EXHIBIT 10.15

EXECUTION COPY

TRUST AGREEMENT

BETWEEN

EL PASO ELECTRIC COMPANY

 
 
 
Trustor
 

                            
AND

TEXAS COMMERCE BANK NATIONAL ASSOCIATION

                                
 
 
 
Trustee
 

RIO GRANDE RESOURCES TRUST II

Dated as of February 12, 1996

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TRUST AGREEMENT

TABLE OF CONTENTS
Section
Page
 
 
 
 
Recitals
1

 
 
 
1.
Definitions
2

 
 
 
2.
Authorization and Direction to Accept and/or Execute Documents
2

 
 
 
3.
Declaration of Trust
4

 
 
 
4.
Limitations on Authority of the Trustee with Respect to the Trust Estate
5

 
 
 
5.
The Trustee's Agreements
6

 
 
 
6.
Concerning the Trustee
11

 
 
 
6.1
The Trustee's Liability
11

 
 
 
6.2
Reliance on Writing; Limitation of Duties
12

 
 
 
6.3
Security or Indemnity to the Trustee
12

 
 
 
6.4
Use of Agents
13

 
 
 
6.5
No Duties of Maintenance, Insurance, Etc.
14

 
 
 
6.6
[Reserved]
14

 
 
 
7.
[Reserved]
14

 
 
 
8.
Removal and Resignation of Trustee and Its Successors
15

 
 
 
8.1
Removal and Resignation of the Trustee
15

 
 
 
8.2
Merger or Consolidation of the Trustee
17

 
 
 
8.3
Estate and Rights of Successor the Trustee
17

 
 
 
9.
Transfer of Trustor's and Beneficiary's Interests
19

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10.
Duration and Termination of and Amendment to Trust
20

 
 
 
10.1
Duration
20

 
 
 
10.2
Termination
20

 
 
 
10.3
Distribution of Trust Estate Upon Termination
21

 
 
 
10.4
Amendments to this Trust Agreement
23

 
 
 
11.
Compensation
23

 
 
 
12.
Miscellaneous
23

 
 
 
12.1
Notices
23

 
 
 
12.2
Situs of Trust; Applicable Law
24

 
 
 
12.3
Identification of Trust
25

 
 
 
12.4
Counterparts
25

 
 
 
12.5
Benefit of Parties; Successors and Assigns
25

 
 
 
12.6
Status of Moneys Received
25

 
 
 
12.7
Conformity with ANPP Participation Agreement
28

 
 
 
12.8
Trust Agreement for Benefit of the Trustee, the Trustor and Beneficiary Only
28

 
 
 
12.9
Grantor Trust
29

 
 
 
12.10
Books, Records and Returns
29

 
 
 
12.11
Miscellaneous
30

 
 
 
Signatures
 
 
 
 
Schedules
 
 
 
 
A
Definitions
A-1

B
Form for Supplemental Instructions
B-1

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TRUST AGREEMENT

Rio Grande Resources Trust II

THIS TRUST AGREEMENT, dated as of February 12, 1996, is between EL PASO ELECTRIC
COMPANY, a Texas corporation, as trustor (the "Trustor"), and TEXAS COMMERCE
BANK NATIONAL ASSOCIATION, as trustee (the "Trustee").

W I T N E S S E T H:

RECITALS

A.    Trustor desires to create a trust with a situs in the State of Texas, for
the initial purpose of enabling the Trustee to acquire from Trustor, certain
rights to Nuclear Fuel that is intended to be utilized in the reactor core of an
electric generating plant and certain rights under contracts into which Trustor
has entered with certain others engaged in the Nuclear Fuel Cycle, and for the
purpose of benefiting Beneficiary, as herein provided.

B.    Trustor may desire to request the Trustee to enter into other transactions
or acquire other assets, subject to the terms and conditions and as provided
herein.

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C.    The Trustee is willing to accept the duties and obligations imposed
hereby.

D.    Trustor has paid to the Trustee the sum of $50 to be held as part of the
Trust Estate, receipt of which is hereby acknowledged by the Trustee.

NOW, THEREFORE, the parties hereby agree as follows:

SECTION 1. Definitions.

For purposes of this Trust Agreement, the capitalized terms used herein and not
heretofore or otherwise herein defined shall have the meanings set forth in
Schedule A hereto.

SECTION 2. Authorization and Direction to Accept and/or Execute Documents.

Trustor hereby authorizes and directs:

(a)    the Trustee to accept, execute and deliver the Purchase Contract and any
modification thereof or supplement thereto and to perform all of the obligations
and duties and to exercise all the rights of the Trustee thereunder;

(b)    the Trustee to accept, execute and deliver the Assignment Agreements and
any agreements similar thereto which

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are entered into in accordance with the Purchase Contract and to perform the
obligations and duties, if any, and to exercise all the rights, of the Trustee
thereunder;

(c)    the Trustee to accept, execute and deliver the Loan Documents and to
perform all of the obligations and duties, and to exercise all the rights of the
Trustee thereunder and to execute and file or record, or both, such financing
statements, continuation statements with respect to financing statements and
such other documents as are required to maintain the interests created under the
Loan Documents;

(d)    the Trustee to borrow such amounts and upon such terms and conditions,
and to issue such promissory notes, obligations or evidences of indebtedness as
shall be requested of the Trustee by the Trustor as provided herein;

(e)    the Trustee to accept, execute, deliver and perform the obligations of
the Trustee under all other instruments, documents and agreements presented to
it by the Trustor, provided that such instruments, documents and agreements are
reasonably satisfactory to Trustee and to its counsel, and upon the written
instructions of the Trustor and only such instructions, to do all such
additional things and to take all such further action as may be necessary,
appropriate or convenient to consummate the transactions contemplated herein and
to perform its duties and obligations as the Trustee of this

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Trust, as contemplated hereby or by the documents referred to herein, provided
that such doing, taking and performing shall be reasonably satisfactory to the
Trustee and to its counsel; and

(f)    the Trustee to execute and deliver such other agreements to accept the
assignment of such other agreements or rights, and to acquire such properties
and enter into such transactions, as Trustor may lawfully request by
Supplemental Instructions in substantially the form set forth in Schedule B
hereto, provided that such agreements, assignments, acquisitions and
transactions are reasonably satisfactory to the Trustee and to its counsel and
are not inconsistent with or in contravention of any agreement to which the
Trustee is party; and to perform all of the obligations and duties, and exercise
all of the rights, of the Trustee under any such agreements, assignments, rights
or transactions.

The documents and instruments referred to in subsections (a) through (c) shall
be executed in substantially the form delivered to the Trustee by Trustor on or
after the date hereof, with such changes as shall be approved by the Trustor.

SECTION 3. Declaration of Trust.

Except as otherwise specifically provided herein, the Trustee hereby declares
that it shall, and hereby undertakes and agrees to, receive, accept and hold the
Trust Estate and any and

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all payments (other than payments to the Trustee of Trustee's Expenses or in
connection with any indemnification of the Trustee), proceeds, rights,
properties and privileges received under this Trust Agreement or any other
document referred to or contemplated herein, in and subject to the Trust for the
use and benefit of the Beneficiary, subject, as the case may be, to the terms
and conditions of the Purchase Contract, the Loan Documents, the Assignment
Agreements, the rights of the Trustor and others thereunder, the rights of
others pursuant to other agreements entered into or assignments or rights
accepted pursuant to Section 2 hereof, and the rights of the holders of
promissory notes, other obligations or evidences of indebtedness issued pursuant
to Section 2(d) hereof.

SECTION 4. Limitations on Authority of the Trustee with Respect to the Trust
Estate.

Except to perform the duties set forth in the instruments, documents, agreements
and Supplemental Instructions referred to in Section 2 hereof and to exercise
and carry out or cause to be exercised and carried out the rights, duties and
obligations of the Trustee thereunder and under Section 5 of this Trust
Agreement, the Trustee shall have no power, right, duty or authority to manage,
control, use, possess, sell, lease, dispose of or in any manner deal in the
Trust Estate. Nothing contained in this Section 4, however, shall be deemed to
limit or restrict the power or authority of the Trustee to enforce the terms and

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provisions of the Purchase Contract, the Loan Documents, the Assignment
Agreements and other agreements or assignments or rights pursuant to Section 2
hereof, to hold estates, to collect and receive sums payable thereunder and
otherwise to exercise their rights, powers and privileges as provided for by
said contracts and agreements to the fullest extent permitted by applicable law.

SECTION 5. Trustee's Agreements.

The Trustee hereby agrees:

(a) to accept, execute and deliver the documents or assignment of documents
referred to in Section 2 hereof and, subject to the conditions contained therein
and to availability of funds or credit pursuant to the Credit Agreement or other
sources, and subject to compliance with all applicable laws and regulations, to
perform all of the obligations and duties, and, subject to the provisions
thereof and of this Trust Agreement, to exercise all the rights of the Trustee
thereunder;

(b) to receive and to apply and distribute all Nuclear Fuel Proceeds: first, to
the payment of any the Trustee's Expenses not theretofore paid pursuant to
Section 5(c) hereof; second, at the election of the Trustor, to the payment or
refinancing of the obligation s then due and payable under the Loan Documents in
the order set forth therein; third, to provide

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the Trustee with funds necessary to pay, or to reimburse El Paso for the payment
of, such amounts as shall become due and payable, or as shall have been paid by
El Paso, with respect to Nuclear Fuel under the Assigned Agreements and pursuant
to the Purchase Contract; fourth, to the prepayment of the amounts advanced to
or borrowed by the Trustee pursuant to the Credit Agreement, to the extent such
amounts may be prepaid with such proceeds and the Trustor instructs the Trustee
to elect to make such prepayment; fifth, to hold and invest in accordance with
Section 12.6 hereof funds not then applied or required to be applied in
accordance with the foregoing clauses first through fourth until such funds are
required to be applied; and sixth, upon termination of this Trust Agreement and
payment in full of all amounts due the Trustee hereunder and upon payment by or
for the account of the Trustee of all of its obligations pursuant to the
Purchase Contract, Assignment Agreements, Loan Documents and other agreements,
borrowings and arrangements entered into pursuant thereto or hereto (including
any instruments, documents and agreements entered into pursuant to Section 2(d)
hereof), to the payment of the entire balance to the Beneficiary or its
designee;

(c)    to receive and to apply and distribute all Basic Heat Supply Charges,
Additional Sales Charges, Fuel Swap Proceeds, and payments received by the
Trustee pursuant to Sections 3(a) and 3(b) of the Purchase Contract: first, to
the payment of the Trustee's Expenses not theretofore paid; second,

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to the payment of the obligations then due and payable under the Loan Documents
in the order set forth therein; third, to the prepayment of the amounts advanced
to or borrowed by the Trustee pursuant to the Credit Agreement, to the extent
such amounts may be prepaid with such proceeds and the Trustor instructs the
Trustee to make such prepayment; fourth, to hold and invest in accordance with
Section 12.6 hereof funds not then applied or required to be applied in
accordance with the foregoing clauses first through third until such funds are
required to be applied; and fifth, upon termination of this Trust Agreement and
payment in full of all amounts due the Trustee hereunder and upon payment by or
for the account of the Trustee of all of its obligations pursuant to the
Purchase Contract, Assignment Agreements, Loan Documents, and other agreements,
borrowings and arrangements entered into pursuant thereto or hereto (including
any instruments, documents and agreements entered into pursuant to Section 2 (d)
hereof), to the payment of the entire balance to the Beneficiary or its
designee; provided, that in the event that the Trustee has not received
sufficient Basic Heat Supply Charges and/or Additional Sales Charges to pay in
full the amounts to be paid in accordance with the foregoing clauses first
through third, the Trustee shall provide five days prior written notice
to Trustor of such deficiency, and the Trustor may, to compensate for such
deficiency, elect to (i) provide additional funds from the Trustor to the
Trustee, or (ii) instruct the Trustee to borrow additional amounts pursuant to
the Credit Agreement.

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(d)    in its discretion and in any event (subject to the provisions of Section
6 hereof and of the agreements, documents or instruments referred to herein or
contemplated hereby) upon the written request of the Trustor or upon the written
request of the Credit Bank given pursuant to the Loan Documents, to exercise any
and all rights or powers of the Trustee under the Purchase Contract, Assignment
Agreements, the Loan Documents or any other contract, agreement, document,
instrument, arrangement, right or estate referred to therein or herein
(including any instrument, document or agreement entered into pursuant to
Section 2(d) hereof);

(e)    to receive any and all other funds payable to the Trustee pursuant to any
agreement, document or instrument to which the Trustee is party pursuant hereto
or any other document referred to herein or in any way relating to the
transactions contemplated hereby and to distribute such funds in accordance with
such agreement, instrument or document or the written instructions of the
Trustor;

(f)    to receive funds or proceeds from agreements, documents, instruments,
arrangements, assignments or rights, or pursuant to transactions, entered into
or obtained pursuant to Supplemental Instructions as contemplated by Section
2(f) hereof and to apply such proceeds as set forth in such Supplemental
Instructions;

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(g)    to execute and file or record, or both, such deeds, conveyances, options,
licenses, leases, other instruments evidencing or memorializing rights or
estates, memoranda of the foregoing, mortgages, security agreements, financing
statements, continuation statements with respect to financing statements and
other such documents as are required to maintain the interests created hereunder
or contemplated hereby in the Trust Estate, as may be specified from time to
time in written instructions of the Trustor; and

(h)    to furnish to Trustor promptly upon receipt thereof, duplicates or copies
of all reports, notices, requests, demands, certificates, financial statements
and other instruments furnished to the Trustee under the agreements or
arrangements referred to herein to the extent that the same shall not have
theretofore been furnished to the Trustor.

Notwithstanding anything to the contrary contained in this Section 5 or
elsewhere in this Trust Agreement or in any of the documents referred to herein,
it is understood and agreed that the Trustee shall not be obligated (i) to make
any payment or distribution hereunder until the funds for such payment or
distribution have been received by the Trustee in immediately available funds or
(ii) to receive physical delivery of or physically to possess any Nuclear Fuel.

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SECTION 6. Concerning the Trustee.

6.1 Trustee's Liability.

The Trustee assumes no liability for anything other than its own gross
negligence or willful misconduct, or the breach of any warranty, representation
or covenant made by the Trustee specifically in its own individual capacity
pursuant to, and other than in reliance on legal opinions as set forth in, the
Purchase Contract, Assignment Agreements, Loan Documents or other agreements,
documents, instruments or arrangements entered into pursuant hereto including,
without limitation, any agreements, documents, instruments or arrangements
entered into pursuant to Section 2 hereof. In accepting the trusts hereby
created, the Trustee acts solely as trustee hereunder and not in its individual
capacity, and all persons, including but not limited to the Trustor, the
Beneficiary and others who are or may be parties to agreements or arrangements
with the Trustee, having any claim against the Trustee by reason of the
transactions contemplated hereby shall look only to the Trust Estate for payment
or satisfaction thereof (except to the extent such claim arises from the
Trustee's gross negligence or willful misconduct and except as otherwise
expressly provided therein), and each agreement entered into by the Trustee
pursuant hereto shall contain a provision to such effect.

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6.2 Reliance on Writing; Limitation of Duties.

Subject to the provision s of Section 6.1 hereof, the Trustee shall not be
liable ·to the Trustor, the Beneficiary, the Credit Bank, parties to agreements
or arrangements with the Trustee or any one else, in acting upon any writing,
including but not limited to, instructions from the Trustor, the Beneficiary,
the Credit Bank or such other parties and certificates of any officer or
representative thereof, and in assuming the truth and correctness of any
statement, opinion or assertion of any nature therein, provided that any such
writing is believed by the Trustee to be genuine and to have been sent or
communicated by or on behalf of a party or parties to this Trust Agreement, the
Purchase Contract, the Assignment Agreements, the Loan Documents or any other
agreement or arrangement entered into pursuant hereto (including any agreement
or arrangement entered into pursuant to Section 2 hereof).

6.3 Security or Indemnity to the Trustee.

The Trustee shall be under no obligation to exercise any of the rights or powers
vested in it by this Trust Agreement or to take any action required of it
hereunder or under any of the agreements, documents, instruments or arrangements
referred to herein unless the Trustee shall first have received such reasonable
security or indemnity against costs, expenses, claims, demands and liabilities
which legal counsel for the Trustee shall

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have advised might be incurred by it in exercising such rights or powers or in
taking such action. The Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order or other
paper or document of the terms or provisions of any of the foregoing, but the
Trustee, in its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit.

6.4 Use of Agents.

The Trustee may exercise its powers and perform its duties by or through such
attorneys, agents and servants as it shall appoint, and the Trustee and such
attorneys, agents and servants shall be entitled to the advice of counsel (who
may, in cases deemed by the Trustee in its reasonable discretion to be
appropriate, be counsel for the Trustor or for a party to the Purchase Contract,
Assignment Agreements, Loan Documents or any other agreement or arrangement
entered into pursuant hereto (including any agreement or arrangement entered
into pursuant to Section 2 hereof)). In furtherance of the foregoing, the
Trustee may authorize one or more persons to execute documents, agreements,
instruments, notices, certificates and authorization on its behalf and in its
names in connection with the exercise of its powers and performance of its
duties hereunder.

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6.5 No Duties of Maintenance, Insurance, Etc.

Unless otherwise expressly agreed by the Trustee in writing, THE TRUSTEE SHALL
NOT BE LIABLE TO ANYONE FOR ANY DEFECT IN, OR FOR THE SAFETY, CONDITION,
EXISTENCE, QUALITY, QUANTITY, LOCATION, REPAIR, PRODUCTION, STORAGE,
TRANSPORTATION, PACKAGING, PROCESSING, SUPPLY, MERCHANTABILITY, FITNESS FOR USE,
CONFORMITY TO SPECIFICATION, INSURANCE, OR MAINTENANCE OF, ANY ASSETS AT ANY
TIME CONSTITUTING PART OF THE TRUST ESTATE, OR FOR ANY DEFECT IN TITLE THERETO
OR OWNERSHIP THEREOF, OR FOR ANY FACT WHICH WOULD IMPAIR OR AFFECT THE
RIGHTFULNESS OR EFFECTIVENESS OF THE NEGOTI­ ATION OR TRANSFER OF TITLE TO ANY
SUCH ASSET OR ANY PORTION THEREOF OR ANY DOCUMENT OF TITLE COVERING OR RELATING
IN ANY WAY THERETO, and nothing contained herein or in any of the documents
referred to herein shall be construed as a representation or warranty on the
part of the Trustee in respect of the title thereto or ownership thereof or the
sufficiency, validity or effect of this Trust Agreement or any of the agreements
or arrangements referred to herein.

6.6 [Reserved].

SECTION 7. [Reserved].

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SECTION 8. Removal and Resignation of the Trustee and its Successors.

8.1 Removal and Resignation of the Trustee.

The Trustee may resign at any time, with or without cause, by giving at least 30
Business Days' prior written notice to Trustor, such resignation to be effective
upon the date specified in said notice, or if no date is specified, on the 30th
Business Day following the date said notice is given; provided, that said
resignation shall not be deemed effective until the acceptance of appointment by
the successor trustee and full compliance by the Trustee and said successor
trustee with all laws respecting the transfer of title to the assets and
properties of the Trust Estate, including without limitation laws requiring
governmental approvals or exemptions and recordation of documents. Should the
person or entity then serving as the Trustee hereunder (a) cease its activities
or doing business as a going concern other than pursuant to a transaction
described in Section 8.2 hereof, or (b) become incapable of acting as such, or
(c) make an assignment for the benefit of creditors, or (d) admit in writing its
inability to pay its debts as they become due, or (e) file a voluntary petition
in bankruptcy, or (f) be adjudicated a bankrupt or insolvent, or (g) file a
petition seeking for itself any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar arrangement under any present
or future statute, law or regulation, or (h)

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file an answer admitting the material allegations of a petition filed against it
in any such proceeding, or (i) consent to or acquiesce in the appointment of a
trustee, receiver or liquidator of it or all or any substantial part of its
assets or properties, or (j) take any action looking to its dissolution or
liquidation or (k) be subject to any proceeding against it seeking
reorganization, arrangement, readjustment, liquidation, dissolution or similar
relief under any present or future statute, law or regulation, which proceeding
is not dismissed within 60 days after commencement thereof, or (1) be subject to
the appointment without its consent or acquiescence of any trustee, receiver or
liquidator of it or of all or any substantial part of its assets or properties,
which appointment is not vacated within 60 days after the date thereof, then
such person or entity shall be deemed to have resigned as the Trustee hereunder
effective immediately prior to the occurrence of any matter specified in items
(a) through (j) above, or, in the event of the occurrence of any of the matters
specified in items (k) or (l) above, immediately prior to the expiration of the
60 day period specified therein. Upon any resignation of the Trustee,
the Trustor shall appoint a successor.

In addition to the foregoing, the Trustor may at any time, on at least ten
Business Days' prior written notice, remove the Trustee for good cause and
appoint a successor trustee or trustees.

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To be eligible for appointment as a successor trustee hereunder, such successor
must be a bank or trust company having a combined capital and surplus of at
least $100,000,000, if there be such an institution willing, able and legally
qualified to perform the duties of the Trustee hereunder upon reasonable or
customary terms.

8.2 Merger or Consolidation of the Trustee.

Any corporation or entity into which the Trustee may be merged or converted or
with which it may be consolidated, resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any corporation or
entity succeeding to all or substantially all of the assets or the
corporate trust business of the Trustee, shall be the successor trustee under
this Trust Agreement without the execution or filing of any paper or any further
act on the part of any of the parties hereto.

