refrain from exercis-ing any of the powers conferred upon it by this Indenture and to direct the manner of the exercise of any such power or waive any default on the part of the Company other than the non-payment of any principal moneys at maturity, or the non-pay-ment of interest when and as the same may become due and payable, upon such terms as may be decided upon; (d) authorize the Trustee in its discretion'o bid at any sale of the mortgaged property, or'any part thereof, and to tender in payment or part payment on account of any property so purchased, all or any part of the bonds then outstanding which may be placed at its disposal for that purpose and to give the Company a valid discharge in respect of the amount of
bonds so tendered, and to hold any property so purchased in trust for all of the holders of outstanding bonds pro rata in proportion to the amounts held by them respectively before making such tender.
Pfovided, however, that any resolution affecting one or more (but less than all) series of bonds issued hereunder shall be required to be adopted only by the afiirmative vote of the holders of at least seventy-five per centum (75/0) in aggregate principal amount of out-standing bonds of such one or more series so affected, but nothing contained in this proviso shall be deemed to affect any'of the rights granted to bondholders by Article 9 to give any direction to the Trus-tee or'to waive any default on the part of the Company; and 5'urther provided, that the foregoing enumeration of specific powers shall not restrict the powers of a meeting of bondholders to make any modifications thereof which they may deem'necessary, but that, any-thing in this Article 15 to the contrary notwithstanding, the bondhold-ers, without the consent of the holder of each bond affected, shall have no power to extend the time of payment of the principal of, or of the interest or premium, if any, on, any bonds, or to reduce the principal amount thereof or the rate of interest or the premium, if any, thereon, or otherwise to modify the terms of payment of such prin-cipal or interest, or premium, if any, or to permit the creation of any lien ranking prior to or on a parity with the lien of this Inden-ture on any of the mortgaged property, or to deprive any non-assenting bondholder of the benefit of a lien upon the mortgaged prop-erty for the security of his bonds (subject only to permitted encum-brances and to any other liens existing upon said property which are prior hereto at the date of the calling of any such bondholders'eeting or of the giving of written consent under the provisions of Section 15.10) or to reduce the percentage of-bondholders authorized to take action under the provisions of this Article 15; provided, Lou<ever, that the prohibition against the modification of the terms of payment of the principal or interest of any bonds hereinabove contained shall not pre-vent the change or alteration of provisions of the Indenture, which such changes or alterations affect a waiver, abolition, reduction or increase
242 of any sinking or other fund, or change or alter the method of its operation or application. For all purposes of this Article 15, the Trustee shall, subject to the provisions of Sections 18.02 and 13.03, be entitled to rely upon an opinion of counsel with respect to the extent, if any, to which any action taken at such meeting, affects the rights, under this Indenture or under any indenture supplemental hereto, of any holders of bonds then outstanding hereunder.
SEGTloN 15.07. No such resolution so passed at a meeting of bond-holders shall be binding unless and until there shall have been delivered to the Trustee a certified resolution of the Board of Directors approv-ing'n form or in substance such bondholders'esolution, and adopted either before or after the adoption of such bondholders'esolution.
Upon the delivery of such certified resolution to the Trustee any such resolution so passed at a meeting of the bondholders duly convened and held shall be binding upon all bondholders, whether present or not at such meeting, and each of the bondholders and the Trustee shall be bound to give effect thereto accordingly, and the passing of any such resolution shall be conclusive evidence that-the circumstances justify the passing thereof, the intention being that it shall rest with the meeting to determine without appeal whether or not the circumstances justify the passing of such resolution; provided, 'however, that any direction or authorization contained in any such resolution shall not be otherwise than in accordance with the provisions of law; and pro-vided further, that, subject to the provisions of Sections 18.02 and 18.03, the Trustee shall have the right to decline to follow any such direction or authorization and to give effect to any such resolution if the Trustee shall be advised by counsel that the action or proceeding directed or authorized by such resolution may not lawfully be taken, or if the Trustee in good faith shall by a responsible officer or officers deter-mine that the Trustee will not be sufficiently indemnified for any expen-ditures or liabilities to be incurred by it in any action or proceeding so directed, and that, subject to the provisions of Sections 13.02 and 18.03, the Trustee'shall not be responsible to anyone for any action taken or omitted by it in good faith and without negligence pursuant to any such direction or authorization.
248 SEmioN 15.08. A record in duplicate of the proceedings of each meeting of bondholders shall be prepared by the permanent Secretary of the meeting and shall have attached thereto the original reports of the Inspectors of Votes, and aKdavits by one or more persons having knowledge of the facts showing a copy of the notice of the meeting and a copy of the notice of adjournment thereof, if required, and showing that said notices were mailed and published as provided in this Article 15. Such records shall be signed and verified by the afii-davits of 'the permanent Chairman and the permanent Secretary of the meeting (and a duly authorized representative of the Trustee if such a representative was present'at the meeting) and one duplicate thereof shall be delivered to the Company and one to the Trustee, Any record so signed and verified shall be proof of the matters therein stated until the contrary is proved and such meeting shall be deemed con-clusively to have been convened and held, and any resolution or pro-ceeding stated in such record to have been adopted or taken shall be deemed conclusively to have been duly adopted or taken at such.
meeting.
SEcnoN 15.09. Bonds authenticated and delivered after the date of any'bondholder's'eeting may bear a notation, in form approved by the.'Trustee, as to the action taken at'meetings of bondholders thereto-fore held, and upon demand of the holder of any bond outstanding at the date of any such meeting and presentation of his bond for the pur-pose at the principal ofiice of the Trustee, the Company shall cau'se suitable notation to be made on such bond by endorsement or otherwise as to any action taken at any meeting of bondholders theretofore held.,
If the Company or the Trustee shall so determine, new bonds so modified that they will, in the opinion of the Trustee and the Board of Directors, conform to such bondholders'esolutions, shall be pre-pared, authenticated and delivered, and such new bonds shall be exchanged for bonds of the same series and maturity then outstand-ing hereunder', upon demand of, and without cost to, the holders thereof, upon surrender of such bonds, and, if coupon bonds, with all unmatured coupons appertaining thereto. The Company or the
Trustee may require bonds to be presented for notation or exchange as aforesaid, if either shall see fit to do so. Instruments supplemental to this Indenture, embodying any modification or alteration of this Indenture or of any indenture supplemental hereto made at any bond-holders'eeting, may be executed by the Trustee and the Company';
and upon demand of the Trustee, or if so specified in any resolution adopted by any such bondholders'eeting, shall (subject to the provi-sions "of subparagraph (a) of Section 15.06, and of Section 15.07) be executed by the Company and the Trustee. The Trustee shall, subject to the provisions of Sections 13.02 and 13.03, be fully protected in rely-ing upon an opinion of counsel as conclusive evidence that any such supplemental indenture complies with the provisions of this Indenture and that it is proper for the Trustee, under the provisions of this Article 15, to join in the execution thereof.
SEOTION 15.10. Any action which can be taken pursuant to a bondholders'eeting as in this Article 15 provided may also be taken without such meeting, provided that the written consent of the holders (or the persons entitled to vote the same) of the percentages of bonds specified in this Article 15 to such action is given and that the approval of the Board of Directors of the Company, and, if required by this Article 15, the written consent of the Trustee, is given as provided by this Article 15.
ARTICLE 16 DEFEASANCE SEcTloN 16.01. If the Company shall pay and discharge the entire indebtedness on all bonds outstanding hereunder in any one or more of the following ways, to wit:
A. By well and truly paying or causing to be paid the principal of (including redemption premium, if any) and inter-est on bonds outstanding hereunder, as and when the same become due and payable; B. By depositing with the Trustee, in trust, at or before maturity, cash sufiicient to pay or redeem the bonds outstand-
245 ing hereunder, with irrevocable directions so to apply the same (subject to the provisions of Section 16.02), provided, however, that in case of redemption the notice requisite to the validity of such redemption shall have been given or irrevocable authority shall have been given by the Company to the Trustee to give such notice, under arrangements satisfactory to the Trustee; and/or C. By delivering to the Trustee, for cancellation by it, all the bonds outstanding hereunder, together with all unpaid coupons thereto belonging; and if the Company shall also pay or cause to be paid all other sums payable hereunder by the Company (except in respect of any refund or reimbursement of taxes, assessments or other governmental charges as to bonds of any series, for which the holders of bonds shall look only to the Company), then and in that case this Indenture and the lien, rights and interests hereby granted shall cease, determine, and become null and void, and thereupon the Trustee shall, upon demand of the Company, forthwith cause satisfaction and discharge of this Indenture to be entered upon the record at the cost and charge of the Company, and shall execute and deliver such instruments of satisfac-tion as may be necessary, and forthwith the estate, right, title and interest of the Trustee in and to any cash (except cash deposited under this Section 16.01) and other personal property held by it under this Indenture shall thereupon cease, determine, and become null and void, and the Trustee shall in such case transfer, deliver and pay the same to or upon the written order of the Company.
In any such case the Company shall furnish to the Trustee a certificate of the Company and an opinion of counsel as to compliance with conditions precedent.
Any bonds previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever and which it shall at any time surrender to the Trustee for cancellation, together with any coupons thereto appertaining, shall upon the surrender and cancellation of such bonds and coupons be deemed to be paid and retired.
246 SEGTIoN 16.02. At the expiration of six (6) years following the due date of coupons or the maturity date of bonds (original or accelerated by redemption or otherwise) the trust established by the terms of this Indenture on moneys deposited for the payment of interest on or of principal (and premium, if any) of the bonds, as the case may be, shall automatically cease and terminate and any moneys deposited for such purposes then remaining on deposit with the Trustee un-claimed by the holders entitled thereto may be repaid by the Trustee to the Company and shall be repaid to the Company by the Trustee on written demand made after such date; and the holder of any of the bonds or coupons entitled to receive such moneys shall thereafter look o'nly to the Company for the payment thereof; provided, however, that the Trustee, before being required to make any such repayment, may at the expense of the Company cause to be published once a week for two (2) successive weeks (in each case on any day of the week) in an authorized newspaper in the Borough of Manhattan, The City of New York, a notice to the eGect that said moneys have not been applied to the purpose for which they were deposited, that said trust has terminated, and that after a date named therein, which'shall be not less than ten (10) days after the date of first publication of said notice, any unclaimed balance of said moneys then remaining in the hands of the Trustee will be returned to the Company.
SEGTIQN 16.03. Upon the satisfaction and discharge of this Inden-ture all moneys then held by any paying agent under the provisions of this Indenture shall, upon demand of the Company, be repaid to it and thereupon suc)i paying agent shall be released from all further liability witli respect to sucli moneys.
ARTICLE 17 MiscE~zEovs SEGTIQN 17.01. Nothing, in this Indenture, expressed or implied, is intended or shall be construed to confer upon or to give to any person or corporation, other than the parties hereto and the holders of the bonds and coupons outstanding hereunder, any right, remedy, or
247 claim under or by reason of this Indenture or any covenant, condition or stipulation hereof; and all the covenants, stipulations, promises and agreements in this Indenture contained by and on behalf of the Company shall be for the sole and exclusive benefit of the parties hereto, and of the holders of the bonds and of the coupons outstand-ing hereunder.
SEGTIQN 17.02. Except as otherwise provided herein, whenever in
'this Indenture any of the parties hereto is named or referred to, such name or reference shall be deemed to include the successors'r assigns of such party, and all the covenants and agreements in this by or on behalf of the Company or by or on behalf of the Indenture'ontained Trustee shall bind and inure to the benefit of the respective suc-cessors and assigns of such parties, whether so expressed or not.
SEOTION 17.03. Any notice or demand by any bondholder to or upon the Trustee shall be due and sufFicient notice or demand for each and every purpose hereunder if made by written instrument delivered to the Trustee at its principal oKce, No. 1 Wall Street, in the Borough of Manhattan, The City of New York. Any notice or demand which by any provision of this Indenture is required or provided to be given or served by the Trustee or by any bondholder upon the Company shall be deemed to have been suSciently given or served for all pur-poses if mailed as registered mail matter, postage prepaid,'ddressed as follows in case of the Company:
PUBLIG SERvicE CoÃPANY 0F NEw MExicop 424 West Central Avenue Albuquerque, New Mexico or addressed to the Company at any other address which it may file with the Trustee as the address to which notices or demands shall be mailed.
I SEerioN l.7.04. All liarties to this Indenture agree, and eacli holder or owner of any bond by his acceptance thereof shall be deemed
to have agreed, that any court may in its discretion require in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party litigant in such suit of an under-taking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys'ees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section 17.04 shall not apply to any suit instituted by the Trustee or the Company, to any suit insti-tuted by any bondholder, or group of bondholders, holding in the aggregate more than ten per centum (10%) in aggregate principal ainount of the bonds outstan'ding, or to any suit instituted by any bondholder for the enforcement of the payment of the principal of or interest on any bond, on or after the respective due dates expressed in such bond.
SEcTIoN 17.05. If and to the extent that any provision .of this Indenture limits, qualifies, or confiicts.with any other provision in-cluded herein that is required to be included herein by the Trust Inden-ture Act of 1989, such required provision shall control.
SECTION 17.06. This Indenture may be simultaneously executed in any number of counterparts, and all such counterparts executed and delivered, each as an original, shall constitute but one and the same instrument.
Iz WxxzEss WHzaEoz, Public Service Company of New Mexico, party hereto of the first part, has caused its corporate name to be hereunto affixed, and this instrument to be signed by its President or Vice-President, and its corporate seal to be hereunto affixed and at-tested by its Secretary or Assistant Secretary for and in its behalf; and Irving Trust Company, party hereto of the second part, in evi'-
dence of its'acceptance of the trust hereby created, has caused its cor-porate name to be hereunto affixed, and this instrument to be signed by its President or a Vice-President and its corporate seal to be here-
249 unto aSxed and attested by its Secretary or an Assistant Secretary, for and in its behalf, all as of the first day of June, 1947.
PURLlc SERVIcE CohIPANY oF NEw MExIco, By ARTHUR PRAGER President.
(CORPORATE SEAL)
Attest:,
R. T. MAOBAIN Secretary.
Signed, sealed 'and delivered by Pvauc, SERvIcE CQMPANY oP NEw MEKIco in the presence'f CLINTON J. RUCH JosEpH MosKovITz IRVING TRUsT CohfPANY, By BEN F. SEssEI.
Vice-President.
/
(CORPORATE SEAL)
Attest:
E. J. VErrcH Assistant Secretary.
Signed, sealed and delivered by IRVINo TRvsT CoMPANY in the presence of M. E. LEwIs D. LORIOT
250 STATE OF NEW YORK ss.
COUNTY OF NEW YORK )
On this 10th day of July, 1947, before me. appeared ARTHUR PRAGERp to me personally known, who, being by me duly sworn, did say that he is the President of PUELIo SERvIcE COMFANv oF NEw MExIco, and that the seal a5xed to said instrument is the corporate seal of said corporation, and that said instrument was signed and sealed in behalf of said corporation by authority of'its Board of Directors, and said Arthur Prager acknowledged said instrument to be the free act and deed of said corporation.
KATHLEEN H. GRIFFIN (NOTARIAL SEAL)
KATHLEEN H. GRIFFIN Notary Public in State of New York Residing in Kings Co. at time of Appointment
¹Kings Co. Clk's No, 338, Reg. 350-6-8 Y. Co. Clk's No. 904, Reg. No. 453-6-8 Term Expires March 30, 1948
251'TATE OF NEw YORK COUNTY OF NET YORK On this 10th day of July, 1947, before me appeared Ben %'. Sessel; to me personally known, who, being by me duly sworn, did say that he is a Vice President of Irving Trust Company, and that the seal aAixed to said instrument is the corporate seal of, said corporation, and that said instrument was signed and sealed in behalf of said eoryo-ration by authority of its Board of Directors, and said Ben F. Sessel acknowledged said instrument to be'he free act and deed of said corporation.
KATHLEEN H. GRIFFIN (NOTARIAL SEAL)
KATHLEEN H. GRIFFIN Notary Public in State of New York Residing in Kings Co. at. time of Appointment Kings Co. Clk's No. 338, Reg. 350-G-8 N. Y. Co. Clk's No. 904, Reg. No. 453-G-8'erm Expires March 30, 1948 United States Revenue Stamps in the amount of $7,480 have been affixed to an cxccuted counterpart hereof, now on file with thc undersigned, as Trustee, and duly cancelled as required by law.
IRVINc TRUsT CohtPhNY By E. 7. Vetrcu Asst'. Secretary
I I
252 The Foregoing Indenture Was Filed for Record as Follows:
Date of Filing asa Date of Filing County of Real Estate Real Estate as a Chattel Mortgage New Mexico Mortgage Hour Mortgage Record Chattel Mortgage Hour Record Number Bernalillo July15,1947 4:ISP.M. Vol. 14 TD, Folio 271 et seq. July 15, 1947 4:16P. hf. Book 12-B, p. 83 61844 Luna July15,1947 4:42P.Xf., Bk. 25, Mtg. and Rel. pgs. 1-138 July15, 1947 4:42P. M. 5 Chatt. Xftge. 15895 SanMiguel July15,1947 3:45P.M. Bk. 43 of Mtgs., pgs. 439-510 July15, 1947 3:45P.M. Book 5, p. P 141 Sandoval July 15, 1947 3:51 P. M. Vol. 5 Misc. Mtgs. Folio 535-578; 589-619 July 15,1947 3:53 P. hf. Reception Rec. Chattel Mtgs.
under No. 7208 7208 Santa Fe Julyl5,1947 4:25P.M. Bk. 37 of Mtgs., pgs.97-173 July15, 1947 4:26P.M. Chattel Mtge. Index Jan. 1, 1941 to Date, p. 83 53928.
Socorro July15,1947 3:45P.M~ Bk 143 of Mtg. Records pgs. 591-QO July15,-1947 3:45P.M. Book 8, p.48 240 and Bk. 150 of Mtg. Records, pgs. 1-88 Torrance July15, 1947 4:OOP. M. Bk. 85 of Mtgs., pgs. 1-124 inc. July15, 1947 4:OOP.M. Book A-6, p. 319 Valencia July15,1947 3:50P.M. Vol. 70 of Records, Folio 426 et seq. July15,1947 3:SOP.M. Book 4 23743
I I
I I
UESTION 9 Provide for each participantI a detailed explanation of all restrictions or constraints on the issuance of short and long-term debt, preferred stock, preference stock and common 'stock. Short-term debt should in-clude bank. lines of credit and commercial paper, if any.
ANSWER TO Q,UESTION s
Constraints on the'ssuance of short term debt are set by the Boar'd 'of
,, Directors. Current maximum limit is $ 40 million, including total bank lines of credit and commercial paper. Established bank lines of credit are
$ 38,5303000.
The Security & Exchange Commisshn has stated regarding commercial paper that the aggregate amount at any one time for any public utility com-pany would not exceed 25% of the company's gross revenues during the preceding4 12 months of operation.
Constraints on the issuance of long term debt, preferred stock, preference and common stock are specified in the Articles of Incorporation and the Indenture.
Reference to specific restrictions are as follows: "
Lon Term Debt Indenture, Article 3, Authentication and Delivery of Bonds. See in particular Section 3.04 (Bonds issuable upon basis of property additions not to exceed 60% of net property additions," evidenced) and Section 3.05 (Net earnings requirements for issuance of Bonds on basis of property addition).
Preferred Stock Articles of Incor oration, Article Fourth, Paragraph E, Cumulative PereIrred Stock, page 13. Items (2)'(a) end (II) (Earnings tests).
Public Service Commission of New Mexico Jurisdiction As a public utility in the State of New Mexico, the company is under 'the jurisdiction of the Public Service Commission of New Mexico, and accordingly, must secure the Commission's authorization on issuance of all permanent
,financing.
Cur'rently the company has authorized 10,000,000 shares of Common Stock and 2,500,000 Cumulative Preferred'Stock (See Prospectus, .675,000 Shares, Dated September 24, 1975).
As
UESTION 10 Describe the nature and amount of each participant's most recent rate relief action(s) and its anticipated effects on earnings and on funds available for construction. Provide copies of the rate order and opin-ion. In addition, indicate the nature and amount of any pending rate relief action(s). Use the attached form to provide this information.
ANSWER TO UESTION 10 On December 20, 1973 Public Service Company of New Mexico (PNM) filed with the New Mexico Public Service Commission (NMPSC) for an overall increase in jurisdictional rates of approximately 11.5% based on 1973 year end annualized test year. On October 10, 1974 the NMPSC entered its Final Decision and Order allowing an increase of 6.6%. PNM ap-pealed this decision in the Santa Fe County'istrict Court.
On January 31, 1975 PNM filed with the NMPSC a petition to approve a "Cost of Service Index" which is explained in the enclosed Decision and Order. On April 22, 1975 the NMPSC granted a 9.8% general rate'ncrease based on 1973 test year and ordered the "Cost of Service Index" be ap-proved ending the case under appeal. The NMPSC Decision and Order in Case 1196 involving the "Cost of Service Index" provides PNM with a vehicle for quarterly adjustment of rates. The target of such adjustment is a return in equity capital of 13.5% to 14.5%
F PNM currently has two rate cases pending for two special contract cus-tomers. The first is'a case before the Federal Power Commission in-volving a sale for resale customer requesting a general rate increase of $ 850,000 per year based on average test year 1974. The other is pending before the NMPSC and involves a $ 818,000 general rate increase based on annualized test year 1974. In the second pending case interim rate relief was granted after hearing before the %PSC. Anticipated effect on earnings of these other cases is unpredictable.
Anticipated effects of these rate changes on funds available for con-struction are also unpredictable.
The testimony of Eugene W. Meyer in NMPSC CASE 1196 and FPC Docket E-9454 are attached.
0 0-
ATTACHMENT FOR ITEM NO. 10 RATE DEVELOPMENTS++-1975 Electric Gas Steam Granted+ New Mexico Public Service Commission Case 1196 Annual amount - test year basis (000's) $ 5,800 (1973 Year End Test Year)
Percent increase 9'.7/o Effective date April 22, 1975 Rate of return on rate base authorized. "
9 of return on common equity authorized. 14 3'ate Revenue Effect 000's "Amount received. in year granted. Unknown
. Amount received in subsequent year Unknown Amount (000's) $ 850 (1974 Average Test Year)
Percent increase 724 Date filed May 22, 1975 Date by which decision must be issued. None Rate of return on rate base. requested. 9 931'5 Rate of return on common equity requested. 15.5$
+Provide copies of latest rate order.
~Provide copies of the submitted. financial testimony of the staff and. company in the last rate relief action or pending rate relief request.
0 0
ATTACHMENT FOR ITEM NO., 10 RATE DEVELOPMENTS~-1975 Electric Gas Steam Granted+ New Mexico Public Service Commission Case 1196 Annual amount - test year basis (000's) $ 1,750 (for 2nd. Quarter, 1975)
Percent increase 9.4%
Effective date August 6, 1975 Rate of return on rate base authori:zed. 9.27%
Rate of return. on common equity authorized. 13-5N Revenue Effect 000's Amount received. in year granted. Unknown Amount received. in subsequent year Unknown Pend,'Re uests New Mexico Public Service Commission Case 1233 Amount (000's) $ 818 (1974 Year End. Test Year)
Percent increase 2S Date filed. July 9, 1975 Date by which decision must be issued. May 9, 1976 Rate of return on rate base requested 8.9g Rate of return on common equity requested. 12 8
+Provide copies of latest rate order.
~Provide copies of the submitted. financial testimony of the staff and. company in the last rate relief action or pending rate relief request.
NEW MEXICO PUBLIC'SERVICE COMMISSION DECISION AND ORDER APRIL 22, l975 COST OF SERVICE INDEX FOR THE PUBLlC SERVlCE COh/!PANY OF NEW MEXlCO
I l 4 I
BEFORE THE NEW MEXICO PUBLIC SERVICE COMMISSION IN THE MATTER OF A RATE FILING )
BY PUBLIC SERVICE COMPANY OF )
NEW MEXICO, )
)
PUBLIC SFRVICE COMPANY OF )
NEW MEXICO, )
Respondent ), Case'o. 1196 DECISION AND ORDER Introduction This Decision and Order departs from traditional methods of regulating and fixing rates for the scrviccs of a public utility and establishes a new method one which is innovativo to this state and, apparently, for the nation as well. Departure ond innovotion require more extensive explanation than is ordinarily necessary so too does the new reality of current and future energy generation, tronsmlssionr distribu-tion ond use. To those offccted by the new method, who we serve, thc explanation is owed. And that this method may serve their best interests, we are constrained to explain it fully to those whose cooperation wc seek namely to private investors whose capital Public Service Company of'ew Mexico (PNM or tt e Company) must have but connot draft.
The Porties.
The Company is a New Mexico corporation and a public utility. It ls a "public scrvicc," but not a "public," corporation. That is to say, it wos not created by thc stoic for political purposes to act as an agency of government; rather, white it is obliged to serve the public, its capital or invested funds must be derived from private investors, not fro,n government. PNM furnishes two types of essential services to its customers namely, electric cncrgy and water services. As an electric utility, it furnlshcs services at retail to consumers in New Mexico~ and, in this regard, PNM is subject lo our regulatory and supervisory jurisdiction and authority. Thc Company also V
sells electric energy at wholcsalc to other customers for resole to third persons in New Mexico ond clsewhcre. In this connection, it is subject to the jurisdiction and authority of the Federal Power Commission (FPC).
Appearing as intcrvenors in this proceeding arc four other parties: The New Mexico Attorney General, who appears on behalf of the Company's New Mexico customers; Southwest Research and Information Center, Inc., a nonprofit corporation concerned with environmental and consumer protection; thc Southwest Vatley Area Council, rcprcscnting the interests of low, fixed income consumers in the Albuqucrquc area; the City of Gallup, a wholesale customer of PNM and a distributor and retailer of electric energy to its own rcsidcnts.
Histor of Proceedings; Summer of Applications.
Thc central problem or predicament with which we ore confronted in this proceeding is illustrated, to some extent; by its immediate predecessor, also instituted by PNM, the appeal of our order in that proceeding by the Company to the Santa Fe County District Court, ond institution of this proceeding by the Company while its oppcal wos yet pending, all within the space of 13 months.
In Case No. 1131, the Company sought our approval of an overall increase in jurisdictional service rates, and thus in service revenues, of approximately 15 percent.
The case was instituted on Dccembcr 20, 1973, and, ofter 15 days of public hearings held over a four month period, this Commission entered its Decision and Order in Casa No. 1131 on October .10, 1974, allowing an overoll avcrogc increase of 6.5584 percent.
As applied to fhe Company's 1973 annuaiized test ycor, this Order was dcsigncd to result in a 14 percent annual rate of return on PNM's common equity capital properly allocable to the furnishing of electric energy services to New Mexico retail consumers, as well as recovery of all otlar costs of service. Thc Company appealed the Order, as indicated.
During the year in which Case No. 1131 was pending 1974, it appcors
that the Company earned only 9.7 percent on average total common equity capitol and 10.1 percent on average common equity copital allocable to our jurisdiction, after rccopture of its other costs of scrvicc. hlo doubt, thc expcriencc inspired PHM to institute this proceeding by the filing of its Advice Notice Ho. 88 and Revised Hew Mexico Public Service Commission Sheet bios. 415 and 416 on January 31, 1975.
In this proceeding, PhlM does not seek a general increase in service rates.
