Exhibit 10.38

 

EXECUTION COPY

 

$100,000,000

 

CREDIT AGREEMENT

 

dated as of

 

December 17, 2004

 

among

 

EL PASO ELECTRIC COMPANY

 

JPMORGAN CHASE BANK, N.A.

not in its individual capacity,

but solely in its capacity as trustee of the

Rio Grande Resources Trust II

 

THE LENDERS PARTY HERETO

 

and

 

JPMORGAN CHASE BANK, N.A.

as Administrative Agent,

Collateral Agent

and Issuing Bank

 

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J.P. MORGAN SECURITIES INC.

as Book Manager and Lead Arranger

 

“JP Morgan Logo appears here”

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TABLE OF CONTENTS

 

          Page

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ARTICLE I Definitions

SECTION 1.01.

   Defined Terms    1

SECTION 1.02.

   Terms Generally    20 ARTICLE II The Credits

SECTION 2.01.

   Commitments    21

SECTION 2.02.

   Loans    21

SECTION 2.03.

   Borrowing Procedure    23

SECTION 2.04.

   Evidence of Debt; Repayment of Loans    24

SECTION 2.05.

   Fees    24

SECTION 2.06.

   Interest on Loans    25

SECTION 2.07.

   Default Interest    26

SECTION 2.08.

   Alternate Rate of Interest    26

SECTION 2.09.

   Termination and Reduction of Commitments    26

SECTION 2.10.

   Conversion and Continuation of Borrowings    27

SECTION 2.11.

   Optional Prepayment    28

SECTION 2.12.

   Reserve Requirements; Change in Circumstances    29

SECTION 2.13.

   Change in Legality    30

SECTION 2.14.

   Indemnity    31

SECTION 2.15.

   Pro Rata Treatment    31

SECTION 2.16.

   Sharing of Setoffs    32

SECTION 2.17.

   Payments    32

SECTION 2.18.

   Taxes    33

SECTION 2.19.

   Assignment of Commitments Under Certain Circumstances; Duty to Mitigate    35

SECTION 2.20.

   Letters of Credit    36

SECTION 2.21.

   Increase of Commitments    40 ARTICLE III Representations and Warranties

SECTION 3.01.

   Organization; Powers    42

SECTION 3.02.

   Authorization    42

 

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SECTION 3.03.

   Enforceability    43

SECTION 3.04.

   Governmental Approvals    43

SECTION 3.05.

   Financial Statements    43

SECTION 3.06.

   No Material Adverse Change    43

SECTION 3.07.

   Title to Properties; Possession Under Leases    44

SECTION 3.08.

   Subsidiaries    44

SECTION 3.09.

   Litigation; Compliance with Laws    44

SECTION 3.10.

   Agreements    44

SECTION 3.11.

   Federal Reserve Regulations    44

SECTION 3.12.

   Investment Company Act; Public Utility Holding Company Act    45

SECTION 3.13.

   Use of Proceeds    45

SECTION 3.14.

   Tax Returns    45

SECTION 3.15.

   No Material Misstatements    45

SECTION 3.16.

   Employee Benefit Plans    45

SECTION 3.17.

   Environmental Matters    46

SECTION 3.18.

   Insurance    46

SECTION 3.19.

   Security Documents    46

SECTION 3.20.

   Labor Matters    47

SECTION 3.21.

   Solvency    47 ARTICLE IV Conditions of Lending

SECTION 4.01.

   All Credit Events    48

SECTION 4.02.

   Closing Date    48 ARTICLE V Affirmative Covenants

SECTION 5.01.

   Existence; Businesses and Properties    51

SECTION 5.02.

   Insurance    51

SECTION 5.03.

   Obligations and Taxes    52

SECTION 5.04.

   Financial Statements, Reports, etc.    52

SECTION 5.05.

   Litigation and Other Notices    53

SECTION 5.06.

   Employee Benefits    53

SECTION 5.07.

   Maintaining Records; Access to Properties and Inspections    54

SECTION 5.08.

   Use of Proceeds    54

SECTION 5.09.

   Compliance with Environmental Laws    54

SECTION 5.10.

   Further Assurances    54

SECTION 5.11.

   Maintenance of Ratings    55

 

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ARTICLE VI Negative Covenants

SECTION 6.01.

  

Indebtedness

   55

SECTION 6.02.

  

Liens

   57

SECTION 6.03.

  

Sale and Lease-Back Transactions

   58

SECTION 6.04.

  

Investments, Loans and Advances

   58

SECTION 6.05.

  

Mergers, Consolidations and Sales of Assets and Acquisitions

   59

SECTION 6.06.

  

Transactions with Affiliates

   59

SECTION 6.07.

  

Businesses of Borrowers and Subsidiaries

   59

SECTION 6.08.

  

Other Indebtedness and Agreements

   59

SECTION 6.09.

  

Release of Collateral

   60

SECTION 6.10.

  

Debt to Capitalization Ratio

   60

SECTION 6.11.

  

Interest Coverage Ratio

   60

SECTION 6.12.

  

Fiscal Year

   60 ARTICLE VII Events of Default ARTICLE VIII The Administrative Agent and
the Collateral Agent ARTICLE IX Guarantee

SECTION 9.01.

  

Guarantee

   65

SECTION 9.02.

  

Obligations Not Waived

   66

SECTION 9.03.

  

Security

   66

SECTION 9.04.

  

Guarantee of Payment

   66

SECTION 9.05.

  

No Discharge or Diminishment of Guarantee

   66

SECTION 9.06.

  

Defenses of the Trustee Waived

   67

SECTION 9.07.

  

Agreement to Pay; Subrogation

   67

SECTION 9.08.

  

Information

   68

SECTION 9.09.

  

Termination

   68 ARTICLE X Security

SECTION 10.01.

  

First Mortgage Bonds

   68

 

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SECTION 10.02.

  

Application of Funds

   69

SECTION 10.03.

  

Rights of Bondholders

   69

SECTION 10.04.

  

Release of Collateral

   69 ARTICLE XI Miscellaneous

SECTION 11.01.

  

Notices

   70

SECTION 11.02.

  

Survival of Agreement

   71

SECTION 11.03.

  

Binding Effect

   71

SECTION 11.04.

  

Successors and Assigns

   71

SECTION 11.05.

  

Expenses; Indemnity

   75

SECTION 11.06.

  

Right of Setoff

   76

SECTION 11.07.

  

Applicable Law

   76

SECTION 11.08.

  

Waivers; Amendment

   76

SECTION 11.09.

  

Interest Rate Limitation

   77

SECTION 11.10.

  

Entire Agreement

   77

SECTION 11.11.

  

Waiver of Jury Trial

   78

SECTION 11.12.

  

Severability

   78

SECTION 11.13.

  

Counterparts

   78

SECTION 11.14.

  

Headings

   78

SECTION 11.15.

  

Jurisdiction; Consent to Service of Process

   79

SECTION 11.16.

  

Confidentiality

   79

SECTION 11.17.

  

Texas Revolving Credit Statute

   80

SECTION 11.18.

  

No Recourse; Multiple Capacities

   80

SECTION 11.19.

  

Limited Representations, Warranties and Covenants of Trustee

   80

SECTION 11.20.

  

USA Patriot Act Notice

   80 SCHEDULES

Schedule 2.01

  

Commitments

    

Schedule 3.04

  

Governmental Approvals

    

Schedule 3.09

  

Litigation and Compliance with Laws

    

Schedule 3.17

  

Environmental Matters

    

Schedule 3.18

  

Insurance

    

Schedule 4.02(a)

  

Local Regulatory Counsel

    

Schedule 6.01

  

Indebtedness

    

Schedule 6.02

  

Liens

    

Schedule 6.04

  

Certain Investments

    

EXHIBITS

         

Exhibit A

  

Form of Administrative Questionnaire

    

Exhibit B

  

Form of Assignment and Acceptance

    

Exhibit C

  

Form of Borrowing Request

    

Exhibit D

  

Form of Security Agreement

    

 

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Exhibit E

  

Form of Pledge Agreement

Exhibit F

  

Form of Subsidiary Guarantee Agreement

Exhibit G-l

  

Form of Opinion of Counsel for El Paso

Exhibit G-2

  

Form of Opinion of Counsel for the Trustee

Exhibit G-3

  

Form of Opinion of Federal Regulatory Counsel

Exhibit G-4

  

Form of Opinion of State Regulatory Counsel

Exhibit G-5

  

Form of Opinion of General Counsel of El Paso

Exhibit H

  

Form of Indenture Supplement

 

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CREDIT AGREEMENT dated as of December 17, 2004, among EL PASO ELECTRIC COMPANY,
a Texas corporation (“El Paso”), JPMORGAN CHASE BANK, N.A., not in its
individual capacity, but solely in its capacity as trustee of the Rio Grande
Resources Trust II (the “Trustee”; each of El Paso and the Trustee is referred
to individually herein as a “Borrower” and collectively as the “Borrowers”), the
Lenders (as defined in Article I), and JPMORGAN CHASE BANK, N.A., as issuing
bank (in such capacity, the “Issuing Bank”), as administrative agent (in such
capacity, the “Administrative Agent”) and as collateral agent (in such capacity,
the “Collateral Agent”) for the Lenders.

 

The Borrowers have requested that the Lenders extend credit in the form of Loans
(such term and each other capitalized term used but not defined herein having
the meaning given to it in Article I) at any time and from time to time prior to
the Maturity Date, in an aggregate principal amount not to exceed $ 100,000,000.
The proceeds of the Loans are to be used (a) by El Paso solely (i) to repay the
principal of, interest on and accrued fees with respect to the outstanding loans
to El Paso under the Existing Credit Agreement, (ii) to provide working capital
to El Paso, (iii) for general corporate purposes in the ordinary course of El
Paso’s business and (iv) to pay related fees and expenses and (b) by the Trustee
solely (i) to repay the principal of, interest on and accrued fees with respect
to the outstanding loans to the Trustee under the Existing Credit Agreement,
(ii) to finance the purchase of Nuclear Fuel by the Trustee in accordance with
the Trust Agreement and the Purchase Contract and (iii) to pay interest and
other amounts payable hereunder by the Trustee as needed. The Letters of Credit
shall be issued, if for the account of El Paso, solely for general corporate
purposes incurred in the ordinary course of business, and, if for the account of
the Trustee, solely to support obligations incurred in the ordinary course of
business by the Trustee in respect of the purchase of Nuclear Fuel in accordance
with the Trust Agreement and the Purchase Contract.

 

Accordingly, the parties hereto agree as follows:

 

ARTICLE I

 

Definitions

 

SECTION 1.01. Defined Terms. As used in this Agreement, the following terms
shall have the meanings specified below:

 

“ABR Borrowing” shall mean a Borrowing comprised of ABR Loans.

 

“ABR Loan” shall mean any Loan bearing interest at a rate determined by
reference to the Alternate Base Rate in accordance with the provisions of
Article II.

 

“ACC” shall mean the Arizona Corporation Commission or any Governmental
Authority succeeding to any or all of such Commission’s authority.

 

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“Administrative Agent Fees” shall have the meaning assigned to such term in
Section 2.05(b).

 

“Administrative Questionnaire” shall mean an Administrative Questionnaire in the
form of Exhibit A, or such other form as shall be approved by the Administrative
Agent.

 

“Affiliate” shall mean, when used with respect to a specified person, another
person that directly, or indirectly through one or more intermediaries, Controls
or is Controlled by or is under common Control with the person specified.

 

“Aggregate Credit Exposure” shall mean the aggregate amount of the Lenders’
Credit Exposures.

 

“Alternate Base Rate” shall mean, for any day, a rate per annum (rounded
upwards, if necessary, to the next 1/16 of 1%) equal to the greatest of (a) the
Prime Rate in effect on such day, (b) the Base CD Rate in effect on such day
plus 1% and (c) the Federal Funds Effective Rate in effect on such day plus  1/2
of 1%. If for any reason the Administrative Agent shall have determined (which
determination shall be conclusive absent manifest error) that it is unable to
ascertain the Base CD Rate or the Federal Funds Effective Rate or both for any
reason, including the inability or failure of the Administrative Agent to obtain
sufficient quotations in accordance with the terms of the definition thereof,
the Alternate Base Rate shall be determined without regard to clause (b) or (c),
or both, of the preceding sentence, as appropriate, until the circumstances
giving rise to such inability no longer exist. Any change in the Alternate Base
Rate due to a change in the Prime Rate, the Base CD Rate or the Federal Funds
Effective Rate shall be effective on the effective date of such change in the
Prime Rate, the Base CD Rate or the Federal Funds Effective Rate, respectively.

 

“Applicable Percentage” of any Lender at any time shall mean the percentage of
the Total Commitment represented by such Lender’s Commitment. In the event the
Commitments shall have expired or been terminated, the Applicable Percentages
shall be determined on the basis of the Commitments most recently in effect.

 

“Applicable Ratings” shall mean at any time the credit ratings at such time by
the Rating Agencies of (a) prior to the Collateral Release Date, the lower of
the two most highly rated series of First Mortgage Bonds (other than any
collateral series of First Mortgage Bonds) (or, if only one such series is
outstanding (other than any collateral series of First Mortgage Bonds), such
outstanding series); provided, however, that if no such First Mortgage Bonds
shall be outstanding (other than any collateral series of First Mortgage Bonds),
the “Applicable Ratings” shall mean the credit ratings at such time by the
Rating Agencies of the Credit Facility, or (b) on and after the Collateral
Release Date, (i) if the Credit Facility is rated by each of the Rating
Agencies, the Credit Facility or (ii) if the Credit Facility is not rated by
each of the Rating Agencies, the Index Debt.

 

“Applicable Spread” shall mean, for any day, with respect to any ABR Loan or
Eurodollar Loan, or with respect to the Commitment Fee, as the case may be, the

 

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applicable percentage set forth below under the caption “ABR Spread”, “LIBOR
Spread” or “Commitment Fee”, as the case may be, based upon the higher of the
Applicable Ratings:

 

    

Applicable Ratings

(S&P/Moody’s)

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ABR

Spread

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LIBOR

Spread

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Commitment

Fee

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Category 1

  

A-/A3 or better

   0.00%   0.625%   0.125%

Category 2

  

BBB+/Baa1

   0.00%   0.750%   0.150%

Category 3

  

BBB/Baa2

   0.00%   0.875%   0.175%

Category 4

  

BBB-/Baa3

   0.00%   1.000%   0.225%

Category 5

  

BB+/Ba1

   0.25%   1.250%   0.300%

Category 6

  

Less than BB+/Ba1

   0.50%   1.500%   0.375%

 

Notwithstanding the foregoing (x) if (i) both Rating Agencies cease to provide a
current Applicable Rating or (ii) if the Applicable Rating of either Rating
Agency shall be below BB+ or Ba1, as the case may be, the Applicable Spread
shall correspond to the percentages listed in Category 6; and (y) at any time
after the occurrence and during the continuation of an Event of Default, the
Applicable Spread shall correspond to the percentages listed in Category 6.

 

“Arizona Public Utility Act” shall mean Chapter 2, Title 40 of the Arizona
Revised Statutes and the rules and regulations promulgated thereunder, as
amended from time to time.

 

“Assessment Rate” shall mean for any date the annual rate (rounded upwards, if
necessary, to the next 1/100 of 1%) most recently estimated by the
Administrative Agent as the then current net annual assessment rate that will be
employed in determining amounts payable by the Administrative Agent to the
Federal Deposit Insurance Corporation (or any successor thereto) for insurance
by such Corporation (or such successor) of time deposits made in dollars at the
Administrative Agent’s domestic offices.

 

“Assigned Agreements” shall mean (a) each agreement listed on Schedule I to the
Security Agreement, (b) each agreement assigned by El Paso to the Trustee after
the Original Closing Date (including any such agreements assigned after the
Closing Date) pursuant to the Purchase Contract and (c) each Assignment
Agreement (as defined in the Purchase Contract) related to an agreement referred
to in clause (a) or (b) above, in each case as amended, supplemented or
otherwise modified from time to time.

 

“Assignment and Acceptance” shall mean an assignment and acceptance entered into
by a Lender and an assignee, and accepted by the Administrative Agent, in the
form of Exhibit B or such other form as shall be approved by the Administrative
Agent.

 

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“Atomic Energy Act” shall mean the Atomic Energy Act of 1954, 42 U.S.C. §§ 2011
et seq. and the rules and regulations promulgated thereunder, as amended from
time to time.

 

“Base CD Rate” shall mean the sum of (a) the product of (i) the Three-Month
Secondary CD Rate and (ii) Statutory Reserves and (b) the Assessment Rate.

 

“Board” shall mean the Board of Governors of the Federal Reserve System of the
United States of America.

 

“Borrowing” shall mean a group of Loans of a single Type made by the Lenders to
the same Borrower on a single date and as to which a single Interest Period is
in effect.

 

“Borrowing Request” shall mean a request by a Borrower in accordance with the
terms of Section 2.03 and substantially in the form of Exhibit C.

 

“Business Day” shall mean any day other than a Saturday, Sunday or day on which
banks in New York City are authorized or required by law to close; provided,
however, that when used in connection with a Eurodollar Loan, the term “Business
Day” shall also exclude any day on which banks are not open for dealings in
dollar deposits in the London interbank market.

 

“Capital Lease Obligations” of any person shall mean the obligations of such
person to pay rent or other amounts under any lease of (or other arrangement
conveying the right to use) real or personal property, or a combination thereof,
which obligations are required to be classified and accounted for as capital
leases on a balance sheet of such person under GAAP, and the amount of such
obligations shall be the capitalized amount thereof determined in accordance
with GAAP.

 

A “Change in Control” shall be deemed to have occurred if (a) any person or
group (within the meaning of Rule 13d-5 of the Securities Exchange Act of 1934
as in effect on the date hereof) shall own directly or indirectly, beneficially
or of record, shares representing more than 50% of the aggregate ordinary voting
power represented by the issued and outstanding capital stock of El Paso; (b) a
majority of the members of the Board of Directors of El Paso are not Continuing
Directors; (c) any change in control (or similar event, however denominated)
with respect to El Paso shall occur under and as defined in the Indenture or any
indenture supplemental thereto.

 

“Closing Date” shall mean December 17, 2004.

 

“Code” shall mean the Internal Revenue Code of 1986, as amended from time to
time.

 

“Collateral” shall mean (i) $100,000,000 principal amount of First Mortgage
Bonds - Collateral Series H, which First Mortgage Bonds are secured by the lien
of the Indenture in the Mortgaged Property in favor of the Indenture Trustee, in
an original aggregate principal amount of $100,000,000 (as such amount may be
increased after the

 

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Closing Date, as contemplated by Section 2.2 l(c)), and (ii) all the
“Collateral” as defined in the Security Agreement and the Pledge Agreement.

 

“Collateral Release Date” shall have the meaning assigned to such term in
Section 10.04.

 

“Commitment” shall mean, with respect to each Lender, the commitment of such
Lender to make Loans hereunder as set forth on Schedule 2.01, or in the
Assignment and Acceptance pursuant to which such Lender assumed its Commitment,
as applicable, as the same may be (a) reduced from time to time pursuant to
Section 2.09 or pursuant to Section 2.19, (b) increased (with the consent of
such Lender) from time to time pursuant to Section 2.21 and (c) reduced or
increased from time to time pursuant to assignments by or to such Lender
pursuant to Section 11.04.

 

“Commitment Fee” shall have the meaning assigned to such term in Section
2.05(a).

 

“Confidential Information Memorandum” shall mean the Confidential Information
Memorandum of El Paso dated September 2004.

 

“Consolidated Cash Flow” shall mean, for any period, the Consolidated Net Income
for such period plus (i) an amount equal to any extraordinary loss plus any net
loss realized in connection with a sale of assets (to the extent such losses
were deducted in computing such Consolidated Net Income), plus (ii) provision
for taxes based on income or profits of El Paso and the Subsidiaries for such
period, to the extent that such provision for taxes was included in computing
Consolidated Net Income, plus (iii) Consolidated Interest Expense for such
period, whether paid or accrued and whether or not capitalized (including
amortization of original issue discount, non-cash interest payments, the
interest component of all payments associated with Capital Lease Obligations,
imputed interest with respect to any sale and leaseback transaction,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers’ acceptance financings, and net payments (if any) pursuant
to hedging transactions, but excluding, however, the interest component of any
deferred payment obligations), to the extent that any such expense was deducted
in computing Consolidated Net Income, plus (iv) depreciation, amortization
(including amortization of goodwill and other intangibles but excluding
amortization of prepaid cash expenses that were paid in a prior period) and
other non-cash charges (excluding any such non-cash charge to the extent that it
represents an accrual of or reserve for cash charges in any future period or
amortization of a prepaid cash expense that was paid in a prior period) of El
Paso and the Subsidiaries for such period to the extent that such depreciation,
amortization and other non-cash charges were deducted in computing Consolidated
Net Income, minus (v) cash payments made on any deferred payment obligations in
such period, in each case, on a consolidated basis and determined in accordance
with GAAP. Notwithstanding the foregoing, the provision for taxes on the income
or profits of, and the depreciation and amortization and other non-cash charges
of, a Subsidiary shall be added to Consolidated Net Income to compute
Consolidated Cash Flow only to the extent (and in the same

 

5

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proportion) that the net income of such Subsidiary was included in calculating
Consolidated Net Income.

 

“Consolidated EBITDA” shall mean, for any period, Consolidated Net Income for
such period, plus, to the extent deducted in computing such Consolidated Net
Income, (a) the sum of, without duplication (i) all Federal, state, local and
foreign taxes, (ii) total interest expense (excluding the interest component of
any deferred payment obligation), (iii) non-recurring premiums in connection
with the repurchase of long-term Indebtedness and (iv) depreciation, depletion,
amortization of intangibles and other non-cash charges or non-cash losses
(excluding any such non-cash charge to the extent that it represents an accrual
of or reserve for cash charges in any future period), minus, to the extent added
in computing such Consolidated Net Income, (b) the sum of, without duplication
(i) any interest income and (ii) any non-cash income or non-cash gains, all as
determined on a consolidated basis with respect to El Paso and the Subsidiaries
in accordance with GAAP.

 

“Consolidated Interest Coverage Ratio” shall mean, for any period, the ratio for
such period of (a) Consolidated EBITDA to (b) Consolidated Interest Expense.

 

“Consolidated Interest Expense” shall mean, for any period, the gross interest
expense of El Paso and the Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP, (a) including (i) the amortization
of debt discounts, (ii) the amortization of all fees (including fees with
respect to Rate Protection Agreements) payable in connection with the incurrence
of Indebtedness to the extent included in interest expense in accordance with
GAAP and (iii) the portion of any payments or accruals with respect to Capital
Lease Obligations that are allocable to interest expense in accordance with GAAP
and (b) excluding the interest component of any deferred payment obligation. For
purposes of the foregoing, gross interest expense shall be determined after
giving effect to any net payments made or received by the Borrower or any
Subsidiary with respect to Rate Protection Agreements.

 

“Consolidated Net Income” shall mean, for any period, net income or loss of El
Paso and the Subsidiaries for such period determined on a consolidated basis in
accordance with GAAP; provided that there shall be excluded (a) the income of
any person in which any other person (other than El Paso or any of its Wholly
Owned Subsidiaries or any director holding qualifying shares in accordance with
applicable law) has a joint interest, except to the extent of the amount of
dividends or other distributions actually paid to El Paso or any Wholly Owned
Subsidiary by such person during such period, (b) the income (or loss) of any
person accrued prior to the date it becomes a Subsidiary of El Paso or is merged
into or consolidated with El Paso or any of the Subsidiaries or the date such
person’s assets are acquired by El Paso or any of the Subsidiaries, (c) the
income of any Subsidiary of El Paso to the extent that the declaration or
payment of dividends or similar distributions by such Subsidiary of such income
is not at the time permitted by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to such Subsidiary and (d) any after tax gains or losses
attributable to sales of assets out of the ordinary course of business.

 

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“Continuing Directors” shall mean, as of any date of determination, any member
of the board of directors of El Paso who (i) was a member of such board of
directors on the Closing Date or (ii) was nominated for election or elected to
such board of directors with the approval of a majority of Continuing Directors
who were members of such board at the time of such nomination or election.

 

“Control” shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a person, whether
through the ownership of voting securities, by contract or otherwise, and
“Controlling” and “Controlled” shall have meanings correlative thereto.

 

“Credit Event” shall have the meaning assigned to such term in Section 4.01.

 

“Credit Exposure” shall mean, with respect to any Lender at any time, the
aggregate principal amount at such time of all outstanding Loans of such Lender
plus the aggregate amount at such time of such Lender’s L/C Exposure.

 

“Credit Facility” shall mean the Commitments and extensions of credit thereunder
and hereunder.

 

“Default” shall mean any event or condition which upon notice, lapse of time or
both would constitute an Event of Default.

 

“dollars” or “$” shall mean lawful money of the United States of America.

 

“Domestic Subsidiary” shall mean any Subsidiary that is incorporated or
organized under the laws of the United States of America, any State thereof or
the District of Columbia.

 

“El Paso L/C Exposure” shall mean that part of the L/C Exposure attributable to
all Letters of Credit issued for the account of El Paso.

 

“El Paso Obligations” shall have the meaning assigned to such term in Section
10.01.

 

“environment” shall mean ambient air, surface water and groundwater (including
potable water, navigable water and wetlands), the land surface or subsurface
strata, the workplace or as otherwise defined in any Environmental Law.

 

“Environmental Claim” shall mean any written accusation, allegation, notice of
violation, claim, demand, order, directive, consent decree, cost recovery action
or other cause of action by, or on behalf of, any Governmental Authority or any
person for damages, injunctive or equitable relief, personal injury (including
sickness, disease or death), Remedial Action costs, tangible or intangible
property damage, natural resource damages, nuisance, pollution, any adverse
effect on the environment caused by any Hazardous Material, or for fines,
penalties or restrictions, resulting from or based upon: (a) the existence, or
the continuation of the existence, of a Release (including sudden or non-sudden,
accidental or non-accidental Releases); (b) exposure to any Hazardous

 

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Material; (c) the presence, use, handling, transportation, storage, treatment or
disposal of any Hazardous Material; or (d) the violation or alleged violation of
any Environmental Law or Environmental Permit.

 

“Environmental Law” shall mean any and all applicable present and future
treaties, laws, rules, regulations, codes, ordinances, orders, decrees,
judgments, injunctions, notices or binding agreements issued, promulgated or
entered into by any Governmental Authority, relating in any way to the
environment, preservation or reclamation of natural resources, the management,
Release or threatened Release of any Hazardous Material or to health and safety
matters, including the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986, 42 U.S.C. §§ 9601 et seq. (collectively “CERCLA”),
the Solid Waste Disposal Act, as amended by the Resource Conservation and
Recovery Act of 1976 and Hazardous and Solid Waste Amendments of 1984, 42 U.S.C.
§§ 6901 et seq., the Federal Water Pollution Control Act, as amended by the
Clean Water Act of 1977, 33 U.S.C. §§ 1251 et seq., the Clean Air Act of 1970,
42 U.S.C. §§ 7401 et seq., as amended, the Toxic Substances Control Act of 1976,
15 U.S.C. §§ 2601 et seq., the Occupational Safety and Health Act of 1970, as
amended by 29 U.S.C. §§ 651 et seq., the Emergency Planning and Community
Right-to-Know Act of 1986, 42 U.S.C. §§ 11001 et seq., the Safe Drinking Water
Act of 1974, as amended by 42 U.S.C. §§ 300(f) et seq., the Hazardous Materials
Transportation Act, 49 U.S.C. §§ 5101 et seq., the Atomic Energy Act and
Low-Level Radioactive Waste Policy Act, 42 U.S.C. §§ 2014 et seq., as amended,
and any similar or implementing state or local law, and all amendments or
regulations promulgated thereunder.

 

“Environmental Permit” shall mean any permit, approval, authorization,
certificate, license, variance, filing or permission required by or from any
Governmental Authority pursuant to any Environmental Law.

 

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as the
same may be amended from time to time.

 

“ERISA Affiliate” shall mean any trade or business (whether or not incorporated)
that, together with El Paso, is treated as a single employer under Section
414(b) or (c) of the Code, or solely for purposes of Section 302 of ERISA and
Section 412 of the Code, is treated as a single employer under Section 414 of
the Code.

 

“ERISA Event” shall mean (a) any “reportable event”, as defined in Section 4043
of ERISA or the regulations issued thereunder, with respect to a Plan; (b) the
adoption of any amendment to a Plan that would require the provision of security
pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA; (c) the
existence with respect to any Plan of an “accumulated funding deficiency” (as
defined in Section 412 of the Code or Section 302 of ERISA), whether or not
waived; (d) the filing pursuant to Section 412(d) of the Code or Section 303(d)
of ERISA of an application for a waiver of the minimum funding standard with
respect to any Plan; (e) the incurrence of any liability under Title IV of ERISA
with respect to the termination of any Plan or the withdrawal or partial
withdrawal of El Paso or any of its ERISA Affiliates from any Plan or

 

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Multiemployer Plan; (f) the receipt by El Paso or any ERISA Affiliate from the
PBGC or a plan administrator of any notice relating to the intention to
terminate any Plan or Plans or to appoint a trustee to administer any Plan; (g)
the receipt by El Paso or any ERISA Affiliate of any notice concerning the
imposition of Withdrawal Liability or a determination that a Multiemployer Plan
is, or is expected to be, insolvent or in reorganization, within the meaning of
Title IV of ERISA; (h) the occurrence of a “prohibited transaction” with respect
to which El Paso or any of the Subsidiaries is a “disqualified person” (within
the meaning of Section 4975 of the Code) or with respect to which El Paso or any
such Subsidiary could otherwise be liable; and (i) any other event or condition
with respect to a Plan or Multiemployer Plan that could reasonably be expected
to result in liability of El Paso.

 

“Eurodollar Borrowing” shall mean a Borrowing comprised of Eurodollar Loans.

 

“Eurodollar Loan” shall mean any Loan bearing interest at a rate determined by
reference to the LIBO Rate in accordance with the provisions of Article II.

 

“Event of Default” shall have the meaning assigned to such term in Article VII.

 

“Existing Credit Agreement” shall mean the Credit Agreement dated as of February
12, 1996 (as amended and restated as of February 8, 1999 and January 28, 2002),
among the Borrowers, the lenders party thereto, the Issuing Bank, the Collateral
Agent and the Administrative Agent.

 

“Farmington Loan Agreements” shall mean, individually and collectively, (a) the
Installment Sale Agreement dated as of November 1, 1983, between the City of
Farmington, New Mexico and El Paso and (b) the Amended and Restated Installment
Sale Agreement dated as of November 1, 1994, between the City of Farmington, New
Mexico and El Paso, in each case as amended from time to time in accordance with
the terms hereof and thereof.

 

“Farmington Reimbursement Agreement” shall have the meaning assigned to such
term in the Indenture.

 

“Federal Funds Effective Rate” shall mean, for any day, the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average of the
quotations for the day for such transactions received by the Administrative
Agent from three Federal funds brokers of recognized standing selected by it.

 

“Federal Power Act” shall mean the Federal Power Act of 1920, 16 U.S.C. §§ 791a
et seq., and the rules and regulations promulgated thereunder, as amended from
time to time.

 

“Fee Letter” shall mean the Fee Letter dated September 27, 2004, among El Paso,
the Administrative Agent and J.P. Morgan Securities Inc.

 

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“Fees” shall mean the Commitment Fees, the Administrative Agent Fees, the L/C
Participation Fees and the Issuing Bank Fees.

 

“FERC” shall mean the Federal Energy Regulatory Commission, or any Governmental
Authority succeeding to any or all of such Commission’s authority.

 

“Fifth Supplemental Indenture” shall mean the Fifth Supplemental Indenture dated
as of the Closing Date, substantially in the form of Exhibit H.

 

“Financial Officer” of any person shall mean the chief financial officer,
principal accounting officer, treasurer, controller or other vice president with
financial planning responsibilities of such person.

 

“Finsub” shall mean a corporation organized under the laws of a state of the
United States of America which is a special purpose wholly-owned subsidiary of
El Paso formed solely for the purpose of engaging in the Receivables Program.

 

“First Mortgage Bonds” shall mean each of Series D, Series E and Collateral
Series H First Mortgage Bonds and any other series of First Mortgage Bonds of El
Paso issued pursuant to the Indenture after the Closing Date.

 

“First Mortgage Bonds - Collateral Series H” shall mean the Collateral Series H
First Mortgage Bonds.

 

“Fixed Charge Coverage Ratio” shall mean, for any period, the ratio of
Consolidated Cash Flow for such period to Fixed Charges for such period. In the
event that El Paso or any of the Subsidiaries incurs, assumes, Guarantees or
redeems any Indebtedness (other than Indebtedness created hereunder) or issues
any series of preferred stock subsequent to the commencement of the period for
which the Fixed Charge Coverage Ratio is being calculated but prior to the date
on which the event for which the calculation of the Fixed Charge Coverage Ratio
is made (the “Calculation Date”), then the Fixed Charge Coverage Ratio shall be
calculated giving pro forma effect to such incurrence, assumption, Guarantee or
redemption of Indebtedness, or such issuance or redemption of any series of
preferred stock, as if the same had occurred at the beginning of the applicable
four-quarter reference period. For purposes of making the computation referred
to above, (i) acquisitions that have been made by El Paso or any of the
Subsidiaries, including through mergers or consolidations and including any
related financing transactions, during the four-quarter reference period or
subsequent to such reference period and on or prior to the Calculation Date
shall be deemed to have occurred on the first day of the four-quarter reference
period, and (ii) Consolidated Cash Flow attributable to discontinued operations,
as determined in accordance with GAAP, and operations or businesses disposed of
prior to the Calculation Date, shall be excluded, but only to the extent that
the obligations giving rise to such Fixed Charges shall not be obligations of El
Paso or any of the Subsidiaries following the Calculation Date.

 

“Fixed Charges” shall mean, for any period, the sum of (i) Consolidated Interest
Expense for such period, whether paid or accrued (including amortization of
original issue discount, non-cash interest payments, the interest component of
all payments

 

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associated with Capital Lease Obligations, imputed interest with respect to any
sale and leaseback transactions, commissions, discounts and other fees and
charges incurred in respect of letter of credit or bankers’ acceptance
financings, and net payments (if any) pursuant to hedging transactions, but
excluding, however, the interest component of any deferred payment obligations),
(ii) Consolidated Interest Expense that was capitalized during such period,
(iii) any interest expense on Indebtedness of another person that is Guaranteed
by El Paso or one of the Subsidiaries or secured by a Lien on assets of El Paso
or one of the Subsidiaries (whether or not such Guarantee or Lien is called
upon), and (iv) all cash dividend payments on any series of preferred stock, in
each case, on a consolidated basis and in accordance with GAAP.

 

“GAAP” shall mean generally accepted accounting principles in the United States
of America applied on a consistent basis.

 

“Governmental Authority” shall mean any Federal, state, local or foreign court
or governmental agency, authority, instrumentality or regulatory body.

 

“Guarantee” of or by any person shall mean any obligation, contingent or
otherwise, of such person guaranteeing or having the economic effect of
guaranteeing any Indebtedness of any other person (the “primary obligor”) in any
manner, whether directly or indirectly, and including any obligation of such
person, direct or indirect, (a) to purchase or pay (or advance or supply funds
for the purchase or payment of) such Indebtedness or to purchase (or to advance
or supply funds for the purchase of) any security for the payment of such
Indebtedness, (b) to purchase or lease property, securities or services for the
purpose of assuring the owner of such Indebtedness of the payment of such
Indebtedness or (c) to maintain working capital, equity capital or any other
financial statement condition or liquidity of the primary obligor so as to
enable the primary obligor to pay such Indebtedness; provided, however, that the
term Guarantee shall not include endorsements for collection or deposit in the
ordinary course of business.

 

“Hazardous Materials” shall mean all explosive or radioactive substances or
wastes, hazardous or toxic substances or wastes, pollutants, solid, liquid or
gaseous wastes, including petroleum or petroleum distillates, asbestos or
asbestos-containing materials, polychlorinated biphenyls (“PCBs”) or
PCB-containing materials or equipment, radon gas, infectious or medical wastes
and all other substances or wastes of any nature regulated pursuant to any
Environmental Law.

 

“Inactive Subsidiary” shall mean, at any time, any Subsidiary that (a) has
assets at such time of $1,000,000 or less and (b) has not conducted any new
business activity during the prior six-month period.

 

“Incremental Facility Amount” shall mean, at any time, the excess, if any, of
(a) $50,000,000 over (b) the aggregate increase in the Total Commitment
established prior to such time pursuant to Section 2.21.

 

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“Indebtedness” of any person shall mean, without duplication, (a) all
obligations of such person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such person
upon which interest charges are customarily paid, (d) all obligations of such
person under conditional sale or other title retention agreements relating to
property or assets purchased by such person, (e) all obligations of such person
issued or assumed as the deferred purchase price of property or services
(excluding trade accounts payable and accrued obligations incurred in the
ordinary course of business), (f) all Indebtedness of others secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien on property owned or acquired by such
person, whether or not the obligations secured thereby have been assumed, (g)
all Guarantees by such person of Indebtedness of others, (h) all Capital Lease
Obligations of such person, (i) all obligations of such person in respect of
interest rate protection agreements, foreign currency exchange agreements or
other interest or exchange rate hedging arrangements, (j) all obligations of
such person as an account party in respect of letters of credit and (k) all
obligations of such person as an account party in respect of bankers’
acceptances. The Indebtedness of any person shall include the Indebtedness of
any partnership in which such person is a general partner.

 

“Indenture” shall mean the General Mortgage Indenture and Deed of Trust dated as
of February 1, 1996, by El Paso to the Indenture Trustee, as supplemented by the
First Supplemental Indenture dated as of February 1, 1996, the Second
Supplemental Indenture dated as of August 19, 1997, the Third Supplemental
Indenture dated as of January 29, 1999, the Fourth Supplemental Indenture dated
as of January 28, 2002 and the Fifth Supplemental Indenture and as the same may
be further supplemented, amended or otherwise modified from time to time in
accordance with the provisions thereof and hereof.

 

“Index Debt” shall mean the senior, unsecured, non-credit enhanced, long-term
debt of El Paso.

 

“Indenture Trustee” shall mean the State Street Bank and Trust Company, as
trustee under the Indenture, together with its successors and assigns in such
capacity.

 

“Interest Payment Date” shall mean, (a) with respect to any ABR Loan, the last
day of each March, June, September and December, and (b) with respect to any
Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing
of which such Loan is a part and, in the case of a Eurodollar Borrowing with an
Interest Period of more than three months’ duration, each day that would have
been an Interest Payment Date had successive Interest Periods of three months’
duration been applicable to such Borrowing.

 

“Interest Period” shall mean, as to any Eurodollar Borrowing, the period
commencing on the date of such Borrowing and ending on the numerically
corresponding day (or, if there is no numerically corresponding day, on the last
day) in the calendar month that is 1, 2, 3 or 6 months thereafter, as the
applicable Borrower may elect;

 

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provided, however, that if any Interest Period would end on a day other than a
Business Day, such Interest Period shall be extended to the next succeeding
Business Day unless such next succeeding Business Day would fall in the next
calendar month, in which case such Interest Period shall end on the next
preceding Business Day. Interest shall accrue from and including the first day
of an Interest Period to but excluding the last day of such Interest Period.

 

“Issuing Bank Fees” shall have the meaning assigned to such term in Section
2.05(c).

 

“JPMorgan” shall mean JPMorgan Chase Bank, N.A., together with its successors
and assigns.

 

“L/C Commitment” shall mean the commitment of the Issuing Bank to issue Letters
of Credit pursuant to Section 2.20.

 

“L/C Disbursement” shall mean a payment or disbursement made by the Issuing Bank
pursuant to a Letter of Credit.

 

“L/C Exposure” shall mean at any time the sum of (a) the aggregate undrawn
amount of all outstanding Letters of Credit at such time plus (b) the aggregate
principal amount of all L/C Disbursements that have not yet been reimbursed at
such time. The L/C Exposure of any Lender at any time shall mean its Applicable
Percentage of the aggregate L/C Exposure at such time.

 

“L/C Participation Fee” shall have the meaning assigned to such term in Section
2.05(c).

 

“Lenders” shall mean (a) the financial institutions listed on Schedule 2.01
(other than any such financial institution that has ceased to be a party hereto
pursuant to an Assignment and Acceptance) and (b) any financial institution that
has become a party hereto pursuant to an Assignment and Acceptance.