8.3 Estate and Rights of Successor Trustee.

Each successor trustee succeeding to all or substantially all of the assets of
the corporate trust business of the Trustee, whether by merger, conversion,
consolidation or sale or otherwise shall succeed, upon the trusts herein
expressed, to all of the estate, properties, rights, powers, duties, obligations
and trusts of such predecessor Trustee

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without the execution or filing of any paper or any further act on the part of
any of the parties hereto, and such predecessor Trustee does hereby bargain,
convey, transfer and assign to such successor trustee upon the trusts herein
expressed, all of the estate, properties, rights, powers, duties, obligations
and trusts thereof. Such succession shall be evidenced by an instrument or
instruments executed by the predecessor Trustee and successor trustee in due
form and in the required number of counterparts for recording or filing, as
appropriate, but such execution, delivery, recording and/or filing of such
instrument or instruments shall not be a prerequisite to the effectiveness of
such succession. Upon such succession, the predecessor Trustee shall deliver and
pay over to such successor trustee any property or moneys then held by such
predecessor Trustee upon the trusts herein expressed. Any successor trustee
shall execute and deliver to the predecessor Trustee and the Trustor an
instrument or instruments (in due form and in the required number of
counterparts for recording or filing as appropriate) accepting such appointment
and assuming the obligations of the predecessor Trustee under the contracts and
agreements executed and delivered pursuant hereto but the execution, delivery,
recording and/or filing of such instrument or instruments shall not be a
prerequi­site to the effectiveness of such acceptance and assumption which shall
become effective upon the succession of such successor trustee to the estate,
properties, rights, powers, duties, obligation s and trusts of the predecessor
Trustee as herein provided. Upon such succession, the successor trustee shall
give

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to the predecessor Trustee a full written release of any and all further duties
and obligations hereunder, and said successor trustee shall execute an indemnity
agreement under which the predecessor Trustee shall be· indemnified against any
and all costs, expenses, claims, demands and liabilities which may arise or be
incurred in connection with any and all further duties and obligations hereunder
after the effective date of such succession.

SECTION 9. Transfer of Trustor's and Beneficiary's Interests.

Trustor and Beneficiary each agree not to transfer or assign their respective
interests hereunder.

SECTION 10. Duration and Termination of and Amendment to Trust.

10.1 Duration.

The Trust created and provided for hereby shall continue until terminated as
herein provided.

10.2 Termination.

The Trust shall cease and be terminated in any one of the following events,
whichever shall first occur:

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(a)    If Trustor shall by notice in writing to the Trustee revoke and terminate
the Trust, on and as of the date stated in such notice, then on the date
specified in such notice the Trust created and provided for hereby shall cease
and terminate, provided, that no such termination shall be effective unless and
until the payment in full of all the obligations of the Trustee under the Credit
Agreement, including without limitation (i) the principal and accrued interest
on all Loans (as defined in the Credit Agreement) to the Trustee thereunder,
(ii) all reimbursement obligations of the Trustee under any Letter of
Credit    (as defined in the Credit Agreement) issued pursuant thereto, (iii)
the L/C Exposure (as defined in the Credit Agreement) has been reduced to zero
(or cash collateral equal to the L/C Exposure has been deposited with the
Collateral Agent    (as defined in the Credit Agreement)), (iv) all fees
(including without limitation any accrued commitment fees, agent fees,
participation fees, and issuing bank fees) and (v) all out­ of-pocket expenses
incurred by the Credit Bank, including without limitation the reasonable fees,
disbursements and charges of legal counsel, provided further, that El Paso and
the Trustee agree and acknowledge that effective upon and after the Trust
Termination Date (as defined in the Credit Agreement), the Trustee shall not be
entitled to request any Borrowing (as defined in the Credit Agreement) or
issuance of any Letter of Credit (as defined in the Credit Agreement); or

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(b)    If the period consisting of the life of the survivor of the members of
the Board of Directors of the Trustee in office, and of their issue living, on
the effective date of this Trust Agreement, plus 21 years shall expire; or

(c)    The bankruptcy or dissolution of the Trustor or the Beneficiary.

10.3 Distribution of Trust Estate Upon Termination.

Upon any termination of this Trust pursuant to the provisions of Section 10.2
hereof, the Trustee shall transfer title to the Trust Estate to the Beneficiary
or its designee, and, upon making such transfer and accounting for all funds
which have come into its hands, the Trustee shall be discharged and free of any
further liability hereunder, except such liability, not payable exclusively out
of the assets of the Trust Estate, as may be shown by such accounting then to
exist.

No later than the effective date of termination of this Trust, (i) the Trustee
shall execute and deliver to the Beneficiary or its designee a bill of sale
(substantially in the form of Schedule C to the Purchase Contract and in the
required number of counterparts for recording) and other written instrument or
instruments in form and content reasonably requested by the Beneficiary or its
designee prior to such termination evidencing the transfer of title to the Trust
Estate

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to the Beneficiary or its designee, and (i) the Beneficiary or its designee
shall execute and deliver to the Trustee a written instrument or instruments, in
the required number of counterparts for recording and in form and content
reasonably requested by the Trustee, evidencing the assumption by it of the
Trustee's duties and obligation s under this Trust Agreement, and the other
agreements, documents and instruments referred to herein. Upon such discharge,
the Beneficiary or its designee shall assume all of the Trustee's duties and
obligations, and shall succeed to all of the Trustee's rights, powers and
benefits under this Trust Agreement and all the documents and arrangements
referred to herein.

10.4 Amendments to this Trust Agreement.

This Trust Agreement may, from time to time and at any time, be amended or
supplemented by an instrument or instruments in writing executed by the Trustor
and by the Trustee, provided, that no such amendment or supplement shall extend
the maximum term of this Trust as provided for by Section 10.2 hereof.

SECTION 11. Compensation.

The Trustee shall receive as compensation for its services hereunder such fees
as may heretofore and from time to time hereafter be agreed upon between Trustor
and the Trustee.

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SECTION 12. Miscellaneous.

12.1    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 Trustor or the Beneficiary, to El Paso Electric Company, 303 North
Oregon Street, El Paso, Texas 79901, Attention of: General Counsel (Telecopy No.
(915) 543-5710)); and

(b)    if to the Trustee, to Texas Commerce Bank National Association, Texas
Commerce Bank Building, 201 East Main, El Paso, Texas 79901, Attention of Sarah
Wilson (Telecopy No. (915) 546-6701).

All notices and other communications given to any party hereto in accordance
with the provisions of this Trust 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 or in accordance with the
latest unrevoked direction from such party given in accordance with this
Section.

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12.2 Situs of Trust; Applicable Law.

The Trust has been accepted by the Trustee and will be located and administered
in the State of Texas, and the validity and construction of, and all rights
under this Trust Agreement shall be governed by the laws of the State of Texas.
If any provisions of this Trust Agreement shall be invalid or unenforceable, the
remaining provisions hereof shall continue to be fully effective, provided that
such remaining provisions do not increase the obligations or liabilities of the
Trustee.

12.3 Identification of Trust.

The Trust may for convenience be referred to as the Rio Grande Resources Trust
II.

12.4 Counterparts.

This instrument may be simultaneously executed in any number of counterparts,
each of which so executed shall be deemed to be an original, and such
counterparts together shall constitute and be one and the same instrument.

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12.5 Benefit of Parties, Successors and Assigns.

This instrument shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns.

12.6 Status of Moneys Received.

All moneys received by the Trustee under or pursuant to any provision of this
Trust Agreement (other than payments to the Trustee of Trustee's Expenses or in
connection with any indemnification of the Trustee) shall constitute trust funds
for the purpose for which they were paid or are held, but need not be segregated
in any manner from any other moneys and shall be deposited by the Trustee under
such conditions as may be prescribed or permitted by law for trust funds.

In addition, the balance at any time and from time to time of moneys received by
the Trustee in excess of amounts sufficient to satisfy the amounts then owing
and subject to distribution as provided in Section 5 hereof or in any
Supplemental Instruction shall, to the extent practicable, be invested by the
Trustee in any of the following, as directed from time to time by Trustor:

(a)    direct obligations of, or obligations the principal of and interest on
which are unconditionally

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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;

(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 Standard & Poor's Rating Group or from Moody's Investor
Services, Inc.;

(c)    money market funds which are invested solely in the types of investments
described in subparagraphs (a) and (b) above, including but not limited to funds
for which the Trustee, its affiliates, or subsidiaries provide investment,
advisory, or other management services;

(d)    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 organized under the laws
of the United States of America or any state thereof which has

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a combined capital and surplus and undivided profits of not less than
$250,000,000; and

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

provided, however, that the maturities of such investments shall be such as to
permit the Trust to meet its payment obligations as herein provided.

12.7 Conformity with ANPP Participation Agreement.

In connection with the provisions of Section 15.4 of the ANPP Participation
Agreement, the Trustee (i) hereby waives all right to partitionment of any
discrete portion or portions of Nuclear Fuel (as defined in the ANPP
Participation Agreement) financed in connection with this Trust Agreement, (ii)
understands that it shall not obtain any rights not possessed by the Trustor
with respect to the operation or scheduling of any Generating Unit (as defined
in the ANPP Participation Agreement) or removal of Nuclear Fuel therefrom and
(iii) understands that it will not be a "Participant" (as defined in the ANPP
Participation Agreement) unless and until it complies with certain requirements
contained in the ANPP Participation Agreement.

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Additionally, this Trust Agreement does not give the Trustee any different
rights or obligations under the ANPP Participation Agreement than would be
possessed or imposed upon the Trustor in the absence of the Trust Agreement.

12.8 Trust Agreement for Benefit of the Trustee, the Trustor and Beneficiary
Only.

Nothing in this Trust Agreement, whether express or implied, shall be construed
to give any person other than the Trustee, Trustor and Beneficiary any legal or
equitable right, remedy or claim under or in respect of this Trust Agreement;
but this Trust Agreement shall be held to be for the sole and exclusive benefit
of the Trustee, Trustor and Beneficiary.

12.9 Grantor Trust.

The Trust is intended to be treated as a "grantor trust," as described in
Internal Revenue Code Sections 671 through 679 and the applicable regulations
pertaining thereto, for which the Trustor is treated as grantor and beneficiary.
The Trustor, as grantor, acknowledges and agrees that the Trustee may take all
such actions as are necessary to achieve such treatment, and the Trustee may
file information returns and reports consistent therewith. Trustor, as grantor,
acknowledges and agrees that Trustor will be responsible for reporting any
income

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generated by the assets in trust or any expenses allocable to the Trust, based
on information to be supplied to it by the Trust.

12.10 Books, Records and Returns.

The Trustee shall be responsible for the keeping of all customary and
appropriate books and records relating to all transactions hereunder. Trustee
agrees at the request and expense of Trustor to file an application prepared by
Trustor with the Internal Revenue Service for a taxpayer identification number
with respect to trust created hereby, and in the absence of such instruction, to
use the taxpayer identification number of the Trustor in connection with reports
and returns required in connection with the Trust. The Trustee agrees to sign
and file a federal fiduciary return, but only if prepared by or on behalf of the
Trustor and paid for by the Trustor. Trustee shall keep copies of all returns
delivered to it or filed by it.

12.11 Miscellaneous.

(a)    Section headings herein are for the convenience of the parties only, and
shall be given no substantive or interpretative effect whatsoever.

(b)    Waiver of the breach of any provision here­ under shall not be deemed a
waiver of any prior or

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subsequent breach of the same or any other provision hereunder.

(c)    Pursuit of any remedy shall not be deemed the waiver of any other remedy
hereunder or at law or equity.

(d)    Any provision of this Trust Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating
remaining provisions hereof, provided that such remaining provisions do not
increase the obligations or liabilities of the Trustee; and any such prohibition
or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, the parties hereto hereby waive any provision of law which
renders any provision hereof prohibited or unenforceable in any respect.

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IN WITNESS WHEREOF, Trustor and the Trustee have caused this instrument to be
duly executed on the day and year first above written.

    
 
EL PASO ELECTRIC COMPANY
 
 
 
 
 
 
 
By
/s/ John E Droubay
 
 
Name: John E. Droubay
 
 
Title: VP & Treasurer
 
 
"Trustor"
 
 
 
 
 
 
 
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
 
 
 
 
 
 
 
By
 
 
 
Name:
 
 
Title:
 
 
"Trustee"

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IN WITNESS WHEREOF, Trustor and the Trustee have caused this instrument to be
duly executed on the day and year first above written.
    
 
EL PASO ELECTRIC COMPANY
 
 
 
 
 
 
 
By
 
 
 
"Trustor"
 
 
 
 
 
 
 
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
 
 
 
 
 
 
 
By
/s/ [ILLEGIBLE]
 
 
Name:
 
 
Title:
 
 
"Trustee"

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SCHEDULE A
Definitions

Acquisition Cost. The purchase price paid in order to acquire any portion of the
Nuclear Fuel, including any progress payments made thereon, together with costs
of milling, conversion, enrichment, fabrication, installation, delivery,
containerization, transportation, storage, processing and any other direct costs
with respect to acquiring or preparing such portion of the Nuclear Fuel for use
in or management thereof through any stage of the Nuclear Fuel Cycle, but
excluding therefrom all Capitalized Cost with respect thereto.

Additional Sales Charge. Additional Sales Charges are (i) all amounts that El
Paso agrees to pay the Trustee as the result of charges (other than Basic Heat
Supply Charges, Acquisition Cost and payments made by El Paso pursuant to
Sections 3(a) and 3(b) of the Purchase Contract) incurred by the Trustee in
connection with the Nuclear Fuel or a portion thereof (except amounts payable
upon termination of the Purchase Contract and amounts payable pursuant to
Section 18 of such Contract) and (ii) the Trustee's Expenses.

ANPP Participation Agreement. Arizona Nuclear Power Project Participation
Agreement dated August 23, 1973, as amended, among Arizona Public Service
Company, Salt River Project Agricultural Improvement and Power District,
Southern California

A-1

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Edison Company, Public Service Company of New Mexico, El Paso, Southern
California Public Power Authority and Department of Water and Power of the City
of Los Angeles. The ANPP Participation Agreement is sometimes referred to as the
Palo Verde Nuclear Generating Station Participation Agreement.

Assembly. Any one of the separate fuel assemblies constituting a portion of the
Nuclear Fuel.

Assigned Agreements. The agreements and contracts and exhibits and appendices
thereto between and among El Paso, or others on behalf of El Paso, and various
entities engaged in the Nuclear Fuel Cycle which are the subject of the various
Assignment Agreements, including the ANPP Participation Agreement and any
additional such agreements entered into after the Closing Date, as such Assigned
Agreements may from time to time be supplemented, amended, waived or modified in
accordance with the terms thereof.

Assignment Agreements. All of the several Assignment Agreements, as of the date
entered into (including those entered into subsequent to the Closing Date)
between the Trustee and El Paso, together with the annexed consents thereto
assigning certain rights of El Paso to the Trustee.

A-2

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Basic Heat Supply Charge. The Basic Heat Supply Charge shall be calculated
pursuant to the provisions of Section 3(j) of the Purchase Contract.

Basic Heat Supply Payment Date has the meaning set forth in Section 3(j) of the
Purchase Contract.

Beneficiary. El Paso Electric Company, a Texas corporation, and its successors
and assigns.

Bill of Sale. A bill of sale in substantially the form of Schedule C to the
Purchase Contract, by which title to all or any portion of the Nuclear Fuel is
transferred from the Trustee to El Paso.

Business Day. Any day other than Saturday, Sunday or a day when banks are
authorized or required by law to close in New York or Texas.

Capitalized Cost. The sum of all legal, printing, reproduction, closing and
other normally capitalizable fees, disbursements, and other expenses actually
incurred and paid by El Paso or the Trustee in connection with the acquisition
of the Nuclear Fuel, including Trustee's Expenses, plus the sum of the
Capitalized Daily Financing Charge.

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Capitalized Daily Financing Charges. The sum of all Daily Financing Charges
accrued pursuant to the Purchase Contract allocable to the Nuclear Fuel or any
portion thereof during any stage of its Nuclear Fuel Cycle.

Closing Date. February 12, 1996, or such other date as may hereafter be agreed
by the parties hereto.

Credit Agreement. The Credit Agreement dated as of February 12, 1996 among El
Paso, the Trustee, the lenders from time to time party thereto and Credit Bank
as said Credit Agreement may from time to time be supplemented, amended, waived
or modified.

Credit Bank. Chemical Bank, a New York banking corporation, in its capacity as
issuing bank, administrative agent and collateral agent under the Credit
Agreement, and its successors or assigns under the Credit Agreement.

Daily Financing Charge. For any calendar day (whether or not a Business Day)
during the term of the Purchase Contract the sum of: an accrual for each such
day of all interest expenses, commitment, and other fees, on or with respect to
any loans obtained by the Trustee pursuant to the Credit Agreement which are
outstanding at the close of business on such day, minus or plus, respectively,
any investment income or loss credited to the account established pursuant to
Section 12.6 of the Trust

A-4

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Agreement; provided that Daily Financing Charge shall not include an item which
would constitute an element of Acquisition Cost.

Disclosure Schedule. Disclosure Schedule means the Disclosure Schedule attached
as Schedule E to the Purchase Contract.

DOE. The United States Department of Energy or any body (governmental or
private) succeeding to any of the functions of such agency as constituted at the
date of the Purchase Contract.

Effective Date. "Effective Date" has the meaning set forth in Section 1.52 of
the Fourth Amended Plan of Reorganization of El Paso, dated November 7, 1995, as
confirmed by the United States Bankruptcy Court, Western District of Texas,
Austin Division on January 9, 1996.

El Paso. El Paso Electric Company, a Texas corporation and, prior to the
Effective Date, a debtor and debtor in possession under Chapter 11 of the United
States Bankruptcy Code.

Event of Default. The term as used in Section 19 of the Purchase Contract or in
Article VII of the Credit Agreement, as the case may be.

A-5

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Fee Agreement. Fee Agreement, dated as of January __, 1996, between the Trustee
and Trustor with respect to those fees and expenses incurred by the Trustee
pursuant to the Trust Agreement and the transactions contemplated thereby which
are payable or reimbursable by the Trustor.

Fuel Management. The design of, contracting for, fixing the price and terms of
acquisition of, management, movement, removal, disengagement and other
activities in connection with the utilization of the Nuclear Fuel, and sometimes
referred to as "management, " all of which shall be conducted according to the
sole discretion of El Paso.

Fuel Schedule. An instrument in substantially the form of Schedule B to the
Purchase Contract and made a part thereof.

Fuel Swap. Any swap, exchange or similar transaction described in the proviso to
the definition of Nuclear Fuel.

Fuel Swap Proceeds. Means any amount received by El Paso or the Trustee, as the
case may be, pursuant to a Fuel Swap.

GAAP. Means generally accepted accounting principles in use at the Closing Date,
or, at the option of El Paso, other generally accepted accounting principles
which are in use at the time of their determination; in determining generally
accepted accounting principles, El Paso may, but shall not be required to,

A-6

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conform to any accounting order, rule or regulation of any regulatory authority
having jurisdiction over the electric generating, transmission and distribution
operations of El Paso.

Heat. Any and all of the heat energy produced, emitted or generated by the
Nuclear Fuel while engaged in a reactor core of a Unit in accordance with the
provisions of the Purchase Contract.

Heat Production. The stage of the Nuclear Fuel Cycle in which the Nuclear Fuel
is engaged in a reactor core and is being consumed, pursuant to the process of
nuclear fission, in the production of steam for the generation of electric
energy.

Impositions. All license, documentation and registration fees and all taxes,
except taxes upon the net income of the Trustee in its individual capacity, but
including without further limitation gross income, gross receipts, interest
equalization, sales, use, occupation, franchise, personal property, stamp and
other taxes, levies, imposts, duties, charges or withholdings of any nature
whatsoever, together with any penalties or interest thereon imposed by any
taxing authority or governmental subdivision upon or in respect of, or measured
by, any payments under the Purchase Contract from El Paso to the Trustee or
gross receipts from the sale of Heat or Nuclear Fuel or in respect of any
property subject to the Purchase Contract or any transaction pursuant to the
Purchase Contract or any right or

A-7

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interest held by virtue of the Purchase Contract or Beneficiary's interest
therein.

Insurance Requirements. All terms of any insurance policy covering or applicable
to the Nuclear Fuel or any portion thereof, all requirements of the issuer of
any such policy, and all orders, rules, regulations and other requirements of
the DOE, the National Board of Fire Underwriters, or any other body exercising
similar functions with respect to electric utility properties or any other body
hereafter constituted exercising similar functions, which are applicable to or
affecting the Plant, the Nuclear Fuel or any portion thereof or any operation,
use or condition of the Plant, the Nuclear Fuel or any portion thereof.

Investment. With respect to any portion of the Nuclear Fuel, the sum of (i) the
Acquisition Cost for such portion, plus (ii) the Capitalized Cost for such
portion, or such lesser part of items (i) and (ii) paid by the Trustee pursuant
to the Purchase Contract, as such sum shall be set forth from time to time with
respect to such portion in the appropriate Schedule thereto, as amended from
time to time by a Fuel Schedule in accordance with the Purchase Contract.

Legal Requirements. All material requirements having the force of law applicable
to the Plant, a Unit, the Nuclear Fuel, or any transaction pursuant to the
Purchase Contract,

A-8

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compliance with which is at the time presently required and feasible.

Lenders. The "Lenders" as defined in the Credit Agreement.

Lien. Means with respect to any asset, any mortgage, pledge, lien, encumbrance,
charge or adverse claim affecting title or resulting in a charge against real or
personal property, or a security interest of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).

Lien of the Security Agreement. Means the Lien created by the Security
Agreement.

Loan Documents. Means the Credit Agreement and the Security Agreement.

Nuclear Fuel. The interest of El Paso or the Trustee in all unmined uranium ore
in place, unmilled uranium ore, converted, and/or enriched uranium ore and
byproducts therefrom,

A-9

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fabricated Nuclear Fuel, including rods, assemblies, batches, regions and cores
whether or not in place in a nuclear reactor and all other uranium products
(excluding Spent Fuel) and services rendered or to be rendered in connection
therewith that are the subject of certain Assignment Agreements; provided, that
the definition of Nuclear Fuel shall not include any Nuclear Fuel which is
loaned or otherwise provided by El Paso to third parties pursuant to swap,
exchange or similar agreements which are customary in the industry, but will
include Nuclear Fuel which is loaned or otherwise provided by third parties to
El Paso pursuant to such agreements.

