EXECUTION COPY
THIS INSTRUMENT GRANTS A SECURITY INTEREST BY A UTILITY AND CONTAINS
AFTER-ACQUIRED PROPERTY PROVISIONS PURSUANT TO SUBCHAPTER 35A OF THE TEXAS
BUSINESS AND COMMERCE CODE
BOND AGREEMENT, dated as of September 10, 1996, by TEXAS-NEW MEXICO
POWER COMPANY, a Texas corporation ("TNP" or the "Pledgor"), in favor of THE
FIRST NATIONAL BANK OF CHICAGO, as collateral agent for the lenders (in such
capacity, the "Collateral Agent") party to the Credit Agreement, dated as of
September 10, 1996 (as amended, modified or supplemented from time to time, the
"Credit Agreement"), among TNP, the lenders named therein (the "Lenders"), The
First National Bank of Chicago, as administrative agent and collateral agent for
the Lenders, and The First National Bank of Chicago and Union Bank of
California, N.A., as co-agents (the "Co-Agents").
The Lenders have agreed to make Loans (such term and each other term
used but not defined herein having the meaning assigned to it in the Credit
Agreement) to the Borrower pursuant to, and subject to the terms of, the Credit
Agreement. The obligations of the Lenders to make the Loans are conditioned,
among other things, upon the execution and delivery by the Pledgor of a bond
pledge agreement in the form hereof to secure the due and punctual payment by
the Borrower of (a) the principal of and interest on the Loans, when and as due,
whether at maturity, by acceleration, upon one or more dates set for prepayment
or otherwise, (b) all other monetary obligations of the Borrower to the Agents
and the Lenders under the Loan Documents and (c) all obligations of the Pledgor
or any Subsidiary under any Interest Rate Protection Agreement entered into with
a Lender to protect against interest rate fluctuations with respect to
Indebtedness under the Credit Agreement (the foregoing obligations described in
clauses (a), (b) and (c) being collectively called the "Obligations"). It is
understood that TNP is the issuer of the New First Mortgage Bonds pledged
hereunder and that, accordingly, the New First Mortgage Bonds constitute
obligations, and not property, of TNP, the purpose of the arrangements provided
for herein being to provide for the payment of, and the benefits of security
for, the Obligations through the issuance and delivery of the Bonds to the
Collateral Agent as contemplated by Section 4.02 of the Credit Agreement.
Accordingly, the Pledgor and the Collateral Agent hereby agree as
follows:
SECTION 1. Pledge and Delivery of Bonds. To provide for the payment,
and the benefit of security for the payment and performance in full, of the
Obligations, the Pledgor hereby transfers, grants, bargains, sells, conveys,
hypothecates, pledges, sets over and delivers unto the Collateral Agent, for the
benefit of the Lenders and the Agents, and grants to the Collateral Agent, for
the benefit of the Lenders and the Agents, a security interest in, the
following:
(a) the New First Mortgage Bonds, and the certificate or
certificates representing or evidencing the New First Mortgage Bonds,
that may be delivered to the Administrative Agent from time to time
pursuant to Section 4.02(a) of the Credit Agreement and held by the
Collateral Agent pursuant to the terms hereof and the Supplemental
Indenture;
(b) all other property which may be delivered to and
held by the Collateral Agent pursuant to the terms hereof (whether or
not described herein);
(c) all payments of principal, interest and other amounts, and
all cash, instruments and other property, from time to time received,
receivable or otherwise distributed in respect of, in exchange for or
upon the conversion of the securities referred to in clauses (a) and
(b) above;
(d) all rights and privileges of the Pledgor with
respect to the securities and other property referred to in
clauses (a) and (b) above; and
(e) all proceeds of any of the foregoing
(the items referred to in clauses (a) through (e) above being collectively
called the "Collateral"). Upon delivery to the Collateral Agent, (x) the New
First Mortgage Bonds and any certificates, instruments, notes or other
securities now or hereafter included in the Collateral shall be accompanied by
duly executed instruments of transfer or assignment satisfactory to the
Collateral Agent and by such other instruments and documents as the Collateral
Agent may reasonably request and (y) all other property included in the
Collateral shall be accompanied by proper instruments of assignment duly
executed by the Pledgor and such other instruments or documents as the
Collateral Agent may reasonably request.