 

“Letter of Credit” shall mean any letter of credit issued pursuant to Section
2.20.

 

“LIBO Rate” shall mean, with respect to any Eurodollar Borrowing for any
Interest Period, the rate appearing on Page 3750 of the Telerate Service (or on
any successor or substitute page of such Service, or any successor to or
substitute for such Service, providing rate quotations comparable to those
currently provided on such page of such Service, as determined by the
Administrative Agent from time to time for purposes of providing quotations of
interest rates applicable to dollar deposits in the London interbank market) at
approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period, as the rate for dollar deposits with a
maturity comparable to such Interest Period. In the event that such rate is not
available at such time for any reason, then the “LIBO Rate” with respect to such
Eurodollar Borrowing for such Interest Period shall be the rate at which dollar
deposits of $5,000,000 and for a maturity comparable to such Interest Period are
offered by the principal London office of the Administrative Agent in
immediately available funds in

 

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the London interbank market at approximately 11:00 a.m., London time, two
Business Days prior to the commencement of such Interest Period.

 

“Lien” shall mean, with respect to any asset, (a) any mortgage, deed of trust,
lien, pledge, encumbrance, charge or security interest in or on such asset, (b)
the interest of a vendor or a lessor under any conditional sale agreement,
capital lease or title retention agreement (or any financing lease having
substantially the same economic effect as any of the foregoing) relating to such
asset and (c) in the case of securities, any purchase option, call or similar
right of a third party with respect to such securities.

 

“Loan Documents” shall mean this Agreement, the Letters of Credit, the Security
Agreement, each Subsidiary Guarantee Agreement, each Pledge Agreement and the
First Mortgage Bonds – Collateral Series H.

 

“Loan Parties” shall mean the Borrowers and any Subsidiary that shall become a
guarantor of the El Paso Obligations pursuant to Section 5.10.

 

“Loans” shall mean the loans made by the Lenders to the Borrowers pursuant to
Section 2.01. Each Loan shall be a Eurodollar Loan or an ABR Loan.

 

“Margin Stock” shall have the meaning assigned to such term in Regulation U.

 

“Maricopa Loan Agreements” shall mean, individually and collectively, (a) the
Loan Agreement dated as of December 1, 1983, between Maricopa County, Arizona
Pollution Control Corporation (“Maricopa”) and El Paso, (b) the Loan Agreement
dated as of July 1, 1994, between Maricopa and El Paso, (c) the Loan Agreement
dated as of December 1, 1984, between Maricopa and El Paso, and (d) the Loan
Agreement dated as of August 1, 1985, between Maricopa and El Paso, in each case
as amended from time to time in accordance with the provisions hereof and
thereof.

 

“Maricopa Reimbursement Agreement” shall have the meaning assigned to such term
in the Indenture.

 

“Material Adverse Effect” shall mean (a) a materially adverse effect on the
business, assets, operations, prospects or condition, financial or otherwise, of
El Paso and the Subsidiaries, taken as a whole, (b) material impairment of the
ability of the Trustee, El Paso or any other Loan Party to perform any of its
obligations under any Transaction Document to which it is or will be a party or
(c) material impairment of the rights of the Lenders under any Transaction
Document.

 

“Maturity Date” shall mean December 17, 2009.

 

“Moody’s” shall mean Moody’s Investors Service, Inc., and its successors.

 

“Mortgaged Property” shall have the meaning assigned to such term in the
Indenture.

 

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“Multiemployer Plan” shall mean a multiemployer plan as defined in Section
4001(a)(3) of ERISA.

 

“New Mexico Public Utility Act” shall mean the New Mexico Public Utility Act,
N.M. Stat. Ann. §§ 62-13-1 et seq., and the rules and regulations promulgated
thereunder, as amended from time to time.

 

“NMPRC” shall mean the New Mexico Public Regulation Commission or any
Governmental Authority succeeding to any or all of such Commission’s authority.

 

“NRC” shall mean the Nuclear Regulatory Commission or any Governmental Authority
succeeding to any or all of such Commission’s authority.

 

“Nuclear Fuel” shall have the meaning assigned to such term in the Purchase
Contract.

 

“Nuclear Waste Act” shall mean the Nuclear Waste Policy Act of 1982, 42 U.S.C.
§§ 10101 et seq., the Nuclear Waste Policy Amendments Act of 1987, 42 U.S.C. §§
10172, 10172a et seq., and the rules and regulations promulgated thereunder, as
amended from time to time.

 

“Obligations” shall mean, collectively, the Trust Obligations and the El Paso
Obligations.

 

“Original Closing Date” shall mean February 12, 1996.

 

“PBGC” shall mean the Pension Benefit Guaranty Corporation referred to and
defined in ERISA.

 

“Permitted Investments” shall mean:

 

(a) direct obligations of, or obligations the principal of and interest on which
are unconditionally guaranteed by, the United States of America (or by any
agency thereof to the extent such obligations are backed by the full faith and
credit of the United States of America), in each case maturing within one year
from the date of acquisition thereof, and repurchase obligations with a term of
not more than seven days for underlying securities of the type described in this
clause (a) (without regard to their maturity) entered into with financial
institutions with the minimum amount of capital and surplus specified in clause
(c) below;

 

(b) investments in commercial paper maturing within 270 days from the date of
acquisition thereof and having, at such date of acquisition, the highest credit
rating obtainable from S&P or Moody’s;

 

(c) investments in certificates of deposit, banker’s acceptances and time
deposits maturing within one year from the date of acquisition thereof issued or
guaranteed by or placed with, and money market deposit accounts issued or
offered by, any domestic office of any commercial bank (including the Trustee)

 

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organized under the laws of the United States of America or any state thereof
which has a combined capital and surplus and undivided profits of not less than
$250,000,000;

 

(d) investments in money market or other mutual funds substantially all of the
assets of which consist of investments of the types described in clauses (a)
through (c) above; and

 

(e) other investment instruments approved in writing by the Required Lenders and
offered by financial institutions which have a combined capital and surplus and
undivided profits of not less than $250,000,000.

 

“person” shall mean any natural person, corporation, business trust, joint
venture, association, company, limited liability company, partnership or
government, or any agency or political subdivision thereof.

 

“Plan” shall mean any employee pension benefit plan (other than a Multiemployer
Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code
or Section 307 of ERISA, and in respect of which the Borrower or any ERISA
Affiliate is (or, if such plan were terminated, would under Section 4069 of
ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.

 

“Pledge Agreement” shall mean each pledge agreement delivered pursuant to
Section 5.10 for the benefit of the Secured Parties, each substantially in the
form of Exhibit E.

 

“Prime Rate” shall mean the rate of interest per annum publicly announced from
time to time by the Administrative Agent as its prime rate in effect at its
principal office in New York City; each change in the Prime Rate shall be
effective on the date such change is publicly announced as being effective.

 

“PUCT” shall mean the Public Utility Commission of Texas or any Governmental
Authority succeeding to any or all of such Commission’s authority.

 

“Purchase Contract” shall mean the Purchase Contract dated as of February 12,
1996, as amended as of February 11, 1999, between the Trustee and El Paso, as
the same may be further amended, supplemented or otherwise modified from time to
time in accordance with the provisions thereof and hereof.

 

“Purchase Contract Default” shall have the meaning assigned to the term “Event
of Default” in Section 19(a) of the Purchase Contract.

 

“Rate Protection Agreements” shall mean any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement or similar agreement
or arrangement designed to protect El Paso against fluctuations in interest
rates and not for speculation.

 

“Rating Agency” shall mean S&P and Moody’s.

 

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“Rating Threshold” shall mean that the Applicable Ratings of the Index Debt are
BBB- or better by S&P and Baa3 or better by Moody’s, in each case with at least
a stable outlook.

 

“Receivables Program” shall mean, collectively, (a) the sale of, or transfer of
interests in, account receivables and related contract rights (“Receivables”) of
El Paso to Finsub and (b) the transfer of such Receivables by Finsub to a
special purpose trust or corporation which is not an Affiliate of El Paso or
Finsub; provided, that all terms and conditions (including any terms or
conditions providing for recourse to El Paso or any of the Subsidiaries (other
than Finsub)) of, and all documentation relating to, the Receivables Program
shall be subject to the prior written approval of the Required Lenders (it being
understood and agreed that certain amendments to Article VI and the other
provisions of this Agreement may be required in connection with the
implementation of the Receivables Program).

 

“Receivables Program Documents” shall mean all agreements, in form and substance
reasonably satisfactory to the Required Lenders, that may from time to time be
entered into by El Paso or a Subsidiary in connection with any Receivables
Program, as such agreements may be amended, supplemented or otherwise modified
from time to time in accordance with the provisions thereof and hereof.

 

“Regional Transmission Organization” shall mean an entity that satisfies the
minimum characteristics, performs the functions, and accommodates the open
architecture condition set forth in FERC regulations.

 

“Register” shall have the meaning given such term in Section 11.04(d).

 

“Regulation T” shall mean Regulation T of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.

 

“Regulation U” shall mean Regulation U of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.

 

“Regulation X” shall mean Regulation X of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.

 

“Release” shall mean any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, disposing,
depositing, dispersing, emanating or migrating of any Hazardous Material in,
into, onto or through the environment.

 

“Remedial Action” shall mean (i) “remedial action” as such term is defined in
CERCLA, 42 U.S.C. § 9601(24), and (ii) all other actions required by any
Governmental Authority or voluntarily undertaken to: (x) cleanup, remove, treat,
abate or in any other way address any Hazardous Material in the environment; (y)
prevent the Release or threat of Release, or minimize the further Release of any
Hazardous Material so it does not migrate or endanger or threaten to endanger
public health, welfare or the environment; or

 

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(z) perform studies and investigations in connection with, or as a precondition
to, (x) or (y) above.

 

“Required Lenders” shall mean, at any time, Lenders having Loans, L/C Exposure
and unused Commitments representing more than 50% of the sum of all Loans
outstanding, L/C Exposure and unused Commitments at such time.

 

“Responsible Officer” of any person shall mean any executive officer or
Financial Officer of such person and any other officer or similar official
thereof responsible for the administration of the obligations of such person in
respect of this Agreement.

 

“Rio Grande Resources Trust II” shall mean the trust created by the Trust
Agreement.

 

“Sale-Leaseback Transaction” shall have the meaning assigned to such term in
Section 6.03.

 

“Secured Parties” shall have the meaning assigned to such term in the Security
Agreement.

 

“Securities Act” shall mean the Securities Act of 1933, as amended from time to
time.

 

“Securities Exchange Act” shall mean the Securities Exchange Act of 1934, as
amended from time to time.

 

“Security Agreement” shall mean the Security Agreement and Assignment of
Contracts dated as of the Closing Date between the Trustee and the Collateral
Agent for the benefit of the Secured Parties, in the form of Exhibit D.

 

“S&P” shall mean Standard & Poor’s Rating Services and its successors.

 

“Statutory Reserves” shall mean a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board and any other banking authority, domestic or foreign,
to which the Administrative Agent or any Lender (including any branch,
Affiliate, or other fronting office making or holding a Loan) is subject for new
negotiable nonpersonal time deposits in dollars of over $100,000 with maturities
approximately equal to three months. Statutory Reserves shall be adjusted
automatically on and as of the effective date of any change in any reserve
percentage.

 

“Stockholders’ Equity” shall mean, as at any date of determination, the
stockholders’ equity at such date of El Paso, as determined in accordance with
GAAP.

 

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“subsidiary” shall mean, with respect to any person (herein referred to as the
“parent”), any corporation, partnership, association or other business entity
(a) of which securities or other ownership interests representing more than 50%
of the equity or more than 50% of the ordinary voting power or more than 50% of
the general partnership interests are, at the time any determination is being
made, owned, controlled or held, or (b) that is, at the time any determination
is made, otherwise Controlled, by the parent or one or more subsidiaries of the
parent or by the parent and one or more subsidiaries of the parent.

 

“Subsidiary” shall mean any subsidiary of El Paso.

 

“Subsidiary Guarantee Agreement” shall mean each guarantee agreement delivered
pursuant to Section 5.10 for the benefit of the Secured Parties, each
substantially in the form of Exhibit F.

 

“Texas Public Utility Regulatory Act” shall mean the Texas Public Utility
Regulatory Act of 1995, and the rules and regulations promulgated thereunder, as
amended from time to time.

 

“Three-Month Secondary CD Rate” shall mean, for any day, the secondary market
rate for three-month certificates of deposit reported as being in effect on such
day (or, if such day shall not be a Business Day, the next preceding Business
Day) by the Board through the public information telephone line of the Federal
Reserve Bank of New York (which rate will, under the current practices of the
Board, be published in Federal Reserve Statistical Release H.15(519) during the
week following such day), or, if such rate shall not be so reported on such day
or such next preceding Business Day, the average of the secondary market
quotations for three-month certificates of deposit of major money center banks
in New York City received at approximately 10:00 a.m., New York City time, on
such day (or, if such day shall not be a Business Day, on the next preceding
Business Day) by the Administrative Agent from three New York City negotiable
certificate of deposit dealers of recognized standing selected by it.

 

“Total Consolidated Capital” shall mean, as at any date of determination, the
sum of Total Debt on such date and Stockholders’ Equity at such date.

 

“Total Commitment” shall mean, at any time, the aggregate amount of the
Commitments, as in effect at such time. The Total Commitment as of the Closing
Date is $100,000,000.

 

“Total Consolidated Debt” shall mean, as of any date of determination, all
Indebtedness (excluding Indebtedness of the type described in clauses (i) and
(k) of the definition of the term “Indebtedness”) of El Paso at such date.

 

“Transaction Documents” shall mean the Loan Documents and the Indenture.

 

“Transactions” shall have the meaning assigned to such term in Section 3.02.

 

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“Trust Agreement” shall mean the Trust Agreement dated as of February 12, 1996,
between the Trustee and El Paso, providing for the creation of the Rio Grande
Resources Trust II, as the same may be amended, supplemented or otherwise
modified from time to time in accordance with the provisions thereof and hereof.

 

“Trust Indenture Act” shall mean the Trust Indenture Act of 1939, and the rules
and regulations promulgated thereunder, as amended from time to time.

 

“Trust Obligations” shall have the meaning assigned to such term in Section
9.01.

 

“Trust Termination Date” shall mean the date of any termination of the Purchase
Contract.

 

“Trustee L/C Exposure” shall mean that part of the L/C Exposure attributable to
all Letters of Credit issued for the account of the Trustee.

 

“Trustee’s Liens” shall have the meaning assigned to such term in the Purchase
Contract.

 

“Type”, when used in respect of any Loan or Borrowing, shall refer to the Rate
by reference to which interest on such Loan or on the Loans comprising such
Borrowing is determined. For purposes hereof, the term “Rate” shall include the
LIBO Rate and the Alternate Base Rate.

 

“USA Patriot Act” shall mean The Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001
(Title III of Pub. L. No. 107-56 (signed into law October 26, 2001)).

 

“Wholly Owned Subsidiary” of any person (the “Parent”) shall mean a subsidiary
of the Parent of which securities (except for directors’ qualifying shares) or
other ownership interests representing 100% of the equity or 100% of the
ordinary voting power or 100% of the general partnership interests are, at the
time any determination is being made, owned, controlled or held by the Parent
and/or one or more Wholly Owned Subsidiaries of the Parent.

 

“Withdrawal Liability” shall mean liability to a Multiemployer Plan as a result
of a complete or partial withdrawal from such Multiemployer Plan, as such terms
are defined in Part I of Subtitle E of Title IV of ERISA.

 

SECTION 1.02. Terms Generally. The definitions in Section 1.01 shall apply
equally to both the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words “include”, “includes” and “including” shall
be deemed to be followed by the phrase “without limitation” All references
herein to Articles, Sections, Exhibits and Schedules shall be deemed references
to Articles and Sections of, and Exhibits and Schedules to, this Agreement
unless the context shall otherwise require. Except as otherwise expressly
provided herein, (a) any reference in this Agreement to any Loan Document shall
mean such document as amended, restated, supplemented or

 

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otherwise modified from time to time and (b) all terms of an accounting or
financial nature shall be construed in accordance with GAAP, as in effect from
time to time; provided, however, that, if El Paso notifies the Administrative
Agent that El Paso wishes to amend any covenant in Article VI or any related
definition to eliminate the effect of any change in GAAP occurring after the
Closing Date on the operation of such covenant (or if the Administrative Agent
notifies El Paso that the Required Lenders wish to amend Article VI or any
related definition for such purpose), then El Paso’s compliance with such
covenant shall be determined on the basis of GAAP in effect immediately before
the relevant change in GAAP became effective, until either such notice is
withdrawn or such covenant is amended in a manner satisfactory to El Paso and
the Required Lenders.

 

ARTICLE II

 

The Credits

 

SECTION 2.01. Commitments. Subject to the terms and conditions and relying upon
the representations and warranties herein set forth, each Lender agrees,
severally and not jointly, to make Loans to the Trustee or El Paso, at any time
and from time to time on or after the date on which the conditions set forth in
Section 4.02 are satisfied, and until the earlier of the Maturity Date and the
termination of the Commitment of such Lender in accordance with the terms
hereof, in an aggregate principal amount at any time outstanding that will not
result in such Lender’s Credit Exposure exceeding such Lender’s Commitment;
provided, however, that at no time shall the sum of (x) the aggregate principal
amount of Loans outstanding to the Trustee and (y) the Trustee L/C Exposure
exceed $70,000,000 (as such amount may be increased from time to time pursuant
to Section 2.21). Within the limits set forth in the preceding sentence and
subject to the terms, conditions and limitations set forth herein, the Borrowers
may borrow, pay or prepay and reborrow Loans.

 

SECTION 2.02. Loans. (a) Each Loan shall be made as part of a Borrowing
consisting of Loans made by the Lenders ratably in accordance with their
respective Commitments; provided, however, that the failure of any Lender to
make any Loan shall not in itself relieve any other Lender of its obligation to
lend hereunder (it being understood, however, that no Lender shall be
responsible for the failure of any other Lender to make any Loan required to be
made by such other Lender). Except for Loans deemed made pursuant to Section
2.02(f), the Loans comprising any Borrowing shall be in an aggregate principal
amount that is (i)(A) with respect to any Eurodollar Borrowing, an integral
multiple of $1,000,000 and not less than $5,000,000 or (B) with respect to any
ABR Borrowing, an integral multiple of $1,000 and not less than $100,000 or (ii)
equal to the remaining available balance of the Commitments.

 

(b) Subject to Sections 2.08 and 2.13, each Borrowing shall be comprised
entirely of ABR Loans or Eurodollar Loans as the applicable Borrower may request
pursuant to Section 2.03. Each Lender may at its option make any Eurodollar Loan
by causing any domestic or foreign branch or Affiliate of such Lender to make
such Loan; provided that any exercise of such option shall not affect the
obligation of the Borrower

 

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to repay such Loan in accordance with the terms of this Agreement. Borrowings of
more than one Type may be outstanding at the same time; provided, however, that
the Borrowers shall not be entitled to request any Borrowing that, if made,
would result in more than seven Eurodollar Borrowings outstanding hereunder at
any time. For purposes of the foregoing, Borrowings having different Interest
Periods, regardless of whether they commence on the same date, shall be
considered separate Borrowings.

 

(c) Each Lender shall make each Loan to be made by it hereunder on the proposed
date thereof by wire transfer of immediately available funds to such account in
New York City as the Administrative Agent may designate not later than 11:00
a.m., New York City time, and the Administrative Agent shall by 12:00 (noon),
New York City time, credit the amounts so received to an account in the name of
the applicable Borrower maintained with the Administrative Agent and designated
by such Borrower in the applicable Borrowing Request or, if a Borrowing shall
not occur on such date because any condition precedent herein specified shall
not have been met, return the amounts so received to the respective Lenders.

 

(d) Unless the Administrative Agent shall have received notice from a Lender
prior to the date of any Borrowing that such Lender will not make available to
the Administrative Agent such Lender’s portion of such Borrowing, the
Administrative Agent may assume that such Lender has made such portion available
to the Administrative Agent on the date of such Borrowing in accordance with
paragraph (c) above and the Administrative Agent may, in reliance upon such
assumption, make available to the applicable Borrower on such date a
corresponding amount. If the Administrative Agent shall have so made funds
available then, to the extent that such Lender shall not have made such portion
available to the Administrative Agent, such Lender and the applicable Borrower
severally agree to repay to the Administrative Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the date
such amount is made available to the applicable Borrower until the date such
amount is repaid to the Administrative Agent at (i) in the case of either
Borrower, the interest rate applicable at the time to the Loans comprising such
Borrowing and (ii) in the case of such Lender, the Federal Funds Effective Rate.
If such Lender shall repay to the Administrative Agent such corresponding
amount, such amount shall constitute such Lender’s Loan as part of such
Borrowing for purposes of this Agreement.

 

(e) Notwithstanding any other provision of this Agreement, (i) neither Borrower
shall be entitled to request any Borrowing if the Interest Period requested with
respect thereto would end after the Maturity Date and (ii) the Trustee shall not
be entitled to request any Borrowing on or after the Trust Termination Date.

 

(f) If the Issuing Bank shall not have received from the Trustee or El Paso, as
the case may be, the payment required to be made by Section 2.20(e) within the
time specified in such Section, the Issuing Bank will promptly notify the
Administrative Agent of the L/C Disbursement and the Administrative Agent will
promptly notify each Lender of such L/C Disbursement and its Applicable
Percentage thereof. Each Lender shall pay by wire transfer of immediately
available funds to the Administrative Agent not later than 2:00 p.m., New York
City time, on such date (or, if

 

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such Lender shall have received such notice later than 12:00 (noon), New York
City time, on any day, not later than 10:00 a.m., New York City time, on the
immediately following Business Day), an amount equal to such Lender’s Applicable
Percentage of such L/C Disbursement (it being understood that such amount shall
be deemed to constitute an ABR Loan of such Lender and such payment shall be
deemed to have reduced the L/C Exposure by such amount), and the Administrative
Agent will promptly pay to the Issuing Bank amounts so received by it from the
Lenders. The Administrative Agent will promptly pay to the Issuing Bank any
amounts received by it from the Trustee or El Paso, as the case may be, pursuant
to Section 2.20(e) prior to the time that any Lender makes any payment pursuant
to this paragraph (f); any such amounts received by the Administrative Agent
thereafter will be promptly remitted by the Administrative Agent to the Lenders
that shall have made such payments and to the Issuing Bank, as their interests
may appear. If any Lender shall not have made its Applicable Percentage of such
L/C Disbursement available to the Administrative Agent as provided above, such
Lender and the Trustee or El Paso, as the case may be, severally agree to pay
interest on such amount, for each day from and including the date such amount is
required to be paid in accordance with this paragraph to but excluding the date
such amount is paid, to the Administrative Agent at (i) in the case of the
Trustee or El Paso, as the case may be, a rate per annum equal to the interest
rate applicable to ABR Loans pursuant to Section 2.06(a), and (ii) in the case
of such Lender, for the first such day, the Federal Funds Effective Rate, and
for each day thereafter, the Alternate Base Rate.

 

SECTION 2.03. Borrowing Procedure. In order to request a Borrowing (other than a
deemed Borrowing pursuant to Section 2.02(f), as to which this Section 2.03
shall not apply), the applicable Borrower shall hand deliver or telecopy to the
Administrative Agent a duly completed Borrowing Request (a) in the case of a
Eurodollar Borrowing, not later than 11:00 a.m., New York City time, three
Business Days before a proposed Borrowing, and (b) in the case of an ABR
Borrowing, not later than 12:00 noon, New York City time, on the day of the
proposed Borrowing. Each Borrowing Request shall be irrevocable, shall be signed
by or on behalf of the applicable Borrower and shall specify the following
information: (i) whether the Borrowing then being requested is to be a
Eurodollar Borrowing or an ABR Borrowing; (ii) the date of such Borrowing (which
shall be a Business Day); (iii) the number and location of the account to which
funds are to be disbursed (which shall be an account that complies with the
requirements of Section 2.02(c)); (iv) the amount of such Borrowing; and (v) if
such Borrowing is to be a Eurodollar Borrowing, the Interest Period with respect
thereto; provided, however, that, notwithstanding any contrary specification in
any Borrowing Request, each requested Borrowing shall comply with the
requirements set forth in Section 2.02. If no election as to the Type of
Borrowing is specified in any such notice, then the requested Borrowing shall be
an ABR Borrowing. If no Interest Period with respect to any Eurodollar Borrowing
is specified in any such notice, then the applicable Borrower shall be deemed to
have selected an Interest Period of one month’s duration. The Administrative
Agent shall promptly advise the Lenders of any notice given pursuant to this
Section 2.03 (and the contents thereof), and of each Lender’s portion of the
requested Borrowing.

 

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SECTION 2.04. Evidence of Debt; Repayment of Loans. (a) Each Borrower hereby
unconditionally promises to pay to the Administrative Agent for the account of
each Lender the then unpaid principal amount of each Loan made to such Borrower
on the Maturity Date; provided, however, that if the Purchase Contract shall
terminate prior to the Maturity Date, the Trustee shall repay the unpaid
principal amount of each Loan made to it on the earlier of (i) the Maturity
Date, (ii) the 150th day following the Trust Termination Date, (iii) if any
Event of Default that is not a Purchase Contract Default shall be in existence
on the Trust Termination Date or shall thereafter occur, the 10th day following
the later to occur of the Trust Termination Date or such Event of Default or
(iv) if a Purchase Contract Default shall have occurred, on (A) the date of such
occurrence or (B) such later date as the Administrative Agent may elect.

 

(b) Each Lender shall maintain in accordance with its usual practice an account
or accounts evidencing the indebtedness of each Borrower to such Lender
resulting from each Loan made by such Lender from time to time, including the
amounts of principal and interest payable and paid such Lender from time to time
under this Agreement.

 

(c) The Administrative Agent shall maintain accounts in which it will record (i)
the amount of each Loan made hereunder, the Type thereof and the Interest Period
applicable thereto, (ii) the amount of any principal or interest due and payable
or to become due and payable from each Borrower to each Lender hereunder and
(iii) the amount of any sum received by the Administrative Agent hereunder from
each Borrower and each Lender’s share thereof.

 

(d) The entries made in the accounts maintained pursuant to paragraphs (b) and
(c) above shall be prima facie evidence of the existence and amounts of the
obligations therein recorded; provided, however, that the failure of any Lender
or the Administrative Agent to maintain such accounts or any error therein shall
not in any manner affect the obligations of the Borrowers to repay the Loans in
accordance with their terms.

 

(e) Notwithstanding any other provision of this Agreement, in the event any
Lender shall request and receive a promissory note payable to such Lender and
its registered assigns, the interests represented by such note shall at all
times (including after any assignment of all or part of such interests pursuant
to Section 11.04) be represented by one or more promissory notes payable to the
payee named therein or its registered assigns.

 

SECTION 2.05. Fees. (a) The Borrowers agree, jointly and severally, to pay to
each Lender, through the Administrative Agent, on the last day of March, June,
September and December in each year and on each date on which the Commitment of
such Lender shall expire or be terminated as provided herein, a commitment fee
(a “Commitment Fee”) equal to the Applicable Spread per annum in effect from
time to time on the daily unused amount of the Commitment of such Lender during
the preceding quarter (or other period commencing on the Closing Date or ending
on the Maturity Date or the date on which the Commitments of such Lender shall
expire or be terminated). All

 

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Commitment Fees shall be computed on the basis of the actual number of days
elapsed in a year of 360 days. The Commitment Fees due to each Lender shall
commence to accrue on the Closing Date and shall cease to accrue on the date on
which the Commitment of such Lender shall expire or be terminated as provided
herein.

 

(b) The Borrowers agree, jointly and severally, to pay to the Administrative
Agent the fees set forth in the Fee Letter at the times and in the amounts
specified therein (the “Administrative Agent Fees”).

 

(c) The Borrowers agree, jointly and severally, to pay (i) to each Lender,
through the Administrative Agent, on the last day of March, June, September and
December of each year and on the date on which the Commitment of such Lender
shall be terminated as provided herein, a fee (an “L/C Participation Fee”)
calculated on such Lender’s Applicable Percentage of the daily aggregate L/C
Exposure (excluding the portion thereof attributable to unreimbursed L/C
Disbursements) during the preceding quarter (or shorter period commencing on the
Closing Date or ending on the Maturity Date or the date on which all Letters of
Credit have been canceled or have expired and the Commitments of all Lenders
shall have been terminated) at a rate per annum equal to the Applicable Spread
from time to time used to determine the interest rate on Eurodollar Loans
pursuant to Section 2.06(b) and (ii) to the Issuing Bank with respect to each
Letter of Credit the fronting fees set forth in the Fee Letter (the “Issuing
Bank Fees”). All L/C Participation Fees and Issuing Bank Fees shall be computed
on the basis of the actual number of days elapsed in a year of 360 days.

 

(d) All Fees shall be paid on the dates due, in immediately available funds, to
the Administrative Agent for distribution, if and as appropriate, among the
Lenders, except that the Issuing Bank Fees shall be paid directly to the Issuing
Bank. Once paid, none of the Fees shall be refundable under any circumstances.

 

SECTION 2.06. Interest on Loans. (a) Subject to the provisions of Section 2.07,
the Loans comprising each ABR Borrowing shall bear interest (computed on the
basis of the actual number of days elapsed over a year of 365 or 366 days, as
the case may be, when the Alternate Base Rate is determined by reference to the
Prime Rate and over a year of 360 days at all other times) at a rate per annum
equal to the Alternate Base Rate plus the Applicable Spread in effect from time
to time.

 

(b) Subject to the provisions of Section 2.07, the Loans comprising each
Eurodollar Borrowing shall bear interest (computed on the basis of the actual
number of days elapsed over a year of 360 days) at a rate per annum equal to the
LIBO Rate for the Interest Period in effect for such Borrowing plus the
Applicable Spread in effect from time to time.

 

(c) Interest on each Loan shall be payable on the Interest Payment Dates
applicable to such Loan except as otherwise provided in this Agreement. The
applicable Alternate Base Rate, LIBO Rate and Applicable Spread for each
Interest Period or day within an Interest Period, as the case may be, shall be
determined by the Administrative Agent, and such determination shall be
conclusive absent manifest error.

 

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SECTION 2.07. Default Interest. If either Borrower shall default in the payment
of the principal of or interest on any Loan or any other amount becoming due
hereunder, by acceleration or otherwise, or under any other Loan Document, such
Borrower shall on demand from time to time pay interest, to the extent permitted
by law, on such defaulted amount to but excluding the date of actual payment
(after as well as before judgment) (a) in the case of overdue principal, at the
rate otherwise applicable to such Loan pursuant to Section 2.06 plus 2.00% per
annum and (b) in all other cases, at a rate per annum (computed on the basis of
the actual number of days elapsed over a year of 365 or 366 days, as the case
may be, when determined by reference to the Prime Rate and over a year of 360
days at all other times) equal to the sum of the Alternate Base Rate plus 2.00%.

 

SECTION 2.08. Alternate Rate of Interest. In the event, and on each occasion,
that on the day two Business Days prior to the commencement of any Interest
Period for a Eurodollar Borrowing the Administrative Agent shall have determined
that dollar deposits in the principal amounts of the Loans comprising such
Borrowing are not generally available in the London interbank market, or that
the rates at which such dollar deposits are being offered will not adequately
and fairly reflect the cost to any Lender of making or maintaining its
Eurodollar Loan during such Interest Period, or that reasonable means do not
exist for ascertaining the LIBO Rate, the Administrative Agent shall, as soon as
practicable thereafter, give written or telecopy notice of such determination to
the Borrowers and the Lenders. In the event of any such determination, until the
Administrative Agent shall have advised the Borrowers and the Lenders that the
circumstances giving rise to such notice no longer exist, any request by either
Borrower for a Eurodollar Borrowing pursuant to Section 2.03 shall be deemed to
be a request for an ABR Borrowing. Each determination by the Administrative
Agent hereunder shall be conclusive absent manifest error.

 

SECTION 2.09. Termination and Reduction of Commitments. (a) The Commitments and
the L/C Commitment shall automatically terminate on the Maturity Date.

 

(b) Upon at least three Business Days’ prior irrevocable written or telecopy
notice to the Administrative Agent, the Borrowers may at any time in whole
permanently terminate, or from time to time in part permanently reduce, the
Commitments; provided, however, that (i) each partial reduction of the
Commitments shall be in an integral multiple of $1,000,000 and in a minimum
amount of $5,000,000 and (ii) the Total Commitment shall not be reduced to an
amount that is less than the Aggregate Credit Exposure at the time.

 

(c) Each reduction in the Commitments hereunder shall be made ratably among the
Lenders in accordance with their respective Commitments. The Borrowers shall pay
to the Administrative Agent for the account of the applicable Lenders, on the
date of each termination or reduction, the Commitment Fees on the amount of the
Commitments so terminated or reduced accrued to but excluding the date of such
termination or reduction.

 

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SECTION 2.10. Conversion and Continuation of Borrowings. The applicable Borrower
shall have the right at any time upon prior irrevocable notice to the
Administrative Agent (a) not later than 12:00 (noon), New York City time, on the
day of conversion, to convert any Eurodollar Borrowing into an ABR Borrowing,
(b) not later than 10:00 a.m., New York City time, three Business Days prior to
conversion or continuation, to convert any ABR Borrowing into a Eurodollar
Borrowing or to continue any Eurodollar Borrowing as a Eurodollar Borrowing for
an additional Interest Period, and (c) not later than 10:00 a.m., New York City
time, three Business Days prior to conversion, to convert the Interest Period
with respect to any Eurodollar Borrowing to another permissible Interest Period,
subject in each case to the following:

 

(i) each conversion or continuation shall be made pro rata among the Lenders in
accordance with the respective principal amounts of the Loans comprising the
converted or continued Borrowing;

 

(ii) if less than all the outstanding principal amount of any Borrowing shall be
converted or continued, then each resulting Borrowing shall satisfy the
limitations specified in Sections 2.02(a) and 2.02(b) regarding the principal
amount and maximum number of Borrowings of the relevant Type;

 

(iii) each conversion shall be effected by each Lender and the Administrative
Agent by recording for the account of such Lender the new Loan of such Lender
resulting from such conversion and reducing the Loan (or portion thereof) of
such Lender being converted by an equivalent principal amount; accrued interest
on any Eurodollar Loan (or portion thereof) being converted shall be paid by
such Borrower at the time of conversion;

 

(iv) if any Eurodollar Borrowing is converted at a time other than the end of
the Interest Period applicable thereto, such Borrower shall pay, upon demand,
any amounts due to the Lenders pursuant to Section 2.14;

 

(v) any portion of a Borrowing maturing in less than one month may not be
converted into or continued as a Eurodollar Borrowing;

 

(vi) any portion of a Eurodollar Borrowing that cannot be converted into or
continued as a Eurodollar Borrowing by reason of the immediately preceding
clause shall be automatically converted at the end of the Interest Period in
effect for such Borrowing into an ABR Borrowing; and

 

(vii) upon notice to the Borrowers from the Administrative Agent given at the
request of the Required Lenders, after the occurrence and during the continuance
of a Default or Event of Default, no outstanding Loan may be converted into, or
continued as, a Eurodollar Loan.

 

Each notice pursuant to this Section 2.10 shall be irrevocable and shall refer
to this Agreement and specify (w) the identity and amount of the Borrowing that
the applicable Borrower requests be converted or continued, (x) whether such
Borrowing is to be converted to or continued as a Eurodollar Borrowing or an ABR
Borrowing, (y) if

 

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such notice requests a conversion, the date of such conversion (which shall be a
Business Day) and (z) if such Borrowing is to be converted to or continued as a
Eurodollar Borrowing, the Interest Period with respect thereto. If no Interest
Period is specified in any such notice with respect to any conversion to or
continuation as a Eurodollar Borrowing, the applicable Borrower shall be deemed
to have selected an Interest Period of one month’s duration. The Administrative
Agent shall advise the Lenders of any notice given pursuant to this Section 2.10
and of each Lender’s portion of any converted or continued Borrowing. If a
Borrower shall not have given notice in accordance with this Section 2.10 to
continue any Borrowing into a subsequent Interest Period (and shall not
otherwise have given notice in accordance with this Section 2.10 to convert such
Borrowing), such Borrowing shall, at the end of the Interest Period applicable
thereto (unless repaid pursuant to the terms hereof), automatically be continued
into an ABR Borrowing.

 

SECTION 2.11. Optional Prepayment. (a) Each Borrower shall have the right at any
time and from time to time to prepay any Borrowing, in whole or in part, upon
written or telecopy notice (or telephone notice promptly confirmed by written or
telecopy notice) to the Administrative Agent before 12:00 (noon), New York City
time (i) in the case of any prepayment of a Eurodollar Borrowing, at least three
Business Days prior to the date designated for such prepayment or (ii) in the
case of any prepayment of an ABR Borrowing, on the date of such prepayment;
provided, however, that each partial prepayment shall be in an amount that is
(x) in the case of any partial prepayment of a Eurodollar Borrowing, an integral
multiple of $1,000,000 and not less than $5,000,000 or (y) in the case of any
partial prepayment of an ABR Borrowing, an integral multiple of $1,000 and not
less than $100,000.

 

(b) In the event of any termination of all the Commitments, each Borrower shall
repay or prepay all its outstanding Borrowings on the date of such termination,
together with accrued interest to but excluding the date of such payment. In the
event of any partial reduction of the Commitments, then (i) at or prior to the
effective date of such reduction or termination, the Administrative Agent shall
notify the Borrowers and the Lenders of the Aggregate Credit Exposure after
giving effect thereto and (ii) if the Aggregate Credit Exposure would exceed the
Total Commitment after giving effect to such reduction or termination, then the
Borrowers shall, on the date of such reduction or termination, repay or prepay
Borrowings in an amount sufficient to eliminate such excess.

 

(c) Each notice of prepayment shall specify the prepayment date and the
principal amount of each Borrowing (or portion thereof) to be prepaid, shall be
irrevocable and shall commit the applicable Borrower to prepay such Borrowing by
the amount stated therein on the date stated therein. All prepayments under this
Section 2.11 shall be subject to Section 2.14 but otherwise without premium or
penalty. All prepayments under this Section 2.11 (other than prepayments of ABR
Loans prior to the Maturity Date) shall be accompanied by accrued interest on
the principal amount being prepaid to the date of payment.

 

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SECTION 2.12. Reserve Requirements; Change in Circumstances. (a) Notwithstanding
any other provision of this Agreement, if after the date of this Agreement, but
prior to the first date on which the events described in clauses (w), (x), (y)
and (z) of subsection (d) of this Section 2.12 shall have occurred (the
“Obligation Termination Date”), any change in applicable law or regulation or in
the interpretation or administration thereof by any Governmental Authority
charged with the interpretation or administration thereof (whether or not having
the force of law) shall impose, modify or deem applicable any reserve, special
deposit or similar requirement against assets of, deposits with or for the
account of or credit extended by any Lender or the Issuing Bank or shall impose
on such Lender or the Issuing Bank or the London interbank market any other
condition affecting this Agreement or Eurodollar Loans made by such Lender or
any Letter of Credit or participation therein, and the result of any of the
foregoing shall be to increase the cost to such Lender or the Issuing Bank of
making or maintaining any Eurodollar Loan or increase the cost to any Lender or
the Issuing Bank of issuing or maintaining any Letter of Credit or purchasing or
maintaining a participation therein or to reduce the amount of any sum received
or receivable by such Lender or the Issuing Bank hereunder (whether of
principal, interest or otherwise) by an amount deemed by such Lender or the
Issuing Bank to be material, then the applicable Borrower will pay to such
Lender or the Issuing Bank, as the case may be, upon demand such additional
amount or amounts as will compensate such Lender or the Issuing Bank, as the
case may be, for such additional costs incurred or reduction suffered.