Nor docs it sock Commission approval of a ncw or different design of rates for its several classes of rctall customers. Rather, by stipulation with the Commission and the other parties to this proceeding, the Company consents to a reduction in somo of the service rates now in offect and seeks approval of a new method of automatically adjusting all service rates hereby approved by us on a regular quarterly basis so as to reestablish and maintain stable and reliable earnings on jurisdictional common equity capital within fairly narrow parameters on cithcr side of a 14 percent rate of return.
This novel request is met with equally unprecedented response from the two consumer oriented intervcnors. Southwest Research and Information Center, inc., and the South-west Yalley Area Council support the Company's rcqucst.
Respecting P HM's petition, we hove held an additional two days of hcaringsr at which witnesses export in the fields of energy economics, financing and underwriting, and clcctric utility management, engineering, accounting and law, appeared and testified. As a result of thcsc hearings, we are now persuaded that thc new method must be tried because of thc circumstances and for the reasons hereinafter described and explain-ed os to PNM.
c ow+
The Problems Because thc services of public utilitics ore fundamentally and functionally essential to the well-acing of modern society, as well as to the development and vigor of the economy which supports it, ond because such scrviccs require massive investments of capital in necessary plant and cquipment "It is thc declared policy of the state that the public interest, thc interest of consumers, and the interest of investors require the regulation ond supervision of such public utilitics to the cnd that reasonable and proper scrviccs shall bc ovail-able ot fair, just and rcasonablc rates, and to the cnd that capitol and investmcnt may be encouraged ond attracted so os to provide for thc construction, development and extension, without unnecessary duplicotion ond economic waste, of proper plants and facilitics for the renditign of services to the general public and to industry."
Thc duty and power to perform this task of regulating and supervising all public utilities furnishing energy and water services ot retail in Ncw Mexico have been imposed upon 3
and delegotcd to this Commission by the Legislature.
As to privately owned public utilities, our principal powers and duties in 4
these respects are: (1) Prior certification of utility plant construction and operationr (2) control of the issuance of public utility securities, (3) regulation of the character 6
and quality of services, and (4) approval or fixing of service prices or rates. This last mentioned power is a necessary corollary to the consequences of the first that is, in an effort to avoid economic waste resulting from unnecessory, ovcrlopping duplication of costly plant and equipment, public utilities orc created and maintained as monopolies within their respcctivc service areas, and, since competition in thc supply of public utility services is thereby climinatcd or scvcrly restricted, the ability of competitive
- 2. g68N-, N.M.S.A., 953.
3~ $ 68 5 4r N M S A r 1953 4 $ 68 7 lg N M S A r 1953
- 5. $ 68-5<, N.M.S.A., 1953
- 6. $ 68-5-19, N.M,S.A., 1953 7o tt68-6-7, N.M.S.A., 1953
marhct iorccs to~dircctl set prices for such services is also eiimiaotcd. paroathet cally, howcvcr, it should bc noted that this insulation from competition in the furnishing and sale of csscntial scrviccs within a service area does not insulate the public utility from t
competition in the acquisition and purchcse of that which it must have in order to furnish services. That is to say, though protected from coinpctition in the sale of its services, thc public utility must nevertlieless compete with all other commercial enterprises in the acquisition of thc ingredients from which its services are fashioned. And, for the most part, the prices of these ingredients ore fixed by competitive market forces over which fhc service rate regulatory authority and the public utility have no direct control.
They arc, however, quantifiablo and objectively determinablc. Broadly speaking, such costs are of four types: (1) Operation and maintenance costs, (2) depreciation and amortization costs, (3) fax costs, and (4) capital costs.
On previous occasions, this Commission and others like it, as well as in-numerable appellate courts, have addressed themselves to the constitutional and statutory P arameters of their powers and obligations in approving and fixing the service rates of public utilities. No useful purpose would be served here by a lengthy analysis and restatement of these parameters. Suffice it to say that the constitutional reciprocal to statutory Imposition of the duty upon a public utility to "furnish adequate, efficient and reasonable service" to all members of the public within its service area, without discrimination, is the public utility's right to adequate compensation or "just and reasonoble" rates for its services. Wc expressed these paraincters somewhat morc dcfinitivcly in the following comment from our decision and order in No. 1131 Case iN "In approving or fixing a public'utility service ratesp therefore, we must take it as axiomatic that thc current and foreseeable future costs of furnishing thc service must be covered that 'fair and reasonable'ates aro
- 8. See $ 68<-2, N.M.S.A., 1953 Comp.
- 9. Sec )II68-6-5 and 68-6-6p N M S A p 1953 Comp.,
- 10. See $ 68>>6"lI N.M.S.A., 1953 Comp.
ll. Sec October 12, 1974 Decision and Order in Case No. 1131, p. 7.
those which make it economically feasible for the public utility, under cfficlcnt management, to mcct all costs of furnishing services and to ot rwisc comp y wit s the statutory o igations imposed upon it. In ot er wor s, w en approving of a public utility, this Commission is legolly obliged to include increments in a rate to cover each type of cost incurred by the utility in furnishing the scrvicc, and the service rotc itself should be no greater thon necessary to cover the total of these costs. %hen viewed in this perspective, our essential
, task is to determine the nature and thc present and foresccoblc future magnitude of these incremental costs for each type of service. And it is our duty to achieve a condition of equilibrium bctwccn unit rates and unit costs--between scrvicc revenues and service costs, or what is otherwise described as a condition of profit for the public utility whereby all
'zero'conomic economic costs of furnishing scrvlccs, including the cost of the capitol invested, are covered by its revcnucs and neither posit ivo nor negative diffcrencc or 'profit'esults...." (Emphasis added).
In quoting the foregoing statement, wo dclibcrately emphasize the dual nature of the aims or goals of proper rate making -- namely, that it enable tho public utility (1) "to meet oll costs of furnishing services" and (2) otherwise comply with the statutory obligations imposed upon it." Comparatively little has been said in previous rato case decisions respecting this second goal. Under less volatile and moro benign'olitical, social and economic conditions than confront us today, it was not necessary because, where current serviceratcscqualcdcurrentscrvicc costs andrnodcratc increases in the latter could be offset by increased operating efficiency, the present tended to assure the future and thc ability of public utilities to satisfy growing demand and to maintain and improve thc quality and reliability of their services was not impaired.
Today, however, the present does not assure the future. Momentary equality'ctwcen fixed service rates and service costs, cvcn with automatic adjustment of service rates to cover increasing fuel costs, docs not assure that an electric utility will be able to discharge its service obligations to the public in thc long term, or even thc moderately short term, futuro. Respecting energy utilities, thrcc principal phenomena are responsible for this circumstance -- namely, (1) rapid inflation in virtually all unit costs of service(
(2) growth in demand for scrviccs, and (3) growth in capital intensity requirements.
Energy utilities orc ncnv beset with increasing scrvicc costs largely beyond the power of management to resist or to offset by increased efficiency. To the regulatory authority and to thc energy utility, who seek to determine and quantify these costs for rate making purposes, they offer a moving target and con only be estimated by cxtrapolative techniques, which do not lend themselves lo traditional methods of setting service rates at fixed levels. While the energy utility's soaring cost of fuel provides the most notable illustration of its predicament, thc phenorncna is by no means limited to this single increose in unit service costs. It also extends to wages, salaries and employee benefits, to contract services, to the cost of all supplies (in addition to fuel and purchased power) from which the energy utility fashions its services, and to the taxes it must pay. Legislative imposition of cnvironmcntal requirements and restraints hos increased thc utility's operation and maintenance costs pcr unit of cncrgy service furnished lo its customers. These legislative programs have also increased the cost of generating plant pcr unit of capacity and have reduced operating efficiency, thus in" creasing depreciation and amortization costs. Even without these ncw burdens, unit plant costs hove increased massively in the past several years. For example, a con<<
vertible gas and oil fired generator that cost PHM $ 95 pcr kilowatt of capacity in 1969'ould cost $ 175 per kilowatt today. Similarly, thc Company's Four Corners No. 4 coal fired gcncrator cost approximately $ 110 per kilowatt of capacity in 1969, without environmental controls; the current cost is $ 375 per kilowatt, which includes the cost of stack prccipitators to capture particulate rnatter and sulphur dioxide scrubbers at a total cost of between $ 100 and $ 125 per kilowatt of capacity. As a result, thc depreciation reserves of an energy utility are proving woefully inadequate to replace the plant and equipmcnt worn out and "consumed" in furnishing scr'vices to its customers. In other words, thc energy utility must obtain new capital to invest in and replace fully depreciated plant and equipment just to stay cvcn and to satisfy demand in which there is no growth.
Finally, the inelosticity in fixed service rates, in the face of service cost inflation, has inevitably tended to severely erode common equity capital eornings between periodic rate increases, with the result that investor risk has increased, os earnings stability and reliability hove been dissipated, and thc energy utility's cost of copitot has increased in like measure.
Compounding thc foregoing problems of an energy utility in hlew Mexico, as well as thc problems of this Commission as its regulator, orc the problems associated with growth. Growth is inevitably occurring in the number of customers, as regional population incrcascs and as distribution systems become more geographically extensive ond intensive. Moreover, with respect to electric energy utilities, we arc reliably informed that, as the century progresses and as petroleum fuel supplies dwindle, thc proportionate sharc of the nation's total energy requirements they will be obliged to satisfy will grow substantially. Accordingly, even if total energy demand could bc held constant, thc demand for the services of electric utilities, such as PhlM, will nevcrthc-Icss continue to grow. Until recently, substantial growth in pcr customer consumption of electric energy has also been the rule since the cnd of thc Second World War1 and, while conservation in energy consumption inspired by the soaring costs of petroleum fuels and the dire predictions of thc federal government, appears to have abated this trend momentarily, it does not appear that the growth in appetite or need, as distinguished from the ability to pay for electric energy generated from such fuels, has abated. hhrcover, while growth in pcr customer consumption of electric energy may have slackened, growth in the customer's peak-power demands is still occurring, with thc paradoxical result that morc per customer generating capacity is required to satisfy thc some or reduced pcr customer electric energy consumption, and this circumstance results in revenue reductions disproportionate to fuel cost savings ond, thus, in ever higher costs per unit of energy.
The third problem mentioned earlier namely, growth in thc capital intensity requirements of electric energy utilities, is not so much an actual develop-ment as one which must bc encouraged in both the national and thc locol interests as a result of some of the problems discussed carlicr. Until recently, gas prices held artificially low by thc FPC and oil at comparable prices sct by a world market ccmporatively free from the politicol ospirations of producing notions, served as the principal I'uels of electric energy generation in this country. Not only were these fuels cheaper than alternative fuels pcr unit of energy produced, so too were thc costs of necessary generating plant that utilized gas and oil. However, while this second circumstance has not changed, particulorly in light of thc environmental and safety problems attending coal fired and nuclear gene'rotion, the fiist circumsfonce has. To illustrate, PNM's current cost of gos pcr million 8ritlsh thermal units ls 76 cents and "still rising ropidly; its comparable cost of coal, which is increasing less rapidlyd is 26 cents. In overall cost, gas and oil fired generation of electric energy is already more expensive'thon coal-fired generation, and there is indicotion that nuclear generation may yet be cvcn less expensivo. Moreover, the enormous reserves of coal possessed by both New Mexico and the nation, and thc still more vast supplies of nuclear fuels obtainable herc, give assurance of for grcatcr energy reliability and of a vitally needed reduction in foreign fuel dependency if electric utilities are encouraged and cnahicd io aiicct tha.accessary shiit to coal and nocicar goncrating systcrns. This shift, which promises comparatively lower operating costs and, thus, comparatively lower service rates in the future, as well as greater reliability and less dependence upon the political whims and caprices of other nations, involves higher unit costs of necessary ncw plant than does gas and oil generation. In achieving these imperative goals, how-ever, we must incur greater capital intensity per unit of gencroting capacity and, thus, higher dcprcciotion and capital costs. And to do this, we must enable thc Company and others like it to attract extraordinarily large amounts of investment from a private money 0
market mode apprehensive "and wary by a substantial redvction in the reliability and stability of electric utility earnings, particularly in growth areas, by sccmlngly cnd-less inflotion and by thc cnormovs dimensions of the tosk to be occomplishcd.
In passing, wc arc constrained to comment on the efficacy of avtomotic cost of fuel and pvrchascd power odjvstments, such as those authorized by this and similar Commissions, as they relote to the lost discvssed subject. Under such authoriza-tions, the electric utility can pass on its costs of fuel and pvrchascd power to Its customers more or less contemporaneously with experienced increases. However, since it cannot correspondingly increosc its service rates to cover increases in depreciation and capital costs per unit of generating capacity or per unit of energy sold, it is dis-inclined to shift from gas and oil fired generation to coal and nuclear systems. In short, while outomatlc cost of fuel ond purbhased power adjustment authorizations are needed to enable the electric utility "to meet olt costs of furnishing services," they arc llkeI> to operate as a positive disincentive to prepare for and improve thc futuro.
Fortunately, in PNM wc have on electric utility which has been ond is self-encovragcd to make the vitally necessary shift away from oil and gas fired genera-tIon. It began the acquisition of its coal reserves and planning new systems over fifteen years ago, and, today, 50 percent of lts total generating capocity is coal fired. By 1900, it hopes to achieve at least 80 percent coal dependence, with gas and oil fired generators for standby reserves only. Looking further to the future and to eventual reductions in the supply of cool and conseqvent increases in its cost, the Company is planning nvclcar generating'ystems.
While PHM docs not appear to need ovr encouragement to do what is necessary in the pvblic and consvmer interests, it does need ovr aid, particularly in enabling it to attract the vast amounts of ncw capital necessary to accomplish the task. To illvstroter phJM's tentative 5-year construction budget is 5742,000,000, which is approximately two and one-half times the undcprccioted, original cost of its current plant. Tho point of this discussion and the point to be emphasized is that during the next decade, PNM is confronted by a demonstrated need to attract extraordinarily large amounts of ncw capital In order to comply with its statutory mandate and to satisfy growth in demand for,its scrviccs, the need to furnish comparatively more reliable and dcpcndable and ultimately less expensive energy, to comply with thc imperatIves of environmental protection, and to reduce our dependency ond vulnerability to foreign political cortels that now control the price and quantity of available petroleum fuels. The problem of this Commission is to aid and enable the Company to achieve these tasks in thc public interest, while yet achievIng for the consumer the lowest prices for electric energy obtainable consistent with the long run public interest.
Finally, in addition to thc foregoing problems, we are confronted by those
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which are uniquely regulatory in nature. The essential situation in this regard Is that traditional, adversary, formal service rale proceedings, which are occurring with ever n
increasing frequency and urgency, are simply proving both inadcquatc to thc task and too time and energy consuming, In short, this Commission and its staff are subject to the tyranny of continuous rate cases, ond our other regulatory responsibilities are neglected in the consequence. With the companys that come before us, we arc reeling from onc urgent revenue deficiency to the next, with no time to systematically investigate and reflect upon management efficiency, prospective growth in demand as a justification for new plant certification, service rate structuring as a method of morc efficiently allocating and conserving resources, minimum cost financing programs and other matters which may result in cost savings, as well as increased reliability and quality of service.
Moreover, by adhering to traditional rate fixing mcthodsr we risk losing control of even that regulatory responsibility. As mentioned carlicr, service costs have become a moving target which scarcely holds still long enough to bc quantified, with the result that cvcn the most painstaking determination of an energy utility's test-year costsr annualiicd and odjusted to current levels, and service rotes fixed at levels to cover such costs, often prove woefully inadequate by the time the rotes become effective. All too often during the past several years, newly authorized service rates hove foiled to cover the energy utility's rapidly increasing total costs of service, with the result that, while its operation, mointenance, tax, depreciation and amortization. costs may bo covered, its capital costs are not, even though the 'service rates were carefully designed to do so. )Vhen the earnings stability and reliability of an energy utility are reduced, the market responds by increasing its cost of capital and the customer inevitably suffers.
Admittedly, the foregoing explanation of the problems with which energy utilities and this Commission are confronted is o gloomy analysis. But Its expression has suggested the new methods of solution implemenfed by. this Decision and Order, which we shall now proceed to explain and tustify.
The Regulator Method The following Order departs from the traditional method of fixing rates for the several catcgorics of electric energy service furnished at retail by PNM within our jurisdiction. As an initial step, we propose to approve base service rates by modifying PHM's revised hhw Mexico Public Service Commission Sheet clos. 397 through 405, filed on December 20, 1973, so os to reduce the requested percentage incrcascs to thc following amounts:
Rov. Tariff Service Requested Allowed Sheet No. Category tnereato< g> tnoraara(tg>
398 Rcsidentiol Overhead 13.7% 1 1. Ioio Undergrovnd 19.8 17.3 Sma I I Power 9.7 9.7 400 General Power 11.3 11.3 401 Large Power 15.5 10.3 402 indus tr ia I Power 17.2 ~ 8.7
'403 Private Area Lights 6.3 6.3 404 Standby Service'j 405 Irrigation 15.3 15.3 Water 8 Sewage 6.7 6.7 AVE INCREASE ll 5oyo 9 7%
This modification will reduce residential, large power and industrial power service rotes 14 below those in effect since November 7, 1974.
As a second step, this Order allows and provides for automatic, quorterly adjustments in thcsc base rates hereafter where thc accounting reports of the Company demonstrate that, during the preceding accounting period, PHM's earned "rote of return Increase o ove asc rates in cffcct prior to November 7, 1974.
- 13. PNMhas'o "standby service" customers.
14, In connection with its appeal from the October 10, 1974 Decision and Order in Case Mo. 1131, PHM placed toriffs rcqucsted by its Dccernber 20, 1973 filing into effect on hlovembcr 7, 1974.
on thc book value of its common equity capital" (ROE) allocable to jurisdictional electric scrvicc, after deduction for all other costs of such service, is above or below t
a specified range on cithcr side of an allowed rate of return. If thc accounting reports of tho Company, which will bc verified by certified public accountants selected by and responsible to the Commission, indicate ot the cnd of each thrcc month period that the Company's ROE fell. within the specified rongc during the preceding account-ing period, no odjustmcnt in the subsequent quarter will be allowed, except for monthly cost of fuel ond purchased power adjustments pursuant to our General Order No. 28, which is undisturbedby this Order. Should it be indicated that tho ROE exceeded the upper limit of tho range, all service rotcs will be adjusted downward by application of a dccremental amount per kilowatt hour of consumption designed to restore tho Company's ROE during the accounting period ending with the next quarter to thc ~vcr limit of the range, Conversely, if a ROE below thc lower limit of the range is dcmonstratcd, PNM's service rates will be adjusted upward on the some bosis to restore it to thc lower limit of the range. The same decrcmentol or incremental adjustment per kilowatt hour of consumption, as the case may bc, will bc applied to the energy charges for each class of service.
The effect of this arrangement is to provide for flexible service rates at levels enabling thc Company to gencratc jurisdictional electric scrvicc revenues equal to its reasonably contemporaneous levels of operation, maintenance, dcprcciation, amortiza-N tion, tox, debt capital and preferred equity copital costs for such service, plus a return upon its allocated common equity capital within the range permitted by this Commission. As thc midpoint of this r'ange of return, PHM has rcqucsted a rate of 14 percent, which was thc current cost of common equity copital for thc Company determined by us in Case Ho. 1131, and, for reasons we shall hereinafter explains we grant the rcqucst. The range of allowed return will be bclwcen 13.5 and 14.5 percent.
Phile automatic, quarterly adjustments in service rotes will be permitted where indicated by PHM's quarterly reports, after verification by our retained accountants, without the ncccssity of formal scrvicc rotc procccdings, in much the same foshion as we now perm>t monthly cost of tuel and purchased power adjustments, the midpoint of the range of ollow-ed common equity capital earnings and thc breadth of thc range will not bc changed except upon formol notice and service rate proceedings as provided in our rules.
In order to modcratc the magnitude of required cost of service adjustmcnts, this Order provides that thc accounting period preceding lhe end of each calendar quarter will bc thc full 12 mentis ending with that quarter, except that the reporting period at thc end of thc first quarter (i.e., June 30, 1975) will bc thc 3 months then ending, the re-porting period at the cnd of tho second quarter (i.c., September 30, 1975) will be tho second and third calendar quarters of 1975, and the reporting period at the cnd of the third quarter (i.c., December 31, 1975) will be the last nine months of 1975. This arrangcmcnt is necessary in order to average the effect of large additions to plant during the immediately preceding quarter. Unless they are so averaged over an extended period in the calculations to determine the Company's ROE, the net, dollar income to equity capital required to achieve the prescribed level will increase massively when a major ncw generating plant has become operational during the preceding quarter. However, since the cffcct of this arrangement at the cnd of thc first three reporting periods follow-ing entry of this Order would be to average in revenues and costs preceding establishment of thc new baso rates 5 and thus to distort the calculations and to enable PNM to recover
~ 16 we hove provided past revcnuc deficiencies, in part, which we are prohibited from doing for modification of the reporting periods for thc first three quarterly adjustments so as to base thc calculations on the Company's operations since April 1, 1975.
The adjustmcnts, where indicated, will become effective as to all service
- 5. Sec footnote, supra.
l6. State v. Mountain States Tel. 8, Tel. Co., 54 N M 315r 225 P ~ 2d 155 (1950);
see Nicso s and Welc, Ru ing Principles of Utility Regulation, Rate of Returns Suppl Ar pp 3 15421 bills rendered on or after one calendar month .ollowing the,end of the preceding calendar quarter, except where thc accuracy of thc rcport is challenged by our accountants ond wc issue a stay notice or order delaying implementation of the rotc adjustment pending resolution of Ihe dispute. This delay is necessary to enable the Company to prepare thc necessary accounting report for the period in question and to cnablc our accountants to verify thc figures and calculations. Such reports will be filed with thc Commission by the Company at least ten days before any proposed cost of service adjustment shall become effective. Copies of oil such reports will bc kept and made available for public inspection, pursuant to tt23 of NMPSC First Revised General Order No. 2, at PNM's principal office in Albuquerque, New Mexico. Moreover, thc cost of service adjustmcnt applied to service charges on each of Its bills will bc expressed thereon by PNM in dollars per kilowatt hour.
Insofar as possible, the accounting reports required by this Order will follow the system used and defined by the FPC as of Junc 30, 1974, which will enable thc Commission to cross check against PNM's annual report to the FPC. The scvcral em-pirically derived allocation factors for "jurisdictional electric investment," and "j'urisdictional expense allocation" required in order to make the necessary calculations will be redetermined by the Company and verified by the Commission's staff as of the lost day of each year and will become cffcctivc on the 1st of July following. Further, in making these calculations, the ending "jurisdictional electric common equity invest-rnent" amounts for each quarter in the reporting period will bc averaged. ~
In order to "dampen" and further moderate necessary cost of scrvicc adjustments'nd to account for thc onc month delay in their application, this Order provides for calcula-tion of ROE on a simulated, as distinguished from an actual, basis. That is, in making each t
calculation and in determining jurisdictional electric operating revenues, it will be assumed that thc last preceding adjustmcnt factor or "cost of service index" was in effect during the entire reporting period and not just for thc last two months of thc preceding quarter.
It will be noted that the foregoing regulatory method includes, as a cost f interest expense and prefcrrcd stock dividends on debt and preferred equity capital invested in PNM's construction work in progress (GWIP) and also includes common equity capital invested in all CWIP; that, accordingly, the calculated ROE includes the cost of copital invested in CWIP. These inclusions arc deliberate, andr os to transmission, distribution and miscellaneous CWIP, as well as environmental CWIP on existing generating plont, thc formula docs not provide for the inclusion of any offsetting allowance for funds during construction (AFDC) on such CWIP as a revenue item. Neither will PNMbe permitted to capitalize AFDC and add it to thc book capital cost of transmission, distribution, miscellaneous and ncw environmental CWIP on existing generating plants after entry of this Order. As to AFDC on PNM's generoting plant CWIP, the method requires its inclusion as a revenue item in calculating ROE at the rate heretofore or hereafter established by the Commission and permits PNM to capitalize this accrued AFDC and add it to the hook capital cost of new generating plant hereafter, unless the Commission othcrwisc decides and directs at the time thc f
new generating plant is certified for construction pursuant to lt68-7-1, N.M.S.A.,
1953 Comp. or in thc course of a similar proceeding called by thc Commission for such purpose. Thc effect of this arrangement is to defer only tho costs of capital associated with and attributablc to the period when new gcncrating plant is being planned and constructed and to provide for rccovcry of that cost from the future rotc payer after thc plant becomes operational. All other CWIP costs of capital, however, arc thus in-cluded in current service rates.
16a. Wo note I at the FPC is currently considering a change in its rules and accounting methods which will impose the costs of all CWIP capital upon the current rote payer and will prohibit capitalization of any AFDC in the future.
Justification of the Method Wc rccognizc that tho regulatory method explained abovo and in.plcmcntcd by this Order is innovativc, except to thc cxtcnt thot thc cost of fuel and purchased power adjustment clauses of this and other states have been prccurs1vc to it, and we also recognize that wc may be criticized-as guarantors of investor "profits" and of contributing to inflationary pressures by those who do not appreciate nor under-stand thc narrow parameters within which wc are obliged by law to operate and the dimensions of thc energy utility problems confronting all of us. Further, we anticipate the criticism that our method eliminates utility management incentives to resist cost increases and to implement economics. Since we anticipate these and other criticismsI we are constrained to here respond to them and to explain and amplify our reasons for this Order.
Thc tasks herc, as in any service rate procccding, aro to enable PNM to recover its current costs of service and also to enable it to better serve the public in the future. The principal rcquircment of both tasks is associated with capital. On the onc hand, wc should seek to dcvisc a regulatory method that enables the public" utility to recover its costs of capital and to create a regulatory climate that may result ln a reduction of such costs; on thc other, wc should permit the Company to attract tho capital it must hove in order to better serve the public in the future.
Thc capital of a public utility consists of two principal types: (1) Monies borrowed on both a long and a short term basis and, (2) equity monies received by thc utility ln exchange for its stock, as well as past earnings on that stock retained by the utility and not paid to its stockholders os dividends. The public utility's cost of borrowed money or debt capital is simply the aggregate total of interest payablo to 1ls lendcrs during thc year. The rates of interest and, therefore, the cost of this type of capitol, as well as thc times of payment, werc fixed by agreements belwccn the Company and its lcndcrs at the times the loans were made. Moreover, thcsc agreemcnts and thc issuanco of debt capital securities by the Company were subject to the, approval, regulation and supervision of this Commission when thc loans werc made. " This cost of debt capital must bc paid by the utility in the amounts and at the times agreed, just as its costs of purchased fuel or contracted labor must be paid. Should a utility lose thc ability to pay this cost through inadequate rcvenuesr the consequences to it arc insolvency, bankruptcy and rcceivcrship, and the consequence to its customers is h
loss, or at least severe disruption and curtailment, of service.
The equity capital of a public utility is generally of two types: (I) Preferred
'nd (2) common. The former is csscntially the same as long-term debt capital as regards specified and agrccd rates of return or dividends and times of payment. While the consequences of nonpayment are not as onerous, dividends on or the cost of the prefcrrcd stock capital of a public utility nevertheless must bc paid before any dividends may bc paid on common stock.