SECTION 2. Representations, Warranties and Covenants. The Pledgor
hereby represents, warrants and covenants to and with the Collateral Agent
that:
(a) At the time of their delivery hereunder, the New First
Mortgage Bonds will have been authorized, executed, issued,
authenticated and delivered, and registered as provided in Section 3
below, in accordance with applicable law and the terms and provisions
of the TNP Bond Indenture and will constitute the legal, valid and
binding obligations of the Borrower, enforceable in accordance with
their terms and entitled to the benefits of the TNP Bond Indenture and
the Liens created thereby to the same extent as the other First
Mortgage Bonds issued thereunder.
(b) The New First Mortgage Bonds delivered to and held by the
Collateral Agent hereunder will at all times be outstanding for all
purposes of the TNP Bond Indenture and the Collateral Agent and its
successors, as holders thereof, will be entitled to all voting,
consensual and other rights accruing to holders of First Mortgage Bonds
issued under the TNP Bond Indenture.
(c) The Pledgor will make no sale, assignment, pledge,
hypothecation or other transfer of, or create any other security
interest in, the New First Mortgage Bonds or other Collateral.
(d) The Pledgor (i) has good right and legal authority to
issue, pledge and deliver the New First Mortgage Bonds and the other
Collateral to the Collateral Agent in the manner hereby done or
contemplated, (ii) will defend the interest of the Collateral Agent in
the New First Mortgage Bonds and the other Collateral against any and
all attachments, liens, claims, encumbrances, security interests or
other impediments of any nature, however arising, of all persons and
(iii) will promptly turn over to the Collateral Agent in the form in
which received any Collateral which shall at any time come into its
possession.
(e) No consent or approval of any Governmental Authority, the
Trustee under the TNP Bond Indenture or any securities exchange was or
is necessary for the valid issuance of the New First Mortgage Bonds or
the pledge and delivery effected hereby except such as have been
obtained and are in full force and effect.
(f) By virtue of the execution and delivery by the Pledgor of
this Agreement and the Supplemental Indenture, when the certificates,
instruments or other documents representing or evidencing the New First
Mortgage Bonds are delivered to the Collateral Agent in accordance with
this Agreement and the Supplemental Indenture, the Collateral Agent
will obtain a valid and perfected first lien upon and security interest
in such New First Mortgage Bonds and the other Collateral as security
for the payment and performance of the Obligations, prior to all other
liens and encumbrances thereon and security interests therein.
(g) The pledge effected hereby is effective to vest in the
Collateral Agent, on behalf of the Lenders and the Agents, the rights
of the Collateral Agent in the New First Mortgage Bonds and other
Collateral as set forth herein.
SECTION 3. Registration of New First Mortgage Bonds; Denominations. The
New First Mortgage Bonds shall be registered on the register maintained by the
Trustee under the TNP Bond Indenture in the name of the Collateral Agent or its
nominee. The Collateral Agent shall have the right to exchange the certificates
representing the New First Mortgage Bonds for certificates of smaller or larger
denominations to facilitate the exercise of its rights hereunder.