 

(b) If any Lender or the Issuing Bank shall have determined that the adoption
after the date hereof, but prior to the Obligation Termination Date, of any law,
rule, regulation, agreement or guideline regarding capital adequacy, or any
change after the date hereof, but prior to the Obligation Termination Date, in
any such law, rule, regulation, agreement or guideline (whether such law, rule,
regulation, agreement or guideline has been adopted) or in the interpretation or
administration thereof by any Governmental Authority charged with the
interpretation or administration thereof, or compliance by any Lender (or any
lending office of such Lender) or the Issuing Bank or any Lender’s or the
Issuing Bank’s holding company with any request or directive regarding capital
adequacy (whether or not having the force of law) of any Governmental Authority
has or would have the effect of reducing the rate of return on such Lender’s or
the Issuing Bank’s capital or on the capital of such Lender’s or the Issuing
Bank’s holding company, if any, as a consequence of this Agreement or the Loans
made or participation in Letters of Credit purchased by such Lender pursuant
hereto or the Letters of Credit issued by the Issuing Bank pursuant hereto to a
level below that which such Lender or the Issuing Bank or such Lender’s or the
Issuing Bank’s holding company could have achieved but for such applicability,
adoption, change or compliance (taking into consideration such Lender’s or the
Issuing Bank’s policies and the policies of such Lender’s or the Issuing Bank’s
holding company with respect to capital adequacy) by an amount deemed by such
Lender or the Issuing Bank to be material, then from time to time the applicable
Borrower shall pay to such Lender or the Issuing Bank, as the case may be, such
additional amount or amounts as will compensate such Lender or the Issuing Bank
or such Lender’s or the Issuing Bank’s holding company for any such reduction
suffered.

 

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(c) A certificate of a Lender or the Issuing Bank setting forth the amount or
amounts necessary to compensate such Lender or the Issuing Bank or its holding
company, as applicable, as specified in paragraph (a) or (b) above shall be
delivered to the applicable Borrower and shall be conclusive absent manifest
error. The applicable Borrower shall pay such Lender or the Issuing Bank the
amount shown as due on any such certificate delivered by it within 10 days after
its receipt of the same.

 

(d) Failure or delay on the part of any Lender or the Issuing Bank to demand
compensation for any increased costs or reduction in amounts received or
receivable or reduction in return on capital shall not constitute a waiver of
such Lender’s or the Issuing Bank’s right to demand such compensation under this
Section 2.12 for any costs incurred or reduction suffered with respect to any
date so long as such Lender or the Issuing Bank, as applicable, shall have
notified the applicable Borrower that it will demand compensation for such costs
or reduction under paragraph (c) above, not more than 90 days after the later of
(i) such date and (ii) the date on which such Lender or the Issuing Bank, as
applicable, shall have become aware of such costs or reduction. Notwithstanding
the foregoing, no notification contemplated by the preceding sentence shall in
any event be made more than 30 days after the date that (w) all the Obligations
have been indefeasibly paid in full, (x) the Lenders have no further commitment
to lend to either of the Borrowers under this Agreement, (y) the L/C Exposure
has been reduced to zero and (z) the Issuing Bank has no further obligation to
issue Letters of Credit under this Agreement. The protection of this Section
2.12 shall be available to each Lender and the Issuing Bank regardless of any
possible contention of the invalidity or inapplicability of the law, rule,
regulation, agreement, guideline or other change or condition that shall have
occurred or been imposed.

 

SECTION 2.13. Change in Legality. (a) Notwithstanding any other provision of
this Agreement, if, after the date hereof, any change in any law or regulation
or in the interpretation thereof by any Governmental Authority charged with the
administration or interpretation thereof shall make it unlawful for any Lender
to make or maintain any Eurodollar Loan or to give effect to its obligations as
contemplated hereby with respect to any Eurodollar Loan, then, by written notice
to the Borrowers and to the Administrative Agent:

 

(i) such Lender may declare that Eurodollar Loans will not thereafter (for the
duration of such unlawfulness) be made by such Lender hereunder (or be continued
for additional Interest Periods and ABR Loans will not thereafter (for such
duration) be converted into Eurodollar Loans), whereupon any request for a
Eurodollar Borrowing (or to convert an ABR Borrowing to a Eurodollar Borrowing
or to continue a Eurodollar Borrowing for an additional Interest Period) shall,
as to such Lender only, be deemed a request for an ABR Loan (or a request to
continue an ABR Loan as such or to convert a Eurodollar Loan into an ABR Loan,
as the case may be), unless such declaration shall be subsequently withdrawn;
and

 

(ii) such Lender may require that all outstanding Eurodollar Loans made by it be
converted to ABR Loans, in which event all such Eurodollar Loans shall be

 

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automatically converted to ABR Loans as of the effective date of such notice as
provided in paragraph (b) below.

 

In the event any Lender shall exercise its rights under (i) or (ii) above, all
payments and prepayments of principal that would otherwise have been applied to
repay the Eurodollar Loans that would have been made by such Lender or the
converted Eurodollar Loans of such Lender shall instead be applied to repay the
ABR Loans made by such Lender in lieu of, or resulting from the conversion of,
such Eurodollar Loans.

 

(b) For purposes of this Section 2.13, a notice to the Borrowers by any Lender
shall be effective as to each Eurodollar Loan made by such Lender, if lawful, on
the last day of the Interest Period currently applicable to such Eurodollar
Loan; in all other cases such notice shall be effective on the date of receipt
by the Borrowers.

 

SECTION 2.14. Indemnity. Each Borrower shall indemnify each Lender against any
loss or expense that such Lender may sustain or incur as a consequence of (a)
any event, other than a default by such Lender in the performance of its
obligations hereunder, which results in (i) such Lender receiving or being
deemed to receive any amount on account of the principal of any Eurodollar Loan
to such Borrower prior to the end of the Interest Period in effect therefor,
(ii) the conversion of any Eurodollar Loan to such Borrower to an ABR Loan, or
the conversion of the Interest Period with respect to any Eurodollar Loan to
such Borrower, in each case other than on the last day of the Interest Period in
effect therefor, or (iii) any Eurodollar Loan to be made by such Lender to such
Borrower (including any Eurodollar Loan to be made pursuant to a conversion or
continuation under Section 2.10) not being made after notice of such Loan shall
have been given by such Borrower hereunder (any of the events referred to in
this clause (a) being called a “Breakage Event”) or (b) any default by such
Borrower in the making of any payment or prepayment required to be made
hereunder. In the case of any Breakage Event, such loss shall include an amount
equal to the excess, as reasonably determined by such Lender, of (i) its cost of
obtaining funds for the Eurodollar Loan that is the subject of such Breakage
Event for the period from the date of such Breakage Event to the last day of the
Interest Period in effect (or that would have been in effect) for such Loan over
(ii) the amount of interest likely to be realized by such Lender in redeploying
the funds released or not utilized by reason of such Breakage Event for such
period. A certificate of any Lender setting forth any amount or amounts which
such Lender is entitled to receive pursuant to this Section 2.14 shall be
delivered to the applicable Borrower and shall be conclusive absent manifest
error.

 

SECTION 2.15. Pro Rata Treatment. Except as required under Section 2.13, each
Borrowing, each payment or prepayment of principal of any Borrowing, each
payment of interest on the Loans, each payment of the Commitment Fees and the
L/C Participation Fees, each reduction of the Commitments and each conversion of
any Borrowing to or continuation of any Borrowing as a Borrowing of any Type
shall be allocated pro rata among the Lenders in accordance with their
respective applicable Commitments (or, if such Commitments shall have expired or
been terminated, in accordance with the respective principal amounts of their
outstanding Loans). Each Lender agrees that in computing such Lender’s portion
of any Borrowing

 

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to be made hereunder, the Administrative Agent may, in its discretion, round
each Lender’s percentage of such Borrowing to the next higher or lower whole
dollar amount.

 

SECTION 2.16. Sharing of Setoffs. Each Lender agrees that if it shall, through
the exercise of a right of banker’s lien, setoff or counterclaim against either
Borrower, or pursuant to a secured claim under Section 506 of Title 11 of the
United States Code or other security or interest arising from, or in lieu of,
such secured claim, received by such Lender under any applicable bankruptcy,
insolvency or other similar law or otherwise, or by any other means, obtain
payment (voluntary or involuntary) in respect of any Loan or Loans or L/C
Disbursement as a result of which the unpaid principal portion of its Loans and
participation in L/C Disbursements shall be proportionately less than the unpaid
principal portion of the Loans and participation in L/C Disbursements of any
other Lender, it shall be deemed simultaneously to have purchased from such
other Lender at face value, and shall promptly pay to such other Lender the
purchase price for, a participation in the Loans and L/C Exposure of such other
Lender, so that the aggregate unpaid principal amount of the Loans and L/C
Exposure and participation in Loans and L/C Exposure held by each Lender shall
be in the same proportion to the aggregate unpaid principal amount of all Loans
and L/C Exposure then outstanding as the principal amount of its Loans and L/C
Exposure prior to such exercise of banker’s lien, setoff or counterclaim or
other event was to the principal amount of all Loans and L/C Exposure
outstanding prior to such exercise of banker’s lien, setoff or counterclaim or
other event; provided, however, that if any such purchase or purchases or
adjustments shall be made pursuant to this Section 2.16 and the payment giving
rise thereto shall thereafter be recovered, such purchase or purchases or
adjustments shall be rescinded to the extent of such recovery and the purchase
price or prices or adjustment restored without interest. Each Borrower expressly
consents to the foregoing arrangements and agrees that any Lender holding a
participation in a Loan or L/C Disbursement deemed to have been so purchased may
exercise any and all rights of banker’s lien, setoff or counterclaim with
respect to any and all moneys owing by such Borrower to such Lender by reason
thereof as fully as if such Lender had made a Loan directly to such Borrower in
the amount of such participation.

 

SECTION 2.17. Payments. (a) Each Borrower shall make each payment (including
principal of or interest on any Borrowing or any L/C Disbursement or any Fees or
other amounts) hereunder and under any other Loan Document not later than 12:00
(noon), New York City time, on the date when due in immediately available
dollars, without setoff, defense or counterclaim. Each such payment (other than
Issuing Bank Fees, which shall be paid directly to the Issuing Bank if other
than the Administrative Agent) shall be made to the Administrative Agent at its
offices at One Chase Manhattan Plaza, New York, New York.

 

(b) Whenever any payment (including principal of or interest on any Borrowing or
any Fees or other amounts) hereunder or under any other Loan Document shall
become due, or otherwise would occur, on a day that is not a Business Day, such
payment may be made on the next succeeding Business Day, and such extension of
time shall in such case be included in the computation of interest or Fees, if
applicable.

 

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SECTION 2.18. Taxes. (a) Any and all payments by or on behalf of either Borrower
hereunder and under any other Loan Document shall be made, in accordance with
Section 2.17, free and clear of and without deduction for any and all current or
future taxes, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding (i) income taxes imposed on the net
income of the Administrative Agent, any Lender or the Issuing Bank (or any
transferee or assignee thereof, including a participation holder (any such
entity a “Transferee”) and (ii) franchise taxes imposed on the net income of the
Administrative Agent, any Lender or the Issuing Bank (or Transferee), in each
case by the jurisdiction under the laws of which the Administrative Agent, such
Lender or the Issuing Bank (or Transferee) is organized or any political
subdivision thereof (all such nonexcluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities, collectively or individually, being
called “Taxes”. If a Borrower shall be required to deduct any Taxes from or in
respect of any sum payable hereunder or under any other Loan Document to the
Administrative Agent, any Lender or the Issuing Bank (or any Transferee), (i)
the sum payable shall be increased by the amount (an “additional amount”)
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 2.18) the
Administrative Agent, such Lender or the Issuing Bank (or Transferee), as the
case may be, shall receive an amount equal to the sum it would have received had
no such deductions been made, (ii) such Borrower shall make such deductions and
(iii) such Borrower shall pay the full amount deducted to the relevant
Governmental Authority in accordance with applicable law.

 

(b) In addition, each Borrower agrees to pay to the relevant Governmental
Authority in accordance with applicable law any current or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies that arise from any payment made hereunder or under any other Loan
Document or from the execution, delivery or registration of, or otherwise with
respect to, this Agreement or any other Loan Document (“Other Taxes”).

 

(c) The Borrowers jointly and severally agree to indemnify the Administrative
Agent, each Lender and the Issuing Bank (or Transferee) for the full amount of
Taxes and Other Taxes paid by the Administrative Agent, such Lender or the
Issuing Bank (or Transferee), as the case may be, and any liability (including
penalties, interest and expenses (including reasonable attorney’s fees, charges
and disbursements)) arising therefrom or with respect thereto, whether or not
such Taxes or Other Taxes were correctly or legally asserted by the relevant
Governmental Authority. A certificate as to the amount of such payment or
liability prepared by the Administrative Agent, a Lender or the Issuing Bank (or
Transferee), or the Administrative Agent on its behalf, absent manifest error,
shall be final, conclusive and binding for all purposes. Such indemnification
shall be made within 30 days after the date the Administrative Agent, any Lender
or the Issuing Bank (or Transferee), as the case may be, makes written demand
therefor.

 

(d) As soon as practicable after the date of any payment of Taxes or Other Taxes
by either Borrower to the relevant Governmental Authority, such Borrower will
deliver to the Administrative Agent, at its address referred to in Section
11.01, the

 

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original or a certified copy of a receipt issued by such Governmental Authority
evidencing payment thereof.

 

(e) Each Lender (or Transferee) that is organized under the laws of a
jurisdiction other than the United States, any State thereof or the District of
Columbia (a “Non-U.S. Lender”) shall deliver to the Borrowers and the
Administrative Agent two copies of either United States Internal Revenue Service
Form W-8BEN or Form W-8ECI, or, in the case of a Non-U.S. Lender claiming
exemption from U.S. Federal withholding tax under Section 871(h) or 881(c) of
the Code with respect to payments of “portfolio interest”, a Form W-8BEN, or any
subsequent versions thereof or successors thereto (and, if such Non-U.S. Lender
delivers a Form W-8BEN, a certificate representing that such Non-U.S. Lender is
not a bank for purposes of Section 881(c) of the Code, is not a 10-percent
shareholder (within the meaning of Section 871(h)(3)(B) of the Code) of either
Borrower and is not a controlled foreign corporation related to either Borrower
(within the meaning of Section 864(d)(4) of the Code)), properly completed and
duly executed by such Non-U.S. Lender claiming complete exemption from, or
reduced rate of, U.S. Federal withholding tax on payments by the Borrowers under
this Agreement and the other Loan Documents. Such forms shall be delivered by
each Non-U.S. Lender on or before the date it becomes a party to this Agreement
(or, in the case of a Transferee that is a participation holder, on or before
the date such participation holder becomes a Transferee hereunder) and on or
before the date, if any, such Non-U.S. Lender changes its applicable lending
office by designating a different lending office (a “New Lending Office”). In
addition, each Non-U.S. Lender shall deliver such forms promptly upon the
obsolescence or invalidity of any form previously delivered by such Non-U.S.
Lender. Notwithstanding any other provision of this Section 2.18(e), a Non-U.S.
Lender shall not be required to deliver any form pursuant to this Section
2.18(e) that such Non-U.S. Lender is not legally able to deliver.

 

(f) Neither Borrower shall be required to indemnify any Non-U.S. Lender or to
pay any additional amounts to any Non-U.S. Lender, in respect of United States
Federal withholding tax pursuant to paragraph (a) or (c) above to the extent
that (i) the obligation to withhold amounts with respect to United States
Federal withholding tax existed on the date such Non-U.S. Lender became a party
to this Agreement (or, in the case of a Transferee that is a participation
holder, on the date such participation holder became a Transferee hereunder) or,
with respect to payments to a New Lending Office, the date such Non-U.S. Lender
designated such New Lending Office with respect to a Loan; provided, however,
that this paragraph (f) shall not apply (x) to any Transferee or New Lending
Office that becomes a Transferee or New Lending Office as a result of an
assignment, participation, transfer or designation made at the request of the
Borrowers and (y) to the extent the indemnity payment or additional amounts any
Transferee, or any Lender (or Transferee), acting through a New Lending Office,
would be entitled to receive (without regard to this paragraph (f)) do not
exceed the indemnity payment or additional amounts that the person making the
assignment, participation or transfer to such Transferee, or Lender (or
Transferee) making the designation of such New Lending Office, would have been
entitled to receive in the absence of such assignment, participation, transfer
or designation or (ii) the obligation to pay such additional amounts

 

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would not have arisen but for a failure by such Non-U.S. Lender to comply with
the provisions of paragraph (e) above.

 

(g) Nothing contained in this Section 2.18 shall require any Lender or the
Issuing Bank (or any Transferee) or the Administrative Agent to make available
any of its tax returns (or any other information that it deems to be
confidential or proprietary).

 

SECTION 2.19. Assignment of Commitments Under Certain Circumstances; Duty to
Mitigate. (a) In the event (i) any Lender or the Issuing Bank delivers a
certificate requesting compensation pursuant to Section 2.12, (ii) any Lender or
the Issuing Bank delivers a notice described in Section 2.13, (iii) either
Borrower is required to pay any additional amount to any Lender or the Issuing
Bank or any Governmental Authority on account of any Lender or the Issuing Bank
pursuant to Section 2.18 or (iv) any Lender refuses to consent to any amendment,
waiver or other modification of any Loan Document requested by either Borrower
that requires the consent of a greater percentage of the Lenders than the
Required Lenders and such amendment, waiver or other modification is consented
to by the Required Lenders, the Borrowers may, at their sole expense and effort
(including with respect to the processing and recordation fee referred to in
Section 11.04(b)), upon notice to such Lender or the Issuing Bank and the
Administrative Agent, require such Lender or the Issuing Bank to transfer and
assign, without recourse (in accordance with and subject to the restrictions
contained in Section 11.04), all of its interests, rights and obligations under
this Agreement to an assignee that shall assume such assigned obligations (which
assignee may be another Lender, if a Lender accepts such assignment); provided
that (x) such assignment shall not conflict with any law, rule or regulation or
order of any court or other Governmental Authority having jurisdiction, (y)
except in connection with an assignment to another Lender or an Affiliate
thereof, the Borrowers shall have received the prior written consent of the
Administrative Agent and the Issuing Bank, which consent shall not unreasonably
be withheld, and (z) the Borrowers or such assignee shall have paid to the
affected Lender or the Issuing Bank in immediately available funds an amount
equal to the sum of the principal of and interest accrued to the date of such
payment on the outstanding Loans or L/C Disbursements of such Lender or the
Issuing Bank, respectively, plus all Fees and other amounts accrued for the
account of such Lender or the Issuing Bank hereunder (including any amounts
under Section 2.12 and Section 2.14); provided further that, if prior to any
such transfer and assignment the circumstances or event that resulted in such
Lender’s or the Issuing Bank’s claim for compensation under Section 2.12 or
notice under Section 2.13 or the amounts paid pursuant to Section 2.18, as the
case may be, cease to cause such Lender or the Issuing Bank to suffer increased
costs or reductions in amounts received or receivable or reduction in return on
capital, or cease to have the consequences specified in Section 2.13, or cease
to result in amounts being payable under Section 2.18, as the case may be
(including as a result of any action taken by such Lender or the Issuing Bank
pursuant to paragraph (b) below), or if such Lender or the Issuing Bank shall
waive its right to claim further compensation under Section 2.12 in respect of
such circumstances or event or shall withdraw its notice under Section 2.13 or
shall waive its right to further payments under Section 2.18 in respect of such
circumstances or event or shall consent to the proposed waiver, amendment or
other modification, as the case may be, then such

 

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Lender or the Issuing Bank shall not thereafter be required to make any such
transfer and assignment hereunder.

 

(b) If (i) any Lender or the Issuing Bank shall request compensation under
Section 2.12, (ii) any Lender or the Issuing Bank delivers a notice described in
Section 2.13 or (iii) either Borrower is required to pay any additional amount
to any Lender or the Issuing Bank or any Governmental Authority on account of
any Lender or the Issuing Bank pursuant to Section 2.18, then such Lender or the
Issuing Bank shall use reasonable efforts (which shall not require such Lender
or the Issuing Bank to incur an unreimbursed loss or unreimbursed cost or
expense or otherwise take any action inconsistent with its internal policies or
legal or regulatory restrictions or suffer any disadvantage or burden deemed by
it to be significant) (x) to file any certificate or document reasonably
requested in writing by the Borrowers or (y) to assign its rights and delegate
and transfer its obligations hereunder to another of its offices, branches or
affiliates, if such filing or assignment would reduce its claims for
compensation under Section 2.12 or enable it to withdraw its notice pursuant to
Section 2.13 or would reduce amounts payable pursuant to Section 2.18, as the
case may be, in the future. The Borrowers hereby agree, jointly and severally,
to pay all reasonable costs and expenses incurred by any Lender or the Issuing
Bank in connection with any such filing or assignment, delegation and transfer.

 

SECTION 2.20. Letters of Credit. (a) General. Each of the Borrowers may request
the issuance of a Letter of Credit, in a form reasonably acceptable to the
Administrative Agent and the Issuing Bank, appropriately completed, for the
account of such Borrower, at any time and from time to time while the
Commitments remain in effect and the Trust Termination Date has not occurred.
This Section 2.20 shall not be construed to impose an obligation upon the
Issuing Bank to issue any Letter of Credit that is inconsistent with the terms
and conditions of this Agreement.

 

(b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions. In
order to request the issuance of a Letter of Credit (or to amend, renew or
extend an existing Letter of Credit), the requesting Borrower shall hand deliver
or telecopy to the Issuing Bank and the Administrative Agent (reasonably in
advance of the requested date of issuance, amendment, renewal or extension) a
notice requesting the issuance of a Letter of Credit, or identifying the Letter
of Credit to be amended, renewed or extended, the date of issuance, amendment,
renewal or extension, the date on which such Letter of Credit is to expire
(which shall comply with paragraph (c) below), the amount of such Letter of
Credit, the name and address of the beneficiary thereof and such other
information as shall be necessary to prepare such Letter of Credit. A Letter of
Credit shall be issued, amended, renewed or extended for the account of the
Trustee, only if, and upon issuance, amendment, renewal or extension of each
Letter of Credit for the account of the Trustee, the Trustee shall be deemed to
represent and warrant that, after giving effect to such issuance, amendment,
renewal or extension (A) the sum of (i) the aggregate principal amount of the
Loans outstanding to the Trustee and (ii) the Trustee L/C Exposure shall not
exceed $70,000,000 (as such amount may be increased from time to time pursuant
to Section 2.21) and (B) the Aggregate Credit Exposure shall not exceed the
Total Commitment. A Letter of Credit shall be issued, amended, renewed or

 

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extended for the account of El Paso only if, and upon issuance, amendment,
renewal or extension of each Letter of Credit for the account of El Paso, El
Paso shall be deemed to represent and warrant that, after giving effect to such
issuance, amendment, renewal or extension, the Aggregate Credit Exposure shall
not exceed the Total Commitment.

 

(c) Expiration Date. Each Letter of Credit shall expire at the close of business
on the earlier of the date one year after the date of the issuance of such
Letter of Credit and the date that is five Business Days prior to the Maturity
Date, unless such Letter of Credit expires by its terms on an earlier date. Each
Letter of Credit may, upon the request of the applicable Borrower, include a
provision whereby such Letter of Credit shall be renewed automatically for
additional consecutive periods of 12 months or less (but not beyond the date
that is five Business Days prior to the Maturity Date) unless the Issuing Bank
notifies the beneficiary thereof at least 30 days prior to the then-applicable
expiry date that such Letter of Credit will not be renewed.

 

(d) Participation. By the issuance of a Letter of Credit and without any further
action on the part of the Issuing Bank or the Lenders, the Issuing Bank hereby
grants to each Lender, and each such Lender hereby acquires from the applicable
Issuing Bank, a participation in such Letter of Credit equal to such Lender’s
Applicable Percentage of the aggregate amount available to be drawn under such
Letter of Credit, effective upon the issuance of such Letter of Credit. In
consideration and in furtherance of the foregoing, each Lender hereby absolutely
and unconditionally agrees to pay to the Administrative Agent, for the account
of the Issuing Bank, such Lender’s Applicable Percentage of each L/C
Disbursement made by the Issuing Bank and not reimbursed by the Trustee or El
Paso, as the case may be, forthwith on the date due as provided in Section
2.02(f). Each Lender acknowledges and agrees that its obligation to acquire
participations pursuant to this paragraph in respect of Letters of Credit is
absolute and unconditional and shall not be affected by any circumstance
whatsoever, including the occurrence and continuance of a Default or an Event of
Default, and that each such payment shall be made without any offset, abatement,
withholding or reduction whatsoever.

 

(e) Reimbursement. If the Issuing Bank shall make any L/C Disbursement in
respect of a Letter of Credit, the Trustee or El Paso, as the case may be, shall
pay to the Administrative Agent an amount equal to such L/C disbursement not
later than 4:00 p.m., New York City time on the Business Day on which the
Trustee or El Paso, as the case may be, shall have received notice from the
Issuing Bank that payment of such draft will be made, or, if the Trustee or El
Paso, as the case may be, shall have received such notice later than 10:00 a.m.,
New York City time, on any Business Day, not later than 1:00 p.m., New York City
time, on the immediately following Business Day. Any failure by the Trustee or
El Paso, as the case may be, to make a payment under this Section 2.20(e) shall
not constitute a Default or an Event of Default if the Issuing Bank shall have
been reimbursed for such L/C disbursement out of the proceeds of a deemed
Borrowing pursuant to Section 2.02(f).

 

(f) Obligations Absolute. The obligations of the Trustee or El Paso, as the case
may be, to reimburse L/C Disbursements as provided in paragraph (e) above shall
be

 

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absolute, unconditional and irrevocable, and shall be performed strictly in
accordance with the terms of this Agreement, under any and all circumstances
whatsoever, and irrespective of:

 

(i) any lack of validity or enforceability of any Letter of Credit or any other
Transaction Document, or any term or provision therein;

 

(ii) any amendment or waiver of or any consent to departure from all or any of
the provisions of any Letter of Credit or any other Transaction Document;

 

(iii) the existence of any claim, setoff, defense or other right that the
Trustee, El Paso or any other party guaranteeing, or otherwise obligated with,
the Trustee or El Paso, as the case may be, any Subsidiary or other Affiliate
thereof or any other person may at any time have against the beneficiary under
any Letter of Credit, the Issuing Bank, the Administrative Agent or any Lender
or any other person, whether in connection with this Agreement, any other
Transaction Document or any other related or unrelated agreement or transaction;

 

(iv) any draft or other document presented under a Letter of Credit proving to
be forged, fraudulent, invalid or insufficient in any respect or any statement
therein being untrue or inaccurate in any respect;

 

(v) payment by the Issuing Bank under a Letter of Credit against presentation of
a draft or other document that does not comply with the terms of such Letter of
Credit; and

 

(vi) any other act or omission to act or delay of any kind of the Issuing Bank,
the Lenders, the Administrative Agent or any other person or any other event or
circumstance whatsoever, whether or not similar to any of the foregoing, that
might, but for the provisions of this Section 2.20, constitute a legal or
equitable discharge of the obligations of the Trustee or El Paso, as the case
may be, hereunder.

 

Without limiting the generality of the foregoing, it is expressly understood and
agreed that the absolute and unconditional obligation of the Trustee or El Paso,
as the case may be, hereunder to reimburse L/C Disbursements will not be excused
by the gross negligence or willful misconduct of the Issuing Bank. However, the
foregoing shall not be construed to excuse the Issuing Bank from liability to
the Trustee or El Paso, as the case may be, to the extent of any direct damages
(as opposed to consequential damages, claims in respect of which are hereby
waived by the Trustee or El Paso, as the case may be, to the extent permitted by
applicable law) suffered by the Trustee or El Paso, as the case may be, that are
caused by the Issuing Bank’s gross negligence or willful misconduct in
determining whether drafts and other documents presented under a Letter of
Credit comply with the terms thereof; it is understood that the Issuing Bank may
accept documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary and, in making any payment under any Letter of
Credit (i) the Issuing Bank’s exclusive reliance

 

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on the documents presented to it under such Letter of Credit as to any and all
matters set forth therein, including reliance on the amount of any draft
presented under such Letter of Credit, whether or not the amount due to the
beneficiary thereunder equals the amount of such draft and whether or not any
document presented pursuant to such Letter of Credit proves to be insufficient
in any respect, if such document on its face appears to be in order, and whether
or not any other statement or any other document presented pursuant to such
Letter of Credit proves to be forged or invalid or any statement therein proves
to be inaccurate or untrue in any respect whatsoever and (ii) any noncompliance
in any immaterial respect of the documents presented under such Letter of Credit
with the terms thereof shall, in each case, be deemed not to constitute willful
misconduct or gross negligence of the Issuing Bank.

 

(g) Disbursement Procedures. The Issuing Bank shall, promptly following its
receipt thereof, examine all documents purporting to represent a demand for
payment under a Letter of Credit. The Issuing Bank shall as promptly as possible
give telephonic notification, confirmed by telecopy, to the Administrative Agent
and the Trustee or El Paso, as the case may be, of such demand for payment and
whether the Issuing Bank has made or will make an L/C Disbursement thereunder;
provided that any failure to give or delay in giving such notice shall not
relieve the Trustee or El Paso, as the case may be, of its obligation to
reimburse the Issuing Bank and the Lenders with respect to any such L/C
Disbursement. The Administrative Agent shall promptly give each Lender notice
thereof.

 

(h) Interim Interest. If the Issuing Bank shall make any L/C Disbursement in
respect of a Letter of Credit, then, unless the Trustee or El Paso, as the case
may be, shall reimburse such L/C Disbursement in full on such date, the unpaid
amount thereof shall bear interest for the account of the Issuing Bank, for each
day from and including the date of such L/C Disbursement, to but excluding the
earlier of the date of payment by the Trustee or El Paso, as the case may be, or
the date on which the Issuing Bank is reimbursed by the Lenders pursuant to
Section 2.02(f), at the rate per annum that would apply to such amount if such
amount were an ABR Loan.

 

(i) Resignation or Removal of the Issuing Bank. The Issuing Bank may resign at
any time by giving 180 days’ prior written notice to the Administrative Agent,
the Lenders and the Borrowers, and may be removed at any time by the Borrowers
by notice to the Issuing Bank, the Administrative Agent and the Lenders. Subject
to the next succeeding paragraph, upon the acceptance of any appointment as the
Issuing Bank hereunder by a Lender that shall agree to serve as successor
Issuing Bank, such successor shall succeed to and become vested with all the
interests, rights and obligations of the retiring Issuing Bank and the retiring
Issuing Bank shall be discharged from its obligations to issue additional
Letters of Credit hereunder. At the time such removal or resignation shall
become effective, the Borrowers shall pay all accrued and unpaid fees pursuant
to Section 2.05(c)(ii). The acceptance of any appointment as the Issuing Bank
hereunder by a successor Lender shall be evidenced by an agreement entered into
by such successor, in a form satisfactory to the Borrowers and the
Administrative Agent, and, from and after the effective date of such agreement,
(i) such successor Lender shall have all the rights and obligations of the
previous Issuing Bank under this Agreement and the

 

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other Loan Documents and (ii) references herein and in the other Loan Documents
to the term “Issuing Bank” shall be deemed to refer to such successor or to any
previous Issuing Bank, or to such successor and all previous Issuing Banks, as
the context shall require. After the resignation or removal of the Issuing Bank
hereunder, the retiring Issuing Bank shall remain a party hereto and shall
continue to have all the rights and obligations of an Issuing Bank under this
Agreement and the other Loan Documents with respect to Letters of Credit issued
by it prior to such resignation or removal, but shall not be required to issue
additional Letters of Credit.

 

(j) Cash Collateralization. If any Event of Default shall occur and be
continuing or the Trust Termination Date shall occur, the Trustee or El Paso, as
the case may be, shall, on the Business Day it receives notice from the
Administrative Agent or the Required Lenders thereof and of the amount to be
deposited, deposit in an account with the Collateral Agent, for the benefit of
the Lenders, an amount in cash equal to the Trustee L/C Exposure or the El Paso
L/C Exposure, as the case may be, as of such date. Such deposit shall be held by
the Collateral Agent as collateral for the payment and performance of the
Obligations. The Collateral Agent shall have exclusive dominion and control,
including the exclusive right of withdrawal, over such account. Other than any
interest earned on the investment of such deposits in Permitted Investments,
which investments shall be made at the option and sole discretion of the
Collateral Agent, such deposits shall not bear interest. Interest or profits, if
any, on such investments shall accumulate in such account. Moneys in such
account shall (i) automatically be transferred to the Administrative Agent and
be applied by the Administrative Agent to reimburse the Issuing Bank for L/C
Disbursements for which it has not been reimbursed, (ii) be held for the
satisfaction of the reimbursement obligations of the Trustee or El Paso, as the
case may be, for the Trustee L/C Exposure or the El Paso L/C Exposure, as the
case may be, at such time and (iii) if the maturity of the Loans has been
accelerated, be transferred to the Administrative Agent and be applied to
satisfy the Obligations (of both the Trustee and El Paso). If the Trustee or El
Paso, as the case may be, is required to provide an amount of cash collateral
hereunder as a result of the occurrence of an Event of Default, (x) such amount
(to the extent not applied as aforesaid) shall be returned to the Trustee or El
Paso, as the case may be, within three Business Days after all Events of Default
have been cured or waived and (y) at any time that the amount of such cash
collateral exceeds the Trustee L/C Exposure or El Paso L/C Exposure, as the case
may be, the amount of such excess shall be promptly returned to the Trustee or
El Paso, as the case may be.

 

SECTION 2.21. Increase of Commitments. (a) El Paso may, by written notice to the
Administrative Agent, request that the Total Commitment be increased by an
aggregate amount not to exceed the Incremental Facility Amount at such time.
Upon the receipt of such request by the Administrative Agent, the Administrative
Agent shall deliver a copy thereof to each Lender. Such notice shall set forth
the amount of the requested increase (which shall be in minimum increments of
$1,000,000 and a minimum amount of $10,000,000 or equal to the remaining
Incremental Facility Amount), whether all or any portion of the requested
increase is to be made available to the Trustee and the date on which such
increase is requested to become effective (which shall be not less than 10 days
nor more than 60 days after the date of such notice and which, in any event,
must

 

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be on or prior to the Maturity Date), and shall offer each Lender the
opportunity to increase its Commitment by its Applicable Percentage of the
proposed increased amount. Each Lender shall, by notice to El Paso and the
Administrative Agent given not more than 10 days after the date of the
Administrative Agent’s notice, either agree to increase its Commitment by all or
a portion of the offered amount (each Lender so agreeing being an “Increasing
Lender”) or decline to increase its Commitment (and any Lender that does not
deliver such a notice within such period of 10 days shall be deemed to have
declined to increase its Commitment) (each Lender so declining or being deemed
to have declined being a “Non-Increasing Lender”). In the event that, on the
10th day after the Administrative Agent shall have delivered a notice pursuant
to the second sentence of this paragraph, the Increasing Lenders shall have
agreed pursuant to the preceding sentence to increase their Commitments by an
aggregate amount less than the increase requested by El Paso, El Paso may
arrange for one or more banks or other entities (any such bank or other entity
being called an “Augmenting Lender”), which may include any Lender, to extend
Commitments or increase their existing Commitments in an aggregate amount equal
to the unsubscribed amount; provided, however, that each Augmenting Lender shall
be subject to the prior written approval of the Administrative Agent and the
Issuing Bank (which approvals shall not be unreasonably withheld or delayed),
and the Borrowers and each Augmenting Lender shall execute all such
documentation as the Administrative Agent shall reasonably specify to evidence
its Commitment and/or its status as a Lender hereunder. Any such increase may be
made in an amount that is less than the increase requested by El Paso if El Paso
is unable to arrange for, or chooses not to arrange for, Augmenting Lenders.

 

(b) Each of the parties hereto hereby agrees that the Administrative Agent may
take any and all actions as may be reasonably necessary to ensure that, after
giving effect to any increase pursuant to this Section 2.21, the outstanding
Loans (if any) are held by the Lenders in accordance with their new Applicable
Percentages. This may be accomplished at the discretion of the Administrative
Agent, following consultation with El Paso, (i) by requiring the outstanding
Loans to be prepaid with the proceeds of a new Borrowing, (ii) by permitting the
Borrowings outstanding at the time of any increase in the Total Commitment
pursuant to this Section 2.21 to remain outstanding until the last day of the
respective Interest Periods therefor, even though the Lenders would hold the
Loans comprising such borrowings other than in accordance with their new
Applicable Percentage or (iii) by any combination of the foregoing. Any
prepayment described in this paragraph (b) shall be subject to Section 2.14, but
shall otherwise be without premium or penalty.

 

(c) Notwithstanding the foregoing, no increase in the Total Commitment shall
become effective under this Section 2.21 unless, (i) on the date of such
increase, the conditions set forth in paragraphs (b) and (c) of Section 4.01
shall be satisfied and the Administrative Agent shall have received a
certificate to that effect dated such date and executed by a Financial Officer
of El Paso, (ii) unless the Collateral Release Date shall have occurred, the
Collateral Agent shall have received new First Mortgage Bonds - Collateral
Series H (or the First Mortgage Bonds – Collateral Series H shall have been
amended) to provide that the aggregate principal amount of such First Mortgage
Bonds – Collateral Series H shall be at least equal to the Total Commitment, as
increased pursuant

 

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to this Section 2.21 and (iii) if requested, the Administrative Agent shall have
received legal opinions and board resolutions consistent with those delivered on
the Closing Date under paragraphs (a), (b) and (c) of Section 4.02

 

ARTICLE III

 

Representations and Warranties

 

Each of El Paso and, subject to Section 11.19, the Trustee represents and
warrants to the Administrative Agent, the Collateral Agent, the Issuing Bank and
each of the Lenders that as of the Closing Date and thereafter on each date as
required by Section 4.0l(b):

 

SECTION 3.01. Organization; Powers. (a) El Paso and each of the Subsidiaries (i)
is duly organized, validly existing and in good standing under the laws of the
state of its organization, (ii) has all requisite power and authority to own its
property and assets and to carry on its business as now conducted and as
proposed to be conducted, (iii) is qualified to do business in, and is in good
standing in, every jurisdiction where such qualification is required, except
where the failure so to qualify could not reasonably be expected to result in a
Material Adverse Effect, and (iv) has the corporate power and authority to
execute, deliver and perform its obligations under each of the Transaction
Documents to which it is or will be a party and each other agreement or
instrument contemplated hereby to which it is or will be a party and to borrow
hereunder.

 

(b) JPMorgan is a banking corporation duly incorporated, validly existing and in
good standing under the laws of the State of New York, and in its capacity as
Trustee, (i) has all requisite power and authority to own its property and
assets and to carry on its business as now conducted and as proposed to be
conducted and (ii) has all requisite power and authority to execute, deliver and
perform its obligations under each of the Loan Documents and each other
agreement or instrument contemplated hereby to which it is or will be a party
and to borrow hereunder.

 

SECTION 3.02. Authorization. (a) The execution, delivery and performance by it
and each of its Subsidiaries (as applicable) of each of the Transaction
Documents, the Trust Agreement, the Purchase Contract and the Assigned
Agreements to which it is or will be a party and (b) the Borrowings by it
hereunder, the issuance of Letters of Credit, the use by it of the proceeds of
the Loans and the Letters of Credit and the creation of the security interests
contemplated hereby and by the other Transaction Documents (collectively, the
“Transactions”), (x) have been duly authorized by all requisite corporate, trust
and, if required, stockholder action and (y) will not (i) violate (A) any
provision of law, statute, rule or regulation, or of the articles of
incorporation or other constitutive documents or by-laws of El Paso or any of
its Subsidiaries or of the Trust Agreement, as applicable, (B) any order of any
Governmental Authority or (C) any provision of any indenture, agreement or other
instrument to which it is a party or by which it or any of its property is or
may be bound, (ii) be in conflict with, result in a

 

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breach of or constitute (alone or with notice or lapse of time or both) a
default under, or give rise to any right to accelerate or to require the
prepayment, repurchase or redemption of any obligation under any such indenture,
agreement or other instrument or (iii) result in the creation or imposition of
any Lien upon or with respect to any property or assets now owned or hereafter
acquired by it (other than any Lien created hereunder, under any Loan Document
or under the Indenture).

 

SECTION 3.03. Enforceability. Each of the Transaction Documents has been duly
executed and delivered by it and constitutes its legal, valid and binding
obligation enforceable against it in accordance with such document’s terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors’ rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).

 

SECTION 3.04. Governmental Approvals. Except as set forth on Schedule 3.04, (i)
no action, consent or approval of, registration or filing with or any other
action by, any Governmental Authority is or will be required in connection with
the Transactions, except for such as have been made or obtained, are in full
force and effect and are not subject to any appeal or stay and (ii) no action,
consent or approval of, registration or filing with or any other action by any
Governmental Authority relating to the Securities Act, the Securities Exchange
Act, the Trust Indenture Act, the Federal Power Act, the Atomic Energy Act, the
Nuclear Waste Act, the Public Utility Holding Company Act of 1935, the New
Mexico Public Utility Act, the Texas Public Utility Regulatory Act, the Arizona
Public Utility Act, energy or nuclear matters, public utilities, the
environment, health and safety is or will be required in connection with the
participation by the Administrative Agent, the Collateral Agent or any Lender in
any of the transactions contemplated by this Agreement or the other Transaction
Documents, except as have been made or obtained, are in full force and effect
and shall not be subject to any appeal or stay.