Nuclear Fuel Cycle. The various stages in the process by which the component
parts of the Nuclear Fuel are mined, milled, converted, enriched, fabricated
into rods, assemblies, batches, regions and cores utilizable for Heat
Production, loaded into a reactor core and utilized, together with all
incidental processes with respect to the Nuclear Fuel at any stage of the
Nuclear Fuel Cycle.

Nuclear Fuel Proceeds. All proceeds from one or more of (i) borrowings under the
Credit Agreement, or (ii) issuances of notes or obligations referred to in
Section 2(d) of the Trust Agreement to the extent the proceeds therefrom are
used by the Trustee in connection with the performance of the Purchase Contract
or other agreements or arrangements entered into by the Trustee in connection
therewith or (iii) investments (including

A-10

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both princ1pal and interest) pursuant to Section 12.6 of the Trust Agreement to
the extent the principal of such investments represents proceeds from any of the
aforesaid sources.

Net Investment. With respect to any portion of the Nuclear Fuel, the excess of
the amount of the Investment in such portion over the aggregate amount of the
Basic Heat Supply Charge, if any, theretofore paid by El Paso to the Trustee in
respect of such portion. In addition, Net Investment shall be reduced by the
amount of any payment made by El Paso to the Trustee for application pursuant to
Section 3(a) (i) of the Purchase Contract.

Palo Verde Nuclear Generating Station. Means that certain 3,810 megawatt nuclear
generating facility consisting of three generating units located near Phoenix,
Arizona, in which El Paso, as owner or lessee, had a [15.8%] undivided interest
as of the Closing Date. Palo Verde Nuclear Generating Station was previously
known as the Arizona Nuclear Power Project.

Permitted Contests. Contests permitted by Section 14 of the Purchase Contract.

Permitted Encumbrances. Means as of any time any of the following:

(a)    the Lien of the Security Agreement;

A-11

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(b)    Liens for taxes or assessments by governmental bodies not yet due or the
payment of which is being contested in good faith by El Paso and for which El
Paso shall have set aside on its books adequate reserves to the extent required
by GAAP;

(c)    Liens incidental to the mining, milling, fabrication, enrichment,
conversion or transportation of Nuclear Fuel which are not delinquent or,
whether or not delinquent, are being contested in good faith by El Paso and for
which El Paso shall have set aside on its books adequate reserves for the
payment thereof to the extent required by GAAP;

(d)    irregularities in or defects of title relating to any Nuclear Fuel which
do not materially impair the use of such Nuclear Fuel for the purposes for which
such Nuclear Fuel is held by El Paso or the Trustee;

(e)    Liens securing indebtedness incurred by a Person, other than El Paso,
which indebtedness has been neither assumed nor guaranteed by El Paso nor on
which El Paso customarily pays interest, existing on Nuclear Fuel which El Paso
or the Trustee owns jointly or in common with such Person or such Person and
others, if there is an effective bar against partition of such property which
would preclude the sale of such property by such other Person or the holder of
such Lien without the consent of El Paso;

A-12

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(f)    any attachment, judgment and other similar Lien with respect to Nuclear
Fuel arising in connection with court proceedings (i) in an amount not in excess
of the greater of $5,000,000, or (ii) the execution of which has been stayed or
which has been appealed and secured, if necessary, by an appeal bond;

(g)    the burdens of any law or governmental rule, regulations, order or permit
requiring El Paso and the Trustee to maintain certain facilities or to perform
certain acts as a condition of their acquisition or use of Nuclear Fuel;

(h)    any duties or obligations of El Paso and the Trustee to any federal,
state or local or other governmental authority with respect to any franchise,
grant, license, permit or contract which affects any Nuclear Fuel;

(i)    Liens in favor of a government or governmental entity securing (i)
payments pursuant to a statute (other than taxes and assessments), or (ii)
indebtedness incurred to finance all or part of the purchase price or cost of
mining, milling fabrication, conversion, enrichment or transportation of Nuclear
Fuel;

(j)    any Lien of the Trustee contemplated by the Purchase Contract or the
Trust Agreement; and

A-13

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(k)    any other Liens of whatever nature or kind which, in the reasonable
opinion of El Paso, do not individually or in the aggregate, materially impair
the Lien of the Security Agreement;

provided, that Permitted Encumbrances shall not include the Trustee's Liens.

Person. Means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.

Plant. The plant site in Maricopa County, Arizona, of the Palo Verde Nuclear
Generating Station.

Plant Account. An account to which the Trustee's Investment with respect to
Nuclear Fuel may be allocated pending allocation by El Paso of such Investment
among Units.

Purchase Contract. The Purchase Contract dated as of February 12, 1996, between
El Paso and the Trustee as such Purchase Contract may from time to time be
supplemented, amended, waived or modified.

Restoration. The repair, reconstruction or replacement of all or any portion of
the Nuclear Fuel of a Unit which has

A-14

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been damaged or destroyed or which has been affected by a Taking, as nearly as
possible to the value, condition and character of such portion, and in its
location, immediately prior to such damage, destruction or Taking, or the
replacement of any Assembly of the Nuclear Fuel so damaged, destroyed or
affected by a Taking, with an equivalent Assembly of Nuclear Fuel with only such
alterations and additions as may be made at El Paso's elec­tion as will not
diminish the Net Investment of the Nuclear Fuel so repaired, reconstructed or
replaced.

Security Agreement. The Security Agreement and Assignment of Contracts dated as
of February 12, 1996, between Texas Commerce Bank National Association, not in
its individual capacity, but solely in its capacity as trustee under the Trust
Agreement and Chemical Bank, a New York banking corporation, in its capacity as
collateral agent for the secured parties.

Spent Fuel. Nuclear Fuel, which, through engagement in the reactor core of a
Unit, has been consumed pursuant to the process of nuclear fission and is being
stored in the fuel pit of a Unit or such other place as El Paso shall designate.

Supplemental Instructions. Instructions to the Trustee from the Trustor in
substantially the form of Schedule B to the Trust Agreement, upon acceptance by
the Trustee, as any such supplemental instructions may from time to time be
supplemented, amended, waived or modified.

A-15

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Taking. A loss, during the term of the Purchase Contract, of the title,
ownership, use or possession of the Nuclear Fuel, a Unit or any portion of
either thereof, or any interest therein or right accruing thereto, as the result
of or in connection with the exercise of the right of condemnation or eminent
domain pursuant to any law, general or special, or by reason of the temporary
requisition of the use of the Nuclear Fuel, a Unit or any portion of either
thereof, by any governmental authority, civil or military.

Termination Event. Any of the events described in Section 17 of this Contract.

Trust. The Trust established by the provisions of the Trust Agreement.

Trust Agreement. That certain Trust Agreement, dated as of February 12, 1996,
between the Trustee and Trustor, providing for the creation of the Rio Grande
Resources Trust II, as such Trust Agreement may from time to time be
supplemented, amended, waived or modified.

Trust Estate. Subject to Section 3 of the Trust Agreement, all estate, right,
title and interest of the Trustee in and to the Trust Estate Assets and any
other rights, assets or property owned or payments or proceeds (other than
payments of the Trustee's Expenses or payments made in connection with any

A-16

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indemnification of the Trustee) under any agreements, arrangements or
transactions entered into pursuant to Supplemental Instructions.

Trust Estate Assets. Subject to Section 3 of the Trust Agreement: all estate,
right, title and interest of the Trustee in and to the Purchase Contract,
Assigned Agreements, the Loan Documents, all rights, assets or property owned,
or payments or proceeds received, by or for the account of the Trustee under the
Purchase Contract, the Assignment Agreements, the Loan Documents Agreement or an
agreement entered into pursuant to Section 2 of the Trust Agreement; all rights
to any such payments or proceeds; and any and all investments (including both
principal and interest) of the Trustee pursuant to Section 12.6 of the Trust
Agreement to the extent the principal of such investments represents proceeds
from any of the aforesaid sources.

Trustee. Texas Commerce Bank National Association, and, to the extent permitted
by Section 8 of the Trust Agreement, its successors and assigns.

Trustee's Expenses. The fees and expenses of the Trustee payable or reimbursable
by the Trustor pursuant to the Fee Agreement.

Trustee's Liens. Means any Lien or disposition of title arising as a result of
(i) claims against Texas Commerce

A-17

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Bank National Association not related to transactions contemplated by the
Purchase Contract and Trust Agreement, (ii) any act or omission of Texas
Commerce Bank National Association, which is not related to the transactions
contemplated by the Purchase Contract and Trust Agreement or is in violation of
any of the terms of the Purchase Contract and Trust Agreement, (iii) claims
against Texas Commerce Bank National Association with respect to taxes or
expenses against which El Paso is not required to indemnify, and which the
Trustee is otherwise required to pay or (iv) claims against Texas Commerce Bank
National Association arising out of any transfer of all or any portion of its
interests in the Nuclear Fuel or the Trust Estate other than a transfer pursuant
to the terms of the Trust Agreement or pursuant to the exercise of the remedies
set forth in Section 19(b) of the Purchase Contract;

Trustor. El Paso Electric Company, a Texas corporation, and its successors and
assigns.

Unit or Units. Palo Verde Nuclear Generating Station, Units 1, 2, and 3 located
in Maricopa County, Arizona, including fuel handling and storage facilities
relating thereto.

A-18

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SCHEDULE B
FORM FOR SUPPLEMENTAL INSTRUCTIONS

SUPPLEMENTAL INSTRUCTIONS
PURSUANT TO
TRUST AGREEMENT
DATED AS OF ____________ ___, _____

No.     

These Supplemental Instructions are given pursuant to the Trust Agreement dated
as of February 12, 1996 between El Paso Electric Company, as the Trustor, and
Texas Commerce Bank National Association, as the Trustee.

WHEREAS, the Trust Agreement contemplates the delivery by the Trustor to and
acceptance by the Trustee of Supplemental Instructions with respect to the
execution and delivery of agreements, acceptance of assignments of agreements or
rights, acquisition of properties and entering into certain transactions, in
accordance with lawful requests of the Trustor; and

WHEREAS, the Trustor now desires to give Supplemental Instructions to the
Trustee as herein set forth;

B-1

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NOW, THEREFORE, the Trustor hereby gives, and the Trustee by its signature
hereto hereby accepts, the following Supplemental Instructions: [Here insert
specific instructions.]

Section 1. Definitions. For the purpose of these Supplemental Instructions, the
capitalized terms used herein and not otherwise defined herein shall have the
meanings set forth in Schedule A to the Trust Agreement. The following
definitions are hereby added to said Schedule A: [Add any necessary new
definitions].

Section 2. Authorization and Direction to Accept and/or Execute Documents or
Rights. [Here insert specific authorizations and directions with respect to
particular instruments, rights or transactions.]

Section 3. Use of Proceeds. [Here specifically set forth the order of
application of any proceeds received by the Trustee pursuant to agreements or
rights or payments obtained or received pursuant to these Supplemental
Instructions.]

Section 4. Additional Instructions. [Here add any other necessary or appropriate
instructions to the Trustee.]

Section 5. Confirmation of Trust. The Trustee hereby confirm by its execution
hereof that the declaration of trust embodied in Section 3 of the Trust
Agreement shall apply fully to

B-2

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all rights, estates properties, assets, payments or proceeds received or
obtained by the Trustee pursuant to these Supplemental Instructions.

Section 6. Other Provisions. Except as herein expressly provided, all of the
terms and provisions of the Trust Agreement shall as nearly as may be
practicable apply to all rights and obligations obtained or incurred,
respectively, by the Trustee pursuant to these Supplemental Instructions.

B-3

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IN WITNESS WHEREOF, the Trustor and the Trustee have executed these Supplemental
Instructions the day and year below written.
Dated:     

 
 
EL PASO ELECTRIC COMPANY
 
 
 
 
 
 
 
 
 
 
By
 
 
 
 
Name:
 
 
 
Title:
 
 
 
"Trustor"
 
 
 
 
ACCEPTED:
 
 
 
 
 
 
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
 
 
 
 
 
 
 
 
 
 
By
 
 
 
 
Name:
 
 
 
Title:
 
 
 
"Trustee"
 
 

B-4

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

SECOND AMENDMENT TO PURCHASE CONTRACT

THIS SECOND AMENDMENT dated as of July 12, 2007 (the "Second Amendment"), to the
PURCHASE CONTRACT dated as of February 12, 1996 (the "Purchase Contract"), is
entered into between THE BANK OF NEW YORK TRUST COMPANY, NATIONAL ASSOCIATION, a
limited purpose national banking association with trust powers, in its capacity
as successor trustee of the Rio Grande Resources Trust II (the "Trustee"), (said
Trustee being the successor to JPMorgan Chase Bank, National Association,
formerly known as JPMorgan Chase Bank, successor by merger to The Chase
Manhattan Bank, successor by merger to Chase Bank of Texas, National
Association, successor by change of name to Texas Commerce Bank National
Association, as trustee of the Rio Grande Resources Trust II (the "Prior
Trustee")), and EL PASO ELECTRIC COMPANY, a Texas corporation ("El Paso").

RECITALS

A.    El Paso and the Prior Trustee were parties to that certain Credit
Agreement dated as of February 12, 1996 (the "Credit Agreement") among El Paso
and the Prior Trustee as borrowers, Chase Manhattan Bank (successor by merger to
Chemical Bank) as issuing bank, as administrative agent and as collateral agent
for the financial institutions party thereto as lenders (such financial
institutions, the "Lenders"), and the Lenders. Pursuant to the Credit Agreement,
the Lenders agreed to extend credit in the form of loans and letters of credit
to the Prior Trustee, in an aggregate amount not to exceed $60,000,000, (i) to
finance the purchase of Nuclear Fuel by the Prior Trustee, (ii) to provide
backup liquidity for commercial paper issued pursuant to a commercial paper
program to be established by the Prior Trustee, and (iii) to pay interest and
other amounts payable under the Credit Agreement by the Prior Trustee (the
foregoing items (i), (ii) and (iii), the "Trust Credit Purposes"). Consequently,
the Purchase Contract provided in Section 2(g) thereof that El Paso will not
permit the total Net Investment of the Prior Trustee, at any one time, in all
Nuclear Fuel to exceed $60,000,000.

B.    Effective as of February 8, 1999, the Credit Agreement was amended and
restated in its entirety, and the lenders thereunder agreed to extend credit in
the form of loans and letters of credit to the Prior Trustee for Trust Credit
Purposes in an aggregate amount not to exceed $70,000,000. Consequently, El Paso
and the Prior Trustee amended Section 2(g) of the Purchase Contract (the "First
Amendment") to provide that El Paso would not cause or permit the total Net
Investment of the Prior Trustee, at any one time, in all Nuclear Fuel to exceed
$70,000,000.

C.    The Credit Agreement was amended and restated again in its entirety on
January 28, 2002, December 17, 2004 and April 11, 2006. The

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

amended and restated credit agreement dated as of April 11, 2006 (the "2006
Credit Agreement") provided that the $70,000,000 available to the Prior Trustee
for Trust Credit Purposes could be increased from time to time pursuant to
Section 2.21 of the 2006 Credit Agreement. Subsequent to the execution of the
2006 Credit Agreement but prior to the date hereof, the Trustee succeeded the
Prior Trustee as trustee under the Rio Grande Resources Trust II.

D.    On May 30, 2007, El Paso delivered a written notice pursuant to Section
2.21 of the 2006 Credit Agreement to JPMorgan Chase Bank, N.A. (in its capacity
as the administrative agent for the lenders under the 2006 Credit Agreement),
requesting that the amount available to the Trustee in the form of loans and
letters of credit for Trust Credit Purposes be increased from a total amount not
to exceed $70,000,000 to a total amount not to exceed $120,000,000, such
increase to be effective as of July 16, 2007.

E.    As a result of the foregoing, El Paso and the Trustee desire to amend the
Purchase Contract in the manner set forth below.·

F.    Capitalized terms used but not defined herein shall have the
meanings assigned to them in the Purchase Contract.

AGREEMENT

In consideration of the mutual agreements contained herein and other good and
valuable consideration, the sufficiency and receipt of which are hereby
acknowledged, the parties hereto agree as follows:

SECTION 1. Amendment to Section 2(g) of the Purchase Contract. Section 2(g) of
the Purchase Contract is hereby amended and restated to read in its entirety:

(g)
El Paso shall not cause or permit the total Net Investment of the Trustee, at
any one time, in all Nuclear Fuel to exceed $120,000,000.

SECTION 2. Conditions to Effectiveness. This Amendment shall become effective as
of the date first written above upon its execution by both parties hereto.

SECTION 3. Effect of Amendment. Except as expressly set forth herein, this
Amendment shall not by implication or otherwise alter, modify, amend or in any
way affect any of the terms, conditions, obligations, covenants or agreements
contained in the Purchase Contract, all of which are ratified and affirmed in
all respects and shall continue in full force and effect. This Amendment shall
apply and be effective only with respect to the provision of the Purchase
Contract specifically referred to herein.

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

SECTION 4. Counterparts. This Amendment may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same contract. Delivery of an executed counterpart of a signature page of this
Amendment by facsimile transmission shall be as effective as delivery of a
manually executed counterpart hereof.

SECTION 5. APPLICABLE LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.

SECTION 6. Headings. The headings of this amendment are for purposes of
reference only and shall not limit or otherwise affect the meaning hereof.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed by their duly authorized officers, all as of the date first above
written.

 
THE BANK OF NEW YORK TRUST COMPANY, NATIONAL ASSOCIATION, not in its individual
capacity but solely in its capacity as Trustee of the Rio Grande Resources Trust
II
   
 
 
 
 
By:
/s/ Katrhyn Houston
 
 
Name:
Kathryn M. Houston
 
 
Title:
Vice President
 
 
 
 
 
 
 
 
 
 
 
 
 
EL PASO ELECTRIC COMPANY
 
 
 
 
 
 
 
 
 
By:
/s/ Steven Busser
 
 
Name:
Steven P. Busser
 
 
Title:
V.P., Treasurer & Chief
 
 
 
Risk Officer
 
 
 
 
 
image1a20.jpg [image1a20.jpg]
   

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

STATE OF TEXAS    )
)
COUNTY OF EL PASO    )

BEFORE ME, the undersigned authority, on this day personally appeared Steven P.
Busser, a V.P. Treasurer & Chief Risk Officer        
of El Paso Electric Company, a Texas corporation, known to me to be the person
whose name is subscribed to the foregoing instrument and acknowledged to me that
he/she executed the same for the purposes and consideration therein expressed,
in the capacity stated, and as the act and deed of said corporation.

Given under my hand and seal of office, this 12th day of July, 2007.

 
 
 
 
 
 
 
image2a09.jpg [image2a09.jpg]
 
 
 /s/ Hilda Vargas
 
Notary Public – State of Texas
 
 
 
 
 
 
 
 
 
 
 
My Commission Expires:
 
 
6/26/2009
 
 
 
 
 
 
 
 
 
 

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

STATE OF TEXAS    )
)
COUNTY OF TRAVIS    )

BEFORE ME, the undersigned authority, on this day personally appeared Kathryn
Houston , a Vice President

of The Bank of New York Trust Company, National Association, acting in its
capacity as Trustee of the Rio Grande Resources Trust II, known to me to be the
person whose name is subscribed to the foregoing instrument and acknowledged to
me that he/she executed the same for the purposes and consideration ·therein
expressed, in the capacity stated, and as the act and deed of said corporation.

Given under my hand and seal of office, this 11th day of July, 2007.

 
 
 
 
 
 
 
 
 
 
/s/ Karen L Kupecki
 
Notary Public – State of Texas
 
 
 
 
 
 
 
 
 
 
 
My Commission Expires:
 
 
5/4/2011
 
 
 
image3a05.jpg [image3a05.jpg]
 
 
 
 
 
 

    

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

image4a04.jpg [image4a04.jpg]

AMENDMENT AGREEMENT

AMENDMENT AGREEMENT, dated as of February 11, 1999 (the "Amendment"), to the
PURCHASE CONTRACT dated as February 12, 1996 (the "Purchase Contract"), between
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION (formerly Texas Commerce Bank,
National Association), a national banking association, not in its individual
capacity, but solely in its capacity as trustee of the Rio Grande Resources
Trust II (the "Trustee"), and EL PASO ELECTRIC COMPANY, a Texas corporation ("El
Paso").

RECITALS

EL Paso and the Trustee are parties to that certain Credit Agreement, dated as
of February 12, 1996 (the "Credit Agreement"), among El Paso and the Trustee as
borrowers, the Chase Manhattan Bank ("Chase", successor by merger to Chemical
Bank) as issuing bank, as administrative agent and as collateral agent for the
financial institutions party thereto as lenders (such financial institutions,
"Lenders"), and the Lenders. Pursuant to the Credit Agreement, the Lenders
agreed to extend credit in the form of loans and letters of credit to the
Trustee, in an aggregate face amount not greater than $60,000,000, (i) to
finance the purchase of Nuclear Fuel by the Trustee, (ii) to provide backup
liquidity for commercial paper issued pursuant to a commercial paper program to
be established by the Trustee, and (iii) to pay interest and other amounts
payable under the Credit Agreement by the Trustee (the foregoing items (i), (ii)
and (iii), the "Trust Credit Purposes"). Consequently, the Purchase Contract
provides in Section 2(g) thereof that El Paso will not permit the total Net
Investment of the Trustee, at any one time, in all Nuclear Fuel to exceed
$60,000,000.

Effective as of February 8, 1999, the Credit Agreement was amended and restated
in its entirety (hereafter referred to as the "Amended and Restated Credit
Agreement"), by and among El Paso, the Trustee, Chase (in the same capacities as
under the Credit Agreement), Union Bank of California, N.A., as documentation
agent, Barclays Bank PLC, New York Branch, as syndication agent, and the
financial institutions party thereto as lenders (such financial institutions,
also "Lenders"). Pursuant to the Amended and Restated Credit Agreement, the
Lenders have agreed to extend credit in the form of loans and letters of credit
to the Trustee, in an aggregate face amount not greater than $70,000,000, for
the Trust Credit Purposes.