SECTION 4. Voting and Consensual Rights, Etc. (a) Until the Collateral
shall have been released as provided in Section 13, the Collateral Agent shall
have and may exercise, to the exclusion of the Pledgor, all voting, consensual
and other rights accruing to a holder of New First Mortgage Bonds, including,
without limitation, (i) the right to demand and receive payments of principal
and interest on the New First Mortgage Bonds in accordance with the terms of the
New First Mortgage Bonds and the TNP Bond Indenture, (ii) the right to attend or
be represented by proxy at any meeting of bondholders under the TNP Bond
Indenture, (iii) the right to vote the New First Mortgage Bonds in accordance
with the terms of the TNP Bond Indenture, (iv) the right to issue consents and
waivers with respect to the New First Mortgage Bonds, as a holder of First
Mortgage Bonds, under or in connection with the TNP Bond Indenture, (v) the
right to issue any and all instructions and requests for action to the Trustee
under the TNP Bond Indenture that are permitted to a bondholder under the TNP
Bond Indenture and (vi) the right to exercise all remedies provided in the TNP
Bond Indenture for the benefit of the holders of First Mortgage Bonds. The
Pledgor shall not amend, supplement or otherwise modify, or consent to any
amendment, supplement or other modification to, the terms of the New First
Mortgage Bonds or the TNP Bond Indenture in any manner that could directly or
indirectly affect the Collateral, the Lien of the TNP Bond Indenture or the
rights or interests of the Lenders (other than issuances of First Mortgage Bonds
permitted under Section 6.01(d) of the Credit Agreement pursuant to supplemental
bond indentures), in each case except with the prior written consent of the
Collateral Agent.
(b) The Pledgor shall not consent to any voluntary prepayment or
redemption of the New First Mortgage Bonds without the prior written consent of
the Collateral Agent, and any amounts received by or for the account of the
Pledgor in respect of any such prepayment or redemption shall constitute
Collateral hereunder and shall be held by the Collateral Agent for application
as provided herein.
SECTION 5. No Disposition. Without the prior written consent of the
Collateral Agent, the Pledgor agrees that it will not sell, assign, transfer,
exchange, or otherwise dispose of, or grant any option with respect to, the
Collateral, nor will it create, incur or permit to exist any pledge, lien,
mortgage, hypothecation, security interest, charge, option or any other
encumbrance with respect to any of the Collateral, or any interest therein, or
any proceeds thereof, except for the lien and security interest provided for by
this Agreement.
SECTION 6. Amendment, Modifications and Waivers with Respect to
Obligations. The Pledgor hereby agrees that, without notice to or further assent
by the Pledgor, any demand for payment of any of the Obligations made by the
Collateral Agent or the Lenders may be rescinded by the Collateral Agent or the
Lenders and any of the Obligations continued, and the Obligations, or the
liability of the Pledgor or any other party upon or for any part thereof, or any
collateral security or guarantee therefor or right of setoff with respect
thereto, may, from time to time, in whole or in part, be renewed, refunded,
extended, amended, modified, accelerated, compromised, waived, surrendered, or
released by the Collateral Agent or any Lender and the Credit Agreement and any
other Loan Document or any other documents delivered in connection therewith may
be amended, modified, supplemented or terminated in whole or in part, as the
Lenders may deem advisable from time to time, and any collateral security at any
time held by the Lenders for the payment of the Obligations may be sold,
exchanged, waived, surrendered or released on terms that in the good faith
judgement of the Collateral Agent are commercially reasonable in view of the
applicable circumstances and in view of the limitations described in Section 12,
all without notice to or the consent of the Pledgor, which will remain bound
hereunder, notwithstanding any such renewal, extension, modification,
acceleration, compromise, amendment, supplement, termination, sale, exchange,
waiver, surrender or release. Neither the Collateral Agent nor the Lenders shall
have any obligation to protect, secure, perfect or insure any other collateral
security document or property subject thereto at any time held as security for
the Obligations. The Pledgor waives any and all notice of the creation, renewal,
extension or accrual of any of the Obligations and notice of or proof of
reliance by the Collateral Agent or any Lender upon this Agreement, and the
Obligations, and any of them, shall conclusively be deemed to have been created,
contracted or incurred in reliance upon this Agreement, and all dealings between
the Pledgor and the Collateral Agent and the Lenders shall likewise be
conclusively presumed to have been had or consummated in reliance upon this
Agreement. The Pledgor waives diligence, presentment, protest, demand for
payment and notice of default or nonpayment to or upon the Pledgor with respect
to the Obligations.