Thc common equity capital of a public utility is that which incurs the highest risk. Unlike most debt capital, its ultimato recovery by those who furnished the funds is not secured by liens against the property of the utility, and, unlike both debt capitol ond prefcrrcd stock investors, those who hold common stock are not entitled to any agrccd or assured rate of return on their investment. In short, their earnings consist of the nct remaining from revenues after all other creditors of thc public utility, includ-ing long-term debt and preferred stock investors, have been paid. While thc return on
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this type of capital is actually measured by thc amount of net income from gross receipts so remaining, this actual return is not necessarily synonymous with the cost of this category of capital, The cost or rate of return a public utility must pay or be able to pay in order to obtain common equity funds from thc privoto capital markets is sct for the company by the market, not by this Commission or the company. It is particularly important to stress Sec )$ 6 - - Ar 68- through 68-5-13, N.M.S.A., 1953 Comp.
and rccognizc that thc cost of a public utility's common cqu1ty capital is simply another cost of furnishing service, which is not generically diffcrcnt from any of its other costs. Those who furnish common equity capital to a utility, whcthcr by purchasing ncw stock of the company or by permitting thc company to retain and invest their earnings r
in ncw plant ond cqvipmcnt, expect and arc entitled to a retvrn or earnings for the usc of their money by the utility. In an economic sense, this return rcprescnts the company's cost of thc common equity capital employed, just as rent on an offico building leased by thc company or wages to those who work for the company constitute a costs to it.
The United States Supreme Covrt has alluded to this cost of common equity capital in the following comment:
"A public utility is entitled to such rates as will permit it to earn a return on thc value of the property which it employs for the convenience of the public equal to that gcncrally being made at the same time,ond in the same general part of thc country on invcstmenls in other business undcrtokings which are attended by correspond-ing risks and uncertainties; but it has no constitutional right to profits such as are realized or anticipated ln highly profitable enterprises or speculative ventures.
The return should be reasonably sufficient to assure confidence in thc financial soundness of the utility, and should be adequate under efficient and economical management, to maintain and svpport its credit and to enable it to raise the money neccssory for the proper discharge of its public dvty. A rate of return may bc reasonable at onc time, and become too high or too tow by change affecting opportunities for investment, the money .
market and business conditions gencrolly."
Tho same court has elsewhere specified three conditions of a fair return on the invested capital of a public vtility: (1) It should be sufficient to maintain thc financial integrity of the utility; (2) lt should be svfficicnt to compensate the utility's investors for the risks assumed; (3) It should be sufficient to enable the utility to attract needed new capital.19 Our own Supremo Court hos adopted!hesc definitions and descriptions of-a fair return on thc invested capital of a pvblic utility.
- 8. B uc ic oter Wor s mprovcment Compan v. West Virginia Public Service ornnllsslonp 6Z ~ ~ 6 5 6 -3
- 19. raaoro Powar Co laloa v. Mopa Nolo al Gar Co., 320 U.S. 591, 605 (1955).
- 20. late orp, om n. v, tn, States Te . Te . o., 58 N.M, 260, 270 P,2d 685 954 I State Y ~ Mtn. States Tcl ~ 8 Tel ~ Co., svpra.
ln view of the problems and impcrativcs discussed earlier, this Commission is convinced that Ihc third of thc three aforcmcntioncd parameters of a fair return on thc common equity capital of PNM i.e., that it be sufficient to enable the Company to attract needed new capital in competition with other busincsscs of like risk, is primarily controlling in this proceeding. In this connection, we must anaiyrc and predict the behavior of the capital markets, for it is there that thc cost of new equity capitol is fixed, and it is in this phase of proceedings such as this that this Commission and the utility are most aided and advised by outsido experts. All agree that the aim or goal of proper service rate regulation is to enable thc utility to attract needed new capital under reasonable conditions, which we are obliged to identify, In proceedings such as thlsg this Commission and the public utility arc con-cerned with two types of common stock prices or values: (I) Book v'clue, and (2) market value. The book value of a common stock is simply the total number of dollars received by thc company in exchange for its stock when originally issued, plus thc retained earnings of common equity capital, divided by the number of shares issued and outstanding. It is on the basis of book value of common stock capital or rate base property that this Commission, the FPC and virtually all other regulatory commissions, figure and fix the rotc of return to or the cost of common equity capital, since it represents the dollar amount of such copital contributed by shareholders to the company. Currently, the book 21 value of PNM common stock is approximately $ 20.30 pcr share.
Market value, on the other hand, is thc current price at which PNM stock is sold and purchased through the New York Stock Exchange. It reprcscnts a collective
)udgment of thc current worth of the stock, particularly in terms of its earnings prospects in relation to all other securities, by those who scil and buy thc stock after its original sale to or through an underwriter. It also represents thc price obovc which PNM
~ t year<<e cannot scil new stock, For obviously no one will purchaso a ncw share from thc Company at a price obovc that at which he can purchase an outstanding share of thc same stock on thc market. Looked at in another sense, the current market price tends to indicate the current cost of common equity capital to the Compony, for it is the price buyers arc willing to pay for thc current and predicted comings or return on the stock. At the time of our most recent PHM hearings, the market price of its stock was approximately
$ )3,50, and its market price-to-earnings (P/E) ratio was 6. ln other words, pNM could not sell a share of its common stock to raise new capital at a price obove rds of its book value. Moreover, if compelled to do so in order to raise the new capital it needs to satisfy growing demand for its services, the impcratives of environmental protection and the other urgencies mentioned carlierr its existing stockholders are in a very real sense confiscated, for the book value of their shares will be diluted and diminishedr as will bc their earnings per share. Thc prospect, and particularly the possibility of its subsequent repetition, also suggest that few might buy a new sha're from the Company or its underwriters at any price significantly below book valve, To illustrate: When a utility offers its common stock to the public at a price below current book value per share, it also offers to transfer a portion of the existing stockholder's book value pcr sharc and, more importantly, a portion of his claim on earnings, to the ncw stockholder. While thc prospect suggests supcrficlal attractions to the person to whom the offer is made, it disregards his intelligence and his ability to realize that, if he purchases, the next public offering of the company's stock will dilute his book value per sharc and, thcrcforc, reduce his earnings pcr share.
Thus, If a utility continually attempts to sall common stock at prices below inevitably declining book values to raise that portion of its ncw capital requirements dictated by the need to keep its debt capital ratio in reasonable balance, sophisticated investors ond ultimately thc entire market may soon bc unwilling to buy at any price.
Since we have no power or ability to compel or force investors to purchase
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the common stock of a public utility subject to our jurisdiction in order to supply thc company with thc ncw capital it must have to satisfy the public and consumer intcrcsts wc arc both charged with serving, it follows that wc must aspire to attract or encourage wixst wc cannot command. And this necessity suggests that both the Company and this Commission should seek to achieve a rnarkct price for the Company's common stock at or slightly above its book value. A modest margin above book value is required in'order to assure tint thc Company's net receipts from a new offering will at least equal thc book value of the stock. In our view and under current economic conditions, a market-to-book value (~B) ratio in!he neighborhood of 1.25 appears attainoble and currently appropriate.
It is not our responsibility to encourage significantly higher multiples for this would simply achieve the rcvcrsc of thc present situation i.e., windfalls for existing stockholders, and it would also suggest that the rale of return to equity c'apital incorporated in service rates approved by us significantly cxcccds the rate necessary to enable thc Company to obtain funds in the capital markets on reasonable terms.
From goals, wc turn now to rncthods for their achievement. Historically, electric and other utility shares have fared relatively well in thc security markets. Their P/E and +It ratios have bccn consistently high, and thc cost of equity capitol as well as debt capital, to utilitics has been significantly lower tiwn for unregulated concerns.
The experts who have appeared before us agree that this historical preference was accorded to utilitics and their shares bccausc of the comparatively low risks associated with their purchase and retention -" thot is, because of the stability and reliability of their comings, dividends and modest growth. In a stable economy, they hove bccn rc-garded as bond substitutes.
As we hove explained earlier, such is no longer the case. Fcw electric utility stocks arc now trading on a securities exchange at or above book value, More-overr the P/E ratios of all have declined substantially, particularly during 1974, and the costs of capital to them have incrcascd In inverse proportion. Heedless to say,
<<23
we did not make and wc cannot control thc market and other economic conditions under which this has occurred, but we are obliged to consider and account for thc causes of this fall from favor. Herc again, th'e cxpcrts appearing before us in this and similar proceedings agrcc that it has occurred as a result of an unfortunate concurrencc of rampant inflation in all costs to everyone and thc unprccedentcd new capital rcquirc-ments of the entire electric energy industry.
It also appears that another significant cause of this fall from investor favor rcposcs in thc manner in which this and all other regulatory commissions hove traditionally approved or fixed service rates. With thc exception of our General Order hlo. 28, promulgated on April 9, 1973, permitting automatic rate adiustments to compensate for changes in the utility's cost of fuel and purchased power, we have frozen each service rote at a specified, inflexible amount. In other words, wc have directed the company to charge no more ond no less for a unit of service in question and to recover its costs of furnishing that service from a rate that does not increase or decrease in proportion to the costs of furnishing the service. Sinco we arc powerless to direct those who furnish the utility with labor, services, materials, supplies and the like, to keep their charges or prices within the cost range assumed in the scrvicc rate, the inevitable result in a sustain-cd inflationary spiral Is that the common stockholder never receives the return the service rate was designed to pay him for the use of his capital. Moreover, his earnings steadily decline from thc moment a new rate becomes effective because the increment of a rate included for his bcncfit must go to others whose increasing prices arc not rcgutatcd.
In short, thc utility has lost all stability and reliability of common stock earnings in the view of Investors~ and the restoration of his allowed level of comings, which can bc prospective r
only and not retroactive, must await thc outcome of yet another protracted and expensive gcncral rate proceeding, at the conclusion of which the dismal cycle of declining comings begins again. Since the only apparent certainty respecting electric utility comings is thot they will inevitably and inexorably decline between allowed rate
<<24-
incrcascs, thc ncw investor and the market respond by reducing or discounting the market prices of stock below thc basis on which rate of return is figured and allowed by a regulatory commission namely, book value, thus making it impossible for the utilities to sell ncw issues at book value. It is in this fashion that the market exacts payment of the cost of capital it requires of each company, whatever may bc thc rcgula-lory commission's view of a fair return, but in so doing it effcctivcly forecloses thc possibility of a new stock offering to raise ncw equity capital for thc utility at or near the book value of thc stock. h/ercover, If the company nevcrthclcss offers its new stock at thc price significantly below book value scl by the market and if thcrc is no forc-sccablc cnd to Ibis unfortunate cyclo of earnings decline and continuing need for new equity capital, the likely result is that few if any will buy, since the inevitable con-scqucnce is continuing dilution in book value pcr share and in even greater declines in tho earnings of all existing shorcholders, as wc have explained carlicr.
To summarize tho foregoing: As the common equity eornings of a public utility decline and become less reliable and stable, risk to the investor increases ond so too does the cost of new common equity capital to the company exacted by the capital market. Ultimately, thcrcfore, since service rates multiplied by units of service sold must equal services costs, the consumer is obliged to pay this increased cost of capital through increased service rates or suffer the consequences of inferior or less reliable service, which may affect his entire economic wellbeing, for, as our legislature has declared, energy utilities "are affected with the public interest in that" "Thc development and extension of their business directly affects thc development, growth, and expansion of the general welfare, business and industry of the state."
Similarly, it has been demonstrated that declines in common equity earnings and reduction in comings stability and reliability increase the costs of preferred stock 22 $ 68< IA(3 g N M 5 A r 1953 Comp.
<<25-
and debt capital to the public utility, as well. Eugene Meycr, a vicc-president and director in charge of thc utility corporote finance department of Kidder, Peabody 8 Company, inc., explained that rating institutions, such as Moody's and Standard 6 Poors, evaluate and rate thc debt and prcfcrrcd stock securities of public utilitics on the principal basis of risk, as indicated by thc magnitudo of debt to total capital and net income or pretax income to intcrcst cost ratios. Quite logically, these institutions perceive increases in debt ratios and declines in coverage ratios as indicative of an incrcasc in risk lo the investor and downratc the securities of thc public utility accordingly, with the result that thc cost of new debt and preferred stock capital to it is increased by the capital market proportionately. Mr. Mcycr illustrated this simple lesson, as well as its conscqucnces to PHM and its customers, at the hearings before us. He pointed out that, at that moment, PHM's AA bond rating was in con-sldcrablc jcapordy as a result of thc decline in its coverage ratios ond its apparent inability to market the new issues of its common equity stock necessary to keep its debt ratio in reasonable balance, He also pointed out that the current diffcrcnce between thc cost of AA and A rated utility bonds and preferred stocks is 0.89 percent.
Estimating that approximately 85 percent of thc capital necessary to finance PNM's 5-year construction budget i.e., $ 625,760,000, must be generated externally or from the private capital markets, that 65 percent of this amount must be raised by the sale of bonds and preferred stock, and that the new plant in which it will be invested will have a 30-year life, h'e. Mayer dcmonstratcd that retention of PNM's AA rating would result in 30-year savings in the amount of approximately $ 110,000,000, This too is a cost that must ultimately be paid by the consumer, unless it can be avoided.
And in this last observation lies a principal justification for cost of scrvicc indexing. If~ as pointed out carlicrr tho cost of capital was comparatively low to a Sec p. 0 supra.
public utility when and because it enjoyed earnings stability and reliability, it follows that, if risk is again rcduccd by restoration of earnings stability and reliability, thc cost of copilal should again be comparatively lower. Mr. Mayer is unhesitating and confident in this prediction. Moreover, while he indicated that scrvicc rates dcsigncd to generate a 14 percent rotc of return on thc book value of common equity capitol, but fixed in the traditional regulatory manner, probably would not achieve a 1.25 M/6 ratio for PNM stock, which hc regarded as essential, he expressed thc view that such service rates probably would do so, with the same rate of return, if subject to automatic, quarterly cost of service adjustments In the manner provided in this Order. Our own expcricncc and that of PHM following the October 10, 1974 order in Case Ho. 1)3),
which approved fixed service rates for the Company designed fo result in a 14 percent annual rate of return on its average common equity capital, attests to the accuracy of Mr, Meyer's first observation. At the time of that order, thc market price of PNM stock was approximately 60 percent of its book value, and it merely fibrillaled without appreciable rnovemcnt upward between the time the order was cntercd and the cnd of the year. In contrast, svithin a week or two after this Commission announced its decision to grant thc Company's request for cost of service indexing in a somewhat simple and elliptical public statement to such effect on March 7, 1975, the market price of PNM stock rose by approximately 20 percent, which tends to demonstrate thc validity of Mr. Mcycr's second observation or prediction. Moreover, in the wcck follow-ing the public statement, PNM was able to obtain a new, 30-year debt security under-writing at a coupon rate of 9 )/8 percent, which is currently low for AA rated bonds, despite 1974 common equity earnings at a rate of only 9.7 pcrccnt. Hopefully, when potential investors and the capital market fully understand thc concepts and mechanics of the method of service rotc regulation cffcctcd by this Decision and Order, which is one of thc principal reasons for its unusuol comprehensiveness ond length, and have had on opportunity to observe the operation of the method, they will respond by raising
<<27
market price of the stock to a seasonable margin above its book value. Accordingly, to thc criticisms anticipated earlier, wc assert the following responses:
First, cost of scrvicc indexing docs not guarantcc investor "profits."
I Rather, it affords the best assurance wc can devise that PNM will bc able to pay its minimum costs of capital, which, as wc construe thc constitutional rcquircmcnts and our statutory mandate, wc are obliged by Inw to do.- As concerns wlmt we may "guarantee" to the common equity investor, It is merely the minimum rate of return necessary to satisfy him and attract his capital when he has an abundance of other investment oppor-tunitics elsewhere and no obligation whatever to moke his monies available for the use of PNM. Moreover,.it should be noted that there arc two cdgcs to the new method we l
havo chosen to employ. That Is, in providing that PNM earn at a prescribed, minimum t
rate of return on its common equity capital, we have also provided that it vrill not earn at a significantly higher rate. In traditional rate proceedings, there is an abundant t
opportunity to miscalculate that is, to set servico rates at levels that will cause the utility to earn morc or less than thc rates of return or costs of common equity copital found to be proper. Vfherc wc err in favor of thc utility, correction requires yct another general rate proceeding, and we cannot compel the utility to refund the excess of actual return over cost of capital. Vfhile the new method docs not provide for refunds, it does provide for timely correction of our calculations on the basis of actual experience under bose service rates ~
Second, in historically dcmonstratcd theory which is supported by the views of Mr. Meycr and of Irwin Stelzer, the PresIdcnt of National Economic Research Associatesr lnc.i who also testified before us~ as well as by initial market indications and reoctionsr cost of scrvicc indexing will not contribute to inflation; rather, it will have a moderating influcncc, at least, and it may well effect both a short and a long term reduction in the costs of capital for PNM, and ultimately in its service rates, at best. Moreover, wc are confident that, cvcn with continuing inflation, cost of scrvicc indexing will result in service costs ond rates lower thon they would otherivise bc.
Third, VHM's incentives to resist cost increases and to cffcct economies are not rcduccd by the new method, This is thc purposo of establishing a band or range of return, with thc allowed rate in the middle of thc range, and in providing for adjustments of rates so as to bring PWM's rale of return on common equity capital back to the nearest edge of the range, Instead of the middle. Only by successfully resisting cost increases and by cffccting economies can PHMbring its rate of return above thc bottom of thc l
range. Since thc magnitude of thc range is sct at one percent, the current diffcrcnce in net dollar earnings to the Company between the lower and upper limits of thc range is approximately $ 725,000 annually. In addition, incentive to resist cost increases and to effect economics is supplied by. the time period involved. Since adjustmcnts in rates under this Order will only bc allowed every three montlis and since past'evenue deficiencies will only be remedied prospectively, it is to be anticipated that PNM's management will not lose its inccntivcs to economize and resist cost incrcascs, Fourth, in addition to preserving management cfficicncy incentives, the nesv method also enables the Company to implement the efficiencies good management planning may dcviso. Mr, Stclzer expressed this consequence os the principal justifica-tion for cost of service indexing. In this connection, he pointed out that, given both tfx: incentive and the means, good management can bc most effcctivc in planning ncw systems and methods of gcncrating, transmitting, distributing, using and conserving electric energy morc efficiently and less expensively and in implementing such plans.
He also obscrvcd that thc path toward greater efficiency and reliability and lower cost and foreign dcpcndcncy lay in the direction of higher capital intensity or higher unit costs systems, such as coal fired and nuclear generating plants and others that do not I
require petroleum fuels. However, hc pointed out that theso planning goals are not attainoblo and that they will not serve thc public or consumer interests, if frustrated by the energy utility's inability to attract and capture thc necessary capital. Ity restoring stability and rcliobility of earnings and the market price of PHM's stock to a reasonoble multiple above its book value, as well as optimum capital rotios and odcquale coverage ratios, the new method should enable PHM to attract the capital it must have in order to better servo the public and consumer interests in tho future.
Fifth, as also pointed out by JV>>. Stclrcr~ the new method promises to im-prove the efficiency and the input of this Commission and its staff. As matters now stand, wc are almost continuously involved in formol service rote proceedings, passively E
responding to the urgency and pressure of circumstances and conditions already beyond our control and that of thc public utility. We arc as much the victims of the unavoid-able regulatory log ossociated with formal rate procccdings, not to mention the exorbitant cxpcnse tint attends these proceedings, as are the utilities, and, as mentioned earlier, our other regulatory rcsponsibilitics are neglected in the conscquenc'c. Mr. Stelzer aptly described our predicoment and, the means to improve it in the following comment:
cYct thc Commission has had very little opportunity, because it is always involved in rate cases and be-cause Its staff is always in rale cases, to inquire systematically into whether the Company is being efficiently manoged, whcthcr its prospective growth in demand really justifies the construction program, whether appropriate adjustments in rate structures might temper thc growth in demand and thereby're-duco thc need for construction and for further rate increases, whether the construction program has thc mix of facilitics which will result in minimum cost>>
whclhcr thc financing progrom will result in the lowest cost of capital. These arc where the bodies arc buried. These are v>>herc thc real bucks are for a commission to gct into to save the consumers some money and it can't do that while sitting in a rate case inquiring about line 6g column 9 from some very erudite accounting witness. It's in these neglected areas which thc Commission could, as its other choicer begin to cxcrcise some control over events, or could at least get a rcasonoble assurance that the costs being incurred by the Company, which costs after all in thc long run are borne by thc rote payer, orc no moro!han is necessary, and the inability of the Commission, lied up in one case after another, onc 40-
rate case after another, actively to inquire into such matters boils down to a simple formula: the situation is oul of thc control of the Commission, faced with just a dreadful problem of a responsibility which it can't adcquotcly exercise.
"To get out of that box, to get control of thc situation ogain, it is ncccssory that the Commission liberate itself from the tyranny of thc rotc case cycle. This it can do, I think, by the adoption of a cost of service adjustmcnt clause constructed and supervised in such a way that rate paycrs ncvcr pay for more than the cost truly incurred by the Company, and thc Company-Is able to corn the rate of return to which thc Commission says it is entitled, but cannot earn an excessive rate of return by that standard. Thc rate case load might then become manageable, and thc hands of the Commission and its staff, freed to deal with thc more important policy questions facing the Compony, the Commission'nd above all, the consuming public. Only in that way can the Commission begin lo get the fullest under-standing of, and control over, the factors which are giving risc to continually increasing costs."
Having been personally involved in the "tyranny of the rate case cycle" during these past several years, we can attest to the accuracy of IV<. Stelzcr's observations and join him in anticipation of thc benefits to be derived from cost of service indexing.
Sixth, the new method of service rote regulation established by this Order calculates a total cost of scrvlce adjustment and passes on to the consumer only the net result, as either an incrcose or a decrease in service rates. Unlike cost of fuel indexing, it ls not tied to only onc cost of service. Rather, it considers the increases and decreases ln all costs of service, together with changes in system efficiency, and passes only the net result onto thc consumer.
Seventh, thc cost of scrvicc indexing formula implemented hero encourages energy conservation. While it can be readily demonstrated that. the unit cost of furnish-ing electric cnerg'y to a customer is inversely proportional to the magnitude of his consumption, since only fuel costs rise vrith consumption, whereas unit capital and
~
other costs decline as kilowott hour consumption and the annual load factor increase,
-3 I-
we recognize and support Ihe need for energy conservation. Pccognizing also that pcr customer consumption is increasing and thol automatic scrvico rate adjustments will most likely bc in a gcncrally upward direction for the foreseeable future, wc have provided in thc new formula for o flat cncrgy charge adjustmcnt, on a pcr kilowatt hour basis, to be opplied to oil service rotcs ond customers equally in proportion to their energy consumption. Thus, as these service rates may increase, those customers who do not conserve, and particularly those who continue to increase their consumptive habits, will bear the major portion of the incrcasc in costs.
Eighth, it Is perceived by thc Commission that thc cost of service indexing method of service rate regulation will be much more convenient to administer and modify than traditional methods, and that it will enable the Commission to respond much morc readily to the current economy and to the requircmcnts of the copital ae'rket. As we stated carlicr, both thc Company and this Commission should seek to achieve a market price for thc Company's common stock at or slightly above its book value. Vk also observed theta modest margin above book value is required in order to assure that tlm Company's nct receipts from a new offering of common stock will ot least equal the book value and that, in our view and under current economic conditions, a market-to-book value (g'B) ratio in thc neighborhood of 1.25 appears attainable and currently appropriate. This ratio provides a convenient and easily ascertainable indicator as to whether wc have chosen the right method and have accurately determined PNM's current cost of equity capital, under conditions of stable and reliable earnings, lf the price increases relotively more than the stock prices of other utilities on thc market, we will know tlat thc method is generally correct. If thc price rises and stays at a rcason-able multiplo above book value, we will know that both thc method and thc rate of return determined by us ore correct. Ifr on thc other Ixsnd, thc market-to@oak price r'atio rises above a then currently reasonable multiple, we will know that thc method is correct, but the rote is higher thon necessary, in which case we have thc power to, and wills 3 2\
take appropriate action on our own initiative in formal procccdings that may be limited to thol issue without the necessity of protracted hearings on all the other issues that inject themselves into formal rate proceedings under troditional methods, As earlier noted, the quarterly cost of scrvicc index report form is keyed t
to the FPC Uniform S>stem of Accounts, to actual rcvenucs ond costs, and to book capital accounts. While it does utilize book values of plant and other assets, it does so only for purposes of deriving a jurisdictional capital allocation factor, not for purposes of determining required comings or the denominator of thc ROE calcula-tion. Moreover, thc formula docs not utilize the so called "fair value" of property concepts expressed in'$68-5-14g N M S A I 1953 Comp g at all As a resu(tr PNMs reserve for deferred income taxes cannot be included as an item of common equity capital, as other public utilitics have urged us to do, and, therefore, this reserve is treated as "zero cost" capital ond service rates will not include any incremental return thereon. Similarly, cxccpt for the amortized portion, PNM's invcstmcnt lax credits cannot bc included in common equity capital, and, thus, Ihe unamortized portion of this item is also treated os "zero cost" capital.
The short justification for this Commission's disregard of the provisions of tt68-5-14, ~su ra, is that, for purposes of determining the magnitude of PNM's several service rates upon the basis of cost of service indexing, it is not "necessary for the Commission to consider or ascertain the valuation of thc properties or business" of the Company. Moreover, it would seriously distort our calculations unless wo mode thc formula morc complicated than it already is by converting "fair values" to either market values or book values of securities. Every cost of capital witness who has testified before us in procccdings such as this has odmit ted, either expressly or tacitly, that the rates of return required by the capital market and revealed by market quotations and other available market information, are applicablc to book and market values of securities or to original cost values of utility property not to the "fair values" of such 33
properties. Market indicated rates of return for public utilities include the current, L
aggregate investor assessment of and an accommodation for inflation, efficiency of management, future prospects, dcprcciation, accounting and tox policies and the Company's regulatory climate. On thc other hand, one of the elcmcnts of "fair value" namely, reproduction cost ncw, alsocontainson accommodation for inflation.
Accordingly, to multiply a market rote of return times a "fair value" rate base, with-out conversion of onc or the other, would obviously compound the effect of inflation to a substantial extent.
Cost of service indexing will not decreosc this Commission's regulation and supervision of PNM, To the contrary, thc new method will result in regulation and supervision that is more cffcctivc, more extensive and morc intensive. It permits thc Commission and its staff to concentrate more of our cnergics on certification of new plant construction, approval of new financing plans, new rate designs and the vital considerations that aftend these matters-that is, os Iv'r. Stelzer put it, on mottcrs relating to "thc real bucks," and we intend to carefully monitor PNM's performance profiles on a continuing basis In comparison with its own past performance and with the current performance of other, comparable, electric energy utilities.
Conclusion Simply stated, thc method of regulation established and implemented by this Decision and Order provides for automatic, quarterly adjustmcnts in PNM's base service rates in response to ncl increoses and decreases in thc Company's actuol book costs for furnishing jurisdictional scrviccs. It is hoped and onlicipated that the method will pro-mote incentives to serve the public and achieve equality between unit service rates and unit service costs and, thus, the conditions which competition in thc furnishing of such services would achicvc if permitted to do so. Thc only cost factor held constant in the regulatory equation is that by which thc cost of necessary common equity capital is measured namely, the rate of return on such capital, which this Commission has established ot a prescribed rango of from 13.5 to 14.5 percent and which, in our view, corresponds to thc current cost rate of such capital to PNM if its earnings remain stable and reliable and economic conditions do not change too drostipally in thc future. Thc rncthod will not re-quire formal service rate proceedings in connection with each quarterly adjustment rather, thc Company's quarterly financial statements, which will be verified b> certified public accountants retained by the Commission and checked against the Company's audited annual statements, will serve as Ihe basis of periodic increases and decreases in service rates.