As a result of the foregoing, El Paso and the Trustee desire to amend the
Purchase Contract as set forth herein below. Capitalized terms used but not
defined herein shall have the meanings assigned to them in the Purchase
Contract.

Accordingly, in consideration of the mutual agreements contained herein and
other good and valuable consideration, the sufficiency and receipt of which are
hereby acknowledged, the parties hereto agree as follows:

::ODMA\PCDOCS\NEWYORK\92043\2

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

SECTION 1. Amendment to Section 2(g) of the Purchase Contract. Section 2(g)
of the Purchase Contract is hereby amended and restated to read in its entirety:

(g)
El Paso shall not cause or permit the total Net Investment of the Trustee, at
any one time, in all Nuclear Fuel to exceed $70,000,000.

SECTION 2. Conditions to Effectiveness. This Amendment shall become effective as
of the date first written above upon its execution by both parties hereto.

SECTION 3. Effect of Amendment. Except as expressly set forth herein, this
Amendment shall not by implication or otherwise alter, modify, amend or in any
way affect any of the terms, conditions, obligations, covenants or agreements
contained in the Purchase Contract, all of which are ratified and affirmed in
all respects and shall continue in full force and effect. This Amendment shall
apply and be effective only with respect to the provision of the Purchase
Contract specifically referred to herein.

SECTION 4. Counterparts. This Amendment may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same contract. Delivery of an executed counterpart of a signature page of this
Amendment by facsimile transmission shall be as effective as delivery of a
manually executed counterpart hereto.

SECTION 5. APPLICABLE LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.

SECTION 6. Headings. The headings of this Amendment are for purposes of
reference only and shall not limit or otherwise affect the meaning hereof.

-2-

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

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed by their duly authorized officers, all as of the date first above
written.

 
CHASE BANK OF TEXAS NATIONAL ASSOCIATION, not in its individual capacity, but
solely in its capacity as Trustee,
   
 
 
 
 
By:
 
 
 
Name:
 
 
 
Title:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EL PASO ELECTRIC COMPANY
 
 
 
 
 
 
 
 
 
By:
/s/ Gary R Hendrick
 
 
Name:
Gary R. Hedrick
 
 
Title:
Vice President
 
 
 
 
 
 
 
 

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

STATE OF TEXAS    )
)
COUNTY OF EL PASO    )

BEFORE ME, the undersigned authority, on this day personally appeared
Gary R. Hedrick, a Vice President of El Paso Electric Company, a Texas
corporation, known to me to be the person whose name is subscribed to the
foregoing instrument and acknowledged to me that he/she executed the same for
the purposes and consideration therein expressed, in the capacity stated, and as
the act and deed of said corporation.

Given under my hand and seal of office, this 4th day of February, 1999.

 
 
 
 
 
 
 
image5a02.jpg [image5a02.jpg]
 
 
 /s/ Hilda Vargas
 
Notary Public – State of Texas
 
 
 
 
 
 
 
 
 
 
 
My Commission Expires:
June 26, 2001
 
 
 
 
 
 
 
 
 
 
 
 

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

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed by their duly authorized officers, all as of the date first above
written.

 
CHASE BANK OF TEXAS NATIONAL ASSOCIATION, not in its individual capacity, but
solely in its capacity as Trustee,
   
 
 
 
 
By:
/s/ Kathryn Houston
 
 
Name:
Kathryn Houston
 
 
Title:
Vice President
 
 
 
 
 
 
 
 
 
 
 
 
 
EL PASO ELECTRIC COMPANY
 
 
 
 
 
 
 
 
 
By:
 
 
 
Name:
 
 
 
Title:
 
 
 
 
 
 
 
 
 

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

STATE OF TEXAS    )
)
COUNTY OF EL PASO    )

BEFORE ME, the undersigned authority, on this day personally appeared
Kathryn Houston, a Vice President of Chase Bank of Texas, National Association,
a banking corporation organized under the federal laws of the United States of
America, acting in its capacity as Trustee of the Rio Grande Resources Trust II,
known to me to be the person whose name is subscribed to the foregoing
instrument and acknowledged to me that he/she executed the same for the purposes
and consideration therein expressed, in the capacity stated, and as the act and
deed of said corporation.

Given under my hand and seal of office, this 2 day of February, 1999.

 
 
 
 
 
 
 
image6a03.jpg [image6a03.jpg]
 
 
/s/ Ramon S. Olivas
 
Notary Public – State of Texas
 
 
 
 
 
 
 
 
 
 
 
My Commission Expires: 3-31-2001
Ramon S. Olivas
 
 
 
 
 
 
 
 
 
 
 
 

    

    

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

EXECUTION COPY

THIS INSTRUMENT GRANTS A
SECURITY INTEREST BY A UTILITY
____________________________

THIS INSTRUMENT CONTAINS AFTER ACQUIRED PROPERTY PROVISIONS
    

PURCHASE CONTRACT

BETWEEN

TEXAS COMMERCE BANK NATIONAL ASSOCIATION
not in its individual capacity
but solely as Trustee of
the Rio Grande Resources Trust II

Trustee

AND

EL PASO ELECTRIC COMPANY,

El Paso

____________________________

RIO GRANDE RESOURCES TRUST II

____________________________

Dated as of February 12, 1996

    

THIS CONTRACT IS SUBJECT TO A SECURITY INTEREST IN FAVOR OF CHEMICAL BANK
PURSUANT TO A SECURITY AGREEMENT DATED AS OF FEBRUARY 12, 1996.

    
* But only if, contrary to the intention of the parties, it should be so
construed. This instrument is filed as a utility security interest as a
precautionary matter.

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

TABLE OF CONTENTS
 
 
 
Page

A.
THE TRANSACTION
1

 
1.
Definitions
1

 
2.
Purchase and Sale of Rights to Nuclear Fuel
1

 
3.
Payment by El Paso
5

 
4.
Payment Obligations of El Paso Absolute and
 
 
 
    Unconditional; Disclaimer of Warranties
10

 
5.
Procedure for Progress and Other Payments
13

 
6.
The Trustee's Agreement with Respect to
 
 
 
    Action under Related Agreements
15

 
 
 
 
B.
LOCATION, CONDITION AND USE OF NUCLEAR FUEL
16

 
7.
Location of Nuclear Fuel
16

 
8.
Condition and Use of Nuclear Fuel
16

 
 
 
 
C.
TERMS AND CONDITIONS
21

 
9.
Certificates and Opinions by El Paso; Further Assurance, Financial Information
 
 
 
    and Compliance Certificates
21

 
10.
Impositions
25

 
11.
Indemnification by El Paso
25

 
12.
Insurance
27

 
13.
Compliance with Legal and Insurance Requirements
28

 
14.
Permitted Contests
28

 
15.
Damage or Destruction
29

 
16.
Taking
30

 
17.
Events Upon Which Contract to Terminate
31

 
18.
Procedure for Termination of Contract
35

 
19.
Events of Default and Remedies
38

 
20.
Notices
41

 
21.
Allocation of Amounts
42

 
22.
Amendments
42

 
23.
Severability
43

 
24.
Warranties and Representations of El Paso
43

 
25.
Successor Trustee
46

 
26.
[Reserved]
47

 
27.
[Reserved]
47

 
28.
Miscellaneous
47

 
29.
Inspection of Books and Records
48

 
30.
[Reserved]
48

 
31.
Failure of Performance by the Trustee
48

 
32.
Incorporated Schedules
49

SCHEDULE A Definitions
A-1

SCHEDULE B FORM OF FUEL SCHEDULE
B-1

ANNEX I (Schedule B)
B-5

i

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

SCHEDULE C FORM OF BILL OF SALE FROM THE TRUSTEE
C-1
ANNEX I (Schedule C)
C-3
SCHEDULE D (Basic Heat Supply Charges)
D-1
Annex I (Schedule D)
D-2
SCHEDULE E DISCLOSURE SCHEDULE
E-1

ii

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

This PURCHASE CONTRACT dated as of February 12, 1996 (this "Contract" or the
"Purchase Contract") , is between TEXAS COMMERCE BANK NATIONAL ASSOCIATION, not
in its individual capacity but solely as Trustee pursuant to the Trust Agreement
referred to in Schedule A hereto (the "Trustee"), and EL PASO ELECTRIC COMPANY,
a Texas corporation ("El Paso").

In consideration of the covenants contained herein and subject to the terms,
limitations and conditions hereof, the parties hereto agree as follows:

A.
THE TRANSACTION

1.Definitions.

Unless otherwise defined or unless the context otherwise requires, the
capitalized terms used in this Contract have the respective meanings designated
in Schedule A hereto.

2.Purchase and Sale of Rights to Nuclear Fuel.

(a)    El Paso is or may become a party to the Assigned Agreements, and wishes
to transfer to the Trustee all of the rights and title of El Paso thereunder in
and to or respecting Nuclear Fuel as specified in the Assignment Agreements. On
the Closing Date, an Assignment Agreement with respect to the ANPP Participation
Agreement shall be delivered to the Trustee,

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

evidencing and effecting the transfer to the Trustee of certain rights and title
specified in such - Assignment Agreement. To the extent that El Paso enters into
one or more agreements relating to the Nuclear Fuel Cycle after the Closing
Date, El Paso shall promptly deliver to the Trustee an Assignment Agreement with
respect thereto and thereafter each such agreement shall be considered an
Assigned Agreement hereunder.

(b)    El Paso has heretofore made certain payments and incurred certain costs
with respect to Nuclear Fuel pursuant to the Assigned Agreements. At the Closing
Date, El Paso shall deliver to the Trustee a completed Fuel Schedule in the form
of Schedule B attached hereto, describing in Annex I to said Fuel Schedule the
amounts, if any, paid by El Paso pursuant to the Assigned Agreements and other
costs incurred by El Paso with respect to Nuclear Fuel for which El Paso desires
reimbursement from the Trustee and allocating such amounts to one or more Units
or to a Plant Account. At the Closing Date, the Trustee shall (conditioned upon
receipt by the Trustee of necessary funds available for such purpose) reimburse
El Paso in the total amount, if any, so specified and in the manner set forth in
Section 5.

(c)    Subject to the terms and conditions hereof and of the Trust Agreement and
Loan Documents, the Trustee shall, from time to time, but only if, when and to
the extent requested by El Paso and in accordance with the provisions of the
Assigned

-2-

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

Agreements and the procedure set forth in Section 5 of this Contract, and
subject to the receipt by the Trustee of any necessary funds available for such
purposes, (i) pay such amounts as shall become due and payable with respect to
Nuclear Fuel under the Assigned Agreements, (ii) reimburse El Paso for payments
made by El Paso with respect to Nuclear Fuel pursuant to the Assigned Agreements
and (iii) reimburse El Paso for other costs incurred by it with respect to
Nuclear Fuel.
Notwithstanding any of the foregoing, the Trustee may decline under this Section
2(c) to make any payment or to reimburse El Paso in respect of payments by El
Paso to any person or entity which has not consented in writing to an Assignment
Agreement or to a similar agreement between the Trustee and El Paso, the
provisions of each of which written consent, Assignment Agreement and/or similar
agreement shall have been satisfactory to counsel for the Trustee and to the
Credit Bank and executed by the parties hereto prior to any such payment or
reimbursement.

(d)    The Trustee agrees that pursuant to the terms of the Assignment
Agreements, El Paso shall have, subject to the provisions of Section 19(b)
hereof, retained (and will retain) all rights, and the entire obligation, it had
(or will have) under he Assigned Agreements to deal with the respective parties
thereto in respect of all matters other than the right to receive and the
obligation to make payments with respect to Nuclear Fuel pursuant thereto and
the receipt and holding of title to the Nuclear Fuel covered thereby. Such
rights and obligation of El

-3-

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

Paso shall include, without limitation, rights to make all inspections, consent
to all modifications or variations, give any instructions or directions, give
any necessary consents or waivers and negotiate any amendments or modifications
to any of said contracts, provided, that no action by El Paso pursuant to any
Assigned Agreement shall increase the obligation of the Trustee or the Trust
beyond that expressly provided for herein without the prior written consent of
the Trustee or shall materially lessen any benefit inuring to the Trustee
pursuant to the Assignment Agreements or any similar agreements referred to in
this Section 2. Except as otherwise expressly limited by the provisions of this
Contract, El Paso shall, as hereinafter more fully provided, have full right and
lawful authority to engage in Fuel Management.

(e)    [Reserved]

(f)    [Reserved]

(g)    El Paso shall not cause or permit the total Net Investment of the
Trustee, at any one time, in all Nuclear Fuel to exceed $60,000,000.

(h)    The Trustee agrees, subject to the terms hereof, to sell and make
available to El Paso, and El Paso agrees to take, or cause to be taken, and to
purchase and pay for, whether

-4-

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

taken or not, any and all Nuclear Fuel, upon all of the terms and conditions
contained in this Contract.

(i)    El Paso may at any time allocate the Trustee's Investment among Units or
to a Plant Account for later allocation among Units. Each amount allocated to
the Plant Account shall be allocated by El Paso to particular Units as soon as
practicable after El Paso has determined the Units to which each amount should
be allocated.

(j)    This Contract shall become effective as of February 12, 1996 and shall
terminate as provided in Sections 17 through 19 hereof.

3.    Payment by El Paso

(a)    At any time during the term of this Contract:

(i)    El Paso may elect from time to time to reduce the Investment of the
Trustee in the Nuclear Fuel by paying to the Trustee the amount by which such
Investment is to be reduced and concurrently delivering to the Trustee a revised
Fuel Schedule in the form of Fuel Schedule B hereto giving effect to said
reduction. Upon receipt of such payment and Fuel Schedule, the Trustee shall
execute a Bill of Sale is the Form of Schedule C hereto to convey title to such
Nuclear Fuel to El Paso; and

-5-

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

(ii)    At any time when there is no Nuclear Fuel covered by a Fuel Schedule,
the Trustee shall deliver to El Paso a written computation showing the amount of
any Daily Financing Charges incurred by the Trustee to the date thereof and El
Paso shall pay the amount of such Daily Financing Charges, plus any additional
Daily Financing Charges incurred by the Trustee to the date of such payment.

(b)    Notwithstanding any other provision of this Contract, El Paso shall
timely pay to the Trustee such amounts sufficient to pay in full all amounts
then due and payable by the Trustee under the Credit Agreement. The Trustee
shall give three Business Days' prior notice to El Paso if the Trustee has
insufficient funds on hand to pay amounts to be so paid under the Credit
Agreement. On receipt of such notice by El Paso, El Paso shall (i) timely
provide such funds as necessary to enable the Trustee to pay all amounts so due
and payable under the Credit Agreement, or (ii) if and to the extent such funds
are available under the Credit Agreement, instruct the Trustee to borrow all or
a portion of such funds necessary to make the required payments under the Credit
Agreement (with El Paso providing the balance, if any, of funds necessary to
make such payments). The Trustee's failure to deliver the notice required by the
second sentence of this Section 3(b) shall not affect El Paso's obligations
under this Section 3(b).

-6-

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

(c)    All sums payable by El Paso to the Trustee under this Contract shall be
payable in immediately available funds at the office of the Trustee at 201 E.
Main Street, El Paso, Texas, before 1 p.m. El Paso time on the date due, or to
such other person or at such other address as the Trustee, from time to time,
may designate.

(d)    El Paso shall pay, from time to time, as provided in this Contract, or on
demand of the Trustee, all Additional Sales Charges as and when due and payable.
At El Paso's option, El Paso may in lieu of such payment deliver to the Trustee
a Fuel Schedule in the form of Schedule B attached hereto directing that such
Additional Sales Charges be added to the Investment of the Trustee (to the
extent funds are available to the Trustee under the Credit Agreement or
otherwise) and allocating said amount of Additional Sales Charges among Units or
to the Plant Account.

(e)    Spent Fuel shall be promptly reconveyed by the Trustee to El Paso by the
execution of a Bill of Sale in the form of Schedule C hereto.

(f)    El Paso shall promptly pay all Fuel Swap Proceeds to the Trustee for
subsequent payment to the Credit Bank pursuant to the terms of the Trust
Agreement.

(g)    [Reserved]

-7-

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

(h)    [Reserved]

(i)    [Reserved]

(j)    El Paso shall pay to the Trustee on the 25th day of each January, April,
July and October, or if such day is not a Business Day, on the next following
Business Day (each such date being herein called a "Basic Heat Supply Payment
Date"), the Basic Heat Supply Charge shown on Annex I to the Schedule D for the
preceding calendar quarter concurrently delivered to the Trustee in accordance
with Section 3(k). The calculation of the Basic Heat Supply Charge shall conform
with the following formula:

(BHSC) =    (NI-R)    x    AF

(i)    "BHSC" shall be the Basic Heat Supply Charge.

(ii)    "NI" shall be Net Investment in each Unit at the end of such period.

(iii)    "R" shall be the current estimation of the residual value of the
applicable Nuclear Fuel presently in use and it is agreed that such residual
value shall be the fair market value currently estimated to remain at the time
of removal; provided that in no event shall "R" be a number less than zero.

-8-

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

(iv)    "AF" shall be an amortization factor based upon thermal output of
applicable Nuclear Fuel during such period divided by the available thermal
output estimated by El Paso as remaining in such Nuclear Fuel at the beginning
of such period, including and adjusted for Nuclear Fuel loaded or removed during
such period.

(k)    At least 15 days before each Basic Heat Supply Payment Date, the Trustee
shall deliver to El Paso a certificate in the form of Schedule D filled in as to
Columns B and C and with respect to Column E, the "Total" amount of Capitalized
Daily Financing Charges, without further allocation. Three Business days prior
to such Basic Heat Supply Payment Date, El Paso shall deliver to the Trustee the
certificate so received or a copy thereof duly completed as to the remaining
Columns and information and as to Annex I.

On the Basic Heat Supply Payment Date, El Paso shall pay to the Trustee, or on
the Trustee's written order, to the Credit Bank, the Basic Heat Supply Payment
shown in Annex I for the quarterly period ended on the last day of the month
preceding such Basic Heat Supply Payment Date.

(l)    [Reserved]

-9-

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(m)    [Reserved]

(n)    [Reserved]

(o)    [Reserved]

4.    Payment Obligations of El Paso Absolute and Unconditional; Disclaimer of
Warranties.

(a)    The obligation of El Paso to make all payments pursuant to this Contract
shall be absolute and unconditional under any and all circumstances and shall
not be affected by any circumstances of any character.

THE TRUSTEE, IN ITS INDIVIDUAL CAPACITY, MAKES NO REPRESENTATION OR WARRANTY OF
ANY KIND WHATSOEVER, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO, AS TO THE
SAFETY, TITLE, CONDITION, QUALITY, QUANTITY, TEMPERATURE, FITNESS FOR USE,
MERCHANTABILITY, CONFORMITY TO SPECIFICATION, OR ANY OTHER CHARACTERISTIC, OF
THE NUCLEAR FUEL, OR WHETHER OR NOT ANY HEAT WHATSOEVER IS OR CAN BE PRODUCED BY
THE NUCLEAR FUEL, OR AS TO WHETHER THE NUCLEAR FUEL OR THE OWNERSHIP THEREOF
COMPLIES WITH ANY RULES, REGULATIONS OR REQUIREMENTS OF ANY KIND.

As between El Paso and the Trustee, EL PASO ASSUMES ALL RISKS AND WAIVES ANY AND
ALL DEFENSES TO ITS OBLIGATION TO PAY

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HEREUNDER, INCLUDING, WITHOUT LIMITATION, ANY DEFENSE RELATING TO:

(A)    THE SAFETY, TITLE, CONDITION, QUALITY, QUANTITY, TEMPERATURE, FITNESS FOR
USE, MERCHANTABILITY, CONFORMITY TO SPECIFICATION, OR ANY OTHER QUALITY OR
CHARACTERISTIC OF THE NUCLEAR FUEL, OR WHETHER OR NOT ANY HEAT WHATSOEVER IS OR
CAN BE PRODUCED BY THE NUCLEAR FUEL;

(B)    ANY SET-OFF, COUNTERCLAIM, RECOUPMENT, DEFENSE OR OTHER RIGHT WHICH EL
PASO MAY HAVE AGAINST THE TRUSTEE OR ANYONE ELSE, FOR ANY REASON WHATSOEVER;

(c)    ANY DEFECT IN TITLE OR OWNERSHIP OF THE NUCLEAR FUEL;

(D)    ANY LOSS, THEFT OR DESTRUCTION OF, OR DAMAGE TO, THE NUCLEAR FUEL, IN
WHOLE OR IN PART, OR CESSATION OF THE USE OR POSSESSION OF THE NUCLEAR FUEL BY
EL PASO FOR ANY REASON WHATSOEVER AND OF WHATEVER DURATION, OR ANY CONDEMNATION,
CONFISCATION, REQUISITION, SEIZURE, PURCHASE, TAKING OR FORFEITURE OF THE
NUCLEAR FUEL, IN WHOLE OR IN PART;

(E)    ANY INABILITY OR ILLEGALITY WITH RESPECT TO THE OWNERSHIP OR THE USE OR
POSSESSION OF THE NUCLEAR FUEL BY EL PASO OR THE OWNERSHIP THEREOF BY THE
TRUSTEE;

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(F)    ANY INSOLVENCY, BANKRUPTCY, REORGANIZATION OR SIMILAR PROCEEDING BY OR
AGAINST EL PASO OR THE TRUSTEE;

(G)    ANY FAILURE TO OBTAIN, OR EXPIRATION, SUSPENSION OR OTHER TERMINATION OF,
OR INTERRUPTION TO, ANY REQUIRED LICENSES, PERMITS, CONSENTS, AUTHORIZATIONS,
APPROVALS OR OTHER LEGAL REQUIREMENTS;

(H)    THE INVALIDITY OR UNENFORCEABILITY OF THIS CONTRACT OR ANY OTHER
INFIRMITY HEREIN OR ANY LACK OF POWER OR AUTHORITY OF THE TRUSTEE OR EL PASO TO
ENTER INTO THIS CONTRACT; OR

(I)    ANY OTHER CIRCUMSTANCES OR HAPPENING WHATSOEVER WHETHER OR NOT SIMILAR TO
ANY OF THE FOREGOING. EL PASO HEREBY WAIVES, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, ANY AND ALL RIGHTS WHICH IT MAY NOW HAVE OR WHICH AT ANY TIME
HEREAFTER MAY BE CONFERRED UPON IT, BY STATUTE OR OTHERWISE, TO TERMINATE,
CANCEL, QUIT, RESCIND OR SURRENDER THIS CONTRACT EXCEPT IN ACCORDANCE WITH THE
EXPRESS TERMS HEREOF. If for any reason whatsoever this Contract shall be
terminated in whole or in part by operation of law or otherwise, except as is
specifically provided herein, El Paso nonetheless agrees to pay to the Trustee
an amount equal to the amounts payable by El Paso pursuant to Section 18 hereof.
Each payment made by El Paso pursuant to Sec­tion 3(j) hereof shall be final.
Notwithstanding the foregoing, if an error has been made in the computation of
an amount paid by

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El Paso pursuant to this Contract, which error has resulted in the payment by El
Paso of an amount in excess of or less than the amount which El Paso should have
paid pursuant to said Section, El Paso or the Trustee, as the case may be, shall
not be precluded by this Section 4 (a) from recovering the amount of such excess
or deficit from the appropriate party.