 

SECTION 3.05. Financial Statements. El Paso has heretofore furnished to the
Lenders its consolidated balance sheets and related statements of operations,
shareholders’ equity and cash flows (a) as of and for the fiscal year ended
December 31, 2003, audited by and accompanied by the opinion of KPMG LLP,
independent public accountants, and (b) as of and for the fiscal quarter and the
portion of the fiscal year ended September 30, 2004, certified by a Financial
Officer. Such financial statements present fairly the financial condition and
results of operations and cash flows of El Paso and its consolidated
Subsidiaries as of such dates and for such periods. Such balance sheets and the
notes thereto disclose all material liabilities, direct or contingent, of El
Paso and its consolidated Subsidiaries as of the dates thereof. Such financial
statements were prepared in accordance with GAAP applied on a consistent basis
(except as approved by such accountants or officer, as the case may be, and
disclosed therein).

 

SECTION 3.06. No Material Adverse Change. There has been no material adverse
change in the business, assets, operations, prospects, condition, financial

 

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or otherwise, or material agreements of El Paso and the Subsidiaries, taken as a
whole, since December 31, 2003.

 

SECTION 3.07. Title to Properties; Possession Under Leases. (a) Each of El Paso
and the Subsidiaries has good and marketable title to, or valid leasehold
interests in, all its material properties and assets, except for minor defects
in title that do not interfere with its ability to conduct its business as
currently conducted or to utilize such properties and assets for their intended
purposes. All such material properties and assets are free and clear of Liens,
other than Liens expressly permitted by Section 6.02.

 

(b) Each of El Paso and the Subsidiaries has complied with all obligations under
all material leases to which it is a party and all such leases are in full force
and effect. Each of El Paso and the Subsidiaries enjoys peaceful and undisturbed
possession under all such material leases.

 

SECTION 3.08. Subsidiaries. As of the Closing Date, El Paso has no Subsidiaries
other than MiraSol Energy Services, Inc., an Inactive Subsidiary.

 

SECTION 3.09. Litigation; Compliance with Laws. (a) Except as set forth on
Schedule 3.09, there are no actions, suits or proceedings at law or in equity or
by or before any Governmental Authority now pending or, to its knowledge,
threatened against or affecting it or, in the case of El Paso, the Subsidiaries
or any business, property or rights of any such person (i) that involve any
Transaction Document or the Transactions or (ii) that, if adversely determined,
could reasonably be expected, individually or in the aggregate, to result in a
Material Adverse Effect.

 

(b) Except as set forth on Schedule 3.09, neither it nor, in the case of El
Paso, any of the Subsidiaries or any of their respective material properties or
assets is in violation of, nor will the continued operation of their material
properties and assets as currently conducted violate, any law, rule or
regulation, or is in default with respect to any judgment, writ, injunction,
decree or order of any Governmental Authority, where such violation or default
could reasonably be expected to result in a Material Adverse Effect.

 

SECTION 3.10. Agreements. (a) Neither it nor, in the case of El Paso, any of the
Subsidiaries is a party to any agreement or instrument or subject to any
corporate restriction that has resulted or could reasonably be expected to
result in a Material Adverse Effect.

 

(b) Neither it nor, in the case of El Paso, any of the Subsidiaries is in
default in any manner under any provision of any indenture or other agreement or
instrument evidencing Indebtedness, or any other material agreement or
instrument to which it is a party or by which it or any of its properties or
assets are or may be bound, where such default could reasonably be expected to
result in a Material Adverse Effect.

 

SECTION 3.11. Federal Reserve Regulations. (a) Neither it nor, in the case of El
Paso, any of the Subsidiaries is engaged principally, or as one of its important

 

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activities, in the business of extending credit for the purpose of buying or
carrying Margin Stock.

 

(b) No part of the proceeds of any Loan made to it or any Letter of Credit
issued for its benefit will be used, whether directly or indirectly, and whether
immediately, incidentally or ultimately, for any purpose that entails a
violation of, or that is inconsistent with, the provisions of the Regulations of
the Board, including Regulation T, U or X.

 

SECTION 3.12. Investment Company Act; Public Utility Holding Company Act.
Neither it nor, in the case of El Paso, any of the Subsidiaries is (a) an
“investment company” as defined in, or subject to regulation under, the
Investment Company Act of 1940 or (b) a “holding company” as defined in, or
subject to regulation under, the Public Utility Holding Company Act of 1935.

 

SECTION 3.13. Use of Proceeds. It will use the proceeds of the Loans and will
request the issuance of Letters of Credit only for the purposes specified in the
preamble to this Agreement.

 

SECTION 3.14. Tax Returns. Each of El Paso and the Subsidiaries has filed or
caused to be filed all Federal, state, local and foreign tax returns or
materials required to have been filed by it and has paid or caused to be paid
all taxes due and payable by it and all assessments received by it, except taxes
that are being contested in good faith by appropriate proceedings and for which
El Paso or such Subsidiary, as applicable, shall have set aside on its books
adequate reserves.

 

SECTION 3.15. No Material Misstatements. The Confidential Information
Memorandum, taken as a whole, does not contain any material misstatement of fact
or omit to state any material fact necessary to make the statements therein, in
light of the circumstances under which they are made, not misleading; provided
that to the extent any part of such information was based upon or constitutes a
forecast or projection, El Paso represents only that it acted in good faith and
utilized reasonable assumptions and due care in the preparation of such
information.

 

SECTION 3.16. Employee Benefit Plans. El Paso and its ERISA Affiliates are in
compliance in all material respects with the applicable provisions of ERISA and
the Code and the regulations and published interpretations thereunder. No ERISA
Event has occurred or is reasonably expected to occur that, when taken together
with all other such ERISA Events, could reasonably be expected to result in a
Material Adverse Effect. Schedule B to the most recent annual report filed with
the United States Internal Revenue Service with respect to each Plan is complete
and accurate. Since the date of the Schedule B in effect on the Closing Date,
there has been no material adverse change in the funded status of any Plan. None
of El Paso or any of its ERISA Affiliates has incurred any liability as a result
of a Plan termination which remains outstanding which would subject El Paso or
any of its ERISA Affiliates to a liability in excess of $5,000,000.

 

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SECTION 3.17. Environmental Matters. Except as set forth in Schedule 3.17:

 

(a) The properties owned or operated by El Paso and the Subsidiaries (the
“Properties”) do not contain any Hazardous Materials in amounts or
concentrations which (i) constitute or constituted a violation of, or (ii) could
reasonably be expected to give rise to liability under, Environmental Laws,
which violations and liabilities, in the aggregate, could reasonably be expected
to result in a Material Adverse Effect;

 

(b) All Environmental Permits have been obtained and are in effect with respect
to the Properties and operations of El Paso and the Subsidiaries, and the
Properties and all operations of El Paso and the Subsidiaries are in compliance
with all Environmental Laws and all necessary Environmental Permits, except to
the extent that such non-compliance or failure to obtain any necessary permits,
in the aggregate, could not reasonably be expected to result in a Material
Adverse Effect;

 

(c) There have been no Releases or threatened Releases at, from, under or
proximate to the Properties or otherwise in connection with the operations of El
Paso or the Subsidiaries, which Releases or threatened Releases, in the
aggregate, could reasonably be expected to result in a Material Adverse Effect;

 

(d) None of El Paso and the Subsidiaries has received any notice of an
Environmental Claim in connection with the Properties or the operations of El
Paso or the Subsidiaries or with regard to any person whose liabilities for
environmental matters El Paso or any Subsidiary has retained or assumed, in
whole or in part, contractually, by operation of law or otherwise, which, in the
aggregate, could reasonably be expected to result in a Material Adverse Effect,
nor do El Paso or the Subsidiaries have reason to believe that any such notice
will be received or is being threatened; and

 

(e) Hazardous Materials have not been transported from the Properties, nor have
Hazardous Materials been generated, treated, stored or disposed of at, on or
under any of the Properties in a manner that could reasonably be expected to
give rise to liability under any Environmental Law which could reasonably be
expected to result in a Material Adverse Effect, nor have El Paso or the
Subsidiaries retained or assumed any liability, contractually, by operation of
law or otherwise, with respect to the generation, treatment, storage or disposal
of Hazardous Materials, which transportation, generation, treatment, storage or
disposal, or retained or assumed liabilities, in the aggregate, could result in
a Material Adverse Effect.

 

SECTION 3.18. Insurance. Schedule 3.18 sets forth a true, complete and correct
description of all insurance maintained by El Paso as of the Closing Date. Such
insurance is in full force and effect and all premiums have been duly paid. El
Paso and the Subsidiaries have insurance in such amounts and covering such risks
and liabilities as are in accordance with normal industry practice.

 

SECTION 3.19. Security Documents. (a) In the case of El Paso, the Security
Agreement is effective to create in favor of the Collateral Agent, for the
ratable

 

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benefit of the Secured Parties, a legal, valid and enforceable security interest
in the Collateral (as defined in the Security Agreement), and, when combined
with the financing statements (or utility filings, as appropriate) already
filed, the Security Agreement constitutes a fully perfected Lien on, and
security interest in, all right, title and interest of the Trustee in such
Collateral, in each case prior and superior in right to any other person, other
than with respect to Liens expressly permitted by Section 6.02.

 

(b) In the case of the Trustee, the Collateral is free and clear of all
Trustee’s Liens and, other than pursuant to the Security Agreement, the Trustee
has not granted or created a Lien on any of the Collateral.

 

(c) In the case of El Paso, the Indenture creates in favor of the Indenture
Trustee for the ratable benefit of the holders of the First Mortgage Bonds a
legal, valid and enforceable security interest in the Mortgaged Property and
constitutes a fully perfected Lien on and security interest in all such
Mortgaged Property.

 

SECTION 3.20. Labor Matters. As of the Closing Date, there are no strikes,
lockouts or slowdowns against El Paso or the Subsidiaries pending or, to the
knowledge of El Paso, threatened. The hours worked by and payments made to
employees of El Paso and the Subsidiaries have not been in violation of the Fair
Labor Standards Act or any other applicable Federal, state, local or foreign law
dealing with such matters, except where any such violation could not reasonably
be expected to result in a Material Adverse Effect. All payments due from El
Paso or any Subsidiary, or for which any claim may be made against El Paso or
any Subsidiary, on account of wages and employee health and welfare insurance
and other benefits, have been paid in the ordinary course of business or accrued
as a liability on the books of El Paso or such Subsidiary. The consummation of
the Transactions will not give rise to any right of termination or right of
renegotiation on the part of any union under any collective bargaining agreement
to which El Paso is bound.

 

SECTION 3.21. Solvency. As of the Closing Date, (a) the fair value of the assets
of El Paso, at a fair valuation, will exceed its debts and liabilities,
subordinated, contingent or otherwise; (b) the present fair saleable value of
the property of El Paso will be greater than the amount that will be required to
pay the probable liability of its debts and other liabilities, subordinated,
contingent or otherwise, as such debts and other liabilities become absolute and
matured; (c) El Paso will be able to pay its debts and liabilities,
subordinated, contingent or otherwise, as such debts and liabilities become
absolute and matured; and (d) El Paso will not have unreasonably small capital
with which to conduct the business in which it is engaged as such business is
now conducted and is proposed to be conducted following the Closing Date.

 

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ARTICLE IV

 

Conditions of Lending

 

The obligations of the Lenders to make Loans and of the Issuing Bank to issue
Letters of Credit hereunder are subject to the satisfaction of the following
conditions:

 

SECTION 4.01. All Credit Events. On the date of each Borrowing and on the date
of each issuance, amendment, renewal or extension of a Letter of Credit (each
such event being called a “Credit Event”):

 

(a) The Administrative Agent shall have received a notice of such Borrowing as
required by Section 2.03 (or such notice shall have been deemed given in
accordance with Section 2.03) or, in the case of the issuance, amendment,
renewal or extension of a Letter of Credit, the Issuing Bank and the
Administrative Agent shall have received a notice requesting the issuance,
amendment, renewal or extension of such Letter of Credit as required by Section
2.20(b).

 

(b) Except in the case of a Borrowing that does not increase the aggregate
principal amount of Loans outstanding of any Lender, the representations and
warranties set forth herein and in the other Loan Documents shall be true and
correct in all material respects on and as of the date of such Credit Event with
the same effect as though made on and as of such date, except to the extent such
representations and warranties expressly relate to an earlier date.

 

(c) Each Borrower shall be in compliance with all the terms and provisions set
forth herein and in each other Loan Document on its part to be observed or
performed, and at the time of and immediately after such Credit Event, no Event
of Default or Default shall have occurred and be continuing.

 

Each Credit Event shall be deemed to constitute a representation and warranty by
each Borrower on the date of such Credit Event as to the matters specified in
paragraphs (b) (except as aforesaid) and (c) of this Section 4.01.

 

SECTION 4.02. Closing Date. On the Closing Date:

 

(a) The Administrative Agent shall have received, on behalf of itself, the
Lenders, the Documentation Agent, the Syndication Agent and the Issuing Bank, a
favorable written opinion of (i) Davis Polk & Wardwell, counsel for El Paso,
substantially to the effect set forth in Exhibit G-l, (ii) Ainsa Hutson, LLP
counsel for the Trustee, substantially to the effect set forth in Exhibit G-2,
(iii) Steptoe & Johnson LLP, Federal regulatory counsel for the Borrowers,
substantially to the effect set forth in Exhibit G-3, (iv) each local regulatory
counsel listed on Schedule 4.02(a), substantially to the effect set forth in
Exhibit G-4, and (v) the General Counsel of El Paso, substantially to the effect
set forth in Exhibit G-5, in each case (A) dated the Closing Date, (B) addressed
to the Issuing Bank, the Administrative Agent, the Collateral Agent and the
Lenders and (C) covering such other matters relating to the Transaction
Documents and

 

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the Transactions as the Administrative Agent shall reasonably request, and the
Borrowers hereby request such counsel to deliver such opinions.

 

(b) The Administrative Agent shall have received (i) a certificate of the
Secretary or Assistant Secretary of El Paso dated the Closing Date and
certifying (A) that attached thereto is a true and complete copy of the
certificate or articles of incorporation of El Paso filed with the Secretary of
State of Texas on or prior to the Closing Date and as in effect on the Closing
Date, (B) that attached thereto is a true and complete copy of the by-laws of El
Paso as in effect on the Closing Date and at all times since a date prior to the
date of the resolutions described in clause (C) below, (C) that attached thereto
is a true and complete copy of resolutions duly adopted by the Board of
Directors of El Paso authorizing the execution, delivery and performance of the
Transaction Documents to which El Paso is or is to be a party and the borrowings
hereunder, and that such resolutions have not been modified, rescinded or
amended and are in full force and effect, (D) that the Trust Agreement has not
been modified, rescinded or amended and is in full force and effect, (E) as to
the incumbency and specimen signature of each officer executing this Agreement
or any other document delivered in connection herewith on behalf of El Paso;
(ii) a certificate of another officer of El Paso as to the incumbency and
specimen signature of the Secretary or Assistant Secretary executing the
certificate pursuant to clause (i) above; (iii) a certificate of the Secretary
or Assistant Secretary of JPMorgan dated the Closing Date and certifying as to
the incumbency and specimen signature of each officer executing this Agreement
or any other document delivered in connection herewith on behalf of the Trustee;
(iv) a certificate of another officer of the Trustee as to the incumbency and
specimen signature of the Secretary or Assistant Secretary executing the
certificate pursuant to clause (iii) above; and (v) such other documents as the
Lenders, the Issuing Bank, the Administrative Agent or the Collateral Agent may
reasonably request.

 

(c) The Administrative Agent shall have received a certificate, dated the
Closing Date and signed by a Financial Officer of El Paso, confirming compliance
with the conditions precedent set forth in paragraphs (b) and (c) of Section
4.01.

 

(d) (i) The loans and other amounts outstanding or payable under the Existing
Credit Agreement shall have been paid in full and (ii) the Administrative Agent
shall have received all Fees and other amounts due and payable on or prior to
the Closing Date, including, to the extent invoiced, reimbursement or payment of
all out-of-pocket expenses required to be reimbursed or paid by the Borrowers
hereunder or under any other Loan Document.

 

(e) The Security Agreement shall have been duly executed by the Trustee and
shall have been delivered to the Collateral Agent and shall be in full force and
effect on such date and each document (including each Uniform Commercial Code
financing statement) required by law or reasonably requested by the
Administrative Agent to be filed, registered or recorded in order to create or
continue in favor of the Collateral Agent for the benefit of the Secured Parties
a valid, legal and perfected first-priority security interest in and lien on the
Collateral (subject to any Lien expressly permitted by

 

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Section 6.02) described in such agreement shall have been delivered to the
Collateral Agent.

 

(f) The Collateral Agent shall have received the results of a search of the
Uniform Commercial Code filings (or equivalent filings) made with respect to the
Borrowers in such states or other jurisdictions as it shall reasonably request,
together with copies of the financing statements (or similar documents)
disclosed by such search, and accompanied by evidence satisfactory to the
Collateral Agent that the Liens indicated in any such financing statement (or
similar document) would be permitted under Section 6.02 or have been released.

 

(g) The Collateral Agent shall have received a Perfection Certificate (as
defined in the Security Agreement) with respect to the Trustee dated the Closing
Date and duly executed by a Responsible Officer of the Trustee.

 

(h) (i) The First Mortgage Bonds - Collateral Series H shall have been amended
pursuant to the Fifth Supplemental Indenture, (ii) the Collateral Agent shall
have received a replacement First Mortgage Bond - Collateral Series H, duly
executed and issued by El Paso and authenticated by the Indenture Trustee, as
contemplated by the Fifth Supplemental Indenture and (iii) the Collateral Agent
shall have received such certificates, documents and opinions of counsel as the
Collateral Agent or the Lenders may reasonably request.

 

(i) All requisite Governmental Authorities shall have approved or consented to
the Transactions to the extent required (and such approvals shall be in full
force and effect) and there shall be no action, actual or threatened, before any
Governmental Authority or arbitrator that (a) has a reasonable likelihood of
restraining, preventing or imposing burdensome conditions on the Transactions or
(b) could reasonably be expected to result in a Material Adverse Effect.

 

(j) (i) El Paso shall have outstanding no Indebtedness for borrowed money or
preferred stock other than Indebtedness permitted pursuant to Section 6.01; and
(ii) the Trustee shall have outstanding no Indebtedness or other obligations
(contingent or otherwise) other than (A) any Loans made or Letters of Credit
issued hereunder and (B) obligations under the Purchase Contract or the Assigned
Agreements.

 

(k) The Lenders shall have received, to the extent requested, all documentation
and other information required by regulatory authorities under applicable “know
your customer” and anti-money laundering rules and regulations, including the
USA Patriot Act.

 

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ARTICLE V

 

Affirmative Covenants

 

Each of El Paso and, subject to Section 11.19, the Trustee covenants and agrees
with each Lender that so long as this Agreement shall remain in effect and until
the Commitments have been terminated and the principal of and interest on each
Loan, all Fees and all other expenses or amounts payable under any Loan Document
shall have been paid in full and all Letters of Credit have been canceled or
have expired and all amounts drawn thereunder have been reimbursed in full (or
sufficient cash collateral has been deposited with the Collateral Agent in an
amount equal to the then outstanding L/C Exposure), unless the Required Lenders
shall otherwise consent in writing, each of the Borrowers will, and El Paso will
cause each of the Subsidiaries to:

 

SECTION 5.01. Existence; Businesses and Properties. (a) Do or cause to be done
all things necessary to preserve, renew and keep in full force and effect its
legal existence.

 

(b) Do or cause to be done all things necessary to obtain, preserve, renew,
extend and keep in full force and effect the rights, licenses, permits,
franchises, authorizations, patents, copyrights, trademarks and trade names
material to the conduct of its business; maintain and operate such business in
substantially the manner in which it is presently conducted and operated; comply
in all material respects with all applicable laws, rules, regulations and
decrees and orders of any Governmental Authority, whether now in effect or
hereafter enacted; and at all times maintain and preserve all property material
to the conduct of such business and keep such property in good repair, working
order and condition and from time to time make, or cause to be made, all needful
and proper repairs, renewals, additions, improvements and replacements thereto
necessary in order that the business carried on in connection therewith may be
properly conducted at all times; except in each case where the failure to do so
could not reasonably be expected to result in a Material Adverse Effect.

 

SECTION 5.02. Insurance. (a) With respect to El Paso, keep its insurable
properties and the insurable properties of the Trustee adequately insured at all
times by financially sound and reputable insurers; maintain such other
insurance, to such extent and against such risks, including nuclear hazard, fire
and other risks insured against by extended coverage, as is customary with
companies in the same or similar businesses operating in the same or similar
locations, including public liability insurance (including against nuclear
energy hazards to the full limit of liability under Federal law) against claims
for personal injury or death or property damage occurring upon, in, about or in
connection with the use of any properties owned, occupied or controlled by it;
and maintain such other insurance as may be required by law.

 

(b) In the event that El Paso at any time or times shall fail to obtain or
maintain any of the policies of insurance required hereby or to pay any premium
in whole or part relating thereto, the Collateral Agent may, after giving
written notice thereof to El Paso, without waiving or releasing any obligation
or liability of El Paso hereunder or

 

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any Event of Default, in its sole discretion, obtain and maintain such policies
of insurance and pay such premiums and take any other actions with respect
thereto as the Collateral Agent deems advisable. All sums disbursed by the
Collateral Agent in connection with this Section 5.02(b), including reasonable
attorneys’ fees, costs, expenses and other charges relating thereto, shall be
payable, upon demand, by El Paso to the Collateral Agent and shall be additional
El Paso Obligations.

 

SECTION 5.03. Obligations and Taxes. Pay its Indebtedness and other obligations
promptly and in accordance with their terms and pay and discharge promptly when
due all taxes, assessments and governmental charges or levies imposed upon it or
upon its income or profits or in respect of its property, before the same shall
become delinquent or in default, as well as all lawful claims for labor,
materials and supplies or otherwise that, if unpaid, might give rise to a Lien
upon such properties or any part thereof; provided, however, that such payment
and discharge shall not be required with respect to any such tax, assessment,
charge, levy or claim so long as the validity or amount thereof shall be
contested in good faith by appropriate proceedings and the applicable Borrower
shall have set aside on its books adequate reserves with respect thereto in
accordance with GAAP and such contest operates to suspend collection of the
contested obligation, tax, assessment or charge and enforcement of a Lien.

 

SECTION 5.04. Financial Statements, Reports, etc. Furnish to the Administrative
Agent and each Lender:

 

(a) with respect to El Paso, within 120 days after the end of each fiscal year,
its consolidated balance sheet and related statements of operations,
stockholders’ equity and cash flows showing its financial condition as of the
close of such fiscal year and the results of its operations during such year,
all audited by KPMG LLP or other independent public accountants of recognized
national standing and accompanied by an opinion of such accountants (which shall
not be qualified in any material respect) to the effect that such consolidated
financial statements fairly present its financial condition and results of
operations in accordance with GAAP consistently applied;

 

(b) with respect to El Paso, within 60 days after the end of each of the first
three fiscal quarters of each fiscal year, its consolidated balance sheet and
related statements of operations, stockholders’ equity, and cash flows showing
its financial condition as of the close of such fiscal quarter and the results
of its operations during such fiscal quarter and the then elapsed portion of the
fiscal year, all certified by one of its Financial Officers, as fairly
presenting its financial condition and results of operations on a consolidated
basis in accordance with GAAP consistently applied, subject to normal year-end
audit adjustments;

 

(c) with respect to El Paso, concurrently with any delivery of financial
statements under sub-paragraph (a) or (b) above, a certificate of a Financial
Officer certifying that no Event of Default or Default has occurred or, if such
an Event of Default or Default has occurred, specifying the nature and extent
thereof and any corrective action taken or proposed to be taken with respect
thereto;

 

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(d) with respect to El Paso, promptly after the same become publicly available,
copies of all periodic and other reports, definitive proxy statements filed by
it or any Subsidiary with the Securities and Exchange Commission, or any
Governmental Authority succeeding to any or all of the functions of said
Commission, or with any national securities exchange, or distributed to its
shareholders;

 

(e) with respect to the Trustee, concurrently with the delivery thereof to El
Paso, copies of its periodic trust reports;

 

(f) with respect to El Paso, promptly after El Paso shall have received notice
thereof, notice of any actual or proposed change in the debt rating of any of
the First Mortgage Bonds or the Index Debt, or any notice that El Paso, any
First Mortgage Bonds or any Index Debt shall be placed on “CreditWatch” or
“WatchList” or any similar list maintained by either Rating Agency, in each case
with negative implications;

 

(g) promptly after the request by any Lender, all documentation and other
information that such Lender reasonably requests in order to comply with its
ongoing obligations under applicable “know your customer” and anti-money
laundering rules and regulations, including the USA Patriot Act; and

 

(h) promptly, from time to time, such other information regarding the
operations, business affairs and financial condition of such Borrower or any
Subsidiary, or compliance with the terms of any Loan Document, as the
Administrative Agent or any Lender may reasonably request.

 

SECTION 5.05. Litigation and Other Notices. Furnish to the Administrative Agent
prompt written notice of the following:

 

(a) any Event of Default or Default, specifying the nature and extent thereof
and the corrective action (if any) taken or proposed to be taken with respect
thereto;

 

(b) the filing or commencement of any action, suit or proceeding, whether at law
or in equity or by or before any Governmental Authority, against it or, in the
case of El Paso, any Subsidiary that, if adversely determined, could reasonably
be expected to result in a Material Adverse Effect; and

 

(c) any development that has resulted in, or could reasonably be expected to
result in, a Material Adverse Effect.

 

SECTION 5.06. Employee Benefits. With respect to El Paso, (a) comply in all
material respects with the applicable provisions of ERISA and the Code and (b)
furnish to the Administrative Agent (i) as soon as possible after, and in any
event within 10 days after any Responsible Officer of El Paso or any ERISA
Affiliate knows or has reason to know that, any ERISA Event has occurred that,
alone or together with any other ERISA Event could reasonably be expected to
result in liability of El Paso in an aggregate amount exceeding $5,000,000 or
requiring payments exceeding $1,000,000 in

 

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any year, a statement of a Financial Officer of El Paso setting forth details as
to such ERISA Event and the action, if any, that El Paso proposes to take with
respect thereto.

 

SECTION 5.07. Maintaining Records; Access to Properties and Inspections. Keep
proper books of record and account in which full, true and correct entries in
conformity with GAAP and all requirements of law are made of all dealings and
transactions in relation to its business and activities. Each Borrower will, and
El Paso will cause each Subsidiary to, permit any representatives designated by
the Administrative Agent or any Lender to visit and inspect the financial
records and the properties of such Borrower or such Subsidiary upon reasonable
notice and at reasonable times and as often as reasonably requested and to make
extracts from and copies of such financial records, and permit any
representatives designated by the Administrative Agent or any Lender to discuss
the affairs, finances and condition of such Borrower or such Subsidiary with the
officers thereof and independent accountants therefor.

 

SECTION 5.08. Use of Proceeds. Use the proceeds of the Loans made to it and
request the issuance of Letters of Credit only for the purposes set forth in the
preamble to this Agreement.

 

SECTION 5.09. Compliance with Environmental Laws. With respect to El Paso,
comply, and use commercially reasonable efforts to cause all lessees and other
persons occupying its Properties to comply, in all material respects with all
Environmental Laws and Environmental Permits applicable to its operations and
Properties; obtain and renew all material Environmental Permits necessary for
its operations and Properties; and conduct any Remedial Action in substantial
compliance with Environmental Laws.

 

SECTION 5.10. Further Assurances. Execute any and all further documents,
financing statements, agreements and instruments, and take all further action
(including filing Uniform Commercial Code and other financing statements) that
may be required under applicable law, or that the Required Lenders, the
Administrative Agent or the Collateral Agent may reasonably request, in order to
effectuate the transactions contemplated by the Loan Documents and in order to
grant, preserve, protect and perfect the validity and first priority of the
security interests created or intended to be created herein, by the Security
Agreement or, prior to the Collateral Release Date, by the Indenture. El Paso
shall (a) cause any Domestic Subsidiary with consolidated total assets at any
time equal to or greater than 10% of El Paso’s consolidated total assets at such
time to execute a guarantee of all the El Paso Obligations pursuant to a
Subsidiary Guarantee Agreement and (b) cause the capital stock of any such
Subsidiary referred to in clause (a) above to be pledged to the Collateral Agent
for the ratable benefit of the Secured Parties to secure the El Paso Obligations
pursuant to a Pledge Agreement. In furtherance of the foregoing, El Paso shall
give prompt notice to the Administrative Agent of the creation, acquisition or
existence of any such Subsidiary. Each Borrower agrees to provide such evidence
as the Collateral Agent shall reasonably request as to the perfection and
priority status of each such security interest and Lien.

 

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SECTION 5.11. Maintenance of Ratings. Use commercially reasonable efforts to
cause at all times Applicable Ratings to be in effect.

 

ARTICLE VI

 

Negative Covenants

 

Each of El Paso and, subject to Section 11.19, the Trustee covenants and agrees
with each Lender that, so long as this Agreement shall remain in effect and
until the Commitments have been terminated and the principal of and interest on
each Loan, all Fees and all other expenses or amounts payable under any Loan
Document have been paid in full and all Letters of Credit have been canceled or
have expired and all amounts drawn thereunder have been reimbursed in full (or
sufficient cash collateral has been deposited with the Collateral Agent in an
amount equal to the then outstanding L/C Exposure), unless the Required Lenders
shall otherwise consent in writing, neither Borrower will, nor will El Paso
permit any Subsidiary to:

 

SECTION 6.01. Indebtedness. Incur, create, assume or permit to exist
(collectively, “incur”) any Indebtedness; provided, however, that El Paso may
incur any Indebtedness if the Fixed Charge Coverage Ratio for El Paso’s most
recently ended four full fiscal quarters for which internal financial statements
are available immediately preceding the date on which such additional
Indebtedness is incurred would have been at least 2.50 to 1.00 determined on a
pro forma basis (including giving a pro forma effect to the incurrence thereof
and the application of the net proceeds therefrom), as if such additional
Indebtedness had been incurred at the beginning of such four-quarter period.
Notwithstanding the foregoing, the following Indebtedness may be incurred:

 

(a) First Mortgage Bonds (excluding (i) any collateral series of First Mortgage
Bonds issued to the Collateral Agent to secure the Obligations, (ii) collateral
series of First Mortgage Bonds in an aggregate principal amount not to exceed
$200,000,000 (plus premium, interest and related fees) at any time outstanding
issued to secure any of the Indebtedness permitted under Section 6.01 (c) and
(iii) any First Mortgage Bonds issued in reliance on Section 6.01(1)) in an
aggregate principal amount not greater than $550,000,000 at any time
outstanding;

 

(b) Indebtedness of El Paso existing on the Closing Date and set forth in
Schedule 6.01 and any extensions, renewals, refundings or replacements of such
Indebtedness, provided that any such extension, renewal, refunding or
replacement is (i) in an aggregate principal amount not greater than the
principal amount of such Indebtedness so extended, renewed, refunded or replaced
plus the amount of accrued interest and premiums, if any, thereon and the
reasonable expenses incurred in connection therewith and (ii) on terms no less
favorable to the Lenders and El Paso than the terms of such Indebtedness so
extended, renewed, refunded or replaced;

 

(c) Indebtedness under the Maricopa Reimbursement Agreement, the Farmington
Reimbursement Agreement, the Maricopa Loan Agreements and the

 

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Farmington Loan Agreements, and any extensions, renewals, refundings or
replacements of any such Indebtedness, provided that any such extension,
renewal, refunding or replacement is in an aggregate principal amount not
greater than the principal amount of such Indebtedness so extended, renewed,
refunded or replaced plus (A) the amount of accrued interest and premiums, if
any, thereon and the reasonable expenses incurred in connection therewith and
(B) with respect to any extension, renewal, refunding or replacement of the
Farmington Reimbursement Agreement or the Maricopa Reimbursement Agreement, the
amount of interest coverage then required, based on the determination of a
Rating Agency, to be included in such Indebtedness;

 

(d) Indebtedness created hereunder;

 

(e) Additional First Mortgage Bonds – Collateral Series H issued to the
Collateral Agent as contemplated by Section 2.21;

 

(f) Indebtedness of El Paso and Finsub incurred pursuant to the Receivables
Program Documents;

 

(g) Rate Protection Agreements, in form and with parties reasonably acceptable
to the Administrative Agent;

 

(h) Indebtedness of El Paso or any Subsidiary represented by Capital Lease
Obligations, mortgage financings or purchase money obligations, in each case
incurred for the purpose of financing all or any part of the purchase price or
cost of construction or improvement of property used in the business of El Paso
or the Subsidiaries, and Indebtedness incurred to refinance such Capital Lease
Obligations, mortgage financings or purchase money obligations, in an aggregate
principal amount not to exceed, when combined with the aggregate principal
amount of Capital Lease Obligations outstanding pursuant to paragraph (i) below,
$25,000,000 at any time outstanding; provided that such Indebtedness shall
initially be incurred within 180 days of the acquisition or construction of such
property;

 

(i) Capital Lease Obligations incurred in connection with Sale Leaseback
Transactions permitted pursuant to Section 6.03, in an aggregate principal
amount not to exceed, when combined with the aggregate principal amount of
Indebtedness outstanding pursuant to paragraph (h) above, $25,000,000;

 

(j) Any other unsecured Indebtedness of El Paso or any Subsidiary in an
aggregate principal amount not to exceed $10,000,000;

 

(k) Indebtedness between and among El Paso and any of its Wholly Owned
Subsidiaries that guarantee the Obligations; and

 

(l) First Mortgage Bonds in an aggregate principal amount not to exceed
$200,000,000 (plus premium, interest and related fees) at any time outstanding
issued either (i) as collateral series First Mortgage Bonds to secure the
Indebtedness permitted in Section 6.01(c) or (ii) to repurchase, repay or
otherwise refinance such Indebtedness.

 

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SECTION 6.02. Liens. Create, incur, assume or permit to exist any Lien on any
property or assets (including stock or other securities of any person, including
any Subsidiary) now owned or hereafter acquired by it or on any income or
revenues or rights in respect of any thereof, except:

 

(a) Liens on property or assets of El Paso existing on the date hereof and set
forth in Schedule 6.02; provided that such Liens shall secure only those
obligations which they secure on the date hereof;

 

(b) any Lien created under the Loan Documents;

 

(c) any Lien existing on any property or asset prior to the acquisition thereof
by El Paso or any Subsidiary; provided that (i) such Lien is not created in
contemplation of or in connection with such acquisition and (ii) such Lien does
not apply to any other property or assets of either Borrower or any Subsidiary;

 

(d) Liens for taxes or assessments by any Governmental Authority not yet due or
which are being contested in compliance with Section 5.03;

 

(e) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s,
landlords’, licensors’ or other like Liens arising in the ordinary course of
business and securing obligations that are not due and payable or which are
being contested in compliance with Section 5.03;

 

(f) pledges and deposits made in the ordinary course of El Paso’s business in
compliance with workmen’s compensation, unemployment insurance and other social
security laws or regulations;

 

(g) deposits by El Paso to secure the performance of bids, trade contracts
(other than for Indebtedness), leases (other than Capital Lease Obligations),
statutory obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature incurred in the ordinary course of business;

 

(h) zoning restrictions, easements, rights-of-way, restrictions on use of real
property or permit or license requirements and other similar encumbrances
incurred in the ordinary course of business which, in the aggregate, are not
substantial in amount and do not materially detract from the value of the
property subject thereto or interfere with the ordinary conduct of the
businesses of the Borrowers or any Subsidiary;

 

(i) purchase money security interests in real property, improvements thereto or
equipment hereafter acquired (or, in the case of improvements, constructed) by
El Paso; provided that (i) such security interests secure Indebtedness permitted
by Section 6.01(b) or Section 6.01(j), (ii) the Indebtedness secured thereby
does not exceed 85% of the lesser of the cost or the fair market value of such
real property, improvements or equipment at the time of the incurrence of such
Indebtedness and (iii) such security interests do not apply to any other
property or assets of El Paso or any Subsidiary;

 

(j) the Lien of the Indenture;

 

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(k) Liens on the property of Finsub incurred pursuant to the Receivables Program
Documents and Liens in favor of Finsub granted by El Paso with respect to
Receivables purportedly sold to Finsub by El Paso pursuant to the Receivables
Program;

 

(l) the Lien in favor of the Indenture Trustee created by the Indenture and
securing the payment of its fees and expenses;

 

(m) one or more attachments or other similar Liens on assets of El Paso arising
in connection with court proceedings (i) in an aggregate principal amount not in
excess of $10,000,000 (so long as El Paso has set aside adequate reserves
therefor) or (ii) the execution of which has been stayed or which has been
appealed and secured, if necessary, by an appeal bond; provided that in each
case no Event of Default shall result therefrom;

 

(n) any Lien arising by operation of law on the assets of El Paso in favor of
any Governmental Authority with respect to any franchise, grant, license, permit
or contract that affects any Mortgaged Property; and

 

(o) any other Liens (i) incurred prior to the Collateral Release Date that, in
the reasonable judgment of the Required Lenders, do not individually or in the
aggregate materially impair the Liens of each of the Security Agreement, this
Agreement and the Indenture, or the security afforded thereby for the benefit of
the Secured Parties or (ii) incurred after the Collateral Release Date that do
not secure obligations, or encumber property with a fair market value, in excess
of $10,000,000.

 

SECTION 6.03. Sale and Lease-Back Transactions. Enter into any arrangement,
directly or indirectly, with any person whereby it shall sell or transfer any
property, real or personal, used or useful in its business, whether now owned or
hereafter acquired, and thereafter rent or lease such property or other property
which it intends to use for substantially the same purpose or purposes as the
property being sold or transferred (a “Sale Lease-Back Transaction”), except for
Sale Lease-Back Transactions of real property and tangible personal property
with an aggregate fair market value not to exceed $25,000,000 at any time.

 

SECTION 6.04. Investments, Loans and Advances. Purchase, hold or acquire any
capital stock, evidences of indebtedness or other securities of, make or permit
to exist any loans or advances to, or make or permit to exist any investment or
any other interest in, any other person in excess of $5,000,000 at any time
outstanding (without giving effect to any write-offs or write-downs thereof),
except:

 

(a) investments by El Paso in the capital stock of each Subsidiary; provided
however, that the aggregate cumulative amount of El Paso’s investments in, and
loans and advances to, such Subsidiaries that are not Loan Parties shall not
exceed $20,000,000;

 

(b) Permitted Investments;

 

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(c) Investments of El Paso existing on the Closing Date and set forth on
Schedule 6.04;

 

(d) Investments received in connection with the bankruptcy or reorganization of
customers and suppliers and in settlement of delinquent obligations of, and
other disputes with, customers and suppliers arising in the ordinary course of
business;

 

(e) Investments in intercompany loans permitted pursuant to Section 6.0l(k).

 

SECTION 6.05. Mergers, Consolidations and Sales of Assets and Acquisitions.
Merge into or consolidate with any other person, or permit any other person to
merge into or consolidate with it, or sell, transfer, lease or otherwise dispose
of (in one transaction or in a series of transactions) all or any substantial
part of its assets (whether now owned or hereafter acquired) or any capital
stock of any Subsidiary, or purchase, lease or otherwise acquire (in one
transaction or a series of transactions) all or any substantial part of the
assets of any other person except that (a) the Trustee may purchase and sell
Nuclear Fuel in accordance with the provisions of the Purchase Contract, (b) El
Paso and Finsub may sell Receivables pursuant to the Receivables Program and (c)
El Paso may sell or contribute transmission assets to the extent that FERC
orders such assets to be sold in connection with joining a Regional Transmission
Organization.

 

SECTION 6.06. Transactions with Affiliates. Sell or transfer any property or
assets to, or purchase or acquire any property or assets from, or otherwise
engage in any other transactions with, any of its Affiliates (other than its
Wholly Owned Subsidiaries), except that El Paso or any Subsidiary may engage in
any of the foregoing transactions in the ordinary course of business at prices
and on terms and conditions not less favorable to El Paso or such Subsidiary
than could be obtained on an arm’s-length basis from unrelated third parties.