Only changes in the midpoint and in the breadth of the allowed range of rate of return on jurisdictional common equity capital, as well as redesign of service rates, will require formal service rate proceedings, PNM's customers arc bcnefitcd by thc new method in several respects: In the short term, bccausc the method establishes and maintains stability and rcliabilit>r of PNM's capital earnings which shouid ~corn arottvcly reduce its capitol cost ~ and thus its service rates haiow what they would otihenvisc have to be. In the long, term, because the method affords far greater assurance that PNM will be able to furnish rcliablc electric scrviccs to lts customers in the quantities and of thc quality they require in thc futuro at thc lowest optimum service rates. In all ovcnts, because the method automatically and virtually instantaneously passes on to thc customer, through reduction in rates, nct decrcascs in the costs of furnishing service.
The Company also benefits from this ncw method in several respects. First, it enables PNM to recover its costs of service from its customers on a reasonably ossured and timely basis.
Second, the method enoblcs PNM to ottract necdcd new capital under reason-able terms and conditions ot the lowest possible cost and, thus to comply with its statutory I
mondotc respecting quantity, quality, reliability and minimum costs of service in the future.
The public interest is better served in that thc ncw method permits supply ond dcmond to achieve a balance upon the basis of the actual cost of furnishing electric service that is, upon the basis of economic reality. Accordingly, it maintains market systems of allocating material (including fuel), labor and capital resources, thus avoiding the hazards 4
of energy rationing, on the one hond, and encouraging new methods of generating 'or cap-turing, transmitting, distributing, using and conserving energy as they become economically fcosible or relatively less costly, on the other.
Lastly, this Commission and its staff are also benefited by thc new method in that it enables us to concentrate on those neglected areas of regulation and supervision where we moy effectively influence events before they dcvclop and, thus, better servo the consumer and public interests.
We arc constrained to point out that cost of service indexing, as herc established, probobly will not restore PNM's jurisdictional electric cncrgy service rates lo thc low levels formerly enjoyed. Since the costs of furnishing the services are not likely to return to the some levels, this appears impossible, and it is necessary to recognize that the era of cheap and abundant energy is over. What is claimed for the ncw method in this limited regard is that it will moderate PNM's needs for increased service rates in the immediate and long-term future and that it wilt thus effect comparative reductions in service rates that is, in com-
! At present, wc parison with other energy utilities subject to traditional regulatory methods.
have no formed intention of opplying this new method to other public utilities subject lo our jurisdiction. At this stage, we view thc method as an cxpcrimental innovation having opplica-tion only to a vertically integrated energy utility which is subject to our jurisdiction in all phases of its operations that is, in the generation, transmission and distribution of cncrgy, in thc construction and financing of new plant, and in thc quantity, quality and reliability of its services.
Findings of Fact Having heard ond considered all cvidencc prcscntcd, as well as applicable law and thc submissions of the attorneys for our staff and other parties, thc Commission mokes Ihc following findings of fact, in addition to those heretofore stated in this Decision and Order:
- 1. That due and proper notice of public hearing In this matter has been served upon P NM and otherwise given to the public as required by and in accordance with thc Public Utility Act and the Commission's Rules of Practice and Procedure.
2, That in order to maintain the financial integrity of PNM, to compensate its common stock investors for thc usc of their capital and the risks assumed, and to enable PNM to attract ncedcd ncw capital under current market and other economic conditions, a stable and reliable rate of return on its avcroge common equity capital (at book value) of approximately 14 percent is required; that if such rate of return is realized for the forcsccable future on a stable and reliable basis, PNM should be able to attract the ncw capital required by it to satisfy customer demands for reliable electric cncrgy services, with a minimum of environmental degradation, and at the lowest possible cost to ils customers consistent with thc long run public in!crest.
3, That in order to maintain its cost of capital at the lowest possible levels, to enable PNM to obtain needed new capital from the private capital market on reasonable terms, and to enable PNM to better serve the public in thc future, it will be ncccssary to adjust PNM's base service rates established by this Decision and Order on the first day of each Feb uary, Mayr August and November hcreaftr r so as to achieve and maintain a stable and reliable rate of return on its average, common equity capital properly allocable to the furnishing of clcctric service subject to this Commission's jurisdiction, within a 0.5 percentage point range on cilhcr side of a 14 percent rate of return, or such other rale of return as this Commission may Imreafter prcscribc upon notice and hearing, by uniformly increasing or decreasing thc cncrgy charge pcr kilowatt hour of service on each bill rendcrcd on or after the adjustment dote by a "current cost of scrvicc index" factor (scc linc item 66 of Appendix A hcrcto).
That the Commission, PNM and all other portics to Santa Fc County District Court Cause No. 48744, cntitlcd "Public Service Company of Ncw Mexico vs. New Mexico Public Service Commission, ct ol," have agreed to and filed their stipulation therein on January 31r 1975r providing in material port os follows:
"C.). Within one (1) working day following the date on which an Order approving Cost of Service Index becomes final and non-appealoble, then PNM agrees to file with!he New Mexico Public Service Commission revised Tariff Sheets designed to reduce the revenues presently being collected under Tariff Shccts 398, 401 ond 402, from Residential Scrvicc, Lorgo Power Service and lndustriol Power Service, by Onc Million Dollars ($ 1,000,000.00), annualizcd, for thc test year period ending December 31, 1973, which Tariffs shall be modified to contain the Cost of Service Clause set forth in paragraph A hereof. In addition, Petitioner shall file re-vised Tariffs covering all rates now on file under Tariff Sheets 399, 400, 403, 404, 405 and 406$
Small Power Service, General Power Service, Private Area Lighting, Standby Service, Irriga-tion Service and Water and Sewage Pumping, making no chango In rates but inserting the Cost of Service Index clause.
"C.2. The revised Tariff Sheets filed pursuant to paragroph C. 1 hereof shall be accepted by the Commission as effective upon filing and shall forth-with supercede the Petitioner's revised electric rate schedules as filed with Respondent, New Mexico Public Service Commission, on December 20, 1973, being Toriff Sheets Nos. 397, 398, 399, 400, 401, 402, 403, 404, 405, and 406, Table of Contents, Residential Service, Small Power Service, General Power Service, Large Power Service, Industrial Power Service, Private Area Lighting, Standby Service, Irrigation Service, ond Water and Sewage Pumping, respectively, as implemented by Petitioner pursuant to the Stipulation and Order filed in this cause on November 7, 1974; howcvcr, no portion of thc revenues billed under such rates shall be subject to refund to ony consumers."
That thc foregoing stipulation provides for just and rcasonoblc base rates for the indicated electric energy services of PHM subject to this Commission's jurisdiction, with such "current cost of service index" odjustrnenls as moy be required hereafter pursuant to
.this Order.
Order Thc Commission, therefore, directs and orders:
~
1, That thc bose service rates and conditions staled in PNM's Revised NMPSC Tariff Sheot Nos. 399 (Schedule No. 2 for Small Power Service), 400 (Schcdulc No. 3 for General Power Service)~ 403 {Schedule No. 6 for Private Area Lighting Service), 404 (Schedule No. 7 for Standby Service), 405 (Schedule No. 10 for irrigation Service)r and 406 (Schedule No. Il for Water and Sewage Service), filed with thc Commission on Dcccmbcr 20, 1973, are hereby approved; fhat, however, PNM shall forthwith file similar new tariff sheets with the Commission and include in each a "Cost of Service index Adjustment" clause as stated ln para-graph 3 below of Ibis Order; further, that PNM shall charge its customers for said services in accordance with said new tariff sheets on all bills for the same rendered on or after the date of this Order.
- 2. That thc conditions stated in PNM's following described Revised NMPSC Tariff Sheets, filed with the Commission on Dcccmbcr 20, 1973, are hereby approved; that Ihe base service rates stated in said tariff sheets arc hereby disapproved; that PNM slmll forthwith file new tariff sheets with thc Commission for each of thc following described classes oF service providing for the indicotcd incrcascs in PNM's revenues from such classes of service, as colculated upon thc basis oF PNM's 1973, annualized, test year, and include in each a "Cost of Service Index Adjustmenf" clause as stafcd in paragraph 3 below of fhis Order:
Deccmbcr 20, 1973 Schedule No. Allowed Revised Tariff and Revenue Sheet No. Service Category Iaaraara 398 ~1 - Residential Overhead 11 )
Underground 17.3%
401 <4 - Large Power 10.3%
402 <5 - Industrial Power 8.7%
Further, that PNM shall charge its customers for said services in accordance with said new tariff sheets on all bills for the some rendcrcd on or after thc date said ncw tariff sheets are filed with the Commission.
- 3. That the "Cost of Service Index Adjustmcnt" clauses lo be included in PNM's ncw Revised NMPSC Tariff Sheets dcscribcd in and pursuant lo paragraphs 1 and 2 above of this Order, shall provide as follows:
Cost of Service Index Adjustmcnt: On its average common equity copita allocated to electric services subject to the jurisdic-tion of thc Ncw Mexico Public Service Commission (NMPSC), the Company has been allowed a rate of return (ROE) of 14%
in NMPSC Case Nos. 1131 and 1196, Pur-suant to the NMPSC's Order entered on jdatcj in said Case No. 1196 and as provided therein, the Company shall file with thc NMPSC, a "Cost of Service Index Report Form" te'n (10) days prior to the first day of February, May, August and Novcmbcr, after Juno 30, 1975, and, if the calculations on Report show that PNM's ROE for the
'aid applicable reporting period was morc than 14.5% or less than 13.5%, the charge per KWH of all electric energy furnished, under this tariff shall be adjusted as follows on all bills rendcrcd for said services on or after the first day of the month following the filing of said Report:
- l. If the ROE is more than 14,5%, thc charge for each KWH shall bc decreased by a "current cost of service Index" factor equal to thc diffcrcnce between said ROE and 14.5%.
2, If the ROE is less than 13.5%, thc charge for each KWH shall bc increased by a "current cost of service index" factor equol to thc difference between 13,5% and said ROE.
The reporting period for each of said Reports will be the four calendar quarters immediately preceding the adjustment date, except that thc reporting periods for thc following odjuslment dates will bc:
August 1, 1975 2d calendar quarter of 1975 Novcmbcr 1, 1975 2d and 3d calendar quarters of 1975 February I, 1976 2d, 3d and 4th calendarquartersof1975 Thc "current cost of service index",factor applied to service charges on each bill slxsll bc cxprcssed thereon in dollars per KEVH. Copies of all of said Reports shall bc kept and mode available for public inspection at the Company's principal offices in Albuquerque, Ncw'Iv'exico.
That each base olectric service rate approved by the Commission pursuant to parographs 1 ond 2 above of this Order (as well as all other baso electric service rates hercaftcr made subject to a "Cost of Service Index" clause by order of thc Commission, when such orders arc cntcred) shall be adjusted by PNM in the following manner on ccich bill rcndcrcd for such services on or after thc 1st day of February, gaby, August and November, hereafter, commencing with thc first day of August, 1975:
Section 1, Definitions.
A. The."Jurisdictional Elt:ctric Investment AllocalionFactor" (Appendix A hereto, line 28) is that factor dctermincd at least annually as of the last day of each year from the books and records of PNM, and verified by thc Commission's staff, which sholl be used in the following described calculations to allocate PNM's total Invcstmcnt to its electric services subject to this Commission's jurisdiction and which shall become effective during thc next succeeding calendar quarter following such verification. Said factor shall be 95.286% until a ncw factor is so determined and verified.
B. The'"Jurisdictional Expense Allocation Factor" (Appendix A hereto, line 47) is that factor determined at least annually as of thc lost day of each year from thc books and records of PNM, and verified by the Commission's staff, which shall be used in thc following described calculations to allocate PNM's total, non-revenue related, electric service costs to its electric services subject to thc Commission's juris-diction and which shall become cffcctivc during thc next succeeding calendar quarter 4
following such verification. Said factor shall be 94.545% until a ncw factor is so determined and verified.
C. As used in Appendix A hereto, thc cxprcssion "Acct." and parenthetically rcfercnccd nvmbers following refer to accounts dcfincd and required by the Federal Power Commission Uniform System of Accounts as of thc date of this Order.
Section 2. Adjustment Dotes and Reporting Periods.
A. The reporting period for the August 1, 1975 adjustment date shall bc the second calendar quarter of 1975.
B. The reporting period for thc November 1, 1975 adjustmcnt date shall be the second and third calendar quarters of 1975.
C. The reporting period for the February 1, 1976 adjustment date shall be thc second, third and fovrth calendar quarters of 1975.
D. The reporting periods for each February I, Ahy 1, August'1 and November 1 adjustment dates thcrcaftcr shall bc thc four calendar quarters immediately preceding.
Section 3. Calculation of "Current Cost of Service Index" Ad'ustment.
A. From its books and records, and for each reporting pcriodr PHM shall prepare a "Cost of Service Index Report Form" in the manner prescribed by and as shown in Appendix A attached'to and hereby incorporated in this Order; said Report shall bc attested by an officer of PHM or by thc person primarily responsible for pre-paring the same.
B. In preparing said Report (Appendix A hereto)
(I) The amountsshown in Linc I for "UtilityPlant," and in Line 3, for "Construction Work in Progress (CWIP)" shall not include any "Electric Allowance for Funds Used During Construction (AFDC)" on transmission, distribv-tion and miscellaneous new plant, or on,environmental additions to existing plant, accrving after date of this Order; provided, however, that said amovnls may include AFDC on generating plant accruing on and after the date of this
Order at rates heretofore or hcrcoftcr cstoblished by thc Commission, unless othcrwis'c directed by thc Commission pursuant lo Section 8 below.
(2) The amounts shown in I.inc 52, Column A for "Electric Allowance for Funds Used During Construction (AFDC)," and in Linc 53,
'olumn 8 for "Jurisdictional Electric AFDC" shall include AFDC on all new generating plant CWIP at thc rates hcretoforc or hereafter established by the Commission, vnless otherwisc directed by'he Commission pursuant to Section 8 below.
(3)'ntil sich time as base clcctric'service rates other tixsn those described in paragraphs I and 2 above of this'rder arc made subject to a "Cost of Service Index" clause by order of thc Commission, the amovnt of "Jurisdictional Electric Operating Rcvcnvc" shown in Line 40, Column 8, and the amount of "Income Adjustment for Prcccding Calculations" shown
~ in Line 54, Colvmn 8, shall nevertheless bc calculated as if all approved jurisdictional service rates, and the revenues derived therefromr were subject to a "Cost of Service Index" clause during the reporting period.
(4) The amovnts"shown In Line 46, Column A, for "Income Taxes;" and in Line 50, Colvmn 8, for "Jurisdictional Income Taxesi shall not inclvde the amounts of accumulated, deferred investment tax credits amortized during the rcporling period.
(5) The amount shown in Line 54, Colvmn 8, for "Income
~
Adjustmcnl for Preceding Calculations," sholl be compvtcd from thc "Previous P C Index Factor" (PIF Line 65, Colvmn 8) and shall equal the nct sum of thc following amounts for each month of the reporting period:
Actual Cost o No. of juris- Revenue Scrvicc Index dictional KWH Related Tax PIF - adjvstmcnt in sold during Factor (i.c.,
effect dvring thc month cvrrent ly thc month 0.4856)
Section 4. Filing and Public Inspection of Reports; Billing Notice.
A, Not less than lcn (10) days before an odjustment date, PNM shall prcparc a duly attested "Cost of Service Index Report Form" (Appendix A hereto) for thc prcccding reporting period and file the same with the Commission.
- 8. Copies of all of said Reports shall be kept and made availablc for public inspection, pursuant to Section 23 of NMPSC Revised General Order No. 2, at PNM's principal offices in Albuquerque, New Mexico.
C. The "Current Cost of Service Index" factor (Appendix A hereto, Linc 66, Column 8) opplicd to service charges on each bill of PNM shall be exprcsscd thereon in dollars per kilowatt hour.
Section 5. Cost of Service Index Adlustmcnts to Service Rates.
A. When PNM's calculated "Return on Jurisdictional Common Equity" (Appendix A hereto, Line 60, Column 8), as shown by its duly filed "Cost of Service Index Peport" (Appendix A hereto), exceeds 14.5%, the energy charge for each kilowatt hour of service shall be dccrcascd to the sum of (1) the base energy charges for the class of such service, (2) appropriate adjustmcnts thereto required pursuant to any applicable "Fuel and Purchased Power Cost Adjustment" and (3) the "Current Cost of Service Index" factor (Appendix A hereto, Linc 66, Column 8), as calculated in said Report, on each bill rendered on or after the next adjustment date for services subject to a "Cost of Service Index" clause.
B. When PNM's calculated "Return on Jurisdictional Common Equity" (Appendix A hereto, Line 60, Column 8), as shown by its duly filed "Cost of Service Index Rcport Form" (Appendix A hereto), is between 13.5% and 14.5%, thc charge per kilowatt hour on each bill rendered on or after the next adjustment date for services shall remain thc same as that chorged during thc preceding three months, cx-ccpting for such adjustments thereto as may be required pursuant lo any applicable "Fuel and Purchased Power Cost hd just ment. "
C. IVhen PhJM's calculated "Return on Jurisdictional Common Equity" (Appendix A hereto, Line 60, Column B), as shown by its duly filed "Cost of Service Index Report Form" (Appendix A hereto), is less than 13,5%, the energy charge for each kilowatt hour of sctvice shall bc increased to the sum of (I) thc base cncrgy charges for thc class of such service, (2) oppropriatc adjustmcnts thereto rcquircd pursuant to any applicable "Fuel and Purchased Power Cost Adjustmcnt" and (3) thc "Current Cost of Scrvicc Index" factor (Appendix A hereto, Line 66, Colum'n B), as calculated in said Report, on each bill rendered on or after the next adjustment date for services subject to a "Cost of Service Index" clause.
4 Section 6. Verification of Rc orts; Resolution of Errors and Dis utes.
A. For the purpose of examining and verifying the information and calculations stated in each "Cost of Service Index Report Form" (Appondix A hereto)r
~ilcd with the Commission, prior to tho next following adjustment date, thc Commission a ///
MPH select and retain a certified public accounting firm (the Accountant) with experience In public utility accounting and with the FPC Uniform System of Accounts.
B. Thc Accountant shall have access to all material books and records of PNME and PNM shall otherwise aid and cooperote with the Accountant in all reason-able respects, in connection with said examinations and verifications.
'. In the event that the Accountant determines thal a "Cost of Service Index Rcport Form" (Appendix A hcrcto) contains a material error as to any information or calculations stated therein, and such error connot be resolved or settled by an agreed correction thereof by and between PHM ond the Accountant, thc latter shall submit to the Commission and to PHM a written statement identifying each such error and his contentions as to thc correct facts or calculations, on or before thc last day of thc month preceding the next following adjustmcnt date. Prior to the 1st day of the month fotlow-ing said adjustment date and upon notice and hearing, the Commissfon shall rcsolvc such dispute by appropriate order stating any prospectively required changes in the "Current Cost of Service Index" factor.
D. )Vhere Ihc accuracy of the information or calculations stated in a "Cost of Service Index Rcport Form" (Appendix A hereto) are clmilcnged or disputed by the Commission, its staff or the Accountant, the Commission may immediately issue and scrvc upon PNM on order delaying implementation of thc "Current Cost of Service Index" adjustment stated in such rcport form pending resolution of such dispute by the Commission.
E. Failure of thc Accountant to comply with thc provisions of para-graph C of this section, shall not prejudice his right to bring any material errors in "Cost of Service Index Rcport Form" (Appendix A hereto) information or calculations to the attention of the Commission or the right of the Commission to correct the same/
in any lawful manner thereafter, Section 7. Notice to the Commission of Solar and Wage Changes.
On or bcforc fifteen (15) days before the same shall become effective, PNM shall furnish to the Commission a written report as to any adjustments or changes in the general salary and wage levels of its'officers and employees.
Section 8. Change in Treatment of New Generating Plant CEVIP, AFDC, Investment and Costs.
Notwithstanding the provisions of subparagraphs B(1) and B(2) of Section 3
'bove, thc Commission hereby reserves thc right and power, upon notice, hearing and order A. To prospectively change the required rate of AFDC on generating plant CWIP in preparing any subsequent "Cost of Service Index Report Form" (Appendix A hcrcto);
B, To prospectively direct that all or any part of the capital invested ln gcncrating plant CWIP and thc costs thereof, shall be excluded in the preparation of any subsequent "Cost of Service Index Rcport Form" (Appendix A hereto), until such generating plant becomes operational.
Section 9. Changes in Methods of Calculation ond in Allowed POE.
No changes in the fundamental methods of calculation prescribed in this Order parogroph 8 or in!he allowed level or range of ROE prescribed in Section 5 above, shall be made except upon notice, hearing and order; provided, however, that such notice and hearing shall not be required as,to clarifying changes or modifications in the expression of such methods or as to such changes or modifications as will not significantly affect the interests of the public, the consumers, PNM or its investors.
DONE at Santa Fe, New Mexico, this ~t~" day pril, 1975.
i ~ rd P. IVentog C airman vbrris'Yas s
'~~Wc P'/c'~
n, Commissioner
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PREPARED TESTIMONY EUGENE W. MEYER BEFORE THE NEW MEXICO PUBLIC SERVICE COMMISSION Case Number 1196 March 5, 1975,
Please st"te your name, address and occupation.'y Skyline Drive,.Morristown,
~ . A. name is Eugene W. Meyer.
New Jersey. I am I reside at a Vice President and 91 Director of Kidder, Peabody 6 Co.,
Incorporated, 10 Hanover Square, New York, New York.
~ .
Please describe your qualifications for the testimony you are about to give.
A. My qualifications are presented i.n Appendix I.
Are you familiar with the proposal before this Commission wherein a "Cost of Service Index" would be used in establishing rates for Public Service Company of New Mexico?
A. Yes, I am.
N
~
E 1
Vfhat is the purpose of your testimony?
h A. I propose to discuss the cost of service index from the standpoint of prospective
~
investors in the Company's securities and to render an opinion as to the impact the index might be expected to'have on the Company's future cost of-C
, capital.
Q. Please proceed.
A; It is my understanding that the cost of.service index would establish a rate of return on equity range within which the Company could opcmto. On tho basis of quarterly reviews, rates would be adjusted upward if tho return on-equity declined to a level below the index and conversely, rates would be adjusted downward if the return on equity exceeded the range established
by the Commission. Such adjustments would be made without benefit of the long, ardueus and expensive rate hearings'ow required. It is further my understanding that if the'ate of return on equity during any quarter was found to be within the range previously approved, no change in rates would occur.
Finally, it is my understanding that the range of rate of return may be adju tcd upward or downward by the Public Service Commission according to its findings in full rate proceedings.
What advantages, if any, do you see in the. Cost of Service Index approach?
.The primary advantage would be in the reduction of regulatory lag which has exacted a severe penalty on utility. earnings in recent years. Due to regulatory-lag, utilities have been unable to actually earn the rates of return found just and reasonable by the various regulatory commissions; By the time, lengthy hearings are completed and new rates placed into effect,
~
costs have risen sharply and companies find they must immediately refile 1
for additional increases or suffer earnings inadequate to attract new capital on a reasonable basis.
The reduction'f regulatory lag to a three month period with known parameters will, in my judgement, remove some of the now excessive risk in the common stock of Public Service Company of New Mexico. With the reduction of risk should come a higher market price for the stock--hopefully somewhat above book value. Furthermore, the Company's debt and preferred stock coverage ratios should steady, enabling it to maintain its AP/Aa bond ratings, a matte'r of vital concern to the Company's financial viability.
Who will benefit from these advantages?
The benefit will obtain ultimately to the customers of the Company in that the cost of capital employed by the Company in the future will be lower.
As a result, rates will be lower than would otherwise be the case. In a regulated utility, when costs are lowered, rates are lowered. It may also be held that the. existing shareholders of the Company would benefit. This is true but it should be remembered that the losses these investors have suffered in market price over the last few years are the root cause for the inability of
'he Company to attract sufficient equity funds to carry out its franchise requirements. To suggest that the stockholders would get a "windfall profit" if stock prices returned to book value or above is to suggest that the customers gained a "windfall profit" at the stockholder's expense over the past few years.
Such reasoning is specious, at best.
Q. Have you prepared an exhibit illustrating the plight of the utility common stock investor in recent years.
A. Yes, I have. Exhibit I compares the earnings per share, rate of return on equity and average price of Moody's 24 Electric Common Stock Index and Public Service Company of New Mexico during the 1960-1974 period. The exhibit indicates steady growth in earnings per share for both the Moody's 24 and Public Service during the 1960's..The following observations can be made about the 1960's with reference to Exhibit I:
- 1. The rate of inflation nationally ranged from 2-3% during most of the period.
- 2. E><ornal capital requirements of utilities were relatively steady during most of the period.
- 3. The cost of new senior capital (debt and preferred stock) range from 3-5% until the last few years of the decade.
- 4. Utility rates per Kwh were declining for the period.
- 5. Utility stock prices were above book value throughout the period.
In some periods, prices became excessively high relative to book value due to the euphoric psychology which gripped the market during much of the-period.
The steady, but certainly not spectacular performance of earnings during the early 1960's did not justify the market price excesses but by the end of the decade, the market had corrected for'reality.
Since 1970, however, earnings per share and return on equity performance.
has deteriorated for the industry as a whole and in 1974 for Public Service.
Reflecting the uncertainty and decline in earnings performance, stock prices tumbled as is also shown on Exhibit I.
Vfhy should this Commission be concerned with the decline in stock prices?
One primary concern of the Commission should be to assure that the Company avail itself of the lowest costs possible for needed goods and capital. When new equity capital must be sold at market prices below booL valu'e, dilution of earnings per share and assets per share occurs. When such a situation continues, it becomes ever more difficult to issue new shares unless at even lower price levels, thus extending the downward cycle. The sale of stock at
prices below book value requires ever larger rate increases as an offset.
Each rate increase carries with it a higher. rate of return on equity requirement just to offset the dilution of the below book value sale and stay even, 1 t alone meet the requirements of the market place. Therefore, the Commission should be greatly concerned about common stock selling below book value because it is having a direct impact upon the customers rates.
Why don't utility companies sell debt securities instead of common stock when
.the price is below book value?
Many utilities have done exactly that with disastrous results. Excessive debt is the primary culprit responsible for bond rating reductions and indenture violations in the industry today.. With ratings reductions and indenture
- violations comes the inability to finance, in some cases regardless of price.
Public Ser'vice Company of New Mexico has resisted this temptation for short-
. term expediency and maintained its equity ratio at. nearly acceptable levels for .
the long term. As a result, the Company has been able to maintain AA/Aa bond ratings and the ability to issue long term securities. The Company's needs for new capital now and in the years ahead are extensive reflecting New Mexico's growth and need for expanded ynd upgraded employment. The combination of the Company's sound financial policy and the Cost of Servico Index approach in regulation should go a long way-toward providing the Company and its customers with the lowest cost of capital possible to meet
Mr. Meyur, you referred to companies whose securities have been down-rated with resulting inability to finance. Have you prepared an exhibit giving evidence of this?