(b)    It is specifically understood and agreed that the Trustee has not made
nor has any obligation to make any warranties, representations, covenants or
undertakings as to the accounting treatment to be accorded El Paso, or as to the
federal or any state income or other tax consequences, if any, to El Paso, as a
result of or by virtue of the transactions contemplated by this Contract and the
other agreements referred to herein.

5.    Procedure for Progress and Other Payments.

(a)    When El Paso desires the Trustee to make any payment (as provided by
Sections 2(b), 2(c), 3(a), 3(b) and 3(d)), El Paso shall notify the Trustee of
the amount of such payment by telephone or in writing at least five Business
Days prior to the payment date and shall deliver to the Trustee a Fuel Schedule
in the form of Schedule B hereto dated as of the payment date, duly completed in
three counterparts not later than 24 hours before the payment date.

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(b)    Not later than 12:00 (noon), New York time, on the date specified in said
notice, the Trustee shall make the payment in immediately available funds
specified in said Fuel Schedule to the parties specified in such Fuel Schedule;
provided, however, that the Trustee shall not be required to make any payment
pursuant to this Section in excess of the funds available to the Trustee for
such purpose under the Credit Agreement or otherwise.

(c)    El Paso shall have the right to disengage any portion of the Nuclear Fuel
and to remove it from Heat Production; provided, however, that not more than six
months after any Nuclear Fuel is disposed of or when more than six months shall
have elapsed after the removal (without the same being returned) from the Plant,
El Paso shall notify the Trustee in the first certificate in the form of
Schedule D hereto required to be delivered after any such six-month period of
the Net Investment of the Trustee in such Nuclear Fuel on the date of such
certificate and shall pay to the Trustee an amount equal to the Basic Heat
Supply Charge for the period ended on the date of such certificate together with
an amount equal to the Net Investment of the Trustee after giving effect to such
payment or charge in respect of such Nuclear Fuel removed or disposed; provided,
further, that thereafter and so long as the Trustee shall have no Net Investment
in such Nuclear Fuel, it shall be deleted from further forms of Schedule D
delivered pursuant hereto. Upon the payment by El Paso to the Trustee of Basic
Heat Supply Charge and Net Investment pursuant to this paragraph, the

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Trustee shall promptly convey title to such Nuclear Fuel to El Paso by executing
and delivering a Bill of Sale in the form of Schedule C hereto.

(d)    Notwithstanding any other provision of this Contract, each delivery of a
Fuel Schedule in the form of Schedule B hereto or a Bill of Sale in the form of
Schedule C hereto shall be deemed to amend, accordingly, the certificate in the
form of Schedule D hereto last delivered by El Paso to the Trustee.

6.    The Trustee's Agreement with Respect to Action under Related Agreements.

The Trustee agrees upon the written request of El Paso, (i) to exercise any
rights which the Trustee may have, from time to time, under the Credit Agreement
to borrow funds in order to carry out its obligations hereunder, and (ii) not,
without the prior consent of El Paso, to agree to any amendment of the Credit
Agreement or any Loan Document (as defined in the Credit Agreement).

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B.

LOCATION, CONDITION AND
USE OF NUCLEAR FUEL

7.    Location of Nuclear Fuel.

El Paso covenants with the Trustee that during the period the Trustee has title
to the Nuclear Fuel pursuant to the terms of this Contract, the Nuclear Fuel
location will be limited to: (1) the facility of any party involved in the
Nuclear Fuel Cycle of any portion of the Nuclear Fuel, (2) transit during the
Nuclear Fuel Cycle between such facilities, (3) the Plant, and (4) a storage
facility.

8.    Condition and Use of Nuclear Fuel.

(a)    El Paso represents and warrants to the Trustee that any portion of
Nuclear Fuel which becomes subject to this Contract will be free and clear of
all Liens, except for Permitted Encumbrances. The Trustee, in its individual
capacity, represents and warrants to El Paso that any portion of Nuclear Fuel
which becomes subject to this Contract will be free and clear of all Trustee's
Liens. EL PASO ACKNOWLEDGES AND AGREES THAT THE TYPE AND DESIGN OF THE NUCLEAR
FUEL HAS NOT BEEN SELECTED BY THE TRUSTEE, THAT THE TRUSTEE HAS NOT SUPPLIED ANY
SPECIFICATIONS WITH RESPECT TO THE PROCESSING OR FABRICATION OF ANY THEREOF AND
THAT NEITHER THE TRUSTEE, AS THE TRUSTEE OR INDIVIDUALLY, THE TRUST, NOR ANY
PERSON (EXCEPT EL PASO IN

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CERTAIN CIRCUMSTANCES) ACTING ON ITS OR THEIR BEHALF (i) IS A MANUFACTURER OF,
OR DEALER IN, NUCLEAR MATERIAL OF ANY KIND OR HAS ANY LICENSE TO USE OR POSSESS
SUCH MATERIAL, (ii) HAS MADE ANY RECOMMENDATION, GIVEN ANY ADVICE OR TAKEN ANY
OTHER ACTION WITH RESPECT TO (y) THE CHOICE OF ANY SUPPLIER, PROCESSOR,
DESIGNER, FABRICATOR OR TRANSPORTER OF, OR ANY OTHER CONTRACTOR WITH RESPECT TO,
THE NUCLEAR FUEL OR ANY PORTION THEREOF, OR (z) ANY ACTION TAKEN OR TO BE TAKEN
WITH RESPECT TO THE NUCLEAR FUEL OR ANY PORTION THEREOF AT ANY STAGE OF THE
NUCLEAR FUEL CYCLE, (iii) HAS AT ANY TIME HAD PHYSICAL POSSESSION OF ANY PORTION
OF THE NUCLEAR FUEL OR MADE ANY INSPECTION THEREOF, OR (iv) HAS MADE ANY
WARRANTY OR OTHER REPRESENTATION WHATSOEVER, EXPRESS OR IMPLIED, INCLUDING, BUT
NOT LIMITED TO, ANY WARRANTY OR REPRESENTATION THAT THE NUCLEAR FUEL (x) WILL
NOT RESULT IN INJURY OR DAMAGE TO PERSONS OR PROPERTY, (y) HAS BEEN PROPERLY
DESIGNED OR FABRICATED OR WILL ACCOMPLISH THE RESULTS WHICH EL PASO INTENDS
THEREFOR, OR (z) IS SAFE IN ANY MANNER OR RESPECT. THE PROVISIONS OF THIS
SECTION 8 (a) HAVE BEEN NEGOTIATED WITH THE INTENTION OF COMPLETELY EXCLUDING
AND NEGATING ALL WARRANTIES BY THE TRUSTEE, AS THE TRUSTEE OR INDIVIDUALLY, THE
TRUST OR ANY PERSON ACTING ON THEIR BEHALF, EXPRESS OR IMPLIED, RELATING TO
THE NUCLEAR FUEL OR ANY PORTION THEREOF, WITH RESPECT TO MERCHANTABILITY,
FITNESS OR OTHERWISE, WHETHER ARISING PURSUANT TO A UNIFORM COMMERCIAL CODE OR
ANY OTHER PRESENT OR FUTURE LAW, OR OTHERWISE.

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(b)    The Trustee hereby authorizes El Paso, at El Paso's cost and expense, to
assert all rights and claims, and to bring suits, actions and proceedings, in
its own name or in the name of the Trustee, in respect of any seller's,
manufacturer's, transporter's, designer's, processor's or fabricator's
warranties or undertakings, express or implied, relating to any portion of the
Nuclear Fuel. El Paso, subject to the provisions of the Trust Agreement, shall
be entitled to retain all proceeds and recoveries received by it under this
Section 8(b) and any proceeds or recoveries received by or on behalf of the
Trustee shall, subject to the provisions of the Trust Agreement, be paid over to
El Paso, unless an Event of Default shall have occurred and be continuing.

(c)    El Paso has investigated the state of the title to and rights of
ownership in the Nuclear Fuel subject to this Contract at the date hereof, and
has approved the same for all purposes hereof. El Paso will from time to time
after such date make (or cause to be made) such investigation of each portion of
additional Nuclear Fuel as El Paso deems appropriate or necessary as such
Nuclear Fuel becomes subject to this Contract, and will not permit any such
portion to become subject to this Contract unless El Paso is similarly satisfied
with and has similarly approved the same for all purposes thereof.

(d)    El Paso, subject to the provisions of the Trust Agreement, shall have
exclusive right to possession and use of

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all Nuclear Fuel to which the Trustee has title hereunder, but El Paso will not
do or approve to be done any act or thing (i) that is contrary to any Legal
Requirement or Insurance Requirement or (ii) that may impair the value or
usefulness of such Nuclear Fuel or any part thereof (other than as the normal
usage thereof in Heat Production). El Paso shall cause such Nuclear Fuel to
comply with all Legal Requirements, and the applicable provisions and conditions
of all licenses, permits, consents, authorizations and approvals of any
governmental authority issued to El Paso or its employees, servants or agents
and in a manner that does not make void or voidable any insurance or
governmental or other indemnification agreement with regard to liability arising
out of the same (which would not have been void or voidable but for such
action). El Paso shall likewise observe and comply with the requirements of all
policies of insurance and indemnity agreements at any time in force with respect
to such Nuclear Fuel. El Paso agrees that it will not, without written consent
of the Trustee, enter into, or consent to, any change order or other amendment,
modification, or supplement to any Assigned Agreement if such change order,
amendment, or modification would terminate the Trustee's right to receive title
to any Nuclear Fuel under any Assigned Agreement; provided that no such consent
shall be required if (i) the Trustee's Investment in such Nuclear Fuel shall be
zero or (ii) El Paso shall have delivered to the Trustee written notice to the
effect (aa) that El Paso intends to reduce to zero the Trustee's Investment in
such Nuclear Fuel and (bb) that El Paso will pay to the Trustee, on or before
the 90th

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day following the date of said notice and in accordance with the provisions of
Section 3(a) (i) hereof, such amount as is necessary to reduce said Investment
to zero.

(e)    The Trustee may, with the prior written consent of El Paso (which consent
shall not be required if an Event of Default shall have occurred and be
continuing), enter into any agreement or modify any existing agreement with any
party involved in the Nuclear Fuel Cycle in respect of any Nuclear Fuel.

(f)    The Nuclear Fuel (other than unmined uranium ore in place) is personal
property and El Paso shall, at its expense, take all such action as may be
required to cause the Nuclear Fuel to retain its character as personal property.
The Nuclear Fuel shall not become part of any real property on which it or any
portion thereof may from time to time be situated, notwithstanding the means by
which it is installed or attached thereto and notwithstanding any law or custom
or the provision of any lease, mortgage or other instrument applicable to any
such real property.

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C.
TERMS AND CONDITIONS

9.    Certificates and Opinions by El Paso; Further Assurance, Financial
Information and Compliance Certificates.

(a)    On the Closing Date and no later than April 30 in each year until the
termination or expiration of this Contract, commencing with the year 1997, El
Paso shall furnish to the Trustee a certificate of an officer of El Paso, as of
the preceding December 31st (i) stating the location of the Nuclear Fuel, and
such information regarding the condition of the Nuclear Fuel as the Trustee may
reasonably request, (ii) stating that such officer has caused a review to be
made by responsible personnel of El Paso with respect to compliance during such
period by El Paso with Sections 7 and 8 of this Contract and that such review
has not disclosed any material failure on the part of El Paso to comply with its
obligations under said Sections, (iii) stating that El Paso is in compliance
with Sections 10 and 12 of this Contract, and (iv) stating that no Event of
Default or event which, with the lapse of time or notice or both, would
constitute an Event of Default, has occurred and is continuing, or if an Event
of Default has occurred and is continuing, or an event which, with the lapse of
time or notice or both, would constitute an Event of Default has occurred and is
continuing, specifying the nature thereof, the period of existence thereof and
what action El Paso proposes to take with respect thereto.

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(b)    Concurrently with such certificates, El Paso shall furnish to the Trustee
an opinion of its counsel, which opinion and counsel shall be reasonably
satisfactory to the Trustee, dated upon such dates and addressed to the Trustee,
stating that:

(i)    El Paso is a corporation validly existing and in good standing under the
laws of the State of Texas and has all requisite power and authority, corporate
or otherwise, to conduct its business, to own its properties and to perform all
of its obligations under the Assignment Agreements and the Purchase Contract.

(ii)    The performance by El Paso of its obligations to make payments under the
Purchase Contract does not and will not (A) violate any provision of any
existing law, rule or regulation as presently implemented or interpreted, or,
to the best knowledge of such counsel of El Paso, any existing order, writ,
judgment, injunction, decree, determination or award of the United States of
America or of the State of Texas, Arizona or New Mexico or of any court, agency,
subdivision or authority thereof having applicability to El Paso, or (B) result
in a breach of or constitute a default under any indenture or loan or credit
agreement or any other agreement, lease or instrument known to such counsel of
El Paso to which El Paso is a party or by which it or its properties may be
bound or affected.

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(iii)    No authorization, consent, approval or license of, or filing or
registration with, any court or governmental department, commission, board,
bureau, agency or instrumentality of the United States of America or the State
of Texas, Arizona or New Mexico or any specifically granted exemption from any
of the foregoing was or, under present law, is necessary for the performance by
El Paso of its obligations to make payments under the Purchase Contract or the
legality, validity or effectiveness of the Purchase Contract, except for
authorization s by the Federal Energy Regulatory Commission and the New Mexico
Public Utility Commission, which authorizations have been duly obtained.

(iv)    Such counsel has reviewed the applicable law (including the federal laws
of the United States) in effect in the States of Texas, Arizona and New Mexico
and in the opinion of such counsel no action to continue the perfection of the
Trustee's title to the Nuclear Fuel or rights transferred or to be transferred
to the Trustee as contemplated by the Purchase Contract or the Assignment
Agreements is required or, if any such action is required, describing such
action.

(v)    [Reserved]

(vi)    [Reserved]

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(c)    El Paso hereby agrees, at its expense, to promptly execute and deliver to
the Trustee such further certificates, statements, instruments, documents and
assurances in recordable form, if appropriate, and take such further action as
the Trustee may from time to time reasonably request in order more
effectively to carry out the intent and purpose of this Contract, to establish
and protect the rights and remedies created or intended to be created in favor
of the Trustee hereunder and under the Trust Agreement and to protect the
interest and title of the Trustee in and to the Nuclear Fuel and this Contract.

(d)    El Paso shall furnish the Trustee (i) on or before April 30th in each
year until the termination or expiration of this Contract, commencing with the
year 1996, a balance sheet of El Paso as of the preceding fiscal year end,
together with a statement of income of El Paso for such fiscal year then ended,
certified by El Paso's independent accountants, (ii) quarterly unaudited
financial statements as they appear in El Paso's quarterly reports to
shareholders, and (iii) such other information relating to the affairs of El
Paso as the Trustee may from time to time reasonably request.

(e)    The Trustee shall have the right to and shall make available any records
maintained by the Trustee regarding the Trust and/or the Nuclear Fuel and the
Trustee's rights under this Contract to any governmental authority requesting
such records, or to El Paso, El Paso's independent accountants or the Credit

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Bank and the Lenders. The Trustee shall notify El Paso of any such request other
than by banking authorities.

10.    Impositions.

El Paso agrees that until this Contract is terminated, it will promptly pay all
Impositions. El Paso further agrees at its expense to do all things required to
be done by the Trustee in connection with the levy, assessment, billing or
payment of such Impositions and is hereby authorized by the Trustee to act for
and on behalf of the Trustee in any and all such respects, and to file, at the
request and on behalf of the Trustee, all required returns and reports
respecting Impositions. El Paso shall promptly provide the Trustee with a copy
of all such returns and reports and with evidence of payment of all Impositions.

11.    Indemnification by El Paso.

El Paso hereby agrees, whether or not any of the transactions contemplated by
the Trust Agreement shall be consummated, to assume liability for and does
hereby agree to indemnify, protect, save and keep harmless the Trustee, in its
individual capacity, and its successors, assigns, trustees, officers and
servants (collectively, for the purposes of this Section 11, the "Trustee
Indemnitees") from and against, any liabilities, obligations, losses, damages,
taxes, claims,

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actions, suits, costs, expenses and disbursements (including legal fees and
expenses) of any kind and nature whatsoever (for the purposes of this Section 11
collectively called "Expenses") which may be imposed on, incurred by or asserted
at any time against one or more of Trustee Indemnitees in any way relating to or
arising out of the acceptance or administration of the Trust, the action or
inaction of any of the Trustee Indemnitees hereunder or under the Trust
Agreement, the Loan Documents or any Assignment Agreement or such other
instruments as may be entered into pursuant to the Trust Agreement, or relating
in any way to the Nuclear Fuel, including (without limitation) strict liability
or liability without fault or other liability of an owner or vendor, arising out
of statute, judicial decision or otherwise, provided, however, that El Paso
shall not be required to indemnify any Trustee Indemnitee for (i) income or
franchise taxes on, based on, or measured by, any fees or compensation received
by a Trustee Indemnitee in an individual capacity for services rendered in
connection with the transactions contemplated by the Trust Agreement, (ii) any
Expenses caused by the gross negligence or willful misconduct of a Trustee
Indemnitee, (iii) any Expenses caused by Trustee's Liens, and (iv) any Expenses
caused by breach of a representation, warranty or covenant of any Trustee
Indemnitee contained in this Contract, the Trust Agreement, the Loan Documents
and any certificate or document delivered by such Trustee Indemnitee in
connection herewith or therewith. Subject to the provisions of clause (ii) of
the proviso in the immediately preceding sentence, the

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indemnification by El Paso to the Trustee provided by this Section 11 shall
include, to the full extent permitted by applicable law, an indemnity for
Expenses incurred by the Trustee caused by Trustee's sole or contributory
negligence. Any payment to any Trustee Indemnitee under this Section 11 shall be
in­ creased to such amount as will, after taking account of all (i) taxes
imposed with respect to the accrual or receipt of such payment by such Trustee
Indemnitee (as the same may be increased pursuant to this sentence) and (ii) any
deductions or credits under any applicable tax law attributable to the Expenses
or taxes for which payment has been made, equal the amount of the payment. The
indemnities contained in this Section shall survive the termination of this
Contract, the Trust Agreement, any Trust created under the Trust Agreement and
the resignation or removal of any Trustee. In the event that any action, suit or
proceeding is brought against any Trustee Indemnitee by reason of any
aforementioned occurrence, condition or event, El Paso will, at El Paso's
expense, resist and defend such action, suit or proceeding or cause the same to
be resisted and defended by counsel designated by El Paso and acceptable to
such· Trustee Indemnitee.

12.    Insurance.

El Paso shall, at no cost to the Trustee, keep its insurable properties
adequately insured at all times by financially sound and reputable insurers;
maintain such other

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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.

13.    Compliance with Legal and Insurance Requirements.

El Paso at its expense will promptly (a) comply with all Legal Requirements and
Insurance Requirements as to Nuclear Fuel owned by the Trustee and (b) procure,
maintain and comply with all permits, licenses and other authorizations required
for the ownership of such Nuclear Fuel or any portion thereof by the Trustee or
El Paso.

14.    Permitted Contests.

El Paso at its expense may contest by appropriate legal proceedings conducted in
good faith and with due diligence, the amount or validity or application, in
whole or in part, of any Imposition or lien therefor, or any Legal Requirement,
respecting Nuclear Fuel, provided, however, as follows:

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(a)    in the case of a contest involving material Imposition, material lien or
material Legal Requirement (as determined in each case by El Paso), El Paso
shall provide prior notice to the Trustee, and

(b)    neither the Trustee nor the Trust could be subject to any additional
civil liability (other than interest, which El Paso agrees to pay) or any
criminal liability, for failure to pay any such Imposition or to comply with
such Legal Requirement.

El Paso agrees to indemnify, and hold the Trustee and the Trust harmless against
all claims, demands, losses, judgments, decrees and costs, including attorneys'
fees and expenses, in connection with any such contest and shall, promptly after
the final determination of such contest, pay and discharge the amounts which
shall be levied, assessed or proposed or determined to be payable therein,
together with all penalties, fines, interest, costs and expenses thereon or in
connection therewith.

15.    Damage or Destruction.

If any material incident of damage to or destruction of any Nuclear Fuel then
covered by any Fuel Schedule hereto should occur, El Paso upon actual knowledge
thereof will promptly give

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written notice thereof to the Trustee, generally describing the nature and
extent of such damage or destruction.