SECTION 7. Remedies. (a) If a Default or Event of Default shall have
occurred and be continuing, the Collateral Agent, without demand of performance
or other demand, advertisement or notice of any kind (except the notice
specified below of time and place of public or private sale) to or upon the
Pledgor or any other person (all and each of which demands, advertisements
and/or notices are hereby expressly waived), may forthwith collect, receive,
appropriate and realize upon the Collateral, or any part thereof, and/or may
forthwith sell, assign, give option or options to purchase, contract to sell or
otherwise dispose of and deliver said Collateral, or any part thereof, in one or
more parcels at public or private sale or sales, at any exchange, broker's board
or at any of the Collateral Agent's offices or elsewhere upon such terms and
conditions as it may deem advisable and at such prices as it may deem best, for
cash or on credit or for future delivery without assumption of any credit risk,
and the Collateral Agent or any Lender shall have the right, upon any such sale
or sales, public or private, to purchase the whole or any part of said
Collateral so sold, free of any right or equity of redemption in the Pledgor,
which right or equity is hereby expressly waived or released. In addition to the
rights and remedies granted to it in this Agreement and in any other instrument
or agreement securing, evidencing or relating to any of the Obligations, the
Collateral Agent shall have all the rights and remedies of a secured party under
the Uniform Commercial Code in effect in the State of Illinois at that time (the
"Code"), whether or not the Code applies to the affected Collateral. The Pledgor
shall be liable for the deficiency if the proceeds of any sale or other
disposition of the Collateral are insufficient to pay the Obligations. The
Pledgor agrees that, to the extent notice of sale of any Collateral shall be
required by law, at least ten days' notice to the Pledgor of the time and place
of any public sale or the time after which any private sale is to be made shall
constitute reasonable notification. The Collateral Agent shall not be obligated
to make any sale of Collateral regardless of notice of sale having been given.
The Collateral Agent may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned. Any
cash held by the Collateral Agent as Collateral and all cash proceeds received
by the Collateral Agent in respect of any sale of, collection from, or other
realization upon all or any part of the Collateral may, in the discretion of the
Collateral Agent, be held by the Collateral Agent as collateral for, and/or then
or at any time thereafter applied (after payment of any amounts payable to the
Collateral Agent pursuant to paragraph FIRST of Section 8) in whole or in part
by the Collateral Agent against, all or any part of the Obligations in such
order as the Administrative Agent shall elect. Any surplus of such cash or cash
proceeds held by the Collateral Agent and remaining after payment in full of all
the Obligations shall be paid over to the Pledgor or to whosoever may be
lawfully entitled to receive such surplus.
(b) If an Event of Default shall have occurred and be continuing, in
addition to its other rights and remedies hereunder and under the other Loan
Documents, the Collateral Agent shall, upon the instruction of the
Administrative Agent pursuant to Article VII of the Credit Agreement, furnish to
the Trustee written notice of such Event of Default and direct the Trustee to
cause a redemption of the New First Mortgage Bonds by the Borrower pursuant to
the terms of the Supplemental Indenture.
(c) Neither the Collateral Agent nor any Lender shall be liable for
failure to collect or realize upon the Obligations or any collateral security or
guarantee therefor, or any part thereof, or for any delay in so doing nor shall
any of them be under any obligation to take any action whatsoever with regard
thereto. Although the Collateral Agent or its nominee may without notice
exercise any and all rights, privileges or options pertaining to any of the New
First Mortgage Bonds as if it were the absolute owner thereof, the Collateral
Agent shall have no duty to exercise any of the aforesaid rights, privileges or
options, shall not be responsible for any failure to do so or delay in so doing
and, in any event, may do so without liability.