Yes. Exhibit II lists the rating reductions accorded utility.companies from 1970 to the present.
Since the issuance of excessive debt is not a viable solution, is there any-other way to avoid the issuance of new common stock at prices below book value?
The most obvious way is to reduce capital expansion to levels justified by retained earnings alone. This is the course undertaken by virtually all of American business. The electric, telephone and gas industries are notable exceptions to this rule, however. These companies operate under franchise requirements wherein they must provide services to tPe customers on demand.
To render such services, enormous amounts of. capital are'required. If companies in these three industries were to reduce construction expenditures to levels justified by Detained earnings alone, they would quickly be unable to meet the demand for their services.
Have you prepared an exhibit illustrating the capital demands of the electric utility industry and Public Service?
Yes, Exhibit III shows the total construction expenditures past and projcctcd for the investor-owned electric utility industry and for Public Service. In addition, the exhibit shows the percentage of these expenditures requiring external, new financing. It should be noted that the external financing
required over the past Ecw years has increased substantially. While some slowdown in construction expenditures is possible for the industry as a whole in the next few years, such slowdown is primarily the result of post-ponements and cancellations of power plants under construction Eor which companies are unable to attract the'necessary external capital. Not only are such postponements and cancellations expensive in terms of penalty payments but they are also a real threat to future service reliability. Public Service has made some reductions in its 'construction program thus Ear but not to the point of jeopardizing future service reliability.. In my opinion, the Cost of Service Index, if set at competitive levels in today's capital markets, will go a long way.toward assuring Public Service's ability to finance its future needs.
The Cost of Service Index proposes to set rates depending on the level of the rate of return on equity. Why is the rate of return on equity important as a measure of a company's abili'ty to attract new capital?
The dollars provided by the return on equity provide the coverage on bonds and
~
preferred stock in addition to the obvious earnings per share and dividends per share. The coverage ratios are the foremost statistical measurement used in the evaluation of the quality of bonds and preEerred stock. The lower the coverage ratio, the lower is the rating on the securities and the higher is the interest rate or preferred dividend rate the company must pay.to attract senior capital. Investors in common stocks derive their return on investment from current yield, which is the dividend per share paid divided by the price per share at which he purchases the stock, and appreciation in the price of the
stock which, in the long run, derives from growth in earnings per share.
Growth in earnings per share derives from earning a return on the portion of earnings reirivested in the business. =
That return is the return oa equity.
If it declines sharply as it did for Public Service in 1974,. earnings per share decline and the price of the stock declines. If, however, the rate of return on equity is maintained'or improved, earnings per share growth occurs and price appreciation is possible'. Thus, it may be seen that the key ingredients of common stock investment return-result from the Company's rate of return on book equity. When the return on equity is too low, the price of the common stock declines below book value. When this occurs, the J
Company is not earning 'the true cost of equity capital.
In your opinion, wi)l the cost of service index reduce the cost of new capital for Public Service?
Yes, so long as the level of rate of return on equity is realistic in today' marketplace. Such a level should provide coverages sufficient for the Company to maintain its AP/Aa bond ratings. It. is my opiriion that the Company's ratings will be lowered to A by all three rating services unless pre-tax coverage ratios are maintained in 3.0x to 3.5x range. As can be seen by referring to Exhibit III, the Company's construction oxpcnditures are enormous by past standards for the 1975-79 period. If the Company's bonds are downrated to A, there will be a substantial increase in the cost of senior capital.
Describo the magnitude of increased costs if the Company loses its AP/Aa'-
ratings.
According to Exhibit III, Public Service will have total external capital requirement of $ 625,760,000 during the 1975-79 period. Vie can reasonably assume that approximately 1/2'of this amount will be raised in the form of debt capital and 15% in the form of preferred stock. Thus, $ 312,880,000 would be financed as debt and $ 93,864,000 would be financed with preferred stock. Refer now to Exhibits IV and V which indicate the differentials between AM, AA, and A rated bonds for the last ten years and month by month for 1974. The .
differential between Aa and A-rated outstanding utility bonds averaged .89%
for the last three months of 1974. Currently, the differential is about the same. If, then, Public Service w re to be downrated to the A level and the differential. between Aa and.A remained the same the following increased of debt capital would occur over the next thirty years.
'osts 50% of $ 625,760,000 total requirements =
$ 312,880,000 debt financing
$ 312,880,000 x .89% = $ 2,784,632 annual excess interest cost
$ 2,784,632x 30 years = $ 83,538,960 total excess interest cost The same differential should apply to a downrating of the Company's
'referred stock.
15% of $ 625,760,000.total requirements =
$ 93,864,000 preferred stock financing
$ 93,864,000x .89% = $ 835,390 annual excess cost
$ 835,390x 30 years = $ 25,061,700 total excess cost
Combining tho two, senior additional capital costs borne by customers oE Public Service over the next thirty years, iE the Company loses its AA/Aa rating Is in the neighborhood of $ 83,538,960+ $ 25,061,700 = $ l08,600,660. Clearly, the cost of a lost rating for a company with growing demand is extraordinarily expensive.
I believe that the cost of service index with the return on equity set at a level to assure coverage ratios of 3.00x 3.50x would enable Public Service to retain its AA/Aa bond ratings.
Mr. Meyer, you have commented on substantial savings accruing from the cost of service index with regard to senior security capital costs. Can you be as objective with regard to the cost of new common stock?
I cannot be as objective, but certain subjective observations are important.
If the rate of return on equity range established under the cost of service index reflects today's capital market requirements, I believe. that Public Service will be able to issue its new common stock at prices equal to book value or higher.
Under such circumstances, ever higher rates of return on equity will not be required from the customers of the Company. Furthermore, the confiscation of property which takes place when new common stock is issued at prices below book value.'he cost of service index, with the return on equity set at levels which will attract new equity capital at book value or above, will provide the customers of Public Service equity capital from outside the state at the lowost possible cost consistent with boing able to attract it again.
What level oE return on equity is required together with the cost of service I
index to finance Public Service at the lowest cost of capital?
Exhibit VI indicates that even in the current depressed common'tocl market, some utility stocks are selling above book value. The dots on the chart represent electric utilities with revenues over $ 50.0 million. As of 7anuary 27, 1975, ten stocks were selling sufficiently above book value so that a new sale might provide net proceeds to the issuing company not less than book value. Such companies are earning from 13% to nearly 18% on book common equity. Some stocks where the return on equity is slightly above 13% are, however, selling at prices below book value. In the current marketplace, it is.my opinion that a cost. of service index with a return on book equity range of 14-15% would provide a market price for Public Service stock sufficiently above book value to provide net proceeds at least equal to book value on new issues of common stock.
Q. Is such a level of return on equity a permenent requirement?
A. No, lower returns on equity were adequate in the past when'on-inflationary conditions were obtained.. If and when inflation is eliminated as a serious investor concern, I would expect that lower return on equity levels would'uffice.
However, for all of our current concerns about the recession, inflation is still rampant. Furthermore, the projected huge Federal government deficit budgets indicate that an even greater inflation rate may be our heritage over
'I the next few years. If inflation does, indeed, accolorato a higher return on equity may well be required to attract the new common. stock capital at prices not lower than book value. It is my understanding that the New Mexico
Public Service Commission will have the opportunity to adjust the return on equity range utilized under the cost of service index concept.
Would you please summarize your testimony?
Yes. It is my opinion that the cost of service index would substantially reduce the cost of capital for Public Service Company of New Mexico.. This lower cost of capital would result from a lowering of the risk in the Company's securities. In addition, the cost of service index should enable Public Service to raise the necessary capital for its construction program even in difficult capital markets. It is, however, essential that the level of 'oday's return on equity be set at levels which are realistic in any given economi'c situation. In my judgement that level is currently 14 15%.
Does that conclude your testimony?
Yes, it does.
APPENDIX I, EUGENE V/. MEYER President and Director
'ice Utility Corporate Finance Kidder, Peabody & Co. Incorporated Qualifications I studied at both the University of Iowa and Valparaiso University, graduating with a Bachelor of Business Administration Degr'ee from Iowa in 1960. I joined Investors Diviersified Services, Inc., Minneapolis, Minnesota, as a junior security analyst in 1960, pursuing the analysis of the electric utility industry. Later io 1960, I became senior electric utility industry analyst for IDS, and in 1964, Manager, Utility Investments, in-cl'uding electric, gas and telephone companies. In 1966, I joined Panhandle Eastern Pipe Line Company as Director of Financial Research and in 1967 moved to Tucker, Anthony & R. f. Day as Director of Research, beco'ming a general partner of that firm on January 1, 1969. I have been a Vice President with Kidder, Peabody since January 1, 1971 and a member of the Board of Directors since January 1, 1973. I am currently a member of the firm's Executive Committee. I am a member of the New York Society of Security Analysts, where I served a three-year term on the Utility Program Committee, and the New York Utility Group. I am a Chartered Financial Analyst, having received that designation from the Institute of Chartered Financial Analysts in 1966.
Furthermore, I have participated in Irving Trust Company Utility Seminars and Regulatory Seminars as a guest lecturer on the subjects, "Financial Policy from an Institutional Common Stock Buyer's Point of View" and "Security Analysis," respectively. In addition, I have delivered addresses at various conferences of the Financial Analysts Federation, American Statistical Association, American Gas Association, New England Gas Association, Southern Gas Association, Public Utilities Buyers Group, Electric Council of New England, the Southeastern Electric Exchange, the I
New York State Utility Executives Association, the National Association of Auditors, Comptrollers.and Treasurers, the Edison Electric Institute National Convention, and the Rutgers University Conference on the Environment and the Energy Crisis. Since 1971, I have appeared in numerous rate proceedings'before 22. regulatory commi'ssions including
~
Alabama, Arizona, Colorado, the District of Columbia, Florida, Idaho, Illinois, Kentucky, MarylandMassachusetts, Michigan, New Jersey, New Mexico, New York, North Carolina, Ohio, South Carolina, Vermont, Virginia, the Federal Power Commission, and the City Councils of El Paso and New Orleans. I have also testified before the U.S. Senate Subcommittee on Anti-trust and Monopoly Affairs concerning a.bill designed to force the separation of combination utility companios, before the Securities and Exchange Commission in the Pacific Lighting divestiture proceedings, before the U;S. Price Commission in the public hearing on utility guidelines and twice before the U.S. Senate Committee on the Interior and Insular Affairs in its continuing
investigation of the Nation's energy problems. I am also a member of the Electric Utility Advisory Committee to the Federal Energy Administration.
As Director of the Utility Corporate Finance Department of Kidder, Peabody & Co. Incorporated, I am engaged primarily with raising new capital for the electric, gas and telephone industries. My duties entail intensive research, assistance and guidance in negotiated public offerings, 4 direct placements of utility securities, and competitive'bidding. I am responsible for price negotiations in all utility offerings where Kidder, Peabody is chosen to manage or co-manage the transaction.
Kidder, Peabody is engaged in investment banking, securities brokerage and investment advisory services. The firm is a member of the New York Stock Exchange, the American Stock Exchange and other principal securities. exchanges. In the field of investment banking, the firm acts as the manager or co-manager of a substantial volume of public offerings of first. mortgage bonds, debentures, preferred stocks and common stocks in many different industries. We also participate as an underwriter and distributor of security offerings underwritten. by groups of other investment banking firms. In addition, the firm is active in negotiating direct placements of 'security issues with institutional investo'rs.
During tho last five years, Kidder, Pea'body has acted as the managing underwriter or as the co-manager of pubIic offerings and private placements of corporate securities aggregating about $ 23.0 billion, making the firm one of the largest investment banking houses in the country during this period.
As measured by the volume of business. transacted on the iNew York Stock Exchange, Kidder,, Peabody is among the larger securities brokers; it is also very active in the trading of unlisted securities in the over-the-counter market ..
So far as bonds, debentures and preferred stocks are concerned, our clientele is comprised primarily of institutional investors since it is.
this type of account which provides by far the largest source of demand for fixed income.'securities. So far as common stocks are concerned, the-type of clientele is far more varied. We do a substantial business both with individuals and with institutional investors that is to say, with
. funds which are administered by professional investment managers. These would include trust companies, investment trusts, insurance companies, 4
pension funds, charitable institutions and the like.
Currently, the firm has over 750 salesmen in 47 offices in this country and abroad,.serving both individual and institutional investors.
Return Comparison Moody's 24 Electric Power Common Stocks and Public Service Com an of New Mexico Moody's 24 Electric Power Public Service Company Common Stocks of New Mexico Earnings Return Average Earnings Return Average Per Share ~on E uit Price Per Share ~on Eauit ~Price e 0/
1960 4.12 10.24 70.75 1.63 13. 22 23.67 1961 4.33 10.26 92.19 1.07 11. 82 34.19 1962 4.73 10.66 90.31 1.23 12.77 28.38 1963 4.99 10.77 103. 7.3 1.25 12.02 32.00 1964 .5. 41 11.05 109.38 1.33 12.10 32.56 1965 5.92 11.67 116.90 1.46 12. 65 35.13
'966 6.30 12.06 101.93 1.55 13. 20 26.31 1967 6.67 12,15 101.27 1.67 13. 64. 24.56 1968 6.67 11.51 99.7) 1.64 12. 62 .26.50
-1969 6.92 11.43 95.56 1.67 12. 10 26.94 1970 6. 89 10.75 78.78 1.81 12.33 20.50 1971 7.14 10.76 84.82 1.95 11.44 21.88 1972 7.73 10.98 80.99 2.50 12. 76- 22.88 1973 7.55 10.53 . 70.15 2.81 14. 20 20.56 1974 7.49p N.A. 51.37 1.95 9.52 14.94 (a) ~ Based on High and Low Bid Prices 1960-1972 (partial) and High and Low sale prices New York Stock Exchange 1972 (partial)-1974.
p -.Preliminary N.A. Not Available Source: Moody's Public Utility Manuals
~
The Wall Street Journal Public Service Company. of New Mexico Annual reports Report for Security Analysts Prospectuses
Utility Companies Downgraded by Moody's Investors Service, Inc. and Standard 6 Poor's Cor oration SENIOR RAVING REDUCED DATE* COMPANY FROM TO BY 1970 1" 1.4 'Connecticut Light 6 Power AAA AA -
Standard 6 Poor's 2-18 Potomac Electric Power. Aa A Moody's 2-25 Duke Power 'AA AA'tandard & Poor's Aaa Aa Moody' 4-7 Trunkline Gas BBB Standard 6 Poor's 4-23 Boston Gas BBB- Standard 6 Poor's 5-13 Monongahela Power AA Standard 6 Poor's 6-4 Kansas City Power & Light AA Standard & Poor's 6"15 Appalachian Power A Standard 6 Poor's 6-22 Boston Edison AA Standard 6 Poor's 7 2 PJamaica Water Supply BBB Standard 6 Poor's 8-27 Southern Connecticut Gas A BBB Standard & Poor's A Baa Moody' 9-15 Ohio Edison AAA Standard 6 Poor's 9-29 Carolina Telephone 6 Telegraph Aa 'A Moody's Standard 6 Poor's Elizabethtown Gas AA A Standard & Poor's Aa A Moody's 12-1 Ohio Power A Moody' 12-2 New England Power A Standard & Poor's 12-/ New B dford Gas 6 Electric .A Standard 6 Poor's
) 2-8 Iowa Electric & Power A Standard & Poor's 12>>10 Philadelphia Electric Aa Moody's
Page 2
+DATE COMPANY SENIOR ~.'.Tl n REOUCZD FROi.f BY 1971 l-13 Florida Power & Light A 'tandard & Poor's 2-1 Pennsylvania Pv~. & Lt. A Standard & Poor's 2-l8 Jersey Central Pwr. & Lt. BBB Standard & Pocr's
'4-1 Ohio Power Standard & Poor's, 5-4 Wisconsin Pubic Service A Standard &
S-ll Poor'A Southern New England Tel. Standard & Poor's Kansas City Pwr. & Lt. .Moody's 8-10 Consumers Power ML Standard & Poor's 8-19 Pennsylvania ElecLNc A BDB Standard & Poor's 8-26 Hawaiian Telephone Aa Moody's AA Standard & Poor's 10-19 Carolina Power & Ught Aa Moody' AA Standard & Poor's 11-3 Metropolitan Ed'on BBB Standard & Poo".'s 11-29 ~
Iowa Power & Light A Standard & Poo.'s 11-29 Orange & Rockland Utilities)
Rockland Electric Co.) Baa . Moody's Rockland Light & Power) BBB Standard & Poor's 1972 1-17 Kentucky Power BBB Standard & Poor's 2-3 Niagara Mohawk Standard & Poor's 2-9 Centi Hudson Gas & Electric Standard & Pom's Central Vermont Public Service BBB Standard & Poor's 2-24 Columbus & So. Ohio Electric Standard & Poor's 3-22 New England Tel. & Tele. AA Standard & Poor's Iowa Qlinois Gas & Elechdc A Standard & Poor'.s Rochester Gas & Electric A 'tandard 6 Poor's New Jersey Power & Light ~
BBB Standard & Poor's
Page 3 "DATE COMPANY SENIOR RATING REDUCED FROM TO BY on~.)
5-17 Pennsylvania Power Standard & Poor's 6-6 Consumers Power Aaa Aa Moody's
~
6-12. Cambridge Electric Light AA A Standard & Poor's
~ 6-29 Baltimore Gas & Electric AAA AA Standard & Poor's 8-16 Jersey Central Power & Light A Baa Moody's New Jersey Power & Light A Baa Moody's 12-5 Duke Power Standard & Poor's 12-12 Georgia Power Moody's Standard & Poor's Canal Electric Standard & Poor's 1973 2<<5 Commonwealth Edison Standard & Poor's 2-14 Consolidated Edison of New York BBB Standard & Poor's
~O3 Indiana & Michigan Electric Standard & Poor's 4:4 Boston Edison Company & Poor's 'tandard S-3) Pacific Telephone & Telegraph Standard & Poor's (all Debs. & Notes) 6-) 3 Atlantic City Electric M Standard & Poor's 9-19 Natural Gas Pipeline Aa 'A Moody's 13,-12 Duke Power Aa Moody' Q 12-10 Boston Edison Aa A Moody,'s 1974 1-7 San Diego Gas & Electric Standard & Poor's 2-5 Union Electric A Standard & Poor's 3-6 Public Service Company of New Hampshire A Baa Moody's 3-6 Public Service Company of New Hampshire A 'BB Standard & Poor's 3"7 Consolidated Edison of New'York A Baa Moody's 3-21 Connecticut Light & Power AA A Stan'dard & Poor's 3 Jamaica Water Withdrawn Moody's
Page 4 DATE COMPANY FROM TO BY 1974 (cont.)
Wisconsin Power & Light Company ~ AA A Standard & Poor's Baltimore Gas & Electric Company Aaa Aa Moody's 4-9 Hartford Electric Light & Power Company AA A Standard & Poor's
. 4"18 Western Massachusetts Electric Company Aa A Moody's Standard & Poor's
'I 4-18 Western Massachusetts Electric Company AA A 4-24 Consolidated Edison of New York BBB BB Standard & Poor's 4-30 The Detroit Edison Company Aa A Moody's.
4-30 II II II AA A Standard & Poor's 5-1 Cleveland Electric Illuminating AA Standard & Poor's 5-6 Central Vermont Public Service Corporation, Withdra wn Moody's A Moody's 4 5-6 Iowa Electric Light & Power Aa 5-7 Co>umbus and Southern Ohio Electric Co, Aa A Moody's 5-1 3 Consolidated Edison of New York Withdra wn Moody's Baa Moody's 4 517 Savannah Electric & Power Company A Moody's A Baa O 5-20 Blackstone Valley Electric t
5-20 Brockton Edison Company Baa Moody's
-20 Utilities A'ssociates'astern Baa Ba Baa Moody's Moody's 4 5-20 Fall River Electric Light 5-28 Ohio Power Company Baa Moody' 6-4 Central Illinois Light Company A Standard & Poor's 6-8 Savannah Electric & Power Company BBB Standard & %or's 6-13 Delmarva Power & Light A'. Moody's
'6-13 Delmarva Power & Light Standard & Poor's 6-17 Long Island Lighting A Standard & Poor's 6-24 Virginia Electric Power .A. Moody's
. 6-24 Virginia Electric Power A Standard & Poor's 6-2 6 Boston'Edison BBB Standard & Poor's 6-2 6 Boston Edison Baa Moody's 7-17 Consumers Power Company Aa A Moody's 7-17 Consumers Power Company AA A Standard & Poor's 7-23 Toledo Edison AA A+ Standard & Poor's Connecticut Light & Power Aa A Moody's Hartford Electric Light Company Aa A Moody's
rage 5 SENIOR BATING BEDLiCED DATE CO i>1PANY PRO!YI TO bY 7~
(Contd.)
8-20 Ohio Edison Company Aaa Moody's Pennsylvania Power Company AA Moody's Florida Power Corporation Aa ~
Moody's Florida Power Corporation AA Standard & Poor's
~ 1 Q-l Detroit Edison Moody's 10-3 New York State Elec. & Gas Standard & Poor's 10-8 Southern California Gas Standard & Poor's 10-8 Niagara Mohawk -
Standard & Poor's 10-1 7 Philadelphia Electric Aa Moody'.s 10-1 7 Philadelphia Electric AA Standard & Poor's 10<<22 Dayton Power & Light Aa Moody's 1 0-2'2 Dayton Power & Light AA Standard & Poor's 10-29 Power Poor's A'tandard BBB &
It1-19 9'hio 11-19 C incinna ti Cincinnati Ga s & Electric Ga s & Electric Aa Standard & Poor's Moody's 11-1 San Diego Gas & Electric Moody's 11-1 9 Florida Power & Light A Moody's 12-5 Nevada Power BBB Standard & Poor's
)2-234 'Consumers Power Baa Moody's12-234 Georgia Power Baa Moody's 1975 1-9 Western Massachusetts Elec. A Baa Moody' 1-9 Western Massachusetts Elec, A BBB Standard & Poo s 1-22 Columbus & Southern Ohio A BBB Standard & Poor's 1-23 Hartford Electric Light A BBB Standard & Poor's 1-27 jr Georgia Power Co. Withdra wn Moody's Savannah Elec. 6 Power Co., Withdra wn Moody's 1-27'%-1 Savannah Elec. & Power Co. BBB BB Standard & Poor's Og Appalachian Power A Baa Moody's 2-19 Arizona Public Service A Baa Moody's 2-24 Houston Lighting & Power Co. Aha
'- Aa Moody's Houston Lighting & Power Co. AAA , Standard & Poor's
SENIOR RATING REDUCED DATE COMPANY FROM TO BY OFB (Contd.)
2-25 Louisville Gas 6 Electric Standard 6 Poor '
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~Represents date of new issue 4New Offering not involved. 'Date, where shown, is Agency's publication date.
/Private Placement, P/Sale was postponed. "
'l Note: Assumed debt of predecessor companies not listed, Source: Moody's Bond Survey Standard 6 Poor's Bond Outlook and Fixed Income Investor.
Construction and External Capital Rcqu'ircments
'EI Investor-Owned Eiectric .Utilitics and Public Service Company of New Mexico 1961-1978 EEI Investor Owned Public Service Company Electric Utilities of New Mexico onstruction a) External Caoital Construction External Canital
% of % of
~00 D $ 000 Construction $ 000 $ 000 Construction 1961 3,671,000 ~
1,546,090 42. 12,48G 9,162 73.4 1962 3,408,000 1,455,000 1'1.7 0,446 434 5.1 1963 4,035,000 1,529,000 37.9 5,516 600 10-. 9
'964 3,724,000 1,526,000 41.0 7,100 484 6.7 1965 4;469;000 1,717,000 30.4 7,055 1,737 24.6 1966 5,443,000 2,071,000 52. 7 13,546 7,704 57.5 1967 6,'726,000 3,772,000 56,1 15,206 10,027 GS.G 1968 7,480,000 5,096,000 68. 1 24,914 16,996 68.2 1969 8,720,000 5,336,000 61. 1 13,129 2,749 20.9 1970 10.,610,000 7,696,000 72.5 11,092 4,21G 35. 5 1971 12,490,000 9,220,000 73.8 21,540 13,233 61. 4 972 13,068,000 9,945,000 71.7 .
'4,500 30,028 69. 3 1973 1S,996,000 10,409,000 65.6 28,188 16,132 57.2 1974 15,700,000E 11,500,000E 73.2E 47,265 38,539 01.5 1975F 16,000,000 10,000,000 62.5 91,000 '9,000 86. 8
$ 976F 17,000,000 10, 000~000 50.0 152;400 132,900 07.2 1977F 19,000,000 11,000,000 S7.9 163,100 14S,700 89.3
'978F 21,0000000 13,000,ooo 61.9 174,900 13'9,920 00.0 1979F 23,000 OOO 14,000,000 60.9 160,300 128,240 00.0 E - Estimate F - Forecast (Assuming no rate relief for Public Service Company of New Mexico)
(a)- Commencing l970, investment in Nuclear Fuel is included Source: Edison Electric Institute Estimated Cash Flow Statcmcnt Public Service Company of New Mexico Annual Reports, Reports for Security Analysts and Prospectus
Yield Differentials Mood 's Outstandin Utilit Bonds Aaa Rate Differential Aa Rate Differential A Rate 1965 4. 50% . 02% 52% . 06% 4. 58%
1966 5.19 .06 5. 25 .14 5.39 1967 5.58 .08 S. 66 .21 5.87 1968 6.22 .13 '.35 .16 6.51 1969 7.)2 .22 7.34 .20 7.54 1970 8.31 .21 8.52 .17 8.69 1971 7.72 .28 8.00 .16 8.16 1972 7.46 .14 7.60 .12 7-72 1973 7.60 .12 7.72 '12 .
7.84 1974 January 8.00 .15 8.15 .21. 8.36 February 8.01 .19 8.20 .22 8.42 March 8.14 .21 8. 35 .11 8.46 April 8.36 .20 8.56 .21 8'.77 =-
May 8.47 ~ 24 8.71 .28 8.99 t =
'une July August September October 8.58 8.83 9.09 9.36 9.50
,35
.34
~ 44
.69
.43 8,93 9.17.