16.    Taking.

In case of a Taking or the commencement of any proceedings or negotiations that
might result in any Taking, El Paso upon actual knowledge thereof will promptly
give written notice thereof to the Trustee generally describing the nature and
extent of such Taking or the nature of such proceedings or negotiations and the
nature and extent of the Taking that might result therefrom, as the case may be.
The Trustee, upon receipt of any award or payment on account of any Taking of
Nuclear Fuel then covered by any Schedule hereto or any portion thereof shall
give prompt notice to El Paso and the Credit Bank of such award or payment.
Within ten (10) Business Days after receipt of the notice referred to in the
preceding sentence, El Paso shall elect, by written notice to the Trustee, to
apply the proceeds thereof to (i) the Restoration of the Nuclear Fuel, (ii) the
reimbursement of El Paso for funds theretofore used for such Restoration, or
(iii) the reduction, by the amount of such award or payment, of the Net
Investment of the Trustee in such Nuclear Fuel in accordance with the provisions
of Section 3(a) (i) hereof. In the event El Paso elects the options described in
clauses (i) or (ii), the Trustee shall pay such award or payment to El Paso. In
the event El Paso elects the option described in clause (iii), the Trustee shall
pay such award or payment to the Credit Bank.

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El Paso may elect to apply portions of any award or payment to each of, or a
combination of, the options described in clauses (i), (ii) and (iii), and
payments by the Trustee to El Paso and the Credit Bank shall be made
accordingly.

17.    Events Upon Which Contract to Terminate.

(a)    This Contract shall terminate in the manner and with the effect
hereinafter set forth in Section 18 upon the happening of any of the following
events (each, a "Termination Event"):

(i)    El Paso shall have delivered to the Trustee a certificate (signed by the
President or any Vice President of El Paso) stating that El Paso desires to
terminate this Contract effective on a date stated therein (which shall not be
less than 60 days after receipt of such notice), and such date shall have
occurred.

(ii)    The Trustee, in the opinion of its counsel (a copy of which opinion
shall have been delivered to El Paso), by virtue of any interest in the Nuclear
Fuel, the Trust, or otherwise, should be or become potentially liable, whether
because of a change in laws or for any other reason, to respond in damages to
any person or persons for injury, death or property damage in an amount for
which the Trustee is not fully insured, covered, held harmless or otherwise

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indemnified against or protected from hereunder or pursuant to any insurance
policy or policies or indemnification issued by a person or persons satisfactory
to the Trustee; and the Trustee shall have given notice of termination of this
Contract to El Paso.

(iii)    The Trustee is declared by the Securities and Exchange Commission to
be, or with the passage of a specific period of time would become, an "electric
utility company" or a "gas utility company" as defined in the Public Utility
Holding Company Act of 1935, as amended, or the shareholders of the Trustee or
any partner, officer or employee of the Trustee, shall become, or with the
passage of a specific period of time would become, subject to regulation under
said Act by reason of the transactions contemplated by this Contract.

(iv)    The Trustee becomes, or is declared by the Public Utilities Commission
of Texas, the New Mexico Public Utility Commission or the Arizona Corporation
Commission to be, or with the passage of a specific period of time would become,
a "public utility" as defined under Texas, New Mexico or Arizona law or the
shareholders of the Trustee or any partner, officer or employee of the Trustee
shall become, or with the passage of a specific period of time would become,
subject to regulation under said law by reason of the transactions contemplated
by this Contract.

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(v)    The Trustee becomes, or is declared by a governmental agency having
jurisdiction to be, or with the passage of a specific period of time would
become, a "public utility" as defined in the Federal Power Act, as amended, or
the shareholders of the Trustee or any partner, officer or employee of the
Trustee, shall be or with the passage of a specific period of time would become,
subject to regulation under said Act by reason of the transactions contemplated
by this Contract.

(vi)    Any law or regulation or interpretation of any law or regulation shall
be adopted or enforced by any governmental or regulatory authority (including,
without limitation·, DOE, the Arizona Corporation Commission, the Public
Utilities Commission of Texas, the New Mexico Public Utility Commission, the
Securities and Exchange Commission, the Federal Energy Regulatory Commission and
the New York Stock Exchange), and as a result of such adoption or enforcement,
approval of the transactions contemplated by this Contract shall be required and
shall not have been obtained within any grace period after such adoption or
enforcement; or as a result of any such adoption or enforcement this Contract or
any transaction contemplated hereby shall be or become, or with the passage of a
specific period of time would become, unlawful or the performance of this
Contract or any term thereof shall be rendered impracticable in any material
way, unlawful or unenforceable

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and the Trustee shall have given notice of termination of this Contract to El
Paso.

(vii)    A "nuclear incident" (as defined in the Atomic Energy Act of 1954, as
amended) involving or connected in any way with the Nuclear Fuel, any Unit or
any portion of either thereof shall have occurred and the Trustee shall have
given notice to El Paso that the Trustee believes such "nuclear incident" may
give rise to an aggregate liability (whether of El Paso or the Trustee), or to
damage, destruction or personal injury, in excess of the insurance and
indemnification available.

(viii)    An Event of Default (as defined in the Credit Agreement) which is not
an Event of Default under Section 19(a) of this Contract shall have occurred and
be continuing.

(b)    Promptly after either the Trustee or El Paso shall actually learn of the
happening of any of the events listed in Section 17 (a), such person shall give
written notice thereof to the other party hereto (unless the happening of the
event itself shall cause such notice to be given), identifying the happening of
such event or events.

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18.    Procedure for Termination of Contract.

(a)    Immediately upon the happening of any Termination Event, this Contract
shall cease and terminate, except with respect to obligations and liabilities of
El Paso, actual or contingent, which arose under this Contract on or prior to
the date of termination and except for El Paso's obligations set forth in
Sections 3 and 4 and 10 through 16 and in this Section, all of which obligations
shall continue until discharged as provided for below. The notice of the
happening of such events, required by Section 17(b), shall (x) acknowledge that
this Contract has terminated, subject to the continuing obligations of El Paso
mentioned above, (y) state that on a settlement date which, shall not be more
than 150 days after the giving of such notice, which settlement date shall be
specified therein, El Paso shall be obligated to pay the Trustee an amount equal
to the Net Investment of the Trustee with respect to Nuclear Fuel then covered
by any Fuel Schedule hereto on such settlement date, plus any other amounts due
the Trustee hereunder plus such further amount, if any, as shall be sufficient
to enable the Trustee to pay in full: (A) all obligations under the Credit
Agreement and notes issued thereunder; and (B) all other obligations and
liabilities of the Trustee related to this Contract and the Trust Agreement, and
(z) state that on such settlement date, the Trustee shall be obligated to
deliver to El Paso a Bill of Sale in the form of Schedule C hereto conveying the
entire interest and ownership of the Nuclear Fuel from the Trustee to El Paso.

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Upon the delivery of such notice, the Trustee and El Paso shall become obligated
to make the payment and to deliver the documentation referred to herein on such
settlement date to the same extent as if each had acknowledged in writing its
obligation so to do. Such payment and delivery of documentation shall be made in
accordance with this Section 18. Any other provision of this Contract to the
contrary notwithstanding, if this Contract is terminated as a result of the
happening of an event set forth in Section 17(a) (viii) hereof, then the
settlement date referred to in this Section 18 shall be ten (10) Business Days
after El Paso (i) obtains actual knowledge of such termination or (ii) receives
notice of such termination pursuant to Section 17 (b) hereof, whichever is
earlier. El Paso's obligations will not be discharged until all of its
liabilities hereunder are satisfied.

(b)    Upon the settlement date specified in the notice delivered by the Trustee
or El Paso, El Paso shall pay to the Trustee at the office of the Credit Bank at
270 Park Avenue, New York, New York 10017 or to such other person at such other
place designated by the Trustee the payments specified in Section 18(a) hereof
in immediately available funds, and the Trustee shall transfer the title to and
ownership interest in the Nuclear Fuel to El Paso. El Paso shall pay all
expenses in connection with such transfer, including all escrow fees, search and
recording and filing fees, attorneys' fees and all applicable federal, state and
local sales, use and other taxes which may be incurred or imposed by reason of
the transfer then being made by the

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Trustee, or by reason of the delivery of an instrument or instruments to
transfer title.

(c)    Notwithstanding any other provisions of this Contract, whenever El Paso
has the right or obligation to purchase the Nuclear Fuel or any portion thereof
or any other property pursuant to any provision of this Contract other than
Section 18(a), then, subject to the Trust Agreement, El Paso may cause such
purchase to be effected by, and the Trustee shall transfer title to and
ownership of the subject matter of such purchase to, any other person lawfully
entitled to receive the same and specified by El Paso in a written notice to the
Trustee given at least 15 days prior to the date of such purchase, provided,
that nothing specified in this subsection (c) shall in any way impair or affect
the obligations of El Paso under this Contract in connection with such purchase
and provided, further, that at the time of any such transfer to such other
person, El Paso shall deliver to the Trustee the undertaking of El Paso
indemnifying and holding the Trustee harmless from and against any loss, claim,
damage, or liability incurred by him by reason of such transfer in the same
manner and to the same extent as if the Trustee had made such transfer to El
Paso.

(d)    Upon the purchase by El Paso or any other person pursuant to this
Contract of the interest of the Trustee or any other person in the Nuclear Fuel
or any portion thereof or in any insurance proceeds or condemnation awards (or
the right to

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receive the same) relating thereto, the Trustee need not transfer any better
title thereto or ownership interest therein than existed on the respective dates
when the various items of property so sold first became subject to this
Contract.

19.    Events of Default and Remedies.

(a)    Any of the following events of default by El Paso shall constitute an
"Event of Default" and give rise to the rights on the part of the Trustee
described in Section 19(b):

(i)    default in the payment of any amount payable by El Paso hereunder for 30
days after such payment is due; or

(ii)    failure to perform or observe any other term, covenant or agreement
contained in this Contract or in any other agreement between El Paso and the
Trustee on El Paso's part to be performed or observed, which such failure shall
remain unremedied for 30 days after written notice thereof shall have been given
to El Paso by the Trustee; or

(iii)    any representation or warranty made by El Paso herein, in the
Assignment Agreements or in any document or certificate furnished to the Trustee
or any other party in connection herewith or therewith or pursuant hereto or

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thereto shall prove at any time to be incorrect as of the date made in any
material respect; or

(iv)    the institution of any proceeding by or against El Paso seeking to
adjudicate it a bankrupt or insolvent or seeking reorganization, arrangement,
adjustment, liquidation or compensation of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of debtors, or
seeking appointment of a receiver, trustee, or similar official or for any
substantial part of its property and, if instituted against El Paso, consent
thereto by El Paso or failure by El Paso for 60 days to stay such proceeding, or
the taking of any action by El Paso to authorize any of the actions set forth
above; or

(v)    the termination of existence or business failure of, or the making of an
assignment for the benefit of creditors by El Paso; or

(vi)    admission in writing by El Paso of its in- ability to pay its debts; or

(vii)    this Contract or the Trust Agreement shall terminate or cease to be in
full force and effect for any reason (other than pursuant to Section 17 hereof).

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(b)    Upon the occurrence and during the continuance of any Event of Default,
the Trustee may in its discretion do any one or more of the following:

(i)    proceed by appropriate judicial proceedings, either at law or in equity,
to enforce performance or observance by El Paso of the applicable provisions of
this Contract, or to recover damages for the breach thereof; or

(ii)    without limiting the generality of clause (i) above, the Trustee may, at
its option, in addition to all other rights and remedies provided hereunder or
under applicable law, without regard to whether any· or all of such other rights
and remedies have been or are to be exercised, in its own name or the name of El
Paso, demand, sue upon or otherwise enforce the Assigned Agreements with full
power as though the Trustee were the party named in the Assigned Agreements, and
amend, revise, release or otherwise change the same as may seem proper to the
Trustee in its sole discretion and exercise all other rights of El Paso under
the Assigned Agreements in such manner as it may determine. The exercise by the
Trustee of the rights and remedies granted it in this clause (ii) shall not be
considered a waiver of any Event of Default.

(iii)    without limiting the generality of Clauses (i) or (ii) above, upon the
occurrence and during the

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continuance of an Event of Default, El Paso agrees that the Trustee may (but
shall not be obliged to), at its sole election, perform for El Paso under any
and all Assigned Agreements.

(iv)    terminate this Contract.

(c)    In addition to the remedies of the Trustee provided in Section 19(b)
above, the Trustee shall be entitled to recover from El Paso all losses, damages
and expenses sustained by the Trustee by reason of such default and to all other
remedies provided by law.

20.    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 El Paso, to El Paso Electric Company, 303 North Oregon Street, El
Paso, Texas 79901, Attention of:    General Counsel (Telecopy No. (915)
543 5710)); and
(b)    if to the Trustee, to Texas Commerce Bank National Association, Texas
Commerce Bank Building, 201 East Main, El Paso, Texas 79901, Attention of Sarah
Wilson (Telecopy No. (915) 546-6701).

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All notices and other communications given to any party hereto in accordance
with the provisions of this Contract 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 or in accordance with the
latest unrevoked direction from such party given in accordance with this
Section.

21.    Allocation of Amounts.

Whenever, under this Contract, computations or allocations are required to be
made involving a cost, price, payment, charge, factor, discount, burn-up
residual value, or any other amount relating to the Nuclear Fuel, such cost,
price, payment, charge, factor, discount, burn-up or any other amount shall be
determined by El Paso. El Paso shall inform the Trustee in writing of the basis
of such allocations.

22.    Amendments.

Except as otherwise provided for herein, this Contract may not be amended,
modified or terminated, nor may any obligation hereunder be waived, orally, and
no amendment, modification, termination or waiver shall be effective for any

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purpose unless it is in writing, signed by the party against whom enforcement
thereof is sought.

23.    Severability.

Any provision of this Contract that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable law, El Paso hereby
waives any provision of law that renders any provision hereof prohibited or
unenforceable in any respect.

24.    Warranties and Representations of El Paso.

Except as set forth in the Disclosure Schedule, El Paso hereby warrants and
represents to the Trustee, individually and otherwise, as follows:

(a)    El Paso is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Texas and has all requisite power and
authority, corporate or otherwise, to conduct its business, to own its
properties and to

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execute and deliver, and to perform all of its obligations under this Contract
and the Assignment Agreements.

(b)    The execution and delivery by El Paso of this Contract and the Assignment
Agreements and the performance of its obligations to make payments under this
Contract and the Assignment Agreements have been duly authorized by all
necessary corporate action and do not and will not (i) require any consent or
approval of the stockholders of El Paso, (ii) violate any provision of the
charter or bylaws of El Paso, or of any existing law, rule or regulation
(including, without limitation, Regulation X of the Board of Governors of the
Federal Reserve System), or to the best of knowledge of responsible officers of
El Paso, any existing order, writ, judgment, injunction, decree, determination
or award of the United States of America or of the State of Texas, Arizona or
New Mexico or of any court, agency, subdivision or authority thereof having
applicability to El Paso or of the charter or by-laws of El Paso, or (iii)
result in a breach of or constitute a default under any indenture or loan or
credit agreement or any other agreement, lease or instrument to which El Paso is
a party or by which it or its properties may be bound or affected.

(c)    This Contract and the Assignment Agreements each constitutes a legal,
valid and binding obligation of El Paso enforceable against El Paso in
accordance with its terms.

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(d)    There are no actions, suits or proceedings pending or, to the knowledge
of El Paso, threatened against or affecting El Paso or the properties of El Paso
before any court or governmental department or commission which, if adversely
determined, could reasonably be expected, individually or in the aggregate, to
have a material adverse effect on the ability of El Paso to carry out its
obligations under this Contract or the Assignment Agreements.

(e)    Neither El Paso nor any of its subsidiaries, if any, is a party to any
indenture, loan or credit agreement or any lease or other agreement or
instrument or subject to any charter or corporate restriction which could
reasonably be expected to result in a material adverse effect on the ability of
El Paso to carry out its obligations under this Contract or the Assignment
Agreements.

(f)    No event has occurred and is continuing which constitutes an Event of
Default under this Contract or which would constitute an Event of Default
thereunder but for the requirement that notice be given or time elapse or both.

(g)    The execution, delivery and performance by El Paso of this Contract, the
Assignment Agreements and all other agreements and instruments to be executed by
El Paso pursuant to or as contemplated by the provisions hereof or thereof do
not require the consent or approval of, the giving of notice to, the

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registration with, or the taking of any other action with or by or in respect
of, any federal, state or other governmental authority or agency, except (i) as
set forth in the opinions of counsel for El Paso dated the Closing Date and
referred to in Section 4.02(a) of the Credit Agreement and (ii) any notices and
reports, if any, that have been effectively filed for the purposes thereof, or
that are not yet due, a list of which is delivered concurrently herewith to the
Trustee. In the event any such consent, approval, notice, registration or action
shall from time to time be required, El Paso agrees to notify the Trustee and
the Credit Bank thereof and to promptly secure such consents, approvals, and
registrations, give such notices and take such actions.

25.    Successor Trustee.

El Paso agrees that in the case of the appointment of any successor trustee
pursuant to the terms of the Trust Agreement, such successor trustee shall, upon
written notice by such successor trustee to El Paso, succeed to all rights,
powers and title of the predecessor trustee hereunder, including the right to
indemnification, other than as may relate to past indemnification or earned fees
and shall be deemed to be the Trustee and owner of the Nuclear Fuel for all
purposes hereof, without in any way altering the terms of this Contract or El
Paso's rights and obligations hereunder. Upon the appointment of a successor
trustee under the Trust Agreement, the predecessor

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trustee shall have no further obligations, rights or duties under this Contract,
including the right to indemnification, other than as may relate to past
indemnification or earned fees. One such appointment and designation of a
successor trustee shall not exhaust the right to appoint and designate further
successor trustees pursuant to the Trust Agreement, but such right may be
exercised from time to time as long as this Contract shall be in effect. The
Trustee or any successor trustee may, but shall not be obligated to, appoint an
agent and designate one or more officers of such agent as attorney-in-fact to
execute and deliver any and all notices, consents and approvals or other
documents necessary or desirable to be executed in connection with this Contract
or with the Nuclear Fuel.

26.    [Reserved]

27.    [Reserved]

28.    Miscellaneous.

El Paso understands and agrees that the duties and obligations of the Trustee
hereunder shall be subject to the terms of the Trust Agreement. The terms and
provisions of this Contract supersede all prior negotiations and oral
understandings, if any, between the Trustee and El, Paso with respect to the
transactions contemplated hereby. The captions in this Contract are for
convenience or reference only and shall not

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be used to interpret any of the terms or provisions hereof. This contract shall
in all respects be governed by, and construed in accordance with, the laws of
the State of Texas, including all matters of construction, validity and
performance.

29.    Inspection of Books and Records.

Upon reasonable notice by El Paso to the Trustee, authorized representatives of
El Paso (or, upon El Paso's request, of regulatory authorities having
jurisdiction over El Paso) or its designee shall have the right to examine
during normal business hours the books of account and records of the Trustee
pertaining to the transactions contemplated hereby.

30.    [Reserved]

31.    Failure of Performance by the Trustee.

If the Trustee shall fail to perform any act which he is obligated to perform
under the Credit Agreement and such failure shall continue for five Business
Days following notice thereof from El Paso to the Trustee, El Paso shall be
entitled and is hereby irrevocably appointed (so long as no Event of Default
shall have occurred hereunder and be continuing), as agent and attorney-in-fact
of the Trustee, to perform such act on behalf of the Trustee.

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32.    Incorporated Schedules.

Schedules A through E attached hereto are by this reference incorporated and
made a part hereof.

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IN WITNESS WHEREOF, the parties hereto have caused this Contract to be executed,
as of the day and year first above written.

 
TEXAS COMMERCE BANK NATIONAL ASSOCIATION, not in its individual capacity but
solely as the Trustee of the Rio Grande Resources Trust II
   
 
 
 
 
By:
/s/ [ILLEGIBLE]
 
 
Name:
 
 
 
Title:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EL PASO ELECTRIC COMPANY
 
 
 
 
 
 
 
 
 
By:
 
 
 
Name:
 
 
 
Title:
 

XXZ95A04.WPN (2/9/96 12:02am)

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IN WITNESS WHEREOF, the parties hereto have caused this Contract to be executed,
as of the day and year first above written.

 
TEXAS COMMERCE BANK NATIONAL ASSOCIATION, not in its individual capacity but
solely as the Trustee of the Rio Grande Resources Trust II
   
 
 
 
 
By:
 
 
 
Name:
 
 
 
Title:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EL PASO ELECTRIC COMPANY
 
 
 
 
 
 
 
 
 
By:
/s/ John E. Droubay
 
 
Name:
John E. Droubay
 
 
Title:
VP & Treasurer

XXZ95A04.WPN (2/9/96 12:02am)

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

STATE OF NEW YORK    )
)
COUNTY OF NEW YORK    )

BEFORE ME, the undersigned authority, on this day personally appeared Sarah
Wilson, Vice President of Texas Commerce Bank National Association, a banking
corporation organized under the federal laws of the United States of America,
acting in its capacity as Trustee of the Rio Grande Resources Trust II, known to
me to be the person whose name is subscribed to the foregoing instrument and
acknowledged to me that she executed the same for the purposes and consideration
therein expressed, in the capacity stated, and as the act and deed of said
corporation.

Given under my hand and seal of office, this 9th day of February, 1996.

 
 
CORINNE M. RAICHT
 
 
Notary Public, Stale of New York
 
[SEAL]
No. 4985516
 
 
Qualified in Westchester County
 
 
Qualified in New York County
 
 
Commission Expires Aug. 19, 1997
 
 
Notary Public – State of New York
 
 
 
 
 
 
 
 
/s/ Corinne Raicht
 
 
Corinne Raicht
 
My Commission Expires:
 
 
August 19, 1997
 
 
 
 
 
 
 
 
 
 
 
 
 

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SCHEDULE A
Definitions

Acquisition Cost. The purchase price paid in order to acquire any portion of the
Nuclear Fuel, including any progress payments made thereon, together with costs
of milling, conversion, enrichment, fabrication, installation, delivery,
containerization, transportation, storage, processing and any other direct costs
with respect to acquiring or preparing such portion of the Nuclear Fuel for use
in or management thereof through any stage of the Nuclear Fuel Cycle, but
excluding therefrom all Capitalized Cost with respect thereto.