SECTION 8. Application of Proceeds. The cash proceeds of any sale of
Collateral received by the Collateral Agent pursuant to Section 7, as well as
any cash Collateral received by the Collateral Agent, shall be applied by the
Collateral Agent as follows (the timing of such application to be in the sole
discretion of the Collateral Agent):
FIRST, to the payment of all costs and expenses incurred by
the Collateral Agent in connection with any such sale or otherwise in
connection with this Agreement or any of the Obligations, including,
but not limited to, all court costs and the reasonable fees and
expenses of its agents and legal counsel and any other costs or
expenses incurred in connection with the exercise of any right or
remedy hereunder;
SECOND, to the payment in full of the Obligations due but
unpaid at the time of such receipt, pro rata among the holders of the
Obligations in accordance with the amounts of the Obligations held by
them on the date of any distribution; provided, that in the event no
such Obligations are due and payable at such time, or to the extent the
Collateral Agent receives noncash Proceeds, all cash Collateral and
Proceeds shall be retained by the Collateral Agent for application
against the Obligations as they become due and payable; and
THIRD, to the Pledgor, its successors or assigns, or as a
court of competent jurisdiction may otherwise direct.
SECTION 9. Reimbursement of the Collateral Agent. The Pledgor hereby
agrees to reimburse the Collateral Agent, on demand, for all reasonable
out-of-pocket expenses incurred by the Collateral Agent in connection with the
administration and enforcement of this Agreement, and agrees to indemnify the
Collateral Agent and hold the Collateral Agent harmless from and against any and
all liability incurred by the Collateral Agent hereunder, or in connection
herewith, unless such liability shall be due to wilful misconduct or gross
negligence on the part of the Collateral Agent.
SECTION 10. The Collateral Agent Appointed Attorney-in-Fact. The
Pledgor hereby appoints the Collateral Agent as attorney-in-fact of the Pledgor
for the purpose of carrying out the provisions of this Agreement and taking any
action and executing any instrument which the Collateral Agent may deem
necessary or advisable to accomplish the purposes hereof, which appointment is
irrevocable and coupled with an interest. Without limiting the generality of the
foregoing, the Collateral Agent shall have the right and power to receive,
endorse and collect all checks and other orders for the payment of money made
payable to the Pledgor representing any payment of interest or other
distribution payable in respect of the Collateral or any part thereof and to
give full discharge for the same.
SECTION 11. No Waiver. No failure on the part of the Collateral Agent
to exercise, and no delay in exercising, any right, power or remedy hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right, power or remedy by the Collateral Agent preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
All remedies hereunder are cumulative and are not exclusive of any other
remedies provided by law.
SECTION 12. Securities Act, etc. The Pledgor understands that
compliance with the Securities Act of 1933, as now or hereafter in effect, or
any similar statute hereafter enacted analogous in purpose or effect (such Act
and any such similar statute as from time to time in effect being called the
"Federal Securities Laws") might very strictly limit the course of conduct of
the Collateral Agent if the Collateral Agent were to attempt to dispose of all
or any part of the Collateral pursuant to Section 7, and might also limit the
extent to which or the manner in which any subsequent transferee of any
Collateral could dispose of the same. Similarly, there may be other legal
restrictions or limitations affecting the Collateral Agent in any attempt to
dispose of all or part of the Collateral pursuant to Section 7 under applicable
Blue Sky or other state securities laws or similar laws analogous in purpose or
effect. Under applicable law, in the absence of an agreement to the contrary,
the Collateral Agent might be held to have certain general duties and
obligations to the Pledgor and to make some effort toward obtaining a fair price
even though the Obligations may be discharged or reduced by the proceeds of a
sale at a lesser price. The Pledgor clearly understands that the Collateral
Agent is not to have any such general duty or obligation to the Pledgor, and the
Pledgor will not in any way whatsoever attempt to hold the Collateral Agent
responsible for selling all or any part of the Collateral at an inadequate price
even if the Collateral Agent shall accept the first offer received or does not
approach more than one possible purchaser.