9.53 10.05 9.93
.39
.49
.50
~ 40
.85 9.32
.9. 66 10.03 10.45 1,0. 78 November 9.10 . ;44 9.54 .92 10.46 December 9.02 .35 9.37 .90 10.27 Source: Moody's Public Utility Manual Moody's Bond Record
Yield Di fferentials Mood 's Newl Issued Utilit Bonds Aaa Rate Differential Aa Rate= Differe'ntia 1 R Rate 1965 1966 1967
'.44 4.57%
5.8S 05
.13
~ 13
- 4. 62%
5.57 5.98
. 08%
.19
.20
- 4. 70%
S.76 6.18 1968 6.57 .15 6 '2 .18 6.90 1969 7.75 .13 7.88 .19 8.07 1970 8.52 .22 8.74 .41 9.15 1971 7.58 .12 7. 70 .27 7.97 1972 7.34 .08 7.42 .14 '.56 1973 7.76 .06 7.82 .18 8.00 1974 January 8.06 .31 8.37 .13 8.50
~
February 8.07 ".06 8.13 .36 8.49 March 8. 33 .28 8.61 .20 8.81 April 8.86 ;22 9.08 .32 9.40 May 8. 85 ..35 9.20 .61 9.81 June 9.30 ,16 9.46 .49 9.95 July 9. 65 11.05
'78 August 9.97 10.75 10.75 Septemberl 0. 05 .40 10.45 ~ 57 11.02 October 10.06 1.27 11.33 (. 58) 10.75 November 9.15 .75 9.90 December 9;52 ..12 9.64 .61 10.25 Source: Moody's Public Utility Manual
Exhibit Vl COMPARISON OF RETURN ON EQUITY TO MARKET/BOOI< RELATIONSHIP OF ELECTRIC UTILITYCOMPANIES
- 170.0 160.0 150.0 140.0 130.0 R
120.0 oO 110.0 100.0 0 0
CO Q4 90.0 0
0 00 80.0 0
0 0 0 0
0 70.0 ~ \ ~
0 0
0 0 60.0 q
0 0 0 0
~ 0 0 50.0 40.0 30.0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 RATE OF RETURN ON EQUITY (PERCENT)
+Annual Revenues in Excess of $ 50,000,000.
Source: C. A. Turner, PUI3LIC UTILITIES CO~MON STOCK February 1975
UNITED'STATES OP AMERICA BEFORE THE FEDERAL POWER COMMISSION STATE OF NEW'ORK )
)
COUNTY OF NEVE YORK) AFFIDAVIT OP EUGENE W. MEYER Eugene W'. Meyer, being first duly sworn, disposes and says:
That he has read the foregoing testimony of Eugene W, Meyer; that he would respond in the same manner to the questions, if so asked, upon taking the stand and that the matters and things said therein are true and correct to the best of his knowledge, information and belief.
'7,.: .
W; Mayer/ /('~/Eugene
/
Sworn and Subscribed to bef re me this~~'ay of P4', 1975.
Notary Pubs c KDWIN J. LAWRENCE etOTARY PUBLIC, STAtE OC NEW YORK No. 41 ~ 7450225 Quellfled In Queens County Cettltlcste tiled ln llew Yorlt Contettsslon exphee March 30,County 1976
1 TESTIMONY OF EUGENE W. MEYER 2 VICE PRESIDENT AND DIRECTOR OF KIDDER, PEABODY & CO.
3 FOR 4 PUBLIC SERVICE COMPANY OF NEW MEXICO 5 FPC DOCKET NO. E 6
7 8 Q. PLEASE STATE YOUR NAME, ADDRESS AND OCCUPATION.
9 A. My name is Eugene W. Meyer. -
I reside at 91 Skyline Drive, Morris-10 town, New Jersey. I am a Vice President and Director of Kidder, Peabody & Co. Incorporated, 10 Hanover Square, New York, New York.
12 13 PLEASE DESCRIBE YOUR QUALIFICATIONS FOR THE TESTIMONY YOU ARE ABOUT 14 TO GIVE.
15 A. My qualifications are presented in Exhibit I.
16 17 Q. WHAT IS THE PURPOSE OF YOUR TESTIMONY IN THESE .PRECEEDINGS?
18 A. The purpose of my testimony is to describe capital market condi-19 tions as they exist today. Then, I will discuss the financial 20 policies and results which Public Service Company of New Mexico 21 must achieve to attract capital from those markets on reasonable 22 terms.
23 24 Q. PLEASE BEGIN YOUR TESTIMONY BY DISCUSSING BOND MARKET CONDITIONS ~
25 A. As may be seen by the attached Exhibit II, long-term bond rates 26 have risen steadily since 1965. During this period of time, the 27 rate of inflation nationally has also been increasing as may be 28 noted on Exhibit III. During 1974, long-term interest rates were 29 at record levels for most of the year as can again be noted in 30 Exhibit II. The rate of inflation for 1974 was, of course, also at 31 record levels.
32 33 Along about the end of September, 1974, the national economic focus 34 turned toward the problems of recession. Almost immediately, long-35 term rates began to decline as the market reflected the increased 36 money supply that the Federal Reserve would be making available to 37 provide funds for the Treasury to finance the projected huge budget 38 deficits. This decline in long-term rates extended until the end 39 of February. However, since the Houston Lighting and Power Company 40 AA-rated issue was offered at 8.67% during the last week of Febru-41 ary, long-term rates for new utility debt issues have been increas-42 ing. For instance, just two weeks later, on March 12, Duquesne 43 Lighting's AA-rated bonds required an interest rate of 9.47% and on 44 April 24, Cleveland Electric Illuminating long-term bonds were 45 priced to yield 9.85%.
46 47 Q. MR. MEYER, THE PRIME RATE CONTINUES TO DECLINE. WHY, THEN, HAVE 48 LONG-TERM BOND RATES STOPPED DECLINING AND, INDEED, INCREASED 49 DURING THE PAST FEW WEEKS?
50 A. It is important to realize that the factors which affect short-term
1 interest rates and long-term interest rates are different. Short-2 term rates are almost entirely a function of the new money supply 3 as provided by the Federal Reserve System, and the demand for those 4 funds by business and the United State Government. The rate of in-5 flation plays a very minor role due to the short period of time in-6 volved. Short-term funds are used primarily for working capital 7 purposes by most of American industry. As inventory accumulation 8 has been reduced in response to recessionary conditions, the demand 9 for short-term capital has declined. At the same time, of course, 10 the Federal Reserve has been sharply increasing the supply of ll 12 short-term capital. to finance Treasury requirements.
13 Long-term rates, however, are related to the supply and demand 'for 14 permanent capital to be employed largely in financing new and ex-15 panded production capacity. Because the funds are to be employed 16 for anywhere from five to forty years, thus exposing the investment 17 to the ravages of inflation, higher interest rates are required to 18 attract the long-term capital.
19 20 Currently, bond investor concern is turning back toward the rate of 21 inflation. The financing of the projected Federal budget deficit 22 indicates another increase in the rate of inflation late in 1975.
23 In addition, the increase in the investment tax credit should 24- encourage increased capital investment and because corporate earn-25 ings are down for industry generally, it is believed that increased 26 capital investment will require infusions of new debt capital as 27 weil, thus greatly increasing the demand for long-term capital.
28 Already the demand for new debt capital by industrial concerns is 29 growing. This tremendous increase in the demand for new debt 30 capital leaves little reason to expect that long-term rates will be 31 lower for the balance of the year but higher rates are a distinct 32 possibility if the rate of inflation does not decline much or'ven 33 increases later in the year.
34 35 Additional comment on the financing of the proposed Federal budget 36 deficit seems appropriate at this point due to its powerful impact 37 on the capital availability for the private sector., It is esti-38 mated that the U.S. Treasury will require as much as $ 90-100 billion 39 in new financing from the public market during 1975. Debt of the 40 U.S. Government is regarded as the highest quality available. In 41 recessionary times, such as these, investors become ever more 42 "quality-conscious" and are currently stressing quality more than 43 ever. Pith such a huge supply of Government securities available 44 to them this year, in addition to an increasing supply of AAA and 45 AA-rated corporate bonds, it will become increasingly difficult for
'46 A-rated and BBB-rated and lower-rated companies to attract capital 47 except at exorbitant prices, if at all. Already there are strong 48 signs that A-rated and lower-rated companies cannot find a market 49 for 30-year bonds and must reduce the maturity to the 5-10 year 50 range. Even, AA-rated companies are finding that 30-year debt
1 requires an interest rate at least 100 basis points higher than the 2 5-10 year maturity.
3 4 q. ARE THERE OTHER CHARACTERISTICS OF THE CURRENT BOND MARKET IMPOR-5 TANT IN THEIR IMPACT UPON INDIVIDUALCOMPANIES?
6 A. Yes, of course. The differential between interest rates at various 7 bond ratings is a most important characteristic of the current bond 8 market. This differential widened precipitously in 1974,'s shown 9 in Exhibit II. Near the end of the year, for instance, the differ-10 ential between AA and A-rated bonds was approaching a full 1% (.90 ll 12 in December). Currently that differential can be as high as 1.5%.
Undoubtedly, this is primarily due to the fears investors have that 13 bonds will be downrated while they hold them.
14 15 Exhibit IV lists the bond downratings which have occurred in the 16 utility industry since January 1, 1970. The widening differential 17 in interest rates between bond ratings is, of course, of enormous 18 importance to utility companies'ustomers and investors. Until 19 1974, a downrating from AA to A bore with it economic consequences, 20 of course, but they were relatively minor in nature. Now, however, 21 such a downrating bears not only ec'onomic consequences of substan-22 tial importance but means, also, that long-term financing may not 23 be available at all. In the current atmosphere, the BBB bond is 24 expected to be downrated to BB, a r'ating level which is forbidden 25 for most institutions. Because A-rated bonds are suspect to become 26 BBB very soon, that market is also highly questionable. In fact, 27 for several months in 1974, there was no market for A rated bonds 28 unless the maturity was within ten years of the date of issuance.
29 As mentioned before, I believe we have returned to that situation 30 now.
31 32 In addition to shorter maturities and to paying higher interest 33 rates, for new debt issues, lower-rated utilities have been forced 34 to provide cash sinking funds and call protection in excess of the 35 customary five years. The stricter terms of the bonds indicate 36 that investors have realized the increased business and financial 37 risk of utility companies rated A and below and are, therefore, 38 unwilling to commit for the long-term, pending resolution of the 39 industry's earnings problems.
40 41 Q. YOUR. TESTIMONY THUS FAR HAS DEALT WITH LONG-TERM DEBT SECURITIES.
42 IS IT SAFE TO SAY THAT THE TRENDS YOU HAVE DESCRIBED WOULD APPLY TO 43 THE PREFERRED STOCK MARKETS AS WELL?
44 A. Yes, the trends I have described for the bond market apply to the 45 preferred stock-market. This market has been dominated by life 46 insurance companies and corporations who receive an 85% tax ex-47 clusion on preferred stock dividends. Currently, this exclusion is 48 threatened by proposed legislation before the U.S. Congress. If 49 this exclusion is lost, substantially higher preferred stock div-50 idend rates may be expected. In addition, most preferred stock is
1 rated one grade lower than the company's bonds adding to the higher 2 dividend rate required for this kind of security.
3 4 $ ale of this security by utilities is absolutely required in these 5 times, however, if a bond rating of a company is to be maintained.
6 There is no way, under current circumstances, that only common 7 stock can be sold to make up the total equity required to support 8 the debt.
9 10 PLEASE DESCRIBE THE COMMON STOCK MARKET SITUATION.
ll 12 Q.
A. The stock market, not surprisingly, has performed poorly over the last few years. This performance mirrors the Nation's difficult 13 economic circumstances in the 1970's. Recently, the market has 14 rallied somewhat in anticipation of an end to the recession later 15 this year. It remains to be seen, of course, whether this antic-16 ipation will be rewarded.
17 18 The long stock market decline together with the dramatic impact of 19 the dividend omission by Consolidated Edison in April, 1974 reduced 20 the prices of most utility common stocks to levels well below book 21 value. Exhibit V lists utilities with revenues of $ 50 million or 22 more, the prices of the common stocks of such companies as of April 23 25, 1975 and the book value per share of such companies as listed in the April C.A. Turner sheets. Obviously, the majority of util-25 ity common stocks are still selling below book value despite the 26 market rally since the beginning of 1975.
2?
28 Q. OBVIOUSLY, THE DEPRESSED PRICES OF UTILITY STOCKS HAVE CAUSED 29 LOSSES FOR COMMON STOCKHOLDERS. MiAT IMPACT DO THESE PRICES HAVE 30 ON THE CUSTOMERS OF UTILITY COMPANIESP 31 A. When a utility company is forced to issue new common stock below 32 book value, the required rate of return on equity (a cost ulti-33 mately borne by the customer) is increased. Exhibit VI illustrates 34 that the sale of common stock below book value results in both 35 dilution of assets per share (book value) and earnings per share.
36 This is obviously bad for the common stockholder. It is also bad 37 for the rate payer. So long as deterioration in the rate of return 38 on equity occurs, earnings per share will decline, finally, to the 39 level of the common stock dividend where it must be arrested or the 40 dividend cannot be paid in full. If a company begins to reduce its 41 dividend, it is effectively foreclosed from the market place for it would be unable to finance expanded 42 new equity funds. Therefore, 43 plant or, in these inflationary times, even replace worn-out or 44 obsolete high operating-cost plant. Furthermore, it would, by 45 definition, have no additional retained earnings.
46 47 Thus, it is imperative to maintain earnings per share for the pro-48 tection of, the dividend and for the protection of the retained 49 earnings required for reinvestment. Regulatory commissions have 50 consistently recognized these needs in rate orders across the land.
1 According to Exhibit VI, the sale of stock below book. value, in and 2 of itself, would require a higher rate of return on book equity 3 merely to maintain earnings per share, let alone record an incre-4 ment of growth on the new capital invested. In the case of an 5 industrial company, the price of the product would be increased to 6 provide the 12.2% rate of return and to maintain the $ 1.20 per 7 share earnings. If, because of competition, the price of the 8 product could not be increased, the expansion of plant and the 9 financing to accomplish it would not be undertaken to begin with.
10 11 If Company A were a utility company, the price necessary to provide 12 the required 12.2% would have to be approved by regulation. In 13 other words, merely because new common stock was required to be 14 raised at prices below book value, the required rate of return on 15 book value was increased and thus the'cost of capital, a cost 16 ultimately borne by the ratepayer was increased. If regulation 17 refused to recognize this increment of increased cost in setting 18 rates, the market price of the stock would be depressed to levels 19 even further below book value and, eventually, investors would re-20 fuse to put up new equity capital funds at all. When that occurs, 21 of course, financing with debt and preferred stock disappears also.
22 23 Q. MR. MEYER, IMPLICIT IN YOUR TESTIMONY ON THE ISSUANCE OF NEW COM-24 MON STOCK AT PRICES BELOW BOOK VALUE IS THE NOTION THAT UTILITIES 25 MUST ISSUE NEW COMMON STOCK. WHY DO UTILITIES ISSUE NEW SECURI-26 TIES - DEBT, PREFERRED STOCK OR COMMON STOCK?
27 A. Utilities issue these securities in order to pay for the construc-28 tion of facilities that will provide service for existing and 29 future customers.
30 31 Q. WHY DON'T UTILITY COMPANIES SELL DEBT SECURITIES INSTEAD OF COMMON 32 STOCK WHEN THE MARKET PRICE OF THE COMMON IS BELOW BOOK VALUE?
33 A. Many utilities have done exactly that with disastrous results as 34 evidenced by the rating downgradings listed in Exhibit IV. Exces-35 sive debt is the primary culprit responsible for bond rating re-36 ductions and indenture violations in the industry today. With 37 ratings reductions and indenture violations comes the inability to 38 finance, in. some cases regardless of price. Public Service Company 39 of New'exico has resisted this temptation for short-term exped-40 iency and maintained its equity ratio at nearly acceptable levels 41 for the long term. As a result, the Company has been able to main-42 tain AA/Aa bond ratings and the ability to issue long-term securit-43 ies. The Company's needs for new capital now and in the years 44 ahead are extensive reflecting New Mexico's growth and need for 45 expanded and upgraded employment. The combination of the Company's 46 sound financial policy and realistic regulation go a long way 47=- toward providing the Company and its customers with the lowest cost 48 of capital possible to meet these needs.
49 50 Q. SINCE THE ISSUANCE OF EXCESSIVE DEBT XS NO T A VIABLE SOLUTION, IS
1 THERE ANY OTHER WAY TO AVOID THE ISSUANCE OF NEW COMMON STOCK AT 2 PRICES BELOW BOOK VALUES?
3 A. The most obvious way is to reduce capital expansion to levels jus-4 tified by retained earnings alone. This is the course undertaken 5 by virtually all of American business. The electric, telephone and 6 gas industries are notable exceptions to this rule, however. These 7 companies operate under franchise requirements wherein they must 8 provide services to the customers on demand. To render such ser-9 vices, enormous amounts of capital are required. If companies in 10 these three industries were to reduce construction expenditures to 11 levels justified by retained earnings alone, they would quickly be 12 unable to meet the demand for their services.
13 14 Q HAVE YOU PREPARED AN EXHIBIT ILLUSTRATING THE CAPITAL DEMANDS OF 15 THE ELECTRIC UTILITY INDUSTRY AND PUBLIC SERVICE?
16 A. Yes, Exhibit VII shows the total construction expenditures past and 17 projected for the investor-owned electric utilf,ty industry and for 18 Public Service. In addition, the exhibit shows the percentage of 19 these expenditures requiring external, new financing. It should be 20 noted that the external financing required over the past few years
.21 has increased substantially. While some slowdown in construction 22 expenditures is possible for the industry as a whole in the next 23 few years, such slowdown is primarily the result of postponements 24 and cancellations of power plants under construction for which 25 companies are unable to attract the necessary external capital.
Not only are such postponements and cancellations expensive in
'6 27 terms of penalty payments but they are also a real threat to future 28 service reliability. Public Service has made some reductions in 29 its construction program thus far but not to the point of jeopard-30 izing future service reliability. In my opinion, a return on 31 equity set at competitive levels in today's capital markets, will 32 go a long way toward assuring Public Service's ability to finance 33 its future needs.
34 35 Q. WHY IS THE RATE OF RETURN ON EQUITY IMPORTANT AS A MEASURE OF A 36 COMPANY'S ABILITY TO ATTRACT NEW CAPITAL?
37 A. The dollars provided by the return on equity provide the coverage 38 on bonds and preferred stock in addition to the obvious earnings 39 per share and dividends per share. The coverage ratios are the 40 foremost statistical measurement used in the evaluation of the 41 quality of bonds and preferred stock. The lower the-. coverage 42 ratio, the lower is the rating on the securities and the higher is 43 the interest rate or preferred dividend rate the company must pay 44 to attract senior capital. Investors in common stocks derive their 45 return on investment from current yield, which is the dividend per 46 share paid divided by the price per share at which he purchases the 47 stock, and appreciation in the price of the stock which, in the 48 long .run, derives from growth in earnings,per share. Growth in 49 earnings per share derives from earning a return on the portion of 50 earnings reinvested in the business. That return is the return on
0 1 equity. If it declines sharply as it did for Public Service in 2 1974, earnings per share decline and the price of the stock de-3 clines. If, however, the rate of return on equity is maintained or 4 improved, earnings per share growth occurs and price appreciation 5 is possible. Thus, it may be seen that the key ingredients of 6 common stock investment return result from the Company's rate of 7 return on book equity. When the return on equity is too low, the 8 price of the common stock declines below book value. When this 9 occurs, the Company is not earning the true cost of equity capital.
10 ll 12 IN NEW YOUR OPINION, WILL A HIGHER RETURN ON EQUITY REDUCE THE COST OF CAPITAL FOR PUBLXC SERVICE?
13 A. Yes, so long as the level of rate of return on equity is realistic 14 in today's market place. Such a level should provide coverages 15 sufficient for the Company to maintain its AA/Aa bond ratings. It 16 is my opinion that the Company's ratings will be lowered to A by 17 all three rating services unless pre-tax coverage ratios are main-18 tained in 3.0x to 3.5x range. As can be seen by referring to 19 Exhibit VII, the Company's construction expenditures are enormous 20 by past standards for the 1975-79 period. If the Company's bonds 21 are downrated to A, there will be a substantial increase in the 22 cost of senior capital.
23 24 Q DESCRIBE THE MAGNITUDE OF INCREASED COSTS IF THE COMPANY LOSES ITS 25 AA/Aa RATING.
26 A. According to Exhibit VII, Public Service will have total external 27 capital requirements of $ 625,760,000 during the 1975-79 period. We 28 can reasonably assume that approximately 1/2 of this amount will be 29 raised in the form of debt capital and 15% in the form of preferred 30 stock. Thus, $ 312,880,000 would be financed as debt and $ 93,864,000 31 would be financed with preferred stock. Refer now to Exhibit II 32 which indicates the differentials between AAA, AA, and A rated 33 bonds for the last ten years and month by month for 1974 and 1975.
34 The differential between Aa and A-rated outstanding utility bonds 35 averaged .89% for the last three months of 1974. Currently, the 36 differential, as mentioned before, can be as high as 1.50%. If 37 Public Service were to be downrated to the.A level and a between Aa and A of. approximately 1% were realized, the fol-differen-'ial 38 39 lowing increased costs of debt capital would occur over the next 40 thirty years.
41 42 50% of $ 625,760,000 total requirements =
43 $ 312,880,000 debt financing 44 45 $ 312,880,000 x 1% $ 3,128,800 annual excess interest cost 46 $ 3,128,800 x 30 years = $ 93,864,000 total excess interest
'47 cost 48 49 The same differential should apply to a downrating of the Company's 50 preferred stock.
15% of $ 625,760,000 total requirements
$ 93,864,000 preferred stock financing 3
4 $ 93,864,000 x 1% = $ 938,640 annual excess cost 5
6 ' $ 938,640 x 30 years = $ 28,159,200 total excess cost, before taxes 8 $ 28,159,200 + 50% tax factor = $ 56,318,400.
9 Combining the two, additional senior capital costs borne by cus-.
10 ll tomers of Public Service over the next thirty years, if the Company 12 loses its AA/Aa rating is in the neighborhood of $ 93,864,000 +
13 $ 56,318,400 $ 150,182,400. Clearly, the cost of a lost rating for 14 a company with growing demand is extraordinarily expensive.
15 16 Furthermore, if the Company's rating were reduced to A, it would 17 then be facing even a higher differential between A and BBB. Most 18 importantly, however, the Nation's governmental and corporate debt 19 capital requirements are such that A or lower-rated long-term debt 20 funds will be often unavailable at any price. The over-leveraging 21 of the Nation's political and business structure insures this 22 reality until the long arduous process of restoring good credit to 23 our system is completed.
24 25 THE COMPANY'S FINANCING REQUIREMENTS INCLUDE SOME $ 200.0 MILLION OF 26 NEW COMMON STOCK FINANCING DURING THE 1975-1979 PERXOD. EARLIER 27 YOU DESCRIBED THE ECONOMXC COST OF SELLING NEW CO>MON STOCK AT 28 PRICES BELOW BOOK VALUE. PUBLIC SERVICE COMPANY OF NEW MEXICO'S 29 COMMON STOCK IS CURRENTLY SELLING AT $ 16.75 PER SHARE ON THE NEW 30 YORK STOCK EXCHANGE WHILE ITS BOOK VALUE PER SHARE AS OF MARCH 31, 31 1975 WAS $ 20.71. PRESENTLY, THEREFORE PNM STOCK IS SELLING AT 81%
32 OF BOOK VALUE. IN'YOUR OPINION, WHAT WILL IT TAKE FOR PNM STOCK TO 33 REACH BOOK VALUE IN THE MARKET PLACE SOMETIME DURING THE 1975-1979 34 PERIOD SO THAT THE EXTRAORDINARY HIGH COSTS ASSOCIATED WITH SELLING 35 NEW STOCK BELOW BOOK VALUE MAY BE AVOIDED FOR AT LEAST SOME OF THE 36 COMPANY'S REQUIRED NEW STOCK ISSUANCE?
37 A. It is true that Public Service Company of New Mexico is in the position of requiring additional equity through the sale of new 38 39 common stock and it is most desirable that the market price of the 40 stock be above book value at the time of the announcement of a new 41 sale. However, it is desirable that the market value of the common 42 be above book value prior to the sale of additional shares. This 43 is required because that announcement usually results in a downward 44 market pressure on the stock price, reflecting expected earnings 45 per share dilution. In addition, between the time of announcement 46 and time of sale, there needs to be some cushion to protect against 47 market declines caused by factors unrelated to the Company itself.
48 For example, such'actors could include outbreaks of war in dif-49 ferent parts of the world, political upheaval'in other countries or 50 this one. Finally, the costs.of'doing the financing itself, i.e.
1 the payment to underwriters and to legal firms, will also reduce 2 the net proceeds to the Company. It is, therefore, desirable for 3 utility stocks to sell at least a minimum of 20% over book value in 4 order to guard against these pressures.
5 6 In order for the common stock to sell at such a premium to book 7 value, it must offer the investor an adequate return at that price 8 to be attractive relative to other investments.
9 10 Exhibit VIII presents studies completed by Kidder, Peabody concern-11 ing periods of time during the 1960's and, in some cases, into the 12 1970's for many utility companies including Public Service Company 13 of New Mexico. In these studies, we selected periods where the 14 common stocks of the companies sold at premium prices to book 15 value. In addition, the periods selected were ones exhibiting 16 moderate but steady earnings per share growth.
17
18 The purpose of the studies is to establish the relationship between 19 the rate of return available to the common stock buyer during the 20 period and the rate of return available to buyers of the subject 21 company's bonds during the period. A higher return must be avail--
22 able to the investor if he is to take the additional risk of in-23 vesting in common stock rather than the bonds of the same company.
- 24. Notice that all of the studies completed thus far indicate a dif-25 ferential in return to the investor ranging from 3-5%., That is, 26 when the average yield on bonds is 6% for example, the combined 27 dividend yield and earnings per share growth rate available to 28 common stock investors ranges between 9%-11%.
29 30 I have always been troubled by rate of return testimony which 31 claims that if companies are permitted to earn a rate of return on it will 32 equity equal to the absolute levels in some prior period, 33 be just and reasonable and enable the company to attract new common 34 equity at a reasonable price. Such suggested rates of return on 35 equity often result in returns to the equity investor equal to or 36 lower than returns available in less riskier debt sec'urities. Such 37 a notion makes no sense.
38 39 As a capital-intensive industry, utility common stock prices have 40 always been interest-rate sensitive. Thus, in the search for other 41 investments. with which to compare utility stocks, there is no 42 better measure than the same company's bonds.
43 44 Xn the current market, the outstanding long-term bonds of PNM would 45 provide a yield to the investor of approximately 9.55%. If a new 46 issue of long-term bonds were to be offered by the company, a yield 47 of 9.85% would be required, if indeed the bonds could be sold at 48 all. So we see that the investor can obtain a return on his in-49 vestment of 9.55%-9.85% if he buys PNM long-term bonds.
to Therefore, differen-50 assuming that, over time, he continues demand a 3-5%
51 tial in order to invest in the common stock at a premium over book
1 value, he would currently require a return 3-5% over the median 2 9e?0% bond yield or 12.7-14.7%.
a 3
4 Let's examine the actual circumstances in the current market place.
5 The stock of PNM is, selling at $ 16.75 per share, the dividend is per share, the earnings for the 12 months ended March 31, 6 $ 1.28 7 1975 were $ 2.12, tHe Company's indicated dividend payout ratio is 8 60.4% (the retention ratio is, therefore, 39.6%), the book value is 9 $ 20.71 and the rate of return on equity for the 12 months ended 10 March 31, 1974 was 10.24%.
ll 12 The investors return at a price of $ 16.75 per share is as follows:
13 14 $ 1.28 dividend ". $ 16.75 price 7.64% current yield 15 + 39.6% retention rata x 20.24% roe = 4.06% prospective eps 16 groath rate 17 TOTAL 11.70%
18 19 However, the investor can achieve a 9.70% yield from PNM bonds.
20 Thus, the additional return for the higher risk of the common stock 21 is only 2% (11.7%-9.7%). The differential falls short of the 3-5%
22 range required to produce market prices above book value so that 23 come as no surprise that the market price of $ 16.75 per i.t'hould 24 share is only 81% of the book value of $ 20.71.