Additional Sales Charge. Additional Sales Charges are (i) all amounts that El
Paso agrees to pay the Trustee as the result of charges (other than Basic Heat
Supply Charges, Acquisition Cost and payments made by El Paso pursuant to
Sections 3(a) and 3(b) of the Purchase Contract) incurred by the Trustee in
connection with the Nuclear Fuel or a portion thereof (except amounts payable
upon termination of the Purchase Contract and amounts payable pursuant to
Section 18 of such Contract) and (ii) the Trustee's Expenses.

ANPP Participation Agreement. Arizona Nuclear Power Project Participation
Agreement dated August 23, 1973, as amended, among Arizona Public Service
Company, Salt River Project Agricultural Improvement and Power District,
Southern California

A-1

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Edison Company, Public Service Company of New Mexico, El Paso, Southern
California Public Power Authority and Department of Water and Power of the City
of Los Angeles. The ANPP Participation Agreement is sometimes referred to as the
Palo Verde Nuclear Generating Station Participation Agreement.

Assembly. Any one of the separate fuel assemblies constituting a portion of the
Nuclear Fuel.

Assigned Agreements. The agreements and contracts and exhibits and appendices
thereto between and among El Paso, or others on behalf of El Paso, and various
entities engaged in the Nuclear Fuel Cycle which are the subject of the various
Assignment Agreements, including the ANPP Participation Agreement and any
additional such agreements entered into after the Closing Date, as such Assigned
Agreements may from time to time be supplemented, amended, waived or modified in
accordance with the terms thereof.

Assignment Agreements. All of the several Assignment Agreements, as of the date
entered into (including those entered into subsequent to the Closing Date)
between the Trustee and El Paso, together with the annexed consents thereto
assigning certain rights of El Paso to the Trustee.

A-2

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Basic Heat Supply Charge. The Basic Heat Supply Charge shall be calculated
pursuant to the provisions of Section 3(j) of the Purchase Contract.

Basic Heat Supply Payment Date has the meaning set forth in Section 3(j) of the
Purchase Contract.

Beneficiary. El Paso Electric Company, a Texas corporation, and its successors
and assigns.

Bill of Sale. A bill of sale in substantially the form of Schedule C to the
Purchase Contract, by which title to all or any portion of the Nuclear Fuel is
transferred from the Trustee to El Paso.

Business Day. Any day other than Saturday, Sunday or a day when banks are
authorized or required by law to close in New York or Texas.

Capitalized Cost. The sum of all legal, printing, reproduction, closing and
other normally capitalizable fees, disbursements, and other expenses actually
incurred and paid by El Paso or the Trustee in connection with the acquisition
of the Nuclear Fuel, including Trustee's Expenses, plus the sum of the
Capitalized Daily Financing Charge.

A-3

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Capitalized Daily Financing Charges. The sum of all Daily Financing Charges
accrued pursuant to the Purchase Contract allocable to the Nuclear Fuel or any
portion thereof during any stage of its Nuclear Fuel Cycle.

Closing Date. February 12, 1996, or such other date as may hereafter be agreed
by the parties hereto.

Credit Agreement. The Credit Agreement dated as of February 12, 1996 among El
Paso, the Trustee, the lenders from time to time party thereto and Credit Bank
as said Credit Agreement may from time to time be supplemented, amended, waived
or modified.

Credit Bank. Chemical Bank, a New York banking corporation, in its capacity as
issuing bank, administrative agent and collateral agent under the Credit
Agreement, and its successors or assigns under the Credit Agreement.

Daily Financing Charge. For any calendar day (whether or not a Business Day)
during the term of the Purchase Contract the sum of: an accrual for each such
day of all interest expenses, commitment, and other fees, on or with respect to
any loans obtained by the Trustee pursuant to the Credit Agreement which are.
outstanding at the close of business on such day, minus or plus, respectively,
any investment income or loss credited to the account established pursuant to
Section 12.6 of the Trust

A-4

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Agreement; provided that Daily Financing Charge shall not include an item which
would constitute an element of Acquisition Cost.

Disclosure Schedule. Disclosure Schedule means the Disclosure Schedule attached
as Schedule E to the Purchase Contract.

DOE. The United States Department of Energy or any body (governmental or
private) succeeding to any of the functions of such agency as constituted at the
date of the Purchase Contract.

Effective Date. "Effective Date" has the meaning set forth in Section 1.52 of
the Fourth Amended Plan of Reorganization of El Paso, dated November 7, 1995, as
confirmed by the United States Bankruptcy Court, Western District of Texas,
Austin Division on January 9, 1996.

El Paso. El Paso Electric Company, a Texas corporation and, prior to the
Effective Date, a debtor and debtor in possession under Chapter 11 of the United
States Bankruptcy Code.

Event of Default. The term as used in Section 19 of the Purchase Contract or in
Article VII of the Credit Agreement, as the case may be.

A-5

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Fee Agreement. Fee Agreement, dated as of February __,1996, between the Trustee
and Trustor with respect to those fees and expenses incurred by the Trustee
pursuant to the Trust Agreement and the transactions contemplated thereby which
are payable or reimbursable by the Trustor.

Fuel Management. The design of, contracting for, fixing the price and terms of
acquisition of, management, movement, removal, disengagement and other
activities in connection with the utilization of the Nuclear Fuel, and sometimes
referred to as "management," all of which shall be conducted according to the
sole discretion of El Paso.

Fuel Schedule. An instrument in substantially the form of Schedule B to the
Purchase Contract and made a part thereof.

Fuel Swap. Any swap, exchange or similar transaction described in the proviso to
the definition of Nuclear Fuel.

Fuel Swap Proceeds. Means any amount received by El Paso or the Trustee, as the
case may be, pursuant to a Fuel Swap.

GAAP. Means generally accepted accounting principles in use at the Closing Date,
or, at the option of El Paso, other generally accepted accounting principles
which are in use at the time of their determination; in determining generally
accepted accounting principles, El Paso may, but shall not be required to,

A-6

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conform to any accounting order, rule or regulation of any regulatory authority
having jurisdiction over the electric generating, transmission and distribution
operations of El Paso.

Heat. Any and all of the heat energy produced, emitted or generated by the
Nuclear Fuel while engaged in a reactor core of a Unit in accordance with the
provisions of the Purchase Contract.

Heat Production. The stage of the Nuclear Fuel Cycle in which the Nuclear Fuel
is engaged in a reactor core and is being consumed, pursuant to the process of
nuclear fission, in the production of steam for the generation of electric
energy.

Impositions. All license, documentation and registration fees and all taxes,
except taxes upon the net income of the Trustee in its individual capacity, but
including without further limitation gross income, gross receipts, interest
equalization, sales, use, occupation, franchise, personal property, stamp and
other taxes, levies, imposts, duties, charges or withholdings of any nature
whatsoever, together with any penalties or interest thereon imposed by any
taxing authority or governmental subdivision upon or in respect of, or measured
by, any payments under the Purchase Contract from El Paso to the Trustee or
gross receipts from the sale of Heat or Nuclear Fuel or in respect of any
property subject to the Purchase Contract or any transaction pursuant to the
Purchase Contract or any right or

A-7

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interest held by virtue of the Purchase Contract or Beneficiary's interest
therein.

Insurance Requirements. All terms of any insurance policy covering or applicable
to the Nuclear Fuel or any portion thereof, all requirements of the issuer of
any such policy, and all orders, rules, regulations and other requirements of
the DOE, the National Board of Fire Underwriters, or any other body exercising
similar functions with respect to electric utility properties or any other body
hereafter constituted exercising similar functions, which are applicable to or
affecting the Plant, the Nuclear Fuel or any portion thereof or any operation,
use or condition of the Plant, the Nuclear Fuel or any portion thereof.

Investment. With respect to any portion of the Nuclear Fuel, the sum of (i) the
Acquisition Cost for such portion, plus (ii) the Capitalized Cost for such
portion, or such lesser part of items (i) and (ii) paid by the Trustee pursuant
to the Purchase Contract, as such sum shall be set forth from time to time with
respect to such portion in the appropriate Schedule thereto, as amended from
time to time by a Fuel Schedule in accordance with the Purchase Contract.

Legal Requirements. All material requirements having the force of law applicable
to the Plant, a Unit, the Nuclear Fuel, or any transaction pursuant to the
Purchase Contract,

A-8

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compliance with which is at the time presently required and feasible.

Lenders. The "Lenders" as defined in the Credit Agreement.

Lien. Means with respect to any asset, any mortgage, pledge, lien, encumbrance,
charge or adverse claim affecting title or resulting in a charge against real or
personal property, or a security interest of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).

Lien of the Security Agreement. Means the Lien created by the Security
Agreement.

Loan Documents. Means the Credit Agreement and the Security Agreement.

Nuclear Fuel. The interest of El Paso or the Trustee in all unmined uranium ore
in place, unmilled uranium ore, converted, and/or enriched uranium ore and
byproducts therefrom,

A-9

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fabricated Nuclear Fuel, including rods, assemblies, batches, regions and cores
whether or not in place in a nuclear reactor and all other uranium products
(excluding Spent Fuel) and services rendered or to be rendered in connection
therewith that are the subject of certain Assignment Agreements; provided, that
the definition of Nuclear Fuel shall not include any Nuclear Fuel which is
loaned or otherwise provided by El Paso to third parties pursuant to swap,
exchange or similar agreements which are customary in the industry, but will
include Nuclear Fuel which is loaned or otherwise provided by third parties to
El Paso pursuant to such agreements.

Nuclear Fuel Cycle. The various stages in the process by which the component
parts of the Nuclear Fuel are mined, milled, converted, enriched, fabricated
into rods, assemblies, batches, regions and cores utilizable for Heat
Production, loaded into a reactor core and utilized, together with all
incidental processes with respect to the Nuclear Fuel at any stage of the
Nuclear Fuel Cycle.

Nuclear Fuel Proceeds. All proceeds from one or more of (i) borrowings under the
Credit Agreement, or (ii) issuances of notes or obligations referred to in
Section 2(d) of the Trust Agreement to the extent the proceeds therefrom are
used by the Trustee in connection with the performance of the Purchase Contract
or other agreements or arrangements entered into by the Trustee in connection
therewith or (iii) investments (including

A-10

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both principal and interest) pursuant to Section 12.6 of the Trust Agreement to
the extent the principal of such investments represents proceeds from any of the
aforesaid sources.

Net Investment. With respect to any portion of the Nuclear Fuel, the excess of
the amount of the Investment in such portion over the aggregate amount of the
Basic Heat Supply Charge, if any, theretofore paid by El Paso to the Trustee in
respect of such portion. In addition, Net Investment shall be reduced by the
amount of any payment made by El Paso to the Trustee for application pursuant to
Section 3(a) (i) of the Purchase Contract.

Palo Verde Nuclear Generating Station. Means that certain 3,810 megawatt nuclear
generating facility consisting of three generating units located near Phoenix,
Arizona, in which El Paso, as owner or lessee, had a 15.8% undivided interest as
of the Closing Date. Palo Verde Nuclear Generating Station was previously known
as the Arizona Nuclear Power Project.

Permitted Contests. Contests permitted by Section 14 of the Purchase Contract.

Permitted Encumbrances. Means as of any time any of the following:

(a)    the Lien of the Security Agreement;

A-11

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(b)    Liens for taxes or assessments by governmental bodies not yet due or the
payment of which is being contested in good faith by El Paso and for which El
Paso shall have set aside on its books adequate reserves to the extent required
by GAAP;

(c)    Liens incidental to the mining, milling, fabrication, enrichment,
conversion or transportation of Nuclear Fuel which are not delinquent or,
whether or not delinquent, are being contested in good faith by El Paso and for
which El Paso shall have set aside on its books adequate reserves for the
payment thereof to the extent required by GAAP;

(d)    irregularities in or defects of title relating to any Nuclear Fuel which
do not materially impair the use of such Nuclear Fuel for the purposes for which
such Nuclear Fuel is held by El Paso or the Trustee;

(e)    Liens securing indebtedness incurred by a Person, other than El Paso,
which indebtedness has been neither assumed nor guaranteed by El Paso nor on
which El Paso customarily pays interest, existing on Nuclear Fuel which El Paso
or the Trustee owns jointly or in common with such Person or such Person and
others, if there is an effective bar against partition of such property which
would preclude the sale of such property by such other Person or the holder of
such Lien without the consent of El Paso;

A-12

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(f)    any attachment, judgment, and other similar Lien with respect to Nuclear
Fuel arising in connection with court proceedings (i) in an amount not in excess
of the greater of $5,000,000, or (ii) the execution of which has been stayed or
which has been appealed and secured, if necessary, by an appeal bond;

(g)    the burdens of any law or governmental rule, regulations, order or permit
requiring El Paso and the Trustee to maintain certain facilities or to perform
certain acts as a condition of their acquisition or use of Nuclear Fuel;

(h)    any duties or obligations of El Paso and the Trustee to any federal,
state or local or other governmental authority with respect to any franchise,
grant, license, permit or contract which affects any Nuclear Fuel;

(i)    Liens in favor of a government or governmental entity securing (i)
payments pursuant to a statute (other than taxes and assessments), or (ii)
indebtedness incurred to finance all or part of the purchase price or cost of
mining, milling fabrication, conversion, enrichment or transportation of Nuclear
Fuel;

(j)    any Lien of the Trustee contemplated by the Purchase Contract or the
Trust Agreement; and

A-13

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(k)    any other Liens of whatever nature or kind which, in the reasonable
opinion of El Paso, do not individually or in the aggregate, materially impair
the Lien of the Security Agreement;

provided, that Permitted Encumbrances shall not include the Trustee's Liens.

Person. Means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.

Plant. The plant site in Maricopa County, Arizona, of the Palo Verde Nuclear
Generating Station.

Plant Account. An account to which the Trustee's Investment with respect to
Nuclear Fuel may be allocated pending allocation by El Paso of such Investment
among Units.

Purchase Contract. The Purchase Contract dated as of February 12, 1996, between
El Paso and the Trustee as such Purchase Contract may from time to time be
supplemented, amended, waived or modified.

Restoration. The repair, reconstruction or replacement of all or any portion of
the Nuclear Fuel of a Unit which has

A-14

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been damaged or destroyed or which has been affected by a Taking, as nearly as
possible to the value, condition and character of such portion, and in its
location, immediately prior to such damage, destruction or Taking, or the
replacement of any Assembly of the Nuclear Fuel so damaged, destroyed or
affected by a Taking, with an equivalent Assembly of Nuclear Fuel with only such
alterations and additions as may be made at El Paso's elec­tion as will not
diminish the Net Investment of the Nuclear Fuel so repaired, reconstructed or
replaced.

Security Agreement. The Security Agreement and Assignment of Contracts dated as
of February 12, 1996, between Texas Commerce Bank National Association, not in
its individual capacity, but solely in its capacity as trustee under the Trust
Agreement and Chemical Bank, a New York banking corporation, in its capacity as
collateral agent for the secured parties.

Spent Fuel. Nuclear Fuel, which, through engagement in the reactor core of a
Unit, has been consumed pursuant to the process of nuclear fission and is being
stored in the fuel pit of a Unit or such other place as El Paso shall designate.

Supplemental Instructions. Instructions to the Trustee from the Trustor in
substantially the form of Schedule B to the Trust Agreement, upon acceptance by
the Trustee, as any such supplemental instructions may from time to time be
supplemented, amended, waived or modified.

A-15

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Taking. A loss, during the term of the Purchase Contract, of the title,
ownership, use or possession of the Nuclear Fuel, a Unit or any portion of
either thereof, or any interest therein or right accruing thereto, as the result
of or in connection with the exercise of the right of condemnation or eminent
domain pursuant to any law, general or special, or by reason of the temporary
requisition of the use of the Nuclear Fuel, a Unit or any portion of either
thereof, by any governmental authority, civil or military.

Termination Event. Any of the events described in Section 17 of this Contract.

Trust. The Trust established by the provisions of the Trust Agreement.

Trust Agreement. That certain Trust Agreement, dated as of February 12, 1996,
between the Trustee and Trustor, providing for the creation of the Rio Grande
Resources Trust II, as such Trust Agreement may from time to time be
supplemented, amended, waived or modified.

Trust Estate. Subject to Section 3 of the Trust Agreement, all estate, right,
title and interest of the Trustee in and to the Trust Estate Assets and any
other rights, assets or property owned or payments or proceeds (other than
payments of the Trustee's Expenses or payments made in connection with any

A-16

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indemnification of the Trustee) under any agreements, arrangements or
transactions entered into pursuant to Supplemental Instructions.

Trust Estate Assets. Subject to Section 3 of the Trust Agreement: all estate,
right, title and interest of the Trustee in and to the Purchase Contract,
Assigned Agreements, the Loan Documents, all rights, assets or property owned,
or payments or proceeds received, by or for the account of the Trustee under the
Purchase Contract, the Assignment Agreements, the Loan Documents Agreement or an
agreement entered into pursuant to Section 2 of the Trust Agreement; all rights
to any such payments or proceeds; and any and all investments (including both
principal and interest) of the Trustee pursuant to Section 12.6 of the Trust
Agreement to the extent the principal of such investments represents proceeds
from any of the aforesaid sources.

Trustee. Texas Commerce Bank National Association, and, to the extent permitted
by Section 8 of the Trust Agreement, its successors and assigns.

Trustee's Expenses. The fees and expenses of the Trustee payable or reimbursable
by the Trustor pursuant to the Fee Agreement.

Trustee's Liens. Means any Lien or disposition of title arising as a result of
(i) claims against Texas Commerce

A-17

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Bank National Association not related to transactions contemplated by the
Purchase Contract and Trust Agreement, (ii) any act or omission of Texas
Commerce Bank National Association, which is not related to the transactions
contemplated by the Purchase Contract and Trust Agreement or is in violation of
any of the terms of the Purchase Contract and Trust Agreement, (iii) claims
against Texas Commerce Bank National Association with respect to taxes or
expenses against which El Paso is not required to indemnify, and which the
Trustee is otherwise required to pay or (iv) claims against Texas Commerce Bank
National Association arising out of any transfer of all or any portion of its
interests in the Nuclear Fuel or the Trust Estate other than a transfer pursuant
to the terms of the Trust Agreement or pursuant to the exercise of the remedies
set forth in Section 19(b) of the Purchase Contract;

Trustor. El Paso Electric Company, a Texas corporation, and its successors and
assigns.

Unit or Units. Palo Verde Nuclear Generating Station, Units 1, 2, and 3 located
in Maricopa County, Arizona, including fuel handling and storage facilities
relating thereto.

A-18

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SCHEDULE B
FORM OF FUEL SCHEDULE
FUEL SCHEDULE NO. ______

FUEL SCHEDULE NO. ______, dated as of _______________,
_____, between Texas Commerce Bank National Association, not in its individual
capacity but solely as the Trustee pursuant to the Trust Agreement defined in
the Contract (as hereinafter defined) (the "Trustee"), and El Paso Electric
Company, a Texas corporation ("El Paso").

W I T N E S S E T H:

WHEREAS, the Trustee and El Paso have heretofore entered into that certain
Purchase Contract dated as of February ___, 1996 (herein as heretofore modified,
supplemented or amended, called the "Contract"), the defined terms therein being
used herein with the same meaning, which Contract provides in certain Sections
thereof for Fuel Schedules, amending Schedule D, to be executed and delivered
from time to time; and

WHEREAS, the Trustee and El Paso have heretofore entered into Assignment
Agreements;

NOW, THEREFORE, in consideration of the premises and other good and sufficient
consideration and in compliance with

B-1

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the requirements of the Contract, the Trustee and El Paso hereby agree as
follows:

1.    El Paso requests that the Trustee reimburse El Paso for or make payments
to certain parties in the amounts specified in Annex I hereto.

2.    Schedule D is hereby modified, supplemented or amended so as to include
the descriptions and amounts specified in Annex I hereto.

3.    (a)    The Nuclear Fuel described in Annex I hereto and not heretofore
listed in Schedule D to the Contract complies with all requirements of the
Contract and all applicable Legal Requirements. All payments or reimbursements
requested hereby comply with the provisions of the Assigned Agreements. El Paso
has made (or has caused to be made) or shall make (or shall cause to be made)
all necessary recordings, filings and publications in respect of Nuclear Fuel
listed on Annex I hereto and owned by the Trustee (including financing
statements and continuation statements under any applicable law or Uniform
Commercial Code) in the public offices in which such recordings and filings
should be made to perfect and transfer title in such Nuclear Fuel to the Trustee
and has paid or shall pay all fees, taxes and charges payable in connection with
any such recordings, filings and publications.

B-2

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(b)    El Paso warrants to the Trustee that the property described in Annex I
hereto (except unmined ore in place, if any) is, and is intended, while owned by
the Trustee, to be and remain personal property, is not, has not been and will
not, while owned by the Trustee, be affixed to any land; and all such property
which is owned by the Trustee is and will be free and clear of all claims,
liens, security interests and other encumbrances occurring as a result of the
contracts and agreements specified in the Assignment Agreements, except for
Permitted Encumbrances.

4.    Except as expressly modified and amended by this Fuel Schedule, the
Contract is ratified and confirmed in all respects including, without
limitation, the obligation of El Paso to pay all Basic Heat Supply Payments and
any Additional Sales Charges and other amounts to be paid by El Paso under the
Contract.

B-3

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IN WITNESS WHEREOF, the Trustee and El Paso have caused this Fuel Schedule to be
duly executed as of the date first above written.