 

SECTION 6.07. Businesses of Borrowers and Subsidiaries. Engage at any time in
any business or business activity other than (a) with respect to El Paso and the
Subsidiaries, the business conducted by them on the Closing Date and business
activities reasonably incidental thereto, including in the case of Finsub the
activities contemplated in the Receivables Program, and (b) with respect to the
Trustee, purchasing, holding title to, making payments with respect to and
selling Nuclear Fuel pursuant to, and on the terms set forth in, the Trust
Agreement and the Purchase Contract.

 

SECTION 6.08. Other Indebtedness and Agreements. (a) Except as expressly
permitted pursuant to Section 6.01, permit any waiver, supplement, modification,
amendment, termination or release of any indenture, instrument or agreement
pursuant to which any Indebtedness or preferred stock of either Borrower or any
Subsidiary is outstanding in an aggregate outstanding principal amount in excess
of $5,000,000, to the extent that any such waiver, supplement, modification,
amendment, termination or release would be adverse to the Lenders in any
material respect.

 

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(b) Except as provided in the Fifth Supplemental Indenture, permit any waiver,
supplement, modification, amendment, termination or release of the Indenture to
the extent that any such waiver, supplement, modification, amendment,
termination or release would be adverse to the interests of the holders of First
Mortgage Bonds-Collateral Series H in any material respect, without the consent
of the Required Lenders (it being understood that, subject to the foregoing, the
Indenture may be supplemented or otherwise modified in connection with the
issuance of First Mortgage Bonds after the Closing Date permitted hereunder).

 

(c) Permit any waiver, supplement, modification, amendment, termination or
release of (i) the Trust Agreement, the Purchase Contract or the Assigned
Agreements or (ii) the Receivables Program Documents, in each case to the extent
that any such waiver, supplement, modification, amendment, termination or
release would be adverse to the Lenders in any material respect.

 

SECTION 6.09. Release of Collateral. Prior to the Collateral Release Date, El
Paso shall not effect the release of any of the Mortgaged Property from the lien
of the Indenture unless such release would have been permitted by the Indenture
as in effect on the Closing Date without the consent of any holder of First
Mortgage Bonds.

 

SECTION 6.10. Debt to Capitalization Ratio. Permit the ratio of (i) Total
Consolidated Debt to (ii) Total Consolidated Capital as of the last day of any
fiscal quarter to be in excess of 0.65 to 1.00.

 

SECTION 6.11. Interest Coverage Ratio. Permit the Consolidated Interest Coverage
Ratio for any period of four consecutive fiscal quarters to be less than 2.50 to
1.00.

 

SECTION 6.12. Fiscal Year. Change the end of its fiscal year from December 31 to
any other date.

 

ARTICLE VII

 

Events of Default

 

In case of the happening of any of the following events (“Events of Default”):

 

(a) any representation or warranty made or deemed made in or in connection with
any Loan Document or the borrowings or issuances of Letters of Credit hereunder,
or any representation, warranty, statement or information contained in any
report, certificate, financial statement or other instrument furnished pursuant
to any Loan Document, shall prove to have been false or misleading in any
material respect when so made, deemed made or furnished;

 

(b) default shall be made in the payment of any principal of any Loan or the
reimbursement with respect to any L/C Disbursement when and as the same shall

 

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become due and payable, whether at the due date thereof or at a date fixed for
prepayment thereof or by acceleration thereof or otherwise;

 

(c) default shall be made in the payment of any interest on any Loan or any Fee
or L/C Disbursement or any other amount (other than an amount referred to in (b)
above) due under any Loan Document, when and as the same shall become due and
payable, and such default shall continue unremedied for a period of five
Business Days;

 

(d) default in any material manner shall be made in the due observance or
performance by either Borrower or any Subsidiary of any covenant, condition or
agreement contained in Section 5.01 (a), 5.05 or 5.08 or in Article VI;

 

(e) default shall be made in the due observance or performance by either
Borrower or any Subsidiary of any covenant, condition or agreement contained in
any Loan Document (other than those specified in (b), (c) or (d) above) and such
default shall continue unremedied for a period of 30 days after notice thereof
from the Administrative Agent or any Lender to the Borrowers;

 

(f) either Borrower or any Subsidiary shall (i) fail to pay any principal or
interest, regardless of amount, due in respect of any Indebtedness in a
principal amount in excess of $10,000,000, when and as the same shall become due
and payable, or (ii) fail to observe or perform any other term, covenant,
condition or agreement contained in any agreement or instrument evidencing or
governing any such Indebtedness if the effect of any failure referred to in this
clause (ii) is to cause, or to permit the holder or holders of such Indebtedness
or a trustee on its or their behalf (with or without the giving of notice, the
lapse of time or both) to cause, such Indebtedness to become due prior to its
stated maturity;

 

(g) an involuntary proceeding shall be commenced or an involuntary petition
shall be filed in a court of competent jurisdiction seeking (i) relief in
respect of either Borrower or any Subsidiary (other than an Inactive Subsidiary)
or of a substantial part of the property or assets of either Borrower or any
such Subsidiary, under Title 11 of the United States Code, as now constituted or
hereafter amended, or any other Federal, state or foreign bankruptcy,
insolvency, receivership or similar law, (ii) the appointment of a receiver,
trustee, custodian, sequestrator, conservator or similar official for either
Borrower or any Subsidiary (other than an Inactive Subsidiary) or for a
substantial part of the property or assets of either Borrower or any such
Subsidiary or (iii) the winding-up or liquidation of either Borrower or any
Subsidiary (other than an Inactive Subsidiary); and such proceeding or petition
shall continue undismissed for 60 days or an order or decree approving or
ordering any of the foregoing shall be entered;

 

(h) either Borrower or any Subsidiary (other than an Inactive Subsidiary) shall
(i) voluntarily commence any proceeding or file any petition seeking relief
under Title 11 of the United States Code, as now constituted or hereafter
amended, or any other Federal, state or foreign bankruptcy, insolvency,
receivership or similar law, (ii) consent to the institution of, or fail to
contest in a timely and appropriate manner, any proceeding or the filing of any
petition described in (g) above, (iii) apply for or consent to the

 

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appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for either Borrower or any such Subsidiary or for a substantial
part of the property or assets of either Borrower or any such Subsidiary, (iv)
file an answer admitting the material allegations of a petition filed against it
in any such proceeding, (v) make a general assignment for the benefit of
creditors, (vi) become unable, admit in writing its inability or fail generally
to pay its debts as they become due or (vii) take any action for the purpose of
effecting any of the foregoing;

 

(i) one or more judgments for the payment of money in an aggregate amount in
excess of $10,000,000 shall be rendered against either Borrower or any
Subsidiary and the same shall remain undischarged for a period of 30 consecutive
days during which execution shall not be effectively stayed, or any action shall
be legally taken by a judgment creditor to levy upon assets or properties of
either Borrower or any Subsidiary to enforce any such judgment;

 

(j) an ERISA Event shall have occurred that, in the opinion of the Required
Lenders, when taken together with all other such ERISA Events, could reasonably
be expected to result in liability of El Paso and its ERISA Affiliates in an
aggregate amount exceeding $10,000,000 or requires payments exceeding $5,000,000
in any year;

 

(k) any security interest purported to be created hereby or by the Security
Agreement shall cease to be, or shall be asserted by either Borrower not to be,
a valid, perfected, first priority (except as otherwise expressly provided in
this Agreement or the Security Agreement) security interest in the assets or
properties covered thereby;

 

(l) there shall have occurred a Change in Control;

 

(m) a Purchase Contract Default shall have occurred and be continuing;

 

then, and in every such event (other than an event with respect to either
Borrower described in paragraph (g) or (h) above), and at any time thereafter
during the continuance of such event, the Administrative Agent may, and at the
request of the Required Lenders shall, by notice to the Borrowers, take either
or both of the following actions, at the same or different times: (i) terminate
forthwith the Commitments and (ii) declare the Loans then outstanding to be
forthwith due and payable in whole or in part, whereupon the principal of the
Loans so declared to be due and payable, together with accrued interest thereon
and any unpaid accrued Fees and all other liabilities of each Borrower accrued
hereunder and under any other Loan Document, shall become forthwith due and
payable, without presentment, demand, protest or any other notice of any kind,
all of which are hereby expressly waived by each Borrower, anything contained
herein or in any other Loan Document to the contrary notwithstanding; and in any
event with respect to either Borrower described in paragraph (g) or (h) above,
the Commitments shall automatically terminate and the principal of the Loans
then outstanding, together with accrued interest thereon and any unpaid accrued
Fees and all other liabilities of each Borrower accrued hereunder and under any
other Loan Document, shall automatically become due and payable, without
presentment, demand,

 

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protest or any other notice of any kind, all of which are hereby expressly
waived by each Borrower, anything contained herein or in any other Loan Document
to the contrary notwithstanding.

 

ARTICLE VIII

 

The Administrative Agent and the Collateral Agent

 

In order to expedite the transactions contemplated by this Agreement, JPMorgan
is hereby appointed to act as Administrative Agent and Collateral Agent on
behalf of the Lenders and the Issuing Bank (for purposes of this Article VIII,
the Administrative Agent and the Collateral Agent are referred to collectively
as the “Agents”). Each of the Lenders and each assignee of any such Lender
hereby irrevocably authorizes the Agents to take such actions on behalf of such
Lender or assignee or the Issuing Bank and to exercise such powers as are
specifically delegated to the Agents by the terms and provisions hereof and of
the other Loan Documents, together with such actions and powers as are
reasonably incidental thereto. The Administrative Agent is hereby expressly
authorized by the Lenders and the Issuing Bank, without hereby limiting any
implied authority, (a) to receive on behalf of the Lenders and the Issuing Bank
all payments of principal of and interest on the Loans, all payments in respect
of L/C Disbursements and all other amounts due to the Lenders hereunder, and
promptly to distribute to each Lender or the Issuing Bank its proper share of
each payment so received; (b) to give notice on behalf of each of the Lenders to
the Borrowers of any Event of Default specified in this Agreement of which the
Administrative Agent has actual knowledge acquired in connection with its agency
hereunder; and (c) to distribute to each Lender copies of all notices, financial
statements and other materials delivered by either Borrower pursuant to this
Agreement or the other Loan Documents as received by the Administrative Agent.
Without limiting the generality of the foregoing, the Agents are hereby
expressly authorized to execute any and all documents (including releases) with
respect to the Collateral and the rights of the Secured Parties with respect
thereto, as contemplated by and in accordance with the provisions of this
Agreement and the Security Agreement.

 

Neither the Agents nor any of their respective directors, officers, employees or
agents shall be liable as such for any action taken or omitted by any of them
except for its or his own gross negligence or willful misconduct, or be
responsible for any statement, warranty or representation herein or the contents
of any document delivered in connection herewith, or be required to ascertain or
to make any inquiry concerning the performance or observance by each Borrower or
any other Loan Party of any of the terms, conditions, covenants or agreements
contained in any Transaction Document. The Agents shall not be responsible to
the Lenders for the due execution, genuineness, validity, enforceability or
effectiveness of this Agreement, any other Transaction Document, or any other
document, instrument or agreement. The Agents shall in all cases be fully
protected in acting, or refraining from acting, in accordance with written
instructions signed by the Required Lenders and, except as otherwise
specifically provided herein, such instructions and any action or inaction
pursuant thereto shall be

 

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binding on all the Lenders. Each Agent shall, in the absence of knowledge to the
contrary, be entitled to rely on any instrument or document believed by it in
good faith to be genuine and correct and to have been signed or sent by the
proper person or persons. Neither the Agents nor any of their respective
directors, officers, employees or agents shall have any responsibility to either
Borrower on account of the failure of or delay in performance or breach by any
Lender or the Issuing Bank of any of its obligations hereunder or to any Lender
or the Issuing Bank on account of the failure of or delay in performance or
breach by any other Lender or the Issuing Bank or either Borrower of any of
their respective obligations hereunder or under any other Loan Document or in
connection herewith or therewith. Each of the Agents may execute any and all
duties hereunder by or through agents or employees and shall be entitled to rely
upon the advice of legal counsel selected by it with respect to all matters
arising hereunder and shall not be liable for any action taken or suffered in
good faith by it in accordance with the advice of such counsel.

 

The Lenders hereby acknowledge that neither Agent shall be under any duty to
take any discretionary action permitted to be taken by it pursuant to the
provisions of this Agreement unless it shall be requested in writing to do so by
the Required Lenders.

 

Subject to the appointment and acceptance of a successor Agent as provided
below, either Agent may resign at any time by notifying the Lenders and the
Borrowers. Upon any such resignation, the Required Lenders shall have the right
to appoint a successor reasonably satisfactory to Borrower. If no successor
shall have been so appointed by the Required Lenders and shall have accepted
such appointment within 30 days after the retiring Agent gives notice of its
resignation, then the retiring Agent may, on behalf of the Lenders, appoint a
successor Agent which shall be a bank with an office in New York, New York,
having a combined capital and surplus of at least $500,000,000 or an Affiliate
of any such bank. Upon the acceptance of any appointment as Agent hereunder by a
successor bank, such successor shall succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent and the retiring
Agent shall be discharged from its duties and obligations hereunder. After the
Agent’s resignation hereunder, the provisions of this Article and Section 11.05
shall continue in effect for its benefit in respect of any actions taken or
omitted to be taken by it while it was acting as Agent.

 

With respect to the Loans made by it hereunder, each Agent in its individual
capacity and not as Agent shall have the same rights and powers as any other
Lender and may exercise the same as though it were not an Agent, and the Agents
and their Affiliates may accept deposits from, lend money to and generally
engage in any kind of business with either Borrower or any Subsidiary or other
Affiliates thereof as if it were not an Agent.

 

Each Lender agrees (a) to reimburse the Agents, on demand, in the amount of its
Applicable Percentage of any expenses incurred for the benefit of the Lenders by
the Agents, including counsel fees and compensation of agents and employees paid
for services rendered on behalf of the Lenders, that shall not have been
reimbursed by the Borrowers and (b) to indemnify and hold harmless each Agent
and any of its directors,

 

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officers, employees or agents, on demand, in the amount of such pro rata share,
from and against any and all liabilities, taxes, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever that may be imposed on, incurred by or asserted
against it in its capacity as Agent or any of them in any way relating to or
arising out of this Agreement or any other Transaction Document or any action
taken or omitted by it or any of them under this Agreement or any other
Transaction Document, to the extent the same shall not have been reimbursed by
the Borrowers, provided that no Lender shall be liable to an Agent or any such
other indemnified person for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements that are determined by a court of competent jurisdiction to have
resulted from the gross negligence or willful misconduct of such Agent or any of
its directors, officers, employees or agents.

 

Each Lender acknowledges that it has, independently and without reliance upon
the Agents or any other Lender and based on such documents and information as it
has deemed appropriate, made its own credit analysis and decision to enter into
this Agreement. Each Lender also acknowledges that it will, independently and
without reliance upon the Agents or any other Lender and based on such documents
and information as it shall from time to time deem appropriate, continue to make
its own decisions in taking or not taking action under or based upon this
Agreement or any other Loan Document, any related agreement or any document
furnished hereunder or thereunder.

 

ARTICLE IX

 

Guarantee

 

As a result of the arrangements contemplated by the Trust Agreement and the
Purchase Contract for the financing by the Trustee of Nuclear Fuel, El Paso
acknowledges that it will derive substantial benefit from the commitments of the
Lenders to make Loans to the Trustee and the commitment of the Issuing Bank to
issue Letters of Credit for the account of the Trustee. To induce the Lenders to
make the Loans and the Issuing Bank to issue Letters of Credit and to enter into
this Agreement, El Paso agrees with each Lender, the Issuing Bank, the
Administrative Agent and the Collateral Agent (each such person, together with
its successors and assigns, a “Guaranteed Party”) as follows:

 

SECTION 9.01. Guarantee. El Paso unconditionally guarantees, as a primary
obligor and not merely as a surety, (a) the due and punctual payment of (i) the
principal of and premium, if any, and interest (including interest accruing
during the pendency of any bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether allowed or allowable in such proceeding) on
the Loans made to the Trustee, when and as due, whether at maturity, by
acceleration, upon one or more dates set for prepayment or otherwise, (ii) each
payment required to be made by the Trustee under this Agreement in respect of
any Letter of Credit, when and as due, including payments in respect of
reimbursement of disbursements, interest thereon and obligations

 

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to provide cash collateral and (iii) all other monetary obligations, including
fees, costs, expenses and indemnities, whether primary, secondary, direct,
contingent, fixed or otherwise (including monetary obligations incurred during
the pendency of any bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether allowed or allowable in such proceeding), of
the Trustee to the Guaranteed Parties under this Agreement and the other Loan
Documents and (b) the due and punctual performance of all covenants, agreements,
obligations and liabilities of the Trustee under or pursuant to this Agreement
and the other Loan Documents (all the monetary and other obligations referred to
in the preceding clauses (a) and (b) being collectively called the “Trust
Obligations”). El Paso further agrees that the Trust Obligations may be extended
or renewed, in whole or in part, without notice to or further assent from it,
and that it will remain bound upon its guarantee notwithstanding any extension
or renewal of any Trust Obligation.

 

SECTION 9.02. Obligations Not Waived. To the fullest extent permitted by
applicable law, El Paso waives presentment to, demand of payment from and
protest to the Trustee of any of the Trust Obligations, and also waives notice
of acceptance of its guarantee and notice of protest for nonpayment. To the
fullest extent permitted by applicable law, the obligations of El Paso hereunder
shall not be affected by (a) the failure of the Collateral Agent or any other
Guaranteed Party to assert any claim or demand or to enforce or exercise any
right or remedy against the Trustee, (b) any rescission, waiver, amendment or
modification of, or any release from any of the terms or provisions of this
Agreement, any other Transaction Document, any Guarantee or any other agreement,
including with respect to any other guarantor of the Obligations, or (c) the
failure to perfect any security interest in, or the release of, any of the
security held by or on behalf of the Collateral Agent or any other Guaranteed
Party.

 

SECTION 9.03. Security. El Paso authorizes the Collateral Agent and each of the
other Guaranteed Parties to (a) take and hold security for the payment of this
guarantee and the Trust Obligations and exchange, enforce, waive and release any
such security, (b) apply such security and direct the order or manner of sale
thereof as they in their sole discretion may determine and (c) release or
substitute any one or more endorsees, other guarantors or other obligors.

 

SECTION 9.04. Guarantee of Payment. El Paso further agrees that its guarantee
constitutes a guarantee of payment when due and not of collection, and waives
any right to require that any resort be had by the Collateral Agent or any other
Guaranteed Party to any of the security held for payment of the Trust
Obligations or to any balance of any deposit account or credit on the books of
the Collateral Agent or any other Guaranteed Party in favor of the Trustee or
any other person.

 

SECTION 9.05. No Discharge or Diminishment of Guarantee. The obligations of El
Paso hereunder shall not be subject to any reduction, limitation, impairment or
termination for any reason (other than the payment in full in cash of the Trust
Obligations), including any claim of waiver, release, surrender, alteration or
compromise of any of the Trust Obligations, and shall not be subject to any
defense or setoff, counterclaim, recoupment or termination whatsoever by reason
of the invalidity,

 

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illegality or unenforceability of the Trust Obligations or otherwise. Without
limiting the generality of the foregoing, the obligations of El Paso hereunder
shall not be discharged or impaired or otherwise affected by the failure of the
Collateral Agent or any other Guaranteed Party to assert any claim or demand or
to enforce any remedy under this Agreement, any other Transaction Document or
any other agreement, by any waiver or modification of any provision of any
thereof, by any default, failure or delay, willful or otherwise, in the
performance of the Trust Obligations, or by any other act or omission that may
or might in any manner or to any extent vary the risk of El Paso or that would
otherwise operate as a discharge of El Paso as a matter of law or equity (other
than the payment in full in cash of all the Trust Obligations).

 

SECTION 9.06. Defenses of the Trustee Waived. To the fullest extent permitted by
applicable law, El Paso waives any defense based on or arising out of any
defense of the Trustee or the unenforceability of the Trust Obligations or any
part thereof from any cause, or the cessation from any cause of the liability of
the Trustee, other than the payment in full in cash of the Trust Obligations.
The Collateral Agent and the other Guaranteed Parties may, at their election,
foreclose on any security held by one or more of them by one or more judicial or
nonjudicial sales, accept an assignment of any such security in lieu of
foreclosure, compromise or adjust any part of the Trust Obligations, make any
other accommodation with the Trustee or any other guarantor or exercise any
other right or remedy available to them against the Trustee or any other
guarantor, without affecting or impairing in any way the liability of El Paso
hereunder except to the extent the Trust Obligations have been fully, finally
paid in cash. To the fullest extent permitted by applicable law, El Paso waives
any defense arising out of any such election even though such election operates,
pursuant to applicable law, to impair or to extinguish any right of
reimbursement or subrogation or other right or remedy of El Paso against the
Trustee or any other guarantor, as the case may be, or any security.

 

SECTION 9.07. Agreement to Pay; Subrogation. In furtherance of the foregoing and
not in limitation of any other right that the Collateral Agent or any other
Guaranteed Party has at law or in equity against El Paso by virtue hereof, upon
the failure of the Trustee to pay any Trust Obligation when and as the same
shall become due, whether at maturity, by acceleration, after notice of
prepayment or otherwise, El Paso hereby promises to and will forthwith pay, or
cause to be paid, to the Collateral Agent or such other Guaranteed Party as
designated thereby in cash the amount of such unpaid Trust Obligations. Upon
payment by El Paso of any sums to the Collateral Agent or any Guaranteed Party
as provided above, all rights of El Paso against the Trustee arising as a result
thereof by way of right of subrogation, contribution, reimbursement, indemnity
or otherwise shall in all respects be subordinate and junior in right of payment
to the prior payment in full in cash of all the Trust Obligations. In addition,
any indebtedness of the Trustee now or hereafter held by El Paso is hereby
subordinated in right of payment to the prior payment in full of the Trust
Obligations. If any amount shall erroneously be paid to El Paso on account of
(i) such subrogation, contribution, reimbursement, indemnity or similar right or
(ii) any such indebtedness of the Trustee, such amount shall be held in trust
for the benefit of the Guaranteed Parties and shall forthwith be paid to the
Collateral Agent to be credited against the payment of the Trust Obligations,
whether matured or unmatured, in accordance with the terms of the Loan
Documents.

 

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SECTION 9.08. Information. El Paso assumes all responsibility for being and
keeping itself informed of the Trustee’s financial condition and assets, and of
all other circumstances bearing upon the risk of nonpayment of the Trust
Obligations and the nature, scope and extent of the risks that El Paso assumes
and incurs hereunder, and agrees that none of the Collateral Agent or the other
Guaranteed Parties will have any duty to advise El Paso of information known to
it or any of them regarding such circumstances or risks.

 

SECTION 9.09. Termination. The guarantee made hereunder (a) shall terminate when
all the Trust Obligations have been indefeasibly paid in full and the Lenders
have no further commitment to lend to the Trustee under this Agreement, the
Trustee L/C Exposure has been reduced to zero and the Issuing Bank has no
further obligation to issue Letters of Credit under this Agreement and (b) shall
continue to be effective or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any Trust Obligation is rescinded or must
otherwise be restored by any Guaranteed Party or El Paso upon the bankruptcy or
reorganization of the Trustee, El Paso or otherwise.

 

ARTICLE X

 

Security

 

SECTION 10.01. First Mortgage Bonds. As security for the payment and performance
of (i) the due and punctual payment of (A) the principal of and premium, if any,
and interest (including interest accruing during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding, regardless of whether
allowed or allowable in such proceeding) on the Loans made to El Paso, when and
as due, whether at maturity, by acceleration, upon one or more dates set for
prepayment or otherwise, (B) all monetary obligations of El Paso pursuant to the
Guarantee in Article IX hereof, (C) each payment required to be made by El Paso
under this Agreement in respect of any Letter of Credit, when and as due,
including payments in respect of reimbursement of disbursements, interest
thereon and obligations to provide cash collateral and (D) all other monetary
obligations, including fees, costs, expenses and indemnities, whether primary,
secondary, direct, contingent, fixed or otherwise (including monetary
obligations incurred during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding), of El Paso to the Administrative Agent, the
Collateral Agent and the Lenders under this Agreement and the other Loan
Documents and (ii) the due and punctual performance of all covenants,
agreements, obligations and liabilities of El Paso under or pursuant to this
Agreement and the other Loan Documents (all the monetary and other obligations
referred to in the preceding clauses (i) and (ii) being collectively called the
“El Paso Obligations”), El Paso has delivered (and, in the circumstances
contemplated by Section 2.21, will deliver) to the Collateral Agent, for the
ratable benefit of the Secured Parties, the First Mortgage Bonds - Collateral
Series H in an initial aggregate principal amount of $100,000,000, duly executed
and issued by El Paso and authenticated by the Indenture

 

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Trustee and entitling the Collateral Agent and the Secured Parties to the
benefits of the Indenture with respect to the El Paso Obligations.

 

SECTION 10.02. Application of Funds. The Collateral Agent shall remit any funds
received on account of the First Mortgage Bonds - Collateral Series H to the
Administrative Agent for application against the El Paso Obligations as well as
any Collateral consisting of cash, as follows:

 

FIRST, to the payment of all costs and expenses incurred by the Administrative
Agent or the Collateral Agent (in its capacity as such hereunder or under any
other Loan Document) in connection with such collection or sale or otherwise in
connection with this Agreement or any of the El Paso Obligations, including all
court costs and the reasonable fees and expenses of its agents and legal
counsel, the repayment of all advances made by the Collateral Agent or the
Administrative Agent hereunder or under any other Loan Document and any other
reasonable costs or expenses incurred in connection with the exercise of any
right or remedy hereunder or under any other Loan Document;

 

SECOND, to the payment in full of the El Paso Obligations (the amounts so
applied to be distributed among the Secured Parties pro rata in accordance with
the amounts of the El Paso Obligations owed to them on the date of any such
distribution); and

 

THIRD, to El Paso, its successors or assigns, or as a court of competent
jurisdiction may otherwise direct.

 

The Administrative Agent shall have absolute discretion as to the time of
application of any such proceeds, moneys or balances in accordance with this
Agreement. To the extent that funds recovered under the First Mortgage Bonds -
Collateral Series H are insufficient to pay in full the El Paso Obligations, El
Paso shall remain liable under the terms of this Agreement and the other Loan
Documents for any such deficiency.

 

SECTION 10.03. Rights of Bondholders. The Collateral Agent, as the holder on
behalf of the Secured Parties of the First Mortgage Bonds - Collateral Series H,
shall have only such rights with respect thereto as provided in the Indenture.

 

SECTION 10.04. Release of Collateral. (a) Notwithstanding any other provision of
this Agreement or any Transaction Document, any First Mortgage Bonds -
Collateral Series H delivered to the Collateral Agent pursuant to Section 10.01
shall be returned to El Paso, without representation, warranty or recourse of
any nature, on a Business Day specified by El Paso (the “Collateral Release
Date”), upon satisfaction of the following conditions precedent:

 

(i) El Paso shall have given written notice to the Administrative Agent at least
30 days prior to the Collateral Release Date, specifying the proposed Collateral
Release Date;

 

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(ii) as of the Collateral Release Date, the Rating Threshold shall have been
achieved;

 

(iii) no Default or Event of Default shall have occurred and be continuing as of
the Collateral Release Date; and

 

(iv) on the Collateral Release Date, the Collateral Agent shall have received a
certificate, dated the Collateral Release Date and executed on behalf of El Paso
by the President, a Vice President or a Financial Officer of El Paso confirming
the satisfaction of the conditions set forth in clauses (ii) and (iii) above;

 

(b) Subject to the satisfaction of the conditions set forth in paragraph (a)
above, on or after the Collateral Release Date, the Lenders hereby expressly
authorize the Collateral Agent to, and the Collateral Agent hereby agrees to,
return to El Paso any First Mortgage Bonds—Collateral Series H delivered to the
Collateral Agent pursuant to Section 10.01. Any execution and delivery of
documents pursuant to this Section 10.04 shall be without recourse to or
representation or warranty by the Collateral Agent.

 

(c) Without limiting the provisions of Section 11.05, the Borrowers shall
reimburse the Administrative Agent, the Collateral Agent upon demand for all
costs and expenses, including fees, disbursements and other charges of counsel,
incurred by any of them in connection with any action contemplated by this
Section 11.04.

 

ARTICLE XI

 

Miscellaneous

 

SECTION 11.01. Notices. Notices and other communications provided for herein
shall be in writing and shall be delivered by hand or overnight courier service,
mailed by certified or registered mail or sent by telecopy, as follows:

 

(a) if to either Borrower, to it in care of El Paso Electric Company, Stanton
Tower, 100 N. Stanton, El Paso, Texas 79901, Attention of: Stephen P. Busser,
Treasurer (Telecopy No. (915) 521-4729));

 

(b) if to the Administrative Agent, to JPMorgan Chase Bank, N. A., Loan and
Agency Services Group, 1111 Fannin, 10th Floor, Houston, TX 77002, Attention of
Candace Grayson (Telecopy No. (713) 750-2938), with a copy to JPMorgan Chase
Bank, N.A., at 201 E. Main, 1st Floor, El Paso, TX 78801, Attention of Marty
Cedillos (Telecopy No. (915) 546-6575); and

 

(c) if to a Lender, to it at its address (or telecopy number) set forth on
Schedule 2.01 or in the Assignment and Acceptance pursuant to which such Lender
shall have become a party hereto.

 

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All notices and other communications given to any party hereto in accordance
with the provisions of this Agreement shall be deemed to have been given on the
date of receipt if delivered by hand or overnight courier service or sent by
telecopy or on the date five Business Days after dispatch by certified or
registered mail if mailed, in each case delivered, sent or mailed (properly
addressed) to such party as provided in this Section 11.01 or in accordance with
the latest unrevoked direction from such party given in accordance with this
Section 11.01.

 

SECTION 11.02. Survival of Agreement. All covenants, agreements, representations
and warranties made by each Borrower herein and in the certificates or other
instruments prepared or delivered in connection with or pursuant to this
Agreement or any other Loan Document shall be considered to have been relied
upon by the Lenders and the Issuing Bank and shall survive the making by the
Lenders of the Loans and the issuance of Letters of Credit by the Issuing Bank,
regardless of any investigation made by the Lenders or the Issuing Bank or on
their behalf, and shall continue in full force and effect as long as the
principal of or any accrued interest on any Loan or any Fee or any other amount
payable under this Agreement or any other Loan Document is outstanding and
unpaid or any Letter of Credit is outstanding (for which sufficient cash
collateral has not been deposited with the Collateral Agent) and so long as the
Commitments have not been terminated. The provisions of Sections 2.12 (except as
expressly limited therein), 2.14, 2.18 and 11.05 shall remain operative and in
full force and effect regardless of the expiration of the term of this
Agreement, the consummation of the transactions contemplated hereby, the
repayment of any of the Loans, the expiration of the Commitments, the expiration
of any Letter of Credit, the invalidity or unenforceability of any term or
provision of this Agreement or any other Transaction Document, or any
investigation made by or on behalf of the Administrative Agent, the Collateral
Agent, any Lender or the Issuing Bank.

 

SECTION 11.03. Binding Effect. This Agreement shall become effective when it
shall have been executed by the Borrowers and the Administrative Agent and when
the Administrative Agent shall have received counterparts hereof which, when
taken together, bear the signatures of each of the other parties hereto.

 

SECTION 11.04. Successors and Assigns. (a) Whenever in this Agreement any of the
parties hereto is referred to, such reference shall be deemed to include the
permitted successors and assigns of such party; and all covenants, promises and
agreements by or on behalf of each Borrower, the Administrative Agent, the
Issuing Bank or the Lenders that are contained in this Agreement shall bind and
inure to the benefit of their respective successors and assigns.

 

(b) Each Lender may assign to one or more assignees all or a portion of its
interests, rights and obligations under this Agreement (including all or a
portion of its Commitment and the Loans at the time owing to it); provided,
however, that (i) except in the case of an assignment to a Lender or an
Affiliate of a Lender, (x) El Paso must give its prior written consent to such
assignment (which consent shall not be unreasonably withheld) and (y) the amount
of the Commitment of the assigning Lender subject to each such assignment
(determined as of the date the Assignment and Acceptance with respect

 

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to such assignment is delivered to the Administrative Agent) shall not be less
than $5,000,000 (or, if less, the entire remaining amount of such Lender’s
Commitment), provided further that during the continuation of an Event of
Default, the consent of El Paso shall not be required for such assignment, (ii)
all assignments shall require the prior written consent of the Administrative
Agent and the Issuing Bank (which consents shall not be unreasonably withheld),
(iii) each such assignment shall be of a constant, and not a varying, percentage
of all the assigning Lender’s rights and obligations under this Agreement, (iv)
the parties to each such assignment shall execute and deliver to the
Administrative Agent an Assignment and Acceptance, together with a processing
and recordation fee of $3,500, and (v) the assignee, if it shall not be a
Lender, shall deliver to the Administrative Agent an Administrative
Questionnaire. Upon acceptance and recording pursuant to paragraph (e) of this
Section 11.04, from and after the effective date specified in each Assignment
and Acceptance, which effective date shall be at least five Business Days after
the execution thereof, (A) the assignee thereunder shall be a party hereto and,
to the extent of the interest assigned by such Assignment and Acceptance, have
the rights and obligations of a Lender under this Agreement and (B) the
assigning Lender thereunder shall, to the extent of the interest assigned by
such Assignment and Acceptance, be released from its obligations under this
Agreement (and, in the case of an Assignment and Acceptance covering all or the
remaining portion of an assigning Lender’s rights and obligations under this
Agreement, such Lender shall cease to be a party hereto but shall continue to be
entitled to the benefits of Sections 2.12 (except as expressly limited therein),
2.14, 2.18 and 11.05, as well as to any Fees accrued for its account and not yet
paid).

 

(c) By executing and delivering an Assignment and Acceptance, the assigning
Lender thereunder and the assignee thereunder shall be deemed to confirm to and
agree with each other and the other parties hereto as follows: (i) such
assigning Lender warrants that it is the legal and beneficial owner of the
interest being assigned thereby free and clear of any adverse claim and that its
Commitment, and the outstanding balance of its Loans, in each case without
giving effect to assignments thereof which have not become effective, are as set
forth in such Assignment and Acceptance, (ii) except as set forth in (i) above,
such assigning Lender makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with this Agreement, or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement,
any other Loan Document or any other instrument or document furnished pursuant
hereto, or the financial condition of the Borrowers or the performance or
observance by either Borrower of any of its obligations under this Agreement,
any other Loan Document or any other instrument or document furnished pursuant
hereto; (iii) such assignee represents and warrants that it is legally
authorized to enter into such Assignment and Acceptance; (iv) such assignee
confirms that it has received a copy of this Agreement, together with copies of
the most recent financial statements referred to in Section 3.05 or delivered
pursuant to Section 5.04 and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
such Assignment and Acceptance; (v) such assignee will independently and without
reliance upon the Administrative Agent, the Collateral Agent, such assigning
Lender or any other Lender and based on such documents and information as it
shall deem appropriate at the

 

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time, continue to make its own credit decisions in taking or not taking action
under this Agreement; (vi) such assignee appoints and authorizes the
Administrative Agent and the Collateral Agent to take such action as agent on
its behalf and to exercise such powers under this Agreement as are delegated to
the Administrative Agent and the Collateral Agent, respectively, by the terms
hereof, together with such powers as are reasonably incidental thereto; and
(vii) such assignee agrees that it will perform in accordance with their terms
all the obligations which by the terms of this Agreement are required to be
performed by it as a Lender.

 

(d) The Administrative Agent, acting for this purpose as an agent of the
Borrowers, shall maintain at one of its offices in The City of New York a copy
of each Assignment and Acceptance delivered to it and a register for the
recordation of the names and addresses of the Lenders, and the Commitment of,
and principal amount of the Loans owing to, each Lender pursuant to the terms
hereof from time to time (the “Register”). The entries in the Register shall be
conclusive and the Borrowers, the Administrative Agent, the Issuing Bank, the
Collateral Agent and the Lenders may treat each person whose name is recorded in
the Register pursuant to the terms hereof as a Lender hereunder for all purposes
of this Agreement, notwithstanding notice to the contrary. The Register shall be
available for inspection by each Borrower, the Issuing Bank, the Collateral
Agent and any Lender, at any reasonable time and from time to time upon
reasonable prior notice.

 

(e) Upon its receipt of a duly completed Assignment and Acceptance executed by
an assigning Lender and an assignee, an Administrative Questionnaire completed
in respect of the assignee (unless the assignee shall already be a Lender
hereunder), the processing and recordation fee referred to in paragraph (b)
above and, if required, the written consent of each Borrower, the Issuing Bank
and the Administrative Agent to such assignment, the Administrative Agent shall
(i) accept such Assignment and Acceptance, (ii) record the information contained
therein in the Register and (iii) give prompt notice thereof to the Lenders and
the Issuing Bank. No assignment shall be effective unless it has been recorded
in the Register as provided in this paragraph (e).

 

(f) Each Lender may without the consent of the Borrowers, the Issuing Bank or
the Administrative Agent sell participation interests to one or more banks or
other entities in all or a portion of its rights and obligations under this
Agreement (including all or a portion of its Commitment and the Loans owing to
it); provided, however, that (i) such Lender’s obligations under this Agreement
shall remain unchanged, (ii) such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations, (iii) the
participating banks or other entities shall be entitled to the benefit of the
cost protection provisions contained in Sections 2.12, 2.14 and 2.18 to the same
extent as if they were Lenders, provided, however, the right of each holder of a
participation to receive payment under such sections shall be limited to the
lesser of (a) the amounts actually incurred by such holder for which payment is
provided under said sections and (b) the amounts that would have been payable
under said sections by the applicable Borrower to the Lender granting the
participation to such holder had such participation not been granted, and (iv)
the Borrowers, the Administrative Agent, the Issuing Bank and the Lenders shall
continue to deal solely and directly with such

 

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Lender in connection with such Lender’s rights and obligations under this
Agreement, and such Lender shall retain the sole right to enforce the
obligations of the Borrowers relating to the Loans or L/C Disbursements and to
approve any amendment, modification or waiver of any provision of this Agreement
(other than amendments, modifications or waivers decreasing any fees payable
hereunder or the amount of principal of or the rate at which interest is payable
on the Loans, extending any scheduled principal payment date or date fixed for
the payment of interest on the Loans or increasing or extending the
Commitments).

 

(g) Any Lender or participant may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
11.04, disclose to the assignee or participant or proposed assignee or
participant any information relating to the Borrowers furnished to such Lender
by or on behalf of the Borrowers; provided that, prior to any such disclosure of
information designated by the Borrowers as confidential, each such assignee or
participant or proposed assignee or participant shall execute an agreement
whereby such assignee or participant shall agree (subject to customary
exceptions) to preserve the confidentiality of such confidential information on
terms no less restrictive than those applicable to the Lenders pursuant to
Section 11.16.

 

(h) Any Lender may at any time assign all or any portion of its rights under
this Agreement to a Federal Reserve Bank to secure extensions of credit by such
Federal Reserve Bank to such Lender; provided that no such assignment shall
release a Lender from any of its obligations hereunder or substitute any such
Bank for such Lender as a party hereto. In order to facilitate such an
assignment to a Federal Reserve Bank, each Borrower shall, at the request of the
assigning Lender, duly execute and deliver to the assigning Lender a promissory
note or notes evidencing the Loans made to such Borrower by the assigning Lender
hereunder.

 

(i) Neither Borrower shall assign or delegate any of its rights or duties
hereunder without the prior written consent of the Administrative Agent, the
Issuing Bank and each Lender, and any attempted assignment without such consent
shall be null and void.

 

(j) In the event that S&P, Moody’s and Thompson’s BankWatch (or InsuranceWatch
Ratings Service, in the case of Lenders that are insurance companies (or Best’s
Insurance Reports, if such insurance company is not rated by Insurance Watch
Ratings Service)) shall, after the date that any Lender becomes a Lender,
downgrade the long-term certificate of deposit ratings of such Lender, and the
resulting ratings shall be below BBB-, Baa3 and C (or BB, in the case of a
Lender that is an insurance company (or B, in the case of an insurance company
not rated by InsuranceWatch Ratings Service)), then the Issuing Bank shall have
the right, but not the obligation, at its own expense, upon notice to such
Lender and the Administrative Agent, to replace (or to request the Borrowers to
use their reasonable efforts to replace) such Lender with an assignee (in
accordance with and subject to the restrictions contained in paragraph (b)
above), and such Lender hereby agrees to transfer and assign without recourse
(in accordance with and subject to the restrictions contained in paragraph (b)
above) all its interests, rights and obligations in respect of its Commitment to
such assignee; provided,

 

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however, that (i) no such assignment shall conflict with any law, rule and
regulation or order of any Governmental Authority and (ii) the Issuing Bank or
such assignee, as the case may be, shall pay to such Lender in immediately
available funds on the date of such assignment the principal of and interest
accrued to the date of payment on the Loans made by such Lender hereunder and
all other amounts accrued for such Lender’s account or owed to it hereunder.