SECTION 13. Termination; Redelivery of New First Mortgage Bonds. This
Agreement shall terminate upon the earlier to occur of (a) the date on which all
of the Obligations have been fully and indefeasibly paid and the Lenders have no
further commitment to extend credit under the Credit Agreement and (b) the date
on which the conditions to the release of the Collateral set forth in Section
9.17 of the Credit Agreement shall have been satisfied. At the request of the
Pledgor following such termination, the Collateral Agent shall reconvey,
reassign and deliver to the Pledgor, or to such person or persons as the Pledgor
shall designate, against receipt, such of the Collateral (if any) as shall not
have been applied by the Collateral Agent pursuant to the terms hereof and shall
still be held by it hereunder, together with appropriate instruments of
reconveyance, reassignment and release. Any such reconveyance and reassignment
shall be without recourse to or representation or warranty by the Collateral
Agent and at the expense of the Pledgor.
SECTION 14. Notices. All communications and notices hereunder shall
be in writing and given as provided in Section 9.01 of the Credit Agreement.
SECTION 15. Further Assurances. The Pledgor agrees to do such further
acts and things, and to execute and deliver such additional conveyances,
assignments, agreements and instruments, as the Collateral Agent may at any time
reasonably request in connection with the administration and enforcement of this
Agreement or with respect to the Collateral or any part thereof or in order
better to assure and confirm unto the Collateral Agent its rights and remedies
hereunder and under the Supplemental Indenture.
SECTION 16. Binding Agreement; Assignments. This Agreement, and the
terms, covenants and conditions hereof, shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns
(including any future Lender becoming a party to the Credit Agreement and any
purchaser of a participation in any of the Obligations), except that the Pledgor
shall not be permitted to assign this Agreement or any interest herein or in the
Collateral, or any part thereof, or otherwise convey, pledge, encumber or grant
any option with respect to the Collateral, or any part thereof, or any cash or
property held by the Collateral Agent as Collateral under this Agreement except
as contemplated by this Agreement.
SECTION 17. Survival of Agreement. All covenants and agreements made by
the Pledgor herein and in the certificates or other instruments prepared or
delivered in connection with this Agreement shall be considered to have been
relied upon by the Collateral Agent and the Lenders, shall survive the making by
the Lenders of the Loans and shall continue in full force and effect as long as
the principal of or any accrued interest on any Loan or any other fee or amount
payable under this Agreement or, without duplication of the foregoing, under any
of the other Loan Documents, or any of the other Obligations, is outstanding and
unpaid and so long as this Agreement has not terminated. The representations and
warranties contained in Section 2 of this Agreement shall be considered to have
been relied upon by the Lenders and shall survive the making of the Loans and
shall remain in full force and effect after the termination of this Agreement.
SECTION 18. Provisions Severable. The provisions of this Agreement are
severable, and if any clause or provision shall be held invalid and
unenforceable in whole or in part, then such invalidity or unenforceability
shall affect only such clause or provision, or part thereof, and shall not in
any manner affect any other clause or provision of this Agreement.
SECTION 19. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS)
OF THE STATE OF ILLINOIS.
SECTION 20. Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall constitute an original, but all of
which, when taken together, shall constitute but one instrument.
SECTION 21. Headings. Section headings used herein are for
convenience only and are not to affect the construction of, or be taken into
consideration in interpreting, this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Bond
Agreement, or have caused this Bond Agreement to be duly executed on their
behalf, as of the day and year first above written.
TEXAS-NEW MEXICO POWER COMPANY
By
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO,
as Collateral Agent,
By
Name:
Title:
THE STATE OF TEXAS )
)
COUNTY OF TARRANT )
This instrument was acknowledged before me on the day of
September, 1996, by ,
of TEXAS-NEW MEXICO POWER COMPANY, a Texas
corporation, on behalf of said corporation.
----------------------------------------
NOTARY PUBLIC in and for the State of TEXAS
My Commission Expires:
------------------------------ ------------------------------
Typed or Printed Name of
Notary
THE STATE OF ILLINOIS )
)
COUNTY OF XXXX )
This instrument was acknowledged before me on the day of
September, 1996, by ,
of THE FIRST NATIONAL BANK OF CHICAGO, on behalf
of said financial institution.
NOTARY PUBLIC in and for the State of ILLINOIS
My Commission Expires:
Typed or Printed
Name of Notary
34\43834\011\BONDAGMT
November 1, 1996 11:19AM