25 26 There are only a few utilities whose common stock is selling at a 27 premium to book value today. Most of them are actually earning in 28 excess of 15% on book value or .are expected to reach such levels 29 during the year due to recent rate relief not yet fully reflected 30 in their financial statements.
31 32 In the case of PNM, I have tested for various levels of rate of 33 return on book equity which may be expected to produce a market 34 price of approximately 120% of book value, the minimum level for 35 companies facing numerous stock offerings minimum, that is, if 36 economic confiscation is to be avoided. A rate of return on book 37 equity of approximately 15.5% produces such results.
38
. 39 In proving this conclusion, the following assumptions were made for 40 Public Service Company of New Mexico:
41 42 1. Rate of return on book equity (roe) 15.5%
43 2. March 31, 1975 book value per share (BV) $ 20.71 44 3. Dividend payout ratio 60.4%
45 4. Earnings retention rate 39.6%
46 5. Median investor return required: 13.7%
47 12.7% - 14.7%
48 49 First, if PNM earned 15.5% on book equity of $ 20.71 per share, 50 earnings per share would be $ 3.21:
1 BV $ 20.71 x roe 15.5% = $ 3.21 per share 2
~ 3 Next, assuming PNH would pay a dividend based on its current payout 4 ratio (a reasonable investor expectation) the dividend per share 5 would be $ 1.94:
6 7 Eps $ 3.21 x payout ratio 60.4% = $ 1.94 dividend per share 8 lowss:
9 Furthermore, the investor would know that he could anticipate an 10 earnings per share growth rate of.6.14% per year derived as fol-ll 12 13 Roe 1$ :5% x retention rate 39.6% == 6.14% eps growth rate.
14 15 We know that the investor requires a total return on his investment 16 of 12.7%-14.7% (median 13.7%) in order to purchase the stock at a 17 price higher than book value. Thus far, we have solved for the 18 earnings per share growth rate portion of that return and found it 19 to be 6.14%. The difference between 13.7% and 6.14% is then the 20 current yield required by the investor. It is derived as follows:
21 22 Hedian investor total return 13.7%-6.14% eps growth rate 23 7.56% yield 24 25 Current yield is a function of the dividend per share and the price 26 per share. We know that the dividend per share would be $ 1.94 and 27 we know that the investor requires a 7.56% yield. We, therefore, 28 solve to find the price at which the $ 1.94 dividend would produce 29 a yield of 7.56% as follows:
30 31 Dividend $ 1.94 ". yield 7.56% = $ 25.66'er share market price.
32 33 A market price of $ 25.66 would be 124% of the book value of $ 20.71 34 as follows:
- 35 36 Harket price $ 25. 66 ~ BV $ 20.71 = 124%.
37 38 It is, therefore, my opinion that a rate of return on equity in the 39 area of 15.5% must be earned by Public Service Company of New 40 Hexico if the company is to raise new equity funds from the public
,41 at a price which will not result in economic confiscation to the 42 existing shareholders.
43 May I stress that thds return must be ~actual'1 earned. In these 45 inflationary times, most utilities have fallen woefully short of, 46 actually earning the rates of return which have been permitted-in 47 rate orders. This has caused investors to discount the rate of 48 return ordered by a Commission to levels which can realistically be 49 expected.
50
1 MR. MEYER, WOULD YOU BRIEFLY S&fMARIZE YOUR TESTIMONY?
2 A. I have attempted to describe the capital markets in which Public 3 Service Company of New Mexico must operate to attract the necessary 4 capital to provide the service required by its customers. These 5 markets reflect the Nation's difficult economic circumstances and 6 thus 'create pressures on the Company's ability to raise capital to 7 meet its, requirements. If the Company's senior securities are 8 downrated to A, enormous increased costs will accrue in the long 9 run to the Company's customers. Moreover, capital may be denied to 10 the Company from time to time if a downrating occurs. If the ll 12 resultant increased costs customers, the Company will are not not be met able through to revenues finance the from the facilities 13 required to provide the future service demanded by its customers.
14 Such a development is unnecessary if this Company can achieve the 15 financial results required to meet the demands of the capital 16 markets in these inflationary times.
17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41
-42 43 44 45 46 47 48 49 50
Exhibit I 1 EUGENE W. MEYER 2 Vice President and Director 3 Utility Corporate Finance 4 Kidder, Peabody & Co. Incorporated 5
6 Qualifications 7
8 9 I studied at both the University of Iowa and Valparaiso University, 10 graduating with a Bachelor of Business Administration Degree from Iowa ll 12 1960. I joined Investors Diviersified Services, Inc., Minneapolis, Minnesota, as a junior security analyst in 1960,. pursuing the analysis
'n 13 of the electric utility industry. Later in 1960, I became senior 14 electric utility industry analyst for IDS, and in 1964, Manager, Utility 15 Investments, including electric, gas and telephone companies. In 1966, 16 I joined Panhandle Eastern Pipe Line Company as Director of Financial 17 Research and in 1967 moved to Tucker, Anthony & R.L. Day as Director of 18 Research, becoming a general partner of that firm on January 1, 1969. I 19 have been a Vice President with Kidder, Peabody since January 1, 1971 20 and a member of the Board of Directors since January 1, 1973. I am a 21 member of the New York Society of Security Analysts, where I served a 22 three-year term on the Utility Program Committee, and the New York 23 Utility Group. I am a Chartered Financial Analyst, having received that 24 designation from the Institute of Chartered Financial Analysts in 1966.
25 26 Furthermore, I have participated in Irving Trust Company Utility Semi-27 nars and Regulatory Seminars as a guest lecturer on the subjects, "Fin-28 ancial Policy from an Institutional Common Stock Buyer's Point of View"
'29 and "Security Analysis," respectively. In addition, I have delivered 30 addresses at various conferences of the Financial Analysts Federation, 31 American Statistical Association, American Gas Association, New England 32 Gas Association, Southern Gas Association, Public Utilities Buyers 33 Group, Electric Council of New England, the Southeastern Electric Ex-34 change, the New York State Utility Executives Association, the National 35 Association of Auditors, Comptrollers and Treasurers, the Edison Elec-36 tric Institute National Convention, and the Rutgers University Confer-37 ence on the Environment and the Energy Crisis. Since 1971, I have ap-38 peared to testify in numerous rate proceedings before 25 regulatory 39 commissions including Alabama, Arizona, Colorado, the District of Colum-40 bia, Florida, Idaho, Illinois, Kentucky, Maryland, Massachusetts, Michigan, 41 Minnesota, New Jersey, New Mexico, New York, North Carolina, North 42 Dakota, Ohio, South Carolina, Tennessee, Vermont, Virginia, the Federal 43 Power Commission, and the City Councils of El Paso and New Orleans. I 44 have also testified before the U.S. Senate Subcommittee on Anti-trust 45 and Monopoly Affairs concerning a bill designed to force the separation 46 of combination utility companies, before the Securities and Exchange 47 Commission in the Pacific Lighting divestiture proceedings, before, the 48 U.S. Price Commission in the public hearing on utility guidelines and 49 three times before the U.S. Senate Committee on the Interior and Insular 50- Affairs in its continuing investigation of the Nation's energy problems.
~ ~
1 I am also a member of the Electric Utility Advisory Committee to the 2 Federal Energy Administration.
3 4 As Director of the Utility Corporate Finance Department of Kidder, 5 Peabody & Co. Incorporated, I am engaged primarily with raising new 6 capital for the electric, gas and telephone industries. My duties 7 entail intensive 'research, assistance and guidance in negotiated public 8 offerings, direct placements of utility securities, and competitive bid-9 ding. I am responsible for price negotiations in all utility offerings 10 where Kidder, Peabody is chosen to manage or co-manage the transaction.
11 12 Kidder, Peabody is engaged in investment banking, securities brokerage 13 and investment advisory services. The firm is a member of the New York 14 Stock Exchange, the American Stock Fxchange and other principal securi-15 ties exchanges. In the field of investment-banking, the firm acts as 16 the manager or co-manager of a substantial volume of public offerings of 17 first mortgage bonds, debentures, preferred stocks and common stocks in 18 many different industries. Me also participate as an underwriter and 19 distributor of security offerings managed by other investment banking 20 firms. In addition, the firm is active in negotiating direct placements 21 of security issues with institutional investors.
22 23 During the last five years, Kidder, Peabody has acted as the managing 24 underwriter or as the co-manager of public offerings and private place-25 ments of corporate securities aggregating about $ 23.8 billion, making 26 the firm one of the largest investment banking houses in the country 27 during this period. As measured by the volume of business transacted on 28 the New York Stock Exchange, Kidder, Peabody is among the larger secu-29 rities brokers; it is also very active in the trading of unlisted se-30 curities in the over-the-counter market.
31 So far as bonds, debentures and preferred stocks are concerned, our clientele is comprised primarily of institutional investors since it is 32 33 34 this type of account which provides by far the largest source of demand 35 for fixed income securities. So far as common stocks are concerned, the type of clientele is far more varied. Me do a substantial business both with individuals and with institutional investors that is to say, 36 37 38 with funds which are administered by professional investment managers.
39 These would 'include trust companies, investment trusts, insurance com-40 panies, pension funds, charitable institutions and the like.
41 42 Currently, the firm has over 750 salesmen in 47 offices in this country 43 and abroad, serving both individual and institutional investors.
. 44 45 46 47 48 49 50
EXHIBIT II Yield Differentials Mood 's Outstandin Utilit Bonds Aaa Rate Differential Aa Rate Differential A Ratt
, 1965 4. 50% . 02% 4 ~ 52% . 06% 4 ~ 58i 1966 ST 19 .06 S. 25 ~ 14 5.39 1967 5.58 .08 .
5.66 .21 5.07 1960 6.22 .13 6.35 .16 6.51 1969 7.12'.31
.22 .7.34 .20 7.54 1970 .21 8.52 .17 0.69 1971 7.72 .28 8.00 .16 8. 1'6 1972 7.46 .14 7.60 .12 7.72
~
1973 7.60 .12 7.72 .12 7.84 1974 8.71r .33 9.04 .46 9.SO t
1974 January 8.00 .15 8.15 .21 0,36
. February 0.01 ..19 8.20 .22 ~
8.42 March 8.14 .21 8.35 .11 8.46 April 8.36 .20 8.56 .21 8.77 8.71 .28 . 0.99 May 8.47 .24 June 8.50 .35 8.93 .39 9.32 July 0.03 -. 34 9.17 .49 9.66 August 9.09 ,44 9 .'53 .50 10.03 September 9.36 .69 10.05 .40 10 45 October 9.50 .43 9.93 .85 10.78 November 9.10 ~ 44 9.S4 .92- 10.46 December 9.02 .35 ~
9.37 .90 10.27 1975 January 0.99 .46 9.45, .92 10. 37 February 0.79 ~ 44 9.23 .76 9.99
'arch 8.82 .35 9.17 .55 9.72
~, r Revised Source: Moody's Public Utility Manual Moody's Bond Record
LxnlD14 Ill Consumer and Wholesale Prices (1967 = 100)
Consumer Prices Wholesale Prices All Ail Items Chan e 1965 94.5 96.6 1966 '7.2 2 ~ 86% 99.8 3. 31%
- 1967 100.0 2.88 100.0 .20 1968 104.2 4.20 102.5 '.50 1969 109.8 5.37 106. 5,, 3.90 1970 116.3 5,92 110. 4 3.66 1971 121.3 4.30 113.9 3.17 1972 125.3 3.30 I19.1 4.57 1973 133.1 6.23 134.7 13.10 1974 147.7 10.97 160.1 18.86 1974 january 139. 7 146. 6 February 141.5 149.5 March " 143.1 151.4 April 143.9 152.7 May 145.S 15S.O June 1-46. 9 155.7 July 148.0 '161. 7 August 149.9 167.4 September 151.7 167.2 October 1S3.0 170. 2-Novembef 154.3 171.9 December 155.4 171.5 1975 January 156.1 171. 8 February 157,2 171,3
% Changk 1974-1965 56. 3% 65. 7%
Compound Annual Growth Rate to 1974 5.1% 5. 8%
Source: Federal Reserve Bulletins Economic Indica tors
Zxhibit IV Utility Companies Downgraded by Moody's Investors Service, Inc. and Standard & Poor's Cor oration SENIOR RATING REDUCED DATE* COMPANY FROM =
TO BY 1970 1-14 Cohnecticut Light & Power AAA AA Standard & Poor's 2-18 Potomac Electric Power Aa A Moody' 2-25 Duke Power 'AA AA Standard & Poor's Aaa Aa Moody' 4-7 Trunkline Gas BBB Standard & Poor's 4-23 Boston Gas BBB Standard & Poor's 5-13 Monongahela Power Standard & Poor's
.6-4 Kansas City Power & Light AA Standard & Poor's 6-15 Appalachian Power A Standard & Poor's 6-22 Boston Edison AA 'tandard & Poor's
/jamaica IVater Supply Standard & Poor's
~ 7 2 8-27 Southern Connecticut Gas BBB BBB Standard & Poor's Baa Moody' 9-15 Ohio Edison AAA Standard & Poor's 9-29 Carolina Telephone & Telegraph Aa Moody's AA Standard & Poor's Elizabethtown Gas AA Standard & Poor's Aa Moody' 12-1 Ohio Power A Moody' 12-2 New England Power A Standard & Poor' 12-7 New Bedford Gas & Electric A Standard & Poor's 12-8 Iowa Electric & Power A Standard & Poor's 12-10 Philadelphia Electric Aa Moody's
'age"2' A' SENIOR RATING REDUCED FROM TO BY
.1971 1-l3 Florida Power & Light A Standard & Poor's 2-1 Pennsylvania Pvv. & Lt. A Standard & Poor's 2-18 Jersey Central Pwr. & Lt. BBB Standard & Poor's Ohio Power Standard & Poor's 5-4 Wisconsin Public Service A Standard & Poor'A 5-11 Southern New England Tel. Standard &, Poor's 6-3 Kansas City Pwr. & Lt. Aa Mood y' 8-10 Consumers Power AA Standard & Poor's 8-19 Pennsylvania Electric BBB Standard & Poor's 8-26 Hawaiian Telephone A Moody' A Standard & Poor's.
A 10-19 Carolina Power & Light Moody' Standard & Poor's .
11-3 Metropolitan Edison BBB Standard & Poo.'s 11-29 . Iowa Power & Light A Standard & Poor's 11-29 Orange & Rockland Utilities)
Rockland Electric Co.) A Baa Moody' A BBB Standard & Poor's Rockland Light & Power) 1972 1-17 Kentucky Power BBB Standard & Poor's 2-3 Niagara Mohawk A . Standard & Poor's 2-9 Central Hudson Gas & Electric A Standard & Poor's Central Vermont Public Service .BBB Standard &, Poor's 2-24 Columbus & So. Ohio Electric AA A Standard & Poor's 3-22 New. England Tel. & Tele. AA 'tandard & Poor's O Iowa Qlinois Gas & Electric AA ~ A Standard & Poor's 4 Rochester Gas & Electric AA A Standard & Poor's 4 New Jersey Power & Light A BBB Standard & Poor's
Page 3 COMPANY SENIOR RATING REDUCED FROM TO BY 1972
~ (cont.) .
5-17 Pennsylvania Power Standard & Poor's
,6-6 .,
Consumers Power Moody's 6-12 Cambridge Electric Light .Standard & Poor's 6-29 Baltimore Gas & Electric Standard & Poor's 8-16 Jersey Central Power & Light Baa Moody's New Jersey Power & Light Baa . Moody's
~
12;5 Duke Power Standard & Poor's 12-12
- Georgia Power Moody's Standard & Poor's Canal Electric Standard & Poor's 1973 2-5 Commonwealth Edison AA Standard & Poor's 2-14 Consolidated Edison of New York BBB "Standard & Poor's Indiana & Michigan Electric A Standard & Poor's Boston Edison Company AA Standard '& Poor's 5-31 Pacific Telephone & Telegraph Standard & .Poor's (all Debs. & Notes) 6-13 Atlantic C,ity Electric AA Standard & Poor's 9-19 Natural Gas Pipeline Aa 'Moody's 11-12 Duke Power , Aa Moody's 0,12-10 Boston Edison Aa Moody's 1974 1-7 San Diego Gas & Electric ,
Standard & Poor's 2-5 3-6 3-6 3-7
=3-21.
3 Union Electric Public Service Company of New Hampshire Public Service Company of New Hampshire Consolidated Edison of New'York Connecticut Light & Power Water 'amaica
'aa AA Withdrawn BBB Baa A
Standard & Poor's Moody's Standard & Poor's Moody's Stan'dard. & Poor's
'.Moody'
~
1 t
l
'I I
Page 4 DATE COMPANY PRO M TO BY 1974 (cont.)
4-2 Wisconsin Power & Light Company AA A Standard & Poor'.
4-3 Baltimore Gas & Electric Company Aaa Aa Moody's 4-9 Hartford Electric Light & Power Company AA A Standard & Poor'.
4-1 8 Western Massachusetts Electric Company Aa A Moody's 4-.1 8 'Western Massachusetts Electric Company AA A Standard & Poor".
4-24 Consolidated Edison of New York BBB BB Standard & Poor'q 4-30 The Detroit Edi'son Company Aa A Moody's 4-30 II II II II AA A Standard & Poor".
5<<1 Cleveland Electric Illuminating AAA AA Standard & Poor'.
5-6 Central Vermont Public Service Corporation Withdrawn Moody's 5-6 Iowa Electric Light & Power Aa A Moody's 5-7 Co>umbus and Southern Ohio Electric Co. Aa A Moody's 5-13 Consolidated Edison of New York Wxthdra wn Moody's 5 17 Savannah Electric & Power Company A Baa Moody's 5-20 Blackstone Valley Electric A Ba Moody's 4 '-20 Brockton Edison Company A . Baa Moody's 5-20 'astern Utilities Associates Baa B Moody's 4 5-20 Fall River Electric Light A Baa Moody's 5-28 Ohio Power Company Baa Moody' 6-4 Central Illinois Light Company Ah A Standard & Poor's 6-8 Savannah Electric & Power Company A BBB Standard & Ebor's 6-13 Delmarva Power & Light Aa A Moody's 6-1 3 Delmarva Power & Light AA A Standard & Poor' 6-17 Long Island Lighting AA . A Standard Poor's 6-24 Virginia Electric Power Aa A . Moody's
. 6-24 Virgsnia Electric Power A Standard & Poor's 6-2 6 Boston Edison BBB Standard & Poor's 6<<26 Boston Edison Baa Moody's 7 -Consumers Power Company Aa Moody's
~ 7-1 7 Consumers Power Company AA Standard &. Poor's 7-23 Toledo Edison AA Standard & Poor's Connecticut Light & Power Aa Moody's Hartford Electric Light Company Aa Moody's
Page 5 SENIOR RATING REDUCED DATE COMPANY FROM TO BY v~4
. (Contd.)
8-20 Ohio Edison Company Aaa Aa Moody's Pennsylvania Power Company Aa A Moody's Florida Power Corporation Moody's Florida Power Corporation Standard & Poor's 10-1 Detroit Edison Baa Moody's 10-3 New York State Elec. & Gas A Standard & Poor's 10-8 Southern California Gas A Standard & Poor's 10-8 Niagara Mohawk BBB Standard & Poor's 10-17 Philadelphia Electric Moody's
. 10-17 Philadelphia Electric Standard & Poor's 10-22 Dayton Power & Light Moody's 10-22 Dayton Power & Light Standard & Poor'.s 10-29 Power BBB Standard & Poor's Ql-19 ll-19'hio 11-19 Cincinnati Gas Cincinnati Gas
& Electric
& Electric AAA Aaa AA Aa Standard & Poor's Moody's San Diego Gas & Electric Aa A, Moody'.
11-19 Florida Power & Light Aa A Moody's 12-5 Nevada Power A BBB Standard & Poor's 1 2-234. Consumer's Power A Baa Moody's12-234" Georgia Power A Baa Moody's
. 1975 1-9 Western Massachusetts Elec. Baa Moody's
.1-9 Western Massachusetts Elec. BBB Standard & Poor's 1-22 Columbus & Southern Ohio BBB Standard & Poor's 1-23 Hartford Electric Light A BBB Standard & Poor's 1-274 Georgia Power Co. Withdra wn Moody's 1-274 Savannah Elec. & Power Co. Withdra wn Moody' e Savannah Elec. & Power Co. BBB BB Standard & Poor's 2-1 Appalachian Power A Baa Moody's Arizona Pu'blic Service Moody's 04'-19 A Baa Q-24 Houston Lighting & Power Co.
"'Houston Lighting & Power Co, Aaa Aa Moody's AAA AA Standard & Poor's
Page 6.
SENIOR RATING REDUCED COMPANY PROM, TO BY 1975 (Contd.)
2-24 g Indiana & Michigan Elec. Co. Moody's 2-25 Louisville Gas & Electric Standard & Poor's 3-34 Iowa Electric Light & Power A- Baa Moody's 3-l3** Carolina Power & Light A Baa Moody's 3-1 9 Union Electric Aa A Moody's 4-8 Cleveland Electric Illuminating Aaa Aa Moody' 4/22 Appalachian Power Company A BBB Standard & Poor s =
5-1 Pacific Power & Light Company A Baa Moody' 5-6 San Diego Gas and Electric Co. A Baa Moody'
- Represents date of new issue.
- Preferred offering of 2 million shares.
4New Offering not involved. Date, where shown, is Agency's publication date.
/Private Placement.
P/Sale was postponed.
Note: Assumed debt of predecessor companies not listed.
Source: Moody's Bond Survey Standard & Poor's Bond Outlook and Fixod Income Investor.
Exhi.bit V Market to Book Relationship of
.Electric Utilit 'Com anies with Revenues Over SO.O Million 25 75 Market Price Book Value 0/ Qf Period ~Com an Per Share Book Value 9/30/74 Consolidated Edison of $ 32.61 S 12. 25 37. 6%
New York 1/31/75 Savannah Electric & Power 16.32 6.75 41.4 1/31/75 Consumers Power 27.85 13.625 48.9 1/31/75 Southern Company 20.41 10.625 52.1 12/31/74 Southern California Edison 31.94 17.00 53.2 1/31/75 Detroit Edison 20. 19 10.875 53.9 9/30/74 Duke Power 25.08 13.875 55.3 1/31/75 Nevada Power Company 30.77 17.125 55.7 1/31/75 Virginia Electric.& Power 20.00 11.25 56.3 10/31/74 Niagara Mohawk Power 18.32 10.375 56.6 12/31/74 Public Service Electric & Gas 25.79 14.75 57.2 9/30/74 Boston Edison 32;50 19.00 58.5 12/31/74 General Public Utilities 23. 03 13.50 58.6 12/31/74 San Diego Gas & Electric 19.23 ..11.375 59.2 1/31/75 Northeast Utilities 13. 67 8.25 60.4 9/30/74 Arizona Public Service 22. 85 14.00 61. 3 12/31/7'4 Carolina Power & Light 23.52 14.50 61.6 1/31/75 Iowa Electric Light & Power 17.19 10.625 61.8 12/31/74 Pacific Gas & Electric 30. 28 19.00 62.7 12/31/74 Florida Power Corporation '9.74 18.875, 63.5 12/31/74 Rochester Gas. & Electric 22.00 14.00 63.6 9/30/74 Philadelphia Electric 20.47 13.125 64.1
~
12/31/74 Kentucky Utilities 23.85 15.375 64.5 2/28/75 Public Service Co. of New Hampshire 24.07 15.625 64.9 12/31/74 Madison Gas & Electric =
16.70 10.875(b) 65.1 12/31/74 Missouri Public Service 14. 71 9.625 65.4 12/31/74 Delmarva Power & Light 16.60 10.875 65.5 1/31/75 New York State Electric & Gas 30.68 20.125 65.6 12/31/74 Puget Sound Power 37.04 24.375 65.8
S 4 2'5 7S Market Price Book Value I of Period Com an Per Share $ Book Value 12/31/74 Central Hudson Gas & Electric $ 23.88 $ 15.75 66. 0%
12/31/74 Orange & Rockland Utilities 15.31 10.125 66.1 1/31/75 Potomac Electric Power 16.35 11.125 68.0 ll/30/74 New England Electric System 23.41 '16.125 68.9 12/31/74 Baltimore Gas & Electric 27.02, 18.75 69.4 9/30/74 Eastern Utilities Associates 17.94 12.50 69.7 12/31/74 Public Service Co. of Colorado 18.86 13.25 70.3 1/31/75 Columbus & Southern Ohio 25.03 17:625 70.4 1/31/75 Sierra Pacific Power 13.64 9;625 70.6 12/31/74 Toledo Edison Company 25.63 18. 25 71.2 9/30/74 Union Electric 15.40 11.00 71.4 12/31/74 Dayton Power & Light 19.52 14.00 71.7 9/30/74 New England Gas & Electri,c 15.97 11.625 72.8 2/28/75 Central Illinois Light 20.92 15.25 72. 9 9/30/74 Central Maine Power 16.28 11.875 72.9 1/31/75 Kansas City Power & Light 31.40 23.00 73.2 12/31/74 Tucson Gas & Electric 13.37 9.875 73.9 2/28/7S Kansa s Ga s & Electric 21.66 16.00 73.9 9/30/74 Duquesne Light 20.11 15.375 76.5 1/31/75 Middle South Utilities 16.90 13.00 76.9 11/30/74 Allegheny Power System 19.43 15.00 77.2 12/31/74 Community Public Service 20.96 16.25 77.5 1/31/75 Portland General Electric 19.96 15.50 77.7 1/31/75 Iowa Public Service 20.20 15.75 78.0 12/31/74 Pennsylvania Power & Light 22.90 17..875 78.1 12/31/74 Long Island Lighting 17-. 90 14.00 78.2 1/31/75 Gulf States Utilities 14. 05 11.00= 78.3 12/31/74 Florida Power & Light 25. 60 20.375 79.6 12/31/74 Kansas Power & Light 19.93 16.00 80.3 12/31/74 United Illuminating 26.09 21.00 80.5 12/31/74 Iowa-Illinois Gas & Electric 18. 85 15.25. 80.9 11/30/74 South Carolina Electric & Gas 17.50 14.25 81.4 12/31/74 Public Service Co. of New Mexico 20.97 17.125 81.7 1/31/75 Atlantic City Electric 19.46 16.125 82.9 1/31/75 Cincinnati Gas & Electric 17.94 15.00 83.6 12/31/74 Iowa Power & Light 22.27 '8.75 84.2 2/28/75 Southern Indiana Gas & Electric 30.88 26. 00. "84.2 2/28/7S Houston. Light & Power 24.19 20.75 85.8 1/31/75 Minnesota Power & Light 18.39 16.125 87.7
25 75 Market Price Book Value / of Period . ~Com an Per Share Book Value 12/31/74 Hawaiian Electric S 23.91 $ 21.00 87. 8%
12/31/74 Ohio Edison Company 15. 95 14.00 87.8 1/31/75 Commonwealth Edison 27.55 24.25 88.0 12/31/74 Wisconsin Public Service 16.01 14.125 88.2
,12/31/74 Interstate Power 14.85 13.25 89.2 1/31/75 Loui,sville Gas & Electric 21.97 19.75 89.9 I
1/31/75 Northern Indiana Public Service 17.06 15.375 90. 1 9/30/74 Wisconsin Power & Light 17.34 15.625(b) 90. 1 2/28/75 Washington Water Power 19.88 18.00 90.5 2/28/75 Central Illinois Public Service 13.23 12.00 -
90.7 12/31/74 Northern States Power 23.83 22.125 92. 8 2/28/75 Tampa Electric Company .13. 32 12.50 93. 8 11/30/74 Pacific Power & Light 18.10 17.00 93.9 2/2S/75 Wisconsin Electric Power 24.72 24. 75 100.1 12/31/74 Idaho Power Company 27.13 27.50 101.4 12/31/74 Cleveland Electric Illuminating 25.15 25.625 101.9 ll/30/74 Indianapolis Power & Light 19. 08 19.50 102.2 1/31/75 Illinois Power Company 19. 55 20.50 104.9 1/31/75 El Paso Electric Company 8.31 ~ 9.00(b) 108.3 9/30/74 Montana Power Company 'he 21.34 23.125 108.4 2/2S/75 Public Service Indiana 29.56 32.50 109.9 1/31/75 Central & Southwest 12.61 14.125 112. 0 1/31/75 Texas Utilities 16.37 18.375 112.2 1/31/75 Central Louisiana 13.63 15.825 116.5 Electric'klahoma 2/2S/75 Gas & Electric 14. 80 18.00 121. 6 1/31/75 Southwestern Public Service 6.90 10.25 148. 6 9/30/74 Citizens Utilities 15.23 25.50 167. 4 (b) Bid Price Note: American Electric Power and Utah Power & Light Company have been deleted
~ because reported financial results were prior to September 30, 1974.