 

SECTION 11.05. Expenses; Indemnity. (a) Each Borrower jointly and severally
agrees to pay all reasonable out-of-pocket expenses incurred by the
Administrative Agent, the Collateral Agent and the Issuing Bank in connection
with the syndication of the credit facilities provided for herein and the
preparation and administration of this Agreement and the other Loan Documents or
in connection with any amendments, modifications or waivers of the provisions
hereof or thereof (whether or not the transactions hereby or thereby
contemplated shall be consummated) or incurred by the Administrative Agent, the
Collateral Agent or any Lender in connection with the enforcement or protection
of its rights in connection with this Agreement and the other Loan Documents or
in connection with the Loans made or Letters of Credit issued hereunder,
including the reasonable fees, charges and disbursements of Cravath, Swaine &
Moore LLP, counsel for the Administrative Agent and the Collateral Agent, and,
in connection with any such enforcement or protection, the reasonable fees,
charges and disbursements of any other counsel for the Administrative Agent, the
Collateral Agent or any Lender.

 

(b) Each Borrower jointly and severally agrees to indemnify the Administrative
Agent, the Collateral Agent, each Lender and the Issuing Bank, each Affiliate of
any of the foregoing persons and each of their respective directors, officers,
employees and agents (each such person being called an “Indemnitee”) against,
and to hold each Indemnitee harmless from, any and all losses, claims, damages,
liabilities and related expenses, including reasonable counsel fees, charges and
disbursements, incurred by or asserted against any Indemnitee arising out of, in
any way connected with, or as a result of (i) the execution or delivery of this
Agreement or any other Loan Document or any agreement or instrument contemplated
thereby, the performance by the parties thereto of their respective obligations
thereunder or the consummation of the Transactions and the other transactions
contemplated thereby, (ii) the use of the proceeds of the Loans or issuance of
Letters of Credit, (iii) any claim, litigation, investigation or proceeding
relating to any of the foregoing, whether or not any Indemnitee is a party
thereto, (iv) any actual or alleged presence or Release of Hazardous Materials
on any property owned or operated by either Borrower or any Subsidiary, or any
Environmental Claim related in any way to either Borrower or any Subsidiary or
(v) any strict liability or liability without fault or other liability of an
owner or vendor relating in any way to the Nuclear Fuel, whether arising out of
statute, judicial decision or otherwise; provided that such indemnity shall not,
as to any Indemnitee, be available to the extent that such losses, claims,
damages, liabilities or related expenses are determined by a court of competent
jurisdiction to have resulted from the gross negligence or willful misconduct of
such Indemnitee.

 

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(c) The provisions of this Section 11.05 shall remain operative and in full
force and effect regardless of the expiration of the term of this Agreement, the
consummation of the transactions contemplated hereby, the repayment of any of
the Loans, the expiration of the Commitments, the expiration of any Letter of
Credit, the invalidity or unenforceability of any term or provision of this
Agreement or any other Transaction Document, or any investigation made by or on
behalf of the Administrative Agent, the Collateral Agent, any Lender or the
Issuing Bank. All amounts due under this Section 11.05 shall be payable on
written demand therefor.

 

SECTION 11.06. Right of Setoff. If an Event of Default shall have occurred and
be continuing, each Lender is hereby authorized at any time and from time to
time, to the extent not prohibited by applicable law, to set off and apply any
and all deposits (general or special, time or demand, provisional or final) at
any time held and other indebtedness at any time owing by such Lender to or for
the credit or the account of either Borrower against any of and all the
Obligations now or hereafter existing under this Agreement and the other Loan
Documents held by such Lender, irrespective of whether or not such Lender shall
have made any demand under this Agreement or such other Loan Document and
although such obligations may be unmatured. The rights of each Lender under this
Section 11.06 are in addition to other rights and remedies (including other
rights of setoff) which such Lender may have.

 

SECTION 11.07. Applicable Law. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
(OTHER THAN LETTERS OF CREDIT) SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. EACH LETTER OF CREDIT SHALL
BE GOVERNED BY, AND SHALL BE CONSTRUED IN ACCORDANCE WITH, THE LAWS OR RULES
DESIGNATED IN SUCH LETTER OF CREDIT, OR IF NO SUCH LAWS OR RULES ARE DESIGNATED,
THE UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS MOST RECENTLY PUBLISHED
AND IN EFFECT, ON THE DATE SUCH LETTER OF CREDIT WAS ISSUED, BY THE
INTERNATIONAL CHAMBER OF COMMERCE (THE “UNIFORM CUSTOMS”) AND, AS TO MATTERS NOT
GOVERNED BY THE UNIFORM CUSTOMS, THE LAWS OF THE STATE OF NEW YORK.

 

SECTION 11.08. Waivers; Amendment. (a) No failure or delay of the Administrative
Agent, the Collateral Agent, any Lender or the Issuing Bank in exercising any
power or right hereunder or under any other Loan Document shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Administrative Agent, the
Collateral Agent, the Issuing Bank and the Lenders hereunder and under the other
Loan Documents are cumulative and are not exclusive of any rights or remedies
that they would otherwise have. No waiver of any provision of this Agreement or
any other Loan Document or consent to any departure by either Borrower therefrom
shall in any event be effective unless the same shall be permitted by paragraph
(b) below, and then such waiver or consent shall be effective only

 

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in the specific instance and for the purpose for which given. No notice or
demand on the Borrowers in any case shall entitle either Borrower to any other
or further notice or demand in similar or other circumstances.

 

(b) Neither this Agreement nor any provision hereof may be waived, amended or
modified except pursuant to an agreement or agreements in writing entered into
by the Borrowers and the Required Lenders; provided, however, that no such
agreement shall (i) decrease the principal amount of, or extend the maturity of
or any scheduled principal payment date or date for the payment of any interest
on any Loan or any date for reimbursement of an L/C Disbursement, or waive or
excuse any such payment or any part thereof, or decrease the rate of interest on
any Loan or L/C Disbursement, without the prior written consent of each Lender
directly adversely affected thereby, (ii) increase or extend the Commitment of
any Lender without the prior written consent of such Lender, (iii) decrease the
Commitment Fees or L/C Participation Fees of any Lender, or extend the date of
payment of such fees, without the prior written consent of such Lender or (iv)
amend or modify the pro rata sharing requirements of Section 2.15, the
provisions of this Section 11.08 or Section 11.04(i), the definition of the term
“Required Lenders”, release El Paso from its guarantee hereunder, release any
Subsidiary from any guarantee of the El Paso Obligations, or release all or
substantially all of the Collateral, without the prior written consent of each
Lender; provided further, however, that no such agreement shall amend, modify or
otherwise affect the rights or duties of the Administrative Agent, the
Collateral Agent or the Issuing Bank hereunder or under any other Loan Document
without the prior written consent of the Administrative Agent, the Collateral
Agent or the Issuing Bank, respectively.

 

SECTION 11.09. Interest Rate Limitation. Notwithstanding anything herein to the
contrary, if at any time the interest rate applicable to any Loan or L/C
Disbursement, together with all fees, charges and other amounts which are
treated as interest on such Loan or L/C Disbursement under applicable law
(collectively the “Charges”), shall exceed the maximum lawful rate (the “Maximum
Rate”) which may be contracted for, charged, taken, received or reserved by the
Lender holding such Loan or the Issuing Bank in accordance with applicable law,
the rate of interest payable in respect of such Loan or L/C Disbursement
hereunder, together with all Charges payable in respect thereof, shall be
limited to the Maximum Rate and, to the extent lawful, the interest and Charges
that would have been payable in respect of such Loan or L/C Disbursement but
were not payable as a result of the operation of this Section 11.09 shall be
cumulated and the interest and Charges payable to such Lender in respect of
other Loans or L/C Disbursements or periods shall be increased (but not above
the Maximum Rate therefor) until such cumulated amount, together with interest
thereon at the Federal Funds Effective Rate to the date of repayment, shall have
been received by such Lender; provided that at any time Texas law shall
establish the Maximum Rate, the Maximum Rate shall be the “indicated rate
ceiling” (as defined in Chapter One of the Texas Credit Code, V.T.C.S. Art.
5069-1.04 et seq.) as in effect from time to time.

 

SECTION 11.10. Entire Agreement. THIS AGREEMENT, THE FEE LETTER AND THE OTHER
LOAN DOCUMENTS CONSTITUTE THE ENTIRE CONTRACT BETWEEN THE PARTIES RELATIVE TO
THE SUBJECT

 

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MATTER HEREOF. ANY OTHER PREVIOUS AGREEMENT AMONG THE PARTIES WITH RESPECT TO
THE SUBJECT MATTER HEREOF IS SUPERSEDED BY THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS. NOTHING IN THIS AGREEMENT OR IN THE OTHER LOAN DOCUMENTS, EXPRESSED
OR IMPLIED, IS INTENDED TO CONFER UPON ANY PARTY OTHER THAN THE PARTIES HERETO
AND THERETO ANY RIGHTS, REMEDIES, OBLIGATIONS OR LIABILITIES UNDER OR BY REASON
OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS.

 

SECTION 11.11. Waiver of Jury Trial. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 11.11.

 

SECTION 11.12. Severability. In the event any one or more of the provisions
contained in this Agreement or in any other Loan Document should be held
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein shall
not in any way be affected or impaired thereby (it being understood that the
invalidity of a particular provision in a particular jurisdiction shall not in
and of itself affect the validity of such provision in any other jurisdiction).
The parties shall endeavor in good-faith negotiations to replace the invalid,
illegal or unenforceable provisions with valid provisions the economic effect of
which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.

 

SECTION 11.13. Counterparts. This Agreement may be executed in counterparts (and
by different parties hereto on different counterparts), each of which shall
constitute an original but all of which when taken together shall constitute a
single contract, and shall become effective as provided in Section 11.03.
Delivery of an executed signature page to this Agreement by facsimile
transmission shall be as effective as delivery of a manually signed counterpart
of this Agreement.

 

SECTION 11.14. Headings. Article and Section headings and the Table of Contents
used herein are for convenience of reference only, are not part of this
Agreement and are not to affect the construction of, or to be taken into
consideration in interpreting, this Agreement.

 

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SECTION 11.15. Jurisdiction; Consent to Service of Process. (a) Each Borrower
hereby irrevocably and unconditionally submits, for itself and its property, to
the nonexclusive jurisdiction of any New York State court or Federal court of
the United States of America sitting in New York City, and any appellate court
from any thereof, in any action or proceeding arising out of or relating to this
Agreement or the other Loan Documents, or for recognition or enforcement of any
judgment, and each of the parties hereto hereby irrevocably and unconditionally
agrees that all claims in respect of any such action or proceeding may be heard
and determined in such New York State or, to the extent permitted by law, in
such Federal court. Each of the parties hereto agrees that a final judgment in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement shall affect any right that the Administrative Agent,
the Collateral Agent, the Issuing Bank or any Lender may otherwise have to bring
any action or proceeding relating to this Agreement or the other Loan Documents
against either Borrower or its respective properties in the courts of any
jurisdiction.

 

(b) Each Borrower hereby irrevocably and unconditionally waives, to the fullest
extent it may legally and effectively do so, any objection which it may now or
hereafter have to the laying of venue of any suit, action or proceeding arising
out of or relating to this Agreement or the other Loan Documents in any New York
State or Federal court. Each of the parties hereto hereby irrevocably waives, to
the fullest extent permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.

 

(c) Each party to this Agreement irrevocably consents to service of process in
the manner provided for notices in Section 11.01. Nothing in this Agreement or
any other Loan Document will affect the right of any party to this Agreement to
serve process in any other manner permitted by law.

 

SECTION 11.16. Confidentiality. The Administrative Agent, the Collateral Agent,
the Issuing Bank and each of the Lenders agrees to keep confidential (and to use
its best efforts to cause its respective agents and representatives to keep
confidential) the Information (as defined below) and all copies thereof,
extracts therefrom and analyses or other materials based thereon, except that
the Administrative Agent, the Collateral Agent, the Issuing Bank or any Lender
shall be permitted to disclose Information (a) to such of its respective
officers, directors, employees, agents, affiliates and representatives as need
to know such Information, (b) to the extent requested by any regulatory
authority, (c) to the extent otherwise required by applicable laws and
regulations or by any subpoena or similar legal process, (d) in connection with
any suit, action or proceeding relating to the enforcement of its rights
hereunder or under the other Loan Documents, (e) to the extent such Information
(i) becomes publicly available other than as a result of a breach of this
Section 11.16 or (ii) becomes available to the Administrative Agent, the Issuing
Bank, any Lender or the Collateral Agent on a nonconfidential basis from a
source other than the Borrowers, or (f) to the extent permitted by Section
11.04(g). For the purposes of this Section 11.16 , “Information” shall mean all
financial statements, certificates, reports, agreements and information
(including all analyses, compilations and studies prepared by the Administrative
Agent,

 

79

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the Collateral Agent, the Issuing Bank or any Lender based on any of the
foregoing) that are received from the Borrowers and related to the Borrowers,
any shareholder of El Paso or any employee, customer or supplier of either
Borrower, other than any of the foregoing that were available to the
Administrative Agent, the Collateral Agent, the Issuing Bank or any Lender on a
nonconfidential basis prior to its disclosure thereto by either Borrower, and
which are in the case of Information provided after the date hereof, clearly
identified at the time of delivery as confidential. The provisions of this
Section 11.16 shall remain operative and in full force and effect regardless of
the expiration and term of this Agreement.

 

SECTION 11.17. Texas Revolving Credit Statute. If, notwithstanding the
provisions of Section 11.07, Texas law shall be applied by any Governmental
Authority to this Agreement, the other Loan Documents or the obligations of
either Borrower hereunder or thereunder, each Borrower hereby agrees that,
pursuant to Tex. Rev. Civ. Stat. Ann. art. 5069-15.10(b), Chapter 15 of Title 79
of the Revised Civil Statutes of Texas, as amended, shall not govern or in any
manner apply to its obligations hereunder or thereunder.

 

SECTION 11.18. No Recourse; Multiple Capacities. (a) Wherever in this Agreement
or the other Loan Documents JPMorgan has undertaken any obligations in its
capacity as Trustee, it has done so solely in such capacity and not in its
individual capacity. JPMorgan shall not be liable for the obligations or
liabilities of the Trustee hereunder or under any other Loan Document, except to
the extent such obligations or liabilities result from JPMorgan’s gross
negligence or willful misconduct.

 

(b) Each party to this Agreement (i) acknowledges that JPMorgan, in addition to
acting in its capacity as Trustee, will be party to the Loan Documents in
various other capacities, including in its capacity as Administrative Agent,
Collateral Agent, Issuing Bank and a Lender, (ii) hereby consents to JPMorgan’s
acting in such capacities and (iii) hereby waives any claim of fiduciary duty or
conflict of interest arising out of or relating to JPMorgan’s serving in such
other capacities.

 

SECTION 11.19. Limited Representations, Warranties and Covenants of Trustee.
With respect to representations and warranties contained in Article III, the
affirmative covenants contained in Article V and the negative covenants
contained in Article VI, it is understood and agreed that (a) the Trustee has
made no independent inquiry as to (i) the assets placed in trust into the Rio
Grande Resources Trust II, (ii) any facts concerning El Paso and the
Subsidiaries or as to the status or condition of any of their assets or any
disclosures made by them or (iii) the existence of any Liens on the Collateral
in existence before the Trustee became or becomes the owner of such property
pursuant to the Purchase Contract and (b) the Trustee’s representations,
warranties and covenants are limited to itself and those matters within its
control. The Trustee has no actual knowledge of any facts that would indicate
that any such representations or warranties by El Paso or the Subsidiaries are
untrue.

 

SECTION 11.20. USA Patriot Act Notice. Each Lender and the Administrative Agent
(for itself and not on behalf of any Lender) hereby notifies the

 

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Borrowers that pursuant to the requirements of the USA Patriot Act, it is
required to obtain, verify and record information that identifies the Borrowers,
which information includes the name and address of the Borrowers and other
information that will allow such Lender or the Administrative Agent, as
applicable, to identify the Borrowers in accordance with the USA Patriot Act.

 

81

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.

 

EL PASO ELECTRIC COMPANY,

   

by

        /s/ Terry D. Bassham        

Name:

 

Terry D. Bassham

       

Title:

 

Exec. VP & Chief Financial & Admin. Officer

JPMORGAN CHASE BANK, N.A., not in its

individual capacity, but solely in its capacity as

Trustee,

   

by

        /s/ Cary W. Gilliam        

Name:

 

CARY W. GILLIAM

       

Title:

 

VICE PRESIDENT

JPMORGAN CHASE BANK, N.A., individually and

as administrative agent, collateral agent and issuing

bank,

   

by

        /s/ Ruben R. Hernandez        

Name:

 

Ruben R. Hernandez

       

Title:

 

Vice President

 

82

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SIGNATURE PAGE TO THE

EL PASO ELECTRIC COMPANY

CREDIT AGREEMENT

 

LENDER: Union Bank of California N.A.

by:  

/s/ Dennis G. Blank

Name:

 

Dennis G. Blank

Title:

 

Vice President

 

--------------------------------------------------------------------------------

SIGNATURE PAGE TO THE

EL PASO ELECTRIC COMPANY

CREDIT AGREEMENT

 

LENDER: The Bank of New York

    by:  

/s/ Craig Anderson

   

Name:

 

Craig Anderson

   

Title:

 

Vice President

 

--------------------------------------------------------------------------------

SIGNATURE PAGE TO THE

EL PASO ELECTRIC COMPANY

CREDIT AGREEMENT

 

LENDER: The Norinchukin Bank, New York Branch

    by:  

/s/ Toshifumi Tsukitani

   

Name:

 

Toshifumi Tsukitani

   

Title:

 

General Manager

 

--------------------------------------------------------------------------------

SIGNATURE PAGE TO THE

EL PASO ELECTRIC COMPANY

CREDIT AGREEMENT

 

BANK HAPOALIM B.M.

by:  

/s/ James P. Surless

Name:

 

JAMES P. SURLESS

Title:

 

VICE PRESIDENT

 

--------------------------------------------------------------------------------

SIGNATURE PAGE TO THE

EL PASO ELECTRIC COMPANY

CREDIT AGREEMENT

 

LENDER: Bank of Communications, New York Branch

by:  

/s/ Yuning Liu

Name:

 

Yuning Liu

Title:

 

Deputy General Manager

 

--------------------------------------------------------------------------------

     EXHIBIT A      JPMorgan Chase Bank    “JP Morgan Logo appears here”     
Loan and Agency Services          

1111 Fannin Street, 10th Floor

         

Houston, TX 77002

         

Tel 713.750.2366

         

Fax 713.750.2666

         

 

ADMINISTRATIVE QUESTIONNAIRE FOR:

 

El Paso Electric Company

DEPOSIT FUNDED CREDIT AGREEMENT

 

Please accurately complete the following information and return via FAX or
E-Mail to the attention

of Michelle Straley and Kelly Schrock at JPMorgan Chase Bank as soon as
possible. It is very important that all of

the requested information is accurately completed and returned promptly.

 

TELEPHONE: 713.750.2366 / 713.216.3939

FAX: 713.750.2666 / 713.216.2291

E-MAIL ADDRESS:

Kelly.Schrock@JPMorgan.com

Michelle.Straley@JPMorgan.com

 

LEGAL NAME OF LENDING INSTITUTION TO APPEAR IN DOCUMENTATION:   NUMBER OF LINES
NEEDED FOR SIGNATURE PAGE:                      INVESTOR TYPE:      INVESTOR
PARENT:      GENERAL INFORMATION - DOMESTIC LENDING OFFICE: Institution Name:   
  Street Address:      City, State and Zip Code:      GENERAL INFORMATION -
EURODOLLAR LENDING OFFICE: Institution Name:      Street Address:      City,
State and Zip Code:          TAX STATUS:

Is your institution a non-Resident Alien, foreign corporation or partnership?  
                              Yes          No           

If yes:

•      What is the country of incorporation or organization?

    

•      Tax Form W-8BEN or W-8ECI should be enclosed as per the Tax Section of
the referenced Credit Agreement. Failure to properly complete and return the
applicable form will subject your institution to withholding tax. Please also
mail an original tax form to the address listed on the top of this form.

If no:

•      Please submit Tax Form W-9. Please also mail an original tax form to the
address listed on the top of this form

Lender’s Tax Identification Number:

            CONTACTS/NOTIFICATION METHODS:      CREDIT CONTACT:     

 

Administrative Questionnaire

   Page 1 of 2     

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Name:      Street Address:      City, State and Zip Code:      Telephone Number:
     Fax Number:      E-mail Address:      ADMINISTRATIVE CONTACTS - BORROWINGS,
PAYDOWNS, INTEREST, FEES, ETC. Name:      Street Address:      City, State and
Zip Code:      Telephone Number:      Fax Number:      E-mail Address:      BID
LOAN NOTIFICATION: (IF APPLICABLE) Name:      Street Address:      City, State
and Zip Code:      Telephone Number:      Fax Number:      E-mail Address:     
       PAYMENT INSTRUCTIONS USD: Name of bank where funds are to be transferred:
  Routing Transit/ABA Number of Bank where funds are to be transferred:   Name
of Account, if applicable:   Account Number:      Additional Information:       
     Other applicable foreign currencies: Name of bank where funds are to be
transferred:   Routing Transit/ABA Number of Bank where funds are to be
transferred:   Name of Account, if applicable:   Account Number:      Additional
Information:            

 

Administrative Questionnaire

   Page 2 of 2     

--------------------------------------------------------------------------------

EXHIBIT B

 

[Form of]

 

ASSIGNMENT AND ACCEPTANCE

 

Reference is made to the Credit Agreement dated as of December 17, 2004 (the
“Credit Agreement”), among El Paso Electric Company (“El Paso”), JPMorgan Chase
Bank, N.A., not in its individual capacity, but solely in its capacity as
trustee of the Rio Grande Resources Trust II (the “Trustee”), the lenders party
thereto (the “Lenders”), and JPMorgan Chase Bank, N.A., as issuing bank (in such
capacity, the “Issuing Bank”), as administrative agent (in such capacity, the
“Administrative Agent”) and as collateral agent for the Lenders. Terms defined
in the Credit Agreement are used herein with the same meanings.

 

1. The Assignor hereby sells and assigns, without recourse, to the Assignee, and
the Assignee hereby purchases and assumes, without recourse, from the Assignor,
effective as of the Effective Date set forth below (but not prior to the
recordation of the information contained herein in the Register pursuant to
Section 11.04(e) of the Credit Agreement), the interests set forth below (the
“Assigned Interest”) in the Assignor’s rights and obligations under the Credit
Agreement and the other Loan Documents, including, without limitation, the
amounts and percentages set forth below of (i) the Commitments of the Assignor
on the Effective Date, (ii) the Loans owing to the Assignor which are
outstanding on the Effective Date and (iii) participations in Letters of Credit
which are outstanding on the Effective Date. Each of the Assignor and the
Assignee hereby makes and agrees to be bound by all the representations,
warranties and agreements set forth in Section 11.04(c) of the Credit Agreement,
a copy of which has been received by each such party. From and after the
Effective Date (i) the Assignee shall be a party to and be bound by the
provisions of the Credit Agreement and, to the extent of the interests assigned
by this Assignment and Acceptance, have the rights and obligations of a Lender
thereunder and under the Loan Documents and (ii) the Assignor shall, to the
extent of the interests assigned by this Assignment and Acceptance, relinquish
its rights and be released from its obligations under the Credit Agreement.

 

2. This Assignment and Acceptance is being delivered to the Administrative Agent
together with (i) if the Assignee is organized under the laws of a jurisdiction
outside the United States, the forms specified in Section 2.18(e) of the Credit
Agreement, duly completed and executed by such Assignee, (ii) if the Assignee is
not already a Lender under the Credit Agreement, an Administrative Questionnaire
in the form of Exhibit A to the Credit Agreement and (iii) unless otherwise
agreed to by the Administrative Agent, a processing and recordation fee of
$3,500 pursuant to Section 11.04(b) of the Credit Agreement.

 

3. THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

 

--------------------------------------------------------------------------------

Date of Assignment:                                         
                                        
                                                             

Legal Name of Assignor:                                         
                                        
                                                     

Legal Name of Assignee:                                         
                                        
                                                     

Assignee’s Address for Notices:                                         
                                        
                                        

 

Effective Date of Assignment:                                         
                                        
                                             

Principal Amount of Commitment Assigned:
                                        
                                                             

Percentage of Commitment Assigned */:                                         
                                                                     

 

The terms set forth above are

hereby agreed to:

     

Accepted **/:

[Name of Assignor],

as Assignor,

     

JPMORGAN CHASE BANK, N.A.,

as Administrative Agent and Issuing

Bank,

by:

         

by:

       

Name:

             

Name:

       

Title:

             

Title:

   

[Name of Assignee],

     

EL PASO ELECTRIC COMPANY,

as Assignee,

       

by:

         

by:

       

Name:

             

Name:

       

Title:

             

Title:

           

JPMORGAN CHASE BANK, N.A.,

not in its individual capacity, but solely in its capacity as trustee of the RIO
GRANDE RESOURCES TRUST II,

           

by:

                       

Name:

                       

Title:

   

--------------------------------------------------------------------------------

*/ Set forth, to at least 8 decimals, as a percentage of the Total Commitment of
all Lenders.

 

**/ To be completed to the extent consents are required under Section 11.04(b)
of the Credit Agreement.

 

2

--------------------------------------------------------------------------------

EXHIBIT C

 

[Form of]

 

BORROWING REQUEST

 

JPMorgan Chase Bank, N.A., as Administrative Agent

For the Lenders referred to below,

270 Park Avenue

New York, NY 10017

 

Attention of [    ]

 

[Date]

 

Ladies and Gentlemen:

 

The undersigned, [EL PASO ELECTRIC COMPANY] [JPMORGAN CHASE BANK, not in its
individual capacity, but solely in its capacity as trustee of the Rio Grande
Resources Trust II] (the “Borrower”), refers to the Credit Agreement dated as of
December 17, 2004, as amended, supplemented or otherwise modified from time to
time (the “Credit Agreement”), among El Paso Electric Company, JPMorgan Chase
Bank, not in its individual capacity, but solely in its capacity as trustee of
the Rio Grande Resources Trust II, the lenders from time to time party thereto
(the “Lenders”), and JPMorgan Chase Bank, as issuing bank, as administrative
agent and as collateral agent for the Lenders. Capitalized terms used herein and
not otherwise defined herein shall have the meanings assigned to such terms in
the Credit Agreement. The Borrower hereby gives you notice pursuant to Section
2.03 of the Credit Agreement that it requests a Borrowing under the Credit
Agreement, and in that connection sets forth below the terms on which such
Borrowing is requested to be made:

 

(A) Date of Borrowing (which is a Business Day)
                                        
                                                                  

 

(B) Principal Amount of Borrowing 1                                         
                                        
                                              

 

(C) Interest rate basis 2                                         
                                        
                                                                     

 

(D) Interest Period and the last day thereof 3
                                        
                                                                           

 

(E) Funds are requested to be disbursed to the Borrower’s account with [JPMorgan
Chase Bank] (Account No. [        ]).

 

Upon acceptance of any or all of the Loans offered by the Lenders in response to
this request, the Borrower shall be deemed to have represented and Warranted
that the conditions to lending specified in Sections 4.0 l(b) and (c) of the
Credit Agreement have been satisfied.

 

[APPLICABLE BORROWER], by:        

Name:

   

Title: [Responsible Officer]

--------------------------------------------------------------------------------

1 With respect to any Eurodollar Borrowing, not less than $5,000,000 and in an
integral multiple of $1,000,000, and with respect to any ABR Borrowing, not less
than $100,000 and in an integral multiple of $1,000, but in any event not
exceeding the available Total Commitment available to the Borrower.

 

2 Specify Eurodollar Borrowing or ABR Borrowing.

 

3 Which shall be subject to the definition of “Interest Period” and end not
later than the Maturity Date (applicable only for Eurodollar Borrowings only).

 

--------------------------------------------------------------------------------

EXHIBIT E

 

PLEDGE AGREEMENT (as supplemented from time to time, this “Agreement”) dated as
of [        ], between EL PASO ELECTRIC COMPANY, a Texas corporation (the
“Pledgor”), and JPMORGAN CHASE BANK, N.A. (“JPMorgan”), as collateral agent (in
such capacity, the “Collateral Agent”) for the Secured Parties (as defined in
the Credit Agreement referred to below).

 

Reference is made to (a) the Credit Agreement dated as of December 17, 2004 (and
as amended, supplemented or otherwise modified from time to time, the “Credit
Agreement”), among the Pledgor, JPMorgan Chase Bank, N.A., not in its individual
capacity, but solely in its capacity as trustee of the Rio Grande Resources
Trust II (the “Trustee”; each of the Pledgor and the Trustee is referred to
individually herein as a “Borrower” and collectively as the “Borrowers”), the
Lenders (as defined in the Credit Agreement), and JPMorgan, as administrative
agent (in such capacity, the “Administrative Agent”) for the Lenders and as
Collateral Agent, and (b) the Guarantee Agreement dated as of [        ] (as
amended, supplemented or otherwise modified from time to time, the “Guarantee
Agreement”), between [        ], a [        ] [corporation] and JPMorgan.
Capitalized terms used herein and not defined herein shall have the meanings
assigned to such terms in the Credit Agreement.

 

Pursuant to Section 5.10 of the Credit Agreement, the Pledgor has agreed, among
other things, to cause the capital stock of any Domestic Subsidiary with
consolidated total assets at any time equal to or greater than 10% of El Paso’s
consolidated total assets at such time to be pledged to the Collateral Agent for
the ratable benefit of the Secured Parties to secure the Obligations (as defined
in the Guarantee Agreement). Accordingly, the Pledgor agrees with each Lender,
the Issuing Bank, the Administrative Agent and the Collateral Agent as follows:

 

SECTION 1. Pledge. As security for the payment and performance, as the case may
be, in full of the Obligations, the Pledgor hereby transfers, grants, bargains,
sells, conveys, hypothecates, pledges, sets over and delivers unto the
Collateral Agent, its successors and assigns, and hereby grants to the
Collateral Agent, its successors and assigns, for the ratable benefit of the
Secured Parties, a security interest in all of the Pledgor’s right, title and
interest in, to and under (a) the shares of capital stock owned by it and listed
on Schedule I hereto and the certificates representing all such shares (the
“Pledged Stock”); provided that, to the extent that applicable law requires that
a Subsidiary of the Pledgor issue directors’ qualifying shares, the Pledged
Stock shall not include such qualifying shares; (b) subject to Section 5, all
payments of dividends, cash, instruments and other property from time to time
received, receivable or otherwise distributed, in respect of, in exchange for or
upon the conversion of the Pledged Stock; (c) subject to Section 5, all rights
and privileges of the Pledgor with respect to the securities and other property
referred to in clauses (a) and (b) above; and (d) all proceeds of any of the
foregoing (the items referred to in clauses (a) through (d) above being
collectively referred to as the “Collateral”). Upon delivery to the Collateral
Agent, (a) any stock certificates, notes or other securities now or hereafter
included in the Collateral (the “Pledged Securities”) shall be accompanied by
stock powers duly executed in blank or other instruments of transfer
satisfactory to the Collateral Agent and by such other instruments and documents
as the Collateral Agent may reasonably request and (b) all other property
comprising part of the Collateral shall be accompanied by proper instruments of
assignment duly executed by the Pledgor and such other instruments or documents
as the Collateral Agent may reasonably request. Each delivery of Pledged
Securities shall be accompanied by a schedule describing the securities
theretofore and

 

--------------------------------------------------------------------------------

then being pledged hereunder, which schedule shall be attached hereto as
Schedule I and made a part hereof. Each schedule so delivered shall supersede
any prior schedules so delivered.

 

TO HAVE AND TO HOLD the Collateral, together with all right, title, interest,
powers, privileges and preferences pertaining or incidental thereto, unto the
Collateral Agent, its successors and assigns, for the ratable benefit of the
Secured Parties, forever; subject, however, to the terms, covenants and
conditions hereinafter set forth.

 

SECTION 2. Delivery of the Collateral. The Pledgor agrees promptly to deliver or
cause to be delivered to the Collateral Agent any and all Pledged Securities,
and any and all certificates or other instruments or documents representing the
Collateral.

 

SECTION 3. Representations, Warranties and Covenants. The Pledgor hereby
represents, warrants and covenants, as to itself and the Collateral pledged by
it hereunder, to and with the Collateral Agent that:

 

(a) the Pledged Stock represents that percentage as set forth on Schedule I of
the issued and outstanding shares of each class of the capital stock of the
issuer with respect thereto;

 

(b) except for the security interest granted hereunder, the Pledgor (i) is and
will at all times continue to be the direct owner, beneficially and of record,
of the Pledged Securities indicated on Schedule I, (ii) holds the same free and
clear of all Liens, (iii) will make no assignment, pledge, hypothecation or
transfer of, or create or permit to exist any security interest in or other Lien
on, the Collateral, other than pursuant hereto, and (iv) subject to Section 5,
will cause any and all Collateral, whether for value paid by the Pledgor or
otherwise, to be forthwith deposited with the Collateral Agent and pledged or
assigned hereunder;

 

(c) the Pledgor (i) has the power and authority to pledge the Collateral in the
manner hereby done or contemplated and (ii) will defend its title or interest
thereto or therein against any and all Liens (other than the Lien created by
this Agreement), however arising, of all persons whomsoever;

 

(d) no consent of any other person (including stockholders or creditors of the
Pledgor) and no consent or approval of any Governmental Authority or any
securities exchange was or is necessary to the validity of the pledge effected
hereby, except for such as have been made or obtained, are in full force and
effect and are not subject to any appeal or stay;

 

(e) by virtue of the execution and delivery by the Pledgor of this Agreement,
when the Pledged Securities, certificates or other documents representing or
evidencing the Collateral are delivered to the Collateral Agent in accordance
with this Agreement, the Collateral Agent will obtain a valid and perfected
first lien upon and security interest in such Pledged Securities as security for
the payment and performance of the Obligations;

 

2

--------------------------------------------------------------------------------

(f) the pledge effected hereby is effective to vest in the Collateral Agent, on
behalf of the Secured Parties, the rights of the Collateral Agent in the
Collateral as set forth herein;

 

(g) all of the Pledged Stock has been duly authorized and validly issued and is
fully paid and nonassessable;

 

(h) all information set forth herein relating to the Pledged Stock is accurate
and complete in all material respects as of the date hereof; and

 

(i) the pledge of the Pledged Stock pursuant to this Agreement does not violate
Regulation T, U or X of the Federal Reserve Board or any successor thereto as of
the date hereof.

 

SECTION 4. Registration in Nominee Name; Denominations. The Collateral Agent, on
behalf of the Secured Parties, shall have the right (in its sole and absolute
discretion) to hold the Pledged Securities in its own name as pledgee, the name
of its nominee (as pledgee or as sub-agent) or the name of the Pledgor, endorsed
or assigned in blank or in favor of the Collateral Agent. The Pledgor will
promptly give to the Collateral Agent copies of any notices or other
communications received by it with respect to Pledged Securities registered in
the name of the Pledgor. The Collateral Agent shall at all times have the right
to exchange the certificates representing Pledged Securities for certificates of
smaller or larger denominations for any purpose consistent with this Agreement.

 

SECTION 5. Voting Rights; Dividends, etc. (a) Unless and until an Event of
Default shall have occurred and be continuing:

 

(i) The Pledgor shall be entitled to exercise any and all voting and/or other
consensual rights and powers inuring to an owner of Pledged Securities or any
part thereof for any purpose consistent with the terms of this Agreement, the
Credit Agreement and the other Loan Documents; provided, however, that the
Pledgor will not be entitled to exercise any such right if the result thereof
could materially and adversely affect the rights inuring to a holder of the
Pledged Securities or the rights and remedies of any of the Secured Parties
under this Agreement or the Credit Agreement or any other Loan Document or the
ability of the Secured Parties to exercise the same.

 

(ii) The Collateral Agent shall execute and deliver to the Pledgor, or cause to
be executed and delivered to the Pledgor, all such proxies, powers of attorney
and other instruments as the Pledgor may reasonably request for the purpose of
enabling the Pledgor to exercise the voting and/or consensual rights and powers
it is entitled to exercise pursuant to subparagraph (i) above and to receive the
cash dividends it is entitled to receive pursuant to subparagraph (iii) below.

 

(iii) The Pledgor shall be entitled to receive and retain any and all cash
dividends paid on the Pledged Securities to the extent and only to the extent
that such cash dividends are permitted by, and otherwise paid in accordance
with, the terms and conditions of the Credit Agreement, the other Loan Documents
and applicable laws. All noncash dividends and all dividends paid or payable in
cash or otherwise in connection with a partial or total liquidation or
dissolution, return of capital, capital surplus or paid-

 

3

--------------------------------------------------------------------------------

in surplus, and all other distributions (other than distributions referred to in
the preceding sentence) made on or in respect of any Pledged Securities, whether
paid or payable in cash or otherwise, whether resulting from a subdivision,
combination or reclassification of the outstanding capital stock of the issuer
of any Pledged Securities or received in exchange for Pledged Securities or any
part thereof, or in redemption thereof, or as a result of any merger,
consolidation, acquisition or other exchange of assets to which such issuer may
be a party or otherwise, shall be and become part of the Collateral, and, if
received by the Pledgor, shall not be commingled by the Pledgor with any of its
other funds or property but shall be held separate and apart therefrom, shall be
held in trust for the benefit of the Collateral Agent and shall be forthwith
delivered to the Collateral Agent in the same form as so received (with any
necessary endorsement).

 

(b) Upon the occurrence and during the continuance of an Event of Default, all
rights of the Pledgor to dividends that the Pledgor is authorized to receive
pursuant to paragraph (a)(iii) above shall cease, and all such rights shall
thereupon become vested in the Collateral Agent, which shall have the sole and
exclusive right and authority to receive and retain such dividends. All
dividends received by the Pledgor contrary to the provisions of this Section 5
shall be held in trust for the benefit of the Collateral Agent, shall be
segregated from other property or funds of the Pledgor and shall be forthwith
delivered to the Collateral Agent upon demand in the same form as so received
(with any necessary endorsement). Any and all money and other property paid over
to or received by the Collateral Agent pursuant to the provisions of this
paragraph (b) shall be retained by the Collateral Agent in an account to be
established by the Collateral Agent upon receipt of such money or other property
and shall be applied in accordance with the provisions of Section 7. After all
Events of Default have been cured or waived, the Collateral Agent shall, within
five Business Days after all such Events of Default have been cured or waived,
repay to the Pledgor all cash dividends (without interest) that the Pledgor
would otherwise be permitted to retain pursuant to the terms of paragraph
(a)(iii) above and which remain in such account.

 

(c) Upon the occurrence and during the continuance of an Event of Default, all
rights of the Pledgor to exercise the voting and consensual rights and powers it
is entitled to exercise pursuant to paragraph (a)(i) of this Section 5, and the
obligations of the Collateral Agent under paragraph (a)(ii) of this Section 5,
shall cease, and all such rights shall thereupon become vested in the Collateral
Agent, which shall have the sole and exclusive right and authority to exercise
such voting and consensual rights and powers, provided that, unless otherwise
directed by the Required Lenders, the Collateral Agent shall have the right from
time to time following and during the continuance of an Event of Default to
permit the Pledgors to exercise such rights. After all Events of Default have
been cured or waived, the Pledgor will have the right to exercise the voting and
consensual rights and powers that it would otherwise be entitled to exercise
pursuant to the terms of paragraph (a)(i) above.