 
TEXAS COMMERCE BANK NATIONAL ASSOCIATION, not in its individual capacity but
solely as the Trustee of the Rio Grande Resources Trust II
   
 
 
 
 
By
 
 
 
Name:
 
 
 
Title:
 
 
 
 
 
 
 
 
 

B-4

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ANNEX I (Schedule B)

Description of Property    Net Investment    Account*

    
*Insert Unit No. or "Plant"

B-5

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SCHEDULE C
FORM OF BILL OF SALE FROM THE TRUSTEE

BILL OF SALE

KNOW ALL MEN BY THESE PRESENTS, that the undersigned,

Texas Commerce Bank National Association, not in its individual capacity but
solely as the Trustee (the "Trustee") pursuant to the Trust Agreement, dated as
of February 12, 1996 between the Trustee and El Paso Electric Company, as
Trustor, for a valuable consideration, hereby conveys, transfers, sells and sets
over all of the right, title, interest and claim of the Trustee in the personal
property consisting of Nuclear Fuel described in Annex I hereto and by this Bill
of Sale does hereby grant, bargain, sell, transfer and deliver all of the
Trustee's right, title, interest and claim in and to such property to EL PASO
ELECTRIC COMPANY, a Texas corporation ("El Paso"), to have and to hold, to
itself and its successors and assigns, forever. Further, the Trustee hereby
assigns to El Paso all warranties and claims to which the Trustee is entitled
under the following agreements between the Trustee and El Paso, and the
contracts and agreements referred to therein, with respect to said Nuclear
Fuel:  [List applicable Assigned Agreements].

The Trustee warrants and agrees that said Nuclear Fuel is free of all liens,
encumbrances, charges, exceptions and

C-1

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restrictions created by act or omission of the Trustee except any thereof for
the discharge of which El Paso is responsible under that certain Purchase
Contract dated as of February 12, 1996, between the Trustee and El Paso.

IN WITNESS WHEREOF, the Trustee has caused this Bill of Sale to be executed.

Dated: _________________, 19____.

 
TEXAS COMMERCE BANK NATIONAL ASSOCIATION, not in its individual capacity but
solely as the Trustee of the Rio Grande Resources Trust II
   
 
 
 
 
By:
 
 
 
Name:
 
 
 
Title:
 

C-2

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ANNEX I (Schedule C)
Description of Property

C-3

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SCHEDULE D (Basic Heat Supply Charges)

Quarterly Net Investment Schedule
(To be filled in by the Trustee and El Paso Electric Company)

Costs Attributable to Quarterly Period ended ______________ ___, ______

Fuel
Status
 
Net
Investment
at Beginning
of Quarter
 
Plus
Acquisition Costs
Incurred During
Such period
 
Plus
Transfers
Between
Fuel Status
 
Plus
Capitalized
Daily Financing
Charges
 
Less
Basic Heat
Supply
Charge
 
Net
Investment
at End of
Quarter
A
 
B
 
C
 
D
 
E
 
F
 
G
 
 
 
 
 
 
 
 
 
 
 
 
 
Loaded:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   Unit 1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   Unit 2
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   Unit 3
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unloaded
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   Total
 
$
 
$
 
$
 
$
 
$
 
$

Notes:

Column C derived from Schedule B
Column F derived from Annex I

D-1

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Annex I (Schedule D)

Calculation of Basic Heat Supply Charge
(To be filled in by El Paso Electric Company)

Quarterly Period ended _____________ ___, ____

Unit
 
Month
 
Net
Investment
at Beginning
of Month
 
Plus
Transfers
Between
Fuel Status
 
Plus
Capitalized
Daily Financing
Charges
 
Sub-Total
 
Multiplied by
Amortization
Factor
 
Basic Heat
Supply
Charge
A
 
B
 
C
 
D
 
E
 
F
 
G
 
H
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Quarterly Basic Heat Supply Charge
 
 

D-2

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SCHEDULE E

DISCLOSURE SCHEDULE

E-1

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Schedule 24(d)

Legal Proceedings

1.
EL PASO ELECTRIC COMPANY v. CENTRAL AND SOUTH WEST CORPORATION, In the District
Court of El Paso County, Texas, 205th Judicial District, Case No. 95-7153.

In May 1993, the Company entered into an agreement and plan of merger (the
"Merger Agreement") with Central and South West Corporation ("CSW"), pursuant to
which the Company would have been acquired by CSW. On June 1995, CSW terminated
the Merger Agreement. In response to CSW's termination of the Merger Agreement,
the Company filed a complaint against CSW in the 205th Judicial District Court
of El Paso County, Texas, alleging breach of contract, breach of duty of good
faith and fair dealing, breach of fiduciary duty, business disparagement,
tortious interference with contract and fraud in the inducement. The Company is
seeking an unspecified amount of damages, punitive, damages, attorney's fees and
costs. Pursuant to the Plan, the first $20 million in proceeds, if any, to the
Company from this litigation will be distributed to the holders of preferred
stock and common stock of the Company prior to the reorganization. On June 15,
1995, CSW filed an adversary proceeding against the Company in the Bankruptcy
Court seeking to recover termination fees of $25.0 million and approximately
$3.7 million in attorneys' fees and expenses that CSW claims it advanced on
behalf of the Company in certain regulatory proceedings. The Company is
attempting to transfer the litigation to the United States District Court for
the Western District of Texas in El Paso. The parties have commenced discovery,
and the Company cannot predict the outcome of the litigation with CSW.

2.
Litigation with the City of Las Cruces

The City of Las Cruces has two actions pending against the Company in federal
district court in New Mexico, one seeking to recover franchise fees despite the
expiration of the Company's Las Cruces franchise on March 18, 1994 and one
seeking a declaratory judgment that the City of Las Cruces can proceed with a
condemnation action against the Company.

The franchise fee claim is pending as City of Las Cruces v. El Paso Electric
Co., pursuant to which the City of Las Cruces is seeking to enforce what it
claims are the Company's continued payment obligations under an allegedly
implied continuation of the municipal franchise ordinance that expired by its
own terms on March 18, 1994.
Alternatively, the City of Las Cruces is seeking the reasonable value of the
Company's use, occupation and rental

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

of the City of Las Cruces' rights of way or damages for trespass. On August 25,
1995, the court denied the Company's motion to dismiss the complaint.

On April 7, 1995, the City of Las Cruces filed its Complaint for Declaratory
Judgement against the Company in the District for Dona Ana County, New Mexico,
seeking a declaratory judgment that the City of Las Cruces has a right of
eminent domain to condemn the electric distribution system and related
facilities owned and operated by the Company within the city limits that provide
or assist in the provision of electricity within the municipal boundaries of the
City of Las Cruces. On May 3, 1995, the Company removed the case to the United
States District Court for the District of New Mexico, where it is pending as
City of Las Cruces, New Mexico v. El Paso Electric Co. (the "Declaratory
Judgment Suit"). On October 25, 1995, the federal magistrate hearing the cases
entered an order denying the Company's motion for summary judgment in the
Declaratory Judgment Suit. On November 1, 1995 the Board of Commissioners of
Dona Ana, New Mexico, filed a motion to intervene in the Declaratory Judgment
Suit to ensure that the concerns of non-municipal county customers and residents
are fully developed.

The City of Las Cruces has taken several actions in an effort to acquire
portions of the Company's distribution system and certain related facilities.
The City of Las Cruces has taken steps to obtain a supply of power and an
operator for its municipal utility in the event it is successful in its
condemnation efforts. On June 6, 1994, the Las Cruces City Council approved a
resolution selecting Southwestern Public Service Company ("SPS") to provide
operation and maintenance services for the proposed City of Las Cruces electric
distribution system, substations and associated transmission facilities and
authorizing the staff of the City of Las Cruces to negotiate a contract with SPS
related to such services. In August 1994, SPS and the City of Las Cruces entered
into a fifteen-year contract granting SPS the right to provide all of the
electric power and energy required by the City of Las Cruces during the term of
the contract. The City of Las Cruces also has offered to purchase the Company's
assets serving the City of Las Cruces for $43 million. In addition, the City of
Las Cruces announced that, in October 1995, it sold approximately $73 million in
revenue bonds to provide funding to finance the acquisition by condemnation or
negotiated purchase of the Company's electrical distribution assets within and
adjacent to the City of Las Cruces city limits. The Company has filed a lawsuit
in the Dona Ana County District Court challenging the legality of the sale of
the revenue bonds. In addition, the Company has filed a complaint before the

- 2 -

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New Mexico Public Utility Commission ("NMPUC") Case 2684 seeking among other
things, a stay against the ability of the City of Las Cruces to use any of the
proceeds associated with the sale of revenue bonds to purchase any part of the
Company's system in the City of Las Cruces or elsewhere in the State of New
Mexico, until such time as the City receives proper authorization from the NMPUC
as to its ability to purchase the system. A stay has been granted by the NMPUC
and presently remains in effect.

3.    Water Cases

San Juan River System. The Four Corners Participants are among the defendants in
a suit filed by the State of New Mexico in March 1975 in state district court in
New Mexico against the United States of America, the City of Farmington, New
Mexico, the Secretary of the Interior, as trustee for the Navajo Nation and
other Indian tribes, and certain other defendants. The suit is pending as State
of New Mexico ex rel. S.E. Reynolds, New Mexico State Engineer v. United States
of America, et al., in the Eleventh Judicial District Court, County of San Juan,
State of New Mexico. The suit seeks adjudication of the water rights of the San
Juan River Stream System in New Mexico, which supplies the water used at Four
Corners. No trial date has been set in this matter and the case has been
inactive for several years. An agreement reached with the Navajo Nation in 1985,
however, provides that if Four Corners loses a portion of its rights in the
adjudication, the Navajo Nation will provide, at a cost to be determined at that
time, sufficient water from its allocation to offset the loss. The ultimate
outcome of this case and the materiality thereof cannot be determined at this
time.

Gila River System. In connection with the construction and operation of Palo
Verde, Arizona Public Service Company ("APS") entered into contracts with
certain municipalities granting APS the right to purchase effluent for cooling
purposes at Palo Verde. In early 1986, a summons was served on APS that required
all water claimants in the Lower Gila River Watershed in Arizona to assert any
claims to water in an action pending in Maricopa County Superior Court, titled
In re The General Adjudication of All Rights to Use Water in the Gila River
System and Source. Palo Verde is located within the geographic area subject to
the summons and the rights of the Palo Verde Participants to the use of
groundwater and effluent at Palo Verde is potentially at issue in the action.
APS, as operating agent, filed claims that dispute the court's jurisdiction over
the Palo Verde Participants' groundwater rights and their contractual rights to
effluent relating to Palo Verde and, alternatively, seek confirmation of such
rights. On

- 3 -

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December 10, 1992, the Arizona Supreme Court heard oral argument on certain
issues in this matter that are pending on interlocutory appeal. Issues important
to the Palo Verde Participants' claims were remanded to the trial court for
further action and the trial court certified its decision for interlocutory
appeal to the Arizona Supreme Court. On September 28, 1994, the Arizona Supreme
Court granted review of the June 30, 1994 trial court decision. No trial date
has been set in this matter. The ultimate outcome of this case and the
materiality thereof cannot be determined at this time.

4.    Four Corners

The Company owns a 7% ownership interest in Units 4 and 5 of Four Corners
located in northwestern New Mexico on land leased from the Navajo Nation. In
July 1995, the Navajo Nation enacted the Navajo Nation Air Pollution Prevention
and Control Act, the Navajo Nation Safe Drinking Water Act and the Navajo Nation
Pesticide Act (collectively, the "Acts"). By letter dated October 12, 1995, the
Four Corners Participants requested that the United States Secretary of the
Interior resolve their dispute with the Navajo Nation regarding whether the Acts
apply to operation of Four Corners. The Four Corners Participants subsequently
filed a law suit in the District Court of the Navajo Nation, Window Rock
District, seeking, among other things, a declaratory judgment that (i) the Four
Corners leases and federal easements preclude the application of the Acts to the
operation of Four Corners; and (ii) the Navajo Nation and its agencies and
courts lack adjudicatory jurisdiction to determine the enforceability of the
Acts as applied to Four Corners. On October 18, 1995, the Navajo Nation and the
Four Corners Participants agreed to indefinitely stay the proceedings referenced
above so that the parties may attempt to resolve the dispute without litigation.
The Company is unable to predict the outcome of this matter.

5.    Federal Tax Indemnification

One of the owner participants in the sale/leaseback transactions related to Unit
2 of Palo Verde has notified the Company that the Internal Revenue Service
("IRS") has raised issues, primarily related to investment tax credit claims by
the owner participant, regarding the income tax treatment of the sale/leaseback
transactions. The Company estimates that the total amount of potential claims
for indemnification from all owner participants related to the issues raised by
the IRS could approximate $10 million, exclusive of any applicable interest, if
the IRS prevails. This matter is at a preliminary stage and, although the
Company believes the owner participant has meritorious

- 4 -

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

defenses to the IRS position, the Company cannot predict the outcome of the
matter or the Company's liability for any resulting claim for indemnification.
If the IRS ultimately is successful and the owner participant incurs additional
tax liability or other loss, the owner participant may have a claim against the
Company for indemnification pursuant to the Participation Agreement and Lease in
the sale/leaseback transaction. Such claim for indemnification would be assumed
pursuant to settlement agreements that become effective at the effective date of
the Company's Plan of Reorganization or would be subject to limitations and
defenses under the Bankruptcy Code if the Plan does not become effective.

6.    Environmental Litigation

Please see Schedule 3.17 of the Credit Agreement for a discussion of relevant
environmental litigation.

- 5 -

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Schedule 24(e)

Except as set forth in the Registration Statement, the Plan of Reorganization or
the Disclosure Statement, as defined in the Credit Agreement.

XXZ9SA04.WPN

E-2

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Schedule 24(g)

Pending Regulatory Approvals
Under Fourth Amended Plan
of El Paso Electric Company
 
FERC § 204
Application
NRC License
Amendment Request
NMPUC Securities
Application
NMPUC Reacquisition
Application
PUHCA
PUCT
Docket/
Case No.
Docket No. ES96-4-000
Docket Nos. STN50-529/530
Case No. 2676
Case No. 2672
File No. 70-8735
Docket No. 12700
Applicant
El Paso Electric Company
El Paso Electric and Arizona Public Service Company
El Paso Electric Company
El Paso Electric Company
Fidelity
El Paso Electric Company
Purpose
EPE seeks FERC authorization to issue the securities and to assume the
obligations contemplated by the Plan. EPE also seeks FERC approval to (i) assume
liability in connection with certain modifications to existing pollution control
revenue bonds and (ii) enter into a nuclear fuel financing and working capital
credit facility.
Applicants seek a license amendment from NRC to authorize EPE's reacquisition of
the Palo Verde Units 2 & 3 leased assets as contemplated by the Plan.
EPE seeks NMPUC approval for the issuance of securities under the Plan and for
the assumption of obligations on financing arrangements contemplated by the
Plan, including modifications to existing pollution control bonds and the
nuclear fuel financing and working capital credit facility. The Securities
Application also seeks prior approval of the NMPUC to form a public utility
holding company and a variance from the NMPUC's rules governing the
regulatory oversight of public utility holding companies.
EPE seeks NMPUC approval of its reacquisition of the Palo Verde leased assets.
Fidelity, represented by Reid & Priest, has applied for an exemption under PUHCA
as a company that is "temporarily a holding company." Alternatively, Fidelity
seeks an exemption under PUHCA on the basis that it is only incidentally a
holding company, being primarily engaged in another non-utility business and not
deriving any material part of its income from public utility subsidiary
companies.
Texas rate case. On August 30, 1995, PUCT entered an Agreed Order implementing
certain provisions of the Unopposed Stipulation and Settlement Agreement. The
Agreed Order establishes Texas retail rates consistent with the Stipulation and
acknowledges the 10-year rate freeze. The Agreed Order by its terms will become
effective upon the Effective Date of the Plan consistent with the terms of the
Stipulation and without further action by the PUCT.
Order Date
December 4, 1995
December 8, 1995
January 8, 1996
January 8, 1996
January 5, 1996
(Effective date)

168901/ph        Page 1

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

Pending Regulatory Approvals
Under Fourth Amended Plan
of El Paso Electric Company
 
FERC § 204
Application
NRC License
Amendment Request
NMPUC Securities
Application
NMPUC Reacquisition
Application
PUHCA
PUCT
 
 
 
 
 
 
 
Appeal
Deadlines
and Status

(cont'd on next page)
Application filed on October 11, 1995.

FERC approved § 204 application at November 29, 1995 meeting.

An official copy of the FERC order approving EPE's § 204 application was posted
on December 4, 1995, and became effective on that date.
Application filed on October 3, 1995.

On November 8, 1995, a proposed favorable determination on safety issues
regarding EPE's reacquisition of the Palo Verde leased assets was published in
the Federal Register.
Application filed on October 6, 1995.

Technical conferences were held on November 6, 7 and 29, 1995.

On December 6, 1995, Las Cruces filed testimony in the proceeding. Staff also
filed testimony on December 11, 1995.

Hearing commenced on December 20, 1995.
Application filed on September 19, 1995.

Hearing completed on November 29, 1995.

On December 7, 1995, a Proposed Recommended Decision was submitted to the
Examiner and circulated to the parties by EPE.
Application submitted to SEC on November 7, 1995.

Notice of Application published by SEC on November 17, 1995.

The SEC issued its decision, granting a three-year temporary exemption, on
January 5, 1996.
Once the Agreed Order becomes effective on the Effective date of the Plan, it
will become administratively final and nonappealable if no motion for rehearing
is filed within 20 days after the date on which a party or party's attorney is
notified of the PUCT decision. (If the notice of the PUCT decision is by mail,
the party or party's attorney is presumed to have been notified on the date the
notice is mailed.)

168901/ph        Page 2

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

Pending Regulatory Approvals
Under Fourth Amended Plan
of El Paso Electric Company
 
FERC § 204
Application
NRC License
Amendment Request
NMPUC Securities
Application
NMPUC Reacquisition
Application
PUHCA
PUCT
 
 
 
 
 
 
 
Appeal
Deadlines
and Status
(cont'd)
On January 3, 1996, Las Cruces filed a motion for rehearing and request for
stay.

FERC denied Las Cruces motion for a stay, thus permitting EPE to proceed with
the transactions authorized by the December 4, 1995 Order. FERC also issued a
"tolling order," which provides it additional time within which to decide the
request for rehearing.

A petition for judicial review must be filed in a U.S. Court of Appeals within
60 days of the Commission's order denying the request for rehearing.
On or about November 21, 1995, Staff concluded consistent with EPE that no NRC
approval from an environmental standpoint would be required, and published this
finding in the Federal Register.

On November 30, 1995, Staff advised counsel for EPE that it agreed with EPE that
no pre-licensing antitrust review would be required.

On December 8, 1995, the NRC unconditionally approved the license amendment
request, effective immediately.

The period for seeking review of the December 8, 1995 order expired on February
8, 1996.
On December 27, 1995, a Recommended Decision was issued.

Exceptions to the Recommended Decision were filed by Las Cruces on January 3,
1996. Responses to exceptions were filed on January 5, 1996.

On January 8, 1996, the NMPUC issued an order granting the Securities
Application.

The period for seeking review of the December 8, 1995 order has expired.
On December 15, a Recommended Decision was issued by the Hearings Examiner. The
Recommended Decision was favorable to EPE and EPE did not file exceptions.

EPE's motion for expedited exceptions was granted and exceptions to the
Recommended Decision were due no later than December 26, 1995. No exceptions
were filed.

On January 8, 1996, the NMPUC issued an order granting the Reacquisition
Application.

The period for seeking review of the December 8, 1995 order has expired.
Appeals must be filed within 60 days. An appeal could be filed either with the
Court of Appeals for the 10th Circuit or the Court of Appeals for the D.C.
Circuit
Replies to motions for rehearing must be filed within 30 days after the date on
which a party or party's attorney is notified of the PUCT decision.
 
If motions for rehearing are timely filed, then the PUCT must rule within 45
days after the date on which a party or party's attorney is notified of the
decision, or the motions are overruled by operation of law and the decision
becomes administratively final. (Time for filing motion for rehearing, reply to
motion for rehearing, or ruling on motion for rehearing can be extended by the
PUCT but not by more than 90 days after the date on which a party or party's
attorney is notified of the PUCT decision.)

A petition for judicial review must be filed within 30 days after the date on
which the, decision is administratively final. If no such petition is filed, the
decision becomes nonappealable.

168901/ph        Page 3

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

Pending Regulatory Approvals
Under Fourth Amended Plan
of El Paso Electric Company
 
FERC § 204
Application
NRC License
Amendment Request
NMPUC Securities
Application
NMPUC Reacquisition
Application
PUHCA
PUCT
 
 
 
 
 
 
 
lntervenors
City of Las Cruces
No third party intervenors.
City of Las Cruces

NMPUC - General Counsel

Attorney General of New Mexico

New Mexico Industrial Electrical Consumers

Klaus Wittern

Fidelity

City of Las Cruces

NMPUC - General Counsel

Attorney General of New Mexico

Department of Defense

Klaus Wittern

New Mexico Industrial Electrical Consumers
City of Las Cruces
PUCT – General Counsel

Phelps Dodge Refining Corporation

Chevron U.S.A. Inc.

The Department of Defense

Office of Public Utility Counsel

ASARCO Incorporated

City of El Paso

Texas State Agencies

Border Steel Rolling Mills, Inc.

El Paso Iron & Metal Company, Inc.

International Brotherhood of Electrical Workers

168901/ph        Page 4

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

STATE OF NEW YORK    )
)
COUNTY OF NEW YORK    )

BEFORE ME, the undersigned authority, on this day personally ap-peared John E.
Droubay, Vice President and Treasurer of El Paso Electric Company, a Texas
corporation, known to me to be the person whose name is subscribed to the
foregoing instrument and acknowledged to me that he executed the same for the
purposes and consideration therein expressed, in the capacity stated, and as the
act and deed of said corporation.

Given under my hand and seal of office, this 9th day of February, 1996.

 
 
CORINNE M. RAICHT
 
 
Notary Public, Stale of New York
 
[SEAL]
No. 4985516
 
 
Qualified in Westchester County
 
 
Qualified in New York County
 
 
Commission Expires Aug. 19, 1997
 
 
Notary Public – State of New York
 
 
 
 
 
 
 
 
/s/ Corinne Raicht
 
 
Corinne Raicht
 
My Commission Expires:
 
 
August 19, 1997