Source: C.A. Turner Public Utility Common Stocks, April 1975 The Wall Street Journal, April 28, 1975
Exhibit VI EFFECT OF SELLING COMMON STOCK BHLOKV BOOK VALU~~'
COMPANY A Assume that Company A has $ 1,000 invested in equity and has 100 shares outstanding.. Assume further that Company A is earning 12% on its equity, In that'case, it ha earnings for comuon tock of $ 1.20 p r share:
$ 1000 equity x 12% rate of return $ 120 earnings
$ 120 earnings -.'.
100 shares $ 1.20 earnings per share It may also be seen that Company A's book value per share is $ 10:
$ 1000 equity '100 shares $ 10 per share book value Let us now further assume that Company A requires new common equity from the sale of new stock and that it. stock is se)ling for $ 8 per share on the market; 20% below book value. Vixen Company A sells 10 new shares of stock at $ 8 per share, it realize new equity proceeds of $ 80:
10 shares x $8 per share price $ 80 new equity Company A now has equity inve ted of $ 1080:
$ 1000 old equity+ $ 80 new equity $ 1080 In addition, Company A no v has 110 shares outstanding:
100 old shares + 10 new snares 110 shares outstanding.
Thus, the book value per share of Company A's now $ 9. 82, down from $ 10 before the ale:
$ 1080 equity -.'10 shares $ 9'.82 per share Furthermore, if. Company A continues to earn 12% on its'quity invest-ment as before, earning per share will decline as well to $ 1.18 per 'share from the previous $ 1,20 per share:
12% rate of return x $ 1080 equity $ 129,60
$ 129. 60 earnings .'10 shares $ 1.' per share In order to merely maintain earnings per share of $ 1.20 after the sale of common shares below book value, the Company must now have earnings of
$ 132:
110.shares outstanding x $ 1.20 earnings per share'-- $ 132 earnings.
To earn $ 132, however, Company A must have a rate of return on equitv of approximately 12. 2%," i.e.,
$ 1080 equity x 32.2% rate of retur:i $ 132 ear'ning s
EMIIBIT VII Construction and External Capital Requirements EEI Investor-Owned Electric Utilities and Public Service Company of New Mexico 1961-1970 EEI Investor Owned Public Ser vi cc Company Electric Utilities of New Mexico onstruction a) External Caoital Construction External Ca ital 0/ Qf % of
~000 S000 Construction S000 S000 'onstruction
~
. 1961 3,671,000 1,546,0gO 42. 1 12,406 ,9,162 73.4
.1962 3,400,000 1,455,000 41.7, 0,446 '434 5.1 1963 4,035,000 1,529,000 37.9 5,516 600 10.9 1964 3,724,000 ~
1,526,000 41.0 7,100 484 6.7 196S 4,469,000 1,717,000 7,055 1,737 24:6 1966 5,443,000 2,071,000 52.7 13,546 7,704 57.5 1967 6,726,000 3,772,000 56.1 15,206 10,027 65.6 1960 7,400,000 5,096,000 60.1 24,914 16,996 60.2 1969 0,728,000 5,336,000 61.1 13,129 2,749 20s9 1970 10,610,000 7,696,000 72.5 11,092 4,216 3S.S 1971 12,490,000 9,220,000 73.0 21,540 13,233 61. 4 1972 13,860,000 9,945,000 71.7 44,SOO 30,028 69.3 l973 1S,996,000 10,409,000 65.6 20,100 16,132 57.2 1974K 16,400,000 10,500,000 64*.0 47,265 30,539 81.5 1975F 16,000, 000 10,000,000 62.5 91,000 79,000 06;8 1976F 17,000,000 14,000,000'0.4 10,000,000 50.0 152,400 132,900 07.2 1977F 19,000,000 11,000,000 57.9 163,100 145,700 09.3 1970F 21,000,000 13,000,000 61.9 174,900 139,920 00.0 1979F 23,000,000 60.9 160,300 128,240 00.0 E - Estimate F - Forecast (Assuming no rate relief for Public Service Company of New Mexico)
(a)- Commencing 1970, investment in Nuclear Fuel is included Source: Edison Electric Institute Estiihated Cash Flow Statement Public Service Company of Now Mexico Annual Reports, Reports for Security Analysts, and Prospectus
.COMPARISON OF TOTAL RETURN OF PUBLIC SERVICE COMPANY OF NEW MEXICO COMMON STOCK INVESTOR TO MOODY'S Aaa-RATED OUTSTANDING PUBLIC UTILITYBONDS Public Service Company of New Mexico Common Stock Average Dividends Earnings Moody's Average Yield on
~Price ) Paid Yield Per Share Outstandin Aaa-Rated Bonds 1961 1962 828. 38 $ .72 2. 54% 1.23 4. 54%
1963 32.00 .72 2 '5 1.25 1.33 4.39 1964 32;56 .74 2.27 4.,52 1965 35.13 .80 2 '8 1.46 4.58 1966 26. 31 .83 3.15 1.52 5.39 1967 24.56 . 885 3. 60 1.67 5.87 1968 26.50 .90 3. 40 1.64 6. 51 1969 26. 94 .90 ~
- 3. 34 1.67 7.54 1970 20.50 .90 4. 39 1.81 8. 69 1971 21. 88 .975 4.46 1,95 8.16 Average+ Compound Annual Total Average Bond Yield Growth Rate Return - Yield = Differential 3,17% 6. 2% 9. 37% 6. 02%o 3 ~ 35%
(a) Based on high and low bid prices.
Source: Moody's Public Utility Manual Public Service Company of New Mexico Report for Security Analysts.
COMPARISON OF TOTAL RETURN OF AMERICAN TELEPHONE AND TELEGRAPH COMPANY COMMON STOCK INVESTOR.
TO MOODY'S Aaa-RATED OUTSTANDING PUBLIC UTILITY BONDS American Telephone and Telegraph Company
.Common Stock a Average Dividends Earnings Moody's Average Yield on Price Paid Yield Per Share Outstandin Aaa-Rated Bonds 1964 $ 3.24 1965 $ 65.31 $ 2.00 3.1% 3.41 4. 5%
1966 56. 63 2.20 3.9 3. 69 5.2 1967 56. 25 2.20 3.9 3. 79 5.6 1968 53.19 2.40 4.5 3.75 6.2 1969 53.13 2,40 '.5 4.01 7.1 1970 47.13 2.60 5.5 3.99 8.3 1971 47. 31 2. 60 5.5 3.92 7.7 1972 47. 31 2. 65 5.6 4.34 7.5 1973 50.19 2. 80 5.6 4. 98(b) 7.6 1974. 46. 31 3.16 6.8 5.27 8.0 'I Average Compound Annual Total Average Yield Growth Rate Return Yield Differential
- 4. 9% 5. 0% 9. 9% 6. 8% 3,1%
(a) On basis of $ 16-2/3 par value common stock.
(b) Before 'extraordinary item of $ .08 per share from sale of Communications Satellite common stock.
Source: American Telephone and Telegraph Company Annual Reports and Statistical Summaries.
Moody's Investors Services Inc. Public. Utility Manual.
Standard & Poor's Corporation Standard N.Y.S.E: Reports, December 4, 1974.
Comparison to Total Return to Carolina Poiver & Liqht Comoany Common Stock Investor Lo Moody's Aa Public Utility Bond Average Yield Moody's Aa Public Utilit; Bond Carol'ina Po.ver & Li ht Comoanv (1) Averaae Yield Eai nings A.-. crace Price Dividend Yield Per Sh<<~re 960 $ 19.94 $ .66 3. 31% $ 1.12 4. 53%
1961 26. 56 .74 2. 79 1.23 4.46 1962 27. 31 .82 3.00 1.34 4;41 1963 33.25 .92 2.77- 1. 41 4.32 1964 39.19 1 . 0.0 2.55 1. 62 4.44 1965 46. 81 1.16 2.48 1.80 4. 52.
lo66 44. 00 1.28 2 91 1.88 5.25 1967 40. 31 34 3 ..32 1.91 5.66 1968 38. 69 1.38 3.57 1.98 6.35 1969 34. 94 1.42 4.06 2.05 7.34 4
4 Arera e Yield Compound Annua 1 Gro ivth Ra te Total Return Ai. erac;e Yield I Differentia]
- 3. 08% 6. 5% 9. 58% 5.13% [ 4 45%
(1) A.:justed for 2-1 stoc.': split in 196i1
( ) Average Shares (3) Earn . gs .'or base year, 1959, !vere $ 1. 09.
Sou. Ce. lv1oo"'y's Investors Services, Public Utility Manual Stafldard & Poor's Corporation Carolina Pov:er & Light Compa.-iy Annual Repo:ts
0 COMPARISON OF TOTAL RETURN OF CENTRAL ILLINOIS PUBLIC SERVICE COMPANY COMMON STOCK INVESTOR TO MOODY'S Aa PUBLIC UTILITY BOND AVERAGE YIELD Central Illinois Public Service Comoan Average Earnings ,Moody's Average Yield on,.
Price Dividend Yield Per Share Outstanding Aa-Rated Bonds 1961 u.05(a) 1962 821. 00 8.76 3. 62% 1,13 4, 41%
1963 24. 63 .80 3.25 1,22 4,32 1964 26. 00 .84 '3.23 1.33 4.44 1965 27.38 .92 3. 3'6 1.42 4.52 1966 23.50 1.00 4. 26 1.50 5.25 1967 21.25- 1.06 4.99 1.59 5,66 1968 22.81 1.12 4.91 1. 52(b) 6. 35 1969 20.81 1.12 5,38 .1.58(b) 7.34 1970 17.94 1.16 6. 47 1. 66(b) 8. 52 1971 20. 06 1.20 5.98 1.78 8.00 Average 10 Year Compound Total Average Bond Yield Growth Rate Return Yield Differential
- 4. 55% 5. 4% 9. 95% 5. 88% 4. 07%
(a) Adjusted for three-for-one common stock split April 25, 1962.
(b) Reflects reduction of about 15 cents per share in 1968 and 1969 and about 3 cents per share in 1970 due to Federal income tax surcharge.
Source: Central Illinois Public Service Company, Statistical Informatiori (1974 Edition).
Moody's Public Utility Manual, 1974.
COMPARISON OF TOTAL RETURN OF CENTRAL ILLINOIS PUBLIC SERVICE COMPANY COMMON STOCK INVESTOR TO MOODY'S Aa PUBLIC UTILITY BOND AVERAGE YIELD Central Illinois Public Service Comoan Average Earnings Moody's Average Yield on Price Dividend Yield Per Share Outstandin Aa-Rated Bonds 1961 $ 1.OS(a) 1962 821. OO- 8.76 3. 62% 1,13 4. 41%
1963 24. 63 .80 3.25 1 22 4.32
'4
~
1964 26. 00 .84 '3.23 1.33 4 196S 27. 38 .92 3.36 1.42 4.52 1966 23. 50 1.00 4.26 1.50 5. 25.
-1967 21.25. 1,06 4.99 1.59 5. 66 1968 22.81 1.12 4.91 1.S2(b) 6. 35 1969 20.81 1.12 5.38 1. 58(b) 7. 34 1970 17.94 1.16 6. 47 1. 66(b) 8.52 1971 20.06 1.20 5,98 1.78 8.00 Average 10 Year Compound Total Average Bond Yield Growth Rate Return -Yield Differential
- 4. 55% 9. 95% 5. 88% 4. 07%
(a) Adjusted for three-for-one common stock split April 25, 1962.
(b) Reflects reduction of about 15 cents per share in 1968 and 1969 and about 3 cents per share in 1970 due to Federal income tax surcharge. Q Q
Q Source: Central Illinois Public Service Company; Statistical Information (1974 Edition).
Moody's Public Utility Manual, 1974.'
COKIPARISON OF TOTAL RETURiN OF THE MIDDLE SOUTH UTILITIES, INC.. COihlMON STOCK INVESTOR TO MOODY'S A-fQTED OUTSTANDING PUBLIC UTILITY BONDS MSU Common Stock I Average Dividends Earnings Moody's Average Yield on Price Paid Yield Per Share Outstandin A-Rated Bonds 1960 .75 1961 18. 06 -
.52 2. 88 .76 4. 62 1962 16.'13 .54 3.35 .83, 4.54 1963 18.63 .56 3. 01 .87 4.39 1964 22.06 .58 2. 63 1.00 ~
t"7 V4 1965 25.53 .62 2.43 1,11 4.58 1966 23.88 .68 2.85 1.21 5.39 19 67- .'4.88
.76 3.05 1.25 5.87 1968 23.63 .82 3.47 1. 31 6. Sl 1969 ~
22.31 .88 3.94 1.48 7.54 1970 23.13 .96 4.15 1. 61 8.69 1971 25.19 1.02 4.05 l. 68 8.16 Average Compound Total Average Yield Annual Growth Rate Return Yield Differential
- 3. 26% 7. 6% 1.0. 86% S. 89% 4. 97%
'I) Adjusted for 2-for-1 stock split in 1966.
Source: Moody's Public Utility Manual, 1974.
Standard 6 Poor's Corp. "Tear Sheets".
Middle South Utilities, Inc. 1973 Annual Report.
COMPARISON OF TOTAL RETURN NORTHERN STATES POWER COMPANY COMMON STOCK INVESTOR TO MOODY'S Aa-RATED OUTSTANDING PUBLIC UTILITY BONDS Northern States Power Com anv Average Earnings. Moody's Average Yield on Price Dividend Yield Per Share Outstandin Aa-Rated Bonds 1962 $ 1,71 1963 $ 35. 94 $ 1. 34. 3 73% 1,79 4. 32%
1964 37.38 1. 40 3. 75 1.90 4. 44 1965 37.44 1. 44 3. 85 1.94 4. 52 1966 31. 81 1. 50 4. 72 2.05 5.25 1967 31. 63 1.56 4.93 2.11 5.66 1968 30.38 1. 60 5.27 . 2.13 6. 35 1969 26.75 1. 60 5.98 2.24 7'. 34 1970 24.56 1. 675 6.82 2. 41 8. 52 1971 27.13 1. 70 6.27 2.54 . 8. 00 1972 27.81 1.768 6.36 2.75 7. 60 Average 10 Year Compound Average Yield Annual Growth Rate Yield Differential
- 5. 17% 4. 9% 6. 20% 3. 87%
Total Return
- 10. 07%
COMPARISON OF TOTAL RETURN TO EL PASO ELECTRIC COMPANY COMMON STOCK INVESTOR TO MOODY'S Aa P BLIC UTILITYBOND AVERAGE YIELD El Paso Electric Company Moody's Aa Average Common Earnings Public Utility .Bond Bid Dividends Yield Per Share Avera e Yield 1960 $ 13.38 0 .39 2.91% 8.58 4.53 19 61 17.75 .40 2.25 .57 4.46 1962 16.92 .41 '2. 42 .63 4. 41 1963 17. 63 .44 2.50 .72 4.32 1964 19.42 .49 2.52 .77 4 '4 1965 20.09 .54 2. 69 .87 4.52 1966 a7.so .60 3.43 .91 5.25 1967 as.s6 .64 4.11 ,92 5.66 1968 14. 69 .68 4. 63 .98 6.35 1969 13.94 .72 5.16 1.05 7.34 ~
1970 13.13 .76 5. 79 1,10 8.52 EPS 10 Year Compound 1961-1970 Annual Total 1961-1970 Av . Yield Growth Rate Return Av . Yield Differential
- 3. 55% 6. 6% 10.15 5. 53% 4. 62%
Source: .El Paso Electric Company Annual Reports.
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Moody's Investors Service, Inc. Public Utility Manuals.
Note: Average price, dividend and earnings adjusted for stock splits.
1 Comparison of Total Return to Public Service Company of Colorado Common Stock Investor to Moody's Aa Public Utility Bond Average Yield Pu blic Service Comoan of Colorado (1)
Dividend Earnings Moody's Aa Public Utility Bond Averaoe Price Paid Yield- Per Share Avera e Yield (Average) 1963 828.38 .76 2.68 1.17 4. 32 1964 29.50 .77 2.61 1.34 4 ~ 44 1965 30.25 .855 2.83 1.40 4.52 1966 23.88 .90 3.77 '-1.52 5,25 1967 23.25 .95 4.09 1.57 5.66 1968 24.19 1.015 4.20 1. 71. 6.35 1969 23.13 1.06 4.58 1.73 7.34 1970 21. 31 1.09 5,11'.84 1.82 8.52 1971 23.13 1.12- 1.80'. 8.00 1972 21. 31 1.14 5.35 01 7.60 1973 19.19 1.18 6.15 2.10 7.72 10 year Average Yield
- 4. 35%
Compound Growth Rate
- 6. 00%
Total Return
- 10. 35%
. Average Bond Yield 54% '.
Differential 81%
(1) Adjusted for Stock Splits and Stock Dividends Source: Public Service Company of Colorado Statistical Reviews Moody's Public Utility Manual
0 Comparison of Total Return to Public Service Electric and Gas Company Common Stock Investor to Avera e Yield of the Comoan 's First Mort a e Bonds Public Service Electric and Gas Common Stock 1 Earnings Average Yield, e Price Dividend Yield Per Share Mort a e Bonds 1961 8 28.50 S 1.025 3. 60% $ 1. 69 4.60%
1962 29.75 1.125 3.78 ~ 1.'89 4.41 1963 37.13 1.225 3.30 - 2.00 4.36 1964 38.19 1.315 3.44 2.10 4.53 1971'vera 1965 1966 40.69 34.00 1.385 1.48 3.40 4.35 2.31 2.42 4.66 5.02
'967 33.94 1.555 4.58 2.62 6.21 1968 33.94 1.61 4. 7,4 2.61 6.80 1969 30. 94 1.64 5.30 2.63 8.03 1970 24.44 1.64 6.71 2.41. 8.00 27.44 1.64 5.98 2.93 7,50 ESP-Ten Yr;
.1961-1970 Compound Total 1961-1970 Av . Yield Growth ate Return Av . Yield Differential
- 4. 56% 5. 7% 10.26 5. 95% 4.31% (2)
(1) Adjusted to reflect two-for-one stock split effective April 24, 1964.
(2) 4.38% when compared to average yield of Moody's Outstanding Aa-Rated Bonds during same period.
Source: Moody's Public Utility Manual.
Public Service Electric and Gas Company Financial and Statistical Review Public Service Electric and Gas Company
II 1
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COMPARISON OF- TOTAL RETURN OF SOUTH CAROLINA ELECTRIC & GAS COMPANY COMMON STOCK INVESTOR TO MOODY'S A-RATED OUTSTANDING PUBLIC UTILITYBONDS South Carolina Electric'6 Gas Company Common Stock Average Earnings Moody's Average Yield on Price Dividend Yield Per Share Outstandin A-Rated Bonds 1964 gl . 37 leeS $ 33.19 .9375 2. 82% 1.47 4. 58%
1966 31. 44 .9875 3.14 1. 60 5.39 1967 30.44 1.0375 3. 41 1,71 5.87 1968 30.50 1.1025 3. 61 1 .'78 6,51 1969 28.75 1.1725 4.08 1.91 7.54 1970 24.56 1.2425 5.06 2. 00. 8.69 .
Compound Average + Annual Growth = Total Average Yield Rate ~
Return Yield Differential
- 3. 69% 6. 5% 10 ~ 19% 6. 43% 3. 76%-
Sour"e: South Carolina Electric 6 Gas Company Standard 6 Poor's Corporation Tear Sheet
COMPARISON OF TOTAL RETURN OF THE SOUZHERN COMPANY COMMON STOCK INVESTOR TO MOODY'S A-RATED OUTSTANDING PUBLIC UTILITY BONDS Average Earnings Moody's Average Yield on Price Dividend Yield Per Share Outstandin A-Rated Bonds 1963 $ 1.17 1964 $ 29.94 S .8625 2, 88% 1. 31 4. 52%
1965 33.94 .9150 2. 70 1.38 4,58 1966 29.63 .9750 3. 29 1.45 5.39 1967 27.81 1,0350 3. 72 1,57 ~
- 5. 87 1968 27.31 1.0950 4. 01 1. 63 6. 51 1969 26.75 1,1550 4. 32 1. 85 7,54 1970 23.94 1.2150 5.08 1. 94 8. 69 1971 23. 63 1.2600 5.33 1. 77 8.16 1972 20. 69 1.3000 6. 28 1. 88 7. 72 1973 17. 81 1.3400 '7. 52 2.07 7. 84 I
Average 10 Year Compound Average Yield Annual Growth Rate Yield Differential
- 4. 51% 5. 80% '..68% 3. 63%
Total Return
- 10. 31%
Comparison of Total Return to Tampa Electric Company Common Stock investor to Moody's Aa Public Utility Bond Average Yield (1)
Tampa Electric Company Common Earnings Moody's Aa Public Utility Bond Per Share Avera e Yield (Average) 1 63 $ 23. 88 S.47 l. 97% 8 4 32 1964. 26.50 .50 1.89 .83 4. 44 1965 27.50 .52 1.89 1.02 4.52 1966 27.94 .56 2.00 1.21 5.25 1967 28.50 .62 2.18 1.27 5.66 1968 26.88 .71 2.64 1.16 6.35 1969 24.69 ~ 73. 2.96 1.37 .
7.34 1970 22.25 .79 3.55 1.45 8.52 1971 24.56 .80 3.26 '.99 8.00 1972 22.13 .83 3.75 1.66 7 60 1973 17.75 .86 . 4.85 1.70 7. 72 10 year Average Compound Total Average Yield Growth Rate Return Bond Yield Differential
- 2. 90% 7. 40% 10. 30% 6. 54% 3. 76%
(1) Adjusted for two-for-one stock split in April, 1963.
'Source: Tampa Electric Company 1973 Annual Report and Financial and Operating Statistics Moody's Public Utility Manual
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UESTION 11 Provide for each participant a list of generating units to be construc-
-ted during the period of construction of the subject nuclear power plant, showing the type of unit, net capacity of each unit, the dollar amounts to be expended for each unit during each of, the years involved, 'and the in-service date of each unit.
ANSWER TO UESTION 11 The only planned generating units which Public Service Company (PNM) will be constructing during -the construction period for the Palo Verde Nuclear Generating Station're San Juan Generating Station Units 3 and
- 4. PNM and Tucson Gas 6,Electric Company each own an undivided 50%
of these units. The information requested in question 11 follows, for PNM's share.
A. Type of Unit and Commercial Date Unit // 3 Coal Fired 5/78 4
Unit II 4 -"
Coal Fired 5/80 B. Net Capacity (With SO Removal)
Unit I! 3 466 MW (PNH's share 233 MW)
Unit 8 4 - 466 MW (PNM's share 233 MW)
C. Unit No. 3 Utility (PNH's share)
Year Cash Flow AFl)C Total 1976 35,423,500 1,659,700 37,083,200 1977 33,000,000 4,500,000 37,500,000 1978 15,703,200 6,675,700 22,378,900
Question 11 (continued)
Unit No. 3 Environmental (Pll';1's Share)
Year Cash Flow AFDC Total 1976 27,455$ 000 1,042,700 28,497,700 1977 '9,454,400 2,000,000 11,454,400 1978 8,339,400 3,108,000 11,447,400 Unit No. 4 "Utility (PN."a's Share)
Year Cash Flow AFDC To to l 1976 2,682,200 198,900 2$ 881,100 1977 18,000,000 850,000 18,850,000 1978 35,000,000 2,500,000 37,500,000 1979 30$ 000,000 5,000,000 35,000$ 000 1980 9,155,200 6,256,900 15,412, 100 Unit No. 4 Environmental (PiV4's Share)
Year Cash Flow AFDC Total 1976 1,442,700 54, 100 1,496,800 197? 10 $ 000 $ 000 400,000 10,400,000 1978 24,000,000 1,500,000, 25,500,000 1979 16,000,000 2,800,000 .18,800$ 000 1980 5,401,000 3,370,700 8,771,700
0 '
Complete for each participant the attached form entitled, "Financial Analysis" for the years ended December 31, 1974 and December 31, 1973.
k ~
e ANSWER TO UHSTION 12 1974 1973 dollar" in millions Earnings available to common equity 8,524el 12,160.4 Average conmion equity 87,877.5 81,613.4 Rate of return on average common equity 9.7f 14.1@d Net.-income before total interest charges+ 18,963.1 20>371.5 Total interest charges 8,670.6 7,615.7 Times total interest charges earned 2e19 2.67 Net income before total interest chareges+ 18,963.1 20,371.5 Interest on'ong-term debt 6,728.0 6,771.4 Times long-term interest charges earned 2.82 3.01 Gross income after taxes (Income Before Interest) 18,963el 20p371 5 Total interest chmges &: preferred dividends 10~439.0 8,211.1 Preferred stock coverage 1.02 2.40 AFUDC 1,043.0 2,792.6 Net income after preferred dividends 8,524.1 12p160.4 cf 12.24 22.96 tOperating expenses (less depr.
Operating revenues Oper'ating ratio Market price Book of common (Average) value of common (Year End)
&, total taxes)
-3.
30,836.1 67,367.0 45'i 14.875 20.30 22,904.2 50,105.6 3956 20.0125 19.8i Market-book ratio 7299 1.0490 Cash earnings available for common 18,196.2 19,601.5 Common dividends 5P244.7 4 925 Ratio 3.47 3 99 Capiteliznzion '(hmounz Ik percent)
Long-t;erm debt, 116,315.0 49.3 109,162.0 52.5 Preferred stock 30~000.0 12.7 13,000.0 6.3 Common equity 09,559.0 '0.0 05,612.0 41.2
+Include income taxes - current and deferxeQ
-1 Operations 0 Maintenance Expense
-2 Net Income + Depreciation 8e Anort. + Def. Inc. Tax + ITC - AFDC - UndistributeQ Earnings 'of 50'q Owned Co. - PreferreQ Dividend"
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