 

SECTION 6. Remedies upon Default. Upon the occurrence and during the continuance
of an Event of Default, subject to applicable regulatory and legal requirements,
the Collateral Agent may sell the Collateral, or any part thereof, at public or
private sale or at any broker’s board or on any securities exchange, for cash,
upon credit or for future delivery as the Collateral Agent shall deem
appropriate. The Collateral Agent shall be authorized at any such sale (if it
deems it advisable to do so) to restrict the prospective bidders or purchasers
to persons who will represent and agree that they are purchasing the Collateral
for their own account for investment and not with a view to the distribution or
sale thereof, and upon consummation of any such sale

 

4

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the Collateral Agent shall have the right to assign, transfer and deliver to the
purchaser or purchasers thereof the Collateral so sold. Each such purchaser at
any such sale shall hold the property sold absolutely free from any claim or
right on the part of the Pledgor, and, to the extent permitted by applicable
law, the Pledgor hereby waives all rights of redemption, stay, valuation and
appraisal the Pledgor now has or may at any time in the future have under any
rule of law or statute now existing or hereafter enacted.

 

The Collateral Agent shall give the Pledgor 10 days’ prior written notice (which
the Pledgor agrees is reasonable notice within the meaning of Section 9-611 of
the Uniform Commercial Code as in effect in the State of New York or its
equivalent in other jurisdictions) of the Collateral Agent’s intention to make
any sale of the Collateral. Such notice, in the case of a public sale, shall
state the time and place for such sale and, in the case of a sale at a broker’s
board or on a securities exchange, shall state the board or exchange at which
such sale is to be made and the day on which the Collateral, or portion thereof,
will first be offered for sale at such board or exchange. Any such public sale
shall be held at such time or times within ordinary business hours and at such
place or places as the Collateral Agent may fix and state in the notice of such
sale. At any such sale, the Collateral, or portion thereof, to be sold may be
sold in one lot as an entirety or in separate parcels, as the Collateral Agent
may (in its sole and absolute discretion) determine. The Collateral Agent shall
not be obligated to make any sale of any Collateral if it shall determine not to
do so, regardless of the fact that notice of sale of such Collateral shall have
been given. The Collateral Agent may, without notice or publication, adjourn any
public or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for sale, and such sale may, without
further notice, be made at the time and place to which the same was so
adjourned. In case any sale of all or any part of the Collateral is made on
credit or for future delivery, the Collateral so sold may be retained by the
Collateral Agent until the sale price is paid in full by the purchaser or
purchasers thereof, but the Collateral Agent shall not incur any liability in
case any such purchaser or purchasers shall fail to take up and pay for the
Collateral so sold and, in case of any such failure, such Collateral may be sold
again upon like notice. At any public (or, to the extent permitted by applicable
law, private) sale made pursuant to this Section 6, any Secured Party may bid
for or purchase, free from any right of redemption, stay or appraisal on the
part of the Pledgor (all said rights being also hereby waived and released), the
Collateral or any part thereof offered for sale and may make payment on account
thereof by using any claim then due and payable to it from the Pledgor as a
credit against the purchase price, and it may, upon compliance with the terms of
sale, hold, retain and dispose of such property without further accountability
to the Pledgor therefor. For purposes hereof, (a) a written agreement to
purchase the Collateral or any portion thereof shall be treated as a sale
thereof, (b) the Collateral Agent shall be free to carry out such sale pursuant
to such agreement and (c) the Pledgor shall not be entitled to the return of the
Collateral or any portion thereof subject thereto, notwithstanding the fact that
after the Collateral Agent shall have entered into such an agreement all Events
of Default shall have been remedied and the Obligations paid in full. As an
alternative to exercising the power of sale herein conferred upon it, the
Collateral Agent may proceed by a suit or suits at law or in equity to foreclose
upon the Collateral and to sell the Collateral or any portion thereof pursuant
to a judgment or decree of a court or courts having competent jurisdiction or
pursuant to a proceeding by a court-appointed receiver. Any sale pursuant to the
provisions of this Section 6 shall be deemed to conform to the commercially
reasonable standards as provided in Section 9-611 of the Uniform Commercial Code
as in effect in the State of New York or its equivalent in other jurisdictions.

 

5

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SECTION 7. Application of Proceeds of Sale. The proceeds of any sale of
Collateral pursuant to Section 6, as well as any Collateral consisting of cash,
shall be applied by the Collateral Agent as follows:

 

FIRST, to the payment of all costs and expenses incurred by the Collateral Agent
in connection with such sale or otherwise in connection with this Agreement, any
other Loan Document or any of the Obligations, including all court costs and the
reasonable fees and expenses of its agents and legal counsel, the repayment of
all advances made by the Collateral Agent hereunder or under any other Loan
Document on behalf of the Pledgor and any other costs or expenses incurred in
connection with the exercise of any right or remedy hereunder or under any other
Loan Document;

 

SECOND, to the payment in full of the Obligations (the amounts so applied to be
distributed among the Secured Parties pro rata in accordance with the amounts of
the Obligations owed to them on the date of any such distribution); and

 

THIRD, to the Pledgors, their successors or assigns, or as a court of competent
jurisdiction may otherwise direct.

 

The Collateral Agent shall have absolute discretion as to the time of
application of any such proceeds, moneys or balances in accordance with this
Agreement. Upon any sale of the Collateral by the Collateral Agent (including
pursuant to a power of sale granted by statute or under a judicial proceeding),
the receipt of the purchase money by the Collateral Agent or of the officer
making the sale shall be a sufficient discharge to the purchaser or purchasers
of the Collateral so sold and such purchaser or purchasers shall not be
obligated to see to the application of any part of the purchase money paid over
to the Collateral Agent or such officer or be answerable in any way for the
misapplication thereof.

 

SECTION 8. Reimbursement of Collateral Agent. (a) The Pledgor agrees to pay upon
demand to the Collateral Agent the amount of any and all reasonable expenses,
including the reasonable fees, other charges and disbursements of its counsel
and of any experts or agents, that the Collateral Agent may incur in connection
with (i) the administration of this Agreement, (ii) the custody or preservation
of, or the sale of, collection from, or other realization upon, any of the
Collateral, (iii) the exercise or enforcement of any of the rights of the
Collateral Agent hereunder or (iv) the failure by the Pledgor to perform or
observe any of the provisions hereof.

 

(b) Without limitation of its indemnification obligations under the other Loan
Documents, the Pledgor agrees to indemnify the Collateral Agent and the
Indemnitees (as defined in Section 11.05 of the Credit Agreement) against, and
hold each Indemnitee harmless from, any and all losses, claims, damages,
liabilities and related expenses, including reasonable counsel fees, other
charges and disbursements, incurred by or asserted against any Indemnitee
arising out of, in any way connected with, or as a result of (i) the execution
or delivery of this Agreement or any other Loan Document or any agreement or
instrument contemplated hereby or thereby, the performance by the parties hereto
of their respective obligations thereunder or the consummation of the
Transactions and the other transactions contemplated thereby or (ii) any claim,
litigation, investigation or proceeding relating to any of the foregoing,
whether or not any Indemnitee is a party thereto, provided that such indemnity
shall not, as to any Indemnitee, be available to the extent that such losses,
claims, damages, liabilities or related expenses are determined by a court

 

6

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of competent jurisdiction by final and nonappealable judgment to have resulted
from the gross negligence or wilful misconduct of such Indemnitee.

 

(c) Any amounts payable as provided hereunder shall be additional Obligations
secured hereby and by the other Security Documents. The provisions of this
Section 8 shall remain operative and in full force and effect regardless of the
termination of this Agreement, the consummation of the transactions contemplated
hereby, the repayment of any of the Obligations, the invalidity or
unenforceability of any term or provision of this Agreement or any other Loan
Document or any investigation made by or on behalf of the Collateral Agent or
any other Secured Party. All amounts due under this Section 8 shall be payable
on written demand therefor and shall bear interest at the rate specified in
Section 2.07 of the Credit Agreement.

 

SECTION 9. Collateral Agent Appointed Attorney-in-Fact. The Pledgor hereby
appoints the Collateral Agent the attorney-in-fact of the Pledgor for the
purpose of carrying out the provisions of this Agreement and taking any action
and executing any instrument that the Collateral Agent may deem necessary or
advisable to accomplish the purposes hereof, which appointment is irrevocable
and coupled with an interest. Without limiting the generality of the foregoing,
the Collateral Agent shall have the right, upon the occurrence and during the
continuance of an Event of Default, with full power of substitution either in
the Collateral Agent’s name or in the name of the Pledgor, to ask for, demand,
sue for, collect, receive and give acquittance for any and all moneys due or to
become due under and by virtue of any Collateral, to endorse checks, drafts,
orders and other instruments for the payment of money payable to the Pledgor
representing any dividend or other distribution payable in respect of the
Collateral or any part thereof or on account thereof and to give full discharge
for the same, to settle, compromise, prosecute or defend any action, claim or
proceeding with respect thereto, and to sell, assign, endorse, pledge, transfer
and to make any agreement respecting, or otherwise deal with, the same;
provided, however, that nothing herein contained shall be construed as requiring
or obligating the Collateral Agent to make any commitment or to make any inquiry
as to the nature or sufficiency of any payment received by the Collateral Agent,
or to present or file any claim or notice, or to take any action with respect to
the Collateral or any part thereof or the moneys due or to become due in respect
thereof or any property covered thereby. The Collateral Agent and the other
Secured Parties shall be accountable only for amounts actually received as a
result of the exercise of the powers granted to them herein, and neither they
nor their officers, directors, employees or agents shall be responsible to the
Pledgor for any act or failure to act hereunder, except for their own gross
negligence or wilful misconduct.

 

SECTION 10. Waivers; Amendment. (a) No failure or delay of the Collateral Agent
in exercising any power or right hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Collateral Agent hereunder and of
the other Secured Parties under the other Loan Documents are cumulative and are
not exclusive of any rights or remedies that they would otherwise have. No
waiver of any provisions of this Agreement or consent to any departure by the
Pledgor therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) below, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice or demand on the Pledgor in any case shall entitle the Pledgor to any
other or further notice or demand in similar or other circumstances.

 

7

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(b) Neither this Agreement nor any provision hereof may be waived, amended or
modified except pursuant to a written agreement entered into between the
Collateral Agent and the Pledgor, subject to any consent required in accordance
with Section 11.08 of the Credit Agreement.

 

SECTION 11. Securities Act, etc. In view of the position of the Pledgor in
relation to the Pledged Securities, or because of other current or future
circumstances, a question may arise under the Securities Act of 1933, as now or
hereafter in effect, or any similar statute hereafter enacted analogous in
purpose or effect (such Act and any such similar statute as from time to time in
effect being called the “Federal Securities Laws”) with respect to any
disposition of the Pledged Securities permitted hereunder. The Pledgor
understands that compliance with the Federal Securities Laws might very strictly
limit the course of conduct of the Collateral Agent if the Collateral Agent were
to attempt to dispose of all or any part of the Pledged Securities, and might
also limit the extent to which or the manner in which any subsequent transferee
of any Pledged Securities could dispose of the same. Similarly, there may be
other legal restrictions or limitations affecting the Collateral Agent in any
attempt to dispose of all or part of the Pledged Securities under applicable
Blue Sky or other state securities laws or similar laws analogous in purpose or
effect. The Pledgor recognizes that in light of such restrictions and
limitations the Collateral Agent may, with respect to any sale of the Pledged
Securities, limit the purchasers to those who will agree, among other things, to
acquire the Pledged Securities for their own account, for investment, and not
with a view to the distribution or resale thereof. The Pledgor acknowledges and
agrees that in light of such restrictions and limitations, the Collateral Agent,
in its sole and absolute discretion, (a) may proceed to make such a sale whether
or not a registration statement for the purpose of registering such Pledged
Securities or part thereof shall have been filed under the Federal Securities
Laws and (b) may approach and negotiate with a single potential purchaser to
effect such sale. The Pledgor acknowledges and agrees that any such sale might
result in prices and other terms less favorable to the seller than if such sale
were a public sale without such restrictions. In the event of any such sale, the
Collateral Agent shall incur no responsibility or liability for selling all or
any part of the Pledged Securities at a price that the Collateral Agent, in its
sole and absolute discretion, may in good faith deem reasonable under the
circumstances, notwithstanding the possibility that a substantially higher price
might have been realized if the sale were deferred until after registration as
aforesaid or if more than a single purchaser were approached. The provisions of
this Section 11 will apply notwithstanding the existence of a public or private
market upon which the quotations or sales prices may exceed substantially the
price at which the Collateral Agent sells.

 

SECTION 12. Loan Documents. The Pledgor agrees that this Agreement and the
Guarantee Agreement shall constitute “Loan Documents” for all purposes of the
Credit Agreement and the other Loan Documents.

 

SECTION 13. Security Interest Absolute. All rights of the Collateral Agent
hereunder, the grant of a security interest in the Collateral and all
obligations of the Pledgor hereunder, shall be absolute and unconditional
irrespective of (a) any lack of validity or enforceability of the Credit
Agreement, any other Loan Document, any agreement with respect to any of the
Obligations or any other agreement or instrument relating to any of the
foregoing, (b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations, or any other amendment or waiver
of or any consent to any departure from the Credit Agreement, any other Loan
Document or any other agreement or instrument relating to any of the foregoing,
(c) any exchange, release or nonperfection of any other collateral, or any
release or amendment or

 

8

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waiver of or consent to or departure from any guaranty, for all or any of the
Obligations or (d) any other circumstance that might otherwise constitute a
defense available to, or a discharge of, the Pledgor in respect of the
Obligations or in respect of this Agreement (other than the indefeasible payment
in full of all the Obligations).

 

SECTION 14. Termination or Release. This Agreement and the security interests
granted hereby shall terminate when all the Obligations have been indefeasibly
paid in full and the Lenders have no further commitment to lend under the Credit
Agreement, the L/C Exposure has been reduced to zero and the Issuing Bank has no
further obligation to issue Letters of Credit under this Agreement.

 

(b) Upon any sale or other transfer by the Pledgor of any Collateral that is
permitted under the Credit Agreement to any person that is not an Affiliate of
the Pledgor, or, upon the effectiveness of any written consent to the release of
the security interest granted hereby in any Collateral pursuant to Section
11.08(b) of the Credit Agreement, the security interest in such Collateral shall
be automatically released.

 

(c) In connection with any termination or release pursuant to paragraph (a) or
(b), the Collateral Agent shall execute and deliver to the Pledgor, at the
Pledgor’s expense, all documents that the Pledgor shall reasonably request to
evidence such termination or release. Any execution and delivery of documents
pursuant to this Section 14 shall be without recourse to or warranty by the
Collateral Agent.

 

SECTION 15. Notices. All communications and notices hereunder shall be in
writing and given as provided in Section 11.01 of the Credit Agreement.

 

SECTION 16. Further Assurances. The Pledgor agrees to do such further acts and
things, and to execute and deliver such additional conveyances, assignments,
agreements and instruments, as the Collateral Agent may at any time reasonably
request in connection with the administration and enforcement of this Agreement
or with respect to the Collateral or any part thereof or in order better to
assure and confirm unto the Collateral Agent its rights and remedies hereunder.

 

SECTION 17. Binding Effect; Assignments. Whenever in this Agreement any of the
parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of such party; and all covenants, promises and agreements
by or on behalf of the Pledgor that are contained in this Agreement shall bind
and inure to the benefit of its successors and assigns. This Agreement shall
become effective when it shall have been executed on behalf of the Pledgor and
the Collateral Agent, and thereafter shall be binding upon the Pledgor and the
Collateral Agent and their respective successors and assigns, and shall inure to
the benefit of the Pledgor, the Collateral Agent and the other Secured Parties,
and their respective successors and assigns, except that the Pledgor shall not
have the right to assign its rights hereunder or any interest herein or in the
Collateral (and any such attempted assignment shall be void), except as
expressly contemplated by this Agreement or the other Loan Documents.

 

SECTION 18. Survival of Agreement; Severability. (a) All covenants, agreements,
representations and warranties made by the Pledgor herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the Collateral Agent and the

 

9

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other Secured Parties and shall survive the making by the Lenders of Loans and
the issuance of the Letters of Credit by the Issuing Bank regardless of any
investigation made by the Secured Parties or on their behalf, and shall continue
in full force and effect as long as the principal of or any accrued interest on
any Loan or any other fee or amount payable by a Borrower under the Credit
Agreement or any other Loan Document is outstanding and unpaid or the L/C
Exposure does not equal zero and as long as the Commitments have not been
terminated.

 

(b) In the event any one or more of the provisions contained in this Agreement
or in any other Loan Document should be held invalid, illegal or unenforceable
in any respect, the validity, legality and enforceability of the remaining
provisions contained herein and therein shall not in any way be affected or
impaired thereby (it being understood that the invalidity of a particular
provision in a particular jurisdiction shall not in and of itself affect the
validity of such provision in any other jurisdiction). The parties shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.

 

SECTION 19. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

 

SECTION 20. Counterparts. This Agreement may be executed in counterparts, each
of which shall constitute an original, but all of which when taken together
shall constitute a single contract, and shall become effective as provided in
Section 11. Delivery of an executed signature page to this Agreement by
facsimile transmission shall be as effective as delivery of a manually executed
counterpart of this Agreement.

 

SECTION 21. Rules of Interpretation. The rules of interpretation specified in
Section 1.02 of the Credit Agreement shall be applicable to this Agreement.

 

SECTION 22. Execution of Financing Statements. The Pledgor hereby irrevocably
authorizes the Collateral Agent at any time and from time to time to file in any
relevant jurisdiction any initial financing statements (including fixture
filings) and amendments thereto that contain the information required by Article
9 of the Uniform Commercial Code with respect to the Collateral owned by it
without the signature of the Pledgor in such form and in such filing offices as
the Collateral Agent reasonably determines appropriate to perfect the security
interests of the Collateral Agent under this Agreement. A carbon, photographic
or other reproduction of this Agreement shall be sufficient as a financing
statement for filing in any jurisdiction.

 

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the day and year first above written.

 

EL PASO ELECTRIC COMPANY,

   

by

                 

Name:

           

Title:

   

 

10

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JPMORGAN CHASE BANK, N.A.,

as Collateral Agent,

   

by

                 

Name:

           

Title:

   

 

11

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Schedule I to the

Pledge Agreement

 

CAPITAL STOCK

 

Issuer

--------------------------------------------------------------------------------

 

Number of

Certificate

--------------------------------------------------------------------------------

 

Registered

Owner

--------------------------------------------------------------------------------

  

Number and

Class of Shares

--------------------------------------------------------------------------------

  

Percentage

of Shares

--------------------------------------------------------------------------------

 

--------------------------------------------------------------------------------

EXHIBIT F

 

SUBSIDIARY GUARANTEE AGREEMENT (as supplemented from time to time, this
“Agreement”) dated as of [    ], between [    ], a [    ] [corporation] (the
“Guarantor”), and JPMORGAN CHASE BANK, N.A. (“JPMorgan”), as Collateral Agent
(as defined below).

 

Reference is made to the Credit Agreement dated as of December 17, 2004, (and as
amended, supplemented or otherwise modified from time to time, the “Credit
Agreement”), among El Paso Electric Company, a Texas corporation (“El Paso”),
JPMorgan Chase Bank, N.A., not in its individual capacity, but solely in its
capacity as trustee of the Rio Grande Resources Trust II (the “Trustee”; each of
El Paso and the Trustee is referred to individually herein as a “Borrower” and
collectively as the “Borrowers”), the Lenders (as defined in the Credit
Agreement), and JPMorgan, as administrative agent (in such capacity, the
“Administrative Agent”) and as collateral agent (in such capacity, the
“Collateral Agent”) for the Lenders. Capitalized terms used herein and not
defined herein shall have the meanings assigned to such terms in the Credit
Agreement.

 

Pursuant to Section 5.10 of the Credit Agreement, El Paso has agreed, among
other things, to cause any Domestic Subsidiary with consolidated total assets at
any time equal to or greater than 10% of El Paso’s consolidated total assets at
such time to execute a guarantee of all the Obligations (as defined below). The
Guarantor’s assets are equal to or greater than 10% of El Paso’s consolidated
total assets and the Guarantor acknowledges that it will derive substantial
benefit from the commitments of the Lenders to make Loans to the Borrowers and
the commitment of the Issuing Bank to issue Letters of Credit for the account of
the Borrowers. Accordingly, the Guarantor agrees with each Lender, the Issuing
Bank, the Administrative Agent and the Collateral Agent (each such person,
together with its successors and assigns, a “Guaranteed Party”) as follows:

 

SECTION 1. Guarantee. The Guarantor unconditionally guarantees, as a primary
obligor and not merely as a surety, (a) the due and punctual payment of (i) the
principal of and premium, if any, and interest (including interest accruing
during the pendency of any bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether allowed or allowable in such proceeding) on
the Loans, when and as due, whether at maturity, by acceleration, upon one or
more dates set for prepayment or otherwise, (ii) each payment required to be
made by a Borrower under the Credit Agreement in respect of any Letter of
Credit, when and as due, including payments in respect of reimbursement of
disbursements, interest thereon and obligations to provide cash collateral, and
(iii) all other monetary obligations, including fees, costs, expenses and
indemnities, whether primary, secondary, direct, contingent, fixed or otherwise
(including monetary obligations incurred during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding, regardless of whether
allowed or allowable in such proceeding), of the Borrowers to the Guaranteed
Parties under the Credit Agreement and the other Loan Documents and (b) the due
and punctual performance of all covenants, agreements, obligations and
liabilities of the Borrowers under or pursuant to the Credit Agreement and the
other Loan Documents (all the monetary and other obligations referred to in the
preceding clauses (a) and (b) being collectively called the “Obligations”). The
Guarantor further agrees that the Obligations may be extended or renewed, in
whole or in part, without notice to or further assent from it, and that it will
remain bound upon its guarantee notwithstanding any extension or renewal of any
Obligation.

 

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SECTION 2. Obligations Not Waived. To the fullest extent permitted by applicable
law, the Guarantor waives presentment to, demand of payment from and protest to
the Borrowers of any of the Obligations, and also waives notice of acceptance of
its guarantee and notice of protest for nonpayment. To the fullest extent
permitted by applicable law, the obligations of the Guarantor hereunder shall
not be affected by (a) the failure of the Collateral Agent or any other
Guaranteed Party to assert any claim or demand or to enforce or exercise any
right or remedy against the Borrowers, (b) any rescission, waiver, amendment or
modification of, or any release from any of the terms or provisions of the
Credit Agreement, any other Transaction Document, any Guarantee or any other
agreement, including with respect to any other guarantor of the Obligations, or
(c) the failure to perfect any security interest in, or the release of, any of
the security held by or on behalf of the Collateral Agent or any other
Guaranteed Party.

 

SECTION 3. Security. The Guarantor authorizes the Collateral Agent and each of
the other Guaranteed Parties to (a) take and hold security for the payment of
this guarantee and the Obligations and exchange, enforce, waive and release any
such security, (b) apply such security and direct the order or manner of sale
thereof as they in their sole discretion may determine and (c) release or
substitute any one or more endorsees, other guarantors or other obligors.

 

SECTION 4. Guarantee of Payment. The Guarantor further agrees that its guarantee
constitutes a guarantee of payment when due and not of collection, and waives
any right to require that any resort be had by the Collateral Agent or any other
Guaranteed Party to any of the security held for payment of the Obligations or
to any balance of any deposit account or credit on the books of the Collateral
Agent or any other Guaranteed Party in favor of the Borrowers or any other
person.

 

SECTION 5. No Discharge or Diminishment of Guarantee. The obligations of the
Guarantor hereunder shall not be subject to any reduction, limitation,
impairment or termination for any reason (other than the payment in full in cash
of the Obligations), including any claim of waiver, release, surrender,
alteration or compromise of any of the Obligations, and shall not be subject to
any defense or setoff, counterclaim, recoupment or termination whatsoever by
reason of the invalidity, illegality or unenforceability of the Obligations or
otherwise. Without limiting the generality of the foregoing, the obligations of
the Guarantor hereunder shall not be discharged or impaired or otherwise
affected by the failure of the Collateral Agent or any other Guaranteed Party to
assert any claim or demand or to enforce any remedy under the Credit Agreement,
any other Transaction Document or any other agreement, by any waiver or
modification of any provision of any thereof, by any default, failure or delay,
willful or otherwise, in the performance of the Obligations, or by any other act
or omission that may or might in any manner or to any extent vary the risk of
the Guarantor or that would otherwise operate as a discharge of the Guarantor as
a matter of law or equity (other than the payment in full in cash of all the
Obligations).

 

SECTION 6. Defenses of Borrowers Waived. To the fullest extent permitted by
applicable law, the Guarantor waives any defense based on or arising out of any
defense of a Borrower or the unenforceability of the Obligations or any part
thereof from any cause, or the cessation from any cause of the liability of a
Borrower, other than the payment in full in cash of the Obligations. The
Collateral Agent and the other Guaranteed Parties may, at their election,
foreclose on any security held by one or more of them by one or more judicial or
nonjudicial sales, accept an assignment of any such security in lieu of
foreclosure, compromise or adjust any part of the Obligations, make any other
accommodation with the Borrowers or any other

 

2

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guarantor or exercise any other right or remedy available to them against the
Borrowers or any other guarantor, without affecting or impairing in any way the
liability of the Guarantor hereunder except to the extent the Obligations have
been fully, finally paid in cash. To the fullest extent permitted by applicable
law, the Guarantor waives any defense arising out of any such election even
though such election operates, pursuant to applicable law, to impair or to
extinguish any right of reimbursement or subrogation or other right or remedy of
Guarantor against a Borrower or any other guarantor, as the case may be, or any
security.

 

SECTION 7. Agreement to Pay. In furtherance of the foregoing and not in
limitation of any other right that the Collateral Agent or any other Guaranteed
Party has at law or in equity against the Guarantor by virtue hereof, upon the
failure of a Borrower to pay any Obligation when and as the same shall become
due, whether at maturity, by acceleration, after notice of prepayment or
otherwise, the Guarantor hereby promises to and will forthwith pay, or cause to
be paid, to the Collateral Agent or such other Guaranteed Party as designated
thereby in cash the amount of such unpaid Obligations. Upon payment by the
Guarantor of any sums to the Collateral Agent or any Guaranteed Party as
provided above, all rights of the Guarantor against the Borrowers arising as a
result thereof by way of right of subrogation, contribution, reimbursement,
indemnity or otherwise shall in all respects be subordinate and junior in right
of payment to the prior payment in full in cash of all the Obligations. In
addition, any indebtedness of a Borrower now or hereafter held by the Guarantor
is hereby subordinated in right of payment to the prior payment in full of the
Obligations. If any amount shall erroneously be paid to the Guarantor on account
of (i) such subrogation, contribution, reimbursement, indemnity or similar right
or (ii) any such indebtedness of a Borrower, such amount shall be held in trust
for the benefit of the Guaranteed Parties and shall forthwith be paid to the
Collateral Agent to be credited against the payment of the Obligations, whether
matured or unmatured, in accordance with the terms of the Loan Documents.

 

SECTION 8. Information. The Guarantor assumes all responsibility for being and
keeping itself informed of each Borrower’s financial condition and assets, and
of all other circumstances bearing upon the risk of nonpayment of the
Obligations and the nature, scope and extent of the risks that the Guarantor
assumes and incurs hereunder, and agrees that none of the Collateral Agent or
the other Guaranteed Parties will have any duty to advise the Guarantor of
information known to it or any of them regarding such circumstances or risks.

 

SECTION 9. Representations and Warranties. The Guarantor represents and warrants
that all representations and warranties relating to it contained in the Credit
Agreement are true and correct.

 

SECTION 10. Termination. The guarantee made hereunder (a) shall terminate when
all the Obligations have been indefeasibly paid in full and the Lenders have no
further commitment to lend under the Credit Agreement, the L/C Exposure has been
reduced to zero and the Issuing Bank has no further obligation to issue Letters
of Credit under the Credit Agreement and (b) shall continue to be effective or
be reinstated, as the case may be, if at any time payment, or any part thereof,
of any Obligation is rescinded or must otherwise be restored by any Guaranteed
Party or the Guarantor upon the bankruptcy or reorganization of either Borrower
or otherwise.

 

SECTION 11. Binding Effect; Assignments. Whenever in this Agreement any of the
parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of such party; and all covenants, promises and agreements
by or on behalf of the Guarantor that

 

3

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are contained in this Agreement shall bind and inure to the benefit of each
party hereto and their respective successors and assigns. This Agreement shall
become effective when it shall have been executed on behalf of the Guarantor and
the Collateral Agent, and thereafter shall be binding upon the Guarantor and the
Collateral Agent and their respective successors and assigns, and shall inure to
the benefit of the Guarantor, the Collateral Agent and the other Secured
Parties, and their respective successors and assigns, except that the Guarantor
shall not have the right to assign its rights or obligations hereunder or any
interest herein (and any such attempted assignment shall be void). If all of the
capital stock of the Guarantor is sold, transferred or otherwise disposed of
(other than to an Affiliate of a Borrower) pursuant to a transaction permitted
by the Credit Agreement, the Guarantor shall be released from its obligations
under this Agreement without further action.

 

SECTION 12. Waivers; Amendment. (a) No failure or delay of the Collateral Agent
in exercising any power or right hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Collateral Agent hereunder and of
the other Guaranteed Parties under the other Loan Documents are cumulative and
are not exclusive of any rights or remedies that they would otherwise have. No
waiver of any provision of this Agreement or consent to any departure by the
Guarantor therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) below, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice or demand on the Guarantor in any case shall entitle the Guarantor to any
other or further notice or demand in similar or other circumstances.

 

(b) Neither this Agreement nor any provision hereof may be waived, amended or
modified except pursuant to a written agreement entered into between the
Guarantor and the Collateral Agent, with the prior written consent of the
Required Lenders (except as otherwise provided in the Credit Agreement).

 

SECTION 13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

 

SECTION 14. Notices. All communications and notices hereunder shall be in
writing and given as provided in Section 11.01 of the Credit Agreement. All
communications and notices hereunder to the Guarantor shall be given to it at
its address set forth below its name on the signature page hereto, with a copy
to El Paso.

 

SECTION 15. Survival of Agreement; Severability. (a) All covenants, agreements,
representations and warranties made by the Guarantor herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the Collateral Agent and the other Guaranteed Parties
and shall survive the making by the Lenders of Loans and the issuance of the
Letters of Credit by the Issuing Bank regardless of any investigation made by
the Guaranteed Parties or on their behalf, and shall continue in full force and
effect as long as the principal of or any accrued interest on any Loan or any
other fee or amount payable by a Borrower under the Credit Agreement or any
other Loan Document is outstanding and unpaid or the L/C Exposure does not equal
zero and as long as the Commitments have not been terminated.

 

4

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(b) In the event any one or more of the provisions contained in this Agreement
or in any other Loan Document should be held invalid, illegal or unenforceable
in any respect, the validity, legality and enforceability of the remaining
provisions contained herein and therein shall not in any way be affected or
impaired thereby (it being understood that the invalidity of a particular
provision in a particular jurisdiction shall not in and of itself affect the
validity of such provision in any other jurisdiction). The parties shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.

 

SECTION 16. Counterparts. This Agreement may be executed in counterparts, each
of which shall constitute an original, but all of which when taken together
shall constitute a single contract, and shall become effective as provided in
Section 11. Delivery of an executed signature page to this Agreement by
facsimile transmission shall be as effective as delivery of a manually executed
counterpart of this Agreement.

 

SECTION 17. Rules of Interpretation. The rules of interpretation specified in
Section 1.02 of the Credit Agreement shall be applicable to this Agreement.

 

SECTION 18. Jurisdiction; Consent to Service of Process. (a) The Guarantor
hereby irrevocably and unconditionally submits, for itself and its property, to
the nonexclusive jurisdiction of any New York State court or Federal court of
the United States of America sitting in New York City, and any appellate court
from any thereof, in any action or proceeding arising out of or relating to this
Agreement or the other Loan Documents, or for recognition or enforcement of any
judgment, and each of the parties hereto hereby irrevocably and unconditionally
agrees that all claims in respect of any such action or proceeding may be heard
and determined in such New York State or, to the extent permitted by law, in
such Federal court. Each of the parties hereto agrees that a final judgment in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement shall affect any right that the Collateral Agent or
any other Guaranteed Party may otherwise have to bring any action or proceeding
relating to this Agreement or the other Loan Documents against the Guarantor or
its properties in the courts of any jurisdiction.

 

(b) The Guarantor hereby irrevocably and unconditionally waives, to the fullest
extent it may legally and effectively do so, any objection that it may now or
hereafter have to the laying of venue of any suit, action or proceeding arising
out of or relating to this Agreement or the other Loan Documents in any New York
State or Federal court. Each of the parties hereto hereby irrevocably waives, to
the fullest extent permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.

 

(c) Each party to this Agreement irrevocably consents to service of process in
the manner provided for notices in Section 14. Nothing in this Agreement will
affect the right of any party to this Agreement to serve process in any other
manner permitted by law.

 

SECTION 19. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS. EACH PARTY

 

5

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HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER
PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT,
IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 19.

 

SECTION 20. Right of Setoff. If an Event of Default shall have occurred and be
continuing, each Guaranteed Party is hereby authorized at any time and from time
to time, to the fullest extent permitted by law, to set off and apply any and
all deposits (general or special, time or demand, provisional or final) at any
time held and other Indebtedness at any time owing by such Guaranteed Party to
or for the credit or the account of the Guarantor against any or all the
obligations of the Guarantor now or hereafter existing under this Agreement and
the other Loan Documents held by such Guaranteed Party, irrespective of whether
or not such Guaranteed Party shall have made any demand under this Agreement or
any other Loan Document and although such obligations may be unmatured. The
rights of each Guaranteed Party under this Section 20 are in addition to other
rights and remedies (including other rights of setoff) which such Guaranteed
Party may have.

 

6

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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the day and year first above written.

 

[NEW SUBSIDIARY],

   

by

           

Name:

           

Title:

           

Address for Notices:

JPMORGAN CHASE BANK, N.A.,

as Collateral Agent,

   

by

           

Name:

           

Title:

   

 

7

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EXHIBIT H

 

THIS INSTRUMENT GRANTS A SECURITY INTEREST BY A UTILITY.

 

THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS.

--------------------------------------------------------------------------------

 

FIFTH

 

SUPPLEMENTAL INDENTURE

 

--------------------------------------------------------------------------------

 

EL PASO ELECTRIC COMPANY

 

To

 

U.S. BANK NATIONAL ASSOCIATION

 

Trustee

 

Dated as of December     , 2004

 

--------------------------------------------------------------------------------

 

Supplemental to General Mortgage Indenture

and Deed of Trust

 

Dated as of February 1, 1996

 

--------------------------------------------------------------------------------

 

THIS IS A SECURITY AGREEMENT GRANTING A SECURITY INTEREST IN PERSONAL PROPERTY
INCLUDING PERSONAL PROPERTY AFFIXED TO REALTY AS WELL AS A MORTGAGE UPON REAL
ESTATE AND OTHER PROPERTY.

 

--------------------------------------------------------------------------------

FIFTH SUPPLEMENTAL INDENTURE

 

THIS FIFTH SUPPLEMENTAL INDENTURE, dated as of December     , 2004 (the
“Supplemental Indenture”), between EL PASO ELECTRIC COMPANY, a Texas corporation
(the “Company”), whose principal office is located at 100 North Stanton Street,
El Paso, Texas, 79901, and U.S. BANK NATIONAL ASSOCIATION, a banking corporation
organized under the laws of The Commonwealth of Massachusetts, as Trustee (the
“Trustee”), whose principal corporate trust office is located at 225 Franklin
Street, Boston, Massachusetts, 02110.

 

WITNESSETH

 

WHEREAS, the Company and the Trustee have entered into that (i) General Mortgage
Indenture and Deed of Trust, dated as of February 1, 1996 (the “Original
Indenture”), relating to the issuance of Bonds as may be created and established
from time to time in one or more series; (ii) First Supplemental Indenture dated
as of February 1, 1996 (the “First Supplemental Indenture”); (iii) Second
Supplemental Indenture dated as of August 19, 1997 (the “Second Supplemental
Indenture”); (iv) Third Supplemental Indenture dated as of January 29, 1999 (the
“Third Supplemental Indenture”) and (v) Fourth Supplemental Indenture dated as
of January 25, 2002 (the “Fourth Supplemental Indenture” and, together with the
Original Indenture, the First Supplemental Indenture and the Second Supplemental
Indenture, the “Indenture”);

 

WHEREAS, the Company issued Bonds pursuant to the terms of the Indenture and
mortgaged and pledged the Mortgaged Property to secure payment of the Bonds;

 

WHEREAS, Section 14.02 of the Original Indenture permits the Indenture or the
Bonds to be amended or supplemented with the consent of the Holders of not less
than a majority in principal amount of the then Outstanding Bonds; provided that
if the proposed amendment or waiver affects only the Holders of certain series
of Outstanding Bonds, then the consent only of the Holders of a majority in
aggregate principal amount of Outstanding Bonds of such affected series,
considered as one class, shall be required; provided further that if the
proposed amendment changes the fixed maturity of any Bond, the consent of the
Holders of each Outstanding Bond affected thereby shall be required;

 

WHEREAS, the Company proposes to amend Section 2.02(a)(iii) of the First
Supplemental Indenture and the Series H Bonds to extend the maturity date of the
Series H Bonds to December     , 2009, and such proposed amendment affects the
Holders of Series H Bonds;

 

WHEREAS, the Company proposes to amend the financial and other covenants
contained in Article 4 of the First Supplemental Indenture following the
retirement or repayment of the Series D and Series E Bonds, and such proposed
amendment affects only the Holders of Series H Bonds;

 

WHEREAS, the Company has obtained and delivered to the Trustee the written
consent of the sole Holder of the Outstanding Bond of Series H to the proposed
amendments set forth in this Supplemental Indenture;

 

--------------------------------------------------------------------------------

WHEREAS, it is provided in the Original Indenture, among other things, that the
Company shall execute and file with the Trustee, and the Trustee at the request
of the Company, when required by the Original Indenture, shall join in,
indentures supplemental thereto, and which thereafter shall form a part thereof,
for the purpose, among others, of amending the Indenture as permitted by Section
14.02 thereof; and

 

WHEREAS, all acts and things have been done and performed which are necessary to
make this Supplemental Indenture, when duly executed and delivered, a valid,
binding and legal instrument in accordance with its terms and for the purposes
herein expressed; and the execution and delivery of this Supplemental Indenture
have been in all respects duly authorized.

 

NOW, THEREFORE, in consideration of the premises and for other good and valuable
consideration the receipt and sufficiency of which are hereby acknowledged, it
is agreed by and between the Company and the Trustee as follows:

 

ARTICLE 1

DEFINITIONS

 

Section 1.01. Terms Incorporated By Reference. Except for the terms defined in
this Supplemental Indenture, all capitalized terms used in this Supplemental
Indenture have the respective meanings set forth in the Indenture.

 

ARTICLE 2

AMENDMENT OF FIRST SUPPLEMENTAL INDENTURE

 

Section 2.01. Amendment to Section 2.02(a). Section 2.02(a)(iii) of the First
Supplemental Indenture is amended by deleting from the fourth sentence thereof
the date “February 12, 2008” and substituting therefor the date “December     ,
2009”.

 

Section 2.02. Addition of Section 4.12. Article 4 of the First Supplemental
Indenture is amended by inserting a new Section 4.12 as follows:

 

“Section 4.12. Special Provision Affecting Collateral Series H First Mortgage
Bonds.

 

On and as of the date upon which none of the Investor Series Bonds remain
Outstanding (the “Covenant Substitution Date”), the provisions of this Article 4
shall cease to be in effect and the Collateral Series H First Mortgage Bonds
shall no longer be entitled to the benefits thereof, and the Collateral Series H
First Mortgage Bonds shall instead be entitled to the benefits of the negative
covenants set forth in each supplemental indenture creating a new series of
Bonds issued to institutional or public investors on or after the Covenant
Substitution Date on the same basis as the holders of such new series of Bonds
for so long as such new series of Bonds remains outstanding.”

 

3

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Section 2.03. Exhibit H. Exhibit H to the First Supplemental Indenture is hereby
replaced in its entirety with Exhibit H hereto.

 

ARTICLE 3

AMENDMENT AND REPLACEMENT OF SERIES H BONDS

 

Section 3.01. Amendment to Maturity Date. Each of the Series H Bonds is amended
by deleting from the first sentence of the first full paragraph thereof the date
“February 12, 2008” and substituting therefor the date “December     , 2009”.

 

Section 3.02. Amendment to Reflect Addition of Section 4.12 to the Indenture. In
order to reflect the addition of Section 4.12 to the Indenture, as provided by
Section 2.02 above, each of the Series H Bonds is amended by adding the
following at the end of the ninth paragraph thereof:

 

“Notwithstanding the foregoing proviso, without the consent of the Holders, on
and as of the date upon which none of the Investor Series Bonds remain
Outstanding (the “Covenant Substitution Date”), the provisions of Article 4 of
the First Supplemental Indenture shall cease to be in effect and this Series H
Bond shall no longer be entitled to the benefits thereof, but shall instead be
entitled to the benefits of the negative covenants set forth in each
supplemental indenture creating a new series of Bonds first issued to
institutional or public investors on or after the Covenant Substitution Date on
the same basis as the holders of such new series of Bonds for so long as such
new series of Bonds remains outstanding.”

 

Section 3.03. Amendment to Reflect the Collateral Release Provisions of
Revolving Credit Agreement. In order to give effect to the provision in Section
10.04 of the New Credit Agreement, the following language is added to the Series
H Bonds at the end of the sixth paragraph thereof:

 

“This Series H Bond shall also be surrendered to the Trustee, or to the Company
for delivery to the Trustee, for cancellation on the Collateral Release Date, as
that term is defined in Section 10.04 of the Revolving Credit Agreement, if the
conditions enumerated in such Section 10.04 have been satisfied.”

 

Section 3.04. Replacement of Series H Bond. Upon surrender of the Outstanding
Series H Bond by the sole Holder thereof, the Company shall execute, and the
Trustee shall authenticate, in each case as provided in the Indenture, a
replacement Bond substantially in the form of Exhibit H hereto.

 

ARTICLE 4

THE TRUSTEE

 

Section 4.01. Trustee’s Disclaimer. The Trustee shall not be responsible in any
manner whatsoever for or in respect of the validity or sufficiency of this
Supplemental Indenture or the

 

4

--------------------------------------------------------------------------------

due execution hereof by the Company, or for or in respect of the recitals and
statements contained herein, all of which recitals and statements are made
solely by the Company.

 

Except as herein otherwise provided, no duties, responsibilities or liabilities
are assumed, or shall be construed to be assumed, by the Trustee by reason of
this Supplemental Indenture other than as set forth in the Indenture, and this
Supplemental Indenture is executed and accepted on behalf of the Trustee,
subject to all the terms and conditions set forth in the Indenture, as fully to
all intents as if the same were set forth at length herein.

 

ARTICLE 5

MISCELLANEOUS

 

Section 5.01. Reference to Original Indenture. Except insofar as otherwise
expressly provided herein, all the provisions, definitions, terms and conditions
of the Original Indenture, as it has been and may from time to time be amended,
shall be deemed to be incorporated in and made a part of this Supplemental
Indenture; and the Original Indenture as heretofore supplemented and as
supplemented by this Supplemental Indenture is in all respects ratified and
confirmed; and the Original Indenture, as amended, and this Supplemental
Indenture shall be read, taken and construed as one and the same instrument.

 

Section 5.02. Governing Law. In view of the fact that Bondholders may reside in
various states and the desire to establish with certainty that this Supplemental
Indenture will be governed by and construed and interpreted in accordance with
the law of a state having a well developed body of commercial and financial law
relevant to transactions of the type contemplated herein, this Supplemental
Indenture shall be construed in accordance with and governed by the laws of the
State of New York (without regard to the conflict of laws provisions thereof)
applicable to agreements made and to be performed therein, except to the extent
that the TIA shall be applicable and except to the extent that the TIA shall be
applicable and except to the extent the law of any jurisdiction wherein any
portion of the Mortgaged Property is located shall mandatorily govern the
perfection, priority or enforcement of the Lien of the Indenture with respect to
such portion of the Mortgaged Property.

 

Section 5.03. Successors. All covenants, stipulations and agreements of the
Company in this Supplemental Indenture shall bind its successors and assigns.
All agreements of the Trustee in this Supplemental Indenture shall bind its
successor.

 

Section 5.04. Counterparts. This Supplemental Indenture may be executed in any
number of counterparts, and each of such counterparts when so executed shall be
deemed to be an original, but all such counterparts shall together constitute by
one and the same instrument.

 

5

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, EL PASO ELECTRIC COMPANY has caused this Supplemental
Indenture to be executed by its Chairman of the Board, Chief Executive Officer,
President or one of its Vice Presidents, and duly attested by its Secretary or
one of its Assistant Secretaries, and U.S. BANK NATIONAL ASSOCIATION has caused
the same to be executed by one of its Vice Presidents or Assistant Vice
Presidents and its corporate seal to be hereunto affixed, and duly attested by
one of its Assistant Secretaries, as of the day and year first above written.

 

EL PASO ELECTRIC COMPANY

By:         

Name:

       

Title:

   

 

Attest:

  

Secretary

 

U.S. BANK NATIONAL

ASSOCIATION, as Trustee

By:         

Name:

       

Title:

   

 

[Corporate Seal]

Attest:

  

Title:

 

6

--------------------------------------------------------------------------------

ACKNOWLEDGEMENT

 

STATE OF TEXAS

   )           )   

SS.

COUNTY OF EL PASO

   )     

 

On the      day of December, 2004, before me personally came
                                        , to me known, who, being by me duly
sworn, did depose and say that he resides in                            ; that
he is the                                          of El Paso Electric Company,
a Texas corporation, the corporation described in and which executed the
foregoing instrument; and that he signed his name thereto by authority of the
board of directors of said corporation.

 

 

Notary Public

 

(Notary Seal)

 

--------------------------------------------------------------------------------

ACKNOWLEDGEMENT

 

COMMONWEALTH OF MASSACHUSETTS

   )           )   

        SS.

COUNTY OF SUFFOLK

   )     

 

On the      day of December, 2004, before me personally came
                    , to me known, who, being by me duly sworn, did depose and
say that s/he resides in                     , Massachusetts; s/he is a
                     of U.S. Bank National Association, a banking corporation
organized under the laws of The Commonwealth of Massachusetts, the corporation
described in and which executed the foregoing instrument; that s/he knows the
seal of said corporation; that the seal affixed to said instrument is such
corporate seal; that it was so affixed by authority of the board of directors of
said corporation, and that s/he signed her/his name thereto by his authority.

 

 

Notary Public

 

(Notary Seal)

 

--------------------------------------------------------------------------------

Exhibit H

 

[Form of Series H Bond]

 

THIS BOND IS NOT TRANSFERABLE EXCEPT TO A SUCCESSOR COLLATERAL AGENT UNDER THE
CREDIT AGREEMENT, DATED AS OF DECEMBER [    ], 2004, AMONG THE COMPANY, JPMORGAN
CHASE BANK, AS TRUSTEE OF THE RIO GRANDE RESOURCES TRUST II, THE LENDERS
SPECIFIED THEREIN (THE “LENDERS”), AND JPMORGAN CHASE BANK, AS ISSUING BANK, AS
ADMINISTRATIVE AGENT, AND AS COLLATERAL AGENT (THE “COLLATERAL AGENT”) (SUCH
CREDIT AGREEMENT, AS AMENDED FROM TIME TO TIME, THE “REVOLVING CREDIT
AGREEMENT”).

 

EL PASO ELECTRIC COMPANY

 

No.

   $100,000,000

 

COLLATERAL SERIES H FIRST MORTGAGE BONDS

 

El Paso Electric Company, a Texas corporation (herein, together with its
successors and assigns, the “Company”), for value received promises to pay to
                                                 , or registered assigns the
principal sum of ONE HUNDRED MILLION DOLLARS or such lesser principal amount as
is equal to the aggregate principal amount of the outstanding Loans and L/C
Disbursements (as defined in the Revolving Credit Agreement) in whole or
installments on such date or dates as the Company has any obligation to make
payments under the Revolving Credit Agreement, but not later than the Maturity
Date (as defined in the Revolving Credit Agreement) or December     , 2009,
whichever shall occur first, at the same place or places as such payments are
required to be made by the Company, in any coin or currency of the United States
of America which at the time of such payment shall be legal tender for the
payment of public and private debts, and to pay interest on the unpaid principal
amount hereof in like coin or currency to the registered owner hereof at said
place or places at such rate per annum on each interest payment date (as
hereinafter defined) as shall cause the amount of interest payable on such
interest payment date on this Series H Bond to equal the amount of interest,
fees, charges and expenses payable on such interest payment date under the
Revolving Credit Agreement. Such interest shall be payable on the same dates as
interest is payable from time to time pursuant to the Revolving Credit Agreement
(each such date hereinafter called an “interest payment date”), until maturity
of this Series H Bond, or if the Collateral Agent shall demand redemption of
this Series H Bond, until the redemption date, or, if the Company shall default
in the payment of principal due on this Series H Bond, until such principal and
interest, shall have been paid in full and the Company’s obligations with
respect thereto discharged as provided in the Indenture (as hereinafter
defined). The amount of interest and fees and types of charges and expenses
payable from time to time under the Revolving Credit Agreement, the basis on
which such amounts are

 

--------------------------------------------------------------------------------

computed and the dates on which such amounts are payable are set forth in the
Revolving Credit Agreement.

 

Except as hereinafter provided, this Series H Bond shall bear interest (a) from
the interest payment date next preceding the date of this Series H Bond to which
interest has been paid, or (b) if the date of this Series H Bond is an interest
payment date to which interest has been paid, then from such date, or (c) if no
interest has been paid on this Series H Bond, then from the date of initial
issue.

 

This Series H Bond is one of the bonds of the Company known as its First
Mortgage Bonds (the “Bonds”), issued and to be issued in one or more series
under and secured by a General Mortgage Indenture and Deed of Trust, dated as of
February 1, 1996, duly executed by the Company to U.S. Bank National
Association, a banking corporation organized under the laws of The Commonwealth
of Massachusetts, Trustee (“Trustee”), and indentures supplemental thereto,
heretofore or hereafter executed, to which General Mortgage Indenture and Deed
of Trust and all indentures supplemental thereto (collectively referred to as
the “Indenture”) reference is hereby made for a description of the property
mortgaged and pledged, the nature and extent of the security, the terms and
conditions upon which the Bonds are, and are to be, issued and secured, and the
rights of the owners of the Bonds and the Trustee in respect of such security.
As provided in the Indenture, the Bonds may be in various principal sums, are
issuable in series, may mature at different times, may bear interest at
different rates and may otherwise vary as therein provided; and this Bond is the
only Bond of a series entitled “Collateral Series H First Mortgage Bonds”,
created by a First Supplemental Indenture dated as of February 1, 1996, as
provided for in the Indenture. The terms of this Series H Bond include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act of 1939, as amended (15 U.S. Code §§77aaa-77bbbb) (the
“Act”), as in effect on the date of the Indenture.

 

The Indenture authorizes the issuance of up to $100,000,000 aggregate principal
amount of Series H Bonds, but the aggregate principal amount hereof outstanding
at any time shall not exceed such lesser amount as is equal to the amount of the
Total Commitment under the Revolving Credit Agreement or, if such Total
Commitment shall have terminated, the aggregate outstanding principal amount of
the Loans and L/C Disbursements under the Revolving Credit Agreement.

 

This Series H Bond has been issued by the Company to the Collateral Agent (i) to
provide for the payment of the Company’s obligations to make payments to any
person under the Revolving Credit Agreement and (ii) to provide to such persons
the benefits of the security provided for by this Series H Bond.

 

Any payment made in respect to the Company’s obligations under the Revolving
Credit Agreement shall be deemed a payment in respect of this Series H Bond, but
such payment shall not reduce the principal amount of this Series H Bond unless,
and then only to the extent, the aggregate amount of the Total Commitment is
irrevocably reduced concurrently with such payment. In the event that all of the
Company’s obligations under the Revolving Credit Agreement have been paid in
full and discharged, this Series H Bond shall be deemed paid in full and the
Collateral Agent shall surrender this Series H Bond to the Trustee for
cancellation. This

 

10

--------------------------------------------------------------------------------

Series H Bond shall also be surrendered to the Trustee, or to the Company for
delivery to the Trustee, for cancellation on the Collateral Release Date, as
that term is defined in Section 10.04 of the Revolving Credit Agreement, if the
conditions enumerated in such Section 10.04 have been satisfied.

 

In the manner provided in the Indenture, this Series H Bond shall be redeemed at
a redemption price of 100% (expressed as a percentage of principal amount) plus
accrued interest thereon to the redemption date, in cash, upon receipt by the
Trustee of a written demand for redemption of this Series H Bond from the
Collateral Agent (the “Collateral Series Redemption Demand”). This Series H Bond
shall be redeemed in the amount specified in the Collateral Series Redemption
Demand, which amount shall be equal to the outstanding principal, interest and
other amounts then due and owing under the Revolving Credit Agreement. The
Collateral Series Redemption Demand shall also state (i) that an “Event of
Default” has occurred and is continuing under the terms of the Revolving Credit
Agreement, (ii) that payment of the principal amount outstanding under the
Revolving Credit Agreement, all interest thereon and all other amounts payable
thereunder are immediately due and payable, and (iii) that the Collateral Agent
has demanded payment thereof from the Company. The portion of this Series H Bond
subject to redemption shall be redeemed on the fifth Business Day following
receipt by the Trustee of the Collateral Series Redemption Demand. Any payment
made to the Collateral Agent pursuant to a Collateral Series Redemption Demand
shall constitute a payment by the Company in respect of its obligations under
the Revolving Credit Agreement. The Collateral Series Redemption Demand shall be
rescinded and shall be null and void for all purposes of the Indenture upon
receipt by the Trustee, no later than the Business Day prior to the date fixed
for redemption, of a certificate of the Collateral Agent (a) stating that there
has been a waiver of such Event of Default, or (b) withdrawing said Collateral
Series Redemption Demand.

 

The principal of this Series H 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 an Event of Default as therein defined.

 

With the consent of the Holders of not less than a majority in aggregate
principal amount of the Outstanding Bonds which would be affected by the action
to be taken, the Company and the Trustee may from time to time and at any time,
enter into a Supplemental Indenture for the purpose of adding any provision or
changing in any manner or eliminating any provision of the Indenture or of any
Supplemental Indenture or of modifying in any manner the rights of the Holders
of Bonds and any coupons; provided, however, that (i) no such Supplemental
Indenture shall, without the consent of the Holder of each Outstanding Bond
affected thereby (a) reduce the principal amount of Bonds whose Holders must
consent to an amendment, supplement or waiver, (b) reduce the Principal of or
change the fixed maturity of any Bond, or alter the provisions with respect to
any sinking, improvement, maintenance, replacement or analogous fund or
conversion, redemption or repurchase rights with respect to any Bond, (c) reduce
the rate of or change the time for payment of interest on any Bond, (d) waive a
Default or Event of Default in the payment of Principal of or interest on the
Bonds (except a rescission of acceleration of the Bonds pursuant to the
Indenture where the Event of Default has been remedied), (e) make any Bond
payable in money other than that stated in such Bond, (f) make any change in the
provisions of the Indenture relating to waivers of past Defaults or the rights
of Holders of Bonds to receive payments of Principal of or interest on the
Bonds, (g) waive a redemption payment with respect

 

11

--------------------------------------------------------------------------------

to any Bond, (h) limit the right of a Holder of Bonds to institute suit for the
enforcement of payment of Principal of or interest on such Bonds in accordance
with the terms of said Bonds, (i) permit the creation by the Company of any
Prior Lien (but no merger or consolidation permitted under the Indenture of the
Company with any other Person owning property which is subject to a Prior Lien,
shall be deemed the creation of a Prior Lien), or (j) make any change in the
Indenture pertaining to amendments, supplements or waivers to the Indenture or
any Supplemental Indenture with the consent of the Holders, and (ii) if there
shall be Bonds of more than one series of Bonds outstanding and if such proposed
action shall materially adversely affect the rights of Holders of Bonds of one
or more such series, then the consent (including consents obtained in connection
with a tender offer or exchange offer for Bonds) only of the Holders of a
majority in aggregate principal amount of the outstanding Bonds of all series so
affected, considered as one class, shall be required. Notwithstanding the
foregoing proviso, without the consent of the Holders, on and as of the date
upon which none of the Investor Series Bonds remain Outstanding (the “Covenant
Substitution Date”), the provisions of Article 4 of the First Supplemental
Indenture shall cease to be in effect and this Series H Bond shall no longer be
entitled to the benefits thereof, but shall instead be entitled to the benefits
of the negative covenants set forth in each supplemental indenture creating a
new series of Bonds issued to institutional or public investors on or after the
Covenant Substitution Date on the same basis as the holders of such new series
of Bonds for so long as such new series of Bonds remains outstanding.

 

No incorporator, stockholder, director, officer or employee of the Company shall
have any liability for any obligations of the Company under this Series H Bond
and the Indenture or for any claim based on, in respect of, or by reason of,
such obligations or their creation. Any and all such rights and claims against
every such incorporator, stockholder, director, officer or employee, as such,
whether arising at common law or in equity, or created by rule of law, statute,
constitution or otherwise, are expressly released and waived as a condition of,
and as part of the consideration for, the execution of the Indenture and the
issuance of this Series H Bond.

 

This Series H Bond is nontransferable except to effect transfer to any successor
to the Collateral Agent under the Revolving Credit Agreement, but is
exchangeable by the registered holder hereof, in person or by attorney duly
authorized, at the corporate trust office of the Trustee, any such permitted
transfer or exchange to be made in the manner and upon the conditions prescribed
in the Indenture, upon the surrender and cancellation of this Series H Bond and
the payment of any applicable taxes and fees required by law, and upon any such
transfer or exchange a new registered bond or bonds or the same series and
tenor, will be issued to the authorized transferee, or the registered holder, as
the case may be.

 

This Series H Bond shall not be valid until authenticated by the manual
signature of the Trustee, or a successor trustee or authenticating agent
appointed pursuant to the Indenture.

 

12

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the Company has caused this Series H Bond to be executed in
its name by the manual or facsimile signature of its Chairman of the Board, its
Chief Executive Officer, its President or one of its Vice Presidents, and
attested by the manual or facsimile signature of its Secretary or one of its
Assistant Secretaries.

 

Issue Date:

Authentication Date:

        This Bond is one of the Bonds of the series designated therein,
described in the within-mentioned Indenture.      

EL PASO ELECTRIC COMPANY,

as Issuer

U.S. BANK NATIONAL       By:     

ASSOCIATION,

         

    Title:

as Trustee

                   

Attest:

By:                 

    Authorized Officer

                                 

Title:

 

13

--------------------------------------------------------------------------------

ASSIGNMENT

 

To assign this Series H Bond, fill in the form below:

 

(I) or (we) assign and transfer this Series H Bond to

  (Insert assignee’s soc. sec. or tax I.D. no.)        

(Print or type assignee’s name, address and zip code)

and irrevocably appoint  

         

agent to transfer this Series H Bond on the books of the Company.

The agent may substitute another to act for him.

 

Date:                                 

 

Your Signature:

  

(Sign exactly as your name appears on this Series H Bond)

 

Signature

          Guarantee:               

(Signatures must be guaranteed by an “eligible guarantor institution” meeting
the requirements of the Registrar, which requirements will include membership or
participation in STAMP or such other “signature guarantee program” as may be
determined by the Registrar in addition to, or in substitution for, STAMP, all
in accordance with the Exchange Act.)

 

14

--------------------------------------------------------------------------------

        PWRW&G LLP DRAFT 12/14/04

 

CLOSING CERTIFICATE

INTERLINE BRANDS, INC.

 

Pursuant to Section 4(d) of the Amendment and Restatement Agreement dated as of
December [    ], 2004 (the “Amendment”), amending that certain Credit Agreement
(as heretofore amended and as amended by the Amendment, the “Credit Agreement”;
terms defined therein being used herein as therein defined), dated as of May 29,
2003 by and among Interline Brands, Inc., a New Jersey corporation (the
“Company”), the lenders named therein (the “Lenders”) and Credit Suisse First
Boston, as administrative agent, the undersigned chief financial officer of the
Company hereby certifies on behalf of the Company as follows:

 

1. The representations and warranties set forth in Article III of the Credit
Agreement and in each other Loan Document are true and correct in all material
respects on and as of the date hereof with the same effect as if made on the
date hereof, except to the extent such representations and warranties expressly
relate to an earlier date.

 

2. As of the date hereof, no Event of Default or Default has occurred and is
continuing.

 

3. Except as attached as Exhibit A hereto, the information set forth on the
Perfection Certificate of the Borrower dated May 29, 2003 is complete, correct
and accurate as of the date hereof.

 

[Remainder of Page Intentionally Left Blank]

 

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the undersigned has hereunto set his name as of the date set
forth below.

 

 

Name:

  Charles Blackmon

Title:

  Chief Financial Officer

Date:

  December     , 2004

 

2

--------------------------------------------------------------------------------

Schedule 2.01

Commitments

 

Lender

--------------------------------------------------------------------------------

   Commitment

--------------------------------------------------------------------------------

JPMorgan Chase Bank, N.A.

   $ 25,000,000.00

Union Bank of California, N.A.

   $ 20,000,000.00

The Bank of New York

   $ 20,000,000.00

The Norinchukin Bank, New York Branch

   $ 15,000,000.00

Bank Hapoalim B.M.

   $ 10,000,000.00

Bank of Communications, New York Branch

   $ 10,000,000.00

Total

   $ 100,000,000.00

 

--------------------------------------------------------------------------------

SCHEDULE 3.04

Governmental Approvals

 

FERC

 

On September 1, 2004, El Paso Electric Company (the “Company”) filed with the
Federal Energy Regulatory Commission (“FERC”) an application seeking authority
pursuant to Section 204 of the Federal Power Act to enter into the Credit
Agreement and to engage in transactions related thereto. This application was
amended on September 24, 2004 and on November 16, 2004. The FERC Order approving
the Company’s application and first amendment (Dockets ES04-46-000 and
ES04-46-001) was posted on October 18, 2004 (the “Original Order”). The FERC
Order approving the Company’s second amendment (Docket ES04-46-002) was posted
on November 30, 2004 (the “Amended Order”). The FERC also issued an Errata
Notice on December 8, 2004, clarifying its Amended Order (the “Errata Notice”).
The Amended Order and Errata Notice are subject to applications for rehearing to
the FERC which must be filed, if at all, within thirty (30) days after issuance
of the Amended Order and Errata Notice, respectively. No applications for
rehearing were filed within the thirty (30) days after the issuance of the
Original Order.

 

--------------------------------------------------------------------------------

SCHEDULE 3.09

Litigation and Compliance with Laws

 

Schedule 3.17(d) is incorporated herein by reference.

 

On January 16, 2003, the Company was served with a complaint on behalf of a
purported class of shareholders alleging violations of the federal securities
laws (Roth v. El Paso Electric Company, et al., No. EP-03-CA-0004). The
complaint was filed in the El Paso Division of the United States District Court
for the Western District of Texas. The suit seeks undisclosed compensatory
damages for the class as well as costs and attorneys’ fees. The lead plaintiff,
Carpenters Pension Fund of Illinois, filed a consolidated amended complaint on
July 2, 2003, alleging, among other things, that the Company and certain of its
current and former directors and officers violated securities laws by failing to
disclose that some of the Company’s revenues and income were derived from an
allegedly unlawful relationship with Enron. The allegations arise out of the
FERC investigation of the power markets in the western United States during 2000
and 2001, which the Company previously settled with the FERC Trial Staff and
certain intervening parties. On August 15, 2003, the Company and the individual
defendants filed a motion to dismiss the complaint for failure to state a claim
upon which relief can be granted. On November 26, 2003, the Court denied the
motion to dismiss as to the Company and three of the individual defendants and
granted the motion to dismiss as to two individual defendants. On April 13,
2004, the Court granted a motion of the Company and the remaining individual
defendants requesting permission to file an interlocutory appeal to the U. S.
Court of Appeals for the Fifth Circuit regarding certain legal questions
relating to the Court’s denial of the motion to dismiss the complaint as to
those defendants. On April 27, 2004, the Court entered an order staying the
district court proceedings until the Fifth Circuit completed its review. On June
7, 2004, the U. S. Court of Appeals denied the appeal which automatically lifted
the stay in the district court. This matter is presently set for trial on
September 19, 2005. While the Company believes the lawsuit is without merit and
intends to defend itself vigorously, the Company is unable to predict the
outcome.

 

On May 21, 2003, the Company was served with a complaint by the Port of Seattle
seeking civil damages under the Sherman Act, the Racketeer Influenced and
Corrupt Organization Act, and state anti-trust laws, as well as for fraud (Port
of Seattle v. Avista Corporation, et al., No. CV03-117OP). The complaint was
filed in the United States District Court for the Western District of
Washington. The complaint alleges that the Company, indirectly through its
dealings with Enron, conspired with the other named defendants to manipulate the
California energy market, which had the effect of artificially inflating the
price that the Port of Seattle paid for electricity. The Company, together with
several other defendants, filed a motion to dismiss. On May 12, 2004, the Court
granted the Company’s motion, and the suit was dismissed. The Port of Seattle
has filed an appeal of the Court’s decision with the U. S. Court of Appeals for
the Ninth Circuit. The Company is unable to predict the outcome of this appeal.

 

--------------------------------------------------------------------------------

On May 5, 2004, Wah Chang, a specialty metals manufacturer which operates a
plant in Oregon, filed suit against the Company and other defendants in the
United States District Court for the District of Oregon. (Wah Chang v. Avista
Corporation, et al., No. 04-619AS). The complaint makes substantially the same
allegations as were made in Port of Seattle and seeks the same types of damages.
In addition, on June 7, 2004, the City of Tacoma filed suit against the Company
and other defendants in the United States District Court for the Western
District of Washington (City of Tacoma v. American Electric Power Service Corp.,
et al., C04-5325RBL). This complaint also makes substantially the same
allegations as were made in Port of Seattle and seeks civil damages (including
treble damages) from the Company and the other defendants for violations of
certain antitrust provisions under the Sherman Act. Both of these matters have
now been transferred to the same court that heard and dismissed the Port of
Seattle lawsuit. While the Company believes that these matters are without merit
and intends to defend itself vigorously, the Company is unable to predict the
outcome.

 

--------------------------------------------------------------------------------

SCHEDULE 3.17

Environmental Matters

 

(c) Releases

 

The Company experiences sporadic, limited quantity releases of electric
insulating oil (mineral oil) within its electric distribution and transmission
system consistent with the operation of these systems. These releases are
commonly cleaned and removed within regulatory accepted timeframes and are
overseen by the respective environmental enforcement agencies.

 

In a similar manner, the generation of electricity at power plants owned and
operated by the Company, may experience sporadic and limited quantity releases
of chemicals common to the processes of the generation of electricity within the
power plant property. These releases are commonly cleaned and removed within
regulatory accepted timeframes and are overseen by the respective environmental
enforcement agencies.

 

(d) Environmental Claims.

 

On October 15, 2003, the Company received a Request for Information and Document
Production pursuant to the Texas Solid waste Disposal Act regarding San Angelo
Electric Service Company (SESCO), located at 926 Pulliam Street, San Angelo,
Texas. While the Company believes it is not a responsible party with respect to
environmental concerns at the SESCO site and has defenses to any liability, the
Company is unable to predict the outcome of this matter.

 

(e) Hazardous Materials Handling.

 

The Company handles, stores, transports and a arranges for the proper disposal
of limited and specific hazardous materials. Other waste streams including but
not limited to regulated wastes, non-regulated wastes, hazardous wastes,
non-hazardous wastes, and industrial wastes are handled, stored, transported and
properly disposed as necessary to the operation(s) of its business.

 

--------------------------------------------------------------------------------

SCHEDULE 3.18

Insurance

 

See attached schedule.

 

--------------------------------------------------------------------------------

INSURANCE COVERAGE PROFILE

2004 Thru 2005

 

Type of Coverage

--------------------------------------------------------------------------------

  

Insurer

--------------------------------------------------------------------------------

   Policy Period

--------------------------------------------------------------------------------

  

Coverage Limits

and Deductibles

--------------------------------------------------------------------------------

  

Premium

(w/o taxes)

--------------------------------------------------------------------------------

       

Broker/Agent

--------------------------------------------------------------------------------

Workers’ Compensation and Employers Liability Texas, New Mexico & Arizona

  

Crum & Forster -United

States Fire Insurance Co.

Policy #4060292328

   06/01/04-05   

$500,000 Each accident

$500,000 Bl by disease each employee

$500,000 Bl by disease each policy

   $353,315        

Rogers & Belding

Insurance Agency, Inc.

               Deductibles                              

$ 150,000 Each claim

$1,750,000 Aggregate

              

Comprehensive Automobile Liability and Physical
Damage

  

Crum & Forster

Policy #138-0268314

   06/01/04-05   

$500,000 CSL

$35,000 Each covered vehicle damage

$1,000,000 CSL (fuel truck)

   $99,024        

Rogers & Belding

Insurance Agency, Inc.

               Deductibles                              

$1,000 Property damage

$    250 Comprehensive

$    500 Collision

              

General (OL&T) Liability

  

Crum & Forster

Policy #5410254411

   06/01/04-05   

$500,000 Combined single limit, bodily injury and property damage each
occurrence

$2,500,000 General Aggregate

   $26,997        

Rogers & Belding

Insurance Agency, Inc.

Excess Liability
(1st Layer)

  

AEGIS

Policy #X0407A1A04

   06/01/04-05   

$35,000,000 Each occurrence

   $710,565.00
$34,462
$711    Tax
Fee   

Rogers & Belding

Insurance Agency, Inc.

                   

--------------------------------------------------------------------------------

                              $745,738          

Excess Liability
(2nd Layer)

  

EIM

(Energy Ins. Mutual)

Policy #501480-04GL

   06/01/04-05   

$50,000,000 XS of $35,000,000

   $265,125.00
12,858.56
265.13    tax   

Rogers & Belding

Insurance Agency, Inc.

                   

--------------------------------------------------------------------------------

                              $278,248.69          

Primary Directors and Officers Liability

  

AIG - National Union Fire Ins. Co.

Policy #3588471

   02/12/04-05   

$25,000,000 Aggregate

Deductible

$1,500,000

   $700,000        

Rogers & Belding

Insurance Agency, Inc.

Excess Directors and Officers Liability
(1st Layer)

  

AEGIS

Policy #D0407A1A03

   02/12/04-05   

$25,000,000 XS of

$25,000,000

   $609,000
$0
$30,407
$0    Policy fee
State tax
State fee   

Rogers & Belding

Insurance Agency, Inc.

                   

--------------------------------------------------------------------------------

                              $639,407          

 

Page 1

--------------------------------------------------------------------------------

INSURANCE COVERAGE PROFILE

2004 Thru 2005

 

Type of Coverage

--------------------------------------------------------------------------------

  

Insurer

--------------------------------------------------------------------------------

   Policy Period

--------------------------------------------------------------------------------

  

Coverage Limits and
Deductibles

--------------------------------------------------------------------------------

   Premium
(w/o taxes)

--------------------------------------------------------------------------------

       

Broker/Agent

--------------------------------------------------------------------------------

Excess Directors and
Officers Liability

(3rd Layer)

   RLI Insurance Company Policy #EPG0002648    02/12/04-05    $15,000,000 XS of
$50,000,000    $325,000        

Rogers & Belding

Insurance Agency, Inc.

Excess Directors and
Officers Liability

(4th Layer)

  

EIM

Policy #90073203DO

   02/12/04-05    $25,000,000 XS of $65,000,000    $487,000
$0
$24,369
$0    Policy fee
State tax
State fee   

Rogers & Belding

Insurance Agency, Inc.

                   

--------------------------------------------------------------------------------

                              $511,369          

Excess Directors and
Officers Liability

(5th Layer)

  

St. Paul Mercury Insurance Company

Policy #591CM0651

   02/12/04-05    $10,000,000 XS of $90,000,000    $170,872        

Rogers & Belding

Insurance Agency, Inc.

Excess Directors and
Officers Liability

(6th Layer)

  

Hartford - Twin City Fire Insurance Company

Policy #DA012735203

   02/12/04-05    $10,000,000 XS of $100,000,000    $149,000        

Rogers & Belding

Insurance Agency, Inc.

Excess Directors and
Officers Liability

(7th Layer)

  

Travelers

Policy #103997136

   02/12/04-05    $10,000,000 XS of $110,000,000    $140,000        

Rogers & Belding

Insurance Agency, Inc.

Excess Directors and
Officers Liability

(8th Layer)

  

MAG - U.S. Specialty Insurance Company

Policy #34MGU03A3211

   02/12/04-05    $10,000,000 XS of $120,000,000    $132,000        

Rogers & Belding

Insurance Agency, Inc.

Excess Directors and

Excess Directors and
Officers Liability

(9th Layer)

  

Continental Casualty Company

Policy #267840785

   02/12/04-05    $5,000,000 XS of $130,000,000    $66,000        

Rogers & Belding

Insurance Agency, Inc.

Excess Directors and
Officers Liability

(10th Layer)

  

ARCH Insurance Company

Policy #41DOX1538700

   02/12/04-05    $5,000,000 XS of $135,000,000    $66,000        

Rogers & Belding

Insurance Agency, Inc.

 

Page 2

--------------------------------------------------------------------------------

INSURANCE COVERAGE PROFILE

2004 Thru 2005

 

Type of Coverage

--------------------------------------------------------------------------------

 

Insurer

--------------------------------------------------------------------------------

  Policy Period

--------------------------------------------------------------------------------

  

Coverage Limits and
Deductibles

--------------------------------------------------------------------------------

 

Premium

(w/o taxes)

--------------------------------------------------------------------------------

      

Broker/Agent

--------------------------------------------------------------------------------

Excess Directors and Officers Liability

(11th Layer)

 

CHUBB - Federal Insurance Company

Policy #8168-9799

  02/12/04-05    $10,000,000 XS of $140,000,000   $122,500        Rogers &
Belding Insurance Agency, Inc.

Excess Directors and Officers Liability

ExecSecure -Excess Side A

 

AlG - National Union Fire Insurance Company

Policy #3588473

  02/12/04-05    $25,000,000 XS of 150,000,000   $400,000        Rogers &
Belding Insurance Agency, Inc.

Primary Pension Trust (Fiduciary) Liability

 

AlG - National Union Fire Insurance Company

Policy #3588469

  02/12/04-05   

$15,000,000 Aggregate Deductibles

$50,000

  $85,000       

Rogers & Belding

Insurance Agency, Inc.

Excess Pension Trust

 

AEGIS

Policy #F0407A1A03

  02/12/04-05    $15,000,000 XS of $15,000,000   $67,000
$0
$3,579
$0   Policy fee
State tax
State fee   

Rogers & Belding

Insurance Agency, Inc.

                

--------------------------------------------------------------------------------

                          $70,579         

Excess Coverage

 

RLI

Policy #

  02/12/04-05    $10,000,000 XS of $30,000,000   $39,000       

Rogers & Belding

Insurance Agency, Inc.

Excess Coverage

  ST. PAUL   02/12/04-05    $10,000,000 XS of $40,000,000   $34,000       

Rigers $ Belding

Insurance Agency, Inc.

All Risk Property

  AEGIS   04/01/04-05    $300,000,000 Per occurrence   $1,562,401       

Rogers & Belding

Insurance Agency, Inc.

                 $32,500
$7,500
$151   B&M Policy
Inspection Fee
Texas Volunteer Fire Tax

Boiler and Machinery

  Policy #L0407A1A02       

Deductible

$1,500,000 Generating locations

  36,619
755   tax
fee                      

--------------------------------------------------------------------------------

            

Lloyd’s of London

Policy #NA00l240a

      

$    500,000 Per occurrence substation and other properties

  $1,639,926             

Liberty Ins. Underwriters

Policy #NY042704002

      

$    100,000 Per occurrence office locations $100,000 Per occurrence as respects
contractors eqmt. 45 day waiting period on business interruption and $25,000 max
limit

per day for replacement power

                

The Hartford Steam Boiler & Inspection

Policy #

                          Allianz Insurance Co.                      

 

Page 3

--------------------------------------------------------------------------------

INSURANCE COVERAGE PROFILE

2004 Thru 2005

 

Type of Coverage

--------------------------------------------------------------------------------

  

Insurer

--------------------------------------------------------------------------------

   Policy Period

--------------------------------------------------------------------------------

  

Coverage Limits

and Deductibles

--------------------------------------------------------------------------------

  

Premium

(w/o taxes)

--------------------------------------------------------------------------------

  

Broker/Agent

--------------------------------------------------------------------------------

    

Policy #

 

Continental Casualty
Insurance Co. Engineering Services-Boiler and Machinery only

Policy #BM 1077607424

                   

Blanket Crime

   Chubb Ins. Co.
Policy #8134-5198    02/12/04-05   

$3,000,000 Per loss

$    500,000 Per loss on premises and transit

   $20,002   

Rogers & Belding

Insurance Agency, Inc.

              

Deductibles

Employee theft and Funds transfer fraud $50,000 depositor’s forgery, Premises
and Transit $10,000

         

Employers Comprehensive Notary Public Errors and Omissions Policy

   Western Surety Co.
Policy #68586624    03/10/04-05   

$20,000 Per insured. (Covers employees for E&O as notaries if at the request

of EPEC)

       $422
(adjusted increase
to be determined)   

Rogers & Belding

Insurance Agency, Inc.

Business Travel Accident Insurance

   AIG LIFE
Policy #GTP 8051346    06/06/04-05   

$100,000 Per employee, per accident

$1,200,000 Per accident on aircraft

     $1,190   

Rogers & Belding

Insurance Agency, Inc.

Kidnap/Ransom and Extortion

  

CHUBB - Federal Insurance Company

Policy #8179-97-16

   12/01/03-06    $10,000,000 Per loss    $16,000   

Rogers & Belding

Insurance Agency, Inc.

PAC

  

American international Specialty Lines

Policy #278-98-37

   02/12/04-05   

$1,000,000 Aggregate

Deductible

$1,000 Each loss

     $4,000   

Rogers & Belding

Insurance Agency, Inc.

 

Page 4

--------------------------------------------------------------------------------

INSURANCE COVERAGE PROFILE

2004 Thru 2005

 

Type of Coverage

--------------------------------------------------------------------------------

  

Insurer

--------------------------------------------------------------------------------

   Policy Period

--------------------------------------------------------------------------------

  

Coverage Limits

and Deductibles

--------------------------------------------------------------------------------

   Premium
(w/o taxes)

--------------------------------------------------------------------------------

  

Broker/Agent

--------------------------------------------------------------------------------

International Exporter’s

   Chubb
Policy #BIND283518    02/09/04-05   

$500,000 Bodily Injury & Property

$250,000 Employment Practices

$    10,000 Medical Expense

   $3,500   

Rogers & Belding

Insurance Agency, Inc.

 

Page 5

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SCHEDULE 4.02(a)

Local Regulatory Counsel

 

Jurisdiction

--------------------------------------------------------------------------------

  

Counsel

--------------------------------------------------------------------------------

Arizona

  

Perkins Coie Brown & Bain P.A.

New Mexico

  

Law Offices of Randall W. Childress, P.C.

Texas

  

Clark Thomas & Winters,

a Professional Corporation

 

--------------------------------------------------------------------------------

SCHEDULE 6.01

Indebtedness

 

Payee

--------------------------------------------------------------------------------

   Interest
Rate

--------------------------------------------------------------------------------

   

Issue

Date

--------------------------------------------------------------------------------

   Original
Amount

--------------------------------------------------------------------------------

   Current
Balance

--------------------------------------------------------------------------------

   Security

--------------------------------------------------------------------------------

   Maturity
Date

--------------------------------------------------------------------------------

El Paso Natural Gas Company Note

   5.50 %   11/20/1996    $ 963,919    $ 45,057    Office Equipment   
05/01/2007

 

--------------------------------------------------------------------------------

SCHEDULE 6.02

Liens

 

1. Liens created pursuant to a Security Agreement dated as of November 20, 1996
between El Paso Electric Company and El Paso Natural Gas Company.

 

2. Minor miscellaneous liens existing on the Closing Date, incurred in the
ordinary course of business, none of which cover property that is material to
the business, operations or financial position of the Company.

 

--------------------------------------------------------------------------------

SCHEDULE 6.04

Certain Investments

 

1. Contributions to and interests of the Company in decommissioning trusts
relating to the Palo Verde Nuclear Generating Station (“PVNG”) (to the extent
such contributions and interest constitute investments) as contemplated by the
ANPP Participation Agreement dated as of August 23, 1973, as amended.

 

2. Contributions to and interests of the Company in spent nuclear fuel trust
relating to the PVNG (to the extent such contributions and interests constitute
investments.

 

3. Other minor investments which were obtained in the ordinary course of
business and, in the aggregate, have a book value of less than $200,000.